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Home My WebLink About2024-01-16 City Council Agenda PacketCITY COUNCIL Special Meeting Tuesday, January 16, 2024 CITY O F Council Chambers & Hybrid PALO 5:30 PM ALTO Palo Alto City Council meetings will be held as "hybrid" meetings with the option to attend by teleconference or in person. To maximize public safety while still maintaining transparency and public access, members of the public can choose to participate from home or attend in person. Information on how the public may observe and participate in the meeting is located at the end of the agenda. Masks are strongly encouraged if attending in person. The meeting will be broadcast on Cable TV Channel 26, live on YouTube https://www.youtube.com/c/cityofpaloalto, and streamed to Midpen Media Center https://midpenmedia.org. VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/362027238) Meeting ID: 362 027 238 Phone: 1(669)900-6833 PUBLIC COMMENTS Public comments will be accepted both in person and via Zoom for up to three minutes or an amount of time determined by the Chair. All requests to speak will be taken until 5 minutes after the staff's presentation. Written public comments can be submitted in advance to city.council@CityofPaloAlto.org and will be provided to the Council and available for inspection on the City's website. Please clearly indicate which agenda item you are referencing in your subject line. PowerPoints, videos, or other media to be presented during public comment are accepted only by email to city.clerk@CityofPaloAlto.org at least 24 hours prior to the meeting. Once received, the Clerk will have them shared at public comment for the specified item. To uphold strong cybersecurity management practices, USB's or other physical electronic storage devices are not accepted. TIME ESTIMATES Listed times are estimates only and are subject to change at any time, including while the meeting is in progress. The Council reserves the right to use more or less time on any item, to change the order of items and/or to continue items to another meeting. Particular items may be heard before or after the time estimated on the agenda. This may occur in order to best manage the time at a meeting or to adapt to the participation of the public. Special Meeting January 16, 2024 Materials submitted after distribution of the agenda packet are available for public inspection at www.CityofPaloAlto.org/agendas. CALL TO ORDER AGENDA CHANGES, ADDITIONS AND DELETIONS PUBLIC COMMENT (5:30 - 5:45 PM) Members of the public may speak to any item NOT on the agenda. Council reserves the right to limit the duration of Oral Communications period to 30 minutes. COUNCIL MEMBER QUESTIONS. COMMENTS. ANNOUNCEMENTS (5:45 - 5:50 PM) Members of the public may not speak to the item(s). CONSENT CALENDAR (5:50 - 5:55 PM) Items will be voted in one motion unless removed from the calendar by three Council Members. Approval of Minutes from December 11, 2023, December 18, 2023, and December 19, 2023 Meetings 2. Adopt an Ordinance to Expand the Public Art Commission (PAC) from Five to Seven Members; CEQA status - not a project 3. Approval of Contract Amendment Number 1 to Contract Number C24189060 with US Bank and its Wholly owned Subsidiary Elavon for General Banking and Merchant Services and Approval of Contract Amendment Number C24189061 with Wells Fargo for Lockbox Services; CEQA Status — Not a Project. 4. Approval of Professional Services Contract with Energy and Environmental Economics, Inc. (E3) for a Not -to -Exceed Amount of $945,286 for the Sustainability and Climate Action Plan (S/CAP) Funding Study; Amendment to Professional Services Contract with Sterling Communications, Inc. to Amend the Scope, Extend the Timeline, and Increase Total Not -to -Exceed Compensation by $75,000 (from $85,000 to $160,000); and a Budget Amendment in the Electric Fund for Acceptance of $75,000 DEED grant for S/CAP Funding Study; CEQA Status — Not a Project. 5. Accept the City of Palo Alto's Audited Financial Statements as of June 30, 2023 and the Macias, Gini & O'Connell Management Letter; Approve the FY 2023 Annual Comprehensive Financial Report (ACFR)and Amendments to the FY 2023 Budget in Various Funds; and Adopt a Resolution to Extend and Amend the Development Services Reserve Fund Policy, as Recommended by the Finance Committee; CEQA Status — Not a Project 6. Approval of Amendment No. 2 with Pets in Need Contract (C19174493) to extend the term through March 2024 and increase the compensation by $342,501 for operations of the Palo Alto Animal Shelter, for a Not -to -Exceed Amount of $4,431,872; CEQA status — not a project. Special Meeting Janua ry 16, 2024 Materials submitted after distribution of the agenda packet are available for public inspection at www.CityofPaloAlto.org/agendas. 7. Adopt a Resolution Approving an Amendment to the City's 2009 California -Oregon Transmission Project Long -Term Layoff Agreement to Extend the City's Layoff of its Share of the California Oregon Transmission Project (COTP) until 2034 and to Receive Annual Market Payments as Recommended by the Utilities Advisory Commission (UAC); CEQA Status — Not a Project 8. Approval of Recommendations on Process for 2024 Council Priority Setting Retreat as Recommended by Policy & Services Committee (CEQA Status — Not a Project) 9. Approval of the Office of the City Auditor's Investment Management Audit Report as Recommended by the Policy & Services Committee (CEQA Status - Not a Project) 10. SECOND READING: Adoption of an Ordinance Amending Palo Alto Municipal Code (PAMC) Section 18.42.160 (Safe Parking) to Permanently Establish the Congregation - Based Safe Parking Program and Establishing Regulations Related to Safe Parking, Including a Maximum Number of Vehicles Per Night on Each Site (FIRST READING: December 4, 2023 PASSED 6-1, Tanaka no) 11. SECOND READING: Adoption of an Ordinance Amending Chapters 4.10 (Licenses Obtained by Application to Chief of Police), 4.30 (Soliciting Funds), and Chapter 4.32 (Soliciting Information for Commercial Purposes); and Adding Chapter 4.12 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code to Comply With Updates to the Law, Including 2018 Senate Bill 946 (Sidewalk Vendors). CEQA status — categorically exempt. (FIRST READING: December 11, 2023 PASSED 5-1-1, Kou no, Veenker absent) 12. SECOND READING: Adoption of an Urgency Ordinance and an Interim Ordinance That Allows the Director of Planning and Development Services to Extend Planning Entitlements for Housing Development Projects up to an Additional 18 Months. Environmental Review: Exempt from CEQA in Accordance with CEQA Guidelines 15061(b)(3). (FIRST READING: December 11, 2023 PASSED 5-1-1, Kou no, Veenker absent) CITY MANAGER COMMENTS (5:55 - 6:10 PM) BREAK (5-10 MINUTES) ACTION ITEMS (Item 13: 6:20 - 7:50 PM, Item 14: 7:50 - 8:35 PM) Include: Report of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Report of Officials, Unfinished Business and Council Matters. 13. Tree Protection Ordinance Year One Review and Recommendations; Adoption of an Ordinance Amending Chapter 8.04 (Street Trees, Shrubs, and Plants) and Chapter 8.10 Special Meeting Janua ry 16, 2024 Materials submitted after distribution of the agenda packet are available for public inspection at www.CityofPaloAlto.org/agendas. (Tree Preservation and Management Regulations of the Palo Alto Municipal Code to Update the Allowable Reasons for Removal of Protected Trees, Make Clarifying Changes, and to Make Clerical Updates; and Adoption of a Resolution amending the Administrative Penalty Schedule to Increase the Penalties for Violations of Title 8 of the Palo Alto Municipal Code; CEQA Status — Not a Projects 14. Approval of a Substation Improvement Agreement With Tesla Inc. to Install Improvements and Reserve Capacity at Hanover Substation, and Approval of a Fiscal Year 2024 Budget Amendment in the Electric Fund to Establish the Hanover Substation Upgrade Project (EL -24001); CEQA Status — Exempt under CEQA Guideline Sections 15301 and 15302 ADJOURNMENT INFORMATION REPORTS Information reports are provided for informational purposes only to the Council and the public but are not listed for action during this meeting's agenda. 15. Sales Tax Digest Summary Calendar 2023 02 (April 2023 —June 2023) OTHER INFORMATION Standing Committee Meetings Public Comment Letters Schedule of Meetings Special Meeting January 16, 2024 Materials submitted after distribution of the agenda packet are available for public inspection at www.CityofPaloAlto.org/agendas. PUBLIC COMMENT INSTRUCTIONS Members of the Public may provide public comments to teleconference meetings via email, teleconference, or by phone. 1. Written public comments may be submitted by email to city.council@cityofpaloalto.org. 2. For in person public comments please complete a speaker request card located on the table at the entrance to the Council Chambers and deliver it to the Clerk prior to discussion of the item. 3. Spoken public comments using a computer or smart phone will be accepted through the teleconference meeting. To address the Council, click on the link below to access a Zoom -based meeting. Please read the following instructions carefully. o You may download the Zoom client or connect to the meeting in- browser. If using your browser, make sure you are using a current, up-to-date browser: Chrome 30 , Firefox 27 , Microsoft Edge 12 , Safari 7 . Certain functionality may be disabled in older browsers including Internet Explorer. Or download the Zoom application onto your smart phone from the Apple App Store or Google Play Store and enter in the Meeting ID below. o You may be asked to enter an email address and name. We request that you identify yourself by name as this will be visible online and will be used to notify you that it is your turn to speak. o When you wish to speak on an Agenda Item, click on "raise hand." The Clerk will activate and unmute speakers in turn. Speakers will be notified shortly before they are called to speak. o When called, please limit your remarks to the time limit allotted. A timer will be shown on the computer to help keep track of your comments. 4. Spoken public comments using a phone use the telephone number listed below. When you wish to speak on an agenda item hit *9 on your phone so we know that you wish to speak. You will be asked to provide your first and last name before addressing the Council. You will be advised how long you have to speak. When called please limit your remarks to the agenda item and time limit allotted. CLICK HERE TO JOIN Meeting ID: 362-027-238 Phone: 1-669-900-6833 Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public programs, services and meetings in a manner that is readily accessible to all. Persons with disabilities who require materials in an appropriate alternative format or who require auxiliary aids to access City meetings, programs, or services may contact the City's ADA Coordinator at (650) 329-2550 (voice) or by emailing ada@cityofpaloalto.org. Requests for assistance or accommodations must be submitted at least 24 hours in advance of the meeting, program, or service. Special Meeting January 16, 2024 Materials submitted after distribution of the agenda packet are available for public inspection at www.CityofPaloAlto.org/agendas. Item 1 Item 1 Staff Report City Council Staff Report Report Type: CONSENT CALENDAR CITY O F Lead Department: City Clerk PALO a LTO Meeting Date: January 16, 2024 Report #:2312-2461 TITLE Approval of Minutes from December 11, 2023, December 18, 2023, and December 19, 2023 Meetings RECOMMENDATION That the minutes be reviewed and approved. ATTACHMENTS Attachment A: December 11, 2023 Draft Action Minutes Attachment B: December 18, 2023 Draft Action Minutes Attachment C: December 19, 2023 Draft Action Minutes APPROVED BY: Mahealani Ah Yun Item 1: Staff Report Pg. 1 Packet Pg. 6 of 553 Item 1 Attachment A - December 11, 2023 Draft Action CITY COUNCIL Minutes CITY Or PALO DRAFT ACTION MINUTES ALTO Regular Meeting December 11, 2023 The City Council of the City of Palo Alto met on this date in the Council Chambers and by virtual teleconference at 5:30 P.M. Present In Person: Burt, Kou, Lauing, Lythcott-Haims, Stone, Tanaka Present Remotely: Absent: Veenker Consent Calendar Mayor Kou registered a no vote on Agenda Item Number 4, 5, 6. Council Member Lythcott-Haims, Council Member Tanaka, Vice Mayor Stone, and Council Member Lauing requested to pull Agenda Item Number 6 from Consent. MOTION: Vice Mayor Stone moved, seconded by Mayor Kou to approve Agenda Item Numbers 1-5. MOTION SPLIT FOR THE PURPOSE OF VOTING MOTION PASSED ITEMS 1-3: 6-0-1, Veenker absent MOTION PASSED ITEMS 4-5: 5-1-1, Kou no, Veenker absent 1. Approval of Minutes from November 27, 2023 Meeting 2. Regional Water Quality Control Plant Joint Intercepting Sewer Rehabilitation Project Phase 1: Approval of Construction Contract, Construction Management Contract Amendment, and Addendum 12 to the Mountain View, Los Altos, and Palo Alto Agreement on Project Funding; CEQA status — Exempt under CEQA Guidelines Section 15301 (Repairs to Existing Facilities) 3. Approval of Contract Amendment Number 1 to Contract C23187506 with Momentum for Health to Extend Term by Eight (8) Months at No Additional Cost to the City, Revise the Not -to -Exceed Amount Down by $68,294 to $1,931,706 and Compensation Language, Provide Quarterly Invoicing, and Revise the Schedule of Rates; CEQA Status — Not a Project. Page 1 of 5 Item 1: Staff Report Pg. 2 Packet Pg. 7 of 553 Item 1 Attachment A - December DRAFT ACTION MINUT N U T 11, 2023 Draft Action Minutes 4. Adoption of an Ordinance Amending Chapters 4.10 (Licenses Obtained by Application to Chief of Police), 4.30 (Soliciting Funds), and Chapter 4.32 (Soliciting Information for Commercial Purposes); and Adding Chapter 4.12 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code to Comply With Updates to the Law, Including 2018 Senate Bill 946 (Sidewalk Vendors). CEQA status — categorically exempt. 5. Adoption of an Urgency Ordinance and an Interim Ordinance That Allows the Director of Planning and Development Services to Extend Planning Entitlements for Housing Development Projects up to an Additional 18 Months. Environmental Review: Exempt from CEQA in Accordance with CEQA Guidelines 15061(b)(3). 6. SECOND READING: Adoption of an Ordinance Implementing Program 1.1A and 1.1B of the Housing Element, Including: 1) New Chapter 18.14: Housing Incentives, and 2) Modifications to Base Zoning Districts Throughout Title 18. Adoption of a Resolution Making Corresponding Changes to the Land Use and Design Element of the Comprehensive Plan. (FIRST READING: November 13, 2023 PASSED 5-1-1, Kou no, Veenker recused and PASSED 6-1, Kou no) Removed from Consent Action Items 7. LEGISLATIVE: Adopt Ordinances Amending Planned Community Ordinance 2343 for 2901- 2905 Middlefield Road and Establishing a Separate Planned Community Zoning Designation for 702 Ellsworth Place to Enable the Development of a new Single -Story, Single -Family Residence. CEQA Status -- Categorically Exempt Under CEQA Guidelines Sections 15061(b)(3), 15301, and 15303 (Continued from September 18 and November 6, 2023) MOTION: Council Member Burt moved, seconded by Mayor Kou to approve the staff recommendation to adopt two ordinances and implement the following: 1. UPS approved delivery spot plan on Ellsworth that does not affect the footprint of the house, that provides a useable delivery spot for 10-11 foot wide trucks, maintains safe road circulation with Middlefield, does not remove public parking on Sutter, and to relocate the communications pole at a shared expense of the City and the property owner. 2. Require graded fencing that would allow visibility line of sight through 2 angles of the fence that allows adequate transparency of 3 -foot fence. 3. Direct Staff to pursue ADA tactile markers on the sidewalk where it intersects the Ellsworth Place easement subject to approval by the Director of Public Works at the City's expense. Page 2 of 5 City Council Meeting Draft Action Minutes: 12/11/2023 Item 1: Staff Report Pg. 3 Packet Pg. 8 of 553 Item 1 Attachment A - December DRAFT ACTION MINUT 11,2023DraftAction Minutes 4. Width of Ellsworth Place at entrance to be 26 -feet wide for at least 100 -feet from Middlefield Road. 5. Parking space #16 can be removed at the discretion of the Planning Director. MOTION PASSED: 6-0-1, Veenker absent 8. Direction to Pursue Development of New Parking and Refined Proposals for Housing in the University Avenue Downtown and Development Goals for Housing Investment. CEQA Status — Not a Project. MOTION: Council Member Burt moved, seconded by Mayor Kou to direct staff to: 1. Resume work on a new parking structure in the downtown core on a City surface parking lot (previously designed for on Hamilton / Waverley Lot D at 375 Hamilton Avenue) based on the premise that City funds for parking at this site would only be for the purpose of replacing lost surface parking. MOTION PASSED: 6-0-1, Veenker absent MOTION SPLIT FOR THE PURPOSE OF VOTING 2. Pursue refined proposals for potential housing development on City surface parking lot on Lytton / Kipling Lot T at 450 Lytton Avenue, or elsewhere, with direction on key development goals: a. 100% affordable housing up to the 80% AMI that qualifies for relevant tax credits. b. Height allowance and/or density evaluate to two additional stories above current 50 -foot height limit with the additional stories being set back from the street face. c. Evaluate parking on site that would be available for the affordable housing residents and potentially shared use for public purposes. Pursue transit pass provisions for residents as well as other best practices in reducing single occupancy vehicle use. MOTION PASSED: 5-1-1, Tanaka no, Veenker absent 9. Adopt a Resolution Establishing the Council Annual Calendar of Meetings, Breaks and Council Events for the Calendar Year 2024. Item 1: Staff Report Pg. 4 Page 3 of 5 City Council Meeting Draft Action Minutes: 12/11/2023 Packet Pg. 9 of 553 Item 1 Attachment A - December DRAFT ACTION MINUT 11,2023DraftAction Minutes MOTION: Council Member Lauing moved, seconded by Council Member Burt to adopt a resolution establishing the Annual Summer (June 21 —August 4, 2024) and Winter (December 20, 2024 — January 5, 2025) Breaks, Council Regular and alternate meeting dates and Council event schedule from January to December 2024 with the following changes: 1. Elimination of Finance Committee meeting on Tuesday, March 5th, 2024 and to be rescheduled. 2. Add Tuesday, June 18th, 2024 as an optional additional City Council meeting. 3. Eliminate Monday, June 24th, 2024 City Council Meeting. MOTION PASSED: 6-0-1, Veenker absent 10. Approval of Amendments to the Employment Agreements between the City of Palo Alto and Council Appointed Officers, specifically the City Manager, and City Attorney and Adoption of Amended Resolution Amending Appointment Term for Interim City Clerk through March 31, 2024 and salary adjustment. CEQA Status - Not a Project MOTION: Mayor Kou moved, seconded by Council Member Burt to approve and authorize the Mayor to execute the following contract amendments for Council Approved Officers and Adoption of Amended Resolution Amending Appointment Term for Interim City Clerk: 1. Amendment No. 11 to Employment Agreement between the City of Palo Alto and Molly S. Stump (Attachment A); 2. Amendment to Resolution Amending Appointment Term for Interim City Clerk through March 31, 2024, and salary adjustment in alignment with increase for all unrepresented Management and Professional employees (Attachment C). MOTION PASSED: 6-0-1, Veenker absent MOTION SPLIT FOR THE PURPOSE OF VOTING 3. Amendment No. 5 to Employment Agreement between the City of Palo Alto and Ed Shikada (Attachment B); and MOTION PASSED: 5-1-1, Tanaka no, Veenker absent Adjournment: The meeting was adjourned at 11:03 P.M. Item 1: Staff Report Pg. 5 Page 4 of 5 City Council Meeting Draft Action Minutes: 12/11/2023 Packet Pg. 10 of 553 Item 1 Attachment A - December DRAFT ACTION MINUT N U T 11, 2023 Draft Action Minutes ATTEST: APPROVED: City Clerk Mayor NOTE: Action minutes are prepared in accordance with Palo Alto Municipal Code (PAMC) 2.04.160(a) and (b). Summary minutes (sense) are prepared in accordance with PAMC Section 2.04.160(c). Beginning in January 2018, in accordance with Ordinance No. 5423, the City Council found action minutes and the video/audio recordings of Council proceedings to be the official records of both Council and committee proceedings. These recordings are available on the City's website. Item 1: Staff Report Pg. 6 Page 5 of 5 City Council Meeting Draft Action Minutes: 12/11/2023 Packet Pg. 11 of 553 Item 1 Attachment B - December 18, 2023 Draft Action CITY COUNCIL Minutes CITY Or PALO DRAFT ACTION MINUTES ALTO Regular Meeting December 18, 2023 The City Council of the City of Palo Alto met on this date in the Council Chambers and by virtual teleconference at 5:30 P.M. Present In Person: Burt, Kou, Lauing, Lythcott-Haims, Stone, Tanaka, Veenker Present Remotely: Absent: ecial Orders of the Da 1. Resolution Expressing Appreciation to Matt Raschke Upon His Retirement MOTION: Council Member Burt moved, seconded by Mayor Kou to adopt a resolution expressing appreciation to Matt Raschke upon his retirement. MOTION PASSED: 7-0 2. Proclamation Honoring Bob Moss for his Service to the City of Palo Alto No action taken. AA1. Proclamation Honoring Herb Borock for his Service to the City of Palo Alto No action taken. Closed Session 3. CONFERENCE WITH REAL PROPERTY NEGOTIATORS Authority: Government Code Section 54956.8 Property: 4000 Middlefield Road, Palo Alto (Cubberley Community Center) Negotiating Party: Palo Alto Unified School District Page 1 of 7 Item 1: Staff Report Pg. 7 Packet Pg. 12 of 553 Item 1 Attachment B - December DRAFT ACTION MINUT 18, 2023 Draft Action Minutes City Negotiators: (Ed Shikada, Kiely Nose, Chantal Cotton Gaines, Kristen O'Kane, Sunny Tong) Subject of Negotiations: Purchase and Lease, Price and Terms of Payment MOTION: Mayor Kou moved, seconded by Council Member Lauing to go into Closed Session. MOTION PASSED: 7-0 Council went into Closed Session at 6:03 P.M. Council returned from Closed Session at 6:40 P.M. Mayor Kou announced no reportable action. Study Session 4. Request for Pre -Screening of Application to Amend the Development Agreement and South of Forest Area Phase 1 Coordinated Area Plan for 260 Homer Avenue that Currently Restricts the Amount of Space that One or More Commercial Office Tenants can Occupy at the Property. Zoning District: AMF (MUO). CEQA Status: Not a Project. No action taken. Consent Calendar Mayor Kou registered a no vote on Agenda Item Number 13. Council Member Tanaka registered a no vote on Agenda Item Number 8, 14,19. Mayor Kou, Council Member Burt, and Council Member Lauing requested to pull Agenda Item Number 11. MOTION: Mayor Kou moved, seconded by Council Member Veenker to approve Agenda Item Numbers 5-10, 12-20, and pull Agenda Item Number 11 off of Consent. MOTION SPLIT FOR THE PURPOSE OF VOTING MOTION PASSED ITEMS 5-7, 9-10, 12, 15-18, 20: 7-0 MOTION PASSED ITEM 13: 6-1, Kou no MOTION PASSED ITEMS 8, 14, 19: 6-1, Tanaka no Page 2 of 7 City Council Meeting Draft Action Minutes: 12/18/2023 Item 1: Staff Report Pg. 8 Packet Pg. 13 of 553 Item 1 Attachment B - December DRAFT ACTION MINUT 18, 2023 Draft Action Minutes 5. Approval of Minutes from December 4, 2023 Meeting 6. Review and Approve the Williamson Act Contract Renewals Within Palo Alto City Limits (2023) 7. Approval of Construction Contract with GradeTech, Inc. in the Amount of $296,599 and Authorization for the City Manager to Negotiate and Execute Change Orders up to a Not - to -Exceed Amount of $29,659 for Site Work for Rinconada Park Improvements (PE -08001) and Ramos Park Restroom Installation (PG -19000) Projects; CEQA status — exempt under CEQA Guidelines Section 15303 8. Adoption of Updated Salary Schedules for Limited Hourly (HRLY) and Service Employee International Union Hourly (SEIU-H) Employee Groups in Accordance with the City of Palo Alto Minimum Wage Ordinance; Adoption of Revised Salary Schedules for Management and Professional, Fire Chiefs' Association (FCA), and Service Employees International Union (SEIU); CEQA Status - Not a project. 9. Approval of Professional Services Contract Number C24189293 with Nova Partners, Inc. in an Amount Not to Exceed $652,331 for Construction Management Services for the Capital Improvement Program Fire Station No. 4 Replacement Project (PE -18004); CEQA Status — Exempt under CEQA Guidelines Sections 15302 and 15303 10. Approval of Easement at Greer Park, 1098 Amarillo Avenue, for Sewer Line Connecting Building at 2850 W. Bayshore Road; CEQA status — categorically exempt. 11. Adoption of a Resolution and Approving an Easement Relocation Agreement Relocating and Vacating a 25 Foot Public Service Easement at the Castilleja School at 1263 Emerson Street and 220 Embarcadero Road (also commonly known as 1310 Bryant Street), Assessor Parcel Numbers 124-12-033 & 124-12-034; CEQA status — categorically exempt. 12. Adoption of a Resolution Vacating Two Public Service Easements at 1129 San Antonio Road 13. Approval of Professional Services Contract Number C24188179 with Urban Field Studio for a Not -to -Exceed Amount of $249,708 for the Development of the Car -Free Streets Implementation Plan, for a Period of 7 -Months; CEQA Status - statutorily Exempt. 14. Approval of Amendment Number Two to Contract Number S17168145 with WONDERWARE INC., dba CORE BUSINESS TECHNOLOGIES, in the Amount of $205,200 for an Upgrade to the Revenue Collections Cashiering Application and Extend Term for Three Additional Years; and Authorization of a Contract Contingency in an Amount Not -to - Exceed $54,264 for Related, Additional but Unforeseen Work Which May Develop During the Project for a new Not -to -Exceed Contract Amount of $596,913; CEQA Status - Not a Project Page 3 of 7 City Council Meeting Draft Action Minutes: 12/18/2023 Item 1: Staff Report Pg. 9 Packet Pg. 14 of 553 Item 1 Attachment B - December DRAFT ACTION MINUT 18, 2023 Draft Action Minutes 15. Approval of Contract Amendment Number 1 to Contract Number S22185727 with the City of San Jose in the Amount of $30,000 for Minimum Wage Enforcement Services; CEQA Status — Not a Project 16. Approval of Two Lease Agreements for a Five Year Term Between the City of Palo Alto (Landlord) and Palo Alto Community Child Care (Tenant) for Community Child Care Spaces at the College Terrace and Ventura Sites; CEQA Status — Not a Project 17. Recognize Permanent Local Housing Allocation Program (PLHA) Grant Funding from the State of California of $592,367 for Homeless Outreach Services, Approve FY 2024 Budget Amendments in the General Fund, and Establish a Permanent Local Housing Allocation Program (PLHA) Grant Fund; CEQA status — not a project. 18. Approval of a Resolution Authorizing the City Manager to Negotiate and Execute Temporary Construction Easements and Compensation with the Property Owners at 475 Newell Road and 1761 & 1767 Woodland Avenue for the Newell Road/San Francisquito Creek Bridge Replacement Project CIP Program (PE -12011); CEQA - Environmental Impact Report for Newell Road/San Francisquito Creek Bridge (Resolution No. 9889) 19. SECOND READING: Adoption of an Ordinance Amending the Palo Alto Municipal Code to Add Chapter 9.65 and Amend Chapter 9.72 to Establish a Mandatory Registry Program of Residential Rental Units in the City of Palo Alto; CEQA Status - Exempt under CEQA Guidelines Section 15061(b)(3) (FIRST READING: November 27, 2023 PASSED 6-1, Tanaka No). 20. SECOND READING: Adoption of an Ordinance Amending Chapter 2.30 (Contracts and Purchasing Procedures) and Chapter 2.37 (Business Tax) of the Palo Alto Municipal Code to Correct Clerical Errors and Clarify Procedures for Administering the Business Tax. CEQA Status -- Not a project. (FIRST READING: December 4, 2023 PASSED 7-0) Artinn Itemc AA2. SECOND READING: Adoption of an Ordinance Implementing Program 1.1A and 1.1B of the Housing Element, Including: 1) New Chapter 18.14: Housing Incentives, and 2) Modifications to Base Zoning Districts Throughout Title 18. Adoption of a Resolution Making Corresponding Changes to the Land Use and Design Element of the Comprehensive Plan. (FIRST READING: November 13, 2023 PASSED 5-1-1, Kou no, Veenker recused and PASSED 6-1, Kou no) Council Member Veenker Recusal on Stanford -owned properties & Housing Focus Area MOTION: Council Member Lauing moved, seconded by Council Member Lythcott-Haims to: Page 4 of 7 City Council Meeting Draft Action Minutes: 12/18/2023 Item 1: Staff Report Pg. 10 Packet Pg. 15 of 553 Item 1 Attachment B - December DRAFT ACTION MINUT 18, 2023 Draft Action Minutes 1. Adopt on second reading the attached housing element implementation ordinance that includes a clarifying revision related to a building facade modulation requirement for properties located in the Housing Focus Area. 2. Planning Director to work with the Housing Ad Hoc Committee for other possible suggested changes to this focus area and return to Council. MOTION PASSED: 5-1-1, Kou no, Veenker recused MOTION: Council Member Lythcott-Haims moved, seconded by Council Member Lauing to adopt a resolution updating the Land Use and Design Element of the Comprehensive Plan to be consistent with Programs 1.1A and 1.1B of the Housing Element. MOTION PASSED: 6-1, Kou no 21. Discussion and Confirmation of the Preferred Alternative Concept Plan Line for the University Avenue Streetscape Improvements Project (PE -21004) and Authorization for the City Manager to Develop and Refine the Scope of Work for Future Phases through a Contract Amendment MOTION: Council Member Lauing moved, seconded by Council Member Burt to: 1. Direct staff to draft additional alternatives that would include one option with the current parklet plan and that sidewalks should be variable or outdoor dining space comparable to the current parklet plan. 2. Consider moving bikes to Hamilton and Lytton and or shrinking the travel lane. 3. Direct staff to present options to the Retail Ad Hoc Committee and come back to Council with interim measures that we can do cheap and quickly that will show progress in that area. 4. Alternatives should cover a range of costs. MOTION PASSED: 7-0 22. Policy and Services Committee Recommendations for Changes to the City Council Procedures and Protocols Handbook based on Prior City Council Referrals MOTION: Council Member Burt moved, seconded by Mayor Kou to: Item 1: Staff Report Pg. 11 Page 5 of 7 City Council Meeting Draft Action Minutes: 12/18/2023 Packet Pg. 16 of 553 Item 1 Attachment B - December DRAFT ACTION MINUT N U T 18, 2023 Draft Action Minutes 1. Continue the discussion of the changes of the City Council Procedures and Protocols Handbook to a date uncertain soon in the beginning of 2024. 2. Allow for the prior year's current Ad Hoc, standing committees and council liaison roles, and regional appointment compositions to carry over until the new mayor appoints new members so that those committees can therefore continue to meet in January of the following new year. MOTION PASSED: 7-0 Adjournment: The meeting was adjourned at 11:14 P.M. Item 1: Staff Report Pg. 12 Page 6 of 7 City Council Meeting Draft Action Minutes: 12/18/2023 Packet Pg. 17 of 553 Item 1 Attachment B - December DRAFT ACTION MINUT N U T 18, 2023 Draft Action Minutes ATTEST: APPROVED: City Clerk Mayor NOTE: Action minutes are prepared in accordance with Palo Alto Municipal Code (PAMC) 2.04.160(a) and (b). Summary minutes (sense) are prepared in accordance with PAMC Section 2.04.160(c). Beginning in January 2018, in accordance with Ordinance No. 5423, the City Council found action minutes and the video/audio recordings of Council proceedings to be the official records of both Council and committee proceedings. These recordings are available on the City's website. Item 1: Staff Report Pg. 13 Page 7 of 7 City Council Meeting Draft Action Minutes: 12/18/2023 Packet Pg. 18 of 553 Item 1 Attachment C - December 19, 2023 Draft Action CITY COUNCIL Minutes CITY OF PALO DRAFT ACTION MINUTES ALTO Special Meeting December 19, 2023 The City Council of the City of Palo Alto met on this date in the Council Chambers and by virtual teleconference at 5:30 P.M. Present In Person: Burt, Kou, Lauing, Lythcott-Haims (5:52 P.M.), Stone, Tanaka (5:50 P.M.), Veenker Present Remotely: Absent: CLOSED SESSION 1. Public Employment Title: City Clerk Authority: Government Code Section 54957 (b). 2. Conference with Labor Negotiators Authority: Cal. Gov. Code section 54957.6; Agency representative: Maria Hurtado, Peckham & McKenney; Unrepresented Employee: City Clerk MOTION: Mayor Kou moved, seconded by Council Member Veenker to go into Closed Session. Motion PASSED: 5-0-2 Lythcott-Haims, Tanaka absent Council went into Closed Session at 5:33 P.M. Council returned from Closed Session at 10:42 P.M. Mayor Kou announced no reportable action. Adjournment: The meeting was adjourned at 10:43 P.M. Page 1 of 2 Item 1: Staff Report Pg. 14 Packet Pg. 19 of 553 Item 1 Attachment C - December DRAFT ACTION MINUT N U T 19, 2023 Draft Action Minutes ATTEST: APPROVED: City Clerk Mayor NOTE: Action minutes are prepared in accordance with Palo Alto Municipal Code (PAMC) 2.04.160(a) and (b). Summary minutes (sense) are prepared in accordance with PAMC Section 2.04.160(c). Beginning in January 2018, in accordance with Ordinance No. 5423, the City Council found action minutes and the video/audio recordings of Council proceedings to be the official records of both Council and committee proceedings. These recordings are available on the City's website. Item 1: Staff Report Pg. 15 Page 2 of 2 City Council Meeting Draft Action Minutes: 12/19/2023 Packet Pg. 20 of 553 Item 2 Item 2 Staff Report City Council Staff Report From: City Manager CITY O F Report Type: CONSENT CALENDAR PALO Lead Department: Community Services ALTO Meeting Date: January 16, 2024 Report #:2312-2326 TITLE Adopt an Ordinance to Expand the Public Art Commission (PAC) from Five to Seven Members; CEQA status - not a project RECOMMENDATION Staff recommends that the City Council adopt the attached ordinance to expand the Public Art Commission from five to seven members. BACKGROUND AND DISCUSSION In June 2020, the Public Art Commission was reduced from seven members to five at the direction of Council.' On December 4, 2023, Mayor Kou and Vice Mayor Stone presented a Colleagues' Memo2 to the Council recommending the City Council direct staff to schedule a Consent Calendar item for City Council to restore the PAC to seven members. A motion passed unanimously to proceed with a Consent Calendar item and staff is now returning with the attached ordinance to formally make this change. The ordinance will stagger the two seats so only a portion of the Commission will change each year. The term of the seats will remain three (3) years. Existing Staggering Schedule: Seat Current Term Expiration Date 1 March 31, 2024 2 March 31, 2024 3 March 31, 2025 4 March 31, 2025 5 March 31, 2025 Next Term April 2024 -March 2027 April 2024 -March 2027 April 2025 -March 2028 April 2025 -March 2028 April 2025 -March 2028 1 City Council, June 22, 2020; Item #29; SR#11424, httDS://www.CitvofDaloalto.ore/files/assets/public/v/1/aRendas-minutes-reports/reports/citv-manaRer-reports cmrs/yea r-archive/2020/id-11424.pdf?t=72303.63 2 City Council, December 4, 2023; Item #12; Report # 2311-2244, https://cityofpaloaIto.primegov.com/Portal/viewer?id=0&type=7&uid=37038514-797e-4ba8-8d09-b38b24b5aef7 Item 2: Staff Report Pg. 1 Packet Pg. 21 of 553 Item 2 Item 2 Staff Report If the ordinance is approved, Council may select four Commissioners in the upcoming recruitment process — two commissioners that have three -year terms and two Commissioners that will have two-year partial terms. Seats 6 and 7 will revert to regular three-year terms in April 2026. New Staggering Schedule: Current Term Expiration Date _Seat 1 March 31, 2024 2 March 31, 2024 3 March 31, 2025 4 March 31, 2025 5 March 31, 2025 6 (new) (new) 7 (new) (new) RESOURCE IMPACT Next Term April 2024 — March 2027 April 2024 — March 2027 April 2025 — March 2028 April 2025 — March 2028 April 2025 — March 2028 April 2024 — March 2026 April 2024 — March 2026 Increasing the Commission size to seven members will increase demands on staff to support the administration of the PAC, however; overall, staff will be positively impacted by this change as there will be greater opportunities for ad hoc committees to advance work of the Commission. A larger decision -making body will allow for diverse perspectives in the selection of the public art including commissioned artists and locations for temporary and permanent art within Palo Alto. STAKEHOLDER ENGAGEMENT This item is brought forward as part of the Council's motion from December 4, 2023. No additional stakeholder engagement was performed. The motion also included a referral to Policy & Services Committee to "review with the Public Art Commission the respective role of the Public Art Commission staff, stakeholders, and the Council in public art decision in relation to placement and themes of art." Staff anticipates placing this on a Policy & Services Committee agenda later this year. ENVIRONMENTAL REVIEW Approving this ordinance is not a project within the meaning of CEQA. ATTACHMENTS Attachment A: Ordinance Expanding the Public Art Commission from Five to Seven Members APPROVED BY: Kristen O'Kane, Community Services Director Item 2: Staff Report Pg. 2 Packet Pg. 22 of 553 *Not Yet Approved* Ordinance No. Item 2 Attachment A - Ordinance Expanding the Public Art Commission from Five to Seven Members Ordinance of the Council of the City of Palo Alto Amending PAMC Section 2.18.010 to Expand the Public Art Commission from Five to Seven Members The Council of the City of Palo Alto ORDAINS as follows: SECTION 1. The City Council finds and declares as follows: A. The City has a Public Art Commission as detailed in Chapter 2.18 of the Palo Alto Municipal Code. B. The City Council desires to expand the membership of the Public Art Commission from five to seven members. C. The two new seats created by this ordinance shall initially have two-year terms in order to stagger the introduction of new members as detailed in Section 3 of this ordinance. SECTION 2. Section 2.18.010 (Membership) of Chapter 2.18 (Public Art Commission) of the Palo Alto Municipal Code (PAMC) is hereby amended and restated as follows (deleted text is in stFikethrough, new text is underlined): 2.18.010 Membership. There is created a public art commission composed of seven members who are not council members, officers, or employees of the city, and who shall be appointed by the city council. SECTION 3. The two new seats on the Public Art Commission created by this ordinance shall initially have shortened terms to expire on March 31, 2026, subject to extension under the provisions of PAMC 2.18.040 (Term of office). After that, successive terms shall be consistent with the term lengths in PAMC section 2.18.040 and any other applicable section of the PAMC. This Section 3 shall be uncodified. SECTION 4. If any section, subsection, clause or phrase of this Ordinance is for any reason held to be invalid, such decision shall not affect the validity of the remaining portion or sections of the Ordinance. The Council hereby declares that it should have adopted the Ordinance and each section, subsection, sentence, clause or phrase thereof irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid. SECTION 5. The Council finds that this project is exempt from the provisions of the California Environmental Quality Act ("CEQA"), pursuant to Section 15061 of the CEQA 1 102_20231220_t524 Item 2: Staff Report Pg. 3 Packet Pg. 23 of 553 Item 2 Attachment A - Ordinance *Not Yet Approved* Expanding the Public Art Commission from Five to Guidelines, because it can be seen with certainty that there is no possibili Seven Members nce will have a significant effect on the environment. SECTION 6. This ordinance shall be effective on the thirty-first day after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Assistant City Attorney Mayor APPROVED: City Manager Director, Community Services Department 102_20231220_ts24 Item 2: Staff Report Pg. 4 Packet Pg. 24 of 553 Item 3 Item 3 Staff Report CITY OF PALO ALTO City Council Staff Report From: City Manager Report Type: CONSENT CALENDAR Lead Department: Administrative Services Meeting Date: January 16, 2024 Report #:2310-2132 TITLE Approval of Contract Amendment Number 1 to Contract Number C24189060 with US Bank and its Wholly owned Subsidiary Elavon for General Banking and Merchant Services and Approval of Contract Amendment Number C24189061 with Wells Fargo for Lockbox Services; CEQA Status — Not a Project. RECOMMENDATION Staff recommends that the City Council approve and authorize the City Manager or their designee, to execute: 1. Amendment No. 1 to Contract C24189060 with US Bank and its wholly owned subsidiary, Elavon, for general banking and merchant services (Attachment A), extending the term for one-year, ending June 30, 2024, with an option to negotiate extension for one additional year and; 2. Amendment Number C24189061 with Wells Fargo for lockbox services (Attachment B), extending the term for one-year, ending June 30, 2024, with to negotiate an option to extend for one additional year; and EXECUTIVE SUMMARY This report recommends the approval of a one-year extension of current banking services contracts and related services, through completion of an ongoing procurement for new contracts. Administrative Services staff issued a request for proposal (RFP) for these services in October 2023. Proposals are being reviewed by staff and plans to award contracts in 2024. The extensions attached to this staff report are effective July 1, 2023 through June 30, 2024 and maintain pricing from when the contracts were extended on September 21, 2020. Due to the imbedded nature of banking services with day-to-day financial transactions at the City, staff recommends that the City Manager be authorized to negotiate an option to extend the general banking and merchant services agreement with US Bank and Elavon and lockbox services with Wells Fargo to provide overlap for transition if new banking providers are selected. Item 3: Staff Report Pg. 1 Packet Pg. 25 of 553 Item 3 Item 3 Staff Report BACKGROUND Staff last conducted a competitive solicitation for banking and related services in 2014. Details for the RFP process are discussed in staff's report to Council on June 23, 20141. Council awarded contracts to the following financial institutions: 1) U.S. Bank and Elavon for banking and merchant services, 2) Wells Fargo for lockbox service, 3) Commerce Bank for a new and innovative Accounts Payable bill payment service, 4) Union Bank for investment safekeeping (custodial) service, and 5) JP Morgan Chase Banks for purchase card (P -Card) service. The Commerce Bank's Accounts Payable bill payment implementation was halted and then discontinued as the service was unable to meet the City's needs as was originally expected as part of their proposal. Union Bank was acquired by US Bank in August 2021. On September 21, 20202, the contracts extended for to two- or three-year extension for banking services contracts and related services, extending the contracts to a total term of eight or nine years. At the time, Union Bank was in the process of selling this line of business to US Bank, therefore a two-year extension was done. Upon acquiring this service US Bank honored the full three-year and beyond extension under the original Union Bank's existing terms (Attachment C). ANALYSIS Due to the embedded nature of banking contracts in day-to-day financial transactions of City business, it is not uncommon to see longer term contracts up to 8-10 years to ensure continuity of service and necessary strategic deployment of resources for major projects, such as Automatic Clearing House (ACH) services, auto -draft payments for utility customers, internal control or fraud features (i.e., positive pay), and integrations with the City's enterprise resource planning system, SAP. An RFP was issued in October 2023 and staff plan to recommend Council's approval to award contracts to service providers in March 2024. To bridge services and provide overlap in the event service providers are changed through the RFP, staff recommends extending the contracts through June 30, 2024, with an option for the City Manager to negotiate an additional one-year extension if the banks maintain the per unit pricing as in the 2020 extensions. In each contract, the City and the banking services provider each retains the option to terminate the contract upon 30 -day notice. Below is a summary of the recommended agreements: 1) US Bank and its wholly owned subsidiary, Elavon, for general banking and merchant services. U.S. Bank and Elavon have agreed to continue the same transaction prices for 1 City Council, June 23, 2014, Staff Report ID #4905: https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-reports/reports/city-manager-reports- cmrs/year-archive/2014/4905. pdf 2 City Council, September 21, 2020, Staff Report ID #11402: https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-reports/reports/city-manager-reports- c m rs/year-archive/2020-2/i d-11402. pd f Item 3: Staff Report Pg. 2 Packet Pg. 26 of 553 Item 3 Item 3 Staff Report this one-year contract that were agreed to in the original contract in FY 2014. In FY 2023, the annual net spending was $31,700 (gross expense of $41,700, offset by earnings of $10,000) for general banking. (Attachment A) 2) Wells Fargo provides lockbox services. This extension reflects the current pricing. In FY 2023, the annual net spending was $16,500 (gross expense of $24,900 offset by earnings of $8,400). (Attachment B) These contracts are structured based on service and activity level; the City essentially controls costs via a fixed payment per service during the length of the contracts. Therefore, staff recommends continuation of the previous contract terms that do not include a "not -to -exceed limit", as cost is dictated by transaction volume which can change over time. Staff has and will continue to closely monitor costs on a regular basis. In total, net annual costs for these contracts have remained at or below $100,000 annually. FISCAL/RESOURCE IMPACT The FY 2024 Adopted Budget includes sufficient funding for this extension. Staff will return to the City Council for approval of any future funding needs upon completion of the REP, as necessary. These one-year contracts are from July 1, 2023 to June 30, 2024 for (1) banking and merchant services; and (2) lockbox services. Fees are netted against interest earnings. therefore, a not -to -exceed limit is not assigned to these contracts and is based on negotiated per unit fixed pricing, based on specific services, with volume controlled by the City. STAKEHOLDER ENGAGEMENT For the duration of these contracts, Administrative Services staff coordinates with departments that are involved in daily banking transactions, primarily the Utilities Department, whose feedback on the service level provided by US Bank and Wells Fargo is satisfactory. ENVIRONMENTAL REVIEW Council action on this item is not a project under the California Environmental Quality Act (CEQA) because the contract amendments for general banking and merchant services and lockbox services are a continuing administrative or maintenance activity. CEQA Guidelines section 15378(b)(2). ATTACHMENTS Attachment A: US Bank and Elavon Amendment Agreement Attachment B: Wells Fargo Amendment Agreement Attachment C: US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement APPROVED BY: Kiely Nose, Assistant City Manager Lead Staff: Christine Paras, Assistant Director Item 3: Staff Report Pg. 3 Packet Pg. 27 of 553 DocuSign Envelope ID: 00B72325-E38C-441 D-BE01-290153F450BD Item 3 Attachment A - US Bank and Elavon Amendment Agreement AMENDMENT NO.1 TO AGREEMENT FOR BANKING AND MERCHANT SERVICES CONTARCT NO. C24189060 This AMENDMENT TO AGREEMENT FOR BANKING AND MERCHANT SERVICES (the "Amendment"), dated as of July 1, 2023 (the "Effective Date"), is made by and between the CITY OF PALO ALTO, CALIFORNIA ("City") and U.S. BANK NATIONAL ASSOCIATION, a national banking association ("Bank"). WHEREAS, City and Bank have entered into that certain Agreement for Banking and Merchant Services dated July 1, 2020 (the "Existing Agreement"); and WHEREAS, City and Bank have agreed to extend the current pricing arrangements through June 30, 2024, all in accordance with the terms and conditions set forth herein. NOW THEREFORE, in consideration of the foregoing premises and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree to be bound as follows: Section 1. Capitalized Terms. All capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Existing Agreement. Section 2. Extension of Pricing Arrangements. The following pricing arrangements shall hereby remain in effect through June 30, 2024: (a) Treasury Management Services: Bank will hold the line -item treasury management services at the same exception price as they are at the time of this Amendment through June 30, 2024. (b) Institutional and Corporate Trust: Confirmation and agreement has been obtained from a management level to hold the City's custody fees consistent with the existing fee through June 30, 2024. (c) Elavon Merchant Processing: Elavon has an evergreen clause in its contract which auto -renews the City's agreement with existing pricing for an additional twelve months upon expiration of the existing contract. Elavon shall honor the pricing currently in place for the City through June 30, 2024. Section 3. Effect of Amendment. Bank and City agree that after this Amendment becomes effective, the Existing Agreement, as hereby amended, shall remain in full force and effect. Page 1 of3 Item 3: Staff Report Pg. 4 Packet Pg. 28 of 553 DocuSign Envelope ID: 00B72325-E38C-441 D-BE01-290153F450BD Item 3 Attachment A - US Bank and Elavon Amendment Agreement Section 4. Incorporation of Existing Agreement and Other Agreements by Reference: Ratification of ExistingAgreement. Except as expressly modified under this Amendment, all of the terms, conditions, provisions, agreements, requirements, promises, obligations, duties, covenants and representations of City and Bank under the Existing Agreement and any and all other documents and agreements entered into with respect to the rights, duties and obligations under the Existing Agreement are incorporated herein by reference and are hereby ratified and affirmed in all respects by City and Bank. All references in the Existing Agreement to "this Agreement," "herein," "hereof," and similar references, and all references in any related agreement to the "Existing Agreement," shall be deemed to refer to the Existing Agreement, as amended by this Amendment. Section 5. Merger and Integration, Superseding Effect. This Amendment, from and after the date hereof, embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes and has merged into it all prior oral and written agreements on the same subjects by and between the parties hereto with the effect that this Amendment shall control. Section G. Counterparts. This Amendment and any waiver or amendment hereto may be executed in counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. This Amendment may be executed and delivered by pdf format via email transmission or by facsimile transmission, all with the same force and effect as if the same were a fully executed and delivered original manual counterpart. (Signature page to follow.) Page 2 of 3 Item 3: Staff Report Pg. 5 Packet Pg. 29 of 553 DocuSign Envelope ID: 00B72325-E38C-441 D-BE01-290153F450BD Item 3 Attachment A - US Bank and Elavon Amendment Agreement IN WITNESS WHEREOF, the parties hereto have caused this Amendment to Agreement for Banking and Merchant Services to be executed and effective as of the date and year first above written. U.S. Bank National Association DacuS 9ned by: City of Palo Alto, CA By: �{� A Lsou . FC6CD0RF0C434A9. By: Name: Nick Nelson Name: Title: Vice President Title: APPROVED AS TO FORM: City Attorney or designee Page 3 of 3 Item 3: Staff Report Pg. 6 Packet Pg. 30 of 553 Item 3 Attachment A - US Bank and Elavon Amendment GuSign Certificate Of Completion Agreement En;elape Id: 0OB72325E38C441DBE01290153F450BD Status: Completed Subject: Complete with DocuSign: FINAL US Bank Palo Alto Contract Amend No. 1 [7.123-6.3024].pdf Source Envelope: Docur lent Pages: 3 Signatures: 1 Envelope Originator: Certificate Pages: 1 Initials: 0 Alice Harrison AutoNav: Enabled 250 Hamilton Ave Envelopeld Stamping: Enabled Palo Alto , CA 94301 Time Zone: (UTC-08:00) Pacific Time (US & Canada) AliceHarrison@CityofPaloAlto.arg IP Address: 1993332254 Record Tracking Status: Oriainal 10. ' 8 2023 2:08:07 Pr i Security Ap::.liance Status: Connected Storage Appliance Status: Connected Signer Events Nick Nelson NickNelson@USBank.com Vice President Security Level: Email, Account Authentication (None) Electronic Record and Signature Disclosure: Nct Cffe-ed a DocuSign Holder: Alice Harrison Location: DocuSign Alice. Harrison@CityofPaloAlto.arg Pool: StateLocal Pool: City of Palo Alto Location: DocuSign Signature Timestamp ...sgnee by. Sent: 10:18.+2023 2:09:47 PI l [11 c� M,Is6�. Viewed: 10118/2023234 39 PM Fc6co-7BFoc434A9... Signed: 10/18/2023 2 35 23 PM Signature Adoption: Pre -selected Style Using IP Address: 10.139.142.0 In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Witness Events Signature Timestamp Notary Events Signature Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 10/18/202320947 PM Certified Delivered Security Checked 10/18/2023 2 34 39 PM Signing Complete Security Checked 10/18/2023 2 35 23 PM Completed Security Checked 10/18/2023 2 35 23 PM Payment Events Status Timestamps Item 3: Staff Report Pg. 7 Packet Pg. 31 of 553 Item 3 Attachment B - Wells Fargo Amendment Dale Barton Agreement Director, Relationship Manager 420 Montgomery Street, 10th Fl. San Francisco, CA 94104 Work: 415-940-1023 Email: dale.r.barton@wellsfargo.com September 1, 2023 City of Palo Alto 250 Hamilton Avenue, 4th Floor Palo Alto, CA 94301 Attn: Tarun A. Narayan, Manager of Treasury, Debts & Investments Re: Contact for Treasury Manaaement Services and Pricing (City of Palo Alto Contract No. C24189061 We are pleased to extend the term of the pricing agreement with the City of Palo Alto at the current pricing for the deposit and treasury management services as described on the Wells Fargo Treasury Management Proposal, Pricing as of May 2023, which is attached hereto as Exhibit 1, for one (1) term of thirteen (13) months, effective as of June 1, 2023, through June 30, 2024. Additional fees will apply to new deposit and treasury management services not described on Exhibit 1, and we will provide information regarding those fees in connection with the implementation of any such additional services. We reserve the right to modify pricing to reflect the impact of any changes in law, regulations or interpretations thereof. We also reserve the right to change our pricing methodology, including element IDs for a particular service, so long as the change does not increase the total price of such service to you (unless permitted under the immediately preceding sentence). This letter agreement along with your Master Agreement for Treasury Management Service signed 10/01/2020, attached hereto as Exhibit 2, and other Service Documentation (as that term is defined in the Master Agreement for Treasury Management Services) applicable to your accounts and treasury management services provided as described on Exhibit 1, will constitute the contract governing our deposit and treasury management services relationship. The Service Documentation, including the Service Descriptions for the treasury management services you are enrolled in are posted at our Commercial Electronic Office® (CEO®) portal. If you agree, please sign, date, and return this agreement below. Thank you for your business and continued partnership with Wells Fargo Bank. Please feel free to call me with any questions. Director, Relationship Manager 415-940-1023 Acknowledged and Agreed: City of Palo Alto By: Name: Tit I 02023 Wells Fargo Bank, N.A. All rights reserved. Item 3: Staff Report Pg. 8 Packet Pg. 32 of 553 Item 3 Attachment B - Wells Fargo Amendment Agreement Exhibit 1 Wells Fargo Treasury Management Proposal, Pricing as of May 2023 (Attached) Item 3: Staff Report Pg. 9 Packet Pg. 33 of 553 Item 3 Attachment B - Wells Fargo Amendment Agreement Treasury Management Proosai Palo Alto, City of Pricing as of May 2023 Average Positive Collected Balance $ 206,578.87 Reserve Requirement @ 0.00% $ 0.00 Investable Balance Available for Services $ 206,578.87 Monthly Analyzed Charges $ 2,361.14 Earnings Allowance @ 4.72% $ 801.41 Net Monthly Analyzed Charges $ 1,559.73 *Monthly Fee Based Charges $ 0.00 Total Monthly Analyzed Charges $ 1,559.73 *Charges not offset by balances Investable balance required to offset $1.00 of analyzed charges $ 257.77 ..FI IY1Tlr.i. . .. ACH Fraud Filter 34333 ACH CEO FRAUD FILTER REVIEW MO BASE Account 5.00000 2 10.00 Subtotal 10.00 ACH Receive ES349 ACH RECEIVED ADDENDA Addenda record 0.00000 40 0.00 ES344 ACH RECEIVED ITEM Transaction 0.30000 30 9.00 Subtotal 9.00 1WGen Acct Services Recoupmen IAMTH RECOUPMENT MONTHLY Deposit assessment 0.12750 516 65.80 Subtotal 65.80 General Account Services 22051 ACCT MAINTENANCE Account 7.00000 2 14.00 CK021 DEBITS POSTED Debit 0.10000 13 1.31 CK018 ELECTRONIC CREDITS POSTED Credit 0.25000 35 8.75 08025 MISCELLANEOUS CREDITS POSTED Transaction 1.00000 66 66.00 Subtotal 90.06 WGeneral Disbursement Services 22225 CHECK CASHING THRESHOLD MO BASE Account 0.00000 2 0.00 22245 CHECKS PAY TO INDIV BLOCK MO BASE Account 0.00000 2 0.00 22235 OTC DEBIT BLOCK MONTHLY BASE Account 0.00000 2 0.00 MD091 PYMT AUTH MAX CHECK MTHLY BASE Account 10.00000 2 20.00 Subtotal 20.00 Image Delivery 27707 CEO SEARCH Inquiry 0.50000 1 0.50 12812 CEO IMAGE VIEW < 90 DAYS - ITEM Image retrieved 3.50000 1 3.50 Subtotal 4.00 Incoming Wire Transfers ES030 WIRE IN TO USAACCT-USA DOMESTIC Transfer 15.00000 1 15.00 Subtotal 15.00 Information Reporting 34123 CEO ALERTS SERVICE - EMAIL Email 0.75000 10 7.50 34121 CEO INTRADAY REPORTING ITEMS RPTD Item reported 0.10000 207 20.71 34120 CEO INTRADAY REPORTING SUBSCRIPTION Account 35.00000 2 70.00 34115 CEO PREV DAY REPORTING ITEMS LOADED Item loaded 0.07500 123 9.23 34100 CEO PREV DAY REPORTING SUBSCRIPTION Account 35.00000 2 70.00 Subtotal 177.44 Customer Proposal Report 1 of 3 Item 3: Staff Report Pg. 10 Packet Pg. 34 of 553 Item 3 Attachment B - Wells Fargo Amendment Agreement MSC -TM 03303 LBX PKG US MAIL DELIVERY $ pass through 1.00000 10 10.00 Subtotal 10.00 Paper Checks Deposited 311 WHOLESALE LOCKBOX - DEPOSITED CHECK Check deposited 0.05000 2,790 139.50 Subtotal 139.50 Returned Items CK062 CEO RETURN ITEM RETRIEVAL -IMAGE Transaction 3.50000 1 3.50 CK064 CEO RETURN ITEM SERVICE MTHLY BASE Customer ID 0.00000 2 0.00 CK061 RETURN ITEM - CHARGEBACK Transaction 2.00000 2 4.00 CK069 RETURN ITEM SPECIAL INSTRUCTIONS Transaction 0.25000 2 0.50 CK081 RETURN ITEM SPECIAL INST MTHLY BASE Account 15.00000 2 30.00 CK075 RETURN ITEM REDEPOSITED Transaction 1.00000 1 1.00 Subtotal 39.00 Wells Tax • 32068 WELLSTAX CEO SUBSCRIPTION Access code 6.00000 2 12.00 Subtotal 12.00 Wholesale Lockbox 03302 LBX TRANSMISSION BASE Lockbox 65.00000 2 130.00 03711 LBX WEEKEND SERVICE BASE Transmission 0.00000 2 0.00 36709 LBX WHOLESALE BASE Lockbox 100.00000 2 200.00 03102 LBX REMIT PROCESSED CASH Remittance 5.00000 1 5.00 03611 LBX REMIT PROCESSED EXPRESS MAIL Remittance 1.00000 4 4.00 36731 LBX CORRESPONDENCE OR REJECTS Envelope 0.30000 12 3.60 36755 LBX STANDARD CHECK PROCESSED Remittance 0.30000 453 135.91 03905 LBX DOCUMENT SCANNED Remittance 0.05000 5,959 297.95 36791 LBX 7 YEAR IMAGE ARCHIVE Image archived 0.01000 5,959 59.60 36745 LBX VALUE ADDED KEYING Keystroke 0.01000 15,810 158.10 34222 LBX CEO TIR REPORT PER ITEM Item accessed 0.25000 1 0.25 48200 LBXWHOLETAIL BASE Lockbox 65.00000 2 130.00 48210 LBX WT CHECKS Check 0.00000 2,338 0.00 48220 LBX WT TOTAL PAYMENTS PROCESSED Coupon 0.13000 2,687 349.32 48307 LBX WT STD ITEM PROCESSED NON SCAN Check 0.30000 1 0.30 48221 LBXWT MULTI PAYMENT Coupon 0.10000 481 48.11 48222 LBXWT PARTIAL PAYMENT Coupon 0.02000 194 3.88 48257 LBX WT MARK SENSE OR ADDRESS CHANGE Coupon 0.06000 2,687 161.22 48501 LBX WT TRANSMISSION PER ITEM Remittance 0.01000 2,687 26.88 36739 LBX POST OFFICE RETURNED MAIL Transaction 5.00000 1 5.00 48250 LBXWT OCR SCANLINE REJECTS Coupon 0.30000 1 0.30 Subtotal 1,719.42 Wires Origination and Reporting ES139 WIRE OUT DOMESTIC CEO/API Transfer 5.00000 10 50.00 Subtotal 50.00 Total Monthly Activity Charges Total Monthly Balance Based Charges (can be paid with balances) Earnings Credit Rate Estimated Earnings Credit 2,361.22 2,361.22 4.72% 801.41 Customer Proposal Report Item 3: Staff Report Pg. 11 Packet Pg. 35 of 553 2 of 3 Item 3 Attachment B - Wells Fargo Amendment Agreement We created this proposal for you based on our understanding of your requirements and the services in which you expressed interest. This proposal confirms the deposit and treasury management services and the pricing we plan to provide you based on certain assumptions including projected volumes and other relevant information you provided. This document is confidential. Please do not share it without first obtaining our written permission. The services and pricing contained in this proposal are valid for 90 days. The pricing is subject to change if the actual volume or scope of services differs from the assumptions upon which we based the pricing. Please let us know if you believe this proposal does not accurately represent the prices or services we discussed with you. If you have questions about the services in this proposal, please contact your Treasury Management Sales Consultant or visit: www.wellsfargo.com/accountanalysis for additional information about the services. Regarding your services Alerts Service Charges are assessed against the volume of Alerts per user, per company, per month basis. Users are only charged for the first 80 events/alerts per month, per delivery mechanism (email or text). There is no per company cap for billing. Wire Book Transfer A CEO Wire book transfer is between two accounts initiated via CEO Wires Book Transfer workflow. A Payment Manager Book transfer is charged when the debit and credit accounts are setup in a single CEO Company id and entitled to Book Transfer. Services with No Volumes Services listed with zero volume are not included in the estimated monthly analysis fee but are included in the event the service is used in the future. This message may contain confidential and/or privileged information. If you are not the addressee or authorized to receive this for the addressee, you must not use, copy, disclose, or take any action based on this message or any information herein. If you have received this message in error, please advise the sender immediately by reply email and delete this message.Thank you for your cooperation. © 2023 Wells Fargo Bank, N.A. All rights reserved. Not intended for public distribution. Customer Proposal Report Item 3: Staff Report Pg. 12 Packet Pg. 36 of 553 3 of 3 Item 3 Attachment B - Wells Fargo Amendment Agreement Exhibit 2 Master Agreement for Treasury Management Services (Attached) Item 3: Staff Report Pg. 13 Packet Pg. 37 of 553 DocuSign Envelope ID: 88344AA5-5208-4894-BE72-CB721 C5A4721 Item 3 Attachment B - Wells Fargo Amendment Agreement Master Agreement for Treasury Management Services The Service Documentation contains the terms under which Wells Fargo Bank, N.A. and the banks, branches or subsidiaries listed in Appendix X (each, "Bank") provide you treasury management services ("Services"). "You," "your" or "yours" refer to the Bank customer identified on the Acceptance of Services that is signed when you enroll in Services ("Acceptance"). The terms "we," "us," or "our" refer to the Bank. The Bank customer to which the Services will be provided is identified in the Acceptance. Other capitalized terms used in this Master Agreement for Treasury Management Services ("Agreement") are defined in this document. You and we agree: 1. Service Description. The Service Documentation contains the terms governing each Service and includes: a. The Service Description (which contains terms and conditions applicable to the specific Service), b. The Acceptance (which indicates your acceptance of the Service Documentation), c. This Agreement (which contains terms and conditions applicable to all Services), d. The account agreement governing the account(s) (each, an "Account") you use in connection with the Service, e. The Product Enrollment Form (which contains set-up information for each Service in which you are enrolling), and f. User Guides (which include Terms of Use, software, software licenses, price schedules, specifications, instructions, and notices). The documents and individual provisions of the Service Documentation are intended to be read together as one agreement between you and us. This Agreement and the Service Descriptions for Services you enroll in are posted at our Commercial Electronic Office® (CEO®) portal. If there is a conflict among the documents that are part of the Service Documentation, they will govern in the order listed above. Your use of a Service confirms your receipt of, and agreement to be bound by, this Agreement and all Service Documentation. 2. Services. You and we will agree upon the Services to be provided. Each Service is subject to the approval by our applicable branch or subsidiary. You may not begin using a Service until we have received all required and properly executed forms and you have successfully completed any testing or training requirements. 3. Changes to services. We may change (or add to) the terms and fees in the Service Documentation at any time. If an enhancement to a Service or other change requires a change to a Service Description, we will post an updated Service Description on the CEO portal. When required by Applicable Law, we will notify you of the change. If you continue to use a Service after the change takes effect, you will be bound by the change. As used in this Agreement, the term "Applicable Law" means all applicable laws (including common or customary laws), statutes, constitutions, policies, decrees, judgments, treaties, regulations, directives, by-laws, rulings, orders or operating circulars governing our activities and/or any transaction effected under this Agreement, including, but not limited to, the funds transfer system and clearing and settlement house rules. 4. Term and termination. Unless a Service is terminated in accordance with the Service Documentation, this Agreement and each Service will continue in effect until terminated by either party upon 30 days' prior written notice to the other party. Master Agreement for Treasury Management Services (EDOCS#16890561 Rev. 11/08/2019) Item 3: Staff Report Pg. 14 Packet Pg. 38 of 553 Page 1 of 8 DocuSign Envelope ID: 88344AA5-5208-4894-BE72-CB721 C5A4721 Item 3 Attachment B - Wells We may suspend or terminate any Service: Fargo Amendment a. After we notify you of a breach of any provision of the Service DL Agreement other agreement with us, and you fail to cure the breach (if it can be cured) within 15 days of the date of the notice; or b. Without prior notice to you if: i. We reasonably suspect that an Account associated with a Service has been compromised or otherwise subject to irregular, unauthorized, fraudulent, or illegal activity, ii. You become subject to any insolvency or bankruptcy proceeding, or any receivership, liquidation, reorganization, or other similar proceeding, or you enter into any agreement or proceeding for voluntary liquidation, dissolution, composition with or assignment for the benefit of creditors or other winding up, iii. We determine in our sole discretion that continuing to provide a Service may place us at risk of financial loss or result in an unacceptable credit exposure, iv. Any guaranty of your obligations to us ("Guaranty") is terminated, revoked, or its validity contested by the guarantor ("Guarantor"), v. We determine in our sole discretion that a material adverse change has occurred in your ability to perform your obligations under the Service Documentation, or in the ability of a Guarantor to perform its obligations under a Guaranty, or vi. The Account necessary to provide a Service is closed. The termination of a Service will not affect your or our respective rights with respect to transactions occurring before the termination. We will not be liable to you for any losses or damages you may incur as a result of any termination of any Service or termination or restriction of any CEO portal access rights under section 9(d) below. 5. Service fees. You will pay us the fees described in the Service Documentation and any taxes applicable to each Service, however designated, but excluding taxes based on our net income. We may debit your Account for any fees not covered by earnings credits and any taxes that are due, or we may send you an invoice for these amounts, which you will promptly pay. Our charges and fees are in the applicable fee schedule for Services used in connection with your Account. 6. Security procedures. a. Unless otherwise agreed, you agree that "Security Procedure" is the applicable security procedure described in the Service Documentation for your Initiation Method for the Service, which we will use to verify the authenticity of a Transaction. The term "Initiation Method" refers to the method we offer in the product enrollment form ("Set-up Form") or other Service Documentation for delivering your Transaction instructions to us with respect to the applicable Service and includes any applicable transmission protocols. The term "Transaction" means (i) any funds transfer or payment instruction (including any communication cancelling or amending an instruction), and (ii) any instruction, data or other information which we receive in your name with respect to a funds transfer. The purpose of the Security Procedure is to verify the authenticity of the Transaction. We will not use the Security Procedure to detect an erroneous or duplicate transaction. You will be responsible for any erroneous or duplicate transaction we receive in your name. You agree to be bound by each Transaction, whether or not authorized by you, issued in your name and accepted by us in compliance with the Security Procedure for the Service. b. You agree that each Security Procedure for the Initiation Method in the Set-up Form or other Service Documentation for each of the Services (a) best meets your requirements with regard to the size, type and frequency of your Transactions, and (b) is commercially reasonable. If you have refused to use any standard Security Procedure and elect a non-standard Security Procedure, then you must sign the Non -Standard Security Procedure Elections form. 7. Confidential information. Unless otherwise stated in the Service Documentation, "Confidential Information" means all (a) User Guides and Terms and Use, and (b) Security Procedures, passwords, codes, security devices and related instructions. You will not acquire any ownership interest in or rights to Confidential Information as a result of your use of any Service. Master Agreement for Treasury Management Services (EDOCS#16890561 Rev. 11/08/2019) Item 3: Staff Report Pg. 15 Packet Pg. 39 of 553 Page 2 of 8 DocuSign Envelope ID: 88344AA5-5208-4894-BE72-CB721 C5A4721 Item 3 Attachment B - Wells You will: Fargo Amendment a. Maintain the confidentiality of the Confidential Information, Agreement b. Not disclose (or permit your employees or agents to disclose), copy, transfer, sublicense, or otherwise make any of it available to any person or entity, other than your employees who have a need to use the Confidential Information in connection with the applicable Service, and c. Not decompile, reverse engineer, disassemble, modify, or create derivative works of any Confidential Information. You will notify us immediately if you know of or suspect any unauthorized disclosure, possession, use, or knowledge (each, an "Unauthorized Use") of any Confidential Information. If you (or your employees or agents) are responsible for the Unauthorized Use, you will, at your expense, promptly take all actions, including initiating court proceedings to recover possession and prevent further Unauthorized Use of the Confidential Information. You will also compensate us for any injury caused to us as a result of the Unauthorized Use. 8. Currency conversion. When your instructions require us to convert the amount of a payment order from the currency in which the Account is denominated ("Account Currency") to another currency ("Foreign Currency"), we will do so using the Applicable Exchange Rate in effect at the time we execute your payment order. "Applicable Exchange Rate" means the exchange rate we set and use for you when we convert one currency to another currency and includes a markup over our cost of sourcing the relevant currency. The markup factors include costs incurred, market risks and our desired return. The exchange rate we provide to you may be different from the exchange rates you see elsewhere. Foreign exchange rates are dynamic, and rates fluctuate over time based on market conditions, liquidity, and risks. If a financial institution designated to receive the funds does not pay the beneficiary specified in the payment order, and the funds are returned to us, we will not be liable to you for a sum greater than the amount of the payment order after we have converted it from the Foreign Currency to the Account Currency using the Applicable Exchange Rate in effect at the time the funds are returned to us. You accept the risks of any change in the Applicable Exchange Rate between the time you request a payment order and the time the payment order is either completed or is unwound due to a cancellation, an amendment, a rejection, or a return. 9. CEO portal. a. Description of the CEO portal. The CEO portal is our electronic banking portal that is accessed via the Internet. Your Authorized Agents (defined below) may use the CEO portal to access (i) Services in which you have separately enrolled (each, an "Accessed Service") and (ii) third -party sites we may make available through the CEO portal. We offer different channels through which you may access the CEO portal, including personal computers and mobile devices. We may add or eliminate channels at any time. A Service or third party site accessible through one channel may not be accessible through another channel. b. Access to the CEO portal. When you enroll in the CEO portal, and as we may determine is necessary after enrollment, we will provide Log -On Credentials (defined below) to the persons who are authorized to access the CEO portal on your behalf (each, an "Authorized Agent"). Log - On Credentials mean one or more secure methods we provide to access the Services and may include user IDs, passwords, token IDs, and other methods that we adopt from time to time. We have no obligation to separately verify or authenticate any communication we receive in your name through the CEO portal, whether or not it was actually from an Authorized Agent. You assume the entire risk of (i) unauthorized use of your Log -On Credentials and (ii) unencrypted electronic transmissions. c. Administration of the CEO portal. We offer two options for administering the CEO portal: (i) Administration and (ii) Bank administration. I. Administration. If you enroll in the Administration option, there are three categories of Authorized Agents: Company Administrator, Administrator, or User. Unless you and we separately agree, we will provide Log -On Credentials only to your initial Company Master Agreement for Treasury Management Services (EDOCS#16890561 Rev. 11/08/2019) Item 3: Staff Report Pg. 16 Packet Pg. 40 of 553 Page 3 of 8 DocuSign Envelope ID: 88344AA5-5208-4894-BE72-CB721C5A4721 Item 3 Administrator(s) who will (a) assign Log -On Credentials Attachment B - Wells and (b) designate those individuals as one of the following: Fargo Amendment (1) A Company Administrator, who may perform alL Agreement Jitial Company Administrator, (2) An Administrator, who may perform all functions of an Administrator including designating other Administrator(s) and User(s), or (3) A User, who may access the Services designated by a Company Administrator or an Administrator, as well as those Services in which we permit a User to self - enroll. Each Company Administrator and Administrator has the authority to enroll you in additional Services. In addition to your use of Administration as described in this subsection, you may request that we assign Log -On Credentials to Users that you designate in writing to us. Your designation to us will specify the Services which the User is authorized to access in addition to those Services in which we permit a User to self -enroll. ii. Bank administration. For the Bank administration option, there is one category of Authorized Agent: Users. We will assign Log -On Credentials to each User you designate. You will promptly revoke the Log -On Credentials of any Authorized Agent or User when that individual is no longer authorized to access the CEO portal. If you notify us in writing to revoke the Log -On Credentials of an Authorized Agent or User, we will have a reasonable time after receiving your written notification to revoke the individual's access. d. Terminating access. We may terminate or restrict any Authorized Agent's access to any Service through the CEO portal if we determine such use: i. Does not comply with any term applicable to the CEO portal, ii. Is not permitted by Applicable Law, iii. Is not authorized by you or any third party whose authorization we believe is necessary, or iv. Should be denied for your or our protection (without us agreeing to or being required to make this determination in any circumstance). Financial information. Financial market data, quotes, news, research, and other financial information developed by third parties and transmitted to us ("Financial Information") may be available to you at the CEO portal. The posting of any Financial Information or any other information or data at the CEO portal is not a recommendation by us of any particular Service or transaction. We do not guarantee the accuracy or completeness of any Financial Information, nor are we responsible for (i) the actions or omissions of the third parties developing or transmitting Financial Information or (ii) any decision you make or action you take by relying on any Financial Information. 10. Alerts. a. Non -subscribed alerts. When you enroll in the CEO portal or other channels or Services, you consent to receiving by email or other delivery channels, servicing messages that we determine are important or urgent. You do not need to subscribe to receive such alerts and you do not pay additional service fees. b. Subscribed alerts. You may also enroll in fee -based alerts for applicable Services so that you can receive messages you subscribe to at the intervals and through delivery channels that you choose. 11. Liability and indemnification. a. We are not obligated to honor, in whole or in part, any payment order or other instruction that: Exceeds the available balance in the Account, unless otherwise provided in the Service Documentation, ii. Does not comply with the Service Documentation or our applicable policies, procedures, or practices made available to you, Master Agreement for Treasury Management Services (EDOCS#16890561 Rev. 11/08/2019) Item 3: Staff Report Pg. 17 Packet Pg. 41 of 553 Page 4 of 8 DocuSign Envelope ID: 88344AA5-5208-4894-BE72-CB721 C5A4721 Item 3 Attachment B - Wells iii. We have reason to believe may not have been duly auth honored for our or your protection, or involves funds subject to a Fargo Amendment ction, or legal process, or Agreement iv. Would possibly result in us not complying with Applicable Law. b. Neither we nor our software vendors make any express or implied representations or warranties with respect to the Services or any software used in connection with the Services, including any warranty as to the merchantability or fitness for a particular purpose, other than those expressly set forth in the Service Documentation. c. Any claim, action, or proceeding against us for losses or damages arising from a Service, must be brought within one year from the date of the act or omission, except as otherwise stated in the account agreement governing the Account. d. We will have no liability for our failure to perform or delay in performing a Service if the failure or delay is due to circumstances beyond our reasonable control. If we determine that any funds transfer or communications network, Internet service provider, or other system used to provide a Service is unavailable, inaccessible, or otherwise unsuitable for use by you or us, we may, upon notice to you, suspend or discontinue the affected Service. e. We will only be liable to you for actual damages incurred as a direct result of our failure to exercise reasonable care in providing the Services. Reasonable care requires only that we follow standards that do not vary unreasonably from the general standards followed by similarly situated banks. Our policies and procedures are general internal guidelines for our use and do not establish a higher standard of care for us than otherwise established under Applicable Law. A mere clerical error or an honest mistake will not be considered a failure by us to perform any of our obligations. Our liability to you will be limited to an amount not greater than 10 times our fees incurred in the calendar month immediately before the calendar month in which the loss or damages were incurred (or, if no fees were incurred in that month, our fees incurred in the month in which the losses or damages were incurred). f. Except in the case of our negligence or intentional misconduct, you will indemnify and hold us, our directors, officers, employees and agents ("Representatives") harmless from all losses or damages that arise out of: i. The performance of a Service in compliance with the Service Documentation, including any warranty we are required to make to a third party in connection with a Service, ii. An actor omission of any of your agents, couriers, or Authorized Agents, and iii. If the Service includes a license or sublicense of any software, any use or distribution of the software by you or any person gaining access to the software through you that is inconsistent with the license or sublicense. You will promptly provide us with written proof of loss, and notify us if you become aware of any third party claim related to a Service. You will cooperate fully (and at your own expense) with us in recovering a loss. If we reimburse you, we or our designee will be subrogated to all of your rights (i.e., we will be entitled to assert any legal rights you had relating to the claim). g. Except as expressly provided otherwise in the Service Documentation, neither party nor its Representatives will be liable to the other party for: i. Any special, consequential, incidental (including court costs and attorneys' fees), indirect, or punitive losses or damages, or ii. Business interruption, loss of profits, loss of business, loss of revenue, loss of goodwill, loss of opportunity, loss or injury to reputation, or loss of anticipated savings, whether any claim is based on contract or tort, or whether the likelihood of these losses or damages was known to the other party and regardless of the form of the claim or action. h. When you send payments on behalf of your third party customers, you agree you are solely liable to your customers for any and all losses those customers may suffer. We exclude all and any liability of whatever nature (including those losses detailed in subsection g above) arising out of your relationship with your customer. 12. Governing law. The Service Documentation will be governed by: (a) U.S. federal law and (b) the law of Master Agreement for Treasury Management Services (EDOCS#16890561 Rev. 11/08/2019) Item 3: Staff Report Pg. 18 Packet Pg. 42 of 553 Page 5 of 8 DocuSign Envelope ID: 88344AA5-5208-4B94-BE72-CB721 C5A4721 Item 3 (i) the U.S. state in which the office of Bank that maintains the Account i Attachment B - Wells is no such state or no account associated with such Service, (ii) the State of New Y Fargo Amendment e to its principles of conflicts of laws ("Governing Law"). Agreement 13. Arbitration agreement. Upon demand by you or us, any dispute or claim arising out of or relating to this Agreement, or the breach thereof, must be submitted to arbitration administered by the American Arbitration Association ("AAA") under its Commercial Arbitration Rules, and must be heard before three arbitrators if the amount in dispute is US $5,000,000 or more or its equivalent in any other currency, and before one arbitrator for amounts in dispute of less than US $5,000,000 or its equivalent in any other currency. Arbitration will proceed in a location selected by AAA in the state of the applicable Governing Law, and if there is no such state, the place of arbitration must be New York, NY. The language of the arbitration must be English. Judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. This arbitration requirement does not limit the right of you or us to: (a) exercise self-help remedies including setoff or (b) obtain provisional or ancillary remedies such as injunctive relief or attachment, before, during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of you or us to submit any dispute to arbitration hereunder, including those arising from the exercise of the actions detailed in (a) and (b) of this section. 14. Jurisdiction. For any proceedings regarding this Agreement (not subject to arbitration as provided in this Agreement), you hereby irrevocably submit to the jurisdiction of the courts of the Borough of Manhattan, New York City, in the State of New York or the federal courts located there and irrevocably agree that all claims in relating to the proceeding may be heard or determined in those courts. 15. Miscellaneous a. Severability. Any portion of the Service Documentation which is inconsistent with Applicable Law or Governing Law will be deemed modified and applied in a manner consistent therewith, and we will incur no liability to you as a result of the inconsistency or modification and application to any dispute regarding the Service Documentation. If any portion or provision of the Service Documentation is deemed unenforceable, it will not affect the enforceability or validity of the remaining Service Documentation nor the enforceability or validity of that portion or provision under the law of any other jurisdiction. b. Entire agreement. The Service Documentation (and any documents referred to therein): i. Constitutes the entire agreement between you and us regarding the Services we provide for all Accounts opened with us, and ii. Supersedes and extinguishes all prior agreements, understandings, representations and warranties of any nature (including requests for proposals and other sales material), whether oral or written, between you and us relating to any of our Services (including any other Master Agreement for Treasury Management Services, but excluding the current Commercial Account Agreement or Global Commercial Account Agreement, as applicable). c. Electronic agreement. To facilitate execution, the Service Documentation may be executed by a party in the form of an "Electronic Record" (as defined in the Electronic Signatures in Global and National Commerce Act at 15 U.S.C. §7001 et seq. ["ESIGN Act"]). The Service Documentation may be executed in as many counterparts as may be required to reflect all parties' approval, and all counterparts will collectively constitute a single agreement. An "Electronic Signature" (as defined in the ESIGN Act) that can be authenticated will constitute an original and binding signature of a party. The fact that a document is in the form of an Electronic Record or is signed using an Electronic Signature will not, in and of itself, be grounds for invalidating such document. d. No waiver. Neither our failure nor any delay by us in exercising any right or remedy will be deemed to be a waiver of the right or remedy. No course of dealing or waiver of any right on one occasion will constitute a modification of the Service Documentation or be a waiver of that right on a subsequent occasion. e. Third party beneficiaries. Except as otherwise provided in the Service Documentation, no person or entity other than the parties to this Agreement will be deemed to be a third party beneficiary under the Service Documentation. Master Agreement for Treasury Management Services (EDOCS#16890561 Rev. 11/08/2019) Item 3: Staff Report Pg. 19 Packet Pg. 43 of 553 Page 6 of 8 DocuSign Envelope ID: 88344AA5-5208-4894-BE72-CB721 C5A4721 Item 3 Attachment B - Wells f. Financial condition. You will provide us promptly upon our requ ncial statements or other information pertaining to your financial cod Fargo Amendment usly unprepared financial statements which we may require you to Agreement udited or reviewed by independent certified public accountants acceptable to us. g. Your representations and warranties. You represent and warrant that: (i) you will not use any Service in a manner that would violate any Applicable Law by you or us; (ii) if you employ an agent in connection with its use of any Service, you represent and warrant to us that: (1) your governing body has duly authorized the agent; (2) you will exercise appropriate controls to ensure each authorized agent does not exceed the authority granted to it; and (3) you will preserve the confidentiality of the Log -On Credentials and immediately notify us if you become aware or suspect that any Log -On Credential may have been compromised. h. Use of names. You and we will not use each other's name or refer to our relationship in any solicitation, marketing material, advertisement, news release, or other written, online or oral communication without specific prior written consent for each such use or release, except that we may use your name as a reference in service proposals if we obtain your prior written approval for such use. i. Notices and communications. Either party may provide notice to the other party by mail, personal delivery, or electronic transmission. i. You will notify us promptly in writing of any change in your name, Address, legal status, or any other changes relevant to the conduct of the Account or affecting your business relationship with us. ii. The term "Address" as used in this Agreement refers to a mailing or electronic address. iii. You will use the Address where your relationship manager or other manager is located and will address any notice to the attention of the manager. iv. Each party will have a reasonable time after receipt of any notice to act on it. v. Any communication or notice to us from your agent about your use of a Service will be deemed to be a communication from you, and you authorize us to communicate with your agent about any such communication or Service. vi. We are entitled to rely on any communication or notice from you that we believe in good faith was authorized by your authorized representative or Authorized Agent and, we will have no obligation to verify or authenticate an identity of a sender or signature on any notice or communication, except as expressly provided in the Service Documentation. 16. Survival. Sections 7, 11 - 15 will survive termination of the Services and this Agreement. Master Agreement for Treasury Management Services (EDOCS#16890561 Rev. 11/08/2019) Item 3: Staff Report Pg. 20 Packet Pg. 44 of 553 Page 7 of 8 DocuSign Envelope ID: 88344AA5-5208-4894-BE72-CB721 C5A4721 Item 3 Appendix X Attachment B - Wells Fargo Amendment Applicable Branches or Subsidiaries of BareAgreement 1. Wells Fargo Bank, N.A. — London Branch 2. Wells Fargo Bank, N.A. — Cayman Islands Branch city of Palo Alto Customer Name: Signature Docusigned by: C4444 E 5 4F9 CITY ATTORNEY'S OFFICE APPROVED AS TO FORM SIGNATURE C�.SSit, CA- DATE_10/1/' Master Agreement for Treasury Management Services (EDOCS#16890561 Rev. 11/08/2019) © 2019 Wells Fargo Bank, N.A. All rights reserved Item 3: Staff Report Pg. 21 Packet Pg. 45 of 553 Page 8 of 8 ®MUFG CUSTODYAGREEMENIT For PUBLIC FUNDS Securities and Non -Custody Assets This Custody Agreement ("Agreement") is made as of July 1, 2020 by and between the Cityof-Palo-Alto, a chartered municipal corporation" ("Principal') and MUFG Union Bank, N.A. ("Custodian"), and shall be effective as of July 1, 2020. WHEREAS, Custodian is a bank meeting the qualifications required by Section 17f-(1) of the Act as defined below to act as custodian of the portfolio securities and other assets of investment companies; WHEREAS, Principal wishes to continue retaining Custodian as custodian to perform the safekeeping and ministerial acts described in this Agreement, and Custodian has indicated its willingness to so act; WHEREAS, solely for consolidated record keeping purposes, Principal wishes to have Custodian reflect on account statements, with appropriate descriptions and disclaimers, and pursuant to policies and procedures adopted by Custodian from time to time, certain assets which Principal and Custodian acknowledge Custodian has not registered under Custodian's name or Custodian's nominee name and Custodian has not exercised control over such assets; NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, and intending to be legally bound hereby, both parties agree as follows. 1. DEFINITIONS. Certain terms used in this Agreement are defined as follows: 1.1. 'Account" means, collectively, each account maintained by Custodian on behalf of Principal pursuant to Paragraph 4 of this Agreement. 1.2. 'Act"means the Investment Company Act of 1940, as amended, and the rules and regulations adopted by the U.S. Securities and Exchange Commission ("SEC") thereunder, including §270.17f-1, §270.17f-4, Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement §270.17f-5 and §270.17f-7, all as may be amended from time to time. 1.3. "Authorized Agent" means a representative duly appointed by Principal or Investment Manager provided in writing to Custodian, for the purpose of directing Custodian to effect certain transactions, activities, accounting or other informational services related to Property, including without limitation shareholder activities and fund expenses. 1.4. "Board" means the Board of Trustees or the Board of Directors of Principal. 1.5. "Depository" means both any "securities depository" within the meaning of §270.17f-4 of the Act and any Eligible Securities Depository. 1.6. "Eligible Foreign Custodian" means an entity that is incorporated or organized under the laws of a country other than the United States and that is a Qualified Foreign Bank, as defined in §270.17f -5(a)(5) of the Act. 1.7. "Eligible Securities Depository", ("Depository", or collectively "Depositories") means a system for the central handling of securities as defined in §270.17f -7(b)(1) of the Act. 1.8. "Emerging Market" means each market so identified in Appendix A attached hereto as appropriate. 1.9. "Foreign Account" means an Account in which Foreign Currencies or Securities are held by Custodian for the benefit of clients whether in co mingled accounts or accounts designated for each beneficial owner as is required under the regulatory jurisdiction where the Foreign Account is established. 1.10. "Foreign Assets" has the meaning provided in §270.17f -5(a)(2) of the Act. 1.11. "Foreign Currency" ("Currencies") means any currency or any composite currency unit issued by a government or entity other than the United States Department of Treasury. Page 1 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO(GOVERNING LAW VENUE)(002) Item 3: Staff Report Pg. 22 Packet Pg. 46 of 553 1.12. "Foreign Market"means each market so identified in Appendix A attached hereto as appropriate. 1.13. "Global Sub -Agent Network" ("Sub - Agent Network" or "Sub -Agents") means any Sub -Custodian located in the United States and any sub -agents located in the countries and markets where Eligible Foreign Sub -Custodians and Eligible Foreign Depositories are maintained by Custodian or any Sub -Custodian located in the United States which utilizes a Sub -Agent Netvwrk on behalf of Custodian. 1.14. "Governing Documents"means, with respect to each of the portfolios, (i) the declaration of trust or other constituting document of the Principal of which the portfolio is a series or portfolio, (ii) the currently effective prospectus under the Securities Act; (iii) the most recent statement of additional information, and (iv) a certified copy of the Board approving the engagement of Custodian to act as custodian of the Securities. 1.15. "Investment Manager" or "Manager" means an investment advisor or manager identified by Principal in a written notice to Custodian as having the authority to direct Custodian regarding the management, acquisition, or disposition of Securities. If no Investment Manager has been appointed, Principal shall have all responsibilities assigned to Manager in this Agreement. 1.16. "Monitoring System" means the policies and procedures established by Custod ian to fulfill its duties to monitor the custody risks associated with maintaining Securities with a Sub -Custodian or Depository on a continuing basis, pursuant to this Agreement. 1.17. " Non -Custody Assets" means Property as defined herein, which are not registered in Custodian's name or its nominee name and not under the control of Custodian, as indicated to Custodian in writing by Principal or Manager at the time of receipt or purchase of such Property and as accepted by Custodian, and which Custodian has agreed to report only for consolidated record keeping purposes. Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement 1.18. "Property" means Securities and Non -Custody Assets, as those terms are defined herein, which are subject to the terms of this Agreement. 1.19. "Securities" means securities as defined in §2(a)(36) of the Act together with cash or any currency or other property of Principal and all income and proceeds of sale of such securities or other property of Principal that are held by Custodian in the Account, excluding Non -Custody Assets. 1.20. "Securities Act" means the Securities Act of 1933, as amended. 1.21. "Sub-Custodian"means another custodian, including without limitation an Eligible Foreign Custodian and its agents, retained by Custodian to hold Securities. 1.22. "Valuation Agent" means as a qualified agent which includes Sub - Custodian under Subparagraph 1.21 or an agent which Principal designates in writing to Custodian. A Valuation Agent may be a Securities and Exchange Commission ("SEC") registered transfer agent or a Public Comopany Accounting Oversight Board ("PCAOB") qualified accounting firm, or other qualified agent, which Custodian may, in its absolute discretion, consider a reasonable pricing source for certain Non - Custody Assets under Subparagraph 8.9.1 of this Agreement. 2. APPOINTMENT AS AGENT OF SECURITIES 2.1. Principal hereby appoints Custodian to perform the safekeeping and ministerial acts described in this Agreement, and Custodian hereby accepts such appointment and agrees to establish and maintain one or more Accounts for Principal in which Custodian will hold the Securities. 2.2. Custodian hereby accepts appointment as Principal's agent for such Securities of Principal and agrees to perform the duties of such custodian in accordance with the terms and conditions of this Agreement. 2.3. Principal has provided Custodian with a copy of its Governing Documents, and will Page 2 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 23 Packet Pg. 47 of 553 provide Custodian with a copy of amendments, supplements and modifications thereof from time to time. 3. REPRESENTATIONS AND ACKNOWLEDGEMENTS 3.1. Power to Enter Agreement. Principal represents that, with respect to the Account, Principal is authorized to enter into this Agreement and to retain Custodian on the terms and conditions and for the purposes described herein. 3.2. Foreign Custody Manager. Custodian agrees to serve as Principal's "Foreign Custody Manager" as defined in Rule §270.17f -5(a)(3) of the Act, in respect of Principal's Foreign Assets held from time to time by Custodian with any Sub -Custodian that is an Eligible Foreign Custodian or with any Eligible Securities Depository. 3.3. Custodian's Sub Agent Network. Principal hereby acknowledges receiving appropriate notice of Custodian's selection of the use of those Eligible Foreign Custodians and Eligible Securities Depositories that are identified in Appendix A of this Agreement, as appropriate and amended from time to time. 4. ESTABLISHMENT OF ACCOUNTS FOR SECURITIES AND NON -CUSTODY ASSETS Custodian shall open and maintain a separate Account or Accounts in the name of Principal and shall hold in such Account or Accounts, subject to the provisions hereof, all Securities received by Custodian from Principal or for the Account of Principal as Custodian, and to report any Non -Custody Assets for consolidated record keeping purposes only as agreed to by Custodian from time to time. Custodian, in its sole discretion, may reasonably refuse to accept any Security or Non -Custody Assets now or hereafter delivered to Custodian for inclusion in the Account. Principal shall be notified promptly of such refusal and any such property received by Custodian shall be immediately returned to Principal. Custodian shall be under no duty to take any action hereunder on behalf of the Principal except as specifically set forth herein or as may be specifically agreed to by Custodian and the Principal in a written amendment hereto. Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement 5. CUSTODY AND REGISTRATION OF SECURITIES Custodian may (i) maintain possession of all or any portion of the Securities, including possession in a foreign branch or other office of Custodian: or (ii) retain, in accordance with this Paragraph 5 and Paragraph 6 of this Agreement, one or more Sub -Custodians to hold all or any portion of the Securities. Custodian and any Sub -Custodian may, in accordance with this Paragraph 5 and Paragraph 6 of this Agreement, deposit definitive or book -entry Securities with one or more Depositories. 5.1. Identification of Securities. Custodian shall ensure the Securities are at all times properly identified as being held for the appropriate Account. Custodian shall separate the Securities from other securities owned by Custodian. Custodian shall not be required to separate Securities held for Principal from other securities or property held by Custodian for third parties as custodian or other representative capacity, but Custodian shall maintain adequate records indicating that the Principal is the beneficial owner of the Securities. 5.2. Use of Depositories and Sub - Custodians. Custodian may, in its discretion, deposit any Securities which, under applicable law, are eligible to be so deposited in a Depository or Sub -Custodian account. Securities and Foreign Currencies held by a Sub -Custodian or Depository will be held subject to the rules, terms, and conditions of such securities markets or securities depositories. If Custodian deposits Securities with a Sub -Custodian or Depository, Custodian shall maintain adequate records showing the identity and location of the Sub -Custodian or Depository, the Securities held by the Sub -Custodian or Depository and each account to which such Securities belong. With respect to Securities that are held for Custodian or any Sub -Custodian at a Depository, as defined in §270.17f-4 of the Act, Custodian shall satisfy or cause the Sub -Custodian to satisfy the requirements of §270.17f-4 of the Act. 5.3. Use of Nominees. Custodian shall have the right to hold or cause to be held all Page 3 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO(GOVERNING LAW VENUE)(002) Item 3: Staff Report Pg. 24 Packet Pg. 48 of 553 ®MUFG Securities in the name of Custodian, or for any Sub -Custodian or Depository, or in the name of a nominee of any of them as Custodian shall determine to be appropriate under the circumstances. 5.4. Foreign Currency Deposits. Custodian may in accordance with customary practices hold any currency in which any cash is denominated on deposit, and effect transactions relating thereto, through an account with an affiliate of Custodian, or Sub -Custodian or Depository in the country where such currency is the lawful currency or in other countries where such currency may be lawfully held on deposit. 5.5. Transferability and Convertibility of Currency. Custodian shall have no liability for any loss or damage arising from the applicability of any law or regulation now or hereafter in effect, or from the occurrence of any event, which may affect the transferability, convertibility, or availability of any currency in the countries where such Foreign Accounts are maintained and in no event shall Custodian be obligated to substitute another currency for a currency whose transferability, convertibility, or availability has been affected by such law, regulation or event. To the extent that any such law, regulationor event imposes a cost or charge upon Custodian in relation to the transferability, convertibility, or availability of any such currency, such cost or chargeshall be for the Account. 5.6. Delivery of Securities. If Principal or Investment Manager directs Custodian to deliver assets, certificates or other physical evidence of ownership of Securities to any broker or other party, other than a Sub - Custodian or Depository employed by Custodian for purposes of maintaining the Account, Custodian's sole responsibility shall be to exercise care and diligence in effecting the delivery as instructed by Principal or Manager. Upon completion of the delivery, Custodian shall be discharged completely of any further liability or responsibility with respect to the safekeeping and custody of Securities so delivered. Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement 5.7. Transferability of Securities. Except as otherwise provided under this Agreement or as the parties may otherwise agree, Custodian shall ensure that (i) the Securities will not be subject to any right, charge, security interest, lien, or claim of any kind in favor of Custodian or any Sub -Custodian or any person claiming through any of them except for Custodian's expenses relating to the Securities' safe custody or administration or other services made available under contractual agreements to Account by Custodian, and in the case of cash deposits at an Eligible Foreign Custodian, liens or rights in favor of the creditors of the Eligible Foreign Custodian arising under bankruptcy, insolvency, or similar laws, and (ii) the beneficial ownership of the Securities will be freely transferable without the payment of money or value other than for safe custody or ad ministration. 5.8. Access to Account Records. Principal or its designee, shall have access, upon reasonable prior notice to Custodian, during regular business hours to the books and records relating to the Accounts, or shall be given confirmation of the contents of the books and records, maintained by Custodian or any Sub -Custodian holding securities hereunder to verify the accuracy of such books and records. Custodian shall notify Principal promptly of any applicable law or regulation in any country where Securities are held that would restrict such access or confirmation. 6. SELECTION AND MONITORING OF GLOBAL SUB -AGENT NETWORK Upon written notice to Principal, as provided in Subparagraph 6.3 of this Agreement, Custodian may from time to time select one or more Sub - Custodians and Eligible Foreign Custodians and, subject to the provisions of Subparagraph 6.5, one or more Eligible Securities Depositories, to hold Securities hereunder. 6.1. Governing Sub -Agent Agreement. Any relationship Custodian establishes with an Eligible Foreign Custodian with respect to Securities shall be governed by a written contract providing for the reasonable care of Securities based on the standards specified in Section §270.17f -5(c)(1) of the Act, and Page 4 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 25 Packet Pg. 49 of 553 .)MUFG including the provisions set forth in Sections §270.17f-5(c)(2)(i)(A) through (F) of the Act, or provisions which Custodian determines provide the same or greater protection of Principal's Securities. 6.2. Sub -Agent Network Selection. 6.2.1. Foreign Sub -Custodian. In selecting an Eligible Foreign Custodian on behalf of Custodian, the Sub - Custodian shall exercise reasonable care, prudence and diligence and shall consider whether the Securities will be subject to reasonable care, based on the standards applicable to custodians in the relevant market, including (i) the Eligible Foreign Custodian's practices, procedures, and internal controls, including, but not limited to, the physical protections available for certificated securities (if applicable), the method of keeping custodial records, and the security and data protection practices; (ii) the Eligible Foreign Custodian's financial strength, general reputation and standing in the country in which it is located, its ability to provide efficiently the custodial services required, and the relative cost of such services: and, (iii) whether the Eligible Foreign Custodian has branch offices in the United States, or consents to service of process in the United States. in order to facilitate jurisdiction over and enforcement of judgments against it. 6.2.2. Securities Depository. In selecting an Eligible Securities Depository, Custodian shall exercise reasonable care, prudence, and diligence in evaluating the custody risks associated with maintaining Securities with the Eligible Securities Depository under Custodian's custody arrangements with any relevant Eligible Foreign Custodian and the Eligible Securities Depository. 6.3. Notices to Principal. Custodian shall give written notice to Principal of the deposit of Securities with an Eligible Foreign Custodian or, directly or through an Eligible Foreign Sub -Custodian, with an Eligible Securities Depository. The notice shall Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement identify the Eligible Foreign Custodian or Eligible Securities Depository and shall include reasonably available information relied on by Custodian in making the selection. 6.4. Monitoring ofSub AgentNetwork. Custodian shall monitor under_.its Monitoring_ System the appropriateness of the continued custody or maintenance of Principal's Securities with each Sub - Custodian and their Global Network of Eligible Foreign Custodian or Eligible Securities Depository. 6.4.1. Custodian shall evaluate and determine at least annually the continued eligibility of its Sub -Custodian and each Eligible Foreign Custodian and Eligible Securities Depository approved by Principal to act as such hereunder. In discharging this responsibility, Custodian shall (i) monitor on a continuing basis the services and reports provided by its Sub -Custodian for each of its Eligible Foreign Custodians or Eligible Securities Depositories; (ii) at least annually, obtain and review the periodic reports published by its Sub -Custodian confirming the Sub -Custodian's review of the continued eligibility of each Foreign Sub -Custodian and Foreign Securities Depository; and (iii) review periodic reports related to the Sub - Custodian's periodic physical inspections of the operations of each Eligible Foreign Custodian or Eligible Securities Depository as deemed appropriate. 6.4.2. Custodian shall provide to the Board annually and at such other times as the Board may reasonably request based on the circumstances of the Principal's foreign custody arrangements, written reports notifying the Board of the placement of Securities of Principal with a particular Sub - Custodian or a particular foreign Eligible Foreign Custodian within a Foreign Market or an Emerging Market and of any material change in the arrangements (including any material changes in any contracts governing Page 5 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 26 Packet Pg. 50 of 553 ®MUFG such arrangements or any material changes in the established practices or procedures of Depositories) with respect to Securities of the Principal held by the Eligible Foreign Custodian. 6.4.3. If Custodian determines that (i) any Eligible Foreign Custodian or Eligible Securities Depository no longer satisfies the applicable requirements described in Subparagraph 1.6 of this Agreement (in the case of an Eligible Foreign Custodian) or Subparagraph 1.7 of this Agreement (in the case of an Eligible Securities Depository); or, (ii) any Eligible Foreign Custodian or Eligible Securities Depository is otherwise no longer capable or qualified to perform the functions contemplated herein; or, (iii) any change in a contract with a Eligible Foreign Custodian or any change in established Eligible Securities Depository or market practices or procedures shall cause a custody arrangement to no longer meet the requirements of the Act, Custodian shall promptly give written notice thereof to Principal. The notice shall either indicate Custodian's intention to transfer Securities held by the removed Eligible Foreign Custodian or Eligible Securities Depository to another Eligible Foreign Custodian or Eligible Securities Depository previously identified to Principal, or include a notice pursuant to Subparagraph 6.3 of this Agreement of Custodian's intention to deposit Securities with a new Eligible Foreign Custodian or Eligible Securities Depository, in either instance such transfer of Securities to be effected as soon as reasonably practical. 6.5. Compulsory Depositories. Notwithstanding the foregoing subparagraphs of this Paragraph 6, Custodian shall have no responsibility for the selection or monitoring of any Eligible Securities Depository or Eligible Securities Depository's agent ("Compulsory Depository") (i) the use of which is mandated by law or regulation; (ii) because securities cannot be withdrawn from the depository; or (iii) because maintaining securities outside the securities depository is Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement not consistent with prevailing market practices in the relevant market; provided however, that Custodian shall notify Principal if Principal has directed a trade in a market containing a Compulsory Depository, so Principal and Investment Manager, if any, shall have an opportunity to determine the appropriateness of investing in such market. 6.6. Assessment of Custody Risk. Principal and Custodian agree that, for purposes of this Paragraph 6, Custodian's determination of appropriateness shall only include custody risk, and shall not include any evaluation of "country risk" or systemic risk associated with the investment or holding of assets in a particular country or market, including, but not limited to (i) the use of Compulsory Depositories; (ii) the country's or market's financial infrastructure; (iii) the country's or market's prevailing custody and settlement practices; (iv) risk of nationalization, expropriation or other governmental actions; (v) regulation of the banking or securities industries; (vi) currency controls, restrictions, devaluation or fluctuation; and (vii) country or market conditions which may affect the orderly execution of securities transactions or affect the value of the transactions. Principal and Custodian further agree that the evaluation of any such country and systemic risks shall be solely the responsibility of Principal and the Investment Manager. 7. TRANSACTIONS 7.1. Instructions and Immediately Available Funds. Principal, or where applicable, the Investment Manager, is responsible for ensuring that Custodian receives timely instructions and sufficient immediately available funds for all transactions by such time and date as conditions in the relevant market dictates. As used herein, "sufficient immediately available funds" shall mean either (i) sufficient cash denominated in the currency of Principal's home jurisdiction to purchase the necessary foreign currency, or (ii) sufficient applicable foreign currency, to settle the transaction. If Custodian does not receive such timely instructions and/or immediately available funds, Custodian shall have no liability of any kind to any person, Page 6 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 27 Packet Pg. 51 of 553 )MUFG including Principal, forfailing to effect settlement. However, Custodian shall use reasonable efforts to effect settlement as soon as possible after receipt of appropriate instructions. Unless otherwise specified by Principal or Manager, foreign exchange transactions will be processed according to the instructions in Appendix B as appropriate and amended from time to time. 7.2. Customary or Established Settlement Practices. Principal and Manager acknowledge settlement of and payment for Securities received for and delivered from the Account may be made in accordance with the customary or established securities trading and securities processing practices in the market in which the transaction occurs. Principal understands that when Custodian is instructed to deliver Foreign Securities or Foreign Currencies against payment, delivery of such Foreign Securities and Foreign Currencies and receipt of payment therefore may not be completed simultaneously. Principal assumes full responsibility for all credit risks involved in connection with Custodian's delivery of Foreign Securities or Foreign Currencies pursuant to instructions of Principal or Manager. 7.3. Additions to and Withdrawals from Account. Custodian shall make all additions and withdrawals of Securities to and from this Account only upon receipt of and pursuant to written instructions from Principal or Manager and in accordance with Custodian's procedures. Principal acknowledges Authorized Agents are permitted to process shareholder movement and fund expenses, without prior approval by Principal or Manager. 7.4. Purchase or Sales. Principal or Manager from time to time may instruct Custodian regarding the purchase or sale of Securities in accordance with this Paragraph 7. 7.5. Purchases. Provided the Account contains sufficient funds, Custodian shall settle purchases by charging the Account with the amount necessary to make the purchase and effecting payment to the seller or broker for the Securities as provided in Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement this subparagraph and as provided herein. Custodian shall have no liability of any kind to any person, including Principal, if Custodian is unable to settle a purchase or sale because the Account does not contain sufficient funds, or if Custodian effects payment on behalf of the Account, and the settler or broker specified by Manager fails to deliver the Securities purchased. Custodian shall exercise such ordinary care and diligence as would be employed by a reasonably prudent custodian in examining and verifying the certificates or other ind icia of ownership of the Securities purchased before accepting them, except with respect to assets described in Paragraph 7.7. 7.6. Sales. Custodian shall settle sales by delivering certificates or other indicia of ownership of the Securities, and as instructed, shall receive cash for such sales. Custodian shall have no liability of any kind to any person, including Principal, if Custodian exercises due diligence and delivers such certificates or indicia of ownership and the purchaser or broker fails to effect payment. 7.7. Depository Settlement If a purchase or sale is settled through a Sub -Custodian or Depository, Custodian shall exercise such ordinary care and diligence as would be employed by a reasonably prudent custodian in verifying proper consummation of the transaction by the Sub -Custodian or Depository. 7.8. Income and Principal. Custodian or its designated Sub -Agents are authorized, as Principal's agent, to surrender against payment maturing obligations and obligations called for redemption, and to collect and receive payments of interest and principal, dividends, warrants, and other things of value in connection with Securities. Absent written instructions from Principal or Manager, funds will remain in the currency of collection upon receipt of payment. 7.8.1. Custodian shall collect the income when paid on Securities and credit to the Account or invest it in a cash management vehicle which Custodian makes available and Principal or Manager designates from time to time. Page 7 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO(GOVERNING LAW VENUE)(002) Item 3: Staff Report Pg. 28 Packet Pg. 52 of 553 MUFG 7.8.2 Custodian shall collect principal of Securities when paid on maturity, redemption, sale or otherwise and credit to the Account or invest it in a cash management vehicle which Custodian makes available and Principal or Manager designates from time to time. 7.9. Foreign Currency Transactions. At the direction of Principal or Manager, as the case may be, Custodian shall convert currency in the Account to other currencies through customary channels including, without limitation, Custodian or any of its affiliates or Sub -Custodian Network, as shall be necessary to effect any transaction directed by Principal or Manager. If Principal or Manager gives Custodian standing instructions to execute foreign currency exchange transactions on Principal's behalf. such transactions will be performed in accordance with the FX Standing Instructions Defined Spread Program Description as amended from time to time. 7.10. Taxes. Custodian shall pay or cause to be paid from the Account all taxes and levies in the nature of taxes imposed on the Account or the Foreign Securities thereof by any country. Custodian will use reasonable efforts to give the Principal or Manager, as the case may be, advance notice of the imposition of such taxes. Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Principal or Custodian as custodian of the Principal by thetax law of the United States or of any state or political subdivision thereof or any foreign jurisdiction. The sole responsibilities of Custodian with regard to such tax law shall be to use reasonable efforts to effect the withholding of local taxes and related charges with regard to market entitlement/payment in accordance with local law and subject to local market practice or custom and to assist Principal with respect to any claim for exemption or refund under the tax law of countries for which Principal has provided such information. Except as specifically provided in this Agreement or otherwise agreed to in writing by Custodian, Custodian shall have no independent obligation to determine the tax obligations now or hereafter imposed on Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement Principal by any taxing authority or to obtain or provide information relating thereto, and shall have no obligation or liabilitywith respect to such tax obligations. 7.11. Foreign Tax Reclamation. Custodian shall use reasonable efforts to obtain refunds of taxes withheld on Foreign Securities or the income thereof that are available under applicable tax laws, treaties and regulations subject to Principal's provision of all documentation and certifications as required by U.S. and foreign tax authorities to establish the eligibility of Principal for tax reclamation under applicable law or treaty. Principal hereby agrees to indemnify and hold harmless Custodian and its agents in respect to any liability arising from any underwithholding or underpayment of any tax which results from the inaccuracy or invalidity of any such forms or other documentation, and such obligation to indemnify shall be a continuing obligation of Principal, its successor and assignees, notwithstanding the termination of this Agreement. Custodian is authorized to disclose any information req uired by any such tax or other governmental authority in relation to processing any claim for exemption from or reduction or refund of any taxes relating to the Principal's transactions and holdings. 7.12. Collection Obligations. Custodian shall diligently collect income and principal of Securities which Custodian has received actual notice in accordance with normal industry practices. However, Custodian shall be under no obligation or duty to take any action to effect collection of any amount if the Securities upon which such amount is payable is in default, or if payment is refused after due demand. Custodian shall notify Principal and Manager promptly of such default or refusal to pay. Custodian shall have no duty to file or pursue any bankruptcy or class action claims with respect to Account, unless indemnified by Principal in manner and amount satisfactory to Custodian provided, however, unless Principal directs otherwise, Custodian will use its best efforts to file claims in class actions and pay any recovery to account, net of Custodian's fees as disclosed in the fee schedule. Page 8 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 29 Packet Pg. 53 of 553 MUFG 7.13. Capital Changes. Custodian may, without further instruction from Principal or Manager, exchange temporary certificates and may surrender and exchange Securities for other securities in connection with any reorganization, recapitalization or similar transaction in which the owner of the Securities is not given an option. Custodian has no responsibility to effect any such exchange unless it has received notice of the event permitting or requiring such exchange at the office of Custodian's designated agents. 7.14. Fractional Interest. Custodian shall sell or distribute all stock distributed by a corporation as a dividend, stock split, or otherwise, unless otherwise instructed. 7.15. Delivery of Instructions and Funds. Instructions and Funds shall be directed to Custodian or Sub -Custodian, as applicable with respect to the foregoing. 7.16. Deposit of Monies. If Principal is a political subdivision of a state of the United States ("State") other than California, Principal hereby waives security, if security is required by the laws of the State, for that portion of the total amount of cash held in the Account which is insured pursuant to federal law and Principal and Custodian agree that cash held in the Account includes funds held pursuant to Section 7.8 hereof and any moneys which Principal instructs Custodian to hold uninvested orto deposit in MUFG Union Bank, N.A deposit accounts or certificates of deposit. If Principal is a political subdivision of the State of California, it has either (i) previously entered into a Contract for Deposit of Moneys ("Deposit Contract") with M UFG Union Bank, N.A. and a copy of the executed contract is attached hereto; or (ii) will execute and deliver to Custodian a Deposit Contract in the form attached hereto. The parties agree that the Deposit Contract shall apply to any moneys deposited by Principal with Custodian and any cash held in the Account pursuant to Section 7.8 hereof and any moneys which Principal instructs Custodian to hold uninvested orto deposit in MUFG Union Bank, N.A. deposit accounts or certificates of deposit. Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement 8. NON -CUSTODY ASSETS 8.1. Consolidated Recordkeeping Services. Custodian may provide consolidated recordkeeping services for No n -Custody Assets as indicated by Principal. Non -Custody Assets shall be designated on Custodian's books as "Held Away," "Shares Not Held" or by similar characterization. Principal acknowledges and agrees that it shall have no security entitlement against Custodian with respect to Non -Custody Assets, that Custodian may rely, without independent verification, on information provided by Principal, Manager, Valuation Agent or an appropriate Authorized Agent regarding Non -Custody Asset descriptions and other relevant information. Custodian shall have no responsibility whatsoever with respect to Non -Custody Assets or the accuracy of any information maintained on Custodian's books orsetforth on account statements concerning Non -Custody Assets. Principal acknowledges and agrees any account statement or report generated by Custodian for Accounts holding Non -Custody Assets are not to be relied upon by Principal, Manager, Valuation Agent, their respective agents, current or potential investors for valuation, reporting, or disclosure purposes in furtherance of Principal's ongoing regulatory or statutory obligations. 8.2. Recognition of Non -Custody Assets. Notwithstanding any other provision in this Agreement, Custodian's sole duty and responsibility with respect to each Non - Custody Asset shall be to list each Non - Custody Asset on the asset statement at the last known price provided by Valuation Agent or at zero value pursuant to Subparagraph 8.9 below. 8.3. Identification of Non -Custody Assets. Custodian shall have no duty or obligation to hold, verify or perfect title or ownership to any Non -Custody Asset, review or make recommendations as to the disposition of such Non -Custody Asset or to authenticate the existence, value, or nature of any Non - Custody Asset. 8.4. Instructions. Principal represents that for each and every Non -Custody Asset Page 9 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE)(002) Item 3: Staff Report Pg. 30 Packet Pg. 54 of 553 ®MUFG transaction, the documentation has been or will be prepared to the satisfaction of Principal, Manager and Custodian as appropriate, and Custodian will not be held in any way responsiblefor any of the provisions of any documentation nor for any aspect of the closing of any Non -Custody Asset transaction other than as directed in writing by Principal, Manager, Authorized Agents or other duly appointed authorized agents herein. 8.5. Income and Other Payments. Any interest, dividends, rents, royalties or other payments that may be received by Custodian in the Account with respect to Non -Custody Assets shall be maintained in the Account until invested or otherwise disposed of pursuant to written instructions from Principal, Manager or Authorized Agent, or otherwise directed in accordance with the Agreement. 8.6. Use of Sub -Custodian's System. Upon written notice to Principal and where appropriate as determined by Custodian, Custodian may utilize the record keeping system of its Sub -Custodian to account for certain transactions related to Non -Custody Assets. Notwithstanding Custodian's use of Sub -Custodian's record keeping system, Custodian shall provide Principal and/or Authorized Agents consolidated reports of all Non -Custody Assets. 8.7. Collection Obligations. Custodian shall have no duty or obligation to make demand or to take any action to effect collection of any payments that may become due and shall not be required to notify Principal, Manager or Authorized Agent of any default or refusal to pay. 8.8. Representations and Warranties as to Non -Custody Assets 8.8.1. Investment Authority. Principal, Manager or Authorized Agent will retain full investment authority over all Non - Custody Assets pursuant to the provision of this Agreement. 8.8.2 Investment Accreditation. Principal hereby certifies to Custodian that Principal, Manager and Authorized Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement Agents meet any and all required accreditation or other standards needed to invest in any Non -Custody Asset and that no license of any nature or consent by any governmental entity is required in connection with the ownership of any No n -Custody Asset. 8.8.3 Investment Due Diligence. Principal hereby represents that Principal, Manager or Authorized Agent has completed such due diligence as needed to confirm the value and substance of each and every Non - Custody Asset, including, but not limited to any credit questions regarding any Non -Custody Asset. Principal confirms that Principal is fully responsible for any matters which may arise in regard to any Non -Custody Asset. 8.9. Accounting and Reporting of Non - Custody Assets 8.9.1. Valuation at Zero. Non -Custody Assets will be listed on the account statement by Custodian at zero value, such value which Principal agrees is reported for record keeping purposes only and not an indication of any market value. In its absolute discretion, Custodian may agree to report certain Non -Custody Assets at a value other than zero, provided such value is submitted by a Valuation Agent accompanied by appropriate documentation acceptable to and received by Custodian within a stated period of time. Principal acknowledges Custodian shall have no independent duty or obligation to verify or ascertain the value or to request or obtain valuation updates on any Non -Custody Asset, except as agreed to by Custodian in writing from time to time. 8.9.2. Transaction Accounting. Custodian shall have no duty or obligation to provide Principal or Authorized Agent with a separate accounting for payments or receipts or to allocate such receipts between principal and income. For certain Non - Custody Assets, Custodian shall use Sub -Custodian's record keeping system Page 10 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT -PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 31 Packet Pg. 55 of 553 upon proper notice to Principal as provided herein under Paragraph 8 of this Agreement. 8.9.3 Limited PowerofAttorney. The limited power of attorney granted by Principal to Custodian in this Agreement shall not apply to the Non -Custody Assets. 9. PLEDGE OF SECURITIES Principal shall inform Custodian in writing in the event that Principal has pledged any Property held in the Account as collateral ("Pledged Collateral") for any loan or advance ("Secured Obligation") made to Principal by any lender designated by Principal ("Secured Party"). Custodian may enter into documentation with Principal and/or Secured Party that is acceptable to Custodian, including without limitation a securities account control agreement. Custodian shall segregate and identify Property subject to any such pledge in its records as pledged and otherwise act in accordance with the terms of any such documentation to which it has agreed. 10. CREDITS TO ACCOUNT RELATING TO SECURITIES 10.1. Payment. Custodian may, as a matter of bookkeeping convenience or by separate agreement with the Principal, credit the account with the proceeds from the sale, redemption or other disposition of Securities or interest or dividends or other distributions payable on Securities prior to its actual receipt of final payment; therefore, all such credits shall be conditional until Custodian's actual receipt of final payment and may be reversed by Custodian to the extent that final payment is not received. Payment with respect to a transaction will not be final until Custodian receives immediately available funds under which applicable local law, rule and/or practice are irreversible and not subject to any security interest, levy or other encumbrance, and which are specifically applicable to such transaction. Principal acknowledges and agrees that any currency risk associated with such credits will be borne by Principal. Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement 10.2. Emerging Market Settlement Dates. Notwithstanding the foregoing Paragraph 10.1, Principal understands and agrees that settlement of Securities transactions is available only on settlement date basis in certain Emerging Markets, which are identified in Appendix A, as appropriate and amended from time to time. 10.2.1. Cash Deposits. For Emerging Markets with restricted settlement conditions, cash of any currency deposited or delivered to the Account shall be available for use by Principal or Investment Manager only on the business day on which actual receipt of final payment and funds of good value are available to Sub -Custodian in the Account. 10.2.2 Securities. For Emerging Markets with restricted settlement conditions, Securities deposited or delivered to the Account shall be available for use by Principal or Investment Manager only on the business day on which such Securities are held in the nominee name or are otherwise subject to the control of, and in a form for good delivery by, the Sub - Custodian. 11. OVERDRAFT AND INDEBTEDNESS 11.1. Advance Funds. Custodian, in its sole discretion, may advance funds to or for the benefit of Account in connection with the settlement of securities or currency transactions or other activity in the Account including overdrafts or other indebtedness incurred in connection with the Account transactions. Principal agrees to reimburse Custodian on demand the amount of the advance or overdraft and any related fees and interest as established in Custodian's fee schedule or as otherwise established by Custodian. Principal will bear the risk from any currency valuation differences associated with Principal's reimbursement obligations to Custodian. Custodian shall also have the right to utilize any cash in the Account in order to obtain reimbursement hereunder and to setoff Custodian's obligations with respect to any deposits or Page 11 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 32 Packet Pg. 56 of 553 ®MUFG credit balances in the Account against any obligation of Principal hereunder. 11.2. Pledge of Accounts to Secure Repayment. To the extent permissible by applicable law, in order to secure repayment of Account's obligations to Custodian hereunder, Principal hereby pledges and grants to Custodian a continuing lien and security interest in, and right of set-off against, all of Principal's right, title and interest in and to all Accounts in Principal's name and the Securities, money and other property now or hereafter held in such Accounts (including proceeds thereof), provided however, that if Principal is comprised of more than one entity, Custodian's rights under this subparagraph shall be limited to the cash, Property or proceeds thereof held in the Account(s) as to which the advance or overdraft relates. In this regard, Custodian shall be entitled to all the rights and remedies of a pledgee and secured creditor under applicable laws, rules or regulations as then in effect. Principal authorizes Custodian, in Custodian's sole discretion, at any time to charge any overdraft or indebtedness, together with interest due thereon, against any balance of account standing to the credit of Principal on Custodian's books. In addition. Custodian shall be entitled to utilize available cash and to dispose of such Principal's Property to the extent necessary to obtain reimbursement. 12. CORPORATE ACTIONS, PROXIES AND LITERATURE RELATING TO SECURITIES 12.1. Corporate Actions. Custodian shall notify Manager of the receipt of notices of redemptions, conversions, exchanges, calls, puts, subscription rights, and scrip documents ("Corporate Action(s)"). Custodian need not monitor financial publications for notices of Corporate Actions and shall not be obligated to take any action unless actual notice has been received by Custodian at the offices of its Sub - Custodian. Custodian's sole responsibility in this regard shall be to give such notices to Principal or Investment Manager, as the case may be, within a reasonable time after Custodian receives them. Custodian has no responsibility to respond or otherwise act with respect to any such notice unless and Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement until Custodian has received timely and appropriate instructions from Principal or Manager. Principal or Manager is responsible to ensure all required documentation and funds are available to Custodian and its agents as required under the terms of the offeror by legal jurisdiction in order for Custodian and its agent to take action on behalf of Account. 12.2. Proxies. Custodian shall forward to Manager or Principal, as directed, all proxies and accompanying material actually received by Custodian's Sub -Custodian relating to Securities held in the Account. Principal and Manager acknowledge that proxy services are limited in foreign markets and Custodian's sole responsibility with respect to such proxy materials will be to forward the proxy and accompanying material received by Custodian's Sub - Custodian to Principal or Manager. Custodian shall have no duty to translate or retain any material received unless required to do so by law. 12.2.1. Proxies related to Non - Custody Assets. Notwithstanding any provision in this Agreement, Custodian shall have no duty to forward to Principal or Authorized Agent any notices, correspondence or other communication it may receive relating to any Non -Custody Asset other than proxies, corporate actions and other notices from partnerships and other limited liability entities that are actually delivered to Custodian. Custodian shall have no duty or obligation to take any action of any kind with respect to any Non -Custody Asset. Custodian's duties as to any Non -Custody Asset shall be limited to those under Paragraph 8. 12.3. Corporate Literature. Custodian shall have no duty to forward or to retain any other corporate material received by Custodian for the Account unless required to do so by law. Custodian shall have no duty to translate or retain any material received from its Global Sub -Agent Network unless required to do so by law. 12.4. Disclosure to Issuers of Securities. Unless Principal directs Custodian in writing Page 12 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 33 Packet Pg. 57 of 553 Cb� to the contrary, Principal agrees that Custodian or its Sub -Custodian or its Sub - Agents may disclose the name and address of the party with the authority to vote the proxies of the Securities held in this Account as well as the number of shares held, to any issuer of said Securities or its agents upon the written request of such issuer or agent in conformity with the provisions of the applicable law. Principal acknowledges that Custodian or its Sub -Custodian or its Sub - Agents maybe required under jurisdictional law to disclose to issuers beneficial owner information regardless of Principal's instructions otherwise. 13. INSTRUCTIONS 13.1. Written. All instructions, directions, and other notices to Custodian from Principal, Manager, Authorized Agent, Valuation Agent, and other duly authorized agents, except those described in Paragraph 7. given in connection with this Agreement (`Instructions") shall be in writing, and shall continue in force until changed by subsequent instructions. As used herein, written Instructions include Instructions which may be electronically executed pursuant to the Federal Electronic Signatures in Global and National Commerce Act ("E -Sign Act") delivered via: (i) e-mail instructions/communications with an affixed Adobe Digital Signature mark, (ii) facsimile transmission or email with an imaged or scanned attachment (in portable document or similar format or other similar electronic transmission (receipt confirmed), or (iii) secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by Custodian, or another method or system specified by Custodian, as available for use in connection with its services hereunder ("Electronic Means"); provided, however, that Principal. Manager, Authorized Agent, and Valuation Agent shall provide to Custodian an incumbency certificate listing officers with the authority to provide such Instructions ("Authorized Officers") and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by Principal, Manager, Authorized Agent, and Valuation Agent whenever a Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement person is to be added or deleted from the listing. If Principal, Manager, Authorized Agent, and Valuation Agent elects to give Custodian Instructions using Electronic Means and Custodian in its discretion elects to act upon such Instructions, Custodian's understanding of such Instructions shall be deemed controlling. Principal understands and agrees that Custodian cannot determine the identity of the actual sender of such Instructions and that Custodian shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to Custodian have been sent by such Authorized Officer. Principal, Manager, Authorized Agent, and Valuation Agent shall be responsible for ensuring that only Authorized Officers transmit such Instructions to Custodian and that Principal and Manager and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by Principal, Manager, Authorized Agent, Valuation Agent, and other duly authorized agents. Pending receipt of written authority, Custodian may in its absolute discretion at any time, accept orally transmitted instructions from Principal, Manager, Authorized Agent, or Valuation Agent provided Custodian believes in good faith that the instructions are genuine and in such circumstance, Principal, Manager, Authorized Agent, and Valuation Agent shall promptly confirm such instructions in writing or by Electronic Means. Principal will hold Custodian harmless for the failure of any authorized party to send confirmation in writing to Custodian in a timely manner, the failure of such confirmation to conform to the telephone instructions received or Custodian's failure to produce such confirmation at any subsequent time. Only those individuals as maybe designated as described above are authorized to give instructions as described in this Agreement. 13.2. Reliance on Instructions. Except as otherwise provided herein, all Instructions shall be in writing as described in Paragraph 13.1 and shall continue in force until changed by subsequent instructions. Custodian may assume that any written or Page 13 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE)(002) Item 3: Staff Report Pg. 34 Packet Pg. 58 of 553 ® MUFG oral instructions received hereunder are consistentwith the provisions of organizational documents of the Principal or of any vote, resolution or proceeding of the Principal's board of directors or the Principal's shareholders, unless and until Custodian receives written instructions to the contrary. Custodian shall not be liable for any losses, costs or expenses arising directly or indirectly from Custodian's reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. Principal agrees: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to Custodian, including without limitation the risk of Custodian acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to Custodian and that there may be more secure methods of transmitting Instructions than the method(s) selected by Principal, Manager, Authorized Agent, Valuation Agent, and other authorized agents; (iii) that the security procedures (if any) to be followed in connection with its transmission of instructions provide a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify Custodian immediately upon learning of any compromise or unauthorized use of the security procedures. 14. RIGHT TO RECEIVE ADVICE 14.1. Advice of the Principal. If Custodian is in doubt as to any action it should or should not take under this Agreement, Custodian may request directions or advice, including oral instructions or written instructions, from the Principal or Manager. 14.2. Advice of Counsel. If Custodian shall be in doubt as to any question of law pertaining to any action it should or should not take, Custodian may request advice from counsel of its own choosing (who may be counsel for the Principal, Manager or Custodian, at the option of Custodian). Principal shall pay the reasonable cost of Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement any counsel retained by Custodian with prior notice to Principal. 14.3. Conflicting Advice. In the event of a conflict between directions or advice or oral instructions or written instructions Custodian receives from the Principal, Manager, Authorized Agent, and Valuation Agent, and the advice it receives from counsel, Custodian shall be entitled to rely upon and follow the advice of counsel. 14.4. Protection of Custodian. Custodian shall be indemnified by Principal and without liability for any action Custodian takes or does not take in reliance upon directions or advice or oral instructions or written instructions Custodian receives from or on behalf of the Principal, or from counsel and which Custodian believes, in good faith, to be consistent with those directions or advice or oral instructions or written instructions. Nothing in this paragraph shall be construed so as to impose an obligation upon Custodian (i) to seek such directions or advice or oral instructions or written instructions, or (ii) to act in accordance with such directions or advice or oral instructions or written instructions. 15. ACCOUNTING AND REPORTING OF SECURITIES 15.1. Cost and Nominal Value. Principal agrees to furnish Custodian with the income tax cost basis and dates of acquisition of all Securities held in the Account to be carried on its records. If Principal. does not furnish such information, Custodian shall carry the Securities at any such nominal value it determines, such value to be for bookkeeping purposes only. All statements and reporting of any matters requiring this information will use this nominal value. Custodian shall have no duty to verify the accuracy of the cost basis and dates of acquisition furnished by Principal. Securities purchased in the Account shall be carried at cost. 15.2. Valuations. To the extent that Custodian has agreed to provide pricing or other information services, Custodian is authorized to utilize any vendor (including brokers and dealers of Securities and pricing Page 14 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 35 Packet Pg. 59 of 553 ®MUFG services embedded in Custodian's securities processing or accounting systems) reasonably believed by Custodian to be reliable to provide such information. Principal understands that certain pricing information with respect to complex financial instruments including, without limitation, derivatives, may be based on calculated amounts rather than actual market transactions and may not reflect actual market values, and that the variance between such calculated amounts and actual market values may or may not be material. Where pricing vendors used by Custodian do not provide information for Securities, a qualified party may advise Custodian regarding the fair market value of, or provide other information with respect to, such held Securities. If such information is not available, Custodian shall use the cost or nominal value for such Securities, solely for administrative convenience. Custodian shall not be liable for any loss, damage or expense incurred as a result of errors or omissions with respect to any pricing or other information utilized by Custodian hereunder and shall have no responsibility or d uty to ascertain or authenticate the value of pricing applied to any such Security. 15.3. Activity Reports. Custodian shall provide access to Principal, Manager, Authorized Agents Valuation Agent, and other persons authorized by Principal to ad vices of transactions and other information regarding the Account by means of Custodian's online system. 15.4. Statements. Custodian shall provide Principal, Manager, and other Authorized Agents with copies of Account statements and other reports periodically via paper delivery or electronically by means of Custodian's online service or as otherwise as agreed to by Principal and Custodian showing all income and principal transactions and cash positions, and a list of Property. Principal and Manager are responsible for providing Custodian with accurate and updated contact information for themselves and their respective agents, to allow Custodian to deliver Account statements in a timely manner. Principal may approve or disapprove any such Account Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement statement within thirty (30) days of its receipt, and, if no written objections are received within the thirty (30) day period, such Account statement of Account shall be deemed approved. Principal acknowledges and agrees that if Custodian's online service is selected, paper statements will be provided only upon req uest and that Custodian's online statements, trade confirms and related online communications satisfy all of Custodian's existing legal and contractual obligations to provide statements, reports and confirmations with respect to the account. Printed trade confirmations for trades effected by Custodian will be available upon request and at no additional cost. Principal and Manager may request printed trade confirmations for other securities transactions from the broker through which they direct such trades. 15.5. Shared Data. For the purpose of operational efficiencies, including without limitation, trade settlement, proxy voting, trade reconciliation, performance reporting. on-line access and the like, Custodian, upon direction of the Principal's appointed Manager, on occasion may send electronic trade, holdings, and or Principal's information to third party vendors ("TPV") who are agents of the aforementioned Manager. Principal's appointed Manager is responsible for any due diligence and monitoring of TPV with whom they have contracted and Custodian shall have no obligation to do so. 16. USE OF OTHER BANK SERVICES 16.1. Mutual Fund Investments. Principal or Manager may direct Custodian to invest cash balances carried in the Account in any mutual fund available in the market as permitted by law. These investment directions may include, but are not limited to, money market mutual funds or long equity and fixed income mutual funds. Such funds may be sub -advised by an affiliate or subsidiary of Custodian and/or for which Custodian may also act as the mutual fund's custodian and/or provide other services for the mutual fund. Principal or Manager shall Page 15 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE)(002) Item 3: Staff Report Pg. 36 Packet Pg. 60 of 553 ®MUFG designate the particular mutual fund that Principal or Manager deems appropriate for the Account. Principal hereby acknowledges that Custodian or its affiliate or subsidiary will receivefees for such services which are in'addition to those fees charged by Custodian as agentfor the Principal's custody Account. 16.2. Foreign Exchange. Custodian makes available to Principal or Manager foreign exchange services directly with Custodian or through Custodian's Sub -Custodian to convert currencies in conjunction with transactions in the Principal's Account under direction provided in Appendix B, as amended from time to time. Principal acknowledges that Custodian is the counterparty with respect to foreign exchange transactions provided under the Standing Instructions Defined Spread Service ("Defined Spread Service") with Custodian's Sub -Custodian and are subject to Paragraph 6 of this Agreement. 16.2.1. Standing Instructions Defined Spread Service. Foreign currency exchanges offered under the Defined Spread Service are directed to Custodian's Sub -Custodian or, for markets with currency restrictions, to the local market Sub -Agent. Both services may be amended from time to time. 16.2.2 Direct with Custodian's Institutional Banking & Markets. Principal or Manager may elect to have foreign currency exchanges provided under separate agreement with Custodian's Institutional Banking & Markets and performed in accordance with Custodian's Foreign Exchange Agreement. Principal acknowledges that (i) Principal or Manager is not obligated to effect foreign currency exchange with Custodian or Custodian's Sub - Custodian, (ii) Custodian will make available the relevantdata ata so that Principal or Manager, as the case may be, can independently monitor foreign exchange activities, and (iii) Custodian will receive benefits for such foreign currency transactions as defined in Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement Paragraph 16.2, which are in addition to the compensation which Custodian receives for ad ministering the Account. 16.3. Interest Bearing Deposits. Principal or Manager may direct that assets of the Account be invested in deposits with Custodian, affiliates or Sub -Custodian as a sweep vehicle or other deposit held in Custodian's nominee nameforthe benefit of its clients. Principal and Manager acknowledge deposits at M UFG Union Bank, N.A. are covered by FDIC insurance up to the designated value in effect for each beneficial owner. Principal and Manager acknowledge deposits at affiliates, existing now or in the future, are not subject to FDIC insurance. 16.4. Other Transaction Services. Principal or Manager may direct Custodian to utilize for the Account other services or facilities provided by Custodian, its subsidiaries or affiliates. Such services may include, but are not limited to the placing of orders for the purchase or sale of units or shares of any registered investment company, including such registered investment company to which Custodian, MUFG Americas Holdings Corporation, or their subsidiaries or affiliates, manage. provide investment advice, act as custodian or provide other services. 16.5. Credit Facilities. Custodian may, in accordance with its commercial lending practices, enter into a credit facility with Principal for use with the operation of the Account. Such credit facility will be agreed to under separate agreement and subject to the terms and conditions, therein. Principal acknowledges that any such credit facility is subject to the lien provisions of Paragraph 11.2 of this Agreement. 17. CUSTODIAN'S RESPONSIBILITIES AND LIABILITIES 17.1. Standard of Care. In performing the responsibilities delegated to it under this Agreement, Custodian agrees to exercise reasonable care and shall not be liable for any damages arising out of Custodian's performance of or failure to perform its duties under this Agreement except to the Page 16 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 37 Packet Pg. 61 of 553 COQ? extent that damages arise directly out of Custodian's willful misconduct or gross negligence. 17.2. Investment Authority. The parties intend and acknowledge that Custodian shall not be considered a fiduciary of the Account. 17.3. Insurance and Force Majeure. Without limiting the generality of Paragraph 17.1 or of any other provision of this Agreement, Custodian shall not be liable so long as and to the extent that it exercises reasonable care, for any defect in the title, validity or genuineness of any Property in the evidence of title thereto received by it or delivered by it pursuant to this Agreement. In addition, Custodian (i) shall not be required to maintain any special insurance for the benefit of Principal, and (ii) shall not be liable or responsible for any loss, damage, expense, failure to perform or delay caused by accidents, strikes, fire, flood, war, riot, electrical or mechanical or communication line orfacility failures, acts of third parties (including without limitation any messenger, telephone or delivery service), acts of God, war, government action, civil commotion, fire, earthquake, or other casualty or d isaster or any other cause or causes which are beyond Custodian's reasonable control. However, Custodian shall use reasonable efforts to replace Securities lost or damaged due to such causes with securities of the same class and issue with all rights and privileges pertaining thereto. Custodian shall not be liable to Principal for any loss which shall occur as the result of the failure of a Sub -Custodian to exercise reasonable care with respect to the safekeeping of assets. 17.4. Legal Proceedings. 17.4.1. Custodian shall not be required to appear in or defend any legal proceedings with respect to the Account, the Securities, or Non - Custody Asset unless Custodian has been indemnified to its reasonable satisfaction against loss and expense (including reasonable attorneys' fees). Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement 17.4.2 With respect to legal proceedings, Custodian may consultwith counsel acceptable to it after written notification to Principal concerning its duties and responsibilities under this Agreement, and shall not be liable for any action taken or not taken in good faith on the advice of such counsel. 17.4.3 To the extent permissible by law or regulation and upon Principal's request, the Principal shall be subrogated to the rights of Custodian with respect to any claim for any loss, damage or claim suffered by Principal, in each case to the extent that Custodian fails to pursue any such claim or Principal is not made whole in respect of such loss, damage or claim. 18. COMPLIANCE WITH RELEVANT LAW Principal hereby represents and warrants that (i) no Relevant Person is located, organized, or resident in a Sanctioned Country or otherwise a Sanctioned Person; and (ii) each Relevant Person shall comply with Relevant Law in connection with use of the Account(s) and Custodian's service(s). Principal agrees to promptly notify Custodian if any such representation becomes untrue. Principal further agrees not to access its Account(s) or Custodian's services from a Sanctioned Country, and not to use or permit the use of account(s) or Custodian's services in connection with any transaction that violates, or that has the purpose of evading, Relevant Law. If Custodian is uncertain regarding the legality of any transaction, Principal acknowledges that Custodian may refuse the transaction or freeze the Account in question while Custodian investigates the matter. For purposes of the foregoing: "Relevant Law" means U.S. Sanctions and all laws, rules, regulations, and executive orders applicable to Principal's Account(s), services, or transactions related to bribery, corruption, money laundering, or the funding of terrorist activities, including, without limitation, the Bank Secrecy Act, the USA PATRIOT Act, the U.S. Foreign Corrupt Practices Act of 1977, and the U.K. Bribery Act 2010. "Relevant Person" means Principal or any other person delegated authority with respect to Principal's Accounts or services Page 17 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 38 Packet Pg. 62 of 553 (.)MUFG provided thereto. "Sanctioned Country" means a country or territory that is or whose government is subject to U.S. Sanctions that broadly prohibit dealings with that country, territory, or government. "Sanctioned Person" means an individual or entity with whom a U.S. person is prohibited or restricted by U.S. Sanctions from engaging in trade, business, or other activities. "U.S. Sanctions" means all laws, rules, regulations and executive orders promulgated or administered by any U.S. governmental authority (including, without limitation, the Office of Foreign Assets Control of the U.S. Department of Treasury) to implement and enforce sanctions. 19. INDEMNITIES AND LIMITATION OF LIABILITY 19.1. In addition to the indemnification provisions contained in this Agreement, Principal agrees to indemnify, defend, and hold harmless Custodian and its affiliates providing services under this Agreement, including their respective officers, directors, agents, and employees from all taxes, charges, expenses, assessments, claims and liabilities including, without limitation, reasonable attorneys' fees, and disbursements and liabilities ("Claims") arising directly or indirectly from any action or omission to act which Custodian takes in connection with the provision of services to Principal, Manager, Authorized Agents Valuation Agent, and other Authorized Agents. Neither Custodian, nor any of its affiliates, shall be indemnified against any liability (or any expenses incident to such liability) caused by Custodian's or its affiliates' own willful misconduct, gross negligence or reckless disregard in the performance of Custodian's or its affiliates' activities under this Agreement. The provisions of this Paragraph 19 shall survive termination of this Agreement. 19.2. In all cases, Custodian's liability under this Agreement shall be limited to the resulting direct loss, if any, incurred by Principal. Under no circumstances shall Custodian be liable for any incidental, consequential, indirect, punitive, or special damage which Principal may incur or suffer in connection with this Agreement. Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement 20. COMPENSATION AND OTHER CHARGES 20.1. Compensation. Principal shall pay Custodian compensation for its services hereunder as specified in Appendix C as amended from time to time. Fees shall accrue and be taken in arrears as specified on the active fee schedule and charged to the Account unless Principal has requested that it be billed directly. However, any fees not paid within sixty (60) days of billing will be charged automatically to the Account(s) based on the active fee schedule. 20.2. Expenses. Principal shall reimburse Custodian by debiting the Account(s) for all reasonable out-of-pocket expenses and processing costs incurred by Custodian and Global Sub -Custodian Network in the administration of the Account and Sub - Account including, without limitation, reasonable counsel fees incurred by Custodian pursuant to Subparagraph 14.2 of this Agreement. 20.3. Other Compensation for Services. All disbursements from the Account are drawn on an account in Custodian's or its affiliate's name. Any "float" (earnings from the investment of funds pending negotiation of the disbursement or check) is retained by Custodian or its affiliate as partial compensation for handling such transaction. 21. AMENDMENT AND TERMINATION 21.1. Amendment. This Agreement may be amended at any time by a written instrument signed by the parties or by Custodian immediately if required by applicable law or upon thirty (30) days written notice to Principal. 21.2. Termination. Custodian may terminate this Agreement immediately if Custodian, in its sole discretion, determines that (i) Principal failed to strictly comply with any provision of this Agreement; or (ii) any representation, warranty or covenant of the other party in this Agreement is false or misleading. Any such termination shall not constitute a waiver of any other rights that Custodian may have under this Agreement. Page 18 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE)(002) Item 3: Staff Report Pg. 39 Packet Pg. 63 of 553 MUFG In addition, either party may terminate this Agreement and the Account upon ninety (90) days' written notice. Upon such termination and within ninety (90) days from the date of the written termination notice, both parties agree to cooperate to ensure an orderly transition of services to a successor custodian, the Principal, or as otherwise instructed by Principal. Custodian shall deliver or cause to be delivered the Property, less any amounts due and owing to Custodian under this Agreement. Custodian shall have reasonable time to transfer Non -Custody Assets. If a successor custodian has not accepted an appointment by the effective termination date of the Account, Custodian may petition a court of competent jurisdiction unless an extension is agreed to in writing by both parties. Expenses related to such court filing shall be reimbursed by Principal and further subject to the provisions of Subparagraph 20.2. Upon completion of such delivery, Custodian shall be discharged of any further liability or responsibility with respect to the Securities and any Non -Custody Asset so delivered. In the event that Securities. Non -Custody Assets or other properties remain in the possession of Custodian after the date of termination hereof owing to failure of Principal to provide proper instructions, Custodian shall be entitled to fair compensation for its services during such period as Custodian retains possession of such securities, funds, Non -Custody Assets. and other properties and the provisions of this Agreement relating to the duties and obligations of Custodian shall remain in full force and effect. Costs associated with transferring Property including Non -Custody Assets shall be charged to theAccount(s) based on Custodian's active fee schedule. 22. SUCCESSORS This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors in interest. This Agreement may not be assigned by either party, nor may the duties of either party hereunder be delegated, without the prior written consent of the other party. 23. GOVERNING LAW Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement The validity, construction, and administration of this Agreement shall be governed by the applicable laws of the United States from time to time in force and effect and, to the extent not preempted by such laws of the United States, by the laws of the State of California from time to time in force and effect. Any action or proceeding to enforce, interpret ordjudicate the rights and responsibilities of the parties hereunder shall be commenced in the State or Federal courts located in the State of California. 24. NOTICES Except as otherwise specified herein, all notices, requests, demands and other communications under this Agreement shall be signed and in writing and shall be deemed as having been duly given on the date of service, if served personally on the party to whom notice is to be given, or on the fifth (5) day after mailing, if mailed to the party to whom notice is to be given and properly addressed as follows: To Principal: Attn: Facsimile: Email: To Custodian: Global Custody Services — SF Office Mail Code H-17001 350 California Street, 17th Fl San Francisco, CA 94104 Email: ITCS_Govt_andjns@unionbank.com This Agreement and any amendment, notice or other document required to be signed and in writing under this Agreement may be delivered by personal service or U.S. first class mail postage prepaid or via fax, email with an imaged or scanned attachment (such as a .PDF), or similar electronic transmission with electronic signature through Custodian's online secure messaging service pursuant to security protocols established and agreed by the parties, Page 19 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT -PUBLIC FUNDS 20191023_CAO(GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 40 Packet Pg. 64 of 553 C•� MUFF unless otherwise specified herein. Signatures delivered via fax, email, or similar electronic transmission shall be effective as original signatures in binding the parties and shall be effective upon receipt. Periodic communications related to foreign currencies and global market updates will be available to authorized parties through Custodian's secure messaging service. Either party may changethe address at which notice may be given by giving ten (10) days'. prior written notice of such change to the other party. 25. CONFIDENTIALITY All non-public information and advice furnished by either party to the other shall be treated as confidential and will not be disclosed to third parties unless required by law, except Custodian may disclose (i) the identity of Principal as a client or client reference of Custodian: (ii) any information to any government regulator of Custodian or its affiliated entities or as otherwise required by law; and (iii) any information to Custodian's affiliated entities and product and service providers to the extent necessary to provide the financial products and services under this Agreement. 26. COUNTERPARTS This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement and all exhibits, appendices, attachments and amend merits hereto may be reproduced by any reasonable means. The parties hereto each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. 27. LIMITED POWER OF ATTORNEY Except in connection with Non -Custody Assets, Custodian is hereby granted a limited power of Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement attorney by Principal to execute on Principal's behalf any declarations, endorsements, assignments, stock or bond powers, affidavits, certificates of ownership or other documents required (i) to effect the sale, transfer, or other disposition of assets held in the Account, (ii) to obtain payment with respect to assets held in the Account, (iii) to exercise its rights as a secured party hereunder, or (iv) to take any other action required with respect to the assets held in the Account, and in the Custodian's own name to guarantee as Principal's signature any signature so affixed. 28. MISCELLANEOUS Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. This Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof. The captions and headings in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. [LEFT INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS] Page 20 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 41 Packet Pg. 65 of 553 ®MUFG ACCEPTED BY PRINCIPAL: By::'i4 F Name: L i c Title: i c Date: ( / t 3 /e2 By: Name: Title: Date: ACCEPTED BY CUSTODIAN: Digitally signed by April Beauchamp Date: 2020.07.24 By: 13:39:47 -07'00' Name: April Beauchamp Title: Vice President Date: 7/24/2020 Digitally signed by Scott pti_ Parker Date: 2020.07.24 By: 13:54:01 -0700' Name: Scott Parker Title: Director Date: 7/24/2020 AppendixA: Attached ❑ Not Applicable ❑x Appendix B: Attached ❑ Not Applicable 0 Appendix C: Attached L Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement Page 21 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 42 Packet Pg. 66 of 553 )MUFG Deposit Contract: Attached ❑ Not Applicable ❑x Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement Page 22 of 22 MUFG (UNION BANK) CUSTODY AGREEMENT - PUBLIC FUNDS 20191023_CAO (GOVERNING LAW VENUE) (002) Item 3: Staff Report Pg. 43 Packet Pg. 67 of 553 Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Schedule of Fees Custody Agreement GLOBAL CUSTODY SERVICES DIVISION Schedule of Fees for Custodial Services Prepared for: City of Palo Alto Annual Administration Fee (assessed each fee cycle) PerSingle Account................................................................. $5,000 `Transaction Charges Depository Eligible'.......... .. ................... $ 12 Depository Ineligible- ........ ..... $ 40 Monthly Holding DepositoryEligible'..................................................................................... $ 1 Depository Inelii€gible`............................................ $ 4 P&I Paydowns , Income Collection, Capital Gains Distribution .............................. $ 5 Disbursements (Checks/Wires) 10 Additional Services Out -o₹ -Pocket Expenses .............. ..... ..,............. ..... .. .. ,. ...... As incurred Class Action Services.......................................................... 5 a• o₹ recovered funds Hardcopy Statements...................................$25 . ......... .. .. .......$25 per statement r I (f IO Authorized - ie t Representative Dat. i _.. .. J . l tee, Caro / "7i Named Digitally signed by April Title r.y. Beauchamp Date: 2020.07.24 7/? 4/2020 13:39:08 -0700' MUFG Union Bank, N A.. Represertative Date April Beaucham Name Title CONFIDENTIAL Market value used for fee calculations on fee invoices may differ slightly from market values on client statements due to posting of accruals, late pricing of securities. and/cr other timing issues. A transaction is defined as any activity affecting assets including purchases, sales, tender offers, stock dividends, free deliveries, free receipts, maturities, exchanges, redemptions, etc. Fees for foreign securities, foreign exchange transactions, international wires, and non-standard services are quoted separately. MUFG Union Bank. N.A., retains the right to charge special fees for extraordinary services not covered in this fee schedule. MUFG Union Bank, N.A. will pass on to the Client out of pocket fees including, but not limited to, securities movements associated with securities lending, courier expense. registration fees, stamp duties, custom reporting, or custom programming, proxy voting and expenses associated with additional paper statements. You may be assessed an overdraft charge for any negative balance in your account, provided such advance or overdraft is not related to Bank errors, omissions, or processes. Please see Appendix 1 (Overdrafts) for additional information. Fees are assessed monthly unless otherwise agreed. This fee schedule is subject to charge upon thirty (30) dayswritten notice. DTC, Fed, or similar, Includes Cash Sweep. USD denominated assets 2 Physical Securities, Vault, Held -Away, etc. USD denominated assets MUFG Union Bank, N.A. OMUFG Item 3: Staff Report Pg. 44 Packet Pg. 68 of 553 APPENDIX I OVERDRAFTS OVERDRAFTS Item 3 Attachment C - US Bank (Formerly Union Bank) Existing (Investment) Custody Agreement MUFG Union-Bank,-i.l.A.("Custodian") uses reasonable efforts -to effect settlement as soon as possible after receipt of appropriate instructions and funds. However, if overdrafts are incurred, not attributable to the errors of Custodian or its agents, Custodian may debit the account for payment of the overdraft and Custodian's fees and charges as set forth below. Circumstances that could lead to overdrafts resulting in debit charges include, without limitation: Trade, foreign exchange or other currency movement instructions which fail due to late, incomplete, or incorrect instructions, broker, client or investment manager errors or market practice; Settlement of securities transactions; or Insufficient cash balance in an account due to client, investment manager or other error not attributable to Custodian or its agents. If an overdraft was caused by an error of Custodian or its agents, Custodian will not debit charges for that overdraft. Please refer to the applicable account agreement for more information. CALCULATION OF DEBIT RATES In calculating debit rates, Custodian will take the daily overdrawn balance multiplied by the applicable annual debit rate and divided by the relevant divisor shown below. Overdraft debit charges will be accrued daily and posted monthly. Effective as of July 15, 2016, Custodian may charge the current United States federal funds rate, as announced daily by Bloomberg or another third party service as selected by Custodian, plus a spread of +2.50 (+250 bps.). Custodian may change the spread at any time. Currency Benchmark + Bank OD Charge Market Divisor USD Fed Funds Effective +250 bps 360 days ADDITIONAL COSTS Custodian reserves the right to recoup additional costs incurred as a result of the introduction or change in any law or regulation, or additional costs related to the cost of borrowing not covered by the above -mentioned rates. MUFG Union Bank. N.A. ®MUFG Item 3: Staff Report Pg. 45 Packet Pg. 69 of 553 Item 4 Item 4 Staff Report CITY OF PALO ALTO City Council Staff Report From: City Manager Report Type: CONSENT CALENDAR Lead Department: Utilities Meeting Date: January 16, 2024 Staff Report:2308-1939 TITLE Approval of Professional Services Contract with Energy and Environmental Economics, Inc. (E3) for a Not -to -Exceed Amount of $945,286 for the Sustainability and Climate Action Plan (S/CAP) Funding Study; Amendment to Professional Services Contract with Sterling Communications, Inc. to Amend the Scope, Extend the Timeline, and Increase Total Not -to -Exceed Compensation by $75,000 (from $85,000 to $160,000); and a Budget Amendment in the Electric Fund for Acceptance of $75,000 DEED grant for S/CAP Funding Study; CEQA Status — Not a Project. RECOMMENDATION Staff recommends that Council: 1. Approve of Professional Services Contract Number C24188769 with E3 in an Amount Not - to -Exceed $945,286 for the S/CAP Funding Study for a Period of One (1) Year; 2. Approve an amendment to Professional Services Contract Number S23187670 with Sterling Communications, Inc. to increase the Not -to -Exceed compensation in the amount of $75,000 for a total of $160,000, to expand the scope to include other electrification initiatives, and to extend the timeline for Advanced Heat Pump Water Heater Pilot Program outreach; 3. Approve the acceptance of the American Public Power Association's Demonstration of Energy & Efficiency Developments (DEED) grant of $75,000; 4. Amend the Fiscal Year 2024 Budget Appropriation for the Electric Fund (requires a 2/3 vote) by the following: a. Increasing the Contract Services expense appropriation by $75,000; and b. Increasing Other Revenue by $75,000. BACKGROUND The City of Palo Alto (Palo Alto or City) adopted its 2022 Sustainability and Climate Action Plan in 2022 outlining the strategies needed to meet our sustainability goals, including the goal of reducing GHG emissions 80 percent below 1990 levels by 2030. The S/CAP Funding Study will assess the funding needs and explore funding sources to meet Palo Alto's building and Item 4: Staff Report Pg. 1 Packet Pg. 70 of 553 Item 4 Item 4 Staff Report transportation electrification goals and will center around the development of an analytical model to estimate the "community cost to electrify" and to structure the financing of future electrification programs. As part of this study scope, there will be multiple sub -studies to collect inputs to the model such as gas appliance saturation, EV charging needs, and funding and financing sources/methodologies. Key outputs from the model include: the total cost, net of any benefits, of the necessary equipment and infrastructure upgrades, utility rate impacts, and bill impact to different customer groups. Results from the study will inform the development of electrification programs to meet the City's Sustainability/Climate Action Plan (S/CAP) goals. City staff applied for and were awarded the American Public Power Association's Demonstration of Energy & Efficiency Developments (DEED) grant, which can provide $75,000 in funding towards completing this Funding Study. One major electrification program is already operating, the Advanced Heat Pump Water Heater Pilot Program. This program has required significant outreach to drive program participation. The program has not yet reached its budgeted program capacity and is continuing into 2024. ANALYSIS This report requests approval of two S/CAP items: 1. Approval of a consulting contract to complete the City's S/CAP Funding Study, and 2. Amendment of a contract for the Advanced Heat Pump Water Heater Pilot Program outreach to continue the program through June 2024 and include additional electrification programs. S/CAP Funding Study Contract Approval The City published the Request for Proposals (RFP) for the Funding Study on the City's eProcurement platform, on August 14, 2023. The City received five responsive Proposals from Buro Happold Consulting Engineers, Arup US, Black and Veatch, Quanta Technology, and Energy and Environmental Economics (E3). Table 1. Summary of RFP Process RFP Name/Number Consulting Services Funding Study for Electrification Goals RFP No. 188769 Request for Proposals Issued Proposals Due Number of Firms Notified Total Days to Respond to RFP Number of Proposals Received Non -responsive bidders/ Responsive bidders August 14, 2023 September 25, 2023 2,848 42 5 0/5 Item 4: Staff Report Pg. 2 Packet Pg. 71 of 553 Item 4 Item 4 Staff Report RFP Name/Number Consulting Services Funding Study for Electrification Goals RFP No. 188769 https://procurement.opengov.com/portal/paIo-alto- Public Link to Solicitation ca/projects/56912 Proposals Price Range $396,541 to $645,000 An evaluation committee comprised of Resource Management Division staff carefully reviewed each firm's qualifications and submittals in response to the criteria identified in the RFP: 1. Quality and completeness of proposal 2. Quality, performance and effectiveness of the solution, goods and/or services to be provided by the Proposer 3. Proposer's experience, including the experience of staff to be assigned to the project, the engagements of similar scope and complexity 4. Cost to the city 5. Proposer's financial condition and stability 6. Proposer's ability to perform the work within the time specified 7. Proposer's prior record of performance with the City or other local, county, or state agencies 8. Proposer's compliance with applicable laws, regulations, policies (including City policies), guidelines and orders governing prior or existing contracts performed by the proposer The City received five responses. The evaluation committee identified a preferred service provider based on the best overall score from the proposal and an interview. Based on this approach, staff recommends contracting with E3, who provided a comprehensive approach to the scope of work, demonstrated a clear understanding of Palo Alto and its needs, has extensive experience working with California utilities and governments on projects involving building and transportation electrification and financing solutions, proposed an aggressive timeline for completion with a reasonable budget and a competitive average hourly rate, and demonstrated exceptional project management experience. The scope of work E3 proposed includes the following tasks, to be completed within a 7 -month process, beginning shortly after the contract is executed, anticipated for January 2024 ($614,286): 1. Funding Source Survey - An extensive summary of all potential financing mechanisms that Palo Alto could use for funding citywide electrification, including a review of those used by other agencies to identify new potential mechanisms. The timing, structure and method of raising capital for the City's proposed transactions are key elements to the financial plan. Item 4: Staff Report Pg. 3 Packet Pg. 72 of 553 Item 4 Item 4 Staff Report 2. Building Sector Studies - A study of the single-family, multi -family, and non-residential sectors with the objective of characterizing the equipment used in the buildings, estimating the cost of electrifying that equipment, identifying cost-effective efficiency opportunities, and using this to identify least cost electrification opportunities and as an input into the calculation of the total cost of the building electrification efforts needed to achieve the City's 80x30 goals. These studies will be used as an input to the funding model. 3. EV Charger Strategic Plan — A plan developed to provide a blueprint on alternatives for future City actions to build the necessary infrastructure to support large scale EV growth in the most cost-efficient and user-friendly way possible, and to project the community cost and funding needs related to these actions. This study will be used as an input to the funding model. 4. Funding Study - An Excel model that estimates the community cost to electrify using building and transportation electrification outputs from the Building Sector Studies and EV Charger Strategic Plan, paired with results from other parallel studies completed by the Utilities Department to analyze Palo Alto's potential electrification needs and costs, available funding, and financing options. This model will be used by E3 in collaboration with City staff to produce a report with options for funding the S/CAP for Council consideration. In addition, the RFP requested proposals for optional tasks that could be added to the contract at the City's discretion. These were tasks that required skill sets and data closely tied to the S/CAP Funding Study. Staff is proposing to include the following three optional tasks in the S/CAP Funding Study contract ($250,000): A. Electrification Grid Impacts — This additional service will enable the City, at its discretion, to have the consultant model the impacts on the City's electric distribution system from the electrification measures analyzed in the S/CAP Funding Study. This could be useful if the City needs to validate assumptions in its grid modernization study and can help with evaluating the distribution benefit of flexible energy technologies. B. Affordable Housing Study — This additional service enables the City to direct consulting resources used to complete the Building Sector Study for the multi -family sector to include a more in-depth study of electrifying the affordable housing complexes in Palo Alto. C. Low Carbon Commute Strategies — This additional service enables the City direct the consultant to explore regulatory and other transportation management tools focused on employers that could drive employee adoption of low -carbon transportation generally. There is also $81,000 included in the contract for additional services if needed to complete the base contract work or optional tasks due to factors unanticipated in the original scope. Sterling Contract Amendment Item 4: Staff Report Pg. 4 Packet Pg. 73 of 553 Item 4 Item 4 Staff Report The City has an existing $85,000 contract in place with Sterling Communications (S23187670) that was put in place following an informal request for proposals (RFP). Staff is seeking to amend it to expand the scope, extend the timeline, and increase the maximum compensation by $75,000 to $160,000. This contract is to provide communications consulting services for program outreach related to the Advanced Heat Pump Water Heater (HPWH) Pilot Program and electrification more generally. This contract has resulted in innovations in how to the City does its program outreach by developing engaging campaign themes, improving design of the City's program outreach materials, implementing new outreach strategies (such as audience -targeted Google advertisements with specialized landing pages), and advising on how the City can help participants through the program. Staff wishes to retain this consulting assistance through June 2024 while in parallel doing a broader RFP for S/CAP communications and outreach to begin in July 2024. Staff had anticipated the original $85,000 to be adequate but has found during the first few months of the program that it requires more outreach than expected. Typically, professional services contracts with estimated expenditures exceeding $85,000 are solicited by formal RFP, per Palo Alto Municipal Code (PAMC) section 2.30.330 (Professional services Contracts), instead of an informal RFP, as this one was. To meet that code requirement would have required ending this contract and doing a formal RFP for a new one. However, staff determined that performing a formal RFP and allowing this contract to lapse would require stopping outreach, which would seriously impact program participation, leaving program installers unable to retain staff, leading to problems meeting demand later on when the City expands its outreach again. For those reasons staff has approved a competitive solicitation exemption, pursuant to PAMC section 2.30.360 (b)(2) and recommends amending this contract to allow work to continue through June 2024. For future work in July 2024 and beyond, staff is starting a formal RFP for marketing services for the S/CAP more broadly, including all electrification programs, not just the Advanced HPWH Pilot program. POLICY IMPLICATIONS The S/CAP Funding Study will contain specific policy, project, and program recommendations. The study will aim to create a plan for staff and Council review for further actions, identifying funding and financing opportunities to enable the City to successfully implement policies and programs to encourage building and transportation electrification and achieve our sustainability goals. FISCAL/RESOURCE IMPACT Funding for the core elements of the S/CAP Funding Study was approved by Council as part of the FY 2024 budget. However, staff received a $75,000 grant from the American Public Power Association's (APPA) Demonstration of Energy & Efficiency Developments (DEED) Program for Item 4: Staff Report Pg. 5 Packet Pg. 74 of 553 Item 4 Item 4 Staff Report this study. Staff recommends an increase in Contract Services appropriation of $75,000 in the FY 2024 Electric Fund operating budget, offset by an increase in Other Revenue. The S/CAP Funding Study contract totals $945,286 and is funded as follows: • For the base contract tasks totaling $614,286: o $475,101 from the General Fund Office of Sustainability budget (previously approved in FY 2024 budget) o $64,185 from the LCFS Reserve for the EV Strategic Plan o $75,000 funded by new revenue from the APPA DEED grant, which will be for the S/CAP Funding Study generally (aligns with budget appropriation action recommendation 4 in this report) • For the optional tasks totaling $250,000: o Up to $200,000 from existing Utilities consulting budgets for electrification grid impact studies o $50,000 from the Electric Cap and Trade Reserve for the low carbon commute strategies study • For the additional services of $81,000, the budget to be used is to be determined based on whether it is needed for the base contract tasks or the optional tasks. The amendment of the Sterling Communications contract requires an additional $75,000. This will be funded by the Gas Cap and Trade Reserve. It should be noted that an additional cost of $37,000 is expected for outreach materials and online advertising associated with the program outreach strategies designed by Sterling, and these supply and material costs will be paid as incurred, also funded by the Gas Cap and Trade Reserve. STAKEHOLDER ENGAGEMENT The scope of this study was reviewed with the Council Ad Hoc S/CAP Committee and the S/CAP Working Group in August of this year. The City provided the public procurement process through its eProcurement platform and notified 2,848 firms to encourage participation. In addition, nine firms were contacted directly by Procurement staff to announce availability of the Request for Proposals. Of those notified, 593 firms viewed the project and 47 firms downloaded the proposal documents. Specific to the project, E3 will be engaging with multi -family and nonresidential building managers in order to complete on -site surveys of equipment and will be coordinating with local contractors to determine equipment and labor availability pricing, etc. in Palo Alto's electric appliance markets. E3 will be engaging with City of Palo Alto Utilities staff regularly to ensure continued project alignment. The E3 team will also attend up to six public hearings, four meetings with the Council Ad Hoc S/CAP Committee, and two public stakeholder meetings. Item 4: Staff Report Pg. 6 Packet Pg. 75 of 553 Item 4 Item 4 Staff Report ENVIRONMENTAL REVIEW Approval of the attached agreements described in this staff report does not meet the definition of a project under the California Environmental Quality Act (CEQA), pursuant to the California Public Resources Code Section 21065, because it is not an activity that will cause a direct physical change in the environment. ATTACHMENTS Attachment A: C24188769 E3 S/CAP Funding Study Attachment B: S23187670 Sterling Communications Amendment 1 APPROVED BY: Dean Batchelor, Director of Utilities Staff: Jonathan Abendschein, Assistant Director of Utilities/Resource Management Item 4: Staff Report Pg. 7 Packet Pg. 76 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP CITY OF PALO ALTO CONTRACT NO. C2418874 Funding Study AGREEMENT FOR PROFESSIONAL SERVICES BETWEEN THE CITY OF PALO ALTO AND ENERGY AND ENVIRONMENTAL ECONOMICS, INC. This Agreement for Professional Services (this "Agreement") is entered into as of the 18th day of December, 2023 (the "Effective Date"), by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("CITY"), and ENERGY AND ENVIRONMENTAL ECONOMICS, INC., a California corporation, located at 44 Montgomery Street, Suite 1500, San Francisco, CA 94104 ("CONSULTANT"). The following recitals are a substantive portion of this Agreement and are fully incorporated herein by this reference: RFCITAI,S A. CITY intends to award a contract (the "Project") and desires to engage a consultant to provide a Sustainability Climate Action Plan (S/CAP) Funding Study (the "Services", as detailed more fully in Exhibit A). B. CONSULTANT represents that it, its employees and subconsultants, if any, possess the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Services. C. CITY, in reliance on these representations, desires to engage CONSULTANT to provide the Services as more fully described in Exhibit A, entitled "SCOPE OF SERVICES". NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree as follows: SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described in Exhibit A in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY. ® Optional On -Call Provision (This provision only applies if checked and only applies to on -call agreements.) CITY may elect to, but is not required to, authorize on -call Services up to the maximum compensation amount set forth in Section 4 (Not to Exceed Compensation). CONSULTANT shall provide on -call Services only by advanced, written authorization from CITY as detailed in this Section. On -call Services, if any, shall be authorized by CITY, as needed, with a Task Order assigned and approved by CITY's Project Manager, as identified in Section 13 (Project Management). Each Task Order shall be in substantially the same form as Exhibit A-1 entitled "PROFESSIONAL SERVICES TASK ORDER". Each Task Order shall contain a specific scope of services, schedule of performance and maximum compensation amount, in accordance with the provisions of this Agreement. Professional Services Rev. Dec.15, 2020 Page 1 of 43 Item 4: Staff Report Pg. 8 Packet Pg. 77 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP Compensation for on -call Services shall be specified by CITY in the Funding Study on whichever is lowest: the compensation structure set forth in Exhibit C, me burly rates set forth in Exhibit C-1, or a negotiated lump sum. To accept a Task Order, CONSULTANT shall sign the Task Order and return it to CITY's Project Manager within the time specified by the Project Manager, and upon authorization by CITY (defined as counter -signature by the CITY Project Manager), the fully executed Task Order shall become part of this Agreement. The cumulative total compensation due to CONSULTANT for all Task Orders issued under this Agreement shall not exceed the amount of compensation set forth in Section 4. CONSULTANT shall only be compensated for on -call Services performed under an authorized Task Order and only up to the maximum compensation amount set forth in Section 4. Performance of and payment for any on -call Services are subject to all requirements and restrictions in this Agreement. SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through December 31, 2025 unless terminated earlier pursuant to Section 19 (Termination) of this Agreement. SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit B, entitled "SCHEDULE OF PERFORMANCE". Any Services for which times for performance are not specified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT. CITY's agreement to extend the term or the schedule for performance shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT. SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services shall be based on the compensation structure detailed in Exhibit C, entitled "COMPENSATION," including any reimbursable expenses specified therein, and the maximum total compensation shall not exceed Six Hundred Fourteen Thousand Two Hundred and Eighty -Six Dollars ($614,286.00). The hourly schedule of rates, if applicable, is set out in Exhibit C-1, entitled "SCHEDULE OF RATES." Any work performed or expenses incurred for which payment would result in a total exceeding the maximum compensation set forth in this Section 4 shall be at no cost to the CITY. ® Optional Additional Services Provision (This provision applies only if checked and a not -to -exceed compensation amount for Additional Services is allocated below under this Section 4.) In addition to the not -to -exceed compensation specified above, CITY has set aside the not - to -exceed compensation amount of Three Hundred Thirty -One Thousand Dollars ($331,000) for the performance of Additional Services (as defined below). The total compensation for performance of the Services, Additional Services and any reimbursable expenses specified in Exhibit C, shall not exceed Nine Hundred and Forty -Five Thousand Two Hundred Eighty -Six Dollars ($945,286.00), as detailed in Exhibit C. Professional Services Rev. Dec.15, 2020 Page 2 of 43 Item 4: Staff Report Pg. 9 Packet Pg. 78 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP "Additional Services" means any work that is determined by CITY 11Funding Study the proper completion of the Project, but which is not included within the Scope O1 Services described at Exhibit A. CITY may elect to, but is not required to, authorize Additional Services up to the maximum amount of compensation set forth for Additional Services in this Section 4. CONSULTANT shall provide Additional Services only by advanced, written authorization from CITY as detailed in this Section. Additional Services, if any, shall be authorized by CITY with a Task Order assigned and authorized by CITY's Project Manager, as identified in Section 13 (Project Management). Each Task Order shall be in substantially the same form as Exhibit A-1, entitled "PROFESSIONAL SERVICES TASK ORDER". Each Task Order shall contain a specific scope of services, schedule of performance and maximum compensation amount, in accordance with the provisions of this Agreement. Compensation for Additional Services shall be specified by CITY in the Task Order, based on whichever is lowest: the compensation structure set forth in Exhibit C, the hourly rates set forth in Exhibit C-1, or a negotiated lump sum. To accept a Task Order, CONSULTANT shall sign the Task Order and return it to CITY's Project Manager within the time specified by the Project Manager, and upon authorization by CITY (defined as counter -signature by the CITY Project Manager), the fully executed Task Order shall become part of this Agreement. The cumulative total compensation to CONSULTANT for all Task Orders authorized under this Agreement shall not exceed the amount of compensation set forth for Additional Services in this Section 4. CONSULTANT shall only be compensated for Additional Services performed under an authorized Task Order and only up to the maximum amount of compensation set forth for Additional Services in this Section 4. Performance of and payment for any Additional Services are subject to all requirements and restrictions in this Agreement. SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly invoices to the CITY describing the Services performed and the applicable charges (including, if applicable, an identification of personnel who performed the Services, hours worked, hourly rates, and reimbursable expenses), based upon Exhibit C or, as applicable, CONSULTANT's schedule of rates set forth in Exhibit C-1. If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT's invoices shall be subject to verification by CITY. CONSULTANT shall send all invoices to CITY's Project Manager at the address specified in Section 13 (Project Management) below. CITY will generally process and pay invoices within thirty (30) days of receipt of an acceptable invoice. SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All Services shall be performed by CONSULTANT or under CONSULTANT's supervision. CONSULTANT represents that it, its employees and subcontractors, if any, possess the professional and technical personnel necessary to perform the Services required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subcontractors, if any, have and shall maintain during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All Services to be furnished by CONSULTANT under this Agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances. Professional Services Rev. Dec.15, 2020 Page 3 of 43 Item 4: Staff Report Pg. 10 Packet Pg. 79 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall k Funding Study of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement, as amended from time to time. CONSULTANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services. SECTION 8. ERRORS/OMISSIONS. CONSULTANT is solely responsible for costs, including, but not limited to, increases in the cost of Services, arising from or caused by CONSULTANT's errors and omissions, including, but not limited to, the costs of corrections such errors and omissions, any change order markup costs, or costs arising from delay caused by the errors and omissions or unreasonable delay in correcting the errors and omissions. SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works project, CONSULTANT shall submit estimates of probable construction costs at each phase of design submittal. If the total estimated construction cost at any submittal exceeds the CITY's stated construction budget by ten percent (10%) or more, CONSULTANT shall make recommendations to CITY for aligning the Project design with the budget, incorporate CITY approved recommendations, and revise the design to meet the Project budget, at no additional cost to CITY. SECTION 10. INDEPENDENT CONTRACTOR. CONSULTANT acknowledges and agrees that CONSULTANT and any agent or employee of CONSULTANT will act as and shall be deemed at all times to be an independent contractor and shall be wholly responsible for the manner in which CONSULTANT performs the Services requested by CITY under this Agreement. CONSULTANT and any agent or employee of CONSULTANT will not have employee status with CITY, nor be entitled to participate in any plans, arrangements, or distributions by CITY pertaining to or in connection with any retirement, health or other benefits that CITY may offer its employees. CONSULTANT will be responsible for all obligations and payments, whether imposed by federal, state or local law, including, but not limited to, FICA, income tax withholdings, workers' compensation, unemployment compensation, insurance, and other similar responsibilities related to CONSULTANT's performance of the Services, or any agent or employee of CONSULTANT providing same. Nothing in this Agreement shall be construed as creating an employment or agency relationship between CITY and CONSULTANT or any agent or employee of CONSULTANT. Any terms in this Agreement referring to direction from CITY shall be construed as providing for direction as to policy and the result of CONSULTANT's provision of the Services only, and not as to the means by which such a result is obtained. SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any interest in this Agreement nor the performance of any of CONSULTANT's obligations hereunder without the prior written approval of the City Manager. Any purported assignment made without the prior written approval of the City Manager will be void and without effect. Subject to the foregoing, the covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators and assignees of the parties. SECTION 12. SUBCONTRACTING. Professional Services Rev. Dec.15, 2020 Page 4 of 43 Item 4: Staff Report Pg. 11 Packet Pg. 80 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP Funding Study ❑ Option A: No Subcontractor: CONSULTANT shall not subcontrac any portion o the Services to be performed under this Agreement without the prior written authorization of the City Manager or designee. In the event CONSULTANT does subcontract any portion of the work to be performed under this Agreement, CONSULTANT shall be fully responsible for all acts and omissions of subcontractors. ® Option B: Subcontracts Authorized: Notwithstanding Section 11 (Assignment) above, CITY agrees that subcontractors may be used to complete the Services. The subcontractors authorized by CITY to perform work on this Project are: Willdan Energy Services Willdan Financial Services Rincon Ann Cheng CONSULTANT shall be responsible for directing the work of any subcontractors and for any compensation due to subcontractors. CITY assumes no responsibility whatsoever concerning compensation of subcontractors. CONSULTANT shall be fully responsible to CITY for all acts and omissions of subcontractors. CONSULTANT shall change or add subcontractors only with the prior written approval of the City Manager or designee. SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign Amber Mahone as the CONSULTANT's Project Manager, Telephone: (857) 472-4212, Email: amber(li ethree.com to have supervisory responsibility for the performance, progress, and execution of the Services and represent CONSULTANT during the day-to-day performance of the Services. If circumstances cause the substitution of the CONSULTANT's Project Manager or any other of CONSULTANT's key personnel for any reason, the appointment of a substitute Project Manager and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY's Project Manager. CONSULTANT, at CITY's request, shall promptly remove CONSULTANT personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Services or a threat to the safety of persons or property. CITY's Project Manager is Jonathan Abendschein, Utilities Department, Resource Management Division, 250 Hamilton Ave (3rd Floor), Palo Alto, CA, 94301, Telephone: 650-329-2309, Email: jon.abendscheinncityofpaloalto.org. CITY's Project Manager will be CONSULTANT's point of contact with respect to performance, progress and execution of the Services. CITY may designate an alternate Project Manager from time to time. SECTION 14. OWNERSHIP OF MATERIALS. All work product, including without limitation, all writings, drawings, studies, sketches, photographs, plans, reports, specifications, computations, models, recordings, data, documents, and other materials and copyright interests developed under this Agreement, in any form or media, shall be and remain the exclusive property of CITY without restriction or limitation upon their use. CONSULTANT agrees that all copyrights which arise from creation of the work product pursuant to this Agreement are vested in CITY, and CONSULTANT hereby waives and relinquishes all claims to copyright or other intellectual property rights in favor of CITY. Neither CONSULTANT nor its subcontractors, if any, shall make any of such work product available to any individual or organization without the prior written Professional Services Rev. Dec.15, 2020 Page 5 of 43 Item 4: Staff Report Pg. 12 Packet Pg. 81 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP approval of the City Manager or designee. CONSULTANT makes no L Funding Study the suitability of the work product for use in or application to circumstances not contemplatecontemplateu by the Scope of Services. SECTION 15. AUDITS. CONSULTANT agrees to permit CITY and its authorized representatives to audit, at any reasonable time during the term of this Agreement and for four (4) years from the date of final payment, CONSULTANT's records pertaining to matters covered by this Agreement, including without limitation records demonstrating compliance with the requirements of Section 10 (Independent Contractor). CONSULTANT further agrees to maintain and retain accurate books and records in accordance with generally accepted accounting principles for at least four (4) years after the expiration or earlier termination of this Agreement or the completion of any audit hereunder, whichever is later. SECTION 16. INDEMNITY. 16.1. To the fullest extent permitted by law, CONSULTANT shall indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an "Indemnified Party") from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorney's fees, experts fees, court costs and disbursements ("Claims") resulting from, arising out of or in any manner related to performance or nonperformance by CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from a Claim arising from the active negligence or willful misconduct of an Indemnified Party that is not contributed to by any act of, or by any omission to perform a duty imposed by law or agreement by, CONSULTANT, its officers, employees, agents or contractors under this Agreement. 16.3. The acceptance of CONSULTANT's Services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. No waiver of a condition or nonperformance of an obligation under this Agreement is effective unless it is in writing in accordance with Section 29.4 of this Agreement. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance. Any waiver granted shall apply solely to the specific instance expressly stated. No single or partial exercise of any right or remedy will preclude any other or further exercise of any right or remedy. SECTION 18. INSURANCE. 18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit D, entitled "INSURANCE REQUIREMENTS". CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY as an additional insured under any general liability or automobile policy or policies. Professional Services Rev. Dec.15, 2020 Page 6 of 43 Item 4: Staff Report Pg. 13 Packet Pg. 82 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP Funding Study 18.2. All insurance coverage required hereunder shall be proviaea tnrough carriers with AM Best's Key Rating Guide ratings of A -:VII or higher which are licensed or authorized to transact insurance business in the State of California. Any and all contractors of CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above. 18.3. Certificates evidencing such insurance shall be filed with CITY concurrently with the execution of this Agreement. The certificates will be subject to the approval of CITY's Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days' notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the CONSULTANT's receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY's Chief Procurement Officer during the entire term of this Agreement. 18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss caused by or directly arising as a result of the Services performed under this Agreement, including such damage, injury, or loss arising after the Agreement is terminated or the term has expired. SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES. 19.1. The City Manager may suspend the performance of the Services, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior written notice thereof to CONSULTANT. If CONSULTANT fails to perform any of its material obligations under this Agreement, in addition to all other remedies provided under this Agreement or at law, the City Manager may terminate this Agreement sooner upon written notice of termination. Upon receipt of any notice of suspension or termination, CONSULTANT will discontinue its performance of the Services on the effective date in the notice of suspension or termination. 19.2. In event of suspension or termination, CONSULTANT will deliver to the City Manager on or before the effective date in the notice of suspension or termination, any and all work product, as detailed in Section 14 (Ownership of Materials), whether or not completed, prepared by CONSULTANT or its contractors, if any, in the performance of this Agreement. Such work product is the property of CITY, as detailed in Section 14 (Ownership of Materials). 19.3. In event of suspension or termination, CONSULTANT will be paid for the Services rendered and work products delivered to CITY in accordance with the Scope of Services up to the effective date in the notice of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be Professional Services Rev. Dec.15, 2020 Page 7 of 43 Item 4: Staff Report Pg. 14 Packet Pg. 83 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A- ] E3 SCAP obligated to compensate CONSULTANT only for that portion of CONK Funding Study ces provided in material conformity with this Agreement as such determination is male by me City Manager acting in the reasonable exercise of his/her discretion. The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 17, 19.2, 19.3, 19.4, 20, 25, 27, 28, 29 and 30. 19.4. No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Agreement, unless made in accordance with Section 17 (Waivers). SECTION 20. NOTICES. All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows: To CITY: Office of the City Clerk City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 With a copy to the Purchasing Manager To CONSULTANT: Attention of the Project Manager at the address of CONSULTANT recited on the first page of this Agreement. CONSULTANT shall provide written notice to CITY of any change of address. SECTION 21. CONFLICT OF INTEREST. 21.1. In executing this Agreement, CONSULTANT covenants that it presently has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services. 21.2. CONSULTANT further covenants that, in the performance of this Agreement, it will not employ subcontractors or other persons or parties having such an interest. CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California, as amended from time to time. CONSULTANT agrees to notify CITY if any conflict arises. 21.3. If the CONSULTANT meets the definition of a "Consultant" as defined by the Regulations of the Fair Political Practices Commission, CONSULTANT will file the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act of 1974, as amended from time to time. SECTION 22. NONDISCRIMINATION; COMPLIANCE WITH ADA. Professional Services Rev. Dec.15, 2020 Page 8 of 43 Item 4: Staff Report Pg. 15 Packet Pg. 84 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP 22.1. As set forth in Palo Alto Municipal Code Section Funding Study ded from time to time, CONSULTANT certifies that in the performance of this Agreement, is a 1 not discriminate in the employment of any person due to that person's race, skin color, gender, gender identity, age, religion, disability, national origin, ancestry, sexual orientation, pregnancy, genetic information or condition, housing status, marital status, familial status, weight or height of such person. CONSULTANT acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. 22.2. CONSULTANT understands and agrees that pursuant to the Americans Disabilities Act ("ADA"), programs, services and other activities provided by a public entity to the public, whether directly or through a contractor or subcontractor, are required to be accessible to the disabled public. CONSULTANT will provide the Services specified in this Agreement in a manner that complies with the ADA and any other applicable federal, state and local disability rights laws and regulations, as amended from time to time. CONSULTANT will not discriminate against persons with disabilities in the provision of services, benefits or activities provided under this Agreement. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the CITY's Environmentally Preferred Purchasing policies which are available at CITY'S Purchasing Department, hereby incorporated by reference and as amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of CITY's Zero Waste Program. Zero Waste best practices include, first, minimizing and reducing waste; second, reusing waste; and, third, recycling or composting waste. In particular, CONSULTANT shall comply with the following Zero Waste requirements: (a) All printed materials provided by CONSULTANT to CITY generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, shall be double -sided and printed on a minimum of 30% or greater post -consumer content paper, unless otherwise approved by CITY's Project Manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post -consumer material and printed with vegetable -based inks. (b) Goods purchased by CONSULTANT on behalf of CITY shall be purchased in accordance with CITY's Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Department's office. (c) Reusable/returnable pallets shall be taken back by CONSULTANT, at no additional cost to CITY, for reuse or recycling. CONSULTANT shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. SECTION 24. COMPLIANCE WITH PALO ALTO MINIMUM WAGE ORDINANCE. CONSULTANT shall comply with all requirements of the Palo Alto Municipal Code Chapter 4.62 (Citywide Minimum Wage), as amended from time to time. In particular, for any employee otherwise entitled to the State minimum wage, who performs at least two (2) hours of work in a calendar week within the geographic boundaries of the City, CONSULTANT shall pay such employees no less than the minimum wage set forth in Palo Alto Municipal Code Section 4.62.030 for each hour worked within the geographic boundaries of the City of Palo Alto. In addition, Professional Services Rev. Dec.15, 2020 Page 9 of 43 Item 4: Staff Report Pg. 16 Packet Pg. 85 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP CONSULTANT shall post notices regarding the Palo Alto Minimum Funding Study in accordance with Palo Alto Municipal Code Section 4.62.060. SECTION 25. NON -APPROPRIATION. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code, as amended from time to time. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Agreement are no longer available. This Section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 26. PREVAILING WAGES AND DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS. 26.1. This Project is not subject to prevailing wages and related requirements. CONSULTANT is not required to pay prevailing wages and meet related requirements under the California Labor Code and California Code of Regulations in the performance and implementation of the Project if the contract: (1) is not a public works contract; (2) is for a public works construction project of $25,000 or less, per California Labor Code Sections 1782(d)(1), 1725.5(f) and 1773.3(j); or (3) is for a public works alteration, demolition, repair, or maintenance project of $15,000 or less, per California Labor Code Sections 1782(d)(1), 1725.5(f) and 1773.3(j). SECTION 27. CLAIMS PROCEDURE FOR "9204 PUBLIC WORKS PROJECTS". For purposes of this Section 27, a "9204 Public Works Project" means the erection, construction, alteration, repair, or improvement of any public structure, building, road, or other public improvement of any kind. (Cal. Pub. Cont. Code § 9204.) Per California Public Contract Code Section 9204, for Public Works Projects, certain claims procedures shall apply, as set forth in Exhibit F, entitled "Claims for Public Contract Code Section 9204 Public Works Projects". ® This Project is not a 9204 Public Works Project. SECTION 28. CONFIDENTIAL INFORMATION. 28.1. In the performance of this Agreement, CONSULTANT may have access to CITY'S Confidential Information (defined below). CONSULTANT will hold Confidential Information in strict confidence, not disclose it to any third party, and will use it only for the performance of its obligations to CITY under this Agreement and for no other purpose. CONSULTANT will maintain reasonable and appropriate administrative, technical and physical safeguards to ensure the security, confidentiality and integrity of the Confidential Information. Notwithstanding the foregoing, CONSULTANT may disclose Confidential Information to its employees, agents and subcontractors, if any, to the extent they have a need to know in order to perform CONSULTANT's obligations to CITY under this Agreement and for no other purpose, provided that the CONSULTANT informs them of, and requires them to follow, the confidentiality and security obligations of this Agreement. Professional Services Rev. Dec.15, 2020 Page 10 of 43 Item 4: Staff Report Pg. 17 Packet Pg. 86 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP 28.2. "Confidential Information" means all data, informatiL Funding Study out limitation "Personal Information" about a California resident as defined in Livil Lode Section 1798 et seq., as amended from time to time) and materials, in any form or media, tangible or intangible, provided or otherwise made available to CONSULTANT by CITY, directly or indirectly, pursuant to this Agreement. Confidential Information excludes information that CONSULTANT can show by appropriate documentation: (i) was publicly known at the time it was provided or has subsequently become publicly known other than by a breach of this Agreement; (ii) was rightfully in CONSULTANT's possession free of any obligation of confidence prior to receipt of Confidential Information; (iii) is rightfully obtained by CONSULTANT from a third party without breach of any confidentiality obligation; (iv) is independently developed by employees of CONSULTANT without any use of or access to the Confidential Information; or (v) CONSULTANT has written consent to disclose signed by an authorized representative of CITY. 28.3. Notwithstanding the foregoing, CONSULTANT may disclose Confidential Information to the extent required by order of a court of competent jurisdiction or governmental body, provided that CONSULTANT will notify CITY in writing of such order immediately upon receipt and prior to any such disclosure (unless CONSULTANT is prohibited by law from doing so), to give CITY an opportunity to oppose or otherwise respond to such order. 28.4. CONSULTANT will notify City promptly upon learning of any breach in the security of its systems or unauthorized disclosure of, or access to, Confidential Information in its possession or control, and if such Confidential Information consists of Personal Information, CONSULTANT will provide information to CITY sufficient to meet the notice requirements of Civil Code Section 1798 et seq., as applicable, as amended from time to time. 28.5. Prior to or upon termination or expiration of this Agreement, CONSULTANT will honor any request from the CITY to return or securely destroy all copies of Confidential Information. All Confidential Information is and will remain the property of the CITY and nothing contained in this Agreement grants or confers any rights to such Confidential Information on CONSULTANT. 28.6. If selected in Section 30 (Exhibits), this Agreement is also subject to the terms and conditions of the Information Privacy Policy and Cybersecurity Terms and Conditions. SECTION 29. MISCELLANEOUS PROVISIONS. 29.1. This Agreement will be governed by California law, without regard to its conflict of law provisions. 29.2. In the event that an action is brought, the parties agree that trial of such action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California. 29.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys' fees paid to third Professional Services Rev. Dec.15, 2020 Page 11 of 43 Item 4: Staff Report Pg. 18 Packet Pg. 87 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF parties. Item 4 Attachment A - C24188769 E3 SCAP Funding Study 29.4. This Agreement, including all exhibits, constitutes the entire and integrated agreement between the parties with respect to the subject matter of this Agreement, and supersedes all prior agreements, negotiations, representations, statements and undertakings, either oral or written. This Agreement may be amended only by a written instrument, which is signed by the authorized representatives of the parties and approved as required under Palo Alto Municipal Code, as amended from time to time. 29.5. If a court of competent jurisdiction finds or rules that any provision of this Agreement is void or unenforceable, the unaffected provisions of this Agreement will remain in full force and effect. 29.6. In the event of a conflict between the terms of this Agreement and the exhibits hereto (per Section 30) or CONSULTANT'S proposal (if any), the Agreement shall control. In the event of a conflict between the exhibits hereto and CONSULTANT'S proposal (if any), the exhibits shall control. 29.7. The provisions of all checked boxes in this Agreement shall apply to this Agreement; the provisions of any unchecked boxes shall not apply to this Agreement. 29.8. All section headings contained in this Agreement are for convenience and reference only and are not intended to define or limit the scope of any provision of this Agreement. 29.9. This Agreement may be signed in multiple counterparts, which, when executed by the authorized representatives of the parties, shall together constitute a single binding agreement. SECTION 30. EXHIBITS. Each of the following exhibits, if the check box for such exhibit is selected below, is hereby attached and incorporated into this Agreement by reference as though fully set forth herein: EXHIBIT A: SCOPE OF SERVICES EXHIBIT A -I PROFESSIONAL SERVICES TASK ORDER EXHIBIT B: SCHEDULE OF PERFORMANCE EXHIBIT C: COMPENSATION EXHIBIT C -l: SCHEDULE OF RATES EXHIBIT D: INSURANCE REQUIREMENTS THIS AGREEMENT IS NOT COMPLETE UNLESS ALL SELECTED EXHIBITS ARE ATTACHED. Professional Services Rev. Dec.15, 2020 Page 12 of 43 Item 4: Staff Report Pg. 19 Packet Pg. 88 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP CONTRACT NO. C24188769 SIGNATURE PAGE Funding Study IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement as of the date first above written. CITY OF PALO ALTO ENERGY AND ENVIRONMENTAL ECONOMICS, INC. Officer 1 City Manager DocuSigned by: By (Jjj. 1 FAA47D760154E6... Amber Mahone Name: APPROVED AS TO FORM: Partner Title: City Attorney or designee Officer 2 DocuSigned by: BYLkk.N,w�uA, 853668031C054AB... Name: Kate Nguyen Title: Secretary Professional Services Rev. Dec.15, 2020 Page 13 of 43 Item 4: Staff Report Pg. 20 Packet Pg. 89 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP EXHIBIT A LFunding Study SCOPE OF SERVICES CONSULTANT shall provide the Services detailed in this Exhibit A, entitled "SCOPE OF SERVICES". CONSULTANT will provide the CITY with a robust S/CAP Funding Model that accurately assesses community -wide electrification costs and identifies optimal strategies for implementation. CONSULTANT will conduct single-family, multi -family, and nonresidential building sector studies, and will develop an EV Charger Strategic Plan to determine the CITY'S current and future potential for building and transportation electrification to be utilized as inputs to the model. This methodology ensures that the electrification initiatives align with the CITY'S 80x30 goals while minimizing financial burden on residents. Task 1: Proiect Kick -Off & Project Management Upon contract execution, the project manager will schedule a project kick-off with the CITY and CONSULTANT teams to discuss the project objective and goals, review the proposed scope of work, and to finalize the proposed project timeline. To ensure full alignment with the CITY'S objectives, CONSULTANT will also hold an internal workshop, either through a digital platform like MIRO, or in -person, as determined by the CITY. This session will identify major inputs, outputs, constraints, and specific needs for the electrification funding model. As an outcome of this workshop, CONSULTANT will provide a detailed work plan outlining the steps, timelines, and approach for the development and implementation of the funding model. CONSULTANT project manager will meet regularly (at the CITY'S discretion, as frequently as weekly) with the CITY project manager to ensure close coordination and communication regarding the project timeline and progress. CONSULTANT will produce monthly invoices with a summary of work completed to date and Quarterly reports that include a summary of work completed to date, progress relative to the project timeline, key upcoming deadlines and areas where the project is at risk of delay. Other CONSULTANT team members will join meetings with the CITY, on an as -needed basis, to discuss the workplan and approach in detail. The CONSULTANT team will also attend up to six (6) public hearings, four (4) meetings with the Council Ad Hoc S/CAP Committee, and two (2) public stakeholder meetings, as well as a presentation and recorded webinar, as required by the DEED grant. Deliverables: • A final workplan will be delivered within two weeks or less of the stakeholder workshop; • The project manager will provide monthly updates on the project progress with monthly invoices. • CONSULTANT will also produce Quarterly reports, a presentation and a recorded webinar in compliance with the DEED grant requirements'. 1 Grant Requirements & Instructions 4.30.2020.pdf (publicpower.org) Professional Services Rev. Dec.15, 2020 Page 14 of 43 Item 4: Staff Report Pg. 21 Packet Pg. 90 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Task 2: Funding Source Survey Item 4 Attachment A - C24188769 E3 SCAP Funding Study CONSULTANT will conduct a survey of all potential financing mechanisms that The CITY has at their disposal for funding citywide electrification. The timing, structure and method of raising capital for the CITY'S proposed transactions are key elements to the financial plan. The team will begin this process by identifying all existing incentive, rebate, subsidy, and grant programs that are currently available at the federal, state, and regional levels, including, but not limited to, programs offered by organizations such as the U.S. EPA under the Inflation Reduction Act, including the National Clean Investment Act, BayRen, AQMD, and CA -TECH. The list of potential financing mechanisms that will be researched includes, but is not limited to: • Federal and U.S. EPA supported financing through the National Clean Investment Fund and other programs supported by the Inflation Reduction Act • Municipal & utility bonds • On -bill financing • Ratepayer incentives • Utility ownership of assets • Targeted gas decommissioning • Customer loans with utility -backed guarantees • Green bank financing • Public -private partnerships (PPP) • Leases • Carbon tax and other taxes In addition to the funding sources listed above, CONSULTANT will also investigate some schemes specifically tailored for EV charging infrastructure, such as: • Public -private partnership for make-ready equipment • Public -private partnership for EV charging electricity rates • Charging -as -a -Service CONSULTANT will provide up to 2 rounds of review from the CITY and incorporate CITY feedback, to ensure the final funding source survey meets all CITY legal requirements. Deliverables: Report summarizing all available funding sources and their requirements (Microsoft Word); Presentation summarizing all available funding sources and their requirements (Microsoft PowerPoint). Task 3: Single -Family Sector Study CONSULTANT will perform a study of the single-family building sector in The CITY with the following objectives: • Characterize gas usage in single-family buildings by end use (e.g. space heating, water heating, cooking, clothes drying) • Estimate the cost of electrification for various gas end uses and behind -the -meter electrical upgrades Professional Services Rev. Dec.15, 2020 Page 15 of 43 Item 4: Staff Report Pg. 22 Packet Pg. 91 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP • Identify cost-effective efficiency opportunities in single-family home Funding Study • Estimate the cost of electrifying all single-family homes in the CITY net of benefits (such as the avoided cost of like for like gas end use replacement or ongoing operational savings) Task 3.1: Scoping CONSULTANT will meet with CITY staff and other stakeholders selected by the CITY to identify existing and potential data sources and approaches to characterize gas use and building stock structure. CONSULTANT will develop an initial workplan for the CITY staff and stakeholders, including a proposed high-level cost/benefit analysis for each approach. CONSULTANT will incorporate stakeholder feedback and provide a final memorandum detailing the proposed study scope to gather final feedback from the CITY Council Ad Hoc S/CAP Subcommittee. Deliverables: • 2 one -hour meetings with CITY staff, the S/CAP modeling team, and other stakeholders selected by the CITY for Initial Strategy Scoping, Scenario Planning and approach prioritization. • Draft and final workplan Memo. • Presentation of work plan to the CITY Council Ad Hoc S/CAP Subcommittee. Task 3.2: Data Collection CONSULTANT will use any data and reports provided by the CITY and publicly available data from sources such as the Residential Appliance Saturation Survey (RASS), CEC data, and the Cost Effectiveness Explorer developed by Statewide Investor -Owned Utilities Codes and Standards Team to gain a general understanding of the various building types and ages present in the CITY. This information will be used to develop 3-4 building type categories for single family buildings. CONSULTANT will then analyze the CITY's existing building technologies including prevalent panel capacities, drop line condition, need for additional wiring for 240V appliances, and both up -front and marginal costs associated with installation of electric alternatives for each major appliance type (HVAC, hot water, stoves, and dryers). CONSULTANT will estimate costs for both natural gas and electric appliances for various equipment types including, but not limited to: induction and electric resistance cooktops, electric resistance and heat pump dryers, heat pump hot water heaters, heat pump HVAC units, and different EV chargers (level 1,2, and 3). CONSULTANT will estimate these costs using a variety of data sources, including, but not limited to: existing data sources from the region, its own data sets from previous work and research as necessary, and cost data collected by regional groups such as Peninsula Clean Energy and the Bay Area Air Quality Management District. In addition, CONSULTANT will conduct up to 5 contractor interviews to help inform the cost study as well as assess the workforce status in the CITY. Professional Services Rev. Dec.15, 2020 Page 16 of 43 Item 4: Staff Report Pg. 23 Packet Pg. 92 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP CONSULTANT will develop a comprehensive cost analysis worksheet andL Funding Study x that will calculate and summarize the electrification costs, including panel upgrade costs, an changes in energy consumption due to electrification of single-family homes. Deliverables: • An electronic copy of the Draft Building Inventory and Electrification Cost Summary (in Word and PDF) o Existing building inventory based on age of single-family building stock o Detailed residential electrification incentives o Develop 3-4 building type categories for single family buildings in The CITY o Detailed electrification costs for residential buildings o Electrification cost estimates Technical Results Appendix, which will include detailed documentation of all data sources sufficient for CITY staff to verify all input data. • An electronic copy of the Draft Comprehensive Cost Analysis Worksheet (in Excel) Task 3.3: Deliver Study Report Based on feedback from CITY staff, CONSULTANT will develop a final single-family buildings electrification cost analysis Report and comprehensive cost analysis worksheet that will summarize the analysis conducted and the costs to electrify all single-family homes in The CITY for the S/CAP Funding model. Specifically, the report will: • Summarize the data evaluated and information utilized in the analysis; • Characterize gas usage in single-family buildings by end use (e.g., space heating, water heating, cooking, clothes drying); • Estimate the cost of electrification for various gas end uses and behind -the -meter electrical upgrades; • Estimate electrification cost scenarios for 3-4 single-family home prototypes; • Identify incentives and cost-effective efficiency opportunities in single-family homes; and, • Estimate the cost of electrifying all single-family homes in The CITY. Additionally, the report will include the final technical appendix that includes all the supporting documents and calculations utilized to calculate the costs. As part of this task, CONSULTANT anticipates hosting two meetings with the CITY to present the analysis, provide information on the cost and benefits of compliance to the impacted building owners, and to address questions and concerns. Deliverables: • Electronic copies of the final cost summary workbook (in Excel) and technical appendix (word & PDF) • Electronic copy of the final single-family buildings electrification cost analysis report (in Word and PDF) Professional Services Rev. Dec.15, 2020 Page 17 of 43 Item 4: Staff Report Pg. 24 Packet Pg. 93 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Task 4: Multi -Family Sector Study Item 4 Attachment A - C24188769 E3 SCAP Funding Study CONSULTANT will perform a study of the multi -family building sector in the CITY that will: Characterize gas usage in multi -family buildings by end use (e.g. space heating, water heating, cooking, clothes drying); Estimate the cost of electrification for various gas end uses and behind -the -meter electrical upgrades; Identify cost-effective efficiency opportunities in multi -family buildings; and Estimate the cost of electrifying all multi -family homes in The CITY. Conduct additional focused outreach and study at affordable multi -family buildings in the CITY (beyond the broad multi -family sector evaluation) Task 4.1: Scopin CONSULTANT will work with the CITY to develop the study methodology. CONSULTANT will provide one round of review from the CITY to incorporate S/CAP committee feedback on the proposed methodology for the subsector study. CONSULTANT will evaluate the cost to electrify a range of multi -family building types in the CITY including owner -occupied condominiums, rental apartments, mixed -use buildings, and buildings with mixed -ownership types. For purposes of evaluation, the multi -family building population will be segmented by age. Building age segments shall be established to align with years when the building energy code (Title 24) underwent significant changes in order to predict efficiency ratings of equipment installed during those periods. CONSULTANT will characterize building systems by type, fuel source (electricity, natural gas, other fossil fuel), quantity, and capacity. The primary equipment categories will be: • Water heating • Heating, ventilating, air-conditioning (HVAC) • Kitchen • Laundry • Swimming pool • Plug loads • Other systems of significance In addition to characterization of primary system equipment, CONSULTANT will evaluate buildings for potential building efficiency improvements that can reduce overall loads such as low flow hot water fixtures, building envelope improvements, or upgrades to controls. Systems will be evaluated as to whether they are within individual residents' units (i.e., fed by individual residents' utility meters) or whether they serve common areas (e.g., lobbies, pools, gyms, assembly areas) and are metered at the facility level. CONSULTANT will establish typical load profiles for each identified system type. Load profiles will be created using a combination of monthly billing data, NREL ResStock databases of end - use load profiles, CONSULTANT's internal BE-Toolkit, and EnergyPlus/DOE-2 modeling Professional Services Rev. Dec.15, 2020 Page 18 of 43 Item 4: Staff Report Pg. 25 Packet Pg. 94 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP where required. Additional information will be gathered during the detailed Funding Study validate the load profiles. Once the existing building systems are fully characterized, CONSULTANT will develop approaches for electrification by system types. These approaches will consider the feasibility and cost effectiveness of technologies that are currently available, as well as emerging technologies that are on the horizon. For each electrification approach, the anticipated additional electricity demand and gas demand reduction will be calculated on a per unit basis. CONSULTANT will evaluate the electrical infrastructure capabilities to electrify building systems on the customer side of electric meters, as well as the capabilities for, and cost associated with upgrading the electrical service. Electrification approaches will be evaluated according to their feasibility and cost effectiveness. Systems that will be difficult to retrofit and less cost effective may include locations with restricted electrical capacity, and systems with high temperature requirements (e.g., steam heating systems). CONSULTANT will estimate costs to convert natural gas or other fossil fuel consuming systems to all -electric equivalents. These cost estimates will include costs associated with enhancements and upgrades to electric infrastructure required to support electrification of the systems. Both total first costs, and incremental costs (above business -as -usual system replacements) will be evaluated. Costs associated with material, labor, and contractor overhead & profit will be evaluated specifically for the CITY local market. Costs will be "turn -key" and include all hard and soft costs associated with delivery of functioning decarbonized systems, including permitting and disposal of old equipment. Any tax benefits (e.g., depreciation) will not be accounted for within this sub -study. Electrification costs will be evaluated on the customer side of the meter and will be evaluated for households/landlords on a CITY -wide basis, and on an individual sample customer basis. Deliverables: • 2 one -hour meetings with CITY staff, the S/CAP modeling team, and other stakeholders selected by the CITY for Initial Strategy Scoping, Scenario Planning and approach prioritization. • Draft and final workplan Memo. • Presentation of work plan to the CITY Council Ad Hoc S/CAP Subcommittee. Task 4.2: Public Data Review CONSULTANT will first identify available data sources for multi -family housing building stock characterization in the CITY. This citywide evaluation will be followed up with 40-45 site assessments including on -premise inspections and interviews with owners and occupants to align the characterizations based on the data review with facts from the field (see Task 4.3). CONSULTANT will develop initial characterizations of multi -family building gas and electric equipment saturation in the CITY based on: • Electricity and gas usage data from CITY Professional Services Rev. Dec.15, 2020 Page 19 of 43 Item 4: Staff Report Pg. 26 Packet Pg. 95 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP • CONSULTANT's internal BE-Toolkit F d' st d uning uy • NREL's ResStock Tool. This tool combines large public and private data sources to model different housing stock and the energy impact of building technologies. ResStock analysis results are found in the US Building Stock Characterization Study and the End Use Load Profile dataset. CONSULTANT will use any data and reports provided by the CITY and publicly available data from sources such as CEC data and the Cost Effectiveness Explorer developed by Statewide Investor -Owned Utilities Codes and Standards Team to gain a general understanding of the various building types and ages present in the CITY. This information will be used to develop multiple building type categories for multi -family buildings. Deliverables: • An electronic copy of the Draft Multi -family Building Inventory and Equipment Saturation analysis (Public Data -Based) (in PDF) o Analysis of multi -family buildings by age o Analysis of multi -family buildings by type (e.g., condominiums, rental apartments) o Analysis of multi -family buildings by affordability level (e.g., market based, affordable) o Analysis of penetration of gas and electric equipment based on public data review. Task 4.3: Identify Multi -Family Properties for Detailed Site Assessment CONSULTANT will use a stratified sampling method to determine the appropriate number of sites where detailed on -site surveys will be conducted. Surveys will be conducted by CONSULTANT teams, and involve onsite equipment inspections and face-to-face interviews with site staff and residents. Sites will be stratified based on building vintage, type of dwelling unit (e.g., apartments, condominiums, townhomes), and affordability level. Specific sites to undergo detailed surveys will be randomly selected. The group of sites targeted for detailed surveys will need to be larger than the number determined to be statistically significant, because it is expected that some site owners/managers will be unable or unwilling to coordinate with the survey team, or otherwise non -responsive. CONSULTANT will work with the CITY to finalize a list of targeted multi -family properties that is appropriate, and fits within the project budget. CONSULTANT and CITY to establish an approximate number of sites to target as part of Task 4.1 under the work plan. Task 4.3.1: Affordable Multi -Family Property Focused Detailed Site Assessment In addition to the randomly selected sites, CONSULTANT will perform additional site surveys at specific affordable housing sites as directed and agreed upon with the CITY. Focus on these sites will ensure that affordable sites are properly characterized, and that funding approaches specific to the affordable site market are developed. Deliverables: Professional Services Rev. Dec.15, 2020 Page 20 of 43 Item 4: Staff Report Pg. 27 Packet Pg. 96 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP • List of multi -family properties to target for detailed site assessments Funding Study • List of affordable multi -family properties to target for focused, detailed site assessments. Task 4.4: Develop Survey Tool CONSULTANT will develop a Geographic Information System (GIS)-based survey tool specific to this Study. The survey tool will include the following data collection capabilities: • Building level information: address, type and vintage, square footage, annual gas and electricity consumption (EUI calculated), building representative contact information, leasing structure(s) including who pays for utilities, master electric service voltage, capacity, and location. Potential for efficiency retrofits such as improved insulation, windows, and/or low -flow water fixtures. • Building system level information: location within building, type and vintage, capacity and efficiency, estimated average load factor, hours of operation, nearest electrical panel or subpanel and its capacity (both in total Amperage and spare breaker spaces), Voltage, and ability to be expanded if required. For potential heat pump retrofits, ability to install condensate drain line at installation location and added ventilation for small interior spaces. Indicate new location for replacement equipment if applicable. • EV charging information: location, type, and capacity of existing EV chargers. Modes of operation (payment options, charge time management systems). Indicate any plans or desires to increase EV charging capabilities at site and potential locations. Indicate suitable electrical infrastructure to feed new chargers or ability to expand electrical infrastructure for this purpose. Deliverables: • Draft Survey Tool schematic summary o Showing data fields to be collected, and general organization of data. • Presentation of Survey Tool vl.0 functionality and capabilities. Task 4.5: Conduct Survey CONSULTANT will perform initial outreach to the selected multifamily sites to coordinate on - site evaluations. Contact information will be initially obtained from customer -of -record data from CITY's utility billing systems, and any additional customer contact information the CITY may have based on past program participation. Where the CITY's customer -of -record and past program participation data is lacking, CONSULTANT will pursue other methods of finding appropriate outreach contacts. These methods may include the use of multi -family -specific data services (e.g., ALN Apartment Data), use of basic online search tools, and/or door-to-door, in person outreach. Surveys will be conducted by CONSULTANT teams, and involve on -site equipment inspections and face-to-face interviews with site staff and residents. Equipment inspections will be visual in nature and supported by photos and video to support data collection, in conjunction with utilization of the Survey Tool. Professional Services Rev. Dec.15, 2020 Page 21 of 43 Item 4: Staff Report Pg. 28 Packet Pg. 97 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP CONSULTANT teams will spend one to multiple hours at each site collectiL Funding Study on the size of the building and complexity of the systems. Detailed site visits to multi -family buildings will consist of surveys of both common areas and systems and in -unit areas and systems. In -unit areas will be surveyed using a sampling approach such that the range of unit types are characterized. At the end of each detailed site survey, CONSULTANT will download and organize the Survey Tool files and site photos and video to CONSULTANT servers for long-term storage and later analysis. Deliverables: • Bi-weekly or monthly summary reporting of outreach communications and detailed site surveys completed. • Completed site surveys, including photos, videos, and building data. Task 4.5.1: Conduct Affordable Multi -Family Focused Survey In addition to surveys of the broad multi -family building sector, CONSULTANT will conduct additional surveys specifically targeting affordable multi -family housing. Other than specific targeting, the approach will be the same as used for the broad multi -family sector. Outreach is anticipated to be more direct since operators of affordable housing sites in the CITY are publicly known as is their contact information. Deliverables: • Bi-weekly or monthly summary reporting of outreach communications and detailed site surveys completed. • Completed site surveys, including photos, videos, and building data. Task 4.6: Research Electric Alternatives to Gas Equipment For each type of gas or other fossil -fuel consuming system evaluated CONSULTANT will develop suitable electrification and EV charging measures. The cost and the scope of the replacement for individual site types will vary based on the presence or lack of adequate electric infrastructure to support the added electrified load, and the ease or complexity of increasing that capacity if required. Detailed costs for the electrification and EV charging measures will be obtained from two sources. One source is the cloud -based construction cost estimating tool "ProEst". The second source of cost data will be from licensed contractors (mechanical, electrical, and plumbing) that work with CONSULTANT locally in the area. Deliverables: • An electronic copy of the Draft Comprehensive Multi -family Approach and Cost Analysis Worksheet (in Excel) Task 4.7: Deliver Study Report CONSULTANT will develop a draft and final report including the results from the multifamily Professional Services Rev. Dec.15, 2020 Page 22 of 43 Item 4: Staff Report Pg. 29 Packet Pg. 98 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP site surveys and electrification cost research, and estimated costs of electrif Funding Study multifamily buildings in the city. Specifically, the report will: • Summarize the data evaluated and information utilized in the analysis; • Characterize gas usage in multi -family buildings by end -use; • Estimate the cost of electrification for various gas end uses and behind -the -meter electrical upgrades; • Estimate electrification cost scenarios for multiple multi -family building prototypes; • Estimate the cost of electrifying all multi -family buildings in The CITY. Additionally, the report will include the final technical appendix that includes the supporting documents and calculations utilized to perform the analysis, which will include detailed documentation of all data sources sufficient for CITY staff to verify all input data. As part of this task, CONSULTANT anticipates hosting two meetings with the CITY to present the analysis, provide information on the cost and benefits of compliance to the impacted building owners, and to address questions and concerns. Deliverables: • Draft Report for review in PDF or Word format • Final Report incorporating reviewers' comments in PDF format. Task 5: Nonresidential Sector Study CONSULTANT will characterize the non-residential building sector in the city including: • Gas usage in nonresidential buildings with different occupancy types (e.g. office, retail, K-12 schools, assembly, etc.) • Estimated cost of electrification for gas end uses and behind -the -meter electrical upgrades in both small/medium and large nonresidential buildings • Cost-effective efficiency opportunities • Estimated total cost of electrification in nonresidential buildings in Palo Alto Task 5.1: Scopin2 CONSULTANT will work with the CITY to develop the study methodology to evaluate owner - occupied and leased nonresidential buildings. CONSULTANT will provide one round of review from the CITY to incorporate S/CAP committee feedback on the proposed methodology for the subsector study. CONSULTANT will evaluate the cost to electrify a range of nonresidential building types in Palo Alto. The building population will be segmented by age. Building age segments shall be established to align with years when building energy code (Title 24) underwent significant changes, as that will predict efficiency ratings of equipment installed during those periods. Building systems will be characterized by type, fuel source (electricity, natural gas, other fossil fuel), quantity, and capacity. The primary equipment categories will be: • water heating Professional Services Rev. Dec.15, 2020 Page 23 of 43 Item 4: Staff Report Pg. 30 Packet Pg. 99 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP • heating, ventilating, air-conditioning (HVAC) L Funding Study • kitchen • laundry • swimming pool (hotels, gyms, etc.) • plug loads • other systems of significance In addition to characterization of primary system equipment, buildings will be evaluated for potential building efficiency improvements that can reduce overall loads such as low flow hot water fixtures, building envelope improvements, or upgrades to controls. Systems will be evaluated as to whether they are metered at the site level or fed by individual tenant meters for leased spaces. CONSULTANT will establish typical load profiles for each identified system type. Load profiles will be created using a combination of monthly billing data, NREL ComStock databases of end -use load profiles, CONSULTANT's proprietary BE-Toolkit, and EnergyPlus/DOE-2 modeling where required. Additional information will be gathered during the detailed site assessments to validate the load profiles. Once the existing building systems are fully characterized, CONSULTANT will develop approaches for electrification by system types. These approaches will consider the feasibility and cost effectiveness of technologies that are currently available, as well as emerging technologies that are on the horizon. For each electrification approach, the anticipated additional electricity demand and gas demand reduction will be calculated on a per unit basis. The electrical infrastructure capabilities to electrify building systems will be evaluated on the customer side of electric meters, as well as the capabilities for, and cost associated with increasing this infrastructure capacity. Electrification approaches will be evaluated according to their feasibility and cost effectiveness. Systems that will be difficult to retrofit and less cost effective may include locations with restricted electrical capacity, and systems with high temperature requirements (e.g., steam heating systems). CONSULTANT will estimate costs to convert natural gas or other fossil fuel consuming systems to all -electric equivalents. These cost estimates will include costs associated with enhancements and upgrades to electric infrastructure required to support electrification of the systems. Both total first costs, and incremental costs (above business -as -usual system replacements) will be evaluated. Costs associated with material, labor, and contractor overhead & profit will be evaluated specifically for the CITY's local market. Costs will be "turn -key" and include all hard and soft costs associated with delivery of functioning decarbonized systems, including permitting and disposal of old equipment. Any tax benefits will not be accounted for (e.g., depreciation) within this sub -study. Electrification costs will be evaluated on the customer side of the meter and will be evaluated on a citywide basis, and on an individual sample customer basis. Deliverables: Professional Services Rev. Dec.15, 2020 Page 24 of 43 Item 4: Staff Report Pg. 31 Packet Pg. 100 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP • 2 one -hour meetings with CITY staff, the S/CAP modeling team, anL Funding Study rs selected by the CITY for Initial Strategy Scoping, Scenario Planning and approach prioritization. • Draft and final workplan Memo. • Presentation of work plan to the CITY Council Ad Hoc S/CAP Subcommittee. Task 5.2: Public Data Review CONSULTANT will evaluate non-residential buildings at the CITY -wide level using all available data sources. This CITY -wide evaluation will be followed up with no more than 40-45 detailed site assessments including on -premise inspections and interviews with owners and occupants. Information gathered during the detailed site assessments will be used to confirm and refine the results of CITY -wide analysis and assumptions used therein. CONSULTANT will use the following resources to provide initial estimates of non-residential building gas and electric equipment saturation: • Electricity and gas usage data from CITY • CONSULTANT's internal BE-Toolkit • NREL's ComStock Tool. This tool combines large public and private data sources to model different building stock and the energy impact of building technologies. ComStock analysis results are found in the US Building Stock Characterization Study and the End Use Load Profile dataset CONSULTANT will use any data and reports provided by the CITY and publicly available data from sources such as CEC data and the Cost Effectiveness Explorer developed by Statewide Investor -Owned Utilities Codes and Standards Team to gain a general understanding of the various building types and ages present in the CITY. This information will be used to develop multiple building type categories for nonresidential buildings. Deliverables: • An electronic copy of the Draft Nonresidential Building Inventory and Equipment Saturation analysis (Public Data -Based) (in PDF) o Analysis of nonresidential buildings by age o Analysis of nonresidential buildings by type (optimal typologies to be determined) o Analysis of penetration of gas and electric equipment based on public data review. Task 5.3: Identify Nonresidential Properties for Detailed Site Assessment The Non -Residential Sector Study will include detailed site assessments for a sample of buildings. CONSULTANT will use a stratified sampling method to determine the appropriate number of sites where detailed on -site surveys will be conducted. Surveys will be conducted by CONSULTANT teams, and involve onsite equipment inspections and face-to-face interviews with site staff and tenants where applicable. Sites will be stratified based on building vintage, and type of non-residential building. Specific sites to undergo detailed surveys will be randomly selected. Professional Services Rev. Dec.15, 2020 Page 25 of 43 Item 4: Staff Report Pg. 32 Packet Pg. 101 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP The group of sites targeted for detailed surveys will need to be larger than t Funding Study determined to be statistically significant, because it is expected that some site owners managers will be unable or unwilling to coordinate with the survey team, or otherwise non -responsive. CONSULTANT will work with the CITY to finalize a list of targeted nonresidential properties that is appropriate, and fits within the project budget. CONSULTANT and CITY to establish an approximate number of sites to target as part of Task 5.1 under the work plan. Deliverables: • List of nonresidential properties to target for detailed site assessments. Task 5.4: Develop Survey Tool CONSULTANT will develop a Geographic Information System (GIS)-based survey tool adapted for this Study. The survey tool will include the following data collection capabilities: • Building level information: address, type and vintage, square footage, annual gas and electricity consumption (EUI calculated), building representative contact information, leasing structure(s) including who pays for utilities, master electric service voltage, capacity, and location. Potential for efficiency retrofits such as improved insulation, windows, and/or low -flow water fixtures. • Building system level information: location within building, type and vintage, capacity and efficiency, estimated average load factor, hours of operation, nearest electrical panel or subpanel and its capacity (both in total Amperage and spare breaker spaces), Voltage, and ability to be expanded if required. For potential heat pump retrofits, ability to install condensate drain line at installation location and added ventilation for small interior spaces. Indicate new location for replacement equipment if applicable. • EV charging information: location, type, and capacity of existing EV chargers. Modes of operation (payment options, charge time management systems). Indicate any plans or desires to increase EV charging capabilities at site and potential locations. Indicate suitable electrical infrastructure to feed new chargers or ability to expand electrical infrastructure for this purpose. Deliverables: • Draft Survey Tool schematic summary o Showing data fields to be collected, and general organization of data. • Presentation of Survey Tool vl.0 functionality and capabilities. Task 5.5: Conduct Survey CONSULTANT will perform initial outreach to the selected non-residential sites to coordinate on -site evaluations. Contact information will be primarily obtained from customer -of -record data from CITY's utility billing systems, and any additional customer contact information the CITY may have based on past program participation. Where the CITY's customer -of -record and past program participation data is lacking, CONSULTANT will pursue other methods of finding appropriate outreach contacts. These methods may include the use of nonresidential -specific data services (e.g., RocketReach, Professional Services Rev. Dec.15, 2020 Page 26 of 43 Item 4: Staff Report Pg. 33 Packet Pg. 102 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP Zoominfo, Seamless.AI), use of basic online search tools, and/or door -to -d4 Funding Study outreach. Surveys will be conducted by CONSULTANT teams, and involve on -site equipment inspections and face-to-face interviews with site staff and tenants where applicable. Equipment inspections will be visual in nature and supported by photos and video to support data collection, in conjunction with utilization of the Survey Tool. CONSULTANT teams will spend one to multiple hours at each site collecting data, depending on the size of the building and complexity of the systems. At the end of each detailed site survey, CONSULTANT will download and organize the Survey Tool files and site photos and video to CONSULTANT servers for long-term storage and later analysis. Deliverables: • Bi-weekly or monthly summary reporting of outreach communications and detailed site surveys completed. • Completed site surveys, including photos, videos, and building data. Task 5.6: Research Electric Alternatives to Gas Equipment For each type of gas or other fossil -fuel consuming system evaluated CONSULTANT will develop suitable electrification and EV charging measures. The cost and the scope of the replacement for individual site types will vary based on the presence or lack of adequate electric infrastructure to support the added electrified load, and the ease or complexity of increasing that capacity if required. Detailed costs for the electrification and EV charging measures will be obtained from two sources. One source is the cloud -based construction cost estimating tool "ProEst". The second source of cost data will be from licensed contractors (mechanical, electrical, and plumbing) that work with CONSULTANT locally in the area. Deliverables: • An electronic copy of the Draft Comprehensive Multi -family Approach and Cost Analysis Worksheet (in Excel) Task 5.7: Deliver Study Report After the non-residential building sector study activities are complete, a Report will be delivered. The Report will include the results from the nonresidential site surveys and electrification cost research, and estimate costs of electrification for all nonresidential buildings in the CITY. Specifically, the report will: • Summarize the data evaluated and information utilized in the analysis; • Characterize gas usage in nonresidential buildings by end -use; • Estimate the cost of electrification for various gas end uses and behind -the -meter electrical upgrades; • Estimate electrification cost scenarios for multiple nonresidential building prototypes; • Estimate the cost of electrifying all nonresidential buildings in the CITY.Palo Alto Professional Services Rev. Dec.15, 2020 Page 27 of 43 Item 4: Staff Report Pg. 34 Packet Pg. 103 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP Funding Study Additionally, the report will include the final technical appendix that includes the supporting documents and calculations utilized to perform the analysis. As part of this task, CONSULTANT anticipates hosting two meetings with the CITY to present the analysis, provide information on the cost and benefits of compliance to the impacted building owners, and to address questions and concerns. Deliverables: • Draft Report for review in Word format • Final Report incorporating reviewers' comments in PDF format. Task 6: EV Charger Strategic Plan CONSULTANT will develop an EV Charger Strategic Plan that can serve as a roadmap to guide CITY actions on building the necessary infrastructure to support large-scale EV growth and estimate its associated costs and funding needs. This plan will include outputs to inform various aspects of the S/CAP Funding Study, including: • The number and power level of chargers needed by location type and use case • The cost of the EV chargers and the distribution grid upgrades needed to power them • The grants, rebates, and incentives available to defray those costs • The balance of the funding needed to build and maintain this infrastructure, under different business models. This plan will account for such variables as: • The amount of private vs public charging (and possible public -private partnerships, such as publicly -facilitated charging in shopping centers for employees and visitors that can also be used overnight by nearby residents) • The mix of Li charging, L2 charging, and DCFC • The location of the chargers (e.g., on -street light pole chargers vs. on -site post -mounted vs. on -site wall -mounted) • Rate structures available • Consumer end costs of EV charging if different than rates Informed by the analyses conducted for this plan, CONSULTANT will recommend strategies to facilitate the installation and financing of EV chargers and their supporting infrastructure that is consistent with The CITY's environmental and equity goals. Task 6.1: Scoping CONSULTANT will work with CITY staff to refine the approach to the EV Charger Strategic Plan as proposed in the sections below. CONSULTANT will provide one round of review from the CITY to incorporate S/CAP committee feedback on the proposed methodology for the subsector study. In the memo that CONSULTANT will provide on this approach, CONSULTANT will identify the publicly -available data and the CITY studies that CONSULTANT will review, and describe its methodology to forecast EV adoption under three different scenarios using an Excel -based Professional Services Rev. Dec.15, 2020 Page 28 of 43 Item 4: Staff Report Pg. 35 Packet Pg. 104 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP model. CONSULTANT will then describe its methodology for estimating tI Funding Study charging stations needed to support these three different levels of EV adoption in the model, and how CONSULTANT assesses EV charging loads through incorporation of EV load shapes into the model. Lastly, CONSULTANT will propose the business models by vehicle segment that CONSULTANT will analyze, and describe how they will be incorporated into the model. For each element of the model, CONSULTANT will identify the key inputs, outputs, and assumptions used. Deliverables: Memo of the scope of work for the EV Charger Strategic Plan. Task 6.2: Public Data Review CONSULTANT will work with CITY staff to finalize the list of existing public data sources and the CITY studies to be reviewed. To identify current registered light-, medium- and heavy-duty vehicles by fuel type and other characteristics such as transportation segment, CONSULTANT will review DMV and CEC data on zero emission vehicles and infrastructure. CONSULTANT will also use utility and industry data sources including, but not limited to Calstart's MHD EV Dataset to identify fleet vehicles fueled within the CITY and that operate within the CITY but may be fueled elsewhere, and will follow up with individual fleets including, but not limited to DHL and GreenWaste to confirm fleet portfolio and location. CONSULTANT will use, at a minimum, CEC, ChargePoint, PlugShare, and Atlas EV Hub to identify current EV charger installations by customer/transportation segments. Regarding prior CITY studies, CONSULTANT's review will include the 2022 Sustainability/Climate Action Plan and associated documents, the 2020 Electric Vehicle Charger Needs Assessment, the 2020 Electrification Impact Study, the EV updates in the Utilities Quarterly Reports, The CITY EV Charger Program documents, The CITY EV Scale Project, as well as relevant information available through the Affordability Study and Grid Modernization Study. Deliverables: List of public and CITY data sources, summary of vehicles currently registered in the CITY, by vehicle type and location type to determine EV charger installation base in the CITY, and documentation of the data sources for the summary to a level sufficient for CITY staff to verify or replicate. Task 6.3: Develop EV Penetration Model CONSULTANT will develop an Excel spreadsheet model, which will start with the EV penetration scenarios in this task and be expanded upon in the later tasks to create a comprehensive model supporting the EV Charger Strategic Plan. For the EV penetration analysis, CONSULTANT will use the EV adoption scenarios developed as part of the economy - wide PATHWAYS decarbonization scenarios used for the California Air Resources Board (CARB)'s 2022 Scoping Plan. These EV adoption scenarios will be downscaled to represent the CITY and benchmarked against historic EV adoption trends in the CITY. CONSULTANT will also take into account e -bike adoption as incented through CITY programs and their impact on ICE and EV VMT and by extension GHG emissions. CONSULTANT will include a baseline growth scenario that reflects current policy, as well as a more aggressive adoption scenario that represents the CITY'S 80x30 goals. Finally, CONSULTANT will also create a mid -scenario between these two levels. Professional Services Rev. Dec.15, 2020 Page 29 of 43 Item 4: Staff Report Pg. 36 Packet Pg. 105 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP Deliverables: Spreadsheet model showing EV penetration scenarios and as Funding Study n. Task 6.4: Project EV Charger Needs and Associated Costs CONSULTANT will build on the spreadsheet model in the above task by adding in EV charger needs for each adoption scenario and associated costs. CONSULTANT will include detailed assumptions from industry resources, such as NREL's EVi Pro Lite model or the California Energy Commission's AB 2127 report, as model inputs to calculate the number of charging stations needed to support different levels of EV adoption. CONSULTANT will research costs for EV chargers, including costs for the electric vehicle supply equipment ("EVSE" or charger) and the make-ready infrastructure from the customer's meter to the EVSE. Data sources will include data published by the investor -owned utilities through their EV charging infrastructure program reports or other public sources. The model will be built so that each user can select the relevant scenario parameters and inputs and easily view the associated outputs. For example, CONSULTANT will make the EV adoption scenario from the prior task a user -selection in the model so that the spreadsheet model will show associated charger needs and costs for each scenario. Deliverables: EV charger needs incorporated into EV penetration spreadsheet model. Task 6.5: Develop Business Models by Vehicle Segment CONSULTANT will add business model selection for EV charging services as an additional user -selection input in the spreadsheet model. CONSULTANT will research potential business models, which may include: • Private investment only: Here, the CITY would not provide any incentives or pay for any portion of the costs of providing EV charging • Public investment only: The CITY would pay for all EV charging costs, through the CITY or its contractors • Public -private partnership for make-ready equipment: Similar to some of the make-ready programs implemented by California's investor -owned utilities, the CITY would pay for the make-ready equipment at different types of EV charging sites, such as multi -family housing, public locations, or fleet charging sites • Public -private partnership for electricity rates: The CITY would offer discounted electricity rates or demand charge modifiers to EV charging sites • Charging -as -a -Service: The CITY would pay for the upfront costs of the EV chargers and their installation, and bill customers monthly for it until paid off • Others: CONSULTANT will discuss other business models for consideration with the CITY CONSULTANT will add these business models into the spreadsheet model. CONSULTANT plans to make the spreadsheet model as flexible as possible so that the CITY can consider different business models for different sectors (such as one approach for public charging and a different approach for multi -family charging), since different uses cases will need different levels of support and investment from the CITY. Professional Services Rev. Dec.15, 2020 Page 30 of 43 Item 4: Staff Report Pg. 37 Packet Pg. 106 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP The model will use the business model selections to conduct a cash flow an Funding Study e upfront and ongoing costs to the CITY, users, and the private sector. The analysis can be incorporated into the S/CAP Funding Model. Deliverables: Recommend business model options and preliminary financing cashflow analysis/model that will be incorporated into the S/CAP Funding Model. Task 6.6: Assess the EV Charging Loads Because the business model cash flow analysis may rely on hourly EV charging load shapes to inform ongoing EV charging costs and recovery via utility rates, CONSULTANT expects to complete this task concurrently with Funding Model development. CONSULTANT will leverage EV charging load shapes that CONSULTANT has produced for similar projects in California for residential, workplace, public level 2, and public DCFC. CONSULTANT will input these load shapes into the spreadsheet model to calculate EV charging costs and the impact of special/discounted electricity rates as part of the business model assessment. CONSULTANT will also model both managed and unmanaged EV load shapes to show how managed charging would impact EV fueling costs (e.g., to show if costs are lower when vehicles charge off-peak when rates are lower vs on -peak when rates are higher). These load shapes and total capacity and energy will be used to inform the S/CAP Funding model. Deliverables: Completed spreadsheet model. Results of Tasks 4-6 would be provided in an integrated fashion and will serve as input to the S/CAP Funding Model. Task 6.6: Deliver Study Report CONSULTANT will create a comprehensive report for the EV Charger Strategic Plan that covers the plan's framework, details the model's key inputs, assumptions, and outputs, and frames the model's results and key findings regarding EV charging in the CITY in the context of the scenarios and business models studied. Additionally, CONSULTANT will create an abridged version of the report for presentation to the public. CONSULTANT will prepare draft versions of these reports and provide two weeks for CITY staff review, after which CONSULTANT will prepare final versions of the comprehensive and abridged reports. Deliverables: Draft and final study reports, and presentation of study results to internal and external stakeholders. Task 7: S/CAP Funding Model Development CONSULTANT will develop an S/CAP electrification Funding Model in Excel. The tool will use as inputs results from the Building Sector Studies, EV Charger Strategic Plan, Funding Sources Survey, and Affordability and Grid Modernization & Gas Transition Studies, creating a cohesive modeling framework that estimates the community cost to electrify for the CITY under a range of funding and policy scenarios. Task 7.1: Develop Detailed Model Framework and Formulate Data Request CONSULTANT will prepare a detailed model outline for CITY and stakeholder approval. CONSULTANT will present its proposed approach to the CITY and stakeholders and incorporate comments and feedback prior to beginning development on the S/CAP Funding Model. Professional Services Rev. Dec.15, 2020 Page 31 of 43 Item 4: Staff Report Pg. 38 Packet Pg. 107 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - CONSULTANT will prepare a data request to solicit supplementary datase C24188769 E3 SCAP Funding Study om the CITY that is not an output of previous tasks or input study components. ese may include rate forecasts, customer electric and gas consumption data and bills, etc. Deliverables: Model design and outline memo (Microsoft Word) and presentation (Microsoft PowerPoint); Data request template (Microsoft Excel). Task 7.2: Develop S/CAP Funding Spreadsheet Model CONSULTANT will develop a spreadsheet model to estimate the Total Community Cost to Electrify for the CITY. The model will be used to test a range of alternative funding scenarios and quantify the relationships between utility revenues, funding and incentive programs, and customer bills in order to guide the CITY in the achievement of its electrification goals. The model will support future updates to inputs and assumptions. The S/CAP funding model will be structured around representative customer types as the basis for understanding how levels of building and transportation electrification translate to upfront costs and lifetime bill impacts for electric and gas customers in the CITY. A key component of this analysis will be quantifying the amount of "missing money", defined as the net of lifetime benefits and levelized lifetime costs, required for electrification to pencil out across representative customer types and income groups. To estimate the Total Community Cost to Electrify, costs for each representative customer typology must be scaled up across the CITY'S customer base. To complete this aggregation, a representative customer typology will be mapped to each household and building across the CITY, using data from the building characterization completed in the sub -sector studies. Potential representative customer typologies may include, but not be limited to: • Single family homeowners o Pre -1980 and post -1980 building vintage o Customers with and without AC o Low, moderate, and high income customers • Multifamily property owners & tenants o Pre -1980 and post -1980 building vintage o Customers with and without AC o Low, moderate, and high income customers • Commercial building owners o 2-3 commercial building sub -sector typologies Professional Services Rev. Dec.15, 2020 Page 32 of 43 Item 4: Staff Report Pg. 39 Packet Pg. 108 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Figure 3. Overview of SICAP Funding Study and ModeiingApprnoch Customer ' Utility Financial Financial Impacts Impacts • L piront co51S Electric system Incentives coats * Financing - Sy51em co5l5 •Eletlrie rates 8 - Utility programs bills arbd incentives • Qas rates & hills Revenue & rake impacts Funding and Financing Solutions Total Community Cost to Electrify Item 4 Attachment A - C24188769 E3 SCAP Funding Study The model, as illustrated in the figure above, will enable the user to select different combinations and levels of funding streams and observe the impacts on customer economics and utility cash flows, which will serve as the basis for proposed business models and program design. This flexibility will allow scenarios to be developed that target available funding sources to different customer groups and evaluate the relative impact of alternative funding strategies on the utility. Overall scenario results will be evaluated for customers using a Participant Cost Test (PCT) framework and for the utility using a Ratepayer Impact Measure (RIM) framework. Key quantitative metrics, modeled on an annual basis, may include: • Total Community Cost to Electrify, broken out by sector and for disadvantaged communities where applicable: o Total funding required o Available funding from local, state, and federal programs o Remaining funding gap that must be addressed ("missing money") o Distribution of funding needs across customer types by income status • Utility rate impacts for the gas and electric systems • Customer count and sales, for example number of customers electrified by end use and number of heat pump units sold • Customer usage and bill impacts for representative electric and gas customer types • Greenhouse Gas Emissions, including emissions reduction progress toward "80x30" S/CAP target Additional qualitative metrics may include: • Equity impacts of each proposed funding approach, including low- and moderate -income customers Professional Services Rev. Dec.15, 2020 Page 33 of 43 Item 4: Staff Report Pg. 40 Packet Pg. 109 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP • Customer practicality considerations, such as up -front costs of electij Funding Study demand -side measures • Reliability and resilience implications of proposed S/CAP strategies Deliverables: Electrification funding spreadsheet model (Microsoft Excel). Task 7.3: Funding Scenarios Analysis CONSULTANT will work with the CITY to develop scenarios to achieve the CITY'S "80 x 30" greenhouse gas reduction target. CONSULTANT will provide up to 2 rounds of review from the CITY and incorporating CITY feedback, to ensure the final scenarios meet all CITY legal requirements and present the desired range of policy options. CONSULTANT will work with the CITY to ensure alignment around strategies that may target electrification in specific sectors or customer classes, and to consider different combinations of available funding streams. CONSULTANT will develop a counterfactual scenario that accurately captures the anticipated pipeline of upcoming electrification mandates and zero - emissions standards that will impact this analysis. Each core scenario will be evaluated using the quantitative and qualitative metrics above. Key levers to be pulled for the scenario analysis may include, but not be limited to: • Appliance saturation. Ability to select from various appliance electrification rates by sector and end use, drawn from the relevant multi -sector studies • Rate forecasts. Ability to select from a menu of plausible electric and gas rate forecasts • Available funding streams. Ability to include or exclude available local, state, or federal funding sources • Utility incentives. Ability to define varying levels of utility support for electrification or efficiency programs CONSULTANT will use the results of the analysis, together with feedback from the CITY and stakeholders, to develop a recommended portfolio of alternative strategies to develop and fund electrification programs that achieve the CITY'S S/CAP goals and maximizes benefits from a community cost perspective. CONSULTANT will use results from the scenario analysis and cash flow modeling to develop a list of proposed business models for representative customer types in the CITY. Deliverables: Scenario results excel workbook (Microsoft Excel); Scenario results presentation (PowerPoint); Recommended funding and financing approaches. Task 7.4: Model Documentation and Handoff CONSULTANT will develop a comprehensive model user guide that describes model features, lays out procedures for updating model inputs and developing new scenarios, and provides documentation for core inputs and assumptions used to develop scenarios for analysis. Deliverables: Documentation and user guide (Microsoft Word). Professional Services Rev. Dec.15, 2020 Page 34 of 43 Item 4: Staff Report Pg. 41 Packet Pg. 110 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Task 8: Draft and Final Report Item 4 Attachment A - C24188769 E3 SCAP Funding Study CONSULTANT will summarize the results of the analysis and study in a draft report for review by the CITY. This report will include a summary of the methodology and approach, along with all findings from the funding source survey, building and EV sub -sector studies, and funding model scenario analysis. Study results and conclusions in the report will include optimal pathways to help close the funding gap for CITY -wide electrification, and concrete recommendations on electrification programs, incentives, and rebates for different customer segments. CONSULTANT will prepare a final report, incorporating up to two (2) rounds of feedback from the CITY on the draft report. The final report will include an appendix with all supporting data and survey results. CONSULTANT will also attend a meeting with key CITY stakeholders to present a summary of key findings and recommendations from the study. Deliverables: Draft report and final report summarizing study conclusions and recommendations that is in compliance with the DEED grant requirements2 (Microsoft Word); Presentation summarizing study conclusions and recommendations (Microsoft PowerPoint). Task 9: EV & Building Electrification Grid Impact Modeling CONSULTANT shall provide Task -Order -based consulting to the CITY's Electric Utility on the electric distribution system impacts of vehicle and building electrification using projections and analysis developed as part of the S/CAP Funding Study, including the benefits and impacts of managed load on the distribution system and utility and customer costs. The City is currently upgrading and modernizing its electric distribution system to accommodate the increased electric loads associated with vehicle and building electrification and may require assistance from CONSULTANT in providing advisory services and analysis related to its grid modernization plans, such as use of CONSULTANT's Forecasting Anywhere tool to estimate the geographic location of new electrification loads in such a way that can be mapped onto the CITY's assets for grid impacts assessment. Additional adoption trajectories for building electrification would need to be developed to support this analysis and could further support a more detailed analysis in Task 7.3. Adoption trajectories could be combined with E3's load shaping tools to provide annual 8760 hourly load forecasts for a range of EV types and building end -uses. These adoption trajectories and load forecasts could then be geospatially allocated and overlayed with relevant geospatial layers to assess the impacts of adoption and load within the CITY's territory. Deliverables: Deliverables may include items such as: building electrification adoption trajectories; 8760 load forecasts by agent type for each year; results of geospatial downscaling including summary reports, maps, visualizations, and data tables; grid impacts assessment, and headroom and upgrade assessment, as specified on the applicable Task Order (in form of Exhibit A-1 of the Professional Services Agreement) All reports and written material must be provided to and approved by CITY staff. Task 10: Survey of Potential Transportation Demand Management Strategies CONSULTANT shall provide as -needed Task -Order based consulting to the CITY on transportation demand management strategies. The CITY has existing transportation demand management regulations in place and a transportation management association to help employers reduce commute trips. The CITY is exploring ways to increase its impact on employee commute 2 Grant Requirements & Instructions 4.30.2020.pdf licpower.o Professional Services Rev. Dec.15, 2020 Page 35 of 43 Item 4: Staff Report Pg. 42 Packet Pg. 111 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP trips and to expand its efforts to help electrify those employee commute tnp Funding Study CITY may require assistance from CONSULTANT in providing advisory services, researc , and analysis on these topics. Deliverables: Consultant's deliverables will be determined on a task -by -task basis. Deliverables may include analysis and results, one-time written reports, periodic written reports and updates, oral presentations, recommendations and analysis, as specified more clearly on the applicable Task Order (in form of Exhibit A-1 of the Professional Services Agreement). All reports and written material must be provided to and approved by CITY staff. Professional Services Rev. Dec.15, 2020 Page 36 of 43 Item 4: Staff Report Pg. 43 Packet Pg. 112 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP EXHIBIT A-1 LFunding Study PROFESSIONAL SERVICES TASK ORDER CONSULTANT shall perform the Services detailed below in accordance with all the terms and conditions of the Agreement referenced in Item 1A below. All exhibits referenced in Item 8 are incorporated into this Task Order by this reference. CONSULTANT shall furnish the necessary facilities, professional, technical and supporting personnel required by this Task Order as described below. CONTRACT NO. OR PURCHASE ORDER REQUISITION NO. (AS APPLICABLE) IA. MASTER AGREEMENT NO. (MAYBE SAME AS CONTRACT /P.O. NO. ABOVE): 1 B. TASK ORDER NO.: 2. CONSULTANT NAME: 3. PERIOD OF PERFORMANCE: START: COMPLETION: 4 TOTAL TASK ORDER PRICE: $ BALANCE REMAINING IN MASTER AGREEMENT/CONTRACT $ 5. BUDGET CODE COST CENTER COST ELEMENT WBS/CIP PHASE 6. CITY PROJECT MANAGER'S NAME & DEPARTMENT: 7. DESCRIPTION OF SCOPE OF SERVICES (Attachment A) MUST INCLUDE: SERVICES AND DELIVERABLES TO BE PROVIDED SCHEDULE OF PERFORMANCE MAXIMUM COMPENSATION AMOUNT AND RATE SCHEDULE (as applicable) REIMBURSABLE EXPENSES, if any (with "not to exceed" amount) 8. ATTACHMENTS: A: Task Order Scope of Services B (if any): I hereby authorize the performance of the work described in this Task Order. APPROVED: CITY OF PALO ALTO BY: Name Title Date I hereby acknowledge receipt and acceptance of this Task Order and warrant that I have authority to sign on behalf of Consultant. APPROVED: COMPANY NAME: BY: Name Title Date Professional Services Rev. Dec.15, 2020 Page 37 of 43 Item 4: Staff Report Pg. 44 Packet Pg. 113 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP EXHIBIT B LFunding Study SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services so as to complete each milestone within the number of days/weeks specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the Project Managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed ("NTP") from the CITY. Milestones Completion Number of Days/Weeks (as specified below) from NTP 1. Project Kickoff 1 week 2. Funding Source Survey 10 weeks 3. Single Family Sector Study 11 weeks 4. Multi Family Sector Study 17 weeks 5. Nonresidential Sector Study 17 weeks 6. EV Charger Strategic Plan 19 weeks 7. Funding Model 22 weeks 8. Final Report 26 weeks 9. EV and Building Electrification Grid Impact Modelin Per Task Order 10. Survey of Potential Transportation Demand Mana ement Strate ies Per Task Order ® Optional Schedule of Performance Provision for On -Call or Additional Services Agreements. (This provision only applies if checked and only applies to on -call agreements per Section 1 or agreements with Additional Services per Section 4.) The schedule of performance shall be as provided in the approved Task Order, as detailed in Section 1 (Scope of Services) in the case of on -call Services, or as detailed in Section 4 in the case of Additional Services, provided in all cases that the schedule of performance shall fall within the term as provided in Section 2 (Term) of this Agreement. Professional Services Rev. Dec.15, 2020 Page 38 of 43 Item 4: Staff Report Pg. 45 Packet Pg. 114 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF EXHIBIT C COMPENSATION Item 4 Attachment A - C24188769 E3 SCAP Funding Study CITY agrees to compensate CONSULTANT for Services performed in accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule below. Compensation shall be calculated based on the rate schedule attached as Exhibit C-1 up to the not to exceed budget amount for each task set forth below. CITY's Project Manager may approve in writing the transfer of budget amounts between any of the tasks or categories listed below, provided that the total compensation for the Services, including any specified reimbursable expenses, and the total compensation for Additional Services (if any, per Section 4 of the Agreement) do not exceed the amounts set forth in Section 4 of this Agreement. CONSULTANT agrees to complete all Services, any specified reimbursable expenses, and Additional Services (if any, per Section 4), within this/these amount(s). Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth in this Agreement shall be at no cost to the CITY. BUDGET SCHEDULE TASK NOT TO EXCEED AMOUNT Task 1 (Project Kick -Off and Project Management) $35,170 Task 2 (Funding Source Survey) $30,280 Task 3 (Single-family Sector Study) $34,936 Task 4 (Multi -family Sector Study) $101,995 Task 5 (Nonresidential Sector Study) $80,095 Task 6 (EV Charger Strategic Plan) $128,370 Task 7 (S/CAP Funding Model Development) $123,620 Task 8 (Draft and Final Report) $79,820 Sub -total for Services $614,286 Reimbursable Expenses (if any) $0 Total for Services and Reimbursable Expenses $614,286 Optional Tasks (by Task Order): Task 9 (Electrification Grid Impact Modeling) $200,000 Task 10 (Survey of Potential Transportation Demand Management Strategies) $50,000 Additional Services per section 4 $81,000 Maximum Total Compensation $945,286 REIMBURSABLE EXPENSES CONSULTANT'S ordinary business expenses, such as administrative, overhead, administrative support time/overtime, information systems, software and hardware, photocopying, telecommunications (telephone, internet), in-house printing, insurance and Professional Services Rev. Dec.15, 2020 Page 39 of 43 Item 4: Staff Report Pg. 46 Packet Pg. 115 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP other ordinary business expenses, are included within the scope of pa Funding Study and are not reimbursable expenses hereunder. Reimbursable expenses, if any are specified as reimbursable under this section, will be reimbursed at actual cost. The expenses (by type, e.g. travel) for which CONSULTANT will be reimbursed are: NONE up to the not -to -exceed amount of: $0.00. A. Travel outside the San Francisco Bay Area, including transportation and meals, if specified as reimbursable, will be reimbursed at actual cost subject to the City of Palo Alto's policy for reimbursement of travel and meal expenses. B. Long distance telephone service charges, cellular phone service charges, facsimile transmission and postage charges, if specified as reimbursable, will be reimbursed at actual cost. All requests for reimbursement of expenses, if any are specified as reimbursable under this section, shall be accompanied by appropriate backup documentation and information. Professional Services Rev. Dec.15, 2020 Page 40 of 43 Item 4: Staff Report Pg. 47 Packet Pg. 116 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP EXHIBIT C-1 L Funding Study SCHEDULE OF RATES CONSULTANT'S schedule of rates is as follows: E3 Founding Partner $675 E3 Managing Partner $565 E3 Senior Partner $565 E3 Partner $52O E3 Senior Director $475 E3 Director $455 E3 Associate Director $45O E3 Senior Managing Consultant $4OO E3 Managing Consultant $365 E3 Senior Consultant $325 E3 Consultant $27O E3 Associate $235 E3 Analyst $154 Rincon Senior Principal $308 Rincon Director $297 Rincon Senior Planner II $246 Rincon Senior Planner I $230 Rincon Planner III $159 Wilidan Electrification Field Expert $300 Willdan Sector Study Lead $230 Willdan Survey Tool Developer $150 Wi llda n Site Evaluation Lead $175 Wi llda n Site Evaluation Analyst $154 Willdan Site Surveyor $100 Ann Cheng Consulting CEO $300 Professional Services Rev. Dec.15, 2020 Page 41 of 43 Item 4: Staff Report Pg. 48 Packet Pg. 117 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF Item 4 Attachment A - C24188769 E3 SCAP EXHIBIT D LFunding Study INSURANCE REQUIREMENTS CONSULTANTS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST'S KEY RATING OF A -:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY'S INSURANCE REQUIREMENTS AS SPECIFIED HEREIN. MINIMUM LIMITS REQUIRED TYPE OF COVERAGE REQUIREMENT EACH OCCURRENCE AGGREGATE YES WORKER'S COMPENSATION STATUTORY STATUTORY STATUTORY YES EMPLOYER'S LIABILITY STATUTORY YES GENERAL LIABILITY, INCLUDING BODILY INJURY $1,000,000 $1,000,000 PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE $1,000,000 $1,000,000 PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL BODILY INJURY & PROPERTY $1,000,000 $1,000,000 LIABILITY DAMAGE COMBINED. BODILY INJURY $1,000,000 $1,000,000 - EACH PERSON $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, - EACH OCCURRENCE $1,000,000 $1,000,000 INCLUDING ALL OWNED, HIRED, PROPERTY DAMAGE $1,000,000 $1,000,000 NON -OWNED BODILY INJURY AND PROPERTY $1,000,000 $1,000,000 DAMAGE, COMBINED YES PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN ALL DAMAGES $1,000,000 APPLICABLE), AND NEGLIGENT PERFORMANCE YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONSULTANT, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONSULTANT AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS' COMPENSATION, EMPLOYER'S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. INSURANCE COVERAGE MUST INCLUDE: A. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONSULTANT'S AGREEMENT TO INDEMNIFY CITY. II. THE CONSULTANT MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE TO THE FOLLOWING: PURCHASINGSUPPORT(CITYOFPALOALTO.ORG III. ENDORSEMENT PROVISIONS WITH RESPECT TO THE INSURANCE AFFORDED TO ADDITIONAL INSUREDS: A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. Professional Services Rev. Dec.15, 2020 Page 42 of 43 Item 4: Staff Report Pg. 49 Packet Pg. 118 of 553 DocuSign Envelope ID: B8858AAD-2C33-4F86-BA45-EB5E30077FBF B. C. CROSS LIABILITY Item 4 Attachment A - C24188769 E3 SCAP Funding Study THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. NOTICE OF CANCELLATION IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. EVIDENCE OF INSURANCE AND OTHER RELATED NOTICES ARE REQUIRED TO BE FILED WITH THE CITY OF PALO ALTO AT THE FOLLOWING EMAIL ADDRESS: PURCHASINGSUPPORT@CITYOFPALOALTO.ORG Professional Services Rev. Dec.15, 2020 Page 43 of 43 Item 4: Staff Report Pg. 50 Packet Pg. 119 of 553 DocuSign Envelope ID: 590E62BO-E6FO-4E58-674E-C255CA1046FD Item 4 Attachment B - S23187670 Sterling Communications Al AMENDMENT NO. 1 TO CONTRACT NO. S23187670 BETWEEN THE CITY OF PALO ALTO AND STERLING COMMUNICATIONS, INC. This Amendment No. 1 (this "Amendment") to Contract No. S23187670 (the "Contract" as defined below) is entered into as of December 18, 2023 (the "Effective Date"), by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("CITY"), and STERLING COMMUNICATIONS, INC., a California Corporation, located at 3130 Tisch Way 110 Plaza West, San Jose, CA 95128 ("CONSULTANT"). RECITALS A. The Contract (as defined below) was entered into by and between the Parties hereto for the provision of providing development and implementation of a marketing plan in connection with the CITY's program promoting building electrification with a focus on the residential heat pump water heaters (the "Services", as detailed more fully in Exhibit A), as detailed therein. B. The Parties now wish to amend the Contract in order to extend the timeline for provision of the Services for outreach and marketing on electrification, to broaden the scope to encompass more outreach topics, and to increase the total compensation by Seventy -Five Thousand Dollars ($75,000), from Eighty -Five Thousand Dollars ($85,000) to One Hundred and Sixty Thousand Dollars ($160,000), as detailed herein. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the Parties agree: SECTION 1. Definitions. The following definitions shall apply to this Amendment: a. Contract. The term "Contract" shall mean Contract No. S23187670 between CONSULTANT and CITY, dated May 18, 2023. Other Terms. Capitalized terms used and not defined in this Amendment shall have the meanings assigned to such terms in the Contract. SECTION 2. Section "NOT TO EXCEED COMPENSATION" of the Contract is hereby amended to read as follows: "The compensation to be paid to CONSULTANT for performance of the Services shall be based on the compensation structure detailed in Exhibit C, entitled "COMPENSATION," including any reimbursable expenses specified therein, and the maximum total compensation shall not exceed One Hundred and Sixty Thousand Dollars ($160,000). The hourly schedule of rates, if applicable, is set out in Exhibit C-1, entitled "SCHEDULE OF RATES." Any work performed or expenses incurred for which payment would result in a total exceeding the maximum compensation set forth in this Section 4 shall be at no cost to the CITY. Vers.: Aug. 5, 2019 Page 1 of 9 Item 4: Staff Report Pg. 51 Packet Pg. 120 of 553 DocuSign Envelope ID: 590E62BO-E6FO-4E58-674E-C255CA1046FD Item 4 Attachment B - S23187670 Sterling Communications Al SECTION 3. The following exhibit(s) to the Contract is/are hereby amended or added, as indicated below, to read as set forth in the attachment(s) to this Amendment, which is/are hereby incorporated in full into this Amendment and into the Contract by this reference: a. Exhibit "A" entitled "SCOPE OF SERVICES", AMENDED, REPLACES PREVIOUS. b. Exhibit "B" entitled "SCHEDULE OF PERFORMANCE", AMENDED, REPLACES PREVIOUS. c. Exhibit "C" entitled "COMPENSATION", AMENDED, REPLACES PREVIOUS. SECTION 4. Legal Effect. Except as modified by this Amendment, all other provisions of the Contract, including any exhibits thereto, shall remain in full force and effect. SECTION 5. Incorporation of Recitals. The recitals set forth above are terms of this Amendment and are fully incorporated herein by this reference. (SIGNATURE BLOCK FOLLOWS ON THE NEXT PAGE.) Vers.: Aug. 5, 2019 Page 2 of 9 Item 4: Staff Report Pg. 52 Packet Pg. 121 of 553 DocuSign Envelope ID: 590E62BO-E6FO-4E58-674E-C255CA1046FD Item 4 Attachment B - S23187670 Sterling Communications Al SIGNATURES OF THE PARTIES IN WITNESS WHEREOF, the Parties have by their duly authorized representatives executed this Amendment effective as of the date first above written. CITY OF PALO ALTO City Manager APPROVED AS TO FORM: City Attorney or designee Attachments: STERLING COMMUNICATIONS, INC. DocuSigned by: 7� n (:O y J��.t1 a.�t..a.al.l.fi L/ YL/1.0 1. 3504BAFD03884B2.. Marianne O'Connor Name: Title: CEO DocuSigned by: BtidLtL F66 '-97CDO96E3C3E4B5... Michael Foody Name: Title: Di rector EXHIBIT A: SCOPE OF SERVICES (amended, replaces previous) EXHIBIT B: SCHEDULE OF PERFORMANCE (amended, replaces previous) EXHIBIT C: COMPENSATION (amended, replaces previous) Vers.: Aug. 5, 2019 Page 3 of 9 Item 4: Staff Report Pg. 53 Packet Pg. 122 of 553 DocuSign Envelope ID: 590E62BO-E6FO-4E58-674E-C255CA1046FD Item 4 Attachment B - S23187670 Sterling Communications Al EXHIBIT A SCOPE OF SERVICES (Amended, Replaces Previous) CONSULTANT shall provide the Services detailed in this Exhibit A, entitled "SCOPE OF SERVICES". Based on direction and information provided by CITY staff, CONSULTANT shall provide the Services detailed in Exhibit A. CONSULTANT will develop and execute a marketing campaign to build awareness of the CITY's building electrification programs with a particular focus on generating qualified leads for the residential heat pump water heater (HPWH) program by 12/31/2023. This first part of the campaign focused on the residential heat pump water heater (HPWH) program includes two phases: development (Phase 1, below) and implementation (Phase 2, below). The second part of the campaign continues a focus on generating qualified leads for the HPWH program, but also expands the focus of the electrification campaign to include whole home electrification, the CITY's work to enhance the reliability and resiliency of its electric system and, with mutual agreement, other programs or related topics. Phase One: Develop the strategic marketing plan with a focus on early marketing efforts CONSULTANT will: Conduct initial brainstorming session with key CITY staff; . Compile and analyze research on target audiences, including motivators and demotivators; . Incorporate results from focus groups conducted by the CITY into marketing plan, described below; . Lead one (1) strategy and planning workshop with key CITY stakeholders, if requested; . Develop recommendations on streamlining the customer's online journey to understand the CITY's mission, vision, and resources; . Produce a draft marketing plan that includes: o A strategic narrative for the CITY'S building electrification programs, o Audience segmentation relevant to CITY residential electrification initiatives, o A specific communication campaign and related tactics for the CITY and affiliated partners regarding the residential heat pump water heater program, o Required timelines for material distribution in prescribed channel, o Recommendations for streamlining website content and landing pages related to the Project, and Vers.: Aug. 5, 2019 Page 4 of 9 Item 4: Staff Report Pg. 54 Packet Pg. 123 of 553 DocuSign Envelope ID: 590E62BO-E6FO-4E58-674E-C255CA1046FD Item 4 Attachment B - S23187670 Sterling Communications Al o The specific tools, timeline, and costs of the Services necessary for Task Orders in Phase Two; Incorporate final feedback on the draft marketing plan — provided to CONSULTANT in a single document — from CITY staff and program stakeholders; and . Produce a finalized marketing plan shared with City for review and sign -off. ("Marketing Plan") In parallel, CONSULTANT will work with the CITY's Communications staff to conduct Early and Foundational Marketing Efforts. Upon CITY request via Task Order, CONSULTANT will conduct: Research and data gathering to support future marketing efforts Early outreach and marketing with a focus on "quick wins" that will generate high awareness and participation for low effort CITY will have the complete right to use the Work Product during the term of the Contract for any and all purposes outlined in this Scope of Services, upon written acceptance by CITY of the Work Product as in conformance with CITY direction. Notwithstanding Section 14 (Ownership of Materials), full ownership of Work Product generated in Phase One requested by Task Order and associated with Early and Foundational Marketing Efforts will transfer to CITY upon 1) written acceptance by CITY of the Work Product as complete and in conformance with CITY direction, and 2) payment of costs mutually agreed upon in the Task Order. Phase Two: Implement campaign, including creating adaptable communication toolkits CONSULTANT will develop specific tools for relevant CITY departments, program stakeholders, and affiliated community partners based on the Marketing Plan and direction provided by CITY in Task Orders. CITY will have the complete right to use the Work Product during the term of the Contract for any and all purposes outlined in this Scope of Services, upon written acceptance by CITY of the Work Product as in conformance with CITY direction. Notwithstanding Section 14 (Ownership of Materials), during the course of the Contract, full ownership of that Work Product will transfer to CITY upon 1) written acceptance by CITY of the Work Product as complete and in conformance with CITY direction, and 2) payment of costs mutually agreed upon in the Marketing Plan and Task Order. Requested tools may include: EMAIL — Producing content for the CITY to use in email marketing campaigns ; • ADVERTISING — Writing copy for digital ads targeted at residential customers; WEB — Editing HPWH copy for the CITY's website; Vers.: Aug. 5, 2019 Page 5 of 9 Item 4: Staff Report Pg. 55 Packet Pg. 124 of 553 DocuSign Envelope ID: 590E62B0-E6F0-4E58-B74E-C255CA1046FD Item 4 Attachment B - S23187670 Sterling Communications Al PRINT — Providing content and creative direction to the CITY's graphic designer(s) for mailing inserts, flyers, and other campaign collateral MULTIMEDIA — Curating existing CITY assets for sharing on social media accounts of CITY and engaged community members in service of promoting CITY programs supporting home electrification, with a focus on the HPWH conversion program. CONSULTANT will work with the CITY's Communications staff to conduct campaign operations, which will include: • Monitoring campaign results and community feedback, adjusting creative and content as needed, and • Providing ongoing feedback on program and marketing design to improve effectiveness. Phase Three: Expand campaign CONSULTANT will work with CITY to expand the existing marketing plan to encompass whole home electrification, the CITY's work to enhance the reliability and resiliency of its electric system and, with mutual agreement, other programs or related topics, while continuing to also focus on generating leads for the CITY's HPWH Program. CONSULTANT will develop specific tools for relevant CITY departments, program stakeholders, and affiliated community partners based on the Marketing Plan and direction provided by CITY in Task Orders. CITY will have the complete right to use the Work Product during the term of the Contract for any and all purposes outlined in this Scope of Services, upon written acceptance by CITY of the Work Product as in conformance with CITY direction. Notwithstanding Section 14 (Ownership of Materials), during the course of the Contract, full ownership of that Work Product will transfer to CITY upon 1) written acceptance by CITY of the Work Product as complete and in conformance with CITY direction, and 2) payment of costs mutually agreed upon in the Marketing Plan and Task Order. Requested tools may include: • EMAIL — Producing content for the CITY to use in email marketing campaigns; • ADVERTISING — Writing copy for digital ads targeted at residential customers; • WEB — Editing HPWH copy for the CITY's website; • PRINT — Providing content and creative direction to the CITY's graphic designer(s) for mailing inserts, flyers, and other campaign collateral • MULTIMEDIA — Curating existing CITY assets for sharing on social media accounts of CITY and engaged community members in service of promoting CITY programs supporting home electrification, with a focus on the HPWH conversion program. CONSULTANT will work with the CITY's Communications staff to conduct campaign operations, which will include: Vers.: Aug. 5, 2019 Page 6 of 9 Item 4: Staff Report Pg. 56 Packet Pg. 125 of 553 DocuSign Envelope ID: 590E62BO-E6FO-4E58-674E-C255CA1046FD Item 4 Attachment B - S23187670 Sterling Communications Al Monitoring campaign results and community feedback, adjusting creative and content as needed, and Providing ongoing feedback on program and marketing design to improve effectiveness. Vers.: Aug. 5, 2019 Page 7 of 9 Item 4: Staff Report Pg. 57 Packet Pg. 126 of 553 DocuSign Envelope ID: 590E62B0-E6F0-4E58-B74E-C255CA1046FD Item 4 Attachment B - S23187670 Sterling Communications Al EXHIBIT B SCHEDULE OF PERFORMANCE (Amended, Replaces Previous) CONSULTANT shall perform the Services so as to complete each milestone within the number of days/weeks specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the Project Managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed ("NTP") from the CITY. Completion Milestones Number of Days/Weeks (as specified below) from NTP Phase 1 45 days December 31, 2023 unless extended by mutual Phase 2 agreement July 31, 2024 unless extended by mutual Phase 3 agreement ❑ Optional Schedule of Performance Provision for On -Call or Additional Services Agreements. (This provision only applies if checked and only applies to on -call agreements per Section 1 or agreements with Additional Services per Section 4.) The schedule of performance shall be as provided in the approved Task Order, as detailed in Section 1 (Scope of Services) in the case of on -call Services, or as detailed in Section 4 in the case of Additional Services, provided in all cases that the schedule of performance shall fall within the term as provided in Section 2 (Term) of this Agreement. Vers.: Aug. 5, 2019 Page 8 of 9 Item 4: Staff Report Pg. 58 Packet Pg. 127 of 553 DocuSign Envelope ID: 590E62BO-E6FO-4E58-674E-C255CA1046FD Item 4 Attachment B - S23187670 Sterling Communications Al EXHIBIT C COMPENSATION (Amended, Replaces Previous) CITY agrees to compensate CONSULTANT for Services performed in accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule below. Compensation shall be calculated based on the rate schedule attached as Exhibit C-1 up to the not to exceed budget amount for each task set forth below. CITY's Project Manager may approve in writing the transfer of budget amounts between any of the tasks or categories listed below, provided that the total compensation for the Services, including any specified reimbursable expenses, and the total compensation for Additional Services (if any, per Section 4 of the Agreement) do not exceed the amounts set forth in Section 4 of this Agreement. CONSULTANT agrees to complete all Services, any specified reimbursable expenses, and Additional Services (if any, per Section 4), within this/these amount(s). Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth in this Agreement shall be at no cost to the CITY. BUDGET SCHEDULE NOT TO EXCEED AMOUNT Phase 1 (Program Planning, Strategy, Workshopping, Early Marketing) $20,500 Phase 2 (Toolkits, Implementation) by Task Order $64,000 Phase 3 (Campaign Expansion) by Task Order $75,000 Sub -total for Services $159,500 Reimbursable Expenses (if any) $500 Total for Services and Reimbursable Expense $160,000 Additional Services (if any, per Section 4) $0 Maximum Total Compensation $160,000 All requests for reimbursement of expenses, if any are specified as reimbursable under this section, shall be accompanied by appropriate backup documentation and information. Vers.: Aug. 5, 2019 Page 9 of 9 Item 4: Staff Report Pg. 59 Packet Pg. 128 of 553 Certificate Of Completion Envelope Id: 590E62B0E6F04E58B74EC255CA1046FD Subject: Complete with DocuSign: S23187670 Amendment 1 final .pdf Source Envelope: Document Pages: 9 Signatures: 2 Certificate Pages: 2 Initials: 0 AutoNav: Enabled Envelopeld Stamping: Enabled Time Zone: (UTC-08:00) Pacific Time (US & Canada) Record Tracking Status: Original 11/30/2023 3:45:02 PM Security Appliance Status: Connected Storage Appliance Status: Connected Signer Events Marianne O'Connor marianne@sterlingpr.com CEO Security Level: Email, Account Authentication (None) Electronic Record and Signature Disclosure: Not Offered via DocuSign Michael Foody mike@gdh.11c Director Security Level: Email, Account Authentication (None) Electronic Record and Signature Disclosure: Not Offered via DocuSign In Person Signer Events Editor Delivery Events Agent Delivery Events Intermediary Delivery Events Certified Delivery Events Carbon Copy Events Tabatha Boatwright Tabatha.Boatwright@CityofPaloAlto.org Utilities Management Analyst City of Palo Alto Security Level: Email, Account Authentication (None) Electronic Record and Signature Disclosure: Not Offered via DocuSign Holder: Annmarie Romero annmarie.romero@cityofpaloalto.org Pool: StateLocal Pool: City of Palo Alto Signature EDI-Sil"Id by: 3504BAFD0388482... Signature Adoption: Pre -selected Style Using IP Address: 69.181.232.5 Signed using mobile /'by:ED—Signed LI&AtI F66) 97CD096E3C3E4B5... Signature Adoption: Pre -selected Style Using IP Address: 76.173.13.226 Signed using mobile Signature Status Status Status Status Status COPIED Item 4 AttachmentB- - S23187670 Sterling GLISIgn Communications Al Status: Completed Envelope Originator: Annmarie Romero 250 Hamilton Ave Palo Alto , CA 94301 annmarie.romero@cityofpaloalto.org IP Address: 199.33.32.254 Location: DocuSign Location: DocuSign Timestamp Sent: 11/30/2023 3:47:36 PM Viewed: 12/7/2023 7:03:23 AM Signed: 12/7/2023 7:06:52 AM Sent: 12/7/2023 7:06:53 AM Resent: 12/7/2023 10:29:57 AM Resent: 12/11/2023 12:06:20 PM Resent: 12/12/2023 8:52:37 AM Resent: 12/12/2023 8:52:52 AM Viewed: 12/12/2023 9:20:30 AM Signed: 12/12/2023 9:21:20 AM Timestamp Timestamp Timestamp Timestamp Timestamp Timestamp Sent: 12/12/2023 9:21:21 AM Viewed: 12/12/2023 2:45:18 PM Item 4: Staff Report Pg. 60 Packet Pg. 129 of 553 Item 4 Attachment B - Carbon Copy Events Status TimestT S23187670 Sterling Jonathan Abendschein COPIED OPIED Sent: 12/1 Communications Al Assistant Director, Utilities Resource Management Security Level: Email, Account Authentication (None) Electronic Record and Signature Disclosure: Not Offered via DocuSign Witness Events Signature Timestamp Notary Events Signature Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 11/30/2023 3:47:36 PM Envelope Updated Security Checked 12/12/2023 8:52:36 AM Certified Delivered Security Checked 12/12/2023 9:20:30 AM Signing Complete Security Checked 12/12/2023 9:21:20 AM Completed Security Checked 12/12/2023 9:21:22 AM Payment Events Status Timestamps Item 4: Staff Report Pg. 61 Packet Pg. 130 of 553 Item 5 Item 5 Staff Report City Council Staff Report From: City Manager CITY O F Report Type: CONSENT CALENDAR PALO Lead Department: Administrative Services ALTO Meeting Date: January 16, 2024 Report #:2311-2230 TITLE Accept the City of Palo Alto's Audited Financial Statements as of June 30, 2023 and the Macias, Gini & O'Connell Management Letter; Approve the FY 2023 Annual Comprehensive Financial Report (ACFR)and Amendments to the FY 2023 Budget in Various Funds; and Adopt a Resolution to Extend and Amend the Development Services Reserve Fund Policy, as Recommended by the Finance Committee; CEQA Status — Not a Project RECOMMENDATION Finance Committee and Staff recommend that the City Council: 1. Accept the City of Palo Alto's audited financial statements for the fiscal year ended June 30, 2023, and the accompanying reports prepared by Macias Gini & O'Connell LLP ("MGO")'. Reports include: a. Report to the City Council (the "Management Letter"), b. Cable TV Franchise, Independent Auditor's Report and Statements of Franchise Revenues and Expenses for the years ended December 31, 2022, and 2021, c. Palo Alto Public Improvement Corporation (a component unit of the City of Palo Alto) Annual Financial Report for the year ended June 30, 2023, d. Regional Water Quality Control Plant, Independent Auditor's Report and Financial Statements for the year ended June 30, 2023, and e. Independent Accountant's Report on Applying Agreed -Upon Procedures related to the Article XIII-B Appropriations (GANN) Limit for the year ended June 30, 2023. 1 11/28/2023 CMR# 2309-2041 Finance Committee Staff Report, Discussion and Recommendation to the City Council to Accept the Macias Gini & O'Connell's Audit of the City of Palo Alto's Financial Statements as of June 30, 2023 https://recordsporta 1. paloalto.gov/Weblink/DocView.aspx?id=64227 Item 5: Staff Report Pg. 1 Packet Pg. 131 of 553 Item 5 Item 5 Staff Report 2. Approve the Fiscal Year (FY) 2023 Annual Comprehensive Financial Report (ACFR) and reports collectively referred to as the Single Audit in CMR #2308-18572. An electronic copy is available on the City's website3; 3. Amend the Fiscal Year 2023 Budget Appropriation Ordinance for various funds as identified Recommended Amendments to the City Manager's FY2023 Budget; referenced as "Attachment B — Exhibit 1 and various capital projects as identified in Attachment B — Exhibit 2" (Attachment I) in CMR #2308-18572 PDF pp. 26-39 (Effective on first reading; five votes required); 4. Adopt a Resolution to Extend and Amend the Development Services Reserve Fund (DSRF) Policy Resolution of the Council of the City Palo Alto to Extend and Amend the Development Services Reserve Fund Policy (Attachment 11), previously adopted by Ordinance No. 5420 (Attachment III); and 5. Refer to staff review of the approval process for excess Budget Stabilization Reserve (BSR) allocations in both long-term retiree benefit funding policy and capital infrastructure reserve policy with the Finance Committee. Hard copies of these reports were provided in 2023, though additional are available upon request. BACKGROUND Every year, the fiscal year is closed out and the City Council publishes the City's financial report (Palo Alto Municipal Code 2.28.200). At the November 28, 2023 Finance Committee meeting, the Committee reviewed two staff reports: one transmitted by the City Auditor's Office and one by the City Manager's Office via the Administrative Services Department, and unanimously approved both reports for City Council consideration4: • Office of the City Auditor: Discussion and Recommendation to the City Council to Accept the MGO Audit of the City of Palo Alto's Financial Statements as of June 30, 20231. 2 11/28/2023 CMR# 2308-1857 Finance Committee Staff Report, Approval of the FY 2023 ACFR YE Budget Amendments, and Resolution to Extend and Amend the Development and Services Reserve Fund Policy https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=64203 3 City of Palo Alto FY 2023 Annual Comprehensive Financial Report https://www.cityofpa Ioa Ito.org/fi Ies/assets/pu bl is/v/1/ad m i n istrative-services/city-budgets/fy-2023-city- budget/fy-2023-annual-comprehensive-financial-report.pdf 4 November 28, 2023, Finance Committee Action Minutes: https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=38971 Item 5: Staff Report Pg. 2 Packet Pg. 132 of 553 Item 5 Item 5 Staff Report • Administrative Services Department: Recommendation to Approve the Fiscal Year (FY) 2023 ACFR, Approve FY 2023 Budget Amendments in Various Funds and Amend the Development Services Reserve Fund Policy (DSRF) 2. In addition to these reports, the Finance Committee recommended that the Council refer to staff review of the approval process for the allocation of excess Budget Stabilization Reserve (BSR) balance, above the Council approved target range discussed in both the long-term retiree benefit funding policy and capital infrastructure reserve policy. The Committee discussed this in the context of potentially memorializing recent practice in these policies which includes Committee review. MGO issued a clean opinion on each audit report. A finding was noted for the Appropriations Limit (or "Gann Limit") Agreed -Upon Procedures Report where the incorrect adjustment factor was used in the calculation. Staff corrected the calculation and did not exceed the FY 2023 GANN Limit after the calculation was corrected. The City also received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association (GFOA) for its FY 2022 ACFR. The Finance Committee discussed the status of the General Fund and the Budget Stabilization Reserve (BSR) balance. The General Fund Budget Stabilization Reserve (BSR) ended FY 2023 at $61.5 million; after adjusting the BSR for FY 2024 uses approved by Council through November 2023, the net BSR balance is $57.3million, $3.4 million above Council's 20% BSR target level for FY 2024. By policy, the City maintains a BSR balance of 15-20% of the annual operating expense, with a typical target level of 18.5%. In alignment with Council policy, the Committee and staff recommends that the excess is split between the Capital Fund Infrastructure Reserve (IR) and the Section 114 Pension Trust fund ($1.7 million each); necessary budget actions to allocate the BSR funds in excess of the 20% target will be included in the FY 2024 Mid -Year Review (February 2024). ANALYSIS Government -wide As outlined in the staff report to the Finance Committee, at the close of FY 2023, the City's total Net Position is $1.354 billion, an increase of $83.3 million or 6.6% over the prior fiscal year. The total increase of $83.3 million consists of $42.4 million from governmental activities and $40.9 million from business -type activities. Approximately two-thirds of this increase are the City's net investment in capital assets (land, buildings, infrastructure, vehicles, and intangible assets) and restricted funds. Approximately 90% of the City's $1.354 billion Net Position, approximately 90% is net investment in capital assets. Item 5: Staff Report Pg. 3 Packet Pg. 133 of 553 Item 5 Item 5 Staff Report General Fund The General Fund ended with a net Budget Stabilization Reserve (BSR) surplus of $3.4 million, after adjusting for estimates used in the development of the FY 2024 Adopted Budget and Council approved uses of the BSR in FY 2024 through November 2023. Overall, at the end of the current fiscal year, the General Fund's fund balance was $105.8 million, of which $46.3 million is unassigned fund balance. The main difference between the BSR balance ($57.2 million) and unassigned fund balance is the investment unrealized loss adjustment, as required by Governmental Accounting Standards Board (GASB) Statement No. 31. Discussion can be found in staff's November 28, 2023 report to the Finance Committee. Enterprise Funds As of June 30, 2023, the City's Enterprise Funds reported a total net position of $827.7 million, an increase of $36.6 million or 4.6% from the prior year. The increase is primarily from Electric and Gas Funds. Compared to FY 2022, the Change in Net Position for Enterprise funds increased $49.2 million driven primarily by the Electric Fund, and Gas Funds, partially offset by the decrease in Airport Fund. Electric Fund received $23.9 million related to the litigation of the Central Valley Project Improvement Act (CVPIA) operated by the U.S. Bureau of Reclamation. The payment comes after years of litigation by Northern California Power Agency (NCPA) members that the United States government overcharged power contractors in a manner contrary to the CVPIA legislation. The refund represents the City' s share of the judgment issued by the US Court of Federal Claims. FISCAL/RESOURCE IMPACT The actions recommended in CMR 2308-1857 pages 26-392 Attachment B, both Exhibits 1 and 2, recommend adjustments to the FY 2023 appropriated level of funds to align budgeted levels with year-end activities. Overall, these transactions ensure all funds remain in a positive financial picture. STAKEHOLDER ENGAGEMENT This report has been prepared by the Administrative Service Department Accounting division and coordinated with the Office of the City Auditor and the Office of Management and Budget. ENVIRONMENTAL REVIEW Council action on this item is not a project as defined by CEQA because the acceptance of the audited financial reports for the fiscal year ending June 30, 2023 , approval of the ACFR for Fiscal Year 2023, the amendment to the Fiscal Year 2023 Budget Appropriation Ordinance, and extending a resolution of the DSRF Policy are fiscal activities which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. CEQA Guidelines section 15378(b)(4). Item 5: Staff Report Pg. 4 Packet Pg. 134 of 553 Item 5 Item 5 Staff Report ATTACHMENT Attachment A — FY 2023 Budget Amendments, Schedule B, Exhibit 1 and 2 Attachment B — Resolution to Extend and Amend the Development Services Reserve Fund (DSRF)Policy Previously Adopted by Ord 5420 Attachment C — Ordinance No. 5420 APPROVED BY: Kiely Nose, Assistant City Manager Lead Staff; Christine Paras, Assistant Director Item 5: Staff Report Pg. 5 Packet Pg. 135 of 553 ATTACHMENT B, EXHIBIT 1 Department CAPITAL IMPROVEMENT FUNDS Item 5 Attachment A - FY 2023 Budget Amendments, Attachment B, Exhibit 1 and 2 Revenues Expenses Adjustment Adjustment GENERAL FUND CAPITAL IMPROVEMENT FUND (471) Capital Transfer from General Fund $ 2,288,000 $ This action increases the transfer from the General Fund related to TOT revenue Council earmarked to use for city-wide infrastructure improvements due to actual revenue collected being higher than budgeted in FY 2023. Capital Transfer from Gas Tax Fund/Streets Maintenance (PE -86070) $ 43,200 $ 43,200 This action increases the transfer from the Gas Tax Fund as a result of SB1 Gas Tax revenue from the State of California that came in higher than budgeted levels. SB1 funding is designated for street improvment projects, so it will be added to the Streets Maintenance capital project (PE -86070). Capital Transfer to Library Projects Fund $ - $ 73,800 This action transfers the remaining bond funds that were issued in 2013 to reconstruct the Mitchell Park Library and Community Center facility from the Capital Improvement Fund to the Library Projects Fund. The remaining funds had previously been held in the Capital Improvement Fund to complete roof damage repair that persisted from the reconstruction project. The repairs were completed in FY 2023, so the remaining funds are being transferred to be used towards payment of the debt service costs of the bond. Various Retiree Healthcare Department Charges $ - $ (4,170) This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Fund Balance Adjustment to Fund Balance $ - $ 2,218,370 This action adjusts the fund balance to offset adjustments recommended in this report. GENERAL FUND CAPITAL IMPROVEMENT FUND (471) SUBTOTAL $ 2,331,200 $ 2,331,200 CUBBERLEY PROPERTY INFRASTRUCTURE FUND (472) Various Salaries and Benefits $ - $ 126,200 This action increases the allocation for salaries and benefits in this fund due increased labor costs that were negotiatied and approved across the City in FY 2023. Additional funding for these cost increases was not appropriated in FY 2023, so this aligns budget levels with actual expenditures. Fund Balance Adjustment to Fund Balance $ - $ (126,200) This action adjusts the fund balance to offset adjustments recommended in this report. CUBBERLEY PROPERTY INFRASTRUCTURE FUND (472) SUBTOTAL $ - $ - Item 5: Staff Report Pg. 6 Packet Pg. 136 of 553 ATTACHMENT B, EXHIBIT 1 Department ENTERPRISE FUNDS AIRPORT ENTERPRISE FUND (530 Item 5 Attachment A - FY 2023 Budget Amendments, Attachment B, Exhibit 1 and 2 Revenues Expenses Adjustment Adjustment Public Works Retiree Healthcare Department Charges $ - $ (663) This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Fund Balance Adjustment to Fund Balance $ - $ 663 This action adjusts the fund balance to offset adjustments recommended in this report. AIRPORT ENTERPRISE FUND (530) SUBTOTAL $ - $ - ELECTRIC FUND (513 & 523) Capital Capital Improvement Project Adjustments $ - $ 14,336 This action reflects the combined impact from adjustments to projects as outlined in Attachment B, Exhibit 2. Utilities Retiree Healthcare Department Charges $ - $ (21,995) This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Fund Balance Adjustment to Fund Balance $ - $ 7,659 This action adjusts the fund balance to offset adjustments recommended in this report. ELECTRIC FUND (513 & 523) SUBTOTAL $ - $ - GAS FUND (514 & 524 Utilities Residential Customer Revenue/Gas Commodity Purchase $ 380,000 $ 380,000 This action recognizes additional residential customer revenue that was collected in FY 2023 and appropriates funding for increased costs to purchase gas commodities and align the budget with actual expenditures in FY 2023. Utilities Retiree Healthcare Department Charges $ - $ (9,665) This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Fund Balance Adjustment to Fund Balance $ - $ 9,665 This action adjusts the fund balance to offset adjustments recommended in this report. GAS FUND (514 & 524) SUBTOTAL $ 380,000 $ 380,000 Item 5: Staff Report Pg. 7 Packet Pg. 137 of 553 ATTACHMENT B, EXHIBIT 1 Department ENTERPRISE FUNDS REFUSE FUND (525 Item 5 Attachment A - FY 2023 Budget Amendments, Attachment B, Exhibit 1 and 2 Revenues Expenses Adjustment Adjustment Public Works Retiree Healthcare Department Charges $ - $ (3,079) This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Fund Balance Adjustment to Fund Balance $ - $ 3,079 This action adjusts the fund balance to offset adjustments recommended in this report. REFUSE FUND (525) SUBTOTAL $ - $ - STORM WATER MANGEMENT FUND (528) Capital Capital Improvement Project Adjustments $ - $ 27,148 This action reflects the combined impact from adjustments to projects as outlined in Attachment B, Exhibit 2. Public Works Retiree Healthcare Department Charges $ - $ (1,823) This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Fund Balance Adjustment to Fund Balance $ - $ (25,325) This action adjusts the fund balance to offset adjustments recommended in this report. STORM WATER MANGEMENT FUND (528) SUBTOTAL $ - $ - WASTEWATER COLLECTION FUND (527) Utilities Retiree Healthcare Department Charges $ - $ (3,825) This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Fund Balance Adjustment to Fund Balance $ - $ 3,825 This action adjusts the fund balance to offset adjustments recommended in this report. WASTEWATER COLLECTION FUND (527) SUBTOTAL $ - $ - WASTEWATER TREATMENT FUND (526 Capital Capital Improvement Project Adjustments This action reflects the combined impact from adjustments to projects as outlined in Attachment A, Exhibit 2. Public Works Retiree Healthcare Department Charges This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Public Works Revenue from Other Agencies This action is a technical correction to reallocate $0.5 million in revenue from the Advanced Water Purification Facility capital project (WQ-19003) to fund operating costs related to water purification services. These funds were incorrectly appropriated to WQ-19003 in CMR #2302- 1026 and this action allows the revenue to offset other needs in the Wastewater Treatment Fund. Fund Balance Adjustment to Fund Balance This action adjusts the fund balance to offset adjustments recommended in this report. $ (500,000) $ - $ - $ (9,900) $ 500,000 $ - $ - $ 9,900 WASTEWATER TREATMENT FUND (526) SUBTOTAL $ - $ Item 5: Staff Report Pg. 8 Packet Pg. 138 of 553 ATTACHMENT B, EXHIBIT 1 Department ENTERPRISE FUNDS WATER FUND (522) Utilities Retiree Healthcare Department Charges Item 5 Attachment A - FY 2023 Budget Amendments, Attachment B, Exhibit 1 and 2 Revenues Expenses Adjustment Adjustment This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Fund Balance Adjustment to Fund Balance This action adjusts the fund balance to offset adjustments recommended in this report. WATER FUND (522) SUBTOTAL $ (7,014) 7,014 Item 5: Staff Report Pg. 9 Packet Pg. 139 of 553 ATTACHMENT B, EXHIBIT 1 Item 5 Attachment A - FY 2023 Budget Amendments, Attachment B, Exhibit 1 and 2 Revenues Expenses Department Adjustment Adjustment INTERNAL SERVICE FUNDS INFORMATION TECHNOLOGY FUND (682) Information Retiree Healthcare Department Charges $ - $ (5,081) Technology This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Fund Balance Adjustment to Fund Balance $ - $ 5,081 This action adjusts the fund balance to offset adjustments recommended in this report. INFORMATION TECHNOLOGY FUND (682) SUBTOTAL $ - $ - PRINT AND MAILING FUND (683) Administrative Retiree Healthcare Department Charges $ - $ (41) Services This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Fund Balance Adjustment to Fund Balance $ - $ 41 This action adjusts the fund balance to offset adjustments recommended in this report. PRINT AND MAILING FUND (683) SUBTOTAL $ - $ - VEHICLE REPLACEMENT & MAINTENANCE FUND (681) Capital Capital Improvement Project Adjustments $ - $ 130,797 This action reflects the combined impact from adjustments to projects as outlined in Attachment B, Exhibit 2. Public Works Retiree Healthcare Department Charges $ - $ (2,278) This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Fund Balance Adjustment to Fund Balance $ - $ (128,519) This action adjusts the fund balance to offset adjustments recommended in this report. VEHICLE REPLACEMENT & MAINTENANCE FUND (681) SUBTOTAL $ - $ - Item 5: Staff Report Pg. 10 Packet Pg. 140 of 553 ATTACHMENT B, EXHIBIT 1 Department SPECIAL REVENUE FUNDS Item 5 Attachment A - FY 2023 Budget Amendments, Attachment B, Exhibit 1 and 2 Revenues Expenses Adjustment Adjustment PUBLIC ART FUND (207) Community Salary and Benefits $ - $ 12,900 Services This action increases the allocation for salaries and benefits in this fund due increased labor costs that were negotiatied and approved across the City in FY 2023. Additional funding for these cost increases was not appropriated in FY 2023, so this aligns budget levels with actual expenditures. Fund Balance Adjustment to Fund Balance $ - $ (12,900) This action adjusts the fund balance to offset adjustments recommended in this report. PUBLIC ART FUND (207) SUBTOTAL $ - $ - GAS TAX FUND (231) Administrative Revenue from the State of California/Transfer to Capital Improvement Fund $ 43,200 $ 43,200 Services This action recognizes SB1 Gas Tax revenue from the State of California that came in higher than budgeted levels and appropriates funding to increase the transfer to the Capital Improvement Fund. SB1 funding is designated for street improvment projects, so it will be added to the Streets Maintenance capital project (PE -86070). GAS TAX FUND (231) SUBTOTAL $ 43,200 $ 43,200 HAMILTON AVENUE -PUBLIC BENFIT FUND (235) Planning and Investment Income/Grants & Subsidies $ 14,700 $ 14,700 Development This action recognizes higher investment returns and increases the appropriation for Grants Services and Subsidies to Avenidas within the fund to align budget levels with actual expenditures in FY -'n-fl HAMILTON AVENUE -PUBLIC BENFIT FUND (235) SUBTOTAL $ 14,700 $ 14,700 UNIVERSITY AVENUE PARKING PERMIT FUND (236) Various Retiree Healthcare Department Charges $ - $ (208) This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Fund Balance Adjustment to Fund Balance $ - $ 208 This action adjusts the fund balance to offset adjustments recommended in this report. UNIVERSITY AVENUE PARKING PERMIT FUND (236) SUBTOTAL $ - $ - CALIFORNIA AVENUE PARKING PERMIT FUND (237) Various Retiree Healthcare Department Charges $ - $ (119) This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Fund Balance Adjustment to Fund Balance $ - $ 119 This action adjusts the fund balance to offset adjustments recommended in this report. CALIFORNIA AVENUE PARKING PERMIT FUND (237) SUBTOTAL $ - $ - Item 5: Staff Report Pg. 11 Packet Pg. 141 of 553 Item 5 Attachment A - FY 2023 ATTACHMENT B, EXHIBIT 1 Budget Amendments, •' • • Attachment B, Exhibit 1 • • 1 . and 2 Revenues Expenses Department Adjustment Adjustment SPECIAL REVENUE FUNDS RESIDENTIAL PARKING PERMIT PROGRAMS FUND (239) Various Retiree Healthcare Department Charges $ - $ (501) This action reflects the adjustment for retiree healthcare costs as outlined in Attachment B, Exhibit 3. Fund Balance Adjustment to Fund Balance $ - $ 501 This action adjusts the fund balance to offset adjustments recommended in this report. RESIDENTIAL PARKING PERMIT PROGRAMS FUND (239) SUBTOTAL $ - $ - SUPPLEMENTAL LAW ENFORCEMENT SERVICES FUND (248) Police Investment Income/Instruction and Training $ 1,700 $ 1,700 This action recognizes higher investment returns and increases the appropriation for Facilities and Equipment within the fund to align budget levels with actual expenditures in FY 2023. The cost to upgrade the Department's Conductive Energy Weapon platform (commonly known as Tasers) was slightly higher than the approved funding allocated for this purchase in the SLES Fund. SUPPLEMENTAL LAW ENFORCEMENT SERVICES FUND (248) SUBTOTAL $ 1,700 $ 1,700 Item 5: Staff Report Pg. 12 Packet Pg. 142 of 553 ATTACHMENT B, EXHIBIT 1 Department DEBT SERVICE & AGENCY TRUST FUNDS Item 5 Attachment A - FY 2023 Budget Amendments, Attachment B, Exhibit 1 and 2 Revenues Expenses Adjustment Adjustment 2021 PUBLIC SAFETY BUILDING COP FUND (363) Administrative Debt Service Payment $ - $ 1,464,000 Services This action is a technical correction to appropriate funding to cover the capitalized interest payment for the Certificates of Participation to fund the New Public Safety Building capital project (PE -15001). These funds were set aside as part of bond sale in this Fund in order to make this payment; however, they were not fully appropriated as part of the FY 2023 Budget. Fund Balance Adjustment to Fund Balance This action adjusts the fund balance to offset adjustments recommended in this report. $ - $ (1,464,000) 2021 PUBLIC SAFETY BUILDING COP FUND (363) SUBTOTAL $ - $ - LIBRARY PROJECTS FUND (370) Administrative Transfer from Capital Improvement Fund $ 73,800 $ - Services This action recognizes a transfer from the Capital Improvement Fund of the remaining bond funds that were issued in 2013 to reconstruct the Mitchell Park Library and Community Center facility. The remaining funds had previously been held in the Capital Improvement Fund to complete roof damage repair that persisted from the reconstruction project. The repairs were completed in FY 2023, so the remaining funds are being transferred to the Library Projects Fund to be used towards payment of the debt service costs of the bond. Fund Balance Adjustment to Fund Balance $ - $ 73,800 This action adjusts the fund balance to offset adjustments recommended in this report. LIBRARY PROJECTS FUND (370) SUBTOTAL $ 73,800 $ 73,800 EYERLY TRUST FUND (774) Administrative Investment Income/General Expenses $ 1,900 $ 1,900 Services This action recognizes higher investment returns and increases the appropriation for General Expenses within the fund for interest income distribution to designated recipients to align budget levels with actual expenditures in FY 2023. EYERLY TRUST FUND (774) SUBTOTAL $ 1,900 $ 1,900 UNIVERSITY AVENUE PARKING ASSESSMENT AGENCY FUND (775) Administrative Contract Services $ - $ 6,000 Services This action increases the appropriation for Contract Services within the fund to align budget levels with actual expenditures in FY 2023. Fund Balance Adjustment to Fund Balance $ - $ (6,000) This action adjusts the fund balance to offset adjustments recommended in this report. UNIVERSITY AVENUE PARKING ASSESSMENT AGENCY FUND (775) SUBTOTAL $ - $ Item 5: Staff Report Pg. 13 Packet Pg. 143 of 553 Item 5 Attachment A - FY 2023 ATTACHMENT B, EXHIBIT 2 Budget Amendments, ' ' Attachment B, Exhibit 1 iI:i1u A9 ',IIf_UIi and 2 Ivui'iaA.: $ (171,600) Adjustment to allocate Salaries and Benefits AC -86017 Art In Public Spaces across capital projects based on actual expenditures. PE -14018 Baylands Boardwalk Improvements $ 6,258 Adjustment to allocate Salaries and Benefits across capital projects based on actual Benches, Signage, Walkways, Perimeter expenditures. PG -06003 $ 64,765 Adjustment to allocate Salaries and Benefits Landscaping, and Site Amenities across capital projects based on actual expenditures. PL -04010 Bicycle and Pedestrian Transportation $ (200,000) Adjustment to allocate Salaries and Benefits Plan Implementation across capital projects based on actual expenditures. AS -10000 Capital Improvement Fund Administration $ (700,000) Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. PE -13011 Charleston/Arastradero Corridor Project $ 564,252 Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. PL -20000 Churchill Avenue/Alma Street Railroad $ (306,809) Adjustment to allocate Salaries and Benefits Crossing Safety Improvements across capital projects based on actual City Bridge Improvements expenditures. PE -20001 $ 123,555 Adjustment to allocate Salaries and Benefits across capital projects based on actual City Hall Floor 4 Remodel expenditures. PE -17008 $ 1,077 Adjustment to allocate Salaries and Benefits across capital projects based on actual Civic Center Fire Life Safety Upgrades expenditures. PE -18016 $ 71,019 Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. PE -15020 Civic Center Waterproofing Study and $ 113,241 Adjustment to allocate Salaries and Benefits Repairs across capital projects based on actual expenditures. PG -18001 Dog Park Installation and Renovation $ 13,948 Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. PE -18004 Fire Station 4 Replacement $ 176,106 Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. PE -20000 Foothills Nature Preserve Dam Seepage $ 16,545 Adjustment to allocate Salaries and Benefits Investigation and Repairs across capital projects based on actual $ 63,138 expenditures. Adjustment to allocate Salaries and Benefits PE -21003 Magical Bridge Playground Rubber and Synthetic Turf Resurfacing across capital projects based on actual Mitchell Park Improvements expenditures. PE -18010 $ 957 Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. PF-16006 Municipal Service Center Lighting, $ (579,179) Adjustment to allocate Salaries and Benefits Mechanical, and Electrical Improvements across capital projects based on actual expenditures. PE -15007 New Downtown Parking Garage $ (300,000) Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. Item 5: Staff Report Pg. 14 Packet Pg. 144 of 553 ATTACHMENT B, EXHIBIT 2 Item 5 Attachment A - FY 2023 Budget Amendments, Attachment B, Exhibit 1 and 2 .• PE -15001 New Public Safety Building .- $ 464,797 Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. PE -12011 Newell Road/San Francisquito Creek $ (947,154) Adjustment to allocate Salaries and Benefits Bridge Replacement across capital projects based on actual expenditures. OS -00001 Open Space Trails and Amenities $ 213,593 Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. PG -09002 Park and Open Space Emergency Repairs $ 80,985 Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. PG -19000 Park Restroom Installation $ 86,277 Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. PL -17001 Railroad Grade Separation and Safety $ (344,600) Adjustment to allocate Salaries and Benefits Improvements across capital projects based on actual expenditures. PG -14000 Ramos Park Improvements $ (291,512) Adjustment to allocate Salaries and Benefits across capital projects based on actual Rinconada Park Improvements expenditures. PE -08001 $ 66,451 Adjustment to allocate Salaries and Benefits across capital projects based on actual Roth Building Maintenance expenditures. PF-07011 $ 2,610 Adjustment to allocate Salaries and Benefits across capital projects based on actual Sidewalk Repairs expenditures. PO -89003 $ 158,238 Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. PO -05054 Street Lights Improvements $ 48,446 Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. PE -86070 Street Maintenance $ 1,061,401 Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. PE -21004 University Avenue Streetscape Update $ 95,758 Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. PE -19001 Water, Gas, Wastewater Office Remodel $ 347,437 Adjustment to allocate Salaries and Benefits across capital projects based on actual expenditures. $ -$ - EL -17007 Facility Relocation for Caltrain $ 14,336 Increase to project due to higher than Modernization Project anticipated expenditures. $ -$ • 14,336 SD -22000 E Bayshore Rd & E Meadow Dr Storm Drain System UoRrade 27,148 I Increase to project due to higher than anticipated expenditures. 27,148 Item 5: Staff Report Pg. 15 Packet Pg. 145 of 553 ATTACHMENT B, EXHIBIT 2 WQ-19003 Advanced Water Purification Facility $ (500,000) Reallocate $0.5 million in revenue from WQ- 19003 to fund operating costs related to water purification services. TOTAL CIP TS $ (500,000) $ 172,281 Item 5 Attachment A - FY 2023 Budget Amendments, Attachment B, Exhibit 1 and 2 Item 5: Staff Report Pg. 16 Packet Pg. 146 of 553 Fund Fund Expense General Fund Administrative Retiree Healthcare Adjustment $ - $ (8,162) Adjustment to department charges for retiree Services healthcare to align with June 30, 2021 valuation. General Fund City Attorney Retiree Healthcare Adjustment $ - $ (2,106) Adjustment to department charges for retiree healthcare to align with June 30, 2021 valuation. General Fund City Clerk Retiree Healthcare Adjustment $ - $ (637) Adjustment to department charges for retiree healthcare to align with June 30, 2021 valuation. General Fund City Council Retiree Healthcare Adjustment $ - $ (956) Adjustment to department charges for retiree healthcare to align with June 30, 2021 valuation. General Fund City Manager Retiree Healthcare Adjustment $ - $ (2,356) Adjustment to department charges for retiree healthcare to align with June 30, 2021 valuation. General Fund Community Retiree Healthcare Adjustment $ - $ (13,789) Adjustment to department charges for retiree Services healthcare to align with June 30, 2021 valuation. General Fund Fire Retiree Healthcare Adjustment $ - $ (35,753) Adjustment to department charges for retiree healthcare to align with June 30, 2021 valuation. General Fund Human Retiree Healthcare Adjustment $ - $ (2,661) Adjustment to department charges for retiree Resources healthcare to align with June 30, 2021 valuation. General Fund Library Retiree Healthcare Adjustment $ - $ (7,109) Adjustment to department charges for retiree healthcare to align with June 30, 2021 valuation. General Fund Office of Retiree Healthcare Adjustment $ - $ (650) Adjustment to department charges for retiree Emergency healthcare to align with June 30, 2021 valuation. Services General Fund Office of Retiree Healthcare Adjustment $ - $ (1,107) Adjustment to department charges for retiree Transportation healthcare to align with June 30, 2021 valuation. General Fund Planning and Retiree Healthcare Adjustment $ - $ (7,319) Adjustment to department charges for retiree Development healthcare to align with June 30, 2021 valuation. Services General Fund Police Retiree Healthcare Adjustment $ - $ (40,424) Adjustment to department charges for retiree healthcare to align with June 30, 2021 valuation. General Fund Public Works Retiree Healthcare Adjustment $ - $ (13,692) Adjustment to department charges for retiree healthcare to align with June 30, 2021 valuation. • piJI Capital 471 Retiree Healthcare Adjustment $ - $ (4,170) Adjustment to department charges for retiree Improvement healthcare to align with June 30, 2021 valuation. Fund • Item 5: Staff Report Pg. 17 Packet Pg. 147 of 553 Department/ Fund Fund Title Revenue Expen • Airport Fund 530 Retiree Healthcare Adjustment $ - $ (663) Adjustment to department charges for retiree healthcare to align with June 30, 2021 valuation. Electric Fund 513&523 Retiree Healthcare Adjustment $ - $ (21,995) Adjustment to department charges for retiree healthcare to align with June 30, 2021 valuation. Gas Fund 514 & 524 Retiree Healthcare Adjustment $ $ (9,665) Adjustment to department charges for retiree healthcare to align with June 30, 2021 valuation. Refuse Fund 525 Retiree Healthcare Adjustment $ - $ (3,079) Adjustment to department charges for retiree healthcare to align with June 30, 2021 valuation. Stormwater 528 Retiree Healthcare Adjustment $ - $ (1,823) Adjustment to department charges for retiree Management healthcare to align with June 30, 2021 valuation. Fund Wastewater 526 Retiree Healthcare Adjustment $ - $ (9,900) Adjustment to department charges for retiree Treatment Fund healthcare to align with June 30, 2021 valuation. Wastewater 527 Retiree Healthcare Adjustment $ - $ (3,825) Adjustment to department charges for retiree Collection Fund healthcare to align with June 30, 2021 valuation. Water Fund 522 Retiree Healthcare Adjustment $ - $ (7,014) Adjustment to department charges for retiree iiiiiauii.i'J.itsii.� healthcare to align with June 30, 2021 valuation. !j[uUJiJ. Information 682 Retiree Healthcare Adjustment $ - $ (5,081) Adjustment to department charges for retiree Technology Fund healthcare to align with June 30, 2021 valuation. Printing & 683 Retiree Healthcare Adjustment $ - $ (41) Adjustment to department charges for retiree Mailing Fund healthcare to align with June 30, 2021 valuation. Vehicle 681 Retiree Healthcare Adjustment $ - $ (2,278) Adjustment to department charges for retiree Maintenance & healthcare to align with June 30, 2021 valuation. Replacement Fund • • �• • California 237 Retiree Healthcare Adjustment $ - $ (119) Adjustment to department charges for retiree Avenue Fund healthcare to align with June 30, 2021 valuation. Residential 239 Retiree Healthcare Adjustment $ - $ (208) Adjustment to department charges for retiree Parking Permit healthcare to align with June 30, 2021 valuation. (RPP) Fund University 236 Retiree Healthcare Adjustment $ - $ (501) Adjustment to department charges for retiree Avenue Fund healthcare to align with June 30, 2021 valuation. • • $ (207,084) Item 5: Staff Report Pg. 18 Packet Pg. 148 of 553 ATTACHMENT C *NOT YET APPROVED* Resolution No. Item 5 Attachment A - FY 2023 Budget Amendments, Attachment B, Exhibit 1 and 2 Resolution of the Council of the City of Palo Alto to Extend and Amend the Development Services Reserve Fund Policy Previously Adopted by Ordinance No. 5420. RECITALS A In 2016, the Development Services Department completed Phase I of a fee study to update certain non -valuation -based fees for services, reserving an update of valuation - based fees for Phase II of the fee study. B. In 2017, the Development Services Department completed Phase II of the fee study, which recommended adjustments to the Department's valuation -based fees, the adoption of an operating reserve, and associated changes. G On September 19, 2017, the Finance Committee reviewed the fee study and recommended adoption of an ordinance updating Development Services Department fees in accordance with the study's recommendations, adjusted by the annual salary and benefits adjustment of 5.5 percent. D. On November 13, 2017, the City Council adopted Ordinance 5420 to adjust Development Services Department fees and approve a FY 2018 Development Services Department Reserve Fund Policy. E. The Development Services Department Reserve Fund Policy was based on a fee study regarding best practices and assumed that the Reserve Fund would be fully funded by FY 2022. F. Reserve funds were expended in FY 2020 and FY 2021 to cover pandemic -related departmental operating losses and maintain continuity of service. G. As a result of this use of reserve funds, the Planning and Development Services Department seeks to extend the funding period for the Reserve Fund beyond the planned sunset in FY 2022. H. The Planning and Development Services Department plans for continued use of the Reserve Fund at existing levels through FY 2025 when a new Cost of Services Study is expected to be implemented. // // 1 0160109_ 20230830_ay16 Item 5: Staff Report Pg. 19 Packet Pg. 149 of 553 Item 5 Attachment A FY 2023 ATTACHMENT C *NOT Budget Amendments, YET APPROVED* Attachment B, Exhibit 1 NOW, THEREFORE, the Council of the City of Palo Alto RESOLVES as and 2 SECTION 1. The Council of the City of Palo Alto adopts the Planning and Development Services Department Reserve Fund Policy, as set forth in Exhibit "1" and incorporated herein by reference. This policy replaces the policy adopted by Ordinance 5420. SECTION 2. The Council finds that the adoption of this resolution does not meet the definition of a project under Public Resources Code Section 21065, thus, no environmental assessment under the California Environmental Quality Act is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Assistant City Attorney Mayor APPROVED: City Manager Director of Planning and Development Services 0160109_ 20230830_ay16 PJ Item 5: Staff Report Pg. 20 Packet Pg. 150 of 553 Item 5 Attachment B - *NOT YET APPROVED* Resolution to Extend and Amend the Development Resolution No. Services Reserve Fund Policy Previously Adopted Resolution of the Council of the City of Palo Alto to Exten by Ord 5420 Amend the Development Services Reserve Fund Policy Previously Adopted by Ordinance No. 5420. RECITALS A In 2016, the Development Services Department completed Phase I of a fee study to update certain non -valuation -based fees for services, reserving an update of valuation - based fees for Phase II of the fee study. B. In 2017, the Development Services Department completed Phase II of the fee study, which recommended adjustments to the Department's valuation -based fees, the adoption of an operating reserve, and associated changes. C On September 19, 2017, the Finance Committee reviewed the fee study and recommended adoption of an ordinance updating Development Services Department fees in accordance with the study's recommendations, adjusted by the annual salary and benefits adjustment of 5.5 percent. D. On November 13, 2017, the City Council adopted Ordinance 5420 to adjust Development Services Department fees and approve a FY 2018 Development Services Department Reserve Fund Policy. E. The Development Services Department Reserve Fund Policy was based on a fee study regarding best practices and assumed that the Reserve Fund would be fully funded by FY 2022. F. Reserve funds were expended in FY 2020 and FY 2021 to cover pandemic -related departmental operating losses and maintain continuity of service. G. As a result of this use of reserve funds, the Planning and Development Services Department seeks to extend the funding period for the Reserve Fund beyond the planned sunset in FY 2022. H. The Planning and Development Services Department plans for continued use of the Reserve Fund at existing levels through FY 2025 when a new Cost of Services Study is expected to be implemented. // 1 0160109_ 20230830_ay16 Item 5: Staff Report Pg. 21 Packet Pg. 151 of 553 Item 5 Attachment B - *NOT YET APPROVED* Resolution to Extend and Amend the Development NOW, THEREFORE, the Council of the City of Palo Alto RESOLVES as Services Reserve Fund Policy Previously Adopted SECTION 1. The Council of the City of Palo Alto adopts the Plannl a11I.i by Ord 5420 ent Services Department Reserve Fund Policy, as set forth in Exhibit "1" and incorporated herein by reference. This policy replaces the policy adopted by Ordinance 5420. SECTION 2. The Council finds that the adoption of this resolution does not meet the definition of a project under Public Resources Code Section 21065, thus, no environmental assessment under the California Environmental Quality Act is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: Assistant City Attorney City Manager Director of Planning and Development Services Director of Administrative Services 0160109_ 20230830_ay16 K Item 5: Staff Report Pg. 22 Packet Pg. 152 of 553 *NOT YET APPROVED* EXHIBIT 1 Planning and Development Services Department Reserve Fund Policy Item 5 Attachment B - Resolution to Extend and Amend the Development Services Reserve Fund Policy Previously Adopted by Ord 5420 Section 1. Purpose The purpose of the Planning and Development Services Department Reserve Fund (PPDSDRF) is to build and maintain an adequate level of unrestricted funds available to cover any unforeseen shortfalls that arise outside of the regular budget planning process, as well as one- time, nonrecurring expenses that will build long-term capacity for Development Services. The fund may not be used to create or hire new full time benefited positions. The department intends for the operating reserve to be used and replenished within a reasonable period of time for Development Services. This policy will be implemented in conjunction with the other financial policies of the City and is intended to support the goals and strategies contained in those related policies and in strategic and operational plans. Section 2. Definitions and Goals The PDSDRF is a designated fund set aside by action of the City Council. The target of the PDSDRF is equal to three (3) months of average recurring operating costs; with a range of 23 (minimum) to 27 (maximum) percent with a target of 25 percent of average recurring operating cost. The PDSDRF is dynamic and will be reviewed and adjusted in response to internal and external changes. In addition to calculating the actual reserve at the fiscal year-end, the reserve fund minimum, target and maximum can be adjusted by the Council as necessary each year during the annual budget development process. These reserves will be reported to the Finance Committee and City Council. Section 3. Funding of Reserves The PDSDRF will be funded by a five (5) percent of Development Services fees as listed in the City's Municipal Fee Schedule beginning in Fiscal Year 2024, upon City Council approval, through Fiscal Year 2025. The City Council may, from time to time, direct that a specific source of revenue be set aside for the PDSDRF. Section 4. Accounting for Reserves The PDSDRF will be recorded in the City's accounting system and financial statements titled as the Development Services Department Reserve Fund. The PDSDRF will be maintained in accordance with the City's investment policy. Section 5. Authority to Use the PDSDRF Authority to use the PDSDRF will remain with the City Council. The City Manager will submit a request to use the PDSDRF to the City Council. The Director of Development Services Department will prepare the report identifying the need for access to the PDSDRF and confirm that the use is consistent with the purpose of the reserves as described in this policy. Determination of need requires analysis of the sufficiency of the current level of reserve 0160109_20230830_ayl6 Item 5: Staff Report Pg. 23 Packet Pg. 153 of 553 *NOT YET APPROVED* funds, the availability of any other sources of funds before using reserves, the time period for which the funds will be required and replenished. Item 5 Attachment B - Resolution to Extend and Amend the Development Services Reserve Fund Policy Previously Adopted by Ord 5420 Section 6. Fee or Rate Stabilization PDSDRF may be added to the Planning and Development Services Department revenue projections by action of the City Council and held to manage the trajectory of future year rate increases. Section 7. Reappropriation of PDSDRF At the end of each fiscal year the PDSDRF will be reappropriated to the following fiscal year in accordance with Palo Alto Municipal Code Section 2.28.090. Section 8. Relationship to Other Policies The City Manager maintains City Council approved policies, which may contain provisions that affect the creation, sufficiency, and management of the PDSDRF. It will be the responsibility of the City Manager and Director of Administrative Services Officer to notify the Director of Development Services if changes to city-wide policies impact the PDSDRF. These policies may be City Council approved policies such as the Investment Policy or administrative policies within the confines of the Municipal Code. Section 9. Reporting, Monitoring and Review of Policy The Director of Planning and Development Services is responsible for ensuring that the PDSDRF is maintained and used only as described in this policy. Upon approval of the use of PDSDRF, the Director of Planning and Development Services and the Director of Administrative Services will maintain records of the use of funds and plan for replenishment. Staff will provide reports to the City Council within the annual budget process, or sooner if warranted by internal or external events. 4 0160109_20230830_ayl6 Item 5: Staff Report Pg. 24 Packet Pg. 154 of 553 DocuSign Envelope ID: 11 C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 Attachment C - Ordinance No. 5420 Ordinance No. 5420 Ordinance of the Council of the City of Palo Alto to Update the Fiscal Year 2018 Municipal Fee Schedule to Adjust Development Services Department Fees The City Council of the City of Palo Alto does hereby ORDAIN as follows: SECTION 1. Findings and declarations. A. In 2016, the Development Services Department completed Phase I of a fee study to update certain non -valuation -based fees for services, reserving an update of valuation -based fees for Phase II of the fee study. B. In 2017, the Development Services Department completed Phase II of the fee study, which recommended adjustments to the Department's valuation -based fees, the adoption of an operating reserve, and associated changes. C. On September 19, 2017, the Finance Committee reviewed the fee study and recommended adoption of an ordinance updating Development Services Department fees in accordance with the study's recommendations, adjusted by the annual salary and benefits adjustment of 5.5 percent. SECTION 2. The Council of the City of Palo Alto adopts the Development Services Department Reserve Fund Policy, as set forth in Exhibit "1" and incorporated herein by reference. SECTION 3. The Council of the City of Palo Alto adopts the changes to the Municipal Fee Schedule as set forth in Exhibit "2" and incorporated herein by reference. When effective, such fees shall supersede any prior inconsistent fees charged by the Development Services Department. SECTION 4. The amount of the new or increased fees and charges is no more than necessary to cover the reasonable costs of the governmental activity, and the manner in which those costs are allocated to a payer bears a fair and reasonable relationship to the payer's burden on, or benefits received from, the governmental activity. SECTION 5. Fees in the Municipal Fee Schedule are for government services provided directly to the payor that are not provided to those not charged. The amount of this fee does not exceed the reasonable costs to the City of providing the services. Consequently, pursuant to Art. XIII C, Section I(e)(2), such fees are not a tax. SECTION 6. Effective Date. The fee increases proposed for FY 2017 described in Exhibit A shall become effective no sooner than sixty (60) days from the date of adoption of this ordinance. 1 170905 AY/Dev Services/ORD Amending DSD Municipal Fees (Phase II) Item 5: Staff Report Pg. 25 Packet Pg. 155 of 553 DocuSign Envelope ID: 11 C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 Attachment C - Ordinance No. 5420 SECTION 7. CEQA. The adoption of user fees is exempt from environmental review under the California Environmental Quality Act (CEQA). (See CEQA Guidelines Section 15273.) INTRODUCED: October 2, 2017 PASSED: November 13, 2017 AYES: DUBOIS, FILSETH, FINE, HOLMAN, KNISS, KOU, WOLBACH NOES: TANAKA ABSENT: SCHARFF ABSTENTIONS: ATTEST: DocuSigned by: L' 27523117DA804D7... City Clerk APPROVED AS TO FORM: LDocuSigned by: t q" 15B6C45220134DC... Deputy City Attorney DocuSigned by: 6FB3765F09D34EA... Mayor APPROVED: DocuSigned by: 39E7298FB2064DB... City Manager ElkrDocuSigned by: E pl"01 F7A325D57F1 D4C9... Director of Development Services DocuSigned by: 229154BC80A8476... Director of Administrative Services 2 Item 5: Staff Report Pg. 26 Packet Pg. 156 of 553 DocuSign Envelope ID: 11 C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 it 1 Attachment C - Ordinance No. 5420 Development Services Department Reserve Fund Policy Section 1. Purpose The purpose of the Development Services Department Reserve Fund (DSDRF) is to build and maintain an adequate level of unrestricted funds available to cover any unforeseen shortfalls that arise outside of the regular budget planning process, as well as one-time, nonrecurring expenses that will build long-term capacity The fund may not be used to create or hire new full time benefited positions. The department intends for the operating reserve to be used and replenished within a reasonable period of time. This policy will be implemented in conjunction with the other financial policies of the City and is intended to support the goals and strategies contained in those related policies and in strategic and operational plans. Section 2. Definitions and Goals The DSDRF is a designated fund set aside by action of the City Council. The target of the DSDRF is equal to three (3) months of average recurring operating costs; with a range of 23 (minimum) to 27 (maximum) percent with a target of 25 percent of average recurring operating cost. The DSDRF is dynamic and will be reviewed and adjusted in response to internal and external changes. In addition to calculating the actual reserve at the fiscal year-end, the reserve fund minimum, target and maximum can be adjusted by the Council as necessary each year during the annual budget development process. These reserves will be reported to the Finance Committee and City Council. Section 3. Funding of Reserves The DSDRF will be funded by a five (5) percent increase to all Development Services Department fees as listed in the City's Municipal Fee Schedule beginning in Fiscal Year 2018, upon City Council approval, through Fiscal Year 2022. The City Council may, from time to time, direct that a specific source of revenue be set aside for the DSDRF. Section 4. Accounting for Reserves The DSDRF will be recorded in the City's accounting system and financial statements titled as the Development Services Department Reserve Fund. The DSDRF will be maintained in accordance with the City's investment policy. Section 5. Authority to Use the DSDRF Authority to use the DSDRF will remain with the City Council. The City Manager will submit a request to use the DSDRF to the City Council. The Director of Development Services Department will prepare the report identifying the need for access to the DSDRF and confirm that the use is consistent with the purpose of the reserves as described in this policy. Determination of need requires analysis of the sufficiency of the current level of reserve funds, the availability of any other sources of funds before using reserves, and evaluation of the time period for which the funds will be required and replenished. Page 1 of 2 Item 5: Staff Report Pg. 27 Packet Pg. 157 of 553 DocuSign Envelope ID: 11 C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 It Attachment C - Ordinance No. 5420 Section 6. Fee or Rate Stabilization DSDRF may be added to the Development Services Department revenue projections by action of the City Council and held to manage the trajectory of future year rate increases. Section 7. Reappropriation of DSDRF At the end of each fiscal year the DSDRF will be reappropriated to the following fiscal year in accordance with Palo Alto Municipal Code Section 2.28.090. Section 8. Relationship to Other Policies The City Manager maintains City Council approved policies, which may contain provisions that affect the creation, sufficiency, and management of the DSDRF. It will be the responsibility of the City Manager and Director of Administrative Services Officer to notify the Director of Development Services if changes to city-wide policies impact the DSDRF. These policies may be City Council approved policies such as the Investment Policy or administrative policies within the confines of the Municipal Code. Section 9. Reporting, Monitoring and Review of Policy The Director of Development Services is responsible for ensuring that the DSDRF is maintained and used only as described in this policy. Upon approval of the use of DSDRF, the Director of Development Services and the Director of Administrative Services will maintain records of the use of funds and plan for replenishment. Staff will provide reports to the City Council within the annual budget process, or sooner if warranted by internal or external events. Page 2 of 2 Item 5: Staff Report Pg. 28 Packet Pg. 158 of 553 DocuSign Envelope ID: 11 C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 Municipal Fee Schedule It 2 [Attachment C - Ordinance No. 5420 DEVELOPMENT SERVICES Building Current Fee Proposed Fee Business Registry Business Registry Fee $50.00 per business $50.00 Miscellaneous - Technology Surcharge 1.8% of each transaction 1.8% per fee Note: This surcharge will be added to all fees in Development Services. Building Permit Fees A. $1.00 - $1,000.00 $73.00 Base Fee Delete B. $1,000.01 - $2,000.00 $73.00 for the first $1,000.00 plus $5.80 for each additional Delete $100.00 or fraction thereof, to and including $2,000.00 C. $2,000.01 - $25,000.00 $131.00 for the first $2,000.00 plus $26.53 for each additional $1,000.00 or fractio Delete thereof, to and including $25,000.00 D. $25,000.01 - $50,000.00 $741.19 for the first $25,000.00 plus $19.69 for each additional $1,000.00 or Delete fraction thereof, to and including $50,000.00 E. $50,000.01 - $100,000.00 $1,233.44 for the first $50,000.00 plus $13.25 for each additional $1,000.00 or Delete fraction thereof, to and including $100,000.00 F. $100,000.01 - $500,000.00 $1,895.94 for the first $100,000.00 plus $10.63 for each additional $1,000.00 or Delete fraction thereof, to and including $500,000.00 G. $500,000.01 - $1,000,000.00 $6147.94 for the first $500,000.00 plus $9.03 for each additional $1,000.00 or Delete fraction thereof, to and including $1,000,000.00 $10,662.94 for the first $1,000,000.00 plus $7.12 for each additional $1,000.00 or Delete fraction thereof H. $1,000,000.01 and Up If valuation exceeds $5,000,000.00, an alternative fee arrangement may be established by the Chief Building Official to achieve full cost recovery. Building Permit Fee See Above Restructured to be 1.44% of Construction Valuation based on the ICC Table I. Building Demolition Permit $431.00 (does not include C&D fees) per permit $498.00 J. Commercial Interior Non -Structural Demolition Permit $196.00 (does not include C&D fees) per permit $179.00 Construction & Demolition Commercial and Multi -Family Projects greater than or equal to $25,000.00 in $412.00 per permit $305.00 Valuation Item 5: Staff Report Pg. 29 Packet Pg. 159 of 553 DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 Municipal Fee Schedule It 2 [Attachment C - Ordinance No. 5420 DEVELOPMENT SERVICES Single Family and Two Family Projects greater than $172.00 per permit $163.00 $25,000.00 and less than $75,000.00 in Valuations1 Single Family and Two Family Projects greater than $75,000.00 in Valuation $252.00 per permit $210.00 Electrical Permits A. Base Fee $92.00 per permit $115.00 B. New or Remodeled Square Footage $0.02 per square foot per square foot Delete Air Conditioners $91.00 per unit $70.00 Busway, Power Duct, or Floor Duct Per Foot $75.00 each $58.00 Conditional Utility Agreement $265.00 each $236.00 Each Additional Meter $75.00 each $153.00 Fixtures, Switches, and Outlets $75.00 each $58.00 Lighting, Power and/or Control Panel Board, Switchboard Cabinet or Panel $75.00 each $70.00 Motor $75.00 each $58.00 Motor Generator $75.00 each $441.00 Range, Electric Clothes Dryer, or Water Heater $75.00 each $58.00 Service Conductor/Switch - Greater than 800 amp $272.00 each $209.00 Service Conductor/Switch - Less than 200 amp $136.00 each Delete Service Conductor/Switch - Less than 800 amp $181.00 each $367.00 Special Circuit (Not Listed Herein) $75.00 each $58.00 Temporary Power Pole $75.00 each $58.00 Temporary Wiring for Construction $75.00 each $58.00 Electrical Permits - Electrical Vehicle Charging Stations Commercial (Level 1 and 2) $427.00 plus $83.00 for each additional station $357.00 plus $67.00 for each additional station Commercial (Level 3 and 4) $518.00 plus $102.00 for each additional station each $426.00 plus $83 for each additional station Residential (Level 1 and 2) $188.00 per station $154.00 Residential (Level 3) $264.00 per station $235.00 Electrical Permits - Photovoltaic Systems Commercial System (less than 10 kW) $600.00 each $557.00 Commercial System (10kW - 49kW) $901.00 each $557.00 Commercial System (greater than 49kW) $976.00 each $748.00 Residential Systems (greater than 10kW) $340.00 each $357.00 Item 5: Staff Report Pg. 30 Packet Pg. 160 of 553 DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 Municipal Fee Schedule It 2 [Attachment C - Ordinance No. 5420 Residential Systems (less than 10kW) $91.00 each $165.00 General & Miscellaneous Fees Address Change $399.00 single address; $192.00 each additional address $505.00 single; $244.00 each additional DEVELOPMENT SERVICES All Other Publications $18.00 each $16.00 Construction/Maintenance Vehicles $81.00 per space per week. This includes FY 18 adjustment rate of 6%. $80.00 Electric Service and Safety Inspection $169.00 per hour $197.00 Extension of Building Permit or Building Permit Application $95.00 per application $79.00 Inspections and Investigations - Outside Normal Business Hours Note: Inspections and investigations outside normal business hours (2- hour minimum). $408.00 per 1.5x OT Hour; $544.00 per 2.0x OT hour $369.00 per 1.5x OT Hour; $492.00 per 2.Ox OT hour Inspections and Investigations - Unclassified Note: Inspections and investigations for which no fee is specifically indicated (2 -hour minimum). $254.00 per hour $246.00 Reactivation of Expired Building Permit - All Others 50% of original Building Permit Fee not to exceed the full cost to perform remaining inspections as determined by the Chief Building Official $222.00 Reactivation of Expired Building Permit - Final Inspection Only $283.00 or 50% of original Building Permit Fee, whichever is less $256.00 Reactivation of Expired Building Permit Application $211.00 per permit plus Plan Check Fees as applicable per permit $156.00 Real Property Research Fee (1 -hour minimum) $271.00 per hour $229.00 Records Retention $6.00 per plan sheet $6.00 per plan sheet Reinspection Fee - Multi -Family Residential and Non- Residential $315.00 each $137.00 Reinspection Fee - Single Family Residential $247.00 each secondary inspection type; $315.00 each primary inspection type per inspection $76.00 each secondary inspection type; S141.00 each orimary insoection tvoe oer Request for Release of Building Plans $85.00 each $77.00 Residential Inspection Guidelines Note: Available free online $37.00 each No Change Green Building Alterations and additions for single and multifamily>1,000 1,000 sq ft $708.00 per review $728.00 Alterations and additions for single family and multifamily < 1,000 sq ft and increases conditioned space $429.00 per review $441.00 If the project is over $100,000 Energy Star is required after 12 months of occupancy $140.00 per review $144.00 Item 5: Staff Report Pg. 31 1 Packet Pg. 161 of 553 DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 Municipal Fee Schedule It 2 [Attachment C - Ordinance No. 5420 Landscape Inspection $185.00 per inspection $190.00 Landscape Plan Review - Non -Residential & Multi -Family $1886.00 per review $1,939.00 Landscape Plan Review - Single Family Residential $1161.00 per review $1,193.00 Multi Family New Construction of 1-3 (attached) units $923.00 per review $949.00 Multi Family New Construction of 4 or More $1481.00 per review $1,523.00 New Commercial >50,000 SF $1761.00 per review $1,810.00 New Commercial 1,000 - 25,000 SF $1202.00 per review $1,236.00 DEVELOPMENT SERVICES New Commercial 25,001 - 50,000 SF $1481.00 per review $1,523.00 New Single Family $923.00 per review $949.00 Tenant improvements, renovations or alterations > $200,000 in valuation (and not triggered by a Calgreen Tier) $644.00 per review $662.00 Tenant improvements, renovations or alterations > 5,000 SF Note: includes replacement or alteration of at least two of the following: HVAC systems, building envelope, hot water system, or lighting system and project greater than $200,000 $644.00 per review $662.00 Mechanical Permits A. Base Fee $92.00 per permit $115.00 B. New or Remodeled Square Footage $0.02 per square foot Delete Air Handlers up to and including 10,000 cfm $60.00 each $47.00 Boilers, Compressors and Absorption Systems: For the installation or reloacation of each boiler or compressor up to 30 hp or each absorption system up to and including 1,000,000 Btu/h $122.00 each $93.00 Boilers, Compressors, and Absorption Systems: For the installation or relocation of each boiler or compressor exceeding 30 hp, or each absorption system exceeding 1,000,000 Btu/h $182.00 each $93.00 Furnace, Flue and Associated Ducts $182.00 each $93.00 Miscellaneous Note: For each appliance or piece of equipment regulated by this code, but not classed in other appliance categories, or for which no other fee is listed. $60.00 each $47.00 Process Piping System $60.00 per permit $46.00 Process Piping System - Hazardous $145.00 per permit $47.00 Swimming Pool Heater $72.00 per permit $56.00 Ventilation and Exhaust $60.00 each $47.00 Plan Review Fees Item 5: Staff Report Pg. 32 Packet Pg. 162 of 553 DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 Municipal Fee Schedule It 2 [Attachment C - Ordinance No. 5420 Additional Plan Review Note: Required by changes, additions, or revisions to plans including Alternative Means and Methods (2 -hour minimum). For Elective (3rd party) and over-the-counter reviews (half hour minimum). $225.00 per hour $191.00 Building Plan Check 80% of Building Permit fee 75% Certified Access Specialist (CASp) Review/Consultation Actual cost of CASp Consultant plus 15% per hour. Restructured to a flat fee. $367.00 Elective Plan Check 35% of Building Plan Check fee 35% Fire and Life Safety Plan Check 45% of Building Permit fee 54% Public Works Plan Check 12% of Building Permit fee 44% Zoning Plan Check 30% of Building Permit fee 35% Plumbing Permits A. Base Fee $92.00 per permit per permit $115.00 B. New or Remodeled Square Footage $0.02 per square foot Delete DEVELOPMENT SERVICES Atomospheric-type vaccum Breakers • $109.00 each $115.00 Backflow protective device other than atomospheric-type $217.00 each $167.00 Gas Piping System $217.00 each $167.00 Industrial Waste Pretreatment Interceptor Note: Including trap and vent, except kitchen -type grease interceptors functioning as fixture trays $217.00 each $167.00 Medical Gas Piping System $217.00 each $167.00 Plumbing Fixtures Note: For each plumbing fixture on one trap or a set of fixtures on one trap (including water, drainage piping, and back low protection). $91.00 each $116.00 Plumbing Fixtures: For each building sewer $145.00 each $112.00 Rain Water Systems $91.00 each Delete Solar Hot Water System Note: Does not include Plan Check fee. $217.00 each $167.00 Storm Drain System $217.00 each $167.00 Swimming Pool $72.00 each $56.00 Water Heater, Vent or Other $109.00 each $84.00 Water Piping Note: Installation, alteration or repair of water piping, water treatment equipment or both $109.00 each $84.00 Plumbing Permits - Graywater Systems Clotheswasher System $91.00 each $70.00 Complex System $217.00 plus plan review at cost $167.00 Simple System $91.00 plus plan review at cost $70.00 SB 1473 Fee Item 5: Staff Report Pg. 33 1 Packet Pg. 163 of 553 DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 Municipal Fee Schedule It 2 [Attachment C - Ordinance No. 5420 A. $1.00 - $25,000.00 Permit Valuation $1.00 per valuation increment No change B. $25,001.00 - $50,000.00 Permit Valuation $2.00 per valuation increment No change C. $50,001.00 - $75,000.00 Permit Valuation $3.00 per valuation increment No change D. $75,001.00 - $100,000.00 Permit Valuation $4.00 per valuation increment No change E. Each $25,000.00 Increment or Fraction Thereof Above $100,000.00 Add $1.00 per valuation increment No change F. Minimum $1.00 minimum No change Strong Motion Instrument Program Commercial $28.00 per $100,000.00 permit valuation ($0.50 minimum) No change Residential $13.00 per $100,000.00 permit valuation ($0.50 minimum) No change Use & Occupancy Permits Certificate of Use and Occupancy $287.00 each $1,095.00 Certificate of Use and Occupancy - Replacement $123.00 each $228.00 DEVELOPMENT SERVICES SB 1186 Mandated Fee • $1.00 each I No change Note: Does not include fees collected by the Fire Department. Temporary Occupancy Permit - Multi -Family Residential, Non -Residential, and $673.00 each $826.00 Other Commercial Temporary Occupancy Permit - Single Family Residential and Commercial $498.00 each $606.00 Tenant Improvement less than 10,000 sq. ft. Public Works Encroachment Permit Additional Non -Residential Long -Term (More than 5 days) Monthly $746.00 per month No Change Dumpster, Container $310.00 each No Change Non -Residential - Single Day $1,249.00 each No Change Non -Residential Long -Term (More than 5 days) $2,039.00 each No Change Non -Residential Short -Term (Less than 5 days) $1,466.00 each No Change Engineering A. 101 - 1,000 cubic yards $197.00 for the first 100 cubic yards, plus $197.00 for each additional 100 cubic yards or fraction thereof No Change B. 1,001- 10,000 cubic yards $1970.00 for the first 1,000 cubic yards plus $186.00 for each additional 1,000 cubic yards or fraction thereof No Change Item 5: Staff Report Pg. 34 1 Packet Pg. 164 of 553 DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 Municipal Fee Schedule It 2 [Attachment C - Ordinance No. 5420 C. 10,001 or more cubic yards $3830.00 for the first 10,000 cubic yards plus $711.00 for each additional 10,000 cubic yard or fraction thereof No Change Inspection Fees Tree Inspection for Private Development $139.00 per inspection No Change Permit Fees Construction in Public Right -of -Way ($1.00 - $5,999) Note: Including public or private subdivision streets $712.00 per occurrence No Change Construction in Public Right -of -Way ($6,000 - $25,999) Note: Including public or private subdivision streets $712.00 + 8.8% of value greater than $6,000.00 No Change Construction in Public Right -of -Way ($26,000 - $100,999) Note: Including public or private subdivision streets $2472.00 + 10.8% of value greater than $26,000.00 No Change Construction in Public Right -of -Way ($101,000 +) Note: Including public or private subdivision streets 10,572.00 + 9% of value greater than $100,000.00 No Change Storm Drain Plan Check Fee $743.00 per project No Change Temporary Discharge to Storm Drain from Construction Site Dewatering $4,093 per request to discharge No Change Additional Temporary Discharge to Storm Drain from Construction Site Dewatering $313.00 per week for the duration of dewatering activities No Change DEVELOPMENT SERVICES Wet Season Construction Site Stormwater Inspection Note: MRP requirement $287.00 per month, charge monthly October through April I No Change or sites >1 acre and/or high priority (hillside, near creek, prior violation) Fire Compliance Fees Emergency Response Fee - Hazmat (PAMC 17.24.050) Up to $1,212.00 for each incident up to 100% cost recovery $350.00 Installation or Closure Without Approved Plans and/or Permits $275.00 - $813.00 average fee range No Change Documents Emergency Planning Guide $253.00 each No Change Long-term Offsite Document Storage $0.25 per page No Change Microfilm Copy/Print $3.25 per blueprint page; $0.30 per specification/ calculation page No Change Photographs $30.00 first print; $0.55 each additional print No Change Hazardous Materials Classification Permits Item 5: Staff Report Pg. 35 Packet Pg. 165 of 553 DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 Municipal Fee Schedule It 2 [Attachment C - Ordinance No. 5420 Compressed Gas $391.00 annually $351.00 Corrosives $391.00 annually $351.00 Cryogenic Fluid $391.00 annually $351.00 Flammable and Combustible Liquids $391.00 annually $351.00 Flammable Gas $391.00 annually $351.00 Flammable Solids $391.00 annually $351.00 Health Hazard (Liquids & Solids) $391.00 annually $351.00 Liquefied Petroleum Gases $391.00 annually $351.00 Organic Coatings $391.00 annually $351.00 Organic Peroxides $391.00 annually $351.00 Other Hazardous Materials - Unclassified Note: Inspections and investigations for which no fee is specifically indicated (1 -hour maximum) $391.00 annually $351.00 Ovens - Industrial Baking or Drying $391.00 annually $351.00 Oxidizers (Liquids & Solids) $391.00 annually $351.00 Oxidizing Gas $391.00 annually $351.00 Pyrophoric Gas $391.00 annually $351.00 Pyrophoric Materials (Liquids & Solids) $391.00 annually $351.00 Pyrotechnical Special Effects Material $391.00 annually $351.00 DEVELOPMENT SERVICES •Radioactive Materials $391.00 annually $351.00 Refrigeration Equipment $391.00 annually $351.00 Spraying/Dipping $391.00 annually $351.00 Tire Recapping/Tire Storage $1,561.00 annually $1,397.00 Toxic, Highly Toxic, Moderately Toxic, Health Hazard Gas Note: Includes pesticides, fumigants, and etiologic agents. $391.00 annually $351.00 Toxic, Highly Toxic, Moderately Toxic, Health Hazard Materials $391.00 annually $351.00 Unstable Reactive Gas $391.00 annually $351.00 Unstable Reactive Materials (Liquids & Solids) $391.00 annually $351.00 Water Reactive Materials (Liquids & Solids) $391.00 annually $351.00 Hazardous Materials Storage Permits Additional Approvals for Hazardous Materials Storage Permit Note: Additional approval for permit to construct, temporary closure, permanent closure, otherwise modify a hazardous materials storage facility. See CEQA for additional fees. $848.00 per occurrence plus $554.00 per hour for time above two hours per occurrence $761.00 per occurrence plus $498.00 per hour for time above two hours per occurrence Business Plan (HMBP) $554.00 per location annually $498.00 Late Fee for Hazardous Materials Storage Permit 25% of total Hazardous Material permit fee No Change Item 5: Staff Report Pg. 36 1 Packet Pg. 166 of 553 DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 Municipal Fee Schedule It 2 [Attachment C - Ordinance No. 5420 Level I Facility $391.00 annually per location. Includes 1 hr inspection time. $351.00 Note: Minimal storage as defined by having no hazardous materials over CFC permit amounts as specified in CFC section 105. Level II Facility $782.00 annually per location plus other hazardous materials classification permit $703.00 Note: Quantities exceeding CFC permit threshold, but less than 50 gal., 5001bs or 200 cu. if applicable. Includes 2 hrs inspection time. Category also includes dry cleaning, fixed medical gas, auto or aircraft repair, and service stations. Level III Facility $1565.00 annually per location plus other hazardous materials classification permit $1,406.00 Note: Quantities exceed 50 gal. 5001bs, or 200 cu. ft. and not categorized as Level II. if applicable. Includes 4 hrs inspection time. Petroleum Aboveground Storage Tank $782.00 annually $703.00 Note: Includes 2 hrs inspection time. Provisional (6 Month) $782.00 plus other hazardous materials classification permit fees if applicable. $703.00 Includes 2 hrs inspection time. Inspection Fees Additional Inspection or Reinspection Fee $781.00 for up to 2 hours reinspection plus $390.00 per hour (during business $699.00 for up to 2 hours reinspection plus hours) per inspection $349.00 per hour (during business hours) After Hours Inspection Fee $585.00 per hour; 4 hour minimum $524.00 Note: Fee for before or after normal business hours; weekends and holidays included. Fee is to be paid in advance of inspection. As -Built Plan Check and Additional Work $780.00 per review $699.00 Care Facility Inspection Including Fire Clearance $390.00 for facilities with 7-25 clients; $780.00 for facilities with more than 25 $349.00 for facilities with 7-25 clients; clients per inspection $699.00 for facilities with more than 25 Christmas Tree Lot/Pumpkin Patch $391.00 each $349.00 DEVELOPMENT SERVICES High Rise Building - Certificate of Compliance $1626.00 annually for up to 4 hours; $391.00 for each additional hour I $1456.00 annually for up to 4 hours; Note: Certificate of compliance inspection for each high rise building which is required $ 349.00 for each additional hour by state law to be inspected and certified annually as meeting minimum compliance with applicable state of California fire and life safety standards for existing high rise Outside Cooking Booths $210.00 each $524.00 Standby Fire Watch $391.00 per hour $349.00 Note: Per person. Use and Occupancy Fire Inspection $148.00 per inspection $349.00 Investigations & Consultations Additional Hours Over Plan Review/Inspection $308.00 per hour $249.00 Alternate Means and Methods Application $735.00 per application $746.00 Note: 2 hr maximum. Appeals to Decisions $391.00 per hour $349.00 Consultation Fee $391.00 per hour $349.00 Hydrant Flow Fee $391.00 per occurrence $349.00 Life Safety & Fire Protection Item 5: Staff Report Pg. 37 1 Packet Pg. 167 of 553 DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 Municipal Fee Schedule It 2 [Attachment C - Ordinance No. 5420 Hydrant Installation/Modification - Private $195.00 per device $175.00 Automatic Fire Sprinkler Installation/Modification Note: Includes hydrostatic test $780.00 for 1-19 Sprinkler Heads; $1,724.00 plus $4.80 per head for 20 or more Sprinkler Heads $1543.00 for 1-19 Sprinkler Heads; $1,724.00 plus $3.00 per head for 20 or Express Fire Protection Plan Check Fee $173.00 per occurrence No Change Fire Alarm System Installation and Modification $1090.00 plus $23.00 a device or contract point $948.00 plus $21.00 a device or contract pnint Fire and Life Safety Plan Check - Commercial Note: Includes one inspection and reinspection. The Fire and Life Safety Plan Review Fee is 45% of the Building Plan Check Fee and is collected by the Building Division at the time an application of a Building Permit is submitted. $0.54 Fire Prevention Inspection of Private Schools $780.00 annually $699.00 Fire Protection and Fire Access Plan Review for New Single Family Dwellings or Additions $894.00 each $773.00 Multifamily dwellings, hotels & motels 51-100 units $780.00 annually $699.00 Multifamily dwellings, hotels & motels greater than 100 units $1,170.00 annually $1,048.00 Multifamily dwellings, hotels, motels 4-50 Units $391.00 annually $349.00 Other Automatic Fire Extinguishing System Note: Includes hood and duct, FM 200, Inergen, and CO2. If a system has a release panel, Fire Alarm fees apply as well. $1,090.00 per occurrence $948.00 Site Disaster Planning $390.00 per hour $349.00 Standpipe System - Wet, Dry, or Combination $780.00 per riser $699.00 Temporary Certificate of Occupancy $377.00 per occurrence $757.00 Underground Fire Service Line Note: Includes 4 hrs of inspection and 1 hr of plan check $1,870.00 per occurrence $1,647.00 Verification of Fire Protection System Maintenance and Certification $88.00 annually $64.00 DEVELOPMENT SERVICES Specific Hazard Permits Aerosol Products $488.00 annually $437.00 Bowling Alley and Pin Refinishing Involving the use of Flammable Liquids $1,138.00 each $1,019.00 Candles and Open Flames in Assembly Areas $391.00 annually $349.00 Carnivals and Fairs $189.00 each $1,456.00 Cellulose Nitrate Storage/Nitrate Film $113.00 annually $102.00 Hot Work (Welding) Operations $391.00 each No Change Liquid or Gas -Fueled Powered Equipment/Generator $391.00 each $349.00 Malls - Covered $782.00 annually $699.00 Occupant Load Increase -Temporary Public Assembly $391.00 each $349.00 Open Burning $391.00 each $349.00 Item 5: Staff Report Pg. 38 1 Packet Pg. 168 of 553 DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 Municipal Fee Schedule It 2 [Attachment C - Ordinance No. 5420 Open Flame/Flame Producing Devices $391.00 each $553.00 per vehicle $349.00 Operate a Tank Vehicle to Transport Flammable/Combustible Liquids $495.00 Parade Float $122.00 per hour $351.00 Place of Assembly $782.00 per occurrence $703.00 Place of Public Assembly - Temporary $391.00 each $349.00 Tent or Air Supported Structure Note: Tent or air -supported structure having an area in excess of 200 sq. ft. or canopies in excess of 400 sq. ft. Fee includes a public assembly permit of $125.00 for all tents. Building New Fees Commercial & Residential windows, skylights and doors, New and alteration (structural) (per 5) $307.00 each $734.00 $279.00 Commercial & Residential windows, skylights and doors, New and alteration (structural) (per 10) $140.00 Residential Reroof $279.00 Residential Reroof (overlay) $70.00 Commercial and multifamily reroof (first 5000 sf) $279.00 commercial and multifamily reroof (each additional 2500 sf) $70.00 Kitchen (non structural) per each $210.00 Bathroom (non structural) per each $279.00 Commercial & Residential Siding replacement or repair $140.00 commercial & Residential Stucco replacement or repair $210.00 Commercial doors, new and alteration (structural) per 5 doors $210.00 Commercial doors, new and alteration (structural) per 10 doors $140.00 Residential dry rot repair and replacement $70.00 Deck, new or repair up to 1000 sf $210.00 Deck, new or repair each additional 1000 SF $70.00 Sign permit $116.00 Residential and commercial window awnings (group of 5) $70.00 Cell Tower Equip $210.00 Item 5: Staff Report Pg. 39 Packet Pg. 169 of 553 DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Item 5 Municipal Fee Schedule It 2 [Attachment C - Ordinance No. 5420 Utilities Handling Fee $116.00 Progress and partial inspections $56.00 Certifications Green Building - Special Inspector applications and qualifications (internal review) $395.00 Green Building - Special Inspector applications and qualifications (renewal update) $197.00 Special Inspections - materials testing lab certification (up to 4 hours) $1,579.00 Miscellananeous Building - base fee $115.00 Retaining Walls - first 100 LF $93.00 Retaining Walls - each additional 100 LF $46.00 Fees not listed above will either be based on an applicable hourly rate or at the given valuation Fire New Fee TCO fee for Vendors/Stock Occupancy (requires at least one additional inspection $1,125.00 Emergency Responder Radio Coverage (testing) fee $492.00 Item 5: Staff Report Pg. 40 Packet Pg. 170 of 553 Item 5 Attachment C - Ordinance No.5420 CUB r SECURED Certificate Of Completion Envelope Id: 11 C079F5A0914431945D37A5DB90C8E7 Status: Completed Subject: Please DocuSign: ORD 5420 Amending DSD Municipal Fees (Phase II) 2017-11-13 - FINAL.docx, ORD 5... Source Envelope: Document Pages: 16 Signatures: 6 Envelope Originator: Certificate Pages: 5 Initials: 0 Irma Mora AutoNav: Enabled 250 Hamilton Ave Envelopeld Stamping: Enabled Palo Alto , CA 94301 Time Zone: (UTC-08:00) Pacific Time (US & Canada) Irma.Mora@CityofPaloAlto.org IP Address: 12.220.157.20 Record Tracking Status: Original Holder: Irma Mora Location: DocuSign 12/20/2017 12:48:50 PM Irma.Mora@CityofPaloAlto.org Signer Events Signature Timestamp Albert Yang [DocuSignedby: l°� q" Sent: 12/20/2017 12:59:05 PM Albert.Yang@cityofpaloalto.org Resent: 12/21/2017 10:36:10 AM Senior Deputy City Attorney 15B6c45220,34DQ_ Resent: 12/22/2017 9:57:01 AM City of Palo Alto Viewed: 1/2/2018 8:33:27 AM Using IP Address: 73.254.101.222 Security Level: Email, Account Authentication Signed: 1/2/2018 8:34:10 AM (None) Electronic Record and Signature Disclosure: Not Offered via DocuSign Lalo Perez Lalo. Perez@cityofpaloalto.org Chief Financial Officer City of Palo Alto Security Level: Email, Account Authentication (None) Electronic Record and Signature Disclosure: Not Offered via DocuSign Peter Pirnejad Peter. Pirnejad@cityofpaloalto.org Development Services Director Security Level: Email, Account Authentication (None) Electronic Record and Signature Disclosure: Not Offered via DocuSign James Keene James.Keene@cityofpaloalto.org City Manager City of Palo Alto Security Level: Email, Account Authentication (None) Electronic Record and Signature Disclosure: Accepted: 4/14/2015 5:40:07 PM ID: 44fe333a-6a81-4cb7-b7d4-925473ac82e3 ED-IS11"Id bl: Sent: 1/2/2018 8:34:11 AM Viewed: 1/2/2018 8:35:49 AM 22015ABC80AS476 Signed: 1/2/2018 8:35:58 AM Using IP Address: 12.220.157.20 s,g dby. Sent: 1/2/2018 8:35:59 AM PIa� Viewed: 1/2/2018 10:08:06 AM ED F7A325D57F1D4C9C9., Signed: 1/2/2018 11:14:17 AM Using IP Address: 12.220.157.20 ,-Docufigned by: Sent: 1/2/2O18 11:14:18 AM �..�, Viewed: 1/4/2018 12:20:45 PM 30E7296FB2064DB... Signed: 1/4/2018 12:20:50 PM Using IP Address: 12.220.157.20 Item 5: Staff Report Pg. 41 Packet Pg. 171 of 553 Item 5 Signer Events Signature Timest Attachment C - Ordinance N o. 5420 H. Gregory Scharff Greg.Scharff@cityofpaloalto.org Emusig—d by: � i Sent: 1/4/2018 12:20:52 PM Viewed: 1/4/2018 12:26:37 PM Mayor FB3765Fo9D34EA. Signed: 1/4/2018 12:26:53 PM City of Palo Alto Security Level: Email, Account Authentication Using IP Address: 174.215.2.216 (None) Signed using mobile Electronic Record and Signature Disclosure: Not Offered via DocuSign Beth Minor o Sig ee bY: Sent: 1/4/2018 12:26:55 PM Beth.Minor@cityofpaloalto.org ED °r° Viewed: 1/4/2018 1:16:09 PM City Clerk 27523wDAso4D7 . Signed: 1/4/2018 1:16:41 PM City of Palo Alto Security Level: Email, Account Authentication Using IP Address: 12.220.157.20 (None) Electronic Record and Signature Disclosure: Not Offered via DocuSign In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Notary Events Signature Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 1/4/2018 12:26:55 PM Certified Delivered Security Checked 1/4/2018 1:16:09 PM Signing Complete Security Checked 1/4/2018 1:16:41 PM Completed Security Checked 1/4/2018 1:16:41 PM Payment Events Status Timestamps Electronic Record and Signature Disclosure Item 5: Staff Report Pg. 42 Packet Pg. 172 of 553 Electronic Record and Signature Disclosure created on: 10/1/2013 8:33:53 AM Parties agreed to: James Keene Item 5 Attachment C - Ordinance No.5420 CONSUMER DISCLOSURE From time to time, City of Palo Alto (we, us or Company) may be required by law to provide to you certain written notices or disclosures. 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Item 5: Staff Report Pg. 45 Packet Pg. 175 of 553 Item 6 Item 6 Staff Report City Council Staff Report From: City Manager CITY O F Report Type: CONSENT CALENDAR PALO Lead Department: Community Services ALTO Meeting Date: January 16, 2024 Report #:2312-2462 TITLE Approval of Amendment No. 2 with Pets in Need Contract (C19174493) to extend the term through March 2024 and increase the compensation by $342,501 for operations of the Palo Alto Animal Shelter, for a Not -to -Exceed Amount of $4,431,872; CEQA status — not a project. RECOMMENDATION Staff recommends that the City Council approve and authorize the City Manager to execute Amendment No. 2 to Contract No. C19174493 with Pets in Need (Attachment A) in the amount of $342,501 to continue operations of the Palo Alto Animal Shelter for an additional three-month term or until a new Agreement is finalized, whichever is sooner. BACKGROUND Since 2019, animal sheltering services at the Palo Alto Animal Shelter have been provided by Pets in Need. The current Agreement has a five-year term ending January 17, 2024 (Attachment B). On November 15, 2021, Pets in Need (PIN) provided formal notification to the City that it would exercise its right to terminate the Agreement without cause in 12 months' time as allowed in Section 19.2 of the Agreement. PIN has extended the termination date several times while the City and PIN negotiate a new contract Agreement. Staff from the City and PIN have discussed progress with the Council on several occasions'23. August 14, 2023, the City Council approved a proposed Term Sheet with Pets in Need for continued operations of the Palo Alto Animal Shelter. The Council directed staff to return for approval of a new Agreement reflecting the terms and approved an interim payment to Pets in Need in the amount of $55,535 per month beginning June 2023 and each month until a new Agreement is executed. Amendment No. 1 (Attachment C) to the Agreement was approved by the City Manager and increased the not -to -exceed amount of the contract by $444,280, which reflects the addition of the interim payment for the eight - month period beginning June 1, 2023, through January 31, 2024. 1 City Council, March 27, 2023, Agenda Item #3, SR#2302-0940; https://recordsoortal.r)aloalto.Rov/Weblink/DocView.asr)x?id=82278 2 City Council, June 12, 2023, Agenda Item #3, SR#2302-1313; https://cityofpaloaIto.primegov.com/Portal/viewer?id=2049&type=0 3 City Council, August 14, 2023; Agenda Item #6, SR#2306-1712; https://cityofpaloaIto.primegov.com/Portal/viewer?id=2632&type=0 Item 6: Staff Report Pg. 1 Packet Pg. 176 of 553 Item 6 Item 6 Staff Report Additional background information on the Pets in Need Agreement and approved Term Sheet can be found in the previous staff reports included as footnotes to this report. ANALYSIS Staff from both the City and PIN have been working to finalize a new Agreement and expect to return to Council before March 31, 2024 with a final Agreement. In the interim, the City Council must approve the attached Amendment to continue payment of compensation to PIN and extend the term. This Amendment will bridge the gap between the current termination date by providing PIN with monthly compensation equal to the amount in the Term Sheet that the City Council approved on August 14, 2023. Staff expects to return to Council with a new Agreement in the first quarter of 2024. PIN and City staff continue to work collaboratively to develop a new Agreement and as partners to deliver high quality animal care and sheltering services to residents of Palo Alto, Los Altos and Los Altos Hills. The delay in finalizing the new Agreement is related to finalizing contract language and is not a result of revisions to the Term Sheet. FISCAL/RESOURCE IMPACT Amendment No. 2 to the Agreement increases the total not -to -exceed amount by $342,501 for a total contract amount of $4,431,872. This amount represents monthly compensation of $114,167 for the three-month period of January through March 2024 and is calculated using the annual compensation amount of $1.4 million included in the Term Sheet that the Council approved on August 14, 2023. The Term Sheet will be used to develop key terms in the new Agreement. The FY 2024 Adopted Operating Budget includes $1.2 million for contract costs to operate the Animal Shelter and there is sufficient funding remaining for this amendment. When staff returns with a new agreement, staff will include any necessary budget amendments to align with the agreement for the remainder of FY24. Staff will also bring forward funding recommendations to adjust the FY 2025 budget as part of the annual budget development process. STAKEHOLDER ENGAGEMENT Previous Council discussions related to this topic provided opportunities for public comment. ENVIRONMENTAL REVIEW Council action on this item is not considered a Project within the requirements of CEQA. ATTACHMENTS Attachment A: Amendment No. 2 to Contract No. C19174493 with Pets in Need Attachment B: Contract No. C19174493 between the City of Palo Alto and Pets in Need Attachment C: Amendment No. 1 to Contract No. C19174493 with Pets in Need APPROVED BY: Kristen O'Kane, Community Services Director Item 6: Staff Report Pg. 2 Packet Pg. 177 of 553 DocuSign Envelope ID: 145B3CF8-FBB2-4A27-A870-6A4040807FC0 Item 6 Attachment A - Amendment No. 2 to Contract No. C19174493 AMENDMENT NO. 2 TO CONTRACT NO. C19174493 with Pets in Need BETWEEN THE CITY OF PALO ALTO AND PETS IN NEED This Amendment No. 2 (this "Amendment") to Contract No. C19174493 (the "Contract" as defined below) is entered into as of January 1, 2024 by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("CITY"), and PETS IN NEED, a California non-profit public benefit corporation, located at 871 Fifth Ave., Redwood City, CA 94063 ("CONSULTANT or Pets in Need"). CITY and CONSULTANT are referred to collectively as the "Parties" in this Amendment. RFCITAI C A. The Contract (as defined below) was entered into by and between the Parties hereto for the provision of animal sheltering and veterinary care as detailed therein. B. The Parties acknowledge that PIN has terminated the Agreement effective March 31, 2024, and that they are negotiating a new agreement in good faith. C. The Parties now wish to amend the Contract in order to extend the term to March 31, 2024, and to add compensation. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the Parties agree: SECTION 1. Definitions. The following definitions shall apply to this Amendment: a. Contract. The term "Contract" shall mean Contract No. C19174493 between CONSULTANT and CITY, dated January 17, 2019, as amended by: • Amendment No.1, dated August 20, 2023 b. Other Terms. Capitalized terms used and not defined in this Amendment shall have the meanings assigned to such terms in the Contract. SECTION 2. Section 4 "NOT TO EXCEED COMPENSATION" of the Contract is hereby amended to read as follows: "SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services shall be in the amount of, and shall not exceed Four Million Two Hundred Twenty -Seven Thousand Four Hundred Seven Dollars and Ten Cents ($4,171,872.10) as detailed in Exhibit "B" (Compensation). CONSULTANT agrees to complete all Services within this amount. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY. Vers.: Aug. 5, 2019 Page 1 of 6 Item 6: Staff Report Pg. 3 Packet Pg. 178 of 553 DocuSign Envelope ID: 145B3CF8-FBB2-4A27-A870-6A4040807FC0 Item 6 Attachment A - Amendment No. 2 to Contract No. C19174493 Notwithstanding the foregoing, a contingency fund of two -hundred thousa With Pets in Need 00) (the "Contingency Fund") shall be available-, as well as a fund for the compensation of renovation delays ("Compensation of Renovation Delays Fund") of sixty thousand dollars ($60,000), as detailed in Exhibit "B" (Compensation). In the event the Contingency Fund and the Compensation of Renovations Delays Fund are utilized as provided for herein, the total compensation for Services, reimbursable expenses and the costs payable by CITY to CONSULTANT under this Agreement, shall be and shall not exceed Four million Four Hundred Eighty -Seven Thousand Four Hundred Seven Dollars and Ten cents ($4,431,872.10) as detailed in Exhibit "B" (Compensation), subject to Section 19 ("TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES")." SECTION 3. Section 2 "TERM" of the Contract is hereby amended to read as follows: "SECTION 2. TERM The term of this Agreement shall be from the date of its full execution (the "Effective Date) and continuing until March 31, 2024. The term of this Agreement may be renewed or extended upon the mutual written agreement of the parties. One year prior to the expiration of the term (or other such timeline as may be mutually agreed upon by the parties), either party may request the parties to begin negotiating in good faith a renewal or extension of this Agreement. SECTION 3. The following exhibit to the Contract is hereby amended as indicated below, to read as set forth in the attachment to this Amendment, and is hereby incorporated in full into this Amendment and into the Contract by this reference: a. Exhibit "B" entitled "COMPENSATION, AMENDMENT NO. 2", AMENDED, REPLACES PREVIOUS." SECTION 4. Legal Effect. Except as modified by this Amendment, all other provisions of the Contract, including any exhibits thereto, shall remain in full force and effect. SECTION 5. Incorporation of Recitals. The recitals set forth above are terms of this Amendment and are fully incorporated herein by this reference. Vers.: Aug. 5, 2019 Page 2 of 6 Item 6: Staff Report Pg. 4 Packet Pg. 179 of 553 DocuSign Envelope ID: 145B3CF8-FBB2-4A27-A870-6A4040807FC0 Item 6 Attachment A - Amendment No. 2 to Contract No. C19174493 SIGNATURES OF THE PARTIES with Pets in Need IN WITNESS WHEREOF, the Parties have by their duly authorized representatives executed this Amendment effective as of the date first above written. CITY OF PALO ALTO City Manager APPROVED: Director, Community Services APPROVED AS TO FORM: City Attorney or Designee PETS IN NEED Officer 1 DocuSigned by: BY _ in,,,,JA. F5A44B 794004 7 Rob Kalman Name: Title: Chair, Board of Directors Officer 2 DocuSigned by: B :j 1)U Jx 03347E7E1 0B54A4... Laura Toiler Gardner Name: CEO Title: Attachment: Exhibit "B" entitled "EXHIBIT B COMPENSATION, AMENDMENT NO. 2 , AMENDED, REPLACES PREVIOUS Vers.: Aug. 5, 2019 Page 3 of 6 Item 6: Staff Report Pg. 5 Packet Pg. 180 of 553 DocuSign Envelope ID: 145B3CF8-FBB2-4A27-A870-6A4040807FC0 Item 6 Attachment A - Amendment No. 2 to Contract No. C19174493 EXHIBIT "B" with Pets in Need COMPENSATION, AMENDMENT NO. 2 (AMENDED, REPLACES PREVIOUS) CITY agrees to compensate CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in the schedule below. SCHEDULE TO EQUAL AND NOT TO EXCEED (SUBJECT TO SECTION 19 "TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES") Year 1 $708,000.00 Year 2 $663,000.00 Year 3 $676,260.00 Year 4 $689,785.20 Year 5 $703,580.90 Additional monthly payment from June 1, 2023 — December 31, 2023 $388,745.00 ($55,535 per month) January 1, 2024 — March 31, 2024 $342,501.00 ($114,167 per month BASED ON $1.37M for Yr 6) Sub -total Basic Services $4,171,872.10 Reimbursable Expenses $0.00 Sub -Total Basic Services and Reimbursable expenses $4,171,872.10 Contingency Funds $200,000.00 (not to exceed $40,000 per year) Additional Compensation for Renovation Delays $60,000.00 (not to exceed 5,000 per month; see Exhibit D, Section 15.7) Vers.: Aug. 5, 2019 Page 4 of 6 Item 6: Staff Report Pg. 6 Packet Pg. 181 of 553 DocuSign Envelope ID: 145B3CF8-FBB2-4A27-A870-6A4040807FC0 Item 6 Attachment A - Amendment No. 2 to Contract No. C19174493 with Pets in Need Maximum Total Compensation $4,431,872.10 ONE-TIME ADVANCE Simultaneous with the execution of this Agreement, CITY shall pay to CONSULTANT One Hundred Seventy -Eight Thousand dollars ($178,000) as an advance against the first three months of CONSULTANT's fee. CONSULTANT shall not submit an invoice for the remainder of its fee for the third month until the end of such third month. CONTINGENCY FUNDS CITY shall provide contingency funds to CONSULTANT in the following circumstances, subject to written approval by the CITY's project manager, and to equal and not to exceed the amount in this Exhibit B: 1. CITY shall provide contingency funds for after-hours and emergency veterinary care if: a. CONSULTANT has already spent at least $10,000 in the past 12 months on a rolling basis on after-hours or emergency veterinary care that was reasonable based on AVMA guidelines; and b. The emergency or after-hours treatment being sought is reasonable based on AVMA guidelines. 2. CITY shall provide contingency funds for hoarding cases if: a. CONSULTANT has already served more than 600 animals from the CITY or the Contract Cities in the past 12 months; and b. The hoarding case involves a minimum of 12 animals brought at once that are expected to stay in the facility for at least 30 days each. 3. CITY shall provide contingency funds for the actual costs of wildlife intake at the Peninsula Humane Society if: a. The Peninsula Humane Society begins charging for the costs of wildlife services; and, b. This Agreement has not yet been amended to reflect the additional costs of such services. 4. CONSULTANT may also request contingency funds in other unforeseen circumstances. To request contingency funds, the CONSULTANT shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT's proposed maximum compensation, for such services. In addition to the factors above, CITY may consider whether contingency funds are appropriate within existing funding and workload, and contingency funds shall not be released if CONSULTANT has not exhausted unused or unallocated funds. The CITY shall notify CONSULTANT in writing of its approval or lack thereof within ten (10) days after the date of CONSULTANT's proposal. If CITY's project manager does not approve CONSULTANT's request, CONSULTANT may appeal that decision to the City Manager. Vers.: Aug. 5, 2019 Page 5 of 6 Item 6: Staff Report Pg. 7 Packet Pg. 182 of 553 DocuSign Envelope ID: 145B3CF8-FBB2-4A27-A870-6A4040807FC0 Item 6 Attachment A - Amendment No. 2 to Contract No. C19174493 If authorized by CITY, the contingency services scope, schedule and maximu with Pets in Need hall be negotiated and agreed to in writing by the CITY's project manager and CONSULTANT, and payment shall be made to CONSULTANT, no later than ten (10) days after the date of CITY's authorization. Contingency funds are subject to all requirements and restrictions in this Agreement. ADDITIONAL COMPENSATION FOR RENOVATION DELAYS The City shall pay Consultant up to $5,000 monthly for up to twelve consecutive months pursuant to the terms of Exhibit D, Section 15.7 ("Additional Compensation for Renovation Delays") of this Agreement. REIMBURSABLE EXPENSES No Reimbursable Expenses are authorized by CITY through this Agreement, unless pursuant to a written amendment to this Agreement as provided for herein. ADDITIONAL SERVICES No Additional Services are authorized by the CITY through this Agreement, unless pursuant to a written amendment to this Agreement as provided for herein. Vers.: Aug. 5, 2019 Page 6 of 6 Item 6: Staff Report Pg. 8 Packet Pg. 183 of 553 Item61 Attachment B - Contract No. C19174493 between the City of Palo Alto and CITY OF PALO ALTO CONTRACT NO. 019174493 Pets in Need AGREEMENT BETWEEN THE CITY OF PALO ALTO AND PETS IN NEED FOR PROFESSIONAL SERVICES This Professional Services Agreement ("Agreement") is entered into on this 2\ q 17 day of January , by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("CITY' or "City of Palo Alto"), and PETS IN NEED, a California non-profit public benefit corporation, located at 871 Fifth Ave, Redwood City, CA 94963 ("CONSULTANT' or "Pets In Need'). RECITALS The following recitals are a substantive portion of this Agreement and are hereby incorporated herein by this reference. A. CITY intends to provide animal sheltering and veterinary care, as more fully described in Exhibit "A" (Scope of Services), attached to and made a part of this Agreement, for the City of Palo Alto, and for the City of Los Altos and the Town of Los Altos Hills (the "Contract Cities"), at the Palo Alto Animal Shelter, 3281 East Bayshore Road, Palo Alto, CA 94303 (the "Palo Alto Animal Shelter" or the "Premises"). B. CITY and CONSULTANT desire for CONSULTANT to perform the Services (as defined below) at the Palo Alto Animal Shelter pursuant to the terms and conditions set forth in this Agreement. C. CITY acknowledges that CONSULTANT is entering into this Agreement in furtherance of its no -kill mission, and that, to the extent permitted by law, CONSULTANT will operate the Palo Alto Animal Shelter as a no -kill shelter. 0. CITY and CONSULTANT are entering into this Agreement with the intention of establishing a long -term partnership to offer exceptional shelter services for Palo Alto and its partner cities of Los Altos and Los Altos Hills, while working together towards building a new Pets in Need Palo Alto animal shelter facility. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the services described at Exhibit "A" ("Services") in accordance with the terms and conditions contained in this Agreement. SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution (the "Effective Date") and continuing for five (5) years from the Effective Date, unless terminated earlier pursuant to Section 19 of this Agreement. The term of this Agreement may be renewed or extended upon the mutual written agreement of the parties. One year prior to the expiration of the term (or other such timeline as may be mutually agreed upon by the parties), either party may request the parties to begin negotiating in good faith a renewal or extension of this Agreement. Page 1 of 25 Item 6: Staff Report Pg. 9 Packet Pg. 184 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need SECTION 3. USE OF PREMISES. CONSULTANT's use of the premises shall be subject to the additional terms set forth on Exhibit "D" (Use of Premises) attached hereto. SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services shall be in the amount of, and shall not exceed three -million, four -hundred forty thousand six -hundred twenty six dollars and ten cents ($3,440,526.10) as detailed in Exhibit "B" (Compensation). CONSULTANT agrees to complete all Services within this amount. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY. Notwithstanding the foregoing, a contingency fund of two -hundred thousand dollars ($200,000) (the "Contingency Fund") shall be available; as well as a fund for the compensation of renovation delays ("Compensation of Renovation Delays Fund") of sixty thousand dollars ($60,000) shall be available, as detailed in Exhibit "B" (Compensation). In the event the Contingency Fund and the Compensation of Renovations Delays Fund are utilized as provided for herein, the total compensation for Services, reimbursable expenses and the costs payable by CITY to CONSULTANT under this Agreement, shall be and shall not exceed three million, seven - hundred thousand, six -hundred twenty-six dollars and ten cents ($3,700,626.10) as detailed in Exhibit 'B" (Compensation), subject to Section i9 ("TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES"). SECTION 5. INVOICES. In order to request payment, CONSULTANT shall invoice the CITY for payment on a monthly basis. Invoices shall describe the services performed and, if reasonably requested by CITY, supporting documentation. CONSULTANT's invoice shall be submitted to the City's project manager for payment at which point the CITY has 30 business days from the date of the submission to render payment to the CONSULTANT. Invoices must also include CONSULTANT name, address, contract number, description of services, date of services, and compensation amount. SECTION 6. QUALIFICATIONSISTANDAR❑ OF CARE. All of the Services shall be performed by CONSULTANT or under CONSULTANT's supervision. CONSULTANT represents that it possesses the professional and technical personnel necessary to perform or supervise, as applicable, the Services required by this Agreement and that its personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, and its employees have and shall maintain (and that it shall require its subcontractors, if any, to have and maintain) during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. Notwithstanding anything to the contrary in this Agreement, the representations and warranties in this Section 6 are exclusive and are in lieu of all other warranties of any kind. whether express or implied (including, without limitation, the implied warranties of merchantability, fitness for a particular purpose and noninfringement, and all warranties that may arise from course of dealing, course of performance or usage of trade), all of which are hereby expressly disclaimed. SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that are applicable to the performance of the Services or those engaged to perform Services under this Agreement. CONSULTANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services. Page 2 of 25 Item 6: Staff Report Pg. 10 Packet Pg. 185 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need SECTION 8. ERRORS/OMISSIONS. CONSULTANT is solely responsible for costs. including, but not limited to, increases in the cost of Services, arising from or caused by CONSULTANT's errors and omissions, including, but not limited to, the costs of correcting such errors and omissions, any change order markup costs, or costs arising from delay caused by such errors and omissions or unreasonable delay in correcting such errors and omissions. SECTION 9. [RESERVED]. SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in performing the Services under this Agreement CONSULTANT, any person employed by CONSULTANT, and any subcontractor retained by CONSULTANT to perform any of CONSULTANT'S obligations under this Agreement, shall act as and be an independent contractor and not an agent or employee of CITY. SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement CONSULTANT shall not assign or transfer any interest in this Agreement nor the performance of any of CONSULTANT's obligations without the prior written consent of the City Manager. The City Manager shall have sixty (60) days from receipt of Consultant's notice of proposed assignment to accept or decline the proposed assignment in writing, if the City Manager declines the proposed assignment, he or she shall state the basis for the decision in the written notice to CONSULTANT. Consent to one assignment shall not be deemed to be consent to any subsequent assignment. Any assignment not expressly contemplated under this Agreement, or made without the approval of the City Manager shall be void SECTION 12. SUBCONTRACTING. Notwithstanding Section 11 above, CITY agrees that subcontractors may be used to perform CONSULTANT'S obligations under this Agreement. The subcontractors authorized by CITY to perform work on this Project are: a. Sage Veterinary Center; and b. Pets Rest Cemetery, and c. Any other subcontractors retained by CONSULTANT to perform CONSULTANT'S obligations under this Agreement. CONSULTANT shall be responsible for directing the work of any subcontractor and for any compensation due to subcontractors. CITY assumes no responsibility whatsoever concerning subcontractor compensation. CONSULTANT shalt be fully responsible to CITY for all acts and omissions of a subcontractor as more fully set forth in Section 16 of this Agreement. CONSULTANT shall change or add a subcontractor to perform the Services set forth on Exhibit A hereto only with the prior approval of the City Manager or his designee (such approval not to be unreasonably withheld, delayed or conditioned). The City Manager shall have thirty (30) days from receipt of CONSULTANT's request to approve or decline in writing CONSULTANT's request to change or add subcontractors. SECTION 13. PROJECT MANAGEMENT, CONSULTANT shall assign its executive director, who currently is Al Mollica, as the project manager to have supervisory responsibility for the performance, progress, and execution of the Services and as the project coordinator to represent CONSULTANT during the day-to-day performance of the Services, if circumstances cause the substitution of the project manager (including if, at Page 3 of 25 Item 6: Staff Report Pg. 11 Packet Pg. 186 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need any time, Al Mollica no longer serves as executive director of C CONSULTANT shall promptly notify the CITY's project manager of such substitution and consider in good faith CITY's requests with respect to such substitution. The parties agree that during the term of this Agreement and for all purposes of this Agreement, CONSULTANT'S project manager shall be authorized to act as the "Superintendent" of the City's animal services division pursuant to Section 6.04.100 of the Palo Alto Municipal Code, for purposes of [Sections 6.12.010, 6.12.030, 6.12.050, 6.16.050, and 6.32.040 of the Palo Alto Municipal Code. CITY's project manager is the Director of Community Services, Community Services Department, 1305 Middlefield Road, Palo Alto, CA 94303, Telephone (650) 463-4900, who is currently Monique leConge Ziesenhenne. The project manager shall be CONSULTANT's point of contact with respect to performance, progress and execution of the Services. CITY may designate an alternate project manager from time to time with prompt written notice to CONSULTANT. SECTION 14. INTELLECTUAL PROPERTY RIGHTS. 14.1 Definition of Intellectual Property Rights. "Intellectual Property Rights" means patents of any type, design rights, utility models or other similar invention rights, copyrights, mask work rights, trade secret or confidentiality rights, trademarks, goodwill, trade names, logos and service marks and any other intangible property rights, including applications and registrations for any of the foregoing, in any country, arising under statutory or common law or by contract and whether or not perfected, now existing or hereafter filed, issued, or acquired. 14,2 "Pets In Need" Ownership. The parties acknowledge and agree that, as between the parties, Pets In Need owns all Intellectual Property Rights in its name ("Pets In Need"), logos and marks, as may be amended from time to time by Pets in Need. 14.3 "City of Palo Alto" Ownership. The parties acknowledge and agree that, as between the parties, the City of Palo Alto owns all Intellectual Property Rights in its name ("City of Palo Alto'), logos and marks, as may be amended from time to time by the City of Palo Alto, and in accordance with Palo Alto Municipal Code as may be amended from time to time. 14.4 "Palo Alto Animal Shelter" Ownership. The parties acknowledge and agree that, as between the parties, the City of Palo Alto owns all Intellectual Property Rights in the name "Palo Alto Animal Shelter". 14.5 Grant of License by City of Palo Alto. The City of Palo Alto hereby grants to Pets In Need a royalty -free, non -transferable term license, for the term of this Agreement, to use, reproduce, make derivative works, display, and perform publicly the name "Palo Alto Animal Shelter" solely in conjunction with "Pets in Need", for example, and without limitation, Pets in Need Palo Alto Animal Shelter" and "Palo Alto Animal Shelter, operated by Pets in Need," for purposes of the performance of this Agreement, as provided for herein. 14.6 Name Changes; Development of Logos or Marks. Any name changes, derivative works, or logos or marks as may be developed by Pets In Need with regard to such animal shelter are required to be approved in writing by the City of Page 4 of 25 Item 6: Staff Report Pg. 12 Packet Pg. 187 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Palo Alto City Manager or designee prior to any publication, or any other puPets Qs iNeed Palo form or media. The City Manager shall approve or deny such requests in writing within 45 days of receipt of CONSULTANT's complete written proposal, and shall set forth its basis for any denial in writing. During the term of this Agreement, the City of Palo Alto shall not change such name of such animal shelter, nor develop any derivative works, or logos or marks, with regard to such animal shelter, except as is mutually agreed in writing with the Pets In Need Executive Director or designee prior to any publication, or any other public use, in any form or media. The City Manager shall approve or deny such requests within 45 days of Consultant's complete written proposal, and shall set forth its basis for any denial in writing. Notwithstanding anything to the contrary in this Agreement, CITY agrees that CONSULTANT may offer naming rights for any wing, room, kennel, or other area within the shelter in compliance with the City's Naming Policy and Procedure. 14.7 Limitations on "Pets In Need Palo Alto Animal Shelter". The City of Palo Alto agrees that its use of the name "Pets In Need Palo Alto Animal Shelter", and as may be changed as provided for herein, with regard to the animal shelter that is the subject of this Agreement, as well as any logos or marks that may be developed and approved as provided for herein with regard to such shelter, are strictly limited to the term of this Agreement, and that, unless otherwise agreed by the parties in writing, upon expiration or termination of this Agreement, the City of Palo Alto shall cease and desist all use of such names, logos and marks with regard to such animal shelter in relation to the ongoing operation of such shelter as of the date of such termination or expiration. 14.8 Use of City of Palo Alto Seal or Logo. Any use by Pets In Need of any City of Palo Alto seal or logo is required to be approved in writing by the City of Palo Alto City Manager or designee prior to any publication ar any other public use, in any form or media, and in accordance with Palo Alto Municipal Code as may be amended from time to time, provided that the City Manager or his designee shall approve or deny in writing a written request by Pets in Need within ten (10) days of the date of the request, and shall set forth his or her basis for any denial in writing. 14.9 Use of Pets in Need Seal or Logo. Any use by the City of Palo Alto of any Pets In Need seal or logo is required to be approved in writing by the Pets In Need Executive Director or designee prior to any publication, or any other public use, in any form or media, provided that the Executive Director of PIN or designee shall approve or deny in writing a written request by CITY within twenty (20) days of the date of the request. 14.10 Reservation of Rights. All Pets In Need Intellectual Property Rights not expressly granted under this Agreement are reserved to and retained by Pets In Need. All City of Palo Alto Intellectual Property Rights not expressly granted under this Agreement are reserved to and retained by the City of Palo Alto. SECTION 15. AUDITS. CONSULTANT shall permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, CONSULTANT's records pertaining to CONSULTANT'S performance of the Services under this Agreement. CONSULTANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. SECTION 16. INDEMNITY; LIMITATION OF LIABILITY. 15.1. To the fullest extent permitted by law, CONSULTANT shall indemnify, defend and hold harmless CITY, its Council members, officers, employees and Page 5 of 25 Item 6: Staff Report Pg. 13 Packet Pg. 188 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need agents (each a "CITY Indemnified Party") from and against any and all it party demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including reasonable attorneys' fees, experts fees, court costs and disbursements ("Claims") to the extent resulting from, or arising out of (I) any act or omission of CONSULTANT that is outside the scope of CONSULTANT's authority under this Agreement and/or (ii) the negligence or willful misconduct of CONSULTANT or its officers, employees, agents or subcontractors in the performance of this Agreement. To the fullest extent permitted by law, CITY shall indemnify, defend and hold harmless CONSULTANT, its directors, officers, employees and agents (each a "CONSULTANT Indemnified Party") from and against any and all third party Claims to the extent resulting from or arising out of (1) the negligence or willful misconduct of CITY or its officers, employees, agents or subcontractors in the performance of this Agreement , (ii) any condition in or about the Premises, except to the extent caused by the negligence or willful misconduct of CONSULTANT or a CONSULTANT Indemnified Party. or (iii) CITY's decision to transition to a consultant -provided service delivery model and City's decision, based on CONSULTANT's representations contained in its proposal to the City and herein, to contract with CONSULTANT to provide the Services. 16.2. In the event of concurrent negligence of more than one party, its Council members (or directors), officers, employees, agents or subcontractors, the liability for any and all Claims shall be apportioned under the California theory of comparative negligence as presently established or as may hereafter be modified. Nothing in this Agreement shall constitute a waiver or limitation of any rights that a party may have under applicable law in the event of concurrent negligence of persons or entities other than the parties to this Agreement. 16.3. The parties agree to cooperate with each other in the investigation and disposition of third -party Claims hereunder. It is the intention of the parties to reasonably cooperate in the disposition of all such Claims. Such cooperation may include joint investigation, defense and disposition of claims of third parties hereunder. The parties agree to promptly inform one another whenever an incident report, claim or complaint is filed or when an investigation is initiated concerning this Agreement. Notwithstanding the foregoing, in the event of a conflict in interest, each party may conduct its own investigation and engage its own counsel. 16.4. Each party agrees to mitigate any loss or damage which it may suffer in consequence of any breach by the other party of the terms of this Agreement. or any fact, matter, event or circumstance giving rise to a Claim. 16.5. LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR ELSEWHERE, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL, PUNITIVE OR EXEMPLARY DAMAGES, INCLUDING BUT NOT LIMITED TO LOST PROFITS IN CONNECTION WITH THIS AGREEMENT, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH POTENTIAL CLAIM, LOSS OR DAMAGE. 16.6. LIMITATION OF LIABILITY OF CITY. EXCEPT WITH REGARD TO CITY'S OBLIGATIONS TO INDEMNIFY AND HOLD HARMLESS THE CONSULTANT PURSUANT TO THIS SECTION 16, CITY'S PAYMENT OBLIGATIONS UNDER THIS AGREEMENT SHALL BE LIMITED TO THE PAYMENT PROVIDED FOR IN SECTION 4 (NOT TO EXCEED COMPENSATION) OF THIS AGREEMENT. Page 6 of 25 Item 6: Staff Report Pg. 14 Packet Pg. 189 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need 16.7. LIMITATION OF LIABILITY OF CONSULTANT. IN NO EVENT SHALL THE TOTAL AGGREGATE LIABILITY UNDER THIS AGREEMENT OF CONSULTANT TO CITY EXCEED FIVE MILLION DOLLARS. 16.8. CITY represents and warrants that (i) it has complied with Section 2.30.250 of the Palo Alto Municipal Code and (ii) the CITY's indemnification obligations contained in this is Section 16 represent the valid and enforceable obligations of CITY. SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, shall not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. No waiver of a condition or nonperformance of an obligation hereunder is effective unless it is in writing signed by the authorized representatives of the parties hereto and, as applicable, approved as required under the Palo Alto Municipal Code or Charter. SECTION 18. INSURANCE, CONSULTANT, at its sole cost and expense, shall obtain, as soon as practicable following the date of this Agreement, and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit "C". CONSULTANT shall be responsible for ensuring that its subcontractors retained to perform Services under this Agreement, if any, shall obtain and maintain in full force and effect during the term of the subcontractor's engagement, the insurance coverage described in Exhibit "C," as well as a policy endorsement naming CITY as an additional insured under any policies required in this Section 18- 18-1. Ali insurance coverage required hereunder shall be provided through carriers with AM Best's Key Rating Guide ratings of A-Vll or higher which are licensed or authorized to transact insurance business in the State of California. 18.2. CONSULTANT shall file with CITY certificates evidencing such insurance as soon as practicable following the date of execution of this Agreement but in any event prior to the first day any of CONSULTANT'S obligations are performed hereunder. The certificates shall be subject to the approval of CITY's Risk Manager and shall contain an endorsement stating that the insurance is primary coverage and shall not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days' notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within five (5) business days of the CONSULTANT's receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY's Chief Procurement Officer during the entire term of this Agreement. 18.3. The procuring of such required policy or policies of insurance will not be construed to limit either party's liability hereunder nor to fulfill the indemnification provisions of this Agreement. SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES. 19.1. The City Manager may terminate this Agreement or suspend Page 7 ❑f 25 - Item 6: Staff Report Pg. 15 Packet Pg. 190 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need the performance of the Services, in whole or in part, in the event of a material breach of CONSULTANT's obligations to CITY under this Agreement, which breach is not cured by CONSULTANT within (60) days of receipt of written notice from CITY to CONSULTANT detailing the nature of such failure. The City Manager may terminate this Agreement without cause by giving one-year prior written notice thereof to CONSULTANT. 19,2. CONSULTANT may terminate this Agreement or suspend its performance of the Services, in whole or in part, in the event of a material breach of CITY's obligations to CONSULTANT under this Agreement, which breach is not cured by CITY (i) with respect to material breach of CITY's payment obligations herein, within thirty (30) days of receipt of written notice from CONSULTANT to CITY, or (ii) with respect to material breach of all other CITY obligations hereunder, within sixty (60) days of receipt of written notice from CONSULTANT to CITY detailing the nature of such breach. CONSULTANT may terminate this Agreement without cause by giving one-year prior written notice thereof to CITY. 19.3. In the event of any suspension or termination hereunder, CITY shall pay CONSULTANT for the Services rendered and materials delivered to CITY (i) on or before the effective date of such suspension or termination and (ii) in accordance with this Agreement. CITY shall pay such amounts to CONSULTANT within thirty (30) days after receipt of CONSULTANT's invoice. To the extent that CITY has prepaid any fees, CONSULTANT shall fund to CITY any prepaid fees on a pro -rata basis to the extent such fees are attributable to the period after the termination date, and CITY shall have no obligation to pay unpaid fees that would have become due during the remaining Term had this Agreement not been terminated. 19.4 The following Sections shall survive any expiration or termination of this Agreement: 14, 15, 16, 17, 19.3, this 19.4, 20, 25, and 27. SECTION 20. NOTICES. Any notice provided for in this Agreement shall be in writing and shall be either (i) personally delivered, (ii) received by certified mail, return receipt requested, or (iii) sent by reputable overnight courier service (charges prepaid) to the recipient at the address indicated below. To CITY: City of Palo Alto, City Manager's Office 250 Hamilton Ave., Palo Alto, CA 94301 With a copy also to the CITY's Project Manager. To CONSULTANT: Attention of the project director at the address of CONSULTANT recited above. Notices will be deemed to have been given hereunder (i) when delivered personally to the recipient, (ii) one (1) business day after being sent to the recipient by reputable overnight courier service (charges prepaid) or (iii) five (5) business days after being mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. SECTION 21. CONFLICT OF INTERESJ 21.1. In accepting this Agreement, CONSULTANT covenants that it presently has no interest, and shall not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services. Page 8 of 25 Item 6: Staff Report Pg. 16 Packet Pg. 191 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need 21.2. CONSULTANT further covenants that, in the performance of this Agreement, it shall not employ subcontractors or other persons or entities having such an interest. CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision shall be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California. 2'1.3. CITY agrees and acknowledges that, as of the date of hereof, CONSULTANT is not a "Consultant" as that term is defined by the Regulations of the Fair Political Practices Commission, and that therefore CONSULTANT shall not be required to file the financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act. SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. CONSULTANT acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the CITY's Environmentally Preferred Purchasing policies which are available at CITY's Purchasing Department (and copies of which have been provided to CONSULTANT by CITY), incorporated by reference and may be amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of CITY's Zero Waste Program. Zero Waste best practices include first minimizing and reducing waste; second, reusing waste and third, recycling or composting waste. In particular, CONSULTANT shall comply with the following zero waste requirements: (a) All printed materials provided by CONSULTANT to CITY generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, shall be double -sided and printed on a minimum of 30% or greater post -consumer content paper, unless otherwise approved by CITY's project manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post - consumer material and printed with vegetable based inks. (b) Goods purchased by CONSULTANT on behalf of CITY shall be purchased in accordance with C€TY's Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Division's office, and a copy of the current policy has been provided to CONSULTANT by CITY. (c) Reusable/returnable pallets shall be taken back by CONSULTANT, at no additional cost to CITY, for reuse or recycling. CONSULTANT shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. Page 9 of 25 Item 6: Staff Report Pg. 17 Packet Pg. 192 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need SECTION 24. COMPLIANCE WITH PALO ALTO MINiMUM WAGE ORDI CONSULTANT shall comply with all requirements of the Palo Alto Municipal Code Chapter 4,62 (Citywide Minimum Wage), as it may be amended from time to time. In particular, for any employee otherwise entitled to the State minimum wage, who performs at least two (2) hours of work in a calendar week within the geographic boundaries of the CITY, CONSULTANT shall pay such employees no less than the minimum wage set forth in Palo Alto Municipal Code section 4.62.30 for each hour worked within the geographic boundaries of the City of Palo Alto. In addition, CONSULTANT shall post notices regarding the Palo Alto Minimum Wage Ordinance in accordance with Palo Alto Municipal Code section 4.62.060. SECTION 25. NON -APPROPRIATION. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement shall terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Agreement are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 26. PREVAILING WAGES AND DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS. The Services are not subject to prevailing wages. CONSULTANT is not required to pay prevailing wages in the performance of the Services in accordance with applicable law including without limitation SB 7. SECTION 27. MISCELLANEOUS PROVISIONS. 27.1. This Agreement shall be governed by the laws of the State of California without regard to its conflict of laws provisions. 27.2. In the event that an action is brought, the parties agree that trial of such action shall be vested exclusively in the state courts of California in the County of Santa Clara, State of California. 27.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys' fees paid to third parties. 27.4. This document represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the parties. 27.5. The covenants, terms, conditions and provisions of this Agreement shall apply to, and shall bind, the heirs, successors, executors, administrators, assignees, and consultants of the parties. 27.6. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto shall remain in full force and effect. Page 10 of 25 Item 6: Staff Report Pg. 18 Packet Pg. 193 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and 27.7. All exhibits referred to in this Agreement an�Qp, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and shall be deemed to be a part of this Agreement. 27.8. In the event of a conflict between the terms of this Agreement and the exhibits hereto or CONSULTANT's proposal (if any), this Agreement shall control. In the case of any conflict between the exhibits hereto and CONSULTANT's proposal, the exhibits shall control. 27.9. If, pursuant to this contract with CONSULTANT, CITY shares with CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d) about a California resident ("Personal Information'), CONSULTANT shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform CITY as soon as practicable, but no later than 24 hours after learning that there has been a breach in the security of the system or in the security of the Personal Information. CONSULTANT shall not use Personal Information for direct marketing purposes without CITY's express written consent. 27.10. All unchecked boxes do not apply to this Agreement. 27.11. The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. 27.12. This Agreement may be signed in multiple counterparts, which, when executed and delivered by the parties hereto, shall together constitute a single binding agreement. This Agreement may be signed using the City's Docusign platform. [signature page follows] Page 11 of 25 Item 6: Staff Report Pg. 19 Packet Pg. 194 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need CONTRACT No. C19174493 SIGNATURE PAGE IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement on the date first above written. llukegs]0 L1 1.1.1 to] PETS IN NEED Officer I By: City Manager Title: APPROVED AS TO FORM: City A Ofn or designee Attachments: Officer 2 By: Name: . r -.- Title: Lc/r T EXHIBIT "A": SCOPE OF SERVICES EXHIBIT "B": COMPENSATION EXHIBIT "C" INSURANCE REQUIREMENTS EXHIBIT "D': USE OF PREMISES Page 12 of 25 Item 6: Staff Report Pg. 20 Packet Pg. 195 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and EXHIBIT "A" Pets in Need SCOPE OF SERVICES PETS IN NEED ("CONSULTANT") agrees to provide Animal Shelter Services as described in Section 11 below at the Palo Alto Animal Shelter, 3281 East Sayshore Road, Palo Alto, CA, for the City of Palo Alto ("CITY") and the Contract Cities- CITY agrees to perform the obligations as described in Section III below. I. DEFINITIONS The following terms as used in this Exhibit "A" Scope of Services shall have the meaning provided below: A. "Diseased and crippled animal" means those animals which are known or believed to be infected with any dangerous or communicable disease, or which have an incurable, crippled condition or which are afflicted with any painful disease which is believed to be incurable. B. "Dangerous animal" means any dog or other animal which demonstrates a propensity to assault, bite, scratch or harass people or other animals without provocation. There shall be a rebuttable presumption that any animal that bites a person is a dangerous animal. Capitalized terms used but undefined herein shall have the meanings set forth in the Agreement for Professional Services (this "Agreement") to which this Exhibit is attached and of which it forms a part. II. PETS IN NEED RESPONSIBILITIES: 1. Animal Shelter Services. CONSULTANT shall perform the following sheltering services and shall provide shelter supplies, animal attendants, supervisors and administrative personnel, and any other personnel, supplies and equipment, reasonably required to perform the following services ("Shelter Services"): a) Shelter of abandoned, surrendered, impounded, lost or stray domestic animals brought to the shelter by CITY or its Contract Cities, its residents, or personnel. b) CONSULTANT may shelter and provide services to animals outside the scope of paragraph (a) above ("non -City animals") including moving animals between the Palo Alto Animal Shelter and Pets In Need Redwood City facility on a space -available basis and at CONSULTANT's sole expense for all costs, including labor, equipment, supplies, food, and medication. At no time shall animals within the scope of paragraph (a) above be denied services due to services provided to non -City animals at the Pets in Need Palo Alto Animal Shelter, c) For the avoidance of doubt, to the maximum extent Page 13 of 25 Item 6: Staff Report Pg. 21 Packet Pg. 196 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need permissible by law, CONSULTANT shall have exc usive discretion over how long an animal is sheltered, including exclusive discretion to shelter an animal for a longer period than the statutory minimum number of days This section shall not be interpreted to authorize funds in addition to those specified in this Agreement, and CONSULTANT shall be responsible for managing the length of animal sheltering within the funds and resources authorized by this Agreement. d) Quarantine of biting animals. e) Rabies testing of suspect animals. f} Provision for reclaim of abandoned, lost or stray domestic animals during established business hours, g) Shelter staff shall make every effort to identify lost animals (through ID tags and microchips) and to contact owners. h) Be CITY's and Contract Cities' main point of contact (by phone, in -person, and electronic means) regarding animal shelter services, including inquiries regarding missing pets. i) Provide medical evaluation and treatment, if necessary, to all incoming animals. This includes vaccinations, and spay and neuter surgeries to domestic animals. j} Euthanasia and disposal of abandoned, lost, impounded, or stray domestic animals that are unclaimed by their owners and found to be diseased and crippled and/or dangerous as defined by Palo Alto Municipal Code and California State Law. k) For purposes of clarity, CONSULTANT shall not be required to provide owner -requested euthanasia at any time, and CITY acknowledges that CONSULTANT has elected not to provide or subcontract this service. I) CONSULTANT shall maintain a public website, separate from the CITY's website, with information including without limitation: shelter hours, volunteer opportunities, adoption information, medical services offered and information about those services and contact information. m) Consultant shall allow CITY Animal Control Officers access to the shelter at all times for purposes of dropping off animals and provide reasonable accommodation for Animal Control Officers to begin and end their shifts, and complete administrative work in the shelter. n) CONSULTANT shall maintain, repair and replace all surgical room equipment, cages, hoses, and other equipment at the facility. o) CONSULTANT shall comply with all federal, state, and local laws in effect applicable to the Services upon commencement of the provision of the Services, and shall be subject to inspection by the CITY and other duly authorized federal, state, and local authorities to insure Page 14 of 25 Item 6: Staff Report Pg. 22 Packet Pg. 197 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need such compliance. This includes the applicable provisions or Palo Alto Municipal Code Title 6, as amended from time to time. For the avoidance of doubt, this provision shall not be construed to expand the scope of the Services as expressly set forth in this Exhibit "A". p) CONSULTANT shall use commercially reasonable efforts to offer comprehensive volunteer and educational programs which may include, without limitation: animal fostering programs, dog walker programs, and animal care trainings. q) When appropriate, in CONSULTANT'S sole discretion, CONSULTANT may partner and/or coordinate with adoption programs, rescue groups, and other no -kill shelters to maximize the shelter's adoption rate and/or place animals in suitable foster care. CONSULTANT shall seek CITY's approval for partnerships in which CONSULTANT pays or receives money or other financial consideration, solely to the extent that such partnership relates to CONSULTANT's performance of the Services. CITY shall approve or deny in writing any such request within thirty (30) days after receipt of such request. r) Develop and maintain communication with CITY by: 1. Responding in a timely manner to em ails and phone calls. 2. Communicating and resolving issues and concerns promptly. s) Develop, in cooperation with CITY, a feral cat plan. The plan shall include how PIN handles feral cats, spay/neuter provisions, and release of feral cats. CONSULTANT shall not release feral cats within the City of Palo Alto or any of its Partner Cites. t) Develop, in cooperation with CITY, a disaster preparedness plan. 2. Medical Services a) CONSULTANT shall provide supplies, and professional and trained personnel, employed or under subcontract or contract, necessary to perform the following services ("Medical Services"): Provision of veterinarian services twenty-four (24) hours per day to treat and provide veterinarian care for impounded animals, including for animals picked -up by Animal Control Officers. CONSULTANT may, in its sole discretion and at its sole expense, arrange after-hours emergency care through any veterinary subcontractor. b) Monitor quarantined animals. c) For a fee, conduct vaccination clinics and have available, free of charge to the public, rabies control information. d) Conduct microchipping. e) For a fee, which shall be posted on CONSULTANT's website, Page 15 of 25 Item 6: Staff Report Pg. 23 Packet Pg. 198 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need at the same rate established for City residents and Contract Cities, provide access to the CONSULTANT's low cost spay and neuter clinic. I) The City's Animal Control Officers shall be licensed through CONSULTANT'S medical authority to administer euthanasia as necessary for animals that are unclaimed by their owners and found to be diseased and crippled and/or dangerous as defined by Palo Alto Municipal Code. g) Comply with all laws requiring reporting of animal -borne diseases, including rabies. This includes Municipal Code section 6.32.020, as amended from time to time. 3. Operating Schedules a) CONSULTANT shall provide Shelter Services for the animals twenty-four (24) hours a day, seven (7) days a week. b) CONSULTANT shall provide emergency veterinary services in accordance with Section 597(f) of the California Penal Code. c) CONSULTANT shall have shelter staff on site for care of shelter animals seven (7) days per week, 365 days per year. d) CONSULTANT shall have business offices and public access areas of shelter to be open to the public on a schedule designed to benefit the public and facilitate the services established in this Agreement, provided that the public hours and access be a minimum of six (6) days per week and forty (40) hours per week. CONSULTANT shall post the public hours on its website, and inform CITY and Contract Cities in writing of any change in hours. e) CITY acknowledges and agrees that, until the renovations described in Exhibit D are completed, CONSULTANT may be unable to be fully staffed and operational in accordance with this Paragraph 3, and may request to operate at a reduced schedule at its reasonable discretion. Consultant's project manager shall make any such request to City's project manager, whose consent shall not be unreasonably denied, delayed, or conditioned. f} CONSULTANT shall observe the following holiday closures for public hours: January 1 (New Year's Day) Martin Luther King's birthday Memorial Day July 4th (Independence Day) Labor Day Thanksgiving Day Day after Thanksgiving Christmas Eve (112 Day) Christmas Day 4 Dead Animal Services a) CONSULTANT shall provide storage facilities, disposal Page 16 of 25 Item 6: Staff Report Pg. 24 Packet Pg. 199 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need mechanisms, administrative personnel, and any other�rQVill l ed supplies and equipment reasonably required to perform the following services ("Dead Animal Services"): i. Identification of and notification to the owner of the dead animal, whenever possible; and ii. Disposal of the body of the dead animal. CONSULTANT shall offer animal owners the option to pay for cremation services, in which case, CONSULTANT shall arrange for cremation with the appropriate subcontractor. b) CONSULTANT shall subcontract with one or more subcontractors for the maintenance of a dead animal storage facility as well as collection of dead animals and maintenance of the facility and equipment, all at CONSULTANT's sole expense. Wildlife a) The impoundment of wildlife shall be managed by CONSULTANT staff. An assessment of wildlife shall be done by medical staff, if necessary. If the animal is severely injured or sick, a licensed veterinarian shall be consulted, and the case shall be fully documented in accordance with AVMA guidelines. This Agreement assumes that all wildlife animals will continue to be transferred to the Peninsula Humane Society at no cost to the CITY or to CONSULTANT, as set forth in the Memorandum of Understanding between CONSULTANT and Peninsula Humane Society dated November 17, 2017. Should Peninsula Humane Society request fees for wildlife intake, CONSULTANT and the CITY shall negotiate in good faith to amend this Agreement per Section 27.4 herein, to provide for the reimbursement by CITY to CONSULTANT of such fees (upon documentation of such fees by CONSULTANT reasonably satisfactory to CITY). Records Management a) CONSULTANT and CITY's Animal Control shall maintain joint access to the Chameleon database, as provided for in this section. CONSULTANT is responsible for keeping the Chameleon database updated in a timely fashion. Chameleon data is designated "For Official Use Only," meaning, CONSULTANT may only use such data for the performance of this Agreement, and not for marketing or any other purposes without the prior written consent of the C1TY's City Manager or designee. Annual maintenance fees for the Chameleon software shall be paid by CITY. Repair and replacement cost of the server and supporting hardware, if any, shall also be paid by CITY. CONSULTANT shall not have access to certain areas of the database, such as saved criminal information (as required by law). CITY shall work with the database programmer/vendor to ensure that such areas of the Page 17 of 25 Item 6: Staff Report Pg. 25 Packet Pg. 200 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need database are not accessible by CONSULTANT. All data entered into the Chameleon database by any party shall be property of CITY. b) Monthly Report I. CONSULTANT shall deliver to CITY during the term of this AGREEMENT, and within thirty (30) days of the end of each month, a monthly Animal Shelter and Impound Report summarizing monthly and year-to-date services provided by CONSULTANT for CITY. This report shall include, but not be limited to, the following information: (1) Licensing statistics (2) Medical statistics including spay and neuter, microchips, and vaccinations (3) Volume of animals in and out of facility by type of animal and type of outcome. (4) For each animal, which city in which it was picked up (if known). c) Financial Reporting i. CONSULTANT shall deliver to CITY during the term of this Agreement, and within ninety (90) days of the end of each May, an audited financial report covering CONSULTANT's operation of the Palo Alto Animal Shelter. d) Retention of Records, Right to Monitor and Audit i. CONSULTANT shall maintain records relating to CONSULTANT's operation of the Palo Alto Animal Shelter for a period of four (4) years after the expiration or termination of this Agreement or until any audits or reviews are completed, whichever comes later, and such records shall be subject to examination andlor audit of CITY, a Federal grantor agency, and the State of California for a period of four (4) years after the expiration or termination of this Agreement or until any audits or reviews are completed, whichever comes later. ii. Records/accounts relating to CONSULTANT's operation o€ the Palo Alto Animal Shelter shall be open and accessible to inspection upon reasonable notice during normal business hours throughout the term of this Agreement and for a period of four (4) years thereafter or until any audits or reviews are completed, whichever comes later. iii. Parties, upon request by either party to the other, shall meet on occasion to consider revisions which may be needed to the reporting forms created to document performance of the Services provided. 7. Fundraising, Marketing and Branding a) CONSULTANT shall create and manage fundraising, marketing, volunteer development and education programs. Local volunteer Page 18 of 25 Item 6: Staff Report Pg. 26 Packet Pg. 201 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need groups shall be integrated into fundraising and other activities and events when reasonably possible. The "Pets In Need Palo Alto Animal Shelter" shall be the initial brand name of the shelter t❑ be operated by CONSULTANT pursuant to this Agreement, and any logo or name change shall be approved in writing by CONSULTANT and the CITY's City Manager or designee prior t❑ use. 8. Licensing and other fee collection a) CONSULTANT shall charge fees for services according to the CITY's municipal fee schedule or according to state ❑r local laws. Fees for any services not covered by CITY's municipal fee schedule or state or local taws shall be set by CONSULTANT. CONSULTANT shall take CITY's comments into consideration when setting such fees. CITY shall take CONSULTANT's comments into consideration when setting its municipal fee schedule. b) CONSULTANT shall manage dog licensing including processing, issuance, and renewals on behalf of CITY and Contract Cities. Licensing information shalt be included on all Incident Reports and, additionally, provided to CITY on an as requested basis. CONSULTANT shall collect all associated license fees on behalf of CITY, at the fee amounts set by CITY. Licensing includes the licensing of dogs as defined in Municipal Code Chapter 6.16 as amended from time to time. c) CONSULTANT shall process citation fees, and shall remit 100% of these fees to the CITY on a quarterly basis. PETS IN NEE❑ shall process and retain all other fees and revenues, including without limitation adoption fees, spay, neuter, impoundment, permit, license, and ❑ther fees as listed in the municipal fee schedule. Contract Cities; WeCare Alliance a) CITY and CONSULTANT shall provide services to the City of Los Altos and the Town of Los Altos Hills (the "Contract Cities) pursuant to the CITY's amended Regional Animal Care and Control contracts approved by City Council on June 2, 2014. These contracts are valid through June 30, 2019 with an option for an additional five-year extension. The Parties agree that this Agreement assumes that the Contract Cities' contracts will be in effect during the entire term of this Agreement. b) CITY shall consult with CONSULTANT should the contracts with the Contract Cities be amended or terminated, provided that if any such amendment or termination is reasonably expected to result in increased costs to CONSULTANT, such amendment or termination (if initiated by CITY) shall be subject to Page 19 of 25 Item 6: Staff Report Pg. 27 Packet Pg. 202 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need CONSULTANT's prior written consent. CONSULTANT shall notify CITY in writing of its consent or lack thereof within forty-five (45) days after receipt of CITY's written request, which request shall include the precise language of such amendment or all relevant details of such termination (whichever applies). If CONSULTANT consents, the parties shall amend this Agreement (i) to adjust the scope of Services accordingly and (ii) to cover any reasonable cost increases to CONSULTANT. c) CITY may contract with additional cities, subject to CONSULTANT's prior written consent. CONSULTANT shall notify CITY in writing of its consent or lack thereof within forty- five (45) days after receipt of CITY's written request, which request shall include the text of such proposed contracts. If CONSULTANT consents, CONSULTANT and CITY shall amend this Agreement (i) to adjust the scope of Services accordingly and (ii) to cover any reasonable cost increases to CONSULTANT. d) CONSULTANT shall continue membership in the WeCare Alliance (www.sheltersfirst.org). 10. Cost Overruns or Changes a) If CITY or state laws are passed during the term of this Agreement that require a greater level of service, CITY and CONSULTANT agree to negotiate in good faith regarding the reimbursement of CONSULTANT for additional costs associated with implementing the new laws. If Parties are unable to agree on reimbursement costs, CONSULTANT shall document the increased costs and submit to the City Auditor. The City Auditor shall conduct an independent audit. Parties agree to accept the City Auditor's determination of any increased costs. b) If current state laws are amended, repealed, otherwise changed or suspended during the term of this Agreement that reduce, alter, or remove existing relevant mandates, either party may require the other party to meet to discuss possible financial and operational impacts of levels of service per the change in law, including but not limited to any decrease in contract amounts paid to CONSULTANT, provided that no such decrease shall be effective unless agreed by CONSULTANT. 111. CITY RESPONSIBILITIES. CITY shall: 1. Provide an adequate and safe facility for CONSULTANT to perform the Services. Provide Animal Control Officers (ACOs) and their services for CITY and Contract Cities. This shall include maintenance of ACO vehicles Page 20 of 25 Item 6: Staff Report Pg. 28 Packet Pg. 203 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need and equipment. Establish fees for dog licensing and anima impounding. 3. With regard to the shelter facility, provide and/or pay for utilities, taxes, electricity, water, gas, waste water, recycling, waste (not animal disposal), internet, Chameleon software/database and associated support, and Chameleon server hardware and support (if any), which collectively is estimated to cost approximately $55,000 per year. 4. Develop and maintain proactive and consistent communication and rapport with CONSULTANT a) Respond in a timely manner to emails and phone calls b) Communicate and resolve issues and concerns immediately c) Provide excellent customer service to CONSULTANT staff and customers 5. Develop, in cooperation with CONSULTANT, a disaster preparedness plan 6. Administer the agreements between the CITY and the Contract Cities regarding animal shelter services. Page 21 of 25 Item 6: Staff Report Pg. 29 Packet Pg. 204 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need EXHIBIT "B" COMPENSATION CITY agrees to compensate CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in the schedule below. SCHEDULE Year 1 Year 2 Year 3 Year 4 Year 5 Sub -total Basic Services Reimbursable Expenses TO EQUAL AND NOT TO EXCEED (SUBJECT TO SECTION 19 "TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES") $708,000.00 $663,000-00 $676,260.00 $689,785.20 $703, 580.90 $3,440,626.10 $0.00 Total Basic Services and Reimbursable expenses $3,440,626.10 Contingency Funds $200,000.00 (not to exceed $40,000 per year) Additional Compensation for Renovation Delays $60,000.00 (not to exceed $5,000 per month; see Exhibit D, Section 15.7) Maximum Total Compensation $3,700,626.10 ONE-TIME ADVANCE Simultaneous with the execution of this Agreement, CITY shall pay to CONSULTANT One Hundred Seventy Eight Thousand dollars ($178,000) as an advance against the first three months of CONSULTANT's fee. CONSULTANT shall not submit an invoice for the remainder of its fee for the third month until the end of such third month. CONTINGENCY FUNDS CITY shall provide contingency funds to CONSULTANT in the following circumstances, subject to written approval by the CITY's project manager, and to equal and not to exceed the amount in this Exhibit C: 1. CITY shall provide contingency funds for after-hours and emergency veterinary care if: a- CONSULTANT has already spent at least $10,000 in the past 12 months on a rolling basis on after-hours or emergency veterinary care that was reasonable based on AVMA guidelines; and b. The emergency or after hours treatment being sought is reasonable based Page 22 of 25 Item 6: Staff Report Pg. 30 Packet Pg. 205 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need on AVMA guidelines. 2. CITY shall provide contingency funds for hoarding cases if: a. CONSULTANT has already served more than 600 animals from the CITY or the Contract Cities in the past 12 months; and b. The hoarding case involves a minimum of 12 animals brought at once that are expected to stay in the facility for at least 30 days each. 3. CITY shall provide contingency funds for the actual costs of wildlife intake at the Peninsula Humane Society if: a. The Peninsula Humane Society begins charging for the costs of wildlife services; and, b. This Agreement has not yet been amended to reflect the additional costs of such services. 4. CONSULTANT may also request contingency funds in other unforeseen circumstances. To request contingency funds, the CONSULTANT shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT's proposed maximum compensation, for such services. In addition to the factors above, CITY may consider whether contingency funds are appropriate within existing funding and workload, and contingency funds shall not be released if CONSULTANT has not exhausted unused or unallocated funds. The CITY shall notify CONSULTANT in writing of its approval or lack thereof within ten (10) days after the date of CONSULTANT's proposal. If CITY's project manager does not approve CONSULTANT's request, CONSULTANT may appeal that decision to the City Manager. If authorized by CITY, the contingency services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY's project manager and CONSULTANT, and payment shall be made to CONSULTANT, no later than ten (10) days after the date of CITY's authorization. Contingency funds are subject to all requirements and restrictions in this Agreement. ADDITIONAL COMPENSATION FOR RENOVATION DELAYS The City shalt pay Consultant up to $5,000 monthly for up to twelve consecutive months pursuant to the terms of Exhibit D, Section 15.7 ("Additional Compensation for Renovation Delays") of this Agreement. REIMBURSABLE EXPENSES No Reimbursable Expenses are authorized by CITY through this Agreement, unless pursuant to a written amendment to this Agreement as provided for herein. ADDITIONAL SERVICES No Additional Services are authorized by the CITY through this Agreement, unless pursuant to a written amendment to this Agreement as provided for herein. Page 23 of 25 Item 6: Staff Report Pg. 31 Packet Pg. 206 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need EXHIBIT "C" INSURANCE REQUIREMENTS CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BESTS KEY RATING OF A - :VII, OR HIGHER, LICENSED OR AUTHORIZE❑ TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY'S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: MINIMUM LTMITS REQUIRE❑ TYPE OF COVERAGE REQUIREMENT EACH OCCURRENCE AGGREGATE YES WORKER'S COMPENSATION STATUTORY YES EMPLOYER'S LIABILITY BODILY INJURY $5,000,000 $5,000,000 YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE 55,000,000 $5,000,000 PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY $1,000,000 $1.000.000 EACH PERSON $1,000,000 $1,000,000 EACH OCCURRENCE $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON -OWNED PROPERTY DAMAGE $1,000,000 $1,000,000 BODILY INJURY AND PROPERTY $1,000,000 $1,00D,000 DAMAGE, COMBINED YES PROPERTY INSURANCE ALL RISK, FULL REPLACEMENT INSURANCE YES BUSINESS INTERRUPTION INSURANCE PROFESSIONAL LIABILITY. YES INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE WHEN ALL DAMAGES $2,000,000 APPLICABLE), AND NEGLIGENT PERFORMANCE YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED CONTRACTOR, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN. IN FULL FORCE AN❑ EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONTRACTORS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS' COMPENSATION. EMPLOYER'S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. 1. INSURANCE COVERAGE MUST INCLUDE: A PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS ❑F THE NAME❑ INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY ❑THER INSURANCE CARRIED BY ❑R FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. B. CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS Page 24 ❑f 25 Item 6: Staff Report Pg. 32 Packet Pg. 207 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUIS Pets in Need OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF CONSULTANT UNDER THIS POLICY. C. NOTICE OF CANCELLATION IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, CONSULTANT SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, CONSULTANT SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION, INSURANCE COVERAGE MUST INCLUDE A PROVISION FOR A WRITTEN THIRTY (30) DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONSULTANT'S AGREEMENT TO INDEMNIFY CITY. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY'S PRIOR APPROVAL. Vendors are required to file their evidence of insurance and any other related notices with the City of Palo Alto at the following URL: httDs://www, olanetbid s. comloorta I/Aortal. cfm?Comoanvi ❑=25569 OR htto:llwww.citvofoaloaito.orglaov/dents/asdlolanet bids how to.as Ili Page 25 of 25 Item 6: Staff Report Pg. 33 Packet Pg. 208 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need EX IBIT I) USE OF PREMISES SECTION 1. USE OF PREMISES. Consultant shall have the exclusive right to enter and use the Premises during the term of this Agreement for the sole purposes of performing the Services and fulfilling Consultant's obligations under the Agreement, as detailed in this Section 1 ("Use of Premises") of this Exhibit D. Consultant shall have the right to permit Consultant's employees, agents and subcontractors to enter and access the Premises for the sole purposes of performing the Services and fulfilling Consultant's obligations under this Agreement. Consultant shall have the right to exclude third parties and trespassers onto the Premises. Notwithstanding the foregoing, City's Animal Control Officers and their supervisors have the right to enter the Premises at any time. In addition, City has the right to enter Premises at any time for the purposes of inspection, emergency response and the performance of City obligations under this Agreement. Consultant shall, at City's request, promptly remove any of Consultant's property or Consultant -installed improvements on the Premises to allow City access to the utilities or other City owned facilitiesfproperty. In the event City deems it necessary, for purposes of health, safety or building code requirements, in City's sole discretion, City shall have the right to move, alter or remove any such property or improvements and City shall be responsible for promptly restoring or returning the same to its prior condition. SECTION 2. CONDITION OF PREMISES, CLEANING AND MAINTENANCE. 2.1 Condition of Premises, Routine Interior Cleaning and Janitorial Activities. In connection with its use, Consultant shall maintain the Premises in a clean, safe, secure, orderly, and sanitary condition, consistent with a commercially reasonable standard for a well -run animal shelter facility, so far as the Premises may be affected by Consultant's activities under this Agreement. Specifically, Consultant shall undertake routine cleaning and janitorial activities as necessary to maintain the interior of the Premises in an orderly condition, as above, provided that nothing in this section shall obligate Consultant to make any alterations or capital improvements to the Premises. Consultant shall maintain all of its own equipment, furnishings and trade fixtures upon the Premises which are required for the maintenance and operation of the Palo Alto Animal Shelter. 2.2 Maintenance and Utilities. Outside of Consultant's responsibilities for routine interior cleaning and janitorial activities in Section 2.1 of this Exhibit, City shall be responsible for the maintenance of the interior and exterior of the Premises and the surrounding grounds, including (without limitation) the maintenance, repair, and replacement of the roof, building structure, improvements, and the HVAC, electrical, plumbing, and other building systems. City shall perform any alterations to the Premises (1) required by applicable laws or laws of general application (i.e. ADA, seismic regulations, and building codes) and (2) to ensure that utilities (including, without limitation, water, gas, and electricity) are available to the Premises, in amounts sufficient for Consultant to perform the Services. In the event of a utilities outage, the City will work diligently to restore availability as quickly as possible. City shall promptly perform its obligations under this Section 2.2 ("Maintenance and Utilities"). In the event of a maintenance issue that impacts the health and safety of the operations, the City shall respond within 24 hours of receipt of notice from Consultant to develop an action plan to address the issue in an expedited timeframe. SECTION 3. HAZARDOUS MATERIALS. 3.1 Environmental Laws. "Environmental Laws" means any applicable federal, state or local laws and regulations relating to Hazardous Material (including, without limitation, its use, handling, transportation, production, disposal, discharge or storage) or to human health and safety, industrial hygiene or environmental conditions in, on, under or adjacent to the Premises, including without limitation soil, air and groundwater conditions. Item 6: Staff Report Pg. 34 Packet Pg. 209 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need 3.2 Hazardous Materials. "Hazardous Materials" means any substance, material, waste, pollutant or contaminant which is regulated by applicable Environmental Laws as being hazardous, toxic, flammable, carcinogenic, explosive or radioactive, or is potentially injurious to the public health, safety or welfare or the environment. 3.3 Release. "Release," when used with respect to Hazardous Materials, means any actual or imminent spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, depositing, or disposing on, in, under or adjacent to the Premises, or any improvements constructed hereunder by or on behalf of the Consultant, or in, on, under or adjacent to the Premises or any portion thereof in violation of Environmental Laws. 3.4 Remediation. "Remediation" (and derivatives thereof such as an without limitation "remediate"), when used with reference to Hazardous Materials, means any activities undertaken to clean up, remove, contain, treat, stabilize, monitor or otherwise control Hazardous Materials located in, on or under or adjacent to the Premises, or which have been or are being, or risk of being Released into the environment. Remediation includes, without limitation, those actions included within the definition of "remedy" or "remedial action" in California Health and Safety Code Section 25322 and "remove" or "removal" in California Health and Safety Code Section 25323, and as may be amended from time to time. 3.5 No Hazardous Materials. Consultant covenants and agrees that Consultant shall not, nor shall Consultant permit any of Consultant's officers, employees, agents, or subcontractors, to cause or permit any Hazardous Material to be brought upon, kept, used, stored, generated, deposited or disposed of in, on, under or adjacent to the Premises in violation of Environmental Laws, provided that Consultant may store and use such substances in and on the Premises in such limited amounts as are customarily used in the operation of an animal shelter such as the Premises so long as such storage and use is at all limes in full compliance with all applicable Environmental Laws and permits. Consultant shall notify the City as soon as possible within 24 hours if and when it learns or has reason ₹o believe that there has been any Release of Hazardous Material in, on, under or adjacent to the Premises. The City may request Consultant to provide adequate information for City to determine that any Hazardous Material permitted hereunder is being handled in compliance with all applicable Environmental Laws, and Consultant shall promptly provide all such information. In the event that any Hazardous Material is Released in, on, under or adjacent to the Premises by Consultant or any of Consultant's officers, agents, employees, or subcontractors, Consultant shall promptly undertake all necessary actions to Remediate the contaminating Hazardous Material from the Premises and to return the Premises and other City property affected thereby, to the condition existing prior to such Release, or its reasonable equivalent or better, and otherwise investigate and Remediate the Release in accordance with applicable Environmental Laws, at no cost to City. Notwithstanding the foregoing, and excluding Consultant's notice obligations under this Section, Consultant shall have no Remediation obligations under this Section for (i) the mere discovery of any preexisting condition, or (ii) any conditions arising out of any action or inaction of City, its Council members, officers, employees, agents or subcontractors, and not contributed to by any action or inaction of Consultant or Consultant's officers, employees, agents, or subcontractors, (iii) any conditions arising out of any action or inaction of third party vendors that are not an agent or subcontractor of Consultant, and not contributed to by any action or inaction of Consultant or Consultant's officers, employees, agents, or subcontractors, (iv) any conditions arising out of any action or inaction of a third party, not an agent or subcontractor of Consultant, and not contributed to by any action or inaction of Consultant or Consultant's officers, employees, agents, or subcontractors. 3.6 Hazardous Material Indemnity. Consultant shall, on behalf of itself and its successors and assigns, indemnify, defend and hold harmless City, its Council members, officers, employees and agents (each a "City Indemnified Party") from and against any and all claims, liabilities, penalties, forfeitures, losses and/or expenses (including, without limitation, diminution in value of the Premise, damages for the loss or restriction on use of the rentable or usable space or of any amenity of the Premise, Item 6: Staff Report Pg. 35 Packet Pg. 210 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and damages arising from any adverse impact or marketing of the Premises and sums p1U1W rrrscrrremerrL claims, response costs, cleanup costs, site assessment costs, reasonable attorneys' fees, reasonable expert fees, judgments, administrative rulings or orders, fines, penalties, costs of death of or injury), to any person or damage to any property whatsoever (including, without limitation, groundwater, sewer systems and atmosphere), arising from, or caused or resulting, in whole or in part, directly or indirectly, by the presence or discharge in, on, under or adjacent to the Premises by Consultant, or Consultant's officers, employees, agents or subcontractors, of Hazardous Material, or by any such party's failure to comply with any applicable Environmental Law, whether knowingly or by strict liability. Such Consultant indemnity obligations include, without limitation, and whether foreseeable or unforeseeable, all costs of any Hazardous Materials management plan, closure, investigation, repairs, and Remediation and restoration of the Premises to its prior condition. For purposes of such indemnity obligations, any acts or omissions of Consultant, its officers, employees, agents, or subcontractors (whether or not they are negligent, intentional, willful or unlawful) shall be strictly attributable to Consultant. Consultant shall provide the City with written notice of and afford City a full opportunity to participate in any discussions with governmental regulatory agencies regarding any settlement agreement, Remediation or abatement agreement, consent decree, permit, approvals, or other compromise or proceeding involving a Release of Hazardous Materials in, on, under, or adjacent to the Premises by Consultant or Consultant's officers, employees, agents, or subcontractors as detailed in this Section. Notwithstanding the foregoing, Consultant shall have no obligation to indemnify the City or any City Indemnified Party for (i) the mere discovery of any preexisting condition, or (ii) any conditions arising out of any action or inaction of City, its Council members, officers, employees, agents or subcontractors and not contributed ₹o by any action or inaction of Consultant or Consultant's officers, employees, agents, or subcontractors, (iii) any conditions arising out of any action or inaction of third party vendors that are not an agent or subcontractor of Consultant, and not contributed to by any action or inaction of Consultant or Consultant's officers, employees, agents, or subcontractors, (iv) any conditions arising out of any action or inaction of a third party, not an agent or subcontractor of Consultant, and not contributed to by any action or inaction of Consultant or Consultant's officers, employees, agents, or subcontractors. SECTION 4. DAMAGE TO UTILITIES. Consultant shall exercise reasonable care to not do anything in, on, under or adjacent to the Premises that damages any City utilities (e.g. gas, water, wastewater, fiber, electric) located in, on, under or about the Premises. Consultant agrees to reimburse City within thirty (30) calendar days of City's written request for any damages caused to City owned utilities caused by a failure of PIN to exercise reasonable care the Premises. SECTION 5. [RESERVED BY AGREEMENT OF THE PARTIES[ SECTION 6. SURRENDER; DUTIES UPON TERMINATION OR EXPIRATION. Upon the expiration or earlier termination of this Agreement, Consultant shall immediately surrender the Premises in the same condition as received upon completion of the improvements detailed in this Agreement and any other improvements completed by City during the term of this Agreement (excepting reasonable wear and tear; casualty not caused or contributed to by Consultant or its officials, employees, agents or subcontractors; or condemnation not caused or contributed to by Consultant or its employees, agents or subcontractors), broom cleaned, walk-through with City staff completed, and free from hazards that are not pre-existing and were not introduced by the City or its officials employees, agents or subcontractors and clear of all debris that is not pre-existing and was not introduced by the City or its officials, employees, agents or subcontractors. At such time, Consultant shall remove all of its property from the Premises hereunder, and shall repair, at its cost, any damage to the Premises caused by such removal. Consultant's obligations under this Section shall survive any termination of this Agreement. Consultant shall deliver to the City the originals of all books, permits, plans, records, licenses, contracts, and other documents pertaining to the Premises and its operation, any insurance policies, bills of sale or other documents evidencing title or rights of the City, and any and all other records or documents pertaining to the Premise, whether or not enumerated herein, which are requested by the City or necessary or desirable for the ownership and operation of the Premise, which are in the Consultant's possession. Consultant shall also deliver to City all keys, alarm codes, passwords, and other items used to secure the Premise Item 6: Staff Report Pg. 36 Packet Pg. 211 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need J Consultant further agrees to do all other reasonable things reasonably necessary to cause an or er y transition of the management and operation of the Premises. The provisions of this Section shall survive the expiration or earlier termination of this Agreement until the obligations of the Consultant under this Section are fulfilled to the reasonable satisfaction of the City. SECTION 7. REPAIR OF DAMAGE. If any portion of the Premises or any property of City located in, on, under or adjacent to the Premises is damaged or at risk of damage by any of the activities conducted by Consultant or anyone acting by or through Consultant, Consultant shall immediately notify City in writing of such damage or risk of damage. City may remedy, but shall not be obligated to remedy, such damage or risk of damage at Consultant's sole cost, or City may elect to witness Consultant's repair work. In the event City elects not to remedy such damage or threat, Consultant shall repair any and all such damage and restore the Premises or such property to its previous condition subject to City's inspection, review and approval. SECTION 8. CITY'S RIGHT TO CURE DEFAULTS BY CONSULTANT. If Consultant fails to perform any of its obligations under this Exhibit D to restore the Premise, remove or alter improvements or repair damage, or if Consultant defaults in the performance of any of its other obligations under this Exhibit D within a reasonable time after demand by City, then City may, at its sole option, remedy such failure at Consultant's expense; within ten (10) days of receipt of a bill, Consultant shall promptly reimburse the City's actual reasonable costs (including without limitation all costs, damages, expenses or liabilities incurred by City, reasonable attorneys', experts' and Consultants' fees) in remedying or attempting to remedy such failure, or City may reduce any outstanding amount due to Consultant under the Agreement by the cost to City of such remedial action. In the alternative, the cost thereof may be made a lien on Consultant's property as provided in section 12.12.010 of the Palo Alto Municipal Code. Any such remedial action by City shall not be construed as a waiver of any rights or remedies of City under this Exhibit D or the Agreement, and nothing herein shall imply any duty of City to do any act that Consultant is obligated to perform. Consultant's obligations tinder this Section shall survive the expiration or earlier termination of this Exhibit D. SECTION 9. GENERAL PROVISIONS. (a) If Consultant consists of more than one person, the obligations of each person shall be joint and several. (b) Consultant may not record this Exhibit D or any memorandum hereof. (c) Any sale or conveyance by City of the Premises, the provisions of Section 19 ("Termination or Suspension of Agreement or Services") of this Agreement shall govern. SECTION 10. HOLDING OVER. If Consultant remains in possession of the Premises or any part thereof after the expiration of the term of this Agreement, or any renewal option thereto, such occupancy shall be a revocable license from month to month with all the obligations of this Exhibit D applicable to Consultant. Nothing contained Exhibit D or in the Agreement shall give to Consultant the right to occupy the Premises after the expiration of the term of this Agreement, or any renewal option thereto, or upon any earlier termination. SECTION 11. WAIVER OF CIVIL CODE. Consultant expressly waives the benefit of any statute now or hereinafter in effect, including the provisions of sections 1941 and 1942 of the Civil Code of California, to the extent applicable, which would otherwise afford Consultant the right to make repairs at City's expense or to terminate this Agreement because of City's failure to keep Premises in good order, condition and repair. SECTION 12. ALTERATIONS BY CONSULTANT. Consultant shall not make any alterations or improvements to the Premises without obtaining the prior written consent of the City Manager, except for alterations or improvements that cost less than Ten Thousand Dollars ($IO,000.00) and which do not affect any building systems or the structural integrity or any structural components of the Premises. 12.1 Ownership of Improvements. All improvements constructed, erected, or installed upon the Premises by Consultant must be free and clear of all liens, claims, or liability for labor or material and Item 6: Staff Report Pg. 37 Packet Pg. 212 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need J shall become the property of City, at its election, upon expiration or earlier termination ror-inc term ar d shall remain upon the Premises upon expiration or earlier termination of this Agreement. Any furniture, trade fixtures installed by Consultant, equipment or other property of Consultant (whether obtained prior to or during the term of this Agreement) shall remain the property of Consultant. Consultant shall restore the Premises to the condition prior to Consultant's installation of such trade fixtures, consistent with Section 6 ("Surrender; Duties Upon Termination or Expiration"). . 12.2 Indemnity for Claims Arising Out of Construction. For the avoidance of doubt, included in Consultant's obligations under Section 16 ("Indemnity; Limitation of Liability") of the Agreement to which this is an exhibit, is Consultant's obligation to indemnify, defend and hold harmless City Indemnified Parties against all Claims arising out of construction and maintenance work performed on the Premises by Consultant or caused to be performed on the Premises by Consultant. 12.3 Certificate of Inspection. In the event Consultant will perform, or cause to be performed, any construction, improvement or alteration or any other work on or to the Premises for which City requires a certificate of completion, then upon completion of any such construction, improvement or alteration, Consultant shall submit to the City Manager a Certificate of Inspection, verifying that such construction, improvement or alteration was completed in conformance with Title 20 of the California Code of Regulations for residential construction, or in conformance with Title 24 of the California Code of Regulations for non-residential construction, as applicable. 12.4 As Built Plans. Consultant shall provide the City Manager with a complete set of reproducible "as built plans" reflecting actual construction within or upon the Premises upon completion of any: (i) new construction or (ii) structural alterations. SECTION 13. ASBESTOS NOTIFICATION. Consultant acknowledges that City has advised Consultant that the Premises contains, or because of its age, is likely to contain asbestos -containing materials ("ACMs"). if Consultant undertakes any alterations, additions, or improvements to the Premises, Consultant shall do so in a manner that avoids disturbing any ACMs present on the Premises. If ACMs are likely to be disturbed in the course of such work, Consultant shall encapsulate or remove the ACMs in accordance with an asbestos -removal plan approved by the City and otherwise in accordance with all applicable laws, including giving all notices required, if any, by California Health and Safety Code §§ 25915-25919.7, as may be amended. SECTION 14. MATERIAL CASUALTY 14.1 Damage and Repair. If a Material Casualty (as defined herein) occurs, then the City shall determine, in its sole and absolute discretion, whether it wishes to continue to operate the Premises as an animal shelter. The City's failure to provide written notice to Consultant of such election within thirty (30) days after the occurrence of a Material Casualty or other damage or destruction of the Premises shall constitute the City's election to continue the operation of the Premises as an animal shelter. If the City elects (or is deemed to elect) to continue the operation of the Premises as an animal shelter after a Material Casualty, or if the Premises is damaged but such damage does not constitute a Material Casualty, then the City shall promptly reconstruct or repair the destroyed or damaged portion of the Premises. City shall pay all costs of repairing and reconstructing the Premises. A "Material Casualty" is a total destruction of the Premises or any damage to the Premises the repair of which would exceed the City Manager's Council -delegated contracting authority under Palo Alto Municipal Code section 2.30.210, depending on the applicable contract types in relation to the repairs required. 14.2 Termination. If City notifies Consultant in writing within thirty (30) days after the occurrence of a Material Casualty that the City elects to not continue the operation of the Premises as an animal shelter after such Material Casualty, then the Agreement shall immediately terminate as of the date such notice is delivered to Consultant. In the event of such termination, (i) City shall pay Consultant's reasonable costs in winding down the operations at the Premises, including, but not limited to, any costs Item 6: Staff Report Pg. 38 Packet Pg. 213 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need associated with the termination of employees by Consultant and (ii) Consultant shall be entitled to retain its prorated compensation amount for the quarter in which termination occurs (prorated for the number of days in such quarter that elapsed up to the date of termination). 14.3 Continuation. Lithe City elects (or is deemed to elect) or is obligated to reconstruct or repair the damaged portions of the Premises because such damage does not constitute a Material Casualty pursuant to Section 14.1 ("Damage and Repair"), the City and Consultant shall make a determination as to whether the Premises will continue to operate during the reconstructionlrepair period. If the parties mutually determine (in their respective reasonable discretion) that the Premises will operate during such period, this Agreement shall remain in full force and effect. Otherwise, Consultant's obligations to provide animal shelter services under this Agreement shall be suspended during such period. In the event of such suspension, (i) City shall pay Consultant's reasonable costs incurred by Consultant during any such suspension of operations and (ii) Consultant shall be entitled to retain its prorated compensation amount for the quarter in which suspension occurs (prorated for the number of days in such quarter that elapsed up to the date of suspension). City shall further pay all reasonable costs incurred by Consultant due to such suspension, if the parties desire, during the suspension period, the parties may negotiate in good faith to try to provide for animal shelter services to the best of the parties' reasonable abilities under the circumstances of such a suspension. SECTION 15. CITY IMPROVEMENTS TO PREMISES. The City has worked with Consultant to identify improvements to the Premises. The City shall improve the Premises as follows, subject to the Contingencies described in this section: 15.1 Expansion of Existing Medical Suite. The City shall expand the medical suite at the Premises to accommodate more animals and offer more privacy to customers. The remodeled medical suite shall expand into the office area for the shelter and shall offer separate entrances for medical customers, separate treatment, recovery, and preparation areas, as well as a lobby for medical customers. The expansion will not be inconsistent with the plans entitled "Floor Plan — New Medical Area" that Consultant provided to City, attached as (Exhibit D -l), to the extent practicable and feasible based on site requirements and architectural- or engineering -based considerations. The City shall abate asbestos and lead paint within the medical suite area of the Premises. Expected Timeline: Design and Review Timelines: A/E Consultant Procurement: November 8 — December 30, 2018 Schematic Design / Design Development: January 2,2019 —February 25, 2019 Construction Documents: February 28 — March 22, 2019 Building Permit: April 4 — May 5, 2019 Procurement and Construction Timelines: General Contract Bidding/Procurement: April 25 —July 7, 2019 Construction: July 24 —November 14, 2019 Note: During construction, the building will be closed, and staff will need alternative worksites. All other parts of the building should still be open. 15.2 Addition of New Modular Building. The City shall place a modular building on the site to supplement the existing building. The building shall be used for offices as well as for meetings and educational programs for the public. The modular building shall be connected to utilities and will likely require a concrete pad. The modular building will not be inconsistent with Exhibit D-2, to the extent practicable and feasible based on site requirements and architectural- or engineering -based considerations. The City will place one (I)construction-type trailer within sixty (60) days as temporary accommodations until the modular building is installed and operational. Expected Timeline: Item 6: Staff Report Pg. 39 Packet Pg. 214 of 553 Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need Design and Review Timelines: Design: November 8,2018 —February 25, 2019 ARB Review: January 10, 2019— February 8, 2019 Building Permit (concurrent): January 11, 2019 -- May 4, 2019 Procurement and Construction Timelines: Procurement (9 steps): February 28— May 12, 2019 Construction (4 major steps): May 1, 2019 — July 28, 2019 15.3 Renovation of Existing Dog Kennels. The City shall renovate the existing dog kennels located at the Premises to ensure that all kennels are operable and expected that this work shall be done by March 15, 2019. The renovation shall be as described in Exhibit D-3, to the extent practicable and feasible based on site requirements and architectural- or engineering -based considerations. 15.4 Construction of New Dog Kennels. The City shall construct 16 new kennels on the Premises. Construction is expected to be complete by July 30, 2020. The new kennels will be constructed of galvanized steel, will be air-conditioned and heated, and located as close as possible to the existing dog kennels and medical area, to the extent practicable and feasible based on site requirements and architectural- or engineering -based considerations. Interior and exterior runs shall be of material size and quality not inconsistent with the applicable items as set forth on Exhibit D-4, to the extent practicable and feasible based on site requirements, architectural- or engineering -based considerations, and procurement requirements applicable to the City as a public entity. 15.5 Total Cost. The total cost of these improvements above is expected to be approximately $3.4 million, not including staff time, as estimated at the time as of the execution of this Agreement, and shall be fully paid for by the City of Palo Alto. 15.6 Contingencies. The Parties acknowledge that the improvements in this Section are subject to conditions which may alter the scope of the aforementioned improvements and could prevent one, some, or all of them from being constructed. These conditions include, but are not limited to: (a) Permitting and architectural review; (b) Appropriation of sufficient funds, as decided by the City Council; (c) Compliance with all laws, regulations, permits, and conditions, including CEQA; and (d) Changes in the prices for construction and materials. 15.7 Additional Compensation for Renovation Delays. Due to facility inadequacies, that would be remedied by the completion of the renovations outlined in sections 15.1, 15.2, and 15.3, the City will provide additional compensation to Consultant up to five -thousand dollars ($5,000) per month, should the City be unable to substantially complete the renovations in the time periods outlined in sections 15.1, 15.2, and 15.3. The additional compensation must be specifically documented and related to costs Consultant incurs as a result of facility inadequacies that would be remedied by the completion of renovations. 15.8 All work performed by the City shall be performed in a workmanlike manner, in compliance with all applicable laws., City shall take reasonable steps to perform such work in a manner which results in minimal disruption to Consultant's activities in the Premises. Consultant will take reasonable steps to accommodate City's work. The City shall enforce all applicable third party warranties at the request of Consultant. City shall promptly obtain final certificates of occupancy for all applicable portions of the Premises. 15.9 Renovation Timeline Updates. City shall provide renovation timeline updates to Consultant on a quarterly basis or more frequently upon request. Six months after the commencement of the construction of the improvements detailed in this Agreement, the parties will meet to review whether the renovation timelines stated herein are on track. City shall provide renovation timeline updates to Item 6: Staff Report Pg. 40 Packet Pg. 215 of 553 Consultant on a quarterly basis or more freauentiy upon request. If, in Can determination, there is excessive delay in any renovation timelines stated herein, and City is not diligently pursuing completion of the improvements detailed in Section 15.1, 15.2, or 153, Consultant may terminate this Agreement upon sixty (60) days' written notice to City. Item 6 Attachment B - Contract No. C19174493 between the City of Palo Alto and Pets in Need Item 6: Staff Report Pg. 41 Packet Pg. 216 of 553 3[ TfSL7-.�-•sorry a - -F Item 6 Palo Alto Animal Shelter O r Attachment B - Contract No. 3281 East Bayshore Rd., Palo Alto, CA ' C19174493 between the City of Palo — ;i • _ d T! Alto and Pets in Need 1$es -* : ' •,� i� ''7 F` '4 - J V� r - x Tf �. , 9r ,��r ,•4i}1�Ef: :4V _ ti 'ti •�d '' � r�. . f • . '� ' ' ti(�j /�►f'�y�T y�Y � ��i..� ♦• irt"r +7�'7��"r� �� f!Y •' S, 'r • wY �• _ r t. ` � i ±� � �� i L � R►' , r � rr� 3�� 1'� �Y. tr•• c• F ' i • �� i� ��'tir� �' A � �• � � ,fir / ��+ •,� � , j�;r�,w• •�� r rI r � fX r.-. �y� •: .. :.^ r r iys �,�IklT. � ��M ..# yi - � ■ ' �+�� fit,. ` `•�4•i �r` � � its l.r� �;,• �� •�.� ..� r:r-I f S DocuSign Envelope ID: 67EE6E23-85D4-4502-8854-30 BAD16134CA AMENDMENT NO. 1 Item 6 Attachment C - Amendment No. 1 to Contract No. C19174493 with Pets in Need TO CONTRACT NO. C19174493 BETWEEN THE CITY OF PALO ALTO AND PETS IN NEED This Amendment No. 1 (this "Amendment") to Contract No. C19174493 (the "Contract" as defined below) is entered into as of August 20, 2023 by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("CITY"), and PETS IN NEED, a California non-profit public benefit corporation, located at 871 Fifth Ave., Redwood City, CA 94063 ("CONSULTANT or Pets in Need"). CITY and CONSULTANT are referred to collectively as the "Parties" in this Amendment. RECITALS A. The Contract (as defined below) was entered into by and between the Parties hereto for the provision of animal sheltering and veterinary care as detailed therein. B. The Parties now wish to amend the Contract in order to add additional compensation. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the Parties agree: SECTION 1. Definitions. The following definitions shall apply to this Amendment: a. Contract. The term "Contract" shall mean Contract No. C19174493 between CONSULTANT and CITY, dated January 17, 2019. b. Other Terrns. Capitalized terms used and not defined in this Amendment shall have the meanings assigned to such terms in the Contract. SECTION 2. Section 4 of the Contract is hereby amended to read as follows: SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services shall be in the amount of, and shall not exceed three -million eight -hundred eighty-four thousand nine -hundred six dollars and ten cents ($3,884,906.10) as detailed in Exhibit "B" (Compensation). CONSULTANT agrees to complete all Services within this amount. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY. Notwithstanding the foregoing, a contingency fund of two -hundred thousand dollars ($200,000) (the "Contingency Fund") shall be available; as well as a fund for the compensation of renovation delays ("Compensation of Renovation Delays Fund") of sixty thousand dollars ($60,000) shall be available, as detailed in Exhibit "B" (Compensation). In the event the Contingency Fund and the Compensation of Renovations Delays Fund are utilized as provided for herein, the total compensation for Services, reimbursable expenses and the costs payable by CITY to CONSULTANT under this Agreement, shall be and shall not exceed four - million one -hundred forty-four thousand nine -hundred six dollars and ten cents ($4,144,906.10 as detailed in Exhibit "B" (Compensation), subject to Section 19 ("TERMINATION OR SUSPENSION Vers.: Aug. 5, 2019 PaeIof4 Item 6: Staff Report Pg. 43 Packet Pg. 218 of 553 DocuSign Envelope ID: 67EE6E23-85D4-4502-8854-30 BAD16134CA Item 6 Attachment C - Amendment No. 1 to Contract No. C19174493 with Pets in Need OF AGREEMENT OR SERVICES"). SECTION 3. The following exhibit(s) to the Contract is/are hereby amended or added, as indicated below, to read as set forth in the attachment(s) to this Amendment, which is/are hereby incorporated in full into this Amendment and into the Contract by this reference: a. Exhibit "B" entitled "COMPENSATION", AMENDED, REPLACES PREVIOUS. SECTION 4. Legal Effect. Except as modified by this Amendment, all other provisions of the Contract, including any exhibits thereto, shall remain in full force and effect. SECTION 5. Incorporation of Recitals. The recitals set forth above are terms of this Amendment and are fully incorporated herein by this reference. SIGNATURES OF THE PARTIES IN WITNESS WHEREOF, the Parties have by their duly authorized representatives executed this Amendment effective as of the date first above written. CITY OF PALO ALTO DocuSigned by: City Manager [U F2DCA19CCUNF9.. Ed Shikada APPROVED: CDocuSigned by: 0 14343AF62D49 Director, Commune y ervices Kristen O'Kane APPROVED AS TO FORM: DocuSigned by: Tim Shimizu City Attorney2or°designee Tim Shimizu Attachments: Exhibit "B" Compensation PETS IN NEED Officer 1 By: &L(6 1 - Name: Robert Kalman Title: Chair, Board of Directors Officer 2 t✓� �J� By: Name: La,Gcf/li. Qf Title: I'1Fi Vers.: Aug. 5, 2019 Item 6: Staff Report Pg. 44 Packet Pg. 219 of 553 DocuSign Envelope ID: 67EE6E23-85D4-4502-8854-30BAD16134CA Item 6 Attachment C - Amendment No. 1 to Contract No. C19174493 with Pets in Need EXHIBIT "B" COMPENSATION CITY agrees to compensate CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in the schedule below. SCHEDULE TO EQUAL AND NOT TO EXCEED (SUBJECT TO SECTION 19 "TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES') Year 1 $708,000.00 Year 2 $663,000.00 Year 3 $676,260.00 Year 4 $689,785.20 Year 5 $703,580.90 Additional monthly payment starting June 2023 $444,280.00 ($55,535 per month or pro -rated for partial months) Sub -total Basic Services Reimbursable Expenses Sub -Total Basic Services and Reimbursable expenses Contingency Funds $3,884,906.10 $0.00 $3,884,906.10 $200,000.00 (not to exceed $40,000 per year) Additional Compensation for Renovation Delays $60,000.00 (not to exceed $5,000 per month; see Exhibit D, Section 15.7) Maximum Total Compensation $4,144,906.10 ONE-TIME ADVANCE Simultaneous with the execution of this Agreement, CITY shall pay to CONSULTANT One Hundred Seventy Eight Thousand dollars ($178,000) as an advance against the first three months of CONSULTANT's fee. CONSULTANT shall not submit an invoice for the remainder of its fee for the third month until the end of such third month. CONTINGENCY FUNDS CITY shall provide contingency funds to CONSULTANT in the following circumstances, subject to written approval by the CITY's project manager, and to equal and not to exceed the amount in this Exhibit C: 1. CITY shall provide contingency funds for after-hours and emergency veterinary care if: a. CONSULTANT has already spent at least $10,000 in the past 12 months on a rolling basis on after-hours or emergency veterinary care that was reasonable based on AVMA guidelines; and Vers.: Aug. 5, 2019 Item 6: Staff Report Pg. 45 Packet Pg. 220 of 553 DocuSign Envelope ID: 67EE6E23-85D4-4502-8854-30 BAD16134CA Item 6 Attachment C - Amendment No. 1 to Contract No. C19174493 with Pets in Need b. The emergency or after hours treatment being sought is reasonable based on AVMA guidelines. 2. CITY shall provide contingency funds for hoarding cases if: a. CONSULTANT has already served more than 600 animals from the CITY or the Contract Cities in the past 12 months; and b. The hoarding case involves a minimum of 12 animals brought at once that are expected to stay in the facility for at least 30 days each. 3. CITY shall provide contingency funds for the actual costs of wildlife intake at the Peninsula Humane Society if: a. The Peninsula Humane Society begins charging for the costs of wildlife services; and, b. This Agreement has not yet been amended to reflect the additional costs of such services. 4. CONSULTANT may also request contingency funds in other unforeseen circumstances. To request contingency funds, the CONSULTANT shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT's proposed maximum compensation, for such services. In addition to the factors above, CITY may consider whether contingency funds are appropriate within existing funding and workload, and contingency funds shall not be released if CONSULTANT has not exhausted unused or unallocated funds. The CITY shall notify CONSULTANT in writing of its approval or lack thereof within ten (10) days after the date of CONSULTANT's proposal. If CITY's project manager does not approve CONSULTANT's request, CONSULTANT may appeal that decision to the City Manager. If authorized by CITY, the contingency services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY's project manager and CONSULTANT, and payment shall be made to CONSULTANT, no later than ten (10) days after the date of CITY's authorization. Contingency funds are subject to all requirements and restrictions in this Agreement. ADDITIONAL COMPENSATION FOR RENOVATION DELAYS The City shall pay Consultant up to $5,000 monthly for up to twelve consecutive months pursuant to the terms of Exhibit D, Section 15.7 ("Additional Compensation for Renovation Delays") of this Agreement. REIMBURSABLE EXPENSES No Reimbursable Expenses are authorized by CITY through this Agreement, unless pursuant to a written amendment to this Agreement as provided for herein. ADDITIONAL SERVICES No Additional Services are authorized by the CITY through this Agreement, unless pursuant to a written amendment to this Agreement as provided for herein. Vers.: Aug. 5, 2019 Item 6: Staff Report Pg. 46 Packet Pg. 221 of 553 Certificate Of Completion Envelope Id: 67EE6E2385D44502885430BAD16134CA Subject: Complete with DocuSign: Executed PA Amendment RK and LTG 9 6 23 FINAL.pdf Source Envelope: Document Pages: 4 Signatures: 3 Certificate Pages: 2 Initials: 0 AutoNav: Enabled Envelopeld Stamping: Enabled Time Zone: (UTC-08:00) Pacific Time (US & Canada) Record Tracking Status: Original 9/6/2023 3:45:15 PM Security Appliance Status: Connected Storage Appliance Status: Connected Signer Events Kristen O'Kane Kristen.O'Kane@cityofpaloalto.org Director Community Services City of Palo Alto Security Level: Email, Account Authentication (None) Electronic Record and Signature Disclosure: Not Offered via DocuSign Tim Shimizu Tim.shimizu@cityofpaloalto.org Assistant City Attorney Security Level: Email, Account Authentication (None) Electronic Record and Signature Disclosure: Not Offered via DocuSign Ed Shikada Ed.Shikada@cityofpaloalto.org Ed Shikada City of Palo Alto Security Level: Email, Account Authentication (None) Electronic Record and Signature Disclosure: Not Offered via DocuSign In Person Signer Events Editor Delivery Events Agent Delivery Events Intermediary Delivery Events Certified Delivery Events Holder: Cayla Koga Cayla.Koga@CityofPaloAlto.org Pool: StateLocal Pool: City of Palo Alto Signature ED-16ig,11 by: 14343AF6226D499... Signature Adoption: Pre -selected Style Using IP Address: 199.33.32.254 by: ED$�1111 im Shimizu 23DECA072A0E483... Signature Adoption: Pre -selected Style Using IP Address: 174.160.254.220 ED—Signed�by:F2DGu" . Signature Adoption: Pre -selected Style Using IP Address: 199.33.32.254 Signature Status Status Status Status Item 6 Attachment C Am - CUSign Amendment No. 1 to Contract No. C19174493 Status: Co with Pets in Need Envelope Originator: Cayla Koga 250 Hamilton Ave Palo Alto , CA 94301 Cayla.Koga@CityofPaloAlto.org IP Address: 199.33.32.254 Location: DocuSign Location: DocuSign Timestamp Sent: 9/6/2023 3:57:14 PM Viewed: 9/7/2023 9:13:18 AM Signed: 9/7/2023 9:13:38 AM Sent: 9/7/2023 9:13:39 AM Viewed: 9/7/2023 9:14:17 AM Signed: 9/7/2023 9:15:00 AM Sent: 9/7/2023 9:15:01 AM Viewed: 9/7/2023 4:10:30 PM Signed: 9/7/2023 4:10:45 PM Timestamp Timestamp Timestamp Timestamp Timestamp Item 6: Staff Report Pg. 47 l Packet Pg. 222 of 553 J Item 6 Carbon Copy Events Status Timest Attachment C - Amendment No. 1 to Witness Events Signature Timest Contract No. C19174493 with Pets in Need Notary Events Signature Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 9/6/2023 3:57:14 PM Certified Delivered Security Checked 9/7/2023 4:10:30 PM Signing Complete Security Checked 9/7/2023 4:10:45 PM Completed Security Checked 9/7/2023 4:10:45 PM Payment Events Status Timestamps Item 6: Staff Report Pg. 48 Packet Pg. 223 of 553 Item 7 Item 7 Staff Report CITY OF PALO ALTO City Council Staff Report From: City Manager Report Type: CONSENT CALENDAR Lead Department: Utilities Meeting Date: January 16, 2024 Staff Report: 2306-1634 TITLE Adopt a Resolution Approving an Amendment to the City's 2009 California -Oregon Transmission Project Long -Term Layoff Agreement to Extend the City's Layoff of its Share of the California Oregon Transmission Project (COTP) until 2034 and to Receive Annual Market Payments as Recommended by the Utilities Advisory Commission (UAC); CEQA Status — Not a Project RECOMMENDATION The Utilities Advisory Commission (UAC) and staff recommend the City Council adopt a Resolution approving Amendment No. 3 to the City's 2009 California -Oregon Transmission Project Long -Term Layoff Agreement to extend the term for 10 years until 2034 and to receive annual market payments, as shown in Exhibit A to the attached Resolution. EXECUTIVE SUMMARY The UAC and staff recommend the City extend the current 2009 Long -Term Layoff Agreement (2009 LTLA) for ten years until February 1, 2034 and add an annual market payment to the City of $550k in years 2024-2028 and $800k in 2029-2033. Amendment No. 3, approved by the TANC Commission on November 15, 2023, is included for review as Exhibit A to the Resolution in Attachment A. In parallel with approval by TID, MID and SMUD's governing boards, Amendment No. 3 will be considered by Palo Alto's City Council on January 16, 2024. In 2009 Palo Alto entered into a 15 -year temporary ownership agreement (or "layoff") of its share of California Oregon Transmission Project (COTP) with three of these utilities who had not joined the ISO: Turlock Irrigation District (TID), Modesto Irrigation District (MID), and the Sacramento Municipal Utilities District (SMUD). The 2009 layoff term ends February 1, 2024 unless extended or replaced. Upon expiration in 2024 the City would be required to pay the TID, MID, and SMUD approximately $1M (which is the value of the remaining useful life of existing capital replacements). The UAC reviewed the history and options for Palo Alto's share of the COTP in Item 7: Staff Report Pg. 1 Packet Pg. 224 of 553 Item 7 Item 7 Staff Report May 2023 (Staff Report: 2301-07951). The current 2009 Long -Term Layoff Agreement (2009 LTLA) and both of its amendments are included as Attachments B, C, and D. The proposed amendment and extension was reviewed by the UAC on December 6, 2023. The UAC discussion focused on why staff recommended the ten-year extension rather than another term; why staff recommended a layoff rather than a permanent sale; and understanding the net financial impact. A longer period layoff was preferable for cost certainty for Palo Alto, but ten years was negotiated. Regarding a permanent sale of the asset, the process of giving TANC members right of first refusal for a sale would have taken longer than the remaining duration of the layoff, at which point several benefits would have been lost to Palo Alto. Staff clarified that although the annual market payments will total up to $6.75M over the next ten years, staff also expects about $3.9M in accumulated capital replacement costs to be due to the layoff recipients in 2034, so the net financial impact will be saving approximately $7M in costs over the next ten years, plus a net collection of approximately $2.85M in market payments. The UAC voted unanimously to recommend to Council adopt the Resolution to approve the contract extension. BACKGROUND In 1984 the City of Palo Alto was a founding member of the Transmission Agency of Northern California (TANC), a joint powers agency formed in 1984 to facilitate the construction and joint ownership of transmission projects. TANC invested in construction the California Oregon Transmission Project, a high -voltage transmission extending from just north of the California - Oregon border to Tracy in the Central Valley. The purpose of this line was to ensure publicly owned utilities had sufficient transmission capacity outside of the PG&E -owned transmission system. With the formation of the California Integrated System Operator (ISO), the City of Palo Alto Utilities and several other publicly owned utilities joined the ISO. However, there were other publicly owned electric utilities, along with the federal hydroelectric project the Western Area Power Authority, which elected to not join the ISO and instead jointly decided to keep the COTP outside of the ISO market and transmission planning process. This decision stranded Palo Alto's share of the COTP in a different balancing authority and limited the value of the asset to Palo Alto. The COTP is a 340 -mile, 500 -kV AC transmission line between Southern Oregon and Central California. The COTP became operational in March 1993, and has a total rated capacity of 1,600 MW. 1 Staff Report 2301-0795 https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes- reports/agendas-minutes/utilities-advisory-commission/archived-agenda-and-minutes/agendas-and-minutes- 2023/05-m ay -2023/05-03-2023-2301-0795-i nfo. pdf Item 7: Staff Report Pg. 2 Packet Pg. 225 of 553 Item 7 Item 7 Staff Report From its northern end at the Bonneville Power Administration's Captain Jack Substation in Southern Oregon, the COTP continues south to the Western Area Power Administration's Tracy Substation and on towards the Tesla Substation (owned and operated by PG&E) in the CAISO balancing area. The Transmission Agency of Northern California (TANG) is a California Joint Powers Agency, formed in 1984 to facilitate the construction and joint ownership of transmission projects. Palo Alto was a founding member of TANC. Other members include MID, TID, SMUD and the Cities of Alameda, Biggs, Gridley, Healdsburg, Lodi, Lompoc, Redding, Roseville, Santa Clara, and Ukiah. TANC currently owns and operates approximately 87 percent of the COTP. Palo Alto is a signatory to TANC's 1990 Project Agreement No. 3 (PA3) MCSS (Resolution No. 6877, adopted March 26, 1990), Figure 1. Map of COTP as part of the California -Oregon Intertie. which provides the City a 3.6815%, or approximately 50 MW, share of TANC's current entitlement to transfer capability on the COTP. That line is expected to be increased in rating in 2025, increasing Palo Alto's share to 54 MW for north to south transmission. Palo Alto decided to lay off its share of the line in 2009 to MID, SMUD, and TID, and that layoff will come to end February 1, 2024 if not extended. DISCUSSION Analysis In 2009 laying off the COTP at cost to non -ISO public utilities was a reasonable choice; however, several fundamental policy and market changes have occurred in the last 15 years. These market changes have made transmission both more expensive and more valuable. Some of the market changes include high renewable electricity mandates, large increases in transmission costs to deliver renewable electricity, greater electricity market integration with neighboring states, and the California ISO's 2020 creation of a revenue stream for ISO utilities who make their portion of the COTP available to the ISO. Overall these changes increased the value of the COTP to both Palo Alto and the utilities who currently operate Palo Alto's share of the COTP under the 2009 layoff agreement. Item 7: Staff Report Pg. 3 Packet Pg. 226 of 553 Item 7 Item 7 Staff Report There are also substantial upcoming capital and operating expenses planned for the COTP to which Palo Alto would need to contribute if it took back its share, and uncertainties around future value streams which could make value of the City's share of the COTP lower than the City's cost of ownership, as shown in Table 1. Changes to the Current Layoff in the Amendment Terms for an amendment to the current were negotiated with MID, TID and SMUD resulting in a 10 -year amendment and extension of the 2009 layoff agreement as recommended to the Council for approval. Specifically, this amendment extends the layoff term until 2034, includes an annual market payment of $550k in years 2024-2028 and $800k in 2029-2033 from MID, TID and SMUD to Palo Alto. In addition, extending the layoff term would ensure that all the operating costs and a large percentage of the capital costs for the next 10 years would continue to be allocated to MID, TID and SMUD. Over the course of the current 15 -year layoff PA3 participants have approved many required capital projects to the COTP, which have mostly been replacements to existing facilities. As detailed in the 2009 LTLA (Attachment B), the portion of the useful life of the capital replacements that extend beyond the duration of the current layoff will be the responsibility of the layoff entities, including Palo Alto. To date, approximately $1M of these capital obligations would be payable by the City at the end of the layoff term in February 2024. Again, this $1M represents the City's share of the capital replacements whose life exceeds the duration of the layoff, were the City to end the current layoff in 2024. If the City amends the layoff agreement in accord with the terms in Amendment No. 3, then these previously accrued capital obligations would be reduced substantially and be due in 2034 instead. This reduction is shown in Table 1. The annual payments to the City from the Districts receiving the layoff of $550k will start in 2024, changing to $800k in 2029 through 2033. Comparison of Amended Layoff Agreement and Bringing COTP Back A summary table with approximation of the annual costs and value streams is below, for the 10 - year layoff agreement, from February 1, 2024 to January 31, 2034. This table compares the different costs and values of bringing the COTP back to Palo Alto's electric portfolio versus amending and extending the layoff agreement. The terms of the current layoff are shown as a comparison, although an extension of the current layoff without the annual payments to Palo Alto is not being considered. Table 1. Financial comparison of current estimates of value for bringing COTP Back versus the proposed terms for the Amended Layoff. The "Current Layoff Terms" are shown for comparison only, if the current layoff were extended, which is not under Item 7: Staff Report Pg. 4 Packet Pg. 227 of 553 Item 7 Item 7 Staff Report consideration, but simply shown for comparison purposes. All numbers are presented on an annual basis for the ten-year term covered by the proposed Amendment. Annual Cost or Revenue Bring COTP Back to Portfolio (2024-2034) RECOMMENDED Layoff Extension (2024-2034) Current Layoff Terms (2009-2024) O&M Obligations -$1,400,000 - - New Capital Obligations -$600,000 -$350,000 -$350,000 Prior Capital Obligations -$100,000 -$40,000 -$40,000 CRR Options Revenue $920,000 - - Energy Transfer System Resources Revenue $480,000 - - Average Layoff Payment - $675,000 - Low Cost Renewables Value unclear - - Total Cost (-) or Value (+) per year -$700,000 $285,000 -$390,000 Detailed Estimates of Costs and Values The prior capital obligation for repayment of about $1M (accrued from 2009 to 2024) is shown on an annual basis for different options for the duration. If the City were to bring the resource back rather than amend and extend the current layoff agreement, the City would be required to pay roughly $1M in prior capital obligations (shown in the table above as $100k per year over 10 years), effective February 1, 2024. The City is exempt from all operation and maintenance obligations related to PA3 during the current layoff, and that will continue with this layoff extension. Under the current 2009 LTLA Section 3.g. which remains unchanged via the potential extension, the City will be responsible for paying the Districts back at the end of the layoff for the percentage of the useful life of that capital replacement that extends beyond the term of the layoff agreement (in other words, when the COTP share returns to the City). There are substantial capital replacements planned for the next ten years, which TANC has preliminarily decided to finance. Staff projects that the expected capital costs to the City without a layoff extension will be approximately $600k per year for the 10 years covered by the proposed extension. Approximately $1M of that total of $6M over ten years is anticipated to be funded by TID, MID, and SMUD under a long-term layoff. Of the remaining $5M in capital expenditures from 2024-2034, Utilities staff, TANC staff, and NCPA staff are estimating approximately 70% of the capital replacements will need to be paid back to Districts in 2034, which is roughly $3.5M. This is estimated from the anticipated expenditures based on the timing of the expenditures and the lifetime of the actual equipment. These capital expenditures are shown in Table 1. These are for planned capital expenditures, and actual capital expenditures could potentially be higher. Under the 2009 layoff agreement, Palo Alto relinquishes "all of Palo Alto's use of its interests, rights, and obligations under TANC Project Agreement No. 3" unless TID, MID, and SMUD default, and this would remain so under the amendment extending the current agreement. Item 7: Staff Report Pg. 5 Packet Pg. 228 of 553 Item 7 Item 7 Staff Report Two revenue streams which are both volatile and uncertain are Congestion Revenue Rights (CRR) Options, and Energy Transfer System Resources (ETSRs). The ISO made CRR options available to Palo Alto in 20202; they are available to COTP owners so that entities can turn over their percentage of the COTP on a monthly or annual basis to the ISO and collect both CRR value for north to south and south to north throughout the year. This is essentially allowing the ISO to optimize that portion of the COTP within the ISO full network model to minimize costs for all, and then pass the value of the cost minimization to the respective COTP rights -holders. ETSRs are the difference between the energy component of the locational marginal price at different locations between Balancing Authorities beyond ISO, but within the Western Energy Imbalance Market (WEIM) and the Extended Day Ahead Market (EDAM). EDAM is under development and is expected to launch with PacifiCorp in 2025, and SMUD in approximately 2026. ETSRs essentially pass on the energy value to transmission owners who are connecting lower cost resources to higher cost generation areas. The COTP CRR options for public utilities like Palo Alto have averaged about $17k/MW per year. Palo Alto's current 51MW share will likely increase to 54MW by 2025, which staff estimates will generate approximately $920k/yr in CRR Options revenue. The revenue from ETSRs is harder to estimate and requires both that Palo Alto put its share of the COTP in the EDAM and that transmission owners to the north do the same with their transmission. The City's consultants have also advised that there are additional nuances regarding how ETSRs are collected and distributed that may impact these estimates. CAISO has not yet finalized the EDAM rules. The potential value from lower cost renewable resources comes from the fact that there might be high -quality wind resources able to directly connect on the COTP, which would be of value to Palo Alto if the City opted to bring the asset back. However, securing transmission rights from the COTP's northern end at Captain Jack to further north where the resources are located is very difficult. In addition, the COTP process for direct interconnection is only now being developed and is likely to take years and require expensive power flow studies. Alternatives Staff explored bringing the COTP share back and issued an RFP for renewables with preference for interconnection at Captain Jack intertie. The City did not receive any offers, although there was some potential for projects which would take several years to develop. Alternatively, an outright sale of the City's share of the COTP was explored, the regulatory uncertainty with EDAM and other issues greatly diminished the value. There is also long-term interest in maintaining the City's share of the COTP to maintain flexibility of resources into the z Explanation of the CRR Options developed for the COTP in 2020 https://www.youtube.com/watch?v=lo2ig60i9wo&t=146s Item 7: Staff Report Pg. 6 Packet Pg. 229 of 553 Item 7 Item 7 Staff Report future given the uncertain regulatory environment and the difficulty in siting and constructing new transmission lines. FISCAL/RESOURCE IMPACT The recommended action to amend and extend the 2009 Layoff will not require payments from Palo Alto until 2034, and Palo Alto will receive annual payments May 1st of $550k each year from 2024 to 2028 and then $800k from 2029 to 2033. The terms are the same as current cost obligations meaning that PA3-related operations and maintenance costs during the layoff will not be Palo Alto's responsibility, while capital replacements made during the layoff will continue to be allocated as described in Section 3.g. of the 2009 LTLA (Attachment B). In 2034 Palo Alto will need to pay the City's portion of capital costs and obligations that were prefunded by TID, MID, and SMUD during the layoff, if applicable. As shown in Table 1 these capital costs which are being prefunded by TID, MID, and SMUD from 2024-2034 can be tracked annually and funds can be set aside for that repayment. STAKEHOLDER ENGAGEMENT This proposed layoff amendment is consistent with the Utilities Strategic Plan, the Utilities Electric Integrated Resources Plan, Sustainability Implementation Plans, and the City's Sustainability and Climate Action Plan (S/CAP) ENVIRONMENTAL REVIEW Staff's recommendation does not require California Environmental Quality Act review, because it does not meet the definition of a project under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), as an administrative governmental activity which will not cause a direct or indirect physical change in the environment. TANC certified the Final Environmental Impact Report for the COTP in 1988. ATTACHMENTS Attachment A: Resolution with Amendment No. 3 as Exhibit A Attachment B: Current 2009 Long -Term Layoff Agreement Attachment C: Amendment No. 1 to the 2009 LTA Attachment D: Amendment No. 2. to the 2009 LTA APPROVED BY: Dean Batchelor, Director Utilities Staff: Lena Perkins, PhD, Senior Resource Planner Item 7: Staff Report Pg. 7 Packet Pg. 230 of 553 Item 7 *NOT YET APPROVED* Resolution io Attachment Resolution with Resolution No. Amendment No. 3 as Resolution of the Council of the City of Palo Alto Approc b Exhibit A Amendment No. 3 to the 2009 California -Oregon Transmission Project Long -Term Layoff Agreement with Certain Other Members of the Transmission Agency of Northern California to Extend the Term for 10 Years Until 2034 and to Receive Annual Market Payments RECITALS A. The City of Palo Alto ("City"), a municipal utility and a chartered city, became a founding member of the Transmission Agency of Northern California ("TANC") in 1984, to facilitate construction and joint ownership of transmission projects. B. The City of Palo Alto, the California cities of Alameda, Biggs, Gridley, Healdsburg, Lodi, Lompoc, Redding, Roseville, Santa Clara, and Ukiah; the Modesto Irrigation District ("MID"); the Turlock Irrigation District ("TID"); and the Sacramento Municipal Utility District ("SMUD") are also members of TANC. C. TANC currently owns approximately 87 percent of the California -Oregon Transmission Project ("COTP"), a 500 -kV transmission line that interconnects with the Bonneville Power Administration at the Captain Jack Substation in Southern Oregon and with Pacific Gas & Electric Company in California at the Tesla Substation. D. The City became a participant in the COTP in 1990, by executing Project Agreement No. 3 (PA3) and has a 3.6815%, or approximately 50 MW, share of TANC's current entitlement to transfer capability on the COTP. Due to changes in the value of the COTP to the City's electric portfolio in 2009 the City, along with the City of Roseville, executed the Long -Term Lay-off Agreement ("2009 LTLA") to transfer each party's full COTP entitlement and obligations to MID, TID and SMUD for fifteen years (Resolution No. 8900). Amendment No. 1 to the 2009 LTLA returned Roseville's COTP interests, rights, and obligations from MID, TID, and SMUD back to Roseville, and clarified the City's voting rights under TANC PA 3. G. At TANC's January 27, 2016 meeting, TANC approved a resolution authorizing the issuance of California -Oregon Transmission Project Revenue Refunding Bonds, 2016 Series, ("the 2016 COTP Bonds"). On March 9, 2016 TANC issued and sold its $173,920,000 California - Oregon Transmission Project Revenue Refunding Bonds, 2016 Series A (the "2016A Bonds"), which have a maturity date of May 1, 2039. H. Amendment No. 2 to the 2009 LTLA provided that in the absence of a default by MIDTID, and SMUD, Debt Service for the 2016A Bonds and any extension thereof associated with City's 3.6815 Participation Percentage in TANC's entitlement to Transfer Capability on the COTP would be paid by MID, TID, and SMUD. 6056795 UAC Item 7: Staff Report Pg. 8 Packet Pg. 231 of 553 Item 7 Attachment A - *NOT YET APPROVED* Resolution with Amendment No. 3 as Exhibit A J The Parties have agreed to execute this Amendment No. 3 tL. attached as Exhibit A, to extend the 2009 LTLA for approximately an additional ten years to January 31, 2034 to ensure that all of City's interests, rights, and obligations associated with its Participation Percentage under TANC PA 3 continue to be laid off to MID, TID, and SMUD for the extended term of the 2009 LTLA in the absence of a default by MID, TID, and SMUD, and to add an annual market payment to City from MID, TID, and SMUD. This Amendment No. 3, by modifying the term of the 2009 LTLA, will also extend the term of ROSEVILLE's layoff of its South of Tesla ("SOT") allocation, originally described in Section 4 of the 2009 LTLA. The Council of the City of Palo Alto RESOLVES as follows: SECTION 1. The Council approves Amendment No. 3 to the 2009 Long Term Layoff Agreement by and Among the Transmission Agency of Northern California and Certain of its Members, attached as Exhibit A to this resolution. SECTION 2. As permitted by Section 2.30.290 of the City's Municipal Code, the Council delegates authority to the City Manager, or his designee, to execute further amendments to the 2009 Long Term Layoff Agreement as needed to maintain the value of the City's laid -off COTP share through the remaining term of the 2009 Long Term Layoff Agreement. Any further amendments shall be in writing, accomplished in accordance with the terms of the 2009 Long Term Layoff Agreement, as amended, and shall not exceed the limits of the authority granted by the Council. Further amendments shall also require approval by the City Attorney's Office, TANC and the other 2009 Long Term Layoff Agreement participants. // // // // // // 6056795 UAC Item 7: Staff Report Pg. 9 Packet Pg. 232 of 553 Item 7 Attachmt A - *NOT YET APP ROVED* Resolution io nwi Resolution with Amendment No. 3 as SECTION 3. The Council finds that the adoption of this resolutio ExhibitA ute a project under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), as an administrative governmental activity which will not cause a direct or indirect physical change in the environment. TANC certified the Final Environmental Impact Report for the COTP in 1988. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: Assistant City Attorney 6056795 UAC City Manager Director of Utilities Director of Administrative Services Item 7: Staff Report Pg. 10 Packet Pg. 233 of 553 Item 7 Attachment A - it A Resolution with Amendment No. 3 as Amendment No. 3 Exhibit A Long -Term Layoff Agreement By and Among the Transmission Agency of Northern California and certain of its Members namely The City of Palo Alto The City of Roseville The Modesto Irrigation District The Turlock Irrigation District and The Sacramento Municipal Utility District 6056786 83112.00002\41775073.2 Item 7: Staff Report Pg. 11 Packet Pg. 234 of 553 TABLE OF CONTENTS Item 7 Attachment A - it A Resolution with Amendment No. 3 as Exhibit A RECITALS....................................................................................................................................................... 2 AGREEMENT.................................................................................................................................................. 3 Section1. Effective Date...........................................................................................................................3 Section 2. Modification of Section 2, "Term"........................................................................................... 3 Section 3. Addition of Section 3.k, "Annual Market Payment"...............................................................4 Section4. Integration................................................................................................................................ 4 SIGNATURES..................................................................................................................................................4 This Amendment No. 3 of the February 1, 2009 Long Term Layoff Agreement By and Among the Transmission Agency of Northern California and certain of its members ("LTLA"), is entered into as of the Effective Date defined in Section 1 of this Amendment No. 3, by and among the Transmission Agency of Northern California ("TANC") and certain of its members, namely the City of Palo Alto, referred to as "PALO ALTO", and, the City of Roseville ("ROSEVILLE"), the Modesto Irrigation District ("MODESTO"), the Turlock Irrigation District ("TURLOCK"), and the Sacramento Municipal Utility District ("SMUD"), with references to each entity individually and collectively as "Party" or "Parties". Capitalized terms used in this Amendment No. 3 are defined in TANC Project Agreement No. 3, unless otherwise specifically defined in this Amendment No. 3. RECITALS: A. PALO ALTO, MODESTO, ROSEVILLE, TURLOCK, and SMUD are each Participants in and parties to TANC Project Agreement No. 3 ("TANC PA 3"), entered into March 1, 1990. B. In the LTLA, PALO ALTO and ROSEVILLE laid off their entitlement to TANC's Transfer Capability on the California -Oregon Transmission Project ("COTP") associated with their Participation Percentages under TANC PA 3 to MODESTO, TURLOCK, and SMUD for the fifteen -year term of the LTLA. C. In the LTLA, MODESTO, ROSEVILLE, TURLOCK, and SMUD accepted and assumed all of PALO ALTO and ROSEVILLE's Participation Percentages under TANC PA 3 for the term of the LTLA. D. Amendment No. 1 to the LTLA returned ROSEVILLE's COTP interests, rights, and obligations from MODESTO, TURLOCK, and SMUD back to ROSEVILLE, and clarified PALO ALTO's voting rights under TANC PA 3. 6056786 83112.00002\41775073.2 Item 7: Staff Report Pg. 12 Packet Pg. 235 of 553 Item 7 Attachment A - it A Resolution with Amendment No. 3 as E. At TANC's January 27, 2016 meeting, TANC approved a resolution a ExnibitA issuance of California -Oregon Transmission Project Revenue Refunding Bonds, 2016 Series, ("the 2016 COTP Bonds"). On March 9, 2016 TANC issued and sold its $173,920,000 California -Oregon Transmission Project Revenue Refunding Bonds, 2016 Series A (the "2016A Bonds"), which have a maturity date of May 1, 2039. F. Amendment No. 2 to the LTLA provided that in the absence of a default by MODESTO, TURLOCK, and SMUD, Debt Service for the 2016A Bonds and any extension thereof associated with PALO ALTO's 3.6815 Participation Percentage in TANC's entitlement to Transfer Capability on the COTP would be paid by MODESTO, TURLOCK, and SMUD. G. The Parties have agreed to execute this Amendment No. 3 to the LTLA to extend the LTLA for approximately an additional ten years to January 31, 2034 to ensure that all of PALO ALTO's interests, rights, and obligations associated with its Participation Percentage under TANC PA 3 continue to be laid off to MODESTO, TURLOCK, and SMUD for the extended term of the LTLA in the absence of a default by MODESTO, TURLOCK, and SMUD, and to add an annual market payment to PALO ALTO from MODESTO, TURLOCK, and SMUD. This Amendment No. 3, by modifying the term of the LTLA, will also extend the term of ROSEVILLE's layoff of its South of Tesla ("SOT") allocation, originally described in Section 4 of the LTLA. H. The Parties agree that except as amended and modified by Amendment No. 1 and Amendment No. 2, which remain in effect, and this Amendment No. 3, the LTLA remains in full force and effect, without any other changes to any of its provisions. NOW THEREFORE, in consideration of the premises described in the Recitals, and in consideration of the terms, covenants, and conditions that are set out below, the Parties have entered into this Amendment No. 3 to the LTLA. AGREEMENT: Section 1. Effective Date. This Amendment No. 3 shall become effective and enforceable on January 30, 2024 at 0001 hours Pacific Prevailing Time following the due execution and delivery of this Amendment No. 3 to TANC, or the date on which this Amendment No. 3 is duly executed by all of the Parties and delivered to TANC, if January 30, 2024 passes without such execution and delivery (hereinafter "Effective Date"). Section 2. Modification of Section 2. "Term". Section 2 of the LTLA, entitled "Term", is hereby modified as follows: 6056786 83112.00002\41775073.2 Item 7: Staff Report Pg. 13 Packet Pg. 236 of 553 Item 7 Attachment A - it A Resolution with Amendment No. 3 as "The term of this Agreement shall be approximately twenty five (25) years ExhibitA e Effective Date and terminating at 0000 hours Pacific Prevailing Time on January 31, 2034, unless the Parties mutually agree in writing to extend the term of the Agreement for another five (5) years (hereinafter "Term"). Section 3. Addition of Section 3.k, "Annual Market Payment". Section 3.k., "Annual Market Payment." is hereby added: "Starting May 1, 2024, and on each May 1 thereafter for the term of the LTLA, MODESTO, TURLOCK, and SMUD, in aggregate, will pay PALO ALTO an annual fixed payment of $550,000 per year to PALO ALTO for the 5 years from 2024 through 2028 ($61,820 from MODESTO or 11.24%%, $244,090 from TURLOCK or 44.38%, and $244,090 from SMUD or 44.38%), and $800,000 per year for the 5 years from 2029 through 2033 ($89,920 from MODESTO or 11.24%, $355,040 from TURLOCK or 44.38%, and $355,040 from SMUD or 44.38%). While this payment will be administered by TANC in accordance with section 3.f of the LTLA, MODESTO, TURLOCK and SMUD shall be jointly and severally liable to make the payment annually." Section 4. Integration. Except as amended and modified by Amendment No. 1 and Amendment No. 2, which remain in effect, and this Amendment No. 3, the LTLA remains in full force and effect, without change to any of its provisions other than the text expressly altered by this Amendment No.3. On the Effective Date this Amendment No. 3 and the LTLA shall be one, integrated Agreement. The Parties have duly executed and delivered this Amendment via their authorized representatives set forth below. SIGNATURES: TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By: Its: Dated: CITY OF PALO ALTO By: Its: Dated: 6056786 83112.00002\41775073.2 Item 7: Staff Report Pg. 14 Packet Pg. 237 of 553 Item 7 Attachment A - it A Resolution with Amendment No. 3 as TURLOCK IRRIGATION DISTRICT ExhibitA By: Its: Dated: SACRAMENTO MUNICIPAL UTLITY DISTRICT By: Its: Dated: MODESTO IRRIGATION DISTRICT By: Its: Dated: CITY OF ROSEVILLE By: Its: Dated: 6056786 83112.00002\41775073.2 Item 7: Staff Report Pg. 15 Packet Pg. 238 of 553 Item 7 Attachment B - Current 2009 Long -Term Layoff Agreement Long -Term Layoff Agreement By and Among the Transmission Agency of Northern California and certain of its Members namely The City of Palo Alto The City of Roseville The Modesto Irrigation District The Turlock Irrigation District and The Sacramento Municipal Utility District EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 16 Packet Pg. 239 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement TABLE OF CONTENTS RECITALS..........................................................................................................................1 AGREEMENT....................................................................................................................3 Section1. Effective Date..................................................................................................3 Section 2. Term............................................................ 3 .................................................. Section3. COTP Layoffs..................................................................................................3 a. Layoff of ROSEVILLE's COTP Interests, Rights, and Obligations.................................................................................................4 b. Return of ROSEVILLE's Interests, Rights, and Obligations ...............5 c. Layoff of PALO ALTO's COTP Interests, Rights, and Obligations.................................................................................................5 d. Return of PALO ALTO's Interests, Rights, and Obligations..............6 e. Project Agreement No. 3 Appendix C ...................................................7 f. Billings and Payments..............................................................................8 g. Additions, Betterments, and Replacements ..........................................9 h. Default......................................................................................................13 i. Voting Rights...........................................................................................14 Section4. SOT Layoff....................................................................................................15 a. Layoff of ROSEVILLE's SOT Interests, Rights, and Obligations...............................................................................................15 b. Return of ROSEVILLE's Interests, Rights, and Obligations .............16 c. SOT Agreement Appendix B-2.............................................................16 d. Billings and Payments............................................................................17 e. Increases in SOT Allocation, Interests, or Obligations ......................18 f. Default......................................................................................................18 i EXECUTIQN ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 17 Packet Pg. 240 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement Section 5. No Assignment Without Consent..............................................................19 Section 6. Long -Term Layoff to Third Parties Not an Assignment ........................20 Section 7. Dispute Resolution.......................................................................................21 a. Negotiation.......................................................................21 b. Mediation ..................................................................................22 c. Additional Rights....................................................................................22 Section 8. Attorney Fees........................................................................................23 Section9. California Law..............................................................................................23 Section 10. Integrated Agreement...........................................................�� Section 11. No Third Party Beneficiaries....................................................................24 Section 12. TANC Liability ....................................................................24 Section13. Notices.......................................................................24 Section 14. Severability...........................................................................25 Section 15. Discharge of Obligations...........................................................................25 Section16. Modifications........................................................................26 11 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 18 Packet Pg. 241 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement This Long -Term Layoff Agreement ("Agreement") is entered into by and among the Transmission Agency of Northern California, a California public entity and joint powers agency ("TANC"), and certain of its members, namely the City of Palo Alto, a California charter city and municipal corporation ("PALO ALTO"), the City of Roseville, a California charter city and municipal corporation ("ROSEVILLE"), the Modesto Irrigation District, a California irrigation district ("MODESTO"), the Turlock Irrigation District, a California irrigation district ("TURLOCK"), and the Sacramento Municipal Utility District, a California municipal utility district ("SMUD"), referred to as "Party" or "Parties" in this Agreement, as of the Effective Date, defined in section 1 of this Agreement, with regard to the following RECITALS: A. ROSEVILLE, PALO ALTO, MODESTO, TURLOCK, and SMUD are each Participants in and parties to TANC Project Agreement No. 3, entered into as of March 1, 1990. B. Pursuant to section 7.1 of TANC Project Agreement No. 3, ROSEVILLE and PALO ALTO each desire to make their entitlement to TANC's Transfer Capability on the California -Oregon Transmission Project (COTP), in their respective Participation Percentages, available to a Participant (hereinafter "layoff") in accordance with the terms and conditions relating to layoffs by EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 19 Packet Pg. 242 of 553 Item 7 Attachment B - Current 2009 Long -Term Layoff Agreement Participants under the Intertie Agreements, under TANC's Long -Term Layoff Procedures, and this Agreement. C. MODESTO, TURLOCK and SMUD are willing to accept the PALO ALTO and ROSEVILLE Participation Percentages of TANC's entitlement to Transfer Capability on the COTP. D. ROSEVILLE, TURLOCK and SMUD are each SOT Members and parties to the South of Tesla Agreement (SOT Agreement) between TANC and its Members, dated as of February 14,1993. E. ROSEVILLE desires to voluntarily transfer its SOT Allocation of TANC's entitlement to firm bidirectional Tesla-Midway Transmission Service from PG&E as a Long -Term Reallocation pursuant to section 4 of the SOT Agreement and in accordance with this Agreement. F. TURLOCK and SMUD are willing to accept the ROSEVILLE SOT Allocation of TANC's entitlement to Tesla-Midway Transmission Service. NOW THEREFORE, in consideration of the premises described in the recitals, and in consideration of the terms, covenants, and conditions that are set out below, the Parties have entered into this 2 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 20 Packet Pg. 243 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement AGREEMENT: Section 1. Effective Date. This Agreement shall become effective and enforceable on its effective date, which date shall commence at 0001 hours Pacific Prevailing Time on the first day of the month following the due execution and delivery of this Agreement to TANC (hereinafter "Effective Date"). Section 2. Term. The term of this Agreement shall be fifteen (15) years commencing on the Effective Date and terminating at 0000 hours Pacific Prevailing Time on the day before the 15th anniversary of the Effective Date, unless the Parties mutually agree in writing to extend the term of the Agreement for another five (5) years (hereinafter "Term"). Section 3. COTP Layoffs. This section 3 does not apply to or affect any provision of section 4, SOT Layoffs, of this Agreement. Section 4 shall not be construed with reference to this section 3. Section 3 is intended to stand alone. Section 3 and section 4 are included in this single Agreement to make the adminis₹ration, management, and recordkeeping of layoffs under the TANC programs efficient and economic. Terms in section 3 of 3 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 21 Packet Pg. 244 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement this Agreement that begin with capitalized letters are defined in TANG Project Agreement No. 3, unless otherwise specifically defined in this Agreement. a. Layoff of ROSEVILLE's COTP Interests, Rights, and Obligations. Except as otherwise set forth in this Agreement, on the Effective Date, and for the Term of this Agreement, ROSEVILLE hereby lays off and relinquishes to TANC all of ROSEVILLE's use of its interests, rights, and obligations under TANC Project Agreement No. 3, except its interests, rights and obligations in the event of a default pursuant to section 6 of Project Agreement No. 3 and this Agreement, associated with ROSEVILLE's 2.1119 Participation Percentage in TANC's entitlement to Transfer Capability on the COTP. TANC hereby transfers at that instant: (i) 0.2373 Participation Percentage in TANC's entitlement to Transfer Capability on the COTP to MODESTO; (ii) 0.9373 Participation Percentage in TANC's entitlement to Transfer Capability on the COTP to TURLOCK; and (iii) 0.9373 Participation Percentage in TANC's entitlement to Transfer Capability on the COTP to SMUD. MODESTO, TURLOCK, and SMUD hereby accept and assume at that instant for the Term of this Agreement all of the use of the ROSEVILLE interests, rights, and obligations under the provisions of TANC Project Agreement No. 3. 4 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 22 Packet Pg. 245 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement b. Return of ROSEVILLE's Interests, Rights and Obligations. Unless earlier relinquished because of a default under this Agreement by MODESTO, TURLOCK and/or SMUD, upon the end of the last hour of the last day of the Term of this Agreement, all of the ROSEVILLE interests, rights, and obligations in ROSEVILLE's Participation Percentage adjusted for any changes in such Participation Percentages during the Term of this Agreement (presently 2.1119 as of the Effective Date of this Agreement) under TANG Project Agreement No. 3 shall automatically and without any action of the Parties be relinquished by MODESTO, TURLOCK, and SMUD through TANC to ROSEVILLE, and ROSEVILLE hereby accepts its interests, rights, and obligations at that instant in the future. c. Layoff of PALO ALTO's COTP Interests, Rights and Obligations. Except as otherwise set forth in this Agreement, on the Effective Date and for the Term of this Agreement, PALO ALTO hereby lays off and relinquishes to TANC all of PALO ALTO's use of its interests, rights, and obligations under TANC Project Agreement No. 3, except its interests, rights and obligations in the event of a default pursuant to section 6 of Project Agreement No. 3 and this Agreement, associated with PALO ALTO's 3.6815 Participation Percentage in TANC's entitlement to Transfer Capability on the COTP. TANC hereby 5 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 23 Packet Pg. 246 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement transfers at that instant: (i) 0.4137 Participation Percentage in TANC's entitlement to Transfer Capability on the COTP to MODESTO, and (ii) 1.6339 Participation Percentage in TANC's entitlement to Transfer Capability in the COTP to TURLOCK; and (iii) 1.6339 Participation Percentage in TANC's entitlement to Transfer Capability on the COTP to SMUD. MODESTO, TURLOCK, and SMUD hereby accept and assume at that instant for the Term of this Agreement all of the use of the PALO ALTO interests, rights, and obligations under the provisions of TANC Project Agreement No. 3. d. Return of PALO ALTO's Interests, Rights and Obligations. Unless earlier relinquished because of a default under this Agreement by MODESTO, TURLOCK and / or SMUD, upon the end of the last hour of the last day of the Term of this Agreement, all of the PALO ALTO interests, rights, and obligations in PALO ALTO's Participation Percentage adjusted for any changes in such Participation Percentages during the Term of this Agreement (presently 3.6815 as of the Effective Date of this Agreement) under TANC Project Agreement No. 3 shall automatically and without any action of the Parties be relinquished by MODESTO, TURLOCK, and SMUD through TANC to PALO ALTO, and PALO ALTO hereby accepts its interests, rights, and obligations at that instant in the future. EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 24 Packet Pg. 247 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement e. Project Agreement No. 3 Appendix C. The TANC Commission by resolution has approved a revised version of APPENDIX C of TANC Project Agreement No. 3, showing the effect of the layoffs on the Participation Percentages of ROSEVILLE, PALO ALTO, MODESTO, TURLOCK, and SMUD during. the Term of this Agreement, for the purposes of delineating voting rights, billings, and obligations during the Term of this Agreement. The version of APPENDIX C approved by the TANC Commission and attached to and incorporated into this Agreement as ATTACHMENT A has been created solely for the convenience of the Parties, and does not affect the interests, rights, or obligations of ROSEVILLE or PALO ALTO if MODESTO, TURLOCK, or SMUD were to default in their obligations under this Agreement. Notwithstanding anything to the contrary in this Agreement, title to the interests, rights and obligations of ROSEVILLE and PALO ALTO in their respective Participation Percentages shall remain vested in ROSEVILLE and PALO ALTO during the Term of this Agreement, while the right of use of those interes₹s, rights, and obligations shall be vested in MODESTO, TURLOCK, and SMUD in their respective layoff shares acquired hereunder. Nothing in this Agreement is intended to alter or amend any interest, right or obligation of any Participant under TANC Project Agreement No. 3. The failure to give due and timely notice of a default or potential default pursuant to section 3(h) of this Agreement shall AI EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 25 Packet Pg. 248 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement not absolve the obligation of any Party to this Agreement to comply with its responsibilities under TANG Project Agreement No. 3. Regardless of any default on the part of MODESTO, TURLOCK, or SMUD, neither ROSEVILLE nor PALO ALTO shall be excused from their respective obligations under TANC Project Agreement No. 3. Billings and Payments. During the Term of this Agreement, and in the absence of a default under this Agreement by MODESTO, TURLOCK, or SMUD, all billings and payments shall be made in accordance with the provisions of TANC Project Agreement No. 3, with ATTACHMENT A of this Agreement employed by TANC to assure that, in the absence of a default by MODESTO, TURLOCK, or SMUD, ROSEVILLE and PALO ALTO will not be billed for any TANC Project Agreement No. 3 costs, including but not limited to TANC Project Agreement No. 3's O&M Costs, Indebtedness, Debt Service, or Capital Improvement Costs, during the Term of this Agreement; provided, however, that ROSEVILLE and PALO ALTO shall remain responsible under the TANC Joint Powers Agreement for any costs unrelated to TANC Project Agreement No. 3. During the Term of this Agreement, TANC shall bill SMUD, and SMUD shall pay, for TANC Project Agreement No. 5 costs, expenses, fees, and charges otherwise allocable to ROSEVILLE and PALO ALTO pursuant to section 3 of TANC Project EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 26 Packet Pg. 249 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement Agreement No. 5 for the portion of TANC's entitlement to Transfer Capability on the COTP laid off to SMUD in this Agreement. g. Additions, Betterments, and Replacements. (i) Use of Additions, Betterments, and Replacements during Term of Agreement. Additions, Betterments, and Replacements, as defined in TANC Project Agreement No. 3, that are approved by TANC during the Term of this Agreement in regards to the use of the acquired shares of the COTP interests, rights, and obligations laid off to MODESTO, TURLOCK and SMUD under this Agreement (referred to in this section 3g as "layoff portions"), shall be available for MODESTO, TURLOCK and SMUD's sole use and at their sole expense during the Term hereof. (ii) Responsibility For and Use of Betterments at End of the Term of this Agreement. At the end of the Term of this Agreement, MODESTO, TURLOCK, and / or SMUD shall be solely and severally responsible for the layoff portions of Betterments approved and financed by them during the Term of this Agreement, and the layoff portions of such Betterments shall remain available for their sole use and benefit for the life of the COTP. G0 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 27 Packet Pg. 250 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement (iii) Responsibility For and Use of Additions that Exceed the Adjusted Cost Index at End of the Term of this Agreement. At the end of the Term of this Agreement, MODESTO, TURLOCK, and / or SMUD shall be solely and severally responsible for the layoff portions of Additions approved and financed by them that exceed the adjusted cost index defined in section 3.1.2.2.2 of TANC Project Agreement No. 3 (hereinafter "Adjusted Cost Index"). Such layoff portions of such Additions shall remain available for MODESTO, TURLOCK, and/ or SMUD's sole use and benefit for the life of the COTP. (iv) Responsibility For and Use of Additions Up to the Adjusted Cost Index at End of the Term of this Agreement. At the end of the Term of this Agreement, PALO ALTO and ROSEVILLE shall be solely and severally responsible for the layoff portions of Additions approved by TANC during the Term of this Agreement in an amount up to the Adjusted Cost Index, and the layoff portions of such Additions shall be available for their sole use and benefit in their respective Participation Percentage, adjusted for any changes in such Participation Percentages during the Term of this Agreement for the life of the COTP. For the purposes of clarification, to the extent that an Addition exceeds the Adjusted Cost Index, PALO ALTO and ROSEVILLE shall be responsible for any amount up to the Adjusted Cost Index pursuant to this subsection 3(g)(iv), and MODESTO, TURLOCK, and/or SMUD, as applicable shall be 10 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 28 Packet Pg. 251 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement responsible for the remaining amount that exceeds the Adjusted Cost Index, in accordance with subsection (3)(g)(iii). (v) Responsibility For and Use of Replacements at End of the Term of this Agreement. At the end of the Term of this Agreement, PALO ALTO and . ROSEVILLE shall be solely and severally responsible for the layoff portions of Replacements approved by TANC during the Term of this Agreement. Such layoff portions of such Replacements shall be available for their sole use and benefit in their respective Participation Percentage, adjusted for any changes in such Participation Percentages during the Term of this Agreement for the life of the COTP. (vi) Allocation of Capital Costs and Associated Financing Costs. The Parties agree that the capital costs and associated financing costs of any portions of Additions that do not exceed the Adjusted Cost Index and all Replacements put into service during the Term of this Agreement shall be allocated on a straight-line financial basis over the expected useful life of such Additions and Replacements. Capital costs and associated financing costs and the expected useful life of such Additions and Replacements shall be determined at the time the Additions and Replacements are put into service. 11 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 29 Packet Pg. 252 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement (vii) Payment of True -Up Adjustments. If the expected useful life of any portions of Additions that do not exceed the Adjusted Cost Index and all Replacements put into service during the Term of this Agreement extend beyond the Term of this Agreement, the Parties agree to make "true -up adjustments" via true - up payments for the capital costs and associated financing costs paid or incurred for such Additions or Replacements put into service during the Term of this Agreement. The "true -up adjustments" will be based on the cost differences between the costs calculated on a straight line financial basis, and the actual payment method(s) used. Upon the end of the Term of this Agreement the Parties shall make such true -up payments to each other, as calculated in accordance with subsection 3(g)(viii), below, to effect their mutual intention that costs for such Additions and Replacements with long lives be allocated among the Parties on a straight-line financial basis. These true -up payments will effect the required true -up adjustments referenced above. (viii) Calculation of True -Up Adjustments. Prior to the end of the Term of this Agreement, unless the Parties otherwise agree, TANC shall determine from its books and records, and recommend to the Parties an allocation of the capital costs and associated financing costs for any portions of Additions that do not 12 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 30 Packet Pg. 253 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement exceed the Adjusted Cost Index and all Replacements during the Term of the Agreement that have been (aa) paid or incurred during the Term of the Agreement plus (bb) those that remain to be paid beyond the Term of the Agreement. The true -up adjustments shall be calculated by TANC in a manner consistent with the examples in Attachment C, which are incorporated herein by reference. Any disagreement regarding the calculation of the true -up adjustments shall be resolved by the TANC Commission. h. Default. In the event of a default by MODESTO, TURLOCK, or SMUD under this Agreement, TANC shall immediately and simultaneously notify each of the Parties in accordance with the provisions of section 13 of this Agreement. If a default remains uncured for twenty (20) days after the date notice is first given under section 13, then ROSEVILLE and PALO ALTO shall cure any monetary default not later than three (3) business days following the 20th day. Upon ROSEVILLE and PALO ALTO's completion of the cure of a monetary default or, in the instance of a non -monetary default arising out of a breach of sections 5 or 6, below, by MODESTO, TURLOCK and / or SMUD that remains uncured for twenty (20) days after the date notice is first given under section 13 use of the interests, rights, and obligations laid off shall be automatically relinquished to ROSEVILLE and PALO ALTO at that 13 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 31 Packet Pg. 254 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement instant, and without any action of the Parties. TANC shall provide notice of the default to each of the Parties to this Agreement, but TANG shall have no responsibility to otherwise respond to the default. i. Voting Rights. During the Term of -this Agreement: (i) In the absence of a default under this Agreement, neither PALO ALTO nor ROSEVILLE shall have rights to vote on any matter related to TANC Project Agreement No. 3. (ii) In the event of a default under this Agreement by either MODESTO, TURLOCK, or SMUD, the defaulting Party may not vote on any matter related to TANG Project Agreement No. 3 with respect to the use of their acquired shares of the COTP interests, rights, and obligations laid off to them under this Agreement. The Parties adversely affected by the default may vote on any matter related to TANC Project Agreement No. 3 with respect to their shares of the COTP interests, rights, and obligations that were laid off to the defaulting Party under this Agreement. 14 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 32 Packet Pg. 255 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement (iii) Any new TANC program or project shall be governed by the agreements that pertain to such programs or projects. Section 4. SOT Layoff. This section 4 does not apply to or affect any provision of section 3, COTP Layoffs, of this Agreement. Section 3 shall not be construed with reference to this section 4. Section 4 is intended to stand alone. Section 3 and section 4 are included in this single Agreement to make the administration, management, and recordkeeping of layoffs under the TANC programs efficient and economic. Terms in section 4 of this Agreement that begin with capitalized letters are defined in the SOT Agreement, unless otherwise specifically defined in this Agreement. a. Layoff of ROSEVILLE's SOT Interests Rights and Obligations. Except as otherwise set forth in this Agreement, on the Effective Date and for the Term of this Agreement, ROSEVILLE hereby voluntarily transfers to TANC all of ROSEVILLE's use of its interests, rights, and obligations, except its interests, rights and obligations in the event of a default pursuant to section 10 of the TANC SOT Agreement and/ or this Agreement, associated with ROSEVILLE's 1.786 percent SOT Allocation (expressed as a percentage of TANC's Tesla-Midway Transmission Service), and TANC hereby makes a Long -Term Reallocation and transfers at that instant 62.71 percent of the 15 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 33 Packet Pg. 256 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement ROSEVILLE SOT Allocation (1.120 percent of the total SOT Allocations) to TURLOCK and 37.29 percent of the ROSEVILLE SOT Allocation to SMUD (0.666 percent of the total SOT Allocations). TURLOCK and SMUD hereby accept and assume at that instant for the Term of this Agreement the use of all of the ROSEVILLE interests, rights, and obligations under the provisions of the TANC SOT Agreement. b. Return of ROSEVILLE's Interests, Rights. and Obligations. Unless relinquished earlier because of a default under this Agreement by TURLOCK and/or SMUD, upon the end of the last hour of the last day of the Term of this Agreement, all of ROSEVILLE's interests, rights, and obligations under the TANC SOT Agreement, including ROSEVILLE's 1.786 percent SOT Allocation, shall automatically and without any action of the Parties be relinquished by TURLOCK and SMUD through TANC to ROSEVILLE, and ROSEVILLE hereby accepts its interests, rights, and obligations at that instant in the future. c. SOT Agreement Appendix B-2. The TANG Commission by resolution has approved a revised version of Appendix B-2 of the TANC SOT Agreement, showing the effect of the transfer on the SOT Allocations and the Cost Sharing Percentages 16 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 34 Packet Pg. 257 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement for the purposes of delineating voting rights, billings, and payments during the Term of this Agreement. The revision of Appendix B-2 approved by the TANC Commission and attached to and incorporated into this Agreement as ATTACHMENT B has been prepared solely for the convenience of the Parties, and does not affect the interests, rights, and obligations of ROSEVILLE, if TURLOCK or SMUD were to default in their obligations under this Agreement. Notwithstanding anything to the contrary in this Agreement, title to the interests, rights and obligations of ROSEVILLE in its SOT Allocation shall remain vested in ROSEVILLE during the Term of this Agreement, while the right of use of those interests, rights, and obligations of ROSEVILLE's SOT Allocation shall remain vested in TURLOCK and SMUD during the Term of this Agreement. d. Billings and Payments. During the Term of this Agreement, and in the absence of a default by TURLOCK or SMUD under this Agreement, all billings and payments shall be made in accordance with the provisions of the TANC SOT Agreement, with ATTACHMENT B of this Agreement employed by TANC to assure that, in the absence of a default by TURLOCK or SMUD, ROSEVILLE will not be billed for any costs, SOT Service Charges, or other expenses associated with the SOT Agreement during the Term of this Agreement. 17 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 35 Packet Pg. 258 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement e. Increases in SOT Allocation, Interests, or Obligations. Any increases in SOT Allocations, interests, rights or obligations approved by TURLOCK or SMUD during the Term of this Agreement shall be available for their sole use and at their sole expense during the Term hereof, and at the end of the Term of this Agreement, such increases in SOT Allocations, interests, rights or obligations shall remain with TURLOCK or SMUD. f. Default. In the event of a default by TURLOCK or SMUD under this Agreement, TANC shall immediately and simultaneously notify each of the Parties in accordance with the provisions of section 13 of this Agreement. If a default remains uncured for twenty (20) days after the date notice is first given under section 13 of this Agreement, then ROSEVILLE shall cure any monetary default not later than three (3) business days following the 20th day. Upon ROSEVILLE's completion .of the cure of a monetary default or, in the instance of a non -monetary default arising out of a breach of sections 5 or 6, below, by TURLOCK and/or SMUD that remains uncured for twenty (20) days after the date notice is first given under section 13 use of the interests, rights, and obligations laid off shall be automatically relinquished to ROSEVILLE 18 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 36 Packet Pg. 259 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement at that instant, and without any action of the Parties. TANC shall provide notice of the default to each of the Parties to this Agreement, but TANC shall have no responsibility to otherwise respond to the default. Section 5. No Assignment Without Consent. During the Term of this Agreement, MODESTO, TURLOCK and/or SMUD shall not assign the rights to the use of the interests, rights or obligations of PALO ALTO and ROSEVILLE acquired pursuant to this Agreement, or delegate any obligations that have been undertaken by MODESTO, TURLOCK and / or SMUD pursuant to this Agreement, including but not limited to the obligation to pay as set forth in sections 3 and 4 o€ this Agreement and the obligations set forth in sections 5 or 6, to any entity, including but not limited to a TANC Member (hereinafter "Assign" or "Assignment"), without the advance written consent of the respective boards, commissions and / or councils with requisite authority (hereinafter "Council") of TANC, PALO ALTO and ROSEVILLE, or their authorized representatives. The Parties agree that such consent shall not be unreasonably withheld, and further agree that best efforts shall be utilized by the Parties to bring the issue of a proposed Assignment to Council within ninety (90) days following the Parties' receipt of written notice requesting permission to Assign. It is the intent of the Parties that any proposed Assignment by MODESTO, TURLOCK and/or SMUD must result in a complete assumption of that which was acquired by the assigning 19 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 37 Packet Pg. 260 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement Party under this Agreement. Partial Assignments by MODESTO, TURLOCK and! or SMUD are expressly prohibited. Section 6. Long -Term Layoff to Third Parties Not an Assignment. To the extent that either MODESTO, TURLOCK, and/or SMUD, as applicable (hereinafter "Layoff Party") intend to layoff or transfer the use of the interests, rights, and obligations received from ROSEVILLE and PALO ALTO under this Agreement to a third party ("Acquiring Party") for a period of more than one (1) year, and such layoff or transfer is not otherwise an Assignment as defined and discussed in section 5 of this Agreement, and provided the conditions of sections 7.1, 7.2, and 7.4 of Project Agreement No. 3 have been satisfied, the Layoff Party shall do all of the following: (1) provide written notice to ROSEVILLE, PALO ALTO and TANC prior to the effective date of such layoff; (2) include in its layoff agreement with the Acquiring Party provisions specifying (i) that such layoff agreement shall be terminated immediately upon a default under this Agreement by MODESTO, TURLOCK and/or SMUD, as applicable, that remains uncured for twenty (20) days after the date notice is first given under section 13; (ii) that the Acquiring Party is not a ₹hird-party beneficiary of this Agreement between ROSEVILLE and PALO ALTO on the one hand and MODESTO, TURLOCK and! or SMUD, as applicable, on the other; and (iii) that the Acquiring Party shall have no recourse against ROSEVILLE, PALO ALTO and TANC in the event of a default by MODESTO, TURLOCK and / or SMUD 20 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 38 Packet Pg. 261 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement under this Agreement and the layoff agreement; and (3) provide ROSEVILLE, PALO ALTO and TANC with a copy of the executed layoff agreement. Section 7. Dispute Resolution. In the event of any controversy or claim between the Parties, whether based in contract, tort or otherwise, arising out of, based upon, or relating to this Agreement, except for any controversy or claim based upon a default of the obligations to make payments as set forth in sections 3 or 4 of this Agreement or a breach of the obligations set forth in sections 5 or 6 of this Agreement (hereinafter "Dispute"), the Parties shall attempt to resolve such Dispute in the following manner: a. Negotiation. The Parties shall attempt in good faith to resolve the Dispute promptly by negotiations between duly authorized representatives of the Parties who have authority to resolve the Dispute. When a Party believes there is a Dispute, that Party shall give the other Party written notice describing the Dispute with reasonable particularity. Within fifteen (15) calendar days following the receipt of such notice, the receiving Party shall submit a written response to the noticing Party. The authorized representatives shall meet in person and attempt to resolve the Dispute. 21 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 39 Packet Pg. 262 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement b. Mediation. If the Dispute is not resolved within fifteen (15) calendar days following receipt of the receiving Party's response given pursuant to subsection a, above, or such additional time, if any, that the Parties mutually agree to in writing, the Parties shall try in good faith to resolve the Dispute by mediation. The form of mediation and the mediator selected to mediate the Dispute shall be acceptable to both Parties, which acceptance shall be confirmed by the Parties in writing. c. Additional Rights. If the Dispute is not resolved through mediation within ninety (90) calendar days of the noticing Party's written notice of the Dispute pursuant to subsection a above, or such additional time, if any, that the Parties mutually agree to in writing, the Party or Parties involved in the dispute shall be free to pursue any and all legal and equitable actions or remedies. EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 40 Packet Pg. 263 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement Section 8. Attorney Fees. In any mediation, arbitration, or litigation to enforce or defend any interest, right, or obligation of this Agreement, the prevailing Party shall be entitled to an award of reasonable attorneys' fees and other litigation expenses. Section 9. California Law. This Agreement was made in and will be performed in California, and the law of California shall apply in the interpretation and enforcement of this Agreement. Section 10. Integrated Agreement. This Agreement is the whole, integrated agreement of the Parties, superseding prior negotiations and replacing and terminating the Principles for Long -Term Layoff of Palo Alto and Roseville Transmission Entitlements. This Agreement does not amend Project Agreement No. 3 or the TANC SOT Agreement in any respect. In the event of any conflict between this Agreement, TANC Project Agreement No. 3, or TANC SOT Agreement, the provisions of TANC Project Agreement No. 3 or the TANC SOT Agreement shall control. 23 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 41 Packet Pg. 264 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement Section 11. No Third -Party Beneficiaries. There are no third -party beneficiaries to this Agreement, and this Agreement shall not impart any rights enforceable by any person or entity that is not a Party to this Agreement. Section 12. TANC Liability. TANC and its officers, agents, and employees, as well as the other members and commissioners of TANC (hereinafter "Indemnitees"), undertake no legal liability to the Parties to this Agreement and each Party releases, holds harmless, and covenants not to sue the Indemnitees for any cause, claim, injury, damage, or death arising from a negligent act or omission of an Indemnitee in connection with this Agreement. Section 13. Notices. Notices required under this Agreement shall be given by TANC to each Party to this Agreement using all of the four following methods on the same day, if possible: facsimile, email, overnight delivery, and a personal phone call from the TANC General Manager to each Chief Executive Officer of each Party. 24 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 42 Packet Pg. 265 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement Contact information for the purposes of notice for each Party shall be maintained by TANC as ATTACHMENT D of this Agreement, attached to and incorporated herein. Each Party shall be responsible for maintaining current contact information with TANC. Section 14. Severability Any provision of this Agreement determined by a court of competent jurisdiction to be invalid shall not be severed from this Agreement if severance would materially adversely affect any Party, and if any Party in good faith concludes that severance would result in materially adverse consequences, such Party may give notice under the notice provisions hereof, that this Agreement shall terminate on a date all of the Parties consider appropriate, and if no agreement is reached on an appropriate early termination date, then at the last hour of the day that is one hundred and twenty (120) days after the date notice was first given. Section 15. Discharge of Obligations. All obligations unsatisfied at the end of the Term of this Agreement shall be promptly discharged by the responsible Party. 25 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 43 Packet Pg. 266 of 553 Item 7 Attachment B - Current 2009 Long -Term Layoff Agreement Section 16. Modifications. This Agreement may only be modified or amended in writing by the Parties following receipt of all necessary approvals. TRANSMISSION AGENCY OF NORTHERN CALIFORNIA CITY OF PALO ALTO By: Its: Dated: CITY OF ROSEVILLE By: Its: Dated: TURLOCK IRRIGATION DISTRICT By: Its: Dated: SACRAMENTO MUNICIPAL UTLITY DISTRICT By: Its: Dated: MODESTO IRRIGATION DISTRICT By: Its: Dated: 26 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 44 Packet Pg. 267 of 553 Item 7 Attachment B - Current 2009 Long -Term Layoff Agreement Section 16. Modifications, This Agreement may only be modified or amended in writing by the Parties following receipt of all necessary approvals. TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By: Dated:,. CITY OF PALO ALTO By: Its: Dated: CITY OF ROSEVILLE By: Its: Dated: TURLOCK IRRIGATION DISTRICT ii j Its: `jv Dated; _ SACRAMENTO MUNICIPAL UTLITY DISTRICT By:_ Its: Dated: MODESTO IRRIGATION DISTRICT By: Its: Dated: 26 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 45 Packet Pg. 268 of 553 Item 7 Attachment B - Current 2009 Long -Term Layoff Agreement Section 16. Modifications. This Agreement may only be modified or amended in writing by the Parties following receipt of all necessary approvals. TRANSMISSION AGENCY OF NORTHERN CALIFORNIA F By: Its: Dated: CITY OF PALO ALTO Its: Dated: I 2JO'% CITY OF ROSEVILLE By: Its: Dated: TURLOCK IRRIGATION DISTRICT By: Its: Dated. SACRAMENTO MUNICIPAL UTLITY DISTRICT By: Its: Dated: MODESTO IRRIGATION DISTRICT By: Its: Dated: 26 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 46 Packet Pg. 269 of 553 Item 7 Attachment B - Current 2009 Long -Term Layoff Agreement Section 16. Modifications. This Agreement may only be modified or amended in writing by the Parties following receipt of all necessary approvals. TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By: Its: Dated: CITY OF PALO ALTO TURLOCK IRRIGATION DISTRICT By: Its: Dated: SACRAMENTO MUNICIPAL By: By: ) 1 X -- Its: Its: Dated. Dated: J u M 2?- 00g CITY OF ROSEVILLE By:, Its: Dated: IMIODESTO IRRIGATION DISTRICT By: Its: Dated.• 26 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 47 Packet Pg. 270 of 553 Item 7 Attachment B - Current 2009 Long -Term Layoff Agreement Section 16. Modifications. This Agreement may only be modified or amended in writing by the Parties following receipt of all necessary approvals. TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By: Its: Dated; CITY OF PALO ALTO By: Its: Dated: CITY OF ROSEVILLE B Y Its: Dated: " O TURLOCK IRRIGATION DISTRICT By: Its: Dated: SACRAMENTO MUNICIPAL UTLITY DISTRICT By: Its: Dated: MODESTO IRRIGATION DISTRICT By: Its: Dated: 26 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 48 Packet Pg. 271 of 553 Item 7 SS Attachment B - Current 2009 Long -Term Layoff Agreement Section 16. Modifications. This Agreement may only be modified or amended in writing by the Parties following receipt of all necessary approvals. TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By: Its: Dated: CITY OF PALO ALTO By: Its: Da₹ed: CITY OF ROSEVILLE Its: Dated: W TURLOCK IRRIGATION DISTRICT By: Its: Dated: SACRAMENTO MUNICIPAL UTLITY DISTRICT By:_ Its: Dated: MODESTO IRRIGATION DISTRICT By: Its: Dated: I - 23 _ EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 49 Packet Pg. 272 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement ATTACHMENT A APPENDIX C-1 OPERATIONS AND MAINTENANCE TANG Entitlement Percent MW Third -Party Layoffs* MW Scheduling Rights MID 21.2960% 295.9351 ....................... 5.9629 ... 290............... --....... 'Redding .8.4120% ................ 116.8950 2.3553 115 .... SM[JD 27.5631 % 383.0252 7.7177. 375 ....................................... .......... Santa Clara 20.4745%.....284.5201 5.7329 78 2°.......... TID 12.5393% 174.2501 3.5110 171. Alameda 1.2272% 17.0531 0.3436 . 17 ...... Healdsburg ...................................................................................... 0.2456% 3.4132 m _ t0688 ,Mv _..: Lodi 1.9201% 26.6817 ....... ... 0.5376 26 Lompoc .......................� 0.1865% .... ................. 2.5 911 0.0522 3 Palo Alto 3.6815% 51.1594 ... 1.0308 ........ :......: ,.............. Plumas 0.1479% :.:.. 2.0555 0.0414 :.... '.�.._ 2 ,_ . Roseville 2.1119% 29.3482 0.5913 29 ................ Ukiah..:. ................---............................. 2.7026....:..: _.:...,..._...: 0.0545 .:.....:...:.., :.: r........._::.3..:.:,..,...._.:,,., Total .0.1945% 100.0000% 1389.6304 28.0000 1362 *Includes Western 27 MW and San Juan 1 MW assignments 27 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 50 Packet Pg. 273 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement APPENDIX C -la OPERATIONS AND MAINTENANCE (To accommodate Palo Alto and Roseville 2008 Long -Term Layoffs) TANC Entitlement Pre -Layoff Percentage TANC Member Layoff Net TANC Member Percentage North to South MW Scheduling Rights South to North MW Scheduling Rights MID 21.2960% 0.6509% 21.9469% 299 229 Redding 8.4120% ff 0.0000% 8.4120% 115 gg':.....n,� SMUD 27.5631% 2.5713% 30.1344% 410 314 Santa Clara .....................................................................................................................................•---.--- 20.4745% 0.0000% 20.4745% 278 212 TID :,....:....:....:::.,,..,...._.-", 12.5393% ,.,...,,..,.:..,.....:.:..,.v .................Y.-: 2.5713 % 15.1106% .................................................................... 206 157 Alameda ......................................................... 1.2272% ,......,......:::..:...................,..:.,,...,.,:,.._..., 0.0000% 1.2272% «...,,..,,..,.... 17 - ..,:... 13 Healdsburg 0.2456% ..... 0.0000 % 0.2456 3.............................13.........--.... Lodi"...... ......... ................................................................................................ 1.9201% .. 0.0000% ....1.9201....... .... 26 ........... ..... 2.......... Lompoc 0.1865% .............. 0.0000% .................................................................................... 0.1865 % 3 1............. 2 Palo Alto ............. 3.6815% -3.6815% ............................................................................................... 0.0000% 0 0 .....................................................I.....................,......... Plumas 0.1479%..... 0.0000% .0.1479..... 2 Roseville 2.1119% -2.119% ...,2 0.0000% 0 Ukiah .._.:.::.,. mM1n 0.1945% 0.0000% 0.1945% o .. _....-.�.:3... m,w .....:M Total 100.0000% 0.0000% 100.0000% „rvry 1362 _2 n.. (1042++ EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 51 Packet Pg. 274 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement APPENDIX C-2 ORIGINAL COTP DEBT SERVICE TANG Member Percent MID 21.1200% r as nQ........._.........._......._.....8.281a°io..... SMUD 27.1330% Santa Clara 20.7030% .. .......................................................................... TID 12.4220%......... ............................ Alameda 1.3330% He al dsburl7 ...'...... 0.2670 %......... .................... Lodi 1.8900% Lompoc .................................... 0.1840%......... Palo Alto ................................................. Plumas . ...4.0000 r 0.1610% _ Roseville .._..., _.......:... 2.2950 Ukiah.:......... �................_. 0.2110% TotaIT µw 100.0000 29 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 52 Packet Pg. 275 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement APPENDIX C -2a COTP DEBT SERVICE (To accommodate Palo Alto and Roseville 2008 Long - Term Layoffs) TANG Member Percent TANC Member Layoff Net TANG Member Percentage MID 21.1200% 0.7073% 21.8273% Redding.. 8.2810% 8.2810% SMUD ....~._ 27.1330% ,,,..:.0.0000%:::::,._: 2.7938% 29.9269% Santa Clara ................................... 20.7030% 0.0000% .................. 20.7030% TID ................. 12.4220% 2.7938 /...........15.2158.% .. Alameda ................................................................................................................................. 1.3330% ....................... 0.0000% ......... 1.3330% Healdsbur&.................... 0.2670% 0.0000% ....................... 0.2670% Lodi 1.8900% ..................................................... 0.0000% 1.8900% Lom °c 0.1840% 0.0000% 0.1840% �.-:.... Palo Alto 4.0000% -4.0000% _ 0.0000% Plumas... .:........-....:...... ......... 0.1610 ......,....._....-----...........................• 0.0000%-. 0.1610 Roseville 2.2950 ................:................... -2.2950% 0.0000% Ukiah :...,..,...._......::..................:......_..: 0.2110% 0._...:.:,.........:....:...._... 0.0000% 0.2110% Total 100.0000% .:...................,..._........::.,,........._.,..... 0.0000% ,,...:..,.... 100.0000% 30 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 53 Packet Pg. 276 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement ATTACHMENT B APPENDIX B-1 PERMANENT ALLOCATIONS of SOTP (A) I Expressed in percentages (B) Expressed in Megawatts Alameda 2.104 6.31 lof of Healdsbur 0.236 0.71 of Lodi City of Lompoc 2.069 0.266 6.21 0.80 Modesto Irrigation District 34.000 102.00 Plumas-Sierra Rural Electric Cooperative 0.235 0.70 City of Redding 10.333 31.00 City of Roseville 1.786 5.36 Sacramento Municipal Utility District 15.333 46.00 City of Santa Clara 27.000 81.00 Turlock Irrigation District 6.334 19.00 City of Ukiah 0.304 0.91 TOTAL 100.000 300.00 31 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 54 Packet Pg. 277 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement APPENDIX B -la PERMANENT ALLOCATIONS of SOT? (To accommodate Roseville's 2008 Long -Term Layoff) (A) Expressed in percentages (B) Expressed in Megawatts City of Alameda 2.104 6.31 City of Healdsburg 0.236 0.71 City of Lodi 2.069 6.21 City of Lompoc 0.266 0.80 Modesto Irrigation District 34.000 102.00 Plumas-Sierra Rural Electric Cooperative 0.235 0.70 City of Redding 10.333 31.00 City of Roseville 0.000 0.00 Sacramento Municipal Utility District 15.999 48.00 City of Santa Clara 27.000 81.00 Turlock Irrigation District 7.454 22.36 City of Ukiah 0.304 0.91 TOTAL 100.000 300.00 32 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 55 Packet Pg. 278 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement ATTACHMENT C True -Up Methodology for Replacements and Additions The Parties have identified a desire to provide for equitable allocation of costs between the Districts (MID, TID, and SMUD) and Cities (Roseville and Palo Alto) for the laid -off shares of Replacements and those Additions (all Additions approved by TANC up to the threshold limit and the portion of those greater than the limit up to the threshold limit) that, at the end of the term of the layoff, will revert from a right and responsibility of the Districts to that of the Cities. TANC developed the following methodology, which has been approved by the Parties. TANC will treat all Replacements and Additions (at least up to the PA 3 Threshold Amount) as if they were financed using "typical municipal financing" (i.e. levelized payments composed of principal and interest, at the prevailing municipal cost of money at the time of the Replacement or Addition, over the useful life of the Replacement/ Addition). The TANC Commission will make a determination of the useful life and the cost of financing at the time of approving a Replacement and/or Addition. If a payment structure or financing were used that were different from the form of a "typical municipal financing," then a transfer payment may be necessary to account for an accelerated or decelerated (relative to typical municipal financing) payoff of principal as of the end of the term of the layoff. EXAMPLES: The following assumptions apply to the examples provided below: 1. End of term of layoff: 2 / 1 / 2024 2. Timing of Replacement (or Addition): 2/1/2014 3. Applicable cost threshold for Section 3.1.2.2.2: $52.7M 5. Cost of Replacement or Addition: $25M 6. Estimated useful life of Replacement or Addition at 1/1/2014: 20 years 7. Remaining term of layoff at 2 / 1/2014: 10 years 8. Estimate useful life of Replacement or Addition remaining after layoff: 10 years 9. Prevailing municipal cost of money, 2/1/ 2014: 6 percent (20 -year term) Using the assumptions listed above, TANC examined five different payment structures and the potential need for a transfer payment under each. These are described below and a summary table is included at the end of this section Example #1: TANC Pas Cash at time of Replacement Addition As of February 1, 2024, all principal would have been paid off and there would be no outstanding obligations for the Addition. With typical municipal financing, there would have been ten years of levelized payments remaining for principal and interest at 33 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 56 Packet Pg. 279 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement $2.180M/yr with respect to the full $25M cost for the Addition. The NFV of this payment stream as of 2/1/2024 comes to $16.04M.' Cities should pay the respective Districts their laid off participation percentages times $16.04M. Example #2: TANC Borrows $25 million and makes interest onliivauments: As of February 1, 2024, no principal would have been paid off. With typical municipal financing, there would have been approximately $9M of principal paid off at the end of the layoff; and the Districts should pay the respective Cities their laid off participation percentages times $8.96 million. Example #3: Levelized payments over life of Addition: As of February 1, 2024, there would have been $8.96 million principal retired. Since financing used typical municipal financing, this is the expected amount of principal to be paid off at the end of the layoff, and no transfer payment is needed. Example #4: Levelized payments over longer than life of Addition: As of February 1, 2024, assuming a 25 -year financing term, there would have been about $6M of principal paid off. With typical municipal financing, there would have been about $9M of principal paid off at the end of the layoff. Districts should pay the respective Cities their laid off participation percentages times $3M. Example #5: Levelized payments over shorter than life of Addition: As of February 1, 2024, assuming a 15 -year financing term, there would have been about $14.2M of principal paid off. With typical municipal €inancing, there would have been about $9M of principal paid off at the end of the layoff. Cities should pay the respective Districts their laid off participation percentages times $5.2M. fix 1e #1 Exat le #2 Ex le #3 Ex le #4 E le 45 Cash Paymit lntenston "Typci'Maijiiy LongMaturity S1iotMaturity Loan Amount S 25,000,000 S 25,000,000 S 25,000,000 S 25,000,000 S 25,000,000 1nVntRate 6.00% 6.00% 6.00% 6.00% 6.00% "Typical Temt"-years 20 20 20 20 20 AnaualPaytrasit S2,179,614 S2,179,614 52,179,614 S2,179,614 S2,179,614 TargetBalance 1/1/2024 S 16,042,148 S 16,042,148 S 16,042,148 S 16,042,148 S16,042,148 Exatt;tleTetn-years na 20 25 15 Actual Re as ling Balance as of January 1,2024 0 S 25,000,000 516,042,148 S 18,993,934 10842915.45 Deviation$ntn"typical" S (16,042,148) S 8,957,852 S - S 2,951,786 S (5,199,233) Paytnentto Districts S 16,042,148 S (8,957,852) S S (2,951,786) S 5,199,233 As mentioned above, this approach will require certain determinations be made by the Commission at the approval of any future Replacements or Additions; these include: (1) the useful life of the Replacement/Addition; and (2) prevailing TANG borrowing rate for the determined useful life. Alternatively, $8.96M of the $25M original principal would have been paid down. 34 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 57 Packet Pg. 280 of 553 Item 7 Attachment B - Current 2009 Long -Term Layoff Agreement ATTACHMENT D Contact Information for Purposes of Notices City of Palo Alto: Valerie Fong, Utilities Director City of Palo Alto USPS: P.O. Box 10250 Palo Alto. CA 94303 Courier: 250 Hamilton Avenue Palo Alto, CA 94301 Phone: (650) 329-2277 Fax: (650) 321-0651 Email: Valerie.Fong@CityofPaloAlto.org City of Roseville: Tom Habashi, Electric Utility Director Roseville Electric City of Roseville 2090 Hilltop Circle Roseville, CA 95747 Phone: (916) 774-5600 Fax: .(916) 784-3797 Email: thabashi@roseville.ca.us MID: Allen Short, General Manager Modesto Irrigation District USPS: P.O. Box 4060 Modesto, CA 95352 Courier: 1231 Eleventh Street Modesto, CA 95354 Phone: (209) 526-7405 Fax: (209) 526-7315 Email: allens@mid.org TID: Larry Weis, General Manager Turlock Irrigation District USPS: P.O. Box 949 Turlock, CA 95381-0949 Courier: 333 East Canal Drive Turlock, CA 95380 Phone: (209) 883-8211 Fax: (209) 656-2143 Email: lwweis@tid.org 35 EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 58 Packet Pg. 281 of 553 Item 7 Attachment B - Current 2009 Long Term Layoff Agreement SMUD: Jim Shetler Assistant General Manager, Energy Supply Sacramento Municipal Utility District USPS: P.O. Box 15852 Mail Stop: B408 Sacramento, CA 95852-1830 Courier: 6201 S Street, Sacramento, CA 95817-1899 Phone: 916 732 6757 Fax: 916 732 6562 Email: jshetle@smud.org TANC: Transmission Agency of Northern California James W. Beck, General Manager P.Q. Box 15129 Sacramento, CA 95851-0129 Phone: (916) 852-1673 Fax: (916) 852-1073 Email: gm@tanc.us OR EXECUTION ORIGINAL Approved January 28, 2009 Item 7: Staff Report Pg. 59 Packet Pg. 282 of 553 Item 7 Attachment C - Amendment No 1 to the 2009 LTLA Amendment No. 1 Long -Term Layoff Agreement By and Among The Transmission Agency of Northern California And certain of its Members Namely The City of Palo Alto The City of Roseville The Modesto Irrigation District The Turlock Irrigation District and The Sacramento Municipal Utility District Item 7: Staff Report Pg. 60 EXECUTION ORIGINAL Packet Pg. 283 of 553 Item 7 Attachment C - Amendment No 1 to the 2009 LTLA TABLE OF CONTENTS RECITALS................................... . AGREEMENT...................................................................... 1 Section1. Effective Date..............................................................................................................1 Section 2. Return of ROSEVILLE's COTP Interests, Rights and Obligations .....................1 Section 3. Modification of LTLA Provisions Made Unnecessary by this AmendmentNo. 1..................................................................................................... 2 Section4. Integration................................................................................................................... 3 SIGNATURES ................................. i EXECUTION ORIGINAL Item 7: Staff Report Pg. 61 Packet Pg. 284 of 553 Item 7 Attachment C - Amendment No 1 to the 2009 LTLA This Amendment No. 1 of the January 28, 2009 Long Term Layoff Agreement ("LTLA"), entered into by and among the Transmission Agency of Northern California ("TANC") and certain of its members, namely the City of Palo Alto ("PALO ALTO"), the City of Roseville ("ROSEVILLE"), the Modesto Irrigation District ("MODESTO"), the Turlock Irrigation District ("TURLOCK"), and the Sacramento Municipal Utility District ("SMUD"), referred to as "Party" or "Parties," as of the Effective Date defined in Section 1 of this Amendment No. 1, with regard to the following: RECITALS: A. In section 3.a. of the LTLA, ROSEVILLE laid off all of ROSEVILLE's use of its interests, rights, and obligations under TANC Project Agreement No. 3 associated with ROSEVILLE's 2.1119 Participation Percentage in TANC's entitlement to Transfer Capability on the California -Oregon Transmission Project ("COTP") for the fifteen (15) year term of the LTLA. B. MODESTO, TURLOCK, and SMUD accepted and assumed all of the use of ROSEVILLE's interests, rights, and obligations transferred to TANC and by TANC to MODESTO, TURLOCK, and SMUD for the term of the LTLA. C. ROSEVILLE has asked to reverse the layoff effected in the LTLA on the Effective Date of this Amendment No. 1 and MODESTO, TURLOCK, and SMUD are willing to transfer the interests, rights, and obligations back to ROSEVILLE on such date. NOW THEREFORE, in consideration of the premises described in the recitals, and in consideration of the terms, covenants, and conditions that are set out below, the Parties have entered into this AGREEMENT: Section 1. Effective Date. This Amendment No. 1 shall become effective and enforceable on July 1, 2014 at 0001 hours Pacific Prevailing Time following the due execution and delivery of this Amendment No. 1 to TANC or the date on which this Amendment No. 1 is duly executed and delivered to TANC if July 1, 2014 passes without such execution and delivery (hereinafter "Effective Date"). Section 2. Return of ROSEVILLE's COTP Interests, Rights and Obligations. Except as otherwise set forth in this Amendment No. 1, on the Effective Date: i) MODESTO transfers the 0.2373 Participation Percentage in TANC's entitlement to Transfer Capability on the COTP, accepted and assumed in the LTLA, to TANC; 1 EXECUTION ORIGINAL Item 7: Staff Report Pg. 62 Packet Pg. 285 of 553 Item 7 Attachment C - Amendment No 1 to the 2009 LTLA ii) TURLOCK transfers the 0.9373 Participation Percentage in TANC's entitlement to Transfer Capability on the COTP, accepted and assumed in the LTLA, to TANC; and iii) SMUD transfers the 0.9373 Participation Percentage in TANC's entitlement to Transfer Capability on the COTP, accepted and assumed in the LTLA, to TANC. Such transfers include all of the interests, rights, and obligations associated with ROSEVILLE's Participation Percentage laid off in Section 3 of the LTLA. TANC hereby transfers at that instant the sum of the returned Participation Percentages from MODESTO, TURLOCK, and SMUD, being 2.1119, to ROSEVILLE. ROSEVILLE hereby accepts and assumes at that instant all of the interests, rights, and obligations associated with its 2.1119 Participation Percentage under the provisions of TANC Project Agreement No. 3. Section 3. Modification of LTLA Provisions Made Unnecessary by this Amendment No. 1. a. Section 3.a. of the LTLA, entitled "Layoff of ROSEVILLE's COTP Interests, Rights, and Obligations," and Section 3.b. of the LTLA, entitled "Return of ROSEVILLE's Interests, Rights, and Obligations, are hereby deleted from the LTLA. b. Section 3.e. of the LTLA, entitled "Project Agreement No. 3 Appendix C," is hereby modified to state that a revised APPENDIX C showing the effect of the return of ROSEVILLE's 2.1119 Participation Percentage has been approved by the TANC Commission and attached to and incorporated into this Amendment No. 1 as ATTACHMENT A. c. Section 3.f. of the LTLA, entitled "Billings and Payments," is hereby modified to state that ROSEVILLE shall resume the performance of its obligations under TANC Project Agreement No. 3 on the Effective Date of this Amendment No 1. d. Section 3.g. of the LTLA, entitled "Additions, Betterments, and Replacements," is hereby modified to: i) state that, between the effective date of the LTLA and this Amendment No. 1, TANC has not approved any Additions, Betterments, or Replacements, as defined in TANC Project Agreement No. 3; ii) delete ROSEVILLE from (iv) and (v) of section 3.g.; iii) delete ROSEVILLE from section 3.h., entitled "Default"; and iv) delete ROSEVILLE and any associated conjunction or preposition from Section 5 entitled "No Assignment Without Consent," and from Section 6 entitled "Long -Term Layoff to Third Parties Not an Assignment." 2 EXECUTION ORIGINAL Item 7: Staff Report Pg. 63 Packet Pg. 286 of 553 Item 7 Attachment C - Amendment No 1 to the 2009 LTLA e. Section 3.i.(i), of the LTLA is hereby deleted and replaced with the following: In the absence of a default under this Agreement, Palo Alto shall not have any rights to vote on any matter related to TANC Project Agreement No. 3; provided, however, that Palo Alto shall retain voting rights related to Additions and Betterments to be considered for approval under TANG Project Agreement No. 3, but their percentage of such vote will be zero (0) percent in order to fulfill the meaning of Opposing Member. Absent any vote to contrary, the vote of Palo Alto shall be deemed to be a "no" vote. If TANC were to consider extending the term of the outstanding Indebtedness for the COTP beyond the current maturity in 2024, then PALO ALTO shall be entitled to vote the 3.6815 Participation Percentage it held before the layoff on the question of the extension of the term of the Indebtedness, and the Participation Percentages of the DISTRICTS shall be reduced on such question by subtracting the Participation Percentages they had accepted from PALO ALTO. Section 4. Integration. Except as amended and modified by this Amendment No.1, the LTLA remains in full force and effect, without change to any of its provisions other than the text expressly altered by this Amendment No. 1. On the Effective Date this Amendment No. 1 and the LTLA shall be one, integrated agreement. 3 EXECUTION ORIGINAL Item 7: Staff Report Pg. 64 Packet Pg. 287 of 553 TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By: Its: Dated: CITY OF PALO ALTO By: Its: Dated: CITY OF ROSEVILLE Item 7 Attachment C - Amendment No 1 to the 2009 LTLA The Parties have duly executed and delivered this Amendment of their authorized representatives set forth below. TURLOCK IRRIGATION DISTRICT By:_ Its: Dated: SACRAMENTO MUNICIPAL UTLITY DISTRICT By: Its: Dated: MODESTO IRRIGATION DISTRICT By: By: Its: Its: Dated: Dated: 4 EXECUTION ORIGINAL Item 7: Staff Report Pg. 65 Packet Pg. 288 of 553 Item 7 Attachment C - Amendment No 1 to the 2009 LTLA The Parties have duly executed and delivered this Amendment of their authorized representatives set forth below. TURLOCK IRRIGATION DISTRICT TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By: Its:/'YID. s ..tS 7f1 CITY OF PALO ALTO By: — Its: Dated: CITY OF ROSEVILLE By: Its: Dated: By: Its: Dated: SACRAMENTO MUNICIPAL UTLITY DISTRICT By: Its: Dated: MODESTO IRRIGATION DISTRICT By: Its: Dated: 4 EXECUTION ORIGINAL Item 7: Staff Report Pg. 66 Packet Pg. 289 of 553 Item 7 Attachment C - Amendment No 1 to the 2009 LTLA The Parties have duly executed and delivered this Amendment of their authorized representatives set forth below. TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By:_ Its: Date CITY OF PALO ALTO By: ;7C Its: Dated: 42 CITY OF ROSEVILLE By: Its: Dated: TURLOCK IRRIGATION DISTRICT By: Its: Dated: SACRAMENTO MUNICIPAL UTLITY DISTRICT By: Its: Dated: MODESTO IRRIGATION DISTRICT By: Its: Dated: 4 EXECUTION ORIGINAL Item 7: Staff Report Pg. 67 Packet Pg. 290 of 553 Item 7 Attachment C - Amendment No 1 to the 2009 LTLA The Parties have duly executed and delivered this Amendment of their authorized representatives set forth below. TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By: Its: Dated: CITY OF PALO ALTO By: Its: Dated: CITY OF ROSEVILLE By: Liy7' iYl Its: 3+ f Dated: 4- 17-4 TURLOCK IRRIGATION DISTRICT By: Its: Dated: SACRAMENTO MUNICIPAL UTLITY DISTRICT By:_ Its: Dated: MODESTO IRRIGATION DISTRICT By: Its: Dated: 4 EXECUTION ORIGINAL Item 7: Staff Report Pg. 68 Packet Pg. 291 of 553 Item 7 Attachment C - Amendment No 1 to the 2009 LTLA The Parties have duly executed and delivered this Amendment of their authorized representatives set forth below. TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By:_ Its: Dated: CITY OF PALO ALTO By:_ Its: Dated: CITY OF ROSEVILLE By:_ Its: Dated: IRRIGATION DISTRICT '"y: James M. Farrar Its: Director of Energy Markets Dated: Ma 1, 2014 SACRAMENTO MUNICIPAL UTLITY DISTRICT By:_ Its: Dated: MODESTO [RRIGATION DISTRICT By:_ Its: Dated: 4 EXECUTION ORIGINAL Item 7: Staff Report Pg. 69 Packet Pg. 292 of 553 TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By: Its: Dated: CITY OF PALO ALTO Item 7 Attachment C - Amendment No 1 to the 2009 LTLA The Parties have duly executed and delivered this Amendment of their authorized representatives set forth below. TURLOCK IRRIGATION DISTRICT By:_ Its: Dated MUNICIPAL By: By:41' fti Its: Its: Dated: Dated:4/ /'t I 14 CITY OF ROSEVILLE By: Its: Dated: MODESTO IRRIGATION DISTRICT By: Its: Dated: 4 EXECUTION ORIGINAL Item 7: Staff Report Pg. 70 Packet Pg. 293 of 553 Item 7 Attachment C - Amendment No 1 to the 2009 LTLA The Parties have duly executed and delivered this Amendment of their authorized representatives set forth below. TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By: Its: Dated: CITY OF PALO ALTO By: Its: Dated: CITY OF ROSEVILLE By: Its: Dated: TURLOCK IRRIGATION DISTRICT By: Its: Dated: SACRAMENTO MUNICIPAL UTLITY DISTRICT By: Its: Dated: MODESTO IRRIGATION DISTRICT By: Its: General 4tthager Dated: o 4 Item 7: Staff Report Pg. 71 EXECUTION ORIGINAL Packet Pg. 294 of 553 1 TA N A' Transmission Agency of Northern California P.O. Box 15129, Sacramento, CA 95851 916/852-1673 MEMORANDUM DATE: July 14, 2016 TO: TANC Commission FROM: Bryan W. Griess General Manager Item 7 Attachment D - Amendment No. 2 to the 2009 LTLA SUBJECT: REPORT AND RESOLUTION APPROVING AMENDMENT NO. 2 TO THE 2009 LONG-TERM LAYOFF AGREEMENT (LTLA) On January 28, 2009, the TANC Commission approved Resolution 2009-01 that authorized a 15 - year Long -Term Layoff Agreement (2009 LTLA) from the City of Palo Alto and the City of Roseville to the Modesto Irrigation District (MID), the Turlock Irrigation District (TID), and the Sacramento Municipal Utility District (SMUD). On March 19, 2014, the TANC Commission approved Resolution 2014-04, which returned to the City of Roseville its California -Oregon Transmission Project (COTP) entitlement rights. This was encapsulated in Amendment No. 1 to the 2009 Long -Term Layoff Agreement. On January 27, 2016, the TANC Commission approved Resolution 2016-02 that authorized the issuance of COTP Revenue Bonds (2016A Bonds), and on March 9, 2016 those bonds were issued and sold. The 2016A Bonds have a termination date of May 1, 2039. The 2009 LTLA is scheduled to expire on January 28, 2024, and as part of that agreement the City of Palo Alto will receive its original COTP entitlement back. Amendment No. 2 to the 2009 LTLA will affirm that MID, TID, and SMUD will continue paying the City of Palo Alto's share of COTP debt service obligations through the term of the 2016A Bonds expiration date. A draft of Amendment No. 2 to the 2009 LTLA is enclosed for review. No revision to the existing debt service cost responsibility is envisioned under Project Agreement No. 3 (PA -3) and Project Agreement No. 5 (PA -5) related cost sharing obligations. Approval of the attached resolution will effectuate Amendment No. 2 to the 2009 LTLA. Enclosures A Public Entity whose Members include: Alameda, Biggs, u,I-k, --1 Palo Alto, Pi Item 7: Staff Report Pg. 72 Packet Pg. 295 of 553 Sacramento Munic noation uistrict, UKign Item 7 Attachment D - Amendment No. 2 to the 2009 LTLA RESOLUTION 2016-XX A RESOLUTION OF THE TRANSMISSION AGENCY OF NORTHERN CALIFORNIA APPROVING AMENDMENT NO. 2 TO THE 2009 LONG-TERM LAYOFF AGREEMENT WHEREAS, the Transmission Agency of Northern California (TANC) is a joint exercise of powers agency organized under the laws of the State of California; and WHEREAS, the TANC Procedures for Long -Term Layoffs of Transmission Capacity govern TANC Member layoffs of their California -Oregon Transmission Project (COTP) entitlements; and WHEREAS, pursuant to Resolution 2009-01, the Cities of Palo Alto and Roseville entered into a Long -Term Layoff Agreement By and Among the Transmission Agency of Northern California and certain of its Members (2009 LTLA) to lay off their COTP Entitlements; and WHEREAS, pursuant to Resolution 2014-04, the City of Roseville's COTP Entitlement rights were restored and the affected cost sharing percentages associated with TANC Project Agreements No. 3 (PA -3) and No. 5 (PA -5) were modified by Amendment No. 1 to the Long -Term Layoff Agreement By and Among the Transmission Agency of Northern California and certain of its Members; and WHEREAS, the City of Palo Alto's COTP Entitlement associated with PA -3 remains laid off to certain TANC Members; and WHEREAS, parties to the 2009 LTLA as amended seek certainty regarding the remaining cost sharing obligations associated with COTP; and Item 7: Staff Report Pg. 73 Packet Pg. 296 of 553 Item 7 Attachment D - Amendment No. 2 to the — 2009 LTLA WHEREAS, TANC's General Counsel has drafted Amendment No. 2 to the Long -Term Layoff Agreement By and Among TANC and certain of its Members (Amendment No. 2) to affirm the duration of the existing cost sharing obligations; and WHEREAS, draft Amendment No. 2 will not result in any changes to the cost sharing percentages associated with PA -3 or PA -5; and WHEREAS, the draft Amendment No. 2 to the Long -Term Layoff Agreement By and Among TANC and certain of its Members (Amendment No. 2), has been reviewed and approved by the Parties of the 2009 LTLA. NOW, THEREFORE, BE IT HEREBY RESOLVED by the Commission of the Transmission Agency of Northern California that the proposed Amendment No. 2 Long -Term Layoff Agreement By and Among TANC and certain TANC Members is approved in the form presented today, with such additional changes in form as the General Manager and General Counsel agree and subsequently present to this Commission. PASSED AND ADOPTED this 20h day of July, 2016 on a motion by seconded by 2 Item 7: Staff Report Pg. 74 Packet Pg. 297 of 553 City of Alameda City of Biggs City of Gridley City of Healdsburg City of Lodi City of Lompoc Modesto Irrigation District City of Palo Alto Plumas-Sierra Rural Electric Cooperative City of Redding City of Roseville Sacramento Municipal Utility District City of Santa Clara Turlock Irrigation District City of Ukiah 3 AYES NOES Item 7 Attachment D - Amendment No. 2 to the 2009 LTLA ABSTAIN ABSENT Item 7: Staff Report Pg. 75 Packet Pg. 298 of 553 Item 7 Attachment D - Amendment No. 2 to the 2009 LTLA Amendment No. 2 Long -Term Layoff Agreement By and Among the Transmission Agency of Northern California and certain of its Members namely The City of Palo Alto The City of Roseville The Modesto Irrigation District The Turlock Irrigation District and The Sacramento Municipal Utility District Item 7: Staff Report Pg. 76 Packet Pg. 299 of 553 Item 7 Attachment D - Amendment No. 2 to the 2009 LTLA TABLE OF CONTENTS RECITALS............................................................................................................1 AGREEMENT.......................................................................................................3 Section 1. Effective Date......................................................................................3 Section 2. Addition of Section 3.j, "Treatment of Project Agreement No.3 Debt".................................................................................................... 3 Section3. Integration...........................................................................................4 SIGNATURES.......................................................................................................4 Item 7: Staff Report Pg. 77 Packet Pg. 300 of 553 Item 7 Attachment D - Amendment No. 2 to the 2009 LTLA This Amendment No. 2 of the January 28, 2009 Long Term Layoff Agreement ("LTLA"), is entered into by and among the Transmission Agency of Northern California ("TANC") and certain of its members, namely the City of Palo Alto ("PALO ALTO"), the City of Roseville ("ROSEVILLE"), the Modesto Irrigation District ("MODESTO"), the Turlock Irrigation District ("TURLOCK"), and the Sacramento Municipal Utility District ("SMUD"), referred to as "Party" or "Parties," as of the Effective Date defined in Section 1 of this Amendment No. 2, with regard to the following: RECITALS: A. In the LTLA, PALO ALTO laid off its interests, rights, and obligations to TANC's Transfer Capability on the California -Oregon Transmission Project ("COTP"), associated with PALO ALTO's Participation Percentage, for the fifteen year term of the LTLA, which terminates on January 28, 2024. B. In the LTLA, MODESTO, TURLOCK, and SMUD accepted and assumed all of the use of PALO ALTO's interests, rights, and obligations transferred to TANC, and by TANC to MODESTO, TURLOCK, and SMUD, for the term of the LTLA. C. Amendment No. 1 to the LTLA returned Roseville's COTP interests, rights, and obligations from MODESTO, TURLOCK, and SMUD back to Roseville, and clarified PALO ALTO's voting rights under Project Agreement No. 3. 1 Item 7: Staff Report Pg. 78 Packet Pg. 301 of 553 Item 7 Attachment D - Amendment No. 2 to the 2009 LTLA D. At TANC's January 27, 2016 meeting, TANC approved a resolution authorizing the issuance of California -Oregon Transmission Project Revenue Refunding Bonds, 2016 Series, ("the 2016 COTP Bonds"). On March 9, 2016 TANC issued and sold its $173,920,000 California -Oregon Transmission Project Revenue Refunding Bonds, 2016 Series A (the "2016A Bonds") E. The Parties have agreed to execute this Amendment No. 2 to the LTLA, to provide that in the absence of a default by MODESTO, TURLOCK, or SMUD, the Debt Service for the 2016A Bonds associated with PALO ALTO's 3.6815 Participation Percentage in TANC's entitlement to Transfer Capability on the COTP will be paid by MODESTO, TURLOCK, and SMUD, as provided in this Amendment No. 2. NOW THEREFORE, in consideration of the premises described in the Recitals, and in consideration of the terms, covenants, and conditions that are set out below, the Parties have entered into this Amendment No. 2 to the LTLA. 2 Item 7: Staff Report Pg. 79 Packet Pg. 302 of 553 Item 7 Attachment D - Amendment No. 2 to the 2009 LTLA AGREEMENT: Section 1. Effective Date. This Amendment No. 2 shall become effective and enforceable on May 26, 2016 at 0001 hours Pacific Prevailing Time following the due execution and delivery of this Amendment No. 2 to TANG, or the date on which this Amendment No. 2 is duly executed and delivered to TANG, if May 26, 2016 passes without such execution and delivery (hereinafter "Effective Date") Section 2. Addition of Section 3.j, "Treatment of Project Agreement No.3 Debt". Section 3.j, "Treatment of Project Agreement No.3 Debt", is hereby added: MODESTO, TURLOCK, and SMUD accept and assume the obligation to pay PALO ALTO's 3.6815 Participation Percentage of the Debt Service on the 2016A Bonds in accordance with their respective Participation Percentages of the layoff shares transferred in section 3.c of the LTLA from and after the end of the Term of the LTLA until the last maturity date of the 2016A Bonds, currently May 1, 2039, and any extension thereof. Nothing in this Amendment No. 2 shall affect or limit the underlying obligations of PALO ALTO under TANG Project Agreement No. 3, such as, by way of example and not as a limitation, the obligation of PALO ALTO, in the event of a default by MODESTO, TURLOCK, or SMUD, to pay to TANG an amount equal to its Participation Percentage of all Debt Service on the TANG Project Indebtedness and to pay to TANG an amount equal to PALO ALTO's Participation Percentage of TANG Project Costs, TANG Project O&M 3 Item 7: Staff Report Pg. 80 Packet Pg. 303 of 553 Item 7 Attachment D - Amendment No. 2 to the 2009 LTLA Costs, and TANC Capital Improvement Costs, as provided in section 4.1.3.2 of TANC Project Agreement No. 3. Nothing in this Amendment No. 2 shall affect or limit the other obligations of PALO ALTO under TANC Project Agreement No. 3, such as, by way of example and not as a limitation, the obligations of PALO ALTO to pay to TANC an amount equal to PALO ALTO's Participation Percentage of TANC Project Indebtedness issued and sold for certain future Additions under section 3.1.2.2.2, and Replacements under section 3.1.2.2.3 of TANC Project Agreement No. 3. Section 3. Integration. Except as amended and modified by Amendment No. 1 and this Amendment No. 2, the LTLA remains in full force and effect, without change to any of its provisions other than the text expressly altered by this Amendment No. 2. On the Effective Date this Amendment No. 2 and the LTLA shall be one, integrated agreement. The Parties have duly executed and delivered this Amendment via their authorized representatives set forth below. I1 Item 7: Staff Report Pg. 81 Packet Pg. 304 of 553 TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By: Its: Dated: CITY OF PALO ALTO By: Its: Dated: MODESTO IRRIGATION DISTRICT By: Its: Dated: Item 7 Attachment D - Amendment No. 2 to the 2009 LTLA TURLOCK IRRIGATION DISTRICT By: Its: Dated: SACRAMENTO MUNICIPAL UTLITY DISTRICT By: Its: Dated: CITY OF ROSEVILLE By: Its: Dated: 5 Item 7: Staff Report Pg. 82 Packet Pg. 305 of 553 Item 8 Item 8 Staff Report City Council Staff Report From: City Manager CITY O F Report Type: CONSENT CALENDAR PALO Lead Department: City Manager ALTO Meeting Date: January 16, 2024 Report #:2312-2398 TITLE Approval of Recommendations on Process for 2024 Council Priority Setting Retreat as Recommended by Policy & Services Committee (CEQA Status — Not a Project) RECOMMENDATION Policy Services Committee and Staff recommends that the Council approve the recommended process for the Council 2024 priority setting retreat. BACKGROUND In October 2012, the City Council approved the Priority Setting Guidelines' and outlined the role of the Policy and Services Committee in this activity. The Guidelines state: If needed, the Policy and Services Committee, each year at its December meeting, shall make recommendations about the process that will be used at the Annual Retreat paying particular attention to the number of priorities suggested by Council members. The recommended process is to be forwarded to Council for adoption in advance of the Council retreat. This report outlines the recommended process at a general level. The current Council Priorities are: • Economic Recovery and Transition • Climate Change and the Natural Environment: Protection and Adaptation • Housing for Social and Economic Balance • Community Health and Safety 1 City Council Meeting October 2012: https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes- reports/reports/city-manager-reports-cmrs/yea r-archive/2012/mini-packet-3156. pdf Item 8: Staff Report Pg. 1 Packet Pg. 306 of 553 Item 8 Item 8 Staff Report ANALYSIS At its December 12, 20231 meeting, the Policy and Services Committee (P&S) reviewed the 2023 Council Priorities and proposed 2024 priority setting process for reviewing and selecting Council priorities. In response to Council comments at its previous retreat regarding retreat format and length of Priorities, staff presented three options for consideration: 1. Follow the traditional process of selecting priorities; 2. Explore a strategic planning process; or 3. Add a strategic element to the traditional process of selecting priorities. The P&S Committee selected Option 3. In the recommended Option 3, staff continues to solicit from the community, the priorities that Council should focus on for the coming year. However, this option allows the Council to enable a deeper discussion of the strategies required to advance each priority area. The retreat would use the current four Priorities as a baseline, poll the Council for edits or additions, and discuss key strategic questions that can help ensure that the City is appropriately organized and focused to advance the priorities, such as: 1. How does the Council envision its engagement in advancing each Priority area? If involving ad hoc committees, are there specific goals to be assigned to each committee? 2. What are the key community engagement needs to support and enhance the City's progress toward these goals? 3. What resources (staff and Council time, financial, partner, other) are needed to achieve Council's vision for each priority? The P&S Committee supported the recommended option and requested that the Council be provided with the above questions in advance of the retreat to prepare for thoughtful discussion. Further, the P&S Committee discussed extending the priorities and strategies to a two-year cycle with progress indicators, which would allow more time to achieve Council goals. If the Council focuses on a two-year strategy during the retreat, then appropriate edits to the Council's Procedures and Protocols Handbook would be recommended in February 2024. The Council Objectives would also be part of the retreat process, with 2023 highlights of the 72 projects presented during the retreat. The proposed 2024 Objectives discussion will be presented at a subsequent meeting once the Priorities and strategies are confirmed based on the retreat discussion. Committee workplans could be considered at this time as well. The City Council 2024 priority setting retreat is scheduled for Monday, January 29, 2024, location to be finalized. FISCAL/RESOURCE IMPACT The Council's annual priority setting process is included within the City's annual work program. 2 Policy & Services Committee, December 12, 2023, Item #2, 2024 City Council Priority Setting Process Discussion and Recommendations, https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=52592 Item 8: Staff Report Pg. 2 Packet Pg. 307 of 553 Item 8 Item 8 Staff Report STAKEHOLDER ENGAGEMENT The Policy and Services Committee discussed the 2024 priority setting retreat process at its December 12, 2023, meeting, there was no public comment pertaining to the process. Councilmembers were solicited feedback on desired priorities in advance of the December P&S conversation for consideration by the Committee. Further community engagement and feedback on Council Priorities, solicited through the City's portal (https://www.cityofpaIoaIto.org/News- Articles/City-Manager/What-Would-You-Like-to-See-the-City-Council-Prioritize-in-2024), will be summarized in the January 29, 2024, retreat report to Council. ENVIRONMENTAL REVIEW Council action on this item is not a project as defined by CEQA because the process for the Council Priority Setting retreat is a continuing administrative or maintenance activity. CEQA Guidelines section 15378 (b)(2). ATTACHMENTS None APPROVED BY: Ed Shikada, City Manager Lead Staff: Lupita Alamos, Assistant to the City Manager Item 8: Staff Report Pg. 3 Packet Pg. 308 of 553 Item 9 Item 9 Staff Report City Council Staff Report From: City Manager CITY O F Report Type: CONSENT CALENDAR PALO Lead Department: City Auditor ALTO Meeting Date: January 16, 2024 Report #:2312-2402 TITLE Approval of the Office of the City Auditor's Investment Management Audit Report as Recommended by the Policy & Services Committee (CEQA Status - Not a Project) RECOMMENDATION The Policy and Services Committee and the City Auditor recommend that the City Council approve the Investment Management Audit Report. BACKGROUND Baker Tilly, in its capacity serving as the Office of the City Auditor (OCA), performed a citywide risk assessment that assessed a wide range of risk areas, including strategic, financial, operational, compliance, technological, and reputation risks. The purpose of the assessment was to identify and prioritize risks to develop the annual audit plan. During the FY2022 risk assessment (ID#13914)1, the OCA identified risks associated with Investment Management. The council members approved the attached Investment Management Audit Report at the Policy and Services Committee meeting on December 12, 20232. MOTION: Mayor Kou moved, seconded by Chair Tanaka, to approve the Investment Management Audit Report and recommend the City Council accept the report. MOTION PASSED: 2-0 ANALYSIS The objectives of this review were to: 1) Determine whether adequate controls are in place and working effectively to ensure that investments are properly managed in accordance with the investment policy. 1 https://www.cityofpaloalto.org/files/assets/public/v/8/agendas-minutes-reports/agendas-minutes/city-council- agendas-minutes/2022/20220404/20220404pccsmamended linked 1.pdf 2 https://cityofpaloaIto.primegov.com/Portal/Meeting?meetingTemplateld=12186 Item 9: Staff Report Pg. 1 Packet Pg. 309 of 553 Item 9 Item 9 Staff Report 2) Assess the efficiency and the effectiveness of the investment portfolio management against the best practice. The OCA evaluated the processes and controls that safeguard the City's investment of pooled idle cash to which the City's Investment Policy is applied to and tested the selected controls by reviewing a sample of investment activities between July 1, 2020, to March 26, 2023. The OCA used the California Debt and Investment Advisory Commission (CDIAC) and the Government Finance Officers Association (GFOA) as best practices. The attached report summarizes the analysis, audit findings, and recommendations. FISCAL/RESOURCE IMPACT The timeline and resource needs for implementation of management's corrective action plans are identified by management within the attached report. The City management requires no additional resources to implement the recommended corrective actions identified in the report. STAKEHOLDER ENGAGEMENT The OCA worked primarily with Administrative Services Department and engaged with additional stakeholders, including the City Manager's Office and the City Attorney's Office, as necessary. ENVIRONMENTAL REVIEW Environmental review is not applicable to this activity. ATTACHMENTS Attachment A: OCA — Investment Management APPROVED BY: Adriane D. McCoy, City Auditor Item 9: Staff Report Pg. 2 Packet Pg. 310 of 553 i , I_i :1 • *�'.+�'� _;alt, �� December 12, 2023 4 1 __ 1q,. ib 4 "4 4 __ City of Palo Alto Office of the City Auditor Investment Management Audit 1 Item 9: Staff Report Pg. 3 Packet Pg. 311 of 553 Contents EXECUTIVESUMMARY.................................................................................................1 INTRODUCTION.............................................................................................................3 DETAILEDANALYSIS...................................................................................................6 AUDITRESULTS..........................................................................................................10 APPENDICES...............................................................................................................16 Li A CG bakertitty Baker Tilly US, LLP, trading as Baker Tilly, is an independent member of Baker Tilly International. Baker Tilly International Limited is an English company. Baker Tilly International provides no professional services to clients. Each member firm is a separate and independent legal entity, and each describes itself as such. Baker Tilly US, LLP is not Baker Tilly International's agent and does not have the authority to bind Baker Tilly International or act on Baker Tilly International's behalf. None of Baker Tilly International, Baker Tilly US, LLP nor any of the other member firms of Baker Tilly International has any liability for each other's acts or omissions. The name Baker Tilly and its associated logo is used under license from Baker Tilly International Limited. Item 9 Th Attachment A - OCA - Investment Management U y Executive Summary Purpose of the Audit Baker Tilly US, LLP (Baker Tilly), in its capacity serving as the Office of the City Auditor (OCA) for the City of Palo Alto (the City), conducted an Investment Management Audit based on the approved Task Order 4.17. The objectives of this review were to: 1) Determine whether adequate controls are in place and working effectively to ensure that investments are properly managed in accordance with the investment policy. 2) Assess the efficiency and the effectiveness of the investment portfolio management against the best practice. Report Highlights Finding 1: Segregation of duties and oversight of investment activities (Page 10) The City's Administrative Services Department (ASD)'s Treasury Division includes the investment function. The day-to-day operations of the investment function are performed by the Manager of Treasury, Debt, Investment (Manager). The Assistant Director of ASD (Assistant Director) oversees the function and has delegated the responsibility for managing the investment program to the Manager and authorized him to enter into the investment within the parameters set in the City's Investment Policy. The Manager performs all tasks to manage the investment program as well as initiating wire transactions among all responsibilities of the Treasury Division. While an approval is required prior to sales of investments, formal independent reviews of investment purchase decisions prior to purchases are not in place. When the Manager is out of office, there is no backup personnel to buy/sell securities. The limited staffing of the Treasury Division and untimely authorization of investment activities cause a concern for the inadequate segregation of duties in the investment function even through there are some segregations of duties: the purchased investments are required to be delivered to the City's safekeeping custodian and recorded in the City's accounting system by the Accounting team. Without adequate segregation of duties, the City has a higher risk of not preventing and detecting errors and fraudulent transactions in a timely manner. As mitigating controls, increased monitoring and oversight of the investment function are required. Key Recommendations The City should implement a formal process for a review and approval of investment activities by the Assistant Director and, if required, the Director prior to placing an order to buy or sell securities. Approvals should be documented. Additionally, the City should reassess the City's Investment Policy to ensure that the City will comply with the requirement to perform a monthly performance review described in the City's Investment Policy and address Section 53607 of California Government Code that requires submission of a monthly report of investment transactions to the City Council. Furthermore, the City should continue the efforts to adjust the staffing of the investment function to assign responsibilities to ensure adequate internal controls are in place for prevention of the loss of public funds arising from errors, imprudent actions, and fraud. Item 9: Staff Report Pg. 5 Packet Pg. 313 of 553 Item 9 Attachment A - OCA - Investment Management Finding 2: Supporting documents for investment activities (Page 13) The OCA reviewed 58 out of 850 investment activities from July 1, 2020, to March 26, 2023, and noted inadequate or lack of supporting documents related to the following: • Manager's investment decisions • Quotations from authorized brokers and dealers • Qualification of brokers and dealers • Broker's acknowledgement of the applicable California Government Code sections and the City's Investment Policy Adequate supporting documents for investment decisions and transactions are important for transparency and accountability. The supporting documents provide the necessary information to demonstrate the validity, accuracy, and compliance to the approvers of the decisions and transactions and the oversight functions such as auditors and an oversight committee. Key Recommendations The City's ASD should implement a procedure to assemble and maintain adequate supporting documents such as the cash flow forecasts and evaluation of quotations for each investment decision and transaction to enable the approvers to review and approve them prior to purchases/sales and to allow the oversight functions to evaluate the validity, accuracy, and compliance when needed. Additionally, the City should update the City's Investment Policy to require the brokers and dealers who wish to sell and buy securities to the City to provide documentation showing their financial condition and relevant registration. The City should also require them to certify in writing that they reviewed the applicable California Government Code sections and the City's Investment Policy. An annual review should be also conducted to maintain the List of Authorized Brokers and Dealers with the recent status. Item 9: Staff Report Pg. 6 Packet Pg. 314 of 553 Item 9 Th Attachment A - OCA - Investment Management U y Introduction Objective The objectives of this review were to: 1) Determine whether adequate controls are in place and working effectively to ensure that investments are properly managed in accordance with the investment policy. 2) Assess the efficiency and the effectiveness of the investment portfolio management against the best practice. Background The City of Palo Alto (City) invests idle cash pooled from all sources and all funds in accordance with the California Government Code and the City's Investment Policy. California Government Code states that trustees who are governing bodies or individuals authorized to make investment decisions on behalf of local agencies investing public funds are subject to the prudent investor standard that requires a trustee to act with care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency.' The City follows the prudent investor standard and defines the following investment objectives in the City's Investment Policy: 1. Ensure the safety of the public funds 2. Maintain the liquidity to meet the City's financial obligations 3. Achieve a reasonable yield on the City's investment portfolio The City's Administrative Services Department (ASD) is responsible for cash management and investment activities. The Assistant Director of ASD who is authorized to make all investment transactions and responsible for managing the investment program oversees the activities while the Manager of Treasury, Debt, Investment (Manager) performs the day-to-day responsibilities, including purchasing and selling securities, recording investment transactions, maintaining the cash flow forecast, revenue analysis, and revenue projection spreadsheets. The Note 3 in the City's Annual Comprehensive Financial Report (ACFR) as of June 30, 2022, shows that cash and investments available for operations were $553M as shown in Table 1: Table 1 — Cash and Investment Classification (in thousands) Governmental Business -Type Fiduciary Activities Activities Funds Total Cash and investments: Available for operations $ 311,653 $ 238,002 $ 3,324 $ 552,979 With fiscal agents and trustees 89,071 3,340 2,712 95,123 Total cash and investments $ 40,724 $ 241,342 5 6,036 $ 646,102 Source: page 64, Note 3, City of Palo Alto FY2022 Annual Comprehensive Financial Report 1 Section 53600.3: https://Ieginfo.legislature.ca.gov/faces/codes displavSection.xhtml?sectionNum=53600.3.&IawCode=GOV Item 9: Staff Report Pg. 7 Packet Pg. 315 of 553 Item 9 Attachment A - OCA - Investment Management The City's investment Policy describes limitations on types, maturity periods, and amounts of investments in accordance with the Section 53601 of the California Government Code. These limitations are summarized in the Note 3 in the City's ACFR as of June 30, 2022 (Table 2 below). Table 2 — Investments Authorized by the Investment Policy and Debt and Trust Agreements Maximum Maximum Maximum Minimum Credit Percentage of Investment in Authorized Investment Type Maturity Quality Portfolio One issuer U.S. Government Securities 10 years (*) N/A No Limit No Limit U.S. Federal Agency Securities (C) 10 years (') N/A No Limit (AI No Limit Certificates of Deposit 10 years (') N/A 20% 10% of the par value of portfolio Bankers Acceptances 180 days (D) N/A (D) 30% $5 million Commercial Paper 270 days A-1 15% $3 million (B) Local Agency Investment Fund N/A N/A No Limit $75 million per account Short -Term Repurchase Agreements 1 year N/A No Limit No Limit City of Palo Alto Bonds N/A N/A No Limit No Limit Money Market Mutual Funds N/A N/A (E) No Limit No Limit Mutual Funds (F) N/A N/A 20% 10% Negotiable Certificates of Deposit 10 years (*) N/A 10% $5 million Medium -Term Corporate Notes 5 years AA 10% $5 million Bonds of State of California Municipal 10 years (*) AA/AA2 30% No Limit Agencies & Other U.S. States Supranational 5 years AA/AA2 20% 10% of the par value of portfolio Source: page 65, Note 3, City of Palo Alto FY2022 Annual Comprehensive Financial Report See the footnotes at https://www.cityofpaloalto. org/files/assets/public/v/1 /adm inistrative-se rvices/financial-reporting/cam prehensive-annual-fi nancial- reports-cafr/current-2011-cafrs/2022-acfr-final/city-of-pal o-alto-acfr-fv2022-final-secured-2. pdf The ASD's goals and key performance measures in the FY2023 Adopted Operating Budget include the following investment -related goal and key performance measure: Goal: Ensure public funds and assets are invested prudently and are well -managed. Objectives: • Ensure sufficient cash is always available to meet current expenditures. • Maintain a reasonable rate of return on investments while prioritizing the safety and liquidity needs. • Invest in sound Environmental, Social, and Governance (ESG) securities, which include green and sustainable bonds, when available and appropriate, in alignment with the Investment Policy. Key Performance Measure: Annual percentage yield on 2.22% 1.72% 1.70% 1.80% investments Source: page 208, City of Palo Alto FY2023 Adopted Operating Budget The ASD submits a quarterly report to the City Council that provides the information on the City's investment portfolio (Appendix A) as required by the Section 53646 of the California Government Code. 4 Item 9: Staff Report Pg. 8 Packet Pg. 316 of 553 Item 9 Attachment A - OCA - Investment Management Scope The OCA evaluated the processes and controls that safeguard the City's investment of pooled idle cash to which the City's Investment Policy is applied toe and tested the selected controls by reviewing a sample of investment activities between July 1, 2020, to March 26, 2023 (audit period). Methodology To achieve the audit objectives, the OCA performed the following procedures: • Reviewed the pertinent laws, policies, and guidelines related to investments. • Gathered the City's financial and management reports related to investments. • Interviewed the appropriate individuals to understand the roles and responsibilities, processes, and controls related to investment activities. • Judgmentally3 selected a sample of investments purchased and sold during our audit period in order to cover all three fiscal years in our audit period, all brokers used, all types of investments, and all approval workflow types. • Reviewed supporting documents for controls performed and approvals for the selected investment activities. • Used the California Debt and Investment Advisory Commission (CDIAC) and the Government Finance Officers Association (GFOA) as best practices. Compliance This audit activity was conducted from March 2023 to June 2023 in accordance Statement with generally accepted government auditing standards, except for the requirement of an external peer review4. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Organizational During this audit activity, we observed that the dedicated Manager of Treasury, Strengths Debt, Investment maintained the detailed spreadsheets to monitor the cash flow forecast and keep track of the compliance with the investment restrictions. We also observed the adequate supporting documents maintained by the detail - oriented Accounting team who posts the investment transactions in the City's accounting system and reconciles the transactions. The Office of the City Auditor greatly appreciates the support of the Treasury and Accounting Divisions of the Administrative Services Department in conducting this audit activity. Thank you! 2 The Investment Policy does not cover funds held by the California Public Employees Retirement System (CaIPERS), the California Employers' Retiree Benefit Trust (CERBT), Deferred Compensation program (ICMA, Hartford), the Authority for California Cities Excess Liability (ACCEL), and the Public Agency Retirement Services (PARS) Section 115 IRREVOCABLE Trust. 3 Judgmental sampling is a non -statistical sampling that involves selecting a sample based on auditors' experience, knowledge, and professional judgment and is appropriate when auditors do not need to draw conclusions about the population. 4 Government auditing standards require an external peer review at least once every three (3) years. The last peer review of the Palo Alto Office of the City Auditor was conducted in 2017. The Palo Alto City Council approved a contract from October 2020 through June 2022 with Baker Tilly US, LLP (Baker Tilly) and appointed Kyle O'Rourke, Senior Consulting Manager in Baker Tilly's Public Sector practice, as City Auditor. Given the transition in the City Audit office, a peer review was not conducted in 2020 and will be conducted after the third year of Baker Tilly's contract. Item 9: Staff Report Pg. 9 Packet Pg. 317 of 553 Item 9 Th Attachment A - OCA - Investment Management U y Detailed Analysis Investment The City's Investment Policy describes the following internal controls over the City's Policy investment activities: Roles and Responsibilities • The Director of ASD/Chief Financial Officer (Treasurer) o Must approve any sale of securities from the City's portfolio • The Assistant Director of ASD o Is charged with the responsibility to manage the investment portfolio o Needs to approve a transfer more than total of $10 million a day from the City's general account to any one financial institution • Manager and Analyst o Are directed and supervised by Assistant Director of ASD o Prepare the quarterly report and record investment transactions (type of investment, amount, yield, and maturity) • Custodian o All securities (with a few exceptions listed in the City's Investment Policy) must be delivered to the City's safekeeping custodian List of Authorized and Prohibited Investments • The investments authorized by Section 53601 of California Government Code are reflected in the City's Investment Policy List of Authorized Brokers and Dealers • Brokers and dealers meeting the City's two requirements must be approved by the Assistant Director before they are added to the City's List of Authorized Brokers and Dealers • Brokers and Dealers will be removed from the list if a history of problems is developed Reporting • On a monthly basis, the ASD reviews performance against the City's Investment Policy • On a quarterly basis, the ASD reports investment activities, including the portfolio's performance and compliance with the City's Investment Policy to the City Council, as well as a detailed list of all securities and the City's ability to meet expenditure requirements over the next six months Policy Review • Annually, the ASD presents a proposed investment policy to the City Council during the annual budget process The Appendix B is the flowchart showing the current processes and controls in place. Item 9: Staff Report Pg. 10 Packet Pg. 318 of 553 Item 9 Attachment A - OCA - DETA Investment Management Best Practices The California Debt and Investment Advisory Commission (CDIAC) provides and guidance to local governments in California to improve the public finance practice. Benchmarking The CDIAC's publication, Local Agency Investment Guidelines, includes the following recommendations. The Annual Investment Policy Although the California Government Code does not specify the elements of an investment policy for local governments other than counties, it should include at least the following elements required of counties: • List of authorized investments with percentages by type of security and the maximum terms • The manner of calculating and apportioning the authorized costs of investing, etc. • Limits on the receipt of honoraria, gifts, and gratuities • Criteria for selecting brokers and dealers • A requirement that the treasurer provide an investment report Reporting The treasurer or designated official should provide the local government's legislative body a quarterly investment report that provides the status of the current investment portfolio. The quarterly investment report should include the following: • A listing of individual securities held at the end of the reporting period by authorized investment category • Average life and final maturity of all investments listed • Coupon, discount, or earnings rate • Par value, amortized book value and market value • Percentage of the portfolio represented by each investment category • A description of the funds, investments, and programs managed by contracted parties • A statement of compliance with the investment policy or an explanation for non-compliance • A statement of the local agency's ability to meet its pool's expenditure requirements for the next six months In addition to a quarterly investment report required by California Government Code 53646, the treasurer should submit a monthly report of investment transactions to the legislative body even though the California Government Code 53607 does not specify the contents of the monthly report of transactions. Treasury Oversight Committee Local governments should consider whether an oversight committee is appropriate. Some cities6 have treasury oversight committees even though the law does not require them to have such a committee. The more discretion the 5 https://www.treasurer.ca.gov/cdiac/LAIG/guideline.pdf 6 For example, the Investment Advisory Committee is mentioned in the investment polices of City of San Diego and City of Burbank; The Investment Committee is mentioned in the investment policies of City of Riverside and City of Beverly Hills. Item 9: Staff Report Pg. 11 Packet Pg. 319 of 553 Item 9 Attachment A - OCA - DETA Investment Management treasurer has in making investment decisions, the greater the need for oversight procedures. The role of the oversight committee should be clearly specified. The Government Finance Officers Association (GFOA) Investment Policy Best Practices recommends that the investment policy include the following elements': A. Scope and investment objectives B. Roles, responsibilities, and standards of care — "Standards of care should include language on prudence....... due diligence, ethics and conflicts of interest, delegation and authority, and knowledge and qualifications." C. Suitable and authorized investments D. Investment diversification E. Safekeeping, custody, and internal controls — "Develop guidelines to enhance the separation of duties and reduce the risk of fraud. " F. Authorized financial institutions, depositories, and broker/dealers — See the additional information provided by the GFOA below. G. Risks and performance standards H. Reporting and disclosure standards The GFOA provides recommendations pertaining to selecting securities dealers for an approved vendor list in its website8 and includes the following in its Sample Investment Policy9: "All financial institutions and broker/dealers who desire to become qualified for investment transactions must supply the following as appropriate: • Audited financial statements demonstrating compliance with state and federal capital adequacy guidelines • Proof of Financial Industry Regulatory Authority (FINRA) certification (not applicable to Certificate of Deposit counterparties) • Proof of state registration • Completed broker/dealer questionnaire (not applicable to Certificate of Deposit counterparties) • Certification of having read and understood and agreeing to comply with the [entity's] investment policy. • Evidence of adequate insurance coverage. An annual review of the financial condition and registration of all qualified financial institutions and broker/dealers will be conducted by the investment officer." The OCA compared the City's Investment Policy as well as the investment policies of the six California cities that have relatively similar revenue amounts as the City1° to the GFOA Sample Investment Policy (using the elements A through H listed above) for the benchmarking purpose (see Table 1 below). The GFOA states that its Sample Investment Policy is presented as a model to help entities customize a ' https://www.gfoa.org/materials/investment-policy 8 https://www.gfoa.org/materials/government-relationships-with-securities-dealers 9 https://gfoaorg.cdn.prismic.io/gfoaorg/76b137b8-17e3-42bd-ae9f-7f7be8be50bd_GFOA_sample_investment_policy.pdf 10 Based on the "Revenues broken down by City", California State Controller's Office https://cities.bythenumbers.sco.ca.gov/#!/year/2021 /revenue/0/entity_name Item 9: Staff Report Pg. 12 Packet Pg. 320 of 553 Item 9 Attachment A - OCA - DETA Investment Management policy to fit their needs, constraints, and capabilities, not to supplant an existing policy. Table 1: Comparison of Investment Policies zIJ_�: .te irrrr:rIara t]il Palo Alto Sacramento A. Scope & objectives B. Roles & standards of care Note 1 C. Authorized investments D. Investment diversification Note 2 E. Safekeeping & internal controls No 3 F. Authorized broker/dealers A A Note 4 G. Riks & performance standards A Note 5 H. Reporting standards A Note 6 � = All elements are covered in the policy A = One or more elements are not covered San Diego Riverside Burbank Berkeley Beverly Hills A ' A A A A Note 1: Ethics and conflicts of interest is not discussed while other cities include a section Note 2: Although dollar and/or percentage limits on securities are listed, an overall diversification strategy/approach is not discussed. Note 3: Although safekeeping and custody are discussed, some requirements related to "Delivery Versus Payment" and internal controls are not discussed. Note 4: Although a list of authorized broker/dealers are maintained, the information and documentation required from them for authorization are limited. Note 5: The benchmark(s) to be used for the portfolio performance measurement is not established. Note 6: Two reporting requirements by California Government Code are not clearly addressed. 9 Item 9: Staff Report Pg. 13 Packet Pg. 321 of 553 Item 9 Th Attachment A - OCA - Investment Management U y Audit Results Finding 1: The City's Administrative Services Department (ASD)'s Treasury Division Segregation of includes the investment function. The day-to-day operations of the duties and investment function are performed by the Manager of Treasury, Debt, oversight of Investment (Manager). The Assistant Director of ASD (Assistant Director) investment oversees the function and has delegated the responsibility for managing the activities investment program to the Manager and authorized him to enter into the investment within the parameters set in the City's Investment Policy. The Manager also enters the investment transactions in the City's investment management software, maintains the cash flow forecast, revenue analysis, and revenue projection spreadsheets, and executes wire transactions. At the time of this audit in FY2023, there was no Senior Management Analyst who performed any of these tasks under supervision of the Manager. The OCA reviewed 58 out of 850 investment activities from July 1, 2020, to March 26, 2023, and noted the following: • None of purchased investments (45 of 58 investment activities reviewed) had the evidence of approval by the Assistant Director or other authorized personnel prior to the trade dates" Although the Assistant Director can check the reasonableness of investment activities using cash flow spreadsheets at the time the Manager notifies the custodian bank and the Assistant Director of an investment purchase (within a day or so of a purchase), there is no evidence of a review because a response from the Assistant Director is expected only when there is a question or an issue, which did not happen for the 45 purchased investments that were reviewed (or for the remaining investments in the audit period). The Manager prepares the final paperwork for each purchase (Memorandum) that requires a signature by the Assistant Director for securities under five years and by both the Assistant Director and the Director of ASD for securities over five years. The memorandums for all 45 purchased investments we reviewed were signed by the required authorized personnel four to 170 days (average 65 days) after the trade dates. Wire transfers to the custodian bank initiated by the Manager are approved by the Assistant Director after an order to buy a security is placed. However, three of 45 purchased investments we reviewed did not have any approval because there were no outgoing wire transfers for these purchases due to settlement netting12 that nets incoming security maturity and interest earnings against a security purchase. As an independent review of a wire transaction is the only documented review the City has formally implemented in the 11 The trade date is the day a trader/investor place an order to buy or sell a security. 12 According to the data provided by the management, during FY21, there were 18 settlement netting (totaling $24.3M purchase settlement) that were processed without approval and, during FY22, there werel4 settlement netting (totaling $11.6M). 10 Item 9: Staff Report Pg. 14 Packet Pg. 322 of 553 Item 9 Attachment A - OCA - ,Investment Management investment purchasing process, there was no independent review of these three purchased investments until the memorandums were signed 11 to 130 days (average 72 days) after the trade dates. The proposed sale of investments made by the Manager in July 2022 was approved by a designee of the Director of ASD on July 7, 2022. The detailed listing of the sold investments shows 13 securities totaling $10.7M (par value) were sold with a net gain of $3.5K on July 12, 13, and 14, 2022, which was accurately reported in a quarterly report (Investment Activity Report for the Fourth Quarter, Fiscal Year 2022). However, the approval e-mail dated July 7, 2022, from a designee of the Director of ASD listed only five of 13 securities sold. According to the Manger, changes had to be made to the approved list of proposed securities to be sold due to the daily changes in market values of securities. The Manager sent e -mails to update a designee of the Director of ASD and the Director of ASD on July 7, 8, and 13, but there was no documentation of the final approval. Additionally, a monthly review of performance has not been performed by the ASD as described in the City's Investment Policy for many years, according to the Manager. The City does not have other oversight mechanism such as an investment advisory committee. Another reporting requirement is submission of a monthly report of investment transactions to the legislative body, which is required by Section 53607 of the California Government Code. However, this reporting requirement is not mentioned in the City's Investment Policy. As described above, the Manager performs all tasks to manage the investment program as well as initiating wire transactions among all responsibilities of the Treasury Division. While an approval is required prior to sales of investments, formal independent reviews of investment purchase decisions prior to purchases are not in place. When the Manager is out of office, there is no backup personnel to buy/sell securities. The limited staffing of the Treasury Division and untimely authorization of investment activities cause a concern for inadequate segregation of duties in the investment function even through there are some segregations of duties: the purchased investments are required to be delivered to the City's safekeeping custodian and recorded in the City's accounting system by the Accounting team. Segregation of duties is a key internal control that disperses responsibilities of a process to more than one individual. Without adequate segregation of duties, the City has a higher risk of not preventing and detecting errors and fraudulent transactions in a timely manner. As mitigating controls, increased monitoring and oversight of the investment function are required. According to the Assistant Director, the efforts to assign more employees to perform some of the cash management function tasks currently performed by the Manager were initiated at the end of our fieldwork of this audit. Recommendation The City should implement a formal process for a review and approval of investment activities by the Assistant Director and, if required, the Director 11 Item 9: Staff Report Pg. 15 Packet Pg. 323 of 553 Item 9 Attachment A - OCA - ,Investment Management prior to placing an order to buy or sell securities. Approvals should be documented. Additionally, the City should reassess the City's Investment Policy to ensure that the City will: Comply with the requirement to perform a monthly performance review described in the City's Investment Policy. The City can take this opportunity to assess the suitability of an investment advisory committee to execute a monthly performance review to ensure appropriate investment decisions are made in compliance with the laws, regulations, and the City's Investment Policy. • Address the Section 53607 of the California Government Code that requires submission of a monthly report of investment transactions to the City Council. Furthermore, the City should continue the efforts to adjust the staffing of the investment function to assign responsibilities to ensure adequate internal controls are in place for prevention of the loss of public funds arising from errors, imprudent actions, and fraud. The new staff members should receive adequate training and a procedure manual to perform their job responsibilities, and succession planning should be reviewed and updated for the key positions. Management Responsible Department(s): Administrative Services Department Response Concurrence: Agree Target Date: February 2024 Action Plan: The City agrees that a formal process for review and approval of investment activities by the Assistant Director will provide oversight of investment activities and transactions. A workplan has been developed for the team and will be amended to include clear approval processes for the purchase or sale of securities in advance of the transaction, however, staff does anticipate some authority to continue to be granted for real time transactions within approved guidelines and limits. Expected implementation is targeted for January 2024. The City concurs with the City Auditor's recommendation that a monthly informational report of investment transactions be made available to the City Council, as required by California Government Code section 53607, and will implement this practice in January 2024. The City agrees with segregation of duties in this function will provide adequate internal controls, additional oversight, and back fill for these activities when the key staff is on leave. A workplan for this was provided in early 2023 and under the guidance of an Assistant Director, has continuously worked on transitioning certain duties to ASD's analytical staff and administrative support staff. The workplan will be reviewed and amended to ensure documented adequate training and a procedure manual 12 Item 9: Staff Report Pg. 16 Packet Pg. 324 of 553 Item 9 Attachment A - OCA - Alnvestment Management for job responsibilities is available to other ASD staff. The targeted completion and transition of these duties is targeted for February 2024. The analyst assigned to the Treasury Division has been tasked with creating a desk manual for certain treasury tasks. While full completion of this manual is not targeted for February 2024, it is continuously being worked on as the analyst increases exposure and knowledge of treasury operations. Finding 2: The Manager maintains the cash flow forecast and revenue projection Supporting spreadsheets to monitor the City's cash needs and make investment documents for decisions. According to the Manager, when the City needs to purchase or investment sell securities, the Manager verbally communicates the City's requirements activities and needs to the brokers/dealers who are listed on the City's List of Authorized Brokers and Dealers (List) approved by the Assistant Director. The City's Investment Policy requires brokers and dealers to meet two conditions before they can be added to the List. The Manager reviews the information e -mailed by authorized brokers/dealers and decides a security to purchase/sell. After a purchase/sale of a security, the Manager enters the trade information in the investment management software and prepares a Memorandum that will be approved by the Assistant Director and, if necessary, the Director. The OCA reviewed 58 out of 850 investment activities from July 1, 2020, to March 26, 2023, and noted the following: • The printouts of the spreadsheets or the versions of the spreadsheets that supported the Manager's investment decisions for the purchased investments (45 of 58 investment activities reviewed) are not available as they were not included in the supporting documents for the wire payments or in the Memorandums. The General Investment Guidelines in the City's Investment Policy encourages the City to obtain three or more quotations on the purchase or sale of comparable securities13 and take the higher yield on purchase or higher price on sale whenever possible. However, no multiple quotations were obtained for any of the 45 purchased investments we reviewed. In the supporting documents for eight of 45 investment purchases we reviewed, a standard language "Not required to obtain three or more quotations" was included. For the remaining investment purchases we reviewed, a standard language, "No comparable security offering maturing within 30 days of the one purchased were available" was included. There were no other documents such as evaluation of securities and the information obtained from the authorized brokers and dealers to support the unavailability of a comparable security. • The OCA verified that the brokers and dealers associated with the selected investment activities were listed in the List of Authorized 13 The General Investment Guidelines in the City's Investment Policy states, "This rule will not apply to new issues, which are purchased at market no more than three (3) working days before pricing, as well as to LAIF, City of Palo Alto bonds, money market accounts and mutual funds, all of which shall be evaluated separately." 13 Item 9: Staff Report Pg. 17 Packet Pg. 325 of 553 Item 9 Attachment A - OCA - ,Investment Management Brokers and Dealers. During our audit period, there were two changes to the List: The List dated 10/27/2020 had a new broker; The List dated 11 /16/2022 also had a new broker. Both changes were approved by the Assistant Director. However, there were no supporting documents showing that new brokers and dealers met the City's criteria. Additionally, the two requirements in the City's Investment Policy do not address Section 53601.5 of the California Government Code regarding authorized brokers and dealers. Furthermore, there was no documentation showing the broker's acknowledgement of the applicable California Government Code sections and the City's Investment Policy. Adequate supporting documents for investment decisions and transactions are important for transparency and accountability. The supporting documents provide the necessary information to demonstrate the validity, accuracy, and compliance to the approvers of the decisions and transactions and the oversight functions such as auditors and an oversight committee. Recommendation The City's ASD should implement a procedure to assemble and maintain adequate supporting documents such as the cash flow forecast and evaluation of quotations for each investment decision and transaction to enable the approvers to review and approve them prior to purchases/sales and to allow the oversight functions to evaluate the validity, accuracy, and compliance when needed. The City should update the City's Investment Policy to require the brokers and dealers who wish to sell and buy securities to the City to provide documentation showing their financial condition and relevant registration. The City should also require them to certify in writing that they reviewed the applicable California Government Code sections and the City's Investment Policy. An annual review should be also conducted to maintain the List of Authorized Brokers and Dealers with the recent status. Management Responsible Department(s): Administrative Services Department Response Concurrence: Agree Target Date: January and June 2024 Action Plan: The City agrees that the evaluation of investment options that are available at the time of purchase should be performed and documented before an investment is purchased. Investment offerings are received by the Manager via email and can be attached to investment paperwork as documentation. Furthermore, a workplan to formalize review and oversight of investment activities has been developed outlining expectations for routine reviews of cash flow and investment status. Expected implementation of this workplan is targeted for January 2024. The City agrees that the Investment Policy should be updated to include the requirements that brokers and dealers who wish to buy or sell securities with the City must provide documentation of their financial condition and relevant 14 Item 9: Staff Report Pg. 18 Packet Pg. 326 of 553 Item 9 Attachment A - OCA - ,Investment Management registration. ASD staff will consider these updates in the next Investment Policy review by the City Council in June 2024. 15 Item 9: Staff Report Pg. 19 Packet Pg. 327 of 553 `+�liii�i•► Appendices Item 9 Attachment A - OCA - Investment Management Appendix A: City of Palo Alto Investment Portfolio The following information on the City's investment portfolio was reported in the Investment Activity Report for the Second Quarter, Fiscal Year 2023. Graph 1: Investments by Type - $579.3M Liquid Accts. (Par Value Supranational _ $y_U.S. Treasury 7.7% 2.2% U.S. Corporate 4.7% U.5. Agency Negotiable CD_ - 36.3% U.S. Muniripal1State— _- ;S Yields Graph 2: Yields and Interest Earnings Int.Earnings(Millions) 6.0% 5.88% $5.0 5.5°16 5.25% 4.9896 $4.5 5 ea4� 5.0% - 45446 $d.0 4.5% 4,17°% 4.39% 46 4.39% City of Palo Alta I$3.55 4.0% 4.00% 3-3846 $3.0 3.5% 2 8846 3.23% 3.0% $2.5 5-Yr. Treasury - 271% 2.47% 2.5% I.fl56 $2.0 1.9396 1,b6% '9$ 2.0% $1.5 1.5% 1A4'% 1.29% 7% $1.0 1.03'4 1.4155 flr. Treasury 0.5% LAIF $0.5 4'S1n n.Z596 D.27% b Sr 00'0'o❑y 0o0' c'0'c'p40''0'4a' a 0'4 o' 4 a 6 a a •a' a a aa' 4 CI 4 a' 0rya 0-06 ppct papeo eqn ONE ❑ O 4❑ 4 O 9 O 9 4 O O O 4 a O� O 4 Q p O O 4 4� O O 4 4 O ON Ory Cf� 4N� ON O! Fiscal Year Quarters City's portfolio duration is 3.87 years, 17 Item 9: Staff Report Pg. 21 Packet Pg. 329 of 553 Appendix B: Palo Alto Investment Management Processes and Controls City of Palo Alto ASD Investment Function N • a 0 Annually, prepare a Approved Obtain an Proposed Statement Approve sales of v Investment Policy approval by the investments •c u of Investment Policy •L Council before maturity < Nr Item 9 Attachment A - OCA - Investment Management Needs Key Control Improvement Monthly Independent auditor • This report is not prepared and Review performance provides reasonable reviewed as required by the policy against the Report to assurance about the • Advisory or oversight committee does Investment Policy Council fnancial statements not exist Director of ASD Approve a memo via Docusign Account for Untme A Review by IIn Director, City Lnuestmertv nancial statements Manager, and. (ACFR) City Attorney in This is no[ a control as the Q I • No supporting documents for qualifications evidence of review and •No broker's acknowledgement of the applicable Wire payment Yes California Government Code sections and the City's approval is not maintained O Investment Policy u v Authorize Treasury Check the ApproveuPdvtevjcceptabl A rove wire O Manager to enter into Approve sales of reasonableness of Respond to an US Bank Portal pp Reviewand approves the list of acceptable via APProve a memo Investment investments within investments investment activities email on an Approveawire paperwork quarterly report in the dealers via Docusign over 5 years? .f°, parameters specified before maturity using cash flow exception basis transaction Docusign One Meeting system •� by the Policy spreadsheet m Q No Suggest dealers to Upload and be added to/ submit a quarterly Supporting documents (cash flow Contact a Broker (111nmming g Receive the removed from the report In the One projection and evaluation of to buy/sell the on Yes nettedquotations(: investment a amount Meeting system O • are not assembled O •are not submitted for approval vs I.5 I\'. Therein no Verbally No r�proval ofth Quarter) , prepare a Place the Y P P Maintain Cash communicate to Daily, review the SymPro Email paperwork transaction report on investment information on m Monitor the Cites flow and daily % the dealers the options received ( Enter the with roversheet activit, portfolio's the investment in r ra cash flow - investment / Cites from brokers via a temporary trade to custodian and performance, etc. / spreadsheets requirements and email shared Polder information 1 / Assistant Director needs 0 ano r Formulas are used to meet / Send the wire Memofor trade Save the m various re uirements listed \ m In the Investment Policy. Sell before N��N actioInvesn needed. N Invest? Yes Prepare wire U58ank Portal paperwork via tickets to approved memo M�hlyort ofm1IIaturity? aaiopaperwork Initiateawire Docusign tothe formalize and supportingtransaction approver of the paperwork documents in the nt Propose \ \ transaction shared drive ns investment to be Yes sold before \ This report is maturity nduded in the Quarterly Report Daily reconciliation SAP Fl Receive an Monthly r, O against a dally bank Recording of .� automatic a -mail reconciliation statement, cash flow Investment notification against SymPro spreadsheet, and SymPro � TransactIons � c Journal Eno ntries p Prepared u monthly and annually 18 Item 9: Staff Report Pg. 22 1 Packet Pg. 330 of 553 Item 9 Attachment A - OCA - Investment Management Appendix C: Management Response Findings and Recommendation Fining 1: Segregation of duties and oversight of investment activities The City should implement a formal process for a review and approval of investment activities by the Assistant Director and, if required, the Director prior to placing an order to buy or sell securities. Approvals should be documented. Additionally, the City should reassess the City's Investment Policy to ensure that the City will: Comply with the requirement to perform a monthly performance review described in the City's Investment Policy. The City can take this opportunity to assess the suitability of an investment advisory committee to execute a monthly performance review to ensure appropriate investment decisions are made in compliance with the laws, regulations, and the City's Investment Policy. • Address the Section 53607 of the California Government Code that requires submission of a monthly report of investment transactions to the City Council. The City should continue the efforts to adjust the staffing of the investment function to assign responsibilities to ensure adequate internal controls are in place for prevention of the loss of public funds arising from errors, imprudent actions, and fraud. The new staff members should receive adequate training and a procedure manual to perform their job responsibilities, and succession planning should be reviewed and updated for the key positions. Responsible Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Department(s) Plan Administrative Concurrence: Agree Services Target Date: February 2024 Action Plan: The City agrees that a formal process for review and approval of investment activities by the Assistant Director will provide oversight of investment activities and transactions. A workplan has been developed for the team and will be amended to include clear approval processes for the purchase or sale of securities in advance of the transaction, however, staff does anticipate some authority to continue to be granted for real time transactions within approved guidelines and limits. Expected implementation of this is targeted to be completed in January 2024. The City concurs with the City Auditor's recommendation that a monthly informational report of investment transactions be made available to the City Council, as required by California Government Code section 53607. Administrative Concurrence: Agree Services Target Date: February 2024 Action Plan: The City agrees with segregation of duties in this function will provide adequate internal controls, additional oversight, and back fill for these activities when the key staff is on leave. A workplan for this was provided in early 2023 and under the guidance of an Assistant Director, has continuously worked on transitioning certain duties to ASD's analytical staff and administrative support staff. The workplan will be reviewed and amended to ensure documented adequate training and a procedure manual for job responsibilities is available to 19 Item 9: Staff Report Pg. 23 Packet Pg. 331 of 553 Item 9 Attachment A - OCA - Investment Management Findings and Recommendation Finding 2: Supporting documents for investment activities Responsible Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Department(s) Plan The City's ASD should iAdministrative mplement a procedure to assemble and Services maintain adequate supporting documents such as the cash flow forecast and evaluation of quotations for each investment decision and transaction to enable the approvers to review and approve them prior to purchases/sales and to allow the oversight functions to evaluate the validity, accuracy, and compliance when needed Administrative The City should update the City's Investment Policy to require the Services brokers and dealers who wish to sell and buy securities to the City to provide documentation showing their financial condition and relevant registration. The City should also require them to certify in writing that they reviewed the applicable California Government Code sections and the City's Investment Policy. An annual review should be also conducted to maintain the List of Authorized Brokers and Dealers with the recent status. other ASD staff. The targeted completion and transition of these duties is targeted for February 2024. The analyst assigned to the Treasury Division has been tasked with creating a desk manual for certain treasury tasks. While full completion of this manual is not targeted for February 2024, it is continuously being worked on as the analyst increases exposure and knowledge of treasury operations. Concurrence: Agree Target Date: January 2024 Action Plan: The City agrees that the evaluation of investment options that are available at the time of purchase should be performed and documented before an investment is purchased. Investment offerings are received by the Manager via email and can be attached to investment paperwork as documentation. Furthermore, a workplan to formalize review and oversight of investment activities has been developed outlining expectations for routine reviews of cash flow and investment status. Expected implementation of this workplan is targeted for January 2024. Concurrence: Agree Target Date: June 2024 Action Plan: The City agrees that the Investment Policy should be updated to include the requirements that brokers and dealers who wish to buy or sell securities with the City must provide documentation of their financial condition and relevant registration. ASD staff will consider these updates in the next Investment Policy review by the City Council in June 2024. 20 Item 9: Staff Report Pg. 24 Packet Pg. 332 of 553 Item 10 Item 10 Staff Report City Council Staff Report Report Type: CONSENT CALENDAR CITY O F Lead Department: City Clerk PALO ALTO Meeting Date: January 16, 2024 Report #:2312-2328 TITLE SECOND READING: Adoption of an Ordinance Amending Palo Alto Municipal Code (PAMC) Section 18.42.160 (Safe Parking) to Permanently Establish the Congregation -Based Safe Parking Program and Establishing Regulations Related to Safe Parking, Including a Maximum Number of Vehicles Per Night on Each Site (FIRST READING: December 4, 2023 PASSED 6-1, Tanaka no) BACKGROUND This was heard by the City Council on December 4, 2023 for a first reading and was approved 6- 1, Tanaka no. The ordinance has been amended to reflect parts D. and E. of the Council's motion. Specifically, a notice and appeal process was added to PAMC Section 18.42.160, subdivision (f)(2) and the ability to convert existing temporary permits as added as an uncodified provision in Section 3 of the ordinance. It is now before the Council for a second reading. The additional directives in the motion are being undertaken by staff. Such directions include exploring expansion of parking at Geng Road, referring to PTC the consideration of allowing safe parking in commercial parking lots, and exploring clearer data regarding unhoused persons in Palo Alto. These items will return separately to Council for further consideration. ATTACHMENTS Attachment A: Ordinance Adopting Permanent Regulations for Safe Overnight Parking Programs APPROVED BY: Mahealani Ah Yun, Interim City Clerk Item 10: Staff Report Pg. 1 Packet Pg. 333 of 553 *NOT YET APPROVED* Ordinance No. Item 10 tachment A - Ordinan Adopting Permanent Regulations for Safe Overnight Parking Programs Ordinance of the Council of the City of Palo Alto Adopting Permanent Regulations for Safe Overnight Parking Programs. SECTION 1. Findings and Declarations. The City Council finds and declares as follows: to A. The number of households dwelling in vehicles has grown substantially in the past decade. The lack of stable, affordable housing and other life circumstances have contributed to this growth. B. On thoroughfares throughout the city, individuals, families, and households of many kinds can be found dwelling in recreational vehicles, trucks, vans, cars, and other motorized vehicles. C. The City must, for the health, safety, and welfare of the community, identify and implement short-term and long-term solutions that support these households as they pursue and ultimately secure affordable, stable housing. Safe parking programs, which offer off-street, authorized parking spots in parking lots for households dwelling in their vehicles, represent a short-term solution. D. Churches and other religious institutions have expressed a desire and willingness to make their parking areas available for safe parking programs. Allowing such legally operating churches and other religious institutions to host safe parking programs for up to eight vehicles in their parking lots overnight provides assistance to homeless households as they seek and follow a path towards stable housing. The provision of such assistance is a use consistent with the mission and purpose of many congregations and religious institutions. E. The presence of up to eight vehicles in such parking lots overnight and the accompanying administration of assistance is a minor additional use that would not conflict with the primary use of the properties nor threaten the health, safety, or welfare of the community or its inhabitants. The administration of such programs serves to enhance the health, safety, and welfare of the community. SECTION 2. Section 18.42.160 (Safe Parking) of Chapter 18.42 (Standards for Special Uses) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows [additions are underlined and deletions struck through]. 18.42.160 Safe Parking. The following regulations apply to zoning districts where safe parking use is permitted. 1 0160126_20231206_ay16 Item 10: Staff Report Pg. 2 Packet Pg. 334 of 553 *NOT YET APPROVED* Item 10 tachment A - Ordinance t A Adopting Permanent Regulations for Safe (a) Purpose. The intent of this section is to establish regul Overnight Par:��alo the operation of safe parking programs at churches and religious institutions Programs Alto. The safe parking programs provide interim assistance to households using vehicles as their residence by providing a safe place to park, access to restroom facilities, connection to social service programs, and other support to transition households into permanent, stable housing. (b) Definitions (1) "Safe parking" means the providing of shelter of homeless persons as an incidental use to an existing, legal church or religious institution use where the shelter is provided in vehicles located in designated paved safe parking areas. (2) "Safe parking area" means the paved area where the vehicles are parked for the safe parking use. (3) "Safe parking program operator" means an agency or organization that facilitates, administers, oversees, and provides staffing for safe parking uses in safe parking areas. (c) Safe Parking Permit Required (1) Permit required. No person shall operate, allow, permit or suffer a safe parking use without approval of a valid safe parking permit. (2) Application requirements. All applications pursuant to this section shall be filed with the director in a form prescribed by the director. The application form shall contain a list of information that must be submitted in order for the application to be deemed complete. (3) Receipt of application. No application shall be deemed received until the following have been provided to the director: (i) An application fee as set forth in the municipal fee schedule; and (ii) All documents specified as part of the application in this section or on the application form. (d) Decision and Appeal. Notwithstanding the provisions of Chapter 18.77, the procedures of this section shall apply to all safe parking permits. (1) Authority and findings. The director may approve a safe parking permit only after finding that: (i) The proposed safe parking use complies with the standards listed in subsection (f) of this Section 18.42.160. (ii) The proposed safe parking use at the location requested will not adversely affect the health, safety, or welfare of persons residing or working in the surrounding area. 2 0160126_20231206_ay16 Item 10: Staff Report Pg. 3 Packet Pg. 335 of 553 *NOT YET APPROVED* (iii) The proposed site is adequate in size and shape to parking use. Item 10 tachment A - Ordinance t A Adopting Permanent Regulations for Safe Overnight Parking afe Programs The application shall be denied where the information which is either submitted by the applicant or presented at the public hearing fails to satisfactorily substantiate such findings. (2) Decision by director. (i) The director shall prepare a written decision to approve, approve with conditions, or deny the application. (ii) The Department may host a community meeting, held virtually or in - person, and send mailed notice to owners and residents of property within 600 feet of the subject property notifying them of the date, time, location of the meeting. Notices shall be [sent/postmarked] 14 days prior to the community meeting. (iii) Following a community meeting, if one is held, or after the director has made a tentative decision to issue a permit, notice of the director's decision shall be given by mail to owners and residents of property within 600 feet of the subject property. The notice shall include the address of the property, a brief description of the proposed use, a brief description of the director's decision, and a description of how to appeal the decision. (iv) The director's decision shall become final fourteen (14) days after the date the notice is mailed unless an appeal is filed. The director may, for good cause, specify in writing a longer period for requesting a hearing at the time the director issues the decision. (3) Filing of appeal and withdrawal. Notwithstanding the provisions of Chapter 18.78, the process set forth in this subsection (d)(3) and subsections (d)(4) -(d)(5) below of this section shall apply to appeals of the director's decision on safe parking permits. (i) The applicant or subject property owner, or owners or residents tenants of a property within 600 feet of the subject property, may file an appeal of the director's decision by filing a written request with the city clerk before the date the director's decision becomes final. The written request shall be filed in a manner prescribed by the director and shall be accompanied by a fee, as set forth in the municipal fee schedule. (ii) At any time prior to the hearing, the person requesting the hearing may withdraw the request. If the hearing request is withdrawn and 14 days have lapsed from the mailing date of the notice under subsection (d)(2) above, the proposed director's decision shall be final. (4) Decision by the city council on appeal. If a timely appeal is received by the city clerk, and not withdrawn, the director's decision shall be placed on the consent calendar of the city council within 45 days. The city council may: (i) Adopt the findings and recommendation of the director; or 3 0160126_20231206_ay16 Item 10: Staff Report Pg. 4 Packet Pg. 336 of 553 *NOT YET APPROVED* Item 10 tachment A - Ordinance t A Adopting Permanent Regulations for Safe (ii) Remove the recommendation from the consent Overnight Parking hall require three votes, following which the city council shall adopt findings ak. the application. (5) Decision by the city council final. The decision of the city council on appeal is final. (e) Duration of Permits. Permits shall be valid as provided in Section 18.77.100.fe--e u1:uionuuiiiuiuiaj p... p....j.t.. SflflA. �..LUUL (f) Standards and Conduct of Use. The following standards shall apply to all safe parking uses: (1) Qualifying site. Safe parking may be allowed on a parcel with an existing, legal church or religious institution use. (2) Number of vehicles. For the first twelve (12) months following permit issuance, the permit holder may host up to four vehicles for safe parking per evening. After twelve (12) months following permit issuance, the permit holder shall be eligible to host up to six vehicles for safe parking per evening. After twenty-four (24) months following permit issuance, the permit holder shall be eligible to host up to eight vehicles for safe parking per evening. The Planning Director shall mail notice of each scheduled increase in capacity to the permit holder and all residents and owners of property within 600 feet of the subject property. The increase in capacity shall become effective fourteen (14) days after this notice is mailed unless an appeal is filed pursuant to subdivision (d)(3) above. safe parking (3) Hours of operation. A safe parking use may only occur between the hours of 6:00 p.m. and 8:00 a.m. (4) Noise. Audio, video, generator, or other amplified sound that is audible outside the vehicles parked in the safe parking program is prohibited. Additionally, participants shall observe quiet hours from 10:00 p. m. to 7:00 a. m. (5) Shelter in vehicles. All persons receiving safe parking shall shelter within the vehicles. No person shall be housed in tents, lean-tos, or other temporary facilities. 4 0160126_20231206_ay16 Item 10: Staff Report Pg. 5 Packet Pg. 337 of 553 Item 10 *NOT YET APPROVED* Attachment A - Ordinance t A Adopting Permanent Regulations for Safe (6) Required facilities. Accessible restroom facilities, inch Overnight Parking and handwashing sink, shall be available to persons utilizing the site for saf Programs es during the hours of operation. These facilities may be the existing onsite facilities or mobile facilities brought onsite on a temporary basis to serve persons utilizing safe parking. Whenever feasible. portable restroom facilities shall be located at least 25 feet from neiehborine residential buildings and 25 feet from street frontages. In the event the lot configuration does not allow such siting, the Director shall have discretion to determine the location of the aortable restroom and/or handwashine facilities. (7) Contact information. The following emergency contact information shall be posted on site in a place readily visible to persons utilizing safe parking: (i) a contact phone number for the safe parking program operator; (ii) the police non -emergency phone number; and (iii) 911. The safe parking program operator shall be available at all hours of operation at the posted phone number and shall be the first contact for non -emergency matters. The contact information described shall also be sent from the City by mail to the residents and owners within 600 feet of the aroeram site. (8) Connection to county case management system. The safe parking use shall be managed and operated by a safe parking program operator that participates in the federal Homeless Management Information System with Santa Clara County or other county. (9) Safe, clean, orderly premises. The safe parking area and other onsite areas accessed by persons utilizing safe parking shall be maintained in a safe, clean and orderly condition and manner. (10) Compliance with laws. The safe parking use shall be operated in a manner that is fully in conformance with all state and local laws including regulations and permit requirements. (11) Annual Reporting. The safe parking program operator shall submit a report to the Director reflecting the prior calendar year's activities. The report shall be submitted electronically in a format approved by the Director. The report shall include the number of individual participants in the calendar year, the number of nights each space was occupied each year, the disposition of each participant that exited the program during the calendar year (exit to housing, exit to homelessness, etc.), the city in which the person was last housed, and any complaints from neighbors communicated to the operator or permit holder along with the resolution of the complaints. Where a safe parking program operator operates multiple sites within the City of Palo Alto, the annual report may be combined. (12) Participant preferences. A safe parking program provider shall award available parking spaces with preference given to students, or households with students, enrolled in the Palo Alto Unified School District. (13) Vehicle Idling. Vehicle idling is not allowed except as allowed under Chapter 10.62 of this code. 5 0160126_20231206_ay16 Item 10: Staff Report Pg. 6 Packet Pg. 338 of 553 (14) *N0T YET APPR0VED* No temporary structures. No tempora Item 10 Attachment A - Ordinance t A Adopting Permanent Regulations for Safe structure Overnight Parking in Programs program hours, provided that they are stored in vehicles or within the permit holder's building(s) during quiet hours. vehicles. (15) Personal property. All personal property shall be stored in participant (16) Fire. No open fires or open flames are allowed. (17) Lot monitoring. The safe parking program operator shall deploy lot monitors to occupied safe parking lots. Lot monitors shall make at least three visits to the lots to ensure the safety of the participants and adherence to the operational conditions. Lot monitors are advised to be deployed in the early evening (lot opening — 10:00 p. m.), in the overnight hours (11 p. m. —5 a. m.), and in the morning hours (6 a. m. — 8:00 a. m.). (g) No Assignment of Permit. No person shall assign or transfer a safe parking program permit issued under this section. (h) Suspension, Revocation and Modification. (1) Grounds for suspension, revocation or modification. The director may suspend, revoke or modify a permit, according to the procedures set forth in subsection (h)(2) below, if the director finds that: (i) Operation of the safe parking program violates any provision of the permit, this section, other applicable provision of this code, or state law; or (ii) Operation of the safe parking program is detrimental to public health, safety or the general welfare. (2) Procedure for suspension, revocation or modification of approval. (i) Public hearing by director (a) Notice to permit holder. Whenever the director believes that grounds for the suspension, revocation, or modification of a permit exist, the director shall give the permit holder written notice of the date, time and place of a hearing to be held before the director on whether the permit should be suspended, revoked, or modified. The notice shall state the alleged grounds for the proposed revocation, suspension or modification of the permit, and the notice shall be served on the permit holder by mail at least 10 days prior to the hearing at the most recent home or business address on file with the planning and development services department. (b) Notice to public. Notice of the hearing shall be given at least 10 days prior to the hearing by mailing to all residents and owners of property within 600 feet of the subject property. Decision of the director. 0160126_20231206_ay16 Item 10: Staff Report Pg. 7 Packet Pg. 339 of 553 Item 10 Attachment A - Ordinance *NOT YET APPROVED* t A Adopting Permanent Regulations for Safe (a) Within 10 days following the hearing, the directors Overnight Parking ten decision to revoke, suspend, modify, or leave unchanged the permit. Programs (b) Notice of the decision shall be provided by mail to the permit holder, by posting on the planning and development services' department's website and by email to other interested persons who requested notice to the planning and development services department. (c) The director's decision shall become final 10 days after the notice is mailed to the permit holder unless a timely appeal is filed. (iii) Request for appeal hearing. The permit holder or subject property owner, or owners or residents of a property within 600 feet of the subject property may file an appeal of the director's decision with the city clerk. The appeal shall be filed in written form in a manner prescribed by the director. (iv) Decision by the city council on appeal. If a timely appeal is received by the city clerk, and not withdrawn, the director's decision shall be placed on the consent calendar of the city council within 45 days. The city council may: (a) Adopt the findings and recommendation of the director; or (b) Remove the recommendation from the consent calendar, which shall require three votes, following which the city council shall adopt findings and take action on the application. (v) Effective date of revocation, suspension or modification. The decision of the city council is final. The revocation, suspension or modification will be effective 5 days after mailing of the decision addressed to the permit holder. SECTION 3. A temporary safe parking permit issued under Ordinance No. 5490 shall, upon written request of the permit holder, become subject to the rights and obligations provided in Palo Alto Municipal Code Section 18.42.160 as enacted by this ordinance and as may be amended from time to time. Specifically, the duration of such permit would not be limited by an expiration date or the expiration of Ordinance No. 5490 and the permit would be subject to the requirements of Section 18.42.160, subdivision (f). SECTION 4. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the Ordinance would be subsequently declared invalid or unconstitutional. 7 0160126_20231206_ay16 Item 10: Staff Report Pg. 8 Packet Pg. 340 of 553 Item 10 Attachment A - Ordinance *NOT YET APPROVED* Adopting Permanent t A Regulations for Safe SECTION 5. The Council finds that the Ordinance is exempt from the Cali Overnight Parking tal Quality Act pursuant to Section 15301 of the CEQA Guidelines, whi1 ms inor alterations of existing public or private structures, facilities, mechanical equipment, or topographical features involving negligible or no expansion of use. Adopting the Ordinance to allow the use of existing parking lots for temporary overnight safe parking would not constitute any significant expansion of use. CEQA Guidelines Section 15061(b)(3) also applies to the adoption of the Ordinance because it can be seen with certainty that there is no possibility that the activity of limited parking overnight in existing parking lots may have a significant effect on the environment. The Council further finds that the potential exceptions to the categorical exemption in CEQA Guidelines Section 15300.2 are not applicable. Use of existing parking lots in the operation of temporary safe parking does not impose a significant cumulative impact over time as the use as a parking lot is generally unchanged and the safe parking use is limited to a short duration; it is not an unusual circumstance to modify the hours of use of existing facilities, and there is nothing unusual about the size or location of the existing parking lots at which temporary overnight safe parking would be allowed; the use of existing parking lots does not adversely impact scenic or historical resources; and the Ordinance does not involve hazardous sites as it relates to existing parking lots and no ground disturbance would result from implementation of the Ordinance. // // // // // // // // // // // // // 8 0160126_20231206_ay16 Item 10: Staff Report Pg. 9 Packet Pg. 341 of 553 *NOT YET APPROVED* SECTION 6. This Ordinance shall be effective on the thirty-first date adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Assistant City Attorney Mayor APPROVED: City Manager Director of Planning and Development Services Item 10 tachment A - Ordinan Adopting Permanent Regulations for Safe Overnight Parking Programs to its 0160126_20231206_ay16 9 Item 10: Staff Report Pg. 10 Packet Pg. 342 of 553 Item 11 Item 11 Staff Report City Council Staff Report Report Type: CONSENT CALENDAR CITY O F Lead Department: City Clerk PALO LTO Meeting Date: January 16, 2024 Report #:23 12-2464 TITLE SECOND READING: Adoption of an Ordinance Amending Chapters 4.10 (Licenses Obtained by Application to Chief of Police), 4.30 (Soliciting Funds), and Chapter 4.32 (Soliciting Information for Commercial Purposes); and Adding Chapter 4.12 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code to Comply With Updates to the Law, Including 2018 Senate Bill 946 (Sidewalk Vendors). CEQA status — categorically exempt. (FIRST READING: December 11, 2023 PASSED 5-1-1, Kou no, Veenker absent) BACKGROUND This was heard by the City Council on December 11, 2023 for a first reading and was approved 5-1-1, Kou no, Veenker absent. No changes were made to the ordinance; it is now before you for a second reading. ATTACHMENTS Attachment A - Ordinance Amending Chapters 4.10 (Licenses Obtained by Applicatio.12 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code APPROVED BY: Mahealani Ah Yun, City Clerk Item 11: Staff Report Pg. 1 Packet Pg. 343 of 553 Item 11 *NOT YET APPROVED* Attachment A - Ordinancf Amending Chapters 4.10 Ordinance No. (Licenses Obtained by Applicatio.12 to Title 4 Ordinance of the Council of the City of Palo Alto Amending Cha (Business Licenses and (Licenses Obtained by Application to Chief of Police), 4.30 (Solicitin Regulations) of the Palo Chapter 4.32 (Soliciting Information for Commercial Purposes), Alto Municipal Code Chapter 4.12 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code to Regulate Sidewalk Vendors, Remove License Requirements for Solicitors and Peddlers, and Update Requirements for Secondhand Dealers The Council of the City of Palo Alto ORDAINS as follows: SECTION 1. Findings and declarations. The City Council finds and declares as follows: A. The City currently regulates various types of mobile and stationary vendors in Chapter 4.10 (Licenses Obtained by Application to Chief of Police), including solicitors, peddlers, and pushcart vendors; B. In 2018, the State of California enacted SB 946, which regulates sidewalk vendors under state law (See Gov. Code section 51036 et seq.); C. SB 946 permits local authorities, including charter cities like the City of Palo Alto, to regulate specific aspects of sidewalk vendors in accordance with the provisions of SB 946 (See Gov. Code section 51038(a)); D. SB 946 requires the City to allow sidewalk vendors to vend in City owned or operated parks unless the City has an exclusive concession agreement in that park (See Gov. Code section 51038(b)(2)); E. In order to protect the health, safety, and welfare of the City, the Council intends to regulate sidewalk vendors as detailed in this Ordinance. F. In order to protect the health, safety, and welfare of the City, the Council intends to limit the operation of sidewalk vendors near schools during instructional hours to prevent distraction or interference with school instruction. G. In addition, in order to comply with various other updates to the law, the City now intends to amend its requirements for solicitors, peddlers, and secondhand dealers. SECTION 2. Chapter 4.10 (Licenses Obtained by Application to the Chief of Police) of Title 4 (Business Licenses and Regulations) is hereby amended as follows (additions are underlined, deletions are in strikcthrough): Chapter 4.10 Liccnc S Obtain„, by Application to Chief of Police Solicitors, Peddlers, Pawnbrokers, Secondhand Dealers, and Other Businesses Regulated by Police 4.10.010 Application to chief of police. tea4 Applications for licenses for businc c described in this chapter shall be made to the chief of police and shall be sworn and in writing and shall contain be on a form designated by the Police Department. the following information: (1) Name and description of the applicant; 101_2023112s_ts_24 Item 11: Staff Report Pg. 2 Packet Pg. 344 of 553 *NOT YET APPROVED* Item 11 attachment A - Ordinancf Amending Chapters 4.10 (Licenses Obtained by Applicatio.12 to Title 4 (Business Licenses and Regulations) of the Palo establishing the exact relationship; Alto Municipal Code ) ()ThcTgth of time for which the right to d$ siRess is dcsi cd; (6) If a vchicic is to bc r Iicen.-c number or other means of identification 4.10.020 Solicitor defined. A "solicitor" is any person, whether a resident of the city or not, traveling either by foot, wagon, automobile, motor truck or any other type of conveyance, from place to place, from house to house, or from street to street, taking or attempting to take orders for sale of goods, wares and merchandise, personal property of any nature whatsoever, for future delivery, or for services, whether or not such individual has, carries or exposes for sale a sample of the subject of such sale or whether he is collecting advance payments on such sales or not. 4.10.025 Peddler defined. A "peddler" is a person, whether a resident of the city or not, traveling by foot, wagon, automotive vehicle or any other type of conveyance, from place to place, from house to house, or from street to street, carrying, conveying or transporting goods, wares, merchandise, fruits, garden truck, farm products or provisions, offering and exposing the same for sale, or making sales and delivering articles to purchasers. The word "peddler" includes the words "hawker" and "huckster." 4.10.030 Pushcart dcfincd. Reserved. 4.10.035 Pushcart vendor defined. Reserved. A "pushcart vendor" is a person licensed pursuant to this chapter, who offers food intended for immediate consumption or flowers for sale from a wagon, cart or mobile stand from a stationary location o a public sidewalk 4.10.040 License foes for solicitors and peddlers. Reserved. A daily, quarterly, or annual fee for soliciting or peddling shall be levied. Additional licenses may be issued to employees of a license holder on the payment of an annual fee for each 101_20231128_ts_24 Item 11: Staff Report Pg. 3 Packet Pg. 345 of 553 *NOT YET APPROVED* 4.10.045 Liccnsc fees for pushcart , ndors Reserved. Item 11 attachment A - Ordinancf Amending Chapters 4.10 (Licenses Obtained by Applicatio.12 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code IRflflTS7Z!!l:Z11■:l1��Tl :T.ff�1:SZfil�R:}1:tT��1�E7,:7�1R�TSPz�10r.:fsif 1:l��R:�7:l�_T!!:l11�. . 4.10.050 Regulations for solicitors Solicitors and peddlers - regulations. (a) No peddler or solicitor, nor any person in his behalf, shall shout, make an outcry, blow a horn, ring a bell or use any sound device or musical instrument, including any loud -speaking radio or sound -amplifying system, upon any of the streets, alleys, parks or other public places of the city or upon any private premises in the city where sound of sufficient volume is emitted or produced therefrom to be capable of being plainly heard upon the streets, avenues, alleys, parks or other public places, for the purpose of attracting attention to any goods, wares or merchandise which such licensee proposed to sell. (b) No peddler or solicitor shall have any exclusive right to any location in the public streets, nor shall he be permitted a stationary location, nor shall he be permitted to operate in any congested area where his operations might impede or inconvenience the public. For the purpose of this title, the judgment of a police officer, exercised in good faith, shall be deemed conclusive as to whether the area is congested or the public impeded or inconvenienced. (c) No person shall sell or offer for sale goods, wares or merchandise from vehicles upon any of the public streets of the city; provided, however, that the prohibition contained in this section does not include the peddling from door to door from vehicles of fresh food products of farm or garden, nor bona fide deliveries of goods, wares, merchandise or food made on a regular route to regular customers. (d) No person shall solicit or peddle from six p.m. to nine a.m., or at any time when a sign has been posted on a building stating: "No solicitors or peddlers," except that a lensed solicitor or peddler may call upon the occupant of a residence at other times when he has received express prior permission from such occupant to do so. (c) Whilc soliciting or pcddling, no person shall rcprcscnt that all or a portion of thc procccds from such solicitation or pcddling will bc uscd for charitablc, rcligious, cducational, community, rccrcational, political or similar nonprofit purposc or arc to bc transmittcd to any person, firm or corporation for any such purposc unlcss such person is liccnscd undcr Chaptcr 4.30 of this code. 4.10.051 Reserved. 4.10.052 Reserved. 4.10.055 Identification cards for solicitors and peddler Reserved. (a) Contents. The holder of any peddler or solicitor license shall furnish each person engaged in the licensed activity with a suitable identification card or badge. The cards or badges shall contain such information as the chief of police deems necessary, but shall include at least the 101_20231128_ts_24 Item 11: Staff Report Pg. 4 Packet Pg. 346 of 553 Item 11 *NOT YET APPROVED* Attachment A - Ordinancf Amending Chapters 4.10 (1) The namc of the licence; (Licenses Obtained by (2 The namc of the main Iiccnse holder, if diffcreRt; Applicatio.l2toTitle4 /3 � e of the I. activity; (Business Licenses and � Ee„�ed-a�� (4) he product orservice being peddled or olicited. Regulations) of the Palo /h\ A, tc Dorvi iirorl Crirh r —4, nr fiord-oc droll h ., Alto Municipal Code :��.7LP.1r.Sl977T1fTs�:. .RS11 7:T�:GIH:l:�T!!1 n......-'A'pfl•flJafl•LApfl ii jniiiiiwnir •••••••••• L!. •. 101_20231128_ts_24 Item 11: Staff Report Pg. 5 Packet Pg. 347 of 553 Item 11 *NOT YET APPROVED* Attachment A - Ordinancf Amending Chapters 4.10 from a rcstaurant or food markct and a flowcr pushcart vcndor shall bc lo (Licenses Obtained by feet from a fl.,�.,.,r or plant shop. Applicatio.12toTitle4 (3) In nonpublic sidcwalk locations, a pushcart vcndor shall bc situatcd (Business Licenses and Regulations) of the Palo (cSFze and SFgnage Alto Municipal Code (2) Soft umbrellas or canopics which arc opcn on four sidcs shall bc permittcd but shall not exccc.d eight feet in heightm real from ground level (3) All signs shall be placed on the pushcart structure; no signs shall be permitted on ancillary umbrellas or canopies. Freestanding signs, illuminated signs or flashing lights shall be prohibited. (d) Operations. (1) No pushcart vendor shall sell food or flowers from eight p.m. to seven a.m. The pushcart shall be removed from its assigned location by eight P (2) No fires and open flame heating equipment, incidental to the operations of the pushcart, shall be permitted. (3) No pushcart esendor shad shout, blow a horn, ring hell or use any so and device or musical instrument, including any loud speaking radio or sound amplifying system, for the purpose of attracting attention to any goods or merchandise on sale from the pushcart. (4) No pushcart vendor shall represent that all or a portion of the proceeds from the pushcart sales will be used for charitable, religious, educational, community, recreational, political or similar nonprofit purpose or are to be transmitted to any person, firm or corporation for any such purpose unless such vendor is licensed under Chapter 4.30 of this code. (5) A pushcart vendor shall comply with all applicable federal, state or local laws including the regulations of the Santa Clara County health department. (c) License Application Issuance and Revocation. Procedures for the application for issuance of and revocation of a pushcart vendor license shall be in accord with the provisions of Chapter 4.04; provided, that the following additional regulations shall apply: (1) The application shall contain a statement of intended use, a map showing location and clearance and a sketch of the proposed pushcart showing dimensions and intended , colors. (2) The application shall include a certificate of insurance in an amount and form satisfactory to the city loss control manager and a hold harmless and indemnity agreement in favor of the (3) A complete application for a pushcart vendor license shall be reviewed by the city staff for a determination as to whether such application complies with the regulations contained in this chapter. Such review shall include a referral to the design staff of the department of planning and development services for review and comment. The design of the pushcart shall be evaluated on its own merits rather than for its compatibility with the character of nearby building facades (4) Conditions of approval may be imposed on pushcart vendor licenses where they are required for the maintenance of e -public health, safety and welfare. (5) chief of police, or designee, may revoke the pushcartvendor license if he or she determines that the conditions of the license or any provisions of this chapter are being violated, or if municipal use of the sidewalk is required for reasons of public safety or convenience. 'Athe cased a revocation, the licensee shall he notified 101_20231128_ts_24 Item 11: Staff Report Pg. 6 Packet Pg. 348 of 553 Item 11 *NOT YET APPROVED* Attachment A - Ordinancf Amending Chapters 4.10 Doration violating any provision of th (Licenses Obtained by Applicatio.l2 to Title 4 ors who have valid liccnscs on thc c (Business Licenses and or guidelines applicable to peddlers, Regulations) of the Palo ,fc rnnfoinorl in cor fir -n /I in nc7/r\ Alto Municipal Code 4.10.058 Reserved. 4.10.060 Reserved. 4.10.070 Circuses, carnivals and traveling shows_Fees. {-a-} Every person conducting a circus, carnival, traveling show, rodeo, or any other like or similar exhibition or amusement shall obtain a special event permit and pay a fee as set forth in the municipal fee schedule. in addition to the of the license fees required, deposit with the treasurer of the city either five payment thousand dollars in cash, lawful money of the United States, or a surety bond in the sum of five thousand dollars, issued by a surety company acceptable to the treasurer, to insure the to the city for any damage to city occasioned by the operation of such payment circus, carnival or traveling show within property the limits of the city, including damages occasioned by the entrance into or exit from the city by said circus, carnival or traveling show, and to insure the removal, within forty eight hours after leaving the city, of any signs, or advertising matter upon any within the city limits by the authority placards of any such placed property persons. 4.10.080 Reserved. 4.10.090 License exemptions. Reserved. 4.10.100 Fee exemptions under Business and Professions Code section 16001. In order to claim a license fee exemption as a veteran, as specified in Sections 16001 and 16001.5 of the Business and Professions Code of the state, or any license fee exemption required by state or federal law, the applicant shall file with the city treasurer an affidavit or a declaration under penalty of perjury, on the form provided by him, establishing the facts entitling the applicant to such fee exemption. The treasurer Cii�t rr may require proof of such facts. The denial of the application and any appeal from such denial shall be governed by the procedures in Chapter 4.04 of this title. 101_20231128_ts_24 Item 11: Staff Report Pg. 7 Packet Pg. 349 of 553 Item 11 *NOT YET APPROVED* Attachment A - Ordinancf Amending Chapters 4.10 (Licenses Obtained by 4.10.110 Mcchanical amucmcnt dcv+Ees Dcfinit+os. Reserved. Applicatio.12 to Title 4 (Business Licenses and d.T Regulations) of the Palo /o1 ��/�rr•orJo�� moonc one, oc+o"lic"rnonf r -non fn f"o ni ii -di,- in i"ir" civ rir Alto Municipal Code 11. IWWJLVA 11 4.10.120 Arcadeprohibited -' License required for mechanical amusement devices. Reserved. No arcade shall be permitted in the city, except that any licensee may continue to install, operate or maintain the number of mechanical amusement devices located in such licensee's premises on May 8, 1977. The licensee or applicant therefor shall have the burden of cstablishing thc precise numbcr of mechanical amuscmcnt dcviccs located in any premises on May 8, 1977, and any such license may bc dcnicd by thc chicf of police for failurc to sustain such burdcn. No person shall install, operatc, or maintain any mcchanical amuscmcnt device, including thosc in cxistcncc or operation prior to May 8, 1977, without obtaining a license to do so on or bcforc July 1, 1977, for thc ensuing ycar. Thc provisions of Chaptcr 4.04 shall apply to and in all othcr respects, except as expressly providcd hcrcin to thc contrary. 4.10.130 LisLiccnsc application fee. Reserved. 4.10.140 License term - Nontransferability. Reserved. Mechanical amusement device licenses required by this chapter shall be issued for one year, commencing I61I" 1st 9f each year, and shall not be transferable. 4.10.150 Increased closing hours. Reserved. rniu I ijijuru:urrj flIrt :lF rIIaIw[I: 1]EIIJR]W IirrL11Bj.uiuJMuJrJJiunhI 101_20231128_ts_24 Item 11: Staff Report Pg. 8 Packet Pg. 350 of 553 *NOT YET APPROVED* 4.10.160 Reserved. 4.10.170 Reserved. 4.10.180 Reserved. 4.10.190 Reserved. 4.10.200 Pawnbrokers prohibited. Item 11 Attachment A - Ordinance Amending Chapters 4.10 (Licenses Obtained by Applicatio.12 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code It is unlawful for anyone to carry on the business of pawnbroker within the city. For the purpose of this section, a pawnbroker shall have the same meaning as defined in California Financial Code section 21000. 4.10.210 Secondhand dealer defined. "Secondhand dealer" mezRc y person Tci y engaged in conducting, m3n3ging or corrying on the buines of buying, selling or otherwise deoling in secondh3nd goods, wre 3nd orch ,n ise os defined in this ,"rotor. shall have the same meaning as defined in California Business and Professions Code section 21625 et sea. 4.10.220 Secondhand good`, wore r ^nd merch3ndi e tangible personal property defined. "Secondhand good`, w3res ond m h3ndi e tangible personal property" shall not include rags, bottIc othcr than milk or crcam bottIc, sacks othcr than ccmcnt sacks, barrcls, cans, law. shall have the same meanin& as defined in California Business and Professions Code section 21625 et sea. 4.10.225 Secondhand dealer — license required. A license is required to operate as a secondhand dealer. Applications must be made the Chief of Police and are subject to all requirements in state and local law, including Business and Professions Code section 21625 et sea. and the provisions of this Chapter. Any fee authorized by the Municipal Fee Schedule and/or state law must be paid prior to issuance of the license. 4.10.230 Daily r ert of purchasc by ccondhand dealer Secondhand dealers - regulations. Secondhand dealers must follow all applicable laws, including Business and Professions Code section 21625 et the hour of ten m3ke ond deliver to the chief of in writing 3 full, true 3nd complete ., police report, in chronologicol order, of oIl de31ings in secondh3nd wore ond merch3ndie by such secondhond dealer within the city during the twenty goods, four hours next preceding oid report, together with the time of doy when or received, o complete description of purchosed eoch orticle or received, ond o description of the or from whom purchosed person persons or received or with whom deolt, ond olso the true nome of such or os purchosed nearly a the some i known to or con be oscertained by the person moking person such report. persons If ony such orticle or received hos engroved or stamped thereon any number, word or purchosed 101_20231128_ts_24 Item 11: Staff Report Pg. 9 Packet Pg. 351 of 553 *NOT YET APPROVED* kind. Item 11 attachment A - Ordinancf Amending Chapters 4.10 (Licenses Obtained by Applicatio.12 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code .aflflap. 4.10.240 Copies of report kept by dealer. Reserved. Every secondhand dealer shall keep at his place of business a copy of every report required by Section 4.10.230 hereof, and such copy shall be open at 311 times during business hours to the inspection of the chief of police o any member of the police department or any officer authorized by law. The report shall be in book form, and each transaction shall be kept in chronological order. 4.10.260 Failur to maker „rt. Reserved. It is for dcalcr for unlawful any sccondhand or any agcnt or cmploycc of such sccondhand 4.10.270 Goods held for inspection. Reserved. IJLn1LLwnFu:unxmuwJuiTrIuI1LiJi! tUJiJfl 4.10.280 Exemptions. Reserved. (a) The provisions of this chapter shall not to secondhand goods, wares and merchandise: (1) Purchased at a public sale or auction; se(2) Purchased from any person holding a State Board of Equalization permit number as a 101_20231128_ts_24 Item 11: Staff Report Pg. 10 Packet Pg. 352 of 553 Item 11 *NOT YET APPROVED* Attachment A - Ordinancf Amending Chapters 4.10 (3) Acccptcd in tradc on the purchasc of nc li-rre C limcdk c; (Licenses Obtained by Applicatio.l2 to Title 4 purpocs .,f resale (Business Licenses and Regulations) of the Palo SECTION 3. Title 4 (Business Licenses and Regulations) is hereby amended Alto Municipal Code Chapter 4.12 (Sidewalk Vendors) to read as follows: 4.12.010 Purpose This Chapter 4.12 implements a sidewalk vendor program as permitted by Government Code Section 51306 et seq. 4.12.020 Definitions (a) "Sidewalk vendor" means a person who sells food or merchandise from a pushcart, stand, display, pedal -driven cart, wagon, showcase, rack, or other nonmotorized conveyance, or from one's person, upon a public sidewalk or other City -owned pedestrian path. (b) "Roaming sidewalk vendor" means a sidewalk vendor who moves from place to place and stops only to complete a transaction. (c) "Stationary sidewalk vendor" means a sidewalk vendor who vends from a fixed location. 4.12.030 General Sidewalk vendors are permitted except: (a) Within 100 feet of the outer perimeter of a permitted certified farmers' market or a permitted swap meet during the limited operating hours of that certified farmers' market or swap meet. A "certified farmers' market" means a location operated in accordance with Chapter 10.5 (commencing with Section 47000) of Division 17 of the Food and Agricultural Code and any regulations adopted pursuant to that chapter. A "swap meet" means a location operated in accordance with Article 6 (commencing with Section 21660) of Chapter 9 of Division 8 of the Business and Professions Code, and any regulations adopted pursuant to that article. (b) Within 100 feet of the outer perimeter of an area designated for a temporary special permit issued by the City, provided that any notice, business interruption mitigation, or other rights provided to affected businesses or property owners under the City's temporary special permit are also provided to any sidewalk vendors specifically permitted to operate in the area, if applicable. For purposes of this subsection, a temporary special permit is a permit issued by the City for the temporary use of, or encroachment on, the sidewalk or other public area, including, but not limited to, an encroachment permit, special event permit, or temporary event permit, for purposes including, but not limited to, filming, parades, or outdoor concerts. A prohibition of sidewalk vendors pursuant to this subsection shall only be effective for the limited duration of the temporary special permit. (c) Within 100 feet of the outer perimeter of a school during in -person instructional time. (d) Within zones that are exclusively residential as defined in Chapter 18 (Zoning) of the Palo Alto Municipal Code. This subsection (d) shall only apply to stationary sidewalk vendors. (e) In City owned or operated parks in which the City has signed an agreement for concessions that exclusively permits the sale of food or merchandise by the concessionaire. 101_20231128_ts_24 Item 11: Staff Report Pg. 11 Packet Pg. 353 of 553 *NOT YET APPROVED* Item 11 Attachment A - Ordinancf Amending Chapters 4.10 4.12.040 Placement and Operation Requirements (Licenses Obtained by (a) No sidewalk vendor shall be located in a manner that: Applicatio.l2toTitle4 (1) Impedes access to any city inspection, maintenance and operational (Business Licenses and Is; (2) Blocks curbside access to a loading zone, as defined in Section 10.40 Regulations) of the Palo (3) Impedes pedestrian access from curbside vehicles to the adjacent si Alto Municipal Code (4) Impedes the use of sidewalk bumps or other tactile paving by use of the visually impaired; (5) Impedes access to a driveway; (6) Is situated between a duly permitted parklet or other on -street use and the adjacent storefront (b) No sidewalk vendor shall be permitted on a public sidewalk within a distance of ten feet from corner curb lines and corner crosswalks. (c) In areas zoned community commercial (CC), commercial downtown (CD) and in areas of the downtown zoned public facility (PF), no sidewalk vendor shall be permitted within a minimum sidewalk clearance width of eight feet between fixed objects, planter wells and/or curbs. Other than in the above locations, the minimum sidewalk clearance width for a sidewalk vendor shall be at least half of the sidewalk but not less than three feet. (d) Sidewalk vendors shall be considered "retail" businesses for the purpose of Section 18.23.040 (Late Night Uses and Activities) and shall be subject to its provisions. Sidewalk vendors in violation of Section 18.23.040 shall be subject to the penalties in Section 4.12.060. (e) Sidewalk vendors shall possess a valid California Department of Tax and Fee Administration seller's permit and any other permit or license required by law, including a permit from the County of Santa Clara for mobile food facilities, if applicable. (f) Sidewalk vendors shall follow all other generally applicable laws. (g) The City Manager or designee may promulgate regulations regarding the size, placement, safety, and operational requirements or restrictions of sidewalk vendors. 4.12.050 Sidewalk Vendors in Parks (a) Notwithstanding Section 22.04.160 (Commercial activities and solicitation), a sidewalk vendor may operate in City parks, including those dedicated in Chapter 22.08 (Park Dedications), unless specifically restricted pursuant to statute or regulation. (b) Following the procedure in Section 22.04.030 (Compliance Required), the City Manager may promulgate regulations regulating the time, place, and manner of sidewalk vending in parks owned or operated by the City if the requirements are any of the following: (1) Directly related to objective health, safety, or welfare concerns; (2) Necessary to ensure the public's use and enjoyment of natural resources and recreational opportunities; or (3) Necessary to prevent an undue concentration of commercial activity that unreasonably interferes with the scenic and natural character of the park. (c) It shall be a violation for any person to violate any provision in the regulations authorized by subsection (b) of this section. Violators will be subject to the penalties in Section 4.12.060. 101_20231128_ts_24 Item 11: Staff Report Pg. 12 Packet Pg. 354 of 553 *NOT YET APPROVED* 4.12.060 Violations and Penalties (a) A person found to be in violation of any of the provisions of this Cha regulations authorized by this Chapter shall be subject to the following pE (1) An administrative fine of one hundred dollars ($100) for a first violas (2) An administrative fine of two hundred dollars ($200) for a second vi year of the first violation. Item 11 attachment A - Ordinancf Amending Chapters 4.10 (Licenses Obtained by Applicatio.12 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code (3) An administrative fine of five hundred dollars ($500) for each additional violation within one year of the first violation. (4) The City may prohibit a sidewalk vendor from operating in the City for one year upon the fourth violation or subsequent violations within one year of the first violation in addition to an administrative fine of five hundred dollars ($500). (b) Failure to pay an administrative fine pursuant to subdivision (a) or (b) shall not be punishable as an infraction or misdemeanor. Additional fines, fees, assessments, or any other financial conditions beyond those authorized in subdivision (a) and (b) shall not be assessed. (c) When assessing an administrative fine pursuant to subdivision (a) and (b), the hearing officer shall take into consideration the person's ability to pay the fine. The City shall provide the person with notice of his or her right to request an ability -to -pay determination and shall make available instructions or other materials for requesting an ability -to -pay determination. The person may request an ability -to -pay determination at adjudication or while the judgment remains unpaid, including when a case is delinquent or has been referred to a comprehensive collection program. (d) If the person meets the criteria described in subdivision (a) or (b) of California Government Code section 68632, the City shall accept, in full satisfaction, 20 percent of the administrative fine imposed pursuant to subdivisions (a) and (b). (e) The hearing officer may allow the person to complete community service in lieu of paying the total administrative fine, may waive the administrative fine, or may offer an alternative disposition. SECTION 4. Chapter 4.30 (Soliciting Funds) of Title 4 (Business Licenses and Regulations) is hereby amended as follows (additions are underlined, deletions are in strikcthrough): 4.30.010 Permit rcquircd. Reserved. No person shall solicit within thc city for a contribution of funds for a charitable, political, religious, educational, community, recrcational or similar nonprofit purpose by mcans of calling upon places of rcsidcncc or business, or by means of dircct personal contact in public placcs or upon public property without obtaining a permit as provided in this chaptcr. Any peddling or soliciting as defined in Chapter 4.10, by means of representation that all or a portion of the proceeds thereof are to be used for a charitable or similar nonprofit purpose or are to be transmitted to any person, firm or corporation for any such purpose is unlawful unless a permit has been first obtained a provided in this chapter. 4.30.020 Exceptions to permit requirements. Reserved. (a) The provisions of this chapter, except for Section 4.30.100, shall not be applicable . (1) Solicitations by one member of an organization to another when the solicitation is conducted for that same organization; (2) Political committees for which the Secretary of State has assigned an identification number pursuant to the Political Reform Act (California Government Code Section 84101). 101_20231128_ts_24 Item 11: Staff Report Pg. 13 Packet Pg. 355 of 553 Item 11 *NOT YET APPROVED* Attachment A - Ordinancf Amending Chapters 4.10 (Licenses Obtained by 4.30.030 Application. Reserved. Applicatio.12 to Title 4 (Business Licenses and Regulations) of the Palo chief of nnlice fnr rtnnrd ,r ithe filinrr of 11 ---lice+in Alto Municipal Code I:�Rf1:Rll:Ltd.�TST17Tl��.T.GSliiTZ7:r1f�SSiT�:��:t111�1:SSfl:7lT��11G1Aii�.T.'ii:� iimwii J]E ifliU :.vw1u!jwoLivaw]ru: uIw! uciuucu r iiwullua:wTuIiJr iituwuji__ 4.30.040 issuance of permits. Reserved. .. . 4.30.050 Suspension and r ti„n of permits. Reserved. ()Def Definitions. (1) "Suspcnsion" mcans that thc permit is temporarily withdrawn and is rcinstatcd whcn thc suspension nd end. (2) "Rcvocation" mcans that thc permit is terminated and that a ncw permit may not bc obtained until the original permit period ends. (b) Grounds for Suspension or Reyoca io The permit be suspended o revoked i accordance with the procedures specified in Section 4.30.060 for a violation of this chapter or for any one of the followir,,. reasons: (1) Failure to comply with the requirements of California Business and Professions Code Section 17510.3 dg the solicitation; (2) The permit holder or any of the persons involved in the solicitation is found by a court to have engaged, during the solicitation, in fraudulent activity, violation of trespass statutes, or crimes of violence; (3) The applicant has intentionally misrepresented a material fact on the application; 101_20231128_ts_24 Item 11: Staff Report Pg. 14 Packet Pg. 356 of 553 *NOT YET APPROVED* 4.30.060 Proccdures for suspcnsion or rcvocation of permit. Reserved. Item 11 attachment A - Ordinancf Amending Chapters 4.10 (Licenses Obtained by Applicatio.12 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code y1rZa"Ona ii:TlT7:■:�GT�T��'JT7�.*L6'�f1�.T.' 'J:TT.Z......�1r1:J7�1:�:1�R:�:1 i:iitttirwnuir - ■ 4.30.070 Pcrmit time limit Rcncwal. Reserved. Pcrmits issucd pursuant to this chaptcr shall bc valid a maximum of nincty days only, and no person shall solicit with an cxpircd permit. Thc chicf of policc shall prcscribc proccdurcs and standards for thc rcncwal of such permits, cxccpt that such standards and proccdurcs shall not bc strictcr than thosc rcguircd for thc original issuancc of thc permit. Each rcncwal period shall bc for a maximum of nincty days. 4.30.080 ldeRtification cards. Reserved. 4.30.090 Identification cards to be carried and produced. Reserved. 4.30.100 Conduct of solicitations. (a) No person shall solicit funds at any time at any building where there is a posted sign stating "No solicitors," or words to that effect, except that a licensed solicitor may call upon an 101_20231128_ts_24 Item 11: Staff Report Pg. 15 Packet Pg. 357 of 553 Item 11 *NOT YET APPROVED* Attachment A - Ordinance Amending Chapters 4.10 occupant of a building when he has received express prior permission fro (Licenses Obtained by do so. Applicatio.12 to Title 4 (b) No person shall solicit funds in any congested area where the solicit (Business Licenses and Ides the public. For the purpose of this section, the judgment of a police officer Regulations) of the Palo faith, shall be deemed conclusive as to whether the area is congested or th Alto Municipal Code 4.30.110 Severability. If any provision or clause of this chapter or the application thereof to any person or circumstance is held to be unconstitutional or to be otherwise invalid by any court of competent jurisdiction, such invalidity shall not affect other chapter provisions, and clauses of this chapter are declared to be severable. SECTION 5. Chapter 4.32 (Soliciting Information for Commercial Purposes) of Title 4 (Business Licenses and Regulations) is hereby amended as follows (additions are underlined, deletions are in strikethro� ugh): 4.32.010 Definitions. (a) For the purpose of this chapter, unless it is plainly evident from the context that a different meaning is intended, certain terms used in this chapter are defined as follows: (1) "Interviewee" means a person from whom information is requested by a solicitor as defined in this chapter. (2) "Soliciting" means requesting information on the background, occupation, economic status, social status, religious status, political status, attitudes, viewpoints, occupants of a residence, telephone number, address, furnishings, or the like of another person for the purpose of compiling such information as raw data or refined data into a document, record, book, or directory to be sold, or to be used wholly or in part for a commercial purpose. (3) "Solicitor" means the person soliciting as defined in this chapter. 4.32.020 Permit r ed for solicitors. Reserved. A permit is required for cvcry person or organization which cngagcs in soliciting information by means of calling upon places of rcsidcncc or by means of dircct personal contact in public placcs or upon public property. Onc permit may bc obtained by an organization to covcr thc individual solicitors for thc organization. Any pcddling or soliciting, as dcfincd in Chaptcr 4.10, which is carried on in conncction with said solicitation of information is unlawful unless a 4.32.030 Exceptions. Reserved. (a) The provisions of this chapter shall not apply to the following: (1) Any news gathering activity bona fide news medium; (2) Any solicitation of informationfor telephone a telephone -company. 4.32.040 Application. Reserved. II WJi[ilJ(JJJ Li JJIIII fill 101_20231128_ts_24 Item 11: Staff Report Pg. 16 Packet Pg. 358 of 553 *NOT YET APPROVED* Item 11 attachment A - Ordinancf Amending Chapters 4.10 (Licenses Obtained by Applicatio.12 to Title 4 (Business Licenses and Regulations) of the Palo applicant's r ord• Alto Municipal Code madc of any information thcrcfrom; , 4.32.050 Pcrmit fccs. Reserved. A fcc for a permit to solicit information shall bc lcvicd as sct forth in thc municipal fcc sic. 4.32.060 lnvcsti ation of hooks and r ords. Reserved. 4.32.070 Standards for issuancc of r mits. Reserved. permit application o issuing a probationary permit a specified in Chapter 4.04. 4.32.080 Identification cards. Reserved. (a) The permittee shall furnish each person engaged in the soliciting activity in question with a suitable identification card or badge. The cards or badges shall contain such information as the chief of police deems necessary, but shall include at toast the following: (1) Thenameof theindividual solicitor; (2) The name of thepermittee, if different; (3) Thepurposc of the solicitation activity; 101_20231128_ts_24 Item 11: Staff Report Pg. 17 Packet Pg. 359 of 553 *NOT YET APPROVED* 4.32.090 Arts r ed during ch solicitation. Reserved. Item 11 attachment A - Ordinancf Amending Chapters 4.10 (Licenses Obtained by Applicatio.12 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code 4.32.100 Restrictions on methods of solicitation. (a) It shall be unlawful for a solicitor to do any of the following: (1) Falsely represent, directly or by implication, that the information is being solicited on behalf of a governmental organization; (2) Threaten, directly or by implication, that the information requested will be solicited from sources other than the interviewee if the interviewee does not provide the information; (3) Without the express prior permission of an occupant, solicit at any residence address or apartment complex where there is posted a sign stating: "No solicitors or peddlers." 4.32.110 Hours of solicitation. No person shall solicit information from six p.m. to nine a.m.; provided, however, a solicitor may call upon the occupant of a residence during such hours when he has received express prior permission from such occupant to do so. SECTION 6. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the Ordinance would be subsequently declared invalid or unconstitutional. SECTION 7. The Council finds that adoption of this Ordinance is exempt from the California Environmental Quality Act pursuant to CEQA Guidelines Sections 15301 (Existing Facilities) and 15323 (Normal Operations of Facilities for Public Gatherings). // // // // 101_20231128_ts_24 Item 11: Staff Report Pg. 18 Packet Pg. 360 of 553 *NOT YET APPROVED* SECTION 8. This Ordinance shall be effective on the thirty-first date after adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: NOT PARTICIPATING: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: Assistant City Attorney City Manager Chief of Police r � Item 11 Attachment A - Ordinance Amending Chapters 4.10 (Licenses Obtained by Applicatio.12 to Title 4 (Business Licenses and Regulations) of the Palo l Alto Municipal Code Director of Community Services 101_20231128_ts_24 Item 11: Staff Report Pg. 19 Packet Pg. 361 of 553 Item 12 Item 12 Staff Report City Council Staff Report Report Type: CONSENT CALENDAR CITY O F Lead Department: City Clerk PALO LTO Meeting Date: January 16, 2024 Report #:23 12-2465 TITLE SECOND READING: Adoption of an Urgency Ordinance and an Interim Ordinance That Allows the Director of Planning and Development Services to Extend Planning Entitlements for Housing Development Projects up to an Additional 18 Months. Environmental Review: Exempt from CEQA in Accordance with CEQA Guidelines 15061(b)(3). (FIRST READING: December 11, 2023 PASSED 5-1-1, Kou no, Veenker absent) BACKGROUND This was heard by the City Council on December 11, 2023 for a first reading and was approved 5-1-1, Kou no, Veenker absent. No changes were made to the ordinance; it is now before you for a second reading. ATTACHMENTS Attachment A - Ordinance Authorizing Extensions for Housing Projects APPROVED BY: Mahealani Ah Yun, City Clerk Item 12: Staff Report Pg. 1 Packet Pg. 362 of 553 Item 12 NOT YET ADOPTED Attachment A - Ordinance nt B Authorizing Extensions for Housing Projects Ordinance No. Interim Ordinance of the Council of the City of Palo Alto Temporarily Authorizing the Director of Planning and Development Services to Extend the Validity of Planning Entitlements for Housing Development Projects The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Findings and Declarations. The City Council finds and declares as follows: A. Pursuant to state law, the City of Palo Alto (City) was assigned a regional housing need allocation (RHNA) of 6,086 housing units for the 2023-2031 planning period, comprised of 1,556 very -low income units, 896 low-income units, 1,013 moderate -income units, and 2,621 above moderate -income units; and B. In accordance with state law and to further the City's goals of producing housing, the City Council adopted the City of Palo Alto 2023-2031 Housing Element on May 8, 2023. C. Construction of housing units that have been previously approved is an essential factor in meeting the City's RHNA and Housing Element goals. D. Changes in economic conditions and other factors may result in a delay in construction of housing units following approval by the City. E. Pursuant to Palo Alto Municipal Code section 18.77.090, planning permits and approvals shall expire within 12 months, or within the time provided in the permit or approval, unless the proposed use of the site or construction of buildings has commenced. In addition, the Planning Director is authorized to extend this time for up to 12 additional months. F. In order to permit maximum flexibility for property owners who obtain or have obtained planning approvals that are in danger of expiration, the City Council desires to authorize the Planning Director to issue further extensions of time before a planning permit or approval will expire. SECTION 2. Notwithstanding Section 18.77.090 of the Palo Alto Municipal Code or the provisions of any planning permit or approval, the Director of Planning and Development Services is authorized, in his or her sole discretion, to extend the duration of a planning permit or approval for a Housing Development Project, as defined in Government Code Section 65589.5, by an additional eighteen (18) months beyond the expiration date that would otherwise apply. The authority granted herein shall be effective only until December 31, 2024. 1 0160130_20231128_ayl6 Item 12: Staff Report Pg. 2 Packet Pg. 363 of 553 Item 12 NOT YET ADOPTED Attachment A Ordinance nt B Authorizing Extensions for Housing Projects SECTION 3. The Council finds that the adoption of this ordinance is exempt from the provisions of the California Environmental Quality Act pursuant to CEQA Guideline sections 15061(b)(3) because it can be seen with certainty that that the extension of a planning entitlement will not have a significant impact on the environment. SECTION 4. This ordinance shall be effective on the thirty-first date after the date of its adoption and shall expire on December 31, 2024. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Assistant City Attorney Mayor APPROVED: City Manager Director of Planning and Development Services 0160130_20231128_ayl6 K Item 12: Staff Report Pg. 3 Packet Pg. 364 of 553 Item 13 Item 13 Staff Report City Council Staff Report From: City Manager CITY O F Report Type: ACTION ITEM PALO Lead Department: Public Works ALTO Meeting Date: January 16, 2024 Report #:2310-2190 TITLE Tree Protection Ordinance Year One Review and Recommendations; Adoption of an Ordinance Amending Chapter 8.04 (Street Trees, Shrubs, and Plants) and Chapter 8.10 (Tree Preservation and Management Regulations of the Palo Alto Municipal Code to Update the Allowable Reasons for Removal of Protected Trees, Make Clarifying Changes, and to Make Clerical Updates; and Adoption of a Resolution amending the Administrative Penalty Schedule to Increase the Penalties for Violations of Title 8 of the Palo Alto Municipal Code; CEQA Status — Not a Projects RECOMMENDATION Staff recommends that Council adopt the proposed changes to Palo Alto Municipal Code amending Chapter 8.04 and Chapter 8.10 of the Palo Alto Municipal Code and adopt a resolution amending the Administrative Penalty Schedule to increase the penalties for violations of Title 8 of the Palo Alto Municipal Code. EXECUTIVE SUMMARY Title 8 of Palo Alto Municipal Code (PAMC) regulates street trees, shrubs, and plants (Chapter 8.04), weed abatement (Chapter 8.08), and tree preservation and management (Chapter 8.10) and is often referred to as the "Tree Protection Ordinance". Major updates were made to Title 8 in June 2022. Implementation of the new Tree Protection Ordinance began in July 2022 and is still in progress. During the adoption of the updated Tree Protection Ordinance in June 2022, Council directed staff to review the ordinance with the Parks and Recreation Commission (PRC) and Planning and Transportation Commission (PTC) near the one-year mark, as adjustments might be needed'. On June 19, 2023, staff updated Council through a study session focused on 1 City Council Meeting Action Minutes, June 6, 2022; https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=42899 Item 13: Staff Report Pg. 1 Packet Pg. 365 of 553 Item 13 Item 13 Staff Report implementation efforts.' As directed by Council, staff evaluated the updated ordinance over the course of the first year and held study sessions with both PRC and PTC this past fall. The proposed changes to Title 8 included as Attachment A incorporate feedback received during those study sessions. Specific changes from those study sessions include modifications to 8.04.050 regarding trees as public nuisance, and the incorporation of right tree in the right place principles to the updated reasons for removal included in 8.10.050. BACKGROUND The updates to the Tree Protection Ordinance in 2022 focused on implementation of Council - approved policies in the 2030 Comprehensive Plan (Natural Environment Chapter), and the Urban Forest Master Plan. Additional code updates included changes prompted by State law, specifically Executive Order B-29-15, also known as the Model Water Efficient Landscape Ordinance. Amendments to the ordinance ranged from significant policy changes, like expanding the types of protected trees and revising allowances for tree removal, to more clerical updates, like updating authorized officers and accounting for recent changes in other development -related codes. The amendments in the 2022 update were the result of a detailed multi -year effort. The staff report for the June 6, 2022 Council meeting3 included a detailed list of the public meetings included in the process, which included meetings with the Planning and Transportation Commission, the Policy and Services Committee, the Architectural Review Board, the Parks and Recreation Commission, the City Council and Community meetings. During the first year of implementation of the updated ordinance, staff made note of code sections that caused confusion or did not work as originally intended. Many of the updates included in staff's recommended changes focus on resolving those issues. ANALYSIS Proaosed Ordinance Clarifications During the first year of ordinance implementation, staff noted any areas of the updated code that might warrant edits to increase clarity. Many of the proposed updates that are included in the attached draft updates to PAMC Chapters 8.04 and 8.10 center around this goal. The following areas have proposed changes to increase clarity or simplify the wording of the code. 1. 8.04.050(e) - Infested trees as public nuisance 2 City Council, June 19, 2023; Agenda Item #41, SR #2306-1599: https://cityofpaloaIto.primegov.com/Portal/Meeting?meetingTemplate Id=1170 3 City Council, June 6, 2022; Agenda Item #13, SR #14355 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=81908 Item 13: Staff Report Pg. 2 Packet Pg. 366 of 553 Item 13 Item 13 Staff Report o Issue: Current text is vague as to what qualifies as an "infestation" which could lead to confusion and possibly inappropriate application of this code section. o Resolution: Proposed text clarifies what types of infestations qualify. Pests now must be included in the California Department of Food and Agriculture's detection and eradication programs or be injurious to trees. 2. 8.04.050(i) — Trees declared a public nuisance under State law and ordered removed by a court of competent jurisdiction o Issue: The ordinance did not make clear that a tree declared a public nuisance under state law would qualify for a Tree Removal Permit. o Resolution: State law public nuisance declaration was added as a reason for declaring a protected tree a nuisance. 3. 8.10.020(d) — Designated Arborist — Clarification as to when the applicant chooses the arborist and when the arborist is chosen by the City o Issue: Existing text is unclear as to who selects and pays for the designated arborist. o Resolution: Proposed text clarifies that the project applicant pays for all arborist services and may select a designated arborist of their choice unless the project requires a public hearing as part of the approval process. In those cases, the City selects the arborist. 4. 8.10.020(l)(4) — Protected Trees - Designated Trees — Clarification of designated tree definition. o Issue: Current text can be interpreted as referring only to trees on approved landscape plans for current projects. o Resolution: Proposed text specifies that designated trees are any trees that were planted as part of an approved landscape plan included in a development project, past or current. 5. 8.10.040(b) — Tree Disclosure Requirements — Reorganization of the types of trees that need to be disclosed for clarity and adding a formal exemption allowing disclosure to be completed by applicant instead of by a designated arborist for Section 18.09.030 Table 1 ADU projects o Issue: Current text lists the categories of trees that must be disclosed in paragraph form and experience has shown that it can be misunderstood. o Resolution: Proposed text separates each type of tree that must be disclosed into separate numbered items to clarify. o Issue: Current exemption for Section 18.09.030 Table 1 ADU projects is only included in the instructions for the Ti Tree Protection Plan Sheet. o Solution: Proposed text formalizes this exemption in the code. 6. 8.10.050(a)(1) — Clarification on type of permits needed for tree removal o Issue: Applicants have applied for the incorrect type of tree removal permit. Tree removals outside of development on parcels other than single-family (R-1) or low density residential (RE, R-2, or RMD) require a staff level architectural review Item 13: Staff Report Pg. 3 Packet Pg. 367 of 553 Item 13 Item 13 Staff Report through planning, not a tree removal permit through public works (this requirement pre -dates the 2022 update). o Solution: Included the clarification above in the code. 7. 8.10.050(a)(2) — Clarification on details of development moratoriums imposed as conditions of tree removal permits o Issue: Current text is unclear regarding length of moratoriums and who specifically has the authority to issue a moratorium. o Resolution: Proposed text includes specific clarifications about who can issue a moratorium, the length of the moratorium and how a moratorium may be lifted early. 8. 8.10.050(d)(1) —Twenty-Five Percent Rule — clarification on method used to calculate the percentage impact of protected trees on buildable area o Issue: Current text does not include references to the fact that more than one protected tree may contribute to the impact on buildable area. o Solution: Proposed text specifies that the impact on buildable area for the 25% rule includes the tree protection zones of all trees whose tree protection zones include portions of the buildable area. 9. 8.10.140(c)(2) - Appeals of Tree Removal Decisions o Issue: The intent of the 2022 update was that any appeals of a tree removal permit decision would go first to a director's hearing, and then to a commission or Council. The Title 18 code referenced in this subsection does not include a director's hearing as a first step. o Solution: Text added to include a director's hearing as a first appeal step before following procedures included in PAMC 18.78. Proposed Ordinance Changes for Tree Removal and Pruning In addition to the areas listed above requiring clarification, other areas have more substantial proposed changes. Some of the issues raised during the first year of the updated ordinance centered around the 2023 winter storm season. The series of storms the Bay Area saw last winter was very unusual. The storms included high rainfall totals in very short time spans and strong winds from non - prevailing directions with little or no time for recovery in between events. Many citizen concerns centered around the permission to remove a hazardous tree. The ability of a tree owner to remove a hazardous tree is already contained in the ordinance. Staff created a new list of FAQs4 to address some of the concerns. These following changes are being proposed to address issues that arose during the first year of implementation. 4 Palo Alto Urban Forestry FAQs; https://www.cityofpaloalto.org/Departments/Public-Works/Public-Services/Palo- Altos-Urban-Forest/Frequently-Asked-Questions Item 13: Staff Report Pg. 4 Packet Pg. 368 of 553 Item 13 Item 13 Staff Report 8.10.050 Removal of Protected Trees Several changes are proposed to 8.10.050. Under 8.10.050(a)(1), item (ii) has been separated into (ii) and (iv). The proposed (ii) and (iv) now read: (ii) It is a detriment to or is crowding an adjacent protected tree. (iv) It is impacting the foundation or eaves of a residence or any covered parking required under Title 18. This change allows (ii) to be cited as a reason for removal during a development project, while isolating the use of (iv) to removal in the absence of development only. A new reason for removal is being proposed as 8.10.050(a)(1)(iii). This reason for removal is intended to address some of the issues that presented during the first year of ordinance implementation. Occasionally, situations arise where removal and replacement of an existing protected tree would be appropriate, yet the existing code does not allow for its removal. The proposed (iii) would address most of these situations. (iii) It is at risk for retrenchment or other tree decline coping processes or does not conform with right tree in the right place principles. Retrenchment in trees is defined as the process by which over -mature trees in natural settings reconfigure as they age and deteriorate. This process is sometimes called 'natural retrenchment'. The tree may continue to grow trunk diameter while branches die and fail — reducing overall height of the tree while maintaining or increasing stability. Right tree in the right place principles means the set of principles that determine if a tree is located in an appropriate location for its specific species requirements and characteristics. Factors to be considered when applying right tree in the right place principles include, but are not limited to local climate zone, micro -climates, soil type, rainfall, irrigation, available soil volume, existing landscape, existing hardscape, existing utilities, existing infrastructure and available above ground growing volume. Specific principles and additional details will be included in the forthcoming Tree and Landscape Technical Manual. Staff intends to incorporate any ordinance changes approved by Council into the Tree and Landscape Technical Manual that will be published following its approval by the City Manager. Ideally, this will coincide with the effective date of the ordinance changes following a second reading. Some specific examples of where 8.10.050(a)(1)(iii) might be applied include the following: • A protected tree with a structure that negatively impacts its surroundings but does not qualify for removal under current code. This could be a tree that has a lopsided and unrepairable canopy that encroaches on a home but does not meet criteria as either a hazard tree or as directly damaging foundation or eaves. Item 13: Staff Report Pg. 5 Packet Pg. 369 of 553 Item 13 Item 13 Staff Report • A protected tree that has entered end -of -life decline but does not qualify for removal under current code. This could be a tree species that is known to have a shorter life span in a landscape setting and may begin to drop limbs as a coping mechanism when in decline. The tree may not yet present as a hazard tree. As with all reasons listed under 8.10.50(a)(1), treatments and corrective practices must be infeasible to invoke (iii) as a reason for removal. A new reason for removal is also being proposed under 8.10.050(b)(2). This involves the inclusion of the "25% Rule" to residential projects. This rule allows the removal of a protected tree if the tree protection zone of the tree occupies 25% or more of the parcel's buildable area. Historically, this reason has been applied to single family residential projects. Both versions of the ordinance, pre and post the 2022 update, did not include this rule in the single family residential category. This change is intended to recognize this and to correct the oversight. Clarification to the language defining the "25% rule" has also been added, both in the proposed new location of 8.10.050(b)(2) and the existing location of 8.10.050(d)(1). The changes center around how the impact to the buildable area is calculated. The proposed changes to both codes now read: Retention of one or more trees would result in reduction of the otherwise -permissible buildable area of the lot by more than twenty-five percent, and there is no financially feasible design alternative that would permit preservation of the tree(s), where financially feasible means an alternative that preserves the tree(s) unless retaining the tree(s) would increase project cost by more than twice the reproduction cost of the tree or ten percent of the given project valuation, whichever is greater. All tree protection zones impacting buildable area are included in the reduction of buildable area calculation. The last new reason for removal being proposed is under 8.10.050(d)(3). This is intended to address concerns first raised by Stanford University staff during the review of the Tree Ordinance in May and June of 2022. The concern presented was that the ordinance as proposed in 2022 did not allow for discretion regarding tree removal and replacement on larger projects that were subject to the regular planning approval process. During the 2022 ordinance review process, staff believed that a reading of the existing Title 18 code included the needed discretion surrounding protection and removal of trees on these larger projects. Further review of the code over the last year has determined that discretion regarding the protection and removal of trees on these types of projects is not explicitly granted under Title 18. Staff received specific feedback on this item during the PTC study session and has incorporated that feedback into the proposed changes. To resolve this, staff is proposing to add the following reason for removal under 8.10.050(d)(3): Item 13: Staff Report Pg. 6 Packet Pg. 370 of 553 Item 13 Item 13 Staff Report (3) Discretionary development review determines that the final project follows right tree in the right place principles and would result in a net tree canopy increase on the property within fifteen years, and replacement of trees, shrubs, and plants either: (i) Is consistent with Urban Forest Master Plan Goal 2: "Re -generated native woodland and riparian landscapes as the key ecological basis of the urban forest with focus on native species and habitat, " or (ii) Uses climate adaptive, drought tolerant species. This addition seeks to include the specific type of discretion that was already being applied to larger commercial projects under both versions of the Tree Protection Ordinance. The final proposed change seeks to address the issue of exemptions to excessive pruning requirements. Some horticultural and arboricultural practices may exceed the maximum pruning limits outlined in 8.10.020(j). These may include trees that have been grown and maintained as a hedge, trees that are being purposefully reduced on a regular basis to fit a growing space, or trees subject to specific cultural practices such as pollarding or espalier training. The exemption language as proposed would be located under 8.10.070(c): (c) No pruning that exceeds the limits set forth in Section 8.10.020(j)(1) or (2) shall take place without the approval of the urban forester. The property owner or their designee shall submit any requests to exceed the limits for pruning set forth in Section 8.10.020(j)(1) or (2) to the urban forester at least fourteen days prior to pruning a protected tree. Each request shall be accompanied by a statement explaining why exceeding the limits is warranted. Approval for pollarding, hedging or other approved annual practices that exceed limits for pruning need only be secured once every five years. Updates to the Administrative Penalty Schedule Included in this report as Attachment B are updates to the administrative penalty schedule. The updates seek to include corrected code references related to the 2022 Title 8 update that are not included in the current schedule. For example, the current administrative penalty schedule does not list 8.10.040 Failure to disclose protected trees or 8.10.055 Failure to comply with tree replacement as citable offenses. Penalty amounts have also been adjusted to complement the civil penalty amounts included in the 2022 update. The current administrative penalty schedule has a maximum fine of only $500 for the unauthorized removal of a protected tree. This fine is being increased to $5000 per tree or reproduction cost up to $10,000, whichever is greater. For comparison, the civil penalty for the unauthorized removal of a protected tree under the current ordinance is $10,000 or twice the reproduction cost, whichever is greater. Potential Additional Actions Item 13: Staff Report Pg. 7 Packet Pg. 371 of 553 Item 13 Item 13 Staff Report While staff has presented potential updates to Chapters 8.04 and 8.10 intended to address issues encountered during the first year of ordinance implementation, there are other actions that could be considered. These options were presented to the PRC and PTC during the fall study sessions. These options were presented as potential additional actions in response to concerns raised during the 2023 storm season, during the June 19, 2023 City Council study session on Tree Ordinance Implementation, and through feedback on the City's housing element from the State Housing and Community Development department. Feedback from the fall study sessions indicated that the types of changes included in these potential additional actions would not be appropriate at this time. 1. Changes to Allowable Reasons for Removal Staff could explore more substantial changes or additions to the allowable reasons for removal. While staff believes the proposed changes included in Attachment A address many of the concerns raised by both staff and the public in the wake of this past winter's storms, additional changes could be considered. 2. Changes to the Definition of Protected Trees Staff could explore proposing changes to the definition of protected trees. This could potentially involve one or more of the following options: • Elimination of one or more specific protected native species • Increasing the diameter threshold for protected native species (currently 11.5") • Increasing the diameter threshold for coastal redwood (currently 18") • Increasing the diameter threshold for all other species (currently 15") Depending on the changes proposed, the total number of protected trees would decrease in differing amounts based on changes in protected species or protected diameters. Under the current ordinance, the definition of a Protected Tree includes the following: Specific native species protected at 11.5" diameter at breast height (DBH): • Acer macrophyllum (Bigleaf Maple) o Calocedrus decurrens (Incense Cedar) o Quercus agrifolia (Coast Live Oak)* o Quercus douglasii (Blue Oak) o Quercus kelloggii (California Black Oak) o Quercus lobata (Valley Oak)* • Species protected at 18" DBH: o Sequoia sempervirens (Coast Redwood)* • Protected Mature Trees at 15" DBH: o includes all species not listed above except: ■ Invasive species per Cal-IPC Item 13: Staff Report Pg. 8 Packet Pg. 372 of 553 Item 13 Item 13 Staff Report ■ High Water Users per WUCOLS (Excluding Redwood) • Other protected tree categories: o Any tree designated for protection during review and approval of a development project o Any tree designated for carbon sequestration and storage and/or for environmental mitigation purposes o Any replacement mitigation tree or other tree designated to be planted due to the conditions listed in this ordinance * species protected prior to July 21, 2022 If changes to the definition of protected trees are explored, estimates of the impact to the total number of protected trees can be made using our existing representative sample data set for the composition of our urban forest. 3. Exemptions for Certain Housing Projects The State Housing and Community Development department commented on the City's housing element in its August 3, 2023 letter noting a need for further analysis related to, among other regulations, the impact of the City's tree protection ordinance on housing. Specifically, the City's updated housing element must analyze the tree ordinance as a potential constraint on a variety of housing types. While the City has previously taken measures to address concerns regarding ADUs and the contemplated changes referenced in this report would address single family homes and some commercial mixed -use projects, more work may be needed to ensure the City's tree policies are not a constraint to qualifying housing accountability projects. Accordingly, staff is exploring the appropriateness of additional regulations that would seek to balance the local and state interests for more housing production with the City's desire to preserve and support tree health and expand the tree canopy. Some initial concepts staff are considering would apply to projects with four or more units with at least two-thirds of the project floor area dedicated toward housing. If a tree protected by the City's ordinance would require a redesign of the project that triggers one or more of the following, the tree or trees would be approved for removal, including: • redesign to accommodate the tree costs two times the replacement cost of the tree (existing provision); • redesign to accommodate the tree costs more than 5% of the total project valuation (down from 10% currently in the code); • redesign requires a greater parking reduction than authorized by the code; or • redesign requires a density reduction of 5% or greater. Staff continues to evaluate the need for these additional regulations in the context of the other contemplated modifications. After feedback received during the PTC study session, staff Item 13: Staff Report Pg. 9 Packet Pg. 373 of 553 Item 13 Item 13 Staff Report believes more study of the issues involved is warranted before proposing any code changes to address these items. Staff will bring any proposed housing exemption changes to Title 8 back to the PTC for review and recommendations. FISCAL/RESOURCE IMPACT The proposed changes to Chapters 8.04 and 8.10 should have no additional impact on staff resources. STAKEHOLDER ENGAGEMENT Public outreach regarding the updated ordinance has been ongoing since the adoption of the updated ordinance in June 2022. The majority of public outreach has been conducted by City staff and the City's urban forestry non-profit partner Canopy. Below is a list of outreach efforts that have been completed or are currently in progress. • City Urban Forestry webpages have been updated to reflect new ordinance. o New Tree Ordinance Information page created and expanded. • New Tree FAQs created to address many questions about the tree ordinance and storm related tree issues. • Creation of a new general trees email address (trees@cityofpaloalto.org) to simplify contacting the Urban Forestry Section. • Canopy webpages updated to mirror new information on City web pages. • Canopy tree walk flyers updated to highlight tree ordinance updates. • Canopy Tree -news has released 3 Issues (June 2022, January 2023, April 2023) that speak about the updated tree ordinance. o Tree news issues reach approximately 4500 subscribers. • An email distribution list of arborists, tree care companies, and urban forestry advocates has been compiled by staff and informational updates are being sent periodically. These updates have been added to the Tree Ordinance Information webpage as PDFs5. Staff is in the process of translating these updates into Spanish language versions as well. Anyone can be added to the list by email request sent to trees@cityofpaloalto.org. The following outreach components are still in development and will be put in place in the coming months. • A direct mailed postcard to all Palo Alto residences providing information about the updated tree ordinance. • Utility bill insert and email highlighting new ordinance information. 5 Tree Ordinance Information Update example: https://www.cityofpaloalto.org/files/assets/public/v/1/public- works/tree-section/new-folder/palo-alto-tree-ordinance-information-updates-2-excessive-pruning.pdf Item 13: Staff Report Pg. 10 Packet Pg. 374 of 553 Item 13 Item 13 Staff Report • Informational ads in local printed and electronic press. • Live webinar sessions targeted at local arborists and tree care companies to review new ordinance requirements. These will be recorded and posted to the City's website. Stakeholder feedback was also received through comments from councilmembers and commissioners as well as through public comment at the following public meetings: • City Council —June 19, 2023 —Tree Ordinance Implementation study session • Parks and Recreation Commission — October 24, 2023 - Tree Protection Ordinance Year One Review and Recommendations Study Session • Planning and Transportation Commission — November 8, 2023 - Tree Protection Ordinance Year One Review and Recommendations Study Session Based on feedback received at the October 24, 2023 Parks and Recreation Commission meeting and the November 8, 2023 Planning and Transportation Commission meeting, staff plans to explore the possibility of adding the following additional outreach components. • Webinars, workshops, or Utility bill inserts focused on how to prepare trees for storm season and how to care for them after storms. • Inclusion of more tree related information and resources into the City's regular informational postings on electronic media. ENVIRONMENTAL REVIEW This proposed update to the Tree Protection Ordinance is not subject to the California Environmental Quality Act. The proposed code amendments have been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the State CEQA Guidelines, and the environmental regulations of the City. Specifically, the proposed amendments have been determined to be exempt from further environmental review pursuant to CEQA Guidelines Section 15061(b)(3) because it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment. In the event Section 15061(b)(3) is found not to apply, the ordinance is also exempt under Section 15308 because it involves regulatory action for the protection of the environment. ATTACHMENTS Attachment A: Ordinance of the Council of the City of Palo Alto Amending Chapter 8.04 Street, Trees, Shrubs, and Plants and Chapter 8.10 Tree Preservation and Management Regulations Attachment B: Resolution Amending and Restating Administrative Penalty Schedule APPROVED BY: Brad Eggleston, Director Public Works/City Engineer Item 13: Staff Report Pg. 11 Packet Pg. 375 of 553 Item 13 *NOT YET APPROVED* Attachment A Ordinance t A of C the Council of the City of Palo Alto Amending Ordinance No. Chapter 8.04 Street, Trees, Shrubs, and Plants Ordinance of the Council of the City of Palo Alto Amending 1 and Chapter 8.10 Tree (Street, Trees, Shrubs, and Plants) and Chapter 8.10 (Tree Pre Preservation and Management Regulations). lIanagementRegulations The Council of the City of Palo Alto ORDAINS as follows: SECTION 1. Chapter 8.04 (Street Trees, Shrubs, and Plants) of Title 8 (Trees and Vegetation) of the Palo Alto Municipal Code is hereby amended to read as follows (additions underlined and deletions struck through): Chapter 8.04 PUBLIC TREES, SHRUBS, HEDGES, AND PLANTS Sections: 8.04.005 Purpose. 8.04.010 Definitions. 8.04.015 Authority of city. 8.04.020 Permit required for certain work. 8.04.030 Application for permit. 8.04.040 Issuance of permit. 8.04.050 Public nuisances. 8.04.070 Enforcement. 8.04.080 Interference with enforcement. 8.04.090 Adoption of regulations. 8.04.005 Purpose. The purpose of this chapter is to protect and promote trees, shrubs, hedges, and plants located on public property within the city. In establishing these procedures and standards, the city recognizes that trees, shrubs, hedges, and plants are an essential part of the city's infrastructure, with benefits that include promoting the health, safety, welfare, and quality of life of the residents of the city; addressing climate change by sequestering carbon and providing a cooling effect; reducing air, water, and noise pollution; preventing soil erosion and 1 0010_20240104_mv30 Item 13: Staff Report Pg. 12 Packet Pg. 376 of 553 *NOT YET APPROVED* Item 13 \ttachment A - Ordinance of the Council of the City t A of Palo Alto Amending stormwater runoff; providing wildlife habitat; and enhancing the aesthetic Chapter 8.04 Street, the city's intent to encourage the preservation of trees, shrubs, hedges, an Trees, Shrubs, and Plants and Chapter 8.10 Tree 8.04.010 Definitions. Preservation and Management Regulation For the purposes of this title, the following words shall have the meaning ascribed to them in this section: (a) "Person" means individuals, firms, associations and corporations, and agents, employees or representatives thereof. (b) "City" means the city of Palo Alto acting by and through its authorized representatives. (c) "Street" means and includes all land lying between the boundaries of property abutting on all public streets, boulevards, alleys, and walks. (d) "Parks" means and includes all parks to which names have been given by action of the city council. (e) "Public places" means and includes all grounds, other than streets or parks, owned by, leased to, or under the control of the city of Palo Alto. (f) "Tree" means and includes any woody perennial plant generally having a single main stem and commonly achieving ten feet in height. (g) "Shrub" means and includes any woody perennial plant generally having multiple stems and commonly less than ten feet in height. (h) "Hedge" means and includes any tree, shrub, or plant, when planted in a dense, continuous line or area, as to form a thicket or barrier. (i) "Plant" means and includes all vegetation other than trees and shrubs. (j) "Public trees, shrubs, hedges, and plants" means and includes any tree, shrub, hedge, or plant in any street, park, or public place in the city of Palo Alto. (k) "Urban forester" means public works department staff including the urban forester or their designee. (I) "Tree permit" means a permit issued by the urban forester for one or more of the following purposes: (1) To permit removal of a public tree. (2) To permit public tree care, work, or treatment. (3) To permit removal of a protected tree under 8.10.050. (4) To establish a tree preservation bond. (5) For payment of "in -lieu" fees for required mitigation measures. 2 0010_20240104_mv30 Item 13: Staff Report Pg. 13 Packet Pg. 377 of 553 *NOT YET APPROVED* 8.04.015 Authority of city. Item 13 4ttachment A - Ordinance of the Council of the City t A of Palo Alto Amending Chapter 8.04 Street, Trees, Shrubs, and Plants The city of Palo Alto shall have control of all public trees, shrubs, hedges, and Chapter 8.10 Tree hereafter in any street, park or public place within the city limits, and shall Preservation and i to plant, care for, remove, replace, and maintain such trees, shrubs, hedges, agementRegulatio 8.04.020 Permit required for certain work. Unless authorized by a tree permit or other city approval, no person shall do any of the following: (a) Plant, prune, trim, shape, remove, top, or in any way damage, destroy, injure or mutilate a public tree, shrub, hedge, or plant. A tree permit is not required for a property owner, resident, or their agent to maintain shrubs, hedges, or plants located within the city right-of- way associated with their property. (b) Fasten a sign, wire, or injurious material to any public tree, shrub, hedge, or plant. (c) Excavate any ditch or tunnel; or place concrete or other pavement within a distance of ten feet of the center of the trunk of any public tree. 8.04.030 Application for permit. Any person desiring to do any of the work described in Section 8.04.020 may apply for a tree permit so to do. The applicant shall state the nature of the work and the location where it will be done. 8.04.040 Issuance of permit. A tree permit shall be issued authorizing work that meets all the following conditions: (a) Will not create, continue, or aggravate any hazardous condition, or public nuisance. (b) Will not prevent or interfere with the growth, location or planting of any approved public tree. (c) Is consistent with the planting plan being followed by the city. 8.04.050 Public nuisances*. Any of the following are, for the purposes hereof, defined to be public nuisances: (a) Any dead, diseased, infested, or dying tree, shrub, hedge, or plant in any street or on any public or private property so near to any public tree, shrub, hedge, or plant as to constitute a danger to a public tree, shrub, hedge, or plant, or street, or portion thereof or public property. (b) Any tree, shrub, hedge, or plant on any private property or in any street, of a type or species that will destroy, impair, or otherwise interfere with any street improvement, sidewalk, curb, approved public tree, gutter, sewer, other public improvement, including utility mains and services, or a public tree, shrub, hedge, or plant. 3 0010_20240104_mv30 Item 13: Staff Report Pg. 14 Packet Pg. 378 of 553 Item 13 Attachment A - Ordinance *NOT YET APPROVED* t A of the Council of the City of Palo Alto Amending (c) Any tree limb, shrub, hedge, or plant reaching a height more than th Chapter 8.04 Street, curb grade adjacent thereto, except a tree trunk having no limbs lower tha Trees, Shrubs, and Plants curb grade, within the thirty-five foot triangle of public or private property and Chapter 8.10 Tree he projected curb lines, at the intersections of any street improved for vehicu Preservation and ljvlanagement Regulations either traffic signals, stop signs, or yield signs are not installed, or at any int are determined by the chief transportation official to contain a tree limb, shrub, hedge, or plant that obscures or impairs the view of a passing motorist, cyclist or pedestrian so as to create a safety hazard. (d) Vines or climbing plants growing into or over any public tree, shrub, hedge, or plant; or any public hydrant, pole or electrolier. (e) Existence of any tree within the city limits that is infested or infected with objcctionable insects, scale, fungus, or growths that are included in the California Department of Food and Agriculture's detection and eradication programs or that are growth injurious to trees. (f) The existence of any branches or foliage which interfere with visibility on, free use of, access to, or obstruct public vehicular or pedestrian travel on any portion of any street improved for vehicular or pedestrian travel. (g) Hedges or dense, thorny shrubs and plants on any street or part thereof. (h) Shrubs and plants more than two feet in height in any tree well or planting strip between the sidewalk and curb, measured above top of curb grade. (fl Any tree. shrub. hedge. or olant declared a public nuisance pursuant to state law and ordered removed by a court of competent jurisdiction. * Abatement procedure - See Chapter 9.56 of this code. 8.04.070 Enforcement. (a) Violation of any provision of this chapter is a misdemeanor, punishable as provided in this code. Each day of violation constitutes a separate offense and may be separately punished. (b) Persons employed in the following designated employee positions are authorized to exercise the authority provided in California Penal Code Section 836.5 and are authorized to issue citations for violations of this chapter, including but not limited to leveling fines under the city's administrative penalty authority: assistant director of public works public services division, urban forester, project manager in the urban forestry section, landscape architect, and code enforcement officer. (c) Any person who damages a public tree, through any act or omission, whenever such act or omission is prohibited by or not authorized pursuant to this chapter, may be liable civilly in a sum not to exceed ten thousand dollars per tree, or the reproduction cost of each such tree, whichever amount is higher. 4 0010_20240104_mv30 Item 13: Staff Report Pg. 15 Packet Pg. 379 of 553 Item 13 *NOT YET APPROVED* Attachment A - Ordinancet A of the Council of the City of Palo Alto Amending (d) Injunctive relief. A civil action may be commenced to abate, enjoin, Chapter 8.04 Street, el the cessation of such violation. Trees, Shrubs, and Plants and Chapter 8.10 Tree (e) Costs. In any civil action brought pursuant to this chapter in which th Preservation and court shall award to the city all costs of investigation and preparation for anagement Regulations lal, reasonable expenses including overhead and administrative costs incurred in prosecuting the action, and reasonable attorney fees. (f) The remedies and penalties provided in this section are cumulative and not exclusive. 8.04.080 Interference with enforcement. No person shall interfere with or delay the authorized representatives of the city from the execution and enforcement of this chapter, except as provided by law. 8.04.090 Adoption of regulations. The city may adopt regulations prescribing standards of landscaping and planting of streets, parks and public places, therein. A copy of such regulations shall be available for public inspection upon request, and all work performed in streets, parks or public places shall be performed in accordance therewith. SECTION 2. Chapter 8.10 (Tree and Landscape Preservation Management) of Title 8 (Trees and Vegetation) of the Palo Alto Municipal Code is hereby amended to read as follows (additions underlined and deletions struck through): Chapter 8.10 TREE AND LANDSCAPE PRESERVATION AND MANAGEMENT* Sections: 8.10.010 Purpose. 8.10.020 Definitions. 8.10.030 Tree and Landscape Technical Manual. 8.10.040 Disclosure of information regarding existing trees. 8.10.050 Removal of protected trees. 8.10.055 Tree replacement. 8.10.060 No limitation of authority under Titles 16 and 18. 8.10.070 Care of protected trees. 8.10.080 Development conditions. 8.10.090 Designation of heritage trees. 5 0010_20240104_mv30 Item 13: Staff Report Pg. 16 Packet Pg. 380 of 553 *NOT YET APPROVED* 8.10.092 Tree removal in wildland- urban interface area. 8.10.095 Tree removal in Hospital District Zone. 8.10.100 Enforcement. 8.10.110 Remedies for violation. 8.10.120 Fees. 8.10.130 Severability. 8.10.140 Applications, notice, and appeals. 8.10.010 Purpose. Item 13 Attachment A - Ordinance of the Council of the City of Palo Alto Amending Chapter 8.04 Street, Trees, Shrubs, and Plants and Chapter 8.10 Tree Preservation and anagement Regulatio to The purpose of this chapter is to protect specified trees located on private property within the city, and establish standards for removal, maintenance, and planting of trees and landscaping. In establishing these procedures and standards, the city recognizes that trees and landscaping are an essential part of the city's infrastructure. Their benefits include promoting the health, safety, welfare, and quality of life of the residents of the city; addressing climate change by sequestering carbon and providing a cooling effect; reducing air, water, and noise pollution; preventing soil erosion and stormwater runoff; providing wildlife habitat; and enhancing the aesthetic environment. It is the city's intent to encourage both the preservation of trees and the proactive incorporation of trees and their benefits within development. 8.10.020 Definitions. For the purposes of this chapter, terms defined in Chapter 8.04 shall have the same meanings in this chapter, and the following terms shall have the meaning ascribed to them in this section: (a) "Basal flare" means that portion of a tree where there is a rapid increase in diameter at the confluence of the root crowntrunk and trunk. (b) "Buildable area" means that area of a parcel: (1) Upon which, under applicable zoning regulations, a structure may be built without a variance, design enhancement exception, or home improvement exception; or (2) Necessary for construction of primary access to structures located on or to be constructed on the parcel, where there exists no feasible means of access which would avoid protected trees. On single-family residential parcels, the portion of the parcel deemed to be the buildable area for primary access shall not exceed ten feet in width. (c) "Building footprint" means the two-dimensional configuration of a building's perimeter boundaries as measured on a horizontal plane at ground level. 6 0010_20240104_mv30 Item 13: Staff Report Pg. 17 Packet Pg. 381 of 553 Item 13 Attachment A - Ordinance *NOT YET APPROVED* t A of the Council of the City of Palo Alto Amending (d) "Designated arborist" means an arborist certified by the Internation Chapter 8.04 Street, Arboriculture or another nationally recognized tree research, care, and pr Trees, Shrubs, and Plants organization, selected by the urban forester for inclusion in a list of appro ree and ChaptePreservation hircd by: Preservation and ion an Management Regulations (1) Hired by anA4 applicant at their own expense, or (2) Chosen by theT#e city at an applicant's expense, if a project includes a public hearing. (e) "Development" means any work upon any property in the city which requires a subdivision, planned community zone, variance, use permit, building permit, demolition permit, or other city approval or which involves excavation, landscaping or construction within the tree protection zonedri^Iinc ar^a of a protected tree or is subject to requirements of the California Model Water Efficient Landscape Ordinance (MWELO). (f) "Director of planning and development services" means the director of planning and development services or their designee. (g) "Director of public works" means the director of public works or their designee. (h) "Discretionary development approval" means planned community zone, subdivision, use permit, variance, home improvement exception, design enhancement exception, architectural review board approval, or any proposal or application that requires the discretion of the authorizing person or entity. eez-half Teet (fifty four +ne ies) abovc natural gradc, whicheve is grcatcr. "Excessive pruning" of a protected tree means any of the following: (1) Removal of more than twenty-five percentonc fourth of the functioning leaf, stem, or root area of a tree in any twenty -four -month period. (2) Removal of more than fifteen percent of the functioning root area of any Quercus (oak) species in any thirty -six-month period. (3) Any removal of the functioning leaf, stem, or root area of a tree so as to cause a significant decline in health, increased risk of failure, or the unbalancing of a tree. (ik) "Hazardous" means an imminent hazard which constitutes a high or extreme threat to the safety of persons or property as defined by American National Standards Institute A300, Part 9. (14) "Protected" tree means any of the following: (1) Any locally native tree of the species Acer macrophyllum (Bigleaf Maple), Calocedrus decurrens (California Incense Cedar), Quercus agrifolia (Coast Live Oak), Quercus douglasii (Blue Oak), Quercus kelloggii (California Black Oak), or Quercus lobata (Valley Oak) which is eleven 7 0010_20240104_mv30 Item 13: Staff Report Pg. 18 Packet Pg. 382 of 553 *NOT YET APPROVED* Item 13 4ttachment A - Ordinance of the Council of the City t A of Palo Alto Amending and one-half inches in diameter (thirty-six inches in circumference) or mor Chapter 8.04 Street, four and one-half feet (fifty-four inches) above natural grade. Trees, Shrubs, and Plants and Chapter 8.10 Tree (2) Any Coast Redwood tree (species Sequoia sempervirens) that is eigh Preservation and diameter (fifty-seven inches in circumference) or more when measured fo lanagementRegulations t (fifty-four inches) above natural grade. (3) Any tree, otherlarger than a Coast Redwood Tree, fifteen inches in diameter (forty-seven inches in circumference) or more when measured four and one-half feet (fifty-four inches) above natural grade of any species except those invasive species described as weeds in Section 8.08.010 and those species classified as high water users by the Water Use Classificationwater uc cla ifi at on of Landscape Speciesthc landcapc pccics list (WUCOLS) approved by the California Department of Water Resources. (4) Any tree designated for protection during review and approval (with the cxccption of a current or previously completed development project. On parcels zoned other than single- family (R-1) or low density (RE, R-2, or RMD) residential, species exempted under subsection (3) of this Section may be designated as a protected tree. (5) Any tree designated for carbon sequestration and storage and/or environmental mitigation purposes as identified in an agreement between the property owner and a responsible government agency or recorded as a deed restriction. (6) Any heritage tree designated by the city council in accordance with the provisions of this chapter. (7) Any replacement mitigation tree or other tree designated to be planted due to the conditions listed in Section 8.10.055. (I) "Protected tree removal permit" means a permit issued to allow a person to remove a protected tree. m) "Right tree in the right glace arinciales" means the set of arinciales that determine if a tree is located in an appropriate location for its specific species requirements and characteristics, in accordance with the factors listed in the Tree and Landscape Technical Manual. (n) "Remove" or "removal" means: (1) Complete removal, such as cutting to the ground or extraction, of a tree; or (2) Taking any action foreseeably leading to the death of a tree or permanent damage to its health; including but not limited to excessive pruning, cutting, topping, girdling, poisoning, overwatering, underwatering, unauthorized relocation or transportation of a tree, or trenching, excavating, altering the grade, or paving within the tree protection zonedriplinc ar^a of a tree. 8 0010_20240104_mv30 Item 13: Staff Report Pg. 19 Packet Pg. 383 of 553 *NOT YET APPROVED* Item 13 4ttachment A - Ordinance of the Council of the City t A of Palo Alto Amending -(o) "Retrenchment" means the process in which trees may reconfigure aChapter 8.04 Street, Trees, Shrubs, and Plants and Chapter 8.10 Tree (p) —"Tree Protection Zone" means the area defined by a circle with a rPreservation and diameter of the trunk when measured four and one-half feet grade. four inCiManagement Regulations�l (g) "Tree Report" means a report prepared by a designated arborist. (re) "Tree and Landscape Technical Manual" means the regulations issued by the city manager to implement this chapter. 8.10.030 Tree and Landscape Technical Manual. The city manager, through the urban forestry section, and public works and planning and development services departments, shall issue regulations necessary for implementation and enforcement of this chapter, which shall be known as the Tree and Landscape Technical Manual. In the event of a conflict between the provisions of this Title 8 and the Tree and Landscape Technical Manual, this Title 8 shall prevail. The Tree and Landscape Technical Manual will be made readily available to the public and shall include, but need not be limited to, standards and specifications regarding the following: (a) Protection of trees during construction. (b) Replacement of trees allowed to be removed pursuant to this chapter where such replacements: (1) Prioritize the use of locally native species, as listed in Section 8.10.020(1)(1), consistent with Urban Forest Master Plan Goal 2: "Re -generated native woodland and riparian landscapes as the key ecological basis of the urban forest with focus on native species and habitat;" (2) Include climate adaptive, drought tolerant, non-native species as needed to satisfy right tree in the right place principles; and (3) Incorporate a secondary goal of net tree canopy increase on the property within fifteen years. (c) Maintenance of protected trees (including but not limited to pruning, irrigation, and protection from disease). (d) The format and content of tree reports required to be submitted to the city pursuant to this chapter. (e) The criteria for determining whether a tree is hazardous within the meaning of this chapter. (f) Landscape design, irrigation, and installation standards consistent with the city's water efficient landscape regulations. 9 0010_20240104_mv30 Item 13: Staff Report Pg. 20 Packet Pg. 384 of 553 Item 13 *NOT YET APPROVED* Attachment A - Ordinance t A of the Council of the City of Palo Alto Amending 8.10.040 Disclosure of information regarding existing trees. Chapter 8.04 Street, Trees, Shrubs, and Plants (a) Any application for development or demolition shall be accompanie and Chapter8.10Tree y a designated arborist which discloses whether any protected trees exist on t Preservation and is the subject of the application, and describing each such tree, its species, si anagement Regulations zonedripline arc and location. This requirement shall be met by including the information on plans submitted in connection with the application. (1) Notwithstanding subsection (a), applications involving only the development of an Accessory Dwelling Unit that conforms to Section 18.09.030, Table 1, require only a statement disclosing whether any protected trees are located on the arooerty which is the subject of the application. This statement may be completed by the applicant. (b) In addition, the location and species of an�ra4 other tree which is four inches in diameter (e.g., thirteen inches in circumference) or more when measured four and one-half feet (fifty- four inches) above natural grade shall be shown on the plans if the tree is: (1) On the property or trcc n the pr p rty and in the adjacent public right-of-way, and is which arc within thirty feet of the building footprint proposed for development, or (2) Locatedand trees located on adjacent property within thirty feet of the proposed building footprint, or (4-(3) Close enough that its canopy overhangswi+h canopic ov^rhanging the project site, shall be shown on the plans, idcntificd h.. r (c) The director of public works or urban forester may require submittal of such other information as is necessary to further the purposes of this chapter including but not limited to photographs. (d) Disclosure of information regarding private protected trees pursuant to this section shall not be required when the development for which the approval or permit is sought does not involve any change in an existing building footprint nor any grading, trenching, paving, or any change in landscaping which could alter water availability to established plants, hedges, shrubs, or trees. (e) The urban forester or the designated arborist for a project shall add identified protected trees into the city's tree inventory database, and in coordination with the planning and development services departments, into city parcel reports. (f) Knowingly or negligently providing false or misleading information in response to this disclosure requirement shall constitute a violation of this chapter. 8.10.050 Removal of protected trees. It shall be a violation of this chapter for anyone to remove or cause to be removed a protected tree, except pursuant to a protected tree removal permit issued under Section 8.10.140 consistent with the following: 10 0010_20240104_mv30 Item 13: Staff Report Pg. 21 Packet Pg. 385 of 553 Item 13 *NOT YET APPROVED* Attachment A Ordinance t A of the Council of the City of Palo Alto Amending (a) In the absence of proposed development: Chapter 8.04 Street, Trees, Shrubs, and Plants (1) A protected tree shall not be removed unless the urban forester gra and Chapter8.10Tree e removal permit, or on parcels zoned other than single-family (R-1) or low Preservation and (RE, R-2, or RMD), the director of planning and development services authLmanagementRegulations through staff level architectural review pursuant to Section 18.76.020(b)(3), having determined, on the basis of a tree report prepared by a designated arborist and other relevant information, that treatments or corrective practices are not feasible, and that the tree should be removed because any of the following apply: (i) It is dead, is hazardous, or constitutes a public nuisance under Section 8.04.050 of this code. (ii) It is a detriment to or is crowding an adjacent protected tree. , or is impacting the iii) It is at risk for retrenchment or other tree decline coping processes or does not conform with right tree in the right place principles. (iv) It is impacting the foundation or eaves of a residence, or any covered parking required under Title 18 of this code. (2) In the event a protected tree is removed pursuant to a protected tree removal permit granted under this subsection (a), a temporary moratorium on development of the subject property may be issued by the urban forester for up to twenty-four months or by, the director of planning and development services, in consultation with the urban forester, for up toff issue a to torte'a'ri"'i-on development of the subject property Ret to exceed thirty-six months, from the date the tree removal occurred. Completion of requiredEor any moratorium less than thirty six months, the urban forester shall determine - -,t„ mitigation measures included infer the tree removal permit does not remove or shorten any such moratorium. A moratorium may be terminated early with approval of the urban forester or director of planning; and development services, as applicable, and may require additional mitigationcnsurc measures. are Incorporated into any f„t„r dcvclopmcnt approvals for the property. Mitigation measures included in the arotected tree removal aermit and any additional mitigation measures required to shorten a moratoriumas determined by the urban forestcr shall be imposed as a condition of any subsequent permits for development on the subject property. (b) In the case of any development on a single-family (R-1) or low density (RE, R-2, or RMD) residential zoned parcel, other than in connection with a subdivision, a protected tree shall not be removed unless determined by the urban forester, on the basis of a tree report prepared by a designated arborist and other relevant information, that any of the following apply: (1) The tree is so close to the proposed development that construction would result in the death of the tree, and there is no financially feasible design alternative that would permit preservation of the tree, where financially feasible means an alternative that preserves the tree unless retaining the tree would increase project cost by more than twice the reproduction cost of the tree or ten percent of the given project valuation, whichever is greater. 11 0010_20240104_mv30 Item 13: Staff Report Pg. 22 Packet Pg. 386 of 553 *NOT YET APPROVED* Item 13 4ttachment A - Ordinance of the Council of the City t A of Palo Alto Amending Retention of one or more trees would result in reduction of the other♦ Chapter 8.04 Street, Trees, Shrubs, and Plants and Chapter 8.10 Tree Preservation and oses of this subsection (a)(2). a financially feasible design altern alternative that areserves the tree(s) and would not increase the aro anagement Regulatio than twice the reproduction cost of the tree(s) or ten percent of the given project valuation, whichever is greater. All tree protection zones impacting buildable area are included in the reduction of buildable area calculation. {44(3)The tree could be removed due to the conditions listed in Section 8.10.050(a)(1)(i), (ii) or III (2) The tree could be FeMeycdzrduc to the conditions listed in Section 8.10.050(a)(1) and treatments or corrective practices are not feasible. (c) In the case of development involving a proposed subdivision of land into two or more parcels, a protected tree shall not be removed unless determined by the urban forester, on the basis of a tree report prepared by a designated arborist and other relevant information, that either of the following apply: (1) Removal is unavoidable due to restricted access to the property or deemed necessary to repair a geologic hazard (landslide, repairs, etc.), in which case only the protected tree or trees necessary to allow access to the property or repair the geologic hazard may be removed. (2) The tree could be removed due to the conditions listed in subsection (a)(1)(i), (ii), or (iii) and treatments or corrective practices are not feasible. (d) In the case of development requiring planning approval under Title 18, and not included under subsections (b) or (c), a protected tree shall not be removed unless determined by the urban forester, on the basis of a tree report prepared by a designated arborist and other relevant information, that awn re; of the following apply: (1) Retention of one or more treesthe tree would result in reduction of the otherwise - permissible buildable area of the lot by more than twenty-five percent, and there is no financially feasible design alternative that would permit preservation of the tree{L; where financially feasible means an alternative that preserves the tree{ unless retaining the tree{ would increase project cost by more than twice the reproduction cost of the tree or ten percent of the given project valuation, whichever is greater. All tree protection zones impacting buildable area are included in the reduction of buildable area calculation. (2) The tree should be removed because it is dead, hazardous, or constitutes a public nuisance under Section 8.04.050. In such cases, the tree protection zonedripline arca of the removed tree, or an equivalent area on the site, shall be preserved for mitigation purposes from development of any structure. Discretionary development review determines that the final project follows right tree in the right place principles and would result in a net tree canopy increase on the property within fifteen years, and replacement of trees, shrubs, and plants either: 12 0010_20240104_mv30 Item 13: Staff Report Pg. 23 Packet Pg. 387 of 553 *NOT YET APPROVED* Is consistent with Urban Forest Master Plan Goal 2: "Re - native species and habitat," or (ii) Uses climate adaptive, drought tolerant species. Item 13 Attachment A - Ordinance of the Council of the City t A of Palo Alto Amending erat Chapter 8.04 Street, d aan 1Tree5, Shrubs, and Plants n and Chapter 8.10 Tree Preservation and anagement Regulatio —(e) In any circumstance other than those described in subsections (a), (b), (c), or (d), a protected tree shall not be removed unless determined by the urban forester, on the basis of a tree report prepared by a designated arborist and other relevant information, that the tree is dead, is hazardous, or constitutes a public nuisance under Section 8.04.050. 8.10.055 Tree replacement. (a) In the event a protected tree is removed pursuant to Section 8.10.050(a)(1)(i), mitigation for the removed tree, replacement tree ratio, in lieu fees, or a combination thereof shall be determined by the urban forester, based on factors including but not limited to the species, size, location, and specific reason for removal of the protected tree, in accordance with the standards and specifications in the Tree and Landscape Technical Manual. (b) In the event a protected tree is removed pursuant to Section 8.10.050(a)(1)(ii), (iii) or (iv), (b), (c), (d), or (e), the tree removed shall be replaced in accordance with the standards and specifications in the Tree and Landscape Technical Manual, including but not limited to prioritization of locally native species, satisfaction of right tree in the right place principles, and incorporation of a secondary goal of net tree canopy increase on the property within fifteen years. The urban forester shall approve the number, species, size, and location of replacement trees. 8.10.060 No limitation of authority under Titles 16 and 18. Nothing in this chapter limits or modifies the existing authority of the city under Title 18 to require trees, shrubs, hedges, and other plants not covered by this chapter to be identified, retained, protected, and/or planted as conditions of the approval of development. In the event of conflict between provisions of this chapter and conditions of any permit or other approval granted pursuant to Title 16 or Title 18, the more protective requirements shall prevail. 8.10.070 Care of protected trees. (a) All owners of property containing protected trees shall follow the maintenance standards in the Tree and Landscape Technical Manual, including avoiding any action foreseeably leading to the death of a tree or permanent damage to its health; including but not limited to excessive pruning, cutting, topping, girdling, poisoning, overwatering, underwatering, unauthorized relocation or transportation of a tree, or trenching, excavating, altering the grade, or paving within the tree protection zonedripline area of a tree. (b) At least seven days prior to pruning a protected tree, other than that required to remove a dead, diseased, or broken branch or branches, the property owner or their designee shall prominently post a notice on the property, in one or more locations readily visible to the public, that includes standards for pruning and a description of the tree including tree species, size, 13 0010_20240104_mv30 Item 13: Staff Report Pg. 24 Packet Pg. 388 of 553 *NOT YET APPROVED* Item 13 Attachment A - Ordinance of the Council of the City t A of Palo Alto Amending location, the date of work, and a contact phone number. The form for sucH Chapter 8.04 Street, available on the city's website as a printable document. Protected trees le Trees, Shrubs, and Plants LId are exempt from this provision. and Chapter 8.10 Tree Preservation and (c) The standards for protection of trees during construction contained i anagement Regulations Landscape Technical Manual shall be followed during any development on property containing trees. (d) The urban forester shall add identified protected trees into the city's tree inventory database and, in coordination with the planning and development services departments, into city parcel reports. 8.10.080 Development conditions. (a) Development approvals for property containing protected public trees shall include appropriate conditions as set forth in the Tree and Landscape Technical Manual, providing for the protection of such trees during construction and for maintenance of such trees thereafter. Trees may be designated for protection that are significant visually or historically, provide screening, or are healthy and important to the nearby ecosystem. (b) It shall be a violation of this chapter for any property owner or agent of the owner to fail to comply with any development approval or building permit condition concerning preservation, protection, and maintenance of any tree, including but not limited to protected trees. 8.10.090 Designation of heritage trees. (a) Upon nomination by any person and with the written consent of the property owner(s), the city council may designate a tree or trees as a heritage tree. (b) A tree may be designated as a heritage tree upon a finding that it is of importance to the community due to any of the following factors: (1) It is an outstanding specimen of a desirable species. (2) It is one of the largest or oldest trees in Palo Alto. (3) It possesses distinctive form, size, age, location, and/or historical significance. (c) After council approval of a heritage tree designation, the city clerk shall notify the property owner(s) in writing. A listing of trees so designated, including the specific locations thereof, shall be kept by the departments of public works. (d) Once designated, a heritage tree shall be considered protected and subject to the provisions of this chapter unless removed from the list of heritage trees by action of the city council. The city council may remove a tree from the list upon its own motion or upon written request by the property owner. Request for such action must originate in the same manner as nomination for heritage tree designation. 14 0010_20240104_mv30 Item 13: Staff Report Pg. 25 Packet Pg. 389 of 553 Item 13 Attachment A - Ordinance *NOT YET APPROVED* t A of the Council of the City of Palo Alto Amending 8.10.092 Tree removal in wildland-urban interface area. Chapter 8.04 Street, Trees, Shrubs, and Plants Tree removal and relocation in the wildland-urban interface (WUI) area, and Chapter8.10Tree on 15.04.190, shall be subject to the provisions in Chapter 15.04. To the exte Preservation and inconsistent with this chapter, Chapter 15.04 shall control. anagement Regulations 8.10.095 Tree removal in Hospital District Zone. Tree removal and relocation in the Hospital District (HD) shall be subject to the provisions in Section 18.36.070. To the extent Section 18.36.070 is inconsistent with this chapter, Section 18.36.070 shall control. 8.10.100 Enforcement. (a) Violation of this chapter is a misdemeanor, punishable as provided in this code. Each day of violation constitutes a separate offense and may be separately punished. (b) Persons employed in the following designated employee positions are authorized to exercise the authority provided in California Penal Code Section 836.5 and are authorized to issue citations for violations of this chapter, including but not limited to leveling fines under the city's administrative penalty authority: assistant director of public works public services division, urban forester, project manager in the urban forestry section, landscape architect, and code enforcement officer. 8.10.110 Remedies for violation. In addition to all other remedies set forth in this code or otherwise provided by law, the following remedies shall be available to the city for violation of this chapter: (a) Stop Work - Temporary Moratorium. (1) If a violation occurs in the absence of proposed development pursuant to Section 8.10.050(a)(1), or while an application for a building permit or discretionary development approval for the lot upon which the tree is located is pending, the director of planning and development services in consultation with the urban forester shall issue a temporary moratorium on development of the subject property, not to exceed five years from the date the violation occurred. The purpose of the moratorium is to provide the city an opportunity to study and determine appropriate mitigation measures for the tree removal, and to ensure measures are incorporated into any future development approvals for the property. Mitigation measures as determined by the urban forester shall be imposed as a condition of any subsequent permits for development on the subject property. (2) If a violation occurs during development pursuant to Section 8.10.050(b), (c), (d), or (e), the city shall issue a stop work order suspending and prohibiting further activity on the property pursuant to the grading, demolition, and/or building permit(s) (including construction, inspection, and issuance of certificates of occupancy) until a mitigation plan has been filed with and approved by the director of planning and development services in consultation with the urban forester, agreed to in writing by the property owner(s), and either implemented or 15 0010_20240104_mv30 Item 13: Staff Report Pg. 26 Packet Pg. 390 of 553 Item 13 Attachment A - Ordinance *NOT YET APPROVED* t A of the Council of the City of Palo Alto Amending guaranteed by the posting of adequate security. The mitigation plan shall i Chapter 8.04 Street, or protection or repair of any remaining trees on the property, and shall prov Trees, Shrubs, and Plants t of each tree removed on the property or at locations approved by the urb and Chapter 8.10 Tree replacement ratio shall be in accordance with the standards set forth in thd Preservation and bpe anagement Regulations Technical Manual, and shall be at least twice the prescribed ratio required wnere tree remO'val is permitted pursuant to the provisions of this chapter. (b) Civil penalties. (1) As part of a civil action brought by the city, a court may assess against any person who commits, allows, or maintains a violation of any provision of this chapter a civil penalty in the following amount: (i) Ten thousand dollars per tree, or twice the reproduction cost of each tree, whichever amount is higher, for the complete removal of a tree, as defined in Section 8.10.020(n)(1). (ii) Ten thousand dollars per tree, or the reproduction cost of each tree, whichever amount is higher, for any of the actions set forth in Section 8.10.020(n)(2). (iii) Ten thousand dollars per tree, or twice the repair cost of each tree, whichever amount is higher, for damage to a tree protected or regulated by this chapter which can be rehabilitated. (2) Penalties shall be payable to the city. (3) Reproduction or repair cost for the purposes of this chapter shall be determined utilizing the most recent edition of the Guide for Plant Appraisal, published by the Council of Tree and Landscape Appraisers. (c) Administrative penalties. Persons listed in Section 8.10.100(b) may issue citations for violations of this chapter that level fines under the city's administrative penalty authority. (d) Injunctive relief. A civil action may be commenced to abate, enjoin, or otherwise compel the cessation of such violation. (e) Costs. In any civil action brought pursuant to this chapter in which the city prevails, the court shall award to the city all costs of investigation and preparation for trial, the costs of trial, reasonable expenses including overhead and administrative costs incurred in prosecuting the action, and reasonable attorney fees. (f) The remedies and penalties provided in this section are cumulative and not exclusive. 8.10.120 Fees. Tree reports required to be submitted to the city for review and evaluation pursuant to this chapter shall be accompanied by the fee prescribed therefor in the municipal fee schedule. 8.10.130 Severability. If any provision of this chapter or the application thereof to any person or circumstance is held to be invalid by a court of competent jurisdiction, such invalidity shall not affect any other 16 0010_20240104_mv30 Item 13: Staff Report Pg. 27 Packet Pg. 391 of 553 Item 13 Attachment A - Ordinance *NOT YET APPROVED* t A of the Council of the City of Palo Alto Amending provision of this chapter which can be given effect without the invalid pro Chapter 8.04 Street, n and to this end the provisions of this chapter are declared to be severable. Trees, Shrubs, and Plants and Chapter 8.10 Tree 8.10.140 Applications, notice, and appeals. Preservation and anagement Regulatio (a) Applications. (1) All applications for removal of a protected tree pursuant to Section 8.10.050 shall be filed in accordance with this section and any applicable provisions of Chapter 18.77. Applications for removal of protected trees on non-residential zoned properties will follow review guidelines set forth in Section 8.10.050(d) and Section 18.76.020 and will follow the process set forth in Section 18.77.070. (2) The application form shall be prescribed by the urban forester and shall contain a list of information that must be submitted in order for the application to be deemed complete. (3) Each application must be signed by all owners of the real property containing the protected tree, or an agent of the owner of record of the real property on which the protected tree occurs, when duly authorized by the owner in writing. (4) No application shall be deemed received until all fees for the application as set forth in the municipal fees schedule have been paid, and all documents specified as part of the application in this chapter or on the application form have been filed. (5) Protected tree removal permits shall automatically expire after twelve months, unless otherwise provided in the permit, from the date of issuance of the permit if within such twelve- month period, the proposed tree has not been removed. (b) Notice. (1) All applications for removal of a protected tree pursuant to Section 8.10.050 shall give notice in accordance with this section, the Tree and Landscape Technical Manual, and any applicable provisions of Chapter 18.77. (2) After submittal of an application to remove a protected tree, notice shall be given consistent with subsection (b)(4) and shall include the date of the proposed removal and the basis for the application. (3) Upon determination of a protected tree removal application, notice shall be given consistent with subsection (b)(4) and shall include a description of the decision and how to appeal it. (4) Notices required pursuant to this section shall include the address of the property, a description of the protected tree, including species, size, and location, and urban forestry contact information, and shall be given as follows: (i) In writing to all owners and residents of property within 300 feet of the exterior boundary of the property containing the protected tree, and to all principal urban forestry partner organizations. 17 0010_20240104_mv30 Item 13: Staff Report Pg. 28 Packet Pg. 392 of 553 Item 13 *NOT YET APPROVED* Attachment A - Ordinance t A of the Council of the City of Palo Alto Amending (ii) By posting on the property, in one or more locations visible to the p Chapter 8.04 Street, Trees, Shrubs, and Plants (iii) By posting on the city's website. and Chapter 8.10 Tree Preservation and (c) Appeals. anagement Regulations (1) Any person applying to remove a protected tree in the absence of proposed development pursuant to Section 8.10.050(a), and any owner or resident of property within 600 feet of the exterior boundary of the property containing the protected tree, may request a public hearing by the director of public works to review the urban forester's decision, and may appeal the director of public works' determination to the city council. Any such request or appeal shall be filed with the public works department in a manner prescribed by the urban forester. (2) Any person applying to remove a protected tree pursuant to Section 8.10.050(b), (c), (d), or (e), and any owner or resident of property within 600 feet of the exterior boundary of the property containing the protected tree may request a hearing by appeal the director of planning and development services to review the decision. The request for a hearing shall be filed with the 0lannin2 division in in a manner orescribed by the director of blannine and development services. An a00eal of the director of olanniniz and development services determination shall be conducted in accordance with the procedures set forth in Chapter 18.78. (3) All appeals must be filed within fourteen days of posting of notice on the property pursuant to subsection (b)(4)(ii). SECTION 3. If any section, subsection, clause or phrase of this Ordinance is for any reason held to be invalid, such decision shall not affect the validity of the remaining portion or sections of the Ordinance. The Council hereby declares that it should have adopted the Ordinance and each section, subsection, sentence, clause or phrase thereof irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid. SECTION 4. The Council finds that this ordinance is exempt from the provisions of the California Environmental Quality Act ("CEQA"), pursuant to Section 15061 of the CEQA Guidelines, because it can be seen with certainty that there is no possibility that the ordinance will have a significant effect on the environment. Alternatively, the ordinance is also exempt under CEQA Guidelines Section 15308 because it involves regulatory action for the protection of the environment. // // // // 18 0010_20240104_mv30 Item 13: Staff Report Pg. 29 Packet Pg. 393 of 553 Item 13 *NOT YET APPROVED* Attachment A - Ordinance t A of the Council of the City of Palo Alto Amending SECTION 5. This ordinance shall be effective on the thirty-first Chapter 8.04 Street, of its adoption. However, this ordinance shall not apply to any projects t Trees, Shrubs, and Plants d a and Chapter 8.10 Tree complete application as of the ordinance's effective date. In addition, unti t of Preservation and designated arborists is established by the Urban Forester, the term "desid hall anagement Regulations mean any arborist certified by the International Society of Arboriculture or anotner nationally recognized tree research, care, and preservation organization. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Assistant City Attorney Mayor APPROVED: City Manager Director of Public Works 19 0010_20240104_mv30 Item 13: Staff Report Pg. 30 Packet Pg. 394 of 553 Item 13 Attachment *NOT YET APPROVED* Resolution Amending and Restating Administrative Resolution No. Penalty Schedule Resolution of the Council of the City of Palo Alto Amending and Restating the Administrative Penalty Schedule and Civil Penalty Schedules for Certain Violations of the Palo Alto Municipal Code The Council of the City of Palo Alto RESOLVES as follows: SECTION 1. Administrative Penalties. The administrative penalty schedule for violations of the Palo Alto Municipal Code established by Resolution No. 10122 is hereby amended and restated to read as follows: Standard penalty unless otherwise indicated below Second violation within 36 month period Third & subsequent violations within 36 month period. Delinquency penalty. $50 150% of listed penalty (unless otherwise specified) 200% of listed penalty (unless otherwise specified) 10% per month, simple interest, on delinquent amount 4.04.020 License or permit required. 300 4.04.100 Display of license or permit. 300 4.10.045 License fees for pushcart vendors. 300 4.10.050 Regulations for solicitors and peddlers. 350 4.10.055 Identification cards for solicitors. 250 4.10.057 Regulations for pushcart vendors. 300 4.10.070 License required - circus etc. 300 4.10.120 Arcade prohibited. 250 4.10.200 Pawn brokers prohibited. 250 4.10.230 Daily report of second hand dealers. 250 4.10.240 Maintaining reports - second hand dealers. 250 4.10.260 Failure to make report - second hand dealers. 250 4.10.270 Second hand goods held for inspection. 250 4.18.040 Unlawful dog or cat kennel. 250 4.30.010 Soliciting without a permit. 250 4.30.100 Conduct of solicitations. 250 4.32.020 Soliciting without a permit. 250 4.32.060 Investigation of records of solicitor. 250 4.32.090 Acts required during solicitation. 250 4.32.100 Restriction of solicitation. 250 4.32.110 Hours of solicitation. 250 4.34.020 Permit required - closing out sale. 250 4.39.030 Audible alarms. 250 4.39.040 Limitation on automatic dialing devices. 250 4.39.060 Registration of alarm. 250 4.39.110 Alarm violations. 100 4.42.020 Certificate of public convenience. 1000 1 001120240104mv30 _ _ Item 13: Staff Report Pg. 31 Packet Pg. 395 of 553 Item 13 Attachment *NOT YET APPROVED* Resolution Amendingand Restating Administrative 4.42.085 Controlled substance and alcohol testing. 500 Penalty Schedule 4.42.090 Taxi owners permit. 5000 4.42.100 Taxi drivers permit expired. 250 4.42.130(b) Taxi drivers permit not displayed. 250 4.42.190 Taximeters. 500 4.42.200 Taxi cab operating regulations. 250 4.42.210(a) Interference with inspection. 500 4.42.210(b) Inspection of vehicles. 500 4.42.220 Operating regulations. 500 4.42.230 Maintenance of vehicles. 500 4.51.030 License required - bingo. 250 4.51.050 Minors restricted - bingo. 50 4.51.080 Staffing and operations - bingo. 250 4.51.110 Physical presence required - bingo. 250 4.52.020 License required - billiards and bowling. 1000 4.52.040 Minors restricted - billiards and bowling. 250 4.52.060 Offensive conduct - billiards and bowling. 250 4.52.070 Interference w/emerg. Access -billiards/bowling. 250 4.54.030(a) Permit required - massage establishment. 1000 4.54.060(a) Permit required - massage tech. 250 4.54.110 Massage establishment facilities. 250 4.54.130 Business name - massage. 250 4.55.030 License required - adult entertainment. 1000 4.56.030 License required - hot tub and sauna. 1000 4.56.060 Employee permit required - hot tub and sauna. 250 4.56.100 Hot tub/sauna establishment and operations. 250 4.56.120 Business name - hot tub and sauna. 250 4.56.150 Display of permit - hot tub and sauna. 250 4.56.200 Employment of persons < 18 - hot tub and sauna. 250 4.57.020 Permit required - firearms sales. 1000 4.57.095 Firearms dealers — business and security. 500 4.58.020 Minors restricted - narcotics paraphernalia shop. 750 4.58.030 Regulations - narcotics paraphernalia shop. 750 4.59.010 Pet shop requirements. 250 4.59.020 Pet shop sanitation. 250 4.59.030 Pet shop food. 250 4.59.040 Pet shop notification. 250 4.59.050 Pet shop - sale of dangerous or wild animals. 250 4.59.070 Dead animals. 250 4.59.080 Permit required - pet shop and kennel. 250 4.59.090 Permit required - grooming shop. 250 4.59.095 Sales of kittens and puppies. 250 4.59.100 Sales of raccoons. 250 4.59.105 Sales of rabbits, chicks, ducklings. 250 4.60.030 Business registration required 250 4.60.060 Business registry application required 250 4.60.120(a) Business registry fee delinquency 50% of registry fee if 1-30 days late 100% of fee or 31+ days late 5.12.010 Permit required - refreshment stand. 250 5.20.030 Discarding solid waste. 250 5.20.040 Accumulation of garbage. 250 5.20.050 Unauthorized bins, boxes, containers -first violation. 500 Second and subsequent violations. 1000 2 0011_20240104_mv30 Item 13: Staff Report Pg. 32 Packet Pg. 396 of 553 *NOT YET APPROVED* 5.20.080 Number of containers required. 5.20.090 Collection of recyclable materials. 5.20.100 Collection of compostable materials. 5.20.105 Contamination of containers. Item 13 Attachment B - Resolution Amending and Restating Administrative 250 Penalty Schedule 250 for Commercial Premises 50 for Residential Premises 250 for Commercial Premises 50 for Residential Premises 250 for Commercial Premises 50 for Residential Premises 5.20.108 Multifamily properties/Commercial premises. 250 5.20.109 Requirements for special events. 100 5.20.111 Self -haul in violation of code 100 5.20.120 Improper container condition. 250 5.20.130 Maintenance of bins and boxes- first violation. 250 Second and subsequent violations. 500 5.20.160 Spillage or leakage of solid waste. 250 5.20.180 No accumulation of solid waste. 250 5.20.190 No burning, burial, or dumping of solid waste. 250 5.20.200 Hazardous waste. 500 5.20.220 Scavenging prohibited. 100 5.30.020 Polystyrene & Non -Recyclable Plastic. 500 5.30.025(a) -(d) Limitation on use of Disposable Foodware items 100 and other Disposable products. 5.30.025(e) Prohibition of third -party vendors providing utensils 350 or condiments unless requested by customer. 5.35.020 Bags at retail establishments. 500 5.35.030 Bags at supermarkets. 500 6.08.020(b) Interference with animal control officer. 250 6.16.010 No dog license. 50 6.16.080 Number of dogs allowed. 100 6.16.100 Leash Law. 100 6.20.010 Animals at large. 100 6.20.020 Animals on unenclosed premises. 100 6.20.030 Animals kept in enclosures. 100 6.20.035 Tying animals to bicycle racks or trees. 100 6.20.040 Nuisance on sidewalk. 100 6.20.045 Animal waste removal - first offense. 25 6.20.045 Animal waste removal - second offense. 50 6.20.045 Animal waste removal - third offense. 125 6.20.055 Animals in vehicles. 250 6.20.060 Bees close to property line. 100 6.20.080 Permit required - livestock. 100 6.20.090 Maintaining birds, goats, pigs and rabbits. 100 6.20.110 Number of cats kept. 100 6.20.120 Permit required - breeding animals. 100 6.20.130 Cat or dog in heat. 100 6.20.140 Barking dogs. 100 6.20.150 Vaccination required - animals. 100 6.20.160 Sanitary enclosures. 100 6.20.170 Slaughter of animals. 500 6.24.020 Permit required - construction of stable. 250 6.24.050 Maintenance of stable. 250 6.28.040 Possession of dangerous or wild animals. 500 6.32.010 Keeping diseased animals. 500 6.32.020 Confining animals with rabies. 500 3 0011_20240104_mv30 Item 13: Staff Report Pg. 33 Packet Pg. 397 of 553 *NOT YET APPROVED* Item 13 Attachment B - Resolution Amending and Restating Administrative 6.32.050 Dead animals in public. 500 Penalty Schedule 6.36.010 Sales of certain animals. 250 8.0;20 8.04.020 Permit required tree work. Unauthorized removal of public trees 50O 5000 per tree or reproduction cost up to 10,000, whichever is greater 8.04.020(a) Failure to comply with permit 500 per tree for work on public trees. 8.04.020(a) Damage to public trees 150 per inch diameter of damaged tree part 8.04.020(b) Fasten a sign, wire, or injurious material 250 per tree to any public tree. 8.04.020(c) Excavate or pave near public trees 500 per tree 8.04.080 Interference with tree enforcement. 500 8.08.010 Weeds as public nuisance. 250 8.10.040 Failure to disclose protected tree 500 per tree 8.1850 8.10.050 Protected trees. Unauthorized removal of protected tree 50O 5000 per tree or reproduction cost up to 10,000, whichever is greater 8.10.055 Failure to comply with tree replacement. 750 per tree 8.10.070 Failure to Ocare efor protected trees. 500 per tree 8.10.080(b) Failure to comply with sdevelopment conditions._ 500 per condition 9.04.010 Open container in business district. 100 9.04.020 Open container in City parking lot. 100 9.04.030 Open container near liquor store. 100 9.04.040 Social host. First violation 250 Second violation 500 Third & subsequent violation 1000 9.07.020 Safe Storage of Firearms 1000 9.08.010 Discharge of firearms/fireworks. 1000 9.09.010(a) Urinating/defecating on street or public place. 250 9.09.010(b) Igniting or maintaining outdoor fire. 250 9.10.030 Residential property noise limits. 100 9.10.040 Commercial property noise limits. 100 9.10.050 Public property noise limits. 100 9.10.060(b) Construction noise signs. 250 9.10.060(c) Construction noise. 250 9.10.060(d) Construction equipment noise. 100 9.10.060(e) Residential power equipment noise. 100 9.10.060(f) Leaf blower noise- first violation. 250 Leaf blower noise- second violation 500 Leaf blower noise- third and subsequent violation 1000 9.10.060(g) Street sweeping noise. 100 9.10.060(h) Refuse collection noise. 100 9.10.060(i) Safety device noise. 100 9.10.060(k) Public parking lot cleaning noise. 100 9.10.060(l) Business district street cleaning noise. 100 9.12.010 Loudspeakers. 150 9.14.020 Smoking prohibited - enclosed places. 250 (2nd violation in 1 year: $300; 3rd and subsequent violations in 1 year: $500) 9.14.025 Smoking prohibited — unenclosed areas. 250 (2nd violation in 1 year: $300; 3rd and subsequent violations in 1 year: $500) 4 0011_20240104_mv30 Item 13: Staff Report Pg. 34 Packet Pg. 398 of 553 Item 13 Attachment *NOT YET APPROVED* Resolution Amendingand Restating Administrative 9.14.030 Smoking prohibited - city cars. 250 (2nd Penalty Schedule 00; 3rd and subsequent violations in 1 year: $500) 9.14.035 Smoking prohibited — public parks and public events 250 (2nd violation in 1 year: $300; 3rd and subsequent violations in 1 year: $500) 9.14.040 Smoking prohibited - child care facilities. 250 (2nd violation in 1 year: $300; 3rd and subsequent violations in 1 year: $500) 9.14.050 Smoking prohibited — commercial areas and public events. 250 (2nd violation in 1 year: $300; 3rd and subsequent violations in 1 year: $500) 9.14.080 Location of tobacco vending machines. 1000 9.14.090 Display of tobacco products. 500 9.14.100 Failure to post "No Smoking" signs. 50 9.22.010 Impersonating public officials. 500 9.26.020 False representation as police officer. 250 9.28.010 Hotel guest register required. 250 9.28.020 Use of false name by hotel guest. 50 9.40.020 Landing aircraft at other than airport. 1000 9.44.010 Solicitation prohibited - public parking lot. 100 9.48.010 Displaying goods on sidewalk. 50 9.48.025 Sitting or lying on University Avenue sidewalks. 100 9.48.030 Operation of sidewalk elevator. 500 9.48.040 Throwing rubbish on streets. 250 9.48.050 Obligation to clean sidewalk. 200 9.50.010 Graffiti prohibited on public property. 500 9.56.030 Abatement of public nuisance. 500 unless otherwise specified 9.56.030(a)(5) Thirty-five foot site triangle. 200 9.56.030(a)(8) Foliage/branch obstruction. 200 9.56.030(a)(10) Excessive planting strip vegetation height. 150 9.60.030 Blocking entrances to City Hall. 500 9.60.050 Placing signs or climbing on City Hall. 500 9.60.060 Bicycles and skateboards at City Hall. 50 9.60.070 Alcoholic beverages prohibited - City Hall. 100 9.64.010 Overnight use of community facilities 250 9.74.030 Discrimination in housing. 250 9.78.020 Mosquito breeding places. 500 9.79.100 News rack violations. 100 12.08.010 Permit required - public right of way. 500 12.08.100 Removal of City Engineer monuments. 500 12.11.010 Building parklet on public right-of-way without 1000 permit 12.11.060 Violation of Chapter 12.11, permit, or regulations 500 12.12.010 Building on public easement without or in violation 1000 of encroachment permit 12.12.020 Failure to obtain or violation of commercial 500 sidewalk encroachment permit 12.16.030 Overhead wires in underground districts. 500 12.16.090 Property owner responsibility. 500 12.20.010 Utility rules and regulations 500 unless otherwise specified 12.20.010 Emergency water conservation regulations 100 (2nd violation in 1 year: $250; 5 0011_20240104_mv30 Item 13: Staff Report Pg. 35 Packet Pg. 399 of 553 Item 13 Attachment *NOT YET APPROVED* Resolution Amendingand Restating Administrative (Reso. Nos. 9509, 9460, 9449) 3rd Penalty Schedule ions in 1 year: $500) 12.20.020 Providing false information to City Utilities. 500 12.32.010 Water use regulation. 100 15.04.070 Violations of Uniform Fire Code. 500 unless otherwise specified 16.04.050 Violations of California Building Code as amended. 500 unless otherwise specified 16.05.040 Violations of California Mechanical Code as amended500 16.06.050 Violations of California Residential Code as amended.500 16.08.040 Violations of California Plumbing Code as amended. 500 16.09.260 Violations of Sewer Use Ordinance 1000 16.10.020 Construction of private sewer system. 750 16.10.050 Permit required - private sewage system. 500 16.14.040 Violations of California Green Building 500 Standards Code as amended 16.14.260 Failure to meet diversion requirements. $150 per ton of waste not diverted or $3000, whichever is greater 16.14.370 Failure to meet diversion requirements. $150 per ton of waste not diverted or $3000, whichever is greater 16.16.060 Violations of California Electrical Code as amended. 500 16.17.020 Violations of California Energy Code as amended. 500 16.18.020 Violations of International Pool and Spa Code as 500 amended 16.20.020 Design review required - signs. 500 16.20.090 Prohibited signs. 250 16.20.100 Prohibited locations - signs. 250 16.20.110 Fuel price signs required. 250 16.20.210 Non-compliance with sign ordinance. 250 16.20.230 Abandoned signs. 250 16.20.250 Parking of advertising vehicles. 250 16.24.080 Fence violation. 250 16.28.060 Permit required - excavation and grading. 500 16.28.330 Protection of adjacent property. 500 16.28.340 Deposits of earth, rock, etc. 500 16.32.010 Permit required - moving a building. 250 16.36.050 Curb painting without a permit. 100 16.36.060 House numbering required. 100 16.38.020 Certificate of occupancy — community housing. 500 16.40.040 Dangerous and substandard buildings. 500 16.40.090 Non-compliance with order of building official. 500 16.40.180 Interference with repair or demolition work. 500 16.42.090 Failure to submit seismic report. 250 16.45.070 Failure to pay fee - Stanford Research Park. 250 16.46.060 Failure to pay fee - San Antonio - West Bayshore. 250 16.47.050 Failure to pay housing impact fee. 250 16.49.050 Exterior alteration of downtown historic structures 10000 or a significant structure outside the downtown without or in violation of permit 16.49.060 Demolition of a significant downtown building 10000 without or in violation of permit 16.49.070 Demolition of a contributing downtown structure 10000 or significant structure outside the downtown 6 0011_20240104_mv30 Item 13: Staff Report Pg. 36 Packet Pg. 400 of 553 Item 13 Attachment *NOT YET APPROVED* Resolution Amendingand Restating Administrative without or in violation of permit Penalty Schedule 16.49.080 Maintenance of downtown historic structure. 10000 16.49.090 Demolition of downtown historic structure. 10000 16.52.070 Construction - flood hazards. 500 16.59.090 Failure to pay fee- Citywide Transportation Impact. 250 16.60.090 Failure to pay fee- Charleston/Arastradero. 250 16.62.020 Maintenance of expired building permit 200 for 31st through 60th day 400 for 61st through 120th day 800 for 121st day and thereafter 17.04.020 Violations of hazardous materials storage. 500, unless otherwise specified 17.04.030 Specific obligation - hazardous materials. 500 17.10.010 General obligation - underground storage tanks. 750 unless otherwise specified 17.10.040 Permit required - underground storage. 500 17.10.140 Financial responsibility - underground storage. 500 17.10.150 Monitoring underground storage tanks. 1000 17.10.170 Unlawful abandonment - underground storage tanks.1000 17.12.010 Permit required - hazardous materials storage. 750 17.12.020 New hazardous materials storage facilities. 750 17.12.060 Hazardous materials storage facilities. 750 17.16.010 Hazardous materials management plan. 250 17.20.010 Hazardous materials inventory statement. 250 17.24.010 Hazardous materials discharge report. 750 17.32.010 Permit required - storage of hazardous materials. 1000 18.01.080 Violation of zoning laws. 500 18.16.060(d)Hotel stay in excess of 30 days. 200 18.38.020 Planned Community zoning (unless otherwise 500 specified in PC ordinance) 2500 beginning the 181st day following notice of violation Violations of Ordinance 5069 shall be subject to the penalties listed above except that the penalty for violations of Sections 4(b)(1), (2), (6), and (7) of Ordinance 5069 shall not be subject to the penalties above or to the escalators for second, third and subsequent violations, but shall be $2157 per day, for each and every day that a grocery store is not in operation within College Terrace Centre in accordance with the terms of Ordinance 5069. (The City Council intends to adjust this penalty amount periodically in future updates to this administrative penalty schedule to account for periodic increases in the Consumer Price Index for All Urban Consumers.) In calculating the penalties for such violations, the City will allow for a grace period for any daily violations that do not 7 0011_20240104_mv30 Item 13: Staff Report Pg. 37 Packet Pg. 401 of 553 Item 13 *NOT YET APPROVED* Attachment Resolution Amendingand Restating Administrative exceed si Penalty Schedule hs in any five (5) year period. However, this grace period was previously applied to violations from 1/10/18 through 7/10/18, so there is no entitlement to any further grace period prior to 1/10/23. 18.42.060(a)lncompatibility of home occupations. 200 18.42.060(b) Employees of home occupation. 200 18.42.060(c) On site advertising of home occupation. 200 18.42.060(d) Floor area of home occupation. 200 18.42.060(e) Traffic related to home occupation. 200 18.42.060(f) Home occupation as nuisance. 200 18.42.060(g) Outdoor storage related to home occupation. 200 18.42.070 Servicing vehicles in residential zone. 250 18.52.050 Transportation demand management conditions 1000 4000 beginning the 181st day following notice of violation 18.84.200 Temporary uses. 250 22.04.030 Compliance with park regulations. 46 for violation of regulation R1-6 requiring payment of Foothills Park entry fee; 250 for violation of all other Park & Open Space Regulations. 22.04.040 Failure to obtain use permit. 300 22.04.150(b) Entry at unapproved location - Foothills Park 50 22.04.150(c) Person in park after hours - Foothills Park. 250 22.04.150(d) Speed limit 20MPH - Foothills Park. 250 22.04.150(e) Vehicles in Foothills Park after hours. 100 22.04.150(f) Skateboards and motorcycles - Foothills Park. 250 22.04.150(g) Smoking on trails - Foothills Park. 1000 22.04.150(h) Fires in Foothills Park. 1000 22.04.150(i) Use of trails - Foothills Park. 100 22.04.150(l) Unleashed dog - Foothills Park. 250 22.04.155 Restraint of dogs in City parks. 250 22.04.160 Permit required - sales in parks. 250 22.04.170 Violation of park use permit. 250 22.04.180 Sound in parks. 250 22.04.190 Unauthorized golf and other games in parks. 250 22.04.200 Unauthorized models and kites in parks. 100 22.04.210 Parking in parks. 100 22.04.215 Launch and takeout from ramp or dock. 250 22.04.220 Bicycle not permitted on trails. 250 22.04.230 Dumping in park. 1000 22.04.240 Interference with park use permit. 250 22.04.250 Park regulations 250 unless otherwise specified 22.04.260 Discharge of weapons in park. 500 22.04.270 Removal of flora or fauna. 500 22.04.280 Removal of turf or soil. 500 22.04.290(a) Damaging, defacing, etc., property. 1000 22.04.290(b) Marking, writing or printing on property. 1000 22.04.290(c) Attaching sign, etc., without permit. 500 8 0011_20240104_mv30 Item 13: Staff Report Pg. 38 Packet Pg. 402 of 553 *NOT YET APPROVED* 22.04.290(d) Entering, etc., structure after posted hours. 250 22.04.290(e) Bringing portable tables without a permit. 100 22.04.300 Unlawful fire in city park. 1000 22.04.310 Enid Pearson Arastradero, Esther Park closure. 250 22.04.315 Byxbee Park and Baylands closed. 250 22.04.320 Parks closed. 250 22.04.321(a)Skateboarding in park after hours. 50 22.04.322 Trespass at Rinconada Park pool. 50 22.04.330 Alcohol in Cogswell Park. 250 22.04.331 Alcohol in Lytton Plaza. 250 22.04.332 Alcohol in Johnson Park. 250 22.04.333 Alcohol in Boulware Park. 250 22.04.334 Alcohol in Scott St. Minipark. 250 22.04.335 Alcohol in Greer Park. 250 22.04.336(a)Alcohol in Rinconada Park. 250 22.04.337 Alcohol in Mitchell Park. 250 22.04.338 Alcohol in Robles Park. 250 22.04.339 Alcohol in Hopkins Park. 250 22.04.340 Vehicles in park. 250 22.04.341 Alcohol in El Palo Alto Park. 250 22.04.342 Alcohol in Heritage Park. 250 22.04.343 Alcohol in Pardee Park. 250 22.04.350 Consumption of alcoholic beverage in vehicles. 250 22.04.360 Open container in park - alcoholic beverage. 250 22.04.370 Reckless driving in park. 250 22.04.380 Unlawful riding and towing in parks. 250 22.04.390 Duck pond. 100 Item 13 Attachment B - Resolution Amending and Restating Administrative Penalty Schedule SECTION 2. Municipal Code Civil Penalties. The civil penalty schedule for violations of the Palo Alto Municipal Code established by Resolution No. 10113 is hereby restated to read as follows*: Standard penalty unless otherwise indicated below. $46 10.36.020 No parking in parkways. 46 10.36.030(a)Storage on the street (72 hours). 86 10.36.040(a)(1)Vehicle for sale on street. 46 10.36.040(a)(2)Repairing vehicle on street. 46 10.36.050 Not w/in 18" of left curb --One-way street. 46 10.36.090 Removal of chalk markings. 111 10.40.020(a)(1)Parking violation — red curb. 46 10.40.020(a)(4)Parking violation — green curb. 46 10.40.020(a)(5)Parking violation — blue curb. 308 10.40.020(b)Parking in violation of sign (except blue curb). 46 10.40.020(b)Unlawful disabled parking - signs (blue curb). 308 10.40.040(b)Commercial vehicle double parking. 46 10.40.050 Unlawful parking in yellow loading zone. 46 10.40.060 Unlawful parking in passenger loading zone. 46 10.40.070 Unlawful alley parking. 46 10.40.100(g)Parking in a bus zone. 46 10.44.010(b)Overtime parking (limited time zone). 41 10.44.010(c)Additional violation of time limited or no 44 parking zones. 10.44.020(a)Oversized vehicle parking in residential or 46 9 0011_20240104_mv30 Item 13: Staff Report Pg. 39 Packet Pg. 403 of 553 *NOT YET APPROVED* public facilities zones tam -ham. 10.44.040(b)Not in space marking. 10.44.050(b)Parking violation --temporary sign. 10.44.060 Dealers --parking for sale or repair. 10.44.070(b)Parking in violation of posted sign. 10.44.080 Vehicle obstruction of roadway or lot. 10.44.090 Unattended vehicle, engine running. 10.45.110 Parking in on -street valet parking space. 10.46.110 Overtime residential parking permit (CT) 10.48.030 Truck route violation. 10.50.100(a)Violation of posted RPP permit sign 10.60.070(c)Permit not properly displayed. 10.60.070(d)Overtime permit parking in City lot. 10.60.070(e)Parking without permit in permit area. 22.04.150(e)ln Foothills Park after hours. 22.04.210 Parking in parks. Late payment penalty. Collection cost penalty. Item 13 Attachment B - Resolution Amending and Restating Administrative Penalty Schedule 46 46 46 46 46 111 46 53 211 53 41 41 46 111 111 35 35% of listed penalty *All penalties include state -mandated assessments pursuant to Gov't. Code 76000, S.B 1407(2008), and Government Code 76000.3 (S.B. 857, 2008) totaling $12.50. SECTION 3. Vehicle Code Civil Penalties. The civil penalty schedule for violations of the California Vehicle Code established by Resolution No. 10113 is hereby restated to read as follows*: 5200 No front license plate. $78 (If corrected within 31 days) 10 (state mandated) 5204(a) No registration tabs on license plate. 78 (If corrected within 31 days) 10 (state mandated) 21113(a) Parking on public grounds. 46 22500(a) Parking in an intersection. 46 22500(b) Parking in a crosswalk. 46 22500(d) Parking w/in 15 feet --fire station driveway. 46 22500(e) Blocking driveway. 46 22500(f) Parking on sidewalk. 46 22500(g) Parking or stopping --excavation site, etc. 46 22500(h) Double parking on roadway. 46 22500(i) Parking in a bus zone. 261 22500(l) Parking in front of accessible curb. 303 22500.1 Parking in a fire lane (public or private). 46 22502 Right hand wheels not w/in 18" of rt. curb. 46 22505(b) Parking on state highway violation. 46 22507.8(a-b)Unlawful parking in handicapped space. 303 22507.8(c)(1-2)Straddling Lines/Cross hatched, disabled. 303 22511.57(a) Parking/standing of vehicle in disabled parking $753 stall or space with invalid license/placard. 22511.57(b) Unauthorized use of license/placard for vehicle $753 parking/standing in disabled parking stall or space. 22511.57(c) Parking/standing of vehicle in disabled parking $753 stall or space with counterfeit, forged, altered or mutilated license/placard for disabled. 10 0011_20240104_mv30 Item 13: Staff Report Pg. 40 Packet Pg. 404 of 553 Item 13 Attachment *NOT YET APPROVED* Resolution Amendingand Restating Administrative 22514 Parking within 15 feet of fire hydrant. 46 Penalty Schedule 22515 Unattended vehicle, engine running. 111 22516 Person locked in vehicle. 111 22521 Parking within 7 1/2 feet of railroad tracks. 46 22522 Parking near sidewalk access ramp. 303 22523(a) Unlawful abandonment of vehicle on highway. 131 22523(b) Abandoned vehicle--public/private property. 131 22526 Entering/blocking intersection — anti -gridlock. 131 22951 No street, alley parking --patron vehicles. 46 *All penalties include state -mandated assessments pursuant to Gov't. Code 76000, S.B 1407(2008), and Government Code 76000.3 (S.B. 857, 2008) totaling $12.50. SECTION 4. The Council finds that the adoption of this resolution does not meet the definition of a project under Public Resources Code Section 21065, thus, no environmental assessment under the California Environmental Quality Act is required. SECTION 5. This resolution shall become effective on the date that Ordinance No. becomes effective. INTRODUCED AND PASSED: AYES: NOES: ABSTENTIONS: ABSENT: ATTEST: City Clerk Assistant City Attorney APPROVED: Mayor City Manager Director of Public Works Director of Administrative Services 11 0011_20240104_mv30 Item 13: Staff Report Pg. 41 Packet Pg. 405 of 553 Item 14 Item 14 Staff Report CITY OF PALO ALTO City Council Staff Report From: City Manager Report Type: ACTION ITEMS Lead Department: Utilities Meeting Date: January 16, 2024 Staff Report:2303-1213 TITLE Approval of a Substation Improvement Agreement With Tesla Inc. to Install Improvements and Reserve Capacity at Hanover Substation, and Approval of a Fiscal Year 2024 Budget Amendment in the Electric Fund to Establish the Hanover Substation Upgrade Project (EL - 24001); CEQA Status — Exempt under CEQA Guideline Sections 15301 and 15302 RECOMMENDATION Staff recommends that Council: 1. Approve and authorize the City Manager or their designee to execute the Substation Improvement Agreement (SIA) and attached Capacity Reservation Agreement between the City of Palo Alto and Tesla for the design and construction of a substation improvements at the City of Palo Alto's Hanover Substation (Attachment A). 2. Amend the Fiscal Year 2024 Budget Appropriation for the Electric Fund (requires a 2/3 vote) by: a. Establish the Hanover Substation Upgrade Project (EL -24001) in the amount of $15,000,000; and b. Decrease the Electric Fund Operations Reserve by $15,000,000. EXECUTIVE SUMMARY Tesla is moving its engineering headquarters to the former HP Headquarters at 1501 Page Mill Road where it will perform advanced research and development to support the vehicles and products it produces. The City is proposing to rebuild the existing Hanover Substation to replace the existing substation facilities, which are nearing the end of their useful life, and to accommodate Tesla's power needs, via improvements designed and installed by Tesla. To best meet the needs of Tesla and the City, a public private partnership is being proposed and will be implemented through a Substation Improvement Agreement (SIA), including an associated Encroachment Permit, and Capacity Reservation Agreement. Item 14: Staff Report Pg. 1 Packet Pg. 406 of 553 Item 14 Item 14 Staff Report The maximum cost of the Hanover Substation project is estimated to be $24,000,000 with the cost being shared equally, subject to specified exceptions in the SIA (for an estimated $12,000,000 by each party). To facilitate the transfer of existing feeders not serving Tesla to the new transformers being installed and cover the costs of City inspections, the City will fund an additional $3,000,000. The total initial cost to the City for this project is $15,000,000. It should be noted that Tesla paid all costs to expedite materials needed for this project and the expediting fees have been excluded from the $24,000,000 total cost of the project. At the end of construction, all assets meeting City requirements as specified in the SIA will become City property. The assets to be transferred to City ownership and control will be general use assets that can be used to serve other City customers. Tesla will reserve capacity in exchange for additional demand -based charges as outlined in the Capacity Reservation Agreement, which is attached to the SIA. Tesla will receive monthly credits upon completion of the facilities for up to 7 years, based on Tesla's projected energy usage. Total credits will be no more than the estimated $12,000,000 to be invested by Tesla. BACKGROUND Tesla announced its engineering headquarters to 1501 Page Mill —formerly known as HP headquarters. It plans to install computers and charging facilities to support research into the electric vehicles it produces. The existing transformers at Hanover Substation, closest to the Tesla site, require upgrades to meet Tesla's anticipated needs and to continue to serve the City's other customers in the area. Tesla has indicated that it would like to be operational at the Page Mill site by the Spring of 2024. The City's Electric Utility staff have also determined that the existing HV 20 and HV 21 transformers at Hanover Substation need replacement. These transformers are undersized relative to the needs of customers in the Stanford Business Park, require a higher -than -normal level of maintenance, and are nearing or past their useful lives of 50 years. ANALYSIS The project proposes to install two 12 kV 50 MVA transformers to replace two 4kV transformers that served 1501 Page Mill Road and make all substation improvements necessary to accommodate the installations. Generally, three to four years are spent on a substation upgrade. However, Tesla is requesting to finish all construction at the substation and energize their new building by April 2024. The City cannot meet this timeline under normal City processes due to insufficient staffing to coordinate the design and construction of all facilities and the time required to complete the City public procurement process. To meet the proposed installation timeline the use of a public private partnership' executed through a Substation Improvement Agreement (SIA) is recommended. 1 Public Private Partnership Policy https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes- reports/reports/city-manager-reports-cmrs/attachments/new-folder/public-private-partnership-policy.pdf Item 14: Staff Report Pg. 2 Packet Pg. 407 of 553 Item 14 Item 14 Staff Report Pursuant to the SIA, Tesla will design, procure, install, and commission two-50MVA transformers, three 60Kv substation breakers, a Power Distribution Center (12kV Switchgear), two 12 kV feeders, and will reroute 12 kV feeders from existing transformers to the new transformers. These upgrades will serve Tesla, accommodate customers in the Stanford Research Park, replace outdated infrastructure, and modernize and reorganize the substation for greater efficiency. The design will be subject to CPAU approval and compliance with CPAU standards. The SIA has been structured to provide infrastructure for the capacity needed by Tesla, replace City equipment at the end of its useful life, and limit the financial risk to the City and the electric rate payers. Since the work being done at Hanover Substation is a joint project with benefits for both parties the initial costs for the project have been split equally, subject to limited exceptions in the SIA. The total cost for the project is estimated to be $27,000,000, not including any expediting fees. Costs for the work inside the substation (approximately $24,000,000) will initially be split in half with each party providing approximately $12,000,000. The City will fund another $3,000,000 of improvements (separately from the SIA) to move feeder connections not related to service for Tesla from substation banks being retired to the new transformers in the Hanover Substation and to fund engineering review and inspection services that will occur prior to and during construction of the project. Tesla will be responsible for all additional costs associated with expediting of materials and services that resulted from the accelerated schedule it has proposed. Tesla is providing the initial funding, design, and construction services for the improvements inside the substation, subject to partial City reimbursement. At the completion of the substation construction, the City will evaluate the installed systems for compliance with City -approved plans, specifications, and other requirements and providing the design and installation complies with the terms of the SIA, the City will accept the facilities. After acceptance, the actual costs for the project will be determined and the portion of the substation that was built solely for City distribution system use, (e.g., not related to the 1501 Page Mill Road project) will be reimbursed to Tesla. The City will reserve up to 11,200 kVA of capacity to serve Tesla's facilities, in exchange for Tesla's payment of a monthly Capacity Reservation Fee calculated based on Tesla's monthly demand. The Monthly Capacity Reservation Fee is designed to compensate the City for reserving system capacity for Tesla's future use and corresponds to the operation and maintenance costs of the facilities providing the capacity. It applies only if Tesla's monthly demand falls below the levels specified in the Capacity Reservation Fee. Upon completion of the facilities, Tesla will receive a Monthly Capacity Usage Credit for up to 7 years based on Tesla's projected energy usage and ramp up rate. Total credits will be capped at $12,000,000 and to protect the City against cost overruns, project costs subject to reimbursement under the SIA are limited to $12,000,000, subject only to any mutual agreement to amend the SIA. The Monthly Capacity Usage Credit is intended to reimburse Tesla for its financial contribution to general use facilities, i.e., that portion that is not already reimbursed by the City under the terms of the SIA, while reducing the risk of Item 14: Staff Report Pg. 3 Packet Pg. 408 of 553 Item 14 Item 14 Staff Report the City investing in assets that end up being underutilized. This credit is based on the expected revenue from energy sales to Tesla over the term of the agreement. The calculations for these payments and credits are outlined the Capacity Reservation Agreement (Exhibit D). Due to the timeline for completion of this project the engineering design and the procurement of long -lead time materials have already been completed by Tesla, acting at its own risk. The City supplied specifications for the materials to be ordered and was consulted on the acceptability of the engineering design firm being used to prepare the plans. Since the award of the design contract, the City has been reviewing design drawings and materials to ensure that they comply with the City specifications and standards. Tesla has proceeded knowing that reimbursement for expenses from the City is contingent upon the completion of the SIA. City staff also reviewed the construction bids for this project. Tesla received four bids for the construction of Hanover Substation and selected the lowest bid. Staff reviewed references for the selected contractor and agreed that the contractor had sufficient experience to construct the substation improvements. FISCAL IMPACT To fund this project a new Capital Improvement Project, EL -24001 (Hanover Substation Upgrade) has been created. Staff recommends increasing the Fiscal Year 2024 Electric Fund CIP and establishing EL -24001 in the amount of $15,000,000 to fund the $12,000,000 contribution for the City's half of the substation rebuild and $3,000,000 for the rearrangement of the distribution feeders and city costs for engineering review and inspection services and decreasing the Electric Fund Operating Reserve by $15,000,000. The Electric Fund Distribution and Supply reserves has a balance of $38.5 million. The Electric Fund reserves will continue to stay within the minimum and maximum reserve guidelines after the transfer. Staffing for the engineering review and inspection services will be provided by internal staff and outside consultants that are under contract. The expected total cost of these services is $400,000 and will be funded from the $3,000,000 funding being allocated to this project for City work on the site. RESOURCE IMPACT The approval of this agreement is consistent with existing City policies governing Public -Private Partnerships, and the Council approved 2018 Utilities Strategic Plan — Strategic Objectives, Priority 4 — Strategy 1 "Establish a proactive infrastructure replacement program, based on planned replacement before failure to support reliability and resiliency". Facing an evolving utility business environment, aging infrastructure needs, and sustainability objectives, CPAU must maintain a competitive position in the market. Remaining financially sustainable and competitive in the market while optimizing our resources is key to maintaining and enhancing our value of City of Palo businesses and customers. Item 14: Staff Report Pg. 4 Packet Pg. 409 of 553 Item 14 Item 14 Staff Report STAKEHOLDER ENGAGEMENT This project is located in an existing substation on Stanford lands. City staff has had discussions with Stanford informing them of the intention to upgrade Hanover Substation. Stanford indicated that they were supportive of this project to provide service to a lessee on their property. A City Encroachment Permit, which attaches and incorporates the Stanford lease terms, granting Tesla, its employees, and contractors a revocable privilege to enter and use the substation property during construction is attached as Exhibit B to the Substation Improvement Agreement. ENVIRONMENTAL REVIEW This project is categorically exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines 15301 (repair, maintenance, of existing facilities) and 15302 (replacement or reconstruction of existing facilities). ATTACHMENTS Attachment A: Tesla Substation Agreement APPROVED BY: Dean Batchelor, Director Utilities Staff: Tomm Marshall, Assistance Director of Electric Utilities Item 14: Staff Report Pg. 5 Packet Pg. 410 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement SUBSTATION IMPROVEMENT AGREEMENT BETWEEN CITY OF PALO ALTO AND TESLA, INC. FOR THE HANOVER SUBSTATION Dated January 16, 2024 I Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 6 Packet Pg. 411 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement TABLE OF CONTENTS Recitals................................................................................................................................3 Agreement 1. Definitions and Purposes..............................................................................................4 2. Party Representatives and Relations.............................................................................7 3. Term.............................................................................................................................8 4. Site Access...................................................................................................................9 5. Project Funding...........................................................................................................10 6. Design Development...................................................................................................12 7. Conditions for Commencement of Project Construction...............................................14 8. Project Construction....................................................................................................17 9. Insurance....................................................................................................................23 10. Indemnity; Limitations on Liability................................................................................24 11. Assignment.................................................................................................................25 12. Force Majeure.............................................................................................................26 13. Project Records..........................................................................................................27 14. Default........................................................................................................................28 15. Notices........................................................................................................................30 16. Dispute Resolution......................................................................................................31 17. Miscellaneous Provisions............................................................................................32 Exhibit A Project Description Exhibit B Encroachment Permit Exhibit C Project Budget Exhibit D Capacity Reservation Agreement Exhibit E Project Schedule Exhibit F Insurance Requirements (Tesla) Exhibit G Insurance Requirements (Engineer) Exhibit H Insurance Requirements (General Contractor) Exhibit I Construction Contract Form 2 Item 14: Staff Report Pg. 7 Improvement Agreement 6056799 Hanover Substation Packet Pg. 412 of 553 Docusign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement SUBSTATION IMPROVEMENT AGREEMENT BETWEEN THE CITY OF PALO ALTO AND TESLA, INC. FOR THE HANOVER SUBSTATION This Substation Improvement Agreement ("Agreement") is dated and effective as of January 16, 2024 (the "Effective Date"), and is made and entered into by and between the City of Palo Alto, a California chartered municipal corporation ("City"), and Tesla, Inc., a corporation organized under the laws of the State of Delaware ("Testa") (individually, a "Party" and, collectively, the "Parties"), in reference to the following facts and circumstances: A. The City owns and operates a municipal electrical utility operated by a division of the City known as City of Palo Alto Utilities ("CPAU"), which provides electricity to residential and commercial customers within the utility's service area. B. The City owns and CPAU operates the Hanover Street Substation ("Substation"), an electrical distribution substation located at 3350 Hanover Street, Palo Alto, California 94304. C. The Substation is located on property that the City has leased from the Board of Trustees of the Leland Stanford Junior University since 1957 (the "Leased Premises"), subject to the terms of the 1957 Lease Agreement and subsequent amendments thereto ("Lease"). D. The purpose of the Agreement is to establish a public -private partnership between the City and Tesla to expedite the installation of additional capacity on the CPAU's distribution network for the expansion of Tesla's electrical load at Tesla's facilities at 1501 Page Mill Road, Palo Alto, California 94304 (the "Tesla Facility") E. The Parties seek to jointly effectuate the design, installation and funding of a project to expand load capacity at the Substation to provide up to 30 MVA of capacity for the Tesla Facility pursuant to the terms of a separate Capacity Reservation Agreement between the Parties, which may include reserved capacity for other Tesla facilities served by the Substation ("Capacity Reservation Agreement"), and to expand the Substation, including switch gear improvements, for future use by the CPAU (collectively, the "Project"). F. The Parties have agreed to fund the Project through their respective contributions, as set forth in this Agreement. G. The Parties have agreed that Tesla will take the lead in design and construction of the Project subject to the terms of this Agreement and in consideration for the terms of the Capacity Reservation Agreement. 3 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 8 Packet Pg. 413 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement IN CONSIDERATION OF the foregoing and the following covenants, terms and conditions, the Parties agree: •► _►BII UJ1 s 1.1 Recitals Incorporated. The foregoing Recitals are expressly incorporated into this Agreement. 1.2 Definitions. The following terms used in this Agreement, including the Recitals, have the meanings set forth in this Section 1.2: "Agreement" means this Agreement. "Capacity Reservation Agreement" means the agreement to be entered into by the Parties, in substantially the form attached as Exhibit D (Capacity Reservation Agreement). "City" means the City of Palo Alto, a California chartered municipal corporation, acting by and through its City Council. "City Agents" means individuals or entities acting within their capacity as duly authorized agents of the City for the Project or for the Substation. "City Reimbursement" means the City's obligation to reimburse Tesla for Project costs as further specified in Section 5 and Exhibit C (Project Budget), the amount of which may be subject to adjustment as further specified in Section 5 and as expressly provided elsewhere in the Agreement. "City Improvements" means that portion of the Project intended to expand the Substation capacity for future City use, but excluding the Tesla Improvements, as further described in Exhibit A (Project Description). "City Representative" has the meaning set forth in Section 2.2. "Claims" means any claim, action, suit, proceedings, demand, investigation, assessment or liability of whatsoever kind or character made or brought by any third party. "Construction Contract" means the contract between Tesla and the General Contractor for construction of the Project in accordance with the Construction Documents, as further specified in Section 7.4. 4 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 9 Packet Pg. 414 of 553 Docusign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement "Construction Cost" means the amount to be paid to the General Contractor to construct the Project based on the Construction Contract price. "Construction Documents" means the final Design Development Documents developed pursuant to Section 6, which have been approved by the City for construction of the Project and for which the City has issued a building permit, including any post -approval modifications pursuant to duly authorized change orders pursuant to this Agreement. "Construction Period" means the period beginning from the commencement by the General Contractor of construction activities at the Site in accordance with the terms of the Construction Contract, and concluding upon the Project Acceptance Date. "CPAU" means the City of Palo Alto's Utilities division. "CPAU Rules and Regulations" means the rules and regulations relating to utility service approved and adopted by resolution of the City of Palo Alto City Council pursuant to Chapter 12.20 of the Palo Alto Municipal Code, as may be amended from time to time, and accessible online via the City's website. "Day" means a calendar day, unless a "business day" is specified; for the purposes of this Agreement, "business day" excludes any "Regular Holiday" or "Other Special Day" referred to in PAMC Section 2.08.100 or any Friday that is considered a "9/80" day, when the City does not require employees, electing to work nine business days in a ten -business -days biweekly period, to work on such days. "Design Development Documents" means the plans and specifications for the Project which are developed pursuant to Section 6 and prepared by the Engineer to become the Construction Documents upon mutual approval of the final design. "Effective Date" means the date set forth in the preamble to this Agreement. "Encroachment Permit" means the Encroachment Permit required pursuant to Section 4.1, in the form attached as Exhibit B (Encroachment Permit). "Engineer" means either (i) the engineering firm identified in Section 6.2.A, or (ii) one or more Tesla employees who are fully licensed and qualified to design the Project. "Force Majeure Event" has the meaning provided in Section 12.1. 5 Item 14: Staff Report Pg. 10 Improvement Agreement 6056799 Hanover Substation Packet Pg. 415 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement "General Contractor" means New River Electrical Corporation, being a duly licensed and qualified general contractor, or any replacement general contractor retained by Tesla and approved by the City pursuant to Section 7.4.A. "Governmental Authority" means any national, regional or local government, any political subdivision thereof, or any governmental, quasi -governmental, regulatory, judicial or administrative agency, authority, commission, board or similar entity having jurisdiction over the performance of the Project, the Substation Improvements, the Substation or their operations, or the Site or otherwise over any Party, including any applicable independent system operator or regional transmission organization, the Federal Energy Regulatory Commission, and the North American Electric Reliability Corporation. "Laws" means all applicable local, state, and federal laws, regulations, rules, codes, ordinances, permits, orders, and the like enacted or imposed by or under the auspices of any Governmental Authority with jurisdiction over the Project, including labor, health and safety requirements, the PAMC, and the CPAU Rules and Regulations. "Lease" has the meaning set forth in Recital C. "Leased Premises" has the meaning set forth in Recital C. "PAMC" means the Palo Alto Municipal Code. "Project" has the same meaning provided in Recital B, as further described and depicted in Exhibit A (Project Description), and includes both the City Improvements and the Tesla Improvements. "Project Acceptance Date" means the date on which the City accepts the Project according to City procedure. "Project Budget" means the budget that the Parties have agreed upon for design and construction of the Project pursuant to this Agreement based on estimated costs as of the Effective Date, including funds expended for Project - related expenses before the Effective Date, as further detailed in Exhibit C (Project Budget), which may be updated by mutual agreement of the Parties. "Project Schedule" means the most current schedule for completing the Project as set forth in Exhibit E (Project Schedule), which may be updated by mutual agreement of the Parties. "Retention" has the meaning provided in Section 5.3 of this Agreement. Item 14: Staff Report Pg. 11 Improvement Agreement 6056799 Hanover Substation Packet Pg. 416 of 553 Docusign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement "Site" means the physical location for construction of the Project, as further described and depicted in the Encroachment Permit. "Substation Improvements" means, collectively, all of the physical improvements to and in connection with the Substation pursuant to the Project, Including the City Improvements and the Tesla Improvements. "Term" has the meaning provided in Section 3 of this Agreement. "Tesla" means Tesla, Inc., a corporation organized under the laws of the State of Delaware. "Tesla Facility" has the meaning set forth in Recital D to this Agreement. "Tesla's Agents" means individuals or entities acting within their capacity as duly authorized agents of Tesla to provide services for the design or construction of the Project, which includes Tesla's employees, its Engineer and the General Contractor and its subcontractors. "Tesla's Contribution" means Tesla's funding obligation for design and construction of the Project, subject to offset by the City Reimbursement as further specified in Section 5 and Exhibit C (Project Budget), the amount of which may be subject to adjustment as further specified in Section 7 and as expressly provided elsewhere in the Agreement. "Tesla Improvements" means that portion of the Project that includes design and installation of two 50 MVA transformers, two 60 kV circuit breakers, a power distribution center, bus switches, buswork, wiring, feeder outlets, and feeders to Tesla's switchgear at the Tesla Facility, but excluding the City Improvements, as further described in Exhibit A (Project Description). "Tesla Representative" has the meaning set forth in Section 2.3. 1.3 Purposes of Agreement. The purposes of this Agreement are to design and construct the Project as set forth in Recitals D and E, above, consistent with the Project Description attached hereto as Exhibit A (Project Description) and incorporated herein. The Substation Improvements are intended to provide 30 MVA of capacity during normal operation of the City's electric system. 2.1 Communication and Coordination. In order to facilitate prompt communications and coordination between the Parties, each Party has designated a single point of contact with authority to make high level decisions and to coordinate approvals by each Party as needed for efficient design and construction of the Project. 7 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 12 Packet Pg. 417 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement 2.2 City Representative. The City Representative is the individual authorized by the City to serve as the primary point of contact for routine communications with Tesla concerning the Project. The City's Representative will not have independent authority to accept, reject, direct, or stop work on the Project; to modify the approved design; or to approve change order requests on behalf of the City. The City Representative has the right, but not the obligation to attend the pre -construction conference and weekly progress meetings, and may be present at the Substation during construction of the Project, subject to compliance with generally applicable health and safety requirements. The City Representative for the Project is Tomm Marshall, and contact information for the City Representative will be provided to Tesla within 10 days after the Effective Date. City reserves the right to replace the City Representative with another qualified individual upon written notice to the Tesla Representative, which will include contact information for the new City Representative. 2.3 Tesla Representative. Tesla's authorized representative for administration and implementation of this Agreement, including coordination and direct communications with the Construction Liaison Team, is Andy Kim, and contact information for the Tesla Representative will be provided to the City within 3 days after the Effective Date. Tesla reserves the right to replace the Tesla Representative with another qualified individual upon written notice to the City Representative, which will include contact information for the new Tesla Representative. 2.4 Monthly Meetings and Weekly Reports to City. Designated representatives of each Party will meet monthly following the Effective Date, to ensure timely and effective communications on Project progress, including updates on design development, construction, schedule, budget, and other construction -related issues, such as changes in design, changed conditions, inspection, testing, and similar matters. In addition, Tesla will submit a weekly written report, sent by email to the City Representative, summarizing the progress made during the preceding week, providing schedule and budget updates, and identifying any significant issues or concerns relating to its performance relative to the Project. Unless this Agreement is terminated pursuant to Section 14, the Term of this Agreement will begin upon the Effective Date and will remain in effect until each of the following has occurred: 3.1 The Project has been completed, including all obligations set forth in Sections 8.11, 8.12, 8.13, and 8.14; 3.2 City has accepted the Project; and Item 14: Staff Report Pg. 13 Improvement Agreement 6056799 Hanover Substation Packet Pg. 418 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement 3.3 City has paid the full amount of City Reimbursement, including any Retention, if any, pursuant to Section 5.3. For the avoidance of doubt, the City Representative and the Tesla Representative will confirm in writing the date upon which each of the actions identified in Sections 3.1 through 3.3 have been completed for purposes of establishing the effective date of the Capacity Reservation Agreement. Notwithstanding the foregoing, the following provisions will survive termination of the Agreement or expiration of the Term: Section 10 (Indemnity; Limitations on Liability), Section 13 (Project Records), Section 15 (Notices), and Section 16 (Dispute Resolution). 4. SITE ACCESS. The Tesla Agents will have reasonable access to the Substation for design and construction of the Project pursuant to an Encroachment Permit, as set forth below. 4.1 Encroachment Permit. Prior to commencement of the Construction Period, Tesla will obtain an Encroachment Permit from the City, in conformance with the applicable requirements of the PAMC and this Agreement and pursuant to terms and conditions of the Encroachment Permit form attached hereto as Exhibit B (Encroachment Permit) and incorporated herein. No other right, title or interest, including, but not limited to, any estate, ownership, leasehold, easement or other property interest, in the Site is granted or intended to be granted by the City to Tesla by this Agreement except as may be specified in the Encroachment Permit. The City will not take any action to revoke the Encroachment Permit, or take any action to compel Tesla or the General Contractor to vacate the Leased Premises or remove property there from, unless and until the Encroachment Permit is revoked as specified in Section 7 of the Encroachment Permit. In the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Encroachment Permit, the terms of this Agreement will take precedence. 4.2 City Access. Subject to compliance at all times with applicable Laws and the Site safety requirements agreed by the Parties for the Construction Period, the City Representative and City Agents, including City inspectors will have unrestricted access to the Site during construction of the Project in order to perform their duties subject to generally applicable health and safety rules for the Site. Nothing in this Agreement will be construed to limit the City's right to enforce contractual requirements or Laws protecting workers, the environment, or public or worker health, safety and welfare. 4.3 Coordination and Site Security. In order to avoid conflicts between the ongoing operations of the Substation and activities for the Project and to ensure Site security, before commencing work on the Project, the City Representative and Tesla Representative, or their respective authorized delegees, will meet with the General Contractor to identify which portion(s) of the "Permit Area" (as defined in the Encroachment Permit) will be designated for access and for other specified Project -related activities, and to establish mutually acceptable protocols for shared use of the single access gate for the Site. The areas designated for specified Project -related activities may be adjusted during the Project, if needed, to avoid interference with the operations, maintenance, or repair of the Substation. 9 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 14 Packet Pg. 419 of 553 Docusign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement These area designations and any adjustments thereto will be memorialized in writing by City and provided to the Tesla Representative for delivery to the General Contractor. The City Representative will also inform the Tesla Representative and the General Contractor of the currently applicable security requirements for the Site. Tesla will be solely responsible for ensuring that the General Contractor and its subcontractors are contractually obligated to comply with the terms of the Encroachment Permit, including use of the Permit Area as designated pursuant to this paragraph, and compliance with all security requirements for the Substation. 5.1 Project Budget. The Project Budget is attached hereto as Exhibit C (Project Budget) and incorporated herein. The Project Budget is subject to further amendment by mutual agreement of the Parties following the conclusion of the design development process in Section 6, prior to commencement of construction pursuant to Section 7, and, as applicable, based on change orders pursuant to Section 8. 5.2 Allocation of Project Costs. Tesla will be responsible for funding design and construction of the Project in accordance with the Construction Documents developed pursuant to Section 6 (collectively, the "Tesla Contribution"), including procurement of equipment and materials, subject to partial reimbursement from the City for certain items as set forth below: A. Tesla Costs. The Tesla Contribution includes 100% of the costs for the following items, with no contribution from the City Reimbursement: 1. Purchase, installation and connection of two 12 kV feeders which will be used to serve the Tesla Facilities; 2. Feeders and on -site switches installation needed to serve the Tesla 30 MVA load; 3. Costs that Tesla elected to pay to expedite delivery of equipment for the Project before the Effective Date; 4. Costs for generally required permits, including the building permit for the Project; 5. Costs to accelerate Project completion after construction has commenced if such acceleration is requested by Tesla for Tesla's convenience, including labor overtime costs and additional Project overhead costs, e.g., additional inspection costs related to the accelerated construction schedule. 10 Item 14: Staff Report Pg. 15 Improvement Agreement 6056799 Hanover Substation Packet Pg. 420 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement In addition, Tesla will reimburse the City for 50% of the premium paid by the City for course of construction or builder's risk coverage pursuant to Section 9.3 ("COC Reimbursement"). The COC Reimbursement will be deducted from the City Reimbursement at the time of payment of the City Reimbursement pursuant to Section 5.3. B. City Costs. The City will reimburse Tesla for 100% of the costs associated with the installation of substructure (conduit, vaults, pads, etc.) which are required solely for City Improvements outside of the Substation. C. Shared Costs. Subject to a cumulative total cap of on the City's payment obligations under this Agreement as set forth in Exhibit C, in addition to the substructure costs in Section 5.2(B), the City will reimburse Tesla for 50% of the costs for the following, except for costs which are solely Tesla's responsibility, as stated in Section 5.1.A, above, or elsewhere in this Agreement (collectively, the "City Reimbursement"): 1. Grading and structural site improvements necessary for the new Substation improvements; 2. Design and installation of the two 50 MVA transformers, three 60 kV circuit breakers, a power distribution center, and related bus switches, buswork, wiring and feeder outlets; 3. Purchase, installation, and connection of two 60 kV transformer bank circuit breakers; 4. Purchase, installation, and connection of a 60 kV bus tie breaker; 5. Purchase, installation and connection of two 50 MVA, 60 to 12 kV transformers; 6. Purchase, installation and connection of a 12 kV distribution load center; and 7. Testing and commissioning of all equipment and components, minus 8. the COC Reimbursement. D. Change Order Costs. Each Party will be responsible for additional costs due to any approved additive change order, which is approved and issued in accordance with the change order approval terms in Section 8.7, below, consistent with the cost allocation provisions set forth in subsections A -C, inclusive, above; except that if (i) costs for a betterment change is sought by only one Party after the 11 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 16 Packet Pg. 421 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement Construction Documents have been approved, or (ii) additional costs are incurred under the Construction Contract which are the responsibility of that Party as specified in this Agreement, that Party will be solely responsible for the added costs of such corresponding change order. Likewise, if the cost of the Construction Contract is reduced due to a deductive change order, which is approved and issued in accordance with the change order approval terms in Section 8.7 below, the City reimbursement obligations will be adjusted consistent with the cost allocation provisions set forth in subsections A -C, inclusive, above. 5.3 City Reimbursement. The Parties will update Exhibit C (Project Budget) to include the Construction Cost for the Project after Tesla has selected the General Contractor to construct the Project, and subject to mutual agreement will update the cap on the City Reimbursement. The City Reimbursement will be paid to Tesla within 60 days following City's acceptance of the Project as specified in Section 8, with the exception of an amount equal to 50% of the amount retained by Tesla under the Construction Contract pending the achievement of "Final Completion" under and as defined in the Construction Contract (the "Retention"), which may be retained by the City until 30 days after all of the following have occurred: (i) final as -built and record drawings have been submitted pursuant to Section 8.11, (ii) final versions of equipment maintenance and operating manuals have been submitted pursuant to Section 8.12.A.3, (iii) all punch list items have been completed in accordance with the requirements of the Construction Contract pursuant to Section 8.12.A.5, (iv) the Contractor certification is received in accordance with Section 8.12.A.6, and (v) Site clearance and restoration is completed in accordance with Section 8.12.A.7. 5.4 Modification for Lack of Funds. The City Reimbursement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the PAMC, including PAMC Section 2.30.260, pertaining to contracts with terms exceeding one year. If the amount appropriated for the City Reimbursement at the time this Agreement is approved by the City Council, the Agreement will be modified to exclude or reduce the City Reimbursement only under the following circumstances: at the end of any fiscal year, if any additional funds are needed for the City Reimbursement due to unforeseen cost increases, but those additional funds are not appropriated for the following fiscal year; or at any time within a fiscal year if funds are only appropriated for a portion of the fiscal year and funds for the City Reimbursement are no longer available. Notwithstanding the foregoing, if additional funds needed for the City Reimbursement obligation are not timely appropriated, the Parties will meet and confer regarding potential adjustments to the Capacity Usage Credit under and as defined in the Capacity Reservation Agreement to offset any shortfall caused thereby. This provision will take precedence in the event of a conflict with any other covenant, term or condition of this Agreement. 6.1 Responsibility. Tesla is responsible for creating the Design Development Documents, including the final Construction Documents for construction of the Project, consistent with the Project description in this Agreement, including Exhibit A. The final 12 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 17 Packet Pg. 422 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement Construction Documents are subject to City approval to ensure compliance with the standards set forth in this Section 6. 6.2 Demon Professional. All Design Development Documents for the Project will be signed by a qualified, registered, professional engineer, licensed in California, and with relevant substation design experience. City has the right to approve any other third -party engineer or engineering firm retained under contract with Tesla to serve as Engineer for the Project, including design development before construction and design consultation during construction. Tesla will work with and direct its Engineer, in consultation with City staff, to develop the Design Development Documents in order to complete the Project within the limits of the Project Budget, as set forth in Exhibit C. A. Approved Engineer. The City hereby approves of Power Engineers, Inc., as the Engineer for the Project. If, for any reason, Tesla wish to substitute a different firm to serve as Engineer for the Project, the substitution will be subject to the City's prior written approval of the proposed firm. Tesla will require the Engineer to provide and maintain insurance coverage, including professional liability insurance, that meets the City's standard requirements for design professional insurance as further specified in Section 9, below. 6.3 Com lin ance. The Project will be designed and constructed in compliance with Laws, and in compliance with the most current version of the City Public Works Department's Standard Drawings and Specifications; the City Utility Department's Water, Gas, Wastewater, and Electric Utilities Standards, including City standard substation design layouts; current California General Safety Orders; and the current applicable National Electric Safety Code. 6.4 Design Development. The City will review and approve all Design Development Documents for conformance with City specifications and standards, including compliance with City -approved equipment specifications provided to Tesla for procurement of equipment to be incorporated into the Project. Tesla will seek the City's approval of the final Design Development Documents, coordinating submittals and responses with the City Representative. The City's Representative will promptly coordinate the City's internal review of the Design Development Documents among all of the City departments that will have responsibilities pertaining to the operation or maintenance of the Substation. The City may provide written comments and directions to Tesla and its Engineer to apply to design development. The Engineer will consider the City's comments and directions and if applicable will provide an updated estimate of the construction cost for the revised design for the Project. The Design Development Documents will include contractor submittal requirements for submittals that will be subject to City approval during the Construction Period, comparable to those submittal requirements required by the City's current standards and specifications, including shop drawings, purchase submittals, e.g., cut sheets, and the like, to ensure that the Project and its components, including, but not limited to the components listed in Exhibit A (Project Description) conform to the City -approved design for the Project. The process for review and approval of the Design Development Documents is as follows: 13 Item 14: Staff Report Pg. 18 Improvement Agreement 6056799 Hanover Substation Packet Pg. 423 of 553 Docusign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement A. Design Development Documents Review. 1. The final Design Development Documents will be submitted to CPAU for City review and comment. 2. The City may either approve the Design Development Documents or may provide comments for further revisions necessary for the City's approval, in which case Tesla will resubmit the Design Development Documents with revisions as directed by the City's comments. 3. The City's Representative will promptly notify the Tesla Representative in writing once the City has approved the Design Development Documents. B. Cooperation. The City will provide reasonable staff support and other assistance to Tesla without charge, upon reasonable request, in connection with review and development of the Design Development Documents and submittal reviews, including cost estimate updates. City staff support may include program expertise, design suggestions or recommendations, and information, including information on City standards and City requirements and procedures. C. Materials and Equipment Procurement. All material and equipment to be incorporated into the Substation as part of the Project are to be approved as part of the City approval of the Design Development Documents. Any subsequent changes to the materials and equipment shall require approval by the City prior to installation. The following items are subject to prior factory inspection and approval by the City as a condition precedent to delivery to the Site: The transformers; and 2. The power distribution center. D. Errors and Omissions. Notwithstanding the City's assistance or the City's approvals of the Design Development Documents in accordance with this Agreement, the City will not be liable in any way for the Engineer's errors and omissions, nor any costs arising to correct such errors and omissions. 6.5 Budget Update. Subject to mutual agreement, the Parties may elect to update the Project Budget set forth in Exhibit C, including the estimated cost to construct the Project, upon conclusion of the design development process set forth in this Section 6. 1.111 [.1 R17.]:ZdI.]JiIJiI[44II LII :Z.a1x44LID] I0:ZUf.0[n]LI 7.1 Conditions Precedent to Construction. Tesla will not permit construction to begin on the Project, and will not be obligated to commence construction of the Project, until 14 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 19 Packet Pg. 424 of 553 Docusign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement all of the conditions precedent to construction set forth in this Section 7 have been satisfied or waived. A. Notification. Tesla's Representative will notify the City Representative in writing when all of the conditions precedent to construction set forth in this Section have been satisfied or waived. Within 14 days thereafter, the City Representative will either (1) confirm that all of the conditions have been satisfied or waived, or (2) identify which conditions have not yet been satisfied or waived. B. Commencement. Tesla will cause construction to commence on the Project within 90 days following notification from the City Representative that all conditions precedent to Construction have been satisfied or waived. The Parties may mutually agree to extend this time if necessary due to provisions outside the control of the Parties, including adverse weather or site conditions or a Force Majeure Event. C. Deadline. If all of the conditions precedent to commencement of construction set forth in this Section 7 are not satisfied or waived by the commencement deadline in 7.1.B, unless the Parties mutually agree to extend the deadline for satisfying any such outstanding condition, this Agreement will terminate without further liability to either Party and neither Party shall have any further rights or obligations under this Agreement. 7.2 Design Development Documents. Approval of the final Design Development Documents by each Party is a condition precedent to the commencement of Project construction. 7.3 Permits and Authorizations. As a condition precedent to commencement of construction, Tesla will provide written proof to the City that all necessary permits and approvals from any and all agencies having jurisdiction over the Project, including the City, have been authorized, including, as applicable, building permits, street opening permits, encroachment permit, utility encroachment permits, and health permits. Subject to compliance by Tesla with applicable permitting requirements, the City will provide reasonable support to Tesla in connection with the timely granting of any permits or approvals necessary for the Project and which are issued by the City or any of its agencies or departments. 7.4 Construction Contract. As a condition precedent to commencement of construction, Tesla will provide written proof to the City that Tesla has entered into the Construction Contract with a General Contractor that is reasonably acceptable to the City, based on the form of agreement attached as Exhibit I, Construction Contract Form, as meeting the requirements in this Section 7.4, and that the General Contractor has submitted all bonds and proof of insurance required by the Construction Contract as specified below. A. General Contractor. Tesla's selection of any replacement General Contractor shall be subject to prior approval by the City, which shall not unreasonably delayed or withheld provided the proposed contractor (1) possesses the requisite 15 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 20 Packet Pg. 425 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement California contractor's license(s), and (2) is a "responsible bidder" as that term is defined PAMC section 2.30.440(c). B. Construction Contract. The Construction Contract between Tesla and its General Contractor will include the following: 1. General Compliance. The Construction Contract will require that General Contractor and its subcontractors will not take any action or fail to take any action which would cause Tesla to be in default under this Agreement or the Encroachment Permit, including, but not limited to, compliance with requirements pertaining to Site security. 2. Compliance with Construction Documents. The Construction Contract will require the General Contractor to construct the Project as specified in the approved Construction Documents, which must be attached or incorporated therein, and in accordance with all applicable permits and authorizations. The Construction Contract must also include a traffic management plan, consistent with the City's current traffic control requirements, that has been approved by the City. 3. Payment and Performance Bonds. The Construction Contract will require the General Contractor to submit a payment and a performance bond prior to commencement of construction and to remain in effect throughout the Construction Period, each for 100% of the Construction Cost, using bond forms provided or approved by the City and in compliance with Laws, including Civil Code section 9550 and PAMC section 2.30.500. 4. Insurance. The Construction Contract will require the General Contractor to maintain insurance coverage throughout the Construction Period as specified in Section 9, below. 5. As -Built Drawings. The Construction Contract will require the General Contractor to prepare and maintain as -built drawings showing any changes from or details not shown in the Construction Documents, suitable for preparation of record drawings. 6. Legal Compliance. The Construction Contract will require the General Contractor and its subcontractors to construct the Project in compliance with applicable Laws, including prevailing wage and Labor Code requirements and any conditions of approval required to be obtained from any Governmental Authority, to the extent any such Laws or conditions of approval are applicable to the General Contractor's performance under the Construction Contract. 16 Item 14: Staff Report Pg. 21 Improvement Agreement 6056799 Hanover Substation Packet Pg. 426 of 553 Docusign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement 7. Warranty. The Construction Contract will require a one-year warranty guaranteeing the work performed by the General Contractor and its subcontractors, consistent with the City's requirements in its standard specifications, with the warranty period commencing on the Project Acceptance Date. 7.5 Condition Related to Project Costs. As a condition precedent to commencement of Project construction, the Parties will further revise the Project Budget, if needed, based on the cost of the Construction Contract, and subject to mutual agreement of the Parties. 7.6 Capacity Reservation Agreement. As a condition precedent to commencement of Project construction, the Parties will execute the Capacity Reservation Agreement based substantially on the form attached as Exhibit D (Capacity Reservation Agreement). 8.1 Responsibility. Tesla will be responsible for construction of the Project and for directing its General Contractor to complete the Project within the Project Schedule, as set forth below. 8.2 Project Schedule. The Project will be completed within three years following commencement of construction (provided that such period shall be extended to account for any Force Majeure Event delaying completion of the Project, and/or any additional time granted pursuant to a change order under the Construction Contract which has been approved or deemed approved by the City). Unless the time for completion is extended by mutual agreement of the Parties. The Parties' planned schedule for design and construction of the Project is set forth in the Project Schedule, attached as Exhibit E (Project Schedule) hereto. The Project Schedule will be refined by Tesla to reflect the as -planned construction schedule, within ten days following issuance of the building permit(s). Each Party will exercise its reasonable efforts to perform its respective obligations in a reasonably timely manner to complete the Project within the time set forth in the Project Schedule. Notwithstanding the foregoing, the Project Schedule may be amended at any time based on mutual agreement of the Parties. 8.3 General Standards. Construction of the Project will be executed so as to materially conform to the requirements of the approved Construction Documents, including the workmanship standards contained therein. The General Contractor and its subcontractors must be licensed in good standing as required by the State of California before performing any work on the Project. A. Inspection. The Project will be subject to inspection during the Construction Period in the same manner as any substation improvement project 17 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 22 Packet Pg. 427 of 553 Docusign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement constructed under the City's jurisdiction in the City's role as a Governmental Authority responsible for compliance with applicable permit(s) and Laws. No construction may be performed at the Site without a City inspector onsite. The City shall be liable for reasonable, documented costs incurred under the Construction Documents in respect of delays in the performance by Tesla or the General Contractor which is caused by the failure by or delay in such City inspector(s) to attend construction activities at the Site, when required during normal hours for Project construction and following reasonable notice for work to be performed outside of those hours, with the exception of failure or delay due to a Force Majeure Event for which relief is granted under the Construction Documents. At all times during the Construction Period, one or more City inspectors may be onsite to monitor and review construction of the Project to ensure compliance with the Construction Documents, the building permit, and applicable Laws. City inspection services will be scheduled based on the Project Schedule and approved working hours for the Project. B. Special Inspections. Tesla will notify the City Representative in advance of any special inspection needs so that the City has the opportunity to have a qualified inspector available on a timely basis. C. Submittals and Substitutions. The City reserves the right to review and approve any submittal or substitution request relating to the Project components listed in Exhibit A (Project Description). D. Remedies. Subject to Section 8.7, the City will not bear the cost for unapproved deviations from the approved Construction Documents that negatively impact the City's future operation of or the future capacity of the Substation. Remedies for installation of Substation Improvements that do not comply with the approved Construction Documents may include one or more of the following, at the City's election: 1. Removal and reinstallation of the deviating or defectively installed component; 2. Modifications to mitigate the deviation from the Construction Documents; or 3. Adjustment to the City Reimbursement obligation commensurate with the City's estimated cost to remedy the deviation, negative impacts on the City's future operational costs, or negative impacts on the Substation capacity. 8.4 Project Commencement. The General Contractor will be required to commence construction of the Project in accordance with the Construction Documents within I Item 14: Staff Report Pg. 23 Improvement Agreement 6056799 Hanover Substation Packet Pg. 428 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement 90 days after the City has confirmed, pursuant to Section 7.1, that all of the conditions precedent to construction of the Project have been satisfied or waived. A. Pre -Construction Conference. The Parties will schedule a pre - construction conference to take place before any work begins on the Site the General Contractor's designated project manager and superintendent(s); the Engineer; the designated inspector(s); and any other individuals whom the Parties mutually agree should be in attendance. The pre -construction conference will address relevant Project objectives and constraints, including communication protocols to ensure efficient and effective communications throughout the construction process; safety requirements; environmental considerations; scheduling; submittals; change order procedures; substitution procedures; the City -approved traffic control plan; noise management; City's Site security requirements; parking; and compliance with the Encroachment Permit, including area designations established pursuant to Section 4.3. B. Weekly Meetings. In addition, Tesla will schedule weekly meetings for the duration of the Construction Period, which will be attended by the General Contractor, the Engineer, and other individuals whose participation is important to help ensure efficient construction of the Project consistent with the Construction Documents, the Encroachment Permit, and the terms of this Agreement. The City Representative and City officials with direct responsibility for the Project have the right, but not the obligation, to attend these weekly meetings. C. Agendas and Minutes. Tesla will be responsible for preparing and distributing agendas and minutes for the pre -construction conference and the weekly meeting to all meeting participants with copies to the City Representative. 8.6 Prevailing Wages. Work on the Project will constitute a "public works" project as defined under Labor Code section 1720 set seq. A. Prevailing Wage Requirements. All contractors and subcontractors performing work on the Project are required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and Labor Code Section 1773.1. Before entering into the Construction Contract to perform work on the Project and at all times while performing work on the Project, the General Contractor and its subcontractors must be registered with the California Department of Industrial Relations ("DIR") to perform public work under Labor Code Section 1725.5. Pursuant to Labor Code Section 1773, the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of worker needed to perform the work may be obtained at the Purchasing Office of the City of Palo Alto. All contractors and subcontractors for the Project must comply with the provisions of Labor Code 19 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 24 Packet Pg. 429 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement Sections 1775, 1776, 1777.5, 1810, and 1813. The General Contractor must also comply with the provisions of Labor Code sections 1776 and 1812 and all implementing regulations, which are fully incorporated by this reference, including requirements for electronic submission of payroll records. The Construction Contract will be subject to compliance monitoring and enforcement by the DIR, pursuant to Labor Code section 1771.4. B. Construction Contract. The Construction Contract must include the prevailing wage requirements set forth above, or as otherwise required by Labor Code provisions currently in effect when the Construction Contract is executed. 8.7 Change Orders. Any proposed changes to the City -approved Construction Documents are subject to prior mutual agreement between the Parties, except as set forth herein. Any change orders proposed by the City will be subject to prior approval by Tesla and subject to the City's commitment to pay for any increased cost resulting from its proposed change order. Tesla may authorize change orders to the Construction Contract without prior approval from the City, except under any of the following circumstances, each of which requires prior written approval by the City Representative: A. Cost Impact. The City's share of the additional cost for a proposed change or its share of the costs for cumulative changes would increase the total of the City Reimbursement obligations by more than $50,000.00. B Scope Alteration. The proposed change would materially alter the Project scope or purposes of this Agreement, including, but not limited to adverse impacts on normal operations and use of the Substation, including the City's planned expansion of the Substation capacity. C. Adverse Impacts. The proposed change would significantly reduce the quality, functionality, or life -expectancy of the improvements or constituent components. D. Maintenance Impacts. The proposed change would materially increase the City's costs to operate, repair, or maintain the improvements or constituent components of the Substation. E. Conflict. The proposed change would conflict with or be inconsistent with the provisions or objectives of this Agreement. F. Governmental Approval. The proposed change would require new or amended approval by a Governmental Authority, including amendments to any permit(s). Provided that in no event shall the City have approval rights for change orders providing time or cost relief to the General Contractor in accordance with the Construction Documents 20 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 25 Packet Pg. 430 of 553 Docusign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement where the General Contractor has an entitlement to relief (and Tesla does not have discretion in terms of relief awarded) for (i) Force Majeure Events or changes in Laws after the effective date of the Construction Contract, or (ii) delays to performance under the Construction Documents which are not caused by the General Contractor or its subcontractors. Tesla shall keep the City informed as to the relief determinations respect of such change orders, and shall consult the City and use its reasonable efforts to minimize the relief granted to the General Contractor in respect of item (ii) above. 8.8 Site Maintenance. During the Construction Period, Tesla and Tesla's Agents, at their sole cost, will maintain the Site and the Project in a commercially reasonable, clean and safe manner and in compliance with the Agreement, the Encroachment Permit and Laws. Tesla or Tesla's Agents will provide approved containers for trash and garbage generated at the Site and arrange for their disposal. The City reserves the right, to enter and inspect the Site for compliance with this maintenance requirement and applicable safety requirements. Tesla's Site maintenance obligations will terminate upon City's acceptance of the Project. 8.9 Utility Service. Tesla will be responsible for timely payment of all utility services required for the Project during the Construction Period, pursuant to applicable City and utility provider requirements, including electric, water, wastewater and garbage services, and fiber, and timely payment of all applicable utility connection charges, required to perform and complete the Project. 8.10 [Not Used] 8.11 Record Drawings. Upon completion of the Project, the Engineer will prepare the record drawings based on the General Contractor's as -built drawings and provide the City Representative with a complete set of electronic AutoCAD drawings of the Design Documents, and one PDF of a red -lined set (i.e., not electronic AutoCAD drawings) reflecting the actual construction of the Project based on the Contractor's as -built drawings. Submission of provisional copies of such complete and accurate record drawings and the as -built drawings is a condition precedent to City acceptance of the Project, with final versions of such record drawings and as-builts to be submitted within ninety (90) days of acceptance. 8.12 Completion and Acceptance. Tesla will use reasonable efforts to achieve completion of the Project within three (3) years of the commencement of construction (provided that such period shall be extended to account for any Force Majeure Event delaying completion of the Project, and/or any additional time granted pursuant to a change order under the Construction Contract which has been approved or deemed approved by the City). A. Conditions for Acceptance. Once the Project has been completed in accordance with the Construction Documents, the Construction Contract, and the terms of this Agreement, the City will accept the Project as complete in accordance with standard City procedure, and will notify the Tesla of acceptance of the Project, subject to Tesla's satisfaction of each of the following conditions 1 to 4 below for City 21 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 26 Packet Pg. 431 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement acceptance (except to the extent that one or more of these conditions precedent to acceptance is expressly waived by the City, in whole or in part): 1. Project Completion. Substantial Completion of the Project is achieved pursuant to the Construction Documents and approved change orders. 2. As -Built and Record Drawings. City receipt of provisional as- builts and the record drawings pursuant to Section 8.11. 3. Manuals. City receipt of provisional equipment maintenance and operating manuals for the Substation Improvements. 4. Inspection. The City Representative has been provided with written confirmation that the Project has passed inspection for permit and code compliance. 5. Punch List Completion. Completion of all punch list items in accordance with the requirements of the Construction Contract, unless the City agrees to accept the Project subject to exceptions for any specified incomplete punch list item. 6. Contractor Certification. City receipt of the General Contractor's signed certification that all subcontractors and suppliers have been paid and that there are no pending claims (including stop payment noticed or payment bond claims) against the General Contractor in relation to the Project. 7. Site Restoration. Tesla has caused all trash and garbage to be removed from the Site and those portions of the Site that have not been modified in connection with the Substation Improvements in accordance with the requirements of the Construction Documents have been restored to their pre -construction condition. 8. Warranty. Tesla has caused warranty rights and guarantees to be assigned (by direct or collateral assignment) or otherwise transferred to the City in accordance with Section 8.13. For the avoidance of doubt, Tesla shall be obligated to complete all of the conditions 1-8 above, with conditions 4 to 8 to be completed (and the final as -built drawings and operation and maintenance manuals delivered to the City) as soon as reasonably possible following acceptance by the City. 22 Item 14: Staff Report Pg. 27 Improvement Agreement 6056799 Hanover Substation Packet Pg. 432 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement B. Notice of Completion. Following acceptance, the City will record a notice of completion pursuant to Civil Code section 9204, within 15 days following the City's acceptance of the Project. 8.13 Transfer Following Acceptance. Tesla covenants that the Project will transfer to the City free and clear of all liens, claims (including stop payment or payment bond claims), or liability for labor or materials upon acceptance of the Project by the City on the Project Acceptance Date, so that the City is the sole owner of all of the Substation Improvements. Subject to payment in full by the City of its reimbursement obligations under Section 5 of this Agreement, Tesla will execute a deed or other document reasonably acceptable to the City quitclaiming any and all right, title and interest in and to the Substation Improvements installed pursuant to the Project, effective as of the Project Acceptance Date. Tesla will assign any remaining third -party warranties and workmanship guarantees in the Construction Contract, including the General Contractor's minimum warranty therein, to the City effective as of the Project Acceptance Date. If City terminates this Agreement for Tesla's default, Tesla will assign to City all third -party product warranties applicable to materials and equipment installed prior to termination, in each case to the extent such warranties are capable of being assigned. 8.14 Operation and Maintenance of the Substation Improvements. Following the Project Acceptance Date, the City shall be responsible for the maintenance and operation of the Substation Improvements and all other equipment located within the Leased Premises and all other cables and connections up to the point of service to Tesla. The City will bear all risk of loss associated with the Substation (including the Site) and Substation Improvements up to the Point of Delivery to Tesla (as defined in Rule and Regulation 2 of the CPAU Rules and Regulations) from and after the Project Acceptance Date. 8.15 Capacity Reservation Agreement. The Capacity Reservation Agreement will become effective in accordance with its terms. A. Tesla will insure its obligations under this Agreement as specified in Exhibit F, Insurance Requirements (Testa), either by (i) maintaining in effect with responsible insurance carriers with a Best Insurance Reports rating of "A-" or better or (ii) through a formal self-insurance mechanism that has both: (a) a Best Insurance Reports rating of "A-" or better; or (b) a financial size category of "VI" or higher; provided, that if such self-insurance program does not meet (a) and (b), then 23 Item 14: Staff Report Pg. 28 Improvement Agreement 6056799 Hanover Substation Packet Pg. 433 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement the Party's use of self-insurance for the coverages herein shall be subject to the City's approval, not to be unreasonably withheld, conditioned, or delayed. B. Tesla must require its Engineer to obtain and maintain during the Term the insurance coverage described in Exhibit G, Insurance Requirements (Engineer). C. Tesla must require the General Contractor to obtain prior to beginning and to maintain throughout construction of the Project, up to the date of Project acceptance, the insurance coverage described in Exhibit H, Insurance Requirements (General Contractor). 9.2 General Requirements. The insurance must remain in full force and effect during the Term, commencing on the Effective Date, except as otherwise specified for the General Contractor in Section 9.1, above. 9.3 COC Policy. City may obtain course of construction or builder's risk coverage ("COC Insurance") for the Construction Period, covering the Site and the Project pursuant to this Section 9.3 and the terms of Section 5.3. The terms of such COC Insurance shall be subject to the reasonable advance approval of Tesla. Tesla and the General Contractor shall be named additional loss payees under the COC Insurance. The City will provide Tesla with a copy of the COC Insurance, together with a copy of the paid premium invoice, promptly following issuance of the policy. For any insured loss covered by the COC Insurance, the deductibles shall be borne equally by the Parties. 10.1 Index To the fullest extent permitted by law, Tesla will protect, defend, indemnify and hold harmless the City, its elected and appointed officials, officers, employees, City Agents and representatives, from any and all Claims for death of or injury to persons, property damage or any other loss, to the extent caused by or arising out of the negligent acts or omissions, or willful misconduct, of Tesla, Tesla's Agents (individually or collectively), its employees, officers, agents, engineers, contractors or design professionals, in the performance of or failure to perform Tesla's obligations under this Agreement. A. Notice. The City will give the Tesla prompt notice of any Claim for which indemnification is sought under this Section 10. Failure to give prompt notice will not diminish the Tesla's obligations under this Section 10 to the extent such failure does not materially prejudice the Tesla's ability to defend the Claim. B. Defense. Tesla shall control the defense of the Claim, and the City may participate in the defense at its own expense with legal representation of its choice. If 24 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 29 Packet Pg. 434 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement the Claim is one that cannot by its nature be defended solely by Tesla, then the City will make available information and assistance as Tesla may reasonably request, at Tesla's expense. C. Consent. Tesla may not, without the prior written consent of the City, consent to the entry of any judgment or enter into any settlement: that provides for injunctive or other non -monetary relief affecting the City; and 2. unless such judgment or settlement provides for an unconditional and full release of the City and does not diminish any rights of the City under this Agreement or result in additional fees or charges to the City. D. Remedies. If Tesla fails to take reasonable steps to defend the City against a Claim in accordance with this Agreement within a reasonable time after receipt of a request for indemnification, the City may undertake the defense of such Claim without waiving its rights and remedies under this Agreement. E. Limitation. Notwithstanding anything to the contrary, in no event will Tesla be obligated to the City, except on a proportionate basis, to the extent a Claim arises out of or is due to the negligence or willful misconduct of the City, the City's Agents, or its employees, officers, agents, inspectors, engineers or contractors. 10.3 Waiver of Certain Damages. In no event shall either Party be liable to the other Party for any consequential, indirect, incidental, special, exemplary or punitive damages (including without limitation damages incurred by a financing) arising out of or relating to any breach of this Agreement, whether or not the possibility of such damages has been disclosed in advance or could have been reasonably foreseen and regardless of the legal or equitable theory (contract, tort or otherwise) upon which the Claim is based. 10.4 No Individual Liability. The City acknowledges and agrees that the liability of Tesla under this Agreement is limited to the assets of Tesla, and no officer, director, employee, agent or contractor of Tesla or other individual affiliated with Tesla will be responsible or liable for the obligations of Tesla under this Agreement. 11. ASSIGNMENT. 11.1 No Assignment Without Consent. Except as set forth in Section 11.2, neither Party will assign, transfer, encumber or convey this Agreement without the express written approval of the other Party, which such Party may give or withhold in its sole discretion, and any such assignment, transfer or conveyance without the approval of the other Party will be void and, in such event at the other Party's option, this Agreement may be terminated upon thirty (30) days' prior written notice to Party making such assignment, 25 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 30 Packet Pg. 435 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement transfer or conveyance in breach of this provision. All of the terms and conditions of this Agreement will be binding on the assignee or transferee, its assigns, transferees, and successors in interest. 11.2 Collateral Assignment. Tesla may with prior written notice to the City, and with the City's prior written consent, collaterally assign this Agreement as security to, or as part of any factoring arrangement with, any financing party, provided that financing party agrees, in an enforceable written instrument, to be fully bound by Tesla's legal obligations under the terms of this Agreement, but no assignment of this Agreement under this Section 11.2 will release Tesla from its obligations and liabilities under this Agreement. A permitted assignee under this Section 11.2 will be bound by the obligations of this Agreement upon a foreclosure and upon the City's request will deliver a written assumption of assignor's rights and obligations under this Agreement to the City. Any written instrument used to effectuate the terms of this Section 11.2 is subject to prior approval by City, which approval will not be unreasonably withheld or delayed, with respect to conforming with the terms herein. 12. FORCE MAJEURE. A Party will be temporarily excused from the performance or further performance of any of its covenants or agreements or any terms or conditions that it is obligated to fulfill hereunder, and such Party's nonperformance will not be deemed an event of default under this Agreement for any period, to the extent that such Party is reasonably unavoidably prevented, hindered or delayed for any period of time from performing any of its covenants or agreements, in whole or in part, or any term or condition it is required to perform or satisfy, as a result of a Force Majeure Event. The Parties agree to use reasonable efforts to avoid and mitigate the effects caused by the occurrence of the relevant Force Majeure Event. 12.1 Definition. "Force Majeure Event" means any act or circumstance beyond the reasonable control and not attributable to the fault or negligence of the Party seeking relief, including acts of God, epidemic, pandemic, flood, fire, earthquake, climatic conditions at the Site that are unusual for the time of year, explosion, action or inaction of a public authority (including delays caused by permitting authorities) for reasons other than the claiming Party's fault, war, terrorist threats or acts or other civil unrest, piracy, lock -outs, strikes or other labor disputes, restraints or delays affecting carriers, and shall include the inability or delay in obtaining supplies of adequate or suitable materials to the extent caused by a Force Majeure Event. Force Majeure Events include any emergencies declarations by any Governmental Authority requiring shutdown or forced curtailment of the Project or the Substation, or imposing delays or other impacts on a Party's performance (including those arising from shut-in, social distancing or other orders by Governmental Authorities, delays or non -availability of labor or materials, enhanced safety or monitoring requirements, or due to any epidemic or pandemic). However, financial cost alone or as the principal factor shall not constitute grounds for a claim of force majeure. 12.2 Notice. A Party will provide written notice promptly to the other Party to the extent that Party relies on the provisions of this Section to temporarily excuse its failure to 26 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 31 Packet Pg. 436 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement perform any of its covenants or agreements or any duties under this Agreement due to a Force Majeure Event. A. Responsibility for Damage. Tesla will be responsible for any damage to the Site or the Substation Improvements (other than damage expressly contemplated in the performance of the work under the Construction Contract) that arises due to acts or omissions of Tesla, Tesla's Agents or the General Contractor during the Construction Period. Except as expressly set forth in this Agreement, including, but not limited to, the indemnity and insurance requirements set forth herein, the City will be responsible for any other loss or damage to the Site or the Substation Improvements that is not covered by the insurance required under this Agreement. B. Damage Prior to Acceptance. If any part of the Project is damaged by fire, other peril, or any other cause, before the Project has been accepted by the City, Tesla will promptly direct its General Contractor to take appropriate measures to secure the Site to avoid further damage or unsafe conditions. Tesla will make reasonable efforts to complete the Project on schedule, if reasonably possible depending on the scope and nature of the damage. Construction of the Project will be suspended, in whole or in part, only to the extent necessary to ensure worker and public safety or to limit the cost to repair and complete the Project. C. Insurance Claim. Tesla may, at its sole option prepare and submit a claim to its insurer(s) or rely on self-insurance, if applicable, for funds to repair and rebuild all insured loss pursuant to the applicable insurance coverage required under Section 9 and exhibits thereto. Both Parties will cooperate to expedite recovery of insurance proceeds for which Tesla elects to make submit a claim to cover the insured loss. 13.1 Maintenance of Project Records. Tesla will maintain or caused to be maintained by its Engineer, General Contractor and subcontractors, if any, in accordance with their respective standard practices books and records relating directly to design and construction of the Project (excluding for the avoidance of doubt any documents which are subject to confidentiality obligations to third parties, which are subject to attorney -client privilege or which constitute privileged work product) until the earlier of three (3) years from the Project Acceptance Date or any earlier termination of this Agreement. Tesla will retain such books and records at accessible locations during the record retention period. 13.2 Inspection of Records. The City may inspect and copy such books and records upon thirty (30) days' prior written notice from the City at any reasonable time during the above -referenced record retention period. 27 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 32 Packet Pg. 437 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement 13.3 Survival. This Section will survive the termination of this Agreement. 14. A. Remedies for Tesla Default. Except as otherwise provided under this Agreement and subject to the dispute resolution provisions of Section 16, if Tesla defaults in the performance of any covenant, term or condition contained in this Agreement and such default is not corrected within 30 days of receipt of a written notice of default from the City, the City may elect to enforce any of the following rights and remedies: 1. In the case of a material default, such as abandonment of the work; uncorrected or repeated material violation of any Laws; or refusal or repeated, unexcused failure to construct the Project in material conformance with the requirements of the Construction Documents, City may elect to terminate this Agreement upon 30 days prior notice to Tesla. 2. The City may cure any default of Tesla by performance of any act, including payment of money, and the cost and expense thereof, plus all reasonable administrative costs actually incurred by the City in so curing, will become immediately due and payable by Tesla to the City. 3. The City may initiate an action or suit in law or equity to enjoin any acts which may be unlawful or in violation of the rights of the City hereunder. 4. The City may pursue any other right or remedy as may be provided at law or in this Agreement. B. Remedies for City Default. Except as otherwise provided under this Agreement and subject to the dispute resolution provisions of Section 16, if the City defaults in the performance of any covenant, term or condition contained in this Agreement and such default is not corrected within 30 days of receipt of a written notice of default from Tesla, Tesla may elect to enforce any of the following rights and remedies: 1. In the case of a material default, Tesla may elect to terminate this Agreement upon 30 days prior notice to the City. Item 14: Staff Report Pg. 33 Improvement Agreement 6056799 Hanover Substation Packet Pg. 438 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement 2. Subject to the provisions of Section 16.3, Tesla may initiate an action or suit in law or equity to enjoin any acts which may be unlawful or in violation of the rights of Tesla hereunder. 3. Subject to the provisions of Section 16.3, Tesla may pursue any other right or remedy as may be provided at law or in this Agreement. C. Wrongful Stoppage or Suspension of Project. If either Party wrongfully stops or suspends work on the Project, other than as authorized herein or pursuant to the lawful exercise of the City's police powers; actions necessary to operate, maintain, or repair the Substation; or to comply with Laws, that Party will be responsible for all additional costs, reasonably incurred by the other Party to complete the Project as a result of such wrongful stoppage or suspension, provided the Party claiming entitlement to additional costs transmitted a timely notice objecting to the stoppage or suspension, and stating the grounds for such objections, and provided the Parties engage in the dispute resolution procedures in Section 16. As used in this paragraph, "wrongful" and "wrongfully" refer to actions that constitute a material breach of this Agreement but exclude City's reasonable exercise of its police powers in accordance with Laws; actions necessary to operate, maintain, or repair the Substation; or to comply with Laws. D. Additional Time for Cure. Except as otherwise provided in this Agreement, in the event of any material default by either Party that is not cured within 30 days of written notice of default from the aggrieved Party, or such additional period of time as is reasonably necessary to cure the default, not to exceed 60 additional days, the aggrieved Party may pursue any rights or remedies provided by law or equity to enforce the Agreement, subject to prior compliance with the dispute resolution procedures in Section 16. 14.2 Termination. A. Failure to Timely Commence the Project. If Tesla fails to cause construction on the Project to commence within 90 days after City's notification pursuant to Section 7.1 that all conditions precedent to construction have been met or waived, City may terminate this Agreement. If the Agreement is terminated pursuant to this paragraph, each Party will bear its own loss with respect to expenditures it has incurred for design and construction of the Project, and neither Party will be entitled to further contribution from the other Party for such expenditures. B. Termination after Project Commencement. If this Agreement is terminated by either Party after work on the Project has already commenced by delivery of written notice of termination at least thirty (30) days prior to the effective date of the termination, Tesla is responsible for prompt removal of the personal property of Tesla or any Tesla Agents from the Site, including temporary facilities for Project construction, and restoring the Site back to its pre -construction condition, with 29 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 34 Packet Pg. 439 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement the exception of Substation Improvements that have already been fully installed at the Site, or as otherwise specified by the City, no later than thirty (30) days after the notice of the termination, unless a longer period is specified in the notice of termination. City will have the right to dispose of any such personal property that is not timely removed, and the right to recover any costs it incurs to remedy any failure by Tesla to timely remove such personal property and restore the Site. Otherwise, each Party will bear its own loss with respect to expenditures it has incurred for design and construction of the Project, except that: 1. The City will compensate Tesla for Substation Improvements that have been fully installed and incorporated into the Substation, provided those Substation Improvements (a) have been installed in accordance with the Construction Documents to the City's reasonable satisfaction, and (b) function as intended based on specified inspection, testing, or commissioning. 2. With respect to materials or equipment which are on Site, but which have not yet been fully installed or incorporated into the Substation, City will have the right, but not the obligation, to retain such materials or equipment for subsequent installation or incorporation, subject to payment to Tesla of an amount equal to the cost of such materials or equipment retained by the City. The Parties mutually intend that disposition of and compensation for improvements, equipment, or materials upon termination after Project commencement should be fair and equitable in relation to the circumstances, and should not result in any unfair enrichment nor an unfair burden to pay for improvements, equipment, or materials that offer little or no benefit without a completed Project. 14.3 Enforcement. The remedies given to the Parties hereunder, or by any Laws now or hereafter enacted, are cumulative and the exercise of one right or remedy will not impair the right of a Party to exercise any or all other remedies. In case any suit, action or proceeding to enforce any right or exercise any remedy is brought or taken and then discontinued or abandoned, then, and in every such case, the Parties will be restored to their former positions, rights and remedies as if no such suit, action or proceedings had been brought or taken. 15. NOTICES. All notices, requests and approvals by a Party will be given, in writing, and delivered by personal service, the United States Postal Service, express delivery service, or electronic mail transmission, as follows: To City: City of Palo Alto City Clerk P.O. Box 10250 250 Hamilton Avenue Palo Alto, CA 94303 30 Item 14: Staff Report Pg. 35 Improvement Agreement 6056799 Hanover Substation Packet Pg. 440 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement With copies to each of: Utilities Department 250 Hamilton Avenue Palo Alto, CA 94303 ATTN: Tomm Marshall To Tesla: Tesla, Inc. 1 Tesla Road Austin, TX 78725 E -Mail: energynotices@tesla.com ATTN: Andy Kim Any notice hereunder will be deemed to have been given upon receipt at the designated address, except that a notification delivered on a weekend, holiday, or other day that the recipient Party is not open for business, will be deemed received on the recipient Party's first business day thereafter. For convenience of the Parties, copies of notices may also be given by email; however, neither Party may give official or binding notice by email. 16. DISPUTE RESOLUTION. Except as expressly provided in this Agreement, good faith compliance with the dispute resolution procedures herein, is a condition precedent to either Party initiating a legal action against the other Party. 16.1 Informal Resolution. If a dispute arises between the Parties from or in connection with this Agreement or any Exhibit hereto (a "Dispute"), the following procedure will govern the resolution of any such Dispute: A. Informal Negotiation. Each Party will nominate a representative to be responsible for engaging in good faith efforts to resolve the Dispute on behalf of that Party for a 14 -day resolution period, beginning with either Party's written notice requesting Dispute resolution pursuant to this provision. Notwithstanding the foregoing, it is understood that under the terms of the PAMC, final authority to approve proposed resolution of a dispute on behalf of the City may be vested in the City Council, in which case the 14 -day resolution period will be extended so that City Council approval may be requested in accordance with standard procedures for such matters. B. Further Negotiations. If the Dispute remains unresolved within the 14 - day period or due to failure to secure City Council approval, as applicable, before either Party initiates mediation under Section 16.2 and 16.3, either Party may refer the Dispute, in writing, for final settlement to Tesla's General Counsel and the City Manager, or designee, who will jointly convene within ten days of receipt of the referral request and use reasonable efforts to consider and resolve the Dispute. The Parties will ensure that their respective representatives confer for a period of 14 days from the date of referral by either Party. Notwithstanding the foregoing, it is 31 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 36 Packet Pg. 441 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement understood that under the terms of the PAMC, final authority to approve proposed resolution of a dispute on behalf of the City may be vested in the City Council, in which case the 14 -day resolution period will be extended so that City Council approval may be requested in accordance with standard procedures for such matters. C. Impasse. If final resolution cannot be achieved, the Parties may follow the procedures described in Sections 16.2 and 16.3. 16.2 Mediation. In the event of an unresolved Dispute between the Parties with respect to this Agreement or the enforcement of rights hereunder, after reaching impasse pursuant to Section 16.1, either Party may, by notice to the other Party (the "Mediation Notice"), require such dispute to be submitted to non -binding mediation in Palo Alto, California, with a single mediator who is mutually acceptable to the Parties. The Parties will use reasonable efforts to cause such mediation to be convened, conducted and completed within a reasonable period of time, from the date of the Mediation Notice, subject to the availability of a mutually acceptable mediator and commensurate availability of the individuals that each Party, respectively, requires to represent it at mediation, including legal counsel, percipient witnesses, expert witnesses, sureties, and individuals authorized to negotiate a settlement. If such mediation does not result in a settlement of the Dispute or if one or more of the Parties does not in good faith participate in such mediation, either Party may pursue other available legal or equitable remedies. The cost of mediation, including the mediator's fee, will be shared equally by the Parties, but each Party is solely responsible for its own legal costs and its own legal representation. 16.3 Remedies for Default. Subject to good faith compliance with the dispute resolution procedures in this Section, nothing contained in this Agreement will prevent or otherwise restrict either Party from pursuing its legal or equitable rights, including injunctive relief and specific performance, in the event of a default by the other Party. Notwithstanding the foregoing, Tesla must comply with the applicable provisions of the Government Claims Act and the PAMC, as a condition precedent to filing any lawsuit or claim relating to this Agreement. 16.4 Limitations. Notwithstanding anything to the contrary set forth herein, prior to any termination of this Agreement and for so long as the City does not default under this Agreement, Tesla will not terminate its construction of the Substation Improvements, unless authority to do so is granted by the City or conferred by a court of competent jurisdiction, or this Agreement has been validly terminated. To the full extent practicable, work on the Project will not be unilaterally suspended, delayed, or stopped by either Party solely because the Parties are engaged in dispute resolution pursuant to this Section 16. 17.1 Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of California. The Parties will comply with all applicable 32 Item 14: Staff Report Pg. 37 Improvement Agreement 6056799 Hanover Substation Packet Pg. 442 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement federal, state and local laws in the exercise of their rights and the performance of their obligations under this Agreement. 17.2 Covenants and Conditions. All provisions of this Agreement, whether covenants or conditions, will be deemed to be both covenants and conditions. 17.3 Entire Agreement; Amendment. This Agreement represents the entire agreement between the Parties and supersedes all prior negotiations, representations and contracts, whether written or oral. This Agreement may be amended by an instrument, in writing, signed by the Parties. This Agreement may be executed in any number of counterparts, each of which will be an original, but all of which together will constitute one and the same instrument. 17.4 Waiver. The waiver by either Party of any breach or violation of any covenant, term, or condition of this Agreement or of the provisions of any permit, approval, ordinance or other City Laws will not be deemed to be a waiver of any such covenant, term, or condition, or of any subsequent breach or violation of the same or any other covenant, term, or condition. The subsequent acceptance by either Party of any consideration which may become due or payable hereunder will not be deemed to be a waiver of any preceding breach or violation by the other Party of any other covenant, term, or condition of this Agreement. No waiver or consent will constitute a continuing waiver or consent. 17.5 Nondiscrimination. The PAMC prohibits discrimination in the employment of any individual under this Agreement because of race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of that person. Tesla acknowledges that it has read and understands the provisions of PAMC Chapter 2.30 relating to nondiscrimination in employment and the penalties for violations thereof, and it agrees to comply with all requirements of PAMC Chapter 2.30 pertaining to nondiscrimination in employment. 17.6 Independent Contractor. In the construction of the Project or other duties imposed upon it by this Agreement, Tesla will act at all times as an independent contractor and not as an employee of the City. Nothing in this Agreement will be construed to establish a partnership, joint venture, group, pool, syndicate or agency between the Parties. No provision contained herein will be construed as authorizing or empowering either Party to assume or create any obligation or responsibility whatsoever, express or implied, on behalf, or in the name of, the other Party in any manner, or to make any representation, warranty or commitment on behalf of the other Party. In no event will either Party be liable for: (1) any loss caused by the other Party in the course of its performance hereunder, except as expressly provided herein; or (2) any debts, obligations or liabilities of the other Party, whether due or to become due. 17.7 Representations and Warranties. On the Effective Date, each Party represents and warrants to the other Party that: (1) it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; (2) to the best of the Party's 33 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 38 Packet Pg. 443 of 553 Docusign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement knowledge, the execution, delivery and performance of this Agreement, the exhibits incorporated herein and the Encroachment Permit are within its powers, have been duly authorized by all necessary action and do not violate any of its governing documents, any contracts to which it is a party or any law, rule, regulation, or order; (3) it has not filed and it is not now contemplating the filing for bankruptcy protection or, to its knowledge, threatened against it which would result in it being or becoming bankrupt; (4) there is not pending or, to its knowledge, threatened against it or any of its affiliates any legal proceedings that could materially adversely affect its ability to perform its obligations under this Agreement and the exhibits incorporated herein; and (5) it is unaware of any events or circumstances, currently existing or likely to arise, that would prevent it from performing its obligations under this Agreement. 17.8 Exhibits; Order of Priority. All exhibits referred to in this Agreement are by such references incorporated in this Agreement and made a part hereof. The following exhibits are made a part of this Agreement: Exhibit A Project Description Exhibit B Encroachment Permit Exhibit C Project Budget Exhibit D Capacity Reservation Agreement Exhibit E Project Schedule Exhibit F Insurance Requirements (Tesla) Exhibit G Insurance Requirements (General Contractor) Exhibit H Insurance Requirements (Engineer) Exhibit I Construction Contract Form A. Order of Precedence. If any inconsistencies between this Agreement and the exhibits exist, the following order of precedence (in declining order of priority) in the interpretation hereof or resolution of such conflict hereunder shall prevail: 1. The body of this Agreement; 2. Exhibit D; 3. Exhibit B; 3. Exhibit A; 3. Exhibit C; 4. Exhibit E; and 5. All other exhibits. 17.9 Organizational Documents. Upon request of the City, Tesla will furnish to the City for its records copies of its articles of incorporation and bylaws and any other information reasonably requested by the City and relating to its organization status. 17.10 Publicity. The Parties acknowledge that the City is subject to California Laws governing charter cites, including public disclosure requirements which include, but are not 34 Improvement Agreement 6056799 Hanover Substation Item 14: Staff Report Pg. 39 Packet Pg. 444 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement limited to, open meeting requirements pursuant to Government Code section 54950 et seq. and public record disclosure requirements pursuant to Government Code section 7920 et seq. Except as required for compliance with applicable Laws, neither Party shall advertise or issue any public announcement regarding the execution of this Agreement or its contents, or use the other Party's mark, name or logo in any marketing literature, web sites, articles, press releases (including interviews with representatives of media organizations of any form), or any other document or electronic communication, without the prior written consent of the other Party. The foregoing shall not prohibit a Party from making any public disclosure or filing that it determines in good faith is required by Laws, including, but not limited to, in respect of Tesla, the rules of the stock exchange on which its shares, or the shares of its parent company, are listed. 17.11 Interpretation. The Parties agree that the normal rule of construction to the effect that any ambiguity is to be resolved against the drafting party will not be employed in the interpretation of this Agreement or any amendment or Exhibit hereto. 17.12 Consent. When either Party is required to give its consent to the other Party, the Party whose consent is required will not unreasonably withhold or delay that consent, unless it is specifically stated that it is within the Party's sole discretion to give or withhold its consent. 17.13 Venue. In the event that an action is brought, the Parties agree that trial of such action will be vested exclusively in the state courts of California or in the United States District Court for the Northern District of California in the County of Santa Clara, State of California. Each Party hereby waives any right it may have pursuant to Code of Civil Procedure Code section 394 to file a motion to transfer any action arising from or relating to this Agreement to a venue outside of Santa Clara County, California, without the prior express written consent of the other Party. 17.14 Attorney's Fees. The prevailing Party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorney's fees expended in connection with that action. 17.15 Severability. If a court of competent jurisdiction finds or rules that any provision of this Agreement, the exhibits, or any amendment thereto, is void or unenforceable, the unaffected provisions of this Agreement, the exhibits, or any amendment thereto, will remain in full force and effect. [Signature page follows.] 35 Item 14: Staff Report Pg. 40 Improvement Agreement 6056799 Hanover Substation Packet Pg. 445 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement IN WITNESS WHEREOF, the Parties by their duly authorized representatives have executed this Agreement on the Effective Date. APPROVED AS TO FORM: Molly Stump, City Attorney APPROVED: Dean Batchelor, Director of Utilities DocuSigned by: TESLA, INC., ,D award corporation cu { a�A to 16AE36ED3Ba7438.,, Vaibhav Taneja, Chief Financial Officer CITY OF PALO ALTO Ed Shikada, City Manager 36 Item 14: Staff Report Pg. 41 Improvement Agreement 6056799 Hanover Substation Packet Pg. 446 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit A to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement EXHIBIT A PROJECT DESCRIPTION The Project will consist of design, construction, installation and/or connection of the following elements at Substation and in the area surrounding Substation: 1. Grading and structural site improvements for the new Substation Improvements; 2. Two 60 kV transformer bank circuit breakers; 3. One 60 kV bus tie breaker; 4. Two 50 MVA, 60 to 12 kV transformers; 5. One 12 kV power distribution center; 6. Two 12 kV feeders to serve the Tesla Facilities. 7. Bus switches, buswork, wiring, and feeder outlets to Tesla's onsite switchgear; and 8. Testing and commissioning of all equipment and components. 1 Item 14: Staff Report Pg. 42 Improvement Agreement 6056799 Hanover Substation Packet Pg. 447 of 553 Exhibit B to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement EXHIBIT B ENCROACHMENT PERMIT 6056799 Hanover Substation Item 14: Staff Report Pg. 43 Packet Pg. 448 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit B to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement This document is recorded for the benefit of the City of Palo Alto and is entitled to be recorded free of charge in accordance with Section 6103 of the Government Code. After recordation, mail to: CITY OF PALO ALTO/REAL ESTATE DIVISION 250 Hamilton Avenue P.O. Box 10250 Palo Alto, CA 94301 SPACE ABOVE THIS LINE FOR RECORDER'S USE CITY OF PALO ALTO ENCROACHMENT PERMIT (# A.P. No.: Permit No.: Project: THIS ENCROACHMENT PERMIT ("Permit") dated as of January 16, 2024, is made by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("City"), and TESLA, INC., a Delaware corporation ("Permittee"), individually, a "Party" and collectively, the "Parties." A. This Permit is required by and issued in conjunction with the Parties' Hanover Substation Improvement Agreement ("Improvement Agreement"), effective January 16, 2024. B. The Improvement Agreement involves improvements to the City's Hanover Substation ("Substation") on certain real property ("Property") which the City has leased from the Board of Trustees for the Leland Stanford Junior University ("Lessor"), pursuant a lease effective on July 1, 1957, and the 1962 amendment thereto ("Stanford Lease", attached hereto as Exhibit B) for the purposes of constructing, maintaining and operating an electric power substation. 6056800 1 Item 14: Staff Report Pg. 44 Packet Pg. 449 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit B to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement C. The Stanford Lease as amended expired on its terms on or about June 30, 2007, the Lease has not been amended to extend the original term, and no rent has ever been due under the Lease besides the City's payment of applicable taxes. Stanford and the City have continued to conduct themselves in their dealings in respect to the Hanover Substation in accord with the amended Lease, notwithstanding the expiration. TERMS AND CONDITIONS City and Permittee agree as follows: 1. Encroachment Permit. City confers to Permittee and the employees, contractors and agents of Permittee ("Permittee's Agents") a revocable (pursuant to Section 7 hereof), non-exclusive and non -possessory privilege to enter upon, use, and encroach into the Property, which is situated in the County of Santa Clara, State of California, and more particularly described in Exhibit A attached hereto (the "Permit Area"), for the limited purpose and subject to the terms, conditions and restrictions set forth below. This Permit gives Permittee a license only and notwithstanding anything to the contrary herein, this Permit does not constitute a grant by City of any ownership, leasehold, easement or other property interest or estate whatsoever in the Permit Area, or any portion thereof. 2. Use of Permit Area. Permittee and Permittee's Agents may enter and use the Permit Area for the sole purpose of the design, construction, installation, and commissioning of the "Substation Improvements" as defined in the Improvement Agreement ( "Substation Improvements") and ingress and egress thereto, and for no other purpose whatsoever. 3. Term of Permit. The privilege conferred to Permittee pursuant to this Permit shall apply for a term ("Term") which will commence on the date on which this Permit is executed and delivered by City, and shall expire upon the earlier of: (a) City acceptance of the "Project" as defined and specified in the Improvement Agreement ("Project"), (b) thirty (30) days written notice from City revoking this Permit pursuant to Section 7 hereof or, (c) ten (10) days written notice of termination from Permittee. 4. Subject to City Uses. Notwithstanding anything to the contrary in this Permit, any and all of Permittee's activities hereunder shall be subject and subordinate at all times to City's existing and future use of the Permit Area for public utility or other public purposes. City shall in no way be liable for any damage or destruction to Permittee's property and/or Improvements resulting from any repair or maintenance activities by City. Permittee shall, at City's request, immediately remove or relocate any personal property of Permittee or Permittee's Agents, including temporary facilities or equipment, on or in the Permit Area to allow City access to the utilities or other City owned facilities. In the event City deems 6056800 2 Item 14: Staff Report Pg. 45 Packet Pg. 450 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit B to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement it necessary, in City's sole discretion, City shall have the right to remove or relocate any such property and City shall not be responsible for restoring or returning same to its prior condition. 5. Responsibility for Maintenance of Improvements. During the Term, and as further specified in the Improvement Agreement, Permittee shall be solely responsible for repairing and maintaining all Substation Improvements placed by Permittee in or on the Permit Area pursuant hereto in good and safe condition prior to the date of the transfer of ownership of the Substation Improvements to the City and the City's acceptance thereof in accordance with the terms of the Improvement Agreement. 6. Covenant to Maintain Permit Area. In connection with its use, Permittee shall at all times during the Term, at its sole cost, maintain the Permit Area in a good, clean, safe, secure, sanitary and sightly condition, so far as the Permit Area may be affected by Permittee's activities under this Permit. 7. Revocability. This Permit is subject to revocation if the Improvement Agreement is terminated pursuant to Section 14 of the Improvement Agreement or if the City is unable to proceed with the Project due to any third party legal action preventing use of the Permit Area for the Project. Revocation of this Permit in accordance with the terms hereof shall be effected by the City sending written notice to Permittee as specified in Sections 3 and 9. If the Permit is revoked after work has commenced on installation of the Substation Improvements pursuant to the Improvement Agreement, the provisions of Section 14.2.B of the Improvement Agreement will apply, including, but not limited to, those provisions addressing removal of personal property, restoration, disposition of materials and equipment, and responsibility for expenditures and loss. 8. Damage. Permittee shall not do anything in, on, under or about the Permit Area that could cause damage or interference to any City utilities or other property located in, on, under or about the Permit Area. As used in this Section 8 and Section 13, below, "damage" expressly excludes alterations to the Permit Area which are authorized by the "Construction Documents" as that term is defined in Section 1.2 of the Improvement Agreement. Permittee agrees to reimburse City for any damage caused by Permittee to City owned property or facilities by virtue of Permittee's construction of Substation Improvements or other activities of Permittee or Permittee's Agents within the Permit Area within thirty (30) calendar days of City's demand. 9. Notice. If any notice given pursuant to this Permit is not personally delivered to Permittee, the notice shall be deemed to be delivered five (5) days after deposit of the notice in a sealed envelope, postage fully prepaid, in a mailing facility regularly maintained by the United States Post Office Department, or the next business day after deposit of the notice with a nationally recognized overnight courier, addressed to as the Party to be notified as follows: 6056800 3 Item 14: Staff Report Pg. 46 Packet Pg. 451 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit B to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement To Permittee: 1 Tesla Road, Austin, TX 78725 Attn: General Counsel / Legal Phone: +1. 512.516.8177 Email: legal@tesla.com; cc : energynotices@tesla.com To City: City of Palo Alto City Clerk 250 Hamilton Avenue Palo Alto, CA 94303 Email: City.Clerk@cityofpaloalto.org cc: tomm.marshall@cityofpaloalto.org cc: amy.bartell@cityofpaloalto.org 10. Compliance with Laws. During the Term, Permittee shall, at its expense, conduct and cause to be conducted its activities on the Permit Area in a safe and reasonable manner and in compliance with all applicable laws of any governmental or other regulatory entity (including, without limitation, the Americans with Disabilities Act) and all covenants, restrictions and provisions of record, whether presently in effect or subsequently adopted and whether or not in the contemplation of the Parties, including any applicable terms of the Stanford Lease, attached hereto as Exhibit B, including the original 1957 lease agreement and the 1962 amendment. 11. Removal of Property. Without limiting City's rights under this Permit, if during the Term, Permittee or Permittee's Agents fail to comply with the terms of this Permit or the Improvement Agreement with respect to placement or storage of personal property on the Property, including materials, tools, or equipment, Permittee shall promptly, at City's written request, remove or relocate at its sole expense any and all such personal property of Permittee or Permittee's Agents, including temporary facilities or equipment, installed or placed in, on, under or about the Property by Permittee or Permittee's Agents (excluding, however, the Substation Improvements, which shall not be altered, removed and/or relocated except as otherwise may be permitted under the Improvement Agreement), under any of the following circumstances: (a) as may be necessary to avoid any actual or reasonably likely interference with the Substation or any of City's utilities or other structures now or later constructed or with the maintenance thereof; (b) to avoid or remedy any potential violation of the Stanford Lease; or 6056800 4 Item 14: Staff Report Pg. 47 Packet Pg. 452 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit B to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement (c) to avoid unauthorized interference with any other operations or land uses by City. In the request, City shall specify reasonable time limits for removal or relocation of the property. If after such written notice Permittee fails to complete the removal or relocation within the prescribed time limits, City shall notify Permittee of same and have the right to perform the requested removal or relocation and charge Permittee all reasonable, direct and documented out of pocket costs and expenses (excluding overhead and salaries for the City's personnel) incurred by City in performing the work. Undisputed portions of such amount shall be due and payable within thirty (30) days after the City's demand therefor. In the event of an emergency, City may, at its sole option and without notice, remove, relocate, or protect at Permittee's sole expense, any and all property installed or placed in, on, under or about the Property by Permittee (excluding, however, the Substation Improvements, which shall not be altered, removed and/or relocated except as otherwise may be permitted under the Improvement Agreement). 12. Surrender. Upon the expiration of the Term, Permittee shall immediately surrender the Permit Area, including the Substation Improvements located thereon, broom cleaned, and free from hazards created by Permittee or Permittee's Agents and clear of all of Permittee's debris. At such time, Permittee shall remove all of its personal property and equipment from the Permit Area, and shall repair, at its cost, any damage to the Permit Area caused by such removal, reasonable wear and tear excepted. Permittee's obligations under this Section shall survive any termination of this Permit. 13. Repair of Damage. If any portion of the Permit Area or any property of City located on or about the Permit Area is damaged or threatened by any of the activities conducted by Permittee or Permittee's Agents, in a manner not contemplated nor authorized under the terms of the Improvement Agreement or Construction Documents, Permittee shall, at its sole cost, immediately notify City in writing of such damage or threat after becoming aware of same. City may remedy, but shall not be obligated to remedy, such damage or threat at Permittee's sole cost, based on the City's reasonable, direct and documented out of pocket costs, but excluding regular salary and benefit costs for salaried City employees. In the event City elects not to remedy such damage or threat, Permittee shall repair any and all such damage and restore the Permit Area or property to its previous condition subject to City's inspection, review and approval (excluding, however, the Substation Improvements, which shall remain in the Permit Area and not be subject to alteration, removal and/or relocation except as may otherwise be provided under the Improvement Agreement). 14. Defaults by Permittee. Permittee's failure to perform any of its obligations under this Permit, or Permittee's default in the performance of any of its other obligations under this Permit, will be governed by the terms in Section 14 of the Improvement Agreement 6056800 5 Item 14: Staff Report Pg. 48 Packet Pg. 453 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit B to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement pertaining to default and cure. Permittee's obligations under this Section shall survive the expiration or termination of this Permit. 15. Indemnity; Limitations on Liability. The respective indemnification obligations of the City and Permittee during the Term shall be as set forth under the terms of the Improvement Agreement, such obligations to survive the expiration or other termination of the Permit. 16. Insurance Requirements. During the term of this Permit, Permittee, and each of its contractors and agents which enter onto the Property to carry out permitted activities, shall each maintain in full force and effect the insurance coverage specified in Section 9 of the Improvement Agreement and corresponding Exhibits thereto. 17. Assignment. This Permit is personal to Permittee and Permittee shall not assign, transfer, or encumber its interest in this Permit and/or the Substation Improvements, except as authorized in Section 11 of the Improvement Agreement. 18. General Provisions. (a) This Permit may be amended or modified only by a writing signed by City and Permittee. (b) This instrument (including the exhibit(s) hereto) contains the entire agreement between the parties and all prior written or oral negotiations, discussions, understandings and agreements are merged herein. (c) If Permittee consists of more than one person then the obligations of each person shall be joint and several. (d) Permittee may not record this Permit or any memorandum hereof without the prior consent of City. (e) City will promptly notify Permittee of any action or steps by Lessor that may affect the rights granted pursuant to this Permit, whereupon City and Permittee will meet and confer to consider available options with reference to the purpose of the Improvement Agreement. [SIGNATURES APPEAR ON FOLLOWING PAGE] 6056800 6 Item 14: Staff Report Pg. 49 Packet Pg. 454 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit B to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement The Parties agree to the foregoing as witnessed by the following signatures: "OWNER" CITY OF PALO ALTO City Manager APPROVED AS TO FORM: Asst. City Attorney APPROVED AS TO CONTENT: Director of Utilities "PERMITTEE" TESLA, INC. DocuSigned by: A a fia a 16E3fiED3887438,. By: Vaibhav Taneja Chief Financial Officer 1 Tesla Road Austin, TX 78725 1.512.516.8177 Attachments: EXHIBIT "A": DESCRIPTION OF PERMIT AREA EXHIBIT "B": STANFORD LEASE 6056800 7 Item 14: Staff Report Pg. 50 Packet Pg. 455 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement EXHIBITA DESCRIPTION OF PERMIT AREA The Permit Area is located at 3350 Hanover Street, Palo Alto, California, 94304, shown on the map below, and is coextensive with the leased premises as described in Exhibit B. 6056800 8 Item 14: Staff Report Pg. 51 Packet Pg. 456 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement EXHIBIT B STANFORD LEASE 6056800 Item 14: Staff Report Pg. 52 Packet Pg. 457 of 553 Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement LEASE THIS LEASE, made and entered into as of the 1st day. of July, 1957, by and between THE BOARD OF TRUSTEES OF 1'i:E LELAND STANFORD JUNIOR UNIVERSITY, a body having corporate powers under the laws o^ the State of California:. Fa.rt-y of the First. Part, hereinafter re <_>d to as "Less:: " ,n �.;�:1 1 OF PALO ALTO, a murti c-t.pal coi-poration orgar2 zed ar,d exts t.-Lng under the laws of the State f c;._t.; :`ornia. Party c* T; -.e So oral Part, hereinafter rer_-rred to -.s the 'Lessee," W I T N E S S E T H:: WHEREAS, Lessor is the owner of the here_na:`ter described property located In the County of Santa Clara., State of California, which Lessee is desirou8 of ii; NOW, THEREFORE. '- t: ' mutually agreed by r, rt between the parties as follows-. 1. Description of Property and Term. For and in cons deration of the faithful per •• formance by the Lessee of the terms, covenants, agreements and conditions herein contained on the part of the .Less+ -,e to be kept and performed, Lessor hereby leases unto the Lessee and the Lessee does hereby hire from Lessor that certain parcel of land being a portion of the lands of The •Leland Stanford Junior University,• located within the bona -:cartes o: the County of Santa Clara, State of California. and more particularly described as follows: 1. Item 14: Staff Report Pg. 53 Packet Pg. 458 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement BEGINNING at, a Concrete Highway Monument si-u. to or: the southwesterly line of El Camino Real (S*rtte riighway) opposite Engineer's Station 1'4+27,.00. as surveyed by the California Division of Highways, as so.Ld southwesterly line was established by that Decree in Condem.nat•ion, a certified copy of which Decree was filed .for record in the office of the Recorder of the County of Santa Gi.fir•a. State of California, on July 7, 1930, in Books 52.E o.t' • Official Records at Page 571; said monument also marks the point • of intersection of said southwestt•rlr Line with the southeasterly line of that certain 1?b9 acre tract of land described to the deed from Ear, tvr C. Crosby, et al, to L,eld Stanford, d ed `t pterribcr 8, -, 1885, recorded S�- >r..cmb� .r 8 , 1885 in 1aock 80 of Deeds �►J at Page 382, Sant. CI.a:•a County Records • uri: lx,?; td along said line of is th:it� •^ert;ain 1289 acre tract and .i is Jth',s 4trV nrolongar-ion, South 33`" 14' -FC:" Ws' 14'�.�21.1U. feat; .:1'.t; -g said prolongation, 'e - :h _0 •� " 13' west o52,. 7 .feet to a point on the �onor;:naves cer-1y line �\ of 4arover Street; THENCE South 33r t4 't0" West along the northwesterly :1.ine of Hanover St,t,eet 163, 8 feet to \' the true point of beg�tnning of the parcel to be described; THENCE from, said true point of beginning„ continuing along said northwesterly line of Hanover Street(60 feet wide), South 33° 14' 40�' West 190.00 feet; THENCE leaving said line, North 56°, 45' 20" West 160.00 feet.; THENCE North 33t' 14' 40" East 190.00 feet; THENCE South 56° 45' 20" East 160.00 feet to the true point of beginning, and containing 0.698 acres more or less. TOGET1- R with an easement 3 feet in, width, m.easur�'d at right angles for the purpose of installing and maintaining power lines and appurtenances contiguous with and lying southwesterly from the southwesterly line of the hereinabove described parcel. The term of this lease shall be fifty (50) years, commencing on the 1st day of July, 1957, and ending on the 31st day of June, 2007. 2. Payment of Taxes. As a part of the consideration of this lease and as rent hereunder, Lessee covenants and agrees to bear, pay and discharge promptly as the same become due and before delinquency all taxes, assessments, rates, charges, license fees, levies, excises or imposts, whether general or special, or ordinary or extraordinary, of every name, nature and kind whatsoever which may be levied, assessed, charged or imposed or may be or become 0 Item 14: Staff Report Pg. 54 Packet Pg. 459 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement a lien or charge upon the property hereby leased or any part thereof or upon any of the buildings or improvements upon the leased premises or upon the leasehold of Lessee or upon the estate hereby created or upon Lessor by reason of its owner- ship of the ic`e underlying this lease, during the term of this lease. 3. Use. The herein described premises are leased to Lessee for the purpose of constructing, maintaining and operating there-• on an electric power sub --station together with all structures and appurtenances necessary and incidental thereto.. Lessee may at any time during the term hereof remove said electric power sub- station and use the leased premises for any other municipal purpose which is in harmony with existing land use irs the Stanford Industrial. Park. In such event Lessee shall first. give thirty (30) days written notice to Lessor•, and shall further comply with the provision of paragraph k, hereafter set forth, relating to the construction of improvements. 4. Construction of Improvements. Lessee shall submit to Lessor the general plans and specifications for development of the leased premises, including all buildings, structures, appurtenances and landscaping incidental thereto, prior to commencement of any construction on or altera- tion or landscaping of the leased premises, and Lessor shall have thirty (30) days thereafter within which to notify Lessee in writ- ing that it disapproves said plans and specifications becsuse the proposed exterior construction or alteration or landscaping Is not deemed appropriate for the leased premises in design or construction and, if such notice is so given, Lessee shall not proceed with 3. Item14: Staff Report Pg. 55 Packet Pg. 460 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI -FFBFA1 7D269E Item 14 Attachment A -Tesla Substation Agreement construction or landscaping until the objection of Lessor is. remedied, but, unless such notice of disapproval is so given, or if Lessor gives its earlier approval in writing of said plans and specifications, Lessee may proceed with construction• or landscaping. Lessor agrees that it will not unreasonably withhold its approval hereunder. 5. Repairs, Governmental Regulations Waste,, Signs. (a) Lessee shall, during the term of this lease, at its own cost and expense, and without cost or expense to Lessor, (1) Keep and maintain all .structures and improvements which may be erected on the leased premises ari all appurtenances thereto and all landscaped areas or the premises in good and neat order and repair and in substant:lal con- formity with said plans and specifications and shall allow no nuisances to exist or to be maintained thereon. Lessor shall not be called upon to make any repairs, replacements or renewals of any kind to the demised premises and Lessee hereby expressly waives all right to make repairs at the expense of Lessor under Sections 1941 and 1942 of the California Civil Code_ (ii) Comply and abide.. by all federal, state, county, municipal and other governmental statutes, ordinances, laws and regulations affecting the leased premises, the improvements thereon or any activity or condition on or in said premises. (b) Lessee shall not commit, or suffer to be committed any waste upon the leased premises. Lessee agrees •1 I 4. Item 14: Staff Report Pg. 56 Packet Pg. 461 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement that it will not remove any dirt, earth, rocks, gravel or the like from the premises except upon the written instruction of the Lessor as to where the same may be deposited at Lessee's expnse, and Lessor agrees that it will make available a site where same may be deposited within 1 mile of the leased premises. (c) Lessee agrees not to place any sign upon the leased premises without having first obtained the consent in writing of Lessor. 6. Mechanics' and Other Liens. Lessee covenants and agrees to keep all of the leased premises and every part thereof and all buildings and other im- provements thereon free and clear of. and from any and all mechanics', materialmen's and other liens for work or labor done, services performed, materials or appliances contributed, used or f'urr_ihcd to be used in or about said premises for or in connection with any operations of Lessee, any alteration, improvement or repairs or additions which Lessee may make or permit or cause to be made, or any work or construction,, by, for or permitted by Lessee on or about the leased premises, and at all times promptly and fully to pay and discharge any and all claims upon which any such lien may or could be based, and to save and hold Lessor and all of the l.e.s,ed premises and all buildings and improvements thereon free and t armless of and from any and all liens and claims of liens and ;suite or other proceedings pertaining thereto. Lessee .00y.enants and agrees to give Lessor written notice not less than ten (10) days in advance of the commencement of any construction, alteration, addition, improvement or repair costing in excess of Five Thousand Dollars ($5,000) in order that Lessor may post appropriate notices of Lessor's non -responsibility., 5. Item 14: Staff Report Pg. 57 Packet Pg. 462 of 553 Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement 7. Liability. Lessee covenants and agrees that Lessor shall not at any time or to any extent whatsoever be liable, responsi- ble or in anywise accountable for any loss, injury, death or damage to persons or property which at any time may be suffered or sustained by Lessee or by any person whosoever may at any time be using or occupying or visiting the leased premises or be in, on or about the same, whether such loss., injury, death or damage shall be caused by or in anywise result from or arise out of any act, omission or negligence of Lessee or of any occupant, subtenant, visitor or user of any portion of the leased premises, or shall result from or be caused by any other matter or thing whether of the same kind as or of a different kind than the matters or things above set forth, and Lessee shall forever indemnify, defend, hold and save Lessor free and harmless of, from and against any and all claims, liability, lose or damage whatsoever on account of any such lose, injury, death or damage. 8. Insurance. During the term of this lease Lessee shall procure In Its name and maintain In full force and effect bodily injury liability insurance, with maximum limits of not less than live Hundred Thousand Dollars ($500,000) and One Million Dollars ($1,000,000) per accident and property damage liability Insurance with a limit of not less than Five Hundred Thousand Dollars ($500,000) per accident, insuring against any and all liability of Lessee with respect to said premises or arising. out of the maintenance, use or occupancy thereof and specifically insuring the performance by Lessee of the indemnity agreement N Item 14: Staff Report Pg. 58 Packet Pg. 463 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement in. paragraph 7 contained, provided that Lessee may be self - insured as to the first Ten Thousand Dollars ($10,OcO) cf such liability. 9. Assignment - Successors and Assi s. (a) Subleasing - Assignment. Lessee agrees not to sublet the whole or any part cf the leased premises without the prior written consent of Lessor. This lease shall not be assignable, in whole or in part, without the prior written consent of Lessor. (b) Successors and Assigns. Subject to the foregoing provisions of this paragraph 9, this lease shall be binding upon and shall inure to the benefit of and shall apply to the respective successors and assigns of Lessor and Lessee, and all references in this lease to "Lessee" shall be deemed to refer to and include successors and assigns of Lessee without specific mention of such successors or assigns. 1O. Termination for a Default. In the event that Lessee shall fail or neglect to observe, keep or perform any of the covenants, terms or condi- tions herein contained on its part to be observed, kept or performed and such default shall continue for a period of one hundred and eighty (180) days after written notice from Lessor setting forth the nature of Lessee's default, then and in any such event, Lessor shall have the right at its option, upon written notice to Lessee, forthwith to terminate this lease, and all rights of Lessee hereunder shall thereupon cease, and Lessor without further notice to Lessee shall have the right immediately to enter into and upon the leased premises and 7. Item 14: Staff Report Pg. 59 Packet Pg. 464 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement take possession thereof with or without process of law and to remove all persons occupying the said premises, including all personal property therefrom, and to use all necessary force therefor and in all respects to take the actual, full and exclusive possession of the leased premises and every part there- of as of Lessor's original estate, without incurring any liability to Lessee or to any persons occupying or using the leased premises for any damage caused or sustained by reason of such entry upon th. leased premises or such removal of such persons or property therefrom; and Lessee hereby covenants and agrees to indemnify and save harmless Lessor from all cost, loss or damage what- soever arising or occasioned thereby. 11. Waiver. None of the covenants, terms or conditions of this lease can be waived except by instrument in writing signed by the waiving party. 12. Inspection of Premises. Lessor shall be entitled, at all reasonable, times, to go upon and into the leased premises for the purpose of posting and keeping posted thereon notices of non -responsibility for any construction, alteration or repair thereof,as required or p�rmitted by any law or ordinance, or for any purpose reasonably related to its rights as Lessor. 13. Covenants of Parties. (a) Lessor covenants and agrees to keep and perform all the terms and conditions hereof on its part to be kept and performed, and that Lessee, keeping and performing all the terms and conditions hereof on its part to be kept and. performed, may, subject to the terms and conditions hereof, have 8. Item 14: Staff Report Pg. 60 Packet Pg. 465 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement and hold the property hereby leased, for the term hereof, with- out let or hindrance by Lessor. (b) Lessee covenants and agrees to keep and perform all the terms and conditions hereof on its part to be kept and performed and, at the expiration or sooner termination of this lease, peaceably and quietly to quit and surrender to Lessor the property hereby leased in good order and condition, subject to the other provisions of this lease• The performance of each and every covenant of Lessee hereunder shall be a condi- tion for non-performance of which this lease may be terminated, as provided herein. 14. Rights Reserved by Lessor. Lessor expressly reserves all rights in and with respect to the land hereby leased not inconsistent with Lessee's use of the leased premises as in this lease provided. 15. Attorney's Fees.' If any action at law or in equity shall be brought to recover any rent under this lease, or for or on account of any breach of or to enforce or interpret any of the covenants, terms or conditions of this lease, or for the recovery of the possession of the leased premises, the prevailing party.nhall be entitled to recover from the other party as a part of prevailing party's costs a reasonable attorney's fee, the amount of which shall be fixed by the court and shall be made a part of any judgment rendered. 16. Ownership of Buildings. All buildings and improvements placed upon the land here- by leased by Lessee during the term hereof shall become and remain the property of Lessee, and Lessee shall remove the same from the leased premises upon expiration or sooner termination of this AM Item 14: Staff Report Pg. 61 Packet Pg. 466 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement lease and shall leave the leased premises in good1 clean and sanitary condition after such removal. Whenever Lessee shall repair, reconstruct, alter or rebuild or restore any building or improvement, as in this lease required or permitted, the material and salvage therefrom may be used or sold by Lessee. 17. Remedies Cumulative. All remedies hereinbefore and hereafter conferred upon Lessor shall be deemed cumulative and no one exclusive of the other, or any other remedy conferred by Ja. 18. Lease Construed as a Whole. The language in all parts of this lease shall in all cases be construed as a whole according to its fair meaning and not strictly for nor against either Lessor or Lessee. 19. Time of the Essence. Time is hereby expressly declared to be of the essence. of this lease and of each and every covenant, term, condition and provision hereof. 20. Notices. All notices or other writings in. this lease provided to be given or made or sent, or which may be given or made or sent, by either party hereto to the other, shall be deemed to be fu]l,)- given or made or sent when made in writing and deposited in the United States mail, registered or certified, postage .prepaid, arid addressed as follows: To Lessor: Stanford University Stanford, California To Lessee: City of Palo Alto Palo Alto, California C The address to which any notice or any writing may be given or made or sent to any party may be changed upon written notice given bq/ such party as above provided. ].0. Item 14: Staff Report Pg. 62 Packet Pg. 467 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement 21. Public Utilities_ All water, gas, electricity or other public utilities used upon or furnished to the leased premises during the term hereof shaJ.l be paid for by Lessee, and all serve ce lines of such utilities shall be installed beneath the surface of the premises and connected to existing public utilities at no cos.or expense to Lessor. 22. Paragraph Hea(ilings . Paragraph headings in this lease are :for convenience only and are not to be construed as a part of this lease or in any way limiting or amplifying the provisions hereof. 23. Rent Nominal Only. It is the understanding of the parties hereto that the rent payable by Lessee under paragraph 2 hereof is only nominal in nature and is not based uponithe fair market value of the premises, and, should it become necessary to determine the fair market value of all or any portion of the premises during the term hereof, It shall be recognized that the rent so payable by Lessee hereunder is a nominal rent only. IN WITNESS WHEREOF, the parties hereto have executed' this instrument in duplicate by proper persons thereunto duly authorized, the day and year first above written. Approved as to form: THE BOARD OF TRUSTEES OF ^'HE LELADDp STAIMORD JUNIOR UNIVERSITY By By CITY- -PF PALO LTG I tg Mayor LESSEE oved a to form: y A orney (SEAL) Item 14: Staff Report Pg. 63 Packet Pg. 468 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement RESOLUTION OF THE CITY COUNCIL RESOLVED, by the Council of the City of Palo Alto, that the, Lease attached hereto between the City of Polo Alto and The Board of Trustee of the Leland 8tantord Junior University dated July 1, 1957 covering the leasing of certain lands for the purpose of constructing, u aintaeining and Gperating thereon an eleotric ,power sub -station, be and the same hereby is approved, that the Mayor be and he hereby is authorized to execute the same for and in behalf of the City, and the City Clerk -Is authorized and directed to attest his signature. The above and foregoing resolution was duly and regularly introduced and passed at a.regular meeting of the Council of the City of Palo Alto on Monday, the 1=Fth day of October , 11057, by the following vote: Bishop, Byxbee, Corcoran, Crosap, Davis, Evans, Giffin, AYES: Marshall, Mitohell, Porter, Rodgers, Ruppenthal, Stephen*, Woodward. NOES: Hone. ABSENT: Mavis. APPROVED- / (' ayor ATTEST: City Cle k K [l APPROVED AS TO FORM: City Attorney Item 14: Staff Report Pg. 64 Packet Pg. 469 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement Amendment to Lease of Land for Substation F The Assistant City Manager presented a proposed amendment to the i,casc entered into on July 1, 1957, between the City and Stanford University for the site of Substation F at Hil.lview Avenue and Porter Drive, adding a parcel of 0.0?9 acre.. CITY COUNCIL 1t wa; moved by Rohr. s, seconded and carried by SEP 24 1962 unanimous, vei�•e vc 1e, tlh,t the Mayer lie authori ed to execute the amendment, being an agreement adding additional lands to the..lease. i Item 14: Staff Report Pg. 65 Packet Pg. 470 of 553 Si DocuSign Envelope ID: 57B09814 8982 4E69-BEFl-FFBFA17D269E ' • i ` Item 14 + AttachmentA -Testa Substation Agreement ..........r. ww. r�•Low+..ua ... .+. �.•.�^: AGREEMENT ADDING ADDITIONAL LANDS TO LASE :'.11S AGi :i3I1IT. rande and itaro•1 into -an of the ::;t day c * ,fl:; - , 1962, by and 'n ,t1:^on ..L•s'i=,G.a OF '1'1... ..Lit; .4Ti•. '::,:.s, J1TiiI:i.:til .i::l"Is:, a )oc;; havi:-g corporate p •were iitdot• Ohn .l,.ws of thn ;; tz t hcra:.nafter roferr :d to as "1 a .or", and the CITE )7 _A7.0 a rnr:icipal corpor :tion rgar red and e::iotinft undo;. t:h(: l the .;cata of Calii:,irnia, h^.rc aa_trr refcw;o't0 n^ "y, '•, I l is ,; •; +: T :1 ,HZ EA5, the p.trtien hux: .o eai.am:ad iii.-- a 3.ca•.o, da::ad a of J.tiy 1, 1957, ; torsi: a; te; refcred to as the :'; r. tac"; by Lor leased tai Lcorr..e at' 'ro::ia ately 11.,69.; n+:t r:v of tn6 i . the ,ity of Palo :lto, out; o: S:+ata i 1atra1 S ta:: c C lifnr.:ia, for a Corm of fift_• (50) II.icnctnit .T+aly 1, :.9`77; ..id the pitrtie liar to ;taus agraa.i to ad(: aiit :anal. L7nt:s to t:1e Lcaso, stn horsin.t2tar tvic:ec; iO , %.1l'i7, it ?.s mu •.tally a rcnii ,' aiid b'141:ccr. tics an 20110173: '•ar and in ronr:icicration -if the f(tit::rful narfcaticr, s th^ LnvnF- c of the tnri n, co'!4aase n, a r!(tr::^r1ti and co:' litior hc.ic 3 cotil aincd on. the :trt oL thr ;,casc , to be kept an p•arfc ;;red, and ar ot.iar val.uablr_ conrildiu a ion, :ncoipt Minreo;: :10 ::cby ac::ou- lei:l.cr_, an addi.tio:tri). pircl of lair! is hereby mach ruhj 'et to the Item 14: Staff Report Pg. 66 Packet Pg. 471 of 553 • DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla • Substation Agreement Le:. , and Lessor hereby 1e -es No 1.cascc and Lesson does hereiiy hi c anti to:a:c from ,e:,ar i_ht ertain parcel of land, being a po•'tion 02 the lands o:c The Lela --d Stanford Junior University situate in thr:`il•y ni Palo Alto, County of Santa Clara, State. of California, ::•x'e particularly described in Exhibit A attached hereto and by this _ t; erenr.c rode a part hereof, up • n and subject in all respects to al' of L'ih,^_ terns and provis ions •,f the lease; provided, however, that th:+ reciuirencut for the payment- f taxes on said additional parcel, as provided in paragraph 2 of the Lease, shall commence as of the date hereof; provided, further, hat Lessee agrees to maintain land - scraping, upon the leased premises., including the additional parcel, in aceordanc_ with the landscaping :•lans entitled "Substation F Fropoaod En: Plantin; I'l)rahrio g ITua,ber. 15040, dated Fearuar', l/. 192. I:S ITITU ESS II11ER3OF, the par::ios hereunto have c;;ecuted this in trurlent in duplicate by props.:• persons thereunto duly authorirad as of the day and year first her,inabove written. ME LOA^i? OF Tl:ili'P; OF 1,10-kni) SlAiixO D .7ill O ,; ;?':r.:S?'Ls Approved as to form- r[n yam' � r •.✓6 .'i/ r � _- Its, ".C5 PC!3. City Clcrl-. CITY OF PALO Al/J'3 Appr vet. a, to ox1a: �y , II:Mayor J Attorney (SEAL) L'r. S:'s'i Item 14: Staff Report Pg. 67 { f Packet Pg. 472 of 553 Item 14 Attachment A-Tesla Substation Agreement ALL that certain real property situate in the City of Palo Alto, County of Santa Clara, State of California, described as follows: BZCINNING at a point in the Northwesterly line of Hanover Street (60 feet in width), at the Southwesterly corner of Parcel "B", as said parcel is.described in that certain peed of Easement.from Stanford University to the City of Palo Alto, Serial Number 1274560, filed for record Novenber 14, 1956 in Book 3656 of Official Records, at Page 424, Santa Clara County Records, said point being the most Southerly corner of that certain 40.00 acre parcel of land leased by Stanford University to Hewlett-Packard Corporation by lease re- corded February 27, 1958 is Book 4016 of Official Records, at page 306, Santa Clara County Records; thence along the Northwesterly 'line of the said Hanover Street South 33° 14' 40" West 353.38 feet to the true point of beginning; said point also being the Southerly corner of that certain parcel of land leased to the City of Palo Alto for a power station; thence continuing along said Northwesterly line of Hanover Street South 33° 14' 40" West 8.00 feet to the centerline of a 10 foot P.U.E. (60 K.V..Power line); thence leaving said Northwesterly line of Hanover Street and running along the centerline of said 10 foot P.U.E. North 56° 45' 20" West 160.00 feet to the most Southerly corner of that certain 6.761 acre parcel of land leased by Stanford University to Hexrlett-Packard Corporation by lease recorded August 26, 1960, Serial Number 1867536, in Book 4899, Official Records of Santa Clara County, at page 429; thence leaving said easement centerline North 33° 14' 40`East 8.00 feet to the Westerly corner of said parcel of land leaned to the City of Palo Alto; thence along the Southwesterly line of said parcel South 56° 45' 20" East 160.00 feet to the true point of beginning. Containing 0.029 ! Acres. Reserving therefrom an easement for power poles and appurtenances 5 � :. ,;.�;,�;:'., ,4 ;. •, .•:, feet in width measured at right angles, contiguous with and lying North- I.: easterly from the Southwesterly line of the hereinabove described parcel. 1. ., tj — ...--- 7 L, I : L0 i,LYO -,.-- 3 Eng:reerinG -''r I - E;0{IBIT A 4� Item 14: Staff Report Pg. 68 Packet Pg. 473 of 553 '.' DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit B to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement I. CERTIFICATE OF ACKNOWLEDGMENT (Civil Code § 1189) A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF COUNTY OF On , before me, (insert name and title of the officer) personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. 6056800 10 Item 14: Staff Report Pg. 69 Packet Pg. 474 of 553 Docusign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit C to Substa ement Item 14 Attachment A -Tesla Substation Agreement EXHIBIT C PROJECT BUDGET 1. Estimated Project Cost. The estimated cost to design and construct the Project is $24,000,000, including the estimated Construction Cost of $15,000,000 (subject to modification by subsequent change orders). 2. Tesla's Contribution. Tesla is responsible for all costs to design and construct the Project, including design and procurement costs incurred prior to approval of the Construction Documents, subject to reimbursement from the City, as set forth in Section 5 of the Agreement, and as further specified below. Tesla's Contribution includes the following cost components: A. All Project -related costs incurred by Tesla prior to the Effective Date of the Agreement. B. 100% of the costs associated with feeders and any switches installation at the Tesla Facility needed to serve a 30MVA load. C. All permit fees that are not waived by the City. D. The cost for insurance policies required pursuant to Section 9 of the Agreement. The cost of all other items specified as Tesla's obligation under the Agreement and the Encroachment Permit. 2. City Reimbursement. Subject to a cumulative total cap of $12 million, the City is responsible for reimbursing Tesla as specified in Section 5 of the Agreement. Tesla will timely provide City with documents evidencing the costs subject to the City Reimbursement, such as paid invoices and the like, sufficient to establish the actual expenditures which are subject to reimbursement herein. 6056799 Hanover Substation Item 14: Staff Report Pg. 70 Packet Pg. 475 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement EXHIBIT D CAPACITY RESERVATION AGREEMENT 6056799 Hanover Substation Item 14: Staff Report Pg. 71 Packet Pg. 476 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement DATED JANUARY 16, 2024 CITY OF PALO ALTO -and- TESLA, INC. CAPACITY RESERVATION AGREEMENT relating to the Hanover Substation Item 14: Staff Report Pg. 72 Packet Pg. 477 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement TABLE OF CONTENTS 1. INTERPRETATION....................................................................................................... 2 2. TERM......................................................................................................................... 8 3. CAPACITY RESERVATION............................................................................................ 8 4. CAPACITY USAGE CREDITING.................................................................................... 10 5. BILLING AND INVOICING.......................................................................................... 10 6. TERMINATION.......................................................................................................... 10 7. DISPUTE RESOLUTION.............................................................................................. 12 8. REPRESENTATIONS, WARRANTIES AND COVENANTS ................................................ 13 9. ASSIGNMENT AND NOVATION................................................................................. 14 10. NOTICES.................................................................................................................. 14 11. CONFIDENTIALITY AND ANNOUNCEMENTS............................................................... 14 12. MISCELLANEOUS...................................................................................................... 15 SCHEDULE 1: CAPACITY RESERVATION AND USAGE CALCULATIONS............ SCHEDULE 1 SCHEDULE 2: MONTHLY CAPACITY USAGE REPORT ....................................SCHEDULE SCHEDULE 2 6056801 Item 14: Staff Report Pg. 73 Packet Pg. 478 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement THIS CAPACITY RESERVATION AGREEMENT is made on January 16, 2024 BETWEEN: (1) CITY OF PALO, a California chartered municipal corporation "City"); and (2) TESLA, INC., a corporation organized under the laws of Delaware, whose principal place of business is at Giga Texas, 1 Tesla Road, Austin, TX 78725 ("Tesla"). RECITALS: A The City and Tesla have entered into the Improvement Agreement pursuant to which the Parties shall jointly design, construct, install and fund improvements to the Hanover Substation to increase the Capacity of the Hanover Substation, on the terms and subject to the conditions therein. B Following completion of the improvements to the Hanover Substation contemplated under the Improvement Agreement, the City is willing to allocate and reserve, in respect of the Hanover Substation, the Reserved Capacity to serve the electricity needs of the Tesla Facilities, on the terms and subject to the conditions set forth in this Agreement. C In addition to the terms that apply to Tesla as a CPAU Electric Service customer pursuant to the CPAU Rules and Regulations, the City and Tesla have agreed that in consideration for the City making the Reserved Capacity available for Tesla, Tesla will pay the City a Monthly Capacity Reservation Fee as further specified in this Agreement. D The City and Tesla have further agreed that in addition to the consideration paid by the City under the terms of the Improvement Agreement for the Hanover Substation improvements designed and installed by Tesla, Tesla will be afforded a Monthly Capacity Usage Credit as a credit against the Monthly Capacity Reservation Fee, if applicable, subject to a Capacity Usage Credit Maximum. E It is a condition precedent to the effectiveness of the Improvement Agreement that the City and Tesla shall have executed and delivered this Agreement. IT IS AGREED: 1. INTERPRETATION 1.1 Definitions In this Agreement: "Agreement" means this Capacity Reservation Agreement. "Billing Period" has the meaning provided in Rule and Regulation 2 of the CPAU Rules and Regulations as may be amended from time to time. "Business Day" means any day other than a Saturday, Sunday or any other day observed as a legal holiday by the City. "Capacity" means the maximum instantaneous power (expressed and measured in kVA) that can be delivered by CPAU in compliance with its operating practices, to Electric Service customers served by the Hanover Substation. 6056801 Item 14: Staff Report Pg. 74 Packet Pg. 479 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement "Capacity Reservation Fee Start Date" means the earlier of (i) the date falling 18 months from the Effective Date, or (ii) the date on which the monthly Demand for the Tesla Facilities has reached 9.00 MW. "Capacity Reservation Modification" has the meaning given in Clause 3.5(a). "Capacity Reservation Period" means the period commencing on the Effective Date and ending on the date that is seven (7) years from the Effective Date. "Capacity Usage Credit Maximum" has the meaning given in paragraph (a) of Schedule 2. "Capacity Usage Credit Period" means the period commencing on the Capacity Reservation Fee Start Date and ending on the date that is seven (7) years from the Capacity Reservation Fee Start Date. "Consultation Period" has the meaning given in Clause 6.3(c). "Contracted Peak Demand" has the meaning given in paragraph (a) of Schedule 1. "CPAU" means the City's Utilities Department, which operates the City's electrical utility system, including the Hanover Substation, to provide Electric Service. "CPAU Event of Default" has the meaning given in Clause 6.2. "CPAU Rules and Regulations" means the rules and regulations relating to utility service approved and adopted by resolution of the City of Palo Alto City Council, pursuant to Chapter 12.20 of the Palo Alto Municipal Code, as may be amended from time to time, and accessible online via the City's website. "Default" means any CPAU Event of Default or Tesla Event of Default, as the context requires. "Defaulting Party" means: (a) the City, in respect of a CPAU Event of Default; and (b) Tesla, in respect of a Tesla Event of Default. "Delivered Energy" means the energy delivered to a Tesla Facility at a Point of Delivery. "Demand" means the highest rate of metered Delivered Energy, expressed and measured in kW, registered within a specific time interval (normally fifteen minutes within a monthly Billing Period unless otherwise specified). "Distribution Demand Charge" means the Distribution component of a Demand charge listed in a rate schedule established by the City for provision of Electric Service, often varying based on season and time period, and with the possibility of multiple demand charges applying to a specific time period, all of which are charged based on the metered Demand for that time period. "Dispute" means any dispute, disagreement or claim between the Parties concerning, relating to or arising from this Agreement, excluding any dispute, disagreement or claim concerning billing for Electric Service that is subject to the provisions of the CPAU Rules and Regulations. "Due Date" means, in relation to any Monthly Invoice, the date on which payment is due in accordance with Clause 5.3(a). 6056801 Item 14: Staff Report Pg. 75 Packet Pg. 480 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement "Effective Date" means the date determined in accordance with Clause 2.1, on which this Agreement comes into full force and effect. "Electric Service" means the generation, transmission, and distribution of electrical power by CPAU for retail use. "Expiration Date" means the date on which the Term ends and this Agreement expires in accordance with its terms. "General Use Utility Asset Costs" has the meaning given in paragraph (a) of Schedule 2. "Governmental Agency" means any national, regional or local government, any political subdivision thereof, or any governmental, quasi -governmental, regulatory, judicial or administrative agency, authority, commission, board or similar entity having jurisdiction over operation of the Substation or CPAU operations, or either Party, including any applicable independent system operator or regional transmission organization, the California Public Utilities Commission, the Federal Energy Regulatory Commission, and the North American Electric Reliability Corporation. "Hanover Substation" means the substation owned and operated by the City, including any facilities ancillary thereto, located at 3350 Hanover Avenue, Palo Alto, California 94304. "Hanover Substation Improvement Completion Date" means the date on which the City accepts the installation of the improvements to the Hanover Substation as complete in accordance with the Improvement Agreement. "Improvement Agreement" means the Substation Improvement Agreement relating to the Hanover Substation dated on or about the date of this Agreement and entered into between the City and Tesla. "JAMS" has the meaning given in Clause 7.2(a). "kVA" means kilo -volt-amperes, which is a measure of apparent power. "kW" means kilowatts, a unit of power equal to 1,000 watts. "kWh" means kilowatt-hours, the amount of energy delivered in one hour where delivery is at a constant rate of one kilowatt. "Law" means all applicable local, state, and federal laws, regulations, rules, codes, ordinances, permits, orders, and the like enacted or imposed by or under the auspices of any Governmental Agency with jurisdiction over the Hanover Substation or either Party, including labor, health and safety requirements, the Palo Alto City Charter, the Palo Alto Municipal Code, and the CPAU Rules and Regulations. "MW" means megawatts, a unit of power equal to 1,000 kW. "Monthly Capacity Reservation Fee" has the meaning given in paragraph (b) of Schedule 1 as a payment due from Tesla to the City as consideration for the Reserved Capacity. "Monthly Capacity Usage Credit" has the meaning given in paragraph (b) of Part 2 of Schedule 1. "Monthly Capacity Usage Credit Rate" has the meaning given in paragraph (b) of Schedule 2. 6056801 Item 14: Staff Report Pg. 76 Packet Pg. 481 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit D to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement 1.2 1.3 "Monthly Invoice" means an invoice in respect of Monthly Capacity Reservation Fees and Monthly Capacity Usage Credits in any Billing Period. "Monthly Payment" means the sum of the Monthly Capacity Reservation Fee (less any Monthly Capacity Usage Credit). "Monthly Statement" means a statement provided with the Monthly Invoice giving the information set out in Clause 5.2(b). "Non -Defaulting Party" has the meaning given in Clause 6.3(a). "Party" means a party to this Agreement, and shall include its successors in title, permitted assignees and permitted transferees. "Point of Delivery" has the meaning provided in Rule and Regulation 2 of the CPAU Rules and Regulations, as applied to electricity delivered to a Tesla Facility pursuant to this Agreement. "Reserved Capacity" means the portion of Capacity that is reserved by CPAU to provide Electric Services to the Tesla Facilities, measured in kVA, as further set forth in Schedule 1 (as such schedule may be amended from time to time). "Signature Date" means the date on which both the City and Tesla have executed this Agreement. "Subsequent Period" means the period commencing on the expiration of the Capacity Reservation Period and ending on the Expiration Date or upon early termination of this Agreement, whichever occurs first. "Term" means ten years from the Effective Date as stated in Clause 2.1. "Termination Notice" has the meaning given in Clause 6.3(h). "Tesla Event of Default" has the meaning given in Clause 6.1. "Tesla Facility" means the Tesla site located at 1501 Page Mill Road in the City of Palo Alto, and subject to mutual agreement of the Parties memorialized in an amendment to this Agreement, may also include additional Tesla facilities located on other sites that are connected to and served by the Hanover Substation. "US Dollars" or "USD" means United States Dollars, the lawful currency of the United States of America. Headings Clause headings used in this Agreement and the table of contents are for convenience only and will have no effect on the interpretation or construction of any of the terms of this Agreement. Interpretation (a) Wording In this Agreement, unless provided otherwise: 6056801 4 Item 14: Staff Report Pg. 77 Packet Pg. 482 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement (i) the use of the singular form of a word includes the plural form and the use of the plural form includes the singular; (ii) a word of any gender includes the corresponding words of each other gender and a reference to one sex includes a reference to all sexes; (iii) any cognate with respect to a word or expression defined in this Agreement shall bear a corresponding meaning; (iv) the words "include" and "including" are to be construed without limitation; and (v) wherever provision is made for the giving or issuing of any notice, decision, consent, acceptance, agreement, expression of satisfaction, endorsement, approval, certificate, instruction or determination by any person, unless otherwise specified, such notice, decision, consent, acceptance, agreement, expression of satisfaction, endorsement, approval, certificate, instruction or determination shall be in writing (and writing shall be inclusive of mail transmitted electronically) and the words "notify", "decide", "consent", "accept", "agree", "endorse", "approve", "certify", "instruct" or "determine" and other cognate expressions shall be construed accordingly. (b) (c) Dates & Times In this Agreement, unless provided otherwise: (i) a time of day shall be construed as a reference to the current Pacific time zone; (ii) a "month" shall be construed as a calendar month according to the Gregorian calendar beginning at 24:00 hours on the last day of the preceding month and ending at 24:00 hours on the last day of that month; (iii) a "day" shall be construed as a twenty-four (24) hour period ending at 24:00 hours; (iv) where a period of time is specified to run from or after a given day or the day of an act or event, it is to be calculated exclusive of that day; and (v) where a period of time is specified as commencing on a given day or the day of an act or event, it is to be calculated inclusive of that day. References In this Agreement, unless provided otherwise, a reference to: (i) a statute or enactment shall be construed as a reference to such statute as it may have been, or may from time to time be, amended or re-enacted; (ii) an obligation includes a liability and a duty and a reference to performance includes observance; (iii) materials, information, data and other records shall be to materials, information, data and other records whether stored in electronic, written or other form; and 6056801 Item 14: Staff Report Pg. 78 Packet Pg. 483 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement (iv) a clause or a Schedule shall be reference to a clause or Schedule of this Agreement. References to this Agreement or any other document shall be construed as a reference to this Agreement or that other document as it may have been, or may from time to time be, amended, varied, novated, replaced or supplemented. (d) General Terminology In this Agreement, unless provided otherwise, "average" for any calculation shall, subject to any contrary indication, be construed as meaning an arithmetic mean. 1.4 Construction (a) Force of Definitions If any provision in a definition in this Agreement is a substantive provision conferring rights or imposing obligations on either Party, then, notwithstanding that it is in a definition, effect shall be given to it as a substantive provision of this Agreement. (b) Force of Recitals The recitals are not intended to create any legally binding rights or obligations for the Parties, but may be used to evidence the intention of the Parties in entering into this Agreement wherever any such intention is relevant in interpreting any particular term of this Agreement. (c) Persons and Corporations (i) A reference to a "person" includes any individual, company, corporation, firm, partnership, joint venture, undertaking, organisation, trust, government authority or government department (in each case whether or not having separate legal personality). (ii) A reference to a person includes that person's successors and permitted assigns and, in the case of a natural person, that person's legal personal representatives. (iii) Where any person to whom reference is made ceases to exist or is reconstituted, renamed or replaced, or its functions or powers are transferred to another person, that reference shall (unless the context requires otherwise) be taken to be to the person so established or constituted in its place or succeeding to its powers or functions. (d) Laws Save where the contrary is indicated, in this Agreement any reference to an act of a Governmental Agency, code, rules, regulations or any Law or any section of, or schedule to, or other provisions thereof, shall be construed, at the particular time, as including a reference to any modification, extension or re-enactment thereof then in force and to all instruments, orders, rules or regulations then in force and made under or deriving validity from the relevant act of a Governmental Agency, code, or Law. 6056801 6 Item 14: Staff Report Pg. 79 Packet Pg. 484 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement 2. 2.1 3. 3.1 3.2 3.3 ii aUr Effectiveness and Term This Agreement shall take effect on the Hanover Substation Improvement Completion Date (the "Effective Date") and shall continue until ten (10) years from the Effective Date (the "Term"), unless terminated sooner pursuant to Clause 6 herein. CAPACITY RESERVATION Determination of payments for Reserved Capacity (a) The Monthly Capacity Reservation Fee for the Reserved Capacity provided by the City to Tesla pursuant to Clause 3 of this Agreement will be calculated in accordance with the provisions of Schedule 1. (b) Tesla's payment of the Monthly Capacity Reservation Fee will apply for each month that Reserved Capacity is made available for Tesla until expiration of the Term or termination of the Agreement, including the Capacity Reservation Period and the Subsequent Period. Reservation of Capacity during the Capacity Reservation Period (a) Commencing on the Effective Date, the City shall reserve and make available not less than the amount of Reserved Capacity for Electrical Service provided to the Tesla Facilities for the Capacity Reservation Period. (b) In consideration for the Reserved Capacity made available in any Billing Period during the Capacity Reservation Period, beginning with the first full Billing Period after the Capacity Reservation Fee Start Date Tesla shall pay to the City a Monthly Capacity Reservation Fee calculated in accordance with paragraph (b) of Part 1 of Schedule 1. (c) For the avoidance of doubt, following the Capacity Reservation Fee Start Date Tesla shall pay the Monthly Capacity Reservation Fee to the City during the Capacity Reservation Period irrespective of whether Tesla's aggregate 12 -month average monthly peak demand in respect to the Tesla Facilities drops below the Reserved Capacity. (d) The Monthly Capacity Reservation Fee applies solely as consideration for the Reserved Capacity and does not apply to payment for Electric Services billed pursuant to the CPAU Rules and Regulations. (e) The City reserves the right but not the obligation to meet its obligations with respect to the Reserved Capacity in whole or in part at any given point in time from CPAU facilities other than the Hanover Substation without affecting Tesla's obligations with respect to the Monthly Capacity Reservation Fee or the City's obligations with respect to the Monthly Capacity Usage Credit. Reservation of Capacity during the Subsequent Period (a) During the Subsequent Period, the City shall, in respect of the Hanover Substation, continue to reserve and make available not less than the Reserved Capacity to serve the electricity needs of the Tesla Facilities, provided that if Tesla's aggregate 12 -month average monthly peak electricity demand in respect to the Tesla Facilities drops below the Reserved Capacity, the City shall: 6056801 Item 14: Staff Report Pg. 80 Packet Pg. 485 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement (i) promptly notify Tesla in writing of such event; and (ii) if Tesla fails to increase its aggregate twelve (12) -month average monthly peak electricity demand in respect to the Tesla Facilities to at least the Reserved Capacity within six (6) months of receipt of such written notice from the City, the City will have the right to divert any of the Capacity originally reserved for Tesla to other Electric Service customers. (b) In consideration for the Reserved Capacity made available during any Billing Period during the Subsequent Period, Tesla shall pay to the City a Monthly Capacity Reservation Fee, calculated in accordance with Schedule 1. (c) No Monthly Capacity Reservation Fee shall be payable by Tesla to the City if the City fails to make available to Tesla the Reserved Capacity at any time during that Billing Period. 3.4 Sale and Purchase of Electric Service In addition to the Capacity Reservation Fee, if any, Tesla shall pay the City on a monthly basis for Electric Service provided to the Tesla Facilities in accordance with the CPAU Rules and Regulations. In addition to the rights and obligations conferred by this Agreement in respect to the Reserved Capacity, the City will provide Electric Service to the Tesla Facilities in accordance with the CPAU Rules and Regulations. 3.5 Capacity Reservation Modification (a) Tesla may request a change to the amount of Reserved Capacity provided by the City to Tesla, including a corresponding adjustment to the amount of the Monthly Capacity Reservation Fee, during the Term pursuant to this Agreement (a "Capacity Reservation Modification"), subject to approval by the CPAU Director or his or her authorized delegee. (b) To initiate a Capacity Reservation Modification, Tesla must send a written notice to the City requesting the modification. If Tesla's requested modification seeks an increase in the amount of Reserved Capacity, City approval of the request will be subject to a determination by the CPAU Director that the CPAU system can accommodate the requested increase at that time. The approved changes to the amount of Reserved Capacity, the corresponding Monthly Capacity Reservation Fee, and Contracted Peak Demand in Schedule 1 will go into effect in the Billing Period no sooner than 90 days from receipt of the notice and approval by the City. The Parties shall determine the revised Reserved Capacity, Monthly Capacity Reservation Fee, and Contracted Peak Demand promptly following Tesla's request for a Capacity Reservation Modification in accordance with the provisions of Schedule 1. For purposes of a Capacity Reservation Modification, the CPAU Director is authorized to modify Schedule 1, consistent with the terms and conditions of this Agreement, without City Council approval. (c) Once the Capacity Reservation Modification is initiated the revised Monthly Capacity Reservation Fee will apply for each month that the revised Reserved Capacity is made available for Tesla until expiration of the Term or termination of the Agreement, including the Capacity Reservation Period and the Subsequent Period, unless the amount of Reserved Capacity is subsequently changed pursuant to a later Capacity Reservation Modification, in which case the most recent approved version of Schedule 1 will control. 6056801 Item 14: Staff Report Pg. 81 Packet Pg. 486 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement 4. 4.1 5. 5.1 5.2 5.3 CAPACITY USAGE CREDITING Monthly Capacity Usage Credit (a) In respect to each Billing Period from the Capacity Reservation Fee Start Date until either the Capacity Usage Credit Period expires or the Capacity Usage Credit Maximum has been reached, whichever occurs first, Tesla shall receive from the City a Monthly Capacity Usage Credit, calculated in accordance with Schedule 2. (b) In no event shall the aggregate of all Monthly Capacity Usage Credits accrued during the Term exceed the Capacity Usage Credit Maximum. (c) Any Monthly Capacity Usage Credit accrued during any Billing Period shall be set-off against the Monthly Capacity Reservation Fee payable in that Billing Period, if applicable, and only the balance shall be paid by Tesla to the City pursuant to Clause 5 below. BILLING AND INVOICING Currency of Monthly Invoices and payments Except as otherwise expressly provided in this Agreement, each Monthly Invoice shall be for amounts in USD and all payments shall be made in USD in accordance with the CPAU Rules and Regulations. Delivery of Monthly Invoices (a) Commencing with the Billing Period following the month in which the Effective Date occurs, the City shall submit to Tesla, in accordance with the CPAU Rules and Regulations, a Monthly Invoice setting out the City's computation of the Monthly Payment for that Billing Period in respect to the Monthly Capacity Reservation Fee, if applicable, and the Monthly Capacity Usage Credit. (b) Each Monthly Invoice shall include a Monthly Statement setting out: (i) a calculation o£ (A) the Monthly Capacity Reservation Fee, if applicable; and (B) the Monthly Capacity Usage Credit; and (ii) such further supporting documentation and information as Tesla may reasonably request, provided that no such request shall prejudice or delay payment of the amount due in respect of the relevant Monthly Invoice. Payment of Monthly Invoices (a) An amount payable under a Monthly Invoice shall be paid in immediately available and freely transferable cleared funds for value on or before the due date specified therein (the "Due Date") to such account of the City as shall have been previously notified to Tesla. (b) Tesla shall pay to the City any amount referred to in a Monthly Invoice on or before the Due Date. 6056801 Item 14: Staff Report Pg. 82 Packet Pg. 487 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement 5.4 5.5 5.6 6. 6.1 6.2 Set off rights (a) Where in any Billing Period there is both a Monthly Capacity Reservation Fee and a Monthly Capacity Usage Credit, the two amounts shall be set-off against each other and only the balance shall be paid by Tesla to the City in lieu of each such payment in respect of that Billing Period. Any payment shall be made to the appropriate account of the City. (b) Save insofar as permitted by the provisions of Clause 5.4(a) above, all payments by Tesla to the City under this Agreement shall be made free of any restriction or condition, whether by way of set-off or otherwise, but the making of payments shall be without prejudice to the other rights of Tesla. Application of payments Payments due from Tesla to the City pursuant to this Agreement, including payments for Electric Service and Monthly Capacity Reservation Fees, will be subject to the provisions of Rule and Regulation 11 of the CPAU Rules and Regulations. Disputed Monthly Invoices If Tesla wishes to dispute a Monthly Invoice, it shall do so in accordance with the CPAU Rules and Regulations. TERMINATION Termination for Tesla Events of Default The City may give notice to Tesla of its intention to terminate this Agreement before the Expiration Date upon the occurrence of any of the following events (each, a "Tesla Event of Default"), except where such event arises as a result of a material breach by the City of this Agreement or a CPAU Event of Default: (a) Tesla commits a material breach of any of its material obligations under this Agreement and does not remedy the breach within thirty (30) Business Days of receiving notice from the City of such breach, provided that if such failure cannot be remedied by Tesla within such period of thirty (30) Business Days with the exercise of reasonable diligence, then such cure period shall be extended for an additional reasonable period of time (not to exceed thirty (30) Business Days), so long as such breach is capable of being remedied with the exercise of reasonable diligence and Tesla is exercising reasonable diligence to remedy such breach; or (b) a representation or warranty made or repeated by Tesla in accordance with Clause 8.1 proves to have been incorrect or misleading in any material respect when made or repeated. Termination for CPAU Events of Default Tesla may give notice to the City of its intention to terminate this Agreement before the Expiration Date upon the occurrence of any of the following events (each, a "CPAU Event of Default"), except where such event arises as a result of a material breach by Tesla of this Agreement or a Tesla Event of Default: (a) the City commits a material breach of any of its material obligations under this Agreement and does not remedy the breach within thirty (30) Business Days of 6056801 10 Item 14: Staff Report Pg. 83 Packet Pg. 488 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement receiving notice from Tesla of such breach, provided that if such failure cannot be remedied by the City within such period of thirty (30) Business Days with the exercise of reasonable diligence, then such cure period shall be extended for an additional reasonable period of time (not to exceed thirty (30) Business Days), so long as such breach is capable of being remedied with the exercise of reasonable diligence and the City is exercising reasonable diligence to remedy such breach; or (b) a representation or warranty made or repeated by the City in accordance with Clause 8.1 proves to have been incorrect or misleading in any material respect when made or repeated. 6.3 Termination Procedure Upon the occurrence of Tesla Event of Default or a CPAU Event of Default, the following procedures shall be followed by the Parties: (a) Upon the occurrence of a Tesla Event of Default or a CPAU Event of Default, as the case may be, which is not cured by the Defaulting Party within the applicable grace period, if any, the other Party (the "Non -Defaulting Party") may, at its option, initiate termination of this Agreement by delivering a notice of its intention to terminate this Agreement (a "Notice of Intention to Terminate") to the Defaulting Party. The Notice of Intention to Terminate shall specify in reasonable detail the Tesla Event of Default or CPAU Event of Default, as the case may be, giving rise to such notice. (b) A Notice of Intention to Terminate given pursuant to Clauses 6.3(a) shall be specified as such, and shall specify in reasonable detail the event giving rise to such notice. Service of a Notice of Intention to Terminate by one Party shall not at any time preclude service of a Notice of Intention to Terminate by the other Party. (c) Following the delivery of a Notice of Intention to Terminate, the Parties shall, consult for a period ("Consultation Period") of thirty (30) days commencing on such delivery date with respect to any such Tesla Event of Default or CPAU Event of Default (or such longer period as the Parties may mutually agree), as to what steps shall be taken with a view to mitigating the consequences of the relevant Tesla Event of Default or CPAU Event of Default, as applicable, taking into account all the circumstances. (d) During the Consultation Period: (i) the Defaulting Party may continue to undertake efforts to cure the Default, and if the Default is cured at any time prior to the delivery of a Termination Notice in accordance with Clause 6.3(e), then the Non -Defaulting Party shall have no right to terminate this Agreement in respect of such cured Default (but without prejudice to any rights in respect of any future breach of this Agreement); (ii) each Party shall not impede or otherwise interfere with the other Party's efforts to remedy the Tesla Event of Default or CPAU Event of Default, as the case may be, which gave rise to the issuance of the Notice of Intention to Terminate; and (iii) both Parties shall, save as otherwise provided in this Agreement, continue to perform their respective obligations under this Agreement. (e) If, during the Consultation Period, the Defaulting Party has diligently pursued the cure of the Default but the Default could not, with the exercise of reasonable diligence, be cured within such Consultation Period, then the Defaulting Party shall have the further 6056801 Item 14: Staff Report Pg. 84 Packet Pg. 489 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement period of time which is reasonably necessary to cure that Default, which, further period shall, subject to Clause 6.3(g), not exceed thirty (30) days, and the Consultation Period shall be extended in accordance with such extension. (f) An extension to the Consultation Period of greater than the thirty (30) days referred to in Clause 6.3(e) may be established if agreed by the Non -Defaulting Party. (g) If a Defaulting Party determines that it requires the benefit of a further period to cure the Default as provided for under Clause 6.3(e), it shall, as soon as reasonably practicable thereafter (but not later than the expiration of the thirty (30) day period established in accordance with Clause 6.3(e)) give notice to the Non -Defaulting Party that more time is required to rectify the Default, giving a reasonable explanation as to why more time is required and requesting that the Consultation Period be extended by the further period referred to in the notice. (h) Within fifteen (15) days of the expiration of the Consultation Period (as it may be extended in accordance with the foregoing clauses), or, if there is no Consultation Period, within fifteen (15) days of the date of the Notice of Intention to Terminate, or unless, in the case of a Tesla Event of Default or a CPAU Event of Default giving rise to the Notice of Intention to Terminate such Default shall have been remedied, the Party having given the Notice of Intention to Terminate may terminate this Agreement by delivering a notice to the other Party terminating this Agreement ("Termination Notice"), whereupon this Agreement shall terminate on the date of the Termination Notice. 7. DISPUTE RESOLUTION 7.1 Negotiation and Mediation (a) Any Dispute arising from or relating to this Agreement shall first be promptly referred to the Parties' respective senior level management for resolution. (b) If the Parties' senior level management are unable to resolve any such Dispute within twenty (20) days after referral, or within any mutually agreed upon extension thereof, either Party may, by notice to the other Party (the "Mediation Notice"), require such Dispute to be submitted to non -binding mediation in Palo Alto, California, with a single mediator who is mutually acceptable to the Parties. The Parties will use reasonable efforts to cause such mediation to be convened, conducted and completed within a reasonable period of time, from the date of the Mediation Notice, subject to the availability of a mutually acceptable mediator and commensurate availability of the individuals that each Party, respectively, requires to represent it at mediation, including legal counsel, percipient witnesses, expert witnesses, sureties, and individuals authorized to negotiate a settlement. The cost of mediation, including the mediator's fee, will be shared equally by the Parties, but each Party is solely responsible for its own legal costs and its own legal representation. 7.2 Arbitration (a) If and to the extent the Parties are unable to resolve the Dispute through mediation, then either Party may take the unresolved portion of a Dispute to arbitration in accordance with the then -current Streamlined Arbitration Rules of the Judicial Arbitration and Mediation Services ("JAMS"). The existence, content and result of the arbitration shall be held in confidence by the Parties, their representatives, any other 6056801 Item 14: Staff Report Pg. 85 Packet Pg. 490 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement participants and the arbitrator, subject to the limits of Law governing the City's public disclosure obligations. (b) The arbitration will be conducted by a single arbitrator selected by agreement of the Parties or, failing such agreement, appointed in accordance with JAMS, in either case, in San Francisco County, California. (c) The arbitration award shall be final and binding on the Parties and the Parties shall not have the right to appeal any such award, except to the extent expressly required by California Law. (d) Each Party will bear its own expenses in the arbitration and will share equally the costs of the arbitration; provided, however, that the arbitrator may, in their discretion, award reasonable costs and fees to the prevailing Party. 7.3 7.4 8. 8.1 Performance of Obligations to Continue (a) Pending final resolution of each Dispute hereunder, the Parties shall each continue to fulfil their respective obligations hereunder, irrespective of whether any Dispute has been noticed, submitted, or is under negotiation or consideration by either Party. (b) Upon resolution of each Dispute, whether by agreement of the Parties or through a Dispute proceeding, any amounts found to be owing by either Party shall be promptly paid by the Party owing payment to the other Party from the day following the date of the overpayment or underpayment, as applicable, until the date of repayment in full. Specific Performance Notwithstanding anything to the contrary contained in this Clause 7, if, due to a material breach or threatened material breach a Party is suffering irreparable harm for which monetary damages are inadequate, or if a Party is seeking to enforce an arbitration award obtained pursuant to this Clause 7, such Party may petition a court of competent jurisdiction for injunctive relief, specific performance or other equitable relief. REPRESENTATIONS, WARRANTIES AND COVENANTS General Representations and Warranties Each Party represents and warrants to the other Party on the Signature Date and the Effective Date that: (a) it is a legal entity, duly organized, validly existing and in good standing under the Law of jurisdiction of incorporation or formation, as applicable; (b) this Agreement constitutes a legal, valid and binding obligation of such Party enforceable in accordance with its terms; and (c) the execution, delivery and performance of this Agreement (i) is within its powers; (ii) has been duly authorized by all requisite action; and (iii) to the best of the Party's knowledge will not violate any agreement, commitment, certificate or other document to which it is a party or by which any of its assets may be bound or affected. 6056801 Item 14: Staff Report Pg. 86 Packet Pg. 491 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement 8.2 Covenants Each Party shall comply with all applicable Law required for the performance of its obligations under this Agreement. 9. ASSIGNMENT AND NOVATION 9.1 General Subject to Clause 9.2, neither Party shall assign or transfer its rights or obligations under this Agreement without the prior written consent of the other Party. Any purported assignment, novation or transfer without such consent, whether voluntary or involuntary, by operation of Law, under legal process or proceedings, by receivership, in bankruptcy or otherwise, is void. 9.2 Unauthorized Assignments Any attempted assignment of this Agreement (or any part thereof) or any of the rights, duties and obligations under this Agreement other than in strict conformance with this Clause 9 is null and void and of no force or effect. 10. NOTICES 10.1 Notices (a) All notices allowed or required under this Agreement shall be in writing, sent to the address for notices given for the City and Tesla on the signature page to this Agreement, or such other address as either Party may notify the other Party in writing from time to time, and shall be deemed given: (i) if sent by courier, on the date when left at the address of the recipient if such date is a Business Day or on the next Business Day if such date is not a Business Day; and (ii) if sent by email, upon receipt by the sender of an email confirming receipt (or otherwise evidencing receipt) of the notice by the recipient (in which case the email will be deemed received on the date it was a received by the recipient if such date is a Business Day, or on the next Business Day if such date is not a Business Day). An automatic "read receipt" shall not constitute confirmation of receipt for purposes of this Clause 10.1. (b) Notices shall be sent to the notice address given for the City and Tesla on the signature page to this Agreement, or such other address as either Party may notify the other Party in writing from time to time. Nothing in this Clause 10.1 shall be construed to restrict the transmission of routine communications between representatives of the City and Tesla. 11. CONFIDENTIALITY AND ANNOUNCEMENTS The Parties acknowledge that the City is subject to California Law governing charter cites, including public disclosure requirements which include, but are not limited to, open meeting requirements pursuant to Government Code section 54950 et seq. and public record disclosure requirements pursuant to Government Code section 7920 et seq. Except as required for compliance with applicable Law, neither Party shall advertise or issue any public announcement regarding the execution of this Agreement or its contents, disclose the existence of this Agreement or otherwise disclose its contents, or use the other Party's mark, name or logo in 6056801 14 Item 14: Staff Report Pg. 87 Packet Pg. 492 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement any marketing literature, web sites, articles, press releases (including interviews with representatives of media organizations of any form), or any other document or electronic communication, without the prior written consent of the other Party. The foregoing shall not prohibit a Party from making any public disclosure or filing that it determines in good faith is required by Law, including, but not limited to, in respect of Tesla, the rules of the stock exchange on which its shares, or the shares of its parent company, are listed. 12. MISCELLANEOUS 12.1 Governing Law This Agreement and all claims arising out of or relating to this Agreement and the transactions contemplated hereby shall in all respects be governed by and interpreted in accordance with the Law of the state of California, without regard to the conflicts of Law principles that would result in the application of any Law other than the Law of such state. 12.2 No Waiver (a) No waiver by either Party of any default or defaults by the other Party in the performance of any of the provisions of this Agreement: (i) shall operate or be construed as a waiver of any other or further default or defaults whether of a like or different character; or (ii) shall be effective unless in writing duly executed by a duly authorised representative of such Party. (b) Neither the failure by either Party to insist on any occasion upon the performance of the terms, conditions, and provisions of this Agreement nor time or other indulgence granted by one Party to the other shall act as a waiver of such breach or acceptance of any variation or the relinquishment of any such right or any other right under this Agreement, which shall remain in full force and effect. 12.3 Entire Agreement; Severability This Agreement constitutes the entire agreement between the Parties regarding the subject matter hereof and supersedes all prior agreements, representations and understandings, oral or written, between the Parties regarding the subject matter hereof. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, such term shall be severable from the remainder of this Agreement and the remainder of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected and each term and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by the Law. 12.4 Costs Each Party will be solely responsible for its own costs and expenses incurred in connection with the preparation, negotiation, execution, delivery and performance of, and compliance with, this Agreement. 6056801 Item 14: Staff Report Pg. 88 Packet Pg. 493 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement 12.5 Amendment; Modification; Waiver No amendment or modification of this Agreement is effective unless it is in writing and signed by each Party. No waiver by either Party of any provision of this Agreement is effective unless explicitly set forth in writing and signed by such Party. No failure to exercise, or delay in exercising, any right or remedy arising from this Agreement operates or may be construed as a waiver thereof. No single or partial exercise of any right or remedy hereunder precludes any other or further exercise thereof or the exercise of any other right or remedy. 12.6 Relationship of the Parties The relationship between the Parties is that of independent contractors. Nothing contained in this Agreement shall be construed as creating any agency, partnership, joint venture or other form of joint enterprise, employment or fiduciary relationship between the Parties, and neither Party shall have authority to contract for or bind the other Party in any manner whatsoever. 12.7 Further Assurances Each Party agrees to execute and deliver all further instruments and documents, and take all further action, as may be reasonably necessary to complete performance by the Parties hereunder and to effectuate the purposes and intent of this Agreement. 12.8 No Third -Party Beneficiaries This Agreement and all rights hereunder are intended for the sole benefit of the Parties and shall not imply or create any rights on the part of, or obligations to, any other person. Claims by non -Parties indemnified pursuant to this Agreement may only be brought by a Party to this Agreement. 12.9 Survival Provisions of this Agreement which by their nature contemplate or govern performance or observance subsequent to the termination or expiration of this Agreement or any transactions contemplated herein shall survive such termination or expiration. Except as otherwise set forth in this Agreement, the expiration or termination of this Agreement will not affect any liabilities of the Parties that accrued prior to such expiration or termination. 12.10 Good Faith and Fair Dealing Each Party's actions in connection with this Agreement (including in the performance of its obligations and enjoyment of its rights hereunder), will be undertaken in accordance with the principles of good faith and fair dealing. Such obligation shall be interpreted to mean that a Party must act honestly and reasonably, but shall not be required to otherwise act contrary to its legitimate commercial interests. 12.11 Successors and Assigns This Agreement shall be binding upon, and inure to the benefit of the Parties and their respective successors and permitted assigns. 12.12 Counterparts This Agreement may be executed by each Party on a separate counterpart, each of which when executed and delivered shall constitute an original, but both counterparts shall together constitute one and the same instrument. 6056801 16 Item 14: Staff Report Pg. 89 Packet Pg. 494 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement 12.13 Mutuality of drafting The Parties hereby stipulate and agree that each of them fully participated and was adequately represented by counsel in the negotiation and preparation of this Agreement and the Parties further stipulate and agree that in the event of an ambiguity or other necessity for interpretation to be made of the content of this Agreement, this Agreement shall not be construed in favour of or against either Party as a consequence of such Party having had a greater role in the preparation of this Agreement, but shall be construed as if the language were mutually drafted by both Parties with full assistance of counsel. [Remainder of Page Intentionally Left Blank] 6056801 Item 14: Staff Report Pg. 90 Packet Pg. 495 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement In witness whereof the Parties, intending to be legally bound, have caused this Agreement to be executed by their duly authorised officers as of the date first above written. CITY OF PALO ALTO By: Name: Ed Shikada Title: City Manager APPROVED AS TO FORM: By: Name: Molly Stump Title: City Attorney APPROVED: By: Name: Dean Batchelor Title: Director of Utilities ADDRESS: City of Palo Alto City Clerk P.O. Box 10250 250 Hamilton Avenue Palo Alto, CA 94303 With copies to: Utilities Department 250 Hamilton Avenue Palo Alto, CA 94303 Signature Page to Capacity Reservation Agreement Item 14: Staff Report Pg. 91 Packet Pg. 496 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit D to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement ATTN: Tomm Marshall TESLA, INC. [DocuSigned by: Nano .1 16AE36ED3BB7438... Name: Vaibhav Taneja Title: Chief Financial Officer Address: 1 Tesla Road, Austin, TX 78725 Attn: General Counsel / Legal Phone: +1.512.516.8177 Email: legal@tesla.com cc: energynotices@tesla.com 6056801 Item 14: Staff Report Pg. 92 Packet Pg. 497 of 553 2 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement SCHEDULE 1: CAPACITY RESERVATION AND USAGE CALCULATIONS The Reserved Capacity for the Tesla Facilities is 11,200 kVA unless modified by a Capacity Reservation Modification. Determination of the Monthly Capacity Reservation Fee The Monthly Capacity Reservation Fee for the Reserved Capacity listed above is calculated in kW rather than kVA. This is because the City meters peak energy Demand based on kW rather than kVA. To calculate a Monthly Capacity Reservation Fee based on kW for a Reserved Capacity based on kVA, a conversion from kVA to kW is required. In actual day-to-day operation of the CPAU electric system, a capacity of 1 kVA might be able to transmit a range of kW quantities depending on the characteristics of the electric load. For the purpose of the Monthly Capacity Reservation Fee this Agreement assumes that 11,200 kVA Reserved Capacity corresponds to 9,000 kW Demand. Because the Monthly Capacity Reservation Fee is intended to reimburse the City for the opportunity cost of reserving unused capacity for Tesla rather than marketing it to other customers, it is indexed to the Distribution Demand Charge for the applicable rate schedule. However, because the Distribution Demand Charges are designed to recover costs based on a month -varying metered peak Demand, the Capacity Reservation Fee includes a month -varying Contracted Peak Demand below that corresponds to a monthly load shape that the City and Tesla have agreed is reflective of what the Parties expect Tesla's eventual actual load shape will be. (a) For the purposes of this Schedule 1, the following term has the following meaning: "Contracted Peak Demand" means, for each Billing Period corresponding with the relevant month: (i) January: 7,500 kW; (ii) February: 7,500 kW; (iii) March: 7,500 kW; (iv) April: 7,500 kW; (v) May: 7,500 kW; (vi) June: 9,000 kW; (vii) July: 9,000 kW; (viii) August: 9,000 kW; (ix) September: 9,000 kW; (x) October: 7,500 kW; (xi) November: 7,500 kW; and (xii) December: 7,500 kW. (b) Determination of the Monthly Capacity Reservation Fee Schedule I Item 14: Staff Report Pg. 93 Packet Pg. 498 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement The "Monthly Capacity Reservation Fee" for any Billing Period shall be an amount in USD equal to: (B — A)*C where: A is the highest fifteen (15) minute peak Demand measured by CPAU meter(s) in relation to the Tesla Facilities during that Billing Period; B is the Contracted Peak Demand for that Billing Period; and C is the Distribution Demand Charge(s) applicable to the peak time period for the season corresponding to the Billing Period defined in the applicable rate schedule set by the City and selected by Tesla (if multiple rate schedules apply) pursuant to the CPAU Rules and Regulations. Notwithstanding the foregoing, if application of the formula set forth hereinabove for determining the Monthly Capacity Reservation Fee results in a negative number sum for any Billing Period, for purposes of this Agreement, that negative number sum will be deemed to equal zero for that Billing Period. Schedule I Item 14: Staff Report Pg. 94 Packet Pg. 499 of 553 Exhibit D to Substation Improvement Agreement DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 Attachment A -Tesla Substation Agreement SCHEDULE 2: MONTHLY CAPACITY USAGE CREDIT Determination of the Monthly Capacity Usage Credit (a) For the purposes of paragraph (b) of this Schedule 2, the following terms have the following meaning: "Capacity Usage Credit Maximum" means an amount in USD equal to the aggregate amount of the General Use Utility Asset Costs incurred by Tesla pursuant to the Improvement Agreement, excluding therefrom those amounts that have reimbursed to Tesla by the City under the terms of the Improvement Agreement. The Parties will amend this Schedule 2 to include the amount of the Capacity Usage Credit Maximum within 14 Business Days following payment of the "City Reimbursement" pursuant to the Improvement Agreement, as that term is defined therein. "General Use Utility Asset Costs" means, in relation to the improvements installed by Tesla and accepted by the City pursuant to the Improvement Agreement, the aggregate documented cost in USD incurred by each Party associated with the material cost, but excluding the design and construction costs, of all equipment and fixed assets that can be used for any CPAU customer (and not restricted to serving a Tesla Facility), as determined by CPAU, including, but not limited to, transformers, switchgear, protection equipment, and cables, but expressly excluding any costs associated with the acceleration of production or accelerated delivery of such equipment. (b) Determination of the Monthly Capacity Usage Credit The "Monthly Capacity Usage Credit Rate" for any Billing Period during the Capacity Reservation Period shall be an amount specified on a USD per kWh basis equal to: A/(B*C) where: A is the Capacity Usage Credit Maximum; B is the estimated annual electrical consumption of the Tesla Facilities expressed in units of kWh, being 75,000,000 kWh; and C is the Capacity Usage Credit Period expressed in years, being seven (7) years. The "Monthly Capacity Usage Credit" for any Billing Period shall be an amount specified in USD equal to the Monthly Capacity Usage Credit Rate multiplied by the Delivered Energy for the Billing Period. Schedule 2 Item 14: Staff Report Pg. 95 Packet Pg. 500 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit E to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement EXHIBIT E PROJECT SCHEDULE Pursuant to Section 8.2, the below schedule, dated December 14, 2024, constitutes the planned schedule for design and construction of the Project as of the Effective Date of the Agreement. Project completion is expected to occur 245 days after the latter of the issuance of the Notice to Proceed, applicable permits, or execution of this Agreement. • City Council Approval: January 16, 2024 • Construction begins: January 29, 2024 • Demolition: January 29, 2024 — March 2024 • Power Distribution Center delivery: April 2024 • Project Completion: September 17, 2024 6056799 Hanover Substation Item 14: Staff Report Pg. 96 Packet Pg. 501 of 553 Docusign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit F to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement EXHIBIT F INSURANCE REQUIREMENTS (TESLA) 1.1. Commercial General Liability Insurance. 1.1.1. USD $5,000,000 each occurrence or per claim, combined single limit for third party bodily injury or property damage. 1.1.2. USD $10,000,000 general aggregate 1.1.3. Coverages. 1.1.3.1. The total of required limits for liability coverage required herein may be met by combination of Primary and Umbrella or Excess Liability policies. 1.1.3.2. Include the City as additional insured where required by written contract. 1.2. Business Automobile Liability Insurance. 1.2.1. USD $1,000,000 combined single limit for third party bodily injury or third party property damage, 1.2.2. Coverages. 1.2.2.1. Coverage with respect to any I vehicles of Tesla used in connection with the work performed under this Agreement. 1.2.2.2. Include the City as additional insured where required by written contract. 1.3. Workers Compensation and Employers Liability Insurance. 1.3.1. Workers Compensation 1.3.1.1. Coverages. 1.3.1.1.1. As required by state or federal laws. 1.3.1.1.2. Tesla may waive Workers' Compensation Insurance requirement if it is a qualified self -insured in the state in which the work under this Agreement is performed. 1.3.2. Employer Liability 1.3.2.1. USD $1,000,000 bodily injury for each accident. 1.3.2.2. USD $1,000,000 bodily injury by disease for each employee. 1.3.2.3. USD $1,000,000 bodily injury by disease policy limit. Waiver of Subrogation. Where permitted by law, all insurances required in Exhibit F shall include a waiver of subrogation. This release and waiver shall be null and void if such loss or damage may have been caused by the sole or gross negligence of the other party. Notice of Cancellation. Tesla shall give the other party prior written notice in the event of cancellation of any policy required to be obtained under Exhibit F. Deductibles and Self -Insured Retentions. Tesla may select their own insurance deductibles or self -insured retentions for insurances required under Exhibit F, to the extent 6056799 Hanover Substation Item 14: Staff Report Pg. 97 Packet Pg. 502 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit F to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement such deductibles or self -insured retentions are reasonable. Tesla's self -insured retentions and deductibles are the sole responsibility of Tesla. Certificates of Insurance. Prior to commencing any work, and upon each renewal of insurance during the Term, Tesla shall provide certificates of insurance to the other party evidencing the required insurance in Exhibit F. Subcontractor Insurance. Tesla shall require each of its subcontractors performing work during the Term to maintain insurance coverage in accordance with the insurance requirements of Tesla's standard subcontract, supplier or designer agreements, as applicable. 6056799 Hanover Substation Item 14: Staff Report Pg. 98 Packet Pg. 503 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit G to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement EXHIBIT G INSURANCE REQUIREMENTS (ENGINEER) 1.1. Commercial General Liability Insurance. 1.1.1. USD $2,000,000 each occurrence or per claim, combined single limit for third party bodily injury or property damage. 1.1.2. USD $2,000,000 general aggregate 1.1.3. Coverages. 1.1.3.1. The total of required limits for liability coverage required herein may be met by combination of Primary and Umbrella or Excess Liability policies. 1.1.3.2. Include the City and Tesla as additional insured. 1.1.3.3. Separation of insureds/severability of interests. 1.2. Business Automobile Liability Insurance. 1.2.1. USD $1,000,000 combined single limit for third party bodily injury or property damage. 1.2.2. Coverages. 1.2.2.1. Coverage with respect to any and all vehicles of the General Contractor whether owned, hired, leased, borrowed, or non -owned, assigned to or used in connection with the work performed under this Agreement. 1.2.2.2. Include the City and Tesla as additional insured. 1.2.2.3. Separation of insureds/severability of interests. 1.3. Workers Compensation and Employers Liability Insurance. 1.3.1. Workers Compensation 1.3.1.1. Coverages. 1.3.1.1.1. As required by state or federal laws. 1.3.1.1.2. The General Contractor may waive Workers' Compensation Insurance requirement if it is a qualified self -insured in the state in which the work under this Agreement is performed. 1.3.2. Employer Liability 1.3.2.1. USD $1,000,000 bodily injury for each accident. 1.3.2.2. USD $1,000,000 bodily injury by disease for each employee. 1.3.2.3. USD $1,000,000 bodily injury by disease policy limit. 1.4. Professional Liability or Errors and Omissions Insurance. 1.4.1. USD $5,000,000 each claim. 1.4.2. USD $5,000,000 in aggregate. 1.4.3. Coverages. 1.4.3.1. Written on a Claims -made basis 1.4.3.2. The retroactive date shall be not later than the Effective Date. 6056799 Hanover Substation Item 14: Staff Report Pg. 99 Packet Pg. 504 of 553 Docusign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit G to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement Waiver of Subrogation. Where permitted by law, all insurances required in Exhibit G shall include a waiver of subrogation. This release and waiver shall be null and void if such loss or damage may have been caused by the sole or gross negligence of the other party. Notice of Cancellation. The Engineer shall give the City prior written notice in the event of cancellation of any policy required to be obtained under Exhibit F. Certificates of Insurance. Prior to commencing any work, and upon each renewal of insurance during the Term, Tesla shall provide certificates of insurance to the City evidencing the required insurance in Exhibit G. 6056799 Hanover Substation Item 14: Staff Report Pg. 100 Packet Pg. 505 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit H to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement EXHIBIT H INSURANCE REQUIREMENTS (GENERAL CONTRACTOR) 1.1. Commercial General Liability Insurance. 1.1.1. USD $5,000,000 each occurrence or per claim, combined single limit for third party bodily injury or property damage. 1.1.2. USD $5,000,000 general aggregate 1.1.3. USD $5,000,000 products/completed operations aggregate. 1.1.4. Coverages. 1.1.4.1. The total of required limits for liability coverage required herein may be met by combination of Primary and Umbrella or Excess Liability policies. 1.1.4.2. Include the City and Tesla as additional insured. 1.1.4.3. Separation of insureds/severability of interests. 1.2. Business Automobile Liability Insurance. 1.2.1. USD $5,000,000 combined single limit for third party bodily injury or property damage, 1.2.2. Coverages. 1.2.2.1. Coverage with respect to any and all vehicles of the General Contractor whether owned, hired, leased, borrowed, or non -owned, assigned to or used in connection with the work performed under this Agreement. 1.2.2.2. Include the City and Tesla as additional insured. 1.2.2.3. Separation of insureds/severability of interests. 1.3. Workers Compensation and Employers Liability Insurance. 1.3.1. Workers Compensation 1.3.1.1. Coverages. 1.3.1.1.1. As required by state or federal laws. 1.3.1.1.2. The General Contractor may waive Workers' Compensation Insurance requirement if it is a qualified self -insured in the state in which the work under this Agreement is performed. 1.3.2. Employer Liability 1.3.2.1. USD $1,000,000 bodily injury for each accident. 1.3.2.2. USD $1,000,000 bodily injury by disease for each employee. 1.3.2.3. USD $1,000,000 bodily injury by disease policy limit. 1.4. Contractor's Pollution Liability Insurance. 1.4.1. USD $1,000,000 each claim. 1.4.2. USD $2,000,000 in aggregate. 1.4.3. Coverages. 1.4.3.1. Written on a Claims -made basis. 1.4.3.2. The retroactive date shall be not later than the Effective Date. 6056799 Hanover Substation Item 14: Staff Report Pg. 101 Packet Pg. 506 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Exhibit H to Substation Improvement Agreement Item 14 Attachment A -Tesla Substation Agreement Waiver of Subrogation. Where permitted by law, all insurances required in Exhibit H shall include a waiver of subrogation. This release and waiver shall be null and void if such loss or damage may have been caused by the sole or gross negligence of the other party. Notice of Cancellation. The General Contractor shall give the City prior written notice in the event of cancellation of any policy required to be obtained under Exhibit H. Certificates of Insurance. Prior to commencing any work, and upon each renewal of insurance during the Term, Tesla shall provide certificates of insurance to the City evidencing the required insurance in Exhibit H. 6056799 Hanover Substation Item 14: Staff Report Pg. 102 Packet Pg. 507 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement EXHIBIT I CONSTRUCTION CONTRACT FORM Master Services Agreement (Construction) This Master Services Agreement ("MSA" or "Agreement") is entered into by and between Tesla Inc., a Delaware corporation with offices at 13101 Tesla Road, Austin, Texas 78725 ("Tesla" or "Owner") and the service provider identified below ("Contractor") effective as of the date signed below by Tesla ("Effective Date") and govern Contractor's performance, and Tesla's purchase, of services. 1. THE SERVICES 1.1 Obligation to Provide the Services, Generally. The parties intend through this Agreement to create a master contract setting forth the terms and conditions under which the Contractor will perform the Work and/or specified services, which make up the whole or a portion of particular Project or Projects. Individual work orders ("Work Authorization" or "Work Authorizations") will be executed in the form attached hereto as Exhibit A, setting forth the agreement regarding Project -specific terms. This Agreement does not obligate Owner to engage Contractor to perform any work or Contractor to perform any work, until both parties have signed a Work Authorization, and then only for the Project specified in the Work Authorization. Any affiliate of Owner (the "Service Recipient") will have the right to enter into a Work Authorization pursuant to this Agreement, and with respect to such Work Authorization, such affiliate becomes a party to this Agreement and references to Owner in this Agreement are deemed to be references to such affiliate. 1.2 Authorization of Services through Work Authorization. Contractor shall provide, and Tesla may purchase, Services pursuant to a Work Authorization. Both parties must sign a Work Authorization for it to be effective. If Contractor commences services for Owner or any affiliate of Owner in the absence of a Work Authorization, this Agreement will nevertheless apply, unless the parties agree otherwise in a writing signed by both parties. If there is a conflict between this Agreement and an Work Authorization, the terms of this Agreement will prevail; except that an Work Authorization may amend or override the terms of this Agreement if and to the extent that the Work Authorization identifies the provision(s) of the Agreement the Work Authorization is intended to amend or override and expressly states that the Parties intend to amend or override such provision(s) for purposes of that Work Authorization. The execution of a Work Authorization by the Owner and the Contractor creates a separate and distinct standalone construction contract that is applicable only to the Project identified in the Work Authorization, even though such Project -specific construction contract incorporates and makes reference to this Agreement, and other Project -specific construction contracts may also incorporate and refer to this Agreement. In no event shall the rights and obligations of the Owner and Contractor under one Project -specific construction contract affect the rights and obligations of Owner and Contractor under a different Project -specific construction contract. 1.3 Work: Scope of the Services. For each Project, the term "Work" means all reasonably necessary and inferable construction and services required of the Contractor by the Contract Documents (including, without limitation, all work, labor, materials, tools, equipment, transportation, procedures, techniques, and supplies), whether completed or partially completed, and whether completed by Contractor, Subcontractors, Sub - subcontractors, Suppliers or any other entity for whom the Contractor is responsible under or pursuant to the Contract Documents, and includes all other labor, materials, equipment and services provided or to be provided by the Contractor to fulfill the Contractor's obligations, including final completion of the construction in accordance with the Drawings and Specifications to achieve a complete and functioning Project in compliance with the Contract Documents. The Work may constitute the whole or a part of the Project, as described in the applicable Work Authorization. The "Services" are the following, as they may be supplemented, modified or replaced during the Term: (a) the functions described in this Agreement or in an Work Authorization as functions for which Contractor is responsible; and (b) any functions related to the foregoing that are not specifically described in this Agreement or in an Work Authorization but are required for the provision of the Services and the completion of the Work in accordance with this Contract Documents. 1.4 Services Not Exclusive. Contractor is a non-exclusive provider of Services. Tesla and its Affiliates have no obligation to order or purchase any Services. The extent and quantity of Services purchased shall be Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 1 Item 14: Staff Report Pg. 103 Packet Pg. 508 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement determined by Tesla. Tesla may purchase from any third party services that are identical or similar to the Services described in this Agreement. Contractor will cooperate and coordinate with Tesla or any other service providers selected by Tesla as reasonably required for Tesla or the service provider to perform services for which it is responsible. 1.5 Relationship of the Parties. The Contractor accepts the relationship of trust and confidence established by this Agreement and covenants with the Owner to cooperate with the Owner and all of the Owner's consultants, and exercise the Contractor's skill and judgment in furthering the interests of the Owner; to furnish efficient business administration and supervision; to furnish at all times an adequate supply of workers and materials; and to perform the Work in an expeditious and economical manner consistent with the Owner's interests. The Owner agrees to furnish and approve, in a timely manner, information required by the Contractor and to make payments to the Contractor in accordance with the requirements of the Contract Documents. Nothing in this Agreement shall be deemed to create a joint venture or partnership between Contractor and Tesla or any of Tesla's Affiliates. 1.6 The Contract Documents. The Contract Documents form the "Contract for Construction" or the "Contract". The Contract represents the entire and integrated agreement between the Owner and Contractor and supersedes prior negotiations, representations or agreements, either written or oral. The Contract may be amended or modified only by a Work Authorization or Modification. The Contract Documents shall not be construed to create a contractual relationship of any kind (1) between the Owner and a Subcontractor or a Sub - subcontractor, or (2) between any persons or entities, other than the Owner and the Contractor. For each Project, the Contract Documents consist of this Agreement, any Supplementary Conditions of the Agreement as set forth in the applicable Work Authorization, Drawings, Specifications, Addenda issued prior to execution of this Agreement, the applicable Work Authorization, other documents listed in the Work Authorization and Modifications issued after execution of this Agreement, all of which form the Contract, and are as fully a part of the Contract as if attached to this Agreement or repeated herein. Except as provided to the contrary in any Work Authorization or Modification, the Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral, including, without limitation the terms of any purchase order now or hereafter accepted (or deemed accepted) by Contractor. 2. PERFORMANCE 2.1 Time of Performance. (a) Contract Time. The Commencement Date shall be the date of the notice to proceed with construction on the Project site ("Notice to Proceed") sent by Owner to Contractor with respect to the Project or such other date as set forth in the Work Authorization. No Work on site shall be commenced by Contractor until receipt of a Notice to Proceed from Owner. However, during the period between the date the Agreement is executed and the date the Notice to Proceed is issued, certain elements of the Work may be authorized by the Owner. During such period all of the terms of the Agreement shall apply. The Contract Time shall be measured from the Commencement Date as specified in the applicable Work Authorization or Notice to Proceed. The Contractor shall achieve Substantial Completion of the Work within the Contract Time(s) specified in the applicable Work Authorization, subject to adjustments of the Contract Time as provided in the Contract Documents. Contractor will provide the resources necessary to, and will, complete all Services diligently, in a timely manner, and in accordance with the time schedules set forth in this Agreement (or applicable Work Authorization). Time is of the essence with respect to the provision of Services under this Agreement. Contractor will promptly notify Tesla in writing upon becoming aware of any circumstances that may reasonably be expected to jeopardize the timely completion of any Services. Contractor will use Commercially Reasonable Efforts to avoid or minimize any delays in performance and will inform Tesla of (a) the steps Contractor is taking or will take to do so and (b) the projected completion time. Within thirty days after the Effective Date, Contractor shall prepare and submit to Owner for Owner's approval a schedule for performance of the Work in a format and with a level of detail acceptable to Owner (the "Construction Schedule"). The Construction Schedule shall be of a critical path method type, acceptable to the Owner, that shall also (i) provide a graphic representation of all activities and events that will occur during the performance of the Work; (ii) identify each phase of construction and occupancy; (iii) set forth dates that are critical in ensuring the timely and orderly completion of the Work in accordance with the requirements of the Contract Documents ("Project Milestones"); and (iv) include time loss for normal adverse weather conditions whether shown in the Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 2 Item 14: Staff Report Pg. 104 Packet Pg. 509 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement Contractor's logic and durations or not. The schedule shall be regularly updated by Contractor to reflect Project progress and conditions and any such updates shall be promptly provided to Owner in electronic and hard copy. (b) Substantial Completion. (i) Unless otherwise defined in an applicable Work Authorization, Substantial Completion is the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for its intended use, subject only to a list ("Punchlist') of minor items that do not adversely affect such use ("Punchlist Items'), provided, in addition, that as a condition precedent to Substantial Completion, the Contractor shall provide the Owner with a schedule of all permits required for the Work and occupancy of the Project and, attached to such schedule, a copy of each such permit. (ii) When the Contractor considers that the Work, or a portion thereof which the Owner agrees to accept separately, is substantially complete, the Contractor and Owner will make an inspection to determine whether the Work or designated portion thereof is substantially complete. If the Owner's inspection discloses any item, including a Punchlist Item, which is not sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work or designated portion thereof for its intended use, the Contractor shall, before issuance of the Certificate of Substantial Completion, complete or correct such item upon notification by the Owner. In such case, the Contractor shall then submit a request for another inspection by the Owner to determine Substantial Completion. (iii) When the Work or designated portion thereof is substantially complete, the Contractor will prepare a "Certificate of Substantial Completion" that shall establish the date of Substantial Completion, shall establish responsibilities of the Owner and Contractor for security, maintenance, heat, utilities, damage to the Work and insurance, and shall fix the time within which the Contractor shall finish any and all items on the Punch List accompanying the Certificate of Substantial Completion. Warranties required by the Contract Documents shall commence on the date of Substantial Completion of the Work or designated portion thereof unless otherwise provided in the Certificate of Substantial Completion. The Contractor shall complete all items within 30 days after issuance of the Certificate of Substantial Completion, provided, however, if certain items cannot be completed due_to the unavailability of necessary labor or materials, the Contractor shall have such additional time as is reasonably required to complete such items. All Work to be performed by the Contractor after Substantial Completion, including but not limited to Punch List work, shall be coordinated with the Owner and shall be performed after-hours unless otherwise agreed to by the Owner. (iv) The Certificate of Substantial Completion shall be submitted to the Owner and Contractor for their written acceptance of responsibilities assigned to them in such certificate. Upon such acceptance and consent of surety, if any, the Owner shall make payment of retainage applying to such Work or designated portion thereof Such payment shall be adjusted for Work that is incomplete or not in accordance with the requirements of the Contract Documents (c) Late Delivery Damages. Without limiting the foregoing and subject to the limitations, if any, set forth in the Work Authorization, Owner shall have the right to recover its damages incurred for actual, out-of-pocket costs either, in Owner's sole discretion, (i) to expedite Owner's vendors' work to avoid having to hold over in existing premises or to find replacement premises due to a delay caused by Contractor; or (ii) to hold over in existing premises or to find and occupy replacement premises, including, but not limited to, increased rent, moving, storage, transportation, fit -out and temporary occupancy costs due to a delay caused by Contractor. (d) Delays and Extensions of Times. If the Contractor is delayed at any time in the commencement or progress of the Work by (i) an act or neglect of the Owner or of an employee or of separate contractor employed by the Owner; or by changes ordered in the Work by Owner (collectively "Compensable Delays"); or by (ii) labor disputes beyond the Contractor's control, fire, or unavoidable casualties (collectively "Excusable Delays"), then in either case, the Contract Time shall be extended by Change Order to the extent such delay will prevent Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 3 Item 14: Staff Report Pg. 105 Packet Pg. 510 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement the Contractor from achieving Substantial Completion within the Contract Time, taking into consideration, without limitation, any float in the critical path Project schedule. The Contractor acknowledges and agrees that equitable adjustments in the Contract Time and equitable adjustments to the Contractor's General Conditions will be permitted for a delay only to the extent such delay (i) is not caused by the Contractor or its Subcontractors of any tier or its Suppliers, (ii) could not be limited or avoided by the Contractor's timely notice to the Owner of the delay or reasonable likelihood that a delay will occur, or (iii) could not be avoided or mitigated by reasonable work -around or precautionary measures. If there is a concurrent delay to the critical path attributable to Contractor and Owner, it will be proportionately allocated between Owner and Contractor based on the percent of impact caused by each party. The part of a concurrent delay allocated to the Owner is an Excusable Delay. Any adjustment in the Contract Time shall be limited to the impact of a delay on the critical path of the Project schedule. The Contractor further agrees that its right to receive an extension of time pursuant to the provisions of this Section shall be Contractor's sole and exclusive remedy with regard to any delays or interferences with the Contractor's schedule for completion of the Work, and Contractor hereby waives any and all claims for monetary damages arising out of or related to any such delay or interference, including, without limitation, claims for delay damages, and any other form of time -related damages, or any other claimed direct or consequential damages of any type or nature whatsoever. (e) Change Orders (i) Change Orders Generally. Changes in the Services may be accomplished after execution of the Work Authorization by written agreement (including via email) of Contractor and Tesla (each a "Change Order") using the change order form set forth in Exhibit B. Tesla will not be responsible for any change to the Contract Price unless Tesla approves or directs additional or changed Services through a Change Order before such additional or changed Services are commenced. Upon mutual execution of a Change Order, Contractor will promptly comply with such Change Order and all the terms and conditions of the Agreement apply to any Change Order. The Contract Price or Contract Time shall not be increased or extended by a Change Order except as specifically set forth in the Change Order. The adjustment to Con tract Price, if any, for any change agreed to by the Contractor and Tesla in a particular Change Order shall constitute full and total payment for such change and for the impact (direct or indirect) to the remainder of the Services, and no other claim for any additional cost, damage, loss or expenses of any kind may be made by Contractor as a result of such Change Order. (ii) Change Order Requests by Contractor. Contractor may request changes to a Work Authorization by delivering a written request to Tesla (a "Change Order Request'). Any Change Order Request made by Contractor will include the following information: (a) a clear and concise explanation of the proposed changes; (b) validation of the requirements of the changes; (c) the exact amount and explanation of methods used to calculate any adjustments in the Contract Price and/or Work Schedule resulting from the Changes; and (d) a proposal for an updated Contract Price, Contract Time and Project Milestones, as applicable. A Change Order Request will not modify any Order until Testa executes a Change Order expressly accepting the Change Order Request. Contractor will continue to perform obligations under the Agreement and Order regardless of the status or outcome of Change Order Requests. 2.2 Manner of Performance. The Contractor agrees to provide the Work in accordance with the requirements of the Contract Documents and in accordance with the construction industry standards and practices. For each Project, the Contractor shall fully execute the Work described in the Contract Documents, except as specifically indicated in the Contract Documents to be the responsibility of others. The Contractor shall supervise and direct the Work, using the Contractor's best skill and attention in accordance with the Contract Documents, all Laws, and the construction standards and practices for the industry. The Contractor shall be solely responsible for, and have control over, initiating, maintaining, and supervising all safety precautions and programs to insure the safe provision or performance of the Work, and will control, supervise and direct the construction means, methods, techniques, sequences and procedures and coordinate all portions of the Work under the Contract, unless the Contract Documents give other specific instructions concerning these matters. If the Contract Documents give specific instructions concerning construction means, methods, techniques, sequences or procedures, the Contractor shall evaluate the jobsite safety thereof and, except as Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 4 Item 14: Staff Report Pg. 106 Packet Pg. 511 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement stated below, shall be fully and solely responsible for the jobsite safety of such means, methods, techniques, sequences or procedures. If the Contractor determines that such means, methods, techniques, sequences or procedures may not be safe, the Contractor shall give timely written notice to the Owner and shall not proceed with that portion of the Work without further written instructions from the Owner. If the Contractor is then instructed to proceed with the required means, methods, techniques, sequences or procedures without acceptance of changes proposed by the Contractor, the Contractor shall not be responsible for any loss or damage arising solely from those Owner -required means, methods, techniques, sequences or procedures. Except with respect to third -party vendors performing work at the Project site pursuant to separate contracts between the Owner and such vendors, Contractor shall be solely responsible for all construction means, methods, techniques, sequences and procedures and for coordinating all portions of the Work. Contractor shall give Contractor's personal supervision to the Work using Contractor's best skill and attention. Contractor agrees to cooperate and coordinate with any third -party vendors performing work at the Project site pursuant to separate contracts between the Owner and such vendors, including reasonable cooperation in scheduling the use of shared items such as freight elevators, cranes and loading areas 2.3 Review of Project Site and Contract Documents. Execution of the Agreement by Contractor constitutes a representation by Contractor that it has visited the Project Site and reviewed the Contract Documents, and is familiar with the requirements of the Work and the conditions under which the Work will be performed. In particular, Contractor represents that it has satisfied itself with regard to the geotechnical and underground conditions related to the Work, and has performed all of the investigation of such conditions the Contractor has determined is necessary. The Contractor shall promptly send written notice to the Owner if the Contractor encounters any differing site conditions, or if the Drawings and Specifications are incomplete or if there are any errors or omissions in the Drawings. In addition, as part of the Work, the Contractor must satisfy all applicable federal and local laws, codes, regulations, ordinances and orders, as well as applicable regulations of any other body with jurisdiction over the Project and requirements of public or private utilities with no increases in the Contract Price or Contract Time. The Contractor acknowledges that (a) the Contractor has included the Contract Price to cover all costs which may result from the risks assumed by the Contractor in this Agreement, (b) the Contractor waives all rights to claim additional costs above the Contract Price as a result of the assumption of these risks, and (c) the provisions of this paragraph 2.3 apply notwithstanding any provisions to the contrary contained in the Contract Documents. 2.4 Responsibility for Supplying Certain Resources. Contractor shall provide and pay for all labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation, and other facilities and services necessary for proper execution and completion of the Work whether temporary or permanent and whether or not incorporated into the Work. Contractor shall be responsible for the proper delivery, handling, application, storage, removal and disposal of all materials and substances brought to the Project Site by Contractor. The Contractor shall have the responsibility to coordinate the Contractor's work with the utility service providers, municipal and/or off -site Contractors related to the Project and in the absence of other special provision of Contract Documents to the contrary, shall be required to coordinate with said entities the physical street/right-of-way work and connection to the structures and/or extensions from the structures to the off -site and/or on -site utilities so that the Work constructed by the Contractor is properly sequenced, and functional for the intended use and purpose thereof. Such coordination and supervision costs incidental thereto, are incidental to the Work and part of the Contract Price. Contractor shall plan and lay out all Work in advance of operations so as to coordinate all Work without delay or revision. Contractor shall establish and maintain existing lot lines, restrictions and benchmarks. Contractor shall establish and maintain all other lines, levels and benchmarks necessary for execution of the Work and take necessary steps to prevent dislocation or destruction. 2.5 Compliance with Laws and Tesla Policies. (a) Except for permits and fees that are specifically made the responsibility of Tesla by this Agreement or any Work Authorization, Contractor will, at its cost and expense, obtain all necessary regulatory approvals, licenses, and permits (collectively, "Permits") applicable to its business and comply with all Laws applicable to its business or the performance of its obligations under this Agreement, as such Laws may be revised from time to time. Contractor shall provide copies of any such Permits at Tesla's request. (b) Contractor will comply with, and perform the Services in compliance with, all Laws pertaining to: (i) occupational safety and health; (ii) protection of persons and property from death, injury or damage; (iii) the environment and the use, handling, storage, labeling and disposal of toxic or hazardous materials; Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 5 Item 14: Staff Report Pg. 107 Packet Pg. 512 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement (iv) labor and employment conditions; (v) wages and hours; (vi) workmen's compensation and unemployment insurance, (vii) affirmative action and equal employment opportunity; and (viii) to the extent relevant to Contractor's performance of Services, Laws with respect to data privacy, data protection, and consumer privacy. (c) To the extent not prohibited by Law, Contractor will promptly notify Tesla in writing of any investigation or inquiry into whether Contractor (or any of its Subcontractors) is charged with failing to comply with any Laws that may or will impact, or are otherwise applicable to, Contractor's performance under this Agreement. (d) If the Project site is a site that Owner leases from the underlying owner of the site (the "Landlord"l and Owner is making improvements to the site for purposes of occupancy as a tenant in connection with the use and occupancy of the Project site. Contractor will comply with the requirements of the use, license, or lease agreement to which Owner and Landlord are a party, together with any rules and regulations of the Project site put in place by the Landlord. Contractor acknowledges that disputes between Owner and Landlord (if any) may become subject to arbitration under the provisions of lease between Owner and Landlord, and if requested in writing by Owner to do so, Contractor shall participate in and become a party to any such arbitration proceeding and agrees to be bound by any final and binding arbitration decision rendered therein. This Section shall apply only to issues and claims directly relating to Contractor and only so long as Contractor has the opportunity and rights to fully participate in any arbitration, including, but not limited to, selection of arbitrators. (e) Contractor will comply with any Tesla policies, standards, rules, and procedures (collectively, "Tesla Policies") applicable to performance of the Services or the Tesla Facility that are disclosed to Contractor in writing, as such Tesla Policies maybe revised from time to time. 2.6 Suspension of Performance. The Owner may, without cause, order the Contractor in writing to suspend, delay or interrupt the Work in whole or in part for such period of time as the Owner may determine. The Contract Price and Contract Time shall be adjusted for increases and decreases in the cost and time caused by suspension, delay or interruption as described in Section 2.1(d). No adjustment shall be made to the extent: (1) that performance is, was or would have been so suspended, delayed or interrupted by another cause for which the Contractor is responsible; or (2) that an equitable adjustment is made or denied under another provision of the Contract. 2.7 Warranty. In addition to any other warranty provisions contained in the Agreement, Contractor warrants to Tesla that Materials and equipment furnished under the Agreement will be of good quality and new unless otherwise required or permitted, that the Work will be free from defects not inherent in the quality required or permitted, and that the Work will conform to the requirements of the Contract Documents. Work not conforming to these requirements, including substitutions not properly approved, shall be considered defective. Contractor's warranty excludes damage or defect caused by abuse, modifications not executed by Tesla, improper or insufficient maintenance, improper operation, or normal wear and tear and normal usage. Contractor shall furnish satisfactory evidence as to the kind and quality of materials and equipment. The minimum warranty provided by Contractor shall be 1 year from the date of Substantial Completion. Contractor will promptly correct any Work that are defective or that do not otherwise comply with the Work Authorization at Contractor's sole expense without causing unreasonable interruption to Customer's business operations in the Project. All warranties shall survive completion, acceptance and final payment. In the event that damage or defect is caused by abuse, improper modification, or lack of maintenance on Tesla's part, the warranty shall only exclude any such specific damage or defect and shall continue to cover the rest of the assembly, provided that in the event the defect relates to material or equipment that has been specified by Tesla by brand name, the manufacturer's warranty shall apply in the event of conflict between the manufacturer's warranty and this sentence. To the extent the Work consist of equipment or other movable or functional components manufactured by other companies, Contractor will obtain warranties for such equipment or components for a period of no less than the manufacturer's standard warranty period and Contractor will manage administration of the warranties issued by those companies. Contractor will not be liable for defects in these components or damages resulting from these defects, unless due to Contractor's negligent procurement or installation. 2.8 Hazardous Materials. Contractor is responsible for compliance with any requirements included in the Contract Documents regarding hazardous materials. If the Contractor encounters a hazardous material or substance not addressed in the Contract Documents, Contractor shall, upon recognizing the condition, Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 6 Item 14: Staff Report Pg. 108 Packet Pg. 513 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement immediately stop Work in the affected area and report the condition to the Owner in writing. Owner shall obtain the services of a licensed laboratory to verify the presence or absence of the material or substance reported by the Contractor and, in the event such material or substance is found to be present, to cause it to be removed or rendered harmless. The Owner shall not be responsible under this Article 5.8 for materials Contractor brings to the Project Site. Except to the extent of the Contractor, Contractor's employees and agents, or subcontractor's negligence, or Contractor's failure to immediately provide notice to Owner regarding the hazardous materials (other than hazardous materials to which Contractor was already aware prior to the Effective Date herein referred to as "Known Environmental Conditions") as set forth above, the Owner shall indemnify and hold harmless the Contractor, subcontractors, and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work in the area affected by hazardous materials (other than Known Environmental Conditions) if in fact the material or substance presents the risk of bodily injury or death and has not been rendered harmless within a reasonable period of time after its discovery, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself), except to the extent that such damage, loss or expense is due to the fault or negligence of the party seeking indemnity. 2.9 Clean Project. Contractor shall keep the Project site and surrounding area free from accumulation of waste materials or rubbish caused by operations under the Agreement. At completion of the Work, Contractor shall remove waste materials, rubbish, Contractor's tools, equipment, machinery and excess materials from the Project Site. 2.10 Progress Reports. By 2:00 p.m. (PST) each Friday during the Contract Time, Contractor will deliver to Tesla in electronic format a weekly progress report, which report shall include, without limitation, (1) pictures of the Project site detailing progress made during the week, (2) a Change Order log, detailing any Change Orders that have been agreed to by the parties in the previous week, or have been proposed by either party during the previous week. Tesla's acceptance of Contractor's weekly progress report shall in no way serve as Tesla's acceptance of any Change Order that has not been otherwise agreed to by the parties. 3. CONTRACTOR PERSONNEL AND SUBCONTRACTING 3.1 General Requirements for Contractor Personnel. (a) "Contractor Personnel" means any personnel furnished by Contractor to perform any part of the Services, including employees and independent contractors of Contractor, its Affiliates and Subcontractors. (b) Contractor will assign an adequate number of Contractor Personnel to perform the Services who are properly educated, trained, familiar with and fully qualified for the Services they are assigned to perform (including, without limitation, licensed in the relevant regions to provide work that requires a license). Contractor will assign sufficient supervisory personnel to provide adequate liaison with Testa. Contractor will manage, supervise and provide direction to Contractor Personnel and cause them to comply with the obligations and restrictions applicable to Contractor under this Agreement. Contractor is responsible for the acts and omissions of Contractor Personnel under or relating to this Agreement. Contractor is responsible for validating the identity of and ensuring that Contractor Personnel assigned to perform Services (i) have the legal right to work in the country(ies) in which they are assigned to work, and (ii) conform to all applicable Tesla Policies with respect to personal and professional conduct (including the wearing of an identification badge and adhering to general safety, dress, behavior, and security practices). (c) Prior to assigning any Contractor Personnel to perform any Services, Contractor shall perform background checks of the personnel. Such background checks may have been performed as part of Contractor's standard pre -employment screening process and will include the following, at a minimum: (i) education verification; (ii) prior employment verification for all employees; (iii) social security verification; and (iv) felony and misdemeanor criminal checks. Tesla may require Contractor to provide written evidence of successful background checks on Contractor Personnel at any time. Unless prohibited by law, Contractor may not assign any person to perform Services for Tesla who was convicted of any criminal offense involving extortion, embezzlement, money laundering, or who has been convicted of a felony crime without Tesla's prior written consent. Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 7 Item 14: Staff Report Pg. 109 Packet Pg. 514 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement 3.2 Key Contractor Positions. "Key Contractor Positions" means those positions designated as such in Exhibit A or the applicable Work Authorization. Contractor will cause each of the Contractor Personnel filling the Key Contractor Positions to devote substantially full time and effort to the provision of the Services during the period of assignment. The appointment, removal and replacement of any person to a Key Contractor Position may only be made with Tesla's prior written approval, such approval not to be unreasonably withheld. 3.3 Subcontracting. (a) Work not performed by Contractor with its own forces shall be performed by Subcontractors ("Subcontractors"). Subject to Section 3.3(b), Contractor may not subcontract or delegate the performance of any part of the Services without Tesla's prior written consent, which Tesla may withhold in its sole discretion. If Tesla approves a Subcontractor that is an Affiliate of Contractor, such approval is subject to the Subcontractor remaining an Affiliate of Contractor. Tesla may require Contractor to replace any previously approved Subcontractor whose performance, in the reasonable judgment of Tesla, has been unacceptable. Contractor is responsible for managing all Subcontractors and is responsible for all Subcontractors to the same extent as if the subcontracted Services were retained by Contractor. Contractor will be Tesla's sole point of contact regarding the Services and all subcontracted Services, including for payment. Contracts entered into between Contractor and Subcontractors and Suppliers shall bind the Subcontractors and Suppliers to all the provisions of this Agreement as they apply to the Subcontractors' and Suppliers' portions of the Work, (b) Contractor may, in the ordinary course of business, utilize third party services or products that are not dedicated to performance of Services for Tesla and that are not material to any particular function constituting a part of the Work. Contractor may also engage individual independent contractors to supplement its employee workforce. Such arrangements do not constitute Subcontracting for the purposes of this Section. Contractor will nevertheless be responsible for such parties. The Contractor shall be responsible to the Owner for acts and omissions of the Contractor Parties, the Contractor's employees, Subcontractors and their agents and employees, and other persons or entities performing portions of the Work for, or on behalf of, the Contractor or any of its Subcontractors. Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 8 Item 14: Staff Report Pg. 110 Packet Pg. 515 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 T 5 L n A Attachment a Substation Agreement 4. CHARGES 4.1 Contract Price. For each Project, the Owner shall pay the Contractor in current funds the Contract Price in the applicable Work Authorization, as adjusted for additions or deductions made by Change Order in accordance with the Contract Documents. For clarification, Owner will make no payments to Contractor apart from those it makes for Work Authorization and shall not exceed the Contract Price. 4.2 Schedule of Values. Owner shall pay Contractor for successfully carrying out the Work according to the agreed schedule of values defined in the relevant Work Order unless specified therein that Contractor will only be entitled to request payment of amounts associated with a Construction Milestone upon completion of the applicable Construction Milestone conditions precedent. 4.3 Progress Payment. Subject to the terms of this Section 4.3, on or before the 25th day of each month after the Effective Date, Contractor shall submit to Owner an application for payment ("Application for Payment") in a form acceptable to Owner, for payment of the portion of the Work actually completed in the period covered by the Application for Payment. Based upon Applications for Payment submitted to the Owner by the Contractor with all necessary supporting documentation required by this Agreement, the Owner shall make progress payments for Work completed in accordance with the Contract Documents. Such payments shall be made to the Contractor as provided below and elsewhere in the Contract Documents. The period covered by each Application for Payment shall be one calendar month ending on the last day of the month or as set forth in the applicable Work Authorization. Owner shall make payment to the Contractor sixty (60) days after receipt of an Application for Payment that complies with this Agreement. Contractor shall submit Applications for payment for the labor and materials furnished the prior month, on a monthly basis. (a) Each Application for Payment submitted by Contractor shall contain sufficient detail for Owner to discern how the amount requested in such application is broken out among Contractor's costs of supplies, materials, Subcontractors (identified individually with specificity), taxes, fee, overhead and any other costs, and any other details which Owner may request. Each such Application for Payment shall be accompanied by (i) conditional lien releases from all Subcontractors and material Contractors who performed and were paid for any Work or provided and were paid for any materials for the Work through the date of the Application for Payment and (ii) unconditional lien releases from all Subcontractors and material Contractors who performed and were paid for Work or provided and were paid for any materials for the Work through the date of the prior Application for Payment, such that at the time of an Application for Payment the unconditional and conditional lien releases for the Project shall be current for all materials provided to and Work performed on the Project through the respective Application for Payment. Owner's obligation to pay Contractor the amount requested in the correct Application for Payment shall be subject to Owner's receipt of both such lien releases, which must be reasonably satisfactory to Owner. All lien waivers and releases and all stop payment documents shall comply with all Laws of the state in which the Project is located. (b) Each Application for Payment shall be based on the most recent schedule of values submitted by the Contractor in accordance with the Contract Documents. The Contractor shall update the schedule of values as reasonably requested by Owner, but no less than every three months, to show changes therein. The schedule of values shall allocate the entire Contract Price among the various portions of the Work. The schedule of values shall be prepared in such form and supported by such data to substantiate its accuracy as the Owner may require. This schedule, unless objected to by the Owner, shall be used as a basis for reviewing the Contractor's Applications for Payment. (c) Each Application for Payment shall show the percentage of completion of each portion of the Work as of the end of the period covered by the Application for Payment. The percentage of completion shall be the lesser of (1) the percentage of that portion of the Work which has actually been completed; or (2) the percentage obtained by dividing (a) the expense that has actually been incurred by the Contractor on account of that portion of the Work for which the Contractor has made or intends to make actual payment prior to the next Application (d) Each Application for Payment made by the Contractor to the Owner shall constitute a warranty to Owner that the Work has progressed to the point indicated and that the quality of the Work is in accordance with the Contract Documents. In taking action on the Contractor's Applications for payment or by making payments upon any Application for Payment, the Owner shall be entitled to rely on the accuracy and completeness of the information furnished by the Contractor and shall not be deemed to represent that the Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 9 Item 14: Staff Report Pg. 111 Packet Pg. 516 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E - Item 14 1 T 5 L n Attachment A -Testa Substation Agrr eement Owner has made a detailed examination, audit or arithmetic verification of the documentation or other supporting data; that the Owner has made exhaustive or continuous on -site inspections, or that the Owner has made any on -site inspections; or that the Owner has made examinations to ascertain how or for what purposes the Contractor has used amounts previously paid on account of the Contract. Such examinations, audits and verifications, if required by the Owner, will be performed by the Owner's auditors or other personnel acting in the sole interest of the Owner. (e) Charges, if any, that Contractor fails to invoice to Tesla within 120 days of the date that such charges should have been billed to Tesla will not be payable by Tesla. In the case of third party charges for which Tesla is responsible for paying or reimbursing Contractor, the 120 -day period will not begin to run until Contractor has been invoiced for such charges by the applicable third party. (f) The amount to be paid on an Application for Payment shall be calculated by: (i) Take that portion of the Contract Price properly allocable to completed Work as determined by multiplying the percentage of completion of each part of the schedule of values less retainage. Pending final determination of cost to the Owner of changes in the Work, amounts not in dispute may be included; (ii) Add that part of the schedule of values allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the Work, or if approved in advance by the Owner, suitably stored off the site at a location agreed upon in writing, less retainage; (iii) Subtract the aggregate of previous payments made by the Owner; (iv) Subtract the shortfall, if any, indicated by the Contractor in the documentation required by Section 4.3(a) to substantiate prior Applications for Payment, or resulting from errors subsequently discovered by the Owner's auditors in such documentation; and (v) Subtract amounts, if any, for which the Owner has withheld payment as provided in Section 4.4. 4.4 Owner Withholding. Owner shall be permitted to withhold progress payments from Contractor for any of the reasons identified below until the reasons giving rise to the withholding are removed: (a) defective Work not remedied; (b) third party claims filed or reasonable evidence indicating probable filing of such claims unless security acceptable to the Owner is provided by the Contractor; (c) failure of the Contractor to make payments properly to Subcontractors and/or Suppliers or for labor, materials or equipment; (d) reasonable evidence that the Work cannot be completed for the unpaid balance of the Contract Price; (e) damage to the Owner or a separate contractor; (f) reasonable evidence that the Work will not be completed within the Contract Time, and that the unpaid balance would not be adequate to cover actual or liquidated damages for the anticipated delay; (g) failure to carry out the Work in accordance with the Contract Documents; (h) any claims which Owner has against Contractor under or in connection with the Contract Documents or Contractor's work; or (i) failure of the Contractor to provide updated weekly status reports and progress schedules. Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 10 Item 14: Staff Report Pg. 112 Packet Pg. 517 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement When the reasons giving rise to the withholding are removed, Owner shall pay the withheld amounts within thirty (30) days. 4.5 Retention. Except with the Owner's prior approval, payments to Subcontractors and Contractors at all tiers (including all major fabricators and manufacturers) and to the Contractor for self -performed work shall be subject to retainage of not less than ten percent (10%) unless stated otherwise in the applicable Work Authorization. The Owner and the Contractor shall agree upon a (1) mutually acceptable procedure for review and approval of payments to Subcontractors and (2) the percentage of retainage held on Subcontracts, and the Contractor shall execute subcontracts in accordance with those agreements. Payments to Contractor shall be subject to a retainage of 10% of the Contract Price with the final 10% of Contract Price payable upon Final Completion unless stated otherwise in the applicable Work Authorization. 4.6 Contractor Payment of Subcontractors. Within seven days after receipt of any progress payment by Contractor, Contractor shall pay (and secure the discharge of any liens asserted by) all persons furnishing labor, equipment, materials or other items in connection with the performance of the Work (including, but not limited to, any Subcontractors, Sub -subcontractors or Suppliers). Contractor agrees that provided Owner has paid Contractor in accordance with the Contract, Owner has the right to a lien free Project. Owner may, at its discretion, make joint payments to Contractor and its creditors. Owner reserves the right, in the event a claim is made against Owner arising out of any obligation incurred by Contractor under the Contract or in connection with performance of the Work, to withhold payments due to or become due to Contractor in such amounts as are necessary to cover the claim and any costs or expenses arising in connection with the legal settlement thereof. Contractor further agrees that if any lien or claim is filed or made against the Project site, Project or Owner as a result of Contractor's failure to meet its obligations, Owner upon fourteen (14) days prior written notice shall have the right to settle said lien or claim directly and deduct the cost of the settlement from payments due Contractor, provided that Contractor within such fourteen (14) day period has not settled such lien or claim or bonded around such lien claim in a manner satisfactory to Owner. 4.7 Final Payment. Provided that the Contract Price is not exceeded, final payment, constituting the entire unpaid balance of the Work (which shall include the retention withheld), shall be made by the Owner to the Contractor when (a) the Contractor has fully performed the Contract (including completing work on Punch Lists) except for the Contractor's responsibility to correct Work, and to satisfy other requirements, if any, which extend beyond final payment; (b) the Contractor has submitted a final accounting for the Work and a final Application for Payment; (c) Contractor has submitted to Tesla both a physical copy (to be left at the Project site) and a digital copy of the final as -built record Drawings and Specifications in both of physical copy (d) Contractor has submitted to Tesla all warranties and all operation and maintenance manuals; (e) Completion of Punch List items; (f) Appropriate final lien releases have been delivered to the Owner for Contractor, all Subcontractors, and all Contractors; and (g) the Contractor has recorded a certificate of completion with the applicable governmental authority in accordance with the Laws. As used herein, the term "Final Completion" and words of similar impact shall mean that all of the requirements set forth above have been fully performed, and "Final Completion Date" shall mean the date on which Final Completion occurs. The Owner's final payment to the Contractor shall be made no later than sixty (60) days after receipt by Owner of a final Application for Payment containing confirmation of the items set forth above and such other terms as a required pursuant to the terms of the Contract Documents. Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page!! Item 14: Staff Report Pg. 113 Packet Pg. 518 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E EE Item 14 T5L nAAttachmn a Substation Agreement 4.8 Incidental and Out -of -Pocket Expenses. (a) Unless expressly provided otherwise in a Work Authorization, Tesla is not responsible for any additional costs or expenses of any nature incurred by Contractor in connection with the provisions of the Services, including travel expenses, clerical or administrative personnel, long distance telephone charges, etc. ("Incidental Expenses"). To the extent that an Work Authorization requires Tesla to reimburse Contractor for Incidental Expenses, Tesla is not responsible for any such reimbursement unless the expenses are (i) approved, in each instance, in advance by Tesla; (ii) substantiated by appropriate receipts and related documentation; and (iii) in compliance with Tesla's corporate travel policies and procedures, as amended from time to time in Tesla's sole discretion. In no event will Tesla be liable for payment of any Incidental Expenses that exceed Contract Price under a Work Authorization by 10% or more. (b) "Out -of -Pocket Supply Expenses" are the reasonable, demonstrable and actual out-of-pocket expenses incurred by Contractor for equipment, materials, or supplies required for performance of the Services and specified in writing by Tesla as reimbursable, and "Out -of -Pocket Service Expenses" are the reasonable, demonstrable and actual out-of-pocket expenses incurred by Contractor for services (such as with tier 2 service providers) required for performance of the Services and specified in writing by Tesla as reimbursable ("Out -of - Pocket Expenses" refers collectively to Out -of -Pocket Supply Expenses and Out -of -Pocket Service Expenses). Out -of -Pocket Expenses are to be determined net of all rebates, discounts and allowances received by Contractor, and shall not include Contractor's actual or allocated overhead costs, administrative expenses or other mark-ups; provided, however, that Contractor may charge Tesla a five percent (5%) markup on Out -of - Pocket Supply Expenses. 4.9 Taxes. (a) Contractor may charge, and Owner will pay, applicable federal, state or local sales or use taxes or value added taxes that Contractor is legally obligated to charge with respect to the Work ("Taxes"), provided that the Contractor shall identify the amount of Taxes due on each payment as a separate line item on its Application for Payment and shall be responsible for remitting to the appropriate office of the State in which the Project is located, the amount received from the Owner for payment of Taxes. Although not included as part of the Contract Price, the Contractor shall show Taxes for the Contract Price on the schedule of values as a separate line item. Owner may provide Contractor an exemption certificate acceptable to the relevant taxing authority, in which case Contractor shall not collect the Taxes covered by such certificate, and if the Contract Price assumed that such Taxes would be collected, the Contract Price shall be reduced by the amount of such Taxes. Contractor will be solely responsible for all other taxes or fees (including penalties, interest, and other additions thereto) arising from the Contract and Work. (b) Withholding Taxes. Owner shall maintain the right to deduct or withhold any taxes that Owner determines it is obligated to withhold from any amounts payable to Contractor under this Agreement, and payment to Contractor as reduced by such deductions or withholdings will constitute full payment and settlement to Contractor of such amounts. Tesla shall not be obligated to pay for any Taxes (i) that are assessed on any goods or services used or consumed by Contractor (or its Subcontractors) in providing the Services where the tax is imposed on Contractor's (or its Subcontractor's) acquisition or use of the goods or services in its provision of the Services; or (ii) that are assessed by taxing authorities in countries other than the United States or the country in which Tesla receives the Services.If laws, rules or regulations require the withholding of income taxes or other taxes imposed upon payments set forth in this Section 4, Tesla shall make such withholding payments as required and subtract such withholding payments from the payments. Tesla shall submit appropriate proof of payment of the withholding taxes to the Contractor within a reasonable period of time. At the request of Contractor, Tesla shall give Contractor such reasonable assistance, which shall include the provision of appropriate certificates of such deductions made together with other supporting documentation as may be required by the relevant tax authority, to enable Contractor to claim exemption from such withholding or other tax imposed or obtain a repayment thereof or reduction thereof and shall upon request provide such additional documentation from time to time as is reasonably required to confirm the payment of tax. 4.10 Failure of Payment. If the Owner, through no fault of the Contractor, does not pay the Contractor within thirty (30) days after the date established in the Contract Documents the undisputed portion of any Application for Payment or the amount awarded by binding dispute resolution, then the Contractor may, upon five (5) additional business days' written notice to the Owner, stop the Work until payment of the amount owing has Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 12 Item 14: Staff Report Pg. 114 Packet Pg. 519 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement been received. The Contract Time shall be extended appropriately and the Contract Price shall be increased by the amount of the Contractor's reasonable costs of shut -down, delay and start-up, plus interest as provided for in the Contract Documents. 5. OWNER 5.1 General. The Owner is the person or entity identified as such in the Agreement or applicable Work Authorization and is referred to throughout the Contract Documents as if singular in number. The Owner shall appoint an individual named in the Work Authorization as its representative for the Project ("Owner's Representative"). Notwithstanding anything to the contrary in this Agreement, no person or entity may bind Owner in any manner with respect to this Agreement other than (i) Owner's Representative; (ii) the president or a vice president of Owner, and (iii) any other representative of Owner that is expressly granted such authority in a Work Authorization or other document executed by Owner (and then only to the extent of such grant). The term "Owner" refers to the entity or individual named in the Work Authorization as such, or its successors in interest. Neither the presence of, nor the monitoring or observations of the Owner's Representative shall limit or reduce the Contractor's liability for defects in the Work, and it is understood that the Contractor will be solely and completely responsible for its Work, compliance with the Contract Documents, and the working conditions on the job site, including safety, during the performance of the Work. The day-to- day communications between the Owner and Contractor, including all written authorizations and written communications shall be directed to the Owner and, if one is designated in the Work Authorization, the Owner's Representative. 5.2 Information and Services Required of the Owner. Except for Permits that are the responsibility of the Contractor under the Contract Documents, including those required under Section 2.6, the Owner shall secure and pay for necessary approvals, easements, assessments and charges required for Owner's use or occupancy of permanent structures or for permanent changes in existing facilities. If the Contractor becomes aware of any such approvals or permits that are the Owner's responsibility, Contractor shall promptly, in writing, notify the Owner of the requirement. The Owner shall furnish information or services required of the Owner by the Contract Documents with reasonable promptness. The Owner shall also furnish any other information or services under the Owner's control and reasonably required for the Contractor's performance of the Work with reasonable promptness after receiving the Contractor's written request for such information or services. 5.3 Savings Clause. Tesla's failure to perform, or cause to be performed, any of its responsibilities (other than payment as required under Article 4) will not constitute grounds for termination by Contractor except as provided in Section 8.4 (Termination by Contractor); provided, however, that Contractor's nonperformance of its obligations under this Agreement will be excused if and to the extent (i) such nonperformance results from Tesla's failure to perform any of its responsibilities, and (ii) Contractor provides Tesla with reasonable notice of such nonperformance and, if requested by Tesla, uses Commercially Reasonable Efforts to perform notwithstanding Tesla's failure to perform. If Contractor's use of Commercially Reasonable Efforts to perform in such a circumstance would cause Contractor to incur significant uncompensated expenses, Contractor may notify Tesla. In that case, Contractor's obligation to continue its efforts to work around Tesla's failure to perform will be subject to Tesla agreeing to reimburse Contractor for its incremental uncompensated expenses. 5.4 Access to Tesla Systems and Facilities. (a) From time to time, Tesla may provide Contractor with access to proprietary computer systems and technologies owned and operated by Tesla and/or its affiliates to facilitate the Services (the "Systems"). Contractor will only use the Systems for the business purposes of Tesla. Tesla may periodically monitor all uses of the Systems as allowed by law and review user access records maintained by Contractor. Contractor's users will have no expectation of privacy when using the Systems. Contractor shall be solely responsible for obtaining and maintaining the hardware and software it uses which are necessary to properly access the Systems and perform the Services. (b) Tesla will provide to Contractor Personnel assigned to work at a Tesla Facility the reasonable use of the facility. Contractor will use the Tesla Facility for the sole purpose of providing the Services. Contractor will be responsible for any damage to the Tesla Facility caused by Contractor Personnel. Contractor will permit Tesla and its agents and representatives to enter into those portions of Tesla Facility that are occupied by Contractor Personnel at any time and, when those portions of the Tesla Facility are no longer required for performance of the Services, Contractor will return them to Tesla in substantially the same condition as they were in when Contractor began use of them, subject to reasonable wear and tear. Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 13 Item 14: Staff Report Pg. 115 Packet Pg. 520 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 T 5 L n A Attachment a Substation Agreement 6. CONFIDENTIALITY 6.1 Confidentiality. Tesla's mutual non -disclosure agreement as of the Effective Date or, if applicable, the signed non -disclosure agreement then in effect between the Parties ("NDA") sets forth the Parties' respective confidentiality obligations hereunder. The NDA is hereby incorporated by reference in this Agreement, and the terms and conditions of the NDA will continue in force throughout the Term. Tesla's Confidential Information shall be deemed, for purposes of this Agreement, to include all Intellectual Property Rights owned or separately licensed by Tesla. 6.2 Data Security. Contractor will: (i) establish, implement and maintain commercially reasonable safeguards against the destruction, loss, alteration and unauthorized access and use of Tesla Data in the possession or control of Contractor (or its Subcontractors) that are no less rigorous than those maintained by Tesla as of the Effective Date and are no less rigorous than those maintained by Contractor for its own data of a similar nature; and (ii) comply with Tesla's information and data security policies as disclosed to Contractor from time to time. Upon written request by Owner, Contractor will deliver to Tesla a copy of all Tesla Data in its possession or control in the form and format requested by Tesla. 7. Intellectual PRoperty Rights 7.1 Tesla Material. "Tesla Material" means all information systems and technology, software, tools, methods, forms, processes, workflows, data, compilations, designs, manuals and other material owned, licensed to, or developed by Tesla (or its Affiliates) that is made available to Contractor Personnel for use in rendering the Services. Subject to any limitations or restrictions set forth in agreements between Tesla (or its Affiliate) and third party licensors of Tesla Material, Tesla grants Contractor a limited, nonexclusive, non- transferable, no -charge license during the Term to Use the Tesla Material in the location(s) approved by Tesla as set forth in Work Authorizations in accordance with this Agreement for the sole purpose of providing the Services. When Tesla Material is no longer required for performance of the Services, or in any event upon expiration or termination of the Agreement, Contractor will return it to Tesla in an agreed format or, at Tesla's election, destroy it and certify the destruction of all copies in Contractor's (and any Subcontractor's) possession or control. 7.2 Developed Material. Subject to Section 7.3, Tesla will own all Intellectual Property Rights in and have the sole right to use all Deliverables and other work product created by Contractor Personnel for Tesla under this Agreement (collectively, "Developed Material"). Developed Material will be deemed to be works made for hire owned by Tesla upon their creation. To the extent that any such Developed Material is not deemed to be a work made for hire and the property of Tesla by operation of Law, Contractor irrevocably assigns, transfers and conveys to Tesla, without further consideration, all of its right, title and interest (including all Intellectual Property Rights) in and to such Developed Material. Contractor shall execute (and cause its employees to execute) such documents or take such actions as Tesla may reasonably request to perfect Tesla's ownership of Developed Material. Contractor will promptly disclose the creation of Developed Material to Tesla. Tesla grants to Contractor a fully paid -up, royalty -free, nonexclusive license during the Term to Use such Developed Material solely as necessary to perform the Services, and to sublicense Subcontractors involved in rendering the applicable Services to do the same on Contractor's behalf. 7.3 Contractor Material. Tesla's ownership of Developed Material that incorporates any material created and owned by Contractor (or its Subcontractor) outside the performance of Services hereunder ("Contractor Material") will be subject to Contractor's (or its applicable Subcontractor's) ownership of such Contractor Material. Unless otherwise agreed in a separate written license agreement executed by the Parties, Contractor grants to Tesla (and its Affiliates) a non-exclusive, royalty -free, perpetual, irrevocable, transferable, fully paid - up, world-wide license to Use, sublicense and distribute Contractor Material that is incorporated into any Developed Material or is reasonably required to Use any Developed Material in a cost-effective manner (e.g., tools). Contractor shall obtain Tesla's written approval prior to incorporating any Contractor Material into any Developed Material. 7.4 Third Party Material. Contractor will not incorporate any third party proprietary materials, information or intellectual property ("Third Party Material") into Developed Material, including all Deliverables or other work product to be delivered to Tesla, unless Contractor has obtained for Tesla a perpetual, worldwide, fully paid -up, royalty -free, non-exclusive license permitting Tesla and its Affiliates to use, sublicense and distribute such Third Party Material in the conduct of their normal business operations. Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 14 Item 14: Staff Report Pg. 116 Packet Pg. 521 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E - Item 14 1 T 5 L n Attachment A -Testa Substation Agrr eement 7.5 Open Source Code. Contractor represents and warrants that it will not incorporate any Open Source Code into a Deliverable or other work product to be delivered to Tesla without Tesla's express, prior written consent. 7.6 Intellectual Property Rights Agreements with Contractor Personnel. Contractor is responsible for having in place with all Contractor Personnel (either directly or indirectly through their respective employers) such agreements respecting Intellectual Property Rights as are necessary to comply with this Section 7 (Intellectual Property Rights). 7.7 Licenses and Rights Survive Bankruptcy. All licenses and rights of Use granted under or pursuant to this Agreement shall be deemed to be licenses to rights in "intellectual property" for the purposes of Section 365(n) of the United States Bankruptcy Code. 7.8 No Interference. Nothing in this Agreement will be deemed to prevent Contractor from carrying on its business or developing for itself or others materials that are similar to or competitive with those produced as a result of the Services provided they do not contain or disclose any Confidential Information or proprietary information of Tesla or otherwise infringe or constitute a misappropriation of Tesla's Intellectual Property Rights. 8. TERM AND TERMINATION 8.1 Initial Term. Unless terminated earlier as provided below, the term of the Agreement will be from the Effective Date until the first anniversary of the Effective Date (the "Term"). Thereafter, this Agreement will be automatically extended on a month -to -month basis until either party terminates this Agreement pursuant to this Section 8 or by providing at least 180 days prior written notice of termination to the other party. 8.2 Termination. Generally. This Agreement or a Work Authorization may only be terminated as provided in this Section 8. Termination by a Party will be without prejudice to any other rights and remedies available to a Party. Tesla will not be obliged to pay any termination charges or demobilization fees in connection with the termination of this Agreement. 8.3 Termination by Tesla. (a) For Convenience. Owner may, at any time and for any reason or for no reason, terminate the Agreement or any Work Authorization. Following a termination for convenience, Contractor shall be entitled to receive payment for Work executed, and the reasonable costs incurred by reason of such termination, but shall not be entitled to any recovery for lost profits or lost business opportunity. (b) For Cause. (i) Tesla may terminate this Agreement, a WorkAuthorization or a Project, for cause, as follows: (a) for default without affording Contractor any additional time or opportunity to cure: (i) if Contractor commits a breach of Section 6 (Confidentiality) of this MSA; (ii) if Tesla is not able to perform under this Agreement by a reason outside of it's reasonable control, including without limitation, by reason of a casualty or other destruction of the Project site; (iii) if Contractor violates any Tesla Policies of which Contractor has been given notice or applicable Laws; (iv) if Contractor breaches Section 9.6 (Debarment) of this MSA; or (v) if Contractor commits multiple breaches of this Agreement, none of which is necessarily a material breach, but which Tesla determines have had an aggregate effect comparable to that of a material breach; or (b) if Contractor has breached any material obligation under this Agreement and does not cure the breach within 15 days after receiving notice of it from Tesla, including, without limitation, (i) refusal or failure to supply enough properly skilled workers or proper materials, (ii) fails to make payment to Subcontractors or Suppliers for materials or labor in accordance with this Agreement; (iii) fails to provide Owner with a construction schedule, construction schedule updates, weekly progress reports, certificates of insurance or any required payment or performance bond in the form and within the time required under the Contract Documents, (iv) failure to achieve Substantial Completion or Final Completion on or before the dates specified in the Contract Documents or otherwise fails to adhere to the Construction Schedule in performing the Work, or (v) fails to timely remove Mechanic's Liens, provided, in each case, Contractor shall not be entitled to a grace period if it has breached the same obligation more than once. Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 15 Item 14: Staff Report Pg. 117 Packet Pg. 522 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement (ii) Upon termination of this Agreement for cause by Owner, Contractor will discontinue the Work, and Owner will be entitled to take possession of the Work and the Project Site and all or any part of the equipment and materials delivered or en route to the Project Site for incorporation into the Work. If requested by Owner, Contractor will make every reasonable effort to cancel any existing orders, subcontracts, and other contracts specified by Owner upon terms satisfactory to Owner, and Contractor will not place any further orders or enter into further subcontracts for Equipment and Materials, labor, services or facilities for the terminated Work. Contractor, upon request, will also deliver and assign to Owner, and Owner may assume, any and all contracts, subcontracts, purchase orders, and options made by Contractor in performance of the terminated Work. In addition to any other remedies and damages to which Owner may be entitled to pursue, Owner shall be permitted to seek enforcement of the provisions of this Section by means of specific enforcement or injunction. Notwithstanding any termination, Contractor will take such steps as are reasonably necessary to preserve and protect Work completed and in progress and to protect materials, supplies, plant and equipment at the Work Site or in transit (iii) Upon termination by Owner for cause, Contractor shall not be entitled to receive any further payment until the Work is completed. If the unpaid balance of the Contract Price ultimately exceeds the Owner's cost of completing the Work, such excess shall be paid to Contractor. If the costs of completing the Work exceed Contractor's unpaid Contract Price, Contractor shall pay the difference to Owner. 8.4 Termination by Contractor. The Contractor may terminate the Contract if the Work is stopped for a period of 90 consecutive days through no act or fault of the Contractor or a Subcontractor, Sub -subcontractor or their agents or employees or any other persons or entities performing portions of the Work under direct or indirect contract with the Contractor, for any of the following reasons only: (1) Issuance of an order of a court or other public authority having jurisdiction that requires all Work to be stopped; (2) An act of government, such as a declaration of national emergency that requires all Work to be stopped; or (3) Owner has not delivered payment pursuant to an Application for Payment for two (2) consecutive months without providing notice of any withholding. 8.5 Operational Transition. Upon termination or expiration of this Agreement, Contractor will deliver to Tesla and/or a subsequent supplier any remaining property of Tesla in Contractor's possession, including reports, data, work product, and Confidential Information (alternatively, as requested by Tesla, Contractor will destroy such property), and certify that all such Tesla property has been removed from Contractor's systems, premises and control and either returned or destroyed. All materials in electronic form shall be delivered to Tesla on such media and in such file format as Tesla may direct. 9. REPRESENTATIONS AND WARRANTIES OF CONTRACTOR 9.1 Performance of Services. Contractor represents and warrants that it will perform all Services (i) in accordance with this Agreement and the Work Authorizations; (ii) in a good, professional and workmanlike manner, free from defects in material and workmanship and in accordance with industry standards; (iii) in strict accordance with Contractor's specifications, samples or other descriptions provided to Tesla or approved or adopted by Tesla; (iv) in compliance with all applicable Laws; (v) efficiently and in a cost-effective manner subject to the requirements of this Agreement; and (vi) using qualified personnel with suitable training, education, experience and skill to perform the Services in accordance with timing and other requirements of the Agreement. 9.2 Contractor Registration. The Contractor hereby warrants and represents that it is a duly licensed Contractor under the laws of the state in which the Project is located and that its Contractor's license number is as set forth in the Work Authorization. 9.3 Sufficient Information. Execution of a Work Authorization by the Contractor is a representation that the Contract Documents are sufficient to have enabled the Contractor to determine the cost of the Work therein, to enter into the Work Authorization, and to accomplish the Work for an amount not in excess of the Contract Price within the Contract Time provided for in the Contract Documents. The Contractor further represents and warrants that prior to execution of the applicable Work Authorization it has visited and examined the Project site, examined all physical, legal, and other conditions affecting the Work and is fully familiar with all of the conditions thereon and thereunder affecting the same, including (1) the nature, location and character of the Project site, including all structures and obstructions thereon, both natural and man-made; (2) the nature, Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 16 Item 14: Staff Report Pg. 118 Packet Pg. 523 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E - Item 14 "1" 5 n Attachment r -Testa Substation Agreement location, and character of the general area in which the Project is located, including without limitation, its climatic conditions, available labor supply and labor costs, and available equipment supply and equipment costs; and (3) the quality and quantity of all materials, supplies, tools, equipment, labor and professional services necessary to complete the Work in the manner and within the cost and time frame required by the Contract Documents. THE FAILURE OF THE CONTRACTOR TO FULLY ACQUAINT ITSELF WITH ANY PROVISION OF THE CONTRACT DOCUMENTS OR OTHER MATTER SHALL NOT IN ANY WAY RELIEVE IT FROM THE RESPONSIBILITY FOR PERFORMING THE WORK IN ACCORDANCE WITH THE CONTRACT DOCUMENTS AND WITHIN THE GUARANTEED MAXIMUM PRICE AND THE CONTRACT TIME AS PROVIDED FOR IN THE CONTRACT DOCUMENTS. 9.4 Non -Infringement. Contractor represents and warrants that: (a) the Services will not infringe or misappropriate any Intellectual Property Rights of any third party; (b) Contractor has all rights and licenses necessary to convey to Tesla the ownership of (or license rights to Use) as required under this Agreement or the Work Authorization, all Intellectual Property Rights in Deliverables, Developed Materials and other materials provided to Tesla; and (c) no Deliverables or other materials provided to Tesla, nor their use by Tesla will infringe or constitute an infringement or misappropriation of any Intellectual Property Rights of any third party. 9.5 Malware. Contractor represents and warrants that it will not introduce Malware into Tesla's or any of its Affiliates' systems and that Contractor will exercise Commercially Reasonable Efforts to prevent Malware from being so introduced. If Malware is found to have been introduced into Tesla's or any of its Affiliates' systems as a result of a breach of the foregoing warranty, Contractor will, at no additional charge, assist Tesla in eradicating the Malware and reversing its effects and, if the Malware causes a loss of data or operational efficiency, to assist Tesla in mitigating and reversing such losses. 9.6 Debarment. For the full Term of the Agreement, Contractor represents and warrants that it shall not: (a) be debarred, suspended, excluded or disqualified from doing business with the United States Government; or (b) be listed on the Excluded Parties List System maintained by the General Services Administration of the United States Government (found at www.sam.gov/SAM ); or (c) be an entity with which U.S. entities are prohibited from transacting business of the type contemplated by the Agreement or with which U.S. entities must limit their interactions to types approved by the Office of Foreign Assets Control, Department of the Treasury ("OFAC'), such as by Law, executive order, trade embargo, economic sanction, or lists published by OFAC. Contractor agrees to immediately notify Tesla in writing in the event Contractor breaches any of its representations and warranties or has reason to believe that it will become in breach of any of such representations and warranties. 10. INSURANCE 10.1 Types of Insurance. During the Term of this Agreement, unless otherwise set forth in a Work Authorization, Contractor shall obtain and maintain at its own cost and expense (and shall cause each Subcontractor to maintain) policies for the following insurance coverages: (a) Commercial general liability insurance with minimum coverage of at least One Million Dollars ($1,000,000) combined single limit per occurrence and Two Million Dollars ($2,000,000) general aggregate, naming Tesla as an additional insured. This will include coverage for: bodily injury; property damage; premises and operations; products and completed operations; broad form property damage including completed operations; explosion, collapse, underground hazards; contractual liability; contractors' protective liability; and personal injury liability. (b) Products and completed operations coverage, which shall include broad form property damage and XCU endorsements. (c) Automobile liability insurance on all owned, non -owned and/or hired vehicles with minimum coverage of at least One Million Dollars ($1,000,000) combined single limit per occurrence for bodily injury and/or property damage, and physical damage insurance for the actual cash value of each such vehicle. (d) Umbrella general liability coverage in the minimum amount of $5,000,000 or as established in the Work Authorization. The policies furnished in compliance with Section 10.1(a) — (d) shall be primary insurance to any other liability insurance of Owner. Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 17 Item 14: Staff Report Pg. 119 Packet Pg. 524 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement (e) Employer's liability insurance with minimum coverage of at least One Million Dollars ($1,000,000). Contractor shall also comply with all applicable workers' compensation and/or other laws that may accrue in favor of any Contractor Personnel in all locales where Contractor Personnel perform(s) hereunder. (f) Contractor's Professional Liability Insurance with minimum limits of $5,000,000 per claim and aggregate and Contractor's Pollution Liability Insurance coverage with minimum limits of $5,000,000 per claim and in the aggregate, or as established in the applicable Work Authorization for both insurance requirements, with all coverage retroactive to the earlier of the date of the Agreement or the commencement of work. (g) If the Work include design/build work, Professional Liability Insurance covering liability for loss or damage due to an act, error, omission or negligence, with a minimum limit of (i) Five Million Dollars ($5,000,000) per claim and aggregate for mechanical (including fire protection), electrical and curtain wall enclosure, and (ii) Two Million Dollars ($2,000,000) per claims and aggregate for all other trades. Professional liability coverage shall be provided by annual policy or policies to be renewed for a continuous period of two years following the Final Completion Date of the Project by the Owner or such longer period as the Contract Documents may require. Renewal policies during this period shall maintain the same retroactive date. 10.2 Insurance. Generally. Contractor will be responsible for all deductibles and retentions with regard to its insurance. In the case of loss or damage or other event that requires notice or other action under the terms of any insurance coverage described above, Contractor will be solely responsible for taking such action. Contractor will provide Tesla with contemporaneous notice and such other reasonable and relevant information as Tesla may request regarding the event. The policies shall: (a) be primary and not contributory with any liability coverage carried by Tesla or any Affiliate of Tesla; (b) name Tesla and any other entity reasonably requested by Tesla as additional insureds; (c) provide for severability of interests; (d) provide for waiver of subrogation; (e) be with one or more insurance companies rated A minus or better (as determined by A.M. Best & Company), and licensed to do business in the locations where Services are to be performed; (f) shall remain in force for the benefit of the Owner for claims arising out of the Work under this Agreement for at least 24 months after Final Completion, except for completed operations coverage which shall extend for a period of six (6) years from Substantial Completion, and (g) require the insurer to give Tesla at least 30 days' prior written notice of any restrictive change, non -renewal or cancellation that may affect Tesla's rights thereunder. Contractor will furnish to Tesla a certificate evidencing such coverage, upon request. 11. INDEMNIFICATION 11.1 Indemnification by Contractor. To the fullest extent provided by Law, Contractor will indemnify, defend and hold harmless Tesla, its Affiliates and their respective officers, directors, employees, agents and representatives (collectively, "Tesla Indemnitees"), from any and all losses arising from, in connection with, or based on allegation of any of the following: (a) Any Claim by, on behalf of or relating to Contractor Personnel; (b) Any Claim that, if true, would constitute a breach of Contractor's obligations under Section 6 (Confidentiality); (c) Any Claim that, if true, would arise from or be attributable to a breach of Contractor's obligations under Section 2.5 (Compliance with Laws and Tesla Policies); (d) Any Claim that, if true, would arise from or be attributable to a breach of Contractor's obligations under Section 9.4 (Non -Infringement); (e) Any Claim for death or bodily injury, or the damage, loss or destruction of real or tangible personal property of third parties (including employees of Tesla and Contractor and their respective Subcontractors) caused by the tortious conduct of Contractor, any Contractor Personnel, or any of Contractor's third -party suppliers; and (f) The inaccuracy or untruthfulness of any representation or warranty made by or on behalf of Contractor in this Agreement. If Losses are caused or alleged to be caused in part by any joint or concurrent negligent act (either active or passive), willful misconduct, omission or breach of contract by the Tesla Indemnitees, the Contractor shall indemnify, hold harmless and defend the Tesla Indemnitiees from such Losses only to the extent such Losses do not arise out of or result from the sole and active negligence or willful misconduct of the Tesla Indemnitiees. In no event shall Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 18 Item 14: Staff Report Pg. 120 Packet Pg. 525 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T5 L._. n AAttachmn Substation Agreement Contractor be obligated to indemnify a Tesla Indemnitee for Losses which arise out of or result from the sole and active negligence or willful misconduct of such Tesla Indemnitee or its agents, servants or independent contractors who are directly responsible to such Tesla Indemnitee, excluding Contractor herein. 11.2 Infringement Claims. If any item used by Contractor to provide the Services becomes, or in Contractor's reasonable opinion is likely to become, the subject of an infringement or misappropriation Claim, Contractor will at its expense, in addition to indemnifying Tesla Indemnitees as provided in this Section 11 (Indemnification) and to the other rights Tesla may have under this Agreement, (i) promptly secure the right to continue using the item, or (ii) if this cannot be accomplished with Commercially Reasonable Efforts, then replace or modify the item to make it non -infringing or without misappropriation; provided, however, that any such replacement or modification may not degrade the performance or quality of the affected components of the Services or disrupt Tesla's business operations, or (iii) if neither of the foregoing can be accomplished by Contractor with Commercially Reasonable Efforts, then upon at least 180 days' prior written notice to Tesla, Contractor may remove the item from the Services, in which case Contractor's charges will be equitably adjusted to reflect such removal. If removal of the item from Services causes material loss or degradation of the Services, such loss or degradation will constitute a material breach of this Agreement by Contractor in respect of which Tesla may exercise its termination and other rights and remedies. 11.3 Indemnification Procedures. Tesla will give Contractor prompt written notice of any Claim for which indemnification is sought under this Section 11 (Indemnification). Failure to give notice will not diminish Contractor's obligation under this Section if Contractor has or receives knowledge of the existence of such Claim by any other means or if the failure does not materially prejudice Contractor's ability to defend the Claim. Contractor may select legal counsel to represent Tesla (said counsel to be reasonably satisfactory to Tesla) and otherwise control the defense of such Claim. If Contractor elects to control the defense of such Claim, Tesla may participate in the defense at its own expense. If Contractor, within a reasonable time after receipt of such notice, fails to defend Tesla, Tesla may undertake the defense of and compromise or settle the Claim on behalf and at the risk of Contractor. If the Claim is one that cannot by its nature be defended solely by Contractor, then Tesla will make available information and assistance as Contractor may reasonably request, at Contractor's expense. Contractor may not, without the prior written consent of Tesla, (i) consent to the entry of any judgment or enter into any settlement that provides for injunctive or other non -monetary relief affecting any Tesla Indemnitee, or (ii) consent to the entry of any judgment or enter into any settlement unless such judgment or settlement provides for an unconditional and full release of the Tesla Indemnitees and does not diminish any of Tesla's rights under this Agreement or result in additional fees or charges to Tesla. 12. Liability 12.1 For any breach of this Agreement or this Master Services Agreement by Contractor, Contractor shall be liable to Tesla for direct damages caused by Contractor's breach, incidental damages incurred by Tesla as a result of such breach, other damages that were reasonably foreseeable at the time of the breach as a result of such breach, and costs and expenses incurred by Tesla in connection with the foregoing types of damages, including without limitation any costs and expenses of containment, sorting, repair, replacement, cure, cover, or other costs and expenses incurred by Tesla (including labor). 12.2 TESLA WILL NOT BE LIABLE TO CONTRACTOR IN CONNECTION WITH THE AGREEMENT OR THIS MASTER SERVICES AGREEMENT FOR ANY INTEREST, PENALTIES OR CONSEQUENTIAL, INCIDENTAL, INDIRECT, MULTIPLE, EXEMPLARY, OR PUNITIVE DAMAGES, OR ANY LOSS OF REVENUE, BUSINESS, SAVINGS OR GOODWILL, REGARDLESS OF THE FORM OF ACTION OR THE THEORY OF RECOVERY, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. (a) 13. DISPUTE RESOLUTION 13.1 Informal Dispute Resolution. (a) The Owner and Contractor shall first endeavor to negotiate resolution of Claims and disputes relating to the Contract directly. If the Claims cannot be resolved through such negotiations within a reasonable time, either Party may request non -binding mediation to be conducted in San Francisco, California, by the Judicial Arbitration and Mediation Services/Endispute ("JAMS") or by a mediator approved by both Parties, and neither Party shall unreasonably withhold approval of a mediator proposed by the other Party in good faith. Each Party shall participate in the mediation process in good faith, with each bearing its own expenses and equally sharing the fees and expenses of the mediator. Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 19 Item 14: Staff Report Pg. 121 Packet Pg. 526 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 TS L n Attachment A -Testa Substation Agrr eement (b) If the Parties are unable to resolve a Claim through good -faith negotiations within 60 days after commencing mediation, the Claim shall be resolved exclusively by final and binding arbitration conducted by the JAMS in accordance with the then -current JAMS Streamlined Arbitration Rules & Procedures. The existence, content and result of the arbitration shall be held in confidence by the Parties, their representatives, any other participants, and the arbitrator. The arbitration will be conducted by a single arbitrator selected by agreement of the Parties or, failing such agreement, appointed in accordance with the JAMS rules. The arbitrator shall be experienced in agreements for capital equipment. Any demand for arbitration and any counterclaim will specify in reasonable detail the facts and legal grounds forming the basis for the claimant's request for relief and will include a statement of the total amount of damages claimed, if any, and any other remedy sought by the claimant. The arbitration will be conducted in the English language in Palo Alto, California. Each Party will bear its own expenses in the arbitration and will share equally the costs of the arbitration; provided, however, that the arbitrator may, in their discretion, award reasonable costs and fees to the prevailing Party. The arbitrator will have full power and authority to determine issues of arbitrability and to interpret or construe the applicable provisions of the Contract and/or this Master Services Agreement and to fashion appropriate remedies for breaches of the Contract and/or this Master Services Agreement (including interim or permanent injunctive relief); provided that the arbitrator will not have any right or authority: (i) in excess of the authority of a court having jurisdiction over the Parties and the dispute would have absent this arbitration agreement; (ii) to award damages in excess of the types and limitation of damages found in the Contract and/or this Master Services Agreement; or (iii) to modify the terms of either the Contract or this Master Services Agreement. The award of the arbitrator will be issued within 30 days of the completion of the hearing, shall be in writing, and shall state the reasoning on which the award is based. Judgment upon the award rendered in the arbitration may be entered in any court of competent jurisdiction. Notwithstanding the foregoing, the Parties acknowledge that Seller's breach of an obligation under this Master Services Agreement or the Contract will subject Tesla to irreparable and continuing injury for which remedies at law would be inadequate and, accordingly, Tesla shall be entitled to temporary, preliminary, or permanent injunctive relief, specific performance, or other equitable relief as appropriate. Seller hereby waives any bond requirements for obtaining equitable relief. The Parties further consent to the jurisdiction of any state or federal court with subject matter jurisdiction located within a district that encompasses assets of a Party against whom a judgment (or award) has been rendered for the enforcement of the judgment (or award) against the assets of such Party. (c) Each Party shall continue performing its obligations under the Master Services Agreement and the Contract while a dispute is being resolved unless and until such obligations are terminated by the termination or expiration thereof. 13.2 Jurisdiction and Venue. (a) If the Owner and Contractor do not resolve the Claim or dispute through mediation, any and all such Claims or disputes shall be decided through litigation under the laws of the State of California. The exclusive venue for such litigation shall be a court of competent jurisdiction located in the United States District Court for the Northern District of California or, if that court does not have jurisdiction, in the Superior Court of the State of California, County of Santa Clara. The Parties irrevocably and unconditionally waive any objection to the laying of venue of any proceeding arising out of or relating to the Agreement in such courts. The Parties further consent to the jurisdiction of any state or federal court with subject matter jurisdiction located within a district that encompasses assets of a Party against whom a judgment (or award) has been rendered for the enforcement of the judgment (or award) against the assets of such Party. (b) Contractor may not sue or bring any action of any kind whatsoever against Owner on any Claim or dispute under the Contract Documents after the expiration of three hundred sixty-five (365) days from Substantial Completion. This contractual period of limitation takes precedence over any contrary or conflicting statutory provision or rule of law applicable to any Claims or disputes which the Contractor may seek to bring. 14. MISCELLANEOUS 14.1 Waiver. No failure or delay by a Party in exercising any right, power or remedy will operate as a waiver of that right, power or remedy, and no waiver will be effective unless it is in writing and signed by an authorized representative of the waiving Party. If a Party waives any right, power or remedy, the waiver will not waive any successive or other right, power or remedy that Party may have. Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 20 Item 14: Staff Report Pg. 122 Packet Pg. 527 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement 14.2 Remedies Cumulative. All remedies provided in this Agreement are cumulative and in addition to and not in lieu of any other remedies available to a Party under this Agreement, at law, or in equity. 14.3 Assignment. Contractor may not assign, transfer or otherwise convey or delegate any of its rights or duties under this Agreement to any other Party (except to the successor in a merger or acquisition of Contractor) without the prior written consent of Tesla, and any attempt to do so will be void. This Agreement shall be binding upon the respective successors and permitted assigns of the Parties. 14.4 Governing Law. This Agreement will be interpreted and construed in accordance with the substantive laws of California and the United States generally applicable therein, without regard to any provisions of its choice of law rules that would result in a different outcome. Notwithstanding the foregoing, if a Claim relates to or is the subject of a mechanic's lien, the party asserting such Claim may proceed in accordance with applicable law to comply with the lien notice or filing deadlines. 14.5 Audits and Records. During business hours and upon reasonable advance notice, Tesla and its agents may inspect, examine and audit the records and data of Contractor (and its Subcontractors) that pertain to the Services to verify (a) the accuracy of Contractor's invoices, and (b) Contractor's compliance with this Agreement. In support of the foregoing right, Contractor will keep and maintain (i) financial records relating to this Agreement in accordance with generally accepted accounting principles, (ii) records substantiating Contractor's invoices, (iii) records pertaining to Contractor's compliance with this Agreement and the Work Authorizations, and (iv) such other operational records pertaining to performance of the Services as Contractor keeps in the ordinary course of its business. Contractor will retain such records for the longer of three (3) years after the Term ends or as required by applicable Laws. Contractor will make such records available to Tesla and its auditors for examination and copying upon request. 14.6 Notices. All formal notices, requests, demands, approvals and communications under this Agreement (other than routine operational communications) (collectively, "Notices") will be in writing and may be served either (i) in person or (ii) by registered or certified mail with proof of delivery, addressed to the Party at the addresses set forth below. Notices given as described in the preceding sentence will be considered received on the day of actual delivery. A Party may change its address or designee for notification purposes by giving the other Party prior written notice of the new address or designee in the manner provided above. The Parties may mutually agree that certain types of routine approvals and notices of a non -legal nature may be given by electronic mail. In the case of Tesla: Tesla, Inc. 13101 Tesla Road Austin, Texas 78725 Attn: With a copy to: Tesla, Inc. 13101 Tesla Road Austin, Texas 78725 Attn: Legal Department In the case of Contractor: (Note: If no information is listed here for Contractor, notices shall be sent to the attention of the Contractor representative who signs this MSA.) Attn: 14.7 Interpretation. Section references are to sections of the document in which the reference is contained and will be deemed to refer to and include all subsections of the referenced section. The section headings in this Agreement are for reference purposes only and may not be construed to modify or restrict any of the terms of this Agreement. This Agreement will be deemed to have been written by both Parties. Section references are to sections of the document in which the reference is contained and will be deemed to refer to and include all subsections of the referenced section. The section headings in this Agreement are for reference purposes only and may not be construed to modify or restrict any of the terms of this Agreement. This Agreement is written in the English language, and the English text of this Agreement shall prevail over any translation hereof. Unless the context requires otherwise, (i) "including" (and any of its derivative forms) means including but not limited to, (ii) "may" means has the right, but not the obligation to do something and "may not" means does not Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 21 Item 14: Staff Report Pg. 123 Packet Pg. 528 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 5 L n A Attachment a Substation Agreement have the right to do something, and (iii) "will" and "shall" are expressions of command, not merely expressions of future intent or expectation. 14.8 Order of Precedence. In the event of conflicts or discrepancies among the Contract Documents, interpretations will be based on the following priorities: (a) Work Authorization, solely to the extent the Work Authorization parties agree that the Work Authorization amends this Agreement, (b) this Agreement, as amended, including all Exhibits; (c) Addenda, if any, with those of later date having precedence over those of earlier date; (d) Modifications to the Drawings and Specifications issued after the execution of the Work Authorization, Specifications, Drawings, and Addenda issued prior to execution of the Work Authorization; and (f) Specifications and Drawings. Unless specifically enumerated in the Agreement or any Work Authorization, the Contract Documents do not include the advertisement or invitation to bid, instructions to bidders, sample forms, other information furnished by the Owner in anticipation of receiving bids or proposals, the Contractor's bid or proposal, or portions of Addenda relating to bidding requirements. 14.9 Severability. If any provision of this Agreement or a Work Authorization is held invalid by a court with jurisdiction over the Parties to this Agreement, such provision will be severed from the Agreement, and the remainder of this Agreement will remain in full force and effect. 14.10 Third Party Beneficiaries. This Agreement is entered into solely between Tesla and Contractor and, except for the Parties' indemnification obligations under Section 11 (Indemnification) and the Service Recipients, will not be deemed to create any rights in any third parties or to create any obligations of either Tesla or Contractor to any third parties. 14.11 Survival. Any provision of this Agreement that contemplates or governs performance or observance subsequent to termination or expiration of this Agreement will survive the expiration or termination of this Agreement for any reason, including the following Sections: 6 (Confidentiality), 7 (Intellectual Property Rights), 9 (Representations and Warranties of Contractor), 11 (Indemnification), 12 (Liability), 13 (Dispute Resolution) and 14 (Miscellaneous) . 14.12 Entire Agreement. This Agreement including all Schedules constitutes the entire agreement between the Parties with respect to its subject matter and merges, integrates and supersedes all prior and contemporaneous agreements and understandings between the Parties, whether written or oral, concerning its subject matter. Any terms and conditions on any order or written notification from either Party that purport to vary or supplement this Agreement shall not be effective or binding on the other Party. This Agreement may be amended or modified solely in a writing signed by a duly authorized representative of each Party. 14.13 Defined Terms. Terms used in this Agreement with initial capitalization have the meanings specified where used or in this Section 14.13. (a) "Addenda" or "Addendum" means written information adding to, clarifying or modifying the bidding documents. (b) "Affiliate" means with respect to an entity, any other entity or person controlling, controlled by, or under common control with, such entity. For purposes of this Agreement, "control" means possessing, directly or indirectly, the power to direct or cause the direction of the management, policies or operations of an entity, whether through ownership of voting securities, by contract or otherwise. (c) "Change" means any material change to the scope of, charges for, or other contractual commitments of a Party with respect to, the Services being provided by Contractor. (d) "Change Order" means a mutually agreed Change to the scope, timing, manner or cost of performing the Services pursuant to an Work Authorization. A change order may not modify the terms of the body of this Agreement. (e) "Claim" means any demand, or any civil, criminal, administrative or investigative claim, action or proceeding (include arbitration) asserted, commenced or threatened against an entity or person by an unaffiliated third party. For the purposes of this definition, an employee of either Party is considered an unaffiliated third party. (f) "Commercially Reasonable Efforts" means taking all such steps and performing in such a manner as a well managed company would undertake where it was acting in a determined, prudent and reasonable manner to achieve a particular desired result for its own benefit. Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 22 Item 14: Staff Report Pg. 124 Packet Pg. 529 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E - Item 14 1 T 5 L n A Attachment a Substation Agreement (g) "Deliverable" means any work product identified as a 'Deliverable' in the Agreement or an Work Authorization. (h) "Drawings" mean graphic and pictorial portions of the Contract Documents showing the design, location and dimensions of the Work, generally including plans, elevations, sections, details, schedules and diagrams. (i) `Intellectual Property Rights" means all (i) patents, patent applications, patent disclosures and inventions (whether patentable or not), (ii) trademarks, service marks, trade dress, trade names, logos, corporate names, Internet domain names, and registrations and applications for the registration for any of them, together with all goodwill associated with any of them, (iii) copyrights and copyrightable works (including computer programs and mask works) and registrations and applications for registration, (iv) trade secrets, know-how and other confidential information, (v) waivable or assignable rights of publicity, waivable or assignable moral rights, (vi) unregistered and registered design rights and any applications for registration, and (vii) database rights and all other forms of intellectual property, such as data. (j) "Law(s)" means any statute, regulation, ordinance, rule, order, decree or governmental requirement enacted, promulgated or imposed by any governmental authority at any level (e.g., municipal, county, province, state or national). (k) "Malware" means program code or programming instruction(s) or set(s) of instructions intentionally designed to disrupt, disable, harm, interfere with or otherwise adversely affect computer programs, data files or operations, or other code typically described as a virus, Trojan horse, worm, back door or other type of harmful code. (1) 'Modification"is (1) a written amendment to the Contract signed by both parties, (2) a Change Order, (3) a Work Authorization or (4) a written order for a minor change in the Work issued by the Owner that does not increase costs or construction time. (m) "Open Source Code" means software that requires as a condition of its use, modification or distribution, that it be disclosed or distributed in source code form or made available at no charge, including, without limitation, software licensed under the GNU General Public License (GPL) or the GNU Lesser/Library GPL. (n) "Party" means either Tesla or Contractor, as required by the context. (o) "Project" means a group of related functions or activities that spans multiple days, weeks, or months and builds cumulatively toward the achievement of defined target outcomes or objectives. A Project typically has multiple phases or life -cycle stages and involves written project plans with defined interim milestones and deliverables to measure progress toward the achievement of its target outcomes or objectives. The Services provided for each Tesla Facility will be deemed a separate Project for purposes of this Agreement. (p) "Specifications" means that portion of the Contract Documents consisting of the written requirements for materials, equipment, systems, standards and workmanship for the Work, and performance of related services. (q) "Substantial Completion" or "Substantially Complete" is further defined as the date certified respectively, by the Owner when (i) the Owner have prepared a Punchlist of Work remaining to be performed and has established sufficient reserves for purposes of completing such Punchlist of Work, and (ii) all required governmental or regulatory inspections applicable to the Contractor's Work have been conducted and all final approvals required for occupancy have been obtained from all authorities having jurisdiction over the Project. Any such occupancy or use described above shall not negate or change the responsibility of the Contractor to Owner for satisfactory completion of the Work nor shall such occupancy or use negate any insurance provisions required hereunder. (r) "Supplier" means a person or entity who has a direct or indirect contract with Contractor or a Subcontractor at any tier to provide any equipment, supplies, materials, or other goods in connection with the Work and who is not a Subcontractor or a Sub -subcontractor. (s) "Tesla Data" means all data and information regarding Tesla, its customers and suppliers that is either: (i) furnished, disclosed or otherwise made available to Contractor Personnel, directly or indirectly, by or on behalf of Tesla pursuant to this Agreement; or (ii) collected or created by Contractor Personnel on behalf of Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 23 Item 14: Staff Report Pg. 125 Packet Pg. 530 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement Tesla in the course of performing the Services. Tesla Data will be deemed to be Confidential Information that is subject to the NDA. (t) "Tesla Facility" means, collectively, the Tesla facility or real property at which Contractor will perform Services and the reasonable office space, furniture, fixtures, equipment, hardware, software, telephones, office supplies, and other facility resources to be provided or made available by Tesla to Contractor Personnel who are assigned by Contractor to work on Tesla premises by mutual agreement of the Parties, as evidenced in the applicable Work Authorization. (u) "Use" means the right to use, execute, display, copy, perform, distribute copies of, maintain, modify, enhance, and create derivative works of software or other copyrighted or copyrightable works. (v) "WorkAuthorization"means the form of document that will be used to authorize Contractor to perform Services by mutual agreement of the Parties. When duly executed by the authorized representatives of both Parties, a Work Authorization becomes an "Work Authorization." 15. MECHANIC'S LIENS 15.1 If at any time, a lien is filed on the Project arising out of the Work, the Contractor, within five (5) days after the date of the filing of such notice of lien, and to the Owner's satisfaction and in accordance with the mechanic's lien laws of the place where the Project is located, shall discharge and remove the lien or post a bond satisfactory to the Owner for such lien or claim of lien and shall indemnify and hold the Owner harmless for all costs, including, but not limited to, attorneys' fees and expert fees, regarding such lien or claim of lien, together with interest on the same from the date any such cost was paid by Owner until reimbursed by Contractor at the rate of interest provided in the Agreement, except if the lien is the result of Owner's nonpayment of an amount contained in a previously submitted pay application over which no good -faith dispute exists between Owner and Contractor. The obligations of Contractor under this Subsection shall survive the expiration or termination of the Contract. 15.2 Contractor shall promptly advise Owner in writing of any action, administrative or legal proceeding or investigation as to which Subsection 15.1may apply, and provided the Owner is not in default of its payment obligations to the Contractor, Contractor, at Contractor's expense, shall assume on behalf of Owner, and conduct with due diligence and in good faith, the defense thereof with counsel satisfactory to Owner, provided that Owner shall have the right to be represented therein by advisory counsel of its own selection and at Contractor's expense, and provided further that if the defendants in any such action include Contractor and Owner and Owner concludes that Contractor has a conflict of interest and cannot adequately represent the Owner, then the Owner shall have the right to select separate counsel to participate in the defense of such action on its own behalf for which fifty percent (50%) of the cost shall be at the Contractor's expense. In the event of failure by Contractor to fully perform in accordance with this Subsection, Owner, has the option of, and without relieving Contractor of its obligations hereunder, to so perform, but all costs and expenses, including but not limited to attorneys' fees and expert fees, so incurred by Owner in that event shall be reimbursed by Contractor to Owner, together with interest on the same from the date any such expense was paid by Owner until reimbursed by Contractor at the rate of interest provided in the Agreement. The obligations of Contractor under this Subsection shall survive the expiration of termination of the Contract. 15.3 The Owner shall release any payments withheld due to a lien or claim of lien if the Contractor removes the lien or obtains security acceptable to the Owner or a lien bond that is (i) issued by a surety acceptable to Owner, (ii) in a form and substance satisfactory to the Owner, and (iii) in an amount not less than one hundred fifty percent (150%) of such lien claim. By posting a lien bond or other acceptable security, however, the Contractor shall not be relieved of any responsibilities or obligations under this Section 15.3, including without limitation the duty to defend and indemnify the Owner. The cost of any premiums incurred in connection with such bonds and security shall be the responsibility of the Contractor and shall not be a part of, or cause any adjustment to, the Contract Price. 15.4 Notwithstanding anything to the contrary contained herein, if the Contractor does not promptly post the bond, the Owner may withhold 150% of the amount of such lien until such lien is discharged or the Owner is protected by bond satisfactory to the Owner in the amount of at least 150% of the amount of the lien or other Master Services Agreement (Construction) General Terms and Conditions Version January 2022 Page 24 Item 14: Staff Report Pg. 126 Packet Pg. 531 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 1 T 5 L n A Attachment a Substation Agreement means satisfactory to the Owner. If no monies are available to be withheld, the Contractor shall within three (3) consecutive calendar days refund to the Owner 150% of the amount of such lien(s). 15.5 Notwithstanding anything in Section 15 to the contrary, and in the event the Contractor fails to make payments to its Subcontractors or Suppliers in accordance with this Contract and does not provide justifiable reasons to the Owner upon Owner's request, Owner may, at the Owner's sole discretion, elect to make any payment requested by the Contractor on behalf of a Subcontractor of any tier or a Supplier, jointly payable to the Contractor and each Subcontractor and/or Supplier. The Contractor and such Subcontractor or Supplier shall be responsible for the allocation and disbursement of funds included as part of any such joint payment. In no event shall any joint payment be construed to create any (i) contract between the Owner and a Subcontractor or Supplier of any tier, (ii) obligations from the Owner to such Subcontractor or Supplier, or (iii) rights in such Subcontractor or Supplier against the Owner. The Contractor agrees to sign such additional documents and take such action as the Owner shall deem necessary to carry out the intent of this Section 15.5. Intending to be legally bound, each of the undersigned parties has caused its duly authorized representative to execute this Agreement as of the Effective Date. Tesla, Inc. By: Printed: Title:_ Date: Contractor By: Printed: Title: Date: Company: Address: Master Services Agreement (Construction) Version January 2022 Item 14: Staff Report Pg. 127 General Terms and Conditions Page 25 Packet Pg. 532 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E - Item 14 1 T 5 L n A Attachment a Substation Agreement EXHIBIT A APPROVED WORK ORDER NO. FOR SERVICES 1. Introduction. This Work Order is entered into as of the Date of Order set forth below by and between the Tesla affiliate set forth below (for the purposes of this Work Order, "Testa") and Contractor, and made a part of that certain Master Services Agreement between [INSERT TESLA ENTITY] ("Testa") and [CONTRACTOR NAME AND ADDRESS] (hereinafter "Contractor") dated [INSERT AGREEMENT DATE] (the "Agreement"). This Work Order sets forth the terms and conditions for the Project described in this Work Order. All capitalized terms not defined in this Work Order have the respective meanings set forth in the Agreement. 2. Description of Project Services and Performance Measurement. Contractor will perform the following Services pursuant to this Work Order. (a) [describe services, any required resources, any Deliverables, and any deadlines or milestones]: (b) Project Site: (c) Project Milestones (specify delivery dates): [IF APPLICABLE] (i) Contractor shall begin Work on , and shall be substantially complete as soon as due diligence and good practice will permit, but not later than . or (ii) Project Milestones Deadline Substantial Completion Date Final Completion Date (d) List of applicable Plans and Specifications: 3. Work Schedule: From the mutual execution of this Work Order until Substantial Completion, at Tesla's request, Contractor shall provide weekly written updates to Tesla describing the Services completed to date and a comparison of costs incurred versus budgeted amounts and providing an updated Work Schedule for the remainder of the Services, including the anticipated date of Substantial Completion. Tesla may request additional services after the Effective Date. Unless otherwise agreed by the Parties in writing, the fees for such services will be calculated by multiplying the Productive Hours by the applicable agreed billing rates set forth herein, or currently on file. Tesla shall have the right within the general scope of the Work and without notice to any surety or sureties of the Contractor, to make changes in the Work pursuant to a written change order ("Change Order"), either by altering the nature of the same or by adding to or deducting from it as more specifically set forth in the Construction General Master Services Agreement (Construction) Annex 2 Page A-2-1 Item 14: Staff Report Pg. 128 Packet Pg. 533 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E Item 14 T 5 I.._., n Attachment A -Testa Substation Agreement Conditions incorporated herein. 4. Contract Price. With reference to Section 4 (Charges) of the Agreement, Tesla will pay the Contractor for the performance of work specified herein the total price of (INSERT TOTAL AMOUNT OF WORK ORDER IN TEXTand no cents) ($00,000.00). 5. Monthly Invoicing: Tesla will pay Contractor the amount above in accordance with the Agreement, subject to receipt of invoices from Contractor in a form and content reasonably acceptable to Tesla. Such invoices shall contain sufficient information to allow Testa to determine the accuracy of the amounts billed and shall include invoices from all subcontractors, any relevant certificates of completion, unconditional lien waivers for all past work and conditional lien waivers for current work. Tesla will pay invoices not disputed in good faith as per the Agreement, less a retainage of 10%. Tesla will pay the accumulated retainage 30 days after the later of (a) receipt of the Close Out Book; or (b) Final Completion; in each case together with invoices and final unconditional lien waivers from all subcontractors. Payment terms are otherwise as set forth in the Agreement, however Contractor shall be paid by Tesla within () days of Tesla's receipt of the applicable invoice for such amounts. 6. Key Contractor Positions. With reference to Section 3.2 (Key Contractor Positions) of the MSA, the Key Contractor Positions for purposes of this Work Order, if any, are: 7. Service -Specific Terms and Conditions. Annexes or additional documents attached hereto set forth additional terms and conditions which may apply for purposes of this Work Order, if applicable to the Services to be performed hereunder. Intending to be legally bound, each of the undersigned parties has caused its duly authorized representative to execute this Approved Work Order as of the date last entered below. TESLA, INC. By: Printed: Title: Date: Contractor By: Printed: Title: Date: Company: Address: Master Services Agreement (Construction) Item 14: Staff Report Pg. 129 Annex 2 Page A-2-2 Packet Pg. 534 of 553 DocuSign Envelope ID: 57B09814-B982-4E69-BEFI-FFBFA17D269E - Item 14 T 5 L F�n[Substation Attachmn Agreet A en � Agreement EXHIBIT B FORM OF CHANGE ORDER TESLA MASTER SERVICES AGREEMENT (CONSTRUCTION) CHANGE ORDER Work Authorization No: Change No.: Architect/Engineer: To (Contractor): Your proposal dated Date: has been accepted for making the following changes: DESCRIPTION OF CHANGE DECREASE INCREASE (Attach additional sheets if required.) NOTICE TO PROCEED DATE: ORIGINAL CONTRACT SUM: Contract Time Days Complete* Subtotal Present Contract New (Add) (Deduct) This Change Present Contract Sum New Contract Time New Contract Sum *SUBSTANTIAL COMPLETION DATE This Change Order is an amendment to the Agreement, and all contract provisions shall apply unless specifically exempted. The amount and time Change designated are the maximum agreed to by both the Owner and the Contractor for this change. In consideration of the foregoing adjustments in Contract Time and Contract Sum, the Contractor hereby releases Owner from all Claims, demands, or causes of action arising out of the transactions, events and occurrences giving rise to this Change Order. This written Change Order is the entire agreement between Owner and Contractor with respect to this Change Order. The cost of the change indicated on the face of this Change Order is the entire amount of the change, and no backup documentation attached hereto may reserve the Contractor's right to increase the contract time or the cost of this change for extended overhead or general conditions or any other reason. AGREED TO IN FORM AND CONTENT CONTRACTOR ARCHITECT/ENGINEER DATE DATE TESLA, INC. DATE Master Services Agreement (Construction) Item 14: Staff Report Pg. 130 Annex 2 Page A-2-3 Packet Pg. 535 of 553 Item 14 DocuSign Envelope ID: 57809814 -B982 -4E69 -B A17D269E S ___ I'[ Attachment A -Testa Substation Agreement Item 14: Staff Report Pg. 131 Packet Pg. 536 of 553 Item 15 Item 15 Staff Report City Council Staff Report From: City Manager CITY O F Report Type: INFORMATION REPORT PALO Lead Department: Administrative Services ALTO Meeting Date: January 16, 2024 Report #:2311-2207 TITLE Sales Tax Digest Summary Calendar 2023 O2 (April 2023 — June 2023) DISCUSSION This report transmits information regarding the City of Palo Alto's sales tax receipts for the second (calendar) quarter (April to June) of 2023. These figures have been factored into the FY 2023 Annual Comprehensive Financial Report and the FY 2025 Long Range Financial report released in November and December 2023 respectively. There are two components to the report in Attachment A that provides further and more detailed levels of information: a. City of Palo Alto Sales Tax Digest Summary 2023 Q2 b. California Legislative Update for Local Taxes The City's sales tax cash receipts of $9.4 million for the second quarter (April to June 2023) is $1.8 million higher than the same quarter of the prior year (see Attachment A, Historical Analysis by Calendar Quarter). When adjusted for non -period related payments, the overall economic quarter over quarter sales tax activity (Q2 2022 to O2 2023) in Palo Alto increased by 4.2% (Attachment A, p. 8). The segments showing increases were business to business, food produces, and general retail, while there was a decrease in transportation (see Attachment A, p. 10, City of Palo Alto Geo Areas & Citywide Chart Data: Change from 2022Q2 to 2023Q2). For the year ending in the second quarter of 2023, cash receipts (including county pools) for the City increased by 23.3% from the prior year. In comparison, both statewide and Northern California decreased by 1.0%. Overall, the decline in California sales tax receipts for the quarter was due to a number of factors, most notably, lower inflation, and higher interest rates which made financing larger purchases more expensive. These factors contributed to an overall decrease in consumer spending. After adjustments for non -period related payments, the overall Item 15: Staff Report Pg. 1 Packet Pg. 537 of 553 Item 15 Item 15 Staff Report economic sales tax activity in Palo Alto for the year increased by 5.5% while it increased 1.5% statewide and increased 1.0% in the San Francisco Bay Area. The second quarter includes $1.8 million of sales tax receipts from the county pool. The City's share of the county pool for this quarter is 6.3% up from 5.5% in the second quarter of 2022. County pools are primarily from online purchases from out-of-state companies, remote sellers who ship merchandise to California/County destinations, and private vehicle sales that are not directly allocated to a jurisdiction. County pools are allocated to local jurisdictions based on each jurisdiction's share of total sales tax. ATTACHMENTS Attachment A: 2023 O2 Sales Tax Data and Legislative Update /_1»:T91T141] YA Kiely Nose, Assistant City Manager Item 15: Staff Report Pg. 2 Packet Pg. 538 of 553 Item 15 City of Palo Alto Attachment A - 2023 Q2 Sales Tax Digest Summary SalesTax Data and Collections through August 2023 Legislative Update Sales April through June 2023 (2023Q2) California Overview For the year ending in the second quarter of 2023, cash receipts increased 2.4% statewide, 3.9% in S.F. Bay Area. However, when adjusted for non -period related payments, the overall economic sales tax activity for the year ending in second quarter of 2023 increased by 1.5% statewide and increased by 1.0% in S.F. Bay Area. City of Palo Alto For the year ending in the second quarter of 2023, sales tax cash receipts for the city increased by 13.5% from the prior year. However, when adjusted for non -period related payments, the overall economic sales tax activity in Palo Alto for the year ending in second quarter of 2023 increased by 5.5%. Sales tax cash receipts decreased by 1.0% in California from O2 2022 to Q2 2023, while the citywide sales tax cash receipts increased by 23.3% over the same period. Overall, the decline in sales tax cash receipts in California in O2 2023 was due to a combination of factors, including bad weather, lower inflation, and higher interest rates. Unusual amounts of rain and bad weather affected most of the state. This led to an overall decrease in consumer spending. Inflation declined by 1.6% from an average of 8.0% in Q1 2022 to 6.4% in O1 2023. Interest rates increases made financing larger purchases, such as new autos, more expensive. According to Experian, the average interest rate for an auto loan in California for the year ended 2023Q1 was 5.41%, up from 4.73% in the year ended 2022Q1. This represents a 14.2% increase in the average interest rate. The Transportation Category in Palo Alto saw the largest decline in taxable sales on an economic basis over the past year, falling by 14.1%. This was driven by a 18.6% year -over -year decline in taxable sales of new autos, which make up 76.4% of the category. The average price of a new car in California was $48,451 in 2023Q2, up from $48,257 in 2022Q2, a 0.4% increase. The average price of a Tesla in California declined by $13,290 in the year ended 2023Q2, from $68,233 in 2022Q2 to $54,943 in 2023Q2, a 19.5% decline. The decrease in the Transportation category for the Palo Alto can be attributed to CDTFA's determination that Tesla had not been reporting the local tax correctly based on Point -of -Sale criteria for auto dealerships. www.avenuinsights.com Item 15: Staff Report Pg. 3 Packet Pg. 539 of 553 ge 1 City of Palo Alto Item 15 Attachment A - 2023 Q2 Sales Tax Data and Legislative Update Regional Overview The first chart on page two shows adjusted economic benchmark year amounts, which means that it shows the year ended second quarter of 2023 compared to the year ended second quarter of 2022 (benchmark years are rolling annual comparisons through the current quarter). The decrease is different between the state and Palo Alto because the sales tax from businesses in Palo Alto were more impacted than those statewide. Regional Overview Chart (Economic) BENCHMARK YEAR 2023Q2 COMPARED TO BENCHMARK YEAR 2022Q2 .. of Total / % Change Palo Alto California S.F. Bay Area Sacramento Central Valley South Coast Inland Empire North Coast Statewide Valley General Retail 27.1/2.8 28.0/1.3 23.5/-2.1 28.5/3.0 36.6/-1.0 26.7/2.1 32.8/4.5 26.8/-5.0 Food Products 17.7/15.5 20.8/4.7 22.8/8.6 16.6/6.3 14.7/2.8 22.6/4.0 17.6/3.0 17.9/-2.7 Transportation 17.5/-14.1 24.2/0.6 20.0/-0.5 26.8/-2.2 22.8/-1.7 25.0/0.9 25.9/6.1 29.5/-7.5 Business to Business 34.5/19.4 16.2/1.3 21.9/-0.4 14.5/5.7 15.1/1.1 15.9/0.5 11.3/10.5 10.2/-12.5 Misc/Other 3.6/-14.3 10.8/-1.1 11.9/-1.0 13.6/-4.3 10.9/-3.6 9.8/0.3 12.4/-2.0 15.7/-2.4 Total 100.0/5.5 100.0/1.5 100.0/1.0 100.0/1.4 100.0/-0.6 100.0/1.8 100.0/4.4 100.0/-5.8 • •FOR• • • California Sacramento Palo Alto S.F. Bay Area Central Valley South Coast Inland Empire North Coast Statewide Valley Miscellaneous Miscellaneous Miscellaneous Largest Segment Leasing Restaurants Restaurants Restaurants Service Stations Retail Retail Retail % of Total / % Change 22.1/16.3 14.9/7.6 16.8/12.6 11.3/10.1 14.1/5.4 16.6/6.7 15.9/7.9 11.3/-5.3 Auto Sales - Auto Sales - Department Auto Sales - Auto Sales - 2nd Largest Segment Restaurants Restaurants Restaurants New New Stores New New % of Total / % Change 15.8/16.7 11.6/3.3 9.7/2.2 11.3/7.4 11.0/-0.9 12.9/4.0 11.2/6.7 11.3/-2.7 Auto Sales - Miscellaneous Department Auto Sales - Miscellaneous 3rd Largest Segment Restaurants Restaurants Service Stations New Retail Stores New Retail % of Total / % Change 13.4/-18.6 9.5/7.9 7.6/0.3 11.3/1.5 9.8/4.1 8.2/11.6 11.1/7.4 11.0/-9.1 www.avenuinsights.com Item 15: Staff Report Pg. 4 Packet Pg. 540 of 553 e 2 City of Palo Alto Gross Historical Sales Tax Cash Receipts by Benchmark Year and Quarter $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 Item 15 Attachment A - 2023 Q2 Sales Tax Data and Legislative Update ti° ti� ti° ti° ti° ti° ti° ti° ti° ti° titi titi titi titi titi titi titi titi ti� ti� �o yo do do yo do do yo do do �o ,yo do �o yo do �o yo do yo Quarterly —Benchmark Year Net Cash Receipts for Benchmark Year second Quarter 2023: $35,791,903 *Benchmark year (BMY) is the sum of the current and 3 previous quarters (2023Q2 BMY is sum of 2023 Q2, 2023 Q1, 2022 Q4, 2022 Q3) Net fools & i 24.! All Other 34.7% Leasing Restaurants 15.8% :o Sales - New 13.4% -it Apparel Stores 7.4% 6.7% www.avenuinsights.com Item 15: Staff Report Pg. 5 Packet Pg. 541 of 553 ge 3 City of Palo Alto TOP 25 SALES/USE TAX CONTRIBUTORS Item 15 Attachment A - 2023 Q2 Sales Tax Data and Legislative Update The following list identifies Palo Alto's Top 25 Sales/Use Tax contributors. The list is in alphabetical order and represents the year ended second quarter of 2023. The Top 25 Sales/Use Tax contributors generate 60.8% of Palo Alto's total sales and use tax revenue. Anderson Honda Apple Stores Arco AM/PM Mini Marts Audi Palo Alto Bloomingdale's Hengehold Trucks Hermes HP Enterprise Services Louis Vuitton Macy's Department Store Magnussen's Toyota of Palo Alto Neiman Marcus Nordstrom Department Store Richemont Rivian Automotive Sephora Shell Service Stations Shreve & Co. Stanford Health Care Tesla Tesla Lease Trust Tiffany & Company Union 76 Service Stations Varian Medical Systems Volvo Cars Palo Alto www.avenuinsights.com Item 15: Staff Report Pg. 6 Packet Pg. 542 of 553 e 2 $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- City of Palo Alto Item 15 Attachment A - 2023 Q2 Sales Tax Data and Legislative Update Sales Tax from Largest Non -Confidential Sales Tax Segments (Economic) c'`�' e�w cep' 5, to �a\e5 Qey�aJ I ate\5 c�5 P O ceQ www.avenuinsights.com Item 15: Staff Report Pg. 7 Packet Pg. 543 of 553 5 City of Palo Alto Historical Analysis by Calendar Quarter Item 15 Attachment A - 2023 O2 Sales Tax Data and Legislative Update Economic Category % 2023O2 2023Q1 2022O4 2022O3 202242 2022O1 2021O4 2021O3 2021O2 2021O1 2020O4 Business To Business 25.8% 2,439,519 2,350,567 2,571,178 2,194,817 2,095,020 2,031,199 2,136,501 1,689,561 1,559,814 1,700,725 1,937,072 Miscellaneous/Other 16.4% 1,546,096 1,302,322 1,517,005 1,597,816 1,724,861 1,701,538 1,687,189 1,812,731 1,743,358 1,558,859 1,777,635 General Retail 21.4% 2,017,885 1,640,927 2,305,038 1,802,777 1,920,316 1,639,417 2,282,253 1,687,461 1,740,666 1,153,240 1,608,823 Food Products 14.3% 1,349,926 1,195,458 1,260,287 1,230,824 1,227,240 1,018,577 1,083,309 999,729 912,939 635,705 674,469 Subtotal Economic(Local Business) 77.9% 7,353,426 6,489,274 7,653,508 6,826,234 6,967,438 6,390,731 7,189,252 6,189,482 5,956,778 5,048,529 5,997,999 Net Pools & Adjustments 22.1% 2,084,763 1,586,938 1,935,580 1,862,181 686,044 1,721,924 1,806,328 584,508 1,513,663 1,741,273 1,343,184 Total Cash Receipts 100.0% 9,438,189 8,076,212 9,589,088 8,688,414 7,653,481 8,112,655 8,995,580 6,773,990 7,470,441 6,789,802 7,341,183 Economic Segment % 2023O2 2023O1 2022O4 2022O3 2022O2 2022Q1 2021O4 202143 2021O2 2021O1 2020O4 Miscellaneous/Other 44.5% 4,197,978 3,818,384 4,490,992 4,087,158 4,008,008 3,949,786 3,969,954 3,752,178 3,570,610 3,406,995 3,982,753 Restaurants 12.9% 1,214,502 1,073,621 1,114,637 1,102,248 1,093,944 902,707 947,771 884,911 799,544 540,244 557,662 Miscellaneous Retail 5.4% 512,077 448,322 545,797 381,616 479,710 432,956 679,381 412,016 514,516 338,032 489,417 Apparel Stores 5.4% 509,894 423,470 538,573 435,730 495,508 392,724 540,782 406,274 398,447 264,318 365,627 Department Stores 5.2% 492,374 356,626 533,032 423,601 454,349 367,144 525,295 388,703 384,763 237,522 315,453 Service Stations 2.4% 222,029 192,723 215,640 233,387 250,715 191,755 190,610 181,460 157,268 116,258 111,242 Food Markets 1.2% 111,465 101,978 116,810 99,811 104,253 91,634 108,203 90,773 89,773 74,397 89,739 Business Services 1.0% 93,106 74,150 98,027 62,683 80,950 62,025 227,256 73,169 41,858 70,763 86,107 Subtotal Economic(Local Business) 77.9% 7,353,426 6,489,274 7,653,508 6,826,234 6,967,438 6,390,731 7,189,252 6,189,482 5,956,778 5,048,529 5,997,999 Net Pools & Adjustments 22.1% 2,084,763 1,586,938 1,935,580 1,862,181 686,044 1,721,924 1,806,328 584,508 1,513,663 1,741,273 1,343,184 Total Cash Receipts 100.0% 9,438,189 8,076,212 9,589,088 8,688,414 7,653,481 8,112,655 8,995,580 6,773,990 7,470,441 6,789,802 7,341,183 The chart above shows the categories and segments in quarterly economic basis amounts. The total amount is the net cash receipts, and it was obtained by adding up the categories/segments with the "Net Pools & Adjustments" amount. www.avenuinsights.com (800) 800-8181 Item 15: Staff Report Pg. 8 1 Packet Pg. 544 of 553 City of Palo Alto Historical Analysis by Calendar BMY from 2014Q2 to 2023Q2 Item 15 Attachment A - 2023 O2 Sales Tax Data and Legislative Update Economic Category % 2023Q2 2022Q2 2021Q2 2020O2 2019Q2 2018O2 2017O2 2016O2 2015O2 2014O2 Business To Business 27.6% 9,893,339 8,286,992 7,485,938 8,193,739 7,496,054 6,707,627 5,418,731 5,120,759 4,034,581 4,713,800 Miscellaneous/Other 16.7% 5,964,981 6,940,297 5,980,661 5,389,899 7,990,749 6,336,507 6,023,496 5,828,635 5,526,056 5,279,967 General Retail 21.7% 7,751,380 7,538,308 6,113,299 7,106,633 8,543,599 8,381,689 8,508,010 8,180,392 8,079,780 8,106,060 Food Products 14.1% 5,055,390 4,376,428 2,835,515 3,891,336 4,885,701 4,776,697 4,596,100 4,609,460 4,323,122 4,035,894 Subtotal Economic(Local Business) 80.1% 28,665,089 27,142,025 22,415,414 24,581,607 28,916,104 26,202,519 24,546,336 23,739,246 21,963,538 22,135,721 Net Pools & Adjustments 19.9% 7,126,814 4,393,682 5,709,337 5,310,618 7,173,726 3,517,503 4,313,668 4,407,390 4,034,611 3,441,331 Total 100.0% 35,791,903 31,535,707 28,124,751 29,892,225 36,089,829 29,720,022 24,546,336 28,146,636 25,998,149 25,577,052 Economic Segment % 2023Q2 2022O2 2021O2 2020O2 2019O2 2018O2 2017Q2 2016O2 2015O2 2014O2 Miscellaneous/Other 47.2% 16,902,798 16,028,739 14,884,738 15,705,174 17,022,880 14,508,248 12,802,455 12,024,028 10,653,521 11,130,513 Restaurants 12.6% 4,523,610 3,877,041 2,410,193 3,388,800 4,304,101 4,166,128 3,993,417 4,010,073 3,761,655 3,516,294 Miscellaneous Retail 5.2% 1,848,192 2,012,947 1,590,233 1,273,539 1,639,505 1,676,488 2,137,729 1,885,952 1,506,384 1,497,498 Apparel Stores 5.3% 1,912,134 1,834,771 1,282,785 1,400,225 2,004,839 1,835,953 1,692,171 1,627,846 1,655,700 1,660,948 Department Stores 5.1% 1,809,245 1,735,491 1,124,004 1,260,329 1,885,556 2,068,624 2,065,427 2,250,100 2,397,566 2,403,841 Service Stations 2.4% 870,389 814,667 488,904 572,745 698,559 651,979 587,986 581,619 699,331 776,593 Business Services 1.0% 368,276 443,531 302,590 577,822 907,685 796,402 762,154 850,451 799,913 700,153 Food Markets 1.2% 430,445 394,839 331,966 402,973 452,977 498,697 504,997 509,177 489,468 449,881 Subtotal Economic(Local Business) 80.1% 28,665,089 27,142,025 22,415,414 24,581,607 28,916,104 26,202,519 24,546,336 23,739,246 21,963,538 22,135,721 Net Pools & Adjustments 19.9% 7,126,814 4,393,682 5,709,337 5,310,618 7,173,726 3,517,503 4,313,668 4,407,390 4,034,611 3,441,331 Total 100.0% 35,791,903 31,535,707 28,124,751 29,892,225 36,089,829 29,720,022 24,546,336 28,146,636 25,998,149 25,577,052 The chart above shows the categories and segments in benchmark year economic basis amounts. The total amount is the net cash receipts, and it was obtained by adding up the categories/segments with the "Net Pools & Adjustments" amount. Benchmark year (BMY) is the sum of the current and 3 previous quarters (2023O2 BMY is sum of 2023 Q2, 2023 Q1, 2022 Q4, 2022 Q3). www.avenuinsights.com Item 15: Staff Report Pg. 9 1 Packet Pg. 545 of 553 Item 15 City of Palo Alto Attachment A -2023O2 Sales Tax Data and Legislative Update Quarterly Analysis by Sales Tax Category: Change from 2022Q2 to 2023Q2 (Economic) Campbell -5.2% 4.5% -5.8% 67.2% 1.5% 3,370,786 2,964,148 13.7% I.T. Infrastructure Light Industry Electronic Equipment Service Stations Cupertino -3.6% 8.1% -4.0% -30.9% -10.6% 5,974,054 7,974,786 -25.1% Restaurants BIdg.Matls-Retail Office Equipment I.T. Infrastructure Gilroy -4.1% 5.3% -7.7% -9.7% -5.3% 4,340,101 4,553,438 -4.7% Auto Sales - New Restaurants Misc. Vehicle Sales Service Stations Los Altos -15.2% 2.3% -25.4% -17.2% 5.2% 645,408 703,169 -8.2% Food Markets Health & Government Service Stations Miscellaneous Retail Los Gatos 7.4% -1.0% -10.7% 25.6% -29.9% 1,538,907 1,585,258 -2.9% Biotechnology Apparel Stores Miscellaneous Other Service Stations Milpitas 6.4% 6.7% -12.5% 0.6% -8.9% 5,955,173 5,980,175 -0.4% Office Equipment Miscellaneous Retail Electronic Equipment Auto Sales - New Morgan Hill 6.2% 4.7% 1.2% -26.0% 3.1% 2,711,516 2,742,041 -1.1% Auto Sales - New Bldg.Matls-Whsle Light Industry Service Stations Mountain View -4.5% 13.2% -14.7% -8.6% -8.7% 4,800,562 4,874,063 -1.5% Restaurants Light Industry Auto Sales - New Energy Sales Palo Alto 4.9% 8.5% -6.7% 14.0% -33.5% 7,415,373 7,118,709 4.2% Leasing Restaurants Health & Government Auto Sales - New San Jose -7.3% 5.0% -8.9% 21.0% -8.2% 49,529,258 49,235,373 0.6% Office Equipment Green Energy Service Stations BIdg.Matls-Whsle Santa Clara -8.6% 12.2% -2.5% 14.1% 21.0% 12,710,915 11,748,360 8.2% Office Equipment BIdg.Matls-Whsle I.T. Infrastructure Heavy Industry County of Santa Clara 1.3% 3.6% 49.9% 15.8% 13.5% 1,398,881 1,256,453 11.3% Misc. Vehicle Sales Leasing Business Services Auto Parts/Repair Saratoga 0.5% -0.1% -29.3% 26.0% -37.1% 262,293 280,920 -6.6% Light Industry Furniture/Appliance Service Stations Miscellaneous Other Sunnyvale -6.6% 10.5% 30.5% -12.0% -12.3% 7,339,420 7,171,301 2.3% Auto Sales - New Light Industry Office Equipment Electronic Equipment Unlike the chart on page one which showed a 'benchmark year' through second quarter of 2023, the chart above shows a comparison of one quarter only — second quarter of 2023 to second quarter of 2022. This chart is for local 'brick and mortar' businesses and it excludes county pools and adjustments. www.avenuinsights.com (800) 800-8181 Page 8 Item 15: Staff Report Pg. 10 Packet Pg. 546 of 553 City of Palo Alto Item 15 Attachment A - 2023 02 Sales Tax Data and Legislative Update City of Palo Alto Geo Areas & Citywide Chart Data: Change from 2022Q2 to 2023Q2 (Economic) FOOD PRODUCTS 21.2% 98,752 81,447 60.7% 51.6% GENERAL RETAIL -27.6% 20,523 28,346 12.6% 18.0% ALL OTHER -9.8% 43,314 48,003 26.6% 30.4% TOTAL 3.0% 162,589 157,797 100.0% 100.0% FOOD PRODUCTS -0.2% 161,383 161,689 42.6% 26.6% GENERAL RETAIL 1.2% 39,467 39,015 10.4% 6.4% ALL OTHER -56.1% 178,382 406,746 47.0% 67.0% TOTAL -37.6% 379,232 607,450 100.0 100.0% FOOD PRODUCTS 10.8% 538,341 485,837 61.4% 60.0% GENERAL RETAIL 2.0% 275,468 270,075 31.4% 33.3% BUSINESS TO BUSINESS 19.4% 42,631 35,703 4.9% 4.4% MISCELLANEOUS 24.9% 9,104 7,288 1.0% 0.9% CONSTRUCTION 3.2% 8,503 8,236 1.0% 1.0% TRANSPORTATION 9.4% 3,276 2,994 0.4% 0.4% TOTAL 8.3% 877,324 810,133 i 100.0% 100.0% GENERAL RETAIL 8.2% 1,457,795 1,346,744 76.9% 78.7% FOOD PRODUCTS 3.7% 167,448 161,418 8.8% 9.4% ALL OTHER 32.4% 270,100 203,974 14.3% 11.9% TOTAL 10.7% 1,895,343 1,712,136 100.0% 100.0% www.avenuinsights.com Item 15: Staff Report Pg. 11 Packet Pg. 547 of 553 e 9 City of Palo Alto City of Palo Alto Geo Areas & Citywide Chart Data: Change from 2022Q2 to 2023Q2 (Economic) Cont. Item 15 Attachment A - 2023 02 Sales Tax Data and Legislative Update FOOD PRODUCTS 4.9% 118,145 112,593 61.5% 62.9% GENERAL RETAIL 13.5% 70,254 61,894 36.5% 34.6% ALL OTHER -12.5% 3,857 4,408 2.0% 2.5% TOTAL 7.5% 192,256 178,895 100.0% 100.0% BUSINESS TO BUSINESS 15.4% 2,328,118 2,017,258 34.0% 31.4% GENERAL RETAIL 6.4% 1,952,382 1,834,998 28.5% 28.5% TRANSPORTATION -6.7% 1,314,080 1,408,859 19.2% 21.9% FOOD PRODUCTS 9.1% 1,167,248 1,069,414 17.0% 16.6% MISCELLANEOUS -13.4% 57,767 66,697 0.8% 1.0% CONSTRUCTION -0.6% 32,731 32,922 0.5% 0.5% TOTAL 6.6% 6,852,325 6,430,147 100.0% 100.0% Balance of Jurisdiction 12.9% 3,345,582 2,963,737 48.8% 46.1% Stanford Shopping Center 10.7% 1,895,343 1,712,136 27.7% 26.6% Greater Downtown 8.3% 877,324 810,133 12.8% 12.6% El Camino Real and Midtown -37.6% 379,232 607,450 5.5% 9.4% Town And Country Shopping Center 7.5% 192,256 178,895 2.8% 2.8% California Avenue 3.0% 162,589 157,797 2.4% 2.5% TOTAL 6.6% 6,852,325 6,430,147 i 100.0% 100.0% BUSINESS TO BUSINESS 14.0% 2,497,077 2,189,789 33.7% 30.8% GENERAL RETAIL 4.9% 2,017,885 1,922,833 27.2% 27.0% FOOD PRODUCTS 8.5% 1,349,926 1,243,678 18.2% 17.5% TRANSPORTATION -6.7% 1,318,080 1,412,974 17.8% 19.8% MISCELLANEOUS -38.7% 188,332 307,262 2.5% 4.3% CONSTRUCTION 4.5% 44,073 42,172 0.6% 0.6% TOTAL 4.2% 7,415,373 7,118,709 100.0% 100.0% www.avenuinsights.com (800) 800-8181 Page 10 Item 15: Staff Report Pg. 12 Packet Pg. 548 of 553 City of Palo Alto City of Palo Alto Geo Area Pie Charts California Avenue 2023Q2 SALES TAX AMOUNTS ALL OTHER -9.8% CHANGE, $� 26.6% TOTE GENERAL RETAIL, -2 CHANGE, $20,52: 12.6% TOTAL DOD PRODUCTS, ALL OTHER, $48,00: CHANGE, $98,752 , 30.4% TOTAL 60.7% TOTAL El Camino Real and Midtown 2023Q2 SALES TAX AMOUNTS ALL OTH EI -56.1% CHAT $178,382 47.0% TOT 'RODUCTS, GE, $161,383 , 6 TOTAL GENERAL RETAIL, 1.2% CHANGE, $39,467 , 10.4%TOTAL GENERAL RETAIL $28,346 , 18.0% TO Item 15 Attachment A - 2023 O2 Sales Tax Data and Legislative Update California Avenue 2022Q2 SALES TAX AMOUNTS D PRODUCTS, $81,447, 51.6% TOTAL El Camino Real and Midtown 2022Q2 SALESTAXAMOUNTS ALL OTHER, $406,7 67.0% TOTAL PRODUCTS, $161,689 , 26.6% TOTAL GENERAL RETAIL, $39,015, 6.4% TOTAL www.avenuinsights.com Item 15: Staff Report Pg. 13 1 Packet Pg. 549 of 553 City of Palo Alto City of Palo Alto Geo Areas Pie Charts Greater Downtown 2023Q2 SALES TAX AMOUNTS MISCELLANEOUS, CONSTRUCTION, 3.2% CHANGE, BUSINESS TOE 19.4% CHANGE 4.9% TO GENERAL RE 2.0% CHAN $275,468 31.4% TOT Stanford Shopping Center 2023Q2 SALES TAX AMOUNTS ALL OTHER, 32.4% CHANGE, $2 FOODPRODUC 3.7% CHANGE $167,448 8.8% TOTAL SPORTATION, 4ANGE, $3,276, 4% TOTAL FOOD PRODUCTS, '/o CHANGE, $538,341 61.4% TOTAL NL RETAIL, iE, $1,457,795 , 'TOTAL Item 15 Attachment A - 2023 O2 Sales Tax Data and Legislative Update Greater Downtown 2022Q2 SALES TAX AMOUNTS CONSTRUCTION, MISCELLANEOUS, $7,288 , $8,236 ,1.0% TOTAL 0.9% TOTAL TRANSP$2 9940.4%TOTAL BO BUSINESS, $35,7503T4.4%TOTAL .-11I_ FOOD PRODUCTS, E5,837 , 60.0% TOTAL GENERAL RETAIL, $270,075 , 33.3% TOTAL Stanford Shopping Center 2022Q2 SALES TAX AMOUNTS ALL OTHER, $203,974 , 11 0 G TnTAI FOOD PRODUCTS, $161,418 9.4% TOTAL AL RETAI L 16,744 ' TOTAL www.avenuinsights.com (800) 800-8181 Item 15: Staff Report Pg. 14 Page 12 Packet Pg. 550 of 553 City of Palo Alto City of Palo Alto Geo Area Pie Charts Town And Country Shopping Center 2023O2 SALES TAX AMOUNTS ALL OTHER, -12.5% CHANGE, $3,857, 2.0% TOTAL GENERALR 13.5% CHANGE 36.5% TC DD PRODUCTS, HANGE, $118,145 , i1.5% TOTAL All Other Geos combined with Balance of Jurisdiction 2023O2 SALES TAX AMOUNTS MISCELLANEOUS, -13.4% CHANGE, CONSTRUCTION, $57,767 , 0.8% TOTAL -0.6% CHANGE, $32,731 , 0.5% TOTAL FOOD PRC 9.1% CHANGE, 17.0% T TRANS PORTATI� -6.7% CHANG $1,314,080, 19.2% TOTAI VESSTO BUSINESS, 5.4% CHANGE, $2,328,118 , 34.0% TOTAL L RETAIL, $1,952,382, za.o-ro TOTAL Item 15 Attachment A - 2023 O2 Sales Tax Data and Legislative Update Town And Country Shopping Center 2022O2 SALES TAX AMOUNTS ALL OTHER, $4,408 ,2.5% TOTAL GENERAL RETAIL, 34.6% TOT, FOOD $1,( 16.6 TRANSPOF $1,408 21.9% 1 All Other Geos combined with Balance of.lurisdiction 2022Q2 SALES TAX AMOUNTS MISCELLANEOUS, CONSTRUCTION, $66,697 , 1.0% TOTAL $32,922 , 0.5% TOTAL FOOD PRODUCTS, $112,593 62.9% TOTAL SINESSTO BUSINESS, $2,017,258 31.4% TOTAL AIL, $1,834,998, 28.5% TOTAL www.avenuinsights.com Item 15: Staff Report Pg. 15 Packet Pg. 551 of 553 13 CALIFORNIA LEISLATI California Legislative Update September 1, 2023 This edition of our policy update provides information on the incoming Senate pro Tempore, Mike McGuire; ACA 13, which will increase the voter threshold for certain initiative constitutional amendments; and the Mental Health Services Act reforms being driven by the administration. The legislature is scheduled to adjourn for interim recess on September 14. Governor Newsom will have until October 14 to sign or veto legislation. We will send a legislative update once we know which legislation he will be considering this year. Tax returns are due in mid -October, and revenues in the first month of the 2023-24 fiscal year are about $1 billion lower than estimated in the Budget Act. Should revenues look particularly bleak after returns are in, the governor could call a special session of the legislature to consider budget solutions prior to January. We hope that this update is helpful, and we will provide additional updates in the future regarding legislation and budget activity in Sacramento. Please reach out to us with any questions. Government Relations Contact Fran.Mancia@avenuinsights.com / 559.288.7296 New Senate pro Tempore On Monday August 28, Senator Mike McGuire (D- Geyserville) quietly secured enough votes from his colleagues to become the new Senate pro Tempore. The official transition from current Senate pro Tern Toni Atkins (D -San Diego) will take place next year at a date to be determined. McGuire was elected to the Senate in 2014, following serving on the Sonoma County Board of Supervisors and as mayor of Healdsburg. He currently represents the counties of Del Norte, Humboldt, Lake, Marin, Mendocino, Sonoma (partial), and Trinity. He plans to Item 15 Attachment A - 2023 Q2 Sales Tax Data and Legislative Update E prioritize climate change, wildfires, insurance markets, reproductive rights, and homelessness. The new Senate pro Tem will be instrumental in determining the Senate's legislative and budget priorities and will decide on committee chairmanships and appointments. Senator McGuire is currently the Senate Majority Leader and will be termed out of office in 2026. ACA 13 (Ward) Voting Thresholds Assemblyman Chris Ward (D -San Diego) amended - ACA 13 on August 17, to require an initiative constitutional amendment to comply with any increased voter approval threshold that it seeks to impose on future ballot measures. Under current law, a ballot measure approved by a simple majority of voters can selectively change the law so that a future measure would require a supermajority to pass. Additionally, ACA 13 guarantees in the state constitution the ability of local governments to submit advisory questions to voters. Of particular note, if passed by California voters, ACA 13 would impact The Taxpayer Protection and Government Accountability Ac (initiative) by requiring it to be approved by two-thirds of the voters in order to take effect. The initiative, which has qualified for the November 2024 ballot, is sponsored by the California Business Roundtable and would limit the ability for state and local governments to impose taxes, fees, and other charges, as well as the ability of a local government to place an advisory measure on the ballot if the measure is related to the potential use of revenues derived from a general tax that is appearing on the same ballot. Should both ACA 13 and the initiative pass, the California Constitution would include potentially conflicting provisions governing local advisory measures. In such a situation, it is unclear which provision would prevail if a local jurisdiction sought to place an advisory measure on the ballot related to the use of revenues from a general tax appearing on the same ballot. Item 15: Staff Report Pg. 16 Packet Pg. 552 of 553 CALIFORNIA LEGISLAT AVENU 1k 51 J,II I # A Mr 1 P I I. , Local government associations including CSAC and the League of California Cities as well as labor interests have weighed in supporting ACA 13 which passed the Assembly Elections Committee on August 23, the Assembly Appropriations Committee on September 1, and will be heard on the Assembly floor within the next two weeks. The California Business Roundtable and Howard Jarvis Taxpayers Association are opposed. Lawmakers have received numerous calls on both sides of the issue. Mental Health Services Act Reform and Bond In June, Governor Newsom announced details of his proposal to modernize the Mental Health Services Act (MHSA) as well as place a bond on the ballot to provide funding for behavioral health housing, language was introduced through AB 531 (Irwin) The Behavioral Health Infrastructure Bond Act of 2023 and SB 326 (Eggman) The Behavioral Health Services Act. These measures are anticipated to be sent to the governor by September 14 when the legislature adjourns for the year. AB 531 would, upon voter approval at the March 5, 2024, statewide primary election, allow $4.68 billion in bonds to be issued for the provision of grants administered by the Department of Health Care Services for the acquisition of capital assets for, and the construction and rehabilitation of, unlocked, voluntary, and community -based treatment settings and residential care settings, as well as grants administered by the Department of Housing and Community Development to acquire capital assets for, and to construct and rehabilitate housing for, veterans and others who are experiencing homelessness or are at risk of homelessness and are living with a behavioral health challenge. Language in the measure specifies that a housing project funded, in whole or in part, by the bond shall be a use by right subject to a streamlined, ministerial review. In addition, contractors and subcontractors performing work on the project must receive prevailing wages for any proposed rehabilitation, construction, or major alterations. SB 326 would make several major and minor changes to the MHSA by focusing on providing services to the most seriously ill and homeless or those at risk of homelessness. Many current programs that do not align with the new parameters will have to be reduced or eliminated. Item 15 Attachment A - 2023 Q2 Sales Tax Data and Legislative Update E Changes to the MHSA include renaming it the Behavioral Health Services Act (BHSA) to reflect the allowance of treatment of substance use disorders (SUDs). County allocations are proposed to be adjusted as follows: • 30% for Housing Interventions including rental and operating subsidies, family housing for children and youth. 50% of this funding bucket must be for chronically homeless individuals. • 35% for Full -Service Partnership (FSP) programs - assertive community treatment, substance use disorder treatment, and employment services. • 35% for behavioral health services and supports, including early intervention; adult, older adult, and youth focused services; capital facilities; deposits into prudent reserves; and outreach and engagement services. The majority of this funding bucket must be for early intervention and at least 51% of early intervention shall be used to serve individuals who are 25 years of age or younger. The Legislative Analyst's Office (LAO), which advises the legislature on the budget and legislative proposals, has been critical of SB 326, in large part because the MHSA is funded through a 1% tax on individuals earning more than $1 million annually, and is therefore an extremely volatile revenue source. In 2020, the tax amounted to $2.8 billion which was paid by 109,000 people, however, about 70% of the total was concentrated among about 13,000 filers with taxable income of $5 million and over. To reduce volatility, the LAO suggests the legislature consider changing the MHSA tax base by reducing the rate and expanding the population of people taxed, or shifting a dedicated portion of the General Fund tax base to fund the MHSA, such as a portion of the sales and use tax or personal income tax. These options would increase stability, but would also reduce long-term growth. Thus far, the administration does not seem inclined to amend the bill to adjust the revenue source. Many cities are supportive of the proposals, while counties have concerns about having to cut current programs. We fully anticipate that this proposal will make it to the governor in September, he will sign it, and it will be placed on the March 2024 ballot. 2 Item 15: Staff Report Pg. 17 Packet Pg. 553 of 553