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HomeMy WebLinkAbout2013-01-22 City Council Agenda PacketCITY OF PALO ALTO CITY COUNCIL Special Meeting Council Chambers January 22, 2013 6:00 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 22, 2013 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. * The agenda now includes time estimates for each section or item. These are provided as part of the Council's effort to manage its time at Council meetings. Listed times are estimates only and are subject to change at any time, including while the meeting is in progress. The Council reserves the right to use more or less time on any item, to change the order of items and/or to continue items to another meeting. Particular items may be heard before or after the time estimated on the agenda. This may occur in order to best manage the time at a meeting or to adapt to the participation of the public. To ensure participation in a particular item, we suggest arriving at the beginning of the meeting and remaining until the item is called. Call to Order City Manager Comments *6:00-6:10 PM Oral Communications *6:10-6:25 PM 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 *6:25-6:30 PM Items will be voted on in one motion unless removed from the calendar by two Council Members. 1. Finance Committee Recommendation to Accept the Utilities Reserves Audit 2. Policy and Services Committee Recommendation to Accept the Audit of Employee Health Benefits Administration 3. Policy and Services Committee Recommendation to Accept the Contract Oversight Audit 4. Policy and Services Committee Recommendation to Accept the Auditor's Office Quarterly Report as of September 30, 2012 5. Appointment of 2013 Emergency Standby Council 2 January 22, 2013 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. 6. Colleague’s Memo From Mayor Scharff and Council Member Klein Regarding Council’s Ad hoc Committee on Infrastructure 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: Adoption of a Resolution Amending the Transportation Element of the Comprehensive Plan to Incorporate the Palo Alto Rail Corridor Study and Approval of a Negative Declaration *6:30-7:15 PM 8. Review and Approval of the Palo Alto City Council Rail Committee Guiding Principles *7:15-8:00 PM 9. Response to Colleague’s Memo on Employee Benefits: Pension *8:00-9:30 PM 10. 2013 State Legislative Priorities *9:30-10:15 PM 11. Library Advisory Commission Viability Report *10:15-10:45 PM 12. Colleague’s Memo from Mayor Scharff, and Council Members Klein and Price Regarding the Length of City Council Meetings *10:45-10:55 PM Council Member Questions, Comments and Announcements *10:55-11:00 PM Members of the public may not speak to the item(s) Adjournment 3 January 22, 2013 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. 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 22, 2013 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 Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Informational Report Annual Review of the City Council Procedures and Protocols Public Letters to Council Set 1 Set 2 Set 3 Set 4 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR January 22, 2013 The Honorable City Council Palo Alto, California Finance Committee Recommendation to Accept the Utilities Reserves Audit The Office of the City Auditor recommends acceptance of the Utilities Reserves Audit. At its meeting on December 4, 2012, the Finance Committee approved and unanimously recommended the City Council accept the report. The Finance Committee minutes are included in this packet. Recommended Action: Accept the Utilities Reserves Audit. Respectfully submitted, Jim Pelletier City Auditor ATTACHMENTS:  : Attachment A: Utilities Reserves Audit (PDF)  : Attachment B: Finance Committee Meeting Minutes Excerpt (December 4, 2012) (PDF) Department Head: Jim Pelletier, City Auditor Page 2 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR December 4, 2012 The Honorable City Council Attention: Finance Committee Palo Alto, California Utilities Reserves Audit In accordance with the Fiscal Year (FY) 2012 Annual Audit Work Plan, the Office of the City Auditor has completed the Utilities Reserves Audit. The audit contains two findings with a total of five recommendations. The Office of the City Auditor recommends the Finance Committee review and recommend to the City Council acceptance of the Utilities Reserves Audit. We thank the staff of the Utilities Department and Administrative Services Department for their time, information, and cooperation during the audit process. Respectfully submitted, Jim Pelletier City Auditor ATTACHMENTS:  Attachment A - Utilities Reserves Audit (PDF) Department Head: Jim Pelletier, City Auditor Attachment A Page 2 Attachment A                                           UTILITIES RESERVES AUDIT DECEMBER 2012    Office of the City Auditor  Jim Pelletier, City Auditor  Mimi Nguyen, Senior Performance Auditor  Attachment A     1 December 2012  SUMMARY OF RESULTS    REPORT HIGHLIGHTS  Opportunities for improving and strengthening of internal  controls are provided in the following findings:    RECOMMENDATIONS  The Office of the City Auditor (OCA) recommends  the following actions:     FINDING 1: Rate Stabilization Reserves are not consistently  maintained within Council‐approved guidelines. The City  does not currently have a formal, comprehensive reserve  policy for its utility funds. Key City documents show  inconsistency in communication of the City’s reserve policy  decisions. Rate Stabilization Reserve balances were often  outside of Council‐approved guideline ranges. Reserve  balances are inconsistently reported and do not always  reconcile, primarily due to the exclusion of Capital  Improvement Program (CIP) carryforward reserves.    Establishing a more comprehensive reserve policy, with  effective supporting procedures, the City Council and the  Utilities Department could benefit from having clear criteria  to communicate, manage, and monitor utility reserves.    FINDING 2: Capital Improvement Program reserves are not  consistently and clearly reported to Council. The reports  issued regarding CIP are not sufficient to adequately  support effective financial and project planning.  Improvements to the consistency and completeness of  reporting CIP carryforward reserve balances could better  support the City Council’s operating budget, capital budget,  and reserves processes.   The Utilities Department should establish formal  and comprehensive policies and procedures for  its Utility Reserves.   The Utilities Department should re‐evaluate and  determine the use of reserve balance guidelines,  updating the City’s resolution and the language  in key City documents accordingly.    The Utilities Department should revisit its annual  risk assessment model to determine, establish,  and document appropriate levels of utility fund  working capital held in unrestricted reserves.   The Utilities Department should revisit and  update the 5‐year financial projection rate  making worksheets to completely state all  reserve balances consistent with the City’s key  financial documents and improve visibility over  all unrestricted reserves.   The Utilities Department should develop a  mechanism to consistently and clearly report  Capital Improvement Program carryforward  reserves to the oversight bodies.      This document represents a limited summary of the audit report and does not include all of the information available in the full report.   The full report can be found on the Office of the City Auditor website at: http://www.cityofpaloalto.org/depts/aud/audit_reports.asp Office of the City Auditor EXECUTIVE SUMMARY–UTILITIES RESERVES AUDIT  Summary of Audit Objectives: To assess the appropriateness and adequacy of utilities reserves,  reserve policies, reserve guidelines, and usage of reserves.  Attachment A     2 December 2012  TABLE OF CONTENTS  EXECUTIVE SUMMARY ..................................................................................................................................................... 1  INTRODUCTION ............................................................................................................................................................... 3  AUDIT OBJECTIVES ........................................................................................................................................................................ 3  BACKGROUND.............................................................................................................................................................................. 3  AUDIT SCOPE AND LIMITATIONS ...................................................................................................................................................... 4  AUDIT METHODOLOGY .................................................................................................................................................................. 5  CITY AUDITOR’S CONCLUSION ......................................................................................................................................................... 5  AUDIT RESULTS ................................................................................................................................................................ 6  FINDING 1: RATE STABILIZATION RESERVES ARE NOT CONSISTENTLY MAINTAINED WITHIN COUNCIL‐APPROVED GUIDELINES .............................. 6  FINDING 2: CAPITAL IMPROVEMENT PROGRAM RESERVES ARE NOT CONSISTENTLY AND CLEARLY REPORTED TO COUNCIL ................................ 12  GLOSSARY OF ACRONYMS AND TERMS .......................................................................................................................... 14  ATTACHMENT 1: UTILITY FUND CAPITAL PROJECTS ‐ FY 2012 APPROPRIATION DETAIL ................................................... 16  ATTACHMENT 2: CITY MANAGER’S ACTION SUMMARY .................................................................................................. 19     In accordance with the Fiscal Year 2012 Annual Audit Work Plan, the Office of the City Auditor has  completed this Audit of Utilities Reserves.  We conducted this performance audit in accordance with  generally accepted government auditing standards.  Those standards require that we plan and perform  the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence obtained provides a  reasonable basis for our findings and conclusions based on our audit objectives.  We would like to thank the staff of the Utilities Department and Administrative Services Department  for their time, information, and cooperation during the audit process.  Attachment A     3 December 2012  INTRODUCTION  Audit Objectives  The objectives of this audit were to assess the adequacy and appropriateness of the utility financial reserves,  which included:  1) Determining if established utilities reserves policies are reasonable and appropriate for all Utilities  Funds, including Electric, Gas, Water, Wastewater Collection (WWC), and Fiber Optics.  2) Determining if the City maintains adequate reserves within the Utilities Funds.  3) Determining if the City’s utilities reserve balances conform to City Council‐approved utilities reserve  guidelines.  4) Determining if reserve funds maintained in utilities reserves are used appropriately in accordance with  established policy.  Background  Palo Alto is the only city in California that offers a full array of utility services to its citizens and businesses. The  utility services are managed by the Palo Alto Utilities Department with a mission to provide safe, reliable,  environmentally sustainable and cost effective services. The department is comprised of the following five  divisions:  1) Administration ‐ responsible for the overall management of the Utilities Department, including  communication, regulatory compliance, budget coordination, and personnel and administrative support.  2) Customer Support Services ‐ responsible for customer services of the electric, fiber, water, gas, and  wastewater systems, including the Utilities Department’s call center, meter reading, utility billing, credit  and collections, energy efficiency and renewable energy programs, and liaison with key accounts.  3) Engineering ‐ responsible for managing all phases of the Utilities Department’s capital improvement  projects, including replacement and rehabilitation of the City's electric, fiber, water, gas, and  wastewater distribution systems.  4) Operations ‐ responsible for operations, maintenance, and emergency response for the electric, fiber,  water, gas and wastewater distribution systems.  5) Resource Management ‐ responsible for the long‐term acquisition plan of resources, including  electricity, natural gas, and water; contract negotiations to acquire renewable resources; rate  development; and legislation and regulatory policy analysis.  The Utilities Department controls an operating budget of $222.8 million and a capital budget of $25.7 million  summarized by fund in Exhibit 1:    Exhibit 1: Utilities Department Operating Budget (FY 2012) and Reserve Actuals (FY 2011)    (in millions) Budget FY 2012 Actual FY 2011  Fund Operating  Revenue Operating  Expense Capital  Expense Reserve  Electric $125.2 $132.0 $8.7 $142.7  Gas $44.8 $49.5 $7.8 $34.4  Water $33.2 $36.6 $4.4 $25.5  Wastewater Collection $15.9 $17.2 $4.3 $17.1  Fiber Optic $3.7 $2.1 $0.5 $11.9  TOTAL $222.8 $237.4 $25.7 $231.6  Source: FY 2012 Adopted Operating Budget and FY 2011 Comprehensive Annual Financial Report (CAFR)  Attachment A     4 December 2012  The charter of the City of Palo Alto, Article VII, Section 2: Public utilities revenue states, “The revenue of each  public utility shall be kept in a separate fund from all other receipts and shall be used for the purposes and in the  order as follows…:  a) The payment of the operating and maintenance expenses of such utility…   b) The payment of interest on the bonded debt incurred for the construction or acquisition of such utility.  c) The payment of the principal of said debt, as it may become due.   d) The capital expenditures of such utility.   e) The replacements or emergency repairs and after special appropriation by the council.  f) The remainder shall be paid into the general fund by quarterly allotments.”  Specific to the utilities funds and by resolution, the City Council set aside unrestricted net assets (in the form of  reserves) and established reserve guidelines for:   General contingencies   Future capital and debt service expenditures   Operating and capital contingencies for unusual or emergency expenditures.  Listed below are current utility fund reserves, including rate stabilization reserves (which have Council‐approved  minimum and maximum balance guidelines) and other reserves.  Exhibit 2: List of Utilities Department Reserves  Reserve Name Minimum Guideline  Methodology  Maximum  Guideline  Methodology  Reserves with Council‐approved balance guidelines: 1. Rate Stabilization Reserves (RSR)  a) Electric Distribution Rate Stabilization Reserve (D‐RSR)15% sales revenue 30% sales revenue  b) Electric Supply Rate Stabilization Reserve (S‐RSR)50% purchase cost 100% purchase  c) Gas Distribution Rate Stabilization Reserve (D‐RSR)15% sales revenue 30% sales revenue  d) Gas Supply Rate Stabilization Reserve (S‐RSR)25% purchase cost 50% purchase cost  e) Water Rate Stabilization Reserve (RSR) 15% sales revenue 30% sales revenue  f) Wastewater Rate Stabilization Reserve (RSR)15% sales revenue 30% sales revenue  g) Fiber Optics Stabilization Reserve (RSR) 20% sales revenue 50% sales revenue  2. Emergency Plant Replacement Reserves (EPR)Insurance Deductible   Other Reserves:  3. Reappropriations  4. Commitments  5. Electric Special Projects (formerly Calaveras)  6. Public Benefit Program  7. Central Valley Project  8. Underground Loan    Audit Scope and Limitations  We reviewed and evaluated Council‐approved resolutions and policies addressing Utilities operating and capital  reserves. We reviewed the City’s utility reserve balances and considered guidance on the establishment and  maintenance of municipal reserves. We reviewed other related City documents including Adopted Operating  and Capital Budgets, Comprehensive Annual Financial Reports, Rate Making Financial Forecasts, Energy Risk  Management Policy and Procedures, and the Debt Policy. We also reviewed and analyzed activity pertaining to  the sources and uses of utility reserves, reserve levels, and appropriate levels of reserve over an 8‐year period.  Attachment A     5 December 2012  Audit Methodology  To conduct this audit, we analyzed reports from the City’s SAP Enterprise Resource Planning system on reserve  balances, operating and capital budgets, and capital project financial information. We interviewed Utilities  Department staff and Administrative Services Department (ASD) staff to assess the City’s overall reserve and  financial policies and procedures, to determine roles and responsibilities, and to assess the adequacy and  reasonableness of established policies and procedures related to reserves. We reviewed applicable federal,  state, and local laws and regulations, and consulted with the City Attorney’s Office.  We also reviewed financial  documents from other jurisdictions for benchmarking.     City Auditor’s Conclusion  Government auditing standards require us to report our conclusion based on the sufficiency and  appropriateness of the evidence supporting the findings in this report. Based on our assessment of Utilities  Reserves, we found that the City generally maintains adequate reserves within the utility funds. We also found  that reserves are generally used appropriately in accordance with established policy. However, we found that by  establishing a more comprehensive reserve policy, with effective supporting procedures, the City Council and  the Utilities Department could benefit from having clear criteria to communicate, manage, and monitor utility  reserves. Additionally, improvements to the consistency and completeness of reporting reserve balances could  better support the City Council’s operating budget, capital budget, and reserves processes.    In this report, the Office of the City Auditor provides five recommendations to improve the management and  monitoring of utility reserves. The audit recommendations in the report are addressed to the Utilities  Department; however, to effectively implement the recommendations, the Utilities Department should work  with the Administrative Services Department to ensure City policies are in alignment.     Attachment A     6 December 2012  AUDIT RESULTS  Rate Stabilization Reserves are not consistently maintained within  Council‐approved guidelines  Reserve level guidelines for utility reserve balances were introduced in 1993 with the establishment of the Rate  Stabilization Reserves. The following are guidelines and objectives for the Rate Stabilization Reserves:  1. To finance extraordinary one‐time contingencies and to finance increased operating cost in the short‐ term.  2. Not to be used to solve long‐term financial problems or to cover major catastrophic disasters.  3. Reserve guidelines to be set to allow reserves to float up or down, with target reserves set based on  assessment of uncertainties and financial risk facing the utilities.  4. Adequacy and prudency of the guidelines to be reviewed internally each year, and if appropriate,  revisions be recommended.  A 1993 Council‐approved resolution states, “The levels of the Rate Stabilization Reserves shall conform to the  reserve level guidelines and other criteria set forth in the Utilities Reserve Policy, as such may be amended from  time to time, and shall be accounted for or disposed of by action of the Council during the fiscal year in which  revenues are placed therein or in the budget of the next succeeding fiscal year.”  Since 1993, some reserve accounts, the methodology for calculating reserve levels, and reserve level guidelines  have changed; however, the requirement to maintain reserve levels within Council‐approved guidelines has  remained unchanged.  Establishing a comprehensive reserve policy could clarify reserve requirements.  The City does not currently have a formal, comprehensive reserve policy. However, we saw elements of policy  language within City staff reports, strategic and operational plans, and other financial documents.  Financial policies are fundamental financial management tools that serve as guidelines for operational and  strategic decision making. Financial policies focus primarily on a government’s  general fund; however, the same emphasis should be placed on other funds,  such as utility enterprise funds, where service is provided which requires a  stable rate and revenue structure, orderly provision of services to ratepayers,  adherence to legislation and regulatory requirements, and sound  management of fiscal financial processes. Due to the close relationships  between rate making, operational and capital budgeting, and debt financing,  it is important that these related policies and procedures are in alignment and  support each other.    FINDING 1:  Recommendation 1:  The  Utilities Department should  establish formal and  comprehensive policies and  procedures for its Utility  Reserves.  Attachment A     7 December 2012  Exhibit 3 includes portions of reserve guideline language in various City documents that communicate reserve  information.  Exhibit 3: Communication of reserve information in various City documents  City Document    Reserve statement  City of Palo Alto, Council  Resolution Numbers 7207, 7769,  and 8386  The levels of the Rate Stabilization Reserves shall conform to the reserve level guidelines and  other criteria set forth in the Utilities Reserve Policy, as such may be amended from time to time,  and shall be accounted for or disposed of by action of the Council during the fiscal year in which  revenues are placed therein or in the budget of the next succeeding fiscal year.    ... the City conformed the levels of the rate stabilization reserves to the reserve level guidelines,  as amended from time to time.  FY 2012 Adopted Operating  Budget, under electric fund  narrative   Reserves may be above the maximum guideline level or below the minimum guideline level for a  particular year as long as the levels are projected to move back to between the minimum and  maximum over the five‐year financial forecast planning horizon.  FY 2012 Adopted Operating  Budget, under enterprise fund  overview section  Reserve levels that are above guidelines are returned to customers in the form of lower future  rates, or used to pay for expenses, which also result in lower future rates.  FY 2013 Adopted Operating  Budget, under City overview  section and under enterprise  funds overview, respectively  Council has adopted a policy specifying the appropriate levels of reserves in each Enterprise  Fund. Typically, the budget will reflect either increasing or decreasing the reserves to within  Council‐approved ranges.    …Reserve levels that are above guidelines are returned to customers in the form of lower future  rates, or used to pay for expenses, which also result in lower future rates.  Utilities Strategic Plan FY 2011 Maintaining adequate cash reserves contributes to maintaining our overall financial health and  retaining our current favorable bond rating. We will maintain Rate Stabilization Reserves levels  within Council‐approved guidelines and sufficient to provide rate stability as desired by  ratepayers. During the annual budget and rate setting process, the risks that each Utilities fund is  exposed to will be identified along with the trajectory of costs and revenues to allow Council to  determine appropriate reserve levels and rate adjustments.  Electric Utility 5‐year Financial  Projections report to Council  (4/19/11)  The projected rate adjustments achieve the goals of ensuring that the balances of the Electric  Supply and Distribution Rate Stabilization Reserves (E‐SRSR and E‐DRSR, respectively) are  adequate and within the Council‐approved reserve guideline levels for the long‐term forecast  horizon.    …These minimum and maximum guidelines represent long term assessments of reserve level  requirements based on long term expected changes in commodity costs, hydro risk and credit  risk. In addition to the long term reserve guidelines, staff performs an annual assessment of  short term uncertainties and risks for each of the supply and distribution funds.    …Rate Stabilization Reserve Adequacy  Table 4 summarizes electric supply and distribution reserve requirement guidelines, short term  assessment of risks and estimated end of year reserve balances for E‐SRSR and E‐DRSR for the  current plus next two fiscal years.    …With no rate increase for the next two years, it is estimated that the end of year balance for  both E‐SRSR and E‐DRSR are expected to be within the long term reserve guideline levels as well  as above the short term risk assessment levels for the current and next two fiscal years.  Energy Risk Management Policy  Maintaining the adequacy of these reserve funds in accordance with Council approved reserve  policies and guidelines is a matter of the highest priority for City of Palo Alto Utilities and the  City.       Attachment A     8 December 2012  Water Revenue Bond  Official Bond Statement ‐ City of  Palo Alto, Utility Revenue  Refunding Bonds, 2011 Series A    The projected adjustments achieve the goals of ensuring that the balance of the water rate  stabilization reserves is adequate and within the Council‐approved reserve guidelines in the long‐ term horizon.    …Based upon a City Council‐approved methodology, reserve level guidelines (minimum and  maximum) are set annually to allow reserves to adjust up or down without unduly falling below  the minimum or above the maximum. On occasion, reserves have exceeded the maximum level  for a short time. Reserve levels are then adjusted in subsequent years, usually through rate  changes. The decision to set aside more or less than the minimum or maximum is based upon an  assessment of the uncertainties and financial risk facing the utilities. The City notes that reserve  levels in excess of “maximum” levels are considered to be consistent with its reserve guidelines.  The various documents show inconsistency in communication of  the City’s reserve policy decisions. By establishing a  comprehensive reserve policy, the Utilities Department will be  able to more effectively monitor, manage, and report reserves  within the defined parameters.    Upon testing Rate Stabilization Reserve balances for compliance  with reserve guidelines1 approved by Council, we found the  balances were often outside of these Council‐approved guideline ranges, as illustrated in Exhibit 4. These  minimum and maximum ranges for each of the Rate Stabilization Reserves can be found in the Adopted  Operating Budgets.   According to the Utilities Department, the  Council‐approved rate stabilization  guideline ranges are used for long‐term  financial planning purposes, and the reserve  balances may be above the maximum or  below the minimum guidelines. In addition,  the Utilities Department states November  2001 was the first report in which Rate  Stabilization Reserve (RSR) levels and  guidelines were issued to the Utilities  Advisory Commission (UAC) in quarterly  staff reports. The Utilities Department also  issues a 5‐year financial projection report  showing changes in RSR balances as a result  of changes in rate adjustments for the next  five years. This report is issued to the UAC,  Finance Committee, and City Council.                                                               1 Guidelines used for testing were based on the methodologies in Exhibit 2 as approved by Council in various City Manager’s  Reports (CMR).  Recommendation 2:  The Utilities  Department should re‐evaluate and  determine the use of reserve balance  guidelines, updating the City’s resolution  and the language in key City documents  accordingly.   Exhibit 4: Rate Stabilization Reserves balance to Council‐approved  guideline ranges (FY 2008 – FY 2012)      Legend:   within range of Council‐approved guidelines  % above maximum range or % below minimum range    Source: Comprehensive Annual Financial Report (FY 2008‐FY 2011), Administrative  Services Department‐Enterprise Account (FY 2012), and Adopted Operating Budget  (FY 2008‐FY 2012)  Attachment A     9 December 2012  During the course of this audit, the Utilities Department reported that the FY 2012, Q4 report to the UAC  included a summary table that shows all Utilities Reserves. Additionally, for the last two quarters, the  Department has specifically included the UAC Quarterly reports as part of the informational reports provided to  the Council.   We were not able to adequately assess the reasonableness of the City’s other utility reserves in relation to  Council‐approved guidelines since a comprehensive reserve policy does not exist to provide the criteria  required.   On average, the City maintains between 13 and 18 months of total unrestricted reserves.  From a broader perspective, we reviewed the City’s total unrestricted reserve balances, in addition to the Rate  Stabilization Reserves as discussed previously. The City’s FY 2011 Comprehensive Annual Financial Report  indicates the level of working capital, within the Utilities reserve funds listed below, could cover between 13 and  18 months of operating expenses:   Electric ‐ 18.4 months  Gas – 13.0 months   Water ‐ 13.2 months  Wastewater Collection ‐ 16.7 months  The Government Finance Officers Association (GFOA) recommends a reserve baseline of three months of  working capital as a starting point and states that the appropriate level depends on the particular characteristics  of each enterprise fund. While the level of unrestricted reserves for the City may be appropriate, the Utilities  Department could not provide documentation to support the current level of working capital currently held in  reserves.  We selected seven local jurisdictions to benchmark the City’s Electric Fund unrestricted reserve balance. We  found the average number of months of operating capital to be 10.3 months, with the City of Palo Alto currently  at 18.4 months, as shown in Exhibit 5. Exhibit 5 compares the City of Palo Alto’s FY 2011 Electric Fund  unrestricted reserve balance, including the Electric Special Projects reserve, to other local jurisdictions providing  similar services. The City of Palo Alto’s Electric Fund reserve represents approximately 62 percent, or $142.7  million, of total reserves in FY 2011.                  Exhibit 5: Comparison of FY 2011 Electric Fund Unrestricted Reserve Balances for selected jurisdictions    Source: Comprehensive Annual Financial Reports  Attachment A     10 December 2012  The level of unrestricted fund balance may differ from one jurisdiction to another based on each jurisdiction’s  particular financial and economic characteristics, and local conditions.  According to the Utilities Department,  the higher reserve requirement is a result of a higher share of hydro resources in the City’s Electric portfolio,  which could result in unexpected shortfalls in generation as well as higher exposure to market price risk.  The GFOA’s guidance states that local governments should adopt a target amount of working capital to maintain  in each of their enterprise funds that best fits local conditions for each fund. Ideally, targets would be formally  described in a financial policy and/or financial plan. The guidance recommends consideration of the following  areas while customizing a working capital target:   Support from general government  Transfers out   Cash cycles  Customer concentration   Demand for services  Control over rates and revenues   Asset age and condition  Volatility of expenses   Control over expenses  Management plans for working capital   Separate targets for operating and  capital needs   Debt position    Currently, the Utilities Department performs an annual  risk assessment to determine the adequacy of Rate  Stabilization Reserves; however there is no explicit  criteria or a specified target to indicate appropriate levels  of working capital.     Reserve balances are inconsistently reported and do not always reconcile. In reviewing the various reports related to  reserve levels and guidelines, we found that  the Utilities Department’s financial forecasting  reports have underreported reserve balances,  as shown in Exhibit 6. The reports include  some utility reserves, and specifically exclude  CIP reserves (known as reappropriation and  commitments). As a result, the financial  forecasting understated actuals of all utility  reserves by $51 million, $72 million, and $54  million in FY 2009, FY 2010, and FY 2011,  respectively.  The projections include balances for reserves  that are attributed to the City’s audited  Comprehensive Annual Financial Report  (CAFR); however, the reserve balances in the  financial projection do not reconcile in total to  the CAFR or to quarterly reports of actual  Exhibit 6: 3‐year historical understatement of financials   Recommendation 3:  The Utilities Department  should revisit its annual risk assessment model  to determine, establish, and document  appropriate levels of utility fund working capital  held in unrestricted reserves.  Attachment A     11 December 2012  reserve balances provided by the Administrative Services Department. This is primarily due to the exclusion of  CIP reserves (reappropriations and commitments).  Our review showed the following causes for inconsistencies in the “Actual” column of the Utilities Department’s  financial forecasting report:   All funds excluded the CIP reserves (reappropriation and commitment).   Water and Gas Funds, in addition to excluding the CIP reserves (reappropriation and commitment),  included debt service reserves. Debt service reserves are unique when compared to other reserves  included in this report as they are considered restricted. In the CAFR, Debt Service reserves are  segregated from other reserves because of their restricted status. Additionally, other restricted reserves  that are included in the CAFR are not included in this report.   Electric Fund, in addition to excluding the CIP reserves (reappropriation and commitment), also  excluded two other reserves (Underground Loan and Central Valley Project).   FY 2010 Gas Fund stated the Rate Stabilization reserve figure twice, once each for pre‐transfer and  post‐transfer; however the total reserve balance is correct in that it does not reflect the duplicate  figures.  We also found instances where the Utilities Department financial  forecast figures do not reconcile to the City’s key documents, such as  the Adopted Budgets.  According to the Utilities Department, the financial forecasting  report is adequate for the purpose of its intended use in rate  planning, not reserves management. The Department explains that  the report only shows a reserve if the balance is expected to change  during the forecast horizon as a result of policy change or Council  action. However, we found this report to be the Departments’  primary mechanism for reporting reserves from a financial planning  perspective. Based on our assessment, the report alone does not provide a complete view of the City’s utility  reserves.       Recommendation 4:   The Utilities Department should  revisit and update the 5‐year  financial projection rate making  worksheets to consistently state  reserve balances consistent with the  City’s key financial documents and  improve visibility over all  unrestricted reserves.  Attachment A     12 December 2012  Capital Improvement Program reserves are not consistently and clearly  reported to Council   The Utilities Department does not consistently and clearly report Capital Improvement Program (CIP)  carryforward appropriations, a reserve which holds unexpended CIP funds from prior fiscal years. Utility  carryforward reserve balances are significant, totaling a high of $82.8 million in FY 2012 and an estimated $75.9  million in FY 2013. The reporting of this information may assist with financial and project planning.  Carryforwards are unexpended appropriations at the end of a fiscal year which are automatically carried over to  the following year for open projects. Exhibit 7 shows each of the utility CIP carryforward balances from the prior  fiscal year, over an 8‐year period, including both reappropriations and commitments.    There are four key reports used for communicating CIP reserves: the Comprehensive Annual Financial Report  (CAFR), the Adopted Budget (Budget), the Financial Forecast (Forecast), and the CIP Status report.  The CAFR  represents the most formal reporting of carryforward balances, reflected as a consolidated number and  reported at the end of the calendar year for the fiscal year ending June 30. The Forecast and the Budget exclude  prior year carryforward and report only on projects with  planned appropriations looking forward five years. Lastly, the  CIP Status Report does include carryforward information;  however, carryforward balances are not reported separately,  and the report is not available until three to six months after  the close of the mid‐year and year‐end periods.  The Government Finance Officers Association (GFOA) guidance on Capital Project Monitoring and Reporting  states, “Producing project status reports will help officials make informed decisions regarding scheduling and  cost. It is important to be consistent and use plain language when compiling information from various sources  and reporting it to multiple stakeholders. Meaningful reports should provide straightforward project  information for executive leadership and internal staff as well as citizens and the media, and, at minimum:  1. Provide a comparison of actual results to the project plan, including:  • Percent of project completed  • Percent of project budget expended  • Progress on key project milestones  • Contract status information  • Revenue and expenditure activity  • Cash flow and investment maturities  FINDING 2:  Exhibit 7: CIP Carryforward Balances of all Utility Funds (FY 2005 – FY 2013)  Recommendation 5:  The Utilities  Department should develop a mechanism to  consistently and clearly report Capital  Improvement Program (CIP) carryforward  reserves to the oversight bodies.  Attachment A     13 December 2012  • Funding commitments  • Available appropriation  • Comparison of results in relation to established performance measures  2. Highlight significant changes to project scope or costs.”    As an example, Exhibit 8 details the CIP projects for Electric Fund Capital projects for FY 2012. The table includes  columns for the FY 2012 Budget, Carryforwards from the prior year, and Net Additional Appropriations/Returns.  The last four columns indicate which projects are included or excluded from each of the key reports. Detailed  CIP projects in FY 2012 for all utility funds are provided in Appendix 1.  In this example, 25 of 39 projects, which represent $6,672,273 or 30% of the total Electric Fund CIP budget, are  not included in the Forecast or the Budget. Additionally, the carryforward total of $13,790,931 is not reported in  detail.  Exhibit 8: Electric Fund Capital projects available appropriations detail (FY 2012)    Overall, we found the reports issued to Council regarding CIP are not sufficient to adequately support effective  financial and project planning. The Utilities Department should have a reporting mechanism that provides  transparency of CIP reserves, specifically carryforward balances, to the oversight bodies.  Attachment A     14 December 2012  Glossary of Acronyms and Terms   Adopted Budget: The annual City budget approved by the City Council on or before June 30.   Administrative Services Department (ASD): City department that strives to provide proactive administrative  support to City departments and decision makers, and to safeguard and facilitate the optimal use of City  resources. ASD is comprised of six divisions, including Administration, Accounting, Purchasing and Contracts,  Office of Management and Budget, Property Management and Acquisition, and Treasury.   Appropriation: The allocation of an expense budget for a particular project or program usually for a specific  period of time.   Capital Budget: A plan of proposed capital outlays and the means of financing them for the current fiscal  period. In a two‐year budget, the second year of the Capital Improvement Program is adopted‐in‐concept.   Capital Improvement Program (CIP): The Capital Improvement Fund accounts for projects related to the  acquisition, expansion, or rehabilitation of the City’s infrastructure.   Carryforward: Unexpended appropriations at the end of the fiscal year that are automatically carried over  to the following year for open projects.   Committed Fund Balance: 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).   Comprehensive Annual Financial Report (CAFR): The CAFR is presented annually to provide City Council,  citizens, representatives of financial institutions and others with detailed information concerning the  financial condition and performance of the City of 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.   Enterprise Funds: These funds account for City operations that are financed and operated in a manner  similar to private enterprise. Costs of providing service to the public are covered by user charges, grant  funds, and impact fees. The City of Palo Alto owns and operates its own utilities, comprised of the Electric,  Fiber Optics, Gas, Water, and Wastewater Collection Funds.   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.   Fiscal Year: A 12‐month period of time to which the annual budget applies and at the end of which a  governmental unit determines its financial position and the results of operations.   Funds: Local government budgets are made up of funds, which help to organize and account for restricted  resources. Each fund is considered a separate accounting entity.   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.  Attachment A     15 December 2012   Government Finance Officers Association (GFOA): Organization with the purpose to enhance and promote  the professional management of governments for the public benefit by identifying and developing financial  policies and best practices and promoting their use through education, training, facilitation of member  networking, and leadership.   Invested in Capital Assets, Net of Related Debt: 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.   Net Assets: The excess of all the City’s assets over all its liabilities, regardless of fund. Net assets are divided  into three categories, 1) Invested in Capital Assets, Net of Related Debt, 2) Restricted, and 3) Unrestricted.   Reappropriations and Commitments: Listed in the City of Palo Alto’s Comprehensive Annual Financial  Report (CAFR) as Unrestricted Reserves in the notes to the basic financial statements.   Reserve: The portion of fund balance set aside for financing future capital improvements or the outlay of  capital projects in any given year, and addressing one‐time emergency needs.   Restricted: 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.   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.   Unrestricted: Describes the portion of net assets which is not restricted as to use.   Unrestricted Net Assets (for Enterprise Funds): 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.   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.   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.     Attachment A     16 December 2012  Attachment 1: Utility Fund Capital Projects ‐ FY 2012 Appropriation Detail            Attachment A     17 December 2012            Attachment A     18 December 2012           Attachment A   19  ATTACHMENT 2: City Manager’s Action Summary  In response to the Audit Recommendations in this report, the City Manager has agreed to take the following actions.   Finding  #  Summary of Finding Recommendation City Manager’s Action Plan   Target  Date  1 The City does not currently have a  formal, comprehensive reserve  policy for its utility funds.     1. The Utilities Department should  establish formal and  comprehensive policies and  procedures for its Utility Reserves.   Utilities Department will establish formal and  comprehensive policies and procedures for its Utility  reserves  June 2013  1 Key City documents show  inconsistency in communication of  the City’s reserve policy decisions.  Rate Stabilization Reserve balances  were often outside of Council‐ approved guideline ranges.  2. The Utilities Department should  re‐evaluate and determine the use  of reserve balance guidelines,  updating the City’s resolution and  the language in key City  documents accordingly.   Utilities Department will re‐evaluate and determine  the use of reserve balance guidelines, updating the  City’s resolution and the language to key City  documents accordingly.  June 2013  1 Although the Utilities Department  performs an annual risk  assessment to determine the  adequacy of Rate Stabilization  Reserves; however there are no  explicit criteria or a specified target  to indicate appropriate levels of  working capital.  3. The Utilities Department should  revisit its annual risk assessment  model to determine, establish, and  document appropriate levels of  utility fund working capital held in  unrestricted reserves.   The Utilities Department will revisit its annual risk  assessment model to determine, establish and  document appropriate levels of utility fund working  capital held in unrestricted reserves.  June 2013  1 Reserve balances are inconsistently  reported and do not always  reconcile, specifically excluding  Capital Improvement Program  (CIP) carryforward reserves.  4. The Utilities Department should  revisit and update the 5‐year  financial projection rate making  worksheets to completely state all  reserve balances consistent with  the City’s key financial documents   The Utilities Department will revisit and update the  5‐year financial projection rate making worksheets  to completely state all reserve balances consistent  with the City’s key financial documents and improve  visibility over all unrestricted reserves.  June 2013  Attachment A     20  Finding  #  Summary of Finding Recommendation City Manager’s Action Plan   Target  Date  and improve visibility over all  unrestricted reserves.  2 The reports issued regarding CIP  are not sufficient to adequately  support effective financial and  project planning. Improvements to  the consistency and completeness  of reporting CIP carryforward  reserve balances could better  support the City Council’s  operating budget, capital budget,  and reserves processes  5. The Utilities Department should  develop a mechanism to  consistently and clearly report  Capital Improvement Program  (CIP) carryforward reserves to the  oversight bodies.   The Utilities Department will develop a mechanism  to consistently and clearly report Capital  Improvement Program (CIP) carryforward reserves  to the oversight bodies.  June 2013        Attachment A FINANCE COMMITTEE EXCERPT Page 1 of 6 Special Meeting December 4, 2012 Utilities Reserves Audit Jim Pelletier, City Auditor said the objective of the Utilities Reserves Audit was to review the Utilities Reserves, reserve policies, reserve guidelines and the usage of those reserves. There were two main findings, five recommendations, and the City Manager’s Action Summary in response to the findings of the report. The conclusion was that the City maintained adequate reserves in the Utility Fund and that reserves were used appropriately within the established policy. Council and the Utilities Department can benefit from establishing a more comprehensive reserve policy to manage and monitor their reserves. Staff recommended improvements towards the consistency of reporting reserves and said it would better support the Council’s Operating Budget, Capital Budget, and reserve processes. Mimi Nguyen, Senior Performance Auditor said the first finding was that Rate Stabilization Reserves were not consistently maintained within Council approved guidelines. There were two parts within this finding: the Rate Stabilization Reserves and all reserves. Staff found that the City did not have a formal comprehensive reserve policy for its Utility Funds and found elements of policy language within strategic and operational plans and Staff reports; however, there were inconsistencies with the communication of reserve policy decisions. One example in a Staff report was that a Council resolution stated that Staff conformed to the reserve level guidelines, but the 2012 Adopted Operating Budget said that it was above the maximum guideline or below the minimum for any particular year. Then a five year financial production report said that it was within the Council approved guidelines, but over a long term period. Based on the Council approved resolution, Staff looked at Rate Stabilization Reserves and tested the balances for compliance. They found that many of the reserves were outside the guideline ranges. Mr. Pelletier said Staff was not suggesting that Council fall between the minimum and maximum guideline, but wanted to provide Council with the data for them to see and determine what was intended. Attachment B EXCERPT Page 2 of 6 Finance Committee Regular/Special Meeting Excerpt 12/4/12 Ms. Nguyen said, regarding reserves in a broader perspective, Staff found that on average, the City maintained between 13 and 18 months of operating expenses in total unrestricted reserves. In reviewing the Fiscal 2011 Comprehensive Annual Financial Report (CAFR), the City’s unrestricted reserves covered 18.4 months in the Electric Fund, 13 months in the Gas Fund, 13.2 months in the Water Fund, and 16.7 months in Wastewater Collection Fund. All of the reserves were Council approved for specific spending, including the Electric Special Project Reserve; however, these reserves could be repurposed and returned to Rate Stabilization Reserves if they were not spent the way they were anticipated. She said Staff benchmarked the CAFR with seven other jurisdictions against Palo Alto’s reserves and said the levels might be appropriate but they did not find documentation to justify these funds. That did not mean that the justification for these funds were inappropriate; policy and documentation of policy is needs to be established. Mr. Pelletier said Government Finance Officers Association (GFOA), a government agency that offers general financial criteria suggested starting with two to three months of operating reserves, and building from there. He explained he was emphasizing justification for the City’s funds. For example, a hydro project presented a different type of risk and it was good to have enough of a reserve for that type of risk; it was good to see the justification for the level that the City was at. Vice Mayor Scharff said if Staff did not account for the special projects then Palo Alto was right there with other agencies. Mr. Pelletier said the problem was not being at a certain level, but to have two to three months of reserves in place, build from there, then justify why the reserves were in place. Vice Mayor Scharff said that most agencies did not have two to three months of reserves. Mr. Pelletier said every agency was different, with regard to their risk profile. Some cities set aside more or less funds, depending on their perceived risk. He emphasized the recommended documentation for the justification of the City’s reserves and clarifying why the City retained the amount of reserves they had. Vice Mayor Scharff asked what the justification looked like. Mr. Pelletier said it was an analysis of the risks that Utilities had; they considered all of the risks, gave Staff examples, and documented in their Attachment B EXCERPT Page 3 of 6 Finance Committee Regular/Special Meeting Excerpt 12/4/12 profile as to why they wanted to set aside additional funds. Staff did not want a large sum of money being unaccounted for. He said it was better to see good justification as to why funds might be in a certain account. James Keene, City Manager confirmed that regardless of what the reserve results were in the Staff report, Staff would have made this request to justify funds. Mr. Pelletier said this information showed where the City was at today and which cities Palo Alto compared to; the issue was justifying where the City was at today, regardless of the amount of reserves the City was carrying. Val Fong, Utilities Director said that there was a risk assessment that was done annually that explained what the accounts were at. It quantified what the risks were at, the market price risk, and variability. Council Member Price asked for explanation of the vertical axis percentages. Ms. Nguyen said it was the percentage of Electric Unrestricted Reserves to operating expense. Council Member Burt said the City had a reserve of 153 percent of operating expense. Chair Shepherd said in the former Calaveras Reserves, now called the Electric Special Projects, there was a three year time period to spend the reserves; the money was being called reserves because an isolation of the reserves was not happening. Ms. Nguyen said within the CAFR document the reserves listed under “unrestricted” were the types of reserves that are not restricted, including Electric Special Project Reserve. Chair Shepherd said it was a matter of using a policy to separate the funds out. Council Member Burt wanted clarification on what Staff was looking for from the City Auditor that was different from what Council received every year regarding the report on Reserve Justification. Ms. Nguyen said the Risk Analysis was very specific to the Rate Stabilization Reserve. Within the unrestricted reserves, there were more reserves than just the Rate Stabilization Reserves; Staff suggested identifying and justifying the reserves. Attachment B EXCERPT Page 4 of 6 Finance Committee Regular/Special Meeting Excerpt 12/4/12 Council Member Burt confirmed that the focus was on reserves other than the Rate Stabilization reserves. Ms. Nguyen said the risk assessment portion was out of scope. Council Member Burt clarified whether it was possible to see the reasoning for the non-rate stabilization reserve that was on the General Rate Stabilization. Ms. Nguyen said the justification was made, but confirmed that she was talking about the General Rate Stabilization. Mr. Pelletier said Staff wanted to make sure that when the presentation was made that Council had a full understanding and that Rate Stabilization was an important part of the picture. Vice Mayor Scharff wanted clarification on why Staff chose this portion of the Audit because it did not seem to be a big risk. Mr. Pelletier said the Audit was requested a few years ago and Staff wanted to answer the request. It was important for Staff to present Council with the correct information and for them to be able to support their decisions. Additionally the Audit revealed other items that needed to be addressed. Council Member Burt said the reason the Audit was requested was Staff wanted Council to have good policy making tools. If the reserves were too big or small, it affected the City’s money and Council wanted to have the information to be able to make informed decisions. Ms. Nguyen said reserve balances were not always reported and did not always reconcile with the City’s CAFR due to the exclusion of the Capital Improvement Program (CIP), carry forward Reserves, and the Utility Funds; there were understated reserves. Staff found that CIP reserves were not consistently or clearly reported to Council and the reports submitted to Council regarding Utility CIP were not adequately supporting financial project planning. Of the four key financial reporting projects, there were problems with the oversight reporting. Ms. Fong said there were certain things that could be clearer and more consistent. Chair Shepherd said looking at all CIP’s and going forward, there were projects that were finished and some of the funds did not zero out; the funds Attachment B EXCERPT Page 5 of 6 Finance Committee Regular/Special Meeting Excerpt 12/4/12 needed to be accounted for in order to move forward. If there were items that were finished then discussion could take place about those funds, taking them out of being held, and making the funds available for something else. Mr. Pelletier said when the City Auditor’s Office reviewed all of the reports, there was a gap in the projects that were carried forward from year to year. Ms. Nguyen said the CIP Status Report was meant to accompany the CAFR report, it was not meant to give Council a project status up-date, and it did not lay out the details of all the projects. The only reporting document that captured all of the details of all of the reports was the Matrix report. For example, fiscal year 2011, for the Electric Fund, there was a carry forward of funds. The Utilities Department reported out projects, it was still not all encompassing. This other report showed Council a different perspective on the budget. Council Member Price asked how the Rate Stabilization Reserves, outside Council approved guidelines, with regard to Fiber Optics was at 50 percent for fiscal year 2011 and wanted to know why these numbers were so extreme. Ms. Fong said there were set rates that were increased by the CPI and making significant profits annually. The City did not spend the monies that were collected because they were still debating how to extend the network right now. Council Member Burt said there was a lot of discussion on what the best utilization of these extra funds should be. Chair Shepherd said the Utilities Department just looked at the report. Mr. Keene said part of the challenge was that the reserve amount was growing. The ultimate objective was so large was that incremental spending did not go too far. Molly Stump, City Attorney said the Fiber Fund was not a municipal monopoly and the people of Palo Alto were not required to use that service. That put the fund in a different category and gave Council greater flexibility to be able to use the funds. Council Member Burt said the fund was banking the dollars for a future major project. There was not a decision on what the money would be allocated for. Attachment B EXCERPT Page 6 of 6 Finance Committee Regular/Special Meeting Excerpt 12/4/12 Chair Shepherd Palo Alto Unified School District (PAUSD) was getting connected to the funds. Council Member Burt asked if it was permissible to bank funds for a future major capital need, to have a reserve that was defined differently, and did these extra dollars help explain the Wastewater Connection Fund. Lalo Perez, Director of Administrative Services said it was permissible to have a Replacement Fund but the key was to outline and document funds. The funds that the City were legally required to have were the ones that had binding obligations with restrictions. Council Member Burt said there were two categories: projects below budget and projects completed at a slower rate than projected. He asked if that was the reason that funds were not expended, budgeted, or part of the understated reserves. Mr. Pelletier said one of the concerns the City Auditor’s Office had was project management, budgeting for projects, and the use of funds. He said they did not go to that level of detail in this Audit. Council Member Burt said there had been a general discussion around the CIP rollovers, what the numbers were and how to see the difference. He asked if, through the City Auditor’s report, there was a clearer frame work and better policies and procedures that applied to the General Fund. Mr. Perez said in terms of the reserves, not as much, but the reasoning was sound. Council Member Burt said the reasoning for the reserves was as well as the explanation for Understated Reserves, how Staff might make them more visible, and how they might be stated in a timelier manner. Mr. Perez said it could be incorporated in both but there may be different views and needs. MOTION: Chair Shepherd moved, seconded by Vice Mayor Scharff to recommend City Council accept the Utilities Reserve Audit. MOTION PASSED: 4-0 Attachment B CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR January 22, 2013 The Honorable City Council Palo Alto, California Policy and Services Committee Recommendation to Accept the Audit of Employee Health Benefits Administration The Office of the City Auditor recommends acceptance of the Audit of Employee Health Benefits Administration. At its meeting on December 11, 2012, the Policy and Services Committee approved and unanimously recommended the City Council accept the report. The Policy and Services Committee minutes are included in this packet. Recommended Action: Accept the Audit of Employee Health Benefits Administration. Respectfully submitted, Jim Pelletier City Auditor ATTACHMENTS:  : Attachment A: Audit of Employee Health Benefits Administration (PDF)  : Attachment B: Policy and Services Committee Meeting Minutes Excerpt (December 11, 2012) (PDF) Department Head: Jim Pelletier, City Auditor Page 2 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR December 11, 2012 The Honorable City Council Attention: Policy & Services Committee Palo Alto, California Audit of Employee Health Benefits Administration In accordance with the Fiscal Year (FY) 2012 Annual Audit Work Plan, the Office of the City Auditor has completed the Audit of Employee Health Benefits Administration. The audit contains five findings with a total of twelve recommendations. The Office of the City Auditor recommends the Policy and Services Committee review and recommend to the City Council acceptance of the Audit of Employee Health Benefits Administration. We thank the staff of the Human Resources Department and Administrative Services Department for their time, information, and cooperation during the audit process. Respectfully submitted, Jim Pelletier City Auditor ATTACHMENTS:  Attachment A: Audit of Employee Health Benefits Administration (PDF) Department Head: Jim Pelletier, City Auditor Attachment A Page 2 Attachment A 0 Jim Pelletier, City Auditor Yuki Matsuura, Senior Performance Auditor Houman Boussina, Senior Performance Auditor December 2012 Office of the City Auditor AUDIT OF EMPLOYEE HEALTH BENEFITS ADMINISTRATION Attachment A 0 Attachment A December 2012 1 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration SUMMARY OF RESULTS Internal controls over health benefits administration within HRD require improvement to ensure that health premiums, administrative fees, and retiree reimbursements are calculated and paid accurately for eligible active and retired employees in accordance with applicable labor agreements, laws, and regulations. REPORT HIGHLIGHTS Finding 1: Retiree reimbursements were not accurately calculated (Page 14)  Retroactive transactions are not consistently documented and processed.  Eligibility criteria for retiree health benefits were not clearly defined, documented, and communicated.  Eligibility criteria have not always been accurately applied in the calculation of retiree reimbursements. Finding 1 Recommendations:  Establish clear, documented procedures to ensure the accuracy of the Reimbursement Report.  Enhance current procedures to ensure that the eligibility criteria are maintained accurately, completely, and in an organized manner.  Establish procedures for determining the health tier for each retiree and maintaining a complete and accurate record of retiree health tiers. Finding 2: CalPERS billing was not adequately monitored (Page 19)  Duplicate active employee records in the CalPERS system went undetected.  HRD did not always update the CalPERS system when a change in employee group was recorded in SAP.  CalPERS did not have the correct formula to calculate the employer share. Finding 2 Recommendations:  Enhance the current procedures to ensure that any changes in employment affecting employees’ health eligibility status are accurately and consistently recorded in both SAP and CalPERS system.  Establish procedures for providing CalPERS with clear, written instructions for the employer share calculation and monitoring to ensure that the City instructions are followed. Finding 3: HRD has not effectively administered the EBS contract (Page 23)  HRD is paying for services it is not receiving.  Payment instructions to EBS are provided without adequate supporting documentation.  HRD was not aware that 20 checks issued in 2011 remained uncashed.  HRD process for ensuring required 1099 tax forms are received by retirees was not always complete or accurate.  Inadequate review left invoicing errors undetected. Finding 3 Recommendations:  Review the contract to ensure the adequacy of the contract terms and accuracy and clarity of the scope of services.  Establish recordkeeping and review procedures to ensure accuracy and completeness of retiree reimbursements.  Establish procedures for handling uncashed EBS checks.  Establish procedures to verify the accuracy and completeness of the EBS services provided.  Establish procedures to review EBS invoices to ensure the accuracy of the EBS billing. Finding 4: Required documentation to verify the eligibility of dependents was not always available (Page 27) Finding 4 Recommendation:  Improve verification procedures to ensure that required documentation is obtained, reviewed, and maintained. Finding 5: Personally Identifiable Information (PII) has not been adequately protected and controlled (Page 28) Finding 5 Recommendation:  Take applicable steps recommended by the NIST Guide to appropriately maintain the confidentiality of PII. This Executive Summary represents a limited summary of the audit report and does not include all of the information available in the full report. Office of the City Auditor EXECUTIVE SUMMARY – AUDIT OF EMPLOYEE HEALTH BENEFITS ADMINISTRATION Audit Objective: To determine whether the Human Resources Department (HRD) has adequate controls over health benefits administration to ensure that health premiums, administrative fees, and retiree reimbursements are calculated and paid accurately for eligible active and retired employees in accordance with applicable labor agreements, laws, and regulations. Attachment A December 2012 2 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration Page intentionally left blank Attachment A December 2012 3 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration TABLE OF CONTENTS EXECUTIVE SUMMARY ......................................................................................................................................................... 1 GLOSSARY OF ACRONYMS AND TERMS USED IN THIS REPORT ............................................................................................ 5 INTRODUCTION ................................................................................................................................................................... 7 AUDIT OBJECTIVE ......................................................................................................................................................................... 7 BACKGROUND.............................................................................................................................................................................. 7 AUDIT SCOPE AND LIMITATIONS .................................................................................................................................................... 12 AUDIT METHODOLOGY ................................................................................................................................................................ 14 CITY AUDITOR’S CONCLUSION ....................................................................................................................................................... 14 FINDINGS FINDING 1: RETIREE REIMBURSEMENTS WERE NOT ACCURATELY CALCULATED ......................................................................................... 14 FINDING 2: CALPERS BILLING WAS NOT ADEQUATELY MONITORED BY THE CITY .................................................................................... 19 FINDING 3: HRD HAS NOT EFFECTIVELY ADMINISTERED ITS CONTRACT WITH EBS .................................................................................... 23 FINDING 4: REQUIRED DOCUMENTATION TO VERIFY THE ELIGIBILITY OF DEPENDENTS FOR ENROLLMENT WAS NOT ALWAYS AVAILABLE. ............. 27 FINDING 5: PERSONALLY IDENTIFIABLE INFORMATION (PII) HAS NOT BEEN ADEQUATELY PROTECTED AND CONTROLLED ................................. 28 ATTACHMENT 1: CALPERS BILLING SUMMARY FOR JUNE 2012 ......................................................................................... 31 ATTACHMENT 2: CITY MANAGER’S ACTION SUMMARY ..................................................................................................... 33 ATTACHMENT 3: CITY MANAGER’S RESPONSE................................................................................................................... 37 In accordance with the Fiscal Year 2012 Annual Audit Work Plan, the Office of the City Auditor has completed this Audit of Employee Health Benefits Administration. We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We would like to thank the staff of the Human Resources Department and Administrative Services Department for their time, information, and cooperation during the audit process. Attachment A December 2012 4 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration Page intentionally left blank Attachment A December 2012 5 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration Glossary of Acronyms and Terms Used in This Report Acronyms/Terms Description Accrued Liability* The total dollars needed as of the valuation date to fund all benefits earned in the past for current members. Active Employees Current employees of the City who are eligible for and enrolled in the CalPERS Health Program. Actuarial Valuations Valuations performed to estimate the cost of benefits and determine the employer contribution. ASD Administrative Services Department. Annual Required Contribution (ARC) The employer’s required annual contributions determined by the value of benefits allocated to the current fiscal year for service during that year, plus an amortization payment toward the Unfunded Actuarial Accrued Liability (unfunded portion of the Accrued Liability as determined by Actuarial Valuations). Blue Shield Bay Area Basic Blue Shield is one of the health plans offered by CalPERS. Bay Area Basic refers to the Basic Monthly Rate in the Bay Area region. This plan was considered by the City “the second most expensive plan” at the time of the audit. Blue Shield Bay Area SM Blue Shield is one of the health plans offered by CalPERS. Bay Area SM refers to the Supplement/Managed Medicare Monthly Rate in the Bay Area region. CalPERS California Public Employees’ Retirement System. CalPERS provides a variety of retirement and health benefit programs and services. CalPERS Billing CalPERS Monthly Employer Billing Roster containing information for each member enrolled in the CalPERS Health Program including the health plan, premium amount, employer share, and member share. CalPERS Health Program Program administered by CalPERS as directed by the Public Employees’ Medical and Hospital Care Act (PEMHCA). Health plans offered, covered benefits, monthly rates, and co-payments are determined by the CalPERS Board, which reviews health plan contracts annually. CalPERS ID* A unique CalPERS identification number that is automatically assigned to all participants and business partners within the CalPERS system. Contracting Agency* A public agency, school district, special district, or county that contracts with CalPERS for retirement or health benefits. Dependent* Those family members who meet the specific eligibility criteria for coverage in the CalPERS Health Program. Domestic Partner* Current and former domestic partners registered in California who have the same rights, protections, and benefits - as well as the same responsibilities, obligations, and duties - provided to current and former spouses. EBS Employee Benefit Specialists, an outside vendor contracted by the City for overall administration of the retiree reimbursement program including reviewing, calculating, and processing reimbursements. Employee Group Labor Union or Association’s representation unit. Encryption* Cryptographic transformation of data into a form that conceals the data’s original meaning to prevent it from being known or used. FCA Palo Alto Fire Chiefs’ Association. GASB 45 Governmental Accounting Standards Board Statement No. 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. Health Premium Monthly cost of a health plan offered by CalPERS. Attachment A December 2012 6 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration HRD Human Resources Department. IAFF Local 1319, International Association of Fire Fighters. Labor Agreement Negotiated Memorandum of Agreement, which is subject to change, containing information about wages, hours and fringe benefits as well as the terms and conditions of employment for classification within a Union or Association’s representation unit. Management Management and Professional Personnel and Council Appointees. Member An employee who qualifies for membership in CalPERS and whose employer pays contributions into the Retirement Fund. Minimum Contribution The amount billed by CalPERS as the City share of the health premium for the employee groups for which Tier 4a/4 was implemented. The minimum contribution is prescribed in Government Code Section 22892(b)(1). NIST Guide Guide to Protecting the Confidentiality of Personally Identifiable Information (PII) developed by the National Institute of Standards and Technology (NIST). This guideline has been prepared for use by Federal agencies and may be used by nongovernmental organizations on a voluntary basis. OCA Office of the City Auditor. PAPOA Palo Alto Peace Officers’ Association. PEMHCA* The Public Employees’ Medical and Hospital Care Act (PEMHCA) is part of the California Government Code Section 22751 et seq. and directs the administration of the CalPERS Health Program. PERSCare Basic PERSCare is one of the health plans offered by CalPERS. Basic refers to the Basic Monthly Rate. This plan was considered by the City “the most expensive plan” at the time of the audit. PII Personally Identifiable Information, defined under California State law to include an individual’s first name or first initial and last name in combination with other identifying information (e.g., social security number, health insurance information, etc.) when either the name or the data elements are not encrypted. Retiree Employees who retired directly from the City and are eligible for and enrolled in the CalPERS Health Program. Retiree Health Tier Retiree health benefit levels negotiated in labor agreements. Currently, labor agreements provide for benefits according to the hire date, retirement date, and employee group at the time of retirement. The use of the term "tier" is based on the HRD interpretation of applicable labor agreements, resolutions, and CalPERS letters at the time of the audit. The tier descriptions in this report are generalized and may not represent specific, exact terms found in each labor agreement. Moreover, tier definition and benefit terms are subject to change. See Exhibit 4 on page 8 for the City share of health premium for each tier according to the HRD interpretation of the labor agreements in effect at the time of the audit. Retroactive Transaction Occurs when the eligibility status for a member or dependent changes and the change is not reported in a timely manner. Typical changes include death and changes in marital status or in employment. These transactions often result in a difference between the premiums paid and the premiums that should have been paid if the transaction had been properly reported. SAP The City’s Enterprise Resource Planning system, which supports the City’s core business functions, including human resources. SEIU Local 521, Service Employees International Union. Survivor* A dependent eligible to receive a benefit upon a member's death. * As defined by CalPERS Attachment A December 2012 7 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration Exhibit 1: PEMHCA Health Benefit Enrollment as of June 2012 Active Employee Retiree # of Member 855 871 # of Dependents 1,526 627 Spouse/Domestic Partner 540 431 Child 986 196 Source: CalPERS billing June 2012 INTRODUCTION Audit Objective The objective of this audit was to determine whether the Human Resources Department (HRD) has adequate controls over health benefits to ensure that health premiums and administrative fees are calculated and paid accurately for eligible active and retired employees in accordance with applicable labor agreements, laws, and regulations. Additionally, the HRD requested our assistance to focus on a complex set of processes related to reimbursement of health premiums to retirees. We amended our scope to accommodate this request. Background The City participates in the Health Program administered by California Public Employees’ Retirement System (CalPERS) as directed by the California Public Employees’ Medical and Health Care Act (PEMHCA). The CalPERS Board reviews health plan contracts annually and determines health plans offered, covered benefits, monthly rates, and co-payments. According to the CalPERS Monthly Employer Billing Roster (CalPERS billing) for June 2012, the City had 855 active members and 871 retired members enrolled in the health benefit plan under PEMHCA as shown in Exhibit 1 (see Attachment 1 for additional information). The number of dependents enrolled was 1,526 and 627, respectively. City Share of Healthcare Premium and CalPERS Billing – Active Employees The entire premium cost for all active employees who are enrolled in the CalPERS Health Program is billed to the City by CalPERS. Exhibit 2 illustrates the annual total health premiums paid by the City for active employees since Fiscal Year (FY) 2005. For FY 2012, the City paid a total of $13.2 million. Over the last ten years, the City reached agreements with employee groups to reduce its maximum payment for health premiums from the most expensive plan (PERSCare Basic) to the second most expensive plan (Blue Shield Bay Area Basic) for all active employees. As illustrated in Exhibit 3, the City subsequently implemented employee contributions beginning with Local 521, Service Employees International Union (SEIU) and Management and Professional Personnel and Council Appointees (Management) on April 1, 2011. The initial contribution by SEIU and Management employees was limited to 50% of the first 10% of each premium increase that occurred for the health plan after January 31, Source: City of Palo Alto financial records Exhibit 2: Health Premiums Paid by the City for Active Employees $9.1 $9.9 $10.5 $11.3 $11.6 $11.8 $12.5 $13.2 $0 $5 $10 $15 2005 2006 2007 2008 2009 2010 2011 2012 Millions Fiscal Year Attachment A December 2012 8 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration 2010 up to 10% of the total premium at the retiree’s level of enrollment (see Contribution A in Exhibit 3). Subsequent labor negotiations resulted in a contribution of 10% of the premium cost up to the second most expensive plan (see Contribution B in Exhibit 3) for all employee groups including the International Association of Fire Fighters (IAFF), the Palo Alto Fire Chiefs' Association (FCA), and the Palo Alto Peace Officers' Association (PAPOA). Employee contributions are collected through payroll deductions and transferred to California Employers’ Retiree Benefit Trust (CERBT) (see page 11 for additional information on CERBT). Exhibit 3: Health Premium Contribution by Active Employees Source: HRD City Share of Healthcare Premium and CalPERS Billing – Retirees For retirees, the City share of the health premium cost varies depending on their “tier”. Each retiree falls under one of the tiers described in Exhibit 4 depending on their hire date, retirement date, and employee group at the time of retirement. Exhibit 4: Retiree Health Tiers1 Tier City Share of Health Premium Cost for Retiree City Share for Dependents2 (Calendar Year) 2011 2012 2013 1 100% 90% 95% 100% 2 100% up to the 2nd most expensive plan offered to active employees 90% 95% 100% 3 Follows CalPERS 20 Year Benefit Schedule (California Government Code Section 22893) 90%3 44 90% up to the 2nd most expensive plan5 4a4 100% up to the 2nd most expensive plan offered to active employees, except that retirees pay 50% of the first 10% of each premium increase that occurred for the health plan after 1/31/10 up to 10% of the total premium 90% 95% 100% Source: HRD 1 Retiree health benefit levels negotiated in labor agreements. Currently, labor agreements provide for benefits according to the hire date, retirement date, and employee group at the time of retirement. The use of the term "tier" is based on the HRD interpretation of applicable labor agreements, resolutions, and CalPERS letters at the time of the audit. The tier descriptions in this exhibit are generalized and may not represent specific, exact terms found in each labor agreement. Moreover, tier definition and benefit terms are subject to change. 2 The percentage is applied to the dependent portion which is the difference between the maximum employer contribution for the applicable “Employee and One Dependent” or “Family” plan and the employee only coverage of the same plan. 3 Maximum of 90% once employee completes 20 years of service. 4 The City contribution is “the same contribution amount it makes from time to time for active City employees.” 5 According to HRD, Tier 4 retirees pay 5% of the dependent portion for 2012 (10% for 2011) in addition to 10% of the total premium. 4/1/2011 SEIU & Mgmt 10/22/2011 5/19/2012 IAFF FCA PAPOA 3/10/2012 10/6/2012 Contribution B Contribution B Contribution BContribution A Contribution B Contribution A: 50% of the first 10% of each premium increase that occurred for the health plan after 1/31/10 up to 10% of the total premium. If the premium exceeds the 2nd Most Expensive Plan (Blue Shield Bay Area Basic), the employee also pays the difference. Contribution B: 10% of the premium. If the premium exceeds the 2nd Most Expensive Plan (Blue Shield Bay Area Basic), the employee also pays the difference. Attachment A December 2012 9 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration Exhibit 5 illustrates when Tier 3 was implemented for each employee group for those employees who were hired on or after the date indicated. Tier 3 retirees are tracked by CalPERS and the City share of the premium cost is calculated and billed by CalPERS in accordance with the benefit schedule set forth by California Government Code Section 22893. An employee subject to the benefit schedule is eligible for 50% of the specified employer health premium contribution after 10 years of service credit, provided at least 5 of those years were performed with the City of Palo Alto. After 10 years, each additional year of service credit will increase the employer contribution percentage by 5% until, at 20 years of service credit, the employee will be eligible upon retirement for 100% of the specified employer contribution. Exhibit 5: Applicable Retiree Health Tiers Based on Hire Date Source: HRD Exhibit 6 illustrates how employees hired before the Tier 3 implementation date are categorized into Tier 1, 2, or 4 based on their retirement date and how implementation of Tier 2 and Tier 4 changed the way CalPERS billed the City. On January 1, 2007, the City implemented Tier 2 for retiree health, capping the healthcare coverage at the second most expensive plan for employees retiring on or after January 1, 2007 for all employee groups except for PAPOA. Tier 2 for PAPOA was not implemented until March 1, 2009. Since CalPERS does not distinguish Tier 1 retirees from Tier 2 retirees, Tier 2 implementation caused CalPERS to apply the cap on all retirees within the affected employee group on their billing to the City (See Billing Plan 1 in Exhibit 6). As a result, Tier 1 retirees who were enrolled in the most expensive health plan started seeing excess deductions from their retirement check from CalPERS for the difference between their plan cost and the second most expensive plan cost. To prevent those Tier 1 retirees from being impacted by the excess deductions, the City started issuing reimbursement checks to cover the excess deductions made by CalPERS. According to the HRD Reimbursement Report for June 2012, a total of $551,950 was reimbursed to 801 retirees for amounts ranging from $5.60 to $2,496.46. Effective May 1, 2011, the City implemented Tier 4a for SEIU and Management. The addition of another Tier, which requires tracking of premium increases and complicated calculations, prompted CalPERS to limit their billing for retirees to the minimum employer contribution as prescribed in Section 22892 (b)(1) of the Government Code (See Billing Plan 2 in Exhibit 6). Upon Tier 4a/4 implementation, all retirees within the applicable employee group except for Tier 3 retirees started seeing significantly larger excess deductions from their retirement checks. This change required the City to reimburse more retirees for larger amounts. Tier 4 was implemented for IAFF on December 1, 2011. 1/1/2005 Mgmt, IAFF, FCA 1/1/20061/1/2004 Tier 1, 2, or 4 Tier 3 SEIU Tier 1, 2, or 4 Tier 3 Tier 1, 2, or 4PAPOA Tier 3 Implementation (Mgmt, IAFF, FCA) Tier 3 Implementation (SEIU) Tier 3 Implementation (PAPOA) Tier 3 Attachment A December 2012 10 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration The health premium reimbursements for May 2011 through August 2011 were processed directly by the City. On August 1, 2011, the City entered into a contract with an outside vendor, Employee Benefit Specialists (EBS), for overall administration of the retiree reimbursement program including reviewing, calculating, and processing reimbursements. Exhibit 6: Non-Tier 3 Retirees Based on Retirement Date and CalPERS Billing Plans Source: HRD * The dependent coverage is based on the requirement for CY 2012 (See Exhibit 4 on page 8) California Employers’ Retiree Benefit Trust (CERBT) The CERBT Fund is administered by CalPERS and managed by a separately appointed board for the purpose of receiving employer contributions that will prefund health and other post-employment benefit costs for retirees and their dependents. The City elected to participate in this irrevocable trust by prefunding $29 million of the 5/1/2011 SEIU & Mgmt 12/1/20113/1/20091/1/2007 Plan 1 Plan 2 IAFF Plan 1 Plan 2 Plan 1FCA PAPOA Plan 1 Tier 2 Implementation (Except for PAPOA) Tier 2 Implementation (PAPOA) Tier 4a Implementation (SEIU & Mgmt) Tier 4 Implementation (IAFF) Plan 0 Plan 0 Plan 0 Plan 0 Tier 2 Retirees Tier 1 Retirees City Share –City share (per Exhibit 4 on page 8) less Minimum Contribution Retiree Share -Retiree share (per Exhibit 4 on page 8) Tier 4a/4 Retirees City Share Minimum Contribution City Share -100% plan cost for retiree &95%* of dependent portion up to 2ndMost Expensive Plan less Minimum Contribution Retiree Share -Excess cost for Most Expensive Plan, 5%* of dependent portion City Share Minimum Contribution City Share 100% plan cost for retiree &95%* of dependent portion less Minimum Contribution Retiree Share 5%* of dependent portion City Share Minimum Contribution CalPERS Billing Plan 2 (Currently applicable to SEIU, Management, and IAFF retirees) CalPERS Billing Plan 1 (Currently applicable to FCA and PAPOA retirees) City Share 100% plan cost for retiree & 95%* of dependent portion up to 2nd Most Expensive Plan Retiree Share -Excess cost for Most Expensive Plan, 5%* of dependent portion City Share 100% plan cost for retiree & 95%* of dependent portion up to 2nd Most Expensive Plan Retiree Share 5%* of dependent portion City Share -Excess cost for Most Expensive Plan Tier 2 Retirees Tier 1 Retirees CalPERS Billing Plan 0 City Share 100% plan cost for retiree & 95%* of dependent portion Retiree Share 5%* of dependent portion Tier 1 Retirees City Share -Billed by and paid to CalPERS City Share -Excess CalPERS deduction from retirement check requiring reimbursement to retiree Retiree Share -Paid by retiree as deduction from retirement check Attachment A December 2012 11 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration City’s future retiree health costs during FY 2008. As a result of prefunding, higher investment return assumptions, known as discount rate assumptions, have been used for actuarial valuations performed for the City, making the annual required contribution (ARC) and unfunded liability lower. The ARC is determined by the value of benefits allocated to the current fiscal year for service worked during that year, plus an amortization payment toward the Unfunded Actuarial Accrued Liability. The City also receives interest earnings from its investment in the CERBT fund. Overview of Health Benefit Costs Paid by the City for Retirees Exhibit 7 provides an overview of the retiree health benefit costs paid by the City since FY 2005. The City’s participation in CERBT and prefunding of $29 million in FY 2008 resulted in a lower ARC in FY 2009; however, the ARC again increased in FY 2011 due to different actuarial assumptions including more retirees and higher healthcare costs, among others. A portion of the prefunded trust asset was used in FYs 2009 and 2010 to offset the ARC. When Tier 2 and CalPERS Billing Plan 1 (see Exhibit 6 on page 10) were implemented in FY 2008, the City began reimbursing retirees for the additional deductions CalPERS was taking from their retirement checks. In FY 2011, Tier 4a and CalPERS Billing Plan 2 were introduced. This resulted in CalPERS taking larger deductions from retirees’ checks which led to a significant increase in the amount of reimbursements the City was required to make. By FY 2012, the amount being reimbursed by the City increased to $5.7 million. It should be noted that the increase in reimbursements represents redirection of payments that otherwise would have been paid to CalPERS, not additional costs to the City. Exhibit 7: Health Benefit Costs Paid by the City for Retirees $2.0 $5.7 $3.2 $3.6 $4.2 $4.6 $5.2 $5.5 $6.2 $2.5$4.7 $1.7 $1.8 $2.4 $0.7 $29.2 -$1.8 -$0.7 $0.9 -$5 $0 $5 $10 $15 $20 $25 $30 $35 $40 2005 2006 2007 2008 2009 2010 2011 2012 Millions Fiscal Year Source: City of Palo Alto financial records Contribution to CERBT in excess of ARC or Use of CERBT asset to cover ARC The following items constitute ARC: Contribution to CERBT from employee contribution Contribution to CERBT from other sources Current year premiums paid to CalPERS Reimbursement made to Retirees Attachment A December 2012 12 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration Audit Scope and Limitations Our review covered the City’s health benefits costs for active and retired employees from September 2011 through October 2012, which included retiree imbursements processed by EBS since the beginning of the contract. The health premium reimbursements processed directly by the City from May 2011 through August 2011 were not reviewed as part of this audit. We also reviewed additional data and documents dating back to FY 2004 as necessary to understand and evaluate HRD internal controls over health benefits. However, the scope was limited due to difficulties in obtaining the required data as described below: Scope Limitation 1 — Incomplete Retiree Records in SAP According to HRD, when the City implemented SAP in June 2003, management decided not to migrate all of the retiree data from the Lawson HR/Payroll system. We used the SAP Termination Report to obtain retiree data from SAP. As of October 2012, the Termination Report included 437 retirees of which we were able to match only 387 retirees to the October 2012 CalPERS billing. We assumed that the 50 retirees representing the difference were not receiving health benefits under CalPERS Health Program. There were 874 retirees in the CalPERS billing, leaving 487 retirees not recorded in SAP. Therefore, the comparison of the retiree data in SAP to the CalPERS billing was limited to the 387 retirees we were able to match. Scope Limitation 2 — Lack of Reliable HRD Records of Payment Instructions to EBS HRD could not provide a complete set of monthly Reimbursement Reports and other payment instructions provided to EBS due to inadequate record maintenance. We initially requested payment and other service instruction records from both HRD and EBS and, where feasible, compared them to determine their reliability. There were instances where a file provided by HRD was not the actual file provided to EBS (the file provided by EBS was deemed more reliable as it was a copy of the original email within which the file was embedded). Based on a review of the HRD records related to EBS saved under their shared drive and inquiry with HRD staff, we determined that we would not be able to obtain reliable records from HRD. Therefore, we relied on the Reimbursement Reports obtained from EBS for the months of September 2011 through August 2012 and used them as the original files provided to EBS by HRD for our analysis. For September 2012 and October 2012, we used the Reimbursement Reports provided directly by HRD. There were other ad-hoc payment instructions made throughout the year, but they were not documented and/or maintained completely or in an organized manner. We obtained evidence of such ad-hoc instructions directly from EBS on an as needed basis and followed up with an interview of HRD staff to determine the reliability of the EBS records or statements. Scope Limitation 3 — Limited CalPERS Billing Data According to HRD and Administrative Services Department (ASD) staff, CalPERS billing becomes unavailable for review in the CalPERS system once the City pays the bill for the month. CalPERS billing contains information for each active employee and retiree including the health plan, premium amount, employer share, and employee/retiree share. While HRD downloads the billing every month and saves a copy of the retiree portion, neither department maintains a copy of the complete billing including active employees. ASD maintains a copy of the premium statement which shows the total amount billed but none of the details contained in the billing. Our request for a complete set of billing data was rejected by CalPERS. As such, the billing data for active Attachment A December 2012 13 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration employees was limited to the June 2012 billing obtained during our preliminary survey and the October 2012 billing obtained during our fieldwork. Scope Limitation 4 — CalPERS System Upgrade and Billing Corrections (Retroactive Transactions) CalPERS billing includes retroactive transactions that occur when the eligibility status for a member or dependent changes and the change is not reported in a timely manner. Typical changes include death and changes in marital status or in employment. These transactions often result in a difference between the premiums paid and the premiums that should have been paid if the transaction had been properly reported. We found that there have been many retroactive transactions resulting from CalPERS billing errors that are likely to have been caused by their system conversion. In September 2011, CalPERS implemented a new Web-based computer system “my|CalPERS”, converting 49 stand-alone systems that previously existed. According to HRD, there are no explanations provided by CalPERS for these errors, and HRD staff is required to research each transaction in the CalPERS system to identify the cause. Affected retirees receive a letter from CalPERS notifying them of any changes in individual billing, but the City does not receive any communication from CalPERS. We requested the retroactive transactions data dating back to the system conversion, but CalPERS stated that they would not be able to provide any data other than what is currently made available to the contracting agencies. They stated that they cannot provide the City with a copy of the letter sent to retirees and that each contracting agency needs to manually review retiree accounts in the CalPERS system to obtain additional information. These retroactive transactions were removed from our analysis. Scope Limitation 5 — Lack of Common Data Fields between CalPERS Billing, SAP, and EBS Reimbursement Report Our analysis required a comparison of data recorded in the CalPERS billing, SAP, and the EBS Reimbursement Report. As illustrated in Exhibit 8, these data sources do not have a common unique data field that would allow us to perform the comparison accurately, completely, and efficiently. As a workaround, we performed additional steps to create a common field using the employee name. Although each of these data sources contained data field(s) for employee name, there were employees with the same or similar names, as well as differences in formatting (e.g., one field for full name vs. separate fields for last, first, and middle name), spelling (e.g., Tim vs. Timothy), spacing (Dela Cruz vs. DelaCruz), etc. This resulted in a number of false positive and/or false negative matches. Although we manually compared the questionable matches to improve the accuracy of our analysis, we could not completely eliminate errors due to this limitation. Exhibit 8: Available Data Field as of October 2012 Source: OCA analysis of the data sources Data Source Employee ID CalPERS ID CalPERS Billing N/A Available for all SAP Available for all active employees but only for 437 retirees Available for all active employees but only for 74 retirees EBS Report N/A N/A Attachment A December 2012 14 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration Audit Methodology We used the following methodology:  Interviewed selected HRD and ASD staff to obtain an understanding of the employee health benefit administration processes.  Reviewed applicable City Council resolutions, labor agreements and compensation plans, City Manager Reports, and City policies and procedures.  Reviewed relevant Government Code sections and interviewed a Senior Deputy City Attorney to identify criteria for compliance.  Obtained and reviewed the CalPERS Health Benefits Procedures Manual, applicable Circular Letters, and CalPERS billing records, and held conference calls with CalPERS staff.  Obtained and analyzed employee benefits data recorded in SAP and compared to the City’s Comprehensive Annual Financial Reports (CAFR) and the Operating Budgets.  Performed risk assessment independently and in coordination with HRD staff to identify key risks to the effective administration of health benefits.  Identified and mapped key processes and reviewed the process maps with HRD staff to identify existing and expected key controls to mitigate the key risks.  Tested controls and performed detailed testing by using data analysis software (ACL) as needed and maintained frequent communication with EBS to obtain additional information. City Auditor’s Conclusion Government auditing standards require us to report our conclusion based on the sufficiency and appropriateness of the evidence supporting the findings in this report. These findings indicate that internal controls over health benefits administration within HRD require improvement to ensure that health premiums, administrative fees, and retiree reimbursements are calculated and paid accurately for eligible active and retired employees in accordance with applicable labor agreements, laws, and regulations. In this report, the Office of the City Auditor provides 12 recommendations to improve health benefits administration processes within the City. Finding 1: Retiree reimbursements were not accurately calculated We compared the excess deduction made by CalPERS for the month of October 2012 to the actual amount reimbursed by the City for each retiree and found that the City made overpayments totaling $12,584.87 and underpayments totaling $4,433.65, resulting in a net overpayment to retirees of $8,151.22. There were 64 retirees who were either overpaid or underpaid by $10 or more. Our analysis was based on a review of 818 out of 874 retirees on the October 2012 CalPERS billing. Tier 3 retirees, Tier 4a/4 retirees, retirees with the same names, and retirees with employee group discrepancy (see page 20 for more information) were excluded from our analysis. According to HRD, the CalPERS bill is reviewed only for the retroactive transactions involving retirees. The rest of the billing is neither reviewed nor reconciled to the Reimbursement Report to ensure that the retiree is Attachment A December 2012 15 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration reimbursed for the actual excess deduction made. We also found that HRD did not have a clear, documented methodology to determine the reimbursement amount. HRD stated that there are so many billing errors and subsequent corrections made by CalPERS that they would not be able to review the entire billing and keep track of all deductions made from each retiree. For this reason, there were cases where HRD was aware that the retiree was receiving overpayment but no actions were taken because they assumed the overpayment was due to a CalPERS error and the error would be corrected by CalPERS in the future. These discrepancies were neither documented nor tracked. Our analysis demonstrated that a clear methodology can be established to perform a review of the billing and its reconciliation to the Reimbursement Report in a systematic manner. As described under Scope Limitation 5, our analysis was significantly limited by the lack of common data fields between CalPERS billing, SAP, and the EBS Reimbursement Report. Had a common field existed, we could have performed our analysis more accurately, completely, and efficiently. Retroactive transactions are not consistently documented and processed to ensure the accuracy and completeness of the adjustments to the reimbursements. We found that not all retroactive transactions impacting retiree reimbursements are recorded in the Reimbursement Report as adjustments in a consistent manner. HRD does not have a standardized methodology for determining which retroactive transactions are recorded in the Reimbursement Report or for ensuring consistent treatment of each transaction. There is no supervisory review performed to ensure the accuracy or appropriateness of the adjustments recorded. According to HRD, the nature of each retroactive transaction significantly varies and CalPERS does not provide adequate explanation. Each month, HRD staff researches each retroactive transaction by reviewing the affected retiree’s account in the CalPERS system and records necessary adjustments under the Adjustment column in the Reimbursement Report. Exhibit 9 shows the number of retroactive transactions Finding 1/Recommendation A to City Management (1-A): Establish clear, documented procedures to ensure the accuracy of the Reimbursement Report. This should include: Establishing a methodology for reconciling the CalPERS billing to the Reimbursement Report and performing a monthly reconciliation to identify, track, and follow up on any discrepancies. Create and maintain common data fields among key data sources to facilitate such reconciliation in an accurate, complete, and efficient manner. Establish criteria and a methodology for addressing, recording, and reviewing retroactive transactions in the Reimbursement Report. Exhibit 9: Number of Retroactive Transactions for Retirees FY 2012 CalPERS Billing Coverage Month # Retroactive Transaction January 23 February 146 March 665 April 131 May 10 June 36 July 24 August 25 Total 1,060 Source: CalPERS billing Attachment A December 2012 16 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration entered by CalPERS for the coverage months from January 2012 through August 2012. Not all retroactive transactions result in an adjustment to the reimbursements. Currently, the treatment of each retroactive transaction is left up to the judgment of one HRD staff member. The adjustments recorded in the Reimbursement Reports do not have any explanation for the origin or reason for the adjustment. There is no tracking mechanism established for these adjustments and therefore, it is difficult for HRD staff to go back and determine which retroactive transactions have already been accounted for and recorded in Reimbursement Reports. Without adequate procedures for recording and reviewing the adjustments to the reimbursements, inaccurate or inappropriate payments could go undetected. We did not perform further testing to determine whether all retroactive transactions are treated and recorded consistently in the Reimbursement Report. Eligibility criteria for retiree health benefits were not clearly defined and documented. HRD maintains a document defining retiree health tiers for each employee group (Tier Matrix). We reviewed the Tier Matrix and found that it was inaccurate and incomplete. As described under the background section of this report, retiree eligibility for health benefits depends on their tier, which is determined by their hire date, retirement date, and their employee group at the time of retirement. Tier implementation for each employee group must be included in the respective labor agreement, passed by a City Council resolution, and filed with the CalPERS board before it becomes effective in accordance with Government Code 22892(a). The effective date is confirmed by CalPERS in a letter provided to the City acknowledging receipt of the resolution. We compared the Tier Matrix to applicable labor agreements, City Council resolutions, and CalPERS letters, and found that some of the tier implementation dates were incorrect, the definition of Tier 4 was inaccurate, and the hire date was not always specified for each tier. HRD did not maintain complete, organized records of key supporting documents. Out of eight CalPERS letters issued covering eleven resolutions passed since FY 2007, HRD did not have a copy of two letters, one for Resolution No. 8896 for PAPOA and the other for Resolution No. 9146 for SEIU and Management. HRD subsequently obtained a copy of the letters from CalPERS and provided them for our review. Eligibility criteria for retiree health tiers was not clearly defined and documented, and HRD staff was not able to provide an accurate and complete explanation. Significant additional research was required in order to establish a clear picture of the actual eligibility criteria. The results of this research are summarized in Exhibit 10 which includes the actual eligibility criteria for each of the retiree health tiers depending upon the employee group. Attachment A December 2012 17 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration Exhibit 10: Eligibility Criteria for Retiree Health Tiers Tier SEIU Management Fire (IAFF) Fire Chiefs (FCA) Police (PAPOA) Hired Retired Hired Retired Hired Retired Hired Retired Hired Retired 1 < 1/1/05 < 1/1/07 < 1/1/04 < 1/1/07 < 1/1/04 < 1/1/07 < 1/1/04 < 1/1/07 < 1/1/06 < 3/1/09 2 < 1/1/05 < 5/1/11 < 1/1/04 < 5/1/11 < 1/1/04 < 12/1/11 < 1/1/04 < 1/1/13 < 1/1/06 ≥ 3/1/09 3 ≥ 1/1/05 ≥ 1/1/04 ≥ 1/1/04 ≥ 1/1/04 ≥ 1/1/06 4 < 1/1/05 ≥ 5/1/11 < 1/1/04 ≥ 5/1/11 < 1/1/04 ≥ 12/1/11 < 1/1/04 ≥ 1/1/13 4a* < 1/1/05 ≥ 5/1/11 < 1/1/04 ≥ 5/1/11 Source: HRD * Effective October 6, 2012, Employee Contribution B (see Exhibit 3 on page 8) was implemented for active employees in SEIU and Management. The retirees in Tier 4a were subsequently transitioned into Tier 4 as the labor agreements required the City contribution for these retirees to be “the same contribution amount it makes from time to time for active City employees.” FY 2011 CAFR note disclosure was inaccurate and incomplete. A review of the FY 2011 CAFR found that the note disclosure regarding the retiree eligibility for health benefits (Note 12 to the Basic Financial Statements) contained inaccurate information and was incomplete. Some of the tier implementation dates were incorrect and the note did not include the eligibility information for PAPOA retirees. Upon our notification of the issue, HRD worked with ASD to revise the notes in FY 2012 CAFR; however, the revised notes still contained inaccurate information and were published before we were able to review the revision and provide feedback. The retiree health eligibility information provided to the City’s actuarial firm was inaccurate. Based on a comparison of the actual retiree health eligibility to the City's Actuarial Valuations issued in May 2012, certain dates included in the actuarial report were inaccurate (See Exhibit 11). According to Government Code 22892 (a), the effective date of retiree health eligibility is set by the acknowledgment letter sent by CalPERS. In this case, the dates used by the actuarial firm reflected the dates in the labor agreements instead of the CalPERS letters. Exhibit 11: Discrepancies in Effective Date of Retiree Health Tier Implementation Retiree Health Tier Implementation Effective Date CalPERS Letter (Actual Effective Date) Resolution Actuarial Valuation (Agrees to Labor Agreement) Tier 4a SEIU 5/1/11 4/1/11 2/1/10* Tier 4a for Management 5/1/11 4/1/11 4/1/11 Tier 2 for PAPOA 3/1/09 3/1/09 1/1/08 * It was stated in the labor agreement that “employees retiring after January 31, 2010 but on or before December 31, 2010 shall not be required to pay any premium increase that first takes effect after January 31, 2010.” HRD stated that applicable City Council resolutions were provided to the actuarial firm and that it was the firm’s oversight that the effective dates documented in the labor agreements were included in their final actuarial report. Since any changes in the labor agreement for the employer contribution will not become effective until the corresponding resolution is accepted by CalPERS, a complete set of the CalPERS letters should have been provided to the actuarial firm. We reviewed the communication between ASD and HRD staff and the actuarial firm and concluded that the retiree health eligibility information was not clearly communicated to the firm. Attachment A December 2012 18 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration We found no evidence to conclude that the inaccuracy resulted in a material difference in the actuarial valuations performed; however, adequate documentation and clear communication of eligibility criteria would help to prevent any inaccuracies in future actuarial valuations that could cause more significant differences in the calculation of ARC. The effective implementation date of retiree health tiers is not clearly communicated to stakeholders. While all labor agreements are posted on the HRD website, the effective date included in the labor agreement is not always the same as the actual effective date specified in the CalPERS letter. Currently, no clear communication is provided to inform the retirees or other stakeholders that the effective date in the labor agreement may not be the actual implementation date. Eligibility criteria for retiree health benefits have not always been accurately applied in the calculation of retiree reimbursements. We found that the health tier for each retiree was not accurately and completely maintained by HRD. The tier and employee group at the time of retirement determine how each retiree’s health premium is billed by CalPERS which impacts the calculation of the reimbursement paid by the City. In our review of the methodology used by HRD to calculate the reimbursement amount, we found that the tier for each retiree was not documented and it was not clear how the tier information was factored in the calculation. The only place where retiree tier was documented was in the monthly Reimbursement Reports provided to EBS. HRD staff explained that this tier information was developed and documented during the initial setup of the contract so that EBS could use this information in calculating the reimbursement amount. The calculation is currently performed by HRD. HRD staff confirmed that neither HRD nor EBS currently uses the tier information included in the Reimbursement Report. We determined the tier for each retiree by obtaining a copy of the SAP Termination Report with the hire date and retirement date and comparing the dates to the actual eligibility criteria for each retiree tier (Exhibit 10 above). We then compared the retiree tier we determined to the tier recorded in the monthly Reimbursement Report. Based on the comparison, 151 of 822 (18%) retirees included in the Reimbursement Report were coded in the incorrect tier as shown in Exhibit 12. As explained under Scope Limitation 5, there were only 437 retiree records available in SAP. Since the retirees whose records were not in SAP retired prior to any tier implementation, we assumed that these 455 retirees were in Tier 1. Finding 1/Recommendation B to City Management (1-B): Enhance current procedures to ensure that the Retiree Medical Tier Matrix is maintained accurately, completely, and in an organized manner along with a complete set of the labor agreements, resolutions, and CalPERS letters. Consider making the Tier Matrix available to all business partners and stakeholders to ensure that the eligibility criteria are clearly communicated to all parties. Finding 1/Recommendation C to City Management (1-C): Establish procedures for determining the health tier for each retiree and maintaining a complete and accurate record of retiree health tiers. Ensure that the tier determination is based on the hire date, retirement date, and employee group at the time of retirement as recorded in SAP and based on the Retiree Medical Tier Matrix. Attachment A December 2012 19 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration Exhibit 12: Inaccurate tier information recorded in Reimbursement Report Tier Determined Based on SAP Termination Report # Retiree Reimbursement Report # Retiree # Incorrect % Incorrect No Retiree Records (Assumed to be Tier 1) 455 Tier 1 422 33 7% Tier 2 33 Tier 1 92 Tier 1 48 44 48% Tier 2 44 Tier 2 267 Tier 1 71 71 27% Tier 2 196 Tier 4a/4 8 Tier 1 2 3 38% Tier 2 1 Tier 4a/4 5 Grand Total 822 822 151 18% Source: OCA analysis of City of Palo Alto records Additionally, we found that the retiree tier definition included in the EBS contract was inaccurate. Had EBS performed the calculation of reimbursement amount as originally required in the contract, they would have used inaccurate tier information which would have resulted in significant errors. Finding 2: CalPERS billing was not adequately monitored by the City We found that neither HRD nor ASD currently reviews the CalPERS billing to verify its accuracy. The only review conducted by HRD is for retroactive transactions associated with retirees to identify the reason and to make corresponding changes in the monthly Reimbursement Report. According to HRD, a review of the active employee portion used to be conducted by ASD staff; however, no review has been performed since the original staff assigned for this task left the City. CalPERS strongly encourages contracting agencies to reconcile their invoices monthly to ensure only eligible members are covered. The CalPERS billing should be reviewed and reconciled to City records monthly to ensure it is accurate. As described under Scope Limitation 1, however, retiree records are not completely maintained in SAP, and the Reimbursement Report contains only the retirees requiring reimbursement. Without accurate and complete City records for both active employees and retirees, it is not feasible to efficiently monitor the accuracy of the CalPERS billing. Additionally, as described under Scope Limitation 5, CalPERS billing, SAP, and the Reimbursement Report do not have a common unique data field to facilitate an accurate, complete, and efficient comparison. Billing inaccuracies are often not discovered unless the affected retiree contacts HRD for an explanation and manual research is conducted only for those specific cases. This requires a significant investment of staff time to investigate these inquiries. We described these inaccuracies in the following three subsections. Each could have been detected sooner had the HRD performed a periodic review of the CalPERS billing. Duplicate active employee records in the CalPERS system went undetected resulting in the City making overpayments to CalPERS. Based on limited billing information we were able to obtain from CalPERS during the audit, it appears the City overpaid approximately $36,811 for duplicate employees. We identified records with duplicate names and duplicate CalPERS IDs in the CalPERS billing and reviewed their employee files and corresponding records in SAP and the CalPERS system for verification. While some of the records with duplicate names were found to be separate records (e.g., a parent and a child sharing the same name), we confirmed that Attachment A December 2012 20 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration there were two duplicate active employees with three duplicate dependents each. The monthly premium was $1,849 for one employee and $1,832 for the other. The City was billed twice for each of these employees resulting in a total overbilling of approximately $36,811 assuming duplicate billing started in January 2012. There were three additional duplicate dependents recorded in the CalPERS system. These duplicate records did not affect the premium cost and therefore did not result in billing errors. According to HRD, duplicate health enrollment is normally prevented because the CalPERS system requires a social security number (SSN) for enrollment. Prior to health enrollment, HR staff must first process retirement enrollment for the eligible employee and obtain a CalPERS ID. Retirement enrollment requires a SSN and an enrollment attempt without a SSN or with a duplicate SSN will be rejected by the system. HRD explained that the CalPERS ID was created for the first time when the CalPERS system went through an upgrade and applied to all existing CalPERS members. Upon our notification of the duplicate records, HRD staff contacted CalPERS to consolidate the two records but could not obtain a clear explanation of why and how the duplicate records were created. HRD requested a formal explanation from CalPERS, but their response had not been obtained at the time of our reporting. We subsequently reviewed the CalPERS billing for December 2012, and confirmed that the City received a credit of $18,489 for one employee representing the premium cost for 10 months. For the other employee, the City received no credit and continued to be billed in duplicate. HRD did not always update the CalPERS system when a change in employee group was recorded in SAP. Based on a comparison of the October 2012 CalPERS billing and the City's active employee and retiree records in SAP, there were 85 active employee records and 36 retiree records in the CalPERS system that did not have the same employee group recorded in SAP (See details in Exhibits 13 and 14). According to HRD, in most cases, employees were promoted into a different employee group during employment but the corresponding field in the CalPERS system was not updated by HRD staff. Employee group at the time of retirement affects the tier determination and how the premium is billed by CalPERS. Since we could not obtain verification of the correct employee group for each of these discrepancies, we excluded the 36 retiree records from our analysis of the reimbursement processed. Finding 2/Recommendation A to City Management (2-A): Enhance the current procedures to ensure that any changes in employment affecting the employee’s health eligibility status are accurately and consistently recorded in both SAP and CalPERS system in a timely manner. Verify the accuracy of the CalPERS system record by comparing to the SAP record for each employee at the time of retirement to ensure accurate billing by CalPERS. Attachment A December 2012 21 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration Exhibit 13: Employee Group Discrepancies for Active Employees Employee Group per SAP # Employees in SAP and CalPERS Billing Total # Coded to Same Group # Coded to Different Group in CalPERS Billing As: Total # Coded to Different Group Variance SEIU Management IAFF FCA PAPOA SEIU 470 446 - 19 - 3 2 24 5% Management 179 125 53 - - 1 - 54 30% IAFF 89 88 1 - - - 1 1% FCA 3 1 - - 2 - - 2 67% PAPOA 71 67 1 2 1 - - 4 6% Total 812 727 54 22 3 4 2 85 10% Source: OCA analysis of CalPERS billing and City of Palo Alto records Exhibit 14: Employee Group Discrepancies for Retirees Employee Group per SAP # Retirees in SAP and CalPERS Billing Total # Coded to Same Group # Coded to Different Group in CalPERS Billing As: Total # Coded to Different Group Variance SEIU Management IAFF FCA PAPOA SEIU 177 174 - 3 - - - 3 2% Management 145 116 26 - 1 2 - 29 20% IAFF 36 35 1 - - - - 1 3% FCA 2 2 - - - - - - - PAPOA 25 22 1 2 - - - 3 12% Total 385 349 28 5 1 2 - 36 9% Source: OCA analysis of CalPERS billing and City of Palo Alto records CalPERS did not have the correct formula to calculate the employer share. We reviewed the October 2012 CalPERS billing to determine the methodology used by CalPERS to calculate the employer share billed to the City. Based on the review, we found that the CalPERS methodology used was inconsistent and inaccurate as illustrated in Exhibit 15. We recalculated the employer share for 832 out of 874 retirees on the billing (36 records with employee group discrepancy and 6 Tier 3 retirees records were excluded from this analysis), and determined the following billing errors made by CalPERS: Exhibit 15: Expected vs. Actual CalPERS Billing Source: OCA analysis of CalPERS billing and City of Palo Alto records * For explanation of the CalPERS Billing Plans, please refer to the “City Share of Healthcare Premium and CalPERS Billing – Retirees” section of the Background from page 8 through page 10. At the time of our reporting, CalPERS billing for SEIU, Management, and IAFF was limited to the minimum contribution ($106.40 for 2012) and to the second most expensive plan less the retiree share for the dependent portion (5% for 2012) for PAPOA and FCA. Employer Group Expected Employer Share Billed Actual Employer Share Billed CalPERS Overbilling/Underbilling Gross Net SEIU, Management, IAFF Billing Plan 2* - Minimum contribution of $106.40 The employer share for 4 of 743 records was not $106.40 (1 record with $766.88 and 3 with $888.25 each) $3,006.03 $3,006.03 PAPOA, FCA Billing Plan 1* - 2nd most expensive plan (Blue Shield Bay Area Basic) less 5% of the dependent portion 51 of 89 records had a total of $2,506.51 in error ranging from ($337.56) to $32.46. $2,506.51 ($1,897.82) Total The employer share for 55 of 832 records reviewed was different from the expected amount $5,512.54 $1,108.21 Attachment A December 2012 22 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration We followed up with CalPERS and HRD to identify the cause for billing errors for PAPOA and FCA retirees, but received conflicting information in some areas. We subsequently facilitated a conference call between CalPERS and HRD to clarify the cause and determine how the billing errors can be corrected. Based on the conference call, the following causes were identified:  CalPERS did not have their calculation formulas set up correctly due to errors. CalPERS confirmed that most of their formulas set up to calculate the employer share were incorrect. They stated that their system conversion caused various issues, and they will correct these errors as soon as clear written instruction is provided by HRD. The errors included the City share for the dependent portion of the premium not being calculated consistently using the 2012 coverage of 95%, and the cap not being applied consistently as explained below. CalPERS stated that although their new system went live in September 2011, the billing was conducted based on the old system throughout 2011; therefore, the formulas for 2011 were not affected by the conversion. Subsequent to the conference call, HRD provided CalPERS with written instruction. We reviewed the CalPERS billing for December 2012 and found that the billing still contained numerous errors. Of 91 PAPOA and FCA retirees included in the billing, 42 (46%) were still being billed incorrectly. For 16 retirees, the City share was calculated using the dependent coverage of 100%. The calculation for 26 additional retirees contained errors, and we could not determine the formula used by CalPERS.  “The second most expensive plan” was not clearly defined in the resolution or understood by CalPERS. CalPERS stated that their interpretation of the second highest plan has been the Blue Shield Bay Area Basic rate for retirees in Basic and the Blue Shield Bay Area Supplement/Managed Medicare (SM) rate for retirees in SM. HRD stated that the City’s intention is to apply Blue Shield Bay Area Basic to all rates. See Exhibit 16 for an explanation of these differences between the City’s intention and CalPERS understanding of the second most expensive plan. According to CalPERS, Blue Shield Bay Area had always been the second highest plan within Basic and within SM until 2012 when Peace Officers Research Association of California (PORAC) became the second highest plan within SM. CalPERS further stated that this resulted in PORAC to be used as a cap for some of the rates. The City Council resolutions for PAPOA and FCA state that the City share should pay “100% of the single party premium up to a maximum of the monthly medical premium for the second most expensive medical plan among the existing array of PEMHCA plans available within the Bay Area/Sacramento region.” HRD provided us with documentation notifying CalPERS in 2008 that the City’s intention was to use the Blue Shield Bay Area Basic, which was the second most expensive plan at the time, as the cap for all rates. CalPERS stated that they were not aware of the communication due to staff turnover and suggested that HRD staff draft a new resolution Finding 2/Recommendation B to City Management (2-B): Establish procedures for providing CalPERS with clear, written instructions for the employer share calculation on a regular basis. Establish monitoring procedures to ensure that the City instructions are followed by systematically reviewing the methodology applied to calculate the employer share. Attachment A December 2012 23 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration which clearly states that Blue Shield Bay Area Basic be used as a cap for all rates. Until such resolution is received, CalPERS stated that they would be unable to apply the Blue Shield Bay Area Basic as a cap for employees in SM. Exhibit 16: Determination of the Second Most Expensive Plan Source: CalPERS Circular Letter Finding 3: HRD has not effectively administered its contract with EBS The City contracts with an outside vendor, Employee Benefit Specialists (EBS), for overall administration of the retiree reimbursement program including reviewing, calculating, and processing reimbursements. We found that:  EBS was not providing all services required in the contract;  Payment instructions are provided without adequate supporting documentation; and  The contract was not adequately monitored by HRD. Because the contract was not amended to reflect the actual services being provided, the City may have overpaid for the limited services it was receiving. Also, without a clearly defined scope of services that accurately reflects the actual services to be provided under the contract, the City cannot effectively monitor the performance of the vendor. HRD is paying for services it is not receiving. We found that EBS was not providing the following services required in the contract: City’s intention was to apply Bay Area Blue Shield Basic as a cap to all rates CalPERSunderstanding was to apply the second most expensive plan within each category (Basic or SM) to which the employee belongs. Blue Shield has always been the second most expensive plan until PORAC became the second most expensive plan in FY 2012. Retirees in Tier 1, 2, 4, and 4a have to pay 5% of the dependent portion in FY 2012 =(Premium–Employee Only Premium)x5% Example For PERSCareplan with 2+ dependents: The City share for Tier 1 retiree is $2,593.66 = $1,029.23+(($2,676.00-$1,029.23)x95%) The City share for Tier 2 retiree is $1,791.97 =$711.10+(($1,848.86-$711.10)x95%) Attachment A December 2012 24 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration  Calculation of reimbursements using formulas provided by the City based on retirement tier and monthly CalPERS billing; and  Reconciliation of monthly disbursements. According to EBS, it is unable to calculate reimbursements as required in the contract as CalPERS would not provide them with the necessary billing data to perform these services. Despite this limitation, the City did not take steps to amend the contract with EBS. We found that HRD staff is one of the CalPERS system access administrators. According to the CalPERS manual for system access administration, each business partner has the ability to submit, correct and/or view information based on appropriate access privileges and the system relies on each business partner to manage the assignment and maintenance of these privileges for their staff. Based on a review of the user access list provided by HRD, one of the EBS staff currently has access to the CalPERS system. As a system administrator, HRD staff has the ability to assign additional system access roles to this EBS staff. HRD stated that the current read-only access granted to EBS should be sufficient for them to perform all of the services required in the contract. Additionally, at the City’s request, EBS agreed to provide additional services related to Form 1099 issuance for 2012; however, this agreement was also not documented or included in the contract. Payment instructions to EBS are provided without adequate supporting documentation resulting in an overpayment of at least $2,148. We identified an overpayment of $2,148 to one retiree resulting from an inaccurate payment instruction. Currently, the HR staff responsible for calculating and preparing the monthly retiree Reimbursement Report is also responsible for sending the Report to EBS. There is no other backup staff who can perform these functions and EBS pays the retirees as instructed by the City without additional review. Ad-hoc payment instructions are provided without adequate supporting documentation and there are no review procedures in place to prevent erroneous or inappropriate payment instructions from being provided to EBS. Such payment instructions are usually provided to EBS via email but HRD does not maintain copies of these emails in an organized manner. This prevented us from obtaining and reviewing the instructions in an efficient manner. We reviewed a few selected instructions and did not find any evidence of inappropriate payments; however, due to lack of adequate support and review, opportunities for inappropriate payments still exist. To ensure the accuracy and completeness of the retiree reimbursements, adequate supporting documentation should be maintained and reviewed prior to payment instructions being provided to EBS. Payment instructions should be reconciled monthly to the EBS check register and any discrepancies including returned, voided, and reissued checks should be identified and tracked until they are resolved. We found that HRD did not have a complete set of Reimbursement Reports and ad-hoc payment instructions sent to EBS. This meant that they did Finding 3/Recommendation A to City Management (3-A): Review the EBS contract to ensure the adequacy of the contract terms and accuracy and clarity of the scope of services including the retiree tier definition. Establish monitoring procedures to ensure the contract terms remain adequate and any changes in the scope of services are documented and properly authorized in accordance with the terms and conditions under the contract. Attachment A December 2012 25 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration not know exactly how much EBS was instructed to pay and how much was actually paid by EBS for each retiree without inquiring with EBS. HRD was not aware which checks were returned, voided, or reissued. We also identified a few instances where EBS collected or attempted to collect the overpayments that had been made directly by the City before the contract was entered into. According to EBS, during the conference calls held in August and September 2011, the City requested EBS to collect the overpayments made to two retirees. No written instructions were provide by the City. EBS subsequently collected $287 from one retiree, but was not able to collect $279 from another retiree as this retiree had passed away in July 2011. HRD did not follow up on the collection activities performed by EBS; therefore, the recovered amount was never reflected in SAP. EBS stated that there were a few more overpayments collected by them throughout the year. We obtained a complete check register from EBS and compared it to the HRD Reimbursement Report for June 2012 (this report was obtained from EBS as explained under Scope Limitation 2). We initially identified significant discrepancies and requested an explanation from EBS. EBS discovered recording errors in their system involving voided/reissued checks, which resulted in duplicate disbursement records in some cases. EBS subsequently fixed the system errors and provided us with the corrected check register. EBS confirmed that these were recording errors and that the actual payments to retirees were not duplicated. We also requested EBS to prepare and provide us with monthly reconciliations of the check register to the HRD Reimbursement Report from the beginning of the contract through September 2012. While this request took over a month for them to complete, EBS stated that they would be able to provide this reconciliation on a monthly basis upon request by HRD. Our analysis of the corrected check register and the EBS reconciliations indicates that EBS appropriately reimbursed the City retirees as directed by HRD. HRD was not aware that 20 checks issued in 2011 remained uncashed. We obtained a list of uncleared checks as of June 2012 from EBS and found that 20 checks issued in 2011 and 68 checks issued in 2012 had not cleared. HRD was not aware of these outstanding checks. According to EBS, they consider a check “stale- Finding 3/Recommendation B to City Management (3-B): Establish recordkeeping procedures for maintaining monthly Reimbursement Reports and additional payment instructions provided to EBS along with adequate supporting documentation. Establish review procedures to ensure accuracy and completeness of retiree reimbursements prior to instructions being provided to EBS for payment. Request EBS to provide monthly and annual reconciliations of their check register to the Reimbursement Reports and to notify the City of any exceptions noted during the month. Establish procedures for reviewing the monthly reconciliations and tracking and following up on any discrepancies including returned, voided, reissued checks in a timely manner. If the exceptions require corrective actions, they should be documented and related written communication to EBS be maintained. Finding 3/Recommendation C to City Management (3-C): Work with ASD to establish procedures for handling uncashed EBS checks. Based on the procedures, formalize the EBS procedures for notifying the City of the returned or uncashed checks and how to handle them. Attachment A December 2012 26 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration dated” once it becomes older than one year. After a year, they ask the client if they wish to put a stop-pay on those checks, reissue, and/or send a communication to the retiree. For checks returned due to incorrect address, EBS has been alerting the City and reissuing the check if a new address is provided by the City. According to the City’s Payroll Procedures for Stale Dated Checks, the original checks become stale dated after six months and the City is required to publish a list of stale-dated checks in a local newspaper on an annual basis. HRD process for ensuring required 1099 tax forms are received by applicable retirees was not always complete or accurate. Retirees are requested to substantiate the retiree health reimbursement received during the tax year to avoid tax consequences on such income by signing and submitting the Retiree Health Premium Substantiation Form to the HRD. The City is required to provide a Form 1099 statement for any reimbursement amounts not listed on this Substantiation Form. Submission of the Substantiation Form is recorded by HRD in a tracking sheet and a list of retirees who did not submit the form is provided to EBS for issuance of 1099 statements. According to the HRD tracking sheet for the 2011 tax year, 80 out of 688 retirees did not submit a Substantiation Form. The HRD list sent to EBS on 1/13/12 contained 77 retirees. We compared the HRD list to the list of actual Form 1099 recipients provided by EBS and also reviewed the actual Substantiation Forms on a sample basis. As a result of this review, we identified the following errors:  One retiree submitted a Substantiation Form before 1/13/12 but was not included in the HRD list. EBS issued a 1099 statement to this retiree as a result; and  For two retirees, there was no record that they submitted a Substantiation Form, but they were included in the HRD list and did not receive a 1099 statement from EBS. HRD confirmed that a 1099 statement should have been issued to these retirees. HRD did not obtain the list of actual Form 1099 recipients from EBS to verify a statement was issued to all applicable retirees for the actual amounts reimbursed. According to HRD, beginning in 2012, EBS will provide a pre-filled substantiation form to each retiree, track submission, and issue 1099 statements based on the actual payment made. This is expected to reduce the burden on the retirees to list their monthly receipt and fill out the form while improving accuracy and completeness. Inadequate review of EBS invoices left invoicing errors undetected. Based on a review of EBS invoices and contract terms, we identified the following invoicing errors by EBS:  Overcharge of $2,388 for administrative fees for the billing periods from September 2011 through August 2012. EBS had been charging $4 per retiree per month for direct deposit payment even though the contract term was $3.50. Finding 3/Recommendation D to City Management (3-D): Establish a methodology for EBS to follow and require specific supporting documentation to be provided to HRD for review. Identify review criteria and establish procedures to verify the accuracy and completeness of the EBS services provided for Form 1099 issuance. Attachment A December 2012 27 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration  Undercharge of $370 for the 2011 Form 1099 processing fees. EBS did not issue any invoice for this service due to an accounting error. According to the contract, EBS should have charged $5 per statement and 74 statements were processed. HRD currently does not have effective monitoring procedures for vendor invoices. All invoices should be reviewed prior to payment and reconciled to the actual services provided and contract terms to ensure the accuracy of the billing. In response to our inquiry, EBS confirmed these errors. In September 2012, the City received a net refund from EBS in the amount of $2,018. Finding 4: Required documentation to verify the eligibility of dependents for enrollment was not always available Based on a review of selected employee files, we found that supporting documentation required by CalPERS for enrollment of dependents in health benefit plans is not completely maintained by HRD. Out of 31 employee files judgmentally selected for review, 20 files had at least one required document missing from the file as shown in Exhibit 17. See Exhibit 18 for the supporting documentation required by CalPERS. Exhibit 17: Sampled Employee Files with Required Dependent Document Missing Employee Status # Employee Files Reviewed # Employee Files with Required Document Missing Dependent Status # of Dependents Required Documents Not Filed Active 17 9 Subtotal 45 14 Spouse/Domestic Partner 13 3 Children under age 26 32 11 Retired 14 11 Subtotal 32 23 Spouse/Domestic Partner 14 10 Children under age 26 13 8 Certified "Parent-Child Relationship" Children 5 5 Total 31 20 Total 77 37 Source: OCA analysis of City of Palo Alto records Exhibit 18: CalPERS Required Supporting Documentation for Enrollment of Eligible Dependent Dependent Type Documentation Required by CalPERS for Enrollment Spouse Copy of the marriage certificate Domestic Partner Copy of the Declaration of Domestic Partnership registered with the Secretary of State Children under age 26 Copy of birth certificate or adoption papers Certified "Parent-Child Relationship" Children Affidavit of Parent-Child Relationship (Form HBD-40) Source: CalPERS Health Benefits Procedure Manual Finding 3/Recommendation E to City Management (3-E): Establish procedures to review EBS invoices to ensure the accuracy of the EBS billing. Review should include reconciliation of the invoice to the actual services provided. Attachment A December 2012 28 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration The forms and supporting documentation required for the various types of enrollments or changes to enrollment are also specified in the CalPERS Circular Letter No. 600-045-12. This letter clarifies the employer’s fiduciary responsibility to manage the CalPERS Health Program by ensuring that only eligible employees and their dependents are covered. CalPERS requires that records of all supporting documentation that determines the eligibility of enrolled dependents be requested and maintained by the employer for active employees. CalPERS is responsible for maintenance of dependent supporting documentation for retirees; however, a majority of the retirees’ dependents were enrolled while they were active employees. Therefore, missing dependent eligibility documentation in the retiree files indicates that eligibility verification for dependents was not properly performed for these retirees while they were still active. According to HRD, required supporting documentation was not consistently obtained at the time of enrollment and filed by HRD; however, they have since strengthened their review procedures. HRD stated that they recently performed a partial review of employee files and obtained missing documentation, but did not review all employee files. Currently, HRD does not perform periodic verification of dependent eligibility including at the time of retirement, and therefore, any changes in the dependent status are not made until it is reported by the employee. Without adequate and consistent verification procedures and complete record maintenance, enrollment of ineligible dependents may go undetected. Finding 5: Personally Identifiable Information (PII) has not been adequately protected and controlled We found that HRD did not have policies and procedures addressing Personally Identifiable Information (PII). During the audit, we obtained and reviewed documents and records containing PII and observed how they are stored and handled by HRD staff. As defined under California State law, PII includes an individual's first name or first initial and last name in combination with other identifying information (e.g., social security number, health insurance information, etc.) when either the name or the data elements are not encrypted. While we found no evidence of a security breach as defined under State law, we did find that not all HRD documents and records containing PII are adequately protected to ensure the confidentiality of such information collected and maintained by HRD. Files containing PII are saved in a shared drive to which all HRD staff have access and emailed without password protection. In August 2012, we came across three unencrypted, unprotected files on the City’s shared network “U” drive containing PII for City employees and individuals in the business community. Two of these files belonged to HRD and the other one to ASD. We immediately contacted both departments and these files were removed from the shared network. HRD stated that the files were placed on the public drive by a former HRD staff, and would reiterate with all HRD staff the importance of protecting PII. We also notified the City’s Information Security Manager to take appropriate actions to prevent such incidents from occurring in the future. We also identified Finding 4/Recommendation to City Management (4): Improve dependent eligibility verification procedures to ensure that required supporting documentation is obtained, reviewed, and maintained in accordance with the CalPERS Circular Letter No. 600-045-12. Attachment A December 2012 29 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration two documents containing the social security number field and questioned whether the SSN field was necessary. HRD subsequently removed the SSN field from these documents According to the Guide to Protecting the Confidentiality of Personally Identifiable Information (PII) recommended by the National Institute of Standards and Technology (NIST Guide), organizations should take the following steps to appropriately protect the confidentiality of PII:  Identify all PII residing in their environment.  Minimize the use, collection, and retention of PII to what is strictly necessary to accomplish their business purpose and mission.  Develop and apply appropriate safeguards for PII based on the assessment of the potential harm that could result to the subject individuals and/or the organization if PII were inappropriately accessed, used, or disclosed. These include: o Creating policies and procedures; o Conducting training; o De-identifying PII; o Using access enforcement; o Implementing access control for mobile devices; o Providing transmission confidentiality; and o Auditing events. Finding 5/Recommendation to City Management (5): Take applicable steps recommended by the NIST Guide to appropriately maintain the confidentiality of PII. Attachment A December 2012 30 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration Page intentionally left blank Attachment A December 2012 31 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration ATTACHMENT 1: CalPERS Billing Summary for June 2012 Status # Participants Premium Amount Participant Share Employer Share Active 855 $1,124,539 - $1,124,539 Blue Shield Advantage Bay Area 14 22,755 - 22,755 Blue Shield NetValue Bay Area 7 7,217 - 7,217 Blue Shield of California Bay Area 357 516,827 - 516,827 Blue Shield of California Other Northern 8 13,530 - 13,530 Blue Shield of California Sacramento Area 1 1,656 - 1,656 Kaiser Permanente California Bay Area 290 355,764 - 355,764 Kaiser Permanente California Other Northern 6 9,242 - 9,242 Kaiser Permanente California Sacramento Area 1 1,463 - 1,463 Peace Officers Research Association of California 65 73,768 - 73,768 PERS Choice Bay Area 96 108,055 - 108,055 PERS Choice Other Northern California 3 4,027 - 4,027 PERS Choice Other Southern California 1 1,368 - 1,368 PERS Choice Out of State 1 1,688 - 1,688 PERS Choice Sacramento Area 3 4,015 - 4,015 PERS Select Bay Area 1 487 - 487 PERSCare Bay Area 1 2,676 - 2,676 Retired 871 $727,700 $561,600 $166,100 Blue Shield Advantage Bay Area 8 7,486 6,403 1,083 Blue Shield Advantage Los Angeles 1 338 232 106 Blue Shield Advantage Other Southern 4 3,103 1,616 1,486 Blue Shield NetValue Other Southern 1 502 - 502 Blue Shield of California Bay Area 207 192,096 153,457 38,639 Blue Shield of California Other Northern 5 4,537 3,104 1,433 Blue Shield of California Other Southern 2 2,193 705 1,488 Blue Shield of California Sacramento Area 10 9,000 7,936 1,064 Kaiser Permanente California Bay Area 166 121,284 97,422 23,862 Kaiser Permanente California Other Northern 11 9,892 8,721 1,170 Kaiser Permanente California Other Southern 5 3,427 1,735 1,692 Kaiser Permanente California Sacramento Area 18 10,402 6,550 3,852 Kaiser Permanente Colorado 1 816 710 106 Kaiser Permanente Georgia 1 816 710 106 Kaiser Permanente Hawaii 2 3,266 3,053 213 Kaiser Permanente Northwest 8 7,424 6,004 1,421 Peace Officers Research Association of California 51 52,298 31,336 20,962 PERS Choice Bay Area 80 64,252 52,808 11,444 PERS Choice Los Angeles Area 1 383 277 106 PERS Choice Other Northern California 13 10,306 7,590 2,716 PERS Choice Other Southern California 7 2,827 1,850 976 PERS Choice Out of State 52 46,787 38,252 8,535 PERS Choice Sacramento Area 6 3,752 3,114 638 PERSCare Bay Area 95 80,767 58,314 22,453 PERSCare Other Northern California 18 12,521 8,492 4,029 PERSCare Other Southern California 9 6,211 5,253 958 PERSCare Out of State 78 63,382 49,727 13,655 PERSCare Sacramento Area 11 7,629 6,227 1,402 Grand Total 1,726 $1,852,238 $561,600 $1,290,638 Attachment A December 2012 32 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration Page intentionally left blank Attachment A 33 City of Palo Alto | Office of the City Auditor | Employee Health Benefits Audit December 2012 ATTACHMENT 2: City Manager’s Action Summary In response to the Audit Recommendations in this report, the City Manager has agreed to take the following actions. Additional comments from the City Manager can be found in Attachment 3 to this report. Finding # Summary of Finding Rec # Recommendation City Manager’s Action Plan Target Date 1. 1 Retiree reimbursements were not accurately calculated. Retroactive transactions are not consistently documented and processed to ensure the accuracy and completeness of the adjustments to the reimbursements. 1-A Establish clear, documented procedures to ensure the accuracy of the Reimbursement Report. This should include:  Establishing a methodology for reconciling the CalPERS billing to the Reimbursement Report and performing a monthly reconciliation to identify, track, and follow up on any discrepancies. Create and maintain common data fields among key data sources to facilitate such reconciliation in an accurate, complete, and efficient manner.  Establish criteria and a methodology for addressing, recording, and reviewing retroactive transactions in the Reimbursement Report.  Written procedures on the Retiree Medical Reimbursement Report process will be created. Mar. 2013  HR staff will request additional resources to establish an automated methodology for reconciling the CalPERS billing to the HR Reimbursement Report. Jan. 2013  A methodology for recording and reviewing the monthly retroactive transactions will be developed. Jan. 2013 1 Eligibility criteria for retiree health benefits were not clearly defined and documented. FY 2011 CAFR note disclosure and the retiree health eligibility information provided to the City’s actuarial firm were inaccurate. The effective implementation date of retiree health tiers is not clearly communicated to stakeholders.  1-B  Enhance current procedures to ensure that the Retiree Medical Tier Matrix is maintained accurately, completely, and in an organized manner along with a complete set of the labor agreements, resolutions, and CalPERS letters.  Consider making the Tier Matrix available to all business partners and stakeholders to ensure that the eligibility criteria are clearly communicated to all parties.  Current process for maintaining Retiree Medical Tier Matrix will be improved and organized so it is available on HR intranet site for business partners. Jan. 2013  Labor Agreements are currently available on HR internet site. 1 Eligibility criteria for retiree health benefits have not always been accurately applied in the calculation of retiree reimbursements. 1-C Establish procedures for determining the health tier for each retiree and maintaining a complete and accurate record of retiree health tiers. Ensure that the tier determination is based on the hire date, retirement date, and employee group at the time of retirement as recorded in SAP and based on the Retiree Medical Tier Matrix.  Review retirees who separated prior to SAP implementation in 2003 to ensure they are accurately recorded on Retiree Medical Tier Matrix. Mar. 2013  A written procedure for documenting health tier as soon as a new retiree appears on CalPERS billing will be documented. Feb. 2013 Attachment A 34 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration December 2012 Finding # Summary of Finding Rec # Recommendation City Manager’s Action Plan Target Date 2 HRD did not always update the CalPERS system when a change in employee group was recorded in SAP. 2-A  Enhance the current procedures to ensure that any changes in employment affecting the employee’s health eligibility status are accurately and consistently recorded in both SAP and CalPERS system in a timely manner.  Verify the accuracy of the CalPERS system record by comparing to the SAP record for each employee at the time of retirement to ensure accurate billing by CalPERS.  HR process for promotions will be updated to include recording changes in SAP as well as CalPERS system until such time that two systems are integrated. Mar. 2013  Quarterly process for reviewing CalPERS billing to ensure accurate billing will be established as well as determining appropriate internal or external resources to accomplish this review. Mar. 2013 2 Duplicate active employee records in the CalPERS system went undetected resulting in the City making overpayments to CalPERS. CalPERS did not have the correct formula to calculate the employer share. 2-B  Establish procedures for providing CalPERS with clear, written instructions for the employer share calculation on a regular basis.  Establish monitoring procedures to ensure that the City instructions are followed by systematically reviewing the methodology applied to calculate the employer share.  Although written instructions were provided in past, to ensure accuracy, HR staff will provide annual instructions to CalPERS to ensure calculations are clearly understood. Dec. 2012  An automated methodology for reviewing the CalPERS billing calculations will be established. Jan. 2013 3 HRD is paying for services it is not receiving. 3-A Review the EBS contract to ensure the adequacy of the contract terms and accuracy and clarity of the scope of services including the retiree tier definition. Establish monitoring procedures to ensure the contract terms remain adequate and any changes in the scope of services are documented and properly authorized in accordance with the terms and conditions under the contract.  HR staff will review the EBS contract with vendor to ensure contract accurately reflects retiree tier definitions and services that can be provided given limitations in access to CalPERS records. Periodic review of contract to ensure scope of services remains accurate will be conducted. Dec. 2012 3 Payment instructions to EBS are provided without adequate supporting documentation resulting in an overpayment of at least $2,148. 3-B  Establish recordkeeping procedures for maintaining monthly Reimbursement Reports and additional payment instructions provided to EBS along with adequate supporting documentation.  Establish review procedures to ensure accuracy and completeness of retiree reimbursements prior to instructions being provided to EBS for payment.  Recordkeeping procedures for any payment instructions and adjustments provided to EBS will be established. Jan. 2013  Review process will be established to ensure retiree reimbursement instructions are complete prior to submitting to EBS for payment. Dec. 2012 Attachment A 35 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration December 2012 Finding # Summary of Finding Rec # Recommendation City Manager’s Action Plan Target Date 3 Payment instructions to EBS are provided without adequate supporting documentation resulting in an overpayment of at least $2,148. (Continued) 3-B  Request EBS to provide monthly and annual reconciliations of their check register to the Reimbursement Reports and to notify the City of any exceptions noted during the month.  Establish procedures for reviewing the monthly reconciliations and tracking and following up on any discrepancies including returned, voided, reissued checks in a timely manner. If the exceptions require corrective actions, they should be documented and related written communication to EBS be maintained.  HR staff will request monthly reconciliation of check register and notification to City of any exceptions noted. Nov. 2012  Procedures will be established for reviewing monthly reconciliation reports, including follow up on any discrepancies and documenting corrective action. Feb. 2012 3 HRD was not aware that 20 checks issued in 2011 remained uncashed. 3-C Work with ASD to establish procedures for handling uncashed EBS checks. Based on the procedures, formalize the EBS procedures for notifying the City of the returned or uncashed checks and how to handle them.  HR will work with ASD to establish a procedure for EBS notification of uncashed checks and steps to follow in such circumstances. Feb. 2013 3 HRD process for ensuring required 1099 tax forms are received by applicable retirees was not always complete or accurate. 3-D Establish a methodology for EBS to follow and require specific supporting documentation to be provided to HRD for review. Identify review criteria and establish procedures to verify the accuracy and completeness of the EBS services provided for Form 1099 issuance.  Establish recordkeeping procedures to ensure EBS accurately issues 1099 forms to retirees who have not submitted Substantiation forms and at the same time, accurately documents forms received. Dec. 2012 3 Inadequate review of EBS invoices left invoicing errors undetected. 3-E Establish procedures to review EBS invoices to ensure the accuracy of the EBS billing. Review should include reconciliation of the invoice to the actual services provided.  Procedure for reviewing EBS invoices will be created to ensure accuracy of EBS billing and completion of services. Feb. 2013 4 Required documentation to verify the eligibility of dependents for enrollment was not always available. 4 Improve dependent eligibility verification procedures to ensure that required supporting documentation is obtained, reviewed, and maintained in accordance with the CalPERS Circular Letter No. 600-045-12.  Verification procedures will be reviewed and improved to ensure that required supporting documentation is obtained and if not, medical insurance will be cancelled promptly. Apr. 2013 5 Personally Identifiable Information (PII) has not been adequately protected and controlled. 5 Take applicable steps recommended by the NIST Guide to appropriately maintain the confidentiality of PII.  The NIST guidelines have been reviewed with HR staff. An internal policy will be created. Jun. 2013 Attachment A 36 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration December 2012 Page intentionally left blank Attachment A 37 City of Palo Alto | Office of the City Auditor | Audit of Employee Health Benefits Administration 37 November 2012 December 2012 ATTACHMENT 3: City Manager’s Response Date: November 30, 2012 To: James Pelletier, City Auditor From: James Keene, City Manager Prepared by: Kathryn Shen, Chief People Officer The Human Resources Department (HR) requested assistance from the City Auditor to focus on a complex Retiree Reimbursement process related to the retiree medical benefits provided to City retirees. HR recognizes the diligent work of the City Auditor Office and appreciates the recommendations which will greatly improve this recently expanded process in support of the City’s effort to collect employee health plan contributions that have decreased the City’s employee benefit costs. In the past 17 months since this Retiree Reimbursement process was expanded, on average 800 checks have been distributed on a monthly basis, in timely fashion, averaging $700,000 in total per month. In September 2011, CalPERS implemented a new billing system, "my/CalPERS" which has documented glitches since the implementation date. CalPERS is still struggling in finding corrections to the various errors. This has complicated the reimbursement process requiring substantial adjustments. Fortunately, most overpayments can be recovered by withholding or reducing future reimbursements. Carefully reviewing the reimbursement reports will be key to addressing the issues found in this audit. Staff will also continue to find solutions to streamline this reimbursement process. Human Resources staff is committed to addressing the deficiencies and improving the reconciliation methodology for this complex process. Attachment 2 includes the steps that will be taken to improve procedures as recommended. Attachment A TO: HONORABLE POLICY AND SERVICES COMMITTEE FROM: OFFICE OF THE CITY AUDITOR DATE: DECEMBER 6, 2012 STAFF REPORT: 3373 SUBJECT: LATE PACKET MEMO We are providing the revised City Manager’s Response (Attachment 3) to the Audit of Employee Health Benefits Administration from the City Manager. This is item #2 on the Policy and Services Committee Agenda. Respectfully submitted, ________________________________ JIM PELLETIER City Auditor 2 Date: Dec. 6, 2012 TO: City Auditor Jim Pelletier FROM: James Keene, City Manager RE: City Manager’s Response to Audit The City has made structural changes to its retiree benefits over the years, producing significant cost savings with each new retiree health tier. CalPERS systems are not as flexible as the City, as it employs a one-size-fits-all policy. CalPERS deducts health premium costs from retirees, but the majority of City retirees receive 100% City-paid health care. Yet CalPERS deducts a greater amount every month than some retirees expect, which the City in turn reimburses to the retiree. This over-deducting has necessitated City staff to institute a reimbursement process as the burden has shifted from CalPERS to the City to administer. Moreover, the different IT systems on both the City and CalPERS side make it difficult to reconcile reimbursement amounts. After learning about the complexities associated with the existing reimbursement process for retiree medical benefits, the Chief People Officer requested that the City Auditor focus the employee benefit audit to document the existing process and make recommendations to improve it. The City Auditor’s recommendations will assist the Human Resource Department in developing a process that balances the expense and effort of administering these tiers against cost savings. On average, 800 checks have been distributed monthly to retirees since 2011, on time, totaling over $700,000 per month. At the same time, CalPERS began implementing a new billing system which has documented glitches since the implementation date. CalPERS is still struggling in finding corrections to the various errors. This has complicated the reimbursement process requiring substantial adjustments. Fortunately, most overpayments can be recovered by withholding or reducing future reimbursements. Carefully reviewing the reimbursement reports will be key to addressing the issues found in this audit. Staff will also continue to find solutions to streamline this reimbursement process. Human Resources staff is committed to addressing the deficiencies and improving the reconciliation methodology for this complex process. Attachment 2 contains the steps that will be taken to improve procedures as recommended. POLICY AND SERVICES COMMITTEE DRAFT EXCERPT Page 1 of 10 Special Meeting December 11, 2012 Audit of Employee Health Benefits Administration Jim Pelletier, City Auditor, provided a presentation on the Audit of Employee Health Benefits Administration. The objective of the audit was to determine whether the Human Resources Department had adequate controls over health benefits to ensure the health premiums and administrative fees were calculated and paid accurately for eligible, active, and retired employees. The Human Resources department had requested the assistance of the City Auditor to focus on the reimbursement process related to the health premiums. Yuki Matsuura, Senior Performance Auditor, explained the City share of premiums for active SEIU and management employees. From April 2011 through to October 6, 2012 the employee paid ten percent of the premium. From October 6, 2012 to the present all active employee groups are paying the ten percent of the premium. Retiree health share costs were dependent upon their health plan and the tier they were in. Council Member Klein asked if the City could request their Legislatures to carry out legislation to simplify the CalPERS billing/payment system. James Keene, City Manager, clarified the audit defined the analysis of what the drivers were to issue and how the City could preventatively manage the impacts of the problem. The goal of the audit was to define future assessments on whether adequate systems were in place to grant such a variety of healthcare benefits. He acknowledged the fundamental issue was a CalPERS problem the City was trapped in as a client and there were adaptations necessary. He felt CalPERS had pulled back from previous commitments and were essentially requesting the cities to pay the bill. Council Member Klein believed the State Legislatures needed to be involved. He asked how much the process was costing the City if they were in fact following the correct process compared to the cost if CalPERS was completing it correctly. Attachment B DRAFT EXCERPT Page 2 of 10 Policy and Services Committee Special Meeting Draft Excerpt 12/11/12 Kathy Shen, Chief People Officer, noted in 2011 CalPERS initiated a new Information Technology system which had a number of issues. Because of those issues CalPERS was only able to administer one type of reimbursement. Since Palo Alto was so aggressive with a number of tiers the thought was CalPERS would be able to administer the process and the City paid them an administration fee. CalPERS passed the administration task back to the City which became a struggle. Council Member Klein recommended reducing the administrative fee paid to CalPERS until they were able to actually complete the administration. He asked the amount paid to CalPERS. Sandra Blanch, Human Resources Assistant Director, stated the fee was a fixed percentage that she did not have at the moment. She would research and provide and answer at a later time. Council Member Klein said he was interested to see if other states had similar issues. Ms. Matsuura reviewed the billing plans for retirees. CalPERS removed large sums of money from the retiree checks so the City increased the reimbursement amounts to the retirees to cover their losses. Mr. Pelletier clarified CalPERS was taking healthcare premiums from retirees checks and then billing the City for their share while the City was providing reimbursement instructions to the outside vendor EBS who was sending the reimbursement checks to the retirees. Ms. Matsuura noted more than half of the retirees were not recorded in the SAP system and those who were in the system were not actively maintained. There was a lack of reliable Human Resources records of payment. The billing data for active employees were not retained by the department and the analysis was limited to the June 2012 and the October 2012 billings for active employees. CalPERS was unable to provide retroactive transaction data so that portion was removed from the analysis. CalPERS billing, the SAP system, and the outside vendor EBS did not have a common data field to compare reimbursement reports. The first finding was the City had made overpayments of $12,000 and underpayments of $4,000 for retiree reimbursements. Retroactive reimbursements were not consistently documented or processed for accuracy or completeness. Based on research of the eligibility criteria for retirees, the information was not clearly defined or documented. Mr. Keene noted there were 64 errors out of 822 retirees reviewed. Attachment B DRAFT EXCERPT Page 3 of 10 Policy and Services Committee Special Meeting Draft Excerpt 12/11/12 Mr. Pelletier noted the Comprehensive Annual Financial Report (CAFR) note was incorrect in 2011 and was not corrected for 2012. Ms. Matsuura stated the health tier for each retiree was not accurately maintained by the department and were not applied to the reimbursement calculation. The tier for each retiree was determined based on their hire and retirement dates, the employee group recorded in SAP, and the comparison to the tier document in the SAP report. 150 records out of 822 were coded to an incorrect tier. Two were CalPERS billing and was not adequately monitored. There were two duplicate active employees where the City was being billed twice by CalPERS; as of October 2012 the overbilling was $37,000. Mr. Pelletier mentioned Human Resources had communicated two duplicate employees to CalPERS. One employee had been repaired but the other remained a duplicate. Ms. Matsuura stated the CalPERS systems were not always updated when a change in an employee group was recorded in SAP. 85 active employees out of 812 were recorded to a different group. 36 retired employees out of 385 were recorded incorrectly. It was found that CalPERS did not have the correct formula to calculate the employer share; the total error was $5,500 in a single month. The third finding was the Human Resources Department had not effectively implemented the outside vendor EBS contract and was paying for services the City was not receiving. Payment instructions to EBS were provided without adequate supporting documentation resulting in overpayment of $2,148. Mr. Pelletier mentioned the amount was not the concern as much of the risk of potential exposure. There was access to a great deal of City funds without sufficient oversight. Ms. Matsuura stated the departments were not tracking the cashed checks nor following the proper procedures for stale dated checks. Council Member Klein asked if the amount of 20 un-cashed checks in 2011 was an unusual amount. Mr. Pelletier felt it was possibly a usual amount for un-cashed checks. Retirees move around without updating their addresses. The main issue was the City had a policy in place where stale checks were dealt with within a 6- month period and that had not been followed. Council Member Klein asked the total amount of the 20 un-cashed checks. Attachment B DRAFT EXCERPT Page 4 of 10 Policy and Services Committee Special Meeting Draft Excerpt 12/11/12 Ms. Matsuura said she did not have the exact amount at the present time. This finding also reflected the 1099 tax forms received were not accurate or complete. Inadequate review of the EBS invoices revealed errors previously undetected; the City received a refund of $2,000. The fourth finding showed 20 employees’ files reviewed out of 31 had missing required documentation. Council Member Klein asked if there were people with dependents listed that were actually not eligible. Ms. Matsuura said there were duplicate dependents located but they were not affecting the premium being paid by the City. Finding five showed personally identified information was not adequately protected or controlled. Ms. Shen requested the audit after becoming aware CalPERS was deducting funds from retirees’ and the City needing to reimburse the retirees. In 2012, if a retiree had Blue Shield medical coverage without any dependents, their health premium was $711.10 monthly. CalPERS had stated they could not do more than credit the City with the minimum contribution which was $106.40. Therefore, $604.70 was deducted from the retiree’s pension. Depending on the tier the retiree was in, the City would reimburse the retiree for the appropriate amount. The audit showed there were improvements needed and where checks and balances could be put into place. She assured the Policy & Services Committee (Committee) the Human Resources Department was committed to correcting the Auditor’s findings. Mr. Keene felt the audit recommendations did not have an adverse effect on the CalPERS billing and reimbursement systems. The recommendations would have been the same if the CalPERS issues did not exist. He acknowledged the problem for error was exacerbated by the fact the City had to pay. The general assumption was the City had a contract and relationship CalPERS to manage the retiree medical system and the audit proved the City could not rely solely on that assumption. There needed to be a parallel system to manage and be sure CalPERS was managing the items correctly. Mr. Pelletier said with any contract the City had there was a responsibility to provide oversight. Mr. Keene said there were 871 employees in the medical plan and each one received a reimbursement check from the City so they could ensure their retirement dollars were made whole because CalPERS deducted funds from their retirement check. That effort required Staff time checking and verifying each one of the 871 reimbursement checks was accurate. Attachment B DRAFT EXCERPT Page 5 of 10 Policy and Services Committee Special Meeting Draft Excerpt 12/11/12 Council Member Espinosa understood the action for the current item was to accept the report; although, he recommended agendizing an action item for the Council to consider what should occur on a broader basis. He asked if there were any liability concerns that the City Attorney may foresee a retiree confronting the City with mismanaging their funds. Molly Stump, City Attorney, was presently in discussions with Ms. Shen regarding the possibility of liability. The question the City needed to explore was whether there were incidents of over or under payments where the City could proactively reach out and make the adjustments. Mr. Keene stated the correction was one of accuracy not in large sums of financial burden. The accuracy needed to be verified further than July 2011. Moving forward there needed to be a system in place to manage the risk given the gap between CalPERS and the City. Ms. Shen said moving forward the City needed to work with CalPERS to get advanced information because the City had not been provided accurate data on why certain adjustments had been made on a month to month basis. Staff would have no knowledge of the difference in payment amount until or unless the retiree notified the Staff. Her goal was to locate a CalPERS staff member to coordinate with to verify inaccuracies as they occur rather than after the fact. Council Member Espinosa asked if there had been discussions with CalPERS in a legal environment regarding addressing some of the issues that had been raised. Ms. Stump noted the initial phase necessary to move forward with discussions was the completion of the detailed work by the Auditor’s office. With the completion of the audit the focus had turned to what could be accomplished on a systemic basis. She mentioned CalPERS was a very large bureaucratic organization that was not a client service platform. Council Member Espinosa questioned the differences between the City Auditor recommendations and the City Manager response to them. There did not seem to be a definitive agreement or disagreement between the City Manager and the Staff recommendations. He asked if the intent was to implement all of the recommendations. Mr. Pelletier stated yes, the intent was to implement all of the recommendations. Ms. Shen noted her department was planning to implement the recommended action plans; the written procedures, additional resources, Attachment B DRAFT EXCERPT Page 6 of 10 Policy and Services Committee Special Meeting Draft Excerpt 12/11/12 process mapping, and the double checking. Some actions had already been put into place. Council Member Espinosa asked if there were other significant changes to the City’s broader Human Resources practices that Ms. Shen felt were necessary to review or other areas of concern she believed should be reviewed. Ms. Shen mentioned there was currently a reorganization occurring in the Human Resources Department to ensure Staff was better educated and had enhanced tools at their disposal to serve their customers. She did not feel an additional audit or review was necessary. Mr. Keene stated the City did not currently have an integrated complete Human Resources information systems module and certainly not one that was compatible with the SAP system. The City needed to realize their relationship with CalPERS was a lifelong process and they needed to protect themselves with the parallel checking procedures. Mr. Pelletier felt putting in specific solid monitoring controls was a step-up from monitoring a standard large contract. Once the up-front investment was implemented and the procedures were in place to complete the recommendations the process would be more efficient and smoother moving forward. He noted there would be a large investment on the side of Staff to complete the implementation. Council Member Klein asked if January 20, 2011 was the date CalPERS began not paying the full amount of the medical insurance. Mr. Keene stated it appeared to be a key date as it related to a large group of the retirees. Ms. Shen clarified May of 2011 was when the 90/10 applications began which was when CalPERS informed the City they were not going to administer the multiple tier process. Council Member Klein asked if there were other cities within the State of California with similar concerns. Mr. Pelletier said Staff was uncertain of issues with other cities. Ms. Matsuura stated CalPERS had mentioned there were other jurisdictions providing reimbursements. Attachment B DRAFT EXCERPT Page 7 of 10 Policy and Services Committee Special Meeting Draft Excerpt 12/11/12 Council Member Klein said if Palo Alto was to pursue legislative action it would be beneficial to partner with other cities that were experiencing similar concerns. Ms. Stump noted when the CalPERS system was rolled out there were tremendous issues. She believed there were a small number of other jurisdictions who experienced similar contribution issues. Council Member Klein believed there were a number of cities who adopted the 90/10 system once Palo Alto had implemented it. Ms. Blanch stated many agencies structure their health benefits differently than Palo Alto. While there were others’ in similar situations they set-up a cafeteria plan and started out with the minimum contribution but paid above the minimum. Council Member Klein asked if EBS would have been hired if not for the CalPERS issues. Ms. Shen stated no, EBS was hired specifically to reconcile the reimbursement situation. Ms. Blanch noted when the initial process began to distribute the checks it was too costly for the Administrative Services Department (ASD) to assist with the check writing process. A Request for Proposal (RFP) was conducted to hire a vendor, originally strictly to distribute checks. As the scope was being developed the intent was to establish a contract between CalPERS and the vendor to have the CalPERS invoices be sent directly to the vendor. In the research performed Staff was informed CalPERS could not connect with a third party vendor. Council Member Klein asked the amount the City paid to EBS. Ms. Blanch said it was an annual contract in the amount of $36,000. Council Member Klein said it seemed the City could perform all of the tasks correctly but there would remain issues because of the uncertainty of what CalPERS was doing. Mr. Pelletier said if the City had an effective reconciliation process in place they could mitigate a significant portion of the at-risk errors. The data of what CalPERS was actually doing was sent to the City; Staff could see what they were doing and the errors being made. Council Member Schmid stated the City was making Annual Required Contribution (ARC) payments to achieve a goal so the payments could be Attachment B DRAFT EXCERPT Page 8 of 10 Policy and Services Committee Special Meeting Draft Excerpt 12/11/12 invested at the high rates of return. Eventually there would be a fund of monies that could pay for retiree benefits. If that was the model for the ARC he was concerned there were reimbursements ranging from $2 million to $5 million; implying the City was on a pay as you go basis for retiree health. Mr. Pelletier stated the $2 million in 2011 and the $5.78 million in 2012 was representative of the City’s share portion of the minimum contribution and the amount the City was responsible for reimbursing to the retirees. Council Member Schmid was under the impression the City was making the City share ARC payments and some pre-payment for future retirees. The reason was to achieve investment return therefore making the final payment easier. Mr. Keene clarified the current premium paid to CalPERS was $6.2 million. That amount was not going to CalPERS in the same way as the billing was being presented from them. The City needed to backfill by directly reimbursing the retirees because of the current situation. The amount used to be a direct payment to CalPERS but now the amount shown was the amount to CalPERS inclusive of the amounts paid to the reimbursement of the retirees. Council Member Klein said a combined cost from 2011 and 2012 was $8.2 million. Mr. Pelletier said the Staff redirected the same funds from 2011 to 2012 so rather than paying CalPERS directly; the City was now using the funds to reimburse the retirees directly. Council Member Schmid understood the concept; however, in reviewing 2008 there was a pre-payment process with the CalPERS system to begin drawing interest for future retirees. As the Staff Report moved from 2008 to 2012 the pre-payment information disappeared. The City should be continuing to make the pre-payments annually to ease the burden on future retirees but instead the system chosen was to directly pay retirees. Mr. Keene confirmed the previous pre-payments were held in the Trust and were factored into the actuarial numbers that comprised the ARC. He was uncertain as to why there were no pre-payments in the 2012 year. Council Member Klein suggested when the Council chose to make changes to the actuarial one of the changes was to not pay it down but to roll it over. Council Member Schmid said part of the monies CalPERS was paying the retirees should reflect the earnings of the ARC down payment made. By Attachment B DRAFT EXCERPT Page 9 of 10 Policy and Services Committee Special Meeting Draft Excerpt 12/11/12 CalPERS forcing the City to reimburse the share of funds they were paying out of the City’s investment was being reduced annually. Ms. Stump stated those were solid questions for the Actuarial John Bartel when he returned. She believed his response would be the City was paying the current bill for the retirees and were beginning in a small way to pre- fund the retirement funds of the current employees. The City had not pre- funded for the current retirees and therefore were on a pay as you go basis. Council Member Schmid said on page 17 of the Staff Report there was a note on the CAFR. He asked if Staff was implying the Consultant who approved the CAFR numbers had problems. Mr. Pelletier clarified the issues in the note disclosure to the CAFR was an explanation of the retirement tiers. Council Member Schmid asked if the note was disclosing there were miscalculated numbers. Mr. Pelletier stated no, the note did not impact the financial numbers in the report. It was information that supported the CAFR numbers. Council Member Schmid asked if the table should be considered during the conversation regarding benefits. Mr. Pelletier stated yes because there were errors located within the table itself. Council Member Schmid said Staff Report page 23 referred to the second most expensive health care plan. The cost for each plan changed annually so noting the second most expensive plan for 2012 could be a different plan in 2013. He asked if that was a complicated factor where CalPERS needed to re-calculate each year. Ms. Shen said in theory it could be difficult but for many years Blue Shield had been the second most expensive plan. Council Member Schmid asked what the highest plan was. Ms. Shen stated PERS Care was the highest. Council Member Schmid said Staff Report page 31 showed a table of the CalPERS billing summary for 2012. He questioned the retiree participant share and employer share. He believed the City had reached the 90/10 cost split but was uncertain how the numbers were reflective of that. Attachment B DRAFT EXCERPT Page 10 of 10 Policy and Services Committee Special Meeting Draft Excerpt 12/11/12 Mr. Keene clarified the 90/10 cost share was only effective for the retirees who retired after the 90/10 plan was implemented. The bulk of the retirees were not in the 90/10 plan. Council Member Schmid said the participant share was around 35 percent, was that because they were receiving Medicare. Ms. Matsuura stated the table on page 31 was based on the billing and the participant share was reflective of the amount CalPERS was deducting from the retirees’ checks. It did not represent what the City intended for each retiree to pay. Mr. Pelletier said the amounts may not accurately reflect the tiers the employees were in or the amount they should pay. The numbers were solely reflective of what CalPERS should pay including the errors. Council Member Schmid clarified the participant share included the City’s reimbursement. Mr. Pelletier concurred. MOTION: Council Member Espinosa moved, seconded by Council Member Schmid to recommend the City Council approve the Employee Health Benefits Administration Audit. MOTION PASSED: 4-0 Council Member Schmid said if there was anything the City Council could do to assist with CalPERS or the state in terms of a Resolution or a letter that could be helpful to let them know. Ms. Shen said thank you, she would keep that in mind. Sheila Tucker, Assistant to the City Manager, stated to her knowledge everything on the work plan had been accomplished for the 2012 year. Council Member Espinosa felt the discussions during the meeting on the process highlighted how issues, ideas, and next steps were raised that would result in a much better process and state for the City. ADJOURNMENT: The meeting was adjourned at 9:44 P.M. Attachment B CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR January 22, 2013 The Honorable City Council Palo Alto, California Policy and Services Committee Recommendation to Accept the Contract Oversight Audit The Office of the City Auditor recommends acceptance of the Contract Oversight Audit. At its meeting on November 20, 2012, the Policy and Services Committee approved and unanimously recommended the City Council accept the report. The Policy and Services Committee minutes are included in this packet. Recommended Action: Accept the Contract Oversight Audit. Respectfully submitted, Jim Pelletier City Auditor ATTACHMENTS:  : Attachment A: Contract Oversight Audit (PDF)  : Attachment B: Policy and Services Committee Meeting Minutes Excerpt (November 20, 2012) (PDF) Department Head: Jim Pelletier, City Auditor Page 2 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR November 20, 2012 The Honorable City Council Attention: Policy & Services Committee Palo Alto, California Contract Oversight Audit In accordance with the Fiscal Year (FY) 2012 Annual Audit Work Plan, the Office of the City Auditor has completed the Contract Oversight Audit. The audit contains six findings with a total of ten recommendations. The Office of the City Auditor recommends the Policy and Services Committee review and recommend to the City Council acceptance of the Contract Oversight Audit. We thank the staff of the Administrative Services Department (ASD) for their time, information, and cooperation during the audit process. Respectfully submitted, Jim Pelletier City Auditor ATTACHMENTS:  Attachment A: Contract Oversight Audit (PDF) Department Head: Jim Pelletier, City Auditor Attachment A Page 2 Attachment A Jim Pelletier, City Auditor Houman Boussina, Senior Performance Auditor AUDIT OF CONTRACT OVERSIGHT: OFFICE SUPPLIES November 2012 Office of the City Auditor Attachment A Attachment A November 2012 1 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit SUMMARY OF RESULTS Internal controls within the Purchasing and Contract Administration Division (Purchasing) of the Administrative Services Department (ASD) require improvement to ensure that contracts are administered in accordance with the Municipal Code and relevant policies and procedures. In regard to the City’s contract with OfficeMax, the City could have saved between $196,484 and $389,426 if the contract had been appropriately administered to ensure the City was receiving reasonably expected discounts at authorized prices. This includes:  $47,563 in overcharges from unauthorized price increases (Finding 1).  $148,921 to $341,863 in additional discounts (Finding 2). Source: OfficeMax billing records for the City In this report, the Office of the City Auditor (OCA) provides 10 recommendations to improve contract oversight practices within the City and to support the City in recovering additional discounts from OfficeMax. We encourage other City departments with contract administration roles and responsibilities to review this report and implement the recommendations where applicable. Page two of this executive summary presents highlights of findings and recommendations presented in this report. The City has spent more on office supplies per Full Time Equivalent (FTE) than other selected local jurisdictions (Finding 3) Source: Cities Office of the City Auditor EXECUTIVE SUMMARY – CONTRACT OVERSIGHT AUDIT: OFFICE SUPPLIES Audit Objective: To assess whether internal controls are effective and adequate to ensure that City contracts are administered in accordance with the City of Palo Alto Municipal Code and relevant policies and procedures. The audit focused on the City’s office supplies contract with OfficeMax Incorporated. The City’s declining discount rate for office supplies purchased from OfficeMax under the America Saves program (Finding 3): Attachment A November 2012 2 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit REPORT HIGHLIGHTS OfficeMax overcharged the City at least $47,563 by applying unauthorized changes to pricing— OfficeMax changed the prices on items purchased by the City under contract and could not provide supporting evidence showing price changes were approved as required by the contract. [Page 9] The City could have received additional discounts for non-contract office supplies—Our analysis indicates the City could have saved between $148,921 and $341,863. [Page 10] ASD has not effectively administered the City’s office supplies contract—ASD has not established effective processes and procedures to ensure the City receives contracted discounts and other key benefits, and that the office supplies contract meets the City’s business needs. [Page 13] ASD should ensure the City’s financial records accurately identify office supplies and should properly budget for and control office supplies expenditures—While City records indicate the City has spent considerably more for office supplies than other local jurisdictions sampled, we could not reasonably associate a significant portion of office supplies expenditures with office supplies vendors. [Page 19] Strategic contracting practices may provide savings opportunities—The City did not have authorized contracts for several vendors selected for review and did not have a process to document and approve all exemptions from competitive procurement. [Page 20] The City has not sufficiently defined contract administration roles and responsibilities—We did not find sufficient guidance regarding contract administration roles, responsibilities, and business practices to ensure compliance with the City’s contract terms and also to ensure the City receives contracted benefits. [Page 25] RECOMMENDATION HIGHLIGHTS OCA recommends that ASD consider the following actions:  Request reimbursement of $47,563 from OfficeMax for contract item overcharges.  Consult with the City Attorney’s Office to determine if the City can recover additional discounts ranging from $148,921 to $341,863 from OfficeMax for non- contract items.  Develop formal procedures to effectively administer the City’s office supplies contract.  Implement controls to ensure that office supplies are accurately recorded in the City’s accounting records.  Clarify the City’s procurement policies and procedures to specify when Purchasing should negotiate contracts, based on dollar amount thresholds applicable to total citywide expenditures for goods and/or services regardless of payment method.  Monitor expiring contracts to ensure they are re- established in a timely manner.  Comply with Municipal Code requirements for applying and documenting exemptions from competitive solicitation in the procurement of goods and services.  Monitor total citywide expenditures on categories of goods and/or services to ensure the City has properly approved contracts in order to maximize cost savings.  Ensure contract administration roles and responsibilities are defined and appropriately communicated. This document represents a limited summary of the audit report and does not include all of the information available in the full report. The full report can be found on the Office of the City Auditor website at: http://www.cityofpaloalto.org/gov/depts/aud/reports/performance.asp Attachment A November 2012 3 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit CONTENTS EXECUTIVE SUMMARY ......................................................................................................................................................... 1 INTRODUCTION ................................................................................................................................................................... 5 AUDIT OBJECTIVE ......................................................................................................................................................................... 5 BACKGROUND.............................................................................................................................................................................. 5 AUDIT SCOPE AND LIMITATIONS ...................................................................................................................................................... 5 AUDIT METHODOLOGY .................................................................................................................................................................. 8 CITY AUDITOR’S CONCLUSION ......................................................................................................................................................... 8 FINDINGS: FINDING 1: OFFICEMAX OVERCHARGED THE CITY AT LEAST $47,563 BY APPLYING UNAUTHORIZED CHANGES TO PRICING ................................ 9 FINDING 2: THE CITY COULD HAVE RECEIVED ADDITIONAL DISCOUNTS FOR NON-CONTRACT OFFICE SUPPLIES ................................................ 10 FINDING 3: ASD HAS NOT EFFECTIVELY ADMINISTERED THE CITY’S OFFICE SUPPLIES CONTRACT .................................................................. 13 FINDING 4: ASD SHOULD ENSURE THE CITY’S FINANCIAL RECORDS ACCURATELY IDENTIFY OFFICE SUPPLIES AND SHOULD PROPERLY BUDGET FOR AND CONTROL OFFICE SUPPLIES EXPENDITURES ................................................................................................................ 19 FINDING 5: STRATEGIC CONTRACTING PRACTICES MAY PROVIDE SAVINGS OPPORTUNITIES ...................................................................... 20 FINDING 6: THE CITY HAS NOT SUFFICIENTLY DEFINED CONTRACT ADMINISTRATION ROLES AND RESPONSIBILITIES .......................................... 25 GLOSSARY OF ACRONYMS AND TERMS ............................................................................................................................. 27 ATTACHMENT 1: CITY OF PALO ALTO MUNICIPAL CODE—CONTRACTS AND PURCHASING PROCEDURES ......................... 29 ATTACHMENT 2: OFFICEMAX LIST OF “AMERICA SAVES NON CORE PRICE RANGES” ......................................................... 53 ATTACHMENT 3: CITY MANAGER’S ACTION SUMMARY ..................................................................................................... 55 ATTACHMENT 4: CITY MANAGER’S RESPONSE................................................................................................................... 61 In accordance with the Fiscal Year 2012 Annual Audit Work Plan, the Office of the City Auditor has completed this Audit of Contract Oversight. We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We would like to thank the staff of the Administrative Services Department for their time, information, and cooperation during the audit process. Attachment A November 2012 4 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Page intentionally left blank Attachment A November 2012 5 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit INTRODUCTION Audit Objective The objective of this audit was to assess whether internal controls are effective and adequate to ensure that City contracts are administered in accordance with the City of Palo Alto Municipal Code (Municipal Code) and relevant policies and procedures. The audit focused on the City’s office supplies contract with OfficeMax Incorporated (OfficeMax). Background The Office of the City Auditor (OCA) presents its contract oversight audit, which is included in the OCA Fiscal Year (FY) 2012 workplan approved by City Council. This audit provides an initial assessment of contract oversight, with a focus on the City’s office supplies contract, which was selected for detailed review. According to an OfficeMax representative, the City entered the OfficeMax America Saves program on November 1, 2007. Under its America Saves program, OfficeMax extended to other government agencies the terms of a master purchasing agreement (the America Saves contract) it held with Oakland County, Michigan, the lead agency. This contract covered the period from June 1, 2006 through June 30, 2011. OfficeMax extended the America Saves program under the terms of a new agreement with Oakland County. According to an OfficeMax representative, the City continued to participate in the America Saves program under the terms of the new agreement. Staff has purchased office supplies using purchasing documents and also the City’s purchasing card (CAL-Card) system. Exhibit 1 summarizes the City’s records of payments to OfficeMax for office supplies from 2005 through 2011. Exhibit 1: City expenditures on office supplies from OfficeMax Year Purchasing Documents CAL-Card Total 2005 $ 43,137 $ 32,271 $ 75,407 2006 $ 129,753 $ 154,809 $ 284,562 2007 $ 82,577 $ 177,652 $ 260,229 2008 $ 106,670 $ 174,790 $ 281,461 2009 $ 96,484 $ 185,899 $ 282,383 2010 $ 85,999 $ 201,878 $ 287,877 2011 $ 53,270 $ 220,645 $ 273,915 Total: $ 597,890 $ 1,147,945 $ 1,745,834 Source: City of Palo Alto financial records Audit Scope and Limitations The period covered was the assumed term of the City’s contract with OfficeMax under the America Saves program, from November 1, 2007 through May 31, 2011. The City did not retain all contract documentation, and we relied on information from OfficeMax to determine the contract commencement date for the City. Subsequent to issuance of the draft audit report, OfficeMax provided documentation supporting that the agreement had been extended through June 30, 2011 due to a delay in signing a new agreement dated June 1, 2011. We did not extend our testing to cover the month of June 2011. The audit focused on the following areas:  OfficeMax compliance with the key America Saves contract terms, with an emphasis on pricing accuracy. Attachment A November 2012 6 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit  Enforcement of contract terms and monitoring of contractor performance by the City.  Usage of the OfficeMax America Saves contract by the City. Scope Limitation—OfficeMax sales tax and service charge data was unreliable and incomplete As illustrated in Exhibit 2a, sales tax was unusually high in 2006, 2007, and 2008. The exhibit also shows service charges paid by the City totaling approximately $25,092. Exhibit 2a: Summary of office supplies charges for the City – data reliability concerns highlighted Year Amount Billed Sales Tax Service Charge 2006 $ 260,481 $ 134,370 $ 29 2007 $ 242,801 $ 145,759 $ 236 2008 $ 256,422 $ 125,478 $ - 2009 $ 246,788 $ 21,610 $ 581 2010 $ 256,674 $ 23,700 $ 23,700 2011 $ 240,857 $ 21,120 $ 546 Total: $ 1,504,023 $ 472,036 $ 25,092 Source: OfficeMax records originally provided for this audit Section 7.17 of the America Saves contract required OfficeMax to maintain and provide access to accurate books and records in connection with the services provided. In response to our concerns regarding data reliability and completeness, OfficeMax provided a new data file that did not include complete sales tax and service charge data. When asked, the OfficeMax representative stated service charge data was included “where applicable,” but that sales tax was not standard data provided in response to an audit request. Because of this limitation:  We could not quantify service charges. We were unable to find any contractual basis for these charges.  We could not verify accuracy of tax charges.  We could not perform a direct comparison of OfficeMax records with the City’s accounting records, which include tax charges, in order to verify OfficeMax records we tested were complete. OfficeMax data we used may understate total City purchases by approximately $25,000 for the period from November 1, 2007 to May 31, 2011. Subsequent to issuance of the draft audit report, OfficeMax provided a new data file showing sales tax and service charges for each invoice. The data appeared more consistent; however, we did not perform any testing or verification on the new data, which is summarized in Exhibit 2b. OfficeMax stated that service charges were delivery charges for special order items that were applied by the vendor and passed on by OfficeMax. However, our analysis indicates OfficeMax only applied the “service charges” in some instances when the City placed an order totaling less than $50. This practice appears consistent with printed language in invoices submitted to the City stating a specified “small order fee” was applicable to orders under $50. We were unable to find any contractual basis for these service charges or small order fees. Attachment A November 2012 7 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Exhibit 2b: Summary of office supplies charges for the City (restated) Year Amount Billed Sales Tax Service Charge 2006 $ 260,481 $ 21,483 $ 215 2007 $ 242,801 $ 20,005 $ 379 2008 $ 256,422 $ 21,148 $ 424 2009 $ 246,788 $ 22,243 $ 312 2010 $ 256,674 $ 23,777 $ 240 2011 $ 240,857 $ 21,265 $ 534 Total: $ 1,504,023 $ 129,920 $ 2,104 Source: OfficeMax records provided subsequent to issuance of the draft audit report Scope Limitation—OfficeMax unit of measure data field is not reliable We also noted discrepancies between the unit of measure data field in OfficeMax billing data for the City and the City’s contract. As a result, $72,099, or about 8 percent of the City’s net purchases during the period from November 1, 2007 through May 31, 2011 was excluded from our analysis. For example, the contract price list identified a ream of Aspen paper with the numeric identification number 322344, product code P154901, and the contracted unit cost of $2.52. OfficeMax billing data for the City shows Aspen paper, identified by the same numeric identification number and product code, was also sold using different units of measure, such as “CT” or “PL,” with the unit cost ranging from $35.70 to $1,460. Due to differences of this type, which prevent a valid comparison of charges with the contract terms, we limited the scope of our audit to records without unit of measure discrepancies. Subsequent to issuance of the draft audit report, OfficeMax explained that the unit of measure data listed in the billing file represents the unit of measure that the City of Palo Alto end-user utilized when placing orders and that a conversion is required to match the unit of measure with the unit of measure associated with the numeric identification number. OfficeMax did not provide formal guidance to convert the information, and we did not assess whether such conversion is feasible or practical. Scope Limitation—Additional discounts offered by OfficeMax outside the America Saves program were not clearly defined During the audit, OfficeMax provided quarterly price lists of items that it stated were discounted specifically for the City of Palo Alto. OfficeMax representatives did not have any formal documentation regarding how these discounts were derived, but explained these items were “competitively bid in the marketplace and discounts arrived from that competitive bid.” In taking a conservative approach in our testing methodology, which is based on contract terms, we did not use price lists not specifically defined and authorized in the contract and assumed all items not matching the valid contract item list were non-contract items. Attachment A November 2012 8 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Exhibit 3 summarizes the City’s office supplies purchases under the America Saves program, shown by the contract categories that are consistent with contract terms, which we refer to in our audit findings. Audit Methodology To conduct this audit, we analyzed reports from the City’s SAP Enterprise Resource Planning system on payments to vendors through purchasing cards and purchasing documents in order to select a contract for detailed review. We interviewed Administrative Services Department (ASD) staff and assessed the City’s overall procurement policies and procedures to determine if contract administration roles and responsibilities have been defined and if contract administration practices were reasonable. In order to assess OfficeMax’s compliance with the office supplies contract terms, we identified key contract terms and conditions, including discounts and incentives to the City. We also interviewed OfficeMax representatives and staff in the Oakland County, Michigan Purchasing Division, who had responsibilities in administration of the America Saves program. We used data analysis software (ACL) to perform a complete analysis of the City’s office supplies purchases from November 1, 2007 through May 31, 2011, to determine if the City received expected discounts and incentives. City Auditor’s Conclusion Government auditing standards require us to report our conclusion based on the sufficiency and appropriateness of the evidence supporting the findings in this report. These findings indicate that internal controls within the Purchasing and Contract Administration Division of ASD require improvement to ensure that contracts are administered in accordance with the Municipal Code and relevant policies and procedures. In our detailed review of the City’s contract with OfficeMax, we found that the City could have saved between $196,484 and $389,426 during the audit period if the contract had been appropriately monitored to ensure the City was receiving reasonably expected discounts at authorized prices. This includes:  $47,563 in overcharges from unauthorized price increases (Finding 1).  $148,921 to $341,863 in additional discounts (Finding 2). In this report, the Office of the City Auditor provides 10 recommendations to improve contract oversight practices within the City and to support the City in recovering additional discounts from OfficeMax. Exhibit 3: City’s office supplies purchases totaling $957,477 under the America Saves program—November 1, 2007 to May 31, 2011 Source: Auditor’s analysis of OfficeMax records Attachment A November 2012 9 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit The audit recommendations in the report are addressed to ASD; however, in an effort to strengthen controls over contract oversight throughout the City, we encourage other City departments with contract administration roles and responsibilities to review this report and implement the recommendations where applicable. Finding 1: OfficeMax overcharged the City at least $47,563 by applying unauthorized changes to pricing From November 1, 2007 through May 31, 2011, OfficeMax changed the prices on items purchased by the City under the contract. Neither OfficeMax nor Oakland County, Michigan (the lead agency under the contract) could provide supporting evidence showing price changes were approved as required by the contract. Our analysis indicates OfficeMax charged the City at least $47,563 more than the amount calculated using the price list included in the contract. Most of the overcharges ($38,045) were due to discrepancies between the contracted price of $2.52 per ream for a commonly purchased package of “Aspen” paper and prices actually charged per ream, which ranged from $3.19 per ream in 2007 (a 27 percent increase from the contracted price) to $3.92 per ream in 2010 (a 56 percent increase). The America Saves contract states that any changes, substitutions, additions, deletions, and/or pricing revisions must be reviewed and approved by Oakland County and OfficeMax in writing. The contract goes on to state that the contractor will be responsible for furnishing and delivering approved price lists to participating agencies. Without any documentation showing price changes were appropriately authorized, our analysis was limited to the original price list provided as an attachment to the contract. Subsequent to issuance of the draft audit report, OfficeMax stated that although it does not have records of the communications, it did follow the process of providing price change information to Oakland County and only made changes with their approval. In addition, OfficeMax stated representatives met with the City of Palo Alto purchasing agents and communicated any changes in writing and that City representatives accepted price changes and at no time questioned prices. We did not find evidence that contract price list changes were appropriately authorized or communicated. The original contract price list was incorporated and made a part of the contract, which required the signature of an authorized OfficeMax employee and an Oakland County agent for any contract modifications or amendments. In addition, Oakland County was contractually required to place a copy of the America Saves contract on the County’s website. We did not find evidence that Oakland County systematically authorized contract price list changes or that it disclosed the amended contract price lists on its website. In fact, when we initially requested the contract price list(s) and information regarding how Oakland County managed the contract, Oakland County provided a single price list and claimed it was the only one available. Subsequently, OfficeMax provided, for our audit, 21 contract price lists associated with each quarter during the term of the contract. In comparing the single Oakland County price list to the OfficeMax price lists, we found it did not match the original contract price list provided by OfficeMax. In response to our repeated Finding 1 Recommendation to City Management: 1.ASD should consult with the City Attorney’s Office to pursue recovery of unauthorized charges from OfficeMax, including at least $47,563 for contract item overcharges under the America Saves program during the period November 1, 2007 through May 31, 2011. 1. Attachment A November 2012 10 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit requests for price lists, Oakland County did provide some additional price lists; however, there was no evidence these price lists were approved as required by the contract or that there had been a systematic process to authorize and/or communicate contract price list amendments to participating jurisdictions. Considering the scope and magnitude of the America Saves program, OfficeMax and Oakland County should have established processes and controls to ensure any modifications to the contract were appropriately documented, communicated, and available to participating jurisdictions during and after the term of the contract and also for audit purposes. According to OfficeMax, as of April 2012, the sales volume of the (renewed) America Saves program was approximately $30 million annually. A 4th quarter 2011 report on the America Saves program shows 1,128 “customers,” total spend of about $9.38 million, and administrative fees totaling $46,918 due to Oakland County, based on a percentage of total net purchases made by participating agencies during the quarter. We note that under the America Saves contract that was in effect during the audit period, Oakland County was awarded in addition to administrative fees, a “long term contract incentive” of approximately $250,000 paid in three equal installments “in consideration of the length of this contract and the benefits that OfficeMax will derive as a result.” Finding 2: The City could have received additional discounts for non-contract office supplies About 71 percent of the City’s office supplies expenditures were for non-contract items discounted on average 40 percent, as opposed to contract items discounted on average 75 percent. The America Saves contract states non-contract items would be discounted at “up to 85 percent.” Since the contract terms were unclear as to the level of discount the City should have received, our analysis considered other sources or reference points in assessing the reasonableness of discounts provided to the City. The two main sources we analyzed included records of bids received from other jurisdictions during the competitive solicitation process Oakland County, Michigan conducted in awarding the office supplies contract in 2006 and other local government audits of office supplies contracts. Overall, while the City received about $452,604 in total discounts from OfficeMax for non-contract items, our analysis of the two sources, summarized below, finds the City could have reasonably anticipated additional discounts between $148,921 and $341,863. Source #1—Competing bids received by Oakland County, Michigan, indicate the City could have received between $148,921 and $341,863 in additional discounts for non-contract items. In assessing other competing bids Oakland County, Michigan, considered when it awarded its office supplies contract to OfficeMax in 2006, we found the other vendors offered clearer terms and calculated additional discounts the City could have received during the contract period:  $341,863 in additional discounts if the Staples bid terms were in effect, assuming the 70 percent discount rate would not have resulted in items sold below cost.  $194,319 in additional discounts if the Corporate Express bid terms were in effect. Finding 2 Recommendation to City Management: 2.ASD should consult with the City Attorney’s Office to determine if the City can recover additional discounts ranging from $148,921 to $341,863 for non-contract items it purchased under the America Saves program terms from November 1, 2007 through May 31, 2011. Attachment A November 2012 11 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit  $148,921 in additional discounts if the Kamar bid terms were in effect. Source #2—Other local government audits of office supplies contracts indicate the City could have received between $228,367 and $341,863 in additional discounts. We also reviewed office supplies contract audits conducted by other jurisdictions to assess the reasonableness of the overall discount provided to the City for non-contract items:  A City of San Jose January 2012 audit report on its office supply purchases under the terms of the same OfficeMax America Saves program found the City’s understanding was that it could expect to save approximately 60 percent for “fluctuating price” items (i.e., non-contract items) when it first signed on to the America Saves program, but that the City actually received only an average discount of 35 percent off list for these items The report states OfficeMax agreed to pay the City $166,000 to correct the problem in the current fiscal year. If the City of Palo Alto had received an average discount of 60 percent for the non-contract items it purchased under the America Saves program, it would have saved an additional $228,367.  A City and County of San Francisco December 2009 audit report on its office supplies contract with Office Depot found its contract terms indicated it should have received an average discount of 70 percent for items not listed in the contract’s fixed price list. If the City of Palo Alto had received an average discount of 70 percent for non-contract items under the America Saves program, it would have saved an additional $341,863. Exhibit 4 summarizes our comparison of overall discounts for non-contract items OfficeMax provided to the City and total discounts the City could have received using other sources or reference points. Exhibit 4: Analysis of discount levels for non-contract office supplies Source: Actual Discount %: Total Discount: OfficeMax Actual 40% $452,604 Source: Proposed Discount Percentage: Total Discount If Applied to City’s Non-contract Expenditures: Additional Discounts the City Could Have Received: OfficeMax contract Up to 85% Not Auditable Not Auditable Staples Bid 70% down to Cost Up to $794,466 Up to $341,863 Kamar Bid Generally 53% About $601,525 About $148,921 Corporate Express Bid 57% $646,923 $194,319 City of San Jose Audit 60% $680,971 $228,367 City of San Francisco Audit 70% $794,466 $341,863 The results of a separate analysis of the City’s office supplies expenditures conducted by ASD are consistent with this finding. OfficeMax stated that many of the bids presented in this report as reference points are either no longer in effect and are therefore inaccurate reference points, or have been proven to have inaccurate information pertaining to their discount structures. Further, OfficeMax stated that each reference point also represents an average, or general prices, not stated exact discounts across the board for every item. During the audit, the City’s Purchasing and Contract Administration Division (Purchasing) requested three office supplies vendors, including OfficeMax, to provide pricing from the most advantageous currently available agreements Attachment A November 2012 12 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit the City of Palo Alto could use. According to the Manager of Purchasing and Contract Administration (Purchasing Manager), vendors applied current pricing to the City’s record of purchases for the top 20 percent of line items that account for approximately 80 percent of the City’s annual office supplies expenditures. The Purchasing Manager stated OfficeMax based its pricing on the current America Saves agreement. Our assessment of the Purchasing Manager’s analysis suggests the City could save approximately $56,000 annually if the City contracts with a different vendor. This is overall consistent with the results of our audit. In response to the draft audit report, OfficeMax explained that the discount term “up to 85 percent” covers all merchandise classes and product categories. OfficeMax provided for our review a spreadsheet titled “America Saves Non Core Price Ranges” to show the basis for the non-contract item discount term of “up to 85 percent.” The document, included as Attachment 2 in this report, shows merchandise classes (e.g., “Envelopes”), the minimum discount from list, maximum discount from list, and average discount from list. In our review of this document, which is not part of the actual contract, we noted the following:  There are a total of 80 merchandise classes, with only 3 of the 80 with a stated “average discount from list” over 50 percent. There is not even one merchandise class with an “average discount from list” approaching 85 percent.  Only 1 of the 80 merchandise classes (i.e., “RIBBONS”) has a “maximum discount from list” that meets or exceeds the 85 percent discount level; however, the range of discount from list for this merchandise class is reported to be from 4 percent to 86 percent, with a stated average discount from list of about 39 percent. We found the City purchased about $2,635 worth of ribbons during the audit period, and that the City received an average discount of only 26 percent for this merchandise class. We did not perform further testing or analysis using the provided “America Saves Non Core Price Ranges” spreadsheet because it was not part of the contract and also because the information does not provide a reasonable basis for audit purposes. OfficeMax further stated that there is no basis for comparing the City of San Jose audit report to our report findings because San Jose restricted purchases of specific items and negotiated terms beyond the America Saves contract through a purchase order process (specifically in writing). This position is not consistent with the OfficeMax written response to the City of San Jose audit report which states, “Also, it’s stated in the P.O., that the estimated average discount will be 60% off of the manufacturers’ price list. Please note, this was an estimate only of the general mix of non-core products under the America Saves Master Agreement. Since 2008, the City changed its purchasing patterns by adding many different types of products to their spend mix including toner products, which by industry standards carry lesser discounts than general office products.” OfficeMax reiterated to the City of San Jose that the America Saves contract terms provided for discounts on non-core items of “up to 85 percent off manufacturers suggested list prices,” and further stated, “All local government customers that are tied to the America Saves Agreement receive the same discounts and pricing for ‘non-core’ pricing [sic].” OfficeMax offered a one-time payment of $166,000 to the City of San Jose “in an effort of goodwill to clear up any misunderstandings in how the P.O. was interpreted and issues coming from the City audit.” This amount covered the fiscal year 2011 overpayments for the “fluctuating price” or “non-core” items discussed in the audit report. Attachment A November 2012 13 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Finding 3: ASD has not effectively administered the City’s office supplies contract ASD has not established effective processes and procedures to ensure the City receives contracted discounts and other key benefits, and that the office supplies contract meets the City’s business needs. As a result, the City missed savings opportunities and did not maximize contracted benefits consistent with the City’s goals and policies. ASD did not ensure the office supplies contract met the City’s business needs, resulting in lost savings opportunities Contract items under the America Saves program that were discounted at about 75 percent accounted overall for only about 21 percent ($203,030) of the City’s OfficeMax office supplies purchases, suggesting the City’s office supplies needs were not adequately addressed in the contract. The City only received a discount of about 40 percent for the majority (71 percent) of its office supplies expenditures on non-contract items. ASD did not have a process to monitor discounts provided to the City or the City’s purchasing patterns. Exhibit 5 shows the City received an overall discount of about 58 percent from OfficeMax for purchases prior to entering the America Saves program, from January 2006 to October 2007. The City’s overall discount dropped each subsequent year, under the America Saves program, to about 45 percent off of list in 2011. The decline appears to be due to a decrease in purchases of highly discounted contract items and an increase in purchases of non-contract items. If the City had continued to receive an average discount of about 58 percent for all its purchases subsequent to entering the America Saves program, it would have saved at least an additional $67,302 from November 1, 2007 through May 31, 2011. Exhibit 5: City of Palo Alto’s declining discount rate for office supplies purchased from OfficeMax Source: OfficeMax billing records for the City Overall discount on OfficeMax purchases prior to entering the America Saves program Attachment A November 2012 14 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit We found ASD does not have procedures to ensure:  OfficeMax has made all contract items available for purchase.  Contract terms and highly discounted contract items continue to meet the City’s business needs.  OfficeMax provides correct discounts for both contract and non-contract items. The City has spent more than other jurisdictions for office supplies and has not fully utilized its office supplies contract In FY 2011, the City budgeted $562,784 for office supplies and spent about $473,790, or about $425 per authorized full time equivalent (FTE), indicating the City has spent more on office supplies than other local jurisdictions. While the majority of the City’s expenditures coded as office supplies could be associated with OfficeMax or other commonly known office supplies vendors (the blue and green bars in Exhibits 6a and 6b), we also identified expenditures coded as office supplies that we could not necessarily identify with office supplies vendors. These are labeled “Other Spend Coded as Office Supplies” (the red bar in Exhibits 6a and 6b). Exhibit 6a: FY 2011 office supplies expenditures per Full Time Equivalent (FTE) Source: Cities Attachment A November 2012 15 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit As shown in Exhibit 6b, office supplies expenditures as a percentage of total expenses were similarly higher than other local jurisdictions in FY 2011. Exhibit 6b: FY 2011 office supplies expenditures as a percentage of total expenses Source: Cities From 2006 through 2011, the City only purchased approximately 59 percent (about $1.67 million) of its office supplies (about $2.8 million in total) from OfficeMax, as shown in Exhibit 7. This raises concerns regarding the nature of expenditures identified in the City’s financial records as office supplies, and whether the City has fully utilized its office supplies contract to realize benefits from the presumed discounts and other favorable terms. We identified other office supplies vendors the City paid, such as Office Depot and Staples, which accounted for about 3 percent of the City’s total office supplies purchases. We also concluded that about 38 percent of the expenditures coded as office supplies in the City’s financial systems could not necessarily be associated with office supplies vendors. This is further discussed in Finding 5. Exhibit 7: City’s office supplies expenditures from 2006 through 2011 Source: City of Palo Alto financial records Attachment A November 2012 16 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit The City does not have procedures to maximize the use of its office supplies contract. According to the City’s Purchasing Manager, the City’s goal is to provide maximum flexibility to staff in purchasing supplies. ASD has not managed or monitored contract incentives owed to the City and/or available to the City The City does not have a process to monitor or account for all contract incentives paid to the City or to ensure the City maximizes its eligibility for contract incentives. The contract required OfficeMax to pay various incentives, including:  Volume incentives from 0.5 percent to 2 percent, based upon total annual net purchases.  A prompt payment incentive of 2 percent, provided payment was made within 10 days via “EFT” (electronic funds transfer). The contract does not further define what qualifies as EFT.  An electronic commerce (ecommerce) incentive of 1 percent of total net purchase volume, provided greater than 75 percent of net purchases were placed electronically. Because Purchasing does not have complete records of incentives received, we relied on OfficeMax to provide the records for our review. As shown in Exhibit 8, OfficeMax likely paid the City volume incentives the City was eligible for; however, the City did not receive all available ecommerce or prompt payment incentives. Considering that staff purchased most office supplies using purchasing cards, a payment method that appears to qualify as a form of electronic funds transfer, the City should at least have received most prompt payment incentives. However, except for in 2011, the City did not qualify for the ecommerce incentive because less than 75 percent of net purchases were placed electronically, using purchasing cards. Exhibit 8: Analysis of incentives Source: OfficeMax billing records for the City Attachment A November 2012 17 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit City warehouse purchase and storage of office supplies results in additional costs to City Departments The City maintains an inventory of office supplies at its warehouse at the Municipal Services Center despite the contract with OfficeMax which ensures a 98.5 percent fill rate and provides for next-day delivery. The warehouse charges City departments for the cost of office supplies plus a 2 percent markup. As shown in Exhibit 9, approximately $1.06 million (about 25 percent) of the City's total office supplies purchases of $4.26 million were issued through the City's warehouse from July 2003 through February 2012. City departments were charged a markup of about $40,000 during this period, or about 3.7 percent.1 The City incurs avoidable costs for maintaining and distributing office supplies, some of which is passed on to City departments in the form of the 2 percent markup. We did not perform a detailed analysis of potential cost savings as part of this audit; however, there is a cost associated with warehouse space used for storing the supplies, as well as the cost for staff time to manage and deliver office supplies. 1 An analysis of the difference between the 2 percent markup rate stated in a City procedure and the actual inventory markup was beyond the scope of this audit. We have brought this to the attention of the ASD Director. Exhibit 10: The City’s inventory of office supplies at the warehouse According to the City’s warehouse supervisor, office supplies occupy about 2 to 4 percent of warehouse space. Exhibit 9: City’s office supplies purchases – July 2003 to February 2012 Source: City of Palo Alto financial records Attachment A November 2012 18 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit ASD has not ensured the City’s office supplies purchases support the City’s environmental policies and goals The City spent $229,420 plus tax on ASPEN 30% Post-Consumer paper, from December 23, 2005 to June 29, 2012. This product was mostly purchased by the warehouse, and according to staff, delivered to City departments. The City’s policy on the procurement of recycled paper products requires the City to purchase paper products consisting of at least 50% secondary and postconsumer waste, whenever the recycled alternative meets the City’s requirements and specifications for paper products, and within the constraints of staff time and cost factors. The policy provides for a price preference of up to 5 percent for recycled products calculated based on the lowest responsible bid or price quoted by suppliers offering non-recycled paper products. We also found the City’s June 2007 Zero Waste Operational Plan raised concerns about compliance with the City’s policy on recycled content. The report recommended the City establish and incorporate environmental standards into applicable bid solicitations and purchasing opportunities. The plan stated: “The recycled product procurement process in the City has not achieved the goals set out by the policy. For example, although the City’s Purchasing Department [sic] had arranged for the purchase of 100 percent recycled paper, but [sic] after nine months of implementation, this program was discontinued.” ASD does not have procedures to ensure the City’s office supplies contract supports the City’s environmental goals and policies. Staff reported during the audit that the City has initiated efforts to address the City’s environmental policies in the future procurement of office supplies. Exhibit 11: The City’s most commonly purchased item: BOISE ASPEN 30 (30% post-consumer content paper) Source: BOISE Inc. Attachment A November 2012 19 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Finding 4: ASD should ensure the City’s financial records accurately identify office supplies and should properly budget for and control office supplies expenditures As discussed in Finding 3, while City records indicate the City has spent considerably more for office supplies than other local jurisdictions sampled, we could not reasonably associate a significant portion of office supplies expenditures with office supplies vendors. For example, we found instances where purchases from the following vendors were recorded as office supplies:  Golden Gate Systems  Creative Data Products  Monterey Mechanical  Palo Alto Hardware Inc.  Hub International Inc.  Tax Collector  Advance Recruitment Solutions ASD has not ensured the use of the office supplies code is limited to office supplies purchased from OfficeMax or other office supplies vendors. In addition, the City’s office supplies budget is nearly double what the City purchases from OfficeMax under its office supplies contract. In FY 2011, the City budgeted $562,784 for office supplies, or approximately double the average total annual purchase amount of $281,409 from OfficeMax. The City’s office supplies spending patterns, as shown in Exhibit 12, raise further concerns regarding what the City has coded as office supplies and the nature and timing of “office supplies” purchases. Exhibit 12 shows, on a monthly basis, the difference between expenditures we could associate with OfficeMax or other commonly known office supplies vendors, and “Other Office Supplies Spend.” It also shows spikes in the purchase of office Finding 3 Recommendation to City Management: 3.ASD should develop formal procedures to effectively administer the City’s office supplies contract in order to ensure: The contract supports the City’s business needs, policies, and goals, including the City’s environmental policies. Purchasing monitors discounts provided to the City in order to timely detect any negative trends, such as a decline in the purchase of highly discounted contract items, and to ensure the City receives all contracted discounts and other key benefits. Use of the contract is maximized and purchases of office supplies from other vendors or suppliers the City has not contracted with is restricted or minimized. The City identifies and maximizes its eligibility for available contract incentives. The City discontinues storing and delivering office supplies, unless staff can provide a cost/benefit analysis justifying the current practice. Responsibility for contract administration is formally assigned, documentation of contract administration activities is retained, and contract administration is minimally impacted by staff turnover. 2. Attachment A November 2012 20 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit supplies near the end or beginning of fiscal years. Our analysis in this area was limited because the City’s financial records and systems do not provide the necessary detail and functionality to assess the nature of all expenditures coded as office supplies. For example, the City’s SAP Enterprise Resource Planning system does not have a report or the data required to assess the use of the office supplies code for purchasing card (CAL-Card) transactions. Exhibit 12: City of Palo Alto’s monthly office supplies expenditures Source: City’s financial records Finding 5: Strategic Contracting Practices May Provide Savings Opportunities In order to assess contract oversight practices in light of concerns raised during our review of the OfficeMax contract and considering the City’s expenditure trends showing increased use of purchasing cards, we judgmentally selected 13 vendors for review. The sample was selected to ensure coverage of vendors we classified into three groups:  Vendors paid using purchasing cards.  Vendors paid using purchasing documents.  Vendors awarded contracts exempted from the City’s competitive solicitation requirements. The scope of our review included determining whether the City had an authorized and competitively solicited contract in place for each vendor. Exhibit 13 summarizes our selection of vendors and the results of our review. $- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 1/ 2 0 0 9 2/ 2 0 0 9 3/ 2 0 0 9 4/ 2 0 0 9 5/ 2 0 0 9 6/ 2 0 0 9 7/ 2 0 0 9 8/ 2 0 0 9 9/ 2 0 0 9 10 / 2 0 0 9 11 / 2 0 0 9 12 / 2 0 0 9 1/ 2 0 1 0 2/ 2 0 1 0 3/ 2 0 1 0 4/ 2 0 1 0 5/ 2 0 1 0 6/ 2 0 1 0 7/ 2 0 1 0 8/ 2 0 1 0 9/ 2 0 1 0 10 / 2 0 1 0 11 / 2 0 1 0 12 / 2 0 1 0 1/ 2 0 1 1 2/ 2 0 1 1 3/ 2 0 1 1 4/ 2 0 1 1 5/ 2 0 1 1 6/ 2 0 1 1 7/ 2 0 1 1 8/ 2 0 1 1 9/ 2 0 1 1 10 / 2 0 1 1 11 / 2 0 1 1 12 / 2 0 1 1 OfficeMax Other Office Supplies Vendors Other Spend Coded As Office Supplies Finding 4 Recommendation to City Management: 4.ASD should develop and communicate to staff policies and procedures to ensure the office supplies accounting code is clearly defined, its use is monitored, and that office supplies are accurately recorded in the City’s accounting records. 11. Attachment A November 2012 21 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Exhibit 13: Summary of testing results for 13 selected vendors Source: City’s financial reports and Auditor’s analysis of ASD Purchasing files for the period May 2003 through February 2012. *Although there was a current properly authorized and exempted contract on file in the amount of $83,210 for each of three years starting April 1, 2011, contracts were not available to cover all prior payments made to Canopy Trees For Palo Alto. The City did not have authorized contracts for several vendors selected for review As shown in Exhibit 13, the City did not have evidence of properly authorized contracts for 7 of 13 vendors we selected for review, as listed below:  OfficeMax, Inc.  W.W. Grainger, Inc.  Wingfoot Commercial Tire Systems, LLC  The Home Depot, Inc.  Stone and Youngberg LLC  Quint & Thimmig LLP  Canopy Trees For Palo Alto While the City had a valid contract with Canopy Trees For Palo Alto dated April 1, 2011 at the time of our review, we found purchasing documents dating back to July 2003 without any record of a valid contract. In response to our concerns regarding the lack of contracts for Canopy Trees For Palo Alto, ASD staff stated that Canopy Trees For Palo Alto is a non-profit organization. We are not aware of Municipal Code provisions that exempt non-profit organizations from the City’s contracting requirements. Moreover, we found a collection of staff emails dating back to 2004 that taken together suggest the City has had ongoing problems in making payments to Canopy Trees For Palo Alto because contracts had not been in place when payments were due. The City does not have a properly authorized office supplies contract The City’s financial records indicate approximately $1.9 million in purchasing documents and purchasing card transactions for supplies from OfficeMax from May 2003 through February 2012. From 2006 through 2011, the City purchased the majority of its office supplies from OfficeMax, with annual expenditures excluding tax and Number Vendor Total (Historical in SAP) Calendar Year 2011 Purchasing Card (% of Calendar Year 2011) Authorized Contract Exists? Solicitation Conducted or Properly Exempted? 1 Granite Rock Company 4,831,371$ 249,000$ 0%Yes Yes 2 Palo Alto Community Child Care 4,011,623$ 407,491$ 0%Yes Yes 3 Hydromax USA, LLC 3,800,000$ 3,800,000$ 0%Yes Yes 4 Ecology Action of Santa Cruz 3,759,190$ 817,397$ 0%Yes Yes 5 OfficeMax, Inc.1,897,830$ 266,039$ 83%No No 6 W.W. Grainger, Inc.833,039$ 64,754$ 69%No No 7 Canopy Trees For Palo Alto 646,993$ 62,408$ 0% No* No* 8 Wingfoot Commercial Tire Systems, LLC 518,977$ 122,331$ 100%No No 9 G&K Services, Inc.414,391$ 154,593$ 1%Yes Yes 10 The Home Depot, Inc.374,552$ 63,629$ 100%No No 11 Renne Sloan Holtzman Sakai LLP 85,000$ 85,000$ 0%Yes No 12 Stone and Youngberg LLC 91,285$ -$ N/A No No 13 Quint & Thimmig LLP 60,002$ -$ N/A No No Total (Purchasing Documents plus Purchasing Card Payments) Attachment A November 2012 22 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit service charges ranging from approximately $243,000 to $260,000. Municipal Code Chapter 2.30 (Part 3 - Contracting Authority) requires City Council approval and the mayor or vice-mayor’s signature, if annual expenditures on goods from a vendor surpass the $85,000 limit on the Purchasing Manager’s contract award authority and the $250,000 limit on the City Manager’s contract award authority. In addition, Municipal Code section 2.30.070 requires approval “as to form” from the City Attorney. We did not find any evidence the City Council authorized the City’s OfficeMax contract or that ASD requested the City Attorney’s Office approve the contract as to form. Staff initially reported the City had an agreement with OfficeMax for office supplies dating back to 2006; however, staff provided an April 13, 2010 “supplier agreement” with the printed names of the City’s Purchasing Manager and an OfficeMax Business Development Manager indicating the City had entered the OfficeMax America Saves program approximately four years after the period initially reported. Staff subsequently found an August 1, 2008 letter from an OfficeMax District Sales Manager stating the City was “tied to the OfficeMax Nationwide Co-operative Purchasing Agreement with non-profit agency Public Sourcing Solutions.” However, an OfficeMax representative stated OfficeMax records indicate the City had actually entered the America Saves program on November 1, 2007. Although the America Saves program master purchasing agreement expired on June 30, 2011, we found no evidence the City subsequently took steps to appropriately contract for office supplies. Staff provided a “Supplier Agreement” dated March 1, 2012, indicating the City re-entered the America Saves program, under a new Oakland County, Michigan master agreement dated June 1, 2011, or eight months after the prior master agreement expired. OfficeMax representatives stated, however, that the City’s account had been rolled over into the new agreement terms when the prior terms had expired in 2011. ASD could maximize savings opportunities for the City through strategic contracting practices The City’s procurement policies and procedures do not clearly identify and communicate requirements for establishing negotiated contracts for goods and/or services the City purchases mainly using purchasing cards, which likely results in lost savings opportunities. Exhibit 13 identifies several vendors (OfficeMax, Inc., W.W. Grainger, Inc., The Home Depot, Inc., and Wingfoot Commercial Tire Systems, LLC) the City purchased goods and/or services from in 2011 primarily using purchasing cards, without having negotiated contracts. ASD staff was not aware of any contracting or competitive solicitation requirements for the purchase of goods and services using purchasing cards, and we did not find any evidence ASD has monitored the City’s aggregate spend for categories of goods and/or services (or total spend by vendor) in order to determine whether cost savings opportunities could be maximized by entering negotiated contracts. The Purchasing Manager stated the role of the ASD Purchasing and Contract Administration Division (Purchasing) is “reactive” to the procurement needs of City departments. Purchasing does not monitor expenditures for goods and/or services from vendors through the use of the City’s SAP Enterprise Resource Planning system reports and generally relies on City departments to contact Purchasing staff regarding contracting needs. Also, according to the Purchasing Manager, Purchasing does not have a process to ensure staff is alerted as contracts approach expiration. In our review of the City’s policies and procedures, we noted the Municipal Code and key policies and procedures suggest the use of procurement cards should not preclude efforts to establish negotiated agreements and to maximize cost savings: Attachment A November 2012 23 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit  The Municipal Code states that all petty cash or purchasing card purchases shall be in accordance with the contract procedures and requirements contained in the purchasing manual, which implements the requirements of the Municipal Code. The Municipal Code states that while Purchasing is centralized and all purchases shall be made through the Purchasing Manager, designated employees authorized by their department head may award and sign contracts for goods and services where the contract price does not exceed $5,000 and the terms is one year or less.  The City’s current purchasing card guidebook states that the purchasing card program is designed as an alternative to a variety of processes including petty cash, check requests, and low dollar purchase orders. The guidebook states the purchasing card program is not intended to avoid or bypass appropriate procurement or payment procedures. Although the guidebook establishes a $5,000 daily transaction limit and a $15,000 monthly spending limit, it provides minimal guidance to ensure the City maximizes savings opportunities where there are repetitive or significant annual purchases of particular categories of goods and/or services.  The purchasing card guidebook makes reference to the Municipal Code prohibition on splitting of purchases for the purpose of evading the City’s competitive solicitation requirements or contract authority limitations. The guidebook presents as an example a situation where a cardholder purchases the same $1,500 dollars in chemicals from one vendor each month, suggesting that while this is not considered a “split,” the commodity should be bid and set up on a blanket purchase order. We found purchasing card payments totaling more than $20,000 in 2011 to each of 19 different vendors. We also noted significant expenditure levels for vendors that sell similar products and/or services without negotiated contracts available for any of the vendors. For example, City records show the City purchases goods and/or services from hardware vendors including W.W. Grainger, Inc., The Home Depot, Inc., and Orchard Supply Hardware Stores Corporation without negotiated contracts to ensure the City maximizes discounts and other benefits for the City. The Purchasing Manager stated the City does not have a “strategic sourcing” strategy implemented, which could facilitate the City’s ability to consolidate expenditures for commonly purchased goods and/or services under a contract with a selected vendor. A detailed analysis of cost savings to the City through contracting with these vendors is beyond the scope of this audit. However, during the course of the audit, we found examples of contracts available to governmental agencies that provide discounts the City could potentially take advantage of for some of the goods and/or services purchased with purchasing cards:  A Home Depot U.S.A., Inc. (Home Depot) contract providing rebates ranging from 1 to 3 percent. We also found potential opportunities for greater savings from a contract with Lowe’s HIW, Inc., which provides discounts of 5 percent off of retail in addition to a 2 percent prompt pay discount. Subsequent to issuance of the draft audit report, the City’s Purchasing Manager stated the City does have a contract with Home Depot, however, the documentation was not provided during the audit. Moreover, according to a Home Depot representative, Home Depot has record of only $13,623 in City of Palo Alto expenditures in 2011. As shown in Exhibit 13, we found the City purchased goods and/or services totaling $63,629 from Home Depot in 2011.  A W.W. Grainger, Inc. contract provides category discounts ranging from 15 percent to 45 percent off of list price, in addition to negotiated pricing on selected items.  A Western States Contracting Alliance contract for tires, tubes, and services provides for discounts ranging from 15 percent to 30 percent. Attachment A November 2012 24 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit ASD does not have a process to document and approve all exemptions from competitive procurement As shown in Exhibit 13, there was no evidence that contracts for 8 of 13 vendors sampled were awarded competitively or properly exempted from competitive solicitation requirements. Municipal Code Section 2.30.360 allows for narrowly applied exemptions from competitive solicitation requirements and provides details on 18 different circumstances that may qualify for an exemption. Departments are required to request an exemption by providing all relevant information supporting the application of the exemption to the Purchasing Manager. Based on this information, the Purchasing Manager must make a recommendation to the City Manager who will determine whether an exemption from competitive solicitation requirements applies. ASD staff stated that Municipal Code section 2.30.360 only requires Departments to submit a “Sole Source Justification Form” for 2 of the 18 exemption categories listed and that no additional step is required from the requesting Department or from Purchasing for the other categories. We disagree with this interpretation. Nearly half of City contracts listed in the City’s biannual report to Council are exempted from competitive solicitation requirements. Staff submits a biannual report to Council on selected contracts, which indicates use of exemptions in awarding these contracts. The reports include sections on contracts awarded in the following categories: service contracts ($25,000 to $85,000), goods contracts ($65,000 to $250,000), and blanket orders for goods and services We did not audit or verify the information contained in the reports. Two recent examples covering the period January 1, 2011 through December 31, 2011 indicate a significant number of City contracts are awarded using bidding exemptions, as shown in Exhibit 14. However, because the City’s SAP Enterprise Resource Planning system does not currently have the reporting capability to effectively identify contracts awarded using exemptions, we could not quantify and assess the use of various types of exemptions. ASD Purchasing does not have any documentation to support it was authorized to participate in the OfficeMax America Saves program through use of the Oakland County, Michigan master purchasing agreement with OfficeMax. Although the Municipal Code provides that the City may, in certain instances, use another governmental or public agency’s contract (i.e., piggyback on another entity’s contract), provided the contract resulted from solicitation methods similar to those required by the Municipal Code, we did not find evidence the Purchasing Manager made a recommendation to the City Manager regarding applying the exemption or that the City Manager determined the exemption was applicable. Exhibit 14: City contracts awarded Source: ASD reports on contracts awarded by the City Manager between January 1, 2011 and December 31, 2011 Contracts Awarded through competitive solicitation 51% Contracts awarded through exemptions from competitive solicitation 49% Attachment A November 2012 25 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Finding 6: The City has not sufficiently defined contract administration roles and responsibilities In reviewing the Municipal Code and the City’s Purchasing Manual, we did not find sufficient guidance regarding contract administration roles, responsibilities, and business practices to ensure compliance with the City’s contract terms and also to ensure the City receives contracted benefits. The Purchasing Manager stated ASD’s Purchasing and Contract Administration Division (Purchasing) only administers two contracts:  The office supplies contract with OfficeMax, Inc.  A uniform rental services contract with G&K Services, Inc. Finding 5 Recommendations to City Management: 5.ASD should clarify the City’s procurement policies and procedures, while ensuring consistency with the Municipal Code, to specify when Purchasing should negotiate contracts, based on dollar amount thresholds applicable to total citywide expenditures for goods and/or services (or payments to vendors) in aggregate, regardless of payment method. ASD should develop policies and procedures to ensure: 6.ASD monitors total citywide expenditures on categories of goods and/or services (or expenditures by vendor) and periodically assesses whether the total volume of the transactions and expenditures, regardless of payment method, may require the City to contract for the goods and/or services either through the City’s competitive solicitation methods or by using another agency’s contract, in order to maximize cost savings. 7.The City has properly approved contracts, when required by the Municipal Code, prior to conducting business. Specifically, the City should ensure it establishes a process to prevent and/or detect issuance of purchasing documents or purchasing card payments to vendors without a properly approved contract, if required. 8.ASD Purchasing staff monitors expiring contracts and ensures contracts are re-established in a timely manner. 9.ASD complies with Municipal Code requirements for applying and documenting exemptions from competitive solicitation in the procurement of goods and services (A City working group that promotes efficient and effective purchasing methods has drafted a new “City of Palo Alto Sole Source Justification Form” which includes all 18 exemptions listed in the Municipal Code). Attachment A November 2012 26 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit However, we did not find any evidence of a defined, documented, or effective process to administer either of these contracts. Specifically, we did not find evidence that staff had identified and monitored key contract terms, such as pricing and incentive terms, contract amendment terms, and various milestone dates. In addition, Purchasing does not monitor purchasing data to detect and follow up on unexplained variances and/or expenditure trends. The Municipal Code states purchasing is to be centralized, and that all purchases shall be made through the Manager of Purchasing and Contract Administration (Purchasing Manager), with certain exceptions. The Purchasing Manual section on “Contractor Performance Documentation” indicates Purchasing is responsible for documenting significant vendor performance issues for purchases of goods and that Department project managers are responsible for documenting contractor performance issues for professional services, but that the project manager should consult with the Purchasing and/or the City Attorney’s office, as needed, to resolve significant performance issues. According to the Purchasing Manager, contract administration practices are inherently defined by each contract and contract administration is the responsibility of the departmental project manager. The Purchasing Manager stated the City’s procurement process requires City departments to identify departmental procurement needs, to manage the pre-solicitation process in order to identify and assess qualified vendors, and to administer each contract to ensure compliance. He stated the role of Purchasing is to manage the competitive solicitation process, address any contract non-compliance issues, and to manage the contract close-out process. In our opinion, the City needs additional controls to ensure contracts are appropriately administered. Finding 3 discusses the results of ineffective contract administration of the City’s office supplies contract. Finding 6 Recommendations to City Management: 10.ASD should ensure contract administration roles and responsibilities are defined and appropriately communicated. At a minimum, ASD should broadly define contract administration and develop a process to: Formally identify the contract administrator and assign contract administration responsibilities. Identify and document key contract terms. Identify and provide the necessary training to ensure the contract administrator has the required expertise. Identify or develop specific methodology, reports, and/or tools required to administer the contract. Establish and monitor timelines and milestones in administering the contract. 10. Attachment A November 2012 27 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Glossary of Acronyms and Terms  America Saves Program – An OfficeMax program that extends the terms of the Oakland County Michigan master purchasing agreement with OfficeMax for office supplies to other government agencies.  ASD – Administrative Services Department. The Purchasing and Contract Administration Division is part of this department.  Contract – A mutually binding, legal relationship obligating the seller to furnish supplies or services, and the buyer to pay for them.  Contract Administration – Government actions taken to obtain compliance with such contract requirements as timely delivery of supplies or services, acceptance, payment, and closing of the contract. These actions include technical, financial, audit, legal, administrative, and managerial services in support of the contracting officer.  Contract items (also referred to as “core” items) – A list of office supplies with contracted prices specifically identified in Exhibit 1 of the Oakland County Master Purchasing Agreement with OfficeMax, which is the basis for the OfficeMax “America Saves” program.  List Price – The price which the manufacturer recommends that the retailer sell the product. According to an OfficeMax representative, office supplies list prices are standardized across the industry and across all OfficeMax contracts.  Non-Contract items (also referred to as “non-core” items) – Office supplies not specifically listed with contracted prices in Exhibit 1 of the Oakland County master purchasing agreement with OfficeMax. The America Saves program states these items are at discounts “up to 85%.”  Numeric ID (NID) – According to OfficeMax records, this is a unique, 6-digit identification number, assigned to each product in an item file.  Product Code – A variable length alphanumeric identification number for office supplies. According to OfficeMax guidance, the Product Code should correspond to an item’s unique NID.  Purchase order – A request or instruction from a purchasing organization to a vendor to deliver a quantity of material or to perform services at a certain point in time.  Purchasing document – In the City’s SAP enterprise Resource Planning system, an instrument used by Purchasing to procure materials or services. SAP purchasing documents may include purchase orders and contracts.  Unit of Measure (UOM) – Identifies the quantity included in a uniquely identified office supplies item.  Unit Price – The price charged for each uniquely identified item with its unit of measure. Attachment A November 2012 28 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Page intentionally left blank Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 29 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit ATTACHMENT 1: City of Palo Alto Municipal Code—Chapter 2.30 Contracts and Purchasing Procedures Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 30 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 31 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 32 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 33 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 34 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 35 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 36 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 37 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 38 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 39 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 40 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 41 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 42 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 43 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 44 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 45 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 46 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 47 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 48 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 49 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 50 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 51 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A Note: This was the current version of the Palo Alto Municipal Code chapter on contracts and purchasing procedures during audit field work (as of February 8, 2012). A more current version is available at: http://www.amlegal.com/library/ca/paloalto.shtml November 2012 52 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Attachment A November 2012 53 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit ATTACHMENT 2: OfficeMax list of “America Saves Non Core Price Ranges” America Saves Non Core Price Ranges Merchandise Class Merchandise Class Description # of in Category Min DFL Max DFL Ave DFL A1 ADHESIVES,CEMENTS,GLUE 25 9.00%66.00%41.60% A2 SELF-ADHESIVE NOTES,TAPE FLAGS 85 12.00%50.00%36.86% A3 SIGNS 1 12.00%12.00%12.00% A4 COIN BOXES, BANKING SUPPLIES 9 13.00%48.00%32.78% A5 LABELS,LABELMAKERS,TAGS,BADGES 203 4.00%63.00%37.54% A6 RUBBERBANDS 30 13.00%81.00%57.43% A7 LUNCHROOM SUPPLIES, FOOD 55 4.00%51.00%21.24% A8 TAPES, DISPENSERS 87 4.00%70.00%39.70% A9 CORRECTION FLUID,RUBBER FINGER 40 10.00%75.00%41.08% B1 CALENDARS - DATED 175 4.00%66.00%35.17% B2 CALENDARS - NON DATED 21 5.00%48.00%26.24% B3 CALENDARS - ORGANIZERS 35 4.00%48.00%36.46% B4 CALENDARS - ACADEMIC 6 30.00%53.00%45.17% B5 REFERENCE BOOKS & DICTIONARIES 9 32.00%32.00%32.00% E3 COMPUTER & LAN FURNITURE 6 26.00%48.00%32.33% E4 SEATING 3 39.00%48.00%42.00% E5 STORAGE,SHELVING,BOOKCASES 13 24.00%39.00%33.31% E6 ERGONOMIC ACCESSORIES 100 10.00%52.00%30.11% E7 MAILROOM FURNITURE, LIT RACKS 13 24.00%33.00%27.85% E8 CONFERENCE & TRAINING ROOM 5 29.00%48.00%36.20% E9 FURNITURE ACCESSORIES 66 4.00%48.00%30.39% F1 FILE FOLDERS (TOP TAB) 182 4.00%76.00%43.93% F2 FILING GUIDES, FILING SORTERS 53 4.00%64.00%34.81% F3 INDEX CARDS, PRINTABLE CARDS 35 4.00%71.00%33.63% F4 BUSINESS CARD FILES,ADDRESS BK 44 4.00%42.00%30.77% F5 HANGING FOLDERS,FILE ORGANIZER 159 6.00%81.00%45.13% F7 BOX/ARCH FILES, CLIPBOARDS 16 21.00%57.00%47.38% F8 FILE FOLDERS (END TAB) 33 4.00%58.00%41.73% G8 ATTACHES,PORTFOLIOS,CASES 11 4.00%48.00%33.09% H1 STAPLERS,STAPLES,TACKERS 68 9.00%80.00%49.46% H2 PUNCHES 34 10.00%71.00%41.85% H3 SCISSORS,XACTO KNIVES,LTR OPNR 42 4.00%84.00%36.38% H4 CLIPS,CLAMPS,TACKS,FASTENERS 77 4.00%68.00%43.51% J1 DRAFTING,ART SUPPLIES, RULERS 16 4.00%53.00%28.88% J4 BOARDS, EASELS 67 26.00%42.00%29.96% K1 DESK PADS, MOTIVATIONAL ITEMS 29 4.00%50.00%29.59% K3 DESK ACCESSORIES, KEY CONTROL 226 4.00%65.00%35.17% K4 LAMPS 10 43.00%48.00%45.00% K5 CLOCKS 14 7.00%61.00%36.14% K6 WASTE BINS,LINERS 25 4.00%70.00%28.12% K7 SHREDDERS 15 33.00%45.00%36.27% L1 PRESENTATION PRODUCTS 8 9.00%61.00%38.50% L2 BINDRS,REPORT COV, LAMINATING 434 4.00%70.00%40.61% L3 INDEXES AND TABS 103 11.00%81.00%39.51% L5 CATALOG/REFERENCE RACKS 3 29.00%36.00%33.67% L6 DATA BINDERS & SUPPLIES 15 16.00%74.00%44.93% L8 TELEPHONE & ACCESSORIES 15 4.00%68.00%40.80% L9 BATTERIES 48 4.00%45.00%22.88% M1 CALCULATORS 44 4.00%48.00%22.52% M2 TYPEWRITERS & WORD PROCESSORS 2 12.00%41.00%26.50% M3 FAX & MULTIFUNCTION MACHINES 2 31.00%38.00%34.50% M5 AIRCLEANERS,FANS,HEATERS 6 12.00%48.00%31.50% M6 DICTATION, RECORDERS, FILM 39 4.00%47.00%11.15% M8 ELECTRONIC ORGANIZERS, & PDA'S 1 4.00%4.00%4.00% N1 BALLPOINT,ROLLING,STYLUS PENS 339 4.00%68.00%40.11% N2 MARKERS, HIGHLIGHTERS 227 4.00%64.00%38.49% N3 PENCIL SHARPENERS 13 9.00%48.00%31.69% N4 PENCILS-AUTOMATIC 76 7.00%54.00%38.54% N5 PENCILS-WOODCASE 12 32.00%68.00%50.67% N6 ERASERS-PENCIL & CHALKBOARD 10 17.00%48.00%41.60% P1 PAPER, COPY, LASER, INKJET 128 4.00%80.00%46.90% P2 ENVELOPES 131 4.00%66.00%47.57% P3 PADS,NOTEBOOKS,FORM,ACCT BKS 144 4.00%80.00%39.66% P4 ADD,CALCULATOR,FAX PPR ROLLS 18 19.00%79.00%48.56% P5 STORAGE BOXES 19 27.00%61.00%43.84% P6 COMPUTER PAPER 4 63.00%69.00%65.50% P7 SHIPPING & MAILROOM SUPPLIES 6 41.00%48.00%46.17% P8 WIDE FORMAT PAPER 4 48.00%48.00%48.00% Q8 PRINTERS & SCANNERS 5 29.00%37.00%34.60% R1 STAMPS,DATERS,NUMBER MACH 68 4.00%48.00%36.22% R2 STAMP PADS, RACKS, INKS 10 12.00%53.00%38.10% S1 PRINTER SUPPLIES 175 4.00%65.00%13.98% S2 RIBBONS 35 4.00%86.00%38.54% S5 COPIER & FAX SUPPLIES 39 4.00%49.00%22.90% S6 COMPUTER ACCESSORIES 77 4.00%48.00%34.52% S7 DISKETTES, DATA MEDIA/STORAGE 129 4.00%51.00%34.63% S9 SURGE, MICE, KEYBOARDS 46 4.00%72.00%33.39% W1 CUTTING BOARD,CTN OPENERS 9 39.00%48.00%42.11% W3 MAINTENANCE SUPPLIES,FIRST AID 43 4.00%52.00%27.40% W5 RESTROOM SUPPLIES 2 22.00%30.00%26.00% Attachment A November 2012 54 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit Page intentionally left blank Attachment A 55 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit November 2012 ATTACHMENT 3: City Manager’s Action Summary In response to the Audit Recommendations in this report, the City Manager has agreed to take the following actions. The full response from the City Manager is included in Attachment 4. Finding # Summary of Finding Recommendation City Manager’s Action Plan Target Date 1 OfficeMax overcharged the City at least $47,563 by applying unauthorized changes to pricing for items with specified contract prices. 1. ASD should consult with the City Attorney’s Office to pursue recovery of unauthorized charges from OfficeMax, including at least $47,563 for contract item overcharges under the America Saves program during the period November 1, 2007 through May 31, 2011.  ASD will work with the City Attorney’s Office to request reimbursement. 2 The City could have received additional discounts for non-contract office supplies. The City could have reasonably anticipated additional discounts between $148,921 and $341,863 for non-contract office supplies. 2. ASD should consult with the City Attorney’s Office to determine if the City can recover additional discounts ranging from $148,921 to $341,863 for non-contract items it purchased under the America Saves program terms from November 1, 2007 through May 31, 2011.  ASD will work with the City Attorney’s Office to consider options for recovering additional discounts. 3 ASD has not effectively administered the City’s office supplies contract. ASD has not established effective processes and procedures to ensure the City receives contracted 3. ASD should develop formal procedures to effectively administer the City’s office supplies contract in order to ensure:  The contract supports the City’s business needs, policies, and goals, including the City’s environmental policies.  ASD has completed a request for proposal process for a new office supply contract with the involvement of department stakeholders and members of the City’s environmental team. Collectively, this review panel selected a new office supply provider that meets the City’s needs, policies and goals. A contract with the new office supply provider is estimated to save the City $40,000 compared to the current contract. This Q4 2012 – Q1 2013 Attachment A 56 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit November 2012 Finding # Summary of Finding Recommendation City Manager’s Action Plan Target Date discounts and other key benefits, and that the office supplies contract meets the City’s business needs.  Purchasing monitors discounts provided to the City in order to timely detect any negative trends, such as a decline in the purchase of highly discounted contract items, and to ensure the City receives all contracted discounts and other key benefits.  Use of the contract is maximized and purchases of office supplies from other vendors or suppliers the City has not contracted with is restricted or minimized.  The City identifies and maximizes its eligibility for available contract incentives.  The City discontinues storing and delivering office supplies, unless staff can provide a cost/benefit analysis justifying the current practice.  Responsibility for contract administration is formally assigned, documentation of contract administration activities is retained, and contract administration is minimally impacted by staff turnover. estimated savings figure may be reduced if: new costs are realized for compliance with environmental policies, incentives are not achieved, purchases from non contract vendors is not prevented, purchases of non discounted items is not prevented.  ASD has formally assigned and documented contract administration duties and transitions those duties when there is staff transition.  Using tools offered by the new contract, ASD will monitor and ensure that discounts and incentives offered are realized. New tools will enable staff to prevent the purchase of non-discount items.  ASD will require departments to purchase office supplies via the new contract and will consider ways to restrict the purchase of office supplies outside of the contract via restrictions in the PCard system.  ASD will review the practice of storing office supplies to see if it is the best approach given the benefits of the new contract. 4 ASD should ensure the City’s financial records 4. ASD should develop and communicate to staff policies and procedures to  City departments handle the classification of expenses at the point of purchase. ASD will make clear to Q4 2012 Attachment A 57 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit November 2012 Finding # Summary of Finding Recommendation City Manager’s Action Plan Target Date accurately identify office supplies and should properly budget for and control office supplies expenditures. City records indicate the City has spent considerably more for office supplies than other local jurisdictions sampled, however, we could not reasonably associate a significant portion of office supplies expenditures with office supplies vendors. ensure the office supplies accounting code is clearly defined, its use is monitored, and that office supplies are accurately recorded in the City’s accounting records. departments via policy and training and periodic review to ensure compliance to properly classify office supply expenses in the accounting system. As result of staffing reductions and increased work volume ASD does not have the person power to monitor how accurately departments classify all expenses. 5 Strategic contracting practices may provide savings opportunities. The City’s procurement policies and procedures do not clearly identify and communicate requirements for establishing negotiated contracts for goods and/or services the City purchases mainly using purchasing cards, which likely results in lost savings opportunities. 5. ASD should clarify the City’s procurement policies and procedures, while ensuring consistency with the Municipal Code, to specify when Purchasing should negotiate contracts, based on dollar amount thresholds applicable to total citywide expenditures for goods and/or services (or payments to vendors) in aggregate, regardless of payment method.  As staffing levels allow, ASD periodically reviews spending activity, services used and commodities to determine if a contract with a vendor would be advantageous. Due to staffing reductions and increased work volume, this level of review is time consuming for staff and staff may not always be available to perform this type of analysis. Staff will continue to perform this review as time permits and will also look into automated tools to flag this activity. In addition, staff will consider hiring temporary help to accomplish this review, which could offset savings. When ASD conducts this review a threshold will be set to flag purchasing activity with vendors when aggregate spend meets the level of $5,000. Where spending levels are met, Purchasing staff will take action to ensure competitive pricing agreements are put in place and are consistent with the muni code. Q4 2012 – Q1 2013 Attachment A 58 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit November 2012 Finding # Summary of Finding Recommendation City Manager’s Action Plan Target Date 5 Strategic contracting practices may provide savings opportunities. The City did not have authorized contracts for several vendors selected for review. OCA did not find evidence ASD Purchasing monitors expenditures for goods and/or services from vendors through the use of the City’s SAP Enterprise Resource Planning system reports in order to determine whether cost savings opportunities could be maximized by entering negotiated contracts. 6. ASD should develop policies and procedures to ensure it monitors total citywide expenditures on categories of goods and/or services (or expenditures by vendor) and periodically assesses whether the total volume of the transactions and expenditures, regardless of payment method, may require the City to contract for the goods and/or services either through the City’s competitive solicitation methods or by using another agency’s contract, in order to maximize cost savings.  As staffing levels allow, ASD periodically reviews spending activity, services used and commodities to determine if a contract with a vendor would be advantageous. Due to staffing reductions and increased work volume, this level of review is time consuming for staff and staff may not always be available to perform this type of analysis. Staff will continue to perform this review as time permits and will also look into automated tools to flag this activity. In addition, staff will consider hiring temporary help to accomplish this review, which could offset savings. When ASD conducts this review a threshold will be set to flag purchasing activity with vendors when aggregate spend meets the level of $5,000. Where spending levels are met, Purchasing staff will take action to ensure competitive pricing agreements are put in place and are consistent with the muni code. Q4 2012 – Q1 2013 5 Strategic contracting practices may provide savings opportunities. OCA found that the City did not have authorized contracts for several vendors selected for review, despite significant aggregate purchases in 2011 and/or historical total 7. ASD should develop policies and procedures to ensure the City has properly approved contracts, when required by the Municipal Code, prior to conducting business. Specifically, the City should ensure it establishes a process to prevent and/or detect issuance of purchasing documents or purchasing card payments to vendors without a properly approved contract, if required.  ASD has in place a Purchasing Manual that outlines the process for contract approval. ASD will continue to work with other departments to ensure that contracts are approved consistent with the process outlined in the Purchasing Manual prior to work commencing.  ASD will implement additional review steps in the contract process to ensure contracts are executed properly. Q4 2012 – Ongoing Attachment A 59 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit November 2012 Finding # Summary of Finding Recommendation City Manager’s Action Plan Target Date purchases from the vendor. 5 Strategic contracting practices may provide savings opportunities. The City does not have a properly authorized office supplies contract. Although the America Saves program master purchasing agreement expired on June 30, 2011, we found no evidence the City subsequently took steps to appropriately contract for office supplies. 8. ASD should develop policies and procedures to ensure ASD Purchasing staff monitors expiring contracts and ensures contracts are re-established in a timely manner.  ASD will work with departments to help develop a process for highlighting contracts that are due to expire. There are reports available that departments can use to review upcoming expiration dates.  Purchasing staff will be assigned to review SAP reports on a quarterly basis to flag contracts that are due to expire. Q4 2012 – Q1 2013 5 Strategic contracting practices may provide savings opportunities. ASD does not have a process to document and approve all exemptions from competitive procurement. As shown in Exhibit 13, there was no evidence to support that contracts for 8 of 13 vendors sampled were awarded competitively or properly exempted from 9. ASD should develop policies and procedures to ensure it complies with Municipal Code requirements for applying and documenting exemptions from competitive solicitation in the procurement of goods and services (A City working group that promotes efficient and effective purchasing methods has drafted a new “City of Palo Alto Sole Source Justification Form” which includes all 18 exemptions listed in the Municipal Code).  ASD prepares a report that goes to the City Council documenting contracts that were approved with exemptions. This has been established process for many years and offers efficiency and approvals at the appropriate staff level while satisfying accountability. Staff will review the municipal code and current practice to ensure they are both in sync and recommend revisions to the municipal code where needed. Should Staff, in collaboration with the City Attorney’s Office, consider streamlining the municipal code requirements for exemptions then staff will make the appropriate recommendation to the City Council. 2013 Attachment A 60 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit November 2012 Finding # Summary of Finding Recommendation City Manager’s Action Plan Target Date competitive solicitation requirements. 6 The City has not sufficiently defined contract administration roles and responsibilities. In reviewing the Municipal Code and the City’s Purchasing Manual, we did not find sufficient guidance regarding contract administration roles, responsibilities, and business practices to ensure compliance with the City’s contract terms and also to ensure the City receives contracted benefits. 10. ASD should ensure contract administration roles and responsibilities are defined and appropriately communicated. At a minimum, ASD should broadly define contract administration and develop a process to:  Formally identify the contract administrator and assign contract administration responsibilities.  Identify and document key contract terms.  Identify and provide the necessary training to ensure the contract administrator has the required expertise.  Identify or develop specific methodology, reports, and/or tools required to administer the contract.  Establish and monitor timelines and milestones in administering the contract.  ASD roles and responsibilities are defined and communicated (e.g., the Contract Administrator or Buyer who handled the solicitation is listed).  ASD will implement a checklist of minimum requirements for project managers and contract administrators and hold departments accountable for satisfying their responsibilities.  Contractor Administrator and or Buyer are formally identified and assigned administration responsibilities pursuant to their respective job description.  ASD Purchasing staff is trained to understand specific terms and conditions of a contract, and is knowledgeable pursuant to the qualifications required to hold the position as described within the job description. Additionally, Team training is held on selected topics (e.g., Risk Management) as needed.  ASD will look to determine if it would serve the organization for Purchasing and Contract Administration to take over the overall contract administration of contracts for the City. Current process is Purchasing and Contracts Administration Division performs the activities required to award a contract. Contract Administration duties are managed by the individual Departments who the contract was issued for. Improved training, to address turnover, and easy access to information will be important.  The role of departments in the contract administration process must be clearly defined. 2013 Attachment A 61 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit November 2012 ATTACHMENT 4: City Manager’s Response Attachment A 62 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit November 2012 Attachment A 63 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit November 2012 Attachment A 64 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit November 2012 Attachment A 65 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit November 2012 Attachment A 66 City of Palo Alto | Office of the City Auditor | Contract Oversight Audit November 2012 Attachment A POLICY AND SERVICES COMMITTEE DRAFT EXCERPT Page 1 of 12 Special Meeting November 20, 2012 Contract Oversight Audit Jim Pelletier, City Auditor reported the Contract Oversight Audit (Audit) focused on the City's office supplies contract with Office Max. The objective of the Audit was to assess the effectiveness and adequacy of internal controls to ensure contracts were administered in accordance with the Municipal Code and relevant policies and procedures. The City Auditor’s Office Staff focused on the office supplies contract, because they felt it would be a simple and straightforward contract and it would allow them to review broader contract administration practices. The office supplies contract was one of the two main contracts administered directly by the Purchasing and Contracting Division of the Administrative Services Department (ASD). Houman Boussina, Senior Performance Auditor stated the Audit report provided six findings and ten recommendations. The audit included selected key points from Office Max's responses and management's perspective. The report concluded with the City Manager's action summary and response. Under the America Saves Program, Office Max extended to governmental agencies a contract it held with Oakland County, Michigan. The term of the Master Purchasing Agreement was June 1, 2006 through June 30, 2011. The City's purchases from Office Max from 2005 through 2011 totaled approximately $1.75 million. Staff did not have all contract documentation; therefore, the City Auditor’s Office relied on Office Max to provide the commencement date for the contract. Staff reported the commencement date of the contract as 2006, while Office Max reported the City entered the agreement on November 1, 2007. The Audit focused on Office Max's compliance with key contract terms, the City's enforcement of contract terms, and the City's usage of the contract. Finding 1 indicated Office Max overcharged the City at least $47,563 by applying unauthorized changes to pricing. The contract required formal amendments or authorized price list changes for contract items. The City Auditor’s Office recommended ASD Staff consult with the City Attorney's Office to pursue recovery of $47,563. Finding 2 indicated the City could have received additional discounts of approximately $149,342 for non-contract office supplies covered under the terms of the contract. In order to provide this analysis, the City Auditor’s Attachment B DRAFT EXCERPT Page 2 of 12 Policy and Services Committee Special Meeting Draft Excerpt 11/20/2012 Office reviewed various reference points, such as the original bids of Oakland County and other audit reports. During the audit, ASD Staff performed an analysis of pricing from another available contract, and found that the City could save $40,000 annually compared to the current contracts. The City Auditor’s Office recommended ASD Staff consult with the City Attorney's Office to determine if the City could recover additional discounts for non- contract items. Finding 3 indicated ASD did not effectively administer the City's office supplies contract. The City Auditor’s Office did not find effective procedures to ensure the City received the contracted discounts and other key benefits. The City Auditor’s Office found an overall decline in the discount rate on office supplies. The City increasingly purchased non- contract items discounted approximately 40 percent as opposed to contract items discounted approximately 75 percent on average. The decrease in the discount percentage resulted from the City's increased purchase of non- contract items. The City spent more than other jurisdictions for office supplies per Full Time Equivalent (FTE). Staff did not fully utilize the office supplies contract to realize benefits. From 2006 through 2011, the City purchased approximately 59 percent of its supplies from Office Max. The City did not manage or monitor contract incentives. The contract provided a 98.5 percent fill rate and next-day delivery; therefore, The City Auditor’s Office did not agree with the necessity for storing office supplies at the City warehouse. ASD Staff did not ensure purchased office supplies supported the City's environmental goals. The City spent approximately $230,000 on 30 percent recycled paper. City policy required the purchase of paper products containing at least 50 percent recycled materials. The City Auditor’s Office recommended ASD Staff develop formal procedures to effectively administer the contract. ASD Staff should ensure the City's financial records accurately identified office supplies. The City Auditor’s Office could not reasonably associate a significant portion of office supply expenditures with office supply vendors. In Fiscal Year 2011, the City budgeted approximately $563,000 for office supplies, approximately twice the actual purchase amount of office supplies from Office Max. The City Auditor’s Office questioned the nature of expenditures for office supplies that were coded as office supplies. The City Auditor’s Office recommended ASD Staff develop and communicate policies and procedures to ensure the office supplies accounting code was properly utilized. Strategic contracting practices could provide savings opportunities. The City did not have authorized contracts for several vendors selected for review in the Audit. In addition, the City did not have a properly authorized office supplies contract. The City Auditor’s Office found the policies and procedures did not clearly identify contracting requirements for goods and services purchased with purchase cards (P-Card). Purchasing did not monitor expenditures for goods and services using reports, relied on departments to communicate information, and did not have a process to ensure Staff was alerted to Attachment B DRAFT EXCERPT Page 3 of 12 Policy and Services Committee Special Meeting Draft Excerpt 11/20/2012 approaching contract expirations. ASD Staff did not have a process to document and approve all exemptions from competitive solicitation. The City Auditor’s Office found a large number of the City's contracts were exempted. Staff reported that in practice approval was required for only 2 of 18 exemption categories specified in the Municipal Code. The Municipal Code provided some details regarding the process for documenting exemptions that were not followed in all cases. The City Auditor’s Office recommended that ASD Staff clarify the City's procurement policies in this area, develop policies and procedures to have approved contracts in place prior to conducting business, monitor expiring contracts, and follow Municipal Code requirements when documenting exemptions from competitive solicitation. Finding 6 indicated Staff did not sufficiently define contract administration rules and responsibilities. The City Auditor’s Office did not find sufficient guidance regarding contract administration, specifically, no evidence that two contracts administered by Purchasing were properly administered. The City Auditor’s Office recommended ASD Staff ensure contract administration rules and responsibilities were defined and communicated. Lalo Perez, Chief Financial Officer stated the recommendations were reasonable, and Staff wished to provide responses. The America Saves Program had more than 1,100 participants nationwide. Staff trusted that Oakland County, Michigan performed a thorough analysis and selected the lowest responsible bidder. As a result of the Audit and Staff's experience, Staff determined the City could have saved more funds than it did. Staff experienced numerous challenges during the period under review, including a reduction in resources and various significant initiatives. He would report the result of the new Request for Proposal (RFP) process and provide an estimate of savings. Losses were reported, but savings and efficiencies were not. The City was a large organization and some areas needed improvement. The City Manager asked him to review the resource allocation to this program. Rather than adding permanent staff, seasonal support could assist with analysis, issue RFPs, and award contracts. Another option was utilizing the Office of Management and Budget (OMB) to review various areas. The City Manager tasked him with continuing to improve opportunities for efficiency and savings. The Palo Alto process required more expenditures than the process in other cities. The level of process added to costs. In reviewing the audit findings, he determined Staff coded various items as office supplies if there were no funds in the appropriate category to fund the purchase. In July 2012, Staff elevated budget controls to a group level. With more training and retraining, Staff could log the proper codes. Attachment B DRAFT EXCERPT Page 4 of 12 Policy and Services Committee Special Meeting Draft Excerpt 11/20/2012 David Ramberg, Assistant Director of Administrative Services reported the Purchasing Group was comprised of three contract administrators, two buyers, and one purchasing manager. Three of those employees retired and the positions had to be filled. The number of purchasing orders processed during the term of the audit (approximately 3 1/2 years) was 8,589. The number of contracts and contract amendments sent to the City Council was 336. The dollar value of purchase orders and contracts processed was approximately $512 million. The number of bids completed was approximately 1,200. The number of bid protests was six. Staff resolved all six protests at Staff level, clearing the City of any inaccuracies in the bid process. Two of the bid protests reached Council level, and the Council supported Staff in not approving the bid protest. The City's purchasing process provided a cost reduction when existing contracts were issued for renewal. Cost reductions were achieved when compared to the estimates Staff expected to receive for some key contracts. The total of cost reductions over 3 1/2 years was approximately $5 million. A better and more accountable P-Card system was installed in 2011. The issuer of the P- Cards, JPMorgan Chase, provided a more favorable contract by offering a competitive rebate based on spending. Staff anticipated a rebate of approximately $40,000 per year. That rebate amount should increase year- to-year as purchasing activity increased. Through the competitive process, the City would have a new contract with Staples for office supplies. The contract would provide savings, better reporting, and controls to ensure Staff purchased only discounted items. In addition, the contract offered remanufactured toner cartridges at a significant price advantage and the largest suite of green products available. The City was moving in a positive direction with the new contract with Staples. Council Member Espinosa was interested in Staff responses to the Audit Recommendations. Staff's responses to Recommendations 4 and 5 noted staffing reductions. Staff's response to Recommendation 9 essentially stated policy and procedures were in place. He inquired whether the City Auditor felt Staff's responses would lead to change and compliance. Mr. Pelletier worked closely with ASD Staff in the development of responses. He was confident ASD Staff would make the necessary changes to correct issues. The City Auditor’s Office follow-up would ensure ASD Staff met the recommendations. Council Member Espinosa asked if there were any areas Mr. Pelletier felt would not change. Attachment B DRAFT EXCERPT Page 5 of 12 Policy and Services Committee Special Meeting Draft Excerpt 11/20/2012 Mr. Pelletier answered no. The City Auditor’s Office and ASD Staff generally agreed with the issues noted and the actions to be taken. Council Member Espinosa asked Mr. Perez if the results of the Audit surprised him. Mr. Perez was surprised by the extent of the amount. As Staff decreased, he had to determine priorities based on the highest return of time. He chose the implementation of the new P-Card as the top priority in order to provide a new revenue stream for the City. The City's program for infrastructure had increased dramatically, which impacted procurement. Contracts and transactions were complex and required a great deal of time, which was impacted by the decrease in staffing. Increased staffing could provide a return that was larger than expenses. Reduced staffing levels increased risk for the City. Other areas of the City organization would also have problems. OMB Staff and additional software could assist with analysis. He would return to the Council with a request for additional funding to address these issues. Mr. Pelletier noted Findings 1 and 2 were specific to Office Max. Other findings concerned general contracting practices across the City. The City Auditor’s Office encouraged ASD Staff to develop procedures and policies that would impact all contracting across the City. Council Member Espinosa expressed concern about Staff's responses regarding the lack of Staff to perform the recommendations. The key purchasing statistics alarmed him. He inquired about the level of risk for the City based on the Audit. Mr. Perez could only guess about the level of risk. This audit raised areas of concern which Staff could review. When purchasing contracts were not in place, Staff was performing some checks and balances to reassure the Council. He could pursue other contracts and savings opportunities if Staff was available. The larger contracts had a rigorous process and project managers to provide checks and balances. One initiative under discussion was decentralization of some purchasing. Staff planned to present Municipal Code changes and levels of authority to the Council. Council Member Schmid inquired whether the Audit could inform processes for service-oriented contracts. Attachment B DRAFT EXCERPT Page 6 of 12 Policy and Services Committee Special Meeting Draft Excerpt 11/20/2012 Mr. Pelletier indicated the Audit considered broader processes regarding all contracts within the City. The larger contracts received more attention; however, the core processes for large and small contracts were similar. Council Member Schmid believed much of the judgment for service contracts was qualitative rather than quantitative. Mr. Pelletier agreed. The City had expectations of what it planned to receive from those contracts, and had a responsibility to monitor contracts to ensure it received what it paid for. Council Member Schmid noted a transition from measuring pieces of paper to determining the quality of contract fulfillment. Mr. Pelletier hoped service contracts contained specific requirements for levels of service and ensured those services were actually provided. Council Member Schmid noted in the Audit Report the number of times information had to be obtained from Office Max, because SAP software did not retain the records. He inquired whether SAP was providing accurate coding. Mr. Pelletier explained that Staff was coding items incorrectly in the SAP system. It was not an issue with the SAP software. Council Member Schmid believed the goal of SAP software was to coordinate definitions across departments. He asked why Staff had to obtain information from Office Max. Mr. Pelletier stated City Staff had not maintained a copy of the contract. Council Member Schmid inquired if Staff had obtained data from Office Max in addition to the contract. Mr. Pelletier explained Staff would request records from a vendor to compare with City records as part of the audit process. Council Member Schmid noted statements in the Audit Report indicating the City did not have data and the reliance on Office Max information. Attachment B DRAFT EXCERPT Page 7 of 12 Policy and Services Committee Special Meeting Draft Excerpt 11/20/2012 Mr. Pelletier felt those statements referred to the City not having a copy of the contract. Mr. Boussina believed those statements concerned the contract initiation date. Mr. Pelletier recalled instances of SAP not being able to provide needed reports. Mr. Boussina indicated SAP could not generate a list of vendors coded as office supplies providers. Council Member Schmid inquired if there were limitations to the data SAP could provide. Mr. Perez stated the data depended on the configuration of the report. A report could be configured to generate almost any data. Council Member Schmid was disappointed SAP could not provide the needed information. Council Member Klein inquired whether other major contracts should be audited given the data obtained from auditing the Office Max contract. Mr. Pelletier stated it was important to review contracts on a regular basis. Regardless of this Audit, he would feel the need to audit different contracts. Council Member Klein asked if the Auditor's work plan included audits of other contracts. Mr. Pelletier reported the work plan contained an audit related to construction practices. It had not been determined which specific contract would be reviewed. Rather than auditing a contract, he could review the processes for managing construction projects contracted to outside vendors. Future audit plans should include one or two important contracts each year. Council Member Klein asked if the ASD Audit had been presented to the Finance Committee. Attachment B DRAFT EXCERPT Page 8 of 12 Policy and Services Committee Special Meeting Draft Excerpt 11/20/2012 Mr. Pelletier answered no. All audits except for utilities-related audits were presented to the Policy and Services Committee (Committee). Utilities- related audits were presented to the Finance Committee. Council Member Klein suggested the Finance Committee should focus on whether the City had a sufficient number of Staff before beginning the budget process. If the purchasing section had an additional employee, the City could have saved $500,000. Mr. Perez believed an additional employee would pay for itself. The position could begin as a temporary trial. If the employee found savings of $500,000, then it would be logical to have a permanent, benefited person. Council Member Klein felt that would be a worthy discussion. Mr. Perez stated hiring an additional person need not necessarily wait for the budget process, because he could work within the City Manager's authority for funding. The Council would not regret an expenditure for an additional Staff position. Council Member Klein said there was a limit to the number of positions that could be reduced before performance suffered. Mr. Perez agreed. The City Manager and he had been reviewing that issue, including the wear and tear on Staff, the capacity, and the level of risk. Further discussions were needed. Council Member Klein noted incorrectly coded purchases would result in other categories being underreported, and inquired whether Staff knew what those other categories were. Mr. Pelletier reported the analysis only considered purchases coded to office supplies. The incorrect coding led him to believe that other categories were not properly stated. Council Member Klein was not persuaded by Mr. Perez's response that Palo Alto was different from other cities regarding spending per FTE. Mr. Perez's response implied that Utility Workers consumed more office supplies than General Fund employees. Attachment B DRAFT EXCERPT Page 9 of 12 Policy and Services Committee Special Meeting Draft Excerpt 11/20/2012 Mr. Perez said Palo Alto had multiple needs for different parts of the process. If miscoding were removed from the equation, Palo Alto's spending per FTE was not that far from Mountain View's spending per FTE. Council Member Klein stated the amount of miscoding was unknown. Mr. Perez suggested ASD needed further analysis. It was tempting for employees to code purchases to categories with sufficient funding due to lack of training. ASD stopped analyzing those issues when the number of Staff was reduced. Council Member Klein noted 59 percent of office supplies were purchased from Office Max and the City Auditor’s surprise that such a large percentage was purchased from other vendors. Mr. Pelletier explained that the chart on Packet Page 89 included purchases incorrectly coded to office supplies. Inclusion of the incorrectly coded purchases made it difficult to analyze the numbers. Council Member Klein asked why office supplies were purchased from vendors other than Office Max. Mr. Pelletier reported the Audit found 3 percent or $91,000 was spent for office supplies from other vendors. Council Member Klein reiterated his question. Mr. Perez indicated the new bid provided more control. Staff may have purchased office supplies from other vendors because of convenience or unique needs. That was difficult to control, but Staff would provide messaging. Council Member Klein felt it was a training problem. Council Member Schmid referenced the first full sentence at the top of page 94 regarding the City's financial records and systems not providing the necessary detail and functionality. That implied that the basic system had a problem. Mr. Boussina stated that was a reasonable interpretation. He had no difficulty determining purchases coded as office supplies when purchase Attachment B DRAFT EXCERPT Page 10 of 12 Policy and Services Committee Special Meeting Draft Excerpt 11/20/2012 orders were utilized. However, there was no visibility when P-Cards were used for purchases. Mr. Pelletier believed the root cause was the bank's lack of detail for transactions. Under the new JPMorgan Chase system, those details would be available. Mr. Perez indicated the problem was the prior vendor, rather than the SAP system. Staff was now scanning receipts and submitting a detailed receipt in electronic format. Mike Ramseck, Office Max Representative welcomed the opportunity to participate in the Audit. It afforded the ability to provide the City with third- party validation of the accuracy of processes. Office Max worked with the City to provide significant amounts of information pertinent to the contract. Office Max reviewed the draft Audit Findings in August 2012, and provided additional information that he believed addressed all concerns. Office Max was disappointed that the final report appeared to conclude there were additional issues to address. Office Max intended to work directly with the City and would continue to share all relevant information. They were confident the process would deliver a resolution acceptable to both parties. Regarding overcharges, Office Max provided the requested price lists, which were validated and updated by a letter of certification from Oakland County. Oakland County accepted all price changes over the audit period; therefore, the price changes were passed on to the City of Palo Alto. Office Max was concerned that it was not asked to participate in the competitive bid process for future purchases. He requested documentation of the bid process to determine why Office Max was not included. Chair Holman inquired about the process to be used to determine additional staffing. Mr. Perez explained audit recommendations required more control, and more control required more time across the organization. Training had to be implemented; however, there was not an appropriate training plan for the organization. Procedures, processes, and checks and balances required a great deal of intervention and Staff time. Staff eliminated controls and accepted risk, because of the lack of resources. Additional efficiencies would not outweigh the requirements of the recommendations. Two concerns were retaining employees on a temporary basis and the tremendous amount of turnover in City Staff. Time and resources were needed to implement processes and training. Attachment B DRAFT EXCERPT Page 11 of 12 Policy and Services Committee Special Meeting Draft Excerpt 11/20/2012 Chair Holman referenced ASD's response to warehousing office supplies, and suggested it could have been more qualitative. Mr. Perez explained Staff could not provide a better response prior to the report being published. Currently, the vendor delivered orders to a central point, and then Staff distributed individual orders to each department. ASD reviewed the issue three to five years ago, and determined vendor delivery to departments was not cost effective. They would review it again. Chair Holman suggested fewer employees having P-Cards could decrease the number of miscoded transactions. Mr. Perez was willing to take the risk. Issuing P-Cards created more efficiencies and more opportunity for risk. In the alternative, increased use of P-Cards would provide higher rebates. If abuse occurred, then P-Cards would be withdrawn. Chair Holman inquired whether systems were in place for Staff to suggest improvements and efficiencies such that problems identified in the Audit could have been identified and halted earlier. Mr. Perez indicated Staff could not implement suggestions quickly enough. Speed teams worked with ASD Staff to make changes in the procurement process. Those changes could include decentralization of some procurement and reconsideration of authority and accountability for specific individuals. Mr. Ramberg said the Audit offered good recommendations. The prior audit of the P-Card system prompted Staff to replace the Cal Card system. In doing so, Staff eliminated a manual process that had been in place for quite some time. The new P-Card system delivered statements electronically, and Staff uploaded paper receipts to the vendor's system. Staff searched for opportunities to utilize new tools and to revise processes. Chair Holman did not wish to convey the impression that the only goals were speed and efficiency. The product and employees were important as well. MOTION: Council Member Schmid moved, seconded by Council Member Espinosa to recommend the City Council accept the Contract Oversight Audit. Attachment B DRAFT EXCERPT Page 12 of 12 Policy and Services Committee Special Meeting Draft Excerpt 11/20/2012 Chair Holman hoped savings from audits would reinforce efficiencies and support audit activities. Mr. Pelletier recognized that audits demanded Staff time and resources, and thanked ASD Staff for their cooperation and efforts. Mr. Perez stated ASD Staff would address audit recommendations as quickly as possible. MOTION PASSED: 4-0 Attachment B CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR January 22, 2013 The Honorable City Council Palo Alto, California Policy and Services Committee Recommendation to Accept the Auditor's Office Quarterly Report as of September 30, 2012 The Office of the City Auditor recommends acceptance of the Auditor’s Office Quarterly Report as of September 30, 2012. At its meeting on November 20, 2012, the Policy and Services Committee approved and unanimously recommended the City Council accept the report. The Policy and Services Committee minutes are included in this packet. Recommended Action: Accept the Auditor’s Office Quarterly Report as of September 30, 2012. Respectfully submitted, Jim Pelletier City Auditor ATTACHMENTS:  : Attachment A: Auditor's Office Quarterly Report as of September 30, 2012 (PDF)  : Attachment B: Policy and Services Committee Meeting Minutes Excerpt (November 20, 2012) (PDF) Department Head: Jim Pelletier, City Auditor Page 2 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR November 20, 2012 The Honorable City Council Attention: Policy & Services Committee Palo Alto, California Auditor's Office Quarterly Report as of September 30, 2012 RECOMMENDATION The City Auditor’s Office recommends the Policy and Services Committee review and recommend to the City Council acceptance of the Auditor’s Office Quarterly Report as of September 30, 2012. SUMMARY OF RESULTS In accordance with the Municipal Code, the City Auditor prepares an annual work plan and issues quarterly reports to the City Council describing the status and progress towards completion of the work plan. This report provides the City Council with an update on the first quarter for FY 2013. Respectfully submitted, Jim Pelletier City Auditor ATTACHMENTS:  Attachment A: Quarterly Report as of September 30, 2012 (PDF) Department Head: Jim Pelletier, City Auditor Attachment A Page 2 Attachment A “Promoting honest, efficient, effective, and fully accountable city government." Attachment A 1 September 2012 CONTENTS INTRODUCTION ................................................................................................................................................................... 2 OVERVIEW OF THE OFFICE OF THE CITY AUDITOR (OCA)...................................................................................................................... 2 OCA’S CORE PRODUCTS & SERVICES ............................................................................................................................................... 2 PROFESSIONAL STANDARDS ............................................................................................................................................................ 3 FIRST QUARTER FY 2012 UPDATE ........................................................................................................................................ 4 OVERVIEW .................................................................................................................................................................................. 4 AUDITS ....................................................................................................................................................................................... 4 OTHER MONITORING AND ADMINISTRATIVE ASSIGNMENTS .................................................................................................................. 5 FRAUD, WASTE, AND ABUSE HOTLINE ADMINISTRATION ..................................................................................................................... 6 Attachment A 2 September 2012 INTRODUCTION Overview of the Office of the City Auditor (OCA) The OCA conducts performance audits of City departments, programs, and services. Performance audits provide the City Council, City management, and the public with independent and objective information regarding the economy, efficiency, and effectiveness of City programs and activities. Our goal is to help the City achieve its strategic, operational, reporting, and compliance objectives using a systematic, disciplined approach to evaluating and recommending improvements to the effectiveness of the City’s risk management, control, and governance processes. Through our audit activities, the OCA supports the key governance roles of Oversight, Insight, and Foresight as described below: Oversight Insight Foresight OCA provides oversight of City management on behalf of the City Council and the residents of Palo Alto by evaluating whether departments have established efficient and effective means of doing what they are required to do, spending funds for intended purposes, and complying with applicable laws and regulations. OCA provides insight to assist City management by assessing the adequacy of internal controls; sharing best practices and benchmark information; and looking across departments to help management identify opportunities to borrow, adapt, or re-engineer good practices. OCA helps City management look forward by identifying trends and bringing attention to emerging challenges before they become crises. These issues often represent long-term risks that can sometimes receive low priority for attention where scarce resources drive more short-term focus on urgent concerns. OCA’s Core Products & Services Audits – OCA’s core product addressing performance (efficiency and effectiveness), compliance, and information technology matters that provide management with value-added recommendations focused on mitigating risks and improving internal control. Audits are designed to support the achievement of the City’s strategic, operational, reporting, and compliance objectives and the City Council’s priorities. Service Efforts and Accomplishments (SEA) and Citizen Centric Report (CCR) – The SEA is an annual report that provides data about the costs, quality, quantity, and timeliness of City services. The report includes a variety of comparisons to other cities and the results of a citizen survey. The goal is to provide the residents of Palo Alto, the City Council, City Staff, and other stakeholders with information on past performance to strengthen public accountability, improve government efficiency and effectiveness, and support future decision making. Prepared in coordination with the annual SEA report, the CCR is intended to be a brief, easy to read document that provides a quick snapshot of the City’s progress over the year. Based on guidance from the Association of Government Accountants, the report is a method to foster innovative means of communication between the City and the public. Administration of the Fraud, Waste, and Abuse Hotline (Hotline) – The Hotline provides an anonymous mechanism for employees to report fraud, waste, and/or abuse of City resources. The OCA is responsible for partnering with an outside vendor to administer the Hotline and ensure that all calls are reviewed and acted upon by the Hotline Review Committee. The OCA may, as necessary, investigate certain cases. Additionally, the OCA will provide quarterly reporting of Hotline activity to the City Council. Attachment A 3 September 2012 Special Advisory Memorandums (SAMs) – Utilized for time critical engagements including limited assessments, reviews, or evaluations as requested by management or the Council. These services do not typically conform to the rigorous audit standards required for Audits, but allow for important information to be provided to management in a quick, flexible manner and can be focused on singular issues. Comprehensive Annual Financial Report (CAFR) and Single Audit Report – Each year, the OCA contracts with an independent, certified public accountant to perform both the City’s annual financial audit as well as the annual Single Audit. Sales and Use Tax Monitoring – The OCA conducts sales and use tax monitoring internally and contracts with an external vendor for quarterly sales and use tax recovery and information services. The purpose of this monitoring is to identify misallocations of local sales and use tax generated by companies doing business in Palo Alto. In addition, the external vendor prepares quarterly sales and use tax summary reports that are provided to the City Council as informational items. Professional Standards The OCA must adhere to a set of professional standards in conducting its work. The Palo Alto Municipal Code requires the OCA to adhere to Government Auditing Standards issued by the US Government Accountability Office. These standards require that we plan and perform our audits to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on the objectives of each audit. The OCA’s compliance with these standards is reviewed every three years by an external firm. Attachment A 4 September 2012 First Quarter FY 2012 Update Overview The audit function is essential to the City of Palo Alto’s public accountability. The Office of the City Auditor’s independence and accountability, mandated by the City Charter and municipal code, means the public, the Council, and City staff can rely on us for objective information and practical advice. We thoroughly review and analyze City performance to give you the information you need about complex and difficult issues. Taking action on our audit recommendations will help the City to reduce risks and protect its good reputation. Audits Below is a summary of our Audit work for the first quarter of FY 2013 (as of September 30, 2012): Title Objective(s) Start Date End Date Status Results/Comments Service Efforts & Accomplishments / Citizen Centric Report To provide consistent, reliable information on the performance of City services to:  Assist users in assessing whether the City is achieving its goals and objectives in an efficient and effective manner  Assist the City in meeting its responsibilities to be publicly accountable in the stewardship over public resources 7/12 1/2013 In Process These reports provide comprehensive and historical data and analysis that is not available in any other single report in the City. The SEA and CCR are available online or hardcopy from the OCA. This year’s report has been redesigned from the ground up with additional focus on performance management. Contract Administration Audit (Audit of Contract Oversight) To assess whether internal controls are effective and adequate to ensure that City contracts are administered in accordance with Municipal Code and relevant policies and procedures. The audit focused on the City’s contract with OfficeMax. 1/2012 11/2012 In Process (Reporting) TBD Attachment A 5 September 2012 Title Objective(s) Start Date End Date Status Results/Comments Utilities Reserves Audit To determine the appropriateness and adequacy of utilities reserves, reserve policies, reserve guidelines, and their usage. 1/2012 12/2012 In Process (Reporting) TBD Human Resources Employee Benefits To determine whether the Human Resources Department has adequate controls over employee benefits to ensure that health premiums and administrative fees are calculated and paid accurately for eligible active and retired employees in accordance with applicable labor agreements, laws, and regulations. 6/2012 12/2012 In Process (Reporting) TBD Other Monitoring and Administrative Assignments Below is a summary of Other Assignments for the first quarter of FY 2013 (as of September 30, 2012): Title Objective(s) Status Results/Comments Sales and Use Tax Allocation Reviews The OCA conducts sales and use tax monitoring in-house and also contracts with an outside vendor. Ongoing The OCA continues to submit inquiries to the State Board of Equalization. As of the end of the first quarter, the City received $44,287 in total Sales and Use Tax Recoveries ($7,341 from OCA inquiries and $39,946 from vendor inquiries). Also, due to processing lags at the State Board of Equalization, there are 54 potential misallocations waiting to be researched and processed (29 from OCA and 25 from the vendor). Quarterly Reporting Each quarter, the OCA prepares Quarterly Status Updates and Sales Tax Digest Summaries for Council review. Ongoing N/A Attachment A 6 September 2012 Fraud, Waste, and Abuse Hotline Administration On August 16, 2012, we launched the City’s Fraud, Waste, and Abuse Hotline. Below is a summary of Hotline Activity for the first quarter of FY 2013 (as of September 30, 2012): Category Number Action Taken Inquiry 1 No Action Required Attachment A POLICY AND SERVICES COMMITTEE DRAFT EXCERPT Page 1 of 2 Special Meeting November 20, 2012 Auditor’s Office Quarterly Report as of September 30, 2012 Jim Pelletier, City Auditor would provide a detailed update at the end of the second quarter, when the Policy and Services Committee (Committee) would review the audit plan in more detail. At that time, he would recommend changes to the audit plan and provide more information. The City Auditor’s Office Staff was working on the annual Service Efforts and Accomplishments (SEA) Report. They were redesigning the report to make it user friendly and visually appealing, and to focus on performance management. The Contract Oversight Audit was complete; the Utilities Reserves Audit and the Human Resources Employee Benefits Audit were in the final reporting stages and scheduled to be reported in early December 2012. Ongoing assignments were the sales and use tax allocation review and quarterly audits. As of the end of the first quarter, the City received slightly more than $44,000 in total sales and use tax recoveries, approximately $7,000 from direct analysis by the Audit Staff and approximately $40,000 from the vendor. Potentially 54 misallocations remained outstanding with the State Board of Equalization, 29 from Audit Staff and 25 from the vendor. Staff anticipated additional recovery as the year progressed. New for the quarterly report was an update on the fraud, waste and abuse hotline, implemented on August 16, 2012. As of the end of September 2012, the hotline received one call, which was an inquiry regarding City policy. No follow-up action was required. The hotline received two additional calls, which would be reported in the next quarter. Council Member Schmid inquired whether the Human Resources Employee Benefits report would be available prior to the December 10, 2012 City Council meeting. Mr. Pelletier indicated it would be provided in the December 10, 2012 Packet. Attachment B DRAFT EXCERPT Page 2 of 2 Policy and Services Committee Special Meeting Draft Excerpt 11/20/2012 MOTION: Council Member Schmid moved, seconded by Council Member Espinosa to recommend the City Council approve the Auditor’s Office Quarterly Report as of September 30, 2012. MOTION PASSED: 4-0 Attachment B CITY OF PALO ALTO OFFICE OF THE CITY CLERK January 22, 2013 The Honorable City Council Palo Alto, California Appointment of 2013 Emergency Standby Council Staff recommends that the City Council approve the selection of the 2013 Emergency Standby Council as follows: • John Barton • Bern Beecham • Peter Drekmeier • Sid Espinosa • Yoriko Kishimoto • Judy Kleinberg • Dena Mossar BACKGROUND The Charter of the City of Palo Alto provides that "the Council may by Ordinance or Resolution, provide for the preservation and continuation of government in the event of disaster which renders unavailable a majority of the Council." On August 7, 2006, the City Council adopted amendments to Section 2.12.090 of the Palo Alto Municipal Code regarding the selection procedure for the City's Emergency Standby Council. The adopted policy states that the Council shall consider the following criteria for appointments to the Emergency Standby Council: residency in the City of Palo Alto, availability, interest in serving and a lack of conflicts of interest. Seven members serve on the Emergency Standby Council. The members of the Emergency Standby Council continue to serve until the Council appoints or reappoints the members at the beginning of each year. Department Head: Donna Grider, City Clerk Page 2 CITY OF PALO ALTO OFFICE OF THE CITY CLERK January 22, 2013 The Honorable City Council Palo Alto, California Colleagues Memo From Mayor Scharff and Council Member Klein Regarding Council’s Ad hoc Committee on Infrastructure Per Council Resolution the membership of the Council’s ad hoc committee on Infrastructure is presently limited to three Council Members. Given the importance of this subject we believe this should be increased to four Council Members and will so move. We hope you will agree. Department Head: Donna Grider, City Clerk Page 2 City of Palo Alto (ID # 3410) City Council Staff Report Report Type: Action Items Meeting Date: 1/22/2013 City of Palo Alto Page 1 Summary Title: Rail Corridor Study Title: Public Hearing: Adoption of a Resolution Amending the Transportation Element of the Comprehensive Plan to Incorporate the Palo Alto Rail Corridor Study and Approval of a Negative Declaration From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that Council: 1) adopt a Resolution (Attachment A) approving the Rail Corridor Study Report, updated as shown on Attachments B and G, amending the Transportation Element of the Palo Alto Comprehensive Plan to incorporate the Vision Statement of the Study, and 2) approve the Negative Declaration (Attachment C) for the project. Executive Summary At its December 6, 2012 hearing, the City Council Rail Committee voted to forward the Palo Alto Rail Corridor Study (Report) and list of text changes to the City Council, expressing support for the revised document. The City Council at its September 18, 2012 hearing had referred the Report back to the Council Committee to ensure consistency with recent decisions on related rail projects and ongoing revisions to the City Council Rail Committee Guiding Principles. The City Council Rail Committee, Planning and Transportation Commission (PTC), Architectural Review Board (ARB), Rail Corridor Study Task Force (Task Force) and staff have recommended approval of the Rail Corridor Study Report (Attachment G; packet copies provided previously to Council and City Libraries and available online at: www.paloaltorailcorridor.org) with the list of text changes in Attachment B and the incorporation of the Vision Statement into the Transportation Element of the Comprehensive Plan. The amendment to the Transportation Element would formalize the City’s approval of the Report and would give the Report’s key policy findings greater legal standing. The recommendations in the Report would be subject to future development, refinement and PTC and Council review. The attached resolution City of Palo Alto Page 2 (Attachment A) would adopt the document as an official City Report and incorporate the Vision Statement into the existing Comprehensive Plan. Background The City Council initiated the Palo Alto Rail Corridor Study in July 2010 to evaluate land use, transportation and urban design elements of the rail corridor, particularly in response to potential improvements to fixed rail services along the Caltrain tracks. The Report, the outcome of the two year process, analyzed those elements and their potential impacts from the range of possible rail improvements, including Caltrain upgrades, such as electrification and/or grade separations, and/or the potential options for the High Speed Rail project. Since the start of this project in 2010, a lot of changes have occurred, including changes to the High Speed Rail and Caltrain Modernization projects. Modifications to the report have been made to reflect those changes, including the City’s official position on rail projects and revised Guiding Principles. Because the rail projects are still pending and subject to change, the Report was written to provide a framework with some flexibility to ensure the effectiveness of the Report as a long range planning document. The purpose is to generate a community vision that would provide land use and transportation policies to guide development under a variety of scenarios, allowing Palo Alto to be proactive in advance of changes to the rail system. Vision Statement The vision of the project, as stated in the Report, is to: “create a vibrant, attractive, transit-rich area with mixed use city and neighborhood centers that provide walkable, safe, pedestrian and bicycle-friendly places that serve the community and beyond; and to connect the east and west portions of the City through an improved circulation network that binds the city together in all directions.” The areas that make up the Rail Corridor have been traditionally viewed as separate and distinct planning areas. This Report attempts to look at the entire 1,000 acre corridor as an interconnected subarea within the City, which is challenging because of the diversity of the corridor and its large size. The intent is to develop a long term comprehensive set of policies that can be used to guide the area regardless of what improvements are made to the fixed rail system. City Council Hearing The Rail Corridor Study had its initial formal review by the City Council on September 18, 2012. The Council unanimously voted to refer the study back to the Council Rail Committee for City of Palo Alto Page 3 further review and input. The item was referred back to the Committee to ensure that the documents accurately reflect the City’s current position on Caltrain, the High Speed Rail project and the Rail Committee Guiding Principles, given all of the recent changes and events. The changes were envisioned to be minor, not changing the intent or vision of the Report. A summary of the Council’s comments are provided below.  Important to reconcile proposed Comprehensive Plan changes with current rail issues.  Need to reflect most current discussion regarding rail improvements, including Caltrain and Guiding Principles.  Update diagram to show full impact of rail crossings along Alma.  Need context sensitive solution regarding rail impact for neighborhoods. Need to consider all neighborhoods equally when examining potential impacts, and then mitigate appropriately.  Need to acknowledge that modernization includes more than electrification. The potential impacts of electrification have not yet been identified, analyzed or mitigated.  Need to be careful regarding grade separation and potential impacts.  Should clarify that elevated crossings are not acceptable.  Concern regarding the Mitigated Negative Declaration regarding aesthetics and cultural resources.  Concern about impact of town centers on neighborhoods.  Important to view the study as a guiding document, not prescriptive. Timing is critical for future funding opportunities.  Support for requirement for timely infrastructure.  Vision statement is very important piece.  Motion approved to refer the report and resolution to the Council Rail Committee. City Council Rail Committee Hearing The Report was brought to the December 6, 2012 City Council Rail Committee. The hearing was also attended by three of the Task Force members. In response to Council and the Council Rail Committee’s direction, staff provided a list of text changes based on Council and Rail Committee comments. The text changes were made to better align the document with the Council’s position on the Caltrain Modernization project, the most recent Guiding Principles (as approved at the December 6, 2012 Council Rail Committee) and concern regarding potential grade separated crossings. Some specific changes included replacing “Caltrain Electrification” with “Caltrain Modernization” and adding language clarifying that any and all crossings must be mitigated for safety. These changes would be in addition to the list of text changes originally City of Palo Alto Page 4 provided at the September 18th City Council hearing. Attachment B, List of Text Changes, incorporates all proposed text changes. Figure 4.5 on Page 4.11 (Attachment B) has also been modified to accurately show that impacts could occur on all intersections with Alma Street. The Rail Committee determined that the text and map changes provided by staff met the Council’s direction. The Council Committee recommended with a vote of 4-0-1 adoption of the Rail Corridor Study as a vision document to guide and inform future rail corridor policy with the text changes. Staff also clarified that the Report is a long range planning and vision document intended to provide guidelines. It does not specifically identify or recommend specific development projects that may be proposed by property owners. Discussion The purpose of this item is to request adoption of a resolution formally approving the Rail Corridor Study Report and to incorporate the Vision Statement into the existing Comprehensive Plan to formally recognize the Report as representing the City’s policy positions. The May 16 draft, previously provided and online, is the most current version of the printed Report. Following the final decision made by Council, staff intends to update the report to reflect the approved changes, as summarized in Attachment B, List of Text Revisions. Should the Council approve the resolution, the Transportation Element of the current Comprehensive Plan would be amended to recognize the Rail Corridor Study Report and to formally incorporate the Vision Statement. The Report establishes the context for decisions in the future regarding more detailed policy and physical improvements. It is the first step towards responding proactively to the City’s needs for the rail corridor area. The recommendations of the Report would then become part of the ongoing Comprehensive Plan update and future studies and projects for implementation, such as area studies and the Capital Improvements Program. Comprehensive Plan Goals and Policies The recommendation of five new goals and new or amended policies for the Comprehensive Plan is an important component of the Implementation Chapter of the Report. Staff has modified the policies under Goals 1 and 2 in response to Council comments. The changes were made to make it clear that impacts must be mitigated, including for any crossings, and that mitigation measures must be proportionate to impacts. The elements of the study are generally consistent with goals, policies and programs in the existing Comprehensive Plan. The new goals and associated policies have been identified and recommended to be incorporated into the Comprehensive Plan as part of the ongoing Amendment process to further the goals of the Study. The policies and Report will be analyzed as part of the continuing Comprehensive Plan update process, including the associated Environmental Impact Report. Key revisions are noted below: City of Palo Alto Page 5 Goal 1: Rail Improvements Should be Constructed in a Below-Grade Trench. Policy 1.1: The City's preferred vertical alignment for fixed rail in Palo Alto is below grade. Policy 1.2: The City is opposed to an elevated alignment of rail in Palo Alto. Policy 1.3: When examining the potential impacts of vertical rail alignments equal attention shall be given to all Palo Alto neighborhoods. Adopted mitigation measures should be proportionate to the impacts identified in the studies. All Neighborhoods in Palo Alto affected by rail should be treated with equal consideration with respect to vertical alignment impacts. Goal 2: Ensure the Highest Possible Safety at All Rail Crossings and Mitigate Rail Impacts on Neighborhoods, Public Facilities, Schools and Mixed-use Centers. Policy 2.1: Improve existing at-grade crossings. All at-grade crossings of the Caltrain corridor should be improved to provide the highest possible level of safety and convenience. This may be grade separations or safer at-grade crossings, with the preferred choice being grade separation, if supported by technical studies. Policy 2.2: Provide additional safe and convenient crossings. Additional crossings of the tracks, and in some cases Alma Street as well, are essential to provide connections from neighborhoods to destinations such as schools, parks and services. Policy 2.3: Improve safety and minimize noise, vibrations and visual impacts of operations in the Caltrain rail corridor. With or without the addition of a High Speed Train, the Caltrain corridor should be modified to improve safety and to minimize noise, vibration and visual impacts on adjoining districts, public facilities, schools and neighborhoods. Rail Corridor Study Report Resolution Following the September Council and the December Council Rail Committee meetings, staff has modified the resolution to clarify the Report’s purpose as a vision document for the City. The resolution now proposes to modify only Policy T-1 of the Comprehensive Plan Transportation Element to incorporate the Vision Statement and that the Report is a City approved policy document. The intent of the Rail Corridor Study Resolution is to formalize the approval of the document and to amend the Comprehensive Plan to give the recommendations in the Report added authority. The Report, as a formal document, must be considered when reviewing development within Palo Alto. The actual implementation of the recommendations of the Report, including the Goals, Policies, and Programs would be part of future planning studies, CIP projects, and related environmental clearance. The following addition (underlined) to existing Policy T-1 is proposed (see attachment B for the consolidated list of proposed changes to the Report): Policy T-1 of the Transportation Element of the City’s Comprehensive Plan: City of Palo Alto Page 6 Make land use decisions that encourage walking, bicycling, and public transit use… The overall vision is to create a vibrant, safe, attractive, transit-rich area with city and neighborhood centers that provide walkable, pedestrian and bicycle-friendly places that serve the community and beyond; and to connect the east and west portions of the city through an improved circulation network that binds the city together in all directions. In 2013, the City approved the Palo Alto Rail Corridor Study Report to guide redevelopment along the rail corridor to be consistent with land use and transportation policies advocated in the Comprehensive Plan. Redevelopment along the rail corridor shall take into account the land use and transportation policies discussed in the Rail Corridor Study Report. The addition to the policy is essentially the same as what was reviewed by the City Council on September 18, 2012. The vision statement remains the same. However, staff added the last sentence requiring that future development along the rail corridor must consider the policies of the Report. Staff believes this addition is important to provide regulatory standing for the Report in the development review process in the City and for compliance with the California Environmental Quality Act for documents prepared by Caltrain and/or the High Speed Rail Authority. Public Outreach A 17-member Rail Corridor Study Task Force was created to represent a cross-section of neighborhoods, business interests, environmental organizations, and other community organizations and interests. The Task Force met 15 times to consider information, discuss issues and policies, and ultimately to recommend the report to Council. Two community meetings were held in 2011 and 2012 for public input. Staff has also met with citizen and neighborhood committees, including the Palo Alto Bicycle Advisory Committee and the City/School Traffic and Safety Committee. To solicit public feedback, a website and email address was established for the project. Notices for all meetings were posted on the City’s website at: http://www.cityofpaloalto.org/knowzone/agendas/rail_corridor_task_force.asp and the City Hall Notice Board. Additional background information was also provided on the webpage. Staff has been maintaining an email distribution list of interested individuals and has used the list to send out meeting notices and updates. An email address, railcorridorstudy@cityofpaloalto.org, was been established for public outreach purposes. A separate detailed website, www.paloaltorailcorridor.org, has been made available to provide as much information as possible for the public, similar to the one developed for the Comprehensive Plan Amendment. The Task Force meetings are also recorded and available for viewing at the Community Media Center website. The Draft report has been made available for public review on the project website during the process. Next Steps City of Palo Alto Page 7 Subsequent to Council approval of the proposed resolution, the next step will be to work with the Planning Commission and the consultant to include the Report’s recommendations for the new Comprehensive Plan goals and policies into the ongoing Comprehensive Plan Update. Staff will coordinate recommendations for future studies into staff’s work programs and will factor priority projects into future Capital Improvements Programs. Resource Impacts The City Council initially authorized $200,000 for consultant services for this study. A total of $90,000 was included in the fiscal year 2010-11 and the remaining $110,000 was allocated in the 2011-12 budget. The contract was amended on June 4, 2012 with a minor budget increase of $25,000 by the Council to accommodate the additional report drafts and meetings that were determined to be needed. Policy Implications The Report will rely on the City’s Comprehensive Plan and other land use and transportation policies to guide the effort for the corridor. The Report is consistent with the current Comprehensive Plan, as shown in the Comprehensive Plan Policies and Program Assessment Table on page 6.14 of the Study. Current Comprehensive Plan and area plan efforts, including the Bicycle and Pedestrian Plan update and the California Avenue Area Concept Plan, were considered with respect to the policies and improvements outlined in the Rail Corridor Study. Policy T-1 will be immediately amended to incorporate the Vision Statement and to recognize the Report. The new Comprehensive Plan Goals and Policies and other program recommendations will be integrated into the ongoing Comprehensive Plan Update and/or subsequent studies. Environmental Review A Draft Initial Study which reviewed the environmental issues as required by the California Environmental Quality Act (CEQA) and Intent to Adopt a Negative Declaration was posted and circulated for a 30 day public review on May 25, 2012 (Attachment C). The public comment period closed at 5:00 PM on June 25, 2012. Copies of the environmental documents have been provided to the State, Caltrain/San Mateo County Transportation District, Caltrans and Stanford University for their review and comments. Caltrain and Stanford University have expressed no objections to the document. No other comments have been received as of the printing of this staff report. Minor modifications to the Initial Study and Negative Declaration were made to reflect the most recent text changes. Because those changes are minor and do not create additional impacts, CEQA does not require recirculation of the documents. Additional environmental review for individual projects would be required as those projects are more fully developed for implementation. In addition, CEQA review for the Next Steps and City of Palo Alto Page 8 Implementation section will be conducted in conjunction with the Comprehensive Plan Update and/or as CIP projects are implemented. Attachments:  Attachment A: Resolution (DOCX)  Attachment B: List of Text Changes and Map of Two-Track On-Grade Configuration: Crossing and Impact Area Locations (PDF)  Attachment C: Negative Declaration (DOC)  Attachment D: December 6, 2012 Rail Committee Staff Report (w/o attachments) (PDF)  Attachment E: September 18, 2012 City Council Staff Report (w/ attachments) (PDF)  Attachment F: Rail Committee Guiding Principles (DOCX)  Attachment G: Palo Alto Rail Corridor Study (previously provided and available online at www.paloaltorailcorridor.org) (TXT) Not Yet Approved 1 120618 jb S://013/Planning/Reso Rail Corridor Study Report 2012 Resolution No. _____ Resolution of the Council of the City of Palo Alto Approving the Palo Alto Rail Corridor Study Report and Amending the Transportation Element of the Palo Alto Comprehensive Plan to Incorporate Certain Findings of the Report WHEREAS, the City Council adopted the 1998-2010 Comprehensive Plan in 1998, including the Transportation Element; and WHEREAS, Policy T-1 provides that land use decisions shall be made that encourage walking, bicycling, and public transit use. The policy also states that transportation and land area are inextricably linked; and WHEREAS, on July 10, 2010, the City Council directed staff to proceed with the preparation of the Rail Corridor Study; and WHEREAS, the City has conducted a public outreach program in developing the Palo Alto Rail Corridor Study Report, (the “Project”), including convening a citizen task force, facilitating outreach to the community and coordinating with other City departments throughout 2010 to 2013; and WHEREAS, the Architectural Review Board heard public comment and reviewed the Palo Alto Rail Corridor Study Report on May 24, 2012; and WHEREAS, the Planning and Transportation Commission heard public comment and reviewed the Palo Alto Rail Corridor Study Report on May 30, 2012; and WHEREAS, the City Council heard public comment and reviewed the Palo Alto Rail Corridor Study Report on June 25, 2012, September 18, 2012 and January 22, 2013; and WHEREAS, the Council desires to amend the Comprehensive Plan to incorporate certain aspects of the Palo Alto Rail Study Report. NOW, THEREFORE, the Council of the City of Palo Alto does HEREBY RESOLVE as follows: SECTION 1. The Palo Alto Rail Corridor Study Report, as amended by the Planning and Transportation Commission and Architectural Review Board is hereby approved. SECTION 2. Policy T-1 of the Transportation Element of the City’s Comprehensive Plan is hereby amended to add the following underlined language: Attachment A Not Yet Approved 2 120618 jb S://013/Planning/Reso Rail Corridor Study Report 2012 Make land use decisions that encourage walking, bicycling, and public transit use… The overall vision is to create a vibrant, safe, attractive, transit-rich area with city and neighborhood centers that provide walkable, pedestrian and bicycle-friendly places that serve the community and beyond; and to connect the east and west portions of the city through an improved circulation network that binds the city together in all directions. In 2013, the City approved the Palo Alto Rail Corridor Study Report to guide redevelopment along the rail corridor to be consistent with land use and transportation policies advocated in the Comprehensive Plan. Redevelopment along the rail corridor shall take into account the land use and transportation policies discussed in the Rail Corridor Study Report. SECTION 3. The City Council adopted a Negative Declaration for this project in accordance with the California Environmental Quality Act. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: APPROVED: _________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: ____________________________ City Manager _________________________ Senior Asst. City Attorney ____________________________ Director of Planning and Community Environment LIST OF TEXT REVISIONS FOR THE RAIL CORRIDOR STUDY REPORT January 24, 2013 (Incorporating revisions from September 18 and November 28, 2012) The word "safe" will be added to the vision statement throughout the document.* EXECUTIVE SUMMARY Page ES-03, last full paragraph ISSUES Regardless of the final outcome of proposals to upgrade modernize Caltrain operations or add high speed train service to the Caltrain corridor on the Peninsula, the study area has many existing issues that should be addressed. Page ES.04, second bullet under “Rail Corridor”  The preferred alternative for any rail improvements or expansion is the Below-Grade Open Trench alignment.  Improve all rail crossings to provide the highest possible level of safety and convenience. Grade-separated crossings, if feasible and fully mitigated, are preferred over at-grade crossings. SECTION 2 BACKGROUND Page 2.01, paragraph 3 The study area extends one parcel east of Alma Street and one parcel west of El Camino Real with the exception of the Stanford University main campus and Stanford Shopping Center where the study area follows the right-of-way to address the land uses that front these major transportation corridors." A note will also be added to each diagram legend next to the label study boundary (approximate, see description on p. 2.01)”* Page 2.08, second paragraph, second bullet  Caltrain Upgrade/Electrification Modernization (No HST) Page 2.11, third paragraph Economic Impacts of High Speed Rail and Caltrain Electrification Modernization in Palo Alto (2011) The City Council authorized a consultant to evaluate possible economic and property value impacts associated with the proposed Caltrain Electrification Modernization Program and the High Speed Rail as currently planned by the California High-Speed Rail Authority. Third bullet  Grade separation, if supported by analysis, at every potential crossing for enhanced safety, and vehicular circulation and reduced noise from horns and crossing bells. Fourth paragraph Economic Impacts of Caltrain Electrification Modernization in Palo Alto Due to the possibility that the HSR project will not proceed as currently envisioned, a separate study analyzed economic and property value impacts in Palo Alto for Caltrain electrification modernization as a stand-alone project. It was concluded that Caltrain electrification modernization will produce net positive, but modest economic impacts in Palo Alto. Transit service will improve as a result of electrification, which along with quieter trains that will have lower vibrations and pollution emissions, will have a net positive impact on the community. However, more travel delays for drivers at the at-grade crossings and visual impacts for properties facing electrical facilities will occur. Therefore, all proposed changes must be fully examined and suitable mitigation measures must be required. Fifth paragraph Role and Guiding Principles of the High Speed City Council Rail Committee of the Palo Alto City Council (2010)(2012) SECTION 3 ISSUES & VISION Page 3.06, first paragraph, under “PUBLIC FACILITIES” INFRASTRUCTURE SHOULD KEEP PACE WITH DEVELOPMENT AND SHOULD ACHIEVE A HIGH QUALITY DESIGN.* SECTION 4 CIRCULATION & CONNECTIVITY Page 4.04, third paragraph under “Task Force Recommendations for the Caltrain Corridor” >> The Caltrain corridor should must be modified to improve safety and to minimize future noise, vibration or visual impacts on adjoining districts and neighborhoods. >> The existing at-grade crossings of the Caltrain corridor should be improved to provide the highest possible level of safety and convenience. Grade separations are preferred, if appropriate and supported by analysis. but iIn certain circumstances, upgraded, safe at- grade crossings may be the only feasible option. Detailed engineering studies of trench, grade separated and at-grade options are necessary and should include the potential impact of increased train traffic and bicycle/pedestrian/vehicular traffic. >> Additional safe and convenient crossings of the tracks and in some cases Alma Street as well, are essential to provide connections from neighborhoods to destinations such as schools, parks and services outside the study area. Engineering studies need to be undertaken and analyzed. A variety of potential solutions should be studied including at- grade and grade-separated options. Engineering studies need to be undertaken and analyzed. Page 4.08, first bullet under “Task Force Recommendations for the Caltrain Corridor with the Rail in a Below-Grade Open Trench” >> Explore a variety of configurations for trench cover design which could include cantilevers, lattice covers and full slab covers accommodate additional pedestrian and bicycle connection opportunities.* Page 4.10, second paragraph Of particular importance is the physical impact that will likely result to properties and natural resources adjoining Palo Alto Avenue, Churchill Avenue, West Meadow Drive, and West Charleston Road as a result of if grade separations that may be are required to ensure safe and convenient crossings and efficiency of rail operations. These grade separation impact areas are illustrated diagrammatically in Figure 4.5. Page 4.11, Figure 4.5 Figure 4.5 (Attachment B) has been amended to show that the purple “impact zone” bars have been extended in all directions on Alma Street. Page 4.13, Table 4.1, item 7, third column Castilleja Elementary School will be changed to Castilleja School.* Page 4.14 Table 4.1, item 10, third column, second bullet Improvements including widening of tunnel to be ADA compliant and also to provide visibility and lighting* Page 4.22, second column, second paragraph, third bullet, first sub-bullet o Corridor-wide: Design elements that can be applied throughout the corridor to ensure continuous identity across the city. This includes identifying and protecting appropriate existing large trees to preserve and may also include the addition of new elements such as; large street trees, street lighting, regulatory signage, signalization and wayfinding, uniformly-designed legible bicycle facilities.* SECTION 5 LAND USE & URBAN DESIGN Throughout the entire document the South Palo Alto Mixed-Use Center will be renamed the El Camino Way Mixed-Use Center. * Page 5.02, Under “Task Force Recommendations for the Mixed Use Centers”, a new bullet point will be added. >> Include public art throughout the corridor as a way to reinforce the unique identity of each of the Mixed-Use Centers.* Page 5.18, fifth paragraph, under “Task Force Recommendations for Southgate/Evergreen Park Residential Subarea” The following recommendations are intended primarily to improve access for the neighborhood. These access improvements are further described in Section 4 of this report. >> New grade-separated pedestrian/bicycle crossing of the rail tracks, if supported by technical studies as safe and feasible, should be provided at Peers Park. This could be a bridge or trench cover if the trench alternative for rail improvements is constructed. Page 5.19, fifth paragraph Task Force Recommendations for Ventura Residential Subarea In Ventura subarea, most of the recommendations focus on methods to improve access to parks, open space and school facilities. These recommendations are further described in Section 4 of this document >> Provide improvements for pedestrians and bicycles at key intersections along El Camino Real (Margarita/Matadero; Los Robles/El Camino Way), on routes that will provide direct linkages to parks and schools to the west. >> Provide a grade-separated pedestrian/bicycle linkage, if supported by technical studies to be safe and feasible, to Hoover Park across the Caltrain tracks along Matadero Creek. >> Identify an additional location for a safe grade-separated crossing of Alma Street and the rail tracks between Matadero Creek and Meadow Drive. Page 5.20, fourth paragraph Task Force Recommendations for Charleston Meadow/Monroe Park Residential Subarea Like the Ventura Residential Subarea, the Charleston Meadow/Monroe Park subarea suffers from a lack of access to recreation and open space amenities or nearby schools. Consequently, connections across the rail corridor and across El Camino are of particular importance. >> Improve connections to other subareas and neighborhoods to ensure safe and convenient access to schools and services. >> Safe grade-separated crossings, that are supported by technical studies, of Alma Street and the rail line for all travel modes at Charleston and Meadow to improve safety and convenience are preferred. >> Identify locations for a safe grade-separated crossing of Alma Street and the rail tracks between Matadero Creek and Meadow Drive. SECTION 6 NEXT STEPS & IMPLEMENTATION Page 6.03-6.04 New Comprehensive Plan Policy Statements (Originally from Attachment C, List of Text Changes, of the September 18, 2012 City Council packet) Goal 1: Rail Improvements Should be Constructed in a Below-Grade Trench. Policy 1.1: The City's preferred vertical alignment for fixed rail in Palo Alto is below grade. Policy 1.2: The City is opposed to an elevated alignment of rail in Palo Alto. Policy 1.3: When examining the potential impacts of vertical rail alignments equal attention shall be given to all Palo Alto neighborhoods. Adopted mitigation measures should be proportionate to the impacts identified in the studies. All Neighborhoods in Palo Alto affected by rail should be treated with equal consideration with respect to vertical alignment impacts. Goal 2: Ensure the Highest Possible Safety at All Rail Crossings and Mitigate Rail Impacts on Neighborhoods, Public Facilities, Schools and Mixed-use Centers. Policy 2.1: Improve existing at-grade crossings. All at-grade crossings of the Caltrain corridor should be improved to provide the highest possible level of safety and convenience. This may be grade separations or safer at-grade crossings, with the preferred choice being grade separation, if supported by technical studies. Policy2.2: Provide additional safe and convenient crossings. Additional crossings of the tracks, and in some cases Alma Street as well, are essential to provide connections from neighborhoods to destinations such as schools, parks and services. Policy2.3: Improve safety and minimize noise, vibrations and visual impacts of operations in the Caltrain rail corridor. With or without the addition of a High Speed Train, the Caltrain corridor should be modified to improve safety and to minimize noise, vibration and visual impacts on adjoining districts, public facilities, schools and neighborhoods. Page 6.06: A note will be added under Table 6.2. Cost estimates shown in Table 6.2 are based on the following assumptions: ° Detail engineering studies have not been conducted. ° Planning estimates with 2012 dollars. ° Source: City of Palo Alto, Hatch Mott MacDonald. ° Costs do not include any necessary property acquisitions.* * Changes originally from the September 18, 2012 City Council Hearing packet. Rail Corridor Study Page 1 Initial Study Rail Corridor Study Report Initial Study Prepared by City of Palo Alto May 21, 2012 Attachment C Rail Corridor Study Page 2 Initial Study ENVIRONMENTAL CHECKLIST City of Palo Alto Department of Planning and Community Environment TABLE OF CONTENTS I. PROJECT DESCRIPTION .............................................................................................. 3 II. ENVIRONMENTAL CHECKLIST AND DISCUSSION OF IMPACTS ..................... 7 A. AESTHETICS ......................................................................................................... 8 B. AGRICULTURAL AND FOREST RESOURCES ................................................ 9 C. AIR QUALITY ...................................................................................................... 10 D. BIOLOGICAL RESOURCES ............................................................................... 12 E. CULTURAL RESOURCES .................................................................................. 13 F. GEOLOGY, SOILS AND SEISMICITY .............................................................. 14 G. GREENHOUSE GAS EMISSIONS ..................................................................... 15 H. HAZARDS AND HAZARDOUS MATERIALS ................................................. 17 I. HYDROLOGY AND WATER QUALITY .......................................................... 18 J. LAND USE AND PLANNING ............................................................................ 20 K. MINERAL RESOURCES ..................................................................................... 21 L. NOISE .................................................................................................................... 21 M. POPULATION AND HOUSING ......................................................................... 22 N. PUBLIC SERVICES ............................................................................................. 23 O. RECREATION ...................................................................................................... 24 P. TRANSPORTATION AND TRAFFIC ................................................................ 25 Q. UTILITIES AND SERVICE SYSTEMS .............................................................. 26 R. MANDATORY FINDINGS OF SIGNIFICANCE ............................................... 28 III. SOURCE REFERENCES .............................................................................................. 29 IV. DETERMINATION....................................................................................................... 29 Rail Corridor Study Page 3 Initial Study ENVIRONMENTAL CHECKLIST Department of Planning and Community Environment PROJECT DESCRIPTION 1. PROJECT TITLE Rail Corridor Study 2. LEAD AGENCY NAME AND ADDRESS City of Palo Alto Department of Planning and Community Environment 250 Hamilton Avenue Palo Alto, CA 94303 3. CONTACT PERSON AND PHONE NUMBER Elena Lee, Senior Planner City of Palo Alto 650-617-3196 4. PROJECT SPONSOR’S NAME AND ADDRESS City of Palo Alto 5. APPLICATION NUMBER Not Applicable 6. PROJECT LOCATION The Rail Corridor Study applies to the City of Palo Alto, which is located in the northern part of Santa Clara County, bounded on the west by the San Francisco Bay, city of Mountain View to the south, city of Menlo Park to the south, and the Santa Cruz mountains to the west, as shown on Figure 1, Regional Map. The boundaries of the corridor include the area between Alma Street on the east to El Camino Real on the west, from the Menlo Park city limits on the north to the Mountain View city limits on the south, as shown in Figure 2. The study area also includes sufficient adjacent land to encompass those areas most directly affected by potential land use, transportation and urban design changes. Rail Corridor Study Page 4 Initial Study Figure 2: Palo Alto Figure 1: Regional Map Rail Corridor Study Page 5 Initial Study 7. GENERAL PLAN DESIGNATION The Rail Corridor Study would apply through a large area of the City of Palo Alto and, therefore, there is no specific General Plan designation applicable to this project. 8. ZONING The Rail Corridor Study would apply through a large area of the City of Palo Alto and, therefore, there is no specific Zoning designation applicable to this project. 9. PROJECT DESCRIPTION Background The Rail Corridor Study (Study) was initiated in 2010 by the City Council to evaluate land use, transportation and urban design elements of the rail corridor in Palo Alto, particularly in response to potential improvements to fixed rail services along the Caltrain tracks. Those improvements may include Caltrain upgrades such as electrification and/or grade separations, and/or High Speed Rail service. Although the High Speed Rail project provides important context, it was not intended to be the focus of this study. The rail corridor is a significant physical component of Palo Alto. It is still unknown at this point how rail use in the corridor may change. The vision of the project, developed with a citizen Task Force and stated in the Report, is to “create a vibrant, attractive, transit-rich area with mixed use city and neighborhood centers that provide walk-able, pedestrian and bicycle-friendly places that serve the community and beyond, and to connect the east and west portions of the City through an improved circulation network that binds the city together in all directions.” The purpose of the study was to generate a community vision for land use, transportation and urban design along the Caltrain corridor. The Study treats the entire corridor as an interconnected but diverse 1,000 acre sub- area within the City. Proposed Project The proposed project is the approval of the Rail Corridor Study and incorporation of the Vision Statement into the Comprehensive Plan. The project would not result in any development. In accordance with CEQA, future projects would be reviewed for compliance with regulations The Study outlines specific policy recommendations to achieve the vision for the rail corridor area, including strategies related to circulation, land use and urban design improvements. The recommendations are focused on two general categories: 1) Circulation and Connectivity and 2) Land Use and Urban Design. The report discusses the context, issues and vision of both of these two items. The report identified several important themes:  East-west connectivity must be improved and barriers shall be removed.  A trench system is the preferred alternative if High Speed Rail is approved.  All residential neighborhoods must be protected. Rail Corridor Study Page 6 Initial Study  New development requires timely infrastructure improvement.  The highest possible level of safety must be ensured at all rail crossings. From these issues, the Study identifies and makes recommendations for several future projects to help implement the vision. These next steps for implementation consist of recommendations for priority safety, connectivity/circulation both related to and independent of the rail corridor itself, future area studies and new Comprehensive Plan Policies. The Study identifies these as priorities that would be incorporated into future City efforts and projects. The safety and connectivity/circulation recommendations include improvements to existing rail crossings, undercrossing and to existing school commute corridors, as identified by the City Council in the School Commute Corridors Network. The Study designates several areas to be part of future area studies, including the Downtown, the South Palo Alto Neighborhood Mixed Use Center, Alma Street, El Camino Real and the Rail Corridor itself. The Transportation Element of the Comprehensive Plan is proposed to be modified as follows: Policy T-1 of the Transportation Element of the City’s Comprehensive Plan is hereby amended to add the following underlined language: Make land use decisions that encourage walking, bicycling, and public transit use… The overall vision is to create a vibrant, safe, attractive, transit-rich area with city and neighborhood centers that provide walkable, pedestrian and bicycle-friendly places that serve the community and beyond; and to connect the east and west portions of the city through an improved circulation network that binds the city together in all directions. In 2013, the City approved the Palo Alto Rail Corridor Study Report to guide redevelopment along the rail corridor to be consistent with land use and transportation policies advocated in the Comprehensive Plan. Redevelopment along the rail corridor shall take into account the land use and transportation policies discussed in the Rail Corridor Study Report. Implementation Process The immediate proposal is for the City Council to approve the document and to incorporate the Vision of this study into the Comprehensive Plan. The implementation of the improvements, and area studies discussed above all require subsequent processes which will include an associated environmental clearance. This document identifies these projects as planned priorities but the approval of this document would not automatically implement these actions. All projects are required to conform to the City of Palo Alto rules and regulations, which can include a General Plan amendment, Architectural Review or approval by City Council by resolution or an ordinance. The City is currently updating the Comprehensive Plan. If this study is approved by Council, the incorporation of the Study’s policy recommendations would be done as part of the Comprehensive Plan update and be included as part of the Environmental Impact Report that will be prepared. Rail Corridor Study Page 7 Initial Study 10. SURROUNDING LAND USES AND SETTING The City of Palo Alto is surrounded primarily by other urban uses, but has two significant natural and sensitive areas on the most eastern (San Francisco Bay/Baylands) and western (Santa Cruz Mountains/Foothills) edges of the city. The map provided above shows these adjacencies. The Rail Corridor Study area is located within a part of the City that is fully developed and urbanized. 11. OTHER PUBLIC AGENCY  County of Santa Clara, Office of the County Clerk-Recorder  California State Clearinghouse  City of Menlo Park  City of Mountain View  Caltrain  California Department of Transportation  Stanford University ENVIRONMENTAL CHECKLIST AND DISCUSSION OF IMPACTS EVALUATION OF ENVIRONMENTAL IMPACTS 1) A brief explanation is required for all answers except "No Impact" answers that are adequately supported by the information sources a lead agency cites in the parentheses following each question. [A "No Impact" answer is adequately supported if the referenced information sources show that the impact simply does not apply to projects like the one involved (e. g. the project falls outside a fault rupture zone). A "No Impact" answer should be explained where it is based on project-specific factors as well as general standards (e. g. the project will not expose sensitive receptors to pollutants, based on a project-specific screening analysis).] 2) All answers must take account of the whole action involved, including off-site as well as on-site, cumulative as well as project-level, indirect as well as direct, and construction as well as operational impacts. 3) Once the lead agency has determined that a particular physical impact may occur, then the checklist answers must indicate whether the impact is potentially significant, less than significant with mitigation, or less than significant. Potentially Significant Impact” is appropriate if there is substantial evidence that an effect may be significant. If there are one or more “Potentially Significant Impact” entries when the determination is made, an EIR is required. 4) “(Mitigated) Negative Declaration: Less Than Significant With Mitigation Incorporated” applies where the incorporation of mitigation measures has reduced an effect from “Potentially Significant Impact” to a “Less than Significant Impact.” The lead agency must describe the mitigation measures, and briefly explain how they reduce the effect to a less than significant level (mitigation measures from Section 17, “Earlier Analysis,” may be cross-referenced). Rail Corridor Study Page 8 Initial Study 5) Earlier analysis may be used where, pursuant to the tiering, program EIR, or other CEQA process, an effect has been adequately analyzed in an earlier EIR or negative declaration. Section 15063 (C)(3) (D). In this case, a brief discussion should identify the following: a) Earlier Analysis Used. Identify and state where they are available for review. b) Impacts Adequately Addressed. Identify which effects from the above checklist were within the scope of and adequately analyzed in an earlier document pursuant to applicable legal standards, and state whether such effects were addressed by mitigation measures based on the earlier analysis. c) Mitigation Measures. For effects that are “Less than Significant with Mitigation Measures Incorporated,” describe the mitigation measures which were incorporated or refined from the earlier document and the extent to which they address site-specific conditions for the project. 6) Lead agencies are encouraged to incorporate into the checklist references to information sources for potential impacts (e.g. general plans, zoning ordinances). Reference to a previously prepared or outside document should, where appropriate, include a reference to the page or pages where the statement is substantiated. 7) Supporting Information Sources: A source list should be attached, and other sources used or individuals contacted should be cited in the discussion. 8) The explanation of each issue should identify: a) the significance criteria or threshold, if any, used to evaluate each question; and b) the mitigation measure identified, if any, to reduce the impact to less than significance. DISCUSSION OF IMPACTS The following Environmental Checklist was used to identify environmental impacts, which could occur if the proposed project is implemented. The left-hand column in the checklist lists the source(s) for the answer to each question. The sources cited are identified at the end of the checklist. Discussions of the basis for each answer and a discussion of mitigation measures that are proposed to reduce potential significant impacts are included. A. AESTHETICS Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Substantially degrade the existing visual character or quality of the site and its surroundings? 1,2,5 X b) Have a substantial adverse effect on a public view or view corridor? 1, 2-Map L4, 5 X c) Substantially damage scenic resources, including, but not limited to, trees, rock outcroppings, and historic buildings within a state scenic highway? 1, 2-Map L4, 5 X d) Violate existing Comprehensive Plan policies regarding visual resources? 1,2,5 X e) Create a new source of substantial light or glare which would adversely affect day or nighttime views in the area? 1,5 X Rail Corridor Study Page 9 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact f) Substantially shadow public open space (other than public streets and adjacent sidewalks) between 9:00 a.m. and 3:00 p.m. from September 21 to March 21? 1,5 X DISCUSSION: The Rail Corridor Study and the vision statement do not propose any specific development. The Study includes recommendations for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement would not result in any development. Physical development that would be part of improvements would be subject to the City’s Architectural Review process. The Architectural Review entitlement is required for all the exterior improvements to ensure the project is designed with high aesthetic quality and is harmonious with its surroundings. Environmental review would be included in the project review. The proposed Study recommendations and vision will not create any new aesthetic impacts. All improvements are subject to Architectural Review to address aesthetics, and once fully developed, all individual components of the recommendations that the City will seek to implement will be further reviewed for impacts and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required B. AGRICULTURAL AND FOREST RESOURCES In determining whether impacts to agricultural resources are significant environmental effects, lead agencies may refer to the California Agricultural Land Evaluation and Site Assessment Model (1997) prepared by the California Dept. of Conservation as an optional model to use in assessing impacts on agriculture and farmland. In determining whether impacts to forest resources, including timberland, are significant environmental effects, lead agencies may refer to information compiled by the California Department of Forestry and Fire Protection regarding the state’s inventory of forest land, including the Forest and Range Assessment Project and the Forest Legacy Assessment project; and the forest carbon measurement methodology provided in the Forest Protocols adopted by the California Air Resources Board. Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Convert Prime Farmland, Unique Farmland, or Farmland of Statewide Importance (Farmland), as shown on the maps prepared pursuant to the Farmland Mapping and Monitoring Program of the California Resources Agency, to non-agricultural use? 1 X Rail Corridor Study Page 10 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact b) Conflict with existing zoning for agricultural use, or a Williamson Act contract? 1, 2-MapL9 X c) Conflict with existing zoning for, or cause rezoning of, forest land (as defined in Public Resources Code section 12220(g)1) or timberland (as defined in Public Resources Code section 45262)? 1 X d) Result in the loss of forest land or conversion of forest land to non-forest use? 1 X e) Involve other changes in the existing environment which, due to their location or nature, could result in conversion of Farmland, to non-agricultural use or conversion of forest land to non-forest use? 1 X DISCUSSION: The Study and vision statement do not include lands that are located in “Prime Farmland”, “Unique Farmland”, or “Farmland of Statewide Importance” area, as shown on the maps prepared for the Farmland Mapping and Monitoring Program of the California Resources Agency. The areas that are the subject of this Study are not zoned for agricultural use, and are not regulated by the Williamson Act. The areas affected are within a developed urbanized area and have no impacts on forest or timberland. Mitigation Measures: None Required C. AIR QUALITY Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Conflict with or obstruct with implementation of the applicable air quality plan (1982 Bay Area Air Quality Plan & 2000 Clean Air Plan)? 1,5 X b) Violate any air quality standard or contribute 1 PRC 12220(g): "Forest land" is land that can support 10-percent native tree cover of any species, including hardwoods, under natural conditions, and that allows for management of one or more forest resources, including timber, aesthetics, fish and wildlife, biodiversity, water quality, recreation, and other public benefits. 2 PRC 4526: "Timberland" means land, other than land owned by the federal government and land designated by the board as experimental forest land, which is available for, and capable of, growing a crop of trees of any commercial species used to produce lumber and other forest products, including Christmas trees. Commercial species shall be determined by the board on a district basis after consultation with the district committees and others. Rail Corridor Study Page 11 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact substantially to an existing or projected air quality violation indicated by the following: i. Direct and/or indirect operational emissions that exceed the Bay Area Air Quality Management District (BAAQMD) criteria air pollutants of 80 pounds per day and/or 15 tons per year for nitrogen oxides (NO), reactive organic gases (ROG), and fine particulate matter of less than 10 microns in diameter (PM10); 1,5 X ii. Contribute to carbon monoxide (CO) concentrations exceeding the State Ambient Air Quality Standard of nine parts per million (ppm) averaged over eight hours or 20 ppm for one hour( as demonstrated by CALINE4 modeling, which would be performed when a) project CO emissions exceed 550 pounds per day or 100 tons per year; or b) project traffic would impact intersections or roadway links operating at Level of Service (LOS) D, E or F or would cause LOS to decline to D, E or F; or c) project would increase traffic volumes on nearby roadways by 10% or more)? 1,5 X c) Result in a cumulatively considerable net increase of any criteria pollutant for which the project region is non-attainment under an applicable federal or state ambient air quality standard (including releasing emissions which exceed quantitative thresholds for ozone precursors)? 1,5 X d) Expose sensitive receptors to substantial levels of toxic air contaminants? 1,5 i. Probability of contracting cancer for the Maximally Exposed Individual (MEI) exceeds 10 in one million 1 X ii. Ground-level concentrations of non-carcinogenic TACs would result in a hazard index greater than one (1) for the MEI 1 X e) Create objectionable odors affecting a substantial number of people? 1 X f) Not implement all applicable construction emission control measures recommended in the Bay Area Air Quality Management District CEQA Guidelines? 1 X DISCUSSION: Rail Corridor Study Page 12 Initial Study The Study and vision statement includes recommendations for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The Rail Corridor Study area is in a developed urbanized location within the City of Palo Alto. The approval of the Rail Corridor Study and incorporation of the Vision Statement would not result in any development. In accordance with CEQA, future projects would be reviewed for compliance with regulations related to Air Quality. The City of Palo Alto is located within the jurisdiction of the Bay Area Air Quality Management District (BAAQMD), the regional agency empowered to regulate air pollutant emissions from stationary sources in the Bay Area. The BAAQMD regulates air quality through its permit authority over most types of stationary emission sources and through its planning and review process. All development in Palo Alto is subject to the BAAQMD regulations. The Rail Corridor Study will not create any new significant air quality impacts. Construction activities related to the implementation of the Study’s recommendations and future projects would be evaluated in a project-specific environmental analysis for potential effects on air quality. Once fully developed, all individual components of the Study that the City would seek to implement would be required to mitigate any potential air quality impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required D. BIOLOGICAL RESOURCES Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? 1, 2-MapN1, 5 X b) Have a substantial adverse effect on any riparian habitat or other sensitive natural community identified in local or regional plans, policies, regulations, including federally protected wetlands as defined by Section 404 of the Clean Water Act (including, but not limited to, marsh, vernal pool, coastal, etc.) through direct removal, filling, hydrological interruption, or other means? 1,2-MapN1, 5 X c) Interfere substantially with the movement of any native resident or migratory fish or wildlife species or with established native resident or migratory wildlife corridors, or impede the use of native wildlife nursery sites? 1,8-MapN1, 5 X d) Conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or as defined by the City of Palo Alto’s Tree Preservation Ordinance (Municipal Code Section 8.10)? 1,2,3,4,5 X Rail Corridor Study Page 13 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact e) Conflict with any applicable Habitat Conservation Plan, Natural Community Conservation Plan, or other approved local, regional, or state habitat conservation plan? 1,5 X DISCUSSION: The approval of the Rail Corridor Study and incorporation of the Vision Statement would cause a less than significant to no impact to biological resources within the City. The Study includes recommendations for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement would not result in any development. The areas within the rail corridor study boundaries are all in urbanized areas and are fully disturbed. The subsequent projects that the City may implement would be further reviewed for potential biological impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required E. CULTURAL RESOURCES Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Directly or indirectly destroy a local cultural resource that is recognized by City Council resolution? 1,10 X b) Cause a substantial adverse change in the significance of an archaeological resource pursuant to 15064.5? 1,2-MapL8 X c) Directly or indirectly destroy a unique paleontological resource or site or unique geologic feature? 1,2-MapL8 X d) Disturb any human remains, including those interred outside of formal cemeteries? 1,2-MapL8 X e) Adversely affect a historic resource listed or eligible for listing on the National and/or California Register, or listed on the City’s Historic Inventory? 1,2-MapL7, 10 X f) Eliminate important examples of major periods of California history or prehistory? 1 X DISCUSSION: The Study and vision statement reflects the recommendations for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement into the Comprehensive Plan would not result in any development. The Study area is located within a fully developed and Rail Corridor Study Page 14 Initial Study disturbed portion of the City. The Study recommends the preservation of historic resources. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for potential cultural and archaeological impacts, and subject to additional CEQA analysis. For all those future projects, if during grading and construction activities, any archaeological or human remains are encountered, construction shall cease and a qualified archaeologist shall visit the site to address the find. The Santa Clara County Medical Examiner’s office shall be notified to provide proper direction on how to proceed. If any Native American resources are encountered during construction, construction shall cease immediately until a Native American descendant, appointed by the Native American Heritage Commission of the State of California, is able to evaluate the site and make further recommendations and be involved in mitigation planning. Mitigation Measures: None Required F. GEOLOGY, SOILS AND SEISMICITY Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Expose people or structures to potential substantial adverse effects, including the risk of loss, injury, or death involving: i) Rupture of a known earthquake fault, as delineated on the most recent Alquist-Priolo Earthquake Fault Zoning Map issued by the State Geologist for the area or based on other substantial evidence of a known fault? Refer to Division of Mines and Geology Special Publication 42. 11 X ii) Strong seismic ground shaking? 2-MapN10 X iii) Seismic-related ground failure, including liquefaction? 2-MapN5 X iv) Landslides? 2-MapN5 X b) Result in substantial soil erosion or the loss of topsoil? 1 X c) Result in substantial siltation? 1 X d) Be located on a geologic unit or soil that is unstable, or that would become unstable as a result of the project, and potentially result in on- or off-site landslide, lateral spreading, subsidence, liquefaction or collapse? 2-MapN5 X e) Be located on expansive soil, as defined in Table 18-1-B of the Uniform Building Code (1994), creating substantial risks to life or property? 2-MapN5 X f) Have soils incapable of adequately 1 X Rail Corridor Study Page 15 Initial Study supporting the use of septic tanks or alternative waste water disposal systems where sewers are not available for the disposal of waste water? g) Expose people or property to major geologic hazards that cannot be mitigated through the use of standard engineering design and seismic safety techniques? 1,5 X DISCUSSION: The Study and Vision statement reflects the study’s recommendation for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The incorporation of the Vision statement and separate approval of the Rail Corridor Study would not result in any development. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for potential geology, soils and seismicity impacts, and subject to additional CEQA analysis. Generally, the City of Palo Alto would experience a range from weak to very violent shaking in the event of a major earthquake along the San Andreas or Hayward faults. Although hazards exist, development would not expose people or property to major geologic hazards that cannot be addressed through the use of standard engineering design and seismic safety techniques, as required by building codes. With proper engineering new development is not expected to result in any significant adverse short or long-term impacts related to geology, soils or seismicity. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required G. GREENHOUSE GAS EMISSIONS Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Generate greenhouse gas emissions, either directly or indirectly, that may have a significant impact on the environment? 1,5,9 X b) Conflict with any applicable plan, policy or regulation of an agency adopted for the purpose of reducing the emissions of greenhouse gases? 1,5,9 X DISCUSSION: The San Francisco Bay Area Air Basin (SFBAAB) is currently designated as a nonattainment area for state and national ozone standards and national particulate matter ambient air quality standards. SFBAAB’s nonattainment status is attributed to the region’s development history. Past, present and future development projects contribute to the region’s adverse air quality impacts on a cumulative basis. By its very nature, air pollution is largely a cumulative impact. No single project is sufficient in Rail Corridor Study Page 16 Initial Study size to, by itself, result in nonattainment of ambient air quality standards. Instead, a project’s individual emissions contribute to existing cumulatively significant adverse air quality impacts. If a project’s contribution to the cumulative impact is considerable, then the project’s impact on air quality would be considered significant. The Bay Area Air Quality Management District’s (BAAQMD) approach to developing a Threshold of Significance for Green House Gas (GHG) emissions is to identify the emissions level for which a project would not be expected to substantially conflict with existing California legislation adopted to reduce statewide GHG emissions needed to move us towards climate stabilization. If a project would generate GHG emissions above the threshold level, it would be considered to contribute substantially to a cumulative impact, and would be considered significant. The Thresholds of Significance for operational-related GHG emissions are: • For land use development projects, the threshold is compliance with a qualified GHG reduction Strategy; or annual emissions less than 1,100 metric tons per year (MT/yr) of CO2e; or 4.6 MT CO2e/SP/yr (residents + employees). Land use development projects include residential, commercial, industrial, and public land uses and facilities. • For stationary-source projects, the threshold is 10,000 metric tons per year (MT/yr) of CO2e. Stationary-source projects include land uses that would accommodate processes and equipment that emit GHG emissions and would require an Air District permit to operate. If annual emissions of operational-related GHGs exceed these levels, the proposed project would result in a cumulatively considerable contribution of GHG emissions and a cumulatively significant impact to global climate change. The BAAQMD has established project level screening criteria to assist in the evaluation of impacts. If a project meets the screening criteria and is consistent with the methodology used to develop the screening criteria, then the project’s air quality impacts may be considered less than significant. Below are some screening level examples taken from the BAAQMD CEQA Air Quality Guidelines, 06/2010 (Table 3-1, Operational-Related Criteria Air Pollutant and Precursor Screening Level Sizes). Land Use Type Operational GHG Screening Size ** Single-family 56 du Apartment, low-rise 78 du Apartment, mid-rise 87 du Condo/townhouse, general 78 du City park 600 acres Day-care center 11,000 sf General office building 53,000 sf Medical office building 22,000 sf Office park 50,000 sf Quality restaurant 9,000 sf **If project size is => screening size, then it is considered significant. The Study and Vision Statement supports recommendations for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The amendment of the vision statement to the Comprehensive Plan and the approval of the Rail Corridor Rail Corridor Study Page 17 Initial Study Study would not result in any development. Future projects that are guided by the Study that the City would seek to implement would be further reviewed for potential greenhouse gas impacts, and subject to additional CEQA analysis. It is not anticipated that the Study’s recommendations would create any new significant operational GHG emissions. The intent of the study is to coordinate land use and transportation decisions, including encouraging bicycle and pedestrian modes of transport and to reduce automobile trips where possible. The subsequent projects guided by the Vision Statement that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required H. HAZARDS AND HAZARDOUS MATERIALS Note: Some of the thresholds can also be dealt with under a topic heading of Public Health and Safety if the primary issues are related to a subject other than hazardous material use. Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Create a significant hazard to the public or the environment through the routing transport, use, or disposal of hazardous materials? 1,5 X b) Create a significant hazard to the public or the environment through reasonably foreseeable upset and accident conditions involving the release of hazardous materials into the environment? 1,5 X c) Emit hazardous emissions or handle hazardous or acutely hazardous materials, substances, or waste within one-quarter mile of an existing or proposed school? 1,5 X d) Construct a school on a property that is subject to hazards from hazardous materials contamination, emissions or accidental release? 1,5 X e) Be located on a site which is included on a list of hazardous materials sites compiled pursuant to Government Code Section 65962.5 and, as a result, would it create a significant hazard to the public or the environment? 1,2-MapN9 X f) For a project located within an airport land use plan or, where such a plan has not been adopted, within two miles of a public airport or public use airport, would the project result in a safety hazard for people residing or working in the project area? 1 X g) For a project within the vicinity of a private airstrip, would the project result in a safety hazard for people residing or working the project area? 1 X Rail Corridor Study Page 18 Initial Study h) Impair implementation of or physically interfere with an adopted emergency response plan or emergency evacuation plan? 1,2-MapN7 X i) Expose people or structures to a significant risk of loss, injury, or death involving wildland fires, including where wildlands are adjacent to urbanized areas or where residences are intermixed with wildlands? 1,2-MapN7 X j) Create a significant hazard to the public or the environment from existing hazardous materials contamination by exposing future occupants or users of the site to contamination in excess of soil and ground water cleanup goals developed for the site? 1,5 X DISCUSSION: The Study and Vision Statement supports recommendations for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement into the Comprehensive Plan would not result in any development. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for hazards and hazardous materials impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. The recommendations do not involve the use, creation or transportation of hazardous materials and seek to improve safety. The actual implementation of the Study is anticipated to have little to no impacts with regard to public safety, hazards and hazardous materials. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required I. HYDROLOGY AND WATER QUALITY Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Violate any water quality standards or waste discharge requirements? 1,2,5 X b) Substantially deplete groundwater supplies or interfere substantially with groundwater recharge such that there would be a net deficit in aquifer volume or a lowering of the local groundwater table level (e.g., the production rate of pre-existing nearby wells would drop to a level which would not support existing land uses or planned uses for which permits have been granted)? 2-MapN2 X Rail Corridor Study Page 19 Initial Study c) Substantially alter the existing drainage pattern of the site or area, including through the alteration of the course of a stream or river, in a manner which would result in substantial erosion or siltation on- or off-site? 1,5 X d) Substantially alter the existing drainage pattern of the site or area, including through the alteration of the course of a stream or river, or substantially increase the rate or amount of surface runoff in a manner which would result in flooding on- or off-site? 1,5 X e) Create or contribute runoff water which would exceed the capacity of existing or planned stormwater drainage systems or provide substantial additional sources of polluted runoff? 1,5 X f) Otherwise substantially degrade water quality? 1,5 X g) Place housing within a 100-year flood hazard area as mapped on a federal Flood Hazard Boundary or Flood Insurance Rate Map or other flood hazard delineation map? 2-MapN6 X h) Place within a 100-year flood hazard area structures which would impede or redirect flood flows? 2-MapN6 X i) Expose people or structures to a significant risk of loss, injury or death involve flooding, including flooding as a result of the failure of a levee or dam or being located within a 100-year flood hazard area? 2-MapN8 X j) Inundation by seiche, tsunami, or mudflow? 2-MapN6 X k) Result in stream bank instability? 1,5 X DISCUSSION: The Study and Vision Statement supports the recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies and the approval of the Rail Corridor Study and adoption of the Vision Statement would not result in any development. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for hydrology and water quality impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. All development is required to comply with building codes that address flood safety issues. Development projects are required to implement Best Management Practices (BMPs) for construction activities as specified by the California Storm Water Best Management Practices Handbook (CASQA, 2003) and/or the Manual of Standards for Erosion and Sediment Control Measures (ABAG, 1995). The BMPs include measures guiding the management and operation of construction sites to control and minimize the potential contribution of pollutants to storm runoff from these areas. These measures address procedures for controlling erosion and sedimentation and managing all aspects of the construction process to ensure control of potential water pollution sources. All development projects must comply with all City, State and Federal standards pertaining to storm water run-off and water quality. The Rail Corridor Study Page 20 Initial Study subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required J. LAND USE AND PLANNING Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Physically divide an established community? 1,5 X b) Conflict with any applicable land use plan, policy, or regulation of an agency with jurisdiction over the project (including, but not limited to the general plan, specific plan, local coastal program, or zoning ordinance) adopted for the purpose of avoiding or mitigating an environmental effect? 1,2,3,4,5 X c) Conflict with any applicable habitat conservation plan or natural community conservation plan? 1,2 X d) Substantially adversely change the type or intensity of existing or planned land use in the area? 1,5 X e) Be incompatible with adjacent land uses or with the general character of the surrounding area, including density and building height? 1,5 X f) Conflict with established residential, recreational, educational, religious, or scientific uses of an area? 1,5 X g) Convert prime farmland, unique farmland, or farmland of statewide importance (farmland) to non-agricultural use? 1,2,3 X DISCUSSION: The Study and Vision Statement supports the recommendations for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement would not result in any development. The policies included in the Study have been analyzed and determined to be consistent with the Comprehensive Plan as a whole. New land uses that would not be allowed in the Comprehensive Plan are not proposed. The entire study area is located within a fully developed or previously disturbed area. Future development is required to be consistent with existing land uses within the City. Future projects supported in the Study that the City would seek to implement would be further reviewed for land use impacts, and subject to additional CEQA analysis. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required Rail Corridor Study Page 21 Initial Study K. MINERAL RESOURCES Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Result in the loss of availability of a known mineral resource that would be of value to the region and the residents of the state? 1,2 X b) Result in the loss of availability of a locally-important mineral resource recovery site delineated on a local general plan, specific plan or other land use plan? 1,2 X DISCUSSION: The City of Palo Alto has been classified by the California Department of Conservation (DOC), Division of Mines and Geology (DMG) as a Mineral Resource Zone 1 (MRZ-1). This designation signifies that there are no aggregate resources in the area. The DMG has not classified the City for other resources. There is no indication in the 2010 Comprehensive Plan that there are locally or regionally valuable mineral resources within the City of Palo Alto. Mitigation Measures: None Required. L. NOISE Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Exposure of persons to or generation of noise levels in excess of standards established in the local general plan or noise ordinance, or applicable standards of other agencies? 1,2,12 X b) Exposure of persons to or generation of excessive ground borne vibrations or ground borne noise levels? 1,2,12 X c) A substantial permanent increase in ambient noise levels in the project vicinity above levels existing without the project? 1,2,12 X d) A substantial temporary or periodic increase in ambient noise levels in the project vicinity above levels existing without the project? 1,2,12 X e) For a project located within an airport land use plan or, where such a plan has not been adopted, would the project expose people residing or working in the project area to excessive noise levels? 1 X f) For a project within the vicinity of a private airstrip, would the project expose people residing or working in the project area to excessive noise levels? 1 X Rail Corridor Study Page 22 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact g) Cause the average 24 hour noise level (Ldn) to increase by 5.0 decibels (dB) or more in an existing residential area, even if the Ldn would remain below 60 dB? 1 X h) Cause the Ldn to increase by 3.0 dB or more in an existing residential area, thereby causing the Ldn in the area to exceed 60 dB? 1 X i) Cause an increase of 3.0 dB or more in an existing residential area where the Ldn currently exceeds 60 dB? 1 X j) Result in indoor noise levels for residential development to exceed an Ldn of 45 dB? 1 X k) Result in instantaneous noise levels of greater than 50 dB in bedrooms or 55 dB in other rooms in areas with an exterior Ldn of 60 dB or greater? 1 X l) Generate construction noise exceeding the daytime background Leq at sensitive receptors by 10 dBA or more? 1,12 X DISCUSSION: The Study and Vision Statement reflects the recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement would not result in any development. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for noise impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. All development, including construction activities, must comply with the City’s Noise Ordinance (PAMC Chapter 9.10), which restricts the timing and overall noise levels associated with construction activity. Short-term temporary construction that complies with the Noise Ordinance would result in impacts that are expected to be less than significant. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required M. POPULATION AND HOUSING Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Induce substantial population growth in an area, either directly (for example, by proposing new homes and businesses) or indirectly (for example, through extension of roads or other 1 X Rail Corridor Study Page 23 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact infrastructure)? b) Displace substantial numbers of existing housing, necessitating the construction of replacement housing elsewhere? 1 X c) Displace substantial numbers of people, necessitating the construction of replacement housing elsewhere? 1 X d) Create a substantial imbalance between employed residents and jobs? 1 X e) Cumulatively exceed regional or local population projections? 1 X DISCUSSION: The Study and Vision Statement reflects the recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and the Vision Statement as amended in the Comprehensive Plan would not result in any development. Future projects that are recommended in the approved Study that the City would seek to implement would be further reviewed for population and housing impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. The approval of the Study and adoption of the Vision Statement would not cause housing or population impacts. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required N. PUBLIC SERVICES Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact Would the project result in substantial adverse physical impacts associated with the provision of new or physically altered governmental facilities, need for new or physically altered governmental facilities, the construction of which could cause significant environmental impacts, in order to maintain acceptable service ratios, response times or other performance objectives for any of the public services: a) Fire protection? 1 X b) Police protection? 1 X c) Schools? 1 X d) Parks? 1 X Rail Corridor Study Page 24 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact e) Other public facilities? 1 X DISCUSSION: The approved Study and the Vision Statement amended in the Comprehensive Plan supports the recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement into the Comprehensive Plan would not result in any development. Future projects recommended in the approved Study that the City would seek to implement would be further reviewed for public safety impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. The approval of the Study and vision statement recommend projects to improve safety and would not cause public safety impacts. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required O. RECREATION Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Would the project increase the use of existing neighborhood and regional parks or other recreational facilities such that substantial physical deterioration of the facility would occur or be accelerated? 1 X b) Does the project include recreational facilities or require the construction or expansion of recreational facilities which might have an adverse physical effect on the environment? 1 X DISCUSSION: The Study and Vision Statement to be amended to the Comprehensive Plan supports the recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement would not result in any development. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for recreation impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. The approval of the Study and vision statement would not cause a population increase that would create recreation impacts. The subsequent projects that the Rail Corridor Study Page 25 Initial Study City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required P. TRANSPORTATION AND TRAFFIC Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Exceed the capacity of the existing circulation system, based on an applicable measure of effectiveness (as designated in a general plan policy, ordinance, etc.), taking into account all relevant components of the circulation system, including but not limited to intersections, streets, highways and freeways, pedestrian and bicycle paths, and mass transit? 1,5 X b) Conflict with an applicable congestion management program, including but not limited to level of service standards and travel demand measures, or other standards established by the county congestion management agency for designated roads or highways? 1,5 X c) Result in change in air traffic patterns, including either an increase in traffic levels or a change in location that results in substantial safety risks? 1,5 X d) Substantially increase hazards due to a design feature (e.g., sharp curves or dangerous intersections) or incompatible uses (e.g., farm equipment)? 1,5 X e) Result in inadequate emergency access? 1,5 X f) Result in inadequate parking capacity? 1,5 X g) Conflict with adopted policies, plans, or programs supporting alternative transportation (e.g., pedestrian, transit & bicycle facilities)? 1,2,5 X h) Cause a local (City of Palo Alto) intersection to deteriorate below Level of Service (LOS) D and cause an increase in the average stopped delay for the critical movements by four seconds or more and the critical volume/capacity ratio (V/C) value to increase by 0.01 or more? 1,5 X i) Cause a local intersection already operating at LOS E or F to deteriorate in the average stopped delay for the critical movements by 1,5 X Rail Corridor Study Page 26 Initial Study four seconds or more? j) Cause a regional intersection to deteriorate from an LOS E or better to LOS F or cause critical movement delay at such an intersection already operating at LOS F to increase by four seconds or more and the critical V/C value to increase by 0.01 or more? 1,5 X k) Cause a freeway segment to operate at LOS F or contribute traffic in excess of 1% of segment capacity to a freeway segment already operating at LOS F? 1,5 X l) Cause any change in traffic that would increase the Traffic Infusion on Residential Environment (TIRE) index by 0.1 or more? 1,5 X m) Cause queuing impacts based on a comparative analysis between the design queue length and the available queue storage capacity? Queuing impacts include, but are not limited to, spillback queues at project access locations; queues at turn lanes at intersections that block through traffic; queues at lane drops; queues at one intersection that extend back to impact other intersections, and spillback queues on ramps. 1,5 X n) Impede the development or function of planned pedestrian or bicycle facilities? 1,5 X o) Impede the operation of a transit system as a result of congestion? 1,5 X p) Create an operational safety hazard? 1,5 X DISCUSSION: The approval of the Rail Corridor Study and amendment of the Vision Statement to the Comprehensive Plan would not result in any development. The Study includes recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for transportation and traffic impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. The approval of the Study and amendment of the Vision Statement to the Comprehensive Plan would not cause traffic impacts. The Study recommends projects that would improve safety and reduce traffic congestion, while enhancing pedestrian and bicycle connectivity. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation: None Required Q. UTILITIES AND SERVICE SYSTEMS Rail Corridor Study Page 27 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Exceed wastewater treatment requirements of the applicable Regional Water Quality Control Board? 1,5 X b) Require or result in the construction of new water or wastewater treatment facilities or expansion of existing facilities, the construction of which could cause significant environmental effects? 1,5 X c) Require or result in the construction of new storm water drainage facilities or expansion of existing facilities, the construction of which could cause significant environmental effects? 1,5 X d) Have sufficient water supplies available to serve the project from existing entitlements and resources, or are new or expanded entitlements needed? 1,5 X e) Result in a determination by the wastewater treatment provider which serves or may serve the project that it has inadequate capacity to serve the project’s projected demand in addition to the provider’s existing commitments? 1,5 X f) Be served by a landfill with sufficient permitted capacity to accommodate the project’s solid waste disposal needs? 1,5 X g) Comply with federal, state, and local statutes and regulations related to solid waste? 1,5 X h) Result in a substantial physical deterioration of a public facility due to increased use as a result of the project? 1,5 X DISCUSSION: The Study and amendment of the Vision Statement into the Comprehensive Plan includes recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and adoption of the Vision Statement into the Comprehensive Plan would not result in any development. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for utility and service system impacts, and would be subject to additional CEQA analysis. The Study area is located within a fully developed and/or previously disturbed area. No development is recommended within undeveloped areas that are not currently served by existing public services. The approval of the Study and amendment of the Vision Statement into the Comprehensive Plan would not cause utility and service system impacts. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required Rail Corridor Study Page 28 Initial Study R. MANDATORY FINDINGS OF SIGNIFICANCE Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Does the project have the potential to degrade the quality of the environment, substantially reduce the habitat of a fish or wildlife species, cause a fish or wildlife population to drop below self-sustaining levels, threaten to eliminate a plant or animal community, reduce the number or restrict the range of a rare or endangered plant or animal or eliminate important examples of the major periods of California history or prehistory? 1,2,3,4,5,10 X b) Does the project have impacts that are individually limited, but cumulatively considerable? (“Cumulatively considerable” means that the incremental effects of a project are considerable when viewed in connection with the effects of past projects, the effects of other current projects, and the effects of probable future projects)? 1 X c) Does the project have environmental effects which will cause substantial adverse effects on human beings, either directly or indirectly? 1,5 X DISCUSSION: The Study and amendment of the Vision Statement into the Comprehensive Plan includes recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement into the Comprehensive Plan would not result in any development. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for environmental impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. The project does not have the potential to degrade the quality of the environment, substantially reduce the habitat of wildlife species, cause a fish or wildlife population to drop below self-sustaining levels, threaten to eliminate a plant or animal community, reduce the number or restrict the range of a rare or endangered plant or animal. The approval of the Study and Vision would not eliminate an important example of California History. The project does not have impacts that are individually limited, but cumulatively considerable, nor does it have substantial environmental effects which will cause substantial adverse effects on human beings either directly or indirectly. The project is located within a fully developed area and will not result in considerable effects to the environment, and therefore, would create less than significant impacts on the quality of the environment. Rail Corridor Study Page 29 Initial Study The subsequent projects that the City may implement based on the recommendations of the Study and amendment of the Vision Statement to the Comprehensive Plan would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. SOURCE REFERENCES 1. Project Planner’s knowledge of the site and the proposed project 2. Palo Alto Comprehensive Plan, 1998-2010 3. Palo Alto Municipal Code, Title 18 – Zoning Ordinance 4. Palo Alto Tree Technical Manual, Municipal Code Chapter 8.10.030, June 2001 5. Palo Alto Rail Corridor Study, May 2012 (www.paloaltorailcorridor.org) 6. Not used 7. Not used 8. Not used 9. California Environmental Quality Act Air Quality Guidelines, June 2010 10. Palo Alto Historic Resources Inventory 11. Alquist-Priolo Earthquake Fault Zoning Map 12. Palo Alto Municipal Code, Section 9.10-Noise Ordinance ATTACHMENTS A. Executive Summary from the Palo Alto Rail Corridor Study, May 2012 DETERMINATION On the basis of this initial evaluation: I find that the proposed project COULD NOT have a significant effect on the environment, and a NEGATIVE DECLARATION will be prepared. X I find that although the proposed project could have a significant effect on the environment, there will not be a significant effect in this case because revisions in the project have been made by or agreed to by the project proponent. A MITIGATED NEGATIVE DECLARATION will be prepared. I find that the proposed project MAY have a significant effect on the environment, and an ENVIRONMENTAL IMPACT REPORT is required. I find that the proposed project MAY have a “potentially significant impact” or “potentially significant unless mitigated” impact on the environment, but at least one effect: 1) has been adequately analyzed in an earlier document pursuant to applicable legal standards, and 2) has been addressed by mitigation measures based on the earlier analysis as described on attached sheets. An ENVIRONMENTAL IMPACT REPORT is required, but it must analyze only the effects that remain to be addressed. Rail Corridor Study Page 30 Initial Study I find that although the proposed project could have a significant effect on the environment, because all potentially significant effects (a) have been analyzed adequately in an earlier EIR or NEGATIVE DECLARATION pursuant to applicable standards, and (b) have been avoided or mitigated pursuant to that earlier EIR or NEGATIVE DECLARATION, including revisions or mitigation measures that are imposed upon the proposed project, nothing further is required. ___________________________________ May 24, 2012 and revised January 14, 2013 Project Planner Date City of Palo Alto (ID # 3359) City Council Rail Committee Staff Report Report Type: Meeting Date: 12/6/2012 City of Palo Alto Page 1 Summary Title: Rail Corridor Study Title: Rail Corridor Study Review From: City Manager Lead Department: Planning and Community Environment At the September 18, 2012 City Council hearing for the Rail Corridor Study, the City Council unanimously voted to refer the study back to the Council Rail Committee for further review and input. The City Council referred the item to the Committee to ensure that the documents accurately reflect the City’s current position on Caltrain, the High Speed Rail project and the Rail Committee Guiding Principles given all of the recent changes and events. A summary of the Council’s comments are provided below.  Important to reconcile proposed Comprehensive Plan changes with current rail issues.  Need to reflect most current discussion regarding rail improvements, including Caltrain and Guiding Principles.  Update diagram to show full impact of rail crossings along Alma.  Need context sensitive solution regarding rail impact for neighborhoods. Need to consider all neighborhoods equally when examining potential impacts, and then mitigate appropriately.  Need to acknowledge that modernization includes more than electrification. The potential impacts of electrification have not yet been identified, analyzed or mitigated.  Need to be careful regarding grade separation and potential impacts.  Should clarify that elevated crossings are not acceptable.  Concern regarding the Mitigated Negative Declaration regarding aesthetics and cultural resources.  Concern about impact of town centers on neighborhoods.  Important to view the study as a guiding document, not prescriptive. Timing is critical for future funding opportunities. City of Palo Alto Page 2  Support for requirement for timely infrastructure.  Vision statement is very important piece.  Motion approved to refer the report and resolution to the Council Rail Committee. In response to Council and the Council Rail Committee’s direction, a list of text changes based on Council and Rail Committee comments is being provided as Attachment A. The text changes were made to better align the document with the Council’s position on the Caltrain Modernization project, the most recent Guiding Principles and concern regarding potential grade separated crossings. The strikeouts indicate deletion and the underlined text are proposed additions. These text changes may need to be further updated as the Rail Committee continues to refine the Guiding Principles. With that in mind, staff is requesting feedback from the Council Rail Committee on the proposed text changes and input regarding further changes that may be necessary. Attachments:  Attachment A - List of Text Revisions (DOC)  Attachment B - P. 4.11 Figure 4.5 (PDF) City of Palo Alto (ID # 2723) City Council Staff Report Report Type: Action ItemsMeeting Date: 9/18/2012 Council Priority: Land Use and Transportation Planning Summary Title: Rail Corridor Study Title: Public Hearing: Adoption of a Resolution Amending the Transportation Element of the Comprehensive Plan To Incorporate Certain Findings of the Palo Alto Rail Corridor Study and Approval of a Negative Declaration. From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that Council adopt a Resolution (Attachment A) approving the 2012 Rail Corridor Study Report, as updated as shown on Attachments B and G, amending the Transportation Element of the Palo Alto Comprehensive Plan to incorporate some key policy findings of the Report, and that Council approve the Negative Declaration (Attachment C) for the project. Executive Summary The Planning and Transportation Commission (PTC), the Architectural Review Board (ARB), the Rail Corridor Study Task Force (Task Force) and staff have recommended approval of the Rail Corridor Study Report (Attachment G; packet copies to Council and City Libraries only and available online at: http://www.cityofpaloalto.org/gov/agendas/committees/rctf.asp?NewsID=1235&TargetID=59 with list of text changes in Attachment B) and the incorporation of key policies and programs into the Transportation Element of the Comprehensive Plan. The amendment to the Transportation Element would formalize the City’s approval of the Report and would give the Report’s key policy findings greater legal standing. However, the recommendations in the Report would be subject to future development, refinement and PTC and Council review. The City Council initiated a Palo Alto Rail Corridor Study on June 12, 2010 to evaluate land use, transportation, and urban design elements of the corridor. The Report is a direct outcome of the discussions and work of the citizen Task Force for the Rail Corridor Study with support from City staff and the consultant, BMS Design Group (BMS). The 17 member task force, representing a variety of stakeholders (residents, businesses, civic organizations, etc.), was convened to provide input into the process. The purpose of this document is to generate a community vision for land use, transportation and urban design along the Caltrain corridor, while furthering the City Council Rail Committee Guiding Principles. The Report identifies the issues and vision for land use and circulation and attempts to look at the entire 1,000-acre corridor as an interconnected, but diverse subarea within the City. Recommendations are also made for implementing the vision described in the study. The attached resolution (Attachment A) would adopt the document as an official City Report and incorporate key policies and programs into the existing Comprehensive Plan. Background The City Council initiated the Palo Alto Rail Corridor Study in July 2010 to evaluate land use, transportation and urban design elements of the rail corridor, particularly in response to potential improvements to fixed rail services along the Caltrain tracks. The Report, the outcome of the two year process, analyzed those elements and their potential impacts from the range of possible rail improvements, including Caltrain upgrades, such as electrification and/or grade separations, and/or the potential options for the High Speed Rail project. Although the High Speed Rail project provides important context, it was not intended to be the focus of this project. Both the Caltrain and High Speed Rail projects are still pending and the ultimate form those projects may take will not be known for some time. The purpose was to generate a community vision that would provide land use and transportation policies to guide development under a variety of scenarios, allowing Palo Alto to be proactive in advance of changes to the rail system. The boundaries of the rail corridor include the area between Alma Street on the east to El Camino Real on the west, from the Menlo Park city limits on the north to the Mountain View city limits on the south. Council’s authorization included the formation of a Task Force to assist in the preparation of the study and to provide a forum for public input. The 17-member Task Force is made up of several different stakeholder groups, including residents and business owners, and representatives of the school district, a non-profit housing venture, environmental groups, and Stanford University, as well as a Caltrain rider. Vision Statement The vision of the project, as stated in the Report, is to: “create a vibrant, attractive, transit-rich area with mixed use city and neighborhood centers that provide walkable, safe, pedestrian and bicycle-friendly places that serve the community and beyond; and to connect the east and west portions of the City through an improved circulation network that binds the city together in all directions.” The areas that make up the Rail Corridor have been traditionally viewed as separate areas. This Report attempts to look at the entire 1,000 acre corridor as an interconnected subarea within the City, which is challenging because of the diversity of the corridor and its large size. The intent is to develop a long term comprehensive set of policies that can be used to guide the area regardless of what improvements are made to the fixed rail system. As such, the Report does not analyze in detail the various impacts of the various rail alternatives, such as noise, traffic and air quality, which are beyond the scope and resources of this study. Task Force The Rail Corridor Study Report is a direct outcome of the discussions and work of the Council- authorized Task Force for the Rail Corridor Study, with support from City staff and the consultant, BMS. This Report represents the consensus of the Task Force as a whole, as an outcome of fifteen (15) publicly noticed meetings. Through the Task Force meetings and community workshops, staff has also received detailed feedback on the draft report from the public. The Task Force members also acted as a conduit and a voice for their specific stakeholder groups and for other interested members of the public. The public process also included input from liaisons of various City boards and commissions to represent their respective groups, including the Planning and Transportation Commission (PTC), the Architectural Review Board (ARB), the Utilities Advisory Commission (UAC), the Historic Resources Board (HRB) and the Palo Alto Bicycle Advisory Committee (PABAC). A study area tour was held on September 10, 2011 with a majority of the Task Force, as well as interested members of the public, to familiarize them with the corridor. The highlights of the four hour tour included the South of Forest Area, the Homer tunnel, California Avenue, the Churchill Avenue train crossing area, the intersection of El Camino Real and Charleston Road, rail crossings at Charleston Road and at Meadow Avenue, and the new residential developments near the Elks Lodge in south Palo Alto. At the final Task Force meeting on May 1, 2012, the Task Force voted to recommend that the City Council approve the Report, including the Implementation Chapter. City Council Rail Committee The Rail Corridor Study Report was the subject of three meetings before the City Council Rail Committee. A brief update was provided on January 26, 2012. On March 1, 2012, the first draft of the Rail Corridor Study Report was presented for their review and comments. The primary comment received was a request to make the references to the future of the rail line more general because the future of the High Speed Rail and Caltrain Electrification projects is uncertain and continues to change. On April 26, 2012, the Committee met and provided further comments. Staff and BMS informed the Committee that various changes had been made to the document in response to their feedback and subsequent public hearings. It was emphasized that the Report was crafted to be consistent with the City’s position on the High Speed Rail project and the City Council Rail Committee Guiding Principles. The document was also revised so that it would be as flexible as possible to provide a longer horizon to better respond to the rapidly changing High Speed Rail and Caltrain Electrification projects. The Committee was generally supportive of the direction of the document. Community Workshops and PABAC/CSTSC Joint Meeting Two community workshops were held on the Rail Corridor Study. The first Community Workshop was held on May 19, 2011 at the Lucie Stern Community Room. The public was provided with a project overview, including the schedule and process. The attendees were requested to provide their vision of the future of the corridor, preferred uses in specific areas, view of the role of the corridor and priorities regarding transportation improvements. A second Community Workshop was held on March 29, 2012 at the Lucie Stern. In order to encourage a greater attendance of this workshop, additional public outreach was implemented, including the mailing of over 7,000 notice cards, publication of the notice in the Palo Alto Weekly, and posting of announcements at City Hall, the City’s social networking sites and the libraries. Staff requested the Task Force members to publicize the meeting and encourage that their neighbors attend the meeting. Because of the greater outreach, the second workshop was well attended with more than 50 attendees, including many residents of South Palo Alto. A few key issues were raised, including safety for children, pedestrians and bicyclists, treatment of all neighborhoods fairly, and protecting schools from rail impacts. Some members of the public stated that although additional pedestrian and bicycle crossings were desired, additional vehicular crossings were not. The community members were generally appreciative and supportive of the Report. In addition to the community workshops, staff and BMS also met with the representatives of the Palo Alto Bicycle Advisory Committee (PABAC) and the City/School Traffic Safety Committee (CSTSC) on February 16, 2012. The participants were generally supportive of the work that had been done. The majority of the attendees encouraged trenching for rail projects and improving safety for children, bicyclists and pedestrians, especially with grade separated crossings. Discussion The purpose of this item is to request adoption of a resolution formally approving the Rail Corridor Study Report and to incorporate specific policies and programs into the existing Comprehensive Plan to formally recognize the Report as representing the City’s policy positions. The PTC conducted its final review of the Rail Corridor Study Report and resolution on May 30, 2012, following review by the ARB on May 24, 2012. Both the PTC and ARB unanimously recommended that the City Council approve the resolution approving the Report and to amend the Comprehensive Plan. The May 30th PTC and May 24th ARB staff reports and excerpt minutes are provided as Attachments D and E. The May 16 draft, included in the packet and online, is the most current version of the printed Report. In addition, following the final decision made by Council, staff intends to update the report to reflect the changes suggested by the PTC and ARB. Those changes have been summarized on Attachment B, List of Text Revisions. Following a final decision by the City Council, all those changes and any other changes per Council direction would be incorporated into a final Report. Should the Council approve the resolution, the Transportation Element of the current Comprehensive Plan would be amended to recognize the Rail Corridor Study Report and to formally incorporate some of its key policy findings into the Comprehensive Plan to provide a regulatory framework for these key policies. The Report establishes the context for decisions in the future regarding more detailed policy and physical improvements. It is the first step towards responding proactively to the City’s needs for the rail corridor area. The recommendations of the Report would then become part of the ongoing Comprehensive Plan update and future studies and projects for implementation, such as area studies and the Capital Improvements Program. To develop an understanding of the broad study area, the Report described related plans, programs and policies and created two areas of focus: (1) Circulation and Connectivity and (2) Land Use and Urban Design, as endorsed by the Task Force, public and various boards and commissions. The background, existing conditions, issues and visions are discussed in detail in the subsequent chapters. Those sections are followed by an Implementation chapter, which includes project improvement and policy recommendations for inclusion into the Comprehensive Plan and other City programs, designed to help implement the vision. Key Themes Five overall themes emerged as critical components for the success of this Report as a guiding document. Those themes are: 1. East-west connectivity must be improved and barriers should be removed. 2. A trench system is the preferred alternative if High Speed Rail is approved (although this was not unanimous). 3. All residential neighborhoods must be protected and treated equally. 4. New development requires timely infrastructure improvement. 5. The highest possible level of safety must be ensured at all rail crossings. In addition to the general categories of Land Use and Urban Design and Circulation and Connectivity, there was also focus on the rail alignment itself and on public facilities/infrastructure to support existing and new development. The rail corridor issue is discussed in the following section. One of the consistent messages heard throughout the process has been the need to ensure infrastructure to keep pace with development. This includes transportation facilities, schools and parks. Rail Alternatives The City Council’s most recent position on the High Speed Rail (HSR) project is to oppose it in any form, although there is continued discussion of the merits of 1) a below-grade trench and 2) the blended two-track Caltrain/HSR project. The Task Force focused on those two rail alternatives that would capture the range of issues that could occur under any of the various alternatives being discussed by the State. The report includes three key recommendations to address the issues related to the railroad alignment, given some form of Caltrain or HSR expansion occurs.  The preferred high speed train alternative is a continuous below-grade trench, with the incorporation of trench covers and bridges at key locations.  Rail crossings should be improved to provide the highest possible level of safety and convenience.  Rail impacts on neighborhoods and mixed-use centers should be mitigated. Circulation and Connectivity The Circulation and Connectivity Chapter focused on:  Physical barriers to east-west connections, particularly for pedestrians and bicycles, at the railroad tracks, Alma Street, and El Camino Real  Alma Street, emphasizing the importance of maintaining traffic capacity of Alma, as well as improved aesthetic design.  Corridor-wide design principles.  Enhancing connection opportunities and safety along the rail corridor, again particularly for pedestrians and bicyclists. In order to try to provide opportunities to improve the connectivity of the area, the study proposes to look at the City’s roadways as a layered network, recognizing that different types of streets have different primary functions. By identifying the purpose of the streets within the corridor, the Report recommends how the streets should be treated to enhance circulation and connectivity. Six key recommendations were developed to implement the vision and issues for circulation and connectivity. They consist of:  Improve east-west connectivity across the rail corridor, Alma Street and El Camino Real.  Provide additional rail crossings in the southern section of the corridor.  Strengthen pedestrian and bicycle connections to citywide facilities.  Create a walkable, pedestrian and bicycle-friendly framework that provides convenient and safe access to goods and services.  Implement a layered street framework.  Retain traffic carrying capacity where needed. Land Use and Urban Design The Land Use and Urban Design chapter focuses on the following overarching concerns:  Conservation of residential neighborhoods and historic resources.  Improving access to and facilities for public services and resources.  Providing more opportunities for commercial goods and services, especially in the southern portion of the City of Palo Alto.  Improving public spaces, including streetscape and pedestrian facilities  Enhancing underutilized land resources. This chapter refines the designations of the very diverse corridor as Mixed-Use Centers and Residential Subareas. The Mixed Use Centers consist of the 1) Downtown/University City Center, 2) California Avenue Town Center, and 3) South Palo Alto/El Camino Way Neighborhood Center. The Report also outlines the concept of a “keystone block” for each center. The keystone blocks are comprised of key multiple parcels within the subareas that can unify the district and ensure the success of the area. Recommendations developed for the Land Use and Urban Design issues include the following:  Conserve, protect and preserve historic and natural resources.  Enhance the three mixed-use centers to create unique places that serve the community.  Protect existing residential neighborhoods.  Encourage a diverse mix of housing.  Encourage improved utilization of land resources. Implementation The Implementation and Next Steps Section provides recommendations made by the Task Force to improve the livability of the study area and benefiting the rest of the City. The key components of this section are the identification of transportation improvements/connections and proposed Comprehensive Plan policy amendments. Because this is not intended to be a technical study, these recommendations represent big picture goals and policy statements to assist the City with future decisions regardless of what happens to either Caltrain or any other rail project. The implementation projects have been presented in three priority categories. Tier One implements existing goals and policies. Tier Two implements other key safety projects. Tier Three projects are important enhancements for connectivity, safety and accessibility, but not so immediately critical as the other tiers. These are recommendations deemed best to achieve the Report’s vision, but they do not preclude other measures that may be identified in the future. The Tier One priority projects, as listed in Table 6.1 on page 6.05, include:  Implement existing safety goals and policies, including the School Commute Corridors Network Crossings.  Rail safety crossing improvements for Charleston Road.  Rail safety crossing improvements for Churchill Avenue.  Rail safety crossing improvements for East Meadow Drive. Recommended priority projects would be implemented through the City’s Capital Improvements Program scheduling. The Implementation Section also recommends future studies that would help achieve the vision and goals of the Report. Those studies include:  Transportation and public improvement plans for Alma Street.  Detailed area studies (similar to the California Avenue Concept Plan) for the Downtown/University Mixed Use City Center and the El Camino Way/South Palo Alto Neighborhood Mixed Use Center.  Rail Corridor/Alma Street crossing improvements and engineering studies, to identify the feasibility of proposed improvements, and estimated costs prior to incorporating into the CIP. Comprehensive Plan Goals and Policies The recommendation of new or amended policies for the Comprehensive Plan is an important component of the Implementation Chapter of the Report. Most of the elements of the study are consistent with goals, policies and programs in the existing Comprehensive Plan. Five new goals and associated policies were identified and recommended to be incorporated into the Comprehensive Plan as part of the ongoing Amendment process to further the goals of the Study. Certain policies and programs can immediately be implemented into the existing Transportation Element without much additional environmental analysis. These policies are detailed below and covered in the Negative Declaration. Other policies and programs recommended by the Report will require more detailed analysis and therefore will be analyzed as part of the continuing Comprehensive Plan update process. Although the Task Force has recommended approval of the goals and policies, there was some difference of opinion regarding Policy 1.1. There were some Task Force members, as well as members of the public, who do not believe the below-grade trench should be referenced as the only preferred option. This topic was the subject of some debate, but a clear majority of the group supported the policy as proposed. Goal 1: Rail improvements should be constructed in a below-grade trench. Policy 1.1: The City’s preferred vertical alignment for fixed rail in Palo Alto is below grade. Policy 1.2: The City is opposed to an elevated alignment of HSR/Caltrain in Palo Alto. Policy 1.3: All Neighborhoods in Palo Alto affected by rail should be treated with equal consideration with respect to vertical alignment impacts. Goal 2: Ensure the highest possible safety at all rail crossings and mitigate rail impacts on neighborhoods, public facilities, schools and mixed-use centers. Policy 2.1: Improve existing at-grade crossings. All at-grade crossings of the Caltrain corridor should be improved to provide the highest possible level of safety and convenience. This may be grade separations or safer at-grade crossings, with the preferred choice generally being grade separation. Policy 2.2: Provide additional safe and convenient crossings. Additional crossings of the tracks, and in some cases Alma Street as well, are essential to provide connections from neighborhoods to destinations such as schools, parks and services. Policy 2.3: Improve safety and minimize noise, vibrations and visual impacts of operations in the Caltrain rail corridor. With or without the addition of High Speed Train, the Caltrain corridor should be modified to improve safety and to minimize future noise, vibration and visual impacts on adjoining districts and neighborhoods. Goal 3: Connect the east and west portions of the City through an improved circulation network that binds the City together in all directions. Policy 3.1: Seek to increase the number of east-west pedestrian and bicycle crossings along Alma Street, particularly south of Oregon Expressway. Policy 3.2: All four existing at-grade rail crossings shall remain open to vehicular traffic. Goal 4: Provide improved access to parks and recreation facilities and schools and assess future needs for these facilities. Policy 4.1: Enhance connections to parks, community centers, libraries and schools within the corridor or between the corridor and nearby facilities. Opportunities to increase school capacity and facility development and use should be evaluated and coordinated between the Palo Alto Unified School District and the City. Goal 5: Infrastructure should keep pace with development. Policy 5.1: Implement plans and coordinate with other agencies where required for parks, recreation and traffic improvements, as well as new or expanded schools in order to keep pace with new development. Sewer, water, storm drainage and wastewater management should be evaluated and implemented in conjunction with development. Rail Corridor Study Report Resolution The intent of the Rail Corridor Study Resolution is to formalize the approval of the document and to amend the Comprehensive Plan to give the recommendations in the Report added authority. With the resolution and the amendment into the Comprehensive Plan, the Report becomes a formal document that must be considered when reviewing development within Palo Alto. The Resolution would amend or add three policies and three programs in the Transportation Element to reflect the Report recommendations, including the Vision Statement. However, the actual implementation of the recommendations of the Report would be part of future planning studies, CIP projects, and related environmental clearance. The following additions (underlined) to existing programs and policies are proposed (as modified by the PTC): Program T-1: Encourage infill, redevelopment, and reuse of vacant or underutilized parcels employing minimum density requirements that are appropriate to support transit, bicycling, and walking. The overall vision is to create a vibrant, safe, attractive, transit-rich area with city and neighborhood centers that provide walkable, pedestrian and bicycle-friendly places that serve the community and beyond; and to connect the east and west portions of the city through an improved circulation network that binds the city together in all directions. In 2012, the City approved the 2012 Palo Rail Corridor Study Report to provide land use and transportation policies to guide redevelopment along the rail corridor that would encourage the appropriate kinds of development, which are consistent with and advocated in the Comprehensive Plan. Program T-17: Support Caltrain electrification and its extension to downtown San Francisco. Palo Alto supports the extension of Caltrain to downtown San Francisco to provide a regional transit connection for the Peninsula. The City supports electrification of Caltrain to speed service, allow for more trains, and decrease noise and air pollutions. Extension of Bay Area Rapid Transit (BART) service is an alternative to upgrading Caltrain but would be significantly more expensive and would take a long time to build. The Vision statement in the 2012 Palo Alto Rail Corridor Study Report represents the City’s preference for the below-grade rail alignment and support of the Caltrain two-track on grade alignment. The City is opposed to the above grade aerial rail options. Program T-21: Study projects to depress bikeways and pedestrian walkways under Alma Street and the Caltrain tracks and implement if feasible. There are distances of up to 1-1/4 miles between the existing pedestrian/bicycle railroad crossings. One or more strategically-located new crossings under Alma Street and the Caltrain tracks would reduce detours for bicyclists and pedestrians and improve northeast-southwest circulation. New pedestrian/bicycle undercrossings are envisioned as a way to increase grade crossing safely and reduce delays for users, especially as train frequencies increase. Additional improvements are discussed in general terms in the 2012 Palo Alto Rail Corridor Study Report and will be evaluated in more detail in subsequent studies and shall be coordinated in the future with Caltrain and High speed Rail Authority plans. Policy T-28: Make effective use of the traffic-carrying ability of Palo Alto’s major street network without compromising the needs of pedestrians and bicyclists also using this network. Palo Alto desires to keep traffic flowing as freely as possible on major streets to minimize the diversion of through-traffic onto local residential streets. A challenge is to balance the free flow of traffic with residents’ desire to maintain low traffic speeds, especially on residential arterials. Most future roadway improvements will be made within existing rights-of-way at intersections and will provide relatively small increases in roadway capacity. The primary exception is the Sand Hill Road area, where Stanford University plans to implement an expansion and extension of Sand Hill Road and construct other new roadways to handle existing and projected traffic. Elsewhere in the City, intersection improvements are planned only at the major intersections noted below. Palo Alto’s Policy is to make necessary roadway improvements while providing for bicyclists and pedestrians while ensuring the safety of all roadway and sidewalk users…. The 2012 Rail Corridor Study Report discusses street network improvements in general terms and those improvements will be evaluated in more detail in subsequent studies. The vision statement of the Rail Corridor Study Report supports enhancing connections between the east and west portions of the City’s circulation network for a pedestrian and bicyclist friendly places. Planning and Transportation Commission (PTC) The first Planning and Transportation Commission study session on the Rail Corridor Study was held on June 8, 2011. Staff and the consultant, BMS Design Group, provided a detailed introduction and an update on the Rail Corridor Study and Task Force. The PTC provided extensive input regarding the study. The items of concerned raised by the PTC included increasing public outreach, the importance of Alma Street, and connectivity in South Palo Alto. A second study session before the PTC was held on March 14, 2012. The PTC expressed support for the document and provided comments and direction to staff and the consultant. Some of the more important comments included the need for clear vision statements, avoiding impractical goals/actions, making the City Council Rail Committee Guiding Principles more prominent (especially the third principle regarding equal treatment among neighborhoods), the need for future area plans and stronger urban design policies. The PTC staff report and minutes of the June 8, 2011 and March 14, 2012 meetings can be found online (http://www.cityofpaloalto.org/knowzone/agendas/planning.asp). The final hearing on the request for a recommendation by the PTC to the City Council was held on May 30, 2012. The staff report and minutes for the May 30th hearing have been included as Attachment D. The PTC have recommended an additional policy to clarify that the City is opposed to an elevated rail alignment, all neighborhoods must be treated equally and that existing vehicular crossings remain open. These changes have been added to the Resolution (Attachment A). The PTC again expressed support for the Report and associated resolution, but expressed some concerns. Those concerns included making sure policy statements are explicit, especially regarding rail alignment, ensuring that the north and south neighborhoods are treated equally, properly identifying potential impacts at all rail crossings, and confirming that the goals and policies of the implementation chapter would be incorporated into the larger Comprehensive Plan update for consistency. The PTC had the following specific comments:  Make policy language more positive.  Policy statements should be explicit.  North and South Palo Alto must be treated equally.  Vehicular rail crossings must be retained.  Make sure Figure 4.5 for Alma Street shows all potential impacts at critical rail crossings.  Rename Palo Alto Mixed Use Center with more descriptive name.  Report should include the Rail Committee Guiding Principles 1 and 3.  Substitute “high speed rail” with “rail”. The PTC offered specific modifications to the language of the Resolution and unanimously recommended adoption of the resolution and the accompanying Negative Declaration. Architectural Review Board The Report was also brought to the Architectural Review Board for a study session on March 15, 2012 and a hearing on May 24, 2012. The ARB was also supportive of the document and expressed a desire to confirm that this effort would be incorporated and not ignored. The ARB had similar comments to the PTC. The comments included support for the “keystone block” concept, the need to improve pedestrian and bicycle circulation, especially along the tracks, and the importance of development of a vision statement for Alma Street. The ARB staff report for the March 15 study session can be found online at: http://www.cityofpaloalto.org/knowzone/agendas/architectural.asp. The ARB recommended approval of the Report and amendment to the Comprehensive Plan at its May 24th hearing. The one change the ARB recommended was to the vision statement. The Board recommended that the word “safe” be added. This modification has been added to the list of changes and also to the vision statement in the staff report. The May 24th ARB staff report and minutes are provided as Attachment E. Public Outreach To solicit public feedback, a website and email address was established for the project. Notices for all meetings are posted on the City’s website in the Know zone (http://www.cityofpaloalto.org/knowzone/agendas/rail_corridor_task_force.asp) and the City Hall Notice Board. Additional background information is also provided on the webpage. Staff has been maintaining an email distribution list of interested individuals and has used the list to send out meeting notices and updates. An email address, railcorridorstudy@cityofpaloalto.org, has been established for public outreach purposes. A separate detailed website, www.paloaltorailcorridor.org, has been made available to provide as much information as possible for the public, similar to the one developed for the Comprehensive Plan Amendment. The Task Force meetings are also recorded and available for viewing at the Community Media Center website. The Draft report has been made available for public review on the project website during the process. Next Steps Subsequent to Council approval of the proposed resolution, the next step will be to work with the Planning Commission and the consultant to include the Report’s recommendations on new Comprehensive Plan goals and policies into the ongoing Comprehensive Plan Update. Staff will coordinate recommendations for future studies into staff’s work programs and will factor priority projects into future Capital Improvements Programs. Resource Impacts The City Council initially authorized $200,000 for consultant services for this study. A total of $90,000 was included in the fiscal year 2010-11 and the remaining $110,000 was to be allocated in the 2011-12 budget. The contract was amended on June 4, 2012 with a minor budget increase of $25,000 by the Council to accommodate the additional report drafts and meetings that were determined to be needed. Policy Implications The Report will rely on the City’s Comprehensive Plan and other land use and transportation policies to guide the effort for the corridor. The Report is consistent with the current Comprehensive Plan, as shown in the Comprehensive Plan Policies and Program Assessment Table on page 6.14 of the Study. Current Comprehensive Plan and area plan efforts, including the Bicycle and Pedestrian Plan update and the California Avenue Area Concept Plan, would be considered with respect to the policies and improvements outlined in the Rail Corridor Study. The Report and Vision Statement of the Report would immediately amend Programs T1, T17 and T21, amend Policies T28, and add Policies T-6.1 and T-38.1 in the Transportation Element. The new Comprehensive Plan Goals and Policies and other program recommendations would be integrated into the ongoing Comprehensive Plan Update and/or subsequent studies. Environmental Review A Draft Initial Study which reviewed the environmental issues as required by the California Environmental Quality Act (CEQA) and Intent to Adopt a Negative Declaration was posted and circulated for a 30 day public review on May 25, 2012 (Attachment C). The public comment period closed at 5:00 PM on June 25, 2012. Copies of the environmental documents have been provided to the State, Caltrain/San Mateo County Transportation District, Caltrans and Stanford University for their review and comments. Caltrain and Stanford University have expressed no objections to the document. No other comments have been received as of the printing of this staff report. Minor modifications to the Initial Study and Negative Declarations were made to reflect the PTC and ARB comments. Because those changes are minor and do not create additional impacts, CEQA does not require recirculation of the documents. Additional environmental review for individual projects would be required as those projects are more fully developed for implementation. In addition, CEQA review for the Next Steps and Implementation section will be conducted in conjunction with the Comprehensive Plan Update and/or as CIP projects are implemented. Attachments:  Attachment A: Resolution (PDF)  Attachment B: List of Text Changes and Figure 1 of Grade Configuration (PDF)  Attachment C: Negative Declaration and Initial Study (PDF)  Attachment D: May 30, 2012 P&TC Staff Report and Minutes (PDF)  Attachment E: May 24, 2012 ARB Staff Report and Minutes (PDF)  Attachment F: Rail Committee Guiding Principles (PDF)  Attachment G: Palo Alto Rail Corridor Study - Councilmembers and Libraries only. Also available at http://www.cityofpaloalto.org/civicax/filebank/documents/31091 (TXT) Prepared By: Elena Lee, Senior Planner Department Head: Curtis Williams, Director City Manager Approval: ____________________________________ James Keene, City Manager Not Yet Approved 1 120618 jb S://013/Planning/Reso Rail Corridor Study Report 2012 Resolution No. _____ Resolution of the Council of the City of Palo Alto Approving the 2012 Rail Corridor Study Report and Amending the Transportation Element of the Palo Alto Comprehensive Plan to Incorporate Certain Findings of the Report WHEREAS, the City Council adopted the 1998-2010 Comprehensive Plan in 1998, including the Transportation Element; and WHEREAS, Policy T-1 provides that land use decisions shall be made that encourage walking, bicycling, and public transit use. The policy also states that transportation and land area are inextricably linked; and WHEREAS, Program T-21 provides that the City shall study projects to depress bikeways and pedestrian walkways under Alma Street and the Caltrain tracks and implement if feasible; and WHEREAS, Program T-17 provides that the City shall support Caltrain electrification; and WHEREAS, Policy T-28 provides that the City shall make effective use of the traffic-carrying ability of Palo Alto’s major street network without compromising the needs of pedestrians and bicyclists also using this network; and WHEREAS, on July 10, 2010, the City Council directed staff to proceed with the preparation of the Rail Corridor Study; and WHEREAS, the City has conducted a public outreach program in developing the 2012 Palo Alto Rail Corridor Study Report, (the “Project”), including convening a citizen task force, facilitating outreach to the community and coordinating with other City departments throughout 2010 to 2012; and WHEREAS, the Architectural Review Board heard public comment and reviewed the 2012 Palo Alto Rail Corridor Study Report on May 24, 2012; and WHEREAS, the Planning and Transportation Commission heard public comment and reviewed the 2012 Palo Alto Rail Corridor Study Report on May 30, 2012; and WHEREAS, the City Council heard public comment and reviewed the 2012 Palo Alto Rail Corridor Study Report on June 25, 2012; and WHEREAS, the Council desires to amend the Comprehensive Plan to incorporate certain aspects of the 2012 Palo Alto Rail Study Report. Not Yet Approved 2 120618 jb S://013/Planning/Reso Rail Corridor Study Report 2012 NOW, THEREFORE, the Council of the City of Palo Alto does HEREBY RESOLVE as follows: SECTION 1. The 2012 Palo Alto Rail Corridor Study Report, as amended by the Planning and Transportation Commission and Architectural Review Board is hereby approved. SECTION 2. Program T-1 of the Transportation Element of the City’s Comprehensive Plan is hereby amended to add the following underlined language: Encourage infill, redevelopment, and reuse of vacant or underutilized parcels employing minimum. The overall vision is to create a vibrant, safe, attractive, transit-rich area with city and neighborhood centers that provide walkable, pedestrian and bicycle-friendly places that serve the community and beyond; and to connect the east and west portions of the city through an improved circulation network that binds the city together in all directions. In 2012, the City approved the 2012 Palo Rail Corridor Study Report to provide land use and transportation policies to guide redevelopment along the rail corridor that would encourage the appropriate kinds of development, which are consistent with and advocated in the Comprehensive Plan. SECTION 3. Program T-17 of the Transportation Element of the City’s Comprehensive Plan is hereby amended to add the following underlined language: Support Caltrain electrification and its extension to downtown San Francisco. Palo Alto supports the extension of Caltrain to downtown San Francisco to provide a regional transit connection for the Peninsula. The City supports electrification of Caltrain to speed service, allow for more trains, and decrease noise and air pollutions. Extension of Bay Area Rapid Transit (BART) service is an alternative to upgrading Caltrain but would be significantly more expensive and would take a long time to build. The Vision statement in the 2012 Palo Alto Rail Corridor Study Report represents the City’s preference for the below grade alignment and support of the Caltrain two-track on grade alignment. The City is opposed to the above grade aerial rail options. SECTION 4. Program T-21 of the Transportation Element of the City’s Comprehensive Plan is hereby amended to add the following underlined language: Study projects to depress bikeways and pedestrian walkways under Alma Street and the Caltrain tracks and implement if feasible. There are distances of up to 1-1/4 miles between the existing pedestrian/bicycle railroad crossings. One or more strategically-located new crossings under Alma Not Yet Approved 3 120618 jb S://013/Planning/Reso Rail Corridor Study Report 2012 Street and the Caltrain tracks would reduce detours for bicyclists and pedestrians and improve northeast-southwest circulation. New pedestrian/bicycle undercrossings are envisioned as a way to increase grade crossing safely and reduce delays for users, especially as train frequencies increase. Additional improvements are discussed in general terms in the 2012 Palo Alto Rail Corridor Study Report and will be evaluated in more detail in subsequent area plans and shall be coordinated in the future with Caltrain and High Speed Rail Authority plans. SECTION 5. Policy T-28 of the Transportation Element of the City’s Comprehensive Plan is hereby amended to add the following underlined language: Make effective use of the traffic-carrying ability of Palo Alto’s major street network without compromising the needs of pedestrians and bicyclists also using this network. Palo Alto desires to keep traffic flowing as freely as possible on major streets to minimize the diversion of through-traffic onto local residential streets. A challenge is to balance the free flow of traffic with residents’ desire to maintain low traffic speeds, especially on residential arterials. Most future roadway improvements will be made within existing rights-of-way at intersections and will provide relatively small increases in roadway capacity. The primary exception is the Sand Hill Road area, where Stanford University plans to implement an expansion and extension of Sand Hill Road and construct other new roadways to handle existing and projected traffic. Elsewhere in the City, intersection improvements are planned only at the major intersections noted below. Palo Alto’s Policy is to make necessary roadway improvements while providing for bicyclists and pedestrians while ensuring the safety of all roadway and sidewalk users. The 2012 Rail Corridor Study Report discusses street network improvements in general terms and those improvements will be evaluated in more detail in subsequent area plans. The vision statement of the Rail Corridor Study Report supports enhancing connections between the east and west portions of the City’s circulation network for a pedestrian and bicyclist friendly places. SECTION 6. Goal T-2 of the Transportation Element of the City’s Comprehensive Plan is hereby amended to add Policy T-6.1: Policy T-6.1: The City is opposed to an elevated alignment of rail in Palo Alto. All neighborhoods in Palo Alto affected by rail improvements should be treated with equal consideration with respect to vertical alignment impact. All four existing at grade rail crossings in Palo Alto shall remain open to vehicular traffic. SECTION 7. Goal T-5 of the Transportation Element of the City’s Comprehensive Plan is hereby amended to add Policy T-38.1: Not Yet Approved 4 120618 jb S://013/Planning/Reso Rail Corridor Study Report 2012 Policy T-38.1: All neighborhoods in Palo Alto affected by rail improvements should be treated with equal consideration with respect to vertical alignment impact. All four existing at grade rail crossings in Palo Alto shall remain open to vehicular traffic. SECTION 8. The City Council adopted a Negative Declaration for this project in accordance with the California Environmental Quality Act. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: APPROVED: _________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: ____________________________ City Manager _________________________ Senior Asst. City Attorney ____________________________ Director of Planning and Community Environment ATTACHMENT C LIST OF TEXT REVISIONS Report of the Rail Corridor Study Task Force September 10, 2012 The following is a list of text revisions that will be made to the final draft based on input provided during the Architectural Review Board and the Planning and Transportation Commission hearings. ■ The word "safe" will be added to the vision statement throughout the document. ■ p. 2.01, paragraph 3 will be revised to read: "The study area extends one parcel east of Alma Street and one parcel west of El Camino Real with the exception of the Stanford University main campus and Stanford Shopping Center where the study area follows the right-of-way to address the land uses that front these major transportation corridors." A note will also be added to each diagram legend next to the label study boundary (approximate, see description on p. 2.01)” ■ p. 3.06, The first paragraph under Public Facilities will be revised to read: "INFRASTRUCTURE SHOULD KEEP PACE WITH DEVELOPMENT AND SHOULD ACHIEVE A HIGH QUALITY DESIGN. Implementation of schools, parks, recreation and cultural facilities, and transportation improvements should keep pace with development. In particular, ensure adequate transportation facilities, schools and parks are in place concurrently with development. New facilities should be designed to be attractive and compatible with the surrounding context. Establish and enforce measurable standards to ensure that this is achieved." ■ p. 4.08, first bullet under Task Force Recommendations, additional text will be added that reads: "Explore a variety of configurations for trench cover design which could include cantilevers, lattice covers and full slab covers accommodate additional pedestrian and bicycle connection opportunities. ■ p. 4.11, Figure 4.5 will be updated to show conceptual impacts on Alma Street for all priority existing rail crossings (4). See attached figure. ■ p. 4.13, Table 4.1, item 7, third column: Castilleja Elementary School will be changed to Castilleja School. ■ p. 4.14 Table 4.1, item 10, third column, second bullet the text will be revised to read: "Improvements including widening of tunnel to be ADA compliant and also to provide visibility and lighting." ■ p. 4.22, second column, second paragraph, third bullet, first sub-bullet text will be modified to read: "Corridor-wide: Design elements that can be applied throughout the corridor to ensure continuous identity across the city. This includes identifying and protecting appropriate existing large trees to preserve and may also include the addition of new elements such as; large street trees, street lighting, regulatory signage, signalization and wayfinding, uniformly-designed pedestrian crossings and facilities, and uniformly-designed legible bicycle facilities." ■ p. 5.02, Under Task Force Recommendations for the Mixed Use Centers, a new bullet point will be added as follows: "Include public art throughout the corridor as a way to reinforce the unique identity of each of the Mixed-Use Centers." ■ Throughout the entire document the South Palo Alto Mixed-Use Center will be renamed the El Camino Way Mixed-Use Center. ■ p. 6.03-6.04: The policies under Goals 1 and 3 have additions, see below. ■ p. 6.06: A note will be added under Table 6.2 that reads: "Note regarding cost assumptions in Table 6.2 which follows Cost estimates shown in Table 6.2 are based on the following assumptions: ° Detail engineering studies have not been conducted. ° Planning estimates with 2012 dollars. ° Source: City of Palo Alto, Hatch Mott MacDonald. ° Costs do not include any necessary property acquisitions." Revised Task Force recommendations for new policies that should be considered for inclusion in the Comprehensive Plan Update Goal 1: Rail Improvements Should be Constructed in a Below-Grade Trench. Policy 1.1: The City's preferred vertical alignment for fixed rail in Palo Alto is below grade. Policy 1.2: The City is opposed to an elevated alignment of rail in Palo Alto. Policy 1.3: All Neighborhoods in Palo Alto affected by rail should be treated with equal consideration with respect to vertical alignment impacts. Goal 2: Ensure the Highest Possible Safety at All Rail Crossings and Mitigate Rail Impacts on Neighborhoods, Public Facilities, Schools and Mixed-use Centers. Policy 2.1: Improve existing at-grade crossings. All at-grade crossings of the Caltrain corridor should be improved to provide the highest possible level of safety and convenience. This may be grade separations or safer at-grade crossings, with the preferred choice being grade separation. Policy2.2: Provide additional safe and convenient crossings. Additional crossings of the tracks, and in some cases Alma Street as well, are essential to provide connections from neighborhoods to destinations such as schools, parks and services. Policy2.3: Improve safety and minimize noise, vibrations and visual impacts of operations in the Caltrain rail corridor. With or without the addition of a High Speed Train, the Caltrain corridor should be modified to improve safety and to minimize noise, vibration and visual impacts on adjoining districts, public facilities, schools and neighborhoods. Palo Alto Rail Corridor Study September 10, 2012 2 Goal 3: Connect the East and West Portions of the City Through an improved circulation network that binds the City together in all directions. Policy 3.1: Seek to increase the number of east-west pedestrian and bicycle crossings along Alma Street, particularly south of Oregon Expressway. Policy 3.2: All four existing at-grade rail crossings shall remain open to vehicular traffic. Goal 4: Provide Improved Access to Parks, Recreation Facilities and Schools and Assess Future Needs for these Facilities. Policy4.1: Enhance connections to parks, community centers, libraries and schools within the corridor or between the corridor and nearby facilities. Opportunities to increase school capacity and facility development and use should be evaluated and coordinated between the Palo Alto Unified School District and the City. Goal 5: Infrastructure Should Keep Pace with Development. Policy 5.1: Implement plans and coordinate with other agencies where required for parks, recreation and traffic improvements, as well as new or expanded schools in order to keep pace with new development. Sewer, water, storm drainage and wastewater management should be evaluated and implemented in conjunction with development. Palo Alto Rail Corridor Study September 10, 2012 3 DRAFT ADOPTED ON: __________________________________ City of Palo Alto Department of Planning and Community Environment California Environmental Quality Act DRAFT NEGATIVE DECLARATION I. DESCRIPTION OF PROJECT Date: September 18, 2012 Project Name: Palo Alto Rail Corridor Study Report Project Location: City of Palo Alto Applicant: City of Palo Alto Department of Planning and Community Environment Elena Lee, Senior Planner Owner: Various property owners and City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 Project Description: The proposal is the approval of the Rail Corridor Study and incorporation of the Vision Statement and specific policies into the Comprehensive Plan. No development is proposed. The Study outlines specific policy recommendations to achieve the vision for the rail corridor area, including strategies related to circulation, land use and urban design improvements. The Rail Corridor Study was initiated the City Council to evaluate land use, transportation and urban design elements of the rail corridor in Palo Alto, particularly in response to potential improvements to fixed rail services along the Caltrain tracks. The vision of the project, developed with a citizen Task Force and stated in the Report, is to “create a vibrant, safe, attractive, transit-rich area with mixed use city and neighborhood centers that provide walk-able, pedestrian and bicycle-friendly places that serve the community and beyond, and to connect the east and west portions of the City through an improved circulation network that binds the city together in all directions.” The purpose of the study was to generate a community vision for land use, transportation and urban design along the Caltrain corridor. The Study treats the entire corridor as an interconnected but diverse 1,000 acre sub-area within the City. Proposed Project The proposed project is the approval of the Rail Corridor Study and incorporation of the Vision Statement and specific policies into the Comprehensive Plan. The project would not result in any development. In accordance with CEQA, future projects would be reviewed for compliance Page 2 of 5 with regulations The Study outlines specific policy recommendations to achieve the vision for the rail corridor area, including strategies related to circulation, land use and urban design improvements. The recommendations are focused on two general categories: 1) Circulation and Connectivity and 2) Land Use and Urban Design. The report discusses the context, issues and vision of both of these two items. The report identified several important themes:  East-west connectivity must be improved and barriers shall be removed.  A trench system is the preferred alternative if High Speed Rail is approved.  All residential neighborhoods must be protected.  New development requires timely infrastructure improvement.  The highest possible level of safety must be ensured at all rail crossings. From these issues, the Study identifies and makes recommendations for several future projects to help implement the vision. These next steps for implementation consist of recommendations for priority safety, connectivity/circulation both related to and independent of the rail corridor itself, future area studies and new Comprehensive Plan Policies. The Study identifies these as priorities that would be incorporated into future City efforts and projects. The safety and connectivity/circulation recommendations include improvements to existing rail crossings, undercrossing and to existing school commute corridors, as identified by the City Council in the School Commute Corridors Network. The Study designates several areas to be part of future area studies, including the Downtown, the South Palo Alto Neighborhood Mixed Use Center, Alma Street, El Camino Real and the Rail Corridor itself. In order to formalize the approval of the Study and to give added authority to the Study’s recommendations, the Transportation Element of the Comprehensive Plan is proposed to be modified as follows: Program T-1 of the Transportation Element of the City’s Comprehensive Plan is amended to add the following underlined language: Encourage infill, redevelopment, and reuse of vacant or underutilized parcels employing minimum. The overall vision is to create a vibrant, safe, attractive, transit-rich area with city and neighborhood centers that provide walkable, pedestrian and bicycle-friendly places that serve the community and beyond; and to connect the east and west portions of the city through an improved circulation network that binds the city together in all directions. In 2012, the City approved the 2012 Palo Rail Corridor Study Report to provide land use and transportation policies to guide redevelopment along the rail corridor that would encourage the appropriate kinds of development, which are consistent with and advocated in the Comprehensive Plan. Program T-17 of the Transportation Element of the City’s Comprehensive Plan is amended to add the following underlined language: Support Caltrain electrification and its extension to downtown San Francisco. Page 3 of 5 Palo Alto supports the extension of Caltrain to downtown San Francisco to provide a regional transit connection for the Peninsula. The City supports electrification of Caltrain to speed service, allow for more trains, and decrease noise and air pollutions. Extension of Bay Area Rapid Transit (BART) service is an alternative to upgrading Caltrain but would be significantly more expensive and would take a long time to build. The Vision statement in the 2012 Palo Alto Rail Corridor Study Report represents the City’s preference for the below grade alignment and support of the Caltrain two-track on grade alignment. The City is opposed to the above grade aerial rail options. Program T-21 of the Transportation Element of the City’s Comprehensive Plan is amended to add the following underlined language: Study projects to depress bikeways and pedestrian walkways under Alma Street and the Caltrain tracks and implement if feasible. There are distances of up to 1-1/4 miles between the existing pedestrian/bicycle railroad crossings. One or more strategically-located new crossings under Alma Street and the Caltrain tracks would reduce detours for bicyclists and pedestrians and improve northeast-southwest circulation. New pedestrian/bicycle undercrossings are envisioned as a way to increase grade crossing safely and reduce delays for users, especially as train frequencies increase. Additional improvements are discussed in general terms in the 2012 Palo Alto Rail Corridor Study Report and will be evaluated in more detail in subsequent area plans and shall be coordinated in the future with Caltrain and High Speed Rail Authority plans. Policy T-28 of the Transportation Element of the City’s Comprehensive Plan is amended to add the following underlined language: Make effective use of the traffic-carrying ability of Palo Alto’s major street network without compromising the needs of pedestrians and bicyclists also using this network. Palo Alto desires to keep traffic flowing as freely as possible on major streets to minimize the diversion of through-traffic onto local residential streets. A challenge is to balance the free flow of traffic with residents’ desire to maintain low traffic speeds, especially on residential arterials. Most future roadway improvements will be made within existing rights-of-way at intersections and will provide relatively small increases in roadway capacity. The primary exception is the Sand Hill Road area, where Stanford University plans to implement an expansion and extension of Sand Hill Road and construct other new roadways to handle existing and projected traffic. Elsewhere in the City, intersection improvements are planned only at the major intersections noted below. Palo Alto’s Policy is to make necessary roadway improvements while providing for bicyclists and pedestrians while ensuring the safety of all roadway and sidewalk users. The 2012 Rail Corridor Study Report discusses street network improvements in general terms and those improvements will be evaluated in more detail in subsequent area plans. The vision statement of the Rail Corridor Study Report supports enhancing connections between the east and west portions of the City’s circulation network for a pedestrian and bicyclist friendly places. Page 4 of 5 Goal T-2 of the Transportation Element of the City’s Comprehensive Plan is amended to add Policy T-6.1: Policy T-6.1: The City is opposed to an elevated alignment of rail in Palo Alto. All neighborhoods in Palo Alto affected by rail improvements should be treated with equal consideration with respect to vertical alignment impact. All four existing at grade rail crossings in Palo Alto shall remain open to vehicular traffic. Goal T-5 of the Transportation Element of the City’s Comprehensive Plan is hereby amended to add Policy T-38.1: Policy T-38.1: All neighborhoods in Palo Alto affected by rail improvements should be treated with equal consideration with respect to vertical alignment impact. All four existing at grade rail crossings in Palo Alto shall remain open to vehicular traffic. The immediate proposal is for the City Council to approve the document and to incorporate the Vision of this study and specific policies, as described above, into the Comprehensive Plan. The implementation of the improvements and area studies discussed above all require subsequent processes which will include an associated environmental clearance. This document identifies these projects as planned priorities but the approval of this document would not automatically implement these actions. All projects are required to conform to the City of Palo Alto rules and regulations, which can include a General Plan amendment, Architectural Review or approval by City Council by resolution or an ordinance. The City is currently updating the Comprehensive Plan. The incorporation of the Study’s policy recommendations would be done as part of the Comprehensive Plan update and be included as part of the Environmental Impact Report that will be prepared. II. DETERMINATION In accordance with the City of Palo Alto’s procedures for compliance with the California Environmental Quality Act (CEQA), the City has conducted an Initial Study to determine whether the proposed project could have a significant effect on the environment. On the basis of that study, the City makes the following determination: X The proposed project COULD NOT have a significant effect on the environment, and a NEGATIVE DECLARATION is hereby adopted. Although the project, as proposed, could have a significant effect on the environment, there will not be a significant effect on the environment in this case because mitigation measures for traffic impacts have been added to the project and, therefore, a MITIGATED NEGATIVE DECLARATION is hereby adopted. The attached initial study incorporates all relevant information regarding the potential environmental effects of the project and confirms the determination that an EIR is not required for the project. Page 5 of 5 Project Planner Date Adopted by City Council, Attested by Director of Planning and Community Environment Date Rail Corridor Study Page 1 Initial Study Rail Corridor Study Report Initial Study Prepared by City of Palo Alto May 21, 2012 Rail Corridor Study Page 2 Initial Study ENVIRONMENTAL CHECKLIST City of Palo Alto Department of Planning and Community Environment TABLE OF CONTENTS I. PROJECT DESCRIPTION .............................................................................................. 3 II. ENVIRONMENTAL CHECKLIST AND DISCUSSION OF IMPACTS ..................... 9 A. AESTHETICS ....................................................................................................... 10 B. AGRICULTURAL AND FOREST RESOURCES .............................................. 11 C. AIR QUALITY ...................................................................................................... 12 D. BIOLOGICAL RESOURCES ............................................................................... 13 E. CULTURAL RESOURCES .................................................................................. 14 F. GEOLOGY, SOILS AND SEISMICITY .............................................................. 15 G. GREENHOUSE GAS EMISSIONS ..................................................................... 17 H. HAZARDS AND HAZARDOUS MATERIALS ................................................. 18 I. HYDROLOGY AND WATER QUALITY .......................................................... 20 J. LAND USE AND PLANNING ............................................................................ 21 K. MINERAL RESOURCES ..................................................................................... 22 L. NOISE .................................................................................................................... 23 M. POPULATION AND HOUSING ......................................................................... 24 N. PUBLIC SERVICES ............................................................................................. 25 O. RECREATION ...................................................................................................... 25 P. TRANSPORTATION AND TRAFFIC ................................................................ 26 Q. UTILITIES AND SERVICE SYSTEMS .............................................................. 28 R. MANDATORY FINDINGS OF SIGNIFICANCE ............................................... 29 III. SOURCE REFERENCES .............................................................................................. 30 IV. DETERMINATION ....................................................................................................... 31 Rail Corridor Study Page 3 Initial Study ENVIRONMENTAL CHECKLIST Department of Planning and Community Environment PROJECT DESCRIPTION 1. PROJECT TITLE Rail Corridor Study 2. LEAD AGENCY NAME AND ADDRESS City of Palo Alto Department of Planning and Community Environment 250 Hamilton Avenue Palo Alto, CA 94303 3. CONTACT PERSON AND PHONE NUMBER Elena Lee, Senior Planner City of Palo Alto 650-617-3196 4. PROJECT SPONSOR’S NAME AND ADDRESS City of Palo Alto 5. APPLICATION NUMBER Not Applicable 6. PROJECT LOCATION The Rail Corridor Study applies to the City of Palo Alto, which is located in the northern part of Santa Clara County, bounded on the west by the San Francisco Bay, city of Mountain View to the south, city of Menlo Park to the south, and the Santa Cruz mountains to the west, as shown on Figure 1, Regional Map. The boundaries of the corridor include the area between Alma Street on the east to El Camino Real on the west, from the Menlo Park city limits on the north to the Mountain View city limits on the south, as shown in Figure 2. The study area also includes sufficient adjacent land to encompass those areas most directly affected by potential land use, transportation and urban design changes. Rail Corridor Study Page 4 Initial Study Figure 2: Palo Alto Figure 1: Regional Map Rail Corridor Study Page 5 Initial Study 7. GENERAL PLAN DESIGNATION The Rail Corridor Study would apply through a large area of the City of Palo Alto and, therefore, there is no specific General Plan designation applicable to this project. 8. ZONING The Rail Corridor Study would apply through a large area of the City of Palo Alto and, therefore, there is no specific Zoning designation applicable to this project. 9. PROJECT DESCRIPTION Background The Rail Corridor Study (Study) was initiated in 2010 by the City Council to evaluate land use, transportation and urban design elements of the rail corridor in Palo Alto, particularly in response to potential improvements to fixed rail services along the Caltrain tracks. Those improvements may include Caltrain upgrades such as electrification and/or grade separations, and/or High Speed Rail service. Although the High Speed Rail project provides important context, it was not intended to be the focus of this study. The rail corridor is a significant physical component of Palo Alto. It is still unknown at this point how rail use in the corridor may change. The vision of the project, developed with a citizen Task Force and stated in the Report, is to “create a vibrant, safe, attractive, transit-rich area with mixed use city and neighborhood centers that provide walk-able, pedestrian and bicycle-friendly places that serve the community and beyond, and to connect the east and west portions of the City through an improved circulation network that binds the city together in all directions.” The purpose of the study was to generate a community vision for land use, transportation and urban design along the Caltrain corridor. The Study treats the entire corridor as an interconnected but diverse 1,000 acre sub- area within the City. Proposed Project The proposed project is the approval of the Rail Corridor Study and incorporation of the Vision Statement and specific policies into the Comprehensive Plan. The project would not result in any development. In accordance with CEQA, future projects would be reviewed for compliance with regulations The Study outlines policy recommendations to achieve the vision for the rail corridor area, including strategies related to circulation, land use and urban design improvements. The recommendations are focused on two general categories: 1) Circulation and Connectivity and 2) Land Use and Urban Design. The report discusses the context, issues and vision of both of these two items. The report identified several important themes:  East-west connectivity must be improved and barriers shall be removed.  A trench system is the preferred alternative if High Speed Rail is approved.  All residential neighborhoods must be protected. Rail Corridor Study Page 6 Initial Study  New development requires timely infrastructure improvement.  The highest possible level of safety must be ensured at all rail crossings. From these issues, the Study identifies and makes recommendations for several future projects to help implement the vision. These next steps for implementation consist of recommendations for priority safety, connectivity/circulation both related to and independent of the rail corridor itself, future area studies and new Comprehensive Plan Policies. The Study identifies these as priorities that would be incorporated into future City efforts and projects. The safety and connectivity/circulation recommendations include improvements to existing rail crossings, undercrossing and to existing school commute corridors, as identified by the City Council in the School Commute Corridors Network. The Study designates several areas to be part of future area studies, including the Downtown, the South Palo Alto Neighborhood Mixed Use Center, Alma Street, El Camino Real and the Rail Corridor itself. In order to formalize the approval of the Study and to give added authority to the recommendations, the Transportation Element of the Comprehensive Plan is proposed to be modified as follows: Program T-1 of the Transportation Element of the City’s Comprehensive Plan is amended to add the following underlined language: Encourage infill, redevelopment, and reuse of vacant or underutilized parcels employing minimum. The overall vision is to create a vibrant, safe, attractive, transit-rich area with city and neighborhood centers that provide walkable, pedestrian and bicycle-friendly places that serve the community and beyond; and to connect the east and west portions of the city through an improved circulation network that binds the city together in all directions. In 2012, the City approved the 2012 Palo Rail Corridor Study Report to provide land use and transportation policies to guide redevelopment along the rail corridor that would encourage the appropriate kinds of development, which are consistent with and advocated in the Comprehensive Plan. Program T-17 of the Transportation Element of the City’s Comprehensive Plan is amended to add the following underlined language: Support Caltrain electrification and its extension to downtown San Francisco. Palo Alto supports the extension of Caltrain to downtown San Francisco to provide a regional transit connection for the Peninsula. The City supports electrification of Caltrain to speed service, allow for more trains, and decrease noise and air pollutions. Extension of Bay Area Rapid Transit (BART) service is an alternative to upgrading Caltrain but would be significantly more expensive and would take a long time to build. The Vision statement in the 2012 Palo Alto Rail Corridor Study Report represents the City’s preference for the below grade alignment and support of the Caltrain two-track on grade alignment. The City is opposed to the above grade aerial rail options. Rail Corridor Study Page 7 Initial Study Program T-21 of the Transportation Element of the City’s Comprehensive Plan is amended to add the following underlined language: Study projects to depress bikeways and pedestrian walkways under Alma Street and the Caltrain tracks and implement if feasible. There are distances of up to 1-1/4 miles between the existing pedestrian/bicycle railroad crossings. One or more strategically-located new crossings under Alma Street and the Caltrain tracks would reduce detours for bicyclists and pedestrians and improve northeast- southwest circulation. New pedestrian/bicycle undercrossings are envisioned as a way to increase grade crossing safely and reduce delays for users, especially as train frequencies increase. Additional improvements are discussed in general terms in the 2012 Palo Alto Rail Corridor Study Report and will be evaluated in more detail in subsequent area plans and shall be coordinated in the future with Caltrain and High Speed Rail Authority plans. Policy T-28 of the Transportation Element of the City’s Comprehensive Plan is amended to add the following underlined language: Make effective use of the traffic-carrying ability of Palo Alto’s major street network without compromising the needs of pedestrians and bicyclists also using this network. Palo Alto desires to keep traffic flowing as freely as possible on major streets to minimize the diversion of through-traffic onto local residential streets. A challenge is to balance the free flow of traffic with residents’ desire to maintain low traffic speeds, especially on residential arterials. Most future roadway improvements will be made within existing rights-of-way at intersections and will provide relatively small increases in roadway capacity. The primary exception is the Sand Hill Road area, where Stanford University plans to implement an expansion and extension of Sand Hill Road and construct other new roadways to handle existing and projected traffic. Elsewhere in the City, intersection improvements are planned only at the major intersections noted below. Palo Alto’s Policy is to make necessary roadway improvements while providing for bicyclists and pedestrians while ensuring the safety of all roadway and sidewalk users. The 2012 Rail Corridor Study Report discusses street network improvements in general terms and those improvements will be evaluated in more detail in subsequent area plans. The vision statement of the Rail Corridor Study Report supports enhancing connections between the east and west portions of the City’s circulation network for a pedestrian and bicyclist friendly places. Goal T-2 of the Transportation Element of the City’s Comprehensive Plan is amended to add Policy T-6.1: Policy T-6.1: The City is opposed to an elevated alignment of rail in Palo Alto. All neighborhoods in Palo Alto affected by rail improvements should be treated with equal Rail Corridor Study Page 8 Initial Study consideration with respect to vertical alignment impact. All four existing at grade rail crossings in Palo Alto shall remain open to vehicular traffic. Goal T-5 of the Transportation Element of the City’s Comprehensive Plan is hereby amended to add Policy T-38.1: Policy T-38.1: All neighborhoods in Palo Alto affected by rail improvements should be treated with equal consideration with respect to vertical alignment impact. All four existing at grade rail crossings in Palo Alto shall remain open to vehicular traffic. Implementation Process The immediate proposal is for the City Council to approve the document and to incorporate the Vision of this study into the Comprehensive Plan. The implementation of the improvements, and area studies discussed above all require subsequent processes which will include an associated environmental clearance. This document identifies these projects as planned priorities but the approval of this document would not automatically implement these actions. All projects are required to conform to the City of Palo Alto rules and regulations, which can include a General Plan amendment, Architectural Review or approval by City Council by resolution or an ordinance. The City is currently updating the Comprehensive Plan. If this study is approved by Council, the incorporation of the Study’s policy recommendations would be done as part of the Comprehensive Plan update and be included as part of the Environmental Impact Report that will be prepared. 10. SURROUNDING LAND USES AND SETTING The City of Palo Alto is surrounded primarily by other urban uses, but has two significant natural and sensitive areas on the most eastern (San Francisco Bay/Baylands) and western (Santa Cruz Mountains/Foothills) edges of the city. The map provided above shows these adjacencies. The Rail Corridor Study area is located within a part of the City that is fully developed and urbanized. 11. OTHER PUBLIC AGENCY  County of Santa Clara, Office of the County Clerk-Recorder  California State Clearinghouse  City of Menlo Park  City of Mountain View  Caltrain  California Department of Transportation  Stanford University Rail Corridor Study Page 9 Initial Study ENVIRONMENTAL CHECKLIST AND DISCUSSION OF IMPACTS EVALUATION OF ENVIRONMENTAL IMPACTS 1) A brief explanation is required for all answers except "No Impact" answers that are adequately supported by the information sources a lead agency cites in the parentheses following each question. [A "No Impact" answer is adequately supported if the referenced information sources show that the impact simply does not apply to projects like the one involved (e. g. the project falls outside a fault rupture zone). A "No Impact" answer should be explained where it is based on project-specific factors as well as general standards (e. g. the project will not expose sensitive receptors to pollutants, based on a project-specific screening analysis).] 2) All answers must take account of the whole action involved, including off-site as well as on-site, cumulative as well as project-level, indirect as well as direct, and construction as well as operational impacts. 3) Once the lead agency has determined that a particular physical impact may occur, then the checklist answers must indicate whether the impact is potentially significant, less than significant with mitigation, or less than significant. Potentially Significant Impact” is appropriate if there is substantial evidence that an effect may be significant. If there are one or more “Potentially Significant Impact” entries when the determination is made, an EIR is required. 4) “(Mitigated) Negative Declaration: Less Than Significant With Mitigation Incorporated” applies where the incorporation of mitigation measures has reduced an effect from “Potentially Significant Impact” to a “Less than Significant Impact.” The lead agency must describe the mitigation measures, and briefly explain how they reduce the effect to a less than significant level (mitigation measures from Section 17, “Earlier Analysis,” may be cross-referenced). 5) Earlier analysis may be used where, pursuant to the tiering, program EIR, or other CEQA process, an effect has been adequately analyzed in an earlier EIR or negative declaration. Section 15063 (C)(3) (D). In this case, a brief discussion should identify the following: a) Earlier Analysis Used. Identify and state where they are available for review. b) Impacts Adequately Addressed. Identify which effects from the above checklist were within the scope of and adequately analyzed in an earlier document pursuant to applicable legal standards, and state whether such effects were addressed by mitigation measures based on the earlier analysis. c) Mitigation Measures. For effects that are “Less than Significant with Mitigation Measures Incorporated,” describe the mitigation measures which were incorporated or refined from the earlier document and the extent to which they address site-specific conditions for the project. 6) Lead agencies are encouraged to incorporate into the checklist references to information sources for potential impacts (e.g. general plans, zoning ordinances). Reference to a previously prepared or outside document should, where appropriate, include a reference to the page or pages where the statement is substantiated. 7) Supporting Information Sources: A source list should be attached, and other sources used or individuals contacted should be cited in the discussion. 8) The explanation of each issue should identify: a) the significance criteria or threshold, if any, used to evaluate each question; and Rail Corridor Study Page 10 Initial Study b) the mitigation measure identified, if any, to reduce the impact to less than significance. DISCUSSION OF IMPACTS The following Environmental Checklist was used to identify environmental impacts, which could occur if the proposed project is implemented. The left-hand column in the checklist lists the source(s) for the answer to each question. The sources cited are identified at the end of the checklist. Discussions of the basis for each answer and a discussion of mitigation measures that are proposed to reduce potential significant impacts are included. A. AESTHETICS Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Substantially degrade the existing visual character or quality of the site and its surroundings? 1,2,5 X b) Have a substantial adverse effect on a public view or view corridor? 1, 2-Map L4, 5 X c) Substantially damage scenic resources, including, but not limited to, trees, rock outcroppings, and historic buildings within a state scenic highway? 1, 2-Map L4, 5 X d) Violate existing Comprehensive Plan policies regarding visual resources? 1,2,5 X e) Create a new source of substantial light or glare which would adversely affect day or nighttime views in the area? 1,5 X f) Substantially shadow public open space (other than public streets and adjacent sidewalks) between 9:00 a.m. and 3:00 p.m. from September 21 to March 21? 1,5 X DISCUSSION: The Rail Corridor Study and the vision statement do not propose any specific development. The Study includes recommendations for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement would not result in any development. Physical development that would be part of improvements would be subject to the City’s Architectural Review process. The Architectural Review entitlement is required for all the exterior improvements to ensure the project is designed with high aesthetic quality and is harmonious with its surroundings. Environmental review would be included in the project review. The proposed Study recommendations and vision will not create any new aesthetic impacts. All improvements are subject to Architectural Review to address aesthetics, and once fully developed, all individual components of the recommendations that the City will seek to implement will be further reviewed for impacts and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required Rail Corridor Study Page 11 Initial Study B. AGRICULTURAL AND FOREST RESOURCES In determining whether impacts to agricultural resources are significant environmental effects, lead agencies may refer to the California Agricultural Land Evaluation and Site Assessment Model (1997) prepared by the California Dept. of Conservation as an optional model to use in assessing impacts on agriculture and farmland. In determining whether impacts to forest resources, including timberland, are significant environmental effects, lead agencies may refer to information compiled by the California Department of Forestry and Fire Protection regarding the state’s inventory of forest land, including the Forest and Range Assessment Project and the Forest Legacy Assessment project; and the forest carbon measurement methodology provided in the Forest Protocols adopted by the California Air Resources Board. Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Convert Prime Farmland, Unique Farmland, or Farmland of Statewide Importance (Farmland), as shown on the maps prepared pursuant to the Farmland Mapping and Monitoring Program of the California Resources Agency, to non-agricultural use? 1 X b) Conflict with existing zoning for agricultural use, or a Williamson Act contract? 1, 2-MapL9 X c) Conflict with existing zoning for, or cause rezoning of, forest land (as defined in Public Resources Code section 12220(g)1) or timberland (as defined in Public Resources Code section 45262)? 1 X d) Result in the loss of forest land or conversion of forest land to non-forest use? 1 X e) Involve other changes in the existing environment which, due to their location or nature, could result in conversion of Farmland, to non-agricultural use or conversion of forest land to non-forest use? 1 X DISCUSSION: 1 PRC 12220(g): "Forest land" is land that can support 10-percent native tree cover of any species, including hardwoods, under natural conditions, and that allows for management of one or more forest resources, including timber, aesthetics, fish and wildlife, biodiversity, water quality, recreation, and other public benefits. 2 PRC 4526: "Timberland" means land, other than land owned by the federal government and land designated by the board as experimental forest land, which is available for, and capable of, growing a crop of trees of any commercial species used to produce lumber and other forest products, including Christmas trees. Commercial species shall be determined by the board on a district basis after consultation with the district committees and others. Rail Corridor Study Page 12 Initial Study The Study and vision statement do not include lands that are located in “Prime Farmland”, “Unique Farmland”, or “Farmland of Statewide Importance” area, as shown on the maps prepared for the Farmland Mapping and Monitoring Program of the California Resources Agency. The areas that are the subject of this Study are not zoned for agricultural use, and are not regulated by the Williamson Act. The areas affected are within a developed urbanized area and have no impacts on forest or timberland. Mitigation Measures: None Required C. AIR QUALITY Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Conflict with or obstruct with implementation of the applicable air quality plan (1982 Bay Area Air Quality Plan & 2000 Clean Air Plan)? 1,5 X b) Violate any air quality standard or contribute substantially to an existing or projected air quality violation indicated by the following: i. Direct and/or indirect operational emissions that exceed the Bay Area Air Quality Management District (BAAQMD) criteria air pollutants of 80 pounds per day and/or 15 tons per year for nitrogen oxides (NO), reactive organic gases (ROG), and fine particulate matter of less than 10 microns in diameter (PM10); 1,5 X ii. Contribute to carbon monoxide (CO) concentrations exceeding the State Ambient Air Quality Standard of nine parts per million (ppm) averaged over eight hours or 20 ppm for one hour( as demonstrated by CALINE4 modeling, which would be performed when a) project CO emissions exceed 550 pounds per day or 100 tons per year; or b) project traffic would impact intersections or roadway links operating at Level of Service (LOS) D, E or F or would cause LOS to decline to D, E or F; or c) project would increase traffic volumes on nearby roadways by 10% or more)? 1,5 X c) Result in a cumulatively considerable net increase of any criteria pollutant for which the project region is non-attainment under an applicable federal or state ambient air quality standard (including releasing emissions which exceed quantitative thresholds for ozone precursors)? 1,5 X d) Expose sensitive receptors to substantial levels of toxic air contaminants? 1,5 X Rail Corridor Study Page 13 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact i. Probability of contracting cancer for the Maximally Exposed Individual (MEI) exceeds 10 in one million 1 X ii. Ground-level concentrations of non- carcinogenic TACs would result in a hazard index greater than one (1) for the MEI 1 X e) Create objectionable odors affecting a substantial number of people? 1 X f) Not implement all applicable construction emission control measures recommended in the Bay Area Air Quality Management District CEQA Guidelines? 1 X DISCUSSION: The Study and vision statement includes recommendations for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The Rail Corridor Study area is in a developed urbanized location within the City of Palo Alto. The approval of the Rail Corridor Study and incorporation of the Vision Statement would not result in any development. In accordance with CEQA, future projects would be reviewed for compliance with regulations related to Air Quality. The City of Palo Alto is located within the jurisdiction of the Bay Area Air Quality Management District (BAAQMD), the regional agency empowered to regulate air pollutant emissions from stationary sources in the Bay Area. The BAAQMD regulates air quality through its permit authority over most types of stationary emission sources and through its planning and review process. All development in Palo Alto is subject to the BAAQMD regulations. The Rail Corridor Study will not create any new significant air quality impacts. Construction activities related to the implementation of the Study’s recommendations and future projects would be evaluated in a project-specific environmental analysis for potential effects on air quality. Once fully developed, all individual components of the Study that the City would seek to implement would be required to mitigate any potential air quality impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required D. BIOLOGICAL RESOURCES Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or 1, 2-MapN1, 5 X Rail Corridor Study Page 14 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact U.S. Fish and Wildlife Service? b) Have a substantial adverse effect on any riparian habitat or other sensitive natural community identified in local or regional plans, policies, regulations, including federally protected wetlands as defined by Section 404 of the Clean Water Act (including, but not limited to, marsh, vernal pool, coastal, etc.) through direct removal, filling, hydrological interruption, or other means? 1,2-MapN1, 5 X c) Interfere substantially with the movement of any native resident or migratory fish or wildlife species or with established native resident or migratory wildlife corridors, or impede the use of native wildlife nursery sites? 1,8-MapN1, 5 X d) Conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or as defined by the City of Palo Alto’s Tree Preservation Ordinance (Municipal Code Section 8.10)? 1,2,3,4,5 X e) Conflict with any applicable Habitat Conservation Plan, Natural Community Conservation Plan, or other approved local, regional, or state habitat conservation plan? 1,5 X DISCUSSION: The approval of the Rail Corridor Study and incorporation of the Vision Statement would cause a less than significant to no impact to biological resources within the City. The Study includes recommendations for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement would not result in any development. The areas within the rail corridor study boundaries are all in urbanized areas and are fully disturbed. The subsequent projects that the City may implement would be further reviewed for potential biological impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required E. CULTURAL RESOURCES Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact Rail Corridor Study Page 15 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Directly or indirectly destroy a local cultural resource that is recognized by City Council resolution? 1,10 X b) Cause a substantial adverse change in the significance of an archaeological resource pursuant to 15064.5? 1,2-MapL8 X c) Directly or indirectly destroy a unique paleontological resource or site or unique geologic feature? 1,2-MapL8 X d) Disturb any human remains, including those interred outside of formal cemeteries? 1,2-MapL8 X e) Adversely affect a historic resource listed or eligible for listing on the National and/or California Register, or listed on the City’s Historic Inventory? 1,2-MapL7, 10 X f) Eliminate important examples of major periods of California history or prehistory? 1 X DISCUSSION: The Study and vision statement reflects the recommendations for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement into the Comprehensive Plan would not result in any development. The Study area is located within a fully developed and disturbed portion of the City. The Study recommends the preservation of historic resources. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for potential cultural and archaeological impacts, and subject to additional CEQA analysis. For all those future projects, if during grading and construction activities, any archaeological or human remains are encountered, construction shall cease and a qualified archaeologist shall visit the site to address the find. The Santa Clara County Medical Examiner’s office shall be notified to provide proper direction on how to proceed. If any Native American resources are encountered during construction, construction shall cease immediately until a Native American descendant, appointed by the Native American Heritage Commission of the State of California, is able to evaluate the site and make further recommendations and be involved in mitigation planning. Mitigation Measures: None Required F. GEOLOGY, SOILS AND SEISMICITY Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Expose people or structures to potential substantial adverse effects, including the Rail Corridor Study Page 16 Initial Study risk of loss, injury, or death involving: i) Rupture of a known earthquake fault, as delineated on the most recent Alquist-Priolo Earthquake Fault Zoning Map issued by the State Geologist for the area or based on other substantial evidence of a known fault? Refer to Division of Mines and Geology Special Publication 42. 11 X ii) Strong seismic ground shaking? 2-MapN10 X iii) Seismic-related ground failure, including liquefaction? 2-MapN5 X iv) Landslides? 2-MapN5 X b) Result in substantial soil erosion or the loss of topsoil? 1 X c) Result in substantial siltation? 1 X d) Be located on a geologic unit or soil that is unstable, or that would become unstable as a result of the project, and potentially result in on- or off-site landslide, lateral spreading, subsidence, liquefaction or collapse? 2-MapN5 X e) Be located on expansive soil, as defined in Table 18-1-B of the Uniform Building Code (1994), creating substantial risks to life or property? 2-MapN5 X f) Have soils incapable of adequately supporting the use of septic tanks or alternative waste water disposal systems where sewers are not available for the disposal of waste water? 1 X g) Expose people or property to major geologic hazards that cannot be mitigated through the use of standard engineering design and seismic safety techniques? 1,5 X DISCUSSION: The Study and Vision statement reflects the study’s recommendation for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The incorporation of the Vision statement and separate approval of the Rail Corridor Study would not result in any development. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for potential geology, soils and seismicity impacts, and subject to additional CEQA analysis. Generally, the City of Palo Alto would experience a range from weak to very violent shaking in the event of a major earthquake along the San Andreas or Hayward faults. Although hazards exist, development would not expose people or property to major geologic hazards that cannot be addressed through the use of standard engineering design and seismic safety techniques, as required by building Rail Corridor Study Page 17 Initial Study codes. With proper engineering new development is not expected to result in any significant adverse short or long-term impacts related to geology, soils or seismicity. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required G. GREENHOUSE GAS EMISSIONS Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Generate greenhouse gas emissions, either directly or indirectly, that may have a significant impact on the environment? 1,5,9 X b) Conflict with any applicable plan, policy or regulation of an agency adopted for the purpose of reducing the emissions of greenhouse gases? 1,5,9 X DISCUSSION: The San Francisco Bay Area Air Basin (SFBAAB) is currently designated as a nonattainment area for state and national ozone standards and national particulate matter ambient air quality standards. SFBAAB’s nonattainment status is attributed to the region’s development history. Past, present and future development projects contribute to the region’s adverse air quality impacts on a cumulative basis. By its very nature, air pollution is largely a cumulative impact. No single project is sufficient in size to, by itself, result in nonattainment of ambient air quality standards. Instead, a project’s individual emissions contribute to existing cumulatively significant adverse air quality impacts. If a project’s contribution to the cumulative impact is considerable, then the project’s impact on air quality would be considered significant. The Bay Area Air Quality Management District’s (BAAQMD) approach to developing a Threshold of Significance for Green House Gas (GHG) emissions is to identify the emissions level for which a project would not be expected to substantially conflict with existing California legislation adopted to reduce statewide GHG emissions needed to move us towards climate stabilization. If a project would generate GHG emissions above the threshold level, it would be considered to contribute substantially to a cumulative impact, and would be considered significant. The Thresholds of Significance for operational-related GHG emissions are: • For land use development projects, the threshold is compliance with a qualified GHG reduction Strategy; or annual emissions less than 1,100 metric tons per year (MT/yr) of CO2e; or 4.6 MT CO2e/SP/yr (residents + employees). Land use development projects include residential, commercial, industrial, and public land uses and facilities. • For stationary-source projects, the threshold is 10,000 metric tons per year (MT/yr) of CO2e. Stationary-source projects include land uses that would accommodate processes and equipment that emit GHG emissions and would require an Air District permit to operate. If annual emissions of Rail Corridor Study Page 18 Initial Study operational-related GHGs exceed these levels, the proposed project would result in a cumulatively considerable contribution of GHG emissions and a cumulatively significant impact to global climate change. The BAAQMD has established project level screening criteria to assist in the evaluation of impacts. If a project meets the screening criteria and is consistent with the methodology used to develop the screening criteria, then the project’s air quality impacts may be considered less than significant. Below are some screening level examples taken from the BAAQMD CEQA Air Quality Guidelines, 06/2010 (Table 3-1, Operational-Related Criteria Air Pollutant and Precursor Screening Level Sizes). Land Use Type Operational GHG Screening Size ** Single-family 56 du Apartment, low-rise 78 du Apartment, mid-rise 87 du Condo/townhouse, general 78 du City park 600 acres Day-care center 11,000 sf General office building 53,000 sf Medical office building 22,000 sf Office park 50,000 sf Quality restaurant 9,000 sf **If project size is => screening size, then it is considered significant. The Study and Vision Statement supports recommendations for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The amendment of the vision statement to the Comprehensive Plan and the approval of the Rail Corridor Study would not result in any development. Future projects that are guided by the Study that the City would seek to implement would be further reviewed for potential greenhouse gas impacts, and subject to additional CEQA analysis. It is not anticipated that the Study’s recommendations would create any new significant operational GHG emissions. The intent of the study is to coordinate land use and transportation decisions, including encouraging bicycle and pedestrian modes of transport and to reduce automobile trips where possible. The subsequent projects guided by the Vision Statement that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required H. HAZARDS AND HAZARDOUS MATERIALS Note: Some of the thresholds can also be dealt with under a topic heading of Public Health and Safety if the primary issues are related to a subject other than hazardous material use. Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Less Than Significant Impact No Impact Rail Corridor Study Page 19 Initial Study Mitigation Incorporated a) Create a significant hazard to the public or the environment through the routing transport, use, or disposal of hazardous materials? 1,5 X b) Create a significant hazard to the public or the environment through reasonably foreseeable upset and accident conditions involving the release of hazardous materials into the environment? 1,5 X c) Emit hazardous emissions or handle hazardous or acutely hazardous materials, substances, or waste within one-quarter mile of an existing or proposed school? 1,5 X d) Construct a school on a property that is subject to hazards from hazardous materials contamination, emissions or accidental release? 1,5 X e) Be located on a site which is included on a list of hazardous materials sites compiled pursuant to Government Code Section 65962.5 and, as a result, would it create a significant hazard to the public or the environment? 1,2-MapN9 X f) For a project located within an airport land use plan or, where such a plan has not been adopted, within two miles of a public airport or public use airport, would the project result in a safety hazard for people residing or working in the project area? 1 X g) For a project within the vicinity of a private airstrip, would the project result in a safety hazard for people residing or working the project area? 1 X h) Impair implementation of or physically interfere with an adopted emergency response plan or emergency evacuation plan? 1,2-MapN7 X i) Expose people or structures to a significant risk of loss, injury, or death involving wildland fires, including where wildlands are adjacent to urbanized areas or where residences are intermixed with wildlands? 1,2-MapN7 X j) Create a significant hazard to the public or the environment from existing hazardous materials contamination by exposing future occupants or users of the site to contamination in excess of soil and ground water cleanup goals developed for the site? 1,5 X DISCUSSION: The Study and Vision Statement supports recommendations for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement into the Comprehensive Plan would not result in any development. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for hazards and hazardous materials impacts, and subject to additional CEQA analysis. Rail Corridor Study Page 20 Initial Study The Study area is located within a fully developed and or previously disturbed area. The recommendations do not involve the use, creation or transportation of hazardous materials and seek to improve safety. The actual implementation of the Study is anticipated to have little to no impacts with regard to public safety, hazards and hazardous materials. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required I. HYDROLOGY AND WATER QUALITY Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Violate any water quality standards or waste discharge requirements? 1,2,5 X b) Substantially deplete groundwater supplies or interfere substantially with groundwater recharge such that there would be a net deficit in aquifer volume or a lowering of the local groundwater table level (e.g., the production rate of pre-existing nearby wells would drop to a level which would not support existing land uses or planned uses for which permits have been granted)? 2-MapN2 X c) Substantially alter the existing drainage pattern of the site or area, including through the alteration of the course of a stream or river, in a manner which would result in substantial erosion or siltation on- or off-site? 1,5 X d) Substantially alter the existing drainage pattern of the site or area, including through the alteration of the course of a stream or river, or substantially increase the rate or amount of surface runoff in a manner which would result in flooding on- or off-site? 1,5 X e) Create or contribute runoff water which would exceed the capacity of existing or planned stormwater drainage systems or provide substantial additional sources of polluted runoff? 1,5 X f) Otherwise substantially degrade water quality? 1,5 X g) Place housing within a 100-year flood hazard area as mapped on a federal Flood Hazard Boundary or Flood Insurance Rate Map or other flood hazard delineation map? 2-MapN6 X h) Place within a 100-year flood hazard area structures which would impede or redirect flood flows? 2-MapN6 X i) Expose people or structures to a significant risk 2-MapN8 X Rail Corridor Study Page 21 Initial Study of loss, injury or death involve flooding, including flooding as a result of the failure of a levee or dam or being located within a 100-year flood hazard area? j) Inundation by seiche, tsunami, or mudflow? 2-MapN6 X k) Result in stream bank instability? 1,5 X DISCUSSION: The Study and Vision Statement supports the recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies and the approval of the Rail Corridor Study and adoption of the Vision Statement would not result in any development. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for hydrology and water quality impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. All development is required to comply with building codes that address flood safety issues. Development projects are required to implement Best Management Practices (BMPs) for construction activities as specified by the California Storm Water Best Management Practices Handbook (CASQA, 2003) and/or the Manual of Standards for Erosion and Sediment Control Measures (ABAG, 1995). The BMPs include measures guiding the management and operation of construction sites to control and minimize the potential contribution of pollutants to storm runoff from these areas. These measures address procedures for controlling erosion and sedimentation and managing all aspects of the construction process to ensure control of potential water pollution sources. All development projects must comply with all City, State and Federal standards pertaining to storm water run-off and water quality. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required J. LAND USE AND PLANNING Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Physically divide an established community? 1,5 X b) Conflict with any applicable land use plan, policy, or regulation of an agency with jurisdiction over the project (including, but not limited to the general plan, specific plan, local coastal program, or zoning ordinance) adopted for the purpose of avoiding or mitigating an environmental effect? 1,2,3,4,5 X c) Conflict with any applicable habitat conservation plan or natural community conservation plan? 1,2 X d) Substantially adversely change the type or 1,5 X Rail Corridor Study Page 22 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact intensity of existing or planned land use in the area? e) Be incompatible with adjacent land uses or with the general character of the surrounding area, including density and building height? 1,5 X f) Conflict with established residential, recreational, educational, religious, or scientific uses of an area? 1,5 X g) Convert prime farmland, unique farmland, or farmland of statewide importance (farmland) to non-agricultural use? 1,2,3 X DISCUSSION: The Study and Vision Statement supports the recommendations for future consideration safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement would not result in any development. The policies included in the Study have been analyzed and determined to be consistent with the Comprehensive Plan as a whole. New land uses that would not be allowed in the Comprehensive Plan are not proposed. The entire study area is located within a fully developed or previously disturbed area. Future development is required to be consistent with existing land uses within the City. Future projects supported in the Study that the City would seek to implement would be further reviewed for land use impacts, and subject to additional CEQA analysis. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required K. MINERAL RESOURCES Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Result in the loss of availability of a known mineral resource that would be of value to the region and the residents of the state? 1,2 X b) Result in the loss of availability of a locally- important mineral resource recovery site delineated on a local general plan, specific plan or other land use plan? 1,2 X DISCUSSION: The City of Palo Alto has been classified by the California Department of Conservation (DOC), Division of Mines and Geology (DMG) as a Mineral Resource Zone 1 (MRZ-1). This designation signifies that there are no aggregate resources in the area. The DMG has not classified the City for Rail Corridor Study Page 23 Initial Study other resources. There is no indication in the 2010 Comprehensive Plan that there are locally or regionally valuable mineral resources within the City of Palo Alto. Mitigation Measures: None Required. L. NOISE Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Exposure of persons to or generation of noise levels in excess of standards established in the local general plan or noise ordinance, or applicable standards of other agencies? 1,2,12 X b) Exposure of persons to or generation of excessive ground borne vibrations or ground borne noise levels? 1,2,12 X c) A substantial permanent increase in ambient noise levels in the project vicinity above levels existing without the project? 1,2,12 X d) A substantial temporary or periodic increase in ambient noise levels in the project vicinity above levels existing without the project? 1,2,12 X e) For a project located within an airport land use plan or, where such a plan has not been adopted, would the project expose people residing or working in the project area to excessive noise levels? 1 X f) For a project within the vicinity of a private airstrip, would the project expose people residing or working in the project area to excessive noise levels? 1 X g) Cause the average 24 hour noise level (Ldn) to increase by 5.0 decibels (dB) or more in an existing residential area, even if the Ldn would remain below 60 dB? 1 X h) Cause the Ldn to increase by 3.0 dB or more in an existing residential area, thereby causing the Ldn in the area to exceed 60 dB? 1 X i) Cause an increase of 3.0 dB or more in an existing residential area where the Ldn currently exceeds 60 dB? 1 X j) Result in indoor noise levels for residential development to exceed an Ldn of 45 dB? 1 X k) Result in instantaneous noise levels of greater than 50 dB in bedrooms or 55 dB in other rooms in areas with an exterior Ldn of 60 dB or greater? 1 X l) Generate construction noise exceeding the daytime background Leq at sensitive receptors by 10 dBA or more? 1,12 X Rail Corridor Study Page 24 Initial Study DISCUSSION: The Study and Vision Statement reflects the recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement would not result in any development. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for noise impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. All development, including construction activities, must comply with the City’s Noise Ordinance (PAMC Chapter 9.10), which restricts the timing and overall noise levels associated with construction activity. Short-term temporary construction that complies with the Noise Ordinance would result in impacts that are expected to be less than significant. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required M. POPULATION AND HOUSING Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Induce substantial population growth in an area, either directly (for example, by proposing new homes and businesses) or indirectly (for example, through extension of roads or other infrastructure)? 1 X b) Displace substantial numbers of existing housing, necessitating the construction of replacement housing elsewhere? 1 X c) Displace substantial numbers of people, necessitating the construction of replacement housing elsewhere? 1 X d) Create a substantial imbalance between employed residents and jobs? 1 X e) Cumulatively exceed regional or local population projections? 1 X DISCUSSION: The Study and Vision Statement reflects the recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and the Vision Statement as amended in the Comprehensive Plan would not result in any development. Future projects that are recommended in the approved Study that the City would seek to implement would be further reviewed for population and housing impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. The approval of the Study and adoption of the Vision Statement would not cause housing or population impacts. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Rail Corridor Study Page 25 Initial Study Mitigation Measures: None Required N. PUBLIC SERVICES Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact Would the project result in substantial adverse physical impacts associated with the provision of new or physically altered governmental facilities, need for new or physically altered governmental facilities, the construction of which could cause significant environmental impacts, in order to maintain acceptable service ratios, response times or other performance objectives for any of the public services: a) Fire protection? 1 X b) Police protection? 1 X c) Schools? 1 X d) Parks? 1 X e) Other public facilities? 1 X DISCUSSION: The approved Study and the Vision Statement amended in the Comprehensive Plan supports the recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement into the Comprehensive Plan would not result in any development. Future projects recommended in the approved Study that the City would seek to implement would be further reviewed for public safety impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. The approval of the Study and vision statement recommend projects to improve safety and would not cause public safety impacts. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required O. RECREATION Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Would the project increase the use of existing neighborhood and regional parks or other recreational facilities such that 1 X Rail Corridor Study Page 26 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact substantial physical deterioration of the facility would occur or be accelerated? b) Does the project include recreational facilities or require the construction or expansion of recreational facilities which might have an adverse physical effect on the environment? 1 X DISCUSSION: The Study and Vision Statement to be amended to the Comprehensive Plan supports the recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement would not result in any development. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for recreation impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. The approval of the Study and vision statement would not cause a population increase that would create recreation impacts. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required P. TRANSPORTATION AND TRAFFIC Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Exceed the capacity of the existing circulation system, based on an applicable measure of effectiveness (as designated in a general plan policy, ordinance, etc.), taking into account all relevant components of the circulation system, including but not limited to intersections, streets, highways and freeways, pedestrian and bicycle paths, and mass transit? 1,5 X b) Conflict with an applicable congestion management program, including but not limited to level of service standards and travel demand measures, or other standards established by the county congestion management agency for designated roads or highways? 1,5 X c) Result in change in air traffic patterns, including either an increase in traffic levels 1,5 X Rail Corridor Study Page 27 Initial Study or a change in location that results in substantial safety risks? d) Substantially increase hazards due to a design feature (e.g., sharp curves or dangerous intersections) or incompatible uses (e.g., farm equipment)? 1,5 X e) Result in inadequate emergency access? 1,5 X f) Result in inadequate parking capacity? 1,5 X g) Conflict with adopted policies, plans, or programs supporting alternative transportation (e.g., pedestrian, transit & bicycle facilities)? 1,2,5 X h) Cause a local (City of Palo Alto) intersection to deteriorate below Level of Service (LOS) D and cause an increase in the average stopped delay for the critical movements by four seconds or more and the critical volume/capacity ratio (V/C) value to increase by 0.01 or more? 1,5 X i) Cause a local intersection already operating at LOS E or F to deteriorate in the average stopped delay for the critical movements by four seconds or more? 1,5 X j) Cause a regional intersection to deteriorate from an LOS E or better to LOS F or cause critical movement delay at such an intersection already operating at LOS F to increase by four seconds or more and the critical V/C value to increase by 0.01 or more? 1,5 X k) Cause a freeway segment to operate at LOS F or contribute traffic in excess of 1% of segment capacity to a freeway segment already operating at LOS F? 1,5 X l) Cause any change in traffic that would increase the Traffic Infusion on Residential Environment (TIRE) index by 0.1 or more? 1,5 X m) Cause queuing impacts based on a comparative analysis between the design queue length and the available queue storage capacity? Queuing impacts include, but are not limited to, spillback queues at project access locations; queues at turn lanes at intersections that block through traffic; queues at lane drops; queues at one intersection that extend back to impact other intersections, and spillback queues on ramps. 1,5 X n) Impede the development or function of planned pedestrian or bicycle facilities? 1,5 X o) Impede the operation of a transit system as a result of congestion? 1,5 X p) Create an operational safety hazard? 1,5 X Rail Corridor Study Page 28 Initial Study DISCUSSION: The approval of the Rail Corridor Study and amendment of the Vision Statement to the Comprehensive Plan would not result in any development. The Study includes recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for transportation and traffic impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. The approval of the Study and amendment of the Vision Statement to the Comprehensive Plan would not cause traffic impacts. The Study recommends projects that would improve safety and reduce traffic congestion, while enhancing pedestrian and bicycle connectivity. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation: None Required Q. UTILITIES AND SERVICE SYSTEMS Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Exceed wastewater treatment requirements of the applicable Regional Water Quality Control Board? 1,5 X b) Require or result in the construction of new water or wastewater treatment facilities or expansion of existing facilities, the construction of which could cause significant environmental effects? 1,5 X c) Require or result in the construction of new storm water drainage facilities or expansion of existing facilities, the construction of which could cause significant environmental effects? 1,5 X d) Have sufficient water supplies available to serve the project from existing entitlements and resources, or are new or expanded entitlements needed? 1,5 X e) Result in a determination by the wastewater treatment provider which serves or may serve the project that it has inadequate capacity to serve the project’s projected demand in addition to the provider’s existing commitments? 1,5 X f) Be served by a landfill with sufficient permitted capacity to accommodate the project’s solid waste disposal needs? 1,5 X g) Comply with federal, state, and local statutes and regulations related to solid waste? 1,5 X h) Result in a substantial physical deterioration 1,5 X Rail Corridor Study Page 29 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact of a public facility due to increased use as a result of the project? DISCUSSION: The Study and amendment of the Vision Statement into the Comprehensive Plan includes recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and adoption of the Vision Statement into the Comprehensive Plan would not result in any development. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for utility and service system impacts, and would be subject to additional CEQA analysis. The Study area is located within a fully developed and/or previously disturbed area. No development is recommended within undeveloped areas that are not currently served by existing public services. The approval of the Study and amendment of the Vision Statement into the Comprehensive Plan would not cause utility and service system impacts. The subsequent projects that the City may implement based on the recommendations of the Study would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. Mitigation Measures: None Required R. MANDATORY FINDINGS OF SIGNIFICANCE Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact a) Does the project have the potential to degrade the quality of the environment, substantially reduce the habitat of a fish or wildlife species, cause a fish or wildlife population to drop below self-sustaining levels, threaten to eliminate a plant or animal community, reduce the number or restrict the range of a rare or endangered plant or animal or eliminate important examples of the major periods of California history or prehistory? 1,2,3,4,5,10 X b) Does the project have impacts that are individually limited, but cumulatively considerable? (“Cumulatively considerable” means that the incremental effects of a project are considerable when viewed in connection with the effects of past projects, the effects of other current projects, and the effects of probable future projects)? 1 X c) Does the project have environmental effects which will cause substantial adverse effects on human beings, either directly or 1,5 X Rail Corridor Study Page 30 Initial Study Issues and Supporting Information Resources Would the project: Sources Potentially Significant Issues Potentially Significant Unless Mitigation Incorporated Less Than Significant Impact No Impact indirectly? DISCUSSION: The Study and amendment of the Vision Statement into the Comprehensive Plan includes recommendations for future consideration of safety and connectivity/circulation improvements, future area studies and new Comprehensive Plan policies. The approval of the Rail Corridor Study and incorporation of the Vision Statement into the Comprehensive Plan would not result in any development. Future projects that are recommended in the Study that the City would seek to implement would be further reviewed for environmental impacts, and subject to additional CEQA analysis. The Study area is located within a fully developed and or previously disturbed area. The project does not have the potential to degrade the quality of the environment, substantially reduce the habitat of wildlife species, cause a fish or wildlife population to drop below self-sustaining levels, threaten to eliminate a plant or animal community, reduce the number or restrict the range of a rare or endangered plant or animal. The approval of the Study and Vision would not eliminate an important example of California History. The project does not have impacts that are individually limited, but cumulatively considerable, nor does it have substantial environmental effects which will cause substantial adverse effects on human beings either directly or indirectly. The project is located within a fully developed area and will not result in considerable effects to the environment, and therefore, would create less than significant impacts on the quality of the environment. The subsequent projects that the City may implement based on the recommendations of the Study and amendment of the Vision Statement to the Comprehensive Plan would be further reviewed for potential impacts, and additional CEQA analysis will be determined at that time. SOURCE REFERENCES 1. Project Planner’s knowledge of the site and the proposed project 2. Palo Alto Comprehensive Plan, 1998-2010 3. Palo Alto Municipal Code, Title 18 – Zoning Ordinance 4. Palo Alto Tree Technical Manual, Municipal Code Chapter 8.10.030, June 2001 5. Palo Alto Rail Corridor Study, May 2012 (www.paloaltorailcorridor.org) 6. Not used 7. Not used 8. Not used 9. California Environmental Quality Act Air Quality Guidelines, June 2010 10. Palo Alto Historic Resources Inventory 11. Alquist-Priolo Earthquake Fault Zoning Map 12. Palo Alto Municipal Code, Section 9.10-Noise Ordinance ATTACHMENTS A. Executive Summary from the Palo Alto Rail Corridor Study, May 2012 Rail Corridor Study Page 31 Initial Study DETERMINATION On the basis of this initial evaluation: I find that the proposed project COULD NOT have a significant effect on the environment, and a NEGATIVE DECLARATION will be prepared. X I find that although the proposed project could have a significant effect on the environment, there will not be a significant effect in this case because revisions in the project have been made by or agreed to by the project proponent. A MITIGATED NEGATIVE DECLARATION will be prepared. I find that the proposed project MAY have a significant effect on the environment, and an ENVIRONMENTAL IMPACT REPORT is required. I find that the proposed project MAY have a “potentially significant impact” or “potentially significant unless mitigated” impact on the environment, but at least one effect: 1) has been adequately analyzed in an earlier document pursuant to applicable legal standards, and 2) has been addressed by mitigation measures based on the earlier analysis as described on attached sheets. An ENVIRONMENTAL IMPACT REPORT is required, but it must analyze only the effects that remain to be addressed. I find that although the proposed project could have a significant effect on the environment, because all potentially significant effects (a) have been analyzed adequately in an earlier EIR or NEGATIVE DECLARATION pursuant to applicable standards, and (b) have been avoided or mitigated pursuant to that earlier EIR or NEGATIVE DECLARATION, including revisions or mitigation measures that are imposed upon the proposed project, nothing further is required. ___________________________________ _May 24, 2012_____________________ Project Planner Date ____________________________________________________________________________________________ City of Palo Alto Page 1 of 9 PLANNING & TRANSPORTATION DIVISION STAFF REPORT TO: PLANNING & TRANSPORTATION COMMISSION FROM: Elena Lee, Senior Planner DEPARTMENT: Planning and Community Environment AGENDA DATE: May 30, 2012 SUBJECT: Palo Alto Rail Corridor Study: Review and Recommendation to the City Council for the Palo Alto Rail Corridor Study Report. RECOMMENDATION: Staff recommends that the Planning and Transportation Commission (PTC) review and recommend that the City Council approve a resolution approving the Rail Corridor Study Report (Report) and incorporating the Vision Statement into the Comprehensive Plan Transportation Element. BACKGROUND AND PURPOSE: The City Council initiated the Palo Alto Rail Corridor Study to evaluate land use, transportation and urban design elements of the rail corridor, particularly in response to potential improvements to fixed rail services along the Caltrain tracks. Those improvements may include any or all of the following: Caltrain upgrades, such as electrification and/or grade separations, and/or High Speed Rail service. Although the High Speed Rail project provides important context, it was not intended to be the focus of this study. The rail corridor is a significant physical component of Palo Alto. It is still unknown at this point what the future holds for either High Speed Rail or Caltrain. The intent of the process was to generate a community vision that would provide land use and transportation policies to guide development under a variety of scenarios, allowing Palo Alto to be proactive to changes to the rail system. The Report will guide staff and the City as decisions are made regarding land use and transportation improvements, such as private development and the Capital Improvement Program. Following the Rail Corridor Study Task Force (Task Force) recommendation on the Report, and given the public feedback from the two community workshops, the revised study is presented for a formal recommendation. The Report includes revisions to reflect comments from the Task ____________________________________________________________________________________________ City of Palo Alto Page 2 of 9 Force, the PTC, the Architectural Review Board (ARB), the City Council Rail Committee, various City Board/Committee liaisons and the public. Staff has also coordinated with Caltrain staff on this project. Once the Study is approved by City Council, the next step will be to incorporate the Study as a whole into the Comprehensive Plan by reference. The five goals and related policies would be integrated into the Comprehensive Plan as part of the on-going Amendment. The boundaries of the corridor include the area between Alma Street on the east to El Camino Real on the west, from the Menlo Park city limits on the north to the Mountain View city limits on the south, as shown in the Report (Attachment B and available online at www.paloaltorailcorridor.org). The study area also includes sufficient adjacent land to encompass those areas most directly affected by potential land use, transportation and urban design changes. The plan and implementation measures is proposed to be ultimately be incorporated into the City’s Comprehensive Plan by reference and the Comprehensive Plan goals and policies are proposed to be incorporated directly into the document. Rail Corridor Study Task Force The Rail Corridor Study Report is a direct outcome of the discussions and work of the City Council authorized Task Force for the Rail Corridor Study with City staff and the consultant, BMS Design Group (BMS). This report represents the consensus of the Task Force as whole, as an outcome of fifteen meetings. Through the Task Force meetings and community workshops, staff has also received detailed feedback on the draft report from the public. The Task Force members also acted as a conduit and a voice for their specific stakeholder groups and for other interested members of the public. The public process also included the input from liaisons of various City boards and commissions to represent their respective groups, including the PTC, the ARB, Utilities Advisory Commission (UAC), the Historic Resources Board (HRB) and the Palo Alto Bicycle Advisory Committee (PABAC). At the final Task Force meeting on May 1, 2012, the Task Force voted to recommend that the City Council approve the Report, including the Implementation Chapter. Rail Corridor Study Area Tour A study area tour was held on September 10, 2011. A majority of the Task Force and interested members of the public participated in the four hour tour. The tour included a bus tour of the entire length and walk throughs of specific areas within the corridor. The tour provided an opportunity for the Task Force members to view the study area together and to get familiar with areas that they were not as familiar with. Some highlights of the tour included the South of Forest Area, the Homer tunnel, California Avenue, the Churchill Avenue train crossing area, the intersection of El Camino Real and Charleston Road and the recently developed residential projects in South Palo Alto. The tour enabled the Task Force members to better understand the perspectives from the various areas of the City, especially where crossings are proposed. Rail Corridor Study Process The Rail Corridor Study is a three part process that began in late 2010. Following the City Council decision on the report, the report and any identified changes would be incorporated into and referenced in the Comprehensive Plan Amendment process as appropriate. The phases consist of the following: ____________________________________________________________________________________________ City of Palo Alto Page 3 of 9 1. Phase I, “Context and Vision”. Establish the background and context for the rail corridor in order to begin developing a preferred vision. 2. Phase II, “Alternatives and Analysis”. Develop and analyze the preferred alternatives. 3. Phase III, “Plan Preparation”. Prepare the Report, obtain feedback and refine alternatives. Now completing Phase III, staff and the consultant will continue to obtain feedback and refine the alternatives given final input from the ARB, Commission, Council and the public. Palo Alto Bicycle Advisory Committee and City/School Traffic Safety Committee Joint Meeting A joint meeting with representatives of PABAC and the City/School Traffic Safety Committee (CSTSC) was held on February 16, 2012. The purpose of the meeting was to solicit input the stakeholders’ input on this report. The participants were generally supportive of the work that had been done. Barb Mitchell, the Palo Alto Unified School District Task Force member also was in attendance. Some of the main comments raised at the meeting for follow up include:  Encouraging trenching across the entire City  Improving safety for bicyclists and pedestrians.  Encouraging grade separated crossings for bicyclists and pedestrians.  Improving safety of school children. City Council Rail Committee The Rail Corridor Study was the subject of three meetings before the City Council Rail Committee. A brief update was provided on January 26th, 2012. On March 1, 2012, the first draft of the Rail Corridor Study Report was presented for their review and comments. The March 1st meeting was also attended by four members of the Rail Corridor Study Task Force. The primary comment received was a request to make the references to the future of the rail line more general because the future of the High Speed Rail and Caltrain Electrification projects is so unknown and continues to change. The requested change would allow the Report to have greater flexibility and to be used in a variety of scenarios, similar to the other long range City policy documents. The item was continued to give the Committee more time to provide comments. On April 26, 2012, the Committee met and provided final comments. Staff and BMS informed the Committee that various changes had been made to the document in response to their feedback and subsequent comments from the Task Force, the Planning and Transportation Commission, the Architectural Review Board and the public. It was emphasized that the report was crafted to be consistent with the City’s position on the High Speed Rail project and the City Council Rail Committee Guiding Principles. The document was also revised so that it would be as flexible as possible to provide a longer horizon to better respond to the rapidly changing High Speed Rail and Caltrain Electrification projects. The Committee was appreciative of the work completed for the project and generally supportive of the document. Community Workshop A second Community Workshop was held on March 29, 2012 at the Lucie Stern Community Center, Community Room. The first Community Workshop was held on May 19, 2011 also at the Lucie Stern Community Room. In order to encourage a greater attendance of this workshop, ____________________________________________________________________________________________ City of Palo Alto Page 4 of 9 notice cards were mailed out to all property owners and occupants within 600 feet of the rail corridor study area for over 7,000 notice cards. A notice was also published in the Palo Alto Weekly. Staff requested the Task Force members to publicize the meeting and encourage that their neighbors attend the meeting. Announcements of the workshop were also posted at City Hall, the libraries, Lucie Stern and on the City’s websites well in advance of the meeting. In addition, staff sent notices to various merchants and posted announcements on the City’s social network pages. The public outreach drive was successful. Most of the 50 attendees had not previously attended the workshop. There was also a representation of the various parts of Palo Alto, with more than half from residents of South Palo Alto. The community members were generally appreciative and supportive of the report. A few key issues were raised, including safety for children, pedestrians and bicyclists, treatment of all neighborhoods fairly, protecting schools from rail impacts. Some members of the public stated that although additional pedestrian and bicycle crossings were desired, additional vehicular crossings were not. PTC and ARB Hearings The Rail Corridor Study Report was distributed to both the Planning and Transportation Commission and Architectural Review Board for their comments. A study session before the Commission was held on March 14th. The Commission expressed support for the document and provided comments and direction to staff and the consultant. Some of the more important comments included:  Have clear, bold vision statements.  Provide measurable improvements and implementation steps.  Be careful with language to avoid commitment to impractical goals/actions.  Include language to prevent narrowing of Alma Street.  Discuss open space opportunities.  Discuss land use opportunities above trench and alternate ways of designing trench cover.  Make City Council Rail Committee Guiding Principles more prominent, including incorporating Guiding Principal 3 (equal consideration for all neighborhoods affected by the rail) into the Study’s Goal 1.  Support for proposal of future area plans, similar to Concept Plans.  Need stronger urban design component, especially for Alma Street and rail right of way. An Architectural Review Board Study Session was held the next day on March 15. The ARB was also supportive of the document and expressed a desire to confirm that this effort would be incorporated and not ignored. The ARB had similar comments to the PTC. The comments included:  Appreciated key stone discussion.  Need to consider impact on high school.  Concerned about trenching roadways rather than train, but should be studied.  Great opportunity to improve pedestrian and bike friendly, especially along tracks.  Should study potential crossings for pedestrians and bikes, not just for vehicles.  Move new Comprehensive Plan policies to front.  Clarify what City’s position and reasons regarding rail improvements ____________________________________________________________________________________________ City of Palo Alto Page 5 of 9  Would like more studies of various scenarios.  Would like vision statement for Alma Street.  Report should be clear what benefits the City.  Implementation plan is very important component. A formal hearing requesting the ARB’s recommendation is scheduled to be held on May 24th. Staff will provide a summary of the outcome of the hearing at the Commission hearing. DISCUSSION: Draft Rail Corridor Study Report The vision of the project, developed with the Task Force and stated in the Report, is to “create a vibrant, transit-rich area with mixed use city and neighborhood centers that provide walkable, pedestrian and bicycle-friendly places that serve the community and beyond, and to connect the east and west portions of the City through an improved circulation network that binds the city together in all directions.” The purpose of this document is to generate a community vision for land use, transportation and urban design along the Caltrain corridor. The areas that make up the Rail Corridor have been historically viewed as separate disconnected areas. The Report attempts to look at the entire corridor as an interconnected sub-area within the City. This represents challenges because of the diversity of the various components that make up the corridor and the sheer size of the 1,000 acres that comprise it. The intent is also not to analyze in detail the various impacts of the various rail alternatives, such as noise and air quality. The study was also not intended to provide detailed traffic impact analysis. This type of analysis is beyond the scope and resources of this study. BMS will provide a detailed presentation of the Report at the hearing. The Report is divided into seven detailed sections:  Executive Summary  Introduction  Background  Issues and Vision  Circulation and Connectivity  Land Use and Urban Design  Implementation and Next Steps Five overall themes developed that became particularly important to the Task Force and the success of this report as a guiding document. Those themes are: 1. East-west connectivity must be improved and barriers should be removed. 2. A trench system is the preferred alternative if High Speed Rail is approved (although this was not unanimous) 3. All residential neighborhoods must be protected and treated equally. 4. New development requires timely infrastructure improvement. 5. The highest possible level of safety must be ensured at all rail crossings. ____________________________________________________________________________________________ City of Palo Alto Page 6 of 9 Revisions to Report The most recent City Council position on the High Speed Rail (HSR) project was to oppose it in any form, although there is some support for the blended two-track Caltrain/HSR project. Because this is not a technical study or a feasibility study, the decision was made to focus on two rail configurations that would capture the range of issues that could occur under any of the various alternatives being discussed by the State in order to allow this study to be flexible and able to address multiple scenarios. Those two options are:  Trench  Below-grade two-track on-grade These two options encompass the conditions that would occur with all the other variations of the rail projects that have been discussed. Following the various hearings, public meetings and the second community workshop, the Report was revised to clarify that the City’s preference is for the trench option only. Various revisions have been made to the report subsequent to the March PTC hearing to address the comments and concerns raised during the public process. The major changes include: Circulation and Connectivity Chapter:  Expanded the Alma Street discussion to address more issues and opportunities.  Emphasized the importance of maintaining traffic capacity of Alma, which would be impossible if Alma Street was narrowed.  Created a concept diagram for Alma Street, similar to the one created for El Camino Real.  Incorporated a Corridor-wide design principles and specific improvement recommendations throughout.  Discussed connection opportunities along the rail corridor. Opportunities include incorporation of green spaces and other treatments to benefit the City and its occupants either above a covered trench or along the rail corridor. Implementation Chapter:  Revised goals and policies in the Implementation Chapter to be more consistent with the format of the Comprehensive Plan  Added ball park cost estimates for the Tier 1 Priority Improvements  Recommended detailed area studies, similar to the California Avenue Concept Plan for the Downtown/University Mixed Use City Center and the South Palo Alto Neighborhood Mixed Use Center.  Recommended a Transportation and Public Improvements Plan for Alma Street. Although the rail projects are still pending, it was discussed that improvements along the right of way could be started and implemented.  Recommended a Rail Corridor/Alma Street Crossings Improvements Study and Engineering Studies. All efforts should be coordinated with any rail improvement projects. ____________________________________________________________________________________________ City of Palo Alto Page 7 of 9 Comprehensive Plan Goals and Policies One of the important components of the implementation of this report is the recommendation of new policies for the Comprehensive Plan. Much of the elements of the study are consistent with goals, policies and programs in the existing Comprehensive Plan. Five new goals were identified in the Study to be incorporated into the Comprehensive Plan as part of the overall Amendment process to further the goals of the Study. As discussed above, the goals have been modified to respond to comments and to make them more consistent with existing Comprehensive Plan policies. The goals have been endorsed by the Task Force. However, there were some task force members, as well as some members of the public, who supported an at-grade rail system and voted to rewrite Goal 1 to allow it. Goal 1: Rail improvements should be constructed in a below-grade trench. Policy 1.1: The City’s preferred vertical alignment for fixed rail in Palo Alto is below grade. The City is opposed to an elevated alignment of HSR/Caltrain in Palo Alto. Goal 2: Ensure the highest possible safety at all rail crossings and mitigate rail impacts on neighborhoods, public facilities, schools and mixed-use centers. Policy 2.1: Improve existing at-grade crossing. All at-grade crossings of the Caltrain corridor should be improved to provide the highest possible level of safety and convenience. This may be grade separations or safer at-grade crossings, with the preferred choice generally being grade separation. Policy 2.2: Provide additional safe and convenient crossings. Additional crossings of the tracks, and in some cases Alma Street as well, are essential to provide connections from neighborhoods to destinations such as schools, parks and services. Policy 2.3: Improve safety and minimize noise, vibrations and visual impacts of operations in the Caltrain rail corridor. With or without the addition of High Speed Train, the Caltrain corridor should be modified to improve safety and to minimize future noise, vibration and visual impacts on adjoining districts and neighborhood. Goal 3: Connect the east and west portions of the City through an improved circulation network that binds the City together in all directions. Policy 3.1: Seek to increase the number of east-west pedestrian and bicycle crossings along Alma Street, particularly south of Oregon expressway. Goal 4: Provide improved access to parks and recreation facilities and schools and assess future needs for these facilities. Policy 4.1: Enhance connections to parks, community centers, libraries and schools within the corridor or between the corridor and nearby facilities. Opportunities to increase school capacity and facility development and use should be evaluated and coordinated between the Palo Alto Unified School District and the City. ____________________________________________________________________________________________ City of Palo Alto Page 8 of 9 Goal 5: Infrastructure should keep pace with development. Policy 5.1: Implement plans and coordinate with other agencies where required for parks, recreation and traffic improvements, as well as new or expanded schools in order to keep pace with new development. Sewer, water, storm drainage and wastewater management should be evaluated and implemented in conjunction with development. Next Steps The next step will be to bring the PTC’s recommendation and the Report to the City Council for their formal decision whether to adopt a Resolution to approve the Rail Corridor Study. The draft resolution will be provided via email prior to the May 30th hearing and at places. Should the resolution be approved, the Report would be immediately incorporated into the Comprehensive Plan by reference and the five Comprehensive Plan goals/policies would be included as part of the Comprehensive Plan Update process, as well as the associated Environmental Impact Report. POLICY IMPLICATIONS: The Report will rely on the City’s Comprehensive Plan and other land use transportation policies to guide the effort for the corridor. The Report is consistent with the current Comprehensive Plan, as shown in the Comprehensive Plan Policies and Program Assessment Table on page 6.14 for the Study. Current Comprehensive Plan and area plan efforts, including the Bicycle and Pedestrian Plan update, would be considered in conjunction with the Rail Corridor Study. The Vision Statement of the Report would be immediately be amended to Program T1 in the Transportation Element. The new Comprehensive Plan Goals and Policies and other program recommendations would be part of the Comprehensive Plan Update and/or subsequent studies. ENVIRONMENTAL REVIEW: CEQA review for the clearance for Rail Corridor Study is in progress and will be completed prior to the City Council hearing in June. A Negative Declaration (ND) pursuant to the California Environmental Quality Act (CEQA) is anticipated. Additional environmental review for individual projects may also be required as those projects are more fully developed for implementation. In addition, CEQA review for the Next Steps and Implementation section will be conducted in conjunction with the Comprehensive Plan Update. Staff expects Council review of the Draft Comprehensive Plan in the fall of 2012 and review of the EIR and Final Comprehensive Plan in the spring of 2013. PUBLIC OUTREACH: To solicit public feedback, a website and email address has been established for the project. Notices for all meetings are posted on the City’s website in the Know zone (http://www.cityofpaloalto.org/knowzone/agendas/rail_corridor_task_force.asp) and the City Hall Notice Board. Additional background information is also provided on the webpage. Staff has been maintaining an email distribution list of interested individuals and has used the list to send out meeting notices and updates. An email address, railcorridorstudy@cityofpaloalto.org, has been established for public outreach purposes. A separate detailed website, ____________________________________________________________________________________________ City of Palo Alto Page 9 of 9 www.paloaltorailcorridor.org, has been made available to provide as much information as possible for the public, similar to the one developed for the Comprehensive Plan Amendment. The Task Force meetings are also recorded and available for viewing at the Community Media Center website. The Draft report has been made available for public review on the project website, City Hall, the Development Center and all four public libraries during the process. ATTACHMENTS: A. Draft Palo Alto Rail Corridor Study Report (PTC only. Also available online at www.paloaltorailcorridor.org.) B. City Council Rail Committee Guiding Principles C. March 14, 2012 Planning and Transportation Commission Staff Report and Excerpt Minutes D. Public Correspondence COURTESY COPIES: BMS Design Group Rail Corridor Study Task Force Prepared by: Elena Lee, Senior Planner Department/Division Head Approval: Amy French, Acting Assistant Director Page 1 Planning and Transportation Commission 1 Verbatim Minutes 2 May 30, 2012 3 4 Rail Corridor Study Report: Review and Recommendation to the City Council for the Palo 5 Alto Rail Corridor Study Report. 6 7 Chair Martinez: Item 2 is a public hearing on the Rail Corridor Study Report or consideration of 8 a resolution and recommendation of this resolution to the Council for approval. We will start 9 with the Staff Report. 10 11 Elena Lee, Senior Planner: Thank you Chair Martinez and Commissioners. We are returning to 12 you today to request a formal Commission recommendation on the Report. Staff recommends 13 the Commission recommend the Council to approve the negative declaration and resolution 14 approving the Rail Corridor Study Report and to incorporate the Vision Statement and the 15 recommendations for future area improvement studies in greater connectivity into the 16 transportation element of the Comprehensive Plan. Subsequent to the distribution of this report, 17 the Commission was given via e-mail and at places copy of the resolution and the draft negative 18 declaration that was prepared and circulated for this project in conformance with the California 19 Environmental Quality Act (CEQA). 20 21 Also at places is an e-mail from Beth Bunnenberg, the liaison for the Historic Resources Board 22 expressing her support for the project. Your packet also includes an e-mail from Martin 23 Summer, a Task Force Member with a request for minor revisions including the order and 24 changing Goal 1 to state “the future vertical rail improvements should be constructed in a below 25 grade trench.” Goal 1 currently states that “rail improvements should be constructed in a below 26 grade trench” and was the subject of debate with the Task Force. 27 28 The purpose of tonight’s resolution is for the Commission to make a decision on the Study itself. 29 As a policy document their report identifies recommendations for priorities and the Vision 30 Statement. The Report recommends future actions. It lays down the groundwork or framework 31 to help the City make future decisions regarding implementing the recommended policies and 32 goals identified in the Study. The Commission is being requested to confirm support for the 33 Study. 34 35 The accompanying resolution includes specific policy and programs that would formalize the 36 City’s position on the Report, which enables the City to site the Report as a binding document. 37 The resolution would state the Report was approved to provide policies, that the Vision 38 Statement represents the City’s polices and support for the electrification of Caltrain and that the 39 City would evaluate recommendations in future area improvement studies. The 40 recommendations identify priority improvement projects for safety and connectivity as well as 41 new Comprehensive Plan polices. These are recommendations. The purpose of the document is 42 to identify these as future efforts. The new policies if the study is approved would be 43 incorporated into the Comprehensive Plan update similar to other work that has already begun on 44 the update process that the Commission has been involved with. Other future projects would be 45 the part of future area studies, development projects, and the Capital Improvement Program 46 Page 2 (CIP). All these future projects would be subject to future CEQA process including the 1 Environmental Impact Report (EIR) which is being prepared for the Comprehensive Plan update. 2 That document is anticipated to start work this summer and would be brought back to the 3 Commission for hearing in summer of 2013 along with the Comprehensive Plan Update. 4 5 This Report is the outcome of a nearly two year effort by Staff, BMS Design Group and the 6 Citizen Task Force to study and develop land use and transportation policies for areas along the 7 Rail Corridor. The intent as defined by Council is to generate a community vision for land use, 8 transportation, and urban design opportunities along the Corridor in conjunction with and apart 9 from the various projects. 10 11 Subsequent to the Commission hearing in March, a second community workshop was held to 12 solicit feedback from the public. Staff implemented significant public outreach. We requested 13 the Task Force Members to encourage their fellow stakeholders to attend, sent multiple e-mail 14 announcements, posted flyers at City Hall and all four libraries, sent postcards to residents and 15 occupants within 600 feet of the Corridor for over 7,000 postcards. We’ve also posted meeting 16 notices on the City’s website including social network pages. We also provided the poster for 17 the meeting to local business owners to post in their businesses. As a result the workshop was 18 well attended with approximately over 50 new people along with Task Force Members and some 19 other interested people. BMS would provide a summary of the workshop following Staff’s 20 presentation. The attendees represented various stakeholders of the City including both North 21 and South Palo Alto. 22 23 A final Task Force Meeting was held on May 2nd for their final recommendation. The Report 24 was updated following various meetings and hearings to respond to comments from the public, 25 the Commission, the Architectural Review Board (ARB), as well as City, the City Council Rail 26 Committee. BMS will provide a summary of the changes. 27 28 One of the key outcomes of the process has been an acknowledgement that concerns of both 29 North and South Palo Alto have to be equally addressed throughout this project as we move 30 forward. The changes in the Report include more discussions on urban design, treatment of the 31 corridor, and clarification on the City’s position on the various rail projects. Following an in 32 depth discussion the Task Force voted to recommend approval of the document. However, 33 during the discussion the modifications to Goal 1 regarding the alignment of the high speed rail, 34 not all members supported saying that trench was the only preferred alternative. This was a 35 subject of multiple debates. 36 37 On May 24th an ARB meeting was held on the project. The ARB voted to recommend approval 38 of the document and adoption of the Vision Statement. Judith Wasserman, Chair of the ARB is 39 here tonight to speak about the meeting. BMS will also provide a short summary on the meeting. 40 The ARB did recommend one change, and that was to include the word “safety” into the Vision 41 Statement. Once the Commission makes a recommendation the next step is a Council hearing 42 which has been scheduled for June 25th for their final decision. 43 44 There are also several Task Force Members and Liaisons in the audience. Staff invites them to 45 speak on the process. We’d like to express our appreciation for their hard work throughout this 46 Page 3 process and the large amount of time they have devoted to this. Following this BMS will make 1 their presentation. Both Staff and the consultants are available to answer questions. 2 3 Michael Smiley, BMS Design Group Consultant: Chair Martinez and members of the 4 Commission thank you for having us back again. My name is Michael Smiley, I’m a partner 5 with the firm of BMS Design Group. We are urban designers. With me here this evening also is 6 Paige Martin. So we’ll be jointly, I’ll be handling a short presentation and then jointly we’ll be 7 answering any questions you may have. 8 9 What I am going to do is, this is of course a rather lengthy document and hopefully maybe you 10 had a chance to read it twice now. But I’m going to run through essentially where we’ve been 11 since the last time we saw you and essentially what some of the changes are rather than the full 12 content of the report. 13 14 Since we were here the last time which was on March 14th, you see on this list of meetings, 15 we’ve been through a whole series of additional meetings. We’ve met with the ARB twice now. 16 The first time was the day following our meeting with you. We’ve also held Community 17 Workshop Two. There have been meetings with the Rail Committee and then as Elena 18 mentioned we had a final Task Force meeting #15. 19 20 And on that particular item I’d like to just say that, express our appreciation to the Task Force. 21 Fifteen meetings they did yeoman’s effort. That’s a lot of meetings. That’s a lot of work. We 22 also went out and walked the site on a Saturday one day. This long Corridor we walked large 23 portions of it and we bused other portions. They’ve been a great committee to work with, it’s 24 made our work as consultants and pulling this all together it’s made our work, probably one of 25 the better professional experiences I’ve had working with a committee because they really did 26 coalesce into a group where we had a lot of different opinions but we were able to kind of 27 through a process come together with a lot of recommendations that there was general 28 unanimity. 29 30 Next slide, please. Now just a few words on the Community Workshop, there was a very good 31 attendance at the Community Workshop. I mean 50 people we, we would’ve needed a bigger 32 room to handle any more. It was completely at capacity in the room and those were community 33 attendees and did not include Staff or consultants. Generally speaking, while the meeting was 34 handled a presentation of the findings of the Task Force and then there were boards and panels 35 and so on around the wall for people to review and make comments. The, generally speaking the 36 sense of the meeting, the tone of the meeting there was broad general support for the 37 recommendations of the Task Force. In fact there were few additional comments that really 38 differed from what the Task Force had to say, they tended to be more refinements and so on and 39 added input of things that were already in the Task Force recommendations. 40 41 I think the key thing we came away from this with that was really most important is that we were 42 able to prioritize a set of recommendations through the community process. And that middle 43 slide, I know it’s very difficult to read but in the corner there is a panel and if you squint your 44 eyes you can see a set of dots. We used a dot exercise. Next slide. And essentially each 45 participant was given eight dots and there were 27 subjects that they could place their dots 46 Page 4 against. They ranged everything from rail crossings to El Camino crossings and a variety of 1 other types of improvements. Here you see the top three vote getters in some of these categories 2 related say to the Rail/Alma Street Crossing Improvements, the El Camino Real Intersection 3 Improvements, some of the top vote getters. 4 5 Now this is not a scientific survey obviously, people could put down three dots. They weren’t 6 limited to say you could only put one dot. So they could stack the deck if they so chose. We 7 don’t know if that happened. But for instance what you see in the rail crossings, I think this is 8 not new news. You’ve heard it for years and we heard it all 15 meetings with the Task Force and 9 lengthy conversations. Concern over those three crossings in particular out of 50 people there’s 10 50 votes. And again that doesn’t necessarily mean every person, but a very high vote getter. 11 12 Next slide. Also other intersection improvements that also received high number of dots in the 13 voting exercise and then a few other additional pedestrian/bicycle crossings, the California 14 Avenue refers to improving the existing crossing that’s there today. The additional southern 15 undercrossing relates to the need and the desire, particularly in the South to provide an additional 16 crossing at the tracks, but of course we know there’s a land use constraint there that’s caused by 17 the fact that we have a lot of single family homes all along the tracks. It’s not so much a rail 18 issue; it’s a land use issue. And so the Report as you know recommends that further study be 19 taken to help define some additional locations where that might happen. Next. 20 21 The final Report revisions there’s basically six categories if you like as a result of all those 22 meetings. It includes the input received from you and the input we’ve received from the other 23 meetings and the community meeting. And those include expanded Alma Street 24 recommendations, and that includes recommendations related to setting some design principles 25 for Alma Street. The preferred vertical alignment of the rail was clarified as Elena mentioned, 26 although it wasn’t 100% unanimous it was the majority of the Task Force agreed with that 27 clarification. The Comprehensive Plan policy recommendation that you saw before have been 28 modified slightly. Priority projects were revised slightly from what you saw before. Next Steps, 29 a whole new chapter was added or a whole subsection was added on Next Steps to the 30 Implementation Chapter. There were slight revisions to the appendices. 31 32 So let’s touch on each of these. The Alma Street recommendations included as I mentioned, 33 expanded text which really clarifies the issues and opportunities related to Alma. And then in 34 addition to a concept diagram there are some specific recommendations or broad principles 35 related to functional aesthetic improvements. Some of that is a response directly to some of the 36 things you said here in wanting to set some more clear principles related to what Alma could and 37 might be. And also identifying the key quarter segments, and related to Alma then a specific 38 recommendation for a type of study that should be done for transportation and public 39 improvements along the Alma Corridor. Next. 40 41 Regarding the Comprehensive Plan Goals and Policy Statements, what you saw before had four 42 Goals and their subtext Policy Statements. Goal 1, which essentially combined the statement 43 about the rail vertical alignment, was combined with the Goal 2, of insuring highest safety. And 44 those two were split into two separate goals at this point. And part of the reason for that was that 45 there was a feeling, there was a split as Elena mentioned among the Task Force Members about 46 Page 5 whether the Goal 1 even really needed to be said. That the Report itself stands in terms of the 1 various recommendations and so on and because we don’t really know what rail configuration is 2 coming the goals and recommendations of the Report would apply regardless of what the trench 3 configuration would be. However, there were some that felt that it was important to make the 4 statement about the preference for below grade trench because that’s consistent with existing 5 City, at least City Council statements. The Goal 2 is really the most important in some ways. 6 It’s certainly a very important one and the Task Force felt very strongly about this safety at the 7 rail crossings issue. Next slide. 8 9 I mentioned that there was a whole new subsection added to the Implementation Chapter, these 10 are the topics that are in that. It touches on the Comprehensive Plan, policy modifications, it 11 mentions specific, these are some early action things that will happen right now. The input to the 12 California Avenue concept plan process that’s going on now, which this plan can provide. It also 13 discusses the need to, or the next step, to actually prepare some detailed area plan studies. 14 Similar to the California Avenue area study that’s going on now, in the North, in the mixed use 15 area that’s been defined, and in the South, Palo Alto area around the triangle which these other 16 two mixed use centers and the need to move into some more detailed studies in those locations. 17 18 As you know, there are some specific, what we call keystone block areas that are, that in this 19 study recommend those as prime opportunity areas for looking into. The Alma Street 20 Transportation and Public Improvements Plan I mentioned to you already now, and then I also 21 mentioned the third from the bottom Rail Corridor Alma Street Crossing opportunities. This 22 would be looking for locations, particularly in the South where some additional opportunities 23 could be created. And then finally, input to the Engineering Studies this would be input to 24 Engineering Studies that actually others are doing, Caltrain, High Speed Rail Joint Powers 25 Authority and so on. And then finally to continue the work that’s been done with the Stanford 26 intersection, Stanford Avenue intersection and consider, continue with the El Camino Real 27 intersection and improvements. Next. 28 29 The priority projects were confirmed by the Task Force with one modification and that was to 30 move the, what was a tier 3 priority of investigating these southern crossings, moving it up to a 31 tier 2 priority. Next slide. 32 33 And then finally there were some minor modifications to the Appendices, essentially 34 clarifications of the four rail alternatives that are already being evaluated and some additional 35 explanation related to the Guiding Principles of the Rail Committee. Next. 36 37 The ARB at their hearing on the 24th last week formally recommended approval of the, of this 38 document. Similar to the kind of approval you’re being asked to give tonight with one 39 amendment that would actually in the Vision Statement add the word “safe” to the Vision 40 Statement. There were some other comments; I would call those minor comments that can be 41 incorporated into the Report. Generally there was unanimous support for the Report and 42 findings. But the third bullet you see there a few miscellaneous specific comments. And one of 43 the, I would say that there was a broad feeling and this being the design review board I think was 44 very appropriate to consider the attractiveness of the design of infrastructure. We’re talking 45 about some big infrastructure projects here and their aesthetic character is as important as there 46 Page 6 vertical alignment. And maybe there can be some language about that in this Report, and related 1 to that, the incorporation of public art, particularly in the public infrastructure, and public spaces, 2 and public projects. There was also a very important word “follow through” that means there’s 3 an intense desire to see this not sit on a shelf. It was expressed many times not just like any other 4 report, we’d like to see this, some of this get done. And that’s where the Next Steps and some of 5 these policy documents become very important. Next. 6 7 So here you see it’s the Vision Statement that’s in the Report, it’s always been in the Report. 8 Here is the change with the word “safe” added, “to create a vibrant, safe, attractive transit rich 9 area within the City,” and I won’t read through the whole thing. But, it’s the Vision Statement 10 for the entire corridor. Next. 11 12 So this is my last slide. Just to repeat the Staff recommendation to you is seeking that you 13 review and recommend to the City Council that the Council approve a resolution approving the 14 Light Rail Corridor Study and incorporating the Vision Statement and the Report. Essentially it 15 becomes a component of the Transportation Element of the Comprehensive Plan. Thank you, so 16 we will be available for questions and any of your comments. 17 18 Chair Martinez: Thank you Michael. I’d like to before we open up to the public to give the Chair 19 of the ARB a chance to comment because she said that she isn’t going to be able to stay long. 20 For her? 21 22 Judith Wasserman, Chair of the ARB: Thank you Chair Martinez. 23 24 Chair Martinez: Excuse me Judith, and anyone else that cares to speak you still have an 25 opportunity to submit a speaker card. Thank you, dear Judith. 26 27 Ms. Wasserman: Thank you Chair Martinez, I’m Judith Wasserman Chair of the ARB. And 28 thank you for inviting me to your meeting. Greetings Commissioners. We welcome this Rail 29 Corridor Study for a number of reasons. It’s not the first time that the Corridor has been looked 30 at but this is the first time it’s been looked at I think in such a broad way and I mean that 31 geographically. That it did not simply look at the train tracks, but it looked at the City from 32 Alma Street to El Camino on both sides. And by doing so it gave the City an opportunity to 33 examine what has been sort of put together haphazardly over the years. 34 35 If High Speed Rail has done any good, and so far in is process it has that it, it has been that it’s 36 called attention to this major asset in the community, which is also a major obstacle. And when 37 we had our design workshop three years ago we called it “Together Again for the First Time,” 38 because this is a chance for us to knit our community together across the east and west direction. 39 I mean we can go north and south, you know, rather easily on any number of large streets, but 40 getting across the train tracks on Alma Street and El Camino is kind of a hard job. So, one of the 41 things that we really liked about the Rail Corridor Study was that it gave us an excellent 42 framework for urban design examination of this area, you know, from boarder to boarder in the 43 City. We liked the way it structured the divisions. The El Camino design guidelines do that a 44 little bit but they don’t do it as well as this Study does it and in fact I thought it was interesting 45 that Commissioner Fineberg brought up the El Camino design guidelines because we have 46 Page 7 intention to reexamine them. They are not working as well as they should. They work in some 1 ways; they don’t work in other ways. There are different land uses, works well for some land 2 uses and not for others, and so by using this structure of the divisions of the areas we can 3 examine the guidelines in a better way. 4 5 The other thing that I felt was very important about the Study was the instruction from the 6 Council to look at the Rail Corridor with or without the rail. Because it’s gonna be here with or 7 without the rail. And we’re gonna have to deal with the grade crossings with the Caltrain 8 upgrades whether we have high speed trains or not. And this Study gives us a framework in 9 which to do that as well. And I think that’s probably the most important single item in the Rail 10 Corridor Study is to, is dealing with the grade crossings because that’s become a real, you know, 11 life safety issue in town. If we can’t deal with our life safety issues what can we deal with? So I 12 enjoin you all to examine it carefully and join us in supporting this Study and recommending it 13 to the Council. Thank you. If you have any questions I’ll be happy to answer them, but I can’t 14 stay for long. 15 16 Chair Martinez: Thank you very much Judith. Just before we open the public hearing, I’d like to 17 hear from our City Attorney on the resolution and sort of what is it meant to achieve? 18 19 Cara Silver, Senior Assistant City Attorney: Thank you Chair Martinez. Cara Silver, Senior 20 Assistant City Attorney. The resolution that was prepared attempts to incorporate some of the 21 comments that we received back from the Planning & Transportation Commission last time, 22 which was that the Commission wanted the document to have some sort of regulatory teeth. And 23 so, the way we accomplished that is to incorporate some of the major principles of this Study 24 particularly the vision statement and some of the overriding principles into particular aspects of 25 the Comprehensive Plan. And there are also some pieces of the Study that we do anticipate will 26 be flushed out later on down the road and those will be analyzed separately and will be 27 incorporated, some of them will be incorporated as polices, new polices in the Comprehensive 28 Plan, but we are not able to incorporate all of them at this stage because we anticipate there will 29 be some additional environmental analysis that will need to be conducted and it would be more 30 appropriate to analyze some of those new policies in connection with the Transportation Element 31 update that is ongoing. But, this resolution adopts some of the policies that can be adopted at 32 this stage with nominal environmental review. 33 34 Chair Martinez: Ok, thank you. Let’s go to our, hear from the public. We have two speakers so 35 far. Vice Chair. 36 37 Vice Chair Fineberg: Irvin Dawid to be followed by Bill Cutler. 38 39 Mr. Irvin Dawid: Thank you Chairman Martinez, Vice Chairperson Fineberg. You’ve got my 40 comments that are in the packet that I made to the ARB. I wanted, Irvin Dawid, one the two 41 Environmental Members of the Task Force. I wanted to change them a little bit, especially as I 42 listened to Michael and Elena speak on the project and I think it is really important that this just 43 not be another study that goes into the bin and maybe they use a resolution or not. I mean, I 44 can’t help but think if something really big came out of this that would be good. 45 46 Page 8 And, when I’m thinking of something big I can’t help but think of what we just saw this past 1 Sunday, the 75th anniversary of the Golden Gate Bridge opening. You know, and whether you 2 like the project or not Governor Brown used the opportunity to reference High Speed Rail. Now, 3 I think we can understand his analogy to it, but here in Palo Alto what can we reference as sort of 4 a big project that relates to our priorities and what this Study covered? It comes down to what 5 ARB Chair Wasserman I think said. And that’s the intersections. I’d like you to think back, 6 where do we have great intersections on this line in the Palo Alto? When were they constructed 7 and how did they get done? 8 9 Now recently we saw another grade separation done. It was a new one, it’s right by my house, 10 it’s the Homer Avenue tunnel. And now there’s a possibility we can get one in South Palo Alto, 11 but let’s face it, we need something much bigger than that that appeals to all of Palo Alto. And 12 you saw it from those dots, there are two grade crossings now that are hazardous that really stand 13 out in people’s minds. And wouldn’t it be great if something like this Study was used to actually 14 put forward a project, a Capital Improvement Project that did something about them, much like 15 the way the City of Bart their residents went to the ballot box and supported a bond measure to 16 put all of Bart underground. Now, I’m not saying to depress the whole trench the right of way. I 17 am saying address one or address two of those grade separations. I think that would be huge and 18 I’d urge you to think big. Thank you. 19 20 Vice Chair Fineberg: Bill Cutler. 21 22 Chair Martinez: Ok, well I want to thank Irvin for speaking again. And it appears that Bill 23 Cutler isn’t present so we are going to close the public hearing and sort of take a round of 24 questions to Staff or the consultant. Commissioners. Commissioner Tuma do you want to? 25 You’re ready to go, you want to wait? Commissioner Michael. 26 27 Commissioner Michael: So having spent some time with Commissioner Tanaka in the 28 Infrastructure Commission, I find the report of the Rail Corridor Commission profoundly 29 impressive. I’m sort of envious and jealous of the quality of analysis and presentation and the 30 clarity and when I read it in March and read through it again, I had very few if any questions. I 31 think it’s excellent, excellent work and we should move this forward to the Council for approval. 32 33 I think that the other experience in the Infrastructure Commission is the notion that there, it’s one 34 thing to identify the importance of a project, or even to identify how it might be funded or what 35 the issues might be in terms of its impact on the community or the approval. It’s another thing to 36 get it actually done. So I think that, you know, the potential for this to be of great benefit to the 37 community when and if it’s done is pretty exciting. I think it’s very thoughtful and I’m trying in 38 my mind to imagine what the construction process would be like, when you have to operate the 39 north/south commute while you’re digging the open trench. But having lived in San Francisco 40 when they trenched under Market Street it can be done, and after it’s finished it will be lovely. 41 So thanks for all the hard work and I’m intending to vote in favor. 42 43 Chair Martinez: Can I ask the kind of Staff to clarify something? We have a recommendation 44 that we recommend approval of the report and its adoption incorporation into the current 45 Comprehensive Plan, and we have along with the Vision Statement and recommended polices 46 Page 9 and goals, and then we have a resolution which also has recommended policies and goals and 1 they’re not the same. Is that intentional or? 2 3 Ms. Lee: Thank you Chair, yes that was intentional. The purpose of this resolution as Cara 4 mentioned is to give some weight to this document, so we are basically in the resolution we are 5 saying that the Study Report has been approved by the City, that the Report is consistent with 6 various existing policies as well as the entire Comprehensive Plan and that we’re adopting the 7 Vision Statement and that we are identifying future studies that we’re undertaking to help 8 implement this study, which contains all these recommendations. So some of the 9 recommendations included in the Study would be future Comprehensive Plan goals and policies 10 that would be potentially included into the Transportation Element, but those policies are part of 11 the future actions that this Report is recommending. So, as Cara mentioned that would also 12 require a substantial CEQA analysis, which is why we’re not proposing that and the intention is 13 for those future studies to be incorporated into future processes that would go through the 14 additional Staff work as well as returning to the Commission and the Commission subcommittee 15 as part of the overall Comprehensive Plan update. 16 17 Chair Martinez: Very good, thank you. Commissioner Keller. 18 19 Commissioner Keller: Thank you. So, I noticed that the grade separation was a policy in terms 20 of the Rail Corridor Study document. However, the idea of not building aerial railroad structures 21 is listed under a program in the notes. So in some sense in the commentary in page 2 of the not 22 yet approved resolution amending the Comp Plan. And I’m wondering the extent to which a 23 note that is perhaps slightly ambiguously worded saying “represents the City’s current support, 24 the City’s opposition to the above grade aerial high speed rail options.” I’m wondering if that is 25 sufficient weight to such a statement as opposed to the wording that’s in Policy 1.1 and whether 26 it should be elevated to the policy level as opposed to a program level. And have the wording of 27 1.1 that’s in here and in the Attachment A. And perhaps that’s a question for our City Attorney 28 to address. 29 30 Ms. Silver: I think that’s a policy call and either proposal would be fine from a legal standpoint. 31 32 Commissioner Keller: So it wouldn’t, it wouldn’t harm the CEQA analysis in order to essentially 33 insert a policy in the Comp Plan with the wording of Policy 1.1 in this document. That would be 34 acceptable for the process? 35 36 Ms. Silver: I’m sorry. I thought that you were referencing language that was already in the 37 resolution. 38 39 Commissioner Keller: No, I’m not referencing, I was first referencing language in the resolution 40 which is kind of ambiguous saying as well as the City’s opposition to the, to above grade aerial 41 high speed rail options, but that is a statement of a program that indicates our opposition as 42 opposed to necessarily a policy statement that says we’re opposed to it. And so my question is, 43 can we explicitly state that policy by saying Policy 1.1 and this, and incorporate that at the policy 44 level as opposed to the program level. 45 46 Page 10 Ms. Silver: I think the concern is that the first sentence of that policy is something that has not 1 yet been fully analyzed in an EIR document and we would anticipate that that would be more 2 fully analyzed through a CEQA process. The second sentence is not problematic. 3 4 Commissioner Keller: So we could have a policy added to the Comp Plan with a new number or 5 maybe an A after it indicating it’s inserted into the sequence or perhaps somewhere else in the 6 policy level that is the wording of the second sentence of Policy 1.1 and that would be 7 acceptable? 8 9 Ms. Silver: Yes, I don’t think that would raise CEQA concerns. 10 11 Commissioner Keller: And would that have stronger weight in terms of expressing the policies of 12 the City of Palo Alto than putting it as a comment in the program? 13 14 Ms. Silver: Probably. 15 16 Commissioner Keller: Thank you. 17 18 Chair Martinez: Vice Chair Fineberg had a question. 19 20 Vice Chair Fineberg: Same question but can you apply it generally to all the four sections of 21 specific language in the resolution where the text has been added as the kind of flowery 22 descriptive text under a specific program, would it be stronger, not allowed, or no difference if 23 all of that language was inserted as a new policy or a new program? Look at the fourth one, the 24 same kind of thing, where we’re saying the vision, we’re talking about the Vision Statement, 25 would that be stronger, weaker, or no difference if it wasn’t an amendment to Policy T28, but if 26 it was T x+5? Could you answer that for all four? 27 28 Ms. Silver: You know, I think that a court would give sufficient weight to the concepts that are 29 here as codified as notes to policies or as stand-alone policies. What the court will do is look at 30 the City’s overall record in terms of its intent. The reason why we had structured it this way is 31 that we don’t want to at this stage completely overhaul the numbering system, etcetera, that 32 people have been accustomed to with the Transportation Element. We thought it would be more 33 appropriate to do that at the, you know, more formal Comp Plan update stage. 34 35 Chair Martinez: Commissioner Tanaka. 36 37 Commissioner Tanaka: Yes, so I guess I also share Commissioner Michael’s feeling about the 38 Rail Corridor Study. It looks very well done. It’s also my second time looking at it and it looks 39 even better, so good work. I didn’t have a lot of questions on this; I’m inclined to also support it 40 as well. Thank you. 41 42 Chair Martinez: Ok, Vice Chair I think it’s your turn. Are you ready? 43 44 Vice Chair Fineberg: I’d like to start by thanking the members of the public who’ve served on 45 the Rail Corridor Task Force and members of the public who have attended the community 46 Page 11 meetings. It’s huge to have so many people coming and sharing what their hopes and dreams are 1 for the City and giving feedback and helping shape that future rather than having the future 2 happen without input of the people who live and work here. So, many, many thanks from all of 3 us. 4 5 I appreciate the changes that have happened with the texts and the resolution since our last 6 review. I think the document is getting better and better. I too will be in support of moving it 7 forward to Council. There are a few areas where I just want to bring up some questions and I’m 8 not sure if there are some easy fixes or just maybe a little more consideration. One sort of global 9 question I have is we have our at places tonight, so I guess that means people can, if they are 10 playing that weekly drinking game they get a beer because I just said “at places.” There was a 11 notice of intent to adopt a negative declaration. Are we supposed to be, reviewed that or 12 comment on it, or is that just courtesy to inform us that it’s there? 13 14 Ms. Lee: We actually are requesting the Commission to review it and comment on it. We 15 understand that it was brought to you late but it’s a general negative declaration which 16 demonstrates that the policies that are being recommended to be adopted will not have an impact 17 on the environment. 18 19 Vice Chair Fineberg: Ok, I’m not sure I’m in a position to comment on it because I haven’t had a 20 chance to review it. So, I don’t know if we need to take later a quiet 5 minutes and I’ll leaf 21 through it or we can do it during the rest of the communications but I think that should be 22 addressed and how we’ll handle it. 23 24 Chair Martinez: Yeah, I’m inclined to take a 5 or 10 minute break so that we can say that we’ve 25 looked at it. We can do that after additional comments, questions. Just take a break for that. 26 27 Vice Chair Fineberg: Thank you. A lot of us have talked about, you know, on that last item the 28 east/west crossings and our north/south capacity. I appreciate that this plan addresses that. 29 There are a couple small points. Let me run through this quickly. One, we need to have a name 30 change for what they call this “South Palo Alto Neighborhood Center.” That’s sort of a mixed 31 use district at El Camino Way. Just calling it a South Palo Alto Neighborhood Center just 32 doesn’t feel like it’s talking about what that area is. So, I don’t know what it should be. I don’t 33 know if the Rail Corridor Task Force talked about that, but that isn’t a South Palo Alto 34 Neighborhood Center. It just doesn’t work for anybody I’ve talked to just in terms of the 35 nomenclature. 36 37 On Page 5.12 there’s a specific policy that talks about encouraging the relocation of auto 38 oriented and auto serving businesses, specifically the auto repair and sales to other less 39 pedestrian oriented locations in the City. I agree with that in principle, but specifically what 40 they’re talking about is the Mclaren-Fisker Dealership and the Volvo Dealership and we have 41 conflicting policies from Council to maintain auto dealerships because they’re sales tax revenue 42 producing. I don’t know what other neighborhoods we would have that would have auto 43 dealerships, so I think we’ve sort of created a conflict. How it should be resolved, I don’t have 44 the answers tonight, but I think we need to look at that. 45 46 Page 12 And then there’s also I’m seeing in multiple places within the documents where they’re talking 1 about the depth on the west of El Camino or on the east of Alma. In some places I’m seeing 2 references for one block. In other places I’m seeing one parcel. In some places that’s the same, 3 but in other places it’s not. The parcel doesn’t go the whole block, so I think we need to get a 4 little more consistency there. And otherwise, thank you. I’m looking forward to it moving 5 forward. 6 7 Chair Martinez: We’re tired I think. Commissioner Tuma did you want to pick it up? 8 9 Commissioner Tuma: Yeah, I had a question for Staff and I don’t know that there’s a particular 10 answer to, but I just wanted to get more of the thoughts on it. Which is, not to compare this 11 Study with the IBRC Study directly, but coming out of the IBRC Study I felt like there was an 12 assessment of where we were, what was going on, and while there was nothing definitive there 13 were a series of suggestions that seemed to be a little bit more concrete in terms of where do we 14 go from here? The sort of the “so what” coming out of the Study. When I read this Study, a lot 15 of what the next steps are, are more studies. More plans, more things to look at. And I’m 16 mindful of what some of the previous speakers said in terms of don’t just put this on the shelf, 17 don’t just have it be a study that has all this information in it but where’s the “so what?” Where 18 do we go from here? And I know, like I said I don’t think there was any definitive specific 19 answer, but is there some way to make some of the output here a little bit more concrete? Or is it 20 just really that a lot of this feeds into these various different plans and studies and other things 21 that we’re gonna do? Just your thoughts on that? 22 23 Mr. Williams: I’ll take a shot at that. I think this is really much more of a policy oriented 24 document than IBRC which was very, not project specific but, you know, very concrete so to 25 speak. The, so we have a policy framework that’s essentially been developed with this Study to 26 set out some overarching policies that we hope we can use in number one responding to any rail 27 suggestions. Number two, developing then subsequent work programs to implement some of 28 these polices. And Number three establishing priorities as we move through CIP reviews in the 29 future. 30 31 So as Michael indicated we have a few additional studies to come down. One of those, I mean 32 three of those relate to the three sort of sub areas and land uses. Cal Avenue is under way 33 already. I think this helps them sort of bolster that. The downtown one, I think a lot of what’s 34 been discussed here will come out of the 27 University Avenue analysis that’s under way that ex-35 Commissioner Garber is working very diligently on because that is really turning into I think 36 more of a community, you know, how does it benefit the community type of exercise than a 37 private development proposal would be. So we have that. So I think what’s left then is the south 38 or the El Camino Way neighborhood area, and, you know, that was already identified to some 39 extent in the existing Comp Plan. But I do think that will then target that as we move into 40 subsequent phases of where should we do area studies? I think that’s the next one. It has to be 41 or maybe even expanded South El Camino Real type study that we’ve talked about before. So I 42 think it lends credence to that. 43 44 The implementation program specifies these different tiers of improvements and so I think that 45 feeds into directly the Capital Improvements Program and which projects should we be looking 46 Page 13 at first? Now, there still are too many of those to deal with in terms of any reasonable budget at 1 this point. But, I think what we probably will do is we’ll probably put some kind of, you know, 2 in the short term, put some kind of feasibility money in there or money to look at feasibility 3 studies of some of these key crossing locations. And that and then go from there as far as 4 identifying which ones are most appropriate to go. So I think there’s a game plan here, but 5 you’re right it’s not maybe as specifically laid out at this point as we’d like but I think that’s sort 6 of the nature of getting these policy framework in place initially. 7 8 Chair Martinez: Well, good segue-way for me because my question to the consultant first is, I 9 can see where you’re very happy with having survived working in Palo Alto. But on the other 10 hand, does the Report really achieve what it set out to do? Does it give us some buffer to the 11 High Speed Rail project? Does it speak to the environmental sensitive areas of the community? 12 Does it protect neighborhoods? Does it give us a defense when we sit down at the table with 13 High Speed Rail? 14 15 Mr. Smiley: I think it does. And, I think that the conversation that we’re having here and that we 16 had also with the ARB and the general concern about whether there’s enough, I mean it relates 17 back to that question of whether there’s enough that makes this useful and not something that 18 will just sit on the shelf. I think that one of the things that we did, it was certainly an effort that 19 we felt was part of our brief and it was something that the Task Force came to get on board with, 20 there’s that pun again. Was that this project isn’t about the high speed train. It’s, the train is one 21 piece of a very complex urban environment. And it’s a very rich environment; it’s got many, 22 many things going on. And it happens that that train is probably the biggest single piece of 23 infrastructure coming down potential in the future if it comes. And so it’s a very important part. 24 And dealing with that whether it’s the high speed train itself, or whether its Caltrain 25 improvements dealing with that question, I think, is very important. And it has emerged that a 26 tremendous amount of that has to do with east/west connectivity, tying the City back together. 27 28 But it also deals with where are the opportunities for us to build upon the existing rail 29 infrastructure, the stations and so on that we have available now at California Avenue for 30 example, and at the downtown station. And are there opportunities to go forward in those areas 31 beyond perhaps thinking about those areas beyond perhaps what’s been done today, and provide 32 some input to future thinking. 33 34 I would have to say from my perspective if I were, well, I’ll start by saying that one of the 35 thoughts that we had as the, if you like, the interpreters of what the Task Force was saying and 36 then advancing that and bringing our value added, if you like, to the process, is that a simple 37 policy document goes so far. And I think that it covers a variety of policies that will help work 38 with the update of the Comprehensive Plan and so on. 39 40 But I think it goes beyond that because if I were to then be asked to prepare a Transportation and 41 Public Improvements Plan for the Alma Street Corridor, what I might be asked if I was the 42 consultant brought into that project, it might be a blank slate. And say, ok we got this grant, 43 we’re going to, we’re now going to do a Transportation Plan for the Alma Street Corridor and 44 it’s going to have component pedestrianization all the various modes of transportation. We also 45 Page 14 want to do some beautification and a variety of things, we don’t know if the train’s gonna come, 1 but we know there’s certain things we can do today. 2 3 I could start from scratch and I could say, well it breaks it down and we see that it breaks down 4 into certain components and there are certain values that we bring to it. This Study sets some of 5 those values already. It gives instruction to the next consultant, so it goes beyond a policy 6 document. It starts giving instructions to what future plans might think about and those who will 7 come after us who may get asked to do those plans. In that respect I think it goes beyond a 8 policy document. And I think it does provide, in some areas more specifically than others, but I 9 believe it does provide some guidance in a variety of specific areas on how, for those who will 10 come, who will follow us and for you to be able to evaluate and set the brief for those, as you 11 evaluate those projects. 12 13 Chair Martinez: I think you’re right. I think it does set the values, which is the most important 14 part of a planning process, but is it enough when there’s another set of values coming down the 15 tracks? To our Senior Assistant City Attorney, is the resolution enough? Does it do what we 16 need to do in establishing those values and in establishing the precedent for what would work in 17 this community? 18 19 Ms. Silver: You know I think I think it’s a very good first step and there is certainly a process in 20 place and from what I’m hearing some momentum to move it forward to the next step of the 21 Comprehensive update process. And actually adds some new policies into the Comprehensive 22 Plan and analyze those, yeah, in connection with all of the other transportation policies that 23 you’ll be considering. 24 25 Chair Martinez: Can we really say that we are opposed to above, whatever, raised structures for 26 High Speed Rail, and for that to mean anything in terms of it going to court or it being the 27 precedent of this City, or in any other manner carrying the weight that we want it carry? Or is it 28 simply after the fact in defense of what we would like to see? 29 30 Ms. Silver: Well it’s rather an open ended question; I’m not sure exactly how to respond. But 31 certainly when, if you’re just looking to defend this City against a, you know, above grade High 32 Speed Rail project, what the court would do is look at the whole range of policy documents that 33 the City has in place and will look at whether that particular project is consistent with those 34 policy documents and whether the High Speed Rail project, excuse me, had taken or can take 35 additional steps to mitigate in a way to make the project compatible with the existing policy 36 documents. 37 38 Mr. Williams: If I could just add that we also did visit with the Council’s Rail Committee, the 39 four Council Members, and I think this is very consistent with where they saw this effort going, 40 which was to set some sort of general policies on the trench versus at grade versus aerial type of 41 approach. But in a kind of generic way because the rail project is always in such a state of flux, 42 so they steered us towards, you know, more of this kind of approach but felt like it was important 43 and that it was useful to have this kind of language there to refer to as we respond to proposals 44 from whether it’s Caltrain or from High Speed Rail for improvements along the tracks. 45 46 Page 15 Chair Martinez: Well, I don’t know. I can see that we do want to establish this policy, I would 1 like to see in the policy or in the plan that there’s really something that says for the sake of the 2 City that is above grade structures is the worst possible alternative. And nothing in the plan or in 3 the resolution even leans that way. We count on reasonableness and good planning and 4 5 Mr. Williams: Well we can certainly add some, but I thought we already have some, I mean we 6 do have something in the resolutions that says that references the Vision Statement represents the 7 City’s opposition to the above grade aerial High Speed Rail options and also in the plan there’s 8 language as well. 9 10 Mr. Smiley: Yes, Goal 1, Policy 1.1. And I think that gets to the second sentence that 11 Commissioner Keller was referring to. It specifically says the City is opposed to an elevated 12 alignment of the High Speed Rail Caltrain. So it’s a very, and if I understood correctly, 13 Commissioner Keller was raising the possibility that that one sentence become a policy rather 14 than a program statement. So that is in the plan, or in the Report, and I think that’s where the 15 conversation earlier was about making that a part of the resolution as well as a policy. 16 17 Chair Martinez: Vice Chair with a follow up. 18 19 Vice Chair Fineberg: I’m wondering what different it makes, or if it makes the difference that 20 there is or is not a Vision Statement or whether the Vision Statement matters. When we as a City 21 Planning Commission do a project level review, we’ve been instructed repeatedly that the Vision 22 Statement of our Comprehensive Plan is irrelevant, it’s nice, it sets the tone, but it’s not what we 23 look to when we evaluate a project. So the Vision Statement says, you know, the things about 24 the vibrant, attractive, safe, transit rich things. I think those are the things that Chair Martinez is 25 wanting to see with teeth in detail. So does referring to the Vision Statement in a policy 26 somehow give that a force in law and make it be something that has to be considered at a project 27 level review, or is the Vision Statement still just flowery prose that has no standing even if we 28 refer to it in a policy? I don’t know if that’s getting at your question. I think that gets it at Chair 29 Martinez’s question. 30 31 Chair Martinez: Yes, it does, thank you. 32 33 Mr. Williams: And I’ll let the City Attorney respond as far as the legal force of something, but, 34 you know, I think, I don’t think this resolution can create the specifics of where you want to go 35 with this. And I think its step one, got plan, got the policies. Step two, you’ve got a resolution 36 that references that plan and Vision Statements at this point. Step three, we incorporate those 37 more specifically into Comprehensive Plan, particularly the Transportation Element. And step 38 four, we then take the steps we need to implement through additional area plans, Capitol 39 Improvement Programs, etcetera. 40 41 So, I understand it’s frustrating not to get, you know, to a certain level with this, but I think you 42 have to establish this initially as that overall framework and I think the Vision Statement is very 43 pertinent. I think it was very important to the Task Force and I think it’s important to have it 44 here even though you’re right, I mean it’s a general statement but everything else kind of feeds 45 off it so you have to go back to it and say this is overall vision and then ultimately the thing 46 Page 16 that’s most enforceable is when we get specific Comprehensive Plan policies and then specific 1 land use changes or projects through the CIP that are implemented to do this. 2 3 Chair Martinez: Commissioner Michael. 4 5 Commissioner Michael: Yes, my question is maybe just a request to clarify something which I’m 6 a little bit confused. Looking at the language of the proposed resolution there were, when you 7 get to the “now therefore” there are four sections. And Section 3 talks about modifying Program 8 T21 to study projects to depress bikeways and pedestrian walkways under the Alma Street and 9 Caltrain tracks and implement a feasible. And then looking at the Report, and I’m just looking 10 right now in the sort of the Vision and the executive summary it talks about the preferred 11 alternative for any rail improvements or expansions to below grade open trench. And then 12 thinking about sort of what’s gonna go on in the practicalities of the CIP process, if you’re gonna 13 create the open trench and put the rail line down then you will not have wanted to put all the 14 pedestrian and bike transportations down because then you obsolete those and so it’s not a good 15 use of public funds. So if we’re strongly supporting the report, which I for one am. I’m looking 16 at the resolution in Section three about the undergrounding the bikeways and walkways. I’m just 17 confused why you have that. 18 19 Mr. Williams: I think that’s a very good point. I think we should change that. We need to make 20 it emphasize that what we’re really looking for is separating the traffic level, whether that 21 happens with a train below and a crossing above or vice versa. That’s what we’re looking for is 22 that grade separation of the pedestrian and bicycle traffic from the train crossing. So that’s a 23 very good point. Also, in the one above that, that Section two that we talked about before with 24 the Vision Statement represents the City’s current, I think that is incomplete and that we ought to 25 really be saying represents the City’s current preference for the below grade alignment. I’m not 26 sure about, I guess we could say and support of the Caltrain two track on grade electrification as 27 well as the City’s opposition to the above grade. So I think we’ve left out the preference for the 28 below grade alignment in there and we should add that to that item. 29 30 Chair Martinez: If I can just sort of finish my comments. I support the report so I’m just kind of 31 moody, ok? You know words are important, but to have a goal that says we oppose above grade 32 isn’t as powerful as something that said this is an environmentally sensitive area that this, that 33 could only support something that doesn’t, you know, tower above houses as I picture them at 34 Churchill and along Alma. It just seems that capturing really what is that outcome is much more 35 important and much more powerful than just saying we oppose this. I know everyone we know 36 knows we oppose it. So I was looking for something out of the study that really nailed why this 37 is not a good idea. And I would still urge you to go back and just look at that, you know, the 38 hours of work that you did to find that, you know, that really one item that nails it for us. I don’t 39 know what it is, I would think there would be a lot of things, but just stating we oppose it I think 40 doesn’t even get us to the table in terms of trying to get this to go in the direction we want it to 41 go. And I know High Speed Rail is sort of, we don’t, it’s uncertain, but what’s uncertain is 42 probably the worst that we can imagine so we should be looking at that, not just the uncertainty. 43 But I’m prepared to support this if this is what Council, our City Attorney, and consultants are 44 expressing is the best way we should go. 45 46 Page 17 Did you? Commissioner Keller you had something else to say first and then 1 2 Commissioner Keller: Yeah there’s been a lot of discussion on that end of the table and very 3 little on this end of the table. Yeah, for once. But a couple of things. 4 5 So let’s talk about the distinction between “no this” versus “preference for that.” I happen to be 6 allergic to chocolate. So if somebody says to me “would you like vanilla or chocolate?” I’m not 7 gonna say I prefer vanilla, because if they give me chocolate I’m gonna get allergic reaction. 8 I’m gonna say, “no chocolate. I’m allergic to it. Don’t give it to me, it’ll cause me to get ill.” 9 Ok? There’s a big difference between saying, you know, if you say, “I prefer vanilla,” well, you 10 know somebody hands me chocolate anyway I’m not gonna eat it. So there’s a big difference 11 between stating a preference and stating a prohibition. And a preference is, just doesn’t have the 12 weight. That’s the first comment. 13 14 The second comment about this is when I read the rail, the High Speed Rail Alternatives Report 15 two years ago or so when it first came out, three years, I’m not sure how long. A while ago 16 when it first came out I remember there being a point in there saying that something was rejected 17 because it was not compatible with local land use plans. Well, if you want to make sure that it’s 18 compatible, what we do here is compatible with local land use plans then be explicit. Don’t beat 19 around the bush. Ok? Be explicit. If we really mean no aerial railroad structures we should say 20 so. In particular when the City of Palo Alto created Planning Commission, Council, when the 21 Council created the Guiding Principles which are attachment B to our Staff Report, Principle #1 22 is the City is opposed to an elevated alignment of High Speed Rail Caltrain in Palo Alto. Ok? 23 We should say that. Explicitly, no beating around the bush, make it clear, that’s their language. 24 Use it. 25 26 The second thing is that somehow missing from all the goals and policies that are in the High 27 Speed Rail document the City’s Guiding Principle #3 seems to be missing. It says “all 28 neighborhoods in Palo Alto affected by High Speed Rail Caltrain shall be treated with equal 29 consideration with respect to vertical alignment impacts.” Now that’s written in the positive 30 language that I think that our Chair prefers, but it somehow is lost in terms of the goals and 31 policies that are in the High Speed Rail document. 32 33 In addition, one that seems to be a corollary of a bunch of stuff but hasn’t been stated, is that all 34 four at grade vehicular crossings should be remain open to vehicular traffic. We have a crossing 35 at Palo Alto Avenue, we have a crossing at Churchill, we have a crossing at Charleston, and a 36 crossing at Meadow. There’s no statement that these should remain open and I think that’s a 37 critical thing. If you’re gonna be changing alignments or things like that we should certainly 38 keep those four open and I’d like to see a statement to that effect, certainly in as one of the 39 policies or goals in the High Speed Rail and in terms of this overall Rail Corridor Study. And 40 that seems to be missing. 41 42 It’s been mentioned a couple of times the idea of a lattice cover, and that you don’t have to have 43 gaps, you can cover part of High Speed, of the Rail Corridor. You don’t, you know, while you 44 have to have 1,400 feet of distance that’s not covered, that 1,400 feet doesn’t have to be the full 45 width of the trench. You could have like a zippering effect going, a lattice going back and forth 46 Page 18 where part of it is covered on one side, part of it is covered on the other side. And I don’t see 1 particular mention of that idea as one of the possibilities which would enable a north to south 2 class one bike facility, which you do talk about, but you talk about primarily when in the Alma 3 Street right of way where there’s no, not much room. But if it’s over a lattice that lines back and 4 forth there is room for it on top of this cover. And so that idea isn’t mentioned. 5 6 In Figure 4.5 there’s impact on Alma not only at Palo Alto Avenue but there’s impact on Alma at 7 Churchill, Meadow, and Charleston. Somehow the impacts on Alma, those ears that go either 8 direction, those wings if you will to one side or the other, those need to continue on Alma on 9 those three current grade crossings. They can’t, just as it is on Alma and Palo Alto Avenue they 10 would continue on those three intersections. 11 12 If you look at the alternative, either alternative 2 or 2b, the two alternatives that are not aerial 13 structures through Palo Alto by High Speed Rail, when you go under Embarcadero Road it 14 involves bringing, when High Speed Rail or Caltrain goes under Embarcadero Road it involves 15 brining Embarcadero road to an at grade traffic light intersection with Alma. Ok? And the 16 descriptions of the, the descriptions of what happens to the intersection basically doesn’t take 17 into account that design reality of High Speed Rail. And the opportunities that that presents in 18 terms of better, better connectivity between Alma Street and, for example, Stanford or El 19 Camino. And the idea right now the main way you go is on Churchill or you go around this kind 20 of crazy loop on Lincoln, which doesn’t make much sense. You know, that, this would be a 21 considerable improvement. 22 23 The other issue is that rail under Oregon/Page Mill Road means no change to the Oregon/Page 24 Mill Road intersection because you have to go underneath that. You’re not gonna completely, 25 you’re not gonna make that an at grade intersection, that’s not feasible. That’s, the traffic would 26 not handle that. But also in terms of the mat that goes on there there’s no need to go as far 27 underneath when you get past meter level, meter #1890. When you’re going past there, you 28 don’t have to go far down you could go somewhat shallower in terms of building that. 29 30 It’s very important to there to be engineering analysis of the rail grade separations to the extent 31 that anything were to be built that would involve grade separations of one kind or another. There 32 are dollar figures in here, but I don’t think that those dollar figures, I’m not sure where they came 33 from. I don’t believe that they are that accurate because an undercrossing under Charleston and 34 Meadows and Churchill that does not connect with Alma does involve property losses. In 35 particular if it goes under Alma then it’s gonna have to go, it’s gonna have to come to grade, 36 come to surface past Alma and at Churchill, at East Meadow, at Charleston, there are properties 37 on either side, on one or both sides of the crossing that would lose their access to their driveways 38 and that’s a problem. So there would, you can’t say well you can keep your house but you can’t 39 get out of it. Sorry, you have no access to your driveway. So, there would necessarily have to be 40 a some sort of condemnation of those properties because you essentially made those properties 41 inaccessible. And the same thing is true to some extent with the side that is west of the train 42 tracks. Some of those properties would also be inaccessible with a depressed configuration. 43 44 Chair Martinez: Are you almost done? 45 46 Page 19 Commissioner Keller: I’m almost done, thank you. In terms of RC-T-1, on page 6.06 1b and the 1 other ones of those, you know, that has to be, those have to be changed page 6.06 because those 2 essentially indicate that there is no loss of property and condemnation and that can’t possibly be 3 the case because of the analysis I’ve just described. 4 5 And the last thing is that in terms of the Comp Plan process here, in terms of the Comp Plan 6 process in terms of the revision, there’s a description here in terms of goals and policies. Well, 7 the Comp Plan has a hierarchy of vision, goal, policy, program. It’s highly unlikely that you 8 would have for High Speed Rail or the Rail Corridor have five policy level, sorry five goal level 9 entries in the Comp Plan. You might have one goal level entry in the Comp Plan, a number of 10 policy level things in the Comp Plan and below that a number of program level things in a 11 hierarchy. But the way this is written, will have to require a translation by the Transportation 12 Comp Plan subcommittee to handle that. I don’t know if you want to take a stab at trying to 13 convert that, if you want to leave that for the Comp Plan subcommittee to take a stab at that, but 14 in some sense some translation is needed because it doesn’t directly apply. 15 16 I would actually like to make a Motion if I may? 17 18 Chair Martinez: Sure, are we making Motions tonight Planning Director? 19 20 Mr. Williams: Yes. 21 22 Chair Martinez: Ok. 23 24 Commissioner Keller: You want to say something first? 25 26 Vice Chair Fineberg: We need to take a five minute break, unless your Motion is not gonna 27 include the neg. dec.? 28 29 Commissioner Keller: I’m happy to take a 5 minute break and then come back to my Motion if 30 that’s ok. 31 32 Chair Martinez: I’m just looking at it. Let’s make it a 10 minute break. Thank you. 33 34 BREAK 35 36 Chair Martinez: Ok, we’re back. We’re ready to go. What were we talking about again? 37 Actually before your Motion, Commissioner Tuma you had wanted to say something earlier? 38 39 Commissioner Tuma: Yeah, it was just dovetailing on what several others had said about 40 whether this is strong enough or, you know, above grade is a no no, blah, blah, blah. I was 41 looking at the Staff Report on page 6 at the top, under “Revisions to Report” and it says “the 42 most recent City Council position on High Speed Rail was to oppose it in any form,” and then it 43 goes on to say “but the decision was made to focus on two rail configurations.” So, this City 44 Council position, is that a position that they’ve taken formally? That they are opposed to High 45 Speed Rail in any form? Is that something that was voted on? Is that, how much weight does 46 Page 20 that position, cause it also says “although there is some support for blended two track Caltrain.” 1 So, how much weight should we and will they give to that current position? And if the answer is 2 significant then instead of saying that we oppose the above grade aerial configuration, should 3 there be something about opposing High Speed Rail? 4 5 Mr. Williams: Well, a couple answers to that. One is that we’ve tried not to necessarily say High 6 Speed Rail on here so the configurations aren’t specific necessarily to High Speed Rail versus 7 Caltrain electrification as well, which could be in a trench or in a at grade configuration. The 8 other thing is that, you know, the Council I believe that is an official position of the Council to 9 oppose High Speed Rail. It’s primarily based, or a lot of it is based on the business plan and 10 some of the other assumptions and costs that go around that. And we’re aware of that and 11 presented this to them and to the committee, the Council Rail Committee, and they felt 12 comfortable with leaving it like this. I think they wanted to just leave themselves the flexibility 13 to, you know, say what they want to say on High Speed Rail as opposed to formalizing 14 something in this document about High Speed Rail. 15 Commissioner Tuma: I guess what’s inconsistent with that is that in Section two we’re adding 16 this specific thing that says “City’s opposition to above grade aerial High Speed Rail options.” 17 So that seems to, we’re saying something specific about that, but that’s much more narrow. 18 19 Mr. Williams: We should delete High Speed Rail from that comment entirely. I mean we should 20 just say “alignment,” “opposition to above grade aerial alignment,” or something like that. 21 22 Commissioner Tuma: Ok. I mean if Council’s comfortable with that, it just seems like that’s 23 they’ve taken this very public position on being against High Speed Rail period, and here we’re 24 sort of dancing around that. But if you, if, I think it’s worth at least at the meeting brining that 25 up again and saying this is your policy, this is what we’re doing here, are you guys putting that 26 together and saying yeah, that’s the right way to go. 27 28 Chair Martinez: Thank you. Commissioner Keller, you got the Motion? 29 30 MOTION 31 32 Commissioner Keller: Thank you and I’ve actually thanks to Commissioner Tuma’s comments 33 slightly modified my Motion. Perhaps not in ways that he expects. So, my Motion is three parts. 34 The first part is to approve, sorry to recommend approval of the negative declaration with 35 addendum. And I’ll talk about the addendum later. 36 37 The second is, the second part of the Motion is to recommend approval of the resolution of the 38 City Council for the Rail Corridor Study Report with the change that an additional 39 Comprehensive Plan policy is to be added which has these three parts. The first part is the City 40 is opposed to an elevated alignment of rail in Palo Alto. The second part is that all 41 neighborhoods in Palo Alto affected by rail should be treated with equal consideration with 42 respect to vertical alignment impacts. And the third part is that all four existing at grade rail 43 crossings shall remain open to vehicular traffic. 44 45 Page 21 And the third part of the Motion is that the Planning Commission, I’m not sure if this has to be a 1 third part of the Motion, but essentially that we want to recommend approval of the Rail Corridor 2 Study with textual amendments as to accommodate the comments we’ve made. 3 4 Chair Martinez: And your addendum? 5 6 Commissioner Keller: The addendum is to the negative declaration is that the negative 7 declaration texturally addresses the, textually addresses the resolution. And because I’m 8 recommending a change to the resolution, the addendum to the negative declaration has to reflect 9 the change to the resolution, so that’s the, that’s the… 10 11 Chair Martinez: Ok. Is there a second to the Motion? 12 13 SECOND 14 15 Chair Martinez: Yes, Commissioner Michael seconds the Motion. You care to speak to your 16 Motion briefly? 17 18 Commissioner Keller: Yes, so I think that, first of all I’d like to thank all the people who have 19 been participating in the Study for their work on it. I’ve certainly seen improvements to the 20 Study in the six or so months that I’ve participated and working on it. Actually it’s been longer 21 than six months the work that I’ve done with the as a Liaison to the Rail Corridor Study. 22 23 And even though the City has expressed its policy that it is opposed to High Speed Rail if you 24 say, if somebody says to you do you want A or B and you say neither, you may get A or you may 25 get B anyway. It is not, I don’t think it’s the place of the Comp Plan to put a statement that says 26 we’re opposed to High Speed Rail. But on the other hand, in the Comp Plan is the place to say 27 well, we are opposed to B and we will, and, you can, at further City documents say you don’t 28 want A either but the issue is that, in terms of how this is worded A may be desirable for Caltrain 29 improvements independent of High Speed Rail. So, that’s why I’ve described this this way and I 30 also will entertain other amendments that people wish to consider. 31 32 Chair Martinez: Commissioner Michael? 33 34 Commissioner Michael: So I support the Motion by Commissioner Keller who has skillfully 35 identified the procedural aspects of what we should do to get this correct. And I would hope that 36 at a policy level this is excellent work. I hope that it translates into action with the community 37 supporting the benefits that are visualized in this project that clearly are gonna require further 38 study and I guess not the least of which is a study of the funding for the CIP’s that would be 39 involved. But I can imagine that if the community understands and gets behind all this that it 40 will be potentially transformational, so I support the Motion. 41 42 Chair Martinez: Right. Vice Chair Fineberg. 43 44 FRIENDLY AMENDMENT 45 46 Page 22 Vice Chair Fineberg: I support the Motion. I’d like to make a Friendly Amendment. In the 1 Section 1 where you recommending approval of the neg. dec. with addendums, I would like to 2 add an additional addendum that the language in Sections 2 and 3, so Programs T17 and T21 be 3 amended to reflect the language that will match what’s in the resolution itself regarding the 4 below grade preference for the, on T17, Mr. Williams had talked about the language being 5 incomplete and that the language being changed to say that the preference is for below grade so 6 that the language that goes into the amended resolution will be mirrored in the resolution 7 language of the neg. dec. and the same thing on T21 where we’re deleting the word 8 “undercrossing” and making it just be a separated grade crossing. Again, the language in the 9 neg. dec. match what will be in the amended resolution and those changes be incorporated into 10 the second part of the Motion, which was the recommendation for approval of the resolution. So 11 that we’re picking up those changes in the resolution and the neg. dec. 12 13 Commissioner Keller: Does Staff have that change? 14 15 Mr. Williams: Yes we do. I did have. Oh, I’m sorry go ahead. So I just wanted to be sure we’re 16 understanding your Motion. The last part of it said something about making changes in the text 17 per Commission comments. Are these the changes you were talking about? Or are you talking 18 about the text of the Report. 19 20 Commissioner Keller: I was talking about the text of the Report itself. We had made comments 21 about the Report. 22 23 Mr. Williams: Ok, well I don’t, I mean I think we would need to know what, I mean if they were 24 specifically corrections or something that’s one thing, but like the, so, I mean, but you had a lot 25 of comments about we should have more study of the grade crossings or engineering 26 information. So if it’s some of the corrections that were mentioned we’ll pull those out and get 27 those. 28 29 Commissioner Keller: Yeah, I was only, I was referring to the corrections like to Figure 4.5 and 30 to how Embarcadero Road was handled and the, our, the Page 6.06 and things like that. Those 31 are the kinds of things I’m talking about correcting. 32 33 Mr. Williams: Ok. We’ll look at those. Thank you. 34 35 Chair Martinez: Cara, does this strengthen the resolution? Are you, are you good with it? 36 37 Ms. Silver: Yes, I think it does. And it’s consistent with the report and prior comments. 38 39 Chair Martinez: Commissioner, yes. 40 41 Commissioner Keller: I will accept Commissioner, Vice Chair Fineberg’s Amendment, Friendly 42 Amendment. 43 44 Commissioner Michael: Likewise. 45 46 Page 23 Chair Martinez: Ok. Commissioner Keller the, can you reread the policy about the equal impacts 1 on of the alignments? I wasn’t clear about that. 2 3 Commissioner Keller: Yes, it’s actually, it’s actually read word for word in the Guiding 4 Principles #3 in this document. The only change I’ve made is I’ve replaced High Speed Rail 5 HSR/Caltrain with rail. That’s the only textual change I made to that. And similarly to policy, 6 to Guiding Principle #1 the only change I made was the same change to that one. Thank you. 7 8 VOTE 9 10 Chair Martinez: Ok. Thank you. Commissioner? We ready for a vote? Last chance? All those 11 in favor of the Motion say Aye. Aye. Those opposed? The Motion Passes unanimously. Thank 12 you very much. Thanks to our crack consultants, appreciate it. Elena, as usual. Thank you all. 13 Goodnight. 14 15 10PLN-00198 Page 1 of 9 Architectural Review Board Staff Report Agenda Date: May 24, 2012 To: Architectural Review Board From: Elena Lee, Senior Planner Department: Planning and Community Environment Subject: Palo Alto Rail Corridor Study: Review and Recommendation to the City Council and Planning and Transportation Commission for the Palo Alto Rail Corridor Study Report. RECOMMENDATION: Staff recommends that the Architectural Review Board (ARB) review and recommend that the Planning and Transportation Commission recommend that the City Council approve the Rail Corridor Study Report. BACKGROUND AND PURPOSE: The City Council initiated the Palo Alto Rail Corridor Study to evaluate land use, transportation and urban design elements of the rail corridor, particularly in response to potential improvements to fixed rail services along the Caltrain tracks. Those improvements may include any or all of the following: Caltrain upgrades, such as electrification and/or grade separations, and/or High Speed Rail service. Although the High Speed Rail project provides important context, it was not intended to be the focus of this study. The rail corridor is a significant physical component of Palo Alto. It is still unknown at this point what the future holds for either High Speed Rail or Caltrain. The intent is to generate a community vision that would provide land use and transportation policies to guide development under a variety of scenarios, allowing Palo Alto to be proactive to changes to the rail system. This document will guide staff and the City as decisions are made regarding land use and transportation improvements, such as private development and the Capital Improvement Program. Following a recommendation made by the Rail Corridor Study Task Force and public feedback from the two community workshops, the revised Rail Corridor Study Report is being proposed for a formal recommendation. The Rail Corridor Study Report includes revisions to reflect comments from the Task Force, the Planning and Transportation Commission, the Architectural Review Board, the City Council Rail Committee, various City Board/Committee liaisons and the public. Staff has also coordinated with Caltrain staff on this project. Once the Study is approved by City Council, the next step will be to incorporate the Study as a whole into the 10PLN-00198 Page 2 of 9 Comprehensive Plan by reference. The five goals and related policies would be integrated into the Comprehensive Plan as part of the on-going Amendment. The boundaries of the corridor include the area between Alma Street on the east to El Camino Real on the west, from the Menlo Park city limits on the north to the Mountain View city limits on the south, as shown in the Report (Attachment B and available online at www.paloaltorailcorridor.org). The study area also includes sufficient adjacent land to encompass those areas most directly affected by potential land use, transportation and urban design changes. The plan and implementation measures is proposed to be ultimately be incorporated into the City’s Comprehensive Plan by reference as a whole and the Comprehensive Plan goals and policies are proposed to be incorporated directly into the document. Rail Corridor Study Task Force The Rail Corridor Study Report is a direct outcome of the discussions and work of the City Council authorized Task Force for the Rail Corridor Study with City staff and the consultant, BMS Design Group (BMS). This report represents the consensus of the Task Force as whole, a result of fifteen meetings. Through the Task Force meetings and community workshops, staff has also received detailed feedback on the draft report from the public. The public process also included the input from liaisons of various City boards and commissions to represent their respective groups, including the Planning and Transportation Commission, the Architectural Review Board, Utilities Advisory Commission, the Historic Resources Board and the Palo Alto Bicycle Advisory Committee. At the final Task Force meeting on May 1, 2012, the Task Force voted to recommend that the City Council approve the Report, including the Implementation Chapter. Rail Corridor Study Area Tour A study area tour was held on September 10, 2011. A majority of the Task Force, as well as interested members of the public participated. The approximately four hour tour comprised of a bus tour of the entire length and walk throughs of specific areas within the corridor. It provided an opportunity for the Task Force members to view the study area together and to get familiar with areas that they were not as familiar with. Some highlights of the tour included the South of Forest Area, the Homer tunnel, California Avenue, the Churchill Avenue train crossing area, the intersection of El Camino Real and Charleston Road and the recently developed residential projects in South Palo Alto. The tour enabled the Task Force members to better understand the perspectives from the various areas of the City, especially where crossings are proposed. Rail Corridor Study Process The Rail Corridor Study is a three part process that began in late 2010. Following the City Council decision on the report, the report and any identified changes would be incorporated into and referenced in the Comprehensive Plan Amendment process as appropriate. The phases consist of the following: 1. Phase I, “Context and Vision”. Establishment of the background and context for the rail corridor in order to begin developing a preferred vision. 2. Phase II, “Alternatives and Analysis”. Development and analysis of preferred 10PLN-00198 Page 3 of 9 alternatives. 3. Phase III, “Plan Preparation”. Preparation of the Report. Staff and the consultant will continue to refine the alternatives and obtain feedback from the Task Force, Commission, Council and the public. Palo Alto Bicycle Advisory Committee and City/School Traffic Safety Committee Joint Meeting A joint meeting with representatives of the Palo Alto Bicycle Advisory Committee (PABAC) and the City/School Traffic Safety Committee (CSTSC) was held on February 16, 2012. The purpose of the meeting was to solicit input from those stakeholders on this report. The attendees were generally supportive of the work that had been done. Barb Mitchell, the Palo Alto Unified School District Task Force member also was in attendance. Some of the main comments raised at the meeting for follow up include:  Encouraging trenching across the entire City  Improving safety for bicyclists and pedestrians.  Encouraging grade separated crossings for bicyclists and pedestrians.  Improving safety of school children. City Council Rail Committee The Rail Corridor Study was the subject of three meetings before the City Council Rail Committee. A brief update was provided on January 26th, 2012. On March 1, 2012, the first draft of the Rail Corridor Study Report was presented for their review and comments. The March 1st meeting was also attended by four members of the Rail Corridor Study Task Force. The primary comment received was a request to make the references to the future of the rail line more general because the future of the High Speed Rail and Caltrain Electrification projects is so unknown and continues to change. The change would allow the Rail Study Report to have greater flexibility and to be used in a variety of scenarios, similar to the other long range City policy documents. The item was continued to give the Committee more time to provide comments. The item returned to the April 26, 2012 Rail Committee for final comments. Staff and BMS informed the Committee that various changes had been made to the document in response to their feedback and subsequent comments from the Task Force, the Planning and Transportation Commission, the Architectural Review Board and the public. It was emphasized that the report was crafted to be consistent with the City’s position on the High Speed Rail project and the City Council Rail Committee Guiding Principles. The document was also revised so that it would be as flexible as possible to provide a longer horizon to better respond to the rapidly changing High Speed Rail and Caltrain Electrification projects. The Committee was appreciative of the work completed for the project and generally supportive of the document. Community Workshop A second Community Workshop was held on March 29, 2012 at the Lucie Stern Community Center. The first Community Workshop was held on May 19, 2011 at the Lucie Stern Community Room. In order to encourage a greater attendance of this workshop, notice cards were mailed out to all property owners and occupants within 600 feet of the rail corridor study area for over 7,000 notice cards. A notice was also published in the Palo Alto Weekly. Staff 10PLN-00198 Page 4 of 9 requested the Task Force members to publicize the meeting and encourage that their neighbors attend the meeting. Announcements of the workshop were also posted at City Hall, the libraries, Lucie Stern and on the City’s websites well in advance of the meeting. In addition, staff sent notices to various merchants and posted announcements on the City’s social network pages. The public outreach drive was successful. Over fifty members of the public, most of whom had not been previously involved, attended the workshop. There was also a representation of the various parts of Palo Alto, with more than half from residents of South Palo Alto. The community members were generally appreciative and supportive of the report. There were a few key issues that were raised. Those issues included safety for children, pedestrians and bicyclists, treatment of all neighborhoods fairly, protecting schools from rail impacts. Some members of the public stated that although additional pedestrian and bicycle crossings were desired, additional vehicular crossings were not. PTC and ARB Hearings The Rail Corridor Study Report was distributed to both the Planning and Transportation Commission (PTC) and Architectural Review Board for their comments. A study session before the PTC was held on March 14. The PTC expressed support for the document and provided comments and direction to staff and the consultant. Some of the more important comments included:  Have clear, bold vision statements.  Provide measurable improvements and implementation steps.  Be careful with language to avoid commitment to impractical goals/actions.  Include language to prevent narrowing of Alma Street.  Discuss open space opportunities.  Discuss land use opportunities above trench and alternate ways of designing trench cover.  Make City Council Rail Committee Guiding Principles more prominent, including incorporating Guiding Principal 3 (equal consideration for all neighborhoods affected by the rail) into the Study’s Goal 1.  Support for proposal of future area plans, similar to Concept Plans.  Need stronger urban design component, especially for Alma Street and rail right of way. An Architectural Review Board Study Session was held the next day on March 15. The ARB was also supportive of the document and expressed a desire to confirm that this effort would be incorporated and not ignored. The ARB had similar comments to the PTC. The comments included:  Appreciated key stone discussion.  Need to consider impact on high school.  Concerned about trenching roadways rather than train, but should be studied.  Great opportunity to improve pedestrian and bike friendly, especially along tracks.  Should study potential crossings for pedestrians and bikes, not just for vehicles.  Move new Comprehensive Plan policies to front. 10PLN-00198 Page 5 of 9  Clarify what City’s position and reasons regarding rail improvements  Would like more studies of various scenarios.  Would like vision statement for Alma Street.  Report should be clear what benefits the City.  Implementation plan is very important component. DISCUSSION: Draft Rail Corridor Study Report The vision of the project, developed with the Task Force and stated in the Rail Corridor Study Report, is to “create a vibrant, transit-rich area with mixed use city and neighborhood centers that provide walkable, pedestrian and bicycle-friendly places that serve the community and beyond, and to connect the east and west portions of the City through an improved circulation network that binds the city together in all directions.” The purpose of this document is to generate a community vision for land use, transportation and urban design along the Caltrain corridor. The areas that make up the Rail Corridor have been historically viewed as separate disconnected areas. This report attempts to look at the entire corridor as an interconnected subarea within the City. This represents challenges because of the diversity of the various components that make up the corridor and the sheer size of the 1,000 acres that comprise it. The intent is also not to analyze in detail the various impacts of the various rail alternatives, such as noise and air quality. The study was also not intended to provide detailed traffic impact analysis. This type of analysis is beyond the scope and resources of this study. BMS will provide a detailed presentation on the report at the hearing. The report is divided into seven detailed sections:  Executive Summary  Introduction  Background  Issues and Vision  Circulation and Connectivity  Land Use and Urban Design  Implementation and Next Steps Five overall themes developed that became particularly important to the Task Force and the success of this report as a guiding document. Those themes are: 1. East-west connectivity must be improved and barriers should be removed. 2. A trench system is the preferred alternative if High Speed Rail is approved (although this was not unanimous) 3. All residential neighborhoods must be protected and treated equally. 4. New development requires timely infrastructure improvement. 5. The highest possible level of safety must be ensured at all rail crossings. 10PLN-00198 Page 6 of 9 Revisions to Report The most recent City Council position on the High Speed Rail (HSR) project was to oppose it in any form, although there is some support for the blended two-track Caltrain/HSR project. Because this is not a technical study or a feasibility study, the decision was made to focus on two rail configurations that would capture the range of issues that could occur under any of the various alternatives being discussed by the State in order to allow this study to be flexible and able to address multiple scenarios. Those two options are:  Trench  Below-grade two-track on-grade These two options encompass the conditions that would occur with all the other variations of the rail projects that have been discussed. Following the various hearings, public meetings and the second community workshop, the report was revised to clarify that the City’s preference is for the trench option only. Various revisions have been made to the report subsequent to the Planning and Transportation PTC hearing in March to address the comments and concerns raised during the public process. The major changes include: Circulation and Connectivity Chapter:  The Alma Street discussion has been expanded to address more issues and opportunities.  The importance of maintaining traffic capacity of Alma was emphasized, which would be impossible if Alma Street was narrowed.  A concept diagram for Alma Street was created, similar to the one created for El Camino Real.  Corridor-wide design principles and specific improvement recommendations were incorporated throughout.  Connection opportunities along the rail corridor are discussed. Opportunities include incorporation of green spaces and other treatments to benefit the City and its occupants either above a covered trench or along the rail corridor. Implementation Chapter:  The goals and policies in the Implementation Chapter were revised to be more consistent with the format of the Comprehensive Plan  Ball park cost estimates were added for the Tier 1 Priority Improvements  Detailed area studies, similar to the California Avenue Concept Plan, were recommended for the Downtown/University Mixed Use City Center and the South Palo Alto Neighborhood Mixed Use Center.  A Transportation and Public Improvements Plan for Alma Street was recommended. Although the rail projects are still pending, it was discussed that improvements along the right of way could be started and implemented.  A Rail Corridor/Alma Street Crossings Improvements Study and Engineering Studies are also recommended. All efforts should be coordinated with any rail improvement projects. 10PLN-00198 Page 7 of 9 Comprehensive Plan Goals and Policies One of the important components of the implementation of this report is the recommendation of new policies for the Comprehensive Plan. Much of the elements of the study are consistent with goals, policies and programs in the existing Comprehensive Plan. Five new goals were identified in the Study to be incorporated into the Comprehensive Plan as part of the overall Amendment process to further the goals of the Study. As discussed above, the goals have been modified to respond to comments and to make them more consistent with existing Comprehensive Plan policies. The goals have been endorsed by the Task Force. However, there were some task force members, as well as some members of the public, who supported Goal 1 to allow an at-grade rail system. Goal 1: Rail improvements should be constructed in a below-grade trench. Policy 1.1: The City’s preferred vertical alignment for fixed rail in Palo Alto is below grade. The City is opposed to an elevated alignment of HSR/Caltrain in Palo Alto. Goal 2: Ensure the highest possible safety at all rail crossings and mitigate rail impacts on neighborhoods, public facilities, schools and mixed-use centers. Policy 2.1: Improve existing at-grade crossing. All at-grade crossings of the Caltrain corridor should be improved to provide the highest possible level of safety and convenience. This may be grade separations or safer at-grade crossings, with the preferred choice generally being grade separation. Policy 2.2: Provide additional safe and convenient crossings. Additional crossings of the tracks, and in some cases Alma Street as well, are essential to provide connections from neighborhoods to destinations such as schools, parks and services. Policy 2.3: Improve safety and minimize noise, vibrations and visual impacts of operations in the Caltrain rail corridor. With or without the addition of High Speed Train, the Caltrain corridor should be modified to improve safety and to minimize future noise, vibration and visual impacts on adjoining districts and neighborhood. Goal 3: Connect the east and west portions of the City through an improved circulation network that binds the City together in all directions. Policy 3.1: Seek to increase the number of east-west pedestrian and bicycle crossings along Alma Street, particularly south of Oregon expressway. Goal 4: Provide improved access to parks and recreation facilities and schools and assess future needs for these facilities. 10PLN-00198 Page 8 of 9 Policy 4.1: Enhance connections to parks, community centers, libraries and schools within the corridor or between the corridor and nearby facilities. Opportunities to increase school capacity and facility development and use should be evaluated and coordinated between the Palo Alto Unified School District and the City. Goal 5: Infrastructure should keep pace with development. Policy 5.1: Implement plans and coordinate with other agencies where required for parks, recreation and traffic improvements, as well as new or expanded schools in order to keep pace with new development. Sewer, water, storm drainage and wastewater management should be evaluated and implemented in conjunction with development. Next Steps The next step will be to bring the ARB’s recommendation and the report to the PTC on May 30, 2012 for their formal recommendation to the City Council regarding the Rail Corridor Study. Should the Study be approved, it would be incorporated into the Comprehensive Plan by reference and the five Comprehensive Plan goals/policies would be included as part of the Comprehensive Plan Amendment process, as well as the associated Environmental Impact Report. POLICY IMPLICATIONS: The Study will rely on the City’s Comprehensive Plan and other land use transportation policies to guide the effort for the corridor. Current Comprehensive Plan and area plan efforts, including the Bicycle and Pedestrian Plan update, will be considered in conjunction with the Rail Corridor Study. The Study is consistent with the current Comprehensive Plan, as shown in the Comprehensive Plan Policies and Program Assessment Table on page 6.14 for the Study. PUBLIC OUTREACH: To solicit public feedback, a website and email address has been established for the project. Notices for all meetings are posted on the City’s website in the Know zone (http://www.cityofpaloalto.org/knowzone/agendas/rail_corridor_task_force.asp) and the City Hall Notice Board. Additional background information is also provided on the webpage. Staff has been maintaining an email distribution list of interested individuals and has used the list to send out meeting notices and updates. An email address, railcorridorstudy@cityofpaloalto.org, has been established for public outreach purposes. A separate detailed website, www.paloaltorailcorridor.org, has been made available to provide as much information as possible for the public, similar to the one developed for the Comprehensive Plan Amendment. The Task Force meetings are also recorded and available for viewing at the Community Media Center website. The Draft report has been made available for public review on the project website, City Hall, the Development Center and all four public libraries during the process. 10PLN-00198 Page 9 of 9 ATTACHMENTS: A. Draft Palo Alto Rail Corridor Study Report (ARB only. Also available online at www.cityofpaloalto.org/knowzone/agendas/rail_corridor_task_force.asp and www.paloaltorailcorridor.org.) B. City Council Rail Committee Guiding Principles C. March 14, 2011 Planning and Transportation Commission Staff Report D. Public Correspondence COURTESY COPIES: BMS Design Group Rail Corridor Study Task Force Prepared By: Elena Lee, Senior Planner Manager Review: Amy French, Current Planning Manager/Acting Assistant Planning Director City of Palo Alto Page 1 Palo Alto Rail Corridor Study: Review and Recommendation to the City Council and Planning 1 and Transportation Commission for the Palo Alto Rail Corridor Study Report. 2 3 Chair Wasserman: We are up to Item #3. We, Russ? You want, would you like, are you going 4 away? Oh, Ok. We’ll miss you. Yeah. Are you coming back for the other ones? Ok, ok. 5 You’re gonna leave us on our own? You trust us? Ok. This is item #3, it’s a major review of 6 the Palo Alto Rail Corridor Study, in which we are asked to review and recommend to the City 7 Council and the Planning and Transportation Commission (Commission) this Rail Corridor 8 Study Report. We also have with us Eduardo Martinez from the Planning and Transportation 9 Commission should he have words of wisdom for us as any time. And do we have a Staff 10 report? 11 12 Elena Lee, Senior Planner: Thank you Chair Wasserman and Board Members. We are returning 13 to you today to request formal Architectural Review Board (ARB) recommendation on the Rail 14 Corridor Study Report. Staff recommends that the ARB recommend to the Commission and 15 Council to prove a resolution approving the Study and to incorporate the Vision Statement into 16 the Comprehensive Plan. 17 18 This Report is the outcome of a nearly two year process by Staff, BMS Design Group, and the 19 Citizen Task Force to study and develop land use and transportation policies for the Corridor. 20 The intent as defined by Council is to generate a community vision for land use, transportation, 21 and urban design opportunities along the Corridor in conjunction with and apart from the various 22 rail projects. 23 24 Subsequent to the ARB hearing in March, a second Community Workshop was held on March 25 29th to help solicit feedback from the public. To encourage attendance Staff implemented 26 significant public outreach process. We requested the Task Force reach out to their stakeholders 27 to encourage them to attend, we mailed out multiple e-mail announcements, we sent out 28 postcards to residents and occupants within 600 feet for a total of over 7,000 postcards. We 29 posted the meeting on the website, the social network pages; we printed an ad in the paper. We 30 also worked with business owners to give them copies of the posters for them to post. And as a 31 result we did have a much better attended Workshop. We had over, probably a little over 50 new 32 people attending the workshop as well as Task Force Members so it was a full room. And BMS 33 will provide a summary of the results of the Workshop. But the attendees represented various 34 stakeholders and they represented both South and North Palo Alto, and they generally expressed 35 support for the project and really focused on safety improvements especially for kids on the 36 school corridors. 37 38 A final Task Force Meeting was held on May 2nd for their final recommendation. The Report 39 was updated following those meetings, the workshops, and to respond to comments from the 40 public, Commission, and the ARB. BMS will provide a summary of the changes and it’s also 41 listed in the Staff report. 42 43 The changes include a discussion on urban design, treatment of the corridor, and clarification of 44 the City’s position on the various rail projects. The intent of this Study is to be a higher level 45 City of Palo Alto Page 2 study and because of limited time and resources issues were identified and also identified were 1 future actions to help address those issues that cannot be resolved within this time frame. 2 3 And at the final Task Force meeting the Task Force Members did vote in favor of recommending 4 approval of the project. However, during the discussion of the project, especially modifications 5 to Goal 1 regarding the alignment of the high speed rail project, not all members supported 6 saying that trench was the only preferred alternative, which is consistent with past discussions. 7 And however, they did vote in favor of Goal 1 as written in your current report. 8 9 Staff would also like to draw attention to a subsequent e-mail sent by Beth Bunnenberg, Liaison 10 from Nature, recommending her support for the project. Also in your packet was an e-mail from 11 Martin Summer, a Task Force Member who was unable to attend today. Specifically requesting 12 that everyone consider changing Goal 1 and Goal 2 so Goal 2 would become Goal 1 and vice 13 versa. Not changing the content, but just changing the order of it to prioritize safety over the 14 alignment of the rail. 15 16 The Report’s recommendations identify priority improvement projects for safety and 17 connectivity. The Report also recommends new Comprehensive Plan polices. The purpose of 18 this document as discussed before is to identify these as future efforts. The new policies if 19 approved will be incorporated into the upcoming Comprehensive Plan, or ongoing 20 Comprehensive Plan update process. Other future projects would become part of future area 21 studies, development projects as appropriate, and the Capital Improvement Program (CIP). 22 However these future projects would be subject to separate California Environmental Quality 23 Act (CEQA) process including the Environmental Impact Report (EIR) being prepared for the 24 Comp Plan update. 25 26 There are several Task Force, well there is at least one Task Force Member in the audience, Staff 27 invites them to speak on the process. We would also like to express our appreciation for their 28 hard work throughout the process and the enormous amount of time they devoted to this. The 29 next steps would be a Planning and Transportation Commission hearing on May 30th and Chair 30 Martinez is here in the audience. Following this BMS will make their presentation. And 31 Council is scheduled for June 25th. Both Staff and consultant are available to answer questions. 32 Thank you. 33 34 Chair Wasserman: Thank you very much. If there is anyone in the audience who is going to 35 want to speak to this later could you put a card in please? And can we have the presentation? 36 My understanding is that you asked for 15 minutes and I cleared you for 15 minutes. 37 38 Michael Smiley, BMS Consultant: Ok, well thank you. I’ll try to do it in less because 39 40 Chair Wasserman: That’d be good. 41 42 Mr. Smiley: I have 11 slides. My name is Michael Smiley I’m a partner with BMS Design 43 Group. With me here today is also is Paige Martin, with the firm and between the two of us we 44 will present essentially what we’re going to present here to you, or what I’m going to present to 45 you now is the mostly an overview of some of the modifications in response to the comments we 46 City of Palo Alto Page 3 received both from you and from the community, Commission, and other comments that were 1 received. So we, it’s not my intent to go through the details of all those, but just a broad 2 overview of the kinds of modifications that were made and then we can answer your questions. 3 4 Before I start I would also like to reiterate what Elena said about the work of the Task Force. 5 Fifteen meetings, about a year and a half, and it was really yeoman’s effort. It made our work 6 certainly a lot easier to again a lot of people, but interpreting and bringing something together 7 with a lot of input and very good regular attendance. So I think the Task Force really needs to be 8 commended because we haven’t had that kind of working group. I think mostly my entire 9 political career we haven’t had that so, not political career, excuse me, professional career. So it 10 was great. 11 12 Elena briefly went through the review process. This was a third review draft review that of the 13 document you saw before in the various meetings we’ve held and the dates up until the last Task 14 Force meeting on May 1st when the Task Force approved or endorsed the recommendations 15 represented in this report, which was then republished, if you like, on May 16th and that’s the 16 document you have now. Next slide. 17 18 Now the last, just a comment about the Community Workshop, which Elena also mentioned. We 19 had quite good attendance and one of the things that was also very nice about that is that we 20 asked for a show of hands of the proportion of the crowd that was from South Palo Alto, from 21 the southern area of the Corridor because there was some concern that there may not be adequate 22 representation there. And it was something in the order of two thirds of the crowd came from the 23 southern, California Avenue South and that was really terrific that we had that kind of 24 attendance. Generally speaking what we did was we presented of course the overall findings and 25 we also had as you can see from the photos we had had various in the various categories land 26 use, urban design, implementation strategies and then some response panels related to the Rail 27 Corridor itself. We asked people to review those and place comments, written comments and so 28 on. And generally speaking, I’d say that there was broad support for the findings and the 29 recommendations of the Task Force. In fact there was very little dissent of any kind that we can 30 think of that related, of the findings of the Task Force. So the, the attendees were quite pleased 31 with the work the Task Force had done and really probably the most important thing to come out 32 of that was that we did, went through the dot exercise and that allowed us to prioritize some of 33 the recommendations that became the priority projects in the report. Next. 34 35 Here you see the summary of this; it was not a scientific survey of course. We gave each 36 attendee eight dots and there were 27 subjects that they could put dots on. We did not restrict 37 them to one dot per subject, so if you wanted to load an area with three dots you could. We 38 don’t know how many people did that, but generally speaking we think people kind of spread 39 their dots around. But there were a few of the recommendations of the priority projects that 40 clearly emerged. They were covered with dots. And here you see those, there are some that are 41 not surprising at all, for instance this has long been a topic the three rail crossings of concern to 42 the neighbors and particularly those in the south. And so you see out of 27 subjects, 50 43 attendees, you have eight dots there’s 50 votes just for the Charleston rail crossing. So it, not a 44 surprise. Again and you see here some of the others related to the intersections that were felt to 45 be most important for improvement on El Camino Real. Next slide. 46 City of Palo Alto Page 4 1 And then various other locations for intersection improvements, again University at El Camino 2 Real and those crossings at Embarcadero crossing right directly adjacent to the High School. 3 And then a couple of other votes about improvements to the California Avenue tunnel and a 4 desire for an additional southern undercrossing. The, as you’ll recall the recommendation the 5 Task Force show one made in the vicinity of Materdero Creek but there’s also a very strong 6 recommendation that additional investigations be made for further crossings assuming we can 7 solve the land use constraints of adjacent neighborhoods. Next. 8 9 Some of the final Report revisions I’m gonna just touch on these briefly, this is a little bit of a 10 table of contents if you like, that we received a lot of comments before about Alma in the various 11 meetings both from here and from the Commission. And so I wanted to expand a little bit about 12 the recommendations about Alma itself and various other things related to the Rail 13 Comprehensive Plan policy recommendations, priority policies. And one of the things we did 14 add is a whole new chapter on next steps, or a subchapter, and that’s in there. And I’ll touch on 15 these so we can, let’s go to the next slide. 16 17 The Alma Street recommendations basically there was a desire in a lot of the comments we see 18 from the various meetings and so on that there be more information and more guidance related to 19 Alma itself. And so there is an expanded text related to the issues and opportunities there. There 20 is concept diagram now that’s very similar to the kind of a concept drawing that was done for El 21 Camino Real showing the priority crossings for Alma and as they might relate to the rail. And 22 then a few additional specific recommendations that are in those sub-bullets you see here. One 23 was the idea of providing continuous Class 1 bicycle facility along the entire Alma corridor and 24 part of this would be, would be the way it it’s structured here is it needs to be considered as part 25 of the rail improvements and has the total right of way of both facilities. So it’s associated with 26 Alma, but it’s something that would be, is going to require a look at the right of way in both 27 facilities. 28 29 The other thing there’s conversation about preparing a Transportation and Public Improvements 30 Plan. Now that plan is not here, but there’s strong recommendations that as a next step an actual 31 Transportation and Public Improvements Plan be prepared for Alma as a next step. That would 32 include measures of beautification and there is also clear identification of the two corridor 33 segments of Alma. Now the sort of the downtown segment and what we’re calling the more high 34 traffic volume primary quarter segment and there’s better definition of that in the current Report 35 as well today. And then, as I mentioned, a recommendation that future studies be conducted. 36 Particularly a Transportation and Public Improvements Plan. Next. 37 38 The Comprehensive Plan Goals and Policy statements were modified really, this ended up being 39 a rather significant conversation topic among the Task Force but the modification that was made 40 is where Goal 1 and 2 you see here today is now broken out as two separate goals. They were, in 41 the prior document, one. And the emphasis was to one, to make a statement more clearly about 42 what the, the rail facility itself, the preferred option for the rail facility might be. Now this 43 caused some discussion and it’s in your packets that not all Task Force Members were 44 completely concerned that the actual rail configuration be necessarily in a trench. It could 45 possibly be a surface improvement. But generally speaking it actually went to a consensus vote 46 City of Palo Alto Page 5 and it generally was favored to say something that was consistent with current City policy, a 1 preference for the trench. 2 3 Having said that Goal 2 was something that people were very strongly in favor of, and that’s a 4 very strong goal that talks about safety, and making sure we’re very clear about we want the 5 highest possible level of safety regardless of what the vertical alignment of that rail is. And that 6 gets back to things we saw in the community meeting where 50 people said we’ve got some 7 crossings we’re very concerned about and we need to fix those and it’s more important we get 8 those fixed then we talk about all day right now about the vertical alignment because there’s too 9 much we don’t know about the vertical alignment yet. Otherwise the goals remain the same as 10 they were in your prior document. Next slide. 11 12 Now I mentioned that we added, this is a subchapter, Next Steps, to the Implementation Chapter 13 and these are the basic headings that are in that. It goes into a series of, it of course has the 14 Comprehensive Plan Policy Statements are part of that chapter and it just mentions that yes that’s 15 a very important first step is let’s roll this into the Comp Plan update process as well as input to 16 the California Avenue Concept Plan which is in process now. The, you’ll see, the preparing 17 detail area concept studies the idea that particularly in the California, I’m sorry in the northern 18 mixed use center that we’ve described around University Avenue and El Camino Park and Way. 19 And in the south, that some detail concept area plan work be done in those two places similar to 20 what’s being done in California Avenue today that’s more detailed look. Palo, the Alma Street 21 Transportation and Public Improvements Plan, I mentioned that. 22 23 Now the second, the, I guess they’d be the fifth and sixth relate to the Alma and Rail Corridor 24 crossings themselves and their two different things. One is something the City can begin a 25 process now is to identify where some additional crossing opportunities might be particularly in 26 the south, and begin a process maybe working with neighborhoods and property owners. The 27 sixth bullet there, input to the engineering studies this is something that the City needs to be an 28 active part in working with the engineers, the High Speed Rail Authority, Caltrain and so on 29 playing an active role in those engineering studies, which really aren’t going to be conducted by 30 the City likely, that work is going to be done by the engineers for the rail, the rail engineers, but 31 to actively participate in that beginning now. And to the extent that you already are, that’s good, 32 but keep that going. And then continue the El Camino Real intersection improvements 33 particularly the priority intersections that came out of the community process. Next. 34 35 The priority projects were, are generally the same as you saw in the prior document they have 36 not changed except that the, there was in the third tier it was mentioned in the prior document in 37 the third tier of projects was this idea of finding a additional southern crossings. That was 38 moved to a second tier priority. And that’s what that second point mentions. And then finally 39 next line. I believe there were a few minor edits in the Appendices, mostly they related to 40 clarifications of the four rail alternatives of High Speed Rail and the surface alternative and add a 41 bit of additional explanation relating to the role and Guiding Principles of the Rail Committee 42 itself. 43 44 Finally I’ll just mention here, this is the last slide, that we will be going to the Planning and 45 Transportation Commission on May 30th and on June 25th is the City Council. So we are 46 City of Palo Alto Page 6 available for questions. I believe there are some others that you’d like to have speak first but 1 then we can answer questions however. 2 3 Chair Wasserman: Thank you very much, and thank you for doing this enormous job. Eduardo, 4 did you want to speak at this point about what the Planning and Transportation Commission said 5 and then we’ll hear from Irvin Dawid who put in a card to speak. Anybody else want to speak 6 on this get your cards in now. Going, going, gone. 7 8 Eduardo Martinez, Chair of Planning and Transportation Commission: Ok, thank you Chair 9 Wasserman and Board Members. I’m Eduardo Martinez, Chair of Planning and Transportation 10 Commission. The most important think that will come out of this is the adoption of the plan, not 11 just the policies and goals, but the adoption of the plan itself, of this Study into the 12 Comprehensive Plan update. And that’s huge; I mean that’s like a big thing for the next 10 years 13 of our City. Because every year we will go back to the Comprehensive Plan and say, well what 14 does the Rail Corridor Study say about what we’re going to do? And, so the goals, the policies 15 that have been stated in the plan are really the most critical elements and we want to make sure 16 we get them right. We want to make sure that we really want to emphasize public safety at the 17 crossings and how that’s important for when, in some future day another authority comes and say 18 we want to do rail this way. That we’re fortified with the argument to say it has to address this. 19 And that includes urban design, the historic element of the Corridor, public safety of the 20 crossings, and things of that nature. 21 22 So your weigh in at this point and hopefully in a future meeting is really, really important to us 23 on the Planning Commission to help us strengthen how we’re going to look at this. We, we 24 don’t want to have a policy that says the Corridor must be safe. I mean that’s our intention but 25 that’s not good enough. We really want to say, these, we want to create a strong connectivity 26 east and west to our City and this is potentially how we want to do it and things of that nature. 27 So I really encourage you to weigh in on what is being proposed and how we could make that 28 stronger. 29 30 The Commission did weigh in and greatly supported the work of the consultant, Task Force, and 31 Staff on this. We think it was, as you’ve stated an overwhelming job of pulling this all together. 32 But now it’s our work, the Board and our Commission, to really step back and say, well how can 33 we really put this to work? Because they’re going to be in front of us great challenges. I want to 34 say to what the future of this Rail Corridor is gonna be so we might need to make this Comp Plan 35 recommendations as strong as possible. And I agree with what your consultant just said that 36 really we need to look at these next steps of really creating a plan. A plan based on these 37 policies and programs and goals, and be prepared to support and defend that plan going forward 38 in the next five to ten years. Thank you. 39 40 Chair Wasserman: Thank you very much. I really appreciate your coming and sitting through 41 this with us. Irvin Dawid. 42 43 Irvin Dawid: Thank you Chair Wasserman and Commission Members. Irvin Dawid, 753 Alma. 44 I was one of two Task Force Members assigned from the environmental community. It was a 45 real positive experience participating on this Task Force, which we always generally got between 46 City of Palo Alto Page 7 10 and 15 members, very diverse opinions. You know I remember when one of the first Council 1 meetings where there was a report, some members of the public accused us of being 2 representative of the development community. You know nothing could be further from the 3 truth. We, if there were representatives from all sectors but one thing that was very clear was 4 that everybody drew upon their own experience as a Palo Alto resident and their images of the 5 Corridor. 6 7 I think Martin, Elena mentioned I think that Martin suggested that polices one and two be 8 reversed. Martin was clearly one of the more outspoken members of the Task Force, and 9 unfortunately I did not get to attend the final meeting on May 1st. I was out of town, but I think 10 when you look at these policies, if you look at policy 1.1, 2.1, and 2.1 the one thing that really 11 hits you, certainly it hits me is that they’re contradictory. If you’ve ever been on the Belmont to 12 San Carlos elevated, the berm, and there, it’s the ultimate in safety in all existing rail crossings. 13 Plus if you biked along that on the east side, or even on the El Camino side, but mostly on the 14 east side, I think it’s called County Road, what you’ll see is that there are ped. bike tunnels. You 15 know, in both Belmont and San Carlos that went in there simply because it was elevated. 16 17 So, if, the way I, I mean, I, we also took a tour of, we took a bus tour of it. And the one thing 18 that I really got out of it is that our existing grade crossings really are not safe, they are not safe 19 from, I mean most recently there was a fatality of somebody who was from out of town on one of 20 the two, I forget whether it was Charleston or Meadow. I was just on a train just last month, 21 although we, the train swiped a motorist, this was at Ravenswood in Menlo Park, but I ended up 22 sitting in the train for an hour opposite El Camino Park because they couldn’t, they wouldn’t let 23 us out while they investigated. If Palo Alto insists that above all our highest thing is we will 24 have to have under grade, then they really have to commit to paying for it. Thank you. 25 26 Chair Wasserman: Thank you very much. Is there anybody else from the public who would like 27 to speak to this subject? Ok. Oops, sorry. The thing you’ve asked us to vote on is accepting the 28 Vision Statement into the Comp Plan, plus the Report. But that was a specific request? So I’m 29 gonna, is that correct? 30 31 Ms. Lee: Yes. That was. 32 33 Chair Wasserman: Ok, I’m gonna read that one so that we know what the vision is and then 34 everybody can talk about anything they want and we’ll get back to voting on the Vision 35 Statement. This is on Page 3.03. “The overall vision is to create a vibrant, attractive, transit rich 36 area with City and neighborhood centers that provide walkable, pedestrian, and bicycle friendly 37 places that serve the community and beyond and to connect the east and west portions of the City 38 through an improved circulation network that binds the City together in all directions.” Doesn’t 39 seem to mention safety? But that’s what it is here and that’s, so I will just now open it up to the 40 Board for their comments. Lee. 41 42 Board Member Lippert: First of all Mr. Smiley I want to thank you and your consultancy for the 43 work that you’ve done with the corridor in terms of facilitating the meetings and everything. 44 I’ve attended several of the meetings and for a group that was rather, how should we say? Going 45 City of Palo Alto Page 8 in many different directions you managed to get everybody pretty much moving in one direction, 1 which I think is a task by itself. It’s remarkable. 2 3 When the City Council started this project they put together their Guiding Principles so to speak, 4 and probably what’s the most significant thing out of this is to have a group of citizens now able 5 to come up with their thoughts and be able to run it through a variety of boards, commissions, 6 etcetera. And then bring it back to the City Council for ultimately their final blessing, you know, 7 on what’s being proposed here. And that’s really what’s pretty important here. You know, in 8 some ways this community was blindsided by High Speed Rail. And when I say blindsided the 9 voters voted for it, we thought it was a great idea in terms of being able to travel from San 10 Francisco to L.A. in two hours and 40 minutes. What wasn’t understood at the time was that it 11 was going to be bisecting our community at the time and ultimately making land use decisions 12 for us on the adjacent properties and how the City functions. 13 14 And with this Report what it does is it adds legs to the CEQA process that was initially started 15 when we were first introduced to what High Speed Rail meant to this community. And taking 16 out of the equation High Speed Rail allowed us to look at what the community wanted in terms 17 of being able to knit the community back together again, how we wanted our community to 18 function and ultimately then give direction back to the High Speed Rail Authority and Caltrain as 19 how we want the train to come through Palo Alto. And so with regard to what’s being presented 20 in this report, they are important. I look at this as being the beginning. It is our vision, it can be 21 incorporated into the Comprehensive Plan, it has gone through a process which has engaged the 22 citizens and the leadership and Staff in this community. And ultimately what I would hope is 23 that it would be served back to the High Speed Rail Authority and the, and Caltrain in terms of 24 us saying this is the way we view this Rail Corridor in Palo Alto. 25 26 And finally one last step is that ultimately in the CEQA process probably it is the State 27 Legislature that will have the final word as to what’s going to happen, but these are elected 28 officials. And they need to know how Palo Alto feels about High Speed Rail and this Corridor 29 as well. And because they have to prepare, if they’re not in agreement, their statement of 30 overriding considerations. And so this document in some ways is our Bible. It is our, it is our 31 plan and if people are in variance to it they have to give good reason. 32 33 So I’m in support of what you have here. I think the Vision Statement is just fine. I don’t have 34 any need to tinker with it although I have things that I see here that could be improved. As far as 35 the document’s concerned it’s very complete. I’m glad that not everybody was in complete 36 agreement with regard to a trench solution. I think that it’s a process, it’s an evolution as they 37 say, so ultimately, you know, it’s gonna be on the surface for now and at some point portions of 38 it may wind up going in a trench and some portions of it may in fact wind up going underground. 39 We don’t know, but at least the plan addresses that. 40 41 And I think lastly, I think that Eduardo Martinez has hit the nail on the head with regard to his 42 comment with regard to, Chair Martinez has hit the nail on the head with regard to, this is a plan 43 and what needs to happen is that it needs to be reviewed on a periodic basis and now we need to 44 begin to flush out the specifics of how the mechanics are gonna work. The physical mechanics. 45 46 City of Palo Alto Page 9 And I’m just gonna give you one example, just quickly, is at Oregon Expressway. Right now we 1 have Oregon Expressway goes down underneath, you know, and with the train going above. It’s 2 a really great opportunity to sort of flip things around if they do take us up on our word and say, 3 gee, you know we can trench everything, we’re gonna find that road has to go somewhere. It can 4 either go deep or it can be elevated. That’s a real important note as far as I’m concerned in the 5 entire City, because first of all it basically represents the midpoint of Palo Alto if you were to 6 take, drive from University Avenue where the City North boundary south, Cal Ave. is about 7 midpoint of the City. Everybody goes to midtown whether you’re coming from the north or the 8 south. It’s an exit off of the freeway, it leads out to the Research Park. So in some ways it’s a 9 crossroad at that point. It bridges residential neighborhood with a commercial business district. 10 It has far more opportunity than the downtown ever has in the way of future because downtown 11 was already pretty much built out. We have in place the opportunity for pedestrian transit 12 overlay district which allows for higher density as well as people being able to hop on Caltrain as 13 well as grab the bus, the express bus if we have a future high speed bus there. So, I think that 14 that might be one area that we actually begin to target or flush out in terms of the mechanics or 15 the details that I think would be a really great starting point as far as the City’s concerned. And 16 so if anything, because of a lot of things happening in that area I would just say that that’s where 17 the mechanics should begin. Thank you. 18 19 Chair Wasserman: Thank you very much. 20 21 Ms. Lee: Chair Wasserman? 22 23 Chair Wasserman: Oh, yes Elena. 24 25 Ms. Lee: I’m sorry. I’m sorry to interrupt, but I just wanted to clarify for the members of the 26 public the Vision Statement is on Page 5 of the Staff Report. So directly under the first section 27 under “Discussion.” So just so the public can also read the statement. 28 29 Chair Wasserman: Page 5 of the Staff Report says that… oh, it’s in quotes. Yes. Yes, it’s the 30 same, it’s the same wording but it is in quotes at the, yeah, at the under “Discussion” on Page 5. 31 Thank you. Alex. 32 33 Board Member Lew: So I just want to thank BMS and also the Task Force. I mean the document 34 is really, really just is great, I mean, this is amazing that you went through all of Palo Alto’s 35 many, many plans and looked at it all comprehensively together. I realize that was a huge, huge 36 undertaking. The improvements that you’ve made since the last draft that we reviewed are 37 substantial. I mean, I think that the last draft that you gave us had a lot of information, but it was 38 sort of missing some of the implementation and, you know, and just, you know, just general 39 attitude and I think you have that in this document. And I think is all very good. 40 41 In reading the document this time around I can’t help but thinking of, you know, going even, you 42 know, further like next steps, and some of the things that came to my mind, just as a were like 43 some of the neighborhood groups wanted like neighborhood markets. And then I look at like the 44 size of the population of some of these neighborhoods, maybe like 2,000 people and, you know, 45 they’re not really big enough to support a market in terms of, you know, market area and 46 City of Palo Alto Page 10 catchment area. And then they’re also opposed to say like additional auto crossings across Alma 1 so that’s gonna limits the market for say like a grocery store. So I think that there are some 2 things in here in the document that are very interesting to me that I think should, wouldn’t 3 warrant further studies and I think that that you have sort of put that in there as like specific, you 4 know, specific area plans and stuff. And I think that that would be the right way of pursuing it. 5 But it seems like that there’s really in the Corridor area that they’re really, it is ripe for more 6 improvements and I’m not sure that, you know, in the scope of this Study that you could’ve 7 really, you know, you couldn’t really address them but, I mean my take on it is like, you know, 8 like a, like a like if like transit stops. Like more so trolleys than Bus Rapid Transit (BRT), but I 9 mean they’re usually like in Portland and stuff they actually attract development in mixed use 10 developments around there and we don’t really have any we’ve haven’t really touched on that. 11 You know, what happens when you know BRT comes in. You know, like does that give us 12 more opportunity to do some of the things that the communities want. 13 14 And then also just have some detail questions for you. The, so I think the Task Force was 15 recommending like 15 foot wide sidewalks and I was wondering where that came, magic number 16 came from because we, I mean the City and elsewhere like in downtown and El Camino we’ve 17 been doing 12 feet. And I also looked on the, you know, the Grand Boulevard Initiative they 18 have a boilerplate design guidelines and I think if I can recall correctly I think they were 19 recommending 19 feet. Just as a magic number, to you know, just as a generic number to use. 20 And I was wondering where the 15 foot recommendation came from? 21 22 Mr. Smiley: Fifteen, is this on? Yes. Fifteen feet, we happen to do as another part of what we 23 do we do a lot of street design work and fifteen feet is a number that is true there isn’t real 100% 24 consensus on what an ideal number is, but fifteen feet tends to be a number that you can settle in 25 on. We know ten is typically too narrow, particularly if you have got, if you break a sidewalk 26 say into the three zones, either a curbside zone and a main pedestrian zone, and then some 27 building zone. Twelve becomes a number that’s often used and it’s right on the minimum 28 threshold really. Nineteen is very generous actually, I mean you can that starts to get to a scale 29 that’s very comfortable. So fifteen is kind of a middle zone in there, it’s a middle, let’s call it a 30 middle generous zone. In a sidewalk that doesn’t need or is not intended to carry a great deal of 31 traffic you can get away with ten or twelve. You can get away with it, but if you’re trying to 32 create activities you need to meet a threshold of, we’ve found that you need to meet a threshold 33 of somewhere around fifteen feet. 34 35 Now that doesn’t, having said that in relation to this particular document it isn’t that the Task 36 Force said that’s what they want. We suggested that as we did a variety of other things in our 37 role as the professional consultants here and that became a part of the document that the Task 38 Force endorsed. 39 40 Board Member Lew: Ok. Would it make sense to, I mean in the recommendation the 15 feet to 41 include a range of what you said just now, like 12 foot minimum, just so that we have an idea of 42 what are acceptable standards? I mean cause it’s, we have, I mean as we come, as projects come 43 to us we usually have to fight for every, to get the 12 feet as is today. And I don’t disagree with 44 you though wider would be nicer but, or just if you could, if it’s, I mean it seems to me that it’s a, 45 if it’s a recommendation that’s fine because I mean it just means that we have to do further 46 City of Palo Alto Page 11 study. But it seems like it would be, I don’t know, it would be useful to understand where that 1 came from in the document, but that’s a minor point I think. 2 3 Mr. Smiley: well we can certainly discuss that with Staff and how they want to handle it because 4 it may be something that you also want to, it might apply to other documents so that you would 5 have a way to, maybe more clear guidance. Particularly in some of the detailed area plans that 6 might be done in the future there might be certain specific areas that would be handled one way 7 and others would be handled another way. That would often be the way that it would be done in 8 any case. 9 10 Board Member Lew: Ok, and think should move on to the next one which is, I’ll give you a page 11 number, Page Number 5.09. This is in the California Avenue Area. I was actually looking at the 12 Fry’s area. And, so you’re showing like a new connection at Fry’s to El Camino, or an 13 enhanced, some you know, connection there. And right next to there, there’s the, you know, old 14 railroad spur that cross, that used to cross El Camino to the Bol Park path. And I did see that in 15 like, in our old Bike Plan, like I think maybe in the 2003 Bike Plan there was some mention of 16 connecting the Bol Park Bike Path through the Stanford Research Park. And I could see and 17 they could continue all the way to maybe the Cal Avenue Train Station and I’m not sure that that 18 actually continued on into the current Bike Plan, you know, document. I didn’t see it the last 19 time I looked. But I was wondering if there was any, if that had come up in any of your planning 20 discussions? 21 22 Ms Lee: Raphael Ruis from Transportation Division is here and he confirms that it is included in 23 the new Bike Plan as well. 24 25 Board Member Lew: Ok. Great. Thank you. So did that come up in any of the discussions? It’s 26 been 27 28 Mr. Smiley: No, not with the Task Force that specific connection did not. 29 30 Board Member Lew: Ok. I would, you know I don’t know, you know, the, you know how 31 feasible that thing is but I would say like in the in Berkley at like the North Berkley Bay Area 32 Rapid Transit (BART) Station there is a whole green way system to get to the BART Station and 33 it’s really fabulous. I mean it’s just like sort of the nicest way you could, you know, take to get 34 to the, you know, to get to the BART Station. And if we have something like that, this would 35 connect potentially connect Los Altos Hills and Barron Park and everything into the Cal Avenue 36 area without having to go on like Page Mill Road or, you know. And so, it seems like to me to 37 be a huge opportunity. 38 39 I think, I mean diagrammatically you’re showing a new connection through Fry’s and what is it, 40 Hansen Way or something? So I mean I think in terms of the document I think it’s probably ok. 41 I mean it’s like a block, you’re showing something a block away so that’s it seems like you could 42 be covering the bike path. But the idea of like a green way and stuff is really compelling to me. 43 44 Mr. Smiley: I’ll make a comment on that we could we can go back and look at the Bike Plan 45 also and make sure there’s good coordination there with those two. 46 City of Palo Alto Page 12 1 Board Member Lew: Ok, thank you. And then on the Comp Plan polices the Comp Plan goals 2 6.03, something popped into my head when Eduardo Martinez was speaking and that was just 3 about like the attractiveness of infrastructure projects. I was wondering if it made sense to add 4 something about, you know, attractive design with regard to infrastructure if it’s not already 5 covered elsewhere in the Comp Plan or say like the 1% for art for public projects. 6 7 What’s coming, what comes to my mind is things like I think in Phoenix, you know they have 8 overpasses that are attractively designed. They’re not just the standard cookie cutter overpasses. 9 Or say like there’s the sound wall that was built along Highway 85 in Mountain View. You 10 know it’s just like, you know, typical concrete sound wall but actually has art pieces embedded 11 into it. It seems to me that a lot of the infrastructure things that I see, like I’m thinking of 12 Millbrae BART Station has an art piece but also, you know, there are a lot of outlying buildings 13 for BART. I don’t know what they are if they’re air, you know, like say if it’s in a covered 14 trench then they need air intake or something. Usually though they’ll have all the little things 15 that pop up. And most of the time they’re designed by engineering firms and they’re really ugly. 16 I don’t know that we would actually, you know, if we would actually have any, if the City here if 17 any of our processes would have oversight over the design of that and if they don’t I would like 18 to have, you know, something to fall back on somewhere maybe in the Comp Plan or elsewhere. 19 20 But infrastructure can be really beautiful it doesn’t have to be ugly. If you look at like the 21 Golden Gate Bridge and you know the anniversary of that the original design of that was not 22 nearly so attractive. And so, I don’t know that was just food for thought. And I’d like to maybe 23 hear what the other Board Members have to say about that. Thank you. 24 25 Chair Wasserman: Thank you Alex. Clare. 26 27 Vice Chair Malone Prichard: Well I have far less to say than my colleagues. I’m very much in 28 support of what you have done here and I’m particularly appreciative of the expansion you did in 29 the Alma section regarding the whole Alma Study and putting together a plan for the street. And 30 as far as what Alex had to say, yes I would definitely be in support of having some kind of 31 language in here regarding infrastructure because I suspect we do not get to review that and it’ll 32 just get put in however the Authority chooses to put it in. But I think that generally this is ready 33 to go ahead and get moved on to and get it all put into the Comp Plan. 34 35 Chair Wasserman: Thank you very much Clare. I, I think this is a wonderful document. I, I just 36 want to say I also think that it is graphically really elegant and I actually could read it. Somehow 37 the graphic elements did not fight with the text, which seems to be a popular problem nowadays. 38 So I think it’s good looking, easy to read, and the content is very significant and I think you guys 39 did a really excellent job. I did a little proofreading there’s some really small errors like 40 Castilleja is a High School not an Elementary School. There’s something on Page 5.01 that calls 41 it a landscape perspective, I think it’s supposed to mean land use perspective. 42 43 And then there were a couple of things that were missing, that I thought needed to be just 44 mentioned somehow. One is that the present pedestrian bicycle undercrossing at California 45 Avenue is not Americans with Disabilities Act (ADA) accessible. It’s a mess. It’s a danger and 46 City of Palo Alto Page 13 a hazard and it’s a pain in the neck for a bicycle to go through there. And it was just sort of 1 listed as existing and I think existing is putting it a little too nicely. Also Alma Street, the best 2 thing about Alma Street is that row of trees on the train right of way and that, there should be 3 something mentioned about trying to protect that as much as possible. 4 5 I would like to second Alex’s call for public art. In the Comp Plan itself there’s a lot of talk 6 about gateways and public art at gateways and public art in almost anything and I know that 7 because I threw it in there when the Comp Plan was being written. So, I would just pick it up 8 please and put the public art in. You know, you talk about the identity of the mixed use centers. 9 Public art has been traditionally used to do that. Whether it’s the guy on the horse, or a fountain, 10 or you know, elegant paving or whatever. It’s a good way to do it. 11 12 On Page 5.09 there’s a, there’s a bike path that’s shown that runs, runs more or less parallel to 13 the train tracks and it needs to make the connection across California Avenue. I didn’t know 14 whether that was just a printing mistake or something but it would be 15 16 Board Member Lew: You’re saying Ash and not Park, or both? 17 18 Chair Wasserman: Well, no there’s one, what are all those little dots? Existing and planned 19 bicycle facility boulevard route, the little round blue dots that runs along Park and it runs along 20 Park on both sides of Cal Avenue and it’s not, it needs to be shown connected, that’s all. And 21 the square one that runs on Ash doesn’t seem to go anywhere, it sort of dies at California 22 Avenue. I think that’s a problem with the bike paths in general. The one, I mean, there’s there, I 23 just want to stay in this project area. 24 25 And also while we’re talking about bikes in this Corridor, the Fairmeadow Circles is a little bit of 26 a nightmare. I have never been able to pick the right turn to pick up the bike trail through the 27 Circles. It needs a sign, at least two or three, because once you get on the Circles you don’t 28 know how to get off and it’s just, it’s really it’s silly. 29 30 I’m gonna come back to the land use in a minute. Yeah, there are a couple of crossings that, that 31 were not mentioned. There’s one in this Cal Avenue section from if you go up Matadero and 32 cross the tracks there’s a parking lot. You can pick that up pretty easily with an easement. I 33 think you may lose one parking space to go through there with a bicycle, so that, you might just 34 look at that again. And public art. And also I thought that your study of the Comp Plan was 35 really excellent. I mean that, that’s a hell of a document and you really went through it with a 36 fine toothed comb and did a great job on that. 37 38 So here’s the part of this whole thing that disturbs me. And it was the slide that you showed 39 about the, the implementation. I think it’s a slide, that one. It’s all about studies and plans. 40 There’s actually, except for the last one that says, “Continue these intersection improvements.” 41 It’s yet another tier of studies and plans. And concept area plans and concept area plans in this 42 town have a special place at the bottom of the drawer in the back. And I, I can’t tell you how 43 many charrettes I have been to that have come out with wonderful plans full of trees and café’s 44 and plazas and God knows what and none of them have been implemented. The only one that 45 got anywhere was the South of Forest Area (SOFA) Plan and that was because there was an 46 City of Palo Alto Page 14 imminent development. There were, you know, thousands, you know, tens of thousands of 1 square feet coming down and people ready to build right on top of them and then needed a plan 2 and they used it. But we’ve done this, the Fabian, the East Meadow Circle plan we’ve done 3 twice. Both of them are completely different. One had housing one had none. The Cal Ave. 4 plan I think has been done before. I don’t know, I don’t know where that’s gonna get us and that 5 really concerns me. 6 7 And the other thing that I wanted to ask about was there are recommendations for land use from 8 mixed use areas that I think is great, but I have no idea how to achieve it. The plan says, you 9 know, we need this and we need that and we need housing and retail, and I have no, and in some 10 place it says, offer incentives for some of these things. And if you could just give me an 11 example of one location and one kind of incentive that could, cause we talk, we have these 12 community meetings and everyone wants a grocery store, right? And how do you get a grocery 13 store? How does the City get a grocery store? So, help. You’ve got, can you, can you tell me 14 how that’s done? 15 16 Mr. Smiley: Well I can, let me one that’s a little easier than a grocery store because of course 17 there has to be enough as they say rooftops to support a grocery store in the first place. And it 18 isn’t necessarily the case that there’s enough of those in any given catchment area where it’s kind 19 of the Trader Joe’s problem that lots of communities have. Lots of people want Trader Joe’s but 20 Trader Joe’s doesn’t want to go to all communities, right? 21 22 Chair Wasserman: Exactly. 23 24 Mr. Smiley: But an example that I think is rather striking is in the California Avenue area 25 between Oregon Expressway and California Avenue you’ve got large numbers of parking lots in 26 there. Now these are, where I’m gonna go with this I of course don’t have the history that you 27 all have and much of this has presumably been discussed before, but I’m going to restate some of 28 it and bring something maybe new. There is of course a fair amount of publicly owned land in 29 there with parking lots. And that seems with the value of land, not just from a dollar perspective 30 but from a use perspective, the immense value to a community of land in this Corridor it seems 31 that parking one layer of cars seems like a rather underutilized way to be using land. So the City 32 does control that land and can initiate some things themselves with that land. 33 34 The other thing is there are some County agencies in there. And one of those is I believe it’s the 35 Mental Health Services or something of that type building. It’s a one story building and sitting 36 in a great grassy lawn. And, I was trained as a landscape architect and so I have nothing against 37 landscape but again, I’m not sure that lawn doesn’t really get used by anybody. It’s just strictly 38 decorative. And then there’s a very large building that’s about three or four stories tall and it sits 39 at an angle in a parcel also with surface parking. 40 41 And so if you take the entire area what you’ve got is you’ve got immense amount of publicly 42 owned land and yes, it’s gonna take a considerable amount of community discussion to 43 determine how to best use that land but there’s opportunities for what this Report refers to as 44 both public/public and public/private partnerships to reuse some of that land. That does not 45 mean removing those public services that are necessary. It doesn’t necessarily even mean 46 City of Palo Alto Page 15 removing a rather tall building that’s there. That’s an important investment but the land certainly 1 could be used in a much more efficient way and that could be through public, through joint 2 development opportunities engaging both the County and the City and the private sector in 3 supporting the goals of both this Plan and some of the other goals that you have that relate to, as 4 I can’t remember now who said it, but the importance of the California Avenue as being the 5 midtown area. Yeah. Commissioner, I mean Board Member Lippert as you said. So that is an 6 opportunity area that this touches on but there needs to be some additional work done to start a 7 dialogue about how we’re gonna go about that. And I think there’s tremendous opportunity there 8 to get going on some real activities that will start to make and you control so much of that land. 9 10 Chair Wasserman: Well, we… 11 12 Mr. Smiley: I mean the City. 13 14 Chair Wasserman: Yes. Yeah, well that does help me because this kind of thing has been going 15 on forever and nothing ever happens. Elena. 16 17 Ms. Lee: Chair Wasserman the Study does identify future studies and part of that is because we 18 have limited resources and time. But what this does is it, it identifies priorities. It gives us 19 background document to return to the various boards and Commission and to Council to help us 20 identify what they want us to tackle next. We have a document with public input to show that 21 there is at least some public support to move forward on these items so, it gives us a list to start 22 working from and our goal would be to start working on implementing these in appropriate time 23 frames. But the intention is to follow up and we are continuing with a Cal Ave. Concept Plan. A 24 lot of what’s been discussed here will be folded into that process. And we’ll be bringing that 25 back to the public and back to the Commission and the Council so we have full intention of 26 following up on these items, which is why they’re being incorporated into a resolution to give it 27 teeth so that we know that we do have to follow up on these items. 28 29 Chair Wasserman: Oh, good. And the Cal Ave. Plan, it sort of is pressed by the Fry’s lease or 30 the some, something that expires in the Fry’s zoning problem. And that may actually make 31 something happen. 32 33 Ms. Lee: Yes, you’re referring to the limit of the retail uses on the Fry’s side. That limitation 34 was actually removed, but what the new property owners . Sobrato, waiting for is that Fry’s has a 35 lease, an option to extend that lease and they haven’t expressed a desire either way and we may 36 not know for about a year or so, but we fully anticipate that once they make a decision that we 37 will get some sort of response back from the property owner about what they want to do. But, 38 both Fry’s as well as the property owners are involved in the concept plan and they have been, 39 they will continue to be involved whether they want to respond to us or not. 40 41 Chair Wasserman: So when they, when their deadline comes up something will happen? 42 43 Ms. Lee: That is our hope. 44 45 City of Palo Alto Page 16 Chair Wasserman: Ok. That’s nice. Alright. Well I think that was pretty much my take on this. 1 I, I’m really impressed with the quality of the document both content and the appearance. And 2 so we actually there were a couple of things that you asked us to specifically comment on. One 3 was the Vision Statement and except for the missing word “safety,” you know, where it lists the 4 qualities of the, it was like I can’t find it anymore. The qualities of the Corridor that it should be 5 transit rich and all that, I think that the word “safe” should just be inserted there because I 6 personally would reverse Goals 1 and 2. And that, say safety first because regardless of what the 7 train does we need to address those crossings. Because even if the High Speed Rail never comes 8 through here Caltrain is always gonna come through here, I hope, and if it increases its service to 9 more trains per hour, not only will the safety factor get worse but nobody will ever be able to 10 cross the train tracks again because there will always be trains there. So something has to be 11 done at the crossings. And so I personally have to take a poll of my colleagues think that that 12 should be the first item. 13 14 So anybody else want to comment on the Vision Statement and the order of the Goals? 15 16 Mr. Martinez: Can I say something? 17 18 Chair Wasserman: Yes. Yes, please say something. 19 20 Mr. Martinez: Ok, again Chair Eduardo Martinez, Planning Transportation Commission. I’ve 21 served on the subcommittee for the Comp Plan Update for two years. And in reordering the 22 Comp Plan one of the things we’ve done is compacted a lot of things. So, this Rail Corridor 23 Study will likely be incorporated into the Transportation Element. The Transportation Element 24 has a Vision Statement, or will have a Vision Statement. And while this Vision Statement is 25 very inspiring, very nice, it probably won’t be the over umbrella Vision Statement, or it will be a 26 part of the Vision Statement. So, that’s one item. 27 28 The other is that they’ll probably be one goal for it’s like a chapter. One goal for the Rail 29 Corridor Study, not two, three, or four goals. And so the remaining goals will probably be 30 adopted as policies or programs or suggested programs. So I don’t know where the idea of 31 having, it’s as if they were a separate element for the Rail Corridor Study and that isn’t gonna 32 happen. It’s gonna be part of something else. So I would recommend, you know, supporting 33 this because those are good ideas and intentions but they’re gonna be in all likelihood rewritten 34 and have a different form as they are incorporated into the Comp Plan Update. That’s all. Thank 35 you. 36 37 Chair Wasserman: So what you’re suggesting is that our detailed editing is probably premature. 38 39 Mr. Martinez: Yeah and you won’t appreciate it when you see it come back to you because it 40 will have a different form. 41 42 Chair Wasserman: Ok. 43 44 Board Member Lippert: I have a different take on that which is that this is a distinct document by 45 itself. If you look at the SOFA two coordinated area plan, the SOFA coordinated area plan, it 46 City of Palo Alto Page 17 exists in its own little document. It, you know, when people say well the zoning ordinance, this 1 is the zoning ordinance and you go to SOFA, well no. SOFA has its own zoning. And in this 2 case here this is a Rail Corridor Study with its own outcomes and Vision Statement. To dilute it, 3 I think, begins to take the work that’s been done here and in some ways dismiss, you know, a lot 4 of the work and comments that have gone into it. It is a document by itself and whether we 5 comment on it and massage it a little bit and the Planning and Transportation Commission takes 6 it up and the City Council takes it up is their business. For us, we’re, our basis of what we’re 7 doing here is reviewing it and commenting and if we think that what they’ve done in terms of 8 flipping the guide, the Guiding Principles, you know, that’s our business. 9 10 Chair Wasserman: Ok. 11 12 Mr. Martinez: I think you’re right. And that’s not what I was saying because I fully support the 13 Report and the work that’s been done. I’m saying as it goes forth to be adopted as part of the 14 Comp Plan it’s going to change in form and hopefully it’ll all be included there but it will be 15 rewritten and adopted in a different manner than, as a part of the Comp Plan then what you’re 16 seeing here today. But you’re right, that’s totally separate than our support of the plan. 17 18 Chair Wasserman: I also think that, that the two things are not mutually exclusive. That, I think 19 you’re correct. I think we should make our comments and recommendations as we see fit and 20 then what this will have, what I’m getting from Eduardo is that this will have, in addition to be a 21 the stand alone document it will have Comp Plan teeth. Whatever that gets us. Ok. So and so 22 what is your view on the Vision Statement and the order of the Goals? 23 24 Board Member Lippert: I think what you’ve suggested here is perfectly fine. I would adopt that, 25 I would in fact if you want to include something about safety I think that that’s, you know, 26 important too in the Vision Statement. You had something very specific in mind. 27 28 One thing that it doesn’t say in here which I think is equally important is the number of young 29 citizens here and troubled individuals have committed suicide on the railroad tracks and while 30 safety is not implicit in that because if you choose to jump on the rail line it’s not gonna stop 31 you. What is gonna stop you is physical barriers, and it’s hard to implement those physical 32 barriers without doing something about the grade separation. And so 33 Chair Wasserman: Bingo. 34 35 Board Member Lippert: Right. And so that’s not in here but it’s a, but it is a significant issue in 36 our community. 37 38 Chair Wasserman: And you are the first one who’s actually said it out loud in public. I have 39 been to zillions of meetings and everybody’s walked around this. So I think it’s important that it 40 be said and I believe that safety has been the euphemism for suicide prevention and that’s ok 41 with me at this point. 42 43 Board Member Lippert: Yeah, let me just say that, you know, what the inconsistency is here is 44 that when you say, when you talk about suicide on the rail road tracks the easy solution is we just 45 elevate the railroad or we put it underground. And that’s in some ways, you know the 46 City of Palo Alto Page 18 community has really pushed back in terms of elevating the railroad; it’s not a good solution. 1 And in some ways, that’s the direction that people are forced to go in and I think that’s a false 2 choice. And so, I think just by talking about it and getting it into the report doesn’t necessarily 3 say that that’s what we want is elevated railroads. Or elevated, you know, what do they call it, 4 Great Wall of Palo Alto. 5 6 Chair Wasserman: Ok, Alex do you want to chime in on the two items in question, the Vision 7 Statement and the order of the two Goals? 8 9 Board Member Lew: I think the Vision Statement is fine as, and would support your proposed 10 addition of safety. And I think that the Goals, in my mind, are fine as enumerated. It seems like 11 Goal #1 is, to me, when I look at that it includes a whole bunch of things in addition to safety. 12 Say like, visual impacts, noise impacts and stuff like that. So I’m fine with, and those are 13 substantial and so it seems to me that that, I’m actually fine with having that as Goal #1 instead 14 of Goal #2. 15 16 Chair Wasserman: And so what happens if there is no High Speed Rail? And the whole question 17 of changing the rail the rail alignment goes away, then what do you do with your primary Goal? 18 You still have other issues. 19 20 Board Member Lew: Right, but it’s not like any of the other Goals go away, right? 21 22 Chair Wasserman: Ok. 23 24 Board Member Lew: Right? I mean they’re still… 25 26 Chair Wasserman: Yeah, Clare. 27 28 Vice Chair Malone Prichard: I don’t see anything here that says this is a prioritized list. It’s just 29 a list of five things. I don’t think that one has priority over two, three, or four. So I don’t think it 30 matters what order they’re in. 31 32 Chair Wasserman: Ok. We are asked for a recommendation. That means you want us to vote on 33 something, yes? Ok. Can we have a Motion on this please? Don’t all jump at once, c’mon 34 guys. 35 36 Board Member Lippert: You had something very specific in terms of how you wanted to 37 incorporate safety into the Vision Statement. So why don’t you 38 39 Chair Wasserman: Ok let me find the Vision Statement again. 40 41 Board Member Lew: I think it’s 303. 42 43 Chair Wasserman: Ok. I found, yeah. So where it says, “to create a vibrant, transit rich area 44 with mixed use centers,” I would say, “create a vibrant, safe, and transit rich area.” Just to get it 45 City of Palo Alto Page 19 up front. That was, that was my, and then I’m not very strongly, I don’t have strong feelings 1 about the Goal segment. I’ll go with the Board. 2 3 MOTION 4 5 Vice Chair Malone Prichard: So I move that we recommend approval of this document with the 6 addition of “safe” as Judith just stated. 7 8 SECOND 9 10 Board Member Lippert: I’ll second that. 11 12 VOTE 13 14 Chair Wasserman: Thank you. All in favor? Aye. Anybody opposed? No. You’re good to go. 15 16 MOTION PASSED (4-0-0) 17 18 Ms. Lee: I’m sorry, one clarifying question. Are you, do you want to remove the word 19 “attractive” or is it, “vibrant, safe, attractive, transit rich area?” 20 21 Chair Wasserman: I, well there were some, there were some other recommendations about 22 including public art and attractiveness. I don’t think that we need to actually vote on that. I 23 think that’s just sort of a standard. Oh attractive, attractive is in the document? But not in the 24 Staff Report. 25 26 Ms. Lee: Right, that was a mistake. 27 28 Chair Wasserman: Oooh. Ok. So it is attractive. Good. I read the other one it was my mistake. 29 Pretend I read that one. Yeah. I don’t think we have to, you know, say that you as a condition 30 that public art has to be included but I would highly recommend that, I mean there are enough of 31 us to believe in it. That we should really do it. Yeah, so that was, that was four to nothing. 32 Thank you all and I really hope that this has more fruit than most of our trees that we plant 33 around here. 34 35 Mr. Smiley: We certainly do too. 36 37 Chair Wasserman: Thank you. And thank you very much Chair Martinez, you are always 38 welcome at our meeting, early morning meetings and we don’t serve coffee. 39 40 41      1 PALO ALTO CITY COUNCIL RAIL COMMITTEE  GUIDING PRINCIPLES  Role and Authority of the Rail Committee  The Committee shall advise the City Council on high speed rail (HSR), Caltrain and related rail  transit matters and provide the community with appropriate forums for the discussion of such  issues.  The Committee shall keep the full Council informed on a regular basis.  The Committee shall have the authority to act on behalf of the City on HSR, Caltrain and related  rail transit matters when there is not sufficient time to refer a particular issue to the full City  Council before action is needed. However, the Committee shall forward their recommendations  to the Council for final action if the Committee determines that it is feasible to do within the  time available.  Such actions by the Committee shall include, but not be limited to, advocacy to  the state legislature, the HSR Authority, Caltrain Joint Powers Board, Congress and other  pertinent governmental agencies.  Such actions by the Committee shall be consistent with the  following policies of the City:  Background  In November 2008 California voters approved Prop 1A, a nearly ten billion dollar bond measure,  the primary purpose of which is to develop HSR service from Los Angeles to San Francisco.  The  High Speed Rail Authority (the Authority) has decided that the route HSR will take from San Jose  to San Francisco is along the Caltrain right of way (ROW), including the portion of the ROW that  runs through Palo Alto.  However, the Environmental Impact Report used by the Authority in  making this decision has been de‐certified per court order.  Many issues, such as the vertical  alignment of the HSR, remain undecided.  Recognizing that HSR could have significant impacts  on Palo Alto, the City Council on May 18, 2009 created an ad hoc High Speed Rail Subcommittee  of four Council Members, (since changed to a standing committee and renamed the Rail  Committee).  The Council also adopted a set of Guiding Principles which allowed the Committee  to take a variety of actions in the name of the City without action of the full Council.  Subsequently, the Committee‐‐‐ indeed the entire community‐‐‐ has learned a great deal about  HSR and many HSR related actions have taken place.  The Authority has selected the central valley as their first construction segment which allows  for more a more deliberative and collaborative consideration of alternatives on the peninsula.   Additionally, an alternative for a limited “blended” rail system along the Caltrain corridor has       2 been proposed along with a corresponding limited EIR. This proposal limits the scale of rail on  the peninsula.  The Authority in November 2011 issued its revised Business Plan showing that  the cost of HSR would be $98 billion dollars.  In the revised Business Plan the Authority used the  same ridership forecast model as it had in the past and did not address numerous flaws  identified by many experts who found the Authority’s projections to be unfounded and  unreliable.    Guiding Principles  The City Council therefore, adopts the following Principles to guide its decision making  framework and the actions of the Committee:   The City of Palo Alto believes that the High Speed Rail (HSR) Project should be terminated for  the following reasons:  1. The current project fundamentally contradicts the measure presented to the voters under  Prop. 1A in 2008.  2. The Business Plan is fatally flawed and not credible.  In November 2008, the voters passed a bond measure for a HSR project based on:  • Grossly understated construction costs,  • Understated fares and overstated ridership,  • Operating without a government subsidy, and  • A Funding Plan legally required to identify funding sources and achieve environmental       review prior to construction of an Initial Operating Segment (IOS).   Since the revised HSR Business and Funding Plans do not meet the projected ridership, fare, job  creation, and other significant requirements, the City believes that the voters were not given  accurate information during the 2008 election to make an informed decision on a HSR project  for the State of California.  If the State should move forward with the HSR project, the following Guiding Principles shall  apply to the City’s positions on HSR:  1. The City is opposed to an elevated alignment of HSR/Caltrain in Palo Alto.  2. The City’s preferred vertical alignment of fixed rail in Palo Alto is below grade.  3. All neighborhoods in Palo Alto affected by HSR/Caltrain should be treated with equal  consideration with respect to vertical alignment impacts.       3 4. The City believes that the pending program EIR for the Central Valley to San Francisco  portion of HSR is fatally flawed and that the HSR Authority should reopen and  reconsider its decision to use the Pacheco Pass route.  5. The City supports the findings of the Legislative Analyst’s Office, State Auditor and the  HSR Peer Review Committee which question the viability and accuracy of the Authority’s  Business Plan on such matters as the ridership projections, identification of sufficient  and reliable funding sources, project management, and operations of HSR.   6. The City favors legislation which would enable effective implementation of the HSR Peer  Review Committee authorized by AB 3034.  7. Palo Alto supports transit and urban design solutions that will be compatible with our  economic development strategies, transportation goals, and vision of the transit  corridor within our boundaries; HSR/Caltrain needs to complement the goals and  strategies of our Comprehensive Plan.   8. Palo Alto supports the use of the Context Sensitive Solutions related to HSR and Caltrain  that is effectively funded and implemented by the Authority.   9. The High Speed Rail Authority should provide sufficient funding to affected Cities to  allow them to hire experts to study reports requiring feedback and sufficient outreach  to the community to capture their concerns and suggestions.  10. Proposed changes to the Caltrain corridor by either the Authority or Caltrain should  provide realistic renderings of the various alternatives and also provide simulations that  would help to provide an understanding of the sound and vibrations.   11. Palo Alto strongly supports Caltrain and the commuter rail service at the present or  improved levels of service.  12. Palo Alto also supports the modernization of Caltrain, and/or as the lead agent for a  phased alignment with but independent of HSR.  13. Palo Alto will work cooperatively with neighboring communities with respect to HSR and  Caltrain issues of mutual concern through vehicles such as the Peninsula Cities  Consortium.  14. Palo Alto expects all current rail crossings to remain active.  In the event that the  modernization of Caltrain and/or HSR increases train service from current 2011 levels,  Palo Alto will consider grade separation solutions for the Alma, Churchill, East Meadow,       4 and East Charleston crossings that are effectively funded and implemented by the lead  agency  15. The Guiding Principles of the Committee incorporates by reference Council adopted  written comments to the Authority, the Caltrain Joint Powers Board, and other relevant  agencies. In case of any conflict in policies the most recent language prevails.      Updated: December 19, 2011 (previously updated October 12, 2011 and May 17, 2010)  PALO ALTO CITY COUNCIL RAIL COMMITTEE GUIDING PRINCIPLES Background In November 2008 California voters approved Proposition 1A, a $9.95 billion bond measure, for High Speed Rail (HSR) service from Los Angeles to San Francisco. The San Jose to San Francisco segment of the selected route will take HSR rail service through Palo Alto. This segment is now proposed to be a “blended system”, primarily relying on existing Caltrain right-of-way and track. Caltrain is proposing to modernize this segment, including electrification of the trains, partially utilizing HSR funds. However, the costs and environmental impacts of this “blended system” continue to evolve, and have not yet been fully defined, studied or mitigated. The most recent HSR business plan sets the initial cost of the overall HSR system at approximately $68 billion. While this cost reflects a reduction compared to recent cost estimates, it still significantly exceeds the $33 billion cost estimate advertised in Proposition 1A. In this revised business plan, the California High Speed Rail Authority (CHSRA) also continues to use the debatable and highly optimistic ridership forecast models, and does not address numerous inconsistencies that had been noted by experts in previous business plans. This analysis, therefore, creates an unreliable framework for accurate fiscal and environmental review of the HSR system. Moving forward, the initial construction segment (ICS) for HSR will be in the Central Valley. In July 2012, legislation was enacted that allocated approximately $8 billion of state and federal money for construction of the ICS, and for investments in Northern and Southern California commuter rail systems in anticipation of the future operation of HSR trains on these tracks as part of a Blended System. However, at least $55 billion of unidentified funding remains necessary for completion of the Los Angeles to San Francisco system. Therefore, important funding and environmental issues remain undecided, and must be critically examined prior to final decisions being made. An ongoing, detailed analysis is even more critical for the complex, blended San Jose to San Francisco segment. Guiding Principles The City Council adopts the following Principles to guide its decision making framework and the actions of the Committee: The City of Palo Alto believes that the HSR project should be terminated for the following reasons: 1. The current project fundamentally contradicts the measure presented to the voters under Prop. 1A in 2008. The voters approved the measure based on grossly ATTACHMENT F underestimated construction costs, overstated ridership numbers and underestimated fares. The voters also required that HSR operate without a subsidy and that funding sources would be identified and environmental review would be complete prior to construction of an Initial Operating Segment. 2. Given that the revised HSR Business and Funding Plans do not meet the projected ridership, fare, job creation, and other significant requirements, the City believes that the voters were not given the accurate information during the 2008 election necessary to make an informed decision on a HSR project for the State of California. The City realizes, however, that there is momentum at the Federal and State level to make HSR a reality, despite the conflicts with Prop 1A. There are many evolving aspects of HSR, however, that have not yet been studied or decided. Therefore, if the State should move forward with the HSR project, the following Guiding Principles shall apply to the City’s positions on HSR: 1. The City supports a non-elevated alignment of HSR/Caltrain in Palo Alto. 2. The City’s preferred vertical alignment of fixed rail in Palo Alto is below grade. 3. When examining the potential impacts of vertical rail alignments equal attention shall be given to all Palo Alto neighborhoods. Adopted mitigation measures should be proportionate to the impacts identified in the studies. 4. The City believes that the Program Environmental Impact Report (EIR) for the Central Valley to San Francisco portion of HSR is fatally flawed and that the CHSRA should reopen and reconsider its decision to use the Pacheco Pass route. 5. The City supports the findings of the Legislative Analyst’s Office, State Auditor, and the HSR Peer Review Committee regarding the viability and accuracy of the CHSRA’s Business Plan on such matters as the ridership projections, the identification of sufficient and reliable funding sources, project management, and operation of HSR. 6. The City favors legislation which would enable implementation of the HSR Peer Review Committee authorized by AB 3034. 7. Palo Alto supports transit and urban design solutions that will be compatible with our economic development strategies, transportation goals, and rail corridor vision. HSR/Caltrain needs to complement the goals and strategies of the City’s Comprehensive Plan. 8. Palo Alto supports the use of the Context Sensitive Solutions process for HSR and Caltrain that is funded and implemented by the CHSRA. 9. The CHSRA should provide sufficient funding to affected cities to allow them to hire experts to study reports requiring feedback and sufficient outreach to the community to capture their concerns and suggestions. 10. Proposed changes to the Caltrain corridor by either the CHSRA or PCJPB should provide both realistic renderings of the various alternatives and simulations that would help provide an understanding of the system’s sound and vibration impacts. 11. Palo Alto strongly supports Caltrain and the commuter rail service at the present or improved levels of service. 12. Palo Alto supports the modernization of Caltrain. However, whether the City supports electrification cannot be determined until all potential impacts are identified, studied and suitable mitigation measures are implemented. 13. Palo Alto supports Caltrain as the lead agency for all Caltrain Corridor environmental documents and system improvements. 14. Palo Alto will work cooperatively with neighboring communities with respect to HSR and Caltrain issues of mutual concern through agencies such as the Peninsula Cities Consortium. 15. Palo Alto expects all current rail crossings to remain open to automobiles, bicycles and pedestrians. In the event that the modernization of Caltrain and/or HSR increases train service from current 2012 levels, Palo Alto will consider grade separation solutions for the Alma, Churchill, East Meadow, and East Charleston crossings. These improvements must be funded by Caltrain, HSR and/or other external funding source. 16. A detailed and transparent environmental analysis of all proposed improvements must be completed. Therefore, the California Environmental Quality Act (CEQA) and the National Environmental Policy Act (NEPA) shall not be modified in any way that affects the HSR or Caltrain Corridor environmental review process as currently required by law. 17. The overall environmental review should be comprised of two separate Environmental Impact Reports. The first EIR should be for the Caltrain Modernization Project. The second EIR should address any subsequent improvements proposed or necessary for HSR operation in the corridor. 18. Palo Alto strongly supports revisions to the Peninsula Corridor Joint Powers Board (PCJPB) governance structure that more accurately reflect the distribution of Caltrain ridership. Additionally, the PCJPB should consider making such revisions consistent with a ballot measure seeking a dedicated funding source for Caltrain operations, should one occur. 19. The Guiding Principles of the Committee incorporates by reference Council adopted written comments to the CHSRA, PCJPB, and other relevant agencies. In case of any conflict in policies the most recent language prevails. Updated: January 22, 2013 (previously updated December 19, 2011 October 12, 2011 and May 17, 2010) 7025.txt Note only. Page 1 City of Palo Alto (ID # 3458) City Council Staff Report Report Type: Action Items Meeting Date: 1/22/2013 City of Palo Alto Page 1 Summary Title: Review of Rail Committee Guiding Principles Title: Review and Approval of the Palo Alto City Council Rail Committee Guiding Principles From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the Council approve the proposed revisions to the Rail Committee Guiding Principles. Executive Summary The Palo Alto City Council Rail Committee is comprised of four City Council members with the responsibility to advise the City Council on rail and related rail transit matters and provide the community with appropriate forums for the discussion. The Guiding Principles document is used to guide Rail Committee decision making and recommendations to the City Council. This document was last updated and approved by the City Council in December 2011. Given the evolving nature of the California High Speed Rail and Caltrain Modernization projects, the Rail Committee directed that the Guiding Principles be updated to reflect the most recent status of both projects. The revised principles were reviewed at the October 11, 2012 and December 6, 2012 Rail Committee meetings and forwarded to the City Council for approval. The revised Guiding Principles are attached to this report, and are summarized below. Background In November 2008 California voters approved Proposition 1A, a $9.95 billion bond measure, for High Speed Rail (HSR) service from Los Angeles to San Francisco. The San Jose to San Francisco segment of the selected route will take HSR rail service through Palo Alto. This segment is now proposed to be a “blended system,” primarily relying on existing Caltrain right-of-way and track. Caltrain is proposing to modernize this segment, including electrification of the trains, partially City of Palo Alto Page 2 utilizing HSR funds. However, the costs and environmental impacts of this “blended system” continue to evolve, and have not yet been fully defined, studied or mitigated. The most recent HSR business plan sets the initial low-end cost of the overall HSR system at approximately $68 billion. While this cost reflects a reduction compared to recent cost estimates, it still significantly exceeds the $33 billion cost estimate advertised in Proposition 1A. In this revised business plan, the California High Speed Rail Authority (CHSRA) also continues to use the debatable and highly optimistic ridership forecast models, and does not address numerous inconsistencies that had been noted by experts in previous business plans. This analysis, therefore, creates an unreliable framework for accurate fiscal and environmental review of the HSR system. Moving forward, the initial construction segment (ICS) for HSR will be in the Central Valley. In July 2012, legislation was enacted that allocated approximately $8 billion of state and federal money for construction of the ICS, and for investments in Northern and Southern California commuter rail systems in anticipation of the future operation of HSR trains on these tracks as part of a blended system. However, at least $55 billion of unidentified funding remains necessary for completion of the Los Angeles to San Francisco system. Therefore, important funding and environmental issues remain undecided, and must be critically examined prior to final decisions being made. An ongoing, detailed analysis is even more critical for the complex, blended San Jose to San Francisco segment. The Palo Alto City Council Rail Committee is comprised of four City Council members with the responsibility to advise the City Council on Rail and related rail transit matters and provide the community with appropriate forums for the discussion of such issues. With the above background in mind, the Rail Committee requested that the staff update the Rail Committee Guiding Principles. The Guiding Principles document is broken down into two sections: a brief historical background of the California High Speed Rail (HSR) and Caltrain Modernization projects (largely the same as the text above) and the Guiding Principles. The revised principles were reviewed at the October 11, 2012 and December 6, 2012 Rail Committee meetings. After review and providing input, the Rail Committee forwarded the Guiding Principles to the City Council on a unanimous vote (3-0-1, Scharff absent). If approved by the City Council, the revised principles will be used to guide Rail Committee decision making and recommendations to the City Council. It is expected that the Guiding Principles will be updated on an annual basis, or as recommended by the Rail Committee. Discussion The Guiding Principles document is broken down into two sections: a brief historical background of the California HSR and Caltrain Modernization projects and the Guiding Principles. The entire document was reviewed by the Rail Committee in October and December. The Rail Committee gave general direction to keep the document succinct, relevant and factual, thereby allowing the public to quickly understand the status of both projects. The key is to create the general understanding that while some HSR and Caltrain Modernization decisions have been made, many important statewide and regional policy choices are still City of Palo Alto Page 3 undecided, and therefore the public’s continued attention and participation are critically important. The background section, which had not been updated in a year, was completely revised to contain the most relevant information. This section focuses on HSR and Caltrain funding, the blended system approach, the HSR construction status and the unresolved environmental issues associated with Caltrain Modernization and HSR in the Peninsula Corridor. It is expected that the relationship between HSR and Caltrain, the environmental review process (CEQA/NEPA) and general Caltrain/HSR funding issues will be the most discussed topics by the Rail Committee in 2013. The Guiding Principles were also updated and made more concise. While many of the Guiding Principles remain as previously approved, several were revised and an additional Guiding Principle was added. The key revisions are as follows:  Guiding Principle No. 3 was updated to clarify that during the environmental review stage, equal attention shall be given to all Palo Alto neighborhoods. Adopted mitigation measures should be proportionate to the impacts identified in the studies.  Guiding Principle No. 12 now states that while the City supports Caltrain Modernization, the City’s position of electrification cannot be determined until the environmental impacts are studied, identified and suitable mitigation measures are implemented.  Guiding Principle No. 16 language was strengthened, stating that the California Environmental Quality Act (CEQA) and the National Environmental Policy Act (NEPA) shall not be modified in any way that affects the HSR or Caltrain Corridor environmental review process as currently required by law.  Guiding Principle No. 17 was added, stating that the overall environmental review process should be comprised of two separate Environmental Impact Reports. The first EIR should be for the Caltrain Modernization Project. The second EIR should address any subsequent improvements proposed or necessary for HSR operation in the corridor.  Minor language changes and clarifications were made throughout the document, all of which are shown in the attached redlined document. Policy Implications The revised principles will be used to guide Rail Committee decision making and recommendations once adopted. It is expected that the relationship between HSR and Caltrain, the environmental review process (CEQA/NEPA) and general Caltrain/HSR funding issues will be the most discussed topics by the Rail Committee in 2013. Environmental Review There is no environmental review required for adoption of the revised Rail Committee Guiding Principles. City of Palo Alto Page 4 Attachments:  Attachment A: CLEAN Draft Updated Rail Committee Guiding Principles (DOCX)  Attachment B: REDLINE Draft Updated Rail Committee Guiding Principles (PDF)  Attachment C: Rail Committee Guiding Principles (Adopted 12-19-2011) (DOC) PALO ALTO CITY COUNCIL RAIL COMMITTEE GUIDING PRINCIPLES Background In November 2008 California voters approved Proposition 1A, a $9.95 billion bond measure, for High Speed Rail (HSR) service from Los Angeles to San Francisco. The San Jose to San Francisco segment of the selected route will take HSR rail service through Palo Alto. This segment is now proposed to be a “blended system”, primarily relying on existing Caltrain right-of-way and track. Caltrain is proposing to modernize this segment, including electrification of the trains, partially utilizing HSR funds. However, the costs and environmental impacts of this “blended system” continue to evolve, and have not yet been fully defined, studied or mitigated. The most recent HSR business plan sets the initial cost of the overall HSR system at approximately $68 billion. While this cost reflects a reduction compared to recent cost estimates, it still significantly exceeds the $33 billion cost estimate advertised in Proposition 1A. In this revised business plan, the California High Speed Rail Authority (CHSRA) also continues to use the debatable and highly optimistic ridership forecast models, and does not address numerous inconsistencies that had been noted by experts in previous business plans. This analysis, therefore, creates an unreliable framework for accurate fiscal and environmental review of the HSR system. Moving forward, the initial construction segment (ICS) for HSR will be in the Central Valley. In July 2012, legislation was enacted that allocated approximately $8 billion of state and federal money for construction of the ICS, and for investments in Northern and Southern California commuter rail systems in anticipation of the future operation of HSR trains on these tracks as part of a Blended System. However, at least $55 billion of unidentified funding remains necessary for completion of the Los Angeles to San Francisco system. Therefore, important funding and environmental issues remain undecided, and must be critically examined prior to final decisions being made. An ongoing, detailed analysis is even more critical for the complex, blended San Jose to San Francisco segment. Guiding Principles The City Council adopts the following Principles to guide its decision making framework and the actions of the Committee: The City of Palo Alto believes that the HSR project should be terminated for the following reasons: 1. The current project fundamentally contradicts the measure presented to the voters under Prop. 1A in 2008. The voters approved the measure based on grossly Attachment A underestimated construction costs, overstated ridership numbers and underestimated fares. The voters also required that HSR operate without a subsidy and that funding sources would be identified and environmental review would be complete prior to construction of an Initial Operating Segment. 2. Given that the revised HSR Business and Funding Plans do not meet the projected ridership, fare, job creation, and other significant requirements, the City believes that the voters were not given the accurate information during the 2008 election necessary to make an informed decision on a HSR project for the State of California. The City realizes, however, that there is momentum at the Federal and State level to make HSR a reality, despite the conflicts with Prop 1A. There are many evolving aspects of HSR, however, that have not yet been studied or decided. Therefore, if the State should move forward with the HSR project, the following Guiding Principles shall apply to the City’s positions on HSR: 1. The City supports a non-elevated alignment of HSR/Caltrain in Palo Alto. 2. The City’s preferred vertical alignment of fixed rail in Palo Alto is below grade. 3. When examining the potential impacts of vertical rail alignments equal attention shall be given to all Palo Alto neighborhoods. Adopted mitigation measures should be proportionate to the impacts identified in the studies. 4. The City believes that the Program Environmental Impact Report (EIR) for the Central Valley to San Francisco portion of HSR is fatally flawed and that the CHSRA should reopen and reconsider its decision to use the Pacheco Pass route. 5. The City supports the findings of the Legislative Analyst’s Office, State Auditor, and the HSR Peer Review Committee regarding the viability and accuracy of the CHSRA’s Business Plan on such matters as the ridership projections, the identification of sufficient and reliable funding sources, project management, and operation of HSR. 6. The City favors legislation which would enable implementation of the HSR Peer Review Committee authorized by AB 3034. 7. Palo Alto supports transit and urban design solutions that will be compatible with our economic development strategies, transportation goals, and rail corridor vision. HSR/Caltrain needs to complement the goals and strategies of the City’s Comprehensive Plan. 8. Palo Alto supports the use of the Context Sensitive Solutions process for HSR and Caltrain that is funded and implemented by the CHSRA. 9. The CHSRA should provide sufficient funding to affected cities to allow them to hire experts to study reports requiring feedback and sufficient outreach to the community to capture their concerns and suggestions. 10. Proposed changes to the Caltrain corridor by either the CHSRA or PCJPB should provide both realistic renderings of the various alternatives and simulations that would help provide an understanding of the system’s sound and vibration impacts. 11. Palo Alto strongly supports Caltrain and the commuter rail service at the present or improved levels of service. 12. Palo Alto supports the modernization of Caltrain. However, whether the City supports electrification cannot be determined until all potential impacts are identified, studied and suitable mitigation measures are implemented. 13. Palo Alto supports Caltrain as the lead agency for all Caltrain Corridor environmental documents and system improvements. 14. Palo Alto will work cooperatively with neighboring communities with respect to HSR and Caltrain issues of mutual concern through agencies such as the Peninsula Cities Consortium. 15. Palo Alto expects all current rail crossings to remain open to automobiles, bicycles and pedestrians. In the event that the modernization of Caltrain and/or HSR increases train service from current 2012 levels, Palo Alto will consider grade separation solutions for the Alma, Churchill, East Meadow, and East Charleston crossings. These improvements must be funded by Caltrain, HSR and/or other external funding source. 16. A detailed and transparent environmental analysis of all proposed improvements must be completed. Therefore, the California Environmental Quality Act (CEQA) and the National Environmental Policy Act (NEPA) shall not be modified in any way that affects the HSR or Caltrain Corridor environmental review process as currently required by law. 17. The overall environmental review should be comprised of two separate Environmental Impact Reports. The first EIR should be for the Caltrain Modernization Project. The second EIR should address any subsequent improvements proposed or necessary for HSR operation in the corridor. 18. Palo Alto strongly supports revisions to the Peninsula Corridor Joint Powers Board (PCJPB) governance structure that more accurately reflect the distribution of Caltrain ridership. Additionally, the PCJPB should consider making such revisions consistent with a ballot measure seeking a dedicated funding source for Caltrain operations, should one occur. 19. The Guiding Principles of the Committee incorporates by reference Council adopted written comments to the CHSRA, PCJPB, and other relevant agencies. In case of any conflict in policies the most recent language prevails. Updated: January 22, 2013 (previously updated December 19, 2011 October 12, 2011 and May 17, 2010) PALO ALTO CITY COUNCIL RAIL COMMITTEE GUIDING PRINCIPLES    Background (not shown in redline format, as Background section was completely revised)  In November 2008 California voters approved Proposition 1A, a $9.95 billion bond measure, for  High Speed Rail (HSR) service from Los Angeles to San Francisco.  The San Jose to San Francisco  segment of the selected route will take HSR rail service through Palo Alto.  This segment is now  proposed to be a “blended system”, primarily relying on existing Caltrain right‐of‐way and  track.  Caltrain is proposing to modernize this segment, including electrification of the trains,  partially utilizing HSR funds.  However, the costs and environmental impacts of this “blended  system” continue to evolve, and have not yet been fully defined, studied or mitigated.   The most recent HSR business plan sets the initial cost of the overall HSR system at  approximately $68 billion.  While this cost reflects a reduction compared to recent cost  estimates, it still significantly exceeds the $33 billion cost estimate advertised in Proposition  1A.  In this revised business plan, the California High Speed Rail Authority (CHSRA) also  continues to use the debatable and highly optimistic ridership forecast models, and does not  address numerous inconsistencies that had been noted by experts in previous business  plans.  This analysis, therefore, creates an unreliable framework for accurate fiscal and  environmental review of the HSR system.  Moving forward, the initial construction segment (ICS) for HSR will be in the Central Valley.  In  July 2012, legislation was enacted that allocated approximately $8 billion of state and federal  money for construction of the ICS, and for investments in Northern and Southern California  commuter rail systems in anticipation of the future operation of HSR trains on these tracks as  part of a Blended System.  However, at least $55 billion of unidentified funding remains  necessary for completion of the Los Angeles to San Francisco system.  Therefore, important  funding and environmental issues remain undecided, and must be critically examined prior to  final decisions being made.  An ongoing, detailed analysis is even more critical for the complex,  blended San Jose to San Francisco segment.          Guiding Principles  The City Council therefore, adopts the following Principles to guide its decision making  framework and the actions of the Committee:   The City of Palo Alto believes that the HSR project should be terminated for the following  reasons:  1. The current project fundamentally contradicts the measure presented to the voters  under Prop. 1A in 2008.  The voters approved the measure based on grossly  underestimated construction costs, overstated ridership numbers and underestimated  fares.  The voters also expected that HSR could operate without a subsidy and that  funding sources would be identified and environmental review would be complete prior  to construction of an Initial Operating Segment.     2. Given that the revised HSR Business and Funding Plans do not meet the projected  ridership, fare, job creation, and other significant requirements, the City believes that  the voters were not given the accurate information during the 2008 election necessary  to make an informed decision on a HSR project for the State of California.  The City realizes, however, that there is momentum at the Federal and State level to make  HSR a reality, despite the conflicts with Prop 1A. Tthere are many evolving component and  many aspects of HSR, however, that have not yet been studied or decided.    Therefore, if the State should move forward with the HSR project, the following Guiding  Principles shall apply to the City’s positions on HSR:  1. The City supports a non‐elevated alignment of HSR/Caltrain in Palo Alto.    2. The City’s preferred vertical alignment of fixed rail in Palo Alto is below grade.  2.3. When examining the potential impacts of vertical rail alignments equal attention  shall be given to all Palo Alto neighborhoods.  Adopted mitigation measures should be  proportionate to the impacts identified in the studies.    3. All neighborhoods in Palo Alto affected by HSR/Caltrain should be treated with equal  consideration with respect to vertical alignment impacts.  4. The City believes that the Program Environmental Impact Report (EIR) for the Central  Valley to San Francisco portion of HSR is fatally flawed and that the CHSRA should  reopen and reconsider its decision to use the Pacheco Pass route.  5. The City supports the findings of the Legislative Analyst’s Office, State Auditor, and the  HSR Peer Review Committee which questionregarding the viability and accuracy of the  CHSRA’s Business Plan on such matters as the ridership projections, the identification of  sufficient and reliable funding sources, project management, and operation of HSR.   6. The City favors legislation which would enable effective implementation of the HSR Peer  Review Committee authorized by AB 3034.  7. Palo Alto supports transit and urban design solutions that will be compatible with our  economic development strategies, transportation goals, and rail corridor vision of the  transit corridor within our boundaries.  HSR/Caltrain needs to complement the goals  and strategies of the City’s Comprehensive Plan.   8. Palo Alto supports the use of the Context Sensitive Solutions process for HSR and  Caltrain that is effectively funded and implemented by the CHSRA.   9. The CHSRA should provide sufficient funding to affected cities to allow them to hire  experts to study reports requiring feedback and sufficient outreach to the community to  capture their concerns and suggestions.  10. Proposed changes to the Caltrain corridor by either the CHSRA or PCJPB should provide  both realistic renderings of the various alternatives and simulations that would help  provide an understanding of the system’s sound and vibration impacts.   11. Palo Alto strongly supports Caltrain and the commuter rail service at the present or  improved levels of service.  12. Palo Alto supports the modernization of Caltrain.  but However, whether or not that  includesthe City supports electrification is still cannot be undetermined until all  potential impacts are identified, studied and suitable mitigation measures are  implemented.  13. Palo Alto supports Caltrain as the lead agency for all system improvements in the  Caltrain corridor.  14. Palo Alto will work cooperatively with neighboring communities with respect to HSR and  Caltrain issues of mutual concern through vehicles such as the Peninsula Cities  Consortium.  15. Palo Alto expects all current rail crossings to remain activeopen to automobiles, bicycles  and pedestrians.  In the event that the modernization of Caltrain and/or HSR increases  train service from current 2012 levels, Palo Alto will consider grade separation solutions  for the Alma, Churchill, East Meadow, and East Charleston crossings. that areThese  improvements must be effectively funded by Caltrain, HSR and/or other external  and  implemented by the lead agency.  16. Under no circumstances should HSR or Caltrain be exempted in any way from theA  detailed and transparent environmental analysis of all proposed improvements must be  completed.  Therefore, the California Environmental Quality Act (CEQA) andor  the  National Environmental Policy Act (NEPA), including any amendments.)shall not be  modified in any way that affects the HSR or Caltrain Corridor environmental review  process as currently required by law.  17. The overall environmental review should be comprised of two separate Environmental  Impact Reports.  The first EIR should be for the Caltrain Modernization Project.  The  second EIR should address any subsequent improvements proposed or necessary for  HSR operation in the corridor.  17.18. Palo Alto strongly supports revisions to the Peninsula Corridor Joint Powers  Board (PCJPB) governance structure that more accurately reflect the distribution of  Caltrain ridership.  Additionally, the PCJPB should consider making such revisions in  congruence consistent with a ballot measure seeking a dedicated funding source for  Caltrain operations, should one occur.  18.19. The Guiding Principles of the Committee incorporates by reference Council  adopted written comments to the CHSRA, PCJPB, and other relevant agencies.  In case  of any conflict in policies the most recent language prevails.      Updated: January 22, 2013December 19, 2011 (previously updated December 19, 2011,  October 12, 2011 and May 17, 2010)                 1 PALO ALTO CITY COUNCIL RAIL COMMITTEE GUIDING PRINCIPLES Role and Authority of the Rail Committee The Committee shall advise the City Council on high speed rail (HSR), Caltrain and related rail transit matters and provide the community with appropriate forums for the discussion of such issues. The Committee shall keep the full Council informed on a regular basis. The Committee shall have the authority to act on behalf of the City on HSR, Caltrain and related rail transit matters when there is not sufficient time to refer a particular issue to the full City Council before action is needed. However, the Committee shall forward their recommendations to the Council for final action if the Committee determines that it is feasible to do within the time available. Such actions by the Committee shall include, but not be limited to, advocacy to the state legislature, the HSR Authority, Caltrain Joint Powers Board, Congress and other pertinent governmental agencies. Such actions by the Committee shall be consistent with the following policies of the City: Background In November 2008 California voters approved Prop 1A, a nearly ten billion dollar bond measure, the primary purpose of which is to develop HSR service from Los Angeles to San Francisco. The High Speed Rail Authority (the Authority) has decided that the route HSR will take from San Jose to San Francisco is along the Caltrain right of way (ROW), including the portion of the ROW that runs through Palo Alto. However, the Environmental Impact Report used by the Authority in making this decision has been de-certified per court order. Many issues, such as the vertical alignment of the HSR, remain undecided. Recognizing that HSR could have significant impacts on Palo Alto, the City Council on May 18, 2009 created an ad hoc High Speed Rail Subcommittee of four Council Members, (since changed to a standing committee and renamed the Rail Committee). The Council also adopted a set of Guiding Principles which allowed the Committee to take a variety of actions in the name of the City without action of the full Council. Subsequently, the Committee--- indeed the entire community--- has learned a great deal about HSR and many HSR related actions have taken place. The Authority has selected the central valley as their first construction segment which allows for more a more deliberative and collaborative consideration of alternatives on the peninsula. Additionally, an alternative for a limited “blended” rail system along the Caltrain corridor has Attachment C 2 been proposed along with a corresponding limited EIR. This proposal limits the scale of rail on the peninsula. The Authority in November 2011 issued its revised Business Plan showing that the cost of HSR would be $98 billion dollars. In the revised Business Plan the Authority used the same ridership forecast model as it had in the past and did not address numerous flaws identified by many experts who found the Authority’s projections to be unfounded and unreliable. Guiding Principles The City Council therefore, adopts the following Principles to guide its decision making framework and the actions of the Committee: The City of Palo Alto believes that the High Speed Rail (HSR) Project should be terminated for the following reasons: 1. The current project fundamentally contradicts the measure presented to the voters under Prop. 1A in 2008. 2. The Business Plan is fatally flawed and not credible. In November 2008, the voters passed a bond measure for a HSR project based on: • Grossly understated construction costs, • Understated fares and overstated ridership, • Operating without a government subsidy, and • A Funding Plan legally required to identify funding sources and achieve environmental review prior to construction of an Initial Operating Segment (IOS). Since the revised HSR Business and Funding Plans do not meet the projected ridership, fare, job creation, and other significant requirements, the City believes that the voters were not given accurate information during the 2008 election to make an informed decision on a HSR project for the State of California. If the State should move forward with the HSR project, the following Guiding Principles shall apply to the City’s positions on HSR: 1. The City is opposed to an elevated alignment of HSR/Caltrain in Palo Alto. 2. The City’s preferred vertical alignment of fixed rail in Palo Alto is below grade. 3. All neighborhoods in Palo Alto affected by HSR/Caltrain should be treated with equal consideration with respect to vertical alignment impacts. 3 4. The City believes that the pending program EIR for the Central Valley to San Francisco portion of HSR is fatally flawed and that the HSR Authority should reopen and reconsider its decision to use the Pacheco Pass route. 5. The City supports the findings of the Legislative Analyst’s Office, State Auditor and the HSR Peer Review Committee which question the viability and accuracy of the Authority’s Business Plan on such matters as the ridership projections, identification of sufficient and reliable funding sources, project management, and operations of HSR. 6. The City favors legislation which would enable effective implementation of the HSR Peer Review Committee authorized by AB 3034. 7. Palo Alto supports transit and urban design solutions that will be compatible with our economic development strategies, transportation goals, and vision of the transit corridor within our boundaries; HSR/Caltrain needs to complement the goals and strategies of our Comprehensive Plan. 8. Palo Alto supports the use of the Context Sensitive Solutions related to HSR and Caltrain that is effectively funded and implemented by the Authority. 9. The High Speed Rail Authority should provide sufficient funding to affected Cities to allow them to hire experts to study reports requiring feedback and sufficient outreach to the community to capture their concerns and suggestions. 10. Proposed changes to the Caltrain corridor by either the Authority or Caltrain should provide realistic renderings of the various alternatives and also provide simulations that would help to provide an understanding of the sound and vibrations. 11. Palo Alto strongly supports Caltrain and the commuter rail service at the present or improved levels of service. 12. Palo Alto also supports the modernization of Caltrain, and/or as the lead agent for a phased alignment with but independent of HSR. 13. Palo Alto will work cooperatively with neighboring communities with respect to HSR and Caltrain issues of mutual concern through vehicles such as the Peninsula Cities Consortium. 14. Palo Alto expects all current rail crossings to remain active. In the event that the modernization of Caltrain and/or HSR increases train service from current 2011 levels, Palo Alto will consider grade separation solutions for the Alma, Churchill, East Meadow, 4 and East Charleston crossings that are effectively funded and implemented by the lead agency 15. The Guiding Principles of the Committee incorporates by reference Council adopted written comments to the Authority, the Caltrain Joint Powers Board, and other relevant agencies. In case of any conflict in policies the most recent language prevails. Updated: December 19, 2011 (previously updated October 12, 2011 and May 17, 2010) City of Palo Alto (ID # 3275) City Council Staff Report Report Type: Action Items Meeting Date: 1/22/2013 City of Palo Alto Page 1 Council Priority: City Finances Summary Title: Staff Response to Colleague's Memo Concerning Pension Benefits Title: Response to Colleagues' Memo on Employee Benefits From: City Manager Lead Department: Human Resources Recommendation Staff recommends that Council receive input and provide guidance, on issues related to the City’s strategy for reforms and innovations in employee retirement plans and pension. The Council’s direction for this session anticipated the following purposes: 1. Educate the public and employees about CalPERS pensions and how they work 2. Inform the public and employees about the recently enacted pension reform and how it impacts the City of Palo Alto 3. Enumerate the limitations on the City’s options given our participation in the CalPERS system and the requirements of state law. 4. Explore additional pension legislation to close remaining loopholes and to give cities broader decision making power in regards to their pension plans. Staff recommends, at a minimum, the following action by the Council: DRAFT MOTION: I move that the staff explore additional pension legislation with our legislators and other parties (such as the League of California Cities) to close remaining loopholes and to give cities broader decision making power in regards to their pension plans. (Agenda Item later this evening on Legislative Matters anticipates this action). I further move that staff continue to work with our employees and the public to fully City of Palo Alto Page 2 understand the facts about pensions and the status of the City’s efforts to manage our costs and provision of benefits while maintaining a talented work force. Background Council proposed exploring a sustainable model of pension, health and other benefits in its Colleagues’ Memo dated June 15, 2012. Beginning with the Council meeting of October 15, staff created a foundation for this discussion with a review of the components of total compensation (salary, health benefits, retirement savings/pension, paid time off, etc.) and their relationship to recruitment and employee engagement. This report, the second in a series of three reports, seeks to educate the public and City employees about the CalPERS pensions system, explain the Public Employee Retirement Law (PERL) and the Public Employee Pension Reform Act (PEPRA) that became effective January 1, 2013, and provide a foundation for policy discussions and long-term strategies from Council regarding employee pensions. Many of these issues are subject to collective bargaining with the City’s recognized bargaining units and to state law. The primary objective of PEPRA is to ensure that employees share in paying the normal pension cost, introducing a lower-formula second pension tier, and in this regard Palo Alto has been in the forefront of implementing cost-cutting pension practices as permissible under existing law. Before PEPRA, Palo Alto had already implemented second tier CalPERS plans and negotiated that employees pay their full percentage of pension cost for nearly every employee group. A review of our standard Bay Area survey cities indicates that only 41% of cities have created second pension tiers for miscellaneous employees and 50% for public safety. Additionally, 25% of survey cities continue to provide City-paid employee pension contributions and only one agency pays some portion of the employee pension contribution for safety employees. Most of the PEPRA changes apply to new, future employees. PEPRA does not do enough, however, to address the hurdle that California agencies still face covering the cost of increasingly expensive employee pensions for current active employees and retirees. Cities operating under the CalPERS pension system will experience increasing costs and the lack of flexibility provided to cities will put downward pressure on salaries and health benefits. City of Palo Alto Page 3 PEPRA does level the playing field for competing for talent for the long-term, with all new CalPERS agency non-safety employees earning the same 2% at 62 pension benefit formula across CalPERS agencies statewide. It also caps pensionable earnings, imitating social security. There the flexibility ends, leaving CalPERS cities like Palo Alto with few alternatives to traditional defined-benefit pensions short of further legislation. If the City wished to hire employees with alternate retirement benefits but no defined-benefit CalPERS pension, we could not legally do so. Attachment A is an analysis of PEPRA’s impact to Palo Alto. At Council request, staff has sought employee feedback about the desirability and the perceived value of various benefits through two facilitated employee forums. (Attachment B is a summary of the employee feedback). Discussion What is a “defined benefit” pension? A “defined benefit” pension is a retirement plan that guarantees a fixed monthly retirement allowance, calculated according to the plan formula, when certain prerequisites are met. CalPERS’ retirement allowances are calculated based on three factors: Service Credit - generally, the number of years the employee worked Benefit Factor - the percentage of Final Compensation an employee is entitled to for each year of service. For most CalPERS’ plans, the benefit factor increases with the age of the employee at retirement City of Palo Alto Page 4 Final Compensation - either the highest single year or the average of the highest three consecutive years of the employee’s compensation Defined benefit examples. For example, under CalPERS’ “2%@ 60” formula, which is now in use for Palo Alto employees hired after July 2010 in non-safety positions, pension is calculated at age 60 by taking the number of Years of Service x .02 (Benefit Factor) x Final Compensation equal the Annual Retirement Allowance, as shown in the two examples below. A non-safety employee who retires under that formula at age 60, with 30 years of service and a final compensation of $70,000 will receive the following annual retirement allowance: 30 Years of Service X .02 Benefit Factor X $70,000 Final Compensation = $42,000 Annual Retirement Allowance A safety employee, who retires at age 55 under the “3% at 55” formula, with 30 years of service and a final compensation of $70,000 will receive the following annual retirement allowance: 30 Years of Service X .03 Benefit Factor X $70,000 Final Compensation = $63,000 Annual Retirement Allowance Both of these examples reflect the second tier pension formulas adopted by the City over the past few years. The majority of existing employees maintain their tier one formula benefits of 2.7% at 55 for non-safety employees and 3% at 50 for safety employees, which result in a higher pension benefit. PEPRA made no changes in this regard. Benefit increases with age. The above illustrated examples do not tell the entire story, because the benefit factor increases with age. The “2% at 60” plan, for instance, pays a factor of 1.092 for early retirement at age 50, increasing incrementally to a factor of 2.418 at age 63 or older. This translates to an annual pension of $50,778 at age 63, up from an annual pension at age 60 of $42,000. At Attachment C are detailed charts showing the available percentage of final compensation for the CalPERS’ safety and non-safety plans according to age/benefit fact and years of service. Note that the reduced benefit formulas and increased retirement age provisions under PEPRA, explained later in this report, create new defined benefit formulae for City of Palo Alto Page 5 all miscellaneous (non-safety) and safety employees. Moreover, CalPERS pensions are subject to inflation adjustments up to 2% each year but cannot exceed the national rate of inflation. How are CalPERS’ defined benefit pensions funded? Three sources fund CalPERS’ pensions. First, employees generally contribute a percentage of their annual pay toward their pension. Historically, statute sets that amount, and for most commonly-used plans it is 7% or 8% for non-safety employees and 9% for safety. Employers may agree to pay some or the employees’ entire portion, and many have done so. A comparison of Bay Area pension plans shows that 25% of local agencies pay all or part of the employees’ portion of pension. For fiscal year 2014 the employee contributions will be a combined 7.945% for non-safety employees and 9% for safety employees (not including new pension tiers). Under PEPRA, employee contribution rules and procedures will be changing, as described in this report and the attachments. Second, the entire CalPERS’ system has investment earnings (or losses) arising from investment of system assets in stocks, bonds, real estate and other investment vehicles. This source of funding varies from year to year, sometimes dramatically. Gains are available to fund pension benefits. Losses must be made up by the agencies providing additional funding. If investment earnings are not high enough, CalPERS will just pass the bill onto the city. CalPERS reports total returns varying as shown in the table below. 2012 YTD ending 10.31.12 4.1% 3 year period ending 9/30/12 9.3% 5 year period ending 9/30/12 0.1% 10 year period ending 9/30/12 7.3%  Third, employer contributions provide the balance of needed funds. Employer contributions may decline when investment returns rise and increase when returns fall and/or when actuarial assumptions adjust to reflect higher system costs. Every year, CalPERS transmits an actuarial study to each participating employer stating the percentage of payroll that the employer must pay to fund benefits for its current employees and retirees. Employers must pay the entire employer contribution each year. In the last 15 years, employer contributions have varied from zero (when investment earnings were very high) to more than 24.6% of payroll for non-safety employees and 33.4% of payroll for safety employees in fiscal year 2014. This translates that, for every $1 in qualified pension salary, the city pays $0.25 and $0.33 respectively. City of Palo Alto Page 6 What are Palo Alto’s pension costs? For fiscal year 2014 CalPERS provided the following pension costs: CalPERS Required Employer Contribution FY 2012-13 June 30, 2010 FY 2013-14 June 30, 2011 Difference Non-safety 15,800,795$ 16,208,975$ 408,180$ 3% Safety 7,870,938$ 8,322,938$ 452,000$ 6% Total 23,671,733$ 24,531,913$ 860,180$ 4% Funded Status Total Unfunded Liability (AVA Basis)153,941,378$ 176,609,601$ 22,668,223$ 15% Total Unfunded Liability (MVA Basis)300,666,178$ 256,827,528$ (43,838,650)$ -15% Non-Safety Funded Ratio (AVA Basis)80%79%-1% Funded Ration (MVA Basis)62%69%7% Safety Funded Ratio (AVA Basis)83%81%-2% Funded Ration (MVA Basis)65%72%7% * The Actuary Value of Assets (AVA) is used to establish funding requirements and the funded ratio on this basis represents the progress toward fully funding future benefits for current participants. The funded ratio based on the Market Value of Assets (MVA) is an indicator of the short-term solvency of the plan. End of the “Reversal”. A long-standing retirement pay practice is ending for Palo Alto employees because of PEPRA and the City’s policy that employees pay their full share of pension costs. When a city employee retires, they must designate a 12 month period during his or her service in CalPERS as their “final compensation period.” Prior to employees paying the full employee retirement contribution, an employee retiring was eligible for reversal of Employer-Paid Member Contributions (EPMC). The City would reverse the applicable 7, 8 or 9 % employer-paid member contribution paid out of a retiring employee’s wages, by increasing their salary by the applicable 7, 8 or 9% and the employee would then pay the contribution directly to CalPERS. However this “reversal” was only applicable if an employee was designating the final 12 month period preceding the effective date of retirement. Any employee who designated an earlier period as their highest 12 months would not be eligible for the EPMC or “reversal.” Since employees are now paying their full employee retirement contribution, this “reversal” is no City of Palo Alto Page 7 longer available. The Colleague’s Memo posed the following questions about public pensions. I. How should the costs of pensions be shared between employers and employees? Cost sharing is a critical issue in pension design. There are two primary means of lowering pension costs for employers: reducing benefit levels and achieving greater cost sharing from employees. Of the two, only cost sharing has the potential to impact employer costs in the short and medium term. This is because under current law, pension benefit levels are generally considered to be “vested,” which means that employers are prohibited from making significant reductions for existing employees. Lower pension formulas may be applied only to new hires, resulting in a longer time horizon for cost-reduction. By contrast, employers may lawfully seek additional cost sharing from current employees. Changes in cost sharing generally are subject to collective bargaining and may be subject to other limitations, as described in part below. The new PEPRA legislation fails to increase cost sharing options for the City, since we have already achieved employee pick up of the employee pension costs. Years down the road, the City may have more options but these are restricted over the next five years. Because Palo Alto provides pensions through the CalPERS system, the City must comply with the cost-sharing procedures and limitations in the Public Employees Retirement Law (PERL), as amended by the Public Employee Pension Reform Act (“PEPRA”), which took effective January 1, 2013. Under the PERL, the employee contribution amount is fixed by statute and ranges from 5% to 9% of earnings. Pension formulas and cost-sharing for Palo Alto employees are shown below: City of Palo Alto Page 8 Pension Formulas and Employee Contributions by Employee Unit Non-Safety (Miscellaneous) SEIU Mgmt (Unrepresented) Utilities Mgrs Formula 2.7%@55 2%@60 2.7%@55 2%@60 2.7%@55 2%@60 Eff Date 2007 2010 2007 2010 2007 2010 Current EE Contribution Amount 8% 7% 8% 7% 2%* 2%* *Currently negotiating increased EE pension contribution Safety POA Police Mgrs Assoc IAFF Fire Fire Chiefs' Assoc Formula 3%@50 3%@55 3%@50 3%@55 3%@50 3%@55 3%@50 3%@55 Eff Date 2002 2012 2002 2012 2001 2012 2001 2012 Current EE Contribution Amount 9% 9% 0%* 0%* 9% 9% 9% 9%** *Will be negotiating increased EE pension contribution this fiscal year **Employee contribution for 4 members of Fire Chiefs Association will reset to 5.1% in March 2013 based on concession agreement in MOA. The question of who actually pays the employee contribution has historically been subject to negotiation, as employee pension contributions falls within the scope of representation under the Meyers Milias Brown Act (MMBA). However, for new employees, PEPRA establishes City of Palo Alto Page 9 mandatory formulae and cost sharing of pension benefits, leaving little negotiating discretion over the legislatively mandated changes. Non-Safety employees hired on or after Jan. 1, 2013 will receive the new 2% at 62 pension formula; new public safety employees as of Jan. 1, 2013 will receive the new formula (2.7% @ 57) that is closest to the formula provided to safety members in the same retirement classification offered by the City on Dec. 31, 2012). PEPRA provides as of Jan. 1, 2013, that the new employee contribution rate will be at least 50% of the total “normal cost” for the pension plan. This DOES NOT mean 50% of the pension contribution costs and in fact is far less than that cost. An employer may not pay any part of new members’ employee contribution. If the terms of a contract between an employer and its employees in effect on Jan. 1, 2013, would be impaired by the equal sharing of normal cost for new employees, the equal sharing of normal cost will not apply until the contact contract expires, is renewed, amended or otherwise extended. Local agencies throughout the state are seeking to understand CalPERS’ instruction regarding how it will implement cost-sharing for employees hired on or after January 1, 2013. CalPERS has issued guidance in the form of a Circular Letters, such as attached in Attachment D. PEPRA also addresses cost-sharing for existing employees, in two ways. First, after January 1, 2018, PEPRA authorizes employers to bargain for current employees to pay 50% of the normal cost so long as the employee contribution does not exceed 8% for Miscellaneous and 12% for Police & Fire. This language and its implementation are not entirely clear. In Palo Alto, most employees already pay their full statutory PERS contribution of 7%, 8% or 9%. PEPRA appears to authorize Palo Alto to negotiate, after January 1, 2018, additional increments up to the PEPRA cap of 8% for Miscellaneous and 12% for Safety employees. At this point, with limited guidance from CalPERS, it appears that this provision will apply to Tier 2 non-safety employees (who currently pay 7%) and safety employees (who currently pay 9%). Second, PEPRA authorizes employers and employees to agree to share the employer contribution, but prohibits employers from imposing cost-sharing of the employer share in the absence of an agreement with labor. In sum, Palo Alto and its employees have already achieved substantial cost sharing through employees’ agreement to pay their full PERS contribution. Going forward after 2018, the Council has authority to consider seeking additional cost sharing, through negotiations where appropriate, with respect to employees paying50% of the normal cost, capped at 8% for Miscellaneous and 12% for Safety. In addition, at any time when contracts are open, the Council may consider seeking additional cost sharing of the employer contribution through collective bargaining process. Finally, Council should be aware that there is active litigation over the question of whether City of Palo Alto Page 10 there is a constitutional limit to the extent of costs that can be shifted to employees without impairing vested pension rights, and if so, what is that limit. San Jose voters enacted changes to that city’s pension system that shifted substantial costs onto current employees who wish to retain current benefit levels. San Jose unions have challenged that cost shift on the theory that it violates members’ constitutional vested contract rights. The matter is in litigation in the Superior Court. II. Should the City establish a hybrid plan combining defined benefits, defined contributions, and social security? PEPRA has answered this question in the negative and precludes such options. The question of whether the City should establish a hybrid plan combining defined benefits, defined contributions and social security is moot short of new State legislation. Retirement planning has long held that a three-fold approach yields the most predictable results for the retiree by spreading risk. The three foundational pillars of retirement have been social security, employer pension and personal savings. A defined benefit plan is one where the employee, upon retirement, is entitled to a fixed periodic payment. The asset pool - available to pay benefits - may be funded by employer or employee contributions, or a combination of both. But the employer typically bears the entire investment risk and must cover any underfunding as the result of a shortfall that may occur from the plan’s investments. Conversely, defined contribution plans are a type of retirement plan in which the amount of the employees’ annual contribution is specified. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts (through employee contributions and, if applicable, employer contributions) plus any investment earnings on the money in the account. Only contributions to the account are guaranteed, not the future benefits. In the last two decades, the traditional three-fold approach almost entirely disappeared from the private sector, as corporate defined-benefit pension plans were being phased out in favor of defined-contribution programs, such as 401(k) employee savings accounts. A 2010 survey by Towers Watson, the global consulting firm, found that only 17% of Fortune 100 companies still offer a defined-benefit plan, down from 67% in 1998. Those that offer direct-contribution plans, such as 401(k)'s, total 58%, up from 10%. There is more emergent data and studies that challenge the effectiveness of 401(k) plans for providing adequately towards retirement. Despite the decline, 36% of the country's small and medium companies still offer pensions, and there is a slight trend towards combining defined benefit pension benefits with 401(k) plans among companies, according to Towers Watson. That study, as written up in HR Magazine, is detailed in the attached Attachment E. Currently, Palo Alto uses two of the three traditional retirement planning vehicles: a pension plan and optional voluntary employee savings. Palo Alto’s pension plan is described in detail elsewhere in this report. The City supports employee’s savings by sponsoring a defined City of Palo Alto Page 11 contribution 457 plan, although the City does not contribute any funds. Employees may defer a portion of gross compensation each year, up to an annual dollar limit, which is $17,500 for 2013. The 457 plan offers a "Catch-Up" provision for employees over age 50, which allows employees to contribute an additional annual amount of $5,500. Currently 55% of employees actively participate in the 457 plan. Establishing a hybrid pension/social security plan would either necessitate that the City commit to change to the one CalPERS plan that combines social security with a lower-level CalPERS pension, or exit CalPERS. This is because the CalPERS system only provides for one social security plan (that may or may not still be open to new entrants). CalPERS has an option to combine social security with a lower pension formula called a “Section 218 agreement.” This option would only be available for non-sworn future new hires and any current employees who vote in agreement to join Social Security. For safety employees, all members of their bargaining group would have to vote and approve the change. If the City were to pursue the CalPERS Social Security plan, staff will need to investigate how would the plan work in conjunction with PEPRA. The alternative scenario for adopting a hybrid pension/social security plan is for the City to leave CalPERS altogether. In that case, the City must pay a sum to CalPERS that will secure the pensions already in the system. CalPERS has informed the Administrative Services Department (ASD) that the City’s cost to exit CalPERS is estimated to be between $600,000,000 and $1 billion. III. What is the appropriate and sustainable vesting for pension rights? The question of what is the appropriate vesting schedule for pension rights is the subject of much scholarly debate and developing legal case law. A “vested” benefit is one that has matured into an irrevocable contractual right. It cannot be taken away or otherwise impaired without the member’s consent, except in extremely limited circumstances. According to CalPERS, California law establishes that public employee retirement benefits are a form of deferred compensation and part of the employment contract. At the time when the employee provides service to his public employer, he earns rights to the deferred compensation. To be eligible for any service retirement (as opposed to disability or industrial disability retirement) active employees must be at least 50 years of age and have at least five years of credited service. Frequently the term “vested” indicates that the employee earned the minimum number of credited service years and that a pension will be due to the employee upon reaching 50 years old. A member’s initial allowance is subject to annual cost-of-living adjustments (“COLAs”) that account for changes in the applicable cost of living index each year. City of Palo Alto Page 12 IV. Are retroactive pension increases justifiable and, if not, how can they be prohibited? Retroactive pension increases are prohibited under PEPRA. PEPRA now prohibits retroactive pension increases. The new law prohibits public employers from granting retroactive pension benefit enhancements that would apply to service performed prior to the date of the enhancement. In addition, if a change in a member’s classification or employment results in a benefit enhancement, such enhancement applies only to service performed on or after the operative date of the change. This provision applies to both classic and new members. Note that annual cost-of-living adjustments are excluded from this prohibition. This is an important and long overdue change. V. Should the city offer employees a choice of significantly reduced pension packages in exchange for more desirable near term compensation and employment terms? The City is currently restricted to offering pension packages offered by CalPERS. The CalPERS system, the largest public pension system in the U.S., offers a set group of packages, none of which is a significantly reduced package. It would not be possible for the City to offer anything else unless the City exits CalPERS altogether. VI. How should the timing of negotiations and the City’s position in negotiations relate to The Long Range Financial Forecast? The City’s Long Range Forecast provides the basis for the funding resources and service cost to run the City, and it provides the information needed to attain cost savings that may be necessary to make up funding shortfalls. Each union negotiation features a financial overview to share the fiscal forecast with employees. Therefore it is advantageous to update the long range forecast before the next round of negotiations, which will begin the Summer 2013. The coming union bargaining schedule is set forth below: January 2013 UMPAPA January 2013 SEIU Hourly March 2013 Begin discussions with PMA (pension cost sharing issue) June 2013 Deadline PMA Begin SEIU December 2013 Deadline SEIU (contract expires) Begin PMA, POA, Fire City of Palo Alto Page 13 June, 2014 Deadline POA, PMA, Fire (contracts expire) Resource Impact At this time funding isn’t required. However, if a study is necessary, staff will come back to Council for such a request. Attachments:  Attachment A - PERPRA Effect on CalPers Pension Benefits (PDF)  Attachment B - Summary of Employee Feedback (PDF)  Attachment C - Percentage of Final Comp Charts (PDF)  Attachment D - Circular Letters (PDF)  Attachment E - HR Magazine Article (PDF) 1 Attachment A CalPERS PENSION BENEFITS: STATE LAW, PENSION REFORM & IMPACTS ON PALO ALTO State Law Mandates for Local Agencies Offering CalPERS Pensions Palo Alto Benefits Pension Formulas and Retirement Age State Law as of 12/31/2012 CalPERS offers employers a menu of pre-defined basic and enhanced benefit formulas for Miscellaneous (Non-Safety) and Safety (Police & Fire). In general, employers contract with CalPERS for one of the formulas after bargaining with employee organizations. The benefit factor is a percentage of pay to which members are entitled for each year of service. It is determined at the member’s age at retirement and one of the following retirement formulas that the employer has contracted for. Misc: 2% at 55, 2% at 60. 2.5% at 55, 2.7% at 55, 3% at 60 Safety: 2% at 50. 2% at 55, 2.5% at 55, 3% at 50, 3% at 55 In 1999, the California Legislature amended the pension law to allow the state to offer enhanced pension formulas: 3% at age 50 for Safety and 2.7% at age 55 for Miscellaneous. Subsequently, the Legislature authorized cities and other local government agencies to adopt the same enhanced benefit formulas. The California Courts have held that a pension formula generally “vests” at the time it is promised, which means the promise is binding and cannot be reduced during the employees service or retirement, subject to certain limited exceptions. For this reason, reduced formulas are applied only to newly hired employees. Palo Alto Pension Benefits as of 12/31/2012 Palo Alto last moved to enhance benefit formulas in 2002 for Police and Fire and in January 2007 for Miscellaneous employees. Beginning in July 2010, the City has been negotiating lower more sustainable benefits for newly hired employees. Currently, Palo Alto’s pension formulas are: Miscellaneous (Non-Safety) Employees  Tier 1, hired before July 16, 2010: 2.7% at 55  Tier 2, hired on or after July 17, 2010: 2% at 60 Police & Fire  Tier 1 Fire, hired before June 8, 2012: 3% at 50  Tier 1 Police, hired before December 2012 (estimated): 3% at 50  Tier 2 Fire, hired on or after June 8, 2012: 3% at 55 Tier 2 Police, estimated to change in December 2012: 3% at 55 2 PEPRA Effective January 1, 2013, all newly hired employees must be enrolled in the following pension plans:  Miscellaneous Employees: 2% at 62  Police & Fire: PEPRA includes three formulas – 2% at 57, 2.5% at 57, and 2.7% at 57 – and mandates that the employer use the formula closest to status quo. After January 1, 2013, an employer could bargain to use a lower formula, but may not impose a lower formula in the absence of an agreement. Note: Employees who move from one CalPERS or reciprocal employer to another after Jan. 1, 2013, are not considered new employees, unless there is a break in service of more than six months. PEPRA requires that employees who move from one public employer to another be enrolled in the new employer’s formula that would have applied on December 31, 2012. PEPRA’s Impact on Palo Alto PEPRA will add a 3rd pension tier for both Miscellaneous and Safety, applicable to employees hired on or after Jan. 1, 2013 (except that employees previously employed by another CalPERS or reciprocal employer will move into Tier 2):  Miscellaneous Tier 3: 2% at 62 (earliest eligibility 50 years @1.426% - 2.5% @ 67 years of age)  Safety Tier 3: 2.7% at 57 (earliest eligibility 50 years @2% - 2.7% @ 57 years of age) 3 State Law Mandates for Local Agencies Offering CalPERS Pensions Palo Alto Benefits Calculation of Final Compensation: Single Highest Year or Average of Three Consecutive Highest Years State Law as of 12/31/2012 The CalPERS basic pension benefit is calculated using the average of the three highest consecutive earning years. CalPERS allowed employers to select an enhanced benefit of basing pension on the single highest earning year. Palo Alto Pension Benefits as of 12/31/2012 Palo Alto moved to single highest year in 1983 for Miscellaneous and 1981 for Fire and Police. Beginning in 2011 for Public Safety, the City began negotiating a return to three-year final averaging as part of its effort to adopt more sustainable pensions for new employees. Currently, Palo Alto plans are as follows: Miscellaneous (Non-Safety) –  All Miscellaneous: single highest year Safety (Police & Fire) –  Fire, hired before June 7, 2012: single highest year  Police, hired before December 6, 2012 (estimated): single highest year  Fire, hired on or after June 8, 2011: average of three highest years  Police, hired on or after Dec. 7, 2012: average of three highest years PEPRA Effective January 1, 2013, pensions must be calculated using the average of the three highest consecutive years. This change applies only to new employees hired on or after Jan. 1, 2013, except that employees with prior public service will be enrolled in the local plan in effect on December 31, 2012. PEPRA’s Impact on Palo Alto For all employees hired on or after Jan. 1, 2013, pensions will be based on the average of three highest consecutive years, except that Miscellaneous employees hired from another CalPERS or reciprocal employer will remain eligible for single highest year. 4 State Law Mandates for Local Agencies Offering CalPERS Pensions Palo Alto Benefits Base Retirement Allowance on Regular Pay State Law as of 12/31/2012 State law defines compensation as that which is payment for the member's services performed during normal working hours or for time during which the member is excused from work because of holidays, sick, disability, and other leaves, vacation (taken, not cashed out). State law also defines special compensation. Special compensation is outside of base pay but still included in pensionable earnings. Examples are bilingual pay or fire inspector certification pay. Palo Alto Pension Benefits as of 12/31/2012 Memoranda of Agreement may contain provisions for special compensation for employees to receive payment for special skills, knowledge, abilities, work assignment, workdays or hours, or other work conditions as permissible under PERL. PEPRA For employees hired on or after January 1, 2013, pension must be calculated on normal monthly rate of pay. Excludes some payments such as vacation, sick leave, overtime and other special pay categories. In December, 2012, CalPERS issued an interim regulation stating that many categories of payments that were previously pensionable as “special compensation” will still be considered “pensionable compensation” under PEPRA. Palo Alto is seeking clarification from CalPERS. PEPRA’s Impact on Palo Alto Will be subject to further consultation with CalPERS. 5 State Law Mandates for Local Agencies Offering CalPERS Pensions Palo Alto Benefits Cap on Pensionable Compensation State Law as of 12/31/2012 CalPERS limits safety pensions at either 80% or 90% of final compensation. Miscellaneous employees are not subject to these limits, although generally are covered by lower formulas and in most cases are unlikely to reach 80% or 90% of final compensation. Otherwise, CalPERS pensions apply to all compensation up to the federal limit in Internal Revenue Code section 401(a)(17), currently $250,000. Palo Alto Pension Benefits as of 12/31/2012 The limits in state and federal law apply to Palo Alto retirees. PEPRA For employees hired on or after January 1, 2013, PEPRA caps the amount of compensation that can be used to calculate a retirement benefit at:  $ $113,700for employers participating in social security  $136,440for employers not participating in social security. The cap is adjusted annually based on the Consumer Price Index for All Urban Consumers or otherwise by the Legislature. Employers are barred from adopting any supplementary defined benefit plan. Employers may contribute to a defined contribution plan, subject to certain limitations. PEPRA’s Impact on Palo Alto Palo Alto does not participate in social security. New employees hired on or after Jan. 1, 2013, except those with prior CalPERS or reciprocal service, will be subject to $136,440 cap on pensionable income. At this time, Palo Alto does not have a program in place to make deferred compensation contributions on behalf of all employees. However, employees can make voluntary contributions to deferred compensation plans made available. 6 State Law Mandates for Local Agencies Offering CalPERS Pensions Palo Alto Benefits Cost Sharing: Employee Contributions to Pension Costs State Law of 12/31/2012 CalPERS establishes a fixed mandatory employee contribution:  Misc. Basic Plans (Tier 2) – 7%  Misc. Enhanced Plans (Tier 1) – 8%  Safety All Plans – 9% Employers may agree to “pick up” part or all of the employee contribution. In addition to the employee contribution, which does not change from year to year, CalPERS determines annually an amount that the employer must pay to fund the benefits owed to retirees and current employees. CalPERS’ actuaries determine the employer contribution by adding the employee contributions to the system’s investment returns and subtracting those sums from the total amount required to fund the system. Funds collected from employees and employers fund two types of liabilities:  the “normal cost” of pension benefits, which is the amount that must be set aside this year to pay for the pension obligations earned by active employees this year, incorporating CalPERS’ rate of return and employee demographic assumptions, and  any “unfunded liabilities,” which are funding gaps generated by shortfalls in the projected rate of return on investment, changes in employee demographic assumptions (such as employees living longer), etc. Palo Alto Pension Benefits as of 12/31/2012 Palo Alto began “picking up” the employee contribution in 1981 for Fire and Police and in 1983 for Miscellaneous employees. In 2007, the City began to bargain for employees to resume paying the employee contribution for Miscellaneous employees. Currently:  SEIU, IAFF, Battalion Chiefs, POA and Managers/Professionals pay full employee contribution of 7%, 8% or 9%, depending on the employee’s benefit formula.  PMA pays 0%.  UMPAPA pays 2%. In addition to the employee contribution, as of June 30, 2011, CalPERS actuaries calculated Palo Alto’s pension liabilities as follows (expressed as a percent of payroll): Miscellaneous  Normal cost 10.360%  Unfunded liabilities 14.240%  Total = 24.600% Safety  Normal cost 18.658%  Unfunded liabilities 14.786%  Total = 33.444% 7 PEPRA The cost-sharing provisions of PEPRA are complex and not clearly drafted. CalPERS is working to clarify the implementation of the new law. Clean-up legislation, implementing regulations or litigation may be required in order to clarify the meaning of several of the provisions. New employees – sharing the “normal cost.” PEPRA states that employees hired on or after Jan. 1, 2013, must pay “at least” 50% of the normal cost of their pension or the current contribution rate of similarly situated employees, whichever is greater. CalPERS has informed Palo Alto that new Miscellaneous members will pay 6.25% and new Safety members will pay 11.25%. Current employees – sharing the “normal cost.” After Jan. 1, 2018, PEPRA authorizes employers to bargain for current employees to pay 50% of the normal cost so long as the employee contribution does not exceed 8% for Misc and 12% for Police & Fire. The employer contribution. PEPRA also authorizes employers and employees to agree to share the employer contribution, but prohibits employers from imposing cost-sharing of the employer share in the absence of an agreement with labor. PEPRA’s Impact on Palo Alto Palo Alto is at or close to the goal set in PEPRA for employee cost sharing. Except for Police Managers and UMPAPA, all Palo Alto employees already pay their full employee PERS contribution (7%, 8% or 9%). After 2018, PEPRA allows employers to negotiate an additional increment, not to exceed 8% for Miscellaneous and 12% for Safety, as labor contracts are open. Under PEPRA, the City could seek to negotiate additional employee contributions towards the employer portion. Any such negotiations would require agreement and would not be subject to impasse procedures. 8 OTHER PENSION REFORM CHANGES Restrictions on Hiring Retirees PEPRA requires new retirees to sit out for at least 180 days before returning to work as a retiree. The local agency’s governing body may make exceptions for critically needed positions. The 180-day rule does not apply to police or fire retirees. Forfeit Pension on Felony Conviction PEPRA requires a pension be forfeited upon a felony conviction related to the performance of official duties. It appears that this requirement only applies to pension benefits earned after the date of the felony. PEPRA states the rule applies to both new and current employees, although CalPERS has stated it believes the rule may violate the vested rights of current employees. Eliminate Airtime CalPERS allows employees to purchase service credit for years in excess of those actually worked, known as “air time.” Effective January 1, 2013, PEPRA bans the practice of allowing the purchase of “air time.” PEPRA applies the ban to both new and current employees. CalPERS has stated that it believes the application of this rule to current employees may violate vested rights. Prohibit Retroactive Benefit Increases Historically, CalPERS has required benefit increases to apply to all service earned by current employees, including service already earned in prior years. Effective January 1, 2013, PEPRA requires that any enhancements to formulas or benefits must occur prospectively and not retrospectively. Prohibit Pension Holidays CalPERS calculates the annual contribution for all employers. Participating employers must pay the full amount of the annual required contribution as determined by CalPERS. In some past years, when high returns on investments led to funded status well over 100%, CalPERS granted employers a “pension holiday,” meaning employers were not required to contribute to CalPERS for that year. Effective January 1, 2013, PEPRA prohibits pension holidays, except if (a) the plan is more than 120% funded; (b) excess earnings could result in disqualification of tax deferred status; and (c) the CalPERS board finds that additional contributions would conflict with its fiduciary duty. Other changes PEPRA makes other changes, including requiring local elected members first elected after January 1, 2013, to receive pensions based on the highest average compensation earned as an elected member; instructing CalPERS to develop regulations to adjust costs between employers where excessive compensation is paid by a successor agency; increasing Disability Retirements for certain public safety employees; and requiring equal health benefits vesting rules for non-represented and represented employee groups. 9 ATTACHMENT B Summary of Employee Feedback Benefits/Pension 12/12/12 Health/Pension Forum 1/10/13 Health/Pension Forum Total Health Care Plan – City Pays 100% 10 90 190 Health Care Plan – City Pays 90% 67 3 70 Health Care Plan – City Pays 75% 0 0 0 Health Care Plan – City Pays 60% 3 0 3 Health Care Waiver - $284 8 2 10 Dental Plan – Current 39 15 54 Dental Plan – City Pays Less 2 2 4 Vision 5 3 8 Short Term Disability 8 29 37 Long Term Disability 2 2 4 EAP 0 1 1 457 Matching 30 0 30 Tuition/Technology Reimbursement 0 24 24 Increase in Employee’s Pension Contribution 0 1 1 Retiree Medical 227 252 479 Retiree Medical - City Pay 50% 0 0 0 PERS Survivor Benefit 14 3 17 Retirement Health Savings Account 2 0 2 RETIREMENT FORMULAS & BENEFIT FACTORS Understanding Your Retirement Formula Your benefit &'ctor is the percentage of pay to which you are entitled for each year of service. It is determined by your age at retirement and the retirement formula that your employer(s) has contracred for you. This guide explains the followiog Local Miscellaneous retiremem formulas: You can refer to your CalPERS Annual Member Statement to verilY your retirement fonnula. Starting on the following page you'll find two charts for each of the Local Miscellaneous formulas. The first charr shows how the benefit factor increases for each quarter year of age. The second chart for each formula shows the percentage of final compensation you will receive. There is no cap and it can .;:xceed 100 percent. Not all benefit factors increase to age 63. If your retirement fomlula has changed after you began employment, be aware that some retirement formula changes contracted by your employer may not enhance retirement benefits for all members. To take full advantage of your retirement benefits, carefully review your benefit information and request an estimate of your retirement allowance. 8S8 CalPERS !er 888-225·73:;77) ; www.ca!pers.ca.gcv BENEFIT FACTORS The chart below shows how the benefit mctor increases for each quarter year of age from 50 to 63. . 51 1.576 r 52 1.686 53 2.014 2.066 2.092 57 2.104 2.118 2.130 2.144 58 2.156 2.170 2.182 2.196 2.210 2.222 2.236 2.248 60 2.262 2.274 2.288 2.300 61 2.314 2.326 62 2.366 2.378 63 or older 2.418 CalPERS Member Publication I Loea: Miscellaneou·s PERCENTAGE OF FINAL COMPENSATION -I 5 7.13 : 7.61 8.14 18.71 9.33 I 10:00 110.26 IO.52 [ 1078: 11.05. 11.3111.57 11.83 i 12.()9 I 6 i 8.56 9.13 9.77 i 10.45 11.20112.00112.31 I 12.62 1 12.94 13.26' 13.57 13.88114.20' 1451 I 7 ! 9.98 10.65 11.40 1~.l9 13.06 i 14.00 i 14.36 , 14.73 , 15.0: . 15.47 : 15.83 16.:0 116.56 16.93 I : 8 ! 11041 12.18 I 13.02113.94 ,14.93 16.00 16.42! 16.83 ! 17.2) 17.68· 18.10 ! 18.)1 • 18.93 19.34 I 9 12.83 I 13.70 ! 14.65 15.68: 16.79 18.00 18.47' 18.94 19.40 19.89 20.36, 20.83 i 21.29 , 21.76 . 16 22.82 I 24.35 26.05 1:27.87 29.86132.()0 32.83 i :)3.66 134.50 • 35.36 36.19 37.0237.86! 38.69 I 17 • 24.24: 25.87 27.68! 29.61 31.72! 34.00 I 34.88 35.77 i 36.65 : 37.57 38045 39.34 40.22 4!.ll i i 18 : 25.67 27.40 29.30 i 31.36 33.59 I 36.00 I 36.94 37.87 38.81! 39.78 i 40.72 41.65 42.59 43.52 ' ! 19 ·27.09 28.92, 30.93 33.10 I 35.45 I 38.00 '38.99 39.98 40.96' 41.99 ' 42.98 i 43.97 1 44.95 45.94 20 28.52 30.44 32.56 34.84 I 37.32 40.00 41.04 I 42.08 43.12 44.20' 45.24 I 46.28 1 47.32 L 48.36· 21 29.95 1 31.96 134.19' 36.58 ~ 3919 42.00 43.09 144,18.45.28 46.41 47.50! 48.59: 49.69 I 50.78 • 22 31.37 '33.48 I 35.82 I 38.32 1 41.05 . 44,00 45.14: 46.29 47.43 I 48.62 49.76150.91 52.05! 53.20 : ~ 23 32.80 ! 35.01 , 37.44 i 40.07 42.92 I 46.00 i 47.20 48.39' 49.59 I 50.83 52.03 53.22 54.42 55,61' 1 24 '34.22 36.53.39.07! 41.81 44.78 i 48,00 I 49.25 50.50! 51.741 53.04 I 54.29 55.54 56.78 58.03' 1 25 135.65 38.05 40.70 43.55 i 46.65 150.001 51.30 52.60, 53.90 . 55.25 I 56.55 • 57.85 ! 59.15 60.45 26 . 37.08 39.57 4233 45.29 I 48.52 52.00 53.35 I 54.70 56.06 57.46 i 58.81 60.16 I 61.52 I 62.87 27 38.50 i 41.09 143.96 47.03 I 50.38 54.00 55,40 I 56.8158.211 59,67 . 61.07 . 62.48 :63.88 I 65.29 , 28 39.93 1 42.62 I 45.58 1 48.78 52.25 56.00 57AGei 58.91 60.37! 61.88 63.34 64.791 66.25 . 67.70 : , 29 . 41.35 ! 44.14 ' 47.21 I 50.52 . 54.11 i 58.00 : 59.51 61.02 62.52! 64.09 65.60 G7.1I 68.61 70.12-' 1 30 '42.78 . 45.66 48.84. 52.26 55.98: 60.00 I 61.56 63.12. 64.68 66.30 1 67.86 69.42 70.98 72.54' 31 ,44.21 47.18 50.47i 54.00 57.85 I 62,00 1 63.61 [65.22 66.84 68.51 i 70.12 ~ 71.73 73.35 74.96 32 45.63 48.70 52.10 55.74 I 59.71 i 64.00 65.66 j 67.33 . 68.99 70.72' 71.38 1 74:05 ' 75.71 ~ 77.38 33 47.06 I 50,23 1 53.72 57.49 61.5866.00 67.72 , 69.43 ! 71.15 72.93 74.65 1 76.36 ! 78.08 I 79.79 34 -I 51.75 I 55.35 59.23 I 63.44 68.00 69.77' 71.54 . 73.30 75.14 76.91 78.6880.441 82.21 I : 35 -I -'56.98 60.97 1 65.31 • 70.00 : 71.82 73.64 75.46. 77.35 79.17 80.99 82.81 84.63 1 36 I -I 62.71 1 67.18 noD i 73.87 75.74. 77.621 79.56 I 81.43183.30 . 85.18 . 87.05 . 37 - ! -69.04 I 74.00 I 75.92 77.85 79.77' 81.77 83.69, 85.62 1 87.54 I 89.47 38 -i - -i 76.00 77.98 i 79.95 . 81.93 83.98' 85,96 1 87.93 1 89,91 : 91.88 I 39 - -.-:.'.:..-80.03 182.06 • 84.08 I 86.19 . 88.22 . 90.25 ! 92,27 i 94.30 . ! 40 - -I - - -I 84.16 86.24 188.40 '90.48 92,56 94.64 96.72 1 888 CalPERS (or 888·225·7377) 1 www.calpers.ca.gov 23 BENEFIT FACTORS The chart below shows how the benefit factor increases for each quarter year of age from 50 to 63. 51 1.156 1.172 1.190 1.206 52 1.224 1.260 1.278 53 1.296 1.316 1.336 1.356 54 1.376 1.396 1.418 1.438 55 1.460 1.482 1.506 1.528 56 1.552 1.576 1.600 1.626 57 1.650 1.678 1.704 1.730 58 1.758 1.786 1.816 1.846 59 1.874 1.906 1.938 1.970 60 2.000 2.034 2.100 61 2.134 2.168 2.238 62 2.272 2.308 2.382 63 or older 2.418 CalPERS Menber PL.:olicatior !. Lecal Miscellaneous PERCENTAGE OF FINAL COMPENSATION 888 CalPERS (or 888-225-73771 I www.calpers.ca.gov 25 BENEFIT FACTORS The chatt below shows how the benefit factor increases for each quarter year of age from 50 to 55. 50 2.000 2.025 2.050 2.075 51 2.100 2.125 2.150 2.175 52 2.200 2.225 2.250 2.275 53 2.300 2.325 2.350 2.375 2.400 2.425 2.450 2.475 2.500 CalFERS Member Publication I Local Miscellareous PERCENTAGE OF FINAL COMPENSATION Age I 50 I 5] I 52 I 53 54, 55- Bendi, Factor 2.000 • 2.100 2.200 I 2.100 . 2.400 2.'iOO • Years of Seryice Percentage of Fioal Compensation t=1 6 " ... ~-+I,~ .. ~I~:OO -r1O.5o 1 11.00 L~_1-1-:..5=O==--+~~12.00 T~-12~50~--, ~_ , 12.00 ... 12.60.. I 13.20 13.80 I' 14.40 , 15.00 ' , 7 ' 14.00 . 14.70 15.40 16.10 16.S0 17.50 ;--~_8~ ]6.00. 16.S0 ,u-:60 i -1-8-.40--'1-19.2020:00 r-" 9=:518.00 ' , . IS.90X 19.80 '=r" 20.70 .. 1 21.60 22.50 l ~ -i --;,: ± -;;-;: I ~:: -, --;;: ~ J--~{:~ 12 24.00 I 25.20 2.6.40 .. , .. 27'~._i-. 2 3 8 1 '.2800 .1' __ 3 32 ° .. :°,,° 0 'j.' I 13 +-26 00 27.30 28.60. 29.90 .... ... _ 1-' --14--, -28:00 1 29.40 I 30:;;;;---~-3·-2-.2-0~+-"3·-3.-60-35.00 LIS I 30.00 i 31.50 I 33.00 I 34.50 '36.00 37.50_-1 i-16 I 32.00 1 33.60 ~ 35.20 I 36:8E __ L 38.40 40.00 l...~:: ..... -j-..... _ ::.~~--+-1~::~-t :r::~ : ::~{-+ :;:~6~ ~;:~~~ .. ~_19==+= 38.00 1 __ 39.90 .. ; -41.80--I"~70=+=~~4750- r--~~~--1 :~.~~ , ::~~:=::~: I~{-±=~~-.. :~:~~ ! t "-i «00 I "'" '""" M> i '2"'_ -t-"."" . -~--t_:;~_1 ::~ +-;~::: .... -L-.~~:~:-_+ i~:;'_L-_~~~~l L-~_ j.. __ 50.001. __ S2.50 ',' 55.0os=, . 57.50 60.00 "'1-' _--"2.50 __ 1 , I I I c--__ 26_ ' 52.00 ' 54.60 I.. 57.20 ... 59.80 62.40 65.00 f l-2287 54.00 56.70 J' _59.40 , ... ~_62.10 64.80 I 6750_j I ' 56.00 58.80 61.60, 64.40 . 67.20 , 70.00 I 29 58.00 60.90 I 63.80 I 66.7~ 69.60 ;~-n.50 --1 Dol 60.00 63.00 66.00: 69.00 72.00 ---t-75.00 --I L __ J.l __ .. -t .. _62.:.?~0~ .. 1 65.:.!.0_ 68.20. 1_ :L30~ _-''"0 -t_77.5~ i __ ~2 i.. 64.00 i 67.20 70.4°3.60. 76.80 .... 80.00~ ~ __ 66.~_O ~ .. I 69.30 72.60 .. 1~.90L........z2:20~_ ..... ~_82.50_j' ~_~ 71.40 74.80 I 78.20 I 81.60 ! 85.00 'I-=~-=-I' ... ',-'" 77.70 "~I,' -----SO:;O~-r 84.00~ I ... 87.50 .. ! '~I ~ ~=r= ---r 82.80 "-=1-'" 86.4O......t~90.00=== I :: t __ _ 1 88.80-+ :~:~~ ~ aaa CalPERS (or a88-225-73771 I www.calpers.ca.gov 27 BENEFIT FACTORS The chart below shows how the benefit factor increases for each quarter year of age from 50 to 55. 2.035 2.070 2.105 51 2.140 2.175 2.210 2.245 52 2.280 2.315 2.350 2.385 53 2.455 2.490 2.525 54 2.595 2.630 1.665 55+ CalPERS Member Publication I Local MiscelialiBous PERCENTAGE OF FINAL COMPENSATION 27~5 5 10.00 10.70 11.40 12.1 0 12.80 13.50 6 12.00 12.84 13.68 1452 15.36 16.20 7 14.00 14.98 15.96 16.94 17.92 18.90 8 16.00 17.12 18.24 19.36 20.48 21.60 9 18.00 19.26 20.52 21.78 23.04 24.30 10 20.00 21.40 22.80 24.20 25.60 27.00 11 22.00 23.54 25.08 26.62 28.16 29.70 12 24.00 25.68 27.36 29.04 30.72 32.40 13 26.00 29.64 31.46 35.10 14 37.80 15 16 17 38.76 18 41.04 19 43.32 20 45.60 21 47.88 50.16 52.44 60.50 26 55.64 62.92 66.56 27 65.34 69.12 72.90 28 75.60 29 30 31 32 75.24 84.48 ~"-77.52 87.04 91.80 79.80 89.60 94.50 92.16 97,20 37 94.72 99.90 38 888 CalPERS (or 888·225·73771 I www.calpers.ca.gov 29 BENEFIT FACTORS The chart below shows how the benefit factor increases for each quarter year of age from 50 to 60. 51 2.100 2.125 2.150 52 2.200 2.225 2.250 53 2.300 2.325 2.350 54 2.400 2.425 2.450 2.475 55 2.500 2.525 2.550 2.575 56 2.600 2.625 2.650 2.675 2.700 2.725 2.750 2.775 2.800 2.825 2.850 2.875 2.900 2.925 3.000 CalPERS Merrber Publication I Local Miscellaneous 1 I I ! • PERCENTAGE OF FINAL COMPENSATION 3~O ~ I 5 10.00 10.50 I 11.00 11.50 12.00 12.50: 13.00 I 13.50 14.00 14.50 I 15.00 , , ! , i 6 7 8 9 I 10 i 11 12 13 14 1 15 16 ! 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 35 36 37 38 39 40 12.00 12.60 i 13.20 13.80 14.40 15.00 15.60 16.20 16.80 17.40! 18.00 I 'I' 14.00 14.70 15.40 i 16.10 ' 16.80 ! 17.50 18.20 18.90 19.60 20.30 21.00 I 16.00 I 16.80 17.60! 18.40 ,19.20 20.00 20.80! 21.60 i 22040 23.20 24.00 i 18.00 18.90 19.80 20.70 21.60 I 22.50 : 23.40 i 24.30 i 25.20 26.10 27.00 I 20.00 21.00 i 22.00 23.00 24.00 25.00 26.00 I 27.00 28.00 29.00 1 30.00 ' 22.00 23.10 i 24.20 25.30 26AO 27.50 i 28.60 29.70 30.80 31.90 i 33.00 24.00 25.20 I 26AO 27.60: 28.80 30.00 i 31.20 32.40 33.60: 34.80 I 36.00 26.00 I 27.30 i 28.6'0 29.90 I 31.20 32.50! 33.80 35.10 36.40 37.70, 39.00 i 28.00 29AO i 30.80 32.20 33.60 i 35.00 36040 37.80 39.20 40.60 42.00 I 30.00 31.50 33.00: 34.50 i 36.00 37.50 39.00 40.50: 42.00 I 43.50 45.00 i 32.00 ! 33.60 35.20 i 36.80 38.40 i 40.00 41.60 43.20 44.80 46.40 48.00 ; 34.00 • 35.70 37AO 39.10 40.80 42.50 44.20 45.90! 47.60 i 49.30 5l.00 36.00 37.80 39.60 41.40 43.20 45.00 46.80! 48.60 50040 I 52.20 i 54.00 38.00 40.00 39.90 41.80 42.00 I 44.00 43.70 45.60 i 47.50 1 49.40 51.30 53.20 i 55.1 0 i 57.00 46.00 : 48.00 50.00 i 52.00 54.00 56.00 I 58.00 ' 60.00 ! i 42.00 44.10 i 46.20 48.30 i 50040 52.50 I 54.60 56.70 i 58.80 60.90 63.00 i ! 44.00 46.20 I 48.40 I 46.00 I 48.30 50.60 i 50.60 52.80 i 55.00 57.20 59.40 i 61.60 63.80 66.00 52.90 55.20 i 57.50 59.80 I 62.10 64040 66.70 .. 1 69.00 : , 55.20 : 57.60 ! 60.00 62040 i 64.80 67.20 69.60 i 72.00 i I 48.00 i 50040 I 52.80 • 50.00 ! 52.50 55.00 , 52.00 I 54.60 57.20 i 59.80 62.40 65.00 67.60 70.20 , i 72.80 i 75.40 i 78.00 54.00 56.70 59.40 I 62.10 64.80 56.00 58.80 I 6L60 64.40 I 67.20 : 58.00 60.90 I 63.80 66.70 :.69.60 67.50 • 70.20 i 72.90 75.60 i 78.30 ! 81.00 70.00 ! 72.80 i 75.60 78.40 81.20 84.00 78.30 i. 81.20 72. So I 75.40 87.00 ! 84.10 . 90.00 I 78.00 81.00 80.60 83.70 84.00 86.80 87.00 89.90 I 93.00 I i 64.00 i 67.20 i 70AO I 73.60 ! 76.80 I 80.00 83.20 96.00 i 89.60 92.80 86.40 I 99.00 I 89.10 92AO 95.70 -~ : 71.40 74.80 i 78.20 81.60 85.00 88040 91.80, 95.20 98.60 102.00 77.00 ! 80.50 84.00 87.50 • 91.00 i 94.50 105.00 82.80 i 86.40 98.00 i 101.50 i ! 90.00 i 93.60 97.20 100.80 104040 108.00 I 88.80 92.50 96.20 I 99.90 i 103.60 107.30 111.00 j i-I • 95.00 98.80 102.60! 106AO 110.20 114.00 I i -: --- i -101.40 105.30 109.20 113.10 i 117.00 : -i ---I -_ -: 108.00 112.00! 116.00 120.00 I 888 CalPERS (or 8B8-225~73771 www.calpe-rs.ca.gov 31 RETIREMENT FORMULAS AND BENEFIT FACTORS Understanding Your Retirement Formula Your benefit £actor is the percentage of pay to which you are entitled for each year of service. It is determined by your age at retirement and the retirement formula that your employer(s) has contracted for you. This guide explains the following Local Safety retirement formulas: 2~O You can refer to your CalPERS Annual Member Statement to verilY your retirement formula. If you have safety service with multiple employers and under different safety formulas, ,here could be more than one maximum benefit cap applied to your retirement allowance. You should contact CalPERS for more information. Starting on rhe following page, we have provided two charts for each of the Local Safety formulas. The first chart shows how the benefit factor increases for each quarter year of age from 50 to 55, as well as showing the required years of service to reach your maximum percentage allowed by Jaw. The second chart shows the percentage of final compensation you will receive. 888 CalPERS lor 888-225-7377: I www.calpers.ca.go" BENEFIT FACTORS The chart below shows how the benefit factor increases for each quarter year of age from 50 to 55, as well as showing the required years of service to reach your maximum percentage allowed by law. 50 2.000% 45.000 50 \4 2.035% 44.226 50 ¥" 2.070% 43.478 50% 2.105% 42.775 51 2.140% 42.056 5114 2.175% 41.379 51V. 2.210% 40.724 510/4 2.245% 40.090 52 2.280% 39.474 52 \4 2.315% 38.877 52 ¥" 2.350% 38.298 52% 2.385% 37.736 53 2.420% 37.191 53 V4 2.455% 36.660 ---·········i 53 ¥" 2.490% 36.145 ........ .~~ ..... 5H:i 2.525% 35.644 54 2.560% 35.157 5414 2.595% 34.683 54'1. 2.630% 34.221 540/. 2.665% 33.772 55 or older 2.700% ..~ ..... 33.334 CalPERS Mel'iiber Publication I Local Safety PERCENTAGE OF FINAL COMPENSATION Years of Service I of Final Compensation I I 5 10.00 10.70 11.40 12.10 12.80 13.50 6 12.00 12.84 13.68 14.52 15.36 16.20 ! 7 14.00 14.98 15.96 16.94 17.92 18.90 8 16.00 17.12 18.24 \9.36 20.48 21.60 9 18.00 19.26 20.52 21.78 23.04 24.30 IQ 20.00 21.40 22.80 24.20 '25.60 27.00 11 22.00 23.54 25.08 26.62 28.16 29.70 12 24.00 25.68 27.36 30.72 32.40 13 26.00 27.82 29. .46 I 33.28 35.10 14 . 28.00 29.96 31.92 33.88 35.84 37.80 15 30.00 32.10 34.20 36.30 38.40 40.50 16 32.00 34.24 36.48 38.72 40.96 43.20 \7 34.00 36.38 38.76 41.14 43.52 45.90 . 18 36.00 , 38.52 41.04 43.56 46.08 48.60 19 38.00 I 40.66 43.32 45.98 48.64 51.30 20 40.00 . 42.80 45.60 48.40 51.20 54.00 21 I 42.00 44.94 47.88 50.82 53.76 56.70 22 44.00 47.08 50.\6 53.24 56.32 59.40 23 46.00 49.22 52.44 55.66 58.88 62.10 24 48.00 51.36 54.72 58.08 61.44 64.80 25 50.00 53.50 57.00 60.50 64.00 67.50 26 52.00 55.64 59.28 62.92 , 66.56 70.20 27 54.00 57.78 61.56 65.34 69.12 72.90 28 . 56.00 59.92 63.84 67.76······ 71.68 75.60 29 58.00 62.06 66.12 70.18 74.24 78.30 30 60.00 64.20 68.40 72.60 76.80 81.00 3\ 62.00 66.34 70.68 75.02 7936 83.70 32 64.00 68.48 72.96 77.44 81.92 86.40 33 70.62 75.24 79.86 84.48 89.10 34 -..... i -77.52 82.28 . 87.04 90.00 max 35 --84.70 89.60 90.00 max 36 ---90.00 max I 90.00 max 37 -----90.00 max B88 CalPERS lor 888-225-7377) I www.calpers.ca.goY 27 BENEFIT FACTORS The chart below shows how the benefit factor increases for each quarter year of age from 50 to 55, as well as showing the required years of service to reach your maximum percentage allowed by law. 50'" 1.450% 62.069 50 1.474% 61.059 50 '.4 1.498% 60.080 51 1.522% 59.133 51 V4 1.550% 58.065 51 Y, 1.576% 57.107 51 % 1.602% 56.180 52 1.628% 55.283 52 'A 1.656% 54.348 52V2 1.686% 53.381 52'" 1.714% 52.509 53 1.742% 51.665 53',4 1.772% 50.790 53V2 1.804% 49.890 5H'. 1.834% 49.074 54 48.232 1.900% 47.369 1.932% 46.584 45.779 2.000% 45.000 Ca'PEflS MeMber Publication I Locai Safe'y PERCENTAGE OF FINAL COMPENSATION 2'55 Age ')0 ,}1: 52 Bendlt FactoJ 1426 1.522 1.628 Years of Service of Final 5 7.13 7.61 8.14 8.71 9.33 10.00 6 8.56 9.13 9.77 10.45 11.20 12.00 7 9.98 10.65 11.40 12.19 13.06 14.00 8 11.41 12.18 13.02 13.94 14.93 16.00 9 12.83 13.70 14.65 15.68 16.79 18.00 10 14.26 15.22 16.28 17.42 18.66 20.00 11 15.69 16.74 17.91 19.16 20.53 22.00 12 17.11 18.26 19.54 20.90 22.39 24.00 13 18.54 19.79 21.16 22.65 24.26 26.00 14 19.96 21.31 22.79 24.39 26.12 28.00 15 21.39 22.83 24.42 26.13 27.99 30.00 16 22.82 24.35 26.05 27.87 29.86 32.00 17 24.24 25.87 27.68 29.61 31.72 34.00 18 25.67 27.40 29.30 31.36 33.59 36.00 19 27.09 28.92 30.93 33.10 35.45 38.00 20 28.52 30.44 32.56 34.84 37.32 40.00 21 29.95 31.96 34.19 36.58 39.19 42.00 22 31.37 33.48 35.82 38.32 41.05 44.00 23 32.80 35.01 37.44 40.07 42.92 46.00 24 34.22 36.53 39.07 41.81 44.78 48.00 25 35.65 38.05 40.70 43.55 46.65 50.00 26 37.08 ·39.57 41.33 45.29 48.52 52.00 27 38.50 41.09 43.96 47.03 50.38 54.00 28 39.93 42.62 45.58 48.78 52.25 56.00 29 41.35 44.14 47.21 54.11 58.00 30 42.78 45.66 48.84 52.26 55.98 60.00 31 44.21 47.18 50.47 54.00 57.85 62.00 32 45.63 48.70 52.10 55.74 59.71 64.00 33 50.23 53.72 57.49 61.58 66.00 34 55.35 59.23 63.44 68.00 35 60.97 65.31 70.00 36 67.18 72.00 37 74.00 38 76.00 39 78.00 40 80.00 888 CalPERS (or 888-225-73771 I www.calpers.ca.goy 29 BENEFIT FACTORS The chart below shows how the benefit factor increases for each quarter year of age ITom 50 to 55, as well as showing the required years of service to reach your maximum percentage allowed by law. SOy, 2.050"", 43.903 50% 2.075% 43.375 51 2.100% 42.858 51 '4 2.125% 42.353 2.175% 41.380 2.200% 40.910 2.225% 40.450 40.000 52 'i4 2.275% 39.561 53 2.300% 39.131 53 '4 2.325% 38.710 531/, 53 'A 37.895 54 37.500 54'4 2.425% 37.114 54 'h 2.450% 54',4 2.475% 55 or older 2.500% Ca!PERS Member Publicaflon ! Local Safety PERCENTAGE OF FINAL COMPENSATION 7 I 14.00 I 14.70 15.40 16.10 16.80' 17.50 8 16.00 16.80 17.60 18.40 19.20 20.00 9 18.00 18.90 19.80 20.70 21.60 22.50 10 20.00 21.00 22.00 23.00 24.00 25.00 11 22.00 23.10 24.20 15.30 26.40 27.50 12 24.00 25.20 26.40 27.60 28.80 30.00 13 26.00 27.30 28.60 29.90 31.20 32.50 14 28.00 29.40 30.80 32.20 33.60 35.00 15 30.00 31.50 33.00 34.50 36.00 37.50 16 32.00 33.60 35.20 : 36.80 38.40 40.00 17 34.00 35.70 37.40 ! 39.10 40.80 42.50 . 18 36.00 37.80 39.60 41.40 43.20 45.00 19 38.00 39.90 41.80 43.70 45.60 i 47.50 20 40.00 42.00 44.00 46.00 48.00 50.00 21 i 42.00 44.10 46.20 48.30 50.40 52.50 22 44.00 46.20 48.40 50.60 52.80 55.00 23 46.00 i 48.30 50.60 52.90 55.20 57.50 24 48.00 50.40 52.80 55.20 5;.60 60.00 25 50.00 52.50 55.00 57.50 60.00 62.50 26 52.00 54.60 57.20 59.80 62.40 65.00 27 54.00 56.70 59.40 62.10 64.80 67.50 28 56.00 58.80 61.60 64.40 67.20 70.00 58.00 60.90 63.80 72.50 29 60.00 63.00 66.00 75.00 i 30 66.70 69.00 i 69.60 ! """.---- 72.00 31 62.00 65.10 68.20 71.30 74.40 77.50 32 64.00 67.20 70.40 73.60 76.80 80.00 i : 33 : 69.30 72.60 75.90 79.20 82.50 34 74.80 78.20 81.60 85.00 35 -80.50 84.00 87.50 36 : ---86.40 90.00 max 37 -: 90.00 max 888 CalPEAS (or 888-225-7377) I www.ca1pers.ca.gov 31 BENEFIT FACTORS The chart below shov." how the benefir factor increases for each quarter year of age from 50 to 55, as well as showing rhe tequired years of service to reach your maximum percentage allowed by law . • i\gc at Rctiremen Years Nee(lcd to Attain 90% 50 30.000 50 'At 3.000% 30.000 50 'h 3.000% 30.000 50% 3.000% 30.000 51 3.000% 30.000 51 '.4 3.000% 30.000 51 'h 3.000% 30.000 51% 3.000% 30.000 52 3.000% 30.000 52 \4 3.000% 30.000 52\1, 3.000% 30.000 52'4 3.000% 30.000 53 3.000% 30.000 53 'Ai 3.000% 30.000 53 II:! 3.000% 30.000 53% 3.000% 30.000 54 3.000% 30.000 54 14 3.000% 30.000 54\12 3.000% 30.000 54';. 3.000% 30.000 55 or older 3.000% 30.000 CatPERS Merr,oe' PJbl,cation I Local Safety PERCENTAGE OF FINAL COMPENSATION Age I ')0 51 52 53 54 55+ Benefit Factor 3.aOO 3.000 3.000 3.000 .?OOO 3.000 Years of Service Percentage of Final Compensation 5 15,00 15.00 I 15,00 15,00 15.00 15.00 I 6 18.00 18.00 18,00 18.00 18,00 18.00 ........ -~ 7 21.00 21.00 21.00 21.00 21.00 21.00 ........ ~-... 8 24.00 24.00 I 24.00 24.00 24,00 24,00 ....... ~-.. 9 , 27.00 27.00 27.00 27,00 27.00 27.00 10 I 30.00 30.00 30.00 30.00 30.00 30,00 11 33.00 33,00 33.00 33.00 33.00 33,00 .. ~ .. 12 36,00 36,00 36,00 36.00 36,00 36.00 13 39.00 39.00 39,00 39,00 39.00 39.00 ........ ~ 14 42.00 42,00 42,00 42,00 42,00 42,00 15 45,00 45,00 45.00 45.00 45.00 45.00 ........ - 16 48,00 48.00 48,00 48.00 48,00 48.00 -~ .. : 17 51.00 51.00 51.00 51.00 51.00 51.00 18 54.00 54,00 54,00 54.00 54.00 54.00 19 57.00 57.00 57.00 57,00 57,00 57.00 20 60.00 60.00 60,00 60,00 60,00 60.00 : 21 63,00 63.00 63.00 63.00 63.00 63,00 22 66.00 66.00 66,00 66,00 66,00 66.00 23 69.00 69.00 69.00 69.00 69.00 69.00 .. ~. I 24 72.00 nOD 72.00 72.00 noD 72.00 .. ~. 25 75.00 75.00 75.00 75.00 75.00 : 75.00 ....... ~--... ....... - 26 . 7B.00 78.00 78.00 78.00 78.00 78.00 27 81.00 81.00 81.00 81.00 81.00 81.00 "----... 28 84.00 84.00 84.00 84,00 84.00 84.00 -~. 29 87.00 87,00 87,00 87,00 87,00 87.00 ....... _. 30 90.00 max 90,00 max 90.00 max 90.00 max 90.00 max 90.00 max ~ ....... ~. ....... '----.. 888 CalPERS lor 8BB·225·7377} I www.calpers.ca.gov 33 ~-.. ~~~-------~ BENEFIT FACTORS The chart below shows how the benefit factor increases for each quarter year of age from 50 to 55, as well as showing the required years of service to reach your maximum percentage allowed by law. ge at Retiremen Years Ne~dcd to Attain 900{1 50 37.500 5014 2.430% 37.037 SOliz 2.460% 36.586 50'4 2.490% 36.145 51 2.520% 35.715 51 '4 2.550% 35.295 51 liz 2.580% 34.884 51 '/4 2.610% 34.483 52 2.640% 34.091 52 '4 2.670% 33.708 52 liz 2.700% 33.334 52 '4 2.730% 32.967 53 2.760% 32.609 53 14 2.790% 32.258 53 112 2.820% 31.915 53¥4 2.850% 31.579 54 2.880% 31.250 54 V. 2.910% 30.928 54 liz 2.940% 30.613 543f4 2.970% . 30.303 55 3.000% 30.000 CalPERS Member Publication I Local Safety PERCENTAGE OF FINAL COMPENSATION 3~5 Age 50 51 52 53 54 55+ Beneht Factor 2AOO 1.520 2.640 2.760 2.880 },OOO Years of Service i Percentage of Final Compensation 12.60 I I I 14.40 , 15.00 5 12.00 13.20 13,80 6 14.40 15.12 15.84 16.56 17.28 18.00 I 7 16,80 17,64 18.48 19.32 , 20.16 21.00 8 19.20 20.16 21.12 22.08 23.04 24.00 .. -... 9 21.60 22,68 i 23.76 24,84 25.92 27.00 : 10 I 24.00 25.20 26.40 27,60 28,80 30.00 , 11 : 26.40 27,72 29.04 30.36 31.68 33,00 12 28.80 30.24 31.68 33.12 34.56 36.00 ... -... 13 31.20 32.76 34.32 35.88 37.44 39,00 14 33,60 35.28 36.96 38,64 40.32 42.00 15 36,00 37,80 39.60 41.40 43,20 45.00 16 38.40 40.32 41,24 44.16 I 46,08 48,00 17 40,80 42,84 44.88 46,92 48,96 51.00 ,~----- 18 43,20 45.36 47.52 49.68 51.84 54,00 r-----... -.. ! 19 45,60 47.88 50,16 52.44 54.72 57,00 ~ 20 48,00 50.40 52,80 55,20 57,60 60,00 ........... _ ... 55.44 57,96 60.48 21 50.40 52,92 63,00 22 52,80 55.44 58.08 60,72 63,36 66,00 23 55,20 57,96 60,72 63.48 66.24 69,00 24 57,60 60.48 63.36 66.24 69,12 72.00 , 15 60,00 63,00 66,00 69,00 71.00 75,00 26 I 62.40 65,52 68,64 71.76 74,88 78,00 f--: 27 64.80 68.04 71.28 7452 77.76 81.00 28 67,20 70,56 73,92 77.28 80.64 84,00 29 69,60 73.08 76.56 80,04 83.52 87.00 30 i 72.00 75.60 79,20 82.80 86.40 90,00 max 31 I 74.40 78,12 81.84 85.56 89,28 90,00 max 32 76,80 80,64 84,48 88.32 90,00 max 90.00 max .............. ~ ..... 33 -83.16 87,12 90,00 max 90,00 max 90,00 max ... _- 34 --89.76 90,00 max 90,00 max 90,00 max 35 --..... -90,00 max 90,00 max 90,00 max 666 Cal PEAS lor 888-225-73771 I www.calpers.ca.gov 35 ! // California Public Employees' Retirement System P.O. Box 942709 Sacramento, CA 94229-2709 (888) CalPERS (or 888-225-7377) TTY: (877) 249-7442 www.calpers.ca.gov Circular Letter TO: ALL CALPERS EMPLOYERS Reference No.: Circular Letter No.: 200-055-12 Distribution: IV, V, VI, X, XII, XVI Special: December 3,2012 SUBJECT: IMPLEMENTATION OF PUBLIC EMPLOYEES' PENSION REFORM ACT OF 2013 The purpose of this Circular Letter is to confirm CalPERS current interpretation of the Public Employees' Pension Reform Act of 2013 (PEPRA) and related Public Employees' Retirement Law (PERL) amendments in Assembly Bill (AB) 340, passed by the California Legislature on August 31,2012, and signed by the Governor on September 12, 2012. Recent news about the enactment of pension reform has generated increased attention and questions from our employers, members, and stakeholders. We created this Circular Letter to provide a summary of the provisions outlined in the bill as they apply to CalPERS retirement and health benefits. We also include information on mylCalPERS system modifications and explain what actions employers need to take to comply with the new provisions that change how they do business with CaIPERS. This Circular Letter is not intended to provide a comprehensive summary of PEPRA and related law changes. The current interpretations discussed below address the key areas of the bill that may directly affect CalPERS interactions with our members and employers. Our pension reform team continues to analyze PEPRA provisions and the resulting impacts. As CalPERS moves ahead with implementing PEPRA and related amendments to the PERL, our interpretations may be revised. CalPERS strongly recommends that all employers review AB 340 in its entirety to understand how the changes in law will affect their organization and employees. MEMBERSHIP AND BENEFIT FORMULAS Definition of a New Member A new member is defined in PEPRA as any of the following: • A new hire who is brought into CalPERS membership for the first time on or after January 1, 2013, and who has no prior membership in any California public retirement system. • A new hire who is brought into CalPERS membership for the first time on or after January 1,2013, and who is not eligible for reciprocity with another California public retirement system. Circular Letter No.; 200-055-12 December 3,2012 Page 2 • A member who first established CalPERS membership prior to January 1, 2013, and who is rehired by a different CalPERS employer after a break in service of greater than six months. Effective January 1, 2013, every new enrollment will be tested against this definition of "new member", regardless of whether the enrollment is for a first-time CalPERS member or an existing CalPERS member. It is important to note that if a member has a break in service of more than six months but returns to service with the same employer, the member would not be considered a new member under PEPRA. All State agencies, including CSU, are treated as a single employer under PEPRA, as are all school employers. CalPERS refers to all members that do not fit within the definition of a new member as "classic members". All existing CalPERS members as of December 31,2012, will retain the existing benefit levels for future service with the same employer. Because the new member determination is made on an appointment-by-appointment basis, classic members will be tested against the "new member" definition upon each new appointment and, in some cases, may become "new members" for services under a new appointment. PEPRA does not require retroactive reductions to benefits earned for prior service, even where a member separates from service and is later re-hired as a new member by a new employer and becomes subject to the applicable PEPRA formula. In these cases, the member's "classic member" service wlll be calculated separately from his or her service as a "new member". CalPERS will develop a form for employers to use when a member hired by a CalPERS agency is considered a classic member as a result of membership with a previous reciprocal retirement system. Employers must complete the form and retain it in the individual's employment records for auditability purposes. mylCalPERS will be updated to include fields on the enrollment page where employers will identify if the new hire is coming from a reciprocal agency and prompt the employer for the necessary data elements which subject them to reciprocity. It will be extremely important for employers to properly identify the status of members at the time of hire. Based on the information provided by the employer, mylCalPERS will automatically determine the proper benefit group for each member. In addition, CalPERS will create for each employer a report identifying their recent enrollments and the correct corresponding formula based on the information provided at enrollment. If an employer believes the enrollment is incorrect, they may contact CalPERS to review and correct the data as necessary. Employers must store, in their own databases, the partiCipant details necessary to categorize individuals as new members or classic members. Important! These system enhancements are not yet available. All member enrollments with an effective date of January 1,2013, or later should be held until employers receive notification that the transaction may be processed. ·', I / Circular Leiter No.: 200-055-12 December 3,2012 Page 3 Throughout the upcoming months, CalPERS will create and/or update forms and publications to assist employers with enrollment transactions for new members. A Circular Letter will be sent to employers as those resouroes become available. Benefit Formulas The reduced benefit formulas and increased retirement age provisions under PEPRA create new defined benefit formulas for all new miscellaneous (non-safety) and safety members. For new safety members, the law provides for three possible retirement formulas and requires that new safety members be provided with the new formula that is closest to the formula offered to classic members of the same classification and that provides a lower benefit at 55 years of age than the formula offered to classic members. The three new defined benefit formulas for new safety members include a normal retirement age of 50 and a maximum benefit at age 57. For all new miscellaneous members, with the exception of State Tier II, the new defined benefit formula is 2% at age 62, with an early retirement age of 52 and a maximum benefit factor of 2.5% at age 67. For State Tier II members, the new formula is 1.25% at age 67. Please refer to the tables below to see how the reduced benefit formulas compare to current formulas. Current Miscellaneous Formula New Miscellaneous Formula i1.5%@ 65 1.5'7'0@65 (retain existing formula) 1.25%:§L65 1.25%@67 All others 2'7'0@62 I Current Safety Formula New Safety Formula ·3%@50,3%@55,2%@50 2.7% 57 • 2.5'7'0@55 2.5% 57 I 2'7'0@55, 2.5%@60, %@55 .2'7'0@57 The new formulas will be implemented in mylCalPERS to take effect on January 1, 2013. The legislatively mandated formulas and provisions will be merged with the employer's existing optional provisions, with some exceptions, effective on December 31 , 2012, to create the new benefit groups. No formal contract amendments are necessary to implement the new mandated benefit groups. CalPERS will work with employers to update the employer's contract(s) either at the time of a future amendment or as soon as practicable. CalPERS estimates that it will take approximately two years to complete this update process for all employers. Circular Letter No.: 200-055-12 December 3,2012 Page 4 EMPLOYER AND MEMBER CONTRIBUTIONS Normal Cost Contributions For public agencies, school employers, CSU, and the judicial branch, a new member's initial contribution rate will be at least 50% of the total normal cost rate for their defined benefit plan or "the current contribution rate of similarly situated employees, whichever is greater", except where it would cause an existing Memorandum of Understanding (MOU) to be impaired. If an employer determines that an existing MOU is impaired, and communicates that decision to CalPERS using the required certification form, then any otherwise impaired contribution rate agreement will apply to new members through the duration of the MOU. Once the impaired MOU is amended, extended, renewed, or expires, the new requirements will apply. CalPERS interprets "similarly situated members" to mean those employees that are in the same benefit group (meaning those employees with the same benefit formula). The member contribution rate is not required to change for classic members of a public agency or school district. State employees, including both classic and new members (excluding new CSU members and new judicial branch members), will pay the statutory rates determined through bargaining and provided for by statute. See Proposed Changes in Member Contribution Rates for State Employees for changes that PEPRA imposes on State member contributions available on CalPERS On-Line. CalPERS will be sending a letter to each employer this month outlining the benefit formula applicable to new members, as well as the employer and member contribution rates that will be effective January 1, 2013, for new members. For classic members, employers should refer to the June 30, 2011 actuarial valuation report that was mailed in November 2012 to determine what amount reflects 50% of the total normal cost for classic members. In addition, a new report will be added in mylCalPERS that will identify member and corresponding member rates by group and plan. The Appointment Details and Events page in mylCalPERS will also display the appropriate contribution rates for members. Beginning January 1,2018, public agencies that have collectively bargained in good faith and completed impasse procedures (including mediation and fact-finding) will be able to unilaterally require classic members to pay up to 50% of the total normal cost of their pension benefit. It is important to note that the employee contribution may only be increased up to an 8% contribution rate for miscellaneous members, a 12% contribution rate for local police officers, local firefighters, and county peace officers, or an 11 % contribution rate for all other local safety members. Cost Sharing of Employer Contributions Some public agencies have amended their CarPERS contract to have their members pay a portion of the employer's contribution. These contributions are paid in addition to the member contribution rate. Under existing law, such employer cost sharing contract amendments were required to be tied to a benefit improvement. This requirement will be eliminated as of January 1, 2013, when the new amendments to the PERL go into ;t Circular Letter No.: 200-055-12 December 3, 2012 Page 5 effect. In addition, under the new law, cost sharing agreements may differ by bargaining unit or for classifications of employees subject to different benefit levels as agreed to in an MOU. The new law also permits cost sharing of the employer costs for non- represented employees as approved in a resolution passed by the public agency. Employer Paid Member Contributions (EPMC) PEPRA prohibits EPMC for new members, employed by public agencies, school employers, the judicial branch, or CSU, unless an employer's existing MOU would be impaired by this restriction. It is up to each employer to determine if an MOU would be impaired by this restriction on EPMC for new members. The impaired MOU must have an effective date of January 1,2013, or earlier. If the employer determines that an existing MOU is impaired, then any stated EPMC agreements will apply to new members through the duration of the MOU. CalPERS must receive the full required member contributions, regardless of the amounts paid by the member or the employer. Once the impaired MOU is amended, extended, renewed, or expires, EPMC will no longer be pennitted for new members. CalPERS will implement a manual validation procedure to ensure EPMC is not being reported on payroll for new members. Employers must notify CalPERS in writing if they determine that their MOU is impaired and provide a certification to CaIPERS, signed by the agency's presiding officer, confirming that application of Section 7S22.30(c) of PEPRA would cause an existing MOU to be impaired. CalPERS will provide a form to employers for this certification. More information on the certification and the fonn will be sent to employers in a future Circular Letter. EPMC may continue to be reported for classic members pursuant to existing PERL provisions. Employers who wish to eliminate or reduce EPMC for classic members are able to do so under existing law through collective bargaining and contract . amendments. Existing PERL statutes allow employers to periodically increase, reduce or eliminate employer paid member contributions. Pension Holiday The combined employer and member contributions required, in any fiscal year, cannot be lower than the total year's normal cost. Some employers currently have a surplus in their plan and presently pay less than the total normal cost. CalPERS will review each employer in this category and detennine whether this prOVision must be implemented at the start of the next fiscal year. A letter will be sent to affected employers notifying them of their required contribution amounts. PENSIONABLE COMPENSATION Compensation Caps This provision caps the annual pensionable compensation that can be used to calculate final compensation for new members. Circular Letter No,: 200-055-12 December 3,2012 Page 6 Presently, there is a compensation cap in place for first-time members hired after January 1, 1996, The compensation cap is set by the Internal Revenue Service and is referred to as the 401 (a)(17) limit. CalPERS will continue to cap contributions for affected classic members at the 401 (a)(17) limil, New member contribution caps are effective January 1, 2013. The new member cap for 2013 will be $113,700 (100% of the 2013 Social Security contribution and benefit base) for members that participate in Social Security or $136,440 (120% of the 2013 contribution and benefit base) for those employees that do not participate in Social Security, Adjustments to the caps are permitted annually based on changes to the Consumer Price Index for All Urban Consumers. Employers will report full pay rate and actual earnings for all members in mylCalPERS and the system will flag and notify the employer when the contribution limit has been reached for that calendar year. Member contributions must stop when the member's actual earnings reach the contribution limits outlined above. Note that this does not necessitate a change to your file formatting structure; rather it is related to how employers track and report payroll. Reporting up to the compensation cap for new members will occur in the same manner it does currently for classic members subject to the 401 (a)(17) limit. Currently, CalPERS does not cap employer contributions at the 401(a)(17) limit and we do not intend to cap employer contributions at the PEPRA limits for at least the next two years. We are conducting further analysis to determine if employer contributions will be capped beginning with the 2015/2016 fiscal year. We will share the new information with you in ,a future Circular Letter once a final decision has been made. Three-Year Final Compensation PEPRA requires that a three-year final compensation period be used to calculate the average final compensation for a retirement calculation for all new members. Some employers, including the State, already provide for a three-year final compensation period, Public employers are also prohibited from adopting a final compensation period of less than three years for classic members who are currently subject to three-year final compensation. Pensionable Compensation PEPRA introduces a new term "pensionable compensation" for the purposes of determining reportable compensation for new members. PEPRA broadly defines pensionable compensation, and while it specifically excludes some forms of compensation, it does not clearly identify which forms of pay fall within the scope of pensionable compensation. CalPERS is evaluating what forms of compensation are considered as pensionable compensation and how they should be reported. We will update employers on this issue in a future Circular Letter that we anticipate will be sent later this month. ; I Circular Letter No.: 200-055-12 December 3,2012 Page 7 Excessive Compensation This new PERL provision requires the CalPERS Board to "define a significant increase in actuarial liability due to increased compensation paid to a non-represented employee". The Board is further directed to implement program changes to ensure that a public agency that creates a significant increase in actuarial liability bears the increased cost associated with that liability. CalPERS will develop the program changes necessary to assess the cost of excessive compensation to the employer that paid the excessive compensation. This provision will apply to any significant increase in actuarial liability that is determined after January 1, 2013, regardless of when excessive compensation was paid. CalPERS is working to develop the program changes and definitions necessary to administer these provisions and anticipates promulgating regulations to address these new requirements. Updates on this issue will be provided to employers in a future Circular Letter. WORKING AFTER RETIREMENT PEPRA includes two provisions applicable to working after retirement. These provisions include restrictions, including, but not limited to: • All employees who retire from public service will be prohibited from working more than 960 hours per calendar or fiscal year for any public employer in the same public retirement system that .the individual is retired from without reinstating from retirement. • A 180-day waiting period is required for all employees who retire from a public employer before a retiree can return to work without reinstating from retirement, except under certain specified circumstances. The 180-day waiting period starts from the date of retirement. . • Any public retiree appointed to a full-time position on a State board or commission will be required to suspend their retirement allowance and become an active member of CaIPERS, unless the appointment is non-salaried. As currently required, employers must continue to report in mylCalPERS all the hours worked by any CalPERS retired annuitant in order to monitor the 960-hour cap per fiscal year. CalPERS retirees who are hired as independent contractors or consultants with a direct relationship, for purposes of this section, are considered retired annuitants and must also be reported and tracked in myICaIPERS. The 180-day waiting period provision applies without exception to retirees who receive either a golden handshake or some other employer incentive to retire. Retired annuitants who started working before January 1, 2013, are not impacted by the 180- day waiting period. mylCalPERS plans to validate the 180-day waiting period for all new enrollments and will flag any potential violations of this waiting period for additional review. Potential violations will not prohibit the online mylCalPERS enrollment; however, when enrolling a retiree under the certification-resolution exception to the 180-day waiting period, the Circular Letter No.: 200-055-12 December 3,2012 Page 8 employer must submit a copy of the certification-resolution to CaIPERS. The rest of the enrollment process will remain the same as today. PENSION AND HEALTH BENEFIT CHANGES Industrial Disability Retirement (lOR) Benefits In addition to the current calculation options of the IDR benefit for a member, this provision adds a calculation for a safety member who qualifies for an IDR that may result in a higher benefit than 50% of salary. An actuarial reduced retirement formula, as determined by the actuary for each quarter year of service age less than 50, will be used to determine if the IDR benefit is greater for the safety member who qualifies for IDR. These provisions remain in effect only until January 1,2018. After that date, the new IDR provisions will not apply unless the date is extended by statute. Retroactive Pension Benefit Enhancements Public employers will be prohibited from granting retroactive pension benefit enhancements that would apply to service performed prior to the operative date of the enhancement. An increase to a retiree's annual cost-of-living adjustment within existing statutory limits is not considered to be an enhancement to a retirement benefit. CalPERS will develop a list of those existing optional benefits that are considered to be retirement benefit enhancements and therefore subject to this restriction. CalPERS also plans to promUlgate a regulation interpreting and clarifying this provision. Additional information will be sent to employers in a future Circular Letter. Replacement Benefit Plans PEPRA prohibits public employers from providing new employees a plan of replacement benefits to supplement retirement benefits that are limited by Internal Revenue Code Section 415(b). This provision also prohibits public employers from offering a replacement benefit plan to any employee group that was not provided this benefit prior to January 1, 2013. CalPERS will continue to offer replacement benefit plans for classic members not impacted by this provision. Health Benefit Vesting Schedule This provision generally prohibits employers from providing a more advantageous health benefit vesting schedule to certain individuals (namely a public employee who is elected or appointed, a trustee, excluded from collective bargaining, exempt from civil service, or a manager) than it does for other public employees, including represented employees, of the same public employer who are in related retirement membership classifications. In the event that bargaining groups under one employer have established different vesting schedules, the non-represented employees must align with the least advantageous of the groups in related membership classifications, such as State miscellaneous. Circular Leiter No,: 200-055-12 December 3, 2012 Page 9 If an employer has established tiered vesting schedules based upon date of hire, then all non-represented employees must be subject to the same tiered vesting schedules as represented employees of the same membership classifications. Additional Retirement Service Credit (ARSC) The ability to purchase non-qualified service, or "airtime", will be eliminated on January 1, 2013. An official application must be submitted and stamped as received by CalPERS on or before December 31,2012, Only applications from individuals who qualify to purchase ARSC on or before December 31,2012, will be accepted. CalPERS is reviewing whether other types of nonqualified service credit may be impacted by this prohibition. The prohibition on future "airtime" service credit purchases does not prohibit purchases of qualified service credit. For example, service credit purchases for qualified military service will still be allowed. Felony Forfeiture of Pension Benefits Any current or future public official or employee convicted of a felony while carrying out his or her official duties, in seeking an elected office or appointment, and/or in connection with obtaining salary or pension benefits, will be required to forfeit any pension or related benefit earned from the date of the commission of the felony. OTHER RETIREMENT PROGRAMS Alternate Retirement Program (ARP) ARP, a retirement savings program that certain State employees are automatically enrolled in for two years from their initial hire date, will be eliminated. The bill provides that all new members hired on or after July 1,2013, will no longer be enrolled in the program. An urgency legislative amendment was introduced to change the ARP elimination date from July 1, 2013 to January 1, 2013, CalPERS will continue to monitor the bill and work with the State Controller's Office and the California Department of Human Resources to determine how to enroll new State miscellaneous and industrial members beginning January 1,2013. Once a process has been identified, we will notify State employers. Members currently enrolled in ARP will continue to participate in ARP pursuant to existing 'statutory requirements. CalPERS does not administer ARP, For program details on the ARP savings plan, contact the California Department of Human Resources at www.calhr.ca.gov. Legislative Retirement System (LRS) These provisions prohibit new members, including constitutional, statutory elected officers and the Insurance Commissioner, who assume office for the first time on or after January 1,2013, from enrolling in LRS, Members already enrolled in LRS prior to January 1, 2013, will continue to participate in the plan until they separate or retire. Circular Letter No.: 200-055-12 December 3, 2012 Page 10 mylCalPERS will be modified to remove LRS enrollment as an option for new members. The current process that allows new members to elect optional membership into CalPERS will not change. ADDITIONAL INFORMATION CalPERS On-Line For more information on PEPRA and how it impacts current and future CalPERS members, visit the Pension Reform Impacts page on CalPERS On-Line at www.calpers.ca.gov.This page features the latest updates regarding PEPRA including a question and answer section and links to additional resources. In addition, the video "Pension Reform: A Discussion with CalPERS Experts" highlights how pension reform impacts employers. Teleconferences CalPERS will conduct a series of teleconferences to address questions you may have relating to the information in this Circular Letter. Please register online via the Pension Reform Impacts page. I Date Time i Agency Type I ! ! Dec 10 I 9:30 to 11 :30 am Public A~ency I Dec 10 1 :30 to 3:30 pm School ! • Dec 11 9:30 to 11 :30 am State I Dec 12 9:30 to 11 :30 am : Public Agency ! Dec 13 9:30 to 11 :30 am School • Dec 14 i 9:30 to 11 :30 am State mYlCalPERS Changes CalPERS will provide more detailed information regarding mylCalPERS changes in the coming weeks. Contact Us Please share this information with your employees to help answer their questions and provide additional information on the changes. If you have any questions, please call the CalPERS Customer Contact Center at 888 CalPERS (or 888-225-7377). KAREN DeFRANK, Chief Customer Account Services Division 1    Attachment E Are Defined Benefits Plans Dead? Society of Human Resources Management’s HR Magazine, Vol. 57 No. 7 Reports of the demise of the defined benefit pension plan may be exaggerated. 7 / / 2 0 2 By Joanne Sammer Defined benefit pension plans have had a string of bad luck. Since their peak in the mid-1980s, they have been on the decline as more employers close or freeze their plans each year. Is there a chance for a comeback? In the 1990s, the robust stock market kept defined benefit plans well-funded, without the need for hefty contributions from the organizations sponsoring them. When things were going well, "these plans were out of sight, out of mind," says Bart Pushaw, a principal and consulting actuary with Milliman Inc. in Dallas. "Finance people did not need to pay much attention until suddenly pension plans became the squeaky wheel." Then the dot-com bust and the accompanying stock market decline caused plan assets to take a hit. That was followed by years of low interest rates, which increased plan funding obligations. At the same time, the federal government tightened pension plan funding requirements and established new accounting rules for calculating plan assets and liabilities. The net result: Plan sponsors have less leeway when it comes to smoothing out the ups and downs in a plan's funded status. This increased volatility. If there is anything corporate leaders hate, it is unpredictable expenses. So, more sponsors opted to freeze or close their plans altogether. Funding requirements and accounting rules aside, the decline in defined benefit plans is basically about who should shoulder the risks associated with ensuring that employees have enough assets to retire. With the rise of 401(k) 2    plans, employers clearly prefer the risk to be employees'. Has this shift gone too far? Risks and Worries When 401(k) plans gained popularity during the 1990s and began replacing defined benefit plans, the soaring stock market helped to ease the transition. It is ironic that the stock market meltdown in 2008 and 2009 and the Great Recession may have done more to educate employees about the value of defined benefit plans than any effort by employers. Employees also got a full appreciation of the investment risks associated with self-directed 401(k) plans, and they did not like it. Employers have responded by improving 401(k) plan designs with automatic enrollment, target-date funds and professional investment advice for participants. However, the risk of these investments and of creating a stream of retirement income to last a lifetime still resides with individual employees. As a result, more workers are concerned about their retirement security, especially young employees. In fact, 55 percent of employees are willing to trade some of their pay for a guaranteed retirement. That is a significant increase from 46 percent in 2009, according to a July 2011 survey of 9,218 full-time U.S. employees at nongovernmental organizations with 1,000 or more employees conducted by Towers Watson. Employees younger than age 40 who are now participating in a traditional defined benefit pension plan are particularly concerned. Among this group, the number willing to pay for a guaranteed retirement benefit increased from 39 percent in 2009 to 66 percent in 2011. This attitude is being driven by concerns that employers will continue to pull back on the retirement benefits they provide. Indeed, 44 percent of the respondents were concerned about reductions in their retirement benefits over the next two years. Among employees under age 40 who participate in a defined benefit pension plan, this worry was particularly widespread, with 63 percent concerned about benefit cuts. Defined Benefit vs. Cash Balance Plans Because they provide a guaranteed monthly benefit from retirement for the lifetime of the participant and, potentially, a surviving spouse, defined benefit pension plans require a large pool of assets, with associated investment risks, to cover the long-term liabilities. A key criticism of these plans is that they no longer fit today's workforce. To accumulate a significant monthly benefit, participants must work for a 3    single company for many years. Moreover, some defined benefit plans backload benefit accruals to the years just before retirement and base benefits on average pay during the final five years before retirement. Recognizing this lack of fit with today's workforce, some employers have implemented cash balance plans. These defined benefit plans incorporate the best elements of 401(k) plans, including transparency achieved by expressing benefits as an account balance and portability that allows participants to roll over those benefits when they leave the company. However, as with traditional defined benefit plans, the financial risk of cash balance plans resides with the plan sponsor and not the employee. Participants receive credits per year of service and credits based on a specific interest rate chosen by the plan, usually a government bond rate. Pay Attention Since employers offer benefits to meet employee needs and to attract and retain talent, this survey data is something that employers should keep in mind. The data suggest that "workers are increasingly focused on things that are less available in the employment market," says Alan Glickstein, senior retirement consultant with Towers Watson in Dallas. "Plan sponsors would be wise to pay attention to this data because ultimately there will be growing competition for talent, particularly as Baby Boomers retire." As employers look for ways to differentiate themselves in the war for talent, a defined benefit plan may be more of a selling point than corporate leaders realize. Twenty years ago, having a defined benefit pension plan was not much of a differentiator because so many other companies offered them. Now, an employer that offers some sort of guaranteed retirement benefit could really stand out from the competition. Houston-based CenterPoint Energy, an energy distributor with about 8,800 employees, sponsors a cash balance plan with an annual company contribution equal to 5 percent of an employee's salary and a 401(k) plan with a dollar-for- dollar match on employee contributions up to 6 percent of pay. Company leaders maintain dual retirement plans for two reasons: "We appreciate the need to have both a defined benefit and a defined contribution plan in order to maintain a stable, high-quality workforce and to stay competitive in our industry," says Ira Winsten, the company's director of compensation and benefits. Winsten notes that prospective employees tend to be "pleasantly surprised that we have both a defined benefit and a defined contribution plan." A survey of 424 mid-size and large employers with defined benefit plans 4    found that 36 percent offer the plans to new employees; 68 percent of those employers said they remain committed to offering the plans to new hires over the next two to three years. The top reasons for providing a defined benefit plan to new hires? Seventy-one percent said they want to attract and retain new employees, and 50 percent do it to maintain employee morale, according to the Towers Watson survey report, Pensions in Transition: Retirement Plan Changes and Employer Motivations, which was released in May. Ongoing Decline The story of traditional defined benefit pension plans is one of slow but steady decline. According to data from the U.S. Pension Benefit Guaranty Corp., defined benefit pension plans peaked in number at more than 112,000 in 1985. That number of plans had declined to more than 47,000 in 1996. The most recent numbers show 25,607 plans operating in 2011 and covering about 33.39 million participants. Other surveys tell a similar story. Just 22 percent of the companies represented in the Society for Human Resource Management's 2011 Employee Benefits research report offered a defined benefit plan to all employees, while 12 percent had a plan that is closed and 8 percent offered a cash balance plan. Finally, data from Mercer reveals a significant change in active plans in just five years and what happens to many of those formerly active plans. In 2006, 54 percent of the Fortune 200 companies had active defined benefit pension plans. By 2011, that number declined to just 35 percent. The remainder had no plan at all (27 percent), a plan frozen for all employees (19 percent), a plan frozen for just new employees (15 percent) and a plan frozen for just some employees (4 percent). Inevitably, many of the plans frozen only for new employees are likely to freeze completely. Coming Back? Is it possible that defined benefit plans could come full circle? Yes, it is possible but by no means certain. The problems associated with traditional defined benefit pension plans—including lack of portability, onerous regulatory requirements and fluctuating funding commitments—have not changed. "Defined benefit pension plans were designed to provide retirement benefits for employees, but they also served as a long-term incentive," says Randi Miller, HR and benefits analyst with Allied Container Systems Inc., a Walnut Creek, Calif.-based company with about 100 employees that designs and 5    installs modular buildings. But today, "it is becoming much more common to see people working for a company for only two or three years, then moving on." Given defined benefit plans' lack of portability, expecting companies to unfreeze existing plans or establish new ones could be a nonstarter. "I do not see defined benefit plans as viable in today's industry," Miller says. Miller is not alone. "I don't see a comeback in the cards for traditional defined benefit plans, given the current business and regulatory environment," Winsten says. "It is difficult to see who would champion that type of benefit in the future because it does not fit the mold of today's employment experience in which you can expect to work for several employers during your career." "Employers are convinced that the risks of maintaining a defined benefit plan are not sustainable," agrees Jim McHale, a principal with PricewaterhouseCoopers LLP in New York City. New Designs If any sort of defined benefit plan is to take hold, it will require new thinking and plan designs. "Right now, we are stuck between two models for retirement plans—one that puts all the risk on the employer and the other that places all of the risk on the individual employee," says Richard Shea, a partner with law firm Covington & Burling in Washington, D.C. "To build a sustainable retirement plan, you need to have some risk sharing" among both the employer and its employees. "Defined contribution approaches have gone too far to one side and left risks with the workers that they are unlikely to be able to manage on their own," McHale says. "A solution somewhere in the middle is going to be much healthier for the system." At a recent standing-room-only conference called Re-Imagining Pensions: Using Innovative Pension Plan Design to Reduce Risk and Increase Retirement Income, sponsored by the Pension Rights Center, The Urban Institute and Covington & Burling, participants discussed how defined benefit plans could once again play an important part in the retirement landscape. "There is recognition that we may see a different type of pension plan that combines some of the best features of defined benefit plans, such as employer contributions, pooled and professional investments, and annuities, with the best parts of 401(k) plans, including employee contributions and portability," said Karen Ferguson, director of the Pension Rights Center in Washington, 6    D.C. New plan designs represent potential solutions for employers that want to offer a more secure retirement benefit without the costs and regulatory complexity of traditional defined benefit pension plans. However, it is important for employers to keep in mind that these designs may require regulatory clarification. Government action or inaction could be a major roadblock for any kind of pension plan renaissance. "The federal government has to encourage innovation and get out of the way," Glickstein says. "While there is a need to protect the interests of workers and plan sponsors, it cannot be overly slow and cumbersome in writing rules that inhibit where plan sponsors and employees want to go." Still, the conversation about a new approach to retirement plan design has started. If plans that offer some sort of guaranteed retirement benefit are to make a comeback, Pushaw predicts that it will be small or mid-size companies that lead the way. "Executives and entrepreneurs in these companies are more likely to have an open mind about these plans and are less burdened by the political risk of changing direction than their peers in large companies," he says. "There is a lot of risk for an executive who tries to reanimate defined benefit plans when many companies considered these plans happily dead and buried for the last five or ten years." The author is a New Jersey-based business and financial writer.          City of Palo Alto (ID # 3472) City Council Staff Report Report Type: Action Items Meeting Date: 1/22/2013 City of Palo Alto Page 1 Summary Title: 2013 Legislative Priorities Title: 2013 State Legislative Priorities From: City Manager Lead Department: City Manager Recommendation Staff recommends that Council provide direction on and approve priority legislative issues for the 2013 legislative session. Background The last day to submit bill requests to the Office of Legislative Counsel is January 25, 2013. Staff is meeting with the City’s state legislative representatives to explore potential legislation for the 2013 state legislative session. In preparation for these meetings, staff is seeking direction and approval of key priority legislative issues to guide these discussions. Discussion The potential issues identified below are not intended to be an exhaustive list of the legislative priorities that are important to the City and/or that the City may engage in advocacy efforts during 2013. As in past years, staff is bringing forward the City’s guiding principles for legislative advocacy, and a more comprehensive list of both the state and federal legislative priorities to the Policy and Services Committee for discussion in February 2013 and to the full Council for approval. Issues/Possible Legislation to Address: 1. Require CalPERS to offer a wider range of health care options and flexibility to local governments: CalPERS to provide a wider range of types and costs of HMO and PPO health benefit plans, including, for example, a high-deductible plan, a catastrophic-only plan, and a plan with lower overall premiums but higher co- pays and other participant cost-sharing features. City of Palo Alto Page 2 2. Extend the three year highest average for calculation of pension: Adopt a clean- up amendment to the Public Employee Pension Reform Act (PEPRA) that would allow cities to amend their pension plan applicable to new hires who are eligible for “classic” status (in this case, employees in CalPERS from another jurisdiction who transfer to another city) to the limited extent of changing the calculation of final compensation from single highest year to the average of the three highest consecutive years. A three-year average compensation would match the new PEPRA law and would save cities money since the three-year average would be less than the 12 highest months factor that would otherwise be applied in such situations. 3. More flexibility for new hires to save money over the long term and tailor recruiting to a new generation who may prefer higher pay over benefits: Allow cities to not require participation in PERS by new employees, and/or allow cities to participate in social security with greater flexibility. Having an option for employees choosing more pay over a lesser benefit, would allow cities to have flexibility in compensation and potentially attract and retain talent without increasing unfunded pension and health care liabilities. 4. Eliminate costly and punitive CalPERS rules that restrict cities from hiring some job candidates: Get rid of the returning employee “windfall pension” mandate that can allow some employees who worked previously for a city to return and capture a retroactive enhanced lifetime pension benefit at a higher pension formula than they previously had or are willing to accept in order to be re- employed. 5. PEPRA clean-up and clarification: Prevent CalPERS from implementing interim regulations that will inflate pensionable compensation by greatly expanding the types and number of eligible pay for calculation of retirement benefit, in conflict with the language and spirit of PEPRA. See Attachment A, CalPERS Circular Letter with Pensionable Compensation Items. The attachment to the Circular lists the special pay premiums that CalPERS intends to continue to count in base pay. 6. Landfill capping requirements: Secure postponement of State landfill capping requirements for a limited time while the City evaluates a potential Energy/ Compost facility on a 10 acre site on the now-closed Palo Alto Landfill, as endorsed by the Palo Alto electorate through adoption of Measure E in November 2012. Explore options for legislative support. In addition, based on discussions during the City’s 2012 study sessions with former Senator Simitian and Assembly Member Gordon and topics submitted individually by Council members for consideration, three additional priority areas that staff may be discussing with the City’s legislators and tracking in the upcoming 2013 legislation session include: 1) CEQA reform (particularly as it relates to High Speed Rail), 2) State’s Housing Element Process and Allocation, and 3) some form of dedicated funding for Caltrain. City of Palo Alto Page 3 Draft Motion: Direct staff to explore potential legislation with the City’s state legislators on the issues outlined in this staff report for the 2013 state legislative session. Attachments:  Attachment A. CalPERS Circular Letter with Pensionable Compensation Items (PDF) California Public Employees’ Retirement System P.O. Box 942709 Sacramento, CA 94229-2709 Reference No.: (888) CalPERS (or 888-225-7377) Circular Letter No.: 200-063-12 TTY: (877) 249-7442 Distribution: IV, V, VI, X, XII, XVI www.calpers.ca.gov Special: Circular Letter December 31, 2012 TO: ALL CALPERS EMPLOYERS SUBJECT: PUBLIC EMPLOYEES' PENSION REFORM ACT OF 2013 – NEW ENROLLMENTS, NEW AND REVISED FORMS AND PUBLICATIONS The purpose of this Circular Letter is to provide information regarding new enrollments and CalPERS forms and publications that were created or revised due to the Public Employees’ Pension Reform Act of 2013 (PEPRA) and related Public Employees’ Retirement Law (PERL) amendments in Assembly Bill (AB) 340. NEW ENROLLMENTS All new enrollments with an effective date of January 1, 2013, or later should be held until Monday, January 7, 2013. The necessary my|CalPERS system enhancements will then be available and you should resume processing transactions at that time. If an enrollment is required to be entered prior to that time due to other constraints, please call the CalPERS Customer Contact Center at 888 CalPERS (or 888-225-7377) for assistance. Please note that enrollments with an effective date of December 31, 2012, or earlier may be processed as normal in my|CalPERS. NEW FORMS The new forms listed below will be available online after January 1, 2013. To access the online versions, please visit the Forms & Publications Center on CalPERS On-Line. Printed copies of the new forms are attached to this letter. Member Reciprocal Self-Certification Form (PERS-CASD-801) This form is for employers to use to identify if new employees are classic members due to reciprocity. It is extremely important for employers to properly identify the status of members at the time of hire. While processing an enrollment in my|CalPERS, employers will identify if the new hire is coming from a reciprocal agency and be prompted to enter the necessary data elements which subject them to reciprocity. This form identifies those necessary data elements the employer is required to enter. Circular Letter No.: 200-063-12 December 31, 2012 Page 2 Based on the enrollment information entered by the employer, my|CalPERS will automatically determine the proper benefit group for the new employee. Employers must retain a copy of this form in the individual’s employment records for auditability purposes. Certification of MOU Impairment (PERS-CASD-800) This form can be used by employers to notify CalPERS in writing if they certify that the terms of their Memorandum of Understanding (MOU), in effect on or before January 1, 2013, will be impaired by their compliance with the requirements of one or more provisions of Government Code Section 7522.30. See the form for more information. Please review Circular Letter #200-055-12 for additional information on reciprocity and MOU impairment as it relates to PEPRA. UPDATED PUBLICATIONS The revised versions of the following publications will be available online in the Forms & Publications Center on CalPERS On-Line by January 1, 2013. Printed editions will be available in approximately 6-8 weeks:  School Member Benefit Publication (PUB 2)  State Safety Member Benefit Publication (PUB 7)  Local Miscellaneous Member Benefit Publication (PUB 8)  Local Safety Member Benefit Publication (PUB 9)  Alternate Retirement Program (PUB 10)  A Guide to Your CalPERS Service Credit Purchase Options (PUB 12)  When You Change Retirement Systems (PUB 16)  Employment After Retirement (PUB 33)  A Guide to Completing Your CalPERS Disability Retirement Election (PUB 35)  Reinstatement From Retirement (PUB 37)  A Guide to CalPERS Community Property (PUB 38A) The revised versions of the following publications are anticipated to be available online by January 15, 2013:  Planning Your Service Retirement (PUB 1)  State Miscellaneous & Industrial Member Benefit Publication (PUB 6)  National Guard Member Benefit Publication (PUB 11)  State Second Tier Election Application (PUB 52) Please note that the dates of availability for the revised versions of the publications listed in this letter are subject to change. We encourage you to visit the Pension Reform Impacts page on CalPERS On-Line at www.calpers.ca.gov for the latest PEPRA information and updates. Circular Letter No.: 200-063-12 December 31, 2012 Page 3 In addition, a new online training class, my|CalPERS Changes Due to the Public Employee’s Pension Reform Act of 2013 (PEPRA), is now available for employers. This class reviews important changes to the my|CalPERS system based on PEPRA provisions.To enroll in online training, log in to in my|CalPERS and select the Education tab. If you have any questions, please call the CalPERS Customer Contact Center at 888 CalPERS (or 888-225-7377). KAREN DeFRANK, Chief Customer Account Services Division Enclosures Member Reciprocal Self Certification Form (PERS-CASD-801) Certification of Memorandum of Understanding (MOU) Impairment (PERS-CASD-800) Circular Letter No.: 200-062-12 – Attachment December 27, 2012 Page 1 “Pensionable Compensation” Items – New PEPRA Public Agency and School Members CalPERS interpretation of the types of compensation that may be reported as “pensionable compensation” for CalPERS contracting agencies, provided those items meet the criteria contained in Government Code Section 7522.34(a), are listed below. CalPERS will initiate the regulatory process in 2013 to provide this list of items that may be reported as “pensionable compensation” for contracting agencies. More information on the proposed regulations will be provided to you as it becomes available. In the meantime, the proposed list of “pensionable compensation” items below will be implemented, and can be reported on January 1, 2013, for new PEPRA public agency and school members. It is important to note that as the proposed regulations proceed through the regulatory process, some changes, including the items contained in this list, may be required. Type Reportable Special Compensation Items Incentive Pay • Dictation/Shorthand/Typing Premium • Longevity Pay • Marksmanship Pay • Master Police Officer • Physical Fitness Program Educational Pay • Applicator’s Differential • Certified Public Accountant Incentive • Educational Incentive • Emergency Medical Technician Pay • Engineering Registration Premium • Government Agency Required Licenses • International Conference of Building Officials (ICBO) Certificate • Mechanical Premium (Brake Adjustment License, SMOG Inspector License) • National Institute of Automotive Service Excellence (NIASE) Certificate • Notary Pay • Paramedic Pay • Peace Officer Standard Training (POST) Certificate Pay Continued on next page Circular Letter No.: 200-062-12 – Attachment December 27, 2012 Page 2 “Pensionable Compensation” Items – New PEPRA Public Agency and School Members, Continued Type Reportable Special Compensation Items Educational Pay, Continued • Reading Specialist • Recertification Certificate • Special Class Driver’s License Pay • Undergraduate/Graduate/Doctoral Credit Special Assignment Pay • Accountant Premium • Administrative Secretary Premium • Aircraft/Helicopter Pilot Premium • Asphalt Work Premium • Audio Visual Premium • Auditorium Preparation Premium • Bilingual Premium • Branch Assignment Premium • Canine Officer/Animal Premium • Cement Finisher Premium • Circulation Librarian Premium • Computer Operations Premium • Confidential Premium • Contract Administrator Coordinator Premium • Crime Scene Investigator Premium • Critical Care Differential Premium • D.A.R.E. Premium • Detective Division Premium • Detention Services Premium • DUI Traffic Officer Premium • Extradition Officer Premium • Fire Inspector Premium • Fire Investigator Premium • Fire Prevention Assignment Premium • Fire Staff Premium • Flight Time Premium • Float Differential Premium • Front Desk Assignment (Jail) • Fugitive Officer Premium • Gang Detail Assignment Premium • Grading Assignment Premium Continued on next page Circular Letter No.: 200-062-12 – Attachment December 27, 2012 Page 3 “Pensionable Compensation” Items – New PEPRA Public Agency and School Members, Continued Type Reportable Special Compensation Items Special Assignment Pay, Continued • Hazard Premium • Heavy/Special Equipment Operator • Height Premium • Housing Specialist Premium • Juvenile Officer Premium • Lead Worker/Supervisor Premium • Library Reference Desk Premium • Gas Maintenance Premium • Plumber Irrigation System Premium • Refuse Collector Premium • Street Lamp Replacement Premium • MCO Instructor Premium • Motorcycle Patrol Premium • Mounted Patrol Premium • Narcotic Division Premium • Paramedic Coordinator Premium • Park Construction Premium • Park Maintenance/Equipment Manager Premium • Parking Citation Premium • Patrol Premium • Police Administrative Officer • Police Investigator Premium • Police Liaison Premium • Police Polygraph Officer • Police Records Assignment Premium • Rangemaster Premium • Refugee Arrival Cleanup Premium • Safety Officer Training/Coordinator Premium • Sandblasting Premium • School Yard Premium • Search Pay Premium • Severely Disabled Premium • Sewer Crew Premium • Shift Differential Continued on next page Circular Letter No.: 200-062-12 – Attachment December 27, 2012 Page 4 “Pensionable Compensation” Items – New PEPRA Public Agency and School Members, Continued Type Reportable Special Compensation Items Special Assignment Pay, Continued • Solo Patrol Premium • Sprinkler and Backflow Premium • Tiller Premium • Tire Technician Premium • Traffic Detail Premium • Training Premium • Tree Crew Premium • Utility Meter Premium • Utilities Systems Operation Premium • Water Certification Premium Statutory Items • Fair Labor Standards Act (FLSA) • Holiday Pay CITY OF PALO ALTO OFFICE OF THE CITY CLERK January 22, 2013 The Honorable City Council Palo Alto, California Library Advisory Commission Viability Report In July 2012 Library Advisory Commissioner Noel Bakhtian resigned from the Commission. The City Clerk Staff recruited, beginning in July, and no applications were received. Staff recruited again beginning in September and one application was received. On October 22, 2012 Council directed Staff to postpone additional recruitments and report back to the Council regarding the viability of the Library Advisory Commission. Excerpt of 10/22/12 discussion regarding the Library Advisory Commission: MOTION: Council Member Shepherd moved, seconded by Vice Mayor Scharff to direct Staff to recruit for additional applications for the Library Advisory Commission. Council Member Klein said it seemed there was a succession of people resigning prior to the end of their term dates and there were fewer applicants for openings. He requested information regarding the viability of the Commission. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER before starting the recruitment, to request Staff to advise Council on the viability of the Library Advisory Commission given the reduction in applicants, and the number of resignations prior to the completion of their terms. MOTION PASSED: 9-0 On December 3, 2012 the Library Advisory Commission submitted an informational report concluding that the Library Advisory Commission is viable. A copy of that report is attached. Later in December during a discussion regarding Boards and Commissions recruitment, the Policy and Services Committee asked the City Clerk for a status on the recruitment. The Committee also indicated the full Council Page 2 should discuss the viability of the Library Advisory Commission. The City Clerk agreed to return to the full City Council with a report. The vacancy created by Commissioner Bakhtian’s resignation is still open. Additionally, three terms are set to end on January 31, 2013. The Municipal Code allows for commissioners to serve past their term end dates until a replacement is named. However, if the commissioners are unable to continue serving, the Library Advisory Commission could have only three out of seven seats filled as of February 1, 2012. Staff is requesting the City Council provide direction. Some potential options for direction include: Council could direct that the Library Advisory Commission will remain in its current form. Recruitment for the four vacancies should begin immediately. Council could direct that the number of commissioners on Library Advisory Commission should be reduced. The Municipal Code indicates that the Commission is composed of seven members who shall be appointed by and shall serve at the pleasure of the City Council. The complete Municipal Code section pertaining to the Library Advisory Commission is attached. According to the City Attorney’s Office (as noted on the 12/3/12 informational report) there is no set process for initiating a change in the number of commissioners. Council may take action to adopt an ordinance to change the number of commissioners if desired. Staff could then begin recruitment for the appropriate number of Commissioners once the ordinance is passed. ATTACHMENTS:  Informational Report from LAC (PDF)  Municipal Code (PDF) Department Head: Donna Grider, City Clerk Page 3 City of Palo Alto COLLEAGUES MEMO January 22, 2013 Page 1 of 2 (ID # 3440) DATE: January 22, 2013 TO: City Council Members FROM: Council Member Klein, Council Member Price, Mayor Scharff SUBJECT: COLLEAGUE'S MEMO FROM MAYOR SCHARFF, AND COUNCIL MEMBERS KLEIN AND PRICE REGARDING THE LENGTH OF CITY COUNCIL MEETINGS Problem Our Council meetings are taking too long. Recommendations: 1. We should discuss this problem for one hour at our retreat on February 2. 2. We hope that voluntary changes by Council Members will reduce the length of our meetings over the first half of 2013. 3. If there is no improvement we suggest that at a mid-year retreat Council consider mandatory provisions to limit Council questions and debate time. Discussion At our request the Clerk’s office prepared the attached schedule which shows the start and end time of each Council meeting for years 2008 through 2012. All numbers and charts in this memorandum were produced by its authors based on the attached schedule and we are solely responsible for them. Here are some of those numbers: Year Number of meetings Hours in Meetings Average length of meeting 2008 45 194 4.31hours 2009 47 204 4.34 2010 52 221 4.25 2011 58 256 4.4 2012 52 260 5.0 January 22, 2013 Page 2 of 2 (ID # 3440) Year Meetings started before 6 Meetings ended after 11 Meetings ended after 12 2008 7 18 10 2009 2 21 10 2010 8 26 11 2011 6 25 12 2012 37 27 9 We believe that these numbers show a disturbing trend. In 2012 we spent 66 more hours in meetings than we did in 2008, a 34% increase. In 2012 we started 37 meetings before 6; in the previous four years combined there were only 23 such meetings. Yet in 2012 we still had about the same number of meetings ending after 11 or 12. The average length of a meeting jumped more than a half hour between 2011 and 2012. We acknowledge that there may be many reasons for longer meetings: more extensive reports and more discussions from the public, for example. But the one variable we have direct control over is the time we spend as Council Members asking questions and discussing issues. We risk undermining public confidence in our processes if we can’t get this problem under control. The City Manager has reviewed this memorandum and has no comments. We therefore hope you will join with us in voting to put this matter on the Retreat agenda. City Council Meetings 2008 2009 2010 Date Start End Date Start End Date Start End 1 7-Jan 7:05 10:00 5-Jan 7:12 8:15 4-Jan 7:16 9:00 2 14-Jan 6:00 9:40 12-Jan 7:05 11:20 ll-Jan 6:04 11:36 3 22-Jan 6:00 9:58 26-Jan 6:05 12:41 19-Jan 6:00 8:00* 4 28-Jan 8:20 10:40 2-Feb 6:10 11:59 25-Jan 7:01 12:10 5 4-Feb 5:05 11:10 9-Feb 6:05 12:32 27-Jan 5:30 7:00 6 5-Feb 6:02 7:05 10-Feb 6:00 8:00* 30-Jan 9:00 11:00* 7 ll-Feb 6:04 11:40 18-Feb 6:05 8:50 l-Feb 6:01 11:34 8 19-Feb 6:15 9:45 25-Feb 7:32 10:22 8-Feb 6:01 10:25 9 25-Feb 7:03 8:45 2-Mar 6:06 1:00 22-Feb 7:47 10:15 10 10-Mar 6:30 9:48 14-Mar 8:34 1:43 3-Mar 7:05 10:15 11 17-Mar 6:05 11:50 16-Mar 7:13 1:25 8-Mar 6:00 11:32 12 24-Mar 5:35 12:08 17-Mar 6:02 8:00 15-Mar 6:04 12:00 13 7-Apr 6:00 12:18 30-Mar 6:04 12:12 18-Mar 5:30 6:10 14 14-Aor 6:05 10:40 6-Aor 6:05 10:38 22-Mar 7:46 11:08 15 28-Aor 5:40 11:31 13-Aor 6:00 12:02 5-Aor 6:05 12:21 16 30-Aor 8:04 9:55 27-Aor 7:05 11:58 12-Apr 5:37 10:47 17 5-Mav 6:05 10:26 4-Mav 6:05 8:50 19-Apr 7:01 11:59 18 12-Mav 5:05 11:46 6-Mav .6:00 7:45 3-Mav 5:50 1:26 19 19-Mav 6:05 10:38 ll-Mav 5:33 9:37 4-Mav 6:00 8:00* 20 2-Jun 6:05 9:40 18-Mav 6:35 11:56 10-Mav 5:34 11:44 21 9-Jun 6:05 12:51 l-Jun 7:04 11:10 12-Mav 6:04 9:48 22 15-Jun 12:36 6:50 8-Jun 6:00 11:40 24-Mav 6:07 12:31 23 16-Jun 6:05 9:40 15-Jun 7:15 10:37 27-Mav 6:08 11:50 24 7-Jul 6:02 12:00 22-Jun 7:07 11:32 7-Jun 6:00 12:18 25 8-Jul 6:00 6:45 23-Jun 6:00 7:45 14-Jun 7:38 11:20 26 9-Jul 7:00 9:15 6-Jul 6:00 11:50 15-Jun 6:00 7:00 27 14-Jul 6:05 12:08 13-Jul 6:04 11:27 16-Jun 6:04 9:00 28 15-Jul 5:15 7:15* 14-Jul 6:00 6:35 21-Jun 6:03 11:36 29 16-Jul 6:00 8:00* 20-Jul 7:07 12:35 23-Jun 6:37 10:32 30 21-Jul 6:05 10:40 21-Jul 6:00 7:00 28-Jun 7:03 10:32 31 22-Jul 7:10 8:48 27-Jul 7:07 12:48 12-Jul 6:04 12:24 32 28-Jul 5:35 10:45 3-Aug 6:05 12:45 14-Jul 6:00 7:32 33 4-Aug 7:05 11:34 14-Aug 5:03 5:10 19-Jul 6:05 1:10 34 8-Sep 7:05 9:50 10-Sep 6:00 8:00* 21-Jul 6:00 7:03 35 15-Sep 6:03 12:10 14-Sep 6:00 2:10 26-Jul 5:40 11:44 36 6-0ct 6:30 12:20 21-Seo 6:30 1:05 27-Jul 6:00 7:00 37 14-0ct 6:13 7:14 5-0ct 6:35 1:00 2-Aug 5:33 11:23 38 20-0ct 6:02 12:30 13-0ct 8:00 10:00* 5-Aug 6:05 10:15 39 3-Nov 6:01 11:10 14-0ct 6:00 8:00* 13-Sep 6:07 11:50 40 10-Nov 6:05 12:37 19-0ct 6:05 12:16 20-Sep 6:05 12:00 41 17-Nov 7:01 11:27 21-0ct 6:30 8:00 21-SeJ> 6:00 8:00* 42 l-Dec 7:03 12:23 26-0ct 6:05 12:48 27-Seo 6:03 11:56 43 8-Dec 6:30 10:31 5-Nov 7:03 11:52 4-0ct 6:05 12:10 44 15-Dec 6:05 12:52 9-Nov 6:00 12:30 13-0ct 6:00 7:52 45 16-Dec 5:35 6:45 16-Nov 6:09 11:45 18-0ct 5:20 11:53 46 7-Dec 6:07 1:15 25-0ct 6:00 12:00 47 14-Dec 6:33 1:00 27-0ct 7:00 9:00* 48 l-Nov 6:05 8:50 49 8-Nov 6:37 11:42 50 22-Nov 6:02 12:04 51 6-Dec 6:06 12:20 52 13-Dec 6:00 8:00* 53 54 55 56 57 58 L~LlIIICI\.t::'U Time City Council Meetings 2011 2012 Date Start End Date Start End 1 4-Jan 7:19 8:30 17-Jan 6:10 11:14 2 10-Jan 6:04 11:06 21-Jan 9:05 1:57 3 13-Jan 6:05 9:00 23-Jan 6:02 11:18 4 18-Jan 6:05 10:12 30-Jan 5:35 10:12 5 22-Jan 9:00 2:15 6-Feb 7:02 10:06 6 25-Jan 5:30 8:50 13-Feb 5:30 11:02 7 31-Jan 6:03 9:55 21-Feb 6:00 10:58 8 I-Feb 6:15 7:00 28-Feb 5:00 10:58 9 7-Feb 6:01 12:03 29-Feb 5:00 7:30 10 8-Feb 2:05 7:00 5-Mar 5:30 10:27 11 14-Feb 6:03 11:36 12-Mar 6:00 12:50 12 16-Feb 5:00 7:00* 19-Mar 5:33 11:56 13 18-Feb 4:00 6:00* 22-Mar 5:00 7:07 14 I-Mar 5:01 9:12 26-Mar 5:06 9:52 15 7-Mar 6:04 12:16 27-Mar 5:00 7:00 16 14-Mar 6:03 12:17 9-Aor 5:30 12:12 17 21-Mar 6:05 11:37 16-Aor 5:32 11:56 18 4-Aor 6:02 11:59 23-AJJr 6:00 12:24 19 ll-Aor 6:06 12:40 30-Aor 5:09 8:45 20 19-Aor 6:00 7:00 7-Mav 5:00 11:50 21 27-Aor 4:00 6:00* 14-Mav 5:32 1:06 22 2-Mav 6:01 11:42 21-Mav 7:14 11:08 23 3-May 4:00 6:50 4-Jun 5:36 11:19 24 9-Mav 4:20 10:05 Il-Jun 5:30 11:25 25 16-Mav 7:06 11:24 13-Jun 5:10 8:41 26 6-Jun 6:07 11:16 18-Jun 5:35 11:30 27 13-Jun 6:02 12:21 25-Jun 5:36 12:03 28 20-Jun 6:04 11:27 26-Jun 5:30 10:00 29 27-Jun 6:04 12:40 2-Jul 6:00 10:07 30 Il-Jul 6:05 12:24 9-Jul 5:33 11:03 31 12-Jul 6:00 6:50 Il-Jul 5:00 5:00 32 18-Jul 6:05 12:38 12-Jul 5:00 8:30 33 20-Jul 6:00 10:00 16-Jul 5:35 1:00 34 25-Jul 6:03 11:20 23-Jul 4:39 12:18 35 27-Jul 6:00 10:30 29-AuJ; 5:00 8:40 36 l-Aug 6:00 12:15 30-Aug 5:00 7:30 37 31-Aug 6:05 9:20 4-Seo 6:00 12:07 38 6-Seo 6:05 11:45 10-Seo 5:03 11:53 39 12-Seo 6:03 1:10 18-Seo 5:30 11:50 40 13-Seo 5:30 9:00 24-Seo 5:31 12:31 41 19-5ep 6:04 10:23 1-0ct 7:05 12:08 42 20-Seo 6:05 7:06 15-0ct 5:05 11:03 43 21-Seo 6:03 8:30 22-0ct 5:05 11:07 44 3-0ct 5:05 1:13 25-0ct 6:00 8:35 45 6-0ct 5:00 9:45 5-Nov 6:02 10:33 46 17-0ct 5:35 1:33 13-Nov 5:38 11:35 47 19-0ct 4:05 7:00 19-Nov 5:00 10:04 48 24-0ct 6:03 9:50 3-Dec 5:00 12:35 49 I-Nov 7:03 12:15 5-Dec 5:30 9:45 50 7-Nov 7:00 12:10 10-Dec 6:02 10:58 51 14-Nov 6:04 12:15 Il-Dec 5:02 6:14 52 21-Nov 7:03 8:53 17-Dec 7:05 10:47 53 28-Nov 7:01 11:26 54 5-Dec 6:08 11:45 55 6-Dec 5:05 6:45 56 7-Dec 5:30 7:45 57 12-Dec 6:05 9:11 58 19-Dec 6:05 11:45 * Estimated Time