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HomeMy WebLinkAbout1982-07-19 City Council Summary Minutes1 1 CITY COUNCIL M If1UT€S CITY OE PALO ALTO Regular Meeting Monday, July 19, 1982 ITEM PAGE Oral Communications 2 2 4 4 Minutes of May 17, 1982 2 2 4.4 Minutes of May 24, 1982 2 2 4 4 Consent Calendar 2 2 4 5 Item #1, Utility Rule and Regulation Change 2 2 4 5 (CMR:377:2) Item #2, Final Subdivision Map 124 2 2 4 5 University Avenue Item #3, Public Hearing: Planning Commission Recommendation re Application of Eula Youmans for an Exception from Termination of Nonconforming Use at 4277 Miranda (Request Continuance to September) Item #4, Public Hearing: . Planning Commission Recommendation re Application of JTC, c/o William Stevens Jarvis, for Tentative Subdivision Map at 350 Cambridge Item #5, Public Hearing: Planning Commission Recommendation re Zoning Ordinance Amendment for New Handicapped Parking Regulations Item #6, Public Hearing: Planning Commission Recommendation re Application of Palo Alto Housing Corporation, for Tentative Subdivision Map at Birch/ Grant/Sherman. Avenues 2 2 4 5 2 2 4 8 2 2 5 4 2 2 S 7 Item #7, Cable Television 2 2 5 8 Adjournment 2 2 8 3 '2 2 4 3 7/19/82 Regular Meeting Monday, July 19, -1982 The City Council of the City of Palo Alto met on this date in the Council Chambers at City Hall, 250 Hamilton Aveue, at 7:30 p.m, with Mayor Eyerly presiding. 1 1 PRESENT: Bechtel, Cobb, Eyerly, Fazzi,no, Fletcher, Kletn, Levy, Renzel, Witherspoon ORAL COMMUNICATIONS 1. Dr. Harvey Roth, 3422 Kenneth Drive, presented copies of the various responses he received regarding the labeling of alcoholic beverages as being dangerous to ones health when used to excess. 2. John F. Walker, 19375 Greenwood Circle, Cupertino, sai d • that the Palo Alto Harbor Association (PAHA) completed the first cycle of dredging on July 11, 1982. PAHA dredged the small boat launch ramp. It was interesting that the number of launchings from the small boat launch ramp increased drarnat' cal ly over the July 4 weekend. The channel was dredged and the berth area for theSea Scout Shop, "Boxer." The Sea Scouts were happy to be able to go in and out of the harbor during almost any tide. A channel was dredged down the center of the berthing area. The window for sailing in and out of the harbor had increased to a point where one could get out of the harbor up to four hours before and after high tide. for. the first time in.; years, shrimps, small crabs, and baby oysters were growing i n the harbor, and a seal had taken up residence al so, 3. Judy Peterson, 228 Fulton, said that on Tuesday, July 20, at 7:30 p.m., at the old Stanford Theater, the Coordinating Committee for Downtown Palo Alto Inc., was sponsoring an open meeting for the citizens of Palo Alto. The meeting would include a film followed by a panel discussion to help decide the future of downtown Palo Alto. Mayor Eyerly mentioned an informational Special Meeting of the City Council on the modernization of . Stanford Hospital to be held on Wednesday, July 21, 1982 at 12:00 noon. The press had been contacted and were invited, and the pubic was invited. Stanford was going to set up another meeting early in August for the same purpose. MINUTES OF MAY 17, 1982 Vice Mayor Bechtel submitted the following correction: Page 2053, fourth- paragraph, last line, the word "not" should be deleted. MOTION: Counci lmember Cobb moved, seconded by Fazzi nos approval of the Minutes of May 17, 1982, as corrected. MOTION PASSED unanimously. MINUTES OF MAY 24, 1982 Vice Mayor Bechtel submitted the -fol i owi ng cor`recti or: Page 2070, second paragraph, be nni n9 with the second 1 i ne, change the sentence to "...as there are excellent medical facilities in 2 2 -.4. 4 7-/19/82 the area, the kind of disaster which would occur as a result of a nuclear attack could not be .handled by these medical facilities." Councilmember Cobb had the following corrections: Page 2069, last paragraph, first line, the word "i n" should be inserted after the word "that." Pail2077, second paragraph, last word should be "passed." Pa4e 2079, second paragraph, line 11, should read: "... Council started to venture into requirements which made it uneconomic for a bui lding to ,continue to exist, and forcing such buildings to be torn down and something larger and more dense and more offensive put up in their place." Councilmember Witherspoon had the following correction: Pa e 2069, second paragraph, second sentence should read as s: "She did not necessarily feel that by simply saying that nothing would survive, thdt the threat of nuclear war would go away. She was concerned that ,there were a lot of unpleasant causes for ,.. it MOTION: Councilmember Cobb moved, seconded by Witherspoon, approval of the Minutes of May 24, 1982 as corrected. MOTION PASSED unanimously. CONSEN1T. CALENDAR MOTION: Councilmember Renzel moved, seconded by Klein, approval of the Consent Calendar. ITEM #1. UTILITY RULE AND REGULATION CHANGE -- LATE CHARGES ON Staff recommends that Counci 1 adopt the resolution amending Utility Rule and Requ i ati on No. 10, effective immediately, to include sub -subparagraph (3) to paragraph 8 - Provisions for Late Charges on Loans Secured by Real Property. RESOLUTION 6054 entitled 'RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING UTILITY RULE AND REGULATION NO. 10 TO ADD SUBPARAGRAPH 3(b) RELATING TO LATE CHARGES ON SOLAR LOANS' ITEM #2 FINAL SUBDIVISION MAP -- 124 UNIVERSITY AVENUE (CMR:398; Staff recommends that the City Council approve the final map MOTION PASSED unanimously. ITEM #3i PUBLIC HEARING: PLANNING COMMISSION RECOMMENDATION AOPLICATION OF EULA YOUMANS FOR AN_ ontinued to September CC:4D3:2) MOTION: Councilmember Renzel moved, seconded by Fletcher, to continue the application of-Eela Youmans until September 20, 1982. RE City Attorney Diane Lee said that the item was supposed to be a public hearing, and the applicant was not present. She did not think it was appropriate to take public testimony. She said that if the applicant was under the impression that the public hearing was to be another date,: and .was - not present because of that representation by staff, it may be unfair for, the Council to proceed and take testimony. 2 2 4 5 7/19/82 1 Bill Rutledge, 854 Miranda, said the continuance had yet not been granted, and it was presumptious for the applicant to think the Council would grant it. He and his neighbors opposed a continuance. He requested that if the matter WAS continued that the Counci lmentbers visit the site again. Further, the neighbors would like to receive a detailed guideline regarding the facts the City Council would consider relevant at the hearing. The neighbors were not limited by Proposition 13 and had the time to develop the facts because they believed the incompatibility with their neighborhood was clear. Councilmember Renzel said she hastily made the motion because of the staff recommendation. She asked if the Council's decision would be jeopardized if they proceeded with the item tonight. Zoning Administrator Robert Brown said that both the applicant's counsel, Frank Lee Crist, Jr., and the applicant's son, Mr. Youmans were notified of the hearing date. He said that Mr. Cri st was told the date of the hearing when he requested the continu- ance, and was informed of the exact date to which it was con-- tinued. Mr. Youmans was contacted about 1-1/2 weeks before the Planning Commission hearing to ascertain if another' continuance would be requested.. Mr. Youmans was told that if another continu- ance was necessary, he should contact the Planning staff before the meeting. The Planning Department received no such contact. Councilmember Renzel asked if Mr. Grist and Mr. Youmans were advised that the possible continuance tonight would be voted on by the Council and was not guaranteed. Mr. Brown said absolutely. Ms. Lee advised that the Council could proceed on that basis. She said that when a continuance was requested, it was up to the decision -maker to make that evaluation. CONTINUANCE MOTION WITHDRAWN BY MAKER Councilmember Renzel said that the item was before the Council previously for other matters, and she was familiar with the site and the request. SECOND TO MOTION OPPOSES WITHDRAWAL Councilmember Fletcher said she would oppose withdrawing the motion to continue. According to the letter from the attorney, Mr. Cri st, the applicant had an extensive illness and was unable to respond to the initial notice. Since the situation had been ongoing and would drastically impact the applicant, she would be in favor of continuing the public hearing continued until the applicant had a chance -to be heard. Every applicant should have that opportunity unless it was negligence on the part of the applicant not to respond. Vice Mayor Bechtel said staff must have had an idea that a con- tinuance request wouldbe approved by the Council' because the Council received no papers in their packets concerning the item. - She said the Council only received the minutes that went along with the other Planning Commission items. She thought the item was a request for an extension of the termination date required under a nonconforming use, but had no further information. She was sympathetic to the neighbors who sat through all the meetings, but felt she had no alternative but to votein favor of the continuance to September 20. She cautioned that if the continuance request was a game by the applicant and her attorney, the matter would not be continued beyond the September 20 date. Councilmember Fazzi no said he was not pleased with the request for a continuances,, and supported .:Counci imember Renzel to deny the request for a continuance. He did not think the facts had changed since January, 1981. He said the issue was discussed at length at that time, and the Planning Commission minutes revealed that nothing had changed since then. He was ready to move on and dis- cuss the issue tonight. He recognized that the applicant could come back each year and bring up the issue again, but he hoped that any applicant would discover new facts and new reasons for bringing an item back to the City Council. He said the neighborhood would be forced to cone out once a year to discuss tile issue, and the applicant appeared willing to pay the money to argue it again. He saw no reason for a continuance and would vote against the motion. Planning Commission Chai rperson Jean K. McCown said she had no reason to suggest that the Planning Commission's vote would have been any different had they heard from the applicant. The fact was that the Commission had no application before them other than the one or two page submittal for an extension of a nonconforming use. She said the Commission was supplied no information from the applicant at all. It was a different application than the one made 1-1/2 years ago --which was an application for a zone change. She said the Commission was concerned at its meeting that no one was present on behalf of the applicant, and she had no reason to disbelieve lir. Brown's comments, but for whatever reason, the applicant did not send a representative to the Planning Commission hearing. She felt that in the interest of disposing the matter once and for all, the matter should be continued for another sixty (60) days in order for the applicant to pursue his case. Mayor Eyerly agreed with Ms. McCown. He felt the Council should wait to have the hearing when the, applicant was present. Counci lmember Cobb said he agreed with Ms. McCown. He was inclined to support the Planning Commission recommendation, and unless new and usual facts were presented, he would not change his opinion. He said the neighborhood had a good cause, but due process must be followed. Counci{member Witherspoon was concerned why the hearing would be delayed for 60 days. Mayor Eyerly said that the motion for continuance was still on the floor. Mr. Brown said 60 days was the request of the applicant and was -based upon the poor health of Mrs. Youmans. - Counci ]member Witherspoon clarified that the attorney, Mr. Cri st , was informed of tonight's meeting and still no representation was present. Mr. Brown confi rmed that that was the case. Counci lmember Witherspoon said it was unfair to the neighborhood - who had been asking the Council for help for a long time. She could not support the concept that by not showing up, the applicant would get another 60 days. instead. She would vote against the continuance. Counci lmember Levy said he supported the neighbors in this case, and apologized to them for having to attend tonight's meeti ny. He said that the request for an extension was due to the applicant having a a heart operation and fairness called for the Council to gi.ve.Mrs. Youmans an extra measureof due process. He would reluctantly vote in favor of the continuance. Councilmember Klein agree] with Counci lmember Levy. MOTION TO CONTINUE TO SEPTEMBER 20 PASSED by vote of 6-3, Fazzino, RenzeI, Witherspoon voting 'no." 8 ITEM #4 PUBLIC HEARING: PLANNING COMMISSION RECOMMENDATION RE APPLitAfION OFJTC, co WILLIAM STEVENS JARVIS FOt TENTATIVE Planning Commission Chairperson Jean K. McCown said that the Commission discussed the item briefly. She said there was concern about the parking situation and the fact that the project was in the assessment district and would generate a demand for spaces significantly in excess of what was -being provided. The Commission understood that since the Architectural Review Board (ARB) reviewed the project last Fall and the EIA for the whole project was long since approved and on record, the Commission was not in a position to reanalyze except as related to the subdivi- sion map application. She said. the Commission concluded that there was not a di fference between the impact of .the project as condominiums and the impact as a conventional "for rent" office building. On that basis, the Commission concluded that it was not An a position to do other than make the appropriate negative declaration on the project.' She said some frustration existed about the parking .situation, and the Commission was concerned that the project to review the California Avenue Assessment area and assessment districts generally be pushed forward as quickly ,as possible, in order to address the problem in a broader way. Mayor Eyerly declared the public hearing open. David Gleason, 396 Stanford, Acting President of the Evergreen Park Neighborhood Association, said that while the Association had no objections to_ the development per se, it was appropriate for the Council to note that the project would generate considerable traffic —an estimated 400 car trips per day --many of which would pass through Evergreen Park. The Association requested that the Council remain sensitive to the situation in Evergreen Park. There was a considerable traffic problem, and this would be the second major development in i2 months to be approved. The Association believed more developments would be approved in the near future. They requested that the Council monitor the situation along with them, and would stay in touch with the Councilmembers regarding the traffic in Evergreen Park. R. Tourzan, 371 Juanita Way, Los Altos, said that regarding the traffic impact of the property, whether it was used as office condominiums or as a rental building,- the impact would basically be the same. The property was in a parking assessment district, but they were not required to provide any parking; however, they provided the maximum parking possible. Mayor Eyerly declared the public hearing closed. Counci lmember Fazzi no said he- recogni zed that the Council may not be able to do much -about the project given their legal options, but he could not, in good'faith, support the sic of the project and the tremendous parking probl em created in the adjacent residential area.- Even though the project was within the assessment district and was not required to provide provide parking, the City staff report indicated that a intajor overflow could be expected within one block of the site. College Avenue se and Evergreen Park were within one block of the project, and the project itself was on a part of .the California Avenue Assessment District which saw overflow parking on a daily basis,, He could not understand how the environmental assessment could have resulted in a _negative declaration for the site given the exacerbation of the parking problem outside of f the assessment district. elt was not fair to companies -like Hewlett. Packard- or Syntex, which were forced-to.,wpay through the nose" for parking and traffic mitigation, that this project not be assessed for' its addi.ti onai burden upon the City. He had no problem with the project itself, he, thought it was a good one, but it did "not 2 24 8 7/19/82 bel nriy on the subject site. He could not support the application. With regard to the environmental assessment, he asked what options the Councf l had with respect to the parking issue. Ms. Lee said that the negative declaration was approved last Fall. Under the California Environmental Quality Act (CEQA) guidelines, the subsequent approval by a City Council was bound by the prior environmental document prepared unless certain conditions were made which required a subsequent EIR. The project was pretty much the same as the one approved, by the ARB. tlnless substantial changes occurred with respect to the ci rcunistances under which the project was undertaken, and she did not think in this case substantial changes had occurred with respect to the circumstances, or if new information of substantial importance' became available and that information was not available at the time the original enviromental document was approved. Unless the Planning staff was aware that any of these particular conditions applied, the question of the envi ronmmental review of the, project could not be opened. Councilmember Fazzino clarified that the Council was ."stuck" with the decision of the Planning Department and the ARB. Ms. Lee said yes. Councilmember Witherspoon said that the EI A was for the decision - makers to make sure that all parameters were covered, and the decision -makers had to decide whether they could make particular findings. Ms. Lee said the process i n the CEQA guidelines was somewhat dif- ferent than the process for approval of the tentative map. Under CEQA, there could be several stages of approval for a project -- such as ARB approval and tentative map approval. Cases requiring a rezoning would be a separate approval. A separate environmental review was not necessary for each approval. One environmental document was prepared at the earliest approval stage for the project. As future bodies approved the project and took whatever legal steps were requi red by them, they were bound by the environmental documents prepared in conjunction with the earlier. approval unless one of the circumstances previously outlined occurred. Councilmember Witherspoon asked what was meant by "bound." Ms. Lee said preparation of a subsequent -environmental document could not be required. Councilmember Witherspoon said she thought the environmental report documented the parking problems well. Ms. Lee said the environmental report also made . cone i usi ons regarding whether the problems were mitigated and whether the document was complete. Councilmember Witherspoon clarified that the Council was "stuck" with the conclusions as well as the document.. Ms. Lee said -yes. Councilmember Cobb agreed with Councilmember Fazzino. He was •sur- prised that the Evergreen Park representative did not express more concern about the overflow of parking into .the neighborhood. He understood from the staff report that no data was available to indicate occupancy levels in the Cambridge Avenue lots, =which suggested that the City did not know how seven the impact would be. The Council needed to find a `way to addrel that kind of a question before supporting the application. He asked if the Council could legally oppose the application On the basis of noncompliance with the Comprehensive Plan with regard to its impact on the neighborhood. 2 2 4 9 7/19/82 Ms. Lee said she was not familiar with every provision in the Comprehensive Plan, but knew that one required finding of the Council was that the project conformed with the Comprehensive Plan. She deferred to Mr. Schreiber. 1 r Director of Planning and Community Environment Ken Schreiber said he was not aware of any provisions in the ,Comprehensive Plan that the project would violate. The bottom line from staff's standpoint was that the project was consistent with the zoning and went to ARB; there was a lot of concern about parking, however, the Council had a situation where the incremental impact of the project., within the area was not that substantial. There was a problem in the area and the project would make it incremental 1y worse, but the percentages were small if one i poked at the amount of additional parking and traffic. Staff's understanding of CEQA was such that they did not feel any adequate basis existed to require a full environmental impact report or to deny the -project. When the ARB was concerned about the project, staff recommended that rather than focusing on one project with a relatively small incremental impact, the appropriate action would be to focue Jon the sense of the larger problem in the area and take that concern to the' Ci ty Council. That concern was presented to. the City Council, and was the action that triggered the California Avenue Study subsequently assigned to staff. Further, he commented that the subdivision was before the Council for action. The project itself was approved and was consistent with the zoning. If the subdivision was denied, the project could still recei ee a building permit and be built, and would be a rental office project . rather than an ownership office project. The action tonight was whether the square footage would be in one ownership or multiple ownerships. Councilmember Klein said he did not like the project, but did not see any way to vote against it. The requested action was to approve a tentative subdivision map for condominium office units. The Council had a similar request earlier in the year, with one significant difference. When the Counci 1 consi dered the proposal s in north of downtown for a condominium residential parcel, it turned down the request for the condominium primarily on the grounds that the Council wanted to preserve rental space in the residential housing, In this case, the Council did not have those concerns, but, rather, were concerned about parking. Unfortunately the parking concerns were not before the Council, and the Counci 1 was not moving fast enough on what was really required --the Cal fforni a Avenue Study. The applicant acted totally within the rules of the game and it was too 1 ate to change the rules with regard to this particular applicant. He felt the Council was not moving fast enough to .change the rules to prevent these situations, and pointed out that the ARB recommendations for University Avenue and California Avenue parking were tentatively scheduled for January and ,February, 1983. Until those recommendations were sped up, the application required Council approval. Counci lmember Renzel . asked if there was anything to prevent the project being used as commercial, provided that proper payments were paid into the Assessment District . for parking, even though the project was billed as an office condominium. Mr. Schreiber said no. ,The use must be consistent with _ the zoning. Counci h ember Renzel clarified : that while the traffic' projections and parking needs were based on office, there was nothing to prevent the project from being used as; a commercial use which would change both the parking and the traffic projections. Mr. Schreiber said nothing theoreti c 11y could prevent that.- The_ building was designed as an office structure --not just . for retail space. At least the -ground floor of the building 2 2 5,0 7/19/82 would have to be converted into a retail facility. Councilmember Renzel asked if the CC&R's restricted the use to office. Mr. Tourzani said he understood that regarding the traffic impacts and the use, there was no difference between the office condo- miriurn and office rental. It was only a commercial -issue of the sel l abi l ity of the property from a tax standpoint. The use of the building would be exactly the same as a rental building versus a condominium office building. Councilmember Renzel asked Mr. Tourzanl if anything existed in .. . s CC&R's that restricted the use to office as opposed to retail use. Mr. Touzani said he did not think so. Councilmember Fazzino said he could not support a motion which validated the project as being in conformance with the Comprehen- sive Plan --particularly the col i i ces like reductions of through traffic for residential streets, and' reduction of employee or com- muter parking in residential neighborhoods. A tremendous exacerbation of parking problems would occur in residential areas and he was concerned about it. He was become more frustrated as he drove through town and saw hideous projects like Midas Muffler and this one knowing that the City Council had abosl utely nothing to do with them. The projects were decided by the Planning staff and the Architectural Review Board, and he felt the Council needed to take a close look at its rules and regulations to ensure that this type of thing would not happen again. A year from now the Evergreen Park residents would be in the Council Chambers screaming about parking problems, and the Council would authorize another study which would cost $75,000 of staff time. It would cost more to do that than i t did to put the original environmental impact report together on the project. He asked the City Attorney if it was legal to enact a moratorium on the property. Ms. Lee said no moratorium could be impacted on a particular pi -ace of property. Councilmember Fazzino said the alternative would be to take a reasonable transition area between the assessment district which bordered the residential area and place a moratorium on it because of the parking plan being developed. Ms. Lee said it could be done based on whatever area was being studied, but if the moratorium was to be done for one area, she did not know what distinguished one particular area from any other particular area being studied. Councilmember Fazzino said he would vote to deny the project and urged his colleagues to do the same. Councilmember Levy said the £IA indicated there would be a need for approximately 100 parking spaces and that. 11 would be pro- vided. That meant the project was imposing on the assessment district for 89 parking spaces. He asked if 89 permit parking spaces were available within assessment district lets. Mr. Schreiber . said that the amount of parking required was related to the zoning ordi nance--not the amount of square footage. Regarding the amount of parking .available within the district, there were;. times during the day and week that district lots were ful l , and there were' blocks of times--nonpeak hour/non noon hour, especially --when spaces were avai l abl e. The most spaces were available on the other side of California Avenue, not the lots along Cambridge. 2 2 5 .1 7/19/82 8 Councilmember Levy said he could make a finding that the project violated the Comprehensive plan particularly a Policy of the Transportation Section #10, to reduce employee or commuter parking in residential neighborhoods. He said the project went completely opposite to that by, enlarging the amount of employee or commuter parking in the residential neighborhoods surrounding the project. The project was within the assessment district, and it was unfortunate that the assessment district was defined in such a way that it did not provide sufficient parking for the commercial projects within the district. He could comfortably vote against the motion. Mayor Cyerly said the applicant acted in good faith, his property was within the assessment _.district, and the assessment district was to be the provider of the necessary parking, and the applicant paid into the district for any parking he could not provide. He did not see how the Council could vote against the application in view of that fact. If the Council was concerned about what was happening in the CC zone of California Avenue, the proper action would have been to move toward a moratorium so that some of the studies could be completed. It was too late to do that now. Councilmember Cobb said he agreed with Councilmembers Fazzino and levy and could make the finding that the project was not consistent with the Comprehensive Plan. He recogni zed the point was bei ng stretched, but felt it was important because as Mr. Schreiber said, this one project had a marginal impact, but ten similar projects would not have marginal impacts. MOTION: Mayor Eyerly moved, seconded by Klein, to adopt the Planning Commission recommendation that the project, including the design and improvements (e.g., the street alignments, drainage and sanitary facilities, locations and size of all required rights -- of -way, lot size and configuration, grading and traffic access) is consistent with the adopted Comprehensive Plan and complies with the Subdivision Map Act and Title 21 of the Palo Alto Municipal Code; that the project will not have a significant impact on the environment nor be likely to result in serious public health prob- lems; that the site is physically suitable for the type and density of the proposed development; and that there are no con- flicts with public easements, and finding: 1) The proposed project, together with its design and improve- ments is consistent with the Comprehensive Plan land use designation of Regional/Community commercial; 2) The proposed project, together with its design and improve- ments is consistent with the Comprehensive Plan Housing Objective 'to reduce the intrusion of through traffic into the neighborhood' in that the provision for on -site parking, When no such provision is required by the City, shall serve to reduce the potential for added intrusion into the neighbor- hood; 3 )` The developer should coorol n lte any use planned for the public right-ofway during excavation and construction with the Public Works -Engineering Department; 4) A s to drainage plan shell be submitted for approval by the City Engineer prior to the -issuance of a building permit; and 5) .,With an additional recommendation of 7 parking spaces for a maximum of 18 spaces. Councilmember Klein felt that a vote against the project wood be one of the most unfair things he had : seen since being a member of the City Council. He did not think it was appropriate to "distort" the. Comprehensive Plan to find against the project. The Counci lmernbers, as elected government officials, had an obligation 2 .2 5 2 7/19/82 to treat everyone fairly. The Council was changing the rules of the game not in the middle, but with five seconds left in the game. He did not see the Council's authority to do that. Because the Council did not move fast enough to cut off a problem did not mean they had the right to contradict their own procedures and treat the. applicant in a high handed and unfair manner. He would be upset if the project failed. Cour.ci lmember Renzel said that while she had no objections to the building itself, she was concerned about the failure of new buildings to provide adequate parking within the parking short assessment district .areas. It would be a sham and a rubber stamp for the Council not to look at all the information and documents and assess them in terms of their conformance with the Comprehensive Plan. She personally felt concern that while there was no restriction at all of the "offices" being used as commercial, those impacts remained as a potential in the area abutting a residential zone that already experienced severe impacts from the adjacent commercial. She agreed with those who would deny the subdivision. A subdivision was discretionary on the part of the City Council, and she chose not to support it. Councilmember Fletcher said the Planning Director advised that if the Council did not approve the project, it would go ahead in any event, and the only difference would be that it would be,a rental building instead of a condominium building. She would support the project because she felt the Council had a better chance of receiving cooperation from the tenants in the building if they were the owners rather than having to deal with an absentee landlord who may not even be in the State. Vice Mayor Bechtel said she shared the concerns of her colleagues regarding the parking, but pointed out that the applicant volun- tarily added II spaces when not required to provide any. It was not enough, but she did not feel that denying the application would gain anything. lu the interest of further dealings with the City, she encouraged the applicant to voluntarily see what he could do to add to the Assessment [)i strict's pot. Councilmember Levy said he was moved by Councilmember Klein's comments about fair process in this particular situation. He believed in fair process and fair treatment. of al 1 , and Councilmember Kl ei n's comments were germane to the situation. He would reluctantly support the motion,. Mr. Tourzani said he was moved by Councilmember Klein's comments. He said as. a good faith measure, he promised to provide seven more spaces or a total of 18 parking spaces. Councilmember Fazzi no said he resented the implication that those Counci lmembers voting against the application were not being fair. The Council was being asked to approve a subdivision, and some Counci lmembers had concerns about the subdivision particularly with regard to parking problems. Further, the Council was being asked to declare the project in` conformance with the Comprehensive- -Plan, and he felt it was fair to look at the dichotomy between the Comprehensive Plan and the proposal. He felt it was more unfair to the neighborhood to exacerbate a traffic problem and much more unfair to the community who would be forced. to pay for a $50,000 to $100,00.0 traffic study a year down the road because the Council. wanted to rush ahead and approve this ` project. He said it was better to -"hold off en the project, deny it, and work with the applicant and the assessment district to develop a project which would be far more sensitive to the needs of, the City. Vice Mayor Bechtel said she appreciated the applicant's offer to provide 18 parking -spaces. She asked about the appropriate procedure to guarantee the 18 spaces. 2 2 5 3- 7/19/82 Mr. Schreiber said he was reluctant in terms of conditioning the project on that number of spaces because the use of the area had to be designed for parking with access and appropri ate backup dis- tances, etc., and the Director of Transportation had not reviewed the matter in terms of the additional spaces. He said that if th applicant was totally confortable that the additional spaces couii be provided and was willing to commit to them, that was fine. lony Carrasco, Architectural Review Board Member, 4216 Darlington Court, said that the ARB looked at the parking arrangement and it would necessitate some removal of office space, but enough backup distance was available to provide the required parking. Mr. Schreiber said that Mr. Tourzani presented a formal offer for the 18 rather than 11 parking spaces and hewould encourage acceptance. MOTION PASSED by a vote 6-3, Cobb, Fazzino, Renzel voting ''no." Councilmember Cobb said he was also moved by Councilmember Klein's comments. He said he knew the votes were there to pass the motion, and appreciated the applicant's commitment to provide 18 rather than 11 parking spaces. He would like to see the Council take some action to move .ahead the California Avenue study and the Evergreen Park study. Mr. Schreiber said that with regard to the California Avenue study, staff and representatives of the neighborhood, commercial organizations, Planning Commission, ARB and other organizations were interviewing economic consultants this week. Last Tuesday, the Finance and Public Works Committee indicated that they wished to review the consultants in that process, and staff hoped to include that on the F&PW's August 10 agenda. Given the need to hire a consultant, to work out the contract, the complexity of the project itself, and the need to establish a solid working relationship process with the neighborhood, commercial interests, property owners, and tenants, getting the project to P&P before early 1983 would be difficult and could only be done by shortcutting the information collection and community involvement which would probably not pay off in the long run. If the matter could be sped up, staff would do so. Regarding the Evergreen Park project, some weeks ago Council looked at the traffic barrier issue and were aware of the State Supreme Court decision. Staff indicated that action was being taken by the State legislature and also at CalTrans. Staff's feeling so far was that Evergreen Park would not be sent to the P&P Committee until sometime this Fall. The thinking was that staff had a very uncertain situation given the court case and the status oaf legislation, which hopefully would be through the State Assembly and the Governor's office by late August. Also given the fact that CalTrans had not yet authorized any emergency, regulations for traffic harriers, staff did not want to put the sCommittee or the Council in the position of considering something where the staff really did not feel it had a good comfortable base of State regulations on which to recommend the types of things the neighborhood association wanted to pursue. Hopefully, by Fall, the. CalTrans regulations, State legislation, and the court .case would all be resolved to the point where staff felt they could give Council some direction as far as what was possible within the framework of those various rules and. regulations. ITEM 15 PUBLIC HEARING: PLANNING : COMMISSION RECOMMENDATIONRE P 1 anni ng, Conmi ssi on Chairperson Jean K.; McCown r said the -recommen- dation by the Planning Commission was_ unanimous. She said :there, was quite a_ bit of disgruntlement _ at sore of the elements of the amendment although the concept was completely supported. The 2 2 6 4 7/19/82 Planning Commission added a phrase in Section 1(b) of the ordi- nance. As originally drafted, the ordinance provided that the parking spaces had to have vertical clearance of 8'2" rather than 7'S", but said nothing about the access to get into the spaces. Commissioner Northway pointed out the problem that could occur in a parking garage where the clearance would be 7'5". to enter the garage and a space in the'middle that was 8'2" which was not the Intent. From Commissioner Northway's point of view, there may be other aspects of the regulations that present the same kinds of illogical situations. The Commission understood that they did not have any alternatives as far as adopting the ordinance. City Attorney Diane Lee said that while the City was bound by the regulations, she advised the Council that many people were not happy about having to comply with them, not because they were not sympathetic to the needs of handicapped people, but because many of the regulations were ill conceived and poorly written. She said the legislature was going to take up the issue when it reconvened in August, and perhaps would suspend some of the regulations. Staff would keep the Council advised, but .in the meantime, recommended that the Council proceed to adopt the ordinance. Mayor Eyerly declared the public hearing open. Receiving no requests from the public to speak, he declared the public hearing closed, MOTION: Councilmember Fletcher moved, seconded by Renzel, the findings that the proposed ordinance changes will not have a significant environmental impact, approval of a negative declaration, and approval of the changes contained in the ordinance, and approval of the ordinance for first reading ORDINANCE FOR FIRST READING entitled "ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING THE ZONING CODE (TITLE 18) WITH REGARD TO PARKING FOR THE HANDI- CAPPED" Councilmember Fletcher commented that she had considerable concern regarding the benefits to be derived from a higher vertical clear- ance for handicapped parking spaces. She asked whether the task force for the handicapped could be brought in to at least lobby the legislature. She said the handicapped task force might agree with the legislature and if so, she wanted to hear their reasons. Ms. Lee responded that staff checked around with a lot of other jurisdictions to see how they were responding to the new regula- tions. Staff was told that many handicapped groups,, were not in favor of some of the regulations, and perhaps Counci lmember Fl etcher's suggestion would be well received. Councilmember Klein askedewhat would happen if. the Council did not pass the ordinance, Ms. Lee said the Chief Building Official` was required, under State law, to enforce the regul ati ons whether. -or' not the Council imposed them by way of the zoning , ordi nance. She said approving the ordi- nance would make the requirements easier to implement. Coanci lMember Klein said he was intrigued by :the fact that some of the handi capped. organ;i zati ons were not in favor of the regulations. Ms .Lee- -said that was her° understandi-ng after staff conversed wl th people around _the- State. She said that some members--- oaf the l egi s- 1 at; re w 'not enthralled - wf th some of the regul ati ors: -and, therefore, some precipitation existed for, reopening the matter when the legislature reconvened in August. Staff did not know what the outcome -would - bey 2 2 5 5 7/19/82 Counci lmertiber Klein asked wlldi, the added cost was for the require- ment. Mr. Schreiber said he had not seen any cost estimates, but said that the City had somewhere between $40-$45 million worth of building permits filed in the last part of June, which was an indication of the private sector doing everything possible to get projects done before July 1. He thought the costs were very significant. Some permits had been filed since July 1, but staff was deluged for three weeks. an June with people trying to get in ahead of the regulations. Ms. Lee said there was a procedure for reimbursement of any costs under SB 90, which required that a form for reimbursement be filed with the State Board of Claims. Once the City documented what its costs would be for administering the project, the City could follow that procedure. She was not sure about the likelihood of the claim being honored, but did not believe the State Board of Claims' track record was very outstanding. ' Counci lmember Klein said he was upset by this, as well as other State mandates that seemed to have little logic or sense to them, and he would not vote in favor of the ordinance. He urged that the Councilmembers not support the ordinance.. If the motion failed, he would make a motion that the City Council protest the highhanded action by the State, and notify its State legislators why the .City was not making the requi rements part of its zoning ordinance, and urge them to reconsider the matter and pass more sensible legislation. Mr. Schreiber said that regarding what would be done if the ordi- nance did not pass, the situation was very confusing for appli- cants currently --the zoning ordinance had one set of requirements, and the City was mandated to enforce a different set of require- ments. Staff was trying to communicate that fact verbally with applicants now, but if the ordinance failed, staff would have to prepare a handout asking applicants to disregard specific sections of the zoning ordinance because the City had an obligation under State law to implement the regulations. Staff did not feel that any choice existed whether to implement the regulations. Mayor Eyerly clarified that if the . Council were to oppose the ordinance, staff would go ahead and require the clearance for the handicapped spaces and access regardless. Mr. Schreiber said that staff felt they had no choice under the State Building Code procedures. Staff currently: had a confusing situation where people used the zoning ordinance to design a project, then came in and were told that the project could not be designed that way, that different regulations had to be rnet. Ms. Lee agreed with Mr.. Schreiber. She did hot -think it would be inappropriate, if the Council voted in favor of the ordinance, for them to send that message to the legislature. It was important for the legislature to receive the Council's message before they reconvened in August. She urged the Council to support the ordinance•and said that if the City had a zoning ordinance which was not representative of what the City was supposed; to enforce, it was confusing - for applicants as well as staff, . Vice Mayor Bechtel encouraged her colleagues to support, the ordi-- --nance. '-She thought . the ordinance contained some good poi rats in spite of the confusions about 7 -1/2 -feet versus B'2" for the hands zapped spaces. The sections concerning the width _ of the :parking spaces were key because many shopping centers and Other. locations put i`n, a standard .carspace and label ed- it` "handi-' capped,"-- and the person with the wheelchair was unable to get out of the car because .of an inadequate width, She Isaid _that particu- lar problem was taken care of by the ordinance. 2 2 5 6 7/19/82 MOTION PASSED by a vote of 8-1, Klein voting 'no.* MOTION: Councllmember Klein moved, seconded by Cobb, that the Mayor be directed to inform the State legislators that the Palo Alto City Council reluctantly passed the handicapped parking ordinance in order to prevent any confusion for potential applications, but that the Council feels the ordinance is seriously flawed and urge the legislature to reconsider the area and prepare a better bill. Ms. Lee asked if Counci lmember Klein intended to make his motion broader than just the parking regulations. She was unclear whether he intended to address all the new handicapped regulations which were promulgated. Counci lmemberKlein said that was not his intent, but he accepted the recommendation. Mr. Zaner said he was concerned about the Counci 1 's taking a shot gun approach to dealing with the legislature on the handicapped legislation. He commented that staff was preparing a report internally in order to give the Council some details and examples of how the regulations were affecting the City of Palo Alto. When staff has some specific information, that type of a motion would be requested. That would have more of an impact than sending a broad general messagethat the City of Palo Alto was not in favor of handicapped regulations, which was not the case, Councilmember Klein said he was concerned about the timing. He said he would defer the matter if he felt the information would come to the Council within the next few weeks. Mr. Zaner suggested that the information would be before the Council next Monday night. There were some specific kinds of problems especially with regard to the City's C.I.P. Energy regulations were on the way down that bore the same kind of problems. The State issued the rules, but did not pay for them. The chances of the State picking up the costs under the Proposition 13 regulations was smal 1 , Counci 1i ember Klein said he was concerned not only with the City's costs, but also the costs to the private sector. He hoped the staff report would make reference to that. Mr. ?aver said the staff reported included information regarding the private sector. In the aggregate, it hurt the private sector more than the City. MOTION WITHDRAWN BY COUi4C I LMEHBERS KLEIN AND COBB ITEM 06 PUBLIC HEARING: PLANNING COMMISSION UNANIMOUSLY GRANS'/S1fEHMAN N MAT FOR -PROPERTY LOCATED Planning Commission. Chairperson Jean K. McCown said that the Planning Commission was happy to give its recommendation for the project. She said it was consistent with what everyone hoped would come forward in the community as far as affordable housing. MOTION; Counci l.ember Fazzi no •.. ved, seconded by Fletcher, approval of the. Planning Comw°I ss1 on recommendations to adopt a motion finding that the project, including the design and improve- ments (e.g., the street alignments, drainage and sanitary facili- ties, locations and size of all required rights -of -way, lot sizes and cohfigurstions, grading, and traffic access) is consistent with `the adopted Comprehensive plan and complies with the Subdivi- sion Nap Act and Title 21 of the Paid -Alto Municipal Code; that the project will not have a si gnf flcant .impact.- on the 2 2 5 7 7/19/82 environment nor be likely to result in serious public health problems; that the Commission has considered the Environmental Assessment previously certified during the design review in making its decision on this project; that the site is,physically suitable for the type and density of the proposed development; and that there are no conflicts with public easements, and finding: 1) the proposed project, together with its design and improvements is consistent with the Palo Alto Comprehensive Plan Housing Objective that states, "'Palo Alto needs to increase its housing supply, especi al'y for individuals and families who earn low and moderate incomes, in that all 39 units will be placed below prevailing market rates and five units will be for households ` below HUD specified units; Mayor Eyerly declared the public hearing open. Receiving no requests from the public to speak, he declared the public hearing closed. Counci l member Levy commented that the project was an excellent one and another in a string of good work by the Palo Alto Housing Corporation. Sylvia Seman gave him a detailed rundown of what the Housing Corporation had accomplished, and it was an impressive string of accomplishments. The Housing Corporation had been thorough with its screening so that each unit they managed was either rented or sold to families truly in need. There was a difference in how ongoing needs tests were handled for renters versus condominium buyers. Each renter's income was checked annu=1 ly. Buyers, however, were checked only at the time of their purchase of the condominium. Over the years, the buyers' situation changed their income rose, or they married and had two incomes. There was no requirement that the b'iyer seek market rate housing in order to free the unit again for someone in need. He had urged Sylvia Seman to bring that concern to the Housing ,;.orporati on for consideration. He felt the matter must be handled with sensitivity because even if an owner's financial position had improved or there were no longer the same number of individuals occupying the unit, it would be wrong to immediately force them to find new housing. On the other hand, there should be an ongoing means requirement for condominiums as there was for rentals to ensure that public benefits were secured over the years. He hoped the Housing Corporation would look favorably upon such an Ongoing means requirement and report back to the City Council. MOTION PASSED unanimously. COWICIL RECESSED FROM 9:00 a.m. to 9:15 o.m. ITEM #1 CABLE TELEVISION (CMR:406:2) Mayor Eyerly commented that the City Council had had four work sessions regarding Cable Television, but had not yet had the final staff comments. The item was agendized so that the Council would be in the position to take any course of action they desired following the .staff's report. He advised that Counci lmember Klein would not participate in the Cable Television issue until policy direction had been set by the Council whether to go -municipal, public or coop. City Manager Bill Zaner said staff had provided the Council with a lot of data and information in the past few weeks regarding the City staff's proposal for a municipally owned and operated system. Staff also provided a condensation of the major points in that report .as well as the items_ that .had been discussed over the past several weeks. Staff recommended that the Council make a decision with regard _ to private or municipal systems, and a different approach was recommended ,by Councilmembers I`az i no and Levy, and the Council may have other alternatives it wishes to pursue. Staff felt it was time for the Council to take the n'xt step. 2 2 5 8 7/19/82 City Attorney. Diane Lee introduced Tom Rosch, who was with the law firm of McCutchen Doyle in San Francisco. Mr. Rosch was a. graduate of Harvard College and Harvard Law School. Mr. Rosch had been an antitrust practitioner since 1965 first with the firm of McCutchen, Doyle, Brown & Enersen and then as Bureau Director of the Federal Trade Commission from 1973 to 1975, and since 1975, h_ e was with the McCutchen firm. He had handled over two dozen antitrust cases in his 17 years of practice and was a member of the Governing Counsel of the American Bar Association's Antitrust Section, a member of the National Advisory Board, and a principal of the National Trust Publication -- Antitrust and Trade Regulation Reporter. He had chaired numerous seminars in antitrust matters, and written numerous law review articles on the subject. Mr. Rosch commented that nothing could be said with absolute .'cer- tainty= about the antitrust laws. He doubted that any decision the Council made regarding : municipal ownership, franchising or i i cerisi ng, or who should be franchised or licensed was covered by any of the antitrust laws. Staff's preliminary economic reports suggested that Cable Television was a market which could just support one enterprise. The Supreme Court held repeatedly that antitrust laws existed to protect competition --not competitors. When a situation existed which might create a monopoly in any event, he doubted that any antitrust laws were implicated in the first instance. That issue had not been addressed by any court, but was one which the Council should bear in mind. Mr. Rosch continued that even if the antitrust laws applied, it was arguable whether the City could be charged with a violation given the peculiar nature of the market. The market appeared on its face to be a natural monopoly market and one which could support only one firm. The courts repeatedly held, under that kind of a market, that the person who was operating in the market --who was the single firm in the market --who was the monopolist in the market --could not be held liable for antitrust violation try virtue of that position unless it acquired that market position unlawfully or unfairl He felt that claim would be hard for anyone to make, particularly if the Council opted for municipal ownership, because both the Constitution of the State of California and State of California Public Utilities Code specifically authorized cities .o construct and operate those kinds of facilities. Under those circumstances, . it would be difficult to make a viable claim that the City, having acquired a monopoly position, did so illegally or unfairly. If the Council opted to franchise or license a franchisee or licensee in accordance with State law, it would be difficult to charge that that franchisee or licensee acquired its position unlawfully or unfairly. Mr. Rosch `felt strong ground existed for an argument that even if the antitrust laws applied, and even if there could be a violation on the part of the City, the City would be immune from prosecution for an antitrust law violation. Until the Boulder decision, the antitrust law was clear that states were immune from federal anti- trust laws, i.e., the Parker v. Brown doctrine. In City of Boulder, the Supreme Court held hat that was not so i n the case of cities --that is, .the State could not delegate its immunity to the cities, unless the State specifically authorized the anti- competitive activity that the city was engaging 'in. He thought it was strongly arguable that in this particular instance, the State did exactly that. Cities were specifically authorized under the Constitution and the Government Code to franchise or license private operations using criteria which have nothing to do with competition using variousother public interest criteria So long as the Council abides by the State law to make its: decision, i f opting for the private route, in accordance with those criteria, even though it may lead to an anticompetitive effect, it was strongly arguable that the City would be immune from any kind of anti trust liability. • 2.2 5`9 7/19/82 Mr. Rosch could not guarantee that the Council would not get some kind of an antitrust claim, nor could he give an ironclad guarantee that the antitrust laws would not be applicable, but in his opinion, while the Council's decisions were not entirely free of antitrust risk, antitrust considerations were secondary. Vice Mayor Bechtel said she appreciated that Mr. Rosch's comments concerning the antitrust situation were clear. She did not under- stand the difference between franchise versus license especially with regard to revocability, conferring property right, nonexclu- sive and nontransferrable. She asked the consultant to expound on those differences, and whether the license situation was even viable under the circumstances outlined by the City Attorney in her report dated July 15, 1982. Mr. Rosch responded that he concurred entirely with City Attorney Diane Lee's report. He felt that the jist was that because there were some hazards in proceeding with the license as opposed to the franchise route, the Council should be cautioned to proceed with the franchise route. Gi ven the considerations spelled out by the franchise, he opined that if the Council. went the franchise route and put it to the voters, from an antitrust standpoint, the seal of approval by the voters on a decision would strengthen the City's position substantially: Counci lmember Fazzino asked for an opinion regarding the actual power of Congress to overturn a contractual arrangement between a private f1'anchi se and the City. He asked if there were particular aspects of a contract which could be overturned by a Congressional act. Mt. Rosch responded that Congress took the position that they have the power with respect to .communications generally to preempt the field. He felt the Counci should proceed on the basis that Congress had that power --not that they would. Should the Federal Communications Commission (FCC), or Congress itself, or through a grant power to the FCC, attempt to govern the franchisor/ franchisee relationship, every prospect existed that it could do so. Cauncilrnember Fazzino clarified that every aspect of a contract between the City and a private company could be open to Congressional review and overturning. Mr. Rosch said he believed that was correct, and certainly the threat existed. He added that the FCC had proposed guidelines for franchise fees,'and that a five percent (5%) franchise fee limit had been proposed. Councilmember Fazzino hypothesized that a private company and a city agreed in a contractual arrangement that all provisions of the contract shall apply regardless cif any Congressional action, and asked if that situation would be open to challenge." Mr. Rosch responded yes if a Congressional action occurred. Mayor_ Eyerly said he was concerned that. if the City went muni- cipal, would the financing and the backing of the bonds require general revenues of_ the --City .car- co► ld.. bonding take place. Mr. Zaner responded that several mechanisms were available for municipal financing, and the systems recommended by staff did not require that the City pledge its resources or assets to secure the bonds to be floated by the City. Staff recommended a system that would not have_ the City's assets securing the ,fonds --a system which would pledge the revenues from the CATV system itself to pay_. off the security. Mayor. Eyerly asked if that would be handed by an underwriter in a negotiated sale. 2 2 6 0 7/19/82 Lora J. Stovall , Partner Bartle Wel 1 s Associates, said that the financing methods were discussed both in their report and in the staff report, ani it was lease_ financing which had the potential to put a contingent liability on other city revenues. She reiterated about there being the design or rate structure in a -financing plan that would not impose any obligation on Other revenues. Straight revenue bonds contained a legal lien only on the stream -of revenues producedlay the cable television. That was a weaker form of financing, more expensive, and difficult to package without a large flow revenues in proportion to the annual debt service.- Regarding how -the financing would be placed, it could be placed either through competitive bidding or negotiated placement if it was a Certificate 'of Participation forma of lease financing. If it were a nonprofit corporati on form of lease financing, a Government Code requirement existed that it be competitive, but she was not sure whether that applied to a Charter City. Mayor Eyerly clarified that lease financing bonds would bear lower interest rates, Ms. Stovall said yes. Councilmernber Witherspoon said she was concerned how the City would fund the first year's cash flow before it had enough revenue to meet the ongoing operating expenses. Ms. Stovall responded that a cash flow short fall existed, and in the first couple of years, some form of interfund borrowing must be available which would be repaid from subsequent cable televi- sion revenues. The methods of raising the capital for the construction of the project were not applicable -to borrowing operating funds. Table 7 of their report estimated an operating loss of $568000 in the first year, and operating revenue of $533,000 in the second year due to the fact that the City would not yet have a debt service requirement, and the capital reserve and the allocation of indirect costs were postponed until the system was up and running. She clarified that the City would have an approximate balance in the first two years --a negative in the first year, and a positive in the second year. The City would have almost enough money to pay back what was borrowed during the first year. Mayor Eyerly asked if interim financing would be available without interfund transfers within the City. Ms. Stovall responded that the City's local banks would be its sources. Mayor Eyerly asked if the interim financing coul d be arranged with the system as security. Ms. Stovall said the thought that would be difficult and more expensive because there were 1 ess costly methods available. Counci lmemtier Fi etcher asked staff if contact was made with a financial institution regarding the prospect of selling bonds and what the terms might be. Mr. -Liner -responded that no discussions- were held with regard to terMs. .Staff contacted a Humber of financial institutions who reviewed the work _done by the consultants., The financial i nsti tu- -ti ons appeared to be very enthusiastic, and Palo Alto was obvi- ously_ a good riarket. The financial institutions assured staff th t: no problem was foreseen In fl nanci ng .the system as ()Wined the engl,neerl ng reports and - ffnanci al data.- If Council chose to -Move ahead `with a municipal system,- the City would- begi n co_mmi tt i ng thosei nsti t uti ons to developing detailed -plans and programs as to how the financing would oe--:dome. 2 2 6 .1 7/19/82 Charles McNeely, Assistant to the City Manager, pointed out that in terms of financing a cable issue whi r,h was not tied to the City's general fund or utilities fund, there was a city which recently approved municipal ownership which was doing the same thing. That issue was supposed to be wrapped up within the next three or four weeks. Counci lmember Levy said he understood that when the City raised the capital funds, enough money would be raised to cover the first. year's deficit. Ms. Stoval 1 clarified that the City would raise enough money to cover the first two years' debt service, but not its operating deficit. Counci lmember Levy clarified that the deficit, which was estimated - at about $800,000 the first year, would have to be funded from funds borrowed by the City outside of the initial raising of capital. Ms. Stovall said that was correct. The start up deficit was $568,000, and $800,000 was a projection with varying levels of subscriber penetration. Councilmember Levy said that a lease bond and a revenue bond were mentioned, and the revenue bond was indicated as being more expen- sive than the lease bonds. He asked for an idea about what the interest costs would be in today's market. #s. Stovall responded that today a lease bond would sell for about 12 percent or a little below for a credit the caliber of the City of Palo Alto. She estimated, in the absence of any experience in the marketing of cable television revenue bonds, that revenue bonds would sell for a full percent higher. Counci lmember Levy clarified that the difference between the two kinds of bonds was one percent per year. Ms. Stovall said that was her estimate, and pointed out that it was a cons derable difference in costs over 15 years on $10 to $12 million. Counci lmember. Fazzi no asked if going the revenue bond approach would affect the City's basic credit rating. Ms, Stovall responded that if the City elected to go the straight revenue bonds, the bonds were rated strictly on the security of that bond, but if any problems arose, it had a carry over effect to the City's general credit. That was another reason that Bartle Wells recommended in favor of a lease form of financing as being a stronger credit and a better choice for the City of Palo Alto. Counci lrnembereFazzi rto asked what was meant by "problems." Ms. Stovall responded that if the City sold a revenue bond --not a 1 ease bond --it was -supported only by the flow of revenues from the cable television .operation. If, at any time, the revenues from the operation were not sufficient .to make the payment, the reserve fund would carry the City through one year. The holder of the bond had no recourse other than to the annual revenues of the cable television system. If the revenues of the system were not sufficient at any point, the City's entire credit rating would be affected. Mr. Zaner said that with regard ,to what would occur with a revenue bond if the" stream of revenue was insufficient to `pay the bond, the bond. holder had only the stream of revenue to look hack to, but the owner also had the discretion to sell the system. 2 2.6 2:- 7/19/82 Councilmember Fazzino asked if any less onerous approaches existed. Mr. Zaner said that the bond holder must assess the risks he was willint to take when he purchased the bond. The City's solution, if the City began to fear for its credit worthiness, was to get ,out of the business --it would literally sell the system out. Councilmember Fazzino was concerned that the appearance of any problems on the part of the City with respect to payment of that bond cause any potential credit rating problems. Ms. Stovall felt that was unlikely. The City had a position of - great financial strength with which -to work, and the appearance described by Counci lmember Fazzino was of solving the financial problems rather than -ignoring them and letting them compound. Counci lmember Fazzino clarified that the City would actually have to be in the position of not being able to pay off its debts in order to get in a bad credit rating situation. Ms. Stovall said yes. Counci lmember Renzel clarified that al 1 of the consultants projec- tions were based on the assumptions on which the_ system was being designed, which included a 41% penetration rate, and 2.03 pay to basic ratio, Ms. Stovall said yes. Counci lmember Renzel asked if that meant that the 41% who sub- scribed to the basic service would also subscribe to two other services. She asked if any change occurred in the actual situation from the assumptions, it would alter the consultants conclusions. Ms. Stovall said it would alter the, results. Counci lmember Renzel clarified that if the City began to get in trouble with its revenues and sold -the system, it would still be required to pay off the entire bond. If the sale of the system did --not realize sufficient revenue pay off the bonds, what would the City do. Mr. Zaner said Counci lmember Renzel was correct that the City was obligated to pay off the bond. Ultimately, the bond holder, who invested the money, would not get repaid. Ms. Stovall said legal provisions existed in all bond resolutions for what would happen if the asset was -sold or taken through eminent domain or acts of God. The sale of a money -losing asset was not considered because not many city enterprises were subject to that type of sale. Counci lmember Cobb asked why the city in Oklahoma chose to sell its system. Counci lmember .Levy responded that it'was a transaction between private companies. One private company purchased thesystem from another at approximately 25% over the cost of the system. He placed the item in the packet to convey the realization that an ongoing system was generally salable in .the, open market at a price above the cost of the system. Mayor,Fyerly' said he understood that the City could sell revenue bonds and did not need to pledge any general revenues/ He asked for clarification that on lease bonds, the City would pledge general revenues. Ms. Stovall said the City's general revenues were not pledged, but a lease obligation was an obligation payable from any unrestricted revenues of the City. 2 2 6 3 7/19/82 Mayor Eyerly asked what was meant by "unrestricted revenues." Ms. Stovall said that the point of the lease structure as security was to expand it beyond cable television revenues because of the unpredictable nature ofthose revenues. If the City did anything to restrict the available revenues for the payment of the lease, it would weaken the security it was trying to provide. Mayor Eyerly asked if lease bonds could be sold .without any revenues pledged other than what the system would generate. Ms. Stovall responded that a revenue bond always included a pledge that net revenues must exceed debt service by a certain factor, and the factor would be considerable for something like cable television. That meant that if the City's net revenue revenue, after the payment of operating and maintenance expenses, was $1.5 million, the City could only have debt service of $1 million. She said because an annual lease payment to be made from all restricted revenues did not require that coverage factor, it gave the City more flexibility in its financial operations with respect to the project. Vice Mayor- Bechtel asked about municipal bond insurance. Ms. Stovall responded that municipal bond insurance was a service offered by two groups of insurance companies., Basically it was not something that a bond issuer was free to go out any buy. A pond issuer could request that the bonds be qualified, and if qualified, he could decide to purchase the insurance and sell the bonds as insured bonds, or decide to sell the bonds as qualified bonds withthe underwriter determining whether to purchase the insurance and market them as insured bonds. The .insurance required that a premium be paid at the time the bonds were issued which insured the payment of principal and interest through the term of the bond. The bonds would receive a AAA rating from Standard and Poors, but there was no change in the Moody's rating. She said Municipal Bond Insurance companies were not in the business of insuring bonds that were not investment grade in the first place. A tough screening and analysis was done of what was an insurable bond, and was not an answer to the problem of an otherwise unsalable bond. Nice Mayor Bechtel said staff responded to some of the cable tele- vision vision spokespeople who criticized the _ staff report that techno- logically the City was not including everything it should. In the report just received by staff, it was -indicated that the City could operate rnunici pal iy whatever it desired to operate. The Bartle,Welis consultant described the minimum system configuration plus the first group options as financially feasible, and that particular portion was criticized as not including all the things the City should include. She asked if the details were examined to ascertain how financially feasible it was and hoer many years there would be a loss if the second group of -options were included, wh,f.ch were considered crucial according to the private cable companies. Ms. Stovall. said she could not answer the question of how many more years there would be a loss off hand. .The approach used in .developing the recommendation was that it would be a break even system financially -when it was fully operating., and that there would be revenues derived after that point to -enable iaddittonal features to be -added. If additional features' wee added initially, the system cost would. go _,up by- about $2.5 million, and. the operating costs would increase it approximately $5' million from $4 million. Yi ce_ Mayor Bechtel clarified that the system would not work financially by i ncl udi ng the second group of opts ores ..initially. Ms. Stovall said it could not be done initially and have it be a break even system by the time At was fb.l.ly up and running which was what' the consultant determined as the financial necessity. 2- 2 6 4 1/19/82 Councilmember Cobb asked how long the City could be In the worst case break even point. Ms. Stovall said that the consultant looked at what happened with only a 30% saturation versus a 40% saturation, which gave the City an $800,000 operating loss, it would probably take one to two more years to break even than what was originally estimated. Counci lmember Cobb asked how long the City would have to find some sort of subsidy before it was finally in the black if everything went wrong that could. Ms. Stoval 1 said the consultant attempted to do the financial plan by putting in a lot of protection in the estimates to protect against that. She commented that the plan was pretty safe with that in mind. Mr. Zaner clarified that all analyses were built on a series of assumptions. Staff gave the financial consultant an assumption to begin with that the Ci ty wanted the system to break even early. Counci imember Witherspoon said if the City decided not to go to an municipal system, and took a year to decide what kind of system to get, was it possible for anyone to come in and ask for a fran- chise, and would the City have to react to such a request under State law. City Attorney Diane Lee said that regarding a franchise, the City Charter specifically provides the manner in which franchises are granted. That was pursuant to the initiative procedure whereby a measure was put on the ballot. She said there were two means for doing that --1) Council would put the franchise ordinance on the ballot under Article 6, Section 11; and 2) Someone who wanted a franchise would circulate a petition and obtain the requisite number of signatures, and that would be placed on the ballot in that manner. Vice Mayor Bechtel said Mr. Monaco recommended the minimal system plus the first and second group of options. He concluded at one point that there would be no immeditate substantial revenue resulting from the second group -of options. The City was criticized by the private cable companies for not including the institutional link and that the City could be building an expensive antiquated system. She asked Mr. Monaco for hi s response to that criticism. Mr. F. Paul Monaco, Hammett & Edison, Inc. said the second group of options included items the City would require be built if someone came in to franchise a system --although all items would not be required for construction initially. The first class of items was special cable plants, the institutional system, which required construction throughout the City. If the cables were not built in initially, provisions should be made for therm to be added later, i.e., things like stubbing out cables at certain places intended to feed areas to be built to later. The second class of items were basically items to provide for service, i.e., an item would be installed in the head end and an item would be installed in the user's end, and between those two items on the existing cable system, some new service could be provided. Those items could be added at any time. When it appeared that the service was viable for the City to provide, the equipment could be purchased and the City could begin just as . though a sub business within the cable system.'s, operation. He suggested that something on the order of $100,000 would be required in the initial construction in order to provide for the eventual construction of everything. Mr. McNeely added that Mr. Monaco was correct in terms of having the capability to add the institutional link and the other links on later. Staff, in its recommendation, did not recommend against 2 2 6 b 7/19/82 putting in the additional cables, but that the City would do the first group of options and a minimum system first, then gather additional data about the use of the institutional and other links to make sure sufficient revenue was available. Councilmember Fazzino asked Mr. Zaner to concisely state why the City should own and operate a cable television system. Mr. Zaner said one reason was that the Council and community would retain control of the ownership of the system. It was known that the prospect existed that CATV would become the subject of national legislation at which point, the City would not have any control unless it was the owner. He thought a lot of activity could occur on a CATV system that was not conceived yet. He could remember a previous City Council trying to determine whether it should own and operate its own electric system. In those days, the only thing people could see for the future for electricity for commercial purposes was lighting the downtown area. It was interesting to note that those people had no idea that electricity would be as essential as it is today. He suggested that cable television offered the City the same kinds of unforeseen opportunities. It was unknown what the future would hold, • but if the City owned the system, the community was in a position to take advantage .of whatever comes down the road. Finally, he felt the City was in a position to provide a service to the community at a lower cost than could be provided by the private sector. The private sector did exactly what staff was suggesting, i .e. , went out and borrowed the money, which would be borrowed at a higher rate than what the City would be required to pay. The pri vate sector also had to make a profit, which was how they convinced investors to give them the money they borrowed to begin with, and the City was not in the position of having to make a profit. The City could afford to break even and provide a service to the community. The foregoing were the major reasons he felt it made sense for the City to be in the business. There was no question in his mind that the CATV companies in this area were extremely capable, and if the Council decided to go the franchise route or find some other way of operating with a private concern, it would get a first rate system. He felt the City would have a first rate system, plus the other advantages, by having a municipally owned and operated system. Katherine J. McCann, 783 Garland Drive, said she attended all the publicly held briefing sessions of the City Council regarding cable television. She was alarmed at some of the uncertainties concerning cable television, and hoped the City would not commit any general funds to the cable venture. She did not feel it was equitable for general funds to be pledged when it was likely that only an estimated half of the City population was likely to subscribe and, therefore, benefit from access to CATV. The rest of the residents would be risking their taxes . and City capital for the subscriber. She said that having a City -owned and operated cable television system would be a risky speculation for the following reasons: - 1. The .City would have to enter into a totally new line of business which it was not equipped to handle at present. 2. The cable television bus-iness was in a state of change with no one sure how fast or how much there would be. 3. The capital expenditure would be large and no onewas sure how large. 4. The City could end up in litigation. 5. The system would involve repair, complaints, and improvements which would need a competent staff to handle. 6., Any pay off in the installation of cable television would not come for at least an estimated two years if then. 2 2 6 6 7/19/82 7. It was not a good time for the City Counci 1 to embark on an expensive project. Funds from many activities were being cut and moneywas in short supply. Ms. McCann said that rather than having the City involved in a speculative field and one which was unknown to it, the City could count on income from whoever was awarded the franchise. Whoever. got the franchise should be experienced and successful in the field, and the City could stipulate whatever safeguards were necessary for the benefit of the subscriber. She said that if taking more time for a decision was best, then the Council could appoint.a broad based committee to gather necessary information and make recommendations to the Council. She commented that that approach was successful in the case of Foothills Park. Alison Lee, 1241 Harker Avenue, supported the staff's recommenda- tion for a municipal system. Palo Alto was a special community with a special atti tode toward television. She thought many people enjoyed the cultural enrichment, the sports, and the various other possibilities made available by television. The moment was important to move forward and take courage at the beginning of the process to move toward municipal ownership. If a private company were to be chosen without the support of the community, they might run into problems. Palo Alto needed to do its own marketing, and the community would be happy to be involved. Hollis Russo, 1143 Stanford Avenue, said she hoped the City Council would. schedule a public hearing before making a final decision regarding cable ownership. Many residents were inter- ested in the issue, but were unable to attend the meeting tonight. Regarding the possibility of a request for proposal from private companies and from the staff, she believed that would be expensive in terms of time and money. She said the di fferernce between the various owner0ip options did not lie in the amount of technical sophistication available in the system, but rather how the system would be financed, how policy decisions would be made, and how likely ittwas that promises would be kept. She supported com- munity ownership with the possible role of consumer involvement to be decided later. She felt that the design of the system was a separate issue which deserves public input, but which required much more public education. Once the preliminary decision on ownership was reached, she hoped the City could become more actively involved in educating the public about the design options for a cable system. Karl J. Schmidt, 903 El Cajon, represented The Standing Committee on Arts and Sciences, and said the Committee saw the decision as very important and which had an impact on many levels of the arts and sciences community. The Committee urged that the City Council consider the following points as areas of concern of the arts and sciences community with regard to the establishment of a cable television system for Palo Alto: 1. Advanced System Design. Palo Alto should have a "state of the art" system that makes the broadest range of usage by indi- viduals, groups, and institutions, possible. The system should allow for two-way interactive communications as well one-way television transmission, and should be adaptable to projected future technological advances. Mr. Schmidt said the committee"envisioned a system that would bring :Palo Alto programs and services to enhance its cultural awareness, appreciation and participation. The Committee hoped to see high quality programs of international national regional and local origin that touch people bf al 1 ages and interests within the community. The Committee envisioned a system that was avail- able to various arts and sciences groups and was open to experi- mental use. He said the Committee urged that the. Palo Alto system. be compatible in design with existing and projected neighboring systems In order to enjoy interconnects with Stanford University as 2 2 6 7 7/19/82 and communities up and down the peninsula. 2. Regarding access, the Committee felt there must be easy community access to the cable system. The Committee wanted to encourage use of the system by all who had aesthetic statements to share and who had need of the communication services the system could offer. He said it could be :accomplished either by designation of community channels or by the allocation of programming hours on various channels for community programming or both. . To insure adequate access, the system should be designed with the highest carrying capacity technically feasible at this time. He said the equipment and technical personnel should be designated for use by community groups and a portion of the budget should be set aside to support that function. 3. Regarding quality, quality of all programming, including local programming, must be high. "Local or community programs" were defined as programs produced by local groups or programs about local groups whether those were produced locally or by outside sources. 4. Regarding community control of local programming, community control of 1 ocal programming was seen by the arts community as necessary to assuring adequate access and high quality. The control should be exercised by a group that represents the users of the system, and it was preferred that the control group be elected rather than appointed. 5. Regarding revenues, the arts community welcomed the potential revenues that the cable system should produce for, the City. Further, the community equally welcomed the potential reve ues the system might produce for practicing artists and arts groups through fees for performance and copyright payments. Stanley R. Smith, 610 Wildwood Lane, had been a resident of Palo Alto for 25 years, a member of a local grocery coop for the same period of time, and a director for the recently formed Cable Cooperative Group. Regarding private versus municipal ownership, he seconded Mr. Zaner's comments about the decision of an earlier City Council to have municipal ownership of the electrical system, The community had benefited from that decision for 70 years, and he felt a direct analogy existed between that decision and the one about a cable system. The potential of a cable system was more than just entertainment, It should be considered that there would be another 70 years of pay off if the right decision was made. He urged the Council not to give up ownership and control of the system to an outside private conglomerate. The staff report reflected a natural reluctance of the City to take risks, and as a citizen and taxpayer, he supported that position. The City needed to clearly recognize what the risks were and how they showed up in the staff's recommendations. :The Cable Coop felt that a joint City -Cooperative owned system wgul d attempt to deal with some of the issues which were raised. It would maintain control of the system within the local community, and some of the risks could be sharedbythe owner -subscribers of the system. People from thy. National Cooperative Bank had spoken to the Councils and the Cable Cooperative was prepared to raise a significant amount of money to help fund systems. .The Coop felt that the subscribers should have a significant input into the kinds of services they were willing to pay for, and assume. the risks for the economic viability of the services. He urged the Council to direct the staff to work out .a proposal_; for a joint City -Subscriber owned system. He thou;ht that kind of a ..system_ would provide local ownership and control and would be responsive to the citizens in the community. 2 2 6 8 7/19/82 Marvin Lee, 1'l4! Harker Avenue, said that unlike the rest of the population of Palo Alto, he spent some time in front of the tele- vision. He was a sports consumer and a. consumer of entertainment programs, which were available .in surrounding communities, and it was time for Palo Alto to enter the age of cable television. He felt that one of the most important points presented was that the Council had been thorough in what it attempted to do, and had an extremely competent staff. He urged the Council to move in the direction of municipal ownership. Don MacQuivey, 743 Gallen Avenue, supported a joint venture approach to bringing cable to Palo Alto. The joint venture he had in mind would bring out those capabilities that each member could provide best, which would result in the best- possible system at the lowest possible cost. To provide cable jointly required more cooperation than would be necessary if one organization assumed the whole task, and of course, one body must assume the final responsibility. A joint venture, which seems most relevant to the City's situation, is that of the Communication Satellite Corporation, COMSAT. Mr. MacQui vey said COMSAT was a carrier's carrier --it provides the means by which communication carriers such as broadcasting or telephone and telegraph companies deliver their programs and mes- sages from one place to another. Its unique feature is that it uses earth satellites and shares the radio propagation spectrum to do so. He said it was limited to share only one electromagnetic spectrum. That spectrum use could never be duplicated at the same place and time as can the spectra in the cables being considered by the City. Nevertheless, COMSAT provided and controled many channels. He believed that Palo Alto could and should provide a similar carrier's carrier service on a local basis using cables. COMSAT's board of di rectors included p1 aces for three representa- tives of the Federal (Government. The other members represent various carriers who use the system. He said the City's joint venture could also include representatives of the City Government and the user organizations, each contributing a special expertise and assuming appr4ri ate responsibilities. Funding of the venture would reflect these factors. Mr. MacQui vey said that the Palo Alto Cable Coop was in a . unique position to seek cooperation and to undertake much nongovernmental funding and programming responsibility which was inappropriate for the City Government to assume. The City, on the other hand, represented everyone in assuring that the new communication "high- way" would be readily accessible and responsive to the City's growing needs. He said that through foresight in undergrounding its City -owned electric utilities` almost 20% of the mileage to be covered now provides extra ducts for communication cables. Revenues from users for rental of time on the channels in those cables could provide necessary income to maintain them and, perhaps, for other City needs if the venture was particularly successful, The situa- tion was anal agous to the use of . gasoline tax revenue funds paid by users of vehicles on the streets and highways He understood that those funds provided income to maintain them, and some had been diverted elsewhere. However, both seemed to be legitimate functions of. City Government. He urged the City Council to ask the staff and the Palo Al to Cabl e Coop to initiate plans to develop a joint communications cable venture to include, at least, Stanford University. Further, he urged retention of ownership and control of Palo Alto's comiaoni ca - ti on "highway" in Palo Alto. Mr. Mdcgui vey said that the COMSAT joint vent re satellite idea was helping make the world a global communication village. A Palo Alto joint venture cable system could regain marry desirable vil- lage communication capabilities for Palo Alto.. 2 2 6 9 7/19/82 Councilmember Fletcher asked Mr. MacQuivey to expound on the rev- enue raising method his proposal could undertake. Mr. MacQuivey responded that if the City were to pull in the cables and operate the cables themselves, it could charge a fee much like the taxes paid for gasoline. The City could charge for the time on the. City -owned cable channels which would provide rev- enues for the City and would be subject to negotiations and set- ting occasionally dependent upon the needs of the City and the users of the cable. Counci lmember Fletcher clarified that the Coop would be leasing the cable. Mr. MacQuivey said either the Coop would need to make arrange- ments, through the joint venture, for Stanford perhaps to lease channels for use of its instructional television, or for computer club to lease time. Some of Mr. Zaner's projections involved individual use of the cables, and channels would be available to be used by individuals or small clubs. It would be difficult for the City to do these things if the franchise were owned by a pri- vate corporation. Carroll Harrington, Executive Director of the Peninsula Community Access Television Association (PCATVA), 348 Waverley, said that PCATVA was a midpeni nsul a based impartial nonprofit organization created tali inform the public about the issues of cable television and the potential of community based programming. While PCATVA would not take positions on ownership or management issues in the communities in San Mateo County and Northern Santa Clara County, they advocated the necessity for well informed active participation by • citizens during the negotiation of ownership and management. Now was the most important time for full and open discussion about the various alternatives. The mi dpen i nsu l a was one of the richest areas in the world in terms of expertise, talent and information. With cable television, the public sti 1 1 had the enforced rights of access. The people had the opportunity to share that richness with others. PCATVA urged community involvement to insure that local needs were met by local people. Continued public awareness was needed even after contracts were negotiated, the system was installed, and programming had commenced. PCATVA would provide information, references, speakers and other types of assistance to individuals, public officials, and community organizations. Anne Sal di ch, 1500 Bryant Street, was a political scientist, and for the past 15 years had specialized in the relationship between politics and electronic media. She supported the consumer/ municipally owned system primarily because the air waves in the United States belonged to the public and not the government. It was appropriate that the consumer should have some voice in the content of the material which Comes over the air waves. Further, she asked the Council to consider that if they wished to put the issue before the voters at any time, a democratic responsibility existed to also provide the voters with an extensive comprehensive educational program. As mentioned earlier, ..the Council had the FCC deregulations which was complex even for specialists, the copyright problem, and the technological problems. The importance of the state of the art system and why .it was so important for the near future must be understood because democracy would be affected by interactive capabilities. The Wall Street Journal reported that there was a bi 1 1 before the U. S. Senate which was thinking of negating the 3 to .5 percent fee charged by cities to the people who offered their cable franchises. She thought that was particularly important to the City Council with respect to financing.. Mayor Eyerly ;said he hoped the Council could make decisions and some forward movements, 2J2. 7 0 7/19/82 Councilmember Fazzino said that the Council had spent the past few months listening to various perspectives on and general informa- tion about cable television. Further, the Council heard from a number of individuals promoting different forms of cable televi- sion ownership. Now was the time to grapple with the almost over- whelming amount of information and issues before the Council and decide how to proceed. Under present law, the City sti 1 l had the opportunity to award a cable franchise for the community. He and Councilmember Levy felt that the opportunity was of particular importance given the possibility of Congressional action which may soon open cities to any and all cable alternatives that do not have existing contractual relationships. Given that concern, they believed it was important for the City of Palo Alto to proceed with dispatch. Councilmember Fazzino said that in order to assist the progress of the cable discussions, he and Councilmember Levy proposed a two- step procedure to bring the cable to a decision -making juncture. He and Councilmember Levy believed that a Process Committee should be appointed by the Mayor. The ad hoc, short term committee should be composed of Counci members, staff members and represen- tatives of Mountain View (a neighbor which recently went through the process of cable system selection), and Stanford which might wish to be associated with Palo Alto in a cable system. Councilmember Fazzino suggested that the Committee would have the following tasks: 1. Make a recommendation regarding making the selection of an independent advisor to assist the Council with the decision of Cable ownership and operation. This advisor should be com- pletely independent of personal ties to any municipal, co-op or private system. The advisor would, first of all , assist the Council with the determination of needs and policies for a system (physical system, community access, financial viability, operational ccntrol and other general policies), with the development of a final Request for Proposals (RF P ) that responds to the Council stated goals for a cable system and request bids from all interested parties. Finally, the advisor would make a recommendation to the Council for selection of a specific cable bid. Given the City staff's advocacy of a municipal system, it is important that the advisor be completely independent and view a municipal system as one of several cable alternatives. He and Councilmember Levy agreed that a decision regarding muni- cipal ownership be made early in the process, yet the staff's proposal must be scrutinized alongside private bids; . Propose a time schedule and budget for Council consideration of cable television system; and 3. Meet within two weeks time and bring recommendations to the Council by mid to late August. Counci Imembers Fazzino and Levy believed their proposal repre- sented a_ reasonable approach. towards that end and for an informed decision on cable television by the City Council. The Process Committee's goal was to propose a framework for Council decisions; the entire Council should make the decision itself. Councilmember Fazzino thanked the City staff and the consultants for an excellent job in presenting the concept of a municipal system. NOTION: Councilmember Fazzino moved, seconded.. by Levy, that the City Council resolve to make cable television available by some method to Palo Alto citizens. 2 2 7 1 7/19/82 Councilmember Renzel said that since she had been a member of the City Council she had not heard from any citizen asking why Palo Alto did not have cable television. She was concerned that the poll taken by the City was overly optimistic. Since the poll results were released, and since the City received more concrete information regarding the prices of the cable options, she inquired of many people to ascertain whether they would pay the fee to have basic cable television service. Out of . the thirty people she asked, not one person said they would subscribe to Cable TV. She was concerned that the City Council was talking about stringing cables around town and perhaps asking for some financial headaches without a stronger sense from within the community from disinterested parties, She could not support stringing more cables without some feeling that a clamor existed for the service. Councilmember Witherspoon said she agreed with Councilmember Renzel in that she did not sense an overwhelming demand for the. service. She would not support the motion before the Council. She said the motion would probably pass and the Council would arrive_ at the point reached. on many issues where a policy decision would have to be made. She would be interested to go ahead with that procedure, but at present she was not overwhelmed by the demand for cable. Councilmember Cobb commented that cable television was not a major concern among people with which he was in contact, and thought it was unfortunate that only about 50 people were present at the Council meeting for a decision of such importance. He thought the motion was worth supporting because he felt there were a suffi- cient number of people who wished to have cable that it should be available to them in one form or another. Councilmember Levy said that perhaps so few people had talked with the other Councilmembers about CATV because they all talked to him He said he was deluged with people who indicated. that Palo Alto was left behind with regard to cable and who hoped Palo Alto could catch up quickly, He traveled in an investment circle and saw a tremendous clamor--nationwide--of companies willing to spend substantial amounts of money to get into the cable markets. He presented the Councilmembers with a listing of eleven publicly traded cable television companies. The companies commanded sub- stantial price earnings ratios as high as the most active high technology companies on the peninsula. Further, the companies traded substantially in excess of book value, and some as many as three or four times the book value. That indicated. to him that investors in the marketplace gave a high valuation to cable television and were willing to pay far more than it would actually cost to construct a system o in order to be a shareholder in a CATV company. The audience included members from the League of Women Voters, who were beinning to study the issue of CATV, the Palo Alto Cooperative, and CAPA. A substantial interest existed in the community for CATV, and although the issue was not earthshaking, it was important both in terms of quality of service that the City could offer its citizens, and an opportunity for the City to involve itself in an enterprise which could provide substantial income to the City and a means of counteracting a number of governmental problems. He urged the Councilmembers to, begin the endeavor by voting in favor of the motion. Mayor Eyerly said he _ felt the motion was prudent especially since some of the Councilmembers were not Overly enthused about cable TV. If the motion passed, the full • Council must wholeheartedly face the policies and the decisions which must be made He said his circle of acquaintances was also intested in cable TV. He thought the City's marketing survey supported the view that suffi- ci ett interest:axisted- among Pa1oAl to t ci tiaens its cable. tel evi4 lion for: the: Council for pursue it` 2 2 7 2 7/19/82 As Corrected 9/13/82 Councilmember F azzi no said the interest in cable was clear, and no issue was asked of him more during 1 ast year's campaign. He said a poll which was done three years ago to ascertain the feelings of Palo Alto residents clearly showed a strong interest in cable television for Palo Alto. The cable television discussions in Palo Alto took on some of the arguments that any potential sports franchise could not make it in Palo Alto because there were so many other things to do in the Bay Area, which he felt made for a strong marketing spproach. The poll which was done clearly showed a strong level for basic service, and the City Council should abide by that and at least approve the motion to put the Council on record as supporting some form of cable television. MOTION PASSED by a vote of 5-2, Renzel, Witherspoon voting "no," Klein not participating." MOTION: Councilmember fazzino moved, seconded by Levy, that the Mayor appoint a committee to establish ground rules for the Council's cable discussions along the lines of the memo submitted by Counci lmembers Fazzi no and Levy dated July 13, 1982. Councilmember Cobb said that with regard to costs, even though all the costs associated with a system were presumably self- liquidating, he asked to what extent municipal involvement would bleed time from staff members who were not officially a part of the associated costs, but which would become an "unofficial" cost, and which might affect the budget in an indirect way. He said an analogy had been made that Palo Alto had a public utility and that municipal involvement in cable television was just a small step from that. He pointed out that everyone used electricity, but not everyone used television. The difference between the two was that one did not have to market utilities --but absolutely must market an entertainment device. He was troubled with regard to any potential for municipal ownership and how the Council would separ- ate programming from politics. He did not think that would be easy. He agreed with Mr. Schmidt about all the wonderful things that could be done with cable television, but was concerned if the Council underestimated the desire for class programming, and wound up having a 2a-30 percent market, and lost the system, then the Council could not do it that way no matter how much it wanted to. Councilmember Levy said that both public and ,_private ownership were viable alternatives and offered benefits. He could not say that one or the other should be excl uded at this point. He could not exclude private because he had not heard the detailed pro- posals that private operators would make to the City, and could not exclude municipal because the City Council had not laid out the context of what it wanted, nor asked City staff to respond with a municipal ownership proposal that would speak directly to what the Council wanted the City to .have as a cable television system. The Council should not judge municipal ownership based on the original staff proposals made 1 ast April because those were made in a vacuum and were not drawn from any Council policies or Council discussions. He felt that at this point, the Council must include both the private and municipal sector in their considera- tions. He was concerned that if Palo Alto had municipal owner- ship, the .City staff would be in a difficult position because they would be asked to run the system, and would be asked •to advise the Council on whether they should be the owners and operators of the system or whether the system should go to a private concern. In this case, the Council must adopt a new plan to include the hiring and selection of a consultant to be independent of private and municipal concerns, to aid staff in putting together, the proposal that the ,Council would like to see; He said the proposal could be in detailed terms and cost about $25,000, or it could be 1n gen- eral terms and cost- about $3,000. If a private franchise were selected, the cost would be reimbursed by the private franchiser, and if the City were selected, the cost would be reimbursed in the course of time through its ownership of the system. 2 2 7 3 7/19/82- Councilmember Levy said the City would need to lay down responses it received from the private sector with responses from the municipal sector, and ask all the specific questions, and compare them on a close basis and pick the best. Once that process was completed, and he had considered everything, he was confident he. could make a decision that he felt was the best for Palo Alto. If the Council selected a private franchiser, it would have to go to the public for a vote affirming the Council's actions. Counci lmemoer Witherspoon felt the first motion was a good step forward because it forced the Council to come to grips with the issue of cable television, and she felt the present motion set the Council back about a year. It would take a year to get a consul- tant on board and go through the discus ion, and she felt the Council should narrow down its options tonight. She could not see spending the time and money on a consultant, and said a fantastic array of experts were at tonight's meeting who had already done all kinds of studies for the Council. The Council knew as much as it could possibly know given the economy, etc., and must start making decisions. The Council must decide whether it was philosophically more inclined to municipal or more inclined for a private enterprise. She preferred that the Council take that route rather than get involved in a"committee and consultant and again outlining the parameters of a decision. Councilmember Renzel said that if the Council decided that it wanted to string all the extra wires around the community for the 41 percent who were estimated to want the cable service, she felt the service should be municipal. She preferred municipal because the Council was responsible for the decision to have cable, and would take the political heat for whatever kinds of problems the cable system had. If the Council was going to take political heat, they ought to have the means to solve the probl ems at thei r disposal. From .a municipal standpoint and since the Council determined that its citizens wanted the cable service, it made sense to provide it at the lowest possible cost. As a City, the service should be provided with the idea of providing a service and a secondary thought of ultimately providing revenues for the City. She thought that if there was optimism that the projections were real enough to say let's go forward and have a system, then the Council should rely on that. She disagreed with the proposal for a committee to select an advisor to assist the Council with the determination of needs and policies for a sytem. The Council had several thick reports describing possible physical plants, the pros and cons of each of them, the financial implications of each of them, and she felt the Councilmembers could realistically assess them and how likely each was to create a demand. She thought staff's municipal proposal provided flexibility for future add ons of additional capacities when they would not affect the break even nature of the operation so that Council =was not cutting off technological possibilities in the future and yet were taking a conservative approach for the financial implications at the present time. Regarding programming, Counci lmember Renzel said she was intrigued with the idea of those people who subscribe having some _mechanism_ for looking' at programming. Sha preferred that those who purchased the service determine what they saw. Vice Mayor Bechtel said she opposed continuing to del ay the decision. She suspected that 70 years ago ;when the Counci_l's predecessors made the decision about municipal utility systems, that they did not have nearly the amount of information: this City Council had She would oppose the motion, and would oppose 'the. hiring of outside consultants. The Council was educated on the subject, and would be unrealistic to think that a committee could be forced and come .back in the next two weeks with a recommenda- tion. Councilmember Fletcher said she would oppose the motion. She com- mented that regarding the separation of programming and politics, she grew up in England with the British Broadcasting system (BBC) being government owned, and there was no governmental control of the programming. The quality of the programming was far superior to what she found when she came to this country. She commented that the key point in hiring an independent advisor was to solicit requests for proposals (RFP), and she thought the RFP's would be almost meaningless because by the time the Council got them or by the time they were implemented, they could easily be preempted by Congressional action. She was concerned about franchising out the cable system because the Council would lose complete control. Legislation was pending which could prohibit, the Council from requiring public access, or having any say in the programming, and even might lock the Council in to keeping a franchise which it may not wish to keep. She felt the Council should come to grips with the issue tonight and make a policy decision one way or the other, Mayor Eyerly commented that all the Counci lmembers had opinions regarding cable television whether they were one way or the other, and he complimented Mr. Zaner about the material he provided to the Council. The reasons given by Mr. Zaner about municipal own- ership being the most viable way to go, were that it would give the City control and opportunity to provide proper service as the state of the art changed and improved with time, and would give a service to Palo Alto at a lower cost. He was inclined to support municipal ownership, and said the Council must be farsighted and willing to take a reasonable risk to gain the advantage municipal ownership could give Palo Alto. He did not feel the Council needed to rush into a decision, and would support some forward movement one way or the other. The memo submitted by Council - members Fazzi no and Levy was the first to suggest a means to approach the decision, and he was glad because .i t gave some spe- cific course of action. The weaknesses regarding a committee, were that once the Committee was formed it had a minimum amount of work to do. A consultant would be hired and would do all the work. The Committee would propose a time schedule and budget and bring recommendations to the Council in a couple of weeks. He asked if it would be possible for the City to fund the hiring of a an outside consultant by an outside committee when the City had spelled out a consultant selection process. Mr. Zaner responded that the Council did have an adopted policy which set forth a consultant selection process, which was somewhat labored. He said the process went through a lot of steps and applied to any contract over $20,000. If the contract was over $20,000, it would have to be referred to the Finance and Public Works (F&PW). Committee, and the F&PW Committee would have to determine whether they wanted .to review it. Councilmember Cobb commented that the word "independent" struck him in the recommendation made by Counci lmembers Fazzino and Levy. He did not know how anyone could be found that was truly indepen- dent, and he suspected that the search for that would take most of the one year alluded to by Councilmember Witherspoon. He was mindful of real estate leases where one had to go through an appraisal process where one acquired an independent appraiser, and. each side got to appoint one and the two appraisers would appoint a third. That process was all in an attempt to make the appraisal objective. He felt everyone had a bias, and one might think they had an independent advisor, but they probably had their own -biases built in also. He agreed with Councilmember Levy about trying to get a true picture of all the options so that when the Council made the decision about municipal or coop, they would know for sure what they were comparing. He agreed with Councilmember F1 etcher's point that if the Council did not do something pretty soon, the federal legislation may take it all away. The Council should try and obtain more information in order to make a decision, put the matter -on the ballot , and a final decision made. 2 2 7 5 7/19/82 City Attorney Di ane Lee said that under the initiative provision of the City Charter under which a franchise would be granted, a provision was included that no such election (referring to an initiative election whether initiated by the Council or by. petition) shall be held more than once a year. She reminded the Council that one was held in March, 1982. The Council would be looking at April of next year. Counci ,member Cobb said that if federal legislation was passed' before April, 1983, and something had to be done through the ballot process which could not be done any sooner than Apri 1 , maybe the Citywould get taken out of the game before they ever got in no matter what decision was made. Ms. Lee said that was correct. Vice Mayor Bechtel said that the Policy and Procedures Committee (P&P) Committee would discuss charter amendments tomorrow night which would go on the November ballot. She asked if it -would be possible that something could be drafted to deal with that particular issue. Ms. Lee responded that she could draft something that would deal with the -restriction if she were given some guidance as to the parameters. Sne_was unsure regarding the policy aspects because the Council would be required to act next Tuesday in order to put the matter ori, the ballot. A charter amendment which might impact more than just the cable issue without wider circulation was a policy question the Council would have to deal with. Counci lmember Cobb said he thought that an RFP, which was a formal kind of document designed to give things that were exact alike to compare, was a good step at the end of a process. He thought the Council could get a lot of information by going through a "pre - proposal process." The industry he worked in did a lot of govern- ment contracting, and he had written hundreds of preproposal requests, where there was a potential market for a service, and a dociment was prepared, in response to some general guidelines pro- vided by the client, and :provided with costs, schedules, contents,. etc. He thought a similar request could be made of all the parties the Council might like to select from in the process . SUBSTITUTE MOTION: Counci laaember Cobb moved, seconded by Eyerly, that staff be requested to take the following actions: 1. Invite interested private cable television franchisors to submit to Palo Alto by , a preproposal outlining their recommendations for a Cable TV system for Palo Alto. This preproposal should deal with, but not be limited tog the following issues: a) Local access/origination; b) Provision for instructional networks; c System operations; . d Construction .and sai ntenance; e Non -entertainment uses; f i` ranckl se fees to the City /Revenues, -g Service; -1 h) trogra$mi ng; and 1 Iwpact of potential deregulation legislation. The.preproposal- would be limited to pages, and the request should indicate that, other Wii a very brief tech.ni -_cal overview description (dealing with capacity, expandabi l i ty, basic technology , : etc.) the City `s` i nterest was in the nontechnical f ssues out 1 i ned above. 2 2 7 6 7/19/82 MOTION! CONTINUE© 2. Invite the local co-op to submit a comparable preproposal, addressing the same issues, and adding: J) Financing 3. Request staff to prepare a comparable summary document for a municipal system, addressing the same issues, also including: j) Financing k) Risk All Respondents would be asked for a five-year projection with regard to: f) Revenues Counci lmember Cobb felt that if the Council had the foregoing sort of general information before then, they would have the basis for knowing what a private system would look like, what the pro- gramming content would be, and a variety of other things. He commented that some aspects of a private system would show up that it would be clear to the Council whether it was the right way to go or the wrong way to go. Counci lmember Faa=zi no said he appreciated Counci lmember Cobb's intent, but he suspected the private companies would prefer to go the whole route and present the City with a formal RFP rather than going through a half-hearted, inconsistent approach. If Councilmember Cobb wanted.more information, he should support the original motion which would provide information developed in a consistent common fashion. He wanted to keep the issue of muni- cipal, franchise, and co-op alive even though he had serious probl ems with the municipal approach. He began as a supporter of municipal a few 'weeks ago, but the City staff presented him with an approach which did not provide him the information he needed to move ahead and endorse a municipal system. The Council had a financial plan which posed great potenti al ` risk, a smaller cable system which cut corners and attempted to be successful, and a system which attracted di si nterest from Stanford and other natural neighbors_ because of a lack of an institutional network. To him that was '"three strikes and you're out."' He could not move ahead tonight and endorse a Municipal system, but he wanted to give staff, and those representing private tompanies, a chance to develop mere information. He wanted to begin to compare the information received in order to make a decision based on factual information. He did not want to drag the matter Outs but felt it was important to begin comparing real information involving .a specific proposal. At that time, the Council would be in a posi- tion to make a decision. tlie disagreed with Councilmember Cobb that it was impossible to find an independent person. He felt there were A. Allen post types available in California as well as other states who could provide the kind of independent 'analysis to simply present the City with tl'.e options ..avai i abl a with _respect to a cable system. He felt that the :approach presented by he and Councilmember Levy was a good one --it moved the Council alone keeping all the options open. He felt more information was needed within a rationale ti me schedule-. Councilnember Fletcher said she would oppose the substitute motion because- any proposals -or promises received from the cable com- panies were likely to he worthless after the federal -legislation was passed regardless of when the election was held. _She said it looked as:. though the. legislation would be retroactive and would apply to any. system already in operation regardless of the agree- ments worked out at the local level. The Council would rot- be able to demand the : type of programmi rig. for the. Cfty, and one 'of the features in the proposed legislation was that the CATV companies could unilaterally deci de to drop a program If they determined that ._the ratings were not high enough. 2 2 7 7 7/19/82 Councilmember Fletcher was concerned that the programming would be what was the most desireable rather than quality programming which might appeal to a select few, but which Palo Alto wanted. No matter what proposals or promises were received from the private companies, theywould be worthless if not this year --than next. Counci l member Witherspoon said she agreed with what had been said in opposition to the substitute motion and added that she would find it less than useful to get a lot of quick figures from cable companies. She preferred that the Council get back to making a basic decision of some sort because she did not think any more information was needed. A lot of interim figures would not change the pros and cons for municipal versus franchise. Counci lmerber Renzel said she preferred the substitute motion to the main motion, but would oppose both. She agreed with Council - member Fletcher that the information which might be obtained in a request for preproposal was not likely to be reliable because it would have no binding effect on the company submitting it. Regardless of what happened with deregulation which was an addi- tional risk, she thought the companies would attempt to make the return to the City look more favorable with a franchise than it woul d under a municipal ownership. She thought that would be the emphasis of preproposals because those get the Council to make a decision to franchise, and when the Council got i i to the real proposal stage, they would see what they would get when talking hard dollars and true contractual obligations. The Council should be prepared to assume the risks in a municipal system as long as the Council was not jeopardizing the City's general funds. If the Council could be assured that the City would not jeopardize its general fund, she was prepared to go forward with a municipal system. SUBSTITUTE MOTION FAILED by a vote of 2-6, Cobb and Eyerly voting *aye," Klein "not participating.* MAIN MOTION RESTATED that the Mayor be authorized to appoint a committee to establish ground rules for the Council's cable discussions along the lines submitted by Counci lmembers Fazzi no and Levy in their July 13, 1982 memo. Councllmember Levy said he was the original supporter of municipal ownership and when he first suggested it, the Council had a memo from staff with a number of concerns and suggesting that perhaps the Council not go forward with municipal -ownership. Since then, staff and a lot of Counci lmembers had changed their minds. He was uncomfortable if. the Council made the decision in a vacuum to go with municipal ownership. The Council needed to have the detailed proposals submitted by the private sector to hold up against a municipal ownership just as earlier tonight when the Council did not take a vote on an item when the proponent of the item was not in attendance. It behooved everyone to have the proponents of private ownership make their case strongly and directly by way of an RFP. The Council had two choices --either have staff take the leadership, or Council take the leadership Independent of staff because they were one of_ the bidders4 He believed the 1 eadershi p should be taken independent of staff. There should be a certain independence so. that when -staff presented its proposals for municipal ownershi p, the Council could evaluate that at arms length recognizing that there was ea distance between what the __ Council `suggested be done and what staff did. The proposal made by he and Counci lmernber Fazzi no made 'sense: - If the Council chose to 'vote it down, -the Council should go to staff and request., that they` recommend `a course of. action that would.en'able the Council to evaluate comparable propos-al s between both private and municipal ownership. Councilmember Cobb said if he Gould nat get a preproposal, he wanted a —fixed proposal In order to compare the private against the public. He asked Councilmurnber Levy what -was meant by "ground rules." 2 2 7 8 7/19/82 Councilmember Levy said he was thinking in terms of the RFP, in terms of what kind of a system the Council wanted, and in terms of the policy decisions about programming that would also have to be included. Councilmember Cobb clarified that by ground rules, he was really asking the independent consul tart to recommend to the Council the specific content of an RFP. Councilmember Levy s'`a1d that was correct. Councilmember Cobb queried that if the City had to go out and find an i ndependert consultant to do the job outlined by the main motion, where such a consultant be found. Mr. Zaner responded that he believed those kinds of consultants existed. He said independent organizations existed that were not allied with the CATV industry --they neither sold services nor owner operated systems. They were in the business of advising others about CATV. Councilmember Cobb asked if Mr. Zaner would be comfortable that such a consultant could be found that would give the Council a truly objective measure of the alternatives, and contents of an RFP for Palo Alto. Mr. Zaner responded that he was confident that staff could find a consultant, if instructed to do so by the Council, who could bring them as unbiased a vi ew of the market as they could hope for. Councilmember Cobb asked if there was a way that the Council could get the process down so that it could happen in several weeks rather than many months. Mr. Zaner said he did not see how. If the Council wanted to compare a chart, some standards would have to be set forth for the bidders to work with, and that was an RFP. The bidders would respond to the RFP, and all that would take time. Councilmember Witherspoon did not see why another consultant had to be hired. If the Council did not like the consultant's conclu- sions, they shotld take the other route and go franchise. The Council could n& even decide on a RFP--how long would it take to decide what to have in the City's system. The more she listened to the Council 's discussions, the best way to keep the. options open was to opt for a municipal system. If the Council went for a franchise system, it could not go back to a municipal system. If the Council went for a municipal system and asked for a great deal more information, all the Councilmembers had qualms on various aspects, and if it got down to the bottom line and was not feasible, the Council could always go for a franchise assuming Congress did not take that option away. She thought that if the Council went for a ;municipal system, those who wanted a cable system would be six months further that road than if the Council sat around and tried to develop an RFP. Councilmember Fazzi no sal d he did not want to back into a particu- lar system because of a desire to move ahead. He realized that a number of Councilmembers had the same concerns as he regarding the information with respect to the municipal system. Council did not have the information to make an informed decision. His motion kept the municipal and franchise options available. Councilmember Renzel said she thought Councilmember : Witherspoon made a good point. The Council must have faith that there were people out there who would subscribe, :-and if people subscribed according to the assumptions, then a municipal system would work. She agreed with Councilmember Witherspoon that the Council . could obtain more information about the municipal system, and if they 2 2 7 9 7/19./82. were not satisfied, the option was still available to 90 forward with a franchise. If the deregulation removed the City's ability to award a franchise or changed the rules so that the City would not have adequate controls, the Council probably would not want to go that route anyway. Councilmember Fazzlno said he thought it was an incredible leap of faith to move from peoples' desire to have a cable system to acceptance of a municipal cable system. MAIN MOTION FAILED by a vote of 3-5, Cobb, Fazzino, Levy voting "aye," Klein not participating. MOTION: Councilmember Fletcher moved, seconded by Eyerly, that Council wished to proceed with a municipal. cable system and requests that staff contact brokerage firms and return to the Council with information regarding the sale of revenue bonds to fund the system. Mayor Eyerly read the motion as being contingent upon staff's returning with a financing plan acceptable to the Council. Councilmember Fletcher said that was correct. Councilmember Cobb said he would still like to see what the pri- vate sector would propose before deciding on a municipal system. He was inclined to oppose the motion even though he was not neces- sarily opposed to a municipal system. He did not feel he knew what the private sector would come up with, and he wanted to know that before making a decision. He could support a motion to explore the alternative of municipal ownership as outlined by Councilmember Fletcher and in parallel with that send the RFP's out to the private sector, because then he felt he would have the necessary information to make a final decision. Vice Mayor. Bechtel said she would like to ascertain additional financial information without supporting a motion for municipal ownership. She directed Council to the Bartle Wells study which ultimately recommended that it was financially possible to go municipal ownership, but said it was only financially possible if the Council had a 40 percent saturation ratio. She pointed out almost two pages worth of risks of the municipal cable television industry --the fact that it was a nonessential service with no captive audience. She was concerned about the marketing aspects of a municipally owned Cable TV system and would hate to see the kind of aggressive marketing that would be required for Cable TV done by the City of Palo Alto. She could see aggressive marketing done for things like saving energy, but had a real problem aggres- sively marketing some hot entertai nment channel or the all sports channel or whatever aspects of Cable TV the City might come up with. Councilmember Levy said he had a feeling the City would end up with a municipally owned system, but was not ready to make that leap of faith. He preferred to plod through the analysis and satisfy himself absolutely that it was the right deci sion. He did` not think he could justify .to .-his constituents that he had con- sidered both sides .of -the issue if he'excluded one :side tonight. He would not support rnunl ci pal ownership at this time in order to keep both options option. Councilmember Fazti no said it was incredible to him that the Council spent two months shooting ,holies in the City staff's report and then asked them - to to move :ahead and present the Count l with a pl an for municipal ownership.. He began the process as someone who was supportive of. muni ci pal ownership, and would love to be con - vi noed that munici pal ,was the way . to go, but in- perusingthe . infbematiors before the Council objectively, he saw an incredible financial risk, and marketing to a_._degree that .had never been handled by the- City.. They Were t`al ki ng about.- a 2 2 8. 0 7/19/82 -potentially poorer credit rating, no interest by Stanford, and instituting two-thirds of a cable system in order to make it run over the first few years. It was incredible that the Council would move ahead based upon the current information. It should not be an either/or decision, and he was not ready to decide for franchise or municipal. He was bei ng forced to make that. - decision --more information was needed both from City staff and from pri vate. franchises to make a well informed decision. Not to do so would be a tremendous disservice to the community. He understand that a provision existed that if there were a number of tie votes that any member of the Council who was forced to retire due to a conflict of interest could be brought back into the discussion. Ms. lee said she believed that was true if a quorum were not present. Councilmember Witherspoon said she was under the impression that the Council wanted to study both systems, and the motion suggested studying them in tandem not together. Councilmember Fletcher said the issue was not whether the Council was rewarding the staff. The issue was what would serve the citi- zens of Palo Alto the best, and that was a system the City Council would have control over. No matter what the cable companies promised, the promises were worthless whenever the legislation passed in Congress, and it would pass. Councilmember f azzi no said he was not in favor of any of the legislation in Washington, D.C., but both major pieces of legisla- tion dealt with a specific number of i ssues relating to local cable television --not to deregulating the entire process. Further, Mr. Rosch indicated there may be potential legal chal- lenge to existing legal contracts. He did not say they would automatically be abolished or become moot. Those were the kinds of issues the Council needed to look at. He was not endorsing them, but :ranted to get information on those kinds of issues before making a decision. Councilmember Renzel said she thought that those who felt there was a demand for cable wanted to get the best possible system for Palo Alto. Interest had been expressed about a municipal system if it was financially viable and would not endanger the City's resources-, and interest was expressed about program control and how the City would keep from having political control .over the programming. She concurred with the concerns, but saw no problem with asking staff to come back with the ans-veers to those kinds of questions, and whether municipal ownership could solve those problems. eShe asked if some of the other Councilmembers felt that franchising would offer something other than the financial security -that municipal could not offer. Hayor Eyerly commented that the motion to opt for municipal owner- ship of cable television was a way to flush out a financing plan from the -staff that Council could accept. He. sal d Council really needed to see a financing plan which could be acceptable. If that could not be done, the issue was dead. When the plan was returned, if Council was rot happy. with the information, the opportunity was avai l abl a 'to approach something from the private sector.- Ale felt that -somewhere along the line, the Council had to find out about financing, and he thought the motion did that MOTION FAILED by a vote of 4-4, Fazz1 nos Lear, Bechtel, Cobb voting 'no," Klein "not participating." MOTION: Vice MayorBechtel moved seconded by Renzel, to continue Cable TV to August : 2 and ask ..staff to describe how to minimize risk if City went municipal and how to handle marketing aspects and return with a financial plans ..i ncl udl ng five year projection on of revenues and encourage ` private sector to attend on August 2. 2 2 8 1 7/19/82 Mr. Zaner said he had no problem with the motion, but had a little problem with the time. He did not want to delay the process, but; asked that the Council give him until September 1. Vice Mayor Bechtel commented that the only meeting everyone would attend was September 13, which followed a two week break, and which would have a heavy agenda. Councilmember Fazzino said that before the Council adhered to Mr. Zaner's request, the Council should put the matter on the agenda. and see what staff could do in two weeks time in order ':far keep the matter moving. He preferred to have a check point in two weeks. Counci lmember Cobb said he was concerned that trying to get the information together in two weeks would put staff in a fire drill situation and that was not the best way to make a decision. Vise Mayor Bechtel was trying to get more of the public to attend the meeting in order to get responses from people other than those who had faithfully followed all the hearings. He thought that was a good idea, and if the Council turned the public out in droves to finally get on with the Cable TV decision, and staff said they needed a couple of more weeks, he thought the public was ,being done a disservice. The Council should be ready when the matter was put on the agenda. SUBSTITUTE MOTION: Councilmember Levy moved, seconded by Fazzt no, to request staff to recommend a course of action for Council approval that would enable the Council to evaluate compar- able proposals for both private and municipal ownership of cable television. Councilmember Levy said it was suggested earlier that the Council have its own special .advisor to do this. That was voted down --it was determined to be cumbersome and too much out of the ordinary. He was suggesting that staff take the lead in getting the job done, but that the job to be done was a comparison of private and municipal ownership. He believed that should involve RFP 's, but he felt staff should be allowed to propose the course of action from here. Councilmember Witherspoon said she did not think the staff or a consultant could be told to make up the Council's minds. Vice Mayor Bechtel said that staff did a compari son between municipal, co-op, and prl vate i n April and made a recommendation. Not everyone agreed with. Staff's recommendation, and she felt Council was asking staff >to go spin their wheels some more. She • would oppose the substitute motion. Councilmember Renzel said she would oppose the substitute motion and support the main motion. Councilmember Levy said he was not asking that staff be the advo- cateof the private system, but rather than staff give the Council a course of _ action so that the private industry could come in and speak for themselves. He wanted to hear what the private industry had to say directly, and what they would offer the citizens of Palo Alto. Councilmember Fletcher said she would oppose the substitute motion because it was going back to asking ° for .detailed proposals from private cable companies. Councilmember Fazzi no said it was sad when the Council was cl early split on the issue that there was not a willingness to at least consider information from all groups who would like a part of the system. He thought it was only fair to let staff, in conjunction with the information they develop on a municipal system, .develop a course of action which would allow private companies to come in and have their voices heard. The problem was that private 2 2 82" 7/19/82 p companies had been muzzled. Private companies were told by staff in May to speak in generalities and to essentially stay out of the way while staff presented t►.:e municipal option. If the Council did not allow everyone a chance to speak on the issue and move ahead and chose one option, they would be guilty of not practicing democracy to the fullest degree. He thought it was appropriate to allow everyone to speak and be heard which was why he thought Councilmember Levy's motion was a good one. SUBSTITUTE MOTION FAILED by a vote of 3-5, Cobb, Fazzino and Levy voting *aye," Klein "not -participating." Mayor Eyerly .said he thought inherent with the gain motion was to encourage private companies to come forth and speak on September 13. Councilmember Fazzino agreed with Mayor Eyerly. MOTION PASSED unanimously, Klein "not parti :ipating.° Mayor Eyerly said the Counc i }members received a notice from Hollis Russo Cable Communications Co -Op of Palo Alto advising that they would show a movie on July 26, in the Council Chambers at 6:30 p.m. He would schedule the showing of the movie as a special work session, with nothing on the agenda requiring voting. Council - members would be free to attend without any danger of violating the Brown Act. ADJOURNMENT Council adjourned at 12:30 a.m. ATTEST: APPROVED: -, 2 2 8 3 7/19/82