HomeMy WebLinkAbout1999-04-05 City Council Summary Minutes Regular Meeting April 5, 1999 1. Council Selection of Candidates to be Interviewed for the Public Art Commission.................................88-127 2. Appointments to Human Relations Commission............88-127 ORAL COMMUNICATIONS........................................88-128 APPROVAL OF MINUTES........................................88-128 3. Community Development Block Grant Funding - Refer to Finance Committee.............................................88-129
4. Resolution 7841 entitled ΑResolution of the Council of the City of Palo Alto Adopting the Utility Standards for Water,
Gas and Wastewater, Second Edition of the City of Palo Alto≅......................................................88-129 5. Consulting Contract Between the City of Palo Alto and Deloitte & Touche, LLP to Provide Risk Management Consulting Services......................................................88-129 7. Contract Between the City of Palo Alto and Rabbit Office Automation for Citywide Convenience Copier Rental.....88-129 8. Amendment No. 2 to Consultant Contract No. C9106646 Between the City of Palo Alto and Group 4/Architecture, Research and Planning, Inc. for Professional Consulting Services Related to the Interior Improvements and Space Planning Project..88-129
9. Resolution 7842 entitled ΑResolution of the Council of the City of Palo Alto Authorizing the Filing of an Application for Federal Surface Transportation Program and Congestion Mitigation and Air Quality Improvement Program Funding for the Embarcadero Bridge and Bike Path Project and for the Palo Alto Medical Foundation/South of Forest Area Caltrain
Pedestrian/Bicycle Undercrossing Projects≅ ............88-129
10. Resolution 7843 entitled ΑResolution of the Council of the City of Palo Alto Authorizing the Submittal of an Application to the Santa Clara County Valley Transportation Authority
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(VTA) for Funds from the Transportation Fund for Clean Air 40% Program Manager Fund for the Arastradero Road Bike Lanes Project and the Palo Alto Medical Foundation/South of Forest
Area Caltrain Pedestrian/Bicycle Undercrossing Project≅88-129
11. Ordinance 4552 entitled ΑOrdinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1998-99 to Provide an Additional Appropriation of $50,000 for Legal
Contract Assistance in the City Attorney=s Office≅ ....88-130 12. The Policy and Services Committee recommends to the City Council to adopt the proposed 1999 Legislative Objectives as
the basis for the City=s legislative advocacy in 1999. 88-130 13. Contract Between the City of Palo Alto and N. V. Heathorn, Inc. for the Replacement of a Wastewater Channel Screening System at the Regional Water Quality Control Plant....88-130 14. Contract Between the City of Palo Alto and Power Engineering Contractors for the Aeration Diffusers and Baffle System at the Regional Water Quality Control Plant..............88-130 15. Recommendation for Approval of Process for Implementation of a Heating, Venting and Air-Conditioning Unit for the Lucie Stern Community Center Theatre Through Award of Design-Build Contract and Waiver of Committee Review of Scope of Services......................................................88-130 16. Request for Approval of Increased Change Order Authority for Contract No. C8104259 Between the City of Palo Alto and Anderson Pacific Engineering Construction Inc. for Construction of Temporary Seismic Bracing at the Municipal Service Center........................................88-130
17. The Policy and Services Committee re ΑFiber to the Home≅88-130 18. The Utilities Advisory Commission re Requested Guidance on the
Utilities Advisory Commission=s Role in Telecommunications88-154 19. Approval of Cost-Sharing with the City of Menlo Park for the Second Phase of the San Francisquito Creek Bank Stabilization and Revegetation Study................................88-154 20. Council Members Dick Rosenbaum and Vic Ojakian and Mayor Gary Fazzino re Joint City-School District Project to Add Gymnasium Facilities at the Middle Schools......................88-155 21. Council Comments, Questions, and Announcements........88-155 ADJOURNMENT: The meeting adjourned at 11:30 p.m...........88-155
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The City Council of the City of Palo Alto met on this date in the Council Chambers at 7:05 p.m. PRESENT: Fazzino, Huber, Kniss (arrived at 7:10 p.m.), Mossar, Ojakian, Rosenbaum, Schneider, Wheeler ABSENT: Eakins SPECIAL ORDERS OF THE DAY 1. Council Selection of Candidates to be Interviewed for the Public Art Commission City Clerk Donna Rogers announced that Brian Bolitho, Gerald Brett, Michael Chacon, Carol Doyle, Tony Eppstein, Patrice Langevin, David Levin, Patrick Ford, Jane Moorman, Barbara Mortkowitz, and Judith Wasserman each received four or more votes and would be interviewed on Monday, April 19, 1999. MOTION: Mayor Fazzino moved, seconded by Kniss, that the City Council would not interview the three incumbents, leaving 8 candidates to be interviewed on April 19, 1999. MOTION PASSED 8-0, Eakins absent. 2. Appointments to Human Relations Commission Council Member Ojakian thanked the current members of the Human Relations Commission (HRC) who were dedicated to the community. Roy Blitzer had done an outstanding job during the six years of serving on the HRC, and Pat Singer had done impressive work. Mayor Fazzino instructed Council Members to cast their votes. FIRST ROUND OF VOTING VOTING FOR ROSEMARIE BEDNAR: Schneider VOTING FOR WILLIAM BENNETT: VOTING FOR ROY BLITZER: Rosenbaum, Huber, Schneider, Ojakian, Mossar, Kniss, Wheeler, Fazzino VOTING FOR ROBERTA COLIN: VOTING FOR RONALD LEE JONES: VOTING FOR VICTOR FROST: VOTING FOR RANDY MONT-REYNAUD:
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VOTING FOR KENNETH RUSSELL: Fazzino VOTING FOR PAT SINGER: Rosenbaum, Huber, Ojakian, Mossar, Kniss, Wheeler VOTING FOR PETER J. ULLMAN: City Clerk Donna Rogers announced that Roy Blitzer and Pat Singer each received more than five votes and were appointed to the Human Relations Commission on the first ballot. ORAL COMMUNICATIONS Cleveland Kennard, homeless, spoke about police harassment. Alex Christenson, 1705 Fulton Street, spoke regarding a public in-line skatepark. Ed Powers, 2254 Dartmouth Street, spoke about civic responsibility. APPROVAL OF MINUTES MOTION: Council Member Schneider moved, seconded by Kniss, to approve the minutes of January 25, 1999, as submitted. MOTION PASSED 8-0, Eakins absent. Council Member Mossar said page 8 of the minutes of February 8, 1999, contained an error. Martin Bernstein requested the name of the company be changed from "Mumford" to "Rumford." MOTION: Council Member Schneider moved, seconded by Kniss, to approve the minutes of February 8, 1999, as corrected. MOTION PASSED 8-0, Eakins absent. CONSENT CALENDAR Mayor Fazzino said staff requested removal of Consent Calendar Item No. 6 from the Consent Calendar until the determination was made regarding who could or could not participate in historic preservation, which created a problem with obtaining a quorum of Council Members eligible to vote. Council Member Ojakian would abstain from voting on Consent Calendar Item Nos. 9 and 10 due to a potential conflict of interest, since his wife worked for the Palo Alto Medical Foundation (PAMF). Council Member Mossar said she and Senior Assistant City Attorney Sue Case discussed the issue prior to the meeting. Consent Calendar Item Nos. 9 and 10 were not a conflict since grant
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applications for funding were being discussed, and PAMF was not a beneficiary or directly involved. Senior Assistant City Attorney Sue Case said the issue was for funding of and receiving a grant for a bicycle path that PAMF had given to the City which, therefore, would not cause a conflict of interest. MOTION: Council Member Mossar moved, seconded by Ojakian, to approve Consent Calendar Item Nos. 3 - 5, and 7 - 16, with Consent Calendar Item No. 6 removed due to lack of quorum to vote on the issue. 3. Community Development Block Grant Funding - Refer to Finance Committee
4. Resolution 7841 entitled ΑResolution of the Council of the City of Palo Alto Adopting the Utility Standards for Water,
Gas and Wastewater, Second Edition of the City of Palo Alto≅ 5. Consulting Contract Between the City of Palo Alto and Deloitte & Touche, LLP to Provide Risk Management Consulting Services 6. Amendment No. 2 to Contract No. C9109545 Between the City of Palo Alto and Dames & Moore for Phase 2 of the Historic Inventory Project 7. Contract Between the City of Palo Alto and Rabbit Office Automation for Citywide Convenience Copier Rental 8. Amendment No. 2 to Consultant Contract No. C9106646 Between the City of Palo Alto and Group 4/Architecture, Research and Planning, Inc. for Professional Consulting Services Related to the Interior Improvements and Space Planning Project
9. Resolution 7842 entitled ΑResolution of the Council of the City of Palo Alto Authorizing the Filing of an Application for Federal Surface Transportation Program and Congestion Mitigation and Air Quality Improvement Program Funding for the Embarcadero Bridge and Bike Path Project and for the Palo Alto Medical Foundation/South of Forest Area Caltrain
Pedestrian/Bicycle Undercrossing Projects≅
10. Resolution 7843 entitled ΑResolution of the Council of the City of Palo Alto Authorizing the Submittal of an Application to the Santa Clara County Valley Transportation Authority (VTA) for Funds from the Transportation Fund for Clean Air 40% Program Manager Fund for the Arastradero Road Bike Lanes Project and the Palo Alto Medical Foundation/South of Forest
Area Caltrain Pedestrian/Bicycle Undercrossing Project≅
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11. Ordinance 4552 entitled ΑOrdinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1998-99 to Provide an Additional Appropriation of $50,000 for Legal
Contract Assistance in the City Attorney=s Office≅ 12. The Policy and Services Committee recommends to the City Council to adopt the proposed 1999 Legislative Objectives as
the basis for the City=s legislative advocacy in 1999. 13. Contract Between the City of Palo Alto and N. V. Heathorn, Inc. for the Replacement of a Wastewater Channel Screening System at the Regional Water Quality Control Plant 14. Contract Between the City of Palo Alto and Power Engineering Contractors for the Aeration Diffusers and Baffle System at the Regional Water Quality Control Plant 15. Recommendation for Approval of Process for Implementation of a Heating, Venting and Air-Conditioning Unit for the Lucie Stern Community Center Theatre Through Award of Design-Build Contract and Waiver of Committee Review of Scope of Services 16. Request for Approval of Increased Change Order Authority for Contract No. C8104259 Between the City of Palo Alto and Anderson Pacific Engineering Construction Inc. for Construction of Temporary Seismic Bracing at the Municipal Service Center MOTION PASSED 8-0, for Item Nos. 3-5, 7, 8, and 11-16, Eakins absent. MOTION PASSED 7-0, for Item Nos. 9 and 10, Ojakian Αabstain,≅ Eakins absent. REPORTS OF COMMITTEES AND COMMISSIONS
17. The Policy and Services Committee re ΑFiber to the Home≅ Council Member Kniss said Council Member Eakins, Chairperson of the Policy and Services (P&S) Committee, was absent, so she would explain the P&S Committee motion regarding the Fiber to the Home (FTTH) issue. In May 1995, the Council moved to expedite upgrading of telecommunications facilities and applied for funding. The motion would only afford a small segment of the community an opportunity to be connected from their home to the fiber. The Council was faced with three alternatives: 1) Proceed with the Universal Telecommunications Service Request for Proposal (UTS-RFP) without the trial while pursuing other strategies; 2) Proceed with the trial and submit the UTS-RFP after the trial, incorporating information gained during the trial; and 3) Proceed with the trial and UTS-RFP on a parallel track, the third of which represented the
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recommendations of both the Utilities Advisory Commission (UAC) and the P&S Committee. The Council appreciated the support of the public. Utilities Advisory Commissioner Paul Johnston said the UAC first became involved with dark fiber in 1996. Although installed the fiber was under-utilized. The FTTH concept was in existence for a number of years. The question was whether and when the City would move forward and actually use the facilities it had begun to build or watch what the rest of the world did before moving forward. The UAC had considered the issue and thought it was time the City moved forward. The issues raised during the UAC meeting with regard to FTTH were largely financial concerns with regard to the payback period. They were issues which could be easily resolved to the satisfaction of the UAC with adjustments to reduce some of the costs and, if necessary, increase monthly payments to produce a payback period more acceptable to the City. The UAC thought the City should move forward on both programs. Assistant City Manager Emily Harrison said the two projects under evaluation were: 1) a short-term project whereby the City became responsible for construction of a trial FTTH; and 2) the long-term issue of how high-speed telecommunications services could be provided to the entire City. FTTH was an option which included such things as wireless communications, cable modem service, and high-speed telephone connections. The staff report (CMR:162:99) focused on the short-term FTTH trial. The options of how to pursue the long-term project would be thoroughly explored in the Request for Proposal (RFP) for telecommunications services, which staff called "UTS-RFP." Staff focused on the short-term project of the FTTH trial because both the UAC and the P&S Committee were recommending to the Council that the trial proceed in conjunction with the UTS-RFP. Two of the risks associated with the short-term trial were that there would be less participation than predicted for marketability risk, and the cost would not be recovered over an economically reasonable period of time. Staff prepared a proposal for the Council, Attachment B of the staff report (CMR:162:99), to ensure recovery of the City's capital investment for the FTTH trial in the five-year period. For 10 megabyte per second (Mb/s) service, the resident would pay $1,200 up front and $75 per month. In addition, a resident would have to pay an Internet Service Provider (ISP) a base fee of $25 to $50 per month plus a possible usage charge. In terms of marketability risk, staff was assured by residents involved in the Community Center area, that an extraordinary effort would be made to market the FTTH trial to ensure a high enough level of participation to make the trial successful. Although such an effort could not be counted on for future efforts to build FTTH, the trial itself would provide a demonstration that could be the basis for marketing the system in the long term. Staff concerns with the long term issue of the City as provider of telecommunications services were covered extensively in the staff report (CMR:424:98), provided to the Council in
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December 1998. The long-term feasibility issues included the financial risks involved in having the City become the provider of FTTH; the investment of $25 to $35 million and the need to issue debt financing at the same time as other infrastructure projects for the General Fund, Storm Drain Fund, and the Palo Alto Unified School District (PAUSD) going to the voters; the impact on the Electric Utility to administer the new project while responding to the changes brought about by energy deregulation; the lack of expertise on staff to design, build, and oversee the operation of such a system and the consequent reliance on consultants and contractors; the rapidly changing technology environment and the City's limited ability to move rapidly to respond to it compared to the private sector; and the uncertainty of the marketability of the technology compared to lessor technical solutions that might provide sufficient speed and capacity for many residents, as well as the ability to recover the cost of the capital investment in an economically reasonable period of time. There were also legal and regulatory issues that needed to be resolved. Staff believed the issues needed to be addressed prior to any decision on whether or not to proceed with the FTTH trial and the responses to the UTS-RFP. Staff agreed with the UAC and the P&S Committee about the importance of continuing to pursue the concept of a public/private partnership for high-speed telecommunication services to the home. The City, by owning its own Electric Utility, brought valuable assets to the table in such a partnership. The City owned rights-of-way, conduit and electric line poles to string fiber or cable, the dark fiber ring which could be a critical element for high-speed telecommunications services, using both wireless and coax technology, and valuable real property which could be sites for wireless technology. Staff agreed with the UAC that it was likely that many customers would be satisfied with connection speeds less than 10 Mb/s, and would want to take advantage of alternative technologies immediately. Some residents might be unwilling to pay for FTTH, but would be willing to pay for a lessor technology which was still superior to a 56K modem. A working relationship with Cable Co-op might provide an opportunity for a hybrid fiber coaxial solution that would be less expensive than FTTH. All of the possibilities would be explored through the UTS-RFP. Some members of the community expressed reservations about the UTS-RFP, saying it precluded FTTH as a solution, which was incorrect. The staff report (CMR:162:99) summarized the pros and cons of the alternatives. In putting together the pros and cons, staff worked with representatives of Palo Alto FiberNetwork group (PA-FiberNet). Mayor Fazzino opened the public hearing. Michael Eager, President of PA-FiberNet, 1960 Park Boulevard, spoke in support of the FTTH trial. PA-FiberNet worked with the staff, both of whom learned a great deal in the process. Ken Poulton, 884 Los Robles Avenue, said the fiber system was 10 to 100 times faster than other types of technologies at a similar
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cost. Long term, fiber could offer 10 to 100 times more bandwidth per user than competing technologies and could be upgraded easily in the future, compared with other technologies which would face limits to expansions. To build another FTTH system, in competition with the City's system, was uneconomical. The FTTH system was unlikely to have other competitors with similar capabilities. The building blocks of the network included the physical structure, such as, poles, wires, equipment, and the day-to-day operation of the network which included the running of the network, security, billing, and 24-hour customer support. Internet access carried the bits from the local network into the Internet. In the long run, PA-FiberNet was interested in competing with Internet Access Providers (IAP), which was a key part of the network and could be competitive in a city-wide arrangement. Because of the scale of the FTTH system, it made more sense to have a single integrated IAP and network operator. In terms of day-to-day operations, the City would install and maintain the fiber infrastructure. The City would chose an IAP as the network operating partner for network operations. City ownership was not a necessity for the long-term system but would provide a unique benefit. The privately-owned system operator normally chose one IAP, typically the same as the ISP. The policies of the system interpreted what was possible with the computers, for instance, not able to run a web server or any kind of services out of a home. With a publicly-owned system, a chance could be taken for multiple IAPs, allowing and enabling competition. Key questions included the size of the FTTH trial, a key concern of which was efficiency. The larger the trial area, the further the overhead of construction, and operations were spread. It was important to learn enough from the trial to determine whether it made sense to move forward with a city-wide system. A larger trial provided larger numbers thereby reducing the uncertainties of statistics, more areas of a greater diversity of population, poles and underground construction, and a wider variety of home constructions. A benchmarking of other trials showed a range from 180 to 2,000, making the City's trial of 160 homes small in comparison and 69 homes inadequate. Cost recovery was another important decision for the Council to make. Short cost-recovery goals increased prices, and increased the revenue stream if the base remained the same but could reduce participation to the point revenues dropped and cost-recovery time actually increased. High pricing placed the City into a smaller market that served only the most extreme users willing to pay the higher prices. However, the goal was to provide a service useful to everyone in the City; therefore, the prices should be as low as possible. The longest cost-recovery period that made sense with the technology and the market was the best alternative. The staff report (CMR:162:99) mentioned 10-15 years, but PA-FiberNet thought 10 years was appropriate. Less than eight years was unadvisable. Mr. Eager thanked staff for their work and explained the differences PA-Fibernet had with the staff report (CMR:162:99). Staff recommended an RFP process to solve all the problems to
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provide communications quickly and without risk. PA-FiberNet, however, was not convinced that was the case. Bidders on the RFP would provide nothing more than what was already available, unless the RFP actually specified FTTH. PA-FiberNet was not opposed to the RFP, but the City would not get something for nothing. Staff had done a reasonable job of providing the pros and cons of the FTTH proposal. Staff's original estimates were conservative, with a 20 percent contingency fee. The staff report (CMR:162:99) contained an additional 15 percent. PA-FiberNet questioned the need for an additional staff person to administer contracts for a FTTH trial. The best market assessment possible was to sign up people for the trial. Staff should request adequate funding for the trial but the number should be representative of the actual cost. Staff previously estimated the trial at six months from approval to operation, which was somewhat inflated. Margaret Cooley, 830 University Avenue, said the City was asked to build the infrastructure since it already held rights of way, in the same way the City helped build streets. A full-scale trial could set the standard for what could be expected in Palo Alto for whomever provided city-wide deployment in the future. The City should maintain local control for the infrastructure because it would minimize the amount of disruption in rights of way in neighborhoods. When it came time for companies to offer services, open access and competition would be ensured. The costs to the users could be kept to a minimum. By using the City's fiber ring in the build-out, a local area network could be created in the City, connecting homes to the schools, libraries, and medical facilities, without entering the Internet. The Council had the opportunity to provide national leadership and vision for other cities throughout the country and would leave residents a lasting legacy. The Council was urged to vote in favor of a full-scale trial. Mr. Eager urged the Council to take a bold step into the next century to create a lasting benefit to Palo Alto and its residents. Palo Alto was respected throughout the world and what was done would be viewed as a precedent others would follow. The Council was trusted to balance concerns with the benefits of the project. Brian Reid, 2960 Waverley Street, spoke in opposition to PA-FiberNet's advice. The City should not consider involvement in the telecommunications service business, but should be getting the City to build the infrastructure necessary for someone else to run the service business. The project should be termed a data communications project rather than telecommunications project. Fiber optics was invented in 1935 and was less expensive. Copper wire was not obsolete and fiber would not become obsolete. Investments in fiber equipment were slow. Fiber was able to carry light forever and could last over 100 years. Bill Kruse, 3230 Ross Road, spoke in support of FTTH.
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Louis Rocha, 3099 Yancy Drive, San Jose, lineman for Pacific Bell (PacBell)spoke in support of offering telecommunications services to all levels of people in Palo Alto.
Steve Kroes, 915 ΑL≅ Street, Ste. 800, Sacramento, spoke on behalf of the California Taxpayers Association (CTA) in opposition to the proposal because of the significant financial risk which required a commitment of approximately $.5 million of taxpayer or ratepayer funds. Care should be exercised in the expenditure of such funds, particularly for the benefit of only a small group. Of concern also was the policy aspect, for instance, government's purpose should not compete against the private sector. Any business could undercut competitors if free from property tax on equipment and income tax on earnings, and with lighter regulatory burdens. CTA was concerned about local governments entering into what remained a private sector business. Proponents of FTTH already acknowledged no competition would exist if the City wired the neighborhoods first, which was not an appropriate role for the government. Governments were often unable to continually upgrade equipment, standing in the way of progress in the community where governments established businesses. The equipment might be state-of-the-art in 1999, but he questioned the future and how long the trial would lose money before making money. Using $.5 million of ratepayer or taxpayer funds for eight to ten years was not wise stewardship of the funds. CTA sought to minimize unnecessary taxation by focusing on government spending and promoting efficient, quality services. The Council was urged to exhibit caution. Michael W. Condry, 985 Paradise Way, Director of Internet Standards for Sun Microsystems, Inc. (Sun) said Sun was committed to assisting in connecting all Sun employees to the fiber and ensure each home had strong equipment. A collection of monitoring and experimental tasks would be run and reported back to the City on a regular basis. In addition, Sun would provide high-performance experimental web terminals to the City for use in the school system, particularly elementary schools. Sun would in turn gain information about the performance of its terminals and its product while helping to provide funding and objectives in the FTTH trial. Randy Okamura, 345 Hamilton Avenue, No. 308, PacBell representative, said fiber was a superior medium used for some of PacBell's customers in the area. An OC48 speed was used, which was a very high optical channel speed. In 1995, the City offered high-speed telecommunications. Since that time, a number of products were introduced into the marketplace. Integrated Services Digital Network (ISDN) would not have been used as a term back in 1995. Digital Subscriber Line (DSL) would not have been used as a product. But when the subject was raised in 1998, PacBell conducted a trial for Asymmetric Digital Subscriber Line (ADSL). Since then ADSL had been ruled out. PacBell responded to the market by reducing prices by 45 percent. Although not as fast as
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10 Mb/s, for $149 per month PacBell offered downloads of 6.0 Mb/s. Most consumers used the 1.5 download and 384 upload at an average of $39 per month with a one-year commitment. For an additional $10, PacBell Internet could be utilized. The staff report (CMR:162:99) was incorrect regarding two/one lines which were available for $350 per month. The discounted services were offered to community-based organizations and schools at a cost of $175 per month. The PAUSD was a recipient of PacBell's grants at 50 percent off. The list of companies was growing, with AT&T, MCI, @Home, and Regional Communication Network (RCN) all coming into the area. The number of companies using PacBell's central office to provide fiber was growing. Most of the goals set out by the City in 1995 had been met, including no financial risk to the City. Using a lower risk cost-recovery method of leasing the dark fiber should be compared with a full-fledged IAP situation which increased the financial risk. Mayor Fazzino noted the City Manager provided him with a copy of an e-mail from Michael Condry. Kate Sherwood, 558 Forest Avenue, spoke in favor of FTTH. As a current Cable Co-op cable modem user, she was willing to pay more than staff's figures indicated. Her use of the Internet was extensive and of great value to her. FTTH was an investment in the value to her home. Good fiber would give her a competitive edge over the rest of the world. One million people per month in the United States came on line. Terry Andre, 598 Vista, spoke in favor of the City installing an infrastructure so universal access to all citizens was possible. If a private organization installed the lowest level of infrastructure, the community would be tied into that particular infrastructure. The Council was encouraged to approve the FTTH trial. Having public ownership of the infrastructure would allow more competition. The Council was encouraged to base the trial on 160 homes since it would take a long time to complete the trial and many citizens outside of the trial period wanted to be involved. The larger the number, the faster fiber could be accessed by the entire City. Geoff Thompson, 416 Oxford Avenue, Chairperson of the Institute of Electrical and Electronic Engineers (IEEE) Standards Committee that standardized the Ethernet, said the fiber backbone was an inspired investment on the part of the City. The real leverage and vision was to bring the potential of the fiber backbone into residences and get it to the residential taxpayers who had paid for it. In an era of deregulation, it was important to have a path into service providers not currently available. The Council was urged to commit to high-speed access to homes by providing the infrastructure. Long-term contracts should be avoided when technology was moving rapidly in an adventuresome and experimental era.
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Paul Botterff, 3776 La Donna Avenue, said new technology was currently bottle-necked at access networks. The new services in the next millennium would require the capacity of the fiber networks, for professionals, schools, and everyday learning and interaction. It would be a mistake for Palo Alto not to lead the way to such access to residents. Michael Silverton, 114 Greenmeadow Way, said market demand in the community was exciting to see for his company, Fiberhood Network. As an Ethernet-to-the-home company, Fiberhood was currently studying several installations in Palo Alto using existing guidelines. A few basic NII guidelines included competition in the local loop, removal of barriers to entry, and promotion of private investment and information infrastructure. Although excited about FTTH, he was unsure government was the means by which to accomplish the job since it was unlikely another provider would build another fiber infrastructure, which was a barrier to entry and could be an inhibitor to private investment. He took exception to the position that no private company could provide an open architecture infrastructure. He worked at Sun where open architecture worked well. In general, private companies could provide open solutions that worked well in the marketplace. The idea of an RFP where public and private worked together in partnership was ideal. He questioned the long cost-recovery phase and how long the trial would take. The FTTH trial was demonstrative of the visionary insight that led to the first fiber backbone. He looked forward to FTTH in Palo Alto. Colin Mick, 2130 Hanover Street, spoke about the benefits of the FTTH trial and infrastructure. Trials enabled an examination of new service approaches, new alliances, and new technologies. Nothing in the model prohibited PacBell or any other company from being a service provider on the infrastructure. The issues of marketing data, cost of connections, price elasticity, adoption rates, packaging, marketing in the future, and service use would be better understood after the trial. Applications testing was important. Benefits from the infrastructure might include the revenue to recover some of the fiber backbone. Citizen participation was important. Business communication for the City and traffic reduction were important elements. Better Internet connectivity was a good option. Bob Moss, 4010 Orme Street, Board of Directors, Cable Co-op, said although Cable Co-op should be afraid of competition, no objections were raised to the City's participation in the FTTH trial because if the City failed to install FTTH, no one else would either. With over $23 million in surplus for the Electric Utility and $70 million in the Calaveras Reserve, $.5 million was not a big amount for the City to expend. The Council was urged to move forward with the FTTH. Disagreement was voiced with the staff report (CMR:162:99) which recommended a manager at over $100,000 per year as an extravagance. The $40,000 fee for a consultant to evaluate
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the RFP was a waste of time and money. The time it would take to write, evaluate, and prepare a contract proposal was not as great as staff estimated. Cable Co-op recently conducted an engineering study to determine how much it would cost to convert the entire system to fiber, estimated at $16 million. Cable Co-op considered fiber in 1986, but the cost was prohibitive. The fiber Cable Co-op considered installing in 1986 would have been the same fiber Palo Alto was currently considering. Carroll Harrington, 830 Melville Avenue, spoke in agreement with other speakers in favor of FTTH. As a resident in one of the proposed trial areas, she was willing to pay the proposed $1,200 installation fee along with the monthly fees. The Council was urged to act expeditiously to initiate the trial. Bill Zamuch, 912 Clara Drive, said the FTTH would restore bandwidth and provide benefits to more than only just end users, but local businesses who would be given an edge over larger companies enabling the community to keep valuable businesses. Regarding the CTA, the network should not make the same mistakes the transportation infrastructure made. Richard Gerges, 714 East Charleston Road, spoke in opposition to City financing of the fiber. Members of the public in support of the FTTH project were wealthy enough to afford it but others who would not benefit would still be required to pay. The project should be established as an assessment district so everyone within the district paid for the project. The City should make money on the project. Undergrounding of the Electric Utility was only handled in certain neighborhoods because of the cost, while the City refused to do so in other neighborhoods. Fiber should be connected to libraries and other public buildings so every citizen would have access. The City claimed to have insufficient funding to enforce traffic laws, but seemed willing to expend excess funds on something that would not benefit the entire community. David Harris, 455 Margarita Avenue, said increased Internet communication reduced travel on the roads through telecommuting, thus reducing traffic problems in the City. Having a high-speed test bed where citizens were technically oriented would allow new businesses to emerge, and create new tax revenues. The proposal for the trial involved initial payment for nearly one-third of the cost with the remainder paid gradually. In terms of equity, fiber to the individuals receiving the first benefit would pay the most and would become less expensive over time as it spread. The eventual cost would be more reasonable. Herb Borock, P. O. Box 632, spoke in support of the FTTH trial as the first step in implementing a City-owned universal FTTH system. A letter submitted to the Council (on file in the City Clerk's Office) raised some process issues: 1) placing the Electric Utility Fund at risk; 2) updates to PAMC Chapter 2.11 to ensure fair and
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open decisions regarding fiber optics; and 3) City negotiations with Residential Communications Networks (RCN) while negotiating an extension of the franchise agreement with Cable Co-op. Documentation was also provided to the Council. Rick Ferguson, 1037 Harker Avenue, Community Center Neighborhood Association (CCNA) member, spoke in favor of the FTTH trial. Financial risk, which was one of the most important concerns of the Council and staff, could be handled in a straightforward fashion via the terms and conditions of a contract between each resident and the City for installation of the fiber. He envisioned a contract between the individual resident and the City for purposes of installing the infrastructure and suggested the City Attorney could decide how to draft the contract. There would be an additional contract for trial purposes between each resident and the ISP. That contract would have a price and would soon have competitive contracts with other ISPs. Contracts were documents that people frequently used to manage financial risk. He encouraged the Council to build that contract feature into the motion and into the policy recommendation. The outcome of the FTTH trial was an enormous Citywide interest which brought together the community and put residents in touch with each other. The cross-town view of the trial would preserve the new dimension of community rather than artificially sever it on the grounds of financial risk. Mayor Fazzino closed the public hearing. RECESS: 9:20 - 9:30 P.M. Council Member Ojakian asked about the cost to the City of the infrastructure and the components thereof. Assistant Director of Utilities Larry Starr said staff focused on the medium-sized trial area, the costs for which were listed in Attachment B of the staff report (CMR:162:99). Staff estimated the cost of construction at $342,900. As with all bid prices, however, a 10 percent contingency fund would be requested. Staff would request the Council approve $380,000 from the Electric Reserve. Attachment B of the staff report (CMR:162:99) indicated four scenarios to determine how the monthly payment affected the pay-back period, ranging from a $35 per month base, $1,200 initial payment at a pay back of 14 years, to $75 per month base, $1,200 initial payment at a pay back of 5 years. Council Member Ojakian said components were involved such as data switches in the infrastructure. He asked for a breakdown of some of the components for the study area of 70 households versus the larger group. Mr. Starr said the electronics for the project represented a small portion of the total infrastructure. Labor costs were 45 percent
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of the entire project, with electronics in the 15 to 20 percent range, including the switch and other electronics. Other components were engineering design and cable. The larger trial was two separate areas, for instance, two individual trials with no ties whatsoever to each other with separate electronics, and different fibers. If staff was directed to move forward with the FTTH in the Community Center area, with the assistance of PA-FiberNet and residents in the area, staff could pickup a few more customers in the area. Council Member Schneider asked about how many flyers the City initially sent out, and what was the response. Mr. Starr said a flyer was distributed to 26,000 electric customers. Approximately 1,000 responses were received in the first month, spread throughout the City. The Community Center area and Barron Park areas received the most responses. Council Member Schneider asked how many of the responses received favored FTTH. Mr. Starr said all the responses indicated a willingness to pay $1,200 initially and $35 per month, or more for the more expensive 100 Mb/s service. No negative responses were received. Council Member Huber asked what mechanism the City would use to assure repayment of the cost allocated to a particular piece of property. Mr. Starr said the City had nothing in place at the current time. Senior Assistant City Attorney Grant Kolling said to guarantee payment, an assessment district could be formed requiring participation by all, which had Proposition 218 implications. There was no assurance that someone who signed up would stay on forever. Council Member Huber clarified the City had no mechanism by deed or other form to assure monies would be recovered from whoever signed up for the service. Mr. Kolling said the City could ask the resident to provide a deed of trust to secure payment, but there was no guarantee. Council Member Huber feared long-term costs would not be recovered if individuals could sign up and left the country six months later. Mr. Kolling said Council Member Huber's concern was real. Council Member Mossar asked whether the difference between the City's situation with FTTH and what she recalled from the loans for
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solar systems was the City's ability to require a lien on the property. Mr. Kolling said Council Member Mossar was correct. Solar heating panels were a benefit to the customer. The FTTH was on the City's side of the meter. Council Member Mossar asked whether staff had actually selected the two areas. Mr. Starr replied no. Staff conducted cost estimates for both areas. The most accurate cost estimate was on the Community Center area and the larger estimates were simply a scale-up of some of the numbers. Council Member Mossar asked whether a trial could be conducted that was not in the two separate areas. Mr. Starr said staff thought more residents within the trial area would become interested in the trial once they realized how easy it was. Mention was made of conducting the trial in Barron Park because of the undergrounding possibilities. However, part of the Barron Park area was new and some homes were not built. The developer indicated a willingness to pay the $1,200, but there were no assurances of monthly fees. If the Community Center area was chosen, the City planned to underground across Middlefield and Embarcadero Roads; therefore, conduit could be placed in the surrounding areas and included easily in the trial. Concern was expressed with undergrounding in the Barron Park area. Previously installed conduits might not lend themselves to fiber optic cable with electric cable already inside. Director of Utilities Ed Mrizek said when the flyers were mailed out the prior summer, staff considered the level of participation necessary to make the project cost-effective. Participation was established at 30 percent, but the Community Center, the largest positive response, was at 18 percent. If expanded beyond the Community Center area, the participation level might only be 1 or 2 percent. Council Member Rosenbaum asked whether the $380,000 cost for a medium project included the $125,000 per year for personnel. Mr. Starr said staff wanted to show the Council what was required to conduct the FTTH trial. Currently, a Telecommunications Manager and electricians worked on the dark fiber project. Telecommunications Manager was a full-time position to market and contract for new customers with the dark fiber ring. With the addition of the FTTH project, staff needed some in-house design expertise. The design engineer could be utilized to help manage the FTTH project as well as begin design work as more customers were added to the dark fiber ring. Currently, a senior engineer
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was utilized for the job, but underground districts were suffering. The Telecommunications Engineer was not paid $125,000, but that was the cost to the City for the position. Council Member Rosenbaum asked about Rick Ferguson's suggestion to contract to secure payment. Mr. Kolling said when two parties agreed to a type of arrangement in which one performed services and the other paid money, it was a contract whether or not in writing. The question was how extensive the contract should be. The City Attorney's Office could attempt to provide a fail-safe contract, but anyone who wanted to break a contract could do so and legal remedies took money to resolve. Council Member Rosenbaum said an alternative was to ask for the entire amount initially. In terms of net present value, there was no difference between someone paying the entire cost initially and paying it off over a number of years. Mr. Kolling agreed. Vice Mayor Wheeler asked about a statement made on page 2 of the staff report (CMR:162:99) that, "staff reached the conclusion that the major benefit from doing the trial would be as a precursor to a citywide build out of FTTH by the City." Many of the comments heard from members of the public would bolster that statement. The City was asked by a segment of the community to actually build out the system. She was unsure the Council, in any of its prior discussions of the issue, had started down that path. When the fiber backbone was discussed, the Council had backed away from making such an investment of City funds. She asked whether there was any other reason for conducting the trial or whether conducting the trial was setting the City down the path of investing, as a City, in going citywide. Assistant City Manager Emily Harrison replied no. Staff would not have supported the trial if that were the case because staff continued to have concerns about the City's role in a build-out. In meeting with members of the community advocating FTTH, staff was convinced the information from the trial could be valuable in evaluating the public/private possibilities of an actual build-out in terms of the actual marketability of the actual cost of the technology itself. Staff would be unable to confirm or contradict its concerns until after the trial was conducted. The trial could provide pieces of information to the Council to enable it to make a final decision as to how The Council wanted to provide telecommunications services. Vice Mayor Wheeler said the proposed time line for proceeding with the FTTH trial showed staff returning to the Council after it conducted a market survey, presumably using more real numbers than
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the original survey. She questioned whether that was the point at which staff would expect a final decision by the Council. Ms. Harrison said Vice Mayor Wheeler was correct. Staff hoped to have more information about the City's possibilities for partnering at that time. Staff would bring the results of both the trial and the UTS-RFP prior to having the Council make a decision. Vice Mayor Wheeler asked whether staff would have the results of the July 1999 RFP when the market assessment report returned to the Council in September 1999. Vice Mayor Wheeler wanted to know when the Council's decision point was on moving forward with the FTTH trial, for instance, the current meeting or in September when the real interest was known. Ms. Harrison thought the trial would begin to be designed the following day if the Council directed staff to do so. Mr. Mrizek said staff would begin work on the trial if directed by the Council. However, since the costs were higher per month than first indicated, staff needed to return to the Community Center participants to ask whether they were willing to pay more. The information would be brought back to the Council in September as to whether or not the City had sufficient participants to cover the cost based on what the Council indicated, such as, 5-year payback, or 8-year payback. Vice Mayor Wheeler clarified the Council would give staff direction but the actual implementation decision would be made in September. Mr. Mrizek said Vice Mayor Wheeler was correct. Ms. Harrison said the market assessment would be conducted in house. Concern had expressed about the additional consultant cost of the market assessment, but that was a misconception. Vice Mayor Wheeler asked Council Member Kniss about the actual P&S Committee motion, the intent of which suggested that the trial area would be one neighborhood. Council Member Kniss said it depended upon the size of the trial the Council directed. Vice Mayor Wheeler said the recommendation was for the medium-size trial. Council Member Kniss preferred the "modest" recommendation. Vice Mayor Wheeler asked what the P&S Committee's motion indicated with relation to the financial risk to the City.
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Council Member Kniss said the P&S Committee struggled with the same issues expressed during the current meeting, for instance, people who signed up and then left town. The P&S Committee discussed the legal ramifications and a reasonably fast payback, such as, five or eight years. Vice Mayor Wheeler wanted to make sure Council Member Kniss' understanding was the motion covered the concept of a contracted payback period and an unspecified vehicle to assure full payback from subscribers. Council Member Kniss said the vehicle was not something the Council as policy makers would design, but would come from staff. The Council's job was to set policy on the actual trial itself. Council Member Schneider asked how many members in the audience would be willing to take the financial risk over a 5 to 8-year period and be in the position of collecting the revenues the City might be able to enjoy, for instance, making the initial participants shareholders. Vice Mayor Wheeler thought the Council wanted Utilities staff to respond to discussions about cost-recovery and what costs the City was expecting to recover, for instance, whether it would include the ongoing operating costs of the system. Mr. Starr said staff planned to recover all of the costs: the initial construction costs, ongoing monthly charges to manage the system, yearly license fees of the fiber ring, and operations and maintenance costs incurred during the year to keep things going. Ms. Harrison said staff was not including in the cost estimates payback of staffing and additional consulting, or Research & Development (R&D) costs, with a venture of that kind in the private sector. Council Member Huber supported the concept of a trial based on the ability to then sell to someone other than the City, since he was not interested in running it as a City utility. He wanted to know exactly what the trial would show and how long the trial had to go before the City gathered what was needed in order to "sell it" to someone else. The City approved and paid for the fiber ring, and he recalled many people had expressed a willingness to use the ring, but for whatever reason, had not done so. At some point, the City said it would install the ring, but the people who said they would use it had not done so. Mr. Starr said Council Member Huber was correct. The City had not seen as many customers sign up for dark fiber as originally projected. To date, the $2 million had not been entirely repaid to the Electric Reserves. The annual ongoing maintenance costs were high and included funding the Telecommunications Manager and staff
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in Operations conducting construction and maintenance. Revenues increased to the point of paying the R&M costs. Staff would need to continue adding customers to recoup the $2 million. The period was extended from a 3-year to 5-year payback to a realistic 10-year payback, given what was seen with dark fiber licensing. Staff was also concerned that the City might be slightly high priced, so prices should be reviewed in order to possibly pick up more customers. Council Member Huber asked what the City would get for the trial and how long the trial would have to be run to attract someone to operate the system. Mr. Starr said the trial would provide the actual costs for installing fiber to a home, since staff's estimates were just a guess. The cost to run from one switch location to a number of homes in a residential area would also be known. The other information gained from the trial was managing the system, for instance, whether the City would be overwhelmed with calls from customers with problems or whether it ran with very little maintenance. Council Member Huber was interested in how much time would be necessary to gain sufficient information. Mr. Starr said staff planned to return to the Council in February 2001 with results of the trial at which time the Council could make the decision to either continue to collect revenue or sell the business. Staff would have completed the trial, gleaned from it all the information it needed and would have the option to sell. Council Member Huber asked what would happen if no one wanted to purchase the system and the City decided it did not want to go citywide. Mr. Starr said the decision would be one for the Council to make: 1) if the Council no longer wanted to be in the fiber business, it could write off the remaining monies owed and stop operations; 2) the Council could determine to remain in the business until it had recouped the monies owed, at which time it could stop operating the business; or 3) the Council could make the decision to continue operating the fiber business. Council Member Mossar had found it intriguing that the fiber ring was underutilized yet the City was considering the potential of adding more customers to the ring. She questioned how the City would continue repaying the dark fiber ring investment, how it would generate more customers, and how FTTH fit into the issue. Mr. Starr said the FTTH trial was a small customer. Only two fibers were necessary from the Community Center to Downtown, which represented a few thousand dollars per year. Larger customers
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paid tens of thousands of dollars per year in fiber leases of up to 12 fibers, which was the business the City wanted to promote. The Telecommunications Manager's job was to promote business. Staff thought the City's licensing costs were not right, since many companies still installed their own fiber. Staff thought companies would want to lease from the City rather than putting in their own fiber because of the cost differential. The entire City was built out, the FTTH might only utilize 30 switch sites. The City had 288 fibers to license. Council Member Mossar asked whether the business of fiber optics was an appropriate role for the City and could be compared to running lines to homes, at which point the City's responsibility was over. Mr. Starr said running fiber optics like a gas utility would be difficult. The City leased dark fiber to customers who then purchased the electronics to do whatever was required to go into business. The City's only responsibility was to make sure the fiber was not broken. FTTH was different because the electronics were in the middle, requiring the City to light up the fiber and contract for the service. The City would have to be more involved than with the gas. Council Member Mossar said the staff report (CMR:162:99) failed to comment on the benefits to the community through telecommuting, to which several members of the public had alluded. She asked whether staff had an opportunity to discuss the possible benefits to the community from high-speed telecommunications services. Ms. Harrison said the issue could be assessed during the FTTH trial. Discussions were held on an anecdotal basis, but staff had not gained any solid information regarding a benefit with regard to telecommuting. Staff might be able to gain such information from participants in the trial. Council Member Mossar attended a meeting of the Bay Area Air Quality Management District (BAAQMD) where funding innovative programs for reducing vehicle miles traveled in the Bay Area were discussed. The Bay Area was coming under greater Federal scrutiny with regard to air quality management, and an innovative communications program might be eligible for funding. If the City proceeded further with FTTH, such funding should be investigated. Many comments both in the UAC minutes, which had been very helpful in the analysis of the project, and in the current public comments, addressed the need for City participation to jump-start the project. She asked what was the UAC's opinion of the legitimate role of the City and what would happen if the City chose not to participate. Mr. Johnston said a number of opinions were expressed with regard to what would result from the trial. Council Member Huber's desire
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to start the process and then sell off the business to a private enterprise was not widespread among supporters of FTTH or the UAC, since many felt competitive businesses had a place in the City. PA-FiberNet had shown a chart stacking the five different responsibilities from customers, to services, to Internet access, to network operations, and then the fiber infrastructure, which showed the one naturally anti-competitive area was in the construction of the last mile. If anyone was going to own the "last mile", it should be the City. The fundamental idea was not to get the technology to the point of selling it off to a bidder. A number of potential sources of funding were not pursued but should be considered once the City moved beyond the initial trial and considered ways of expanding fiber to the rest of the City. The UAC asked staff to explore the use of the $2 million per year available in public benefit dollars. Conservative reading indicated the City was unable to use the funds; however, with more lobbying, the funds might be available. Confusion still existed about the need for the trail. Some Council Members had indicated that unless the exact outcome and use was known, support would not be given; however, the very reason for a trial was to reveal the unknowns. A balance between the risks and the proposal of staff to share the risk between the City and homeowners had to be found. Council Member Kniss asked how many of the members of the audience were able to telecommute from their homes, and more than half responded. With a more expedient network she assumed the public would be better able to telecommute. The ability to telecommute and leave home at different times of the day, relieved many transportation problems. Council Member Huber asked about the cost to fiber the entire City. Mr. Starr said staff had rough estimates for a citywide build-out. The community indicated $25 million, but staff thought the cost was closer to $30 million, which was a big undertaking resulting in the City having a new utility. Some costs would require additional staffing. The new business would require the ability to be in the business, in addition to installing all of the plant and facilities. Council Member Mossar asked what would happen if the Council decided not to spend $25 to $30 million for a separate utility, the FTTH trial was conducted, and the City never built out the network. Mr. Starr said the City could take one of the options outlined to Council Member Huber earlier. Council Member Mossar asked what staff thought would really happen. Mr. Starr said only Council could make the decision about whether or not to spend the money. If not, customers in the trial area
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would continue to be served because there would be strong support to keep it going. Council Member Mossar asked about the larger, unserved customers. Mr. Mrizek said staff discussed the issue somewhat with the UAC. If the trial was conducted, one part of the community would be served. Another neighborhood might request a similar construction but with only 10 percent participation rather than the 19 percent. The Council would have to make a decision as to whether or not to move forward with the next neighborhood. The trial would provide marketing and operational information, but the Council might be faced with such a scenario in the future. Council Member Mossar clarified Mr. Mrizek thought an incremental build-out was possible. Mr. Mrizek replied yes, an incremental build-out was possible as an option if the Council decided not to fully network the City in the future. Council Member Mossar said at that point, staff would have obtained more hard data from which the Council could make a decision. Mr. Mrizek said Council Member Mossar was correct. Council Member Mossar asked whether the UAC had any other visions. Mr. Johnston said the whole purpose of the trial was to determine whether or not the concept was provable. If provable, the City would have a success model. He found it difficult to believe the City would stop at that point. If the trial was successful, it would expand. The only question was how rapid the expansion should proceed. Some parts of Palo Alto might have low participation rates, making expansion not cost effective. That was a decision the Council had to make. The idea of ending after a successful trial defied logic. Council Member Ojakian asked about the UTS-RFP process since the UAC minutes indicated the draft proposal was 90 percent complete. Ms. Harrison said staff wanted to take the Scope of Services for the UTS-RFP through a rigorous review with the community which meant the UTS-RFP was not 90 percent complete. Council Member Ojakian was interested in seeing the time line condensed. Ms. Harrison thought working with the community would not require an enormous amount of time; however, the UTS-RFP had not incorporated discussions recently held with PA-FiberNet or the Council's current discussion, which were important. The UTS-RFP
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should incorporate the Council's vision for how fiber was incorporated into the final solution. The draft RFP was vague and had asked for any solution to high-speed telecommunications, which should be more specific. Council Member Ojakian asked whether staff observed success in other cities, in connecting to residences. In many communities, the delineation might not be as clear since cable was also being hooked up. Mr. Mrizek said Anaheim had contracted with one corporation to handle the fiber which was primarily installed in a commercial/industrial area. The corporation promised to extend to the residential class in the future, but the timing was unknown and was based on when it became profitable. Other agencies were in similar situations. He thought no residential areas in the entire United States had a fiber system similar to what the Council was considering. Council Member Ojakian said the reason was probably the financial risk. Mr. Mrizek said Council Member Ojakian was correct. Mayor Fazzino asked Mr. Johnston about the issue of technological obsolescence, and risks to the City. Mr. Johnston said the issue was one of fiber versus wireless or copper. Neither fiber nor copper would become obsolete. The length of time for payback could not be justified for some of the electronics as for the fiber itself. In terms of wireless technology, from what the UAC understood, nothing suggested the City would be able to get the same kind of bandwidth in a community through any kind of satellite or wireless technology as was possible through fiber. The UAC would probably agree with the comments that were made about the status of obsolescence. Mayor Fazzino said some concerns had been raised that the City might be buying too much bandwidth for the needs of much of the community. Mr. Johnston said the needs of the majority of the community at the current time versus the needs of the community in the future was the issue. Mayor Fazzino asked for the UAC's perspective on the issue of the public versus private role. Many members of the public expressed concern about the City's participation and what it portended in the City's role as opposed to private competition. The issue was raised that the City might be in the position of regulator, competitor, and provider of services. Based on the recommendation of the P&S Committee, there was an opportunity for private sector
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participation in the system, once the trial was over with a clearer idea about the needs of the community. Mr. Johnston agreed. For purposes of controlling the cost with a rather modest trial of 70 to 160 homes, a single ISP might need to be signed up to make the economics work with such a small group. The concept should not be confused with the idea that in the long-run with proven success and expansion, there would be the desire to limit to a single ISP or IAP. The intent would be to create competition. There was no conflict in terms of the City building the fundamental infrastructure and handling it as other utilities. He could understand why some businesses might prefer to own a monopoly and, although not currently economical, wanted to preserve the right to do so in the future. There was not a conflict. If fibers went to every home and people decided to get cable or telephone over the same fibers, he would be back to the Council stating her opposition to the City providing such service and would argue in favor of private enterprise. It was true that in the short-term, the City had competing technologies for providing essentially similar or competitive services, although not at the same speed. MOTION: Council Member Kniss moved, seconded by Schneider, to proceed with the Universal Telecommunications Service Request for Proposal and the Fiber to the Home trial on a parallel track. The alternative represented the recommendations of the Utilities Advisory Commission and the Policy and Services Committee. Council Member Kniss said the staff report (CMR:162:99) indicated various alternatives, but the P&S Committee was interested in moving with Alternative 3, to proceed with the UTS-RFP and the FTTH trial on a parallel track. Issues raised during the current meeting ranged from why to conduct a trial, what difference it would make, what it would show, and the timeframe. In early 1994, Palo Alto was the first city to have a website. At the time, the City was not sure what the Internet was or what a website would mean. For a City that owned its own utilities for 90 years and had its own website for four or five years, it was not an enormous leap to take the City to a trial of fiber. Mr. Johnston was articulate about what the fiber would or would not do for the City. There was an inherent expense to the trial. In prior minutes, the observation was made that there were times when it was important to just "do it" rather than employ a consultant and continue to discuss it. If the trial failed, it was not an enormous amount of money to invest in a technology that drove the Silicon Valley and the entire country. Some of the advantages included receiving consultant feedback and traffic impacts. Many people were able to work out of homes or change working hours and days, which made a difference in traffic and parking. The Council needed to provide direction regarding how to proceed. The best support seemed to come from a medium-sized area and the Community Center. The Barron Park area had a real interest and there might be ways to pursue
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that. Staff needed to return with a Budget Amendment Ordinance (BAO) along with the RFP. The trial was an opportunity, for Palo Alto to be one of the first cities to take fiber to residences. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add: test Αmedium trial area≅; Community Center area; return to Council with a Budget Amendment Ordinance and an RFP; staff to return at the end of the trial with an evaluation of market assessment, legal issues, technical feasibility, cost of construction and operation staffing, contracting, and payback time (range of 5-8 years). Council Member Schneider said Council Member Kniss covered all of the issues except one. The proposal had seen an overwhelming amount of public support in the neighborhood in which it would serve. She thought the City would be overwhelmed by the number of people wanting to participate. Council Member Rosenbaum offered a somewhat different perspective. He attended the California Municipal Utility Association (CMUA) meeting a few weeks prior, before which time he had not objected to a one-neighborhood test with the City getting its money back. However, at the CMUA meeting, he attended a telecommunications session where he questioned four people involved in telecommunications, all of whom had a very strong public policy rationale for cities being involved in telecommunications similar to viewpoints expressed. He asked whether fiber to residences was planned or whether they knew of anyone who was doing so. The four had not planned to do so nor had they heard of anyone who planned to do so, the reason being economical. The city of Alameda was considering what to do and had put a measure on the ballot to determine whether the community was interested in proceeding with a city system, and the measure passed. The impetus was mainly for cable. No plans were made to put fiber to homes except in special cases. For most communities, a hybrid system with the provision that people who wanted to pay the extra could have their own fiber was probably the way it was likely to work. The City would get to that system if it proceeded with Alternative 1 and the UTS-RFP. The FTTH trial would be a diversion which, if structured properly, would not mean a great loss of money but was not the way the City should proceed. If Alternative 1 was adopted, FTTH could be tried. Internet terminals could be hooked up to the fiber in the libraries where hundreds of people could try out the high-speed system. Opposition was expressed with Alternative 3 and, if insufficient votes were received, he planned to offer Alternative 1. Council Member Huber supported the motion for the trial but had concerns about the City becoming a municipal utility for telecommunications. Mr. Johnston's statement about the necessity of the City to take that direction was an honest and correct one to make. It was easy to compare utilities, but the existing water and
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electricity utilities were monopolies or would be until deregulation. The telecommunications or data transfer was not something people had to have. Many people would be concerned about the potential, not the trial, of a downstream, multi-million dollar infrastructure to serve a relatively small number of people. The 18 or 19 percent response would need to increase. However, if levels were insignificant, the community would not support a utility to provide the service. The people who were truly interested should be diligent to get intense penetration, which was probably the only way to sell the item to the community as a whole and for Council Members when considering whether to proceed. The democratic process was slow and the City was not interested in making a profit. He had much faith in private industry and suspected in ten years it would become easier to communicate, probably without wires. The results would have to be very good if the City were to proceed any further than just the localized area. Council Member Schneider was concerned about adding more time to the process. Council Member Mossar said Transportation staff could examine various potential funding, all of which were prescribed by law as to use. Staff could indicate the funds available for the particular use and what the application process involved. Ms. Fleming said if the intent was to limit FTTH to one area, Council Member Mossar was correct and Transportation staff could look into the one area. Council Member Mossar supported the motion enthusiastically. The trial would be very good, from which something very exciting could result. Vice Mayor Wheeler was concerned about moving ahead with the trial. Although in support of FTTH, since there was information to be gleaned, the Council should not give the impression it was committing itself to a $30 million investment to wire the City. Council Member Kniss said implicit in the trial was the fact that it was just a trial. Ms. Fleming suggested including the wording in the motion based on a experiences when staff was left to interpret. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER that Alternative 3 be more specific to a five-year payback period with reasonable assurance through contractual compliance of payback. Further, staff be directed to return with information on grant funding possibilities (vehicle miles traveled reduction). Further, that the City was not committing itself to a $30 million investment to wire the town, but was only a trial.
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Vice Mayor Wheeler had not wanted anyone in the public to leave with the impression that the City was ready to take the next step, even though there were enthusiastic individuals wanting the entire community wired by the City. The steps the Council took should be clear. Council Member Ojakian said focus was placed on the FTTH trial, which was where interest was expressed from the community and where the discussion had been. He would not want to see any further delays in the UTS-RFP process. A decision was made in February to proceed with the UTS-RFP but, because of the trial which would allow staff to develop the RFP, some people said the City should install fiber citywide. That was not where he or several of his colleagues intended to go. Focus should remain on getting the UTS-RFP out, part of which should emphasize a strong interest in connecting to residential homes. In the meantime, the City was conducting a trial that could provide information for whoever responded to the RFP. An attempt was being made to provide a service and get people connected to the Internet or data communications. The Council voted against joint powers involvement with Cable Co-op, so there was a track record of not wanting to get involved. The Council had to decide whether to act in a practical or visionary way. The Council was willing to take the visionary risk but would not want anyone to extrapolate it out beyond the trial. Mayor Fazzino supported the motion. Council Member Kniss made a good case for the proposal. The City's position was facilitating the creation of a communications infrastructure throughout the community, which was a proper role that would not interfere with the ability of PacBell or others from playing a significant, long-term role as a business partner with the City or providing competitive services to residents of the community. The most important aspect of the proposal with respect to public policy was that the City was in effect addressing the very important principle of universal service, which was one of the four or five principles of the initial telecommunications or data communications policy several years prior. The fiber optic ring was a decision on the Council's part, and he was disappointed with others that the City was not able to identify many business partners. At the same time, the concerns of the fiber ring at the outset had to do with universal service and the fact that most of the use of the ring related to businesses and other large customers. FTTH was a way for the City to begin to make sure service was provided throughout the community. The trial would provide the City with significant information about the degree of customer interest, behavior, usage. The City would not be overwhelmed by wireless over the next years, so there was no need to worry about technical obsolescence, which was one of his concerns at the outset of the process. He would have preferred a more flexible payback proposal of five to eight years, since he would not want the concept to fail on the basis of an inflexible payback system. On one hand, the City wanted to make
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sure individuals were committed and willing to put resources up front. At the same time, he encouraged a reasonable payback process. Five to eight years seemed more reasonable than five years. The City was not looking at a significant financial risk. There would always be someone who wanted to step forward and provide the service. After the trial, more information would be known about interest and the City's role. PA-FiberNet, the Community Center neighborhood, and the Barron Park neighborhood were applauded for the grassroots effort. What was particularly unique about the FTTH effort was that, in addition to wide community support, the quality of information was outstanding and put the Council in a better position to make the decision. He appreciated the fact that the interest group had focused on the intellectual aspect of the discussion, providing the Council with excellent data. The UAC was also thanked. The UAC played an important role in getting the City where it was. MOTION PASSED 7-1, Rosenbaum Αno,≅ Eakins absent. Mayor Fazzino announced that Item No. 18 would be continued to a date uncertain, and Item No. 20 would be continued to the April 12, 1999, City Council Meeting. 18. The Utilities Advisory Commission re Requested Guidance on the
Utilities Advisory Commission=s Role in Telecommunications Item continued to date uncertain. ORDINANCES 19. Approval of Cost-Sharing with the City of Menlo Park for the Second Phase of the San Francisquito Creek Bank Stabilization and Revegetation Study City Manager Fleming said staff was able to get Santa Clara Valley Water District (SCVWD) participation, and the Council should not be concerned about where the issue would rest when the Joint Powers Agreement (JPA) was formed. A representative from Coordinated Resource Management and Planning (CRMP) was present earlier in the meeting and wanted her support given to the recommendation. Council Member Ojakian asked whether both Menlo Park and SCVWD approved similar amounts already. Ms. Fleming said Menlo Park had put up the entire amount initially because the work had to begin on a good faith that Palo Alto would share in the costs. However, the SCVWD agreed to participate, so the City was paying the same as the SCVWD. MOTION: Council Member Mossar moved, seconded by Wheeler, to approve the staff recommendation as follows:
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1. Grant approval for a subsequent cost-sharing agreement with the City of Menlo Park, which will provide a 25 percent contribution of the funding for Phase 2 of the San Francisquito Creek Bank Stabilization and Revegetation Study (Study). 2. Approve a Budget Amendment Ordinance in the amount of $61,836 from the Storm Drainage Fund Rate Stabilization Reserve to provide the necessary funding for Phase 2 of the Study.
Ordinance 4553 entitled ΑOrdinance of the Council of the City of Palo Alto Amending the Budget for the Fiscal Year 1998-99 to Provide an Additional Appropriation of $61,836 for the Second Phase of the San Francisquito Creek Bank Stabilization
and Revegetation Study≅ 3. Authorize the City Manager to negotiate and execute a cost-sharing agreement with the City of Menlo Park for Phase 2 of the Study. MOTION PASSED 8-0, Eakins absent. COUNCIL MATTERS 20. Council Members Dick Rosenbaum and Vic Ojakian and Mayor Gary Fazzino re Joint City-School District Project to Add Gymnasium Facilities at the Middle Schools Item continued to April 12, 1999, Council Meeting. 21. Council Comments, Questions, and Announcements ADJOURNMENT: The meeting adjourned at 11:30 p.m. in memory of
Helen Tao and Council Member Eakins= mother. 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
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available for members of the public to listen to during regular office hours.
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