HomeMy WebLinkAbout2012-01-30 City Council Agenda PacketCITY OF PALO ALTO
CITY COUNCIL Special Meeting
Council Chambers
January 30, 2012
5:30 PM
Agenda posted according to PAMC Section 2.04.070. Supporting materials are
available in the Council Chambers on the Thursday preceding the meeting.
1 January 30, 2012
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CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS.
Call to Order
Closed Session
Public Comments: Members of the public may speak to the Closed Session item(s); three minutes per speaker. The
following Closed Sessions will be held with the City Labor Negotiator.
1.CONFERENCE WITH LABOR NEGOTIATOR
City Designated Representatives: City Manager and his designees
pursuant to Merit System Rules and Regulations (James Keene,
Pamela Antil, Dennis Burns, Lalo Perez, Joe Saccio, Sandra Blanch, Marcie
Scott, Darrell Murray)
Employee Organization: Palo Alto Police Officers Association (PAPOA)
Authority: Government Code Section 54957.6(a)
2.CONFERENCE WITH LABOR NEGOTIATOR
City Designated Representatives: City Manager and his designees
pursuant to Merit System Rules and Regulations (James Keene,
Pamela Antil, Dennis Burns, Lalo Perez, Joe Saccio, Sandra Blanch, Marcie
Scott, Darrell Murray)
Employee Organization: Palo Alto Police Manager’s Association (PAPMA)
Authority: Government Code Section 54957.6(a)
3.CONFERENCE WITH LABOR NEGOTIATOR
City Designated Representatives: City Manager and his designees
pursuant to Merit System Rules and Regulations (James Keene,
Pamela Antil, Dennis Burns, Lalo Perez, Joe Saccio, Sandra Blanch, Marcie
Scott, Roger Bloom, Darrell Murray)
Employee Organization: Palo Alto Fire Chiefs’ Association
Authority: Government Code Section 54957.6(a)
2 January 30, 2012
MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER
DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY
CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS.
City Manager Comments
Oral Communications
Members of the public may speak to any item not on the agenda; three minutes per speaker. Council reserves the
right to limit the duration of Oral Communications period to 30 minutes.
Consent Calendar
Items will be voted on in one motion unless removed from the calendar by two Council Members.
4.Adopt Ordinance to Close FY 2011 Budget and Authorize Re-Appropriations
into FY 2012 Budget; Close Completed Capital Improvement Projects and
Transfer Remaining Balances to Reserves; Approve the City’s FY 2011
Comprehensive Annual Financial Report (CAFR)
5.Approval of the Final City Council Priorities Report for Calendar Year 2011
6.Approval to Submit Application to the State Water Resources Control Board
for Grant Funding from the Proposition 84 Storm Water Grant Program for the
Southgate Neighborhood Storm Drain Improvements and Green Street Project
Agenda Changes, Additions and Deletions
HEARINGS REQUIRED BY LAW:Applications and/or appellants may have up to ten minutes at the outset of the
public discussion to make their remarks and put up to three minutes for concluding remarks after other members of
the public have spoken.
OTHER AGENDA ITEMS: Public comments or testimony on agenda items other than Oral Communications shall be limited to a maximum of three minutes per speaker.
Action Items
Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials,
Unfinished Business and Council Matters.
7.Public Hearing: Appeal Of An Architectural Review Approval And A Record Of
Land Use Action Regarding the Director's Architectural Review Approval Of A
Three Story Development Consisting Of 84 Rental Residential Units In 104,971
Square Feet Within The Upper Floors, 50,467 S.F. Ground Floor Research And
Development Area, Subterranean And Surface Parking Facilities, And Offsite
Improvements, With Two Concessions Under State Housing Density Bonus Law
(GC65915) On A 2.5 Acre Parcel At 195 Page Mill Road And 2865 Park
Boulevard. * Quasi-Judicial-APPLICANT HAS REQUESTED CONTINUANCE
3 January 30, 2012
MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER
DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY
CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS.
8.Retiree Medical Actuarial Report Discussion
Council Member Questions, Comments and Announcements
Members of the public may not speak to the item(s)
Adjournment
AMERICANS WITH DISABILITY ACT (ADA)
Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance.
PUBLIC COMMENT
Members of the Public are entitled to directly address the City Council/Committee concerning any item that is
described in the notice of this meeting, before or during consideration of that item. If you wish to address the
Council/Committee on any issue that is on this agenda, please complete a speaker request card located on the table at the entrance to the Council Chambers, and deliver it to the City Clerk prior to discussion of the item. You
are not required to give your name on the speaker card in order to speak to the Council/Committee, but it is very
helpful.
4 January 30, 2012
MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER
DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY
CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS.
Additional Information
Supplemental Information
Informational Report
City of Palo Alto Investment Activity Report for the Second Quarter, Fiscal Year
2012
Schedule of Meetings
Schedule of Meetings from the City Clerk
Tentative Agenda
Tentative Agenda from the City Clerk
Public Letters to Council
City of Palo Alto (ID # 2423)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 1/30/2012
January 30, 2012 Page 1 of 2
(ID # 2423)
Summary Title: Close Budget and Approve CAFR for FY 2011
Title: Adopt Ordinance to Close FY 2011 Budget and Authorize Re-
Appropriations into FY 2012 Budget; Close Completed Capital Improvement
Projects and Transfer Remaining Balances to Reserves; Approve the City's FY
2011 Comprehensive Annual Financial Report (CAFR)
From:City Manager
Lead Department: Administrative Services
RECOMMENDATION
The Finance Committee and Staff recommend that Council:
·Adopt the attached Ordinance authorizing closing of the Budget for the Fiscal Year
ending June 30, 2011 and authorize re-appropriation of 2011 funds into the 2012
budget;
·Close completed capital improvement projects and transfer remaining Capital
Improvement Project balances to the appropriate reserves.
·Approve the City’s 2010 Comprehensive Annual Financial Report (CAFR), Attachment A
to CMR 2285. An electronic copy is available at:
www.cityofpaloalto.org/depts/asd/financial_reporting.asp, and hard copies are
available at the Administrative Services Office upon request.
BACKGROUND
As customary, the City Council is required to close out its financials each fiscal year. At its
December 14, 2011 meeting, the Finance Committee unanimously approved closing of the 2011
fiscal year. Details are included in Attachment A and the minutes from the meeting are
included in Attachment D.
During the December 14 meeting, Finance Committee asked for an explanation of the decrease
in the actual expenses in the City Council department between FY2010 and FY2011 from $0.5
million to $0.1 million, as shown on page 11 of the CAFR. The decrease in expenses is
attributable to a change in methodology in how the cost for retiree medical is allocated. In
FY2010, retiree medical was allocated on a head count basis and in FY2011 the allocation was
based on the actuarial calculation. The actuarial calculation is a more precise allocation of
costs. In addition, in 2010 the external auditor recommended a year-end allocation to
apportion expenses between governmental and business activities at the government-wide
financial statement level, which resulted in higher allocated expenses.
January 30, 2012 Page 2 of 2
(ID # 2423)
The Committee pointed out several necessary language corrections to the budget amendment
document when they approved the ordinance. These changes have been incorporated into the
attached version (Attachment B).
Staff has attached to this memo the report from October that provided an update on the 2012
budget (Attachment C). Staff provided this memo to the Finance Committee in response to
direction the Committee provided to staff during the FY2012 budget process. In the report staff
provided the Finance Committee with a preliminary view of the FY2011 year-end close figures.
Attachments:
·Attachment A: CMR ID# 2285 FY2011 Year End Close (PDF)
·Attachment B: BAO FY 2011 Year-End (PDF)
·Attachment C: 2012 Budget Update (ID 2104)(PDF)
·Attachment D: Excerpt Minutes from December 14, 2011 Finance Committee meeting
(PDF)
Prepared By:Laura Kuryk, Manager of Accounting
Department Head:Lalo Perez, Director
City Manager Approval: ____________________________________
James Keene, City Manager
City of Palo Alto (ID # 2285)
Finance Committee Staff Report
Report Type:Meeting Date: 12/14/2011
December 14, 2011 Page 1 of 12
(ID # 2285)
Summary Title: Close FY2011 Budget And Approve FY2011 CAFR
Title: Recommendation Regarding Adoption of Ordinance Authorizing Closing of
the Budget for the Fiscal Year Ending June 30, 2011, Including Reappropriation
Requests, Closing Completed Capital Improvement Projects, Authorizing
Transfers to Reserves and Approval of Comprehensive Annual Financial Report
(CAFR)
From:City Manager
Lead Department: Administrative Services
RECOMMENDATION
Staff recommends that the Finance Committee review, provide input, and forward the attached
ordinance (Attachment A) and associated exhibits to the City Council for its approval to:
·Close the Fiscal Year (FY) 2011 Budget;
·Authorize re-appropriation of FY 2011 funds into the FY 2012 Budget (Exhibits 1 & 2);
·Close completed capital improvement projects (Exhibit 3); and
·Transfer remaining balances to the appropriate reserves (Table 1 for General Fund and
Exhibits 5 & 6 for Enterprise Funds).
In addition, staff recommends the Finance Committee review and forward to the City Council
for its approval the City’s FY 2011 Comprehensive Annual Financial Report (CAFR) (Attachment
B).
BACKGROUND
At the conclusion of each fiscal year (July-June) the City must close the financial system for the
year and produce year-end financial reports. The reports along with financial data are reviewed
by Macias Gini & O’Connell (MGO), an audit firm hired by the City Auditor. MGO produces a
written assessment of the City’s year-end fiscal condition and this, together with other financial
information, forms the City’s Comprehensive Annual Financial Report.
The attachments to this report provide the necessary documents for closing the FY 2011 Budget
and reauthorizing FY 2011 funds for the current FY 2012. In addition, they provide detailed
information on the City’s financial activities for FY 2011. This CMR highlights key fiscal issues
affecting the City of Palo Alto. The Management's Discussion and Analysis (MD&A) chapter of
the CAFR (Attachment B) also provides a discussion and analysis of the City’s current fiscal
health, and includes financial statements and performance information that is compared to the
prior year, along with capital asset and debt administration data.
December 14, 2011 Page 2 of 12
(ID # 2285)
DISCUSSION
Economy
Like jurisdictions throughout the country, the City was impacted by the “Great Recession,” and
is now showing signs of slow recovery in key revenue sources such as property, sales, and hotel
taxes. The recovery in Silicon Valley is now outpacing that of the state, with most job growth
coming from the technology sector. Palo Alto’s unemployment rate decreased by fiscal year-
end 2011 to 5.5 percent from 6.1 percent compared to the prior year. During the same period,
the unemployment rates for Santa Clara County and the state also declined, but the County’s
rate was 10.3 percent and the state’s was 12.4 percent.
The City believes it will take multiple years to fully recover from the effects of the recession.
Though some revenues are showing short-term recovery, the City’s long-term structural
expenses continue to rise. For example, retiree medical costs are expected to increase nearly
40% between FY 2011 and FY 2012; pension expenses continue to rise; and the City is far
behind in funding its infrastructure needs.
The City continues to take steps to align expenses and revenues through service and program
cuts, revenue enhancements, and employee compensation concessions. The City Council
adopted a General Fund budget for FY 2012 that eliminated a projected deficit of $3.1 million,
mostly by placing a safety employee compensation placeholder. This is after implementing a
total of $14.3 million in structural changes during the prior two fiscal years. Most of the City’s
employees have accepted a number of cost-sharing concessions, and the City is in continued
negotiations with the remaining employee groups to seek comparable concessions. A detailed
discussion of the economy and FY 2011 revenues also is included in the CAFR MD&A pages 3-4.
In addition, staff will present the 10 year Long Range Financial Forecast to the Finance
Committee in early 2012.
Results by Fund
General Fund
The FY 2011 figures in the General Fund represent an improvement over recent years,
reflecting the modestly positive economic conditions that transpired in FY 2011. The final FY
2011 result for the General Fund is a net increase of $2.7 million, which represents the
difference between revenues and expenditures, and transfers in and out, for one fiscal year.
This difference increases the Budget Stabilization Reserve (BSR), a component of the fund
balance. FY 2011 revenues were $7.4 million more than prior year primarily from increased
sales tax revenue and charges for services. While year-end results are encouraging, the City still
faces substantial financial challenges, such as costs for retiree medical, employee pensions, and
infrastructure.
Effective for FY 2011, the City was required to implement Governmental Accounting Standards
Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type
Definition for its governmental funds. The objective of this Statement is to enhance the
usefulness of fund balance information by providing clearer fund balance classifications that
December 14, 2011 Page 3 of 12
(ID # 2285)
can be more consistently applied. Fund balances are now classified as non-spendable,
restricted,committed, assigned and unassigned based on the relative strength of the
constraints that control how specific amounts can be spent. Previously, fund balance
classifications were either reserved, unreserved designated or unreserved undesignated. The
new fund balance classifications affect only the financial statement presentation and do not
impact any of the reserve calculations. GASB Statement No. 54 is described more fully in Note
1 of the CAFR.
The General Fund reserves are comprised of the BSR, encumbrances, notes and loans,
inventory, prepaid items, unrealized gain on investment, and reappropriations. The $2.7 million
increase results in an increase in the BSR. The BSR balance will also increase or decrease as the
balances in the other reserve components change. The net increase to the General Fund of $2.7
million and net changes in other reserves of $1.3 million is a total increase of $4 million to the
BSR, resulting in an ending BSR balance of $31.4 million, which is 21.4 percent of budgeted
expenditures and operating transfers for FY 2012. This percentage is slightly higher than the
Council approved guidelines of 15 to 20 percent of budgeted expenditures. As described in the
BSR reserve policy approved by Council, any reserve balance above 18.5 percent may be
transferred to the infrastructure budget within the Capital Fund at the discretion of the City
Manager. Staff’s recommendation contained in this report is to keep the balance in the BSR
above 18.5 percent to offer flexibility for possible needs in FY 2012, in case the remaining safety
labor groups do not provide compensation concessions.
December 14, 2011 Page 4 of 12
(ID # 2285)
At fiscal yearend, the fund balance for the General Fund totaled $44.2 million. This is
comprised of reserves for:
Table 1
Balance Net From Balance
@ 06/30/10 Operations @ 06/30/11
CAFR TO Budget Reconciliation:
CAFR Fund Balance 41,457 2,722 44,179
Less: Encumbrances (3,778)373 (3,405)
Reappropriations (185)(298)(483)
Adjustment for Stores Operations (117)73 (44)
Budgetary Fund Balance 37,377 2,870 40,247
Allocate To Reserves:
Budget Stabilization Reserve 27,396 3,980 31,376
Notes Receivable Reserve 1,430 (145)1,285
Stores Inventory Reserve 3,661 (74)3,587
Prepaid Reserve 1,490 (277)1,213
Unrealized Investment Gain/Loss Reserve 3,517 (687)2,830
Adjustment for Stores Operations (117)73 (44)
Budgetary Fund Balance 37,377 2,870 40,247
Adjustment for Stores Inventory Encumbrance 0
Adjustment for Stores Operations (44)
Total Adjustments (44)
GENERAL FUND RESERVE SUMMARY ($000s)
FISCAL YEAR 2010
December 14, 2011 Page 5 of 12
(ID # 2285)
The following graph provides a snapshot of the General Fund BSR balance and percentage of
budgeted expenditures for the last ten years:
Graph 1
General Fund BSR & Percent of Budgeted
Expenditures FY 2002-2011
($ in millions)
$31.4
21.4%$27.4
19.7%
$24.7
17.4%
$26.1
18.0%
$27.5
19.8%$22.7
18.1%
$21.1
17.5%
$21.5
18.5%
$21.4
18.5%
$22.7
18.5%
$0
$5
$10
$15
$20
$25
$30
$35
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal Year
December 14, 2011 Page 6 of 12
(ID # 2285)
The following graph provides a five-year comparison of major General Fund tax revenues.
Graph 2
Major General Fund Tax Revenues Fiscal Years 2007-2011
($ in thousands)
21,466
22,194
9,356
6,709
5,837
23,084
22,623
10,285
7,976
5,382
25,432
20,089
11,030
7,111
3,092
25,981
17,991
11,295
6,858
3,707
25,688
20,746
10,851
8,082
5,167
1,000
6,000
11,000
16,000
21,000
26,000
31,000
FY2007 21,466 22,194 9,356 6,709 5,837
FY2008 23,084 22,623 10,285 7,976 5,382
FY2009 25,432 20,089 11,030 7,111 3,092
FY2010 25,981 17,991 11,295 6,858 3,707
FY2011 25,688 20,746 10,851 8,082 5,167
Totals 121,651 103,643 52,817 36,736 23,185
Property Tax Sales Tax User Utility Tax Transient Occupancy Tax Documentary Transfer Tax
December 14, 2011 Page 7 of 12
(ID # 2285)
The following graph provides a five-year comparison of General Fund department expenditures.
Graph 3
General Fund Department Expenditures Fiscal Years 2007-2011
($in thousands)
17,116 20,879
21,868
6,158 9,744
26,077
12,863
19,098 21,866 24,279
7,033 10,145
29,784
13,243
17,717 21,677
23,765
6,502
10,483
28,464
13,489
19,219
20,846
28,180
6,623 10,058
29,090
13,40516,906 20,518
29,012
6,722 10,416
31,286
13,842
5,000
10,000
15,000
20,000
25,000
30,000
35,000
FY2007 17,116 20,879 21,868 6,158 9,744 26,077 12,863
FY2008 19,098 21,866 24,279 7,033 10,145 29,784 13,243
FY2009 17,717 21,677 23,765 6,502 10,483 28,464 13,489
FY2010 19,219 20,846 28,180 6,623 10,058 29,090 13,405
FY2011 16,906 20,518 29,012 6,722 10,416 31,286 13,842
Totals 90,056 105,786 127,104 33,038 50,846 144,701 66,842
Administrative
Depts CSD Fire Library Planning &
Community Env.Police PWD
FY 2009 postponed a budgeted $4.8 million transfer to the Technology Fund. This one-time deferral was the General
Fund share of technology cost allocations and it will be addressed in a four year funding plan for all departments except
Fire. FY 2010 Fire Department expenditures include $1.2 million cost allocations to the Technology Fund for FY 2009.
Details of the General Fund are discussed in the MD&A pp. 15-16.
The FY 2011 year-end Budget Amendment Ordinance (BAO) includes transfers of
unencumbered appropriation balances between General Fund Departments. These
reallocations include: (1) distribution of the $1.5 million in attrition savings that was included in
the adopted budget, and (2) transfer of remaining unencumbered appropriations to various
departments that fell short after attrition savings were distributed. Table 2 depicts a before and
after view of these General Fund adjustments. Details of these reallocations can be found in the
Year-End Budget Amendment Ordinance.
December 14, 2011 Page 8 of 12
(ID # 2285)
Table 2
General Fund Reallocation of Unencumbered Appropriations
(in thousands)
Budget
Remaining
Before Adj Change After Adj Actual Budget
City Attorney 2,996$ (184)$ 2,812$ 2,808$ 4$
City Auditor 1,060 21 1,081 1,081 -
City Clerk 1,367 (97) 1,270 1,257 13
City Council 217 (24) 193 192 1
City Manager 2,442 13 2,455 2,456 (1)
Administrative Services 6,778 (322) 6,456 6,446 10
Community Services 20,718 (188) 20,530 20,518 12
Fire 28,503 511 29,014 29,012 2
Human Resources 2,898 (221) 2,677 2,666 11
Library 6,906 (173) 6,733 6,722 11
Planning 10,795 (368) 10,427 10,416 11
Police 31,273 15 31,288 31,286 2
Public Works 14,329 (483) 13,846 13,842 4
Non-Departmental 5,399 1,500 6,899 7,958 (1,059)
Transfers out 11,224 - 11,224 11,000 224
Total 146,905$ -$ 146,905$ 147,660$ (755)$
Capital Projects Fund
For FY 2011, the Capital Projects Fund reported $36.3 million in expenditures and other uses, an
increase of $10.4 million from prior year. This level of expenditures is consistent with the City’s
effort to rehabilitate and maintain its existing infrastructure. The Capital Projects Fund balance
totaled $62.7 million, a decrease of $21.1 million. This decrease is due to expenditures for
major projects such as construction of the Mitchell Park Library and Community Center,
improvements to the Main Library, and infrastructure improvements to the Civic Center.
As noted previously, fund balances are now classified as non-spendable, restricted, committed,
assigned and unassigned. As of June 30, 2011,the assigned fund balance was comprised of the
Infrastructure Reserve (IR) of $3.2 million, a decrease of $5.4 million from prior year, and the
Capital Projects Reserve (formerly Reappropriation Reserve) of $16.2 million, an increase of $1
million from prior year. The Committed fund balance for capital projects (formerly
Encumbrance Reserve) is $6.7 million, compared to $5.9 million in the prior year. The Library
Bond Project has a balance of $36 million that represents the unused portion of bond proceeds.
The prior year balance was $53.5 million. Bond proceeds are maintained by a fiscal agent and
the Library Oversight Committee makes quarterly presentations to the City Council.
December 14, 2011 Page 9 of 12
(ID # 2285)
Overall, the following summarizes changes to the City’s General and Capital Fund reserves:
·The General Fund BSR is 21.4 percent of budgeted expenditures and operating transfers
for FY 2012. This percentage is slightly above the Council approved guidelines of 15 to
20 percent and shows a closing balance of $31.4 million, an increase of $4 million from
the prior year.
·Budget transactions included in the attached ordinance decreased General Fund
reserves by $0.9 million.
·The Infrastructure Reserve has a final balance of $3.2 million at the end of FY 2011. To
address the infrastructure backlog, the City Council created the Infrastructure Blue
Ribbon Commission (IBRC) and tasked it with identifying and prioritizing the City’s
infrastructure needs. Steps to address the infrastructure backlog are pending the
outcome of the IBRC’s report in early 2012.
Enterprise Funds:
Exhibit F provides the balance changes for all reserve categories for the Enterprise Funds. Major
changes include a $6.4 million decrease in the Water Fund, $12 million increase in the Electric
Fund, and $15.3 million increase in the Wastewater Treatment Fund. Exhibit F provides the
balance changes for all reserve categories for the Enterprise Funds.
Water Fund
The Water Fund ended the year with a net income of $3.5 million, a decrease of $3.5 million
from the prior year. At fiscal year-end, unrestricted net assets for the Water Fund totaled $25.5
million, which includes $10.6 million for RSR. The Water Fund also has restricted cash and
investments of $30 million for the Emergency Water Supply project, funded by a bond issuance.
Electric Fund
For FY 2011 the Electric Fund had a net income of $13.1 million compared to a net income of
$9.4 million in the prior year. The increase is due mainly to lower utility purchase costs. The RSR
balance is $66.3 million, an increase of $12 million from the prior year.
Gas Fund
The Gas Fund ended the year with a net income of $6.2 million, a decrease of $1.7 million from
prior year. The decrease is primarily due to a $.5 million decline in return on investments and a
$.9 million reduction in transfers in. The RSR has an ending balance of $16.2 million, a decrease
of $2.4 million from the prior year.
Fiber Optics Fund
The Fiber Optics Fund had a net income of $2.1 million, which is the same as the prior year. The
ending RSR is $10.1 million, an increase of $1.9 million from prior year.
December 14, 2011 Page 10 of 12
(ID # 2285)
Wastewater Collection Fund
The Wastewater Collection Fund had a net income of $3.4 million compared to a net income of
$4.7 million in the prior year. The RSR ended the year with a balance of $5.9 million, compared
to $6.8 million for the prior year.
Wastewater Treatment Fund
Wastewater Treatment Fund ended the year with a net income of $1.4 million compared to a
net loss of $1.2 million in FY 2010. The net income increases the RSR, resulting in a balance of
$3 million, compared to a negative $12.4 million for the prior year. The improvement is also
due to a $10 million reduction in the appropriation for the Disinfection Facility Improvement
Program in December, 2010 as a result of savings realized from lower bids. At fiscal year-end,
unrestricted net assets for the Wastewater Treatment Fund totaled $36.5 million. This was
comprised of reserves for:
Table 3
Rate Stabilization Reserve $3.0 million
Reappropriations –Disinfection Facility Improvement Program $1.6 million
Reappropriations –other projects $6.2 million
Emergency plant replacement $1.7 million
Commitments $2.7 million
Refuse Fund
For FY 2011 the Refuse Fund had a net income of $.3 million, compared to the prior year net
loss of $2.8 million. The improvement in net income is due to increased revenue of $1.9
million, which resulted primarily from increased disposal fees due to the reinstatement of
commercial drop-offs, and $.8 million in increased transfers in. The ending balance of the RSR
as of June 30, 2011 is a negative $5 million compared to the prior year negative balance of $4.9
million.
The City is required by State and Federal laws and regulations to make annual funding
contributions to finance closure and post-closure care. In FY 2011, for the $5.2 million post-
closure maintenance, the City changed its financial assurance mechanism from an enterprise
fund mechanism to a pledge of revenue agreement with the California Integrated Waste
Management Board. The $5.6 million closure liability remains under the enterprise fund
mechanism. The City is in compliance with these requirements for the year ended June 30,
2011.
Refuse Fund 2012 Update
Staff continues to closely monitor the activities of the Refuse Fund. On September 19, 2011
December 14, 2011 Page 11 of 12
(ID # 2285)
Council approved retaining the rate increases from FY 2010, and implemented an additional
monthly fixed fee for residential customers effective October 1, 2011.
The General Fund has provided a $1.25 million loan to the Refuse Fund in FY 2012 that will be
repaid with interest based on the investment portfolio earnings in FY 2013.
At the beginning of FY 2012 the Rate Stabilization Reserve was in a negative position of $5
million due to the recognition of the landfill post closure costs as required by accounting rules.
Without recognition of the $5.2 million post closure liability the Rate Stabilization Reserve
would be positive $0.15 million. It is anticipated that the Rate Stabilization Reserve will return
to a positive balance in future years under a subsequent rate structure to be determined after a
cost of service study is completed.
Storm Drainage Fund
The Storm Drainage Fund ended the year with a net income of $3 million, an increase of $.5
million from the prior year. The RSR had an ending balance of $1.6 million compared to $.3
million in the prior year.
Retiree Medical Benefits and Trust Assets
For FY 2011, the City’s annual required contribution (ARC) for retiree medical costs is $9.8
million. During FY 2011, the City made contributions of $8.2 million for retiree premiums, which
covered 860 retirees. The City also contributed an additional $2.4 million to the California
Employers’ Retirees Benefit Trust (CERBT) in early FY 2012, which was accrued for in FY 2011.
As of June 30, 2011 the balance of the trust, including the contribution made in early FY 2012,
was $44.8 million. Total contributions from inception of the trust are $40.5 million, investment
income is $4.4 million, and administrative cost is $.1 million. The retiree medical liability per the
June 30, 2011 actuarial valuation was $179.9 million, less the actuarial value of the trust assets,
$40.2 million, leaving a net unfunded liability of $139.7 million.
RESOURCE IMPACT
Adoption of the attached budget-closing ordinance (Attachment A) allows for the re-
appropriation and carryover of funding from the FY 2010 budget so that specific operating
programs and capital projects can be completed in the current fiscal year (Exhibit 2). In
addition, by closing completed capital improvement projects, balances (Exhibit 3) are returned
to the original funding source for future appropriation. Exhibits 4 and 5 summarize financial
results for the General Fund and Enterprise Funds, respectively, by providing an analysis of the
performance of these funds in comparison to the budget as adopted and adjusted by Council.
Exhibit E reflects the changes to and status of major reserves.
POLICY IMPLICATIONS
This recommendation is consistent with existing City policies.
ENVIRONMENTAL REVIEW
December 14, 2011 Page 12 of 12
(ID # 2285)
The action recommended is not a project for the purposes of the California Environmental
Quality Act.
Attachments:
·Attachment A: Budget Amendment Ordinance Authorizing Closing of the Budget for Fiscal
Year June 30, 2011 (DOC)
·Exhibit 1: Detailed Changes to the Adjusted Budget (XLS)
·Exhibit 2: Fiscal Year 2011 Re-Appropriation Requests (DOC)
·Exhibit 3: FY 2011 Year-end BAO-Exhibit C (XLS)
·Exhibit 4 -General Fund Summary (XLS)
·Exhibit 5: ENT by FYE Actuals 1011 (XLS)
·Exhibit 6: ENT by FYE Actuals 1011 (XLS)
·Attachment B: City of Palo Alto 2011 CAFR (PDF)
Prepared By:Laura Kuryk, Manager of Accounting
Department Head:Lalo Perez, Director
City Manager Approval: ____________________________________
James Keene, City Manager
ATTACHMENT A
Page of 61
ORDINANCE NO. XXXXX
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AUTHORIZING CLOSING OF THE BUDGET FOR THE
FISCAL YEAR ENDING JUNE 30, 2011
The Council of the City of Palo Alto does ordain as
follows:
SECTION 1. The Council of the City of Palo Alto finds
and determines as follows:
A. Pursuant to the provisions of Section 12 of Article
III of the Charter of the City of Palo Alto and as set
forth in Section 2.28.070 of the Palo Alto Municipal Code,
the Council on June 28, 2010 did adopt a budget for fiscal
year 2011; and
B. Fiscal year 2011 has ended and the financial
results, although subject to post-audit adjustment, are now
available and are herewith reported in summarized financial
Exhibits “1”, “2”, “3”, “4”, “5”, and “6”prepared by the
Director, Administrative Services, which are attached
hereto, and by reference made a part hereof.
SECTION 2. Pursuant to Section 2.28.080 of the Palo
Alto Municipal Code, the City Manager during fiscal year
2011 did amend the budgetary accounts of the City of Palo
Alto to reflect:
A. Additional appropriations authorized by ordinance
of the City Council.
B. Amendments to employee compensation plans adopted
by the City Council.
C. Transfers of appropriations from the contingent
account as authorized by the City Manager.
D.Redistribution of appropriations between
divisions, cost centers, and objects within various
departments as authorized by the City Manager.
E. Fiscal Year 2011 appropriations which on July 1,
2010 were encumbered by properly executed, but uncompleted,
purchase orders or contracts.
ATTACHMENT A
Page of 62
SECTION 3. The Council hereby approves adjustments
to the fiscal year 2011 budget for Fund Balancing Entries
as shown on attached Exhibit 1.
SECTION 4. The Council hereby re-appropriates
fiscal year 2011 appropriations in certain departments and
categories, as shown on the attached Exhibit 2, which were
not encumbered by purchase order or contract, at year end
into the fiscal year 2012 budget.
SECTION 5. The fiscal year 2011 encumbered
balances for the departments and categories shown on
Exhibit 4 shall be carried forward and re-appropriated to
those same departments and categories in the fiscal year
2012 budget.
SECTION 6.The City Manager is authorized and
directed:
A. To close the fiscal year 2011 budget accounts in
all funds and departments and, as required by the Charter
of the City of Palo Alto, to make such interdepartmental
transfers in the 2011 budget as adopted or amended by
ordinance of the Council; and
B. To close various completed Capital Improvement
Projects (CIP)as shown in Exhibit 3 and move all completed
CIP to their respective reserve funds indicated in Exhibit
1; and
C. To establish reserves as shown in Exhibits 5 and 6
for all Funds as necessary to provide for:
(1)A reserve for encumbrances and re-
appropriations in the various funds, the
purpose of which is to carry forward into
the fiscal year 2012 budget and continue,in
effect,the unexpended balance of
appropriations for fiscal year 2011
departmental expenditures as shown in
Exhibits 5 and 6; and
(2)Reserves for Advances to Other Funds,
Stores Inventory, and other reserves in
accordance with ordinance and policy
guidelines as shown in Exhibit 5; and
ATTACHMENT A
Page of 63
(3)A reserve for general contingencies of such
amount that the City Council has approved;
and
(4)Reserves for utilities plant replacement,
rate stabilization, and other reserves in
accordance with Charter and policy
guidelines as shown Exhibit F.
D. To fund the Budget Stabilization Reserve in
accordance with the General Fund Reserves Policy adopted by
the City Council.
SECTION 7. The Utilities Administration Fund is
hereby increased by the sum of One Hundred Eighty Six
Thousand Nine Hundred Ninety Four Dollars ($186,994), as
described in Exhibit 1. This transaction will change the
balance in the Electric Supply Rate Stabilization Reserve
to zero.
SECTION 8. The Electric Supply Rate Stabilization
Reserve is hereby decreased by the sum of Fifty Nine
Dollars ($59), as described in Exhibit 1. This transaction
will change the balance in the Electric Supply Rate
Stabilization Reserve to $57,091,000.
SECTION 9.The Electric Distribution Rate
Stabilization Reserve is hereby increased by the sum of
Sixty Two Thousand Eight Hundred Sixteen Dollars ($62,816)
as described in Exhibit 1. This transaction will change the
Electric Distribution Rate Stabilization Reserve to
$9,240,000.
SECTION 10.The Fiber Optics Rate Stabilization
Reserve is hereby increased by the sum of Sixty Six
Thousand Three Hundred Eighty Nine Dollars ($66,389) as
described in Exhibit 1. This transaction will change the
Electric Fiber Optics Rate Stabilization Reserve to
$10,130,000.
SECTION 11. The Gas Distribution Rate Stabilization
Reserve is hereby decreased by the sum of Two Thousand
Seven Hundred Forty Nine Dollars ($2,749) as described in
Exhibit 1. This transaction will change the Gas
Distribution Rate Stabilization Reserve to $7,399,000.
ATTACHMENT A
Page of 64
SECTION 12.The Wastewater Collection Rate
Stabilization Reserve is hereby decreased by Two Hundred
Eighty Nine Dollars ($289) as described in Exhibit 1. This
transaction will change the Wastewater Collection Rate
Stabilization Reserve to $5,896,000.
SECTION 13. The Water Rate Stabilization Reserve is
hereby decreased by the sum of Two Thousand Nine Hundred
Three Dollars ($2,903) as described in Exhibit 1. This
transaction will change the Water Rate Stabilization
Reserve to $10,639,000.
SECTION 14. The Refuse Fund Rate Stabilization
Reserve is hereby decreased by the sum of Six Thousand Two
Hundred Ninety Nine Dollars ($6,299) as described in
Exhibit 1. This transaction will change the Refuse Fund
Rate Stabilization Reserve to ($5,049,000).
SECTION 15. The Storm Drain Fund Rate Stabilization
Reserve is hereby decreased by the sum of Five Hundred
Twenty Six Dollars ($526) as described in Exhibit 1. This
transaction will change the Storm Drain Rate Stabilization
Reserve to $1,640,000.
SECTION 16. The Wastewater Treatment Rate
Stabilization Reserve is hereby decreased by the sum of Two
Thousand Eight Hundred Ninety Two Dollars ($2,892) as
described in Exhibit 1. This transaction will change the
Wastewater Treatment Rate Stabilization Reserve to
$3,020,000.
SECTION 17. The Community Development Block Grant
Fund is hereby increased by Ten Thousand Four Hundred Forty
Four Dollars ($10,444) as described in Exhibit 1. This
transaction will change the Community Development Block
Grant Balance to $3,510,000.
SECTION 18. The University Avenue Parking Permit
Fund is hereby increased by One Hundred Eighty Four
Thousand Eight Hundred Eight Six Dollars ($184,886) as
described in Exhibit 1. This transaction will change the
Community Development Block Grant Balance to $652,000.
SECTION 19. The Recovery Act JAG Fund is hereby
decreased by Five Thousand Five Hundred Dollars ($5,500) as
described in Exhibit 1. This transaction will change the
Recovery Act JAG Fund Balance to $11,000.
ATTACHMENT A
Page of 65
SECTION 20. The Capital Projects Fund
Infrastructure Reserve is hereby increased by Ninety Six
Thousand One Hundred Twenty Eight Dollars ($96,128)as
described in Exhibit 1. This transaction will change the
Infrastructure Reserve to $3,199,000.
SECTION 21. The Vehicle Replacement Fund is hereby
decreased by Four Hundred Eighty Nine Dollars ($489) as
described in Exhibit 1. This transaction will change the
Local Law Enforcement Block Grant Fund Balance to
$21,871,000.
SECTION 22. The Technology Fund is hereby increased
by One Hundred Twenty Nine Three Hundred Thirty Six Dollars
($129,336) as described in Exhibit 1. This transaction
will change the Technology Fund Balance to $19,637,000.
SECTION 23.The Retiree Medical Fund is hereby
increased by Fifty One Thousand Nine Hundred Sixty Four
Dollars ($51,964) as described in Exhibit 1. This
transaction will change the Retiree Medical Fund Fund
Balance to $26,285,000.
SECTION 24.Upon completion of the independent audit,
detailed financial statements reflecting the changes made
by the Sections 7 through 23 of this ordinance shall be
published as part of the annual financial report of the
City as required by Article III, Section 16, of the Charter
of the City of Palo Alto and in accordance with generally
accepted accounting principles.
SECTION 25. As specified in Section 2.28.080(a) of
the Palo Alto Municipal Code, a two-thirds vote of the City
Council is required to adopt this ordinance.
SECTION 26. The Council of the City of Palo Alto
hereby finds that the enactment of this ordinance is not a
project under the California Environmental Quality Act and,
therefore, no environmental impact assessment is necessary.
SECTION 24. As provided in Section 2.04.330 of the
Palo Alto Municipal Code, this ordinance shall become
effective upon adoption.
INTRODUCED AND PASSED:
ATTACHMENT A
Page of 66
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:
____________________________________________________
City Clerk Mayor
APPROVED AS TO FORM:APPROVED:
____________________________________________________
City Attorney City Manager
____________________________
Director of Administrative
Services
EXHIBIT 1
CITY OF PALO ALTO
FISCAL YEAR ENDING JUNE 30, 2011 BUDGET SUMMARY
DETAIL CHANGES TO BUDGET AMENDMENT ORDINANCE
Page 1 of 5
Fund/Dept Category Description
GENERAL FUND
various Salaries & Benefits Retiree ARC allocation (63,551)
various Salaries & Benefits Retiree medical reimbursement program 924,685
NON Salaries & Benefits Allocate attrition savings to General Fund depts 1,500,000
CMO Salaries & Benefits Allocate attrition savings to General Fund depts (50,700)
CLK Salaries & Benefits Allocate attrition savings to General Fund depts (28,950)
HR Salaries & Benefits Allocate attrition savings to General Fund depts (38,550)
AUD Salaries & Benefits Allocate attrition savings to General Fund depts (28,950)
ATT Salaries & Benefits Allocate attrition savings to General Fund depts (23,250)
ASD Salaries & Benefits Allocate attrition savings to General Fund depts (112,200)
PWD Salaries & Benefits Allocate attrition savings to General Fund depts (149,550)
PCE Salaries & Benefits Allocate attrition savings to General Fund depts (117,300)
POL Salaries & Benefits Allocate attrition savings to General Fund depts (425,100)
FIR Salaries & Benefits Allocate attrition savings to General Fund depts (334,950)
CSD Salaries & Benefits Allocate attrition savings to General Fund depts (132,750)
LIB Salaries & Benefits Allocate attrition savings to General Fund depts (57,750)
various Indirect charges Allocate print charges to General Fund depts 60,160
109 Indirect charges Allocate print charges to General Fund depts 154
191 Indirect charges Allocate print charges to General Fund depts 258
AUD Various Additional appropriations from other departments 50,000
FIR Various Additional appropriations from other departments 844,820
MGR Various Additional appropriations from other departments 64,000
POL Various Additional appropriations from other departments 440,000
ASD Various Allocate savings to other departments (210,349)
ATT Various Allocate savings to other departments (160,685)
CLK Various Allocate savings to other departments (68,055)
COU Various Allocate savings to other departments (24,480)
CSD Various Allocate savings to other departments (55,000)
HRD Various Allocate savings to other departments (182,050)
LIB Various Allocate savings to other departments (114,901)
PCE Various Allocate savings to other departments (250,820)
PWD Various Allocate savings to other departments (332,480)
TOTAL - EXPENSE 921,707
FUND BALANCING ENTRY
Budget Stabilization Reserve (921,707)$
12/8/2011
EXHIBIT 1
CITY OF PALO ALTO
FISCAL YEAR ENDING JUNE 30, 2011 BUDGET SUMMARY
DETAIL CHANGES TO BUDGET AMENDMENT ORDINANCE
Page 2 of 5
ENTERPRISE FUNDS
Utilities Administration Fund
UTL Salaries & Benefits Retiree ARC allocation (200,039)
UTL Indirect costs Indirect costs allocation for printing services 13,045
Total Utilities Administration Fund (186,994)
FUND BALANCING ENTRY
Increase to fund balance 186,994
Electric Fund
UTL Salaries & Benefits Retiree ARC allocation (162,440)
UTL Salaries & Benefits Retiree medical reimbursement program 162,440
UTL Indirect costs Indirect costs allocation for printing services 4,748
UTL CIP Completed and closed projects in FY 2011 (67,505)
Total Electric Fund (62,757)
FUND BALANCING ENTRY
Decrease to RSR - Electric Supply (59)
Increase to RSR - Electric Distribution 62,816
Fiber Optics Fund
UTL Salaries & Benefits Retiree ARC allocation (66,797)
UTL Indirect costs Indirect costs allocation for printing services 408
Total Fiber Optics Fund (66,389)
FUND BALANCING ENTRY
Increase to RSR - Fiber Optics Fund 66,389
Gas Fund
UTL Salaries & Benefits Retiree ARC allocation (76,161)
UTL Salaries & Benefits Retiree medical reimbursement program 76,161
UTL Indirect costs Indirect costs allocation for printing services 2,749
Total Gas Fund 2,749
FUND BALANCING ENTRY
Decrease to RSR - Gas Distribution (2,749)
12/8/2011
EXHIBIT 1
CITY OF PALO ALTO
FISCAL YEAR ENDING JUNE 30, 2011 BUDGET SUMMARY
DETAIL CHANGES TO BUDGET AMENDMENT ORDINANCE
Page 3 of 5
Wastewater Collection Fund
UTL Salaries & Benefits Retiree ARC allocation (37,711)
UTL Salaries & Benefits Retiree medical reimbursement program 37,711
UTL Indirect costs Indirect costs allocation for printing services 289
Total Wastewater Collection Fund 289
FUND BALANCING ENTRY
Decrease to RSR - Wastewater Collection Fund (289)
Water Fund
UTL Indirect costs Indirect costs allocation for printing services 2,903
Total Water Fund 2,903
FUND BALANCING ENTRY
Decrease to RSR - Water Fund (2,903)
Refuse Fund
PWD Salaries & Benefits Retiree ARC allocation (47,564)
PWD Salaries & Benefits Retiree medical reimbursement program 47,564
PWD Indirect costs Indirect costs allocation for printing services 6,299
Total Refuse Fund 6,299
FUND BALANCING ENTRY
Decrease to RSR - Refuse (6,299)
Storm Drain Fund
PWD Salaries & Benefits Retiree ARC allocation (14,771)
PWD Salaries & Benefits Retiree medical reimbursement program 14,771
PWD Indirect costs Indirect costs allocation for printing services 526
Total Storm Drain Fund 526
FUND BALANCING ENTRY
Decrease to RSR - Storm Drain Fund (526)
Wastewater Treatment Fund
PWD Salaries & Benefits Retiree ARC allocation (100,543)
PWD Salaries & Benefits Retiree medical reimbursement program 100,543
PWD Indirect costs Indirect costs allocation for printing services 2,892
Total Wastewater Treatment Fund 2,892
FUND BALANCING ENTRY
Decrease to RSR - Wastewater Treatment Fund (2,892)
12/8/2011
EXHIBIT 1
CITY OF PALO ALTO
FISCAL YEAR ENDING JUNE 30, 2011 BUDGET SUMMARY
DETAIL CHANGES TO BUDGET AMENDMENT ORDINANCE
Page 4 of 5
OTHER FUNDS
Community Development Block Grant
232 Salaries & Benefits Retiree ARC allocation (10,444)
Total Community Development Block Grant (10,444)
FUND BALANCING ENTRY
Increase to Fund Balance 10,444
University Avenue Parking Permit Fund
236 Revenue Administrative citation and permit revenue 201,821
236 Salary & Benefits Hourly salary 11,222
236 Contract Services Facilities repair 5,713
Total University Avenue Parking Permit Fund 184,886
FUND BALANCING ENTRY
Increase to Fund Balance 184,886
Recovery Act - JAG
251 Contract Services Instruction and training expense 5,500
Total Recovery Act - JAG 5,500
FUND BALANCING ENTRY
Decrease to Fund Balance (5,500)
Capital Projects Fund
471 Indirect charges Printing charges to Capital Improvement 66
471 Salaries & Benefits Retiree ARC allocation (96,194)
Total Capital Projects Fund (96,128)
FUND BALANCING ENTRY
Increase to Fund Balance 96,128
Vehicle Replacement Fund
681 Salaries & Benefits Retiree ARC allocation (20,764)
681 Salaries & Benefits Retiree medical reimbursement program 20,764
681 Indirect charges Printing charges to Vehicle Replacement Fund 489
Total Vehicle Replacement Fund 489
FUND BALANCING ENTRY
Decrease to Fund Balance (489)
12/8/2011
EXHIBIT 1
CITY OF PALO ALTO
FISCAL YEAR ENDING JUNE 30, 2011 BUDGET SUMMARY
DETAIL CHANGES TO BUDGET AMENDMENT ORDINANCE
Page 5 of 5
Technology Fund
682 Indirect charges Printing charges to Tech Fund 464
682 Salaries & Benefits Retiree ARC allocation (49,143)
682 Salaries & Benefits Retiree medical reimbursement program 49,143
682 CIP Completed and closed projects in FY 2011 (129,800)
Total Technology Fund (129,336)
FUND BALANCING ENTRY
Increase to Fund Balance 129,336
Print and Mail Fund
683 Reimbursements Additional department charges 95,450
683 Salaries & Benefits Retiree ARC allocation (1,516)
683 Salaries & Benefits Retiree medical reimbursement program 1,516
683 Contract Svcs Additional contract expense 95,450
Total Print and Mail Fund -
FUND BALANCING ENTRY
N/A -
Retiree Medical Fund
694 Miscellaneous Department Charges - Retiree ARC 913,099
694 Salaries & Benefits Retiree ARC department charges 913,098
694 Salaries & Benefits Retiree ARC & reimbursement program 51,965
Total Print and Mail Fund (51,964)
FUND BALANCING ENTRY
Increase to Fund Balance 51,964$
12/8/2011
Page 1 of 3
FY 2011 REAPPROPRIATION REQUESTS
SUMMARY OF REQUESTS
Total Requests Total Recommended
GENERAL FUND $483,290 $483,290
ENTERPRISE FUND $1,400,221 $1,400,221
INTERNAL SERVICE FUND $0 $0
TOTAL $1,883,511 $1,883,511
$
AMOUNT INTENDED USE
COMMENTS/REASONS
FOR NOT COMPLETING IN FY 2011 STATUS
City Manager’s Office
$68,890 Rail Project This reappropriation is being requested for costs
related to the Rail Project which is a multi-year
project without an identified source of funding.
Council approved the appropriation of funds from
the FY 2011 Council contingency.$68,890
represents the balance remaining from those
funds.
Recommended $68,890. There is
sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
$94,000 Various projects See attached (Attachment 2).Recommended $94,000. There is
sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
Planning Department
$221,800 Development Center
Blueprint Process
This reappropriation is being requested for
contract services related to the Development
Center Blueprint Process, a multi-year project.In
FY 2011, CMR1442 increased the budget for the
Blueprint Process by $115,000 for contract staff
and $113,233 for salaries and benefits. A
delayed start to the contracting effort resulted in
remaining budget that will be needed
immediately and was not included in the FY2012
budget proposal.
Recommended $221,800. There
is sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
Administrative Services
$68,600 Fee Study This reappropriation is being requested to hire a
consultant to update the cost allocation plan,
municipal fee schedule, and development impact
fees. Development of the RFP was delayed due to
staffing shortages. The RFP is now completed
and will be released early in Fiscal Year 2012.
Recommended $68,600.There is
sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
Fire Department
Exhibit 2
Page 2 of 3
$
AMOUNT INTENDED USE
COMMENTS/REASONS
FOR NOT COMPLETING IN FY 2011 STATUS
$30,000 Fire Chief Recruitment This reappropriation is being requested for the
funding of the recruitment of a Fire Chief.
CMR1442 added a budget of $50,000 for this
effort. The bid process is not yet complete and a
specific contract award timeframe has not yet
been established. Concurrent experience with
other recruitment indicates that $30,000 is more
than adequate for this activity.
Recommended $30,000. There is
sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
Utilities Department
$100,000 Organizational
Assessment
This reappropriation is being requested for the
funding of an organizational assessment to review
the services Utilities delivers and how to best
deliver these services. It will include evaluating
utility industry trends and challenges.This
project was funded mid-year 2011.Utilities is
coordinating the drafting of the scope and does
not have $100,000 in its budget for FY2012 to
cover this expense if not reapprorpriated..
Recommended $100,000. There
is sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
Utilities Department-Electric Fund
$250,000 Electric Efficiency
Financing Program
This reappropriation is being requested to fund
rebates for customers who complete electric
energy efficiency projects. There are many
projects in process, but they did not complete by
June 30, 2011. Recently updated Council goals
are expected to increase the number of efficiency
rebates in FY 2012.These energy efficiency
projects support Council’s environmental
sustainability objectives.
Recommended $250,000. There
is sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
Utilities Department –Gas Fund
$230,000 Energy Efficiency
Projects
This reappropriation is being requested to fund
rebates for customers who complete energy
efficiency projects related to gas. Utilities expects
to work with new vendors to increase the number
of rebates issued. Funds are expected to be
exhausted in FY 2012.
Recommended $230,000.There
is sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
$62,000 Energy Risk
Management
This reappropriation is being requested to
contract for energy risk management services.
These services had been part of the Energy Risk
Management position. Duties will be undertaken
by contractor, alongside the .5 FTE Senior
Financial Analyst in the FY2012 budget, saving
the City an estimated $50,000 to $100,000 per
year.
Recommended $62,000. There is
sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
Page 3 of 3
Public Works Department-Storm Drainage Fund
$758,221 Storm Drain Innovative
Improvements
This reappropriation is being requested for
innovative storm drain improvements.These
funds must be reappropriated because they were
specifically earmarked for innovative storm drain
improvements per the 2005 Storm Drainage
ballot measure approved by Palo Alto property
owners. These funds have been budgeted for a
stormwater rebate program that offers incentives
to residents and businesses to reduce stormwater
runoff, but the rebate program has not generated
sufficient demand to exhaust funds. Staff has
proposed to utilize the unused funds to fund the
Southgate Neighborhood Storm Drain
Improvements CIP project, which may include
permeable pavement, infiltration devices, and/or
an underground cistern that could supplement
irrigation water demands for Peers Park.
Recommended $758,221. There
is sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
PROJECT NUMBER PROJECT TITLE
PROJECT
BALANCE
General Fund
CC-10000 Replacement of Cubberley Gym B Bleachers 0
PE-04014 Animal Shelter Expansion & Renovation 0
PE-07007 Cubberley Turf Renovation 0
PE-08005 Municipal Service Center Resurfacing 0
PE-10006 Bridge Rail, Abutment, and Deck Repair 0
PL-06001 Adobe Creek Bicycle Bridge Replacement 0
Total $0
Internal Service Fund
TE-02016 Enterprise Resourse Planning 102,526
TE-06002 9-1-1 Emergency Phone System Upgrade 27,274
TE-07001*Emergency Notification System 0
TE-07003 Bill and Payment Processing 0
Total $129,800
Electric Fund
EL-11005 Rebuild UG Dist 22 67,505
Total $67,505
Gas Fund
GS-00011*Compress Natural Gas 0
GS-03010*CNG Seq Fuel System 0
Total $0
Wastewater Collection Fund
WC-03003*WC Reh/Aug. Prj 16 0
Total $0
Wastewater Treatment Fund
WQ-04010*Replacement of Existing Reclaimed Water Pipes 0
Total $0
* Projects are closed. No expenditures were incurred in the current fiscal year.
Exhibit 3
CAPITAL IMPROVEMENT PROGRAM PROJECTS
Completed and Closed in FY 2011
City of Palo Alto
1
EXHIBIT 4
GENERAL FUND SUMMARY ($000s)
FY 2011 FY 2011 FY 2011 FY 2011 FY 2011 FY 2011 FY 2011
Adopted Adjusted CAFR Basis Allocated Encum+Budgetary Variance
Budget Budget Rev/Exp Charges Reapprop Rev/Exp Adj Budget
Revenues
Sales Taxes 18,218$ 19,507$ 20,746$ -$ n/a 20,746$ 1,239$
Property Taxes 25,907 25,323 25,688 - n/a 25,688 365
Transient Occupancy Tax 7,021 7,400 8,082 - n/a 8,082 682
Documentary Tranfer Tax 3,613 4,002 5,167 - n/a 5,167 1,165
Utility User Tax 11,429 10,824 10,851 - n/a 10,851 27
Other Taxes and Fines 2,330 2,137 2,129 - n/a 2,129 (8)
Charges for Services 20,008 20,924 22,390 - n/a 22,390 1,466
Permits and Licenses 4,593 5,102 5,058 - n/a 5,058 (44)
Return on Investment 1,646 1,337 565 - n/a 565 (772)
Rental Income 13,716 13,776 14,264 - n/a 14,264 488
From Other Agencies 155 221 295 - n/a 295 74
Charges to Other Funds 10,622 10,681 -11,211 n/a 11,211 530
Other Revenues 1,490 1,584 2,117 - n/a 2,117 533
Total Revenues 120,748 122,818 117,352 11,211 n/a 128,563 5,745
Add: Operating Transfers In 18,684 18,677 17,932 n/a 17,932 (745)
Prior Year Encum & Reapprop -3,963 -3,963 n/a 3,963 -
Total Source of Funds 139,432 145,458 135,284 15,174 n/a 150,458 5,000
Expenditures
City Attorney 2,369 2,812 2,241 98 469 2,808 4
City Auditor 982 1,081 905 41 135 1,081 -
City Clerk 1,093 1,270 1,159 86 12 1,257 13
City Council 142 193 183 - 9 192 1
City Manager 2,178 2,455 2,180 119 157 2,456 (1)
Administrative Services 6,293 6,456 5,652 614 180 6,446 10
Community Services 20,032 20,530 15,885 4,196 437 20,518 12
Fire 27,007 29,014 26,127 2,573 312 29,012 2
Human Resources 2,817 2,677 2,361 211 94 2,666 11
Library 6,609 6,733 5,630 879 213 6,722 11
Planning 9,320 10,427 8,783 772 861 10,416 11
Police 30,579 31,288 27,959 3,052 275 31,286 2
Public Works 13,084 13,846 10,040 3,072 730 13,842 4
Non-Departmental/School Site 5,970 6,899 7,955 - 3 7,958 (1,059)
Total Expenditures 128,475 135,681 117,060 15,713 3,887 136,660 (979)
Add: Operating Transfers Out 10,924 11,224 11,000 - - 11,000 224
Total Use of Funds 139,399 146,905 128,060 15,713 3,887 147,660 (755)
Excess (deficiency) of revenues
over (under) expenditures,
budgetary basis 33$ (1,447)$ 7,224$ (539)$ (3,887)$ 2,798 4,245$
CAFR Reconciliation:Current year encumbrances/reappropriations 3,887
Prior year encumbrances/reappropriations (3,963)
CAFR Excess of revenues over expenditures, GAAP basis 2,722$
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Water sales 25,841 28,801 26,115 (2,686)
Other revenues 3,113 2,572 2,831 259
Bond Proceeds 34,958 - - -
Bonded Reappropriations/Enc - 28,853 28,853 -
Restricted Bond Proceeds - 2,358 2,358 -
Reappropriations / Enc 20,113 10,639 10,639 -
TOTAL REVENUE 84,025 73,223 70,796 (2,427)
EXPENSES
Purchases 9,061 12,845 10,678 2,167
Other Expenses 13,810 13,194 14,398 (1,204)
TOTAL OPERATING EXPENSES 22,871 26,039 25,076 963
Capital Expenses 49,155 48,881 50,917 (2,036)
Principal Payments 362 1,201 1,201 -
TOTAL EXPENSES 72,388 76,121 77,194 (1,073)
TO/(FROM) RESERVES 11,637 (2,898) (6,398) (3,500)
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Electric retail sales 111,140 111,380 109,950 (1,430)
Electric wholesale sales - - - -
Other revenues 19,535 17,351 15,915 (1,436)
Bond Proceeds - - - -
Reappropriations / Enc 10,900 13,393 13,393 -
TOTAL REVENUE 141,575 142,124 139,258 (2,866)
EXPENSES
Purchases 68,713 74,130 61,247 12,883
NCPA & TANC Debt Svc 7,819 8,849 7,243 1,606
Other Expenses 44,870 47,069 42,570 4,499
TOTAL OPERATING EXPENSES 121,402 130,048 111,060 18,988
Capital Expenses 18,550 19,391 21,020 (1,629)
Principal Payments 100 100 100 -
TOTAL EXPENSES 140,052 149,539 132,180 17,359
TO/(FROM) RESERVES 1,523 (7,415) 7,078 14,493
EXHIBIT 5
ELECTRIC FUND
WATER FUND ($000)
EXHIBIT 5
WATER FUND ($000)
EXHIBIT 5
WATER FUND ($000)
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Revenues 3,593 3,312 3,660 348
Reappropriations / Enc 607 921 921 -
TOTAL REVENUE 4,200 4,233 4,581 348
EXPENSES
Operating Expenses 1,510 1,909 1,575 334
TOTAL OPERATING EXPENSES 1,510 1,909 1,575 334
Capital Expenses 856 1,119 1,146 (27)
TOTAL EXPENSES 2,366 3,028 2,721 307
TO/(FROM) RESERVES 1,834 1,205 1,860 655
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Gas retail sales 43,502 43,993 42,855 (1,138)
Gas wholesale sales - - - -
Other revenues 3,248 7,694 7,586 (108)
Reappropriations / Enc 12,063 10,042 10,042 -
TOTAL REVENUE 58,813 61,729 60,483 (1,246)
EXPENSES
Purchases 22,529 24,619 21,464 3,155
Other Expenses 16,191 23,809 22,778 1,031
TOTAL OPERATING EXPENSES 38,720 48,428 44,242 4,186
Capital Expenses 14,284 18,115 18,142 (27)
Principal Payments 443 459 459 -
TOTAL EXPENSES 53,447 67,002 62,843 4,159
TO/(FROM) RESERVES 5,366 (5,273) (2,360) 2,913
FIBER OPTICS FUND
GAS FUND
EXHIBIT 5
WATER FUND ($000)
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Revenues 15,914 15,999 16,129 130
Reappropriations / Enc 7,122 8,789 8,789 -
TOTAL REVENUE 23,036 24,788 24,918 130
EXPENSES
Sewer Treatment Exp.6,519 7,499 7,414 85
Operating Expenses 4,244 5,305 4,898 407
TOTAL OPERATING EXPENSES 10,763 12,804 12,312 492
Capital Expenses 11,441 12,823 13,417 (594)
Principal Payments 61 65 65 -
TOTAL EXPENSES 22,265 25,692 25,794 (102)
TO/(FROM) RESERVES 771 (904) (876) 28
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Operating Revenues 17,550 20,590 20,932 342
Restricted Bond Proceeds - - - -
Loan Proceeds 4,528 3,972 3,972 -
Reappropriations / Enc 26,298 22,043 22,043 -
Bonded Reappro/Encum - - - -
TOTAL REVENUE 48,376 46,605 46,947 342
EXPENSES
Operating Expenses 18,122 19,955 18,385 1,570
TOTAL OPERATING EXPENSES 18,122 19,955 18,385 1,570
Capital Expenses 26,654 12,835 12,610 225
Principal Payments 384 400 400 -
TOTAL EXPENSES 45,160 33,190 31,395 1,795
TO/(FROM) RESERVES 3,216 13,415 15,552 2,137
WASTEWATER TREATMENT FUND
WASTEWATER COLLECTION FUND
EXHIBIT 5
WATER FUND ($000)
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Revenues 29,163 33,696 31,605 (2,091)
Reappropriations / Enc 3,021 2,836 2,836 -
TOTAL REVENUE 32,184 36,532 34,441 (2,091)
EXPENSES
Payments to GreenWaste 12,478 13,205 12,529 676
Other Expenses 19,582 20,488 18,940 1,548
TOTAL OPERATING EXPENSES 32,060 33,693 31,469 2,224
Capital Expenses 2,207 3,669 3,079 590
TOTAL EXPENSES 34,267 37,362 34,548 2,814
TO/(FROM) RESERVES (2,083) (830) (107) 723
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Revenues 5,815 6,058 6,286 228
Reappropriations / Enc 2,305 2,408 2,408 -
TOTAL REVENUE 8,120 8,466 8,694 228
EXPENSES
Operating Expenses 3,292 3,799 3,349 450
TOTAL OPERATING EXPENSES 3,292 3,799 3,349 450
Capital Expenses 3,039 4,278 3,561 717
Principal Payments 405 430 430 -
TOTAL EXPENSES 6,736 8,507 7,340 1,167
TO/(FROM) RESERVES 1,384 (41) 1,354 1,395
STORM DRAINAGE FUND
REFUSE FUND
EXHIBIT 5
WATER FUND ($000)
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Revenues -- - -
Reappropriations / Enc -- - -
TOTAL REVENUE - - - -
EXPENSES
Operating Expenses -- 118 (118)
TOTAL OPERATING EXPENSES - - 118 (118)
Capital Expenses -- - -
Principal Payments -- - -
TOTAL EXPENSES - - 118 (118)
TO/(FROM) RESERVES - - (118) (118)
AIRPORT FUND
FISCAL YEAR 2011 Water Electric Fiber Optics Gas WWC WWT Refuse Storm Drain Airport Total
Beginning Reserves $18,037 $119,991 $9,270 $19,548 $7,772 ($10,226)($4,277)$286 $0 $160,401
To (From) Reserves (6,398)7,078 1,860 (2,360)(876)15,552 (107)1,354 (118)15,985
Ending Reserves 11,639 127,069 11,130 17,188 6,896 5,326 (4,384)1,640 (118)176,386
Adj Budgeted Reserves 15,170 119,711 8,256 19,599 7,817 (36)1,902 125 0 172,544
% of Budgeted Reserves 77%106%135%88%88%-14794%-230%1312%102%
FISCAL YEAR 2011 Water Electric Fiber Optics Gas WWC WWT Refuse Storm Drain Airport Total
Rate Stabilization
General RSR $10,639 $10,130 $5,896 $3,020 ($5,049)$1,640 ($118)$26,158
Supply RSR 57,091 8,789 $65,880
Distribution RSR 9,240 7,399 $16,639
Total RSR 10,639 66,331 10,130 16,188 5,896 3,020 (5,049) 1,640 (118) $108,677
Emergency Plant Replace 1,000 1,000 1,000 1,000 1,000 1,747 $6,747
Calaveras 55,558 $55,558
Underground Loan 736 $736
Notes and Loans 559 $559
Landfill Corrective Action 665 $665
Shasta rewind Loan $0
Central Valley Project 305 $305
Public Benefit Program 3,139 $3,139
Ending Reserves 11,639 127,069 11,130 17,188 6,896 5,326 (4,384) 1,640 (118) 176,386
FISCAL YEAR 2011 Water Electric Fiber Optics Gas WWC WWT Refuse Storm Drain Airport Total
Beginning RSR $17,037 $54,339 $8,270 $18,548 $6,772 ($12,386)($4,935)$286 $0 $87,931
To(from) RSR (6,398) 11,992 1,860 (2,360) (876) 15,406 (114) 1,354 (118) 20,746
Ending RSR 10,639 66,331 10,130 16,188 5,896 3,020 (5,049) 1,640 (118) 108,677
RSR Minimum 4,300 38,371 609 9,379 2,156 2,990 2,614 N/A N/A 60,419
RSR Maximum 8,600 76,741 1,522 18,759 4,311 5,980 5,228 N/A N/A 121,141
RSR % of Maximum 124%86%666%86%137%51%-97%N/A N/A 90%
EXHIBIT 6
RATE STABILIZATION RESERVE
RESERVE SUMMARY ($000)
RESERVE DETAIL
Page 1 of 1 12/2/2011
2010-2011
Comprehensive Annual
Financial Report
Fiscal Year Ended June 30, 2011
CITY OF PALO ALTO, CALIFORNIA
City of Palo Alto
California
Prepared by: Administrative Services Department
Comprehensive
Annual Financial
Report
For the fiscal year ended
June 30, 2011
This page is intentionally left blank.
CITY OF PALO ALTO
For the Year Ended June 30, 2011
Table of Contents
Page
INTRODUCTORY SECTION:
Transmittal Letter .................................................................................................................................... i
City Officials .......................................................................................................................................... v
Organizational Structure ........................................................................................................................ vi
Administrative Services Department Organization .............................................................................. vii
GFOA Certificate of Achievement for Excellence in Financial Reporting ......................................... viii
FINANCIAL SECTION:
Independent Auditor’s Report ................................................................................................................ 1
Management’s Discussion and Analysis
(Required Supplementary Information – Unaudited) ...................................................................... 3
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Assets .......................................................................................................... 24
Statement of Activities ............................................................................................................ 25
Governmental Fund Financial Statements:
Balance Sheet .......................................................................................................................... 28
Reconciliation of the Balance Sheet of Governmental Funds to
the Statement of Net Assets - Governmental Activities .................................................... 29
Statement of Revenues, Expenditures and Changes in Fund Balances ................................... 30
Reconciliation of the Statement of Revenues, Expenditures and Changes
in Fund Balances of Governmental Funds to the Statement of Activities – Governmental
Activities ........................................................................................................................... 31
Statement of Revenues, Expenditures and Changes in Fund Balance –
Budget and Actual – General Fund ................................................................................... 32
Proprietary Fund Financial Statements:
Statement of Fund Net Assets ................................................................................................. 34
Statement of Revenues, Expenses and Changes in Fund Net Assets ...................................... 36
Statement of Cash Flows ......................................................................................................... 38
Fiduciary Funds Financial Statement:
Statement of Fiduciary Net Assets .......................................................................................... 42
Index to the Notes to the Basic Financial Statements .......................................................................... 43
Notes to the Basic Financial Statements .............................................................................................. 45
CITY OF PALO ALTO
For the Year Ended June 30, 2011
Table of Contents (Continued)
Page
Supplementary Information:
Non-Major Governmental Funds:
Combining Balance Sheet ..................................................................................................... 101
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances .............................................................................................. 102
Non-Major Special Revenue Funds:
Combining Balance Sheet ..................................................................................................... 104
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances .............................................................................................. 106
Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances – Budget and Actual ............................................................ 108
Non-Major Debt Service Funds:
Combining Balance Sheet ..................................................................................................... 114
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances .............................................................................................. 115
Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances – Budget and Actual ............................................................ 116
Non-Major Permanent Fund:
Schedule of Revenues, Expenditures and
Changes in Fund Balances – Budget and Actual ............................................................ 120
Internal Service Funds:
Combining Statement of Fund Net Assets ............................................................................ 122
Combining Statement of Revenues, Expenses and
Changes in Fund Net Assets ........................................................................................... 123
Combining Statement of Cash Flows .................................................................................... 124
Fiduciary Funds:
Statement of Changes in Assets and Liabilities– All Agency Funds .................................... 126
STATISTICAL SECTION:
Financial Trends:
Net Assets by Component ............................................................................................................ 129
Changes in Net Assets ................................................................................................................. 130
Fund Balances of Governmental Funds ....................................................................................... 132
Changes in Fund Balance of Governmental Funds ...................................................................... 134
CITY OF PALO ALTO
For the Year Ended June 30, 2011
Table of Contents (Continued)
Page
Revenue Capacity:
Electric Daily Loads and Top Customers by Usage .................................................................... 136
Electric Operating Revenue by Source ........................................................................................ 137
Assessed Value of Taxable Property ........................................................................................... 138
Property Tax Rates, All Overlapping Governments .................................................................... 139
Property Tax Levies and Collections ........................................................................................... 140
Principal Property Taxpayers ....................................................................................................... 141
Assessed Valuation and Parcels by Land Use ............................................................................. 142
Per Parcel Assessed Valuation of Single Family Homes ............................................................. 143
Debt Capacity:
Ratios of Outstanding Debt by Type ........................................................................................... 144
Computation of Direct and Overlapping Debt ............................................................................. 145
Computation of Legal Bonded Debt Margin ............................................................................... 146
Revenue Bond Coverage .............................................................................................................. 147
Demographic and Economic Information:
Taxable Transactions by Type of Business .................................................................................. 148
Demographic and Economic Statistics ........................................................................................ 149
Principal Employers ..................................................................................................................... 150
Operating Information:
Full-Time Equivalent City Government Employees by Function ............................................... 151
Operating Indicators by Function/Program .................................................................................. 152
Capital Asset Statistics by Function/Program .............................................................................. 154
Insurance Coverage ...................................................................................................................... 156
SINGLE AUDIT SECTION:
Index to the Single Audit Report ................................................................................................. 157
Independent Auditor’s Report on Internal Control over Financial Reporting and
on Compliance and Other Matters Based On an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards ......................................... 159
Independent Auditor’s Report on Compliance with Requirements That Could Have a
Direct and Material Effect on Each Major Program and on Internal Control
Over Compliance in Accordance with OMB Circular A-133 ............................................... 161
Schedule of Expenditures of Federal Awards .............................................................................. 163
Notes to the Schedule of Expenditures of Federal Awards .......................................................... 164
Section I – Summary of Auditor’s Results .................................................................................. 165
Section II – Financial Statement Findings ................................................................................... 166
Section III – Federal Award Findings and Questioned Costs ...................................................... 170
Section IV – Status of Prior Year Findings and Questioned Costs .............................................. 176
Introduction
i
City of Palo Alto
Office of the City Manager
Transmittal Letter…………………………………
December 6, 2011
THE HONORABLE CITY COUNCIL
Palo Alto, California
Attention: Finance Committee
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED JUNE 30, 2011
Members of the Council and Citizens of Palo Alto:
Transmittal: The Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30,
2011, is submitted for Council review in accordance with Article III, Section 16 and Article IV, Section
13 of the City of Palo Alto Charter and is published as a matter of public record for interested citizens.
This transmittal letter provides information regarding the economy and the governing structure in Palo
Alto. An overview of the City’s financial activities for the fiscal year is discussed in detail in the
Management’s Discussion and Analysis section of the CAFR. While the independent auditor has
expressed opinions on the basic financial statements contained in this report, management takes sole
responsibility for the completeness and reliability of the information contained in this report, based upon
a comprehensive framework of internal control that it has established for this purpose. The objective of
internal controls is to provide reasonable, rather than absolute, assurance that the CAFR information is
accurate in all material respects.
INDEPENDENT AUDIT
The City of Palo Alto’s financial statements have been audited by Macias Gini & O’Connell LLP, a firm
of licensed certified public accountants. The goal of the audit is to obtain reasonable assurance that the
financial statements are free of material misstatement. Macias Gini & O’Connell LLP concluded, based
on the audit, that there was a reasonable basis for rendering an unqualified opinion for the fiscal year
ended June 30, 2011, and that the financial statements are fairly presented in conformity with generally
accepted accounting principles (GAAP). The independent auditor’s report is presented as the first
component of the financial section of this report.
In addition, Macias Gini & O’Connell LLP also conducts the federally mandated “Single Audit” designed
to meet the special needs of federal grantor agencies. The standards governing the Single Audit require
the independent auditor to report on the fair presentation of the financial statements, government’s
internal controls and compliance with legal requirements. These reports are available in the Single Audit
section of the CAFR.
Introduction
ii
THE PALO ALTO ECONOMY
Local Trends: The City of Palo Alto, population 64,417, is a largely “built-out” community in the heart
of Silicon Valley and the greater San Francisco and San Jose areas. The adjacent Stanford University, one
of the premier institutions of higher education in the nation, has produced much of the talent that founded
many successful high-tech companies in Palo Alto and Silicon Valley. With varied and relatively stable
employers such as Stanford University, the Stanford Medical Center, the Palo Alto Medical Foundation,
the Palo Alto Unified School District, the Stanford Shopping Center and businesses such as Hewlett-
Packard Company, VMware, Facebook, and Space Systems Loral, Palo Alto has enjoyed diverse
employment and revenue bases.
Like jurisdictions throughout the country, the City was impacted by the “Great Recession,” and is now
showing signs of slow recovery. At the end of Fiscal Year (FY) 2011, the City’s unemployment rate had
dropped to 5.5 percent from 6.1 percent the prior year, as compared to Santa Clara County’s
unemployment rate of 10.3 percent, and the state’s rate of 12.4 percent.
Property taxes in FY 2011 were marginally lower than in FY 2010. This was a consequence of
commercial property valuation appeals many of which have not been processed and will impact FY 2012
revenue levels. In addition, the City has seen a falloff in its telephone utility user tax. Changes in
provider billing practices are believed to cause this revenue source decline.
The City believes it will take multiple years for revenue sources to fully recover from the effects of the
“Great Recession.” This perspective is reinforced by recent volatility in the stock market and challenges
to the developed and developing economies.
The City also faces rising benefit costs and a significant backlog in infrastructure investment. As with
past economic downturns, the City is proactively taking steps to align expenses and revenues through
service and program cuts, revenue enhancements, and employee compensation savings. The City Council
adopted a General Fund budget for FY 2012 that eliminated a projected deficit of $3.1 million, after
implementing a total of $14.3 million in structural changes during the prior two fiscal years. The City’s
non-safety employees have accepted a number of cost-sharing concessions, along with a reduced
retirement benefit for new employees. The City is in continued negotiations with public safety employees
to seek comparable concessions.
Employment Trends: Palo Alto is home to a strong mix of small, medium, and large firms.
Employment opportunities within the City are much sought after and include: education at Stanford
University, high technology at the Stanford Research Park, and health care at two medical facilities of
national stature.
Numerous institutions that have more than 1,000 employees include: the University, the Veterans Affairs
Palo Alto Health Care facility, the Palo Alto Medical Foundation, Hewlett Packard, the Palo Alto Unified
School District, and the City of Palo Alto.
Real Estate Market: In its most recent annual report, the Santa Clara County Assessor’s Office noted
that Santa Clara County’s 2011/2012 assessment roll increased by just under 1%, from $296 billion to
$299 billion, and that “compared to the last three years, this very small increase in property assessments
provides encouraging news, and hopefully signifies the beginning of a positive trend out of the depths of
the Great Recession.” There are, however, significant geographic differences within the County. For
example, Los Altos Hills and Los Altos had increases of 3.81 and 3.59 percent, respectively; Palo Alto’s
roll increased by 2.39 percent; but Milpitas experienced a 3.48 percent decline.
Introduction
iii
With its highly regarded school district, well-educated and high-income population, cultural amenities,
and the presence of Stanford University, the City’s real estate values are typically shielded from major
price swings. However, Palo Alto experienced just 0.36 percent growth in 2011 after 3.8 percent growth
in 2010, which in turn was down from its 11.43 percent growth in FY 2009.
Long Range Financial Forecast: The City of Palo Alto produces a 10 year Long Range Financial
Forecast (LRFF) annually. This comprehensive report analyzes, for example, local, state, and federal
economic conditions; short and long-term revenue and expense trends; expense challenges such as
funding retiree medical benefits; revenue opportunities such as instituting an occupancy tax increase; and
infrastructure needs. The forecast is designed to highlight finance issues which the City can address
proactively. Moreover, it is a tool that allows policymakers an opportunity to prioritize funding needs
over time.
Delivered to Council in December or January, this forecast sets the tone and themes for the annual budget
process that begins in January. The forecast is one of the many tools and reports the City uses for
financial planning. These include, for example: quarterly revenue and expense analysis, midyear budget
adjustments, a five-year capital improvement plan, quarterly sales tax reports, and actuarial reports to
ascertain long-term retiree liabilities. The City is conscientious and pro-active in financial planning.
It is worthwhile to note that during the last two economic downturns, the City has balanced its annual
budget via expenditure reductions or revenue enhancements and has not drawn down reserves.
Cash and Investments: The City of Palo Alto invests its excess cash prudently and has adopted an
investment policy as prescribed by State law. The policy states that investments are to be made in the
following priority order: safety, liquidity, and yield. As of June 30, 2011, the City had $373 million (par
value) in its portfolio. Its principal investments were in agency securities, treasuries, and a State of
California investment pool. The City’s investment practice is to buy securities and hold them to maturity
to avoid principal loss. Staff provides a quarterly report of investments for Council review. During FY
2011, staff complied with all requirements of the City’s investment policy.
THE PALO ALTO GOVERNMENT
As a charter city delivering a full range of municipal services and public utilities under the council-
manager form of government, Palo Alto offers an outstanding quality of life for its residents. The
independent Palo Alto Unified School District (PAUSD) has achieved state and national recognition for
the excellence of its programs. The City has dedicated 4,000 acres of open space to parks and wildlife
preserves. Public facilities include five libraries, four community centers, a cultural arts center, an adult
and children’s theater, a junior museum and zoo, and a golf course. The City provides a diversity of
human services for seniors and youths, an extensive continuing education program, concerts, exhibits,
team sports and special events.
City Council: The Council consists of nine members elected at-large for four-year, staggered terms. At
the first meeting of each calendar year, the Council elects a Mayor and Vice-Mayor from its membership,
with the Mayor having the duty of presiding over Council meetings. The Council is the appointing
authority for the positions of City Manager, City Attorney, City Clerk, and City Auditor, and those
positions report directly to the City Council.
Finance Committee: While retaining the authority to approve all actions, the City Council has
established a subcommittee to review financial matters. Staff provides the CAFR, the results of external
and internal audits, periodic budget-versus-actual, and investment and performance measure reports to the
Finance Committee and Council to assist in their evaluation of the City’s financial performance.
Introduction
iv
City Manager: The City Manager directs administrative services, human resources, libraries, public
works, planning and community environment, public safety, community services departments and also
the municipal electric, water, gas, fiber optics, wastewater collection, wastewater treatment, storm
drainage, and refuse utilities (the utilities represent almost two-thirds of the City’s revenues).
SUMMARY
Awards: During the past year, the City received an award for the prior fiscal year CAFR from the
Government Finance Officers Association (GFOA) for “excellence in financial reporting.” The 2011
CAFR has been submitted to the GFOA award program and management believes that, once again, it will
meet the criteria for this distinguished financial reporting award.
Acknowledgment: This CAFR reflects the hard work, talent and commitment of the staff members of
the Administrative Services Department. This document could not have been accomplished without their
efforts and each contributor deserves sincere appreciation. Management wishes to acknowledge the
support of Laura Kuryk, Accounting Manager, and the Senior Accountants, Staff Accountants, Payroll
Analysts and Accounting Specialists for the high level of professionalism and dedication they bring to the
City of Palo Alto. Management would also like to express its appreciation to Macias Gini & O’Connell
LLP, the City’s independent external auditors, who assisted and contributed to the preparation of this
Comprehensive Annual Financial Report.
Special acknowledgment must be given to the City Council Finance Committee for its support and
interest in directing the financial affairs of the City in a responsible, professional and progressive manner.
Respectfully submitted,
LALO PEREZ, JAMES KEENE,
Administrative Services Director City Manager
Introduction
v
City of Palo Alto City Officials ………………
Finance Committee
Greg Scharff, Chair
Greg Schmid
Nancy Shepherd
Yiaway Yeh
Policy and Services Committee
Gail A. Price, Chair
Pat Burt
Karen Holman
Larry Klein
Council-Appointed Officers
City Manager
James Keene
City Attorney
Molly Stump
City Clerk
Donna Grider
City Auditor
Michael Edmonds, Interim
Pat Burt
Karen Holman
Larry Klein
Gail A. Price
Greg Scharff
Greg Schmid
City Council
Sid Espinosa, Mayor
Yiaway Yeh, Vice-Mayor
Nancy Shepherd
Introduction
vi
Assistant City Manager
Pam Antil
City Attorney
Molly Stump
City Manager
James Keene
City Auditor
Michael Edmonds, Interim
City Clerk
Donna Grider
Community Services Department
Greg Betts, Director
Administrative Services Department
Lalo Perez, Director
Fire Department
Dennis Burns, Acting Chief
Human Resources Department
Sandra Blanch, Acting Director
Police Department
Dennis Burns, Chief
Planning & Community Environment Dept
Curtis Williams, Director
Utilities Department
Valerie Fong, Director
Public Works Department
Mike Sartor, Acting Director
Library Department
Vacant
City of Palo Alto Organization ………………
Palo Alto Residents
City Council
Introduction
vii
Administrative Services Organization ………
Administrative Division Treasury Division
Accounting Division Budget Division
Information Technology Division Real Estate Division
Administrative Services Department
Mission Statement
To provide proactive administrative and technical support to
City departments and decision makers, and to safeguard and
facilitate the optimal use of City resources.
Purchasing Division
Introduction
viii
Government Finance Officers Association of the
United States and Canada – Award ……
1
INDEPENDENT AUDITOR’S REPORT
Honorable Mayor and City Council
City of Palo Alto, California
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, each major fund, and the aggregate remaining fund information of the City of Palo Alto,
California (City), as of and for the year ended June 30, 2011, which collectively comprise the City’s basic
financial statements as listed in the table of contents. These financial statements are the responsibility of
the City’s management. Our responsibility is to express opinions on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the City’s internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and the
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities, each major fund,
and the aggregate remaining fund information of the City as of June 30, 2011, and the respective changes
in financial position and, where applicable, cash flows thereof and the respective budgetary comparison
for the General Fund for the year then ended in conformity with accounting principles generally accepted
in the United States of America.
As discussed in Note 1(k) to the basic financial statements, effective July 1, 2010, the City adopted the
provisions of Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and
Governmental Fund Type Definitions.
In accordance with Government Auditing Standards, we have also issued our report dated
December 1, 2011 on our consideration of the City’s internal control over financial reporting and on our
tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and
other matters. The purpose of that report is to describe the scope of our testing of internal control over
financial reporting and compliance and the results of that testing, and not to provide an opinion on
internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards and should be considered in assessing the
results of our audit.
2
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis, as listed in the table of contents be presented to supplement the basic financial
statements. Such information, although not a part of the basic financial statements, is required by the
Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting
for placing the basic financial statements in an appropriate operational, economic, or historical context.
We have applied certain limited procedures to the required supplementary information in accordance with
auditing standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City’s financial statements as a whole. The introductory section, combining and individual
nonmajor fund financial statements and schedules, statistical section, and schedule of expenditures of
federal awards (SEFA)are presented for purposes of additional analysis and as required by OMB Circular
A-133 for the schedule of expenditures of federal awards and are not a required part of the financial
statements. The combining and individual nonmajor fund financial statements and schedules and the
schedule of expenditures of federal awards are the responsibility of management and were derived from
and relate directly to the underlying accounting and other records used to prepare the financial statements.
The information has been subjected to the auditing procedures applied by us in the audit of the financial
statements and certain additional procedures, including comparing and reconciling such information
directly to the underlying accounting and other records used to prepare the financial statements or to the
financial statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America. In our opinion, the information is fairly stated in all
material respects in relation to the financial statements as a whole. The introductory and statistical
sections have not been subjected to the auditing procedures applied in the audit of the basic financial
statements and, accordingly, we do not express an opinion or provide any assurance on them.
Walnut Creek, California
December 1, 2011
Management’s Discussion and Analysis
3
Management’s Discussion and Analysis
Management’s Discussion and Analysis (MD&A) provides an overview of the City of Palo Alto’s financial
performance for the fiscal year ended June 30, 2011. To obtain a complete understanding of the City’s
financial condition, this document should be read in conjunction with the accompanying Transmittal Letter
and Basic Financial Statements.
OVERVIEW OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT
The CAFR is presented in six sections:
An introductory section that includes the Transmittal Letter and general information
Management’s Discussion and Analysis
The Basic Financial Statements that include the Government-wide and Fund Financial
Statements, along with the Notes to these statements
Supplemental Information
Statistical Information
Single Audit
Basic Financial Statements
The Basic Financial Statements contain the Government-wide Financial Statements and the Fund Financial
Statements. These statements provide long and short-term views of the City’s financial activities and financial
position.
The Government-wide Financial Statements provide a longer-term view of the City’s activities as a whole.
They include the Statement of Net Assets and the Statement of Activities. The Statement of Net Assets
includes the City’s capital assets and long-term liabilities on a full accrual basis of accounting similar to that
used by private sector companies. The Statement of Activities provides information about the City’s revenues
and expenses on a full accrual basis, with an emphasis on measuring net revenues or expenses for each of the
City’s programs. The Statement of Activities explains in detail the change in net assets for the year. The
amounts in the Statement of Net Assets and the Statement of Activities are separated into Governmental and
Business-type Activities in order to provide a summary of these activities for the City.
The Fund Financial Statements display the City’s operations in more detail than the Government-wide
financial statements. Their focus is primarily on the short-term activities of the City’s General Fund and other
major funds such as the Capital Projects Fund, Water Services Fund, Electric Services Fund, Fiber Optics
Fund, Gas Services Fund, Wastewater Collection Services Fund, Wastewater Treatment Services Fund,
Refuse Services Fund, Storm Drainage Services Fund and Airport Fund.
For certain entities and funds, the City acts solely as a depository agent. For example, the City has several
Assessment Districts for which it produces fiduciary statements detailing the cash balances and activities of
Management’s Discussion and Analysis
4
these districts. These entities are independent, and their balances are excluded from the City’s financial
statements.
Together, all these statements are called the Basic Financial Statements.
Government-wide Financial Statements
Governmental Activities - All of the City’s basic services are considered to be Governmental Activities.
Included in basic services are the City Council, City Manager, City Attorney, City Clerk, City Auditor,
Administrative Services, Human Resources, Public Works, Planning and Community Environment, Police,
Fire, Community Services, and Library. These services are supported by general City revenues such as taxes,
and by specific program revenues such as fees and grants.
The City’s Governmental Activities also include the activities of the Palo Alto Public Improvement
Corporation and the Redevelopment Agency, which are separate legal entities financially accountable to the
City. The Redevelopment Agency was dissolved on September 6, 2011, as discussed in Note 17.
Business-type Activities - All of the City’s enterprise activities are reported as Business-type Activities,
including Water, Electric, Fiber Optics, Gas, Wastewater Collection, Wastewater Treatment, Refuse, Storm
Drainage and Airport. Unlike governmental services, these services are supported by charges paid by
customers based on services used, except for Airport which is currently supported by a long-term advance
from the General Fund, as discussed in Note 4.
Government-wide Financial Statements are prepared on the accrual basis of accounting, which means they
measure the flow of all economic resources for the City as a whole.
Fund Financial Statements
The Fund Financial Statements provide detailed information about each of the City’s most significant funds,
called Major Funds. The concept of Major Funds, and the determination of which are Major Funds, was
established by Governmental Accounting Standards Board (GASB) Statement No. 34 and replaced the
concept of combining like funds and presenting them in total. Therefore, each Major Fund is presented
individually, with all Non-major Funds combined in a single column on each fund statement. Subordinate
schedules display these Non-major Funds in more detail. Major Funds present the major activities of the City
for the year. The General Fund is always considered a Major Fund, but other funds may change from year to
year as a result of changes in the pattern of City activities.
Fund Financial Statements include Governmental, Enterprise and Internal Service Funds.
Governmental Fund financial statements are prepared on the modified accrual basis of accounting, which
means they measure only current financial resources and uses. Capital assets and other long-lived assets,
along with long-term liabilities, are presented only in the Government-wide Financial Statements. In Fiscal
Year (FY) 2011, the City had two Major Governmental Funds, the General Fund and the Capital Projects
Fund.
Enterprise and Internal Service Fund financial statements are prepared on the full accrual basis of accounting,
similar to that used by private sector companies. These statements, as in the past, include all their assets and
liabilities, current and long-term.
Since the City’s Internal Service Funds provide goods and services exclusively to the City’s Governmental
and Business-type Activities, their activities are only reported in total at the Fund level. Internal Service
Management’s Discussion and Analysis
5
Funds, such as Technology and General Benefits, cannot be considered Major Funds because their revenues
are derived from other City Funds. Revenues between Funds are eliminated in the Government-wide
Financial Statements, and any related profits or losses in Internal Service Funds are returned to the activities
in which they were created, along with any residual net assets of the Internal Service Funds.
Budget and actual financial comparison information is presented only for the General Fund and all Major
Special Revenue Funds.
Fiduciary Statements
The City is the fiduciary agent for certain assessment districts such as the University Avenue Area Parking
Assessment District, and holds amounts collected from property owners that await transfer to the districts’
bond trustees. The City’s fiduciary activities are reported in the separate Statement of Fiduciary Assets and
Liabilities and the supplemental Agency Funds Statement of Changes in Assets and Liabilities. These
activities are excluded from the City’s other financial statements because the City cannot utilize these assets
to finance its own operations.
FINANCIAL HIGHLIGHTS
Economic Background
Like jurisdictions throughout the country, the City was impacted by the “Great Recession,” and is now
showing signs of slow recovery. At the end of FY 2011, the City’s unemployment rate had dropped to 5.5
percent from 6.1 percent the prior year, as compared to Santa Clara County’s unemployment rate of 10.3
percent.
More recently, the recovery in Silicon Valley has outpaced that of the state. The state’s economic recovery
seems to have stalled, according to the California Department of Finance. While about 25,000 jobs were
gained each month between January and April, about 900 jobs were lost in each month from May to August.
The state unemployment rate rose from 12.0 to 12.1 percent from July to August, before falling to 11.9
percent in September, leaving California with the second highest unemployment rate, behind Nevada.
In contrast, the unemployment rate in Santa Clara County fell in September from 9.9 percent to 9.6 percent,
according to the state’s Employment Development Department. While most of this decrease came from added
jobs in the technology sector, 1,000 construction jobs were also added in the South Bay that month.
The City believes it will take multiple years to fully recover from the effects of the “Great Recession.” While
revenue sources seem to be recovering in the short-term, the City’s long-term structural expenses continue to
rise. The CalPERS system, for example, charges rates dependent on its investment returns, which are tied to
the stock market returns and the nation’s economic progress. The City’s healthcare expenses for employees
and retirees are tied to continually rising healthcare costs – again, independent of other economic upward
trends.
The City continues to take steps to align expenses and revenues through service and program cuts, revenue
enhancements, and employee compensation savings. The City Council adopted a General Fund budget for FY
2012 that eliminated a projected deficit of $3.1 million, after implementing a total of $14.3 million in
structural changes during the prior two fiscal years. The City’s non-safety employees, along with one of its
public safety units, have accepted a number of cost-sharing concessions, along with a reduced retirement
benefit for new employees. The City is in continued negotiations with the remaining public safety employees
to seek comparable concessions.
Management’s Discussion and Analysis
6
Through its 10 year Long Range Financial Forecast, the City closely monitors available resources versus
current and long-term expenses. This tool has enabled the City to be forewarned and forearmed as it confronts
the numerous uncertainties and challenges that jurisdictions across the nation are facing.
Government-wide
The City’s total net assets increased to $1,186 million, a $44.1 million increase. Governmental
activities had an increase of $9.9 million and are discussed on page 8. Business-type activities
had an increase of $34.2 million and are discussed on page 13.
The City’s total invested in capital assets, net of related debt, increased to $781.2 million, a
$12.4 million increase. Governmental activities had a net decrease of $4.7 million. Business-
type activities had an increase of $17.1 million primarily in the Water Fund and the Electric
Fund.
The City’s total restricted net assets decreased to $16.4 million, a $22.2 million decrease. This
reflects a $14.9 million decrease for governmental special revenue programs, a decrease of $3.7
million for governmental capital projects and a decrease of $3.6 million for the City’s debt
service.
The City’s total unrestricted net assets increased to $388.5 million, a $53.9 million increase.
Governmental activities had an increase of $32.5 million and Business-type activities had an
increase of $21.4 million.
Government-wide revenues totaled $409 million, an increase of $13.5 million from the prior
year. This total consists of $310.4 million in program revenues and $98.6 million in general
revenues. Program revenues increased by $11.2 million, and general revenues increased by $2.3
million.
Total Government-wide expenses were $364.9 million, a $6 million increase.
Government-wide total assets increased to $1,412 million, a $44.5 million increase.
Government-wide capital assets increased by $32.8 million to $859.1 million.
Government-wide cash and other assets increased $11.7 million to $552.9 million.
Government-wide total liabilities were $225.9 million, an increase of $.4 million.
Government-wide long-term debt decreased $.1 million to $151.9 million.
Government-wide other liabilities were $74 million, an increase of $.5 million.
Fund Level – Governmental Funds
Governmental Fund balances decreased to $141.1 million, a $12.6 million decrease.
Governmental Fund revenues increased to $132.4 million, a $12.4 million increase.
Governmental Fund expenditures were $160.9 million, a $17.5 million increase.
General Fund revenues came in at $117.3 million, an increase of $7.4 million over the prior
year.
General Fund expenditures were $121.5 million, an increase of $2.6 million.
The General Fund balance of $44.2 million at June 30, 2011, was an increase of $2.7 million
from the prior year (refer to Performance of Governmental Funds – General Fund, page 16).
Management’s Discussion and Analysis
7
Fund Level – Enterprise Funds
Enterprise Fund net assets increased to $668.1 million, a $33 million increase.
Enterprise Fund operating revenues increased to $265.8 million, a $3.8 million increase from
prior year revenues.
Enterprise Fund operating expenses decreased to $214 million, a $4.5 million decrease.
Management’s Discussion and Analysis
8
FINANCIAL PERFORMANCE
Government-wide Financial Statements – Governmental Activities
The following analysis focuses on the net assets and changes in net assets of the City’s Governmental
Activities, presented in the Government-wide Statement of Net Assets and Statement of Activities.
2011 2010
Increase/
(Decrease)
Cash and investments 190.6$ 192.5$ (1.9)$
Other assets 47.5 47.1 0.4
Capital assets 393.4 376.0 17.4
Total Assets 631.5 615.6 15.9
Long-term debt outstanding 64.8 65.9 (1.1)
Other liabilities 50.8 43.7 7.1
Total Liabilities 115.6 109.6 6.0
Net Assets:
Invested in capital assets, net of debt 364.8 369.5 (4.7)
Restricted 16.4 34.3 (17.9)
Unrestricted 134.7 102.2 32.5
Total Net Assets 515.9$ 506.0$ 9.9$
GOVERNMENTAL ACTIVITIES
Net Assets at June 30
(in Millions)
The City’s Governmental activities total net assets increased $9.9 million to $515.9 million in FY 2011. This
change results from the following:
Capital assets increased $17.4 million due to additions to the City’s roadway network and sidewalks,
Parks and Open Space facilities’ improvements, the College Terrace Library seismic upgrade, and
City-purchased easements.
Other liabilities increased $7.1 million, primarily due to costs for the Mitchell Park Library and
Community Center project.
Net assets invested in capital assets, net of related debt, decreased $4.7 million to $364.8 million.
Restricted net assets decreased $17.9 million to $16.4 million. Unrestricted net assets increased $32.5
million to $134.7 million. Unrestricted net assets represent current net assets available to finance
subsequent year operations and other expenditures approved by City Council.
Management’s Discussion and Analysis
9
Governmental Activities – Revenues
2011 2010
Increase/
(Decrease)
Program Revenues:
Charges for services 36.0$ 30.4$ 5.6$
Operating grants and contributions 2.9 4.8 (1.9)
Capital grants and contributions 1.9 1.3 0.6
Total Program Revenues 40.8 36.5 4.3
General Revenues:
Property taxes 29.2 26.0 3.2
Sales taxes 20.7 18.0 2.7
Utility user tax 10.8 11.3 (0.5)
Transient occupancy tax 8.1 6.9 1.2
Other taxes 8.2 4.1 4.1
Investment earnings 3.5 6.5 (3.0)
Rents and miscellaneous 12.4 12.7 (0.3)
Total General Revenues 92.9 85.5 7.4
Total Revenues 133.7$ 122.0$ 11.7$
Revenues by Source
GOVERNMENTAL ACTIVITIES
Revenues for the Year ended June 30
(in Millions)
The table above shows that Governmental activities revenues totaled $133.7 million in FY 2011, an increase
of $11.7 million over prior year revenues of $122 million.
Charges for services increased by $5.6 million from prior year for an ending balance of $36 million. The
increase includes the following:
$2.5 million increase in permit and plan checking fees due to increased building activity;
$1.0 million increase in in-lieu housing fees due to completion of major developments, and
$.9 million increase in charges to Stanford for police, communication and fire services.
Operating contributions and grants decreased by $1.9 million from the prior year primarily due to the
following:
$.4 million less for HUD Children’s Library improvements;
$.5 million less in Proposition 42 traffic congestion relief;
$.4 million less in CDBG funding, and
$.3 million less in reimbursement of state mandated costs.
Management’s Discussion and Analysis
10
Property taxes had an increase of $3.2 million, sales taxes increased by $2.7 million, the utility user tax
decreased by $0.5 million, and transient occupancy taxes increased by $1.2 million. The property tax increase
is a result of first year tax receipts from the assessment for the general obligation library bond debt. The sales
tax increase is due to an uptick in sales activity, primarily in department store, miscellaneous retail and
electronic equipment. Transient occupancy taxes increased as a result of higher levels of business activity
which improved occupancy and room rates. Other taxes increased from $4.1 million to $8.2 million primarily
due to a $1.5 million increase in documentary transfer tax and new gas tax revenues of $.6 million.
Investment earnings decreased by $3 million. This is a result of decreased investment earnings of $.7 million,
and a negative $2.3 million for the year-end adjustment to fair value required by GASB 31.
Program revenues such as charges for services, operating grants and contributions, and capital grants and
contributions are generated from or restricted to each activity. Program revenues include contributions from
the University Avenue Off-Street Parking Assessment District as well as other recurring resources.
Sources of Revenues
2
1
3
4
8
7
6
5
1- Program Revenues - 31%
2- Property Taxes - 22%
3- Sales Taxes - 15%
4- Utility User Tax - 8%
5- Transient Occupancy Tax - 6%
6- Other Taxes - 6%
7- Investment Earnings - 3%
8- Rents and Miscellaneous - 9%
General revenues are composed of taxes and other revenues not specifically generated by or restricted to
individual activities. All tax revenues and investment earnings are included in general revenues.
Management’s Discussion and Analysis
11
Governmental Activities – Expenses
The table below presents a comparison of FY 2011 and FY 2010 expenses (does not include encumbrances
and reappropriations) by Governmental Activities and interest on long-term debt. Total Governmental
Activities functional expense was $140.9 million in FY 2011, a decrease of $.4 million.
Activities 2011 2010
Increase/
(Decrease)
City Council 0.1$ 0.5$ (0.4)$
City Manager 1.8 2.4 (0.6)
City Attorney 1.0 2.6 (1.6)
City Clerk 0.8 1.4 (0.6)
City Auditor 0.1 2.6 (2.5)
Administrative Services 9.9 17.9 (8.0)
Human Resources 1.3 3.7 (2.4)
Public Works 19.4 18.7 0.7
Planning and Community Environment 15.0 12.1 2.9
Police 30.5 29.3 1.2
Fire 28.5 26.4 2.1
Community Services 22.9 17.2 5.7
Library 6.9 6.1 0.8
Interest on long-term debt 2.7 0.4 2.3
Total Functional Expense 140.9 141.3 (0.4)
Increase/(Decrease) in Net Assets before
Transfers (7.2) (19.4) 12.2
Transfers in 17.1 14.0 3.1
Change in Net Assets 9.9 (5.4) 15.3
Net Assets, Beginning 506.0 511.4 (5.4)
Net Assets, Ending 515.9$ 506.0$ 9.9$
GOVERNMENTAL ACTIVITIES
Expenses and Change in Net Assets for the Year ended June 30
(in Millions)
Administrative Services expense decreased by $8 million due to the following:
Expense classifications were changed in FY 2011 to effect a more informative presentation. In
the prior year, the net of interdepartmental revenues and expenses was included with
miscellaneous revenue. Effective for FY 2011, interdepartmental revenues and expenses are
spread back to individual departments, reducing Administrative Services expense by $3 million.
Management’s Discussion and Analysis
12
In the prior year, stores inventory cost of sales of $2.2 million was included in Administrative
Services expense. Effective for FY 2011, the cost of sales was netted with stores revenue and
the net was reported as miscellaneous general revenue.
In FY 2011, $.9 million was received from Refuse Services Fund for interest on unpaid landfill
rent.
In FY 2010, $1.9 million was expended for additional retiree medical, compared to $1.0 million
in FY 2011 for additional benefits allocation.
The Functional Expenses Chart below includes only current year expenses. It does not include capital outlays,
which are now added to the City’s capital assets. In FY 2011, the City added $17.4 million in net capital
assets. The composition of FY 2011 additions is shown in detail in the Capital Asset section of Management’s
Discussion and Analysis.
Functional Expense
2 314 514
13 6 7
8
9
10
11
12
1- City Council - less than 1%
2.- City Manager 1%
3- City Attorney - less than 1%
4- City Clerk - less than 1%
5- City Auditor - less than 1%
6- Administrative Services 7%
7- Human Resources 1%
8- Public Works 14%
9- Planning & Community Environment 11%
10-Police 22%
11-Fire 21%
12-Community Services 16%
13-Library 5%
14-Interest on long-term debt 2%
Management’s Discussion and Analysis
13
Government-wide Financial Statements – Business-Type Activities
The following analysis focuses on the net assets and changes in net assets of the City’s Business-type
Activities presented in the Government-wide Statement of Net Assets and Statement of Activities.
2011 2010
Increase/
(Decrease)
Cash and investments 274.0$ 262.6$ 11.4$
Other assets 40.8 39.0 1.8
Capital assets 465.7 450.3 15.4
Total Assets 780.5 751.9 28.6
Long-term debt outstanding 87.1 86.1 1.0
Other liabilities 23.2 29.8 (6.6)
Total Liabilities 110.3 115.9 (5.6)
Net Assets:
Invested in capital assets, net of debt 416.4 399.3 17.1
Restricted 0.0 4.3 (4.3)
Unrestricted 253.8 232.4 21.4
Total Net Assets 670.2$ 636.0$ 34.2$
(in Millions)
BUSINESS-TYPE ACTIVITIES
Net Assets at June 30
The City’s Business-type activities total net assets increased $34.2 million to $670.2 million in FY 2011.
Cash and investments increased $11.4 million primarily due to the decrease in the retail
purchase of utilities for Electric.
Capital assets increased $15.4 million to $465.7 million in FY 2011 as a result of Water and
Electric infrastructure improvements.
Other liabilities decreased $6.6 million primarily as a result of $2.3 million less accrued for
utility construction costs, $1.8 million less accrued for hydro power, and $1.9 million less
accrued for partner’s year-end true-up for Wastewater Treatment.
Net assets invested in capital assets, net of related debt, increased $17.1 million to $416.4
million. The increase was mostly due to $8 million of capital improvements in Water and $7.5
million of capital improvements in Electric.
The amount shown as restricted net assets for debt service in FY 2010 is now correctly reduced
by the amount of debt outstanding that was deposited to debt service reserve accounts when the
debt was issued, thereby reducing the balance to zero at year-end. Unrestricted net assets of
Management’s Discussion and Analysis
14
$253.8 million, an increase of $21.4 million from the prior year, represent liquid assets
available to finance day-to-day operations and other expenditures approved by the City Council.
This amount includes Council-designated reserves such as the rate stabilization reserves of
$108.7 million, the Calaveras reserve for stranded costs of $55.6 million, and the emergency
plant replacement reserve of $6.7 million.
Revenues by Source 2011 2010
Increase/
(Decrease)
Program Revenues:
Water 28.1$ 27.0$ 1.1$
Electric 122.1 121.9 0.2
Fiber Optics 3.3 3.1 0.2
Gas 43.6 44.5 (0.9)
Wastewater Collection 15.6 15.1 0.5
Wastewater Treatment 20.5 16.9 3.6
Refuse 30.6 28.6 2.0
Storm Drainage 5.8 5.6 0.2
Total Program Revenues 269.6 262.7 6.9
General Revenues:
Investment earnings 5.7 10.8 (5.1)
Total General Revenues 5.7 10.8 (5.1)
Total Revenues 275.3$ 273.5$ 1.8$
BUSINESS-TYPE ACTIVITIES
(in Millions)
Revenues for the Year ended June 30
The table above presents the revenues for each of the City’s Business-type Activities or Enterprise Funds. The
City operates the Water, Electric, Fiber Optics, Gas, Wastewater Collection, Wastewater Treatment, Refuse,
Storm Drainage and Airport Funds, which are Major Funds and are presented in the Basic Financial
Statements.
Business-type Activities revenues totaled $275.3 million, an increase of $1.8 million from the prior year.
Revenues were significantly affected by the following events:
Program Revenues for Wastewater Treatment increased $3.6 million from prior year as a result
of $1.6 million in grant revenue for the reclaimed water project and $1.9 million for increased
billings to the partners and to Wastewater Collection.
Investment earnings decreased $5.1 million due to a decrease in interest earnings on
investments. Electric decreased $2.5 million, Water decreased $1.2 million and Gas decreased
$.5 million from prior year.
Management’s Discussion and Analysis
15
Activities 2011 2010
Increase/
(Decrease)
Water 24.3$ 21.0$ 3.3$
Electric 100.1 107.9 (7.8)
Fiber optics 1.6 1.4 0.2
Gas 32.0 32.5 (0.5)
Wastewater collection 12.3 10.7 1.6
Wastewater treatment 19.7 13.5 6.2
Refuse 30.7 28.1 2.6
Storm drainage 3.2 2.5 0.7
Airport 0.1 0.0 0.1
Total Functional Expense 224.0 217.6 6.4
Increase in Net Assets before Transfers 51.3 55.9 (4.6)
Transfers out 17.1 14.0 3.1
Total Transfers 17.1 14.0 3.1
Change in Net Assets 34.2 41.9 (7.7)
Net Assets, Beginning 636.0 594.1 41.9
Net Assets, Ending 670.2$ 636.0$ 34.2$
BUSINESS-TYPE ACTIVITIES
Expenses and Change in Net Assets for the Year ended June 30
(in Millions)
The table above presents a comparison of the FY 2011 and FY 2010 expenses for the City’s Business-type
Activities. Encumbrances and reappropriations are not included.
Business-type Activities expenses and transfers increased $9.5 million for a total of $241.1 million. Changes
to expenses were significantly affected by the following events:
Functional Expense for the Water Fund increased $3.3 million from prior year due to a $1.6
million increase in retail purchase of utilities and a $.9 million increase in operating and
administrative expenses.
Functional Expense for the Electric Fund decreased $7.8 million primarily due to a decrease in
the retail purchase of utilities. Further detail may be found in Note 16 to the financial
statements.
Functional Expense for the Wastewater Treatment Fund increased by $6.2 million due to
allocation of the prior year operating transfers.
Management’s Discussion and Analysis
16
FUND FINANCIAL STATEMENTS
Performance of Governmental Funds
As of June 30, 2011, the City’s Governmental Funds reported combined fund balances of $141.1 million, a
decrease of $12.6 million or 8.2 percent compared with the prior year. The decrease is primarily due to the
expenditure of Library bond proceeds in the current year.
As discussed more fully in Note 1, the City implemented GASB Statement No. 54, Fund Balance Reporting
and Governmental Fund Type Definitions, for the year ended June 30, 2011. Fund balances are classified on
the face of the financial statement as nonspendable, restricted, committed, assigned and unassigned.
Governmental Fund revenues and other financing sources decreased $51.1 million from prior year to $162.7
million. Revenues and other financing sources in the General Fund increased $3.4 million; Capital Projects
Fund decreased $58.6 million, due primarily to the receipt of library bond proceeds from the General
Obligation Bond in the prior year; Non-major Fund revenues and other financing sources increased by $4
million.
Governmental Fund expenditures and other uses were $175.4 million, an increase of $10.6 million from the
prior year. General Fund expenditures and other uses decreased $1.1 million, Capital Projects Fund
expenditures increased by $10.4 million, and Non-major Fund expenditures and other uses increased by $1.3
million.
General Fund
Governmental Funds – General Fund – Balance Sheet
As of June 30, 2011, the General Fund Balance totaled $44.2 million, compared to $41.5 million in the prior
year. This represents 36.4 percent of direct General Fund expenditures, providing a buffer against unexpected
financial events. The Fund Balance has been classified as $6.1 million nonspendable, $6.2 million assigned,
and $31.9 million unassigned. Of the unassigned amount, $31.4 million is designated by the Council for
budget stabilization.
General Fund
Governmental Funds – General Fund – Statement of Revenues, Expenditures and Changes in Fund Balance
The General Fund ended the year with a $2.7 million increase in fund balance, for a total of $44.2 million,
compared to a $1.8 million decrease in the prior year.
The City of Palo Alto’s General Fund revenues totaled $117.3 million in FY 2011. This represents an increase
of $7.4 million, or 6.8 percent, compared to the prior year.
General Fund expenditures and other uses totaled $132.5 million, a decrease of $1.1 million from the prior
year. Transfers out decreased $3.6 million as a result of the prior year Equity Transfer Stabilization Reserve
that was returned to the Gas and Electric Funds.
General Fund - Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual
Sales taxes increased by $2.8 million or 15.3 percent over FY 2010 levels for a total of $20.7 million, which
is $2.5 million more than the adopted budget and $1.2 million greater than the adjusted budget. The City has
seen an uptick in department store, miscellaneous retail, and electronic equipment sales activity. New auto
Management’s Discussion and Analysis
17
sales, however, continue to slump. Overall, sales tax receipts have been trending upward, although stock
market volatility, the broader economy, and consumer sentiment can change this pattern quickly.
Property taxes decreased by $.3 million or 1.1 percent from FY 2010 to FY 2011 for a total of $25.7 million.
This is $.2 million less than the adopted budget and $.4 million greater than the adjusted budget. Amidst the
significant downturn in the housing market, the City has had relatively stable housing valuations and tax
revenues. A significant number of assessment appeals by commercial property owners, however, caused the
City to adjust its budget projections for FY 2011.
Transient occupancy tax (TOT) revenues were $8.1 million in FY 2011, a $1.2 million or 17.8 percent
increase over FY 2010. The $8.1 million is $1.1 million greater than the adopted budget and $.7 million
greater than the adjusted budget. This revenue source has shown considerable improvement in FY 2011,
likely due to heightened and healthy business activity on the Peninsula. Both occupancy and room rates have
been marching upward, and this trend appears to be continuing into FY 2012.
Documentary transfer tax came in at $5.2 million, an increase of $1.5 million or 40.5 percent from the prior
year. Actual revenue results were $1.2 million above the FY 2011 adjusted budget. As a consequence of
multiple large commercial transactions, this tax source turned in a robust performance in FY 2011. Since it is
dependent on the volume and size of transactions, transfer tax receipts can vary considerably from year to
year. For FY 2011, seventeen transactions, or 1.9 percent of the volume, accounted for $.9 million, or 64
percent, of the increase. After the “Great Recession”, this tax fell to $3 million from a high in previous years
of $5 million. While receipts have risen again to over $5 million, there is uncertainty at this time as to
whether this mark will be achieved in FY 2012.
Charges for services were $22.4 million in FY 2011, an increase of $2.7 million from the prior year, an
increase of $2.4 million from the adopted budget and an increase of $1.5 million from the adjusted budget.
Return on investment totaled $.6 million, a decrease of $2.1 million from the prior year, and a decrease of
$1.1 million and $.8 million from the adopted and adjusted budgets, respectively. The budget does not include
the year-end adjustment to the carrying value of investments.
Charges to other funds totaled $11.2 million, a $.2 million increase from prior year. Charges to other funds
were $.6 million greater than the adopted budget and $.5 million greater than adjusted budget.
Non-Departmental expenditures and encumbrances totaled $8 million, a decrease of $.8 million from the prior
year, and $1.1 million more than the adjusted budget due to a $1 million allocation to increase the General
Benefits Internal Services Fund
Capital Projects Fund – Capital Projects Fund expenditures and other uses were $36.3 million in FY 2011,
which is an increase of $10.3 million from the prior year. This level of expenditure is consistent with the
City’s effort to rehabilitate and maintain its existing infrastructure.
Non-major Funds - These funds are not presented separately in the Basic Financial Statements, but are
individually presented as Supplemental Information.
Performance of Enterprise Funds
At June 30, 2011, the City’s Enterprise Funds reported total net assets of $668.1 million, an increase of $33
million or 5.2 percent compared with the prior year. The increase was primarily from the Water, Electric and
Gas Funds for $3.5 million, $13.1 million and $6.2 million, respectively. These net assets constitute 75.2
percent of the Enterprise Funds’ total net assets. Unrestricted net assets for these three funds totaled $202.5
million, a 5.7 percent increase from FY 2010.
Management’s Discussion and Analysis
18
Water Services Fund – Water ended the year with change in net assets of $3.5 million, compared to $7
million in the prior year, a $3.5 million decrease. The decrease in change in net assets is primarily due to a
$1.6 million increase in retail purchase of utilities and a $1.2 million decline in return on investments. The
ending Rate Stabilization Reserve (RSR) balance is $10.6 million.
Electric Services Fund – Electric ended the year with a change in net assets of $13.1 million compared to
$9.4 million in the prior year. The increase in change in net assets is due to a $7.5 million decrease in the
purchase of utilities expense, offset by a $2.5 million decline in return on investments and a $2.5 million
decrease in transfers in. The ending balance for the RSR is $66.3 million, an increase of $12 million.
Fiber Optics Fund – Fiber Optics ended the year with a change in net assets of $2.1 million, the same as the
prior year. The ending RSR is $10.1 million.
Gas Services Fund – Gas ended the year with a change in net assets of $6.2 million, compared to $7.9 million
in the prior year, a decrease of $1.7 million. The decrease is due to a $.5 million decline in return on
investments and a $.9 million reduction in transfers in. The RSR has an ending balance of $16.2 million, a
decrease of $2.3 million.
Wastewater Collection Services Fund - Wastewater Collection ended the year with a change in net assets of
$3.4 million compared to $4.7 million in the prior year. The decrease in change in net assets is primarily due
to a $.9 million increase in purchase of utilities expense and a $.5 million reduction in capital grants and
contributions. The RSR had an ending balance of $5.9 million.
Wastewater Treatment Services Fund – Wastewater Treatment ended the year with a change in net assets of
$1.4 million compared to a negative change in net assets of $1.2 million in FY 2010. The improvement in
change in net assets is due to increased revenue resulting from $1.6 million for the reclaimed water project
and $1.9 million in increased billings to the partners and to Wastewater Collection. The ending RSR balance
is $3 million compared to a negative $12.4 million in the prior year. The improvement is due to a $10 million
reduction in the appropriation for the Disinfection Facility Improvement Program in December 2010 as a
result of savings realized from lower bids.
Refuse Services Fund – Refuse ended the year with a change in net assets of $.3 million, compared to a $2.7
million negative change in net assets in FY 2010. The increased change in net assets is due to increased
revenue of $1.9 million, which resulted primarily from increased disposal fees due to the reinstatement of
commercial drop-offs, and $.8 million in increased transfers in. The ending RSR balance is negative $5
million, compared to a negative $4.9 million the prior year. Compliance requirements for the landfill closure
and post-closure maintenance plan are discussed in detail in Note 9.
Storm Drainage Services Fund – Storm Drainage ended the year with a change in net assets of $3 million
compared to a change in net assets of $2.5 million in the prior year, an increase of $.5 million. The RSR had
an ending balance of $1.6 million compared to $.3 million in the prior year.
Airport Fund – Airport was created in the current fiscal year. The initial funding was $.3 million and
primarily all of that remains in the cash account at the end of the year. The ending RSR balance is negative
$.1 million.
Management’s Discussion and Analysis
19
CAPITAL ASSETS
GASB 34 requires the City to record all its capital assets, including infrastructure and intangible assets.
Infrastructure includes roads, bridges, signals and similar assets used by the entire population. The table
below shows capital assets and the amount of accumulated depreciation for these assets for Governmental and
Business-type Activities. Further detail may be found in Note 6 to the financial statements.
2011 2010
Increase/
(Decrease)
Capital Assets
Land and improvements 78.6$ 78.5$ 0.1$
Street trees 15.4 15.1 0.3
Intangible assets 3.8 0.0 3.8
Construction in progress 36.2 32.3 3.9
Buildings and improvements 124.0 114.6 9.4
Equipment 9.7 8.2 1.5
Roadway network 267.5 260.5 7.0
Recreation and open space network 21.8 18.5 3.3
Less accumulated depreciation (183.7) (174.0)(9.7)
Internal Service Fund Assets
Construction in progress 0.2 0.6 (0.4)
Equipment 51.7 51.3 0.4
Less accumulated depreciation (31.8) (29.6)(2.2)
Total Governmental 393.4$ 376.0$ 17.4$
Land 5.0$ 5.0$ -$
Construction in progress 132.4 111.8 20.6
Buildings and improvements 31.9 30.9 1.0
Transmission, distribution and treatment systems 545.6 536.6 9.0
Less accumulated depreciation (249.2) (234.0) (15.2)
Total Business-type 465.7$ 450.3$ 15.4$
Governmental Activities
Business-type Activities
CAPITAL ASSETS AT JUNE 30
(in Millions)
Governmental Activities’ capital assets net of depreciation increased by $17.4 million over FY 2010. This
increase was primarily due to capitalizations for improvements to the City’s roadway network and sidewalks,
Parks and Open Space facility improvements, the College Terrace Library seismic upgrade, and City-
purchased easements.
Management’s Discussion and Analysis
20
Business-type Activities’ capital assets net of depreciation increased by $15.4 million over FY 2010. The
increased amounts are primarily driven by construction in progress of $8 million in Water, $7.5 million in
Electric, and $3.6 million in Wastewater Treatment.
In early 2010, the Palo Alto City Council established an Infrastructure Blue Ribbon Commission (IBRC) to
review the City’s General Fund infrastructure needs and to recommend resources to fill any funding gaps
identified. Their work builds upon two prior consultant studies that have helped the City address backlogged
and other necessary work. The Commission’s findings and recommendations will be delivered to the City
Council in December 2011.
Major capital projects that are currently in progress, and the remaining capital commitment of each, are as
follows:
Mitchell Park Library and Community Center - $35.6 million
Main Library - $17.3 million
Art Center electrical and mechanical upgrades - $7.2 million
Civic Center infrastructure improvements - $2.6 million
The City depreciates its capital assets over their estimated useful lives, as required by GASB 34. The purpose
of depreciation is to spread the cost of a capital asset over the years of its useful life so that an allocable
portion of the cost of the asset is borne by all users. Additional information on capital assets and depreciable
lives may be found in Note 6.
Management’s Discussion and Analysis
21
DEBT ADMINISTRATION
Each of the City’s debt issues is discussed in detail in Note 7 to the financial statements. Effective for FY
2011, bond issuance costs have been reclassified to noncurrent assets, rather than netted with long-term debt.
FY 2010 has also been reclassified in the following table. At June 30, 2011, the City’s debt was comprised of
the following:
2011 2010
Increase/
(Decrease)
General Long-Term Obligations:
1998 Golf Course Certificates of Participation 3.7$ 4.1$ (0.4)$
2002A Civic Center Refinancing
Certificates of Participation 0.4 0.8 (0.4)
2002B Downtown Parking Improvements
Certificates of Participation 1.8 1.9 (0.1)
General Obligation Bonds
2010 Series A 55.3 55.3 0.0Add: unamortized premium 3.6 3.8 (0.2)
Total Governmental Activities Debt 64.8$ 65.9$ (1.1)$
Enterprise Long-Term Obligations:
Utility Revenue Bonds
1995 Series A 4.6$ 5.0$ (0.4)$
1999 Refunding 12.7 13.2 (0.5)
2002 Series A 18.1 18.9 (0.8)
2009 Series A 34.2 35.0 (0.8)
Less: unamortized premium (discount)(0.2) (0.2) 0.0
Energy Tax Credit Bonds
2007 Series A 1.1 1.2 (0.1)
State Water Resources Loan
2007 8.1 8.6 (0.5)
2009 8.6 4.5 4.1
Less: unamortized premium (discount)(0.1) (0.1) 0.0
Total Business-type Activities Debt 87.1$ 86.1$ 1.0$
Governmental Activities Debt:
Business-type Activities Debt:
LONG-TERM DEBT AT JUNE 30
(in Millions)
Management’s Discussion and Analysis
22
On June 30, 2010, the City issued $55.3 million in General Obligation Bonds to finance costs for construction
of the new Mitchell Park Library and Community Center and to make substantial capital improvements to the
Main and Downtown Libraries. The pledge of future net revenues ends upon repayment of the remaining
debt service on the bonds and is scheduled to occur in 2040.
As stated in the Statistical Section of the CAFR, the combined direct debt ratio to assessed valuation for the
General Fund is a low 0.28 percent compared to the allowable legal debt margin of 15 percent.
SPECIAL ASSESSMENT DISTRICT DEBT
Special assessment districts throughout different parts of the City have also issued debt to finance
infrastructure and facilities construction exclusively in their districts. As of June 30, 2011, the City had no
special assessment district debt with City commitment outstanding.
ECONOMIC OUTLOOK
The economy of the City is discussed in the accompanying Transmittal Letter and in this Discussion and
Analysis.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
The CAFR is intended to provide citizens, taxpayers, investors, and creditors with a general overview of the City’s
finances. Questions about this report should be directed to the Administrative Services Department, at 250
Hamilton Avenue, 4th Floor, Palo Alto, California. This report and other financial reports can be viewed on the City
of Palo Alto website at: www.cityofpaloalto.org. On the home page, select City Departments, select Administrative
Services, and select Financial Reporting. Within Financial Reporting, there are links to reports by title and
reporting date or use the following link: www.cityofpaloalto.org/depts/asd/financial_reporting/asp
23
GOVERNMENT-WIDE STATEMENT OF NET ASSETS AND STATEMENT OF ACTIVITIES
The Citywide Statement of Net Assets and the Statement of Activities summarize all of the City’s
financial activities and financial position. They are prepared on the same basis as is used by most
businesses, which means they include all the City’s assets and all its liabilities, as well as all its revenues
and expenses. This is known as the full accrual basis — the effect of all the City’s transactions is taken
into account, regardless of whether or when cash changes hands. All material internal transactions
between City funds have been eliminated.
The Statement of Net Assets reports the difference between the City’s total assets and the City’s total
liabilities, including all the City’s capital assets and all its long-term debt. The Statement of Net Assets
focuses the reader on the composition of the City’s net assets, by subtracting total liabilities from total
assets.
The Statement of Net Assets summarizes the financial position of all the City’s Governmental Activities
in a single column, and the financial position of all the City’s Business-type Activities in a single column;
these columns are followed by a Total column that presents the financial position of the entire City.
The City’s Governmental and Business-type Activities include the activities of its General Fund, along
with all its Special Revenue, Capital Projects, Debt Service Funds, and Enterprise Funds.
Since the City’s Internal Service Funds service these Funds, their activities are consolidated with
Governmental and Business-type Activities, after eliminating inter-fund transactions and balances.
The Statement of Activities reports increases and decreases in the City’s net assets. It is also prepared on
the full accrual basis, which means it includes all the City’s revenues and all its expenses, regardless of
when cash changes hands. This differs from the “modified accrual” basis used in the Fund financial
statements, which reflect only current assets, current liabilities, available revenues and measurable
expenditures.
The format of the Statement of Activities presents the City’s expenses first, listed by program, and
follows these with the expenses of its Business-type Activities. Program revenues — that is, revenues
which are generated directly by these programs — are then deducted from program expenses to arrive at
the net expense of each governmental and Business-type program. The City’s general revenues are then
listed in the Governmental Activities or Business-type Activities column, as appropriate, and the Change
in Net Assets is computed and reconciled with the Statement of Net Assets.
These Statements include the financial activities of the City Public Improvement Corporation and
Redevelopment Agency, which are legally separate component units of the City because they are
controlled by the City, which is financially accountable for its activities.
These financial statements along with the fund financial statements and footnotes are called Basic
Financial Statements.
CITY OF PALO ALTO
Statement of Net Assets
June 30, 2011
(Amounts in Thousands)
Governmental Business-Type
Activities Activities Total
Assets:
Cash and investments available for operations (Note 3) 148,452$ 237,409$ 385,861$
Receivables, net:
Accounts and intergovernmental 8,234 30,332 38,566
Interest receivable 1,188 1,863 3,051
Notes and loans receivable (Note 5) 10,809 - 10,809
Internal balances (Note 4) (1,727) 1,727 -
Net OPEB asset (Note 12) 23,006 - 23,006
Due from other government agencies - 4,500 4,500
Inventory of materials and supplies and prepaids 5,413 9 5,422
Deferred charges 552 2,342 2,894
Restricted cash and investments with fiscal agents (Note 3) 42,187 30,970 73,157
Restricted cash for post-closure landfill (Note 3) - 5,599 5,599
Capital assets (Note 6):
Nondepreciable 134,183 137,408 271,591
Depreciable, net of accumulated depreciation 259,221 328,316 587,537
Total assets 631,518 780,475 1,411,993
Liabilities:
Accounts payable and accrued liabilities 14,678 10,089 24,767
Accrued salaries and benefits 2,436 1,126 3,562
Unearned revenue 369 1,213 1,582
Accrued compensated absences (Note 1):
Due in one year 3,100 - 3,100
Due in more than one year 6,286 - 6,286
Claims payable (Note 14):
Due in one year 5,873 - 5,873
Due in more than one year 18,030 - 18,030
Accrued landfill closure liability and post-closure care (Note 9):
Due in more than one year - 10,771 10,771
Long-term debt (Note 7):
Due in one year 1,796 3,548 5,344
Due in more than one year 63,044 83,570 146,614
Total liabilities 115,612 110,317 225,929
Net Assets (Note 10):
Invested in capital assets, net of related debt 364,747 416,418 781,165
Restricted for:
Special revenue programs 10,825 - 10,825
Capital projects 2,150 - 2,150
Debt service 2,040 - 2,040
Eyerly Family 1,422 - 1,422
Total restricted net assets 16,437 - 16,437
Unrestricted 134,722 253,740 388,462
Total net assets $ 515,906 $ 670,158 $ 1,186,064
See accompanying notes to basic financial statements.
24
CITY OF PALO ALTO
Statement of Activities
For the Year Ended June 30, 2011
(Amounts in Thousands)
Net (Expense) Revenue and
Program Revenues Changes in Net Assets
Operating Capital
Charges for Grants and Grants and Governmental Business-Type
Functions/Programs Expenses Services Contributions Contributions Activities Activities Total
Governmental Activities:
City Council 15$ -$ -$ -$ (15)$ -$ (15)$
City Manager 1,842 - - - (1,842) - (1,842)
City Attorney 953 - - - (953) - (953)
City Clerk 803 - - - (803) - (803)
City Auditor 138 - - - (138) - (138)
Administrative Services 9,888 2,889 32 619 (6,348) - (6,348)
Human Resources 1,346 - - - (1,346) - (1,346)
Public Works 19,357 2,419 774 1,277 (14,887) - (14,887)
15,031 7,237 1,907 7 (5,880) - (5,880)
Police 30,465 3,237 100 - (27,128) - (27,128)
Fire 28,531 12,037 - - (16,494) - (16,494)
Community Services 22,845 7,724 11 - (15,110) - (15,110)
Library 6,920 480 60 - (6,380) - (6,380)
Interest on long-term debt 2,742 - - - (2,742) - (2,742)
Total Governmental Activities 140,876 36,023 2,884 1,903 (100,066) - (100,066)
Business-Type Activities:
Water 24,268 26,624 610 864 - 3,830 3,830
Electric 100,130 122,109 - - - 21,979 21,979
Fiber Optics 1,561 3,322 - - - 1,761 1,761
Gas 32,051 43,584 - - - 11,533 11,533
Wastewater Collection 12,275 15,094 - 507 - 3,326 3,326
Wastewater Treatment 19,731 18,830 - 1,633 - 732 732
Refuse 30,684 30,469 - - - (215) (215)
Storm Drainage 3,229 5,796 - - - 2,567 2,567
Airport 31 - - - - (31) (31)
Total Business-Type Activities 223,960 265,828 610 3,004 - 45,482 45,482
Total 364,836$ 301,851$ 3,494$ 4,907$ (100,066) 45,482 (54,584)
General revenues:
Taxes:
Property taxes 29,156 - 29,156
Sales taxes 20,746 - 20,746
Utility user tax 10,851 - 10,851
Transient occupancy tax 8,082 - 8,082
Transfer and other taxes 8,156 - 8,156
Investment earnings 3,500 5,722 9,222
Miscellaneous 12,377 - 12,377
Transfers (Note 4)17,083 (17,083) -
Total general revenues and transfers 109,951 (11,361) 98,590
Change in net assets 9,885 34,121 44,006
Net assets, beginning of year 506,021 636,037 1,142,058
Net assets, end of year 515,906$ 670,158$ 1,186,064$
Planning and Community Environment
See accompanying notes to basic financial statements.
25
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27
FUND FINANCIAL STATEMENTS
Introduction
The Fund Financial Statements are presented by individual major funds, while non-major funds are
combined in a single column. Major funds are defined generally as having significant activities or
balances in the current year.
Major Governmental Funds
The funds described below were determined to be Major Funds by the City in fiscal year 2011. Individual
non-major funds may be found in the Supplemental Section.
General Fund
The General Fund is used for all the general revenues of the City not specifically levied or collected for
other City funds, and related expenditures.
Capital Projects Fund
The Capital Projects Fund is utilized to account for resources used for the acquisition and construction of
capital facilities by the City, with the exception of those assets financed by proprietary funds.
CITY OF PALO ALTO
Governmental Funds
Balance Sheet
June 30, 2011
(Amounts in Thousands)
Capital Other Total
General Projects Governmental Governmental
Fund Fund Funds Funds
Assets:
Cash and investments available for operations (Note 3) 37,150$ 27,382$ 23,182$ 87,714$
Receivables, net:
Accounts and intergovernmental 7,682 272 220 8,174
Interest receivable 546 138 143 827
Notes and loans receivable (Note 5) 985 - 9,824 10,809
Prepaid items 1,213 - - 1,213
Advance to other fund (Note 4)300 - - 300
Inventory of materials and supplies 3,587 - - 3,587
Restricted cash and investments with fiscal agents (Note 3)- 40,962 1,225 42,187
Total assets 51,463$ 68,754$ 34,594$ 154,811$
Liabilities and Fund Balances:
Liabilities:
Accounts payable and accrued liabilities 4,693$ 6,013$ 298$ 11,004$
Accrued salaries and benefits 2,222 76 4 2,302
Deferred revenue 369 - - 369
Total liabilities 7,284 6,089 302 13,675
Fund balances (Note 10):
Nonspendable:
Notes and loans receivable 985 - - 985
Prepaid items 1,213 - - 1,213
Inventories 3,587 - - 3,587
Advance to other fund 300 - - 300
Eyerly family - - 1,422 1,422
Restricted for:
Transportation mitigation - - 4,344 4,344
Federal revenue - - 4,619 4,619
Street improvement - - 1,598 1,598
Local law enforcement - - 264 264
Library bond project - 35,961 - 35,961
Improvement to parking garage - 595 - 595
Debt service - - 3,265 3,265
Committed to:
Capital projects - 6,693 - 6,693
Developer's impact fees - - 5,287 5,287
Housing in-lieu - - 11,662 11,662
Special districts - - 1,075 1,075
Downtown business - - 58 58
Assigned to:
Unrealized gains on investments 2,830 - 696 3,526
Infrastructure - 3,199 - 3,199
Capital projects - 16,217 - 16,217
Other general government purposes 3,405 - 2 3,407
Unassigned to:
Budget Stabilization 31,376 - - 31,376
Reappropriations 483 - - 483
Total fund balances 44,179 62,665 34,292 141,136
Total liabilities and fund balances 51,463$ 68,754$ 34,594$ 154,811$
See accompanying notes to basic financial statements.
28
CITY OF PALO ALTO
Reconciliation of the Balance Sheet of Governmental Funds to
the Statement of Net Assets - Governmental Activities
June 30, 2011
Total fund balances reported on the governmental funds balance sheet 141,136$
Amounts reported for governmental activities in the statement of net assets
are different from those reported in the governmental funds above because
of the following:
Costs of issuance related to the bonds are capitalized and amortized 552
over the life of the bonds in the government-wide financial statements
Capital assets used in governmental activities are not current assets or financial
resources and therefore are not reported in the governmental funds (Note 6)393,404
Internal service funds are used by management to charge the costs of activities
such as insurance, equipment acquisition and maintenance, and certain
employees' benefits to individual funds. The assets and liabilities of the
internal service funds are therefore included in governmental activities in
the statement of net assets (excludes capital assets reported above) 46,805
Some liabilities, including bonds payable, are not due and payable in the
current period and therefore are not reported in the governmental funds:
Interest payable (1,151)
Long-term debt (Note 7)(64,840)
Net assets of governmental activities 515,906$
(Amounts in Thousands)
See accompanying notes to basic financial statements.
29
CITY OF PALO ALTOGovernmental FundsStatement of Revenues, Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2011
(Amounts in Thousands)
Capital Other
General Projects Governmental
Fund Fund Funds Total
Revenues:
Property taxes 25,688$ -$ 3,468$ 29,156$
Special assessments - - 92 92
Sales taxes 20,746 - - 20,746
Utility users tax 10,851 - - 10,851
Transient occupancy tax 8,082 - - 8,082
Other taxes and fines 7,296 - 1,661 8,957
Charges for services 22,311 - - 22,311
From other agencies 397 778 439 1,614
Permits and licenses 5,074 - 359 5,433
Investment earnings 565 1,184 521 2,270
Rental income 14,264 - 19 14,283
Other revenue 2,020 1,986 4,618 8,624
Total revenues 117,294 3,948 11,177 132,419
Expenditures:Current:
City Council 18 - - 18
City Manager 1,867 - - 1,867
City Attorney 934 - - 934
City Clerk 796 - - 796
City Auditor 131 - - 131
Administrative Services 3,285 - - 3,285
Human Resources 1,320 - - 1,320
Public Works 11,317 - - 11,317
Planning and Community Environment 9,368 - 941 10,309
Police 30,497 - 22 30,519
Fire 28,355 - - 28,355
Community Services 20,029 - - 20,029
Library 6,509 - - 6,509
Non-Departmental 7,078 - 274 7,352
Capital outlay - 35,486 - 35,486
Debt service:
Principal - - 870 870
Interest and fiscal charges - - 1,815 1,815
Total expenditures 121,504 35,486 3,922 160,912
Excess (deficiency) of revenues
over (under) expenditures (4,210) (31,538) 7,255 (28,493)
Other financing sources (uses):
Other - (101) - (101)
Transfers in (Note 4)17,932 11,202 1,189 30,323
Transfers out (Note 4)(11,000) (747) (2,605) (14,352)
Total other financing sources (uses)6,932 10,354 (1,416) 15,870
Change in fund balances 2,722 (21,184) 5,839 (12,623)
Fund balances, beginning of year 41,457 83,849 28,453 153,759
Fund balances, end of year 44,179$ 62,665$ 34,292$ 141,136$
See accompanying notes to basic financial statements.
30
CITY OF PALO ALTO
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances
of Governmental Funds to the Statement of Activities - Governmental Activities
For the Year Ended June 30, 2011
Net change in fund balances - total governmental funds (12,623)$
Amounts reported for governmental activities in the statement of activities are different
from those reported in the governmental funds above because of the following:
Governmental funds report capital outlays as expenditures. However, in the statement of
activities, the costs of these assets are capitalized and allocated over their estimated useful
lives and reported as depreciation expense. Therefore, the activities associated with
capital assets are as follows:
Capital outlay added back to fund balance for current year additions 36,564
Depreciation expense is deducted from fund balance (depreciation expense is net of
internal service fund depreciation of $4,695 (Note 6), which has already been allocated
through the internal service fund activities below (9,708)
Disposal and impairment of capital assets (7,232)
Principal payments on long-term liabilities are reported as expenditures in governmental
funds when paid. The governmental activities, however, report principal payments as
a reduction of long-term debt on the statement of net assets. Interest accrued on
long-term debt and amortization of bond issuance costs and premiums do not require
the use of current financial resources and therefore are not reported as expenditures
in governmental funds. Therefore, the activities associated with long-term debt are
as follows:
Principal paid during the year 870
Change in interest payable (1,034)
Amortization of deferred costs of issuance (19)
Amortization of bond premium 126
Internal service funds are used by management to charge the costs of activities, such
as insurance, equipment acquisition and maintenance, and employees' benefits to
individual funds. The portion of the net revenue (expense) of these internal service
funds arising out of their transactions with governmental funds is reported with
governmental activities.2,941
Change in net assets of governmental activities 9,885$
(Amounts in Thousands)
See accompanying notes to basic financial statements.
31
Variance with
Budgeted Amounts Final Budget
Actual Positive
Original Final Amounts (Negative)
18,218$ 19,507$ 20,746$ 1,239$
25,907 25,323 25,688 365
7,021 7,400 8,082 682
11,429 10,824 10,851 27
5,943 6,139 7,296 1,157
20,008 20,924 22,390 1,466
4,593 5,102 5,058 (44)
1,646 1,337 565 (772)
13,716 13,776 14,264 488
155 221 295 74
10,622 10,681 11,211 530
1,490 1,584 2,117 533
- 3,963 3,963 -
120,748 126,781 132,526 5,745
2,369 2,812 2,808 4
982 1,081 1,081 -
1,093 1,270 1,257 13
142 193 192 1
2,178 2,455 2,456 (1)
6,293 6,456 6,446 10
20,032 20,530 20,518 12
27,007 29,014 29,012 2
2,817 2,677 2,666 11
6,609 6,733 6,722 11
9,320 10,427 10,416 11
30,579 31,288 31,286 2
13,084 13,846 13,842 4
5,970 6,899 7,958 (1,059)
128,475 135,681 136,660 (979)
(7,727) (8,900) (4,134) 4,766
18,684 18,677 17,932 (745)
(10,924) (11,224) (11,000) 224
7,760 7,453 6,932 (521)
33$ (1,447)$ 2,798 4,245$
3,887
(3,963)
2,722
41,457
44,179$
CITY OF PALO ALTO
General Fund
Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual
For the Year Ended June 30, 2011
(Amounts in Thousands)
Transient occupancy tax
Property taxes
Sales taxes
Revenues:
Charges for appropriations (outflows):
Return on investments
Permits and licenses
Charges for services
Other taxes, fines and penalties
Utility users tax
Prior year encumbrances and reappropriations
Other revenues
Charges to other funds
From other agencies
Rental income
Total revenues
Total expenditures
Current:
City Attorney
City Auditor
City Clerk
City Council
City Manager
Administrative Services
Community Services
Fire
Human Resources
Library
Planning and Community Environment
Prior year encumbrances/reappropriations
Excess of revenues over expenditures, GAAP basis
Fund balance at beginning of year, GAAP basis
Fund balance at ending of year, GAAP basis
Police
Public Works
Non-Departmental
Current year encumbrances/reappropriations
Other financing sources (uses):
Transfers in
Transfers out
expenditures, budgetary basis
Adjustment to Budgetary Basis:
Excess (deficiency) of revenues over (under)
Total other financing sources (uses)
(Deficiency) of revenues over (under) expenditures
See accompanying notes to basic financial statements.
32
33
PROPRIETARY FUNDS
Introduction
Proprietary Funds account for City operations financed and operated in a manner similar to a private
business enterprise. The intent of the City is that the cost of providing goods and services be financed
primarily through user charges.
The City has elected to treat all of its Enterprise Funds as Major Funds in fiscal year 2011.
Proprietary Funds do not provide for the disclosure of budget versus actual comparisons.
Water Services Fund
This fund accounts for all financial transactions relating to the City’s Water service. Services are on a user
charge basis to residents and business owners located in Palo Alto.
Electric Services Fund
This fund accounts for all financial transactions relating to the City’s Electric service. Services are on a
user charge basis to residents and business owners located in Palo Alto.
Fiber Optics Fund
This fund accounts for all financial transactions relating to the City’s Fiber Optics service. Services are on
a user charge basis to licensees located in Palo Alto.
Gas Services Fund
This fund accounts for all financial transactions relating to the City’s Gas service. Services are on a user
charge basis to residents and business owners located in Palo Alto.
Wastewater Collection Fund
This fund accounts for all financial transactions relating to the City’s Wastewater Collection service.
Collections are on a user charge basis to residents and business owners located in Palo Alto.
Wastewater Treatment Fund
This fund accounts for all financial transactions relating to the City’s Wastewater Treatment. Services are
on a user charge basis to residents and business owners located in Palo Alto.
Refuse Services Fund
This fund accounts for all financial transactions relating to the City’s Refuse service. Services are on a
user charge basis to residents and business owners located in Palo Alto.
Storm Drainage Services Fund
This fund accounts for all financial transactions relating to the City’s Storm Drain service. Services are on
a user charge basis to residents and business owners located in Palo Alto.
Airport Fund
This fund was established to account for financial transactions relating to the Palo Alto Airport. The City
will be taking over operation of the airport from Santa Clara County no later than 2017.
Fiber
Water Electric Optics Gas
Assets:
Current assets:
Cash and investments available for operations (Note 3) 24,365$ 129,137$ 11,392$ 32,544$
Accounts receivable, net 3,507 15,572 534 2,997
Interest receivable 296 941 78 224
Due from other government agencies - - - -
Inventory of materials and supplies - - - -
Net OPEB asset (Note 12)- - - -
Restricted cash and investments with fiscal agents (Note 3)29,991 - - 978
Restricted cash for landfill closure (Note 3)- - - -
Total current assets 58,159 145,650 12,004 36,743
Noncurrent assets:
Due from other government agencies - - - -
Deferred bond issuance costs 612 53 - 167
Deposit - 9 - -
Capital assets (Note 6):
Nondepreciable 27,663 39,498 1,049 22,937
Depreciable, net 51,616 123,189 5,891 57,351
Total noncurrent assets 79,891 162,749 6,940 80,455
Total assets 138,050 308,399 18,944 117,198
Liabilities:
Current liabilities:
Accounts payable and accrued liabilities 2,504 2,659 40 1,235
Accrued salaries and benefits 151 347 25 168
Unearned revenue - - - -
Accrued compensated absences (Note 1)- - - -
Current portion of revenue bonds (Note 7)1,277 100 - 479
Accrued claims payable (Note 14)- - - -
Total current liabilities 3,932 3,106 65 1,882
Noncurrent liabilities:
Accrued compensated absences (Note 1)- - - -
Accrued claims payable (Note 14)- - - -
Advance from other fund (Note 4)- - - -
Landfill closure and post-closure care (Note 9)- - - -
Utility revenue bonds, net of
unamortized discounts/premiums (Note 7)41,895 941 - 9,464
Total noncurrent liabilities 41,895 941 - 9,464
Total liabilities 45,827 4,047 65 11,346
Net assets:
Invested in capital assets, net of related debt 66,710 161,699 6,940 71,490
Unrestricted (deficit) 25,513 142,653 11,939 34,362
Total net assets 92,223$ 304,352$ 18,879$ 105,852$
Some amounts reported for Business-Type Activities in the statement of net assets are different because certain
Internal Service Fund assets and liabilities are included with Business-Type Activities
Net assets reported in Business-Type Activities
Business-Type Activities-Enterprise Funds
CITY OF PALO ALTO
Proprietary Funds
Statement of Fund Net Assets
June 30, 2011
(Amounts in Thousands)
See accompanying notes to basic financial statements.
34
Governmental
Activities -
Wastewater Wastewater Storm Internal Service
Collection Treatment Refuse Drainage Airport Totals Funds
15,774$ 14,974$ 3,009$ 5,936$ 278$ 237,409$ 60,738$
1,683 2,244 3,209 586 - 30,332 60
113 106 64 40 1 1,863 361
- 250 - - - 250 -
- - - - - - 613
- - - - - - 23,006
- - - 1 - 30,970 -
- - 5,599 - - 5,599 -
17,570 17,574 11,881 6,563 279 306,423 84,778
- 4,250 - - - 4,250 -
22 1,340 - 148 - 2,342 -
- - - - - 9 -
22,840 18,229 2,734 2,458 - 137,408 151
44,779 21,372 416 23,702 - 328,316 19,935
67,641 45,191 3,150 26,308 - 472,325 20,086
85,211 62,765 15,031 32,871 279 778,748 104,864
331 1,289 1,736 290 5 10,089 2,523
92 207 103 32 1 1,126 134
- - - 1,213 - 1,213 -
- - - - - - 3,100
68 1,169 - 455 - 3,548 -
- - - - - - 5,873
491 2,665 1,839 1,990 6 15,976 11,630
- - - - - - 6,286
- - - - - - 18,030
- - - - 300 300 -
- - 10,771 - - 10,771 -
1,122 22,143 - 8,005 - 83,570 -
1,122 22,143 10,771 8,005 300 94,641 24,316
1,613 24,808 12,610 9,995 306 110,617 35,946
66,451 22,129 3,150 17,849 - 416,418 20,086
17,147 15,828 (729) 5,027 (27) 251,713 48,832
83,598$ 37,957$ 2,421$ 22,876$ (27)$ 668,131 68,918$
2,027
670,158$
Business-Type Activities-Enterprise Funds
See accompanying notes to basic financial statements.
35
Fiber
Water Electric Optics Gas
Operating revenues:
Sales of utilities:
Customers 24,719$ 107,892$ -$ 41,724$
City departments 1,313 3,253 733 1,135
Surplus energy - 3,680 - -
Service connection charges and miscellaneous 282 1,329 - 516
Charges for services - - - -
Other 310 5,955 2,589 209
Total operating revenues 26,624 122,109 3,322 43,584
Operating expenses:
Purchase of utilities:
Retail 10,678 56,368 - 21,464
Surplus energy - 4,879 - -
Administrative and general 3,268 4,673 516 3,039
Engineering (operating)247 1,200 - 280
Resource management and energy efficiency 576 5,868 - 1,602
Operations and maintenance 4,885 9,340 770 3,297
Rent 2,122 3,588 14 230
Depreciation and amortization 1,422 7,341 267 1,848
Claims payments and changes in
estimated self-insurance liability - - - -
Refund of charges for services - - - -
Compensated absences and other benefits - - - -
Total operating expenses 23,198 93,257 1,567 31,760
Operating income (loss)3,426 28,852 1,755 11,824
Nonoperating revenues (expenses):
Return on investments 181 3,205 323 821
Interest expense (1,011) (7,247) - (488)
Gain (loss) on disposal of capital assets (248) (49) - (46)
Other nonoperating revenues 610 - - -
Total nonoperating revenues (expenses)(468) (4,091) 323 287
Income (loss) before transfers and capital contributions 2,958 24,761 2,078 12,111
Capital contributions 864 - - -
Transfers in 123 550 - 35
Transfers out (449) (12,206) (9) (5,925)
Change in net assets 3,496 13,105 2,069 6,221
Net assets, beginning of year 88,727 291,247 16,810 99,631
Net assets, end of year 92,223$ 304,352$ 18,879$ 105,852$
Some amounts reported for Business-Type Activities in the statement of activities are different because certain
Internal Service Fund activities are included with Business-Type Activities
Change in net assets reported in Business-Type Activities
Business-Type Activities-Enterprise Funds
CITY OF PALO ALTO
Proprietary Funds
Statement of Revenues, Expenses and Changes in Fund Net Assets
For the Year Ended June 30, 2011
(Amounts in Thousands)
See accompanying notes to basic financial statements.
36
Governmental
Activities-
Wastewater Wastewater Storm Internal Service
Collection Treatment Refuse Drainage Airport Totals Funds
14,159$ 11,104$ 25,137$ 5,383$ -$ 230,118 -$
128 7,468 1,232 357 - 15,619 -
- - - - - 3,680 -
575 - - - - 2,702 -
- - - - - - 72,001
232 258 4,100 56 - 13,709 -
15,094 18,830 30,469 5,796 - 265,828 72,001
7,414 - 12,529 - - 108,453 -
- - - - - 4,879 -
943 - 1,622 348 31 14,440 8,174
195 2,167 413 345 - 4,847 -
- - - 231 - 8,277 -
2,227 14,515 10,824 885 - 46,743 8,299
115 - 4,289 - - 10,358 -
1,457 2,195 657 857 - 16,044 4,695
- - - - - - 6,772
- - - - - - 114
- - - - - - 42,387
12,351 18,877 30,334 2,666 31 214,041 70,441
2,743 (47) 135 3,130 (31) 51,787 1,560
454 471 99 164 4 5,722 1,200
(90) (632) (606) (542) - (10,616) -
- - - (35) - (378) 85
- - - - - 610 59
364 (161) (507) (413) 4 (4,662) 1,344
3,107 (208) (372) 2,717 (27) 47,125 2,904
507 1,633 - - - 3,004 -
75 - 1,036 325 - 2,144 1,703
(271) (9) (326) (32) - (19,227) (591)
3,418 1,416 338 3,010 (27) 33,046 4,016
80,180 36,541 2,083 19,866 - 64,902
83,598$ 37,957$ 2,421$ 22,876$ (27)$ 68,918$
1,075
34,121$
Business-Type Activities-Enterprise Funds
See accompanying notes to basic financial statements.
37
Fiber
Water Electric Optics Gas
Cash flows from operating activities:
Cash received from customers 25,104$ 112,652$ (21)$ 42,302$
Cash refunds to customers - - - -
Cash payments to suppliers for goods and services (19,230) (84,649) (762) (27,212)
Cash payments to employees (3,237) (4,618) (510) (2,993)
Internal activity- receipts (payment) from (to) other funds 1,313 3,253 733 1,135
Other receipts 310 5,955 2,589 209
Net cash provided by (used in)
operating activities 4,260 32,593 2,029 13,441
Cash flows from noncapital financing activities:
Receipt (disbursement) of loans from (to) other funds - - - -
Transfers in 123 550 - 35
Transfers out (449) (12,206) (9) (5,925)
Cash flows used in noncapital financing activities (326) (11,656) (9) (5,890)
Cash flows from capital and related financing activities:
Acquisition and construction of capital assets (8,328) (11,137) (587) (2,936)
Capital grants and contributions 864 - - -
Interest subsidy received from Build America Bond 610 - - -
Proceeds from debt issuance - - - -
Principal paid on long-term debt (1,200) (100) - (459)
Interest paid on long-term debt (1,029) (7,236) - (478)
Cash flows used in capital and related
financing activities (9,083) (18,473) (587) (3,873)
Cash flows from investing activities:
Interest received 274 3,327 323 839
Net change in cash and cash equivalents (4,875) 5,791 1,756 4,517
Cash and cash equivalents, beginning of year 59,231 123,346 9,636 29,005
Cash and cash equivalents, end of year $ 54,356 $ 129,137 $ 11,392 $ 33,522
Financial statement presentation:
Cash and investments from operations 24,365$ 129,137$ 11,392$ 32,544$
Cash and investments with fiscal agent 29,991 - - 978
Cash and cash equivalents, end of year 54,356$ 129,137$ 11,392$ 33,522$
Reconciliation of operating income (loss) to
net cash provided by (used in) operating activities:
Operating income (loss)3,426$ 28,852$ 1,755$ 11,824$
Adjustments to reconcile operating income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 1,422 7,341 267 1,848
Other - - - -
Change in assets and liabilities:
Accounts receivable 103 (249) (21) 62
Inventory of materials and supplies - - - -
Deposits - (9) - -
Net OPEB asset - - - -
Accounts payable and accrued liabilities (722) (3,397) 22 (339)
Accrued salaries and benefits 31 55 6 46
Accrued compensated absences - - - -
Unearned revenue - - - -
Landfill closure and post-closure care - - - -
Accrued claims payable and other liabilities - - - -
Net cash provided by (used in)
operating activities $ 4,260 $ 32,593 $ 2,029 $ 13,441
Business-Type Activities-Enterprise Funds
CITY OF PALO ALTO
Proprietary Funds
Statement of Cash Flows
For the Year Ended June 30, 2011
(Amounts in Thousands)
See accompanying notes to basic financial statements.
38
Governmental
Activities-
Wastewater Wastewater Storm Internal Service
Collection Treatment Refuse Drainage Airport Totals Funds
14,810$ 10,080$ 25,170$ 5,128$ -$ 235,225$ 71,979$
- - - - - - (114)
(9,782) (18,522) (27,893) (1,672) 5 (189,717) (8,523)
(925) 30 (1,606) (344) (30) (14,233) (51,688)
128 7,468 1,232 357 - 15,619 (4,347)
232 258 3,748 56 - 13,357 59
4,463 (686) 651 3,525 (25) 60,251 7,366
- - - (550) 300 (250) -
75 - 1,036 325 - 2,144 1,703
(271) (9) (326) (32) - (19,227) (591)
(196) (9) 710 (257) 300 (17,333) 1,112
(4,226) (3,220) (284) (1,170) - (31,888) (2,351)
507 1,906 - - - 3,277 -
- - - - - 610
- 3,970 - - - 3,970 -
(64) (850) - (430) - (3,103) -
(89) (405) (606) (511) - (10,354) -
(3,872) 1,401 (890) (2,111) - (37,488) (2,351)
459 475 113 163 3 5,976 1,241
854 1,181 584 1,320 278 11,406 7,368
14,920 13,793 8,024 4,617 - 262,572 53,370
$ 15,774 $ 14,974 $ 8,608 $ 5,937 $ 278 $ 273,978 $ 60,738
15,774$ 14,974$ 3,009$ 5,936$ 278$ 237,409$ 60,738$
- - 5,599 1 - 36,569 -
15,774$ 14,974$ 8,608$ 5,937$ 278$ 273,978$ 60,738$
2,743$ (47)$ 135$ 3,130$ (31)$ 51,787$ 1,560$
1,457 2,195 657 857 - 16,044 4,695
- - - - - - 59
76 (1,024) 33 22 - (998) (22)
- - - - - - (156)
- - - - - (9) -
- - - - - - 236
169 (1,840) 162 (211) 5 (6,151) 17
18 30 16 4 1 207 (415)
- - - - - - (1,033)
- - - (277) - (277) -
- - (352) - - (352) -
- - - - - - 2,425
$ 4,463 $ (686) $ 651 $ 3,525 $ (25) $ 60,251 $ 7,366
Business-Type Activities-Enterprise Funds
See accompanying notes to basic financial statements.
39
40
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41
FIDUCIARY FUNDS
Introduction
These funds account for assets held by the City in trust or as an agent for various assessment and
community facilities districts. The financial activities of these funds are excluded from the Citywide
financial statements, but are presented in separate Fiduciary Fund financial statements.
Agency
Funds
Assets:
Cash and investments available for operations (Note 3)3,118$
Restricted cash and investments with fiscal agents (Note 3)3,906
Interest receivable 32
Total assets 7,056$
Liabilities:
Due to bondholders 6,145$
Due to other governments 911
Total liabilities 7,056$
CITY OF PALO ALTO
Statement of Fiduciary Net Assets
June 30, 2011
(Amounts in Thousands)
See accompanying notes to basic financial statements.
42
CITY OF PALO ALTO
Index to the Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
43
Page
1. Summary of Significant Accounting Policies ......................................................................... 45
2. Budgets and Budgetary Accounting ........................................................................................ 53
3. Cash and Investments .............................................................................................................. 54
4. Interfund Transactions ............................................................................................................. 58
5. Notes and Loans Receivable ................................................................................................... 60
6. Capital Assets .......................................................................................................................... 65
7. General Long-Term Obligations ............................................................................................. 71
8. Special Assessment Debt ......................................................................................................... 78
9. Landfill Closure and Post-Closure Care .................................................................................. 79
10. Net Assets and Fund Balances ................................................................................................ 80
11. Pension Plans ........................................................................................................................... 82
12. Retiree Health Benefits ........................................................................................................... 86
13. Deferred Compensation Plan ................................................................................................... 88
14. Risk Management .................................................................................................................... 88
15. Joint Ventures .......................................................................................................................... 90
16. Commitments and Contingencies ............................................................................................ 93
17. Subsequent Events ................................................................................................................... 99
Notes are essential to present fairly the information contained in the overview level of basic financial
statements. Narrative explanations are intended to communicate information that is not readily apparent
or cannot be included in the statements and schedules themselves, and to provide additional disclosures as
required by the Governmental Accounting Standards Board.
44
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
45
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Palo Alto (the City) was incorporated in 1894 and operates as a charter city, having had its
first charter granted by the State of California in 1909. The City operates under the Council-Manager
form of government and provides the following services: public safety (police and fire), public works,
electric, fiber optics, water, gas, wastewater, storm drain, refuse, golf course, planning and zoning,
general administration services, library, open space and science, recreational and human services.
(a) Reporting Entity
The City is governed by a nine-member council, elected by City residents. The City is legally
separate and fiscally independent, which means it can issue debt, set and modify budgets and fees
and sue or be sued. The accompanying basic financial statements present the financial activities
of the City, which is the primary government presented, along with the financial activities of its
component units, which are entities for which the City is financially accountable. Although
separate legal entities, blended component units are, in substance, part of the City’s operations
and are reported as an integral part of the City’s financial statements. This City’s component
units, which are described below, are blended.
The Palo Alto Public Improvement Corporation (the Corporation) provides financing of
public capital improvements for the City through the issuance of Certificates of Participation
(COPs), a form of debt that allows investors to participate in a stream of future lease payments.
Proceeds from the COPs are used to construct projects that are leased to the City. The lease
payments are sufficient in timing and amount to meet the debt service requirements of the COPs.
The Board of Directors of the Corporation is composed of the same members as the City Council.
The Corporation is controlled by the City, which performs all accounting and administrative
functions for the Corporation. The financial activities of the Corporation are included in the Golf
Course and Civic Center Debt Service Funds and the Capital Projects Fund.
The Palo Alto Redevelopment Agency (the Agency) is a separate government entity whose
purpose is to prepare and implement plans for improvement, rehabilitation, and development of
certain areas within the City. The City Council and the Redevelopment Agency Board are
composed of the same individuals. Certain administrative and accounting functions are
performed by City staff. The financial activities of the Agency have been included in these
financial statements in the Redevelopment Agency Special Revenue Fund. As of June 29, 2011,
changes to the California Redevelopment Law have terminated the authority of redevelopment
agencies to undertake new obligations to redevelop property. On September 12, 2011, the City
filed Ordinance No. 5126 dissolving the operations of the Agency, as discussed in Note 17.
Financial statements for the Corporation and the Agency may be obtained from the City of Palo
Alto, Administrative Services Department, 4th Floor, 250 Hamilton Avenue, Palo Alto, CA
94301.
(b) Basis of Presentation
The City’s basic financial statements are prepared in conformity with accounting principles
generally accepted in the United States of America. The Governmental Accounting Standards
Board (GASB) is the acknowledged standard setting body for establishing accounting and
financial reporting standards followed by governmental entities in the United States.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
46
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
These standards require that the financial statements described below be presented:
Government-Wide Statements: The statement of net assets and the statement of activities
display information about the primary government and its component units. These statements
include the financial activities of the overall City government, except for fiduciary activities.
Eliminations have been made to minimize the double counting of internal activities. However,
interfund goods and services transactions have not been eliminated in the consolidation process.
These statements distinguish between the governmental and business-type activities of the City.
Governmental activities generally are financed through taxes, intergovernmental revenues, and
other non-exchange transactions. Business-type activities are financed in whole or in part by fees
charged to external parties.
The statement of activities presents a comparison between direct expenses and program revenues
for each segment of the business-type activities of the City and for each function of the City’s
governmental activities. Direct expenses are those that are specifically associated with a program
or function and, therefore, are clearly identifiable to a particular function. Program revenues
include: (a) charges paid by the recipients for goods and services offered by the programs, (b)
grants and contributions that are restricted to meeting the operational needs of a particular
program, and (c) fees, grants and contributions that are restricted to financing the acquisition or
construction of capital assets. Revenues that are not classified as program revenues, including all
taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the City’s
funds, including fiduciary funds and blended component units. Separate statements for each fund
category – governmental, proprietary and fiduciary – are presented. The emphasis of fund
financial statements is on major individual governmental and enterprise funds, each of which is
displayed in a separate column. All remaining governmental, enterprise and internal service
funds are aggregated and reported as non-major funds.
Proprietary fund operating revenues, such as charges for services, result from exchange
transactions associated with the principal activity of the fund. Exchange transactions are those in
which each party receives and gives up essentially equal values. Non-operating revenues, such as
subsidies and investment earnings, result from non-exchange transactions or ancillary activities.
Operating expenses for enterprise funds and internal service funds include the cost of sales and
services, administrative expenses, and depreciation on capital assets. All expenses not meeting
this definition are reported as non-operating expenses.
(c) Major Funds
The City’s major governmental and enterprise funds need to be identified and presented
separately in the fund financial statements. All other funds, called non-major funds, are
combined and reported in a single column, regardless of their fund type.
Major funds are defined as funds that have either assets, liabilities, revenues or
expenditures/expenses equal to 10 percent of their fund type total and 5 percent of the grand total.
The General Fund is always a major fund. The City may also select other funds it believes should
be presented as major funds on a qualitative basis.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
47
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The City reported the following major governmental funds in the accompanying financial
statements:
General Fund – This is the City’s primary operating fund. It accounts for all financial resources
of the general government, except those required to be accounted for in another fund.
Capital Projects Fund – This fund accounts for resources used for the acquisition and
construction of capital facilities by the City, with the exception of those assets financed by
proprietary funds.
The City reported all of its enterprise funds as major funds in the accompanying financial
statements.
Water Services Fund – This fund accounts for all financial transactions relating to the City’s
water service. Services are on a user-charge basis to residents and business owners located in the
City.
Electric Services Fund – This fund accounts for all financial transactions relating to the City’s
electric service. Services are on a user-charge basis to residents and business owners located in
the City.
Fiber Optics Fund – This fund accounts for all financial transactions relating to the City’s fiber
optics service. Services are on a user-charge basis to licensees located in the City.
Gas Services Fund – This fund accounts for all financial transactions relating to the City’s gas
service. Services are on a user-charge basis to residents and business owners in the City.
Wastewater Collection Services Fund – This fund accounts for all financial transactions
relating to the City’s wastewater collection. Services are on a user-charge basis to residents and
business owners located in the City.
Wastewater Treatment Services Fund – This fund accounts for all financial transactions
relating to the City’s wastewater treatment. Services are on a user-charge basis to residents and
business owners located in the City.
Refuse Services Fund – This fund accounts for all financial transactions relating to the City’s
refuse service. Services are on a user-charge basis to residents and business owners located in the
City.
Storm Drainage Services Fund – This fund accounts for all financial transactions relating to the
City’s storm drain service. Services are on a user-charge basis to residents and business owners
located in the City.
Airport Fund – This fund was established to account for financial transactions relating to the
Palo Alto Airport. The City will be taking over operation of the airport from Santa Clara County
no later than 2017.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
48
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The City also reports the following funds:
Internal Service Funds – These funds account for fleet replacement and maintenance,
technology, central duplicating, printing and mailing services, administration of compensated
absences and health benefits, and the City’s self-insured workers’ compensation and general
liability programs, all of which are provided to other departments on a cost-reimbursement basis.
Also included is the Retiree Health Benefits Internal Service Fund, which accounts for benefits to
retirees.
Vehicle Replacement and Maintenance – This fund accounts for the maintenance and replacement
of vehicles and equipment used by all City departments. The source of revenues is on
reimbursement of fleet replacement and maintenance costs allocated to each department by usage
of vehicle..
Technology – This fund accounts for replacement and upgrade of technology, and covers four
primary areas used by all City departments: desktop, infrastructure, applications, and technology
research and development. The source of revenue is on reimbursement of costs for support
provided to other departments.
Printing and Mailing Services – This fund accounts for central duplicating, printing and mailing
services provided to all City departments. The source of revenue for this fund is from
reimbursement of costs for services and supplies purchased by other departments.
General Benefits – This fund accounts for the administration of compensated absences and health
benefits.
Workers’ Compensation Insurance Program – This fund accounts for the administration of the
City’s self-insured workers’ compensation program.
General Liability Insurance Program – This fund accounts for the administration of the City’s
self-insured general liability program.
Retiree Health Benefit – This fund accounts for the retiree health benefits.
Fiduciary Funds – These funds account for assets held by the City, an agent for assessment
districts and members of the Cable Joint Powers Authority. These funds are custodial in nature
and do not involve measurement of results of operations. The City maintains three agency funds.
The financial activities of these funds are excluded from the government-wide financial
statements, but are presented in separate fiduciary fund financial statements. Agency funds apply
the accrual basis of accounting but do not have a measurement focus.
California Avenue Parking Assessment District – This fund accounts for the receipts and
disbursements associated with the 1993 Parking District No. 92-13 Assessment Bonds.
Cable Joint Powers Authority – This fund accounts for the activities of the cable television
system on behalf of the members.
University Avenue Area Parking Assessment District – This fund accounts for the receipts and
disbursements associated with the Series 2001-A University Avenue Area Off-Street Parking
Assessments Bonds.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
49
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(d) Basis of Accounting
The government-wide and proprietary fund financial statements are reported using the economic
resources measurement focus and the full accrual basis of accounting. Revenues are recorded
when earned and expenses are recorded at the time liabilities are incurred, regardless of when the
related cash flows take place.
Governmental funds are reported using the current financial resources measurement focus and
the modified accrual basis of accounting. Under this method, revenues are recognized when
measurable and available. The City considers revenues susceptible to accrual reported in the
governmental funds to be available if the revenues are collected within ninety days after year-end,
except for property taxes, which are collected within sixty days after year-end.
Expenditures are recorded when the related fund liability is incurred, except for principal and
interest on general long-term debt, claims and judgments, and compensated absences, which are
recognized as expenditures to the extent they have matured. General capital asset acquisitions are
reported as expenditures in governmental funds. Proceeds of general long-term debt and
acquisitions under capital leases are reported as other financing sources.
Revenues susceptible to accrual include taxes, intergovernmental revenues, interest and charges
for services.
Grant revenues are recognized in the fiscal year in which all eligibility requirements are met.
Under the terms of grant agreements, the City may fund certain programs with a combination of
cost-reimbursement grants, categorical block grants, and general revenues. Thus, both restricted
and unrestricted net assets may be available to finance program expenditures. The City’s policy
is to first apply restricted grant resources to such programs, followed by general revenues if
necessary.
Certain indirect costs are included in program expenses reported for individual functions and
activities. Transactions representing the exchange of interfund goods and services have also been
included.
The City follows those Financial Accounting Standards Board (FASB) Statements and
predecessor pronouncements issued before November 30, 1989, which do not conflict with
GASB Statements, in both the government-wide financial statements for the governmental and
business-type activities and the proprietary fund financial statements. The City has elected not to
apply FASB pronouncements issued after November 30, 1989 to business-type activities and
enterprise funds.
(e) Cash and Cash Equivalents
Restricted and unrestricted pooled cash and investments held in the City Treasury, and other
unrestricted investments invested by the City Treasurer, are considered cash equivalents for
purposes of the statement of cash flows because the City’s cash management pool and funds
invested by the City Treasurer possess the characteristics of demand deposit accounts. Other
restricted and unrestricted investments with maturities of less than three months at the time of
purchase are considered cash equivalents for purposes of the statement of cash flows.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
50
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(f) Deposits and Investments
The City’s investments are carried at fair value, as required by GASB Statement No. 31,
Accounting and Financial Reporting for Certain Investments and for External Investment Pools.
The City adjusts the carrying value of its investments to reflect their fair value at each fiscal year-
end, and it includes the effects of these adjustments in income for that fiscal year.
(g) Inventory of Materials and Supplies
Materials and supplies are held for consumption and are valued at average cost. The consumption
method is used to account for inventories. Under the consumption method, inventories are
recorded as expenditures at the time inventory items are used, rather than purchased.
(h) Compensated Absences
The liability for compensated absences includes the vested portion of vacation, sick leave, and
overtime compensation pay. The City’s liability for accrued compensated absences is recorded in
the General Benefits Fund. Amounts expected to be “permanently liquidated”, such as what is
due to be paid because of a realized employment action, are recorded as fund liabilities in the
General Benefits Fund. The fund is reimbursed through payroll charges to all other funds.
Earned but unpaid vacation and overtime compensation pay are recognized as an expense or
expenditure in the proprietary and governmental fund types when earned because the City has
provided financial resources for the full amount through its budgetary process. Vested
accumulated sick pay is paid in the event of termination due to disability and, under certain
conditions, specified in employment agreements.
During the fiscal year ended June 30, 2011, changes to the compensated absences were as follows
(in thousands):
Beginning balance 10,419$
Additions 5,770
Payments (6,803)
Ending balance 9,386$
Current portion 3,100$
(i) Property Tax
Santa Clara County (the County) assesses properties and bills, collects, and distributes property
taxes to the City. The County remits the entire amount levied and handles all delinquencies,
retaining interest and penalties.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
51
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(i) Property Tax (Continued)
The County assesses property values, levies bills and collects taxes as follows:
Secured Unsecured
Lien Dates January 01 January 01
Levy Dates October 01 July 01
Due Dates 50% on November 01 Upon receipt of billing
50% on February 01
Delinquent after December 10 (for November)August 31
April 10 (for February)
The term “unsecured” refers to taxes on personal property other than real estate, land and
buildings. These taxes are secured by liens on the property being taxed. Property tax revenues
are recognized by the City in the fiscal year they are assessed, provided they become available as
defined above within 60 days after year-end.
(j) Rounding
All amounts included in the basic financial statements and footnotes are presented to the nearest
thousand in accordance with the City’s policy.
(k) Effects of New Pronouncements
During the year ended June 30, 2011, the City implemented the following GASB Statement:
In February 2009, GASB issued Statement No. 54, Fund Balance Reporting and Governmental
Fund Type Definitions. The objective of this Statement is to enhance the usefulness of fund
balance information by providing clearer fund balance classifications that can be more
consistently applied and by clarifying the existing governmental fund type definitions. This
Statement establishes fund balance classifications that comprise a hierarchy based primarily on
the extent to which a government is bound to observe constraints imposed upon the use of the
resources reported in governmental funds. The initial distinction in reporting fund balance
information is identifying amounts that are considered nonspendable, such as fund balance
associated with prepaid items. This Statement provides for additional classification as restricted,
committed, assigned and unassigned based on the relative strength of the constraints that control
how specific amounts can be spent. The details for the governmental fund balance classifications
prescribed under this Statement are separately discussed in Note 10.
In December 2009, GASB issued Statement No. 57, OPEB Measurements by Agent Employers
and Agent Multiple-Employer Plans. This statement clarifies that when actuarially determined
OPEB measures are reported by an agent multiple-employer OPEB plan and its participating
employers, those measures should be determined as of a common date and at a minimum
frequency to satisfy the agent multiple-employer OPEB plan’s financial reporting requirements.
The City participates in the California Employers’ Retirees Benefit Trust (CERBT), an agent
multiple-employer OPEB plan, which requires all participating employers to have the same
actuarial valuation date. As a result, the City conducted its biennial valuation on June 30, rather
than January 1, effective for 2011.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
52
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(k) Effects of New Pronouncements (Continued)
The City is currently analyzing its accounting practices to determine the potential impact on the
financial statements for the following GASB Statements:
In November 2010, GASB issued Statement No. 60, Accounting and Financial Reporting for
Service Concession Arrangements. This Statement addresses how to account for and report
service concession arrangements (SCAs), a type of public-private or public-public partnership
that state and local governments are increasingly entering into. Common examples of SCAs
include long-term arrangements between a transferor (a government) and an operator
(governmental or nongovernmental entity) in which the transferor conveys to an operator the
right and related obligation to provide services through the use of infrastructure or another public
Asset in exchange for significant consideration, and the operator collects and is compensated by
fees from third parties. Application of this Statement is effective for the City’s fiscal year ending
June 30, 2013.
In November 2010, GASB issued Statement No. 61, The Financial Reporting Entity: Omnibus.
GASB Statement No. 61 is designed to improve financial reporting for governmental entities by
amending the requirements of GASB Statement No. 14, The Financial Reporting Entity, and
GASB Statement No. 34, Basic Financial Statements - and Management’s Discussion and
Analysis - for State and Local Governments, to better meet the needs of users and address
reporting entity issues that have come to light since these statements were issued in 1991 and
1999, respectively. GASB Statement No. 61 improves the information presented about the
financial reporting entity, which is comprised of a primary government and related entities
(component units) and amends the criteria for blending – that is, reporting component units as if
they were part of the primary government – in certain circumstances. Application of this
Statement is effective for the City’s fiscal year ending June 30, 2013.
In December 2010, GASB issued Statement No. 62, Codification of Accounting and Financial
Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements.
The objective of this Statement is to incorporate into the GASB’s authoritative literature certain
accounting and financial reporting guidance that is included in the FASB and AICPA
pronouncements issued on or before November 30, 1989, which does not conflict with or
contradict GASB pronouncements. This Statement also supersedes Statement No. 20, Accounting
and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use
Proprietary Fund Accounting. The requirements of this Statement are effective for the City’s
fiscal year ending June 30, 2013.
In June 2011, GASB issued Statement No. 63, Financial Reporting of Deferred Outflows of
Resources, Deferred Inflows of Resources, and Net Position. This Statement provides financial
reporting guidance for deferred outflows of resources and deferred inflows of resources. This
Statement also amends the net asset reporting requirements in Statement No. 34, Basic Financial
Statements—and Management’s Discussion and Analysis—for State and Local Governments, and
other pronouncements by incorporating deferred outflows of resources and deferred inflows of
resources into the definitions of the required components of the residual measure and by
renaming that measure as net position, rather than net assets. The requirements of this Statement
are effective for the City’s fiscal year ending June 30, 2013.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
53
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(k) Effects of New Pronouncements (Continued)
In June 2011, GASB issued Statement No. 64, Derivative Instruments: Application of Hedge
Accounting Termination Provisions. This Statement sets forth criteria to establish when the
effective hedging relationship continues and hedge accounting should continue to be applied.
The requirements of this Statement enhance comparability and improve financial reporting by
clarifying the circumstances in which hedge accounting should continue when a swap
counterparty, or a swap counterparty’s credit support provider, is replaced. The requirements of
this Statement are effective for the City’s fiscal year ending June 30, 2012.
(l) Use of Estimates
The accompanying basic financial statements have been prepared on the modified accrual and
accrual basis of accounting in accordance with generally accepted accounting principles. This
requires management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from those estimates.
NOTE 2 – BUDGETS AND BUDGETARY ACCOUNTING
1. The City Manager submits to the City Council a proposed operating budget for the fiscal year
commencing the following July 1. The operating budget includes proposed expenditures and the
means of financing them.
2. Public hearings are conducted to obtain public comments.
3. The Adopted Budget is legally enacted through passage of a budget ordinance for all funds except
Agency Funds.
4. The City Manager is authorized to reallocate funds from a contingent account maintained in the
General Fund in conformance with the adopted policies set by the City Council. Additional
appropriations to departments in the General Fund, or to total appropriations for all other budgeted
funds, or transfers of appropriations between funds, require approval by the City Council. These
amendments are added to the Adopted Budget and the resulting totals are reflected as Adopted
Budget amounts.
5. As defined in the municipal code, expenditures may not exceed budgeted appropriations at the
department level for the General Fund, and at the fund level for Special Revenue and Debt Service
Funds.
6. Formal budgetary integration is employed as a management control device during the year in all
funds except Agency Funds.
7. Budgets for governmental funds are adopted on a basis consistent with generally accepted accounting
principles (GAAP) for all funds, except that General Fund encumbrances are treated as budgetary
expenditures when incurred.
8. Expenditures for the Capital Projects Fund are budgeted and maintained on a project length basis.
Budget to actual comparisons for these expenditures have been excluded from the accompanying
financial statements.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
54
NOTE 3 – CASH AND INVESTMENTS
The City pools cash from all sources and all funds, except restricted bond proceeds with fiscal agents, and
invests its pooled idle cash according to State of California law and the City’s Investment Policy. The
basic principles underlying the City’s investment philosophy are to ensure the safety of public funds,
ensure that sufficient funds are available to meet current expenditures, and achieve a reasonable rate of
return on investments.
Policies
The City invests in individual investments and in investment pools. Individual investments are evidenced
by specific identifiable securities instruments, or by an electronic entry registering the owner in the
records of the institution issuing the security, called the book entry system. In order to increase security,
the City employs the trust department of a bank as the custodian of certain City managed investments.
Classification
Cash and investments are classified in the financial statements as shown below, based on whether or not
their use is restricted under the terms of City debt instruments or agency agreements (in thousands):
Governmental Business-Type Fiduciary
Activities Activities Funds Total
Cash and investments:
Available for operations 148,452$ 237,409$ 3,118$ 388,979$
Held with fiscal agents 42,187 30,970 3,906 77,063
Held for landfill closure costs - 5,599 - 5,599
Total cash and investments 190,639$ 273,978$ 7,024$ 471,641$
Investments Authorized by the City’s Investment Policy and Debt Agreements
The table below identifies the investment types that are authorized by the City’s Investment Policy. The
table also identifies certain provisions of the City’s Investment Policy that address interest rate risk, credit
risk and concentration of credit risk. The table addresses investments of debt proceeds held by bond
trustees that are governed by the provisions of debt agreements of the City, rather than the general
provisions of the City’s Investment Policy.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
55
NOTE 3 – CASH AND INVESTMENTS (Continued)
Maximum
Maturity
Minimum Credit
Quality
Maximum
Percentage of
Portfolio
Maximum
Investment in One
Issuer
U.S. Government Securities 10 years N/A No Limit No Limit
U.S. Government Agency Securities (C) 10 years N/A No Limit (A) No Limit
Certificates of Deposit 10 years N/A 20%
10% of the par
value of portfolio
Bankers Acceptances 180 days (D) N/A (D) 30% $5 million
Commercial Paper 270 days AAA 15% $3 million (B)
Local Agency Investment Fund N/A N/A No Limit
$50 million per
account
Short-Term Repurchase Agreements 1 year
N/A No Limit No Limit
City of Palo Alto Bonds N/A N/A No Limit No Limit
Money Market Deposit Accounts N/A N/A (E) No Limit No Limit
Mutual Funds (F) N/A N/A 20% 10%
Negotiable Certificates of Deposit 10 years N/A 10% $5 million
Medium-Term Corporate Notes 5 years AA 10% $5 million
10 years AA/AA2 10% No Limit
(A)
(B) The lesser of $3 million or 10% of outstanding commercial paper of any one institution.
Debt Agreements:
(C)
(D)
(E)
(F) Utility Revenue Bonds 2002 Series A, Golf PIC COP 1998, University Avenue Parking Bond 2001 and University Avenue
Parking Bond 2002 are allowed to invest in the California Asset Management Program.
Authorized Investment Type
Bonds of State of California Municipal
Agencies
Callable and multi-step securities are limited to no more than 25% of the par value of the portfolio, provided that: 1) the
potential call dates are known at the time of purchase, 2) the interest rates at which they "step-up" are known at the time of
purchase, 3) the entire face value of the security is redeemed at the call date.
Utility Revenue Bonds 2002 Series A and 1999 Series A allow general obligations of states with a minimum credit quality
rating of A2/A by Moody's and Standard & Poor's.
Utility Revenue Bonds 2002 Series A and 1999 Series A require a minimum credit quality rating of A-1/P-1 by Moody's
and Standard & Poor's and maturing after no more than 360 days. Utility Revenue Bonds 1995 limit the maximum maturity
to 365 days.
Water Revenue Bonds 2009 Series A, Utility Revenue Bonds 2002 Series A and 1999 Series A require a minimum credit
quality rating of AAAm or AAAm-G by Standard & Poor's.
The City must maintain required amounts of cash and investments with trustees under the terms of certain
debt issues. These funds are unexpended bond proceeds or are pledged as reserves to be used if the City
fails to meet its obligations under these debt issues. The California Government Code requires these
funds to be invested in accordance with City ordinance, bond indentures or State statute. All these funds
have been invested as permitted under the Code.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
56
NOTE 3 – CASH AND INVESTMENTS (Continued)
Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates may adversely affect the fair value of an
investment. Normally, the longer the maturity of an investment, the greater the sensitivity of its fair value
to changes in market interest rates.
Information about the sensitivity of the fair values of the City’s investments (including investments held
by bond trustees) to market rate fluctuations is provided by the following table that shows the distribution
of the City’s investments by maturity or earliest call date (in thousands):
Type of Investments
Less Than One
Year
One to
Three Years
Three to
Five Years
Over
Five Years Total
U.S. Federal Agency Securities 42,379$ 107,942$ 113,381$ 96,853$ 360,555$
U.S. Treasury Notes 6,027 4,129 - - 10,156
Money Market Mutual Funds 21,326 - - - 21,326
California Asset Management Program 47,221 - - - 47,221
Local Agency Investment Fund 30,333 - - - 30,333
Total Investments 147,286$ 112,071$ 113,381$ 96,853$ 469,591
Certificates of Deposit 167
Cash in bank and on hand 1,883
Total Cash and Investments 471,641$
Local Agency Investment Fund
The City is a participant in the Local Agency Investment Fund (LAIF) that is regulated by California
Government Code Section 16429 under the oversight of the Treasurer of the State of California. LAIF
management calculates the fair value and cost of the entire LAIF pool. The City adjusts its cost basis
invested in LAIF to fair value based on this ratio. The balance available for withdrawal on demand is
based on accounting records maintained by LAIF, which are recorded on an amortized cost basis. 5.01%
of LAIF’s investment portfolio are collateralized mortgage obligations, mortgage-backed securities, other
asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies,
government-sponsored enterprises, and corporations. At June 30, 2011, these investments matured in an
average of 237 days.
California Asset Management Program
The City is a voluntary participant in the California Asset Management Program (CAMP). CAMP is an
investment pool offered by the California Asset Management Trust (the Trust). The Trust is a joint
powers authority and public agency created by the Declaration of Trust and established under the
provisions of the California Joint Exercise of Powers Act (California Government Code Sections 6500 et
seq., or the “Act”) for the purpose of exercising the common power of its participants to invest certain
proceeds of debt issues and surplus funds. The Pool’s investments are limited to investments permitted
by subdivisions (a) to (n), inclusive, of Section 53601 of the California Government Code. The City
reports its investments in CAMP at the fair value amounts provided by CAMP, which is the same as the
value of the pool share. At June 30, 2011, the fair value approximated the City’s cost. At June 30, 2011,
these investments have an average maturity of 57 days.
Money market mutual funds are available for withdrawal on demand and at June 30, 2011, matured in an
average of 28 days.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
57
NOTE 3 – CASH AND INVESTMENTS (Continued)
Investment with Fair Values Highly Sensitive to Interest Rate Fluctuations
At June 30, 2011, the City’s investments (including investments held by bond trustees) include U.S.
Federal Agency Callable Securities in the amount of $67.9 million that are highly sensitive to interest rate
fluctuations (to a greater degree than already indicated in the information provided above). These
securities are subject to early redemption in a period of declining interest rates. The resultant reduction in
expected total cash flows affects the fair value of these securities and makes the values of these securities
highly sensitive to changes in interest rates.
Credit Risk
Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the
investment. This is measured by the assignment of a rating by a nationally recognized statistical rating
organization. Presented below is the actual rating as provided by Standard & Poor’s investment rating
system as of June 30, 2011, for each investment type (in thousands):
Investment Type AAA/AAAm Total
U.S. Federal Agency Securities 360,555$ 360,555$
U.S. Treasury Notes 10,156 10,156
Money Market Mutual Funds 21,326 21,326
California Asset Management Program 47,221 47,221
Total 439,258$ 439,258
Not Rated:
Certificates of Deposit 167
Local Agency Investment Fund 30,333
Cash In Bank and On Hand 1,883
Total Cash and Investments 471,641$
Concentration of Credit Risk
Investments in any one issuer, other than U.S. Treasury securities, mutual funds, and external investment
pools, that represent 5 percent or more of total City portfolio investments are as follows at June 30, 2011
(in thousands):
Investments Reporting Type
Fair Value at Year-End
(in thousands)
Federal Home Loan Bank U.S. Federal Agency Securities 130,100$
Federal Farm Credit Bank U.S. Federal Agency Securities 110,623
Federal National Mortgage Assoc.U.S. Federal Agency Securities 32,785
Federal Home Loan Mortgage Corp.U.S. Federal Agency Securities 28,581
On August 5, 2011, Standard & Poor's lowered its long-term credit rating on debt of the U.S. government
from “AAA” to “AA+.” This action affected Standard & Poor's view of U.S. public finance debt
instruments that are directly or indirectly backed by the U.S. As a result, on August 8, 2011, Standard &
Poor's lowered its long-term credit ratings of U.S. government-sponsored enterprises and public debt
issues that have credit enhancement guaranteed by those government-sponsored enterprises to “AA+.”
The credit downgrades relate to the credit risk associated with the City’s investments in U.S. Treasuries
and U.S. Agency Securities
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
58
NOTE 3 – CASH AND INVESTMENTS (Continued)
Custodial Credit Risk
California law requires banks and savings and loan institutions to pledge government securities with a
market value of 110 percent of the City’s cash on deposit or first trust deed mortgage notes with a value
of 150 percent of the deposit as collateral for these deposits. Under California Law, this collateral is held
in the City’s name and places the City ahead of general creditors of the institution. The City has waived
collateral requirements for the portion of deposits covered by federal deposit insurance.
The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a
transaction, the City will not be able to recover the value of its investment or collateral securities that are
in the possession of another party. The City’s Investment Policy limits its exposure to custodial credit
risk by requiring that all security transactions entered into by the City be conducted on a delivery-versus-
payment basis. Securities are to be held by a third-party custodian.
NOTE 4 – INTERFUND TRANSACTIONS
Transfers Between Funds
With Council approval, resources may be transferred from one City fund to another. The purpose of the
majority of transfers is to subsidize a fund. Less often, a transfer may be made to open or close a fund.
Transfers between City funds during FY 2011 were as follows (in thousands):
Fund Making Transfer
Amount
Transferred
General Fund Nonmajor Governmental Funds 1,212$ A
Water Services Fund 7 A
Electric Services Fund 11,231 A
Fiber Optics Fund 1 A
Gas Services Fund 5,311 A
Wastewater Collection Fund 4 A
Refuse Services Fund 166 A
Capital Projects Fund General Fund 9,858 B
Nonmajor Governmental Funds 1,081 B
Water Services Fund 8 B
Electric Services Fund 225 B
Fiber Optics Fund 7 B
Gas Services Fund 15 B
Wastewater Collection Fund 8 B
Nonmajor Governmental Funds General Fund 1,109 A
Nonmajor Governmental Funds 80 A
Subtotal 30,323$
Fund Receiving Transfer
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
59
NOTE 4 – INTERFUND TRANSACTIONS (Continued)
(Continued)
Fund Making Transfer
Amount
Transferred
Water Services Fund Capital Projects Fund 57$ C
Gas Services Fund 33 B
Wastewater Collection Fund 33 B
Electric Services Fund General Fund 33 E
Capital Projects Fund 117 C
Water Services Fund 200 B
Gas Services Fund 200 B
Gas Services Fund Capital Projects Fund 35 C
Refuse Services Fund Capital Projects Fund 138 C
Nonmajor Governmental Funds 232 E
Wastewater Collection Fund 75 B
Internal Service Funds 591 D
Wastewater Collection Fund Capital Projects Fund 75 B
Storm Drainage Services Fund Capital Projects Fund 325 B
Internal Service Funds Water Services Fund 234 C
Electric Services Fund 750 C
Gas Services Fund 366 C
Wastewater Collection Fund 151 C
Wastewater Treatment Fund 9 C
Refuse Services Fund 160 C
Storm Drainage Services Fund 32 C
Fiber Optics Fund 1 C
Subtotal 3,847
Total 34,170$
The reasons for these transfers are set forth below:
(A) Transfer to reimburse the General Fund for costs incurred for the benefit of funds making the transfer.
(B) Allocation of funds to construct capital assets.
(C) Transfer to return unspent construction funds.
(D) Transfer to refund replacement charges.
(E) Transfer to reimburse the Utility Funds for costs incurred for the benefit of funds making the transfer.
Fund Receiving Transfer
Interfund Commitment
During FY 2002, the City established the Palo Alto Redevelopment Agency (the Agency). The Agency
and the City have an agreement whereby the City will advance funds to the Agency in support of start-up
and formation costs. However, the interfund advances have no specific repayment date. Generally
accepted accounting principles require that such amounts be treated as transfers in the year made.
Advances without specified repayment terms total approximately $389,000 as of June 30, 2011. On
September 6, 2011, the City filed Ordinance No. 5126 dissolving the operations of the Agency and,
accordingly, this advance will not be repaid to the City.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
60
NOTE 4 – INTERFUND TRANSACTIONS (Continued)
Long-Term Interfund Advance
On December 6, 2010, the City Council accepted an Airport Business Plan of the Palo Alto Airport
(PAO) and approved creation of a new Airport Enterprise Fund to facilitate the transition of PAO control
from the Santa Clara County to the City. The Council approved the General Fund to fund the new Airport
Enterprise Fund in the amount of $300,000 for environmental analysis, legal and personnel costs for the
transition. According to the agreement, the Airport Fund will repay the $300,000 with interest equal to the
average return yield on the City’s investment portfolio in 6 years to the General Fund. As of
June 30, 2011, the outstanding amount is $300,000.
Internal Balances
Internal balances represent the net interfund receivables and payables remaining after the elimination of
all such balances within governmental and business-type activities.
NOTE 5 – NOTES AND LOANS RECEIVABLE
At June 30, 2011, the City’s notes and loans receivable totaled (in thousands):
Palo Alto Housing Corporation:
Oak Manor Townhouse 705$
Tree House Apartments 5,150
Emerson Street Project 375
Alma Single Room Occupancy Development 2,222
Barker Hotel 2,111
Sheridan Apartments 2,248
Oak Court Apartments, L.P. 7,835
Mid-Peninsula Housing Coalition:
Palo Alto Gardens Apartments 195
Community Working Group, Inc.1,280
Opportunity Center Associates, L.P.750
Home Rehabilitation Loans 76
Executive Relocation Assistance Loans 985
Below Market Rate Assessment Loans 74
Stevenson Housing:
Hot Water 81
Fire Alarm 48
Oak Manor Townhouse Water System 114
Palo Alto Senior Housing Project 28
Clara-Mateo Alliance 11
Lytton Gardens Assisted Living 101
Emergency Housing Consortium 75
Alma Gardens Apartments 1,150
Total Notes and Loans 25,614
Less: Valuation Allowance (14,805)
Total Notes and Loans, Net 10,809$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
61
NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Housing Loans
The City engages in programs designed to encourage construction or improvement in low-to-moderate
income housing or other projects. Under these programs, grants or loans are provided under favorable
terms to homeowners or developers who agree to spend these funds in accordance with the City’s terms.
These loans have been offset by nonspendable, restricted or committed fund balances, as they are not
expected to be repaid immediately.
Some of these loans contain forgiveness clauses that provide for the amount loaned to be forgiven if the
third party maintains compliance with the terms of the loan and associated regulatory agreements. Since
some of these loans are secured by trust deeds, that are subordinated to other debt on the associated
projects or are only repayable from residual cash receipts on the projects, collectability of some of the
outstanding balances may not be realized. As a result of the forgiveness clauses and nature of these
housing projects and associated cash flows, a portion of the outstanding balances of the loans has been
offset by a valuation allowance.
Oak Manor Townhouse
On January 7, 1991, the City loaned $2.1 million to assist in the acquisition of an apartment complex to
be used to provide rental housing for low and very low income households. This loan bears interest at 3
percent, is due in annual installments until 2011 and is collateralized by a subordinated deed of trust.
Under the terms of the loan agreement, loan payments are forgiven if the Corporation meets the objective
of this project. During the year ended June 30, 2011, the objective was met. The annual loan payment
was forgiven for the calendar year ended December 31, 2010.
Tree House Apartments
In March 2009, the City agreed to loan $2.8 million to the Tree House Apartments, L.P. for the purchase
of the real property located at 488 West Charlton Road. On March 23, 2010, the City wired the full loan
amount to an escrow account. The loan consisted of $1.8 million funded by Community Development
Block Grant funds; the remaining $1 million was funded by residential funds. An additional development
loan in the amount of $2.5 million was approved by the City on October 18, 2010. As of June 30, 2011,
the outstanding balance for the Tree Housing Apartment in aggregate is $5.2 million. Principal and
interest payments will be deferred for 55 years. However, if the borrower has earned extra income, and if
acceptable to the other entities providing final permanent sources of funds, payment of interest and
principal based on the City’s proportionate share of the project’s residual receipts from net operating
income shall be made by the borrower. In no event shall full payment be made by the borrower later than
concurrently with the expiration or earlier termination of the loan agreement, which is March 23, 2064.
Emerson Street Project
On November 8, 1994, the City loaned $375,000 for expenses necessary to acquire an apartment complex
for the preservation of rental housing for low and very low income households in the City. This loan is
collateralized by a second deed of trust. The loan bears no interest until 2010 after which the loan bears
interest at 3 percent per year. The principal balance is due in 2034.
Alma Single Room Occupancy Development
On December 13, 1996, the City authorized $2.7 million to the Alma Place Associates, L.P. for the
development of a 107-unit single room occupancy development. This loan bears interest at 3 percent and
is collateralized by a subordinated deed of trust. Loan payments are deferred until 2014. The principal
balance is due in 2041.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
62
NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Barker Hotel
On April 12, 1994, the City loaned a total of $2.1 million for the preservation, rehabilitation and
expansion of a low-income, single occupancy hotel. This loan was funded by three sources: $400,000
from the Housing In-Lieu Fund, $1 million from HOME Investment Partnership Program Funds, and
$670,000 from Community Development Block Grant funds. All three notes bear no interest and are
collateralized by a deed of trust, which is subordinated to private financing. Loan repayments are
deferred until 2035.
In July 2004, the City agreed to loan up to $41,000 to the Palo Alto Housing Corporation to rehabilitate
the interior of the Barker Hotel. The loan is funded entirely by Community Development Block Grant
funds and is collateralized by a deed of trust on the property. Annual loan payments are deferred until
certain criteria defined in the loan agreement are reached. The loan shall be forgiven if the borrower
satisfactorily complies with all the terms and conditions of the loan agreement.
Sheridan Apartments
On December 8, 1998, the City loaned $2.5 million to the Palo Alto Housing Corporation for the
purchase and rehabilitation of a 57-unit apartment complex to be used for senior and low-income housing.
The loan is funded by $1.6 million in Community Development Block Grant funds, and $825,000 in
Housing In-Lieu funds. The note bears interest at 9 percent when available surplus cash from the project
equals or exceeds 25 percent of interest calculated using 9 percent. When available surplus cash falls
below this level, the note bears interest at 3 percent. The note is collateralized by a second deed of trust
and an affordability reserve account held by the Palo Alto Housing Corporation. Annual loan payments
were deferred until the Palo Alto Housing Corporation accumulated $1 million in an affordability reserve
account. Two principal payments totaling $202,438 have been made, and interest has also been paid.
The remaining principal balance is due in 2033.
Oak Court Apartments
On August 18, 2003, in connection with the loan to Oak Court Apartments, L.P. discussed below, the City
loaned $5.9 million to the Palo Alto Housing Corporation for the purchase of land on which Oak Court
Apartments, L.P. constructed a 53-unit rental apartment complex for low and very low income
households with children. The note bears interest of 5 percent and is secured by a deed of trust. Annually
accrued interest is added to the principal balance and note payments are due annually after 55 years, or
beginning in 2058, unless the Palo Alto Housing Corporation elects to extend the note until 2102, as
defined in the regulatory agreement.
Oak Court Apartments, L.P.
On August 18, 2003, the City loaned $1.9 million to Oak Court Apartments, L.P. for the construction of a
53-unit rental apartment complex for low and very low-income households with children, which was
completed in April 2005. The note bears no interest until certain criteria defined in the note are satisfied,
at which time the note will bear an interest rate not to exceed 3 percent. The note is secured by a
subordinate deed of trust. The principal balance is due in 2060.
Palo Alto Gardens Apartments
On April 22, 1999, the City loaned $1 million to the Mid-Peninsula Housing Coalition (the Coalition) for
the purchase and rehabilitation of a 155-unit complex for the continuation of low-income housing. This
loan is funded by $659,000 in Community Development Block Grant funds and $341,000 in Housing In-
Lieu funds. The two notes bear interest at 3 percent and are secured by second deeds of trust and a City
Affordability Reserve Account held by the Coalition. Annual loan payments are deferred until certain
criteria defined in the notes are reached. Principal and interest payments began in FY 2008. The
principal balance is due in 2039.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
63
NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Community Working Group, Inc.
On May 13, 2002, the City loaned $1.3 million to the Community Working Group, Inc. for
predevelopment, relocation and acquisition of land for development of an 89-unit complex and homeless
service center for very low income households. The loan is funded by $1.3 million of Community
Development Block Grant funds. The note bears no interest and is secured by a first deed of trust. No
repayment of the $1.3 million will be required, provided that compliance with the City’s agreement is
maintained. After 89 years of compliance with the regulatory agreement, the City’s loan would convert to
a grant and its deed of trust would be re-conveyed.
Opportunity Center Associates, L.P.
On July 19, 2004, the City loaned $750,000 for a 55-year term to the Opportunity Center Associates, L.P.
for construction of 89 units of rental housing for extremely low-income and very low-income households.
The loan is funded by $750,000 of residential housing funds. The note bears 3 percent interest and is
secured by a deed of trust. The loan remains outstanding and becomes due at the end of the 55-year term.
Home Rehabilitation Loans
The City administers a closed housing rehabilitation loan program initially funded with Community
Development Block Grant funds. Under this program, individuals with incomes below a certain level are
eligible to receive low interest loans for rehabilitation work on their homes. These loans are secured by
deeds of trust, which may be subordinated to subsequent encumbrances upon said real property with the
prior written consent of the City. The loan repayments may be amortized over the life of the loans,
deferred, or a combination of both.
Executive Relocation Assistance Loans
The City Council may authorize a mortgage loan as part of a relocation assistance package to executive
staff. The loans are secured by first deeds of trust, and interest is adjusted annually based on the rate of
return of the invested funds of the City for the year ended June 30 plus one-quarter of 1 percent. Principal
and interest payments are due bi-weekly. Employees must pay off any outstanding balance of their loans
within a certain period after ending employment with the City. As of June 30, 2011, the City had two
outstanding home loans, one from the previous City Manager and one from the current City Manager.
The original purchase cost for the previous City Manager’s home was $1.4 million and the City holds a
60 percent equity share. The loan balance owed as of June 30, 2011 was approximately $401,000. The
previous City Manager can remain in the home until December 2017, or until his children have left Palo
Alto public schools, whichever occurs first.
The original purchase cost for the current City Manager’s home was $1.9 million and the City holds a 75
percent equity share. The loan balance owed as of June 30, 2011 is approximately $459,000. During FY
2011, the Council authorized a capital improvement loan of $125,000. Loans for capital improvements
are made on a dollar for dollar matching basis, with an equal equity contribution made by the City
Manager. The loan balance owed as of June 30, 2011 was approximately $125,000.
Below Market Rate Assessment Loans
In December 2002, the City loaned $74,000 to below market rate homeowners with low incomes and/or
very limited assets for capital repairs, special assessments and improvements of their properties. The
loans bear interest at 3 percent and are secured by a deed of trust on each property. Loan payments are
deferred until 2032. In 2011, the City did not receive interest payments.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
64
NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Stevenson Housing Hot Water
In July 2004, the City agreed to loan up to $38,000 to Palo Alto Senior Housing Project, Inc. to refurbish
the hot water piping system at the Stevenson House Senior Housing facility. In April 2005, the City
agreed to increase the loan by $45,000, bringing the total loan to $83,000. The loan is funded entirely by
Community Development Block Grant funds and bears simple interest of 6 percent. Principal and interest
payments were deferred until July 1, 2010. Since the borrower has complied with all terms and
conditions of the agreement, the loan will be written off.
Stevenson Housing Fire Alarm
In December 2006, the City agreed to loan up to $48,000 to the Palo Alto Senior Housing Project, Inc. to
repair and upgrade the existing fire alarm system at the Stevenson House Senior Housing facility. The
loan is funded entirely by Community Development Block Grant funds and bears simple interest of 6
percent. Principal and interest payments are deferred until July 1, 2012, as long as the borrower continues
to comply with all terms and conditions of the agreement.
Oak Manor Townhouse Water System
On May 12, 2003, the City Council approved to allocate $113,672 to Palo Alto Housing Corporation
Housing Apartments, Inc (PAHCA, Inc) to replace the water pipes with an intention to provide a
permanent solution to Oak Manor’s plumbing needs. Repayment of the loan will not be required unless
the property is sold, the program is terminated or purpose of the program is changed without City’s
approval prior to July 1, 2033. The loan for this project is a subordinated to the existing City loan with
PAHCA, Inc of January 7, 1991 for the acquisition of the project site, which is discussed in this section
earlier.
Palo Alto Senior Housing Project
In July 2003, the City agreed to loan up to $45,000 to the Palo Alto Senior Housing Project for home
improvements in the independent living facility for low-income seniors. The loan is funded entirely by
Community Development Block Grant funds, bears interest at 6 percent and is secured by a deed of trust
on the property. Principal and interest on the loan shall be forgiven if the borrower satisfactorily complies
with all the terms set forth in the July 2003 agreement. In April 2008, the City provided $47,600 for the
purpose of repairing and upgrading the fire alarm system at the Senior Housing facility. As of June 30,
2011, the outstanding balance was $28,000.
Clara-Mateo Alliance
In July 2003, the City agreed to loan up to $200,000 to Clara-Mateo Alliance for rehabilitation of the
kitchen and the Elsa Segovia Center to provide services for the homeless. The loan is funded entirely by
Community Development Block Grant funds, bears interest at 6 percent and is secured by a deed of trust
on the property. Repayment of the loan will not be required unless the property is sold or the program
terminated. Principal and interest on the loan shall be forgiven if the borrower satisfactorily complies
with all the terms and conditions set forth in the July 2003 agreement.
Lytton Gardens Assisted Living
In June 2005, the City agreed to loan up to $109,000 to Community Housing, Inc. to upgrade and
modernize the existing kitchens at the senior residential facility known as Lytton Gardens Assisted
Living. The loan is funded entirely by Community Development Block Grant funds, and bears simple
interest of 3 percent. Principal and interest payments are deferred until July 1, 2035, as long as the
borrower continues to comply with all terms and conditions of the agreement.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
65
NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Emergency Housing Consortium
In November 2005, the City agreed to loan up to $75,000 to the Emergency Housing Consortium to cover
architectural expenses that will be incurred in rehabilitating and expanding the property. The loan is
funded entirely by Community Development Block Grant funds, and bears simple interest of 3 percent.
Principal and interest payments are deferred until July 1, 2035, as long as the borrower continues to
comply with all terms and conditions of the agreement.
Alma Garden Apartments
In March 2006, the City agreed to loan up to $1.2 million to Community Working Group, Inc. to acquire
a 10-unit multi-family housing complex known as the Alma Garden Apartments. The loan is funded
entirely by Community Development Block Grant funds. Principal and interest payments are deferred
until July 1, 2061, as long as the borrower continues to comply with all terms and conditions of the
agreement.
NOTE 6 – CAPITAL ASSETS
Valuation
All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not
available. Contributed capital assets are valued at their estimated fair value on the date contributed. The
City’s policy is to capitalize all assets when costs are equal to or exceed $5,000 and the useful life
exceeds one year. Infrastructure assets are capitalized when costs are equal to or exceed $100,000.
Proprietary fund capital assets are recorded at cost including significant interest costs incurred under
restricted tax-exempt borrowings, which finance the construction of capital assets. These interest costs,
net of interest earned on investment of proceeds of such borrowings, are capitalized and added to the cost
of capital assets during the construction period. Maintenance and repairs are expensed as incurred.
The City has recorded all its public domain capital assets, consisting of roadway and recreation and open
space, in its government-wide financial statements. GASB Statement No. 34 requires that all capital
assets with limited useful lives be depreciated over their estimated useful lives. Alternatively, the
“modified approach” may be used for certain capital assets. Depreciation is not provided under this
approach, but all expenditures on these assets are expensed unless they are additions or improvements.
The City has elected to use the depreciation method for its capital assets. The purpose of depreciation is
to spread the cost of capital assets equitably among all users over the life of those assets. The amount
charged to depreciation expense each year represents that year’s pro rata share of the cost of capital
assets.
Depreciation has been provided on capital assets. Depreciation of all capital assets is charged as an
expense against operations each year and the total amount of depreciation taken over the years, called
accumulated depreciation, is reported on the statement of net assets as a reduction in the book value of
capital assets.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
66
NOTE 6 – CAPITAL ASSETS (Continued)
Depreciation is calculated using the straight line method, which means the cost of the asset is divided by
its expected useful life in years, and the result is charged to expense each year until the asset is fully
depreciated. The City has assigned the useful lives listed below to capital assets.
GOVERNMENTAL ACTIVITIES Years
Buildings and structures 10 - 30
Equipment:
Computer equipment 4
Office machinery and equipment 5
Machinery and equipment 10
Roadway network:
5 - 40
Recreation and open space network:
25 - 40
BUSINESS-TYPE ACTIVITIES
Buildings and structures 25 - 60
Vehicles and heavy equipment 3 - 10
Machinery and equipment 10 - 50
Transmission, distribution and treatment systems 10 - 100
Includes pavement, striping and legends, curbs, gutters and sidewalks, parking lots, traffic
signage, and bridges
Includes major park facilities, park trails, bike paths and medians
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
67
NOTE 6 – CAPITAL ASSETS (Continued)
General Capital Assets
Changes in the City’s general capital assets during the year ended June 30, 2011 were (in thousands):
Balance Balance
July 1, 2010 Additions Retirements Transfers June 30, 2011
Governmental activities
Nondepreciable capital assets:
Land and improvements 78,480$ -$ -$ 81$ 78,561$
Street trees 15,052 84 (252) 490 15,374
Intangible assets - 3,617 - 183 3,800
Construction in progress 32,334 32,736 (6,980) (21,793) 36,297
Total nondepreciable capital assets 125,866 36,437 (7,232) (21,039) 134,032
Depreciable capital assets:
Buildings and structures 114,605 36 - 9,275 123,916
Equipment 8,200 91 (13) 1,432 9,710
Roadway network 260,489 - - 7,086 267,575
Recreation and open space network 18,552 - (10) 3,246 21,788
Total depreciable capital assets 401,846 127 (23) 21,039 422,989
Less accumulated depreciation:
Buildings and structures (60,754) (2,482) - - (63,236)
Equipment (6,089) (359) 13 - (6,435)
Roadway network (101,197) (6,256) - - (107,453)
Recreation and open space network (5,978) (611) 10 - (6,579)
Total accumulated depreciation (174,018) (9,708) 23 - (183,703)
Depreciable capital assets, net 227,828 (9,581) - 21,039 239,286
Internal service fund capital assets
Construction in progress 637 2,521 - (3,007) 151
Equipment 51,311 58 (2,661) 3,007 51,715
Less accumulated depreciation (29,603) (4,695) 2,518 - (31,780)
Net internal service fund capital assets 22,345 (2,116) (143) - 20,086
Governmental activities capital assets, net 376,039$ 24,740$ (7,375)$ -$ 393,404$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
68
NOTE 6 – CAPITAL ASSETS (Continued)
Business-Type Capital Assets
Changes in the City’s enterprise fund capital assets during the year ended June 30, 2011 were
(in thousands):
July 1, 2010 Additions Retirements Transfers June 30, 2011
Business-type activities
Nondepreciable capital assets:
Land and improvements 4,971$ -$ -$ -$ 4,971$
Construction in progress 111,778 31,554 - (10,895) 132,437
Total nondepreciable capital assets 116,749 31,554 - (10,895) 137,408
Depreciable capital assets:
Buildings and structures 30,900 - (54) 1,014 31,860
Transmission, distribution and treatment systems 536,593 892 (1,728) 9,791 545,548
Total depreciable capital assets 567,493 892 (1,782) 10,805 577,408
Less accumulated depreciation:
Buildings and structures (7,281) (710) 18 - (7,973)
Transmission, distribution and treatment systems (226,703) (15,216) 800 - (241,119)
Total accumulated depreciation (233,984) (15,926) 818 - (249,092)
Depreciable capital assets, net 333,509 (15,034) (964) 10,805 328,316
Business-type activities capital assets, net 450,258$ 16,520$ (964)$ (90)$ 465,724$ Capital Asset Contributions
Some capital assets may be acquired using federal and state grant funds, or they may be contributed by
developers or other governments. Generally accepted accounting principles require that these
contributions be accounted for as revenues at the time the capital assets are contributed.
Depreciation Allocation
Depreciation expense was charged to functions and programs based on their usage of the related assets.
The amounts allocated to each function or program are as follows (in thousands):
Governmental Activities Business-Type Activities
City Manager 28$ Water 1,388$
Community Services 973 Electric 7,331
Fire 126 Fiber Optics 267
Police 77 Gas 1,837
Public Works 8,240 Wastewater Collection 1,455
Planning 53 Wastewater Treatment 2,165
Non-departmental 10 Refuse 657
Library 201 Storm Drainage 826
Internal Service Funds 4,695 15,926$
14,403$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
69
NOTE 6 – CAPITAL ASSETS (Continued)
Construction In Progress and Completed Projects
Construction in progress during FY 2011 is comprised of the following (in thousands):
Governmental Activities
Expended to
June 30, 2011
ADA Compliance Cubberley Wing I Elevator 257$
Americans With Disabilities 1,066
Art Center Electrical & Mech Upgrades 963
Art Center Kiln Hood 85
Art In Public Places 65
Bicycle Boulevards Implementation Project 169
Building Systems Improvements 341
Charleston/Arastradero Corridor Plan 974
Children's Theatre Fire/Life Safety Upgrade 47
Civic Center Chiller Drive Replacement 72
Civic Center Infrastructure Improvements 3,804
College Terrace Library Improvements 33
College Terrace Traffic Calming 143
Comprehensive Parking 43
Crime Scene Evidence Collection Vehicle 174
Cubberley Mechanical & Electrical Upgrade 181
Downtown Library Improvements 3,774
Downtown Tree Grates 38
ECR/Stanford Intersection 254
El Camino/Ventura Traffic Signal 110
Fire Station Improvements 1,071
Foothills Park Interpretive Center Improvements 55
Golf Maintenance Yard 36
Greer Park Phase IV 1,610
Highway 101 Pedestrian/Bicycle Overpass 230
Interior Finishes Construction 370
Library & Comm Center Temp Facilities 658
Lot J Cowper/Webster Structural Repairs 39
Main Library Construction & Improvements 793
Mitchell Park Library & Community Center 1,230
Mitchell Park Library & Community Center 14,169
Municipal Service Center Improvements 192
Park Maintenance Shop Remodel 58
Park Restroom Installation 378
Public Safety Building Project 183
Rinconada Pool Plaster Construction 118
Roth Building Maintenance 165
Safe Routes To School (10026) 357
San Antonio Road Median Improvements 1,465
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
70
NOTE 6 – CAPITAL ASSETS (Continued)
Governmental Activities (Continued)
Expended to
June 30, 2011
School Site Irrigation 436$
Security System Improvements 215
Stern Community Center/Theater Ext. Paint 95
Ticket Machines 36
Traffic Signal Central System 36
Traffic Signal Upgrades 651
Other Construction in Progress 245
Vehicle Replacement Fund 151
Total Governmental Activities Construction In Progress 37,636$
Business-Type Activities
Storm drainage structural and water quality improvements 1,794$
Gas system extension replacements and improvements 17,333
Water system extension replacements and improvements 16,941
Electric distribution system improvements 13,840
Other electrical improvements projects 787
Water quality control plant equipment replacement and lab facilities 6,992
Sewer system rehabilitation and extensions 4,332
Other construction in progress 70,418
Total Business-Type Activities Construction In Progress 132,437$
Allocations of business-type activity administration and general expenses of $10.6 million have been
capitalized and included in amounts expended through June 30, 2011.
Major capital projects that are currently in progress, and the remaining capital commitment of each, are as
follows:
Mitchell Park Library and Community Center - $35.6 million
Main Library - $17.3 million
Art Center electrical and mechanical upgrades - $7.2 million
Civic Center infrastructure improvements - $2.6 million.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
71
NOTE 7 – GENERAL LONG-TERM OBLIGATIONS
The City’s Long-Term Obligations
Bond premiums and discounts of long-term debt issues are amortized over the life of the related debt.
Gains or losses between the net book value of debt and funds placed in escrow to defease that debt are
amortized over the remaining life of either the refunded debt or the refunding debt, whichever is shorter.
Effective for FY 2011, bond issuance costs have been reclassified to noncurrent assets, rather than netted
with long-term debt.
The City’s long-term debt issues and transactions, other than special assessment debt discussed in Note 8,
were as follows (in thousands):
Original Balance Balance Current
Issue Amount July 1, 2010 Additions Retirements June 30, 2011 Portion
Governmental Activities Debt:
General Long-Term Obligations:
1998 Golf Course
Certificates of Participation,
4.00 -5.00%, due 09/01/2018
7,750$ 4,060$ -$ 370$ 3,690$ 385$
2002A Civic Center Refinancing
Certificates of Participation,
2.00-4.00%, due 03/01/2012
3,500 795 - 390 405 405
2002B Downtown Parking Improvements
Certificates of Participation,
2.00-4.00%, due 03/01/2022
3,555 1,910 - 110 1,800 115
General Obligation Bonds 2010 Series A,
2.00-5.00%, due 08/01/2040
55,305 55,305 - - 55,305 765
Add: unamortized premium - 3,766 - 126 3,640 126
Total Governmental Activities Debt 70,110$ 65,836$ -$ 996$ 64,840$ 1,796$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
72
NOTE 7 – GENERAL LONG-TERM OBLIGATIONS (Continued)
Original Balance Balance Current
Issue Amount July 1, 2010 Additions Retirements June 30, 2011 Portion
Business-Type Activities Debt:
Enterprise Long-Term Obligations:
Utility Revenue Bonds
1995 Series A,
5.00-6.25%, due 06/01/2020
8,640$ 4,969$ -$ 375$ 4,594$ 395$
1999 Refunding,
3.25-5.25%, due 06/01/2024
17,735 13,235 - 520 12,715 550
2002 Series A,
3.00-5.00%, due 06/01/2026
26,055 18,885 - 833 18,052 872
2009 Series A,
1.80-5.95%, due 06/01/2035
35,015 35,015 - 825 34,190 835
Less: unamortized Premium/(Discount)(186) - (16) (170) -
Energy Tax Credit Bonds
2007 Series A, 0%, Due 12/15/2021 1,500 1,200 - 100 1,100 100
Less: unamortized Premium/(Discount)(65) - (6) (59) -
State Water Resources Loans
2007, 0%, due 06/30/2029 9,000 8,550 - 450 8,100 450
2009, 2.6%, due 11/30/2030 8,500 4,530 4,066 - 8,596 346
Total Business-Type Activities Debt 106,445$ 86,133$ 4,066$ 3,081$ 87,118$ 3,548$
Description of the City’s Long-Term Debt Issues
1998 Golf Course Certificates of Participation (COPs) – In August 1998, the City’s Public
Improvement Corporation issued Golf Course Improvement COPs, Series 1998, in the amount of $7.8
million to retire the 1978 Golf Course Lease Revenue Bonds, and to finance various improvements at the
Palo Alto Public Golf Course, including upgrading five fairways and various traps, trees and greens,
constructing new storm drain facilities, replacing the existing irrigation system, upgrading the driving
range, and installing new cart paths. The 1998 COPs are secured by lease revenues received by the Public
Improvement Corporation from golf course revenues or other unrestricted revenues of the City. Principal
and interest are payable semi-annually each March 1 and September 1.
2002A Civic Center Refinancing COPs – On January 16, 2002, the City issued $3.5 million of COPs to
refund the City’s 1992 COPs, which were subsequently retired. Principal payments for the 2002A COPs
are due annually on March 1 and interest payments semi-annually on March 1 and September 1, and are
payable from lease revenues received by the Corporation from the City’s available funds.
2002B Downtown Parking Improvement Project COPs – On January 16, 2002, the City issued $3.6
million of COPs to finance the construction of certain improvements to the non-parking area contained in
the City’s Bryant/Florence Garage complex. Principal payments are due annually on March 1 and interest
payments semi-annually on March 1 and September 1, and are payable from lease revenues received by
the Corporation from the City’s available funds.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
73
NOTE 7 – GENERAL LONG-TERM OBLIGATIONS (Continued)
On January 25, 2005, the City defeased $.9 million of the 2002B Downtown Parking Improvements
COPs. Surplus cash from the Civic Center Refinancing and Downtown Parking Improvement Project
Construction account were placed in an irrevocable trust to provide for future debt payments. The
defeasance resulted in an overall debt service savings of $1.5 million and an economic gain of $.5 million.
Accordingly, the trust account assets and the liability for the defeased bonds are not included on the
financial statements. The total defeased amount was completely paid off on March 1, 2011.
2010 General Obligation Bonds (GO) – On June 30, 2010, the City issued $55.3 million of GO bonds to
finance costs for constructing a new Mitchell Park Library and Community Center, as well as substantial
improvements to the Main Library and the Downtown Library. Principal payments are due annually on
August 1 and interest payments semi-annually on February 1 and August 1 from 2 percent to 5 percent,
and are payable from property tax revenues.
The pledge of future Net Revenues for the above funds ends upon repayment of the $55.3 million
principal and $48.0 million interest as the remaining debt service on the bonds, which is scheduled to
occur in FY 2041. In FY 2011 there were no principal payments due.
1995 Utility Revenue Bonds, Series A – The City issued $8.6 million of Utility Revenue Bonds on
February 1, 1995 to finance certain extensions and improvements to the City’s Storm Drainage and
Surface Water System. The Bonds are special obligations of the City payable solely from and secured by
a pledge of and lien upon the revenues derived by the City from the funds, services and facilities of all
Enterprise Funds except the Refuse Services Fund and Fiber Optics Fund. Principal payments are payable
annually on June 1 and interest payments semi-annually on June 1 and December 1. A $2.9 million 6.3
percent term bond is due June 1, 2020.
As required by the Indenture, the City established a debt service reserve fund for the Bonds (the “Reserve
Account”), with a minimum funding level requirement in the Reserve Account (the “Reserve
Requirement”). At the time it issued the Bonds, the City satisfied the Reserve Requirement with a deposit
into the Reserve Account of a surety bond (the “Surety Bond”) in the amount of $685,340 issued by
Ambac Indemnity Corporation (renamed to Ambac Assurance Corporation in 1997).
On November 9, 2010, Ambac Financial Group Inc. (Ambac Financial) filed for bankruptcy protection
under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District
of New York. Ambac Financial is a holding company whose affiliates provide financial guarantees and
financial services to its customers. Ambac Indemnity Corporation, now known as Ambac Assurance
Corporation, is a subsidiary of Ambac Financial. Ambac has issued a reserve fund surety bond of
$685,340 that expires on June 1, 2020 and is on deposit in the Reserve Fund account securing the Bonds.
According to the Trust Agreement for these bonds, in the event that such surety bond for any reason
terminates or expires, and the remaining amount on deposit in the Reserve Fund account is less than the
required reserve, the City is to address such shortfall by delivering to the trustee a surety bond or a letter
of credit meeting the criteria of a Qualified Reserve Facility under the Trust Agreement, or depositing
cash to the General Account in up to twelve equal monthly installments. Information about Ambac
Financial.is available on Form 10-K and Form 10-Q filed by Ambac Financial; the City refers to this
information for reference only, and does not intend to incorporate any such information herein. The City
is not certain about the effect of the bankruptcy proceedings, if any, on the Surety Bond.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
74
NOTE 7 – GENERAL LONG-TERM OBLIGATIONS (Continued)
The pledge of future Net Revenues for the above funds ends upon repayment of the $4.6 million principal
and $1.6 million interest as the remaining debt service on the bonds, which is scheduled to occur in 2020.
For FY 2011, Net Revenues, including operating revenues and non-operating interest earnings, amounted
to $237.3 million; operating costs, including operating expenses but not interest, depreciation or
amortization, amounted to $167.0 million. Net Revenues available for debt service amounted to $70.3
million, which represented coverage of 103.1 times over the $0.7 million in debt service.
1999 Utility Revenue and Refunding Bonds, Series A – The City issued $17.7 million of Utility
Revenue Bonds on June 1, 1999, to refund the 1990 Utility Revenue Refunding Bonds, Series A and the
1992 Utility Revenue Bonds, Series A, and to finance rehabilitation of the two Wastewater Treatment
sludge incinerators. The 1990 Utility Revenue Refunding Bonds, Series A and the 1992 Utility Revenue
Bonds, Series A, were subsequently retired.
The 1999 Bonds are special obligations of the City payable solely from and secured by a pledge of and
lien upon certain net revenues derived by the City’s sewer system and its storm and surface water system
(the “Storm Drain System”). As of June 30, 2001, the 1999 Bonds had been allocated to and were
repayable from net revenues of the following enterprise funds: Wastewater Collection (10.2 percent),
Wastewater Treatment (64.6 percent) and Storm Drainage (25.2 percent). Principal payments are payable
annually on June 1 and interest payments semi-annually on June 1 and December 1. A $3.1 million 5.3
percent term bond, and a $5.1 million 5.3 percent term bond are due June 1, 2021 and 2024, respectively.
As required by the Indenture, the City established a debt service reserve fund for the Bonds (the “Reserve
Account”), with a minimum funding level requirement in the Reserve Account (the “Reserve
Requirement”). At the time it issued the Bonds, the City satisfied the Reserve Requirement with a deposit
into the Reserve Account of a surety bond (the “Surety Bond”) in the amount of $1,647,300 issued by
Ambac Indemnity Corporation (renamed to Ambac Assurance Corporation in 1997).
On November 9, 2010, Ambac Financial Group Inc. (Ambac Financial) filed for bankruptcy protection
under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District
of New York. Ambac Financial is a holding company whose affiliates provide financial guarantees and
financial services to its customers. Ambac Indemnity Corporation, now known as Ambac Assurance
Corporation, is a subsidiary of Ambac Financial. Ambac has issued a reserve fund surety bond of
$1,647,300 that expires on June 1, 2024 and is on deposit in the Reserve Fund account securing the
Bonds. According to the Trust Agreement for these bonds, in the event that such surety bond for any
reason terminates or expires, and the remaining amount on deposit in the Reserve Fund account is less
than the required reserve, the City is to address such shortfall by delivering to the trustee a surety bond or
a letter of credit meeting the criteria of a Qualified Reserve Facility under the Trust Agreement, or
depositing cash to the General Account in up to twelve equal monthly installments. Information about
Ambac Financial.is available on Form 10-K and Form 10-Q filed by Ambac Financial; the City refers to
this information for reference only, and does not intend to incorporate any such information herein. The
City is not certain about the effect of the bankruptcy proceedings, if any, on the Surety Bond.
The pledge of future Net Revenues for the above funds ends upon repayment of the $12.7 million
principal and $5.8 million interest as the remaining debt service on the bonds, which is scheduled to occur
in 2024. For FY 2011, Net Revenues, including operating revenues and non-operating interest earnings,
amounted to $40.8 million; operating costs, including operating expenses but not interest, depreciation or
amortization, amounted to $29.4 million. Net Revenues available for debt service amounted to $11.4
million, which represents coverage of 9.45 times over the $1.2 million in debt service.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
75
NOTE 7 – GENERAL LONG-TERM OBLIGATIONS (Continued)
2002 Utility Revenue Bonds, Series A – On January 24, 2002, the City issued $26.1 million of Utility
Revenue Bonds to finance certain improvements to the City’s water utility system and the City’s natural
gas utility system. Principal payments are due annually on June 1, and interest payments are due semi-
annually on June 1 and December 1 from 3 percent to 5 percent. The 2002 Revenue Bonds are secured by
net revenues generated by the Water Services and Gas Services Funds.
The pledge of future Net Revenues for the above funds ends upon repayment of the $18.1 million
principal and $7.8 million interest as the remaining debt service on the bonds, which is scheduled to
occur in 2026. For FY 2011, Net Revenues, including operating revenues and non-operating interest
earnings, amounted to $71.2 million; operating costs, including operating expenses but not interest,
depreciation or amortization, amounted to $51.7 million. Net Revenues available for debt service
amounted to $19.5 million, which represented coverage of 11.3 times over the $1.7 million in debt
service.
2007 Electric System Clean Renewable Energy Tax Credit Bonds, Series A – In October 2007, the
City issued $1.5 million of Electric Utility Clean Renewable Energy Tax Credit Bonds (CREBs), 2007
Series A, to finance the City’s photovoltaic solar panel project. The Bonds do not bear interest. In lieu of
receiving periodic interest payments, bondholders are allowed annual federal income tax credits in an
amount equal to a credit rate for such CREBs multiplied by the outstanding principal amount of the
CREBs owned by the bondholders. The Bonds are payable solely from and secured solely by a pledge of
the Net Revenues of the Electric system and the other funds pledged under the Indenture.
The pledge of future Electric Fund Net Revenues ends upon repayment of the $1.1 million remaining debt
service on the bonds, which is scheduled to occur in 2021. For FY 2011, Net Revenues, including
operating revenues and non-operating interest earnings, amounted to $125.3 million; operating costs,
including operating expenses but not interest, depreciation or amortization, amounted to $85.9 million.
Net Revenues available for debt service amounted to $39.4 million, which represented coverage of
394 times over the $0.1 million in debt service.
2009 Water Revenue Bonds, Series A – On October 6, 2009, the City issued $35.0 million of Water
Revenue Bonds to finance certain improvements to the City’s water utility system. Principal payments are
due annually on June 1, and interest payments are due semi-annually on June 1 and December 1 from
1.80 percent to 5.95 percent. The 2009 Revenue Bonds are secured by net revenues generated by the
Water Services Fund. The 2009 Bonds were issued as bonds designated as “Direct Payment Build
America Bonds” under the provisions of the American Recovery and Reinvestment Act of 2009 (“Build
America Bonds”). The City expects to receive a cash subsidy payment from the United States Treasury
equal to 35 percent of the interest payable on the 2009 Bonds. The lien of the 1995 Bonds on the Net
Revenues is senior to the lien on Net Revenues securing the 2009 Bonds and the 2002 Bonds. The City
received subsidy payments amounting to $609,798, which represents 35 percent of the two interest
payments due on December 1, 2010 and June 1, 2011.
The pledge of future Net Revenues for the above funds ends upon repayment of the the $34.2 million
principal and $27.4 million interest as the remaining debt service on the bonds, which is scheduled to
occur in 2035. For FY 2011, Net Revenues, including operating revenues and non-operating interest
earnings, amounted to $26.8 million; operating costs, including operating expenses but not interest,
depreciation or amortization, amounted to $21.8 million. Net Revenues available for debt service
amounted to $5.0 million, which represented coverage of 1.96times over the $2.6 million in debt service.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
76
NOTE 7 – GENERAL LONG-TERM OBLIGATIONS (Continued)
2007 State Water Resources Loan – In October 2007, the City approved the $9 million loan agreement
with State Water Resources Control Board (SWRCB) to finance the City’s Mountain View/Moffett Area
reclaimed water pipeline project. Under the terms of the contract, the City has agreed to repay $9 million
to the State in exchange for receiving $7.5 million in proceeds to be used to fund the Project. The
difference between the repayment obligation and proceeds amounts to $1.5 million and represents interest
on the outstanding balance. Loan proceeds are drawn down as the project progresses, and debt service
payments commenced on June 30, 2010. Concurrently with the loan, the City entered into various other
agreements including a cost sharing arrangement with the City of Mountain View. Pursuant to that
agreement, City of Mountain View agreed to finance a portion of the project with a $5 million loan
repayable to the City. This loan has been recorded as “Due from other government agencies” in the
accompanying financial statements.
2009 State Water Resources Loan – In October 2009, the City approved an $8.5 million loan agreement
with State Water Resources Control Board (SWRCB) to finance the City’s Ultraviolet Disinfection
project. As of June 30, 2011, the full loan in the amount of $8.5 million was drawn down and became
outstanding. Interest in the amount of $96,000 was accrued and added to the outstanding loan balance.
Debt Service Requirements (in thousands):
Debt service requirements are shown below for all long-term debt.
For the Year Ending
June 30 Principal Interest Total Principal Interest Total
2012 1,670$ 2,808$ 4,478$ 3,548$ 3,736$ 7,284$
2013 1,530 2,750 4,280 3,651 3,635 7,286
2014 1,575 2,694 4,269 3,775 3,505 7,280
2015 1,640 2,640 4,280 3,914 3,366 7,280
2016 1,690 2,575 4,265 4,069 3,216 7,285
2017-2021 8,600 11,576 20,176 22,942 13,465 36,407
2022-2026 7,820 9,705 17,525 23,984 8,247 32,231
2027-2031 9,570 7,667 17,237 12,569 4,382 16,951
2032-2036 11,985 5,209 17,194 8,895 1,361 10,256
2037-2041 15,120 1,964 17,084 - - -
Total 61,200$ 49,588$ 110,788$ 87,347$ 44,913$ 132,260$
Governmental Activities Business-Type Activities
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
77
NOTE 7 – GENERAL LONG-TERM OBLIGATIONS (Continued)
Debt Call Provisions
Long-term debt as of June 30, 2011 is callable on the following terms and conditions:
Initial Call Date
Governmental Activities Long-Term Debt
1998 Certificates of Participation 09/01/08 (3)
2002B Certificates of Participation 03/01/11 (2)
2010A General Obligation Bonds
$6.595 million due 08/01/2032 08/01/31 (4)
$4.890 million due 08/01/2034 08/01/33 (4)
$17.725 million due 08/01/2040 08/01/35 (4)
Business-Type Activities Long-Term Debt
Utility Revenue Bonds
1999 Refunding 06/01/09 (1)
2002 Series A 06/01/12 (1)
(1) Callable in inverse numerical order of maturity at par plus a premium of 2 percent beginning on the
initial call date. The call price declines subsequent to the initial date. (2) Callable in any order specified by the City at par plus a premium of 1 percent beginning on the
initial call date. The call price declines subsequent to the initial date.
(3) Callable in any order specified by the Trustee at par plus a premium of 1 percent beginning on the
initial call date. The call price declines subsequent to the initial date.
(4) Callable in any order specified by the City at par value plus any accrued interest beginning on the
initial call date.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
78
NOTE 7 – GENERAL LONG-TERM OBLIGATIONS (Continued)
Leasing Arrangements
COPs and Capital Leases are issued for the purpose of financing the construction or acquisition of
projects defined in each leasing arrangement. Projects are leased to the City for lease payments which,
together with unspent proceeds of the leasing arrangement, will be sufficient to meet the debt service
obligations of the leasing arrangement. At the termination of the leasing arrangement, title to the project
will pass to the City.
Leasing arrangements are similar to debt in that they allow investors to participate in a share of
guaranteed payments, which are made by the City. Because they are similar to debt, the present value of
the total of the payments to be made by the City is recorded as long-term debt. The City’s leasing
arrangements are included in long-term obligations discussed above.
Conduit Financing
On December 15, 1996, the City acted as a financial intermediary in order to assist Lytton Gardens Health
Care Center in issuing Insured Revenue Refunding Bonds. The Bonds are payable solely from revenues
collected by Lytton Gardens Health Care Center. The City has not included these bonds in its basic
financial statements since it is not legally or morally obligated for the repayment of the bonds. At
June 30, 2011, the amount of bonds outstanding was $5.1 million.
Long-term Debt without City Commitment
On July 23, 2007, the City approved the issuance of two variable rate demand Tax-Exempt Revenue
Bonds by the Association of Bay Area Governments (ABAG) Finance Authority in the amounts of $160
million and $180 million for the construction of the Albert L. Schultz Jewish Community Center and a
new continuing care retirement community, respectively. The debt is payable by the borrowers, Albert L.
Schultz Jewish Community Center and 899 Charleston, LLC. The City has no legal or moral liability with
respect to the payment of these debts.
NOTE 8 – SPECIAL ASSESSMENT DEBT
Special Assessment Debt with no City Commitment
The California Avenue Parking Assessment District No. 92-13 issued Assessment Bonds of 1993, but the
City has no legal or moral liability with respect to the payment of this debt, which is secured only by
assessments on the properties in this District. Therefore, this debt is not included in Governmental
Activities long-term debt of the City. At June 30, 2011, the District’s outstanding debt amounted to
$750 thousand.
The University Avenue Area Off-Street Parking Assessment District issued Assessment Bonds of Series
2001-A, but the City has no legal or moral liability with respect to the payment of this debt, which is
secured only by assessments on the properties in this District. Therefore, this debt is not included in
Governmental Activities long-term debt of the City. At June 30, 2011, the District’s outstanding debt
amounted to $7.69 million. A portion of the proceeds from the 2001 Bonds amounting to $3.2 million
was used to defease the 1977 University Avenue Area Off-Street Parking Assessment District Bonds and
the 1989 University Avenue Area Off-street Parking Assessment District Refunding and Improvement
Bonds.
The University Avenue Area Off-Street Parking Assessment District issued Assessment Bonds of Series
2002-A, but the City has no legal or moral liability with respect to the payment of this debt, which is
secured only by assessments on the properties in this District. Therefore, this debt is not included in
Governmental Activities long-term debt of the City. In June 2004, $3.75 million of the bonds were called.
As of June 30, 2011, the remaining outstanding debt amounted to $27.0 million.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
79
NOTE 9 – LANDFILL CLOSURE AND POST-CLOSURE CARE
State and Federal laws and regulations require the City to properly close the Palo Alto Refuse Disposal
Site (Palo Alto Landfill) after it stops accepting waste by constructing a final cover on top of the
approximately 126 acre landfill to cap the wastes, and by performing certain maintenance and monitoring
activities at the site for a minimum of thirty years after closure. The first section of the landfill closed in
1991 was a 29-acre section designated “Phase I” costing $1.6 million. Phase I was subsequently
converted to a pastoral park (Byxbee Park) and opened to the public. The remaining sections of the
landfill are designated as Phase IIA (22.5 acres closed in 1992 at a cost of $.9 million), Phase IIB (23.2
acres closed in 2000 at a cost of $1.2 million) and Phase IIC, a 51.2 acre active area currently being filled.
Phase IIC is currently expected to be filled by 2011 and is projected for closure in 2012. The 30 years of
post-closure maintenance costs will be paid after the State certifies the Phase IIC closure (expected in
early 2013).
In accordance with State regulations, a final closure and post-closure maintenance plan was produced by a
consultant and submitted to State and local regulatory agencies in 2009. As part of this plan, the City’s
consultant updated cost forecasts for both the remaining Phase IIC closure and for the 30 year post-
closure maintenance activities.
Landfill closure and post-closure liabilities for FY 2011 were $10.8 million. Currently 99.9% percent of
the landfill capacity has been used to date. Based on estimated costs to be incurred in FY 2011, $10.8
million is expected to be recorded as future landfill closure and post-closure liability.
The City is required by State and Federal laws and regulations to make annual funding contributions to
finance closure and post-closure care. In FY 2011, for the $5.2 million post-closure maintenance, the City
changed its financial assurance mechanism from an enterprise fund mechanism to a pledge of revenue
agreement with the California Integrated Waste Management Board. The $5.6 million closure liability
remains under the enterprise fund mechanism. The City is in compliance with these requirements for the
year ended June 30, 2011.
The landfill closure balance as of June 30, 2011 comprised the following (in thousands):
Funding Mechanism
Closure 5,599$ Cash on hand
Post-closure care 5,172 Future revenues
Balance 10,771$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
80
NOTE 10 – NET ASSETS AND FUND BALANCES
Net Assets
Net assets are the excess of all the City’s assets over all its liabilities, regardless of fund. Net assets are
divided into three categories and are described below:
Invested in Capital Assets, Net of Related Debt describes the portion of net assets, which is represented by
the current net book value of the City’s capital assets, less the outstanding balance of any debt issued to
finance these assets.
Restricted describes the portion of net assets, which is restricted as to use by the terms and conditions of
agreements with outside parties, governmental regulations, laws, or other restrictions which the City
cannot unilaterally alter. These principally include bond proceeds received for use on capital projects,
debt service requirements, and special revenue programs subject to limitations, defined regulations, and
laws underlying such programs.
Unrestricted describes the portion of net assets which is not restricted as to use.
Fund Balances
As prescribed by GASB Statement No. 54, governmental funds report fund balances in classifications
based primarily on the extent to which the City is bound to honor constraints on the specific purposes for
which amounts in the funds can be spent. Fund balances for governmental funds are made up of the
following:
Nonspendable Fund Balance – comprised of amounts that are: (a) not in spendable form, or (b) legally or
contractually required to be maintained intact. The “not in spendable form” criterion includes items that
are not expected to be converted to cash, for example: prepaid items, land held for redevelopment and
long-term notes receivable. The corpus of the permanent fund is contractually required to be maintained
intact.
Restricted Fund Balance – comprised of amounts that can be spent only for the specific purposes
stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions
may effectively be changed or lifted only with the consent of resource providers.
Committed Fund Balance – comprised of amounts that can only be used for the specific purposes
determined by a formal action of the City’s highest level of decision-making authority, the City Council.
Commitments may be changed or lifted only by the City taking the same formal action that imposed the
constraint originally (for example: resolution and ordinance).
Assigned Fund Balance – comprised of amounts intended to be used by the City for specific purposes that
are neither restricted nor committed. Intent is expressed by the City Council or official to which the City
Council has delegated the authority to assign amounts to be used for specific purposes.
Unassigned Fund Balance – is the residual classification for the General Fund and includes all amounts
not contained in the other classifications. Unassigned amounts are technically available for any purpose.
Other governmental funds may only report negative unassigned fund balance, which occurs when a fund
has a residual deficit after allocation of fund balance to the nonspendable, restricted or committed
categories.
The City implemented GASB 54 in FY2011 as discussed in Note 1. The fund balances of all
governmental funds are presented by the above mentioned categories on the face of the financial
statements. In circumstances when an expenditure is made for a purpose for which amounts are available
in multiple fund balance categories, fund balance is depleted in the order of restricted, committed,
assigned, and unassigned.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
81
NOTE 10 – NET ASSETS AND FUND BALANCES (Continued)
The General Fund Budget Stabilization Reserve (BSR) is established by authority of the General Fund
Reserve Policy, which is approved by the City Council and included in the City’s annual adopted budget.
The BSR is maintained in the range of 15 to 20 percent of General Fund operating expenditures, with a
target of 18.5 percent. Any reserve level below 15 percent requires City Council approval. At the
discretion of the City Manager, a reserve balance above 18.5 percent may be transferred to the
Infrastructure Reserve within the Capital Projects Fund. The purpose of the General Fund BSR is to fund
unbudgeted, unanticipated one-time costs. The BSR is not meant to fund ongoing, recurring General
Fund operating expenditures.
As of June 30, 2011 total outstanding encumbrances related to governmental activities were $3.4 million
for the General Fund, $25.9 million for the Capital Projects Fund, and $0.7 million for the Special
Revenue Funds.
Enterprise Funds
At June 30, 2011, Enterprise Fund net assets (in thousands):
Water Electric Fiber Optics Gas
Wastewater
Collection
Wastewater
Treatment Refuse
Storm
Drainage Airport Total
Unrestricted
Rate stabilization
Supply -$ 57,091$ -$ 8,789$ -$ -$ -$ -$ -$ 65,880$
Distribution - 9,240 - 7,399 - - - - - 16,639
Operations 10,639 - 10,130 - 5,896 3,020 (5,049) 1,640 (118) 26,158
10,639 66,331 10,130 16,188 5,896 3,020 (5,049) 1,640 (118) 108,677
Emergency plant replacement 1,000 1,000 1,000 1,000 1,000 1,747 - - - 6,747
Calaveras - 55,558 - - - - - - - 55,558
Reappropriations 12,458 13,254 723 10,440 9,275 7,822 2,122 1,838 - 57,932
Commitments 1,416 2,330 86 6,734 976 2,679 1,533 1,549 91 17,394
Underground loan - 736 - - - - - - - 736
Notes & Loans - - - - - 560 - - - 560
Landfill corrective action - - - - - - 665 - - 665
Public benefit program - 3,139 - - - - - - - 3,139
Central Valley Project - 305 - - - - - - - 305
Total 25,513$ 142,653$ 11,939$ 34,362$ 17,147$ 15,828$ (729)$ 5,027$ (27)$ 251,713$
The City Council has set aside unrestricted net assets for general contingencies, future capital and debt
service expenditures including operating and capital contingencies for unusual or emergency
expenditures.
Internal Service Funds
At June 30, 2011, Internal Service Funds unrestricted net assets (in thousands):
Vehicle
Replacement
and
Maintenance Technology
Printing and
Mailing
Services
General
Benefits
Workers'
Compensation
Insurance
Program
General
Liabilities
Insurance
Program
Retiree
Health
Benefits Total
Unrestricted net assets:
Commitments 1,684$ 1,330$ 59$ 339$ 14$ 18$ -$ 3,444$
Future catastrophic losses - - - - 86 82 - 168
Retiree health care - - - - - - 26,285 26,285
Capital Projects 951 10,212 28 - - - - 11,191
Available 5,175 2,082 (139) 626 - - - 7,744
Total 7,810$ 13,624$ (52)$ 965$ 100$ 100$ 26,285$ 48,832$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
82
NOTE 10 – NET ASSETS AND FUND BALANCES (Continued)
Commitments represents the portion of net assets set aside for open purchase orders.
Future catastrophic losses is the portion of net assets to be used for unforeseen future losses.
Retiree health care represents the portion of net assets set aside to defer future costs of retiree health care
coverage.
Capital projects represents the portion of net assets set aside for adopted capital projects.
NOTE 11 – PENSION PLANS
CalPERS Safety and Miscellaneous Employees’ Plans
Substantially all permanent City employees are eligible to participate in pension plans offered by the
California Public Employees’ Retirement System (CalPERS), an agent for multiple employer defined
benefit pension plans, which acts as a common investment and administrative agent for its participating
member employers. CalPERS provides retirement and disability benefits, annual cost of living
adjustments and death benefits to plan members, who must be public employees and beneficiaries. The
City’s employees participate in the Safety (police and fire) and Miscellaneous (all other) Employee Plans.
Benefit provisions under both Plans are established by State statute and City resolution. Benefits are
based on years of credited service, equal to one year of full-time employment. Funding contributions for
both Plans are determined annually on an actuarial basis as of June 30 by CalPERS.
The Plans’ provisions and benefits in effect at June 30, 2011, are summarized as follows:
Safety Miscellaneous
Benefit vesting schedule 5 years service 5 years service
Benefit payments monthly for life monthly for life
Retirement age 50 50
Monthly benefits, as a % of annual salary 3%1.092 - 3%
Required employee contribution rates 9%7.999%
Required employer contribution rates 24.695%17.555%
Effective July 17, 2010, the City implemented a 2 percent at 60 retirement plan for Miscellaneous
employees.
The City’s current labor contracts with Safety Police and Safety Management employees require it to pay
employee contributions as well as its own. Starting January 2, 2010, Safety Fire employees paid the entire
employee contribution of 9 percent and the City paid the employer contributions. Within the
Miscellaneous group, Service Employees International Union (SEIU) employees contribute 5.75 percent
of the employee contributions with the City paying the balance. Within the Miscellaneous group, the
management employees contribute 2 percent of the employee contributions with the City paying the
balance. Contributions are collected through payroll deductions and the City remits those contributions to
CalPERS.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
83
NOTE 11 – PENSION PLANS (Continued)
CalPERS determines contribution requirements using a modification of the Entry Age Normal Method.
Under this method, the City’s total normal benefit cost for each employee from date of hire to date of
retirement is expressed as a level percentage of the related total payroll cost. Normal benefit cost under
this method is the level amount the employer must pay annually to fund an employee’s projected
retirement benefit. This level percentage of payroll method is used to amortize any unfunded actuarial
liabilities. The actuarial assumptions used to compute contribution requirements are also used to compute
the actuarial accrued liability. The City does not have a net pension obligation since it pays these
actuarially required contributions monthly.
Actuarially determined employer and employee contributions for all plans for fiscal years 2011, 2010 and
2009 were $24 million in each of those years. The City made these contributions as required, together
with certain immaterial amounts required as the result of the payment of overtime and other additional
employee compensation.
The City uses the actuarially determined percentages of payroll to calculate and pay contributions to
CalPERS. This results in no net pension obligations or unpaid contributions. Annual Pension Costs
representing the payment of annual required contributions determined by CalPERS for the last three fiscal
years were as follows (in thousands):
Fiscal Year Ended
Annual
Pension Cost
(APC)
Percent of
APC
Contributed
Net Pension
Obligation
Safety Plan
June 30, 2009 5,437$ 100%-$
June 30, 2010 5,441 100%-
June 30, 2011 6,029 100%-
Miscellaneous Plan
June 30, 2009 10,963 100%-
June 30, 2010 10,891 100%-
June 30, 2011 12,354 100%-
CalPERS uses the market related value method of valuing the Plan’s assets. An investment rate of return
of 7.75 percent is assumed, including inflation at 3 percent. Annual salary increases are assumed to vary
by duration of service. Changes in liability due to plan amendments, changes in actuarial assumptions, or
changes in actuarial methods are amortized as a level percentage of payroll on a closed basis over twenty
years. Investment gains and losses are tracked and amortized over 30 years.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
84
NOTE 11 – PENSION PLANS (Continued)
The Schedule of Funding Progress presents multi-year trend information about whether the actuarial
value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for
benefits. The Plans’ actuarial value (which differs from market value) and funding progress over the most
recently available three years is set forth below at their actuarial valuation date of June 30 (in thousands):
Safety Plan:
Valuation Date
Entry Age
Accrued
Liability Value of Assets
Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
Unfunded
Liability as a %
of Payroll
2008 258,964$ 228,883$ 30,081$ 88.4%22,181$ 135.6%
2009 280,293 236,274 44,019 84.3%22,087 199.3%
2010 293,895 244,413 49,482 83.2%23,030 214.9%
Miscellaneous Plan:
Valuation Date
Entry Age
Accrued
Liability Value of Assets
Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
Unfunded
Liability as a %
of Payroll
2008 443,337$ 379,837$ 63,500$ 85.7%63,934$ 99.3%
2009 499,200 398,765 100,435 79.9%65,602 153.1%
2010 521,269 416,810 104,459 80.0%62,496 167.1%
Actuarial
Actuarial
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
85
NOTE 11 – PENSION PLANS (Continued)
The significant actuarial assumptions adopted by CalPERS’ Board of Administration that were used to
prepare the City’s actuarial valuations for both the Safety and Miscellaneous Plans are as follows:
Safety Plan
Valuation Date 6/30/2010*6/30/2008**
Actuarial Cost Method Entry Age Normal Cost Method Entry Age Normal Cost Method
Amortization Method Level percent of payroll Level percent of payroll
Average Remaining Period 29 Years as of the Valuation Date 32 Years as of the Valuation Date
Asset Valuation Method 15 Year Smoothed Market 15 Year Smoothed Market
Actuarial Assumptions:
Investment Rate of Return 7.75% (net of administrative expenses) 7.75% (net of administrative expenses)
Projected Salary Increases 3.55% to 13.15% depending on age,
service, and type of employment
3.25% to 13.15% depending on age,
service, and type of employment
Inflation 3.00% 3.00%
Payroll Growth 3.25% 3.25%
Individual Salary Growth A merit scale varying by duration of
employment coupled with an assumed
annual inflation growth of 3.00% and an
annual production growth of 0.25%.
A merit scale varying by duration of
employment coupled with an assumed
annual inflation growth of 3.00% and an
annual production growth of 0.25%.
Miscellaneous Plan
Valuation Date 6/30/2010*6/30/2008**
Actuarial Cost Method Entry Age Normal Cost Method Entry Age Normal Cost Method
Amortization Method Level percent of payroll Level percent of payroll
Average Remaining Period 20 Years as of the Valuation Date 19 Years as of the Valuation Date
Asset Valuation Method 15 Year Smoothed Market 15 Year Smoothed Market
Actuarial Assumptions:
Investment Rate of Return 7.75% (net of administrative expenses) 7.75% (net of administrative expenses)
Projected Salary Increases 3.55% to 14.45% depending on age,
service, and type of employment
3.25% to 14.45% depending on age,
service, and type of employment
Inflation 3.00% 3.00%
Payroll Growth 3.25% 3.25%
Individual Salary Growth A merit scale varying by duration of
employment coupled with an assumed
annual inflation growth of 3.00% and an
annual production growth of 0.25%.
A merit scale varying by duration of
employment coupled with an assumed
annual inflation growth of 3.00% and an
annual production growth of 0.25%.
* The June 30, 2010 valuations, which are the most recent valuations, were used to disclose the funded status.
** The June 30, 2008 valuations were used to determine the contribution requirements for FY 2010/11
Audited annual financial statements and six-year trend information are available from CalPERS at
P.O. Box 942709, Sacramento, CA 94229-2709.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
86
NOTE 12 – RETIREE HEALTH BENEFITS
In addition to providing pension benefits, the City participates in the California Public Employees’
Medical and Health Care Act program to provide certain health care benefits for retired employees.
Employees who retire directly from the City are eligible for retiree health benefits if they retire on or after
age 50 with 5 years of service and are receiving a monthly pension from CalPERS.
For all employees hired before January 1, 2004, the City pays for 100 percent of the cost of retiree health
benefits for retirees for their lifetimes. The City also pays a portion of health benefits for dependents of
retirees equal to 90 percent of the premiums for 2011 and increasing 5 percent per year until the City’s
share reaches 100 percent of dependent premiums for 2013 and beyond.
For management employees, fire fighter and fire chief association members hired on or after January 1,
2004, and SEIU employees hired on or after January 1, 2005, the City pays for 50 percent of the above
described benefits after 10 years of service, and the City's portion increases by 5 percent for each
additional year of service up to 20 years. For management, fire fighter and fire chief association members
who retire on or after January 1, 2006, and for SEIU employees who retire on or after January 1, 2007, the
maximum premium amount the City will pay toward health insurance will be equal to the second highest
CalPERS Bay Area Basic plan premium (currently the Blue Shield HMO premium).
During FY 2008, the City implemented the provisions of Governmental Accounting Standards Board
Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other
Than Pensions. This Statement establishes uniform financial reporting standards for employers providing
other postemployment benefits (OPEB). As part of the implementation, the City elected to participate in
an irrevocable trust to provide a funding mechanism for the OPEB and to apply the provisions of the
statement on a prospective basis. The Trust, California Employers’ Retirees Benefit Trust (CERBT), is
administrated by CalPERS and managed by a separately appointed board, which is not under control of
the City Council. This Trust is not considered a component unit of the City.
Funding Policy and Actuarial Assumptions
The City’s policy is to prefund these benefits by accumulating assets in the Trust Fund discussed above
pursuant to City Council Resolution. The annual required contribution (ARC) was determined as part of a
January 1, 2009, actuarial valuation using the entry age normal actuarial cost method. This is a projected
benefit cost method, which takes into account those benefits that are expected to be earned in the future as
well as those already accrued. The actuarial assumptions include: (a) 7.75 percent investment rate of
return, (b) 3.25 percent projected annual salary increase, and (c) 5 percent health inflation increase. The
actuarial methods and assumptions used include techniques that smooth the effects of short-term volatility
in actuarial accrued liabilities and the actuarial value of assets. Actuarial calculations reflect a long-term
perspective and actuarial valuations involve estimates of the value of reported amounts and assumptions
about the probability of events far into the future. The calculations are based on the types of benefits
provided under the terms of the substantive plan at the time of each valuation and on the pattern of
sharing costs between the City and plan members to that point. Actuarially determined amounts are
subject to revision at least biannually as results are compared to past expectations and new estimates are
made about the future. The City’s OPEB unfunded actuarial accrued liability is being amortized as a level
percentage of projected payroll using a 30 year open amortization period.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
87
NOTE 12 – RETIREE HEALTH BENEFITS (Continued)
Generally accepted accounting principles permit assets to be treated as OPEB assets and deducted from
the Actuarial Accrued Liability when such assets are placed in an irrevocable trust or equivalent
arrangement. During the year ended June 30, 2011, the City made contributions and amortized the Net
OPEB asset to fund the current year ARC. As a result, the City has calculated and recorded the Net OPEB
Asset, representing the difference between the ARC, amortization and contributions, as presented below
(in thousands):
Annual required contribution 9,786$
Amortization on the Net OPEB Asset 2,280
Interest on the Net OPEB Asset (1,801)
Annual OPEB Cost 10,265
Contributions made:
Contributions to OPEB Trust 1,832
Contributions to Retirees 1,981
City portion of current year premiums paid*6,216
Total contributions made 10,029
Change in Net OPEB Asset (236)
Net OPEB Asset, beginning of year 23,242
Net OPEB Asset, end of year 23,006$
* FY 2011 premiums for 860 retirees.
Shortly after year-end, the City contributed an additional $2.4 million to the Trust.
The Plan’s annual required contributions and actual contributions for the past three years ended June 30
are set forth below (in thousands):
Fiscal Year
Annual OPEB
Cost
Actual
Contribution
Percentage
of OPEB
Cost
Net OPEB
Obligation
(Asset)
June 30, 2009 8,729$ 5,904$ 68%(26,352)$
June 30, 2010 10,329 7,219 70%(23,242)
June 30, 2011 10,265 10,029 98%(23,006)
The Schedule of Funding Progress presents multi-year trend information about whether the actuarial
value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for
benefits. Trend data from the actuarial studies is presented below (in thousands):
Valuation Date
Entry Age
Accrued
Liability
Value of
Assets
Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
Unfunded
Liability as a
% of Payroll
January 1, 2007 102,237$ -$ 102,237$ 0.0% 97,600$ 104.8%
January 1, 2009 129,661 24,616 105,045 19.0% 98,940 106.2%
January 1, 2011 169,979 35,294 134,685 20.8% 80,664 167.0%
June 30, 2011 *179,923 40,222 139,701 22.4% 83,285 167.7%
* In accordance with GASB Statement No. 57, the CERBT required all trust participants to use a common valuation date.
Therefore, the City is required to conduct its biennial valuation on June 30, rather than January 1, effective for 2011.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
88
NOTE 12 – RETIREE HEALTH BENEFITS (Continued)
The retiree activities in the City’s Retiree Health Benefit Internal Service Fund consist of the following
for the year ended June 30 (in thousands):
Retiree Health Benefits 2011 2010
Net assets, beginning of year 25,504$ 26,362$
Interest earnings 60 73
Unrealized gain (loss) on investments 35 49
Interdepartmental charges 10,980 9,698
Compensated benefits (10,294) (10,614)
Transfers in (out)- (64)
Net assets, end of year 26,285$ 25,504$
NOTE 13 – DEFERRED COMPENSATION PLAN
City employees may defer a portion of their compensation under City sponsored Deferred Compensation
Plans created in accordance with Internal Revenue Code Section 457. Under these Plans, participants are
not taxed on the deferred portion of their compensation until distributed to them. Distributions may be
made only at termination, retirement, death or in an emergency as defined by the Plans.
The laws governing deferred compensation plan assets now require plan assets to be held by a Trust for
the exclusive benefit of plan participants and their beneficiaries. Since the assets held under these plans
are not the City’s property and are not subject to City control, they have been excluded from these
financial statements.
NOTE 14 – RISK MANAGEMENT
Coverage
The City provides dental coverage to employees through programs, which are administered by a service
agent. The City is self-insured for the dental coverage.
The City has a workers’ compensation insurance policy with coverage up to the statutory limit set by the
State of California. The City retains the risk for the first $500,000 in losses for each accident and
employee under this policy.
The City also has public employee dishonesty insurance with a $5,000 deductible and coverage up to $1
million per loss.
The City’s property and machinery insurance policy has various deductibles and various coverage based
on the type of machinery.
The City is a member of the Authority for California Cities Excess Liability (ACCEL), which provides
general liability, including auto liability, insurance coverage up to $74 million per occurrence. The City
retains the risk for the first $1 million in losses for each occurrence under this policy.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
89
NOTE 14 – RISK MANAGEMENT (Continued)
ACCEL was established for the purpose of creating a risk management pool for central California
municipalities. ACCEL is governed by a Board of Directors consisting of representatives of its member
cities. The board controls the operations of ACCEL, including selection of management and approval of
the annual budget.
The City’s deposits with ACCEL equal the ratio of the City’s payroll to the total payrolls of all entities.
Actual surpluses or losses are shared according to a formula developed from overall loss costs and spread
to member entities on a percentage basis after a retrospective rating.
During the year ended June 30, 2011, the City contributed $0.9 million to ACCEL for current year
coverage.
Audited financial statements are available from ACCEL at 160 Spear Street, San Francisco, California
94105-2709.
Claims Liability
The City provides for the uninsured portion of claims and judgments in the General Benefits and
Insurance Internal Service Funds. Claims and judgments, including a provision for claims incurred but
not reported, and claim adjustment expenses are recorded when a loss is deemed probable of assertion and
the amount of the loss is reasonably determinable. As discussed above, the City has coverage for such
claims, but it has retained the risk for the deductible or uninsured portion of these claims.
The City’s liability for uninsured claims is limited to dental, general liability, and workers’ compensation
claims, as discussed above. Dental liability is based on a percentage of current year actual expense.
General and workers’ compensation liabilities are based on the results of actuarial studies, and include
amounts for claims incurred but not reported as follows as of June 30 (in thousands):
2011 2010
Beginning balance 21,478$ 21,438$
Liability for current and prior fiscal years claims and
claims incurred but not reported (IBNR)6,665 4,385
Claims paid (4,240) (4,345)
Ending balance 23,903$ 21,478$
Current portion 5,873$ 6,532$
Year Ended June 30
The City has not incurred a claim that has exceeded its insurance coverage limits in any of the last three
years, nor have there been any significant reductions in insurance coverage.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
90
NOTE 15 – JOINT VENTURES
General
The City participates in joint ventures through Joint Powers Authorities (JPAs) established under the Joint
Exercise of Powers Act of the State of California. As separate legal entities, these JPAs exercise full
powers and authorities within the scope of the related Joint Powers Agreement, including the preparation
of annual budgets, accountability for all funds, the power to make and execute contracts and the right to
sue and be sued. Obligations and liabilities of the JPAs are not those of the City.
Each JPA is governed by a board consisting of representatives from each member agency. Each board
controls the operations of its respective JPA, including selection of management and approval of
operating budgets, independent of any influence by member agencies beyond their representation on the
Board.
Northern California Power Agency
The City is a member of Northern California Power Agency (NCPA), a joint powers agency, which
operates under a joint powers agreement among fifteen public agencies. The purpose of NCPA is to use
the combined strength of its members to purchase, generate, sell and interchange electric energy and
capacity through the acquisition and use of electrical generation and transmission facilities. Each agency
member has agreed to fund a pro rata share of certain assessments by NCPA and enter into take-or-pay
power supply contracts with NCPA. While NCPA is governed by its members, none of its obligations are
those of its members unless expressly assumed by them.
During the year ended June 30, 2011, the City incurred expenses totaling $56.4 million for purchased
power and assessments earned by NCPA.
The City’s interest in NCPA projects and reserves, as computed by NCPA, was $7.2 million at June 30,
2011. This amount represents the City’s portion of funds, which resulted from the settlement with third
parties of issues with financial consequences and reconciliations of several prior years’ budgets for
programs. It is recognized that all the funds credited to the City are linked to the collection of revenue
from the City’s ratepayers, or to the settlement of disputes relating to electric power supply and that the
money was collected from the City’s ratepayers to pay power bills. Additionally, the NCPA Commission
identified and approved the funding of specific reserves for working capital, accumulated employees’
post-retirement medical benefits, and billed property taxes for the geothermal project. The Commission
also identified a number of contingent liabilities that may or may not be realized, the cost of which in
most cases is difficult to estimate at this time. One such contingent liability is the steam field depletion,
which will require funding to cover debt service and operational costs in excess of the expected value of
the electric power. The General Operating Reserve is intended to minimize the number and amount of
individual reserves needed for each project, protect NCPA’s financial condition and maintain its credit
worthiness. These funds are available on demand, but the City has left them with NCPA as a reserve
against these contingencies identified by NCPA.
Members of NCPA may participate in an individual project of NCPA without obligation for any other
project. Member assessments collected for one project may not be used to finance other projects of NCPA
without the member’s permission.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
91
NOTE 15 – JOINT VENTURES (Continued)
Geothermal Projects
A purchased power agreement with NCPA obligated the City for 6.2 percent and 6.2 percent,
respectively, of the operating costs and debt service of the two NCPA 110-megawatt geothermal
steampowered generating plants, Project Number 2 and Project Number 3.
The City’s participation in the Geothermal Project was sold to Turlock Irrigation District in October 1984.
Accordingly, the City is liable for payment of outstanding geothermal related debt only in the event that
Turlock fails to make specified payments. Total outstanding debt of the NCPA Geothermal Project at
June 30, 2011 is $79.4 million. The City’s participation in this project was 6.2 percent, or $4.9 million.
NCPA’s Geothermal Project has experienced a greater than originally anticipated decline in steam
production from geothermal wells on its leasehold property. Results of the continuing well analysis
program indicate that the potential productive capacity of the geothermal steam reservoir is less than
originally estimated. Therefore, NCPA has modified the operations of the Geothermal Project to reduce
the average annual output from past levels. As a result, the per unit cost of energy generated by the
projects will be higher than anticipated.
NCPA will continue to monitor the wells while pursuing alternatives for improving and extending
reservoir performance, including supplemental water re-injection, plant equipment modifications, and
changes in operating methodology. NCPA, along with other steam field operators, has observed a
substantial increase in steam production in the vicinity of re-injection wells and is attempting to increase
water re-injection at strategic locations. NCPA, other steam developers, and the Lake County Sanitation
District are constructing a wastewater pipeline project that will greatly increase the amount of water
available for re-injection.
Calaveras Hydroelectric Project
In July 1981, NCPA agreed with Calaveras County Water District to purchase the output of the North
Fork Stanislaus River Hydroelectric Development Project and to finance its construction. Debt service
payments to NCPA began in February 1990 when the project was declared substantially complete and
power was delivered to the participants. Under its power purchase agreement with NCPA, the City is
obligated to pay 22.9 percent of this Project’s debt service and operating costs. At June 30, 2011, the
book value of this Project’s plant, equipment and other assets was $417.5 million, while its long-term
debt totaled $367.3 million and other liabilities totaled $50.2 million. The City’s share of the Project’s
long-term debt amounted to $84.2 million at that date.
Geothermal Public Power Line
In 1983, NCPA, the Sacramento Municipal Utility District, the City of Santa Clara and the Modesto
Irrigation District (Joint Owners) initiated studies for a Geothermal Public Power Line (GPPL), which
would carry power generated at several existing and planned geothermal plants in The Geysers area to a
location where the Joint Owners could receive it for transmission to their load centers. NCPA has an 18.5
percent share of this Project and the City has an 11.1 percent participation in NCPA’s share. In 1989, the
development of the proposed Geothermal Public Power Line was discontinued because NCPA was able to
contract for sufficient transmission capacity to meet its needs in The Geysers.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
92
NOTE 15 – JOINT VENTURES (Continued)
However, because the project financing provided funding for an ownership interest in a Pacific Gas &
Electric (PG&E) transmission line, a central dispatch facility and a performance bond pursuant to the
Interconnection Agreement with PG&E, as well as an ownership interest in the proposed GPPL, NCPA
issued $16 million in long-term, fixed-rate revenue bonds in November 1989 to defease the remaining
variable rate refunding bonds used to refinance this project. The City is obligated to pay its 11.1 percent
share of the related debt service, but debt service costs are covered through NCPA billing mechanisms
that allocate the costs to members based on use of the facilities and services.
At June 30, 2011, the book value of this Project’s plant, equipment and other assets was zero, and its
long-term debt totaled zero.
NCPA Financial Information
NCPA’s financial statements can be obtained from NCPA, 180 Cirby Way, Roseville, CA 95678.
Transmission Agency of Northern California (TANC)
The City is a member of a joint powers agreement with 14 other entities in the Transmission Agency of
Northern California (TANC). TANC’s purpose is to provide electrical transmission or other facilities for
the use of its members. While governed by its members, none of TANC’s obligations are those of its
members unless expressly assumed by them. The City was obligated to pay 4 percent of TANC’s debt-
service and operating costs. However, a Resolution was approved authorizing the execution of a Long-
Term Layoff Agreement (LTLA) between the Cities of Palo Alto and Roseville. These two agencies
desired to “layoff” their entitlement rights to the California-Oregon Transmission Project (COTP) (and
Roseville’s South of Tesla entitlement rights) for a period of 15 years to those acquiring Members
(Sacramento Municipal Utility District, Turlock Irrigation District, and Modesto Irrigation District). The
effective date of this Agreement was February 1, 2009. As a result, the City is obligated to pay zero
percent of TANC’s debt-service and operating costs starting February 1, 2009, for a period of fifteen
years.
According to the 1985 Project Agreement with TANC for the development of the California-Oregon
Transmission Project (COTP) and subsequent related project agreements, the City is obligated to pay its
share of the project’s costs, including debt service, and is entitled to the use of a percentage of the
project’s transmission or transfer capacity. TANC has issued four series of Revenue Bonds and
Commercial Paper Notes totaling $421.4 million as of June 30, 2010. The City’s share of this debt is zero
due to the LTLA mentioned above.
Construction of the COTP was complete as of June 30, 1993. The transmission line was energized
March 24, 1993. Because funding of certain participants’ shares in the project was needed pending
approval of their applications for participation, TANC issued $93.8 million of Commercial Paper debt
backed by a Letter of Credit. The City’s share of the Commercial Paper was zero at June 30, 2011, due to
the LTLA mentioned above.
TANC Financial Information
TANC’s financial statements can be obtained from TANC, P.O. Box 15129, Sacramento, CA 95851.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
93
NOTE 16 – COMMITMENTS AND CONTINGENCIES
Palo Alto Unified School District – The City leases a portion of the former Cubberley School site and
eleven extended day care sites from the Palo Alto Unified School District (PAUSD). The lease is part of a
larger agreement, which includes a covenant not to develop certain properties owned by the PAUSD. The
lease term expired on December 31, 2004, upon which the City exercised its first option to extend for 10
years, for a new expiration date of 12/31/2014. The lease provides for two more five-year options to
extend, 1/1/2015 to 12/31/2019, and 1/1/2020 to 12/31/2024. The City’s rent for the facilities is $7.1
million per year plus insurance, repairs and maintenance. Should any new law or regulation require the
expenditure of work in excess of $250,000, per the terms of the lease, the City and PAUSD may
renegotiate the lease. This lease is cancelable upon 90 days’ written notice in the event funds are not
appropriated by the City. In addition, the lease is contingent upon authorization by the Palo Alto
electorate if it exceeds the City’s Proposition 4 (Gann) appropriations limitation in any fiscal year. Lease
expenditures for the year ended June 30, 2011, amounted to $7.1 million.
Future minimum annual lease and covenant payments are as follows (in thousands):
Year ending June 30 Payments
2012 7,061$
2013 7,273
2014 7,491
2015 7,716
2016 7,945
2017-2020 34,184
71,670$
GreenWaste of Palo Alto – As of July 1, 2009, GreenWaste of Palo Alto is the new contractor for waste
collection, transportation, and processing services. The new agreement has a term of eight years, until
June 30, 2017, with the potential to extend the contract to 2021. Base compensation for GreenWaste is a
set amount for the first two years of the contract, and is adjusted annually thereafter based on CPI
indicators stipulated in their contract. In FY 2011 this resulted in payments to GreenWaste of $10.5
million.
City of Palo Alto Regional Water Quality Control Plant – The cities of Palo Alto, Mountain View and
Los Altos (the Partners) participate jointly in the cost of maintaining and operating the City of Palo Alto
Regional Water Quality Control Plant and related system (the Plant). The City is the owner and
administrator of the Plant, which provides the transmission, treatment and disposal of sewage for the
Partners. The cities of Mountain View and Los Altos are entitled to use a portion of the capacity of the
Plant for a specified period of time. Each partner has the right to rent unused capacity from/to the other
partners. The expenses of operations and maintenance are paid quarterly by each partner based on its pro
rata share of treatment costs. Additionally, joint system revenues are shared by the partners in the same
ratio as expenses are paid. The amended agreement has a term of fifty years beginning from the original
signing in October 1968, but may be terminated by any partner upon ten years’ notice to the other
partners. All sewage treatment property, plant and equipment are included in the Wastewater Treatment
Enterprise Fund’s capital assets balance at June 30, 2011. If the City initiates the termination of the
contracts, it is required to pay the other partners their unamortized contribution towards the capital assets.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
94
NOTE 16 – COMMITMENTS AND CONTINGENCIES (Continued)
Solid Waste Materials Recovery and Transfer Station (SMaRT Station) – On June 9, 1992, the City,
along with the City of Mountain View, signed a Memorandum of Understanding (MOU) with the City of
Sunnyvale (Sunnyvale) to participate in the construction and operation of the SMaRT station, which
recovers recyclable materials from the municipal solid waste delivered from participating cities. Per the
MOU, the City has a capacity share of 21.3 percent of this facility and reimburses its proportionate
capacity share of design, construction and operation costs to Sunnyvale.
On December 1, 1992, the Sunnyvale Financing Authority issued $24.6 million in revenue bonds to
finance the design and construction costs of the SMaRT Station. During the fiscal year ended June 30,
2003, the 1992 bonds were refunded by issuing the 2003 Solid Waste Revenue Bonds in the amount of
$20.6 million. Even though these bonds are payable from and secured by the net revenues of Sunnyvale’s
Utilities Enterprise, the City is obligated to reimburse Sunnyvale 21.3 percent of total debt service
payments related to these bonds. The City’s portion of remaining principal balance for SMaRT revenue
bonds as of June 30, 2011, is $2.4 million. During the year ended June 30, 2011, the City paid $0.4
million as its portion of current debt service.
In FY 2008, the members agreed to finance an Equipment Replacement Project from existing reserves
and proceeds from the Solid Waste Revenue Bond, Series 2007. The City has committed to repay 27.8
percent of the remaining debt service on the Bonds. The City’s portion of the Bonds amounts to $1.9
million as of June 30, 2011. During the year ended June 30, 2011, the City paid $0.1 million as its portion
of current debt service.
UTILITIES ENERGY RESOURCE MANAGEMENT
Energy Markets in the United States and California
U.S. and California electric and gas prices continued to be volatile during the year. The City purchased
electricity in FY 2011 in conformance with the Council-approved Long-term Electric Acquisition Plan
(LEAP) established in 2001 and last modified in March 2011. Due to the City’s commodity purchase
strategy, whereby purchases are made on a 3-year forward basis in a laddered fashion, the City’s gas
utility has a higher average cost of gas for its pool customers in FY 2011 compared to the average market
price during the year. The City’s average natural gas commodity cost for the gas pool customers was
$6.84/MMBtu compared to a spot market price of $4.30/MMBtu. The primary reason the City’s natural
gas costs were higher than market was due to a dramatic drop in spot market prices in FY 2009 after gas
had been purchased and costs were locked in. The City’s average wholesale electric commodity purchase
cost during the fiscal year was approximately 5.4¢/kWh while the average spot market prices were
approximately 3.5¢/kWh.
Hydroelectric supplies were at high levels in FY 2011, which resulted in less energy purchased from the
market. Hydroelectric production accounted for 58 percent of the City’s electric supply in FY 2011
instead of 50 percent in a normal hydrologic year. These hydroelectric supplies derive from two sources –
from contract with the Western Area Power Administration and from the City’s partial ownership of the
Calaveras Hydroelectric Project. Wind and landfill gas resources accounted for 19 percent of the electric
supply in FY 2011, with the balance purchased from the wholesale electric market. The City transacts
with qualified suppliers for the market purchases, and the Northern California Power Agency (NCPA),
which provides scheduling services for the City, buys and sells electricity within the month as needed to
meet the City’s demands.
Incidental sales of surplus energy resulted in revenues of $3.7 million during the year. (The expense
associated with the surplus energy sold from the overall electric supply portfolio was calculated at $4.9
million for the year, and is shown separately on the Statement of Revenues, Expenses and Changes in Net
Assets.)
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
95
NOTE 16 – COMMITMENTS AND CONTINGENCIES (Continued)
During FY 2009, the City executed a 15-year assignment of its full share of ownership and obligations in
the California Oregon Transmission Project (COTP). The assignment resulted in lower cost to serve the
City’s electric rate payers in FY 2011 and is projected to continue saving the City throughout the term of
the assignment.
The City has executed Electric and Gas Master Agreements with suppliers to procure electricity and
natural gas supplies. The table below outlines the electric and natural gas commodity supply
commitments made by the City with these suppliers as of June 30, 2011. Monthly payments are made to
suppliers upon delivery of supplies for the month. The City’s procurement plans conform to the Council-
approved Energy Risk Management Policies. These include a formal oversight role (Middle Office)
within the Administrative Services Department. A quarterly energy risk management report is provided to
the Council as part of this oversight role.
Forward Electricity Commodity Supply Commitments as of June 30, 2011
Supplier FY 2012 FY 2013 Total
BP 2,331,326$ 2,120,640$ 4,451,966$
Powerex 6,691,783 1,613,675 8,305,458
SENA 2,635,200 - 2,635,200
11,658,309 3,734,315 15,392,624
Average Cost
($/MWh)52.50 48.30 51.42
Forward Natural Gas Commodity Supply Commitments as of June 30, 2011
Supplier FY 2012 FY 2013 FY 2014 Total
BP 2,868,864$ -$ -$ 2,868,864$
JP Morgan 1,205,420 967,910 - 2,173,330
Powerex 574,540 1,227,170 611,310 2,413,020
SENA 4,536,733 1,597,500 - 6,134,233
9,185,557 3,792,580 611,310 13,589,447
Average Cost
($/MMBtu)6.52 5.94 4.97 6.26
The City’s natural gas transportation contract with the Pacific Gas and Electric Company (PG&E) went
into effect starting January 1, 2011, and will be in place until the end of 2014. This contract, commonly
known as Gas Accord V, between PG&E and its transportation customers provides the City’s retail
customers stable transportation costs. Palo Alto retains access to transmission capacity on par with
PG&E’s core customers although rates increased for all shippers. Palo Alto’s backbone transmission rate
increased by approximately 40 percent or $150,000 per year. This is due to a shifting of costs from the
pipeline in the south to the northern pipeline. Despite this projected cost increase, the City will continue
to benefit from its transportation contract with PG&E.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
96
NOTE 16 – COMMITMENTS AND CONTINGENCIES (continued)
Future Outlook
Electric
The market price for fossil fuel based electricity is projected to be relatively low for the next 12 months –
at 3 to 4¢/kWh – but in the longer term it is expected to return to a higher level of 6 to 8¢/kWh. The price
premium commanded by renewable energy projects remains significantly higher than “brown” market
power. Costs for renewable energy are expected to remain high in the foreseeable future. The higher
prices will result in higher costs to meet the City’s renewable energy supply targets.
The Council-approved Renewable Portfolio Standard (RPS), last updated in March 2011, is to meet 33
percent of the Citywide load with renewable resource supplies by 2015. On April 12, 2011 California
adopted legislation (SB X12) requiring an RPS for all load serving entities including public owned
utilities. The law requires utilities to procure renewable energy supplies to meet 20 percent of their retail
sales by December 31, 2013, 25 percent of their retail sales by December 31, 2016 and 33 percent of their
retail sales by December 31, 2020. For calendar year 2010, renewable supplies accounted for
approximately 20.6 percent of retail sales. Going forward, the City continues to be on track to meet the
City’s RPS as well as the state mandated RPS. Based on existing and committed renewable supplies –
which are detailed in the table below – the City expects to have a renewable energy supply level as a
percentage of retail sales of 28.6 percent in calendar year 2013, 30.7 percent in calendar year 2016, and
30.4 percent in calendar year 2020. In FY 2011, the Council re-approved the Western GeoPower
renewable energy contract; this project is expected to begin operation in late 2013. In order to procure the
remaining renewable energy to achieve RPS level of 33 percent of retail sales, the City is currently
developing a feed-in-tariff program to buy energy from projects developed in Palo Alto. The City is also
in the process of issuing a solicitation for additional long-term renewable energy purchase contracts from
projects located throughout the western United States.
Project Name Technology
Nameplate
Capacity
(MW)
Nominal
Generation
(MWh/yr)
Currently
Online
Actual or
Expected
Contract
Start Date
Location
(state)
Contracti
ng Date
Contract
Term
(years)
Shiloh Wind 25 74,400 Yes 2006 California 2005 15
High Winds Wind 20 51,800 Yes 2004 California 2004 23.5
Santa Cruz Landfill LFG 1.6 11,200 Yes 2006 California 2004 20
Ox Mountain Landfill LFG 5.7 40,800 Yes 2009 California 2005 20
Keller Canyon Landfill LFG 2 11,800 Yes 2009 California 2005 20
Johnson Canyon Landfill LFG 1.4 11,200 No 2011 California 2009 20
San Joaquin Landfill LFG 4.3 32,000 No 2012 California 2010 20
Crazy Horse Canyon Landfill LFG 2.9 21,600 No 2012 California 2010 20
Western GeoPower Geothermal 3.9 33,100 No 2013 California 2011 25
Energy efficiency is the most cost-effective electric resource available to the City. It is considered a
primary resource for the electric utility. Reducing the need for energy and renewable energy supplies are
two of the main methods the City plans to employ to achieve the greenhouse gas reduction targets
established in the City’s Climate Protection Plan. The City’s first 10-year Electric Energy Efficiency Plan,
adopted by the Council in 2007, had a goal of reducing the City’s electric needs by 3.5 percent by 2016
by employing energy efficiency measures. For the first three years of the 2007 Plan’s implementation,
actual energy savings exceeded the annual goals set in the plan. In May 2010, Council adopted the
updated 2010
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
97
NOTE 16 – COMMITMENTS AND CONTINGENCIES (continued)
10-year Electric Energy Efficiency Plan, which more than doubled the energy efficiency goals of the 2007
Plan. The goal for the 2010 Plan is to reduce the City’s electric needs by 7.2 percent by 2020 by
employing energy efficiency measures.
PaloAltoGreen, the City’s volunteer green power program, currently accounts for an additional 6 percent
of the City’s energy needs from renewable resources. The City also has a program to encourage small-
scale ultra-clean distributed generation and co-generation applications within the City, but there have
been no applicants for this program. The City is planning to re-evaluate this program to make sure that it
provides the proper incentive for customers to build such clean and efficient units at their premises.
The CAISO implemented its Market Redesign and Technology Update (MRTU) in April 2009. An
underlying component of MRTU is the use of location-specific prices for the scheduling of energy
transactions. These locational prices are determined hourly and reflect the marginal costs of meeting
demand and resolving congestion on the transmission grid, which adds more uncertainty and volatility to
the cost of transmission services for the City.
The City continues to follow the development of laws and associated regulations related to
implementation of AB 32 (California Global Warming Solutions Act of 2006, Chaptered 9/27/2006). In
December 2008, the California Air Resources Board (CARB) approved the Scoping Plan, which is the
primary guidance document for shaping how California will reduce its greenhouse gas (GHG) emissions
to 1990 levels by 2020 as called for by AB 32. The scoping plan has a range of GHG reduction actions,
which include direct regulations, alternative compliance mechanisms, monetary and non-monetary
incentives, voluntary actions, market-based mechanisms such as a cap-and-trade system, and an AB 32
cost of implementation fee regulation to fund the program. CARB is tasked with completing the majority
of the work in designing the implementation details by October 28, 2011, with most regulations and other
initiatives adopted by the start of 2012. In FY 2011, CARB delayed the start of the compliance
obligations for electricity providers under the cap-and-trade system by one year, from January 1, 2012 to
January 1, 2013. At this time it is anticipated that the cap-and-trade system will go into full effect in
2013, but it is still unclear what the financial impact will be to the City.
Natural Gas
Long-term market prices for natural gas have remained depressed since the market price decline in
2008/2009. Increasing U.S. and international demand resulting from economic recovery and potential
clean energy legislation may put pressure on gas prices in the long term, however low to moderate gas
prices are forecasted for the next year or two. The gas laddering strategy used to hedge gas portfolio costs
is currently under review. The City also employs asset management strategies to lower overall
commodity costs.
In March 2011, the Council approved a plan to implement a voluntary customer program similar to
PaloAltoGreen for non-fossil fuel gas supplies. The City continues to search for potential supplies that are
priced in a reasonable range for program marketability.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
98
NOTE 16 – COMMITMENTS AND CONTINGENCIES (continued)
Water
The City’s water use during FY 2011 increased about 2 percent from the prior year. Usage is highly
dependent on weather conditions, but has remained essentially flat for the past 10 years. Current water
usage is only 64 percent of what it was in 1975. The small increase in usage in FY 2011 may be attributed
to some level of economic recovery and increased rainfall. Water supply costs for FY 2011 increased by
17.9 percent from FY 2010, primarily due to a 15 percent increase in the San Francisco Public Utilities
Commission (SFPUC) wholesale water rate in FY 2011. The increase was related in part to extensive
capital improvements on the Hetch Hetchy Water System and in part decreased consumption in San
Francisco and other Bay Area Water Supply & Conservation Agency (BAWSA) agencies, which required
a higher per unit wholesale rate in order to recover fixed costs.
Water supply costs are expected to continue to trend upward as the SFPUC implements its upgrade to the
regional water system facilities, the Water System Improvement Program (WSIP). Costs for the WSIP are
expected to be about $4.6 billion. Estimates for these increased costs have been factored into the City’s
long-term water supply cost projections.
Palo Alto is a member of the Bay Area Water Supply and Conservation Agency (BAWSCA), which
represents all the agencies that buy water on a wholesale basis from the City and County of San Francisco
(San Francisco.) The relationship between each of the BAWSCA agencies and San Francisco is specified
in a 25-year water service contract, which expired on June 30, 2009. Each agency, including Palo Alto,
has approved a new 25-year Water Supply Agreement with San Francisco effective on July 1, 2009. The
new contract contains the same mechanism for cost allocation as in the old contract and the contract has
other improvements regarding water quality and fair treatment in water supply emergencies. However, a
new supply limitation will require that the BAWSCA agencies work together to reduce long-term demand
so that additional diversions from the Tuolumne River are minimized or eliminated.
During FY 2009, the City completed a Recycled Water Facility Plan, which provides more detailed
design information on the project to expand the recycled water distribution. After circulating a Draft
Mitigated Negative Declaration document for comments, it was determined that additional study would
be required to address the water quality of the recycled water, particularly the salinity levels, which would
negatively impact plant materials. The City embarked on a single-issue Environmental Impact Report in
FY 2010 to address this issue. The environmental documents, which are necessary to compete for grant
funding opportunities, are expected to be completed in FY 2012.
Contingent Liabilities
Many of the uncertainties faced by the Utilities Department as an aftermath of the 2000-01 energy crisis
have been resolved. The Ninth Circuit Court determined that the Federal Energy Regulatory Commission
(FERC) lacked authority under the Federal Power Act to grant refund relief against governmental
agencies, and the United States Supreme Court declined to review that decision. Nonetheless a number of
entities (“the California Parties”) filed suit against the NCPA and other municipal utilities seeking refunds
for sales made to the CAISO and Power Exchange during the energy crisis. The suit was filed in the
Superior Court in Los Angeles in April 2007. In March 2010, the issue was resolved in a settlement
agreement and the City made a payment to the California Parties and no further claims are expected. On
April 29, 2010, the FERC issued an order approving the settlement between NCPA and the California
Parties. Another dispute between the Western Area Power Administration and PG&E regarding PG&E’s
claim to recover certain CAISO related costs has not been resolved.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
99
NOTE 16 – COMMITMENTS AND CONTINGENCIES (continued)
Litigation – The City is subject to litigation arising in the normal course of business. In the opinion of the
City Attorney, there is no pending litigation, claims or assessments that are likely to have a materially
adverse effect on the City’s financial condition.
Sales Tax Adjustment – On April 14, 1999, the State Board of Equalization informed the City that it had
been allocated and paid $.6 million sales taxes in error and that the City was obligated to refund these
taxes from future sales tax revenues. The City is in process of challenging the Board’s findings. However,
as of June 30, 2011, the issue had not been settled and the refund had not been returned.
Grant Programs – The City participates in Federal and State grant programs. These programs have been
audited by the City’s independent accountants in accordance with the provisions of the Federal Single
Audit Act amendments of 1996 and applicable State requirements. No costs were questioned as a result of
these audits; however, these programs are still subject to further examination by the grantors and the
amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined
at this time. The City expects such amounts, if any, to be immaterial.
NOTE 17 – SUBSEQUENT EVENTS
Approval of the Expansion of Stanford Medical Center
On June 6, 2011, the City Council approved a Development Agreement between the City and Stanford
Hospital and Clinics, Lucile Salter Packard Children’s Hospital at Stanford, and the Board of Trustees of
the Leland Stanford Junior University (collectively, the “SUMC Parties”), whereby the SUMC Parties
will enhance and expand their facilities and the City will grant the SUMC Parties the right to develop the
facilities in accordance with Project Approvals described in the Agreement.
Under the terms of the Agreement, the City received $20.8 million in August, 2011 to be used for various
community and mitigation measures as specified in the Agreement. The City will receive a further $23.4
million over the course of the project.
Refinancing of the 2002A Golf Course Certificate of Participation
On August 2, 2011, the City entered into a master lease-purchase agreement (the Agreement) with
JPMorgan Chase Bank N.A., whereby the proceeds together with the bond reserve fund were used to
refund the Certificates of Participation, Series 1998 (Golf Course Improvements and Refinancing
Project). The principal amount financed by the Agreement was $3.2 million and will be repaid at an
interest rate of 2.49 percent. Semi-annual payments will be made through September 1, 2018. The City
used its Fire Department rolling stock as the collateral in this Agreement.
Dissolution of the Redevelopment Agency
On September 6, 2011, the City adopted Ordinance No. 5126 to dissolve the Palo Alto Redevelopment
Agency (Agency) pursuant to Health & Safety Code Section 33140, effective October 7, 2011. The
Agency was formed in October 2001, pursuant to Section 33101 of the Community Redevelopment Law,
and was reported as one of the City’s special revenue funds. In response to the 2011-12 State budget bill,
the City has evaluated that the Agency has not identified a qualifying redevelopment area and has not
conducted any redevelopment activities, including redeveloping or acquiring land, entering into contract,
issuing bonds or incurring housing obligations, since its formation. Hence, the City Council approved its
dissolution.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2011
100
NOTE 17 – SUBSEQUENT EVENTS (Continued)
Dissolution of the Redevelopment Agency (Continued)
The League of California Cities and the California Redevelopment Association (CRA) filed a lawsuit on
July 18, 2011 on behalf of cities, counties and redevelopment agencies petitioning the California Supreme
Court to overturn Assembly Bills X1 26 and 27 on the grounds that these bills violate the California
Constitution. On August 11, 2011, the California Supreme Court issued a stay of all of Assembly Bill X1
27 and most of Assembly Bill X1 26. However, the Agency decided to move forward with the
dissolution regardless of the outcome of the California Supreme Court.
Issuance of 2011 Series A, Utility Revenue Refunding Bonds
On September 8, 2011, the City issued $17.2 million in Lease Revenue Bonds (2011 Bonds) with an
average interest rate of 3.33 percent and an original bond premium of $1.3 million. On the date of
issuance, the proceeds of the 2011 Bonds together with existing bond reserves of $20.3 million were used
to refund on a current basis the Utility Revenue Bonds, 2002 Series A (2002 Bonds). The 2002 Bonds
were issued to finance improvements to the City’s municipal water utility system and the natural gas
utility system. The remaining proceeds were used to pay for the costs of issuance of the 2011 Bonds and
other costs relating to the refunding.
Special Debt
Revenue Service Permanent
Funds Funds Fund Total
Assets:
Cash and investments:
Available for operations 19,720$ 2,040$ 1,422$ 23,182$
Cash and investments with fiscal agents - 1,225 - 1,225
Receivables, net:
Accounts 220 - - 220
Interest 133 - 10 143
Notes 9,824 - - 9,824
Total assets 29,897$ 3,265$ 1,432$ 34,594$
Liabilities and fund balances:
Liabilities:
Accounts payable and accruals 288$ -$ 10$ 298$
Accrued salaries and benefits 4 - - 4
Total liabilities 292 - 10 302
Fund balances:
Nonspendable
Eyerly family - - 1,422 1,422
Restricted
Transportation mitigation 4,344 - - 4,344
Federal revenue 4,619 - - 4,619
Street improvement 1,598 - - 1,598
Local law enforcement 264 - - 264
Debt Service - 3,265 - 3,265
Committed
Developer's impact fee 5,287 - - 5,287
Housing In-Lieu 11,662 - - 11,662
Special Districts 1,075 - - 1,075
Downtown Business 58 - - 58
Assigned
Unrealized gain on investment 696 - - 696
Other general government 2 - - 2
Total fund balances 29,605 3,265 1,422 34,292
Total liabilities and fund balances 29,897$ 3,265$ 1,432$ 34,594$
CITY OF PALO ALTO
Non-major Governmental Funds
Combining Balance Sheet
June 30, 2011
(Amounts in Thousands)
101
Special Debt
Revenue Service Permanent
Funds Funds Fund Total
Revenues:
Property taxes -$ 3,468$ -$ 3,468$
Special assessments 92 - - 92
Other taxes and fines 1,661 - - 1,661
From other agencies:
Community Development Block Grants 338 - - 338
State of California 101 - - 101
Permits and licenses 359 - - 359
Return on investments 484 3 34 521
Rental income 19 - - 19
Other:
Housing In-Lieu - residential 2,574 - - 2,574
University Avenue Parking 963 - - 963
California Avenue Parking 102 - - 102
Other fees 964 11 4 979
Total revenues 7,657 3,482 38 11,177
Expenditures:
Current:
Planning and Community Environment 941 - - 941
Public safety - Police 22 - - 22
Non-Departmental 256 - 18 274
Debt service:
Principal retirement - 870 - 870
Interest and fiscal charges - 1,815 - 1,815
Total expenditures 1,219 2,685 18 3,922
Excess of revenues over expenditures 6,438 797 20 7,255
Other financing sources (uses):
Transfers in 10 1,179 - 1,189
Transfers out (2,605) - - (2,605)
Total other financing sources (uses)(2,595) 1,179 - (1,416)
Change in fund balances 3,843 1,976 20 5,839
Fund balances, beginning of year 25,762 1,289 1,402 28,453
Fund balances, end of year 29,605$ 3,265$ 1,422$ 34,292$
CITY OF PALO ALTO
Non-major Governmental Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2011
(Amounts in Thousands)
102
103
NON-MAJOR GOVERNMENTAL FUNDS
Special Revenue Funds
STREET IMPROVEMENT
This fund accounts for revenues received from state gas tax. Allocations must be spent on the
construction and maintenance of the road network system of the City.
FEDERAL REVENUE
This fund accounts for grant funds received under the Community Development Act of 1974 and HOME
Investment Grant Programs, for activities approved and subject to federal regulations.
HOUSING IN-LIEU
This fund accounts for revenues from commercial and residential developers to provide housing under the
City’s Below Market Rate program.
SPECIAL DISTRICTS
This fund accounts for revenues from parking permits and for maintenance of various parking lots within
the City’s parking districts.
TRANSPORTATION MITIGATION
This fund accounts for revenues from fees or contributions required for transportation mitigation issues
encountered as a result of City development.
LOCAL LAW ENFORCEMENT
This fund accounts for revenues received in support of City’s law enforcement program.
ASSETS SEIZURE
This fund accounts for seized property and funds associated with drug trafficking. Under California
Assembly Bill No. 4162, the monies are released to the City for specific expenditures related to law
enforcement activities.
DEVELOPER’S IMPACT FEE
This fund accounts for fees imposed on new developments to be used for parks, community centers and
libraries.
REDEVELOPMENT AGENCY
This fund accounts for the activities of administrating the Redevelopment Agency.
DOWNTOWN BUSINESS DEVELOPMENT DISTRICT
The Downtown Business Development District Fund was established to account for the activities of the
Palo Alto Downtown Business Development District, which was established to enhance the viability of
the downtown business district.
Street Federal Housing Special
Improvement Revenue In-Lieu Districts
Assets:
Cash and investments:
Available for operations 1,440$ 374$ 6,533$ 1,116$
Receivables:
Accounts 195 - - -
Interest 9 - 45 7
Notes - 4,266 5,558 -
Total assets 1,644$ 4,640$ 12,136$ 1,123$
Liabilities and fund balances:
Liabilities:
Accounts payable and accruals -$ 21$ 234$ 6$
Accrued salaries and benefits - - - 4
Total liabilities - 21 234 10
Fund balances:
Restricted
Transportation mitigation - - - -
Federal revenue - 4,619 - -
Street improvement 1,598 - - -
Local law enforcement - - - -
Committed
Developer's impact fee - - - -
Housing In-Lieu - - 11,662 -
Special Districts - - - 1,075
Downtown Business - - - -
Assigned
Unrealized gain on investment 46 - 240 38
Other general government - - - -
Total fund balances 1,644 4,619 11,902 1,113
Total liabilities and fund balances 1,644$ 4,640$ 12,136$ 1,123$
CITY OF PALO ALTO
Non-major Special Revenue Funds
Combining Balance Sheet
June 30, 2011
(Amounts in Thousands)
104
Downtown
Business
Transportation Local Law Assets Developer's Redevelopment Development
Mitigation Enforcement Seizure Impact Fee Agency District Total
4,475$ 250$ 2$ 5,450$ -$ 80$ 19,720$
- 25 - - - - 220
31 2 - 39 - - 133
- - - - - - 9,824
4,506$ 277$ 2$ 5,489$ -$ 80$ 29,897$
-$ 6$ -$ -$ -$ 21$ 288$
- - - - - - 4
- 6 - - - 21 292
4,344 - - - - - 4,344
- - - - - - 4,619
- - - - - - 1,598
- 264 - - - - 264
- - - 5,287 - - 5,287
- - - - - - 11,662
- - - - - - 1,075
- - - - - 58 58
162 7 - 202 - 1 696
- - 2 - - - 2
4,506 271 2 5,489 - 59 29,605
4,506$ 277$ 2$ 5,489$ -$ 80$ 29,897$
105
Street Federal Housing Special Transportation
Improvement Revenue In-Lieu Districts Mitigation
Revenues:
Special assessments -$ -$ -$ -$ -$
Other taxes and fines 1,631 - - 30 -
From other agencies:
Community Development Block Grants - 338 - - -
State of California - - 1 - -
Permits and licenses - - - 359 -
Return on investments (3) (22) 224 26 100
Rental income - - 19 - -
Other
Housing In-Lieu - residential - - 2,574 - -
University Avenue Parking - - - 963 -
California Avenue Parking - - - 102 -
Other fees - 145 321 - 50
Total revenues 1,628 461 3,139 1,480 150
Expenditures:
Current:
Planning and Community Environment - 505 368 68 -
Public safety - Police - - - - -
Non-Departmental - 40 29 119 -
Total expenditures - 545 397 187 -
Excess (deficiency) of revenues
over (under) expenditures 1,628 (84) 2,742 1,293 150
Other financing sources (uses):
Transfers in - - - - -
Transfers out (1,042) - - (1,221) (82)
Total other financing sources (uses)(1,042) - - (1,221) (82)
Change in fund balances 586 (84) 2,742 72 68
Fund balances, beginning of year 1,058 4,703 9,160 1,041 4,438
Fund balances, end of year 1,644$ 4,619$ 11,902$ 1,113$ 4,506$
CITY OF PALO ALTO
Non-major Special Revenue Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2011
(Amounts in Thousands)
106
Downtown
Business
Local Law Assets Developer's Redevelopment Development
Enforcement Seizure Impact Fee Agency District Total
-$ -$ -$ -$ 92$ 92$
- - - - - 1,661
- - - - - 338
100 - - - - 101
- - - - - 359
6 - 150 - 3 484
- - - - - 19
- - - - - 2,574
- - - - - 963
- - - - - 102
- 2 446 - - 964
106 2 596 - 95 7,657
- - - - - 941
22 - - - - 22
- - - - 68 256
22 - - - 68 1,219
84 2 596 - 27 6,438
- - - 10 - 10
(30) - (220) (10) - (2,605)
(30) - (220) - - (2,595)
54 2 376 - 27 3,843
217 - 5,113 - 32 25,762
271$ 2$ 5,489$ -$ 59$ 29,605$
107
Street Improvement Federal Revenue
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
Revenues:
Special assessments -$ -$ -$ -$ -$ -$ Other taxes and fines 1,127 1,631 504 - - -
From other agencies:
Community Development Block Grants - - - 663 338 (325)
State of California - - - - - -
Other revenue from other agencies - - - 276 - (276)
Permits and licenses - - - - - -
Return on investments 31 (3) (34) - (22) (22)
Rental income - - - - - -
Other:
Housing In-Lieu - residential - - - - - -
University Avenue Parking - - - - - -
California Avenue Parking - - - - - -
Other fees - - - 7 145 138
Total revenues 1,158 1,628 470 946 461 (485)
Expenditures:
Current:
Planning and Community Environment - - - 1,336 505 831
Public safety - Police - - - - - -
Non-Departmental - - - - 40 (40)
Total expenditures - - - 1,336 545 791
Excess (deficiency) of revenues
over (under) expenditures 1,158 1,628 470 (390) (84) 306
Other financing sources (uses):
Transfers in - - - 5 - (5)
Transfers out (1,042) (1,042) - (5) - 5
Total other financing sources (uses)(1,042) (1,042) - - - -
Change in fund balances 116$ 586 470$ (390)$ (84) 306$
Fund balances, beginning of year 1,058 4,703
Fund balances, end of year 1,644$ 4,619$
(Amounts in Thousands)
CITY OF PALO ALTO
Non-major Special Revenue Funds
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances -
Budget and Actual
For the Year Ended June 30, 2011
108
Housing In-Lieu Special Districts Transportation Mitigation
Variance Variance Variance
Positive Positive Positive
Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative)
-$ -$ -$ -$ -$ -$ -$ -$ -$ - - - 30 30 - - - -
- - - - - - - - -
- 1 1 - - - - - -
- - - - - - - - -
- - - 306 359 53 - - -
153 224 71 29 26 (3) 145 100 (45)
9 19 10 - - - - - -
3,500 2,574 (926) - - - - - -
- - - 963 963 - - - -
- - - 94 102 8 - - -
222 321 99 - - - 562 50 (512)
3,884 3,139 (745) 1,422 1,480 58 707 150 (557)
4,850 368 4,482 148 68 80 - - -
- - - - - - - - -
1,603 29 1,574 128 119 9 - - -
6,453 397 6,056 276 187 89 - - -
(2,569) 2,742 5,311 1,146 1,293 147 707 150 (557)
- - - - - - - - -
- - - (1,349) (1,221) 128 (82) (82) -
- - - (1,349) (1,221) 128 (82) (82) -
(2,569)$ 2,742 5,311$ (203)$ 72 275$ 625$ 68 (557)$
9,160 1,041 4,438
11,902$ 1,113$ 4,506$
(Continued)
109
Local Law Enforcement Asset Seizure Developer's Impact Fee
Variance Variance Variance
Positive Positive Positive
Budget Actual (Negative)Budget Actual (Negative)Budget Actual (Negative)
Revenues:
Special assessments -$ -$ -$ -$ -$ -$ -$ -$ -$ Other taxes and fines - - - - - - - - -
From other agencies:
Community Development Block Grants - - - - - - - - -
State of California 125 100 (25) - - - - - -
Other revenue from other agencies - - - - - - - - -
Permits and licenses - - - - - - - - -
Return on investments 5 6 1 - - - 152 150 (2)
Rental income - - - - - - - - -
Other:
Housing In-Lieu - residential - - - - - - - - -
University Avenue Parking - - - - - - - - -
California Avenue Parking - - - - - - - - -
Other fees - - - - 2 2 553 446 (107)
Total revenues 130 106 (24) - 2 2 705 596 (109)
Expenditures:
Current:Planning and Community Environment - - - - - - - - -
Public safety - Police 153 22 131 - - - - - -
Non-Departmental - - - - - - - - -
Total expenditures 153 22 131 - - - - - -
Excess (deficiency) of revenues
over (under) expenditures (23) 84 107 - 2 2 705 596 (109)
Other financing sources (uses):
Transfers in - - - - - - - - - Transfers out (30) (30) - - - - (220) (220) -
Total other financing sources (uses)(30) (30) - - - - (220) (220) -
Change in fund balances (53)$ 54 107$ -$ 2 2$ 485$ 376 (109)$
Fund balances, beginning of year 217 - 5,113
Fund balances, end of year 271$ 2$ 5,489$
CITY OF PALO ALTO
Non-major Special Revenue Funds
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances -
Budget and Actual
For the Year Ended June 30, 2011
(Amounts in Thousands)
110
Redevelopment Agency Downtown Business Improvement District Total Non-major Special Revenue Funds
Variance Variance Variance
Positive Positive Positive
Budget Actual (Negative)Budget Actual (Negative)Budget Actual (Negative)
-$ -$ -$ 160$ 92$ (68)$ 160$ 92$ (68)$ - - - - - - 1,157 1,661 504
- - - - - - 663 338 (325)
- - - - - - 125 101 (24)
- - - - - - 276 - (276)
- - - - - - 306 359 53
- - - 2 3 1 517 484 (33)
- - - - - - 9 19 10
- - - - - - 3,500 2,574 (926)
- - - - - - 963 963 -
- - - - - - 94 102 8
- - - - - - 1,344 964 (380)
- - - 162 95 (67) 9,114 7,657 (1,457)
- - - - - - 6,334 941 5,393
- - - - - - 153 22 131
9 - 9 170 68 102 1,910 256 1,654
9 - 9 170 68 102 8,397 1,219 7,178
(9) - 9 (8) 27 35 717 6,438 5,721
9 10 1 - - - 14 10 (4) - (10) (10) - - - (2,728) (2,605) 123
9 - (9) - - - (2,714) (2,595) 119
-$ - -$ (8)$ 27 35$ (1,997)$ 3,843 5,840$
- 32 25,762
-$ 59$ 29,605$
111
112
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113
NON-MAJOR GOVERNMENTAL FUNDS
Debt Service Funds
GOLF COURSE
This fund accounts for revenues received from the General Fund to provide payment of principal and
interest associated with Certificates of Participation issued for the City’s golf course.
CIVIC CENTER REFINANCING
This fund accounts for revenues received from the General Fund to provide payment of principal and
interest associated with the 2002A Civic Center Refinancing Certificates of Participation as they become
due.
DOWNTOWN PARKING IMPROVEMENT
This fund accounts for revenues received from the General Fund to provide payment of principal and
interest associated with the 2002B Downtown Parking Improvement Certificate of Participation as they
become due.
LIBRARY PROJECT
This fund accounts for revenues received from property taxes to provide payment of principal and interest
associated with the 2010 General Obligation Bonds as they become due
CITY OF PALO ALTO
Non-major Debt Service Funds
Combining Balance Sheet
June 30, 2011
(Amounts in Thousands)
Civic Downtown
Golf Center Parking Library
Course Refinancing Improvement Projects Total
Assets:
Cash and investments :
Available for operations 43$ -$ -$ 1,997$ 2,040$
Cash and investments with fiscal agents 624 351 250 - 1,225
Total Assets 667$ 351$ 250$ 1,997$ 3,265$
Fund balances:
Restricted:
Debt Service 667 351 250 1,997 3,265
Total fund balances 667 351 250 1,997 3,265
Total liabilities and fund balances 667$ 351$ 250$ 1,997$ 3,265$
114
CITY OF PALO ALTO
Non-major Debt Service Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2011
(Amounts in Thousands)
Civic Downtown
Golf Center Parking Library
Course Refinancing Improvement Project Total
Revenues:
Property taxes -$ -$ -$ 3,468$ 3,468$
Return on investments 1 1 1 - 3
Other
Other fees - - 11 - 11
Total revenues 1 1 12 3,468 3,482
Expenditures:
Debt service:
Principal retirement 370 390 110 - 870
Interest and fiscal charges 190 31 123 1,471 1,815
Total expenditures 560 421 233 1,471 2,685
Excess (deficiency) of revenues
over (under) expenditures (559) (420) (221) 1,997 797
Other financing sources:
Transfers in 528 418 233 - 1,179
Total other financing sources 528 418 233 - 1,179
Change in fund balances (31) (2) 12 1,997 1,976
Fund balances, beginning of year 698 353 238 - 1,289
Fund balances, end of year 667$ 351$ 250$ 1,997$ 3,265$
115
Golf Course Civic Center Refinance
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
Revenues:
Special assessments -$ -$ -$ -$ -$ -$
Return on investments 32 1 (31) 13 1 (12)
Other fees - - - - - -
Total revenues 32 1 (31) 13 1 (12)
Expenditures:
Debt service:
Principal retirement 370 370 - 390 390 -
Interest and fiscal charges 190 190 - 31 31 -
Total expenditures 560 560 - 421 421 -
Excess (deficiency) of revenues
over (under) expenditures (528) (559) (31) (408) (420) (12)
Other financing sources (uses):
Other - - - - - -
Transfers in 528 528 - 408 418 10
Total other financing sources (uses)528 528 - 408 418 10
Change in fund balances -$ (31) (31)$ -$ (2) (2)$
Fund balances, beginning of year 698 353
Fund balances, end of year 667$ 351$
(Amounts in Thousands)
CITY OF PALO ALTO
Non-major Debt Service Funds
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances -
Budget and Actual
For the Year Ended June 30, 2011
116
Downtown Parking Improvement Library Project Total Non-major Debt Service Funds
Variance Variance Variance
Positive Positive Positive
Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative)
-$ -$ -$ 3,491$ 3,468$ (23)$ 3,491$ 3,468$ (23)$
9 1 (8) 9 - (9) 63 3 (60)
- 11 11 - - - - 11 11
9 12 3 3,500 3,468 (32) 3,554 3,482 (72)
110 110 - - - - 870 870 -
123 123 - 1,472 1,471 (1) 1,816 1,815 (1)
233 233 - 1,472 1,471 (1) 2,686 2,685 (1)
(224) (221) 3 2,028 1,997 (31) 868 797 (71)
- - - - - - - - -
224 233 9 - - - 1,160 1,179 19
224 233 9 - - - 1,160 1,179 19
-$ 12 12$ 2,028$ 1,997 (31)$ 2,028$ 1,976 (52)$
238 - 1,289
250$ 1,997$ 3,265$
117
118
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119
NON-MAJOR GOVERNMENTAL FUNDS
Permanent Fund
EYERLY FAMILY
This fund accounts for the revenues received from assets donated by Mr. and Mrs. Fred Eyerly for the
City and or its citizenry.
Eyerly Permanent Fund
Variance
Positive
Budget Actual (Negative)
Revenues:
Return on investments 49$ 34$ (15)$
Other fees - 4 4
Total revenues 49 38 (11)
Expenditures:
Current:
Non-Departmental - 18 (18)
Total expenditures - 18 (18)
Excess (deficiency) of revenues
over (under) expenditures 49 20 (29)
Change in fund balances 49$ 20 (29)$
Fund balances, beginning of year 1,402
Fund balances, end of year 1,422$
(Amounts in Thousands)
CITY OF PALO ALTO
Non-major Permanent Fund
Schedule of Revenues, Expenditures and Changes in Fund Balances -
Budget and Actual
For the Year Ended June 30, 2011
120
121
INTERNAL SERVICE FUNDS
Introduction
Internal Service Funds are used to finance and account for special activities and services performed by a
designated department for other departments in the City on a cost reimbursement basis.
VEHICLE REPLACEMENT AND MAINTENANCE
This fund accounts for the maintenance and replacement of vehicles and equipment used by all City
departments. The source of revenue is on reimbursement of fleet replacement and maintenance costs
allocated to each department by usage of vehicle.
TECHNOLOGY
This fund accounts for replacement and upgrade of technology, and covers four primary areas used by all
City departments: desktop, infrastructure, applications, and technology research and development. The
source of revenue is on reimbursement of costs for support provided to other departments.
PRINTING AND MAILING SERVICES
This fund accounts for central duplicating, printing and mailing services provided to all City departments.
Source of revenue for this fund is on reimbursement of costs for services and supplies purchased by other
departments.
GENERAL BENEFITS
This fund accounts for the administration of compensated absences and health benefits.
WORKERS’ COMPENSATION INSURANCE PROGRAM
This fund accounts for the administration of the City’s self-insured workers’ compensation programs.
GENERAL LIABILITIES INSURANCE PROGRAM
This fund accounts for the administration of the City’s self-insured general liability programs.
RETIREE HEALTH BENEFIT
This fund accounts for the retiree health benefits.
Vehicle Printing Workers' General
Replacement and Compensation Liabilities Retiree
and Mailing General Insurance Insurance Health
Maintenance Technology Services Benefits Program Program Benefit Total
Assets:
Current Assets:
Cash and investments:
Available for operations 7,241$ 13,990$ -$ 12,570$ 17,961$ 5,714$ 3,262$ 60,738$
Accounts receivable, net 60 - - - - - - 60
Interest receivable 50 92 - 69 102 31 17 361
Inventory of materials and supplies 613 - - - - - - 613
Net OPEB assets - - - - - - 23,006 23,006
Total Current Assets 7,964 14,082 - 12,639 18,063 5,745 26,285 84,778
Noncurrent Assets:
Capital assets:
Non-Depreciable 151 - - - - - - 151
Depreciable, net 13,910 6,013 12 - - - - 19,935
Total Noncurrent Assets 14,061 6,013 12 - - - - 20,086
Total Assets 22,025 20,095 12 12,639 18,063 5,745 26,285 104,864
Liabilities:
Current Liabilities:
Accounts payable and accrued liabilities 121 346 49 1,974 33 - - 2,523
Accrued salaries and benefits 29 102 3 - - - - 134
Accrued compensated absences 4 10 - 3,086 - - - 3,100
Accrued claims payable - current - - - 328 3,978 1,567 - 5,873
Total Current Liabilities 154 458 52 5,388 4,011 1,567 - 11,630
Noncurrent liabilities:
Accrued compensated absences - - - 6,286 - - - 6,286
Accrued claims payable - - - - 13,952 4,078 - 18,030
Total Liabilities 154 458 52 11,674 17,963 5,645 - 35,946
Net assets:
Invested in capital assets 14,061 6,013 12 - - - - 20,086
Unrestricted (deficit)7,810 13,624 (52) 965 100 100 26,285 48,832
Total Net Assets (deficit)21,871$ 19,637$ (40)$ 965$ 100$ 100$ 26,285$ 68,918$
CITY OF PALO ALTO
Internal Service Funds
Combining Statement of Fund Net Assets
June 30, 2011
(Amounts in Thousands)
122
Vehicle Printing Workers' General
Replacement and Compensation Liabilities Retiree
and Mailing General Insurance Insurance Health
Maintenance Technology Services Benefits Program Program Benefit Total
Operating revenues:
Charges for services 7,605$ 10,399$ 1,100$ 35,358$ 5,080$ 1,479$ 10,980$ 72,001$
Total operating revenues 7,605 10,399 1,100 35,358 5,080 1,479 10,980 72,001
Operating expenses:
Administrative and general 788 3,546 1,167 338 574 1,254 507 8,174
Operations and maintenance 2,537 5,646 - 115 - 1 - 8,299
Depreciation and amortization 1,609 3,083 3 - - - - 4,695
Claim payments and change in estimated
self-insured liability - - - 1,703 4,796 273 - 6,772
Refund of charges for services 113 1 - - - - - 114
Compensated absences and other benefits - - - 32,600 - - 9,787 42,387
Total operating expenses 5,047 12,276 1,170 34,756 5,370 1,528 10,294 70,441
Operating income (loss)2,558 (1,877) (70) 602 (290) (49) 686 1,560
Nonoperating revenues (expenses):
Return on investments 221 383 (1) 163 290 49 95 1,200
Gain on disposal of capital assets 85 - - - - - - 85
Other nonoperating revenues 59 - - - - - - 59
Total nonoperating revenues (expenses) 365 383 (1) 163 290 49 95 1,344
Income (loss) before transfers 2,923 (1,494) (71) 765 - - 781 2,904
Transfers in - 1,703 - - - - - 1,703
Transfers out (591) - - - - - - (591)
Change in net assets 2,332 209 (71) 765 - - 781 4,016
Net assets, beginning of year 19,539 19,428 31 200 100 100 25,504 64,902
Net assets (deficit), end of year 21,871$ 19,637$ (40)$ 965$ 100$ 100$ 26,285$ 68,918$
CITY OF PALO ALTO
Internal Service Funds
Combining Statement of Revenues, Expenses and Changes in Fund Net Assets
For the Year Ended June 30, 2011
(Amounts in Thousands)
123
Vehicle Printing Workers' General
Replacement and Compensation Liabilities Retiree
and Mailing General Insurance Insurance Health
Maintenance Technology Services Benefits Program Program Benefit Total
Cash flows from operating activities:Cash received from customers 7,583$ 10,399$ 1,100$ 35,358$ 5,080$ 1,479$ 10,980$ 71,979$
Cash refunds to customers (113) (1) - - - - - (114)
Cash payments to suppliers for goods and services (2,607) (5,864) 49 (101) - - - (8,523)
Cash payments to employees (788) (3,540) (1,169) (34,271) (600) (1,262) (10,058) (51,688)
Cash payments for judgments and claims - - - (1,707) (2,213) (427) - (4,347)
Other cash receipts 59 - - - - - - 59
Cash flows provided by (used in)
operating activities 4,134 994 (20) (721) 2,267 (210) 922 7,366
Cash flows from noncapital financing activities:
Transfers in - 1,703 - - - - - 1,703
Transfers out (591) - - - - - - (591)
Cash flows provided by (used in)
noncapital financing activities (591) 1,703 - - - - - 1,112
Cash flows from capital and related financing activities:Acquisition of capital assets (2,294) (57) - - - - - (2,351)
Cash flows from investing activities:
Interest received/(paid) 217 381 (1) 350 188 18 88 1,241
Net change in cash and cash equivalents 1,466 3,021 (21) (371) 2,455 (192) 1,010 7,368
Cash and cash equivalents, beginning of year 5,775 10,969 21 12,941 15,506 5,906 2,252 53,370
Cash and cash equivalents, end of year $ 7,241 $ 13,990 $ - $ 12,570 $ 17,961 $ 5,714 $ 3,262 $ 60,738
Reconciliation of operating income (loss) to net cash
flows provided by (used in) operating activities:
Operating income (loss)2,558$ (1,877)$ (70)$ 602$ (290)$ (49)$ 686$ 1,560$
Adjustments to reconcile operating income (loss)
to net cash provided by (used in) operating activities:
Depreciation 1,609 3,083 3 - - - - 4,695
Other 59 - - - - - - 59
Change in assets and liabilities:
Accounts receivable (22) - - - - - - (22) Inventory of materials and supplies (156) - - - - - - (156)
Net OPEB asset - - - - - - 236 236
Accounts and other payables 86 (218) 49 133 (26) (7) - 17
Accrued salaries and benefits (4) (4) (2) (405) - - - (415)
Accrued compensated absences 4 10 - (1,047) - - - (1,033)
Accrued claims payable - - - (4) 2,583 (154) - 2,425
Cash flows provided by (used in) operating activities 4,134$ 994$ (20)$ (721)$ 2,267$ (210)$ 922$ 7,366$
CITY OF PALO ALTO
Internal Service Funds
Combining Statement of Cash FlowsFor the Year Ended June 30, 2011
(Amounts in Thousands)
124
125
FIDUCIARY FUNDS
Introduction
Fiduciary Funds are used to account for assets held by the City acting in a fiduciary capacity for other
entities and individuals. The funds are operated to carry out the specific actions required by the trust
agreements, ordinances and other governing regulations.
Fiduciary Funds are presented separately from the Citywide and Fund financial statements.
Agency Funds are custodial in nature and do not involve measurement of results of operations. The City
maintains three agency funds, as follows:
CALIFORNIA AVENUE PARKING ASSESSMENT DISTRICT
This fund accounts for receipts and disbursements associated with the 1993 Parking District No. 92-13
Assessment Bonds.
CABLE JOINT POWERS AUTHORITY
The fund was established to account for the activities of the cable television system on behalf of the
members.
UNIVERSITY AVENUE AREA PARKING ASSESSMENT DISTRICT
The fund accounts for the receipts and disbursements associated with the Series 2001-A University
Avenue Area Off-Street Parking Assessments Bonds.
CITY OF PALO ALTO
All Agency Funds
Statement of Changes in Assets and Liabilities
For the Year Ended June 30, 2011
Balance Balance
California Avenue Parking Assessment District July 1, 2010 Additions Deletions June 30, 2011
Assets:
Cash and investments available for operations 220$ -$ 12$ 208$
Liabilities:
Due to bondholders 220$ -$ 12$ 208$
Cable Joint Powers Authority
Assets:
Cash and investments available for operations 885$ 19$ -$ 904$
Interest receivable 8 - 1 7
Total assets 893$ 19$ 1$ 911$
Liabilities:
Due to other governments 893$ 19$ 1$ 911$
University Avenue Area Parking Assessment District
Assets:
Cash and investments available for operations 2,330$ -$ 324$ 2,006$
Cash and investments with fiscal agents 3,902 4 - 3,906
Interest receivable 29 - 4 25
Total assets 6,261$ 4$ 328$ 5,937$
Liabilities:
Due to bondholders 6,261$ 4$ 328$ 5,937$
Total Agency Funds
Assets:
Cash and investments available for operations 3,435$ 19$ 336$ 3,118$
Cash and investments with fiscal agents 3,902 4 - 3,906
Interest receivable 37 - 5 32
Total assets 7,374$ 23$ 341$ 7,056$
Liabilities:
Due to bondholders 6,481$ 4$ 340$ 6,145$
Due to other governments 893 19 1 911
Total liabilities 7,374$ 23$ 341$ 7,056$
(Amounts in Thousands)
126
127
STATISTICAL SECTION
The statistical section contains comprehensive statistical data, which relates to physical, economic, social
and political characteristics of the City. It is intended to provide users with a broader and more complete
understanding of the City and its financial affairs than is possible from the financial statements and
supporting schedules included in the financial section.
In this section, readers will find comparative information related to the City’s revenue sources,
expenditures, property tax valuations, levies and collections, general obligation bonded debt, utility
revenue debt service, demographics and pension plan funding. Where available, the comparative
information is presented for the last ten fiscal years.
In addition, this section presents information related to the City’s legal debt margin computation,
principal taxpayers, notary and security bond coverages, and other miscellaneous statistics pertaining to
services provided by the City.
In contrast to the financial section, the statistical section information is not usually subject to independent
audit.
Financial Trends
These schedules contain trend information to help the reader understand how the City’s financial
performance and well-being have changed over time:
1. Net Assets by Component
2. Changes in Net Assets
3. Fund Balances of Governmental Funds
4. Changes in Fund Balance of Governmental Funds
Revenue Capacity
These schedules contain information to help the reader assess the City’s most significant local revenue
sources, property tax and electric charges:
1. Electric Daily Loads and Top Customers by Usage
2. Electric Operating Revenue by Source
3. Assessed Value of Taxable Property
4. Property Tax Rates, All Overlapping Governments
5. Property Tax Levies and Collections
6. Principal Property Taxpayers
7. Assessed Valuation and Parcels by Land Use
8. Per Parcel Assessed Valuation of Single Family Homes
Debt Capacity
These schedules present information to help the reader assess the affordability of the City’s current levels
of outstanding debt and the City’s ability to issue additional debt in the future:
1. Ratio of Outstanding Debt by Type
2. Computation of Direct and Overlapping Debt
3. Computation of Legal Bonded Debt Margin
4. Revenue Bond Coverage
Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader understand the
environment within which the City’s financial activities take place:
1. Taxable Transactions by Type of Business
2. Demographic and Economic Statistics
3. Principal Employers
128
STATISTICAL SECTION
Operating Information
These schedules contain service and infrastructure data to help the reader understand how the information
in the City’s financial report relates to the services the City provides and the activities it performs:
1. Full-Time Equivalent City Government Employees by Function
2. Operating Indicators by Function/Program
3. Capital Asset Statistics by Function/Program
4. Insurance Coverage
Sources
Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual
Financial Reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules
presenting government-wide information include information beginning in that year.
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Governmental activities
Invested in capital assets, net of related
debt $252,183 $279,306 $297,125 $305,225 $311,335 $326,411 $343,537 $356,657 $369,499 $364,747
Restricted 56,785 37,112 30,417 27,273 29,885 32,576 27,428 36,632 34,323 16,437
Unrestricted 117,113 130,463 123,762 117,301 123,823 127,190 130,460 118,133 102,199 134,722
Total governmental activities net assets $426,081 $446,881 $451,304 $449,799 $465,043 $486,177 $501,425 $511,422 $506,021 $515,906
Business-type activities
Invested in capital assets, net of related
debt $270,622 $279,885 $294,197 $303,473 $318,738 $342,922 $370,303 $384,313 $399,317 $416,418
Restricted 1,728 1,728 1,798 1,750 1,732 1,732 1,732 1,732 4,300 0
Unrestricted 210,990 228,308 226,278 215,128 228,032 230,912 226,539 208,025 232,420 253,740
Total business-type activities net assets $483,340 $509,921 $522,273 $520,351 $548,502 $575,566 $598,574 $594,070 $636,037 $670,158
Primary government
Invested in capital assets, net of related
debt $522,805 $559,191 $591,322 $608,698 $630,073 $669,333 $713,840 $740,970 $768,816 $781,165
Restricted 58,513 38,840 32,215 29,023 31,617 34,308 29,160 38,364 38,623 16,437
Unrestricted 328,103 358,771 350,040 332,429 351,855 358,102 356,999 326,158 334,619 388,462
Total primary government net assets $909,421 $956,802 $973,577 $970,150 $1,013,545 $1,061,743 $1,099,999 $1,105,492 $1,142,058 $1,186,064
Source: Annual Financial Statements
Fiscal Year Ended June 30,
City of Palo Alto - Net Assets by Component
(Accrual Basis of Accounting)
Last Ten Fiscal Years ($000)
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
$
T
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a
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d
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Net of Related Debt Restricted Unrestricted
129
City of Palo Alto - Changes in Net Assets
Last Ten Fiscal Years ($000)
(Accrual Basis of Accounting)
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Expenses
Governmental Activities:City Council $238 $234 $269 $130 $141 $180 $323 $394 $455 $15City Manager 1,765 1,565 1,663 1,725 1,563 1,760 2,273 2,085 2,399 1,842City Attorney 2,410 2,028 2,300 2,653 2,598 2,390 2,653 2,575 2,621 953City Clerk 633 598 808 770 945 900 1,241 1,098 1,369 803City Auditor 583 646 668 764 843 838 1,379 2,053 2,601 138Administrative Services **10,138 9,723 6,271 6,982 6,972 6,419 15,477 17,784 17,893 9,888Human Resources 2,166 1,728 2,078 2,410 2,546 2,472 2,806 3,448 3,707 1,346
Public Works 15,656 13,702 14,460 16,400 17,596 16,645 18,565 21,270 18,658 19,357
Planning and Community Environment 7,311 7,485 8,898 10,162 9,931 12,929 16,388 12,940 12,114 15,031
Police 19,049 19,273 20,414 22,416 23,411 23,861 27,740 29,288 29,351 30,465
Fire 16,870 16,859 17,308 18,127 18,747 19,530 22,386 23,199 26,448 28,531Community Services 19,850 19,633 20,864 17,240 17,296 15,729 17,736 19,862 17,171 22,845Library00 4,835 5,323 5,347 6,321 6,244 6,143 6,920Non-Departmental **8,412 7,449 7,618 12,474 10,400 12,133 0 0 0 0Interest on Long Term Debt 1,094 675 635 693 512 477 438 404 370 2,742
Total Governmental Activities Expenses $106,175 $101,598 $104,254 $117,781 $118,824 $121,610 $135,726 $142,644 $141,300 $140,876
Business-Type Activities:Water $12,722 $13,237 $16,047 $14,969 $15,881 $16,794 $18,842 $20,271 $21,037 $24,268Electric98,405 73,744 73,545 73,051 91,570 99,294 108,032 122,268 107,910 100,130Fiber Optics *0 0000001,284 1,407 1,561Gas28,778 22,270 22,994 26,656 29,107 30,690 37,211 34,603 32,498 32,051Wastewater Collection 8,489 8,712 9,203 8,907 11,005 10,085 12,023 14,875 10,696 12,275Wastewater Treatment 13,287 14,312 14,868 17,457 16,747 15,901 18,902 36,896 13,466 19,731Refuse23,750 24,635 24,282 24,959 26,989 25,372 28,827 37,217 28,119 30,684Storm Drainage 2,188 2,489 2,975 3,336 2,673 2,517 3,202 2,943 2,491 3,229Airport- ----------31External Services 349 583 688 760 868 767 984 0 0 0Total Business-Type Activities Expenses 187,968 159,982 164,602 170,095 194,840 201,420 228,023 270,357 217,624 223,960
Total Primary Government Expenses $294,143 $261,580 $268,856 $287,876 $313,664 $323,030 $363,749 $413,001 $358,924 $364,836
Program Revenues
Governmental Activities:Charges for Services:City CouncilCity ManagerCity Attorney $92 $64 $22 $22 $13 $16 $12 $53City Clerk $1 1 1 2City Auditor 1Administrative Services 12 406 815 480 627 835 870 726 984 $2,889Human Resources 11Public Works 320 1,058 260 573 805 968 1,310 1,169 1,258 2,419Planning and Community Environment 4,062 5,119 3,074 4,090 5,509 6,267 5,498 4,704 4,813 7,237Police3,966 3,396 4,415 3,801 4,178 4,179 4,274 3,947 4,093 3,237Fire7,976 7,811 7,565 8,555 9,078 9,610 9,418 10,723 10,244 12,037Community Services 7,793 7,537 7,846 7,592 10,803 9,128 10,314 8,522 8,729 7,724Library133 129 146 176 177 199 480Operating Grants and Contributions 5,568 4,468 4,213 3,677 3,976 5,642 4,029 3,599 4,829 2,884
* Prior to 2009, Fiber Optics was included in Electric
Fiscal Year Ended June 30,
** Beginning in 2008, includes expenditures classified as Non-departmental in prior years (GFOA recommendation)
130
City of Palo Alto - Changes in Net Assets
Last Ten Fiscal Years ($000)
(Accrual Basis of Accounting)
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Capital Grants and Contributions 32,380 635 1,990 804 3,156 1,756 1,930 3,810 1,280 1,903
62,078 30,524 30,243 29,727 38,285 38,555 37,835 37,389 36,482 40,810
Business-Type Activities:Charges for Services:Water 16,034 17,654 21,993 21,041 21,108 23,495 26,510 27,120 26,259 26,624Electric 93,755 91,622 92,617 88,737 119,418 102,549 103,833 119,320 121,900 122,109Fiber Optics * 0 0000003,336 3,105 3,322Gas 41,658 29,714 24,839 31,206 36,977 42,221 49,021 47,838 44,450 43,584Wastewater Collection 9,292 10,676 12,647 12,041 13,801 14,848 15,102 14,486 15,136 15,094Wastewater Treatment 13,987 13,556 14,744 15,982 18,778 16,957 22,889 28,425 16,915 18,830Refuse 21,777 21,691 21,923 23,387 24,795 25,532 28,805 29,101 28,568 30,469Storm Drainage 2,221 2,192 2,170 2,484 5,174 5,181 5,450 5,505 5,647 5,796External Services 380 605 585 766 854 789 112000Operating Grants and Contributions 361 610Capital Grants and Contributions 185 756 1,594 639 475 3,004
Total Business-Type Activities Program 199,289 187,710 191,518 195,644 240,905 232,328 253,316 275,770 262,816 269,442Revenue
$261,367 $218,234 $221,761 $225,371 $279,190 $270,883 $291,151 $313,159 $299,298 $310,252
Revenues
Net (Expense)/RevenueGovernmental Activities ($44,097) ($71,074) ($74,011) ($88,054) ($80,539) ($83,055) ($97,891) ($105,255) ($104,819) ($100,066)Business-Type Activities 11,321 27,728 26,916 25,549 46,065 30,908 25,293 5,413 45,189 45,482
Total Primary Government Net Expense ($32,776) ($43,346) ($47,095) ($62,505) ($34,474) ($52,147) ($72,598) ($99,842) ($59,630) ($54,584)
General Revenues and Other Changes in Net AssetsGovernmental Activities:Taxes:Property Taxes $13,270 $13,882 $13,707 $16,657 $18,731 $21,466 $23,084 $25,432 $25,981 $29,156Sales Taxes 20,085 18,041 18,151 19,308 20,315 22,194 22,623 20,089 17,991 20,746Utilities Users Taxes 6,457 7,067 7,152 7,269 8,759 9,356 10,285 11,030 11,295 10,851Transient Occupancy Tax 6,615 5,333 5,489 5,686 6,393 6,709 7,976 7,111 6,858 8,082Other taxes 6,284 7,275 8,493 5,580 7,033 6,293 6,261 3,364 4,055 8,156Investment Earnings 10,589 10,213 326 4,988 2,567 8,747 12,313 8,525 6,514 3,500Rents and Miscellaneous 18,524 15,333 10,165 12,997 10,440 13,670 11,896 15,682 12,729 12,377Transfers 13,334 14,730 14,951 14,064 21,545 15,754 18,701 24,020 13,994 17,083
Total Government Activities 95,158 91,874 78,434 86,549 95,783 104,189 113,139 115,253 99,417 109,951Business-Type Activities:Investment Earnings 15,620 13,583 387 8,093 3,631 11,910 16,416 14,103 10,769 5,722Special Item (21,500)Transfers (13,334) (14,730) (14,951) (14,064) (21,545) (15,754) (18,701) (24,020) (13,994) (17,083)
Total Business-Type Activities 2,286 (1,147) (14,564) (27,471) (17,914) (3,844) (2,285) (9,917) (3,225) (11,361)
Total Primary Government $97,444 $90,727 $63,870 $59,078 $77,869 $100,345 $110,854 $105,336 $96,192 $98,590
Change in Net AssetsGovernmental Activities $51,061 $20,800 $4,423 ($1,505)$15,244 $21,134 $15,248 $9,998 ($5,402)$9,885Business-Type Activities 13,607 26,581 12,352 (1,922) 28,151 27,064 23,008 (4,504) 41,964 34,121
Total Primary Government $64,668 $47,381 $16,775 ($3,427) $43,395 $48,198 $38,256 $5,494 $36,562 $44,006
Source: Annual Financial Statements
* Prior to 2009, Fiber Optics was included in Electric
Total Primary Government Program
Total Government Activities Program
Revenues
Fiscal Year Ended June 30,
131
Last Ten Fiscal Years ($000)
(Modified Accrual Basis of Accounting)
$
T
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a
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d
s
Fiscal Year Ended June 30,
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
General Fund
Nonspendable $3,278 $3,303 $3,762 $3,931 $4,052 $5,002 $7,286 $6,476 $6,581 $6,085
Restricted 0000000000
Committed 0000000000
Assigned 6,022 6,386 2,973 3,401 3,914 6,855 4,851 6,100 7,295 6,235
Unassigned 54,133 56,618 60,087 24,498 26,251 27,551 30,278 30,648 27,581 31,859
Total General Fund $63,433 $66,307 $66,822 $31,830 $34,217 $39,408 $42,415 $43,224 $41,457 $44,179
Source: Annual Financial Statements
City of Palo Alto - Fund Balances of Governmental Funds (General Fund)
$0
$10
$20
$30
$40
$50
$60
$70
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Nonspendable Restricted Committed Assigned Unassigned
$
T
h
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a
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d
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132
Last Ten Fiscal Years ($000)
(Modified Accrual Basis of Accounting)
$
T
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a
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d
s
Fiscal Year Ended June 30,
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
All Other Governmental Funds
Nonspendable $0 $0 $0 $0 $0 $0 $731 $1,308 $1,402 $1,422
Restricted 31,622 11,574 2,761 1,522 1,822 1,540 1,406 1,412 55,400 50,644
Committed 15,094 7,127 4,206 7,521 18,430 22,883 15,207 22,043 16,962 24,776
Assigned 29,243 40,606 36,117 45,358 46,723 41,684 44,116 36,629 38,538 20,114
Unassigned 0000000001
Total all other governmental funds $75,959 $59,307 $43,084 $54,401 $66,975 $66,107 $61,460 $61,392 $112,302 $96,957
Source: Annual Financial Statements
City of Palo Alto - Fund Balances of Governmental Funds (All Other Governmental Funds)
$0
$20
$40
$60
$80
$100
$120
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Nonspendable Restricted Committed Assigned Unassigned
$
T
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a
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133
City of Palo Alto - Changes in Fund Balance of Governmental Funds
Last Ten Fiscal Years ($000)
Fiscal Year Ended June 30,
2002 2003 2004 2005
Revenues
Sales tax $20,085 $18,041 $18,151 $19,308
Property tax 13,231 13,821 13,707 16,657
Other taxes 20,485 21,070 22,427 19,941
Permits and licenses 2,901 3,161 2,563 3,183
Fines, forfeits and penalties 2,181 2,124 2,884 2,096
Interest and rentals 19,547 19,981 11,480 14,968
From other agencies 3,860 3,776 4,661 2,757
Charges for services 16,667 16,798 16,018 17,159
Other 8,580 5,095 1,681 4,269
Total Revenues 107,537 103,867 93,572 100,338
Expenditures
Administration (1)18,235 17,521 13,862 14,509
Public works 9,549 9,858 8,031 9,060
Planning and community environment 7,378 7,721 8,793 9,692
Police 19,047 19,719 19,962 21,117
Fire 16,722 16,841 16,891 17,615
Community services 19,499 19,793 19,934 16,298
Library (2) 4,800
Non-departmental 8,259 7,442 7,598 9,028
Special revenue and capital projects 16,960 33,584 22,289 21,317
Debt service - Principal payments 465 875 780 785
Debt Service - Interest and fiscal fees 686 696 639 583
Total Expenditures 116,800 134,050 118,779 124,804
Excess (deficiency) of revenues over
(under) expenditures (9,263)(30,183) (25,207) (24,466)
Other Financing Sources (Uses)
Transfers in 27,389 31,402 28,632 60,429
Transfers (out)(14,444)(16,603) (19,133) (46,622)
Other
Contribution from assessment district 31,823 425
Proceeds from long term debt 7,055
Payments to refunded bond escrow (3,820)(1,038)
Total other financing sources (uses)48,003 15,224 9,499 12,769
Net Change in fund balances $38,740 ($14,959) ($15,708) ($11,697)
Debt service as a percentage of
noncapital expenditures 1.1%1.6%1.5% 1.3%
Source:Annual Financial Statements
Note:(a) The City implemented GASB Statement 34 in fiscal year 2002. Therefore this calculation is included only
for fiscal years subsequent to that date.
(1) Comprised of the following departments: City Council, City Manager, City Attorney, City Clerk, City
Auditor, Administrative Services and Human Resources.
(2) Prior to 2005, Library was included in Community Services.
(Modified Accrual Basis of Accounting)
134
Fiscal Year Ended June 30,
2006 2007 2008 2009 2010 2011
$20,315 $22,194 $22,623 $20,089 $17,991 $20,746
18,731 21,466 23,084 25,432 25,981 29,156
23,712 23,698 25,202 22,712 23,206 26,149
4,305 4,711 4,761 4,033 4,408 5,433
2,128 2,517 2,183 2,131 1,857 1,833
13,776 17,750 20,507 19,183 19,045 16,553
5,931 3,448 4,300 5,984 3,035 1,614
18,672 19,929 19,610 19,837 19,775 22,311
4,058 7,503 4,713 6,223 4,724 8,613
111,628 123,216 126,983 125,624 120,022 132,408
14,299 14,399 16,250 16,002 17,353 8,351
9,036 9,256 10,072 10,064 9,787 11,317
9,292 11,874 9,861 10,462 9,480 10,309
22,279 23,305 27,006 27,053 26,728 30,519
18,114 19,146 21,644 21,904 24,294 28,355
19,740 16,533 17,138 17,451 16,451 20,029
5,170 5,260 6,219 5,985 5,900 6,509
10,389 12,122 14,089 10,765 10,149 7,352
13,243 17,478 21,626 21,485 22,006 35,486
810 850 885 800 840 870
523 489 451 416 382 1,815
122,895 130,712 145,241 142,387 143,370 160,912
(11,267) (7,496) (18,258) (16,763) (23,348) (28,504)
26,640 27,701 33,437 39,903 34,835 30,323
(12,390) (15,882) (16,819) (22,399) (21,415) (14,352)
(90)
59,071
14,250 11,819 16,618 17,504 72,491 15,881
$2,983 $4,323 ($1,640) $741 $49,143 ($12,623)
1.2% 1.2% 1.1% 1.0% 1.0% 2.1%
135
June 30, 2011
Daily (Oct-Mar)(Apr-Sep)
Hours Winter Summer
0 93,533 92,647
1 90,081 88,935
2 88,307 86,821
3 87,933 85,983
4 89,385 87,089
5 93,615 90,323
6 102,552 96,901
7 110,866 105,185
8 115,737 113,038
9 120,311 119,961
10 123,822 125,999
11 125,539 129,720
12 126,447 131,914
13 126,613 133,301
14 125,445 133,904
15 125,276 133,609
16 125,259 132,405
17 127,671 129,973
18 127,644 124,528
19 124,246 119,626
20 120,690 118,503
21 115,015 114,209
22 107,167 106,419
23 99,405 98,557
Source:City of Palo Alto, Utilities Resource Management
Customer (alphabetical order) Type of Business kWh's
% of
System Total
529 Bryant St LLC Technology
City of Palo Alto Municipal
CPI-David Morman Research
Hewlett Packard Computer
Space System Loral Satellite & Satellite Systems
Stanford Hines Interests Property Management
Stanford Hospital Hospital
Varian Medical Systems Manufacturing of Medical Equipment
Veterans Admin Hospital Hospital
VMWare Inc.Computer
Total 340,236,175 35.95 %
Source:City of Palo Alto, Utilities Department
City of Palo Alto - Electric Daily Loads and Top Customers by Usage
(in thousands of kWh)
Top Ten Electric Customers by Usage
# Kilowatt Hours
0
20
40
60
80
100
120
140
1 3 5 7 9
11 13
15 17 19
21 23
KWh
(Average Daily Loads in kWh's)
Hours of the Day
Winter Summer
136
City of Palo Alto - Electric Operating Revenue by Source
Last Ten Fiscal Years ($000)
Fiscal Year Residential Commercial City of Palo Alto Other Total
2002 11,377 56,214 1,925 6 69,521
2003 11,657 55,353 2,004 24 69,039
2004 12,245 54,881 2,047 66 69,240
2005 13,009 56,683 2,222 67 71,981
2006 14,973 67,389 2,395 97 84,854
2007 15,150 68,214 2,397 69 85,829
2008 16,109 72,632 2,571 0 91,312
2009 17,939 83,710 2,823 0 104,472
2010 19,898 89,315 2,890 0 112,103
2011 19,848 88,076 2,991 0 110,915
Customer (alphabetical order) Type of Business Net Charges
% of System
Total
529 Bryant St LLC Technology
City of Palo Alto Municipal
CPI-David Morman Research
Hewlett Packard Computer
Space System Loral Satellite System
Stanford Hines Interests Property Mgmt
Stanford Hospital Hospital
Varian Medical Systems Manufacturing
Veterans Admin Hospital Hospital
VMWare Inc.Computer
Total 38,007,506$ 35.36%
Source:City of Palo Alto, Utilities Department
Notes:Revenue includes all utilities (metered and non-metered), revenue adjustments, and Primary Voltage discount.
Does not include CEC surcharge, UUT, Solar and Rap discounts, and deposits.
Top Ten Electric Revenue
$0$10,000$20,000$30,000
$40,000$50,000
$60,000$70,000
$80,000$90,000$100,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Residential Commercial City of Palo Alto Other
137
City of Palo Alto - Assessed Value of Taxable Property
Last Ten Fiscal Years ($000)
$ T
h
o
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s
a
n
d
s
Net Local Secured Roll Subtotal Less
Fiscal
Year Land Improvements
Personal
Property
Net Local
Secured Roll
Public
Utilities
Unsecured
Property
Exemptions
Net of
State Aid
Total
Assessed
Value
Total
Direct
Tax Rate
2002 5,744,675 6,347,719 292,812 12,385,206 3,371 1,627,594 913,475 13,102,696 1%
2003 6,140,438 6,692,162 309,386 13,141,986 3,859 1,612,179 951,807 13,806,217 1%
2004 6,588,474 6,996,106 195,859 13,780,439 3,956 1,582,368 1,196,546 14,170,217 1%
2005 7,075,300 7,722,660 220,585 15,018,545 4,150 1,354,310 1,402,039 14,974,966 1%
2006 7,941,482 8,364,668 174,666 16,480,816 4,084 1,361,117 1,595,871 16,250,146 1%
2007 8,725,485 8,915,623 213,154 17,854,262 3,923 1,391,284 1,639,856 17,609,613 1%
2008 9,497,746 9,453,436 228,875 19,180,057 3,174 1,536,584 1,797,327 18,922,488 1%
2009 10,420,139 10,527,617 303,688 21,251,444 2,573 1,702,884 1,871,292 21,085,609 1%
2010 11,007,650 10,752,671 288,148 22,048,469 2,573 1,638,436 1,809,119 21,880,359 1%
2011 11,011,160 10,962,928 241,280 22,215,368 2,573 1,495,574 1,757,241 21,956,274 1%
Source:County of Santa Clara Assessor's Office
Note:Beginning in fiscal year 1988-89, Chapter 921 of the Statutes of 1987 requires the establishment
of a single county-wide tax rate area for the assignment of the assessed value of certain types
of state-assessed utility property and sets forth formulas for the determination of county-wide tax
rates for this particular type of property.
The State Constitution requires property to be assessed at one hundred percent of the most
recent purchase price, plus an increment of no more than two percent annually, plus any
local over-rides. These values are considered to be full market values.
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Land Improvements Personal Property Public Utilities Unsecured Property
138
City of Palo Alto - Property Tax Rates
All Overlapping Governments
Last Ten Fiscal Years
Basic County* City**
County County Hospital Library Santa Clara
Fiscal Wide Retirement G. O. Bond G. O. Bond Valley Water School Community
Year Levy Levy (Measure A) (Measure N) District District College Total
2002 1.0000 0.0364 0.0000 0.0000 0.0062 0.0727 0.0000 1.1153
2003 1.0000 0.0388 0.0000 0.0000 0.0072 0.0586 0.0108 1.1154
2004 1.0000 0.0388 0.0000 0.0000 0.0087 0.0666 0.0110 1.1251
2005 1.0000 0.0388 0.0000 0.0000 0.0092 0.0680 0.0129 1.1289
2006 1.0000 0.0388 0.0000 0.0000 0.0078 0.0526 0.0119 1.1111
2007 1.0000 0.0388 0.0000 0.0000 0.0072 0.0720 0.0346 1.1526
2008 1.0000 0.0388 0.0000 0.0000 0.0071 0.0702 0.0113 1.1274
2009 1.0000 0.0388 0.0000 0.0000 0.0061 0.0674 0.0123 1.1246
2010 1.0000 0.0388 0.0122 0.0000 0.0074 0.0686 0.0322 1.1592
2011 1.0000 0.0388 0.0095 0.0171 0.0072 0.0751 0.0326 1.1803
*The County General Obligation Bond (Measure A) was passed in 2008 to fund the seismic upgrade of the Santa Clara Valley
Medical Center. Rates were first levied for the 2009-10 fiscal year.
**The City of Palo Alto General Obligation Bond (Measure N) was passed in 2008 to fund the construction and renovation of
three of the City's libraries. Rates were first levied for the 2010-11 fiscal year.
Source: County of Santa Clara, Tax Rates and Information
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
$
H
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d
r
e
d
s
Basic County Wide Levy County Retirement Levy
County Hospital G.O. Bond City Library G.O. Bond
Santa Clara Valley Water District School District
Community College
139
City of Palo Alto - Property Tax Levies and Collections
Last Ten Fiscal Years ($000)
Percent
of Total
Current Percent Delinquent Total Tax
Fiscal Total Tax of Levy Tax Tax Collections
Year Tax Levy (a) Collections Collected Collections (b) Collections to Tax Levy
2002 13,231 13,231 100% - 13,231 100%
2003 13,821 13,821 100% - 13,821 100%
2004 13,707 13,707 100% - 13,707 100%
2005 16,657 16,657 100% - 16,657 100%
2006 18,731 18,731 100% - 18,731 100%
2007 21,466 21,466 100% - 21,466 100%
2008 23,084 23,084 100% - 23,084 100%
2009 25,432 25,432 100% - 25,432 100%
2010 25,981 25,981 100% - 25,981 100%
2011 25,688 25,688 100% - 25,688 100%
Source:County of Santa Clara Assessor's Office
Note:Current tax collections beginning in 1993 have been reduced by a mandatory
tax reallocation imposed by the State of California.
(a) During fiscal year 1995, the County began providing the City 100% of its
tax levy under an agreement which allows the County to keep all interest
and delinquency charges collected.
(b) Effective with the fiscal year 1993-94, the City is on the Teeter Plan, under
which the County of Santa Clara pays the full tax levy due. All prior delinquent
taxes were also received in that fiscal year.
140
City of Palo Alto - Principal Property Taxpayers
Current Year and Nine Years Ago ($000)
FY 2011 FY 2002
Percentage Percentage
of Total City of Total City
Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed
Taxpayer Value Rank Value Value Rank Value
Leland Stanford Jr University $3,328,472 1 15.2% $1,955,683 1 17.2%
Space System /Loral, Inc.208,784 2 1.0% 187,824 2 1.7%
899 Charleston 157,700 3 0.7%0.0%
Albert L Schultz Jewish Community Center 123,255 4 0.6%0.0%
Arden Realty Limited Partnership 111,632 5 0.5% 0.0%
Whisman Ventures, LLC 104,281 6 0.5%0.0%
ECI 2 Bayshore LLC / ECI Hamilton LLC 73,349 7 0.3% 0.0%
Blackhawk Parent LLC 49,821 8 0.2% 0.0%
Ronald & Ann Williams Charitable Foundation 42,951 9 0.2% 0.0%
300 / 400 Hamilton Associates 41,123 10 0.2% 0.0%
Agilent Technologies 0.0%81,317 3 0.7%
Embarcadero Place Associates 0.0%76,500 4 0.7%
Sun Microsystems, Inc.0.0%73,970 5 0.7%
Harbor Investment Partners 0.0%58,026 6 0.5%
California Pacific Commercial Corp.0.0%50,657 7 0.4%
Cowper-Hamilton Associates 0.0%40,361 8 0.4%
529 Bryant Street 0.0%36,250 9 0.3%
Pacific Hotel Dev Venture LP 0.0%35,067 10 0.3%
Subtotal $4,241,368 19.3%$2,595,655 22.8%
Total City Taxable Assessed Value
FY 2011 $21,956,274
FY 2002 $11,379,838
Source: County of Santa Clara compiled by Hunt Consulting, LLC
141
City of Palo Alto - Assessed Valuation and Parcels By Land Use
As Of June 30, 2011
2010-11 No. of
Assessed % of No. of % of Taxable % of
Valuation (a) Total Parcels Total Parcels Total
Non-Residential:
Agricultural/Forest 25,742,741$ 0.13 50 0.25 34 0.17
Commercial 1,486,858,269 7.27 470 2.31 464 2.31
Professional/Office 2,385,942,691 11.66 484 2.38 465 2.31
Industrial/Research & Development 1,975,226,900 9.65 189 0.93 184 0.91
Recreational 20,804,566 0.10 14 0.07 11 0.05
Government/Social/Institutional 351,145,899 1.72 104 0.51 40 0.20
Miscellaneous 6,313,752 0.03 16 0.08 15 0.07
Subtotal Non-Residential 6,252,034,818$ 30.56 1,327 6.53 1,213 6.02
Residential:
Single Family Residence 11,506,870,425$ 56.25 14,912 73.42 14,885 74.00
Condominium/Townhouse 1,435,220,989 7.02 2,743 13.50 2,739 13.62
2-4 Residential Units 340,294,612 1.66 526 2.59 526 2.61
5+ Residential Units/Apartments 694,174,103 3.39 331 1.63 306 1.52
Mobile Home 71,042 0.00 7 0.03 7 0.03
Subtotal Residential 13,976,631,171$ 68.32 18,519 91.17 18,463 91.78
Vacant Parcels 229,460,815$ 1.12 465 2.30 440 2.20
Total 20,458,126,804$ 100.00 20,311 100.00 20,116 100.00
Source:California Municipal Statistics, Inc.
Note:
(a) Local Secured Assessed Valuation, Excluding Tax-Exempt Property
This schedule is provided as required by the Continuing Disclosure Agreement for the City's Series 2010A General
Obligation Bond and is not required by Government Accounting Standards Board (GASB). Therefore, ten years of
comparison data is not presented.
142
City of Palo Alto - Per Parcel Assessed Valuation of Single Family Homes
June 30, 2011
Average
No. of Assessed
Parcels Valuation
Single Family Residential 14,885 $773,051
No. of
2010-11 No. of % of Cumulative Total % of Cumulative
Assessed Valuation Parcels (a) Total % of Total Valuation Total % of Total
$0 - $99,999 2,085 14.007 14.007 155,194,242$ 1.349 1.349
$100,000 - $199,999 2,017 13.551 27.558 277,894,745 2.415 3.764
$200,000 - $299,999 1,015 6.819 34.377 253,767,993 2.205 5.969
$300,000 - $399,999 855 5.744 40.121 299,307,295 2.601 8.570
$400,000 - $499,999 870 5.845 45.966 392,818,001 3.414 11.984
$500,000 - $599,999 878 5.899 51.864 483,210,968 4.199 16.183
$600,000 - $699,999 749 5.032 56.896 488,078,563 4.242 20.425
$700,000 - $799,999 686 4.609 61.505 515,766,103 4.482 24.907
$800,000 - $899,999 781 5.247 66.752 664,641,232 5.776 30.683
$900,000 - $999,999 741 4.978 71.730 704,718,248 6.124 36.808
$1,000,000 - $1,099,999 706 4.743 76.473 738,400,223 6.417 43.225
$1,100,000 - $1,199,999 554 3.722 80.195 638,039,562 5.545 48.769
$1,200,000 - $1,299,999 424 2.849 83.043 529,245,429 4.599 53.369
$1,300,000 - $1,399,999 362 2.432 85.475 488,049,730 4.241 57.610
$1,400,000 - $1,499,999 323 2.170 87.645 467,586,288 4.064 61.674
$1,500,000 - $1,599,999 313 2.103 89.748 484,896,920 4.214 65.888
$1,600,000 - $1,699,999 205 1.377 91.125 337,668,636 2.934 68.822
$1,700,000 - $1,799,999 163 1.095 92.220 284,459,104 2.472 71.294
$1,800,000 - $1,899,999 132 0.887 93.107 244,458,723 2.124 73.419
$1,900,000 - $1,999,999 105 0.705 93.813 204,125,993 1.774 75.193
$2,000,000 and Greater 921 6.187 100.000 2,854,542,427 24.807 100.000
Total 14,885 100.000 11,506,870,425$ 100.000
Source:California Municipal Statistics, Inc.
Note:
(a) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units.
Assessed Valuation
$567,149
Assessed Median
This schedule is provided as required by the Continuing Disclosure Agreement for the City's
Series 2010A General Obligation Bond and is not required by Government Accounting Standards
Board (GASB). Therefore, ten years of comparison data is not presented.
2010-11
Valuation
$11,506,870,425
143
Last Ten Fiscal Years ($000)
Governmental Activities
Certificates General Special
Fiscal of Obligation Assessment Capital Lease
Year Participation Bonds Debt Obligations Total
2002 13,695 0 595 84 14,374
2003 12,905 0 510 57 13,472
2004 12,215 0 420 25 12,660
2005 10,625 0 325 0 10,950
2006 9,915 0 225 0 10,140
2007 9,175 0 115 0 9,290
2008 8,405 0 0 0 8,405
2009 7,605 0 0 0 7,605
2010 6,765 58,500 0 0 65,265
2011 5,895 58,945 0 0 64,840
Business-Type Activities
Utility Total Percentage Percentage
Fiscal Revenue Primary of Assessed of Personal Per
Year Bonds Total Government Value (a) Income (b) Capita (c)
2002 47,210 47,210 61,584 0.47 % 2.04% $1.02
2003 46,069 46,069 59,541 0.43 % 1.97% $0.98
2004 44,862 44,862 57,522 0.38 % 1.87% $0.95
2005 43,598 43,598 54,548 0.34 % 1.67% $0.88
2006 42,288 42,288 52,428 0.32 % 1.53% $0.84
2007 40,887 40,887 50,177 0.28 % 1.46% $0.80
2008 46,310 46,310 54,715 0.29 % 1.54% $0.86
2009 46,565 46,565 54,170 0.26 % 1.47% $0.84
2010 83,647 83,647 148,912 0.68 % 4.46% $2.28
2011 87,117 87,117 151,957 0.69 % 4.45% $2.36
Sources:City of Palo Alto
(a) County of Santa Clara (assessed value)
(b) Per capita personal income are only available for Santa Clara County.
Personal income is the product of the countywide per capita amount and the City's population.
(c) State of California, Department of Finance (population)
California State Department of Transportation Forecasts
Note:Debt amounts exclude any premiums, discounts, or other amortization amounts.
Details regarding the City's outstanding debt can be found in the notes to the financial statements.
City of Palo Alto - Ratio of Outstanding Debt by Type
0
20
40
60
80
100
120
140
160
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
$
T
h
o
u
s
a
n
d
s
Total Governmental Total Business
144
City of Palo Alto - Computation of Direct and Overlapping Debt
June 30, 2011
FY 2011 Assessed Valuation
Percentage Amount
Total Applicable Applicable
Debt To City of To City of
OVERLAPPING TAX AND ASSESSMENT DEBT:Outstanding Palo Alto (a) Palo Alto
Santa Clara County $334,900,000 8.276% $27,716,324
Santa Clara Valley Water District, Zone W-1 405,000 0.473% 1,916
Foothill-DeAnza Community College District 650,224,288 23.470% 152,607,640
Palo Alto Unified School District 229,109,249 88.460% 202,670,042
Fremont Union High School District 265,975,108 0.002%5,320
Los Gatos Joint Union High School District 55,215,000 0.011%6,074
Mountain View-Los Altos Union High School District 50,486,384 1.030%520,010
Cupertino Union School District 122,899,991 0.004%4,916
Los Altos School District 86,664,000 1.042%903,039
Mountain View-Whisman School District 2,645,000 1.014%26,820
Saratoga Union School District 47,550,032 0.023%10,937
Whisman School District 19,129,761 3.630%694,410
City of Palo Alto 55,305,000 100.000% 55,305,000
El Camino Hospital District 143,805,000 0.093%133,739
City of Palo Alto Special Assessment Bonds 35,480,000 100.000% 35,480,000
Santa Clara Valley Water District Benefit Assessment District 143,160,000 8.276% 11,847,922
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $2,242,953,813 $487,934,109
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
Santa Clara County General Fund Obligations $786,980,000 8.276% $65,130,465
Santa Clara County Pension Obligations 386,024,822 8.276% 31,947,414
Santa Clara County Board of Education Certificates of Participation 12,580,000 8.276% 1,041,121
21,215,000 23.470% 4,979,161
9,650,000 0.011% 1,062
6,115,000 1.030% 62,985
Saratoga Union High School District Certificates of Participation 6,110,000 0.023% 1,405
City of Palo Alto General Fund Obligations 5,895,000 100.000% 5,895,000
Santa Clara County Vector Control District Certificates of Participation 3,800,000 8.276% 314,488
Midpeninsula Regional Open Space Park District General Fund
Obligations 131,003,031 13.742% 18,002,437
$1,369,372,853 $127,375,538
TOTAL DIRECT DEBT $61,200,000
TOTAL OVERLAPPING DEBT $554,109,647
COMBINED TOTAL DEBT $3,612,326,666 $615,309,647 (b)
Note: (a) Percentage of overlapping agency's assessed valuation located within boundaries of the city.
non-bonded capital lease obligations.
Ratios to Assessed Valuation
Direct Debt ($55,305,000)
Combined Direct Debt ($61,200,000)
Total Overlapping Tax and Assessment Debt
Combined Total Debt
STATE SCHOOL BUILDING AID REPAYABLE AS OF 06/30/11: $0
Source: California Municipal Statistics, Inc.
$21,956,274,024
0.28%
2.22%
2.80%
Foothill-DeAnza Community College District Certificates of
Participation
Mountain View-Los Altos Union High School District Certificates of
Participation
(b) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and
TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT
0.25%
Los Gatos-Saratoga Joint Union High School District Certificates of
Participation
145
City of Palo Alto - Computation of Legal Bonded Debt Margin
June 30, 2011
Assessed Valuation:
Secured property assessed value, net of
exempt real property $21,956,274
Bonded debt limit 3.75% of assessed value (a)$823,360
Amount of debt subject to limit: (b)
Certificates of participation 5,895
General Obligation Bonds 55,305
Special assessment debt with government commitment 0
Total Debt 61,200
Less amount of debt not subject to limit 5,895
Amount of debt subject to limit 55,305
Legal bonded debt margin $768,055
Total net debt
applicable
Total Net Debt Legal to the limit
Fiscal Debt Applicable to Debt as a percentage
Year Limit Limit Margin of debt limit
2002 491,351 0 491,351 0.00%
2003 516,615 0 516,615 0.00%
2004 561,561 0 561,561 0.00%
2005 609,378 0 609,378 0.00%
2006 609,377 0 609,377 0.00%
2007 660,360 0 660,360 0.00%
2008 709,593 0 709,593 0.00%
2009 790,710 0 790,710 0.00%
2010 820,513 55,305 765,208 7.23%
2011 823,360 55,305 768,055 7.20%
Source: Annual Financial Statements
Notes: (a) California Government Code, Section 43605 sets the debt limit at 15%. The Code section was
enacted prior to the change in basing assessed value to full market value when it was previously
25% of market value. Thus, the limit shown as 3.75% is one-fourth the limit to account for the
adjustment of showing assessed valuation at full cash value. Prior year limits have been adjusted
to conform to the current year methodology.
(b) In accordance with California Government Code Section 43605, only the City's general obligation
bonds are subject to the legal debt limit of 15%. The above does not include debt recorded in the
Enterprise Funds because such debt is not subject to legal debt margin.
Special assessment debt excludes debt where there is no government commitment.
(in thousands of dollars)
146
Direct Net Revenue
Fiscal Gross Operating Available for
Year Revenue Expenditures Debt Services (a) Principal Interest Total Coverage
2002 176,947 148,345 28,602 1,955 1,660 3,615 7.91
2003 165,414 116,268 49,146 1,255 2,354 3,609 13.62
2004 169,047 121,988 47,059 1,310 2,307 3,617 13.01
2005 171,493 147,123 24,370 1,365 2,257 3,622 6.73
2006 214,944 144,465 70,479 1,410 2,203 3,613 19.51
2007 205,258 164,340 40,918 1,465 2,147 3,612 11.33
2008 222,799 186,285 36,514 1,525 2,088 3,613 10.11
2009 246,028 195,489 50,539 1,590 2,024 3,614 13.98
2010 233,774 187,658 46,116 1,755 1,954 3,709 12.43
2011 237,600 168,328 69,272 2,655 3,261 5,916 11.71
Source: Annual Financial Statements
Note: (a) Excludes depreciation and amortization expense.
Details regarding the City's outstanding debt can be found in the notes to the financial statements.
FY 2008 Principal for Debt Service was restated due to correction of data.
City of Palo Alto - Revenue Bond Coverage
Debt Service
Water, Electric, Gas, Wastewater Collection,
Wastewater Treatment and Storm Drainage Funds
Last Ten Fiscal Years ($000)
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Net Revenue Available Total Debt Service
147
Fiscal
Year
Department
Stores
Eating/
Drinking
Places Auto Sales
Furniture/
Appliance Apparel Stores
Food
Markets
Service
Stations
Drug
Stores
Other
Retail
Retail Stores
Total
All Other
Outlets Total
2002 2,646 2,321 2,533 1,593 1,171 371 379 180 3,674 14,868 5,009 19,877
2003 2,316 2,172 2,094 1,455 1,114 375 388 171 2,811 12,896 4,834 17,730
2004 2,425 2,168 1,958 1,479 1,186 351 437 168 3,698 13,870 3,997 17,867
2005 2,621 2,206 1,966 1,176 1,310 356 533 317 3,590 14,075 5,139 19,214
2006 2,664 2,306 2,062 1,168 1,346 370 595 392 4,244 15,147 5,042 20,189
2007 2,751 2,486 1,954 1,109 1,485 374 602 203 5,075 16,039 5,185 21,224
2008 2,685 2,566 1,731 1,685 1,497 349 622 405 4,682 16,222 5,066 21,288
2009 2,251 2,443 1,358 1,431 1,258 315 493 214 4,284 14,047 5,277 19,324
2010 2,215 2,418 1,288 1,402 1,254 343 549 219 4,458 14,146 4,268 18,414
2011 2,374 2,621 1,474 1,564 1,292 381 630 242 4,873 15,451 4,848 20,299
Source:California State Board of Equalization, compiled by MBIA Muniservices Company
State Funds 7.00%
County Transportation Fund (Transportation Development Act) 0.25%
County Transportation Fund 1.00%
City 1.00%
9.25%
Source: California State Board of Equalization
Note: Effective July 1, 2011 the sales tax rate decreased to 8.25%.
City of Palo Alto- Taxable Transactions by Type of Business
Last Ten Fiscal Years ($000)
RETAIL STORES
SALES TAX RATES FOR THE
FISCAL YEAR ENDED JUNE 30, 2011
Department
Stores
12%
Eating/
Drinking
Places
13.1%
Auto
Sales
7%Furniture/
Appliance
7.6%Apparel
Stores
6.8%
Food
Markets
1.9%
Service
Stations
3%
Drug Stores
1.2%
Other
Retail
24.2%
All Other
Outlets
23.2%
Fiscal Year 2011
148
City of Palo Alto - Demographic and Economic Statistics
Last Ten Fiscal Years
Santa Clara
City of Palo Alto City of Palo Alto Santa Clara City Total
Fiscal City of Palo Alto Unemployment School County Population County ($000)
Year Population Rate (%) Population Population % of County Personal Income
2002 60,500 3.7%9,952 1,719,565 3.52%77,548,912
2003 60,465 4.1%10,151 1,729,917 3.50%77,680,349
2004 60,246 3.2%10,341 1,731,422 3.48%82,638,917
2005 61,674 2.8%10,527 1,759,585 3.51%86,400,000
2006 62,148 2.5%10,607 1,773,258 3.50%91,600,000 *
2007 62,615 2.6%11,056 1,808,056 3.46%96,900,000 *
2008 63,367 3.5%11,329 1,837,075 3.45%107,900,000 *
2009 64,484 6.5%11,329 1,857,621 3.47%109,700,000 *
2010 65,408 6.2%11,565 1,880,876 3.48%99,600,000 *
2011 64,417 5.3%12,024 1,781,427 3.62%105,500,000 *
Source: California State Department of Finance
State Employment Development Office
Palo Alto Unified School District
*California State Department of Transportation Forecasts
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
Total County Personal Income
9
10
11
12
City of Palo Alto School Population
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
City Unemployment Rate
3.00%
3.20%
3.40%
3.60%
3.80%
4.00%
City Population % of County
Thousands
149
City of Palo Alto - Principal Employers
Current Year and Three Years Ago
Percentage
Number of Rank of Total City Number of Rank
Employer Employees Employment Employees
Stanford University 10,223 1 9.3%9,821 1
Stanford University Medical Center/Hospital 5,813 2 5.3%5,025 2
Lucile Packard Children's Hospital 3,549 3 3.2%3,326 4
Veteran's Affairs Palo Alto Health Care System 3,500 4 3.2%3,500 3
Hewlett-Packard Company 2,001 5 1.8%2,001 5
Palo Alto Medical Foundation 2,000 6 1.8%2,000 6
Space Systems Loral 1,700 7 1.5%1,700 7
Wilson Sonsini Goodrich Rosati 1,500 8 1.4%1,500 8
Palo Alto Unified School District 1,318 9 1.2%1,304 9
City of Palo Alto 1,019 10 0.9%1,100 10
Subtotal 32,623 29.7%
Total City Day Population 110,000
Source: www.ReferenceUSA.com, www.stanfordhospital.org, www.lpch.org, www.pausd.org, www.stanford.edu, www.cityofpaloalto.org
FY 2011 FY 2008
Note: Reporting as a statistical started in FY 2006. Comparable data was not available until FY 2008.
150
City of Palo Alto - Full-Time Equivalent City Government Employees by Function
Last Ten Fiscal Years
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Governmental Funds
General Fund
Administrative Depts 143.60 145.10 101.10 96.24 96.65 99.05 98.65 97.80 89.30 82.84
Community Services 153.00 153.00 144.75 98.25 99.25 97.25 96.25 96.50 94.25 74.50
Fire 129.00 132.50 128.50 126.00 127.00 127.00 127.00 126.69 122.69 120.74
Library (a)44.00 44.25 43.75 43.75 43.75 42.25 41.25
Planning and Community Environment 56.50 59.00 54.80 53.30 53.30 53.30 53.30 53.30 48.85 44.60
Police 176.50 177.50 171.00 164.50 164.00 163.00 163.00 164.00 161.50 157.00
Public Works 87.05 93.05 76.20 67.90 67.90 67.90 67.90 69.23 63.67 58.57
Capital Projects Fund 12.70 20.20 20.20 20.00 20.00 20.67 24.67 23.67
Special Revenue Fund 1.20 1.20 1.20 1.20 1.20 1.20 1.15 1.65
Enterprise Funds
Public Works Department 110.45 110.45 111.35 112.65 112.65 112.65 112.65 113.55 114.63 115.01
(Refuse, Storm Drain, Wastewater Treatment)
Utilities Department 230.50 229.50 233.75 233.90 235.90 234.90 234.90 238.01 241.61 250.71
(Administrative, Electric, Gas, Wastewater
Collection, Water )
CPA External Services (b)4.00 7.00 5.70 6.00 6.00 5.80 5.80 - - -
Other Funds
Printing and Mailing 4.15 4.15 4.15 4.70 4.60 4.65 4.05 4.05 4.05 1.57
Technology 33.15 29.56 29.60 29.80 29.80 30.65 30.65 30.41
Equipment Management 15.00 15.00 16.00 16.00 16.00 16.20 16.20 16.20 16.08 16.08
Total 1,109.75 1,126.25 1,094.35 1,074.40 1,078.50 1,076.45 1,074.45 1,075.60 1,055.35 1,018.60
Source: City of Palo Alto - Adopted Operating Budget
(b) CPA External Services of the original 5.80 FTE, .80 FTE was transferred to the Technology Fund
and 5.00 FTE was eliminated.
Notes: (a) Library became its own entity effective 2005, originally part of Community Services.
-
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fu
l
l
T
i
m
e
E
q
u
i
v
a
l
e
n
t
s
Administrative Depts Community Services
Fire Library (a)
Planning and Community Environment Police
Public Works Capital Projects Fund
Special Revenue Fund
151
Last Ten Fiscal Years
2002 2003 2004
Function / Program
Public Safety:
Fire:
Number of Fire Hydrants 1,741 1,746 1,874
Planning & Community Environment:
Number of Housing Units 26,841 26,934 27,019
Commercial & Industrial Space - Million Sq Ft 27.3 27.3 27.3
Electric Utility:
Number of Customer Accounts 28,348 28,408 28,482
Million of KWH Sold 997 957 958
Fiber Optics Utility:
Number of Fiber Optic Connections 30 23 18
Water Utility:
Number of Customer Accounts 19,437 19,487 19,557
Million CCF Sold 5.9 5.6 6.0
Gas Utility:
Number of Customer Accounts 23,116 23,169 23,216
Million Therms Sold 33.7 31.8 31.5
Waste Water:
Number of Customer Accounts 21,772 21,819 21,830
Millions of Gallons Processed 8,699 8,704 8,238
Source:City of Palo Alto
State of California, Dept of Finance (housing units)
Note:Fiscal Years 2004-2006, number of fire hydrants are restated due to change in source of data.
Fiscal Years 2007 and 2008, for Water Utility - Million CCF Sold, are restated due to
correction of measuring units.
City of Palo Alto - Operating Indicators by Function/Program
Fiscal Year
152
2005 2006 2007 2008 2009 2010 2011
1,873 1,919 1,944 1,948 1,949 1,954 1,852
27,522 27,767 27,763 27,938 28,291 28,445 28,216
27.3 27.3 27.3 27.3 27.3 27.3 27.3
28,539 28,653 28,684 29,024 28,527 28,527 29,708
959 966 978 977 996 965 946
39 22 23 27 26 24 24
19,605 19,645 19,726 19,942 19,442 19,916 20,248
5.3 5.2 5.4 5.5 5.7 5.0 5.0
23,300 23,353 23,357 23,502 23,090 23,322 23,816
32.0 31.5 31.3 32.2 30.6 30.7 30.9
21,825 21,784 21,835 21,990 22,210 22,193 22,320
8,395 8,972 9,220 8,510 7,958 8,184 8,652
Fiscal Year
153
City of Palo Alto - Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
2002 2003 2004 2005
Function/Program
Public Safety:
Fire:
Fire Stations 8 8 8 8
Fire Apparatus 25 22 23 25
Police:
Police Stations 1 1 1 1
Police Patrol Vehicles 33 33 30 30
Community Services:
Acres - Downtown/Urban Parks 170 170 170 170
Acres - Open Space 3,731 3,731 3,731 3,731
Parks and Preserves 34 34 34 35
Golf Course 1 1 1 1
Tennis Courts 52 52 52 52
Athletic Center 1 1 1 1
Community Centers 4 4 4 4
Theatres 3 3 3 3
Cultural Center/Art Center 1 1 1 1
Junior Museum and Zoo 1 1 1 1
Swimming Pools 1 1 1 1
Nature Center 2 2 2 2
Libraries:
Libraries 6 6 5 5
Public Works:
Number of Trees Maintained 37,941 34,939 35,440 35,096
Electric Utility:
Overhead Pole Miles 227 227 227 225
Underground Trench Miles 186 186 186 188
Water Utility:
Miles of Water Mains 226 226 226 226
Gas Utility:
Miles of Gas Mains 207 207 207 207
Waste Water:
Miles of Sanitary Sewer Lines 202 202 202 202
Source: City of Palo Alto
Fiscal Year
154
2006 2007 2008 2009 2010 2011
88 8888
25 25 23 28 28 27
11 1111
30 30 30 30 30 30
170 157 157 157 157 157
3,731 3,744 3,744 3,744 3,744 3,744
35 36 36 36 36 36
11 1111
52 51 51 51 51 51
14 4444
44 4444
33 3333
11 1111
11 1111
11 1111
23 3333
55 5555
34,841 34,556 35,322 35,255 35,255 35,207
217 194 193 193 193 193
210 252 253 253 253 253
217 217 217 214 214 214
207 207 207 207 205 205
202 202 202 207 207 207
Fiscal Year
155
EXPIRATION
TYPE COVERAGE (Deductible) LIMITS COMPANY DATE
PROPERTY LOSS
Blanket All real & personal property ($10,000 deductible),
Fine Arts ($2,500 deductible)
$380,029,130 CA Public Entity
Property Program
07/02/16
Boiler & Machinery All real & personal property ($25,000 deductible) $100,000,000 maximum all risk per
occurrence limit
CA Public Entity
Property Program
07/02/16
$1,000,000 minimum contingent
business interruption
Flood Insurance All real property 1305 Middlefield Road ($1,000
deductible)
$500,000 Hartford Fire Insurance
Co.
04/08/16
FINANCIAL LOSS
Employee Dishonesty Position bond-faithful performance per loss ($5,000
deductible)
$1,000,000 / $4,000,000 x
$1,000,000 per occurrence for City
Mgr. & Director of ASD
Fidelity & Deposit Co. 03/23/16
UMBRELLA EXCESS
LIABILITY
City is a member of an insurance pool participating
with a number of other California cities ($1,000,000
self-insured retention)
$100,000,000 annual aggregate Everest Ins. Co.
Lexington Ins Co. Axis
& Arch
07/02/16
Trustees Errors and
Omissions
Bodily injury and property damage liability
Errors and omissions liability
SPECIAL LIABILITY Each occurrence
Volunteers Accident Medical - Each person / ($100 deductible) $20,000 QBE Insurance Co. 02/04/16
Special Events Bodily injury $1,000,000 per occurrence Colony Insurance
Company
01/02/16
EMPLOYEE BENEFIT
Travel Accident Indemnity, based on salary $1,500,000 per accident Life Insurance Co. of
North America
06/02/16
EMPLOYEE HEALTH
PLAN
The City participates in the California Public
Employees' Medical and Health Care Act
(PEMHCA) program to provide medical benefits to
employees and retirees
WORKERS'
COMPENSATION
City is self-insured for first $750,000 liability $750,000 per occurrence 07/02/16
EXCESS WORKERS'
COMPENSATION
Pooled Retention $4,000,000 limit per occurrence -
Workers Comp and Employers
Liability
CSAC Excess Insurance
Authority
07/02/16
Reinsured Layer $45,000,000 workers comp per
occurrence, excess of pooled
retention limit, includes $5,000,000
employers liability
ACE American
Insurance Co.
07/02/16
5
City of Palo Alto - Insurance Coverage
June 30, 2011
Source: Human Resources Dept, City of Palo Alto
156
CITY OF PALO ALTO
Index to the Single Audit Report
For the Year Ended June 30, 2011
157
Page
Independent Auditor’s Report on Internal Control Over Financial Reporting
and on Compliance and Other Matters Based on an Audit of Financial
Statements Performed in Accordance with Government Auditing Standards ....................................... 159
Independent Auditor’s Report on Compliance with Requirements that Could
Have a Direct and Material Effect on Each Major Program, Internal Control
Over Compliance in Accordance with OMB Circular A-133 and
Schedule of Expenditures of Federal Awards ........................................................................................ 161
Schedule of Expenditures of Federal Awards ........................................................................................... 163
Notes to the Schedule of Expenditures of Federal Awards ....................................................................... 164
Schedule of Findings and Questioned Costs ............................................................................................. 165
Schedule of Prior Audit Findings ............................................................................................................. 176
158
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159
Honorable Mayor and City Council
of the City of Palo Alto, California
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF
FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH GOVERNMENT AUDITING STANDARDS
We have audited the financial statements of the governmental activities, the business-type activities, each
major fund, and the aggregate remaining fund information of the City of Palo Alto, California, (City), as
of and for the year ended June 30, 2011, and have issued our report thereon dated December 1, 2011. Our
report includes an explanatory paragraph indicating that the City adopted the provisions of Governmental
Accounting Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type
Definitions. We conducted our audit in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
Management of the City is responsible for establishing and maintaining effective internal control over
financial reporting. In planning and performing our audit, we considered the City’s internal control over
financial reporting as a basis for designing our auditing procedures for the purpose of expressing our
opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness
of the City’s internal control over financial reporting. Accordingly, we do not express an opinion on the
effectiveness of the City’s internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination
of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement
of the City’s financial statements will not be prevented, or detected and corrected on a timely basis.
Our consideration of internal control over financial reporting was for the limited purpose described in the
first paragraph of this section and was not designed to identify all deficiencies in internal control over
financial reporting that might be deficiencies, significant deficiencies or material weakness. We did not
identify any deficiencies in internal control over financial reporting that we consider to be material
weaknesses, as defined above. However, we identified certain deficiencies in internal control over
financial reporting, described as items 2011-A through 2011-H in Section II of the accompanying
schedule of findings and questioned costs over financial statements that we consider to be significant
deficiencies in internal control over financial reporting. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control that is less severe than a material weakness, yet important
enough to merit attention by those charged with governance.
160
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.
The City’s responses to the findings identified in our audit are described in Section II of the
accompanying schedule of findings and questioned costs. We did not audit the City’s responses and,
accordingly, we express no opinion on them.
This report is intended solely for the information and use of the Mayor and City Council, management,
federal awarding agencies and pass-through entities and is not intended to be and should not be used by
anyone other than these specified parties.
Walnut Creek, California
December 1, 2011
161
Honorable Mayor and City Council
of the City of Palo Alto, California
INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH REQUIREMENTS
THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON
EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE
IN ACCORDANCE WITH OMB CIRCULAR A-133
Compliance
We have audited City of Palo Alto’s compliance with the types of compliance requirements described in
the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of
the City’s major federal programs for the year ended June 30, 2011. The City’s major federal programs
are identified in the summary of the auditor’s result section of the accompanying schedule of findings and
questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable
to each of its major federal programs is the responsibility of the City’s management. Our responsibility is
to express an opinion on the City’s compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the
United States of America; the standards applicable to financial audits contained in the Government
Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133,
Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular
A-133 require that we plan and perform the audit to obtain reasonable assurance about whether
noncompliance with the types of compliance requirements referred to above that could have a direct and
material effect on a major federal program occurred. An audit includes examining, on a test basis,
evidence about the City’s compliance with those requirements and performing such other procedures as
we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for
our opinion. Our audit does not provide a legal determination of the City’s compliance with those
requirements.
In our opinion, the City complied, in all material respects, with the compliance requirements referred to
above that could have a direct and material effect on each of its major federal programs for the year ended
June 30, 2011. However, the results of our auditing procedures disclosed instances of noncompliance with
those requirements, which are required to be reported in accordance with OMB Circular A-133 and which
are described in the accompanying schedule of findings and questioned costs as items 2011-1, 2011-4 and
2011-6.
Internal Control Over Compliance
Management of the City is responsible for establishing and maintaining effective internal control over
compliance with the requirements of laws, regulations, contracts, and grants applicable to federal
programs. In planning and performing our audit, we considered the City’s internal control over
compliance with the requirements that could have a direct and material effect on a major federal program
to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test
and report on internal control over compliance in accordance with OMB Circular A-133, but not for the
purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly,
we do not express an opinion on the effectiveness of the City’s internal control over compliance.
162
Our consideration of internal control over compliance was for the limited purpose described in the
preceding paragraph and was not designed to identify all deficiencies in internal control over compliance
that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that
all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as
discussed below, we identified certain deficiencies in internal control over compliance that we consider to
be a material weakness and other deficiencies that we consider to be significant deficiencies.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a
federal program on a timely basis. A material weakness in internal control over compliance is a
deficiency, or combination of deficiencies, in internal control over compliance, such that there is
reasonable possibility that material noncompliance with a type of compliance requirement of a federal
program will not be prevented, or detected or corrected, on a timely basis. We consider the deficiencies in
internal control over compliance described in the accompanying schedule of findings and questioned
costs as items 2011-1, 2011-3, and 2011-5 to be material weaknesses.
A significant deficiency in internal control over compliance is a deficiency, or a combination of
deficiencies, in internal control over compliance with a type of compliance requirement of a federal
program that is less severe than a material weakness in internal control over compliance, yet important
enough to merit attention by those charged with governance. We consider the deficiencies in internal
control over compliance described in the accompanying schedule of findings and questioned costs as
items 2011-2 and 2011-4 to be significant deficiencies.
The City’s responses to the findings identified in our audit are described in the accompanying schedule of
findings and questioned costs. We did not audit the City’s responses and, accordingly, we express no
opinion on the responses.
This report is intended solely for the information and use of the Mayor and City Council, management,
federal awarding agencies and pass-through entities and is not intended to be and should not be used by
anyone other than these specified parties.
Walnut Creek, California
December 1, 2011
Grantor Federal
Identifying CFDA Subrecipients
Grantor/Pass-Through Grantor/Program Title Number Number Expenditures Expenditures
U.S Department of Housing and Urban Development
Direct
CDBG - Entitlement Grants Cluster
Community Development Block Grants/Entitlement Grants B-10-MC-06-0020 14.218 487,032$ 358,946$
ARRA - Community Development Block Grant ARRA Entitlement
Grants (CDBG-R)B-09-MY-06-0020 14.253 52,426 47,049
Subtotal - CDBG - Entitlement Grants Cluster 539,458 405,995
U.S. Department of Interior
Direct
ARRA - Water Reclamation and Refuse Program R10AP20003 15.504 4,939,600 -
U.S. Department of Justice
Direct
Equitable Sharing Program CA0431200 16.CA0431200 1,222 -
U.S. Department of Transportation
Pass-through State of California Department of Transportation
ARRA - Surface Transportation_Discretionary Grants for Capital Investments
ARRA - Alma Road Rehabilitation ESPL-5100(013)20.932 322,545 -
Environmental Protection Agency
Pass-through California State Water Resources Control Board
ARRA - Capitalization Grants for Clean Water State Revolving Funds 09-814-550 66.458 2,166,607 -
U.S. Department of Energy
Direct
ARRA - Energy Efficiency and Conservation Block Grant DE-SC0002146 81.128 527,152 -
U.S. Department of Homeland Security
Direct
Assistance to Firefighter Grant EMW-2008-FO-12589 97.044 136,430 -
Pass-through from County of Santa Clara
State Homeland Security Grant 2008-0006 97.073 6,088 -
Total U.S. Department of Homeland Security 142,518 -
TOTAL FEDERAL FINANCIAL AWARDS 8,639,102$ 405,995$
CITY OF PALO ALTO
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2011
See Notes to Schedule of Expenditures of Federal Awards
163
CITY OF PALO ALTO
Notes to the Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2011
164
NOTE 1 – REPORTING ENTITY
The Schedule of Expenditures of Federal Awards (the Schedule) includes expenditures of federal awards
for the City of Palo Alto, California, and its component units as disclosed in the notes to the basic
financial statements.
NOTE 2 – BASIS OF ACCOUNTING
Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts
and reported in the financial statements, regardless of measurement focus applied. All governmental funds
are accounted for using the modified accrual basis of accounting. All proprietary funds are accounted for
using the basis of accounting. Expenditures of federal awards reported on the Schedule are recognized
when incurred.
OMB Circular A-133 requires that certain adjustments be made to expenditures recognized when
incurred. The adjustments applicable to the City are summarized below:
Expenditure of Long-Term Debt Proceeds – In this fiscal year, the City received proceeds from long-term
debt funded by the federal government, passed through the California State Water Resources Control
Board under CFDA number 66.458. In accordance with the OMB Circular A-133, section .205(d), the
City included current year expenditures of such proceeds on the Schedule.
NOTE 3 – DIRECT AND INDIRECT (PASS-THROUGH) FEDERAL AWARDS
Federal awards may be granted directly to the City by a federal granting agency or may be granted to
other government agencies which pass-through federal awards to the City. The Schedule includes both of
these types of federal award programs when they occur.
NOTE 4 – RELATIONSHIP TO FEDERAL FINANCIAL REPORTS
Amounts reported in the Schedule agree to or can be reconciled with the amounts reported in the related
federal financial reports.
NOTE 5 – RELATIONSHIP TO BASIC FINANCIAL STATEMENTS
Federal awards and expenditures agree to or can be reconciled with the amounts reported in the City’s
basic financial statements.
CITY OF PALO ALTO
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2011
165
Section I - Summary of Auditor’s Results
Financial Statements
Type of auditor’s report issued on the
basic financial statements of the City:
Unqualified
Internal control over financial reporting:
Material weakness(es) identified? No
Significant deficiency(ies) identified that are not
considered to be material weaknesses?
Yes
Noncompliance material to the financial statements
noted?
No
Federal Awards
Internal control over major programs:
Material weakness(es) identified? Yes
Significant deficiency(ies) identified that are not
considered to be material weaknesses?
Yes
Type of auditor’s report issued on compliance for major
programs:
Unqualified
Any audit findings disclosed that are required to be
reported in accordance with section 510(a) of OMB
Circular A-133?
Yes
Identification of major programs:
Program Title CFDA Number
CDBG – Entitlement Grants Cluster 14.218 & 14.253
ARRA – Water Reclamation and Refuse Program 15.504
ARRA – Surface Transportation Discretionary Grants
for Capital Investment 20.932
ARRA –Capitalization Grants for Clean Water State
Revolving Funds 66.458
ARRA – Energy Efficiency and Conservation Block
Grant Program 81.128
Dollar threshold used to distinguish between type A and
type B programs:
$300,000
Auditee qualified as a low-risk auditee? No
CITY OF PALO ALTO
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2011
166
Section II – Financial Statement Findings
2011-A A Comprehensive Disaster Recovery Plan Has Not Been Fully Developed and Tested
(Significant Deficiency)
General computer controls should ensure that plans have been developed and documented to provide
contingency for unforeseeable events, including the recovery of operational and financial data in the event
of a disaster. The City, however, has not completed the development of a comprehensive disaster
recovery plan. The current draft plan started development in 2008 and has yet to be completed. City IT
management stated the prolonged plan development process was due to a lack of sufficient resources.
The lack of a comprehensive plan that has been fully tested places the City at an increased risk of loss of
financial data in the event of a disaster that affects the City’s server room.
We recommend the City CIO (acting), working with the City Manager, should plan to budget for the
resources necessary to complete the development of a comprehensive disaster recovery plan. Once the
plan is completed, it should be fully tested to ensure the City’s financial data can be restored in a
reasonable amount of time.
Management’s Response:
The City’s management agrees with this finding, which is consistent with other reports on the
SAP/IT system. The IT Department was created by the City Manager as a stand alone department
in the FY2012 budget. The Department was created, in part, to provide greater focus on IT
priorities, such as security, among others. The IT Department will be lead by a new Chief
Information Officer. The finding will be evaluated by the new IT Department as part of building
a work plan for the future.
2011-B The City’s IT Assets Are Exposed to an Active Water-Based Fire Suppression System
(Significant Deficiency)
General computer controls should ensure that IT assets are adequately protected from physical and
environmental hazards. The City’s server room, however, still has an active water-based fire suppression
system. This places the City’s IT assets at increased risk of damage should the system be activated or
should a pipe rupture.
We recommend the City CIO (acting), working with the City Manager, should research the feasibility of
implementing a dry fire suppression system in the City’s server room. Alternately, the active water-based
system could be replaced by a dry-pipe system. If it is determined that the systems could be
implemented, the City should budget for the replacement of the water-based system. Should the system
replacement be deemed infeasible, alternative mitigating controls should be implemented, such as the
installation of high temperature sprinkler heads and the development of a comprehensive disaster
recovery plan.
Management’s Response:
Same response as provided under finding no. 2011-A.
CITY OF PALO ALTO
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2011
167
Section II – Financial Statement Findings (Continued)
2011-C A Comprehensive IT Risk Assessment Has Not Been Performed
(Significant Deficiency)
General computer controls over the access to programs and data should require that a mechanism or
procedures be in place to identify and react to risks arising from internal and external sources. A
comprehensive means to identify IT risks is through the periodic performance of IT risk assessments.
The City, however, has not performed a formal comprehensive and independent IT risk assessment to
help identify the risks to the delivery of IT services and the accuracy and integrity of the City’s financial
and personnel data.
We recommend the City CIO (acting) should plan and budget for an independent IT risk assessment to be
performed on the department’s functions. The risk assessment should focus on identifying all of the
possible risks to the City IT department, the delivery of IT services and the accuracy and integrity of the
City’s financial and personnel data. The risk assessment should quantify the likelihood of an event, the
impact of the event and the mitigating controls that would address the possible risk. The risk assessment
should also include network penetration testing to ascertain the vulnerabilities of the City’s computer
network from hacking attempts.
Management’s Response:
Same response as provided under finding no. 2011-A.
2011-D City IT Department Does Not Have Oversight Over Non-Core Financial Applications
(Significant Deficiency)
The City has several applications that are used by the various departments. These include; Class, used by
Parks and Recreation; Chameleon, used by Animal Services; Horizon, used by the Libraries; and Acella,
used for Permitting. These applications are owned by the individual departments and not controlled nor
managed by the City IT Department. Since management of the applications is decentralized, the
individual applications may not adhere to best practices for application access (password configuration)
or management of authorization profiles. This places the City network and financial data at increased risk
of unauthorized access.
We recommend the City Internal Auditor, working with the CIO (acting), should review the password
configuration requirements being used in the City’s non-core financial applications. If it is found that the
password requirements do not meet industry best practices shown in the table below, the password
configuration settings within the applications should be updated, if possible.
Account Setting Best Practices
Password Length (Min.) 7-9 characters
Expiration Period 30-60 days
Account Lockout Threshold 3-5 invalid logon attempts will lock the account.
Strong Passwords Required Yes
Management’s Response:
Same response as provided under finding no. 2011-A.
CITY OF PALO ALTO
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2011
168
Section II – Financial Statement Findings (Continued)
2011-E City Firewalls Are Managed by a Single Person
(Significant Deficiency)
General computer controls require that logical security management be properly administered. The City’s
firewalls, however, are accessible and configurable by mainly only one person within the IT Department.
Although the City has additional staff that can assist with firewall activities, it does not have a single staff
person that is a dedicated back up. This places the City’s network, application and data at increased risk
should this person be unavailable for an extended period, or if the one person decided to lock all others
out of the network.
We recommend the CIO (acting) should either have at least one other IT staff or manager trained in the
management of firewalls or have an outside consultant retained for these services. An additional secured
account should also be created for firewall administration that could be used in the event the primary
firewall administrator is unavailable for an extended period of time.
Management’s Response:
Same response as provided under finding no. 2011-A.
2011-F City Has Not Performed PCI Data Security Standards Compliance Assessment
(Significant Deficiency)
The Payment Card Industry Data Security Standard (PCI DSS) is a set of requirements designed to ensure
that all entities that process, store or transmit credit card information maintain a secure environment.
Entities that do not comply with PCI DSS may be subject to fines, card replacement costs, forensic audits,
brand damage, etc., by the major credit card brands should a breach event occur. The City, however, has
not performed a compliance assessment for PCI DSS.
We recommend the City Manager, working with the CIO (acting) should have a PCI compliance audit
conducted over the City’s payment card practices and security measures.
Management’s Response:
Same response as provided under finding no. 2011-A.
2011-G City-wide Capital Asset Policies are Outdated
(Significant Deficiency)
During the current year, the City purchased software in the amount of $232,696 and capitalized it as a
nondepreciable asset under governmental-type activities. Given the constant evolution of technology,
software typically has a useful life ranging from 5 to 20 years based on the expected duration and
complexities of the system, rather than treating it as indefinite. Capitalizing software as nondepreciable
seems to overstate the value of these intangible assets over time and would necessitate a large write-off
when service utility is diminished or when it becomes obsolete.
CITY OF PALO ALTO
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2011
169
Section II – Financial Statement Findings (Continued)
2011-G City-wide Capital Asset Policies are Outdated (Continued)
(Significant Deficiency)
Furthermore, upon our review of capital assets, we observed that the City-wide capital asset policies
currently in place have not been updated since 1996 for governmental funds and 2005 for enterprise
funds. These policies should be updated to address current practices and the provisions of subsequently
issued Governmental Accounting Standards Board (GASB) guidance that may not be properly reflected
in these dated policies. For instance, GASB issued Statement No. 34 in December 1999 that made
revolutionary changes over the accounting and reporting of capital assets, including new provisions for
infrastructure, and issued Statement No. 51 in June 2007 that provided accounting and financial reporting
guidance for intangible assets, including internally generated computer software.
We recommend that the City review and update the current capital asset policies for both governmental
and enterprise funds to ensure the City is properly accounting and reporting for its capital assets under
U.S. generally accepted accounting principles. Once the updated policies are in place, we also
recommend the City conduct a review of its existing capital assets to ensure compliance with these
policies.
Management’s Response:
The City’s management agrees with this finding and will be undertaking a comprehensive review
of their existing capital asset policy. Once any necessary revisions are updated and approved, we
will evaluate any impact on the capital asset balances.
2011-H Accounting for Retention Payable
(Significant Deficiency)
During our search for unrecorded liabilities, which included an examination of disbursements issued
subsequent to year-end, we observed that the City does not accrue a liability for retention amounts
withheld from its payments to vendors. In total, we identified 7 payments within our sample of
disbursements that contained retention amounts withheld totaling $322,871, which were not accrued as
fund liabilities. While retention amounts may not be due and payable until some future date when project
milestones are met to the City’s satisfaction, they are customarily recognized as a liability since the goods
and/or services have been received.
We recommend that the City review its current practices over accounting for retention payable to
determine whether or not its liabilities are understated for amounts owed to vendors. At a minimum, the
City should accumulate a total of retention amounts withheld to determine the significance of these
amounts by opinion unit and, for governmental funds, whether or not the timing of payments would
necessitate the recording of a fund liability in the current period.
Management’s Response:
The City’s management agrees with this finding and will be evaluating the options available in
our existing system to record these liabilities. The results of the evaluation will determine how
we can best implement this change from a practical perspective.
CITY OF PALO ALTO
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2011
170
Section III - Federal Award Findings and Questioned Costs
Reference Number: 2011-1
Federal Program Title(s): ARRA - Energy Efficiency and Conservation Block Grant
Program
Federal Catalog Number(s): 81.128
Federal Agency: Department of Energy
Pass-Through Entity: N/A – Direct Federal Fund
Federal Award Number and Year: DE-SC0002146 and 2010-11
Category of Finding: Reporting
Criteria:
As a recipient of federal awards, the City is required to comply with the reporting requirements under the
grant agreement. Appendix 6 of the grant agreement states, “You are required to submit an itemized cost
report, by project activity, with submittal of the SF-425, Federal Financial Report. The itemized cost
report must address each item of the Budget Category of the SF-424A.”
Condition:
Under Appendix 6 of the grant agreement and per discussion with the Contract Specialist from the
Department of Energy, the Itemized Cost Report is due quarterly along with the SF-425 Reports. The City
did not submit the required itemized costs reports on a quarterly basis during the fiscal year.
Cause:
The Resource Planner, who is responsible for administering this program, was not aware of these
reporting requirements due to oversight.
Effect:
The City did not comply with the reporting requirement listed in the grant agreement.
Questioned Costs:
There are no questioned costs.
Recommendation:
We recommend that responsible personnel for administering the program review the reporting
requirements outlined in the grant terms and conditions to ensure compliance with reporting requirements.
Management’s Response and Corrective Action Plan:
Unlike the other EECBG reports, the itemized cost report was not required of all EECBG recipients and
was not mentioned in webinars and email communication explaining the EECBG reporting requirements.
The DOE made a monitoring visit on September 19, 2011 to review a 35 point questionnaire and address
any reporting or programmatic issues. No reporting or programmatic issues were brought to staff’s
attention during the visit.
As corrective action, City Staff has already emailed the quarterly itemized cost reports dating back to
Q1, 2010 to the EECBG Contract Specialist at the DOE on November 17, 2011. In the future, when staff
submits the quarterly ARRA reports, staff will continue to email the itemized cost reports to the EECBG
Contract Specialist.
Responsible Staff: Christine Tam, Resource Planner
CITY OF PALO ALTO
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2011
171
Section III – Federal Award Findings and Questioned Costs (continued)
Reference Number: 2011-2
Federal Program Title(s): ARRA - Energy Efficiency and Conservation Block Grant
Program
Federal Catalog Number(s): 81.128
Federal Agency: Department of Energy
Pass-Through Entity: N/A – Direct Federal Fund
Federal Award Number and Year: DE-SC0002146 and 2010-11
Category of Finding: Reporting
Criteria:
As a direct recipient of federal funding, the City is required to submit various reports as required by Part
4 of the OMB A-133 Compliance Supplement and grant agreement. The required reports include SF-425
Report, DOE Quarterly Performance Reports, ARRA Section 1512 Reports, and Itemized Cost Reports.
These reports must be mathematically accurate, must agree to the underlying data and must be
summarized in accordance with the required or stated criteria and methodology. In order to mitigate risk
of non-compliance, each report should be reviewed prior to submission. As required by OMB Circular A-
133, Subpart C – Auditees, Section .300(b) – Auditee Responsibilities, the City, as the grant recipient,
should maintain internal control over Federal programs that provides reasonable assurance that the City is
managing Federal awards in compliance with laws, regulations, and the provisions of contracts or grant
agreements that could have a material effect on each of its Federal programs.
Condition:
Each of the required reports was prepared by the Resource Planner based on information summarized by
responsible personnel (Engineering, Utilities, and Accounting). The reports cover the two projects funded
by the EECBG grants – LED Street Light and the Home Energy Program. The reports are then reviewed
by the Utility Marketing Services Manager, and approved verbally most of the time. Hence, there is no
evidence that shows the Utility Marketing Services Manager is performing this review. The lack of
documentation prevents management from demonstrating that the internal control is operating as designed
to ensure the reports were prepared accurately in accordance to the program requirements. In addition,
while the Utility Marketing Service Manager is familiar with the Home Energy Program only, the
information related to LED Street Light program were not adequately reviewed.
We noted no discrepancies between the reports and its supporting documents from the samples selected
for testing.
Cause:
Since the draft reports were available electronically, the City believes that a verbal communication on the
review is adequate.
Effect:
Although we noted no exceptions during our testing, we are unable to conclude that the required reports
had been properly reviewed and authorized due to lack of documentation over the reporting process.
Questioned Costs:
There are no questioned costs.
CITY OF PALO ALTO
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2011
172
Section III – Federal Award Findings and Questioned Costs (continued)
Recommendation:
We recommend that the City assign the review process to personnel that are familiar and knowledgeable
with the projects to ensure an appropriate level of review is performed. We also recommend that the City
maintain documentation of approval for all reports to demonstrate that the review process is performed
in a timely manner. Documentation such as an email approval, signatures on the draft reports or
something similar would be acceptable to document the personnel who reviewed the report for
compliance with grant requirements.
Management’s Response and Corrective Action Plan:
Prior to submitting the reports electronically, City staff will print out a copy of the draft reports for
approval by the Utility Marketing Services Manager who oversees the Home Energy Report program and
Senior Management Analyst who verifies the expenditures in the financial system. The draft report will
also be emailed to the Supervising Electric Engineer who oversees the LED Streetlight project for
approval; the email correspondence with the Supervising Electric Engineer will be printed and filed with
the paper approval as back-up documentation of management review.
Responsible Staff: Christine Tam, Resource Planner
CITY OF PALO ALTO
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2011
173
Section III – Federal Award Findings and Questioned Costs (continued)
Reference Number: 2011-3
Federal Program Title(s): ARRA - Energy Efficiency and Conservation Block Grant
Program
Federal Catalog Number(s): 81.128
Federal Agency: Department of Energy
Pass-Through Entity: N/A – Direct Federal Fund
Federal Award Number and Year: DE-SC0002146 and 2010-2011
Category of Finding: SEFA Reporting
Criteria:
The City is required to, according to Section .300 of OMB Circular A-133, identify in its accounts, all
Federal awards received and expended and the Federal programs under which they were received as well
as prepare appropriate financial statements, including the schedule of expenditures of Federal awards
(SEFA) in accordance with Section .310. Accordingly, the SEFA shall provide total Federal awards
expended for each individual Federal program.
Condition:
During the review of the reporting for this program, 2 invoices in the total amount of $50,000 were
included in the reimbursement claims, and thus were reimbursed with federal awards. However, these 2
invoices were coded as City expenditures in the City’s general ledger system by mistake, and thus were
not included in the preliminary SEFA provided by the Administrative Services Department of the City.
Per review of the expenditure details, the related expenditures were for allowable costs under the program
guidelines incurred in the current fiscal year. Therefore, the expenditures should be reported as part of the
program expenditures on the SEFA for the current fiscal year.
Cause:
This occurred due to the City’s oversight when reviewing the financial reports submitted to the
Department of Energy and the review of the coding of the expenditures in general ledger system.
Effect:
The total program expenditure on the SEFA was materially understated by $50,000 or 9%.
Questioned Costs:
None
Recommendation:
We recommend that the City perform a review of the financial reports submitted to federal agencies and
reconcile these amounts with the general ledger to ensure that federal expenditures are accurately
reflected on the SEFA. In addition, the City should retain records that show that a secondary review on
the financial report preparation was performed.
Management Response and Corrective Action:
City staff received approval from the DOE to reallocate $50,000 of the federal award from the LED
streetlight project to the home energy report. There was an oversight to update the purchase order for the
home energy report to reflect the $50,000 change. The purchase order has been updated accordingly with
the correct account assignments to differentiate between federal and city funds. In the future, staff will
keep a hard copy of the financial reports reflecting both federal and city expenditures.
Responsible Staff: Christine Tam, Resource Planner
CITY OF PALO ALTO
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2011
174
Section III – Federal Award Findings and Questioned Costs (continued)
Reference Number: 2011-4
Federal Program Title: CDBG – Entitlement Grants Cluster
Federal Catalog Numbers: 14.218 and 14.253 (ARRA)
Federal Agency: Department of Housing and Urban Development
Pass-Through Entity: N/A
Federal Award Numbers and Year: B-10-MC-06-0020, B-09-MY-06-0020, 2010-2011
Category of Finding: Subrecipient Monitoring
Criteria:
Section 400(d)(1) of OMB Circular A-133 requires a pass-through entity to, at the time of the subawards,
identify federal awards made by informing each subrecipient of the CFDA title and number, award name
and number, award year, if the award is R&D, and name of Federal agency. When some of the
information is not available, the pass-through entity shall provide the best information available to
describe the Federal awards.
For ARRA subawards, the pass-through entity should, at the time of the subawards, identify the amount
of ARRA funds provided by the subaward and advise the subrecipient of the requirement to identify
ARRA funds in the Schedule of Expenditures of Federal Awards (SEFA) and the data collection form
(SF-SAC).
For FY2011, subrecipients expenditures were $358,946 for CFDA 14.218 and $47,049 for CFDA 14.253
(ARRA.)
Condition:
The City did not communicate the CFDA and Federal Award numbers to the subrecipients at the time of
the subawards.
Cause:
The lack of communication for the CFDA number was a finding in the FY 2010 single audit. However
the subgrants for FY 2011 had already been awarded prior to the finding. The City was not aware that
they were required to notify the subgrantees of the Federal Award number.
Effect:
The City is not in compliance with the requirements of OMB Circular A-133 section 400(d)(1).
Questioned Costs:
There are no questioned costs.
Recommendation:
We recommend that the City immediately inform the existing subrecipients about this information and
include all applicable information about the Federal funding source and document the communication at
the time of the subaward.
Management Response and Corrective Action:
The finding in the FY 2010 single audit occurred after the FY 2011 subrecipient awards and subsequent
contracts had been issued. As such, the information was not communicated to the subrecipients nor was it
included on the CDBG subrecipient contracts. For FY 2012, the CFDA title and number has been
provided on all CDBG subrecipients contracts.
Responsible Staff: Consuelo Hernandez, CDBG Coordinator
CITY OF PALO ALTO
Schedule of Findings and Questioned Costs (Continued)
For the Year Ended June 30, 2011
175
Section III – Federal Award Findings and Questioned Costs (continued)
Reference Number: 2011-5
Federal Program Title: CDBG – Entitlement Grants Cluster
Federal Catalog Numbers: 14.218 and 14.253 (ARRA)
Federal Agency: Department of Housing and Urban Development
Pass-Through Entity: N/A
Federal Award Numbers and Years: B-10-MC-06-0020, B-09-MY-06-0020, 2010-2011
Category of Finding: Suspension and Debarment
Criteria:
According to 24 CFR 84.35, grantees and subgrantees must not make any award or permit any award
(subgrant or contract) at any tier to any party that is debarred or suspended or is otherwise excluded from
or ineligible for participation in federal assistance programs. The City, as the grantee of the federal
awards, is required to perform any of the following to comply with this requirement: (1) checking the
Excluded Parties List System (EPLS), (2) collecting certification from subgrantees if allowed by this rule
or (3) adding a clause or condition to the covered transaction with the subgrantees.
Condition:
The City did not perform a debarment and suspension check on the subgrantees when awarding subgrants
in FY 2011. Six subgrantees were selected for testing, and all of them did not have documentation that
their status was verified in EPLS, although based on our testing, none of them were noted as debarred or
suspended in the EPLS.
For FY2011, subrecipients expenditures were $358,946 for CFDA 14.218 and $47,049 for CFDA 14.253
(ARRA.)
Cause:
The City was not aware that this was required for subrecipients. Thus, the City did not perform the
verification at the time of subwards.
Effect:
Without verification prior to the subawards, the City runs a risk of passing through federal grants to an
entity that was suspended or debarred. Hence, the City would not be in compliance with this requirement.
Questioned Costs:
There are no questioned costs.
Recommendation:
We recommend that the City check the Excluded Parties List System at EPLS.gov or include a clause in
the contract prior to awarding subgrants to ensure that the subgrantee is eligible for Federal Funds.
Management Response and Corrective Action:
The City was not aware that a debarment and suspension check was required for its public service
subrecipients. Historically, this has only been applied to construction activities and a debarment and
suspension check is performed for the contractor and all subcontractors prior to awarding a construction
contract.
Prior to awarding a CDBG Allocation, the City will perform a debarment and suspension check for all
subrecipients.
Responsible Staff: Consuelo Hernandez, CDBG Coordinator
CITY OF PALO ALTO
Summary Schedule of Prior Audit Findings
For the Year Ended June 30, 2011
176
Section IV – Status of Prior Year Findings and Questioned Costs
Finding #SA 2010-01 Grant Agreement Retention
Federal Program Title: ARRA – Energy Efficiency and Conservation Block Grant
Program
Federal Catalog Number: 81.128
Condition: The City staff did not have a complete copy of the grant
agreement on file. Until asked about the agreement, staff had not
recalled that a copy of the agreement had been posted on the
website.
Status of Corrective Action Plan: Corrected.
Finding #SA 2010-02 Communicating the CFDA Number to Subrecipients
Federal Program Title: CDBG – Entitlement Grants Cluster
Federal Catalog Number: 14.218 & 14.253
Condition: CFDA number was not included in the subrecipient agreements
as required by OMB Circular A-133.
Status of Corrective Action Plan: See current year finding #2011-4.
Finding #SA 2010-03 Signed Grant Agreement Retention
Federal Program Title: Economic Development Initiative, Special Project,
Neighborhood Initiative and Miscellaneous Grants
Federal Catalog Number: 14.251
Condition: The City staff did not have a signed copy of grant agreement #B-
05-SP-CA-0721 on file.
Status of Corrective Action Plan: Not applicable as the City did not have any expenditures
incurred in current year under this program.
177
…………………………………………………………………………………
The City of Palo Alto is located in northern Santa Clara County, approximately
35 miles south of the City of San Francisco and 12 miles north of the
City of San Jose. Spanish explorers named the area for the tall, twin-trunked
redwood tree they camped beneath in 1769. Palo Alto incorporated in 1894
and the State of California granted its first charter in 1909.
…………………………………………………………………………………
AMERICANS WITH DISABILITIES ACT STATEMENT
In compliance with Americans with Disabilities Act (ADA) of 1990,
this document may be provided in other accessible formats.
For information contact:
ADA Coordinator
250 Hamilton Avenue
(650) 329-2550
ADA@cityofpaloalto.org
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ATTACHMENT B
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1
ORDINANCE NO. XXXXX
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AUTHORIZING CLOSING OF THE BUDGET FOR THE
FISCAL YEAR ENDING JUNE 30, 2011
The Council of the City of Palo Alto does ordain as
follows:
SECTION 1. The Council of the City of Palo Alto finds
and determines as follows:
A. Pursuant to the provisions of Section 12 of Article
III of the Charter of the City of Palo Alto and as set
forth in Section 2.28.070 of the Palo Alto Municipal Code,
the Council on June 28, 2010 did adopt a budget for fiscal
year 2011; and
B. Fiscal year 2011 has ended and the financial
results, although subject to post-audit adjustment, are now
available and are herewith reported in summarized financial
Exhibits “1”, “2”, “3”, “4”, “5”, and “6” prepared by the
Director, Administrative Services, which are attached
hereto, and by reference made a part hereof.
SECTION 2. Pursuant to Section 2.28.080 of the Palo
Alto Municipal Code, the City Manager during fiscal year
2011 did amend the budgetary accounts of the City of Palo
Alto to reflect:
A. Additional appropriations authorized by ordinance
of the City Council.
B. Amendments to employee compensation plans adopted
by the City Council.
C. Transfers of appropriations from the contingent
account as authorized by the City Manager.
D. Redistribution of appropriations between
divisions, cost centers, and objects within various
departments as authorized by the City Manager.
E. Fiscal Year 2011 appropriations which on July 1,
2010 were encumbered by properly executed, but uncompleted,
purchase orders or contracts.
ATTACHMENT B
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2
SECTION 3. The Council hereby approves adjustments
to the fiscal year 2011 budget for Fund Balancing Entries
as shown on attached Exhibit 1.
SECTION 4. The Council hereby re-appropriates
fiscal year 2011 appropriations in certain departments and
categories, as shown on the attached Exhibit 2, which were
not encumbered by purchase order or contract, at year end
into the fiscal year 2012 budget.
SECTION 5. The fiscal year 2011 encumbered
balances for the departments and categories shown on
Exhibit 4 shall be carried forward and re-appropriated to
those same departments and categories in the fiscal year
2012 budget.
SECTION 6. The City Manager is authorized and
directed:
A. To close the fiscal year 2011 budget accounts in
all funds and departments and, as required by the Charter
of the City of Palo Alto, to make such interdepartmental
transfers in the 2011 budget as adopted or amended by
ordinance of the Council; and
B. To close various completed Capital Improvement
Projects (CIP) as shown in Exhibit 3 and move all completed
CIP to their respective reserve funds indicated in Exhibit
1; and
C. To establish reserves as shown in Exhibits 5 and 6
for all Funds as necessary to provide for:
(1) A reserve for encumbrances and re-
appropriations in the various funds, the
purpose of which is to carry forward into
the fiscal year 2012 budget and continue, in
effect, the unexpended balance of
appropriations for fiscal year 2011
departmental expenditures as shown in
Exhibits 5 and 6; and
(2) Reserves for Advances to Other Funds,
Stores Inventory, and other reserves in
accordance with ordinance and policy
guidelines as shown in Exhibit 5; and
ATTACHMENT B
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3
(3) A reserve for general contingencies of such
amount that the City Council has approved;
and
(4) Reserves for utilities plant replacement,
rate stabilization, and other reserves in
accordance with Charter and policy
guidelines as shown Exhibit 6.
D. To fund the Budget Stabilization Reserve in
accordance with the General Fund Reserves Policy adopted by
the City Council.
SECTION 7. The Utilities Administration Fund is
hereby increased by the sum of One Hundred Eighty Six
Thousand Nine Hundred Ninety Four Dollars ($186,994), as
described in Exhibit 1. This transaction will change the
balance in the Utilities Administration Fund to zero.
SECTION 8. The Electric Supply Rate Stabilization
Reserve is hereby decreased by the sum of Fifty Nine
Dollars ($59), as described in Exhibit 1. This transaction
will change the balance in the Electric Supply Rate
Stabilization Reserve to $57,091,000.
SECTION 9. The Electric Distribution Rate
Stabilization Reserve is hereby increased by the sum of
Sixty Two Thousand Eight Hundred Sixteen Dollars ($62,816)
as described in Exhibit 1. This transaction will change the
Electric Distribution Rate Stabilization Reserve to
$9,240,000.
SECTION 10. The Fiber Optics Rate Stabilization
Reserve is hereby increased by the sum of Sixty Six
Thousand Three Hundred Eighty Nine Dollars ($66,389) as
described in Exhibit 1. This transaction will change the
Fiber Optics Rate Stabilization Reserve to $10,130,000.
SECTION 11. The Gas Distribution Rate Stabilization
Reserve is hereby decreased by the sum of Two Thousand
Seven Hundred Forty Nine Dollars ($2,749) as described in
Exhibit 1. This transaction will change the Gas
Distribution Rate Stabilization Reserve to $7,399,000.
SECTION 12. The Wastewater Collection Rate
Stabilization Reserve is hereby decreased by Two Hundred
ATTACHMENT B
Page of 6
4
Eighty Nine Dollars ($289) as described in Exhibit 1. This
transaction will change the Wastewater Collection Rate
Stabilization Reserve to $5,896,000.
SECTION 13. The Water Rate Stabilization Reserve is
hereby decreased by the sum of Two Thousand Nine Hundred
Three Dollars ($2,903) as described in Exhibit 1. This
transaction will change the Water Rate Stabilization
Reserve to $10,639,000.
SECTION 14. The Refuse Fund Rate Stabilization
Reserve is hereby decreased by the sum of Six Thousand Two
Hundred Ninety Nine Dollars ($6,299) as described in
Exhibit 1. This transaction will change the Refuse Fund
Rate Stabilization Reserve to ($5,049,000).
SECTION 15. The Storm Drain Fund Rate Stabilization
Reserve is hereby decreased by the sum of Five Hundred
Twenty Six Dollars ($526) as described in Exhibit 1. This
transaction will change the Storm Drain Rate Stabilization
Reserve to $1,640,000.
SECTION 16. The Wastewater Treatment Rate
Stabilization Reserve is hereby decreased by the sum of Two
Thousand Eight Hundred Ninety Two Dollars ($2,892) as
described in Exhibit 1. This transaction will change the
Wastewater Treatment Rate Stabilization Reserve to
$3,020,000.
SECTION 17. The Community Development Block Grant
Fund is hereby increased by Ten Thousand Four Hundred Forty
Four Dollars ($10,444) as described in Exhibit 1. This
transaction will change the Community Development Block
Grant Balance to $3,510,000.
SECTION 18. The University Avenue Parking Permit
Fund is hereby increased by One Hundred Eighty Four
Thousand Eight Hundred Eight Six Dollars ($184,886) as
described in Exhibit 1. This transaction will change the
University Avenue Parking Permit Fund to $652,000.
SECTION 19. The Recovery Act JAG Fund is hereby
decreased by Five Thousand Five Hundred Dollars ($5,500) as
described in Exhibit 1. This transaction will change the
Recovery Act JAG Fund Balance to $11,000.
SECTION 20. The Capital Projects Fund
ATTACHMENT B
Page of 6
5
Infrastructure Reserve is hereby increased by Ninety Six
Thousand One Hundred Twenty Eight Dollars ($96,128) as
described in Exhibit 1. This transaction will change the
Infrastructure Reserve to $3,199,000.
SECTION 21. The Vehicle Replacement Fund is hereby
decreased by Four Hundred Eighty Nine Dollars ($489) as
described in Exhibit 1. This transaction will change the
Vehicle Replacement Fund to $21,871,000.
SECTION 22. The Technology Fund is hereby increased
by One Hundred Twenty Nine Three Hundred Thirty Six Dollars
($129,336) as described in Exhibit 1. This transaction
will change the Technology Fund Balance to $19,637,000.
SECTION 23. The Retiree Medical Fund is hereby
increased by Fifty One Thousand Nine Hundred Sixty Four
Dollars ($51,964) as described in Exhibit 1. This
transaction will change the Retiree Medical Fund Fund
Balance to $26,285,000.
SECTION 24. Upon completion of the independent audit,
detailed financial statements reflecting the changes made
by the Sections 7 through 23 of this ordinance shall be
published as part of the annual financial report of the
City as required by Article III, Section 16, of the Charter
of the City of Palo Alto and in accordance with generally
accepted accounting principles.
SECTION 25. As specified in Section 2.28.080(a) of
the Palo Alto Municipal Code, a two-thirds vote of the City
Council is required to adopt this ordinance.
SECTION 26. The Council of the City of Palo Alto
hereby finds that the enactment of this ordinance is not a
project under the California Environmental Quality Act and,
therefore, no environmental impact assessment is necessary.
SECTION 24. As provided in Section 2.04.330 of the
Palo Alto Municipal Code, this ordinance shall become
effective upon adoption.
INTRODUCED AND PASSED:
AYES:
NOES:
ATTACHMENT B
Page of 6
6
ABSTENTIONS:
ABSENT:
ATTEST:
________________________ ____________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
________________________ ____________________________
City Attorney City Manager
____________________________
Director of Administrative
Services
EXHIBIT 1
CITY OF PALO ALTO
FISCAL YEAR ENDING JUNE 30, 2011 BUDGET SUMMARY
DETAIL CHANGES TO BUDGET AMENDMENT ORDINANCE
Page 1 of 5
Fund/Dept Category Description
GENERAL FUND
various Salaries & Benefits Retiree ARC allocation (63,551)
various Salaries & Benefits Retiree medical reimbursement program 924,685
NON Salaries & Benefits Allocate attrition savings to General Fund depts 1,500,000
CMO Salaries & Benefits Allocate attrition savings to General Fund depts (50,700)
CLK Salaries & Benefits Allocate attrition savings to General Fund depts (28,950)
HR Salaries & Benefits Allocate attrition savings to General Fund depts (38,550)
AUD Salaries & Benefits Allocate attrition savings to General Fund depts (28,950)
ATT Salaries & Benefits Allocate attrition savings to General Fund depts (23,250)
ASD Salaries & Benefits Allocate attrition savings to General Fund depts (112,200)
PWD Salaries & Benefits Allocate attrition savings to General Fund depts (149,550)
PCE Salaries & Benefits Allocate attrition savings to General Fund depts (117,300)
POL Salaries & Benefits Allocate attrition savings to General Fund depts (425,100)
FIR Salaries & Benefits Allocate attrition savings to General Fund depts (334,950)
CSD Salaries & Benefits Allocate attrition savings to General Fund depts (132,750)
LIB Salaries & Benefits Allocate attrition savings to General Fund depts (57,750)
various Indirect charges Allocate print charges to General Fund depts 60,160
109 Indirect charges Allocate print charges to General Fund depts 154
191 Indirect charges Allocate print charges to General Fund depts 258
AUD Various Additional appropriations from other departments 50,000
FIR Various Additional appropriations from other departments 844,820
MGR Various Additional appropriations from other departments 64,000
POL Various Additional appropriations from other departments 440,000
ASD Various Allocate savings to other departments (210,349)
ATT Various Allocate savings to other departments (160,685)
CLK Various Allocate savings to other departments (68,055)
COU Various Allocate savings to other departments (24,480)
CSD Various Allocate savings to other departments (55,000)
HRD Various Allocate savings to other departments (182,050)
LIB Various Allocate savings to other departments (114,901)
PCE Various Allocate savings to other departments (250,820)
PWD Various Allocate savings to other departments (332,480)
TOTAL - EXPENSE 921,707
FUND BALANCING ENTRY
Budget Stabilization Reserve (921,707)$
12/8/2011
EXHIBIT 1
CITY OF PALO ALTO
FISCAL YEAR ENDING JUNE 30, 2011 BUDGET SUMMARY
DETAIL CHANGES TO BUDGET AMENDMENT ORDINANCE
Page 2 of 5
ENTERPRISE FUNDS
Utilities Administration Fund
UTL Salaries & Benefits Retiree ARC allocation (200,039)
UTL Indirect costs Indirect costs allocation for printing services 13,045
Total Utilities Administration Fund (186,994)
FUND BALANCING ENTRY
Increase to fund balance 186,994
Electric Fund
UTL Salaries & Benefits Retiree ARC allocation (162,440)
UTL Salaries & Benefits Retiree medical reimbursement program 162,440
UTL Indirect costs Indirect costs allocation for printing services 4,748
UTL CIP Completed and closed projects in FY 2011 (67,505)
Total Electric Fund (62,757)
FUND BALANCING ENTRY
Decrease to RSR - Electric Supply (59)
Increase to RSR - Electric Distribution 62,816
Fiber Optics Fund
UTL Salaries & Benefits Retiree ARC allocation (66,797)
UTL Indirect costs Indirect costs allocation for printing services 408
Total Fiber Optics Fund (66,389)
FUND BALANCING ENTRY
Increase to RSR - Fiber Optics Fund 66,389
Gas Fund
UTL Salaries & Benefits Retiree ARC allocation (76,161)
UTL Salaries & Benefits Retiree medical reimbursement program 76,161
UTL Indirect costs Indirect costs allocation for printing services 2,749
Total Gas Fund 2,749
FUND BALANCING ENTRY
Decrease to RSR - Gas Distribution (2,749)
12/8/2011
EXHIBIT 1
CITY OF PALO ALTO
FISCAL YEAR ENDING JUNE 30, 2011 BUDGET SUMMARY
DETAIL CHANGES TO BUDGET AMENDMENT ORDINANCE
Page 3 of 5
Wastewater Collection Fund
UTL Salaries & Benefits Retiree ARC allocation (37,711)
UTL Salaries & Benefits Retiree medical reimbursement program 37,711
UTL Indirect costs Indirect costs allocation for printing services 289
Total Wastewater Collection Fund 289
FUND BALANCING ENTRY
Decrease to RSR - Wastewater Collection Fund (289)
Water Fund
UTL Indirect costs Indirect costs allocation for printing services 2,903
Total Water Fund 2,903
FUND BALANCING ENTRY
Decrease to RSR - Water Fund (2,903)
Refuse Fund
PWD Salaries & Benefits Retiree ARC allocation (47,564)
PWD Salaries & Benefits Retiree medical reimbursement program 47,564
PWD Indirect costs Indirect costs allocation for printing services 6,299
Total Refuse Fund 6,299
FUND BALANCING ENTRY
Decrease to RSR - Refuse (6,299)
Storm Drain Fund
PWD Salaries & Benefits Retiree ARC allocation (14,771)
PWD Salaries & Benefits Retiree medical reimbursement program 14,771
PWD Indirect costs Indirect costs allocation for printing services 526
Total Storm Drain Fund 526
FUND BALANCING ENTRY
Decrease to RSR - Storm Drain Fund (526)
Wastewater Treatment Fund
PWD Salaries & Benefits Retiree ARC allocation (100,543)
PWD Salaries & Benefits Retiree medical reimbursement program 100,543
PWD Indirect costs Indirect costs allocation for printing services 2,892
Total Wastewater Treatment Fund 2,892
FUND BALANCING ENTRY
Decrease to RSR - Wastewater Treatment Fund (2,892)
12/8/2011
EXHIBIT 1
CITY OF PALO ALTO
FISCAL YEAR ENDING JUNE 30, 2011 BUDGET SUMMARY
DETAIL CHANGES TO BUDGET AMENDMENT ORDINANCE
Page 4 of 5
OTHER FUNDS
Community Development Block Grant
232 Salaries & Benefits Retiree ARC allocation (10,444)
Total Community Development Block Grant (10,444)
FUND BALANCING ENTRY
Increase to Fund Balance 10,444
University Avenue Parking Permit Fund
236 Revenue Administrative citation and permit revenue 201,821
236 Salary & Benefits Hourly salary 11,222
236 Contract Services Facilities repair 5,713
Total University Avenue Parking Permit Fund 184,886
FUND BALANCING ENTRY
Increase to Fund Balance 184,886
Recovery Act - JAG
251 Contract Services Instruction and training expense 5,500
Total Recovery Act - JAG 5,500
FUND BALANCING ENTRY
Decrease to Fund Balance (5,500)
Capital Projects Fund
471 Indirect charges Printing charges to Capital Improvement 66
471 Salaries & Benefits Retiree ARC allocation (96,194)
Total Capital Projects Fund (96,128)
FUND BALANCING ENTRY
Increase to Fund Balance 96,128
Vehicle Replacement Fund
681 Salaries & Benefits Retiree ARC allocation (20,764)
681 Salaries & Benefits Retiree medical reimbursement program 20,764
681 Indirect charges Printing charges to Vehicle Replacement Fund 489
Total Vehicle Replacement Fund 489
FUND BALANCING ENTRY
Decrease to Fund Balance (489)
12/8/2011
EXHIBIT 1
CITY OF PALO ALTO
FISCAL YEAR ENDING JUNE 30, 2011 BUDGET SUMMARY
DETAIL CHANGES TO BUDGET AMENDMENT ORDINANCE
Page 5 of 5
Technology Fund
682 Indirect charges Printing charges to Tech Fund 464
682 Salaries & Benefits Retiree ARC allocation (49,143)
682 Salaries & Benefits Retiree medical reimbursement program 49,143
682 CIP Completed and closed projects in FY 2011 (129,800)
Total Technology Fund (129,336)
FUND BALANCING ENTRY
Increase to Fund Balance 129,336
Print and Mail Fund
683 Reimbursements Additional department charges 95,450
683 Salaries & Benefits Retiree ARC allocation (1,516)
683 Salaries & Benefits Retiree medical reimbursement program 1,516
683 Contract Svcs Additional contract expense 95,450
Total Print and Mail Fund -
FUND BALANCING ENTRY
N/A -
Retiree Medical Fund
694 Miscellaneous Department Charges - Retiree ARC 913,099
694 Salaries & Benefits Retiree ARC department charges 913,098
694 Salaries & Benefits Retiree ARC & reimbursement program 51,965
Total Print and Mail Fund (51,964)
FUND BALANCING ENTRY
Increase to Fund Balance 51,964$
12/8/2011
Page 1 of 3
FY 2011 REAPPROPRIATION REQUESTS
SUMMARY OF REQUESTS
Total Requests Total Recommended
GENERAL FUND $483,290 $483,290
ENTERPRISE FUND $1,400,221 $1,400,221
INTERNAL SERVICE FUND $0 $0
TOTAL $1,883,511 $1,883,511
$
AMOUNT INTENDED USE
COMMENTS/REASONS
FOR NOT COMPLETING IN FY 2011 STATUS
City Manager’s Office
$68,890 Rail Project This reappropriation is being requested for costs
related to the Rail Project which is a multi-year
project without an identified source of funding.
Council approved the appropriation of funds from
the FY 2011 Council contingency. $68,890
represents the balance remaining from those
funds.
Recommended $68,890.There is
sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
$94,000 Various projects See attached (Attachment 2).Recommended $94,000. There is
sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
Planning Department
$221,800 Development Center
Blueprint Process
This reappropriation is being requested for
contract services related to the Development
Center Blueprint Process, a multi-year project. In
FY 2011, CMR1442 increased the budget for the
Blueprint Process by $115,000 for contract staff
and $113,233 for salaries and benefits. A
delayed start to the contracting effort resulted in
remaining budget that will be needed
immediately and was not included in the FY2012
budget proposal.
Recommended $221,800.There
is sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
Administrative Services
$68,600 Fee Study This reappropriation is being requested to hire a
consultant to update the cost allocation plan,
municipal fee schedule, and development impact
fees. Development of the RFP was delayed due to
staffing shortages. The RFP is now completed
and will be released early in Fiscal Year 2012.
Recommended $68,600. There is
sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
Fire Department
Exhibit 2
Page 2 of 3
$
AMOUNT INTENDED USE
COMMENTS/REASONS
FOR NOT COMPLETING IN FY 2011 STATUS
$30,000 Fire Chief Recruitment This reappropriation is being requested for the
funding of the recruitment of a Fire Chief.
CMR1442 added a budget of $50,000 for this
effort. The bid process is not yet complete and a
specific contract award timeframe has not yet
been established. Concurrent experience with
other recruitment indicates that $30,000 is more
than adequate for this activity.
Recommended $30,000.There is
sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
Utilities Department
$100,000 Organizational
Assessment
This reappropriation is being requested for the
funding of an organizational assessment to review
the services Utilities delivers and how to best
deliver these services. It will include evaluating
utility industry trends and challenges. This
project was funded mid-year 2011. Utilities is
coordinating the drafting of the scope and does
not have $100,000 in its budget for FY2012 to
cover this expense if not reapprorpriated..
Recommended $100,000.There
is sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
Utilities Department- Electric Fund
$250,000 Electric Efficiency
Financing Program
This reappropriation is being requested to fund
rebates for customers who complete electric
energy efficiency projects. There are many
projects in process, but they did not complete by
June 30, 2011. Recently updated Council goals
are expected to increase the number of efficiency
rebates in FY 2012. These energy efficiency
projects support Council’s environmental
sustainability objectives.
Recommended $250,000.There
is sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
Utilities Department – Gas Fund
$230,000 Energy Efficiency
Projects
This reappropriation is being requested to fund
rebates for customers who complete energy
efficiency projects related to gas. Utilities expects
to work with new vendors to increase the number
of rebates issued. Funds are expected to be
exhausted in FY 2012.
Recommended $230,000.There
is sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
$62,000 Energy Risk
Management
This reappropriation is being requested to
contract for energy risk management services.
These services had been part of the Energy Risk
Management position. Duties will be undertaken
by contractor, alongside the .5 FTE Senior
Financial Analyst in the FY2012 budget, saving
the City an estimated $50,000 to $100,000 per
year.
Recommended $62,000. There is
sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
Page 3 of 3
Public Works Department- Storm Drainage Fund
$758,221 Storm Drain Innovative
Improvements
This reappropriation is being requested for
innovative storm drain improvements. These
funds must be reappropriated because they were
specifically earmarked for innovative storm drain
improvements per the 2005 Storm Drainage
ballot measure approved by Palo Alto property
owners. These funds have been budgeted for a
stormwater rebate program that offers incentives
to residents and businesses to reduce stormwater
runoff, but the rebate program has not generated
sufficient demand to exhaust funds. Staff has
proposed to utilize the unused funds to fund the
Southgate Neighborhood Storm Drain
Improvements CIP project, which may include
permeable pavement, infiltration devices, and/or
an underground cistern that could supplement
irrigation water demands for Peers Park.
Recommended $758,221.There
is sufficient balance in the Fiscal
Year 2011 budget that can be
reappropriated.
PROJECT NUMBER PROJECT TITLE
PROJECT
BALANCE
General Fund
CC-10000 Replacement of Cubberley Gym B Bleachers 0
PE-04014 Animal Shelter Expansion & Renovation 0
PE-07007 Cubberley Turf Renovation 0
PE-08005 Municipal Service Center Resurfacing 0
PE-10006 Bridge Rail, Abutment, and Deck Repair 0
PL-06001 Adobe Creek Bicycle Bridge Replacement 0
Total $0
Internal Service Fund
TE-02016 Enterprise Resourse Planning 102,526
TE-06002 9-1-1 Emergency Phone System Upgrade 27,274
TE-07001* Emergency Notification System 0
TE-07003 Bill and Payment Processing 0
Total $129,800
Electric Fund
EL-11005 Rebuild UG Dist 22 67,505
Total $67,505
Gas Fund
GS-00011* Compress Natural Gas 0
GS-03010* CNG Seq Fuel System 0
Total $0
Wastewater Collection Fund
WC-03003* WC Reh/Aug. Prj 16 0
Total $0
Wastewater Treatment Fund
WQ-04010* Replacement of Existing Reclaimed Water Pipes 0
Total $0
* Projects are closed. No expenditures were incurred in the current fiscal year.
Exhibit 3
CAPITAL IMPROVEMENT PROGRAM PROJECTS
Completed and Closed in FY 2011
City of Palo Alto
1
EXHIBIT 4
GENERAL FUND SUMMARY ($000s)
FY 2011 FY 2011 FY 2011 FY 2011 FY 2011 FY 2011 FY 2011
Adopted Adjusted CAFR Basis Allocated Encum+ Budgetary Variance
Budget Budget Rev/Exp Charges Reapprop Rev/Exp Adj Budget
Revenues
Sales Taxes 18,218$ 19,507$ 20,746$-$ n/a 20,746$ 1,239$
Property Taxes 25,907 25,323 25,688 - n/a 25,688 365
Transient Occupancy Tax 7,021 7,400 8,082 - n/a 8,082 682
Documentary Tranfer Tax 3,613 4,002 5,167 - n/a 5,167 1,165
Utility User Tax 11,429 10,824 10,851 - n/a 10,851 27
Other Taxes and Fines 2,330 2,137 2,129 - n/a 2,129 (8)
Charges for Services 20,008 20,924 22,390 - n/a 22,390 1,466
Permits and Licenses 4,593 5,102 5,058 - n/a 5,058 (44)
Return on Investment 1,646 1,337 565 - n/a 565 (772)
Rental Income 13,716 13,776 14,264 - n/a 14,264 488
From Other Agencies 155 221 295 - n/a 295 74
Charges to Other Funds 10,622 10,681 - 11,211 n/a 11,211 530
Other Revenues 1,490 1,584 2,117 - n/a 2,117 533
Total Revenues 120,748 122,818 117,352 11,211 n/a 128,563 5,745
Add: Operating Transfers In 18,684 18,677 17,932 n/a 17,932 (745)
Prior Year Encum & Reapprop -3,963 - 3,963 n/a 3,963 -
Total Source of Funds 139,432 145,458 135,284 15,174 n/a 150,458 5,000
Expenditures
City Attorney 2,369 2,812 2,241 98 469 2,808 4
City Auditor 982 1,081 905 41 135 1,081 -
City Clerk 1,093 1,270 1,159 86 12 1,257 13
City Council 142 193 183 - 9 192 1
City Manager 2,178 2,455 2,180 119 157 2,456 (1)
Administrative Services 6,293 6,456 5,652 614 180 6,446 10
Community Services 20,032 20,530 15,885 4,196 437 20,518 12
Fire 27,007 29,014 26,127 2,573 312 29,012 2
Human Resources 2,817 2,677 2,361 211 94 2,666 11
Library 6,609 6,733 5,630 879 213 6,722 11
Planning 9,320 10,427 8,783 772 861 10,416 11
Police 30,579 31,288 27,959 3,052 275 31,286 2
Public Works 13,084 13,846 10,040 3,072 730 13,842 4
Non-Departmental/School Site 5,970 6,899 7,955 - 3 7,958 (1,059)
Total Expenditures 128,475 135,681 117,060 15,713 3,887 136,660 (979)
Add: Operating Transfers Out 10,924 11,224 11,000 - - 11,000 224
Total Use of Funds 139,399 146,905 128,060 15,713 3,887 147,660 (755)
Excess (deficiency) of revenues
over (under) expenditures,
budgetary basis 33$ (1,447)$ 7,224$ (539)$ (3,887)$ 2,798 4,245$
CAFR Reconciliation:Current year encumbrances/reappropriations 3,887
Prior year encumbrances/reappropriations (3,963)
CAFR Excess of revenues over expenditures, GAAP basis 2,722$
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Water sales 25,841 28,801 26,115 (2,686)
Other revenues 3,113 2,572 2,831 259
Bond Proceeds 34,958 - - -
Bonded Reappropriations/Enc - 28,853 28,853 -
Restricted Bond Proceeds - 2,358 2,358 -
Reappropriations / Enc 20,113 10,639 10,639 -
TOTAL REVENUE 84,025 73,223 70,796 (2,427)
EXPENSES
Purchases 9,061 12,845 10,678 2,167
Other Expenses 13,810 13,194 14,398 (1,204)
TOTAL OPERATING EXPENSES 22,871 26,039 25,076 963
Capital Expenses 49,155 48,881 50,917 (2,036)
Principal Payments 362 1,201 1,201 -
TOTAL EXPENSES 72,388 76,121 77,194 (1,073)
TO/(FROM) RESERVES 11,637 (2,898) (6,398) (3,500)
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Electric retail sales 111,140 111,380 109,950 (1,430)
Electric wholesale sales - - - -
Other revenues 19,535 17,351 15,915 (1,436)
Bond Proceeds - - - -
Reappropriations / Enc 10,900 13,393 13,393 -
TOTAL REVENUE 141,575 142,124 139,258 (2,866)
EXPENSES
Purchases 68,713 74,130 61,247 12,883
NCPA & TANC Debt Svc 7,819 8,849 7,243 1,606
Other Expenses 44,870 47,069 42,570 4,499
TOTAL OPERATING EXPENSES 121,402 130,048 111,060 18,988
Capital Expenses 18,550 19,391 21,020 (1,629)
Principal Payments 100 100 100 -
TOTAL EXPENSES 140,052 149,539 132,180 17,359
TO/(FROM) RESERVES 1,523 (7,415) 7,078 14,493
EXHIBIT 5
ELECTRIC FUND
WATER FUND ($000)
EXHIBIT 5
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Revenues 3,593 3,312 3,660 348
Reappropriations / Enc 607 921 921 -
TOTAL REVENUE 4,200 4,233 4,581 348
EXPENSES
Operating Expenses 1,510 1,909 1,575 334
TOTAL OPERATING EXPENSES 1,510 1,909 1,575 334
Capital Expenses 856 1,119 1,146 (27)
TOTAL EXPENSES 2,366 3,028 2,721 307
TO/(FROM) RESERVES 1,834 1,205 1,860 655
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Gas retail sales 43,502 43,993 42,855 (1,138)
Gas wholesale sales - - - -
Other revenues 3,248 7,694 7,586 (108)
Reappropriations / Enc 12,063 10,042 10,042 -
TOTAL REVENUE 58,813 61,729 60,483 (1,246)
EXPENSES
Purchases 22,529 24,619 21,464 3,155
Other Expenses 16,191 23,809 22,778 1,031
TOTAL OPERATING EXPENSES 38,720 48,428 44,242 4,186
Capital Expenses 14,284 18,115 18,142 (27)
Principal Payments 443 459 459 -
TOTAL EXPENSES 53,447 67,002 62,843 4,159
TO/(FROM) RESERVES 5,366 (5,273) (2,360) 2,913
FIBER OPTICS FUND
GAS FUND
EXHIBIT 5
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Revenues 15,914 15,999 16,129 130
Reappropriations / Enc 7,122 8,789 8,789 -
TOTAL REVENUE 23,036 24,788 24,918 130
EXPENSES
Sewer Treatment Exp. 6,519 7,499 7,414 85
Operating Expenses 4,244 5,305 4,898 407
TOTAL OPERATING EXPENSES 10,763 12,804 12,312 492
Capital Expenses 11,441 12,823 13,417 (594)
Principal Payments 61 65 65 -
TOTAL EXPENSES 22,265 25,692 25,794 (102)
TO/(FROM) RESERVES 771 (904) (876) 28
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Operating Revenues 17,550 20,590 20,932 342
Restricted Bond Proceeds - - - -
Loan Proceeds 4,528 3,972 3,972 -
Reappropriations / Enc 26,298 22,043 22,043 -
Bonded Reappro/Encum - - - -
TOTAL REVENUE 48,376 46,605 46,947 342
EXPENSES
Operating Expenses 18,122 19,955 18,385 1,570
TOTAL OPERATING EXPENSES 18,122 19,955 18,385 1,570
Capital Expenses 26,654 12,835 12,610 225
Principal Payments 384 400 400 -
TOTAL EXPENSES 45,160 33,190 31,395 1,795
TO/(FROM) RESERVES 3,216 13,415 15,552 2,137
WASTEWATER TREATMENT FUND
WASTEWATER COLLECTION FUND
EXHIBIT 5
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Revenues 29,163 33,696 31,605 (2,091)
Reappropriations / Enc 3,021 2,836 2,836 -
TOTAL REVENUE 32,184 36,532 34,441 (2,091)
EXPENSES
Payments to GreenWaste 12,478 13,205 12,529 676
Other Expenses 19,582 20,488 18,940 1,548
TOTAL OPERATING EXPENSES 32,060 33,693 31,469 2,224
Capital Expenses 2,207 3,669 3,079 590
TOTAL EXPENSES 34,267 37,362 34,548 2,814
TO/(FROM) RESERVES (2,083) (830) (107) 723
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Revenues 5,815 6,058 6,286 228
Reappropriations / Enc 2,305 2,408 2,408 -
TOTAL REVENUE 8,120 8,466 8,694 228
EXPENSES
Operating Expenses 3,292 3,799 3,349 450
TOTAL OPERATING EXPENSES 3,292 3,799 3,349 450
Capital Expenses 3,039 4,278 3,561 717
Principal Payments 405 430 430 -
TOTAL EXPENSES 6,736 8,507 7,340 1,167
TO/(FROM) RESERVES 1,384 (41) 1,354 1,395
STORM DRAINAGE FUND
REFUSE FUND
EXHIBIT 5
FY 2010 FY 2011 FY 2011 $ Variance
Actual/Enc Adjusted Actual/Enc Favorable
Reapprop Budget Reapprop (Unfavor.)
REVENUE
Revenues - - - -
Reappropriations / Enc - - - -
TOTAL REVENUE - - - -
EXPENSES
Operating Expenses - - 118 (118)
TOTAL OPERATING EXPENSES - - 118 (118)
Capital Expenses - - - -
Principal Payments - - - -
TOTAL EXPENSES - - 118 (118)
TO/(FROM) RESERVES - - (118) (118)
AIRPORT FUND
FISCAL YEAR 2011 Water Electric Fiber Optics Gas WWC WWT Refuse Storm Drain Airport Total
Beginning Reserves $18,037 $119,991 $9,270 $19,548 $7,772 ($10,226) ($4,277) $286 $0 $160,401
To (From) Reserves (6,398) 7,078 1,860 (2,360) (876) 15,552 (107) 1,354 (118) 15,985
Ending Reserves 11,639 127,069 11,130 17,188 6,896 5,326 (4,384) 1,640 (118) 176,386
Adj Budgeted Reserves 15,170 119,711 8,256 19,599 7,817 (36) 1,902 125 0 172,544
% of Budgeted Reserves 77% 106% 135%88% 88% -14794% -230% 1312% 102%
FISCAL YEAR 2011 Water Electric Fiber Optics Gas WWC WWT Refuse Storm Drain Airport Total
Rate Stabilization
General RSR $10,639 $10,130 $5,896 $3,020 ($5,049) $1,640 ($118) $26,158
Supply RSR 57,091 8,789 $65,880
Distribution RSR 9,240 7,399 $16,639
Total RSR 10,639 66,331 10,130 16,188 5,896 3,020 (5,049) 1,640 (118) $108,677
Emergency Plant Replace 1,000 1,000 1,000 1,000 1,000 1,747 $6,747
Calaveras 55,558 $55,558
Underground Loan 736 $736
Notes and Loans 559 $559
Landfill Corrective Action 665 $665
Shasta rewind Loan $0
Central Valley Project 305 $305
Public Benefit Program 3,139 $3,139
Ending Reserves 11,639 127,069 11,130 17,188 6,896 5,326 (4,384) 1,640 (118) 176,386
FISCAL YEAR 2011 Water Electric Fiber Optics Gas WWC WWT Refuse Storm Drain Airport Total
Beginning RSR $17,037 $54,339 $8,270 $18,548 $6,772 ($12,386) ($4,935) $286 $0 $87,931
To(from) RSR (6,398) 11,992 1,860 (2,360) (876) 15,406 (114) 1,354 (118) 20,746
Ending RSR 10,639 66,331 10,130 16,188 5,896 3,020 (5,049) 1,640 (118) 108,677
RSR Minimum 4,300 38,371 609 9,379 2,156 2,990 2,614 N/A N/A 60,419
RSR Maximum 8,600 76,741 1,522 18,759 4,311 5,980 5,228 N/A N/A 121,141
RSR % of Maximum 124% 86% 666% 86% 137% 51% -97% N/A N/A 90%
EXHIBIT 6
RATE STABILIZATION RESERVE
RESERVE SUMMARY ($000)
RESERVE DETAIL
Page 1 of 1 12/2/2011
City of Palo Alto (ID # 2104)
Finance Committee Staff Report
Report Type:Meeting Date: 10/18/2011
October 18, 2011 Page 1 of 4
(ID # 2104)
Summary Title: Budget Update 2012
Title: Fiscal Year 2012 Budget Update
From:City Manager
Lead Department: Administrative Services
Recommendation
Staff recommends that the Finance Committee provide feedback or direction on how to
address the $4.3 million public safety labor group compensation concession placeholder in the
Fiscal Year 2012 Adopted Budget.
Executive Summary
Staff is returning with information as directed by the Finance Committee during the FY2012
budget hearings to provide an update on the $4.3 placeholder for the public safety labor group
compensation concession.
Background
The Fiscal Year 2012 (FY2012) Adopted Budget included a $4.3 million budget-reducing
placeholder for expected cost savings from negotiations with the City’s four public safety
unions. This placeholder helped close a projected $3.2 million gap in the General Fund as well
as provide funding for additional pension and healthcare cost increases anticipated in FY2013.
When the Finance Committee recommended approval of the FY2012 Proposed Budget, in May,
Committee members expressed uncertainty about the likelihood of obtaining the necessary
budget savings to achieve $4.3 million. The Committee directed staff to return early in the
fiscal year to update the Committee on the status of achieving the $4.3 million in savings.
Council will consider a new memorandum of agreement (MOA) with the International
Association of Fire Fighters (IAFF),Local 1319,on October 17. If Council approves the MOA it
will provide $1.1 million in salary and benefit cost savings in FY2012. This would reduce the
amount needed to close the placeholder to $3.3 million.
Discussion
FY2011 Budget Update
Staff is in the process of finalizing the year-end financial statements for FY2011. The City’s
financial statements and external audit results will be included in the comprehensive annual
financial report (CAFR), which staff will present to the Finance Committee in December.
October 18, 2011 Page 2 of 4
(ID # 2104)
Although the financial statements are not finalized, staff has preliminary numbers that can be
shared at this time. Fiscal Year 2011 revenues came in higher than adjusted budget, driven by a
$0.6 million increase in the transient occupancy tax (hotel tax) that has improved as business
travel has increased some in the local area. Documentary transfer taxes (tax on real estate
transactions) are also a key driver and revenue in this category will be up $1.2 million compared
to the FY2011 adjusted budget. Modest improvements in the local economy in FY2011 resulted
in increased sales tax revenue of $1.2 million compared to FY2011 adjusted budget. Staff is
monitoring these revenues in FY2012 and may recommend changes at midyear, if warranted.
Mainly due to these results, the balance in the General Fund Budget Stabilization Reserve (BSR)
is expected to increase compared to what was presented in the FY2011 mid-year adjusted
budget (report ID#1442) and in the third quarter financial report. At the time of the FY2011
midyear, in March, 2011, staff showed a negative impact to the BSR due to midyear budget
changes that included increases to department budgets. The projected BSR balance at the
FY2011 midyear point was $26.9 million or 19.3% of FY2011 adopted expenditures.
The FY2011 year end results will change the FY2011 BSR ending balance by transferring $2.7
million to the BSR. The resulting BSR balance is estimated to be approximately $30 million or
approximately 21 percent of adopted expenditures.
FY2012 Budget Update
During the review of the FY2012 Proposed Budget the Finance Committee asked staff to
provide alternatives for reducing the public safety budget in the event that staff is unable to
reach agreement with the public safety unions to achieve savings in the amount of $4.3 million.
To do this staff first proposes to defer the $1.1 million reserved for anticipated pension and
healthcare costs in 2013, thus freeing up funds in FY2012 and reducing the placeholder to $3.2
million. If the $1.1 million in concessions from IAFF is approved, the gap is further reduced to
$2.2 million. Since the BSR would have an increase of $2.7 million from FY2011 those funds
could be used to close the budget gap. Staff will continue negotiating with the other safety
labor groups to achieve structural changes to their compensation that will help close this year’s
gap and the significant FY2013 projected gap. As the Finance Committee’s discussion on the
new figures for our retiree medical costs unfunded liability will show, the City faces new,
increased costs in FY 2012 in that area.
As outlined in Attachment A, in the Police Department, staff identified an alternative that
would eliminate 11 police officers to reach savings of $2.0 million. In the Fire Department, staff
identified a reduction of one Engine Company combined with either brown-outs or the
elimination of one Rescue Company. Either combination would provide an estimated $2.3
million in cost savings. Together, the Police and Fire department reductions would result in an
estimated $4.3 million savings necessary to achieve the place holder amount and the additional
amount for pension and healthcare costs in FY2013. As these reductions could have an impact
on service delivery, staff is also pursuing labor concessions through contract negotiations with
October 18, 2011 Page 3 of 4
(ID # 2104)
the four public safety unions. It is the City Manager’s recommendation to not proceed with
these cost saving reductions at this time. These service level reduction options could still be
considered depending on how negotiations proceed.
Public Safety Negotiations Update
Staff has been actively pursuing contract negotiations with all four public safety unions. Since
negotiations with the public safety unions have not resulted in an agreement as of September,
it is unlikely that the City will realize the full $4.3 million placeholder included in the FY2012
budget. A new MOA between the City and IAFF, is scheduled to be considered by the City
Council on October 17. The MOA, if approved by Council, will provide an estimated $1.1 million
in salary and benefit cost savings in FY2012.
Three alternatives are presented for Finance Committee consideration to close the FY 2012
projected budget gap:
1)Eliminate the set aside for FY2013 pension and healthcare increases and transfer BSR
balance to cover the gap as show in Table 1 below.
This is staff’s recommendation based on the upcoming availability of funds prior to the
FY2012 midyear budget. The amount transferred will be $2.1 million if the Council
approves the new MOA for IAFF.
2)Monitor until midyear and propose changes at that time
This is a viable option that may reduce the transfer from the BSR if certain revenues
come in higher at midyear than expected.
3)Budget cuts in public safety as outlined in Attachment A
This option would take time to implement, given the current period of the fiscal year,
and thus would be difficult to achieve the full $4.3m in FY2012. A potential draw on the
BSR could be anticipated depending on the timing of implementation.
Table 1:
Staff Recommendation: Scenario if Council votes on new MOA with
IAFF
($millions)
Scenario: new MOA with IAFF
FY2012 Placeholder $4.30
Eliminate set aside for FY2013 pension and healthcare increases ($1.10)
New MOA with IAFF (pending)($1.10)
Revised FY2012 Placeholder $2.10
October 18, 2011 Page 4 of 4
(ID # 2104)
Transfer from BSR $2.10
Timeline
Staff is recommending that the Finance Committee provide direction that would allow staff to
take action at the midyear timefrem at the latest.
Resource Impact
As shown in Table 1 above staff recommends a transfer from the BSR and elimination of the set
asside for anticipated FY2013 pension and healthcare increases to close the $4.3 million
placeholder. The transfer from the BSR would be $3.2 million or $2.1 million depending on the
outcome of Council’s vote on the MOA. This would result in a BSR balance of approximately
$26.8 million or 18.4 percent of adopted budget total expenditures should the transfer be $3.2
million. If the transfer is $2.1 million the BSR balance would be approximately $27.9 million or
19.1 percent of adopted budget total expenditures. These figures may change as the year-end
FY2011 financials are finalized in December.
Policy Implications
Staff’s recommendation does no impact existing Council Policy.
Attachments:
·Attachment A: Public Safety Cut Alternatives Memo from Finance Committee Meeting May
20, 2011 (PDF)
Prepared By:David Ramberg, Assistant Director
Department Head:Lalo Perez, Director
City Manager Approval: James Keene, City Manager
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TO:
DATE:
SUBJECT:
CITY OF PALO ALTO
MEMORANDUM
HONORABLE FINANCE COMMITTEE
May 20,2011
lb
• Follow-up on Preliminary Reductions to Public Safety if
Compensation Concessions are not Materialized
• Office of Emergency Services Recommendations
Attached are memos for the May 24,2011 Finance Committee Meeting.
\~U)fu~ ~LA ANTIL . J.rt..J.YL • .J'-J
Assistant City Manager
. TO:
FROM:
DATE:
SUBJECT:
Background
CITY OF PALO ALTO
MEMORANDUM
James Keene, City Manager
Pamela Antil, Assistant City Manager
Lalo Perez, Director of Administrative Services
Dennis Burns, Interim Director of Public Safety
May 16,2011
FY 2012 Police Department Alternative Reduction Proposal
The ·2012 General Fund budget balancing proposal to the Finance Committee relies on
$4.3 million in concessions from Police and Fire unions which are still being negotiated
(approximately $2M from Police and $2.3M from Fire). The Finance Committee
requested information related to other cuts that could be rilade if these concessions are not
agreed upon by mid-year of FY 2012 to cover the ensuing $4.3 million gap. Although I
remain confident that concessions will be made by both unions, the following memo was
prepared to address the budget shortfall in the Police Department if they are not made in a
timely manner.
It must be noted that these options were developed fairly quickly and, as a result, should
the Finance Committee and full City Council wish to proceed with such changes, staff
would request additional time to conduct a more detailed analysis to determine final cost
savings; possible impacts related to changes in shift staffmg; and impact on service levels
in the community. Although we cannot predict to what extent, we assume that any
changes to staffing will impact service levels to the community in some way (e.g.,
response times, community outreach, enforcement activities, etc.). This would need to
be addressed through a restructuring of the department to mitigate any negative
outcomes. . Concessions from ihe employee groups are clearly preferable to undertaking
such changes immediately ..
Analysis
The Police Department command staff met on numerous occasions to examine how we
might achieve this $2.0 million reduction through the elimination ofpositions,
reorganization of the Department and/or contracting services currently provided in-house.
This exercise proved challenging as the Police Department has already eliminated 31
positions (18 non-sworn and 13 sworn positions) since FY 2002/03. Further
complicating our analysis is the fact that the Police Department has a number of positions
that are difficult to eliminate as they generate revenue or provide services to a regional
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partner pursuant to a contract (e,g., dispatch and animal services). These are typically the
services that other communities have selected to outsource to another community or
private vendor. To outsource these services in Palo Alto would necessitate a deeper
. analysis/formal study to determine if they could be done more efficiently while still
generating the same or higher level of service and revenues.
Reductions in Sttifj and Operations:
To meet the $2.0 million reduction objective the Police Department would eliminate 11
Police Officer positions, assuntip.g a fully loaded salarylbenefits cost of approximately
$183,500/swom officer position. Eliminating 11 positions would reduce our authorized
strength from the current 91 sworn officer positions to 80 sworn officer positions. 11
sworn positions would be equivalent to eliminating the entire Investigative Services
Division (Detectives) or approximately 25% of the officers assigned to the Field Services
Division (patrol). Most likely a reduction this significant would be accomplished by
eliminating a combination of patrol officer positions, detective positions and traffic
officer positions. Any significant reduction in police officers would necessitate a major
restructuring of the Patrol and Investigations Divisions. In addition, some changes may
trigger meet and confer requirements under the union agreement.
The Police Department has made every effort to identify reductions that did not severely
impact the current level of service to meet the $2 million objective and without bringing
back the recommendations from the last fiscal year which were rejected by the Finance
Committee and City Council (e.g., elimination of traffic unit, crossing guards, etc.).
Unfortunately, we are unable to suggest new cuts that do not impact patrol, traffic and
investigative services in some way.
I look forward to working with you and your staff to answer any questions about the
Police Department's staff reduction options.
Respectfully submitted,
Dennis Burns
Date: May 19, 2011
CITY OF PALO ALTO
MEMORANDUM
To: James Keene, City Manager
Pamela Antil, Assistant City.Manager
Lalo Perez, ASD Director
From: Dennis Burns, Interim Director of Public Safety
Subject: FY 2012 Fire Department Alternative Reduction Proposal
Background
The 2012 General Fund budget balancing proposal to the Finance Committee relies on
$4.3 million in concessions from Police and Fire unions which are still being negotiated
(approximately $2M from Police and $2.3M from Fire). The Finance Committee
requested information related to other cuts that could be made if these concessions are not
agreed upon by mid~year of FY 2012 to cover the ensuing $4.3 million gap. The
following memo was prepared to address the budget shortfall if they are not made in a
timely manner.
It must be noted that these options were developed fairly quickly and, as a result, should
the Finance Committee and full City Council wish to proceed with such changes, staff
would request additional time to conduct a more detailed analysis to determine fInal cost
savings; possible impacts related to the Stanford contract; and impact on service levels in
the conununity. Although we cannot predict to what extent, we assume that any changes
to staffing will impact service levels to the community in some way (e.g., response times,
community outreach, etc.). This would need to be addressed through a restructming of
the department to mitigate any negative outcomes. Concessions from the employee
groups are clearly preferable to undertaking such changes immediately.
Analysis
Outsourcing:
A consideration of outsourcing for the Department's Fire Prevention Bureau was briefly looked at
by staff but would need more time to be fully vetted to determine if such an arrangement is
possible in Palo Alto. Staff also reviewed the 2011 RFP for Fire and Emergency Services that the
City of San Carlos recently completed. However, as with outsourcing fire prevention, further
analysis would be required to make comparisons between that process and the services and the
current environment in Palo Alto.
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ReductlollS In Staff and OperatJolIS:
Staff identified the following options to achieve about $2.3 million cost savings objective placed
upon the Fire Department. These options took into consideration a number of factors including a
combination of call volume, response times and provisions in the current contract with Stanford.
Descriptions of the potential service impacts or other implications are included with each option:
Option 1 (Shut down One Engine Company and Brown-outs):
To meet the savings objective the Fire Department would reduce staffing by 9 FTB
through elimination of one Engine Company and implementing a sequential fire station
brown out system. Daily line staffing would be reduced to 26 personnel from the current
29. Browning out :fire stations would begin when staffing for a given day falls to 25
personnel. In this model, the City of Palo Alto would reduce our authorized strength
from the current 108 to 99 sworn shift personnel and overtime due to staffing would
average one 12 hour person for the medic van per day, resulting in approximately 213 less
overtime per year.
The fully 1OI14ed salarylbenefrts cost reduction would be approximately $4.5 million.
,This option would result in a reduction in Stanford reimbursement of approximately $l.4
. million. leaving a total proposed budget savings of $3.1 million.
Option 2 (Shut down One Engine Company and One Rescue Company):
To meet the savings objective the Fire Department would reduce staffing by 18 FTE
through elimination of one Engine Company and one Rescue Company. Daily line
staffing would be reduced to 23 personnel from the current 29. Eliminating 18 positions
would reduce our authorized personnel from the current 108 positions to 90. The
reduction would eliminate the hazardous materials response capabilities and could affect
the current Stanford-Palo Alto contract. The current practice of staffing the 12 hour
medic unit with overtime would remain the same.
The fully loaded salary /benefits cost reduction would be approximately $3.5 million. This
option would result in a reduction in Stanford reimbursement of approximately $1.07
million leaving a total proposed budget savings of approximately $2.4 million.
It should be noted that all submission options above would require further discussion and are
likely subject to the meet and confer requirements of the union agreement. Fire Department
Management has been meeting with Local 1319 (IAFF) to explore alternative sta:lfmg models that
could provide other cost reductions to the City if adopted.
I remain optimistic that the anticipated labor concessions will be achieved to balance the FY 2012
budget. I am available to meet with you and your staff to answer any questions in this reduction
proposal.
Respectfully submitted,
DennisBmns
Interim Director of Public Safety
December 14, 2011 FCM Item 2 Excerpt
2. Recommendation Regarding adoption Of Ordinance Authorizing
Closing of the Budget for the Fiscal Year Ending June 30, 2011,
Including Reappropriation Requests, Closing Completed Capital
Improvement Projects, Authorizing Transfers to Reserves and
Approval of Comprehensive Annual Financial Report (CAFR).
David Ramberg, Assistant Director of Administrative Services reviewed
the Comprehensive Annual Financial Report (CAFR). The revenues in
Fiscal Year (FY) 2011 were higher than anticipated by $5.7 million
which created a positive balance of $2.7 million. Staff recommended
the adoption of an Ordinance authorizing the $2.7 million to remain in
the Budget Stabilization Reserve (BSR). There were continued
increases in retiree medical costs and pensions. Variances in revenues
included sales tax, documentary transfer tax, property transactions,
plan check revenue and permit fees. He explained the year-end
expenses included non filled vacancies which were spread throughout
other departments who may have been over budget so the un-used
funds brought them back into the black. The Fire Department had
$480,000 in overtime expenses and the available budget was used to
increase their budget allocation which resulted in a positive. He noted
the retiree medical expenses were raised to the required level based
on the annual required contributions through the General Fund. The FY
2012 methodology had been corrected to true-up the contributions
therefore alleviating the need to extract funds from the General Fund.
The full Council had directed Staff to return with John Bartel, the
outside consultant for the Actuarial Study to review his findings and
figures on January 30, 2012.
Council Member Schmid asked why the CAFR reported total General
Fund expenditures of $121.5 million on page 30 yet on page 32 $136
million.
Trudy Eikenberry, Management Specialist explained page 30 excluded
the interdepartmental revenue and expenditures while page 32
included encumbrances and reappropriations.
Council Member Schmid asked if the budget actuals in the CAFR
coincided to the amounts in the Operating Budget material.
Ms. Eikenberry clarified the actuals being questioned were for FY2012
while the FY2011 budget had not closed prior to the receipt of the
FY2012 budget materials.
Mr. Ramberg clarified there would be a column for the FY2011 actuals
in the FY2012 budget materials.
Mr. Keene noted the CAFR was driven by assumptions and reporting
mechanisms where requirements from Government Accounting
Standards Board (GASB) and other sources which were shifting and
evolving over time. The City’s budget was a plan adopted by the
Council so how Staff reported the numbers could be altered to better
suit the needs of Council.
Council Member Schmid asked if a Council person wished to review
prior budget year numbers, the only data available to review was the
statistical data from the CAFR. His concern was the numbers coinciding
with the budget.
Mr. Ramberg stated the assumptions within the CAFR were year-end
actual figures.
Council Member Schmid asked why pages 30 and 32 of the CAFR were
different for the General Fund.
Ms. Eikenberry noted encumbrances were not recognized as expenses
until they were paid which was providing the variance.
Mr. Keene suggested the addition of a statistical section to the budget
documentation to include 10 years of historical budget information
with as much detail as possible. The object of the CAFR was to capture
the results as they related to the close of the fiscal year.
Mr. Perez added there was graphical representation available in the
current budget documentation although without sufficient detail.
Council Member Schmid said having the information readily available
with the budget documentation provided the opportunity for an
independent analysis.
Council Member Shepherd asked for clarification on the title
Governmental Funds. Her understanding was the City was netting
items out but not strategically taking loads from one department to
another.
Mr. Perez stated Staff allocated administrative costs in the General
Fund to other Funds.
Council Member Shepherd asked if it compared to an accrual versus a
cash basis system.
Mr. Perez said yes.
Council Member Shepherd said the Finance Committee may wish to
decide on one form of reporting.
Mr. Perez clarified the City was required to comply with both types of
reporting.
Council Member Shepherd meant for the working documentation she
felt it would be of benefit to the Council to only have one type.
Mr. Perez felt from a Council perspective they should be aware of
everything that was encumbered.
Council Member Shepherd agreed they desired to see what Staff was
allowed to spend.
Chair Scharff asked for clarification on where the transfers either in or
out originated from.
Mr. Perez said if the transfer was in reference to between Funds; for
example and equity transfer from the Electric Fund, those monies
would come in as an operating transfer in to the General Fund but if
there was a contribution to reimburse the Electric Fund as the lead
group for work performed to benefit the General Fund it would be a
transfer out of the General Fund back to the Electric Fund.
Chair Scharff asked where the $30 million transfer was broken out
because he was interested to see where the $14 million came from.
Mr. Perez confirmed page 58 of the CAFR explained the break down of
the transfer.
Chair Scharff asked what a Non-Major Governmental Fund was.
David Bullock, MGO Certified Public Accounting, explained when GASB
changed the reporting model it was revolutionary because it changed
the way in which governments presented their financial statements.
Their goal was to move towards a presentation that focused on the
important Funds, the General Fund was a major Fund because it was
the City’s Operating Fund. Other Funds based on their size and
complexity may be a major Fund if they met certain thresholds or
qualitatively were of importance to the City. Therefore, the other
Funds used for accounting purposes separate from other activities
reviewed individually were combined in the reporting model as the
supplementary section. The Special Revenue Fund would be listed
under that section and could be located under page 104 of the CAFR.
Council Member Shepherd said it appeared to the reviewer as though
there were dual accounting systems occurring simultaneously.
Mr. Bullock stated there were in effect three systems; the government
wide financial statements which were a consolidation of all of the
Funds in two groups, Governmental Activity or Business Activity then
the governmental funds which was a GASB financial statement so
there were rules to follow. The third was the budgetary statement
which compared the actuals to the estimations.
Council Member Schmid noted his issue was not having ample
historical data.
Mr. Keene felt it would be more practical to use the budget document
to show the trend on spending while the CAFR supplied information
that did not go on the budget document such as the balance sheet. He
acknowledged the work involved in reconciliation of the GASB
reporting requirements was severe.
Council Member Schmid said at present the only historical data readily
available was to the 2010 actuals.
Mr. Keene stated the 2009 and previous actuals were available.
Council Member Schmid was concerned they were not available in one
location and the person interested in reviewing them needed to return
to each year separately.
Mr. Keene understood and agreed it was an upgrade to the document
that should be incorporated.
Council Member Schmid asked why the Proprietary Funds did not
appear to coincide with the CAFR.
Mr. Bullock said it sounded as though Council Member Schmid was
trying to compare budgetary base numbers where it showed Capital
Expenditures as a use of a resource. In the GASB financial statement
when monies were spent on a capital asset it was capitalized and
depreciated so it was improbable to compare the two.
Council Member Schmid said Attachment A, Section 7 read “The
Utilities Administration Fund is hereby increased by the sum of One
Hundred Eighty Six Thousand Nine Hundred Ninety Four Dollars
($186,994), as described in Exhibit 1. This transaction will change the
balance in the Electric Supply Rate Stabilization Reserve to zero.” He
asked for an explanation.
Mr. Ramberg said the Utilities Administration Fund was the cost for
running the entire Utilities Department and was spread across the
departments’ Enterprise Funds; the Gas Fund, the Electric Fund, the
Fiber Optic Fund, and others received a share of the cost. The General
Fund was engineered in the same manner for the departments who
perform functions on the City’s behalf.
Chair Scharff said according to the documentation, if the same Fund
was brought to $57 million the Electric Supply Rate Stabilization in
Section 7 it went to zero but in Section 8 it did not. He asked for
clarification.
Mr. Ramberg suspected the last sentence in Attachment A, Section 7
was inaccurate stating the Electric Rate Stabilization Reserve went to
zero.
Council Member Schmid had concerns with the retiree medical packet
information on page 103 of the CAFR. There were two different
amounts $44 million and $23 million being referenced to the CERBT.
He asked for clarification on what the acronym CERBT stood for.
Ms. Eikenberry said it appeared Council Member Schmid was
attempting to compare the net Other Post Employee Benefit (OPEB)
which was $23 million to the Retire Medical costs. She explained they
were two separate items. The $44 million was the balance of the
California Employers’ Retiree Benefit Trust (CERBT). The $23 million
was the portion of the $44 million Staff continued to carry on the
books as an asset. Once used it was removed from the books as an
asset except for the portion that was over funded. Essentially the $23
million was what was left in the CERBT from the initial $30 million
payment and the $44 million was the value of the CERBT.
Council Member Schmid said when Council voted on the budget the
amounts were in the $9 to $10 million range.
Ms. Eikenberry agreed and stated that amount was for the annual
required Annual Required Contribution (ARC) contribution.
Council Member Schmid asked if the assets were not reported.
Ms. Eikenberry explained the expense side of the assets were
reported. If the ARC was over funded the $23 million seen under OPEB
would reflect the over funded amount.
Council Member Schmid asked where that could be viewed.
Mr. Perez said it was not in the budget.
Ms. Eikenberry noted it was a balance sheet item.
Mr. Bullock elaborated it was an accounting issue.
Council Member Schmid said when the Council made their decision on
the annual budget; the first question asked was what the amount of
the assets were.
Mr. Bullock said the assets shown on the documents were not physical
assets but an accounting asset.
Council Member Schmid understood; however, in reviewing the CAFR
there was an asset amount shown but in actuality the physical amount
would be half.
Mr. Bullock clarified there was actually an actuary liability of $180
million while the CAFR reflected an asset of $44 million.
Council Member Schmid asked what was lowering the liability.
Mr. Bullock said the reason there was an asset was the City was
paying more than the required payment on an annual basis.
Mr. Perez said when the proposed budget was presented to Council at
Mid-Year that was where Staff would inform them what the ARC
contribution was based on the actuary recommendation and the
Council would be able to alter the amount with a modified annual
contribution.
Council Member Schmid recommended the information be available in
the budget document prior to the Mid-Year.
Mr. Perez said the current information was available in the budget
document under the Retiree Medical section.
Council Member Shepherd asked if the Document Transfer Tax (DTT)
was a flat fee.
Mr. Perez said it was $3.30 per $1,000.
Council Member Shepherd said Staff was not expecting the DTT to
continue as significantly as this past year.
Mr. Perez said in 2011 there were four or five significant transactions
but Staff could not predict or expect the same number of transactions
in FY2012 but during the Mid-Year they would present the assumptions
for FY2012.
Council Member Shepherd anticipated the unexpected $2.7 million
positive balance would be allocated for infrastructure. She asked if that
was a decision being requested at this time.
Mr. Perez clarified after all of the alterations there was an increase in
the BSR of $4 million. Staff recommendation was for Council to accept
the $4 million being transferred into the BSR for the time being, wait
for Staff to return February 21, 2012 with the Long-Range Financial
Forecast and the Mid-Year with recommendations. He noted if Staff
was not successful in achieving a balanced budget with the public
safety compensation concessions they were hopeful to close the gap
with other revenue increases but if not, Staff may recommend utilizing
part of the $4 million to assist in closing the gap for the 2012 budget.
Council Member Shepherd asked for confirmation that the retiree
medical actuarial had changed for 2012 but not for 2011.
Mr. Perez confirmed Staff recommended implementing the new
methodology in 2012 and change the number from $9.8 million and
add $2.4 million.
Council Member Shepherd recommended a single version of
accounting for an ease of reviewing for the policy maker. She asked if
the Electrical Rate Stabilization Reserve reduction was expected to
materialize in the 2012 budget year.
Mr. Perez said there were a couple of initiatives the Council would have
the opportunity to revisit prior to the implementation regarding the
programs and the level of Reserves.
Vice Mayor Yeh asked about the overall Staff concern regarding the
incoming Chief Information Officer (CIO).
Mr. Perez informed the Finance Committee the new CIO began
December 13, 2011 and Staff had begun setting in place the
framework for structuring the Information Technology (IT)
department. He cautioned having the discussion without the CIO being
able to participate in the process. He stated that he, the City Manager,
and the CIO, were planning on meeting to review the proposed needs
for the department.
Vice Mayor Yeh was aware the Infrastructure Blue Ribbon Commission
(IBRC) was returning to the Council with their funding options for the
external areas of the City and he believed touching on the internal
operating infrastructure needs and he felt the IT department fell under
that category.
Mr. Perez stated their review focused more on the internal
infrastructure with a General Fund emphasis and where there was
coordination of work between the General Fund and other Funds that
supported the City infrastructure. Administrative Services was looking
to the types of funding mechanisms that could be in place for the
Technology Fund, roughly it was approximately 60/40 percent, 60
percent of the cost went to the General Fund and 40 percent was
spread throughout the other Funds.
Vice Mayor Yeh asked if there was an opportunity for the Finance
Committee to review the plan prior to the next years’ external audit.
Mr. Ramberg stated yes.
Vice Mayor Yeh asked why there was a decrease in the City Council
budget of $400,000 from page 11 of the CAFR.
Mr. Perez clarified the charges were being allocated to the Council
Fund based on salary although that was disproportionate because the
cost allocation needed to exclude the City Council salary.
Vice Mayor Yeh believed the desired reflection was for the actual
benefits cost.
Mr. Perez agreed and understood.
Vice Mayor Yeh asked if the amount reflected was the impact to City
Council actual expenses.
Mr. Ramberg clarified the costs decreased from 2010 to 2011 by
$400,000.
Vice Mayor Yeh asked whether the City was authorized to invest in
their own Bonds.
Joe Saccio, Assistant Director of Administrative Services said there was
no restriction in buying Municipal Bonds.
Vice Mayor Yeh asked why the Local Agency Investment Fund was
specifically called out was five percent of the investment portfolio
being mortgage obligations.
Mr. Bullock said there was a requirement to disclose derivatives
whether direct or in-direct.
Vice Mayor Yeh asked what level of risk the City’s investments were at
and how did it compare industry wide.
Mr. Bullock did not see any investment of high risk. If the highly
sensitive interest rate fluctuations could change the rates and there
could be an impact to the value of the investment and the callable
securities would be more sensitive.
Vice Mayor Yeh asked how much analysis went into the risk
assessment.
Mr. Saccio said the callable investments were yielding more than the
current market was providing. There was a standard percentage in the
portfolio of callable investments to seek a higher yield in a low yield
environment.
Mr. Perez noted state law required information be released each
quarter of what percentage the callable cap was.
Vice Mayor Yeh believed the City had moved away from the five year
benefits vesting schedule with the Pension Fund yet it was reflective in
the CAFR.
Mr. Perez stated the five year vesting for the Pension Fund had been in
place for over 26 years. He noted the Retiree Medical had changed to
five years of Palo Alto or PERS service the employee was vested as
long as they retired from the City at age of 50.
Vice Mayor Yeh said it was appreciated seeing the unfunded liability as
a percentage of payroll and asked why it was not always visible.
Mr. Perez said the information was provided in the first week forward
of the budget.
Vice Mayor Yeh asked if there could be a comparison to the industry
standard or if there were any recommended percentages.
Mr. Bullock said the numbers were a standard unit of measurement
comparing the liability to payroll in order to see what the unfunded
liability represented. He noted being 80 percent funded was typical
and was higher than some cities.
Mr. Perez mentioned comparing numbers without knowing the other
city’s plan would not provide adequate information. Palo Alto was in a
two tier plan so if compared to a city with a single tier it would appear
Palo Alto was out of the range.
Vice Mayor Yeh said there had been previous discussion of funding the
ARC and he wanted to ensure it was included Bartel report and also in
the CAFR.
Mr. Perez stated FY 2011 closed with an above required contribution.
The FY 2012 recommendation was to revisit the contribution amount
after the full Council reviews the assumptions during the January 30,
2012 meeting.
Chair Scharff said approval of a Motion to adopt the Budget
Amendment Ordinance in Exhibit A was subject to the following edits;
the Utilities Administrative Fund needed to be tracked in Section 7, in
Section 10 the Electric Fiber Optic Rate Stabilization Reserve was listed
at the bottom while being referred to as Fiber Optics and he felt there
needed to be constancy, in Section 18 the University Avenue Parking
Permit Fund was referred to the Community Block Grant Fund (CDBG),
in Section 20 the Infrastructure Reserve Fund had reference issues
with eth General Fund, in Section 21 there was confusion between the
Electric Vehicle Fund and the Law Enforcement Block Grant.
Mr. Perez stated the edits would be reviewed and completed.
MOTION: Council Member Scharff moved, seconded by Council
Member Shepherd, that the Finance Committee forward the attached
Budget Amendment Ordinance and associated Exhibits to the City
Council for Approval with the discussed changes to Sections 7, 10, 18,
20, and 21, to:
Close the Fiscal Year 2011 Budget
Authorize re-appropriate of FY 2011 funds into the FY2012
budget (exhibits 1 and 2)
Close completed capital improvement projects (exhibit 3)
Transfer remaining balances to the appropriate reserves
(table 1 for General fund and exhibits 5 & 6 for Enterprise
Funds
Council Member Schmid noted the historical trend of revenues over the
past ten years in the CAFR showed property taxes had grown six times
to almost 40 percent of the City’s tax revenues. He felt development
within the City would benefit the economic health with a stream of
revenue.
Chair Scharff said from a policy perspective it would be helpful to have
a break down of the property tax gain whether it came from
redevelopment of single family dwellings being resold at a higher
price, the downtown developments, or new development.
Mr. Perez said there was data available and Staff would ensure it was
provided to Council.
Chair Scharff said he was interested in more than data and suggested
coordinating with Thomas Fehrenbach, the Economic Development
Manager to increase the trends in a positive manner.
Mr. Perez agreed and included the Development Center changes would
play a large part in the information gathering.
Council Member Shepherd noticed in reviewing the General Fund
Department Expenditures the Administrative Services and Community
Services Departments were running off of fewer funds than the others
since 2007. She anticipated seeing the IT Department added to the
list.
Mr. Perez stated the General Fund Department Expenditures was a
service fund and all of the departments in the Fund received a share of
the cost.
Mr. Ramberg clarified the IT expenditures were spread throughout the
other departments; however, the FY 2012 budget documents showed
the IT Department was granted their own budget by Council and had
approximately $13 million which was spread throughout all of the
departments and the Enterprise Funds.
Vice Mayor Yeh said if there was a policy discussion coupled with
efforts of economic development it would be helpful to be aware if
sales tax was going down there was another manner in which
economic development needed to be viewed. There were multiple
layers to the City’s revenue streams that could be discussed to not rely
solely on one pattern.
Mr. Perez mentioned the IBRC had set their recommendations to
change the Municipal Service Center (MSC) in terms of auto dealership
rows as a means of sales tax increase.
MOTION PASSED: 4-0
City of Palo Alto (ID # 2419)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 1/30/2012
January 30, 2012 Page 1 of 2
(ID # 2419)
Council Priority: City Finances, Community Collaboration for Youth Well-Being,
Emergency Preparedness, Environmental Sustainability, Land Use and
Transportation Planning
Summary Title: City Council Priorities
Title: Approval of the Final City Council Priorities Report for Calendar Year 2011
From:City Manager
Lead Department: City Manager
Recommendation
Staff recommends that the City Council approve the final City Council
Strategic Priorities Quarterly Report for calendar year 2011. This report
includes the final quarter results for the period October 1, 2011 to
December 31, 2011.
The City Council adopted Council priorities on January 22, 2011. This
report provides a final update on the status of work related to the priorities
for the full calendar year.
Background
The City Council was provided reports in March, July and November of
2011 that included a master list of the Council priorities and key goals
under each priority. Staff has provided regular quarterly update reports to
the City Council. The enclosed report is the final quarterly update report
on the progress of the priorities for calendar year 2011. This report
includes activities for the most recent quarter October 1, 2011 to
December 31, 2011.
Attachments:
·January 30, 2012 Quarterly Report (DOC)
·Excel tracking worksheet (PDF)
January 30, 2012 Page 2 of 2
(ID # 2419)
·Staff Report 1497 -March 21, 2011 (PDF)
·Staff Report 1892 -July 11, 2011 (PDF)
·Staff Report 2108 -November 07, 2011 (PDF)
Prepared By:Rob Braulik, Director of Office of Management and Budget
Department Head:James Keene, City Manager
City Manager Approval: ____________________________________
James Keene, City Manager
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City of Palo Alto Strategic Priorities Quarterly Report
2011 Strategic Priorities Summary
A.City Finances (CF)
Goals
1.Complete labor negotiations with major bargaining groups
2.Complete refuse fund study and stabilization
3.Complete and implement economic development policy
4.Execute budget/fiscal measures to ensure long-term financial stability
5.IBRC completes long-term infrastructure needs report to City Council
B. Emergency Preparedness (EP)
Goals
1.Conduct community exercise
2.Evaluate a secondary electrical transmission line source
3.Implement recommendations of Foothills Fire Management Plan
4.Implement Office of Emergency Services (OES) restructure
5.Improve emergency operations readiness
C. Environmental Sustainability (ES)
Goals
1.Evaluate construction of composting digester or alternatives
2.Evaluate and implement plan to introduce electric vehicle (EV) charging stations
3.Establish formal collaboration with Stanford University
4.Explore methods to integrate Palo Alto Green into City Sustainability Programs
5.Prepare Urban Forest Master Plan
D. Land Use & Transportation Planning (LUTP)
Goals
1.Complete Development Center plans improving customer service/accountability
2.Complete Rail Corridor Study
3.Complete Stanford University Medical Center Project
4.Substantially complete Comprehensive Plan update
5.Facilitate efforts to sustain Caltrain
6.Participate in regional SB375 & Housing Needs Allocation (RHNA)
7.Prepare Pedestrian and Bicycle Master Plan update
E. Youth Well Being (YWB)
Goals
1.Implement Project Safety Net
2.Magical Bridge Playground Project
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City of Palo Alto Strategic Priorities Quarterly Report
A.City Finances (CF)
Executive Summary:
City finance strategies form the foundation for the City Council identified priorities. A stable
financial picture in the short and long-term ensures the City’s ability to deliver on all five Council
priorities. Sound City finances are integral to Palo Alto’s quality of life.
A key principle of the City’s finance objectives is to provide for the City’s finances in the near and
long-term. For example, the City negotiates labor agreements and the contracts envisioned
during this cycle are ones where the City plans to make meaningful long-lasting changes to key
City legacy costs (e.g., pension and health care). The City is working toward developing a
sustainable business model for funding ongoing infrastructure needs, while eliminating a major
backlog of City projects. These efforts will take time, yet this investment is well worth the
effort. This work will result in improving the overall high quality of life that Palo Alto citizens
have come to rely and expect from their City government. Identified below are goals for Fiscal
Year 2011:
1.Complete labor negotiations with major bargaining groups
2.Complete refuse fund study and stabilization
3.Complete and implement economic development policy
4.Execute budget/fiscal measures to ensure long-term financial stability
5.IBRC completes long-term infrastructure needs report to City Council
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1. Project: Complete labor negotiations with major bargaining groups
Department: Human Resources Department
Secondary Department: City Attorney
Project lead: Interim Human Resources Director
Project start date: May 2010
Target completion date: December 2011
Current status:
In June 2011, the City reached an agreement with Service Employees International Union (SEIU)
to rollover SEIU’s contract, keeping its existing terms, and extending the current contract until
June 30, 2012. On October 17, 2011, Council approved a Memorandum of Agreement with the
International Association of Fire Fighters (IAFF) with a term ending on June 30, 2014. Thus, since
2009, SEIU, Management,and IAFF employees have made important concessions,including
paying a portion or all of the employee retirement contributions required by CalPERS, 10%
medical premium contributions, new pension tiers for new hires, and, in the case of IAFF,
providing flexibility to the City to make staffing changes.
The City has proposed similar concessions but has not yet reached agreement with the Palo Alto
Police Officers Association (PAPOA)(15 meetings since July 2011), Police Managers (PMA), and
the Fire Managers (FCA). The City also has not reached agreement with UMPAPA, a newly
formed unit of management employees in the Utilities Department that the City was ordered by
an arbitrator to certify in April 2011. However, UMPAPA employees were formerly part of the
City-wide unrepresented management group and is already under the same concessions
described above because UMPAPA was formed after those changes went into effect.
Next steps:
The City has been in negotiations with PAPOA, PMA, the Fire Chiefs, and UMPAPA for six months
or longer, depending on the unit, without reaching agreement. In 2012, staff’s goal is to bring
these negotiations to a close in order to provide the City and employees with resolution. In
addition, in early 2012, staff plans to prepare a successor agreement with the SEIU Hourly Unit
and begin negotiating a new contract with SEIU Classified Unit in the early spring, prior to
expiration of the current agreement in June 2012. Effective January 1, 2012,the City must
comply with a new law (AB 646) signed by Governor Brown. This law requires non-binding fact
finding, should the union request it, after the parties reach impasse but before the Council can
impose new economic terms.
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2. Project: Complete refuse fund study and fund stabilization
Department: Public Works Department
Secondary Department: Administrative Services Department
Project lead: Interim Public Works Director
Project start date: August 2010
Target completion date: December 2011
Current status:
Major progress has been made this Fiscal Year in returning the Refuse Fund to financial health
and stability. Fiscal Year 2011 revenues appear to have matched expenditures for the first time
since Fiscal Year 2008, and reserves are no longer decreasing. The Palo Alto Landfill was closed
with substantial savings to follow. Short and long-term time schedules have been developed to
place the Refuse Fund on a trajectory to full sustainability.
Next steps:
A major set of analysis was presented to the Council on July 6, 2011 with refuse rate changes to
ensure financial health in Fiscal Year 2012. The initial Cost of Service Study was completed in fall
2011. The next step is to prepare Fiscal Year 2013 Refuse rate recommendations to continue
the progress made to date. This will be accomplished in the winter 2012.
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3. Project: Complete and implement Economic Development Policy
Department: City Manager’s Office
Project lead: Economic Development Manager
Project start date: January 2011
Target completion date: December 2011
Current status:
The Economic Development Policy has gone through several iterations, and was presented to
the Policy & Services Committee along with a separate Draft Staff Action Plan in November
2011. The Policy is nearly developed; staff anticipates returning to Policy & Services one final
time before bringing it to the City Council for adoption.
Next steps:
Staff will include the final changes, and plans to bring a final version of the Plan back to the
Policy and Services Committee for final adoption in the next 30-60 days.
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4. Project: Execute budget/fiscal measures to ensure long-term financial stability
Department: Administrative Services Department
Secondary Department: City Manager’s Office
Project lead: Chief Financial Officer
Project start date: May 2011
Target completion date: Fall 2011
Current status:
Many potential revenue measures to be considered were incorporated into the IBRC report
discussed by the Council on January 17, 2012.
Next steps:
Based on the finance policy guidance provided by the Council from the January 17, 2012
meeting, staff will initiate work regarding future revenue measures.
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5. Project: IBRC completes long-term infrastructure needs reports for City Council
Department: Public Work’s Department
Secondary Department: City Manager’s Office, Administrative Services Department
Project lead: Deputy City Manager
Project start date: November 2010
Target completion date: December 2011
Current status:
Staff worked closely with the Infrastructure Blue Ribbon Commission (IBRC) to identify
infrastructure needs and sources of funding. This included exploring new sources of revenues
from new or existing sources, potential of issuing additional debt and review of other options to
deliver services to the community.
Next steps:
Completion of the IBRC report occurred on December 22,2011. The next step is for Council to
consider the many recommendations contained in the Report. This will occur during the winter
and spring of 2012.
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B. Emergency Preparedness (EP)
Executive Summary:
The City, like any community in the Bay Area, is susceptible to a variety of natural hazards
including earthquakes, floods, wild-land fires, and manmade disasters. The City is committed to
protecting life, property, and the environment through a number of activities including
preplanning, training, rapid emergency response, and public safety education. Identified below
are goals for Fiscal Year 2011:
1.Conduct community exercise
2.Evaluate a secondary electrical transmission line source
3.Implement recommendations of Foothills Fire Management Plan
4.Implement Office of Emergency Services (OES) restructure
5.Improve emergency operations readiness
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1. Project: Conduct community exercise
Department: Police Department
Secondary Department: Fire Department
Project lead: Acting Public Safety Director
Project start date: January 2011
Target completion date: September 2011
Current Status:
As noted in the last Quarterly Report, the Quakeville Community Exercise was conducted on
September 10, 2011.
Next steps:
Quakeville 2012 planning will commence next quarter. The exercise may involve setting up a
shelter (in partnership with the Red Cross and the Community Services Department), supported
by newly-restructured Emergency Services volunteers.
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2. Project: Evaluate a secondary electrical transmission line source
Department: Utilities Department
Project lead: Utilities Director
Project start date: July 2010
Target completion date: December 2011
Current status:
Palo Alto met with PG&E staff in December 2011 to discuss next steps for PG&E’s Ames project.
Given the technical and economic evaluations to date, City and PG&E agreed that the National
Accelerator Laboratory (SLAC)project is a viable alternative to the Ames project, but that the
City needs more time to coordinate a proposal with SLAC and the Western Area Power
Administration (WAPA). To that end, both PG&E and the City submitted letters to the California
Independent System Operator (CASIO) in December 2011 requesting that CAISO hold on further
evaluation of the Ames project for the current 2011-2012 planning period.
Next steps:
Staff will evaluate the proposal and alternatives for project facilitation offered by WAPA, and
will continue discussions with representatives from SLAC and WAPA to explore this alternative.
The City will prepare a comprehensive cost and benefit analysis.
Up to this point, meetings and discussions have been technical in nature. If the City encounters
obstacles to a secondary electrical transmission line source that are not driven by technical
interconnection issues, staff will pursue other political avenues to bring the parties to the table
to achieve agreement and progress.
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3. Project: Implement recommendations of Foothills Fire Management Plan
Department: Fire Department
Secondary Department: Police Department
Project Lead: Acting Public Safety Director
Project Start Date: January 2011
Target Completion Date: Ongoing
Current status:
As noted in the last Quarterly Report, staff renewed the contract of the Foothills Fire
Management Plan's author, Carol Rice of Wildland Resource Management (WRM). The scope of
work includes certain high priority elements of the Plan (such as evacuation routes),and seeking
sources of grant and other funding to address the current budget shortfall.
Next steps:
In spring and summer 2012, staff will conduct three community education meetings on wildland
fire and emergency procedures.
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4. Project: Implement Office of Emergency Services (OES) restructure
Department: City Manager’s Office/Police Department
Secondary Department: Fire Department, City Manager’s Office
Project lead: Assistant City Manager/Acting Public Safety Director
Project start date: May 2011
Target completion date: Fall 2011
Current status:
In December 2011, staff selected and Council confirmed the appointment of Officer Kenneth
Dueker to serve as the Director of the Office of Emergency Services.
Next steps:
Director Dueker is developing a workplan to address the various areas for improvement
identified in prior consultants’ reports and topics identified by staff.
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5.Project: Improve emergency operations readiness
Department: Police Department
Secondary Department: Fire Department
Project lead: Acting Public Safety Director
Project start date: January 2011
Target completion date: Ongoing
Current status:
Restructuring of the Office of Emergency Services (OES) opens opportunities for improvements
to the City’s ability to prepare for, prevent, respond to, and recover from all hazards. This all-
hazards planning best practice encompasses not only natural disasters, but technological
failures, damage to infrastructure, large-scale criminal events, and more.
Next steps:
The Police Department and OES will work in collaboration with Public Works, Utilities,
Information Technology (IT), and other departments to build a comprehensive system and plan
set to address all hazards. This will be a multi-year project and will comply with the Homeland
Security and Exercise Evaluation Program model. Key elements will include updated plans,staff
training, disaster supplies and equipment, and technology (communications, IT systems).
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C. Environmental Sustainability (ES)
Executive Summary:
Environmental sustainability is a core value and ongoing priority for the City. The City has been
a leader in this area in the Bay Area metropolitan region and in North America. The City is a
Certified Green Business and has adopted a Climate Protection Plan, Sustainability Policy, Palo
Alto Green Program, and continues to make strides in reducing greenhouse gas emissions.
Identified below are goals for Fiscal Year 2011:
1.Evaluate construction of composting digester or alternatives
2.Evaluate and implement plan to introduce electric vehicle (EV) charging stations
3.Establish formal collaboration with Stanford University
4.Explore methods to integrate Palo Alto Green into City Sustainability Programs
5.Prepare Urban Forest Master Plan
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1. Project: Evaluate construction of composting digester or alternatives
Department: Public Works Department
Project lead: Interim Public Works Director
Project start date: October 2010
Target completion date: October 2011
Current status:
The Feasibility Analysis was completed on time and was vetted in a series of public and Council
meetings. Proponents and opponents of a Palo Alto facility on the Landfill/Byxbee Park site had
extensive comments on the analysis. Comments were also received on the alternative regional
sites in the South Bay Area.
Next steps:
Following completion of the Energy/Compost Feasibility Study in September 2011, Palo Alto
voters approved Measure “E” on November 8, 2011,which undedicated 10 acres of Byxbee Park
for consideration as a site for such a facility. Next steps include staff developing a process and
timeline for considering whether to build such a facility.This will occur in the winter and spring
of 2012.
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2. Project: Evaluate and implement plan to introduce electric vehicle (EV) charging stations
Department: City Manager’s Office
Secondary Department: Planning and Community Environment, Utilities Department
Project Lead: Assistant to the CM for Sustainability
Project start date: 2011
Target completion date: EV chargers installed July 2011; remainder of goals will continue
through the end of the year
Current status:
A multi-departmental task force developed an EV Policy. This Policy was approved by the Policy
and Services Committee on October 18, 2011, and approved by Council on December 19, 2011.
The City is a leader in adopting a set of policies supporting EV infrastructure and EV adoption.
Rapid changes are occurring in the EV industry including new models of cars and new standards
for EV chargers. Federal and state subsidies available for EV-related projects are helping to
influence the rate of EV adoption and infrastructure development. The City recognizes EVs as an
important part of the solution for reaching its greenhouse gas emission reduction goal, and so
has an interest in encouraging the use of EVs throughout the community.
The five EV chargers, from the ChargePoint America Program (DOE funded) grant, were installed
in 2011. The installation costs were funded by a grant from the Bay Area Air Quality
Management (BAAQMD) district. The chargers are being well utilized with an average of 10
charging sessions at the five chargers each day during the fist week of January 2012, with usage
constantly increasing. The electricity dispensed at the five chargers to these EVs effectively
assist EV owners reduce greenhouse gas emissions, by approximately 2 tons/month, or 24 tons
per year at current utilization levels. This estimate would increase with higher utilization of
these chargers.
The multi-departmental task force has developed and distributed a Request for Information
(RFI) for EV charging service providers. The objective of the RFI was to solicit interest on
developing and funding the deployment of a private-sector owned, operated, and maintained
charging station infrastructure within the City, while using the City’s remaining $25,000 grant
from the California Energy Commission (CEC)as seed funding.
Next steps:
The multi-departmental task force will continue to thoroughly review all related EV issues,and is
working with regional players in developing a comprehensive EV regional infrastructure.The
task force will review the progress of issues discussed and will return to the Council with
updates. The task force will be reviewing the responses from the RFI that were sent in
December 2011.The City will use the remainder of the grant funds from the CEC to fund any
project that will be developed as a result of the RFI process.
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3. Project: Establish formal collaboration with Stanford University
Department: City Manager’s Office
Project lead: Deputy City Manager
Project start date: 2011
Target completion date: December 2011, but partnership will be ongoing
Current Status:
As reported previously, there are three main connection points which could be explored and
expanded to develop a stronger relationship between Stanford University and the City. They are
internships or academic exchange, faculty knowledge or City projects, and intra-departmental
development or utility relationships. Staff has gathered the details on at least 25 Stanford
interns who have worked with the City since 2005, including five in 2011 who focused on
sustainability issues.
On September 29, 2011, Professor Noah S. Diffenbaugh from the Department of Environmental
Earth System Science and Woods Institute for the Environment spoke at a community forum on
adaptation. Staff is hopeful that this is the first of many potential events where staff and
Stanford personnel will work together.
The Assistant to the City Manager for Sustainability arranged for a site tour of the Jerry Yang and
Akiko Yamazaki Environment and Energy Building (Y2E2) at Stanford on December 12, 2011.
Y2E2 is a green building that set high sustainability standards for Stanford.
A team at the Water Quality Treatment Plant has formed a “Water Team” with graduate
students and faculty at Stanford to review potential projects, including a system of recycled
water.
Next Steps:
Staff will be working with the Office of Government and Community Relations to determine an
appropriate way to celebrate the internships discussed above, and further develop the process
to encourage future internships.
Staff will continue to collaborate with the many different departments on issues or programs
where the City could add value to the process or the community. Such programs or events
could include the Solar Decathlon which Stanford Students are participating in, Earth Day
events, and joint community groups such as the Community Environmental Action Partnership.
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4. Project: Explore methods to integrate Palo Alto Green into City Sustainability Programs
Department: City Manager’s Office
Secondary Department: Planning and Community Environment, Utilities Department
Project lead: Assistant to the CM for Sustainability
Project Start Date: 2011
Target Completion Date: 2012
Current Status:
Staff coordinated a community event titled Adapting to Climate Change and Sea Level Rise in
the Bay Area on September 29, 2011. Staff heard about the ongoing efforts from the Army
Corps of Engineers to protect Palo Alto, why the San Francisco Bay Conservation & Development
Commission is considering amendments to the San Francisco Bay Plan to address sea level rise,
what the academic world is talking about with respect to climate change, and what other cities
in the Bay Area are doing. The discussion included impacts of not only sea level rise, but
flooding, wildfires, resource issues, and changes in weather and temperature. The event was
recorded and can be found on the Midpeninsula Community Media Center’s website:
http://www.communitymediacenter.net/watch/pacc_webcast/September/PACC_092911.html.
Staff is implementing a multi-department Sustainability Team whose goal would be to provide
an integrated, seamless approach to promoting sustainable behaviors. This team would be
supported by a steering committee lead by the City Manager and the directors from the
Utilities, Planning,and Public Works Departments. This new team will seek out opportunities to
work across departments and with various community groups. Staff is developing a strategy to
implement a comprehensive multi-departmental outreach education plan for the public. The
first step in the plan is for a sustainability webpage which will be developed in conjunction with
the City’s website project.
Next Steps:
As a follow up to both the community meeting held in September 2011, and the December 2011
Study Session on the San Francisquito Creek JPA role, staff is planning schedule a Study Session
with Council to discuss all issues pertaining to adaptation and sea level rise. Staff will continue
to work with the Community Environmental Action Partnership and other community groups,
such as the Palo Alto Neighborhoods, Acterra, and Transition Palo Alto to help build
partnerships and promote sustainability.
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5. Project: Prepare Urban Forest Master Plan
Department: Planning and Community Environment
Secondary Department: Fire Department
Project lead: Director, Planning and Community Environment
Project start date: December 2010
Target completion date: September 2012
Current status:
CalFire has reviewed the Urban Forest Master Plan and indicated its support on the direction of
the Plan. The Plan satisfies requirements for reimbursement of the City’s $66,000 grant. Staff is
working with the City’s consultant to complete an outline of the draft, but has deferred
extensive work pending the hiring of an Urban Forester in the Public Work’s Department.
Subsequent to that position being filled, staff will schedule community meetings and hearings
with Boards, Commissions, and the Council in mid-2012.
Next steps:
In early 2012, following the hiring of an Urban Forester, staff and the City’s consultant will revise
the draft Plan and hold a community workshop. The Parks and Recreation Commission and
Planning and Transportation Commission will hold meetings subsequent to the workshop. In
the summer of 2012, the Urban Forest Master Plan is tentatively scheduled to return to the
Council for adoption.
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D. Land Use & Transportation Planning (LUTP)
Executive Summary:
Land use and transportation are key indicators of quality of life in Palo Alto. The overarching
principle of the City’s land use and transportation objectives is to provide for sustainable
development and services: growth, rehabilitation, and services that are sustainable in economic
and fiscal terms, as well as in environmental respects. The City desires to develop in ways that
promote the efficient delivery of services, assures high-quality development and design,
protects and broadens the City’s tax and revenue base, preserves and enhances key
environmental attributes, minimizes energy and water use, and promotes transportation
alternatives such as walking, bicycling, and transit. Identified below are goals for Fiscal Year
2011.
1.Complete Development Center plans improving customer service/accountability
2.Complete Rail Corridor Study
3.Complete Stanford University Medical Center Project
4.Substantially complete Comprehensive Plan update
5.Facilitate efforts to sustain Caltrain
6.Participate in regional SB375 & Housing Needs Allocation (RHNA)
7.Prepare Pedestrian and Bicycle Master Plan update
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1. Project: Complete Development Center plans improving customer service/accountability
Department: Planning and Community Environment
Secondary Department: City Manager’s Office
Project lead: Planning Director
Project start date: July 2010
Target completion date: March 2012 (Phase 1), then ongoing
Current status:
The Development Center (DC) Blueprint Project has entailed a series of efforts by the Steering
Committee (department heads and upper level managers), Staff Action Committee
(approximately 20 staff members involved in the DC process from multiple departments), and a
Development Center Advisory Committee (professionals and others with periodic or regular
interaction with the DC). Some process changes have been implemented over the past year. On
August 1, 2011, the Council authorized the City Manager to hire staff to implement program
actions including piloting new project management and point of contact procedures, as well as
maintaining adequate levels of service at the DC counter. Budget for the additional staff,
technology improvements, and additional office space was approved by Council on December 6,
2011 and January 9, 2012. The DC Manager position is currently in recruitment and a recruiting
firm has been retained to begin hiring for a DC Director.
Next steps:
Staff has recruited and hired counter assistance, plan check staff, and project management staff
on a contract basis, and is recruiting for permanent staffing. The DC will permanently implement
the pilot programs previously initiated. As positions are in place and technology is upgraded,
more and more of the system improvements will be finalized. Reorganization of space needs at
the DC is expected in January and February 2012. This will help establish the collaborative
approach anticipated in the new system. Staff will return to the Council in February 2012 with
an update of performance measurement objectives and procedures, and will continue to meet
with the DC Advisory Group to assure that customer service enhancements are consistent with
their desired outcomes (and those of the public in general).
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2. Project: Complete Rail Corridor Study
Department: Planning and Community Environment
Project lead: Planning Director
Project start date: November 2010
Target completion date: December 2011 (Phases I and II), June 2012 (Phase III)
Current status:
The Rail Corridor Task Force has met ten times to discuss a variety of issues, opportunities, and
vision concepts for the Corridor. Study Sessions with the Planning and Transportation
Commission and the Council were conducted on June 8 and June 27, 2011 to summarize activity
and progress to date.The Task Force has reviewed the progress of Phase I in a document
outlining the vision concepts developed and basic information reviewed and developed. A tour
of the Rail Corridor Study Area was held on September 10, 2011 and included 28 participants. A
preliminary draft Plan has been reviewed at two meetings of the Task Force and a revised draft
was reviewed on January 19, 2012.
Next steps:
Following Task Force review of the draft Plan in January 2012, meetings will be scheduled with
the City-Schools Traffic Safety Committee, Bicycle Advisory Committee, Parks and Recreation
Commission, Council Rail Committee, and Planning and Transportation Commission prior to a
second community-wide meeting. An updated draft will then be reviewed by the Task Force
prior to review and recommendation by the Planning and Transportation Commission.The
Council will then consider the Plan for approval, likely in May of 2012.
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3. Project: Complete Stanford University Medical Center Project
Department: Planning and Community Environment
Secondary Department: City Manager’s Office
Project lead: Planning Director/Deputy City Manager
Project start date: Early 2007
Target completion date: June 2011 (Completed July 6, 2011)
Current status:
On June 6, 2011 the Council approved all entitlements, the Development Agreement, and
certified the Environmental Impact Report for the Stanford University Medical Center (SUMC)
Renewal and Replacement Project. The second reading of the Development Agreement and
zoning ordinances were approved on August 1, 2011.
Next steps:
SUMC has made Initial payments (approximately 1/3 of total) to the City for community
benefits. Construction of improvements on Welch Road and the upgrade of the Hoover Pavilion
have commenced. In 2012, Stanford hospitals will undergo review by the State (California Office
of Statewide Health Planning and Development) for building permit review and approval. In
2013, hospital construction will commence. The completion of the entire project, including
hospitals, clinics, and parking garages is expected in 2025.
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4. Project: Substantially complete Comprehensive Plan Update
Department: Planning and Community Environment
Project lead: Planning Director
Project start date: 2008
Target completion date: September 2012
Current status:
The Comprehensive Plan is expected to be completed, in draft form, by late 2012 and then
undergo environmental review (Environmental Impact Report) prior to adoption. The Area
Concept Plans have received preliminary review by the Planning and Transportation
Commission, and are tentatively scheduled for the Council’s consideration in February 2012
(East Meadow Area),and June 2012 (California Avenue Area). A draft Housing Element will be
considered by the Council in April 2012, and forwarded to the State Department of Housing and
Community Development for review. The Planning and Transportation Commission has
completed its review of the policies and programs contained in the Housing and Land
Use/Community Environment chapters, and is now reviewing the Community Services and
Transportation chapters.
Next steps:
The Planning and Transportation Commission will continue to review the policies and programs
for community services,transportation, and business and economics through the winter and
spring of 2012. In April 2012, the draft Housing Element will be reviewed by the Council and
forwarded to the State Department of Housing and Community Development. The Council will
review the East Meadow Area Concept Plan on February 13, 2012. In June 2012, the Council will
review the California Avenue/Fry’s Area Concept Plan. Environmental review of the
Comprehensive Plan is anticipated to begin in 2012 and the Plan would be adopted in mid-2013.
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5. Project: Facilitate efforts to sustain Caltrain
Department: City Manager’s Office
Secondary Department: Planning and Community Environment
Project lead: Deputy Director, Rob Braulik
Project start date: March 2011
Target completion date: December 2011
Current status:
The Peninsula Corridor Joint Powers Board (PCJPB)continues to evaluate long-term Caltrain
staff strategies to sustain Caltrain service on the Peninsula. The City continues to work with
other public agencies, Federal and State legislative advocacy firms, and the Silicon Valley
Leadership Group (SVLG)to consider strategies and plans to address Caltrain’s operating and
capital moderization fiscal issues. The City Council Rail Committee has regularly invited Caltrain
technical and policy staff to present information on Caltrain’s plans to modernize rail lines
through electrification, install a new positive train control switching system (mandated by the
Federal government), and develop a fiscally sustainable business model with or without high
speed rail (HSR) on the Peninsula. There has been no definitive progress to date on a long-term
fiscal plan which would include a dedicated funding stream for Caltrain service (e.g.,Peninsula-
wide sales tax).
Next steps:
It is anticipated that discussions will continue during Fiscal Year 2012 between the partners
including San Francisco County and City, San Mateo County, Santa Clara County, the
Metropolitan Transportation Commission (MTC), Valley Transportation Authority (VTA), major
private employers, Stanford University, City of Palo Alto,and all the peninsula cities to come up
with a visible funding plan for Caltrain.
Project Tracking Report (October 30, 2011-December 31, 2011) Page 32
City of Palo Alto Strategic Priorities Quarterly Report
6. Project: Participate in SB375 & Housing Needs Allocation (RHNA)
Department: Planning and Community Environment
Project Lead: Planning Director
Project Start Date: 2009
Target Completion Date: 2013
Current status:
Staff continues to attend 3-4 regional and countywide meetings monthly to participate in these
regional planning discussions. Council Member Scharff and the Planning and Community
Environment Director attend monthly meetings of the Regional Housing Needs Methodology
Committee. The regional agencies released an Initial Vision Scenario on March 11, 2011.
Alternative growth scenarios were released by the Association of Bay Area Governments and
Metropolitan Transportation Commission in July 2011. On July 18, 2011 the Council directed
staff to work with a subcommittee to formulate an action plan to focus on coordination with
State legislators and other cities, particularly with respect to demographic and economic
assumptions. Staff met with the Subcommittee twice and reported to the Council on September
19, 2011 at which time the Council formalized its direction to staff and asked that the
Subcommittee become a Standing Committee after January 1, 2012. The Regional Housing
Mandate Committee has met several times and directed information to be prepared relative to
growth projections. The City has commented to the regional agencies regarding the One Bay
Area Grant Program and housing allocations with the sphere-of-influence (Stanford). The
Committee’s next meeting is scheduled for January 26, 2012.
Next steps:
Staff continues to meet with the Council’s Regional Housing Mandate Committee to implement
a Council strategy and to prepare a response to the regional agencies for late February/March
2012. On an ongoing basis, staff will continue to attend regional meetings and participate in
countywide coordination efforts. Council Member Scharff continues to meet with the Regional
Housing Needs Allocation (RHNA) Methodology Committee, which is anticipated to release a
draft of the housing allocations for review in March or April 2012. Local agencies are anticipated
to respond to the draft RHNA allocations following the draft allocations. At approximately the
same time, the preferred Sustainable Communities Strategy (SCS)scenario is anticipated to be
released. The approval of the SCS is anticipated in early 2013.
Project Tracking Report (October 30, 2011-December 31, 2011) Page 33
City of Palo Alto Strategic Priorities Quarterly Report
7. Project: Prepare Pedestrian and Bicycle Master Plan update
Department: Planning and Community Environment
Project lead: Planning Director
Project start date: November 2010
Target completion date: April 2012
Current status:
The development of the new Bicycle and Pedestrian Master Plan is nearly complete. A City-wide
community meeting was held in March 2011, along with a Planning and Transportation
Commission Study Session in April 2011. A Council Study Session was held in May 2011. The
Study Session was preceded by a bike ride to tour two of the City’s bicycle boulevards. A Parks
and Recreation Commission briefing was held on May 24, 2011. On August 31, 2011 the draft
plan was reviewed and recommended for approval by the Planning and Transportation
Commission. The Council reviewed the Plan in November 2011, and recommended several
revisions and review by some of the Boards and Commissions prior to final adoption. Staff met
with South Palo Alto neighborhoods regarding several issues on January 12, 2012.
Next steps:
Meetings with the Parks and Recreation Commission and Planning and Transportation
Commission are scheduled in February 2012. Final review and adoption of the Plan by Council is
anticipated in April 2012.
Project Tracking Report (October 30, 2011-December 31, 2011) Page 34
City of Palo Alto Strategic Priorities Quarterly Report
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Project Tracking Report (October 30, 2011-December 31, 2011) Page 35
City of Palo Alto Strategic Priorities Quarterly Report
E. Youth Well Being (YWB)
Executive Summary:
The City plays two important roles with regard to community collaboration for youth well being.
First, the City plays a role of convener and coordinator, bringing the community together in
order to effectively harness the community’s talent, expertise, and goodwill so that the
community may have the greatest impact in fostering youth well being. A meaningful example
of the City’s role as convener and coordinator is seen in the Project Safety Net (PSN) Community
Task Force. PSN is focused on developing and implementing a comprehensive community-based
mental health plan for overall youth and teen well being. A focus in 2011 is to support PSN as
defined in the PSN Plan (www.PSNPaloAlto.org).
Secondly, the City plays a direct role in providing programs, services, and facilities for youth and
teens. Examples include the variety of afterschool programs at the Palo Alto Teen Center,
Children’s Theatre, Junior Museum and Zoo, Art Center, and Rinconada Pool. The City’s capacity
to provide programs, services, and facilities for youth well being is dependent on community
collaboration through substantial support of Friends Groups and foundations. An example of
community collaboration can be seen in the vision to build the Magical Bridge Playground in
coordination with the Friends of the Palo Alto Parks. The Magical Bridge Playground is planned
for Mitchell Park and will be Palo Alto’s first playground accessible to people of all abilities and
ages. Identified below are goals for Fiscal Year 2011:
1.Implement Project Safety Net
2.Magical Bridge Playground Project
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City of Palo Alto Strategic Priorities Quarterly Report
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Project Tracking Report (October 30, 2011-December 31, 2011) Page 37
City of Palo Alto Strategic Priorities Quarterly Report
1. Project: Implement Project Safety Net (PSN)
Department: Community Services Department
Secondary Department: Police Department
Project lead: Division Manager of Recreation Services
Project start date: September 2009
Target completion date: Ongoing
Current status:
Coordinate the PSN Community Coalition and guide its implementation:Monthly PSN
meetings have been coordinated by the City and Palo Alto Unified School District (PAUSD). A
website and Facebook page for PSN have been created to provide regular updates for anyone
interested in learning about PSN and/or getting involved. Several community trainings have
been held on identifying individuals-at-risk of suicide (gatekeeper training). Training was held
on October 24, 2011 to train ten PSN members to be suicide prevention Gatekeeper trainers.
With PAUSD, created an effective and sustainable structure for the PSN Community Coalition.
A Memorandum of Understanding (MOU) between the PSN Community Coalition and its
members to define roles, responsibilities and commitments was created for 2011-12. With
the generous support of the Santa Clara County Mental Health Department, PSN received a
$30,000 grant for consulting services.PSN has defined a sustainable structure and
implementation plan. Funding for PSN has come from a number of sources, including the Palo
Alto Recreation Foundation, Palo Alto Women’s Club, David and Lucile Packard Foundation,
and Stanford University and Hospital. Over the 2011 summer,the Council completed the
Development Agreement for Stanford’s expanded hospital. As part of the agreement, two
million in community benefits was designated to support PSN.
Staff incorporated the Developmental Assets into the planning, implementation, and
evaluation of City programs and services for youth and teens. The Developmental Assets
Subcommittee of the PSN has launched a campaign to inform and educate the community
about Developmental Assets. The campaign includes an Asset of the Month Program, overpass
banners, posters and other materials promoting the importance of Developmental Assets in a
young person’s life.
Next steps:
Secure administrative capacity for coordinating the PSN community coalition, support PSN
partners in developing specific action plans to move PSN strategies forward, and provide new
and creative opportunities for teen involvement in community decision making.
Project Tracking Report (October 30, 2011-December 31, 2011) Page 38
City of Palo Alto Strategic Priorities Quarterly Report
2. Project: Magical Bridge Playground Project
Department: Community Services Department
Project lead: Director, Community Services
Project start date: July 2011
Target completion date: June 2013
Current status:
After approving the Letter of Intent between the City and the Friends of the Palo Alto Parks
(Friends) on July 18, 2011 staff began working with the Friends to create a Scope of Work for
landscape design services. Managed by the City’s Public Works Engineering Division, this Scope
of Work will include the design and specifications of the universal-access playground and
associated parking, pathways, landscaping,and other amenities. By taking the lead with the
design portion of the project, the Friends could better focus on fundraising for the project,
including the research of possible grant programs. City Landscape Architect,Peter Jensen
distributed the Request for Proposals for the design services and six qualified proposals were
received and evaluated by both City staff and the Friends. On December 7, 2011, three members
of the Friends, together with staff from Public Works and Community Services interviewed the
four most promising finalists. Staff and the Friends are currently reviewing references for the
unanimously selected finalist and a contract for design services will be brought to the Council for
approval in early January 2012.
On January 15, 2011, the Friends hosted a fundraising event at Vino Locale that was very well
attended. $16,800 was raised for the project at this single event. Additional fundraising events
are scheduled for early 2012 to continue building momentum for the project.
Next steps:
Staff anticipates that the design for the playground will be finished by May 2012, and will then
be reviewed by the Parks and Recreation Commission, Architectural Review Board,and Council
by July 2012. The design firm will then be able to finalize their design concepts and prepare final
cost estimates for the project.
Under the terms of the Letter of Intent,the Friends have until June 30, 2013 to raise the funds
for the project and be able to enter into a construction agreement with the City.
City of Palo Alto Strategic Priorities
City Council Priorities Dept Dept CF EP ES LUTP YWB CE CP Completed
PS
A. City Finances (CF)
1 Complete labor negotiations with major bargaining groups HR ATT SEIU, IAFF, & Management agreements
2 Complete refuse fund study and stabilization PW ASD Cost of Service Study
3 Complete and implement economic development policy MGR Final policy nearly developed
4 Execute budget/fiscal measures to ensure long-term financial stability ASD MGR
Potential revenue measures incorporated in
IBRC report
5 IBRC completes long-term city infrastructure needs report for City Council PW ASD, MGR IBRC report
B. Emergency Preparedness (EP)
1 Conduct community exercise POL FIR Quakeville Community Exercise
2 Evaluate a secondary electrical transmission line source UTL Submitted letters to CAISO
3 Implement recommendations of Foothills fire management plan FIR POL Renewed contract with plan's author
4 Implement Office of Emergency Services (OES) restructure POL FIR, MGR OES Director hired
5 Improve Emergency Operations readiness POL FIR Ongoing restructuring of OES
C. Environmental Sustainability (ES)
1 Evaluate construction of compositing digester or alternatives PW Energy/Compost Feasibility Analysis
2 Evaluate and implement plan to introduce electric vehicle (EV) charging stations MGR PCE, UTL EV Policy, 5 EV chargers installed, RFI
3 Establish formal collaboration with Stanford University MGR Adaptation forum, Y2E2 tour, Water Team
4 Explore methods to integrate Palo Alto Green into city sustainability programs MGR PCE, UTL Event on Climate Change, Sustainability Team
5 Prepare Urban Forest Master Plan PCE FIR CalFire review of Urban Forest Master Plan
D. Land Use & Transportation Planning (LUTP)
1 Complete Development Center plans improving customer service/accountability PCE MGR Management and resource changes complete
2 Complete Rail Corridor study PCE Area site tour, review preliminary draft Plan
3 Complete Stanford University Medical Center project PCE MGR SUMC project approvals complete
4 Substantially complete Comprehensive Plan update PCE PTC review of Area Concept Plans
5 Facilitate efforts to sustain Caltrain MGR PCE
Rail Committee advocating for sustainable
Caltrain funding
6 Participate in regional SB375 & Housing Needs Allocation (RHNA)PCE Created Standing Committee
7 Prepare Pedestrian and Bicycle Master Plan update PCE Plan nearly completed
E. Youth Well Being (YWB)
1 Implement Project Safety Net CSD POL Outreach/training, Developmental Assets
2 Magical Bridge Playground project CSD RFP review for Scope of Work, Fundraiser
Acronym Definitions
City Finances (CF)
Emergency Preparedness (EP)
Environmental Sustainability (ES)
Land Use & Transportation Planning (LUTP)
Youth Well Being (YWB)
Community Engagement (CE)
Collaborative Partnerships (CP)
An X means that is the priority whereas a check indicates crossover with other priorities
Dept P, primary department responsible for priority
Dept S, secondary department(s) invovled in priority work
Department Abbreviations
Administrative Services (ASD), City Manager (MGR), Community Services (CSD), Fire (FIR), Human Resources (HR), Planning and Community
Environment (PCE), Police (POL), Utilities (UTL)
Priorities by department
ASD CSD FIR HR MGR PCE POL PW UTL
City of Palo Alto (ID # 1497)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/21/2011
March 21, 2011 Page 1 of 2
(ID # 1497)
Summary Title: City Council Priorities
Title: Approval of the City Council Priorities Report for Calendar Year 2011
From:City Manager
Lead Department: City Manager
Recommendation
Staff recommends that Council approve the outline of Council priorities for calendar year 2011.
Executive Summary
The City Council held their annual retreat January 22, 2011 and reaffirmed their interest in
maintaining the following five priorities for the 2011 calendar year. The Policy and Services
Committee reviewed this item at their February 15th and March 8th meetings.
Strategic Priorities
City Finances Emergency Preparedness Environmental Sustainability
Land Use and Transportation Planning Youth Well-Being
Discussion
Since the retreat, staff has compiled a master list of the priorities and key goals under each
priority for the City Council’s information. This plan is based on current resource allocations
(i.e., staff and financial resources). Thus, should there be a material change in resources staff
would return to the City Council with a modified plan. Outlined in the attached documents are
the five strategic priorities and goals. The attachments include
a master worksheet showing each major priority, key goals, the lead department, and
March 21, 2011 Page 2 of 2
(ID # 1497)
checkmarks next to each goal indicating crossover with other priorities. For example,
completion of the IBRC long-term infrastructure needs is listed in the City Finances (CF)
category, but also has potential impacts on Emergency Preparedness (EP), Environmental
Sustainability (ES), Land Use and Transportation Planning (LUPT), and incorporates community
engagement (CE) and community partnership (CP) components. Several priority items will be
done through collaboration and coordination among several city departments. In addition, we
have included narrative summaries for each priority with additional details on department
actions to be taken to complete the priorities (See attachment B).
Timeline
All objectives identified are projected to be completed by the end of calendar year 2011 except
where noted in the written summaries.
Environmental Review
Environmental review may be required for specific projects and will be undertaken as those
individual projects are pursued.
Attachments:
·Attachment A: Master Excel Priorities Spreadsheet (XLS)
·Attachment B: Priority Narrative Summaries (PDF)
Prepared By:Katie Whitley, Administrative Assistant
Department Head:James Keene, City Manager
City Manager Approval: James Keene, City Manager
City Council Priorities De
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City Finances (CF)
Complete labor negotiations with all major bargaining groups HR x
Complete refuse fund study and stablization PW x ü ü ü
Complete economic development strategic plan MGR x ü ü ü ü ü ü
Execute new budget and fiscal measure to help ensure long-term financial stability ASD x ü ü
IBRC completes analysis of city long-term infrastructure needs and presents report to the City Council PW x ü ü ü ü ü
Emergency Preparedness (EP)
Conduct community exercise POL ü x ü ü
Evaluate a secondary electrical transmission line source UTL ü x ü ü ü
Implement recommendations of Foothills fire management plan FIR ü x
Implement Office of Emergency Services (OES) restructure POL ü x
Improve Emergency Operations readiness POL x ü ü
Environmental Sustainability (ES)
Evaluate construction of compositing digester or alternatives PW ü x
Evaluate plan to introduce electric vehicle (EV) charging stations at commercial and residential sites and city facilities UTL x ü ü
Establish formal collaboration with Stanford University MGR x ü
Explore methods to integrate Palo Alto Green into city sustainability programs MGR x ü ü
Prepare Urban Forest Master Plan PCE x ü ü
Land Use & Transportation Planning (LUTP)
Complete strategies and plans at the Development Center to improve customer service and accountability PCE ü x ü ü
Complete draft Rail Corridor Study outlining measures to provide for community land use, transportation, & corridor urban design PCE ü ü ü x
Complete Stanford University Medical Center renewal and replacement project PCE ü ü ü x
Substantially complete update of city Comprehensive Plan including draft Housing Element, 2 area Concept Plans PCE ü ü ü x ü ü ü
Facilitate in cooperation with local and regional agencies and organizations development of short and long-term action plan to sustain Caltrain MGR ü ü x ü ü
Actively participate in preparation of regional Sustainable Communities Strategy (SB375), Regional Housing Needs Allocation (RHNA)PCE ü ü x ü ü
Prepare Pedestrian and Bicycle Master Plan update PCE ü ü x ü ü ü
Youth Well Being (YWB)
Implement Project Safety Net CSD ü x
Monitor fundraising for Magical Street Bridge CSD ü ü x ü ü
Notes
City Finances (CF)
Emergency Preparedness (EP)
Environmental Sustainability (ES)
Land Use & Transportation Planning (LUTP)
Youth Well Being (YWB)
Community Engagement (CE)
Collaborative Partnerships (CP)
An X means that is the priority whereas a check indicates crossover with other priorities
Department Abbreviations
Administrative Services (ASD), City Manager (MGR), Community Services (CSD), Fire (FIR), Human Resources (HR), Planning and Community
Environment (PCE), Police (POL), Utilities (UTL)
City Finances
Page 1 of 11
City Council Strategic Priority Goals for Fiscal Year 2011
City Finances
Executive Summary
City Finance strategies form the foundation for many of the City Council identified priorities. A stable
financial picture in the short‐term and long‐term ensures the City’s ability to deliver on the all five City
Council Priorities in the areas of: Emergency Preparedness, Environmental Sustainability, Land Use &
Transportation and Youth Well‐Being. Sound City Finances are integral to Palo Alto’s quality of life.
A key principle of the City’s Finance objectives is to provide for the City’s finances in the near and long‐
term. For example, while the City in the normal course of business negotiates labor agreements on a
periodic basis the contacts envisioned during the cycle are ones where the City plans to make
meaningful long‐lasting changes to key City legacy costs (e.g., pension and health care). In addition, the
City is working toward developing a sustainable business model for funding ongoing infrastructure
needs while also eliminating a major backlog of projects in the City. These efforts will take time and yet
this investment is well worth the effort. This work will result in improving and the overall high quality of
life Palo Alto citizens have come to rely and expect from their City government. Identified below are five
key development goals for 2011:
1. Develop and execute new human resource contracts that help the City manage its labor costs to
a sustainable level over the long‐term
2. Execute an economic development program that supports and creates new municipal revenue
streams to support vital City services and positions the City for the 21st century innovation
economy
3. Outline a comprehensive initiative to fund ongoing infrastructure maintenance and fund the
large existing backlog of projects. A quality infrastructure base is vital to community quality of
life and to the City’s ability to attract and sustain a robust business base to support City services
4. Explore in‐depth available potential revenues along with expenditure reductions that enable the
City to create a long‐term sustainable fiscal ecosystem for the City so as to maintain and
ultimately enhance City service delivery and community quality of life. The solution to the City’s
finances must be multi‐dimensional and incorporate new or enhanced revenues, reset of our
long‐term labor and a review of new methods to deliver services
Page 2 of 11
Rationale for Goals Selection
City finances are integral to sustaining and enhancing the “dream” of what Palo Alto is all about which is
a community with an outstanding quality of life, an innovative community, a community where new
ideas thrive and grow, a place where families want to live and send their children to local schools and a
place where collaboration, community engagement and community partnerships are part of the inner
“fabric” of the place known as Palo Alto.
A solid City financial base, short and long‐term is the foundation of all the above. City finances enables
the community to provide the vital municipal services necessary to maintain and in Palo Alto to provide
the myriad number of enhanced community amenities and programs rarely found in any community in
North America of similar size.
There are significant macroeconomic changes occurring today that impact cities. These include a global
economic competitive environment, an environment of high economic uncertainty, super rapid change
in technological innovation and continued demographic changes impacting the ability of employers to
hire and retain talent. In addition, the State of California may be finally facing the reality of
restructuring itself where resources are aligned with expenditures and changing the dynamic of the
state relationship with local agencies (e.g.,. redevelopment proposal). If these changes come to fruition
it will have profound impacts on local government agencies.
Likewise Palo Alto is experiencing change as an organization. The City has seen the retirement of
several senior, mid‐level workers over the past two years and this trend is expected to continue given
the age demographic of the workforce and new changes in pension and health care benefit levels. All
the above trends give the City the ability to think about possibilities that could not be discussed or
considered before and to address the critical policy question about what should the City be doing and
how should it do it? There is also the opportunity now to:
Leverage technology and innovate in ways perhaps not considered before
New ways to structure the organization and organize the work
Set up new systems and methods to provide services (e.g., privatization)
As referenced recently in the Economist “Innovation is the single most important ingredient in any
modern economy”. Palo Alto has the ability to be a leader in local government service delivery
innovation if it executes well the City Finances priorities identified herein.
Page 3 of 11
City Finances
(Labor Negotiations)
Executive Summary
In 2010, Council reaffirmed the importance of attracting and retaining a quality workforce but
emphasized the critical need to balance this objective with a commitment to sustainable employee
compensation. In addition, Council directed that systemic problems and issues be addressed with
systemic solutions. As described in the City’s response to the Santa Clara County Grand Jury Report, the
City agrees that unsustainable employee costs must be aligned with available resources, taking into
consideration the City’s significant infrastructure needs and the public’s expectation of services. As
demonstrated by its balanced budgets, minimal use of reserves, Triple A credit rating, and excellent
annual outside audits, the City prides itself on responsible financial stewardship and management. It
fully intends to maintain these best practices and adjust costs and revenues as needed. However,
progress is dependent on the City’s success in its collaboration with its employee units. The City must
abide by contractual obligations of its labor contracts as well as legal requirements to meet and confer
and bargain in good faith over matters within the scope of representation. This places real and practical
constraints on the City’s ability to move forward with changes it may believe necessary, but which are
subject to negotiation. The City genuinely strives to reach agreements that ensure a sustainable
financial future and excellent services to the community.
In 2009, the City took the lead among Bay Area public agencies by initiating steps in contract
negotiations with Service Employees International Unit (SEIU) and Management and Professional
employees to implement a two‐tier retirement benefit by changing the retirement formula for new hires
to 2% @60. Furthermore, the City pursued and has now implemented an employee medical
contribution with non‐public safety employee groups (e.g., management, professionals, and SEIU
workers). Over the past year, the City has been involved in difficult negotiations with two out of the
four public safety unions: Local 1319, International Association of Firefighters (IAFF) and the Palo Alto
Police Manager’s Association (PAPMA). The other two sworn safety units will begin contract
negotiations in the spring 2011. Because many of the existing benefits were negotiated and approved
over an extended period of time and are long established, these are challenging negotiations and
difficult employee concessions to address in a short period of time.
One of the City’s primary labor relations goals is to agree to meaningful, long‐term structural changes to
employee compensation with all employee groups. Since the non‐safety employees represented by
SEIU and members of the Management and Professional unit have already made significant concessions
in their compensation, the City will be focused on reaching agreement on similar equitable
compensation concessions with all four of the safety units in negotiations this spring.
Goals identified for FY2011 are as follows and are not in rank order:
1. The Palo Alto Police Managers’ Association is a new bargaining unit. The City and PAPMA are in
negotiations to create their first Memorandum of Agreement (MOU).
2. The City has been negotiating with the Fire Fighters’ Association since May 2010. The City
determined that further productive movement toward a negotiated agreement cannot be
reasonably expected after 8 months of negotiations and therefore declared impasse on
February 15, 2011 and has initiated binding interest arbitration of the unresolved issues.
Page 4 of 11
3. The City typically negotiates with the Fire Chiefs’ Association after the Fire Fighters conclude.
Given the lack of progress as described above, the City will initiate negotiations with the Fire
Chiefs in the spring 2011 with the goal of reaching agreement in FY 2012.
4. The City and SEIU will meet in the spring 2011 to prepare a successor agreement that is
scheduled to expire June 30, 2011.
5. The Palo Alto Police Officers’ Association (PAPOA) deferred their scheduled wage increase for
one year to provide relief to the City’s budget and negotiated an additional year on their existing
contract for a new expiration date of June 30, 2011. The City will begin negotiations with
PAPOA in spring 2011.
Rationale for goals selection
Labor negotiations are an ongoing activity of a municipal operation. This is an activity that occurs on a
regular basis as Memorandum of Agreement’s (MOA’s) expire and need to be renegotiated. These
contracts are an integral component of City Finances as labor costs are typically 60% or higher of total
city general fund expenditures. What distinguishes this year’s negotiations from the norm is the
extraordinary strategic nature these contracts will have on the long‐term fiscal health of the City’s
finances. As referenced in the Executive Summary key bargaining groups have already made strategic
and fundamental long‐term structural changes to their contracts. It is the City’s goal to achieve similar
contracts with all bargaining units to assure the long‐term fiscal health of the City.
Page 5 of 11
City Finances
(Refuse Fund Study and Stabilization)
Executive Summary
Studying the Refuse Fund and executing a plan to balance and stabilize the fund is one of five goals
identified by the Palo Alto City Council to be achieved under the City Finances Priority. This enterprise
fund supports a large array of City services including garbage, recyclables, and compostables collection,
processing, and disposal, as well as street sweeping, Household Hazardous Waste services, and
supporting City‐owned facilities such as the Recycling Center and the Palo Alto landfill and composting
site. Due to multiple factors such as the success of the City’s Zero Waste services, the downturn in the
economy, and the use of reserve funds, the Refuse Fund financial health has been compromised. The
goals of the City are to:
1. Rebuild the Refuse Fund’s Rate Stabilization Reserve to a level that meets established
guidelines. This will include ensuring balanced annual operating budgets and establishing a
stable annual revenue stream for the fund.
2. Assess and realign refuse rates among users, as necessary. The City is finalizing a Cost of Service
study, and the results of this study will be used to evaluate the current Refuse rate structure and
make recommendations for changes.
3. Continue to work towards Zero Waste. The City has made great strides towards reaching this
goal, and much of its success is connected to the Refuse Funds conservation pricing rate
structure.
Rationale for Goals Selection
The Refuse Fund is a complex enterprise fund that supports key services and programs for the City.
Through a combination of influences occurring over several years, the Fund’s Rate Stabilization Reserve
has become negative must be rebuilt. A multi‐phased, multi‐year approach to stabilizing the Refuse
Fund and restructuring rates must be developed in 2011.
Page 6 of 11
City Finances
(Economic Development Strategic Plan)
Executive Summary
Economic Development is one of five key goals identified by the Palo Alto City Council to be achieved
under City Finances for FY2011. Economic Development is nearly always a strategic priority for local
municipal business retention, business expansion and business attraction strategies and have direct
correlation to revenues and City services. Stable and predictable revenues are critical to the
community’s quality of life which is dependent on delivery of sustainable City services. Identified below
are 5 economic development goals for FY2011. These goals are not in rank order:
1. Develop new revenue streams and innovative uses for under‐utilized City owned property
o Present by July 2012 to City Manager at least 1 possible income‐producing idea for
city‐owned land
2. Provide leadership in the outreach and messaging for the Development Center (DC)
Restructuring process
o Provide regular updates to business and community groups
o Work with PIO and media to ensure public awareness of progress and goals
Deliverables
Make 6 presentations to business community between January and June 2011
Host monthly meetings with PIO to determine messaging and outreach regarding the DC
Blueprint Project and send 2 DC Improvement press releases by July 2012
3. Outreach to the City’s largest revenue generating and most innovative companies
o Meet at least once with key company leaders, especially on real estate/facility
issues
Identify future expansion, relocation, or renovations plans if applicable, and
connect company representatives with staff at Development Center
Respond to any follow up items promptly‐ no longer than 3 business days.
Coordinate with city staff for additional follow‐up as appropriate
Deliverables
Conduct 20 general outreach meetings each month starting January 2012
Provide meeting summaries in newsletter and report to City Manager
3A. Visit strategically chosen businesses also including City Council, City Manager, and other key
staff in 2011 to have a focused discussion on using City resources to help retain/ grow their
presence in the City
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o Work with City Manager, City Council, Finance, Utility Advisory Commission, other
Boards/Commissions for input to develop plan to select companies to visit
Deliverable
Conduct 12 company site visits that include City Manager, Council Members, Boards and
Commission members and key company executives by January 2012
4. Create “Test Bed” partnerships, especially with innovative green/clean tech companies
o Explore finding suitable business location for test bed help desk
o Engage in promotional activities including:
Utility bill insert
Presentations to business trade organizations and neighborhood groups
Marketing Collateral
Deliverables
Identify staff team and hold brainstorming meetings in March 2011
Identify pilot projects and prepare draft business plan by June 2011
Implement pilot projects by January 31, 2012
5. Enhance City’s “Doing Business” Web Page and create engaging and effective marketing
collateral geared towards Palo Alto’s diverse business environment (i.e. retention and attraction
of different market segments) and transition to electronic marketing wherever possible.
o Engage in creative “web 2.0” strategies to improve messaging & info flow
Deliverables
By year end design/produce and present 3 marketing collateral pieces for City of Palo
Alto Economic Development
By July 2011, present report to City Manager on options for social media and web‐based
software, including determination on use of “Customer Analytics” software
Rationale for goals selection
A focus on finding new uses for city‐owned property could have a significant impact on our bottom line.
For instance, finding an appropriate site for a potential expansion or new location for an automobile
dealership, if successful, will result immediately in new revenues for the City. Estimated revenues for a
dealership could produce at least $100K or more per year in new annual revenues. In order to help
grow and or attract business in Palo Alto, we must enhance the Development Center to create a more
user‐friendly, transparent and predictable experience for customers. Communication and collaboration
across departments as well as with the community will help to streamline our process. If successful, not
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only will the process improve, but the DC itself can become a better marketing tool to attract and
expand business.
Communicating to businesses is the vital element to comprehending their issues and needs. It is
through this understanding that we can learn of potential opportunities, and best leverage the
resources at the City to assist businesses. By proactively engaging strategically chosen businesses in an
ongoing dialogue, we can build partnerships and improve our community, increasing our attractiveness
and in turn the City’s bottom line. As we move forward with economic development and sustainability
goals, we intuitively know that they must fuse. We understand that in order to maintain our leadership
as a global center of innovation, we must continue to attract the next wave of start‐up entrepreneurs,
cutting edge clean‐tech, bio‐tech, nanotech and research‐ based firms, while retaining the existing
companies that keep our character and charm. Working together with the Utilities Department (UTL)
we have a unique opportunity to create an effective “Test Bed”, a tool which can be used for the City to
partner with such companies, as well as with researchers in emerging fields. Developing an effective
system for collaboration between city/ residents/ business will be a great step forward in creating
tangible benefits that will help to attract/ retain such firms.
We should also have targeted marketing material at the ready with information tailored to different
business sectors and purposes. The web has become the number one source of information for
businesses, site locators and real estate professionals to initially start their search for places that may
meet the needs of their clients. The City therefore needs to have a state of the art website to present
the community to these key gatekeepers to ensure the city is competitive right at the initial site location
process. Emerging technologies should be explored to make sure that we have the most effective tools
available.
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City Finances
(Execute new budget and fiscal measures to ensure long‐term financial stability)
Executive Summary
The City currently completes and uses a Long‐Range Financial Forecast (LRFF). The forecast period
provides actual financial data for the most recent budget year, adopted and projected financial data for
the current budget year and projected financial data looking forward for ten years (to 2021). The LRFF is
used by the City to project and quantify a baseline projection of revenues, expenditures, cash flows and
fund balances. The forecast enables the City to take steps to plan in advance for potential revenue gains
and losses, expenditure increases/decreases, increased future liabilities and costs (e.g., health care and
PERS pension) and related items. The forecast is dynamic and subject to constant change and revision
based on the best available information. The forecast enables policy makers to evaluate financial
impacts of potential initiatives and to plan ahead to ensure the long‐term fiscal stability of the City. The
forecast also helps community members understand the organization’s present and future financial
capabilities and resource allocations to support services and programs.
The plan here is for the City to evaluate potential new revenues and service options that may enable the
City to realize new revenues and reduced expenditures. This action will help the City achieve a stronger
more sustainable fiscal model to support services and programs. For example, last year the City made
substantial changes to its PERS pension plan going to a new tiered program (2% @ 60) for non‐safety
personnel which will save the City considerable funds. In addition, the City will be implementing an
employee contribution to health care this year. The City needs to execute additional measures to
ensure long‐term financial sustainability. Completion of the goals identified below and the data
gathered from this work will be incorporated into the LRFF. Identified below are goals for FY2011.
These goals are not in rank order:
6. Identify new potential revenue sources including preparation of a report outlining various
potential revenue options, the pro’s and con’s of each option and the estimated potential
revenues. Potential new revenues options include but are not limited to:
a. Ambulance service subscription tax
b. Business operations tax
c. Citywide parcel tax
d. Increase in property transfer tax
e. Increase in transient occupancy tax
7. Develop plans to address increased employee compensation costs and develop plans to share
cost increase with employees.
8. Identify additional operational efficiencies, potential options to contract out various City
services, explore potential new partnerships with existing non‐profit organizations and non‐
governmental organizations and with other governmental organizations including adjacent
cities, and regional public agencies on the peninsula to deliver services and programs. Potential
ideas to consider include:
a. Advertising or naming rights for city facilities
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b. Analyze and review organizational structure for potential functional consolidation
options (e.g., placing all maintenance functions within one department) and
consolidation options with regional agencies that may provide similar services as the
City
c. Civilianize certain public safety management positions, property and evidence
management and specialist teams (e.g. SWAT)
d. Contracting out fleet maintenance and utility billing services
e. Contracting with other communities for regional emergency services dispatch
f. Creating an exclusive towing services contract in the city
g. Transferring animal care services to the county or to the human society
9. Identify a long‐term sustainable financial model to address City infrastructure project backlog
and develop as part of model plan to be able to fund ongoing preventive maintenance costs of
fundamental infrastructure. This model will be developed in coordination with the
Infrastructure Blue Ribbon Task Force data and work with the Finance Committee.
Rationale for goals selection
The rationale for selecting these goals is to develop a sustainable long‐term financial plan (LTFP) for the
City. More specifically we are seeking to explore potential alternative revenues and expenditure
reduction strategies that will enable the City to continue to deliver high quality services and program to
the community.
The LRFF report recently provided to the City Council Finance Committee outlines a number of long‐
term trends over the next ten years that necessitate a need for the City to explore and implement new
innovative techniques and strategies for delivering services. Just one example among many is
forecasters do not expect job growth and thus the unemployment rate to reach equilibrium for another
five to eight years. This one indicator, jobs, has a tremendous impact on the City finances as it impacts
three of the City’s main revenue streams: property, sales and utility user taxes.
Infrastructure quality is fundamental to local community quality of life. This includes infrastructure
system such as storm water, water, wastewater systems, roads and streets and city facilities. These
systems are integral to City service delivery. The City has a significant infrastructure backlog (in the
millions of dollars) and is the process of developing a plan to remedy the backlog and come up with a
sustainable long‐term approach to maintaining the City investments in its infrastructure assets.
The goals identified here will enable the City to outline a series of potentially meaningful revenue
alternatives that could help stabilize and offset the current volatile revenue streams (i.e., sales taxes)
that form the backbone of supporting City services. In addition, development of alternative service
delivery methodologies including working with potential non‐profit, non‐governmental and other public
agency partners offers the potential to significantly reduce public expenditures while maintaining if not
enhancing existing service delivery.
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City Finances
(Infrastructure Blue Ribbon Commission, IBRC)
Executive Summary
Action by the Infrastructure Blue Ribbon Commission (IBRC) is one of the key “City Finances” goals
established by Council for 2011. The IBRC was established to make recommendations to Council to
address the current backlog in Palo Alto’s Infrastructure needs. The IBRC will report back to Council in
the fall of 2011 after considering the following list of questions referred to it by Council:
What is the complete listing of the City’s infrastructure backlog and future needs?
What criteria should be used to prioritize this list of projects?
Are there ways the City’s infrastructure needs can be prioritized into 5 year increments that can
be financed and also effectively implemented given current staff resources?
What are potential financing mechanisms that could be used to address the City’s infrastructure
needs? Should there be a one‐time financing mechanism or some ongoing source of
infrastructure funding? What are the options for each of these choices?
Is a bond measure the best mechanism for funding the infrastructure backlog? If so, when
should this move forward and how could it be structured?
How can public/private partnerships be leveraged as an infrastructure funding mechanism?
How are City project cost estimates developed and are these in alignment with other local
jurisdictions?
How do Enterprise Fund infrastructure projects intersect with General Fund infrastructure
projects?
Rationale for goals selection
Palo Alto has an extensive and highly acclaimed system of City facilities. Its parks, open space,
libraries, and community centers of all types are one of the important reasons that Palo Alto is such
a desirable place to live. And yet those facilities have aged and spending to revitalize the facilities
has not kept up with the needs from that aging process. Many facilities now exceed their design
lives and upgrades are overdue. One of the main recommendations needed from the IBRC is how to
pay for and schedule the necessary work to refurbish the City facilities. The goal is to eliminate the
backlog of repair projects and put the City on a clear path of keeping up with maintenance needs in
the future. Like the environment around it, Palo Alto’s infrastructure must become truly
sustainable.
Emergency Preparedness
City Council Strategic Priority Goals for Fiscal Year 2011
Emergency Preparedness
Executive Summary
Emergency Preparedness is one of five goals that have been adopted by the Palo Alto City
Council for Fiscal Year 2011. The City of Palo Alto like any community in the Bay Area is
susceptible to a variety of natural hazards including earthquakes, floods, and wild land fires as
well as man‐made disasters such as plane crashes, terrorism and other catastrophes. The City is
committed to protect life, property and the environment through a number of activities
including preplanning, training, rapid emergency response and public safety education for the
benefit of the community. Below are the emergency preparedness goals for FY 2011 for the City
of Palo Alto. These goals are not in rank order:
1. The City will conduct one major Community emergency preparedness exercise. Staff
will work with community groups to plan and host a full‐scale exercise which will include
multiple neighborhood groups and City departments. This exercise will be consistent
with accepted national exercise guidelines
2. The City will evaluate and complete a feasibility analysis and report investigating
alternatives that install a secondary electrical transmission source to the City. The new
transmission source would be established in separate geographical area that would
eliminate the possibility of a single contingency outage interrupting power to the City
3. Implement recommendations of Foothills fire management plan to address treatment
and mitigation measures that are required to ensure the viability of evacuation routes
and protect life and property
4. Implement Office of Emergency Services (OES) restructuring founded on the consultants
report and focus on four key readiness areas: preparedness, mitigation, response and
recovery
5. Improve emergency operations readiness per the City emergency operations plan. The
City will work to better coordinate all facilities and personnel in the organization and
their ability to respond in a coordinated and cohesive fashion
_____________________________________________________________________
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Rationale for goals selection
A community emergency exercise will allow staff and community members to work together
during a simulation to test capabilities, communications, technology and personnel and will
enable the City to better prepare for an actual event. A feasibility report by year end regarding
the installation of a secondary transmission line in the City will enable the City to determine the
technical and financial feasibility of creating this type of emergency redundancy capability in the
community. If it is determined to move forward with installation of a new line it is projected
this work will take three to six years to complete given the regulatory requirements and costs.
Previous reports provided to the City Council have identified hazards and mitigation methods in
the Foothills area. Implementation of the plan will initiate the necessary mitigation steps. A
comprehensive report was recently completed evaluating the Office of Emergency Services
(OES). Implementation of the plan will increase City emergency preparedness and response and
community emergency response coordination. Improving emergency operations readiness per
the Emergency Operations Plan will improve and enhance community safety.
_____________________________________________________________________
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Emergency Preparedness
(Community Exercise)
Executive Summary
The City and the community seek to improve our response to major incidents. A coordinated,
well planned response requires an exercise component in order to rehearse and clarify roles, for
staff, residents and others. Such exercises are building blocks in support of a strategic, multi‐
year Training and Exercise Plan.
Deliverables
1.) City Departments to work with volunteer groups and external stakeholders to develop
the scope, purpose, objective and scenario for City/community exercise.
2.) Identify a joint community/staff exercise design team to coordinate/manage the exercise
and support community resilience.
3.) Encourage participation within community groups and volunteer organizations.
4.) Manage exercise which will evaluate:
‐ Intra‐City communications
‐ Sharing real‐time communications with external stakeholders
‐ Internal emergency preparedness procedures
5.) Develop an after‐action report and corrective action plan post‐exercise.
Rationale for Goal Selection
This exercise will allow staff and community members to work together during a simulation
which will test capabilities, communications, technology and personnel. The after‐action report
will provide staff and community members’ feedback about gaps and areas for improvement
which can be addressed. The exercise will also serve as a reminder that the City is committed to
a culture of preparedness. “It is a given that the City’s resources will be overwhelmed in a
disaster. It is, therefore, incumbent upon all residents and businesses to prepare themselves
and to understand the limitations of the City’s response efforts.” (City of Palo Alto Emergency
Operations Plan)
_____________________________________________________________________
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Emergency Preparedness
(Secondary Electrical Transmission Source)
Executive Summary
In February of 2010 the City of Palo Alto had electricity interrupted to the entire service area for
over 10 hours. This outage was due to an airplane leaving the Palo Alto Airport striking the
Pacific Gas and Electric Transmission lines. The purpose of this initiative is to investigate
alternatives that install a secondary electrical transmission source to the City. The new
transmission source would be established in separate geographical area that would eliminate
the possibility of a single contingency outage interrupting power to the City.
The following tasks are planned over the next 12 months:
Continue coordinating with PG&E and the Independent System Operator (ISO) on
including a transmission line connecting PG&E’s Ames Substation to Palo Alto’s Adobe
Creek Substation. This project would be part of the PG&E’s system plans to improve
transmission service in the Bay Area
Continue discussions with Stanford University on a project that would connect Palo
Alto’s Quarry Substation to Stanford’s Substation and to the Stanford Linear
Accelerator’s 230 kV Substation
Prepare a report for Council on viable alternatives for providing a secondary
transmission source and take action per City Council direction
This project is expected to take between 3 and 6 years to complete once a viable alternative is
determined due to planning and environmental requirements for a transmission facility.
_____________________________________________________________________
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Emergency Preparedness
(Implement Recommendations of Foothills Fire Management Plan)
Executive Summary
In 2009, the City commissioned a study to evaluate the fire potential in the wildland‐urban
interface. The study revealed that there are treatment and mitigation measures that are
required to ensure the viability of evacuation routes and to protect life and property.
Deliverables
1.) Extend consultant’s contract to assist staff in implementing Foothills Fire Management
Plan.
2.) Submit application to classify Foothills Fire Management Plan as a Community Wildfire
Protection Plan; explore grant eligibility under CWPP to fill the estimated $715,000
obligation.
3.) Seek Public Works CIP for ongoing mitigation activities to implement recommendations.
4.) Host three educational sessions for residents to review the community’s role in
mitigation, prevention, response and recovery.
5.) Apply for CALFIRE Work Crew to assist in mitigating identified hazards in the Foothills
Fire Management Plan.
Rationale for Goal Selection
Previous reports to Council have detailed the hazards that exist in the Foothills and the steps
necessary to mitigate these hazards. The Foothills consist of large open space areas/parks,
private residences, private recreation facilities, commercial buildings, critical infrastructure and
property owned by Stanford University. The rationale behind selecting this goal is to reduce the
risk of fire danger to these locations and ensure the safety of the residents. Council has
directed staff to develop strategies to implement the plan.
_____________________________________________________________________
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Emergency Preparedness
(Improve Emergency Operations Readiness)
Executive Summary
The City seeks, per its Emergency Operations Plan, “to incorporate and coordinate all facilities
and personnel…into an efficient organization, capable of responding in a coordinated and
cohesive fashion.” To better achieve this objective the City will make a number of
improvements in training, equipment and technology.
Deliverables
1.) Staff will implement a multi‐year, training and exercise plan designed to engage the
community and improve our response capabilities.
2.) Enhance interoperable communications and further develop our virtual consolidation of
dispatch with neighboring communities.
3.) Identify and seek grant funding of support equipment for emergency response
operations. Staff will explore regional partnerships and support joint planning
initiatives, such as the pending National Disaster Resiliency Center at NASA Moffett
Field.
4.) Develop and implement training for City staff on personal and family emergency
preparedness.
Rationale for Goal Selection
The City has legal obligations to maintain key capabilities to provide public safety, utilities and
other essential services to the community. Advanced preparation can reduce the impact on the
community and expedite recovery activities. These program improvements will support a more
comprehensive, coordinated response and recovery framework.
_____________________________________________________________________
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Emergency Preparedness
(Office of Emergency Services (OES) Restructure)
Executive Summary
In October 2010, the City Manager’s Office commissioned a study to review the City of Palo
Alto’s practices in emergency management. A subject matter expert with national credentials
was hired by the City to conduct a gap analysis and make recommendations to improve
emergency/disaster readiness. The consultant interviewed key stakeholders, inspected critical
infrastructure and reviewed emergency planning procedures. The consultant has written a
report and will present her recommendations to the City Council at a Study Session in the spring
of 2011.
The report will examine how the City and community can improve in the four key
emergency/disaster readiness categories: preparedness, mitigation, response and recovery.
The consultant will make recommendations as to where the activities of the Office of Emergency
Services should best be situated within the City organization. The report will also examine the
appropriate staffing and structure for these activities. Finally, the report will present
recommendations that can enhance the City’s coordination with the community.
Deliverables
1.) Upon receipt of the report, staff will review and analyze the consultant’s report. Staff
will evaluate financial, human resources and philosophical implications of the
recommendations.
2.) Staff will review the report with key stakeholders (Citizen Corps Council), the leadership
of community groups and obtain feedback/input.
3.) Staff will confer with the City Manager and recommend implementation of appropriate
action items.
4.) Staff will report back to Council and implement these action items.
Rationale for Goal Selection
Staff is responding to a directive as set by the City Council to our emergency preparedness
functions. The City has an obligation to ensure community readiness, through education,
training, outreach and exercise. The Office of Emergency Services will be restructured to
coordinate these complex activities across all City Departments and with the community to
ensure a unified, coordinated response.
Environmental Sustainability
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City Council Strategic Priority Goals for Fiscal Year 2011
Environmental Sustainability
Executive Summary
Environmental Sustainability is a core value and ongoing priority for the City. The City has been a leader
in this area and continues to make strides to be a leader on the Peninsula, in the Bay Area metropolitan
region and in North America. The City is a Certified Green Business, has adopted a Climate Protection
Plan (CPP), a Sustainability Policy, has many sustainability programs including the award‐winning Palo
Alto Green Program and continues to make strides in reducing Greenhouse Gas emissions. One of the
most recent examples was the initial installation of LED streetlights in the City. Identified below are five
key development goals for 2011.
1. We continue to look at our Utility plant operations for methods and strategies to increase our
ability to reduce the City’s greenhouse gas emissions (GHG). This year a major focus will be to
look at the financial practicality of new compositing digesters or their alternatives to reduce
GHG’s.
2. Fleet operations and gas vehicles are a major contributor to GHG emissions. Thus we are going
to explore the ability to install electric vehicle charging stations at various locations in the City to
facilitate and encourage use of electric vehicles and technology.
3. Stanford has a robust Sustainability program and several initiatives underway and ongoing in
this area. Stanford is also a leader in research and development of green technologies and
practices. The City, for the first time, is going to explore developing a more formal collaborative
relationship with the University to determine if there are synergies and potential partnerships
between the City and the University to enable both entities to leverage their combined efforts
to be leaders in sustainable communities and use of green technologies and practices.
4. The residents of Palo Alto have embraced many green practices on their own and with the
encouragement of the City. This includes recycling, use of available transit options (e.g.,
Caltrain), planting of trees and many other homegrown initiatives. The City also has a number
of sustainability programs and engages in several practices to encourage sustainability in the
community. This initiative will provide a focused effort in looking at strategies and tactics the
City and the community can engage in together to leverage knowledge, resources and talent to
build a more sustainable community.
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5. Palo Alto is a City with a considerable existing urban forest canopy. This canopy provides
considerable environmental and community quality of life benefits to the community. A master
plan will enable the City to create a long‐term plan for managing and enhancing this significant
asset and help the City meet its sustainability goals.
Rationale for Goals Selection
Environmental Sustainability is, as stated above, a core value of the City of Palo Alto. The City is one of
the foremost leaders in Environmental Sustainability (ES) in the nation and is positioned now and in the
future given current and projected initiatives to continue to build upon what has been and is a cutting
edge leadership role. All of the goals identified here reinforce this ES leadership position. The City
continues to adapt, enhance, change and execute new sustainability practices and initiatives. Palo Alto
has embraced ES for the long‐term and it is an integral part of the quality of life and fabric of what
makes Palo Alto “Palo Alto”.
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Environmental Sustainability
(Evaluation of Composting Digester and Alternatives)
Executive Summary
Evaluating alternatives for handling Palo Alto’s organic residuals (e.g., yard trimmings, food scraps and
wastewater solids) is a critical goal of Council’s Environmental Sustainability Priority. On April 5, 2010
Council directed staff to:
1. Hire a consultant to evaluate a Dry Anaerobic Digestion system
2. Prepare an applicable level EIR, focused on 8‐9 acres of Byxbee Park adjacent to the City’s
Regional Water Quality Control Plant
3. Conduct a Preliminary Analysis before completion of the study itself
4. Explore Energy Conversion Technologies in conjunction with the Regional Water Quality Control
Plant Long Range Facilities Planning
5. Explore Partnering with local agencies within 20 miles of Palo Alto
The Preliminary Analysis will be brought to Council in March or April, 2011 with the full study being
completed in the fall of 2011.
Rational for goals selection
With the closure of Palo Alto’s landfill and current compost facility in late 2011 and early 2012
respectively, the need to manage the City’s residuals becomes a key issue. While the City has the option
to take yard and food residuals to the Gilroy area for composting, and wastewater biosolids are
currently incinerated; other options must be explored which would reduce energy use and greenhouse
gas emissions. If Palo Alto is to meet its Climate Action, Zero Waste, Sustainability, and Externality
Reduction goals, alternatives must be carefully analyzed.
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Environmental Sustainability
(Electric Vehicle Charging Stations at commercial and residential sites and city facilities)
Executive Summary
New electric vehicles (EVs) are being introduced in the market place, and these EVs require new
charging infrastructure. Encouraging the use of EVs will reduce the community’s greenhouse gas (GHG)
emissions and will help meet the Council approved Climate Protection Plan goal of reducing municipal
and community GHG emissions by 15% below 2005 levels by 2020. Having publicly accessible EV
charging stations at City facilities is one way of encouraging the adoption of EVs in town.
The City has undertaken a number of steps to facilitate the adoption of EVs in Palo Alto to date. City
staff have provided charger technology information and permitting requirement for customers to install
chargers in their homes and businesses on the city website and via utility bill inserts; an assessment of
long term EV penetration in town has been undertaken along with an assessment of electric distribution
system infrastructure upgrade needs; EV charging is being encouraged in the City’s building code;
applied and obtained two state grants totaling $35,000 to install five EV chargers at publicly available
facilities. In addition, a number of charging stations are going to be installed at libraries utilizing
‘Measure N’ bond funds.
The following tasks are planned and approvals expected to be sought over the next 12 months:
1. Determine how to best leverage the state grant funds to install 5 chargers in publicly available
facilities. The 5 charging stations could cost $100,000 to $150,000 to install. Explore the
possibility of leveraging private equity capital to provide the funding shortfall
2. Determine the locations to install the chargers. At present, there are two charging spots at City
Hall and Alma Parking Garages, but these are older charger technology. Staff anticipates
installing three of the newer chargers at the same location, while maintaining the older charger
for a few more years. A fast level #3 charger is also being considered at the street level on
Hamilton Avenue in front of City Hall. Other public parking areas are also being evaluated for EV
charger installations.
3. A Request for Proposal (RFP) to solicit proposal from the private sector to optimally deploy
these chargers is planned. This RFP will provide an option for the private sector to utilize the
grants, add their own funds to install, own, and operate the charging station in town, and
provide a franchise fee to the City for utilizing public space to install these chargers. In the event
private sector funds are not available at satisfactory terms, Council approval is being sought to
utilize electric utility funds to make up the difference in cost.
4. Staff plan to bring to the Utility Advisory Commission and the Council a number of policy level
questions in the spring in this regard. These may include:
a. How best to leverage private capital to install EV chargers?
b. Should free EV charging be provided at City facilities to the public?
c. Should the employee commute program include incentives for EV charging?
d. How best to deploy charging stations and optimally utilize the limited parking space
available downtown as reserved spots for EV charging only?
e. What is the role of Utilities Department in installing EV chargers?
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f. Should the Utilities Department offer time‐differentiated residential electric retail rate
for EV owners to encourage charging during night time in order to reduce the adverse
impacts on the electrical grid and distribution system?
5. Much of these goals will be accomplished by December 2011, with all set goals expected to be
completed by June 2012.
Rationale for Goal Selection
EVs have the potential to reduce the community’s GHG foot print considerably over the long term.
Having a robust City policy to encourage EVs and to facilitate building a robust public charging
infrastructure in Palo Alto and in the region is critical for the success of EVs in town. The goal in 2011 is
to frame this policy for Council review/approval and to utilize the state grants available to make a robust
start in installing public charging stations at City facilities in 2011. It may take up to June 2012 to fully
implement all elements of the goal outlined above.
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Environmental Sustainability
(Establish formal collaboration with Stanford University)
Executive Summary
Stanford University represents the most progressive and innovative research into the area of
sustainability and climate change. Palo Alto, by virtue of its proximity and relationship to the University,
can leverage its green initiatives through enhanced collaboration with the University. On the University
side, there are many programs engaged in sustainable innovation. These include the Precourt Institute,
The Woods Institute for the Environment, and Sustainable Stanford just to name a few. The City, with its
own utilities, is uniquely positioned to partner with Stanford and the emerging talent coming through
these programs. While informal relations exist with Stanford, the city could develop strategic relations
around sustainability, allowing for resource sharing, best practices, and internship opportunities.
Goals
1. Organize a “Sustainability Partnership Summit” open to public, including Stanford and City Panelists
2. Organize a formal site visit to Y2E2 including key leaders in Planning, Utilities, and Public Works,
highlighting innovative construction and facilities management techniques utilized by Stanford.
3. Develop volunteer internship program for at least 1 sustainable initiative
Rationale for goal selection
In the past, Earth Day events have included a broad cross‐section of the community. This year, focusing
on the University/City relationship will provide a unique perspective not yet explored. The extent to
which Stanford has implemented sustainable building techniques on campus for new construction is
relatively unfamiliar to many on city staff. Increasing familiarity with the University’s innovative green
building techniques will stimulate creative interactions and thinking from city staff involved in green
building programs. Because Palo Alto owns its utility, there are unique opportunities for internships.
Many progressive programs suitable for graduate level interns could exist. Both the City and Stanford
could find mutual value in such an endeavor.
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Environmental Sustainability
(Explore methods to integrate Palo Alto Green into City Sustainability Programs)
Executive Summary
The City offers numerous sustainability programs, including PaloAltoGreen, which is one of the most
recognized and progressive renewable energy programs the Utility Department offers. Palo Alto is also
a community of highly engaged citizens. Following the Stanford model of an interdisciplinary approach
to sustainability, the City could begin to integrate activities such as Emergency Prep, Economic
Development, and Greenhouse Gas Reductions.
Goals
1. Form sub‐group including City Elected and Appointed Officials, Staff, and key community leaders to
explore connections to broaden the City’s renewable energy and sustainability programs. Employ
the triple bottom line principles in a variety of programs.
2. Bring the Citizen Core Council together with Sustainability Groups (such as CEAP) to explore issues
affecting the community’s preparedness in a changing climate.
3. Hold study session with Council, Planning Commission and Climate Change experts to understand
the policy implications of rising sea levels and other effects of global climate change.
Rationale for goal selection
Collaboration among staff and city leadership could produce new ideas and initiatives. Promoting a
fresh dialogue can stimulate creativity and foster innovation. The City’s policy framework needs to
respond to changing climatic conditions. Policy makers require the best information possible to ensure
appropriate actions and plans are implemented.
Page 8 of 8
Environmental Sustainability
(Urban Forest Master Plan)
Executive Summary
The Urban Forest Master Plan, partially funded by a grant from CALFIRE, is intended to provide a
strategic plan to help the City conserve and renew its urban forest, to establish procedures and
protocols to enhance the effectiveness of City operations and maintenance, and to provide for
consistent and effective monitoring of the urban forest. Key goals of the plan include:
1. Continuing to provide for protection of the environment, including trees, creeks, wildlife, and
open space
2. Enhancing the City’s environmental sustainability objectives, including its Climate Protection
Plan
3. Ensuring that the City has an accurate and complete picture of its Urban Forest
4. Establishing the urban forest as an asset and part of the City’s valuable infrastructure
5. Engaging the community as stewards of the Urban Forest
The process and timeline for preparation of the Urban Forest Master Plan began in December 2010,
when the City contracted with Hort Science, Inc. to work with a staff interdisciplinary team. In January,
the team conducted a successful online survey to which 650 people responded. During January and
February, the team interviewed over 100 staff members from all relevant departments. On February 7,
2011, the consultant introduced the project to the City Council at a Study Session. Future public
meetings and hearings will be scheduled in June and July to accommodate review of the draft plan and
adoption by the City Council.
Rationale for Goals Selection
The Urban Forest Master Plan is an important component of the City’s “sustainable” development goals.
Preserving and protecting the urban forest is a long held tradition in Palo Alto. In recent decades,
however, new and/or increased pressures associated with development and the provision of services
has introduced unprecedented competition for the protection of trees.
The Urban Forest is also an element of the City’s infrastructure and requires management and
maintenance as an asset valued for its environmental, aesthetic and economic benefits: energy
conservation, air quality improvement, CO2 reduction, storm‐water control, and enhanced property
values. The Urban Forest Master Plan will also be closely aligned with goals of other sustainability
programs such as water and energy conservation. It will also further the City’s goals of engaging the
community to foster sustainable natural resources. For example, the plan will establish the benefits of
choosing drought tolerant trees to minimize water use and shade for homes and parking lots to reduce
energy consumption.
Land Use and Transportation Planning
Page 1 of 13
City Council Strategic Priority Goals for Fiscal Year 2011
Land Use and Transportation Planning
Executive Summary
Land use and planning strategies are closely aligned with other Council priorities to protect and enhance
City Finances, to support Emergency Preparedness goals, to further the City’s Environmental
Sustainability objectives, and to encourage Youth Well‐Being. Land use and transportation are key
indicators of quality of life in Palo Alto. The overarching principle of the City’s Land Use and
Transportation objectives is to provide for “sustainable” development and services: growth,
rehabilitation and services that are sustainable in economic and fiscal terms, as well as in environmental
respects. The City desires to develop in ways that promotes efficient delivery of services, assures high
quality development and design, protects and broadens the City’s tax and revenue base, preserves and
enhances key environmental attributes, minimizes energy and water use, and promotes transportation
alternatives such as walking, bicycles, and transit. Identified below are seven key development goals for
2011:
1. Complete strategies and plans at the Development Center to improve customers service and
accountability
2. Complete draft Rail Corridor Study outlining measures to provide for community land use,
transportation and corridor urban design
3. Complete Stanford University Medical Center (SUMC) facilities and replacement project
4. Substantially complete update of City Comprehensive Plan Amendment/Housing Element
Update and 2 Area Concept Plans
5. Continue monitoring of High Speed Rail (HSR) activities and collaborative work with Peninsula
cities and regional agencies, work on a short and long‐term action plan to sustain Caltrain
6. Actively participate in preparation of regional Sustainable Communities Strategy (SB375),
Regional Housing Needs Allocation (RHNA)
7. Prepare Pedestrian and Bicycle Plan Master Plan update
Page 2 of 13
Rationale for Goals Selection
Land use and zoning decisions are integral to facilitating the preservation, development or
redevelopment of uses that contribute to the City’s economic vitality and tax base. Provision of
opportunities for hotels, auto dealers, and other retail uses will assist the City to meet its fiscal
responsibilities. A more efficient development review process will minimize staff resource needs while
providing for a more satisfied customer experience. The facilitation of these uses also provides needed
daily services to the City’s residents.
Transportation alternatives to single occupancy vehicles not only provide environmental (greenhouse
gas and other air quality) benefits, but can also be more cost‐effective and less impacting than
constructing more roadway space. A mix of transit, walking, and bicycle facilities also allows all segments
of the population, including children, seniors, and disabled persons, equal access to safe and efficient
transportation. Protection of the environment is fundamental to the City’s Comprehensive Plan goals
and policies, and provides economic benefits as well. Creeks, the hills, and the Baylands all contribute to
the aesthetic, ecological, recreational and educational values of Palo Alto. These areas also provide for
many of the recreational amenities available in the City.
The City must also recognize its role and relationships to the Bay Area region as a whole. The City may
benefit from taking a more active part in assuring an understanding of Palo Alto’s role as an
employment and education center in the Bay Area and Silicon Valley. At the same time, providing varied
housing opportunities for employees of Palo Alto businesses is an important asset for those employers.
Page 3 of 13
Blueprint for a New Development Center
(Complete strategies and plans at the Development Center to improve customer service and
accountability)
Executive Summary
The “Blueprint for a New Development Center” project is focused on improving the delivery of services
at the Development Center (DC) and increasing customer satisfaction. The City Manager’s public
statement committed to having measurable improvements implemented at the DC by the end of June
2011. The City Manager’s key objectives are the guideposts for the project initiative:
1. Creating a better customer service culture where there is predictability, clear standards, and a
performance measurement program in place to evaluate service delivery and assess customer
satisfaction.
2. Improving organizational efficiency of the Development Center and associated processes to
minimize costs and delays to customers.
3. Maintaining or enhancing community sustainability and economic development goals and objectives
through DC activities.
Rationale for goals selection
The Blueprint project is actively engaged with multiple departments and Development Center users, as
staff continues designing and refining an integrated system throughout 2011. Staff anticipates testing
and implementation of the design will commence in the first half of 2011. To produce wholesome and
sustained results, three initial staff and customer teams have been established to create momentum
and advance the project forward, including:
Staff Steering Committee – Directors and other senior managers from Planning, Building, Public
Works, Fire, City of Palo Alto Utilities (CPAU) and the City Manager’s Office are responsible for
project accountability, policy direction, decision making and issue resolution. This committee is
meeting twice a month to ensure the right staff is involved and they get the necessary resources
to produce the intended results.
Staff Action Team – Key staff representatives, from various departments, are responsible for
redesign of development services business processes, design of the piloting program protocols,
and implementation planning. Additional staff subcommittees are identified and assigned along
the way to address system related impacts (i.e. technology, publications, etc.). Staff is currently
meeting twice weekly to design the new integrated system and will follow‐up with the piloting
and implementation efforts this spring.
Development Center Customer Advisory Group – A customer group, representing a cross‐
section of DC users, has been assembled and meets on a monthly basis to help staff understand
successful service delivery criteria from the customer’s perspective. Their participation ensures
consistency of the design and implementation, provides feedback on ongoing service and
performance‐related issues, and communicates progress of the project to other customers and
City policy makers. At this stage, the customers, in conjunction with the Staff Action Team,
have clearly defined their desired outcomes and expectation for success.
Page 4 of 13
City Manager Monthly Progress Reports – These monthly updates are prepared by the DC
Blueprint System Improvement Manager and the System Design Consultant. The information
apprises the City Manager of progress; as well as, timely notification of potential issues or
constraints. As part of the Blueprint project communication plan, staff has created a City
website to keep everyone informed of the project progress at:
http://www.cityofpaloalto.org/depts/pln/development_center/dc_blueprint/default.asp.
The Blueprint project implements City goals by providing for efficiencies in development services for the
community and for the City budget with improved technology and a customer service philosophy.
Page 5 of 13
Palo Alto Rail Corridor Study
(Complete draft Rail Corridor Study outlining measures to provide for community land use,
transportation and corridor urban design)
Executive Summary
The Palo Alto Rail Corridor Study is intended to provide a vision for land use, transportation, and design
along the Caltrain right‐of‐way and adjacent areas. The plan would identify opportunities for growth
near transit while protecting nearby neighborhoods. The study would encourage more pedestrian and
bicycle friendly mobility, integral to furthering “sustainable development” in the city. The study will also
allow consideration of land use and urban design techniques to enhance the potential for economic
development and increased revenues and tax base within the corridor. Key goals related to the Council’s
priorities include:
1. Contributing to a sense of community and place in neighborhoods and commercial districts
2. Assuring a high quality of development and design
3. Protecting and broadening the City’s tax and revenue base
4. Preserving and enhancing key environmental features
5. Promoting transportation alternatives such as walking, bicycles, and transit
The Rail Corridor Study will be conducted by staff, a 17‐member Task Force, and an urban design
consultant. Public workshops and meetings with the Planning and Transportation Commission and City
Council will supplement the work of the Task Force and provide for extensive public input. The Study will
be conducted in three phases: 1) vision, 2) alternatives, and 3) a draft plan. Each phase will take
approximately four months and the final plan is expected to be considered by Council in early 2012.
Rationale for Goals Selection
Land use and zoning decisions are integral to facilitating the preservation, development or
redevelopment of uses that contribute to the City’s economic vitality and tax base. The City must
simultaneously enhance its neighborhoods by protecting impacts of development or, in this case,
transportation facilities (rail and roads). Protection of the environment is fundamental to the City’s
Comprehensive Plan goals and policies, and provides economic benefits as well. These areas also
provide for many of the recreational amenities available in the City.
Transportation alternatives to single occupancy vehicles not only provide environmental (greenhouse
gas and other air quality) benefits, but can also be more cost‐effective and less impacting than
constructing more roadway space. A mix of transit, walking, and bicycle facilities allows all segments of
the population, including children, seniors, and disabled persons, equal access to safe and efficient
transportation.
The Rail Corridor Study will address all of these goals for the corridor and will provide input to the
Comprehensive Plan, the California Avenue/Fry’s Area Concept Plan, and other ongoing planning and
transportation activities in the city.
Page 6 of 13
Stanford University Medical Center
Facilities Renewal and Replacement Project
(Complete Stanford University Medical Center renewal and replacement project)
Executive Summary
The Stanford University Medical Center (SUMC) Facilities Renewal and Replacement Project is a
comprehensive, multi‐year development project to rebuild and restore the SUMC and School of
Medicine facilities in Palo Alto. The project would satisfy the shared objectives between SUMC and the
City of Palo Alto to optimize the delivery of healthcare to patients and to meet regional needs for
emergency and disaster preparedness. The project applicant is proposing the changes and additions to
meet State mandated seismic safety standards (SB 1953) and to address capacity issues, changing
patient needs and modernization requirements. Various entitlements required for the project, including
certification of an Environmental Impact Report, Comprehensive Plan amendments, creation of a new
“Hospital” zoning district, Architectural Review of the proposed buildings, and a Development
Agreement that would set land use regulations for a 30‐year period in exchange of public benefits. Key
goals related to the Council’s priorities include:
1. Meeting regional needs for emergency preparedness
2. Minimizing environmental, financial and municipal infrastructure impacts on the City
3. Assuring a high quality of development and design
4. Promoting sustainable development and green building design principals throughout the
project
5. Promoting transportation alternatives such as walking, bicycles, and transit
Since the SUMC representatives first introduced the project in late 2006, City staff has worked to
identify the environmental impacts, conducted public outreach meetings to determine key project
objectives, prepared fiscal analysis, held preliminary design review meetings, and identified possible
public benefits to be included in the Development Agreement. In May 2010, the Draft EIR was released
for public comment. In February 2011, the Final EIR and “Response to Comments” was completed. It is
anticipated that the Architectural Review Board, Planning and Transportation Commission, and City
Council will complete their reviews of the project in May 2011.
Rationale for Goals Selection
The project would result in an increase of over 1.3 million square feet of new floor area and site
improvements that will affect how employees and visitors access and interact with the SUMC campus
operations. There is a great opportunity to incorporate green building features, sustainable
development, and state of the art urban design principles that would help achieve City goals and would
be a model for future development. The redevelopment of the SUMC and School of Medicine, designed
in a manner to address the region’s Disaster Preparedness Program, will significantly contribute to the
emergency preparedness goals of not only the City but the region as a whole. While there are many
public benefits inherent to the project, the impact of the proposed development could potentially result
in financial and infrastructure costs to the City. It is important that the Development Agreement address
these potential costs and minimize the project impacts.
The project will result in the creation of many new jobs that will ultimately be a financial benefit to the
City. In order to accommodate these jobs in a manner that meets the City’s environmental goals, the
project applicant will be expected to provide commute alternatives for employees. These alternatives
Page 7 of 13
not only provide environmental (greenhouse gas and other air quality) benefits, but can also be more
cost effective and less impactful than constructing more roadway space. A mix of transit, walking, and
bicycle facilities allows all segments of the population, including children, seniors, and disabled persons,
equal access to safe and efficient transportation.
Page 8 of 13
Comprehensive Plan Amendment/Housing Element Update
(Substantially complete update of City Comprehensive Plan including draft Housing Element, 2 Area
Concept Plans)
Executive Summary
The Palo Alto Comprehensive Plan Amendment and Housing Element Update are intended to provide
the framework for the City’s land use, housing, development and transportation policies. The
Comprehensive Plan Amendment focuses on two Area Concept Plans and on updating policies to 1)
assure provision of adequate support services to neighborhoods and businesses, 2) propose strategies
to retain and enhance retail and other commercial, revenue‐generating uses, and 3) ensure a theme of
“sustainability” throughout the City’s land use and transportation policies and programs. The Area
Concept Plans are being developed for: 1) the East Meadow/West Bayshore commercial/industrial area,
and 2) the California Avenue/Fry’s Area of mixed use development. The Housing Element is being
updated in accordance with State law requirements and will outline the City’s housing objectives
through the year 2014, including the provision of affordable housing units during that period. Key goals
related to the Council’s priorities include:
1. Contributing to a sense of community and place in neighborhoods and commercial districts
2. Assuring a high quality of development and design
3. Protecting and broadening the City’s tax and revenue base
4. Preserving and enhancing key environmental features
5. Accommodating housing for all segments of the population
6. Promoting transportation alternatives such as walking, bicycles, and transit
The Comprehensive Plan is expected to be complete in draft form by the end of 2011 and to then
undergo environmental review (Environmental Impact Report) in 2012, prior to adoption. The Area
Concept Plans have both received preliminary review by the Planning and Transportation Commission,
and are scheduled for City Council consideration in mid‐2011. A draft Housing Element will be
considered by Council in mid 2011 as well, and then will be forwarded to the State Department of
Housing and Community Development for its review.
Rationale for Goals Selection
The City’s Comprehensive Plan is the basis for most land use, development, transportation, and
infrastructure decisions in the city. Land use and zoning decisions are integral to facilitating the
preservation, development or redevelopment of uses that contribute to the City’s economic vitality and
tax base. Provision of retail, recreational, and educational uses assures that residents and businesses
enjoy a high quality of services. A mix of transit, walking, and bicycle facilities allows all segments of the
population, including children, seniors, and disabled persons, equal access to safe and efficient
transportation. Protection of the environment is fundamental to the City’s Comprehensive Plan goals
and policies, and provides economic benefits as well. The East Meadow/West Bayshore/San Antonio
Area Concept Plan implements City goals to protect existing commercial uses, better assure that
adequate public services are available to surrounding residential neighborhoods, and provide non‐
vehicular transportation connections to the Baylands and other amenities. The California Avenue/Fry’s
Area Concept Plan also serves to protect existing commercial and retail uses while providing the
potential for increased housing and mixed‐use opportunities and the creation of a pedestrian and transit
oriented neighborhood. The Housing Element Update will implement City goals to provide adequate
Page 9 of 13
workforce housing as well as housing for a variety of lower income households, while protecting the
value of existing residential neighborhoods.
Page 10 of 13
Land Use & Transportation Planning
(Facilitate in cooperation with local and regional agencies and organizations development of a short
and long‐term action plan to sustain Caltrain)
Executive Summary
Caltrain currently provides fixed rail commuter services to the City of Palo Alto. There are also two
Caltrain stations one located at University Avenue in Palo Alto and another at San Antonio in the City of
Mountain View. Palo Alto has the second highest Peninsula ridership numbers and Stanford University
represents over 50% of the Caltrain “go” commuter rail passes on the system. Thus, Caltrain is an
important component of the City’s transportation system and plays a critical role in helping local
employers and community residents in getting to and from their jobs to local and regional destinations.
Caltrain though is currently facing an unprecedented operating deficit (e.g., $30M) and is planning,
effective July 1 of this year, to make major service cuts to balance their budget. These cuts would leave
Caltrain providing commuter rail services during peak rush times. Caltrain is also the only major regional
commuter transportation system without a dedicated funding source.
Given the importance of Caltrain service to the Palo Alto business community, Stanford University, Palo
Alto residents and to the Peninsula regional transportation system the City is looking to participate,
partner with and support actions that would put in place a viable financial plan to secure short and long‐
term financial stability for Caltrain. Identified below are goals for FY2011. These goals are not in rank
order:
1. Host a Palo Alto community forum in partnership with the Silicon Valley Leadership Group
(SVLG) to communicate and inform community members about the current financial plight of
Caltrain and to secure ideas and suggestions from the community, riders, and businesses about
potential solutions to produce a viable financial model
2. Consult with our federal and state legislative advocacy firms to advise the City on what
methodologies, programs, and tools may be available to help financially support the
modernization of Caltrain (e.g., electrification, positive train control etc.)
3. Explore and evaluate with partners (including public agencies: San Francisco County and City,
San Mateo County, Santa Clara County, Metropolitan Transportation Commission (MTC), major
private employers, Stanford University and others) the viability of developing a dedicated
revenue stream to fund ongoing Caltrain operations (e.g., sales tax, parcel tax)
Rationale for goals selection
The rationale for selecting these goals is to develop a sustainable, long‐term financial plan for Caltrain
on the Peninsula. Caltrain is, as noted earlier, experiencing large operating deficits which will mean
significant service reductions in the near term. In addition, Caltrain does not have sufficient funding to
invest in capital plant modernization (e.g., electrification). This modernization would assist Caltrain in
increasing ridership which would help contribute to a more stabilized financial model for the system.
Page 11 of 13
Sustainable Community Strategy (SB375)
(Actively participate in preparation of regional Sustainable Communities Strategy (SB375), Regional
Housing Needs Allocation (RHNA)
Executive Summary
The Sustainable Communities Strategy (SCS) required by SB375 and the accompanying Regional Housing
Needs Allocation (RHNA) are important regional planning initiatives for the Bay Area. The City of Palo
Alto will be affected by the land use, housing and transportation policies and incentives associated with
the efforts of the regional agencies, particularly the Association of Bay Area Governments (ABAG) and
the Metropolitan Transportation Commission (MTC). The City expects to provide meaningful input to
these initiatives, and to work with other Santa Clara County cities to assure a voice for the sub‐region.
Key goals related to the Council’s priorities include:
1. Enhancing sustainability by promoting sustainable land development patterns and
facilitating alternative transportation modes
2. Participating in regional planning and transportation solutions where appropriate, and
assuring that housing opportunities accommodate multiple segments of the population
3. Using land use and zoning techniques to enhance the potential for economic development
and increased revenues and tax base
4. Contributing to a sense of community and place in neighborhoods and commercial districts
Rationale for Goals Selection
The City’s sustainability objectives are integral to its current and long‐range planning, and are embodied
in the Comprehensive Plan, the Climate Action Plan, and many other policies and programs. The
Sustainable Communities Strategy is an opportunity to implement these objectives within a regional
framework, providing for effective transportation alternatives, efficient land use patterns, and socially‐
responsible housing solutions (RHNA).
Active participation in the SCS and RHNA is critical to assure that the City’s goals of protecting the
character of its communities, encouraging adequate transportation alternatives, and providing an
equitable balance of economic growth with a reasonable accommodation of housing demands. The City
must also assure that the regional efforts are in sync with the Comprehensive Plan Amendment and
other citywide planning and transportation efforts.
The SCS and RHNA process will be intensive during 2011, though the final products for each will not be
approved until late 2012 or early 2013. The City’s Planning Director is active in regional and local
professional meetings to develop and review the SCS, the City Manager is involved in the countywide
managers’ association, and the Council participates in the Cities Association of Santa Clara County.
Councilmember Scharff is a member of the RHNA Housing Methodology Committee. Staff will present
regular updates and opportunities for direction and input to the SCS and RHNA processes to the
Planning and Transportation Commission and City Council throughout the year.
Page 12 of 13
Pedestrian and Bicycle Master Plan
(Prepare Pedestrian and Bicycle Master Plan Update)
Executive Summary
The current Bicycle Master Plan serves as the City’s guide for identifying and setting priorities for bicycle
transportation projects and programs in the community. The last update to the Bicycle Transportation
Plan occurred in 2003. This current update also includes a Pedestrian element for the first time,
providing an opportunity to include more robust projects and programs that benefit key transportation
infrastructure not normally evaluated in a bike‐only plan, including trail projects for recreational and
commute use. An updated Pedestrian and Bicycle Plan is also essential for accruing funding from
regional grant sources. This year, upon development of the plan, the City will embark on an aggressive
update of its bicycle and pedestrian facilities based on the following goals:
1. Continue to lead in providing for transportation modes other than single‐occupancy vehicles, in
order to provide alternatives to avoid traffic gridlock, enhance safety for children and adults,
and reduce greenhouse gas emissions.
2. Identify and implement Best Practices in bicycle and pedestrian system design for both new
projects and updates to existing facilities such as colored bike lanes, bike boxes, and non‐
intrusive detection methods.
3. Continue successful education efforts for the use of bike/walking transportation modes to
schools, but strengthen the link between neighborhood communities and schools through both
capital projects and education programs.
4. Implement bicycle and pedestrian facilities to link major employment centers in the City, such as
Stanford University, with existing transit facilities and other trail/street networks.
5. Identify and implement new innovations in bicycle design and pursue processes that allow their
implementation in the City of Palo Alto and beyond.
6. Identify and pursue regional grant sources to implement Bicycle and Pedestrian Master Plan
projects and programs such as the Highway 101 Bike/Ped Bridge at Adobe Creek.
Development of the new Bicycle and Pedestrian Master Plan is currently in process with the assistance
of consultant support. A Citywide community meeting will be held in March along with a Council study
session in April. Planning and Transportation Commission input will occur in February and June with
final City Council consideration in July. Implementation of the plan will begin immediately in the 2011‐
12 fiscal year.
Rationale for Goals Selection
The City of Palo Alto has long been a leader in the design of bicycle facilities and continues to see the
benefits of early education to youth in promoting walking and bicycle use as effective transportation
modes. Newer design standards now exist and the City of Palo Alto must modify its infrastructure to be
in line with national best practices. In addition, the City of Palo Alto has a unique opportunity to lead
the way in bicycle and pedestrian infrastructure design and program education because of its open
community acceptance to these transportation modes. Inclusion of a pedestrian element into the new
Page 13 of 13
plan for the first time also allows the City to better complete links between street infrastructure such as
bike lanes and sidewalks to park facilities and trails and allows the use of new Bicycle Expenditure Plan
fund sources for those efforts.
Youth Well‐Being
City Council Strategic Priority Goals for Fiscal Year 2011
Youth Well‐Being
(Implement Project Safety Net and Monitor fundraising for Magical Street Bridge)
Executive Summary
The City of Palo Alto plays two important roles with regard to Community Collaboration for
Youth Well‐Being. First, the City plays a role of convener and coordinator, bringing the
community together in order to effectively harness the tremendous community talent, expertise
and goodwill that surround youth and teens, so that our community may have the greatest
impact in fostering youth well‐being. A meaningful example of the City’s role as convener and
coordinator is seen in the Project Safety Net (PSN) Community Task Force. PSN is focused on
developing and implementing a comprehensive community‐based mental health plan for overall
youth and teen well‐being in Palo Alto. A focus in 2011 is to support PSN and the specific goals
as defined in the PSN Plan (www.PSNPaloAlto.org), which includes gatekeeper training,
Developmental Assets initiative; peer‐to‐peer engagement, teen education on drug and alcohol
abuse, track watch, youth forum and celebrating youth friendly businesses.
Secondly, the City plays a direct role providing programs, services and facilities for youth and
teens so they may thrive; this is also done in collaboration with the City Libraries such as Friends
and Foundations support. Examples include the variety of afterschool programs at the Palo Alto
Teen Center, Children’s Theatre, Junior Museum and Zoo, Art Center and Rinconada Pool. The
City’s capacity to provide programs, services and facilities for youth well‐being is dependent on
community collaboration through the substantial support of Friends groups and Foundations.
Supporting youth and teen programs and services along with the respective Friends groups and
Foundations will also be a priority for 2011. An exciting example of community collaboration can
be seen in the vision to build the “Magical Bridge Playground” from the Friends of the Palo Alto
Parks. The Magical Bridge Playground is planned for Mitchell Park and will be Palo Alto’s first
playground accessible to people of all abilities and all ages.
Below are some specific goals and expected outcomes related to the Council priority Community
Collaboration for Youth Well‐Being. It is important to note that the goals below are not the only
City activities that support youth well‐being but rather a select few that are particularly
pertinent for 2011:
2
1. Coordinate the Project Safety Net Community Task Force and guide the implementation
of the PSN Plan
Convene monthly Project Safety Net meetings to provide the space, atmosphere
and time for progress reports, community collaboration and decision making
Create a communications plan for Project Safety Net to keep the community
informed on the City’s support of youth and teens
Coordinate two community trainings on identifying individuals at risk of suicide
(gatekeeper training) and how to report suicide threats to the appropriate parental
and professional authorities
Develop and provide businesses with a simple set of specific opportunities to
support youth and teens
2. With Palo Alto Unified School District (PAUSD) create an effective and sustainable
structure for the Project Safety Net Community Task Force
Develop a Memorandum of Understanding between Project Safety Net Community
Task Force and its members defining roles, responsibilities and commitments
Create a strategic plan to sustain not only the day to day activities of PSN but more
importantly how various community efforts for youth well‐being work together
Secure private funding for PSN through grants, donations and other means
3. Incorporate the Developmental Assets into the planning, implementation and
evaluation of City programs and services for youth and teens
Include Developmental Assets language into job descriptions for staff that work with
youth and teens
Provide Developmental Assets training to all staff that work with youth and teens
Measure Developmental Asset outcomes in our youth and teen programs
4. City Council and staff to engage youth and teens in community decision making
Actively participate and help coordinate the 2011 Youth Forum
City Council to hold a study session with the Youth Council
Provide opportunities for teens to be involved in community decision making
through teen leadership groups and other means
3
5. Celebrate and recognize youth and teens along with community members that make an
outstanding contribution to supporting youth
Encourage and coordinate impromptu special events and recognition opportunities
to celebrate youth and teen accomplishments
Publically recognize community members and organizations that make an
outstanding contribution to supporting youth
6. Support the Friends of the Palo Alto Parks goal of building Palo Alto’s first universally
accessible playground
Monitor private fundraising efforts for the construction of the Magical Bridge
playground and report on the status of fundraising to the City Council
Rationale for goals selection
The rationale for selecting the goals described above is their potential for lasting impacts on
youth well‐being. The goals build on the 2010 work of the Project Safety Net Community Task,
which articulates a plan of action for supporting youth and teens in Palo Alto. The PSN plan
hinges on our ability to effectively leverage community resources and mobilize people, agencies
and groups with common interests to work together for youth well‐being. Consequently,
specific goals to create a sustainable Project Safety Net Community task Force are deemed
essential. Moreover, the City has a variety of youth and teen programs that will benefit from
the Developmental Assets model for youth well‐being. The goals define clear steps of
incorporating the Developmental Assets into the fabric of how we plan and evaluate programs
and services for youth and teens.
Lastly, the Magical Bridge Playground is called out specifically because it is a community
collaboration to build the first playground accessible to people of all abilities and all ages in Palo
Alto. Supporting the Friends of Palo Alto Parks as they raise funds to build this accessible
playground is a commitment to support children of all abilities.
City of Palo Alto (ID # 1892)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 7/11/2011
July 11, 2011 Page 1 of 2
(ID # 1892)
Council Priority: City Finances, Community Collaboration for Youth Well-Being,
Emergency Preparedness, Environmental Sustainability, Land Use and
Transportation Planning
Summary Title: City Council Priorities Quarterly Report
Title: City Council Strategic Priorities Quarterly Report for the Period Ending
June 30, 2011
From:City Manager
Lead Department: City Manager
Recommendation
Approval of the City Council Strategic Priorities Quarterly Report for the
period ending June 30, 2011.
Executive Summary
The City Council adopted Council priorities earlier this year on January 22,
2011.
Background
The City Council was provided a report in April of this year that included a
master list of the Council priorities and key goals under each priority. At
that time, Staff indicated they would provide quarterly update reports to
the City Council. The enclosed report is the first quarterly update report on
the progress of the priorities for the period April to June 2011. The report
includes the original information, plus the current status and next steps for
each priority. The City Council will receive the next report in early October
for the period of July to September 2011.
Attachment
City Council Strategic Priorities Quarterly Report Summary, April 1 to June
30, 2011
July 11, 2011 Page 2 of 2
(ID # 1892)
Attachments:
·Attachment A -Strategic Priorities Quarterly Report (PDF)
Prepared By:Danille Rice,
Department Head:James Keene, City Manager
City Manager Approval: James Keene, City Manager
City of Palo Alto, City Manager’s Office
www.cityofpaloalto.org 650.329.2100
City of Palo Alto 2011
Strategic Priorities Quarterly Report
July 11, 2011
Volume 1, Issue 1
For the period ending June 30, 2011
INSIDE THIS ISSUE
2011 Strategic Priorities Summary Pages 3‐4
Strategic Priorities Narratives:
City Finances Pages 5‐14
Emergency Preparedness Pages 15‐22
Environmental Sustainability Pages 23‐34
Land Use & Transportation Planning Pages 35‐44
Youth Well Being Pages 45‐52
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2011 Strategic Priorities Summary
A. City Finances (CF)
Goals
1. Complete labor negotiations with all major bargaining groups
2. Complete refuse fund study and stabilization
3. Complete economic development strategic plan
4. Execute new budget and fiscal measures to help ensure long‐term financial stability
5. Infrastructure Blue Ribbon Commission to complete analysis of the City’s long‐term infrastructure
needs and report to the City Council
B. Emergency Preparedness (EP)
Goals
1. Conduct community exercise
2. Evaluate a secondary electrical transmission line source
3. Implement recommendations of Foothills Fire Management Plan
4. Implement Office of Emergency Services (OES) restructure
5. Improve Emergency Operations readiness
C. Environmental Sustainability (ES)
Goals
1. Evaluate construction of composting digester or alternatives
2. Evaluate plan to introduce electric vehicle (EV) charging stations at commercial sites, residential
sites, and City facilities
3. Establish formal collaboration with Stanford University
4. Explore methods to integrate Palo Alto Green into City sustainability programs
5. Prepare Urban Forest Master Plan
D. Land Use & Transportation Planning (LUTP)
Goals
1. Complete strategies and plans at the Development Center (DC) to improve customer service and
accountability
2. Complete draft Rail Corridor Study outlining measures to provide for community land use,
transportation, and corridor urban design
3. Complete Stanford University Medical Center Renewal and Replacement Project
4. Substantially complete update of the City’s Comprehensive Plan Amendment/Housing Element
Update and 2 Area Concept Plans
5. Facilitate, in cooperation with local and regional agencies and organizations, the development of a
short and long‐term action plan to sustain Caltrain
6. Actively participate, in preparation of, regional Sustainable Communities Strategy (SB375), and
Regional Housing Needs Allocation (RHNA)
7. Prepare Pedestrian and Bicycle Master Plan update
Project Tracking Report (April 1 – June 30, 2011) Page 5
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A. City Finances (CF)
Executive Summary:
City finance strategies form the foundation for the City Council identified priorities. A stable financial
picture in the short and long‐term ensures the City’s ability to deliver on all five Council priorities.
Sound City finances are integral to Palo Alto’s quality of life.
A key principle of the City’s finance objectives is to provide for the City’s finances in the near and long‐
term. For example, the City negotiates labor agreements on a periodic basis, and the contracts
envisioned during this cycle are ones where the City plans to make meaningful long‐lasting changes to
key City legacy costs (e.g., pension and health care). The City is working toward developing a
sustainable business model for funding ongoing infrastructure needs while eliminating a major backlog
of City projects. These efforts will take time, yet this investment is well worth the effort. This work
will result in improving the overall high quality of life that Palo Alto citizens have come to rely and
expect from their City government. Identified below are goals for Fiscal Year 2011.
1. Develop and execute new human resource contracts that help the City manage its labor costs to
a sustainable level over the long‐term.
2. Execute an economic development program that supports and creates new municipal revenue
streams to support vital City services, and positions the City for the 21st century innovation
economy.
3. Outline a comprehensive initiative to fund ongoing infrastructure maintenance, and the existing
backlog of City projects. A quality infrastructure base is vital to the community’s quality of life,
and attracting and sustaining a robust business base to support City services.
4. Explore in‐depth available potential revenues, along with expenditure reductions that enable
the City to create a long‐term sustainable fiscal ecosystem for the City to maintain and
ultimately enhance City service delivery and quality of life. The solution to the City’s finances
should be multi‐dimensional, incorporate new or enhanced revenues, reset long‐term labor
contracts, and use new methods to deliver City services.
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1. Project: Complete labor negotiations with all major bargaining groups
Department: Human Resources Department
Project lead: Interim Human Resources Director
Project start date: May 2010
Target completion date: December 2011
Background and description:
In 2009, the City took the lead among Bay Area public agencies by initiating steps in contract
negotiations with Service Employees International Unit (SEIU) and Management and Professional
employees to implement a two‐tier retirement benefit. The new benefit changed the retirement
formula for new hires to 2% @60. The City also implemented an employee medical contribution with
non‐public safety employee groups (e.g., management, professionals, and SEIU employees). Over the
past year, the City has been involved in difficult negotiations with two out of the four public safety
unions: International Association of Firefighters (IAFF) Local 1319, and the Palo Alto Police Manager’s
Association (PAPMA). The other two sworn safety units will begin contract negotiations in spring
2011. Many existing benefits were negotiated over an extended period of time and are long
established. These are challenging negotiations to address in a short period of time.
In 2010, Council reaffirmed the importance of attracting and retaining a quality workforce but
emphasized the critical need to balance this objective with a commitment to sustainable employee
compensation. In addition, Council directed that systemic problems and issues be addressed with
systemic solutions. As described in the City’s input to the Santa Clara County Grand Jury Report, the
City agreed that unsustainable employee costs must be aligned with available resources, taking into
consideration the City’s significant infrastructure needs and the public’s expectation of services. As
demonstrated by its balanced budgets, minimal use of reserves, AAA credit rating, and excellent
annual outside audits, the City prides itself on responsible financial stewardship and management.
The City fully intends to maintain these best practices and adjust costs and revenues as needed.
Progress is dependent on the City’s success in its collaboration with employee units. The City must
abide by contractual obligations of its labor contracts, as well as legal requirements to meet, confer,
and bargain in good faith over matters within the scope of representation. This places real and
practical constraints on the City’s ability to move forward with changes it may believe necessary, but
which are subject to negotiation. The City strives to reach agreements that ensure a sustainable
financial future, and one which provides excellent services to the community. Identified below are
goals for Fiscal Year 2011.
1. PAPMA is a new bargaining unit. The City and PAPMA are in negotiations to create their first
Memorandum of Understanding (MOU).
2. The City has been negotiating with the Fire Fighters’ Association since May 2010. The City
determined that a further productive movement toward a negotiated agreement cannot be
reasonably expected after eight months of negotiations, and declared impasse on February 15,
2011. This action initiated a binding interest arbitration of the unresolved issues. Dates for
Arbitration have been set for the Fall.
3. The City typically negotiates with the Fire Chiefs’ Association after the Fire Fighters’
negotiations’ conclude. Given the lack of progress as described above, the City will initiate
negotiations with the Fire Chiefs in spring 2011 with the goal of reaching an agreement in Fiscal
Year 2012.
4. The City and SEIU will meet in spring 2011 to prepare a successor agreement that is scheduled
to expire on June 30, 2011.
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5. Palo Alto Police Officers' Association (PAPOA) deferred their scheduled wage increase in FY 2010
for one year to provide relief to the City’s budget and negotiated an additional year on their
existing contract for a new expiration date of June 30, 2011. Negotiations o begin in the Spring,
2011.
Current status:
The City continues in negotiations with PAPMA to create their first Memorandum of
Understanding (MOU.) The City reached impasse in negotiations with IAFF/Palo Alto Firefighters
in February 2011. Arbitration hearing is scheduled in September 2011. The City has continued
with informal discussions in hope of reaching agreement in accordance with Council direction.
Negotiations with the Fire Chiefs’ Association was initiated in May 2011. The City reached an
agreement with SEIU to rollover SEIU’s contract, keeping its existing terms, and extending the
contract until June 30, 2012. The City held preliminary off‐the‐record discussions with PAPOA in
the Spring of 2011, with formal negotiations targeted to begin in July 2011.
Next steps:
The City will begin formal negotiations with PAPOA in July 2011. The Utilities Management and
Professional Association of Palo Alto (UMPAPA) is a new unit. The City certified UMPAPA in May 2011
and will begin negotiations in July 2011.
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2. Project: Complete refuse fund study and fund stabilization
Department: Public Works Department
Project lead: Interim Public Works Director
Project start date: August 2010
Target completion date: December 2011
Background and description:
Studying the Refuse Fund and executing a plan to balance and stabilize the fund is one goal identified
by the Council. This enterprise fund supports a large array of City services including garbage,
recyclables, compostable collection, disposal, street sweeping, household hazardous waste services,
and supporting City‐owned facilities. City‐owned facilities include the Recycling Center and the Palo
Alto Landfill and Composting Facility. Due to multiple factors, such as the success of the City’s zero
waste services, downturn in economy, and use of reserve funds, the Refuse Fund financial health has
been compromised. Identified below are goals for Fiscal Year 2011.
1. Rebuild the Refuse Fund’s Rate Stabilization Reserve to a level that meets established
guidelines. This includes ensuring balanced annual operating budgets and establishing a stable
annual revenue stream.
2. Assess and realign refuse rates among users. The City is finalizing a Cost of Service Study. The
results of this study will be used to evaluate the current refuse rate structure, and help make
recommendations for changes.
3. Continue to work towards zero waste. The City has made great strides towards reaching this
goal, and much of its success is connected to the Refuse Fund conservation pricing rate
structure.
Current status:
Major progress has been made this fiscal year in returning the Refuse Fund to financial health and
stability. Fiscal Year 2011 revenues are matching expenditures for the first time since Fiscal Year 2008,
and reserves are no longer decreasing. The Palo Alto Landfill is being closed with substantial savings to
follow. Short and Long‐term time schedules have been developed to place the Refuse Fund on a
trajectory to full sustainability.
Next steps:
A major set of analysis will be presented to the Council on July 6, 2011 with refuse rate changes to
ensure financial health in Fiscal Year 2012. The Cost of Service Study is anticipated to be completed in
fall 2011.
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3. Project: Complete economic development strategic plan
Department: City Manager’s Office
Project lead: Economic Development Manager
Project start date: January 2011
Target completion date: December 2011
Background and description:
Economic development is nearly always a strategic priority for local municipal business retention and
business expansion. Business attraction strategies have direct correlation to revenues and City
services. Stable and predictable revenues are critical to the community’s quality of life. Identified
below are goals for Fiscal Year 2011.
1. Develop new revenue streams and innovative uses for under‐utilized City owned properties.
2. Provide leadership in the outreach and messaging for the Development Center (DC)
restructuring process.
3. Outreach to the City’s largest revenue generating and most innovative companies.
4. Create emerging technologies demonstration and pilot partnerships program partnerships,
especially with innovative green/clean tech companies.
5. Enhance the City’s Doing Business webpage and create engaging and effective marketing
collateral geared towards the City’s diverse business environment (i.e. retention and attraction
of different market segments), and transition to electronic marketing.
Current status:
A draft of the Economic Development Strategic Plan was presented to the Policy & Services
Committee in March 2011. A second iteration was brought forward to the Committee in June 2011.
In the meantime, work has progressed on all of the above items:
1. A plan has been developed at the staff level on a revenue generating use for a City‐owned small
parcel and will be returning to the Council in fall 2011.
2. The DC restructuring effort continues, and there has been significant outreach to the business
community and press from the Economic Development Team. Staff will be bringing
recommendations for the DC improvements to the Council at the August 1, 2011 meeting.
Recommendations include a recommendation for central management of all DC operations,
including utility and public works functions.
3. The Economic Development Team has targeted many of the City’s largest revenue generating and
several innovative companies for outreach. Staff has made numerous contacts by email, phone,
and in person. In many cases, solutions to issues have been orchestrated by the Economic
Development Team, including many companies expanding or re‐locating to Palo Alto.
Next steps:
A third iteration of the plan will be brought forward in September 2011 with the idea to separate the
larger policy discussion and the actual team plan. While the policy discussion is expected to be
ongoing, the plan and outlined deliverables, including those prioritized above, are expected to move
forward as a City Manager directive.
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4. Project: Execute new budget and fiscal measures to help ensure long‐term financial
stability
Department: Administrative Services Department
Project lead: Chief Financial Officer
Project start date: May 2011
Target completion date: Fall 2011
Background and description:
The City currently completes and uses a Long‐Range Financial Forecast (LRFF). The forecast provides
actual financial data for the most recent completed budget year, adopted and projected financial data
for the current budget year, and projected financial data looking forward ten years (to 2021). The
LRFF is used to project and quantify a baseline projection of revenues, expenditures, cash flows, and
fund balance for the General Fund. The forecast enables the City to take steps to plan for potential
revenue and expenditure increases/decreases, and future liabilities and costs (e.g., health care and
PERS pensions). The forecast enables policy makers to evaluate financial impacts of potential
initiatives and to plan ahead to ensure the long‐term fiscal stability of the City. To achieve fiscal
stability it is critical for revenues to exceed expenditures on an ongoing basis. The LRFF shows a
snapshot of the expected ten‐year relationship between revenues and expenditures to enable
corrective action to be taken if needed. The forecast helps community members understand the
organization’s present and future financial capabilities and resource allocations to support services
and programs. Coupled with the City’s annual budget documents, the LRFF provides an invaluable
source of financial information for those interested in the City’s financial plan.
The plan allows the City to evaluate potential new revenues, expenditure reductions, and service
options that can achieve a stronger more sustainable budget. For example, last year the City made
substantial changes to its PERS pension plan by moving to a new two‐tier formula (2% @ 60) for non‐
safety personnel. In addition, the City will be implementing an employee contribution to healthcare
this year, which will reduce the City’s healthcare expense immediately. The City needs to execute
additional measures to ensure long‐term financial sustainability. Identified below are goals for Fiscal
Year 2011.
1. Identify new, potential revenue sources including preparation of a report outlining various
potential revenue options, the pro’s and con’s of each option, and estimated potential revenues.
Potential new revenues options include but are not limited to ambulance service subscription tax,
business operations tax, City‐wide parcel tax, increase in property transfer tax, and increase in
utility users tax.
2. Develop plans to address increased employee compensation (salary and benefit) costs, and
develop plans to share cost increases with employees.
3. Identify additional operational efficiencies, such as contracting out City services, exploring
potential partnerships with existing non‐profit organizations and non‐governmental organizations,
adjacent cities, and other governmental organizations. Also consider establishing partnerships
with regional public agencies on the Peninsula to jointly act to deliver services and programs.
a. Analyze and review organizational structure for potential functional consolidation options (e.g.
placing all maintenance functions within one department), and consolidation options with
regional agencies that may provide similar services to the City (e.g. public safety and dispatch
services).
b. Consider the potential ability to civilianize certain public safety management positions.
c. Consider an exclusive towing services contract in the City.
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d. Explore contracting out fleet maintenance and utility billing services.
e. Explore partnerships with private entities and/or Friends Groups for cost sharing for
community services.
4. Identify a long‐term sustainable financial model to address the City’s infrastructure backlog, and
develop a model to fund infrastructure preventive maintenance. This model will be developed in
coordination with the Infrastructure Blue Ribbon Commission (IBRC) and presented to the Finance
Committee.
Current status:
Staff is working on a draft report and anticipates providing the report to the Council in the fall 2011.
The timing is based on coordination between this report and a draft report from the IBRC.
Next steps:
Completion of the report is anticipated in fall 2011.
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5. Project: Infrastructure Blue Ribbon Commission to complete analysis of the City’s
long‐term infrastructure needs and report to the City Council
Department: City Manager’s Office
Project lead: Deputy City Manager
Project start date: November 2010
Target completion date: December 2011
Background and description:
The Infrastructure Blue Ribbon Commission (IBRC) was established to make recommendations to the
Council to address the City’s current infrastructure backlog. The IBRC will return to the Council in the
fall 2011 after considering the following list of questions:
1. What is the complete listing of the City’s infrastructure backlog and future needs? What criteria
should be used to prioritize this list?
2. Are there ways the City’s infrastructure needs can be prioritized into five year increments that
can be financed and effectively implemented given current Staffing resources?
3. What are potential financing mechanisms that could be used to address the City’s infrastructure
needs? Should there be a one‐time financing mechanism or some ongoing source of
infrastructure funding? What are the options for each of these choices?
4. Is a bond measure the best mechanism for funding the infrastructure backlog? If so, when
should this move forward and how could it be structured?
5. How can public/private partnerships be leveraged as an infrastructure funding mechanism?
6. How are project cost estimates developed and are these in alignment with other local
jurisdictions?
7. How do Enterprise Fund infrastructure projects intersect with General Fund infrastructure
projects?
Current status:
The IBRC divided into three sub‐committees and analyzed the project’s problems. Information was
gathered via surveys, Staff interviews, meetings with other cities, and individual members’ research.
Staff and IBRC Commissioners developed the most detailed and extensive needs assessment database
prepared to date. On May 17, 2011 Staff and four IBRC Commissioners toured multiple City parks,
bike paths, streets, bridges, and medians to view examples of the infrastructure backlog and needs.
Next steps:
The three IBRC sub‐committees are preparing reports and a Council study session is being scheduled
in July 2011. A draft report from the IBRC is anticipated in September 2011, with a final report
returning to Council in December 2011.
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B. Emergency Preparedness (EP)
Executive Summary:
The City, like any community in the Bay Area, is susceptible to a variety of natural hazards including
earthquakes, floods, wild‐land fires, and man‐made disasters. The City is committed to protecting life,
property, and the environment through a number of activities including preplanning, training, rapid
emergency response, and public safety education. Identified below are goals for Fiscal Year 2011.
1. The City will conduct one major community emergency preparedness exercise. Staff will work
with community groups to plan and host a full‐scale exercise which will include multiple
neighborhood groups and City departments. This exercise will be consistent with accepted
national exercise guidelines.
2. The City will evaluate and complete a feasibility analysis and report on alternatives for a
secondary electrical transmission source. The new transmission source will be established in a
separate geographical area that would eliminate the possibility of a single contingency outage
interrupting power to the City.
3. Implement recommendations of the Foothills Fire Management Plan to address treatment and
mitigation measures that are required to ensure the viability of evacuation routes and protect
life and property.
4. Implement the Office of Emergency Services (OES) restructuring, and focus on four key
readiness areas: preparedness, mitigation, response, and recovery.
5. Improve emergency operations readiness per the City’s Emergency Operations Plan. The City
will work to better coordinate all City facilities and personnel to respond in a coordinated and
cohesive fashion.
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1. Project: Conduct community exercise
Department: Police Department
Project lead: Acting Public Safety Director
Project start date: January 2011
Target completion date: September 2011
Background and description:
The City and the community seek to improve response time to major incidents. A coordinated, well‐
planned response requires an exercise component in order to rehearse and clarify Staff and resident
roles. Such exercises are building blocks in support of a strategic, multi‐year training and exercise
plan. Deliverables identified are as follows, and not in rank order:
1. City departments will work with volunteer groups and external stakeholders to develop the
scope, purpose, objective, and scenario for a City/community exercise.
2. Identify a joint community/Staff exercise design team to coordinate/manage the exercise, and
support community resilience.
3. Encourage participation within community groups and volunteer organizations.
4. Manage exercises which will evaluate the following: 1) intra‐City communications; 2) sharing
real‐time communications with external stakeholders; and 3) internal emergency preparedness
procedures.
5. Develop an after‐action report and corrective action plan post‐exercise.
Current status:
In 2010, the Palo Alto Neighborhoods (PAN) community group, under the leadership of Lydia Kou,
pioneered the first post‐major‐earthquake scenario called Quakeville. Residents "camped" in a local
park which simulated the immediate aftermath and illustrated some of the challenges that could arise.
In 2011, PAN will partner with the City, via the Palo Alto/Stanford Citizen Corps Council, to involve
residents and Staff (police, fire, public works, utilities, etc.) in an expanded Quakeville community
exercise.
Next steps:
The Training and Exercise Design Team (TEDT), part of the City's adoption of the Homeland Security
Exercise and Evaluation Program (HSEEP), includes Lydia Kou and subject matter experts Sergeant
Wayne Benitez, Sergeant Scott Savage, and Officer. Ken Dueker. The TEDT has met several times to
define the scope and objectives of the exercise. Next steps will be to define the "vignette" scenarios
that will include the Block Preparedness Coordinator (BPC) program communicating with the new
Mobile Emergency Operations Center (MEOC). A series of BPC training classes, neighborhood‐level
training sessions, and mini‐drills have been ongoing, in preparation for the big event.
Project Tracking Report (April 1 – June 30, 2011) Page 18
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2. Project: Evaluate a secondary electrical transmission line source
Department: Utilities Department
Project lead: Utilities Director
Project start date: July 2010
Target completion date: December 2011
Background and description:
In February 2010, the City had electricity interrupted to the entire service area for over ten hours. This
outage was due to an airplane leaving the Palo Alto Airport striking Pacific Gas and Electric (PG&E)
transmission lines. The purpose of this initiative is to investigate alternatives to install a secondary
electrical transmission source to the City. The new transmission source would be established in a
separate geographical area that would eliminate the possibility of a single contingency outage
interrupting power to the City. Identified below are goals for Fiscal Year 2011.
1. Continue coordinating with PG&E and the Independent System Operator (ISO) on including a
transmission line connecting PG&E’s Ames Substation to Palo Alto’s Adobe Creek Substation.
This project would be part of PG&E’s system plans to improve transmission service in the Bay
Area.
2. Continue discussions with Stanford University on a project that would connect the City’s Quarry
Substation to Stanford’s Substation, and to the Stanford Linear Accelerator’s 230 kV Substation.
3. Prepare a report for Council on viable alternatives for providing a secondary transmission source
and take action per Council direction.
This project is expected to take between three and six years to complete once a viable alternative is
determined due to planning and environmental requirements for a transmission facility.
Current status:
The California Independent System Operator (CAISO) submitted its draft plan in April 2011. The draft
plan did not recommend that the Ames to Adobe Creek Substation line be installed in the current
planning year. CAISO continues to review this alternative and it may be included in future planning
years.
Next steps:
As a result of this recommendation, the City proposed that the CAISO consider an alternative
transmission line connecting the SLAC Substation to the Quarry Road Substation. The City met with
the CAISO in June 2011 and identified numerous issues requiring further resolution. Additional
meetings are planned and negotiations are ongoing. The City will continue to include Stanford
University in discussions with the ISO regarding the review of the alternate proposal.
Project Tracking Report (April 1 – June 30, 2011) Page 19
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3. Project: Implement recommendations of Foothills Fire Management Plan
Department: Fire Department
Project Lead: Acting Public Safety Director
Project Start Date: January 2011
Target Completion Date: Ongoing
Background and description:
In 2009, the City commissioned a study to evaluate the fire potential in the wildland‐urban interface.
The study revealed that there are treatment and mitigation measures that are required to ensure the
viability of evacuation routes and to protect life and property. Identified below are goals for Fiscal
Year 2011.
1. Extend consultant’s contract to assist Staff in implementing the Foothills Fire Management Plan.
2. Submit the application to classify the Foothills Fire Management Plan as a Community Wildfire
Protection Plan; explore grant eligibility under Community Wildfire Protection Plan to fill the
estimated $715,000 obligation.
3. Seek Public Works Capital Improvement Program for ongoing mitigation activities to implement
recommendations.
4. Host three educational sessions for residents to review the community’s role in mitigation,
prevention, response, and recovery.
5. Apply for CALFIRE Work Crew as one option to assist in mitigating identified hazards in the
Foothills Fire Management Plan.
Current status:
Staff issued a new scope of work with the City’s consultant Wildland Resource Management, Inc. The
scope included implementation plans, using a fiscally‐constrained environment, which identified
possible cost‐saving alternatives for some abatement processes and possible grant funding (e.g.,
California Fire Safe Grants). The application was successful, and the plan has been accepted as a
Community Wildfire Protection Plan. A City consultant will help identify grant funding. Capital
Improvement Project (CIP) funding for $200,000 has been identified in Fiscal Year 2012. Staff is
planning three public educational meetings, which will cover homeowner fire mitigation (defensible
space laws), the Block Preparedness Coordinator (BPC) program, and evacuation. The use of CALFIRE
Work Crews is anticipated to be covered in subsequent funding options.
Next steps:
Following CIP funding allocation and to ensure work is prioritized based on Plan priorities, Staff will
form an interdepartmental team, including Wildland Resource Management Inc., to coordinate the
implementation and develop a work plan. The work plan will include biological surveys and treatment
prescriptions.
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4. Project: Implement Office of Emergency Services (OES) restructure
Department: City Manager’s Office/Police Department
Project lead: Assistant City Manager/Acting Public Safety Director
Project start date: May 2011
Target completion date: Fall 2011
Background and description:
In October 2010, the City Manager’s Office commissioned a study to review the City’s practices in
emergency management. A consultant was hired by the City to conduct a gap analysis and make
recommendations to improve emergency/disaster readiness. The consultant interviewed key
stakeholders, inspected critical infrastructure, and reviewed emergency planning procedures. Staff
and the consultant presented recommendations to the Council at a study session held in spring 2011.
The report examined how the City and community can improve in the four key emergency/disaster
readiness categories: preparedness, prevention, response, and recovery. The report examined the
appropriate staffing and structure for these emergency preparedness activities. The consultant
presented recommendations that can enhance the City’s coordination with the community.
Current status:
The OES consultant report was completed and reviewed by the Council and the Palo Alto/Stanford
Citizen Corps Council (CCC) in April 2011. In May, the Council's Finance Committee voted to fund the
implementation of the report. The Finance Committee recommended the following actions: 1) hiring
a OES Director; 2) funding one OES Coordinator position; 3) funding one administrative assistant
position; 4) funding the recommended hazard studies (such as HazUS); and 5) creating a separate OES
budget and structure.
Next steps:
Staff, with continued input from the CCC, seeks to move forward with the hiring process for the OES
Director. The report identified numerous high‐priority projects for the OES Director, including
completing various emergency plans, improving the City's Emergency Operations Center,
implementing training for City staff, and optimizing City‐sponsored volunteer programs. Outreach and
interviews for the OES Director is anticipated to occur in the Third Quarter of the current Fiscal Year.
Project Tracking Report (April 1 – June 30, 2011) Page 21
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5. Project: Improve emergency operations readiness
Department: Police Department
Project lead: Acting Public Safety Director
Project start date: January 2011
Target completion date: Ongoing
Background and description:
The City seeks, per its Emergency Operations Plan to “incorporate and coordinate all facilities and
personnel…into an efficient organization, capable of responding in a coordinated and cohesive
fashion.” To better achieve this objective, the City will make a number of improvements in training,
equipment, and technology. Deliverables identified are as follows, and not in rank order:
1. Staff will implement a multi‐year, training and exercise plan designed to engage the community
and improve response capabilities.
2. Enhance interoperable communications and further develop virtual consolidation of dispatch
with neighboring communities.
3. Identify and seek grant funding for support equipment for emergency response operations.
Staff will explore regional partnerships and support joint planning initiatives, such as the
pending National Disaster Resiliency Center at NASA Moffett Field.
4. Develop and implement training for Staff on personal and family emergency preparedness.
Current status:
In September 2010, Staff held a study session with the Council. Numerous projects and plans for
improvement were identified, including the role of the new Palo Alto/Stanford Citizen Corps Council
(CCC), and the importance of regional efforts, such as the National Disaster Resiliency Center at
Moffett Field. Multi‐discipline training, such as Urban Shield, was discussed.
Staff efforts to improve the Emergency Operations Plan and training include the following:
Homeland Security Exercise and Evaluation Program (HSEEP): develop Multiyear Training & Exercise
Plan (MTEP); create Training and Exercise Design Team (TEDT); create a comprehensive, multi‐entity
Training Calendar; interface with regional TEDTs; hold joint‐planning meetings with community
stakeholders.
Regional Cooperation: Officer Dueker is the City’s liaison to regional training groups and exercises,
including the Great Shake Out and Urban Shield; continue to support nascent National Disaster
Resiliency Center at NASA, Moffett Field; review Section 13 of the September 2010 study session
report regarding other regional initiatives.
Emergency Plans: finalize City Continuity of Operations Plan (COOP), Recovery Plan, Pandemic & Public
Health Plan, and Community Emergency Plan; Rewrite the Emergency Operations Plan (EOP).
Emergency Operations Center: Staff are evaluating transition to Mobile Emergency Operations Center
(MEOC) as the primary EOC.
Support of other Council Priorities: It should be noted that some of the community‐based efforts are
supportive of youth well being. For example, the 41 Developmental Assets encourages the City to
create volunteer opportunities for youth. This same objective is part of the CCC. The integration of
businesses and business districts as "neighborhoods", as part of the Block Preparedness Coordinator
Program, supports the City finances priority.
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The ongoing contraction in sales tax revenue increases the burden on public safety to attract visitors
and shoppers to the City. Many revenue sources may be “fragile”, as a criminal incident or other
emergency could disproportionately harm such entities or areas. Due effort is appropriate to aid the
private sector in its preparation, response, and recovery. Officer Dueker is working with the Stanford
Shopping Center and Stanford Hospital in joint exercises and on a hazards vulnerability analysis.
Further, Officer Dueker is coordinating with Thomas Fehrenbach to expand this activity to other
private sector partners.
Next steps:
When the OES restructuring is complete, the City will start a long‐term process to improve its
resilience. The new OES Director will be tasked with surveying the existing situation, studying best
practices, and formulating a strategic plan for the next several years. While there are many areas of
improvement, it should be noted that the City's Block Preparedness Coordinator Program and CCC
were key factors in the Red Cross awarding the City with a 2011 Innovative Heroes Award.
An opportunity for Palo Alto is to be an innovative leader by establishing a solar‐powered, off‐the‐grid
wireless network for disaster recovery: the Community Disaster Network (CDN). One objective of the
CDN is to allow real‐time event reporting and information sharing among all levels of community
response and volunteer structures. During a major storm, when phone and electrical lines are
impaired, a Block Preparedness Coordinator could survey neighbors and fill out an online report form
on their laptop computer (or even iPad®) via the CDN. This information would then be relayed to the
City’s EOC and other key locations, all without the time‐consuming and laborious paper forms and
voice‐radio methods currently employed.
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C. Environmental Sustainability (ES)
Executive Summary:
Environmental sustainability is a core value and ongoing priority for the City. The City has been a
leader in this area in the Bay Area metropolitan region and in North America. The City is a Certified
Green Business and has adopted a Climate Protection Plan (CPP), Sustainability Policy, Palo Alto Green
Program, and continues to make strides in reducing greenhouse gas emissions (GHG). One recent
example is the initial installation of LED streetlights in the City. Identified below are goals for Fiscal
Year 2011.
1. Continue to look at the City’s utility plant operations for methods and strategies to increase the
ability to reduce GHG. This year a major focus will be to look at the financial practicality of new
composting digesters or other alternatives to reduce GHG’s.
2. Fleet operations and gas vehicles are a major contributor to GHG emissions. Staff will explore
the ability to install electric vehicle charging stations at various locations in the City to facilitate
and encourage the use of electric vehicles.
3. Stanford has a robust sustainability program and several initiatives underway and ongoing in
this area. Stanford is a leader in research and development of green technologies and practices.
The City will explore developing a more formal collaborative relationship with Stanford to
determine if there are synergies and potential partnerships to enable both entities to leverage
combined efforts to be leaders in sustainable communities.
5. The residents of Palo Alto have embraced many green practices on their own and with the
encouragement of the City. This includes recycling, use of available transit options (e.g.,
Caltrain), planting of trees, and many other homegrown initiatives. The City has a number of
sustainability programs and engages in practices to encourage sustainability in the community.
This initiative will provide a focused effort in looking at strategies and tactics to leverage
knowledge, resources, and talent to build a more sustainable community.
6. Palo Alto is a City with a considerable urban forest canopy. This canopy provides considerable
environmental and community quality of life benefits to the community. A master plan will
enable the City to create a long‐term plan for managing and enhancing this significant asset, and
help the City meet its sustainability goals.
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1. Project: Evaluate construction of composting digester or alternatives
Department: Public Works Department
Project lead: Interim Public Works Director
Project start date: October 2010
Target completion date: October 2011
Background and description:
Evaluating alternatives for handling the City’s organic residuals (e.g., yard trimmings, food scraps, and
wastewater solids) is a critical goal of the Council’s environmental sustainability priority. Identified
below are goals for Fiscal Year 2011.
1. Hire a consultant to evaluate a dry anaerobic digestion system.
2. Prepare an applicable level EIR, focused on 8‐9 acres of Byxbee Park, adjacent to the City’s
Regional Water Quality Control Plant.
3. Conduct a Preliminary Analysis before completion of the study.
4. Explore energy conversion technologies in conjunction with the Regional Water Quality Control
Plant long range facilities planning.
5. Explore partnering with local agencies within 20 miles of Palo Alto.
Current status:
The Preliminary Feasibility Analysis was completed on time and vetted in a series of public and Council
meetings. Proponents and opponents of a Palo Alto facility on the Landfill/Byxbee Park site had
extensive comments on the analysis. Comments were also received on the alternative regional sites in
the South Bay Area.
Next steps:
The key comments on the Preliminary Analysis were addressed and a draft Feasibility Study was
discussed by City Council at its June 27, 2011 Council meeting. A full study is anticipated to return to
the Council in fall 2011.
Project Tracking Report (April 1 – June 30, 2011) Page 26
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2. Project: Evaluate plan to introduce electric vehicle (EV) charging stations at
commercial sites, residential sites, and City facilities
Department: City Manager’s Office
Project Lead: Assist to the CM for Sustainability
Project start date: 2011
Target completion date: EV chargers installed July 2011; remainder of goals will continue through the
end of the year
Background and description:
Electric vehicles (EVs) are being introduced in the marketplace, and require new charging
infrastructure. Encouraging the use of EVs will reduce the community’s greenhouse gas emissions
(GHG), and help meet the Council approved Climate Protection Plan goal of reducing municipal and
community GHG emissions by 15% below 2005 levels by 2020. Having publicly accessible EV charging
stations at City facilities is one way of encouraging the adoption of EVs.
The City has undertaken a number of steps to facilitate the adoption of EVs. Staff has provided
charger technology and permitting requirement information to customers on the installation of
chargers in homes. An assessment of long‐term EV penetration in town has been undertaken, and in
September 2009, the Utilities Advisory Commission (UAC) received a report assessing the potential
impacts of EVs on the distribution system. Staff concluded that no short‐term capacity problems were
expected. Longer term, if several households within close proximity of each other purchased electric
vehicles, some larger transformers and secondary conductors may need to be installed to alleviate
localized capacity restraints. The Utilities department will continue to monitor charger installation
locations in the City. EV charging is being encouraged in the City’s Building Code. Staff has applied for
and obtained two State grants totaling $35,000 to install EV chargers at publicly available facilities. A
number of charging stations are anticipated at libraries utilizing Measure N bond funds. Identified
below are goals for Fiscal Year 2011.
1. Staff plans to return to the UAC and the Council with a number of policy level questions. These
may include:
a. How can the City best leverage private capital to install EV chargers?
b. Should free EV charging be provided at City facilities to the public?
c. Should the employee commute program include incentives for EV charging?
d. How can the City best deploy charging stations and optimally utilize the limited parking
space available downtown for EV charging?
e. What is the role of the Utilities Department in installing EV chargers?
f. Should the Utilities department offer time‐differentiated residential electric retail rate
for EV owners to encourage charging during evening hours in order to reduce the
adverse impacts on the electrical grid and distribution system?
2. Determine how to best leverage State grant funds to install EV chargers in publicly available
facilities, and explore the possibility of leveraging private equity capital to provide the funding
shortfall. EV chargers cost between $2,500 and $100,000 each, depending on charging speed
and between $1,500 and $50,000 each to install depending on proximity to electric service and
other location‐specific conditions.
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3. Determine locations to install chargers. There are two charging spots at City Hall and the Alma
Parking Garages; however, these are older charger technologies. Staff anticipates installing
three of the newer chargers at the same locations, while maintaining the older chargers for a
few more years. A faster level 3 charger is being considered at the street level on Hamilton
Avenue in front of City Hall, but would cost significantly more than the level 2 chargers. Other
public parking areas are being evaluated for EV charger installations.
4. A Request for Proposal (RFP) to solicit proposals from the private sector to optimally deploy EV
chargers is planned. This RFP will provide an option for the private sector to utilize the grants,
and add their own funds to install, own, and operate charging stations in town, and provide a
franchise fee to the City for utilizing public space.
5. Many of these goals will be accomplished by December 2011, with all goals expected to be
completed by June 2012.
Current status:
A multi‐departmental task force has been created and meets monthly to help develop an EV policy
and resolve related issues including: the installation of new and maintenance of existing EV chargers in
city facilities, developing a fee structure for using City EV chargers, developing an expedited permit
and inspection process for residential and business customers, and determining appropriate locations
throughout Palo Alto for City or privately installed EV chargers.
The internal task force is taking advantage of secured grant offerings from the Department of Energy
(DOE), California Energy Commission (CEC) and the Bay Area Air Quality Management District
(BAAQMD) to install chargers at publicly accessible locations. The first is a ChargePoint America
Program (DOE funded) grant that will provide the City with five Coulomb ‐ Level 2 chargers. A portion
of the installation cost will be offset by a grant from the Bay Area Air Quality Management District
(BAAQMD) and the remainder will be paid for by the Utilities Department. The five Coulomb – Level 2
chargers were received in June and will be installed in July in the following locations:
ChargePoint America Program – Coulomb Level 2 Chargers
No. Downtown Garage No. of Chargers Location ______
1 City Hall 2 A‐Level
2 Bryant Street 2 Level 2
3 Alma/High (South) 1 Level 2 ______
At the April 27, 2011 UAC meeting, the commission provided feedback regarding the Utility’s and the
City’s role with respect to EVs. The UAC supports cost recovery for EV‐related capital expenses and
electricity. In addition, the UAC supports the development of time of use rates to encourage evening
charging providing relief to the distribution system. To the extent that private funds are available, the
UAC did not encourage City‐owed and operated EV charging stations.
The internal task force presented to the Planning and Transportation Commission in late June 2011 to
get their feedback on EV related policies, EV charging station signage, and parking plan related issues.
Project Tracking Report (April 1 – June 30, 2011) Page 28
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Next steps:
The internal task force continues to thoroughly review all related EV issues and is developing a
comprehensive EV policy. Council approval of this policy will be sought in the fall of 2011. After
adoption of the policy and determination of the City’s role in the development of the EV charger
infrastructure, Staff will recommend whether to pursue any additional grant funds for EV chargers and
where funds will come from for costs not covered by grant funds.
A third grant from the CEC, in the amount of approximately $26,000, is still available for EV charging
station installations throughout Palo Alto. Rather than invest the funding in additional EV charging
station infrastructure, the internal task force has opted to solicit private‐sector input in the
development of an EV Charging Station Program through a two‐step RFP process that will be released
in summer 2011. Staff believes that releasing the RFP will help the City better understand the EV
market, and therefore make better decisions regarding infrastructure.
Project Tracking Report (April 1 – June 30, 2011) Page 29
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3. Project: Establish formal collaboration with Stanford University
Department: City Manager’s Office
Project lead: Deputy City Manager
Project start date: 2011
Target completion date: December 2011, but partnership will be ongoing
Background and Description:
Stanford University represents the most progressive and innovative research in the area of
sustainability and climate change. Palo Alto can leverage its green initiatives through enhanced
collaboration with Stanford. Stanford has many programs engaged in sustainable innovation. These
include the Precourt Institute, the Woods Institute for the Environment, and Sustainable Stanford.
While informal relations exist with Stanford, the City could develop strategic relations around
sustainability, allowing for resource sharing, best practices, and internship opportunities. Identified
below are goals for Fiscal Year 2011.
1. Organize a Sustainability Partnership Summit open to the public, including Stanford and City
panelists.
2. Organize a formal site visit to Y2E2, including key Staff in Planning, Utilities, and Public Works,
highlighting innovative construction and facilities management techniques utilized by Stanford.
3. Develop volunteer internship programs for at least one sustainable initiative.
Current Status:
The Assistant to the City Manager for Sustainability met with the Office of Government and
Community Relations and the Department of Sustainability and Energy Management at Stanford
University. The group determined there were three main connection points which could be explored
and expanded to ferment a stronger relationship between Stanford University and the City. They are
internships or academic exchange, faculty knowledge or City projects, and intra ‐ departmental
development or utility relationships.
Internships / Academic Exchange ‐ There have been and continue to be numerous Stanford students
completing internships in the City. The team discussed formalizing the effort or process by having an
annual event where the students will present what they learned in their internship.
Faculty Knowledge / Projects ‐ There are a few faculty/student projects that have occurred, including
one at the WQTP with Professor Craig Criddle, which is expanding into the second phase of research.
The team discussed documenting some of these projects and honoring them and/or asking them to
present their project/results in a larger forum to develop a better connection between academic work
and the community. The team will explore the idea of incorporating this at an event at the Woods
Institute for the Environment. Staff is looking into ways to make the procurement process for projects
with Stanford researchers more streamlined.
Intra ‐ Departmental Relationships ‐ There are existing working relationships between City
departments, such as the Utilities and Public Works departments and their counterparts at Stanford.
This could also include projects such as the Zipcar project or the Stanford Hospital. Many of these
relationships have a sustainability focus or are related to sustainability initiatives. Staff discussed the
idea of formalizing and publishing this information.
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Next Steps:
The City will have a number of Stanford interns which Staff will work with to develop an event
scheduled at the end of summer 2011. In late summer, the Assistant to the City Manager for
Sustainability and individuals from the Office of Government and Community Relations, Department
of Sustainability and Energy Management, and the Woods Institute at Stanford University will
reconvene to review the comprehensive lists of the main connection points and discuss a public
event/summit in the late fall/early winter 2011.
This summer, Stanford University and the City will begin the second phase of research to reduce
salinity in recycled water and enhance irrigation use. The City and Stanford University will begin to
develop decision models for extracting resources from wastewater under the national Science
Foundation grant. This fall the City and Stanford University will attempt to establish a Public‐Private
Partnership Agreement, under which to continue collaborative research on other wastewater
resource recovery and urban water infrastructure issues.
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4. Project: Explore methods to integrate Palo Alto Green into City sustainability programs
Department: City Manager’s Office
Project lead: Assistant to the CM for Sustainability
Project Start Date: 2011
Target Completion Date: 2012
Background and Description:
The City offers numerous sustainability programs, including PaloAltoGreen, which is one of the most
recognized and progressive renewable energy programs the Utilities department offers. Following the
Stanford model of an interdisciplinary approach to sustainability, the City could begin to integrate
various projects and activities such as emergency preparation, economic development, and
greenhouse gas reductions. Identified below are goals for Fiscal Year 2011.
1. Explore connections to broaden the City’s renewable energy and sustainability programs.
Employ the triple bottom line principles in a variety of programs.
2. Bring community groups (such as the Citizen Core Council) together with sustainability groups
(such as Community Environmental Action Partnerships) to explore issues affecting both,
including the community’s preparedness in a changing climate.
3. Hold study sessions with the Council, Planning and Transportation Commission (PTC), and
climate change experts to understand policy implications of rising sea levels and other effects of
global climate change.
Current Status:
In April 2011, Staff developed and presented to Council a comprehensive list of sustainability
programs and initiatives that the City has under taken or is participating in. This multi‐departmental
inventory is a starting point in which to integrate the many initiatives and management tool to see
where Staff may need to expand or reduce initiatives.
Staff is reviewing opportunities to develop a multi‐department sustainability team whose goal would
be to provide an integrated, seamless approach to promoting sustainable behaviors. This team will
seek out opportunities to work across departments, and with various community groups. Staff is
developing a strategy to implement a comprehensive multi‐departmental outreach education plan for
the public. The first step in the plan is for a sustainability webpage which would link many of the
efforts together.
Last year, Staff held a study session with the PTC to discuss including sustainability in the revision to
the Comprehensive Plan. This discussion included incorporation of both mitigation (actions which
reduce long‐term risk and hazards of climate change) and adaptation (actions which mediate potential
changes due to climate change, including sea level rise).
Staff is working with the Community Environmental Action Partnership (CEAP) and other community
groups, such as Palo Alto Neighborhoods (PAN), Acterra, and Transition Palo Alto to help build
partnerships. CEAP is in support of a community meeting or Council study session to discuss the
issues of adaptation in Palo Alto. Staff is working with CEAP to reach out to local climate change
experts to bring this together as a community engagement.
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The Assistant to the City Manager for Sustainability is exploring opportunities to better collaborate
with the Coordinator of Homeland Security & Public Outreach in the newly formed Office of
Emergency Services (OES) to see if their community outreach, including collaboration with PAN and
the Citizen Core Council could be expanded to include outreach for the City’s sustainability programs.
The key concept is that green initiatives can directly support community disaster resilience. Staff is
working on submitting a federal funding request for a grant to purchase a solar powered generator
from a local company for the Mobile Emergency Operations Center (MEOC).
Another possible case for solar power is the Community Disaster Network (CDN). CDN is an off‐the‐
grid WiFi network that will allow first responders, other City staff, and Block Preparedness Coordinator
Program community volunteers a means to efficiently exchange information, even when the phone
lines, power grid, and Internet may be impaired.
Next Steps:
This summer Staff will work on developing a new sustainability webpage. Staff will work with CEAP
and other community groups for a fall 2011 event or study session focusing on adaptation. In fall
2011, Staff anticipated the awarding of federal funding for the purchase of a solar powered generator
for the MEOC. By winter 2011, Staff will meet with the PTC to further develop the discussion of
sustainability in the revision to the Comprehensive plan.
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5. Project: Prepare Urban Forest Master Plan
Department: Planning and Community Environment
Project lead: Director, Planning and Community Environment
Project start date: December 2010
Target completion date: November 2011
Background and description:
The Urban Forest Master Plan, partially funded by a grant from the California Department of Forestry
(CalFire), is intended to provide a strategic plan to help the City conserve and renew its urban forest,
to establish procedures and protocols to enhance the effectiveness of City operations and
maintenance, and to provide for consistent and effective monitoring of the urban forest. Identified
below are goals for Fiscal Year 2011.
1. Continue to provide for the protection of the environment, including trees, creeks, wildlife, and
open space.
2. Enhance the City’s environmental sustainability objectives, including the Climate Protection
Plan.
3. Ensure that the City has an accurate and complete picture of its urban forest.
4. Establish the urban forest as an asset and part of the City’s valuable infrastructure.
5. Engage the community as stewards of the urban forest.
The process and timeline for preparation of the Urban Forest Master Plan began in December 2010,
when the City contracted with Hort Science, Inc. In January 2011, Staff conducted a successful online
survey to which 650 residents responded. During January and February 2011, Staff interviewed over
100 Staff members from all relevant departments. On February 7, 2011, the City’s consultant
introduced the project to the Council at a study session. Future public meetings and hearings will be
scheduled to accommodate further review of the draft plan and adoption by the Council.
Current status:
A preliminary draft of the Master Plan was submitted to CalFire in late May 2011. CalFire has
reviewed the document and indicated its support for the direction of the Plan. The Plan satisfies
requirements for reimbursement of the City’s $66,000 grant. Working with the City’s consultant, Staff
will be working through the summer to revise and complete the draft, and then will schedule
community meetings and hearings with boards, Commissions, and Council in the fall.
Next steps:
In September 2011, Staff and the City’s consultant will revise the draft plan and hold a community
workshop. The Parks and Recreation Commission and Planning and Transportation Commission will
hold meetings in October 2011. In November 2011, the Urban Forest Master Plan is tentatively
scheduled to return to the Council for adoption.
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D. Land Use & Transportation Planning (LUTP)
Executive Summary:
Land use and transportation are key indicators of quality of life in Palo Alto. The overarching principle
of the City’s land use and transportation objectives is to provide for sustainable development and
services: growth, rehabilitation, and services that are sustainable in economic and fiscal terms, as well
as in environmental respects. The City desires to develop in ways that promotes the efficient delivery
of services, assures high quality development and design, protects and broadens the City’s tax and
revenue base, preserves and enhances key environmental attributes, minimizes energy and water use,
and promotes transportation alternatives such as walking, bicycling, and transit. Identified below are
goals for Fiscal Year 2011.
1. Complete strategies and plans at the Development Center (DC) to improve customer service and
accountability.
2. Complete draft Rail Corridor Study outlining measures to provide for community land use,
transportation, and corridor urban design.
3. Complete the Stanford University Medical Center (SUMC) Facilities and Replacement Project.
4. Substantially complete the update of the City’s Comprehensive Plan Amendment/Housing
Element Update and 2 Area Concept Plans.
5. Continue monitoring High Speed Rail (HSR) activities and collaborative work with Peninsula
cities and regional agencies. Staff to work on a short‐term and long‐term action plan to sustain
Caltrain.
6. Actively participate in the preparation of the regional Sustainable Communities Strategy
(SB375), Regional Housing Needs Allocation.
7. Prepare Pedestrian and Bicycle Plan Master Plan update.
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1. Project: Complete strategies and plans at the Development Center to improve
customer service and accountability
Department: Planning and Community Environment
Project lead: Planning Director
Project start date: July 2010
Target completion date: December 2011
Background and description:
Development Center Blueprint Project is focused on improving the delivery of services at the
Development Center (DC). The City Manager’s public statement committed to having measurable
improvements implemented at the DC by the end of June 2011. Identified below are goals for Fiscal
Year 2011.
1. Create a better customer service culture where there is predictability, clear standards, and a
performance measurement program in place to evaluate service delivery and assess customer
satisfaction.
2. Improve organizational efficiency at the DC and associated processes to minimize costs and
delays to customers.
3. Maintain or enhance community sustainability and economic development goals and objectives
through DC activities.
Current status:
The Development Center Blueprint project has entailed a series of efforts by the Steering Committee
(department heads and upper level managers), Staff Action Committee (approximately 20 Staff
members involved in the DC process from multiple departments), and a Development Center Advisory
Committee (professionals and others with periodic or regular interaction with the DC). Some process
changes have been implemented over the past six months. An update was provided to the Council on
March 21, 2011. A current focus is to hire Staff to implement program actions, including piloting new
project management and point of contact procedures, as well as, maintaining adequate levels of
service at the DC counter. The Deputy City Manager has been assigned to work part‐time at the DC,
helping oversee staff integration efforts and performance improvements.
Next steps:
In July and September 2011, it is anticipated that Staff will recruit and hire counter assistance, plan
check staff, and project management staff. The DC will continue the pilot program currently
implemented. Program finalization implementation will occur between July and December 2011. In
December 2011, initial implementation is anticipated to be completed, and Staff will define items for
review and implementation.
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2. Project: Complete draft Rail Corridor Study outlining measures to provide for
community land use, transportation, and corridor urban design
Department: Planning and Community Environment
Project lead: Planning Director
Project start date: November 2010
Target completion date: December 2011 (Phases I and II), June 2012 (Phase III)
Background and description:
The Palo Alto Rail Corridor Study is intended to provide a vision for land use, transportation, and
design along the Caltrain right‐of‐way and adjacent areas. The plan would identify opportunities for
growth near transit, while protecting nearby neighborhoods. The study would encourage more
pedestrian and bicycle‐friendly mobility, integral to furthering sustainable development in the City.
The study will allow consideration of land use and urban design techniques to enhance the potential
for economic development and increased revenues and tax base within the corridor. Identified below
are goals for Fiscal Year 2011.
1. Contribute to a sense of community and place in neighborhoods and commercial districts.
2. Assure high quality of development and design.
3. Protect and broaden the City’s tax and revenue base.
4. Preserve and enhance key environmental features.
5. Promote transportation alternatives such as walking, bicycling, and transit.
The Rail Corridor Study will be conducted by Staff, a 17‐member Task Force, and an urban design
consultant. Public workshops and meetings with the Planning and Transportation Commission and the
Council will supplement the work of the Task Force. The study will be conducted in three phases:
vision, alternatives, and draft plan. Each phase will take approximately four to six months, and the
final plan is expected to be considered by Council in early to mid 2012.
Current status:
The Rail Corridor Task Force has met eight times to discuss a variety of issues, opportunities, and
vision concepts for the Corridor. A community workshop was held on May 19, 2011 to identify key
issues and opportunities. Study sessions with the Planning and Transportation Commission and
Council were conducted on June 8 and June 27, 2011 to summarize activity and progress to date.
Next steps:
A second community workshop will be held in late July 2011 with the Planning and Transportation
Commission to discuss a draft vision statement. In September and October 2011, Staff will review the
draft vision statement. August through December 2011, Staff and the Task Force will work with the
community to develop alternative scenarios (Phase II). This will take place with periodic review by the
Planning and Transportation Commission and Council. In early 2012, the preparation and selection of
a preferred scenario (Phase III), by the Task Force, Staff, and the public, will return to the Council for
review and approval.
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3. Project: Complete Stanford University Medical Center Renewal and Replacement
Project
Department: Planning and Community Environment/City Manager’s Office
Project lead: Planning Director/Deputy City Manager
Project start date: Early 2007
Target completion date: June 2011
Background and description:
The Stanford University Medical Center (SUMC) Facilities Renewal and Replacement Project is a
comprehensive, multi‐year development project to rebuild and restore the SUMC and School of
Medicine facilities in Palo Alto. The project will satisfy the shared objectives between SUMC and the
City to optimize the delivery of healthcare to patients and meet regional needs for emergency and
disaster preparedness. The project applicant is proposing changes and additions to meet State
mandated seismic safety standards (SB 1953), and to address capacity issues. Various entitlements
required include certification of an Environmental Impact Report (EIR), Comprehensive Plan
amendments, creation of a new hospital zoning district, architectural review of the proposed
buildings, and a Development Agreement that would set land use regulations for a 30‐year period in
exchange of public benefits. Identified below are goals for Fiscal Year 2011.
1. Meeting regional needs for emergency preparedness.
2. Minimizing environmental, financial, and municipal infrastructure impacts on the City.
3. Assuring a high quality of development and design.
4. Promoting sustainable development and green building design principals throughout the
project.
5. Promoting transportation alternatives such as walking, bicycling, and transit.
Since the SUMC representatives first introduced the project in late 2006, Staff has identified the
environmental impacts, conducted public outreach meetings, prepared fiscal analysis, held
preliminary design review meetings, and identified possible public benefits to be included in the
Development Agreement. In May 2010, the Draft EIR was released for public comment. In February
2011, the Final EIR and Response to Comments was completed. The Architectural Review Board and
the Planning and Transportation Commission completed their reviews in May 2011.
Current status:
On June 6, 2011 the Council approved all entitlements and the Development Agreement, and certified
the EIR for the project. The Second reading of the Development Agreement and zoning ordinances
was scheduled on June 20, 2011. Community concerns about the loss of Child Care facilities at Hoover
Pavilion postponed the Second Reading while Stanford worked to provide a relocation site during
construction (achieved).
Next steps:
In 2011, payments to the City will begin for community benefits. In early summer 2011, construction
of improvements on Welch Road and the upgrade of the Hoover Pavilion will commence. In 2011‐
2012, Stanford hospitals will undergo review by the State (OSHPOD) for building permit review and
approval. In 2013, hospital construction will commence. The completion of the entire project,
including hospitals, clinics, and parking garages is expected in 2025.
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4. Project: Substantially complete update of the City’s Comprehensive Plan
Amendment/Housing Element Update and 2 Area Concept Plans
Department: Planning and Community Environment
Project lead: Planning Director
Project start date: 2008
Target completion date: Late 2012
Background and description:
The Palo Alto Comprehensive Plan Amendment and Housing Element Update are intended to provide
the framework for the City’s land use, housing, development, and transportation policies. The
Comprehensive Plan Amendment focuses on two Area Concept Plans and on updating policies to: 1)
assure provision of adequate support services to neighborhoods and businesses; 2) propose strategies
to retain and enhance retail and other commercial and revenue‐generating uses; and 3) ensure a
theme of sustainability throughout the City’s land use and transportation policies and programs. The
Area Concept Plans are being developed for the East Meadow/West Bayshore commercial/industrial
area and the California Avenue/Fry’s Area. The Housing Element is updated in accordance with State
law requirements and will outline the City’s housing objectives through 2014, including the provision
of affordable housing units during that period. Identified below are goals for Fiscal Year 2011.
1. Contributing to a sense of community and place in neighborhoods and commercial districts.
2. Assuring a high quality of development and design.
3. Protecting and broadening the City’s tax and revenue base.
4. Preserving and enhancing key environmental features.
5. Accommodating housing for all segments of the population.
6. Promoting transportation alternatives such as walking, bicycling, and transit.
Current status:
The Comprehensive Plan is expected to be completed, in draft form, by early 2012 and then undergo
environmental review (Environmental Impact Report) prior to adoption. The Area Concept Plans have
received preliminary review by the Planning and Transportation Commission, and tentatively
scheduled for the Council’s consideration in mid‐2011. A draft Housing Element will be considered by
the Council in mid‐2011, and forwarded to the State Department of Housing and Community
Development for review. The Planning and Transportation Commission has completed its review of
the policies and programs contained in the Housing and Land Use/Community Environment chapters.
Next steps:
The Planning and Transportation Commission will review the policies and programs for community
services, transportation, and business and economics in the months of June and September 2011. In
September 2011, the draft Housing Element will be reviewed by the Council and forwarded to the
State Department of Housing and Community Development. The Council will additionally review the
East Meadow Area Concept Plan. In October through November 2011, the Council will review the
California Avenue/Fry’s Area Concept Plan. Environmental review and adoption of the Comprehensive
Plan is anticipated in late 2012.
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5. Project: Facilitate, in cooperation with local and regional agencies and organizations,
the development of a short and long‐term action plan to sustain Caltrain
Department: City Manager’s Office
Project lead: Deputy Director, Rob Braulik
Project start date: March 2011
Target completion date: December 2011
Background and description:
Caltrain currently provides fixed rail commuter services to the City. There are two Caltrain stations,
one located at University Avenue in Palo Alto and another at San Antonio in the City of Mountain
View. Palo Alto has the second highest Peninsula ridership numbers. Stanford University represents
over 50% of Caltrain’s “GO Pass” participants. Thus, Caltrain is an important component of the City’s
transportation system, and plays a critical role in helping local employers, students, and residents get
to and from their destinations.
Caltrain is currently facing an unprecedented operating deficit (e.g., $30M). Effective July 1, 2011,
Caltrain is planning to make major service cuts to balance their budget. These cuts would reduce
Caltrain commuter rail services during peak and off‐peak hours. Caltrain is the only major regional
commuter transportation system without a dedicated funding source.
Given the importance of Caltrain’s services to the business community, Stanford University, residents,
and the Peninsula regional transportation system, the City is looking to participate, partner and
support actions that would put in place a viable financial plan to secure short and long‐term financial
stability. Identified below are goals for Fiscal Year 2011.
1. Host a Palo Alto community forum in partnership with the Silicon Valley Leadership Group
(SVLG) to communicate and inform community members on the current financial plight of
Caltrain, and secure ideas and suggestions from the community, riders, and businesses about
potential solutions to produce a viable financial model.
2. Consult with our Federal and State legislative advocacy firms to advise the City on what
methodologies, programs, and tools may be available to help financially support the
modernization of Caltrain (e.g., electrification, positive train control).
3. Explore and evaluate with partners (including public agencies: San Francisco County and City,
San Mateo County, Santa Clara County, Metropolitan Transportation Commission (MTC), major
private employers, Stanford University and others) the viability of developing a dedicated
revenue stream to fund ongoing Caltrain operations (e.g., sales tax, parcel tax).
Current status:
On January 21, 2011, the City participated in SVLG’s forum on Caltrain’s short and long‐term fiscal
sustainability workshop. On April 7, 2011, the City co‐hosted with SVLG a workshop on the same
topic in Palo Alto. The City Council Rail Committee held five meetings in April and May where the
primary topic was Caltrain. The April 13, 2011 meeting included a presentation from Santa Clara
County Supervisor Liz Kniss, who also sits on the Peninsula Corridor Joint Powers Board (PCJPB). The
PCJPB includes the City and County of San Francisco, San Mateo County, San Mateo County Transit
District (SamTrans), Santa Clara County, and Santa Clara Valley Transportation Authority (VTA).
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To maintain current Caltrain service levels for one year, the PCJPB secured temporary interim
funding from the Metropolitan Transportation Commission, board members, increasing fares by
$.25 beginning July 1, and related actions. This period will be used to evaluate long‐term funding
strategies to sustain Caltrain service on the Peninsula.
The City continues to work with other public agencies, Federal and State legislative advocacy firms,
and SVLG to analyze strategies and plans to address Caltrain’s fiscal issues. The City Council Rail
Committee continues to invite Caltrain’s technical and policy staff to present information on the
modernization of rail lines through electrification, installation of a new positive train control
switching system (mandated by the federal government), and the development of a fiscally
sustainable business model, with or without, HSR on the Peninsula.
There has been no definitive progress on analyzing or evaluating an in‐depth and long‐term fiscal
plan, which would include a dedicated funding stream for Caltrain service. It is anticipated that
discussions will occur during Fiscal Year 2012 between the City of County of San Francisco, San
Mateo County, Santa Clara County, Metropolitan Transportation Commission, major private
employers, Stanford University, and others.
Next steps:
The City Council Rail Committee will continue to monitor Caltrain’s fiscal situation and act
accordingly. Caltrain projects will attempt to certify the Environmental Impact Report (EIR) on
Electrification this summer. If this schedule holds, the City may consider commenting on the EIR.
Discussions will continue with Supervisor Kniss, and other Federal and State elected officials and
neighboring public agencies, to provide input on strategies to develop a long‐term plan to address
Caltrain funding.
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6. Project: Actively participate, in preparation of, regional Sustainable Communities
Strategy (SB375) and Regional Housing Needs Allocation (RHNA)
Department: Planning and Community Environment
Project Lead: Planning Director
Project Start Date: 2009
Target Completion Date: 2013
Background and description:
The Sustainable Communities Strategy (SCS) required by SB375 and the accompanying Regional
Housing Needs Allocation (RHNA) are important regional planning initiatives for the Bay Area. The City
will be affected by land use, housing, and transportation policies and incentives associated with the
efforts of regional agencies, particularly the Association of Bay Area Governments (ABAG) and
Metropolitan Transportation Commission (MTC). The City expects to provide meaningful input to
these initiatives, and work with other Santa Clara County cities to assure a voice for the sub‐region.
Identified below are goals for Fiscal Year 2011.
1. Enhance sustainability by promoting sustainable land development patterns and facilitating
alternative transportation modes.
2. Participate in regional planning and transportation solutions where appropriate, and assure
housing opportunities accommodate multiple segments of the population.
3. Use land use and zoning techniques to enhance the potential for economic development and
increased revenues and tax base.
4. Contribute to a sense of community and place in neighborhoods and commercial districts.
Current status:
Staff is attending 3‐4 regional and countywide meetings monthly to participate in these regional
planning discussions. Council Member Scharff and the Planning and Community Environment Director
attend monthly meetings of the Regional Housing Needs Methodology Committee. The regional
agencies released an Initial Vision Scenario on March 11, 2011. Staff reported to the Planning and
Transportation Commission on May 4, 2011, and to the Council on March 14, 2011. A preliminary
Staff letter response is scheduled for Council consideration/revision on July 11, 2011.
Next steps:
On an ongoing basis, Staff will continue to attend regional meetings and participate in countywide
coordination efforts. Alternative scenarios, released by regional agencies, are anticipated to occur in
July 2011. In July through September 2011, the RHNA Methodology Committee is anticipated to meet
and release a draft. In July and October 2011, local agencies are anticipated to respond to said
alternatives. In October through December 2011, local agencies are anticipated to respond to the
draft RHNA allocations. In early 2012, the preferred SCS scenario is anticipated to be released. The
approval of the SCS is anticipated in early 2013.
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7. Project: Prepare Pedestrian and Bicycle Master Plan update
Department: Planning and Community Environment
Project lead: Planning Director
Project start date: November 2010
Target completion date: October 2011
Background and description:
The current Bicycle Master Plan serves as the City’s guide for identifying and setting priorities for
bicycle transportation projects and programs in the community. The last update to the Bicycle
Transportation Plan occurred in 2003. The current update includes a pedestrian element providing an
opportunity to include more robust projects and programs that benefit key transportation
infrastructure not normally evaluated in a bike‐only plan. An updated Pedestrian and Bicycle Plan is
essential for accruing funding from regional grant sources. This year, upon development of the plan,
the City will embark on an aggressive update of its bicycle and pedestrian facilities based on the
following goals:
1. Continue to lead in providing for transportation modes other than single‐occupancy vehicles, in
order to provide alternatives to avoid traffic gridlock, enhance safety for children and adults,
and reduce greenhouse gas emissions.
2. Identify and implement best practices in bicycle and pedestrian system design for both new
projects and updates to existing facilities such as colored bike lanes, bike boxes, and non‐
intrusive detection methods.
3. Continue educational efforts on the use of bicycle and walking transportation modes to schools,
and strengthen the link between neighborhood communities and schools through capital
projects.
4. Implement bicycle and pedestrian facilities to link major employment centers, such as Stanford
University, with existing transit facilities and other trail/street networks.
5. Identify and implement new innovations in bicycle design and pursue processes that allow their
implementation in the City.
6. Identify and pursue regional grant sources to implement Bicycle and Pedestrian Master Plan
projects and programs, such as the Highway 101 Bike/Pedestrian bridge at Adobe Creek.
Current status:
The development of the new Bicycle and Pedestrian Master Plan is currently in process. A City‐wide
community meeting was held in March 2011, along with a Planning and Transportation Commission
study session in April 2011. A Council study session was held on May 2011. The Council study session
was preceded by a bike ride to tour of two of the City’s bicycle boulevards. A Parks and Recreation
Commission briefing was held on May 24, 2011. Following plan revisions, the draft plan will be
reviewed by various boards and Committees prior to consideration and adoption by the Council.
Next steps:
In July 2011, a review of the draft plan is anticipated by the Palo Alto Bicycle Committee, Citizens
Traffic Safety Committee, and the Parks and Recreation Commission. A review and recommendation
by the Planning and Transportation Commission is anticipated in August/September 2011, and a
review and adoption by Council is anticipated in August/September 2011.
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E. Youth Well Being (YWB)
Executive Summary:
The City plays two important roles with regard to community collaboration for youth well being. First,
the City plays a role of convener and coordinator, bringing the community together in order to
effectively harness the community’s talent, expertise, and goodwill so that the community may have
the greatest impact in fostering youth well being. A meaningful example of the City’s role as convener
and coordinator is seen in the Project Safety Net (PSN) Community Task Force. PSN is focused on
developing and implementing a comprehensive community‐based mental health plan for overall
youth and teen well being. A focus in 2011 is to support PSN as defined in the PSN Plan
(www.PSNPaloAlto.org). Examples include gatekeeper training, developmental assets initiative, peer‐
to‐peer engagement, teen education on drug and alcohol abuse, track watch, youth forum, and
celebrating youth‐friendly businesses.
Secondly, the City plays a direct role in providing programs, services, and facilities for youth and teens.
Examples include the variety of afterschool programs at the Palo Alto Teen Center, Children’s Theatre,
Junior Museum and Zoo, Art Center, and Rinconada Pool. The City’s capacity to provide programs,
services, and facilities for youth well being is dependent on community collaboration through
substantial support of Friends groups and foundations. An example of community collaboration can
be seen in the vision to build the Magical Bridge Playground in coordination with the Friends of the
Palo Alto Parks. The Magical Bridge Playground is planned for Mitchell Park and will be Palo Alto’s first
playground accessible to people of all abilities and ages. Identified below are goals for Fiscal Year
2011.
1. Coordinate the PSN Community Task Force and guide its implementation.
Convene monthly PSN meetings to provide the space, atmosphere, time for progress reports,
community collaboration, and decision making.
Create a communications plan for PSN to keep the community informed on the City’s support
of youth and teens.
Coordinate two community trainings on identifying individuals at risk of suicide (gatekeeper
training), and how to report suicide threats to the appropriate parental and professional
authorities.
2. Develop and provide businesses with a simple set of specific opportunities to support youth and
teens.
3. In coordination with the Palo Alto Unified School District (PAUSD) create an effective and
sustainable structure for the PSN Community Task Force.
Develop a Memorandum of Understanding between the PSN Community Task Force and its
members to define roles, responsibilities, and commitments.
Create a strategic plan to sustain the day‐to‐day activities of PSN and how various community
efforts for youth well being work together.
Secure private funding for PSN through grants, donations, and other means.
4. Incorporate the developmental assets into the planning, implementation, and evaluation of City
programs and services for youth and teens.
Include developmental assets language into job descriptions for Staff that work with youth
and teens.
Provide developmental assets training to all Staff that work with youth and teens.
Measure developmental asset outcomes in youth and teen programs.
Project Tracking Report (April 1 – June 30, 2011) Page 46
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5. Council and Staff to engage youth and teens in community decision making.
Actively participate and help coordinate the 2011 Youth Forum.
Council to hold a study session with the Youth Council.
Provide opportunities for teen involvement in community decision making through
teen leadership groups.
6. Celebrate and recognize youth and teens, along with community members, that make an
outstanding contribution to supporting youth.
Encourage and coordinate impromptu special events and recognition opportunities to
celebrate youth and teen accomplishments.
Publically recognize community members and organizations that make an outstanding
contribution to supporting youth.
7. Support Friends of the Palo Alto Parks’ goal of building Palo Alto’s first universally accessible
playground.
Monitor private fundraising efforts for the construction of the Magical Bridge Playground, and
report on the status of fundraising to the Council.
Project Tracking Report (April 1 – June 30, 2011) Page 47
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1. Project: Implement Project Safety Net
Department: Community Services Department
Project lead: Division Manager of Recreation Services
Project start date: September 2009
Target completion date: Ongoing
Background and description:
The Project Safety Net (PSN) Community Task Force was formed in response to the tragic teen suicides
our community experienced between May 2009 and January 2010. The mission of PSN is to develop
and implement an effective, comprehensive, community‐based mental health plan for overall youth
well being in Palo Alto. The coalition is broadly represented with parents, medical professionals from
Stanford University, Lucile Packard Children’s Hospital and Palo Alto Medical Foundation, City of Palo
Alto, Palo Alto Unified School District (PAUSD), youth‐serving non‐profits, City Commissions, the Palo
Alto Youth Council, and many others. The PSN Community Task Force has defined 22 specific
strategies that fall into three categories: education, prevention and intervention. Details of the 22
strategies and history of PSN can be seen at the following website: www.PSNPaloAlto.org
Current status:
1. Coordinate the PSN Community Task Force and guide its implementation:
Monthly PSN meetings have been coordinated by the City and PAUSD. The meetings occur
on the third Thursday of every month at the Lucie Stern Community Center. The meetings
are attended by an average of 40 community members. The typical format of the meetings
consists of a review by sub‐committees working on the education, prevention, and
intervention strategies followed by a learning item or guest speaker.
A website and a Facebook page for PSN has been created to provide regular updates for
anyone interested in learning about PSN and/or getting involved.
Several community trainings on identifying individuals at risk of suicide (gatekeeper training)
and how to report suicide threats to the appropriate parental and professional authorities
have occurred. A training was conducted in the winter for adults and three trainings in the
spring for students.
Staff presented the Developmental Assets framework for youth well being to the Palo Alto
Chamber of Commerce, who subsequently voted to adopt the framework and are now
working on defining how they can best apply the Developmental Assets within the business
community.
2. With PAUSD, create an effective and sustainable structure for the PSN Community Task Force.
A Memorandum of Understanding (MOU) between the PSN Community Task Force and its
members to define roles, responsibilities and commitments was created for 2010‐11 with
generous legal support from Covington and Burling. Twelve organizations contributed to the
MOU defining their commitments in Fiscal Year 2010‐11.
With the generous support of the Santa Clara County Mental Health Department, PSN
received a $30,000 grant for consulting services to help the PSN Community Task Force
define a sustainable structure. The planning process was conducted between March and
June 2011. The results of this work were presented to the City/ School Liaison Committee on
June 16, 2011.
Project Tracking Report (April 1 – June 30, 2011) Page 48
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Funding for PSN has come from a number of sources, including the Palo Alto Recreation
Foundation, Palo Alto Women’s Club, David and Lucile Packard Foundation, and Stanford
University.
3. Incorporate the Developmental Assets into the planning, implementation, and evaluation of City
programs and services for youth and teens.
Developmental Assets language is being used in the recruitment of Staff and is being
incorporated into work plans for all Community Services Department Staff that work with
youth and teens.
A very engaged sub‐committee of PSN, called the Developmental Assets Initiative, has been
working hard to understand and articulate the meaning behind the Developmental Assets
survey that was conducted in October 2010. Presentations to Commissions, community
organizations, and the general public on Developmental Assets are ongoing. The primary
goal of the Developmental Assets initiative is to engage all residents in a conversation about
youth well being.
Measuring Developmental Asset outcomes in youth and teen programs remains an
important goal. The Developmental Assets survey results, that represent the voice of more
than 4,000 students was made available in March 2011. Staff focus has been on interpreting
and understanding the data and sharing the results.
4. Council and Staff will engage youth and teens in community decision making.
Staff, elected officials and many community partners actively participated in coordinating
the 2011 Youth Forum. The Youth Forum was held on May 21, 2011. This year’s forum was a
one day event offering a series of various sessions. The session themes included athletic
performance, student empowerment, visual arts, performing arts, and healthy lifestyles. The
session themes were created to draw a wide range of students with different interests.
Although the structure of the Youth Forum was different than last year the goal of building
relationships between students and adults remained the same. All sessions were taught by
local professionals, parents, and caring adults. Sessions offered students the opportunity to
learn important life skills, plan local events, and interact with adults from the community.
A study session with the Council and the Youth Council is tentatively scheduled in October
2011.
The City is providing opportunities for teen involvement in community decision making
through teen leadership groups such as the Palo Alto Youth Council, Teen Advisory Board,
Teen Arts Council and Junior Advisory Board. Teen leadership groups work with Staff to plan
events, workshops, and activities like the Palo Alto Youth Forum, music nights, and dances.
The Parks and Recreation Commission and Human Relations Commission have assigned a
commissioner as a liaison to the Palo Alto Youth Council. The commissioners attend at least
one Youth Council meeting a month.
5. Celebrate and recognize youth and teens, along with community members, that make an
outstanding contribution to supporting youth.
The City coordinated, in collaboration with many community partners, a number of events
to celebrate and recognize youth and teens this year. A notable event was the Parade of
Champions in January 2011 which recognized the Palo Alto High School football team and
volleyball team for winning State championships. The parade was a tremendous success
with thousands of residents participating. Other events included the May Fete Parade. The
theme for this year's parade was "Books are Hidden Treasures ‐‐ Dig In!" and was chosen to
reflect the Developmental Assets program recently adopted by the City to support healthy
youth development.
Project Tracking Report (April 1 – June 30, 2011) Page 49
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Other events included Day of Service on the Martin Luther King Jr. holiday and a teen event
called “Ignite” where teens from all Palo Alto high schools came together for a celebration
at the Lucie Stern Community Center.
With regard to publically recognizing community members and organizations that make an
outstanding contribution to supporting youth the Community Services Department
recognized Becky Beacom and the Palo Alto Medical Foundation for their outstanding
service and contribution to Project Safety Net and youth well‐being. The PSN Community
Task Force also received the Santa Clara County Human Relations Award for promoting and
protecting the human and civil rights of youth in Santa Clara County in April 2011.
Moreover, Project Safety Net was also honored by receiving Stanford University’s
Community Partnership Award for initiative, leadership and involvement in a collaborative
project that promotes the vitality and well‐being of our mid‐peninsula community in May
2011.
Next steps:
Through PSN’s work in its first two years, programs in suicide prevention, Developmental Assets,
youth voice and outreach, mental health counseling, networking health care providers, and
similar efforts have taken root, developed, or joined together. PSN continues to represent a
powerful collection of community resources that are engaged and working together in new and
creative ways. Thanks to the talent and commitment of PSN members, Staff has managed to
move matters forward. However, coalitions built on good will and organized under an MOU
umbrella have initial potency and may inherently be short‐lived without dedicated resources.
The challenge of improving and sustaining a community, in which suicide gets no traction, and
where youth and teens thrive, is a long‐term proposition. Organizational resources need to be
up to the task. Consequently the most immediate next steps include the following:
Bring the PSN planning efforts that define a sustainable structure for PSN to the City/School
Liaison Committee for discussion.
Secure administrative capacity for coordinating PSN coalition, convening partners,
promoting policies and practices, and advocating the elements of a strategy for making
youth well being an ongoing part of Palo Alto’s values and culture.
Project Tracking Report (April 1 – June 30, 2011) Page 50
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Project Tracking Report (April 1 – June 30, 2011) Page 51
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2. Project: Monitor fundraising for Magical Street Bridge
Department: Community Services Department
Project lead: Director, Community Services
Project start date: July 2011
Target completion date: June 2013
Background and description:
In the fall of 2008, parents of special needs children approached Staff about the inadequacy of access
to Palo Alto playgrounds for some children or their caregivers. As an example, some developmentally
challenged children are unable to grasp and hold the chain supports of most playground swings.
Although some swing sets have cradle‐type swings for very young toddlers, these cradles are not large
enough for a developmentally disabled child who is six years old. Advocates for universally accessible
playgrounds have pointed out that there are nearly 1,500 children in Palo Alto between the ages of 4
and 18‐years of age who have special, visual, auditory, sensory, or developmental needs. In addition,
there are hundreds of physically‐challenged adults or caregivers who can not play and directly interact
with their children or grandchildren at municipal playgrounds because of physical barriers.
The Friends of the Magical Bridge organization was founded in 2009, and is a funding partner with the
Friends of the Palo Alto Parks. Friends of the Magical Bridge have developed conceptual designs for a
universal access playground in the undeveloped section of Mitchell Park, near the rear of Abilities
United and Achieve, Inc. The conceptual plans for a 20,000‐square foot playground were reviewed by
the Parks and Recreation Commission in 2009. The Commission concluded that the development of a
universally‐accessible playground in this location would be consistent with the Master Plan for
Mitchell Park. In reviewing the conceptual plans for this playground, the Human Relations Commission
also endorsed the concept of the project.
Staff has worked closely with representatives of the Friends of the Magical Bridge and Friends of the
Palo Alto Parks to share the concept of this new playground with various Commissions, Staff Members
and the Council. As part of the 2012 Capital Improvement Project Budget, Staff has introduced a new
project (CIP PE‐12000) that will provide up to $300,000 in funding as the City’s share for the project.
The Friends estimate that the project will cost $1,600,000. The Friends have embarked on a
fundraising drive to raise the $1,300,000 needed for their share of the design and construction costs.
Current status:
1. On May 17, 2011, the Finance Committee reviewed the draft Capital Improvement Project
Budget, which included the City’s share of construction and planning expenses. Members of
the Friends of the Magical Bridge were present at the Finance Committee meeting and
answered questions about the status of fundraising for the project.
2. Staff drafted a letter of intent which outlined the responsibilities of the Friends of the Magical
Bridge and City for developing final designs for the project, and seeking necessary permits for
the project. The City Attorney’s Office has reviewed and amended the draft letter of intent.
The revised letter of intent was sent to the Friends on May 18, 2011, for their review and
approval.
3. On May 17, 2011 the need for a universally‐accessible playground was discussed with sub‐
committee members of the Surface Committee of the Infrastructure Blue Ribbon Commission.
Project Tracking Report (April 1 – June 30, 2011) Page 52
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Next steps:
1. It is Staff’s intent to return to the Council with a letter of intent on July 18, 2011 for approval.
2. Under the terms of the letter of intent the Friends of the Magical Bridge will have until June
30, 2013, to raise the funds for the project and be able to enter into a construction agreement
with the City for the project.
ACITY OF V PALO ALTO
City of Palo Alto (ID # 2108)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 11/7/2011
November 07, 2011 Page 1 of 2
(ID # 2108)
Council Priority: City Finances, Community Collaboration for Youth Well-Being,
Emergency Preparedness, Environmental Sustainability, Land Use and
Transportation Planning
Summary Title: City Council Priorities Quarterly Report
Title: Recommendation from Policy & Services Committee to Approve City
Council Priorities Quarterly Report
From:City Manager
Lead Department: City Manager
Recommendation
Staff and the Policy and Services Committee Recommend that the Council
approve the City Council Strategic Priorities Quarterly Report for the period
ending September 30, 2011.
Executive Summary
The City Council adopted Council priorities earlier this year on January 22, 2011.
This report provides an update on the status of work related to the priorities.
Background
The City Council was provided reports in March and July of this year that included
a master list of the Council priorities and key goals under each priority. At that
time, Staff indicated they would provide quarterly update reports to the City
Council.
Staff met with the Policy and Services Committee on October 18th to discuss this
report and potential changes the committee would like to see. This report
includes the following changes:
·Narratives only include current status and next steps for each priority since
the City Council has already seen the background for each priority
November 07, 2011 Page 2 of 2
(ID # 2108)
·A color coded excel spreadsheet is attached. This matrix includes shorter
narrative descriptions, listing of the primary department responsible for the
item (e.g., Complete labor negotiations: Human Resources is the primary
department with ASD and ATT supporting) and a listing of priorities by the
primary department (see pie graph)
The committee also asked if possible to list completed items. Nearly all the
priorities have components that are completed but the entire work for each
priority is not yet done. These priorities are planned to be completed by calendar
year end so the next report for the period October to December 2011 to be
provided in the first quarter of 2012 will incorporate information on completion
of the priorities. The enclosed report is the third quarterly update report on the
progress of the priorities for the period July to September 2011.
Attachments
·City Council Strategic Priorities Quarterly Report Summary, July 1 to
September 30, 2011 including color coded excel spreadsheet
·Prior quarterly reports July 11, 2011 and March 21, 2011
Attachments:
·11.07.11 -Quarterly report.doc (10.26)(DOC)
·11.07.11 -Priorities tracking doc (10 26)(XLS)
·July 11, 2011 City Council Priorities Report (PDF)
·March 21, 2011 City Council Priorities Report (PDF)
Prepared By:Rob Braulik, Project Manager
Department Head:James Keene, City Manager
City Manager Approval: James Keene, City Manager
City of Palo Alto, City Manager’s Office
www.cityofpaloalto.org 650.329.2100
City of Palo Alto 2011
Strategic Priorities Quarterly Report
October 17, 2011
Volume 2, Issue 2
For the period ending October 30, 2011
INSIDE THIS ISSUE
2011 Strategic Priorities Summary Pages
Strategic Priorities Narratives:
City Finances Pages
Emergency Preparedness Pages
Environmental Sustainability Pages
Land Use & Transportation Planning Pages
Youth Well Being Pages
Project Tracking Report (June 30, 2011-October 30, 2011) Page 2
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2011 Strategic Priorities Summary
A.City Finances (CF)
Goals
1.Complete labor negotiations with major bargaining groups
2.Complete refuse fund study and stabilization
3.Complete and implement economic development strategic plan
4.Execute budget/fiscal measures to ensure long-term financial stability
5.IBRC completes long-term infrastructure needs report to City Council
B. Emergency Preparedness (EP)
Goals
1.Conduct community exercise
2.Evaluate a secondary electrical transmission line source
3.Implement recommendations of Foothills Fire Management Plan
4.Implement Office of Emergency Services (OES) restructure
5.Improve Emergency Operations readiness
C. Environmental Sustainability (ES)
Goals
1.Evaluate construction of composting digester or alternatives
2.Evaluate and implement plan to introduce electric vehicle (EV) charging stations
3.Establish formal collaboration with Stanford University
4.Explore methods to integrate Palo Alto Green into City Sustainability Programs
5.Prepare Urban Forest Master Plan
D. Land Use & Transportation Planning (LUTP)
Goals
1.Complete Development Center plans improving customer service/accountability
2.Complete Rail Corridor Study
3.Complete Stanford University Medical Center Project
4.Substantially complete Comprehensive Plan update
5.Facilitate efforts to sustain Caltrain
6.Participate in regional SB375 & Housing Needs Allocation (RHNA)
7.Prepare Pedestrian and Bicycle Master Plan update
E. Youth Well Being (YWB)
Goals
1.Implement Project Safety Net
2.Magical Bridge Playground Project
Project Tracking Report (June 30, 2011-October 30, 2011) Page 3
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A.City Finances (CF)
Executive Summary:
City finance strategies form the foundation for the City Council identified priorities. A stable
financial picture in the short and long-term ensures the City’s ability to deliver on all five Council
priorities. Sound City finances are integral to Palo Alto’s quality of life.
A key principle of the City’s finance objectives is to provide for the City’s finances in the near and
long-term. For example, the City negotiates labor agreements and the contracts envisioned
during this cycle are ones where the City plans to make meaningful long-lasting changes to key
City legacy costs (e.g., pension and health care). The City is working toward developing a
sustainable business model for funding ongoing infrastructure needs, while eliminating a major
backlog of City projects. These efforts will take time, yet this investment is well worth the
effort. This work will result in improving the overall high quality of life that Palo Alto citizens
have come to rely and expect from their City government. Identified below are goals for Fiscal
Year 2011:
1.Complete labor negotiations with major bargaining groups
2.Complete refuse fund study and stabilization
3.Complete and implement economic development strategic plan
4.Execute budget/fiscal measures to ensure long-term financial stability
5.IBRC completes long-term infrastructure needs report to City Council
Project Tracking Report (June 30, 2011-October 30, 2011) Page 4
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Project Tracking Report (June 30, 2011-October 30, 2011) Page 5
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1. Project: Complete labor negotiations with major bargaining groups
Department: Human Resources Department
Secondary Department: City Attorney
Project lead: Interim Human Resources Director
Project start date: May 2010
Target completion date: December 2011
Current status:
The City reached an agreement with Service Employees International Union (SEIU)to rollover
SEIU’s contract, keeping its existing terms, and extending the current contract until June 30,
2012. The City and Firefighters Union (IAFF 1319) reached a tentative agreement which was
ratified by their membership on September 30, 2011. The Council was set to review the
tentative agreement for final approval on October 17, 2011. As stated by the City Manager, this
tentative agreement delivers on the City’s commitment for Public Safety personnel to make a
significant contribution to the shared financial challenges of the City. This action follows the
lead of SEIU and Management and Professional group two years ago. The Firefighters Union has
agreed to important changes in the new contract, and the women and men of the Firefighter’s
Union have made necessary and significant concessions for the well-being and future of the City.
The City held preliminary off-the-record discussions with Palo Alto Police Officers' Association
(PAPOA)in the spring of 2011, with no success in reaching an agreement. Formal negotiations
started in July 2011 with nine meetings to date.
Next steps:
The City continues in negotiations with the Palo Alto Police Manager's Association (PAPMA) to
create their first Memorandum of Agreement. Following the tentative agreement reached with
the Firefighters Union, the City hopes to expeditiously negotiate an agreement with the Fire
Chief’s Association. The City will continue to meet with PAPOA to reach an agreement on a
successor agreement. The Utilities Management and Professional Association of Palo Alto
(UMPAPA) is a new unit. The City certified UMPAPA in May 2011 and began negotiations in July
2011 with four meetings to-date.
Project Tracking Report (June 30, 2011-October 30, 2011) Page 6
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2. Project: Complete refuse fund study and fund stabilization
Department: Public Works Department
Secondary Department: Administrative Services Department
Project lead: Interim Public Works Director
Project start date: August 2010
Target completion date: December 2011
Current status:
Major progress has been made this fiscal year in returning the Refuse Fund to financial health
and stability. Fiscal Year 2011 revenues are matching expenditures for the first time since Fiscal
Year 2008, and reserves are no longer decreasing. The Palo Alto Landfill is being closed with
substantial savings to follow. Short and long-term time schedules have been developed to place
the Refuse Fund on a trajectory to full sustainability.
Next steps:
A major set of analysis will be presented to the Council on July 6, 2011 with refuse rate changes
to ensure financial health in Fiscal Year 2012. The Cost of Service Study is anticipated to be
completed in fall 2011.
Project Tracking Report (June 30, 2011-October 30, 2011) Page 7
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3. Project: Complete and implement Economic Development Strategic plan
Department: City Manager’s Office
Project lead: Economic Development Manager
Project start date: January 2011
Target completion date: December 2011
Current status:
A third iteration of the Economic Development Strategic Plan was brought forward to the Policy
and Services Committee in October 2011 with the idea to separate the larger policy discussion
and the team action plan. While the policy discussion is expected to be ongoing, the plan and
outlined deliverables, including those prioritized above, are expected to move forward as a City
Manager directive.
Work has progressed on the following items:
1.Staff has completed a draft request for proposal (RFP)to engage media companies in
development of a digital readerboard on a small City-owned property adjacent to Highway
101. Staff will be bringing forward a draft to the Policy & Services Committee for
recommendation to the Council to proceed on the RFP in early 2012.
2.The Development Center (DC) restructuring effort continue, and there has been significant
outreach to the business community and press from the ED team. The Council has approved
recommendations for DC enhancements at their September 6, 2011 meeting. Staff is
working closely with the Stakeholders Committee and other users of the DC to communicate
the shift in resources to improve the DC service delivery model.
3.The Economic Development team has targeted many of the City’s largest revenue
generating and several innovative companies for outreach. Staff continues to make
numerous contacts by email, telephone, and in person. In many cases, solutions to issues
have been orchestrated by the Economic Development team, including many companies
expanding or re-locating to Palo Alto.
4.Staff has supported the efforts of the Infrastructure Blue Ribbon Commission to develop
alternatives for the possible re-use of the Municipal Services Center.
Next steps:
Staff plans to bring a final version of the Plan back to the Policy and Services Committee for final
adoption in the next 30-60 days.
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4. Project: Execute budget/fiscal measures to ensure long-term financial stability
Department: Administrative Services Department
Secondary Department: City Manager’s Office
Project lead: Chief Financial Officer
Project start date: May 2011
Target completion date: Fall 2011
Current status:
Staff is working on a draft report and anticipates providing the report to the Council in the fall
2011. The timing is based on coordination between this report and a draft report from the IBRC.
Next steps:
Waiting for IBRC to complete draft preliminary report so that the two reports can be merged
into a single report.
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5. Project: IBRC completes long-term infrastructure needs reports for City Council
Department: Public Work’s Department
Secondary Department: City Manager’s Office, Administrative Services Department
Project lead: Deputy City Manager
Project start date: November 2010
Target completion date: December 2011
Current status:
Staff is working closely with the Infrastructure Blue Ribbon Commission (IBRC) to identify
infrastructure needs and sources of funding. This includes exploring new sources of revenues
from new or existing sources, potential of issuing additional debt and review of other options to
deliver services to the community. In addition, Staff has issued a Request For Proposals to
determine the net cost of programs so the Council can revisit or make Policy decisions on cost
recovery levels.
Next steps:
Completion of the IBRC report is anticipated in fall 2011. The review of net cost should be
completed by end of the calendar year,and used to make recommendations for the proposed
Fiscal Year 2013 proposed budget.
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B. Emergency Preparedness (EP)
Executive Summary:
The City, like any community in the Bay Area, is susceptible to a variety of natural hazards
including earthquakes, floods, wild-land fires, and manmade disasters. The City is committed to
protecting life, property, and the environment through a number of activities including
preplanning, training, rapid emergency response, and public safety education. Identified below
are goals for Fiscal Year 2011:
1.Conduct community exercise
2.Evaluate a secondary electrical transmission line source
3.Implement recommendations of Foothills Fire Management Plan
4.Implement Office of Emergency Services (OES) restructure
5.Improve Emergency Operations readiness
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1. Project: Conduct community exercise
Department: Police Department
Secondary Department: Fire Department
Project lead: Acting Public Safety Director
Project start date: January 2011
Target completion date: September 2011
Current Status:
On September 10, 2011, the Quakeville Community Exercise was conducted in partnership with
the Palo Alto Neighborhoods, Block Preparedness Coordinator Program, Community Emergency
Response Team, ARES/RACES ham radio operators, American Red Cross, Boy Scouts, and other
stakeholders. The event included Staff from the Police Department, Police Animal Services
Division, Fire Department, and Utilities Department. Staff conducted drills in parallel with the
community, including Staff-community joint scenarios,radio communication with the Mobile
Emergency Operations Center (MEOC) at Juana Briones Park and Rinconada Park. Leading up to
Quakeville, Staff conducted several training and drills for community members, such as radio
training, neighborhood drills, and a successful exercise where the neighborhood preparedness
coordinators communicated via Police Department-issued radios to the MEOC.
Next steps:
Staff from the Police Department's Training and Exercise Design Team will work with Quakeville
organizer from the community,Lydia Kou to develop an After Action Report. Quakeville will be
integrated into the City's Homeland Security Exercise and Evaluation Program Multiyear Training
& Exercise Plan. While larger drills of this type are useful, there is a need to develop smaller
training and exercises, including those that bolster or refresh existing skills or facilitate diverse
groups being able to work together (human interoperability).
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2. Project: Evaluate a secondary electrical transmission line source
Department: Utilities Department
Project lead: Utilities Director
Project start date: July 2010
Target completion date: December 2011
Current status:
The California Independent System Operator (CAISO)released its final 2010-2011 Transmission
Plan on May 18, 2011. The plan did not recommend that the Ames to Adobe Creek Substation
line be installed in the current planning year, instead recommending that PG&E drop part, or all,
of the City’s load as necessary to relieve the demand on the transmission grid. Subsequently,
after hearing from the City about the critical hospital loads served in Palo Alto, CAISO committed
to review this alternative again and PG&E has resubmitted the project to CAISO for
consideration in the 2011-2012 Transmission Plan.
As a result of the CAISO’s initial rejection of the Ames to Adobe Creek project, the City proposed
that the CAISO consider an alternative transmission line connecting the SLAC Substation to the
Quarry Road Substation. The City met with the CAISO in June 2011 and identified numerous
issues requiring further resolution. The City has had two further technical meetings with CAISO
and PG&E staff, to model and review the reliability benefits of the Palo Alto/SLAC connection, in
addition to internal meetings with the City’s technical consultant and representatives from
Stanford and the SLAC National Accelerator Laboratory.
Next steps:
An initial cost/benefit analysis suggest that the Palo Alto/SLAC connection will provide both the
reliability of a redundant transmission line,and avoid certain transmission access charges.
Therefore, the City will continue discussions with representatives from SLAC National
Accelerator Laboratory and Stanford University to explore this alternative. A Palo Alto/SLAC
connection had been considered before this current evaluation, but stalled because of
Department of Energy (DOE) concerns over the risks of transmission ownership. The City met
with staff from the Western Area Power Administration (WAPA) and SLAC National Accelerator
Laboratory on October 12, 2011 to discuss the implications and opportunities of this
transmission project. As both SLAC National Accelerator Laboratory and WAPA are under the
DOE, and WAPA has significant experience in transmission development and operation, WAPA
has offered to facilitate the process. The City will prepare a comprehensive cost and benefit
analysis. Pending a decision to move forward with the SLAC connection, the City may request
that CAISO reject PG&E’s Ames to Adobe Creek Project.
Up to this point, meetings and discussions have been technical in nature. If the City encounters
obstacles to a secondary electrical transmission line source that are not driven by technical
interconnection issues, Staff will pursue other political avenues to bring the parties to the table
to achieve agreement and progress.
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3. Project: Implement recommendations of Foothills Fire Management Plan
Department: Fire Department
Secondary Department: Police Department
Project Lead: Acting Public Safety Director
Project Start Date: January 2011
Target Completion Date: Ongoing
Current status:
Staff renewed the contract of the Foothills Fire Management Plan's author, Carol Rice of
Wildland Resource Management (WRM) to begin implementation of certain high priority
elements of the Plan (such as evacuation routes), and seek sources of grant and other funding
to address the unfunded elements thereof. Staff and the consultant are now developing a work
plan. Staff is planning three public educational meetings for the general public, which will cover
property owner fire mitigation and defensible space regulations, the Block Preparedness
Coordinator Program, and evacuation.
Next steps:
WRM and Staff will continue work to prioritize treatment areas, conduct biological surveys, and
implement other components of the Plan as funding permits.
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4. Project: Implement Office of Emergency Services (OES) restructure
Department: City Manager’s Office/Police Department
Secondary Department: Fire Department, City Manager’s Office
Project lead: Assistant City Manager/Acting Public Safety Director
Project start date: May 2011
Target completion date: Fall 2011
Current status:
In July 2011, Staff selected Officer Kenneth Dueker to serve as the Interim Director of the Office
of Emergency Services and Homeland Security. The City Manager’s Office in collaboration with
Police, Fire, and Human Resources Staff finalized the OES Director job description and began the
recruiting and hiring process.
Next steps:
Candidates were interviewed by an oral board on October 19, 2011.
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5. Project: Improve Emergency Operations readiness
Department: Police Department
Secondary Department: Fire Department
Project lead: Acting Public Safety Director
Project start date: January 2011
Target completion date: Ongoing
Current status:
Substantial upgrades to the Mobile Emergency Operations Center (MEOC) have been completed
and are contemplated in the near term, including the following:1) award of grant funding for a
Prime Mover MEOC Support Truck, trailer, and tents to allow the MEOC to serve as the City's
primary EOC or support another jurisdiction in an extended deployment; 2) expansion of radio
interoperability communications to include digital radio systems,such as Alameda County as
well as analog HF and other frequencies; and 3) add mirrored servers for critical IT enterprise
applications, such as CAD, CADStat, and GIS. Regional efforts include Staff has meetings with
neighboring jurisdictions improve the way Staff prepares, prevents, responds to, and recovers
from major events and explore how certain services might be shared. For example, Carnegie
Mellon University at the NASA Ames Research Park at Moffett Field has certain facilities and
technologies that it offers to local governments to promote economies of scale and efficiency.
The City continues to participate in regional training and exercise programs, such as the Urban
Shield SWAT and Homeland Security Exercise. Staff also planned and participated in the Silicon
Guardian Public-Private Sector Exercise, hosted by the National Disaster Resiliency Center.
Interim Director Dueker is continuing work on the Community Disaster Network (CDN) project.
A key element of the CDN is an app for smart phones for Damage Assessment. A prototype of
the DA app is undergoing initial testing with a group of community and Staff members. The Palo
Alto/Stanford Citizen Corps Council (CCC) has been on hiatus during the OES reorganization
process. However, it should be noted that a number of CCC sectors have remained quite active.
A summary of some, but not all, activity follows (where Staff has been involved):1)
Neighborhood Sector: The Block Preparedness Coordinator (BPC) Program continues to grow
and increase activity, with certification training sessions, neighborhood drills, and block parties.
Since Neighborhood Watch as been subsumed by the BPC Program, crime prevention sessions
for residents, businesses, and other groups have been conducted. 2) Volunteer Sector: The Palo
Alto CERT Program (formerly, PANDA) is in the process of swapping out the old PANDA
equipment, with approximately 120 volunteers who have done so now considered active.
Director Dueker has facilitated meetings with Staff and CERT to increase the opportunities for
these volunteers to be utilized. 3) Stanford Shopping Center Sector: The Stanford Shopping
Center conducted a bomb scenario drill with its security department. 4) Seniors Sector: Lytton
Gardens conducted a critical incident and Incident Command System training, as well as a
separate session for senior residents.Stanford University, Stanford Hospital, and others are also
active with several ongoing collaborative projects. Other City departments are also becoming
more involved in this topic. The Utilities Department invited Interim Director Dueker to give a
presentation at their recent all-hands meeting on safety and emergency preparedness. The
Library hosted a Crime Prevention and Personal Preparedness workshop for the community in
its new Downtown Library facility. Staff worked with Mayor Espinosa in developing videos in
support of National Preparedness Month.
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Next steps:
As the recent tragic multiple homicide in Cupertino illustrates, the City may be called upon to
assist its own residents or those in neighboring communities. The MEOC, as a regional asset,
was deployed to the scene where it was integral in the incident command function of that
operation. The recent work on the MEOC made it a valuable asset to that operation. Increasing
the City's operational readiness is ongoing through initiatives such as the Community Disaster
Network, use of volunteers, and cooperation with non-governmental allies. The Palo
Alto/Stanford Citizen Corps Council will be back in operation to fulfill its stated mission,"to
harness the power of individuals, businesses, and organizations through education, training and
volunteer service to make communities resilient, safe, strong and prepared to respond to and
recover from threats of the following:1) natural disasters; 2) human-caused disasters; 3) crime;
4) public health emergencies; 5) terrorism and 6) disasters of all kinds". Internally, the new OES
Department will need to restructure how Staff’s key functions in a critical incident and how non-
governmental resources are to be properly integrated.
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C. Environmental Sustainability (ES)
Executive Summary:
Environmental sustainability is a core value and ongoing priority for the City. The City has been
a leader in this area in the Bay Area metropolitan region and in North America. The City is a
Certified Green Business and has adopted a Climate Protection Plan, Sustainability Policy, Palo
Alto Green Program, and continues to make strides in reducing greenhouse gas emissions.
Identified below are goals for Fiscal Year 2011:
1.Evaluate construction of composting digester or alternatives
2.Evaluate and implement plan to introduce electric vehicle (EV) charging stations
3.Establish formal collaboration with Stanford University
4.Explore methods to integrate Palo Alto Green into City Sustainability Programs
5.Prepare Urban Forest Master Plan
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1. Project: Evaluate construction of composting digester or alternatives
Department: Public Works Department
Project lead: Interim Public Works Director
Project start date: October 2010
Target completion date: October 2011
Current status:
The Preliminary Feasibility Analysis was completed on time and vetted in a series of public and
Council meetings. Proponents and opponents of a Palo Alto facility on the Landfill/Byxbee Park
site had extensive comments on the analysis. Comments were also received on the alternative
regional sites in the South Bay Area.
Next steps:
The key comments on the Preliminary Analysis were addressed and a draft Feasibility Study was
discussed by the Council on June 27, 2011. A full study is anticipated to return to the Council in
fall 2011.
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2. Project: Evaluate and implement plan to introduce electric vehicle (EV) charging stations
Department: City Manager’s Office
Secondary Department: Planning and Community Environment, Utilities Department
Project Lead: Assistant to the CM for Sustainability
Project start date: 2011
Target completion date: EV chargers installed July 2011; remainder of goals will continue
through the end of the year
Current status:
Several factors are driving the need for the City to develop a set of electric vehicle (EV) related
policies. Rapid changes are occurring in the electric vehicle industry including the following: 1)
new models of cars; 2) new standards for EV chargers; and 3) Federal and State subsidies are
available for EV related projects. These changes are helping to influence the rate of EV adoption
and infrastructure development. The City recognizes EVs as a potentially important part of the
solution for reaching its greenhouse gas emission reduction goal, and so has an interest in
encouraging the use of EVs throughout the community. Progressive, early adopter residents
and commuters are moving forward with EV purchases,and the City must position itself
accordingly to support the emerging technologies. The multi-departmental task force has
developed an EV Policy. This Policy was reviewed by the Policy and Services Committee October
18, 2011.
The five EV chargers, from the ChargePoint America Program (DOE funded) grant, have been
installed. Since July 2011, on average four cars have been charging on each of the two City Hall
chargers every day. The electricity dispensed at the two City Hall chargers to these EVs
effectively assist EV owners reduce greenhouse gas emissions by ¾ of a ton/month, or nine tons
per year.
The internal task force has presented and received feedback on EV related issues from the
Utilities Advisory Commission and Planning and Transportation Commission. The internal task
force has developed and distributed a Request for Information (RFI) for EV charging service
providers. The objective of the RFI was to solicit interest on developing and funding the
deployment of a private-sector owned,operated,and maintained charging station
infrastructure within the City, while using the City’s remaining $25,000 grant from CEC as seed
funding.
Next steps:
The internal task force will continue to thoroughly review all related EV issues and is working with
regional players in developing a comprehensive EV regional infrastructure.The internal task force
presented a draft EV Infrastructure Policy to Policy and Services Committee on October 18th. The
Committee approved and recommended that the policy go to council on consent. Council approval of
this policy will be sought in the coming months. After adoption of the policy, and determination of the
City’s role in the development of the EV charger infrastructure, Staff will recommend whether to pursue
additional grant funding and where funds should come from for costs not covered by grant funding
Staff will review the responses from the RFI that were sent out in September 2011.The City will use the
remainder of the grant funds from the CEC to fund any project that will be developed as a result of the
RFI process.
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3. Project: Establish formal collaboration with Stanford University
Department: City Manager’s Office
Project lead: Deputy City Manager
Project start date: 2011
Target completion date: December 2011, but partnership will be ongoing
Current Status:
As reported last quarter,there are three main connection points which could be explored and
expanded to ferment a stronger relationship between Stanford University and the City. They
are internships or academic exchange, faculty knowledge or City projects, and intra-
departmental development or utility relationships. Staff has gathered the details on at least 25
Stanford interns who have worked with the City since 2005, including five during this past
summer who focused on sustainability issues. On September 29, 2011,Professor Noah S.
Diffenbaugh from the Department of Environmental Earth System Science and Woods Institute
for the Environment spoke at a community forum on adaptation. Staff is hopeful that this is the
first of many potential events where Staff and Stanford personnel will work together.
Next Steps:
The Assistant to the City Manager for Sustainability will be working with the Office of
Government and Community Relations to determine an appropriate way to celebrate the
internships discussed above,and further develop the process to encourage future internships.
Likewise, Staff, including leaders in Utilities and Public Works Departments, are developing a list
of past and current projects that could potentially be showcased at a Sustainability event, such
as the Woods Institute Uncommon Dialogues.
The Assistant to the City Manager for Sustainability arranged a site tour of the Jerry Yang and
Akiko Yamazaki Environment and Energy Building (Y2E2) at Stanford on October 5,2011. Y2E2 is
a green building that set high sustainability standards for Stanford. The Assistant to the City
Manager for Sustainability will work with the different departments in the City and Stanford to
plan for a joint event to showcase collective works.
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4. Project: Explore methods to integrate Palo Alto Green into City Sustainability Programs
Department: City Manager’s Office
Secondary Department: Planning and Community Environment, Utilities Department
Project lead: Assistant to the CM for Sustainability
Project Start Date: 2011
Target Completion Date: 2012
Current Status:
Staff coordinated a community event titled Adapting to Climate Change and Sea Level Rise in
the Bay Area. Staff heard about the ongoing efforts from the Army Corps of Engineers to protect
Palo Alto, why the San Francisco Bay Conservation & Development Commission is considering
amendments to the San Francisco Bay Plan to address sea level rise, what the academic world is
talking about with respect to climate change,and what other cities in the Bay Area are doing.
The discussion included impacts of not only sea level rise, but also flooding, wildfires, resource
issues, and changes in weather and temperature. The presenters were Executive Director of the
San Francisco Bay Conservation and Development Commission,Will Travis, Executive Director of
the San Francisquito Creek Joint Powers Authority,Len Materman, Assistant Professor at the
Department of Environmental Earth System Science at Stanford University-Woods Institute for
the Environment, Noah S. Diffenbaugh, and Former Mayor and Bay Area Program Director at
Tuolumne River Trust, Peter Drekmeier. The Community Environmental Action Partnership
(CEAP) played a key role in publicizing the event.
Staff continues to review opportunities to develop a multi-department Sustainability Team
whose goal would be to provide an integrated, seamless approach to promoting sustainable
behaviors. This team will seek out opportunities to work across departments and with various
community groups. Staff is developing a strategy to implement a comprehensive multi-
departmental outreach education plan for the public. The first step in the plan is for a
sustainability webpage which will be developed in conjunction with the City’s website project.
Next Steps:
Staff is planning to return to the Council a Staff Report outlining the feedback and issues on
adaptation and sea level rise. Staff will continue to work with the CEAP and other community
groups, such as the Palo Alto Neighborhoods, Acterra, and Transition Palo Alto to help build
partnerships and promote sustainability. Once the Office of Emergency Services is set up, joint
meetings including all sustainability groups in Palo Alto, will be scheduled to see how they can
best collaborate. CEAP will continue to play a key role in this initiative.
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5. Project: Prepare Urban Forest Master Plan
Department: Planning and Community Environment
Secondary Department: Fire Department
Project lead: Director, Planning and Community Environment
Project start date: December 2010
Target completion date: March 2012
Current status:
CalFire has reviewed the Urban Forest Master Plan document and indicated its support on the
direction of the Plan. The Plan satisfies requirements for reimbursement of the City’s $66,000
grant. Staff is working with the City’s consultant to complete an outline of the draft, but has
deferred extensive work pending the hiring of an Urban Forester in the Public Work’s
Department. Subsequent to that position being filled, Staff will schedule community meetings
and hearings with boards, Commissions, and the Council in early 2012.
Next steps:
In early 2012, Staff and the City’s consultant will revise the draft Plan and hold a community
workshop. The Parks and Recreation Commission and Planning and Transportation Commission
will hold meetings subsequent to the workshop. In Spring of 2012, the Urban Forest Master
Plan is tentatively scheduled to return to the Council for adoption.
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D. Land Use & Transportation Planning (LUTP)
Executive Summary:
Land use and transportation are key indicators of quality of life in Palo Alto. The overarching
principle of the City’s land use and transportation objectives is to provide for sustainable
development and services: growth, rehabilitation, and services that are sustainable in economic
and fiscal terms, as well as in environmental respects. The City desires to develop in ways that
promote the efficient delivery of services, assures high quality development and design,
protects and broadens the City’s tax and revenue base, preserves and enhances key
environmental attributes, minimizes energy and water use, and promotes transportation
alternatives such as walking, bicycling, and transit. Identified below are goals for Fiscal Year
2011.
1.Complete Development Center plans improving customer service/accountability
2.Complete Rail Corridor Study
3.Complete Stanford University Medical Center Project
4.Substantially complete Comprehensive Plan update
5.Facilitate efforts to sustain Caltrain
6.Participate in regional SB375 & Housing Needs Allocation (RHNA)
7.Prepare Pedestrian and Bicycle Master Plan update
Project Tracking Report (June 30, 2011-October 30, 2011) Page 28
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1. Project: Complete Development Center plans improving customer service/accountability
Department: Planning and Community Environment
Secondary Department: City Manager’s Office
Project lead: Planning Director
Project start date: July 2010
Target completion date: December 2011
Current status:
The Development Center (DC) Blueprint Project has entailed a series of efforts by the Steering
Committee (department heads and upper level managers), Staff Action Committee
(approximately 20 Staff members involved in the DC process from multiple departments), and a
Development Center Advisory Committee (professionals and others with periodic or regular
interaction with the DC). Some process changes have been implemented over the past year. On
August 1, 2011, the Council authorized the City Manager to hire Staff to implement program
actions including piloting new project management and point of contact procedures, as well as
maintaining adequate levels of service at the DC counter. The Deputy City Manager continues
to work part-time on an interim basis at the DC, helping oversee Staff integration efforts and
performance improvements.
Next steps:
Staff has recruited and hired counter assistance, plan check staff, and project management staff
on a contract basis, and has begun recruitment for permanent staffing. Position descriptions for
a Development Services Official and Permit Center Manager are scheduled for Council approval
in October or November 2011, following which the positions will be advertised for recruitment.
The DC will continue the pilot programs currently implemented, and will finalize implementation
between July and December 2011. In December 2011, initial implementation is anticipated to
be completed and Staff will define further items for review, implementation, and monitoring the
success of the program.
Project Tracking Report (June 30, 2011-October 30, 2011) Page 30
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2. Project: Complete Rail Corridor Study
Department: Planning and Community Environment
Project lead: Planning Director
Project start date: November 2010
Target completion date: December 2011 (Phases I and II), June 2012 (Phase III)
Current status:
The Rail Corridor Task Force has met ten times to discuss a variety of issues, opportunities, and
vision concepts for the Corridor. A community workshop was held on May 19,2011 to identify
key issues and opportunities. Study sessions with the Planning and Transportation Commission
and Council were conducted on June 8 and June 27, 2011 to summarize activity and progress to
date. The Task Force has reviewed the progress of Phase I in a document outlining the vision
concepts developed and basic information reviewed and developed. A tour of the Rail Corridor
Study Area was held on September 10, 2011 and included 28 participants.
Next steps:
The Task Force meet on October 20,2011 to begin the review of alternative scenarios intended
to address issues identified in Phase I. A second community workshop will be held in the fall,
followed by a session with the Planning and Transportation Commission to discuss the
alternative scenarios. In early 2012, the preparation and selection of a preferred scenario
(Phase III) by the Task Force, Staff, Planning and Transportation Commission, and public will
return to the Council for review and approval.
Project Tracking Report (June 30, 2011-October 30, 2011) Page 31
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3. Project: Complete Stanford University Medical Center Project
Department: Planning and Community Environment
Secondary Department: City Manager’s Office
Project lead: Planning Director/Deputy City Manager
Project start date: Early 2007
Target completion date:June 2011 (Completed July 6, 2011)
Current status:
On June 6, 2011 the Council approved all entitlements, the Development Agreement, and
certified the Environmental Impact Report for the Stanford University Medical Center (SUMC)
Renewal and Replacement Project. The second reading of the Development Agreement and
zoning ordinances were approved on August 1, 2011.
Next steps:
SUMC has made Initial payments (approximately 1/3 of total) to the City for community
benefits. Construction of improvements on Welch Road and the upgrade of the Hoover Pavilion
have commenced. In 2011-2012, Stanford hospitals will undergo review by the State (OSHPOD)
for building permit review and approval. In 2013, hospital construction will commence. The
completion of the entire project, including hospitals, clinics, and parking garages is expected in
2025.
Project Tracking Report (June 30, 2011-October 30, 2011) Page 32
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4. Project: Substantially complete Comprehensive Plan Update
Department: Planning and Community Environment
Project lead: Planning Director
Project start date: 2008
Target completion date: Late 2012
Current status:
The Comprehensive Plan is expected to be completed, in draft form, by mid-2012 and then
undergo environmental review (Environmental Impact Report) prior to adoption. The Area
Concept Plans have received preliminary review by the Planning and Transportation
Commission, and tentatively scheduled for the Council’s consideration in late 2011 (East
Meadow Area) and early 2012 (California Avenue Area). A draft Housing Element will be
considered by the Council in late 2011, and forwarded to the State Department of Housing and
Community Development for review. The Planning and Transportation Commission has
completed its review of the policies and programs contained in the Housing and Land
Use/Community Environment chapters, and is now reviewing the Community Services chapter.
Next steps:
The Planning and Transportation Commission will review the policies and programs for
community services, transportation, and business and economics through the remainder of
2011 into early 2012. In December 2011, the draft Housing Element will be reviewed by the
Council and forwarded to the State Department of Housing and Community Development. The
Council will additionally review the East Meadow Area Concept Plan before the end of 2011. In
early 2012, the Council will review the California Avenue/Fry’s Area Concept Plan.
Environmental review and adoption of the Comprehensive Plan is anticipated in late 2012.
Project Tracking Report (June 30, 2011-October 30, 2011) Page 33
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5. Project: Facilitate efforts to sustain Caltrain
Department: City Manager’s Office
Secondary Department: Planning and Community Environment
Project lead: Deputy Director, Rob Braulik
Project start date: March 2011
Target completion date: December 2011
Current status:
This period will be used to continue to evaluate long-term funding strategies to sustain Caltrain
service on the Peninsula. The City continues to work with other public agencies, Federal and
State legislative advocacy firms,and the Silicon Valley Leadership Group (SVLG)to come up with
strategies and plans to address Caltrain’s fiscal issues. The City Council Rail Committee has
continued to invite Caltrain technical and policy staff to present information on Caltrain’s plans
to modernize rail lines through electrification, install a new positive train control switching
system (mandated by the federal government),and develop a fiscally sustainable business
model with or without high speed rail (HSR) on the Peninsula. There has been no definitive
progress to date to explore or evaluate a long-term fiscal plan which would include a dedicated
funding stream for Caltrain service. For example, a Peninsula-wide sales tax to support such
service.
Next steps:
It is anticipated such discussions will occur during Fiscal Year 2012,beginning July 1, 2011
between the partners including San Francisco County and City, San Mateo County, Santa Clara
County, Metropolitan Transportation Commission, major private employers, Stanford University
and others. Staff has set up a meeting with Caltrain staff in early August 2011 to review the
Caltrain electrification Environmental Impact Report certification issues and timelines.
Project Tracking Report (June 30, 2011-October 30, 2011) Page 34
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6. Project: Participate in SB375 & Housing Needs Allocation (RHNA)
Department: Planning and Community Environment
Project Lead: Planning Director
Project Start Date: 2009
Target Completion Date: 2013
Current status:
Staff is attending 3-4 regional and countywide meetings monthly to participate in these regional
planning discussions. Council Member Scharff and the Planning and Community Environment
Director attend monthly meetings of the Regional Housing Needs Methodology Committee. The
regional agencies released an Initial Vision Scenario on March 11, 2011. Staff reported to the
Planning and Transportation Commission on May 4, 2011, and to the Council on March 14,
2011. Alternative growth scenarios were released by the Association of Bay Area Governments
and Metropolitan Transportation Commission in July 2011. On July 18, 2011 the Council directed
Staff to work with a subcommittee to formulate an action plan to focus on coordination with
State legislators and other cities, particularly with respect to demographic and economic
assumptions. Staff met with the subcommittee twice and reported out to Council on September
19,2011 at which time the Council formalized its direction to Staff and asked that the
subcommittee become a standing committee after January 1, 2012.
Next steps:
Staff is meeting with the Council subcommittee to implement a Council strategy and to prepare
a response to the regional agencies for late October 2011. On an ongoing basis, Staff will
continue to attend regional meetings and participate in countywide coordination efforts. In
November 2011, the RHNA Methodology Committee is anticipated to release a draft of the
housing allocations for review. Local agencies are anticipated to respond to the draft RHNA
allocations in early 2012. In early 2012, the preferred SCS scenario is anticipated to be released.
The approval of the SCS is anticipated in early 2013.
Project Tracking Report (June 30, 2011-October 30, 2011) Page 35
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7. Project: Prepare Pedestrian and Bicycle Master Plan update
Department: Planning and Community Environment
Project lead: Planning Director
Project start date: November 2010
Target completion date: October 2011
Current status:
The development of the new Bicycle and Pedestrian Master Plan is currently in process. A City-
wide community meeting was held in March 2011, along with a Planning and Transportation
Commission study session in April 2011. A Council study session was held in May 2011. The
Council study session was preceded by a bike ride to tour two of the City’s bicycle boulevards. A
Parks and Recreation Commission briefing was held on May 24, 2011. On August 31, 2011 the
draft plan was reviewed and recommended for approval by the Planning and Transportation
Commission.
Next steps:
Review and adoption of the Plan by Council is anticipated on November 9, 2011.
Project Tracking Report (June 30, 2011-October 30, 2011) Page 36
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E. Youth Well Being (YWB)
Executive Summary:
The City plays two important roles with regard to community collaboration for youth well being.
First, the City plays a role of convener and coordinator, bringing the community together in
order to effectively harness the community’s talent, expertise, and goodwill so that the
community may have the greatest impact in fostering youth well being. A meaningful example
of the City’s role as convener and coordinator is seen in the Project Safety Net (PSN) Community
Task Force. PSN is focused on developing and implementing a comprehensive community-based
mental health plan for overall youth and teen well being. A focus in 2011 is to support PSN as
defined in the PSN Plan (www.PSNPaloAlto.org).
Secondly, the City plays a direct role in providing programs, services, and facilities for youth and
teens. Examples include the variety of afterschool programs at the Palo Alto Teen Center,
Children’s Theatre, Junior Museum and Zoo, Art Center, and Rinconada Pool. The City’s capacity
to provide programs, services, and facilities for youth well being is dependent on community
collaboration through substantial support of Friends groups and foundations. An example of
community collaboration can be seen in the vision to build the Magical Bridge Playground in
coordination with the Friends of the Palo Alto Parks. The Magical Bridge Playground is planned
for Mitchell Park and will be Palo Alto’s first playground accessible to people of all abilities and
ages. Identified below are goals for Fiscal Year 2011:
1.Implement Project Safety Net
2.Magical Bridge Playground Project
Project Tracking Report (June 30, 2011-October 30, 2011) Page 38
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1. Project: Implement Project Safety Net (PSN)
Department:Community Services Department
Secondary Department: Police Department
Project lead: Division Manager of Recreation Services
Project start date: September 2009
Target completion date: Ongoing
Current status:
1.Coordinate the PSN Community Coalition and guide its implementation:
Monthly PSN meetings have been coordinated by the City and Palo Alto Unified School
District (PAUSD).
A website and a Facebook page for PSN has been created to provide regular updates for
anyone interested in learning about PSN and/or getting involved.
Several community trainings on identifying individuals at risk of suicide (gatekeeper training)
A training was held on October 24 to train ten PSN members to be suicide prevention
Gatekeeper trainers
2.With PAUSD, created an effective and sustainable structure for the PSN Community Coalition.
A Memorandum of Understanding (MOU) between the PSN Community Coalition and its
members to define roles, responsibilities and commitments was created for 2011-12
With the generous support of the Santa Clara County Mental Health Department, PSN
received a $30,000 grant for consulting services PSN have defined a sustainable structure
and implementation plan.
Funding for PSN has come from a number of sources, including the Palo Alto Recreation
Foundation, Palo Alto Women’s Club, David and Lucile Packard Foundation, and Stanford
University and Hospital.
Over the 2011 summer the City Council completed the development agreement for
Stanford’s expanded hospital. As part of the agreement 2 million dollars in community
benefits has been designated to support PSN.
3. Incorporate the Developmental Assets into the planning, implementation, and evaluation of
City programs and services for youth and teens.
§The Developmental Assets sub-committee of PSN has also launched a campaign to inform
and educate the community about Developmental Assets. The campaign includes an Asset
of the month program, overpass banners, posters and other materials promoting the
importance of Developmental Assets in a young person’s life.
Next steps:
1.To secure administrative capacity for coordinating the PSN community coalition.
2.To support PSN partners in developing specific action plans to move PSN strategies forward.
3.Provide new and creative opportunities for teen involvement in community decision making.
Project Tracking Report (June 30, 2011-October 30, 2011) Page 39
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2. Project: Magical Bridge Playground Project
Department: Community Services Department
Project lead: Director, Community Services
Project start date: July 2011
Target completion date: June 2013
Current status:
On July 18, 2011, the Council approved a Letter of Intent with the Friends of the Magical Bridge
for the mutual design and construction of the Magical Bridge Playground. The Letter of Intent
pledged a contribution of up to $300,000 from the City towards design and construction
expenses.Public Works Engineering Staff has drafted a Scope of Work for professional design
services for the playground, pathways,and replacement bridge of Adobe Creek.On September
14, 2011 Community Services Department Director,Greg Betts and Public Works Landscape
Architect,Peter Jensen met with the Board of the Friends of the Magical Bridge to obtain
approval of the design Scope of Work. Staff discussed a number of grant opportunities and
fundraising strategies with the Board. Ideas for raising community awareness about the Project
was discussed,including ideas for getting a new informational video out to the public through
multiple venues including the Mayor’s monthly newsletter.
Next steps:
Staff will release the Request for Proposal for design services. A contract for services was
brought to Council in October 2011 for approval. Staff anticipates working with the design
consultant to complete the designs for Commission and Council review by July 2012.Under the
terms of the Letter of Intent the Friends of the Magical Bridge will have until June 30, 2013 to
raise the funds for the Project and be able to enter into a construction agreement with the City
for the project.
1
City of Palo Alto Strategic Priorities
City Council Priorities Dept Dept CF EP ES LUTP YWB CE CP
P S
A. City Finances (CF)
1 Complete labor negotiations with major bargaining groups HR ASD, ATT x
2 Complete refuse fund study and stablization PW ASD x ü ü ü
3 Complete and implement economic development strategic plan MGR x ü ü ü ü ü ü
4 Execute budget/fiscal measures to ensure long-term financial stability ASD MGR x ü ü
5 IBRC completes long-term city infrastructure needs report for City Council PW ASD, MGR x ü ü ü ü ü
B. Emergency Preparedness (EP)
1 Conduct community exercise POL FIR ü x ü ü
2 Evaluate a secondary electrical transmission line source UTL ü x ü ü ü
3 Implement recommendations of Foothills fire management plan FIR POL ü x
4 Implement Office of Emergency Services (OES) restructure POL FIR, MGR ü x
5 Improve Emergency Operations readiness POL FIR x ü ü
C. Environmental Sustainability (ES)
1 Evaluate construction of compositing digester or alternatives PW ü x
2 Evaluate and implement plan to introduce electric vehicle (EV) charging stations MGR PCE, UTL x ü ü
3 Establish formal collaboration with Stanford University MGR x ü
4 Explore methods to integrate Palo Alto Green into city sustainability programs MGR PCE, UTL x ü ü
5 Prepare Urban Forest Master Plan PCE FIR x ü ü
D. Land Use & Transportation Planning (LUTP)
1 Complete Development Center plans improving customer service/accountability PCE MGR ü x ü ü
2 Complete Rail Corridor study PCE MGR ü ü ü x
3 Complete Stanford University Medical Center project PCE MGR ü ü ü x
4 Substantially complete Comprehensive Plan update PCE ü ü ü x ü ü ü
5 Facilitate effforts to sustain Caltrain MGR PCE ü ü x ü ü
6 Participate in regional SB375 & Housing Needs Allocation (RHNA)PCE ü ü x ü ü
7 Prepare Pedestrian and Bicycle Master Plan update PCE ü ü x ü ü ü
E. Youth Well Being (YWB)
1 Implement Project Safety Net CSD MGR, POL ü x
2 Magical Bridge Playground project CSD ü ü x ü ü
Acronym Definitions
City Finances (CF)
Emergency Preparedness (EP)
Environmental Sustainability (ES)
Land Use & Transportation Planning (LUTP)
Youth Well Being (YWB)
Community Engagement (CE)
Collaborative Partnerships (CP)
An X means that is the priority whereas a check indicates crossover with other priorities
Dept P, primary department responsible for priority
Dept S, supporting department(s) invovled in priority work
Department Abbreviations
Administrative Services (ASD), City Manager (MGR), Community Services (CSD), Fire (FIR), Human Resources (HR), Planning and Community
Environment (PCE), Police (POL), Utilities (UTL)
Priorities by department
ASD CSD FIR HR MGR PCE POL PW UTL
1
City of Palo Alto (ID # 1892)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 7/11/2011
July 11, 2011 Page 1 of 2
(ID # 1892)
Council Priority: City Finances, Community Collaboration for Youth Well-Being,
Emergency Preparedness, Environmental Sustainability, Land Use and
Transportation Planning
Summary Title: City Council Priorities Quarterly Report
Title: City Council Strategic Priorities Quarterly Report for the Period Ending
June 30, 2011
From:City Manager
Lead Department: City Manager
Recommendation
Approval of the City Council Strategic Priorities Quarterly Report for the
period ending June 30, 2011.
Executive Summary
The City Council adopted Council priorities earlier this year on January 22,
2011.
Background
The City Council was provided a report in April of this year that included a
master list of the Council priorities and key goals under each priority. At
that time, Staff indicated they would provide quarterly update reports to
the City Council. The enclosed report is the first quarterly update report on
the progress of the priorities for the period April to June 2011. The report
includes the original information, plus the current status and next steps for
each priority. The City Council will receive the next report in early October
for the period of July to September 2011.
Attachment
City Council Strategic Priorities Quarterly Report Summary, April 1 to June
30, 2011
July 11, 2011 Page 2 of 2
(ID # 1892)
Attachments:
·Attachment A -Strategic Priorities Quarterly Report (PDF)
Prepared By:Danille Rice,
Department Head:James Keene, City Manager
City Manager Approval: James Keene, City Manager
City of Palo Alto, City Manager’s Office
www.cityofpaloalto.org 650.329.2100
City of Palo Alto 2011
Strategic Priorities Quarterly Report
July 11, 2011
Volume 1, Issue 1
For the period ending June 30, 2011
INSIDE THIS ISSUE
2011 Strategic Priorities Summary Pages 3‐4
Strategic Priorities Narratives:
City Finances Pages 5‐14
Emergency Preparedness Pages 15‐22
Environmental Sustainability Pages 23‐34
Land Use & Transportation Planning Pages 35‐44
Youth Well Being Pages 45‐52
Project Tracking Report (April 1 – June 30, 2011) Page 2
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Project Tracking Report (April 1 – June 30, 2011) Page 3
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2011 Strategic Priorities Summary
A. City Finances (CF)
Goals
1. Complete labor negotiations with all major bargaining groups
2. Complete refuse fund study and stabilization
3. Complete economic development strategic plan
4. Execute new budget and fiscal measures to help ensure long‐term financial stability
5. Infrastructure Blue Ribbon Commission to complete analysis of the City’s long‐term infrastructure
needs and report to the City Council
B. Emergency Preparedness (EP)
Goals
1. Conduct community exercise
2. Evaluate a secondary electrical transmission line source
3. Implement recommendations of Foothills Fire Management Plan
4. Implement Office of Emergency Services (OES) restructure
5. Improve Emergency Operations readiness
C. Environmental Sustainability (ES)
Goals
1. Evaluate construction of composting digester or alternatives
2. Evaluate plan to introduce electric vehicle (EV) charging stations at commercial sites, residential
sites, and City facilities
3. Establish formal collaboration with Stanford University
4. Explore methods to integrate Palo Alto Green into City sustainability programs
5. Prepare Urban Forest Master Plan
D. Land Use & Transportation Planning (LUTP)
Goals
1. Complete strategies and plans at the Development Center (DC) to improve customer service and
accountability
2. Complete draft Rail Corridor Study outlining measures to provide for community land use,
transportation, and corridor urban design
3. Complete Stanford University Medical Center Renewal and Replacement Project
4. Substantially complete update of the City’s Comprehensive Plan Amendment/Housing Element
Update and 2 Area Concept Plans
5. Facilitate, in cooperation with local and regional agencies and organizations, the development of a
short and long‐term action plan to sustain Caltrain
6. Actively participate, in preparation of, regional Sustainable Communities Strategy (SB375), and
Regional Housing Needs Allocation (RHNA)
7. Prepare Pedestrian and Bicycle Master Plan update
Project Tracking Report (April 1 – June 30, 2011) Page 5
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A. City Finances (CF)
Executive Summary:
City finance strategies form the foundation for the City Council identified priorities. A stable financial
picture in the short and long‐term ensures the City’s ability to deliver on all five Council priorities.
Sound City finances are integral to Palo Alto’s quality of life.
A key principle of the City’s finance objectives is to provide for the City’s finances in the near and long‐
term. For example, the City negotiates labor agreements on a periodic basis, and the contracts
envisioned during this cycle are ones where the City plans to make meaningful long‐lasting changes to
key City legacy costs (e.g., pension and health care). The City is working toward developing a
sustainable business model for funding ongoing infrastructure needs while eliminating a major backlog
of City projects. These efforts will take time, yet this investment is well worth the effort. This work
will result in improving the overall high quality of life that Palo Alto citizens have come to rely and
expect from their City government. Identified below are goals for Fiscal Year 2011.
1. Develop and execute new human resource contracts that help the City manage its labor costs to
a sustainable level over the long‐term.
2. Execute an economic development program that supports and creates new municipal revenue
streams to support vital City services, and positions the City for the 21st century innovation
economy.
3. Outline a comprehensive initiative to fund ongoing infrastructure maintenance, and the existing
backlog of City projects. A quality infrastructure base is vital to the community’s quality of life,
and attracting and sustaining a robust business base to support City services.
4. Explore in‐depth available potential revenues, along with expenditure reductions that enable
the City to create a long‐term sustainable fiscal ecosystem for the City to maintain and
ultimately enhance City service delivery and quality of life. The solution to the City’s finances
should be multi‐dimensional, incorporate new or enhanced revenues, reset long‐term labor
contracts, and use new methods to deliver City services.
Project Tracking Report (April 1 – June 30, 2011) Page 6
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1. Project: Complete labor negotiations with all major bargaining groups
Department: Human Resources Department
Project lead: Interim Human Resources Director
Project start date: May 2010
Target completion date: December 2011
Background and description:
In 2009, the City took the lead among Bay Area public agencies by initiating steps in contract
negotiations with Service Employees International Unit (SEIU) and Management and Professional
employees to implement a two‐tier retirement benefit. The new benefit changed the retirement
formula for new hires to 2% @60. The City also implemented an employee medical contribution with
non‐public safety employee groups (e.g., management, professionals, and SEIU employees). Over the
past year, the City has been involved in difficult negotiations with two out of the four public safety
unions: International Association of Firefighters (IAFF) Local 1319, and the Palo Alto Police Manager’s
Association (PAPMA). The other two sworn safety units will begin contract negotiations in spring
2011. Many existing benefits were negotiated over an extended period of time and are long
established. These are challenging negotiations to address in a short period of time.
In 2010, Council reaffirmed the importance of attracting and retaining a quality workforce but
emphasized the critical need to balance this objective with a commitment to sustainable employee
compensation. In addition, Council directed that systemic problems and issues be addressed with
systemic solutions. As described in the City’s input to the Santa Clara County Grand Jury Report, the
City agreed that unsustainable employee costs must be aligned with available resources, taking into
consideration the City’s significant infrastructure needs and the public’s expectation of services. As
demonstrated by its balanced budgets, minimal use of reserves, AAA credit rating, and excellent
annual outside audits, the City prides itself on responsible financial stewardship and management.
The City fully intends to maintain these best practices and adjust costs and revenues as needed.
Progress is dependent on the City’s success in its collaboration with employee units. The City must
abide by contractual obligations of its labor contracts, as well as legal requirements to meet, confer,
and bargain in good faith over matters within the scope of representation. This places real and
practical constraints on the City’s ability to move forward with changes it may believe necessary, but
which are subject to negotiation. The City strives to reach agreements that ensure a sustainable
financial future, and one which provides excellent services to the community. Identified below are
goals for Fiscal Year 2011.
1. PAPMA is a new bargaining unit. The City and PAPMA are in negotiations to create their first
Memorandum of Understanding (MOU).
2. The City has been negotiating with the Fire Fighters’ Association since May 2010. The City
determined that a further productive movement toward a negotiated agreement cannot be
reasonably expected after eight months of negotiations, and declared impasse on February 15,
2011. This action initiated a binding interest arbitration of the unresolved issues. Dates for
Arbitration have been set for the Fall.
3. The City typically negotiates with the Fire Chiefs’ Association after the Fire Fighters’
negotiations’ conclude. Given the lack of progress as described above, the City will initiate
negotiations with the Fire Chiefs in spring 2011 with the goal of reaching an agreement in Fiscal
Year 2012.
4. The City and SEIU will meet in spring 2011 to prepare a successor agreement that is scheduled
to expire on June 30, 2011.
Project Tracking Report (April 1 – June 30, 2011) Page 8
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5. Palo Alto Police Officers' Association (PAPOA) deferred their scheduled wage increase in FY 2010
for one year to provide relief to the City’s budget and negotiated an additional year on their
existing contract for a new expiration date of June 30, 2011. Negotiations o begin in the Spring,
2011.
Current status:
The City continues in negotiations with PAPMA to create their first Memorandum of
Understanding (MOU.) The City reached impasse in negotiations with IAFF/Palo Alto Firefighters
in February 2011. Arbitration hearing is scheduled in September 2011. The City has continued
with informal discussions in hope of reaching agreement in accordance with Council direction.
Negotiations with the Fire Chiefs’ Association was initiated in May 2011. The City reached an
agreement with SEIU to rollover SEIU’s contract, keeping its existing terms, and extending the
contract until June 30, 2012. The City held preliminary off‐the‐record discussions with PAPOA in
the Spring of 2011, with formal negotiations targeted to begin in July 2011.
Next steps:
The City will begin formal negotiations with PAPOA in July 2011. The Utilities Management and
Professional Association of Palo Alto (UMPAPA) is a new unit. The City certified UMPAPA in May 2011
and will begin negotiations in July 2011.
Project Tracking Report (April 1 – June 30, 2011) Page 9
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2. Project: Complete refuse fund study and fund stabilization
Department: Public Works Department
Project lead: Interim Public Works Director
Project start date: August 2010
Target completion date: December 2011
Background and description:
Studying the Refuse Fund and executing a plan to balance and stabilize the fund is one goal identified
by the Council. This enterprise fund supports a large array of City services including garbage,
recyclables, compostable collection, disposal, street sweeping, household hazardous waste services,
and supporting City‐owned facilities. City‐owned facilities include the Recycling Center and the Palo
Alto Landfill and Composting Facility. Due to multiple factors, such as the success of the City’s zero
waste services, downturn in economy, and use of reserve funds, the Refuse Fund financial health has
been compromised. Identified below are goals for Fiscal Year 2011.
1. Rebuild the Refuse Fund’s Rate Stabilization Reserve to a level that meets established
guidelines. This includes ensuring balanced annual operating budgets and establishing a stable
annual revenue stream.
2. Assess and realign refuse rates among users. The City is finalizing a Cost of Service Study. The
results of this study will be used to evaluate the current refuse rate structure, and help make
recommendations for changes.
3. Continue to work towards zero waste. The City has made great strides towards reaching this
goal, and much of its success is connected to the Refuse Fund conservation pricing rate
structure.
Current status:
Major progress has been made this fiscal year in returning the Refuse Fund to financial health and
stability. Fiscal Year 2011 revenues are matching expenditures for the first time since Fiscal Year 2008,
and reserves are no longer decreasing. The Palo Alto Landfill is being closed with substantial savings to
follow. Short and Long‐term time schedules have been developed to place the Refuse Fund on a
trajectory to full sustainability.
Next steps:
A major set of analysis will be presented to the Council on July 6, 2011 with refuse rate changes to
ensure financial health in Fiscal Year 2012. The Cost of Service Study is anticipated to be completed in
fall 2011.
Project Tracking Report (April 1 – June 30, 2011) Page 10
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3. Project: Complete economic development strategic plan
Department: City Manager’s Office
Project lead: Economic Development Manager
Project start date: January 2011
Target completion date: December 2011
Background and description:
Economic development is nearly always a strategic priority for local municipal business retention and
business expansion. Business attraction strategies have direct correlation to revenues and City
services. Stable and predictable revenues are critical to the community’s quality of life. Identified
below are goals for Fiscal Year 2011.
1. Develop new revenue streams and innovative uses for under‐utilized City owned properties.
2. Provide leadership in the outreach and messaging for the Development Center (DC)
restructuring process.
3. Outreach to the City’s largest revenue generating and most innovative companies.
4. Create emerging technologies demonstration and pilot partnerships program partnerships,
especially with innovative green/clean tech companies.
5. Enhance the City’s Doing Business webpage and create engaging and effective marketing
collateral geared towards the City’s diverse business environment (i.e. retention and attraction
of different market segments), and transition to electronic marketing.
Current status:
A draft of the Economic Development Strategic Plan was presented to the Policy & Services
Committee in March 2011. A second iteration was brought forward to the Committee in June 2011.
In the meantime, work has progressed on all of the above items:
1. A plan has been developed at the staff level on a revenue generating use for a City‐owned small
parcel and will be returning to the Council in fall 2011.
2. The DC restructuring effort continues, and there has been significant outreach to the business
community and press from the Economic Development Team. Staff will be bringing
recommendations for the DC improvements to the Council at the August 1, 2011 meeting.
Recommendations include a recommendation for central management of all DC operations,
including utility and public works functions.
3. The Economic Development Team has targeted many of the City’s largest revenue generating and
several innovative companies for outreach. Staff has made numerous contacts by email, phone,
and in person. In many cases, solutions to issues have been orchestrated by the Economic
Development Team, including many companies expanding or re‐locating to Palo Alto.
Next steps:
A third iteration of the plan will be brought forward in September 2011 with the idea to separate the
larger policy discussion and the actual team plan. While the policy discussion is expected to be
ongoing, the plan and outlined deliverables, including those prioritized above, are expected to move
forward as a City Manager directive.
Project Tracking Report (April 1 – June 30, 2011) Page 11
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4. Project: Execute new budget and fiscal measures to help ensure long‐term financial
stability
Department: Administrative Services Department
Project lead: Chief Financial Officer
Project start date: May 2011
Target completion date: Fall 2011
Background and description:
The City currently completes and uses a Long‐Range Financial Forecast (LRFF). The forecast provides
actual financial data for the most recent completed budget year, adopted and projected financial data
for the current budget year, and projected financial data looking forward ten years (to 2021). The
LRFF is used to project and quantify a baseline projection of revenues, expenditures, cash flows, and
fund balance for the General Fund. The forecast enables the City to take steps to plan for potential
revenue and expenditure increases/decreases, and future liabilities and costs (e.g., health care and
PERS pensions). The forecast enables policy makers to evaluate financial impacts of potential
initiatives and to plan ahead to ensure the long‐term fiscal stability of the City. To achieve fiscal
stability it is critical for revenues to exceed expenditures on an ongoing basis. The LRFF shows a
snapshot of the expected ten‐year relationship between revenues and expenditures to enable
corrective action to be taken if needed. The forecast helps community members understand the
organization’s present and future financial capabilities and resource allocations to support services
and programs. Coupled with the City’s annual budget documents, the LRFF provides an invaluable
source of financial information for those interested in the City’s financial plan.
The plan allows the City to evaluate potential new revenues, expenditure reductions, and service
options that can achieve a stronger more sustainable budget. For example, last year the City made
substantial changes to its PERS pension plan by moving to a new two‐tier formula (2% @ 60) for non‐
safety personnel. In addition, the City will be implementing an employee contribution to healthcare
this year, which will reduce the City’s healthcare expense immediately. The City needs to execute
additional measures to ensure long‐term financial sustainability. Identified below are goals for Fiscal
Year 2011.
1. Identify new, potential revenue sources including preparation of a report outlining various
potential revenue options, the pro’s and con’s of each option, and estimated potential revenues.
Potential new revenues options include but are not limited to ambulance service subscription tax,
business operations tax, City‐wide parcel tax, increase in property transfer tax, and increase in
utility users tax.
2. Develop plans to address increased employee compensation (salary and benefit) costs, and
develop plans to share cost increases with employees.
3. Identify additional operational efficiencies, such as contracting out City services, exploring
potential partnerships with existing non‐profit organizations and non‐governmental organizations,
adjacent cities, and other governmental organizations. Also consider establishing partnerships
with regional public agencies on the Peninsula to jointly act to deliver services and programs.
a. Analyze and review organizational structure for potential functional consolidation options (e.g.
placing all maintenance functions within one department), and consolidation options with
regional agencies that may provide similar services to the City (e.g. public safety and dispatch
services).
b. Consider the potential ability to civilianize certain public safety management positions.
c. Consider an exclusive towing services contract in the City.
Project Tracking Report (April 1 – June 30, 2011) Page 12
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d. Explore contracting out fleet maintenance and utility billing services.
e. Explore partnerships with private entities and/or Friends Groups for cost sharing for
community services.
4. Identify a long‐term sustainable financial model to address the City’s infrastructure backlog, and
develop a model to fund infrastructure preventive maintenance. This model will be developed in
coordination with the Infrastructure Blue Ribbon Commission (IBRC) and presented to the Finance
Committee.
Current status:
Staff is working on a draft report and anticipates providing the report to the Council in the fall 2011.
The timing is based on coordination between this report and a draft report from the IBRC.
Next steps:
Completion of the report is anticipated in fall 2011.
Project Tracking Report (April 1 – June 30, 2011) Page 13
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5. Project: Infrastructure Blue Ribbon Commission to complete analysis of the City’s
long‐term infrastructure needs and report to the City Council
Department: City Manager’s Office
Project lead: Deputy City Manager
Project start date: November 2010
Target completion date: December 2011
Background and description:
The Infrastructure Blue Ribbon Commission (IBRC) was established to make recommendations to the
Council to address the City’s current infrastructure backlog. The IBRC will return to the Council in the
fall 2011 after considering the following list of questions:
1. What is the complete listing of the City’s infrastructure backlog and future needs? What criteria
should be used to prioritize this list?
2. Are there ways the City’s infrastructure needs can be prioritized into five year increments that
can be financed and effectively implemented given current Staffing resources?
3. What are potential financing mechanisms that could be used to address the City’s infrastructure
needs? Should there be a one‐time financing mechanism or some ongoing source of
infrastructure funding? What are the options for each of these choices?
4. Is a bond measure the best mechanism for funding the infrastructure backlog? If so, when
should this move forward and how could it be structured?
5. How can public/private partnerships be leveraged as an infrastructure funding mechanism?
6. How are project cost estimates developed and are these in alignment with other local
jurisdictions?
7. How do Enterprise Fund infrastructure projects intersect with General Fund infrastructure
projects?
Current status:
The IBRC divided into three sub‐committees and analyzed the project’s problems. Information was
gathered via surveys, Staff interviews, meetings with other cities, and individual members’ research.
Staff and IBRC Commissioners developed the most detailed and extensive needs assessment database
prepared to date. On May 17, 2011 Staff and four IBRC Commissioners toured multiple City parks,
bike paths, streets, bridges, and medians to view examples of the infrastructure backlog and needs.
Next steps:
The three IBRC sub‐committees are preparing reports and a Council study session is being scheduled
in July 2011. A draft report from the IBRC is anticipated in September 2011, with a final report
returning to Council in December 2011.
Project Tracking Report (April 1 – June 30, 2011) Page 14
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Project Tracking Report (April 1 – June 30, 2011) Page 15
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B. Emergency Preparedness (EP)
Executive Summary:
The City, like any community in the Bay Area, is susceptible to a variety of natural hazards including
earthquakes, floods, wild‐land fires, and man‐made disasters. The City is committed to protecting life,
property, and the environment through a number of activities including preplanning, training, rapid
emergency response, and public safety education. Identified below are goals for Fiscal Year 2011.
1. The City will conduct one major community emergency preparedness exercise. Staff will work
with community groups to plan and host a full‐scale exercise which will include multiple
neighborhood groups and City departments. This exercise will be consistent with accepted
national exercise guidelines.
2. The City will evaluate and complete a feasibility analysis and report on alternatives for a
secondary electrical transmission source. The new transmission source will be established in a
separate geographical area that would eliminate the possibility of a single contingency outage
interrupting power to the City.
3. Implement recommendations of the Foothills Fire Management Plan to address treatment and
mitigation measures that are required to ensure the viability of evacuation routes and protect
life and property.
4. Implement the Office of Emergency Services (OES) restructuring, and focus on four key
readiness areas: preparedness, mitigation, response, and recovery.
5. Improve emergency operations readiness per the City’s Emergency Operations Plan. The City
will work to better coordinate all City facilities and personnel to respond in a coordinated and
cohesive fashion.
Project Tracking Report (April 1 – June 30, 2011) Page 16
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1. Project: Conduct community exercise
Department: Police Department
Project lead: Acting Public Safety Director
Project start date: January 2011
Target completion date: September 2011
Background and description:
The City and the community seek to improve response time to major incidents. A coordinated, well‐
planned response requires an exercise component in order to rehearse and clarify Staff and resident
roles. Such exercises are building blocks in support of a strategic, multi‐year training and exercise
plan. Deliverables identified are as follows, and not in rank order:
1. City departments will work with volunteer groups and external stakeholders to develop the
scope, purpose, objective, and scenario for a City/community exercise.
2. Identify a joint community/Staff exercise design team to coordinate/manage the exercise, and
support community resilience.
3. Encourage participation within community groups and volunteer organizations.
4. Manage exercises which will evaluate the following: 1) intra‐City communications; 2) sharing
real‐time communications with external stakeholders; and 3) internal emergency preparedness
procedures.
5. Develop an after‐action report and corrective action plan post‐exercise.
Current status:
In 2010, the Palo Alto Neighborhoods (PAN) community group, under the leadership of Lydia Kou,
pioneered the first post‐major‐earthquake scenario called Quakeville. Residents "camped" in a local
park which simulated the immediate aftermath and illustrated some of the challenges that could arise.
In 2011, PAN will partner with the City, via the Palo Alto/Stanford Citizen Corps Council, to involve
residents and Staff (police, fire, public works, utilities, etc.) in an expanded Quakeville community
exercise.
Next steps:
The Training and Exercise Design Team (TEDT), part of the City's adoption of the Homeland Security
Exercise and Evaluation Program (HSEEP), includes Lydia Kou and subject matter experts Sergeant
Wayne Benitez, Sergeant Scott Savage, and Officer. Ken Dueker. The TEDT has met several times to
define the scope and objectives of the exercise. Next steps will be to define the "vignette" scenarios
that will include the Block Preparedness Coordinator (BPC) program communicating with the new
Mobile Emergency Operations Center (MEOC). A series of BPC training classes, neighborhood‐level
training sessions, and mini‐drills have been ongoing, in preparation for the big event.
Project Tracking Report (April 1 – June 30, 2011) Page 18
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2. Project: Evaluate a secondary electrical transmission line source
Department: Utilities Department
Project lead: Utilities Director
Project start date: July 2010
Target completion date: December 2011
Background and description:
In February 2010, the City had electricity interrupted to the entire service area for over ten hours. This
outage was due to an airplane leaving the Palo Alto Airport striking Pacific Gas and Electric (PG&E)
transmission lines. The purpose of this initiative is to investigate alternatives to install a secondary
electrical transmission source to the City. The new transmission source would be established in a
separate geographical area that would eliminate the possibility of a single contingency outage
interrupting power to the City. Identified below are goals for Fiscal Year 2011.
1. Continue coordinating with PG&E and the Independent System Operator (ISO) on including a
transmission line connecting PG&E’s Ames Substation to Palo Alto’s Adobe Creek Substation.
This project would be part of PG&E’s system plans to improve transmission service in the Bay
Area.
2. Continue discussions with Stanford University on a project that would connect the City’s Quarry
Substation to Stanford’s Substation, and to the Stanford Linear Accelerator’s 230 kV Substation.
3. Prepare a report for Council on viable alternatives for providing a secondary transmission source
and take action per Council direction.
This project is expected to take between three and six years to complete once a viable alternative is
determined due to planning and environmental requirements for a transmission facility.
Current status:
The California Independent System Operator (CAISO) submitted its draft plan in April 2011. The draft
plan did not recommend that the Ames to Adobe Creek Substation line be installed in the current
planning year. CAISO continues to review this alternative and it may be included in future planning
years.
Next steps:
As a result of this recommendation, the City proposed that the CAISO consider an alternative
transmission line connecting the SLAC Substation to the Quarry Road Substation. The City met with
the CAISO in June 2011 and identified numerous issues requiring further resolution. Additional
meetings are planned and negotiations are ongoing. The City will continue to include Stanford
University in discussions with the ISO regarding the review of the alternate proposal.
Project Tracking Report (April 1 – June 30, 2011) Page 19
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3. Project: Implement recommendations of Foothills Fire Management Plan
Department: Fire Department
Project Lead: Acting Public Safety Director
Project Start Date: January 2011
Target Completion Date: Ongoing
Background and description:
In 2009, the City commissioned a study to evaluate the fire potential in the wildland‐urban interface.
The study revealed that there are treatment and mitigation measures that are required to ensure the
viability of evacuation routes and to protect life and property. Identified below are goals for Fiscal
Year 2011.
1. Extend consultant’s contract to assist Staff in implementing the Foothills Fire Management Plan.
2. Submit the application to classify the Foothills Fire Management Plan as a Community Wildfire
Protection Plan; explore grant eligibility under Community Wildfire Protection Plan to fill the
estimated $715,000 obligation.
3. Seek Public Works Capital Improvement Program for ongoing mitigation activities to implement
recommendations.
4. Host three educational sessions for residents to review the community’s role in mitigation,
prevention, response, and recovery.
5. Apply for CALFIRE Work Crew as one option to assist in mitigating identified hazards in the
Foothills Fire Management Plan.
Current status:
Staff issued a new scope of work with the City’s consultant Wildland Resource Management, Inc. The
scope included implementation plans, using a fiscally‐constrained environment, which identified
possible cost‐saving alternatives for some abatement processes and possible grant funding (e.g.,
California Fire Safe Grants). The application was successful, and the plan has been accepted as a
Community Wildfire Protection Plan. A City consultant will help identify grant funding. Capital
Improvement Project (CIP) funding for $200,000 has been identified in Fiscal Year 2012. Staff is
planning three public educational meetings, which will cover homeowner fire mitigation (defensible
space laws), the Block Preparedness Coordinator (BPC) program, and evacuation. The use of CALFIRE
Work Crews is anticipated to be covered in subsequent funding options.
Next steps:
Following CIP funding allocation and to ensure work is prioritized based on Plan priorities, Staff will
form an interdepartmental team, including Wildland Resource Management Inc., to coordinate the
implementation and develop a work plan. The work plan will include biological surveys and treatment
prescriptions.
Project Tracking Report (April 1 – June 30, 2011) Page 20
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4. Project: Implement Office of Emergency Services (OES) restructure
Department: City Manager’s Office/Police Department
Project lead: Assistant City Manager/Acting Public Safety Director
Project start date: May 2011
Target completion date: Fall 2011
Background and description:
In October 2010, the City Manager’s Office commissioned a study to review the City’s practices in
emergency management. A consultant was hired by the City to conduct a gap analysis and make
recommendations to improve emergency/disaster readiness. The consultant interviewed key
stakeholders, inspected critical infrastructure, and reviewed emergency planning procedures. Staff
and the consultant presented recommendations to the Council at a study session held in spring 2011.
The report examined how the City and community can improve in the four key emergency/disaster
readiness categories: preparedness, prevention, response, and recovery. The report examined the
appropriate staffing and structure for these emergency preparedness activities. The consultant
presented recommendations that can enhance the City’s coordination with the community.
Current status:
The OES consultant report was completed and reviewed by the Council and the Palo Alto/Stanford
Citizen Corps Council (CCC) in April 2011. In May, the Council's Finance Committee voted to fund the
implementation of the report. The Finance Committee recommended the following actions: 1) hiring
a OES Director; 2) funding one OES Coordinator position; 3) funding one administrative assistant
position; 4) funding the recommended hazard studies (such as HazUS); and 5) creating a separate OES
budget and structure.
Next steps:
Staff, with continued input from the CCC, seeks to move forward with the hiring process for the OES
Director. The report identified numerous high‐priority projects for the OES Director, including
completing various emergency plans, improving the City's Emergency Operations Center,
implementing training for City staff, and optimizing City‐sponsored volunteer programs. Outreach and
interviews for the OES Director is anticipated to occur in the Third Quarter of the current Fiscal Year.
Project Tracking Report (April 1 – June 30, 2011) Page 21
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5. Project: Improve emergency operations readiness
Department: Police Department
Project lead: Acting Public Safety Director
Project start date: January 2011
Target completion date: Ongoing
Background and description:
The City seeks, per its Emergency Operations Plan to “incorporate and coordinate all facilities and
personnel…into an efficient organization, capable of responding in a coordinated and cohesive
fashion.” To better achieve this objective, the City will make a number of improvements in training,
equipment, and technology. Deliverables identified are as follows, and not in rank order:
1. Staff will implement a multi‐year, training and exercise plan designed to engage the community
and improve response capabilities.
2. Enhance interoperable communications and further develop virtual consolidation of dispatch
with neighboring communities.
3. Identify and seek grant funding for support equipment for emergency response operations.
Staff will explore regional partnerships and support joint planning initiatives, such as the
pending National Disaster Resiliency Center at NASA Moffett Field.
4. Develop and implement training for Staff on personal and family emergency preparedness.
Current status:
In September 2010, Staff held a study session with the Council. Numerous projects and plans for
improvement were identified, including the role of the new Palo Alto/Stanford Citizen Corps Council
(CCC), and the importance of regional efforts, such as the National Disaster Resiliency Center at
Moffett Field. Multi‐discipline training, such as Urban Shield, was discussed.
Staff efforts to improve the Emergency Operations Plan and training include the following:
Homeland Security Exercise and Evaluation Program (HSEEP): develop Multiyear Training & Exercise
Plan (MTEP); create Training and Exercise Design Team (TEDT); create a comprehensive, multi‐entity
Training Calendar; interface with regional TEDTs; hold joint‐planning meetings with community
stakeholders.
Regional Cooperation: Officer Dueker is the City’s liaison to regional training groups and exercises,
including the Great Shake Out and Urban Shield; continue to support nascent National Disaster
Resiliency Center at NASA, Moffett Field; review Section 13 of the September 2010 study session
report regarding other regional initiatives.
Emergency Plans: finalize City Continuity of Operations Plan (COOP), Recovery Plan, Pandemic & Public
Health Plan, and Community Emergency Plan; Rewrite the Emergency Operations Plan (EOP).
Emergency Operations Center: Staff are evaluating transition to Mobile Emergency Operations Center
(MEOC) as the primary EOC.
Support of other Council Priorities: It should be noted that some of the community‐based efforts are
supportive of youth well being. For example, the 41 Developmental Assets encourages the City to
create volunteer opportunities for youth. This same objective is part of the CCC. The integration of
businesses and business districts as "neighborhoods", as part of the Block Preparedness Coordinator
Program, supports the City finances priority.
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The ongoing contraction in sales tax revenue increases the burden on public safety to attract visitors
and shoppers to the City. Many revenue sources may be “fragile”, as a criminal incident or other
emergency could disproportionately harm such entities or areas. Due effort is appropriate to aid the
private sector in its preparation, response, and recovery. Officer Dueker is working with the Stanford
Shopping Center and Stanford Hospital in joint exercises and on a hazards vulnerability analysis.
Further, Officer Dueker is coordinating with Thomas Fehrenbach to expand this activity to other
private sector partners.
Next steps:
When the OES restructuring is complete, the City will start a long‐term process to improve its
resilience. The new OES Director will be tasked with surveying the existing situation, studying best
practices, and formulating a strategic plan for the next several years. While there are many areas of
improvement, it should be noted that the City's Block Preparedness Coordinator Program and CCC
were key factors in the Red Cross awarding the City with a 2011 Innovative Heroes Award.
An opportunity for Palo Alto is to be an innovative leader by establishing a solar‐powered, off‐the‐grid
wireless network for disaster recovery: the Community Disaster Network (CDN). One objective of the
CDN is to allow real‐time event reporting and information sharing among all levels of community
response and volunteer structures. During a major storm, when phone and electrical lines are
impaired, a Block Preparedness Coordinator could survey neighbors and fill out an online report form
on their laptop computer (or even iPad®) via the CDN. This information would then be relayed to the
City’s EOC and other key locations, all without the time‐consuming and laborious paper forms and
voice‐radio methods currently employed.
Project Tracking Report (April 1 – June 30, 2011) Page 23
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C. Environmental Sustainability (ES)
Executive Summary:
Environmental sustainability is a core value and ongoing priority for the City. The City has been a
leader in this area in the Bay Area metropolitan region and in North America. The City is a Certified
Green Business and has adopted a Climate Protection Plan (CPP), Sustainability Policy, Palo Alto Green
Program, and continues to make strides in reducing greenhouse gas emissions (GHG). One recent
example is the initial installation of LED streetlights in the City. Identified below are goals for Fiscal
Year 2011.
1. Continue to look at the City’s utility plant operations for methods and strategies to increase the
ability to reduce GHG. This year a major focus will be to look at the financial practicality of new
composting digesters or other alternatives to reduce GHG’s.
2. Fleet operations and gas vehicles are a major contributor to GHG emissions. Staff will explore
the ability to install electric vehicle charging stations at various locations in the City to facilitate
and encourage the use of electric vehicles.
3. Stanford has a robust sustainability program and several initiatives underway and ongoing in
this area. Stanford is a leader in research and development of green technologies and practices.
The City will explore developing a more formal collaborative relationship with Stanford to
determine if there are synergies and potential partnerships to enable both entities to leverage
combined efforts to be leaders in sustainable communities.
5. The residents of Palo Alto have embraced many green practices on their own and with the
encouragement of the City. This includes recycling, use of available transit options (e.g.,
Caltrain), planting of trees, and many other homegrown initiatives. The City has a number of
sustainability programs and engages in practices to encourage sustainability in the community.
This initiative will provide a focused effort in looking at strategies and tactics to leverage
knowledge, resources, and talent to build a more sustainable community.
6. Palo Alto is a City with a considerable urban forest canopy. This canopy provides considerable
environmental and community quality of life benefits to the community. A master plan will
enable the City to create a long‐term plan for managing and enhancing this significant asset, and
help the City meet its sustainability goals.
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1. Project: Evaluate construction of composting digester or alternatives
Department: Public Works Department
Project lead: Interim Public Works Director
Project start date: October 2010
Target completion date: October 2011
Background and description:
Evaluating alternatives for handling the City’s organic residuals (e.g., yard trimmings, food scraps, and
wastewater solids) is a critical goal of the Council’s environmental sustainability priority. Identified
below are goals for Fiscal Year 2011.
1. Hire a consultant to evaluate a dry anaerobic digestion system.
2. Prepare an applicable level EIR, focused on 8‐9 acres of Byxbee Park, adjacent to the City’s
Regional Water Quality Control Plant.
3. Conduct a Preliminary Analysis before completion of the study.
4. Explore energy conversion technologies in conjunction with the Regional Water Quality Control
Plant long range facilities planning.
5. Explore partnering with local agencies within 20 miles of Palo Alto.
Current status:
The Preliminary Feasibility Analysis was completed on time and vetted in a series of public and Council
meetings. Proponents and opponents of a Palo Alto facility on the Landfill/Byxbee Park site had
extensive comments on the analysis. Comments were also received on the alternative regional sites in
the South Bay Area.
Next steps:
The key comments on the Preliminary Analysis were addressed and a draft Feasibility Study was
discussed by City Council at its June 27, 2011 Council meeting. A full study is anticipated to return to
the Council in fall 2011.
Project Tracking Report (April 1 – June 30, 2011) Page 26
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2. Project: Evaluate plan to introduce electric vehicle (EV) charging stations at
commercial sites, residential sites, and City facilities
Department: City Manager’s Office
Project Lead: Assist to the CM for Sustainability
Project start date: 2011
Target completion date: EV chargers installed July 2011; remainder of goals will continue through the
end of the year
Background and description:
Electric vehicles (EVs) are being introduced in the marketplace, and require new charging
infrastructure. Encouraging the use of EVs will reduce the community’s greenhouse gas emissions
(GHG), and help meet the Council approved Climate Protection Plan goal of reducing municipal and
community GHG emissions by 15% below 2005 levels by 2020. Having publicly accessible EV charging
stations at City facilities is one way of encouraging the adoption of EVs.
The City has undertaken a number of steps to facilitate the adoption of EVs. Staff has provided
charger technology and permitting requirement information to customers on the installation of
chargers in homes. An assessment of long‐term EV penetration in town has been undertaken, and in
September 2009, the Utilities Advisory Commission (UAC) received a report assessing the potential
impacts of EVs on the distribution system. Staff concluded that no short‐term capacity problems were
expected. Longer term, if several households within close proximity of each other purchased electric
vehicles, some larger transformers and secondary conductors may need to be installed to alleviate
localized capacity restraints. The Utilities department will continue to monitor charger installation
locations in the City. EV charging is being encouraged in the City’s Building Code. Staff has applied for
and obtained two State grants totaling $35,000 to install EV chargers at publicly available facilities. A
number of charging stations are anticipated at libraries utilizing Measure N bond funds. Identified
below are goals for Fiscal Year 2011.
1. Staff plans to return to the UAC and the Council with a number of policy level questions. These
may include:
a. How can the City best leverage private capital to install EV chargers?
b. Should free EV charging be provided at City facilities to the public?
c. Should the employee commute program include incentives for EV charging?
d. How can the City best deploy charging stations and optimally utilize the limited parking
space available downtown for EV charging?
e. What is the role of the Utilities Department in installing EV chargers?
f. Should the Utilities department offer time‐differentiated residential electric retail rate
for EV owners to encourage charging during evening hours in order to reduce the
adverse impacts on the electrical grid and distribution system?
2. Determine how to best leverage State grant funds to install EV chargers in publicly available
facilities, and explore the possibility of leveraging private equity capital to provide the funding
shortfall. EV chargers cost between $2,500 and $100,000 each, depending on charging speed
and between $1,500 and $50,000 each to install depending on proximity to electric service and
other location‐specific conditions.
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3. Determine locations to install chargers. There are two charging spots at City Hall and the Alma
Parking Garages; however, these are older charger technologies. Staff anticipates installing
three of the newer chargers at the same locations, while maintaining the older chargers for a
few more years. A faster level 3 charger is being considered at the street level on Hamilton
Avenue in front of City Hall, but would cost significantly more than the level 2 chargers. Other
public parking areas are being evaluated for EV charger installations.
4. A Request for Proposal (RFP) to solicit proposals from the private sector to optimally deploy EV
chargers is planned. This RFP will provide an option for the private sector to utilize the grants,
and add their own funds to install, own, and operate charging stations in town, and provide a
franchise fee to the City for utilizing public space.
5. Many of these goals will be accomplished by December 2011, with all goals expected to be
completed by June 2012.
Current status:
A multi‐departmental task force has been created and meets monthly to help develop an EV policy
and resolve related issues including: the installation of new and maintenance of existing EV chargers in
city facilities, developing a fee structure for using City EV chargers, developing an expedited permit
and inspection process for residential and business customers, and determining appropriate locations
throughout Palo Alto for City or privately installed EV chargers.
The internal task force is taking advantage of secured grant offerings from the Department of Energy
(DOE), California Energy Commission (CEC) and the Bay Area Air Quality Management District
(BAAQMD) to install chargers at publicly accessible locations. The first is a ChargePoint America
Program (DOE funded) grant that will provide the City with five Coulomb ‐ Level 2 chargers. A portion
of the installation cost will be offset by a grant from the Bay Area Air Quality Management District
(BAAQMD) and the remainder will be paid for by the Utilities Department. The five Coulomb – Level 2
chargers were received in June and will be installed in July in the following locations:
ChargePoint America Program – Coulomb Level 2 Chargers
No. Downtown Garage No. of Chargers Location ______
1 City Hall 2 A‐Level
2 Bryant Street 2 Level 2
3 Alma/High (South) 1 Level 2 ______
At the April 27, 2011 UAC meeting, the commission provided feedback regarding the Utility’s and the
City’s role with respect to EVs. The UAC supports cost recovery for EV‐related capital expenses and
electricity. In addition, the UAC supports the development of time of use rates to encourage evening
charging providing relief to the distribution system. To the extent that private funds are available, the
UAC did not encourage City‐owed and operated EV charging stations.
The internal task force presented to the Planning and Transportation Commission in late June 2011 to
get their feedback on EV related policies, EV charging station signage, and parking plan related issues.
Project Tracking Report (April 1 – June 30, 2011) Page 28
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Next steps:
The internal task force continues to thoroughly review all related EV issues and is developing a
comprehensive EV policy. Council approval of this policy will be sought in the fall of 2011. After
adoption of the policy and determination of the City’s role in the development of the EV charger
infrastructure, Staff will recommend whether to pursue any additional grant funds for EV chargers and
where funds will come from for costs not covered by grant funds.
A third grant from the CEC, in the amount of approximately $26,000, is still available for EV charging
station installations throughout Palo Alto. Rather than invest the funding in additional EV charging
station infrastructure, the internal task force has opted to solicit private‐sector input in the
development of an EV Charging Station Program through a two‐step RFP process that will be released
in summer 2011. Staff believes that releasing the RFP will help the City better understand the EV
market, and therefore make better decisions regarding infrastructure.
Project Tracking Report (April 1 – June 30, 2011) Page 29
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3. Project: Establish formal collaboration with Stanford University
Department: City Manager’s Office
Project lead: Deputy City Manager
Project start date: 2011
Target completion date: December 2011, but partnership will be ongoing
Background and Description:
Stanford University represents the most progressive and innovative research in the area of
sustainability and climate change. Palo Alto can leverage its green initiatives through enhanced
collaboration with Stanford. Stanford has many programs engaged in sustainable innovation. These
include the Precourt Institute, the Woods Institute for the Environment, and Sustainable Stanford.
While informal relations exist with Stanford, the City could develop strategic relations around
sustainability, allowing for resource sharing, best practices, and internship opportunities. Identified
below are goals for Fiscal Year 2011.
1. Organize a Sustainability Partnership Summit open to the public, including Stanford and City
panelists.
2. Organize a formal site visit to Y2E2, including key Staff in Planning, Utilities, and Public Works,
highlighting innovative construction and facilities management techniques utilized by Stanford.
3. Develop volunteer internship programs for at least one sustainable initiative.
Current Status:
The Assistant to the City Manager for Sustainability met with the Office of Government and
Community Relations and the Department of Sustainability and Energy Management at Stanford
University. The group determined there were three main connection points which could be explored
and expanded to ferment a stronger relationship between Stanford University and the City. They are
internships or academic exchange, faculty knowledge or City projects, and intra ‐ departmental
development or utility relationships.
Internships / Academic Exchange ‐ There have been and continue to be numerous Stanford students
completing internships in the City. The team discussed formalizing the effort or process by having an
annual event where the students will present what they learned in their internship.
Faculty Knowledge / Projects ‐ There are a few faculty/student projects that have occurred, including
one at the WQTP with Professor Craig Criddle, which is expanding into the second phase of research.
The team discussed documenting some of these projects and honoring them and/or asking them to
present their project/results in a larger forum to develop a better connection between academic work
and the community. The team will explore the idea of incorporating this at an event at the Woods
Institute for the Environment. Staff is looking into ways to make the procurement process for projects
with Stanford researchers more streamlined.
Intra ‐ Departmental Relationships ‐ There are existing working relationships between City
departments, such as the Utilities and Public Works departments and their counterparts at Stanford.
This could also include projects such as the Zipcar project or the Stanford Hospital. Many of these
relationships have a sustainability focus or are related to sustainability initiatives. Staff discussed the
idea of formalizing and publishing this information.
Project Tracking Report (April 1 – June 30, 2011) Page 30
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Next Steps:
The City will have a number of Stanford interns which Staff will work with to develop an event
scheduled at the end of summer 2011. In late summer, the Assistant to the City Manager for
Sustainability and individuals from the Office of Government and Community Relations, Department
of Sustainability and Energy Management, and the Woods Institute at Stanford University will
reconvene to review the comprehensive lists of the main connection points and discuss a public
event/summit in the late fall/early winter 2011.
This summer, Stanford University and the City will begin the second phase of research to reduce
salinity in recycled water and enhance irrigation use. The City and Stanford University will begin to
develop decision models for extracting resources from wastewater under the national Science
Foundation grant. This fall the City and Stanford University will attempt to establish a Public‐Private
Partnership Agreement, under which to continue collaborative research on other wastewater
resource recovery and urban water infrastructure issues.
Project Tracking Report (April 1 – June 30, 2011) Page 31
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4. Project: Explore methods to integrate Palo Alto Green into City sustainability programs
Department: City Manager’s Office
Project lead: Assistant to the CM for Sustainability
Project Start Date: 2011
Target Completion Date: 2012
Background and Description:
The City offers numerous sustainability programs, including PaloAltoGreen, which is one of the most
recognized and progressive renewable energy programs the Utilities department offers. Following the
Stanford model of an interdisciplinary approach to sustainability, the City could begin to integrate
various projects and activities such as emergency preparation, economic development, and
greenhouse gas reductions. Identified below are goals for Fiscal Year 2011.
1. Explore connections to broaden the City’s renewable energy and sustainability programs.
Employ the triple bottom line principles in a variety of programs.
2. Bring community groups (such as the Citizen Core Council) together with sustainability groups
(such as Community Environmental Action Partnerships) to explore issues affecting both,
including the community’s preparedness in a changing climate.
3. Hold study sessions with the Council, Planning and Transportation Commission (PTC), and
climate change experts to understand policy implications of rising sea levels and other effects of
global climate change.
Current Status:
In April 2011, Staff developed and presented to Council a comprehensive list of sustainability
programs and initiatives that the City has under taken or is participating in. This multi‐departmental
inventory is a starting point in which to integrate the many initiatives and management tool to see
where Staff may need to expand or reduce initiatives.
Staff is reviewing opportunities to develop a multi‐department sustainability team whose goal would
be to provide an integrated, seamless approach to promoting sustainable behaviors. This team will
seek out opportunities to work across departments, and with various community groups. Staff is
developing a strategy to implement a comprehensive multi‐departmental outreach education plan for
the public. The first step in the plan is for a sustainability webpage which would link many of the
efforts together.
Last year, Staff held a study session with the PTC to discuss including sustainability in the revision to
the Comprehensive Plan. This discussion included incorporation of both mitigation (actions which
reduce long‐term risk and hazards of climate change) and adaptation (actions which mediate potential
changes due to climate change, including sea level rise).
Staff is working with the Community Environmental Action Partnership (CEAP) and other community
groups, such as Palo Alto Neighborhoods (PAN), Acterra, and Transition Palo Alto to help build
partnerships. CEAP is in support of a community meeting or Council study session to discuss the
issues of adaptation in Palo Alto. Staff is working with CEAP to reach out to local climate change
experts to bring this together as a community engagement.
Project Tracking Report (April 1 – June 30, 2011) Page 32
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The Assistant to the City Manager for Sustainability is exploring opportunities to better collaborate
with the Coordinator of Homeland Security & Public Outreach in the newly formed Office of
Emergency Services (OES) to see if their community outreach, including collaboration with PAN and
the Citizen Core Council could be expanded to include outreach for the City’s sustainability programs.
The key concept is that green initiatives can directly support community disaster resilience. Staff is
working on submitting a federal funding request for a grant to purchase a solar powered generator
from a local company for the Mobile Emergency Operations Center (MEOC).
Another possible case for solar power is the Community Disaster Network (CDN). CDN is an off‐the‐
grid WiFi network that will allow first responders, other City staff, and Block Preparedness Coordinator
Program community volunteers a means to efficiently exchange information, even when the phone
lines, power grid, and Internet may be impaired.
Next Steps:
This summer Staff will work on developing a new sustainability webpage. Staff will work with CEAP
and other community groups for a fall 2011 event or study session focusing on adaptation. In fall
2011, Staff anticipated the awarding of federal funding for the purchase of a solar powered generator
for the MEOC. By winter 2011, Staff will meet with the PTC to further develop the discussion of
sustainability in the revision to the Comprehensive plan.
Project Tracking Report (April 1 – June 30, 2011) Page 33
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5. Project: Prepare Urban Forest Master Plan
Department: Planning and Community Environment
Project lead: Director, Planning and Community Environment
Project start date: December 2010
Target completion date: November 2011
Background and description:
The Urban Forest Master Plan, partially funded by a grant from the California Department of Forestry
(CalFire), is intended to provide a strategic plan to help the City conserve and renew its urban forest,
to establish procedures and protocols to enhance the effectiveness of City operations and
maintenance, and to provide for consistent and effective monitoring of the urban forest. Identified
below are goals for Fiscal Year 2011.
1. Continue to provide for the protection of the environment, including trees, creeks, wildlife, and
open space.
2. Enhance the City’s environmental sustainability objectives, including the Climate Protection
Plan.
3. Ensure that the City has an accurate and complete picture of its urban forest.
4. Establish the urban forest as an asset and part of the City’s valuable infrastructure.
5. Engage the community as stewards of the urban forest.
The process and timeline for preparation of the Urban Forest Master Plan began in December 2010,
when the City contracted with Hort Science, Inc. In January 2011, Staff conducted a successful online
survey to which 650 residents responded. During January and February 2011, Staff interviewed over
100 Staff members from all relevant departments. On February 7, 2011, the City’s consultant
introduced the project to the Council at a study session. Future public meetings and hearings will be
scheduled to accommodate further review of the draft plan and adoption by the Council.
Current status:
A preliminary draft of the Master Plan was submitted to CalFire in late May 2011. CalFire has
reviewed the document and indicated its support for the direction of the Plan. The Plan satisfies
requirements for reimbursement of the City’s $66,000 grant. Working with the City’s consultant, Staff
will be working through the summer to revise and complete the draft, and then will schedule
community meetings and hearings with boards, Commissions, and Council in the fall.
Next steps:
In September 2011, Staff and the City’s consultant will revise the draft plan and hold a community
workshop. The Parks and Recreation Commission and Planning and Transportation Commission will
hold meetings in October 2011. In November 2011, the Urban Forest Master Plan is tentatively
scheduled to return to the Council for adoption.
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D. Land Use & Transportation Planning (LUTP)
Executive Summary:
Land use and transportation are key indicators of quality of life in Palo Alto. The overarching principle
of the City’s land use and transportation objectives is to provide for sustainable development and
services: growth, rehabilitation, and services that are sustainable in economic and fiscal terms, as well
as in environmental respects. The City desires to develop in ways that promotes the efficient delivery
of services, assures high quality development and design, protects and broadens the City’s tax and
revenue base, preserves and enhances key environmental attributes, minimizes energy and water use,
and promotes transportation alternatives such as walking, bicycling, and transit. Identified below are
goals for Fiscal Year 2011.
1. Complete strategies and plans at the Development Center (DC) to improve customer service and
accountability.
2. Complete draft Rail Corridor Study outlining measures to provide for community land use,
transportation, and corridor urban design.
3. Complete the Stanford University Medical Center (SUMC) Facilities and Replacement Project.
4. Substantially complete the update of the City’s Comprehensive Plan Amendment/Housing
Element Update and 2 Area Concept Plans.
5. Continue monitoring High Speed Rail (HSR) activities and collaborative work with Peninsula
cities and regional agencies. Staff to work on a short‐term and long‐term action plan to sustain
Caltrain.
6. Actively participate in the preparation of the regional Sustainable Communities Strategy
(SB375), Regional Housing Needs Allocation.
7. Prepare Pedestrian and Bicycle Plan Master Plan update.
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1. Project: Complete strategies and plans at the Development Center to improve
customer service and accountability
Department: Planning and Community Environment
Project lead: Planning Director
Project start date: July 2010
Target completion date: December 2011
Background and description:
Development Center Blueprint Project is focused on improving the delivery of services at the
Development Center (DC). The City Manager’s public statement committed to having measurable
improvements implemented at the DC by the end of June 2011. Identified below are goals for Fiscal
Year 2011.
1. Create a better customer service culture where there is predictability, clear standards, and a
performance measurement program in place to evaluate service delivery and assess customer
satisfaction.
2. Improve organizational efficiency at the DC and associated processes to minimize costs and
delays to customers.
3. Maintain or enhance community sustainability and economic development goals and objectives
through DC activities.
Current status:
The Development Center Blueprint project has entailed a series of efforts by the Steering Committee
(department heads and upper level managers), Staff Action Committee (approximately 20 Staff
members involved in the DC process from multiple departments), and a Development Center Advisory
Committee (professionals and others with periodic or regular interaction with the DC). Some process
changes have been implemented over the past six months. An update was provided to the Council on
March 21, 2011. A current focus is to hire Staff to implement program actions, including piloting new
project management and point of contact procedures, as well as, maintaining adequate levels of
service at the DC counter. The Deputy City Manager has been assigned to work part‐time at the DC,
helping oversee staff integration efforts and performance improvements.
Next steps:
In July and September 2011, it is anticipated that Staff will recruit and hire counter assistance, plan
check staff, and project management staff. The DC will continue the pilot program currently
implemented. Program finalization implementation will occur between July and December 2011. In
December 2011, initial implementation is anticipated to be completed, and Staff will define items for
review and implementation.
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2. Project: Complete draft Rail Corridor Study outlining measures to provide for
community land use, transportation, and corridor urban design
Department: Planning and Community Environment
Project lead: Planning Director
Project start date: November 2010
Target completion date: December 2011 (Phases I and II), June 2012 (Phase III)
Background and description:
The Palo Alto Rail Corridor Study is intended to provide a vision for land use, transportation, and
design along the Caltrain right‐of‐way and adjacent areas. The plan would identify opportunities for
growth near transit, while protecting nearby neighborhoods. The study would encourage more
pedestrian and bicycle‐friendly mobility, integral to furthering sustainable development in the City.
The study will allow consideration of land use and urban design techniques to enhance the potential
for economic development and increased revenues and tax base within the corridor. Identified below
are goals for Fiscal Year 2011.
1. Contribute to a sense of community and place in neighborhoods and commercial districts.
2. Assure high quality of development and design.
3. Protect and broaden the City’s tax and revenue base.
4. Preserve and enhance key environmental features.
5. Promote transportation alternatives such as walking, bicycling, and transit.
The Rail Corridor Study will be conducted by Staff, a 17‐member Task Force, and an urban design
consultant. Public workshops and meetings with the Planning and Transportation Commission and the
Council will supplement the work of the Task Force. The study will be conducted in three phases:
vision, alternatives, and draft plan. Each phase will take approximately four to six months, and the
final plan is expected to be considered by Council in early to mid 2012.
Current status:
The Rail Corridor Task Force has met eight times to discuss a variety of issues, opportunities, and
vision concepts for the Corridor. A community workshop was held on May 19, 2011 to identify key
issues and opportunities. Study sessions with the Planning and Transportation Commission and
Council were conducted on June 8 and June 27, 2011 to summarize activity and progress to date.
Next steps:
A second community workshop will be held in late July 2011 with the Planning and Transportation
Commission to discuss a draft vision statement. In September and October 2011, Staff will review the
draft vision statement. August through December 2011, Staff and the Task Force will work with the
community to develop alternative scenarios (Phase II). This will take place with periodic review by the
Planning and Transportation Commission and Council. In early 2012, the preparation and selection of
a preferred scenario (Phase III), by the Task Force, Staff, and the public, will return to the Council for
review and approval.
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3. Project: Complete Stanford University Medical Center Renewal and Replacement
Project
Department: Planning and Community Environment/City Manager’s Office
Project lead: Planning Director/Deputy City Manager
Project start date: Early 2007
Target completion date: June 2011
Background and description:
The Stanford University Medical Center (SUMC) Facilities Renewal and Replacement Project is a
comprehensive, multi‐year development project to rebuild and restore the SUMC and School of
Medicine facilities in Palo Alto. The project will satisfy the shared objectives between SUMC and the
City to optimize the delivery of healthcare to patients and meet regional needs for emergency and
disaster preparedness. The project applicant is proposing changes and additions to meet State
mandated seismic safety standards (SB 1953), and to address capacity issues. Various entitlements
required include certification of an Environmental Impact Report (EIR), Comprehensive Plan
amendments, creation of a new hospital zoning district, architectural review of the proposed
buildings, and a Development Agreement that would set land use regulations for a 30‐year period in
exchange of public benefits. Identified below are goals for Fiscal Year 2011.
1. Meeting regional needs for emergency preparedness.
2. Minimizing environmental, financial, and municipal infrastructure impacts on the City.
3. Assuring a high quality of development and design.
4. Promoting sustainable development and green building design principals throughout the
project.
5. Promoting transportation alternatives such as walking, bicycling, and transit.
Since the SUMC representatives first introduced the project in late 2006, Staff has identified the
environmental impacts, conducted public outreach meetings, prepared fiscal analysis, held
preliminary design review meetings, and identified possible public benefits to be included in the
Development Agreement. In May 2010, the Draft EIR was released for public comment. In February
2011, the Final EIR and Response to Comments was completed. The Architectural Review Board and
the Planning and Transportation Commission completed their reviews in May 2011.
Current status:
On June 6, 2011 the Council approved all entitlements and the Development Agreement, and certified
the EIR for the project. The Second reading of the Development Agreement and zoning ordinances
was scheduled on June 20, 2011. Community concerns about the loss of Child Care facilities at Hoover
Pavilion postponed the Second Reading while Stanford worked to provide a relocation site during
construction (achieved).
Next steps:
In 2011, payments to the City will begin for community benefits. In early summer 2011, construction
of improvements on Welch Road and the upgrade of the Hoover Pavilion will commence. In 2011‐
2012, Stanford hospitals will undergo review by the State (OSHPOD) for building permit review and
approval. In 2013, hospital construction will commence. The completion of the entire project,
including hospitals, clinics, and parking garages is expected in 2025.
Project Tracking Report (April 1 – June 30, 2011) Page 40
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4. Project: Substantially complete update of the City’s Comprehensive Plan
Amendment/Housing Element Update and 2 Area Concept Plans
Department: Planning and Community Environment
Project lead: Planning Director
Project start date: 2008
Target completion date: Late 2012
Background and description:
The Palo Alto Comprehensive Plan Amendment and Housing Element Update are intended to provide
the framework for the City’s land use, housing, development, and transportation policies. The
Comprehensive Plan Amendment focuses on two Area Concept Plans and on updating policies to: 1)
assure provision of adequate support services to neighborhoods and businesses; 2) propose strategies
to retain and enhance retail and other commercial and revenue‐generating uses; and 3) ensure a
theme of sustainability throughout the City’s land use and transportation policies and programs. The
Area Concept Plans are being developed for the East Meadow/West Bayshore commercial/industrial
area and the California Avenue/Fry’s Area. The Housing Element is updated in accordance with State
law requirements and will outline the City’s housing objectives through 2014, including the provision
of affordable housing units during that period. Identified below are goals for Fiscal Year 2011.
1. Contributing to a sense of community and place in neighborhoods and commercial districts.
2. Assuring a high quality of development and design.
3. Protecting and broadening the City’s tax and revenue base.
4. Preserving and enhancing key environmental features.
5. Accommodating housing for all segments of the population.
6. Promoting transportation alternatives such as walking, bicycling, and transit.
Current status:
The Comprehensive Plan is expected to be completed, in draft form, by early 2012 and then undergo
environmental review (Environmental Impact Report) prior to adoption. The Area Concept Plans have
received preliminary review by the Planning and Transportation Commission, and tentatively
scheduled for the Council’s consideration in mid‐2011. A draft Housing Element will be considered by
the Council in mid‐2011, and forwarded to the State Department of Housing and Community
Development for review. The Planning and Transportation Commission has completed its review of
the policies and programs contained in the Housing and Land Use/Community Environment chapters.
Next steps:
The Planning and Transportation Commission will review the policies and programs for community
services, transportation, and business and economics in the months of June and September 2011. In
September 2011, the draft Housing Element will be reviewed by the Council and forwarded to the
State Department of Housing and Community Development. The Council will additionally review the
East Meadow Area Concept Plan. In October through November 2011, the Council will review the
California Avenue/Fry’s Area Concept Plan. Environmental review and adoption of the Comprehensive
Plan is anticipated in late 2012.
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5. Project: Facilitate, in cooperation with local and regional agencies and organizations,
the development of a short and long‐term action plan to sustain Caltrain
Department: City Manager’s Office
Project lead: Deputy Director, Rob Braulik
Project start date: March 2011
Target completion date: December 2011
Background and description:
Caltrain currently provides fixed rail commuter services to the City. There are two Caltrain stations,
one located at University Avenue in Palo Alto and another at San Antonio in the City of Mountain
View. Palo Alto has the second highest Peninsula ridership numbers. Stanford University represents
over 50% of Caltrain’s “GO Pass” participants. Thus, Caltrain is an important component of the City’s
transportation system, and plays a critical role in helping local employers, students, and residents get
to and from their destinations.
Caltrain is currently facing an unprecedented operating deficit (e.g., $30M). Effective July 1, 2011,
Caltrain is planning to make major service cuts to balance their budget. These cuts would reduce
Caltrain commuter rail services during peak and off‐peak hours. Caltrain is the only major regional
commuter transportation system without a dedicated funding source.
Given the importance of Caltrain’s services to the business community, Stanford University, residents,
and the Peninsula regional transportation system, the City is looking to participate, partner and
support actions that would put in place a viable financial plan to secure short and long‐term financial
stability. Identified below are goals for Fiscal Year 2011.
1. Host a Palo Alto community forum in partnership with the Silicon Valley Leadership Group
(SVLG) to communicate and inform community members on the current financial plight of
Caltrain, and secure ideas and suggestions from the community, riders, and businesses about
potential solutions to produce a viable financial model.
2. Consult with our Federal and State legislative advocacy firms to advise the City on what
methodologies, programs, and tools may be available to help financially support the
modernization of Caltrain (e.g., electrification, positive train control).
3. Explore and evaluate with partners (including public agencies: San Francisco County and City,
San Mateo County, Santa Clara County, Metropolitan Transportation Commission (MTC), major
private employers, Stanford University and others) the viability of developing a dedicated
revenue stream to fund ongoing Caltrain operations (e.g., sales tax, parcel tax).
Current status:
On January 21, 2011, the City participated in SVLG’s forum on Caltrain’s short and long‐term fiscal
sustainability workshop. On April 7, 2011, the City co‐hosted with SVLG a workshop on the same
topic in Palo Alto. The City Council Rail Committee held five meetings in April and May where the
primary topic was Caltrain. The April 13, 2011 meeting included a presentation from Santa Clara
County Supervisor Liz Kniss, who also sits on the Peninsula Corridor Joint Powers Board (PCJPB). The
PCJPB includes the City and County of San Francisco, San Mateo County, San Mateo County Transit
District (SamTrans), Santa Clara County, and Santa Clara Valley Transportation Authority (VTA).
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To maintain current Caltrain service levels for one year, the PCJPB secured temporary interim
funding from the Metropolitan Transportation Commission, board members, increasing fares by
$.25 beginning July 1, and related actions. This period will be used to evaluate long‐term funding
strategies to sustain Caltrain service on the Peninsula.
The City continues to work with other public agencies, Federal and State legislative advocacy firms,
and SVLG to analyze strategies and plans to address Caltrain’s fiscal issues. The City Council Rail
Committee continues to invite Caltrain’s technical and policy staff to present information on the
modernization of rail lines through electrification, installation of a new positive train control
switching system (mandated by the federal government), and the development of a fiscally
sustainable business model, with or without, HSR on the Peninsula.
There has been no definitive progress on analyzing or evaluating an in‐depth and long‐term fiscal
plan, which would include a dedicated funding stream for Caltrain service. It is anticipated that
discussions will occur during Fiscal Year 2012 between the City of County of San Francisco, San
Mateo County, Santa Clara County, Metropolitan Transportation Commission, major private
employers, Stanford University, and others.
Next steps:
The City Council Rail Committee will continue to monitor Caltrain’s fiscal situation and act
accordingly. Caltrain projects will attempt to certify the Environmental Impact Report (EIR) on
Electrification this summer. If this schedule holds, the City may consider commenting on the EIR.
Discussions will continue with Supervisor Kniss, and other Federal and State elected officials and
neighboring public agencies, to provide input on strategies to develop a long‐term plan to address
Caltrain funding.
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6. Project: Actively participate, in preparation of, regional Sustainable Communities
Strategy (SB375) and Regional Housing Needs Allocation (RHNA)
Department: Planning and Community Environment
Project Lead: Planning Director
Project Start Date: 2009
Target Completion Date: 2013
Background and description:
The Sustainable Communities Strategy (SCS) required by SB375 and the accompanying Regional
Housing Needs Allocation (RHNA) are important regional planning initiatives for the Bay Area. The City
will be affected by land use, housing, and transportation policies and incentives associated with the
efforts of regional agencies, particularly the Association of Bay Area Governments (ABAG) and
Metropolitan Transportation Commission (MTC). The City expects to provide meaningful input to
these initiatives, and work with other Santa Clara County cities to assure a voice for the sub‐region.
Identified below are goals for Fiscal Year 2011.
1. Enhance sustainability by promoting sustainable land development patterns and facilitating
alternative transportation modes.
2. Participate in regional planning and transportation solutions where appropriate, and assure
housing opportunities accommodate multiple segments of the population.
3. Use land use and zoning techniques to enhance the potential for economic development and
increased revenues and tax base.
4. Contribute to a sense of community and place in neighborhoods and commercial districts.
Current status:
Staff is attending 3‐4 regional and countywide meetings monthly to participate in these regional
planning discussions. Council Member Scharff and the Planning and Community Environment Director
attend monthly meetings of the Regional Housing Needs Methodology Committee. The regional
agencies released an Initial Vision Scenario on March 11, 2011. Staff reported to the Planning and
Transportation Commission on May 4, 2011, and to the Council on March 14, 2011. A preliminary
Staff letter response is scheduled for Council consideration/revision on July 11, 2011.
Next steps:
On an ongoing basis, Staff will continue to attend regional meetings and participate in countywide
coordination efforts. Alternative scenarios, released by regional agencies, are anticipated to occur in
July 2011. In July through September 2011, the RHNA Methodology Committee is anticipated to meet
and release a draft. In July and October 2011, local agencies are anticipated to respond to said
alternatives. In October through December 2011, local agencies are anticipated to respond to the
draft RHNA allocations. In early 2012, the preferred SCS scenario is anticipated to be released. The
approval of the SCS is anticipated in early 2013.
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7. Project: Prepare Pedestrian and Bicycle Master Plan update
Department: Planning and Community Environment
Project lead: Planning Director
Project start date: November 2010
Target completion date: October 2011
Background and description:
The current Bicycle Master Plan serves as the City’s guide for identifying and setting priorities for
bicycle transportation projects and programs in the community. The last update to the Bicycle
Transportation Plan occurred in 2003. The current update includes a pedestrian element providing an
opportunity to include more robust projects and programs that benefit key transportation
infrastructure not normally evaluated in a bike‐only plan. An updated Pedestrian and Bicycle Plan is
essential for accruing funding from regional grant sources. This year, upon development of the plan,
the City will embark on an aggressive update of its bicycle and pedestrian facilities based on the
following goals:
1. Continue to lead in providing for transportation modes other than single‐occupancy vehicles, in
order to provide alternatives to avoid traffic gridlock, enhance safety for children and adults,
and reduce greenhouse gas emissions.
2. Identify and implement best practices in bicycle and pedestrian system design for both new
projects and updates to existing facilities such as colored bike lanes, bike boxes, and non‐
intrusive detection methods.
3. Continue educational efforts on the use of bicycle and walking transportation modes to schools,
and strengthen the link between neighborhood communities and schools through capital
projects.
4. Implement bicycle and pedestrian facilities to link major employment centers, such as Stanford
University, with existing transit facilities and other trail/street networks.
5. Identify and implement new innovations in bicycle design and pursue processes that allow their
implementation in the City.
6. Identify and pursue regional grant sources to implement Bicycle and Pedestrian Master Plan
projects and programs, such as the Highway 101 Bike/Pedestrian bridge at Adobe Creek.
Current status:
The development of the new Bicycle and Pedestrian Master Plan is currently in process. A City‐wide
community meeting was held in March 2011, along with a Planning and Transportation Commission
study session in April 2011. A Council study session was held on May 2011. The Council study session
was preceded by a bike ride to tour of two of the City’s bicycle boulevards. A Parks and Recreation
Commission briefing was held on May 24, 2011. Following plan revisions, the draft plan will be
reviewed by various boards and Committees prior to consideration and adoption by the Council.
Next steps:
In July 2011, a review of the draft plan is anticipated by the Palo Alto Bicycle Committee, Citizens
Traffic Safety Committee, and the Parks and Recreation Commission. A review and recommendation
by the Planning and Transportation Commission is anticipated in August/September 2011, and a
review and adoption by Council is anticipated in August/September 2011.
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E. Youth Well Being (YWB)
Executive Summary:
The City plays two important roles with regard to community collaboration for youth well being. First,
the City plays a role of convener and coordinator, bringing the community together in order to
effectively harness the community’s talent, expertise, and goodwill so that the community may have
the greatest impact in fostering youth well being. A meaningful example of the City’s role as convener
and coordinator is seen in the Project Safety Net (PSN) Community Task Force. PSN is focused on
developing and implementing a comprehensive community‐based mental health plan for overall
youth and teen well being. A focus in 2011 is to support PSN as defined in the PSN Plan
(www.PSNPaloAlto.org). Examples include gatekeeper training, developmental assets initiative, peer‐
to‐peer engagement, teen education on drug and alcohol abuse, track watch, youth forum, and
celebrating youth‐friendly businesses.
Secondly, the City plays a direct role in providing programs, services, and facilities for youth and teens.
Examples include the variety of afterschool programs at the Palo Alto Teen Center, Children’s Theatre,
Junior Museum and Zoo, Art Center, and Rinconada Pool. The City’s capacity to provide programs,
services, and facilities for youth well being is dependent on community collaboration through
substantial support of Friends groups and foundations. An example of community collaboration can
be seen in the vision to build the Magical Bridge Playground in coordination with the Friends of the
Palo Alto Parks. The Magical Bridge Playground is planned for Mitchell Park and will be Palo Alto’s first
playground accessible to people of all abilities and ages. Identified below are goals for Fiscal Year
2011.
1. Coordinate the PSN Community Task Force and guide its implementation.
Convene monthly PSN meetings to provide the space, atmosphere, time for progress reports,
community collaboration, and decision making.
Create a communications plan for PSN to keep the community informed on the City’s support
of youth and teens.
Coordinate two community trainings on identifying individuals at risk of suicide (gatekeeper
training), and how to report suicide threats to the appropriate parental and professional
authorities.
2. Develop and provide businesses with a simple set of specific opportunities to support youth and
teens.
3. In coordination with the Palo Alto Unified School District (PAUSD) create an effective and
sustainable structure for the PSN Community Task Force.
Develop a Memorandum of Understanding between the PSN Community Task Force and its
members to define roles, responsibilities, and commitments.
Create a strategic plan to sustain the day‐to‐day activities of PSN and how various community
efforts for youth well being work together.
Secure private funding for PSN through grants, donations, and other means.
4. Incorporate the developmental assets into the planning, implementation, and evaluation of City
programs and services for youth and teens.
Include developmental assets language into job descriptions for Staff that work with youth
and teens.
Provide developmental assets training to all Staff that work with youth and teens.
Measure developmental asset outcomes in youth and teen programs.
Project Tracking Report (April 1 – June 30, 2011) Page 46
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5. Council and Staff to engage youth and teens in community decision making.
Actively participate and help coordinate the 2011 Youth Forum.
Council to hold a study session with the Youth Council.
Provide opportunities for teen involvement in community decision making through
teen leadership groups.
6. Celebrate and recognize youth and teens, along with community members, that make an
outstanding contribution to supporting youth.
Encourage and coordinate impromptu special events and recognition opportunities to
celebrate youth and teen accomplishments.
Publically recognize community members and organizations that make an outstanding
contribution to supporting youth.
7. Support Friends of the Palo Alto Parks’ goal of building Palo Alto’s first universally accessible
playground.
Monitor private fundraising efforts for the construction of the Magical Bridge Playground, and
report on the status of fundraising to the Council.
Project Tracking Report (April 1 – June 30, 2011) Page 47
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1. Project: Implement Project Safety Net
Department: Community Services Department
Project lead: Division Manager of Recreation Services
Project start date: September 2009
Target completion date: Ongoing
Background and description:
The Project Safety Net (PSN) Community Task Force was formed in response to the tragic teen suicides
our community experienced between May 2009 and January 2010. The mission of PSN is to develop
and implement an effective, comprehensive, community‐based mental health plan for overall youth
well being in Palo Alto. The coalition is broadly represented with parents, medical professionals from
Stanford University, Lucile Packard Children’s Hospital and Palo Alto Medical Foundation, City of Palo
Alto, Palo Alto Unified School District (PAUSD), youth‐serving non‐profits, City Commissions, the Palo
Alto Youth Council, and many others. The PSN Community Task Force has defined 22 specific
strategies that fall into three categories: education, prevention and intervention. Details of the 22
strategies and history of PSN can be seen at the following website: www.PSNPaloAlto.org
Current status:
1. Coordinate the PSN Community Task Force and guide its implementation:
Monthly PSN meetings have been coordinated by the City and PAUSD. The meetings occur
on the third Thursday of every month at the Lucie Stern Community Center. The meetings
are attended by an average of 40 community members. The typical format of the meetings
consists of a review by sub‐committees working on the education, prevention, and
intervention strategies followed by a learning item or guest speaker.
A website and a Facebook page for PSN has been created to provide regular updates for
anyone interested in learning about PSN and/or getting involved.
Several community trainings on identifying individuals at risk of suicide (gatekeeper training)
and how to report suicide threats to the appropriate parental and professional authorities
have occurred. A training was conducted in the winter for adults and three trainings in the
spring for students.
Staff presented the Developmental Assets framework for youth well being to the Palo Alto
Chamber of Commerce, who subsequently voted to adopt the framework and are now
working on defining how they can best apply the Developmental Assets within the business
community.
2. With PAUSD, create an effective and sustainable structure for the PSN Community Task Force.
A Memorandum of Understanding (MOU) between the PSN Community Task Force and its
members to define roles, responsibilities and commitments was created for 2010‐11 with
generous legal support from Covington and Burling. Twelve organizations contributed to the
MOU defining their commitments in Fiscal Year 2010‐11.
With the generous support of the Santa Clara County Mental Health Department, PSN
received a $30,000 grant for consulting services to help the PSN Community Task Force
define a sustainable structure. The planning process was conducted between March and
June 2011. The results of this work were presented to the City/ School Liaison Committee on
June 16, 2011.
Project Tracking Report (April 1 – June 30, 2011) Page 48
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Funding for PSN has come from a number of sources, including the Palo Alto Recreation
Foundation, Palo Alto Women’s Club, David and Lucile Packard Foundation, and Stanford
University.
3. Incorporate the Developmental Assets into the planning, implementation, and evaluation of City
programs and services for youth and teens.
Developmental Assets language is being used in the recruitment of Staff and is being
incorporated into work plans for all Community Services Department Staff that work with
youth and teens.
A very engaged sub‐committee of PSN, called the Developmental Assets Initiative, has been
working hard to understand and articulate the meaning behind the Developmental Assets
survey that was conducted in October 2010. Presentations to Commissions, community
organizations, and the general public on Developmental Assets are ongoing. The primary
goal of the Developmental Assets initiative is to engage all residents in a conversation about
youth well being.
Measuring Developmental Asset outcomes in youth and teen programs remains an
important goal. The Developmental Assets survey results, that represent the voice of more
than 4,000 students was made available in March 2011. Staff focus has been on interpreting
and understanding the data and sharing the results.
4. Council and Staff will engage youth and teens in community decision making.
Staff, elected officials and many community partners actively participated in coordinating
the 2011 Youth Forum. The Youth Forum was held on May 21, 2011. This year’s forum was a
one day event offering a series of various sessions. The session themes included athletic
performance, student empowerment, visual arts, performing arts, and healthy lifestyles. The
session themes were created to draw a wide range of students with different interests.
Although the structure of the Youth Forum was different than last year the goal of building
relationships between students and adults remained the same. All sessions were taught by
local professionals, parents, and caring adults. Sessions offered students the opportunity to
learn important life skills, plan local events, and interact with adults from the community.
A study session with the Council and the Youth Council is tentatively scheduled in October
2011.
The City is providing opportunities for teen involvement in community decision making
through teen leadership groups such as the Palo Alto Youth Council, Teen Advisory Board,
Teen Arts Council and Junior Advisory Board. Teen leadership groups work with Staff to plan
events, workshops, and activities like the Palo Alto Youth Forum, music nights, and dances.
The Parks and Recreation Commission and Human Relations Commission have assigned a
commissioner as a liaison to the Palo Alto Youth Council. The commissioners attend at least
one Youth Council meeting a month.
5. Celebrate and recognize youth and teens, along with community members, that make an
outstanding contribution to supporting youth.
The City coordinated, in collaboration with many community partners, a number of events
to celebrate and recognize youth and teens this year. A notable event was the Parade of
Champions in January 2011 which recognized the Palo Alto High School football team and
volleyball team for winning State championships. The parade was a tremendous success
with thousands of residents participating. Other events included the May Fete Parade. The
theme for this year's parade was "Books are Hidden Treasures ‐‐ Dig In!" and was chosen to
reflect the Developmental Assets program recently adopted by the City to support healthy
youth development.
Project Tracking Report (April 1 – June 30, 2011) Page 49
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Other events included Day of Service on the Martin Luther King Jr. holiday and a teen event
called “Ignite” where teens from all Palo Alto high schools came together for a celebration
at the Lucie Stern Community Center.
With regard to publically recognizing community members and organizations that make an
outstanding contribution to supporting youth the Community Services Department
recognized Becky Beacom and the Palo Alto Medical Foundation for their outstanding
service and contribution to Project Safety Net and youth well‐being. The PSN Community
Task Force also received the Santa Clara County Human Relations Award for promoting and
protecting the human and civil rights of youth in Santa Clara County in April 2011.
Moreover, Project Safety Net was also honored by receiving Stanford University’s
Community Partnership Award for initiative, leadership and involvement in a collaborative
project that promotes the vitality and well‐being of our mid‐peninsula community in May
2011.
Next steps:
Through PSN’s work in its first two years, programs in suicide prevention, Developmental Assets,
youth voice and outreach, mental health counseling, networking health care providers, and
similar efforts have taken root, developed, or joined together. PSN continues to represent a
powerful collection of community resources that are engaged and working together in new and
creative ways. Thanks to the talent and commitment of PSN members, Staff has managed to
move matters forward. However, coalitions built on good will and organized under an MOU
umbrella have initial potency and may inherently be short‐lived without dedicated resources.
The challenge of improving and sustaining a community, in which suicide gets no traction, and
where youth and teens thrive, is a long‐term proposition. Organizational resources need to be
up to the task. Consequently the most immediate next steps include the following:
Bring the PSN planning efforts that define a sustainable structure for PSN to the City/School
Liaison Committee for discussion.
Secure administrative capacity for coordinating PSN coalition, convening partners,
promoting policies and practices, and advocating the elements of a strategy for making
youth well being an ongoing part of Palo Alto’s values and culture.
Project Tracking Report (April 1 – June 30, 2011) Page 50
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Project Tracking Report (April 1 – June 30, 2011) Page 51
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2. Project: Monitor fundraising for Magical Street Bridge
Department: Community Services Department
Project lead: Director, Community Services
Project start date: July 2011
Target completion date: June 2013
Background and description:
In the fall of 2008, parents of special needs children approached Staff about the inadequacy of access
to Palo Alto playgrounds for some children or their caregivers. As an example, some developmentally
challenged children are unable to grasp and hold the chain supports of most playground swings.
Although some swing sets have cradle‐type swings for very young toddlers, these cradles are not large
enough for a developmentally disabled child who is six years old. Advocates for universally accessible
playgrounds have pointed out that there are nearly 1,500 children in Palo Alto between the ages of 4
and 18‐years of age who have special, visual, auditory, sensory, or developmental needs. In addition,
there are hundreds of physically‐challenged adults or caregivers who can not play and directly interact
with their children or grandchildren at municipal playgrounds because of physical barriers.
The Friends of the Magical Bridge organization was founded in 2009, and is a funding partner with the
Friends of the Palo Alto Parks. Friends of the Magical Bridge have developed conceptual designs for a
universal access playground in the undeveloped section of Mitchell Park, near the rear of Abilities
United and Achieve, Inc. The conceptual plans for a 20,000‐square foot playground were reviewed by
the Parks and Recreation Commission in 2009. The Commission concluded that the development of a
universally‐accessible playground in this location would be consistent with the Master Plan for
Mitchell Park. In reviewing the conceptual plans for this playground, the Human Relations Commission
also endorsed the concept of the project.
Staff has worked closely with representatives of the Friends of the Magical Bridge and Friends of the
Palo Alto Parks to share the concept of this new playground with various Commissions, Staff Members
and the Council. As part of the 2012 Capital Improvement Project Budget, Staff has introduced a new
project (CIP PE‐12000) that will provide up to $300,000 in funding as the City’s share for the project.
The Friends estimate that the project will cost $1,600,000. The Friends have embarked on a
fundraising drive to raise the $1,300,000 needed for their share of the design and construction costs.
Current status:
1. On May 17, 2011, the Finance Committee reviewed the draft Capital Improvement Project
Budget, which included the City’s share of construction and planning expenses. Members of
the Friends of the Magical Bridge were present at the Finance Committee meeting and
answered questions about the status of fundraising for the project.
2. Staff drafted a letter of intent which outlined the responsibilities of the Friends of the Magical
Bridge and City for developing final designs for the project, and seeking necessary permits for
the project. The City Attorney’s Office has reviewed and amended the draft letter of intent.
The revised letter of intent was sent to the Friends on May 18, 2011, for their review and
approval.
3. On May 17, 2011 the need for a universally‐accessible playground was discussed with sub‐
committee members of the Surface Committee of the Infrastructure Blue Ribbon Commission.
Project Tracking Report (April 1 – June 30, 2011) Page 52
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Next steps:
1. It is Staff’s intent to return to the Council with a letter of intent on July 18, 2011 for approval.
2. Under the terms of the letter of intent the Friends of the Magical Bridge will have until June
30, 2013, to raise the funds for the project and be able to enter into a construction agreement
with the City for the project.
ACITY OF V PALO ALTO
&Cjf~ o/,.lF"
IY'PALO AL.TO
City of Palo Alto (ID # 1497)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/21/2011
March 21, 2011 Page 1 of 2
(ID # 1497)
Summary Title: City Council Priorities
Title: Approval of the City Council Priorities Report for Calendar Year 2011
From:City Manager
Lead Department: City Manager
Recommendation
Staff recommends that Council approve the outline of Council priorities for calendar year 2011.
Executive Summary
The City Council held their annual retreat January 22, 2011 and reaffirmed their interest in
maintaining the following five priorities for the 2011 calendar year. The Policy and Services
Committee reviewed this item at their February 15th and March 8th meetings.
Strategic Priorities
City Finances Emergency Preparedness Environmental Sustainability
Land Use and Transportation Planning Youth Well-Being
Discussion
Since the retreat, staff has compiled a master list of the priorities and key goals under each
priority for the City Council’s information. This plan is based on current resource allocations
(i.e., staff and financial resources). Thus, should there be a material change in resources staff
would return to the City Council with a modified plan. Outlined in the attached documents are
the five strategic priorities and goals. The attachments include
a master worksheet showing each major priority, key goals, the lead department, and
March 21, 2011 Page 2 of 2
(ID # 1497)
checkmarks next to each goal indicating crossover with other priorities. For example,
completion of the IBRC long-term infrastructure needs is listed in the City Finances (CF)
category, but also has potential impacts on Emergency Preparedness (EP), Environmental
Sustainability (ES), Land Use and Transportation Planning (LUPT), and incorporates community
engagement (CE) and community partnership (CP) components. Several priority items will be
done through collaboration and coordination among several city departments. In addition, we
have included narrative summaries for each priority with additional details on department
actions to be taken to complete the priorities (See attachment B).
Timeline
All objectives identified are projected to be completed by the end of calendar year 2011 except
where noted in the written summaries.
Environmental Review
Environmental review may be required for specific projects and will be undertaken as those
individual projects are pursued.
Attachments:
·Attachment A: Master Excel Priorities Spreadsheet (XLS)
·Attachment B: Priority Narrative Summaries (PDF)
Prepared By:Katie Whitley, Administrative Assistant
Department Head:James Keene, City Manager
City Manager Approval: James Keene, City Manager
City Council Priorities De
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City Finances (CF)
Complete labor negotiations with all major bargaining groups HR x
Complete refuse fund study and stablization PW x ü ü ü
Complete economic development strategic plan MGR x ü ü ü ü ü ü
Execute new budget and fiscal measure to help ensure long-term financial stability ASD x ü ü
IBRC completes analysis of city long-term infrastructure needs and presents report to the City Council PW x ü ü ü ü ü
Emergency Preparedness (EP)
Conduct community exercise POL ü x ü ü
Evaluate a secondary electrical transmission line source UTL ü x ü ü ü
Implement recommendations of Foothills fire management plan FIR ü x
Implement Office of Emergency Services (OES) restructure POL ü x
Improve Emergency Operations readiness POL x ü ü
Environmental Sustainability (ES)
Evaluate construction of compositing digester or alternatives PW ü x
Evaluate plan to introduce electric vehicle (EV) charging stations at commercial and residential sites and city facilities UTL x ü ü
Establish formal collaboration with Stanford University MGR x ü
Explore methods to integrate Palo Alto Green into city sustainability programs MGR x ü ü
Prepare Urban Forest Master Plan PCE x ü ü
Land Use & Transportation Planning (LUTP)
Complete strategies and plans at the Development Center to improve customer service and accountability PCE ü x ü ü
Complete draft Rail Corridor Study outlining measures to provide for community land use, transportation, & corridor urban design PCE ü ü ü x
Complete Stanford University Medical Center renewal and replacement project PCE ü ü ü x
Substantially complete update of city Comprehensive Plan including draft Housing Element, 2 area Concept Plans PCE ü ü ü x ü ü ü
Facilitate in cooperation with local and regional agencies and organizations development of short and long-term action plan to sustain Caltrain MGR ü ü x ü ü
Actively participate in preparation of regional Sustainable Communities Strategy (SB375), Regional Housing Needs Allocation (RHNA)PCE ü ü x ü ü
Prepare Pedestrian and Bicycle Master Plan update PCE ü ü x ü ü ü
Youth Well Being (YWB)
Implement Project Safety Net CSD ü x
Monitor fundraising for Magical Street Bridge CSD ü ü x ü ü
Notes
City Finances (CF)
Emergency Preparedness (EP)
Environmental Sustainability (ES)
Land Use & Transportation Planning (LUTP)
Youth Well Being (YWB)
Community Engagement (CE)
Collaborative Partnerships (CP)
An X means that is the priority whereas a check indicates crossover with other priorities
Department Abbreviations
Administrative Services (ASD), City Manager (MGR), Community Services (CSD), Fire (FIR), Human Resources (HR), Planning and Community
Environment (PCE), Police (POL), Utilities (UTL)
City Finances
Page 1 of 11
City Council Strategic Priority Goals for Fiscal Year 2011
City Finances
Executive Summary
City Finance strategies form the foundation for many of the City Council identified priorities. A stable
financial picture in the short‐term and long‐term ensures the City’s ability to deliver on the all five City
Council Priorities in the areas of: Emergency Preparedness, Environmental Sustainability, Land Use &
Transportation and Youth Well‐Being. Sound City Finances are integral to Palo Alto’s quality of life.
A key principle of the City’s Finance objectives is to provide for the City’s finances in the near and long‐
term. For example, while the City in the normal course of business negotiates labor agreements on a
periodic basis the contacts envisioned during the cycle are ones where the City plans to make
meaningful long‐lasting changes to key City legacy costs (e.g., pension and health care). In addition, the
City is working toward developing a sustainable business model for funding ongoing infrastructure
needs while also eliminating a major backlog of projects in the City. These efforts will take time and yet
this investment is well worth the effort. This work will result in improving and the overall high quality of
life Palo Alto citizens have come to rely and expect from their City government. Identified below are five
key development goals for 2011:
1. Develop and execute new human resource contracts that help the City manage its labor costs to
a sustainable level over the long‐term
2. Execute an economic development program that supports and creates new municipal revenue
streams to support vital City services and positions the City for the 21st century innovation
economy
3. Outline a comprehensive initiative to fund ongoing infrastructure maintenance and fund the
large existing backlog of projects. A quality infrastructure base is vital to community quality of
life and to the City’s ability to attract and sustain a robust business base to support City services
4. Explore in‐depth available potential revenues along with expenditure reductions that enable the
City to create a long‐term sustainable fiscal ecosystem for the City so as to maintain and
ultimately enhance City service delivery and community quality of life. The solution to the City’s
finances must be multi‐dimensional and incorporate new or enhanced revenues, reset of our
long‐term labor and a review of new methods to deliver services
Page 2 of 11
Rationale for Goals Selection
City finances are integral to sustaining and enhancing the “dream” of what Palo Alto is all about which is
a community with an outstanding quality of life, an innovative community, a community where new
ideas thrive and grow, a place where families want to live and send their children to local schools and a
place where collaboration, community engagement and community partnerships are part of the inner
“fabric” of the place known as Palo Alto.
A solid City financial base, short and long‐term is the foundation of all the above. City finances enables
the community to provide the vital municipal services necessary to maintain and in Palo Alto to provide
the myriad number of enhanced community amenities and programs rarely found in any community in
North America of similar size.
There are significant macroeconomic changes occurring today that impact cities. These include a global
economic competitive environment, an environment of high economic uncertainty, super rapid change
in technological innovation and continued demographic changes impacting the ability of employers to
hire and retain talent. In addition, the State of California may be finally facing the reality of
restructuring itself where resources are aligned with expenditures and changing the dynamic of the
state relationship with local agencies (e.g.,. redevelopment proposal). If these changes come to fruition
it will have profound impacts on local government agencies.
Likewise Palo Alto is experiencing change as an organization. The City has seen the retirement of
several senior, mid‐level workers over the past two years and this trend is expected to continue given
the age demographic of the workforce and new changes in pension and health care benefit levels. All
the above trends give the City the ability to think about possibilities that could not be discussed or
considered before and to address the critical policy question about what should the City be doing and
how should it do it? There is also the opportunity now to:
Leverage technology and innovate in ways perhaps not considered before
New ways to structure the organization and organize the work
Set up new systems and methods to provide services (e.g., privatization)
As referenced recently in the Economist “Innovation is the single most important ingredient in any
modern economy”. Palo Alto has the ability to be a leader in local government service delivery
innovation if it executes well the City Finances priorities identified herein.
Page 3 of 11
City Finances
(Labor Negotiations)
Executive Summary
In 2010, Council reaffirmed the importance of attracting and retaining a quality workforce but
emphasized the critical need to balance this objective with a commitment to sustainable employee
compensation. In addition, Council directed that systemic problems and issues be addressed with
systemic solutions. As described in the City’s response to the Santa Clara County Grand Jury Report, the
City agrees that unsustainable employee costs must be aligned with available resources, taking into
consideration the City’s significant infrastructure needs and the public’s expectation of services. As
demonstrated by its balanced budgets, minimal use of reserves, Triple A credit rating, and excellent
annual outside audits, the City prides itself on responsible financial stewardship and management. It
fully intends to maintain these best practices and adjust costs and revenues as needed. However,
progress is dependent on the City’s success in its collaboration with its employee units. The City must
abide by contractual obligations of its labor contracts as well as legal requirements to meet and confer
and bargain in good faith over matters within the scope of representation. This places real and practical
constraints on the City’s ability to move forward with changes it may believe necessary, but which are
subject to negotiation. The City genuinely strives to reach agreements that ensure a sustainable
financial future and excellent services to the community.
In 2009, the City took the lead among Bay Area public agencies by initiating steps in contract
negotiations with Service Employees International Unit (SEIU) and Management and Professional
employees to implement a two‐tier retirement benefit by changing the retirement formula for new hires
to 2% @60. Furthermore, the City pursued and has now implemented an employee medical
contribution with non‐public safety employee groups (e.g., management, professionals, and SEIU
workers). Over the past year, the City has been involved in difficult negotiations with two out of the
four public safety unions: Local 1319, International Association of Firefighters (IAFF) and the Palo Alto
Police Manager’s Association (PAPMA). The other two sworn safety units will begin contract
negotiations in the spring 2011. Because many of the existing benefits were negotiated and approved
over an extended period of time and are long established, these are challenging negotiations and
difficult employee concessions to address in a short period of time.
One of the City’s primary labor relations goals is to agree to meaningful, long‐term structural changes to
employee compensation with all employee groups. Since the non‐safety employees represented by
SEIU and members of the Management and Professional unit have already made significant concessions
in their compensation, the City will be focused on reaching agreement on similar equitable
compensation concessions with all four of the safety units in negotiations this spring.
Goals identified for FY2011 are as follows and are not in rank order:
1. The Palo Alto Police Managers’ Association is a new bargaining unit. The City and PAPMA are in
negotiations to create their first Memorandum of Agreement (MOU).
2. The City has been negotiating with the Fire Fighters’ Association since May 2010. The City
determined that further productive movement toward a negotiated agreement cannot be
reasonably expected after 8 months of negotiations and therefore declared impasse on
February 15, 2011 and has initiated binding interest arbitration of the unresolved issues.
Page 4 of 11
3. The City typically negotiates with the Fire Chiefs’ Association after the Fire Fighters conclude.
Given the lack of progress as described above, the City will initiate negotiations with the Fire
Chiefs in the spring 2011 with the goal of reaching agreement in FY 2012.
4. The City and SEIU will meet in the spring 2011 to prepare a successor agreement that is
scheduled to expire June 30, 2011.
5. The Palo Alto Police Officers’ Association (PAPOA) deferred their scheduled wage increase for
one year to provide relief to the City’s budget and negotiated an additional year on their existing
contract for a new expiration date of June 30, 2011. The City will begin negotiations with
PAPOA in spring 2011.
Rationale for goals selection
Labor negotiations are an ongoing activity of a municipal operation. This is an activity that occurs on a
regular basis as Memorandum of Agreement’s (MOA’s) expire and need to be renegotiated. These
contracts are an integral component of City Finances as labor costs are typically 60% or higher of total
city general fund expenditures. What distinguishes this year’s negotiations from the norm is the
extraordinary strategic nature these contracts will have on the long‐term fiscal health of the City’s
finances. As referenced in the Executive Summary key bargaining groups have already made strategic
and fundamental long‐term structural changes to their contracts. It is the City’s goal to achieve similar
contracts with all bargaining units to assure the long‐term fiscal health of the City.
Page 5 of 11
City Finances
(Refuse Fund Study and Stabilization)
Executive Summary
Studying the Refuse Fund and executing a plan to balance and stabilize the fund is one of five goals
identified by the Palo Alto City Council to be achieved under the City Finances Priority. This enterprise
fund supports a large array of City services including garbage, recyclables, and compostables collection,
processing, and disposal, as well as street sweeping, Household Hazardous Waste services, and
supporting City‐owned facilities such as the Recycling Center and the Palo Alto landfill and composting
site. Due to multiple factors such as the success of the City’s Zero Waste services, the downturn in the
economy, and the use of reserve funds, the Refuse Fund financial health has been compromised. The
goals of the City are to:
1. Rebuild the Refuse Fund’s Rate Stabilization Reserve to a level that meets established
guidelines. This will include ensuring balanced annual operating budgets and establishing a
stable annual revenue stream for the fund.
2. Assess and realign refuse rates among users, as necessary. The City is finalizing a Cost of Service
study, and the results of this study will be used to evaluate the current Refuse rate structure and
make recommendations for changes.
3. Continue to work towards Zero Waste. The City has made great strides towards reaching this
goal, and much of its success is connected to the Refuse Funds conservation pricing rate
structure.
Rationale for Goals Selection
The Refuse Fund is a complex enterprise fund that supports key services and programs for the City.
Through a combination of influences occurring over several years, the Fund’s Rate Stabilization Reserve
has become negative must be rebuilt. A multi‐phased, multi‐year approach to stabilizing the Refuse
Fund and restructuring rates must be developed in 2011.
Page 6 of 11
City Finances
(Economic Development Strategic Plan)
Executive Summary
Economic Development is one of five key goals identified by the Palo Alto City Council to be achieved
under City Finances for FY2011. Economic Development is nearly always a strategic priority for local
municipal business retention, business expansion and business attraction strategies and have direct
correlation to revenues and City services. Stable and predictable revenues are critical to the
community’s quality of life which is dependent on delivery of sustainable City services. Identified below
are 5 economic development goals for FY2011. These goals are not in rank order:
1. Develop new revenue streams and innovative uses for under‐utilized City owned property
o Present by July 2012 to City Manager at least 1 possible income‐producing idea for
city‐owned land
2. Provide leadership in the outreach and messaging for the Development Center (DC)
Restructuring process
o Provide regular updates to business and community groups
o Work with PIO and media to ensure public awareness of progress and goals
Deliverables
Make 6 presentations to business community between January and June 2011
Host monthly meetings with PIO to determine messaging and outreach regarding the DC
Blueprint Project and send 2 DC Improvement press releases by July 2012
3. Outreach to the City’s largest revenue generating and most innovative companies
o Meet at least once with key company leaders, especially on real estate/facility
issues
Identify future expansion, relocation, or renovations plans if applicable, and
connect company representatives with staff at Development Center
Respond to any follow up items promptly‐ no longer than 3 business days.
Coordinate with city staff for additional follow‐up as appropriate
Deliverables
Conduct 20 general outreach meetings each month starting January 2012
Provide meeting summaries in newsletter and report to City Manager
3A. Visit strategically chosen businesses also including City Council, City Manager, and other key
staff in 2011 to have a focused discussion on using City resources to help retain/ grow their
presence in the City
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o Work with City Manager, City Council, Finance, Utility Advisory Commission, other
Boards/Commissions for input to develop plan to select companies to visit
Deliverable
Conduct 12 company site visits that include City Manager, Council Members, Boards and
Commission members and key company executives by January 2012
4. Create “Test Bed” partnerships, especially with innovative green/clean tech companies
o Explore finding suitable business location for test bed help desk
o Engage in promotional activities including:
Utility bill insert
Presentations to business trade organizations and neighborhood groups
Marketing Collateral
Deliverables
Identify staff team and hold brainstorming meetings in March 2011
Identify pilot projects and prepare draft business plan by June 2011
Implement pilot projects by January 31, 2012
5. Enhance City’s “Doing Business” Web Page and create engaging and effective marketing
collateral geared towards Palo Alto’s diverse business environment (i.e. retention and attraction
of different market segments) and transition to electronic marketing wherever possible.
o Engage in creative “web 2.0” strategies to improve messaging & info flow
Deliverables
By year end design/produce and present 3 marketing collateral pieces for City of Palo
Alto Economic Development
By July 2011, present report to City Manager on options for social media and web‐based
software, including determination on use of “Customer Analytics” software
Rationale for goals selection
A focus on finding new uses for city‐owned property could have a significant impact on our bottom line.
For instance, finding an appropriate site for a potential expansion or new location for an automobile
dealership, if successful, will result immediately in new revenues for the City. Estimated revenues for a
dealership could produce at least $100K or more per year in new annual revenues. In order to help
grow and or attract business in Palo Alto, we must enhance the Development Center to create a more
user‐friendly, transparent and predictable experience for customers. Communication and collaboration
across departments as well as with the community will help to streamline our process. If successful, not
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only will the process improve, but the DC itself can become a better marketing tool to attract and
expand business.
Communicating to businesses is the vital element to comprehending their issues and needs. It is
through this understanding that we can learn of potential opportunities, and best leverage the
resources at the City to assist businesses. By proactively engaging strategically chosen businesses in an
ongoing dialogue, we can build partnerships and improve our community, increasing our attractiveness
and in turn the City’s bottom line. As we move forward with economic development and sustainability
goals, we intuitively know that they must fuse. We understand that in order to maintain our leadership
as a global center of innovation, we must continue to attract the next wave of start‐up entrepreneurs,
cutting edge clean‐tech, bio‐tech, nanotech and research‐ based firms, while retaining the existing
companies that keep our character and charm. Working together with the Utilities Department (UTL)
we have a unique opportunity to create an effective “Test Bed”, a tool which can be used for the City to
partner with such companies, as well as with researchers in emerging fields. Developing an effective
system for collaboration between city/ residents/ business will be a great step forward in creating
tangible benefits that will help to attract/ retain such firms.
We should also have targeted marketing material at the ready with information tailored to different
business sectors and purposes. The web has become the number one source of information for
businesses, site locators and real estate professionals to initially start their search for places that may
meet the needs of their clients. The City therefore needs to have a state of the art website to present
the community to these key gatekeepers to ensure the city is competitive right at the initial site location
process. Emerging technologies should be explored to make sure that we have the most effective tools
available.
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City Finances
(Execute new budget and fiscal measures to ensure long‐term financial stability)
Executive Summary
The City currently completes and uses a Long‐Range Financial Forecast (LRFF). The forecast period
provides actual financial data for the most recent budget year, adopted and projected financial data for
the current budget year and projected financial data looking forward for ten years (to 2021). The LRFF is
used by the City to project and quantify a baseline projection of revenues, expenditures, cash flows and
fund balances. The forecast enables the City to take steps to plan in advance for potential revenue gains
and losses, expenditure increases/decreases, increased future liabilities and costs (e.g., health care and
PERS pension) and related items. The forecast is dynamic and subject to constant change and revision
based on the best available information. The forecast enables policy makers to evaluate financial
impacts of potential initiatives and to plan ahead to ensure the long‐term fiscal stability of the City. The
forecast also helps community members understand the organization’s present and future financial
capabilities and resource allocations to support services and programs.
The plan here is for the City to evaluate potential new revenues and service options that may enable the
City to realize new revenues and reduced expenditures. This action will help the City achieve a stronger
more sustainable fiscal model to support services and programs. For example, last year the City made
substantial changes to its PERS pension plan going to a new tiered program (2% @ 60) for non‐safety
personnel which will save the City considerable funds. In addition, the City will be implementing an
employee contribution to health care this year. The City needs to execute additional measures to
ensure long‐term financial sustainability. Completion of the goals identified below and the data
gathered from this work will be incorporated into the LRFF. Identified below are goals for FY2011.
These goals are not in rank order:
6. Identify new potential revenue sources including preparation of a report outlining various
potential revenue options, the pro’s and con’s of each option and the estimated potential
revenues. Potential new revenues options include but are not limited to:
a. Ambulance service subscription tax
b. Business operations tax
c. Citywide parcel tax
d. Increase in property transfer tax
e. Increase in transient occupancy tax
7. Develop plans to address increased employee compensation costs and develop plans to share
cost increase with employees.
8. Identify additional operational efficiencies, potential options to contract out various City
services, explore potential new partnerships with existing non‐profit organizations and non‐
governmental organizations and with other governmental organizations including adjacent
cities, and regional public agencies on the peninsula to deliver services and programs. Potential
ideas to consider include:
a. Advertising or naming rights for city facilities
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b. Analyze and review organizational structure for potential functional consolidation
options (e.g., placing all maintenance functions within one department) and
consolidation options with regional agencies that may provide similar services as the
City
c. Civilianize certain public safety management positions, property and evidence
management and specialist teams (e.g. SWAT)
d. Contracting out fleet maintenance and utility billing services
e. Contracting with other communities for regional emergency services dispatch
f. Creating an exclusive towing services contract in the city
g. Transferring animal care services to the county or to the human society
9. Identify a long‐term sustainable financial model to address City infrastructure project backlog
and develop as part of model plan to be able to fund ongoing preventive maintenance costs of
fundamental infrastructure. This model will be developed in coordination with the
Infrastructure Blue Ribbon Task Force data and work with the Finance Committee.
Rationale for goals selection
The rationale for selecting these goals is to develop a sustainable long‐term financial plan (LTFP) for the
City. More specifically we are seeking to explore potential alternative revenues and expenditure
reduction strategies that will enable the City to continue to deliver high quality services and program to
the community.
The LRFF report recently provided to the City Council Finance Committee outlines a number of long‐
term trends over the next ten years that necessitate a need for the City to explore and implement new
innovative techniques and strategies for delivering services. Just one example among many is
forecasters do not expect job growth and thus the unemployment rate to reach equilibrium for another
five to eight years. This one indicator, jobs, has a tremendous impact on the City finances as it impacts
three of the City’s main revenue streams: property, sales and utility user taxes.
Infrastructure quality is fundamental to local community quality of life. This includes infrastructure
system such as storm water, water, wastewater systems, roads and streets and city facilities. These
systems are integral to City service delivery. The City has a significant infrastructure backlog (in the
millions of dollars) and is the process of developing a plan to remedy the backlog and come up with a
sustainable long‐term approach to maintaining the City investments in its infrastructure assets.
The goals identified here will enable the City to outline a series of potentially meaningful revenue
alternatives that could help stabilize and offset the current volatile revenue streams (i.e., sales taxes)
that form the backbone of supporting City services. In addition, development of alternative service
delivery methodologies including working with potential non‐profit, non‐governmental and other public
agency partners offers the potential to significantly reduce public expenditures while maintaining if not
enhancing existing service delivery.
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City Finances
(Infrastructure Blue Ribbon Commission, IBRC)
Executive Summary
Action by the Infrastructure Blue Ribbon Commission (IBRC) is one of the key “City Finances” goals
established by Council for 2011. The IBRC was established to make recommendations to Council to
address the current backlog in Palo Alto’s Infrastructure needs. The IBRC will report back to Council in
the fall of 2011 after considering the following list of questions referred to it by Council:
What is the complete listing of the City’s infrastructure backlog and future needs?
What criteria should be used to prioritize this list of projects?
Are there ways the City’s infrastructure needs can be prioritized into 5 year increments that can
be financed and also effectively implemented given current staff resources?
What are potential financing mechanisms that could be used to address the City’s infrastructure
needs? Should there be a one‐time financing mechanism or some ongoing source of
infrastructure funding? What are the options for each of these choices?
Is a bond measure the best mechanism for funding the infrastructure backlog? If so, when
should this move forward and how could it be structured?
How can public/private partnerships be leveraged as an infrastructure funding mechanism?
How are City project cost estimates developed and are these in alignment with other local
jurisdictions?
How do Enterprise Fund infrastructure projects intersect with General Fund infrastructure
projects?
Rationale for goals selection
Palo Alto has an extensive and highly acclaimed system of City facilities. Its parks, open space,
libraries, and community centers of all types are one of the important reasons that Palo Alto is such
a desirable place to live. And yet those facilities have aged and spending to revitalize the facilities
has not kept up with the needs from that aging process. Many facilities now exceed their design
lives and upgrades are overdue. One of the main recommendations needed from the IBRC is how to
pay for and schedule the necessary work to refurbish the City facilities. The goal is to eliminate the
backlog of repair projects and put the City on a clear path of keeping up with maintenance needs in
the future. Like the environment around it, Palo Alto’s infrastructure must become truly
sustainable.
Emergency Preparedness
City Council Strategic Priority Goals for Fiscal Year 2011
Emergency Preparedness
Executive Summary
Emergency Preparedness is one of five goals that have been adopted by the Palo Alto City
Council for Fiscal Year 2011. The City of Palo Alto like any community in the Bay Area is
susceptible to a variety of natural hazards including earthquakes, floods, and wild land fires as
well as man‐made disasters such as plane crashes, terrorism and other catastrophes. The City is
committed to protect life, property and the environment through a number of activities
including preplanning, training, rapid emergency response and public safety education for the
benefit of the community. Below are the emergency preparedness goals for FY 2011 for the City
of Palo Alto. These goals are not in rank order:
1. The City will conduct one major Community emergency preparedness exercise. Staff
will work with community groups to plan and host a full‐scale exercise which will include
multiple neighborhood groups and City departments. This exercise will be consistent
with accepted national exercise guidelines
2. The City will evaluate and complete a feasibility analysis and report investigating
alternatives that install a secondary electrical transmission source to the City. The new
transmission source would be established in separate geographical area that would
eliminate the possibility of a single contingency outage interrupting power to the City
3. Implement recommendations of Foothills fire management plan to address treatment
and mitigation measures that are required to ensure the viability of evacuation routes
and protect life and property
4. Implement Office of Emergency Services (OES) restructuring founded on the consultants
report and focus on four key readiness areas: preparedness, mitigation, response and
recovery
5. Improve emergency operations readiness per the City emergency operations plan. The
City will work to better coordinate all facilities and personnel in the organization and
their ability to respond in a coordinated and cohesive fashion
_____________________________________________________________________
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Rationale for goals selection
A community emergency exercise will allow staff and community members to work together
during a simulation to test capabilities, communications, technology and personnel and will
enable the City to better prepare for an actual event. A feasibility report by year end regarding
the installation of a secondary transmission line in the City will enable the City to determine the
technical and financial feasibility of creating this type of emergency redundancy capability in the
community. If it is determined to move forward with installation of a new line it is projected
this work will take three to six years to complete given the regulatory requirements and costs.
Previous reports provided to the City Council have identified hazards and mitigation methods in
the Foothills area. Implementation of the plan will initiate the necessary mitigation steps. A
comprehensive report was recently completed evaluating the Office of Emergency Services
(OES). Implementation of the plan will increase City emergency preparedness and response and
community emergency response coordination. Improving emergency operations readiness per
the Emergency Operations Plan will improve and enhance community safety.
_____________________________________________________________________
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Emergency Preparedness
(Community Exercise)
Executive Summary
The City and the community seek to improve our response to major incidents. A coordinated,
well planned response requires an exercise component in order to rehearse and clarify roles, for
staff, residents and others. Such exercises are building blocks in support of a strategic, multi‐
year Training and Exercise Plan.
Deliverables
1.) City Departments to work with volunteer groups and external stakeholders to develop
the scope, purpose, objective and scenario for City/community exercise.
2.) Identify a joint community/staff exercise design team to coordinate/manage the exercise
and support community resilience.
3.) Encourage participation within community groups and volunteer organizations.
4.) Manage exercise which will evaluate:
‐ Intra‐City communications
‐ Sharing real‐time communications with external stakeholders
‐ Internal emergency preparedness procedures
5.) Develop an after‐action report and corrective action plan post‐exercise.
Rationale for Goal Selection
This exercise will allow staff and community members to work together during a simulation
which will test capabilities, communications, technology and personnel. The after‐action report
will provide staff and community members’ feedback about gaps and areas for improvement
which can be addressed. The exercise will also serve as a reminder that the City is committed to
a culture of preparedness. “It is a given that the City’s resources will be overwhelmed in a
disaster. It is, therefore, incumbent upon all residents and businesses to prepare themselves
and to understand the limitations of the City’s response efforts.” (City of Palo Alto Emergency
Operations Plan)
_____________________________________________________________________
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Emergency Preparedness
(Secondary Electrical Transmission Source)
Executive Summary
In February of 2010 the City of Palo Alto had electricity interrupted to the entire service area for
over 10 hours. This outage was due to an airplane leaving the Palo Alto Airport striking the
Pacific Gas and Electric Transmission lines. The purpose of this initiative is to investigate
alternatives that install a secondary electrical transmission source to the City. The new
transmission source would be established in separate geographical area that would eliminate
the possibility of a single contingency outage interrupting power to the City.
The following tasks are planned over the next 12 months:
Continue coordinating with PG&E and the Independent System Operator (ISO) on
including a transmission line connecting PG&E’s Ames Substation to Palo Alto’s Adobe
Creek Substation. This project would be part of the PG&E’s system plans to improve
transmission service in the Bay Area
Continue discussions with Stanford University on a project that would connect Palo
Alto’s Quarry Substation to Stanford’s Substation and to the Stanford Linear
Accelerator’s 230 kV Substation
Prepare a report for Council on viable alternatives for providing a secondary
transmission source and take action per City Council direction
This project is expected to take between 3 and 6 years to complete once a viable alternative is
determined due to planning and environmental requirements for a transmission facility.
_____________________________________________________________________
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Emergency Preparedness
(Implement Recommendations of Foothills Fire Management Plan)
Executive Summary
In 2009, the City commissioned a study to evaluate the fire potential in the wildland‐urban
interface. The study revealed that there are treatment and mitigation measures that are
required to ensure the viability of evacuation routes and to protect life and property.
Deliverables
1.) Extend consultant’s contract to assist staff in implementing Foothills Fire Management
Plan.
2.) Submit application to classify Foothills Fire Management Plan as a Community Wildfire
Protection Plan; explore grant eligibility under CWPP to fill the estimated $715,000
obligation.
3.) Seek Public Works CIP for ongoing mitigation activities to implement recommendations.
4.) Host three educational sessions for residents to review the community’s role in
mitigation, prevention, response and recovery.
5.) Apply for CALFIRE Work Crew to assist in mitigating identified hazards in the Foothills
Fire Management Plan.
Rationale for Goal Selection
Previous reports to Council have detailed the hazards that exist in the Foothills and the steps
necessary to mitigate these hazards. The Foothills consist of large open space areas/parks,
private residences, private recreation facilities, commercial buildings, critical infrastructure and
property owned by Stanford University. The rationale behind selecting this goal is to reduce the
risk of fire danger to these locations and ensure the safety of the residents. Council has
directed staff to develop strategies to implement the plan.
_____________________________________________________________________
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Emergency Preparedness
(Improve Emergency Operations Readiness)
Executive Summary
The City seeks, per its Emergency Operations Plan, “to incorporate and coordinate all facilities
and personnel…into an efficient organization, capable of responding in a coordinated and
cohesive fashion.” To better achieve this objective the City will make a number of
improvements in training, equipment and technology.
Deliverables
1.) Staff will implement a multi‐year, training and exercise plan designed to engage the
community and improve our response capabilities.
2.) Enhance interoperable communications and further develop our virtual consolidation of
dispatch with neighboring communities.
3.) Identify and seek grant funding of support equipment for emergency response
operations. Staff will explore regional partnerships and support joint planning
initiatives, such as the pending National Disaster Resiliency Center at NASA Moffett
Field.
4.) Develop and implement training for City staff on personal and family emergency
preparedness.
Rationale for Goal Selection
The City has legal obligations to maintain key capabilities to provide public safety, utilities and
other essential services to the community. Advanced preparation can reduce the impact on the
community and expedite recovery activities. These program improvements will support a more
comprehensive, coordinated response and recovery framework.
_____________________________________________________________________
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Emergency Preparedness
(Office of Emergency Services (OES) Restructure)
Executive Summary
In October 2010, the City Manager’s Office commissioned a study to review the City of Palo
Alto’s practices in emergency management. A subject matter expert with national credentials
was hired by the City to conduct a gap analysis and make recommendations to improve
emergency/disaster readiness. The consultant interviewed key stakeholders, inspected critical
infrastructure and reviewed emergency planning procedures. The consultant has written a
report and will present her recommendations to the City Council at a Study Session in the spring
of 2011.
The report will examine how the City and community can improve in the four key
emergency/disaster readiness categories: preparedness, mitigation, response and recovery.
The consultant will make recommendations as to where the activities of the Office of Emergency
Services should best be situated within the City organization. The report will also examine the
appropriate staffing and structure for these activities. Finally, the report will present
recommendations that can enhance the City’s coordination with the community.
Deliverables
1.) Upon receipt of the report, staff will review and analyze the consultant’s report. Staff
will evaluate financial, human resources and philosophical implications of the
recommendations.
2.) Staff will review the report with key stakeholders (Citizen Corps Council), the leadership
of community groups and obtain feedback/input.
3.) Staff will confer with the City Manager and recommend implementation of appropriate
action items.
4.) Staff will report back to Council and implement these action items.
Rationale for Goal Selection
Staff is responding to a directive as set by the City Council to our emergency preparedness
functions. The City has an obligation to ensure community readiness, through education,
training, outreach and exercise. The Office of Emergency Services will be restructured to
coordinate these complex activities across all City Departments and with the community to
ensure a unified, coordinated response.
Environmental Sustainability
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City Council Strategic Priority Goals for Fiscal Year 2011
Environmental Sustainability
Executive Summary
Environmental Sustainability is a core value and ongoing priority for the City. The City has been a leader
in this area and continues to make strides to be a leader on the Peninsula, in the Bay Area metropolitan
region and in North America. The City is a Certified Green Business, has adopted a Climate Protection
Plan (CPP), a Sustainability Policy, has many sustainability programs including the award‐winning Palo
Alto Green Program and continues to make strides in reducing Greenhouse Gas emissions. One of the
most recent examples was the initial installation of LED streetlights in the City. Identified below are five
key development goals for 2011.
1. We continue to look at our Utility plant operations for methods and strategies to increase our
ability to reduce the City’s greenhouse gas emissions (GHG). This year a major focus will be to
look at the financial practicality of new compositing digesters or their alternatives to reduce
GHG’s.
2. Fleet operations and gas vehicles are a major contributor to GHG emissions. Thus we are going
to explore the ability to install electric vehicle charging stations at various locations in the City to
facilitate and encourage use of electric vehicles and technology.
3. Stanford has a robust Sustainability program and several initiatives underway and ongoing in
this area. Stanford is also a leader in research and development of green technologies and
practices. The City, for the first time, is going to explore developing a more formal collaborative
relationship with the University to determine if there are synergies and potential partnerships
between the City and the University to enable both entities to leverage their combined efforts
to be leaders in sustainable communities and use of green technologies and practices.
4. The residents of Palo Alto have embraced many green practices on their own and with the
encouragement of the City. This includes recycling, use of available transit options (e.g.,
Caltrain), planting of trees and many other homegrown initiatives. The City also has a number
of sustainability programs and engages in several practices to encourage sustainability in the
community. This initiative will provide a focused effort in looking at strategies and tactics the
City and the community can engage in together to leverage knowledge, resources and talent to
build a more sustainable community.
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5. Palo Alto is a City with a considerable existing urban forest canopy. This canopy provides
considerable environmental and community quality of life benefits to the community. A master
plan will enable the City to create a long‐term plan for managing and enhancing this significant
asset and help the City meet its sustainability goals.
Rationale for Goals Selection
Environmental Sustainability is, as stated above, a core value of the City of Palo Alto. The City is one of
the foremost leaders in Environmental Sustainability (ES) in the nation and is positioned now and in the
future given current and projected initiatives to continue to build upon what has been and is a cutting
edge leadership role. All of the goals identified here reinforce this ES leadership position. The City
continues to adapt, enhance, change and execute new sustainability practices and initiatives. Palo Alto
has embraced ES for the long‐term and it is an integral part of the quality of life and fabric of what
makes Palo Alto “Palo Alto”.
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Environmental Sustainability
(Evaluation of Composting Digester and Alternatives)
Executive Summary
Evaluating alternatives for handling Palo Alto’s organic residuals (e.g., yard trimmings, food scraps and
wastewater solids) is a critical goal of Council’s Environmental Sustainability Priority. On April 5, 2010
Council directed staff to:
1. Hire a consultant to evaluate a Dry Anaerobic Digestion system
2. Prepare an applicable level EIR, focused on 8‐9 acres of Byxbee Park adjacent to the City’s
Regional Water Quality Control Plant
3. Conduct a Preliminary Analysis before completion of the study itself
4. Explore Energy Conversion Technologies in conjunction with the Regional Water Quality Control
Plant Long Range Facilities Planning
5. Explore Partnering with local agencies within 20 miles of Palo Alto
The Preliminary Analysis will be brought to Council in March or April, 2011 with the full study being
completed in the fall of 2011.
Rational for goals selection
With the closure of Palo Alto’s landfill and current compost facility in late 2011 and early 2012
respectively, the need to manage the City’s residuals becomes a key issue. While the City has the option
to take yard and food residuals to the Gilroy area for composting, and wastewater biosolids are
currently incinerated; other options must be explored which would reduce energy use and greenhouse
gas emissions. If Palo Alto is to meet its Climate Action, Zero Waste, Sustainability, and Externality
Reduction goals, alternatives must be carefully analyzed.
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Environmental Sustainability
(Electric Vehicle Charging Stations at commercial and residential sites and city facilities)
Executive Summary
New electric vehicles (EVs) are being introduced in the market place, and these EVs require new
charging infrastructure. Encouraging the use of EVs will reduce the community’s greenhouse gas (GHG)
emissions and will help meet the Council approved Climate Protection Plan goal of reducing municipal
and community GHG emissions by 15% below 2005 levels by 2020. Having publicly accessible EV
charging stations at City facilities is one way of encouraging the adoption of EVs in town.
The City has undertaken a number of steps to facilitate the adoption of EVs in Palo Alto to date. City
staff have provided charger technology information and permitting requirement for customers to install
chargers in their homes and businesses on the city website and via utility bill inserts; an assessment of
long term EV penetration in town has been undertaken along with an assessment of electric distribution
system infrastructure upgrade needs; EV charging is being encouraged in the City’s building code;
applied and obtained two state grants totaling $35,000 to install five EV chargers at publicly available
facilities. In addition, a number of charging stations are going to be installed at libraries utilizing
‘Measure N’ bond funds.
The following tasks are planned and approvals expected to be sought over the next 12 months:
1. Determine how to best leverage the state grant funds to install 5 chargers in publicly available
facilities. The 5 charging stations could cost $100,000 to $150,000 to install. Explore the
possibility of leveraging private equity capital to provide the funding shortfall
2. Determine the locations to install the chargers. At present, there are two charging spots at City
Hall and Alma Parking Garages, but these are older charger technology. Staff anticipates
installing three of the newer chargers at the same location, while maintaining the older charger
for a few more years. A fast level #3 charger is also being considered at the street level on
Hamilton Avenue in front of City Hall. Other public parking areas are also being evaluated for EV
charger installations.
3. A Request for Proposal (RFP) to solicit proposal from the private sector to optimally deploy
these chargers is planned. This RFP will provide an option for the private sector to utilize the
grants, add their own funds to install, own, and operate the charging station in town, and
provide a franchise fee to the City for utilizing public space to install these chargers. In the event
private sector funds are not available at satisfactory terms, Council approval is being sought to
utilize electric utility funds to make up the difference in cost.
4. Staff plan to bring to the Utility Advisory Commission and the Council a number of policy level
questions in the spring in this regard. These may include:
a. How best to leverage private capital to install EV chargers?
b. Should free EV charging be provided at City facilities to the public?
c. Should the employee commute program include incentives for EV charging?
d. How best to deploy charging stations and optimally utilize the limited parking space
available downtown as reserved spots for EV charging only?
e. What is the role of Utilities Department in installing EV chargers?
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f. Should the Utilities Department offer time‐differentiated residential electric retail rate
for EV owners to encourage charging during night time in order to reduce the adverse
impacts on the electrical grid and distribution system?
5. Much of these goals will be accomplished by December 2011, with all set goals expected to be
completed by June 2012.
Rationale for Goal Selection
EVs have the potential to reduce the community’s GHG foot print considerably over the long term.
Having a robust City policy to encourage EVs and to facilitate building a robust public charging
infrastructure in Palo Alto and in the region is critical for the success of EVs in town. The goal in 2011 is
to frame this policy for Council review/approval and to utilize the state grants available to make a robust
start in installing public charging stations at City facilities in 2011. It may take up to June 2012 to fully
implement all elements of the goal outlined above.
Page 6 of 8
Environmental Sustainability
(Establish formal collaboration with Stanford University)
Executive Summary
Stanford University represents the most progressive and innovative research into the area of
sustainability and climate change. Palo Alto, by virtue of its proximity and relationship to the University,
can leverage its green initiatives through enhanced collaboration with the University. On the University
side, there are many programs engaged in sustainable innovation. These include the Precourt Institute,
The Woods Institute for the Environment, and Sustainable Stanford just to name a few. The City, with its
own utilities, is uniquely positioned to partner with Stanford and the emerging talent coming through
these programs. While informal relations exist with Stanford, the city could develop strategic relations
around sustainability, allowing for resource sharing, best practices, and internship opportunities.
Goals
1. Organize a “Sustainability Partnership Summit” open to public, including Stanford and City Panelists
2. Organize a formal site visit to Y2E2 including key leaders in Planning, Utilities, and Public Works,
highlighting innovative construction and facilities management techniques utilized by Stanford.
3. Develop volunteer internship program for at least 1 sustainable initiative
Rationale for goal selection
In the past, Earth Day events have included a broad cross‐section of the community. This year, focusing
on the University/City relationship will provide a unique perspective not yet explored. The extent to
which Stanford has implemented sustainable building techniques on campus for new construction is
relatively unfamiliar to many on city staff. Increasing familiarity with the University’s innovative green
building techniques will stimulate creative interactions and thinking from city staff involved in green
building programs. Because Palo Alto owns its utility, there are unique opportunities for internships.
Many progressive programs suitable for graduate level interns could exist. Both the City and Stanford
could find mutual value in such an endeavor.
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Environmental Sustainability
(Explore methods to integrate Palo Alto Green into City Sustainability Programs)
Executive Summary
The City offers numerous sustainability programs, including PaloAltoGreen, which is one of the most
recognized and progressive renewable energy programs the Utility Department offers. Palo Alto is also
a community of highly engaged citizens. Following the Stanford model of an interdisciplinary approach
to sustainability, the City could begin to integrate activities such as Emergency Prep, Economic
Development, and Greenhouse Gas Reductions.
Goals
1. Form sub‐group including City Elected and Appointed Officials, Staff, and key community leaders to
explore connections to broaden the City’s renewable energy and sustainability programs. Employ
the triple bottom line principles in a variety of programs.
2. Bring the Citizen Core Council together with Sustainability Groups (such as CEAP) to explore issues
affecting the community’s preparedness in a changing climate.
3. Hold study session with Council, Planning Commission and Climate Change experts to understand
the policy implications of rising sea levels and other effects of global climate change.
Rationale for goal selection
Collaboration among staff and city leadership could produce new ideas and initiatives. Promoting a
fresh dialogue can stimulate creativity and foster innovation. The City’s policy framework needs to
respond to changing climatic conditions. Policy makers require the best information possible to ensure
appropriate actions and plans are implemented.
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Environmental Sustainability
(Urban Forest Master Plan)
Executive Summary
The Urban Forest Master Plan, partially funded by a grant from CALFIRE, is intended to provide a
strategic plan to help the City conserve and renew its urban forest, to establish procedures and
protocols to enhance the effectiveness of City operations and maintenance, and to provide for
consistent and effective monitoring of the urban forest. Key goals of the plan include:
1. Continuing to provide for protection of the environment, including trees, creeks, wildlife, and
open space
2. Enhancing the City’s environmental sustainability objectives, including its Climate Protection
Plan
3. Ensuring that the City has an accurate and complete picture of its Urban Forest
4. Establishing the urban forest as an asset and part of the City’s valuable infrastructure
5. Engaging the community as stewards of the Urban Forest
The process and timeline for preparation of the Urban Forest Master Plan began in December 2010,
when the City contracted with Hort Science, Inc. to work with a staff interdisciplinary team. In January,
the team conducted a successful online survey to which 650 people responded. During January and
February, the team interviewed over 100 staff members from all relevant departments. On February 7,
2011, the consultant introduced the project to the City Council at a Study Session. Future public
meetings and hearings will be scheduled in June and July to accommodate review of the draft plan and
adoption by the City Council.
Rationale for Goals Selection
The Urban Forest Master Plan is an important component of the City’s “sustainable” development goals.
Preserving and protecting the urban forest is a long held tradition in Palo Alto. In recent decades,
however, new and/or increased pressures associated with development and the provision of services
has introduced unprecedented competition for the protection of trees.
The Urban Forest is also an element of the City’s infrastructure and requires management and
maintenance as an asset valued for its environmental, aesthetic and economic benefits: energy
conservation, air quality improvement, CO2 reduction, storm‐water control, and enhanced property
values. The Urban Forest Master Plan will also be closely aligned with goals of other sustainability
programs such as water and energy conservation. It will also further the City’s goals of engaging the
community to foster sustainable natural resources. For example, the plan will establish the benefits of
choosing drought tolerant trees to minimize water use and shade for homes and parking lots to reduce
energy consumption.
Land Use and Transportation Planning
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City Council Strategic Priority Goals for Fiscal Year 2011
Land Use and Transportation Planning
Executive Summary
Land use and planning strategies are closely aligned with other Council priorities to protect and enhance
City Finances, to support Emergency Preparedness goals, to further the City’s Environmental
Sustainability objectives, and to encourage Youth Well‐Being. Land use and transportation are key
indicators of quality of life in Palo Alto. The overarching principle of the City’s Land Use and
Transportation objectives is to provide for “sustainable” development and services: growth,
rehabilitation and services that are sustainable in economic and fiscal terms, as well as in environmental
respects. The City desires to develop in ways that promotes efficient delivery of services, assures high
quality development and design, protects and broadens the City’s tax and revenue base, preserves and
enhances key environmental attributes, minimizes energy and water use, and promotes transportation
alternatives such as walking, bicycles, and transit. Identified below are seven key development goals for
2011:
1. Complete strategies and plans at the Development Center to improve customers service and
accountability
2. Complete draft Rail Corridor Study outlining measures to provide for community land use,
transportation and corridor urban design
3. Complete Stanford University Medical Center (SUMC) facilities and replacement project
4. Substantially complete update of City Comprehensive Plan Amendment/Housing Element
Update and 2 Area Concept Plans
5. Continue monitoring of High Speed Rail (HSR) activities and collaborative work with Peninsula
cities and regional agencies, work on a short and long‐term action plan to sustain Caltrain
6. Actively participate in preparation of regional Sustainable Communities Strategy (SB375),
Regional Housing Needs Allocation (RHNA)
7. Prepare Pedestrian and Bicycle Plan Master Plan update
Page 2 of 13
Rationale for Goals Selection
Land use and zoning decisions are integral to facilitating the preservation, development or
redevelopment of uses that contribute to the City’s economic vitality and tax base. Provision of
opportunities for hotels, auto dealers, and other retail uses will assist the City to meet its fiscal
responsibilities. A more efficient development review process will minimize staff resource needs while
providing for a more satisfied customer experience. The facilitation of these uses also provides needed
daily services to the City’s residents.
Transportation alternatives to single occupancy vehicles not only provide environmental (greenhouse
gas and other air quality) benefits, but can also be more cost‐effective and less impacting than
constructing more roadway space. A mix of transit, walking, and bicycle facilities also allows all segments
of the population, including children, seniors, and disabled persons, equal access to safe and efficient
transportation. Protection of the environment is fundamental to the City’s Comprehensive Plan goals
and policies, and provides economic benefits as well. Creeks, the hills, and the Baylands all contribute to
the aesthetic, ecological, recreational and educational values of Palo Alto. These areas also provide for
many of the recreational amenities available in the City.
The City must also recognize its role and relationships to the Bay Area region as a whole. The City may
benefit from taking a more active part in assuring an understanding of Palo Alto’s role as an
employment and education center in the Bay Area and Silicon Valley. At the same time, providing varied
housing opportunities for employees of Palo Alto businesses is an important asset for those employers.
Page 3 of 13
Blueprint for a New Development Center
(Complete strategies and plans at the Development Center to improve customer service and
accountability)
Executive Summary
The “Blueprint for a New Development Center” project is focused on improving the delivery of services
at the Development Center (DC) and increasing customer satisfaction. The City Manager’s public
statement committed to having measurable improvements implemented at the DC by the end of June
2011. The City Manager’s key objectives are the guideposts for the project initiative:
1. Creating a better customer service culture where there is predictability, clear standards, and a
performance measurement program in place to evaluate service delivery and assess customer
satisfaction.
2. Improving organizational efficiency of the Development Center and associated processes to
minimize costs and delays to customers.
3. Maintaining or enhancing community sustainability and economic development goals and objectives
through DC activities.
Rationale for goals selection
The Blueprint project is actively engaged with multiple departments and Development Center users, as
staff continues designing and refining an integrated system throughout 2011. Staff anticipates testing
and implementation of the design will commence in the first half of 2011. To produce wholesome and
sustained results, three initial staff and customer teams have been established to create momentum
and advance the project forward, including:
Staff Steering Committee – Directors and other senior managers from Planning, Building, Public
Works, Fire, City of Palo Alto Utilities (CPAU) and the City Manager’s Office are responsible for
project accountability, policy direction, decision making and issue resolution. This committee is
meeting twice a month to ensure the right staff is involved and they get the necessary resources
to produce the intended results.
Staff Action Team – Key staff representatives, from various departments, are responsible for
redesign of development services business processes, design of the piloting program protocols,
and implementation planning. Additional staff subcommittees are identified and assigned along
the way to address system related impacts (i.e. technology, publications, etc.). Staff is currently
meeting twice weekly to design the new integrated system and will follow‐up with the piloting
and implementation efforts this spring.
Development Center Customer Advisory Group – A customer group, representing a cross‐
section of DC users, has been assembled and meets on a monthly basis to help staff understand
successful service delivery criteria from the customer’s perspective. Their participation ensures
consistency of the design and implementation, provides feedback on ongoing service and
performance‐related issues, and communicates progress of the project to other customers and
City policy makers. At this stage, the customers, in conjunction with the Staff Action Team,
have clearly defined their desired outcomes and expectation for success.
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City Manager Monthly Progress Reports – These monthly updates are prepared by the DC
Blueprint System Improvement Manager and the System Design Consultant. The information
apprises the City Manager of progress; as well as, timely notification of potential issues or
constraints. As part of the Blueprint project communication plan, staff has created a City
website to keep everyone informed of the project progress at:
http://www.cityofpaloalto.org/depts/pln/development_center/dc_blueprint/default.asp.
The Blueprint project implements City goals by providing for efficiencies in development services for the
community and for the City budget with improved technology and a customer service philosophy.
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Palo Alto Rail Corridor Study
(Complete draft Rail Corridor Study outlining measures to provide for community land use,
transportation and corridor urban design)
Executive Summary
The Palo Alto Rail Corridor Study is intended to provide a vision for land use, transportation, and design
along the Caltrain right‐of‐way and adjacent areas. The plan would identify opportunities for growth
near transit while protecting nearby neighborhoods. The study would encourage more pedestrian and
bicycle friendly mobility, integral to furthering “sustainable development” in the city. The study will also
allow consideration of land use and urban design techniques to enhance the potential for economic
development and increased revenues and tax base within the corridor. Key goals related to the Council’s
priorities include:
1. Contributing to a sense of community and place in neighborhoods and commercial districts
2. Assuring a high quality of development and design
3. Protecting and broadening the City’s tax and revenue base
4. Preserving and enhancing key environmental features
5. Promoting transportation alternatives such as walking, bicycles, and transit
The Rail Corridor Study will be conducted by staff, a 17‐member Task Force, and an urban design
consultant. Public workshops and meetings with the Planning and Transportation Commission and City
Council will supplement the work of the Task Force and provide for extensive public input. The Study will
be conducted in three phases: 1) vision, 2) alternatives, and 3) a draft plan. Each phase will take
approximately four months and the final plan is expected to be considered by Council in early 2012.
Rationale for Goals Selection
Land use and zoning decisions are integral to facilitating the preservation, development or
redevelopment of uses that contribute to the City’s economic vitality and tax base. The City must
simultaneously enhance its neighborhoods by protecting impacts of development or, in this case,
transportation facilities (rail and roads). Protection of the environment is fundamental to the City’s
Comprehensive Plan goals and policies, and provides economic benefits as well. These areas also
provide for many of the recreational amenities available in the City.
Transportation alternatives to single occupancy vehicles not only provide environmental (greenhouse
gas and other air quality) benefits, but can also be more cost‐effective and less impacting than
constructing more roadway space. A mix of transit, walking, and bicycle facilities allows all segments of
the population, including children, seniors, and disabled persons, equal access to safe and efficient
transportation.
The Rail Corridor Study will address all of these goals for the corridor and will provide input to the
Comprehensive Plan, the California Avenue/Fry’s Area Concept Plan, and other ongoing planning and
transportation activities in the city.
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Stanford University Medical Center
Facilities Renewal and Replacement Project
(Complete Stanford University Medical Center renewal and replacement project)
Executive Summary
The Stanford University Medical Center (SUMC) Facilities Renewal and Replacement Project is a
comprehensive, multi‐year development project to rebuild and restore the SUMC and School of
Medicine facilities in Palo Alto. The project would satisfy the shared objectives between SUMC and the
City of Palo Alto to optimize the delivery of healthcare to patients and to meet regional needs for
emergency and disaster preparedness. The project applicant is proposing the changes and additions to
meet State mandated seismic safety standards (SB 1953) and to address capacity issues, changing
patient needs and modernization requirements. Various entitlements required for the project, including
certification of an Environmental Impact Report, Comprehensive Plan amendments, creation of a new
“Hospital” zoning district, Architectural Review of the proposed buildings, and a Development
Agreement that would set land use regulations for a 30‐year period in exchange of public benefits. Key
goals related to the Council’s priorities include:
1. Meeting regional needs for emergency preparedness
2. Minimizing environmental, financial and municipal infrastructure impacts on the City
3. Assuring a high quality of development and design
4. Promoting sustainable development and green building design principals throughout the
project
5. Promoting transportation alternatives such as walking, bicycles, and transit
Since the SUMC representatives first introduced the project in late 2006, City staff has worked to
identify the environmental impacts, conducted public outreach meetings to determine key project
objectives, prepared fiscal analysis, held preliminary design review meetings, and identified possible
public benefits to be included in the Development Agreement. In May 2010, the Draft EIR was released
for public comment. In February 2011, the Final EIR and “Response to Comments” was completed. It is
anticipated that the Architectural Review Board, Planning and Transportation Commission, and City
Council will complete their reviews of the project in May 2011.
Rationale for Goals Selection
The project would result in an increase of over 1.3 million square feet of new floor area and site
improvements that will affect how employees and visitors access and interact with the SUMC campus
operations. There is a great opportunity to incorporate green building features, sustainable
development, and state of the art urban design principles that would help achieve City goals and would
be a model for future development. The redevelopment of the SUMC and School of Medicine, designed
in a manner to address the region’s Disaster Preparedness Program, will significantly contribute to the
emergency preparedness goals of not only the City but the region as a whole. While there are many
public benefits inherent to the project, the impact of the proposed development could potentially result
in financial and infrastructure costs to the City. It is important that the Development Agreement address
these potential costs and minimize the project impacts.
The project will result in the creation of many new jobs that will ultimately be a financial benefit to the
City. In order to accommodate these jobs in a manner that meets the City’s environmental goals, the
project applicant will be expected to provide commute alternatives for employees. These alternatives
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not only provide environmental (greenhouse gas and other air quality) benefits, but can also be more
cost effective and less impactful than constructing more roadway space. A mix of transit, walking, and
bicycle facilities allows all segments of the population, including children, seniors, and disabled persons,
equal access to safe and efficient transportation.
Page 8 of 13
Comprehensive Plan Amendment/Housing Element Update
(Substantially complete update of City Comprehensive Plan including draft Housing Element, 2 Area
Concept Plans)
Executive Summary
The Palo Alto Comprehensive Plan Amendment and Housing Element Update are intended to provide
the framework for the City’s land use, housing, development and transportation policies. The
Comprehensive Plan Amendment focuses on two Area Concept Plans and on updating policies to 1)
assure provision of adequate support services to neighborhoods and businesses, 2) propose strategies
to retain and enhance retail and other commercial, revenue‐generating uses, and 3) ensure a theme of
“sustainability” throughout the City’s land use and transportation policies and programs. The Area
Concept Plans are being developed for: 1) the East Meadow/West Bayshore commercial/industrial area,
and 2) the California Avenue/Fry’s Area of mixed use development. The Housing Element is being
updated in accordance with State law requirements and will outline the City’s housing objectives
through the year 2014, including the provision of affordable housing units during that period. Key goals
related to the Council’s priorities include:
1. Contributing to a sense of community and place in neighborhoods and commercial districts
2. Assuring a high quality of development and design
3. Protecting and broadening the City’s tax and revenue base
4. Preserving and enhancing key environmental features
5. Accommodating housing for all segments of the population
6. Promoting transportation alternatives such as walking, bicycles, and transit
The Comprehensive Plan is expected to be complete in draft form by the end of 2011 and to then
undergo environmental review (Environmental Impact Report) in 2012, prior to adoption. The Area
Concept Plans have both received preliminary review by the Planning and Transportation Commission,
and are scheduled for City Council consideration in mid‐2011. A draft Housing Element will be
considered by Council in mid 2011 as well, and then will be forwarded to the State Department of
Housing and Community Development for its review.
Rationale for Goals Selection
The City’s Comprehensive Plan is the basis for most land use, development, transportation, and
infrastructure decisions in the city. Land use and zoning decisions are integral to facilitating the
preservation, development or redevelopment of uses that contribute to the City’s economic vitality and
tax base. Provision of retail, recreational, and educational uses assures that residents and businesses
enjoy a high quality of services. A mix of transit, walking, and bicycle facilities allows all segments of the
population, including children, seniors, and disabled persons, equal access to safe and efficient
transportation. Protection of the environment is fundamental to the City’s Comprehensive Plan goals
and policies, and provides economic benefits as well. The East Meadow/West Bayshore/San Antonio
Area Concept Plan implements City goals to protect existing commercial uses, better assure that
adequate public services are available to surrounding residential neighborhoods, and provide non‐
vehicular transportation connections to the Baylands and other amenities. The California Avenue/Fry’s
Area Concept Plan also serves to protect existing commercial and retail uses while providing the
potential for increased housing and mixed‐use opportunities and the creation of a pedestrian and transit
oriented neighborhood. The Housing Element Update will implement City goals to provide adequate
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workforce housing as well as housing for a variety of lower income households, while protecting the
value of existing residential neighborhoods.
Page 10 of 13
Land Use & Transportation Planning
(Facilitate in cooperation with local and regional agencies and organizations development of a short
and long‐term action plan to sustain Caltrain)
Executive Summary
Caltrain currently provides fixed rail commuter services to the City of Palo Alto. There are also two
Caltrain stations one located at University Avenue in Palo Alto and another at San Antonio in the City of
Mountain View. Palo Alto has the second highest Peninsula ridership numbers and Stanford University
represents over 50% of the Caltrain “go” commuter rail passes on the system. Thus, Caltrain is an
important component of the City’s transportation system and plays a critical role in helping local
employers and community residents in getting to and from their jobs to local and regional destinations.
Caltrain though is currently facing an unprecedented operating deficit (e.g., $30M) and is planning,
effective July 1 of this year, to make major service cuts to balance their budget. These cuts would leave
Caltrain providing commuter rail services during peak rush times. Caltrain is also the only major regional
commuter transportation system without a dedicated funding source.
Given the importance of Caltrain service to the Palo Alto business community, Stanford University, Palo
Alto residents and to the Peninsula regional transportation system the City is looking to participate,
partner with and support actions that would put in place a viable financial plan to secure short and long‐
term financial stability for Caltrain. Identified below are goals for FY2011. These goals are not in rank
order:
1. Host a Palo Alto community forum in partnership with the Silicon Valley Leadership Group
(SVLG) to communicate and inform community members about the current financial plight of
Caltrain and to secure ideas and suggestions from the community, riders, and businesses about
potential solutions to produce a viable financial model
2. Consult with our federal and state legislative advocacy firms to advise the City on what
methodologies, programs, and tools may be available to help financially support the
modernization of Caltrain (e.g., electrification, positive train control etc.)
3. Explore and evaluate with partners (including public agencies: San Francisco County and City,
San Mateo County, Santa Clara County, Metropolitan Transportation Commission (MTC), major
private employers, Stanford University and others) the viability of developing a dedicated
revenue stream to fund ongoing Caltrain operations (e.g., sales tax, parcel tax)
Rationale for goals selection
The rationale for selecting these goals is to develop a sustainable, long‐term financial plan for Caltrain
on the Peninsula. Caltrain is, as noted earlier, experiencing large operating deficits which will mean
significant service reductions in the near term. In addition, Caltrain does not have sufficient funding to
invest in capital plant modernization (e.g., electrification). This modernization would assist Caltrain in
increasing ridership which would help contribute to a more stabilized financial model for the system.
Page 11 of 13
Sustainable Community Strategy (SB375)
(Actively participate in preparation of regional Sustainable Communities Strategy (SB375), Regional
Housing Needs Allocation (RHNA)
Executive Summary
The Sustainable Communities Strategy (SCS) required by SB375 and the accompanying Regional Housing
Needs Allocation (RHNA) are important regional planning initiatives for the Bay Area. The City of Palo
Alto will be affected by the land use, housing and transportation policies and incentives associated with
the efforts of the regional agencies, particularly the Association of Bay Area Governments (ABAG) and
the Metropolitan Transportation Commission (MTC). The City expects to provide meaningful input to
these initiatives, and to work with other Santa Clara County cities to assure a voice for the sub‐region.
Key goals related to the Council’s priorities include:
1. Enhancing sustainability by promoting sustainable land development patterns and
facilitating alternative transportation modes
2. Participating in regional planning and transportation solutions where appropriate, and
assuring that housing opportunities accommodate multiple segments of the population
3. Using land use and zoning techniques to enhance the potential for economic development
and increased revenues and tax base
4. Contributing to a sense of community and place in neighborhoods and commercial districts
Rationale for Goals Selection
The City’s sustainability objectives are integral to its current and long‐range planning, and are embodied
in the Comprehensive Plan, the Climate Action Plan, and many other policies and programs. The
Sustainable Communities Strategy is an opportunity to implement these objectives within a regional
framework, providing for effective transportation alternatives, efficient land use patterns, and socially‐
responsible housing solutions (RHNA).
Active participation in the SCS and RHNA is critical to assure that the City’s goals of protecting the
character of its communities, encouraging adequate transportation alternatives, and providing an
equitable balance of economic growth with a reasonable accommodation of housing demands. The City
must also assure that the regional efforts are in sync with the Comprehensive Plan Amendment and
other citywide planning and transportation efforts.
The SCS and RHNA process will be intensive during 2011, though the final products for each will not be
approved until late 2012 or early 2013. The City’s Planning Director is active in regional and local
professional meetings to develop and review the SCS, the City Manager is involved in the countywide
managers’ association, and the Council participates in the Cities Association of Santa Clara County.
Councilmember Scharff is a member of the RHNA Housing Methodology Committee. Staff will present
regular updates and opportunities for direction and input to the SCS and RHNA processes to the
Planning and Transportation Commission and City Council throughout the year.
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Pedestrian and Bicycle Master Plan
(Prepare Pedestrian and Bicycle Master Plan Update)
Executive Summary
The current Bicycle Master Plan serves as the City’s guide for identifying and setting priorities for bicycle
transportation projects and programs in the community. The last update to the Bicycle Transportation
Plan occurred in 2003. This current update also includes a Pedestrian element for the first time,
providing an opportunity to include more robust projects and programs that benefit key transportation
infrastructure not normally evaluated in a bike‐only plan, including trail projects for recreational and
commute use. An updated Pedestrian and Bicycle Plan is also essential for accruing funding from
regional grant sources. This year, upon development of the plan, the City will embark on an aggressive
update of its bicycle and pedestrian facilities based on the following goals:
1. Continue to lead in providing for transportation modes other than single‐occupancy vehicles, in
order to provide alternatives to avoid traffic gridlock, enhance safety for children and adults,
and reduce greenhouse gas emissions.
2. Identify and implement Best Practices in bicycle and pedestrian system design for both new
projects and updates to existing facilities such as colored bike lanes, bike boxes, and non‐
intrusive detection methods.
3. Continue successful education efforts for the use of bike/walking transportation modes to
schools, but strengthen the link between neighborhood communities and schools through both
capital projects and education programs.
4. Implement bicycle and pedestrian facilities to link major employment centers in the City, such as
Stanford University, with existing transit facilities and other trail/street networks.
5. Identify and implement new innovations in bicycle design and pursue processes that allow their
implementation in the City of Palo Alto and beyond.
6. Identify and pursue regional grant sources to implement Bicycle and Pedestrian Master Plan
projects and programs such as the Highway 101 Bike/Ped Bridge at Adobe Creek.
Development of the new Bicycle and Pedestrian Master Plan is currently in process with the assistance
of consultant support. A Citywide community meeting will be held in March along with a Council study
session in April. Planning and Transportation Commission input will occur in February and June with
final City Council consideration in July. Implementation of the plan will begin immediately in the 2011‐
12 fiscal year.
Rationale for Goals Selection
The City of Palo Alto has long been a leader in the design of bicycle facilities and continues to see the
benefits of early education to youth in promoting walking and bicycle use as effective transportation
modes. Newer design standards now exist and the City of Palo Alto must modify its infrastructure to be
in line with national best practices. In addition, the City of Palo Alto has a unique opportunity to lead
the way in bicycle and pedestrian infrastructure design and program education because of its open
community acceptance to these transportation modes. Inclusion of a pedestrian element into the new
Page 13 of 13
plan for the first time also allows the City to better complete links between street infrastructure such as
bike lanes and sidewalks to park facilities and trails and allows the use of new Bicycle Expenditure Plan
fund sources for those efforts.
Youth Well‐Being
City Council Strategic Priority Goals for Fiscal Year 2011
Youth Well‐Being
(Implement Project Safety Net and Monitor fundraising for Magical Street Bridge)
Executive Summary
The City of Palo Alto plays two important roles with regard to Community Collaboration for
Youth Well‐Being. First, the City plays a role of convener and coordinator, bringing the
community together in order to effectively harness the tremendous community talent, expertise
and goodwill that surround youth and teens, so that our community may have the greatest
impact in fostering youth well‐being. A meaningful example of the City’s role as convener and
coordinator is seen in the Project Safety Net (PSN) Community Task Force. PSN is focused on
developing and implementing a comprehensive community‐based mental health plan for overall
youth and teen well‐being in Palo Alto. A focus in 2011 is to support PSN and the specific goals
as defined in the PSN Plan (www.PSNPaloAlto.org), which includes gatekeeper training,
Developmental Assets initiative; peer‐to‐peer engagement, teen education on drug and alcohol
abuse, track watch, youth forum and celebrating youth friendly businesses.
Secondly, the City plays a direct role providing programs, services and facilities for youth and
teens so they may thrive; this is also done in collaboration with the City Libraries such as Friends
and Foundations support. Examples include the variety of afterschool programs at the Palo Alto
Teen Center, Children’s Theatre, Junior Museum and Zoo, Art Center and Rinconada Pool. The
City’s capacity to provide programs, services and facilities for youth well‐being is dependent on
community collaboration through the substantial support of Friends groups and Foundations.
Supporting youth and teen programs and services along with the respective Friends groups and
Foundations will also be a priority for 2011. An exciting example of community collaboration can
be seen in the vision to build the “Magical Bridge Playground” from the Friends of the Palo Alto
Parks. The Magical Bridge Playground is planned for Mitchell Park and will be Palo Alto’s first
playground accessible to people of all abilities and all ages.
Below are some specific goals and expected outcomes related to the Council priority Community
Collaboration for Youth Well‐Being. It is important to note that the goals below are not the only
City activities that support youth well‐being but rather a select few that are particularly
pertinent for 2011:
2
1. Coordinate the Project Safety Net Community Task Force and guide the implementation
of the PSN Plan
Convene monthly Project Safety Net meetings to provide the space, atmosphere
and time for progress reports, community collaboration and decision making
Create a communications plan for Project Safety Net to keep the community
informed on the City’s support of youth and teens
Coordinate two community trainings on identifying individuals at risk of suicide
(gatekeeper training) and how to report suicide threats to the appropriate parental
and professional authorities
Develop and provide businesses with a simple set of specific opportunities to
support youth and teens
2. With Palo Alto Unified School District (PAUSD) create an effective and sustainable
structure for the Project Safety Net Community Task Force
Develop a Memorandum of Understanding between Project Safety Net Community
Task Force and its members defining roles, responsibilities and commitments
Create a strategic plan to sustain not only the day to day activities of PSN but more
importantly how various community efforts for youth well‐being work together
Secure private funding for PSN through grants, donations and other means
3. Incorporate the Developmental Assets into the planning, implementation and
evaluation of City programs and services for youth and teens
Include Developmental Assets language into job descriptions for staff that work with
youth and teens
Provide Developmental Assets training to all staff that work with youth and teens
Measure Developmental Asset outcomes in our youth and teen programs
4. City Council and staff to engage youth and teens in community decision making
Actively participate and help coordinate the 2011 Youth Forum
City Council to hold a study session with the Youth Council
Provide opportunities for teens to be involved in community decision making
through teen leadership groups and other means
3
5. Celebrate and recognize youth and teens along with community members that make an
outstanding contribution to supporting youth
Encourage and coordinate impromptu special events and recognition opportunities
to celebrate youth and teen accomplishments
Publically recognize community members and organizations that make an
outstanding contribution to supporting youth
6. Support the Friends of the Palo Alto Parks goal of building Palo Alto’s first universally
accessible playground
Monitor private fundraising efforts for the construction of the Magical Bridge
playground and report on the status of fundraising to the City Council
Rationale for goals selection
The rationale for selecting the goals described above is their potential for lasting impacts on
youth well‐being. The goals build on the 2010 work of the Project Safety Net Community Task,
which articulates a plan of action for supporting youth and teens in Palo Alto. The PSN plan
hinges on our ability to effectively leverage community resources and mobilize people, agencies
and groups with common interests to work together for youth well‐being. Consequently,
specific goals to create a sustainable Project Safety Net Community task Force are deemed
essential. Moreover, the City has a variety of youth and teen programs that will benefit from
the Developmental Assets model for youth well‐being. The goals define clear steps of
incorporating the Developmental Assets into the fabric of how we plan and evaluate programs
and services for youth and teens.
Lastly, the Magical Bridge Playground is called out specifically because it is a community
collaboration to build the first playground accessible to people of all abilities and all ages in Palo
Alto. Supporting the Friends of Palo Alto Parks as they raise funds to build this accessible
playground is a commitment to support children of all abilities.
City of Palo Alto (ID # 2414)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 1/30/2012
January 30, 2012 Page 1 of 3
(ID # 2414)
Council Priority: Environmental Sustainability
Summary Title: Approval to Submit Storm Water Grant Application
Title: Approval to Submit Application to the State Water Resources Control
Board for Grant Funding from the Proposition 84 Storm Water Grant Program
for the Southgate Neighborhood Storm Drain Improvements and Green Street
Project
From:City Manager
Lead Department: Public Works
Recommendation
Staff recommends that Council authorize the City Manager to submit an application to
the State Water Resources Control Board for grant funding from the Proposition 84
Storm Water Grant Program for the City’s Southgate Neighborhood Storm Drain
Improvements and Green Street Project.
Background
The State Water Resources Control Board (State Water Board) has issued a solicitation
seeking concept proposal applications for the Proposition 84 Storm Water Grant
Program (SWGP). During this solicitation round, approximately $42 million is available
Statewide in SWGP grants for projects that will reduce and prevent storm water
contamination of rivers, lakes, and streams. Eligible project types include
implementation of Low Impact Development (LID) measures that seek to maintain
predevelopment hydrology for existing and new development by infiltrating, filtering,
storing, evaporating, or retaining storm runoff in close proximity to the source of water.
Eligible applicants are restricted to local public agencies (cities, counties, districts, etc.).
Individual SWGP grant awards will be between $250,000 and $3 million and will require
a minimum local match of 20%. The SWGP application process is a two-step process.
In the first step, applicants submit concept proposals to the State Water Board by
January 31, 2012. Applicants with the highest-ranking concept proposals will be invited
to submit a full proposal during summer 2012. After a thorough review of all full
proposals, a final list of grant recipients will be adopted by the State Water Board in
early 2013.
January 30, 2012 Page 2 of 3
(ID # 2414)
On November 21, 2011, Council approved a contract with RBF Consulting, Inc. for the
design of the Southgate Neighborhood Storm Drain Improvements and Green Street
Project, Capital Improvement Program Project SD-10101. The key objective of the
project is to eliminate street ponding through the use of innovative techniques that
minimize storm runoff, improve storm water quality, and reduce potable water usage
within the Southgate neighborhood. The Consultant will perform a feasibility study to
identify and analyze the optimum design features and specific locations for the drainage
improvements. Staff has tentatively identified several drainage/"green street" elements
for consideration, including permeable pavement, rain gardens in the planter strips, and
underground infiltration galleries. The scope and objectives of the proposed
improvements are consistent with the goals of the SWGP. Funding of $860,000 for
construction of the drainage improvements has been proposed in the FY2012-2016
Storm Drainage Fund Capital Improvement Program budget.
Discussion
Staff is requesting Council approval to apply for a SWGP grant for the Southgate
Neighborhood Storm Drain Improvements and Green Street Project in order to secure
supplemental funding that would leverage the local funds currently allocated for the
project. Staff would like to take advantage of the potential SWGP grant funding to
increase the construction budget for the proposed storm drain improvements and green
street measures for the Southgate neighborhood to $1.5 million. The increased funding
would allow for the implementation of additional rain gardens, permeable pavement,
and infiltration galleries throughout the neighborhood. If the grant proposal were
approved, the funding breakdown would be $1.2 million grant funds matched by
$300,000 in City funds. In this scenario, the remaining $560,000 originally earmarked
for Capital Improvement Program Project SD-10101 could be redirected to another
Storm Drainage Fund capital project.
Timeline
Upon Council approval, staff is prepared to submit a SWGP concept proposal to the
State Water Board by the January 31, 2012 deadline. Applicants with the highest-
ranking concept proposals will be invited to submit a full proposal during summer 2012.
Grant awards will be announced by the State Water Board in early 2013.
Resource Impact
Matching funds for a potential SWGP grant would be available in the Storm Drainage
Fund FY2013 budget. If a grant is awarded to the City, a Budget Amendment
Ordinance would be required to add the grant funds to the approved budget. The
grant requires the City to expend its own funds prior to seeking reimbursement by the
State. Staff will administer the grant and submit for reimbursements periodically during
the project as required by the grant conditions.
Policy Implications
The scope of work for the Southgate Neighborhood Storm Drain Improvements and
January 30, 2012 Page 3 of 3
(ID # 2414)
Green Street Project is consistent with the Council’s Environmental Sustainability Top 5
priority. Application for outside grant funding is consistent with the Council’s Top 5
priority to improve the state of City finances.
Environmental Review
Receipt of grant funding under the Proposition 84 Storm Water Grant Program is
conditioned upon later California Environmental Quality Act (CEQA) review of the
underlying project. Staff will conduct an environmental assessment in compliance with
CEQA once the scope and locations of the Southgate Neighborhood Storm Drain
Improvements and Green Street Project are identified.
Prepared By:Joe Teresi, Senior Engineer
Department Head:J. Michael Sartor, Director
City Manager Approval: ____________________________________
James Keene, City Manager
City of Palo Alto (ID # 2510)
City Council Staff Report
Report Type: Action ItemsMeeting Date: 2/21/2012
February 21, 2012 Page 1 of 9
(ID # 2510)
Summary Title: SB375 Update
Title: Update Regarding Sustainable Communities Strategy (SCS) and Regional
Housing Needs Methodology, Determination of Designations for Priority
Development Areas, and Authorization for Letter Regarding One Bay Area
Transportation Grant Criteria
From:City Manager
Lead Department: Planning and Community Environment
Recommendation
Staff recommends that the City Council:
1) Direct staff not to request the VTA designation of the El Camino Real Corridor and/or
Downtown as Planned Development Areas (PDAs), consistent with the
recommendations of the Planning and Transportation Commission and the Regional
Housing Mandate Committee;
2) Authorize the Mayor to sign a letter (Attachment A) to the Metropolitan Transportation
Commission (MTC) regarding the One Bay Area Transportation Grant criteria; and
3) Provide input regarding the City’s approach to the proposed Alternative Scenarios being
considered for the Bay Area’s Sustainable Communities Strategy (SB375), including
directing staff and the Regional Housing Mandate Committee to prepare a letter to
ABAG and MTC for Council approval on the Consent Calendar of March 5; and
4)Confirm Council support to retain economic consultant assistance (up to $25,000) as
input to the letter and subsequent analysis of the Draft Preferred Land Use Scenario.
Executive Summary
The Association of Bay Area Governments (ABAG) and the Metropolitan Transportation
Commission (MTC) have prepared regional Alternative Land Use Scenarios to accommodate
almost 1 million new jobs and 770,000 new housing units in the Bay Area through the year
2040. This planning effort is intended to implement Senate Bill 375, which expects to reduce
greenhouse gas (GHG) emissions by supporting higher intensity development near transit along
with substantial increases in transportation investments. Those scenarios would anticipate as
many as 25,000 new jobs and 12,500 new housing units in the City of Palo Alto over that time
period. The Council and its Regional Housing Mandate Committee are considering the City’s
response to these proposals and how to best coordinate with other cities and agencies
throughout the region. Staff is working with the Committee and consultants to develop
February 21, 2012 Page 2 of 9
(ID # 2510)
information for the response, particularly relative to the excessively high jobs and housing
projections and the minimal greenhouse gas benefits to be achieved.
Staff requests input from the Council as to 1) whether to designate the El Camino Real Corridor
and/or Downtown as “priority development areas” (PDAs), similar to the one that exists for the
California Avenue/Fry’s area, and 2) how to respond to the MTC proposed One Bay Area
Transportation Grant proposal, which focuses transportation investments in PDAs in cities that
accommodate high levels of housing.
Background
On December 9, 2011, the Association of Bay Area Governments (ABAG) and the Metropolitan
Transportation Commission (MTC) released information about the Alternative Scenarios. This
information evaluates the five scenarios relative to greenhouse gas (GHG) emissions reductions,
and against a series of performance criteria established by the agencies. A presentation
outlining that information is included as Attachment C.
The City’s Regional Housing Mandate Committee has met twice since that date, most recently
as its initial meeting as a “standing” committee on January 26, 2012, to review this information,
as well as to consider issues regarding the proposed One Bay Area Transportation Grant criteria
and potential designation of the El Camino Real corridor and Downtown as Priority
Development Areas (PDAs). The Planning and Transportation Commission also considered these
issues at its February 8th meeting.
Discussion
This report is intended to provide an update to the Council on these regional planning efforts.
The Council is specifically asked to a) make a recommendation on whether the City should
designate the Downtown and/or El Camino Real areas as Planned Development Areas, b) direct
staff to respond to MTC regarding the updated One Bay Area Transportation Grant, and c)
direct staff and the Council’s Regional Housing Mandate Committee to prepare a response to
the Alternatives Scenario for Council approval on March 5.
Designation of Planned Development Areas
The thrust of the Sustainable Communities Strategy (SCS) is to plan most of the growth from
2010-2040 to be located in “Planned Development Areas (PDAs)” within the region, areas that
typically would accommodate higher intensity development near transit stations or corridors.
The City of Palo Alto has designated the California Avenue area as a PDA. Additionally, the
Valley Transportation Authority (VTA) indicated that all of El Camino Real and areas around
transit stations, including both California Avenue and Downtown, should be considered for such
designation. As the Alternative Scenarios have been developed, ABAG and MTC have included
these areas (and many others in other cities) as “Growth Opportunity Areas (GOAs),” but not as
official PDAs. Growth has been allocated to these GOAs under the scenarios to try to achieve a
70% allocation to transit proximate areas.
February 21, 2012 Page 3 of 9
(ID # 2510)
The One Bay Area Grant Transportation Program proposed by MTC would direct most
transportation funding to PDAs (but not GOAs). As a result, transportation grants would not
likely be available for the City in the next round (2013-15) of funding, except for the California
Avenue PDA. ABAG is accepting requests from cities, however, to designate that GOAs become
PDAs and therefore become eligible for grant funding (see discussion below on the One Bay
Area Grants criteria). The guidelines for application require a process that is fairly complicated
and may take considerable staff time. ABAG indicates, however, that all that is needed for a
VTA-nominated area to be included is a resolution of a City Council to accept that designation,
in this case for the El Camino Real corridor through Palo Alto.
Staff believes that the designation for El Camino would generally be appropriate and would
help the City to obtain funds for improvements, such as for the Charleston/Arastradero/El
Camino intersection, and little work would be required to apply, primarily preparing a
resolution for Council adoption. Staff is concerned, however, that the resolution that would in
some way imply that the City concurs with the allocation of housing and jobs specified by any of
the alternatives for the corridor, and there is no assurance that the agencies would not direct
even further growth to the corridor based on such designation (while the opposite may be true
if not designated). Staff believes that there is likely to be little need for transportation grants for
Downtown, other than perhaps at the Transit Center, which is likely to remain under
consideration as it serves a regional purpose, not specific to Palo Alto. The downside concern
about these designations is that such an action could bring even further increases in housing
and jobs allocations to these areas. Staff does not believe this is likely to be the case, because
ABAG and MTC have already treated them like PDAs in the alternative distributions. There is
some likelihood, however, that if these areas are not designated, those figures would be
reduced. The housing allocations to each of the City’s PDAs and GOAs are listed in Attachment E
as follows (ranges of the three primary intensity scenarios) through 2040:
·California Avenue: 798 –2,362 households
·University Avenue/Downtown: 1,250 –3,595 households
·El Camino Real: 1,565 –5,384 households
The Planning and Transportation Commission and the Council’s Regional Housing Mandate
Committee have both recommended that the City not request designation of either the El
Camino Real Corridor or Downtown as PDAs. The draft minutes of the PTC and Committee and
included as Attachments L and M, respectively. The staff reports to the two bodies are not
attached, but are very similar to this report and are available online.
One Bay Area Transportation Grant Criteria
On November 7, 2011, Council approved a letter to the MTC noting the City’s concerns and
objections regarding the proposed One Bay Area Transportation Grant Criteria. In particular,
the City suggested: a) that a certified Housing Element should not be prerequisite to eligibility
for transportation grants, and b) that some of the criteria (complete streets, housing programs,
etc.) were vague and should be clarified and simplified. On January 13, 2012, MTC issued a
response and revised recommendations (Attachment B). The agency agreed to simplify some of
February 21, 2012 Page 4 of 9
(ID # 2510)
the requirements, though still somewhat vague, but has retained the prerequisite to obtain a
“certified” Housing Element from the State as eligibility for grant funding. The letter also
indicates that a city would need to provide a “nonbinding letter of intent” that it will make a
good faith effort to implement the Sustainable Communities Strategy (SCS) through its housing
element and zoning. These two stipulations remain objectionable to staff (and, we believe, to
many other cities).
The “certified” housing element provision assumes some level of acquiescence to the levels of
housing allocations outlined in the Alternative Scenarios of the SCS (which has not yet been
determined), and vests tremendous authority to the State’s Housing and Community
Development (HCD) Department to determine the fate of transportation funding. ABAG has
noted that, at least for the upcoming (2013-2015) cycle of grants, the housing element
compliance would be for the current (2007-2014) planning period (72% of ABAG region cities
currently have compliant housing elements, though Palo Alto does not). The “statement of
intent” is also problematic, particularly since no one knows what consistency with the SCS will
mean. ABAG and MTC note that this commitment will not be required until the Preferred
Scenario has undergone extensive review, but staff is concerned that the request for projects
pursuant to the grant program will be issued in the summer of fall of this year, ahead of any
adoption of a final plan. Staff has drafted a response (Attachment A) from Council to the MTC
Board continuing to object to these provisions. The Santa Clara County Association of Planning
Officials is also preparing a letter as an entity to MTC with similar objections.
Response to Alternative Land Use Scenarios
Attachment C outlines in presentation form (by ABAG) the status of the alternative scenarios
process and the regional agencies’ recent evaluation of the effectiveness of the various
alternative scenarios regarding GHG emissions reductions. Attachment D provides a tabular
summary of the evaluation, as well as the effectiveness of each in addressing a number of other
environmental, transportation, and social criteria. Attachment E shows the impacts of the five
scenarios on each city and county in the Bay Area, as well as a county-by-county summary.
Attachment E further breaks down the Santa Clara County numbers to provide specifics for the
City of Palo Alto, indicating projections for the California Avenue, Downtown, and El Camino
areas of focus, and implying that any other development slated for Palo Alto would be outside
of those boundaries. As staff determined in the Initial Vision Scenario, a considerable amount of
the proposed intensity under most scenarios would need to fall in areas typified by single-
family residential development or already built out business parks, with less than desirable
access to transit.
Staff has commented on a form provided by ABAG for responses in the next couple of weeks.
We noted the highly unrealistic expectations of these scenarios, although the “Outward
Growth” option is considerably more attainable regarding housing allocations. The form,
however, was too general to be meaningful. The agencies expect to present a draft “Preferred
Scenario” to their joint planning committee on March 9th. The scenario will become the basis
for a draft Sustainable Communities Strategy for the region. The Preferred Scenario is likely to
be released in May and then would be open to comment from all jurisdictions and the public
February 21, 2012 Page 5 of 9
(ID # 2510)
through the end of the year. A final SCS plan is expected to be adopted in early 2013. Staff
believes that, while not necessary, the City should provide comments to ABAG and MTC prior to
the March 9th date if possible. The comments would focus on: a) the regional demographic and
employment forecasts; and b) the minimal impacts of the alternatives on greenhouse gas
emission reductions.
a.Regional Demographic and Employment Forecasts
The Council’s “Regional Housing Mandate” Committee (which also includes one member of the
PAUSD Board) continues to question the basis for ABAG’s estimate of Bay Area jobs and
housing needs. ABAG has estimated that the region will accommodate approximately 33,000
new jobs per year through 2040, as compared to only 10,000 jobs per year that have been
created over the past 20 years. Housing need is then estimated as a function of the jobs
projection (ABAG’s methodology is included in Attachment I). Councilmember Schmid’s analysis
of the excessive jobs and housing growth projections is included as Attachment H.
On February 7, 2012, staff attended a session at ABAG regarding the demographic and
economic projections, presented by three economists, one of which was Steven Levy of Palo
Alto and Stanford. Mr. Levy’s slide presentation is included as Attachment G. He spoke to the
national jobs projection and the Bay Area region’s portion over time, and his reasoning that the
region would do well over the next 30 years, based on its prominent role in economic sectors
(technology, health care, entertainment, etc.) that will be leaders in job growth. The other
speakers focused on the housing issue, including an indication that the housing numbers will be
reduced by approximately 70,000 units regionwide to reflect the inventory of foreclosed
homes.
Staff continues to believe, however,that the projections are “aspirational” rather than realistic,
and that a Sustainable Communities Scenario should not be based on unrealistic expectations
that will make it less likely to achieve the desired goals. Staff has retained an economic
consultant (see below) to help compile this information into a letter to ABAG and MTC.
b.Greenhouse Gas Reductions
The ABAG/MTC analysis of the Alternative Scenarios outlined in Attachments C (page 8) and D
indicates that the greenhouse gas (GHG) emissions reductions expected by the three primary
Alternative Scenarios range from 9.4% (Core Concentration) to 7.9% (Outward Growth) through
2040, all well shy of the 15% target for the SCS. The agencies also estimated that a combination
of transportation policy initiatives (driving behavior, bicycle/pedestrian networks, vanpools,
electric vehicle strategies, telecommuting, parking pricing, etc.) could provide approximately
6.5% additional emissions reductions, generally making up the gap for any of the land use
alternatives. Additionally, the extent of GHG emission reductions expected from the land use
scenarios is close to negligible in terms of compliance with the State’s AB32 emission reduction
goals. Attachment K is a chart, prepared by the Contra Costa Transportation Authority (CCTA)
staff, which indicates that only 4% of the AB32 goals are addressed by SB375 (see below
discussion regarding the CCTA letter). Staff believes that the differences between the three land
February 21, 2012 Page 6 of 9
(ID # 2510)
use scenarios (1.5%) is not significant and certainly not worth the cost and consternation
associated with substantial changes in city and county land use control.
c.Response by Contra Costa Transportation Authority
The Contra Costa Transportation Authority (CCTA) has prepared a letter to ABAG and MTC (staff
report and letter included as Attachment J) that focuses on the two issues (projections and GHG
emission reductions) of particular concern to Palo Alto. Staff notes that the CCTA letter (and
one of the attached letters from a city) references the analysis of Councilmember Schmid
regarding the demographic and economic projections. The letter also addresses a number of
area-specific concerns within that county that are not of particular relevance to Palo Alto. EPS
Consultants, Inc. provided support to CCTA staff in reviewing the ABAG and MTC information
and preparing the letter to the agencies, including the GHG emissions reductions chart included
as Attachment K. Staff has retained EPS to assist Palo Alto and has invited them to participate in
the meeting with the Regional Housing Mandate Committee on February 23rd. While initially
operating under subcontract to MGroup, the City’s consultant for the SCS/SB375 project, staff
believes it will be necessary to provide further funding to produce the letter in a timely manner
and to assist with follow-up regarding the more specific impacts on Palo Alto. Staff
recommends that Council support to allocate $25,000 for this consultant assistance. Staff will
attempt to shift work priorities and funding to accommodate this expense now, but will then
need to provide an additional amount in the FY2012 budget to address deferred priorities.
d.City of Palo Alto Response
Staff anticipates that, at Council direction, a letter to ABAG and MTC could be prepared in time
for the March 5, 2012 Council meeting, after review by the Regional Housing Mandate
Committee (RHMC), to be provided to the agencies ahead of their meeting on March 9th. Many
of the elements of the CCTA letter could form the basis for a City of Palo Alto letter.It is unlikely
that the Planning and Transportation Commission could review the letter in a timely way,
though staff will try to provide it to them and at least will involve Commissioner Fineberg, who
has been appointed a liaison to the RHMC. Staff expects that the letter will, at a minimum,
include the following topics:
·Emphasis on the City’s policies and accomplishments regarding transit-oriented
development, affordable housing and transportation efforts;
·The overstatement of projected jobs and housing producing unrealistic scenarios;
·The minimal difference in the greenhouse gas emissions benefits between the land use
scenarios and the costs associated with significant land use changes;
·A recommendation to consider an alternative scenario with lower projections, in
conjunction with transportation policy initiatives, and leaving flexibility for local
jurisdictions to provide further means of reducing land use/transportation related
emissions.
Staff also expects to present the City’s letter to the other cities in Santa Clara County and to
VTA staff at the March 7th Planning Directors’ meeting, and to request formal support from
interested agencies, if not the group as a whole. Staff is encouraged by the letter and
communications that we’ve had with the CCTA staff, and also recently with the Transportation
February 21, 2012 Page 7 of 9
(ID # 2510)
Authority of Marin, and hope that other cities, counties and transportation agencies will begin
to speak out more about concerns similar to Palo Alto’s.
Regional Housing Needs Assessment (RHNA)
The RHNA Housing Methodology Committee has not met in a few months and will not meet
again until March 8, 2012. Councilmember Scharff is a member of that group. It appears likely
that the Committee will suggest that the RHNA figures be established to relate directly to the
Preferred SCS Alternative housing figures, i.e., 1/3 of the total for each of three 8-year planning
periods. However, it also appears that there may be a considerable reduction in housing needs,
at least for the first housing planning period (2015-2022), given the economy. Staff has also
requested of ABAG and the Committee that Stanford campus housing be excluded from the
City’s total. For the 2007-2014 planning period, this request was made after numbers were
already near final, and only a concerted effort by the City in cooperation with the County and
Stanford resulted in a reduction of over 600 units from the City’s allocation. The County has
also made a similar request that such an adjustment be made up front in this process prior to
draft numbers being distributed to cities and counties, which is currently scheduled for May.
Public and Political Outreach
Staff has developed a draft issues paper (Attachment L) regarding this subject, and expects to
supplement the information with input from the economic consultant. The Council and staff
will then coordinate with other local elected officials and State legislators to develop a strategy
for responses to fundamental assumptions regarding the regional planning effort. The
Committee has directed staff to work with other cities and agencies to determine if similar
support exists to provide a coalition of jurisdictions to make such a request through State
legislators. The PAUSD will participate in the Committee meetings, though a member has not
yet been appointed (Bob Golton attended the last meeting, however). The Planning and
Transportation Commission has appointed Susan Fineberg as a liaison to the Council Committee
to coordinate efforts of the PTC on this issue.
ABAG and MTC have sponsored recent public workshops, purportedly to review the Alternative
Scenarios. However, the sessions have been largely disrupted by some “no-government,
property rights” advocates so that they have not been productive. Staff has attended two of the
workshops (and Commissioner Keller attended one) and found that, even without the
disruption, the materials presented were not focused enough to stimulate meaningful input.
Staff has recently sent MTC “virtual workshop” materials to Palo Alto Neighborhoods and other
community members, though the survey is very generalized in nature, with few specifics about
the alternative scenarios or the impacts on specific cities. Other contact points and methods are
welcomed by staff to extend outreach about the planning effort.
Next Steps
Staff will continue to work with the Council’s Regional Housing Mandate Committee, Council as
a whole, and the Planning and Transportation Commission to coordinate a City and countywide
or broader response to the Alternative Scenarios outlined by ABAG and MTC, with a target of
February 21, 2012 Page 8 of 9
(ID # 2510)
March 5th to return to Council with a draft letter to the agencies. The regional agencies plan to
present a “Preferred Scenario” to the ABAG/MTC committee on March 9th, and the committee
is scheduled to release a draft “Preferred Scenario” by May. It appears that the RHNA process
will result in draft allocations concurrent with the Preferred Scenario release.
Policy Implications
The input and outcome of the Sustainable Communities Strategy relate directly to the City’s
Comprehensive Plan, zoning, and transportation policies, so that a key objective of the City is to
assure that the regional plan continues to allow for implementation of those goals, policies, and
codes.
Resource Impacts
Staff, in particular the Planning Director (approximately 20 hours per month) and one Senior
Planner (approximately 12 hours per month), is spending considerable time following the many
meetings and activities associated with the Sustainable Communities Strategy and the One Bay
Area Transportation Grant process. Staff has used M-Group, a local planning group, to prepare
some materials and provide outreach to other agencies, under a $25,000 contract authorized
by Council. Staff foresees the need for an additional $25,000 for economic consultant services
to provide input to the City’s response to the Alternative Scenarios and follow-up regarding the
specific impacts and options for the City. That funding would need to be accommodated by
rearranging current work priorities, and then addressing deferred tasks in the FY2012 budget.
Environmental Review
No environmental review is necessary by the City. An Environmental Impact Report is expected
to be prepared by ABAG and MTC once a Preferred Scenario is outlined.
Attachments:
·Attachment A: Draft Letter to MTC re: One Bay Area Grant (PDF)
·Attachment B: One_Bay_Area_Grant_Update_01.13.2012 (PDF)
·Attachment C: Alternative Scenarios Presentation_ABAG_December.2011 (PDF)
·Attachment D: Scenario Analysis Overview (PDF)
·Attachment E: SCS All Scenarios Comparison: All Cities(PDF)
·Attachment F: SCS All Scenarios Comparison: CITY OF PALO ALTO (PDF)
·Attachment G: Steven Levy_Feb_7.2012_Presentation (PDF)
·Attachment H: Councilmember Schmid_Demographic Forecasting in California_11.03.2011
(PDF)
·Attachment I: November 1, 2010 Memo Re: ABAG Employment Forecasting Model (PDF)
·Attachment J: Contra Costa Transportation Authority Board Letter_02.01.2012 (PDF)
·Attachment K: GHG Reduction Chart_CCTA (PDF)
·Attachment L: Key Issues Paper -January 25, 2012 (PDF)
February 21, 2012 Page 9 of 9
(ID # 2510)
·Attachment M: February 8, 2012 Planning and Transportation Commission Draft Excerpt
Minutes (PDF)
·Attachment N: January 26, 2012 Regional Housing Mandate Committee Draft Minutes
(PDF)
Prepared By:Curtis Williams, Director
Department Head:Curtis Williams,Director
City Manager Approval: ____________________________________
James Keene, City Manager
DRAFT
February 23, 2012
Adrienne Tissier, Chair and Commission Members
Metropolitan Transportation Commission
101 Eighth Street
Oakland, CA 94607
Re: One Bay Area Grant Proposal
Dear Chair Tissier and Commission Members:
Thank you for the opportunity for the City of Palo Alto to provide input to the updated (January
13, 2012) version of the One Bay Area Grant program proposed by the Metropolitan
Transportation Commission (MTC)and the Association of Bay Area Governments (ABAG).As
you may know, the City of Palo Alto has a strong record of leadership in providing facilities and
programs to encourage alternative transportation options, often in partnership with MTC, the
Valley Transportation Authority (VTA), and the Joint Powers Board of Caltrain. The proposed
One Bay Area Grant program criteria, however, would significantly deter the City of Palo Alto
(and other cities) from advancing such programs and projects in the future, contrary to the intent
of the One Bay Area planning and transportation goals.
Two provisions of the program criteria, however,are highly objectionable and should be
modified to assure that innovative and effective transportation programs may be proposed by
local jurisdictions and remain eligible for funding:
1.Housing Element Prerequisite: Requiring a “certified”Housing Element as prerequisite to
eligibility is problematic and premature. Certification of a Housing Element involves
many complexities and is subject to a highly discretionary approval process by a State
agency (the Department of Housing and Community Development)that is often not
responsive to local concerns. Such a requirement would vest a tremendous amount of
authority with HCD to determine the fate of a city’s or county’s transportation funds.
Further,the Regional Housing Needs Allocation will be based on a Sustainable
Communities Strategy (SCS) that has not yet been approved, so it is inappropriate to
require compliance with a process that has not been finalized and the implications of
which are unknown. The City of Palo Alto requests that Housing Element certification be
eliminated as a prerequisite to grant funding, and that either no connection to the Housing
Element be required or at most that it be limited to “approval” of a Housing Element,
rather than HCD “certification.”
MTC: One Bay Area Grant
Page 2
2
2.Non-binding Resolution of Intent: The proposed prerequisites now include a “non-
binding resolution of intent” to align a city’s RHNA, PDAs, and zoning consistent with
the Sustainable Communities Strategy (SCS). Such a resolution is again premature, given
that the SCS will not be adopted until early 2013, while the grant application process will
be underway later this year. The City of Palo Alto suggests that such a guideline be
postponed until the next cycle of funding, at which time all cities, counties and CMAs
will better understand the implications of a resolution. Alternatively, MTC should allow
the CMAs to work with their respective jurisdictions to satisfy that there is substantial
consistency between a city’s or county’s policies and regulations and the objectives of the
SCS.
The City of Palo Alto continues to support the program’s Complete Streets policy approach (with
further guidance) and the focus of transportation investments in PDAs. We do, however, strongly
recommend that transportation investments should be targeted to Growth Opportunity Areas
(GOAs) as well, since these areas also are proximate to transit and typically are linked to PDAs
in some fashion (particularly for the El Camino Real corridor in Palo Alto).
Without the availability of grant funding, resources will not be available to implement important
programs and projects of benefit to the City and the region. Many of the City’s past projects have
been examples of MTC’s support for innovation and leadership in transportation, including:
·Bicycle and Pedestrian Transportation Plan: The City is completing its updated plan to
accommodate enhanced bicycle and pedestrian facilities and programs, and to elevate the
City’s Bicycle-Friendly Community status from Gold to Platinum level.
·Stanford Avenue/El Camino Real Intersection Improvements: The City has recently
completed improvements at this intersection to enhance safety for pedestrians and
cyclists, including children who use the intersection as a route to school, and to upgrade
the aesthetic qualities of the intersection and of El Camino Real. We expect the project
will serve as a template for improving intersections throughout the Grand Boulevard
corridor.
·Safe Routes to School: The City’s Safe Routes to School program has resulted in a
phenomenal increase in school children bicycling and walking to school over the past
decade. In the 2011 fiscal year, City staff coordinated 140 in-class bike and pedestrian
safety education programs in 12 elementary schools, reaching 4,250 students. Recent
surveys of how children usually get to elementary school showed an average of 42%
choosing to walk, bike or skate to school, compared to a national average of only 13%
(figures for middle schools and high schools are even greater). A recent grant will allow
the City to prepare Safe Routes maps for every elementary school in the city as well as to
expand our education curriculum into middle schools and to adults.
·Traffic Calming on Residential Arterials: The City has an ambitious traffic calming
program along “residential arterials”in efforts to support our Safe Routes to School
program. In particular, the Charleston Road-Arastradero Road Corridor project has
provided substantial safety improvements and selective lane reductions to enhance
bicycling and walking while maintaining efficient levels of vehicle throughput similar to
those prior to the traffic calming improvements.
MTC: One Bay Area Grant
Page 3
3
·Bike Parking Corrals: The City has recently installed the first green “bicycle parking
corral” in the Bay Area, providing for up to 10 bicycle parking spaces in a highly visible,
signed on-street area in downtown,replacing one vehicle parking space. Up to a dozen
more such installations are planned in the downtown and California Avenue areas.
·California Avenue Streetscape Improvements: A pending grant would support the
substantial upgrade of California Avenue to a more pedestrian and bicycle-friendly
roadway, incorporating “complete street” principles, and also enhancing access to the
California Avenue Caltrain station.
·Local Shuttles: The City, with some support from the Caltrain JPB,offers local shuttle
services for commuters, school children, seniors and others between points of interest
within the city. These shuttles further reduce the need for single-occupant vehicle trips
and reduce traffic congestion and parking needs.
Thank you for your consideration of these issues and suggestions. The City of Palo Alto hopes to
remain at the forefront of continuing efforts to facilitate programs to encourage transit, bicycle,
and pedestrian use in the Bay Area, and believes it is essential that the One Bay Area Grant
process support those efforts as outlined above.
If you have questions, please feel free to contact Curtis Williams, the City’s Director of Planning
and Community Environment, at (650) 329-2321 or curtis.williams@cityofpaloalto.org.
Sincerely,
Yiaweh Yeh
Mayor
City of Palo Alto
cc:City Council
Planning and Transportation Commission
James Keene, City Manager
Ezra Rapport, ABAG
Steve Heminger, MTC
John Ristow, VTA
BayArea =a
TO: MTC Planning Committee 1
ABAG Administrative Committee
FR: Deputy Executive Director, Policy, MTC
Executive Director, ABAG
II
DATE: 1113 /2012
RE: Update on Proposed OneBayArea Grant -Cycle 2 STP/CMAQ Funding
Background
The OneBayArea Grant (OBAG) represents a significant step toward integrating the region's federal
transportation program and its land-use and housing policies by:
• Rewardingjurisdictions that accept housing allocations and produce housing with additional
transportation dollars.
• Supporting the Sustainable Communities Strategy (SCS) for the Bay Area by promoting
transportation investments in priority development areas (PDAs) and by initiating a pilot
program in the North Bay Counties that will support open space preservation in priority
conservation areas (PCAs).
• Increasing funding levels and eliminating program silos for greater local investment
flexibility.
Staff presented the OneBayArea Grant proposal to the MTC Planning Committee 1 ABAG
Administrative Committee on July 8, 2011. At that meeting, the committee directed that staff release
the proposal for public review. That initial proposal can be downloaded from the MTC website at
http://www.mtc.ca.gov/funding/onebayarea/. Since then MTC has received numerous comment
letters from stakeholders, transportation agencies and local jurisdictions. Staff has given
presentations to the Bay Area Partnership working groups, Policy Advisory Council, ABAG
Executive Board, ABAG Planning Committee, Regional Advisory Working Group, and the Regional
Bicycle Working Group, as well as at various workshops in conjunction with the Plan Bay Area
development.
Stakeholder Response to OBAG Proposal
Attachment A lists the comtnent letters received to date. The letters are available at the website
referenced above with numbering consistent with the comment reference numbers in the attachment.
Overa 11, the comments are supporti ve of several key elements of the program proposa I, including
greater program flexibility, increased funding subject to local priority-setting, and financial rewards
for accepting Regional Housing Needs Allocation (RHNA) commitments.
Comments Requesting Material Changes to Initial OBAG Proposal:
1. Priority Development Areas: There is support for lowering the proposed requirement that 70% of
funding to each county be used to fund projects in PDAs, and providing more flexibility with
respect to the use of these funds, particularly for counties with relatively few existing PDAs. In
contrast, several stakeholder groups and the MTC Policy Advisory Council support retaining the
70% requirement. Because many noted that project benefits to PDAs are not just from those
Planning Committee Memo -Update on Proposed OneBayArea Grant
Page 2 of 4
projects funded directly within the PDA limits, comment letters recommended allowing projects
that support or provide benefit to PDAs count towards the PDA requirements. There were
requests to exempt certain OBAG program eligibility categories from the PDA requirements,
such as streets and roads rehabilitation, regional bicycle, and Safe Routes to School. A reason
cited was that transportation needs do not always align geographically with PDAs.
2. Priority Conservation Areas: Some comments cal.1 for expanding the eligible use of PCA funding
beyond planning purposes in order to fund capital projects such as farm-to-market and open
space access needs. Additional comments call for expanding the regional pilot program
eligibility beyond the four North Bay counties.
3. Low Income Housing and Protections for Communities of Concern: Comments recommend
modifying the OBAG funding formula to reward jurisdictions that zone for or produce low
income housing units. In addition, some stakeholders also cited the need for policies that will
prevent displacement of low-income residents, which was noted as a potentially unintended
outcome of new housing and transportation investments in PDAs.
4. Performance and Accountabi lity: In the areas of performance and accountabil ity, many
comments asked for more flexibility, such as reasonable progress toward, instead offinal
approval of, required policy actions, in the first round of OBAG funding. The reason cited was
limited time and staff resources to enact new policies in the timeframe proposed.
5. Regional Program: We received requests to continue funding the Safe Routes to School Program
(SR2S) as a regional program within the Climate Initiatives Program since the implementation of
SR2S at the county level is uneven throughout the region.
Recommended Program Revisions
As a result of the input received and continued regional agency dialogue, staff recommends that the
Committee consider significant revisions to the July 8, 20 II proposal, as outlined in the presentation
slides (Attachment B) and explained more fully below. Staff proposes to increase the OneBayArea
Grant from the initial $211 million funding level to $250 million. The increase comprises $39
million in federal funds, with $3 million directed specifically to preserve the "hold harmless"
provision for Marin, Napa and Solano Counties, after accounting for Cycle I planning and SR2S
funds. The funding distribution is also revised to reflect the formula changes discussed below to
reward jurisdictions for very-low and low-income housing units. Attachment C provides the revised
funding levels and distribution amounts.
I. Priority Development Areas
• Increase PDA Flexibility: Staff recommends reducing the requirement that at least 70% of
investments be directed to the PDAs to 50% for the four North Bay counties (Marin, Napa,
Solano, and Sonoma) as there are relatively fewer PDA opportunities in these counties.
Further, staff recommends that for all counties a project outside of a PDA count towards the
PDA minimum if it directly connects to or provides proximate access to a PDA. However,
staff does not recommend exempting certain programs or using different formulas to address
any single program investment as this would run counter to the flexibility of the OneBayArea
grant.
• Strengthen Planning Integration: While an entire county is rewarded ftnancial Iy if its
individual jurisdictions accept housing to meet RHNA targets, there is a need to ensure that
RHNA, PDAs, and supporting zoning policies are effectively aligned. Therefore, staff
PlalU1ing Committee Memo -Update on Proposed OneBayArea Grant
Page 3 of 4
recommends that all jurisdictions receiving OBAG funding be required to pass a non-binding
resolution of intent to align these three elements. Staff also recommends that CMAs prepare
and adopt a PDA development strategy to guide transportation investments that are
supportive of PDAs. Specific requirements will be developed as part of the next round of
planning agreements between MTC and the CMAs.
• Clarify Eligibility for Programs: Staff is proposing to clarify that both pedestrian and all
bicycle facilities would be eligible for OBAG funding and CMA planning costs would
partially count towards PDA targets (50% or 70%), in line with its PDA funding
requirement.
2. Pll0rity Conservation Areas (PCAs)
• Focus on North Bay through Competitive Pilot Program: Staff recommends that the $5
million pilot program continue to be limited to the North Bay Counties and be conducted as a
regional competitive program. However, eligibility would be expanded from planning to
land / easement acquisition, farm-to-market capital projects, and open space access projects.
• Leverage Additional Funding: A priority for these funds should be to paxtner with state
agencies and private foundations to leverage outside funds for these projects, particularly for
land acquisition and open space access. ABAG and MTC would pursue these leveraging
opportunities.
3. Low-Income/Workforce Housing
• Reward counties for low-income/workforce housing production: Staff recommends revising
the funding formula to recognize the importance of planning for and producing very low
and/or low-income housing by directing 25% in total, or 50% of the housing share, to very
low and low-income housing production and RHNA share.
4. Performance and Accountability
• Streamline Requirements: Staff recommends streamlining the performance and
accountability requirements in recognition of the considerable lead time required to
implement these requirements. Jurisdictions will need to be in compliance with the
Complete Streets Act of2008 by July 1,2013 to be eligible for OBAG funds. Staff will work
with jurisdictions to develop a strategy for meeting this timeline that considers individual
jurisdiction's general plan update schedules. MTC will also revise its Complete Streets
Policy to ensure that public review and input for projects occurs early enough to better
inform CMA project selection.
• Retain Housing Element Requirement: Staff recommends no change to the proposal that a
jurisdiction be required to have its general plan housing element adopted and approved by
HCD for 2007-14 RHNA prior to July 1,2013. Attachment D summarizes current
compliance, with 72% of Bay Area jurisdictions already meeting this requirement.
5. Regional Programs: Within the Climate Initiatives program, the SR2S Program would be
continued as a regional program with $10 million being distributed to the counties to be used
only for that purpose. Staff proposes that the remaining $10 million be used for electric vehicle
infrastructure and other climate strategies. Staff is also proposing a new regional $30 million
pilot Transit Performance Initiative Program to implement transit supportive investments in
major transit corridors. Finally, within the regional TLC Program, $15 million would be directed
to PDA planning grants with a special focus on selected PDAs with greater potential for
residential displacement, and to develop and implement community risk reduction plans.
Planning Committee Memo -Update on Proposed OneBayArea Grant
Page 4 of 4
Next Steps
Based on the Committee's direction at this meeting, staff will modify the proposal and return to the
Committee in March 2012 to present the draft program policies. The Commission will then consider
approval of the final OneBayArea Grant Program in May 2012. Throughout this process, staff will
continue to seek further feedback from stakeholder and technical working groups. The OBAG
development schedule will continue to be coordinated with the activities leading to approval of the
Plan Bay Area preferred alternative which are italicized in the schedule below:
an ay OBAG/PI B A rea D eve opment S h d I c e u e
• Outreach / Define preferred scenario
• Joint Planning I ABAG Administrative Committee to review initial January 2012 responses and potential revisions to address major comments for the One
Bay Area Grant
• Release guidance for applying project pelformance assessment results to the February 2012 Plan Bay Area investment strategy
• Release revised Draft Cycle2 One Bay Area Grant proposal
March 2012 • Release preliminary preferred scenario for Plan Bay Area (includes
investment strategy)
• Commission Approves Cycle 2 One Bay Area Grant May 2012 • MTC / ABAG approves preferred scenario for Plan Bay Area
Ann Flemer
Attachments
J:\COMMITTE\Planning Committee\20 12\JanuaryI2\One Bay Area Grant\OneBayArea Granl.doc
Scenario Results
MTC Planning Committee and ABAG Administrative Committee
December 9, 2011
Where we are in the SCS
process:
Adopted Performance Targets (Jan 2011)
Approved Scenario Definitions (July 2011)
Reviewed Project Performance Results (Nov 2011)
Develop Scenario Details/Test Target Results (Dec 2011)
Public Workshops/Tradeoff Discussions (Jan 2012)
Develop/Approve Preferred SCS (Feb – May 2012)
Release/Adopt SCS/SCS EIR (Nov 2012 – Apr 2013)
2
Five Scenarios
1. Initial Vision Transportation 2035
2. Core Concentration Core Transit Capacity
3. Focused Growth Core Transit Capacity
4. Constrained Core Concen. Core Transit Capacity
5. Outward Growth Transportation 2035
All scenarios focus growth as compared to past
trends
There is no business as usual scenario
Performance target results highlight areas where
policy is needed
3
Land Use Scenarios
4
1 Initial Vision Scenario – As defined in Spring 2011
2
Core Concentration – Concentrates housing and job growth
at selected Priority Development Areas (PDAs) along the core
transit network.
3
Focused Growth – Recognizes the potential of PDAs
throughout the region with an emphasis on major transit
corridors.
4
Constrained Core Concentration – Concentrates housing
and job growth at selected PDAs along the core transit
network.
5 Outward Growth – Higher levels of growth in inland areas of
the Bay Area; closer to past trends.
Examples of Significant Projects Tested
Roadway
Regional Express Lanes Network
Freeway Performance Initiative
San Mateo and Santa Clara ITS
Fremont-Union City East-West Connector
I-680/Rt 4 Interchange Impvts. + SR-4
Widening
Marin-Sonoma Narrows Stage 2
Jameson Canyon Impvts. Phase 2
SR-29 HOV Lanes + BRT
New SR-152 Alignment
I-80 Auxiliary Lanes (Airbase to I-680)
Transit
AC Transit Grand Mac-Arthur BRT
Irvington BART Infill Station
Alameda-Oakland BRT + Transit Access
Impvts.
AC Transit East Bay BRT
I-680 Express Bus Frequency Impvts.
Caltrain 6-Train Service + Electrification
(SF to Tamien)
Van Ness Ave. BRT
SMART (San Rafael-Larkspur)
BART Extension from Berryessa to San
Jose/Santa Clara
Fairfield/Vacaville Capitol Corridor Station
Transportation 2035 Network
5
Starts with the 2010 transit and roadway
network
Keeps investment levels for
maintenance, transit and roadway
expansion, and bike/pedestrian at
roughly same levels as in T2035
Tests T2035 projects proposed to be
carried over into Plan Bay Area
Considers project performance
assessment results
Examples of Significant Projects Tested
(includes most T2035 Network projects)
Roadway
SR-84/I-680 Interchange Impvts + SR-84
Widening
Bay Bridge Contraflow Lane
US-101 HOV Lanes (Whipple Ave to Cesar
Chavez St)
Transit
BART Metro Program
Dumbarton Corridor Express Bus
BART Bay Fair Connection
BART to Livermore Phase 1
Golden Gate Ferry Service Frequency
Impvts.
SFMTA Transit Effectiveness
Better Market Street
Geneva Ave BRT and Southern Intermodal
Terminal
Parkmerced Light Rail Corridor
Oakdale Caltrain Station
SamTrans El Camino BRT
VTA El Camino BRT
Service Frequency Impvts. on AC Transit,
Muni, ferries, BART, and Caltrain
Pricing
Congestion Pricing Pilot (NE Quadrant)
Treasure Island Congestion Pricing
Core Capacity Transit Network
6
Starts with the 2010 transit and roadway
network
Keeps T2035 investment levels for
maintenance and bike/pedestrian, but
reduces roadway expansion and boosts
core capacity transit service
Tests most T2035 Network projects and
includes a 46 percent increase in transit
frequency impvts. from 2010 network (at a
total 28-year operating and capital cost of
$53 billion)
Not financially constrained due to cost of
transit frequency impvts. exceeding
available revenue
Only $15 billion of the needed $53 billion is available ($10
billion in operating efficiencies per TSP and $5 billion in
new revenue)
Considers project performance assessment
results
SB 375 Greenhouse Gas
Emissions Targets
The Air Resources Board established per capita
reduction targets for passenger vehicle and light-
duty truck emissions relative to a 2005 baseline
(excludes vehicle or clean fuel regulations)
Bay Area’s target for 2020 is a 7 percent reduction
Bay Area’s target for 2035 is a 15 percent reduction
7
8
Each of the five scenarios
exceeds the 2020 target.
The year 2035 result
exceeds, in each scenario,
the year 2020 result.
The last time we spoke …
Year 2035, Current Regional Plans: -10.6 percent
Year 2035, Initial Vision Scenario: -11.6 percent
And now …
Year 2035, Initial Vision Scenario: -8.2 percent
Model version 0.1 instead of version 0.0 (~2 pct points)
Additional 100,000 employed residents (~1 pct point)
Transit network built from 2010 rather than 2005 (~¼ pct point)
No headway improvements made to transit network (~¼ pct point)
Minor differences in roadway and transit capital projects
9
10
Scenario Population Households Employed
Residents Jobs
Year 2010 7,150,000 2,610,000 3,150,000 3,270,000
(1) Year 2035, Initial
Vision 9,430,000 3,570,000 4,310,000 4,490,000
(2) Year 2035, Core
Concentration 9,180,000 3,470,000 4,270,000 4,490,000
(3) Year 2035, Focused
Growth 8,980,000 3,280,000 3,860,000 4,100,000
(4) Year 2035,
Constrained Core
Concentration
8,980,000 3,280,000 3,860,000 4,100,000
(5) Year 2035, Outward
Growth 8,980,000 3,280,000 3,860,000 4,100,000
Why is there so little variation among
GHG emission reductions?
Q:
11
Workers travel more than non-
workers. Because a larger
share of the population works in
scenarios 1 & 2, the GHG per
capita number is misleadingly
low relative to scenarios 3, 4, &
5. The GHG per worker metric
illuminates these differences.
12
Q: What is the impact of transport?
T-2035 network performs
slightly worse on GHG
relative to the no build
Core capacity network
performs slightly better on
GHG relative to the no
build
1.The Bay Area has a mature transportation
system that we are investing heavily to
maintain.
Do not expect to see dramatic shifts, even with
large expenses on transit frequency improvements
2.Generally speaking, the greenhouse gas
emissions subject to this analysis are a
function of …
… the amount of passenger vehicle travel; and,
… the speed of the traveling vehicles.
Roadway projects can relieve heavy
congestion, which is good for GHG, but also allow
vehicles to travel at faster speeds, which can be
bad for GHG.
13
14
Generally speaking, vehicles perform optimally at
around 45 mph and perform well between 30 and
60 mph.
15
In Scenario 2, transit boardings
increase by over 100 percent
relative to 2005.
16
But transit, along with the other
non-automobile travel modes, are
still expected to be utilized for
less than 20 percent of all trips.
Initiative Per-Capita CO2
Emissions
Reductions (2035)
Smart Driving Campaign1
(changing driver behavior to improve fuel economy; ~$27 m over 5 yrs)
1.4%
Bicycle Network
(build out of the regional bike network; ~$2,200 m over 28 yrs)
0.5%
Safe Routes to Schools/ Pedestrian Network
(expansion of the SR2S and a continued TLC program; $500 m over 5 yrs)
0.3%
Vanpool Incentives
(significant increase in the monetary incentive; ~$37 m over 10 yrs)
0.9%
Electric Vehicle Strategy
(consumer incentives, education, and charger installations to accelerate EV
adoption; ~$170 m over 10 yrs)
1.0%
Commuter Benefit Ordinance
(mandatory pre-tax transit passes or employer operated shuttles; admin cost)
0.3%
Telecommuting
(no specific policies identified at this time)
1.4%
Parking Pricing
(modest pricing throughout the region with higher pricing near transit; meter &
enforcement cost)
0.7%
TOTAL 6.5%
Policy Initiatives
17 1Source: Sivak, M., and Schoettle, B., "Eco-Driving: Strategic, Tactical, and Operational Decisions of the Driver that Improve
Vehicle Fuel Economy", UMTRI-2011-34, August 2011
18
Target Performance: Scenarios
1
2
3a
3b
3c
4
5
TARGET GOAL BEST
RESULT
WORST
RESULT
Carbon Dioxide (CO2) per capita -15% -9% -8%
Adequate Housing 100% 100% 98%
Fine Particulate Matter (PM2.5)
(premature deaths due to emissions) -10% -32% -23%
Coarse Particulate Matter (PM10)
(tons of particulate emissions; includes road dust) -30% -13% -6%
Particulates in CARE Communities
(achieve greater reductions) Yes
Collisions (fatalities & injuries) -50% +18% +26%
Active Transport (time spent walking/biking) +70% +20% +10%
19
6
7
8
9a
9b
10a
10b
10c
TARGET GOAL BEST
RESULT
WORST
RESULT
Open Space/Ag. Preservation
(development within urban footprint) 100% 98% 90%
Low-Income H+T Affordability
(for households less than $60,000) -10% -4% +9%
Gross Regional Product (GRP) +90% +134% +113%
Non-Auto Mode Share 26% 20% 18%
VMT per capita -10% -7% -5%
Local Road Maintenance (PCI) +19% +5% +5%
Highway Maintenance
(distressed lane-miles) -63% +30% +30%
Transit Maintenance
(assets past their useful life) -100% +138% +138%
20
Bay Area Economic Forecast:
2035 Gross Regional Product (in billions)
$0
$200
$400
$600
$800
$1,000
$1,200
Year 2035
Initial
Vision
(Scenario 1)
$1,126 $1,142
$1,036 $1,039 $1,038
Year 2035
Core
Concentration
(Scenario 2)
Year 2035
Focused
Growth
(Scenario 3)
Year 2035
Constrained
Core Conc.
(Scenario 4)
Year 2035
Outward
Growth
(Scenario 5)
TARGET
90% GROWTH
$487
Year 2005
21
Equity Analysis: Overview
1
2
3
4
5
MEASURE POPULATION BASE-
YEAR
BEST
RESULT
WORST
RESULT
Housing + Transportation
Affordability
% of income spent
HH < $30K 77% +10% +12%
HH > $30K 41% +6% +6%
Displacement Risk
rent-burdened households at risk for
displacement from future growth
COC n/a 30% 40%
REMAINDER n/a 7% 10%
VMT Density
Daily VMT on major roads
COC n/a 2,800 3,100
REMAINDER n/a 1,000 1,100
Non-Commute Travel Time
COC 12 +3% +6%
REMAINDER 13 +2% +5%
Commute Time COC 25 +8% +12%
REMAINDER 27 +2% +6%
1.Land use patterns with higher levels of focused
growth in the region’s core tend to perform better.
2.Performance varies only slightly across scenarios because all of the scenarios represent different approaches to focused growth.
3.Transportation policy is critical to building complete communities. However, the transportation scenarios have little direct impact on GHG reduction regionwide.
4.We will likely need to assess further land use, transportation-related, and other policy measures to meet the GHG and other targets.
5.Equity Analysis Scenario assessment identifies
areas that require further regional and local policy
consideration.
22
Key Takeaways
Next Steps
Adopted Performance Targets (Jan 2011)
Approved Scenario Definitions (July 2011)
Reviewed Project Performance Results (Nov 2011)
Developed Scenario Details/Tested Target Results (Dec 2011)
Public Workshops/Tradeoff Discussions (Jan 2012)
Develop/Approve Preferred SCS (Feb – May 2012)
Release/Adopt SCS/SCS EIR (Nov 2012 – Apr 2013)
23
HOW WERE THE SCENARIOS DEFINED AND HOW DO THEY DIFFER?
In June 2011, MTC and ABAG approved five alternative Plan Bay Area land use and transportation
scenarios for evaluation and testing to demonstrate how the region might achieve a set of
performance targets for the environment, the economy and social equity (see inside for details).
These scenarios place varying degrees of growth in Priority Development Areas (PDAs), which
are defined as land near public transit that local officials have determined to be most suitable for
development. Likewise, the scenarios recognize Priority Conservation Areas, places local officials
have deemed worth keeping undeveloped for farm land, parks or open space. The first two
scenarios assume stronger economic growth and financial resources, along with a higher level of
housing growth to meet forecasted demand. The remaining three scenarios fall somewhat short
of meeting future housing demand but reflect input received from local jurisdictions on the level
of growth they think can reasonably be accommodated.
SCENARIO ANALYSIS1. Reduce per-capita CO2 emissions from cars and light-duty trucks by 15%
SB 375 requires the California Air Resources Board (CARB) to set
targets for reducing emissions from cars and light-duty trucks. CARB adopted this target for use in Plan Bay Area; the target results
are based on a measurement of pounds of carbon dioxide emissions
from passenger vehicles for a typical weekday, on a per-person basis.
2. House 100% of the region’s projected 25-year growth by
income level (very-low, low, moderate, above-moderate) without displacing current low-income residents
SB 375 requires regions to plan for housing all projected population
growth, by income level, to prevent growth in in-commuting. This target’s results reflect the percentage of year 2035 total housing
demand that can be accommodated in the nine-county Bay Area. Only
the first two scenarios are able to meet this target, as they assumed higher in-region population levels. In the other three scenarios,
some households must live outside the Bay Area (particularly in the San Joaquin County) and commute into the region for employment.
3a. Reduce premature deaths from exposure to fine particulates (PM2.5) by 10%
The Bay Area currently does not meet the federal standard for
fine particulate matter, which is extremely hazardous to health. The targeted reduction for PM2.5 reflects the expected benefit
from meeting the federal standard. This target’s performance was assessed by Bay Area Air Quality Management District (BAAQMD)
staff; their analysis considers the impacts of fine particulate (PM2.5)
emissions, as well as NOx emissions that produce secondary PM2.5. Note that all direct PM2.5 emissions from vehicles were considered,
but road dust and brake/tire wear were not included.
3b. Reduce coarse particulate emissions (PM10) by 30%
The Bay Area currently does not attain the state standard for coarse particulate matter. The targeted reduction for PM10 is consistent
with the reduction needed to meet the state standard and achieve
key health benefits. The target results reflect tailpipe emissions and road dust from all vehicles, but do not include coarse particulates
from brake and tire wear.
3c. Achieve greater particulate emission reductions in highly impacted areas
A “Yes” rating for this target means that highly impacted areas
achieve greater reductions in particulate emissions than the rest of
the region. The target assessment identified CARE communities as “highly impacted areas”; CARE communities are defined by BAAQMD
as lower-income communities in the Bay Area with high levels of particulate emissions from roads and ports.
4. Reduce by 50% the number of injuries and fatalities from
all collisions (including bike and pedestrian)
This target is adapted from the State’s 2006 Strategic Highway Safety Plan and reflects core goals of improving safety and reducing
driving. The target measures the total number of individuals injured
or killed in traffic collisions, regardless of transport mode.
5. Increase the average daily time walking or biking per person for transportation by 70% (for an average of 15
minutes per person per day)
This target relates directly to U.S. Surgeon General’s guidelines on physical activity, for the purposes of lowering risk of chronic disease
and increasing life expectancy. The target results are based on the
average time spent walking or biking on a typical weekday, only for transportation purposes (i.e. does not include recreational walking
or biking).
6. Direct all non-agricultural development (100%) within
the urban footprint (existing urban development and urban growth boundaries)
SB 375 requires consideration of open space and natural resource
protection, which supports accommodating new housing and commercial development within existing areas of urban growth. The
intent of this target is to support infill development while protecting the Bay Area’s agriculture and open space lands. By focusing on
areas with existing urban development, as well as areas specifically
selected for future growth by local governments, the target seeks
to avoid both excess sprawl and elimination of key resource lands. The target results are based on the percentage of total housing units
located within the year 2010 urban footprint (defined as existing areas of development, as well as areas within existing urban growth
boundaries).
7. Decrease by 10% the share of low-income and lower-
middle income residents’ household income consumed by transportation and housing
This target aims to bring Bay Area housing and transportation costs
in line with the national average, as the region’s costs are currently significantly higher than the rest of the country. The target focuses
on cost impacts for low-income and lower-middle income residents
(with household income less than $60,000 in year 2000 dollars).
8. Increase gross regional product (GRP) by 90% — an average annual growth rate of approximately 2% (in
current dollars)
This target is a key indication of the region’s commitment to advance Plan Bay Area in a manner that supports economic growth and
competitiveness. Growth patterns and transportation investments
in the scenarios affect travel time, cost and reliability. The Plan Bay Area Economic Impact Assessment, developed by consultant
Cambridge Systematics, reflects on the cost of on-the-clock travel and access to labor, suppliers, and markets. Any resulting increases
in productivity make the region more competitive for attracting new
businesses and jobs; this increases employment and wages, which are also reflected in the GRP target.
9a. Increase non-auto mode share by 10%
Mode share can be interpreted as the percent of trips made by a
particular travel mode (walk, bike, drive, etc.); this target reflects the Plan Bay Area goal of reducing trips made using automobiles.
The target benefits from service and infrastructure improvements
for the transit, bicycle, and pedestrian networks. The numeric target shown in the table reflects the resulting 10% mode share
increase from the forecasted 2005 non-auto mode share of 16%. This updated target language has been proposed to replace the
previously adopted non-auto travel time reduction target.
9b. Decrease automobile vehicle miles traveled per capita
by 10%
Vehicle miles traveled (VMT) per capita reflect both the total number
of auto trips and the average distance of auto trips; this target would
be supported by increased transit service, more opportunities for active transportation, and reduced travel distances between origins
and destinations. Given significant traffic congestion in the region, it is critical to reduce VMT per person. The target results are based on
model output for total auto vehicle miles traveled and are adjusted
based on the total population for the relevant scenario.
10a. Increase local road pavement condition index (PCI) to 75 or better
The Pavement Condition Index (PCI) reflects the quality of the
roadway surface – the more cracks and potholes form, the lower the Pavement Condition Index. The target reflects a goal of reaching a
state of good repair on local roadways, which form the backbone of
the transportation network in Priority Development Areas (i.e. key areas for focused growth in the Plan).
10b. Decrease distressed lane-miles of state highways to
less than 10% of total lane-miles
This target’s performance is based on anticipated state funding for highway maintenance. The region must maintain the existing
highway infrastructure in order to support the goals of Plan Bay Area.
10c. Reduce share of transit assets exceeding their useful
life to 0%
This target reflects a goal of replacing all transit assets on-time (i.e. at the end of their useful life); failure to do so would result
in unreliable transit service. As frequent, reliable transit service is critical to support focused growth, this target reflects the need
to maintain existing transit service in a state of good repair. This
updated target language has been proposed to replace the previously adopted average transit asset age target.
2
1 Initial Vision
Core Concentration
3 Focused Growth
4 ConstrainedCore Concentration
5 OutwardGrowth
Housing and job growth is concentrated in the PDAs, based on local land use
priorities, available transit service, and access to jobs. The scanario is based
on input from local jurisdictions on the level of growth they can reasonably
accommodate given resources, local plans, and community support. 70
percent of the housing would be accommodated in PDAs. More than half of
job growth is expected to occur in the region’s 10 largest cities.
Housing and job growth is concentrated in locations that are served by
frequent transit services and within a 45-minute transit commute of Oakland,
San Francisco, and San Jose. Also identifies several “game changers,” or
places with capacity for a high level of growth if coupled with supportive
policies and resources. These areas include the Tasman Corridor in Santa
Clara County, lands east of Oakland Airport to the Coliseum, the Concord
Naval Weapons Station, and the San Francisco Eastern Waterfront, among
others. Overall, 72 percent of the housing and 61 percent of the job growth is
expected within the PDAs.
Distributes growth most evenly throughout the region’s transit corridors and
job centers, focusing most household and job growth within the PDAs.
70 percent of the housing production and around 55 percent of the
employment growth would be accommodated within PDAs. Provides more
housing near transit stations and more local services in existing downtown
areas and neighborhood centers.
Places more household and job growth in those PDAs situated along several
transit corridors ringing the Bay in San Francisco, San Mateo and Santa Clara
counties, and in portions of Alameda and Contra Costa counties. Some
79 percent of the housing production and 58 percent of the employment
growth would be accommodated within PDAs. By concentrating more growth
in the major downtowns and along key transit corridors, this scenario goes
even further than the Focused Growth scenario in trying to maximize the use
of the core transit network and provide access to jobs and services to most of
the population.
Closer to recent development trends, places more growth in the cities and
PDAs in the inland areas away from the Bay than those considered in the
Focused Growth or the Constrained Core Concentration scenarios. Most
housing and employment growth would still be accommodated in areas
closest to the Bay, but with clusters of jobs and housing in key transit-
served locations in the inland areas away from the Bay. Some 67 percent of
housing production and 53 percent of employment growth would be in PDAs.
While increased use of public transit would be limited in inland areas, some
shorter commutes could be expected as jobs are created closer to residential
communities.
Transportation 2035
Plan Network –
Investment strategy in
MTC’s adopted long-range
transportation plan.
Core Capacity Transit
Network – Increases
transit service frequency
along the core transit
network
Core Capacity Transit
Network –
See description above.
Core Capacity Transit
Network –
See description above.
Transportation 2035
Plan Network –
See description above.
SCENARIOS LAND USE PATTERN TRANSPORTATION NETWORK
WHAT ARE THE TARGETS AND HOW ARE THEY MEASURED?
-8%
-8%
-9%
-9%
-8%
-23%
-27%
-32%
-32%
-31%
-6%
-9%
-13%
-13%
-11%
+5%
+5%
+5%
+5%
+5%
+15%
+20%
+14%
+15%
+10%
100%
100%
98%
98%
98%
98%131%
92%134%
92%113%
92%113%
113%90%
19%
20%
19%
19%
18%
+30%
+30%
+30%
+30%
+30%
+138%
+138%
+138%
+138%
+138%
+26%
+23%
+19%
+18%
+20%
-4%
+8%
+9%
+9%
+9%
-6%
-6%
-6%
-7%
-5%
1
2
3
4
5
Initial Vision
Core Concentration
Focused Growth
ConstrainedCore Concentration
OutwardGrowth
CLIMATE
PROTECTION
ADEQUATE
HOUSING
HEALTHY & SAFE
COMMUNITIES
OPEN SPACE &
AGRICULTURAL
PRESERVATION
EQUITABLE
ACCESS
ECONOMIC
VITALITY
TRANSPORTATION
SYSTEM EFFECTIVENESS
Reduce CO2
emissions
per person
from cars
and light-
duty trucks
House
projected
regional
growth
Reduce
premature
deaths from
exposure
to fine
particulate
emissions
Reduce
coarse
particulate
emissions
Achieve
greater
particulate
emissions
reduction
in highly-
impacted
areas
Reduce
injuries and
fatalities
from all
collisions
Increase the
average daily
time walking
or biking per
person
Direct
new non-
agricultural
development
within urban
footprint
Increase
Gross
Regional
Product
(GRP)
Increase
non-auto
mode share
Reduce
vehicle
miles
traveled
(VMT) per
person
Improve
local road
pavement
condition
index (PCI)
Reduce
share of
distressed
state
highway
lane-miles
Reduce
share of
transit
assets
exceeding
their useful
life
TARGETS SCORECARD
-15%100%-10%-30%Yes -50%+70%100%-10%+90%26%-10%+19%-63%-100%NUMERIC
GOALS*
SCENARIOS
TARGETSScenarios were
assessed to
determine their
impacts on the
Bay Area. This
table shows how
each scenario
performs with
regard to
the adopted
Plan Bay Area
performance
targets.
* Percent changes reflect differences between 2005 and 2035 conditions.** Alternate target used.Target results shown with white stripes signify that result is going in the wrong direction with respect to the adopted target.
DECEMBER 2011
1 2 3a 3b 3c 4 5 6 7 8 9a 9b 10a 10b 10c****
Reduce
housing and
transporta-
tion costs
as share of
low-income
households’
budgets
0 0 0 0
-63% +63%-150% +150%-15% 0 0 100%-40% 0 -30% 0 -50% +50%0 70%0 100%-10% +10%0 +140%0 26%-10% 0 0 +19%
Cities_HH
County Jurisdiction
2010
(estimated)2035
Growth
(2010-2035)2040
Growth
(2010-2040)2040
Growth
(2010-2040)2040
Growth
(2010-2040)2040
Growth
(2010-2040)2040
Growth
(2010-2040)IVS
Core
Concentration Focused Growth
Constrained
Core Outward Growth
Alameda Alameda 6,864 5,664 31,774 39,873 8,099 40,710 8,936 30,123 48,117 17,994 35,935 5,812 36,924 6,801 35,843 5,720 7.19 8.50 6.34 6.52 6.33
Alameda Albany 1,150 818 7,150 9,317 2,167 9,517 2,367 7,401 8,742 1,341 8,356 955 8,356 955 8,356 955 11.64 10.69 10.22 10.22 10.22
Alameda Berkeley 6,775 5,100 46,146 61,876 15,730 63,317 17,171 46,029 59,414 13,385 54,399 8,370 54,399 8,370 54,399 8,370 12.42 11.65 10.67 10.67 10.67
Alameda Dublin 7,976 6,670 15,572 32,216 16,644 35,130 19,558 14,913 33,676 18,763 28,724 13,811 25,813 10,900 30,691 15,778 5.27 5.05 4.31 3.87 4.60
Alameda Emeryville 788 585 5,770 13,260 7,490 14,187 8,417 5,694 12,310 6,616 10,929 5,235 11,351 5,657 10,931 5,237 24.24 21.03 18.67 19.39 18.68
Alameda Fremont 49,265 27,451 71,004 98,564 27,560 104,274 33,271 71,004 113,484 42,480 88,385 17,381 90,095 19,091 86,504 15,500 3.80 4.13 3.22 3.28 3.15
Alameda Hayward 28,094 16,119 46,300 61,283 14,982 65,057 18,757 45,365 64,952 19,587 60,842 15,477 60,842 15,477 60,842 15,477 4.04 4.03 3.77 3.77 3.77
Alameda Livermore 15,259 12,561 28,662 40,801 12,138 43,340 14,677 29,134 41,639 12,505 40,347 11,213 38,254 9,120 41,683 12,549 3.45 3.32 3.21 3.05 3.32
Alameda Newark 8,822 7,590 13,530 19,331 5,802 20,042 6,513 12,972 20,098 7,126 18,774 5,802 18,774 5,802 18,774 5,802 2.64 2.65 2.47 2.47 2.47
Alameda Oakland 36,029 26,867 160,567 226,019 65,453 232,163 71,597 153,791 232,800 79,009 211,512 57,721 212,510 58,719 200,004 46,213 8.64 8.66 7.87 7.91 7.44
Alameda Piedmont 1,078 847 3,810 3,820 10 3,820 10 3,801 3,850 49 4,428 627 4,428 627 4,428 627 4.51 4.54 5.23 5.23 5.23
Alameda Pleasanton 14,138 11,275 24,034 33,819 9,785 35,759 11,725 25,245 35,902 10,657 32,626 7,381 31,542 6,297 33,584 8,339 3.17 3.18 2.89 2.80 2.98
Alameda San Leandro 8,471 6,916 31,647 40,447 8,800 41,427 9,780 30,717 43,405 12,688 37,836 7,119 37,836 7,119 37,836 7,119 5.99 6.28 5.47 5.47 5.47
Alameda Union City 12,363 8,285 20,420 25,900 5,480 27,309 6,889 20,433 25,022 4,589 24,982 4,549 24,982 4,549 24,597 4,164 3.30 3.02 3.02 3.02 2.97
Alameda Alameda County Unincorporated 278,707 201,372 51,265 63,872 12,606 66,483 15,218 48,516 64,205 15,689 60,056 11,540 56,783 8,267 60,961 12,445 0.33 0.32 0.30 0.28 0.30
Contra Costa Antioch 17,695 13,843 32,668 46,365 13,697 48,066 15,398 32,252 41,046 8,794 39,143 6,891 38,600 6,348 41,993 9,741 3.47 2.97 2.83 2.79 3.03
Contra Costa Brentwood 7,542 6,353 18,250 24,284 6,034 25,532 7,282 16,494 22,913 6,419 24,651 8,157 22,994 6,500 26,116 9,622 4.02 3.61 3.88 3.62 4.11
Contra Costa Clayton 2,468 2,131 3,966 4,090 124 4,119 153 4,006 4,654 648 4,538 532 4,538 532 4,538 532 1.93 2.18 2.13 2.13 2.13
Contra Costa Concord 19,417 15,812 46,296 65,624 19,328 69,530 23,234 44,278 73,749 29,471 61,558 17,280 61,018 16,740 68,899 24,621 4.40 4.66 3.89 3.86 4.36
Contra Costa Danville 11,560 9,378 16,574 17,920 1,346 18,202 1,628 15,420 17,350 1,930 18,299 2,879 18,054 2,634 18,515 3,095 1.94 1.85 1.95 1.93 1.97
Contra Costa El Cerrito 2,350 1,806 10,422 20,905 10,483 21,135 10,713 10,142 13,744 3,602 11,985 1,843 12,272 2,130 11,985 1,843 11.70 7.61 6.64 6.79 6.64
Contra Costa Hercules 4,195 3,063 8,361 17,431 9,070 18,186 9,825 8,115 14,173 6,058 12,768 4,653 12,768 4,653 12,999 4,884 5.94 4.63 4.17 4.17 4.24
Contra Costa Lafayette 9,811 7,441 9,589 11,068 1,479 11,356 1,767 9,223 11,532 2,309 10,868 1,645 10,719 1,496 11,000 1,777 1.53 1.55 1.46 1.44 1.48
Contra Costa Martinez 8,606 5,905 14,769 16,156 1,387 16,214 1,445 14,287 15,371 1,084 16,836 2,549 16,591 2,304 17,052 2,765 2.75 2.60 2.85 2.81 2.89
Contra Costa Moraga 5,928 5,524 5,811 6,995 1,184 7,227 1,416 5,570 6,656 1,086 6,673 1,103 6,576 1,006 6,758 1,188 1.31 1.20 1.21 1.19 1.22
Contra Costa Oakley 8,201 7,114 10,835 17,508 6,673 18,239 7,404 10,727 14,393 3,666 14,595 3,868 14,474 3,747 22,704 11,977 2.56 2.02 2.05 2.03 3.19
Contra Costa Orinda 8,111 6,779 6,868 8,788 1,920 8,929 2,061 6,553 7,861 1,308 7,529 976 7,490 937 7,563 1,010 1.32 1.16 1.11 1.10 1.12
Contra Costa Pinole 3,403 2,639 7,336 12,623 5,287 13,134 5,798 6,775 8,509 1,734 9,408 2,633 8,909 2,134 10,536 3,761 4.98 3.22 3.57 3.38 3.99
Contra Costa Pittsburg 10,714 7,775 20,849 36,261 15,412 38,162 17,313 19,527 28,257 8,730 29,724 10,197 28,871 9,344 30,374 10,847 4.91 3.63 3.82 3.71 3.91
Contra Costa Pleasant Hill 4,505 3,570 15,247 17,861 2,614 18,216 2,969 13,708 17,070 3,362 19,479 5,771 18,201 4,493 20,609 6,901 5.10 4.78 5.46 5.10 5.77
Contra Costa Richmond 19,357 12,682 37,897 63,439 25,542 65,681 27,784 36,093 56,884 20,791 48,346 12,253 48,346 12,253 48,232 12,139 5.18 4.49 3.81 3.81 3.80
Contra Costa San Pablo 1,634 1,284 9,975 13,027 3,052 13,387 3,412 8,761 11,786 3,025 11,108 2,347 11,108 2,347 10,620 1,859 10.42 9.18 8.65 8.65 8.27
Contra Costa San Ramon 7,520 6,188 22,061 36,682 14,621 39,247 17,186 25,284 30,737 5,453 33,378 8,094 29,476 4,192 34,367 9,083 6.34 4.97 5.39 4.76 5.55
Contra Costa Walnut Creek 12,785 8,439 33,890 40,244 6,354 40,996 7,106 30,443 37,547 7,104 37,777 7,334 34,208 3,765 38,901 8,458 4.86 4.45 4.48 4.05 4.61
Contra Costa C.C. County Unincorporated 320,507 191,685 61,016 69,382 8,366 70,315 9,299 57,706 69,256 11,550 67,629 9,923 67,027 9,321 68,154 10,448 0.37 0.36 0.35 0.35 0.36
Marin Belvedere 388 254 949 969 20 969 20 928 963 35 988 60 988 60 988 60 3.82 3.80 3.90 3.90 3.90
Marin Corte Madera 2,050 1,183 3,948 4,721 773 4,888 940 3,793 4,454 661 4,354 561 4,161 368 4,434 641 4.13 3.77 3.68 3.52 3.75
Marin Fairfax 1,410 1,167 3,301 3,361 60 3,371 70 3,379 3,419 40 3,616 237 3,616 237 3,616 237 2.89 2.93 3.10 3.10 3.10
Marin Larkspur 1,986 1,249 8,036 8,377 341 7,750 -286 5,908 6,607 699 6,436 528 6,436 528 6,519 611 6.21 5.29 5.16 5.16 5.22
Marin Mill Valley 3,018 1,931 6,267 6,631 364 6,709 442 6,084 6,574 490 6,588 504 6,588 504 6,588 504 3.47 3.40 3.41 3.41 3.41
Marin Novato 17,819 9,188 20,375 21,153 778 21,350 975 20,279 21,964 1,685 21,878 1,599 21,853 1,574 21,884 1,605 2.32 2.39 2.38 2.38 2.38
Marin Ross 1,011 832 780 790 10 790 10 798 809 11 867 69 867 69 867 69 0.95 0.97 1.04 1.04 1.04
Marin San Anselmo 1,721 1,294 5,310 5,370 60 5,380 70 5,243 5,323 80 5,653 410 5,653 410 5,653 410 4.16 4.11 4.37 4.37 4.37
Marin San Rafael 10,767 6,503 23,164 28,209 5,045 28,319 5,155 22,764 27,850 5,086 25,556 2,792 25,262 2,498 26,764 4,000 4.35 4.28 3.93 3.88 4.12
Marin Sausalito 1,227 717 4,310 4,400 90 4,420 110 4,112 4,298 186 4,391 279 4,373 261 4,407 295 6.17 6.00 6.13 6.10 6.15
Marin Tiburon 2,918 1,508 3,844 4,242 398 4,305 461 3,729 4,155 426 4,032 303 4,032 303 4,032 303 2.85 2.76 2.67 2.67 2.67
Marin Marin County Unincorporated 291,592 155,293 26,162 28,900 2,738 28,247 2,085 26,193 29,078 2,885 30,110 3,917 29,483 3,290 30,704 4,511 0.18 0.19 0.19 0.19 0.20
Napa American Canyon 2,604 2,094 5,761 7,392 1,632 7,428 1,667 5,657 6,826 1,169 7,402 1,745 7,347 1,690 7,670 2,013 3.55 3.26 3.53 3.51 3.66
Napa Calistoga 1,709 1,485 2,140 2,171 31 2,180 40 2,019 2,178 159 2,140 121 2,134 115 2,146 127 1.47 1.47 1.44 1.44 1.44
Napa Napa 11,548 8,729 29,440 32,019 2,579 32,569 3,130 28,166 31,925 3,759 31,328 3,162 30,830 2,664 31,769 3,603 3.73 3.66 3.59 3.53 3.64
Napa St. Helena 3,122 2,825 2,440 2,533 93 2,551 111 2,401 2,551 150 2,517 116 2,518 117 2,518 117 0.90 0.90 0.89 0.89 0.89
Napa Yountville 920 607 1,110 1,230 120 1,239 129 1,050 1,237 187 1,201 151 1,153 103 1,224 174 2.04 2.04 1.98 1.90 2.02
Napa Napa County Unincorporated 484,471 353,058 10,370 10,716 346 10,754 384 9,583 10,300 717 10,576 993 10,414 831 10,718 1,135 0.03 0.03 0.03 0.03 0.03
San Francisco San Francisco 30,112 19,077 346,680 436,794 90,114 452,093 105,413 345,811 472,534 126,723 436,278 90,467 456,454 110,643 422,240 76,429 23.70 24.77 22.87 23.93 22.13
San Mateo Atherton 3,251 2,909 2,490 2,580 90 2,600 110 2,330 2,685 355 2,729 399 2,729 399 2,729 399 0.89 0.92 0.94 0.94 0.94
San Mateo Belmont 2,942 2,176 10,740 12,759 2,019 12,986 2,246 10,575 12,521 1,946 11,962 1,387 11,962 1,387 11,962 1,387 5.97 5.75 5.50 5.50 5.50
San Mateo Brisbane 2,112 1,526 1,730 5,324 3,594 5,659 3,929 1,821 4,777 2,956 3,403 1,582 3,403 1,582 2,116 295 3.71 3.13 2.23 2.23 1.39
San Mateo Burlingame 2,864 2,188 13,247 19,431 6,184 20,096 6,850 12,361 17,663 5,302 16,289 3,928 16,289 3,928 16,289 3,928 9.18 8.07 7.44 7.44 7.44
San Mateo Colma 1,253 1,091 460 1,372 912 1,392 932 564 2,894 2,330 1,085 521 1,173 609 774 210 1.28 2.65 0.99 1.08 0.71
San Mateo Daly City 4,925 3,496 31,261 43,095 11,834 45,048 13,787 31,090 45,543 14,453 38,559 7,469 38,559 7,469 36,792 5,702 12.89 13.03 11.03 11.03 10.53
San Mateo East Palo Alto 1,616 1,125 7,780 12,310 4,530 12,773 4,993 6,940 10,133 3,193 9,990 3,050 9,990 3,050 9,990 3,050 11.36 9.01 8.88 8.88 8.88
San Mateo Foster City 2,616 1,842 12,210 13,767 1,557 14,027 1,817 12,016 14,289 2,273 13,683 1,667 13,683 1,667 13,683 1,667 7.61 7.76 7.43 7.43 7.43
San Mateo Half Moon Bay 4,133 3,334 4,440 4,730 290 4,779 339 4,149 4,775 626 4,851 702 4,851 702 4,851 702 1.43 1.43 1.46 1.46 1.46
San Mateo Hillsborough 3,943 3,513 3,837 4,589 752 4,737 900 3,693 4,507 814 4,513 820 4,513 820 4,292 599 1.35 1.28 1.28 1.28 1.22
San Mateo Menlo Park 6,524 3,521 12,432 17,563 5,130 18,057 5,625 12,347 15,616 3,269 15,395 3,048 15,395 3,048 14,795 2,448 5.13 4.44 4.37 4.37 4.20
San Mateo Millbrae 2,082 1,660 8,308 12,910 4,602 13,208 4,900 7,994 12,476 4,482 10,172 2,178 10,881 2,887 10,172 2,178 7.95 7.51 6.13 6.55 6.13
San Mateo Pacifica 7,971 4,231 14,320 14,600 280 14,649 329 13,967 14,680 713 15,073 1,106 15,073 1,106 15,073 1,106 3.46 3.47 3.56 3.56 3.56
San Mateo Portola Valley 5,865 4,011 1,730 1,780 50 1,790 60 1,746 1,864 118 1,989 243 1,989 243 1,989 243 0.45 0.46 0.50 0.50 0.50
San Mateo Redwood City 13,182 7,118 29,620 41,032 11,412 42,267 12,648 27,957 41,834 13,877 37,027 9,070 38,470 10,513 36,234 8,277 5.94 5.88 5.20 5.40 5.09
San Mateo San Bruno 3,563 2,664 15,262 21,699 6,437 22,531 7,269 14,701 21,452 6,751 19,370 4,669 19,370 4,669 18,925 4,224 8.46 8.05 7.27 7.27 7.10
San Mateo San Carlos 3,603 2,875 11,909 15,707 3,798 16,157 4,248 11,524 14,758 3,234 13,926 2,402 13,926 2,402 13,863 2,339 5.62 5.13 4.84 4.84 4.82
San Mateo San Mateo 7,910 5,614 38,643 56,678 18,035 59,074 20,431 38,233 55,539 17,306 50,038 11,805 50,038 11,805 48,360 10,127 10.52 9.89 8.91 8.91 8.61
San Mateo South San Francisco 6,023 4,643 20,288 30,522 10,234 31,648 11,360 20,938 31,897 10,959 27,242 6,304 28,548 7,610 28,365 7,427 6.82 6.87 5.87 6.15 6.11
San Mateo Woodside 7,542 6,105 2,029 2,059 30 2,069 40 1,977 2,201 224 2,284 307 2,284 307 2,284 307 0.34 0.36 0.37 0.37 0.37
San Mateo San Mateo County Unincorporated197,384 103,271 21,780 23,830 2,050 24,049 2,269 20,914 27,861 6,947 26,825 5,911 26,825 5,911 26,000 5,086 0.23 0.27 0.26 0.26 0.25
Santa Clara Campbell 3,641 2,836 16,892 21,002 4,110 21,609 4,717 16,163 20,311 4,148 19,107 2,944 19,107 2,944 19,048 2,885 7.62 7.16 6.74 6.74 6.72
Santa Clara Cupertino 6,962 5,377 19,830 21,588 1,758 21,910 2,080 20,181 22,440 2,259 24,141 3,960 24,141 3,960 24,141 3,960 4.08 4.17 4.49 4.49 4.49
Santa Clara Gilroy 10,247 8,881 14,330 22,118 7,788 23,329 8,999 14,175 22,772 8,597 20,616 6,441 19,882 5,707 21,265 7,090 2.63 2.56 2.32 2.24 2.39
Santa Clara Los Altos 4,079 3,408 10,670 11,968 1,298 12,150 1,480 10,745 11,940 1,195 12,902 2,157 12,902 2,157 12,902 2,157 3.56 3.50 3.79 3.79 3.79
Santa Clara Los Altos Hills 5,457 4,714 3,053 3,088 35 3,108 55 2,829 3,070 241 3,557 728 3,557 728 3,557 728 0.66 0.65 0.75 0.75 0.75
Santa Clara Los Gatos 6,958 5,272 12,430 13,151 721 13,287 857 12,355 13,632 1,277 14,688 2,333 14,688 2,333 14,688 2,333 2.52 2.59 2.79 2.79 2.79
Santa Clara Milpitas 8,812 6,753 19,030 38,758 19,728 42,096 23,066 19,184 44,837 25,653 31,991 12,807 31,991 12,807 31,991 12,807 6.23 6.64 4.74 4.74 4.74
Santa Clara Monte Sereno 1,025 929 1,229 1,269 40 1,279 49 1,211 1,329 118 1,515 304 1,515 304 1,515 304 1.38 1.43 1.63 1.63 1.63
Santa Clara Morgan Hill 7,547 6,385 12,399 20,040 7,641 21,140 8,741 12,326 19,518 7,192 16,479 4,153 16,146 3,820 21,088 8,762 3.31 3.06 2.58 2.53 3.30
Santa Clara Mountain View 7,774 5,750 32,114 50,348 18,234 52,407 20,293 31,957 46,505 14,548 44,415 12,458 47,079 15,122 42,976 11,019 9.11 8.09 7.72 8.19 7.47
Santa Clara Palo Alto 15,469 7,796 26,705 38,692 11,987 40,633 13,928 26,493 37,835 11,342 38,743 12,250 38,743 12,250 32,600 6,107 5.21 4.85 4.97 4.97 4.18
Santa Clara San Jose 112,699 81,984 305,087 435,585 130,498 456,367 151,279 301,366 493,121 191,755 432,253 130,887 434,400 133,034 417,871 116,505 5.57 6.01 5.27 5.30 5.10
Santa Clara Santa Clara 11,741 9,752 43,403 67,672 24,269 71,032 27,629 43,021 75,243 32,222 64,150 21,129 67,276 24,255 63,366 20,345 7.28 7.72 6.58 6.90 6.50
Santa Clara Saratoga 7,788 6,792 11,000 11,118 118 11,145 145 10,734 11,259 525 12,983 2,249 12,983 2,249 12,983 2,249 1.64 1.66 1.91 1.91 1.91
Gross Acres Net Acres
Housing Density 2040 (Households per Net Acre)Outward Growth
2010
(U.S. Census)
Core Concentraion Constrained Core
ConcentrationFocused GrowthInitial Vision
Page 1
Cities_HH
County Jurisdiction
2010
(estimated)2035
Growth
(2010-2035)2040
Growth
(2010-2040)2040
Growth
(2010-2040)2040
Growth
(2010-2040)2040
Growth
(2010-2040)2040
Growth
(2010-2040)IVS
Core
Concentration Focused Growth
Constrained
Core Outward GrowthGross Acres Net Acres
Housing Density 2040 (Households per Net Acre)Outward Growth
2010
(U.S. Census)
Core Concentraion Constrained Core
ConcentrationFocused GrowthInitial Vision
Santa Clara Sunnyvale 14,028 10,328 54,170 73,425 19,255 75,943 21,773 53,384 73,911 20,527 70,165 16,781 70,165 16,781 70,165 16,781 7.35 7.16 6.79 6.79 6.79
Santa Clara S.C. County Unincorporated 606,579 433,768 31,604 37,991 6,386 38,660 7,055 28,080 35,529 7,449 38,564 10,484 35,619 7,539 41,168 13,088 0.09 0.08 0.09 0.08 0.09
Solano Benicia 10,084 6,205 11,329 13,527 2,198 13,707 2,378 10,686 11,931 1,245 11,878 1,192 11,872 1,186 12,121 1,435 2.21 1.92 1.91 1.91 1.95
Solano Dixon 4,331 3,808 5,617 8,222 2,605 8,458 2,841 5,856 7,237 1,381 7,537 1,681 7,244 1,388 7,796 1,940 2.22 1.90 1.98 1.90 2.05
Solano Fairfield 23,932 19,853 36,061 52,476 16,415 53,556 17,495 34,484 44,945 10,461 47,003 12,519 46,447 11,963 48,903 14,419 2.70 2.26 2.37 2.34 2.46
Solano Rio Vista 4,507 3,992 3,540 4,737 1,197 5,012 1,472 3,454 5,200 1,746 5,358 1,904 4,878 1,424 5,781 2,327 1.26 1.30 1.34 1.22 1.45
Solano Suisun City 2,579 1,959 9,132 10,548 1,415 10,999 1,867 8,918 10,174 1,256 10,353 1,435 10,281 1,363 10,416 1,498 5.62 5.19 5.29 5.25 5.32
Solano Vacaville 17,438 13,156 32,620 41,775 9,155 43,532 10,912 31,092 39,493 8,401 36,408 5,316 36,028 4,936 41,042 9,950 3.31 3.00 2.77 2.74 3.12
Solano Vallejo 21,159 14,692 42,043 47,814 5,771 48,844 6,801 40,559 49,868 9,309 46,200 5,641 46,046 5,487 46,336 5,777 3.32 3.39 3.14 3.13 3.15
Solano Solano County Unincorporated 484,961 404,052 7,817 8,677 860 8,778 961 6,709 9,514 2,805 7,885 1,176 7,699 990 8,049 1,340 0.02 0.02 0.02 0.02 0.02
Sonoma Cloverdale 1,672 1,322 3,211 4,639 1,428 4,901 1,690 3,182 4,484 1,302 4,227 1,045 4,138 956 4,270 1,088 3.71 3.39 3.20 3.13 3.23
Sonoma Cotati 1,202 998 2,832 3,387 555 3,419 587 2,978 3,220 242 3,449 471 3,434 456 3,520 542 3.43 3.23 3.46 3.44 3.53
Sonoma Healdsburg 2,490 2,019 4,390 5,284 894 5,474 1,084 4,385 5,717 1,332 5,355 977 5,234 856 5,462 1,084 2.71 2.83 2.65 2.59 2.71
Sonoma Petaluma 8,866 6,996 21,775 24,713 2,938 25,416 3,641 21,737 25,074 3,337 24,538 2,801 24,539 2,802 24,539 2,802 3.63 3.58 3.51 3.51 3.51
Sonoma Rohnert Park 4,155 3,154 15,718 20,395 4,677 21,052 5,333 15,808 18,934 3,126 19,019 3,211 18,676 2,868 19,302 3,494 6.67 6.00 6.03 5.92 6.12
Sonoma Santa Rosa 26,010 20,102 62,886 83,010 20,124 85,275 22,389 63,591 78,227 14,636 81,744 18,154 78,762 15,172 86,210 22,620 4.24 3.89 4.07 3.92 4.29
Sonoma Sebastopol 1,225 960 3,325 3,595 270 3,615 290 3,276 3,532 256 3,801 525 3,757 481 3,880 604 3.77 3.68 3.96 3.91 4.04
Sonoma Sonoma 1,679 1,310 4,476 5,036 560 5,159 683 4,955 5,464 509 5,474 519 5,474 519 5,474 519 3.94 4.17 4.18 4.18 4.18
Sonoma Windsor 4,299 3,372 8,884 13,809 4,925 14,004 5,120 8,962 10,548 1,586 10,325 1,355 10,305 1,335 12,901 3,931 4.15 3.13 3.06 3.06 3.83
Sonoma Sonoma County Unincorporated 965,252 845,140 60,933 67,505 6,572 68,313 7,380 56,951 65,041 8,090 65,278 8,327 64,590 7,639 65,886 8,935 0.08 0.08 0.08 0.08 0.08
Alameda 475,780 338,120 557,651 770,397 212,746 802,536 244,884 545,138 807,617 262,479 718,132 172,994 712,889 167,751 709,433 164,295 2.37 2.39 2.12 2.11 2.10
Contra Costa 486,310 319,410 392,680 546,653 153,973 565,873 173,193 375,364 503,490 128,126 486,291 110,927 472,240 96,876 511,916 136,552 1.77 1.58 1.52 1.48 1.60
Marin 335,908 181,117 106,447 117,124 10,677 116,497 10,050 103,210 115,493 12,283 114,469 11,259 113,312 10,102 116,456 13,246 0.64 0.64 0.63 0.63 0.64
Napa 504,375 368,799 51,260 56,061 4,801 56,721 5,461 48,876 55,017 6,141 55,164 6,288 54,396 5,520 56,045 7,169 0.15 0.15 0.15 0.15 0.15
San Francisco 30,112 19,077 346,680 436,794 90,114 452,093 105,413 345,811 472,534 126,723 436,278 90,467 456,454 110,643 422,240 76,429 23.70 24.77 22.87 23.93 22.13
San Mateo 291,303 168,914 264,516 358,337 93,821 369,598 105,082 257,837 359,964 102,127 326,405 68,568 329,951 72,114 319,537 61,700 2.19 2.13 1.93 1.95 1.89
Santa Clara 830,805 600,726 613,947 867,813 253,866 906,095 292,148 604,204 933,252 329,048 846,269 242,065 850,193 245,989 831,324 227,120 1.51 1.55 1.41 1.42 1.38
Solano 568,991 467,717 148,160 187,776 39,616 192,886 44,726 141,758 178,362 36,604 172,622 30,864 170,496 28,738 180,445 38,687 0.41 0.38 0.37 0.36 0.39
Sonoma 1,016,849 885,372 188,430 231,373 42,943 236,628 48,198 185,825 220,241 34,416 223,210 37,385 218,909 33,084 231,444 45,619 0.27 0.25 0.25 0.25 0.26
4,540,433 3,349,251 2,669,772 3,572,327 902,556 3,698,925 1,029,154 2,608,023 3,645,969 1,037,946 3,378,840 770,817 3,378,840 770,817 3,378,840 770,817 1.10 1.09 1.01 1.01 1.01
Page 2
Cities_HH
CITY JURISDICTIONS
County Jurisdiction
% of Net
Acres to
Santa
Clara
County
Net Acres
2010
Population -
Census
% of
Pop to
Santa
Clara
County 2010 (estimated)2035
Growth
(2010-2035) 2040
Growth
(2010-2040) 2040
Growth
(2010-2040) 2040
Growth
(2010-2040) 2040
Growth
(2010-2040) 2040
Growth
(2010-2040) IVS
Core
Concentration
Focused
Growth
Constrained
Core
Outward
Growth
Santa Clara Campbell 3,641 2,836 0.47% 39,349 2.21%16,892 21,002 4,110 21,609 4,717 16,163 20,311 4,148 19,107 2,944 19,107 2,944 19,048 2,885 7.62 7.16 6.74 6.74 6.72
Santa Clara Cupertino 6,962 5,377 0.90% 58,302 3.27%19,830 21,588 1,758 21,910 2,080 20,181 22,440 2,259 24,141 3,960 24,141 3,960 24,141 3,960 4.08 4.17 4.49 4.49 4.49
Santa Clara Gilroy 10,247 8,881 1.48% 48,821 2.74%14,330 22,118 7,788 23,329 8,999 14,175 22,772 8,597 20,616 6,441 19,882 5,707 21,265 7,090 2.63 2.56 2.32 2.24 2.39
Santa Clara Los Altos 4,079 3,408 0.57% 28,976 1.63%10,670 11,968 1,298 12,150 1,480 10,745 11,940 1,195 12,902 2,157 12,902 2,157 12,902 2,157 3.56 3.50 3.79 3.79 3.79
Santa Clara Los Altos Hills 5,457 4,714 0.78% 7,922 0.44%3,053 3,088 35 3,108 55 2,829 3,070 241 3,557 728 3,557 728 3,557 728 0.66 0.65 0.75 0.75 0.75
Santa Clara Los Gatos 6,958 5,272 0.88% 29,413 1.65%12,430 13,151 721 13,287 857 12,355 13,632 1,277 14,688 2,333 14,688 2,333 14,688 2,333 2.52 2.59 2.79 2.79 2.79
Santa Clara Milpitas 8,812 6,753 1.12% 66,790 3.75%19,030 38,758 19,728 42,096 23,066 19,184 44,837 25,653 31,991 12,807 31,991 12,807 31,991 12,807 6.23 6.64 4.74 4.74 4.74
Santa Clara Monte Sereno 1,025 929 0.15% 3,341 0.19%1,229 1,269 40 1,279 49 1,211 1,329 118 1,515 304 1,515 304 1,515 304 1.38 1.43 1.63 1.63 1.63
Santa Clara Morgan Hill 7,547 6,385 1.06% 37,822 2.12%12,399 20,040 7,641 21,140 8,741 12,326 19,518 7,192 16,479 4,153 16,146 3,820 21,088 8,762 3.31 3.06 2.58 2.53 3.30
Santa Clara Mountain View 7,774 5,750 0.96% 74,066 4.16%32,114 50,348 18,234 52,407 20,293 31,957 46,505 14,548 44,415 12,458 47,079 15,122 42,976 11,019 9.11 8.09 7.72 8.19 7.47
Santa Clara Palo Alto 15,469 7,796 1.30% 64,403 3.61%26,705 38,692 11,987 40,633 13,928 26,493 37,835 11,342 38,743 12,250 38,743 12,250 32,600 6,107 5.21 4.85 4.97 4.97 4.18
Percent of Santa Clara Growth 4.77% 3.45% 5.06% 4.98% 2.69%
Average Annual HH Gain 2010-2040 464 378 408 408 204
Santa Clara San Jose 112,699 81,984 13.65%945,942 53.09%305,087 435,585 130,498 456,367 151,279 301,366 493,121 191,755 432,253 130,887 434,400 133,034 417,871 116,505 5.57 6.01 5.27 5.30 5.10
Santa Clara Santa Clara 11,741 9,752 1.62%116,468 6.54%43,403 67,672 24,269 71,032 27,629 43,021 75,243 32,222 64,150 21,129 67,276 24,255 63,366 20,345 7.28 7.72 6.58 6.90 6.50
Santa Clara Saratoga 7,788 6,792 1.13%29,926 1.68%11,000 11,118 118 11,145 145 10,734 11,259 525 12,983 2,249 12,983 2,249 12,983 2,249 1.64 1.66 1.91 1.91 1.91
Santa Clara Sunnyvale 14,028 10,328 1.72%140,081 7.86%54,170 73,425 19,255 75,943 21,773 53,384 73,911 20,527 70,165 16,781 70,165 16,781 70,165 16,781 7.35 7.16 6.79 6.79 6.79
Santa Clara S.C. County Unincorporated 606,579 433,768 72.21% 90,020 5.05%31,604 37,991 6,386 38,660 7,055 28,080 35,529 7,449 38,564 10,484 35,619 7,539 41,168 13,088 0.09 0.08 0.09 0.08 0.09
Santa Clara 830,805 600,726 1.00 1,781,642 1.00 613,947 867,813 253,866 906,095 292,148 604,204 933,252 329,048 846,269 242,065 850,193 245,989 831,324 227,120 1.51 1.55 1.41 1.42 1.38
ALL 9 COUNTIES 4,540,433 3,349,251 2,669,772 3,572,327 902,556 3,698,925 1,029,154 2,608,023 3,645,969 1,037,946 3,378,840 770,817 3,378,840 770,817 3,378,840 770,817 1.10 1.09 1.01 1.01 1.01
PDA
County Jurisdiction Name Key
2010 (estimated)2035
Growth
(2010-2035) 2040
Growth
(2010-2040) 2040
Growth
(2010-2040) 2040
Growth
(2010-2040) 2040
Growth
(2010-2040) 2040
Growth
(2010-2040)
Santa Clara Palo Alto California Avenue PAL1 922 2,889 1,967 2,889 1,967 754 3,893 3,139 2,471 1,717 3,116 2,362 1,552 798
Santa Clara Palo Alto
SUB-AREA:
VTA/Palo Alto:
California Avenue PAL1_VTA1_h n/a n/a 189 2,176 1,987 665 476 840 651 418 229
Santa Clara Palo Alto
Palo Alto: University Avenue/Downtown OAPAL1 2,162 3,701 1,539 3,851 1,689 1,823 4,858 3,035 4,451 2,628 5,418 3,595 3,073 1,250
Santa Clara Palo Alto
Palo Alto: El
Camino Real
Corridor OAPAL2 4,272 6,116 1,845 6,457 2,185 4,092 7,004 2,912 8,023 3,931 9,476 5,384 5,657 1,565
Santa Clara Palo Alto
NON-OVERLAP
VTA Cores, Corridors, and Station Areas VTA1_h n/a 78 92 14 114 36 92 14 107 29
Santa Clara Palo Alto
ALL PALO ALTO PDA/GOA 5,842 11,087 8,788 12,006 3,871
Santa Clara 78,280 253,835 175,554 194,483 116,203 151,692 393,331 241,639 335,018 188,833 357,414 211,229 320,185 174,000
CalAv PDA Percent of CPA Growth 14.13% 27.67% 14.02% 19.28% 13.07%
CalAv Percent of CPA Total Growth outside of PDA 85.87% 72.33% 85.98% 80.72% 86.93%
CalAv PDA Percent of Santa Clara PDA 1.69% 1.30% 0.91% 1.12% 0.46%
CalAv PDA Percent of Santa Clara Growth 0.67% 0.95% 0.71% 0.96% 0.35%
Average Annual HH Gain 2010-2040 in CalAv PDA 66 105 57 79 27
ALL PDA Percent of CPA Growth 41.94% 97.75% 71.74% 98.01% 63.38%
Percent of CPA Total Growth outside of ALL PDA 58.06% 2.25% 28.26% 1.99% 36.62%
ALL PDA Percent of Santa Clara PDA 5.03% 4.59% 4.65% 5.68% 2.22%
ALL PDA Percent of Santa Clara Growth 2.00% 3.37% 3.63% 4.88% 1.70%
Average Annual HH Gain 2010-2040 in ALL PDA 195 370 293 400 129
Average Annual HH Gain 2010-2040 OUTSIDE OF PDA 270 9 115 8 75
Gross Acres Net Acres
Housing Density 2040 (Households per Net Acre)Outward Growth
2010
(U.S.
Census)
Core Concentraion Constrained Core
ConcentrationFocused GrowthInitial Vision
Constrained Core
Concentration Outward GrowthInitial Vision 2010
(U.S.
Census)
Core Concentraion Focused Growth
Page 1
Cities_Jobs
CITY JURISDICTIONS
County Jurisdiction
% of Net Acres
to Santa Clara
County Net
Acres
2010 Population
- Census
% of Pop to
Santa Clara
County 2010 (estimated)2035
Growth
(2010-2035) 2040
Growth
(2010-2040) 2040
Growth
(2010-2040) SSA 2040
Growth SSA
(2010-2040) 2040
Growth
(2010-2040)SSA 2040 Growth SSA(2010-2040) 2040
Growth(2010-2040) SSA 2040
Growth SSA(2010-2040) 2040
Growth(2010-2040)IVS
Core
Concentration Focused Growth
Constrained
Core Outward Growth
Santa Clara Campbell 3,641 2,836 0.47% 39,349 2.21% 22,099 26,897 4,798 27,745 5,646 23,949 25,493 1,544 30,652 6,701 30,728 6,779 30,252 6,302 30,250 6,301 30,539 6,589 30,539 6,590 9.78 8.99 10.83 10.66 10.77Santa Clara Cupertino 6,962 5,377 0.90% 58,302 3.27% 30,513 35,283 4,770 36,329 5,816 20,795 28,798 8,003 27,620 6,630 27,471 6,676 27,650 6,660 27,431 6,636 27,348 6,358 27,132 6,337 6.76 5.36 5.11 5.10 5.05
Santa Clara Gilroy 10,247 8,881 1.48% 48,821 2.74% 16,652 22,666 6,014 24,142 7,490 15,017 21,604 6,587 22,215 4,486 19,218 4,200 21,928 4,199 18,886 3,868 26,154 8,425 22,729 7,711 2.72 2.43 2.16 2.13 2.56
Santa Clara Los Altos 4,079 3,408 0.57% 28,976 1.63% 10,250 11,511 1,261 11,632 1,382 12,865 14,220 1,355 18,101 4,808 17,656 4,792 18,166 4,872 17,675 4,811 18,102 4,808 17,610 4,745 3.41 4.17 5.18 5.19 5.17Santa Clara Los Altos Hills 5,457 4,714 0.78% 7,922 0.44% 1,845 1,937 93 1,948 103 2,769 3,245 477 4,178 1,221 3,920 1,151 4,098 1,141 3,839 1,071 4,357 1,400 4,085 1,317 0.41 0.69 0.83 0.81 0.87Santa Clara Los Gatos 6,958 5,272 0.88% 29,413 1.65% 18,275 20,700 2,425 21,168 2,893 18,629 19,496 867 24,474 5,575 24,187 5,559 24,147 5,248 23,806 5,178 24,268 5,369 23,925 5,296 4.02 3.70 4.59 4.52 4.54
Santa Clara Milpitas 8,812 6,753 1.12% 66,790 3.75% 46,784 55,624 8,840 56,870 10,086 38,678 61,770 23,091 50,180 11,356 50,144 11,466 49,437 10,613 49,280 10,601 49,547 10,724 49,392 10,713 8.42 9.15 7.42 7.30 7.31Santa Clara Monte Sereno 1,025 929 0.15% 3,341 0.19% 400 532 132 554 154 346 355 8 743 218 460 114 722 196 451 104 744 219 460 113 0.60 0.38 0.50 0.48 0.49Santa Clara Morgan Hill 7,547 6,385 1.06% 37,822 2.12% 12,698 20,806 8,109 22,274 9,576 14,951 19,469 4,518 20,811 4,446 19,211 4,260 20,459 4,094 18,827 3,876 23,525 7,159 21,703 6,752 3.49 3.05 3.01 2.95 3.40
Santa Clara Mountain View 7,774 5,750 0.96% 74,066 4.16% 50,074 64,507 14,434 68,811 18,737 45,296 68,083 22,788 60,969 15,279 60,627 15,332 59,866 14,175 59,381 14,085 60,318 14,627 59,822 14,526 11.97 11.84 10.54 10.33 10.40
Santa Clara Palo Alto 15,469 7,796 1.30% 64,403 3.61% 73,303 78,163 4,860 79,291 5,987 65,262 93,493 28,231 103,198 27,817 91,332 26,070 102,015 26,635 90,009 24,748 94,740 19,360 83,302 18,040 10.17 11.99 11.72 11.55 10.69Percent of Santa Clara Growth 1.32% 5.95% 10.02% 9.70% 7.26%Average Annual Jobs Gain 2010-2040 200 941 869 825 601
Average Annual Add Comm Sq Ft for Jobs 84,567 398,745 368,224 349,542 254,806
Santa Clara San Jose 112,699 81,984 13.65% 945,942 53.09% 342,799 593,219 250,420 639,121 296,322 353,541 608,560 255,019 476,342 112,608 463,658 110,117 480,489 116,756 467,666 114,124 472,774 109,041 460,353 106,812 7.80 7.42 5.66 5.70 5.62Santa Clara Santa Clara 11,741 9,752 1.62% 116,468 6.54% 103,186 138,386 35,200 146,862 43,676 96,343 145,309 48,966 127,707 31,366 128,026 31,683 126,417 30,076 126,418 30,075 126,164 29,823 126,164 29,821 15.06 14.90 13.13 12.96 12.94
Santa Clara Saratoga 7,788 6,792 1.13% 29,926 1.68% 6,826 7,279 453 7,308 482 9,734 9,764 30 13,775 3,923 13,662 3,928 13,431 3,580 13,285 3,552 13,744 3,893 13,595 3,862 1.08 1.44 2.01 1.96 2.00
Santa Clara Sunnyvale 14,028 10,328 1.72% 140,081 7.86% 72,392 96,408 24,016 101,639 29,247 63,834 115,973 52,139 83,190 19,334 82,720 18,886 82,126 18,269 81,554 17,720 81,787 17,930 81,109 17,275 9.84 11.23 8.01 7.90 7.85Santa Clara S.C. County Unincorporated 606,579 433,768 72.21% 90,020 5.05% 50,304 64,481 14,177 65,924 15,620 29,887 51,131 21,243 5,145 1,636 38,940 9,053 4,872 1,363 38,224 8,336 5,227 1,718 38,322 8,434 0.15 0.12 0.09 0.09 0.09
Santa Clara 830,805 600,726 1 1,781,642 1 858,399 1,238,400 380,001 1,311,617 453,219 811,895 1,286,762 474,867 1,069,300 257,404 1,071,960 260,065 1,066,075 254,179 1,066,980 255,085 1,059,338 247,443 1,060,240 248,345 2.18 2.14 1.78 1.78 1.76ALL 9 COUNTIES 4,540,433 3,349,251 3,271,321 4,493,333 1,222,012 4,734,624 1,463,303 3,268,229 4,734,002 1,465,773 4,265,733 994,832 4,272,464 1,004,235 4,265,734 994,830 4,266,710 998,481 4,265,742 994,830 4,266,780 998,551 1.41 1.41 1.28 1.27 1.27
PDA Initial
County Jurisdiction Name Key
2010
(estimated)2035
Growth
(2010-2035) 2040
Growth
(2010-2035) 2040
Growth
(2010-2040) 2040
Growth
(2010-2040) 2040
Growth
(2010-2040) 2040
Growth
(2010-2040)
Santa Clara Palo Alto California Avenue PAL1 2,244 2,382 551 2,382 139 1,835 2,727 892 1,834 2,795 961 2,719 885 2,287 453
Santa Clara Palo Alto
SUB-AREA:
VTA/Palo Alto:
California Avenue PAL1_VTA1_h 223 n/a 937 1,386 449 937 1,361 424 1,309 371 1,167 230
Santa Clara Palo Alto
NON-OVERLAP
VTA Cores, Corridors, and
Station Areas VTA1_h 41 n/a 67 112 44 60 82 22 83 23 80 20
Santa Clara Palo Alto
Palo Alto: University
Avenue/Downtown OAPAL1 8,265 9,048 2,622 9,048 783 12,833 16,183 3,350 12,832 17,367 4,535 16,908 4,076 17,677 4,845
Santa Clara Palo Alto
Palo Alto: El
Camino Real Corridor OAPAL2 8,174 10,210 2,389 10,210 2,036 10,231 14,478 4,247 10,233 15,418 5,186 16,218 5,986 15,227 4,995
Santa Clara Palo Alto
ALL PALO ALTO PDA/GOA 2,957 8,982 11,127 11,341 10,542
Santa Clara 152,324 282,092 302,741 282,092 129,768 382,878 674,030 291,152 391,673 545,680 154,008 550,961 159,288 520,944 129,271
CalAv PDA Percent of CPA Growth 2.31% 3.16% 3.69% 3.57% 2.51%CalAv Percent of CPA Total Growth outside of PDA 97.69% 96.84% 96.31% 96.43% 97.49%CalAv PDA Percent of Santa Clara PDA 0.11% 0.31% 0.62% 0.56% 0.35%
CalAv PDA Percent of Santa Clara Growth 0.03% 0.19% 0.37% 0.35% 0.18%
Average Annual Jobs Gain 2010-2040 in CalAv PDA 530 32 29 15
ALL PDA Percent of CPA Growth 49.39% 31.82% 42.68% 45.83% 58.44%
Percent of CPA Total Growth outside of ALL PDA 50.61% 68.18% 57.32% 54.17% 41.56%ALL PDA Percent of Santa Clara PDA 2.28% 3.09% 7.22% 7.12% 8.16%
ALL PDA Percent of Santa Clara Growth 0.65% 1.89% 4.28% 4.45% 4.25%
Average Annual Jobs Gain 2010-2040 in ALL PDA 99 299 371 378 351Average Annual Jobs Gain 2010-2040 OUTSIDE OF PDA 101 642 498 447 250
Focused Growth Constrained Core Concentration Outward GrowthInitial Vision
2010
Core Concentraion
2010
Gross Acres Net Acres
Job Density 2040 (Jobs per Net Acre)Outward GrowthConstrained Core
ConcentrationInitial Vision Core Concentraion
2010
Focused Growth
Page 1
Regional Projections to 2040:
Methodology and Results
Stephen Levy, CCSCE
Presentation to ABAG Regional Advisory
Working Group
February 7, 2012
Overview
•Best Practice Methodology for Regional
Projections
•Developing Regional Job Growth Projections
•Recent History and Short Term Trends
•The Case for Above Average Job Growth to 2040
•Projections of Total Jobs and by Sector
•Issues and Challenges
•Population and Housing
Best Practice Methodology
Used by All Major Regions in CA
•Bay Area job projections depend on assumptions
about U.S. job growth and the Bay Area share of
U.S. jobs. The region and nation are connected.
•Bay Area population projections depend on job
growth and the proportion of Bay Area workers
living in the region.
•Bay Area household projections depend on
population growth, age and ethnic composition,
behavioral factors and assumptions about
housing supply.
Bay Area Job Growth‐1
•Bay Area job growth depends on the number
(POOL) of jobs created in the U.S. and the SHARE
of U.S jobs locating in the region.
•The POOL of U.S. jobs depends on the amount
population growth, the age profile of the
population and labor force participation rate
trends.
•The amount of population growth depends on
assumptions about immigration and birth rates.
Bay Area Job Growth‐2
•The SHARE of U.S. jobs locating in the Bay
Area depends on the composition of U.S. job
growth and the competitive position of the
Bay Area.
•The share of job growth is primarily
determined by growth in the region’s
economic base—those sectors that sell a
majority of goods and services to customers
across the state, nation and world.
Bay Area Job Growth‐3
•Leading sectors in the Bay Area economic base
are technology, including hardware, software and
social media, professional and technical services,
and foreign trade and tourism. The economic
base accounts for 40% of total jobs and is the
primary focus of the competition for job shares.
•The remaining jobs serve local residents and
businesses. The profile of these jobs in the Bay
Area is similar to the national profile.
Job Share History and Recent Trends
•Bay Area grew more slowly than the nation
between 1990 and 2010—the explanation
•Since late 2010 the Bay Area has outpaced the
nation in job growth led by Silicon Valley
•UCLA forecasts that the Bay Area will outpace
the nation in job growth in 2012 and 2013
•High tech job growth and space acquisition
surged in late 2011 continuing into 2012
The Bay Area Share of U.S. Job Growth
Job Growth in 2011 (Pre Revision)
UCLA Bay Area Forecast
•An increase of 160,000 wage and salary jobs
or +5.8% between Q4‐2011 and Q4‐2013.
There will be additional job growth for self‐
employed workers. The forecast for annual
job growth is at least 80,000 per year for 2012
and 2013.
•Real income growth (above the rate of
inflation) of 3.7% in 2012 and 3.3% in 2013.
Real taxable sales gains of 2.7% and 3.1%.
Short Term Outlook
•Bay Area outpaces the state and nation in
2012 and 2013
•An increase in national and state growth in
2014 and 2015 with the Bay Area participating
•By 2013 the beginnings of recovery in
construction and world economic growth
•Santa Clara, San Francisco and San Mateo
counties rank in the top ten in average wages
but also in $ and % wage growth in 2011.
Long Term Strengths
•Industry structure—high concentration of
high wage, fast growing industries
•Strength in labor force (education and skills),
patents, company headquarters
•Location on the Pacific Rim favors growth in
Bay Area trade, tourism and foreign
investment
•A foundation for above average growth
Bay Area has High Share of Fast
Growing High Wage Sectors
•Bay Area has 2.4% of nation’s jobs
•10.3% for software; 8.3% for Internet services
•12% of computer and electronic
manufacturing
•7% of computer services; 8.1% of scientific
R&D services
•Above average shares in management,
consulting and architectural & engineering
services
McKinsey Global Institute Report for
Bay Area Council
•In 2010 Bay Area organizations held 16,364
patents. 2nd place was New York with 6,383
•Highest % of college grads in workforce
(44%)—national average is 28%
•Highest share of jobs in innovation sectors
(18%)—next are Boston and Seattle
•50% of top clean tech firms, 7 in 10 top social
media firms, 2nd highest number of Fortune
500 global companies after New York
Bay Area Job Projections to 2040
•A high tech and recovery bounce in the short
term
•Above average job growth to 2020
•Slightly above average job growth after 2020
•Driving sectors are technology and
professional services
•Above average job growth in these sectors
plus health care, leisure and hospitality and
self employment
Job Growth to 2040
Bay Area Share of U.S. Jobs
Bay Area Jobs (Thousands)
Bay Area Job Growth (Thousands)
Above Average Job Growth 2007‐2040
Below Average Job Growth 2007‐2040
Issues and Challenges
•These job projections reflect the likely growth
pattern if the region maintains its competitive
attraction for technology, trade and tourism and
other driving industries.
•Being competitive includes facing the challenges
of education, infrastructure, housing and quality
of life that are well known in the region, state
and nation. Job growth is never automatic.
•All long‐term projections are subject to
uncertainties in national and world demographic
and economic trends.
Regional Population Growth
•Determined by the population needed to
support the projected job growth
•Depends also on projected levels of in
commuting
•In commuting in this alternative is assumed to
increase following historical trends
•Today I want to call attention to the pattern
of growth by age group—implications for
workforce and housing
Bay Area Population Growth by Age
Group and Decade
Household Projection Methodology
•HH growth consistent with projected job and
population growth
•Population growth analyzed by age and ethnic
group
•Household formation rates by age and ethnic
group developed with input from HCD
•Today I want to call attention to the age
pattern of projected HH growth
HH Growth by Age and Decade
1
California Demographic Forecasts: Why are the numbers over
estimated?
Prepared by City of Palo Alto
November 15, 2011
Actual California Population growth
Over the last decade, the state of California added 3.4 million people, to reach a total of 37.3 million.
This was an increase of 10% over the decade. This growth rate follows the gradual slowing that started
after 1990, down dramatically from the very high rates of the post‐World War II era. Note that the
Department of Finance’s (DOF) 2007 projections reflect a very high growth perspective. The DOF
numbers are currently used as the population forecasts for all state and local projects—they are not
scheduled to be revised until 2013.
Table 1. California’s population growth over the last five decades
(average growth from census to census)
Census Dept of Finance Projections (2007)
1960s 29.2
1970s 18.5
1980s 25.7
1990s 13.8
2000s 10.0 14.8
2010s 12.8
2020s 11.6
2030s 10.2
Source: US Census Bureau actual Census numbers; California Department of Finance 2007 Projections.
2
Recent State forecasts have been consistently overestimated
Even after the sharp decline in growth during the 1990s, forecasters consistently tended to be overly
optimistic about population growth rates through the 2000s. In 2005, the Public Policy Institute of
California issued a report (“California 2025: Taking on the Future”) that included the population
projections of all the key demographic forecasters. The consensus forecast from this group was some
40% higher than the actual outcome for the state:
Table 2. California Population Forecasts for 2010 made before 2005
(Percentage growth expected from 2000‐2010)
California Dept of Finance 15.2
USC Population Dynamics 11.6
UC Berkeley (Lee, Miller) 13.9*
Public Policy Institute of CA 15.2*
CCSCE 17.2
UCLA Anderson Forecasting 16.6
Average of six 2005 forecasts 15.0
*=center point of band
Source: Public Policy Institute of California, “California 2025: Taking on the Future”, 2005, Page 29.
The consensus forecast was some 50% above the actual numbers. The only forecaster who produced a
number below the actual 10% growth was the UC Berkeley group who stated that there was a 5%
chance that the growth rate would be lower than 7.1%. The 2005 PPIC Report stated that “Recent trends
make population projections for California especially difficult…For these reasons, planners should
consider alternative population scenarios … as useful alternatives for planners.” (PPIC, 2005, pages 27‐
28)
Even as late as the end of 2009, on the eve of the decennial census, estimates by the California Dept. of
Finance (the organization responsible for the numbers that are used for all state allocation formulas)
remained strikingly high at 14.1% which was 1.5 million or 44.7% above the above the
contemporaneous and more accurate Census Bureau’s Current Population Estimates.
3
Critical Components of Change and the Future
The Census data provide a nice detailed perspective on the actual components of change during the
decade. While the 3.1 million people added through natural increase (births minus deaths) were the
largest single growth factor, the 2 million net gain from foreign immigration was important in
overcoming a net outflow of 1.6 million from native born emigration, primarily to other states.
Table 3. Components of Population Change in California, 20002010
(millions of people)
Births +5.45
Deaths ‐2.35
Net Domestic migration ‐1.63
Foreign immigration +2.58
Foreign emigration ‐0.59
Military, etc ‐0.07
TOTAL +3.38
Source: USC, Population Dynamics Research Group, “What the Census would show”, February 2011.
The challenge for projecting change in the future is the dramatic shifts in some of these base categories.
With the aging population, we know that, even with slight increases in longevity, the aging population in
California will raise the annual number of deaths in California from 271K in 2011 to 462K in 2039, while
the number of births will rise slightly from 532K in 2011 to 551 in 2039. The natural increase will fall
from some 260K today to 90K in 2040.
Thus, over time any increase in California’s population will increasingly rely on migration. Since net
domestic migration has averaged a net outflow of some 160K per year since the early 1990s, any growth
in population will be increasingly dependent on foreign migration. (Source: USC, Population Dynamics
Groups, April 2011).
There is little reason to see a major shift in domestic migration with California’s high cost and high
unemployment rate. That leaves foreign migration as the critical component source of long‐term
population growth. The most dynamic source for California’s growth has been immigration from Mexico,
both legal and illegal. All observers (The Dept of Homeland Security, the Pew Charitable Trust Hispanic
Center, and the Mexican Migration Project at Princeton) agree that net immigration from Mexico has
been down dramatically in recent years with the stricter enforcement of border crossing and the
prolonged recession in the US. Pew estimates that the illegal immigrant population in the US fell by
some 7% between 2007 and 2010. The important debate about the future is whether this is a business
cycle phenomenon or part of a longer term trend.
The group that has the best data source and takes the longer term look is the Mexican Migration Project
at Princeton. For decades they have been tracking migration patterns from Mexico and doing annual
surveys of thousands of families from migration centers in Mexico. They found that the percent of first
time immigrants from the Mexican communities of highest immigration fell from 1.2% of adults in 2000
to 0.6% in 2005 to zero in 2010. They identify that the changes are due to Mexican demographic and
4
economic factors as much as from U.S. conditions. They identified five internal factors of change in
Mexico:
• Fertility rates are falling dramatically from 6.8 births per women in 1970 to 2.8 in 1995 to 2 in
2010 (replacement level).
• The number of young people entering the labor market has fallen from one million a year in the
1990s to 700K today and demographic factors will bring that down to about 300K in 2030, not
enough to meet local job needs.
• The rate of college attendance and college completion has doubled over the last decade, raising
the career path of an increasing share of young workers.
• The wage disparity between Mexico and the U.S. is narrowing sharply with average wage gaps
falling from 10:1 in the 1960s to some 3.7:1 in the early 2000s.
• The cost of migration has risen dramatically for illegal entrants, further narrowing the earnings
gap.
All of these factors point to the need, at the least, of looking at alternative scenarios of population
growth in California that are more sensitive to possible underlying changes in migration patterns.
5
Sources of Demographic projections about California
US Bureau of the Census (responsible for the decennial census and does updated estimates each year of
state populations—has been much closer to actual numbers than the Cal Dept. of Finance)
California Department of Finance (responsible for state population estimates between the Census
years—forecasts used as key source for state government planning). Statewide estimates for 2010
(made in 2009) were 41% higher than the 2010 Census numbers for the state, 83% over for the nine Bay
Area counties and 137% higher for the three West Bay counties.
Ronald Lee, UC Berkeley, Center for Economics and Demographics of Aging, “Special Report: The
Growth & Aging of California’s Population”, 2003 (an important report that identified the detailed
assumptions that went into the Department of Finance’s long‐term projections).
Hans Johnson, Public Policy Institute of California, “California 2025: Taking on the Future”, Chapter 2
‘California’s Population in 2025’ (a report that gathered projections from eight academic and
government sources). Johnson concluded that “population projections for California are especially
difficult…In addition to overweighting contemporary trends, forecasters are notoriously bad at
predicting fundamental demographic shifts... For these reasons, planners should consider alternative
population scenarios.” Pages 27‐28.
John Pitkin & Dowell Myers, USC Population Dynamics Research Group, “The 2010 Census Benchmark
for California’s Growing and Changing Population”, February 2011; “Projections of the Population of
California by Nativity and Year of Entry to the U.S.”, April 2, 2011. (Pitkin and Myers had the lowest of
the forecasts in the 2005 study—though still overestimating growth by 16%. They are working with the
California Department of Finance on components for a new longer‐term forecast; they are still assuming
a net immigration number of 160,000 holding steady in the future.)
Steve Levy, Center for the Continuing Study of the California Economy
UCLA Anderson Forecasting Project
Greg Schmid
October 2011
Date: November 1, 2010
To: MTC Planning Committee, ABAG Administrative Committee
From: ABAG Staff
Subject: Employment Forecasting Method & Determining 25 Year Regional Housing Need
Summary
SB 375 requires each Metropolitan Planning Organization in California to develop a Sustainable
Communities Strategy, an integrated regional land use and transportation plan, that demonstrates,
amongst other things, areas within the region sufficient to house “all the population of the region.” The
steps and formulas for estimating the amount of housing needed to house all of the region’s population, as
well as the demographic and economic assumptions incorporated into the housing estimate are provided
in detail in this memo.
In addition, staff is requesting that the Board approve a new methodology used to forecast the region’s
long term employment growth. Regional job estimates are a fundamental component to forecasting
population growth and housing need.
As the result of a comprehensive review of employment growth forecasting techniques and results, staff is
recommending that ABAG adopt the “shift share” methodology to prepare the long-term forecast,
specifically to estimate the regional total number of jobs. This methodology would make ABAG’s
employment growth forecasts consistent with the other large metropolitan planning organizations in
California, and better explains the prior twenty year trend in Bay Area employment growth (1990-2010).
In summary, the agency is recommending that ABAG’s Executive Board approve:
1) A revised methodology for forecasting the region’s long-term employment growth;
2) The formula for calculating the region’s 25 year housing need;
3) The household formation assumptions to be used in the formula for calculating the 25 year
housing need.
2
Revised Employment Forecasting Methodology
For this year’s update to the forecast, the agency is recommending that staff employ a different
methodology for forecasting the region’s long-term job growth - a shift share method instead of the
current econometric (IMPLAN) model.
The alternative forecast method, utilized by the other large MPOs in California, is known as the “shift
share method.” The shift share method is essentially a two step process, whereby first total U.S.
employment is assumed for a future year. Next, the Bay Area’s share of that employment is assumed for
future years, typically by looking at historical regional shares of national employment. The Bay Area’s
share of employment is then applied to the U.S. total employment estimate, thereby arriving at total future
Bay Area employment.
There are several reasons for selecting shift share over econometric models to estimate total future Bay
Area employment. The shift share method is more consistent with the methodology of employment
forecast that is used by the other large MPOs in the State, namely SACOG and SCAG. It is more
transparent in terms of explanation and tracking history. It is more practical to use to explain the regional
economic narrative that underlies planning and the SCS. Additionally, the results of shift share conform
better to the regional perception of the long term job forecast. We recognize that there is great
uncertainty in forecasting the future economy. In order to better connect with our partners with the SCS,
we gain more credibility with forecasts that comport better with their understanding of the future
economy.
Calculating the Region’s 25 Year Housing need
The specific calculation of the number of units needed to “house all the population of the region” can be
described best as a series of steps. The first three steps are to estimate total population, while the final two
are about applying household formation rates to that total population:
1. Estimate demographic population growth, as determined by natural increase;
2. Estimate employment growth;
3. Determine in-migration, mostly due to employment growth;
4. Add in-migration to demographic population to arrive at total population;
5. Determine “household formation” rates;
6. Apply household formation or headship rate to total population to determine total housing need.
Household Formation Assumptions for the 25 Year Need
To describe the method more fully, exemplary household estimates have been included. This estimate was
made by starting with the 2000 census headship rates by age and racial/ethnic group for the bay area.
Since the Projections 2009 forecast did not differentiate racial/ethnic populations, estimates in the forecast
years were derived using data from the California Depart of Finance’s long run population forecast. After
reviewing various state demographic methodologies, and consulting with state from other regions, it was
assumed that individual racial/ethnic headship rates would trend 50% toward the 2000 regional mean by
the 2040 forecast year. This is to reflect the pattern of migrant groups taking on the characteristics of the
broader population over time.
2035 Example
Cohort
Total
Population Male Female Households
<15 1,661,460 846,520 814,940
15-24 1,076,530 550,800 525,730 105,970
25-34 1,187,140 609,160 577,990 512,310
35-44 1,181,710 600,720 580,980 677,940
45-54 1,042,580 524,010 518,580 602,050
55-64 998,410 499,000 499,410 508,130
65+ 1,952,280 895,860 1,056,430 1,163,360
Total 9,100,100 4,526,040 4,574,050 3,569,750
As a point of comparison, the Projections 2009 forecast of households for the same year is 3,302,780
3
4
APPENDIX 1: Detailed Discussion
Revised Employment Forecasting Methodology
As discussed in the September, 2010 staff report to the ABAG Executive Board, from 1990 to 2010, there
has been a marked shift in the trend of employment growth in the Bay Area. If we look at the current
decade and the 1990’s, we see that overall employment growth has only been about 5 percent; or about
0.25 percent annually. In 1990, total jobs amounted to 3.1 million, in 2000 there were 3.6 million jobs in
the Bay Area and by 2010, jobs declined to approximately 3.3 million.
ABAG’s previous projections (P 2009) estimated a total number of jobs of 5.1 million by 2035, reflecting
an average annual growth rate of approximately 1.7 percent. Despite the low percentage increase, this
trend is far greater than the Bay Area’s job production over the last 20 years. One of the key issues in
forecasting future employment growth is explaining why the Bay Area has added so few jobs in the last
twenty years despite robust growth in the regional economy, and whether this trend will continue into the
future.
The job component of the forecast is crucial for estimating total population and long term housing need,
as discussed further below. For this year’s update to the forecast, the agency is recommending that staff
employ a different methodology for forecasting the region’s long-term job growth - a shift share method
instead of the current econometric (IMPLAN) model. Over the last 15 years, ABAG staff has been using
IMPLAN software to generate a set of input/output (I/O) tables at the county level to estimate future
employment. Data sources that inform the county-level I/O tables, among others, are originally from the
U.S. Census Bureau, the State of California Employment Development Department and the State
Franchise Tax Board. These tables, primarily utilized to reflect the economic relationship between firms
(“impact analysis”), represent the Bay Area’s economy by showing the flow of goods and services
between sectors. Outputs from one regional industry become the input for another, or an economic sector
can use inputs from outside the region. Some outputs are locally sold; others are exported from the region.
These sector flows show the inputs from each industry needed to produce goods or services for a single
economic activity and the corresponding sales of goods and services to other industry sectors and to
consumers. For long term forecasting purposes however, the econometric model does not accurately
reflect changes in the region’s competitiveness with respect to how growth in the region’s economy
translates to growth in the region’s job production.
While there have been significant job losses during the recent recessions, there has also been a shift in the
regional economy over the last two decades. Growth in manufacturing, retail and utilities has been
limited, while significant growth has occurred in professional services, education and healthcare; areas
5
that tend to have higher output per employee. Further explaining the continued growth in regional GDP is
that jobs are also being restructured. Jobs that can be off shored or relocated to other lower cost areas
have increased firms’ productivity, but result in less employment in the Bay Area. Therefore, while there
is still a relationship of economic growth (or GDP) to employment, the relationship appears to be
fundamentally altered. Part of this explanation could result from the type of industries that are expanding
in the Bay Area, and part can be explained by the Bay Area’s cost of living which impacts regional
competitiveness. Survey information from Bay Area firms indicates that the cost of housing in the Bay
Area is one of the largest impediments to job growth here.
The alternative forecast method, utilized by the other large MPOs in California, is known as the “shift
share method.” The shift share method is essentially a two step process, whereby first total U.S.
employment is assumed for a future year. Next, the Bay Area’s share of that employment is assumed for
future years, typically by looking at historical regional shares of national employment. The Bay Area’s
share of employment is then applied to the U.S. total employment estimate, thereby arriving at total future
Bay Area employment.
A shift share analysis for the Bay Area was performed by Steve Levy, Director and Senior Economist at
the Center for Continuing Study of the California Economy at the request of ABAG. Mr. Levy, who is an
authority in the field, provides similar information to both the Southern California Association of
Governments and Sacramento Council of Governments.
As indicated at the September Executive Board, staff has been participating in numerous discussions with
respect to data associated with the Bay Area economy and job forecasting trends. A peer review group on
this subject was set up under the auspices of the Bay Area Council Economic Institute. Additional
meetings were held between MTC and ABAG to discuss the rationale of alternative methodologies.
Following a sufficient period of due diligence, ABAG staff is recommending that the best method for
forecasting future employment in the Bay Area should utilize the shift share method. A fuller discussion
of the rationale is provided below.
Shift Share Method and Results
The shift share method for employment forecasting utilizes the following approach: 1) estimate U.S. job
growth and 2) review historical data as to the share of jobs that the Bay Area captures of the national
total; 3) estimate the future Bay Area employment growth in relation to the national forecast. To estimate
long term U.S. job growth, Levy states (in memo to ABAG staff, See attachment 1, August 24 report, and
attachment 2, September 19 report) that the “normal methodology is to start with population by age
group, project labor force participation rates and unemployment rates and end with a projection of total
jobs for the nation.” Using this method, Mr. Levy projects U.S. job growth at just fewer than 180 million
jobs. While other metropolitan areas utilize other national employment forecast numbers, Mr. Levy’s
analysis reflects a 0.6 percent annual growth rate for the 2008-2035 period. According to Levy, the
forecast assumes less growth in immigration and 6 percent unemployment over the period. The forecast
also assumes “large growth in labor force participation by older workers.”
Mr. Levy also examined the Bay Area’s historical share of total U.S. jobs.
According to Levy’s analysis, the Bay Area had 2.65 percent of the nation’s jobs in 1990, and that share
fell to 2.46 percent in 2008.He goes on to say that the Bay Area lost approximately 100,000 jobs in the
1990s related to base closures, defense downsizing and their multiplier effect. He indicates that without
these losses, the Bay Area’s job share in 2008 would have been 2.53 percent instead of 2.46 percent. Levy
also states the “remaining share losses are largely the result of high productivity gains in the tech
manufacturing sector plus some movement of assembly jobs to other locations in the older parts of the
region’s high tech base. It is somewhat complicated in the sense that the Bay Area did not lose share in
these sectors since 1990 but that these sectors represent a larger part of the region’s economic base and,
thus, the national job losses hurt our region more.” Under this analysis, Mr. Levy has concluded that the
6
Bay Area’s high end share of 2.55% would result in a forecast of 4.4 million jobs in 2035, which means
that the Bay Area would be projected to grow an average of 50,000 jobs per year over the next 25 years.
Bay Area jobs would grow by roughly 24% compared to the national job gain of 18%, a higher growth
rate than that currently projected for SCAG and SANDAG. The rationale and optimism for this higher
growth rate is that the Bay Area economic base is concentrated in sectors likely to lead the nation in job
growth. However, while this forecast takes into account the Bay Area’s assets, it is substantially below
the econometric forecast of Projections 2009. We believe this forecast methodology more accurately
builds in recognition of the prior twenty year trend which has constrained job growth in the Bay Area.
While the agency is recommending a change in methodology to forecast total regional employment, the
existing model would be used to determine employment distribution by county and industry sector, as
well as to calculate related variables. However, total employment results from the traditional model would
be adjusted to fit the 4.4 million job estimate for the region.
Rationale for Using Shift Share
There are several reasons for selecting shift share over econometric models to estimate total future Bay
Area employment. Shift share methodology is consistent with other metropolitan planning organizations
(MPOs) in the state, and is more transparent and easier to understand than internal econometric modeling.
Consistency
The shift share method is more consistent with the methodology of employment forecast that is used by
the other large MPOs in the State, namely SACOG and SCAG. SANDAG uses a blend of methodologies
but their results, in terms of job growth forecasts, are similar to the other MPOs. Consistency with other
MPOs is valuable in that it makes SCS metrics comparable across the major metropolitan areas and
assists in implementing the policy goals of the State.
7
8
ansparent
are methodology is more transparent in terms of explanation and tracking history.
actical
methodology is more practical to use to explain the regional economic narrative that underlies
onforms to Regional Understanding
etter to the regional perception of the long term job forecast.
B 375 & Regional Housing Target
able Communities strategy must “identify areas within the region
he Bay Area regional agencies, as well as the State Department of Housing and Community
Tr
The shift sh
Assumptions regarding U.S. job growth projections are utilized throughout the nation. Looking at the
Bay Area's share (as well as other regions in CA) of national employment is easy to track over time, and
transparent as to which midpoint is selected based on the regional narrative. This simplicity contrasts
with ABAG's econometric model which uses a variety of inputs/assumptions and then transforms national
GDP projections into regional employment through a set of coefficients using IMPLAN data. One of the
many issues of using econometric data is that it is difficult to forecast the impacts on regional
competitiveness and leakage to the Central Valley.
Pr
Shift share
planning and the SCS. Using shift share, we can look at discreet periods (1960-1990) (1990-2010) and
track data. Projecting outward, the narrative as to how the SCS and other regional planning processes may
impact regional competitiveness is more understandable, as it is tracking the regional share of jobs
compared to the national average. Above the national average is one narrative; at or below is another.
C
The results of shift share conform b
Comments have been made by professors, planners, investment bankers and economists that ABAG's
employment projections are too high. We recognize that there is great uncertainty in forecasting the
future economy. In order to better connect with our partners with the SCS, we gain more credibility with
forecasts that comport better with their understanding of the future economy. Economic growth and job
growth are dependent on the region making progress on the many issues associated with proper planning
and investment. To the extent that the Bay Area makes progress on reducing constraints to job growth,
the Bay Area’s share of national employment will increase.
S
Senate Bill 375 states that the Sustain
sufficient to house all the population of the region, including all economic segments of the population,
over the course of the planning period of the regional transportation plan, taking into account net
migration into the region, population growth, household formation and employment growth.”
T
Development (HCD), interpret this requirement to mean that the region must plan for housing sufficient
to meet total new demand, as generated by natural population increase (net births), household formation
and employment growth. The region must demonstrate how all of the region’s growth in housing demand
can be met within the Bay Area’s nine county borders, and not by surrounding counties via “spill-over”.
9
he net effect of this legislative requirement is that the region must plan for more housing than it has
alculating the Regional Housing Target
rent process than what is used to traditionally estimate long-
ow to specifically calculate the number of units needed to “house all the population of the region” can
7. Estimate demographic population growth, as determined by natural increase;
due to employment growth;
population;
to total population to determine total housing need.
ormulaically, the above steps could be summarized as:
1) PopulationTotal = Population irths-deaths) + Net Migration(jobs)
tep 1: Demographic Population Growth
hic population is perhaps the most straightforward aspect of
looking at the details of the projected population for the region, specific policy implications emerge,
The purpose of this requirement is presumably to reduce vehicle miles traveled (VMT) attributed to
people living just outside of the region, and commuting to jobs within the Bay Area.
T
traditionally planned. To assume that the entire region’s housing demand will be fully met within the
region means to assume that there will be an increase in housing supply. The supply could be increased
through modifications to local land use plans and expanded subsidies for below-market rate housing.
C
Estimating housing demand or need is a diffe
term household growth. Demand in housing is generated by natural increase, employment growth, and
migration. When estimating demand, limitations on housing development are not taken into account, such
as fiscal or local land use constraints, e.g. zoning codes. Need is simply based on estimates of total
population and household formation.
H
be described best as a series of steps. The first three steps are to estimate total population, while the final
two are about applying household formation rates to that total population:
8. Estimate employment growth;
9. Determine in-migration, mostly
10. Add in-migration to demographic population to arrive at total
11. Determine “household formation” rates;
12. Apply household formation or headship rate
F
(b
2) HousingTotal Need = PopulationTotal x Household Formation
S
Estimating long-term growth in the demograp
estimating total housing need. Demographic population growth refers to growth attributed exclusively to
natural increase, or the number of new births, less deaths. Migration into the region is not taken into
account in the demographic population.
In
the most significant of which is the projected aging of the population. Over the next several decades, the
number of people over 65 and over 80 years old will nearly triple. By 2035, one quarter of the population,
almost 2.3 million people will be 65 years or older. Over three million people will be over 55; this is one-
third of the Bay Area’s projected population. As we plan our communities, and move forward with the
development of the Sustainable Communities Strategy, we will need to consider the needs of a much
older, and perhaps significantly greater non-driving population, including the need for non-auto
dependent mobility and smaller homes.
ployment Growth
pulation is directly impacted by economic growth. Population growth is
taff assumes that there will be a long-term decline in employment growth, over previous forecast
tep 3: In-Migration
tion is driven by economic opportunities in the Bay Area relative to opportunities
Step 2: Em
The region’s total projected po
attributed to two fundamental factors: natural increase and net in-migration. Economic opportunities are a
key driver to in-migration. Therefore, to understand migration you first need to understand how the
regional economy will grow, specifically how many jobs the Bay Area will have in the next 25 years.
S
periods. Considering the magnitude of the recession and anticipated slow recovery, in 2009 ABAG
reduced its long-term forecast by nearly 140,400 jobs for the year 2035, compared to earlier forecasts.
Under the recommendation contained in this staff report, the 2035 forecast would be reduced by 700,000
jobs over Projection 2009 estimates. (See discussion regarding employment forecasting method above)
S
As stated above, migra
outside the region. A primary driver of in-migration occurs when a tight labor market causes people
(economic migrants) to relocate to obtain employment. Once employment growth is estimated, labor
force participation rates are applied to the demographic population. The difference between the available
labor force and the number of new jobs is the unmet demand for labor. The demand for labor is supplied
by migrants into the region and in-commuters.
10
M
11
igration is also composed of (although to a much lesser extent) social migration and retirement
tep 4: Compute Total Population
d, net migration can be computed. The net number of new migrants
PopulationTotal = Population(births-deaths) + Net Migration(jobs)
tep 5: Headship Rates/Household Formation
population who are heads of household. Every head of
ine how many housing units are needed to house the entire
he chart above, constructed from data compiled by a housing economist at the National Association of
imates have been included. This estimate was
migration, which is dependent on employment, income and the cost of living. Data from the Department
of Finance on projected migration by age cohort demonstrates that an increasing number of seniors will
be migrating out of the region by 2040. Even considering the increase in retirement migration, we project
the 65 years and older age group to see the greatest growth rates in the coming decades.
S
Once employment growth is estimate
into the region is added to the demographic population to make up the region’s total projected population.
S
Headship rate is the percentage of people in the
household, theoretically, requires a
separate housing unit. If there were
no restrictions on the number of
housing units available, i.e. those
that exist due to local land use
policies or other financial and/or
environmental constraints on
development, every head of
household would form new
“households” or need a home. The
rate of new households that are
formed is called the household
formation rate. It is these rates that
are applied to the total population to determ
population.
T
Home Builders (NAHB), shows U.S. age-specific headship rates for 2002. Notice that those age 65 and
over have a headship rate four times that of 15- to 24-year olds, and about third larger that those in the 25-
to 34-year old category. As the senior age group grows, this difference in headship rates really begins to
matter. That the Bay Area’s population is dramatically aging over the next 25 years, therefore, has
significant implications for the region’s total housing need.
To describe the method more fully, exemplary household est
12
tep 6: Apply Headship Rate to Total Population
la uses household formation rates to determine how
HousingTotal Need = PopulationTotal x Household Formation
ousing Need and the In-Commute
forecast is inter-regional commuting. People working in the Bay
made by starting with the 2000 census headship rates by age and racial/ethnic group for the bay area.
Since the Projections 2009 forecast did not differentiate racial/ethnic populations, estimates in the forecast
years were derived using data from the California Depart of Finance’s long run population forecast. After
reviewing various state demographic methodologies, and consulting with state from other regions, it was
assumed that individual racial/ethnic headship rates would trend 50% toward the 2000 regional mean by
the 2040 forecast year. This is to reflect the pattern of migrant groups taking on the characteristics of the
broader population over time..
S
Once total population is determined, the second formu
many house units are needed to house the total population.
H
A related component of the population
Area, but living outside the region are motivated by factors similar to economic migrants. However,
housing costs and opportunities cause them to make different choices, i.e. to live just outside of the region
in surrounding counties, rather than within the region. If the region were to supply sufficient housing to
meet all demand, as generated by both demographic changes and migration, then inter-regional
commuting would be obviated. If the total need is not supplied, then people will continue to choose to
live just outside of the region, and commute in to their place of employment. Therefore, the amount of
housing supplied by the region has a direct impact on the numbers of people who commute into the
region.
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Planning Committee STAFF REPORT
Meeting Date: February 1, 2012
Subject SB375/SCS Implementation Update and Transmittal of
Comment Letter on SCS Alternatives
Summary of Issues ABAG has requested comments from local jurisdictions on the
evaluation results for the Sustainable Communities Strategy
(SCS) alternative scenarios. Staff has developed general
comments on the three constrained Alternative Scenarios, and
has compiled comments received to date from Contra Costa
jurisdictions. Staff recommends transmittal of a comment letter
to MTC/ABAG on the SCS Alternatives.
Recommendations Approve transmittal of comment letter to MTC/ABAG on the
SCS Alternatives
Financial
Implications
N/A
Options Allow the selection of a preferred SCS alternative to proceed
without further comment
Attachments A. Draft comment letter to Executive Directors Steve
Heminger, MTC, and Ezra Rapport, ABAG Executive Director
Ms. Adrienne Tissier, Chair of MTC, and Mr. Mark Luce,
President of ABAG – Authority Comments on SCS Alternative
Scenarios – (Revised)
B. Comment letters from local jurisdictions regarding the SCS
Alternative Scenarios – (Revised)
Changes from
Committee
The Planning Committee (PC) approved transmittal of a
comment letter to the Chair of MTC and the President of ABAG,
supporting the restoration of the Current Regional Plans
scenario, and requesting development of a balanced jobs‐
housing scenario based on Current Regional Plans. PC directed
staff to continue to work on the letter, noting that in some
jurisdictions, large differences still remain between the proposed
scenarios and local general plans.
Planning Committee STAFF REPORT
February 1, 2012
Page 2 of 7
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Background
In response to Senate Bill (SB) 375, MTC is required to develop a Sustainable
Communities Strategy (SCS) that meets the Greenhouse Gas (GHG) emission reduction
targets for cars and light trucks as established by the California Air Resources Board
(CARB). Work is currently underway at the regional agencies to define and evaluate a
number of SCS alternatives with an objective of establishing a preferred SCS alternative
by March 2012 for incorporation into the 2013 Regional Transportation Plan (the RTP,
also known as Plan Bay Area).
Evaluating the Sustainable Community Strategy (SCS) Alternatives
Work continues at the regional agencies on the analysis of five SCS alternatives:
1. Initial Vision Scenario (IVS): As defined in April 2011, this scenario assumes
unconstrained housing and jobs growth for the Bay Region through 2040, and
focuses the majority of new growth in Priority Development Areas (PDAs).
2. Core Concentration Unconstrained (CC‐U): Uses the unconstrained land use
forecasts from the IVS, and focuses growth more in the PDAs that are located in
the inner bay areas of San Francisco, Oakland, and San Jose.
3. Focused Growth Scenario (FG): This scenario is constrained and recognizes the
potential of the PDAs and Gorwth Opportunity Areas (GOAs), with an emphasis
on housing and job growth along major transit corridors.
4. Constrained Core Concentration Growth Scenario (CCC): This scenario uses a
constrained land use forecast, while concentrating housing and job growth at
selected PDAs in the inner Bay Area (defined as areas along the Bay from
Richmond south to San Jose and up to San Francisco), and along the region’s
core transit network.
5. Outer Bay Area Growth Scenario (OBA): This scenario addresses higher levels of
housing and jobs growth in the outer Bay Area in the context of a constrained
land use forecast, shifting jobs and housing away from San Francisco.
To qualify as an SCS, the alternatives must meet a per capita GHG reduction target of 7
percent below 2005 emissions by 2020, and 15 percent below 2005 by 2035. Recently
released modeling results from ABAG and MTC indicate that all of the alternatives meet
the 7 percent GHG reduction target for 2020, but none meet the 2035 emissions
reduction target of 15 percent. As shown below in a PowerPoint slide extracted from
Planning Committee STAFF REPORT
February 1, 2012
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MTC staff’s presentation, GHG reductions for 2035 range from minus 7.9 percent for the
Outward Growth scenario, to minus 9.4 percent for the Constrained Core Concentration
alternative.
10
Each of the five scenarios
exceeds the 2020 target.
The year 2035 result
exceeds, in each scenario,
the year 2020 result.
To bridge the remaining gap, MTC proposes to introduce a series of policy initiatives
that would further reduce GHG emissions across all alternatives by an additional 6.5
percent. The policies, when overlaid upon the SCS alternatives, would bring both the
Focused Growth and the Constrained Core Concentration alternatives to the 15 percent
target. The remaining alternative come within a fraction of a percent (for example,
Outward Growth would have a 14.4 percent reduction, just 0.6 percent away from the
target).
The proposed policy initiatives are outlined on the following page (also extracted from
MTC staff’s PowerPoint):
Planning Committee STAFF REPORT
February 1, 2012
Page 4 of 7
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Policy Initiative Per‐Capita CO2
Emissions
Reductions
(2035)
Smart Driving Campaign1
(changing driver behavior to improve fuel economy; ~$27 m over 5 yrs)
1.4%
Bicycle Network
(build out of the regional bike network; ~$2,200 m over 28 yrs)
0.5%
Safe Routes to Schools/ Pedestrian Network
(expansion of the SR2S and a continued TLC program; $500 m over 5 yrs)
0.3%
Vanpool Incentives
(significant increase in the monetary incentive; ~$37 m over 10 yrs)
0.9%
Electric Vehicle Strategy
(consumer incentives, education, and charger installations to accelerate
EV adoption; ~$170 m over 10 yrs)
1.0%
Commuter Benefit Ordinance
(mandatory pre‐tax transit passes or employer operated shuttles; admin
cost)
0.3%
Telecommuting
(no specific policies identified at this time)
1.4%
Parking Pricing
(modest pricing throughout the region with higher pricing near transit;
meter & enforcement cost)
0.7%
TOTAL 6.5%
Planning Committee STAFF REPORT
February 1, 2012
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With this information at hand, Authority staff is prepared to comment to MTC and ABAG
on the SCS alternatives. A draft comment letter is shown in Attachment A, with key
points summarized as follows:
• The alternatives scenario evaluation lacks a “no‐build” alternative. We would
like to see that alternative, formally known as “Current Regional Plans
(CRP),”restored and made comparable to the SCS alternatives
• The Outward Growth scenario, which initially sounded promising, turns out not
to embrace the regional job center concept that we previously requested
MTC/ABAG to analyze
• The overall forecast for the region still appears to be higher than recent data
would dictate, given the ripple effects of the recession, and perhaps a sixth
alternative that lowers the forecast and promotes subarea jobs‐housing balance
should be explored
• The recently ‐introduced policy initiatives significantly change the playing field.
Depending on how aggressive they are (assuming they are all in the 6 percent to
8 percent range), any of the alternative scenarios could become viable SCS
options regardless of land use distribution.
The Importance of Maintaining “Current Regional Plans” as the “No‐Build” Alternative
The CRP Alternative is essentially the “no‐build” scenario for the SCS. It was developed
by ABAG through extensive input from local staff and was based upon adopted general
plans. The CRP was released by ABAG as draft Projections 2011 in December 2010.
Authority staff views the CRP alternative as a critical benchmark that reflects local
general plans, including some preliminary SCS elements as set forth in adopted specific
plans for selected PDAs, that would remain in effect even if the new RTP is not adopted.
According to MTC staff, the CRP, when tested using the T‐2030 financially‐ constrained
transportation network, resulted in a 7 percent reduction in GHG emissions. The CRP
corrected for the impacts of the recession, with significantly lower growth figures than
ABAG’s Projections 2009 from two years prior. These recession corrections, when
coupled with new modeling results, further increased emissions reductions for draft
Planning Committee STAFF REPORT
February 1, 2012
Page 6 of 7
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Projections 2011 and the CRP by 5 percent (from 2 percent to 7 percent) compared with
Projections 2009.
Staff believes that the performance of the CRP alternative would improve slightly if it
were analyzed using the same unconstrained transportation network that MTC assumed
for the Constrained Core Concentration and Focused Growth alternatives, which were
each tested assuming increases in transit frequency of 46 percent regionwide.
MTC and ABAG staff have indicated that they no longer support the CRP alternative, and
that they will no longer analyze it as a “base case” for comparison to the “build”
Alternatives 1 through 5. Indeed, they have also opted not to update the CRP to reflect
the 2010 Census, making it more difficult for Authority staff to attempt “apples‐ to‐
apples” comparisons with the SCS alternatives. Without the CRP, however, we have no
benchmark with which to compare the SCS Alternatives.
We therefore, in our comment letter, request that MTC/ABAG restore the CRP as the
“base case” or “no build” alternative for the SCS analysis.
Other Comments
The attached comment letter points out that the proposed land use changes for the
constrained SCS alternatives (FG, CCC, and OB) involve especially significant land use
shifts when compared to adopted policies as reflected in the CRP. The changes to GHG
emissions, however, are marginal. This becomes acutely evident when viewed in the
broader context of AB 32, which addresses total emission reductions for all sectors,
including industry, manufacturing, construction, and agriculture. Because so much of
the Bay Area has already been developed, changes in future land use patterns – even
the extreme changes considered in the Core Concentration Alternatives – have very
little impact on GHG emissions from cars and light trucks.
Although the regional forecast for the FG, CCC, and OB Alternatives is “constrained,” it
still assumes growth rates that are considerably higher than those experienced in the
past 20 years, and it still does not fully incorporate the ripple effects of the persistent
recession. We therefore have asked MTC to consider lowering the forecast. A lower
Planning Committee STAFF REPORT
February 1, 2012
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forecast would likely improve the performance of all of the alternatives, because as we
have learned through the visioning exercise (the IVS and CC‐U), lower population growth
means less travel, less congestion, and fewer emissions.
Also noted in our letter are the effects of the recently‐introduced policy alternatives
(enhanced telecommuting, electric vehicles, etc.), which were brought in by MTC and
ABAG to close the remaining gap between the SCS alternatives and the GHG emissions
target. These have a far more significant impact on emissions than land use changes.
With a 6.5 percent reduction, they are five times as effective as the most aggressive SCS
Alternative (Core Concentration Unconstrained). Furthermore, the assumed percentage
reductions that MTC assigned to each individual policy, if “tweaked” by only a couple of
percentage points, result in even the CRP meeting the SCS target. Enhanced
telecommuting, for example, with its direct impact on trip reduction, could move the
needle several percentage points in the right direction if more aggressive policies were
pursued.
We therefore at this time recommend that MTC/ABAG restore Current Regional Plans as
a “no build” benchmark and perform an “apples‐to‐apples” comparison with the SCS
alternatives. We also suggest a sixththat the preferred alternative that wouldshould
blend the CRP with local jurisdiction comments on the development prospects of the
PDAs, and would foster the achievement of subarea jobs‐housing balance in places like
East County that are striving to achieve it. This new preferred alternative, called the
“Subregional Jobs‐Housing Balance” alternative, cshould result in a reasonable,
achievable SCS that has local support, is congruous with local land use plans and
programs, and meets the emissions targets.
COMMISSIONERS
David Durant, Chair
Don Tatzin,
Vice Chair
Janet Abelson
Genoveva Calloway
Jim Frazier
Federal Glover
Dave Hudson
Karen Mitchoff
Julie Pierce
Karen Stepper
Robert Taylor
Randell H. Iwasaki,
Executive Director
2999 Oak Road
Suite 100
Walnut Creek
CA 94597
PHONE: 925.256.4700
FAX: 925.256.4701
www.ccta.net
February 15, 2012
Ms. Adrienne J. Tissier, Chair Mr. Mark Luce, President
Metropolitan Transportation Commission Association of Bay Area Governments
Joseph P. Bort Metro Center Joseph P. Bort Metro Center
101 Eighth Street P.O. Box 2050
Oakland, CA 94607‐4770 Oakland, CA 94607‐4756
Subject: Authority Comments on Sustainable Communities Strategy (SCS)
Alternative Scenarios
Dear Ms. Tissier and Mr. Luce:
ABAG staff recently requested local agency comments on its land use scenarios
developed as part of the Bay Area’s Sustainable Communities Strategy (SCS).
The Authority (CCTA) acknowledges the high level of outreach with which ABAG
staff engaged the CMAs and local jurisdictions during the SCS development
process, and appreciates the opportunity to comment on the alternative
scenarios.
The passage and implementation of AB 32 and SB 375 set in motion a very
complicated and challenging task for MTC and ABAG: to define a Sustainable
Communities Strategy that will have broad regional support while reducing
greenhouse gas (GHG) emissions as part of a broader statewide effort.
The Authority commends MTC and ABAG staff on the thought and effort they
have dedicated to the San Francisco Bay Region’s SCS and the work here in
Contra Costa, in particular. Regional agency staff explained the rationale and
assumptions of the SCS’s development; provided the initial and interim versions
of the SCS to local planning agencies in a variety of formats and at several levels
of geography; and worked diligently to both elicit and respond to comments,
questions, and criticisms of the proposed allocations of forecast growth to the
individual communities, PDAs, and other small‐area levels.
The Authority is helping to facilitate review of the SCS process and alternatives
by the County and our 19 cities and towns. We encouraged jurisdictions to send
their comments to us and the letters we received are attached.
Draft
4.B.4-8
ATTACHMENT A
Ms. Adrienne Tissier
Mr. Mark Luce
February 15, 2012
Page 2
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Each responding jurisdiction is pleased to participate in the process and is committed to
help develop a workable SCS. All are concerned, however, about some or all of the
alternatives and their underlying assumptions. Their analyses lead us to offer the
following comments as part of a continuing effort to respond to MTC and ABAG and
improve the SCS process and its chances for implementation.
The Jobs and Housing Forecasts Remain Too High Which Has Important Ramifications
for the Region
We recognize and appreciate that the jobs and housing forecasts used for the
alternative scenarios are lower than those employed in the Initial Vision Scenario and
the Core Concentration Unconstrained Scenario.1 Nevertheless, the new forecasts for
the three constrained scenarios remain at the high end of remotely plausible outcomes
for the forecast period. We find insufficient justification for the forecasts used in the
alternative scenarios in the material provided to us.
Regarding jobs, from 1990 to 2007 the Bay Region added jobs at an annual rate of
25,200.2 Skipping over the “great recession” to the year 2010, ABAG is assuming in its
constrained forecast for Scenarios 3 through 5 that the region will add 33,200 jobs
annually from 2010 to 2040.3 This pace of growth seems highly speculative and anything
but “constrained”.
We briefly note that the future housing growth picture has changed dramatically
following the collapse of the housing bubble and the resultant recession.4 Recent work
performed by a nationally recognized economics consultant reduced the 2040 housing
forecast for Contra Costa by 100,000 units. We therefore suggest that you revisit the
housing forecast, taking into account the time required for the market to re‐absorb
foreclosed and abandoned housing units before a resurgence in building can occur.
1 The jobs and housing forecasts of the two unconstrained forecasts (Scenarios 1 and 2) offer, in our view, neither a
reasonable nor an achievable basis for developing the SCS. Therefore, neither is considered in the balance of this letter.
2 2007 Jobs (3,652,000) ‐ 1990 Jobs (3,224,400) = 427,600, / 17 (years) = 25,153/year.
3 2040 Jobs (4,266,752 ‐ 2010 Jobs (3,271,878) = 994,874, / 30 (years) = 33,162/year.
4 The 2011 Woods & Poole series projected 548,770 Contra Costa households by 2040, 17,100 less than the Initial Vision
Scenario but 36,850 higher than the Outer Growth scenario. In 2012, while still recognizing the relatively strong growth
potential of the Western United States, California and the San Francisco Bay Area, Woods & Poole has reduced its 2040
forecast to 448,131 households for Contra Costa County: that’s 24,100 households lower than the Constrained Core
Concentration scenario comparable forecast.
4.B.4-9
Ms. Adrienne Tissier
Mr. Mark Luce
February 15, 2012
Page 3
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We also refer you to the analysis prepared by Palo Alto Council member Greg Schmid
that demonstrates a pattern of forecasts consistently exceeding actual growth.5
These are more than debating points. The forecasts would require numerous General
Plan changes to accommodate more intense land use than currently anticipated in many
jurisdictions and may overwhelm the capacity of current, planned and affordable
infrastructure. Our jurisdictions also note that the housing forecasts in the alternative
scenarios may form the basis for the next round of RHNA allocations, which in turn may
require jurisdictions to make major changes to their housing elements, some of which
were only recently approved. Adopting more realistic jobs and housing forecasts would
diminish demands to intensify land uses, reduce GHG production by reducing energy
consumption, congestion and trips, and necessitate less expensive improvements to
transit and highway infrastructure and operations.
Therefore, we strongly recommend that the jobs and housing forecasts for the
preferred scenario be reduced in light of historical performance, current conditions, and
more likely outcomes for future growth.
Contra Costa County is Diverse and No Single Scenario Adequately Meets the
Aspirations and Conditions of our Jurisdictions
Alternative Scenarios 3, 4, and 5, while applying identical “constrained” household and
job forecasts region‐wide, offer significantly different land use futures for the Bay Area.
“Focused Growth” (FG), “Constrained Core Concentration Growth” (CCC), and “Outward
Growth” (OG) each follow a distinct pattern of distribution of the fixed increment of
future regional growth.
As a county with extensive growth potential in multiple PDAs (with less potential in
others) and with communities and sub regions classified as both “Inner Bay Area” and
“Outer Bay Area”, the differences between the alternative scenarios are, for Contra
Costa, very large indeed. Furthermore, the alternative scenarios are inconsistent with
the Current Regional Plans (CRP) scenario, which received an extensive review by local
staff and which reflects expected growth based upon local general plans.6
With regard to comments on individual PDA and city allocations, we refer you to the
5 Greg Schmid, Councilmember, City of Palo Alto “California Demographic Forecasts: Why are the numbers over‐
estimated?,” November 2011, included in City of Palo Alto’s City Council Staff Report “Response to Alternative Scenarios
for SCS”, dated December 5, 2011.
6 Current Regional Plans – essentially ABAG Projections 2011– was extensively reviewed by the planning staff of Contra
Costa’s local jurisdictions and in our view reflects the most likely land use forecast for Contra Costa.
4.B.4-10
Ms. Adrienne Tissier
Mr. Mark Luce
February 15, 2012
Page 4
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attached letters received from our jurisdictions.
Reflecting the diversity of our 19 cities and towns, each jurisdiction finds different
scenarios more to their liking. No single scenario reflects the aspirations and conditions
of a large share of our jurisdictions. To illustrate this point, the following table (based
upon attached subarea Tables 1‐12) compares the Current Regional Plans (CRP) to the
three alternative scenarios (FG, CCC, and OG) for four Contra Costa sub areas, which are
in themselves not homogeneous. Figures 1 and 2 summarize these observations.
Figure 1. Subregional Household Growth 2010 ‐ 2040 by SCS Scenario
0
10,000
20,000
30,000
40,000
50,000
60,000
West County Central County East County Tri‐Valley (C.C.C) Tri‐Valley (A.C.)
Ne
t
Ne
w
Ho
u
s
e
h
o
l
d
s
CRP Growth
FG Growth
CCC Growth
OG Growth
Figure 2. Subregional Job Growth 2010 ‐ 2040 by SCS Scenario
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
West County Central County East County Tri‐Valley (C.C.C) Tri‐Valley (A.C.)
Ne
t
Ne
w
Jo
b
s
CRP Growth
FG Growth
CCC Growth
OG Growth
4.B.4-11
Ms. Adrienne Tissier
Mr. Mark Luce
February 15, 2012
Page 5
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We conclude that any successful SCS must be a combination of the alternative scenarios
and the Current Regional Plans.
Contra Costa County
Sub-Area
Alternative Scenarios (Compared to Current Regional Plans)
3. Focused Growth
(FG)
4. Constrained Core
Concentration (CCC) 5. Outward Growth(OG)
West County
Intensified housing growth (Table 1)
Arbitrarily cuts job
growth in half (Table
2)
Represents the closest housing growth to the
CRP (Table 1)
Arbitrarily cuts job
growth in half (See Table 2)
Slightly increased housing growth (Table
1)
Arbitrarily cuts job
growth in half (Table 2)
Central County &
Lamorinda
Slight increase in
housing growth
(Table 3)
Slight decrease in job
growth (Table 4)
Slightly less housing
growth than the CRP
(Table 3)
Fewer jobs (Table 4)
Significantly higher
(38%) housing growth
(Table 3)
Job growth higher than
CRP (Table 4)
East County
Housing growth that
most closely
resembles the CRP
(Table 5)
Significant (more
than 50%) reduction
in job growth for East County compared to
the CRP (Table 6)
Reduced housing
growth (Table 5)
Significant (more than
50%) reduction in job growth for East County
compared to the CRP
(Table 6)
More housing growth
than the CRP (Table 5)
Significant (50%)
reduction in job growth for East County
compared to the CRP
(Table 6)
Tri-Valley
Reasonable housing
growth for Contra
Costa, slight reduction for
Alameda portion
(Table 7)
Increased jobs for Contra Costa; lower
job growth for
Alameda portion (Tables 8 and 10)
Significant reductions in
planned housing growth
Reasonable job growth for Contra Costa
Significant reductions in
job growth for Alameda (Table 10)
Overall, 35% reduction
in jobs (Contra Costa
and Alameda combined – Table 12)
More housing growth
for Contra Costa, less
for Alameda portion (Tables 7 & 9)
More job growth for
Contra Costa, less for Alameda portion (Tables 8 & 10)
Overall job growth
similar to CRP (within 3%)
4.B.4-12
Ms. Adrienne Tissier
Mr. Mark Luce
February 15, 2012
Page 6
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Land Use Changes Make a Limited Contribution to Achieving the AB 32/SB 375 Target
and Differences among Scenarios Are Minor
After careful review of the SCS Alternatives, we are compelled to comment on the
overall GHG reduction targets and the factors that will help achieve them. Figure 3, on
the following page, shows the forecast of GHG emissions in the state of California over
the next 40 years.
During this time, the SB 375 target is to reduce carbon dioxide emissions to 85 million
equivalent metric tons per year (tons) by the year 2050, a more than 80 percent
reduction. By the year 2020, to return emissions to the 1990 level of 427 tons, forecast
emissions of 507 tons have to be reduced by 80 tons. Of the 80 ton reduction, only
three tons, or roughly four percent are to be achieved by altering land use patterns as
envisioned through SB 375; the 96 percent balance is to be achieved from improved fuel
standards, energy efficiency, industrial measures, and other methods to curb emissions
from the construction, manufacturing, and agricultural sectors.
We conclude from Figure 3 that changes in regional land use patterns offer a relatively
small contribution to the overall strategy for reducing GHG emissions. Given the
significant and challenging regulatory, economic, and investment efforts necessary to
fundamentally change land use patterns, the question of cost effectiveness arises. What
are the costs of the relatively modest reductions in GHG emissions associated with
variations in land use patterns? And might there be less costly, more feasible options for
achieving them?
A key lesson that we have learned from the regional agencies’ efforts is that GHG
emissions are not particularly sensitive to land use change. In fact, the Alternative
Scenarios show reductions in GHG by 2040 ranging from minus 7.9 percent to minus 9.4
percent. Compared to the CRP, which received a minus 7.0 percent based on the higher
starting point of the 2000 Census, even the most aggressive land use changes only move
the needle a couple of points.
4.B.4-13
Constrained Core Concentration
Initial Vision/Core Concentration
Focused Growth
Outward Growth
Current Regional Plans
9.4%
9.1%
8.2%
7.9%
7.0%
Bay Area Regional Contribution
Scenarios
Mi
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1990 1995 2000 2005 2010 2015
100
250
300
350
150
200
400
450
500
550
600
650
700
750
800
850
2020 2025 2030 2035 2040 2045 2050
80%
427 427
800**
85
275
4
3
2
1507
610
*Million Metric Tons CO2 Equivalent
Tons*
2020 Emissions 507
Target 2020 Emissions (1990)427
Forecast 2050 Emissions 800**
Target 2050 Emissions (20% of 1990)
Target 2035 Emissions (interpolated)
85
Required Reductions:
Year Tons*
By 2020 80
By 2050 715**
1
2
3
4
5 275
**Estimate based on California Council on Science and Technology Report, 2011
IMPROVED FUEL EFFICIENCY (PAVLEY I & II) LOW CARBON FUEL STANDARDSREGIONAL LAND USE & TRANSPORTATION (SCS)
Projected Land Use & Transportation Emissions Reductions
NON-TRANSPORTATION EMISSIONS REDUCTIONACTUAL/PROJECTED EMISSIONS
5
Figure 3: Regional Land Use and Transportation SCS
Achieving StAtewide ghg Reduction tARgetS
4.
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Ms. Adrienne Tissier
Mr. Mark Luce
February 15, 2012
Page 8
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We Recommend a Preferred SCS Focused on the Current Regional Plans and
Incorporating the Policy Directions Being Contemplated
We urge MTC/ABAG to restore the Current Regional Plans Scenario as a benchmark, or
“Base Case” that gives us an “apples‐to‐apples” comparison with the SCS Alternatives.
Specifically, we would like to see the CRP updated to the 2010 Census, and extended out
to 2040, so it is comparable to the SCS alternatives. We would also like to see the CRP
tested using the core transit network that was used to evaluate the Focused Growth and
Constrained Core Concentration Scenarios. This will further inform us of the
performance of the SCS alternatives, apples‐to‐apples.
We ask that you incorporate the CRP forecast into the SCS analysis as the “no‐build”
alternative.
The CRP includes three important concepts that our jurisdictions want the final SCS to
incorporate: 1) Restore jobs to the east and west subareas; 2) match Central County
housing growth with available capacity; and 3) include a more realistic jobs, population,
and housing forecast.
Restore Jobs to the East and West Subareas
We are concerned about the cutback in job growth for Contra Costa’s East and West
subareas. East County in particular is already “housing rich” and “jobs poor.” Yet all of
the scenarios (FG, CCC, and OG) assume 50 percent fewer jobs than the CRP. Reduced
job growth in East County will only serve to exacerbate congestion on Highway 4. We,
therefore, cannot support any alternative that forces more East County residents to
commute to the inner Bay to get to their jobs.
Historically, West County has had more workers than jobs, and prior to the recession
the jobs‐housing balance in that subarea was steadily improving. Yet all of the scenarios
(FG, CCC, and OG) assume a 50 percent reduction in job growth. This assumption will
generate congestion, especially on I‐80, as more workers living in West County would be
forced to commute to Oakland or San Francisco to their jobs.
In our previous letter, we advocated for consideration of “regional job centers.” We
were initially heartened to learn that MTC/ABAG had added an Outward Growth
Scenario specifically to respond to our suggestion. We are now, however, disappointed
to find that the OG scenario increases housing in areas of Contra Costa that already
were approaching jobs‐housing balance (in Central County, for example), and reduces
jobs in the places where they are needed the most (East and West County). We request
4.B.4-15
Ms. Adrienne Tissier
Mr. Mark Luce
February 15, 2012
Page 9
S:\05‐PC Packets\2012\02\Authority\4.B.4 Attach.A.SCSAlt.Comment Letter.docx
that the final SCS scenario at a minimum restores job growth in West and East County to
the CRP levels, and improves jobs‐housing balance throughout Contra Costa.
Match Central County Housing Growth with Available Capacity
The OG Scenario adds 13,628 additional households in Central County compared with
the CRP. This 38 percent increase assumes a growth rate of 1,646 new dwelling units per
year. Not since the 1970’s has Central County come close to this rate of growth. Even
including development of the Concord Naval Weapons Station, we consider this forecast
unrealistic.
Include a More Realistic Jobs, Population, and Housing Forecast
Our comments on the forecast for the alternative scenarios are described above. A
more plausible forecast will reduce the need for the major modifications in land use
policy required by the alternative scenarios and can look more like Current Regional
Plans.
Finally, we understand that since none of the alternatives achieves the 2040 GHG
reduction goal, you are analyzing “policy directions” to bridge the gap. We applaud this
decision and note that these directions may reduce GHG by approximately 6.5 percent.
This effect is four times the variation among the Alternative Scenarios and would enable
all scenarios and the CRP to meet the GHG goal.
The Authority recommends an SCS incorporating these features, coupled with a robust
T‐2040 transportation network, and the newly introduced policy directions. This should
result in a reasonable, achievable SCS that has local support and is congruous with local
land use plans and programs. We look forward to continuing this very engaging and
productive dialogue with you on the Bay Region’s future.
Sincerely,
DRAFT
David E. Durant
Chair
cc: CMA Directors
Doug Kimsey, MTC
Ken Kirkey, ABAG
File: 13.03.08.06
Attachments
4.B.4-16
Table 1. West County Household Forecasts
Scenario 2010
Growth
2010‐2040 2040 Total
0. Current Regional Plans* 88,549 26,334 114,883
3. Focused Growth 88,549 29,744 118,293
4. Core Concentration‐Constrained 88,549 27,795 116,344
5. Outward Growth 88,549 29,651 118,200
Table 2. West County Job Forecasts
Scenario 2010
Growth
2010‐2040 2040 Total
0. Current Regional Plans* 62,590 36,092 98,682
3. Focused Growth 62,590 18,775 81,365
4. Core Concentration‐Constrained 62,590 18,087 80,677
5. Outward Growth 62,590 18,914 81,504
*2010 Base Normalized to Alternative Scenarios
HOUSEHOLDS
*2010 Base Normalized to 2010 Census
JOBS
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Table 3. Central County Household Forecasts (includes Lamorinda)
Scenario 2010
Growth
2010‐2040 2040 Total
0. Current Regional Plans* 146,020 35,764 181,784
3. Focused Growth 146,020 39,185 185,205
4. Core Concentration‐Constrained 146,020 32,920 178,940
5. Outward Growth 146,020 49,392 195,412
Table 4. Central County Job Forecasts (includes Lamorinda)
Scenario 2010
Growth
2010‐2040 2040 Total
0. Current Regional Plans* 176,455 56,873 233,328
3. Focused Growth 176,455 53,769 230,224
4. Core Concentration‐Constrained 176,455 48,122 224,577
5. Outward Growth 176,455 65,632 242,087
*2010 Base Normalized to Alternative Scenarios
HOUSEHOLDS
*2010 Base Normalized to 2010 Census
JOBS
4.
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Table 5. East County Household Forecasts
Scenario 2010
Growth
2010‐2040 2040 Total
0. Current Regional Plans* 102,962 36,286 139,248
3. Focused Growth 102,962 33,175 136,137
4. Core Concentration‐Constrained 102,962 30,390 133,352
5. Outward Growth 102,962 47,355 150,317
Table 6. East County Job Forecasts
Scenario 2010
Growth
2010‐2040 2040 Total
0. Current Regional Plans* 55,943 41,880 97,823
3. Focused Growth 55,943 17,100 73,043
4. Core Concentration‐Constrained 55,943 15,565 71,508
5. Outward Growth 55,943 21,757 77,700
*2010 Base Normalized to Alternative Scenarios
*2010 Base Normalized to 2010 Census
JOBS
HOUSEHOLDS
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Table 7. TriValley ‐ Contra Costa Household Forecasts
Scenario 2010
Growth
2010‐2040 2040 Total
0. Current Regional Plans* 37,833 8,632 46,465
3. Focused Growth 37,833 9,071 46,904
4. Core Concentration‐Constrained 37,833 5,780 43,613
5. Outward Growth 37,833 10,155 47,988
Table 8. TriValley ‐ Contra Costa Job Forecasts
Scenario 2010
Growth
2010‐2040 2040 Total
0. Current Regional Plans* 57,882 14,819 72,701
3. Focused Growth 57,882 16,344 74,226
4. Core Concentration‐Constrained 57,882 14,666 72,548
5. Outward Growth 57,882 20,001 77,883
*2010 Base Normalized to Alternative Scenarios
HOUSEHOLDS
*2010 Base Normalized to 2010 Census
JOBS
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Table 9. TriValley ‐ Alameda Household Forecasts
Scenario 2010
Growth
2010‐2040 2040 Total
0. Current Regional Plans* 71,031 41,359 112,390
3. Focused Growth 71,031 34,060 105,091
4. Core Concentration‐Constrained 71,031 28,744 99,775
5. Outward Growth 71,031 39,594 110,625
Table 10. TriValley ‐ Alameda Job Forecasts
Scenario 2010
Growth
2010‐2040 2040 Total
0. Current Regional Plans* 119,678 59,742 179,420
3. Focused Growth 119,678 37,941 157,619
4. Core Concentration‐Constrained 119,678 33,781 153,459
5. Outward Growth 119,678 52,336 172,014
*2010 Base Normalized to Alternative Scenarios
HOUSEHOLDS
*2010 Base Normalized to 2010 Census
JOBS
4.
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Table 11. TriValley ‐ Total (CCC & AC) Household Forecasts
Scenario 2010
Growth
2010‐2040 2040 Total
0. Current Regional Plans* 108,864 49,991 158,855
3. Focused Growth 108,864 43,131 151,995
4. Core Concentration‐Constrained 108,864 34,524 143,388
5. Outward Growth 108,864 49,749 158,613
Table 12. TriValley ‐ Total (CCC & AC) Job Forecasts
Scenario 2010
Growth
2010‐2040 2040 Total
0. Current Regional Plans* 177,560 74,561 252,121
3. Focused Growth 177,560 54,285 231,845
4. Core Concentration‐Constrained 177,560 48,447 226,007
5. Outward Growth 177,560 72,337 249,897
*2010 Base Normalized to Alternative Scenarios
HOUSEHOLDS
*2010 Base Normalized to 2010 Census
JOBS
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Comments Received from Local Jurisdictions on the
SCS Alternative Scenarios
From Date of Comment Via Signed By Notes
City of Antioch 1/26/2012 Letter Tina Wehrmeister, Community Development Director
City of Brentwood Pending ‐‐
City Council to review scenarios 2/14/12 ‐ feedback to
follow (per Debbie Hill)
City of Clayton
City of Concord Pending ‐‐
City Council to review scenarios 3/6/12 ‐ feedback to
follow (per Carol Johnson)
Town of Danville
City of El Cerrito
City of Hercules
City of Lafayette 1/31/2012 Letter Carol Federighi, Mayor
City of Martinez Informal comments transmitted to ABAG via email
Town of Moraga
City of Oakley 1/31/2012 Letter Bryan Montgomery, City Manager
City of Orinda Pending ‐‐
City Council met on 1/31/12 and directed staff to draft a
comment letter
City of Pinole 1/18/2012 Letter Peter Murray, Mayor
City of Pittsburg
City of Pleasant Hill (1)12/20/2011 Letter Greg Fuz, City Planner 2 letters submitted
City of Pleasant Hill (2)1/30/2012 Letter June Catalano, City Manager 2 letters submitted
City of Richmond
City of San Pablo 1/24/2012 Letter Cecilia Valdez, Mayor
City of San Ramon
City of Walnut Creek Comments transmitted via ABAG survey
Contra Costa County
S:\05‐PC Packets\2012\02\Authority\SCS Comment Log As of 2/6/2012
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4.B.4-24
City of Pleasant Hill
December 20, 2011
Kenneth Kirkey, Planning Director
Association of Bay Area Governments
Joseph P. Bort MetroCenter
10 1 Eighth Street
Oakland, CA 94604
SUBJECT: Priority Development Area Modification -Diablo Valley College Bus Transit
Center and Buskirk Avenue Corridor, Pleasant Hill, CA
Dear Mr. Kirkey:
O ree,clod-
The City has recently concluded a review of the boundaries of its two existing Priority
Development Areas (PDA's) located at the Diablo Valley College Bus Transit Center and within
the Buskirk Avenue Corridor. The purpose of conducting this review was to ensure that the PDA
boundaries more accurately reflect, and take into consideration, existing adopted City land use
and planning maps and documents, including, but not limited to the General Plan Land Use Map,
Zoning Map, applicable specific plan boundaries, redevelopment project area boundaries,
Housing Opportunity sites, as well as, right-of-way and parcel boundaries. The revised
boundaries also exclude existing single family residential neighborhoods that are not
contemplated to transition to other uses during the planning period. The PDA boundaries
originally established in 2007 were conceptual in nature and, as a result, should not be relied on
for SCS scenario planning and/or related employment and household growth projections. Please
provide the attached revised PDA boundary maps to the appropriate staff in your organization so
that they can be referenced as the SCS process goes forward. Please also note that the City
continues to be concerned that the projections for household and employment growth being
made by the SCS team substantially exceed the amount of growth the City anticipates will occur
as envisioned in our General Plan and based on constraints noted in our May 17, 2011
correspondence (attached) commenting on the Initial Vision Scenario.
Further infonnation regarding the PDA boundary revisions is included in the attached
applications which we are providing to you in the event that they are needed for your records.
Also please note that the overall vision and place type for both PDA areas are unchanged from
when both were first designated as PDA's.
The revised PDA boundaries have been reviewed and approved by both our Planning
Commission and our City Council (see attached resolutions and exhibits).
100 Gregory Lane • Pleasant Hill • Califomia 94523-3323 • (925) 671-5270· FAX (925) 256-8190
4.B.4-25
December 20, 2011
Page 2
If you have any questions please contact me at (925) 671-5218 or through email at
gfuz@ci.pleasant-hill.ca.us.
Attachments:
A Letter from the City of Pleasant Hill Mayor to the ABAG, MTC and BAAQMD, dated
May 17, 2011
B City Council Resolutions of Support for PDA Modifications, including Proposed
Modified Priority Development Area boundaries (both PDA's)
C Planning Commission Resolutions of Support for PDA Modifications (both PDA's)
D Amended FOCUS Priority Development Area Applications (both PDA's)
CC: City Council
Planning Commission
City Manager
City Attorney
City Engineer
File
4.B.4-26
.'II
PRIORITY DEVELOPMENT AREA ~
PROPOSED MODIFICATION "~f
DIABLO VALLEY COLLEGE BUS TRANSIT CENTER s
N.T.S.
4.B.4-27
.'Ii
PRIORITY DEVELOPMENT AREA ~
PROPOSED MODIFICATION /f~£
BUSKIRK AVENUE-MONUMENT BOULEVARD CORRIDOR s
N.T.S.
4.B.4-28
CITY OF PINOLE
2131 Pear Street
Pinole, CA 94564
Tel: (510) 724-8912
Fax: (510) 724-4921
January 18, 2012
Mr. Mark Green, Chair
Association of Bay Area Governments
P.O. Box 2050
Oakland, CA 94607-4756
Via Email: markg@unioncity.org
Ms. Adrienne J. Tissler, Chair
Metropolitan Transportation Commission
Joseph P. Bort MetroCenter
101 Eighth Street Oakland, CA 94607-4770
Via Email: atissier@co.sanmateo.ca.us
RE: Sustainable Communities Strategy -Alternative Land Use Scenarios
Dear Mr. Green and Ms. Tissier,
Thank you for providing the Sustainable Communities Strategy land use alternative
scenario information for our consideration and input. The City has reviewed the
alternative scenarios and underlying assumptions and compared the 30-year forecasts
to our recently updated General Plan and Three Corridors Specific Plan.
Our specific plan applies to portions of the City (San Pablo Avenue, Pinole Valley Road,
and Appian Way) that the City has prioritized for development. The City was mindful of
SB375 requirements when establishing the policy direction and development standards
to support sustainability and GHG reduction over time within our land use planning
documents. We utilized property owner input and parcel specific analysis to determine
dwelling unit potential and assess market demand for job-generating land uses. We
allowed for greater development intensification and adopted a variety of mixed use·
designations to provide flexibility to respond to changing market conditions. We also
included extensive policy support for encouraging the evolution of a multi-modal
transportation system including greater transit ridership. This policy direction depends on
future regional funding to support more efficient transit service within Pinole including the
extension of new passenger service travel modes to northwest Contra Costa County to
relieve Interstate 80 congestion over time.
This letter follows prior City staff feedback to ABAG staff over the past two years
including comments on the Initial Vision Scenario last May. We are pleased that ABAG
and MTC have prepared alternatives to the Initial Vision Scenario to provide a more
realistic distribution of housing units based on proximity to existing transit. We believe
the Core Concentration scenario which more closely links housing growth to frequent
transit service is a more realistic approach than was used in the Initial Vision scenario.
We also support allocating at least 70 percent of planned housing production within
PDAs that are closest to major downtowns and along key transit corridors where viable
alternatives to auto use now exist.
1
4.B.4-29
Due to our financial capacity and current transit service levels, we believe enhanced
transit investment within Pinole is needed to support the transit-oriented higher densities
of over 30 dwelling units per acre planned within portions of Pinole. This may not be
feasible within the preferred SCS alternative. Additionally, the land assembly challenges
associated with small properties under separate ownership and local socio-economic
conditions, including school quality, hinder likely housing growth within Pinole.
Consequently, we believe a maximum of 17% household growth or approximately 1,100
housing units should be utilized for Pinole in the preferred SCS alternative.
Through the City's recent planning effort, the City increased its employment
development potential by intensifying allowable non-residential development along the
Specific Plan Corridors in Pinole. As part of the review of the SCS job growth alternative
assumptions, the City evaluated existing employment densities and the economic
forecasts utilized to prepare the Specific Plan. Based on this information, the City
anticipates job growth of approximately 16% or 1,000 jobs during the SCS planning
period. The City also supports the employment growth assumption that at least 50
percent of job growth should be expected to occur in the region's 10 largest cities and
the remaining 50 percent should be planned primarily for PDAs closest to key transit
corridors.
We appreciate this opportunity to provide initial feedback on the detailed SCS
alternatives. During the coming weeks, City staff will provide further information.
We look forward to working with you during the SCS and RTP preparation process.
Sincerely,
p~?:::;if
Mayor
cc: Ken Kirkey, ABAG Planning Director
Sailaja Kurella, Regional Planner
Martin Engelman, CCTA
Christina Atienza, WCCTAC
Project File
2
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___
0
H L)CITorSANPABLO
,N January24,2012
Ms.Sailaja Kurella,Regional Planner
Association of Bay Area Governments
101
Eighth Street
Z Oakland,CA 94607-4756
Subject:Comments on the “Alternative Scenarios”
Dear Ms.Kurella,
<This letter is in response to the recent release of the Technical Analysis on the
five proposed Alternative Scenarios by MTC/ABAG to develop a Sustainable
Communities Strategy (SCS).As an unconstrained scenario,the City of San
Pablo recognizes that many of the assumptions in the first scenario,the Initial
Visions Scenario (IVS),would have to change in order for the SCS to be an
effective and realistic tool toward meeting the greenhouse gas reduction goals
established by AB 32 and SB375.
We preface our comments by acknowledging that the purpose of the IVS was to
initiate a discussion about a consensus-oriented regional approach to steering
long-term sustainable growth and to thereby explore a potential regional
sustainable growth scenario where development of two of the most vital
ingredients to a sustainable Bay Area —housing production and transit service —
was unconstrained.
The report released in December of 20lldefines and analyses the five
Alternative Scenarios (one of which is the Initial Vision Scenario itself);and offers
four additional Alternatives to meet the goals of the SCS.The City of San Pablo
has formed a City Council Ad-Hoc Subcommittee that has been selected to
review and provide feedback on the development of the SCS.Below are our
comments on each of the proposed scenarios:
1383 I San Pablo Avenue,Building I •San Pablo,CA 94806
Main:5 I 0-215-3000 •Fax:5 10-620-0204
www.SanPabloCA.gov
City of New Directions
4.B.4-30
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Ms. Sailaja Kurella, Regional Planner
Association of Bay Area Governments
101 Eighth Street
Oakland, CA 94607-4756
Subject: Comments on the" Alternative Scenarios"
Dear Ms. Kurella,
This letter is in response to the recent release of the Technical Analysis on the
five proposed Alternative Scenarios by MTC/ABAG to develop a Sustainable
Communities Strategy (SCS). As an unconstrained scenario, the City of San
Pablo recognizes that many of the assumptions in the first scenario, the Initial
Visions Scenario (IVS), would have to change in order for the SCS to be an
effective and realistic tool toward meeting the greenhouse gas reduction goals
established by AB 32 and SB375.
We preface our comments by acknowledging that the purpose of the IVS was to
initiate a discussion about a consensus-oriented regional approach to steering
long-term sustainable growth and to thereby explore a potential regional
sustainable growth scenario where development of two of the most vital
ingredients to a sustainable Bay Area -housing production and transit service -
was unconstrained.
The report released in December of 2011 defines and analyses the five
Alternative Scenarios (one of which is the Initial Vision Scenario itself); and offers
four additional Alternatives to meet the goals of the SCS. The City of San Pablo
has formed a City Council Ad-Hoc Subcommittee that has been selected to
review and provide feedback on the development of the SCS. Below are our
comments on each of the proposed scenarios:
13831 San Pablo Avenue, Building I • San Pablo, CA 94806
Main: 510-215-3000 • Fax: 510-620-0204
www.SanPabloCAgov
Ms.Sailaja Kurella
Association of Bay Area Governments
January 24,2012
Page 2
Scenario 1 (The Initial Vision Scenario) and Scenario 2 (Core Concentration
Scenario):
Based on the Technical Analysis released in December,both of these scenarios
are based on unconstrained growth;assume very strong employment growth,
and unprecedented funding to support housing affordability.Scenario 1,the Initial
Vision Scenario which was released in March 2011 was discussed at our City
Council in May of 2011.At that time it was concluded that this unconstrained
scenario would be unattainable given the lack of resources and economic
support.Scenario 2,Core Concentration,which is also an “unconstrained”
scenario,faces the same challenges as Scenario 1 as far as the need for
unprecedented funding.The difference between the two being that Scenario 2
would be developed to provide a more concentrated development pattern along
transit corridors.These two scenarios continue to be unattainable and
inconsistent with local planning efforts as far as the number of Households that
would be allocated to San Pablo.
Scenario 3 (The focused Growth Scenario)and Scenario 4 (Constrained Core
Concentration):
Both of these scenarios concentrate housing and job growth at selected Priority
Development Areas in the inner Bay Area along the region’s core transit network
and job centers-San Francisco,Oakland,San Jose.These two scenarios
assume the same total number of Households for San Pablo of 11,108.In the
past year,the City of San Pablo has conducted extensive public outreach in
efforts to inform a New General Plan for the City and a new Specific Plan for San
Pablo Avenue that focuses on Transit Oriented Development and developing a
complete community.Local efforts have resulted in the creation of new General
Plan designations and densities.To this effect the maximum build out for San
Pablo is to accommodate a total of 10,620 households and both Scenario’s 3 and
4 would undermine this local planning effort.
Scenario 5 (Outer Bay Area Growth Scenario):
This scenario addresses higher levels of growth in the Outer Bay Area and is
closer to previous development and the local planning efforts of jurisdictions in
the past years,but with lower rates of job dispersal.Regional Centers and large
City Centers grow but slower than other Place Types,while Suburban Centers
and office parks outside of PDAs continue to grow at higher rates than the
regional average.This scenario also assumes more growth of households in
what is considered the Outer Bay Area,while allowing for greater growth along
PDA’s.For San Pablo this is the alternative that makes the most sense.This
scenario assumes the number of households would be at 10,620,in line with our
recently adopted General Plan,and it also increases the number of jobs in our
4-304.B.4-31
Ms. Sailaja Kurella
Association of Bay Area Governments
January 24, 2012
Page 2
Scenario ,1 (The Initial Vision Scenario) and Scenario 2 (Core Concentration
Scenario):
Based on the Technical Analysis released in December, both of these scenarios
are based on unconstrained growth; assume very strong employment growth,
and unprecedented funding to support housing affordability. Scenario 1, the Initial
Vision Scenario which was released in March 2011 was discussed at our City
Council in May of 2011. At that time it was concluded that this unconstrained
scenario would be unattainable given the lack of resources and economic
support. Scenario 2, Core Concentration, which is also an "unconstrained"
scenario, faces the same challenges as Scenario 1 as far as the need for
unprecedented funding. The difference between the two being that Scenario 2
would be developed to provide a more concentrated development pattern along
transit corridors. These two scenarios continue to be unattainable and
inconsistent with local planning efforts as far as the number of Households that
would be allocated to San Pablo.
Scenario 3 (The focused Growth Scenario) and Scenario 4 (Constrained Core
Concentration):
Both of these scenarios concentrate housing and job growth at selected Priority
Development Areas in the inner Bay Area along the region's core transit network
and job centers-San Francisco, Oakland, San Jose. These two scenarios
assume the same total number of Households for San Pablo of 11,108. In the
past year, the City of San Pablo has conducted extensive public outreach in
efforts to inform a New General Plan for the City and a new Specific Plan for San
Pablo Avenue that focuses on Transit Oriented Development and developing a
complete community. Local efforts have resulted in the creation of new General
Plan designations and densities. To this effect the maximum build out for San
Pablo is to accommodate a total of 10,620 households and both Scenario's 3 and
4 would undermine this local planning effort.
Scenario 5 (Outer Bay Area Growth Scenario):
This scenario addresses higher levels of growth in the Outer Bay Area and is
closer to previous development and the local planning efforts of jurisdictions in
the past years, but with lower rates of job dispersal. Regional Centers and large
City Centers grow but slower than other Place Types, while Suburban Centers
and office parks outside of PDAs continue to grow at higher rates than the
regional average. This scenario also assumes more growth of households in
what is considered the Outer Bay Area, while allowing for greater growth along
PDA's. For San Pablo this is the alternative that makes the most sense. This
scenario assumes the number of households would be at 10,620, in line with our
recently adopted General Plan, and it also increases the number of jobs in our
Ms.Sailaja Kurella
Association of Bay Area Governments
January 24,2012
Page 3
City to 10,618 -practically a 1:1 ratio between households and jobs.The jobs
would be strategically centered along the PDA’s in San Pablo (San Pablo
Avenue,and 23rd Street).This option is consistent with our local planning efforts
and encourages a healthy balance of households to jobs that would be of great
benefit to our community and will result in a reduction in Vehicle Miles Traveled
by our residents to jobs outside of our City,and hence a reduction in greenhouse
gases,as required by SB375 and AB32.
We look forward to continuing to work with you through this very important
planning process.We are also very interested in learning how the recent State
Supreme Court ruling on Assembly Bill xl 26 and Assembly Bill xl 27 will affect
the development of the SCS and future funding for PDA’s.
We would also like to assert that the City of San Pablo is committed to
participating in the SCS process and we would be more than willing to discuss
any practical and achievable local land use planning efforts that meet the needs
and maintain the character of our City and work to address the goals of AB32
and SB375.We realize that no one scenario is going to fit perfectly the needs of
every jurisdiction.Please feel free to contact Tina Gallegos,City Planner if you
have any additional questions or would like to schedule a follow up meeting.We
look forward to continuing to work with you through this very important planning
process.
Sincerely,
Cecilia Valdez
Mayor of the City of San Pablo
cc:San Pablo City Council
City Manager
4-314.B.4-32
Ms. Sailaja Kurella
Association of Bay Area Governments
January 24, 2012
Page 3
City to 10,618 -practically a 1:1 ratio between households and jobs. The jobs
would be strategically centered along the POA's in San Pablo (San Pablo
Avenue, and 23rd Street). This option is consistent with our local planning efforts
and encourages a healthy balance of households to jobs that would be of great
benefit to our community and will result in a reduction in Vehicle Miles Traveled
by our residents to jobs outside of our City, and hence a reduction in greenhouse
gases, as required by SB375 and AB32.
We look forward to continuing to work with you through this very important
planning process. We are also very interested in learning how the recent State
Supreme Court ruling on Assembly Bill x1 26 and Assembly Bill x1 27 will affect
the development of the SCS and future funding for POA's.
We would also like to assert that the City of San Pablo is committed to
participating in the SCS process and we would be more than willing to discuss
any practical and achievable local land use planning efforts that meet the needs
and maintain the character of our City and work to address the goals of AB32
and SB375. We realize that no one scenario is going to fit perfectly the needs of
every jurisdiction. Please feel free to contact Tina Gallegos, City Planner if you
have any additional questions or would like to schedule a follow up meeting. We
look forward to continuing to work with you through this very important planning
process.
Sincerely,
~h/-J'~
Cecilia Valdez ' ~
Mayor of the City of San Pablo
cc: San Pablo City Council
City Manager
4-324.B.4-33
January 26, 2012
Ms. Adrienne J. Tissier, Chair
Metropolitan Transportation Commission
101 Eighth Street
Oakland, CA 94607
Mr. Mark Luce, President
Association of Bay Area Governments
P.O. Box 2050
Oakland, CA 94607
Re: Comments on the Sustainable Communities Strategy -
Alternative Land Use Scenarios
Dear Ms. Tissier and Mr. Green:
Thank you for the opportunity to comment on the Sustainable Communities Strategy -
Alternative Land Use Scenarios. The Alternative Land Use Scenarios, along with
comments received, will be used to develop the preferred scenario and the Sustainable
Communities Strategy (SCS) required by SB 375. The overarching goal of SB 375 and
the SCS is to reduce greenhouse gas emissions by integrating transportation and land
use planning.
As an additional means of reducing greenhouse gas emissions, the City has previously
stated that it would support a SCS that shows future job growth in areas that are already
"housing rich" which will reduce commute times. It is therefore disappointing to see that
all scenarios do not project the amount of jobs that Antioch is hoping to attract in the
future. In particular I would like to call your attention to the Hillcrest e-BART Station
PDA. The City has prepared a specific plan for this area which calls for transit oriented
development that will be a job center as well as contain high density residential
development. The specific plan projects 5,600 jobs in this PDA alone while the SCS
Alternative Land Use Scenarios project 321 jobs at best and 155 jobs at worst. This'
discrepancy skews the job projections for the entirety of the City.
The City recognizes that focusing future housing density near transit hubs is an
important way to reduce greenhouse gas emissions as the region grows. Therefore,
Antioch would support the Focused Growth Scenario which emphasizes housing along
major transit corridors with the caveat that all scenarios are flawed in projecting future
jobs as discussed above. -
Community Development Department
P.o. Box 5007·200 H Street ·Antioch, CA 94531-5007· Tel: 925-779-7035 • Fax: 925-779-7034· www.ci.antioch.ca_us 4-32
4-334.B.4-34
Comments on the Sustainable Communities Strategy -
Alternative Land Use Scenarios
January 26, 2012
Page 2
Again, thank you for the opportunity to comment on the Alternative Land Use Scenarios.
I am available to discuss the City's position with ABAG and MTC staff and can be
reached at 925.779.7038 or twehrmeister@ci.antioch.ca.us.
Sincerely,
J,WUtA~
Tina Wehrmeister
Community Development Director
cc: City Council
Planning Commission
Jim Jakel, City Manager
Mindy Gentry, Senior Planner
Ezra Rapport, ABAG
Ken Kirkey, ABAG
Steve Heminger, MTC
Doug Kimsey, MTC
4.B.4-35
J~nuary 31, 2012
Ms. Adrienne J. Tissier, Chair
MetropolItan Transportation Commission
Joseph P. Bort Metrocenter
iOl Eighth Street
Oakland, CA 94607-4770
Mr. Mark luce, President
City Council
Carol Federighi, Mayor
Mike Anderson, Vice Mayor
Brandt Andersson, Council Member
Carl Anduri, Council Member
Don Tatzin, Council Member
Associ~tion of Bay Area Governments
P.O. Box 2050
Oakland, CA 94607-4756
Subject: Response to the Alternative Scenarios for the Sustainable Communities Strategy
Dear Chair Tissier and President luce:
Thank you for the opportunity to submit the City of lafayetteJs comments on the Alternative Scenarios
for the Sustainable Communities Strategy (SCS). We appreciate ABAG's and MTCs continued efforts to
develop the process and products to comply with SB 375. Developing the SCS for the Bay Area, with its
. economjc, social, and environmental diversity, is a significant challenge for all of us. Therefore, we want
to first thank ABAG and MTC staff for addressing some of the City's concerns with the loitial Vision
Scenario.
The City's comments on the Alternative Scenarios are in two parts -generar and comments specific to
Lafayette.
General Comments
• T~e presentation of the Scenarios continues to be overly complicated and academic. There is too
much emphasis on methodology and data-crunching rather than summarizing the presentation into
a simpre statement describing a-practical plan. This plan should be based on historic trends in
regional and local growth and established focal land use policies, which should drive more
reasonable expectations about future growth.
• The Scenarios (emain unrealistic from a common sense perspective. While it is possible projected
growth could be accommodated physicaUy, it is highly unlikely Bay Area growth will attain the levels
projected considering the historic trends, shrinking availability of funding, and environmental
constraints. We agree with the findings of Palo Alto's Councilmember Greg Schmid. As an
economist, he surveyed a variety of growth projections made before 2005, including ones from UC
Berkeley, UCLA, and the California Department of Finance, to be far too optimistic about growth
rates. CouncHmember Schmid cited a report from the Public Policy Institute of California that
4.B.4-36
City of lafayette
Response to the Alternative Scenarios for the Sustainable Communities Strategy
JanuarY 311 2012. -
Page 2of4
•
•
•
•
•
included population projects of all key demographic forecasters. The consensus forecast from this
group was 40 percent higher than the actual outcome.
The Scenarios are based on the antiCipation of an improving economy and assume an overly
optimistic rate of job growth inconsistent with historical experience of job growth even during
periods of economic growth. Job growth in the Bay Area at times has been lower than the national
rate. Studies show that parts of the Bay Area} such as Silicon VaHey, will probably recover sooner.
However, other areas, such as those with depressed housing markets, will not recover as quickly.
The annual forecast of new jobs might occur during portions of the forecast period, but it is highly
unlikely to occur throughout the period. This is important since the jobs forecast influences both
population and household growth and the need for new housing. The forecast also affects the
production ofthe.greenhouse gases (GHG).
The-increased emphasis on jobs in the Alternative Scenarios over the Initial Vision raises the
question-of what happens if a city or county cannot provide sufficient development to
accommodate both projected jobs and housing.
Redevelopment has been the major tool in producing affordable housing and public infrastructure
il!lprovements and in promoting economic development. This tool is no longer available .. making the
.Scenarios even more unrealistic. The scope of the Preferred Scenario must respond to the foss of
this funding.
, .
Whn~ GHG reduction targets can .be met in the short-term, they cannot be met in the long-term
using any of the Alternative Scenarios. The Scenarios do little better than the Current Regional Plan
(eRP) and aU rely on additional policy initiatives to meet performance targets. This suggests that the
CRP should be established as the baseline Scenario, updated to the 2010 Census, and extended to
2040 so that it is comparable to the other Scenarios. As these other policy initiatives appear to be
capable of meeting the GHG targets .. the focus should be on making only minor adjustments to the .
CRP.
Identified transportation funding for needed infrastructure to support any of the Alternative
Scenarios is -and will continue to be -woefully inadequate.
Comments Specific to lafayette
• The growth projected for the downtown in our General Plan and the current version of the draft
Downtown Specific Plan (DSP) is consistent with the characteristics and development guidelines for
a Transit Town Center. For this reason, any additional development projected for lafayette's PDA
beyond what is projected in our plans is unnecessary.
• The number of households in the Focused Growth Scenario for the city as a whole is consistent with
our General Plan projections. For the downtown I PDA, the Focused Growth and Constrained Core
4.B.4-37
City of lafayette
Response to the Afternative Scenarios for the Sustainable Communities Strategy
January 31t 2012
Page 3 of4
Concentration Scenarios are the most consistent with the General Plan and OSP. While the City
prefers its own General Plan and OSP as incorporated into the eRP, the City supports the Focused
Growth Scenario for Lafayette's household growth citywide and in the POA.
• Except for the Core Concentration Scenario, the jobs projections are unreasonable. While it is likely
there will be increased telecommuting throughout the city in the future, almost aU new jobs that are
not home-based wiH occur in the downtown. The downtown cannot accommodate the amount of
job growth projected by the other three Alternative Scenarios and meet the housing requirements.
Therefore, the City can only support the Core Concentration Scenario for job growth; the other
Scenarios are unrealistic and unacceptabre.
• However, as demonstrated through the DSP proce.s$, additional growth in Lafayette's downtown,
even under the General Plan, will result in substantial traffic impacts. These impacts are even more
significant because of projected growth in Moraga. This is growth that is beyond our control, and yet
it significantly affects the quality of Ufe in lafayette every day. There win be other environmental
issues as well. It is the goal of both the Genera) Plan and DSP to maintain our downtown character
and preservation of our hillsides and existing neighborhoods. Meeting this goal constrains future
development. Even achieving the projections in the General Plan ultimately may not be feasible. As
listed in our Jetter commenting on the Initial Vision Scenario fast year, these constraints include:
Because of our topugraphy and the soil conditions of our hUlsJdesT more intense levels of
development are limited to the downtown.
The downtown is limited by a lack of parcels available or suitable for redevelopment. The OSP
EJR estimated that at most 30 percent of the downtown would redevelop by 2030.
Existing traffic Levels of Service in the downtown are already at lOS O· at some intersections
with two major intersections at LOS F. The DSP EIR shows that under the General Plan buHdout
scenario more intersections could reach LOS 0, EI and F by 2030 and mitigation may not be
feasible.
A network of creek corridors with significant riparian habitat crisscrosses the downtown.
There is a lack of parks in the downtown -onlyO.7 acres. This does not come dose in meeting
our General Plan's standard of 5 acres /1,000 residents. The DSP proposes three additional
parks in the downtown to meet this shortfall, and these park sites would not be available for
additional development.
• The Preferred Scenario should not only recognize Lafayette's constraints, but the constraints that
exist in every community.
4.B.4-38
City of lafayette
Response to the Alternative Scenarios for the Sustainable Communities Strategy
January 31, 2012
Page 4 of4
As a conduding comment, Lafayette is not alone in having serious concerns about the highly speculative
and ultimately unrealistic direction that the SCS appears to be taking and in questioning the possible
excessive reliance of 5B375 on land development patterns different from existing general plans. It may
be time to begin the discussion on how to realistically address dimate change in California without
burdening already-impacted cities and counties.
Thank you again for the opportunity to comment on the Alternative Scenarios. We-will continue to be an
active participant in the SCS process, and look forward to reviewing the Preferred Scenario with our
comments incorporated and the EIR. In the meantime, jf you have any questions for the City, please
contact Ann Merideth} Special Projects Manager at amerideth@ci.lafayette.ca.us or 925.284.1968.
-Sincerely,
Carol Federighi
Mayor
Cc: Sailaja Kurella, ABAG
4.B.4-39
A Pt..-\C&jor FA..\UllES
iii IN HE.-\IIT 0/ 1M DELTA
3231 Main Street
Oakley, CA 94561
925625 7000 tel
9256259859 fax
www.ci.oakley.ca.us January 31, 2012
MAYOR
Kevin Romick
VICE MAYOR
Carol Rios
COUNCILMEMBERS
Pat Anderson
Randy Pope
Jim Frazier
Steve Heminger, Executive Director
MTC
Joseph P. Bort Metro Center
101 Eighth Street
Oakland, CA 94607-4770
Ezra Rapport, Executive Director
ABAG
Joseph P. Bort Metro Center
101 Eight Street
Oakland, CA 94607-4770
SUBJECT: Oakley City Council Comments on Sustainable Communities
Strategy (SCS) Alternative Scenarios
Dear Mr. HernhLger and Mr. Rapport
On January 24, 2012, the Oakley City Council received a presentation on the
Sustainable Communities Strategy (SCS) Alternative Scenarios. The City
Council understands the challenges in achieving the benchmarked reduction
in greenhouse gas emissions, and the Council appreciates the opportunity to
review and comment on the alternatives. The City Council also supports the
goals of pr.oviding housing and jobs to the Bay Area while reducing
greenhouse gas emissions. Since the beginning of the SCS process, back to
Projections 2009, Oakley has been providing comments related to
inconsistencies with the adopted Oakley General Plan. Although adjushnents
were made to provide growth projections more closely resembling Oakleyl s
General Plan, none of the alternative scenarios were able fa reach those marks.
In regards to the SCS Alternative Scenarios, the Oakley City Council would
like to offer the following comments:
e The. five alternatives scenarios, and especially the three Hreasonable
planning" alternative scenarios" do not seem realistic in that they fail to
recognize some local agencies' planned growth and adopted General
Plans.
Q None of the alternative scenarios fulfill the Oakley General Plan when
it comes to residential build out. The City Council believes housing
4.B.4-40
January 31, 2012
Comments on SCS Alternative Scenarios
Page 2 of3
leads to jobs, and east County needs jobs. Also, east County provides
housing options that may not be available in denser, urbanized areas.
Also, many east County residents are those that prefer single family
housing as a lifestyle choice over higher density attached or multi-
family housing.
e A risk to undermining the Oakley General Plan residential projections
is the potential for Oakley to be unable to compete for funding in
transportation and land use, and thereby lose some ability to
competitively build a community that will provide housing and jobs to
east County residents.
o The recent elimination of Redevelopment Agencies further financially
burdens local agencies. An alternative scenario that focuses growth
and incentives in areas that do not include Oakley further puts Oakley
behlnd when attempting to redevelop the City and attract jobs.
o While focusing incentives and growth in already developed areas of the
Bay Area may achieve some goals of the alternative scenarios, it does
not solve one main problem of east Contra Costa County, which is the
long and tenuous commutes of many residents to tl}.e job centers in
central and west County, as well as job hubs in Oakland, San Francisco,
and San Jose. By providing funding and new and redevelopment to
east County, it will become more attractive to job providers, result in
more jobs, and eventually lead to less vehicle miles traveled per capita
(a goal of GHG reduction).
G The overall feeling of the Oakley City Council is that the SCS
alternative scenarios do not have Oakley's best interests in mind. These
alternatives to a regional approach fail to fully co~ider local agencies'
planning processes and long term land use plans, and while it has been
stated that the SCS alternatives will not result in a loss of local land use
control, it is understood that funding may be more favorably provided
to tI:ose agencies fulfilling the goals of the adopted SCS. If those goals
do not match the goals of a local agency, that agency may not be able to
compete for funding, which could be considered a loss of local land use
control.
4.B.4-41
January 31/ 2012
Comments on SCS Alternative Scenarios
Page 30f3
The City of Oakley City Council hopes these comments will be considered
when developing an alternative scenario that looks to achieve the goals of the
SCS. Oakley City Council recommends that alternative incentivizes Oakley
and east County to continue to develop in a responsible manner so as to
reduce vehicle miles traveled. per capita and continue to increase the quality of
life for its residents.
Bry ontgomery
City Manager
C: Oakley City Council
4.B.4-42
City of Pleasant Hill
January 30, 2012
. ·Ms~·Adrienne J. Tissier, Chair
Metropolitan Transportation Commission
Joseph P. Bart MetroCenter
101 Eighth Street
Oakland, CA 94607
Mr. Mark Green, Chair
Association of Bay Area Governments
PO·Box 2050
Oakland, CA 94607
o recycled paper
SUBJECT: City of Pleasant Hill Comment Letter ~Sustainable Communities Strategies (SCS)
-Alternate Scenarios
Dear Ms. Tissier and Mr . Green:
Please consider the following comments regarding. the latest Alternative Scenario projections
released by the Association of Bay Area Govemments (ABAG) and the Metropolitan
Transportation Commission (MTC). As previously stated in our May 17, 2011 correspondence
(attached), and more recentlyincorrespondence dated December 20, 2011 (attached); the City is
concerned that projections for household and employment growth in Pleasant BiU being m,ade in
the Sustainable Communities Strategie$ (SCS)'plamrlng ,process suhstantiallyexceedtheamount
. of growth the City anticipates will occur as envisioned in our General Plan and based on various
other City physical constraints.
While the Core Concentration Scenario projects a reduction in overall emplo)'lllent .. gnlcwth
during the planning period to 266 (from an increase oimore than 5~OOO itt the Initial Vision
scenario), overall household growth is· projected to increase. by more than 700 over the Initial
Vision scenario's .. projectiolls resulting in a: projecte~l increase, of 3,362. households by 2040.
• The other three,Alternative Scetl~os allincl'Qde signiflcantlyhigher growtbprojectionsforhoth
. households and employment when comptlred·. to the ... proJecti()Ils. containediu the Initial Vision
. scenario. Consequently, the City remains very concerned that the growth. projections being
generated by the SCS· planning process remain unrealistic and inconsistellt with our.· General
Plan.
The City remains supportive of the goals of the SCS . process provided that our concerns over
growth projections for households and employment are adequately addressed.
100 Gregory lane -Pleasant Hilt -California 94523-3323 -(925) 671-5270 -FAX(92S) 256-8190
4.B.4-43
January 30: 2012
Page 2
If you have any questions please contact me at (925) 671-5204 or through email at
Jcatalano@ctpleasant-hill.ca.us .
..• ~.~ ~ .. neca~
/' .~~; ~anager
. .
Attachments -J..etter from the City of Pleasant Bill Mayor to ABAG and MTC, dated May 17,
2011 andLett~r from the-City ofPleasan,t Hin to ABAG for Priority Development
Area, Modifications, dated December 20; 2011
cc: City C;ouncil
Plannifig Commission
City Manager
City Attorney
CityErtgineer
File
Constrained Core Concentration
Initial Vision/Core Concentration
Focused Growth
Outward Growth
Current Regional Plans
9.4%
9.1%
8.2%
7.9%
7.0%
Bay Area Regional Contribution
Scenarios
IMPROVED FUEL EFFICIENCY (PAVLEY I & II) LOW CARBON FUEL STANDARDSREGIONAL LAND USE & TRANSPORTATION (SCS)
Mi
l
l
i
o
n
M
e
t
r
i
c
T
o
n
s
CO
2 E
q
u
i
v
a
l
e
n
t
15%
0%
50
1990 1995 2000 2005 2010 2015
100
250
300
350
150
200
400
450
500
550
600
650
700
750
800
850
2020 2025 2030 2035 2040 2045 2050
Projected Land Use & Transportation Emissions Reductions
80%
427 427
800**
85
275
4
3
2
1507
610
*Million Metric Tons CO2 Equivalent
Tons*
2020 Emissions 507
Target 2020 Emissions (1990)427
Forecast 2050 Emissions 800**
Target 2050 Emissions (20% of 1990)
Target 2035 Emissions (interpolated)
85
Required Reductions:
Year Tons*
By 2020 80
By 2050 715**
1
2
3
4
5 275
**Estimate based on California Council on Science and Technology Report, 2011
NON-TRANSPORTATION EMISSIONS REDUCTIONACTUAL/PROJECTED EMISSIONS
5
Figure 3: Regional Land Use and Transportation SCS
Achieving StAtewide ghg Reduction tARgetS
City of Palo Alto
Sustainable Communities Strategy (SB 375)
Key Issues for Alternative Land Use Scenarios
January 25, 2012
The Sustainable Communities Strategy (SB 375) requires a regional plan and a series of strategies that
will produce a per-capita reduction in vehicle miles traveled (VMT) over the next 25 years. SB 375 is
based on the premise that greenhouse gas (GHG) emissions may be reduced significantly by land use
patterns and transportation facilities and programs to reduce VMT. The potential for GHG reductions
relates to the extent to which land uses and transportation systems accommodate an unknown future of
population increase, economic growth, market forces, and transportation funding availability and
pricing approaches. As such, realistic basic demographic and growth assumptions for such a strategy
are imperative to derive the appropriate strategies and to assure that cities and counties in the Bay
Area region (and other regions) plan accordingly. Similarly, all alternatives to provide for GHG
reduction strategies must be considered to provide the appropriate mix of programs to cost-effectively
meet regional and statewide goals.
To ensure these issues are adequately addressed, the City of Palo Alto believes that further
independent analysis of many of the assumed demographic and economic projections and GHG
benefits in the Initial Vision Scenario and Alternative Land Use Scenarios must be provided and the
following key questions must be answered:
Demographic and Economic Projections
The proposed Alternative Land Use Scenarios anticipate an increase of 33,000 jobs annually in the
region, as compared to 10,000 jobs annually in the past two decades. The attached table compares
these growth rates through 2040 to past trends and a straight-line projection over the past 20 years.
This is a dramatic increase as Silicon Valley and many other technology centers continue to find ways
to provide value with fewer jobs, not more.
The key questions include: “Are the assumptions for the demographic and economic projections
realistic? Or are they overstated and reflective of a different time period when the economy of the
region was manufacturing-heavy and migration to California and the Bay Area was rapid and
substantial?”Is the approach of assuming a 2.45% of the projected national employment increase in
the next 25-30 years appropriate?
The following provides data appear strongly suggest that the projections are unrealistic:
1.The State’s Department of Finance (DOF)is working with a forecast model that projected
a population growth of 9.9% for 2000-2010 for the Bay Area, whereas the Census showed
a growth rate of 5.4% over that period.This represents a 45% overestimation of population
in the region. For the West Bay counties (San Francisco, San Mateo, and Santa Clara), the
DOF projected a 10.2% growth, while actual growth was 4.3%, thus an overestimate of
58%. A similar overestimate occurred for statewide population.See the attached memo
from Councilmember Schmid for further background.
SB375 Key Issues for Alternative Land Use Scenarios
Page 2
2
2.Natural population increase (births –deaths)was 3.1 million for the past decade, the single
largest factor of growth in the state. This increase is expected to fall from about 260,000
annually today to about 90,000 in 2040, due to the gradually aging population and a long-
term decline in fertility rates that are now approaching a long-term replacement level.
3.Migration to the state has slowed substantially in the past decade and is not expected to
rise dramatically in the future, due to factors beyond just the state or national economy.
The primary contributor to in-migration in California is and will be from Mexico.
However, the institutions studying migration (Dept. of Homeland Security, Pew Charitable
Trust Hispanic Center, and the Mexican Migration Project at Princeton) all agree that
immigration has slowed due to the economy and stricter immigration enforcement. Some
of the studies, particularly from Princeton, also suggest that this is a long-term trend due to
declining fertility rates, higher educational levels, and a lesser wage disparity in Mexico
than in the U.S. than in prior years.
The City of Palo Alto suggests that experts at Stanford University, the University of California, and/or
the Public Policy Institute, among others, be consulted to provide independent auditing of the
projections offered to date by ABAG and MTC, as well as those in other regions statewide.
SB375 Key Issues for Alternative Land Use Scenarios
Page 3
3
Greenhouse Gas (GHG) Emissions
The goal of SB 375 is to reduce GHG emissions from passenger vehicles and light trucks by 7 percent
per capita by 2020 and 15 percent per capita by 2035 compared to 2005, as set by the California Air
Resources Board (ARB)for the Bay Area. The Plan Bay Area SCS is focusing on achieving an
unrealistically high population and employment increase that will require a significant amount of
infrastructure and land use changes to support that growth. The key questions are:are there viable
alternatives to allow cities to propose means to achieve GHG reductions at the local level to
supplement the assumed savings for the region?Could the SCS allow cities to provide programs and
facilities that may more effectively (less costly) achieve the needed GHG reductions?
1.The SCS is expected to provide for about 9% of the GHG reductions to satisfy statewide
AB32 climate change objectives. These objectives are to be achieved by gaining a 15% per
capita reduction in the Bay Area (actually yielding a slight total increase in GHG
emissions).
2.Overestimating population and employment would mandate a level of infrastructure
(particularly for transportation), new programs, and land use change that may not be
warranted and almost certainly won’t be affordable.
3.Many cities have adopted or are considering climate change, land use, and transportation
programs to reduce GHG emissions. Examples of efforts that relate to SB375 objectives
include: compact development policies and plans, protected open space buffers, bicycle
and pedestrian programs and facilities to decrease vehicle ridership, and promotion of
electric vehicle infrastructure and programs.
4.Recent evaluation of the Alternative Scenarios shows that the three primary alternatives
reduce GHG emissions by a range of 7.9 –9.3%, as compared to an objective of 15% by
2040. Since no alternative meets the GHG reduction targets, and the difference between
scenarios is not extensive, cities should be allowed flexibility in how they achieve GHG
reductions and demonstrate how they accomplish this through other transportation and land
use initiatives.
Page 1
Planning and Transportation Commission1
Verbatim Minutes2
February 8, 20123
4
DRAFT EXCERPT5
6
7
Update Regarding SB375 (Sustainable Communities Strategy) pertaining to designating Planned 8
Development Areas (PDAs), analysis of Alternative Scenarios,and next steps.9
10
Chair Martinez: Okay our last item on the agenda tonight is an update on SB375 by our Planning 11
Director Curtis Williams. Welcome.12
13
Mr. Curtis Williams, Planning Director: Thank you Chair Martinez and Commissioners. I’m going 14
to go through some of the Staff Report for you. There are three kind of main topics that I want to 15
cover with you as far as potential discussion items. Actually two of them I think are pretty minimal. 16
The third one more substantial. Just as a way of background, the last sort of actions we’ve taken 17
since we met with you are in November the Council approved after the Commission had discussed 18
also a letter to MTC, the Metropolitan Transportation Commission regarding their transportation 19
grant criteria. If you’ll recall the criteria had included some things like complete streets policy and 20
various other things and also focused on planned or priority development areas which we have one of 21
in California Avenue area. That’s were grants would go towards and then a third major criterion was 22
the certification of the housing element for the City in order to qualify for grants so we had sent a 23
letter to MTC at that point and requested certain changes in those criteria.24
25
Also, about the same time shortly thereafter we sent a letter to ABAG to indicate that we thought 26
they needed to segregate out Stanford’s share of the housing allocation as we did the last go round 27
with our housing location. They’ve not done that yet. The county where Stanford is located on the 28
campus, the county has also written a letter to ABAG requesting the same thing so we have another 29
housing methodology committee meeting in early March, March 8th I believe it is and at that time 30
we’ll be talking or seeing if they’ve made any changes to that and reflect that change which will 31
hopefully reduce our allocation by several hundred units if they do.32
33
Thirdly the Regional Housing Mandate Committee of the Council has met now once officially as a 34
standing committee. They had been meeting informally before that and so their last meeting was on 35
January 26th, that was a couple of weeks ago. It was the day after your meeting and so they discussed 36
some of the items we’ll be discussing tonight and actually gave us a recommendation on one of them 37
to take forward to the Council. 38
39
So the three main topics we want to talk about tonight are whether to designate other Priority 40
Development Areas. I think we used the term Planned Development Areas in the Staff Report but the 41
official term is Priority Development Areas and whether to designate downtown in the El Camino 42
corridor also as Priority Development Areas. Second issue is the one Bay Area Transportation Grant 43
criteria and responding to the latest version of that and then the third is sort of the bigger picture of 44
where we are in the alternative scenarios analysis that ABAG and MTC have put forward and how 45
we move forward to address that and the upcoming preferred scenario that they are working on 46
developing.47
48
Page 2
So first of all, actually this is coming through too lightly, these colors here but just indicate for you 1
here on this map, California Avenue, that kind of purplish color here is our one Priority Development 2
Area that we had submitted to ABAG a few years ago and so that qualifies for various transportation 3
and planning grant funding potentially it was helpful in garnering the support of VTA and MTC for 4
the California Avenue streetscape grant that we got. Second, as we’ve mentioned before, when the 5
agencies began looking at these various scenarios for growth in the Bay Area they took all these 6
Priority Development Areas and sort of mapped them out and said we really want to have 70% of 7
future growth land in those areas. They quickly realized that that was probably impossible because 8
there weren’t enough of those designated but they recognized that there were some other areas like 9
transit corridors and our downtown and such that potentially could handle more growth and might be 10
additional candidates for that growth so they called these growth opportunity areas. They asked us if 11
we had opportunities that might fit that category. We did not project number of units or anything like 12
that but we indicated we had El Camino corridor that has transit service, is close to a couple of train 13
stations and then there’s downtown which is close to the University Avenue train station and is a high 14
intensity area. So those were factored into their analysis however they do not have the status of the 15
Priority Development Areas and that now becomes significant because, as I mentioned, 16
Transportation Grant funding is proposed the way the new criteria are set out to be focused on these 17
Priority Development Areas so it may be that if we don’t have these other areas designated that we’re 18
not going to be able to request transportation funding for let’s say the Charleston El Camino 19
intersection if we wanted to do improvements there like we’ve done at the Stanford El Camino 20
intersection of something like that.21
22
So the two growth opportunity areas for us are the El Camino corridor which is hard to see here but 23
it’s mapped in this light beige color and then there’s kind of a yellow circle here around University 24
train station and downtown which is yet a third growth opportunity area. So the question becomes, 25
ABAG has allowed us now to request additional designations of these areas and we can request that 26
they become Priority Development Areas. The plus side of that is that we then qualify for 27
transportation funding assuming we meet the other criteria which include having a Certified Housing 28
Element and the downside we’re not sure about but it appears to us that they are likely to retain a 29
high, what we consider to be an unreasonably high development intensity showing in those areas. So 30
we do have concern if we ask for that designation we are going to set in place there a higher intensity 31
development than we would otherwise anticipate so we brought this forward to you.32
33
Our initial recommendation had been that we not have downtown designated. We don’t think there 34
really are that many transportation funding opportunities downtown in any event but that we might 35
do the El Camino Real corridor partly because it didn’t take a lot of staff work. VTA has already 36
designated it under what they’d like to see planned as a Priority Development Area but we did not. 37
But ABAG is willing to accept just a resolution from Council saying we agree with VTA’s 38
designation of that corridor so it would be a fairly straightforward thing to do but we’re still 39
concerned about the development side and how they target housing in particular in the PDA so we 40
went to the Council’s committee with this basically recommendation not to designate the downtown 41
and kind of an ambivalent recommendation about the corridor, the El Camino corridor and the 42
Council’s committee recommended that we not designate either the El Camino corridor or the 43
downtown as additional Priority Development Areas. It’s Staff’s feeling that that’s not a big risk to 44
take. We’re willing to take the chance, we believe that there will be other opportunities down the 45
road to designate PDAs if we get to a point where we are comfortable with where things are headed. 46
They’re not going to just all of a sudden say this is it for the next 30 years. We’re not going to allow 47
you to designate anything else but right now it just seems too uncertain as to what the implications 48
are of that further designation to do that. 49
Page 3
1
So Item 1 before you tonight is to weigh in on that recommendation to Council. We’ll be going to 2
Council on the 21st of this month and talking to them about it and seeing if they want us to pursue 3
either one of those PDA designations. 4
5
The second item is the One Bay Area Transportation Grant Program itself so as I mentioned, and 6
there’s information in your packet that is essentially an update letter about what recommendations 7
they took and what recommendations the MTC didn’t as far as agency’s comments on the One Bay 8
Area Grant Program, its Attachment G. They did streamline the other criteria. They did add 9
language such as we recommended that the PDA, rather than limiting grant funding within the 10
boundaries of that area, that it also included contributions, areas that contributed to that so for 11
instance, California Avenue is our PDA if we have shuttle program, develop a shuttle program we 12
want to have some funding from VTA from the research park which is outside the bounds of the 13
PDA, but the research park to the Cal Trans train station or something like that would qualify 14
geographically and that’s connected to the PDA. So they did do that. They eliminated some kind of15
ambiguous criteria and focused on the “complete streets concept” and wanting cities to have this 16
concept of using streets for pedestrian bicycle transit and vehicles. 17
18
Policies like that in their general Comprehensive Plans, several cities I know are very concerned 19
about that. They don’t intend on updating those plans for a while. They don’t have those policies 20
now and in our case I think its fine because we’re in the middle of updating the transportation 21
element. All our policies lead us in that direction anyway so we won’t have any problem meeting 22
that criteria but they do still have one of the criterion and is prerequisite at this point is we have a 23
housing element that’s certified by the State Housing Community Development Department prior to 24
June of 2013 or something like that for the present period so we may, but it’s a tough, we’ve got a 25
ways to go with it yet. 26
27
For your information 72% of cities in the Bay Area currently have a Certified Housing Element so 28
28% do not. There was originally something in there about, or you could have a Certified Housing 29
Element for the next period. It looks like they took that out. I don’t know whether that helps or hurts 30
us but in any event they still have that in there. There are a lot of cities that even though they may 31
have Certified Housing Elements they see this as a Harbinger of the future and they’re going to have 32
to keep it certified and it might be difficult to do down the road and it might be difficult to have this 33
in there and that HCD is pretty arbitrary in the way it deals with cities a lot of times there is concern 34
about having to negotiate back and forth with them to get certification and puts more power in their 35
hands over the Housing Element.36
37
So there is a fairly solid movement and coalescence on the idea of commenting back to MTC that 38
having an approved Housing Element by a city but not necessarily certified would be better language 39
and the Santa Clara County Planning Directors met last week and VTA was there as well and we’re 40
putting together a sort of joint position recommendation to MTC to that effect as well as some other 41
suggestions but that’s the primary one. 42
43
So Staff’s suggestion on this item is that we follow up the letter that was sent before and just hammer 44
home the issue on housing and leave the rest of the stuff alone but just hammer home the issue on the 45
Housing Element be certified and recommend that this not be a prerequisite to this, to getting grant 46
funding. So that’s the second item.47
48
Page 4
The third item is the alternative scenarios. So as we’ve discussed before there are basically five 1
alternative scenarios that have been outlined. I really don’t consider 1 and 2 to be in the realm of 2
possibility for, I think ABAG just started with those as kind of unconstrained options but the other 3
three, the focus growth, constrained core and outward growth are the three that are primarily under 4
consideration and then they hope to then focus down to a preferred scenario which we now hear will 5
be probably mid March that they’ll have something out for the MTC and ABAG boards to start 6
looking at.7
8
The three options, all of them aimed towards accommodating one approximately one million new 9
jobs and 770,000 new housing units in the next 25 to 30 years in the Bay Area. So they all then, the 10
way they are laid out and the way they are laid out the first two are pretty much to focus growth in 11
and around transit stations. The third one, outward growth, spreads it out more. It’s not business as 12
usual but it is certainly more dispersed than the other two options and we’ve shown you tables last 13
time you were here that showed that at the range for Palo Alto and housing units for instance is about 14
in that period of time about 6,100 new units under that outward growth scenario up to 12,500 new 15
units which is about a 50% increase in Palo Alto Housing stock for the 25 to 30 year period. 16
Simultaneously about 20 to 25,000 new jobs in Palo Alto over that period as well.17
18
So the Council and Committee have focused less on the specific details of how those alternative 19
scenarios and the distribution of them have happened than kind of challenging the overall numbers 20
and essentially saying this is 33,000 jobs per year compared to 10,000 that we had over the last 20 21
years as an average just seems to be out of whack. I did go to a presentation yesterday, Steven Levy 22
of Palo Alto, Dena Belzer who has worked here before and is well respected Economist in Berkeley 23
and a woman from University of California, I forget her name, a Housing Economist, presented for 24
the first time that we have seen presented, sort of the assumptions and how they got to these numbers 25
and it sounded pretty good but it still seems out there so we’re waiting to get the PowerPoint 26
presentations from them and we’ll get those out to you when we do but basically Steven Levy’s 27
perspective was that he worked with several other firms national firms and institutes as far as making 28
projections, everything from Bureau of Labor statistics to UCLA Anderson School and the various 29
other ones to drive essentially a national job growth projection for the next 25 to 30 years and then 30
looked at what the Bay Area’s percentage of the national job growth scene has been over time and its 31
fluctuated but its generally been between 2.4 and 2.8% or something like that.32
33
Then they looked at the sectors that they thought were most likely to generate jobs and a lot of them 34
tend to be things that are prominent like technology, entertainment, health care, those kind of sectors 35
and felt that we were well positioned to maintain a pretty high share of that and so they didn’t really 36
increase substantially I think it ended up being 2.4% of the national job growth over that period of 37
time and that gave them their total of almost a million jobs in the next 25 to 30 years in the Bay Area 38
and then rolling back from that, how many housing units does it take and they had said originally 39
770,000 making various assumptions about job to housing ratio.40
41
They’re reducing the housing number because of the foreclosures and figuring that a lot of, if you 42
have new jobs, a number of those people are going to fill houses that are empty right now so that will 43
probably bring the 770,000 number down more like 700,000 but its still a lot. So like I said it sort of 44
theoretically it still seems like it’s not reflecting the sort of increased productivity in the Bay Area, 45
some of the trends towards telecommuting and other things that are enabling people not to have to 46
have offices or go and move to a different location to have jobs.47
48
Page 5
So there are still questions about that but I think that after hearing it, it to me made me wonder how 1
difficult it’s going to be to challenge what they’re saying. They’ve got a fair group of economists 2
behind this thing, its not just ABAG Planning Staff coming up with those numbers. So we’ll be 3
pursing that on that note and also on some of the rest of the alternative scenario analysis. I’m going 4
to bring in a firm, Economic and Planning Systems, which is in Berkeley and they’ve done some 5
analysis recently for the Contra Costa Transportation Authority and I thought it was very well done, 6
looking at both the overall forecast as well as also they’ve looked at some of the sub areas of Contra 7
Costa County and how numbers didn’t seem to make sense just within those parameters.8
9
They also did,let me show you. The other component of this that is particularly concerning is that 10
you will recall the intent of this whole exercise is reportedly to reduce greenhouse gas emissions and 11
they have now, they took those alternative scenarios and they looked at the greenhouse gas targets for 12
the Bay Area as set forth by Air Quality Management Board is 7% per capita reduction by 2020, 13
2035 a 15% per capita reduction. So they have analyzed, given certain transportation substantially 14
upgraded transportation network and the different land use patterns on the three scenarios, what they 15
think that impact could be and so here this is 5 scenarios but the three bottom ones here are the ones 16
we’re most interested in I think.17
18
So the Draft Focus Growth scenario which is mostly focused in the PDAs but a little outside of that 19
shows a 7.4% reduction by 2020 which beats the 7% that was the target and a 9.1% reduction by 20
2035 I think. Yeah that’s here. The second one, Constrained Core Concentration, which is really the 21
most focused in Oakland and San Jose and San Francisco and us and the other smaller centers shows 22
7 1/2 % and then 9.4% reduction, not really too close to 15% reduction for any of them and then the 23
Draft Outward Growth which you might have thought would be kind of lagging far behind in terms 24
of greenhouse gas reductions is 7.9% by 2035 so the difference between the highest and the lowest is 25
not an awful lot. And then you take from that and one of the other things that this consulting firm 26
that we’re going to bring on to work with us has done is they’ve looked more at the greenhouse gas 27
issue and I think not only relate it to the different scenarios but also to the overall AB32 which is the 28
statewide Greenhouse Gas Emissions Law and as far as those targets go, this whole effort is about 29
4% of the reduction for the whole state, statewide AB32 and SB375 across the whole state is about 30
4% of the 100% so most of the rest is industrial sources and cap and trade or whatever you do, 31
emission controls the vehicle standards on cars, transition to more electric vehicles, etc., etc., 4% is 32
land use and transportation connections.33
34
Of that, you get to where it is showing some very different land use patterns here that aren’t showing 35
a tremendous difference in the amount of reduction and I think they’ve got another… That might be 36
the best one. At any rate, I think this consultant group has done some good charts showing that 37
relationship and they’ve indicated from the beginning of this process that if they can’t make the 15% 38
reduction then we’ll have to be looking at other transportation initiatives to help reduce it so this is a 39
list of some of the other transportation policy type initiatives that might help reduce greenhouse 40
gasses and you can see that commitments to additional bicycle networks, Safe Routes to School, 41
more electric vehicle strategy, focus on that, telecommuting, total could reduce by 6.5% on top of the 42
9.4 or 7.9 or whatever to get us to the 15% assuming these models are all correct but the point is that 43
that list of those strategies is much more significant than the gap between the different land use 44
policies and so maybe they should de-emphasize the land use connections in putting all the cities 45
through the ringer on being concerned about this and focus more on some of these transportation 46
policies and then maybe allow the cities flexibility to come up with their own additional 47
transportation policies to try to make up gaps if that’s the case so I’m starting to see more of a 48
direction for that. Unfortunately, they’re plowing ahead and like I said, ABAG plans on releasing a 49
Page 6
preferred scenario which I expect will be a hybrid between these three somewhere and coming out 1
with that in the second week of March I think it is. Their plan then is to have pretty much the whole 2
rest of the year being public review and city’s commenting, etc. on the preferred alternative and then 3
early in 2013 they’ll be deliberating at MTC and ABAG to adopt an alternative as the sustainable 4
community strategy for the region.5
6
So that’s where we are. Sorry it takes a while to get through it there. There’s just a lot going on. 7
The Regional Housing Needs Assessment, the next round of housing allocations is due out probably 8
in the next couple of months also and we had thought that that was going to be like one third of 9
whatever the 25 year scenario was because its going to cover 8 years now but they have recognized 10
the economic situation and apparently I haven’t seen numbers yet but they’ve apparently ratcheted 11
down the numbers considerably. What I heard last was that they will be, at least Bay Area wide, the 12
total housing unit objective will probably be like a quarter to a third less than it has been this last go 13
round which was a 7 year period so for an 8 year period it will be less. Now what that means, how 14
they allocate it and whether we still manage to get ours to go up more I can’t promise that that won’t 15
happen but that will come out then. So we’ve got a March 8th is the next meeting of that 16
methodology committee. Councilmember Scharff is at that committee so he’ll be at that meeting.17
18
Then we haven’t made many inroads as far as outreach. I know Commissioner Keller and I both 19
went to one of the community meetings that MTC and ABAG sponsored and that was worthless 20
pretty much the word for it. I think the agencies know that and its partly because the meetings you 21
haven’t heard have been sort of infiltrated by some property rights and advocates in that who have 22
sort of shouted down the speakers and really caused some disruption but even apart from that 23
generally the thrust of these things have been at such a high level, such a conceptual level, its DU 24
favor, having more housing near transit and greater open space in the hillsides and along the Bay or 25
not. It’s kind of that level, something they should have been asking two or three years ago in this 26
process. It should be a lot more specific so there wasn’t any presentation of these alternative 27
scenarios and what they might mean for the city you’re in and the opportunity to come at it 28
meaningfully. They did send out last week what they call a virtual survey I think is what they call it 29
and I just sent that out today to all of you, to the Council, to Palo Alto neighborhoods, to a long list I 30
have of civic organizations and such. It’s a survey that is along the same lines. It’s not much more 31
specific than the community meetings but I thought it was at least useful to get it out there and let 32
people know what’s happening, gave the link to this effort and I did put a little bit in the blurb that I 33
sent out about the 12,500 units for Palo Alto and that hopefully maybe some people can see that and 34
their eyes will open and they will focus in on it and try to get some more involvement. We’ve also 35
had, I sent that off to the school to get that distributed to the School Board and the Council’s 36
Regional Housing Mandate Committee if you don’t know will have one School Board member. 37
They haven’t appointed one yet so Bob Golton came on their first meeting but by the next meeting 38
which is the 23rd they will have that.39
40
I’ve also told them that I had mentioned to you all that if you would like to have a liaison appointed, 41
someone to come sit in on those meetings, it wouldn’t be a voting member or anything but you can 42
certainly come and be there so you can carry things back and forth between the Commission and the 43
Committee and they didn’t have any problem with that so feel free to do that.44
45
Tonight, the one particular action before you is on the Priority Development Areas, as I mentioned 46
the Council Committee recommended that we not pursue either of those, the downtown or El Camino 47
corridor for that. We don’t really need direction from you on the One Bay Area Transportation, 48
we’re going to write the letter in any event but if you want to say anything about that, that’s fine too 49
Page 7
and then any additional thoughts you have about how we proceed on these alternatives and when the 1
preferred alternative comes back or comes out next month how we bring that back to you would be 2
appreciated. Thank you for your indulgence.3
4
Chair Martinez: Thank you Curtis. We have one member of the public to speak so let’s open the 5
Public Hearing. Good, we have another coming up.6
7
Vice Chair Fineberg: Bob Moss to be followed by Cedric de La Beaujardiere.8
9
Mr. Bob Moss: Thank you Chair Martinez and Commissioners. I want to begin by reminding you of 10
something you’ve probably never heard of before. There’s a fellow who is the one time President of 11
Cal Tech and the Nobel Laureate in Physics and he had a saying that one of the greatest evils 12
bequeathed to us by the ancient Greeks was extrapolation and if you look at the figures, his name was 13
Murray Gilman by the way, if you look at the figures in the report where the projects are for growth 14
and also if you look at that letter that Greg Schmid sent he kind of rips it to shreds.15
16
The population growth in California for the first time in 160 years was just barely enough for us to 17
keep the same number of Congress members. It’s the first time we didn’t have an increase in 18
Congress. If you look at the details, out of the 3.4 million around numbers of new residents in 19
California almost 70% were foreign immigrants so are we going to project that we’re going to have 20
that many foreign immigrants over the next 30 years? I doubt it.21
22
The job predictions, 35,000 jobs in Palo Alto would bring us about 20 to 25,000 more than we had 23
during the peak of the dot com boom and that’s after eliminating some areas that were for 24
commercial and industrial and convert them into housing so it’s just not going to happen. It can’t.25
26
In terms of the PDA areas, if you look at that map along El Camino, if you adopt the PDA along El 27
Camino and go a quarter of a mile on either side, all of Ventura, all of Southgate, all of Evergreen 28
Park would be converted from single family to multifamily housing. More than a third of College 29
Terrace and almost half of Barron Park will be converted to multifamily housing. And what will 30
happen is some developer will come in, buy some lots in the R1 area, demolish the houses and build 31
high density housing and reduce the value of the existing housing which will start to create a series of 32
reductions in value. 33
34
What the Staff is saying is you are not going to get money from the state. Let me remind you of 35
something. Every multifamily unit which is built costs the City of Palo Alto a minimum of $1,500 a 36
year more for services than it pays in taxes. It could be as much as $1,900. So if you build 2,000 37
new multifamily units in Palo Alto, our deficit in the budget increases by over $3 million a year. I 38
don’t think that we should have El Camino as a PDA. I think you should agree with the Council and 39
limit it to California Avenue.40
41
Vice Chair Fineberg: Cedric de La Beaujardiere.42
43
Mr. Cedric de La Beaujardiere: So I’m actually thinking kind of the opposite of what Bob just spoke 44
but he’s got a lot more data. He’s thought a lot more about it than I have, I’ve just kind of come into 45
it tonight but to me it seems that to the extent that Palo Alto will be grown, I think we should try to 46
focus that growth in certain areas and I think El Camino is a good area to focus on that growth 47
because it is on that transit corridor. Maybe you could try to incentivize that higher density goes 48
more on El Camino and the density should decrease as it enters into the R1 zones. You already have 49
Page 8
an R1 zone and I think that is single family residential so I’m not sure what the current plan is for the 1
El Camino corridor in terms of the Comprehensive Plan but I would hope you would tend to focus it 2
on El Camino and not scatter it about.3
4
I had something else but I can’t remember it. Thanks very much.5
6
Chair Martinez: Okay thank you. If there are no more speakers from the public we shall close the 7
Public Hearing. Planning Director Williams.8
9
Mr. Williams:I just wanted to clarify for Cedric that, and I’m not speaking for the City but I think 10
generally our Comp Plan heads this way and most of our policies that we do support higher density 11
growth along the El Camino frontage and in downtown as well as the California Avenue area, its just 12
a matter of the degree of that and the compatibility with it and so not having it encroach into the 13
single family areas, having it be at a scale that’s compatible but what we’re seeing is so the basic 14
principle of where growth would be and what’s being laid out is not so much an issue as it is a scale 15
and the magnitude of what’s being discussed and so I think that’s where our focus is but I wouldn’t 16
want to be seen as that we’re not agreeing that if there are areas that would accommodate higher 17
densities or intensities that those are the areas generally but much more narrowly focused or moderate 18
in intensity than what ABAG and MTC have shown.19
20
Chair Martinez: Okay Commissioners. As always we’re going to start with Commissioner Keller. 21
Did you want to go over your questions that you submitted?22
23
Mr. Williams: Yes I apologize for that. I was going to go over these questions and I don’t know if I 24
have any great answers to them but the first one was the memo by Councilmember Schmidt which I 25
did get to you and he does do this analysis of the growth related to sort of historically and in 26
particular the last 20 to 30 years vis-a-vis what’s being projected at this point.27
28
The second one is that the proposals are per capita decrease and much less in the 15% population is 29
increasing so there’s actually a net increase in total greenhouse gasses from this because the 30
population increase offsets the per capita decrease and that is correct. Can Palo Alto propose to 31
implement its own goal by its own means rather than following… The answer is no at this point. I 32
mean we could propose it but that’s not currently the way it looks like this is headed however that’s 33
certainly a suggestion we can make is that there is some component of this program that is a locally 34
driven for this specific community that may be able to do some things and other communities can do 35
something else to address it.36
37
Would it be worthwhile to put in language about Palo Alto’s own 15% greenhouse goal in our 38
Housing Element target? It wouldn’t hurt. I don’t know if it would make much difference but 39
certainly to the extent that we’re tying it to the location of housing, size of housing and type of 40
housing we could do that. Where is Palo Alto meeting its own… I wasn’t able to glean that 41
information as to how close we are to meeting our greenhouse gas targets but I’ll try to get that from 42
our sustainability people.43
44
Could Palo Alto make Charleston Arastradero Road improvements part of the process for 45
implementing a BRT station at that location? Is that a potential alternative to naming El Camino 46
Real a PDA? Well to the extent that we would then be sort of funding might be a project that would 47
otherwise not be eligible for funding, I don’t know if that’s the question or not. If we did I think 48
there are ways, there are some things we could do with Charleston Arastredero and the intersection at 49
Page 9
El Camino that would make it more likely to be a BRT location than, because I know right now there 1
are some issues with the configuration of that intersection and the way it works and such. I think we 2
could do that. I don’t know if it makes it an alternative to naming El Camino as a PDA.3
4
Commissioner Keller: I think what I was referring to is if VTA is hot to trot about that being a BRT 5
location, maybe they would be willing to put in some cash for doing it and that would fund the 6
intersection improvements.7
8
Mr. Williams: Okay. Attachment H on Page 6 shows a dip in employment in the mid 1990s, dip past 9
the boom, narrative seems to… Also states that large growth in labor force participation by 10
workers… Are these points worthwhile in our response? I don’t know yet. I think we’ll ask the 11
consultant when they come on board if they think it is. I do think that it’s going to be important in 12
our response to focus our attention on certain things and not be trying to sort of hit 20 different 13
subjects. There are a lot of them out there that we could go after and not just sort of glaze over when 14
they read a letter.15
16
How would the need for household growth be affected if Bay Area jobs are projected at 4 million in 17
2035 rather than 4.4 million? Well the household growth, they’ve basically figured at the 1.4 jobs 18
per household so if you take that 400,000 job difference I guess and divide by 1.4 and get that many 19
less households which would not be an insignificant number. It would be what 250 or 270,000 or 20
something like that less households. 21
22
To what extent were RHNA allocation numbers increased by building more housing than allocated in 23
the last RHNA or does more housing production… I don’t think that housing production did it so 24
much as overall our population increased a little bit so the population is a little bit more allocated due 25
to the current population of housing units but its not just because of the rate of growth in the last 10 26
years or whatever but I think it has more to do with the think that affects us the most is our proximity 27
to two and arguably three transit stations. We need to go back and emphasize with them again that 28
we’re really proximate to three because I think we get dinged for being close to the San Antonio 29
Station when in reality we don’t have a population that lives within walking distance that Mountain 30
View does and I think that’s a good point.31
32
Commissioner Keller: Plus that San Antonio Station only has one train in an hour.33
34
Mr. Williams: Yes. So a lot of things in the scenario development and even in the GHG reductions 35
that were achieved there were dependent on, and you have to go through a lot of this material to see it 36
but on very substantial investments in transportation that are quite questionable about as to whether 37
or not those will come into play or not. 38
39
Chair Martinez: Commissioner Garber first and then Commissioner Michael.40
41
Commissioner Garber: Curtis, correct me if I’m wrong and you may have made the point and I’m 42
forgetting, if we were to include the downtown area as well as El Camino as part of the PDA areas, 43
part of the fear, and I haven’t read Councilperson Scharff’s letter and maybe he implies it there, but 44
we are sort of suggesting that there is opportunity for growth within the city in those particular cases 45
and we’re sort of opening the door to that interpretation, are we not?46
47
Mr. Williams: That’s exactly the concern and the scenarios as they’ve been developed now already 48
using this growth opportunity term, I can show you that I’ve got a table right there that can show you 49
Page 10
the ranges of development intensity that they’re showing under those scenarios and its extremely high 1
already and so we’re kind of, our sense is that if we don’t designate them they may back off on some 2
of those numbers. If we do designate them they’re at least going to keep the numbers at that point 3
and they may even go higher if we say this is a Priority Development Area.4
5
Commissioner Garber: That’s it for the moment. Thank you.6
7
Chair Martinez: Commissioner Michael.8
9
Commissioner Michael: So I had a question that runs through the number of different topics that 10
you’ve been presenting and if I can just use an experience I had when I was working in Santa Clara 11
about a block away from light rail and my office was located there for 10 years or more and in that 12
entire 10 year time I only had one occasion that it made sense for me to use the light rail to go to 13
some destination that was served by that system. So the question I have is basically if you start at a 14
point A and need to get to a point B then the transit system that gets you from point A to point B is 15
useful but if its not you’re probably going to rely on an automobile or something that doesn’t 16
necessarily do so well with greenhouse gas reduction and part of the issue with the scenarios seems to 17
imply some increased development intensity, you know the issue of the cost to the city if you go from 18
single family to multifamily and minus that occasion, today I made a couple trips from the 19
community center neighborhood to the California Avenue neighborhood and met Commissioner 20
Tuma for lunch and we had a wonderful discussion about the Planning Commission and then I came 21
from the community center here for the meeting and the question is if I could have made that trip in 22
something other than an automobile, the point A to point B problem, it really isn’t served well by 23
anything other than car traffic or streets which got me here in time and so it seems to me over time 24
that there may be some value to having more development along transit corridors but then there’s the 25
question of in Palo Alto and I’m somewhat new to these projections or extrapolations when you have 26
some population of the city currently and in the future that will change and some number of jobs 27
currently and there’s more jobs than residents and there’s more people coming from other locations 28
to work here and the people who live here may be going elsewhere for their jobs. All of this relates 29
to the point A and point B connection and how that relates to the development intensity of the transit 30
systems and I would like to develop my personal understanding of how this plays into the planning 31
because at the moment I don’t have a clear vision of how that should evolve and I know that part of 32
this with the scenarios which has relatively comparable results but they rely on the free market for the 33
development along with some incentives and I just, it’s a bit of a mystery to me as to how that’s 34
going to evolve and the impact that Council and the Planning Commission may have on establishing 35
priorities that will facilitate an evolved evolution of that. But the point A to point B problem is one 36
that I’m kind of stuck on, if you have any comment to help me understand that.37
38
Mr. Williams: I think you’ve hit it pretty well. The plan here is that there would be a lot more of 39
those connections made by transit or by bicycle or there would be ways that are facilitated that are 40
much improved over today. That’s a fundamental assumption here which again, depending upon 41
funding availability and other issues is questionable but at least if you assume that I tend to believe 42
that over time if we’re investing in transportation and particularly transit and areas near transit that 43
we’ll have more of those connections that could be made without vehicles but to what degree and at 44
what cost to the community also depending on how much we take on. 45
46
Mr. Moss makes the comment about the cost of housing and that’s true for every community and if 47
indeed we’re going to have 700,000 new homes they’re going to have to go someplace so there’s 48
somewhat of a fair share concept at work here too. Do you want them to go out into the interlands 49
Page 11
kind of and then we continue to have the business as usual greenhouse gas issues and pollution and 1
building more highways and such where dollars go or do you want to try to get some handle on that 2
and have some of that come in and some of the cities that would prefer to have commercial 3
development but take on some of the residential so again it becomes a matter of how much can you 4
do that can still retain the character of Palo Alto and in some cases enhance the character of Palo Alto 5
because I think there’s a lot of opportunity for that in some of these areas as well so there are 6
definitely places to do that and ways to enhance that transportation network to make that A to B 7
problem resolvable but again the test here is to come up with something that is somewhat realistic 8
and it doesn’t serve any purpose to say a city, whether its Palo Alto or someone else, is going to be 9
sort of allocated or designated that we think that they’re going to have three times as many housing 10
units as they realistically are likely to have because then the other two thirds of those units that can’t 11
be built there, are they going to Tracy or somewhere else that is completely frustrating the goals of 12
the plan? Why not have something that is more realistic that puts those units… There are cities that 13
have a lot of vacant space that are close to transit lines that could accommodate that and it would be 14
more affordable for the housing. They could get to Palo Alto on the train in 15 minutes and isn’t that 15
a better solution? So I think that’s what we’re really… Number one we’re arguing about whether the 16
700,000 units is right or not but also we’re going to be talking about where those units are going and 17
being sure that we’re prescribing some and having a flexibility to make sure those are going in places 18
that make sense, where they will get built, and not where its just a pipe dream and it frustrates the 19
plan in the end.20
21
Commissioner Michael: Just as a follow up, I know when we met with you in connection with the 22
futures work with the IBRC you had very helpful information about the demographic projections 23
with the appropriate cautions about the accuracy of the assumptions and so forth but there were a 24
couple things that were interesting. One was the change in the different age groups, the cohorts and 25
I’m getting to the more advanced age group as opposed to Palo Alto has been very famously 26
attractive to families whose children want to attend our schools and what happens when the families 27
come in and they may prefer a single family house close to the neighborhood school but is there 28
going to be adequate housing for that cohort as their children graduate from school and parents have 29
an empty nest and they could downsize. It seems to me that there may be a shortage of housing for 30
the cohort relative to the changing demographics.31
32
Also one of the things that came up in the discussion that Commissioner Tuma and I had at lunch was 33
the attractiveness of some of the families coming in may be Asian families or different ethnic groups 34
that may have multiple generations living in one house, just a different cultural values but this is a 35
change which seems to be in process and may be likely to continue. But that seems to be fairly 36
significant in terms of these scenarios being those that are more likely.37
38
Chair Martinez: Commissioner Tuma. Your thoughts?39
40
Commissioner Tuma: First, thank you for this report. It was long but packed with interesting 41
information. There is a lot of things that we’ve been working on for years now so it was interesting 42
and informative. To address the specific questions that you had asked on the topic of the PDAs I 43
think with the uncertainty of what would the impact of a designated PDA are might be, I think the 44
direction that you’ve talked about is wise where we don’t necessarily designate it now. 45
46
I also think that we don’t need to put the map back up but that swath down El Camino, if we get to 47
the point where we do think we see over time that there’s not these downsides to designate areas as 48
PDAs perhaps the width of the band that goes down El Camino is simply too wide. I looked at it and 49
Page 12
I had a similar kind of reaction. It seems we’re getting significantly into the R1 areas and if you’re 1
going to do density along El Camino you would then want to have some ability even from there to 2
transition in intensity into the R1 neighborhood but I think the corridor itself is interesting to look at 3
and I don’t know that there is any particular requirement that a PDA be of any size, shape or 4
dimension or anything like that so I think maybe when we get to looking at that going more narrowly 5
down El Camino, and to my mind if you’re looking at the two, El Camino versus downtown, El 6
Camino seems like a better alternative if we were going to do one and then maybe the other one for a 7
variety of reasons including proximity to transit and other areas and commuting and things like that 8
so that makes sense to me.9
10
When it comes to, on the One Bay Area issue about having a certified housing element, one that just 11
fundamentally scares me because we can’t seem to get the housing element done to save our lives and 12
its difficult but two is, I think you had used the word instead of certified that it would be approved 13
and perhaps even another way to think of that would be simply compliant, because I think we’re 14
going to have a very long protracted and perhaps nasty debate with the powers that be about whether 15
our housing element is compliant and what does compliant mean and I think there is a little more 16
helpful ambiguity perhaps in a compliant housing element versus a certified housing element or even 17
an approved one and that debate is going to continue I think to rage on for a long time depending on 18
the various numbers they come out with. It’s nice to hear their cutting them down by 30% but I still 19
think it’s high so some thoughts on direction on the Certified Housing Element issue.20
21
On the topic of the alternative strategies and the jobs and housing units, one of the things that these 22
numbers say loud and clear, I mean if you take the numbers and its interesting to hear your reaction 23
to some of the methodology and rationale behind it as being you know, maybe not entirely off its 24
mark. But even if you said, let’s cut those numbers in half, we’re still looking at an upward direction 25
of 6,250 housing units which would be a 25% increase over what we have now. So you take their 26
numbers and you cut them in half, growth is coming. There is significant growth under even a very 27
conservative scenario here and so this goes I think to one of the things that I’ve said for a long time 28
which is growth is coming, we have to be planful, thoughtful, and put things where we want them 29
and not just try to say somehow all this growth isn’t coming and we’ll deflect it to other 30
neighborhoods or communities or things like that.It’s coming whether its in the magnitude its being 31
talked about, I’m skeptical, but its coming and we’re going to have to absorb it so the more thinking 32
we do about the locations for the units, the size, the types of units, that’s the discussion that to me is 33
inevitable and will serve us well if we put more effort into that.34
35
In terms of addressing Mr. Moss’ concern because I think many of us have this, I would say to the 36
electorate and the legislature and whatever else, whoever else controls it, and I’m glad to hear more 37
and more discussion, Prop 13 needs to go away and needs to be dealt with. It’s such a problem. If 38
you think about all the things that are going on and what we’re talking about here you’ve got this, 39
you know its just more and more and more impact which is going to happen, no matter what we all 40
want its going to happen, but to continue to not have the funding mechanism that we fundamentally 41
need for our schools and other services, times have changed. So well beyond what we’re talking 42
about tonight but I just don’t see, I mean the scenarios that you talk about where you have 12,000 43
new housing units in Palo Alto and a million new jobs, 750,000, that will break the Bay Area 44
fundamentally as we know it in that period of time. If that scenario happens, you know, it’s going to 45
be broken. So I don’t know where the leadership comes from and there is more and more discussion, 46
I’ve seen recently about doing so in Prop 13 but it’s a big component of making this work so. That’s 47
my thought.48
49
Page 13
Mr. Williams: That was one of the recommendations from all three economists I saw yesterday. 1
That was the number one recommendation. You’ve really got to reform or toss out Prop 13.2
3
Vice Chair Fineberg: I’m going to try to start high level and then drill down into detail. On the first 4
question of whether or not to designate the PDAs, I would concur with the Council’s subcommittee 5
that it is premature now and I don’t know if you’re looking for formal recommendation but that the 6
Planning Commission not recommend designation of the two areas as PDAs. My main reason for 7
that conclusion is that it puts the cart before the horse. We have absolutely no idea what the fiscal 8
impacts would be, what the land use impacts would be, we’ve done no environmental analysis and 9
it’s counterintuitive to me to change zoning and planning before we know what effect it’s going to 10
have.11
12
I think we are making progress with our area plans that we’ve got and our Comp Plan to do the 13
analysis to increase density and its not a coincidence that the areas that we’re looking at are at Cal 14
Ave. and the areas that the rail corridor is looking at is along the transit corridor, maybe other areas 15
too but we’re going to get indicators for how much growth we as a community want in those areas 16
and we’ll understand those impacts after we do the analysis with our Comp Plan update and to name 17
or redesignate a PDA before we have that analysis done, I don’t want to characterize how I think 18
about it but I think its good not to make that designation. 19
20
In terms of whether we, how we feel about having the requirement for an approved housing element, 21
I think the case could be made that the denser or more built up an area the harder it is to find land and 22
the more difficult the task of developing a compliant housing element and that level of complexity 23
increases the time requirement. Maybe we might have been better organized several years ago but it 24
doesn’t remove the fact that it’s a lot more difficult to drop on potential areas that can be rezoned 25
versus other communities that have wide open undeveloped areas where it’s an easier task and the 26
scenarios ought to recognize that complexity does add time burden.27
28
As far as the five alternatives, my comments are much more detailed there. I still have to go back to 29
my fundamental previous statements that this entire visioning scenario is an exercise in the willful 30
suspension of disbelief. They are asking us to plan, irregardless of real world constraints. It’s a 31
creative endeavor and you’re supposed to imagine where the growth should go without knowing how 32
its going to get paid for, without knowing whether there is land that you can do it on, whether 33
property or R1 owners are willing to have four houses on their lot and where the funding is going to 34
come from for schools, for infrastructure, so its asking us to plan without the constraints of reality 35
and reality kind of hasn’t entered this planning yet. Yet, when we look at the Bay Area plan Page 8, 36
its telling us, unless I’ve misunderstood and Staff please jump in and correct me, that the sort of most 37
dense growth in the areas like Palo Alto would yield an 8% reduction of greenhouse gasses but the 38
more unconstrained growth of scenario 5 would yield a 7.2% reduction so its about maybe a 2% 39
difference in reduction of greenhouse gasses and it’s a huge burden on the communities to change 40
their land use patterns for only a 2% difference so that, unless I’m misunderstanding, is telling me 41
that this entire vision of using land use to produce greenhouse gasses, is barking up the wrong tree, 42
putting it bluntly. I agree with your comments earlier that maybe the state ought to look at other 43
means for reducing greenhouse gasses and you had showed us that other list. 44
45
If I can just finish up then, I think that there’s a little bit of a danger in looking at specifically the El 46
Camino corridor for PDA because the transportation there is a rapid transit bus. It doesn’t exist in its 47
full state now and it’s coming from VTA, an organization that over the last decade has done nothing 48
but cut bus service in Palo Alto so I view that as a very fragile transportation option. There are 49
Page 14
problems inherent with it that haven’t been analyzed. It is parallel to Cal Train and will potentially 1
cannibalize it. It s a whole other discussion beyond here but potentially cannibalizing riders on Cal 2
Train and also if it gets priority timing on the lights potentially shutting the combination of the VTA, 3
rapid transit and the train, potentially cutting off east west transit throughout all of Palo Alto as east 4
west routes have to stop for the south routes. 5
6
The solution to that and I don’t know if it’s appropriate to push for it in this, is transit dollars to 7
underground rail crossings. If we can underground those rail crossings, we keep our kids safer, we 8
get our cars east and west without the impenetrable barriers, we could potentially then support higher 9
growth without the negative impacts of the roads shut down and then maybe we see if there’s really 10
buses running up and down El Camino but I think its really dangerous to plan for growth on El 11
Camino on the supposition that there might be busses so that’s another place that we have to be 12
careful of the cart before the horse.13
14
Chair Martinez: Okay, if I may, one of the nice things I guess I want to say about being an Architect, 15
many nice things, I don’t want to be corrected by Commissioner Garber, is that we get to work in 16
different communities with a sort of different planning cultures, different needs and we get to see 17
things kind of through their eyes. When I work in a poor community in the East Bay its all about 18
what kind of incentives can we provide to attract development, any kind of development. When I 19
work in San Francisco, it’s all about housing and it’s not only the developer because every developer 20
wants to build housing. If they have a site they want to build housing because they know it will sell. 21
And the Planning Department, if you’re in a UMUA, an Urban Mixed Use Area, they’ll limit the 22
amount of office space 25,000 square feet or so, because they are promoting housing. You don’t 23
have to provide parking because they want the housing. They don’t want people to drive and it’s a 24
different culture than what we have here.25
26
Here, developers don’t want to talk about housing. They want to talk about office space and R&D 27
space and we may have a growth projection of 6,000 housing units that’s put upon us but I don’t see 28
where that’s coming from. We don’t have the land for it and all the things that Vice Chair Fineberg 29
said, we don’t have the will. There is nobody in the development community that wants to go that 30
way. In my couple of years on the Commission there’s been a couple of hundred housing units kind 31
of come by, if that. And so I see us in this discussion with MTC and ABAG about these growth 32
projections which we all don’t agree with but with these planning exercises and housing allocations 33
and job growth and you know creating these PDAs for something that isn’t going to happen and I was 34
greatly relieved when you said its only 4% of our greenhouse reduction requirement because its 35
going to be such a challenge to get even near that if we’re focusing on land use patterns so I’m 36
hoping that we’re not, and I know you a bit Curtis, I know you’re not but we’re not giving up this 37
fight, and not even a fight but a discussion of creating a paradigm that looks at not just what Palo 38
Alto allocation of this or that is but really look at on a region what’s really happening in terms of 39
housing growth and jobs growth based on the last 5 or 10 years and use that as a regional planning 40
exercise because we know its not going to happen here in Palo Alto and I’m hoping and trusting that 41
we’re going to get to the point after our regional governments have us do these exercises where we’ll 42
really be able to sit down and look at really realistic projections and opportunities for growth and 43
building near transit that somehow fits with what every city not only is capable of doing but really 44
wants to do that really hasn’t in practice, the vehicles in development and land availability and 45
housing needs and proximity to transit and all of that that allows us to go forth with this plan.46
47
What I see now I mean fine let’s vote to recommend the PDA on Cal Avenue but I don’t really see 48
the rest of it happening to the extent that its going to change Palo Alto or we need to change the way 49
Page 15
we think about Palo Alto because this is looming upon us. I just think it’s not going to happen. 1
Commissioner Keller.2
3
Commissioner Keller: So firstly, I agree with a lot of things people have said, in fact most of them 4
and in terms of El Camino Real PDA, don’t do it now and eventually if we do find it in our interest to 5
do it, think of the idea that beauty is skin deep and essentially a PDA should be a couple of parcels 6
deep and not much deeper than that.7
8
The next thing is that I am very pleased with the collaborative introspective process that we’re going 9
through for deciding additional PDAs because I recall that it was our previous City Manager who 10
proposed the Cal Ave. PDA, drew the maps themselves or with Staff only and then asked the Council 11
to ratify his decision without being able to amend the map, without being able to decide anything at 12
the last minute and I’m glad we’re not following that approach. We still don’t know the impact of 13
that PDA including the Fry’s area and whether that’s going to harm us in the future so I’m glad we’re 14
doing this deliberate process.15
16
We talk about Steve Jobs having had a reality distortion field. He accomplished things with his 17
reality distortion field and the people putting these together have reality distortion field but they’re 18
not going to accomplish anything except for messing things up. They’re not going to improve things 19
for the rest of us.20
21
In terms of the RHNA allocation, it makes no sense to have a linear division. You don’t divide by 3 22
because that is what’s called an arithmetic progression. Any growth scenario would actually be a 23
geometric progression which means that you’ve divided the first one is smaller, the next one is bigger 24
and then the next one is a little bigger than that. That is the way percentage and growth work so they 25
don’t even understand math.26
27
We already have bus light preemption on for example El Camino. That’s already been implemented. 28
In terms of, there was a comment by Commissioner Tuma that some growth is coming, there is a 29
comment by Chair that he doesn’t think people will build it. The evidence I’ve seen is that if we 30
zone for housing it will be built and it will be large and it will be large units on postal stamp land if 31
they can manage to build it but that’s not the building I think we need and in terms of Commissioner 32
Michael’s comment, we need housing for seniors, we need housing for young 20 and 30 somethings 33
without kids but that is not what developers are building. We need to zone for what we want and 34
have that.35
36
In terms of Prop 13 I’ve been a proponent for the split role. I don’t think we’re going to have 37
taxation on housing, is going to go off Prop 13, it ain't going to happen but when Prop 13 was passed, 38
commercial property paid 60 to 65%, somewhere in that range percent of property taxes and retail or 39
housing paid 35 to 40%, somewhere in that range and now its basically exactly the opposite because 40
commercial property turns over less frequently so that’s why Prop 13 reform for commercial property 41
makes a lot more sense.42
43
I agree with undergrounding our rail crossings. I think that’s very important and we should think 44
about that more. I’ll leave you with one thought and that is that there’s this notion in housing that no 45
good deed goes unpunished and I believe the more housing we build the more we encourage ABAG 46
to allocate us more housing. There are several reasons for that. I was shown by Councilmember 47
Burt, part of their analysis of how much housing to do is based on their projection of how much 48
growth is happening and so in some sense the fact that we’ve grown actually encourages them to 49
Page 16
think we can grow some more even though its not really that we can’t grow because of one time 1
events. He calculated in the last RHNA 50% of the amount of housing growth given to us was based 2
on this current RHNA was based on their projections of how much we should grow so that’s what 3
I’m concerned about.4
5
There’s the other issue that no good deed goes unpunished and that is when housing is actually built, 6
we have to in the next RHNA find even more sites to replace the sites that are on the housing 7
element. If we put all these sites on the housing element and none of the housing gets built we have 8
an easier job the following time so all this talk about incentives are building housing, I don’t think we 9
should have incentives, that makes our job even harder and that’s why I’m interested in the issue of 10
limits to market rate housing and limiting market rate housing to what’s in the RHNA for market rate 11
housing and once you build that you’re done until the next RHNA allocation and the reason for doing 12
that is in particular in order to save land for below market rate housing because once its gone, its 13
gone, and we know market rate housing is going to trump below market rate housing and we had a 14
discussion a month or two ago that that is a legal reason, that it is legal to limit market rate housing to 15
the market rate housing in the RHNA allocation with the express purpose of saving it for below 16
market rate so that’s a thing that we should certainly consider because if we zone for it they will try 17
to build it unless we put limits on that. Thank you.18
19
Chair Martinez: Okay Commissioner Garber, are you ready?20
21
Commissioner Garber: I’m assuming that the reason that we have proposed the PDA for California 22
Avenue is because we’ve already zoned that as a PTOD.23
24
Mr. Williams: Actually the two things happened very close together and technically the PDA 25
preceded the PTOD by just a little bit but they were both in the works at the same time but yes, they 26
connected.27
28
Commissioner Garber: So just a couple of my final thoughts here. To Commissioner Tuma’s 29
comment that growth is coming, I think one of the big learnings in going through the Stanford project 30
was looking at the traffic projections that were being cast on the intersections along El Camino and 31
recognizing that the project itself had very little impact compared to the amount of growth that’s 32
happening outside our borders and I’m talking about the growth and intensity of traffic. Short of 33
putting gates on our community, we are going to be impacted by what’s happening all around us but 34
even if we put a moratorium on all growth in Palo Alto we are still going to have intense impacts that 35
we need to manage. I think one of the most powerful learnings from me from hearing the Director’s 36
presentation and reading the plan, my sense is that the real impacts our community is going to feel 37
over the next 35 years have to do with the look and the feel that we have on our roads and not our 38
land. Yes, there is likely to be greater density and intensity along the transportation routes and at the 39
multimodal centers as we’ve all spoken about. I’ve argued and I know that many others on the 40
Commission have argued that the likelihood of the R1 zones changing in the City over the next 35 41
years is pretty close to zero. Will there be slight tweaks to zoning along El Camino and the rest of 42
that? Probably but as was reported we can change it some and potentially more than a little and have 43
very little impact on the ultimate goals of AB375 and greenhouse gasses and the real opportunities to 44
have those impacts really all occur on our roads and the policies we put in place for how we use our 45
roads and to that end, my only suggestions relative to some of the things that the Planning Director 46
was asking about is to yes, I would focus in on, especially for communities such as ours, which has 47
no open land, is to see if there’s an opportunity for us to get rid of the requirements the land 48
Page 17
requirements in favor of focusing in on the transportation ones because that’s where the real impacts 1
and the real opportunities for our community to have impacts on this.2
3
That presumably would not be the formula for a community that does not have open land or is a 4
much bigger community, I don’t know what those are. Maybe there’s a trade off to be made or a 5
different type of analysis for them to take to evaluate communities that are more like ours and have a 6
different set of criteria than those that do. 7
8
Chair Martinez: Commissioner Michael, final thoughts? Good. Commissioner Tuma? Good. 9
10
Commissioner Tuma: Only one which has to do with this notion about having open land or not 11
having open land and whether that is sort of dispositive of the issue of the ability to grow. When I 12
hear Chair Martinez talk about the growth in San Francisco and the housing being added in San 13
Francisco, we’re talking about a place with no open land. I think sometimes in Palo Alto we talk 14
about not having open land but it’s really on a relative scale. I think there is opportunity for and 15
whether its open land or redevelopment of existing land with more density in certain places, I hear 16
this often bantered about, we have no open land in Palo Alto and maybe that’s a one dimensional 17
view of land, maybe I look at it more as a three dimensional view of land which is the ability to go up 18
and so I do think its interesting to think about, I just don’t feel as if we are an entirely built out city 19
and certainly if San Francisco can be adding housing in significant numbers, I don’t want to be San 20
Francisco. I don’t want to have big high rises like San Francisco does but there’s somewhere in 21
between, particularly in certain locations and we’ve obviously already done some of those but I think 22
as the discussion progresses I tend to pull away from the notion that we’re an entirely built out city 23
with no open land because I think there are opportunities to develop what we have here in a planful 24
and thoughtful way.25
26
Chair Martinez: Thank you. That was nice. Vice Chair Fineberg.27
28
Vice Chair Fineberg: Commissioner Tuma brings up the good points about the redevelopment in San 29
Francisco. San Francisco has some types of land that simply don’t exist here. They’ve had huge 30
military base closures at Hunter’s Point, Southern Pacific Rail yard and the areas around south of 31
Market that were abandoned and derelict office buildings where they’ve had large numbers of 32
Brownfield developments. Our worst areas don’t qualify for redevelopment under the state’s 33
descriptions of derelict and redevelopment plans. I would agree we have some areas that would be 34
good for redevelopment but I think we should act in a way where we retain local control of whether 35
those areas should be developed in a way that’s in accordance with our Comprehensive Plan.36
37
So again, stressing that not designating the PDAs at this time until we further understand the future 38
consequences of having that designation so we can develop what we want where we want according 39
to our Comp Plan rather than a designation and requirements someone else imposes on us and we 40
don’t yet understand those requirements.41
42
For Staff, I’m very pleased to hear also that you’re engaging, I may not get the initials correct, EPS to 43
do the fiscal analysis. I think it’s an absolute imperative that Council and the public understand the 44
fiscal impacts of what the different scenarios require of Palo Alto. I think we need to understand 45
even some more basic numbers. We hear different members of the public, Mr. Moss said 46
multifamily housing costs the city a certain amount and I’ve heard other members of the public bandy 47
about different numbers and I’ve heard Commissioners make statements that housing costs more than 48
office and I’ve yet to see any real analysis of what the fiscal impacts of either are in making the 49
Page 18
policy decisions of do we want to build more houses, do we want to build more offices, do we want 1
more things that generate business revenue, what types of revenue would that be and where would 2
that be so we make the decisions based on facts and I don’t know if EPS is going to go that broad but 3
it certainly would be useful information and I think that the question of whether growth will come, 4
whether its going to be residential or commercial is one of those questions that you’re just going to 5
have competing experts that all are absolutely certain of the voracity of their claims. My reaction is 6
that the analysis that’s done by the economist for this visioning scenario use 2000 census data which 7
was during a period of absolute phenomenal, the 1990s was an unprecedented phenomenal period of 8
growth so the growth rate was very steep slope and then they basically extrapolated that out to 2035 9
and reality happened. The first decade of the 2000s happened and the reality was we had a crash in 10
2000 with the dot com bust and then in 2008 we had a housing bubble and a big recession so during 11
the entire decade the growth at the rate that had happened in the previous decade simply didn’t 12
happen and I think One Bay Area is acknowledging that when they are cancelling the demands for 13
the first, or reducing the demands for growth during that first third period but the question is if you 14
have that vertical growth curve and then it turns out the first part of it is essentially flat, is the 15
remaining growth an even steeper line or do you bring down the initial growth rate that was the target 16
at 2035 and then say the intervening period is less steep? I’m not hearing that they’re bringing down 17
the end point in 2035 because there’s nothing that’s going to lead us to really rapid growth in the 18
second two thirds of the scenario and so it points to the absolute importance of having this analysis 19
and the underlying assumptions that bring us to an end point to have those analyzed by peer 20
reviewers, whoever it would be, there are times when we look at high speed rail and the writership 21
studies and those types of things don’t hold true when there are outside observers that don’t have a 22
vested interest in an outcome and so absolutely important that there be good review of the underlying 23
assumptions to verify whether there will be growth and whether it’s a little growth or a lot of growth.24
25
Chair Martinez: Commissioner Keller.26
27
Commissioner Keller: First I entirely agree with Vice Chair Fineberg of the desirability of having 28
Economic and Planning Systems do a peer review and the comments I made should be considered 29
and some of the things that they should consider, but the interesting thing is that exponential growth, 30
infinite exponential growth is impossible and you get to a overshoot and collapse and that has 31
happened over fishing in the oceans, its happened in a variety of things and we don’t know the 32
carrying capacity of our land is being conceded in terms of what we can build on it and also in terms 33
of the water supply and food systems and things like that. There are limits to these things so 34
naturally as we’re already seeing there’s a dampening of that growth and I would expect a dampening 35
of that growth to continue and not to occur at historically earlier rates. 36
37
Considering the price of things is so expensive here we’re not going to see the kind of growth 38
because things are so expensive its hard to locate more growth here in an expensive community so 39
typically things start here and they go somewhere else where they are cheaper and that mitigates too 40
high a growth.41
42
The thing is this, there is a healthy amount of growth which a reasonably economist would consider 43
and then there is excessive growth or uncontrolled growth which some people consider to be cancer 44
so essentially what the One Bay Area plan is to try and put a cancer on us as opposed to a healthy 45
amount of growth and I’ll just leave that image at that.46
47
Chair Martinez: On that note, Commissioner Garber.48
49
Page 19
Commissioner Garber: I just wanted to acknowledge Commissioner Tuma’s comments regarding 1
growth. I do believe as you are aware that that growth and intensity in land is the future of Palo Alto 2
in the planful and thoughtful way that he was describing it but the real reason I wanted to be called on 3
last is to be able to have the last word and not Commissioner Keller.4
5
Chair Martinez: Well I’m going to try to finish on a lighter note if I can. Commissioner Keller 6
called it a cancer but this Draconian job growth and housing projection numbers sort of led me to 7
come up with a Planning proposal which I call Draconian measures to achieve community housing in 8
neighborhood environments or The Machine. Every planning proposal has to have an acronym. The 9
first is to build in the open space district. I said it was Draconian. The second is to require every 10
development to provide housing, every office building housing, every school, housing, every sewage 11
treatment plant, housing. The third is we mend the Density Bonus Law and we allow one of those 12
Dubai towers to be built near transit. The second is we allow our proposed concessions to 13
concessions. You can build up but you can also build down and the next one is we create a new 14
zoning district called R1 too many. That one kind of speaks for itself. And then I got this one from 15
Commissioner Keller, we built over streets and here, really thinking out of the box we incorporate 16
Mountain View because they love to build housing over there and its kind of a perfect fit.17
18
And then we amend the Living in Cars Ordinance to include driveways in our Housing Allocation 19
survey and then get a little creative with bookkeeping and we count two bedroom units twice and 20
then finally we abolish planning and we call it post-planning and then we’ll be there, wherever there 21
is. Thank you everyone.22
23
Mr. Williams: Send that on to us please. We’d like to post that as our goals for the coming year. We 24
do need a Motion if you wouldn’t mind on the issue of, I guess a non-Motion would mean you’re not 25
suggesting we request designation for PDAs on El Camino but I think it would be helpful to have a 26
Motion.27
28
Chair Martinez: You’re right. Commissioner Garber.29
30
MOTION31
32
Commissioner Garber: I move that we support Staff’s recommendation, both Staff’s 33
recommendation and the City Council’s subcommittee that there be no PDAs for either the 34
downtown or the El Camino corridor at this time.35
36
SECOND37
38
Commissioner Keller: Second.39
40
VOTE41
42
Chair Martinez: Okay Motion by Commissioner Garber and Second by Commissioner Keller. Do 43
you wish to speak to the Motion? Okay let’s call for a vote. All in favor? Aye (ayes).44
45
Chair Martinez: Okay Motion passes with Commissioner Garber, Michael, Keller, Chair Martinez, 46
Vice Chair Fineberg and Commissioner Tuma all voting in support of the Motion and Commissioner 47
Tanaka absent. Thank you.48
49
Page 20
MOTION PASSED (6 –0)1
2
Mr. Williams: I just have one more Motion to add to this topic. I was looking at this article I saw 3
today and I thought I’d clue you in on it and its titled SB375 Draws Ire of Tea Party so I don’t know 4
if you’ve seen and it has something to do with the disruption at these meetings but it basically says 5
the tea party movement has been trying to take back America on the national stage since the election 6
of Barack Obama. Tea party activists have also turned their attention to taking back California and 7
specifically Senate Bill 375, a 2008 law that seeks to combat climate change by promoting density in 8
the state’s metro regions.9
10
It says tea party activists have fought against local and regional planning efforts often invoking the 11
United Nations Agenda 21 sustainable development effort as the enemy. California tea party 12
representatives have increasingly turned up at regional statewide planning sessions including a recent 13
SB375 and One Bay Area workshop in Concord where they disrupted the meeting by challenging its 14
premise and it goes on and on like that so interesting turn of events a little bit but we’ll see where that 15
goes.16
17
1/26/2012 1
REGIONAL HOUSING MANDATE COMMITTEE
Special Meeting
January 26, 2012
The Regional Housing Mandate Committee met on this date in the
Council Conference Room at 2:41 P.M.
Present: Burt, Scharff, Schmid
Absent:Holman
Oral Communications
None
Agenda Items
1.Staff Update of Recent and Upcoming Meetings
a.Bay Area Planning Directors –Economic Overview December 2,
2011
b.Community Meeting –January 18, 2018
c.Planning and Transportation Commission –January 25, 2012
d.Santa Clara County Planning Officials –February 1, 2012
e.Regional Advisory Working Group –February 7, 2012
f.RHNA Methodology Committee Meeting –February 23, 2012
Director of Planning and Community Environment, Curtis Williams
explained the Regional Housing Mandate Committee (RHMC) had been
formed to work with Staff and provide recommendations to the Council
regarding housing issues from the regional planning meetings,those
related to the Association of Bay Area Government (ABAG) and Metro
Transportation Commission (MTC) in particular. The RHMC had
meetings prior to its formalization as a Standing Committee. There
would be four Council Members and representation from the Palo Alto
Unified School District (PAUSD)seated on the Committee. The last
1/26/2012 2
time the RHMC met there was discussion of the Bay Area Planning
Forum where there was an economic overview presented by Dena
Belzer. She discussed assumptions of job growth in Bay Area being
based on of 2.4 percent of the national job growth. A memo was also
resurrected from ABAG showing where the job growth estimate came
from. He attended an ABAG and MTC joint community meeting
regarding sustainability community strategy in the Bay Area. The
meetings had been substantially interrupted by groups with concerns
of local control and property rights making it difficult to stick with the
agenda items. Staff opinion held the agenda items were not focused
on relevant topics. There was no representation of the alternatives
nor was there an analysis of the alternatives or an opportunity to
discuss alternatives. The Planning & Transportation Commission
(P&TC)had agendized materials on January 25th for consideration to
be discussed at the RHMC meeting; however their meeting went long
and they were unable to provide recommendations for Agenda Item
No. 2 of the RHMC agenda. The upcoming Santa Clara County Planning
Officials meeting would focus on the One Bay Area Transportation
Grant and whether the Bay Area Planning Directors want to take a
particular position as a group. He explained the Regional Advisory
Working Group was made up of multiple cities in the Bay Area and
various organizations involved in business, environmental, and social
equity groups had not been able to meet prior to the scheduled
February 7, 2012 date. The objectives of the meeting were to discuss
distribution of economic projections within the Bay Area, which were
opposed to Palo Alto’s overall question on assumptions.He noted the
Regional Housing Needs Allocation (RHNA)Methodology Committee
was scheduled to meet on February 23rd after not having met in over
three months.He attended the Bay Area Planning Director’s
Association Steering Committee meeting where the focus of the
discussion was with the ABAG Planning Director regarding concerns
over the issue of requiring housing compliance as a pre-requisite to
the transportation grants having been voiced at the community
meetings.
No Action Taken
2.Consider Priority Development Area (PDA) Status for El Camino and
Downtown
Director of Planning and Community Environment,Curtis Williams
recommended the Committee Members review Attachment C of the
Planning Division At-Place Item. There was one planned priority
development area in Palo Alto designated by the Council and it was
1/26/2012 3
California Avenue.When the Association of Bay Area Governments
(ABAG)and the Metropolitan Transportation Commission (MTC)
projected future developments around transit stations and transit
corridors their focus was in the Planned Development Areas (PDA’s).
However there was not ample PDA’s to accommodate developments
around the Bay Area. The two groups identified Growth Opportunity
Areas (GOA) and proceeded to ask cities to unofficially designate the
areas they felt fit into the category. Palo Alto’s response included the
Downtown area, University Avenue near the transit station, and all of
El Camino Real.ABAG and MTC used those recommendations as
modeling alternatives. The Transportation Grant Program established
priorities for transportation grants in areas that were designated as
PDA’s. As a result if these grants occurred today California Avenue
would be the only area eligible for the grant funding. The Valley
Transportation Authority (VTA)had nominated the entire El Camino
Real Corridor through the county, but it was not an official designation
as a PDA for the City unless there was a Resolution passed. The MTC
had asked if Palo Alto was interested in designating any of the areas
mentioned as PDA’s officially; if so the designation would make them
eligible for future grants. Since the VTA completed the work on the El
Camino Real designation,Palo Alto would only need to adopt a
Resolution agreeing with the designation.Staff was inquiring whether
there was interest from the Council to designate the El Camino Real
corridor or Downtown as a PDA. He acknowledged the Downtown area
was not part of the VTA proposal and there would be numerous
amounts of detailed information that would need to be prepared to
designate an area. He was not positive that the grant funding
opportunities balanced against the amount of Staff time involved. Staff
recommendation was to not pursue the Downtown area. The El
Camino Real corridor was a different matter in that the amount of Staff
time was minimal since the VTA had completed most of the
designation work necessary. Although he did not see a negative impact
if the Council chose not to designate either area.
Chair Schmid asked what Staff was looking for from the RHMC.
Mr. Williams stated Staff needed direction to not proceed and would be
presenting a report to the full Council on February 21,2012.
Vice Mayor Scharff said it was Staff’s original recommendation to go
with El Camino as a PDA designation but now after further
development it was to not move forward with the designation.
1/26/2012 4
Mr. Williams stated the initial thought was to move forward but at the
present time the situation was in a state of flux and he felt the City
had more benefit if they did not designate the area. He reviewed the
chart within the At-Place items from the Planning Division in
Attachment C; the 2010 U.S. Census showed 754 households in the
designated California Avenue PDA. Focus Growth was one of three
scenarios consistent with most of the development was designated in
the PDA area with some allowed developmental spillage in the outlying
area, Constrained Core Concentration was consistent with compacting
all of the growth into the PDA area, then Outward Growth which
encompassed more disbursal of growth in the Bay Area.
Council Member Burt asked for clarification on the sub area between
the VTA, Palo Alto, and California Avenue.
Mr. Williams stated Staff mapped out how the VTA showed the
California Avenue area. The VTA had compiled a radius around the
transit station which included some single family developments. Palo
Alto Staff considered the area outside of the City’s PDA boundary but
the VTA included it within their PDA designation.
Vice Mayor Scharff asked whether Palo Alto or ABAG identified the
GOA.
Mr. Williams stated the City identified the area and generally what the
Comprehensive Plan allowed.
Vice Mayor Scharff asked if the City could UN-identify GOA’s.
Mr. Williams stated by not designating the areas as PDA’s essentially
the City was un-identifying the areas.
Vice Mayor Scharff asked if the areas were not identified the goal was
to reduce the ABAG numbers in both the El Camino Real and
Downtown areas. In terms of grants, not identifying the additional two
areas would not affect California Avenue.
Mr. Williams stated not identifying other areas would not affect the
grant possibilities for California Avenue.
Chair Schmid said the critical question was surrounding the El
Camino/Charleston/Arastradero intersection; it was a critical east/west
corridor. He asked for confirmation if there was not a PDA then there
1/26/2012 5
would not be grants available but if there were a PDA it might
encourage more mandates to develop along the corridor.
Mr. Williams confirmed if there were no PDA’s there would be no
grants offered.
MOTION:Vice Mayor Scharff moved, seconded by Chair Schmid for
the Regional Housing Mandate Committee to recommend that Staff not
move forward with the designation for either the Downtown area or
the El Camino Real Corridor as a PDA.
Vice Mayor Scharff stated it was not worth the risk,Palo Alto should
proceed slowly,and not encourage more housing along the areas as
suggested by ABAG.
Chair Schmid asked if California Avenue included part of the eastern
side of El Camino Real.
Mr. Williams stated the designation included the western side of El
Camino Real. The designation language said “connecting to or related
to”so if there was a part of El Camino that connected to California
Avenue there would be a good case for inclusion.
Chair Schmid asked if ABAG was double counting where the El Camino
corridor and California Avenue areas crossed over.
Mr. Williams said it was a reasonable question to ask ABAG but he did
not believe so.
Council Member Burt said since there was not a previous discussion of
the Downtown area becoming a PDA there was not an understanding
of the advantages or disadvantages. Given the existing developmental
restrictions on the Downtown area,if it was designated as a PDA,how
would the scenario work with the development cap on commercial,
residential, and office being less than 300,000 square feet.
Mr. Williams corrected the cap was less than 175,000 square feet.
Council Member Burt said there was a low Floor Area Ratio (FAR)
comparative for Downtown so the things being built were from transfer
development rights or Planned Communities (PC). How would
designating Downtown as a PDA affect compliance with state law
requiring grants such as housing bonuses. For example, if market
forces downtown were driving office development not housing and it
1/26/2012 6
was designated as a PDA was there information on how ABAG would
reconcile the constraints of building height and FAR.
Mr. Williams stated his fear was ABAG was not reconciling the issues
and the City would be arguing with them regarding the constraints and
why their numbers would not be workable in the Downtown area. His
thought was if the Downtown area was designated ABAG was likely to
project 36,000 new units be built Downtown over the next 30 years.
He noted those numbers were unrealistic. The issue was if the
numbers were in ABAG’s calculations the City’s Housing Element would
no longer be based on the 25-year horizon but would be chopped up
into 3 8-year housing periods.
Council Member Burt said under the state housing bonuses,in theory,
existing development in those areas could come back and apply for the
housing bonuses under existing zoning.
Mr. Williams stated yes, the bonuses in the scheme were not going to
add up.
Council Member Burt asked if potential housing sites were where
existing zoning developers could come in and demand the housing
bonuses.Mr. Williams stated Staff had been applying mixed-use
criteria which he felt were more units than most cities would try to get
with the bonuses. The numbers in Attachment C did not allow the
developer to take a site that was existing office or was restricted from
residential.
Council Member Burt clarified the restrictions on the Downtown
development did not permit residential.
Mr. Williams stated the mixed-use amount allowed Downtown to have
a limit. The bonus had a limit of 20 to 30 percent above the
developmental limit. Staff had assumed generally 20 units per acre on
sites with mixed-use which appeared to be able to accommodate
redevelopment.
Council Member Burt asked why the City was restricted on identifying
only those sites likely to accommodate the development. He also
asked if the City could use housing near transit for the required
housing supply.
1/26/2012 7
Mr. Williams stated he believed there was a reason for not doing the
development in that manner. He said he would return to the RHMC
with a response when he had one.
Council Member Burt acknowledged the market forces in Palo Alto
were strong and explained no one would have predicted the East
Meadow area would be transformed from commercial to residential. So
realistically the test market forces were off. Whether it was the
California Avenue area or other areas under consideration for that type
of zoning with maximum FAR but minimum density was basically
driving towards smaller units to better accommodate seniors or young
professionals without families. ABAG counted a 5,000 square footage
home the same as an 800 square footage townhouse equally.
Mr. Williams stated Staff had worked the square footage issue into the
Housing Element policies and that was the reason why they were
setting 20 units per acre as the starting point for development.
Council Member Burt was uncertain if that policy provided the proper
achievement. His preference was to review the desired outcome. He
asked whether the zoning method created would achieve those
outcomes.
Mr. Williams thought part of the Housing Element recommendations
were to establish the minimum density and maximum unit size to
achieve smaller units which would be the basis of the unit estimates.
He noted parking was a constraint frequently used. The requirement
of sufficient parking was not particularly restrictive on achieving the
housing numbers.
MOTION PASSED 3-0 Holman absent
3.Staff Response on RHNA Allocation to Sphere of Influence Rules
Re: Stanford
Director of Planning and Community Environment, Curtis Williams
spoke to the Regional Housing Mandate Committee (RHMC) regarding
the housing allocations coming out and explained the last time the
information was released, the City objected because some of the
allocations being counted against the City were from the Stanford
campus.By acknowledging the error Staff reduced the overall housing
element by 600 units and a letter was sent to the Association of Bay
Area Governments (ABAG) requesting the reduction. Santa Clara
County had written a similar letter to ABAG regarding the Stanford
1/26/2012 8
units needing to be allocated to them. He was uncertain when ABAG
would be making the changes but he would report back to Council
after his meeting with them on February 23rd.
No Action Required
4.Review of Alternative Scenarios
Director of Planning and Community Environment, Curtis Williams said
the agencies had completed calculations as shown on Attachment A of
the Planning Division report. The report was a presentation that ran
through the performance measures. The goal that had been set for the
effort in the Bay Area was set by the Air Quality Board that the City
would reduce green house gas emissions by 7 percent by the year
2020 and a minimum of 15 percent by the year 2035. The chart
reflected a 9 percent goal as a best result and an 8 percent reduction
as the worst case scenario. There had been discussion around the
delta between the reductions and how effective it would be if the
outward growth scenario was only a 1 percent difference.The Air
Quality Board required a number of other transportation,pricing,
parking, and other measures regionally that helped reduce green
house gasses from vehicles and light trucks.
Council Member Burt discussed the California Bay Area Resources
Board meeting scheduled that week. They would be considering what
vehicle standards should be set by 2050. 87 percent of the vehicles
would be at zero emissions and some may be of the plug-in nature but
a radical transformation in vehicle emissions which would make the
report completely inconsequential. He asked if Staff was considering
vehicle changes or transportation pattern changes.
Mr. Williams stated yes he was aware of the meeting and they were to
specify the number of lower emission vehicles during the discussion.
He stated the report only reflected transportation changes based on
land use. SB375 only focused on the 9 percent of the total 100 percent
reduction that AB32 was attempting to achieve.
Council Member Burt said AB32 acknowledges the issue and in a
manner SB375 was a subset of their objectives.
Mr. Williams stated there were a number of other criteria that ABAG
and MTC tried to measure with committees’ that had been established
over time for the various projects. What they needed to review was
the carbon dioxide number. Staff had performed an analysis of the
1/26/2012 9
Association of Bay Area Governments (ABAG) and Metropolitan
Transportation Commission (MTC) charted numbers which showed
each city and Planned Development Area (PDA) with each alternative
and the number of housing and jobs then projected out to the year
2040. Staff had performed an analysis of the transportation zones
within the City in an effort to locate where the housing and jobs were
coming from because the charts by ABAG and MTC had them located
in the center of single family residential areas. When asked,ABAG
replied they had randomly located information and the cities could
place the real location within their PDA’s.
Chair Schmid requested Staff look at the ABAG/MTC chart as alternate
scenarios with each one having a high population,household growth,
and job rate which were well over what the Bay Area and state had
experienced over the past twelve years. He found it difficult to vote for
any of the scenarios because that would be endorsing a high growth
outcome.
Council Member Burt said a number of Council Members had broached
the subject of societal pattern changes based on technologies that
were causing trip avoidance. For example; the company Webex had a
carbon calculator which provided the calculations of carbon reduction
as a result of having a virtual conference rather than traveling to the
office. There was a degree to which there was trip avoidance by use of
technology which was pervasive and under acknowledged. The
technology measure was an under-acknowledged trend.
No Action Taken
5.Staff Update of One Bay Area Transportation Grant Proposal
Criteria
Director of Planning and Community Environment, Curtis Williams said
the One Bay Area grant proposal had changed but Staff was preparing
a letter to the Metropolitan Transportation Commission (MTC) Board
and focus on the issue while simultaneously get the Santa Clara
County Planning Directors to take a stance as a group.
No Action Taken
6.Outreach Re: Demographic/Economic Assumptions
Council Member Burt and others had discussion around the fourth
scenario in the Association of Bay Area Governments (ABAG) and the
1/26/2012 10
Metropolitan Transportation Commission (MTC)chart where there was
an extrapolation of growth trends over the last 2 decades. Their
demographers stated this was an anomaly, Palo Alto Staff believed it
to be a trend. They had been consistently inaccurate and now had
come up with a scenario where they would need to project realistically.
He asked how to move forward in a concrete manner to establish the
fourth scenario.He noted there was an intellectual capital in the
community so enlisting those powers could have a significant positive
impact on any situation.
Palo Alto Unified School District (PAUSD)Chief Business Official, Bob
Golton said whenever there was an issue with the District there was
incredible expertise that came forward to assist.He felt partnering
with the Regional Housing Mandate Committee (RHMC)was important
to them because the impact of the ABAG numbers on the enrollment in
the future with limited land and resources within the City.
Council Member Burt suggested a summary to frame the different
scenarios in terms of impacts on the schools.According to ABAG there
would be a 50 percent increase in population in the coming decade
where the alternatives would have a drastically lower impact. He felt
there was a need to leverage Palo Alto’s resources as a community
with actively engaged members of the school community.
Mr. Golton noted the impact of the numbers was profound to the
PAUSD and they needed to be active participants in the planning of the
future. He said the demographers current and past made short-term
projections of approximately 12 years. However the projections were
shorter term because what they were based on information of
development and there was no information on developments that far
in advance.
Council Member Burt asked why the PAUSD allowed the demographers
to project so far in advance that information could not be validated.
Mr. Golton said the PAUSD received information from the City’s
Planning Department Staff that would allow them to modify the
projections moving forward.
Mr. Williams met last week with the PAUSD and their demographer
and created a letter that was currently being reviewed by the City
Manager’s office that will then be sent to the PAUSD with three
different growth scenarios.There was a low scenario was the current
growth point played out of the historic time period, the second
1/26/2012 11
scenario was the outward growth which was the lowest,and the third
was the highest so the PAUSD would have a range.
Chair Schmid said ABAG was using a shift/share model which
projected the total United States (U.S.) growth, implying the bay Area
would maintain the same share of the growth. There were two critical
assumptions in the model 1) that the U.S. growth rate would be high
over that time period and 2) the static nature of the shift/share was
that you hold your own share. If you took the same model and
applied it to New York in 1950 and asked what they would have
prepared for in 1980,they would have prepared for 6 million people
that were not there. That was what ABAG was imposing the City do, to
prepare for a future that was unrealistic. Long term population,
household, or jobs forecasting could not be compiled without looking
at ranges.
Vice Mayor Scharff had concerns with the ranges discussed. The low
growth scenario was what the City had experienced over the past ten
years where there were two growth periods. Was that the time period
Staff was suggesting was the low growth or was it the previous.
Mr. Williams stated no. it was a 40 year spread or 140 units over four
years.
Vice Mayor Scharff the second scenario was the outer growth which
was fairly high.
Mr. Williams stated yes, it was 204 units compared to 149.
Chair Schmid stated using the outer growth scenario was accepting the
ABAG suggested growth for the Bay Area as a whole. The real
challenge to ABAG was for the City to state their base growth rate was
not acceptable.
Mr. Williams said ABAG was creating a range of alternatives, but they
were all exceedingly high projections.
Chair Schmid understood but said the range needed to be based on
assumptions that made sense to capture the range of options.
Vice Mayor Scharff wondered if there was a third alternative for a
different range. He said none of the scenarios being used were realistic
and for the City to use two of them seemed to give undue weight to
ABAG’s process.
1/26/2012 12
Mr. Williams said Staff could use the low and high ranges where the in
between became high and the historic became the low range.
Council Member Burt felt omitting a period of a decade of abnormally
high growth was no more legitimate than ABAG omitting the periods of
low growth. He felt a 40 year period provided the proper amount of
growth cycles. There were two categories of impacts, the school
impact and the community impact. It was important to present to the
PAUSD the community impacts. The community impacts included
traffic, public facilities resources, and infrastructure.Palo Alto was an
anomaly in terms of having a school community experiencing rapid
growth and as a basic aid district.The City needed to convey to the
school community and leverage the resources, politically and through
research. The City may leverage the information and prevail on the
argument but if not it would have a negative impact on the schools.
Mr. Golton said there were basic aid school districts where the
property tax revenue exceeded the amount they would receive from
their revenue; however, some basic aid school districts did not have a
large amount of money where others had significant resources. Some
basic aid school districts merely received a small amount of funding
where as Palo Alto received a significant amount. The metric to look at
would be growth and the ability to accommodate the growth. The
analysis of ABAG was incomplete without the impact on the schools
which was profound.
Chair Schmid noted the City’s population was growing at 1 percent
while the school population was growing at 2 percent. It was not only
the City’s growth impacting the school but something else. In order to
understand what was occurring there needed to be an age distribution
of the population those citizens over 65 and 80 years of age who were
heads of household and the second was school age children. What was
taking place was there was an aging population still sitting within the
Proposition 13 capped housing being displaced by families with young
children who were drawn because of the school district.
Mr. Golton said in the down period following the major economic
downturn,Palo Alto was the only school district in the county that had
assessed value growth.
Chair Schmid had seen a map of houses that showed there had not
been a change of ownership since the 1970’s implying the leverage
change ratio would continue at least for another decade.
1/26/2012 13
Mr. Williams stated the Finance Division compiled the information
when they were estimating the potential property tax increases.
Chair Schmid asked for the map to be distributed to the Council.
Vice Mayor Scharff said when single family homes turned over and off
of the Proposition 13 assessment the difference went from $70,000 to
$100,000 under Proposition 13 to several million dollars. He asked
how much money the PAUSD needed per student if a property was
turned over and the district received 3 new students what type of
property tax increase was needed to cover the new students with the
same services.
Mr. Golton said they had yield numbers for various types of housing.
As it related to the amount of money for each student required,there
were two numbers. One was simply the simple division of school
districts expenditures divided by the number of students. He felt that
would be and interesting number to develop.
Vice Mayor Scharff was not looking for the PAUSD to suffer under the
City’s plan. He was curious as to how to set-up plans to develop the
new housing stock.
Council Member Burt said the numbers needed to reflect not only the
expenditures but also the revenues.
Mr. Golton acknowledged there was a balance needed which came in a
couple of ways;the additional property tax and the developers fees
received for new construction. He noted when there were no
developers fees the property tax needed to not only cover the
operating costs but also needed to cover the capital costs for the
students.
Council Member Burt mentioned the other revenue source was
commercial.
Chair Schmid said it was important to note the student yield out of the
townhouses and condominiums was 50 to 60 percent higher than
expected.
Mr. Golton agreed the student yield was moving up and in addition,
outsiders were continuously supposed by the yields in Palo Alto.
1/26/2012 14
Vice Mayor Scharff asked for comparison data for the unit size of
housing, who was occupying the home.
Mr. Williams will follow-up with the PAUSD on projections and outreach
to work and identify those sources in the community who could assist.
He noted the supplemental hand-out had an updated version of the
key issues summary with the demographic and economic objections
and emissions. Staff would restructure the key issues summary for the
PAUSD to use.
No Action Taken
7.Next Steps
Director of Planning and Community Environment, Curtis Williams
stated the next update would be on January 21st to the City Council
with respect to the Regional Housing Mandate Committee’s (RHMC)
recommendation on the Planned Development Area (PDA). He noted
the next RHMC meeting would be February 23rd at 4:00 PM.
Chief Business Official, Bob Golton stated the School Board would meet
on the 31st to select a board member as a liaison to the RHMC.
Chair Schmid said if there was an issue over a response he suggested
having a short meeting to discuss the options before Staff met with
Council.
Vice Mayor Scharff felt it was helpful to have Mr. Golton in attendance
and asked if there was a possibility he could staff the meeting as well
as a School Board Member.
Mr. Golton stated his intent was to be staff to the liaison.
ADJOURNMENT:The meeting was adjourned at 4:17 P.M.
City of Palo Alto (ID # 2432)
City Council Staff Report
Report Type: Action ItemsMeeting Date: 1/30/2012
January 30, 2012 Page 1 of 2
(ID # 2432)
Summary Title: Retiree Medical Discussion
Title: Retiree Medical Actuarial Report Discussion
From:City Manager
Lead Department: Administrative Services
Recommendation
Staff recommends that Council:
·Review, discuss and provide feedback on the attached actuarial valuation results (see
Attachment A).
Council Review and Recommendations
On November 28, 2011, Council approved staff’s recommendation to review and accept the
updated retiree medical actuarial study with valuation dates as of January 1 and June 30, 2011.
The actuarial study results are required by the Government Accounting Standards Board (GASB)
Statement No. 45, Accounting and Financial Reporting by Employers for Post Employment
Benefits other Than Pensions.
Included in their approval, Council directed staff to schedule a Council meeting, prior to the
midyear budget, with the actuarial consultant who prepared the retiree medical actuarial study,
Bartel and Associates. The meeting is scheduled for January 30, 2012. Council requested the
meeting in order to have an in-depth discussion on several of the assumptions included in the
actuarial study and its conclusions. Among the assumptions up for discussion are the “closed
amortization period” (versus “open”) and the assumed rate of return on investments going
forward and the medical trend assumptions. A listing of all assumptions appears in Attachment
A.
Council asked for the investment rate of return in the California Employers’ Retiree Benefit
Trust (CERBT) for the City’s trust investment since its inception in March 2008. The rate of
return (money-weighted) for the City’s trust investment for the period March 17, 2008 through
June 30, 2011 is 3.62 percent. The rate of return (time-weighted) for the CERBT, overall, for the
period of June 1, 2007 (trust inception) through June 30, 2011 is 1.24 percent.
Attached to this memo are the related staff reports from the Finance Committee discussion on
October 18, 2011 and the Council discussion on November 28, 2011.
January 30, 2012 Page 2 of 2
(ID # 2432)
Attachments:
·Attachment A: Retiree Medical Report (ID 2345)(PDF)
·Attachment B: Excerpt from Finance Committee meeting of November 28, 2011 (PDF)
Prepared By:David Ramberg, Assistant Director
Department Head:Lalo Perez, Director
City Manager Approval: ____________________________________
James Keene, City Manager
City of Palo Alto (ID # 2345)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 11/28/2011
November 28, 2011 Page 1 of 2
(ID # 2345)
Summary Title: City Council to Approve Retiree Medical
Title: Finance Committee Recommendation that the Council Approve and
Accept the Updated Retiree Medical Actuarial Study
From:City Manager
Lead Department: Administrative Services
Recommendation
The Finance Committee recommends that the Council approve and accept the updated retiree
medical actuarial study (Attachment A).
Committee Review and Recommendations
On October 18, 2011, the Finance Committee voted unanimously to accept staff’s
recommendation to review and accept the updated retiree medical actuarial study with
valuation dates as of January 1 and June 30, 2011. The actuarial study results are required by
the Government Accounting Standards Board (GASB) Statement No. 45, Accounting and
Financial Reporting by Employers for Post Employment Benefits Other Than Pensions.
The updated study results in an increase of $3.8 million (39%) in the City’s retiree medical
liability between 2009 and 2011. The result is that the City’s cost for retiree medical goes from
$9.8 million to $13.6 million annually. The reasons for the cost increase are based on changes
to actuarial assumptions and demographic changes and other changes as discussed in detail in
Attachment A.
Staff will provide funding recommendations as part of the FY2012 mid-year budget process and
as part of the FY2013 proposed budget. In addition, staff will include the revised costs in the
long range financial forecast, which will be presented to the Finance Committee in early 2012.
Attachments:
·Attachment A: Retiree Medical Study (PDF)
·Attachment B: Finance Committee minutes 10/18/2011 (PDF)
·Attachment C: Staff Presentation (PDF)
·Attachment D: At places memo (PDF)
November 28, 2011 Page 2 of 2
(ID # 2345)
Prepared By:David Ramberg, Assistant Director
Department Head:Lalo Perez, Director
City Manager Approval: James Keene, City Manager
City of Palo Alto (ID # 2180)
Finance Committee Staff Report
Report Type:Meeting Date: 10/18/2011
October 18, 2011 Page 1 of 5
(ID # 2180)
Council Priority: City Finances
Summary Title: Retiree Medical Study
Title: Review and Acceptance of Updated Retiree Medical Actuarial Study -
Valuation Date January 1, 2011 and Valuation Date June 30, 2011
From:City Manager
Lead Department: Administrative Services
EXECUTIVE SUMMARY
This report provides the City Council with the actuarial study results required by the
Government Accounting Standards Board's (GASB) Statement No. 45, Accounting and Financial
Reporting by Employers for Post Employment Benefits Other Than Pensions. The results of the
study as compared to the 2009 study show a fairly dramatic increase in Citywide costs. See
Attachment B, slide 31 for a summary of the study results.
RECOMMENDATION
Staff recommends that the Council review and approve the attached actuarial valuation results
(see Attachment A).
BACKGROUND
Per GASB Statement No. 45, beginning in Fiscal Year 2008, like other governmental entities, the
City of Palo Alto was required to recognize in its financial statements any unfunded, earned
retiree medical costs including those for current active employees. GASB 45 also requires the
City to complete an actuarial study on a biennial basis, to determine the retiree medical liability
and how much the City should be setting aside each year to fund that liability, the annual
required contribution (ARC).
In Fiscal Year 2008, the City established an irrevocable trust with California Employers Retirees
Benefit Trust (CERBT) for retiree medical benefits. In Fiscal Year 2008, the City transferred $33.8
million to the trust. As of January 1, 2011, the trust was valued at $40.2 million, and as of June
30, 2011, it was valued at $44.8 million. Of course, recent market volatility may have a
downward effect on future figures, not included in this study.
DISCUSSION
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October 18, 2011 Page 2 of 5
(ID # 2180)
Bartel and Associates completed an actuarial valuation for the City on October 11, 2011 with
two valuation dates: January 1, 2011 and June 30, 2011. The reason for the two valuation
dates goes back to a new regulation pertaining to members of the CERBT (trust). All the City’s
past valuations have used a January 1 valuation date. However, beginning FY 2012, members of
the CERBT are required by GASB 57 to switch to a common valuation date of June 30.
Therefore for this study only, the City opted to utilize both the January 1 and June 30 valuation
dates. The January 1, 2011 valuation determines the Actuarially Required Contribution (ARC)
for FY 2012; the June 30, 2011 valuation determines the ARC for FY 2013 and FY 2014.
January 1, 2011 Valuation Date
The actuarial study using a valuation date of January 1, 2011 valued the City's unfunded retiree
medical liability at $134.7 million, compared to the unfunded liability of $105.0 million on
January 1, 2009 –a 28% increase.
The Annual Required Contribution (ARC) associated with the January 1, 2011 valuation is
$13.6 million for Fiscal Year 2012. This is an increase of $3.8 million (39%) over the ARC of
$9.8 million associated with the January 1, 2009 valuation. The dramatic increase in the City’s
retiree medical liability between the 2009 and 2011 studies is attributable to several
differences in assumptions used by the respective actuarial firms (Milliman and Associates
performed the 2009 study, and Bartel and Associates performed the current study). Those
differences are as follows (Attachment A, page 7 also summarizes the assumption changes and
their impact on the City’s liability):
1.New CalPERS “Decrements.” The most recent CalPERS experience study –which gathers
demographic information throughout the state –noted increasing lifespans of retirees,
decreasing average retirement age, and other factors, all of which increase the City’s
projected unfunded liability by approximately $8 million.
2.Recent Spike in Palo Alto Retirements –as cost-sharing and wage freezes have been
implemented, many people have accelerated their retirement plans. There were more
than the projected retirements between 2009 and 2011. All of the retirements since the
last study added $2.7 million to the City’s unfunded liability.
3.Medical Trend Assumptions –The table below shows the difference in medical premium
growth rates assumed in the respective studies. Milliman assumed a slow but steady
increase in rates ranging from 6.5% in the early years and settling at 5.85% from 2018
on. On the other hand, Bartel assumes that the rate of increase will be more front-
loaded, starting at 9% and settling to 5% per year starting in 2021. Cumulative increases
assumed in the more recent report are higher than those assumed in 2009. (See
Attachment B, slide 10 for a comparison of specific medical trend assumptions in the
two studies, and Attachment C for PERS Medical Plan rate changes 2002-2012.) This
added $4.8 million to the City’s unfunded liability.
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October 18, 2011 Page 3 of 5
(ID # 2180)
4.“Actuarial Load”–This is a 2% premium applied to assumed costs based on the premise
that PERS Preferred Provider (PPO) Medical Plan premiums have been increasing at a
slower rate than have claim costs. PERS has been funding the difference from reserves,
but Bartel believes that eventually rate increases will need to bounce upward to more
evenly match the increased costs. This anticipated “bounce” adds $3.4 million to the
City’s unfunded liability.
5.Cost Sharing by Miscellaneous Group –This change in benefits was implemented after
the 2009 study and caused the City’s unfunded liability to decrease by $14.2 million.
Note that the impact of any public safety group concessions is not included in this study.
6.Migration of Retirees to More Expensive Medical Plans –While 13% of actives are
enrolled in PERS PPO plans, that percentage rises to 32% for retirees under 65, and to
54% of retirees over 65. This seems to be due to the increased portability of the PPO
plans for retirees who move out of the area. The last study may not have recognized
this trend, which adds $7.7 million to the City’s unfunded liability. (See Attachment B,
slide 7 for enrollment statistics for active and retired employees.)
7.Asset Smoothing –Bartel recommends smoothing gains and losses in the trust balance
over 5 years, to avoid volatility in the City’s ARC. For example, the year-end 2010 Trust
balance was $40.2 million, an increase of 26% over the year-end 2009 balance of $32.0
million. With asset smoothing, the actuarial value of the trust assets for year-end 2010
would be $35.3 million, since that 26% gain is spread over the next five years. By saving
some of the market gain for subsequent years when there may be losses, the City
assumed an additional $4.6 million in unfunded liability.
8.Closed Amortization Period –Rather than continually “re-up” the 30-year amortization
period, which would never actually completely pay off the liability, Bartel recommends
amortizing over the remaining 28 years of the 30-year period beginning 2009. The
impact of this change on the City’s unfunded liability is included in that of the
Demographic and Other Factors discussed below.
9.Demographic and Other Factors –These are ways in which the City's actual experience
differs from what is assumed in the CalPERS experience study. For example, to the
extent that City employees retire earlier or later than average, or go out on disability
more or less than the statewide average, this affects the liability. In our case these
factors add $12.4 million to our unfunded liability. (See Attachment B, slide 5 for
statistics on active and retired employees included in the study.)
The General Fund’s share of the citywide ARC totals approximately $9.5 million annually for
FY 2012, an increase of $2.7 million from the amount budgeted for FY 2012 based on the
January 1, 2009 valuation. That amount can be funded from the CERBT trust, if needed. Staff
will provide more precise figures for the General Fund portion by the October 18 Finance
Committee meeting. (See Attachment D: Results by Fund.)
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October 18, 2011 Page 4 of 5
(ID # 2180)
June 30, 2011 Valuation Date
The actuarial study using a valuation date of June 30, 2011 valued the City's unfunded liability
at $139.7 million, which is an increase of $5.0 million over the January 1 valuation date. The
ARC associated with this valuation is $14.4 million for Fiscal Year 2013, and projected at $14.8
million for 2014. (Again, see Attachment B, slide 31.) The $0.8 million jump in the ARC
between FY 2012 and FY 2013 is primarily due to the decrease in assumed discount rate from
7.75% to 7.25%.
The reasons for the respective discount rate assumptions are:
The January 1, 2011 valuation assumed a discount rate of 7.75% as mandated by CERBT.
Beginning Fiscal Year 2013, CERBT requires that each member agency employ a discount rate
no higher than 7.61%, as applicable to its selected asset allocation. The trust offers three
possible asset allocations, of which Option 1 –the City’s chosen option -has the highest
projected yield. CERBT’s expected return over a 20-year period for Option 1 Asset
Classifications is 7.61%, with a 50% confidence limit. Bartel recommends dropping the assumed
rate to 7.25% to achieve a 60% confidence limit.
The General Fund portion of the FY 2013 and FY 2014 ARCs is $10.0 million and $10.3 million,
respectively. Again, staff will provide more precise figures for the General Fund portion of the
FY 2013 and 2014 ARCs by the October 18 Council meeting.
RESOURCE IMPACT
The FY 2012 budget allocated $9.8 million towards the ARC for all funds, but this amount was
an estimate before the actuarial study was completed. The ARC contained in the actuarial study
was $13.6 million, representing an increase of $3.8 million across all City funds. The General
Fund portion of the increase is $2.3 million for FY 2012, which may be drawn from the trust, if
needed. Future years’ ARC funding will need to be incorporated into those years’ budgets. Staff
will provide funding recommendations during the Mid-Year or FY 2013 proposed budget
process.
ENVIRONMENTAL REVIEW
The action recommended is not a project for the purposes of the California Environmental
Quality Act.
Attachments:
·-a:Attachment A: Executive Summary (PDF)
·-b:Attachment B: Revised Preliminary Results (PDF)
·-c:Attachment C: 2002-2012 PEMHCA Premiums (PDF)
·-d:Attachment D: Results by Fund (PDF)
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October 18, 2011 Page 5 of 5
(ID # 2180)
Prepared By:Nancy Nagel, Senior Financial Analyst
Department Head:Lalo Perez, Director
City Manager Approval: ____________________________________
James Keene, City Manager
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City of Palo Alto
Retiree Healthcare Plan
January 1, 2011 & June 30, 2011 Actuarial Valuations
Executive Summary
October 11, 2011
Bartel Associates, LLC
411 Borel Avenue, Suite 101
San Mateo, California 94402
Phone: 650-377-1600
Email: jbartel@bartel-associates.com
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City of Palo Alto Retiree Healthcare Plan
January 1, 2011 & June 30, 2011 Actuarial Valuations
Executive Summary
October 11, 2011
Governmental Accounting Standards Board Statement No. 45 (GASB 45), “Accounting and Financial
Reporting by Employers for Postemployment Benefits Other Than Pensions” provides standards for the
financial reporting of the City’s Retiree Healthcare Plan. The City implemented GASB 45 for the
2007/08 fiscal year. The January 1, 2011 actuarial valuation provides the financial reporting information
for the City’s 2011/12 fiscal year and the June 30, 2011 actuarial valuation provides the financial
reporting information for the City’s 2012/13 and 2013/14 fiscal years.
VALUATION RESULTS
Participants: The same participant data was used to prepare both the January 1, 2011 and June 30, 2011
actuarial valuations. A summary of this data as of June 30, 2011 is:
Participants 6/30/11
Actives
Number 923
Average Age 44.7
Average City Service 10.8
Average PERS Service 13.7
Average Pay $86,007
Total Payroll (000’s) $79,384
Retirees
Number 860
Average Age 67.0
Average Retirement Age 55.5
Plan Assets: Assets must be set aside in a trust that cannot legally be used for any purpose other than to
pay retiree healthcare benefits in order to be considered plan assets for GASB 45 purposes. The City's
retiree healthcare plan is currently funded with the CalPERS Trust (CERBT).
The City began prefunding the plan’s obligations during 2007/08. The City’s intention is to fund the full
ARC each year. Investment gains and losses relative to the assumed net rate of return are spread over a 5-
year period by using an Actuarial Value of Assets rather than the Market Value of Assets to determine the
plan’s costs and funded status. This helps smooth any volatility in the Market Value of Assets and provides
an element of stability for the plan expense and City contributions. The Actuarial Value of Assets is kept
within a corridor of 80% to 120% of the Market Value to make sure it does not diverge significantly from
the Market Value of Assets.
The Market Value of Assets was $40,213,000 and the Actuarial Value of assets was $35,294,000 on January
1, 2011. The Market Value of Assets was $44,774,000 and the Actuarial Value of assets was $40,222,000
on June 30, 2011. The following table shows how the Market Value of Assets changed through 6/30/11 and
is projected to change during 2011/12.
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January 1, 2011 & June 30, 2011 Actuarial Valuations Executive Summary
Page 2
October 11, 2011
Plan Assets
(Amounts in 000’s) 2009 2010
1/1/11-
6/30/11
Projected
2011/12
Market Value at Beginning of Year $ 24,616 $ 32,042 $ 40,213 $ 44,774
Contributions 700 3,532 2,448 5,165
Benefit Payments - - - -
Administrative Expenses (23) (34) (41) -
Investment Earnings 6,749 4,674 2,155 3,246
Market Value at End of Year 32,042 40,213 44,774 53,185
Actuarial Value at End of Year 35,294 40,222 49,279
Annualized Investment Return
Market Value 26.9% 13.7% 5.3% 7.3%
Actuarial Value 11.6% 11.9% 7.0% 9.7%
Funded Status: A plan’s funded status is measured by comparing the Actuarial Accrued Liability (see
definitions and assumptions section below) with Plan Assets. A plan is considered funded when Plan
Assets equal the Actuarial Accrued Liability. As the City’s retiree healthcare plan had not been funded
prior to GASB 45 implementation in 2007/08, the City established a contribution policy that would fund
benefits as earned for each future year and would fund the Unfunded Actuarial Accrued Liability over a
30-year period.
GASB 45 requires the discount rate used to determine the present value of future benefit payments be based
on the source of funds used to pay the benefits. This is the expected long-term net earnings rate on plan
assets for funded plans and the expected long-term net earnings rate on an agency’s investment fund for
unfunded plans. A 7.75% and 7.25% discount rate was used for the City’s January 1, 2011 and
June 30, 2011 valuations, respectively, representing the long-term expected net return for the CERBT. See
page 5 in the Definitions and Assumptions Section for a discussion of the discount rates used in the
valuations.
The plan was approximately 21% funded as of January 1, 2011, and 22% funded as of June 30, 2011:
1/1/11 Valuation 6/30/11 Valuation
Funded Status
(Amounts in 000’s)
7.75%
Discount Rate
7.25%
Discount Rate
Actuarial Accrued Liability (AAL)
Actives $ 51,179 $ 57,479
Retirees 118,800 122,444
Total 169,979 179,923
Actuarial Value of Plan Assets (AVA) 35,294 40,222
Unfunded AAL (UAAL) 134,685 139,701
Funded Percentage (AVA/AAL) 21% 22%
Annual Required Contribution (ARC): The Annual Required Contribution is the Normal Cost plus an
amortization payment toward the Unfunded Actuarial Accrued Liability. The Normal Cost is the value of
benefits allocated to the current fiscal year for service worked during that year. The Unfunded Liability is
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January 1, 2011 & June 30, 2011 Actuarial Valuations Executive Summary
Page 3
October 11, 2011
amortized as a level percent of payroll over a period of 28 years as of June 30, 2011 (27 years remaining
as of June 30, 2012).
The City’s Annual Required Contributions for 2011/12, 2012/13 and 2013/14 are as follows:
7.75% 7.25% Annual Required Contribution
(Amounts in 000’s) 2011/12 2012/13 2013/14
Normal Cost $ 4,937 $ 5,609 $ 5,791
Unfunded Liability Amortization 8,666 8,769 9,054
Annual Required Contribution 13,603 14,378 14,845
Estimated Payroll 80,664 83,285 85,992
ARC as a % of Payroll 16.9% 17.3% 17.3%
Amortization Period 28 Yrs 27 Yrs 26 Yrs
Net OPEB Obligation (NOO): The City’s Net OPEB Obligation is the historical difference since GASB
45 implementation between actual contributions made and Annual Required Contributions. Benefits paid
for current retirees directly from City assets are considered contributions. The Net OPEB Obligation
would be zero for an agency that always contributed the Annual Required Contributions. An agency that
contributed more than the ARC would have a Net OPEB Asset (NOA).
Annual OPEB Cost (AOC): The Annual OPEB Cost is the plan’s fiscal year expense. It is equal to the
Annual Required Contribution plus expected interest on the Net OPEB Obligation less an amortization of
the Net OPEB Obligation. It is different from the Annual Required Contribution because the Annual
Required Contribution may include a provision for amounts not yet funded that have been expensed in
prior Annual OPEB Costs. The Annual OPEB Cost equals the Annual Required Contribution when the
Net OPEB Obligation at the beginning of the year is zero.
7.75% 7.25% Annual OPEB Cost
(Amounts in 000’s) 2011/12 2012/13 2013/14
Annual Required Contribution $ 13,603 $ 14,378 $ 14,845
Interest on Net OPEB Obligation (1,781) (1,687) (1,705)
Amortization of Net OPEB Obligation 1,483 1,451 1,498
Annual OPEB Cost 13,305 14,141 14,638
Amortization Period 28 Yrs 27 Yrs 26 Yrs
The City’s expected Net OPEB Obligations for 2011/12, 2012/13 and 2013/14 are:
7.75% 7.25% Estimated Net OPEB Obligation
(Amounts in 000’s) 2011/12 2012/13 2013/14
Net OPEB Obligation (Asset) at Begin. of Yr $ (22,977) $ (23,275) $ (23,511)
Annual OPEB Cost 13,305 14,141 14,638
Estimated Contributions 13,603 14,378 14,845
Net OPEB Obligation (Asset) at End of Yr (23,275) (23,511) (23,718)
The City’s actual June 30, 2012, June 20, 2013 and June 30, 2014 Net OPEB Obligations will differ from
those shown above because actual contributions may differ from those estimated.
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City of Palo Alto Retiree Healthcare Plan
January 1, 2011 & June 30, 2011 Actuarial Valuations Executive Summary
Page 4
October 11, 2011
Projection: The following table shows the projected Net OPEB Obligation, Annual Required
Contribution, Annual OPEB Contribution, and City Contribution (including benefit payments paid
directly by the City) over the next 10 years.
Full ARC Pre-Funding Projection
7.25% Discount Rate1
(Amounts in 000’s)
Contribution Fiscal
Year
Ending
Begin
Year
NOO ARC
Annual
OPEB
Cost
(AOC)
Benefit
Pmts
Pre-
Funding
Total
Contrib Payroll
Contrib
% of
Payroll
2012 $(22,977) $13,603 $13,305 $8,438 $5,165 $13,603 $80,664 16.9%
2013 (23,275) 14,378 14,141 8,988 5,390 14,378 83,285 17.3%
2014 (23,511) 14,845 14,638 9,986 4,859 14,845 85,992 17.3%
2015 (23,718) 15,327 15,155 10,929 4,398 15,327 88,787 17.3%
2016 (23,891) 15,825 15,690 11,945 3,880 15,825 91,672 17.3%
2017 (24,026) 16,340 16,247 12,940 3,400 16,340 94,652 17.3%
2018 (24,119) 16,871 16,825 13,832 3,039 16,871 97,728 17.3%
2019 (24,165) 17,419 17,425 14,692 2,727 17,419 100,904 17.3%
2020 (24,159) 17,985 18,049 15,574 2,412 17,985 104,183 17.3%
2021 (24,095) 18,570 18,697 16,460 2,110 18,570 107,569 17.3%
DEFINITIONS AND ASSUMPTIONS
Present Value of Benefits: When an actuary prepares an actuarial valuation, he or she first gathers
participant data (active employees, retirees, and beneficiaries) as of the valuation date. Using this data
and appropriate actuarial assumptions, the actuary projects the future benefit payments. The actuarial
assumptions estimate when employees will retire, terminate, die or become disabled, as well as salary
increases, inflation, and net investment earnings. The expected future benefit payments are discounted
back to the valuation date using the expected net investment return or discount rate. This discounted
value is the Present Value of Benefits. It represents the funds the plan needs as of the valuation date to
pay all expected future benefits if all assumptions are realized and no additional contributions are made
by the City. The City’s January 1, 2011 and June 30, 2011 Present Value of Benefits were $204.3 million
and $219.2 million, respectively.
Actuarial Accrued Liability: The Actuarial Accrued Liability is the portion of the Present Value of
Benefits that has been allocated to prior service through the valuation date. The City’s January 1, 2011
and June 30, 2011 Actuarial Accrued Liabilities were $170.0 million and $179.9 million, respectively
Normal Cost: The Normal Cost is the portion of the Present Value of Benefits allocated to the current
fiscal year. The plan’s Normal Costs for the 2011/12 and 2012/13 fiscal years are $4.9 million and $5.6
million, respectively.
1 Fiscal year ending 2012 based on prior valuation with 7.75% discount rate.
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January 1, 2011 & June 30, 2011 Actuarial Valuations Executive Summary
Page 5
October 11, 2011
Actuarial Cost Method: The actuarial cost method determines how benefits are allocated to each year of
service. It has no effect on the Present Value of Benefits but has significant effect on the Actuarial
Accrued Liability and Normal Cost. The City’s January 1, 2011 and June 30, 2011 retiree healthcare
valuations were prepared using the Entry Age Normal cost method. Under the Entry Age Normal cost
method, the Plan’s Normal Cost is developed as a level percent of payroll over the participants’ working
lifetimes.
Actuarial Assumptions: Under GASB 45, an actuary must follow current actuarial standards of practice.
These standards generally call for the use of explicit assumptions which means that each individual
assumption must represent the actuary's best estimate for that assumption.
For the January 1, 2011 valuation, a discount rate of 7.75% was used, as required by CalPERS for plans
funded in the CERBT. In March 2011, the CalPERS’ Board approved the following changes to the CERBT:
created 3 different asset allocation strategies, each with different expected returns and volatility,
revised the discount rate assumption from a mandated rate (7.75%) to provide agencies and their
actuaries with the flexibility to select the discount rate (up to a maximum rate based on the selected
asset allocation).
For each investment option, CalPERS’ maximum discount rate is the median return2, with lower rates also
being acceptable. The following table shows CERBT target asset allocation strategies and CalPERS
maximum discount rates:
Option 1 Option 2 Option 3
Asset Allocation
Global Equity 66.0% 50.1% 31.6%
Global Real Estate 8.0% 8.0% 8.0%
Commodities 3.0% 3.0% 3.0%
Inflation Linked Bonds 5.0% 15.0% 15.0%
U.S. Nominal Bonds 18.0% 23.9% 42.4%
Total 100.0% 100.0% 100.0%
Maximum Discount Rate 7.61% 7.06% 6.39%
Bartel Associates recommends a lower discount rate than the maximum to build in some level of
conservatism, so the assumption is expected to be realized (or exceeded) approximately 55% to 60% of
the time. This results in the following discount rates:
Option 1 Option 2 Option 3
≈60% Realization 7.00% 6.50% 6.00%
≈55% Realization 7.25% 6.75% 6.25%
For the June 30, 2011 actuarial valuation, the City chose the Option 1 asset allocation strategy, and agreed
that it would be prudent to build in a margin for conservatism when choosing a discount rate. The discount
rate for the June 30, 2011 valuation is 7.25%, which represents an estimated 55% confidence level that
actual future returns will be at least that high. The change in discount rate from 7.75% to 7.25% between
2 The median return represents the return at which ½ of the returns are expected to be higher and ½ lower.
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City of Palo Alto Retiree Healthcare Plan
January 1, 2011 & June 30, 2011 Actuarial Valuations Executive Summary
Page 6
October 11, 2011
these two valuations results in a $10.6 million actuarial loss.
The January 1, 2009 Milliman valuation used actual premiums for 2009, and then used a healthcare inflation
rate of 6.5% from 2010-2014, 6.0% from 2015-2017, and 5.85% for each year thereafter. In the January 1,
2011 valuation, actual premiums were used for 2011 and 2012. The healthcare inflation rate for non-
Medicare eligible participants starts at 9.0% (the increase in 2013 premiums over 2012 premiums) and
grades down to 5% after 8 years. The healthcare inflation rate for Medicare eligible participants starts 0.4%
higher and also grades down to 5% after 8 years. This change in medical trend leads to a $4.8 million
increase in the Actuarial Accrued Liability. This is partially offset by a $3.9 million gain, because of the
difference between actual 2011 and 2012 premiums and projected 2011 and 2012 premiums from the
January 1, 2009 valuation.
A 2% load was added in the January 1, 2011 valuation, to take into account that recent PEMHCA PPO
premium increases are believed to be below per capita claims increases. This load results in a $3.4 million
increase in the Actuarial Accrued Liability.
Retirement, disability, termination, and mortality assumptions were changed from the CalPERS 97-02
Experience Study in the January 1, 2009 valuation to the CalPERS 97-07 Experience Study in the January 1,
2011 and June 30, 2011 valuations. This change results in a $7.9 million increase in the Actuarial Accrued
Liability.
Another key January 1, 2011 valuation assumption change is the assumed medical plan at retirement. We
believe the 2009 valuation assumed each active participant remained in the same plan at retirement and
Medicare eligibility (at age 65). The January 1, 2011 valuation assumes percentages, as shown below, based
upon actual participation of current retirees, which differs substantially from the participation of current
actives. This change increased the Actuarial Accrued Liability by approximately $7.7 million.
Medical Plan at Retirement
Miscellaneous Safety
<65 65+ <65 65+
Blue Shield 35% 20% 35% 20%
Kaiser 25% 25% 25% 25%
PERS Choice 30% 20% 20% 20%
PERSCare 10% 35% 10% 35%
PORAC 0% 0% 10% 0%
A final key assumption change between the January 1, 2009 valuation and the January 1, 2011 valuation is
the Medicare eligibility rate. The 2011 valuation assumes 80% of Miscellaneous actives and 90% of Safety
actives hired prior to 4/1/86 will be eligible for Medicare, and all actives hired after 4/1/86 will be eligible
for Medicare. Similarly, 90% of current retirees under the age of 65 are assumed to be eligible for Medicare.
These assumptions produce an approximate increase in the Actuarial Accrued Liability of $2.6 million.
The City’s introduction of sharing of future premium cost increases for Management/Confidential, SEIU
and UMPAPA for those retiring after April 1, 2011 has led to a $14.1 million decrease in the Actuarial
Accrued Liability.
The following table shows changes, actual and expected, from the January 1, 2009 valuation to the
January 1, 2011 valuation and, subsequently to the June 30, 2011 valuation:
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City of Palo Alto Retiree Healthcare Plan
January 1, 2011 & June 30, 2011 Actuarial Valuations Executive Summary
Page 7
October 11, 2011
Changes From January 1, 2009 Valuation to January 1, 2011 Valuation
AAL (AVA) UAAL
Actual 1/1/09 $129,661 $(24,616) $105,045
Expected 6/30/11 150,971 (42,322) 108,649
Assumption Changes
Medical Trend 4,840 4,840
New CalPERS Decrements 7,916 7,916
Actuarial Load 3,421 3,421
Medical Plan at Retirement 7,740 7,740
Medicare Eligibility 2,625 2,625
Asset Smoothing 4,552 4,552
Contribution Loss (2,452) (2,452)
Plan Change – Cost Sharing (14,194) (14,194)
Experience (Gains)/Losses
Caps/Premiums < Expected (3,917) (3,917)
New Retirees 2,700 2,700
Demographic & Other 12,383 - 12,383
Total (Gain)/Loss 23,514 2,100 25,614
Projected 6/30/11 174,485 (40,222) 134,263
Changes From January 1, 2011 Valuation to June 30, 2011 Valuation
AAL (AVA) UAAL
Actual 1/1/11 $169,979 $(35,294) $134,685
Projected 6/30/11 174,485 (40,222) 134,263
Expected 6/30/12 182,840 (49,279) 133,561
Assumption Changes
Discount Rate 10,613 10,613
Experience (Gains)/Losses
Demographic & Other (3,510) (3,510)
Total (Gain)/Loss 7,103 - 7,103
Projected 6/30/12 189,943 (49,279) 140,663
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City of Palo Alto Retiree Healthcare Plan
January 1, 2011 & June 30, 2011 Actuarial Valuations Executive Summary
Page 8
October 11, 2011
RETIREE HEALTHCARE BENEFITS
Eligibility Retire directly from the City under CalPERS (age 50 and 5 years of
CalPERS service or disability)
Retiree Medical
(Hired<1/1/043) Retired < 1/1/074
Full employee premium and percentage of dependent premium (90% in
2011, 95% in 2012, 100% in 2013+)
Retired > 1/1/074
Same as above but premium limited to 2nd most expensive Basic
medical plan in the Bay Area Region
For non-Safety – Mgmt/Conf, SEIU and UMPAPA
Retired > 4/1/115, all premium increases starting 1/1/11 shared evenly
between City and employee, up to 10%
Retiree Medical
(Hired>1/1/046) Vesting schedule (based on all CalPERS Service)7:
Years of Service %
< 10 0%
10 50%
↓ ↓
> 20 100%
Vesting applies to 100/90 formula amounts:
2011 2012
Single $ 542 $ 566
2-Party 1,030 1,074
Family 1,326 1,382
Police and Fire with 20 years City service – do not need to retire directly
from City
For Mgmt/Conf, SEIU and UMPAPA Retired > 4/1/118, all premium
increases starting in 1/1/11 shared evenly between City and employee, up
to 10%
Dental, Vision &
Life
None
3 1/1/05 for SEIU and 1/1/06 for PAPOA
4 1/1/08 for PAPOA 5 2/1/10 for SEIU 6 1/1/05 for SEIU and 1/1/06 for PAPOA
7 Minimum 5 years City Service. 100% vested for disability retirement
8 2/1/10 for SEIU
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City of Palo Alto Retiree Healthcare Plan
January 1, 2011 & June 30, 2011 Actuarial Valuations Executive Summary
Page 9
October 11, 2011
Surviving Spouse
Benefit
100% of retiree benefit continues to surviving spouse if retiree elects
CalPERS survivor allowance
Benefit Changes
from Prior
Valuation
New Benefit Provision: cost sharing of future premium increases for
Mgmt/Conf, SEIU and UMPAPA retiring after 4/1/2011
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CITY OF PALO ALTO
RETIREE HEALTHCARE PLAN
January 1, 2011 and June 30, 2011
GASB 45 Actuarial Valuations
Revised Preliminary Results
Presented by John E. Bartel, President
Prepared by Deanna Van Valer, Assistant Vice President & Actuary
Adam Zimmerer, Actuarial Analyst
Bartel Associates, LLC
October 11, 2011
Agenda
O:\Clients\City of Palo Alto\OPEB\2011 val\Reports\BA PaloAltoCi 11-10-11 OPEB 6-30-11 Revised Preliminary Val Results.doc
Topic Page
Benefit Summary 1
Participant Statistics 5
Actuarial Assumptions Highlights 9
Actuarial Methods 15
Assets 17
Results – January 1, 2011 Valuation 19
Results – June 30, 2011 Valuation 29
CERBT Investment Options 41
Bartel Associates GASB 45 Database 43
Other Issues 46
Exhibits 48
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October 11, 2011 1
BENEFIT SUMMARY
Eligibility Retire directly from the City under CalPERS (age 50 and 5 years of
CalPERS service or disability)
Medical
Provider
CalPERS health plans (PEMHCA)
Non-Safety PEMHCA resolution provides only for PEMHCA
minimum (additional benefits paid by City)
Retiree Medical
(Hired<1/1/041)
Retired < 1/1/072
Full employee premium and percentage of dependent premium
(90% in 2011, 95% in 2012, 100% in 2013+)
Retired > 1/1/072
Same as above but premium limited to 2nd most expensive Basic
medical plan in the Bay Area Region
For non-Safety – Mgmt/Conf, SEIU and UMPAPA
Retired > 4/1/113, all premium increases starting 1/1/11 shared
evenly between City and employee, up to 10%
1 1/1/05 for SEIU and 1/1/06 for PAPOA 2 1/1/08 for PAPOA 3 2/1/10 for SEIU
October 11, 2011 2
BENEFIT SUMMARY
Retiree Medical
(Hired>1/1/044)
Vesting schedule (based on all CalPERS Service)5:
Years of Service %
< 10 0%
10 50%
↓ ↓
> 20 100%
Vesting applies to 100/90 formula amounts:
2011 2012
Single $ 542 $ 566
2-Party 1,030 1,074
Family 1,326 1,382
Police and Fire with 20 years City service – do not need to retire
directly from City
For Mgmt/Conf, SEIU and UMPAPA Retired > 4/1/116, all
premium increases starting in 1/1/11 shared evenly between City
and employee, up to 10%
4 1/1/05 for SEIU and 1/1/06 for PAPOA 5 Minimum 5 years City Service. 100% vested for disability retirement 6 2/1/10 for SEIU
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October 11, 2011 3
BENEFIT SUMMARY
Dental, Vision
& Life
None
Surviving
Spouse Benefit
100% of retiree benefit continues to surviving spouse if retiree
elects CalPERS survivor allowance
Benefit
Changes from
Prior Valuation
New Benefit Provision: cost sharing of future premium increases
for Mgmt/Conf, SEIU and UMPAPA retiring after 4/1/2011
Pay-As-You-
Go ($000s)
FY 2011/12 (Est) $8,142
FY 2010/11 $6,216
FY 2009/10 $5,519
FY 2008/09 $5,204
FY 2007/08 $4,646
October 11, 2011 4
BENEFIT SUMMARY
Implied
Subsidy
Non-Medicare eligible retirees pay active rates instead of actual cost
Active employee premiums subsidize retiree cost
Single Retiree Medical Cost
0
200
400
600
800
1,000
30 35 40 45 50 55 60 65
Age
Mo
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C
o
s
t
PremiumMale CostFemale Cost
GASB 45 includes active “implied subsidy” with retiree cost
Community rated plans not required to value implied subsidy
PEMHCA is a community rated plan for most employers
Valuation does not include an implied subsidy
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October 11, 2011 5
PARTICIPANT STATISTICS
Participant Statistics
June 30, 2011
7 1 retiree with missing birth date assumed to retire at average retirement age 8 Excludes 3 retirees with missing retirement date
Miscellaneous Police Fire Total
Actives
Count 737 82 104 923
Average Age 45.7 38.2 43.4 44.7
Average City Service 10.4 10.8 14.0 10.8
Average PERS Service 13.8 11.4 15.0 13.7
Average Salary $78,762 $117,924 $112,185 $86,007
Total Salary (000’s) $58,047 $9,670 $11,667 $79,384
Retirees:
Count 659 87 114 860
Average Age7 67.5 63.0 67.2 67.0
Average Retirement Age8 57.2 47.9 52.1 55.5
October 11, 2011 6
PARTICIPANT STATISTICS
Participant Statistics9
January 1, 2009
9 From 1/1/09 Milliman report
Miscellaneous Police Fire Total
Actives
Count n/a n/a n/a 955
Average Age n/a n/a n/a 45.3
Average City Service n/a n/a n/a 11.2
Average Salary n/a n/a n/a $103,602
Total Salary (000’s) n/a n/a n/a $98,940
Retirees:
Count n/a n/a n/a 710
Average Age n/a n/a n/a 67.2
Average Retirement Age n/a n/a n/a n/a
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October 11, 2011 7
PARTICIPANT STATISTICS
Medical Plan Participation
Non-Waived Participants
Retirees
Medical Plan Actives < 65 ≥ 65 Total
Blue Shield 44% 34% 21% 27%
Blue Shield NetValue 0% 0% 0% 0%
Kaiser 34% 25% 24% 25%
PERS Choice 13% 21% 18% 19%
PERSCare 0% 11% 36% 25%
PORAC 9% 10% 1% 5%
Total 100% 100% 100% 100%
October 11, 2011 8
PARTICIPANT STATISTICS
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ACTUARIAL ASSUMPTIONS HIGHLIGHTS
January 1, 2009 Valuation10 January 1, 2011 &
June 30, 2011 Valuations
Valuation Date January 1, 2009
Fiscal Years 2009/10 &
2010/11 ARCs (end of year)
January 1, 2011
Fiscal Year 2011/12 ARC (end
of year)
June 30, 2011
Fiscal Years 2012/13 &
2013/14 ARCs (end of year)
Funding Policy Full Pre-funding through
CalPERS trust (CERBT)
Same
Discount Rate 7.75% 1/1/11 – 7.75%
6/30/11 – 7.25%
Payroll
Increases
Aggregate Increases – 3.25%
Merit Increases – CalPERS
1997-2002 Experience Study
Aggregate Increases – 3.25%
Merit Increases – CalPERS
1997-2007 Experience Study
10 From 1/1/09 Milliman report
October 11, 2011 10
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
January 1, 2009 Valuation10 January 1, 2011 &
June 30, 2011 Valuations
Medical Trend
Year
Increase from
Prior Year
2009 Premiums
2010 6.50%
2011 6.50%
2012 6.50%
2013 6.50%
2014 6.50%
2015 6.00%
2016 6.00%
2017 6.00%
2018+ 5.85%
Increase from Prior Year
Year Non-Medicare Medicare
2009 n/a
2010 n/a
2011 Premiums
2012 Premiums
2013 9.0% 9.4%
2014 8.5% 8.9%
2015 8.0% 8.3%
2016 7.5% 7.8%
↓ ↓
2021+ 5.0% 5.0%
2.b
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ACTUARIAL ASSUMPTIONS HIGHLIGHTS
January 1, 2009 Valuation10 January 1, 2011 &
June 30, 2011 Valuations
Actuarial Load n/a 2.0% load
PEMHCA PPO premium
increases below per capita
claims increases
Retirement,
Mortality,
Termination,
Disability
CalPERS 1997-2002
Experience Study
Misc Fire Police
Benefit 2.7%@55 3%@50 3%@50
CalPERS 1997-2007
Experience Study
Misc Fire Police
Benefit 2.7%@55 3%@50 3%@50
2%@6011
ERA 57.5 54.5 54.0
Participation at
Retirement
n/a DOH < 1/1/04: 100%
DOH > 1/1/04: 95%
Employees with cost sharing:
reduce above %’s by 5%
11 Applies to employees hired after July 17, 2010
October 11, 2011 12
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
January 1, 2009 Valuation10 January 1, 2011 &
June 30, 2011 Valuations
Medical Plan at
Retirement
n/a Miscellaneous:
<65 65+
Blue Shield 35% 20%
Kaiser 25% 25%
PERS Choice 30% 20%
PERSCare 10% 35%
Safety:
<65 65+
Blue Shield 35% 20%
Kaiser 25% 25%
PERS Choice 20% 20%
PERSCare 10% 35%
PORAC 10% 0%
2.b
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October 11, 2011 13
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
January 1, 2009 Valuation10 January 1, 2011 &
June 30, 2011 Valuations
Medicare
Eligible Rate
n/a Actives hired < 4/1/86:
Miscellaneous – 80%
Safety – 90%
Actives hired > 4/1/86: 100%
Retirees < 65: 90%
Everyone eligible for
Medicare will elect Part B
coverage
Missing PERS
Group
n/a Retirees missing PERS group
assumed to be Misc unless
fund designates Police or Fire
October 11, 2011 14
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
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October 11, 2011 15
ACTUARIAL METHODS
Method January 1, 2009 Valuation12 January 1, 2011 &
June 30, 2011 Valuations
Cost Method Entry Age Normal Level % of
Pay
Same
Unfunded
Liability
Amortization
30 years open period 28 years (closed period) Fresh
Start for total 6/30/2011 UAAL
(27 years remaining on 6/30/12)
15 years (closed period) for
future gains and losses
Maximum 30-year combined
period
12 From 1/1/09 report by Milliman.
October 11, 2011 16
ACTUARIAL METHODS
Method January 1, 2009 Valuation12 January 1, 2011 &
June 30, 2011 Valuations
Actuarial
Value of
Assets
Market Value of Assets Investment gains and losses
spread over a 5-year rolling
period
Not less than 80% nor more than
120% of market value
Same as CalPERS, but shorter
period
Implied
Subsidy
Employer cost for allowing retirees to participate at active rates
Community rated plans are not required to value an implied subsidy
if active rates are independent of number of retirees
PEMHCA is a community rated plan for most employers
Valuation does not include an implied subsidy
2.b
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ASSETS
Market Value of Plan Assets
(amounts in 000’s)
2009 2010
1/1/11-
6/30/11
Projected
2011/12
MVA (Beg. of Year) $ 24,616 $ 32,042 $ 40,213 $ 44,774
Contributions 700 3,532 2,448 5,165
Benefit Payments13 - - - -
Admin. Expenses (23) (34) (41) -
Investment Return 6,749 4,674 2,155 3,24614
MVA (End of Year) 32,042 40,213 44,774 53,185
Approx. Annual Return 26.9% 13.7% 5.3% 7.3%
13 Benefit Payments made outside of trust by City. Refer to Slide 3 for fiscal year amounts. 14 Investment return based on 7.25% net of expenses
October 11, 2011 18
ASSETS
Actuarial Value of Plan Assets
(amounts in 000’s)
2009 2010
1/1/11-
6/30/11
Projected
2011/12
AVA (Beg. of Year) $ 24,616 $ 28,209 $ 35,294 $ 40,222
Contributions 700 3,532 2,448 5,165
Benefit Payments15 - - - -
Exp. Inv. Return 1,935 2,323 1,342 2,916
Exp. AVA (End of Year) 27,251 34,064 39,084 48,303
Preliminary AVA 28,209 35,294 40,222 49,279
Min AVA (80% MVA) 25,633 32,170 35,819 42,548
Max AVA (120% MVA) 38,450 48,255 53,729 63,822
AVA (End of Year) 28,209 35,294 40,222 49,279
Approx. Annual Return 11.6% 11.9% 7.0% 9.7%
15 Benefit Payments made outside of trust by City. Refer to Slide 3 for fiscal year amounts.
2.b
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October 11, 2011 19
RESULTS – JANUARY 1, 2011 VALUATION
Funded Status – 7.75% Discount Rate
(Amounts in 000’s)
1/1/0916 1/1/11
Projected
6/30/11
Present Value of Benefits
Actives $ 78,831 $ 85,476
Retirees 78,384 118,800
Total 157,215 204,276
Actuarial Accrued Liability
Actives 51,277 51,179
Retirees 78,384 118,800
Total 129,661 169,979 $ 174,485
Actuarial Value of Assets (AVA) 24,616 35,294 40,222
Unfunded AAL 105,045 134,685 134,263
Funded Ratio 19% 21%
Normal Cost 3,478 4,937
Pay-As-You-Go Cost 6,075 8,438
16 From 1/1/09 report by Milliman.
October 11, 2011 20
RESULTS – JANUARY 1, 2011 VALUATION
Actuarial Gain/Loss – 7.75% Discount Rate
(000’s Omitted)
AAL (AVA) UAAL
Actual 1/1/09 $129,661 $(24,616) $105,045
Expected 6/30/11 150,971 (42,322) 108,649
Assumption Changes
Medical Trend 4,840 4,840
New CalPERS Decrements 7,916 7,916
Actuarial Load 3,421 3,421
Medical Plan at Retirement 7,740 7,740
Medicare Eligibility 2,625 2,625
Asset Smoothing 4,552 4,552
Contribution Loss (2,452) (2,452)
Plan Change – Cost Sharing (14,194) (14,194)
Experience (Gains)/Losses
Caps/Premiums < Expected (3,917) (3,917)
New Retirees 2,700 2,700
Demographic & Other 12,383 - 12,383
Total (Gain)/Loss 23,514 2,100 25,614
Projected 6/30/11 174,485 (40,222) 134,263
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RESULTS – JANUARY 1, 2011 VALUATION
Annual Required Contribution (ARC) – 7.75% Discount Rate
(Amounts in 000’s)
1/1/09 Valuation 1/1/11 Valuation
Annual Required Contribution 2009/10 2010/11 2011/12
ARC - $
Normal Cost $ 3,478 $ 3,591 $ 4,937
UAAL Amortization 6,308 6,757 8,666
Total 9,786 10,348 13,603
Projected Payroll 98,940 102,156 80,664
ARC - % Pay
Normal Cost 3.5% 3.5% 6.1%
UAAL Amortization 6.4% 6.6% 10.7%
Total 9.9% 10.1% 16.9%
October 11, 2011 22
RESULTS – JANUARY 1, 2011 VALUATION
Estimated Net OPEB Obligation (NOO) Illustration – 7.75% Discount Rate
(Amounts in 000’s)
Estimated Net OPEB Obligation
(Asset)
CAFR
2009/10
Estimate
2010/11
Estimate
2011/12
NOO at Beginning of Year $(26,352) $(23,242) $(22,977)
Annual OPEB Cost
Annual Required Contribution 9,786 10,349 13,603
Interest on NOO (2,042) (1,801) (1,781)
NOO Adjustment 2,585 2,213 1,483
Annual OPEB Cost 10,329 10,760 13,306
Contributions
Benefit Payments Outside Trust17 5,519 6,216 8,438
Trust Funding 1,70018 4,280 5,165
Total Contributions 7,219 10,496 13,603
NOO at End of Year (23,242) (22,977) (23,275)
17 Estimated cash payments shown for years after 2010/11. Actual cash payments should be used for OPEB footnote. 18 Shortly after year end, the City contributed another $1.832 million to the trust
2.b
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RESULTS – JANUARY 1, 2011 VALUATION
Amortization Bases – 7.75% Discount Rate
(000’s Omitted)
1/1/2009 Valuation 1/1/2011 Valuation
6/30/2009 6/30/2010 6/30/2011
Outstanding Balance
2009 UAAL $ 105,045 $ 106,878 $ n/a
2010 Gains & Losses - 2,567 n/a
2011 Fresh Start UAAL - - 134,263
Total 105,045 109,445 134,263
October 11, 2011 24
RESULTS – JANUARY 1, 2011 VALUATION
Amortization Payments – 7.75% Discount Rate
(000’s Omitted)
1/1/2009 Valuation 1/1/2011 Valuation
2009/10 2010/11 2011/12
Amortization Payment - $
2009 UAAL19 $ 6,308 $ 6,513 $ n/a
2010 Gains & Losses - 244 n/a
2011 Fresh Start UAAL20 - - 8,666
Total 6,308 6,757 8,666
19 Amortized over 30 years beginning 2009/10 20 Amortized over 28 years beginning 2011/12
2.b
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RESULTS – JANUARY 1, 2011 VALUATION
Actuarial Obligations – 7.75% Discount Rate
January 1, 2011
(Amounts in 000’s)
Benefits <
Age 65
Benefits >
Age 65 Total
Present Value of Benefits
Actives $ 45,464 $ 40,013 $ 85,476
Retirees 37,577 81,223 118,800
Total 83,041 121,236 204,276
Actuarial Accrued Liability
Actives 26,106 25,074 51,179
Retirees 37,577 81,223 118,800
Total 63,683 106,297 169,979
Normal Cost 2,711 2,226 4,937
October 11, 2011 26
RESULTS – JANUARY 1, 2011 VALUATION
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2.b
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RESULTS – JANUARY 1, 2011 VALUATION
Actuarial Obligations – 7.75% Discount Rate
January 1, 2011
(Amounts in 000’s)
Misc Police Fire Total
Present Value of Benefits
Actives $ 54,725 $ 12,832 $ 17,919 $ 85,476
Retirees 86,109 14,722 17,969 118,800
Total 140,834 27,554 35,888 204,276
Actuarial Accrued Liability
Actives 33,204 6,496 11,479 51,179
Retirees 86,109 14,722 17,969 118,800
Total 119,313 21,218 29,448 169,979
Actuarial Value of Assets21 24,774 4,406 6,114 35,294
Unfunded AAL 94,539 16,812 23,334 134,685
Normal Cost 3,381 719 836 4,937
Pay-As-You-Go Cost 6,285 935 1,218 8,438
21 Allocated in proportion to the Actuarial Accrued Liability.
October 11, 2011 28
RESULTS – JANUARY 1, 2011 VALUATION
Annual Required Contribution (ARC) – 7.75% Discount Rate
2011/12 Fiscal Year
(Amounts in 000’s)
Misc Police Fire Total
ARC - $
Normal Cost $ 3,381 $ 719 $ 836 $ 4,937
UAAL Amortization22 6,072 1,087 1,507 8,666
ARC 9,453 1,807 2,344 13,603
Projected Payroll 58,983 9,826 11,855 80,664
ARC - %
Normal Cost 5.7% 7.3% 7.1% 6.1%
UAAL Amortization 10.3% 11.1% 12.7% 10.7%
ARC 16.0% 18.4% 19.8% 16.9%
22 Allocated in proportion to the Actuarial Accrued Liability.
2.b
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RESULTS – JUNE 30, 2011 VALUATION
Actuarial Obligations
(Amounts in 000’s)
1/1/11 Valuation 6/30/11 Valuation
1/1/11
Projected
6/30/11 6/30/11
Projected
6/30/12
7.75% 7.25%
Present Value of Benefits
Actives $ 85,476 $ 96,769
Retirees 118,800 122,444
Total 204,276 219,213
Actuarial Accrued Liability
Actives 51,179 57,479
Retirees 118,800 122,444
Total 169,979 $ 174,485 179,923 $ 189,943
Actuarial Value of Assets 35,294 40,222 40,222 49,279
Unfunded AAL 134,685 134,263 139,701 140,663
Funded Ratio 21% 22%
Normal Cost 4,937 5,609
Pay-As-You-Go Cost 8,438 9,986
October 11, 2011 30
RESULTS – JUNE 30, 2011 VALUATION
Actuarial Gain/Loss
(000’s Omitted)
AAL (AVA) UAAL
Actual 1/1/11 $169,979 $(35,294) $134,685
Projected 6/30/11 174,485 (40,222) 134,263
Expected 6/30/12 182,840 (49,279) 133,561
Assumption Changes
Discount Rate 10,613 10,613
Experience (Gains)/Losses
Demographic & Other (3,510) (3,510)
Total (Gain)/Loss 7,103 - 7,103
Projected 6/30/12 189,943 (49,279) 140,663
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RESULTS – JUNE 30, 2011 VALUATION
Annual Required Contribution (ARC)
(Amounts in 000’s)
1/1/11 Valuation 6/30/11 Valuation
Annual Required Contribution 2011/12 2012/13 2013/14
7.75% 7.25%
ARC - $
Normal Cost $ 4,937 $ 5,609 $ 5,791
UAAL Amortization 8,666 8,769 9,054
Total 13,603 14,378 14,845
Projected Payroll 80,664 83,285 85,992
ARC - %Pay
Normal Cost 6.1% 6.7% 6.7%
UAAL Amortization 10.7% 10.6%10.6%
Total 16.9% 17.3% 17.3%
October 11, 2011 32
RESULTS – JUNE 30, 2011 VALUATION
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RESULTS – JUNE 30, 2011 VALUATION
Amortization Bases
(000’s Omitted)
1/1/2011 Valuation 6/30/2011 Valuation
6/30/2011 6/30/2012 6/30/2013
7.75% 7.25%
Outstanding Balance
2011 Fresh Start UAAL $ 134,263 $ 140,663 $ 142,093
Total 134,263 140,663 142,093
October 11, 2011 34
RESULTS – JUNE 30, 2011 VALUATION
Amortization Payments
(000’s Omitted)
1/1/2011 Valuation 6/30/2011 Valuation
2011/12 2012/13 2013/14
7.75% 7.25%
Amortization Payment - $
2011 Fresh Start UAAL23 $ 8,666 $ 8,769 $ 9,054
Total 8,666 8,769 9,054
23 Amortized over 28 years beginning 2011/12
2.b
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October 11, 2011 35
RESULTS – JUNE 30, 2011 VALUATION
Estimated Net OPEB Obligation (NOO) Illustration
(Amounts in 000’s)
1/1/11 Valuation 6/30/11 Valuation
Estimated Net OPEB Obligation
(Asset)
Estimate
2011/12
Estimate
2012/13
Estimate
2013/14
NOO at Beginning of Year $(22,977) $(23,275) $(23,511)
Annual OPEB Cost
Annual Required Contribution 13,603 14,378 14,845
Interest on NOO (1,781) (1,687) (1,705)
NOO Adjustment 1,483 1,451 1,498
Annual OPEB Cost 13,305 14,141 14,638
Contributions
Benefit Payments Outside Trust24 8,438 8,988 9,986
Trust Funding 5,165 5,390 4,859
Total Contributions 13,603 14,378 14,845
NOO at End of Year (23,275) (23,511) (23,718)
24 Estimated cash payments shown for all years. Actual cash payments should be used for OPEB footnote.
October 11, 2011 36
RESULTS – JUNE 30, 2011 VALUATION
Estimated Full ARC Funding Projection – 7.25% Discount Rate25
(Amounts in 000’s)
Contribution Fiscal
Year
End
Begin
Year
NOO ARC
Annual
OPEB
Cost
(AOC)
Benefit
Pmts
Pre-
Funding
Total
Contrib Pay
Contrib
% of
Payroll
2012 $(22,977) $13,603 $13,305 $8,438 $5,165 $13,603 $80,664 16.9%
2013 (23,275) 14,378 14,141 8,988 5,390 14,378 83,285 17.3%
2014 (23,511) 14,845 14,638 9,986 4,859 14,845 85,992 17.3%
2015 (23,718) 15,327 15,155 10,929 4,398 15,327 88,787 17.3%
2016 (23,891) 15,825 15,690 11,945 3,880 15,825 91,672 17.3%
2017 (24,026) 16,340 16,247 12,940 3,400 16,340 94,652 17.3%
2018 (24,119) 16,871 16,825 13,832 3,039 16,871 97,728 17.3%
2019 (24,165) 17,419 17,425 14,692 2,727 17,419 100,904 17.3%
2020 (24,159) 17,985 18,049 15,574 2,412 17,985 104,183 17.3%
2021 (24,095) 18,570 18,697 16,460 2,110 18,570 107,569 17.3%
25 Fiscal year ending 2012 based on prior valuation with 7.75% discount rate.
2.b
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October 11, 2011 37
RESULTS – JUNE 30, 2011 VALUATION
Actuarial Obligations – 7.25% Discount Rate
June 30, 2011
(Amounts in 000’s)
Benefits <
Age 65
Benefits >
Age 65 Total
Present Value of Benefits
Actives $ 49,568 $ 47,201 $ 96,769
Retirees 36,082 86,361 122,444
Total 85,650 133,562 219,213
Actuarial Accrued Liability
Actives 28,139 29,340 57,479
Retirees 36,082 86,361 122,444
Total 64,221 115,701 179,923
Normal Cost 2,978 2,631 5,609
October 11, 2011 38
RESULTS – JUNE 30, 2011 VALUATION
Actuarial Obligations – 7.25% Discount Rate
June 30, 2011
(Amounts in 000’s)
Misc Police Fire Total
Present Value of Benefits
Actives $ 61,777 $ 14,823 $ 20,168 $ 96,769
Retirees 88,563 15,240 18,641 122,444
Total 150,340 30,063 38,809 219,213
Actuarial Accrued Liability
Actives 37,268 7,445 12,766 57,479
Retirees 88,563 15,240 18,641 122,444
Total 125,831 22,685 31,407 179,923
Actuarial Value of Assets26 28,129 5,071 7,021 40,222
Unfunded AAL 97,702 17,614 24,386 139,701
Normal Cost 3,823 825 960 5,609
Pay-As-You-Go Cost 7,385 1,132 1,469 9,986
26 Allocated in proportion to the Actuarial Accrued Liability.
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October 11, 2011 39
RESULTS – JUNE 30, 2011 VALUATION
Annual Required Contribution (ARC) – 7.25% Discount Rate
2012/13 Fiscal Year
(Amounts in 000’s)
Misc Police Fire Total
ARC - $
Normal Cost $ 3,823 $ 825 $ 960 $ 5,609
UAAL Amortization27 6,111 1,116 1,541 8,769
ARC 9,934 1,941 2,501 14,378
Projected Payroll 60,900 10,145 12,240 83,285
ARC - %
Normal Cost 6.3% 8.1% 7.8% 6.7%
UAAL Amortization 10.0% 11.0% 12.6% 10.5%
ARC 16.3% 19.1% 20.4% 17.3%
27 Allocated in proportion to the Actuarial Accrued Liability.
October 11, 2011 40
RESULTS – JUNE 30, 2011 VALUATION
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October 11, 2011 41
CERBT INVESTMENT OPTIONS
Additional CERBT asset allocations and revised discount rate assumption
Agency selects one option effective July 1, 2011
Target asset allocations
Asset Classifications Option 1 Option 2 Option 3
Global Equity 66.0% 50.1% 31.6%
US Nominal Bonds 18.0% 23.9% 42.4%
REIT's 8.0% 8.0% 8.0%
U.S. Inflation Linked Bonds 5.0% 15.0% 15.0%
Commodities 3.0% 3.0% 3.0%
Total 100.0% 100.0% 100.0%
CalPERS reported expected returns (20 year period):
Option 1 Option 2 Option 3
75% Confidence Limit28 5.80% 5.60% 5.25%
50% Confidence Limit 7.61% 7.06% 6.39%
25% Confidence Limit 9.43% 8.52% 7.47%
Standard Deviation 11.73% 9.46% 7.27%
28 Confidence Limits – Actual Return will exceed the given rate with indicated probabilities, rates vary by year.
October 11, 2011 42
CERBT INVESTMENT OPTIONS
CalPERS discount rate development:
1st 10 year expected returns – based on asset advisors 10 year projections
Significantly higher returns assumed after 10 years
based on long term historical returns
implies actuarial losses in 1st 10 years
achievable?
Requirement that discount rate cannot be greater than 50% confidence limit rate
Bartel Associates Recommendation: select rate at 55% or 60% confidence limit
Option 1 Option 2 Option 3
55% Confidence Limit
Discount Rate 7.25% 6.75% 6.25%
Maximum Discount Rate 7.61% 7.06% 6.39%
Margin for Adverse Deviation (0.36%) (0.31%) (0.14%)
60% Confidence Limit
Discount Rate 7.00% 6.50% 6.00%
Maximum Discount Rate 7.61% 7.06% 6.39%
Margin for Adverse Deviation (0.61%) (0.56%) (0.39%)
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October 11, 2011 43
BARTEL ASSOCIATES GASB 45 DATABASE
50% of 90% of 100% ofresults results results
are are arewithin within within
this this thisrange range range
0th Percentile
GASB 45
50th Percentile
100th Percentile
Sample Percentile Graph
Retiree Medical Benefits Comparison
95th Percentile
5th Percentile
75th Percentile
25th Percentile
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October 11, 2011 44
BARTEL ASSOCIATES GASB 45 DATABASE
Miscellaneous
NC ARC NC ARC
95th Percentile 11.7% 31.4%11.9% 32.2%
75th Percentile 7.5% 19.4%7.0% 20.5%
50th Percentile 3.6% 8.9%2.9% 10.2%
25th Percentile 1.3% 3.3%1.4% 3.6%
5th Percentile 0.6% 1.3%0.7% 1.8%
Percent of Pay 6.3% 16.3%8.0% 19.9%
Percentile 67% 67%82% 73%
Safety
Discount Rate = 7.25%, Amortization Period = 27 Years
GASB 45
Retiree Medical Benefits Comparison
Normal Cost & Annual Required Contribution
-10%
0%
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October 11, 2011 45
BARTEL ASSOCIATES GASB 45 DATABASE
95th Percentile 251%275%
75th Percentile 151%166%
50th Percentile 74%87%
25th Percentile 23%28%
5th Percentile 8%12%
Percent of Pay 207%242%
Percentile 89%92%
Miscellaneous Safety
Discount Rate = 7.25%
GASB 45
Retiree Medical Benefits Comparison
Actuarial Accrued Liability
0%
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OTHER ISSUES
GASB Pension Accounting
Exposure Draft for pension accounting changes issued 7/8/2011:
Usually the last public document issued before issuing final statement
Similar views expected for OPEB
Comment deadline 9/30/11
Likely effective for 2013/14 fiscal year
Major issues:
Unfunded liability on balance sheet
Lower discount rate if funding less than ARC
Immediate recognition of:
Service & Interest Cost
Benefit changes
Inactive gains/losses & assumption changes
Deferred recognition of:
Active gains/losses & assumption changes, over (future working lifetime)
closed period
Asset gains/losses, over 5 years
Entry age normal cost method
National Health Care Reform – Too early to know impact
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October 11, 2011 47
OTHER ISSUES
Timing:
Present preliminary results September 26, 2011
Present revised preliminary results October 11, 2011
October 11, 2011 48
EXHIBITS
Topic Page
Premiums E- 1
Data Summary E- 3
Actuarial Assumptions E-29
Definitions E-36
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October 11, 2011 E-1
PREMIUMS
2011 PEMHCA Monthly Premiums
Bay Area
Non-Medicare Eligible Medicare Eligible
Medical Plan Single 2-Party Family Single 2-Party Family
Blue Shield $675.51 $1,351.02 $1,756.33 $337.88 $675.76 $1,013.64
Blue Shield NetValue 581.24 1,162.48 1,511.22 337.88 675.76 1,013.64
Kaiser 568.99 1,137.98 1,479.37 282.30 564.60 846.90
PERS Choice 563.40 1,126.80 1,464.84 375.88 751.76 1,127.64
PERS Select 492.68 985.36 1,280.97 375.88 751.76 1,127.64
PERSCare 893.95 1,787.90 2,324.27 433.66 867.32 1,300.98
PORAC 527.00 987.00 1,254.00 418.00 833.00 1,331.00
October 11, 2011 E-2
PREMIUMS
2012 PEMHCA Monthly Premiums
Bay Area
Non-Medicare Eligible Medicare Eligible
Medical Plan Single 2-Party Family Single 2-Party Family
Blue Shield Access+ $711.10 $1,422.20 $1,848.86 $337.99 $675.98 $1,013.97
Blue Shield NetValue 611.59 1,223.18 1,590.13 337.99 675.98 1,013.97
Kaiser 610.44 1,220.88 1,587.14 277.81 555.62 833.43
PERS Choice 574.15 1,148.30 1,492.79 383.44 766.88 1,150.32
PERS Select 487.39 974.78 1,267.21 383.44 766.88 1,150.32
PERSCare 1,029.23 2,058.46 2,676.00 432.43 864.86 1,297.29
PORAC 556.00 1,041.00 1,323.00 418.00 833.00 1,331.00
2.b
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October 11, 2011 E-3
DATA SUMMARY
Active Medical Coverage
Bay Area Plans
Medical Plan Single 2-Party Family Waived Total
Blue Shield 90 68 210 - 368
Blue Shield NetValue 2 1 1 - 4
Kaiser 74 65 151 - 290
PERS Choice 22 39 47 - 108
PERSCare - - 1 - 1
PORAC 12 7 54 - 73
Waived - - - 79 79
Total 200 180 464 79 923
October 11, 2011 E-4
DATA SUMMARY
Retiree Medical Coverage - Under Age 65
Plan Region Single 2-Party Family Total
Bay Area 48 42 25 115
Los Angeles 1 - - 1
Northern CA - 1 1 2
Sacramento 4 3 1 8
Blue Shield
Southern CA - 1 - 1
Bay Area 37 26 11 74
Northern CA 2 1 3 6
Out of State - 5 1 6
Sacramento 3 3 - 6
Kaiser
Southern CA 2 1 1 4
Bay Area 22 19 7 48
Northern CA 3 2 - 5
Out of State 7 13 2 22
Sacramento 1 - - 1
PERS Choice
Southern CA 2 - - 2
Bay Area 11 5 2 18
Northern CA 1 2 - 3
Out of State 13 2 - 15
Sacramento 2 - 1 3
PERSCare
Southern CA 1 - - 1
PORAC 10 14 12 36
Total 170 140 67 377
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October 11, 2011 E-5
DATA SUMMARY
Retiree Medical Coverage - Over Age 65
Plan Region Single 2-Party Family Total
Bay Area 53 40 2 95
Northern CA - 2 - 2
Sacramento 1 - - 1
Blue Shield
Southern CA 2 3 - 5
Blue Shield NetValue Southern CA 1 - - 1
Bay Area 44 42 6 92
Northern CA 2 2 - 4
Out of State 4 3 - 7
Sacramento 6 6 1 13
Kaiser
Southern CA 1 - - 1
Bay Area 14 21 - 35
Los Angeles 1 - - 1
Northern CA 3 5 1 9
Out of State 12 17 2 31
Sacramento 1 3 - 4
PERS Choice
Southern CA 4 1 - 5
Bay Area 47 34 - 81
Northern CA 9 7 - 16
Out of State 41 19 2 62
Sacramento 3 4 - 7
PERSCare
Southern CA 5 3 - 8
PORAC 1 1 1 3
Total 255 213 15 483
October 11, 2011 E-6
DATA SUMMARY
Medical Plan Participation
Non-Waived Participants
Retirees
Medical Plan Actives < 65 ≥ 65 Total
Blue Shield 44% 34% 21% 27%
Blue Shield NetValue 0% 0% 0% 0%
Kaiser 34% 25% 24% 25%
PERS Choice 13% 21% 18% 19%
PERSCare 0% 11% 36% 25%
PORAC 9% 10% 1% 5%
Total 100% 100% 100% 100%
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October 11, 2011 E-7
DATA SUMMARY
Retiree Medical Coverage by Age Group
Miscellaneous
Age Single 2-Party Family Total
Under 50 2 - 2 4
50-54 20 17 8 45
55-59 55 38 17 110
60-64 61 62 14 137
65-69 58 68 5 131
70-74 55 41 1 97
75-79 32 23 - 55
80-84 24 15 1 40
Over 85 28 12 - 40
Total 335 276 48 659
Average Age 68.7 67.4 59.5 67.5
October 11, 2011 E-8
DATA SUMMARY
Retiree Age Distribution
Miscellaneous
0
20
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60
80
100
120
140
160
<50 50-54 55-59 60-64 65-69 70-74 75-79 80-84 ≥85
Age
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October 11, 2011 E-9
DATA SUMMARY
Retiree Medical Coverage by Age Group
Police
Age Single 2-Party Family Total
Under 50 5 3 1 9
50-54 6 3 4 13
55-59 8 5 4 17
60-64 8 6 2 16
65-69 6 3 1 10
70-74 5 1 - 6
75-79 4 2 - 6
80-84 4 4 - 8
Over 85 2 - - 2
Total 48 27 12 87
Average Age 64.8 62.7 56.5 63.0
October 11, 2011 E-10
DATA SUMMARY
Retiree Age Distribution
Police
0
2
4
6
8
10
12
14
16
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<50 50-54 55-59 60-64 65-69 70-74 75-79 80-84 ≥85
Age
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October 11, 2011 E-11
DATA SUMMARY
Retiree Medical Coverage by Age Group
Fire
Age Single 2-Party Family Total
Under 50 1 1 3 5
50-54 1 2 10 13
55-59 5 2 4 11
60-64 7 8 3 18
65-69 4 8 2 14
70-74 11 16 - 27
75-79 5 8 - 13
80-84 4 4 - 8
Over 85 4 1 - 5
Total 42 50 22 114
Average Age 70.6 69.8 55.0 67.2
October 11, 2011 E-12
DATA SUMMARY
Retiree Age Distribution
Fire
0
5
10
15
20
25
30
<50 50-54 55-59 60-64 65-69 70-74 75-79 80-84 ≥85
Age
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October 11, 2011 E-13
DATA SUMMARY
Actives by Age and Service
Miscellaneous
City Service
Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total
< 25 1 2 1 - - - - 4
25-29 9 22 11 2 - - - 44
30-34 7 39 23 16 4 - - 89
35-39 6 25 25 23 3 - - 82
40-44 3 24 21 31 14 3 - 96
45-49 4 31 17 46 34 23 5 160
50-54 7 20 23 31 23 15 14 133
55-59 1 13 11 25 11 10 4 75
60-64 - 8 4 13 8 7 - 40
≥ 65 - - 2 3 4 1 4 14
Total 38 184 138 190 101 59 27 737
October 11, 2011 E-14
DATA SUMMARY
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October 11, 2011 E-15
DATA SUMMARY
Active Age Distribution
Miscellaneous
0
20
40
60
80
100
120
140
160
180
<25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-65 ≥65
Age
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October 11, 2011 E-16
DATA SUMMARY
Active Service Distribution
Miscellaneous
0
50
100
150
200
250
0-4 5-9 10-14 15-19 20-24 >25
Service
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October 11, 2011 E-17
DATA SUMMARY
Actives by Age and Service
Police
City Service
Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total
< 25 - 2 - - - - - 2
25-29 1 6 2 - - - - 9
30-34 1 10 9 1 - - - 21
35-39 - 3 6 7 2 1 - 19
40-44 - - 3 1 4 1 - 9
45-49 - - 1 2 6 4 4 17
50-54 - 1 1 1 - 1 1 5
55-59 - - - - - - - -
60-64 - - - - - - - -
≥ 65 - - - - - - - -
Total 2 22 22 12 12 7 5 82
October 11, 2011 E-18
DATA SUMMARY
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DATA SUMMARY
Active Age Distribution
Police
0
5
10
15
20
25
<25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-65 ≥65
Age
Nu
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October 11, 2011 E-20
DATA SUMMARY
Active Service Distribution
Police
0
5
10
15
20
25
30
0-4 5-9 10-14 15-19 20-24 >25
Service
Nu
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DATA SUMMARY
Actives by Age and Service
Fire
City Service
Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total
< 25 1 2 - - - - - 3
25-29 - 3 2 - - - - 5
30-34 2 3 4 - - - - 9
35-39 - 4 4 10 1 - - 19
40-44 - - 4 9 3 1 - 17
45-49 - 1 4 7 6 13 2 33
50-54 - - - 2 - 5 7 14
55-59 - - - 1 - - 1 2
60-64 - - - - - 1 1 2
≥ 65 - - - - - - - -
Total 3 13 18 29 10 20 11 104
October 11, 2011 E-22
DATA SUMMARY
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DATA SUMMARY
Active Age Distribution
Fire
0
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10
15
20
25
<25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-65 ≥65
Age
Nu
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October 11, 2011 E-24
DATA SUMMARY
Active Service Distribution
Fire
0
5
10
15
20
25
30
0-4 5-9 10-14 15-19 20-24 >25
Service
Nu
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October 11, 2011 E-25
DATA SUMMARY
Actives by Age and Service
Total
City Service
Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total
< 25 2 6 1 - - - - 9
25-29 10 31 15 2 - - - 58
30-34 10 52 36 17 4 - - 119
35-39 6 32 35 40 6 1 - 120
40-44 3 24 28 41 21 5 - 122
45-49 4 32 22 55 46 40 11 210
50-54 7 21 24 34 23 21 22 152
55-59 1 13 11 26 11 10 5 77
60-64 - 8 4 13 8 8 1 42
≥ 65 - - 2 3 4 1 4 14
Total 43 219 178 231 123 86 43 923
October 11, 2011 E-26
DATA SUMMARY
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DATA SUMMARY
Active Age Distribution
Total
0
50
100
150
200
250
<25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-65 ≥65
Age
Nu
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October 11, 2011 E-28
DATA SUMMARY
Active Service Distribution
Total
0
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150
200
250
300
0-4 5-9 10-14 15-19 20-24 >25
Service
Nu
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ACTUARIAL ASSUMPTIONS
January 1, 2009 Valuation29 January 1, 2011 &
June 30, 2011 Valuations
Valuation Date January 1, 2009
Fiscal Years 2009/10 &
2010/11 ARCs (end of year)
January 1, 2011
Fiscal Year 2011/12 ARC (end
of year)
June 30, 2011
Fiscal Years 2012/13 &
2013/14 ARCs (end of year)
Funding Policy Full Pre-funding through
CalPERS trust (CERBT)
Same
General
Inflation
3.00% Same
Discount Rate 7.75% 1/1/11 – 7.75%
6/30/11 – 7.25%
29 From 1/1/09 Milliman report
October 11, 2011 E-30
ACTUARIAL ASSUMPTIONS
January 1, 2009 Valuation29 January 1, 2011 &
June 30, 2011 Valuations
Payroll
Increases
Aggregate Increases – 3.25%
Merit Increases – CalPERS
1997-2002 Experience Study
Aggregate Increases – 3.25%
Merit Increases – CalPERS
1997-2007 Experience Study
Medical Trend
Year
Increase from
Prior Year
2009 Premiums
2010 6.50%
2011 6.50%
2012 6.50%
2013 6.50%
2014 6.50%
2015 6.00%
2016 6.00%
2017 6.00%
2018+ 5.85%
Increase from Prior Year
Year Non-Medicare Medicare
2009 n/a
2010 n/a
2011 Premiums
2012 Premiums
2013 9.0% 9.4%
2014 8.5% 8.9%
2015 8.0% 8.3%
2016 7.5% 7.8%
2017 7.0% 7.2%
2018 6.5% 6.7%
2019 6.0% 6.1%
2020 5.5% 5.6%
2021+ 5.0% 5.0%
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ACTUARIAL ASSUMPTIONS
January 1, 2009 Valuation29 January 1, 2011 &
June 30, 2011 Valuations
Actuarial Load n/a 2.0% load
PEMHCA PPO premium
increases below per capita
claims increases
Mortality,
Termination,
Disability
CalPERS 1997-2002
Experience Study
CalPERS 1997-2007
Experience Study
Retirement CalPERS 1997-2002
Experience Study
Misc Fire Police
Benefit 2.7%@55 3%@50 3%@50
CalPERS 1997-2007
Experience Study
Misc Fire Police
Benefit 2.7%@55 3%@50 3%@50
2%@6030
ERA 57.5 54.5 54.0
30 Applies to employees hired after July 17, 2010
October 11, 2011 E-32
ACTUARIAL ASSUMPTIONS
January 1, 2009 Valuation29 January 1, 2011 &
June 30, 2011 Valuations
Participation at
Retirement
n/a Hired < 1/1/04: 100%
Hired > 1/1/04: 95%
Employees with cost sharing:
reduce above %’s by 5%
Medical Plan at
Retirement
n/a Miscellaneous:
<65 65+
Blue Shield 35% 20%
Kaiser 25% 25%
PERS Choice 30% 20%
PERSCare 10% 35%
Safety:
<65 65+
Blue Shield 35% 20%
Kaiser 25% 25%
PERS Choice 20% 20%
PERSCare 10% 35%
PORAC 10% 0%
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October 11, 2011 E-33
ACTUARIAL ASSUMPTIONS
January 1, 2009 Valuation29 January 1, 2011 &
June 30, 2011 Valuations
Medicare
Eligible Rate
n/a Actives hired < 4/1/86:
Miscellaneous – 80%
Safety – 90%
Actives hired > 4/1/86: 100%
Retirees < 65: 90%
Everyone eligible for
Medicare will elect Part B
coverage
Spousal
Coverage at
Retirement
Actives: 60%
Retirees: based on current
elections
Currently covered: based on
current elections
Currently waived: 80%
Family
Coverage at
Retirement
Actives: 18% until age 65
Retirees: based on current
elections until age 65
Actives
Misc : 10% until age 65
Safety : 20% until age 65
Retirees: based on current
elections until age 65
October 11, 2011 E-34
ACTUARIAL ASSUMPTIONS
January 1, 2009 Valuation29 January 1, 2011 &
June 30, 2011 Valuations
Missing PERS
Group
n/a Retirees missing PERS group
assumed to be Misc unless
fund designates Police or Fire
Missing
Bargaining
Unit
n/a Retirees missing bargaining
unit assumed to be SEIU
unless fund designates Police
(PAPOA) or Fire (IAFF)
Missing
Department
n/a Retirees missing department
assumed to be 80% GF,
10% Elec, and 10% WWT
Missing Fund n/a People assumed to be 80% GF
from above assumption placed
in “Unknown” Fund
Surviving
Spouse
Participation
n/a 100%
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ACTUARIAL ASSUMPTIONS
January 1, 2009 Valuation29 January 1, 2011 &
June 30, 2011 Valuations
Spouse Age Actives – Males 3 years older
than females
Retirees – Males 3 years
older than females if spouse
birth date not available
Same
Future New
Participants
None – Closed Group Same
October 11, 2011 E-36
DEFINITIONS
GASB 45
Accrual
Accounting
Project future employer-provided benefit cash flows for current active
employees and current retirees
Discount projected cash flow to valuation date using discount rate (assumed
return on assets used to pay benefits) and other actuarial assumptions to
determine present value of projected future benefits (PVB)
Allocate PVB to past, current, and future periods using the actuarial cost
method
Actuarial cost method used for this valuation is the Entry Age Normal Cost
method which determines Normal Cost as a level percentage of payroll (same
method used by CalPERS)
Normal Cost is amount allocated to current fiscal year
Actuarial Accrued Liability (AAL) is amount allocated to prior service with
employer
Unfunded AAL (UAAL) is AAL less plan assets pre-funded in a segregated
and restricted trust
PayGo Cost Cash subsidy is the pay-as-you-go employer benefit payments for retirees
Implied subsidy is the difference between the actual cost of retiree benefits
and retiree premiums subsidized by active employee premiums
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DEFINITIONS
Present Value of Benefits
Present Value of Benefits
(With Plan Assets)
Unfunded
Actuarial Accrued
Future
Normal
Costs
Normal Cost
Assets
Present Value of Benefits
(Without Plan Assets)
Unfunded Actuarial
Accrued Liability
Future
Normal
Costs
Normal Cost
October 11, 2011 E-38
DEFINITIONS
Annual
Required
Contribution
(ARC)
“Required contribution” for the current period including:
Normal Cost
Amortization of:
- Initial UAAL
- AAL for plan, assumption, and method changes
- Experience gains/losses (difference between expected and actual)
- Contribution gains/losses (difference between ARC and contributions)
ARC in excess of pay-as-you-go costs not required to be funded
Net OPEB
Obligation
(NOO)
Net OPEB Obligation is the accumulated amounts expensed but not funded
Net OPEB Asset if amounts funded exceed those expensed
Annual OPEB
Cost (AOC)
Expense for the current period including:
ARC
Interest on NOO
Adjustment of NOO
NOO adjustment prevents double counting of expense since ARCs include an
amortization of prior contribution gains/losses previously expensed
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Blue Shield 23.35% 17.95% 23.71% 9.11%13.80%10.06% 5.19% 2.99% 17.01% 5.27% 12.62%
Blue Shield NetValue 3.61% 0.98% 16.17% 5.22% 6.34%
Kaiser 23.33% 17.83% 16.13% 9.78%10.73%9.16% 7.99% 4.77% 6.84% 7.28% 11.25%
PERS Choice 18.88% 18.04% 5.82% 9.43%12.50%6.00% 0.00% 5.44% 10.74% 1.91% 8.71%
PERS Select -3.00% 4.80% 3.74% -1.07% 1.06%
PERSCare 22.05% -0.59% 13.80% 9.76%13.09%-2.56% 0.00% 15.78% 2.97% 15.13% 8.65%
WHA 15.00% 34.23% 15.00% 9.80%11.80%16.86%
PORAC 21.25% 9.91% 1.65% 0.00%9.97%2.99% 6.99% 0.00% 8.88% 5.50% 6.55%
Blue Shield 4.00% 17.95% -10.06% -0.45% 11.33% 7.05% 0.00% -12.27% 12.80% 0.03% 2.62%
Blue Shield NetValue 0.00% -1.68% 12.80% 0.03% 2.63%
Kaiser 55.60% 31.90% -11.19% -10.13% 32.52% -5.63% 2.49% 6.50% -5.38% -1.59% 7.61%
Kaiser/OOS 13.21% 36.39% 8.96% -19.53% 29.43% 9.89% 6.75% 0.16% 11.11% 3.40% 8.99%
PERS Choice 5.08% -1.40% -8.53% 15.18% 6.12% 2.15% 0.00% 2.00% 5.56% 2.01% 2.66%
PERS Select 0.00% 2.00% 5.56% 2.01% 2.37%
PERSCare 5.92% -1.16% -13.91% 20.01% 7.05% 8.86% 0.00% 1.48% 5.62% -0.28% 3.02%
PORAC 21.30% 5.42% 0.00% 0.00% 0.00% -9.33% 7.03% 10.00% 15.15% 0.00% 4.63%
WHA 12.08% 55.09% 0.00% -1.00% 7.00%12.99%
Medicare - All Regions
Percent
Change
Percent
Change
Percent
Change
Percent
Change
Percent
Change
Percent
Change
Percent
Change
Percent
Change
Percent
Change
2011-12
Percent
Change
Bay Area
CalPERS 2002-2012 Health Premiums - Regional
2003-04
Percent
Change
2004-05
Percent
Change
Average per
year
increase
Medicare Percent
Change
2009-10
Percent
Change
2010-11
Percent
Change
2007-08
Percent
Change
2008-09
Percent
Change
2005-06
Percent
Change
2006-07
Percent
Change
Basic 2002-03
Percent
Change
2.
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October 12, 2011 1
RESULTS BY FUND
Actuarial Accrued Liability (AAL)
(Amounts in 000’s)
January 1, 2009 January 1, 2011 June 30, 2011
7.75% 7.75% 7.25%
CIP $ 1,564 $ 2,409 $ 2,572
Elec1,2 13,214 16,325 17,225
Gas1 4,589 6,227 6,668
GF3 91,488 118,946 125,564
ISF - Technology 2,226 2,079 2,257
ISF - Vehicle 1,225 1,411 1,510
Refuse 3,063 4,931 5,256
Storm Drain 494 1,478 1,565
Water1 4,673 5,189 5,539
WWC1 2,013 2,103 2,313
WWT 5,112 8,881 9,454
Total 129,661 169,979 179,923
1 Assets for Fiber Optics Fund appropriated to Elec due to no Fiber Optics employees in data 2 AAL for UTL employees allocated to Elec, Gas, Water, and WWC in proportion to each Fund’s AAL 3 Assets for Printing & Mailing Fund appropriated to GF due to no Printing & Mailing employees in data
October 12, 2011 2
RESULTS BY FUND
Annual Required Contribution (ARC)
(Amounts in 000’s)
1/1/09
Valuation
1/1/11
Valuation 6/30/11 Valuation
Annual Required Contribution 2009/10 2011/12 2012/13 2013/14
7.75% 7.75% 7.25%
CIP $ 142 $ 220 $ 237 $ 245
Elec1,2 953 1,164 1,235 1,275
Gas1 344 390 515 532
GF3 6825 9,510 10,018 10,344
ISF - Technology 214 229 245 253
ISF - Vehicle 95 126 132 136
Refuse 245 402 420 434
Storm Drain 36 112 118 121
Water1 386 428 464 479
WWC1 169 200 223 230
WWT 377 730 771 796
Total 9,786 13,603 14,378 14,845
2.d
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Excerpt from Finance Committee minutes of October 18, 2011.
2. Review and Acceptance of Updated Retiree Medical Actuarial Study
– Valuation Date January 1, 2011 and Valuation Date June 30, 2011
Director of Administrative Services, Lalo Perez stated in 2008
Government Accounting Standards Board (GASB) required
governmental entities to value the benefits of medical plans to
determine the liability; the City complied in January of 2009. It was
required every two-years to complete a refresh of the value. The
presentation showed the differences between the 2009 value of the
benefit to the 2011 refresh. The major difference was in the retirees
where it went from $78,384,000 to $118,800,000. The positive piece
of the information was the assets being set aside had increased and
the City’s earning had risen. The assets went from $24.6 million in
2009 to $35.3 million in 2011 bringing the unfunded liability for retiree
medical for the full organization to $135 million. Public Employee
Retiree Service (PERS) had added the flexibility for the City to select a
regular return. After discussions internally and with Bartel Associates,
Inc. it was determined a 7.25 discount rate was the rate for the City to
use going forward for the Fiscal Years (FY) 2013 and 2014. By
following that recommendation it changed the future Annual Required
Contribution (ARC) from $13.6 to $14.4 million, approximately
$775,000 more for FY13 and if the same rate of assumption was
maintained there would be an additional $467,000 for FY14.
John Bartel, Bartel Associates, LLC addressed the Actuarial Accrual
Liability (AAL) number which was $130 million and the expectation
should be for the AAL to grow from one valuation to the next because
there were services being rendered and as they were rendered it
changed the numbers. He explained if there had been no changes in
the assumption and there had been no gains and losses the expected
AAL would have been $151 million. Assumptions were thought of
future changes for what may occur and no matter how good of an
actuarial firm the City hired they did not determine the cost of the
plan. The cost of the plan was determined based on the benefits paid,
offset by investment earnings received in the Trust and increased by
expenses. He reviewed the actuarial gains and losses comparing the
2009 results to the 2011 results and explained the increase.
Mr. Perez stated in selecting Bartel and Associates, LLC. as the
actuarial firm for the City, Staff had send out a list serve inquiry and
the majority of the responses from other agencies for who they had
completed their reports were Bartel and Associates, LLC. He spoke to
the changes made by the present and prior Council with respect to the
longer term benefits; 1) there was a longer vesting period with retiree
medical so an employee hired post January 2004 needed 20 years to
achieve the 90 percent and 2) for the Public Employee Retirement
Service (PERS) Care Family Health Plan the City was not paying 100
percent which was significant since the annual cost was $24,000 for
someone with family coverage. In order to mitigate the future costs
the City could negotiate with the bargaining units or the other option
was to utilize the funds set aside in the Trust to assist paying the
difference. Staff hoped to return in early calendar year 2012 to provide
recommendations.
City Manager, James Keene announced the main action Staff was
recommending to the Finance Committee was to set the methodology
on the liability and the ARC. The next item on the agenda was a
discussion of the 2012 budget and the implications on finances; he felt
the two issues were directly linked. In the last actuarial valuation there
was a $105 million unfunded liability and currently it was at $134
million even though there was a strong financial performance activity
on the assets. He asked if there was a net increase of assets over the
last two years.
Mr. Perez stated yes there was a net increase in assets. He clarified
the firm made a recommendation and the City accepted to smooth out
the assumptions of the values of the assets going forward.
Mr. Keene asked if the methodology had not been changed would the
valuation of the unfunded liability been less in 2009.
Mr. Bartel stated if no assumption changes were made then the
unfunded liability would have been $109 million.
Mr. Perez said Staff was aware from the Council feedback that Bartel
felt the assumption of 6 and 6.5 percent for medical cost increases
was not sufficient.
Mr. Keene asked for confirmation that the unfunded liability would
continue to rise even if there were solid investment performances.
Mr. Bartel agreed.
Council Member Shepherd asked if a large group of employees retired
in a short timeframe caused a “bubble” which exacerbated the
position, when would there be an “un-bubble” as it were.
Mr. Keene clarified if there were no new hires there could be an “un-
bubble” but the City needed to replace employees so that was not a
probable scenario. He said people were living longer which created a
greater long-term cost.
Council Member Shepherd saw the mass retirement as a cause and
effect of the City’s position to increase the cost of employee
contribution to healthcare and what she was asking was would there
be a softening effect.
Mr. Bartel clarified the firm reviewed the City’s employment population
and calculated their age with years vested. He said in considering the
data the remaining population who did not retire with the early
retirement package were not far from regular retirement. If the City
were to split the active liability in half, that would reduce the actuarial
liability by $25 million. The liability for retirees themselves was $119
million.
Chair Scharff asked when the unfunded liability payment was due.
Mr. Bartel said that liability was being paid off over a period of 28
years. The goal was to ensure there were sufficient funds to make the
benefits payment but there was no requirement that the payment be
made early; it would be prudent to do so if there were the ability but it
was not required.
Council Member Yeh asked why the firm created a closed amortization
period of 30 years.
Mr. Bartel clarified the 30 year timeframe was in the prior firm’s
valuation, although the accounting standard recommended not using a
period longer than 30 years. It appeared the previous firm was using a
rolling 30 year formula but in doing that the City would never pay off
the debt. The City’s policy was to payoff the unfunded liability which
was a good fiscal policy and in that model there needed to be an end
date so the lower the ARC the less of the unfunded liability was paid
off.
Mr. Keene asked if nothing changed over the next 28 years and the
City made the ARC payments as identified, at the end of the 28 years
there would be no unfunded liability.
Mr. Bartel said that it did not mean there would not be a required
contribution but yes, there would not be an unfunded liability.
Council Member Schmid confirmed the formula of applying the health
retiree benefits to current employees had three parts; 1) prepaying for
the liability he or she would have in the future, 2) past retirement
payments, and 3) a portion of the payment would be put off because
in the future his or her payment may be higher. Two parts were
positive and one negative so he asked how the firm would recommend
allocation of shares for each part.
Mr. Bartel stated none of the numbers included any payment for
current active medical costs today; the formula was for their
retirement. The belief was the City was taking into account that the
portion of the premiums being paid for the current employee after
retirement would be substantially higher than what was being paid
today.
Council Member Schmid stated within the demographics the actuary
firm had built-in an assumption people would compete in the labor
market for 28 years prior to retiring.
Mr. Bartel disagreed and stated what was being said was when the
City reviewed their population they made an assumption of how long
they would be working for the City. The formula was to take the
pension plan in conjunction with a generous retiree medical plan which
took you to an expected retirement age based on Palo Alto’s
demographic. He explained to a large degree the employees at 2.7
had an expected retirement age of 57 based on the demographic.
Council Member Schmid asked when a payment was made during the
current year was the payment based on an assumption of the number
of years of service the employee would have when they retired.
Mr. Bartel clarified for the active employees the City may be making
payments on their unfunded liability after they had retired.
Council Member Schmid asked if the City was adequately providing for
those who were currently working.
Mr. Bartel said the sooner the unfunded liability was paid off, the
better off the City would be.
Council Member Schmid asked what the City should be paying for
current employees.
Mr. Bartel said for example, if Palo Alto had the funds and if they were
able to accommodate it he suggested paying off the unfunded liability
closer to a twelve year amortization.
Council Member Schmid asked if the firm was assuming the employees
were going to be working for 25 years why was the City making
payments on the basis of 28 years.
Mr. Bartel stated if the City had been pre-funding the retirement
medical obligation since it began there would not be a term of 28
years. He felt the City would not run out of funds by following the 28
year plan.
Council Member Schmid was concerned that over the past two years
the unfunded liability had taken a large jump because assumptions
were made of the demographics. He said the asset market value
between 2008 and 2011 the total increased by 10 percent but the
actuarial value did not increase at all over the same four year period.
The projected 2012 value had a substantial growth in asset except it
was already the first quarter and the value was at minus 20 percent.
Mr. Bartel stated that was correct.
Council Member Schmid said if the assumption was a growth of 7.25
rate of return; he asked where the 7.25 came from. He mentioned the
Federal Government announced they were going to be driving the
bond market as close to 1 to 2 percent as possible for the next two
years and global equities were going up and down with no trend of a
solid upward momentum.
Council Member Shepherd said Palo Alto had a 50 percent confident
rating and she asked how a 90 percent confident rating would affect
the numbers.
Mr. Bartel confirmed if the confident rating rose to 90 percent the
number would rise to approximately 4 percent. He stated the firm
received their numbers through looking to outside investment advisors
and asset classifications then perform statistic projections. He agreed
a rate return of 7.25 in the short term was not achievable which was
why he explained asset smoothing was so important.
Council Member Schmid was concerned about the smoothing process
being represented.
Mr. Bartel believed the 50 percent confidence level was close to the
7.61 rate of return but he preferred to air on the conservative side and
brought it down to 7.25.
Council Member Schmid felt Council should be able to speak to the
employees he needed to provide realistic numbers.
Mr. Bartel asked what discount rates Council Member Schmid felt
should be used.
Council Member Schmid stated 7.25; given the current asset allocation
was much too high for the amount of risk.
Mr. Bartel said the goal should be to asses the type of risk the City
was willing to take and setting the discount rate at that level.
Council Member Yeh asked the status of legislation to fund the
unfunded liability.
Mr. Bartel clarified the City would issue their financial statements in
compliance with GASB who had a pension exposure draft and although
it was not required to place the pension unfunded liability on the
financial statement it was clearly the most efficient way to accomplish
an accurate accounting. The exposure draft should be issued by the
end of 2012.
Council Member Yeh asked what the impact of monitoring would be
and if Palo Alto changed their methodology would their funded
percentage be reduced.
Mr. Bartel agreed, the more conservative the assumptions for discount
rates the lower the funded percentage would be.
Council Member Yeh asked where the rating agencies would go with
that type of system.
Mr. Bartel said in speaking with the rating agencies if there was a
modest liability and the City was doing nothing it would not affect the
agencies rating but if there was a valuable promise and the City was
not acting on it the rating agency would react.
Council Member Yeh said if GASB did not come out with a prescribed
methodology and each city was using different assumptions that would
become confusing.
Mr. Bartel was told by GASB that the actuaries had a standard of
practice and the outside auditors would review their work for
reasonableness. His concern was the outside auditors may not be
knowledgeable enough in those standards to perform an adequate
review.
Council Member Yeh noted a higher level of comfort with a higher level
of conservativeness but his concern was being more conservative may
position Palo Alto in a manner that could hurt the City externally.
Mr. Bartel stated his recommendation was to set t he discount rate for
the ARC which would also be the discount rate for the financial
statements. That left room to use a different rate for internal
purposes. He felt the concern over the discount rate was not limited to
Other Post Employee Benefit (OPEB), it was part in parcel to the
CalPERS pension.
Council Member Yeh said when there was only a closed amortization
period and new retirees entered the system it created an understated
unfunded liability because the new retires had not been included.
Mr. Bartel clarified his valuation had anticipated that and noted the
level percentage of pay making a negative amortization which meant
there was a negative amortization period until the level of amortization
was below 20 years.
Council Member Yeh said there had been contributions to the Trust
since 2008 and asked to what extend had it been spent down.
Mr. Perez stated the Trust had risen to $44.8 million and the majority
of the increases were from earnings.
Council Member Yeh noted he had seen the contributions listing in the
Staff Report but his question was whether the City had made the
contributions or were they from the structural reforms.
Mr. Bartel said they were City contributions.
Vice Mayor Yeh asked whether or not to use the Trust Fund to pay a
portion of the increased costs.
Mr. Perez noted that was one option to be considered, another option
would be budget reductions or increased revenues.
Vice Mayor Yeh reiterated the actuary had mentioned with a 30 year
amortization the City would not run out of funds. He asked if the funds
being refereed to were Trust Funds.
Mr. Bartel clarified the City was making their benefit payments for
retirees and putting funds aside with the intent of making the benefits
payments from the Trust at a future time. The expectation was the
City would reach a point in approximately 15 years where there were
sufficient funds to be able to expend fewer monies by making the
benefits payments out of the Trust.
Vice Mayor Yeh asked how much City contribution needed to be added
to the Trust in order to achieve the 5.65. If the goal was to continue
with the closed amortization and achieve the goal of using the Trust in
15 years, he did not want to run out of funds.
Mr. Perez stated the key was to be able to make the payments so
there were no funds drawn from the Trust.
Mr. Keene asked for clarification that the employee contributions for
healthcare were dedicated to the unfunded liability.
Mr. Perez stated that was correct.
Vice Mayor Yeh asked if that area would be a separate line item in the
future.
Mr. Perez noted it would be listed in the report under contributions.
Council Member Shepherd commented on how the City was placing
good faith in the Irrevocable Coffers Trust that sound investment
choices were being made with the contributions being placed through
them. She noted she was not comfortable with the investment choices.
Her preference would be having the City put aside the funds utilizing
the mechanisms currently in place for earning interest. She noted the
assumptions did not reflect the adjustments from safety units or what
might be coming forward with the other bargaining units.
Mr. Bartel assured the Committee the rate of return would absolutely
not be 7.25.
Council Member Shepherd said it would be less.
Mr. Bartel clarified he was uncertain what the percentage rate would
be in the short run however not many of their clients were comfortable
with how CalPERS had been investing.
Council Member Shepherd said they had not changed their manner of
thinking on investment strategy during the changing financial crisis.
Mr. Bartel disagreed and clarified there were elements that CalPERS
had changed but some they had not. In the California Employers
Retirees Benefit Trust (CERBT) there were two elements that were in
the Pension Trust and they did not invest in specific real estate.
Council Member Shepherd understood those points but argued their
strategy of investment in the global market place, where they placed
the bulk of their funds, had not changed.
Mr. Bartel suggested they review what the CalPERS investment staff
was doing today, if anything, that was different from their prior
practices. CalPERS had a long run of Chief Investment Officer (CIO)
turn over until they hired Joe Dear a few years ago who focused on
long-term investments and shifted the method of their investment
strategy.
Council Member Shepherd was familiar with Mr. Dear but did not feel
there had been a significant shift in strategy since his arrival. She
recommended using the information as a tool during labor
negotiations.
Chair Scharff agreed and noted it affected how retirees were viewed
and whether or not they could switch to a more expensive plan.
Council Member Yeh asked if Staff was reviewing the determined
funding recommendations for the current year, for example whether
the additions to the net increase in the ARC should be funded through
the Trust or not.
Mr. Perez said the Staff was returning during the Mid-Year to show the
Committee where the City was and recommend a decision at that
time.
Mr. Keene said the increased payment needing to be made was for FY
2012, the next item on the agenda was on the budget update where
there was a recommendation relating to drawing down the Budget
Stabilization Reserve because of the over collection of revenues but
that did not factor in any additional savings from public safety.
Council Member Yeh expressed the information was helpful and asked
about the increase of employee contributions and whether there Staff
had a process in mind.
Mr. Keene agreed with the general statement of Mr. Perez regarding
trends that the City had been consistently making with the bargaining
units and that he was discussing the equity/parity across the
bargaining units but that the contributions would be escalating as time
moved forward. The goal was to have all of the units making the same
contribution on healthcare.
MOTION: Council Member Schmid moved, seconded by Council
Member XXX that the Finance Committee accept the Retiree
Healthcare Plan January 1, 2011 and June 30, 2011 GASB 45 Actuarial
Valuations Revised Preliminary Results and that Staff provide
information on an Option to include a 7 percent Discount Rate and
move the allocation period to 25 years.
MOTION FAILED FOR LACK OF SECOND
MOTION: Council Member Shepherd moved, seconded by Vice Mayor
Yeh that the Finance Committee accept the Retiree Healthcare Plan
January 1, 2011 and June 30, 2011 GASB 45 Actuarial Valuations
Revised Preliminary Results.
Council Member Shepherd requested the structural changes from the
Police and Fire units be included in the report.
Council Member Yeh noted the retiree medical benefits were not a two
year issue and changes needed to be incorporated into the report
being distributed as new information arose. He felt if there were
feedback throughout the process it would be more helpful to show
different methodologies.
Mr. Bartel clarified the modification of the amortization period did not
require a new process, his firm would take the unfunded liability and
re-run the information with a different number of years to reflect the
new amortization date.
Chair Scharff asked if Mr. Bartel was saying it would not cost the City
any further expense to re-run the information.
Mr. Bartel clarified the alteration of the discount rate to 7 percent
would require the firm to complete additional work. He noted in order
of magnitude if they ran a 7 percent discount rate and reviewed a
different amortization period those fees would be between $1,500 to
$2,000 on the outset. Where the amortization change itself would take
approximately 2 hours and cost up to $500.
Council Member Yeh said the current amortization period was an
industry standard of 30 years so he would not want the City’s formal
actuarial study to reflect something different.
MOTION PASSED: 4-0
October 18, 2011
Finance Committee Meeting
#2180
Retiree Medical Valuation Study
2
Actuarial Liability 2009 - 11
FUNDED STATUS – 7.75% DISCOUNT RATE
(Amounts in 000’s)
1/1/09
1/1/11
Projected
6/30/11
Present Value of Benefits
• Actives
• Retirees
• Total
$ 78,831
78,384
157,215
$ 85,476
118,800
204,276
Actuarial Accrued Liability
• Actives
• Retirees
• Total
Actuarial Value of Assets (AVA) Unfunded AAL
51,277 78,384
129,661
24,616
105,045
51,179 118,800
169,979
35,294
134,685
174,485
40,222
134,263
Annual Required Contribution (ARC) 9,786 13,603
Net Increase in ARC 3,817
3
Annual Required Contribution
FY 2012, 2013 and 2014
4
Assumption Changes 2009-11
5
Cost Mitigation Efforts
1.Longer vesting period for retiree medical
for post-1/2004 hires
2.Highest-cost medical plan no longer paid
100% by City, since 2007
3.Miscellaneous group employees ramping
up to 10% medical premium cost-sharing,
effective 4/1/11
4.Firefighters will contribute 10% of medical
premiums, effective 10/31/11 –
-- NOT INCLUDED IN THIS ACTUARIAL STUDY --
6
Next Steps
1.Continue negotiating with Safety
bargaining units
2.Determine funding recommendations for
current year
may include drawing from CERBT trust
3.Determine funding recommendations for
FY 2013 and 2014
may include increasing employee
contributions
November 28, 2011 Item 3a Excerpt
3a. (Former No. 2) Finance Committee Recommendation that the
Council Approve and Accept the Updated Retiree Medical
Actuarial Study.
Council Member Klein stated his opinion that the dollar value of the
item should have excluded it from the Consent Calendar. He asked
Staff to discuss for the benefit of the public why there was a need for a
new actuary firm. He said there were recommendations from the
actuary which were accepted by the Finance Committee that he did
not agree with. Not all of the choices should be conservative. An over
funded City could lead to an under funded community which could
have a negative financial impact by making the community less
desirable. He appreciated the caution being taken over the past few
years and warned balance was necessary for a thriving community.
Lalo Perez, Director of Administrative Services expressed Staff had
intended to continue the use of Milliman, Inc. (Milliman) to conduct the
updated actuarial study. When it became evident the City needed to
have a firm act as an expert witness in the Binding Arbitration hearing
Milliman informed Staff it would not be in their best interest to
participate because of work they performed work for the International
Association of Fire Fighters (IAFF). The new firm chosen, Bartel
Associates, LLC (Bartel) was recommended by CalPERS and they were
willing to participate in the Binding Arbitration.
James Keene, City Manager added the firm was well recognized across
the state and for a period of time were the leading actuarial experts.
Council Member Klein asked if the previous firm had completed any
work on the project prior to transferring out.
Mr. Perez recognized they had completed some partial work.
Council Member Klein noted John Bartel had completed the actuarial
study differently than Milliman had in the past. He asked whether
Milliman would have made the same changes during this update. For
example with the medical trend assumptions; Bartel’s assumptions
were the rates would start high and end low which added $4.8 million
to the City’s unfunded liability where Millimans’ started at 6.5 percent
and ended at 5.85 percent.
Mr. Perez stated Staff would worked with Milliman’s staff to adjust
their low rate. Comments from Council indicated Long Term Projects
rates should be aligned to recent.
Council Member Klein asked if there were other incidents that could be
questioned.
Mr. Perez confirmed there were and explained that CalPERS made
changes to the demographics every couple of years and so Milliman
did not have the information prior to their departure. An additional
factor noticed by Bartel was the employees hired prior to 1986 were
not required to contribute to Medicare. If it were determined those
Staff members were not covered by Medicare, the City was responsible
for the full cost not just the Medicare cost. Milliman had a rolling 30
year amortization but with Bartel it was a 28 year closed end
amortization and the last difference was the rate of return
assumptions because CalPERS had made changes.
Council Member Klein asked the cost difference between the closed
amortization period versus the open.
Council Member Scharff noted the Staff discussion regarding the
differences between open and closed amortization was on packet page
175.
Mr. Perez stated he did not recall the number but would review the
report and let Council know when the information was ready.
Council Member Klein said it was a basic actuarial decision and he was
certain Milliman maintained the open 30 year deliberately. His concern
was if the rolling period was working for the City what was the benefit
to locking in a close date.
Mr. Perez said that by moving to the 28 year closed end
recommendation by the end of the time the cost would only be for the
current employees. The rolling was as if each year the loan was being
extended with no reduction.
Council Member Klein said Staff told Council two years ago the model
being used was accurate and now the new model was the accurate
one.
Mr. Perez clarified two years ago was the first time Staff had
experienced the program and after review and alterations they felt the
proposed program was a better fit for the City.
Mr. Keene said the program was meant to be a mix of the goals
Council wished to achieve. With any actuarial there was discretion for
the City to focus on the mix of assumptions they expected Staff to
include.
Vice Mayor Yeh said the Finance Committee had discussed the new
rules Government Accounting Standards Board (GASB) had
implemented and the need to report what the liability was versus the
need to fund the liability. He asked what steps had been taken with
the different bodies that require the entity fund the liability. The closed
end methodology would have a large impact on the steps towards
repayment but there was a higher burden within a limited timeframe
versus re-upping with the rolling methodology. He said it would be
helpful to know if that was a direction GASB or legislation was going
in.
Mr. Perez acknowledged there was a draft in process but nothing had
been released for review. His understanding was most agencies with
significant amounts were experiencing difficulty in addressing the
liability. His concern for Palo Alto would be because of the changes
made he was not clear how the rating agencies would view the City
not funding irregardless of GASB’s ruling. His secondary concern was
the liability amount was beginning to match the General Fund.
Vice Mayor Yeh asked if it would be possible to have an actuary
calculate through both methodologies.
Mr. Perez stated it was possible. It would add to the cost, but Staff
would comply with Council’s direction.
Mr. Keene shared his thoughts about having an unfunded liability.
Good financial management would be to reduce or eliminate unfunded
liabilities. He clarified either methodology would allow for modifications
to accommodate different goals. There were time constrains as far as
what assumptions Palo Alto was using to report to CalPERS prior to the
end of the 2011 calendar year.
Council Member Klein said the language used by Staff throughout the
report indicated the City was going to fund the Annual Required
Contribution (ARC) and it was his understanding that was included in
the make-up of the budget.
Mr. Perez agreed that was how Staff had approached the funding plan
for Mid-Year. There was a $4.3 million place holder for safety group
concessions; he noted not all of them would be met in the given
timeframe.
Council Member Klein clarified his concern was with the ARC and the
policy had been to fund the full ARC.
Mr. Perez confirmed that had been Staff’s recommendation.
Council Member Klein noted it had been addressed that fully funding
the ARC was not a requirement by GASB at this time.
Mr. Perez stated that was correct, the report read that it was an
annual requirement but in fact it was not.
Council Member Klein was concerned that with the change in direction
it was not City Staff but an outside entity that had placed a burden on
the budget.
Mr. Keene informed the Council the City was in the position to not
accept the actuarial assumptions. He said there was sound advice in
Mr. Bartel’s recommendations. He agreed the elimination of unfunded
liabilities over time was the best way to approach the debt situation.
He acknowledged if the proposed assumptions were approved by
Council, Staff would return later in the year with recommendations to
fund the additional costs in the current budget year for the ARC.
Council Member Klein asked if the FY12-13 budget would be prepared
in a similar manner.
Mr. Perez stated yes.
Council Member Klein asked for clarity on the interest rate assumption,
he was not quite clear from the wording in the report. On page 114
there was notification of an $800,000 jump in the ARC between FY12
and FY13 because of the decrease in the discount rate from 7.75
percent to 7.25 percent but the next paragraph indicated the PERS
Trust offered three possible asset allocations. Number one was the
City’s chosen option as the highest yield of 7.61 percent. Mr. Bartel
recommended dropping this to 7.25 percent. He asked if Staff had
accepted Mr. Bartel’s interest rate assumption recommendation.
Mr. Perez replied yes. In FY12 Staff was using 7.75 percent. For FY13
was where the PERS Trust options became relevant. Staff was
accepting the 7.61 percent with a margin for adverse deviation which
dropped the rate to 7.25 percent.
Council Member Klein asked if Staff was aware of what Milliman would
have recommended in the same situation.
Mr. Perez stated no.
Council Member Klein mentioned the conservative approach was
costing an excess of $800,000 when Staff could have used the 7.61
percent without incident.
Mr. Perez noted if the 7.75 percent had been used there would have
been a $580,000 difference in the annual payment.
Council Member Klein accepted the report but noted there were
implications he was not accept because Staff was being overly
cautious.
MOTION: Vice Mayor Yeh moved, seconded by Council Member
Schmid to approve and accept the Updated Retiree Medical Actuarial
Study.
Vice Mayor Yeh was aware when there was significant change in
methodology there would be a robust discussion but having a Mid-Year
check-in provided the opportunity to understand the true fiscal
impacts.
Mr. Keene recommended the Council meet with Mr. Bartel prior to the
budget process.
Council Member Schmid felt Mr. Bartel’s assumptions were realistic
and noted healthcare costs were rising annually. He acknowledged
past Council decisions had passed liability obligations on to the
present. He said it was unfortunate the increased revenue generated
was being obligated to fund the ARC payment rather than salaries or
other obligations. He believed the 30 year timeframe was based on the
assumption most workers in the system would work for 30 years. He
supported the acceptance of the Bartel recommendation.
Council Member Scharff understood the difference between a retiree
paying off a debt when they would no longer be generating income
while the City would continue to do so. He agreed it was a positive
public policy to payoff the assumptions with a closed end. He asked
what the impact was if the present assumptions were not accurate.
Mr. Perez said the liability would continue to grow.
Council Member Scharff asked what impact the continued growth of
the liability would have on the City.
Mr. Perez said there would be an increase in the calculation of the
payments, if the amount was significant enough to impact the City the
concern was with the rating agencies.
Council Member Scharff asked why the public safety concessions were
not included in the assumptions while the miscellaneous category was
and with that there was $14.2 million saved. He asked if during Mid-
Year the public safety would be included. He believed if the City was
not going to fully fund the ARC they were better off using the
assumptions that would lower the amount.
Mr. Perez agreed in concept it made sense to use the assumptions with
a lower amount if the full ARC was not being funded.
Council Member Scharff stated he supported the Motion.
Council Member Shepherd had concerns with the CalPERS 50 percent
confidence rate of return. She believed Palo Alto was within the norms
of other municipalities so when the reporting occurred to the public, it
appeared conservative although she felt for the 28 year period it
needed to be reviewed. She was aware without the concessions from
fire or police each time Council reviewed the assumptions it would
change with the added concessions. She asked if the City would be
able to cash flow the payoff with the period of the financial picture.
With continued employee retiring there was a need to continue the
funding. She noted her support for the Motion.
Council Member Burt asked why the item was on the Consent
Calendar.
Mr. Keene had thought with the Finance Committee approving the item
unanimously it would suffice being on the Consent Calendar. He
understood if an item passed unanimously but might be contentious it
should not be placed under Consent.
Council Member Burt said the subjective criteria was either
contentiousness or high consequence. He said $1 million was a high
enough consequence and this item was $29 million. He asked for
clarity of future criteria for potential policy changes. He noted the
concern of the new actuary being too conservative but mentioned the
previous actuary understated the liability. He said the difference in the
actuarial studies was the public safety groups from $29 million to $43
million. He asked if his interpretation was accurate.
Mr. Perez believed that was correct. If there was not a positive of $14
million because of the miscellaneous group the liability would have
been $44 million.
Council Member Burt shared his concern with the City relying too
heavily on an actuary study when they could be varied. His attention
was drawn when Milliman refused to be an expert witness because of
their association with the Fire Union.
Mr. Perez noted it was not the City’s Fire Union but rather the National
Fire Fighters Union.
Council Member Burt was disturbed that they would disengage their
relationship with the City because of the relationship with the Union.
He noted one factor to be aware of was the decreased age of
retirement and the second was the spike in Palo Alto retirements which
altered different elements of liabilities. He noticed the PERS PPO
premiums had been increasing at 2 percent annually less than what
appeared to be the actual underline costs.
Mr. Perez explained the premiums had increased 7 percent while the
claims had increased 10 percent. It was recommended by Bartel to
adjust the 2 percent differential because the conjecture was the
amounts would catch up. PERS was using reserves from the PPO plans
to cover the differences, the recommendation was to prepare the City
for the true bill.
Council Member Burt said that was an indication that PERS was
understating the cost. This raised the concern of whether Palo Alto
could trust the information coming from PERS. He acknowledged Palo
Alto was one of the few City’s confronting the situation head on but
there maintained a large unfunded liability.
INCORPORATED INTO THE MOTION WITH THE CONSENT OF
THE MAKER AND SECONDER that Staff is to schedule a meeting with
Mr. Bartel and full Council prior to the Finance Committee Mid-Year
Review.
Council Member Holman said this level of impact to the budget
deserved enlightened discussions.
Council Member Klein said Staff’s intention was to fund the full ARC
each year which had been City policy. The recent spike to Palo Alto
retirements was referred to as a short term occurrence although the
actuary did not believe that to be true.
Mr. Perez said the actuary requested trending data. The current data
was available in the report but was not sufficient for their purposes.
Council Member Klein could not see how the level of retirement trends
could continue.
Mr. Perez clarified the changes made in 2004 to the retirement
packages altered to implosion of retirement costs from those who were
hired prior and could retire earlier.
Council Member Klein said because of the economic trends in the
country the national reports indicate a later in life retirement rather
than the information presented in the report.
Council Member Shepherd asked with the current Motion if the ARC
would be funded next year.
Mr. Keene said Staff was intending to bring forth during Mid-Year a
budget recommendation to fund the ARC in FY12 and unless directed
otherwise, the FY2013 budget would begin in spring also funding the
ARC.
Council Member Shepherd asked if the decision was to not fund the
ARC if there would be a discussion.
Mr. Perez stated the FY2012 had approximately $10 million to fund the
ARC which was adopted by Council previously. The discussion was to
return with a recommendation to increase the amount to match the
actuarial study recommendation. The payment was not made until the
end of the year so Council could direct Staff not to make a payment.
Council Member Shepherd asked if the payment was due at the end of
the calendar year or fiscal year.
Mr. Keene confirmed the fiscal year, June 30, 2012.
Council Member Price asked what the average rate of return had been
from CalPERS assumptions over the past 5 years.
Mr. Perez said the CalPERS Trust had been up and down, he did not
have current numbers in percentages. He noted in January of 2011 it
was 18 percent and as of September 30, 2011 there was a significant
decrease in the portfolio which was at $44 million and dropped by $5
million. He declared Staff would have the historic percentages when
they returned.
Council Member Price felt the information would be helpful for the past
few years and the assumptions moving forward.
Council Member Schmid noted the report showed half of the current
active employees were in the age range of 45 to 54 which indicated a
steady stream of retirements.
MOTION AS AMENDED PASSED: 9-0