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HomeMy WebLinkAbout1987-06-01 City Council Summary MinutesITEM Oral Communications 57-269 Consent Calendar 57-270 1, Resolution 6612 Approving an Application 57-270 to the United States Department of Housing and Urban Development for Rental Rehebili- tation Program Grant Funds 2. Ordinance for First Reading amending Section 4.32c110 of the Palo Alto Munici- pal Code to Change the Prohibited Hours for Solicitation of information for Com- mercial Purposes to Six p.m., until Nine a.m. 3. Ordinance 3752 Repealing Section 5 of Ordinance No. 3716, an Emergency Ordinance Amending Portions of Title 17 of the Palo Alto Aunicipal Code 4.� Ordinance 3753 Amending Ordinance 3437 and Amending Section 18.08.40 of the Palo Alto Municipal Code (The Zoning Map) to Change the Classification of Property. Known as 630 Lytton Avenue from RM-5 to PC 5. Ordinance 3754 Amending Chapters 16.24, 16.48, and 18.90 of the Palo Alto Munici- pal Code Regarding Fences, and Fence Variances CITY COUNCIL MINUTES PALO ALTO CFTYCOUNCILMEETINGSARE BROADCAST LIVE VIA KZSU-FREQUENCY9O.1 ON FM DIAL --- Regular Meeting June 1, 1987 P A U 6. Finance and Public Works Committee Recom- mendation re Council Appointed Officers Support Staff Classification and Benefits that the Matter be Referred to the Council's Personnel Committee. 57-270 57-270 57-270 57-271 57-261 "6/01/87 ITEM PAGE Agenda Changes, Additions, and Deletions 57-271 6-A (old Item 9) Request of Council Members 57--271 Bechtel, Fletcher, and Klein re Resolution Opposing Action on AB 1710 (Costa) Until Completion of Statewide Water Policy Consensus Recess 57-272 7. Palo Alto Unified School District/City of 57-272 Palo Alto Liaison Committoo re School Lease Proposal 8. Finance and Public 'forks Committee Recom- 57-290 mendation re Utility Users Tax Adjournment at 10:37 p.m. 57.297 Regular Meeting Monday, June 1, 1987 The City Council of the City of Palo Alto met on this date in the Council Chambers, 250 Hamilton Avenue, at 7:35 p.m. PRESENT: Bechtel, Cobb, Fletcher, Klein, Levy, Patitucci, Renzel, Sutorius, Woolley Mayor Woolley announced a Closed Session re Employer/ Employee Relations was held in the Council Conference Room at 6:30 p.m. ORAL COMMUNICATIONS 1. Ben Bailey, 171 Everett, said the new Waiver of Liability and Indemnity Agreement forms seemed reason- ably fair and just. The original form required parents to defend the City against their own injured children and offended him greatly. He questioned the competency of the City Attorney. 2. Michael fair, 111 Tennyson Street, spoke in regard to the Golden Triangle Task Force. He provided each Council Member with a copy of a traffic ordinance from the City of Pleasanton (on file in the City Clerk's office). Palo Alto t'eeded an inexpensive way of handling traffic problems. Paying for square footage, building close to transit facilities, or trips generated Was a fee businesses should not have to face, and any of those proposals would deter current and new businesses in the City. The Pleasanton ordinance solved traffic problems for the City and surrounding areas. It was simple, inexpensive, and effective and was the type of ordinance Palo Alto should be considering instead of the Task Force recommendations. Reduction it vehicle trips and benefits derived from reduced traffic congestion, vehicular emissions, energy consumption, and noise levels, could make Palo Alto an attractive and conve- nient place to live, work, visit-, and do business. The ordinance did not -propose any fee on a project. The ordinance monitored ail businesses on an annual basis and suggested methods to meet the ordinance goals. Any decision on the current Task Force proposal should be put on hold and an ordinance similar to Pleasantos should be proposed, then passed. A .commission to study the proposals would not need to be_enacted.. 57-269 6/01/87 CONSENT CALENDAR Council Member Levy would not participate in Items 2, 3, 4, a n d 5. Council Member Fletcher asked to recorded as voting "no" on Item 2, Ordinance to Change the Prohibited Hours for Solici- tation of Information for Commercial Purposes to 6:00 p.m. until 9:00 a.m. Council Member Bechtel asked to recorded as .voting "no" on Item 2, Ordinance to Change the Prohibited Hours for Solici- tation of Information for Commercial Purposes to 6:00 p.m. until 9:00 p.m. MOTION: Council Member Klein moved, seconded by Cobb, approval of the Consent Calendar. 1, RESOLUTION 6612 entitled "RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO APPROVING AN APPLICATION TO THE UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOP- MENT FOR RENTAL REHABILITATION PROGRAM GRANT - FUNS" (CMR:282:7) (412-01-01) 2. ORDINANCE FOR FIRST READING entitled1 "ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING SECTION 4.32.110 OF THE PALO ALTO MUNICIPAL CODE TO CHANGE THE PROHIBITED HOURS FOR SOLICITATION OF INFORMATION FOR COMMERCIAL PURPOSES TO SIX P.M., UNTIL NINE A.M." (409) 3. ORDINANCE 3752 entitled "ORDINANCE OF THE COUNCIL OF THE CITY OF. PALO ALTO REPEALING SECTION 5 OF ORDINANCE NO. 3716, AN EMERGENCY ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING PORTIONS OF TITLE 17 OF THE PALO ALTO .MUNICIPAL CODE" (1st Reading 5/18/87, PASSED 7-0, Levy, Sutoriuc absent) (1440-01) ORDINANCE 3753 entitled "ORDINANCE OF THE COUNCIL OP THE CITY OF PALO ALTO AMENDING ORDINANCE 3437 AND AMENDING SECTION 18.08.40 OF THE PALO ALTO MUNICIPAF., CODE (THE ZONING MAP) . TO CHANGE THE CLASSIFICATION OF PROPERTY KNC-bN AS 630 LYTTON AVENUE FROM RM-5 TO PC" (1st Reading 5/18/87, PASSED 7-0, Levy, Sutorius absent) (300) 5. ORDINANCE 3754 entit.led."ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING CHAPTERS 16.24 16.48 and • 18-.90 OF THE PALO ALTO MUNICIPAL -CODE REGARDING FENCES AND : FENCE VARIANCES" (1st Reading 5/18/87, PASSED 7-0, Levy, Sutorius absent) (2.37 -01) 57.270 6/01/87, CONSENT CALENDAR (Continued) 6. FINANCE AND PUBLIC WORKS COMMITTEE RECOMMENDATION RE COUNCIL APPOINTED OFFICERS SUPPORT STAFF CLASSIFICATION AND BENEFITS THAT THE MATTER BE REFERRED TO THE COUNCIL'S PERSONNEL COMMITTEE (501) MOTION PASSED unanimrouslya Levy abstaining on Items 2-5, and Fletcher and Bechtel voting "no" on Item 2. Mayor Woolley would not participate in Item 7, Palo Alto Unified School District/City of Palo Alto Liaison Committee re School Lease Proposal and Item 8, Utility Users Tax, due to a conflict of interest AGENDA CHANGES, ADDITIONS, AND DELETIONS MOTION: Council Member Klein moved, seconded by Cobb0 to continue Item 7, Palo Alto Unified School District/City of Palo Alto Liaison Committee re School Lease Proposal, to continue for 15 minutes. MAKER AND SECONDER OF MOTION AGREED TO BRING FORWARD ITEM 9, REQUEST OF COUNCIL MEMBERS BECHTEL, FLETCHER, AND KLEIN RE RESOLUTION OPPOSING ACTION ON AB 1710 (COSTA) UNTIL COMPLE- TION OF STATEWIDE WATER POLICY CONSENSUS, TO BECOME ITEM 6-A. MOTION PASSED unanimously, Woolley absent. 6-A (OLD ITEM 9) REQUEST OF COUNCIL MEMBERS BECHTEL, FLETCHERt AND KLEIN RE RESOLUTION OPPOSING ACTION ON AB 1710 (COSTA) UNTIL COMPLETION OF STATEWIDE WATER POLICY CONSENSUS (702-06-02) •_..� Council Member Bechtel stressed the importance of ensuring San Francisco Bay/Delta . water policy had all the protections tor water quality and supply. The bill as presently written did not include those protections and should not be voted .out of committee as written. The state administration should continue to work for a development of consensus. MOTION: Council Member Bechtel moved seconded by Fletcher, to support passage of the resolution and approval of a latter to the State Assembly to be signed by the Mayor. RESOLUTION 6613 entitled "RESOLUTION OF THE .0 CIlOF THE CITY OF PALO ALTO OPPOSING ACTION Ott AB 1710 (COSTA) UNTIL COMPLETION OF STATEWIDE WATER POLIO CONSENSUS" 57-271 6/01/87 Council Member Levy asked why the `atter was not brought to Council via the Legislative Committee, particularly when it was first presented to the legislature in March. Couaeil Member Bechtel said she was alerted by, Council Member Renzel that the item was in the Council's packet a week ago. She would have brought it to the Legislative Committee if there- had been sufficient time and she had known about the bill before. The issue did affect the City of Palo Alto because it included the Bay which was right outside their doors. Council Member Renzel commented the item was terribly impor- tant to the Bay. The proper amount of fresh water flow into the Bay was not properly understood at that point, and Council needed to be certain no precipitous actions pre- cluded the ability to control water quality in the vital estuary. MOTION PASSED unanimously, Woolley absent. MOTION: Council Member Klein moved, seconded by Cobb to recess from 7:50 p.m. to 8:05 p.m. to allow time for members of the Palo Alto Unified School District to be present for discussion of items 7 and 8. MOTION PASSED unanimously, Woolley not participating, COUNCIL RECESSED FROM 7:50 p.m. to 8:05 p.m. 7. PALO ALTO UNIFIED SCHOOL DISTRICT/ CITY OF PALO ALTO LIAISON COMMITTEERE SCHOOL LEASE PROPOSAL (902) Vice Mayor Sutorius said there was a tie between Items 7 and 8. Item 7 was the school lease proposal and item 8 the Finance and Public Works (F&FEW) Committee proposal and recommendation regarding a Utility Users Tax the City would place on the ballots At the beginning of the year, Council spent time looking at priorities for how to focus its time, energies, and efforts beyond the business that carne before Council in the ordinary process. In that process, the rela- tionships, cooperation, and mutual opportunities that might exist for supporting the youth, and the processes and the actions affecting the youth and students in the Palo Alto Unified School District (PAUSD), came in for high priority consideration. A year ago, Mayor Cobb proposed Futurecast 2001, a process in which some 70 citizens through a task force and subcommittee process addressed how they -would recommend the City should address the years between now and 2001., and where they might want to be as a City at , that time. They too identified the relationships and inter- dependence between the school system in Palo Alto a►nd th-e 57-272 6/01/87 l City governmental processes. Council Members Klein and Patitucci made a specific proposal for consideration, then - known as the "Grand Lease" plan. That proposal which was discussed in concept form at the Council level, stimulated a joint meeting between .the Council and the PAUSD Board. The outcome was conceptual support on the part of the Board in directing its intent to work in a cooperative effort to see whether or 'not. a lease proposal along the lines of Council Members Patitucci's and Klein's was feasible and something they could support. Likewise, Council indicated it felt the proposal was creative and worthy of the kind of effort both parties felt the City/School Liaison Committee could tackle and try to shape a lease agreement to return to the full PAUSD Board and Council. MOTION: Council Member Klein moved, seconded by Cobb, to approve in concept the proposed Lease and Covenant Not to Develop (Lease) between the City of Palo Alto and the Palo Alto Unified School District. Council Member Klein said the lease before Council was a carefully ,egotiated item, They negotiated at great length with representatives of the PAUSD. Be congratulated all whc. participated and particularly gave accolades to the City Attorney's staff who did a fine job in drafting the lease before Council. The PAUSD Board Members Liz Kniss and Joe Simitian on behalf of the Board were always cooperative. The lease, known as the 'Less Grand Lease" idea, remained the same in concept as when it was first discussed six to eight weeks previously. Basically, the City would be leasing two sites, Jordan and Jane Lathrop Stanford MS), subject to certain rights of the PAUSD to remove one of the sites under certain conditions, and the City would also receive from the PAUSD a covenant not to develop during the 15 -year terra of the lease any of the other four sites in the district that were presently not being used for school pur- poses but for rental. In exchange, the City would pay $3 million to the PAUSD and would receive in return Jordan and JLS to use as the City saw fit during the 15 -year term and a nondevelopment contract from the PAUSD with regard to its other sites. Five months ago, Council Member Patitucci and he listed as their two main priorities the desire to pre- serve in public ownership.much as they were at present, the surplus school sites in the community; and to provide a mechanism to provide additional revenue to the PAUSD. The lease before Council and the funding, mechanism to be con- sidered _under Item 8, met those goals set forth in their memorandum and which were discussed at the joint City Council/ AUSD meeting. and which were approved in concept at that time by both the City Council and PAUSD. The document 57-273 6/01/97 was unique. No one had been able to find other arrangements between cities and school districts, but people all over the country were saying the country's No. 1 priority had to be education for their children, and that was particularly true in California where the spending per child for education lagged the rest of the country rather. dramatically. They could not tolerate the situation and had to do whatever they could at the local level to protect and promote their school district. They money they would be providing under the lease did not go far enough, but it was an appropriate level and would -get the PAUSD to a better, though not perfect, place. The lease, being a unique document, was not easy to negotiate and prepare. There were many different elements to it, and while i't was not unamendable, Council should consider it as a package with the idea it had been carefully negotiated. The lease_ represented many trade-offs, and there was a great deal of bargaining with each side trying to do right by the community and by the children, but also to represent the particular interests of the govenment agency served on by the representatives. He believed the process worked in the end and they could all be proud of the document. He hoped Council would support the lease which was a step forward in accomplishing the aims that Council Member Patitucci and he first outlined and Council approved. The lease also sent a message that none of there were going to sit by idly and let a combination of forces undermine the education of their children. In the various roles they served, they would do their best to provide a better -than - adequate education for their children. If the lease was ultimately put into effect, they would be sendinga signal that they could have a cooperative partnership a:: the local level between City Councils and school districts, could move forward and accomplish things at that level, and could make Palo Alto a better place to live. Council Member Cobb said both Council and the Futurecast 2001 Committee were clear that education was a high priority for the city. The PAUSD's problem -had been one of raising more money . to support educational programs. 'As they looked at the options before them, he believed they carne down to two choices that would. allow the district to at least hold their own: a parcel tax and a utility users tax with the lease arrangement before Council. The parcel tax presented the PAUSD with the plus of retaining full control of all the monies raised by the tax. The obvious negative was, because it was a special purpose tax, it required a two-thirds vote which was difficult to obtain in .t'he best of places for the best of reasons. The utility tax put the PAUSD in the situ- ation of having less control over the flow of dollars which was clearly a concern to them, And less control over the 57 -►274 6/01/87 properties involved because that was the mechanism used to transfer the funds; but had the significant benefit of a 50 percent plus one vote requirement instead of two-thirds. If one accepted the premise of trying to do something for edu- cation, he believed Council Member Klein was right to state it was a very unique and extraordinary undertaking. Once again, Palo Alto could characterize itself as a leader. The objective of the City/School Liaison Committee was to come up with a lease document that was reasonable and fair to both sides. Neither side got everything they would have liked out of the document, and he suspected both sides got messages from their respective colleagues that they had given up too much and were too liberal ire, their conduct of the negotiations. He hoped that was a sign some reasonable balance was achieved. If passed, together with the eventual passage by the public of the companion Utility Users Tax, the City obtained two things from the lease: one, money to help educate the children of Palo Alto and, two, some tan- gible value which was a protection of properties of extreme importance to the community, namely the secondary school sites, either through the direct- leases- or through agree- ments not to develop. The protection of those properties was very important to the community and a dollar value could be attached to it and the lease did that. It was important to the City and he believed the voters would show how impor- tant it was when they voted on the proposal. He commended the document for his colleagues' support. Council Member Renzel congratulated the negotiators for addressing a great many of her concerns with respect to the general proposal. It also addressed other concerns raised during the course of the joint meeting with the PAUSD, and she wasimpressed with the work accomplished. In regard to the potentiality that the PAUSD would terminate the lease to One of the middle school sites and decide not to use it for school purposes, clause 22.3(ii) said that it would be reinstated according to the , terms of "this section." She hoped that meant the lease would be reinstated where it would have been had the PAUSD not pulled it out of the lease. Council Member Cobb -commented there was a disincentive for pulling sites out unless it was for the good reason of returning the to educational use, and the disincentive was that the income to the PAUSD would go down in accordance with the schedule on' the back of the lease. Unless the PAUSD wanted to use the site for.some educational purpose, it was in their interests to leave the site in the lease. 57-275 6/01/87 Council Member Renzel was concerned the provision that offered the site back to the City to complete the lease term would not have to be renegotiated at that point. She said there had been assaults on the Naylor Bill from time to time by school districts who did not like having to sell some of their land at cheaper prices, and she wondered whether there was any benefit to contracting the Naylor Bill provisions in the lease in the event the Naylor Bill itself disappeared during the course of the lease. The City essentially was paying for holding the properties for a long period of time. In the meantime, if the Naylor Bill was repealed, the City would have put itself in the position of not being able to purchase the properties, playing fields in particular. She asked if the City should protect itself for those Naylor Bill opportunities that might not be available at some point. Council Member Klein. said the matter was considered but would have been one of the deal -breaking points. The posi- tion of the lease was neutral with regard to Naylor. If the City had insisted on the Naylor provisions regardless of what happened to the bill in the legislature, Council would not have a document before it that evening. The PAUSD believed Naylor was an unfair bill, and the California School Board Association:. had been working in the legislature to either get amendments`•or to repeal the Naylor Bill. Council Member Fletcher said in some of the City's lease arrangements, some of the lease payments made now would be credited towards any eventual purchase, and asked whether that point was considered. Council Member Klein said the matter was discussed and vehe- mently rejected by the PAUSD representatives. The City still had the existing credits on the leases on the turf, but the idea of extending that concept further was strongly rejected. Council Member Fletcher pointed out the PAUSD .rejected the original idea too. She did not see a reference to how the current turf lease arrangement was going to be folded into the current proposal, or whether the new proposal would supercede the old lease agreements. City Attorney Diane Northway said staff had decided that only for certain purposes would the present arrangement be folded in. However, they had made the Jordan Turf --which would not have been covered by the covenant not to develop -- a separate site, as seen on Exhibit ,I on page 28 of the Lease and Covenant Not to Develop. The portion of the Jordan site for which the City was actually paying the 57-276 6 01/8.7 lease payment was just the buildings and the tennis courts. Except for the interim termination provisions, the - provi- sions of the lease prevailed for the notice period. Under the existing leases, there was a 90 -day notice to terminate, and under the subject lease there were longer termination provisions. Essentially, the subject lease prevailed with respect to the longer termination provisions. There were no duplicative payments. Council Member Levy referenced information supplied in Item 8 relating to the use .of the cash flow that: it could cost the City perha ;s $1.5 million to prepare Jordan and JLS for sublease, and he ewondered if in the negotiations that item was discussed in the sense that it had been- negotiated that any net revenue in excess of $650,000 a year would be divided equally between the PAUSD and the City. He asked if there was aay discussion about first allowing the City to deduct the cost of necessary leasehold improvements in con- nection with those subleases but which would not show up in any future annualized net revenues. Council Member Klein said the provision came about in a dif- ferent way and was, therefore, not approached in the manner suggested. The provision appeared late in -negotiations when the PAUSD representatives were attempting to get more than $3 million a year and was a small compromise. It was unlikely the provision as presently written would produce a great deal of money for the PAUSD but was an indication of good faith that the City was not trying to make a real estate killing on the sites. In light. of those concerns, the City negotiators suggested that anything above the $650,000 plus annual expenses would lee shared evenly with the PAUSD. Council Member Levy said because the $1.5 million up -front money would be encountered by the City in the first several years, was it worthwhile to discuss the revision of the con- tract in that particular area so the City had a chance to amortize that expenditure. Council Member Klein said the City negotiators were very : oncerned about the money to be put in up front. There were previsions in the lease that would return a proportionate amount of the money to the City if the PAUSD reclaimed -prop- erty prior to the -expiration of -the 15 -year term. In regard to analyzing ::he cash -:-flow,. the money generated from the utility tax in the first two years was significantly in excess of the money to be paid to the PAUSD. He believed that was quite appropriate because the City knew the money would be needed for the capital improvements and those matched up. He did not feel it --would be feasible to 57-277 6/01/87 renegotiate that area of the lease along the lines men- tioned/ primarily because the package was delicately constructed package and the change could invite the PAUSD to respond with similar requests on their side. The PAUSD might feel such renegotiation took away something conceded by the City in the give and take of negotiations. Council Member Levy asked if it was possible to add language into the contract to. describe the concept which underlay the lease formula in narrative form in regard to the Consumer Price Index (CPI) increase on page 7. Manager, Real Property, Bill Fellman believed a broader explanation would not change any of the meaning and would not be hard to do. Vice Mayor Sutorius referenced page 2 of the Summary of Lease and Covenant Not to Develop, under Surrender and Title to Property, which said, "The CITY will be responsible for the repair of any damage and the removal of any alterations, additions and improvements that are not in keeping with the use of the site as a school site " The sentence anticipated that at the termination of the lease the property reverted to a school use, and there were provisions in the lease that under certain circumstances the property might not return to a district use. He opined alterations, additions, and improvements that might not be suitable with the use of a school site could turn out to be extremely suitable for a non --district use. Common sense said the City would not be forced to go to the expenditure of making those modifica- tions if the next use was not going to be a district use, and he asked if it would be determined by common sense and good business procedure or whether there was language to protect the City in that event. Ms. Northway replied there . was no specific language that dictated the result expressed it the site was removed from the lease and not reused for school purposes. The only pro- vision that spoke to the restoration of a lease after the termination for whatever cause, was Section 10.1 which spoke to the situation when there was termination. Another provi-- sion was on a contemplation the parties had _that when improvements were made initially and the PAUSD nave its con- sent it would be on terms to which both parties could agree in some circumstances. She did not believe that 'provision wo.1d necessarily coffer the termination because it might. not be contemplated when initial improvements were offered. She did not believe the- situation was covered Specifically in - the lease. .:;;57-278 6/01/87 Council, Member Klein believed Section 20.1 on page 19 covered the general subject. The Summary of the Lease and Covenant Not to Develop was not subject to negotiation between the members of the City/School Liaison Committee. He assumed the summary was not legally binding. Ms. Northway said no, it was the provisions of the lease that were binding. Section 10.1 was the basis of her response to Vice Mayor Sutorius. Council Member Klein regarded Section 10.1 as a little dif- ferent from the summary. Vice Mayor Sutorius said the matter- might require some thought. He was looking for a reasonable assurance of how a ;situation would be handled if a site was not going to be used for PAUSD purposes. Common sense did dictate, and also the. previsions of 10.1 offered the opportunity each time the City went to the PAUSD to certify an alteration, to include a statement that the type of alteration would not need to be removed in the event the property was use for nondistrict purposes after termination of the lease. Council Member Klein said the point was well taken and went to prove the procedure outlined in 10.1 was what the City wanted. The City wanted a flexible procedure because staff foresaw a need for a variety of alterations and improvements and did not want a bureaucratic system requiring the PAUSD to sign off and a negotiation, process every time. They wanted a system that would be more flexible and readily usable over a period of time, taking into account the inevi- table unforeseen problems which arise in connection with making changes in buildings that large. Vice Mayor Sutorius referenced the Emergency Termination provision on page 22, Section 22. 3(b) . The first paragraph concluded with the statement "subject to the following provisions," and meant that the indented (i) through (v) would all have to apply, and he asked what that meant with respect to the City's receiving the opportunity to rake the right of first refusal if, for instance, the (i) where it said, "If District receives a bona fide offer to purchase such Site, District shall give City written notice specify- ing the name and address of the proposed purchaser, the purchase price and all the terms and conditions of the pro- posed sale." It seemed alt were provisos headed with an "i €" associated and raised the question of what it a bona fide offer was not made. The' City would have received the one -year's written notice but would not be receiving any notice of a bona fide offer if, in fact, one was, not sub- mitted or if the District did not market the site, and he 57-279 6/01/87 asked what that would do to the City's opportunity to con- sider whether or not the site ultimately was going to be sold, and what the City should do to protect any rights it might have. Ms. Northway clarified the section attempted to accomplish two things: first, to require that if. the PAUSD was going to terminate a lease under the provision, the City be given a year's notice of that termination in order to make plans, handle adjustments, and deal with any subtenants; second, if a site was going to be removed for sale, the City wanted to be first in line to purchase it site on the same terms and conditions as a real purchaser. Deletion of a few words might make Vice Mayor Sutorius more comfortable with the section. Vice Mayor Sutorius said if Council action was to approve the draft lease in concept, part of the action could be to point out areas for clarification. He shared his, colleagues concerns over the questions of credit for rent paid against a subsequent purchase of the sites and how the get -ready costs were accounted for, and he suggested a purchase credit identical to the purchase credit contained in every existing agreement the City had on lease of open space. Alison Lee, 1241 Harker Avenue, Chairman on the Standing Committee on the Arts and Sciences, supported the City's efforts to work together with the PAUSD to arrive at a solu- tion of benefit to the community as well as to the education of their children. They were concerned with *hat happened at Jordan, had hopes of use of Jordan by arts and sciences organizations, and believed the neighbors would welcome that kind of use. They appreciated the long'and hard work that went into developing the lease. Steven Popell, 14244 Amherst Court, Los Altos Hills, read a letter to the City Council which said, "On behalf of the Committee for Better School Strategy, I wish to convey our gratitude to Councilmen Larry Klein, Frank Patitucci, and Mike Cobb for their efforts on behalf of the children of the PAUSD. Anyone whose primary interest in a tax selection is the welfare of the children must admire the investment of time, energ y, and political courage which these gentlemen have made throughout this process. Their actions have set a standard of selfless dedication and intergovernmeiit.al coop- eration to which future public servants may repair. Larry, Frank, Mike, we app-),aud your efforts and appreciate them more than you know. WiCa all our hearts we thank you for being there when the children needed you." 57-280 6/01/87 i Ken Delmar., 861 University Drive, Director of the Western Valley Theatre School and the Palo Alto Ballet, said they had been in Palo Alto for ten years and were starting to have difficulty with the skyrocketing rent prices. They had 300 students and currently had to teach 8,000 student hours to pay resit alone. He gave Council total support with the proposal and asked Council to support them if the motion passed in getting into Jordan and having use of the gym. He promised if they had a chance to have a building with a decent rent, he could create in Palo Alto a major American dance institution. He would like to have that chance. Louis Fein, 1540 Oak Creek Drive, shared some of his thoughts and feelings as he listened to the lease negotiations --sometimes hostile, sometimes adversary, some- times cooperative --between a team of his city representatives and another team of his School Board repre- sentatives. The negotiations assumed there were two sides, but the two sides were the two sides of him. What he saw and heard negotiated was a contract where one side of him who already paid for the school properties would again pay to the other side of him for the privilege of leasing back to himself his own properties, and paying for the privilege of promising himself he would not develop them. There was a negotiation on who would pay for the costs of litiggatiox, in the event of disagreement and a court case between the two sides, between him and him; of course, whoever won or lost, he would pay. He asked himself under what conditions during the negotiations would the wasteful, hostile, double - taxation process of negotiating lease and say a properties between the City and the District be eliminated. The answer was quite clear: if .the PAUSE) were a school department of the City and the school properties belonged to the City then when a City -owned school property became surplus, the City would use the surplus building for other City purposes and would not be negotiating with itself about raising taxes to fund the leasing of other properties back to itself. It was the foolish way of organizing cities distinct from school districts that caused the unnecessary, wasteful mess now being culminated. Equally important was was a false assump- tion expressed or implied by Council Members Klein, Cobb and sometimes Patitucci that throwing dollars at any school district would maintain and even enhance the educational programs and duality in that district, in particular the PAUSD. That was not a defensible statement in view of recent history in Palo Alto -and other places. They in Palo Alto had cut programs and educational quality even as they spent per student within the 98th percentile in California, even though they had got 102 percent of last year's income from the State, even as enrollment declined,: even as they got more lottery :moneys than anticipated, and even as they 57-281 6/01/87. depleted a significant portion of their property fund. With all that, in the past they had cut programs and quality. What they hid done, however, was to increase the price of education as its quality and quantity was reduced. They had done that for only one reason, and that was an increase ir, all employee salaries usually by a fixed percentage, some- times far in excess of .the CPT. Since salaries in a service -oriented institution were between 85 and 90 percent of the expenses, it was clear that with a given budget there was an inverse proportionality between salaries --the major expense ---and the service one could provide. Vice Mayor Sutorius noted several members of the PAUSD Board were now present. Council Member Patitucci found it difficult to separate his comments between Items 7 and 8. Council Members Klein and Cobb summarized the specifics very well, and he was in favor of the lease as negotiated. Council had before it the result of a process where the City Council under the leader- ship of Mayor Cobb took a retreat, spent sometime thinking about what was important, went through a priority -setting process in which they heard from a variety of constitu- encies, and came out with two important priorities to deal with in the year; one to see if there was any way the City might be of some assistant to the PAUSD and to the education process in the community; and, two, to deal with questions of how the streets, sidewalks, and other infrastructure of the City were beginning to deteriorate and what could be done. No one quite knew at the time what any of that meant, but they set out to do something. The government process involved a lot of trial and`error and a number of processes that were not exactly predictable. To complicate things, they were dealing with two government agencies, both of which had clear constituencies and somewhat different res- ponsibilities trying to work something out together. They were at., major milestone in accomplishing something that, from a governmental standpoint, was active rather than reactive. The two items before Council were a- lease with the PAUSD and a utility tax which would fund the lease. Also, importantly they could not lose sight of the fact the utility tax would fund the infrastructure improvements found to be the most lacking, i.e., the City street and sidewalk programs which did not have built-in repair and replacement mechanisms. If the items were passed, Council would be able to offer the PAUSD a choice of that option compared to the other option they had in front of them. In his own analys- is, he believed it was the better option, but that was not Counci.i'a decision to make. Aftel, that evening, a number of steps were still invoived: the PAUSD had to approve the 57-282 6/01/87 option, and the people of Palo Alto would have an opportu- nity to vote. In his view, it was a positive thing to be putting before the voters of Palo Alto; it was unique in that it brought together two government agencies to resolve a common and community problem. He hoped Council would go ahead with the proposal that evening and continue the active process of trying to make the community a better one for all. Council Member Cobb commented on the point raised bv Mr. Fein on the -concept of having to pay for the school sites twice. The practical and legal realities were that the PAUSD was a property owner, and there was no legal or prac- tical way the kinds of things that -point raised couz_d ever be accomplished. The PAUSD was like any other property owner. It had an asset and if the City wished to -have that asset, it needed to compensate the property owner. AMENDMENTS Council Member Levy moved, seconded by Klein, to request staff in the final development of the lease to add language to paragraph 6.4 which would describe the lease formula in narrative form. Council Member • Patitucci clarified the amendment was descriptive and not substantive. Council Member Cobb noted there was a graph in the lease which spelled out formula in precise terms numerically. Council Member Renzel believed a narrative form would end up repeating the formula because the formula itself did describe the underlying mechanism. She hoped a brief sum- mary. of the underpinnings of the formula rather than a step -by --step repetition of the formula in words. AMENDMENT PASSED unanimously, Woolley °not partici- pating. Council Member Levy concurred with Council Member Patitucci's about the significance of the action Council was about to take, and also mentioned that essentially and fundamentally Council was trying to put together the best package possible for the community to vote on. It was not the City's nor the PAUSD's proposal but was a ,joint working out on both parts in c:der to be able to offer the voters of their community the best opportunity to provide good funding which would do two things of benefit to them all: 1) provide more funds to the PAUSD which was having difficulty obtaining the funding he believed the residents of the com- munity wanted to provide in order to give their children the educational level they had over the years; and 2) it would 57-283 6/01/87 provide more funds for the infrastructure improvements. Both of those concepts were worthwhile. One was fundamen- tally a City obligation and the other fundamentally a PAUSD obligation, so it was worthwhile and necessary to work together towards a common purpose. Council Member Fletcher was not confident the City was pro- tecting the ultimate open space on the school sites under the current lease proposal. As mentioned by Council Mernber Renzel, Council was not sure the Naylor Bill would be there after, or even up to the expiration of the lease arrange- ment. AMENDMENT' Council Member Fletcher moved, seconded by Renzel, under Section 21, Naylor Bill Allocations, the second line to be amended to allow for provisions of the Naylor Bill to be effective regardless of whether the Bill was still law at the State level. Council Member Fletcher said the intent of. the amendment was to have something to show -for putting so much money into the lease contract, because- the City could lose the open space which was ono of the purposes of the whole arrangement. She. would like to have. some assurance that - the City had an opportunity to purchase the site at a cost the City could afford if the sites became available for purchase. Council Member Renzel said the point was apparently negoti- ated at great length and was a difficult point for her, On the whole the City benefited from the general provisions of the lease agreement, but she was troubled that while the City was paying some $166,000 a year to maintain the legal status quo of a number of school sites, they were running the clock on whether or not they would have the Naylor options and were also not building up any equity with the lease payments or the contractural payments for the cove- nants not to subdivide, etc. Certainly the support of the public for the overall lease agreement and the Utility Users Tax was based on an assumption the open space would continue to be available. She was not certain the city would be able afford to buy the open space without the Naylor provisions. She was philosophically in agreement with Council Member Fletcher. Council Member Klein did not necessarily disagree with the philosophy of the amendment but it should be kept in mind that in any such agreement there were provisions one might -not totally agree with. He believed the provision was a red flag to the PAUSD represent tives, and it would be extremely difficult to negotiate its inclusion without bring willing to make other: substantial concessions. They were note 57-284 6/01/87 talking about mere concepts but about potentially sig- nificant dollars.. Moreover, he urged his colleagues to consider what the City was getting for 15 years which was a long time. They were getting a series of guarantees that the PAUSD sites not being used tor schools in the community would remain- as they were. The community was getting its money worth in a variety of different ways. The money was being used for the schools, and they were getting the pro- tection that the open space and .the buildings which the community regarded as community assets,. would remain in com- munity ownership for the 15 years. He believed they were getting an arrangement the community could support and the .guarantee was sufficient. Council Member_ Levy opposed the amendment because he did not look upon the issue as a deal in "City funds" being paid to the "school district„" Something much more fundamental was going on, the community making a statement about how it wanted its funds overall to be spent for community purposes. Because of that, they as a City did not have a special investment similar to investments made in the past. Rather, they were presenting a package that would be up to the pub- lic to vote on and, therefore, did not have quite same kind of interest they had in past leases. AMENDMENT FAILED by a vote of 1-7, Fletcher voting "aye," Woolley 'not participating.' Vice Mayor Sutorius queried what kinds of considerations would be at issue with a rental credit process identical to the process currently existing in each of the open space leases with Cubberley, Jordan, Garland and the pending lease with Ohlone. AMENDMENT: Vice Mayor Sutorius moved, seconded by Renzel, that staff be directed to incorporate the necessary language where appropriate to provide for a rent credit in the event the City subsequently purchased any or all of the lease of covenanted properties: 1. Site specific rental payments made by the City shall be credited to the purchase price of such properties on the following schedule: first year, 100%; second year, 50%; third year, 37-1/2%; all years thereafter, 0%; 2. The allocation of such payments shall be calculated in accordance with Exhibit "1," Allocation of Payments for Individual Sites; 57-285 6/01./87 AMENDMENT CONTINUED 3. The rent payment credits are separate from other existing agreements or their successors consistent with provisions with Section 21 and 29 of this draft lease. Vice Mayor Sutorius referred to Jordan as an example and used a viewgraph to show the lease payments to be made in millions of dollars in the first, second and third year as shown in Scenario 1 in the staff report (CMR:285:7). In the three years, $2,0641090 would have been paid in lease pay- ments for Jordan. The existing formulas in open space leases applied 100% credit first year, 50% second year, 37-1/2% in the third year which produced $1,271,000 in rent credit. He emphasized that credit to purchase would only apply in the event a property were removed from lease tor nondistrict use purposes, i.e., .0,here it was not being returned for education purposes- The contract provided for. the City to have first right of refusal in acquiring the property. He believed it was a prudent arrangement from a fiscal responsibility standpoint to incorporate some reason- able rent credit process and it was consistent with all existing leases between the City and the PAUSD. While he recognized Council Member Cobbs response to some of the perceptions and attitudes being expressed, he believed it was fair to understand and appreciate that the pr=operty tax and sales tax payers and who would be the utility tax payers had good reason to look to Council to be responsible in terms of what provisions were made in the remote event the property reverted to the PAUSD for nondistrict purposes and went to sale. For the moneys placed into the process, some recognition of the one-time costs referred to by Council Member Levy and the risk associated with managing the prop- erties and the real quest i.on in terms of what revenues could and would be generated ali combined to make it appropriate to have a rent credit formula. Council. Member Klein opposed the amendment. He associated himself with Council Member Levy's earlier comments. He believed the amendment was almost a stalking horse for stating opposition to the lease concept and that such a pro- vision could not be expected without a substantial revision to other terms. The amendment was inconsistent with the arrangements being negotiated with the PAUSD. It was not a "common" commercial practice for a tenant to get a credit on a potential purchase. It was sometimes a commercial practice but was by no means uniform. When the City nego- tiated the credit on the current open space leases, it was a sore point with the PAUSD and to use it as an example could be misleading. He urged his colleagues to oppose , the amend- ment. 57-286 6/01/87 Council Member Fletcher applauded the amendment. The amend- ment was a responsible way to put the proposal forth, especially since there was no assurance of the Naylor provi- sions. The amendment enhanced passage of the item at the ballot because the City's financial situation could be a lot less in 15 years. Of course the PAUSD would be opposed to the concept, but they knew they were getting a good deal from the lease arrangements. She urged her colleagues to vote in favor of the amendment. Council Member Renzel seconded Council Member Fletcher's comments, -The amendment would make her feel better about the risk the City was taking with the Naylor provision as it remeined in the lease. The amount was a small parte of the overall lease payments and was reasonable for the City to expect. There were -demands on the City's- budget for a variety of things and Council was choosing to use it for the -subject purpose. The purpose was a good one but it would compensate the City to know that some of the money was not gone forever but would be usable, particularly against property that would escalate many -fold by the time it might be available for purchase. In keeping with tide trust of the public in passing a measure for purposes, of preserving school sites, the amendment was, reasonable. Council :Member Bechtel supported Council Member Klein and others who said the motion was a caretully-negotiated com- promise with representatives of the PAUSD. The City was not giving up but was gaining control of certain school sites and the assurance the open spaces- would remain, As Council heard at length some weeks ago, the neighbors were concerned the Cubberley School site remain an open space and 15 years was a good period tirne. She urged her colleagues to oppose the amendment. Council Member Cobb was torn between his philosophical sympathies for the amendment and the existing realitieS.e He believed the amendment was a deal -breaker. He felt the PAUSD would prefer a parcel tax except for the two-thirds requirement because a parcel tax guaranteed a certain amount of money independent of whether a school site was in use. The City's proposal was tied, and if a site was taken out of use, the PAUSD's income would fall. During negotiations the subject arose of whether the stream of $3 million could still be maintained if the PAUSD pulled a site back for some -kind of district use, to which his answer Was an emphatic "'no," unless the City got some Oonsider.ation for the -$3 Million. One possible consideration of another piece of property was not well received by the PAUSD, so he offered a proposal akin to the amendment which received an even loss enthusiastic response and, in fact, 'stopped the entire 57-287 6/01/87 discussion, The PAUSD felt so strongly that the City would not have a lease if the amendment passed. If they were closed, he did not believe either Jordan or JLS could be leased for the kinds of numbers the PAUSD would like to see and, as a consequence, those sites would soon be sold for development. If that scenario took place, the City would purchase the open space but the remainder would be sold off for various kinds of development after long and painful negotiations with the City in hearings, etc. The practical end result of the lease not going through would be those sites would be lost. Faced with the difficult tradeoff, he had to look at the practical realities. The lease needed to go through because he wanted to preserve the sites. Vice Mayor Sutorius firmly believed the caliber, concern, and ultimate reasonableness of five mebers of the PAUSD Board were such that the amendment would not be a deal - breaker. He would vote "yes." AMENDMENT FAILED by a vote of 3--5, Menzel, Sutorius, Fletcher voting "aye," Woolley "not participating." Vice. Mayor Sutorius asked the City Attorney for the concept of language which would tighten up the Emergency Termination Section 22.3(b). Ms. Northway suggested removal of the phrase "At the time of such notice," and adding to 22.3(b)(iv), "Then, if the District sells such site, the City shall retain possession under the Lease until one year from the date of the notifi- cation that the District will be terminating the Lease under subsection (b) hereof." Basically, the language was a more definitive division of the concept of the right -of first refusal in the one-year notice provision. As stated, the section really combined two concepts: The first was when emergency termination occurred, the PAUSD would give the City one year's notice that they were going to sell the site, which was in the lease before there was any discussion of a right of first refusal. Then, the City added the con- cept of the right of first refusal to purchase the site, and the remaining provisions were added to accomplish that. She did not, believe adding the language would change the intent. Vice Mayor Sutorius asked for clarification on the use of the word "concept," in order for Council to be clear on its final action and what that communicated to staff and the PAUSD. 57-288 6/01/87 Ms. Northway said Council was essentially expressing that the lease with its essential terms, conditions and detail was one Council would execute providing they had sufficient funding after November. Since the term of the lease did not commence until January 1, 1988, it was anticipated Council would take formal action approving the lease sometime in December. Council's action was a conceptual approval rather than an actual approval and an authorization to sign. Council Member Klein asked if it was fair to say that all negotiations were based on the idea that the lease would be the final document. If both the City and PAUSD approved the lease in "concept," it was the document that would go for - ,ward and would be a formality when it returned in December. Ms. Northway said yes. Council Member Cobb asked if the purpose of the language was to say that the City had the opportunity wi;.hin a defined period of time to essentially match any offer. made. .They wanted to be clear if the PAUSD took the property back and wanted to put it up for sale, the City had an opportunity to Match the offer to protect of the City so they could have the property if they could meet the market prices Ms. Northway said yes, but another purpose of the section was in any event the City be given a year's notice if that was going to occur. MAKER AND SECOND AGREED TO INCORPORATE IN THE MAIN MOTION LANGUAGE "FURTHER, TO DIRECT STAFF TO REVISE PARAGRAPH 22.3(b) TO DELETE THE LANGUAGE 'AT THE TIME OF SUCH NOTICE,' AND IN PARAGRAPH 22.3(b)(iv) TO ADD LANGUAGE, 'THEN, IF THE DISTRICT SELLS SUCH SITE, THE CITY SHALL RETAIN POSSESSION UNDER THIS LEASE UNTIL ONE YEAR FROM THE DATE OF THE NOTIFI- CATION THAT THE DISTRICT WILL BE TERMINATING THE LEASE UNDER SUBSECTION (b) HEREOF.' Council Members Klein assumed the City Attorney would be able to get the language transmitted to the PAUSD the next day. Mt. Northway said yes. Vice Mayor Sutorius believed the discussion conveyed the kind of concern that existed on Section 10.1, Alterations and Improvements and had confidence the resulting documents, or any documents issued once the contract was in force, would d - meet -r the .a.,..,.. ..��a spirit of concern he raised. He clarified the main motion as amended was to approve in concept the 57-289 6/01/87 draft lease between the PAUSD and the City of Palo Alto as recommended by the City/School Liaison Committee for a school lease proposal, understanding certain language word- smithing might . occur and be communicated with the PAUSD, and the ultimate contract would return potentially in the December time frame depending on financing actions from the outcome of any ballot measure associated with the subject. MOTION AS AMENDED PASSED unanimously, Woolley "not par- ticipating." 8. FINANCE AND PUBLIC WORKS (F&PW) COMMITTEE RECOMMENDATION RE UTILITY USERS TAX (CMR:285:7) (408-02-03) MOTION: Council Member Klein for the Finance and Public Works Committee moved the City Council adopt and direct staff to place on the ballot a proposal to enact a 5 percent utility tax on all utilities, with that tax reducing to 3 percent on all City utilities above $800,000 annually and then further reducing to 2 percent on all City utilities above $2,400,000 annually. The figures of -$800,050 and $2,400,000 to be indexed to the Consumer Price Index (CPI) from year to year. Council Member Klein said the item was a companion measure to the lease proposal just approved by Council. The F&PWV` Committee considered several different alternatives for a tax; had input from various members of the public, particu- larly the Chamber of Commerce; and responded to their input in a variety of ways, particularly the three-tier 5,3,2 concept. However, the recommendations were not those sug- gested by others but arrived at by the F&PW Committee. The proposal would produce $4.35 million per year, and that number was not arrived at Lightly. The F&PW Committee wanted a tax that would produce approximately that, amount because such amount would, after the payments to the PAUSD on the lease, leave the City over time with approximately $1 million per year to he used for such projects as. the needed.. sidewalks and street improvements. He noted that "all utilities" included telephone. Telephone had a different configuration and obviously the City did not have its own telephone utility, but the telephone companies did collect for the other communities in the State that levied a utility tax, which would be the case in the subject situation. Thus, the reduction of ttie tax to 3 percent and 2 percent pertained .only to the utilites the City managed and admin- istered because the F&,?W Committee was concerned about ease of administration, and having to administer a three-tier tax on the telephone company level would have been a difficult if not daunting task. Thus, in arriving at a concept to reduce the ourden on the City's heaviest utility tax payers, 57-290 6/01/87 the F&PW Committee felt it would best to do so only on those utilities over which the City had direct control. Many other concepts were considered. The F&PW Committee origi- nally had an idea for. a Lifeline concept, but atter study and staff input, found it would probably be more costly from an administrative standpoint than the amount of money it would save the people who should benefit. He hoped his colleagues would find the proposal acceptable. Council Member Renzei asked what happened after 2002, and whether the authorization was for a utility tax up to 5 percent or would the City continue to collect 5 percent, etc., past 2002. Council Member Klein said the proposed tax did not have a sunset provision; however, the F&PW Committee believed there were -opportunities for automatic sunset provisions along the way. The passage of the tax would put the City over its Gann limit. If the proposal was put on the ballot, there would also be a provision on the ballot to allow the City to exceed the Gann limit. Gann limit extensions only applied for four years, so the City would have to return to the voters in 1.991, and again in 1995 and 1999. If the law stayed the same, the voters in the year 2003 would have the opportunity to say "no" to ehe Gann extension, and the City Council would need to get its revenues down again. One reason he did not favor a 15 -year sunset provision was to make it clear the tax was not totally and directly tied to the lease with the PAUSD but had a variety of different pur- poses. He clarified it was not a special tax. As presently framed, the tax could be used by the Council for any purpose for which General Fund revenues could be used. The wording placed on the ballot would be "up to," so that if future City Councils felt the present formulation produced too much revenue, they could reduce it to anything under the authori- zation given to the City Council in 1987. Ms. Northway clarified the "up to" language would allow the City not to collect the tax at all. She reiterated the points Council Member Klein raised about ensuring the tax was not tied too much .to the relationship with the PAUSD was an important concept, because it vas the .City's position that it was a general tax and that the revenues be used tor any allowable general purposes, including funding the lease. Vice Mayor Sutorius asked if it was technically necessary to have both the Utility Users Tax proposal and the Gann limit on the same ballot given the fact the Gann Limit and its calculations would be tied to the fiscal year. 57-29.1 6/01/87 Director of Finance Mark Harris eaid the budget presented to Council showed approximately $2.9 million below the Gann limit for 1987/88. The Gann limit restricted the City's revenues. With a $4.35 million tax, the City would probably not exceed the limit in 1987/88 but would in 1988/89, etc.; therefore, staff believed it was an appropriate time to have the two companion measures. Vice Mayor Sutorius agreed. Louis Fein, 1540 Oak Creek Drive, said the main obiection to the tax was the text did not guarantee the money would be used for the original motivation; namely, the maintenance and improvement of programs. He urged Council to reject the 5 percent utility tax on all utilities, certainly the part presumed to be placed in the General Fund of the PAUSD. He would support wholeheartedly a portion of the tax to be used for streets and sidewalk improvements. The tax was irra- tional, unnecessary, unjustified, and legally vulnerable if Council did not state specifically which particular educa- tional programs would be restored, maintained, or enhanced by it. He found -it wholly unjustified to have school prop- erty already paid for by local school district tax payers leased back to those same tax payers. Double taxation was unjustified even though it was practical and legal, at least to the 85 percent of the citizens who were common constitu- ents of the PAUSD and the City. The tax was unnecessary and indefensible. The basic premise upon which the request for added funds to the PAUSD was based was that the PAUSD had last year and this year, and would have next year and for the next 10 years a deficit of $3 million. There was a cal- culated campaign to persuade voters that the deficit figures were true. Local newspapers were persuaded of the deficit, and so was the City Council who made helping the PAUSD financially a top priority. A $7,000 survey was carried out telling voters about the PAUSD deficit. Futurecast,2001 was persuaded. Largely political yet educationally uninformed persons accepted the myth of the deficit and voted to recom- mend the tax. The F&PW Committee recommended the tax, but Trustee Davis had shown, and the PAUSD had largely acknowl- edged, there was not much of a deficit which was known before the survey, the editorials, and 2001 came out with their results. The results were ignored. Future deficits were impossible to predict. School revenues consisting of State and local taxes, lottery funds, interest from the property fund, and lease and sale income were not predict- able. Without validation of the premise the PAUSD would have a $3 million deficit in the next decade, it was irra- tional to :::rovide dollars. A utility tax requiring only 50 percent plus one vote rather than two-thirds was legally vulnerable. It .was a ruse to say that it was not meant to 57-292 6/01/87 be a special purpose tax requiring two-thirds vote to pass, and he believed a judge would agree the motivations for a parcel tax and for a utility tax were identical. He urged Council to vote down the request. Susan G. Levenberg, 825 Garland Drive, congratulated Council both on the lease and the utility tax concept which was where creativity and dedication really came together. She believed the proposal would be well received in the commu- nity because it would serve many purposes for many different people. As a parent, she was happy to see the City was addressing the PAUSD's financial problems; as a neighbor of Jordan, she was happy the proposal would preserve her neigh- borhood, and as a member of the community it was good to see two government agencies working for common purposes. Trina Lovercheck, 1070 McGregor Way, did not agree with Dr. Fein that the PAUSD did not need more dollars in order to continue to provide a quality education for the children. When the voters approved money for the PAUSD, they did not necessarily do so to buy land but were putting money into an educational program, and the money was spent by the PAUSD in ways they saw best to provide the best educational program. Council Member Renzel was concerned about an ongoing funding mechanism that did not have some periodic checking -in point to allow the public to determine if they wished to continue to raise the substantial amounts of funds by taxing their utilities. Should the public at some point eliminate the Gann limitation, they were back to no checking -in point on the particular tax. Spending limitations that the State of California and many other stater had enacted were because government found ways to spend increased revenue sources, and there was a public perception that government was spending too much; therefore, it was important for political accountability that huge pots of money not be sitting around without occasional public review. The tax would be a rather substantial atbouht of money, particularly in the far future, without specific allocations contemplated at the present time. She supported the method of financing City objectives, certainly those that were foreseeable in- the next decade or more but was concerned. Council Member Bechtel said the F&PW Committee spent a fair amount of time choosing the fairest formula tor the utility taxi In addition, Council Members Cobb and Klein, with the help of Council Member Patitucci, spent an even greater 'amount of time and she commended them. She felt the four-year requirement to return for the. Gann .limit was 57-293 6/01/87 sufficient and allowed the voters an opportunity to say whether the City should continue the tax. The City would not have "huge pots of money sitting around" at a later date, and those on the F&PW Committee were aware of the widening line between revenues and expenditures in the General Fund and were concerned. The money generated would be much needed for streets and sidewalks. The estimate for sidewalk repairs was over 100 years and streets was in the 50 -year or more range without a utility tax. The formula was discussed at great length and she believed it was fair. A vast part of the tax burden would be placed on the busi- ness community, particularly some of the larger users, and the formula was a fair way of doing it. The burden for the .iouseholder using a 'small amount of utilities would be relatively small. Council Member Cobb said a number of letters were received from the largest users in town (on file in the City Clerk's office) suggesting that if a tiered system could be pro- vided, they would be supportive of the concept. The F&PW Committee recommendation was close to what the letters sug- gested, and he anticipated general support from that part of the ,community. He received a call from a constituent expressing concern about one more tax that might prevent young families from moving into Palo Alto; however, on a $200 per month utility bill, the tax would cost $120 a year or $1U a month which was a small price to pay for schools the young families would populate with their children. He believed the tax was a good thing for helping young families move to Palo Alto. Council Member Levy spoke in favor of the tax. He did not completely agree with the tax as it stood but realized it was the product of compromise which was necessary given the political environment and dealing with a community such as Palo Alto. If he had fiat, he might not impose the tiers and allow the largest users of utilities to get a break at the upper end, but he could also understand the feelings many had and was willing to unaerstand the work that went into the proposal and the balancing of all the necessary interests. On balance, the motion was worthwhile and clearly should be supported. Looking to the future, the community and Council should be aware there would not be "huge pots of money." Many demands were being pressed upon Council. There were demands for the safeguarding of the sites, to make available a significant amount of . square footage for the arts and for other public groups, for addi- tional funds for street and sidewalk repairs, and all the demands were legitimate. However, a significant amount of money would be required for maintenance costs, staffing, ore -time costs, and for EIR preparations if the City was to 57-294 6/01/87 prepare the sites to be used by the general community, e.g., $1.5 million extra in one-time and EIR costs, and about $1.25 million extra per year for maintenance and staffing costs. if the City had trouble renting the sites att the rates suggested, the City might run short of money and even suffer a deficit after the utility tax was collected. A great many people assumed the City would go into the real estate business and be leasing the sites to some degree to the public at large, and to some degree to community inter- est groups. Throughout the City there had been tremendous opposition when the City wanted to lease school sites to the public at large, and there might well also be opposition with the traffic and other elements when the City wanted to lease the sites even to public interest groups. He wanted to make that point, because when City went to the next step of how to use the sites when the leases were in place, they should recognize the City would be landlords and would not lease the sites at 100 percent rates all the time and might fall significantly short of the financial returns contem- plated. They should not assume or take anything for granted as they maintained the sites in the public domain. The package was a great step forward, and he glowed in the com- ments made by members of the public that it reflected the Council at its best, Council Member Renzel clarified at that point Council was basically making the decision of the structure of the tax and at some future point would be determining exactly what would go on the ballot. Vice Mayor Sutorius clarified the effect of the issue before Council was to direct staff to prepare the necessary ordi- nances to return for Couneil approval for placing the specific measure on the ballot. AMENDMENT; Council Member Renzel moved to insert language that the proposal be subject to review under the Gann limi- tation or, in the absence of the Gann limitation, a voter ratification every four years. MOTION DIED FOR LACK OF A SECOND Council Member Renzel believed the contemplated uses for the tax in the relatively short-term of the next 15 years were worthwhile. The mechanism was a good one and the compro- mises in structuring the proposal were good. She supported the motion. She did not mean to imply that she expected the City to have pots of money" in the short term. Her concern was • that after the uses contemplated during the initial election no longer existed or changed substantially, the City would have a revenue source of millions of dollars, and it was important to have a place for the public to check in. 57-295 6/01/87 Council Member Patitucci incorporated his comments on Item 7. Vice Mayor Sut.orius suggested the voters would know what they were being asked to act on when the language went on the , ballot. Anticipating voter approval and passage, Council would have to enact the actual tax which he saw as as an opportunity for putting limits on the effective nature of the tax such that it would require going before Council again on some stated periodicity. Through the F&PW Committee process there would be ample opportunity for scru- tiny of the moneys received under the tax, the appropriate- ness of the level of the tax, and what other activities were either being funded or failing to ue funded for which the community saw priority. Palo Alto was the only municipality in the entire State of California that owned, operated, and set rates for water, gas, and electricity. Council had a unique responsibility where, in effect, to the rate payer the imposition of the Utility User Tax appeared to be what their utility bill amounted to because, with the exception of telephone, they were getting one bill for all three_ City -owned utilities. While the bill gave quite a bit of detail, there was a bottom -aline amount to be paid and obviously the tax would be on top of the charges for the utilities. It was :the bottom; line that would concern people, and he was concerned there was the potential that Councils would be faced with the dilemmas of how to deal equitably and with long-range vision on the proper rate - setting and capital improvement program processes relative to .utilities. They were justifiably proud of the efficient utility service which was excellent and was billed at rates that were more than competitive in California and the nation. The residential user was paying lower electric utility rates than in any other portion of the State; the water rates were competitive but not leading the States; and gas rates tracked with those of neighboring communities. That was part of his agony in considering the impacts of the Utility Users Tax on the City and on their utility customers and the charges they ultimately saw themselves paying. However, he concurred with the 'ditto" comme:tits of Council Member Patitucci that they had an opportunity to do some- thing of importance to the community as a whsle, which he believed the votes in November would substantiate. Beyond the importance of what they could do concerning the open space and physical facilities under lease and covenant, _they would also be able to do an intelligent job in regard to infrastructure,. cutting down on the backlogs attributable: in the street and sidewalk arena in an improvement effort not currently affordable through the existing_ General Fund processed. Therefore, he would vote in favor of the motion,. and he would certainly be. a close watchdog to see they 57-296 6/01/87 maintained the quality of attention and follow-through in the funding of their utility processes, both the capital needs and the regular expenditure needs. They must protect the health of those utilities. Council Member Klein, believed the wording to be included was "not to exceed," but clarified the City Attorney understood whi^,t to suite for the language on the ba 1.'.nt- MOTION PASSED unanimously, Woolley not participating." ADJOURNMENT Council adjourned at 10:37 p.m. ATTEST: APPROVED: Y Mayor oLct- 57-297 6/01/87