HomeMy WebLinkAbout2013-03-18 City Council Agenda PacketCITY OF PALO ALTO
CITY COUNCIL Special Meeting
Council Conference Room
March 18, 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 March 18, 2013
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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
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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
Study Session 6:00-7:00 P.M.
1. Study Session with the Utilities Advisory Commission Regarding 1)
Potential Expansion of the City's Fiber Optic Network and 2) Utilities
Department and Utilities Advisory Commission Priorities for 2013 and
Beyond
COUNCIL CHAMBERS
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.
City Manager Comments 7:00-7:10 P.M.
Oral Communications 7:10-7:30 P.M.
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.
2 March 18, 2013
MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA
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Minutes Approval 7:30-7:35 P.M.
February 2, 2013
February 4, 2013
Consent Calendar 7:35-7:40 P.M.
Items will be voted on in one motion unless removed from the calendar by two Council Members.
2. Approval of Contract Amendment No. One to Contract No. C12143146 in
the Amount of $165,000 with RBF Consulting, Inc. for the Final Design
and Construction Support Services for the Southgate Neighborhood
Storm Drain Improvements and Green Street Project, Capital
Improvement Program Project SD-10101
3. Finance Committee Recommendation that the City Council Appoint an
Electric Undergrounding Advisory Body
4. Recommendation to Adopt a Resolution Amending Utilities Rate
Schedule C-1, Utility Service Calls
5. Adoption of a Resolution Approving, and Authorizing the City Manager to
Negotiate and Execute, Electric Master Agreements and Delegating the
Authority to Transact Under the Master Agreements
6. Finance Committee Recommendation of a Five-year Contract Extension
for the Palo Alto Golf Course Management Services Agreement with
Brad Lozares (Lozares); Amendment to Golf Course Pro Shop Lease with
Lozares to Reduce the Term of the Option to Extend the Lease From
Ten Years to Five Years; and Five-Year Contract Extension for the Golf
Course Maintenance Services Contract with Valley Crest Golf
7. Adoption of a Budget Amendment Ordinance in the Amount of $2.2
Million to Utilize the Additional Funds Added to the Infrastructure
Reserve in FY 2013 for Infrastructure "Keep-up" to address street and
sidewalk problems and to accelerate street and sidewalk improvements
8. Second Reading: Adoption of an Ordinance Reducing the Size of the
Library Advisory Commission from Seven to Five Commissioners and
Amending the Frequency of Regular Meetings to Bi-Monthly (1st
Reading: March 4, 2013, Passed 9-0)
3 March 18, 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.
9. Recommendation from the Council Appointed Officers Committee to
Exercise an Option to Extend for One Year a Consulting Contract with
Sherry L. Lund Associates for a Total Cost Not to Exceed $49,350 for; 1)
Consulting Services related to the 2012-2013 Annual Performance
Reviews for Four Council Appointed Officers for a Total Cost Not to
Exceed $32,300; 2) Solicitation of Staff Feedback Related to
Performance Evaluations for a Total Cost Not to Exceed $9,500; and 3)
Mid-year Performance Review Updates for a Total Cost Not to Exceed
$7,550
10. Policy & Services Committee Recommendation to Approve Revisions to
Section 2.4 of the City Council Protocols Setting Forth the Conduct of
Council Liaisons to Palo Alto Boards and Commissions
Action Items
Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials,
Unfinished Business and Council Matters.
7:40-9:10 P.M.
11. Downtown Parking Update and Direction Regarding Near-Term Parking
Actions
9:10-10:00 P.M.
12. Infrastructure Committee Recommendation to Modify List of Projects
Approved by Council for Public Opinion Research for a Potential
Infrastructure Revenue Ballot Measure
10:00-10:10 P.M.
Council Member Questions, Comments and Announcements
Members of the public may not speak to the item(s)
Adjournment
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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 March 18, 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
Standing Committee Meetings
Finance Committee Meeting
Policy and Service Committee Meeting
Schedule of Meetings
Schedule of Meetings
Tentative Agenda
Tentative Agenda
Informational Report
Downtown Development Cap Study Scope of Work and Request for
Proposal
Public Letters to Council
Set 1 Set 2 Set 3 Set 4
City of Palo Alto (ID # 3557)
City Council Staff Report
Report Type: Study Session Meeting Date: 3/18/2013
City of Palo Alto Page 1
Summary Title: Joint Study Session with Utilities Advisory Commission
Title: Study Session with the Utilities Advisory Commission Regarding 1)
Potential Expansion of the City's Fiber Optic Network and 2) Utilities
Department and Utilities Advisory Commission Priorities for 2013 and
Beyond
From: City Manager
Lead Department: Utilities
Potential List of Topics for Joint Study Session with Council
Below are the potential topics of discussion for the Joint Study Session with the Utilities
Advisory Commission on March 18, 2013.
I. Potential Expansion of the City’s Fiber Optic Network
II. Utilities Department and Utilities Advisory Commission Priorities for 2013 and Beyond
City of Palo Alto (ID # 3569)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/18/2013
City of Palo Alto Page 1
Council Priority: Environmental Sustainability
Summary Title: Approval of Amendment No. One to Southgate Design
Agreement
Title: Approval of Contract Amendment No. One to Contract No. C12143146
in the Amount of $165,000 with RBF Consulting, Inc. for the Final Design and
Construction Support Services for the Southgate Neighborhood Storm Drain
Improvements and Green Street Project, Capital Improvement Program
Project SD-10101
From: City Manager
Lead Department: Public Works
Recommendation
Staff recommends that Council approve and authorize the City Manager or his
designee to execute Contract Amendment No. One (Attachment A) to Contract
No. C12143146 with RBF Consulting, Inc., in the amount of $165,000 for final
design and construction support services for the Southgate Neighborhood Storm
Drain Improvements and Green Street Project (SD-10101). The amendment
includes $145,577 for basic services and $19,423 for additional services. The
revised total contract amount is not to exceed $305,000, including $252,371 for
basic services and $52,629 for additional services.
Background
In 2005, the property owners of Palo Alto voted to increase their monthly storm
drainage fee to fund a set of seven high-priority storm drain-related capital
improvement projects, including drainage improvements in the Southgate
neighborhood. The existing storm drainage system for the Southgate
neighborhood, originally designed in the 1920’s, relies on surface gutter flows.
City of Palo Alto Page 2
Gutter flows from the majority of the streets are directed to a single storm drain
inlet at the southeast corner of the neighborhood, at the intersection of Sequoia
and Mariposa Avenues. Although the existing storm drainage system within this
neighborhood works marginally well, the condition of the curb and gutter has
deteriorated over the years,causing severe ponding within the neighborhood.
Consequently, a design consultant was retained in November 2011 to conduct a
feasibility study and preliminary engineering to review options for a storm drain
system that is innovative and effective.
On November 21, 2011, Council awarded a contract with RBF Consulting, Inc. to
perform a feasibility study and preliminary design for the Southgate
Neighborhood Storm Drain Improvements and Green Street Project (SR#2196).
The contract was awarded in the amount of $106,794 for basic services and
$33,206 for additional services. The scope of work specified under the contract
included feasibility analysis, preliminary engineering design, and public outreach.
During the feasibility study stage, the consultant identified and analyzed the
optimum drainage features for the neighborhood and pinpointed specific
locations for the drainage improvements. The consultant also worked
cooperatively with staff to conduct a robust public outreach program, including
several community meetings and special events to solicit input from the
neighborhood residents on the proposed drainage improvements. Information
gathered from the feasibility analysis and during the public outreach process has
been used to formulate the findings and recommendations included in the project
feasibility study. The Consultant submitted the final draft of the feasibility study
to staff in August 2012. The innovative drainage system improvements proposed
for the Southgate neighborhood include the following key elements:
•Bio-retention areas, vegetated planters constructed as extensions of the existing
planter strips,at up to 19 selected intersections that will intercept, filter, and
infiltrate existing gutter flows.
•Reconstruction of selected crosswalks using permeable interlocking concrete
pavers that will intercept and infiltrate storm runoff.
•Reconstruction of an existing concrete pedestrian paseo connecting the
neighborhood to El Camino Real and a parallel paved drainage ditch with
permeable interlocking concrete pavers and an unlined, vegetated drainage
City of Palo Alto Page 3
swale that will filter and infiltrate storm runoff.
•Installation of a limited amount of new underground storm drains and inlets to
convey runoff more efficiently to the existing drainage system serving the
neighborhood.
Discussion
The original contract with RBF Consulting, Inc. has enough funding to complete
the feasibility study, preliminary design, and initial public outreach for the project.
The November 2011 SR#2196 noted that staff would return to Council for
approval of a contract amendment for final design and construction stage services
when additional project funds were to become available in FY 2013. As
anticipated, with the completion and approval of the final feasibility study, the
City needs the design consultant’s services to provide final plans, specifications,
and a cost estimate for the selected design elements to be constructed for the
Southgate Neighborhood Storm Drain Improvements and Green Street Project.
Staff will also need the consultant to provide construction support services during
the construction of the project.
The following is a summary of the additional scope of work included in the
attached contract amendment:
Task 1 –Final Plans, Specifications & Estimate (PS&E)
Consultant will prepare improvement plans, specifications, and estimate for the
implementation of the drainage improvements (19 bio-retention planters, and
permeable pavement crosswalks and paseo) identified in Phase I of the project,
and shown on the exhibit titled Proposed Project Conceptual Design Map dated
May 2012. The plans will be prepared for review and approval by City at 60%,
90%, and 100% design phases.
Task 2 -Meetings
Consultant will meet with City staff during the design phase to review submittal
review comments, as well as comments from community meetings. The scope
includes a total of five meetings with City staff for the duration of the project
City of Palo Alto Page 4
design phase.
Task 3 -Work Product Submittal
Consultant will provide both reproducible and electronic sets of following work
product submittals for staff review at the appropriate stage of work:
•60% construction documents: 8 half-size plan sets, 8 technical specifications
sets, 8 copies of an opinion of probable construction costs, plus digital files of all
documents on compact disc;
•90% construction documents: 8 half-size sets, 8 technical specifications sets, 8
copies of an opinion of probable construction costs, plus digital files of all
documents on compact disc; and
•100% construction documents: digital files of all documents on compact disc.
Task 4 -Construction Support Services
Consultant shall provide construction phase support services. The duties and
responsibilities at the Project site shall be in an indirect support role in dealings
with the contractor but shall be a direct support role for the interpretation of the
construction documents and the processes that allow the work to proceed
through the construction phase to completion. The construction phase services
shall include the following tasks: bid support services, construction support
services, shop drawing review, construction meetings and observations, punch list
review and approval and close out, final record drawing preparation, and
operations and maintenance consultation.
Task 5 -Southgate Resurfacing Project
Consultant shall conduct additional field survey work and prepare improvement
plans to allow for the construction of new exposed curb and gutter, driveway
aprons and curb ramps for four blocks in the Southgate neighborhood. The plans
will be prepared for review and approval by City at 60%, 90%, and 100% design
phases.
City of Palo Alto Page 5
Timeline
The feasibility phase and the preliminary design phase of the Southgate
Neighborhood Storm Drain Improvements and Green Street Project were
completed in November 2012. Preparation of the final construction documents
will be completed by the end of Spring 2013, and the construction phase is
scheduled to start in Summer 2013.
Resource Impact
Funding in the amount of $131,132 is available in the Storm Drainage Fund Capital
Improvement Program Project budget for Southgate Neighborhood Storm Drain
Improvements, SD-10101.Funds for the curb and gutter design in the amount of
$33,868 are included in Street Maintenance Capital Improvement Project, PE-
86070.
Environmental Review
This project is categorically exempt from the provisions of the California
Environmental Quality Act (CEQA) under Section 15303 of the CEQA Guidelines
and no further environmental review is necessary.
Attachments:
·A -Amendment No. One to Contract C12143146 (PDF)
1 Revision July 25, 2012
AMENDMENT NO. ONE TO CONTRACT NO. C12143146
BETWEEN THE CITY OF PALO ALTO AND
RBF CONSULTING, INC.
This Amendment No. One to Contract No. C12143146 (“Contract”) is entered into
________________,2013 by and between the CITY OF PALO ALTO, a California chartered
municipal corporation (“CITY”), and RBF Consulting, Inc., a California Corporation, located at 500
Ygnacio Valley Road, Suite 270, Walnut Creek, CA 94596 (“Consultant”).
R E C I T A L S:
WHEREAS, the Contract was entered into between the parties for the provision of
feasibility study and preliminary design services for the Southgate Neighborhood Storm Drain
Improvements and Green Street Project (Project); and
WHEREAS, the parties wish to amend the Contract to increase the scope of services
to include final design and construction stage services, increase compensation, and extend the
contract schedule;
NOW, THEREFORE, in consideration of the covenants, terms, conditions, and
provisions of this Amendment, the parties agree:
SECTION 1. Section 1, SCOPE OF SERVICES is hereby amended to read as
follows:
“CONSULTANT shall perform the Services described in the attached Exhibit “A-1”
as an addition to the Scope of Services described in “Exhibit A” of the original Contract and in
accordance with the terms and conditions contained in this Agreement. The performance of all
Services shall be to the reasonable satisfaction of CITY.”
SECTION 2. Section 2, TERM is hereby amended to read as follows:
“The term of this Agreement shall be from the date of its full execution through the
duration of the construction stage services rendered by CONSULTANT for the Project.”
SECTION 3. Section 4, NOT TO EXCEED COMPENSATION is hereby amended
to read as follows:
“The compensation to be paid to CONSULTANT for performance of the Basic
Services described in Exhibit “A-1” is an addition to the compensation of Basic Services described
in “Exhibit A” of the original Contract, including payment for professional services and
reimbursable expenses, shall not exceed two hundred fifty-two thousand three hundred seventy-one
dollars ($252,371). In the event Additional Services are authorized, the total compensation for
services and additional services and reimbursable expenses shall not exceed three hundred five
thousand dollars ($305,000). The applicable rates and schedule of payment are set out in Exhibit
"C-J" as part of Exhibit C of the original Contract.
Additional Services for this Contract Amendment, if any, shall be authorized in
accordance with and subject to the provisions of Exhibit "C-l". Consultant shall not receive any
compensation for Additional Services performed without the prior written authorization of CITY.
Additional Services shall mean any work that is not determined by CITY to be necessary for the
proper completion of the Project, but which is not included within the Scope of Services described in
Exhibit "A" and Exhibit "A-I "."
SECTION 4. The following exhibit(s) to the Contract is/are hereby amended to read
as set forth in the attachment(s) to this Amendment, which are incorporated in full by this reference:
a. Exhibit "A-I" entitled "SCOPE OF SERVICES".
b. Exhibit "B-1 " entitled "SCHEDULE OF PERFORMANCE".
c. Exhibit "C-I" entitled "COMPENSATION".
SECTION 5. Except as herein modified, all other provisions of the Contract,
including any exhibits and subsequent amendments thereto, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have by their duly authorized representatives
executed this Amendment on the date first above written.
CITY OF PALO ALTO
City Manager
Name:
APPROVED AS TO FORM:
Title:
Senior Asst. City Attorney
Attachments:
EXHIBIT "A-I ":
EXHIBIT "B-1 ":
EXHIBIT "C-I":
SCOPE OF SERVICES
SCHEDULE OF PERFORMANCE
COMPENSATION
2 Revision July 25, 2012
City of Palo Alto
Southgate Neighborhood Storm Drain Improvements
and Green Street Project (CIP #SD-10101)
EXHIBIT “A-1” – Detailed Scope of Work
RBF Consulting (The RBF Project Team) agrees to perform the following Scope of Services:
Task 1 – Final Plans, Specifications & Estimate (PS&E)
RBF project team will prepare improvement plans for the project to allow the implementation of the
improvements (nineteen (19) bio-retention sites, and one (1) Paseo) identified in Phase I of the
project, and shown on the exhibit titled Proposed Project Conceptual Design Map dated May 2012.
The plans will be prepared for review and approval by City at 60%, 90%, and 100% design phases.
The tasks are as follows:
Task 1.01 Design Topographic Surveys
RBF project team will coordinate with City staff for City provided topographic mapping of the
project area to be used for design purposes. City provided design surveys shall include features
within each of the 19 specific sites to be improved; Elevation data shall be collected within the street
right of way; Trees shall be located and trunk diameter noted; Utilities and pavement elevations shall
be collected; Invert elevations of sewer manholes, storm drain manholes and inlets shall be collected
and pipe sizes noted where observable. A base map will be prepared in AutoCAD consisting of the
features located from the City provided design surveys. It is anticipated that the above described
design survey, and right of way line and property line information will be provided by the City of
Palo Alto. Therefore, design survey, and right of way mapping is excluded from this scope of work.
RBF project team will prepare base maps sufficient for design purposes based on the City provided
design survey.
Task 1.02 Coordination
The RBF Project Team will coordinate with the Fire Department, and City Waste Management
provider regarding the proposed bio-retention improvements.
Task 1.03 Base Mapping
The RBF Project Team will utilize the information collected (by the City) from the Field Survey/Data
Collection to prepare AutoCAD-generated base maps at a scale of 1”=20’. The base maps will show
existing curb-line, street right-of-way, surface features within the street including valves and manhole
locations and other man-made features. Underground utilities (as obtained from information provided
under Task 1.02) that may be impacted by the proposed improvements will be shown.
City of Palo Alto
Southgate Neighborhood Storm Drain Improvements
and Green Street Project (CIP #SD-10101)
Task 1.04 60% PS&E
RBF will prepare improvement plans for the Project to allow the implementation of the 19 bio-
retention areas, and the Paseo connecting El Camino Real and Portola Avenue, with the associated
storm drain improvements. The plan lists are as follows:
Task 1.04a Street Improvement Plans
The RBF Project Team will prepare final plan and profile (if necessary) street improvement plans for
the previously approved preliminary layout for the 19 bio-retention sites and Paseo developed under
Phase one of the project. The Paseo and each bio-retention intersection site will have a separate sheet
showing street improvement plan including proposed storm drain improvements at 1” = 10’ scale,
demolition plan at 1” = 20’ scale, and applicable details (storm drain profiles, intersection detail,
pervious paver details, proposed ADA ramp details, striping, etc.). The following are the anticipated
plan sheets:
Task 1.04b Planting and Irrigation Plans
The RBF Project Team shall prepare one (1) set of landscape construction drawings for the project
site in sufficient form and detail to construct the landscape improvements. The plans shall be
prepared based on the approved Preliminary plant pallet in Phase 1 of the project. The plans shall be
prepared in AutoCAD at an appropriate scale on a base map of the project prepared by RBF under
task 1.03. The following tasks will be accomplished at 60% milestone:
• Review input from workshop with City to finalize design direction
• Coordinate with City to identify points of connection for water service and power
• Research potential use of solar controllers
• Coordinate with City to determine trench depth/design sleeving locations and utility conflicts
with trench
• Provide input on final hardscape/paver layout
• Prepare 60% complete planting, and irrigation plans.
Plan # Sheets
Title Sheet 1
Key Map/Notes 1
Typical Sections and details 1
Paseo Plan Sheet 1
Bio-retention Plan sheets 10
Total Sheets 14
City of Palo Alto
Southgate Neighborhood Storm Drain Improvements
and Green Street Project (CIP #SD-10101)
Task 1.04c Specifications
The RBF Project Team will prepare contract documents in accordance with the requirements of
Caltrans and the City of Palo Alto. The City will provide its current “boilerplate” contract forms,
general conditions, and general provisions on a diskette in Word format. The RBF Project Team will
add the technical provisions for this Project utilizing Caltrans specifications in applicable areas. The
technical specifications will be prepared in the CSI format.
Task 1.04d Cost Estimate
The RBF Project Team will prepare a Project cost estimate at the 60% design document level.
Task 1.05 90% Contract Documents
The following will be completed in this task:
Task 1.05a 90% PS&E
90% Plans, Specifications and Estimate will be prepared incorporating comments received form 60%
PS&E review.
Task 1.05b Storm Water Pollution Prevention Plan
In order to appropriately determine the scope for the preparation of the Storm Water Pollution
Prevention Plan (SWPPP), RBF has completed a preliminary risk assessment for the project site
based on its location, area, assumed construction duration of 1 year and estimates that the project will
be classified as Risk Level 2.
The following scope of services has been developed based on a risk level two classification of the
project. If during the final assessment the project risk level is determined to be other than risk level
two, the project budget and fee schedule as shown in this proposal will need to be modified.
Task 1.05b1 SWPPP Preparation
RBF will serve as the Qualified SWPPP Developer (QSD) for the project by preparing and
uploading the necessary Permit Registration Documents (PRDs), including the SWPPP for
the project to comply with the construction general permit number R9-2009-0009. The
SWPPP will include a vicinity map, an erosion and sediment control plan (site map), a
description of potential project Best Management Practices (BMPs), a Construction Site
Monitoring Program (CSMP), and a Rain Event Action Plan (REAP) base form. This
proposal assumes that the Post-Construction requirements as described in the construction
general permit, order number R9-2009-0009, do not apply to this project because it is located
within a regulated MS4 area.
City of Palo Alto
Southgate Neighborhood Storm Drain Improvements
and Green Street Project (CIP #SD-10101)
Task 1.05b2 SMARTS and SWPPP Document Revisions and Updates
Acting as the project QSD, RBF will coordinate and update the project SMARTS account and
the project SWPPP document as the project construction progresses. This will include
uploading monitoring reports, revising the project SWPPP map, and processing necessary
Change of Information forms. RBF will perform this task on a time and materials basis. RBF
assumes that 24 hours of services will be required for completion of this task.
Task 1.06 100% Contract Documents
RBF project team will prepare 100% detailed project plans, technical specification, cost estimate, and
SWPPP for construction bidding purposes incorporating plan check comments from 90% review by
the City of Palo Alto.
The project team will provide one reproducible set of final project drawings, specifications, cost
estimate, and SWPPP and digital files of all documents on compact disc to the City.
Task 2 - Meetings
Task 2.01 Advisory Board Meetings
No presentations to City governing boards are included in this Scope of Work.
Task 2.02 Meeting with City project team
RBF project team will meet with City staff during the design phase to review submittal review
comments. We have included a total of 5 meetings with City staff for the duration of the project
design phase. Community meetings are excluded from this Scope of Services.
Task 3 Work Product Submittal
RBF will provide both reproducible and electronic sets of following work product submittals for staff
review at the appropriate stage of work:
• 60% design development documents: 8 half-size plan sets, 8 technical specifications sets, 8
copies of an opinion of probable construction costs, plus digital files of all documents on
compact disc
• 90% design development documents: 8 half-size sets, 8 technical specifications sets, 8 copies
of an opinion of probable construction costs, plus digital files of all documents on compact
disc
City of Palo Alto
Southgate Neighborhood Storm Drain Improvements
and Green Street Project (CIP #SD-10101)
• 100% design development documents: digital files of all documents on compact disc
Task 4 Construction Support Services
Consultant shall provide construction phase support services. The duties and responsibilities at the
Project site shall be in an indirect support role in dealings with the contractor but shall be a direct
support role for the interpretation of the construction documents and the processes that allow the work
to proceed through the construction phase to completion. The construction phase services shall
include the following tasks, which will be performed at the request of Client on a time-and-materials
basis.
Task 4.01 Bid Support Services
RBF shall be available during City’s bidding phase of the project to answer questions and provide
guidance to the bidders. RBF can provide the following:
Attend pre-bid meetings, interpret the documents as may be requested, and maintain a written record
of questions and interpretations given.
Prepare clarification information to the Construction Documents during the bidding period as may be
required. Coordinate all efforts with City staff. The need for a maximum of 12 hours is estimated for
this task.
Task 4.02 Construction Support Services
RBF project team will perform the following tasks:
Task 4.02a Shop Drawing Review
RBF shall process submittals, including receipt, review, and appropriate action on shop drawings,
product data, samples, and other submittals for conformance with the intent of the Contract
Documents. Consultant comments on such vendor data shall be given to the City Project Manager for
further processing. Multiple reviews of re-submittals which do not adequately address the initial
review comments are not included in this scope of services. The need for a maximum of 28 hours is
estimated for this task.
Task 4.02b Construction Plan Interpretation
RBF shall provide consulting services during the construction phase of the Project to interpret plans
prepared by RBF project team and recommend plan revisions based upon field conditions
encountered during construction. RBF shall also review and assist the City in evaluating the
contractor’s change order requests for improvements designed by RBF project team.
City of Palo Alto
Southgate Neighborhood Storm Drain Improvements
and Green Street Project (CIP #SD-10101)
RBF shall prepare supplemental interpretation of Consultant’s documents in response to requests
from the City. The need for a maximum of 48 hours is estimated for this task.
Task 4.02c Construction Meetings & Observation
RBF shall attend field meetings at the request of the City to observe the progress of the work and
report on the construction’s substantial compliance to the plans and specifications prepared by
Consultant. The need for a maximum of 24 hours is estimated for this task.
Task 4.02d Punch List, Approval & Close Out
At the 100% completion of all improvements, RBF project team shall provide up to 12 hours for the
review of the improvements to provide for final review and comment on the improvements as to
conformance with the plans and specifications prepared by Consultant and to assist the City in
obtaining final acceptance of improvements. The field review shall be requested by City, and the
City shall provide a responsible representative and a Contractor’s superintendent to accompany
Consultant during the final review for the purpose of communicating to the Contractor the necessary
corrective work.
Task 4.02e Final Record Drawings
RBF shall revise the approved Plans for the Project, based upon field changes and revisions (redlined
prints) as provided by the Project’s Contractor. Reproducible copies and CD-ROM of Final Record /
Project Drawings in ACAD 2007 format shall be submitted to the City. Since the extent of field
changes is unknown at this time, we have estimated a maximum of 16 hours for this task.
Task 4.02f Operations and Maintenance
RBF project team will provide consultation and training to the Public Works Operations/maintenance
crew for the operation, maintenance, and troubleshooting of proposed bio-retention areas. We have
estimated a maximum of 16 hours for this task.
Task 5 Southgate Resurfacing Project
RBF project team will prepare improvement plans for the project to allow for the construction of new
exposed curb & gutter, driveway aprons and curb ramps for four blocks in the Southgate
neighborhood. The four blocks are identified on attached Exhibit D – Street Resurfacing Site Map.
The plans will be prepared for review and approval by City at 60%, 90%, and 100% design phases.
The tasks are as follows:
City of Palo Alto
Southgate Neighborhood Storm Drain Improvements
and Green Street Project (CIP #SD-10101)
Task 5.01 Survey
RBF Project team will provide additional field survey to obtain elevations at face of sidewalk for the
project area as outlined on Exhibit C. In addition elevations at back of wall at existing driveway and
walkway locations will also be obtained.
Task 5.02 Plans – 60%, 90% & 100% Submittal
The RBF Project Team will prepare final plan and profile (if necessary) for street resurfacing plans
per attached location map, to be included in the improvement plans prepared under Task 1.04a. The
improvement plans and demolition plans will be prepared at a scale of 1” = 20’ scale, and applicable
details (profiles, proposed ADA ramp details, striping, etc.). Each bio-retention location shall include
design of 25’ of exposed curb & gutter on each side to facilitate drainage. The curb and gutter plan
sheets shall be at 1” = 20’ scale and the City’s standard curb & gutter, curb ramp and driveway
approach drawings will be included on one of the typical sections and details sheets. We anticipate 4
plan and profile sheets for the Curb &Gutter design.
This Scope of Work assumes that RBF project team will show construction of exposed 5” and/or 6”
curb and gutter even at locations where proposed top of curb may be higher than adjacent sidewalk
and planting strip, in order to conform to existing face of sidewalk grade. When required, the
difference in elevation between proposed top of curb, and the existing face of sidewalk will be taken
in the existing planting strip. City of Palo Alto has stated this design is acceptable to them. Removal
and replacement of existing sidewalk except at driveway and walkway locations, and landscape and
irrigation services and/or evaluation of the existing landscaping in the planter strips adjacent to the
project sites for the street resurfacing are excluded from this Scope of Work. It is assumed that City
will provide the specifications and cost estimate for plans prepared under Task, to be included in the
specification and cost estimate prepared under tasks 1.04c and 1.04d.
Task 5.03 Meeting with City Staff
RBF project team will meet with City staff during the design phase to review submittal review
comments. We have included a total of 2 meetings with City staff for the duration of the project
design phase.
Task 5.04 Work Product Submittal
RBF will provide both reproducible and electronic sets of following work product submittals for staff
review at the appropriate stage of work:
• 60% design development documents: 2 full-size plan sets, 2 half-size plan sets, 2 technical
specifications sets, 2 copies of an opinion of probable construction costs, plus digital files of
all documents on compact disc
City of Palo Alto
Southgate Neighborhood Storm Drain Improvements
and Green Street Project (CIP #SD-10101)
• 90% design development documents: 2 full-size plan sets, 2 half-size plan sets, 2 technical
specifications sets, 2 copies of an opinion of probable construction costs, plus digital files of
all documents on compact disc
• 100% design development documents: digital files of all documents on compact disc
Construction Support Services for Task 5 - Street Resurfacing Project are excluded from this Scope of
Services.
ASSUMPTIONS
• The following material shall be furnished by the City:
o City shall provide access to the site, and owner CADD archives for the project.
o Right-of-way line and property line information to be provided by the City of Palo Alto from their
GIS system.
o City shall pay all governmental fees and costs.
o Distribution of Consultant-prepared outreach materials to property and business owners
of all community workshop meetings.
o Available information on location of City-Owned utilities and irrigation equipment.
o Coordination and administration of reviews and approvals by internal and external
jurisdictional agencies.
• Pothole excavation will be done by others.
• Proposed Storm Drain will tie into existing catch basin at intersection of Mariposa and
Sequoia Avenues. Existing or proposed storm Drain capacity study is not part of this Scope
of Work.
• Storm Water Quality Monitoring
EXCLUSIONS
The following are excluded from the Basic Services component of the Scope of Work, but may be
provided as additional services, as requested by the City:
• Any presentations to City governing boards
• Community Meetings
• Current Title Reports
• Construction Staking, inspection, administration, construction quantity calculations and
management
• Legal Descriptions and Exhibits for any new right-of-way or easements (including
construction easements)
• Multiple Construction phasing and bid documents
• Preparation of any Environmental Documentation
• Identification of existing easements on properties
City of Palo Alto
Southgate Neighborhood Storm Drain Improvements
and Green Street Project (CIP #SD-10101)
• Preparation of plans for Street Lighting enhancement opportunities, and street light
improvement plans
• Design for areas outside of previously identified 19 bio-retention sites, and the Paseo
• Storm Water Control Report
• Hydrology and/or hydraulic studies
• Graphics / Signage Package
• Conditional Use Permit, Zone change, Specific Plan Amendment and/or Area Plan
• Design of Dry Utilities, i.e. telephone, electric, gas and cable TV Plans
• Dry Utility Relocation Plans
• Acoustical Studies
• Traffic Engineering reports or studies
• Boundary Survey / ALTA Survey
• Lot Line Adjustment or Parcel Map
• Design of traffic signals
• Excavation for potholing of existing underground utilities
• Acquisition of any right-of-way, easements, permit to enter, encroachment permits, etc.
• Property Appraisals
• Parking Analysis
• Design of any retaining walls
• Cathodic Protection Plans
• Water, Sewer, and Storm Drain capacity studies
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EXHIBIT “B‐1”
SCHEDULE OF PERFORMANCE
Consultant shall perform the Services so as to complete each milestone within the number of
weeks specified below. The time to complete each milestone may be increased or decreased by
mutual written agreement of the project managers for CONSULTANTS and CITY so long as all
work is completed within the term of the Agreement. CONSULTANT shall provide a detailed
schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to
proceed.
Milestones Completion No. of Weeks from NTP
1. 60% PS&E 6
2. 90% PS&E 11
3. 100% PS&E 15
4. Final Bid Documents 17
Professional Services
Rev June 2, 2010
D-1
S:\PWD\STORM\CIP\SD-10101 Southgate\CONTRACTS\Amendment #1\Exhibit C-1_COMPENSATION.docx.doc
EXHIBIT “C-1”
COMPENSATION
The CITY agrees to compensate the CONSULTANT for professional services performed in
accordance with the terms and conditions of this Agreement, and as set forth in the budget
schedule below. Compensation shall be calculated based on the hourly rate schedule
described in Exhibit C-1 of the original contract up to the not to exceed budget amount for
each task set forth below.
The compensation to be paid to CONSULTANT under this Agreement for all services
described in Exhibit “A-1” (“Basic Services”) and reimbursable expenses shall not exceed
$145,577. CONSULTANT agrees to complete all Basic Services, including reimbursable
expenses, within this amount. In the event CITY authorizes any Additional Services, the
maximum compensation shall not exceed $165,000. Any work performed or expenses
incurred for which payment would result in a total exceeding the maximum amount of
compensation set forth herein shall be at no cost to the CITY.
CONSULTANT shall perform the tasks and categories of work as outlined and budgeted
below. The CITY’s project manager may approve in writing the transfer of budget amounts
between any of the tasks or categories listed below provided the total compensation for Basic
Services, including reimbursable expenses, does not exceed $145,577 and the total
compensation for Additional Services does not exceed $19,423.
BUDGET SCHEDULE NOT TO EXCEED AMOUNT
Task 1 $88,310
(Final Plans, Specifications & Estimate)
Task 2 $4,562
(Meetings)
Task 3 $1,776
(Work Product Submittal)
Task 4 $20,049
(Construction Support Services)
Task 5 $30,880
(Southgate Resurfacing Project)
Total Basic Services $145,577
Additional Services (Not to Exceed) $19,423
Maximum Total Additional Compensation $165,000
Professional Services
Rev June 2, 2010
D-1
S:\PWD\STORM\CIP\SD-10101 Southgate\CONTRACTS\Amendment #1\Exhibit C-1_COMPENSATION.docx.doc
ADDITIONAL SERVICES
The CONSULTANT shall provide additional services only by advanced, written
authorization from the CITY. The CONSULTANT, at the CITY’s project manager’s request,
shall submit a detailed written proposal including a description of the scope of services,
schedule, level of effort, and CONSULTANT’s proposed maximum compensation, including
reimbursable expense, for such services based on the rates set forth in Exhibit C-1. The
additional services scope, schedule and maximum compensation shall be negotiated and
agreed to in writing by the CITY’s project manager and CONSULTANT prior to
commencement of the services. Payment for additional services is subject to all requirements
and restrictions in this Agreement
Prepared by: RBF Consulting
Prepared for: City of Palo Alto
Southgate Neighborhood Storm Drain Improvements and Green Street Project
Phase 2
Fees and Rate Schedule Date: 2/27/2013
Project
Manager Senior
Engineer
Project
Engineer Designer Surveyor Licensed
Surveyor
Principal Project
Manager Irrigation Cad/Graphics
DESIGN SERVICES
TASK 1 Final Plans, Specifications & Estimate
1.01 Coordination with Fire Dept & Waste Management 4 8 12 $1,664.00
1.02 Coordination for City provided Survey 3 12 16 31 $3,876.001.03 Base Mapping 8 8 $944.00
1.04 60% PS&E
1.04a: Street Improvement Plans 40 8 168 216 $28,328.00
1.04b: Planting & Irrigation Plans 8 2 16 16 2 44 $5,710.00
1.04c: Specifications 4 40 12 56 $8,680.00
1.04d: Cost Estimate 4 12 8 24 $3,096.00
1.05 90% Contract Documents
1.05a: 90% PS&E 24 16 80 2 16 16 154 $20,438.00
1.05b: SWPPP:
1.05b1: SWPPP Preparation 32 $4,736.00
1.05b2: SWPPP Update 24 $3,552.00
1.06 100% Contract Documents 8 8 24 2 4 8 54 $7,286.00
Subtotal - TASK 1 95 72 56 312 16 0 6 56 40 2 599 $88,310.00
TASK 2 Meetings
2.01 Advisory Board Meeting - ARB 0 0 0 0 0 $0.00
2.02 Meetings with City Project Team 20 4 2 26 $4,562.00
Subtotal - TASK 2 20 4 0 0 0 0 2 0 0 0 26 $4,562.00
TASK 3 Work Product Submittal
3.01 Work Product Submittal 2 12 14 $1,776.00
Subtotal - TASK 3 2 0 0 12 0 0 0 0 0 0 14 $1,776.00
TASK 4 Construction Support Services
4.01 Bid Support Services 4 4 1 9 $1,432.004.02 Construction Support Services
4.02a: Shop Drawing Review 4 12 8 24 $3,456.00
4.02b: Constrcution Plan Interpretation 8 1 32 8 49 $6,324.00
4.02c: Constrcution Meetings & Observation 8 8 8 24 $3,584.00
4.02d: Punch List, Approval & Close Out 4 3 7 $1,185.00
4.02e: Final Record Drawings 2 8 3 13 $1,904.00
4.02f: Operation & Maintenance 2 8 4 14 $2,164.00
Subtotal - TASK 4 32 0 41 32 0 0 7 28 0 0 140 $20,049.00
TASK 5 Southgate Resurfacing Project
5.01 Survey 8 24 32 $8,624.00
5.02 PS&E - 60%, 90% & 100% submittal 16 144 $19,872.00
5.03 Meeting with City Staff 8 $1,440.00
5.04 Work Product Submittal 8 $944.00
Subtotal - TASK 5 24 0 0 160 24 32 0 0 0 0 0 $30,880.00
SUBTOAL HOURS & FEE 173 76 97 516 40 32 15 84 40 2 765 $145,577.00
Hourly Rate $180.00 $163.00 $148.00 $118.00 $120.00 $150.00 $155.00 $120.00 $115.00 $100.00
Total Fee $31,140.00 $12,388.00 $14,356.00 $60,888.00 $4,800.00 $4,800.00 $2,325.00 $10,080.00 $4,600.00 $200.00
Reimbursable Expense Budget
Total Additional Services
GRAND TOTAL BUDGET APPROVAL REQUIRED $31,140.00 $12,388.00 $14,356.00 $60,888.00 $4,800.00 $4,800.00 $2,325.00 $10,080.00 $4,600.00 $200.00
$19,423
$145,577.00
$0.00
$165,000.00
Final
Fee
Total
TASK DESCRIPTION Final Hours
Total
RBF CONSULTING GATES + ASSOCIATES
Page 1 2.25.2013 - SOUTHGATE FEEw-resurfacing.xls
City of Palo Alto (ID # 3529)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/18/2013
City of Palo Alto Page 1
Summary Title: Community Engagement on City - Wide Electric
Undergrounding
Title: Finance Committee Recommendation that the City Council Appoint an
Electric Undergrounding Advisory Body
From: City Manager
Lead Department: Utilities
RECOMMENDATION
The Finance Committee recommends that the City Council appoint an advisory body to solicit
community input on potential changes to the City of Palo Alto Utilities electric overhead to
underground conversion policy. The staff and Utilities Advisory Commission (UAC) had
previously made a similar recommendation.
EXECUTIVE SUMMARY
The Committee felt it is necessary to engage the community on the future direction of electric
overhead to underground conversion policies in Palo Alto. The goal is to develop
recommendations that represent the broadest spectrum of support from the community. Due
to the likelihood that the continuation or acceleration of the program, if desired, will result in
increased funding needs or require a funding source that may necessitate an official vote of the
people, it is necessary to ensure the procedural structure utilized provides recommendations
that will position the effort for success.
FINANCE COMMITTEE REVIEW AND RECOMMENDATION
At its December 18th, 2012 meeting, the Finance Committee reviewed the UAC and staff
recommendation (Staff Report #3247 – Attachment A to this report)
The Finance Committee acknowledged that the City needs to develop a long-term electric
undergrounding policy. The City is at an important juncture because aside from the projects
identified over the next couple of years, the remaining areas to be undergrounded are not
City of Palo Alto Page 2
eligible for AT&T cost sharing due to AT&T’s tariff restrictions. The Finance Committee also
discussed acceleration of the program. The costs and cost recovery mechanism associated with
an acceleration of the program is unclear. The Finance Committee discussed the efforts of the
Infrastructure Blue Ribbon Commission (IBRC), which do not include undergrounding, as well as
the confusion within the community about the relationship between the IBRC efforts and the
CPAU undergrounding efforts. One sentiment expressed was that there are higher priorities
facing the City and the City does not have adequate resources to make this a high priority
because it is not a critical infrastructure issues. Two Committee members expressed their
support for the recommendation to appoint an advisory body to solicit commuity input, and it
was suggested that further discussion on the structure, scope, and relationship to the IBRC
efforts should be anticipated.
The Finance Committee recommended Council (by a vote of 2-1) appoint an advisory body to
solicit community input on the development of an electric overhead to undergrdound
conversion policy. Council Member Burt voted against the recommendation. Council Member
Price was absent from the meeting.
RESOURCE IMPACT
The creation of a citizen advisory committee will not result in additional budget requirements,
but will require active staff participation in the administration of the committee, especially if
Brown Act compliance applies.
POLICY IMPLICATIONS
The purpose of the advisory body is to develop recommendations on potential future policy
directions for City Council consideration and approval.
ENVIRONMENTAL REVIEW
The creation of an advisory body does not meet the California Environmental Policy Act’s
definition of a project under Public Resources Code 21065. In addition, conversion of overhead
electric facilities to underground is categorically exempt from CEQA review under Public
Resources Code Section 15302 (d).
Attachments:
Attachment A - Staff Report ID 3247 (PDF)
City of Palo Alto (ID # 3247)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 12/18/2012
City of Palo Alto Page 1
Summary Title: Community Engagement on City-wide Electric
Undergrounding
Title: Utilities Advisory Committee Recommendation that the Finance
Committee Recommend that the City Council Appoint an Electric
Undergrounding Advisory Body
From: City Manager
Lead Department: Utilities
RECOMMENDATION
Staff and the Utilities Advisory Commission (UAC) recommend that the Finance Committee
recommend that the City Council appoint an advisory body to solicit broad community input on
potential changes to the City of Palo Alto Utilities electric overhead to underground conversion
policy.
EXECUTIVE SUMMARY
It is necessary to engage the community on the future direction of electric overhead to
underground conversion policies in Palo Alto. The goal is to initiate a process that results in
recommendations that represent the broadest spectrum of support from the community. Due
to the likelihood that the continuation or acceleration of the program, if desired, will result in
increased funding needs or require a funding source that may necessitate an official vote of the
people, it is necessary to ensure the procedural structure provides recommendations that will
position the effort for success.
BACKGROUND
The idea of electric undergrounding is not new to the City of Palo Alto. The existing
undergrounding program was started in 1965 and approximately 46% of the City has been
undergrounded through overhead to underground conversion, or was originally developed with
City of Palo Alto Page 2
underground utilities.1 The electric utility allocates approximately 2% of annual electric
revenue for funding undergrounding projects. If the City continues on its current pace of
converting overhead to underground, it will take approximately 70 years to complete the
undergrounding of the entire City.
In January 2010, the UAC received a report to provide context and historical background on
undergrounding in Palo Alto. In September 2011, staff provided a report to the UAC on future
options for the program. In November 2011, the Finance Committee was provided an update
on the program and discussed future options as well. During the October 2012 UAC meeting,
Staff presented a proposal to create an advisory body to make future policy direction
recommendations to Council.
1 The majority of undergrounded facilities are in commercial areas. Approximately 15% of residences have
underground facilities.
City of Palo Alto Page 3
DISCUSSION
Electric undergrounding discussions bring up a myriad of issues that are difficult to weave
together to form a policy which will guide the City for decades. There are both pros and cons to
electric undergrounding from an electric utility perspective, though fundamentally a decision to
underground electric facilities throughout the City is primarily based on aesthetic values and is
not a critical component of providing electric service to the residents and businesses in Palo
Alto. As such, the decision to make substantial changes to the existing program to accelerate
undergrounding will be based on individual considerations and value judgments. Due to the
very high cost of the conversions, it is preferable to engage the community early in the
discussions on policy formulation.
Staff recommends the creation of an advisory body with enough expertise and community
representation to produce findings and recommendations that reflect the diverse interests of
the community. The tasks of the advisory body should include the following:
1. Gain subject matter expertise on current and past electric undergrounding efforts in
Palo Alto
2. Evaluate future electric underground program modifications and associated
payment mechanisms
3. Consider equity issues as part of the policy formulation
4. Solicit and receive feedback from the community on the different potential
programs and costs
5. Make program recommendations to UAC and Council for eventual adoption
There are remaining considerations on the appropriate advisory body structure. Actions to
create the advisory body by City Council or the UAC will trigger Brown Act requirements, which
include more formal meeting and reporting requirements and will result in a perhaps slower
but more public process. A decision of this magnitude may benefit from validation by a more
formal process that cannot be obtained by a committee that is, for example, created by the
Utilities Director or the City Manager and may not be subject to the Brown Act.
For discussion purposes, staff has identified two potential structures for the advisory body:
1. A citizen advisory committee appointed by City Council or UAC
2. A citizen advisory committee appointed by the Utilities Director or the City Manager.
City of Palo Alto Page 4
Staff recommends a citizen advisory committee appointed by either City Council or the UAC as
the best structure to thoroughly evaluate the issues and financial implications and make
recommendations to Council for future implementation.
COMMISSION REVIEW AND RECOMMENDATION
The UAC was generally supportive of the staff proposal, but had several follow up questions
regarding the tasks for the workgroup and level of commitment that will be required. Staff
responded that one of the initial tasks for the advisory body will be to establish the tasks and
scope for the advisory body. In terms of time commitment, the advisory body will need to
commit time to familiarize themselves with the issue and the future program policy directions.
Staff initially anticipates the advisory body will meet every other month. After much discussion
on various alternatives on committee structure and member makeup, Commissioner Eglash
moved the staff recommendation, which was seconded by Commissioner Hall. Commissioner
Foster offered an amendment to specify that the City Council appoint the advisory body. With
the amendment accepted, the motion read: “The UAC recommends that the Council appoint an
advisory body to solicit broad community input on potential changes to the City of Palo Alto
Utilities electric overhead to underground conversion policy”. The motion passed 3-0, with
Commissioner Waldfogel abstaining.
RESOURCE IMPACT
The creation of a citizen advisory committee will not result in additional budget requirements,
but will require active staff participation in the administration of the committee, especially if it
involves Brown Act requirements.
POLICY IMPLICATIONS
The purpose of the advisory body is to develop recommendations on potential future policy
directions for City Council consideration and approval.
ENVIRONMENTAL REVIEW
The creation of an advisory body does not meet the California Environmental Policy Act’s.
definition of a project under Public Resources Code 21065. In addition, conversion of overhead
electric facilities to underground is categorically exempt from CEQA review under Public
Resources Code Section 15302 (d).
Attachments:
Attachment A: Excerpted Final UAC Minutes of September 5, 2012 (PDF)
Attachment B - Map of Underground Conversion Projects (PDF)
EXCERPTED FINAL MINUTES OF THE SEPTEMBER 5, 2012
UTILITIES ADVISORY COMMISSION MEETING
ITEM 1: ACTION: Recommendation on an Advisory Body Structure to Solicit Public Input on the City of
Palo Alto Utilities’ Electric Undergrounding Policy
Senior Resource Planner Nico Procos presented slides on the appointment of an advisory body to evaluate
potential changes to the overhead to underground conversion program. Staff recommended the advisory
body be appointed by the City Council or Utilities Advisory Commission.
Commissioner Eglash stated that he supported the staff recommendation as it needs to have the greatest
possible legitimacy in the community since there will be unpopular outcomes for different groups depending
on the ultimate decision. Therefore, the process to arrive at a recommendation must be supported by the
community. Commissioner Eglash asked about the tasks identified for the advisory body. Procos
responded that part of the first task of the advisory body would be to develop a more thorough task list and
to clarify the scope of work for the advisory body. Fong suggested that the Infrastructure Task Force could
be used as a model for this body.
Commissioner Hall asked how often would the committee meet and how much commitment would be
required to participate in the committee. Procos said that the body would need to commit time to
understand the background of the program and options for funding the work in the future. Fong said that it
will likely be meetings at least every other month. Hall stated that the UAC could perform this task
depending upon the time commitment.
Commissioner Eglash commented that the staff recommendation is responsive to the need to have broader
community support and not a function of whether the UAC has the time to commit to the job.
Commissioner Waldfogel offered another option is for the UAC to appoint an ad hoc subcommittee and to
include members of the planning commission and Architectural Review Board. He stated that it may be
best to have someone other than Utilities lead this process and that it may be better suited for Planning, as
the undergrounding is primarily for aesthetic considerations. The key question is whether to spend the
money for the aesthetic benefit for the community.
Vice Chair Foster said that he would recommend that the Council appoint a committee and include at least
two members of the UAC.
Commissioner Eglash stated that this is really a Utilities issue, but best for a community committee to get
broad input and that the Brown Act requirements are in line with the need for transparency in the process.
ACTION:
Vice Chair Foster made a motion to recommend that the City Council appoint an advisory body to solicit
broad community input on potential changes to the CPAU electric overhead to underground conversion
policy and that the advisory body should include two UAC members, two members of the ARB and two
members of the Planning Commission be appointed to the body.
Commissioner Eglash preferred that UAC members not be on the body itself, but be associated with the
body in an advisory role to provide comments and input.
Vice Chair Foster stated that he didn’t have a strong feeling about the need for UAC members to be on the
body, but recognized that the UAC has worked on this issue and may have some valuable information it
could provide to the body.
The motion died for lack of second.
Commissioner Eglash moved the staff recommendation, Commissioner Hall seconded the motion. Foster
offered an amendment to specify that the Council appoint the advisory body. Since the ultimate path may
require a vote of the people, the advisory body is best to report to the Council. Procos stated that a
possible funding option could be in the form of an electric rate increase which may be brought before the
commissioners. Commissioners Eglash and Hall accepted the amendment so that the motion reads: “The
Utilities Advisory Commission recommends that the Council appoint an advisory body to solicit broad
community input on potential changes to the City of Palo Alto Utilities electric overhead to underground
conversion policy.” The motion passed (3-0) with Commissioner Waldfogel abstaining.
UG DISTRICT #5
UG DISTRICT #1
UG DISTRICT #2
1965
UG DISTRICT #3UG DISTRICT #4
PROPOSED UNDERGROUND DISTRICTS
UG DISTRICT #9
UG DISTRICT #6
UG DISTRICT #7
UG DISTRICT #8
UG DISTRICT #13
UG DISTRICT #10
UG DISTRICT #11
UG DISTRICT #12
UG DISTRICT #17
UG DISTRICT #14UG DISTRICT #15
UG DISTRICT #16
1966
19661968
19681968
1969
N/A
1968
1968
1969
1971
1971
19721973
1974
1974
1981
1982
19831983
19841985
1985
1986
1987
1989
1990
1991
1994
19951996
1999
UG DISTRICT #18 1977
UG DISTRICT #25
UG DISTRICT #22
UG DISTRICT #23
UG DISTRICT #24
UG DISTRICT #29
UG DISTRICT #26UG DISTRICT #27
UG DISTRICT #28
UG DISTRICT #33
UG DISTRICT #30
UG DISTRICT #31
UG DISTRICT #32
UG DISTRICT #37
UG DISTRICT #34
UG DISTRICT #35UG DISTRICT #36
UG DISTRICT #38
UG DISTRICT #39
UG DISTRICT #401979
1979UG DISTRICT #20
UG DISTRICT #19
2005
2006
2005
RD
2014 - 2016
2012 - 2013
UG DISTRICT #42
UG DISTRICT #46
EXISTING UNDERGROUND DISTRICTS
14
1
10
1
27
5
18
12
16
39
41
42
23
20
30
31
32
33
29
24
17
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37
35 28
2122
13
11
7
15
6
25
26
4
36
36
38
40
29
6
31
19
34
44
UG DISTRICT #44 2004
43
42
ELECTRIC ENGINEERING
UTILITIES DEPARTMENT
CITY OF PALO ALTO
45
45
AUG 2O1O
1982UG DISTRICT #21
UG DISTRICT #41 2008
2013 - 2015UG DISTRICT #43
9
46
47
2011 - 2013UG DISTRICT #47
UG DISTRICT #45 2010
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City of Palo Alto (ID # 3553)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/18/2013
City of Palo Alto Page 1
Summary Title: Utilities Rate Schedule C-1
Title: Recommendation to Adopt a Resolution Amending Utilities Rate
Schedule C-1, Utility Service Calls
From: City Manager
Lead Department: Utilities
Recommendation
Staff recommends that Council adopt a resolution (Attachment A) amending Utilities Rate
Schedule C-1 effective March 18, 2013.
Summary
The recommended changes correct omissions to Rate Schedule C-1 (Utility Service Calls) that
were not addressed when Council amended Utilities Rules and Regulations in 2010. At that
time, the treatment of late customer payments was proposed to be moved from Rule 11 to
Rate Schedule C-1, but the necessary changes to C-1 were not made.
Background
In May 2010, Council amended twenty-five of the existing twenty-eight Utilities Rules and
Regulations and repealed two obsolete Rules (CMR 223:10). As part of this change, Rule and
Regulation 11 (Billing, Adjustments and Payment of Bills) was modified to clarify billing period
definitions, policies and procedures related to the levelized payment program, proration,
disputed bills, and time limits for billing credits and back-billing. It also included moving Late
Payment Charges on unpaid utility bills from Rule and Regulation 11 to Rate Schedule C-1, and
inserting new language in Rule and Regulation 11 referring to Rate Schedule C-1 for Late
Payment Charge specifics. However, Rate Schedule C-1 failed to incorporate the amendments
moved from Rule and Regulation 11.
Discussion
City of Palo Alto Page 2
The proposed amendments to Utilities Rate Schedule C-1 changes the title for customer clarity
(from “Utility Service Calls” to “Utilities Miscellaneous Charges“), specifies a one-time, two
percent (2%) Late Payment Charge on each separate unpaid balance (no compounding of
interest), clarifies language for meter tests, and amends language between Rate Schedule C-1
and the Municipal Fee Schedule for consistency regarding returned customer payments.
Resource Impact
Approval of amendments to Utility Rate Schedule C-1 will not result in a change in revenues or
expenses.
Policy Implications
This recommendation does not represent a change to current City policies.
Environmental Review
This amendment to Utility Rate Schedule C-1 is not subject to the California Environmental
Quality Act (CEQA), pursuant to California Public Resources Code Section 21080(b)(8) and Title
14 of the California Code of Regulations Section 15273(a)(1) and (3).
Attachments:
Attachment A - Resolution C-1 Rate Schedule (PDF)
Attachment B - Original C-1 with showing changes (PDF)
Attachment C - C-1 effective 3-18-2013 (PDF)
*NOT YET APPROVED*
130225 dm 015003
ATTACHMENT A
Resolution No. _________
Resolution of the Council of the City of Palo Alto Amending Utility Rate Schedule C-1
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule C-1 (Utility Service Calls) is hereby amended to read as attached and
incorporated. Utility Rate Schedule C-1, as amended, shall become effective March 18, 2013.
SECTION 2. The Council finds that the revenue derived from the authorized adoption
enumerated herein shall be used only for the purpose set forth in Article VII, Section 2, of the
Charter of the City of Palo Alto.
SECTION 3. The Council finds that the adoption of this resolution changing Utility
Rate Schedule C-1 to meet operating expenses is not subject to the California Environmental
Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14
of the California Code of Regulations Sec. 15273(a). After reviewing the staff report presented
to Council, the Council incorporates these documents herein and finds that sufficient evidence
has been presented setting forth with specificity the basis for this claim of CEQA exemption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
___________________________ ___________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________
Sr. Deputy City Attorney City Manager
___________________________
Director of Utilities
___________________________
Director of Administrative Services
UTILITY SERVICE MISCELLANEOUS CHARGES CALLS
UTILITY RATE SCHEDULE C-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Effective 37-18-20092013
Supersedes Sheet No.C-1-1 dated 7-1-2005 2009 Sheet No.C-1-
1
Customer charges under this schedule, except for disconnection or restoration of service for non-payment, may be
added to the regular monthly Utilities bill of the customer receiving the service, and payment thereof will be subject to
the Utilities Rules and Regulations regarding disconnection of service for non-payment. All charges related to
disconnection or restoration for non-payment, are due and payable prior to the restoration of Utilities service.
Charges during Charges After
Business Hours Business Hours
A. SERVICE CALLS AND OTHER SERVICE WORK:
Charges During Charges After
Business Hours Business Hours
Setting Meter Set No Charge $
27394.00
Dispatch of service person to disconnect service
at meters for non-payment of Utilities bill $109.00 Not applicable
Restoration for of service at meters following turn-off
fordisconnection for non-payment of Utilities bill
$109.00218.00 $ 27394.00
Restoration of electric service at power pole following turn-off
fordisconnection for non-payment of Utilities bill $218.00
$436294.00
Customer deposit Exchange meter for meter accuracy test (Rule 15) $0-300.00
N ot applicableService not
Available
Note: Customer deposit for meter accuracy test will be refunded if tested meter is more than two
percent (2%) over-registering, Deposit will be forfeit if tested meter registers within +/-2% (plus or
minus two percent) accurate.
B. LABOR RATES PER HOUR PER PERSON:
Services provided during normal working hours $ $109.00 Not
applicable
UTILITY SERVICE MISCELLANEOUS CHARGES CALLS
UTILITY RATE SCHEDULE C-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Effective 37-18-20092013
Supersedes Sheet No.C-1-1 dated 7-1-2005 2009 Sheet No.C-1-
1
Services provided on overtime basis where the
overtimeovertime is scheduled at the City's convenience. N ot applicable
$128.00
Services provided on overtime basis where the
oovertimevertime is scheduled at the customer's convenience. N ot applicable
$147.00
BC. RETURNED CHECK PAYMENT FEES: See City of Palo Alto Municipal Fee
Schedule.
CD. LATE PAYMENT CHARGE: Two percent (2%) of unpaid balance of Utilities Bill
SPECIAL PROVISION:
1.Charges made under this schedule may be added to the regular monthly utilities bill of the person
receiving the service and payment thereof will be subject to the Utilities Rules and Regulations
regarding discontinuance of service for nonpayment.
Charge for meter exchange will be refunded if meter is found to be more than two percent (2%) over-
registering. {End}
{End}
UTILITY MISCELLANEOUS CHARGES
UTILITY RATE SCHEDULE C-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Effective 3-18-2013
Supersedes Sheet No.C-1-1 dated 7-1-2009 Sheet No.C-1-1
Customer charges under this schedule, except for disconnection or restoration of service for non-payment, may be
added to the regular monthly Utilities bill of the customer receiving the service, and payment thereof will be subject to
the Utilities Rules and Regulations regarding disconnection of service for non-payment. All charges related to
disconnection or restoration for non-payment, are due and payable prior to the restoration of Utilities service.
Charges during Charges After
Business Hours Business Hours
A. SERVICE CALLS AND OTHER SERVICE WORK:
Setting Meter No Charge $273.00
Dispatch of service person to disconnect service
at meters for non-payment of Utilities bill $109.00 Not applicable
Restoration of service at meters following
disconnection for non-payment of Utilities bill $109.00 $273.00
Restoration of electric service at power pole following
disconnection for non-payment of Utilities bill $218.00 $436.00
Customer deposit for meter accuracy test (Rule 15) $0-300.00 Not applicable
Note: Customer deposit for meter accuracy test will be refunded if tested meter is more than two
percent (2%) over-registering, Deposit will be forfeit if tested meter registers within +/-2% (plus or
minus two percent) accurate.
B. LABOR RATES PER HOUR PER PERSON:
Service provided during normal working hours $109.00 Not applicable
Service provided on overtime basis where the
overtime is scheduled at the City's convenience. Not applicable $128.00
Service provided on overtime basis where the
overtime is scheduled at the customer's convenience. Not applicable $147.00
C. RETURNED PAYMENT FEES: See City of Palo Alto Municipal Fee Schedule.
D. LATE PAYMENT CHARGE: Two percent (2%) of unpaid balance of Utilities Bill
{End}
City of Palo Alto (ID # 3564)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/18/2013
City of Palo Alto Page 1
Summary Title: Approval of Electric Master Agreements
Title: Adoption of a Resolution Approving, and Authorizing the City Manager
to Negotiate and Execute, Electric Master Agreements and Delegating the
Authority to Transact Under the Master Agreements
From: City Manager
Lead Department: Utilities
Recommendation
Staff recommends that the Council adopt the attached resolution, which approves of several
Edison Electric Institute (EEI) Master Power Purchase & Sale Agreements with electricity
suppliers, and authorizes the City Manager or his designee to:
1. Negotiate and execute the new or amended and restated Master Agreements with the
following electricity suppliers:
a. BP Energy Company;
b. Cargill Power Markets, LLC;
c. Exelon Generation Company, LLC;
d. Iberdrola Renewables, LLC;
e. NextEra Energy Power Marketing, LLC;
f. PacifiCorp;
g. Powerex Corp;
h. Shell Energy North America (US), L.P.; and
i. Turlock Irrigation District.
and
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2. Execute one or more transactions under the Master Agreements with one or more of the
above suppliers to procure and/or sell electricity supplies and related services sufficient to
meet the City’s forecast electricity load and regulatory requirements, subject to the
following limitations:
a. The date for delivery of the electricity for each transaction shall not exceed 36
months from the date the transaction is executed;
b. The delivery date for any transaction shall not extend beyond December 2027;
c. The maximum aggregate transaction limit under each Master Agreement shall be
$50 million;
d. All transactions are subject to the Palo Alto Municipal Code; and
e. All transactions are subject to the City’s Energy Risk Management Policies,
Guidelines and Procedures.
Staff will seek Council approval prior to execution of any transaction outside of the above
limitations.
Executive Summary
An active set of creditworthy counterparties is essential to ensure that the City meets its
electric supply portfolio planning objectives, internal risk management controls, and external
operational and regulatory requirements. Approval of the recommended Master Agreements
provides an extensive set of electric suppliers, with which to transact in a timely and
competitive manner ensuring that the City’s objectives are met efficiently. Executing the
Master Agreements does not commit the City to execute any transactions under any of the
agreements, but allows for transactions to be executed in the future.
The nine proposed Master Agreements were negotiated under terms and conditions acceptable
to the City and have been reviewed and approved in substantial form by the City Attorney’s
Office. Due to each agreement’s significant length, staff has elected not to attach copies to this
staff report. The proposed Master Agreements are provided for in Attachment E.
Background
Over the next three years, the City’s portfolio of long-term resources—including the contract
with the Western Area Power Administration, the Calaveras Hydroelectric Project, and long-
term renewables executed under Power Purchase Agreements—is expected to meet about 75%
of the City’s electric supply needs, based on average hydro conditions. The remaining 25% of
the City’s needs are purchased from the daily wholesale energy market, which can have huge
variations in price. In addition, due to variations in hydro conditions, the amount exposed to
City of Palo Alto Page 3
market prices can be up to half of the City’s needs. All daily purchases and/or sales required to
meet the City’s needs are currently carried out by the City’s Scheduling Coordinator, the
Northern California Power Agency (NCPA). If the City desires to purchase and/or sell energy
beyond a month in term, it must do so on its own through its own suppliers.
The Long-term Electric Acquisition Plan (LEAP) includes objectives to serve the City’s electric
load at competitive and predictable costs (Staff Report 2710). The City meets these objectives
by procuring fixed-price electricity quantities in a diversified, systematic fashion over a rolling
36-month period (i.e., laddering). The laddering strategy minimizes the City’s exposure to daily
market price variations. To implement the laddering strategy and to facilitate obtaining
competitive price quotes from wholesale suppliers, the City established Master Agreements
with a set of pre-qualified suppliers.
In July 2002 the City Auditor made recommendations in its “Assessment of Utility Risk
Management Procedures” to improve the City of Palo Alto Utilities’ (CPAU) energy procurement
process. The report recommended that Master Agreements with suppliers be approved by the
Council with clearly defined dollar, volume and duration limits and with clearly defined
transaction types that staff is authorized to execute under the agreements.
In 2004, Council approved a set of electric Master Agreements (Ordinance #4812) with several
electric commodity suppliers which would enable the City and the supplier to transact energy
and electricity related products to meet load. Under the same ordinance, Council delegated
authority to the City Manager to transact under the agreements subject to certain conditions
and restrictions. Subsequently, in 2007 Council approved a new set of Master Agreements
(Ordinance #4953), with the following suppliers:
a. ConocoPhillips Company;
b. Shell Energy North America (formally Coral Power);
c. Sempra Energy Trading Corporation;
d. BP Energy Company;
e. JP Morgan Ventures Energy Corporation;
f. Powerex Corporation; and
g. Pacific Summit Energy, LLC.
Several transactions have been executed under the existing Master Agreements and a summary
of such transactions by counterparty to date is provided in Attachment C. Table 1 summarizes
the City’s existing committed forward electricity transactions and energy volumes. As of
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February 4, 2013, transactions worth $14.6 million have been executed with existing suppliers
for deliveries during the period February 2013 through March 2015.
Table 1: Outstanding Electric Transactions as of 2/4/13 – Cost ($M) and Volumes (MWh)
FY 2013 FY 2014 FY 2015 Total Outstanding
$M $M $M $M
Powerex $ 2.1 $ 4.4 $ 0 $ 6.5
Shell Energy North America $ 0.5 $ 2.4 $ 5.2 $ 8.1
TOTAL $ 2.6 $ 6.8 $ 5.2 $ 14.6
MWh MWh MWh MWh
Powerex 59,605 110,220 - 169,825
Shell Energy North America 5,760 49,560 113,190 168,510
TOTAL 65,365 159,780 113,190 338,335
Changes in regulatory requirements related to commodity trading as result of the Dodd-Frank
Act; uncertainty with regards to the cost and regulations associated with cap-and-trade for
energy imported in to California; and changes to regulations around providing capacity resource
adequacy products to meet the CAISO’s reliability requirements have resulted in fewer
suppliers willing to transact and therefore reduced product liquidity in the market.
Of the seven Master Agreements approved in 2007, only Powerex,1 Shell and BP remain active
counterparties. The other counterparties have either ceased doing business in California, have
been acquired by another entity, no longer meet the City’s Risk Management supplier eligibility
criteria, or are not responsive to requests for bids issued by the City. As a result, the City
currently has two active counterparties willing and able to meet the City’s electric supply needs;
hence the need for new suppliers.
When Council approved the most recent set of Master Agreements in 2007, staff indicated it
would issue a new Request for Proposals (RFP) in 2012 or earlier if the pool of active suppliers is
not sufficient to carry out competitive solicitations. To that end, an RFP was issued in March
2012 to solicit interest from new and existing suppliers to sign Master Agreements.
1 Powerex has temporarily ceased trading with public load serving entities in California, including Palo Alto,
pending clarification of the Dodd-Frank Act and the Commodity Futures Trading Commission regulations on swap
transactions.
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Attachment D is a copy of the RFP, which includes the eligibility requirements and evaluation
process.
The selection of suppliers was conducted in a fair and competitive manner with negotiated
agreements, to the extent possible, being similar and equitable. The proposed set of Master
Agreements complies with the Wholesale Commodity Contracts provisions as provided for in
the Palo Alto Municipal Code: Chapter 2.30 Contracts and Purchasing Procedures (Ordinance
#4827) and transactions executed under the agreements shall adhere to the Council-approved
Energy Risk Management Policies, including the Approved Product List (Attachment B).
Discussion
The City’s exposure to the wholesale energy market is expected to decrease significantly
beyond 2016, as the City continues to pursue an aggressive Renewable Portfolio Standard
(RPS). However, even after 2016 when the plan is for the City’s annual electric needs to be met
through long-term renewables and existing hydroelectric resources, the City will still need to
buy and sell energy in certain months to balance load and resources. In addition, due to
significant variations in hydroelectric and renewable resources, there may be a need to buy
extra energy or sell additional surplus energy to meet needs consistent with energy risk
management objectives. Intra-month wholesale market purchases and sales will continue to be
carried out through NCPA to meet variations in load and generation resources on an hourly
basis.
Further, to meet compliance requirements under California’s RPS requirements and/or the
City’s carbon neutrality goals, the City may need to purchase short-term renewable energy, and
the proposed Master Agreements allows for such transactions. In addition, the Master
Agreements provide for the ability to buy and/or sell resource adequacy (reliability) capacity
products.
Description of a Master Agreement
The proposed Master Agreements are based on the 2000 Edison Electric Institute (EEI) Master
Power Purchase and Sale Agreement. A Master Agreement is similar to a blanket purchase
order, and includes the general terms and conditions that govern transactions. Executing a
Master Agreement does not commit the City to execute any transaction nor is it a promise of
business by the City or by the supplier. Each transaction for part of the City’s monthly, annual,
or multi-year electricity requirements is completed through competitive bidding, as evidenced
by a completed Confirmation Agreement document.
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The Master Agreement consists of a Base Contract and a Cover Sheet, which lists special
provisions negotiated between the City and the supplier. Addenda and/or exhibits to the
Master Agreements include a Confirmation Agreement, definition of basic energy and capacity
products, and several exhibits for product specific transactions including renewable energy
certificates and resource adequacy products.
Each Master Agreement may be terminated at any time by either party according to the terms
of the agreement. Termination of the Master Agreement cancels the supplier’s ability to bid on
further transactions until a new Master Agreement is executed. Any transaction executed
under the Master Agreement prior to termination will remain in place until the final electricity
delivery date, unless an event of default has transpired. In the event of default by a supplier,
the City has the option to terminate any remaining transactions that were executed under the
Master Agreement, but not yet delivered.
The City may suspend the privilege of bidding on individual transactions with any supplier due
to poor counterparty credit or transaction limits, a supplier credit downgrade event, supplier
default or suspected default, or where inclusion in the solicitation would not comply with the
law or City policies, guidelines, rules or procedures.
Each Master Agreement contains extensive credit protection provisions for both counterparties
to minimize risks associated with transacting for energy on a forward basis. Additionally,
internal controls and limits are put in place to minimize credit risk and ensure adherence to the
Master Agreement provisions.
All transactions under the Master Agreements will be executed by staff in accordance with the
Council-approved Energy Risk Management Policies, including the Approved Product List and
Energy Risk Management Guidelines and Procedures. These procedures are monitored by the
Energy Risk Manager and the Utilities Risk Oversight and Coordination Committee to ensure
that risks inherent in the energy industry are managed prudently. Staff provides Council with
an update of all executed transactions under the Master Agreements in the quarterly Energy
Risk Management reports.
Transaction Volume and Dollar Authority
The transaction volumes executed under the Master Agreements are a function of the electric
market prices and the City’s forecasted and actual volume of electricity needs. Currently,
electricity can be purchased for between $40 and $60 per megawatt-hour (MWh) for deliveries
during the next several years. The City’s expected net market purchase volumes are currently
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about 300,000 MWh per year,2 which translates to an annual net commodity cost of about $12
million to $18 million. Since electricity prices are volatile and the amount of electricity to be
purchased under the Master Agreements is dependent on hydro conditions, it is conceivable
that the market purchase cost could double from expected levels. Table 2 provides an
illustration of market purchase cost under various scenarios and shows the annual cost of
electricity market purchases can range between $12 and $28 million over the next five years.
Table 2: 5 Year Projected Electric Market Purchase Cost ($M)
FY 2013
$M
FY 2014
$M
FY 2015
$M
FY 2016
$M
FY 2017
$M
Expected Hydro and Market Prices $ 13.7 $ 11.5 $ 13.3 $ 12.3 $ 12.3
Change in Market Purchase Cost
under High Prices and Expected Hydro + $ 0.1 + $ 1.6 + $ 3.5 + $ 5.9 + $ 4.9
Change in Market Purchase Cost
under Dry Hydro Conditions + $ 1.9 + $ 7.9 + $ 5.6 + $ 6.8 + $ 7.7
Market Purchase Cost under
Dry Hydro & High Market Prices $ 16.1 $ 23.5 $ 24.9 $ 27.9 $ 28.0
Additionally, the Master Agreements may be utilized to execute other types of transactions to
meet RPS, carbon neutrality and resource adequacy requirements. Table 3 is a summary of the
annual aggregate transaction volumes based on adverse conditions for hydroelectric and
renewable resources and market prices for brown energy and renewable products.
2 The net volume of market purchases is expected to fall substantially in the coming years as additional long-term
renewable energy resources are added to the City’s supply portfolio.
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Table 3: 5 Year Projected Electric Transactions Cost under Adverse Conditions ($M)
FY 2013
$M
FY 2014
$M
FY 2015
$M
FY 2016
$M
FY 2017
$M
Market Purchase Cost under Dry
Hydro & High Market Prices $ 16.1 $ 23.5 $ 24.9 $ 27.9 $ 28.0
Short-term Renewables to Meet RPS –
Adverse Price Risk + $ 0.0 + $ 0.0 + $ 0.9 + $ 1.5 + $ 1.3
Unbundled RECs to Meet Carbon
Neutrality – Adverse Price Risk + $ 1.5 + $ 1.5 + $ 1.5 + $ 1.5 + $ 1.5
Resource Adequacy Products –
Adverse Price Risk + $ 0.0 + $ 1.1 + $ 2.4 + $ 2.6 + $ 2.8
Total Cost under Adverse Conditions $ 17.6 $ 26.1 $ 29.7 $ 33.5 $ 33.6
While the City has selected nine suppliers with whom to sign Master Agreements, it is
conceivable that only a few suppliers may ultimately provide the most competitive prices, and
some may merge or leave the industry, resulting in transactions being concentrated among
fewer qualified suppliers. Staff recommends an aggregate maximum transaction limit of $50
million for the term of each Master Agreement. This limit gives staff the flexibility it needs in
case electricity costs increase above expectations or if some of the suppliers are unable to
continue to do business with the City or do not offer the best prices. It also sets a monetary
limit on the transactions that is less than the total anticipated five-year purchase cost, thus
ensuring supplier diversity.
Outstanding (previously committed) transactions as identified in Table 1 with Powerex and
Shell, will be governed by the amended and restated Master Agreement and shall not be
included in the $50 million transaction limit.
Alternatives
Council could elect not to approve one or more of the proposed contracts. However, doing so
would limit the ability of staff to competitively bid and diversify electricity supplies.
Council could elect to approve the contracts with different contract limits, however, lower
limits could reduce the ability of staff to competitively bid and diversify electricity supplies or
could require staff to return to Council to increase the limits on certain Master Agreements
within the terms of the Master Agreements thereby potentially delaying transactions. Staff
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does not recommend higher limits at this time. Should higher limits be necessary due to
unforeseen circumstances, staff would request Council change contract limits in the future.
Lastly, Council could elect to not approve any of the contracts and instead utilize NCPA to carry
out all transactions beyond one month in term (in addition to the intra-month transactions it
currently does). This alternative, while viable, would require that the City implement several
new agreements with NCPA and develop cross agency controls and limits to ensure that NCPA
carries out the function in a manner consistent with the City’s municipal code requirements and
risk management objectives.
Resource Impact
Approval of the recommendation will not impact the Fiscal Year 2013 budget. Transactions
with deliveries extending beyond the approved budget horizon are contractual commitments
designed to meet expected load requirements. These purchases will be supported by Electricity
Fund retail revenues with retail rates determined by Council.
Policy Implications
Authorizing the City Manager to buy and sell electricity to meet load obligations under the
Master Agreements conforms to existing Council-approved Energy Risk Management Policies
and the Palo Alto Municipal Code. Further, the recommendation is consistent with the Council-
approved LEAP Objectives and Utilities Strategic Plan objective to manage supply cost by
negotiating supply contracts to minimize financial risk.
Environmental Review
Adoption of the resolution approving Master Agreements and delegating electricity
procurement responsibilities to the City Manager under certain limitations does not constitute
a project for the purposes of the California Environmental Quality Act.
Attachments:
Attachment A: Resolution Authorizing City Manager to Execute Master Agreements
(PDF)
Attachment B: Authorized Products Under Energy Risk Management Policies (PDF)
Attachment C: Electric Master Agreement Transaction by Counterparty Summary (PDF)
Attachment D: Summary of RFP #145153 Electric Master Agreement Scope and
Evaluation (PDF)
Attachment E: Master Agreements (PDF)
*NOT YET APPROVED*
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ATTACHMENT A
Resolution No. _____
Resolution of the Council of the City Of Palo Alto Authorizing the City
Manager to Purchase a Portion of the City’s Electricity Requirements
from Certain Prequalified Electricity Suppliers Under Specified Terms
and Conditions During Calendar Years 2013 Through 2027, Inclusive
SECTION 1. The City Council finds, as follows:
A. By Resolution Number 9152, adopted in March 2011, the Council
approved the Long-term Electric Acquisition Plan (LEAP) with the following objectives noted in
Staff Report Number 9152: (1) three primary energy portfolio objectives (“Objectives”),
including the objective to manage supply portfolio cost uncertainty to meet rate and reserve
objectives; (2) a strategy to manage market price exposure by maintaining and adequate pool
of creditworthy suppliers; and diversifying supply purchases across commitment date, start
date, duration, suppliers and pricing terms in alignment with rate stability objectives and
reserve guidelines; and (3) an implementation task to conduct a request for proposals (RFP) for
new electric master agreement counterparties.
B. In accordance with LEAP, the City must annually purchase and, incidental
to purchases, sell electricity and related services to meet the needs of its electric customers by
contracting for terms varying from less than one month to three years. The City's Energy Risk
Management Policies, noted in Staff Report Number 2916, provide that the City will purchase
only that quantity of electricity which meets its load requirements at the time a transaction is
executed.
C. By Ordinance No. 4953, adopted in 2007, the City has one or more
outstanding purchase transactions, costing in the aggregate $12.6 million, which are scheduled
to be delivered in FYs 2013 – 2015. These transactions will be subject to new or amended and
restated EEI Master Power Purchase and Sale Agreements (each a “Master Agreement”).
D. By Resolution No. 9272, adopted in July 2012, the Council approved the
Energy Risk Management Policies, which provides for the City Manager’s oversight and
controls necessary to manage several risks that are inherent in transacting in wholesale
electric commodity products, and which establishes a Council-approved list of electric
commodity products that staff may transact in under the Master Agreements.
E. In March 2012, the City conducted an RFP process to establish Master
Agreements for electricity purchases. Electricity suppliers BP Energy Company, Cargill Power
Markets, LLC, Exelon Generation Company, LLC, Iberdrola Renewables, LLC, NextEra Energy
Power Marketing, LLC, PacifiCorp, Powerex Corp., Shell Energy North America (US), L.P., and
the Turlock Irrigation District have been determined to possess the minimum financial and
*NOT YET APPROVED*
2
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legal qualifications and business experience required to be eligible to do business with the
City.
F. The City intends to purchase electricity and related services and products
from one or more of these pre-qualified suppliers for delivery during calendar years 2013
through 2027, inclusive, provided the supplier, with whom the City may negotiate one or more
specific transactions, continues to be qualified and otherwise eligible to do business with the
City.
The Council of the City of Palo Alto does RESOLVE as follows:
SECTION 2. The Council hereby approves of, and authorizes the City Manager
on behalf of the City to negotiate and sign, new or amended and restated Master Agreements
with the electric suppliers, referred to in Section 1.E, and further authorizes the City Manager
or his designee, the Director of Utilities, to negotiate one or more individual purchase
transactions, sales incidental to purchases, and electricity-related services, including, but not
limited to, negotiating contracts, addenda, confirmations and transactions for resource
adequacy and renewable energy credits. The authorization shall extend to individual
transactions executed under any number of Master Agreements with the referenced suppliers;
provided, however, (a) the maximum expenditure under any Master Agreement shall not
exceed $50 million in the aggregate and, with respect to outstanding transactions for $12.6
million, referred to in Section 1.C, the respective amounts will not be applied against the
maximum expenditure established herein; and (b) the maximum term of any transaction shall
not exceed three (3) years, commencing on the date of execution of the transaction. The
preceding sentence notwithstanding, the City may enter into a transaction greater than three
(3) years with any referenced supplier, if the Council first grants its approval to negotiate such
transaction.
SECTION 3. No Master Agreement and any related transaction entered into
with any qualified supplier, executed by the City Manager or his designated representative and
approved as to form by the City Attorney, under the authority of this ordinance shall extend
beyond December 31, 2027.
//
//
//
//
//
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*NOT YET APPROVED*
3
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SECTION 4. The Council hereby finds that this ordinance is exempt from the
provisions of the California Environmental Quality Act pursuant to Section 15061(b)(3) of the
California Environmental Quality Act Guidelines, because it can be seen with certainty that
there is no possibility of significant environmental effects occurring as a result of the adoption
of this ordinance.
INTRODUCED:
PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:
_____________________________ _____________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
_____________________________ ______________________________
Senior Asst. City Attorney City Manager
______________________________
Director of Administrative Services
______________________________
Director of Utilities
Attachment B
City of Palo Alto Energy Risk Management Policy
Approved July 2012; Resolution Number 9272
Excerpted Authorized Product Policy
The Council has delegated to the City Manager the authority to transact under Council
approved Master Agreements. The purpose of the Authorized Products Policy is to
ensure that products transacted under the Master Agreements are consistent with the
needs of CPAU and fall within the authority granted by the Council to the City Manager.
The following products and/or transactions are approved to be executed under the
Master Agreements:
A. Purchase of physical fixed price, index-based price, call options, capped-price or
collar-priced energy, natural gas, capacity, transportation, basis and transmission
products to meet load requirements;
B. Sale of physical fixed price or index-based price energy, natural gas, capacity, storage,
and transmission incidental to load;
C. Purchase of electric heat rate products to meet load;
D. Purchase and Sale of Renewable Energy Credits with or without bundled energy;
E. Purchase of Gas storage;
F. Purchase and Sale of Electric Ancillary Services;
G. Purchase and sale of local and system capacity to meet the City’s resource adequacy
requirement;
H. Fixed price or index-priced purchases and sales to substitute the use of higher cost
resources with lower cost market alternatives;
I. Fixed price or index-priced forward purchases and sales of transmission and
transmission rights to meet contractual obligations or to dispose of surplus capacity;
and
J. Purchase of physical call options and physical collars.
ATTACHMENT C
Summary of Electric Master Agreement Transactions
As of 2/4/2013
Electricity Procurement Summary for FY 2005 through FY 2015 as of 2/4/13 – Cost ($M) and Volumes (MWh)
FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
$M $M $M $M $M $M $M $M $M $M $M
BP Energy Company $ - $ 3.5 $ 2.7 $ 4.7 $ - $ 0.2 $ 2.4 $ 2.6 $ 3.2 $ - $ -
Duke Energy $ 4.4 $ 2.7 $ - $ - $ - $ - $ - $ - $ - $ - $ -
JP Morgan $ - $ - $ - $ 1.3 $ 3.4 $ 5.4 $ - $ - $ - $ - $ -
Powerex $ - $ - $ - $ 1.1 $ 6.2 $ 3.2 $ 4.0 $ 6.7 $ 7.8 $ 4.4 $ -
Sempra $ 2.5 $ 3.4 $ 10.0 $ 10.0 $ 5.2 $ 2.0 $ 2.6 $ - $ - $ - $ -
Shell Energy North
America (formerly
Coral Power)
$ 3.6 $ 13.9 $ 6.7 $ 13.0 $ 18.7 $ 9.2 $ 6.9 $ 2.6 $ 1.0 $ 2.1 $ 5.2
TOTAL $ 10.5 $ 23.5 $ 19.3 $ 30.2 $ 33.5 $ 20.0 $ 15.8 $ 11.9 $ 12.0 $ 6.5 $ 5.2
MWh MWh MWh MWh MWh MWh MWh MWh MWh MWh MWh
BP Energy Company - 54,160 46,080 70,590 - 6,080 41,960 61,130 84,260 - -
Duke Energy 86,400 38,840 - - - - - - - - -
JP Morgan - - - 18,600 51,960 109,200 - - - - -
Powerex - - - 17,145 65,685 58,185 61,535 131,400 218,530 110,220 -
Sempra 47,560 86,660 157,855 149,235 79,935 41,850 44,180 - - - -
Shell Energy North
America (formerly
Coral Power)
91,100 307,425 162,145 247,280 308,260 174,265 126,435 43,920 28,730 49,560 113,190
TOTAL 225,060 487,085 366,080 502,850 505,840 389,580 274,110 236,450 331,520 159,780 113,190
ATTACHMENT D
Electric Master Agreement - Request for Proposal (RFP) Number 145143
Issued March 2012
Summary of Scope of Services, Eligibility and Evaluation Criteria
1. Description of the City of Palo Alto
The City of Palo Alto (the “City”) is a chartered city located in the San Francisco Bay
Area in northern California. The City provides utility services to customers within its
boundaries through its Utilities Department, under the management of the Director
of Utilities, who reports to the City Manager. The City Manager reports to the City
Council. Electricity rates for customers are set by the City Council.
The City has a peak capacity demand of 190 MW and an annual energy demand of
~1,000 GWh, of which ~60% is currently satisfied through a variety of long-term
resources, including rights to output of the Calaveras hydroelectric plant, a contract
for the purchase of power generated by the Central Valley Project, acquired from
the Western Area Power Administration, and various renewable energy resources
agreements needed to meet the City’s Renewable Portfolio Standard “(RPS”)
requirements. The remaining portions of the City’s energy needs are satisfied by
market purchases with existing energy Counterparties.
The City is a member of the Northern California Power Agency (“NCPA”), which acts
on behalf of the City as its scheduling coordinator and billing agent.
The City’s electricity acquisition activities are governed by the Palo Alto Municipal
Code’s competitive solicitation process requirements and the City’s contract
procurement policies and procedures, ordinances, resolutions, rules, and energy risk
management policies, guidelines and procedures. Information relating to the City’s
RFP, the proposals submitted, and the award of power contracts are made publicly
available upon request consistent with the California Constitution, Article 1, Section
3, and the California Public Records Act, California Government Code section 6250 et
seq., unless an exemption from disclosure applies (e.g., trade secret, proprietary
business and other types of confidential information that otherwise meets
applicable legal requirements may be exempt from disclosure to the public).
Palo Alto’s financial condition is sound; Standard & Poor’s (S&P) and Moody’s ratings
of the City’s General Obligation bonds are AAA and Aaa, respectively. All utility
revenue bonds’ ratings by S&P are also AAA, while Moody’s ratings are Aa2 and Aa3,
respectively. The City’s latest Comprehensive Annual Financial Report (CAFR) for
fiscal year 2010-11 and prior years may be reviewed at:
http://www.cityofpaloalto.org/depts/asd/financial_reporting.asp. Information relating to the
Palo Alto Utilities Department may be found at: http://www.cpau.com/ and
information related to the City’s municipal code may be found at:
http://www.cityofpaloalto.org/government/municipalcode.html.
2. Description of the RFP’s Purposes & Related Transactions
Under this Request for Proposals (“RFP”), the City seeks to negotiate and enter into
one or more EEI Master Power Purchase & Sale Agreements (the “Master
Agreement”) with multiple Suppliers to facilitate the expeditious execution of
wholesale energy purchase and sale transactions needed to meet the City’s current
and future power needs in a fair and competitive manner. The term “Bidder” means
an entity providing a proposal to execute a Master Agreement with the City under
this RFP, and the terms “Supplier” and “Counterparty” means any entity with which
the City has an executed Master Agreement.
The City has proposed certain modifications to the EEI contract, as set forth in the
attached Cover Sheet to the EEI contract (the “Cover Sheet”). The EEI contract and
the Cover Sheet are collectively referred to as the “Master Agreement.” Electronic
files, containing the Master Agreement and other relevant documents related to this
RFP may be found at:
http://www.cityofpaloalto.org/depts/asd/current_solicitations.asp
Under the terms of the executed Master Agreements, the City contemplates
executing a variety of power purchase and sale transactions in order to meet its
obligations as a load serving entity in California. Transactions and services
contemplated include, but are not limited to: physical energy and capacity forward
contracts; capacity only contracts; resource adequacy products; physical options;
locational basis products; transmission-related products/services; renewable energy
products to meet RPS; ancillary service products; hydroelectric power production
hedges; energy storage products or services; gas tolling agreements; AB32
compliance products such as carbon allowances or offsets; and other energy related
products and services .
A Supplier’s eligibility to conduct new business with the City under an executed
Master Agreements is subject to certain City internal risk exposure limits and other
criteria determined by the City’s energy risk management policies, procedures and
guidelines, which may be amended periodically to reflect changing conditions in the
marketplace.
3. RFP Eligibility and Evaluation Criteria
The City will determine a Bidder’s eligibility and evaluate Bidders’ proposals based
upon the information provided in the written proposals, interviews of selected
Bidders, if any, and information regarding Bidders that is publicly available to the
City and ability to meet the requirements set forth in 3.1 and 3.2.
3.1. Credit Worthiness: The City requires all Bidders meet the City’s
creditworthiness requirements and guidelines, as described below, in order to
be eligible to submit a Proposal. A Bidder’s failure to meet the City’s
creditworthiness requirements as of the date and time the proposal is
submitted or any time during the RFP evaluation and selection period will be
grounds for rejection of the proposal, and the Bidder shall be deemed ineligible
for an award of a Master Agreement.
3.1.1. The Bidder, if it is publicly rated, must have an investment grade credit
rating to qualify and be eligible for consideration of an award of a Master
Agreement by the City. An “investment grade credit rating” is a rating of
BBB- [or higher] by S&P, Baa3 [or higher] by Moody’s, or an equivalent
credit rating.
3.1.2. If the Bidder is not publicly rated, then the corporate entity which will be
providing credit support to the Bidder must possess an investment grade
credit rating, as described in Section 3.1.1. The Bidder must also provide
the City with a corporate guarantee (the guarantee of its parent
corporation or an equivalent) in order to permit the City to address the
potential credit exposure presented by the Bidder’s financial condition.
3.2. Required Contractual Provisions: The Bidder must agree to abide by the terms
and conditions of the Master Agreement, as listed below, in order to be eligible
to submit a proposal and receive an award of contract. The relevant EEI
contract sections are provided for ease of reference purposes.
3.2.1. A representation or warranty with respect to the Defaulting Party’s
financial statement or position that is false or misleading in any material
respect is an event of default (EEI contract Section 5.1).
3.2.2. The Federal Energy Regulatory Commission’s revocation of the
Counterparty’s (Party A’s) authorization to make sales at market-based
rates is an event of default (EEI contract Section 5.1).
3.2.3. A contract termination provision that does not provide a defaulting party
with any termination payment or settlement amount (one-way
termination payments (EEI contract Section 5.2).
3.2.4. Provisions for setoffs with affiliates (EEI contract Section 5.6b).
3.2.5. Provisions for netting payments and cash-out mechanisms (EEI contract
Sections 5.3 and 6.8).
3.2.6. Audited financial statements of the Bidder or the entity providing credit
support to the Bidder, which shall be provided to the City on an annual
basis (EEI contract Section 8.2a).
3.2.7. Additional credit assurances shall be provided in the event the
creditworthiness of the Counterparty (or entity providing credit support)
deteriorates (EEI contract Section 8.2d).
3.2.8. Governing law shall be the laws of California (EEI contract Section 10.6).
3.2.9. The venue for dispute resolution shall be Santa Clara County, California
(EEI contract Section 10.6).
3.3. Other Evaluation Criteria: Bidders will also be evaluated based on their
willingness to fully comply with the City’s proposed Master Agreement
provisions as provided for in the Cover Sheet; experience in providing energy
related services in California; City’s experience of past delivery and service
levels with the Bidder; financial qualifications in addition to the requirements
set forth in Section 3.1; reliance on off-balance sheet financing as part of
conducting business; and other relevant criteria.
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FIRST AMENDED AND RESTATED MASTER POWER PURCHASE AND SALE AGREEMENT
(EEI Version 2.1, modified 4/25/00)
COVER SHEET
This First Amended and Restated Master Power Purchase and Sale Agreement (“Master Agreement”) is made as of the
following date: __, 2013, which Master Agreement hereby amends and restates in its entirety that certain Master Power
Purchase and Sale Agreement dated February 8, 2004, as amended (“Effective Date”). The Master Agreement, together
with the exhibits, schedules, annexes and any written supplements hereto, the Party A Tariff, any designated collateral,
credit support or margin agreement or similar arrangement between the Parties and all Transactions (including any
confirmations accepted in accordance with Section 2.3 hereto) shall be referred to as the “Agreement.” The Parties to this
Master Agreement are the following:
Name: BP Energy Company (“Party A”)
Name: City of Palo Alto (“Counterparty” or “Party B”)
All Notices:
Attn: Contract Administration
BP Energy Company (“BP” or “Party A”)
201 Helios Way
Houston, Texas 77079
Phone: (713) 323-2000
Facsimile: (713) 323-0203
Duns: 62-527-5755
Federal Tax ID Number: 36-3421804
All Notices:
Attn: Assistant Director, Resource Management
Department of Utilities
City of Palo Alto
250 Hamilton Avenue, 3rd Floor
Palo Alto, CA 94301
Phone: 650-329-2214
Facsimile: 650-326-1507
Duns: 17-892-8479
Federal Tax ID Number: 94-6000389
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Manager, Credit
Phone: (713) 323-2370
Facsimile: (713) 323-6335
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Senior Assistant City, Attorney/Utilities
City of Palo Alto
Phone: 650-329-2171
Facsimile: 650-329-2646
Confirmations:
Attn: Confirmations – Power
Phone: (713) 323-3806
Facsimile: (281) 227-8470
Invoices:
Attn: Power Accounts Administrator
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678-6420
Phone: (916) 781-4224/3636
Facsimile: (916) 781-4225
Invoices:
Attn: Power Accounting
Phone: (713) 323-7590
Facsimile: (713) 323-0203
Day Ahead Pre-Scheduling:
Confirmations:
Attn: Pre-Scheduler Desk
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4211/4230/4232
Facsimile: 916-781-4255
Scheduling:
Attn: Scheduling
Phone: (713) 323-5262
Facsimile: (713) 323-7909
Real Time Scheduling:
Attn: Chief Dispatcher/Scheduler
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4237/3636
Facsimile: 916-781-4226
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Payments:
Attn: Power Accounting
Phone: (713) 323-7590
Facsimile: (713) 323-0203
Payments:
Attn: Accounts Payable
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4237/3636
Facsimile: 916-781-4226
Wire Transfer:
BNK: JPMorgan Chase Bank, NA
New York, NY
ABA: 021000021
ACCT: 826078354
Wire Transfer:
Deposit to Northern California Power Agency, “to the
benefit of City of Palo Alto”
BNK U.S. Bank
ABA: 121122676
ACCT: 1-534-0216-2744
Attn: Cyndy Husebye
U.S. Bank
555 SW Oak Street, Suite 400
Portland, OR. 97204
Phone: 877-295-2509
Facsimile: 877-324-1680
Credit and Collections:
Attn: Manager Credit
Phone: (713) 323-2370
Facsimile: (713) 323-6335
Credit and Collections:
Attn: Power Accounts Analyst
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4221/4224
Facsimile: 916-781-4255
The Parties hereby agree that the General Terms and Conditions are incorporated herein, as selected, modified and
amended by the following specific provisions, as provided for in such General Terms and Conditions:
Party A Tariff: FERC Electric Rate Schedule No. 1, Dated: August 1, 2010, Docket Number ER10-1790
Party B Tariff: N/A
Article One
General Definitions Section 1.4 “Business Day” Delete the first sentence and replace it to read as follows: “Business
Day” means any day except a Saturday, Sunday, the Friday immediately following the
Thanksgiving holiday or a Federal Reserve Bank Holiday.
Section 1.10 is amended by substituting “U.S. $” for “$U.S.” in line 1.
Section 1.11 is amended by adding the following after “Party” in the third line: “after using
commercially reasonable efforts to mitigate costs”.
Section 1.12 is amended by deleting in the fourth line the word “issues” and replacing it with the
word “issuer”.
Section 1.23(ii), in the second sentence, insert the following text after the word “hereunder”:
“or to obtain the Product at a more advantageous price or advantageous terms and conditions from
a third party supplier”
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Section 1.24 is amended by adding before the period at the end thereof the following: “in
accordance with Section 5.2”.
Section 1.27 is amended by inserting the phrase “and in an amount” in the third line after the word
“form” and before the word “acceptable”.
Section 1.28 is amended by adding before the period at end thereof the following: “in accordance
with Section 5.2”.
Section 1.45 is amended by inserting the word “guarantee” after the word “Credit” and by adding
the following sentence to the end of that provision:
“Party B shall be deemed to have complied with any request from Party A for
Performance Assurance by furnishing a copy of a resolution adopted by Party B’s City
Council within a reasonable period of time after receipt of such request, determining that
Party B’s retail rates are set at levels sufficiently high to recover all costs of providing
electric service to Party B’s retail electric customers, including the costs incurred by
Party B under all Transactions executed under this Agreement.”
Section 1.46 is amended by adding before the period at the end thereof the following:
“; provided that the failure to comply with any requirement of this Master Agreement or a
Transaction, including the requirements of Article 8, before the expiration of the time
period expressly specified for such compliance in this Master Agreement or the
Transaction, if any, shall not be considered a Potential Event of Default unless and until
the applicable time period has expired without compliance”.
Section 1.50 is amended by deleting the reference to “Section 2.4” and replacing it with “Section
2.5”.
Section 1.51 is amended by (a) inserting the phrase “for delivery” in the second line after the word
“purchases” and before the phrase “at the Delivery Point”, and (b) deleting the phrase “at Buyer’s
option” in the fifth line and inserting in their place the following: “absent a purchase”.
Section 1.53 is amended by (a) deleting the phrase “at the Delivery Point” in the second line; and
(b) deleting the phrase “at Seller’s option” in the fifth line and inserting after the word “liability”
in the ninth line the following: “provided, further, if the Seller is unable after using commercially
reasonable efforts to resell all or a portion of the Product not received by the Buyer, the Sales
Price with respect to such unsold Product shall be deemed equal to zero (0).”
Section 1.56 is amended by deleting the words “pursuant to Section 5.2” and by adding before the
period at the end thereof the following: “, as determined in accordance with Section 5.2.”
Article Two
Transaction Terms
and Conditions
The following is added as a separate second paragraph of Section 2.2:
“Party A and Party B confirm that this Master Agreement shall apply to, and shall supersede and
replace in its entirety, the Master Power Purchase and Sale Agreement dated February 8, 2004, as
subsequently amended. The Parties further agree that any transaction for the purchase or sale of
electric energy, capacity or other related products which is entered into before, on or after the
Effective Date of this First Amended and Restated Master Agreement shall be governed by this
First Amended and Restated Master Agreement, and is part of the single integrated agreement
between the Parties, consistent with the first paragraph of this Section 2.2.
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Section 2.3 is amended by striking the word “may” from the first line thereof and replacing it with
the word “shall.”
For purposes of Section 2.3, all references to Seller shall be instead to Party A.
X Optional provision in Section 2.4. If not checked, inapplicable.
Section 2.4 is amended to delete the phrase “either orally or” from the seventh line.
Section 2.5 is amended to delete from the beginning of the first sentence the phrase “Unless a
Party expressly objects to a Recording (defined below) at the beginning of a telephone
conversation, each” and replacing it with the word “Each”.
A new Section 2.6 is added to Article Two, worded as follows:
“2.6 No Oral Agreements or Modifications. Notwithstanding anything to the contrary in
this Master Agreement, including in this Article Two, this Master Agreement and any and all
Transactions may not be orally amended or modified, including by Recording pursuant to Section
2.5.”
Article Three
Section 3.3 shall be amended by deleting from the last sentence the words “resume performance
of” and replacing them with the word “make-up”.
Article Four
Remedies for Failure
to Deliver or
Receive
X Accelerated Payment of Damages. If not checked, inapplicable.
A new Section 4.3 is added to Article Four, worded as follows:
“4.3 Suspension of Performance. Notwithstanding, and in addition to the remedies
provided pursuant to Sections 4.1, 4.2 and 5.7, if Seller or Buyer fails to schedule, deliver
or receive all or part of the Product pursuant to a Transaction for a period of three (3) of
more consecutive days, and such failure is not excused under the terms of the Product, by
Force Majeure, by the other Party’s failure to perform or by agreement of the Parties, then
upon one (1) Business Day prior notice, and for so long as the non-performing Party fails to
perform, the performing Party shall have the right to suspend its performance under such
Transaction. In the event the performing Party suspends performance pursuant to this
Section 4.3, it shall not be obligated to resume performance until it has received notice from
the non-performing Party at least one (1) Business Day prior to the date upon which the
non-performing Party intends to resume its performance; provided that, if the performing
Party has entered into a replacement contract with a term of 31 days or less, the performing
Party may resume performance at the end of the term of such replacement contract.
Remedies available under this provision to the performing Party are in addition to, not in
replacement of, other remedies specified in this Agreement.”
Insert the following as new Section 4.4:
“Section 4.4 Mitigation. Each Party has a duty to mitigate damages under this Agreement
and will use commercially reasonable efforts to minimize any damages it may incur resulting from
the other Party’s performance or nonperformance hereunder.”
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Insert the following as new Section 4.5:
“Section 4.5 Exclusivity. So long as any failure of Seller to schedule or deliver, or any
failure of Buyer to schedule or receive, a Product hereunder does not constitute or result in an
Event of Default as defined in Article 5 hereof, the remedies specified in this Article 4 shall be the
exclusive remedies available to Buyer for any failure of Buyer to schedule or receive a Product
hereunder, and no other liability under any theory of law or equity shall attach in connection with
such failure.”
Article Five
Events of Default;
Remedies
Cross Default provision of Section 5.1(g) shall apply for both Party A’s Guarantor and Party B.
Cross Default amount shall be $150,000,000 with respect to Party A’s Guarantor and $20,000,000
with respect to Party B.
Section 5.1 is amended by adding new subsections “(i)”, “(j)”, “(k)” and “(l)”, which read as
follows:
“(i) during any consecutive 90 day period, there have occurred five (5) or more “Seller
Failures” as that term is used in Section 4.1, under any or all Transactions, regarding
which the Seller shall be deemed to be the Defaulting Party and Buyer shall also be
entitled to its remedies under Section 4.1;
(j) during any consecutive 90 day period, there have occurred five (5) or more “Buyer
Failures” as that term is used in Section 4.2 under any or all Transactions, regarding
which the Buyer shall be deemed to be the Defaulting Party and Seller shall also be
entitled to its remedies under Section 4.2;
(k) a representation or warranty with respect to the Defaulting Party’s financial statement or
position that is false or misleading in any material respect; and
(l) revocation by the Federal Energy Regulatory Commission of Party A’s authorization to
make sales at market-based rates.”
Section 5.2 is amended by adding the following sentence to the end of that provision:
“If the Non-Defaulting Party’s aggregate Gains exceed its aggregate Losses and Costs, if
any, resulting from the termination of this Agreement, the Settlement Amount shall be
zero, notwithstanding any provision of this Agreement to the contrary.”
Section 5.3 is amended by inserting the phrase “plus, at the option of the Non-Defaulting Party,
any cash or other form of security then available to the Defaulting Party pursuant to Article Eight”,
between the words “that are due to the Non-Defaulting Party”, and “plus any and all other
amounts” in the sixth line thereof.
Section 5.4, delete the phrase “two (2)” and insert the phrase “three (3)”
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Section 5.6 Closeout Setoff
___ Option A (Applicable if no other selection is made.)
X Option B - Affiliates shall have the meaning set forth in the Agreement unless otherwise
specified as follows: Option B is amended as set forth in Section 5.2 and Article 10
below. Notwithstanding any provision to the contrary contained in this Agreement, the
Non-Defaulting Party shall not be required to pay to the Defaulting Party any amount
under Article 5 until the Non-Defaulting Party receives confirmation satisfactory to it in
its reasonable discretion (which may include an opinion of its counsel) that all other
obligations of any kind whatsoever of the Defaulting Party and any of its Affiliates to
make any payments to the Non-Defaulting Party or any of its Affiliates under this
Agreement or otherwise have been fully and finally performed.
___ Option C (No Setoff)
Section 5.6 is further amended by inserting before the last sentence in Option B:
“At the election of the Non-Defaulting Party, all obligations owing by or to an Affiliate of
a Party shall be treated as if they owed by or to the Party itself for purposes of set-off.”
Article Six Section 6.2, on the third line, delete “later of the twentieth (20th) day of each month, or”
Section 6.3, in the first sentence, delete the words, “twelve (12) months and insert “two (2) years”.
Section 6.3, in the fifth sentence, delete the words “two (2)” and insert the words “three (3)”.
Section 6.3, in the seventh sentence, delete the words, “twelve (12) months and insert “two (2)
years”.
Section 6.8 is amended by deleting the words, “may by agreement of the Parties,” and inserting in
their place the word “shall”.
Article Eight 8.1 Party A Credit Protection
Credit and Collateral
Requirements
Financial Information from Party B, Section 8.1(a)
___ Option A
X Option B Specify: Audited financial statements for City of Palo Alto and for City of Palo
Alto Enterprise Fund
___ Option C
Credit Assurances from Party B, Section 8.1(b)
___ Not Applicable
X Applicable
Collateral Threshold for Party B, Section 8.1(c)
X Not Applicable
___ Applicable
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Party B Independent Amount: N/A
Party B Rounding Amount: N/A
Party B Minimum Transfer Amount: N/A
Downgrade Event, Section 8.1(d):
__ Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party B only if (i) Party B’s underlying rating, determined
without reference to third party credit enhancement, on its utility revenue bonds (“Debt”) by
S&P or Moody’s is respectively below BBB- or Baa3, or (ii) both S&P and Moody’s refuse to
rate Party B’s Debt, or (iii) Party B’s City Council no longer has the legal authority under the
Act, as defined by Schedule M, to adjust electric rates as necessary to recover Party B’s costs
of providing retail electric service to its customers.
Guarantor for Party B, Section 8.1(e): N/A
Guarantee Amount: N/A
8.2 Party B Credit Protection:
Financial Information from Party A, Section 8.2(a):
__ Option A
X Option B Specify: Audited financial statements to be provided by Party A shall be for
Party A and any corporate parent or entity providing credit support. Option B shall be
modified by deleting all references to “consolidated” therein.
___ Option C
Credit Assurances from Party A, Section 8.2(b):
___ Not Applicable
X Applicable
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Collateral Threshold for Party A, Section 8.2(c ):
___ Not Applicable
X Applicable
If applicable, complete the following:
Party A Collateral Threshold: means with respect to Party A, at any time the lower of: (i) the
amount specified in the table below under the relevant heading opposite the lower of the ratings at
that time assigned by Standard & Poor’s Rating Services, a division of The McGraw Hill
Companies, Inc. (“S&P”) or Moody’s Investors Services, Inc. (“Moody’s”) to the long term,
senior, unenhanced, unsecured debt securities of Party A’s Guarantor, and (ii) the Guarantee
Amount provided by Party A’s Guarantor set forth in Section 8.2(e); provided, that (a) if the long
term, senior, unenhanced, unsecured debt securities of Party A’s Guarantor is no longer rated by
one of S&P or Moody’s, the Threshold with respect to Party A will be zero and (b) if an Event of
Default or Potential Event of Default with respect to Party A has occurred and is continuing, the
Threshold with respect to such party shall be zero.
S&P Rating Moody’s Rating Threshold
AAA through AA- Aaa through Aa3 $60,000,000
A+ through A A1 through A2 $20,000,000
A- through BBB+ A3 through Baa1 $10,000,000
BBB through BBB- Baa2 through Baa3 $5,000,000
Below BBB- (or rating Below Baa3 (or rating $ 0 (zero)
suspended or withdrawn suspended or withdrawn
by both S&P and by both S&P and
Moody’s) Moody’s)
Party A Independent Amount: $0
Party A Rounding Amount: $100,000
Party A Minimum Transfer Amount: $250,000
Downgrade Event, Section 8.2(d):
___ Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party A only if the Credit Rating of Party A’s
Guarantor falls below BBB- from S&P or Baa3 from Moody’s or if the unenhanced,
unsecured senior long-term debt obligations of Party A’s Guarantor ceases to be rated by
either S&P or Moody’s.
Guarantor for Party A, Section 8.2(e):
X Guarantor for Party A: BP Corporation North America Inc., or any additional, substitute
or replacement Guarantor that is acceptable to Party B in Party B’s sole discretion.
Guarantee Amount: $10,000,000
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Article Ten Section 10.1 is amended by replacing “upon (thirty) 30 days’ prior written notice” in lines 2 and 3,
with “upon ten (10) days prior written notice”.
Section 10.2 shall be amended by adding a new sub-section (xiii) as follows:
“Notwithstanding any provision in this Agreement to the contrary, all information,
statements, reports and similar materials, conveyed by Party A orally or in writing in
response to a bid solicitation document [invitation for bids or request for proposals or
combination thereof] of Party B to demonstrate Party A or its Guarantor’s financial
condition or ability to perform, are true and accurate in all material respects when
provided and such representation is deemed to be repeated and reaffirmed as of the date
of entry into and delivery of each Transaction without the need for any further action by
either Party.”
Section 10.2 (ix) is amended by adding after the words, “it is”, the following, “or it shall be
deemed for all purposes to be”.
Section 10.4 shall be amended by inserting the phrase “To the extent permitted by law” at the
beginning of each of the first two sentences.
Section 10.5 shall be amended by deleting clause (ii) and the portion of clause (iii) prior to the
words “provided, however”, and replacing them with the following: “(ii) transfer or assign this
Agreement to an Affiliate of such Party so long as (x) such Affiliate’s creditworthiness is equal to
or higher than that of such Party or the Guarantor as of the Effective Date, if any, for such Party,
or (y) the obligations of such Affiliate are guaranteed by such Party or its Guarantor, if any, in
accordance with a guaranty agreement in form and substance satisfactory to the other Party, and
(iii) transfer or assign this Agreement to any person or entity succeeding to all or substantially all
of the assets of such Party whose creditworthiness is equal to or higher than that of such Party or
its Guarantor, if any, as of the Effective Date.”
Section 10.6 is amended by deleting the words “New York” from the fourth line thereof and
replacing it with the word “California.”
Further, Section 10.6 is amended by deleting the last sentence thereof and replacing it with the
following sentence:
“With respect to any proceeding in connection with any claim, counterclaim, demand,
cause of action, dispute and controversy arising out of or relating to this Agreement, the
Parties hereby consent to the exclusive jurisdiction of the federal courts sitting in the
Northern District of the State of California; provided, however, that if the federal courts
sitting in the Northern District of the State of California refuse jurisdiction, the Parties
agree to the exclusive jurisdiction of the state courts sitting in the County of Santa Clara,
State of California.”
Section 10.8 shall be amended by deleting its penultimate sentence in its entirety and replacing it
with the following sentences: “The indemnity provisions of this Agreement shall survive the
termination of this Agreement for the period of the applicable statute of limitations. The audit
provisions of this Agreement shall survive the termination of this Agreement for a period of
twelve (12) months.”
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Section 10.10 of the Master Agreement is replaced in its entirety with the following:
"10.10 Bankruptcy Issues. The Parties acknowledge and agree that (i) all Transactions constitute
or shall be deemed to constitute "forward contracts" within the meaning of the United States
Bankruptcy Code (the “Bankruptcy Code”);; (ii) all payments made or to be made by one Party to
the other Party pursuant to this Agreement are "settlement payments" within the meaning of the
Bankruptcy Code; and (iii) all transfers of Performance Assurance by one Party to the other Party
under this Agreement are "margin payments" within the meaning of the Bankruptcy Code.”
Confidentiality
Confidentiality Applicable, subject Section
10.11 as amended.
If not checked, inapplicable.
Section 10.11 shall be replaced in its entirety with the following:
“Party A acknowledges that Party B is subject to the California Constitution Article 1,
Section 3, and the California Public Records Act, Cal. Gov. Code § 6250 et seq. (“Public
Records Act”) in regard to the documents comprising this Master Agreement and the
Transactions, which items may constitute public records subject to inspection and
copying by the public under the authority of the California Constitution and the Public
Records Act. Party B shall, consistent with those laws, , use reasonable efforts to provide
Party A with notice of any third party request to inspect and copy any of the documents
that comprise this Master Agreement and the Transactions, which Party A might deem
confidential and exempt from disclosure, in order that Party A may timely seek to protect
those documents from disclosure to the third party. Party A acknowledges and agrees
that Party B shall not be liable to Party A if Party B makes disclosure in accordance with
the California Constitution and/or the Public Records Act before Party A has timely
obtained an order to prevent Party B from making the requested disclosure to the third
party.”
A new Section 10.12 shall be added to Article 10 as follows:
“10.12. No Agency. In performing their respective obligations hereunder, neither Party
is acting, or is authorized to act, as agent of the other Party.”
A new Section 10.13 shall be added to Article 10 as follows:
Dispute Resolution. Except with respect to payment disputes which shall be resolved in
accordance with Section 6.3 of this Agreement, in the event of any controversy or claim, whether
based in contract, tort, or otherwise, arising out of or based upon, or relating to this Agreement or
the scope, breach, termination or validity of each of them (a “Dispute”), the Parties will resolve
such Dispute in the following manner:
10.13.1 Negotiation. The Parties will attempt in good faith to resolve the Dispute promptly by
negotiations between duly authorized representatives of the Parties who have authority to settle the
Dispute. When a Party believes there is a Dispute, that Party will give the other Party written
notice describing the Dispute with reasonable particularity. Within thirty (30) Days after receipt
of such notice, the receiving Party will submit a written response to the other Party.
10.13.2 Mediation. If the Dispute is not resolved within forty-five (45) Days of the date of the
response given pursuant to Section 10.13.1, or such additional time, if any, that the Parties
mutually agree to in writing, the Parties shall try in good faith to settle the Dispute by mediation.
The form of mediation and the mediator(s) selected to resolve the Dispute shall be acceptable to
both Parties.
10.13.3 Additional Rights. (A) If the Dispute is not resolved through mediation within ninety
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.
(90) Days after the first meeting of the Parties and mediator(s), or such additional time, if any, that
the Parties mutually agree to in writing, or (B) if at any time during the resolution of any Dispute
pursuant to the dispute resolution provisions set forth in this Section 10.13, either Party reasonably
believes that despite good faith efforts no resolution of the Dispute is likely, after such Party
provides written notice to the other Party with respect to same; either Party shall be free to pursue
any and all legal actions and remedies as it may deem necessary.
Add the following provisions as a new Section 10.14:
10.14: “The Parties intend that the standard of review for changes to any rate, charge,
classification, term or condition of this Agreement at FERC shall be the most stringent standard
permissible under applicable law. As to the Parties, it is understood and agreed that the standard
is the “Mobile-Sierra public interest” standard of review, as stated by the United States Supreme
Court in Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish County,
Nos. 06-1457, 128 S.Ct. 2733 (2008), and consistent with the order of the Supreme Court in NRG
Power Marketing, LLC, et al., v. Maine Public Utilities Commission et al., No. 08-674, 130 S.Ct.
693 (2010) (“NRG Order”). As to all other persons, the Parties intend and agree that the same
standard, to the maximum degree as may be made applicable to other than the Parties, apply, to
the maximum degree permitted under the NRG Order.”
The following provision is added as a new Section 10.15:
“10.15 The Parties acknowledge and agree that any purchase of power made pursuant to Party
B’s Request for Proposals and under this Agreement and any Transaction shall be executed and
delivered in compliance with applicable laws and regulations in effect at the time this Agreement
is signed by the Parties and at the time of entering into any particular Transaction, including, but
not limited to, Senate Bill 1368 (California Public Utilities Code section 8340 et seq.) and related
regulations (Title 20, Sections 2900 – 2930 of the California Code of Regulations), as amended, to
the extent such laws and regulations, including SB 1368 and related regulations, apply or are
deemed to apply to this Agreement and any Transaction. To the extent SB 1368 and related
regulations require Party B as a local publicly owned electric utility to submit a compliance filing
in accordance with such laws, Party A, upon the request of Party B, shall in good faith provide
promptly to Party B (to the extent Party B lacks such information) the information to the extent
Party A has knowledge of or access to such information.”
The following provision is added as Section 10.16:
“10.16 Utility Disclaimer. Each Party agrees that the other Party is not a “utility” as such term is
used in 11 U.S.C. Section 366, and each Party agrees to waive and not to assert the applicability of
the provisions of 11 U.S.C. Section 366 in any bankruptcy proceeding involving such Party, and
further agrees that the other Party is not a provider of last resort.”
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The following provision is added as Section 10.17:
Index Transactions. If the Contract Price for a Transaction is determined by reference to a
Price Source, then:
(a) Market Disruption. If a Market Disruption Event occurs on any one or more days
during a Determination Period (each day, a “Disrupted Day”), then:
The fallback Floating Price, if any, specified by the Parties in the
relevant Confirmation shall be the Floating Price for each Disrupted
Day.
If the Parties have not specified a fallback Floating Price, then the Parties
will endeavor, in good faith and using commercially reasonable efforts, to
agree on a substitute Floating Price, taking into consideration, without
limitation, guidance, protocols or other recommendations or conventions
issued or employed by trade organizations or industry groups in response
to the Market Disruption Event and other prices published by the Price
Source or alternative price sources with respect to the Delivery Point or
comparable Delivery Points that may permit the Parties to derive the
Floating Price based on historical differentials.
If the Price Source retrospectively issues a Floating Price in respect of a
Disrupted Day (a “Delayed Floating Price”) before the Parties agree on a
substitute Floating Price for such day, then the Delayed Floating Price
shall be the Floating Price for such Disrupted Day. If a Delayed Price is
issued by the Price Source in respect of a Disrupted Day after the Parties
agree on a substitute Floating Price for such day, the substitute Floating
Price agreed upon by the Parties will remain the Floating Price without
adjustment unless the Parties expressly agree otherwise.
If the Parties cannot agree on a substitute Floating Price and the Price
Source does not retrospectively publish or announce a Floating Price, in
each case, on or before the fifth Business Day following the first Trading
Day on which the Market Disruption Event first occurred or existed,
then the Floating Price for each Disrupted Day shall be determined by
taking the arithmetic mean of quotations requested from four leading
dealers in the relevant market that are unaffiliated with either Party and
mutually agreed upon by the Parties (“Specified Dealers”), without
regard to the quotations with the highest and lowest values, subject to
the following qualifications:
o If exactly three quotations are obtained, the Floating Price for
each such Disrupted Day will be the quotation that remains after
disregarding the quotations having the highest and lowest
values.
o If fewer than three quotations are obtained, the Floating Price for
each such Disrupted Day will be the average of the quotations
obtained.
o If the Parties cannot agree upon four Specified Dealers, then each
of the Parties will, acting in good faith and in a commercially
reasonable manner, select up to two Specified Dealers separately,
and those selected dealers shall be the Specified Dealers.
Unless otherwise agreed, if at any time the Parties agree on a substitute
Floating Price for any Disrupted Day, then such substitute Floating Price
shall be the Floating Price for such Disrupted Day, notwithstanding the
subsequent publication or announcement of a Delayed Floating Price by
the relevant Price Source or any quotations obtained from Specified
Dealers.
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o If the Parties cannot agree upon four Specified Dealers, then each
of the Parties will, acting in good faith and in a commercially
reasonable manner, select up to two Specified Dealers separately,
and those selected dealers shall be the Specified Dealers.
Unless otherwise agreed, if at any time the Parties agree on a substitute
Floating Price for any Disrupted Day, then such substitute Floating Price
shall be the Floating Price for such Disrupted Day, notwithstanding the
subsequent publication or announcement of a Delayed Floating Price by
the relevant Price Source or any quotations obtained from Specified
Dealers.
"Determination Period" means each calendar month a part or all of which is within the
Delivery Period of a Transaction.
"Exchange" means, in respect of a Transaction, the exchange or principal trading
market specified as applicable to the relevant Transaction.
"Floating Price" means a Contract Price specified in a Transaction that is based
upon a Price Source.
"Market Disruption Event" means, with respect to any Price Source, any of the
following events:
(a) the failure of the Price Source to announce, publish or make available the
specified Floating Price or information necessary for determining the Floating
Price for a particular day;
(b) the failure of trading to commence on a particular day or the permanent
discontinuation or material suspension of trading in the relevant options
contract or commodity on the Exchange, RTO or in the market specified for
determining a Floating Price;
(c) the temporary or permanent discontinuance or unavailability of the Price
Source;
(d) the temporary or permanent closing of any Exchange or RTO specified
for determining a Floating Price; or
(e) a material change in the formula for or the method of determining the
Floating Price by the Price Source or a material change in the composition
of the Product.
"Price Source" means, in respect of a Transaction, a publication or such other origin of
reference, including an Exchange or RTO, containing or reporting or making generally
available to market participants (including by electronic means) a price,
or prices or information from which a price is determined, as specified in the
relevant Transaction.
“RTO” means any regional transmission operator or independent system operator.
“RTO Transaction” means a Transaction in which the Price Source is an RTO.
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"Trading Day" means a day in respect of which the relevant Price Source ordinarily would
announce, publish or make available the Floating Price.
(b) Corrections to Published Prices. If the Floating Price published, announced or made
available on a given day and used or to be used to determine a relevant price is
subsequently corrected by the relevant Price Source (i) within 30 days of the original
publication, announcement or availability, or (ii) in the case of RTO Transactions only,
within such longer time period as is consistent with the RTO’s procedures and guidelines,
then either Party may notify the other Party of that correction and the amount (if any) that is
payable as a result of that correction. If, not later than thirty (30) days after publication or
announcement of that correction, a Party gives notice that an amount is so payable, the
Party that originally either received or retained such amount will, not later than three (3)
Business Days after such notice is effective, pay, subject to any applicable conditions
precedent, to the other Party that amount, together with interest at the Interest Rate for the
period from and including the day on which payment originally was (or was not) made to
but excluding the day of payment of the refund or payment resulting from that correction.
Notwithstanding the foregoing, corrections shall not be made to any Floating Prices agreed
upon by the Parties or determined based on quotations from Specified Dealers pursuant to
paragraph (a) above unless the Parties expressly agree otherwise.
(c) Rounding. When calculating a Floating Price, all numbers shall be rounded to four (4)
decimal places. If the fifth (5th) decimal number is five (5) or greater, then the fourth (4th)
decimal number shall be increased by one (1), and if the fifth (5th) decimal number is less
than five (5), then the fourth (4th) decimal number shall remain unchanged.
A new Section 10.18 is added as follows:
"The Parties understand and agree that the Transactions under this Agreement are physical
transactions for deferred delivery, and that the Parties contemplate making or taking physical
delivery of electric energy products; provided, however, that nothing in this Agreement, including
this Section 10.18, prohibits the Parties from engaging in Transactions that are or may be
determined to be swaps if they so desire. Party B is a commercial entity engaged in the business
of delivering electricity to retail customers and buying electricity products with the intention of
routinely taking delivery in order to provide service to its retail electric customers."
Schedule M ___ Party A is a Governmental Entity or Public Power System
X Party B is a Governmental Entity, Schedule M Applicable
Part A Part A of Schedule M is amended by including the following definition for the term “Act”:
“Act” means the Constitution of the State of California, the California statute(s), charter
and municipal ordinances under which Party B was created, organized and authorized to
enter into this Master Agreement and each Transaction thereunder
Part A is further amended by adding the following sentence at the end of the definition of the term
“Special Fund”:
“Party A has conducted such investigation as it deems necessary of the City of Palo Alto
Enterprise Fund and the Act under which such Fund was established to determine, for its
purposes under this Agreement, that such Fund meets this definition of Special Fund.”
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Part C Part C of Schedule M is amended by adding the phrase “and to the extent applicable,”
immediately following the word “limitation” in clause (i).
Part D Section 3.4 is modified by deleting “and (ii) an opinion of counsel” in line 8 through the end of
such sentence.
Part E X Section 3.6 under Part E of Schedule M applies; however, the portion of that provision
following the semicolon on the eighth line thereof is replaced in its entirety with the
following:
“any breach of clause ‘(ii)’ of this provision shall be deemed to have arisen
during a fiscal period of Governmental Entity or Public Power System for which
such budgetary approval or certification of its obligations under this Master
Agreement is required to be in effect and an Event of Default shall be deemed to
have occurred for purposes of Section 5.1 under which Governmental Entity or
Public Power System shall be treated as the Defaulting Party.”
Part F ___ Add Section 8.4. If not checked, inapplicable.
Part G Part G does not apply.
Schedule P
SCHEDULE P
PRODUCTS AND RELATED DEFINITIONS
The following defined terms are added to Schedule P:
“CAISO” means the California Independent System Operator Corporation, or its
successor.
“CAISO Tariff” means the Federal Energy Regulatory Commission-approved tariff of
CAISO, including all CAISO protocols, as the same may be amended from time to time.
“CAISO Energy” means a Transaction in which the Seller shall sell and the Buyer shall
purchase a quantity of Energy equal to the hourly quantity without Ancillary Services (as defined
in the CAISO Tariff) that is or will be scheduled as a schedule coordinator to schedule coordinator
transaction pursuant to the CAISO Tariff as amended from time to time for which the only excuse
for failure to deliver or receive is an “Uncontrollable Force” (as defined in the CAISO Tariff)
called by the CAISO in accordance with the CAISO Tariff.
“HLH (Heavy Load Hour)” is defined as energy delivered from hours ending (HE) 0700-
2200 Monday-Saturday, excluding NERC holidays, PPT.
“IST” means Inter-Scheduling Coordinator Trade shall mean a trade between Scheduling
Coordinators of Energy or Ancillary Services in accordance with the CAISO Tariff.
“LLH (Light Load Hour)” is defined as energy delivered from hours ending (HE) 0100-
0600 and 2300-2400 Monday-Saturday, all day Sunday and NERC holidays, PPT.
“NP15 Zone Delivery Point” means the NP15 Zone; provided, however, if CAISO
implements trading hubs under a locational marginal pricing design during the Delivery Period,
the Delivery Point shall be the Existing Zone Generation NP15 Trading Hub (“NP15 EZ Gen
Hub”), as such trading hub is contemplated by the CAISO in its filing made to the FERC dated
March 15, 2005 (“Comprehensive Design Proposal for Inter-Scheduling Coordinator Trades
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Under the California Independent System Operator Corporation’s Market Redesign and
Technology Upgrade, Docket No. ER02-1656-025”); provided further, if the NP15 EZ Gen Hub
(under any name) is not established as part of a market redesign that is implemented during the
Delivery Period, the Parties agree to promptly work together in good faith to designate an alternate
Delivery Point to reasonably approximate the characteristics of the NP-15 Zone.
"West Firm", or “WSPP Schedule C” or “Schedule C” or “WSPPC-Firm” or any similar
description means with respect to a Transaction, a Product that is or will be scheduled as firm
energy consistent with the most recent rules adopted by the WECC for which the only excuses for
failure to deliver or receive are if an interruption is (i) due to an Uncontrollable Force as provided
in Section 10 of the WSPP Agreement; or (ii) where applicable, to meet Seller's public utility or
statutory obligations to its customers. Notwithstanding any other provision in this Agreement, if
Seller exercises its right to interrupt to meet its public utility or statutory obligations, Seller shall
be responsible for payment of damages for failure to deliver firm energy as provided in Article 4
of this Agreement.
"WECC" means the Western Electricity Coordinating Council.
"WSPP Agreement" means the Western Systems Power Pool Agreement as amended
from time to time.
EXHIBIT A
MASTER POWER PURCHASE AND SALE AGREEMENT CONFIRMATION LETTER
EXHIBIT B
RESOURCE ADEQUACY (“RA”) CAPACITY
The Parties acknowledge and agree that after the execution of this Master Agreement, they may
enter into one or more contracts or confirmations concerning Resource Adequacy, which products,
terms, conditions and definitions shall be documented in an Resource Adequacy Form of
Confirmation (“RA Confirm”) or substantially similar form executed as of the Confirmation
Effective Date containing terms and conditions substantially similar to those set forth in the RA
Confirm attached at Exhibit B.
EXHIBIT C
RENEWABLE ENERGY CERTIFICATE (“REC”)
On or after the Effective Date, Party B may secure the appropriate authorization and approval to
buy and/or sell RECs (bundled and unbundled); provided, however, that the purchase and/or sale
of such RECs shall be subject to the approval of Party B’s City Manager. The form of any REC
purchase and/or sale transaction shall be mutually agreed to by the Parties.
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IN WITNESS WHEREOF, the Parties have caused this Master Agreement to be duly executed as of the date first above
written.
Party B: City of Palo Alto
Approval as to Form:
By: ……………………………..
Name: Grant Kolling
Title: Sr. Asst. City Attorney
Date: _________, 2013
Party A: BP Energy Company
By: ……………………………..
Name: ……………………………..
Title: ……………………………..
Date: ________, 2013
Party B: City of Palo Alto
Approval by City Manager:
By: ……………………………..
Name: James Keane
Title: City Manager
Date: ________, 2013
Party B: City of Palo Alto
Approval by Administrative Services Director:
By: ……………………………..
Name: Lalo Perez
Title: Administrative Services Director
Date: _________, 2013
Party B: City of Palo Alto
Approval by Utilities Director:
By: ……………………………..
Name: Valerie Fong
Title: Utilities Director
Date: _______, 2013
DISCLAIMER: This Master Power Purchase and Sale Agreement was prepared by a committee of
representatives of Edison Electric Institute (“EEI”) and National Energy Marketers Association (“NEM”)
member companies to facilitate orderly trading in and development of wholesale power markets. Neither EEI nor
NEM nor any member company nor any of their agents, representatives or attorneys shall be responsible for its
use, or any damages resulting therefrom. By providing this Agreement EEI and NEM do not offer legal advice
and all users are urged to consult their own legal counsel to ensure that their commercial objectives will be
achieved and their legal interests are adequately protected.
THIS PAGE WAS INTENTIONALLY LEFT BLANKED.
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CITY OF PALO ALTO RFP # __________
MASTER POWER PURCHASE AND SALE AGREEMENT
(EEI Version 2.1, modified 4/25/00)
COVER SHEET
This Master Power Purchase and Sale Agreement (“Master Agreement”) is made as of the following date: _____ __,
2013 (“Effective Date”). The Master Agreement, together with the exhibits, schedules, annexes and any written
supplements hereto, the Party A Tariff, if any, the Party B Tariff, if any, any designated collateral, credit support or
margin agreement or similar arrangement between the Parties and all Transactions (including any confirmations accepted
in accordance with Section 2.3 hereto) shall be referred to as the “Agreement.” The Parties to this Master Agreement are
the following:
Name: Cargill Power Markets, LLC (“Counterparty ” or
“Party A”)
Name: City of Palo Alto (“Counterparty” or “Party B”)
All Notices:
Attn: Contract Administration
Phone: 952-984-4113
Facsimile:952-984-3627
E-mail: Rachel_Welch@cargill.com
Duns 01-286-1725
Federal Tax ID Number: 41-1889936
All Notices:
Attn: Assistant Director, Resource Management
Department of Utilities
City of Palo Alto
250 Hamilton Avenue, 3rd Floor
Palo Alto, CA 94301
Phone: 650-329-2214
Facsimile: 650-326-1507
Duns: 17-892-8479
Federal Tax ID Number: 94-6000389
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Gene Becker
Phone: 952-984-3158
Facsimile: 952-984-3627
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Senior Assistant City, Attorney/Utilities
City of Palo Alto
Phone: 650-329-2171
Facsimile: 650-329-2646
Invoices:
Attn:powerinvoices@cargill.com
Phone: 952-984-3947
Facsimile: 952-367-0920
E-mail: powerinvoices@cargill.com
Duns 01-286-1725
Federal Tax ID Number: 41-1889936
Invoices:
Attn: Power Accounts Administrator
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678-6420
Phone: (916) 781-4224/3636
Facsimile: (916) 781-4225
Day Ahead Pre-Scheduling:
Attn: Power Scheduler
Phone: 952-984-4019
Facsimile: 952-984-3763
Day Ahead Pre-Scheduling:
Confirmations:
Attn: Pre-Scheduler Desk
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4211/4230/4232
Facsimile: 916-781-4255
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CITY OF PALO ALTO RFP # __________
Real Time Scheduling:
Attn: Power Scheduler
Phone: 952-984-4019
Facsimile: 952-984-3763
Real Time Scheduling:
Attn: Chief Dispatcher/Scheduler
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4237/3636
Facsimile: 916-781-4226
Payments:
Attn: Accounts Receivable
Phone: 952-984-3947
Facsimile: 952-367-0920
Payments:
Attn: Accounts Payable
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4237/3636
Facsimile: 916-781-4226
Wire Transfer:
BNK JP Morgan Chase Bank, NA
ABA: 021000021
ACCT: 51-01913
Wire Transfer:
Deposit to Northern California Power Agency, “to the
benefit of City of Palo Alto”
BNK U.S. Bank
ABA: 121122676
ACCT: 1-534-0216-2744
Attn: Cyndy Husebye
U.S. Bank
555 SW Oak Street, Suite 400
Portland, OR. 97204
Phone: 877-295-2509
Facsimile: 877-324-1680
Credit and Collections:
Attn: ETM Credit Manager
Phone: 952-94-3430/4257
Facsimile: 952-249-4216
Credit and Collections:
Attn: Power Accounts Analyst
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4221/4224
Facsimile: 916-781-4255
The Parties hereby agree that the General Terms and Conditions are incorporated herein, as selected, modified and
amended by the following specific provisions, as provided for in such General Terms and Conditions:
Party A Tariff: FERC Electric Rate Schedule No. 1, dated __Sept. 17, 2010____________, Docket Number:
ER_10_-_2712__-_000__
Party B Tariff: N/A
Article One
General Definitions Section 1.4 “Business Day” Delete the first sentence and replace it to read as follows: “Business
Day” means any day except a Saturday, Sunday, the Friday immediately following the
Thanksgiving holiday or a Federal Reserve Bank Holiday.
Section 1.10 is amended by adding after “the price” in line 1 the words “, including any and all
AB 32 fees, which shall not be a basis for changing the Contract Price” and substituting “U.S. $”
for “$U.S.” in line 1
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CITY OF PALO ALTO RFP # __________
Section 1.11 is amended by adding the following after “Party” in the third line: “after using
commercially reasonable efforts to mitigate costs”.
Section 1.12 is amended by deleting in the fourth line the word “issues” and replacing it with the
word “issuer”.
Section 1.24 is amended by adding before the period at the end thereof the following: “in
accordance with Section 5.2”.
Section 1.27 is amended by inserting the phrase “and in an amount” in the third line after the
word “form” and before the word “acceptable”.
Section 1.27 is amended by deleting the phrase “or a foreign bank with a U.S. branch” and
replacing it with the phrase “or a U.S. branch of a foreign bank.”
Section 1.28 is amended by adding before the period at end thereof the following: “in accordance
with Section 5.2”.
Section 1.45 is amended by adding the following sentence at the end of that provision:
“Party B shall be deemed to have complied with any request from Party A for the
provision of Performance Assurance by furnishing a copy of a resolution adopted by
Party B’s City Council within 90 (ninety) days after receipt of such request, determining
that Party B’s retail rates are set at levels sufficiently high to recover all costs of
providing electric service to Party B’s retail electric customers, including the costs
incurred by Party B under all Transactions executed under this Agreement.”
Section 1.46 is amended by adding before the period at the end thereof the following:
“; provided that the failure to comply with any requirement of this Master Agreement or
a Transaction, including the requirements of Article 8, before the expiration of the time
period expressly specified for such compliance in this Master Agreement or the
Transaction, if any, shall not be considered a Potential Event of Default unless and until
the applicable time period has expired without compliance”.
Section 1.50 is amended by deleting the reference to “Section 2.4” and replacing it with “Section
2.5”.
Section 1.51 is amended by (a) inserting the phrase “for delivery” in the second line after the
word “purchases” and before the phrase “at the Delivery Point”, and (b) deleting the phrase “at
Buyer’s option” in the fifth line and inserting in their place the following: “absent a purchase”.
Section 1.53 is amended by (a) deleting the phrase “at the Delivery Point” in the second line, and
(b) deleting the phrase “at Seller’s option” in the fifth line and inserting in their place the
following: “absent a sale, assuming a sale could not have been made in a commercially
reasonable manner.”
Section 1.56 is amended by deleting the words “pursuant to Section 5.2” and by adding before
the period at the end thereof the following: “, as determined in accordance with Section 5.2.”
Section 1.60 is amended by inserting the words “in writing” immediately following the words
“agreed to”.
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CITY OF PALO ALTO RFP # __________
Article Two
Transaction Terms
and Conditions
Section 2.1 shall be amended by deleting the second sentence thereof.
For purposes of Section 2.3, Party B requires that all Transactions be confirmed in writing.
Accordingly, the provision is amended by striking the word “may” from the first line thereof and
replacing it with the word “shall.”
For purposes of Section 2.3, all references to Seller shall be instead to Party A. All references to
Buyer shall be instead to Party B.
X Optional provision in Section 2.4. If not checked, inapplicable.
A new Section 2.6 is added to Article Two, worded as follows:
“2.6 No Oral Agreements or Modifications. Notwithstanding anything to the contrary in
this Master Agreement, including in this Article Two, this Master Agreement and any and
all Transactions may not be orally amended or modified, including by Recording pursuant
to Section 2.5.”
Article Four
Remedies for Failure
to Deliver or
Receive
X Accelerated Payment of Damages. If not checked, inapplicable.
A new Section 4.3 is added to Article Four, worded as follows:
“4.3 Suspension of Performance. In addition to the remedies provided pursuant to
Sections 4.1, 4.2 and 5.7, if Seller or Buyer fails to schedule, deliver or receive all or part
of the Product pursuant to a Transaction for a period of three (3) or more consecutive days,
and such failure is not excused under the terms of the Product, by Force Majeure, by the
other Party’s failure to perform or by agreement of the Parties, then upon one (1) Business
Day’s prior written notice, and for so long as the non-performing Party fails to perform,
the performing Party shall have the right to suspend its performance under such
Transaction. In the event the performing Party suspends performance pursuant to this
Section 4.3, it shall not be obligated to resume performance until it has received notice
from the non-performing Party at least one (1) Business Day prior to the date upon which
the non-performing Party intends to resume its performance; provided that, if the
performing Party has entered into a replacement contract with a term of 31 days or less,
the performing Party may resume performance at the end of the term of such replacement
contract. Remedies available under this provision to the performing Party are in addition
to, not in replacement of, other remedies specified in this Agreement.”
Article Five
Events of Default;
Remedies
X Cross Default provision of Section 5.1(g) shall apply for both Party A and Party B.
Cross Default amount for Party A shall be $100,000,000, and for Party B shall be
$20,000,000.
Section 5.1(g) is amended by inserting, “or any Affiliate of such Party” after the first appearance
of the word “Party” in subsections (i) and (ii)..
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CITY OF PALO ALTO RFP # __________
Section 5.1 is further amended by replacing the period at the end of subsection (h) with a semi-
colon, and adding new subsections “(i),” “(j)" , “(k)” and “(l)”, which read as follows:
"(i) during any consecutive ninety (90) day period, there have occurred five (5) or more
“Seller Failures” as that term is used in Section 4.1, under any or all Transactions,
regarding which the Seller shall be deemed to be the Defaulting Party, and Buyer shall
also be entitled to its remedies under Section 4.1;"
"(j) during any consecutive ninety (90) day period, there have occurred five (5) or more
“Buyer Failures” as that term is used in Section 4.2 under any or all Transactions,
regarding which the Buyer shall be deemed to be the Defaulting Party, and Seller shall
also be entitled to its remedies under Section 4.2;”
"(k) a representation or warranty with respect to the Defaulting Party's financial statement or
position that is false or materially misleading; or"
“(l) revocation by the Federal Energy Regulatory Commission of Party A’s authorization to
make sales and market-based rates.”
Section 5.2 is amended in line 3 by changing “right (i) to” to “right to (i)” and by adding the
following sentence to the end of that provision:
“If the Non-Defaulting Party’s aggregate Gains exceed its aggregate Losses and Costs,
if any, resulting from the termination of this Agreement, the Settlement Amount shall be
zero, notwithstanding any provision of this Agreement to the contrary.”
Section 5.3 is amended by inserting the phrase “plus, at the option of the Non-Defaulting Party,
any cash or other form of security then available to the Defaulting Party pursuant to
Article Eight”, between the words “that are due to the Non-Defaulting Party,”, and “plus
any and all other amounts” in the sixth line thereof.
Section 5.6 Closeout Setoff
___ Option A (Applicable if no other selection is made.)
X Option B - Affiliates shall have the meaning set forth in the Master Agreement unless
otherwise specified as follows: Option B is amended as set forth in Article 10 below.
___ Option C (No Setoff)
Section 5.6 is further amended by inserting before the last sentence in Option B:
“At the election of the Non-Defaulting Party, all obligations owing by or to an Affiliate
of a Party shall be treated as if they were owing by or to the Party itself for purposes of
set-off.”
Article Six Section 6.8 is amended by deleting the words, “may by agreement of the Parties,” in line 3 and
inserting in their place the word “shall”.
Article Eight 8.1 Party A Credit Protection
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CITY OF PALO ALTO RFP # __________
Credit and Collateral
Requirements
Financial Information from Party B, Section 8.1(a)
___ Option A
X Option B Specify: Audited financial statements for City of Palo Alto and for City of
Palo Alto Enterprise Fund
___ Option C
Credit Assurances from Party B, Section 8.1(b)
X Not Applicable
___ Applicable
Collateral Threshold for Party B, Section 8.1(c)
X Not Applicable
___ Applicable
Party B Independent Amount: N/A
Party B Rounding Amount: N/A
Party B Minimum Transfer Amount: N/A
Downgrade Event, Section 8.1(d):
__ Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party B only if (i) Party B’s underlying rating, determined
without reference to third party credit enhancement, on its utility revenue bond ("Debt") by
S&P or Moody's is respectively below BBB- or Baa3, or (ii) both S&P and Moody's refuse
to rate Party B's Debt, or (iii) Party B’s City Council no longer has the legal authority under
the Act, as defined by Schedule M, to adjust electric rates as necessary to recover Party B’s
costs of providing retail electric service to its customers.
Guarantor for Party B, Section 8.1(e): N/A
Guarantee Amount: N/A
8.2 Party B Credit Protection:
Financial Information from Party A, Section 8.2(a):
__ Option A
X Option B Specify: Audited Financial statements to be provided by Party A as described
in Section 8.2(a) shall be for Party A or parent entity, if any, providing credit support.
___ Option C
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CITY OF PALO ALTO RFP # __________
Credit Assurances from Party A, Section 8.2(b):
_X __ Not Applicable
Applicable
Collateral Threshold for Party A, Section 8.2(c ):
___ Not Applicable
X Applicable
If applicable, complete the following:
Party A Collateral Threshold: means with respect to Party A, at any time the lesser of the
Guaranty amount and the amount specified in the table below under the relevant heading
opposite the lower of the ratings at that time assigned by Standard & Poor’s Rating Services, a
division of The McGraw-Hill Companies, Inc. (“S&P”) or Moody’s Investors Service, Inc., a
subsidiary of Moody’s Corporation (“Moody’s”) to the long term, senior, unenhanced, unsecured
debt securities or obligations of Party A’s Guarantor; provided, that (a) if the long term, senior,
unenhanced, unsecured debt securities of Party A’s Guarantor is no longer rated by one of S&P
or Moody’s, the Threshold with respect to Party A will be zero dollars and (b) if an Event of
Default or Potential Event of Default with respect to Party A has occurred and is continuing, the
Threshold with respect to such party shall be zero dollars.
S&P Rating Moody’s Rating Threshold
A- or above A3 or above $25,000,000
BBB+ Baa1 $15,000,000
BBB Baa2 $10,000,000
BBB- Baa3 $ 5,000,000
Below BBB- (or rating Below Baa3 (or rating $ 0 (zero)
suspended or withdrawn suspended or withdrawn
by both S&P and by both S&P and
Moody’s) Moody’s)
Party A Independent Amount: $0
Party A Rounding Amount: $100,000
Party A Minimum Transfer Amount: $250,000
Downgrade Event, Section 8.2(d):
___ Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party A only if the Credit Rating of Party A’s
Guarantor falls below BBB- from S&P or Baa3 from Moody's or if the unenhanced,
unsecured senior long-term debt securities or obligations of Party A’s Guarantor ceases
to be rated by either S&P or Moody's.
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CITY OF PALO ALTO RFP # __________
Guarantor for Party A, Section 8.2(e):
X Guarantor for Party A: Cargill, Inc
Guarantee Amount: $5,000,000
Article Ten
Section 10.1 is amended by replacing “upon (thirty) 30 days’ prior written notice” in lines 2 and
3, with “, which termination shall be effective immediately upon receipt of written notice
thereof”.
Section 10.2 (ix) is amended by adding after the words, “it is”, the following, “or it shall be
deemed for all purposes to be”.
Section 10.2 shall be amended by deleting the “and” at the end of sub-section 10.2(xi), replacing
the period at the end of subsection 10.2(xii) with a semi-colon, and adding a new sub-section
(xiii) as follows:
“Notwithstanding any provision in this Agreement to the contrary, all information, statements,
reports and similar materials, conveyed by Party A orally or in writing in response to a bid
solicitation document [invitation for bids or request for proposals or combination thereof] of
Party B to demonstrate Party A’s financial condition, are true and accurate in all material
respects. Any representation made by Party A regarding its financial performance or condition
or that of its corporate parent (“Financial Representation”) as an inducement to Party B during
the solicitation, bidding or negotiation of any transaction entered into under this Master
Agreement shall be deemed to be repeated and reaffirmed, as of the date of the applicable
Transaction Confirmation and to be incorporated as a representation of Party A or related party,
who makes the Financial Representation in that Transaction Confirmation without the need for
any further action by either Party; and”
Section 10.4 shall be amended by inserting the phrase "To the extent permitted by law," at the
beginning of each of the first two sentences, and substituting the word, “each” for “Each” after
the insertion of each such phrase.
Section 10.5 shall be amended by deleting clause (ii) and the portion of clause (iii) prior to the
words “provided, however”, and replacing them with the following: “(ii) transfer or assign this
Agreement to an Affiliate of such Party so long as (x) such Affiliate’s creditworthiness is equal
to or higher than that of such Party or the Guarantor as of the Effective Date and the date of
entering into each Transaction under this Agreement, if any, for such Party, or (y) the obligations
of such Affiliate are guaranteed by such Party or its Guarantor, if any, in accordance with a
guaranty agreement in form and substance satisfactory to the other Party, and (iii) transfer or
assign this Agreement to any person or entity succeeding to all or substantially all of the assets of
such Party whose creditworthiness is equal to or higher than that of such Party or its Guarantor,
if any, as of the Effective Date and the effective date of any such transfer or assignment.
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Section 10.6 is amended by deleting the words “New York” from the fourth line thereof and
replacing it with the word “California.”
Further, Section 10.6 is amended by deleting the last sentence thereof and replacing it with the
following sentence:
“With respect to any proceeding in connection with any claim, counterclaim, demand,
cause of action, dispute and controversy arising out of or relating to this Agreement, the
Parties hereby consent to the exclusive jurisdiction of the federal courts sitting in the
Northern District of the State of California; provided, however, that if the federal courts
sitting in the Northern District of the State of California refuse jurisdiction, the Parties
agree to the exclusive jurisdiction of the state courts sitting in the County of Santa
Clara, State of California.”
Section 10.8 is modified by adding before the word “constitute” in line four of Section 10.8, “,
the bid solicitation document (invitation for bids or request for proposals, or combination
thereof) and all financial and other information, explanations, statements, reports provided by
one party to the other in connection therewith”
Section 10.8 shall be amended by deleting its penultimate sentence in its entirety and replacing it
with the following sentences: “The indemnity provisions of this Agreement shall survive the
termination of this Agreement for the period of the applicable statute of limitations. The audit
provisions of this Agreement shall survive the termination of this Agreement for a period of
twelve (12) months.”
Section 10.10 shall be amended to include the at the end of the first sentence:
“as amended by the Bankruptcy Code Amendments of 2005, and that each believes that it is a
“forward contract merchant” under statutory and decisional law in effect as of the Effective
Date”
Confidentiality
X Confidentiality Applicable, subject Section
10.11 as amended.
If not checked, inapplicable.
Section 10.11 shall be replaced in its entirety with the following:
“Party A acknowledges that Party B is subject to California Constitution Article 1,
Section 3, and the California Public Records Act, Cal. Gov. Code § 6250 et seq.
(“Public Records Act”) in regard to the documents comprising this Master Agreement
and the Transactions, which items may constitute public records subject to inspection
and copying by the public under the authority of the California Constitution and the
Public Records Act. Party B shall, consistent with those laws, use reasonable efforts to
provide Party A with notice of any third party request to inspect and copy any of the
documents that comprise this Master Agreement and the Transactions, which Party A
might deem confidential and exempt from disclosure, in order that Party A may timely
seek to protect those documents from disclosure to the third party. Party A
acknowledges and agrees that Party B shall not be liable to Party A if Party B makes
disclosure in accordance with the California Constitution and/or the Public Records Act
before Party A has timely obtained an order to prevent Party B from making the
requested disclosure to the third party.”
A new Section 10.12 shall be added to Article 10 as follows:
"10.12. No Agency. In performing their respective obligations hereunder, neither Party
is acting, or is authorized to act, as the agent of the other Party.”
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A new Section 10.13 shall be added to Article 10 as follows:
10.13 Dispute Resolution. In the event of any controversy or claim, whether based in contract,
tort, or otherwise, arising out of or based upon, or relating to this Agreement or the scope,
breach, termination or validity of each of them (a “Dispute”), the Parties will resolve such
Dispute in the following manner:
10.13.1 Negotiation. The Parties will attempt in good faith to resolve the Dispute promptly by
negotiations between duly authorized representatives of the Parties who have authority to settle
the Dispute. When a Party believes there is a Dispute, that Party will give the other Party written
notice describing the Dispute with reasonable particularity. Within thirty (30) Days after receipt
of such notice, the receiving Party will submit a written response to the other Party.
10.13.2 Mediation. If the Dispute is not resolved within forty-five (45) Days of the date of the
response given pursuant to Section 10.13.1, or such additional time, if any, that the Parties
mutually agree to in writing, the Parties shall try in good faith to settle the Dispute by mediation.
10.13.3 Additional Rights. If the Dispute is not resolved through mediation within ninety (90)
Days after the first meeting of the Parties and mediator(s), or such additional time, if any, that the
Parties mutually agree to in writing, either Party shall be free to pursue any and all legal actions
and remedies as it may deem necessary.
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A new Section 10.14 shall be added to Article 10 as follows:
10.14: “The Parties acknowledge and agree that any purchase of power made pursuant to Party
B’s Request for Proposals and under this Agreement and any Transaction shall be executed and
delivered in compliance with applicable laws and regulations in effect at the time this
Agreement is signed by the Parties and at the time of entering into any particular Transaction,
including, but not limited to, Senate Bill 1368 (California Public Utilities Code section 8340 et
seq.) and related regulations (Title 20, Sections 2900 – 2930 of the California Code of
Regulations), as amended, to the extent such laws and regulations, including SB 1368 and related
regulations, apply or are deemed to apply to this Agreement and any Transaction. To the extent
SB 1368 and related regulations require Party B as a local publicly owned electric utility to
submit a compliance filing in accordance with such laws, Party A, upon the request of Party B,
shall in good faith provide promptly to Party B (to the extent Party B lacks such information) the
information to the extent Party A has knowledge of or access to such information, and shall work
cooperatively with and provide commercially reasonable assistance to Party B in Party B’s
compliance with such laws. A failure by Party A to provide such information which is within
its possession or knowledge shall constitute a default under this Agreement.”
A new Section 10.15 shall be added to Article 10 as follows:
10.15: “The Parties intend that the standard of review for changes to any rate, charge,
classification, term or condition of this Agreement at FERC shall be the most stringent standard
permissible under applicable law. As to the Parties, it is understood and agreed that the standard
is the “Mobile-Sierra public interest” standard of review, as stated by the United States Supreme
Court in Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish
County, Nos. 06-1457, 128 S.Ct. 2733 (2008), and consistent with the order of the Supreme
Court in NRG Power Marketing, LLC, et al., v. Maine Public Utilities Commission et al., No. 08-
674, 130 S.Ct. 693 (2010) (“NRG Order”). As to all other persons, the Parties intend and agree
that the same standard, to the maximum degree as may be made applicable to other than the
Parties, apply, to the maximum degree permitted under the NRG Order.”
A new Section 10.16 shall be added to Article 10 as follows:
10.16 ““AB 32 fees” means the regulatory assessments, charges, fees imposts and/or taxes
imposed upon and required to be paid by suppliers of energy in accordance with the Global
Warming Solutions Act of 2006, Chapter 488, Statutes 2006, including, without limitation, the
Compliance Offset Protocols, which shall be included (or be deemed included to the extent they
are not expressly included) in the Contract Price, defined in Section 1.10 of the General Terms
and Conditions, and that are in effect as of the Effective Date of this Agreement and/or the date
the Parties enter into each Transaction hereunder.”
A new Section 10.17 shall be added to Article 10 as follows:
10.17 Imaged Agreement. Any original executed Agreement, Confirmation or other related
document may be photocopied and stored on computer tapes and disks (the “Imaged
Agreement”). The Imaged Agreement, if introduced into evidence on paper, the Confirmation, if
introduced as evidence in automated facsimile form, the Recording, if introduced as evidence in
its original form and as transcribed onto paper, and all computer records of the foregoing, if
introduced as evidence in printed format, in any judicial, arbitration, mediation, or administrative
proceedings, will be admissible as between the Parties to the same extent and under the same
conditions as other business records originated and maintained in documentary form. Neither
Party shall object to the admissibility of the Recording, the Confirmation or the Imaged
Agreement (or photocopies of the transcription of the Recording, the Confirmation or the Imaged
Agreement) on the basis that such were not originated or maintained in documentary form under
either the hearsay rule, the best evidence rule or other rule of evidence.
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A new Section 10.18 is added to Article 10 as follows:
"The Parties understand and agree that the Transactions under this Agreement are physical
transactions for deferred delivery, and that the Parties contemplate making or taking physical
delivery of electric energy products; provided, however, that nothing in this Agreement,
including this Section 10.18, prohibits the Parties from engaging in Transactions that are or may
be determined to be swaps if they so desire. Party B is a commercial entity engaged in the
business of delivering electricity to retail customers and buying electricity products with the
intention of routinely taking delivery in order to provide service to its retail electric customers. "
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CITY OF PALO ALTO RFP # __________
A new Section 10.19 is added to Article 10 as follows:
Index Transactions. If the Contract Price for a Transaction is determined by reference to a
Price Source, then:
(a) Market Disruption. If a Market Disruption Event occurs on any one or more days
during a Determination Period (each day, a “Disrupted Day”), then:
The fallback Floating Price, if any, specified by the Parties in the
relevant Confirmation shall be the Floating Price for each
Disrupted Day.
If the Parties have not specified a fallback Floating Price, then the
Parties will endeavor, in good faith and using commercially reasonable
efforts, to agree on a substitute Floating Price, taking into consideration,
without limitation, guidance, protocols or other recommendations or
conventions issued or employed by trade organizations or industry
groups in response to the Market Disruption Event and other prices
published by the Price Source or alternative price sources with respect
to the Delivery Point or comparable Delivery Points that may permit the
Parties to derive the Floating Price based on historical differentials.
If the Price Source retrospectively issues a Floating Price in respect of a
Disrupted Day (a “Delayed Floating Price”) before the Parties agree on
a substitute Floating Price for such day, then the Delayed Floating Price
shall be the Floating Price for such Disrupted Day. If a Delayed Price is
issued by the Price Source in respect of a Disrupted Day after the Parties
agree on a substitute Floating Price for such day, the substitute Floating
Price agreed upon by the Parties will remain the Floating Price without
adjustment unless the Parties expressly agree otherwise.
If the Parties cannot agree on a substitute Floating Price and the Price
Source does not retrospectively publish or announce a Floating Price, in
each case, on or before the fifth Business Day following the first Trading
Day on which the Market Disruption Event first occurred or existed,
then the Floating Price for each Disrupted Day shall be determined by
taking the arithmetic mean of quotations requested from four leading
dealers in the relevant market that are unaffiliated with either Party
and mutually agreed upon by the Parties (“Specified Dealers”),
without regard to the quotations with the highest and lowest values,
subject to the following qualifications:
o If exactly three quotations are obtained, the Floating Price for
each such Disrupted Day will be the quotation that remains
after disregarding the quotations having the highest and lowest
values.
o If fewer than three quotations are obtained, the Floating Price
for each such Disrupted Day will be the average of the
quotations obtained.
o If the Parties cannot agree upon four Specified Dealers, then
each of the Parties will, acting in good faith and in a
commercially reasonable manner, select up to two Specified
Dealers separately, and those selected dealers shall be the
Specified Dealers.
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CITY OF PALO ALTO RFP # __________
Unless otherwise agreed, if at any time the Parties agree on a substitute
Floating Price for any Disrupted Day, then such substitute Floating Price
shall be the Floating Price for such Disrupted Day, notwithstanding the
subsequent publication or announcement of a Delayed Floating Price by
the relevant Price Source or any quotations obtained from Specified
Dealers.
"Determination Period" means each calendar month a part or all of which is within
the Delivery Period of a Transaction.
"Exchange" means, in respect of a Transaction, the exchange or principal trading
market specified as applicable to the relevant Transaction.
"Floating Price" means a Contract Price specified in a Transaction that is based
upon a Price Source.
"Market Disruption Event" means, with respect to any Price Source, any of the
following events:
(a) the failure of the Price Source to announce, publish or make available the
specified Floating Price or information necessary for determining the
Floating Price for a particular day;
(b) the failure of trading to commence on a particular day or the permanent
discontinuation or material suspension of trading in the relevant options
contract or commodity on the Exchange, RTO or in the market specified for
determining a Floating Price;
(c) the temporary or permanent discontinuance or unavailability of the Price
Source;
(d) the temporary or permanent closing of any Exchange or RTO specified
for determining a Floating Price; or
(e) a material change in the formula for or the method of determining the
Floating Price by the Price Source or a material change in the composition
of the Product.
"Price Source" means, in respect of a Transaction, a publication or such other origin of
reference, including an Exchange or RTO, containing or reporting or making
generally available to market participants (including by electronic means) a price,
or prices or information from which a price is determined, as specified in the
relevant Transaction.
“RTO” means any regional transmission operator or independent system operator.
“RTO Transaction” means a Transaction in which the Price Source is an RTO.
"Trading Day" means a day in respect of which the relevant Price Source ordinarily
would announce, publish or make available the Floating Price.
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CITY OF PALO ALTO RFP # __________
(b) Corrections to Published Prices. If the Floating Price published, announced or
made available on a given day and used or to be used to determine a relevant price is
subsequently corrected by the relevant Price Source (i) within 30 days of the
original publication, announcement or availability, or (ii) in the case of RTO
Transactions only, within such longer time period as is consistent with the RTO’s
procedures and guidelines, then either Party may notify the other Party of that
correction and the amount (if any) that is payable as a result of that correction. If,
not later than thirty (30) days after publication or announcement of that correction, a
Party gives notice that an amount is so payable, the Party that originally either
received or retained such amount will, not later than three (3) Business Days after
such notice is effective, pay, subject to any applicable conditions precedent, to the
other Party that amount, together with interest at the Interest Rate for the period
from and including the day on which payment originally was (or was not) made to
but excluding the day of payment of the refund or payment resulting from that
correction. Notwithstanding the foregoing, corrections shall not be made to any
Floating Prices agreed upon by the Parties or determined based on quotations from
Specified Dealers pursuant to paragraph (a) above unless the Parties expressly agree
otherwise.
(c) Rounding. When calculating a Floating Price, all numbers shall be rounded to
four (4) decimal places. If the fifth (5th) decimal number is five (5) or greater, then
the fourth (4th) decimal number shall be increased by one (1), and if the fifth (5th)
decimal number is less than five (5), then the fourth (4th) decimal number shall
remain unchanged.
Schedule M ___ Party A is a Governmental Entity or Public Power System
X Party B is a Governmental Entity, Schedule M Applicable
Part A Part A of Schedule M is amended by including the following definition for the term “Act”:
“Act” means the Constitution of the State of California, the California statute(s), charter
and municipal ordinances under which Party B was created, organized and authorized to
enter into this Master Agreement and each Transaction thereunder
Part A is further amended by adding the following sentence at the end of the definition of the
term “Special Fund”:
“Party A has conducted such investigation as it deems necessary of the City of Palo
Alto Enterprise Fund and the Act under which such Fund was established to determine,
for its purposes under this Agreement, that such Fund meets this definition of Special
Fund.”
Part C Part C of Schedule M is amended by adding the phrase in line 7 “and to the extent applicable,”
immediately following the word “limitation” in clause (i).
Part D Section 3.4 is modified by inserting a period after “Master Agreement” in line 7 and deleting the
rest of the sentence.
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CITY OF PALO ALTO RFP # __________
Part E X Section 3.6 under Part E of Schedule M applies; however, the portion of that provision
following the semicolon on the eighth line thereof is replaced in its entirety with the
following:
“any breach of clause (ii) of this provision shall be deemed to have arisen
during a fiscal period of Governmental Entity or Public Power System for
which such budgetary approval or certification of its obligations under this
Master Agreement is required to be in effect and an Event of Default shall be
deemed to have occurred for purposes of Section 5.1 under which
Governmental Entity or Public Power System shall be treated as the Defaulting
Party.”
Part F ___ Add Section 8.4. If not checked, inapplicable.
Part G Part G does not apply.
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Schedule P SCHEDULE P
PRODUCTS AND RELATED DEFINITIONS
The following defined terms are added to Schedule P:
“CAISO” means the California Independent System Operator Corporation, or its
successor.
“CAISO Tariff” means the Federal Energy Regulatory Commission-approved tariff of
CAISO, including all CAISO protocols, as the same may be amended from time to time.
“CAISO Energy” means a Transaction in which the Seller shall sell and the Buyer shall
purchase a quantity of Energy equal to the hourly quantity without Ancillary Services (as defined
in the CAISO Tariff) that is or will be scheduled as a schedule coordinator to schedule
coordinator transaction pursuant to the CAISO Tariff as amended from time to time for which the
only excuse for failure to deliver or receive is an “Uncontrollable Force” (as defined in the
CAISO Tariff) called by the CAISO in accordance with the CAISO Tariff.
“HLH (Heavy Load Hour)” is defined as energy delivered from hours ending (HE)
0700- 2200 Monday-Saturday, excluding NERC holidays, PPT.
“IST” means Inter-Scheduling Coordinator Trade shall mean a trade between
Scheduling Coordinators of Energy or Ancillary Services in accordance with the CAISO Tariff.
“LLH (Light Load Hour)” is defined as energy delivered from hours ending (HE) 0100-
0600 and 2300-2400 Monday-Saturday, all day Sunday and NERC holidays, PPT.
“NP15 Zone Delivery Point” means the NP15 Zone; provided, however, if CAISO
implements trading hubs under a locational marginal pricing design during the Delivery Period,
the Delivery Point shall be the Existing Zone Generation NP15 Trading Hub (“NP15 EZ Gen
Hub”), as such trading hub is contemplated by the CAISO in its filing made to the FERC dated
March 15, 2005 (“Comprehensive Design Proposal for Inter-Scheduling Coordinator Trades
Under the California Independent System Operator Corporation’s Market Redesign and
Technology Upgrade, Docket No. ER02-1656-025”); provided further, if the NP15 EZ Gen Hub
(under any name) is not established as part of a market redesign that is implemented during the
Delivery Period, the Parties agree to promptly work together in good faith to designate an
alternate Delivery Point to reasonably approximate the characteristics of the NP-15 Zone.
"West Firm", or “WSPP Schedule C” or “Schedule C” or “WSPPC-Firm” or any
similar description means with respect to a Transaction, a Product that is or will be scheduled as
firm energy consistent with the most recent rules adopted by the WECC for which the only
excuses for failure to deliver or receive are if an interruption is (i) due to an Uncontrollable Force
as provided in Section 10 of the WSPP Agreement; or (ii) where applicable, to meet Seller's
public utility or statutory obligations to its customers. Notwithstanding any other provision in this
Agreement, if Seller exercises its right to interrupt to meet its public utility or statutory
obligations, Seller shall be responsible for payment of damages for failure to deliver firm energy
as provided in Article 4 of this Agreement.
"WECC" means the Western Electricity Coordinating Council.
"WSPP Agreement" means the Western Systems Power Pool Agreement as amended
from time to time.
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CITY OF PALO ALTO RFP # __________
EXHIBIT A
MASTER POWER PURCHASE AND SALE AGREEMENT CONFIRMATION LETTER
EXHIBIT B
RESOURCE ADEQUACY (“RA”) CAPACITY
The Parties acknowledge and agree that after the execution of this Master Agreement, they may
enter into one or more contracts or confirmations concerning Resource Adequacy, which
products, terms, conditions and definitions shall be documented in an Resource Adequacy Form
of Confirmation (“RA Confirm”) or substantially similar form executed as of the Confirmation
Effective Date containing terms and conditions substantially similar to those set forth in the RA
Confirm attached at Exhibit B.
EXHIBIT C
RENEWABLE ENERGY CERTIFICATE (“REC”)
On or after the Effective Date, Party B may secure the appropriate authorization and approval to
buy and/or sell RECs (bundled and unbundled); provided, however, that the purchase and/or sale
of such RECs shall be subject to the approval of Party B’s City Manager. The form of any REC
purchase and/or sale transaction shall be mutually agreed to by the Parties.
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CITY OF PALO ALTO RFP # __________
IN WITNESS WHEREOF, the Parties have caused this Master Agreement to be duly executed as of the date first above
written.
Party B: City of Palo Alto
Approval as to Form:
By: ……………………………..
Name: Grant Kolling
Title: Sr. Asst. City Attorney
Date: _________, 2013
Party A:
By: ……………………………..
Name: ……………………………..
Title: ……………………………..
Date: ________, 2013
Party B: City of Palo Alto
Approval by City Manager:
By: ……………………………..
Name: James Keene
Title: City Manager
Date: ________, 2013
Party B: City of Palo Alto
Approval by Mayor:
By: ……………………………..
Name: James Keene, City Manager, for
Title: Mayor
Date: ________, 2013
Party B: City of Palo Alto
Approval by Administrative Services Director:
By: ……………………………..
Name: Lalo Perez
Title: Administrative Services Director
Date: _________, 2013
Party B: City of Palo Alto
Approval by Utilities Director:
By: ……………………………..
Name: Valerie Fong
Title: Utilities Director
Date: _______, 2013
DISCLAIMER: This Master Power Purchase and Sale Agreement was prepared by a committee of
representatives of Edison Electric Institute (“EEI”) and National Energy Marketers Association (“NEM”)
member companies to facilitate orderly trading in and development of wholesale power markets. Neither EEI
nor NEM nor any member company nor any of their agents, representatives or attorneys shall be responsible for
its use, or any damages resulting therefrom. By providing this Agreement EEI and NEM do not offer legal advice
and all users are urged to consult their own legal counsel to ensure that their commercial objectives will be
achieved and their legal interests are adequately protected.
THIS PAGE WAS INTENTIONALLY LEFT BLANKED.
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CITY OF PALO ALTO RFP # __________
MASTER POWER PURCHASE AND SALE AGREEMENT
(EEI Version 2.1, modified 4/25/00)
COVER SHEET
This Master Power Purchase and Sale Agreement (“Master Agreement”) is made as of the following date: _____ __,
2013 (“Effective Date”). The Master Agreement, together with the exhibits, schedules, annexes and any written
supplements hereto, the Party A Tariff, if any, the Party B Tariff, if any, any designated collateral, credit support or
margin agreement or similar arrangement between the Parties and all Transactions (including any confirmations accepted
in accordance with Section 2.3 hereto) shall be referred to as the “Agreement.” The Parties to this Master Agreement are
the following:
Name: Exelon Generation Company, LLC.
(“Counterparty ” or “Party A”)
Name: City of Palo Alto (“Counterparty” or “Party B”)
All Notices:
Street: 100 Constellation Way,
Suite 500C
City/State: Baltimore, MD Zip: 21202
Attn: Contract Administration
Phone: 410-470-3738
Facsimile: 443-213-3556
Duns: 19-674-8938
Federal Tax ID Number: 23-2990190
All Notices:
Attn: Assistant Director, Resource Management
Department of Utilities
City of Palo Alto
250 Hamilton Avenue, 3rd Floor
Palo Alto, CA 94301
Phone: 650-329-2214
Facsimile: 650-326-1507
Duns: 17-892-8479
Federal Tax ID Number: 94-6000389
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: General Counsel
Phone: 410-470-3500
Facsimile: 443-213-3556
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Senior Assistant City, Attorney/Utilities
City of Palo Alto
Phone: 650-329-2171
Facsimile: 650-329-2646
Invoices:
Attn: Billing Group
Phone: 410-470-3737
Facsimile: 410-468-3540
Invoices:
Attn: Power Accounts Administrator
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678-6420
Phone: (916) 781-4224/3636
Facsimile: (916) 781-4225
Day Ahead Pre-Scheduling:
Attn: Scheduling Desk
Phone: 410-468-3530
Facsimile: 410-468-3540
Day Ahead Pre-Scheduling:
Confirmations:
Attn: Pre-Scheduler Desk
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4211/4230/4232
Facsimile: 916-781-4255
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Real Time Scheduling:
Attn: Scheduling Desk
Phone: 410-468-3530
Facsimile: 410-468-3540
Real Time Scheduling:
Attn: Chief Dispatcher/Scheduler
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4237/3636
Facsimile: 916-781-4226
Payments:
Attn: Payments Group
Phone: 410-470-3737
Facsimile: 410-468-3540
Payments:
Attn: Accounts Payable
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4237/3636
Facsimile: 916-781-4226
Wire Transfer:
BNK: M&T Bank
ABA: 022000046
ACCT: 191-9007-8
Wire Transfer:
Deposit to Northern California Power Agency, “to the
benefit of City of Palo Alto”
BNK U.S. Bank
ABA: 121122676
ACCT: 1-534-0216-2744
Attn: Cyndy Husebye
U.S. Bank
555 SW Oak Street, Suite 400
Portland, OR. 97204
Phone: 877-295-2509
Facsimile: 877-324-1680
Credit and Collections:
Attn: Credit Risk Department
Phone: 410-470-2946
Facsimile: 410-470-6200
Credit and Collections:
Attn: Power Accounts Analyst
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4221/4224
Facsimile: 916-781-4255
The Parties hereby agree that the General Terms and Conditions are incorporated herein, as selected, modified and
amended by the following specific provisions, as provided for in such General Terms and Conditions:
Party A Tariff: FERC Electric Tariff Dated: April 30, 2010 Docket Number: ER10-1145 Original
Vol. No. 2
Party B Tariff: N/A
Article One
General Definitions Section 1.1 shall be amended by adding the following new sentence at the end of the current
provision: “With respect to Party A, Baltimore Gas & Electric Company, CNEGH Holdings,
LLC, CNE Gas Holdings, LLC, CNEG Holdings, LLC, Constellation NewEnergy-Gas Division,
LLC, CNE Gas Supply, LLC, PECO Energy Company, Commonwealth Edison Company and
shall not be considered an Affiliate.”
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Section 1.4 “Business Day” Delete the first sentence and replace it to read as follows: “Business
Day” means any day except a Saturday, Sunday, the Friday immediately following the
Thanksgiving holiday or a Federal Reserve Bank Holiday.
Section 1.10 is amended by substituting “U.S. $” for “$U.S.” in line 1.
Section 1.11 is amended by adding the following after “Party” in the third line: “after using
commercially reasonable efforts to mitigate costs”.
Section 1.12 is amended by deleting in the fourth line the word “issues” and replacing it with the
word “issuer”.
Section 1.24 is amended by adding before the period at the end thereof the following: “in
accordance with Section 5.2”.
Section 1.27 is amended by inserting the phrase “and in an amount” in the third line after the
word “form” and before the word “acceptable”.
Section 1.28 is amended by adding before the period at end thereof the following: “in accordance
with Section 5.2”.
Section 1.45 is deleted and replaced in its entirety with:
“Performance Assurance” means collateral in the form of either cash, Letter(s) of Credit, or other
security acceptable to the Requesting Party acting in its commercially reasonable discretion.”
Section 1.46 is amended by adding before the period at the end thereof the following:
“; provided that the failure to comply with any requirement of this Master Agreement or
a Transaction, including the requirements of Article 8, before the expiration of the time
period expressly specified for such compliance in this Master Agreement or the
Transaction, if any, shall not be considered a Potential Event of Default unless and until
the applicable time period has expired without compliance”.
Section 1.50 is amended by deleting the reference to “Section 2.4” and replacing it with “Section
2.5”.
Section 1.51 is amended by (a) inserting the phrase “for delivery” in the second line after the
word “purchases” and before the phrase “at the Delivery Point”, and (b) deleting the phrase “at
Buyer’s option” in the fifth line and inserting in their place the following: “absent a purchase”.
Section 1.53 is amended by (a) deleting the phrase “at the Delivery Point” in the second line, and
(b) deleting the phrase “at Seller’s option” in the fifth line and inserting in their place the
following: “absent a sale, assuming a sale could not have been made in a commercially
reasonable manner.”
Section 1.56 is amended by deleting the words “pursuant to Section 5.2” and by adding before
the period at the end thereof the following: “, as determined in accordance with Section 5.2.”
Section 1.60 is amended by inserting the words “in writing” immediately following the words
“agreed to”.
Article Two
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Transaction Terms
and Conditions
Section 2.1 shall be amended by deleting the second sentence thereof.
For purposes of Section 2.3, Party B requires that all Transactions be confirmed in writing.
Accordingly, the provision is amended by striking the word “may” from the first line thereof and
replacing it with the word “shall.”
For purposes of Section 2.3, all references to Seller shall be instead to Party A.
X Optional provision in Section 2.4. If not checked, inapplicable.
A new Section 2.6 is added to Article Two, worded as follows:
“2.6 No Oral Agreements or Modifications. Notwithstanding anything to the contrary in
this Master Agreement, including in this Article Two, this Master Agreement and any and
all Transactions may not be orally amended or modified, including by Recording pursuant
to Section 2.5.”
Article Four
Remedies for Failure
to Deliver or
Receive
X Accelerated Payment of Damages. If not checked, inapplicable.
A new Section 4.3 is added to Article Four, worded as follows:
“4.3 Suspension of Performance. In addition to the remedies provided pursuant to
Sections 4.1, 4.2 and 5.7, if Seller or Buyer fails to schedule, deliver or receive all or part
of the Product pursuant to a Transaction for a period of three (3) or more consecutive days,
and such failure is not excused under the terms of the Product, by Force Majeure, by the
other Party’s failure to perform or by written agreement of the Parties, then upon one (1)
Business Day’s prior written notice, and for so long as the non-performing Party fails to
perform, the performing Party shall have the right to suspend its performance under such
Transaction. In the event the performing Party suspends performance pursuant to this
Section 4.3, it shall not be obligated to resume performance until it has received notice
from the non-performing Party at least one (1) Business Day prior to the date upon which
the non-performing Party intends to resume its performance; provided, however, that if the
performing Party has entered into a replacement contract with a term of thirty-one (31)
days or less (“Short-Term Replacement Contract”), the performing Party may, upon
written notice to the non-performing Party, elect to postpone the resumption of
performance hereunder until the completion of such Short-Term Replacement Contract.
Remedies available under this provision to the performing Party are in addition to, not in
replacement of, other remedies specified in this Agreement.”
Article Five
Events of Default;
Remedies
X Cross Default provision of Section 5.1(g) shall apply for both Party A and Party B.
Cross Default amount for Party A shall be $100,000,000 and Party B shall be
$20,000,000.
Section 5.1(g) is amended by inserting, “or any Affiliate of such Party” after the first appearance
of the word “Party” in subsections (i) and (ii).
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Section 5.1 is further amended by replacing the period at the end of subsection (h) with a semi-
colon, and adding new subsections “(i),” “(j)" , “(k)” and “(l)”, which read as follows:
"(i) during any consecutive ninety (90) day period, there have occurred five (5) or more
“Seller Failures” as that term is used in Section 4.1, under any or all Transactions,
regarding which the Seller shall be deemed to be the Defaulting Party, and Buyer shall
also be entitled to its remedies under Section 4.1;"
"(j) during any consecutive ninety (90) day period, there have occurred five (5) or more
“Buyer Failures” as that term is used in Section 4.2 under any or all Transactions,
regarding which the Buyer shall be deemed to be the Defaulting Party, and Seller shall
also be entitled to its remedies under Section 4.2;”
"(k) a representation or warranty with respect to the Defaulting Party's financial statement or
position that is false or materially misleading; or"
“(l) revocation by the Federal Energy Regulatory Commission of Party A’s authorization to
make sales and market-based rates.”
Section 5.2 is amended in line 3 by changing “right (i) to” to “right to (i)” and by adding the
following sentence to the end of that provision:
“If the Non-Defaulting Party’s aggregate Gains exceed its aggregate Losses and Costs,
if any, resulting from the termination of this Agreement, the Settlement Amount shall be
zero, notwithstanding any provision of this Agreement to the contrary.”
Section 5.3 is amended by inserting the phrase “plus, at the option of the Non-Defaulting Party,
any cash or other form of security then available to the Defaulting Party pursuant to
Article Eight”, between the words “that are due to the Non-Defaulting Party,”, and “plus
any and all other amounts” in the sixth line thereof.
Section 5.6 Closeout Setoff
__ Option A (Applicable if no other selection is made.)
X Option B - Affiliates shall have the meaning set forth in the Master Agreement unless
otherwise specified as follows: Option B is amended as set forth in Article 10 below.
___ Option C (No Setoff)
Section 5.6 is further amended by inserting before the last sentence in Option B:
“At the election of the Non-Defaulting Party, all obligations owing by or to an Affiliate
of a Party shall be treated as if they owed by or to the Party itself for purposes of set-
off.”
Article Six Section 6.8 is amended by deleting the words, “may by agreement of the Parties,” in line 3 and
inserting in their place the word “shall”.
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Article Seven Section 7.1, shall be amended by (i) deleting in the fifteenth line the words, “UNLESS
EXPRESSLY HEREIN PROVIDED”, (ii) adding in the nineteenth line the words
PROVIDED, HOWEVER, NOTHING IN THIS SECTION SHALL AFFECT THE
ENFORCEABILITY OF THE PROVISIONS OF THIS AGREEMENT EXPRESSING
ALLOWING FOR SPECIAL DAMAGES, INCLUDING BUT NOT LIMITED TO
REMEDIES FOR FAILURE TO DELIVER/RECEIVE IN SECTIONS 4.1 AND 4.2, AND
CALCULATION AND PAYMENT OF THE TERMINATION PAYMENT IN SECTIONS
5.2 AND 5.3.” immediately after the words “ANY INDEMNITY PROVISION OR
OTHERWISE”, and (iii) adding at the end of the last sentence the words “AND ARE NOT
PENALTIES”.
Article Eight 8.1 Party A Credit Protection
Credit and Collateral
Requirements
Financial Information from Party B, Section 8.1(a)
___ Option A
X Option B Specify: Audited financial statements for City of Palo Alto and for City of
Palo Alto Enterprise Fund
___ Option C
Credit Assurances from Party B, Section 8.1(b)
X Not Applicable
___ Applicable
Collateral Threshold for Party B, Section 8.1(c)
___ Not Applicable
X___ Applicable
If applicable, complete the following:
Party A Collateral Threshold: means with respect to Party B, at any time the amount specified in
the table below under the relevant heading opposite the lower of the ratings at that time assigned
by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (“S&P”)
or Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation (“Moody’s”) to the
utility revenue bonds of Party B; provided, that (a) both S&P and Moody's refuse to rate Party
B's utility revenue bonds Threshold with respect to Party B will be zero dollars, (b) Party B’s
City Council no longer has the legal authority under the Act, as defined by Schedule M, to adjust
electric rates as necessary to recover Party B’s costs of providing retail electric service to its
customers, the Threshold with respect to such party shall be zero dollars, and (c) if an Event of
Default or Potential Event of Default with respect to Party B has occurred and is continuing, the
Threshold with respect to such party shall be zero dollars.
S&P Rating Moody’s Rating Threshold
AAA Aaa $30,000,000
AA- through AA+ Aa3 through Aa1 $25,000,000
A through A+ A2 through A1 $10,000,000
A- A3 $ 5,000,000
BBB+ and below (or rating Baa1 and below (or rating $ 0 (zero)
suspended or withdrawn suspended or withdrawn
by both S&P and by both S&P and
Moody’s)
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Party B Independent Amount: N/A
Party B Rounding Amount: $100,000
Party B Minimum Transfer Amount: $250,000
Downgrade Event, Section 8.1(d):
__ Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party B only if (i) Party B’s underlying rating, determined
without reference to third party credit enhancement, on its utility revenue bond ("Debt") by
S&P or Moody's is respectively below BBB+ or Baa1, or (ii) both S&P and Moody's refuse
to rate Party B's Debt, or (iii) Party B’s City Council no longer has the legal authority under
the Act, as defined by Schedule M, to adjust electric rates as necessary to recover Party B’s
costs of providing retail electric service to its customers.
Guarantor for Party B, Section 8.1(e): N/A
Guarantee Amount: N/A
8.2 Party B Credit Protection:
Financial Information from Party A, Section 8.2(a):
__ Option A
X Option B Specify: Audited financial statements to be provided by Party A as described
in Section 8.2(a) shall be for Party A or parent entity, if any, providing credit support.
___ Option C
Credit Assurances from Party A, Section 8.2(b):
_X__ Not Applicable
Applicable
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Collateral Threshold for Party A, Section 8.2(c ):
___ Not Applicable
X Applicable
If applicable, complete the following:
Party A Collateral Threshold: means with respect to Party A, at any time the amount specified in
the table below under the relevant heading opposite the lower of the ratings at that time assigned
by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (“S&P”)
or Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation (“Moody’s”) to the
long term, senior, unenhanced, unsecured debt securities or obligations of Party A; provided, that
(a) if the long term, senior, unenhanced, unsecured debt securities of Party A is no longer rated
by one of S&P or Moody’s, the Threshold with respect to Party A will be zero dollars and (b) if
an Event of Default or Potential Event of Default with respect to Party A has occurred and is
continuing, the Threshold with respect to such party shall be zero dollars.
S&P Rating Moody’s Rating Threshold
A- or above A3 or above $25,000,000
BBB+ Baa1 $15,000,000
BBB Baa2 $10,000,000
BBB- Baa3 $ 5,000,000
Below BBB- (or rating Below Baa3 (or rating $ 0 (zero)
suspended or withdrawn suspended or withdrawn
by both S&P and by both S&P and
Moody’s) Moody’s)
Party A Independent Amount: $0
Party A Rounding Amount: $100,000
Party A Minimum Transfer Amount: $250,000
Downgrade Event, Section 8.2(d):
___ Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party A only if the Credit Rating of Party A falls
below BBB- from S&P or Baa3 from Moody's or if the unenhanced, unsecured senior
long-term debt securities or obligations of Party A ceases to be rated by either S&P or
Moody's.
Guarantor for Party A, Section 8.2(e):
X Guarantor for Party A: _Not Applicable
Guarantee Amount: Not Applicable
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CITY OF PALO ALTO RFP # __________
A new Section 8.4 shall be added to Article 8 as follows:
“Collateral Threshold Disputes. For the purposes of this Section 8.4, Party A is deemed to be the
“Calculation Agent” with respect to its obligations under Section 8.1(c), and Party B is deemed
to be the “Calculation Agent” with respect to its obligations under Section 8.2(c). All
calculations made by the Calculation Agent may be independently confirmed by the other Party
in its sole discretion. In the event that the Parties’ initial calculations are inconsistent and the
amount owed disputed, the undisputed amount will be used to determine payment obligations
and, if then due, paid by the relevant Party. The Parties shall endeavor to resolve any such
dispute in good faith. If the Parties are unable to resolve such dispute with a commercially
reasonable time, the Parties shall mutually select a dealer in the applicable commodity to act as
Calculation Agent with respect to the issue in dispute. The failure of either Party to perform its
obligations as Calculation Agent, as applicable, hereunder shall not be construed as an Event of
Default under this Agreement, and the sole remedy of the other Party with respect to such failure
will be the right, upon notice to the Calculation Agent and provided that such failure is
continuing, to designate itself or a third party as a replacement Calculation Agent.”
Article Ten
Section 10.1 is amended by replacing “upon (thirty) 30 days’ prior written notice” in lines 2 and
3, with “, which termination shall be effective immediately upon receipt of written notice
thereof”.
Section 10.2 (ix) is amended to read in its entirety as follows: “(ix) (1) it is, or it shall be
deemed for all purposes to be, a “forward contract merchant” within the meaning of the United
States Bankruptcy Code; (2) it is an “eligible contract participant” as such term is defined in the
Commodity Exchange Act, as amended 7 U.S.C. § 1 (a) (12); and (3) it is an “eligible
commercial entity” as such term is defined in the Commodity Exchange Act, as amended 7
U.S.C. § 1 (a) (11).”
Section 10.2 shall be amended by deleting the “and” at the end of sub-section 10.2(xi), replacing
the period at the end of subsection 10.2(xii) with a semi-colon, and adding a new sub-section
(xiii) as follows:
“Notwithstanding any provision in this Agreement to the contrary, all information, statements,
reports and similar materials, conveyed by Party A orally or in writing in response to a bid
solicitation document [invitation for bids or request for proposals or combination thereof] of
Party B to demonstrate Party A’s financial condition, are true and accurate in all material
respects. Any representation made by Party A regarding its financial performance or condition
or that of its corporate parent (“Financial Representation”) as an inducement to Party B during
the solicitation, bidding or negotiation of any transaction entered into under this Master
Agreement shall be deemed to be repeated and reaffirmed, as of the date of the applicable
Transaction Confirmation and to be incorporated as a representation of Party A or related party,
who makes the Financial Representation in that Transaction Confirmation without the need for
any further action by either Party; and”
Section 10.4 shall be amended by inserting the phrase "To the extent permitted by law," at the
beginning of each of the first two sentences, and substituting the word, “each” for “Each” after
the insertion of each such phrase.
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CITY OF PALO ALTO RFP # __________
Section 10.5 shall be amended by deleting clause (ii) and the portion of clause (iii) prior to the
words “provided, however”, and replacing them with the following: “(ii) transfer or assign this
Agreement to an Affiliate of such Party so long as (x) such Affiliate’s creditworthiness is equal
to or higher than that of such Party or the Guarantor as of the Effective Date and the date of
entering into each Transaction under this Agreement, if any, for such Party, or (y) the obligations
of such Affiliate are guaranteed by such Party or its Guarantor, if any, in accordance with a
guaranty agreement in form and substance satisfactory to the other Party, and (iii) transfer or
assign this Agreement to any person or entity succeeding to all or substantially all of the assets of
such Party whose creditworthiness is equal to or higher than that of such Party or its Guarantor,
if any, as of the Effective Date and the effective date of any such transfer or assignment.
Section 10.6 is amended by deleting the words “New York” from the fourth line thereof and
replacing it with the word “California.”
Further, Section 10.6 is amended by deleting the last sentence thereof and replacing it with the
following sentence:
“With respect to any proceeding in connection with any claim, counterclaim, demand,
cause of action, dispute and controversy arising out of or relating to this Agreement, the
Parties hereby consent to the exclusive jurisdiction of the federal courts sitting in the
Northern District of the State of California; provided, however, that if the federal courts
sitting in the Northern District of the State of California refuse jurisdiction, the Parties
agree to the exclusive jurisdiction of the state courts sitting in the County of Santa
Clara, State of California.”
Section 10.8 is modified by adding before the word “constitute” in line four of Section 10.8, “,
the bid solicitation document (invitation for bids or request for proposals, or combination
thereof) and all financial and other information, explanations, statements, reports provided by
one party to the other in connection therewith”
Section 10.8 shall be amended by deleting its penultimate sentence in its entirety and replacing it
with the following sentences: “The indemnity provisions of this Agreement shall survive the
termination of this Agreement for the period of the applicable statute of limitations. The audit
provisions of this Agreement shall survive the termination of this Agreement for a period of
twelve (12) months.”
Section 10.10 is deleted in its entirety and replaced with the following new section: “Bankruptcy.
The Parties acknowledge and agree that (i) any Transaction with a maturity date more than two
days after the date the Transaction is entered into constitutes a "forward contract" within the
meaning of the United States Bankruptcy Code (the “Bankruptcy Code”); (iii) all payments made
or to be made by one Party to the other Party pursuant to this Agreement are "settlement
payments" within the meaning of the Bankruptcy Code; and (iv) all transfers of Performance
Assurance by one Party to the other Party under this Agreement are "margin payments" within
the meaning of the Bankruptcy Code. Each Party further agrees that, for purposes of this
Agreement, the other Party is not a "utility" as such term is used in 11 U.S.C. Section 366, and
each Party agrees to waive and not to assert the applicability of the provisions of 11 U.S.C.
Section 366 in any bankruptcy proceeding wherein such Party is a debtor. In any such
proceeding, each Party further agrees to waive the right to assert that the other Party is a provider
of last resort."
Confidentiality
X Confidentiality Applicable, subject Section
10.11 as amended.
If not checked, inapplicable.
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CITY OF PALO ALTO RFP # __________
Section 10.11 shall be replaced in its entirety with the following:
“Party A acknowledges that Party B is subject to California Constitution Article 1,
Section 3, and the California Public Records Act, Cal. Gov. Code § 6250 et seq.
(“Public Records Act”) in regard to the documents comprising this Master Agreement
and the Transactions, which items may constitute public records subject to inspection
and copying by the public under the authority of the California Constitution and the
Public Records Act. Party B shall, consistent with those laws, use reasonable efforts to
provide Party A with notice of any third party request to inspect and copy any of the
documents that comprise this Master Agreement and the Transactions, which Party A
might deem confidential and exempt from disclosure, in order that Party A may timely
seek to protect those documents from disclosure to the third party. Party A
acknowledges and agrees that Party B shall not be liable to Party A if Party B makes
disclosure in accordance with the California Constitution and/or the Public Records Act
before Party A has timely obtained an order to prevent Party B from making the
requested disclosure to the third party. A Party may disclose any one or more of the
commercial terms of a Transaction (other than the name of the other Party unless
otherwise agreed to in writing by the Parties) to any industry price source for the
purpose of aggregating and reporting such information in the form of a published
energy price index.”
A new Section 10.12 shall be added to Article 10 as follows:
"10.12. No Agency. In performing their respective obligations hereunder, neither Party
is acting, or is authorized to act, as the agent of the other Party.”
A new Section 10.13 shall be added to Article 10 as follows:
10.13 Dispute Resolution. In the event of any controversy or claim, whether based in contract,
tort, or otherwise, arising out of or based upon, or relating to this Agreement or the scope,
breach, termination or validity of each of them (a “Dispute”), the Parties will resolve such
Dispute in the following manner:
10.13.1 Negotiation. The Parties will attempt in good faith to resolve the Dispute promptly by
negotiations between duly authorized representatives of the Parties who have authority to settle
the Dispute. When a Party believes there is a Dispute, that Party will give the other Party written
notice describing the Dispute with reasonable particularity. Within thirty (30) Days after receipt
of such notice, the receiving Party will submit a written response to the other Party.
10.13.2 Mediation. If the Dispute is not resolved within forty-five (45) Days of the date of the
response given pursuant to Section 10.13.1, or such additional time, if any, that the Parties
mutually agree to in writing, the Parties shall try in good faith to settle the Dispute by mediation.
The form of mediation and the mediator(s) selected to resolve the Dispute shall be acceptable to
both Parties.
10.13.3 Additional Rights. If the Dispute is not resolved through mediation within ninety (90)
Days after the first meeting of the Parties and mediator(s), or such additional time, if
any, that the Parties mutually agree to in writing, either Party shall be free to pursue any
and all legal actions and remedies as it may deem necessary.
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A new Section 10.14 shall be added to Article 10 as follows:
10.14: “The Parties acknowledge and agree that any purchase of power made pursuant to Party
B’s Request for Proposals and under this Agreement and any Transaction shall be executed and
delivered in compliance with applicable laws and regulations in effect at the time this
Agreement is signed by the Parties and at the time of entering into any particular Transaction,
including, but not limited to, Senate Bill 1368 (California Public Utilities Code section 8340 et
seq.) and related regulations (Title 20, Sections 2900 – 2930 of the California Code of
Regulations), as amended, to the extent such laws and regulations, including SB 1368 and related
regulations, apply or are deemed to apply to this Agreement and any Transaction. To the extent
SB 1368 and related regulations require Party B as a local publicly owned electric utility to
submit a compliance filing in accordance with such laws, Party A, upon the request of Party B,
shall in good faith provide promptly to Party B (to the extent Party B lacks such information) the
information to the extent Party A has knowledge of or access to such information, and shall work
cooperatively with and provide commercially reasonable assistance to Party B in Party B’s
compliance with such laws. A failure by Party A to provide such information which is within
its possession or knowledge shall constitute a default under this Agreement.”
A new Section 10.15 shall be added to Article 10 as follows:
10.15: “The Parties intend that the standard of review for changes to any rate, charge,
classification, term or condition of this Agreement at FERC shall be the “Mobile-Sierra public
interest” standard of review, as stated by the United States Supreme Court in Morgan Stanley
Capital Group Inc. v. Public Utility District No. 1 of Snohomish County, Nos. 06-1457, 128 S.Ct.
2733 (2008), and consistent with the order of the Supreme Court in NRG Power Marketing, LLC,
et al., v. Maine Public Utilities Commission et al., No. 08-674, 130 S.Ct. 693 (2010) (“NRG
Order”). As to all other persons, the Parties intend and agree that the same standard, applies, to
the maximum degree permitted under the NRG Order.”
A new Section 10.16 is added as follows:
"The Parties understand and agree that the Transactions under this Agreement are physical
transactions for deferred delivery, and that the Parties contemplate making or taking physical
delivery of electric energy. Party B is a commercial entity engaged in the business of delivering
electric energy to its retail load and routinely makes or takes delivery of electric energy in order
to provide service to its retail electric customers."
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CITY OF PALO ALTO RFP # __________
The following Section shall be added as a new Section 10.17:
Index Transactions. If the Contract Price for a Transaction is determined by reference to a
Price Source, then:
(a) Market Disruption. If a Market Disruption Event occurs on any one or more days
during a Determination Period (each day, a “Disrupted Day”), then:
The fallback Floating Price, if any, specified by the Parties in the
relevant Confirmation shall be the Floating Price for each
Disrupted Day.
If the Parties have not specified a fallback Floating Price, then the
Parties will endeavor, in good faith and using commercially reasonable
efforts, to agree on a substitute Floating Price, taking into consideration,
without limitation, guidance, protocols or other recommendations or
conventions issued or employed by trade organizations or industry
groups in response to the Market Disruption Event and other prices
published by the Price Source or alternative price sources with respect
to the Delivery Point or comparable Delivery Points that may permit the
Parties to derive the Floating Price based on historical differentials.
If the Price Source retrospectively issues a Floating Price in respect of a
Disrupted Day (a “Delayed Floating Price”) before the Parties agree on
a substitute Floating Price for such day, then the Delayed Floating Price
shall be the Floating Price for such Disrupted Day. If a Delayed Price is
issued by the Price Source in respect of a Disrupted Day after the Parties
agree on a substitute Floating Price for such day, the substitute Floating
Price agreed upon by the Parties will remain the Floating Price without
adjustment unless the Parties expressly agree otherwise.
If the Parties cannot agree on a substitute Floating Price and the Price
Source does not retrospectively publish or announce a Floating Price, in
each case, on or before the fifth Business Day following the first Trading
Day on which the Market Disruption Event first occurred or existed,
then the Floating Price for each Disrupted Day shall be determined by
taking the arithmetic mean of quotations requested from four leading
dealers in the relevant market that are unaffiliated with either Party
and mutually agreed upon by the Parties (“Specified Dealers”),
without regard to the quotations with the highest and lowest values,
subject to the following qualifications:
o If exactly three quotations are obtained, the Floating Price for
each such Disrupted Day will be the quotation that remains
after disregarding the quotations having the highest and lowest
values.
o If fewer than three quotations are obtained, the Floating Price for
each such Disrupted Day will be the average of the quotations
obtained.
o If the Parties cannot agree upon four Specified Dealers, then each of the Parties will,
acting in good faith and in a commercially reasonable manner, select up to two
Specified Dealers separately, and those selected dealers shall be the Specified
Dealers.
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CITY OF PALO ALTO RFP # __________
Unless otherwise agreed, if at any time the Parties agree on a substitute
Floating Price for any Disrupted Day, then such substitute Floating Price
shall be the Floating Price for such Disrupted Day, notwithstanding the
subsequent publication or announcement of a Delayed Floating Price by
the relevant Price Source or any quotations obtained from Specified
Dealers.
"Determination Period" means each calendar month a part or all of which is within
the Delivery Period of a Transaction.
"Exchange" means, in respect of a Transaction, the exchange or principal trading
market specified as applicable to the relevant Transaction.
"Floating Price" means a Contract Price specified in a Transaction that is based
upon a Price Source.
"Market Disruption Event" means, with respect to any Price Source, any of the
following events:
(a) the failure of the Price Source to announce, publish or make available the
specified Floating Price or information necessary for determining the
Floating Price for a particular day;
(b) the failure of trading to commence on a particular day or the permanent
discontinuation or material suspension of trading in the relevant options
contract or commodity on the Exchange, RTO or in the market specified for
determining a Floating Price;
(c) the temporary or permanent discontinuance or unavailability of the Price
Source;
(d) the temporary or permanent closing of any Exchange or RTO specified
for determining a Floating Price; or
(e) a material change in the formula for or the method of determining the
Floating Price by the Price Source or a material change in the composition
of the Product.
"Price Source" means, in respect of a Transaction, a publication or such other origin of
reference, including an Exchange or RTO, containing or reporting or making
generally available to market participants (including by electronic means) a price,
or prices or information from which a price is determined, as specified in the
relevant Transaction.
“RTO” means any regional transmission operator or independent system operator.
“RTO Transaction” means a Transaction in which the Price Source is an RTO.
"Trading Day" means a day in respect of which the relevant Price Source ordinarily
would announce, publish or make available the Floating Price.
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CITY OF PALO ALTO RFP # __________
(b) Corrections to Published Prices. If the Floating Price published, announced or
made available on a given day and used or to be used to determine a relevant price is
subsequently corrected by the relevant Price Source (i) within 30 days of the
original publication, announcement or availability, or (ii) in the case of RTO
Transactions only, within such longer time period as is consistent with the RTO’s
procedures and guidelines, then either Party may notify the other Party of that
correction and the amount (if any) that is payable as a result of that correction. If,
not later than thirty (30) days after publication or announcement of that correction, a
Party gives notice that an amount is so payable, the Party that originally either
received or retained such amount will, not later than three (3) Business Days after
such notice is effective, pay, subject to any applicable conditions precedent, to the
other Party that amount, together with interest at the Interest Rate for the period
from and including the day on which payment originally was (or was not) made to
but excluding the day of payment of the refund or payment resulting from that
correction. Notwithstanding the foregoing, corrections shall not be made to any
Floating Prices agreed upon by the Parties or determined based on quotations from
Specified Dealers pursuant to paragraph (a) above unless the Parties expressly agree
otherwise.
(c) Rounding. When calculating a Floating Price, all numbers shall be rounded to
four (4) decimal places. If the fifth (5th) decimal number is five (5) or greater, then
the fourth (4th) decimal number shall be increased by one (1), and if the fifth (5th)
decimal number is less than five (5), then the fourth (4th) decimal number shall
remain unchanged.
The following Section shall be added as a new Section 10.18.
“Imaged Agreement. Any original executed Agreement, Confirmation or other
related document may be photocopied and stored on computer tapes and disks
(the “Imaged Agreement”). The Imaged Agreement, if introduced as evidence
on paper, the Confirmation, if introduced as evidence in automated facsimile
form, the Recording, if introduced as evidence in its original form and as
transcribed onto paper, and all computer records of the foregoing, if introduced
as evidence in printed format, in any judicial, arbitration, mediation or
administrative proceedings, will be admissible as between the Parties to the
same extent and under the same conditions as other business records originated
and maintained in documentary form. Neither Party shall object to the
admissibility of the Recording, the Confirmation or the Imaged Agreement (or
photocopies of the transcription of the Recording, the Confirmation or the
Imaged Agreement) on the basis that such were not originated or maintained in
documentary form under either the hearsay rule, the best evidence rule or other
rule of evidence.”
Schedule M ___ Party A is a Governmental Entity or Public Power System
X Party B is a Governmental Entity, Schedule M Applicable
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CITY OF PALO ALTO RFP # __________
Part A Part A of Schedule M is amended by including the following definition for the term “Act”:
“Act” means the Constitution of the State of California, the California statute(s), charter
and municipal ordinances under which Party B was created, organized and authorized to
enter into this Master Agreement and each Transaction thereunder
Part A is further amended by adding the following sentence at the end of the definition of the
term “Special Fund”:
“Party A has conducted such investigation as it deems necessary of the City of Palo
Alto Enterprise Fund and the Act under which such Fund was established to determine,
for its purposes under this Agreement, that such Fund meets this definition of Special
Fund.”
Part C Part C of Schedule M is amended by adding the phrase in line 7 “and to the extent applicable,”
immediately following the word “limitation” in clause (i).
Part D Section 3.4 is modified by inserting a period after “Master Agreement” in line 7 and deleting the
rest of the sentence.
Part E X Section 3.6 under Part E of Schedule M applies; however, the portion of that provision
following the semicolon on the eighth line thereof is replaced in its entirety with the
following:
“any breach of clause (ii) of this provision shall be deemed to have arisen
during a fiscal period of Governmental Entity or Public Power System for
which such budgetary approval or certification of its obligations under this
Master Agreement is required to be in effect and an Event of Default shall be
deemed to have occurred for purposes of Section 5.1 under which
Governmental Entity or Public Power System shall be treated as the Defaulting
Party.”
Part F ___ Add Section 8.4. If not checked, inapplicable.
Part G Part G does not apply.
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CITY OF PALO ALTO RFP # __________
Schedule P SCHEDULE P
PRODUCTS AND RELATED DEFINITIONS
The following defined terms are added to Schedule P:
“CAISO” means the California Independent System Operator Corporation, or its
successor.
“CAISO Tariff” means the Federal Energy Regulatory Commission-approved tariff of
CAISO, including all CAISO protocols, as the same may be amended from time to time.
“CAISO Energy” means a Transaction in which the Seller shall sell and the Buyer shall
purchase a quantity of Energy equal to the hourly quantity without Ancillary Services (as defined
in the CAISO Tariff) that is or will be scheduled as a schedule coordinator to schedule
coordinator transaction pursuant to the CAISO Tariff as amended from time to time for which the
only excuse for failure to deliver or receive is an “Uncontrollable Force” (as defined in the
CAISO Tariff) called by the CAISO in accordance with the CAISO Tariff.
“HLH (Heavy Load Hour)” is defined as energy delivered from hours ending (HE)
0700- 2200 Monday-Saturday, excluding NERC holidays, PPT.
“IST” means Inter-Scheduling Coordinator Trade shall mean a trade between
Scheduling Coordinators of Energy or Ancillary Services in accordance with the CAISO Tariff.
“LLH (Light Load Hour)” is defined as energy delivered from hours ending (HE) 0100-
0600 and 2300-2400 Monday-Saturday, all day Sunday and NERC holidays, PPT.
“NP15 Zone Delivery Point” means the NP15 Zone; provided, however, if CAISO
implements trading hubs under a locational marginal pricing design during the Delivery Period,
the Delivery Point shall be the Existing Zone Generation NP15 Trading Hub (“NP15 EZ Gen
Hub”), as such trading hub is contemplated by the CAISO in its filing made to the FERC dated
March 15, 2005 (“Comprehensive Design Proposal for Inter-Scheduling Coordinator Trades
Under the California Independent System Operator Corporation’s Market Redesign and
Technology Upgrade, Docket No. ER02-1656-025”); provided further, if the NP15 EZ Gen Hub
(under any name) is not established as part of a market redesign that is implemented during the
Delivery Period, the Parties agree to promptly work together in good faith to designate an
alternate Delivery Point to reasonably approximate the characteristics of the NP-15 Zone.
"West Firm", or “WSPP Schedule C” or “Schedule C” or “WSPPC-Firm” or any
similar description means with respect to a Transaction, a Product that is or will be scheduled as
firm energy consistent with the most recent rules adopted by the WECC for which the only
excuses for failure to deliver or receive are if an interruption is (i) due to an Uncontrollable Force
as provided in Section 10 of the WSPP Agreement; or (ii) where applicable, to meet Seller's
public utility or statutory obligations to its customers. Notwithstanding any other provision in this
Agreement, if Seller exercises its right to interrupt to meet its public utility or statutory
obligations, Seller shall be responsible for payment of damages for failure to deliver firm energy
as provided in Article 4 of this Agreement.
"WECC" means the Western Electricity Coordinating Council.
"WSPP Agreement" means the Western Systems Power Pool Agreement as amended
from time to time.
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CITY OF PALO ALTO RFP # __________
EXHIBIT A
MASTER POWER PURCHASE AND SALE AGREEMENT CONFIRMATION LETTER
EXHIBIT B
RESOURCE ADEQUACY (“RA”) CAPACITY
The Parties acknowledge and agree that after the execution of this Master Agreement, they may
enter into one or more contracts or confirmations concerning Resource Adequacy, which
products, terms, conditions and definitions shall be documented in an Resource Adequacy Form
of Confirmation (“RA Confirm”) or substantially similar form executed as of the Confirmation
Effective Date containing terms and conditions substantially similar to those set forth in the RA
Confirm attached at Exhibit B.
EXHIBIT C
RENEWABLE ENERGY CERTIFICATE (“REC”)
On or after the Effective Date, Party B may secure the appropriate authorization and approval to
buy and/or sell RECs (bundled and unbundled); provided, however, that the purchase and/or sale
of such RECs shall be subject to the approval of Party B’s City Manager. The form of any REC
purchase and/or sale transaction shall be mutually agreed to by the Parties.
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CITY OF PALO ALTO RFP # __________
IN WITNESS WHEREOF, the Parties have caused this Master Agreement to be duly executed as of the date first above
written.
Party B: City of Palo Alto
Approval as to Form:
By: ……………………………..
Name: Grant Kolling
Title: Sr. Asst. City Attorney
Date: _________, 2013
Party A: Exelon Generation Company, LLC
By: ……………………………..
Name: ……………………………..
Title: ……………………………..
Date: ________, 2013
Party B: City of Palo Alto
Approval by City Manager:
By: ……………………………..
Name: James Keene
Title: City Manager
Date: ________, 2013
Party B: City of Palo Alto
Approval by Mayor:
By: ……………………………..
Name: James Keene, City Manager, for
Title: Mayor
Date: ________, 2013
Party B: City of Palo Alto
Approval by Administrative Services Director:
By: ……………………………..
Name: Lalo Perez
Title: Administrative Services Director
Date: _________, 2013
Party B: City of Palo Alto
Approval by Utilities Director:
By: ……………………………..
Name: Valerie Fong
Title: Utilities Director
Date: _______, 2013
DISCLAIMER: This Master Power Purchase and Sale Agreement was prepared by a committee of
representatives of Edison Electric Institute (“EEI”) and National Energy Marketers Association (“NEM”)
member companies to facilitate orderly trading in and development of wholesale power markets. Neither EEI
nor NEM nor any member company nor any of their agents, representatives or attorneys shall be responsible for
its use, or any damages resulting therefrom. By providing this Agreement EEI and NEM do not offer legal advice
and all users are urged to consult their own legal counsel to ensure that their commercial objectives will be
achieved and their legal interests are adequately protected.
THIS PAGE WAS INTENTIONALLY LEFT BLANKED.
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CITY OF PALO ALTO RFP # __________
MASTER POWER PURCHASE AND SALE AGREEMENT
(EEI Version 2.1, modified 4/25/00)
COVER SHEET
This Master Power Purchase and Sale Agreement (“Master Agreement”) is made as of the following date: _____ __,
2013 (“Effective Date”). The Master Agreement, together with the exhibits, schedules, annexes and any written
supplements hereto, the Party A Tariff, if any, the Party B Tariff, if any, any designated collateral, credit support or
margin agreement or similar arrangement between the Parties and all Transactions (including any confirmations accepted
in accordance with Section 2.3 hereto) shall be referred to as the “Agreement.” The Parties to this Master Agreement are
the following:
Name: Iberdrola Renewables, LLC (“Counterparty ” or
“Party A”)
Name: City of Palo Alto (“Counterparty” or “Party B”)
All Notices:
Attn: Contract Administration
1125 NW Couch, Suite 700
Portland, OR 97209
Phone: 503-796-7034
Facsimile: 503-478-6394
Duns: 94-737-6422
Federal Tax ID Number: 93-1177933
All Notices:
Attn: Assistant Director, Resource Management
Department of Utilities
City of Palo Alto
250 Hamilton Avenue, 3rd Floor
Palo Alto, CA 94301
Phone: 650-329-2214
Facsimile: 650-326-1507
Duns: 17-892-8479
Federal Tax ID Number: 94-6000389
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: IR Office of General Counsel
Phone: 503-796-7127 and 925-943-3103
Facsimile: 503-796-6904 and 925-943-3105
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Senior Assistant City, Attorney/Utilities
City of Palo Alto
Phone: 650-329-2171
Facsimile: 650-329-2646
Invoices:
Attn: Settlements/ Back Office
Phone: 503-796-6917
Facsimile: 503-746-6908
Invoices:
Attn: Power Accounts Administrator
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678-6420
Phone: (916) 781-4224/3636
Facsimile: (916) 781-4225
Day Ahead Pre-Scheduling:
Attn: Pre-Scheduling
Phone: 503-796-7139
Facsimile: 503-796-6903
Day Ahead Pre-Scheduling:
Confirmations:
Attn: Pre-Scheduler Desk
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4211/4230/4232
Facsimile: 916-781-4255
Real Time Scheduling:
Attn: Pre-Scheduling
Phone: 503-796-7139
Facsimile: 503-796-6903
Real Time Scheduling:
Attn: Chief Dispatcher/Scheduler
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4237/3636
Facsimile: 916-781-4226
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CITY OF PALO ALTO RFP # __________
Payments:
Attn: Settlements / Back Office
Phone: 503-796-6917
Facsimile: 503-796-6908
Payments:
Attn: Accounts Payable
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4237/3636
Facsimile: 916-781-4226
Wire Transfer:
BNK: JPMorgan Chase Bank, New York, NY
ABA: 021000021
ACCT: 816536437
Wire Transfer:
Deposit to Northern California Power Agency, “to the
benefit of City of Palo Alto”
BNK U.S. Bank
ABA: 121122676
ACCT: 1-534-0216-2744
Attn: Cyndy Husebye
U.S. Bank
555 SW Oak Street, Suite 400
Portland, OR. 97204
Phone: 877-295-2509
Facsimile: 877-324-1680
Credit and Collections:
Attn: Director, Credit Risk
Phone: 503-241-3214
Facsimile: 503-796-6902
Credit and Collections:
Attn: Power Accounts Analyst
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4221/4224
Facsimile: 916-781-4255
The Parties hereby agree that the General Terms and Conditions are incorporated herein, as selected, modified and
amended by the following specific provisions, as provided for in such General Terms and Conditions:
Party A Tariff: FERC Electric Rate Schedule No. 1, dated September 28, 2010, Docket Number: ER 10-2994
Party B Tariff: N/A
Article One
General Definitions Section 1.4 “Business Day” Delete the first sentence and replace it to read as follows: “Business
Day” means any day except a Saturday, Sunday, the Friday immediately following the
Thanksgiving holiday or a Federal Reserve Bank Holiday.
Section 1.10 is amended by adding after “the price” in line 1 the words “, which shall not be
changed on the basis of any and all AB 32 fees” and substituting “U.S. $” for “$U.S.” in line 1.
Section 1.11 is amended by adding the following after “Party” in the third line: “after using
commercially reasonable efforts to mitigate costs”.
Section 1.12 is amended by deleting in the fourth line the word “issues” and replacing it with the
word “issuer” and adding “or with respect to Party B, Party B’s underlying rating, determined
without reference to third party credit enhancement, on its utility revenue bonds ("Debt") by S&P
or Moody's.
Section 1.24 is amended by adding the following after the word “Costs”: “calculated in a
commercially reasonable manner based on the prime rate of interest as published from time to
time under The Wall Street Journal for such period and such calculation will be equal to the net
present value of the economic gain to it.”
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CITY OF PALO ALTO RFP # __________
Section 1.27 is amended by inserting the phrase “and in an amount” in the third line after the word
“form” and before the word “acceptable”.
Section 1.28 is amended by adding the following after the word “Costs”: “calculated in a
commercially reasonable manner based on the prime rate of interest as published from time to
time under The Wall Street Journal for such period and such calculation will be equal to the net
present value of the economic loss to it.”
Section 1.45 is modified by deleting and replacing in its entirety, so the provision now reads:
“’Performance Assurance’ means collateral in the form of either cash, Letter(s) of Credit, or other
security, which form is determined by the Party issuing the collateral in its sole discretion and is
reasonably acceptable to the Requesting Party.”
Section 1.46 is amended by adding before the period at the end thereof the following:
“; provided that the failure to comply with any requirement of this Master Agreement or
a Transaction, including the requirements of Article 8, before the expiration of the time
period expressly specified for such compliance in this Master Agreement or the
Transaction, if any, shall not be considered an Event of Default unless and until the
applicable time period has expired without compliance”.
Section 1.50 is amended by deleting the reference to “Section 2.4” and replacing it with “Section
2.5”.
Section 1.51 is amended by (a) inserting the phrase “for delivery” in the second line after the
word “purchases” and before the phrase “at the Delivery Point”, and (b) deleting the phrase “at
Buyer’s option” in the fifth line and inserting in their place the following: “absent a purchase”.
Section 1.53 is amended by (a) deleting the phrase “at the Delivery Point” in the second line, and
(b) deleting the phrase “at Seller’s option” in the fifth line and inserting in their place the
following: “absent a sale and (c) inserting “; provided, however if Seller is unable after using
commercially reasonable efforts to resell all or a portion of the Product not received by Buyer, the
Sales Price with respect to such unsold Product shall be deemed no greater than zero (0)” after
“commercially reasonable manner” in the sixth line.”
Section 1.56 is amended by deleting the words “pursuant to Section 5.2” and by adding before the
period at the end thereof the following: “, as determined in accordance with Section 5.2.”
Article Two
Transaction Term
and Conditions
Section 2.3 is amended by (i) replacing all references to “Seller” with “Party A” and all references
to “Buyer” with “Party B”, (ii) replacing the first sentence with the following: “Party A will
confirm a Transaction by forwarding to Party B by facsimile within three (3) Business Days after
the Transaction is entered into a confirmation (“Confirmation”) substantially in the form of
Exhibit A, provided however, Confirmations applicable to Transactions of less than one week in
duration may be through an electronically recorded oral conversation, a written Confirmation
executed by both Parties, or a Confirmation not executed by both Parties but which is binding
under this Section 2.3.”
X Optional provision in Section 2.4. If not checked, inapplicable.
Section 2.4 is amended by replacing the word “orally” in the seventh line with the phrase “in the
Confirmation” and adding “a” before the word “writing”.
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CITY OF PALO ALTO RFP # __________
A new Section 2.6 is added to Article Two, worded as follows:
“2.6 No Oral Agreements or Modifications. Notwithstanding anything to the contrary in this
Master Agreement, including in this Article Two, this Master Agreement and any and all
Transactions may not be orally amended or modified, including by Recording pursuant to Section
2.5.”
Article Three Section 3.2 is hereby amended by adding the following to the end of the Section: “Product
deliveries shall be scheduled in accordance with the then-current applicable tariffs, protocols,
operating procedures and scheduling practices for the relevant region.”
Article Four
Remedies for Failure
to Deliver or
Receive
___ Accelerated Payment of Damages. If not checked, inapplicable.
A new Section 4.3 is added to Article Four, worded as follows:
“4.3 Suspension of Performance. Notwithstanding and in addition to the remedies provided
pursuant to Sections 4.1, 4.2 and 5.7, if Seller or Buyer fails to schedule, deliver or receive all or
part of the Product pursuant to a Transaction for a period of three (3) or more consecutive days,
and such failure is not excused under the terms of the Product, by Force Majeure, by the other
Party’s failure to perform or by agreement of the Parties, then upon one (1) Business Day’s prior
written notice, and for so long as the non-performing Party fails to perform, the performing Party
shall have the right to suspend its performance under such Transaction. In the event the
performing Party suspends performance pursuant to this Section 4.3, it shall not be obligated to
resume performance until it has received notice from the non-performing Party at least one (1)
Business Day prior to the date upon which the non-performing Party intends to resume its
performance; provided that, if the performing Party has entered into a replacement contract with a
term of 31 days or less, the performing Party may resume performance at the end of the term of
such replacement contract. Remedies available under this provision to the performing Party are in
addition to, not in replacement of, other remedies specified in this Agreement.”
Article Five
Events of Default;
Remedies
X Cross Default provision of Section 5.1(g) shall apply for both Party A and Party B.
Cross Default amount for each shall be $50,000,000.
Section 5.1(g) is amended by inserting in lines 3 and 10 after “such Party”, “or, with respect to
Party A and any Guarantor, as such entity may change from time to time, of such Party”.
Section 5.1(f) is amended by adding the following: “or its Guarantor” immediately after the word
“Party” on the first line and changing “of such Party under this Agreement” to “of such entity
with respect to this Agreement” in line five.
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CITY OF PALO ALTO RFP # __________
Section 5.1 is further amended by replacing the period at the end of subsection (h) with a semi-
colon, and adding new subsections “(i),” “(j)" , “(k)”, and “(l)” , which read as follows:
"(i) during any consecutive ninety (90) day period, there have occurred five (5) or more
“Seller Failures” as that term is used in Section 4.1, under any or all Transactions,
regarding which the Seller shall be deemed to be the Defaulting Party, and Buyer shall
also be entitled to its remedies under Section 4.1;"
"(j) during any consecutive ninety (90) day period, there have occurred five (5) or more
“Buyer Failures” as that term is used in Section 4.2 under any or all Transactions,
regarding which the Buyer shall be deemed to be the Defaulting Party, and Seller shall
also be entitled to its remedies under Section 4.2;”
"(k) a representation or warranty with respect to the Defaulting Party's financial statement or
position that is false or materially misleading; or"
“(l) revocation by the Federal Energy Regulatory Commission of Party A’s authorization to
make sales and market-based rates.”
Section 5.2 is deleted in its entirety and replaced with the following:
“5.2 Effect of Event of Default. If at any time an Event of Default with respect to a Defaulting
Party has occurred and is continuing, the Non-Defaulting Party may do one or more of the
following: (a) withhold any payments due to the Defaulting Party under this Agreement; (b)
suspend performance due to the Defaulting Party under this Agreement; and/or (c) by giving not
more than twenty days’ notice, designate a day not earlier than the day such notice is effective as
an Early Termination Date in respect of all outstanding Transactions (each referred to as a
“Terminated Transaction”). The Non-Defaulting Party shall calculate in a commercially
reasonable manner a Settlement Amount for each such Terminated Transaction as of the Early
Termination Date (or, to the extent that in the reasonable opinion of the Non-Defaulting Party
certain of such Terminated Transactions are commercially impracticable to liquidate and
terminate or may not be liquidated and terminated under applicable law on the Early Termination
Date, then each such Transaction (individually, an “Excluded Transaction”) shall be terminated
as soon thereafter as reasonably practicable, and upon termination shall be deemed to be a
Terminated Transaction and the Termination Payment payable in connection with all such
Transactions shall be calculated in accordance with Section 5.3 below. The Gains and Losses for
each Terminated Transaction shall be determined by calculating the amount that would be
incurred or realized to replace or to provide the economic equivalent of the remaining payments
or deliveries in respect of that Terminated Transaction. The Non-Defaulting Party (or its agent)
may determine its Gains and Losses by reference to information either available to it internally or
supplied by one or more third parties including, without limitation, quotations (either firm or
indicative) of relevant rates, prices, yields, yield curves, volatilities, spreads or other relevant
market data in the relevant markets. Third parties supplying such information may include,
without limitation, dealers in the relevant markets, end-users of the relevant product, information
vendors and other sources of market information. If the Non-Defaulting Party’s aggregate
Gains exceed its aggregate Losses and Costs, if any, resulting from the termination of this
Agreement, the Settlement Amount shall be zero, notwithstanding any provision of this
Agreement to the contrary.”
Section 5.3 is amended by inserting (i) the phrase “plus, at the option of the Non-Defaulting Party,
any cash or other form of security then available to the Defaulting Party pursuant to Article
Eight”, between the words “that are due to the Non-Defaulting Party,”, and “plus any and all other
amounts” in the sixth line thereof and (ii) “No Termination Payment shall be due or payable to the
Defaulting Party for any Terminated Transaction.” after the last sentence.
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CITY OF PALO ALTO RFP # __________
Section 5.6 Closeout Setoff
___ Option A (Applicable if no other selection is made.)
X Option B - Affiliates shall have the meaning set forth in the Master Agreement unless
otherwise specified as follows: Affiliates, as it applies to Party A, shall be limited to
Party A’s non-regulated Affiliates only. Option B is amended as set forth in Article 10
below.
___ Option C (No Setoff)
Section 5.6 is further amended by inserting before the last sentence in Option B:
“At the election of the Non-Defaulting Party, all obligations owing by or to an Affiliate of a Party
shall be treated as if they were owing by or to the Party itself for purposes of set-off.”
Article Six Section 6.4 is amended (a) by deleting “and owing to each other on the same date”.”
Section 6.8 is amended by deleting the words, “may by agreement of the Parties,” in line 3 and
inserting in their place the word “shall”.
Article Seven The fifteenth and sixteenth lines of Section 7.1 are amended by deleting “UNLESS EXPRESSLY
HEREIN PROVIDED,”.
The following is added to the end of Article Seven:
"7.2. Disclaimer of Warranties. PARTY A AND PARTY B EACH ACKNOWLEDGES THAT
IT HAS ENTERED INTO THIS AGREEMENT AND IS CONTRACTING FOR THE ENERGY
TO BE SUPPLIED BASED SOLELY UPON THE EXPRESS REPRESENTATIONS AND
WARRANTIES HEREIN AND, SUBJECT THERETO, ACCEPTS SUCH ENERGY “AS-IS”
AND “WITH ALL FAULTS”. PARTY A AND PARTY B EACH EXPRESSLY DISCLAIMS
ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR
IMPLIED, RELATING TO SUCH ENERGY, INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO CONFORMITY TO MODELS
OR SAMPLES, MERCHANTABILITY, OR FITNESS FOR ANY PARTICULAR PURPOSE.”
Article Eight Party A Credit Protection
Credit and Collateral
Requirements
Financial Information from Party B, Section 8.1(a)
___ Option A
X Option B Specify: Audited financial statements for City of Palo Alto and for City of
Palo Alto Enterprise Fund
___ Option C
Credit Assurances from Party B, Section 8.1(b)
Not Applicable
X Applicable
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Collateral Threshold for Party B, Section 8.1(c)
Not Applicable
X Applicable
If applicable, complete the following:
Party B Collateral Threshold: means with respect to Party B, at any time the amount specified in
the table below under the relevant heading opposite the lower of the ratings at that time assigned
by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (“S&P”)
or Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation (“Moody’s”) to the
underlying rating, determined without reference to third party credit enhancement, on its utility
revenue bond (“Debt”) of Party B; provided, that (a) if the Debt of Party B is no longer rated by
one of S&P or Moody’s, the Threshold with respect to Party B will be zero dollars and (b) if an
Event of Default or Potential Event of Default with respect to Party B has occurred and is
continuing, the Threshold with respect to such party shall be zero dollars.
S&P Rating Moody’s Rating Threshold
AA+ or above Aa1 or above $45,000,000
A+ or above A1 or above $35,000,000
A- or above A3 or above $25,000,000
BBB+ Baa1 $15,000,000
BBB Baa2 $10,000,000
BBB- Baa3 $ 5,000,000
Below BBB- (or rating Below Baa3 (or rating $ 0 (zero)
suspended or withdrawn suspended or withdrawn
by both S&P and by both S&P and
Moody’s) Moody’s)
Party B Independent Amount: N/A
Party B Rounding Amount: $100,000
Party B Minimum Transfer Amount: $100,000
Downgrade Event, Section 8.1(d):
Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party B only if (i) Party B’s Debt by S&P or Moody's is
respectively below BBB- or Baa3, or (ii) both S&P and Moody's refuse to rate Party B's Debt,
or (iii) Party B’s City Council no longer has the legal authority under the Act, as defined by
Schedule M, to adjust electric rates as necessary to recover Party B’s costs of providing retail
electric service to its customers.
Sections 8.1(d) is amended by inserting “or fails to maintain such Performance Assurance or
guaranty or other credit assurance for so long as the Downgrade Event is continuing” after
“receipt of notice” in the fifth lines.
Guarantor for Party B, Section 8.1(e): N/A
Guarantee Amount: N/A
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8.2 Party B Credit Protection:
Financial Information from Party A, Section 8.2(a):
Option A
X Option B Specify: Audited financial statements to be provided by Party A as described
in Section 8.2(a) shall be for Party A or parent entity, if any, providing credit support.
Option C
Section 8.2(a), Option B is deleted in its entirety and replaced with the following:
“Option B: If requested by Party B, Party A shall deliver (i) a copy of the annual report
containing audited consolidated financial statements for such fiscal year for the Party specified on
the Cover Sheet and (ii) either a copy of the quarterly report containing unaudited consolidated
financial statements for such fiscal quarter, if available, or (b) a copy of the semi-annual report
containing unaudited consolidated financial statements for the first six months of the fiscal year
for the Party specified on the Cover Sheet. In all cases the statements shall be for the most recent
accounting period and shall be prepared in accordance with generally accepted accounting
principles and delivered pursuant to the times set forth for reporting by publicly traded companies
pursuant to the rules of such Party’s native national securities regulator (or if the Party is not a
publicly traded company, within 120 days of the fiscal year end in the case of (i) above, and
within 90 days of the applicable period of the fiscal year in the case of (ii) above); provided,
however, that should any such statements not be available on a timely basis due to a delay in
preparation or certification, such delay shall not be an Event of Default so long as the relevant
entity diligently pursues the preparation, certification and delivery of the statements. Delivery of
financial statements may be satisfied through public filing with the relevant national securities
regulator or by publication on the Party’s corporate website. In any event the only financial
statements that shall be issued by Party A shall be those of Iberdrola Renewables Holdings Inc.,
as such entity may change from time to time.”
Credit Assurances from Party A, Section 8.2(b):
Not Applicable
X Applicable
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Collateral Threshold for Party A, Section 8.2(c ):
Not Applicable
X Applicable
If applicable, complete the following:
Party A Collateral Threshold: means with respect to Party A, the lower of (i) the amount
specified in the table below under the relevant heading opposite the lower of the Credit Ratings at
that time assigned by Standard & Poor’s Rating Services, a division of The McGraw-Hill
Companies, Inc. (“S&P”) or Moody’s Investors Service, Inc., a subsidiary of Moody’s
Corporation (“Moody’s”) of Party A or Party A’s Guarantor; provided, that if Party A or Party
A’s Guarantor is no longer rated by one of S&P or Moody’s, the Threshold with respect to Party
A will be zero dollars, (ii) the amount of any dollar limit contained in a guaranty provided by
Party A’s Guarantor, if applicable, or (iii) zero, if an Event of Default or Potential Event of
Default with respect to Party A has occurred and is continuing.
S&P Rating Moody’s Rating Threshold
AA+ or above Aa1 or above $45,000,000
A+ or above A1 or above $35,000,000
A- or above A3 or above $25,000,000
BBB+ Baa1 $15,000,000
BBB Baa2 $10,000,000
BBB- Baa3 $ 5,000,000
Below BBB- (or rating Below Baa3 (or rating $ 0 (zero)
suspended or withdrawn suspended or withdrawn
by both S&P and by both S&P and
Moody’s) Moody’s)
Party A Independent Amount:
Party A Rounding Amount: $100,000
Party A Minimum Transfer Amount: $100,000
Downgrade Event, Section 8.2(d):
Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party A only if the Credit Rating of Party A or Party
A’s Guarantor falls below BBB- from S&P or Baa3 from Moody's or if Party A or Party
A’s Guarantor ceases to be rated by either S&P or Moody's.
Sections 8.2(d) is amended by inserting “or fails to maintain such Performance Assurance or
guaranty or other credit assurance for so long as the Downgrade Event is continuing” after
“receipt of notice” in the fifth lines.
Guarantor for Party A, Section 8.2(e):
X Guarantor for Party A: Iberdrola Renewables Holdings Inc.
Guarantee Amount: $2,000,000
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Article Ten
Section 10.1 is amended by replacing “upon (thirty) 30 days’ prior written notice” in lines 2 and
3, with “, which termination shall be effective immediately upon receipt of written notice
thereof”.
Section 10.2(viii) is amended by adding to the end: “; information and explanations of the terms
and conditions of each such Transaction shall not be considered investment or trading advice or a
recommendation to enter into that Transaction; no communication (written or oral) received from
the other Party shall be deemed to be an assurance or guarantee as to the expected results of that
Transaction; and the other Party is not acting as a fiduciary for or an adviser to it in respect of that
Transaction;”.
Section 10.2 (ix) is amended by adding after the words, “it is”, the following, “or it shall be
deemed for all purposes to be”.
Section 10.4 shall be amended by inserting the phrase "To the extent permitted by applicable
law," at the beginning of each of the first two sentences, and substituting the word, “each” for
“Each” after the insertion of each such phrase.
Section 10.5 shall be amended by deleting clause (ii) and the portion of clause (iii) prior to the
words “provided, however”, and replacing them with the following: “(ii) transfer or assign this
Agreement to an Affiliate of such Party so long as (x) such Affiliate’s creditworthiness is equal to
or higher than that of such Party or the Guarantor as of the Effective Date and the date of entering
into each Transaction under this Agreement, if any, for such Party, or (y) the obligations of such
Affiliate are guaranteed by such Party or its Guarantor, if any, in accordance with a guaranty
agreement in form and substance satisfactory to the other Party, and (iii) transfer or assign this
Agreement to any person or entity succeeding to all or substantially all of the assets of such Party
whose creditworthiness is equal to or higher than that of such Party or its Guarantor, if any, as of
the Effective Date and the effective date of any such transfer or assignment.
Section 10.6 is amended by deleting the words “New York” from the fourth line thereof and
replacing it with the word “California.”
Further, Section 10.6 is amended by deleting the last sentence thereof and replacing it with the
following sentence:
“With respect to any proceeding in connection with any claim, counterclaim, demand, cause of
action, dispute and controversy arising out of or relating to this Agreement, the Parties hereby
consent to the exclusive jurisdiction of the federal courts sitting in the Northern District of the
State of California; provided, however, that if the federal courts sitting in the Northern District of
the State of California refuse jurisdiction, the Parties agree to the exclusive jurisdiction of the
state courts sitting in the County of Santa Clara, State of California.”
Section 10.8 shall be amended by deleting its penultimate sentence in its entirety and replacing it
with the following sentences: “The indemnity provisions of this Agreement shall survive the
termination of this Agreement for the period of the applicable statute of limitations. The audit
provisions of this Agreement shall survive the termination of this Agreement for a period of
twelve (12) months.”
Section 10.10 shall be amended to include the at the end of the first sentence:
“as amended by the Bankruptcy Code Amendments of 2005; that all Transactions hereunder
constitute “forward contracts”, and that each believes that it is a “forward contract merchant”
under statutory and decisional law in effect as of the Effective Date”
Confidentiality X Confidentiality Applicable, subject Section If not checked, inapplicable.
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10.11 as amended.
Section 10.11 shall be replaced in its entirety with the following:
“Party A acknowledges that Party B is subject to California Constitution Article 1, Section 3, and
the California Public Records Act, Cal. Gov. Code § 6250 et seq. (“Public Records Act”) in
regard to the documents comprising this Master Agreement and the Transactions, which items
may constitute public records subject to inspection and copying by the public under the authority
of the California Constitution and the Public Records Act. Party B shall, consistent with those
laws, use reasonable efforts to provide Party A with notice of any third party request to inspect
and copy any of the documents that comprise this Master Agreement and the Transactions, which
Party A might deem confidential and exempt from disclosure, in order that Party A may timely
seek to protect those documents from disclosure to the third party. Party A acknowledges and
agrees that Party B shall not be liable to Party A if Party B makes disclosure in accordance with
the California Constitution and/or the Public Records Act before Party A has timely obtained an
order to prevent Party B from making the requested disclosure to the third party.”
A new Section 10.12 shall be added to Article 10 as follows:
"10.12. No Agency. In performing their respective obligations hereunder, neither Party is acting,
or is authorized to act, as the agent of the other Party.”
A new Section 10.13 shall be added to Article 10 as follows:
“10.13 Dispute Resolution. In the event of any controversy or claim, whether based in contract,
tort, or otherwise, arising out of or based upon, or relating to this Agreement or the scope, breach,
termination or validity of each of them (a “Dispute”), the Parties will resolve such Dispute in the
following manner:
10.13.1 Negotiation. The Parties will attempt in good faith to resolve the Dispute promptly by
negotiations between duly authorized representatives of the Parties who have authority to settle
the Dispute. When a Party believes there is a Dispute, that Party will give the other Party written
notice describing the Dispute with reasonable particularity. Within thirty (30) Days after receipt
of such notice, the receiving Party will submit a written response to the other Party.
10.13.2 Mediation. If the Dispute is not resolved within forty-five (45) Days of the date of the
response given pursuant to Section 10.13.1, or such additional time, if any, that the Parties
mutually agree to in writing, the Parties shall try in good faith to settle the Dispute by mediation.
The form of mediation and the mediator(s) selected to resolve the Dispute shall be acceptable to
both Parties.
10.13.3 Additional Rights. If the Dispute is not resolved through mediation within ninety (90)
Days after the first meeting of the Parties and mediator(s), or such additional time, if any, that the
Parties mutually agree to in writing, either Party shall be free to pursue any and all legal actions
and remedies as it may deem necessary.”
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A new Section 10.14 shall be added to Article 10 as follows:
“10.14 The Parties acknowledge and agree that any purchase of power made pursuant to Party
B’s Request for Proposals and under this Agreement and any Transaction shall be executed and
delivered in compliance with applicable laws and regulations in effect at the time this Agreement
is signed by the Parties and at the time of entering into any particular Transaction, including, but
not limited to, Senate Bill 1368 (California Public Utilities Code section 8340 et seq.) and related
regulations (Title 20, Sections 2900 – 2930 of the California Code of Regulations), as amended,
to the extent such laws and regulations, including SB 1368 and related regulations, apply or are
deemed to apply to this Agreement and any Transaction. To the extent SB 1368 and related
regulations require Party B as a local publicly owned electric utility to submit a compliance filing
in accordance with such laws, Party A, upon the request of Party B, shall in good faith provide
promptly to Party B (to the extent Party B lacks such information) the information to the extent
Party A has knowledge of or access to such information, and shall work cooperatively with and
provide commercially reasonable assistance to Party B in Party B’s compliance with such laws.
A failure by Party A to provide such information which is within its possession or knowledge
shall constitute a default under this Agreement.”
A new Section 10.15 shall be added to Article 10 as follows:
“10.15 Index Transactions. If the Contract Price for a Transaction is determined by reference to a
Price Source, then:
(a) Market Disruption. If a Market Disruption Event occurs on any one or more days during
a Determination Period (each day, a “Disrupted Day”), then: (i) the fallback Floating Price, if any,
specified by the Parties in the relevant Confirmation shall be the Floating Price for each Disrupted
Day; (ii) if the Parties have not specified a fallback Floating Price, then the Parties will endeavor,
in good faith and using commercially reasonable efforts, to agree on a substitute Floating Price,
taking into consideration, without limitation, guidance, protocols or other recommendations or
conventions issued or employed by trade organizations or industry groups in response to the
Market Disruption Event and other prices published by the Price Source or alternative price
sources with respect to the Delivery Point or comparable Delivery Points that may permit the
Parties to derive the Floating Price based on historical differentials; (iii) if the Parties cannot agree
on a substitute Floating Price on or before the fifth Business Day following the first Trading Day
on which the Market Disruption Event first occurred or existed, then the Floating Price for each
Disrupted Day shall be determined by taking the arithmetic mean of quotations requested from
four leading dealers in the relevant market that are unaffiliated with either Party and mutually
agreed upon by the Parties (“Specified Dealers”), without regard to the quotations with the highest
and lowest values, subject to the following qualifications: (a) if exactly three quotations are
obtained, the Floating Price for each such Disrupted Day will be the quotation that remains after
disregarding the quotations having the highest and lowest values; (b) if fewer than three
quotations are obtained, the Floating Price for each such Disrupted Day will be the average of the
quotations obtained; (c) if the Parties cannot agree upon four Specified Dealers, then each of the
Parties will, acting in good faith and in a commercially reasonable manner, select up to two
Specified Dealers separately, and those selected dealers shall be the Specified Dealers. Unless
otherwise agreed, if at any time the Parties agree on a substitute Floating Price for any Disrupted
Day, then such substitute Floating Price shall be the Floating Price for such Disrupted Day,
notwithstanding the subsequent publication or announcement of a Delayed Floating Price by the
relevant Price Source or any quotations obtained from Specified Dealers.
For purposes herein, the following definitions shall apply:
“Determination Period” means each calendar month a part or all of which is within the Delivery
Period of a Transaction.
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“Exchange” means, in respect of a Transaction, the exchange or principal trading market specified
as applicable to the relevant Transaction.
“Floating Price” means a Contract Price specified in a Transaction that is based upon a Price
Source.
“Market Disruption Event” means, with respect to any Price Source, any of the following events:
(i) the failure of the Price Source to announce, publish or make available the specified Floating
Price or information necessary for determining the Floating Price for a particular day; (ii) the
failure of trading to commence on a particular day or the permanent discontinuation or material
suspension of trading in the relevant options contract or commodity on the Exchange, RTO or in
the market specified for determining a Floating Price; (iii) the temporary or permanent
discontinuance or unavailability of the Price Source; (iv) the temporary or permanent closing of
any Exchange or RTO specified for determining a Floating Price; or (v) a material change in the
formula for or the method of determining the Floating Price by the Price Source or a material
change in the composition of the Product.
“Price Source” means, in respect of a Transaction, a publication or such other origin of reference,
including an Exchange or RTO, containing or reporting or making generally available to market
participants (including by electronic means) a price, or prices or information from which a price is
determined, as specified in the relevant Transaction.
“RTO” means any regional transmission operator or independent system operator.
“RTO Transaction” means a Transaction in which the Price Source is an RTO.
“Trading Day” means a day in respect of which the relevant Price Source ordinarily would
announce, publish or make available the Floating Price.
(b) Corrections to Published Prices. If the Floating Price published, announced or made
available on a given day and used or to be used to determine a relevant price is subsequently
corrected by the relevant Price Source (i) within 120 days of the original publication,
announcement or availability, or (ii) in the case of RTO Transactions only, within such longer
time period as is consistent with the RTO’s procedures and guidelines, then either Party may
notify the other Party of that correction and the amount (if any) that is payable as a result of that
correction. If, not later than thirty (30) days after publication or announcement of that correction,
a Party gives notice that an amount is so payable, the Party that originally either received or
retained such amount will, not later than three (3) Business Days after such notice is effective,
pay, subject to any applicable conditions precedent, to the other Party that amount, together with
interest at the Interest Rate for the period from and including the day on which payment originally
was (or was not) made to but excluding the day of payment of the refund or payment resulting
from that correction. Notwithstanding the foregoing, corrections shall not be made to any
Floating Prices agreed upon by the Parties or determined based on quotations from Specified
Dealers pursuant to paragraph (a) above unless the Parties expressly agree otherwise.
(c) Rounding. When calculating a Floating Price, all numbers shall be rounded to the four (4)
decimal places. If the fifth (5th) decimal number is five (5) or greater, then the fourth (4th) decimal
number shall be increased by one (1), and if the fifth (5th) decimal number is less than five (5),
then the fourth (4th) decimal number shall remain unchanged.”
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A new Section 10.16 shall be added to Article 10 as follows:
“10.16 “AB 32 fees” means the regulatory assessments, charges, fees imposts and/or taxes
imposed upon and required to be paid by suppliers of energy in accordance with the Global
Warming Solutions Act of 2006, Chapter 488, Statutes 2006, including, without limitation, the
Compliance Offset Protocols, which shall not be a basis for changing the Contract Price, defined
in Section 1.10 of the General Terms and Conditions, and that are in effect as of the Effective
Date of this Agreement and/or the date the Parties enter into each Transaction hereunder.”
A new Section 10.17 shall be added to Article 10 as follows:
“10.17 The Parties intend that the standard of review for changes to any rate, charge,
classification, term or condition of this Agreement at FERC shall be the most stringent standard
permissible under applicable law. As to the Parties, it is understood and agreed that the standard
is the “public interest” application of the “just and reasonable” standard of review, as stated by the
United States Supreme Court in Morgan Stanley Capital Group Inc. v. Public Utility District No.
1 of Snohomish County, Nos. 06-1457, 128 S.Ct. 2733 (2008), and consistent with the order of the
Supreme Court in NRG Power Marketing, LLC, et al., v. Maine Public Utilities Commission et
al., No. 08-674, 130 S.Ct. 693 (2010) (“NRG Order”). As to all other persons, the Parties intend
and agree that the same standard, to the maximum degree as may be made applicable to other
than the Parties, apply, to the maximum degree permitted under the NRG Order.”
A new Section 10.18 is added as follows:
"10.18 The Parties understand and agree that the Transactions under this Agreement are physical
transactions for deferred delivery, and that the Parties contemplate making or taking physical
delivery of electric energy products; provided, however, that nothing in this Agreement, including
this Section 10.18, prohibits the Parties from engaging in Transactions that are or may be
determined to be commodity options or swaps if they so desire. Party B is a commercial entity
engaged in the business of delivering electricity to retail customers and buying electricity products
with the intention of routinely taking delivery in order to provide service to its retail electric
customers."
Schedule M ___ Party A is a Governmental Entity or Public Power System
X Party B is a Governmental Entity, Schedule M Applicable
Part A Part A of Schedule M is amended by including the following definition for the term “Act”:
“Act” means the Constitution of the State of California, the California statute(s), charter and
municipal ordinances under which Party B was created, organized and authorized to enter into this
Master Agreement and each Transaction thereunder
Part A is further amended by adding the following sentence at the end of the definition of the term
“Special Fund”:
“Party A has conducted such investigation as it deems necessary of the City of Palo Alto
Enterprise Fund and the Act under which such Fund was established to determine, for its purposes
under this Agreement, that such Fund meets this definition of Special Fund.”
Part C Part C of Schedule M is amended by adding the phrase in line 7 “and to the extent applicable,”
immediately following the word “limitation” in clause (i).
Part D Section 3.4 is modified by inserting a period after “Master Agreement” in line 7 and deleting the
rest of the sentence.
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Part E X Section 3.6 under Part E of Schedule M applies; however, the portion of that provision
following the semicolon on the eighth line thereof is replaced in its entirety with the
following:
“any breach of clause (ii) of this provision shall be deemed to have arisen during a fiscal
period of Governmental Entity or Public Power System for which such budgetary
approval or certification of its obligations under this Master Agreement is required to be
in effect and an Event of Default shall be deemed to have occurred for purposes of
Section 5.1 under which Governmental Entity or Public Power System shall be treated as
the Defaulting Party.”
Part F Add Section 8.4. If not checked, inapplicable.
Part G Part G does not apply.
Schedule P SCHEDULE P
PRODUCTS AND RELATED DEFINITIONS
Schedule P, “Products and Related Definitions,” is modified by adding the following at the end:
“Other Products and Service Levels: If the Parties agree to a service level defined by a different
agreement (e.g., the WSPP Agreement, the ERCOT Wholesale Electricity Enabling Agreement,
etc.) for a particular Transaction, then, unless the Parties expressly state and agree that all the
terms and conditions of such other agreement will apply, such reference to a service level/product
shall be defined by such other agreement, including, if applicable, the regional reliability
requirements and guidelines as well as the excuses for performance, Force Majeure,
Uncontrollable Forces, or other such excuses applicable to such other agreement, to the extent
inconsistent with the terms of this Agreement, but all other terms and conditions of this
Agreement shall remain applicable including, without limitation, Section 2.2.”
The following defined terms are added to Schedule P:
“CAISO” means the California Independent System Operator Corporation, or its
successor.
“CAISO Tariff” means the Federal Energy Regulatory Commission-approved tariff of
CAISO, including all CAISO protocols, as the same may be amended from time to time.
“CAISO Energy” means a Transaction in which the Seller shall sell and the Buyer shall
purchase a quantity of Energy equal to the hourly quantity without Ancillary Services (as defined
in the CAISO Tariff) that is or will be scheduled as a schedule coordinator to schedule coordinator
transaction pursuant to the CAISO Tariff, as amended from time to time, for which the only
excuse for failure to deliver or receive is an “Uncontrollable Force” (as defined in the CAISO
Tariff) called by the CAISO in accordance with the CAISO Tariff.
“HLH (Heavy Load Hour)” is defined as energy delivered from hours ending (HE) 0700-
2200 Monday-Saturday, excluding NERC holidays, PPT.
“IST” means Inter-Scheduling Coordinator Trade in accordance with the CAISO Tariff.
“LLH (Light Load Hour)” is defined as energy delivered from hours ending (HE) 0100-
0600 and 2300-2400 Monday-Saturday, all day Sunday and NERC holidays, PPT.
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“NP15 Zone Delivery Point” means the NP15 Zone; provided, however, if CAISO
implements trading hubs under a locational marginal pricing design during the Delivery Period,
the Delivery Point shall be the Existing Zone Generation NP15 Trading Hub (“NP15 EZ Gen
Hub”), as such trading hub is contemplated by the CAISO in its filing made to the FERC dated
March 15, 2005 (“Comprehensive Design Proposal for Inter-Scheduling Coordinator Trades
Under the California Independent System Operator Corporation’s Market Redesign and
Technology Upgrade, Docket No. ER02-1656-025”); provided further, if the NP15 EZ Gen Hub
(under any name) is not established as part of a market redesign that is implemented during the
Delivery Period, the Parties agree to promptly work together in good faith to designate an
alternate Delivery Point to reasonably approximate the characteristics of the NP-15 Zone.
“Market Redesign” In the event the current definition of the Delivery Point set forth in
a Transaction is modified, redefined, replaced or eliminated in the transmission provider’s or
other applicable tariff, the Parties agree to promptly negotiate in good faith to designate an
alternate Delivery Point that reasonably approximates the characteristics of the originally
designated Delivery Point so that the Parties shall be in an economic position as close as
reasonably applicable after such designation as they were at the time the Parties entered into such
Transaction, or as mutually agreed to by the Parties.
"West Firm" means with respect to a Transaction, a Product that is or will be scheduled
as firm energy consistent with the most recent rules adopted by the WECC for which the only
excuses for failure to deliver or receive are if an interruption is (i) due to an Uncontrollable Force
as provided in Section 10 of the WSPP Agreement; or (ii) where applicable, to meet Seller's
public utility or statutory obligations to its customers. Notwithstanding any other provision in this
Agreement, if Seller exercises its right to interrupt to meet its public utility or statutory
obligations, Seller shall be responsible for payment of damages for failure to deliver firm energy
as provided in Article 4 of this Agreement.
"WECC" means the Western Electricity Coordinating Council.
"WSPP Agreement" means the WSPP Agreement as amended from time to time.
EXHIBIT A MASTER POWER PURCHASE AND SALE AGREEMENT CONFIRMATION
EXHIBIT B RESOURCE ADEQUACY (“RA”) CAPACITY
The Parties acknowledge and agree that after the execution of this Master Agreement, they may
enter into one or more contracts or confirmations concerning Resource Adequacy, which
products, terms, conditions and definitions shall be documented in an Resource Adequacy Form
of Confirmation (“RA Confirm”) or substantially similar form executed as of the Confirmation
Effective Date containing terms and conditions substantially similar to those set forth in the RA
Confirm attached at Exhibit B.
EXHIBIT C RENEWABLE ENERGY CERTIFICATE (“REC”)
On or after the Effective Date, Party B may secure the appropriate authorization and approval to
buy and/or sell RECs (bundled and unbundled); provided, however, that the purchase and/or sale
of such RECs shall be subject to the approval of Party B’s City Manager and such other internal
approvals as are appropriate to the Parties. The form of any REC purchase and/or sale transaction
confirmation shall be mutually agreed to by both Parties.
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CITY OF PALO ALTO RFP # __________
IN WITNESS WHEREOF, the Parties have caused this Master Agreement to be duly executed as of the date first above
written.
Party A: Iberdrola Renewables, LLC
By: ……………………………..
Name:
Title:
Date: _________, 2013
Party B: City of Palo Alto
Approval as to Form:
By: ……………………………..
Name: Grant Kolling
Title: Sr. Asst. City Attorney
Date: ________, 2013
Party A: Iberdrola Renewables, LLC
By: ……………………………..
Name:
Title:
Date: ________, 2013
Party B: City of Palo Alto
Approval by Mayor:
By: ……………………………..
Name: James Keene, City Manager, for
Title: Mayor
Date: ________, 2013
Party B: City of Palo Alto
Approval by Administrative Services Director:
By: ……………………………..
Name: Lalo Perez
Title: Administrative Services Director
Date: _________, 2013
Party B: City of Palo Alto
Approval by City Manager
By: ……………………………..
Name: James Keene
Title: City Manager
Date: , 2013
Party B: City of Palo Alto
Approval by Utilities Director:
By: ……………………………..
Name: Valerie Fong
Title: Utilities Director
Date: _______, 2013
DISCLAIMER: This Master Power Purchase and Sale Agreement was prepared by a committee of
representatives of Edison Electric Institute (“EEI”) and National Energy Marketers Association (“NEM”)
member companies to facilitate orderly trading in and development of wholesale power markets. Neither EEI
nor NEM nor any member company nor any of their agents, representatives or attorneys shall be responsible for
its use, or any damages resulting therefrom. By providing this Agreement EEI and NEM do not offer legal advice
and all users are urged to consult their own legal counsel to ensure that their commercial objectives will be
achieved and their legal interests are adequately protected.
THIS PAGE WAS INTENTIONALLY LEFT BLANKED.
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MASTER POWER PURCHASE AND SALE AGREEMENT
(EEI Version 2.1, modified 4/25/00)
COVER SHEET
This Master Power Purchase and Sale Agreement (“Master Agreement”) is made as of the following date: _____ __,
2013 (“Effective Date”). The Master Agreement, together with the exhibits, schedules, annexes and any written
supplements hereto, the Party A Tariff, if any, the Party B Tariff, if any, any designated collateral, credit support or
margin agreement or similar arrangement between the Parties and all Transactions (including any confirmations accepted
in accordance with Section 2.3 hereto) shall be referred to as the “Agreement.” The Parties to this Master Agreement are
the following:
Name: NextEra Energy Power Marketing, LLC
(“Counterparty ” or “Party A”)
Name: City of Palo Alto (“Counterparty” or “Party B”)
All Notices:
Attn: Legal Department
700 Universe Blvd., CTR-JB
Juno Beach, FL 33408
Facsimile: (561) 625-7504
Duns 05-448-1341
Federal Tax ID Number: 65-0851428
All Notices:
Attn: Assistant Director, Resource Management
Department of Utilities
City of Palo Alto
250 Hamilton Avenue, 3rd Floor
Palo Alto, CA 94301
Phone: 650-329-2214
Facsimile: 650-326-1507
Duns: 17-892-8479
Federal Tax ID Number: 94-6000389
With additional Notices of an Event of Default or
Potential Event of Default to:
N/A
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Senior Assistant City Attorney/Utilities
City of Palo Alto
Phone: 650-329-2171
Facsimile: 650-329-2646
Invoices:
Attn: Manager, NEPM Accounting
Phone: 561-304-5820
Facsimile: 561-625-7651
E-mail: power_settlements@nexteraenergy.com
Invoices:
Attn: Power Accounts Administrator
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678-6420
Phone: (916) 781-4224/3636
Facsimile: (916) 781-4225
Day Ahead Pre-Scheduling:
Attn: Scheduling Desk
Phone: (561) 625- 7100
Facsimile: (561) 625-7604
Day Ahead Pre-Scheduling:
Confirmations:
Attn: Pre-Scheduler Desk
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4211/4230/4232
Facsimile: 916-781-4255
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Real Time Scheduling:
Attn: Scheduling Desk
Phone: (561) 625- 7100
Facsimile: (561) 625-7604
Real Time Scheduling:
Attn: Chief Dispatcher/Scheduler
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4237/3636
Facsimile: 916-781-4226
Payments:
Attn: Manager, NEPML Accounting
Phone: 561-304-5820
Facsimile: 561-625-7663
E-mail: power_settlements@nexteraenergy.com
Payments:
Attn: Accounts Payable
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4237/3636
Facsimile: 916-781-4226
Wire Transfer:
BNK Bank of America, N.A.
ABA: 0260-0959-3
ACCT: 3751227650
Wire Transfer:
Deposit to Northern California Power Agency, “to the
benefit of City of Palo Alto”
BNK U.S. Bank
ABA: 121122676
ACCT: 1-534-0216-2744
Attn: Cyndy Husebye
U.S. Bank
555 SW Oak Street, Suite 400
Portland, OR. 97204
Phone: 877-295-2509
Facsimile: 877-324-1680
Credit and Collections:
Attn: Credit Manager
Phone: (561) 304-6178
Email: tradecredit@nexteraenergy.com
Credit and Collections:
Attn: Power Accounts Analyst
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4221/4224
Facsimile: 916-781-4255
The Parties hereby agree that the General Terms and Conditions are incorporated herein, as selected, modified and
amended by the following specific provisions, as provided for in such General Terms and Conditions:
Party A Tariff: FERC Electric Rate Schedule 1, dated July 26, 2010, Docket Number: ER10-1971-000
Party B Tariff: N/A
Article One
General Definitions Section 1.4 “Business Day” Delete the first sentence and replace it to read as follows: “Business
Day” means any day except a Saturday, Sunday, the Friday immediately following the
Thanksgiving holiday or a Federal Reserve Bank Holiday.
Section 1.10 is amended by adding after “the price” in line 1 the words “, including any and all
AB 32 fees” and substituting “U.S. $” for “$U.S.” in line 1
Section 1.11 is amended by adding the following after “Party” in the third line: “after using
commercially reasonable efforts to mitigate costs”.
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Section 1.12 is amended by (i) deleting in the fourth line the phrase “as an issues rating” and
replacing it with the phrase “ the general corporate credit rating, long-term issuer rating, or
the utility revenue bond rating”; and (ii) inserting at the end the following sentence “The
standing guaranty of NextEra Energy, Inc. in favor of Party A’s Guarantor, dated as of
October 14, 1998, shall not be considered to constitute ‘third party credit enhancement’ for
purposes of this definition.”
Section 1.24 is amended by adding before the period at the end thereof the following: “in
accordance with Section 5.2”.
Section 1.27 is amended by deleting the phrase “in a form acceptable to the Party in whose favor
the letter of credit is issued” and replacing it with the phrase “to be issued substantially in the
form set forth in Exhibit A attached hereto, with such changes to the terms in that form as the
issuing bank may require and as may be acceptable to the beneficiary thereof. ”
Section 1.28 is amended by adding before the period at end thereof the following: “in accordance
with Section 5.2”.
Section 1.45 is amended by adding the following sentence at the end of that provision:
“Party B shall be deemed to have complied with any request from Party A for the
provision of Performance Assurance by furnishing a copy of a resolution adopted by
Party B’s City Council within a reasonable period of time after receipt of such request,
determining that Party B’s retail rates are set at levels sufficiently high to recover all
costs of providing electric service to Party B’s retail electric customers, including the
costs incurred by Party B under all Transactions executed under this Agreement.”
Section 1.46 is amended by adding before the period at the end thereof the following:
“; provided that the failure to comply with any requirement of this Master Agreement or
a Transaction, including the requirements of Article 8, before the expiration of the time
period expressly specified for such compliance in this Master Agreement or the
Transaction, if any, shall not be considered a Potential Event of Default unless and until
the applicable time period has expired without compliance”.
Section 1.50 is amended by deleting the reference to “Section 2.4” and replacing it with “Section
2.5”.
Section 1.51 is amended by (a) inserting the phrase “for delivery” in the second line after the
word “purchases” and before the phrase “at the Delivery Point”, and (b) deleting the phrase “at
Buyer’s option” in the fifth line and inserting in their place the following: “absent a purchase”.
Section 1.53 is amended by (a) deleting the phrase “at the Delivery Point” in the second line, and
(b) deleting the phrase “at Seller’s option” in the fifth line and inserting in their place the
following: “absent a sale, assuming a sale could not have been made in a commercially
reasonable manner.”
Section 1.56 is amended by deleting the words “pursuant to Section 5.2” and by adding before
the period at the end thereof the following: “, as determined in accordance with Section 5.2.”
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Section 1.60 is amended by inserting the words “in writing” immediately following the words
“agreed to”.
Article Two
Transaction Terms
and Conditions
Section 2.1 shall be amended by deleting the second sentence thereof.
For purposes of Section 2.3, Party B requires that all Transactions be confirmed in writing.
Accordingly, the provision is amended by striking the word “may” from the first line thereof and
replacing it with the word “shall.”
For purposes of Section 2.3, all references to Seller shall be instead to Party A.
X Optional provision in Section 2.4. If not checked, inapplicable.
A new Section 2.6 is added to Article Two, worded as follows:
“2.6 No Oral Agreements or Modifications. Notwithstanding anything to the contrary in
this Master Agreement, including in this Article Two, this Master Agreement and any and
all Transactions may not be orally amended or modified, including by Recording pursuant
to Section 2.5.”
Article Four
Remedies for Failure
to Deliver or
Receive
X Accelerated Payment of Damages. If not checked, inapplicable.
A new Section 4.3 is added to Article Four, worded as follows:
“4.3 Suspension of Performance. In addition to the remedies provided pursuant to
Sections 4.1, 4.2 and 5.7, if Seller or Buyer fails to schedule, deliver or receive all or part
of the Product pursuant to a Transaction for a period of three (3) or more consecutive days,
and such failure is not excused under the terms of the Product, by Force Majeure, by the
other Party’s failure to perform or by agreement of the Parties, then upon one (1) Business
Day’s prior written notice, and for so long as the non-performing Party fails to perform,
the performing Party shall have the right to suspend its performance under such
Transaction. In the event the performing Party suspends performance pursuant to this
Section 4.3, it shall not be obligated to resume performance until it has received notice
from the non-performing Party at least one (1) Business Day prior to the date upon which
the non-performing Party intends to resume its performance; provided that, if the
performing Party has entered into a replacement contract with a term of 31 days or less,
the performing Party may resume performance at the end of the term of such replacement
contract. Remedies available under this provision to the performing Party are in addition
to, not in replacement of, other remedies specified in this Agreement.”
Article Five
Events of Default;
Remedies
X Cross Default provision of Section 5.1(g) shall apply for both Party A’s Guarantor and
Party B. Cross Default amount for each shall be:
Party A’s Guarantor: $75,000,000
Party B: $20,000,000.
Section 5.1(g) is amended by inserting, “or any Affiliate of such Party” after the first appearance
of the word “Party” in subsections (i) and (ii)..
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Section 5.1 is further amended by replacing the period at the end of subsection (h) with a semi-
colon, and adding new subsections “(i),” “(j)" , “(k)” and “(l)”, which read as follows:
"(i) during any consecutive ninety (90) day period, there have occurred five (5) or more
“Seller Failures” as that term is used in Section 4.1, under any or all Transactions,
regarding which the Seller shall be deemed to be the Defaulting Party, and Buyer shall
also be entitled to its remedies under Section 4.1;"
"(j) during any consecutive ninety (90) day period, there have occurred five (5) or more
“Buyer Failures” as that term is used in Section 4.2 under any or all Transactions,
regarding which the Buyer shall be deemed to be the Defaulting Party, and Seller shall
also be entitled to its remedies under Section 4.2;”
"(k) a representation or warranty with respect to the Defaulting Party's financial statement or
position that is false or materially misleading; or"
“(l) revocation by the Federal Energy Regulatory Commission of Party A’s authorization to
make sales and market-based rates.”
Section 5.2 is amended in line 3 by changing “right (i) to” to “right to (i)” and by adding the
following sentence to the end of that provision:
“If the Non-Defaulting Party’s aggregate Gains exceed its aggregate Losses and Costs,
if any, resulting from the termination of this Agreement, the Settlement Amount shall be
zero, notwithstanding any provision of this Agreement to the contrary.”
Section 5.3 is amended by inserting the phrase “plus, at the option of the Non-Defaulting Party,
any cash or other form of security then available to the Defaulting Party pursuant to
Article Eight”, between the words “that are due to the Non-Defaulting Party,”, and “plus
any and all other amounts” in the sixth line thereof.
Section 5.6 Closeout Setoff
___ Option A (Applicable if no other selection is made.)
X Option B - Affiliates shall have the meaning set forth in the Master Agreement unless
otherwise specified as follows: Option B is amended as set forth in Article 10 below.
___ Option C (No Setoff)
Section 5.6 is further amended by inserting before the last sentence in Option B:
“At the election of the Non-Defaulting Party, all obligations owing by or to an Affiliate
of a Party shall be treated as if they were owing by or to the Party itself for purposes of
set-off.”
Article Six Section 6.8 is amended by deleting the words, “may by agreement of the Parties,” in line 3 and
inserting in their place the word “shall”.
Article Eight 8.1 Party A Credit Protection
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Credit and Collateral
Requirements
Financial Information from Party B, Section 8.1(a)
___ Option A
X Option B Specify: Audited financial statements for City of Palo Alto and for City of
Palo Alto Enterprise Fund
___ Option C
Credit Assurances from Party B, Section 8.1(b)
X Not Applicable
___ Applicable
Collateral Threshold for Party B, Section 8.1(c)
X Not Applicable
___ Applicable
Party B Independent Amount: N/A
Party B Rounding Amount: N/A
Party B Minimum Transfer Amount: N/A
Downgrade Event, Section 8.1(d):
__ Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party B only if (i) Party B’s Credit Rating is below BBB-
or Baa3, or (ii) both S&P and Moody's refuse to assign a Credit Rating to Party B's utility
revenue bond, or (iii) Party B’s City Council no longer has the legal authority under the Act,
as defined by Schedule M, to adjust electric rates as necessary to recover Party B’s costs of
providing retail electric service to its customers.
Guarantor for Party B, Section 8.1(e): N/A
Guarantee Amount: N/A
8.2 Party B Credit Protection:
Financial Information from Party A, Section 8.2(a):
__ Option A
X Option B Specify: NextEra Energy, Inc.
___ Option C
Credit Assurances from Party A, Section 8.2(b):
___ Not Applicable
X Applicable
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Collateral Threshold for Party A, Section 8.2(c ):
___ Not Applicable
X Applicable
If applicable, complete the following:
Party A Collateral Threshold: means with respect to Party A, at any time the amount specified in
the table below under the relevant heading opposite the lower of the Credit Ratings at that time
assigned by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc.
(“S&P”) or Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation (“Moody’s”)
of Party A’s Guarantor; provided, that (a) if the long term, senior, unenhanced, unsecured debt
securities of Party A’s Guarantor is no longer rated by one of S&P or Moody’s, the Threshold
with respect to Party A will be zero dollars and (b) if an Event of Default or Potential Event of
Default with respect to Party A has occurred and is continuing, the Threshold with respect to
such party shall be zero dollars.
S&P Rating Moody’s Rating Threshold
A- or above A3 or above $25,000,000
BBB+ Baa1 $15,000,000
BBB Baa2 $10,000,000
BBB- Baa3 $ 5,000,000
Below BBB- (or rating Below Baa3 (or rating $ 0 (zero)
suspended or withdrawn suspended or withdrawn
by both S&P and by both S&P and
Moody’s) Moody’s)
Party A Independent Amount: $0
Party A Rounding Amount: $100,000
Party A Minimum Transfer Amount: $250,000
Downgrade Event, Section 8.2(d):
___ Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party A only if the Credit Rating of Party A’s
Guarantor falls below BBB- from S&P or Baa3 from Moody's or if Party A’s Guarantor
ceases to be rated by either S&P or Moody's.
Guarantor for Party A, Section 8.2(e):
X Guarantor for Party A: NextEra Energy Capital Holdings, Inc.
Guarantee Amount: Must equal amount of Party A’s Collateral Threshold as defined
in section 8.2(c) of this Cover Sheet.
Guaranty to be issued in the form attached hereto as Exhibit A.
Article Ten
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Section 10.1 is amended by replacing “upon (thirty) 30 days’ prior written notice” in lines 2 and
3, with “, which termination shall be effective immediately upon receipt of written notice
thereof”.
Section 10.2 (ix) is amended by adding after the words, “it is”, the following, “or it shall be
deemed for all purposes to be”.
Section 10.2 shall be amended by deleting the “and” at the end of sub-section 10.2(xi), replacing
the period at the end of subsection 10.2(xii) with a semi-colon, and adding a new sub-section
(xiii) as follows:
“Notwithstanding any provision in this Agreement to the contrary, all information, statements,
reports and similar materials, conveyed by Party A orally or in writing in response to a bid
solicitation document [invitation for bids or request for proposals or combination thereof] of
Party B to demonstrate Party A’s financial condition, are true and accurate in all material
respects. Any representation made by Party A regarding its financial performance or condition
or that of its corporate parent (“Financial Representation”) as an inducement to Party B during
the solicitation, bidding or negotiation of any transaction entered into under this Master
Agreement shall be deemed to be repeated and reaffirmed, as of the date of the applicable
Transaction Confirmation and to be incorporated as a representation of Party A or related party,
who makes the Financial Representation in that Transaction Confirmation without the need for
any further action by either Party; and”
Section 10.4 shall be amended by inserting the phrase "To the extent permitted by law," at the
beginning of each of the first two sentences, and substituting the word, “each” for “Each” after
the insertion of each such phrase.
Section 10.5 shall be amended by deleting clause (ii) and the portion of clause (iii) prior to the
words “provided, however”, and replacing them with the following: “(ii) transfer or assign this
Agreement to an Affiliate of such Party so long as (x) such Affiliate’s creditworthiness is equal
to or higher than that of such Party or the Guarantor as of the Effective Date and the date of
entering into each Transaction under this Agreement, if any, for such Party, or (y) the obligations
of such Affiliate are guaranteed by such Party or its Guarantor, if any, in accordance with a
guaranty agreement in form and substance satisfactory to the other Party, and (iii) transfer or
assign this Agreement to any person or entity succeeding to all or substantially all of the assets of
such Party whose creditworthiness is equal to or higher than that of such Party or its Guarantor,
if any, as of the Effective Date and the effective date of any such transfer or assignment.
Section 10.6 is amended by deleting the words “New York” from the fourth line thereof and
replacing it with the word “California.”
Further, Section 10.6 is amended by deleting the last sentence thereof and replacing it with the
following sentence:
“With respect to any proceeding in connection with any claim, counterclaim, demand,
cause of action, dispute and controversy arising out of or relating to this Agreement, the
Parties hereby consent to the exclusive jurisdiction of the federal courts sitting in the
Northern District of the State of California; provided, however, that if the federal courts
sitting in the Northern District of the State of California refuse jurisdiction, the Parties
agree to the exclusive jurisdiction of the state courts sitting in the County of Santa
Clara, State of California.”
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Section 10.8 is modified by adding before the word “constitute” in line four of Section 10.8, “,
the bid solicitation document (invitation for bids or request for proposals, or combination
thereof) and all financial and other information, explanations, statements, reports provided by
one party to the other in connection therewith”
Section 10.8 shall be amended by deleting its penultimate sentence in its entirety and replacing it
with the following sentences: “The indemnity provisions of this Agreement shall survive the
termination of this Agreement for the period of the applicable statute of limitations. The audit
provisions of this Agreement shall survive the termination of this Agreement for a period of
twelve (12) months.”
Section 10.10 shall be amended to include the at the end of the first sentence:
“as amended by the Bankruptcy Code Amendments of 2005, and that each believes that it is a
“forward contract merchant” under statutory and decisional law in effect as of the Effective
Date”
Confidentiality
X Confidentiality Applicable, subject Section
10.11 as amended.
If not checked, inapplicable.
Section 10.11 shall be replaced in its entirety with the following:
“Party A acknowledges that Party B is subject to California Constitution Article 1,
Section 3, and the California Public Records Act, Cal. Gov. Code § 6250 et seq.
(“Public Records Act”) in regard to the documents comprising this Master Agreement
and the Transactions, which items may constitute public records subject to inspection
and copying by the public under the authority of the California Constitution and the
Public Records Act. Party B shall, consistent with those laws, use reasonable efforts to
provide Party A with notice of any third party request to inspect and copy any of the
documents that comprise this Master Agreement and the Transactions, which Party A
might deem confidential and exempt from disclosure, in order that Party A may timely
seek to protect those documents from disclosure to the third party. Party A
acknowledges and agrees that Party B shall not be liable to Party A if Party B makes
disclosure in accordance with the California Constitution and/or the Public Records Act
before Party A has timely obtained an order to prevent Party B from making the
requested disclosure to the third party.”
A new Section 10.12 shall be added to Article 10 as follows:
"10.12. No Agency. In performing their respective obligations hereunder, neither Party
is acting, or is authorized to act, as the agent of the other Party.”
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A new Section 10.13 shall be added to Article 10 as follows:
10.13 Dispute Resolution. In the event of any controversy or claim, whether based in contract,
tort, or otherwise, arising out of or based upon, or relating to this Agreement or the scope,
breach, termination or validity of each of them (a “Dispute”), the Parties will resolve such
Dispute in the following manner:
10.13.1 Negotiation. The Parties will attempt in good faith to resolve the Dispute promptly by
negotiations between duly authorized representatives of the Parties who have authority to settle
the Dispute. When a Party believes there is a Dispute, that Party will give the other Party written
notice describing the Dispute with reasonable particularity. Within thirty (30) Days after receipt
of such notice, the receiving Party will submit a written response to the other Party.
10.13.2 Mediation. If the Dispute is not resolved within forty-five (45) Days of the date of the
response given pursuant to Section 10.13.1, or such additional time, if any, that the Parties
mutually agree to in writing, the Parties shall try in good faith to settle the Dispute by mediation.
The form of mediation and the mediator(s) selected to resolve the Dispute shall be acceptable to
both Parties.
10.13.3 Additional Rights. If the Dispute is not resolved through mediation within ninety (90)
Days after the first meeting of the Parties and mediator(s), or such additional time, if
any, that the Parties mutually agree to in writing, either Party shall be free to pursue any
and all legal actions and remedies as it may deem necessary.
A new Section 10.14 shall be added to Article 10 as follows:
10.14: “The Parties acknowledge and agree that any purchase of power made pursuant to Party
B’s Request for Proposals and under this Agreement and any Transaction shall be executed and
delivered in compliance with applicable laws and regulations in effect at the time this
Agreement is signed by the Parties and at the time of entering into any particular Transaction,
including, but not limited to, Senate Bill 1368 (California Public Utilities Code section 8340 et
seq.) and related regulations (Title 20, Sections 2900 – 2930 of the California Code of
Regulations), as amended, to the extent such laws and regulations, including SB 1368 and related
regulations, apply or are deemed to apply to this Agreement and any Transaction. To the extent
SB 1368 and related regulations require Party B as a local publicly owned electric utility to
submit a compliance filing in accordance with such laws, Party A, upon the request of Party B,
shall in good faith provide promptly to Party B (to the extent Party B lacks such information) the
information to the extent Party A has knowledge of or access to such information, and shall work
cooperatively with and provide commercially reasonable assistance to Party B in Party B’s
compliance with such laws. A failure by Party A to provide such information which is within
its possession or knowledge shall constitute a default under this Agreement.”
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Section 10.14, Index Transactions, is added as follows:
Index Transactions. If the Contract Price for a Transaction is determined by reference to a
Price Source, then:
(a) Market Disruption. If a Market Disruption Event occurs on any one or more days
during a Determination Period (each day, a “Disrupted Day”), then:
The fallback Floating Price, if any, specified by the Parties in the
relevant Confirmation shall be the Floating Price for each
Disrupted Day.
If the Parties have not specified a fallback Floating Price, then the
Parties will endeavor, in good faith and using commercially reasonable
efforts, to agree on a substitute Floating Price, taking into consideration,
without limitation, guidance, protocols or other recommendations or
conventions issued or employed by trade organizations or industry
groups in response to the Market Disruption Event and other prices
published by the Price Source or alternative price sources with respect
to the Delivery Point or comparable Delivery Points that may permit the
Parties to derive the Floating Price based on historical differentials.
If the Price Source retrospectively issues a Floating Price in respect of a
Disrupted Day (a “Delayed Floating Price”) before the Parties agree on
a substitute Floating Price for such day, then the Delayed Floating Price
shall be the Floating Price for such Disrupted Day. If a Delayed Price is
issued by the Price Source in respect of a Disrupted Day after the Parties
agree on a substitute Floating Price for such day, the substitute Floating
Price agreed upon by the Parties will remain the Floating Price without
adjustment unless the Parties expressly agree otherwise.
If the Parties cannot agree on a substitute Floating Price and the Price
Source does not retrospectively publish or announce a Floating Price, in
each case, on or before the fifth Business Day following the first Trading
Day on which the Market Disruption Event first occurred or existed,
then the Floating Price for each Disrupted Day shall be determined by
taking the arithmetic mean of quotations requested from four leading
dealers in the relevant market that are unaffiliated with either Party
and mutually agreed upon by the Parties (“Specified Dealers”),
without regard to the quotations with the highest and lowest values,
subject to the following qualifications:
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If exactly three quotations are obtained, the Floating Price for each
such Disrupted Day will be the quotation that remains after
disregarding the quotations having the highest and lowest
values.
o If fewer than three quotations are obtained, the Floating Price
for each such Disrupted Day will be the average of the
quotations obtained.
o If the Parties cannot agree upon four Specified Dealers, then
each of the Parties will, acting in good faith and in a
commercially reasonable manner, select up to two Specified
Dealers separately, and those selected dealers shall be the
Specified Dealers.
Unless otherwise agreed, if at any time the Parties agree on a substitute
Floating Price for any Disrupted Day, then such substitute Floating Price shall
be the Floating Price for such Disrupted Day, notwithstanding the subsequent
publication or announcement of a Delayed Floating Price by the relevant Price
Source or any quotations obtained from Specified Dealers.
"Determination Period" means each calendar month a part or all of which is within
the Delivery Period of a Transaction.
"Exchange" means, in respect of a Transaction, the exchange or principal trading
market specified as applicable to the relevant Transaction.
"Floating Price" means a Contract Price specified in a Transaction that is based
upon a Price Source.
"Market Disruption Event" means, with respect to any Price Source, any of the
following events:
(a) the failure of the Price Source to announce, publish or make available the
specified Floating Price or information necessary for determining the
Floating Price for a particular day;
(b) the failure of trading to commence on a particular day or the permanent
discontinuation or material suspension of trading in the relevant options
contract or commodity on the Exchange, RTO or in the market specified for
determining a Floating Price;
(c) the temporary or permanent discontinuance or unavailability of the Price
Source;
(d) the temporary or permanent closing of any Exchange or RTO specified
for determining a Floating Price; or
(e) a material change in the formula for or the method of determining the
Floating Price by the Price Source or a material change in the composition
of the Product.
"Price Source" means, in respect of a Transaction, a publication or such other
origin of reference, including an Exchange or RTO, containing or reporting
or making generally available to market participants (including by electronic
means) a price, or prices or information from which a price is determined, as
specified in the relevant Transaction.
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CITY OF PALO ALTO RFP # __________
“RTO” means any regional transmission operator or independent system operator.
“RTO Transaction” means a Transaction in which the Price Source is an RTO.
"Trading Day" means a day in respect of which the relevant Price Source ordinarily
would announce, publish or make available the Floating Price.
(b) Corrections to Published Prices. If the Floating Price published, announced or
made available on a given day and used or to be used to determine a relevant price
is subsequently corrected by the relevant Price Source (i) within 30 days of the
original publication, announcement or availability, or (ii) in the case of RTO
Transactions only, within such longer time period as is consistent with the RTO’s
procedures and guidelines, then either Party may notify the other Party of that
correction and the amount (if any) that is payable as a result of that correction. If,
not later than thirty (30) days after publication or announcement of that correction,
a Party gives notice that an amount is so payable, the Party that originally either
received or retained such amount will, not later than three (3) Business Days after
such notice is effective, pay, subject to any applicable conditions precedent, to the
other Party that amount, together with interest at the Interest Rate for the period
from and including the day on which payment originally was (or was not) made to
but excluding the day of payment of the refund or payment resulting from that
correction. Notwithstanding the foregoing, corrections shall not be made to any
Floating Prices agreed upon by the Parties or determined based on quotations from
Specified Dealers pursuant to paragraph (a) above unless the Parties expressly
agree otherwise.
(c) Rounding. When calculating a Floating Price, all numbers shall be rounded to
four (4) decimal places. If the fifth (5th) decimal number is five (5) or greater, then
the fourth (4th) decimal number shall be increased by one (1), and if the fifth (5th)
decimal number is less than five (5), then the fourth (4th) decimal number shall
remain unchanged.
A new Section 10.15 shall be added to Article 10 as follows:
10.15: “The Parties intend that the standard of review for changes to any rate, charge,
classification, term or condition of this Agreement at FERC shall be the most stringent standard
permissible under applicable law. As to the Parties, it is understood and agreed that the standard
is the “Mobile-Sierra public interest” standard of review, as stated by the United States Supreme
Court in Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish
County, Nos. 06-1457, 128 S.Ct. 2733 (2008), and consistent with the order of the Supreme
Court in NRG Power Marketing, LLC, et al., v. Maine Public Utilities Commission et al., No. 08-
674, 130 S.Ct. 693 (2010) (“NRG Order”). As to all other persons, the Parties intend and agree
that the same standard, to the maximum degree as may be made applicable to other than the
Parties, apply, to the maximum degree permitted under the NRG Order.”
A new Section 10.16 shall be added to Article 10 as follows:
10.16 ““AB 32 fees” means the regulatory assessments, charges, fees imposts and/or taxes
imposed upon and required to be paid by suppliers of energy in accordance with the Global
Warming Solutions Act of 2006, Chapter 488, Statutes 2006, including, without limitation, the
Compliance Offset Protocols, which shall be included (or be deemed included to the extent they
are not expressly included) in the Contract Price, defined in Section 1.10 of the General Terms
and Conditions, and that are in effect as of the Effective Date of this Agreement and/or the date
the Parties enter into each Transaction hereunder.”
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CITY OF PALO ALTO RFP # __________
A new Section 10.17 shall be added to Article 10 as follows:
"The Parties understand and agree that the Transactions under this Agreement are physical
transactions for deferred delivery, and that the Parties contemplate making or taking physical
delivery of electric energy products. Party B is a commercial entity engaged in the business of
delivering electricity to retail customers and buying electricity products with the intention of
routinely taking delivery in order to provide service to its retail electric customers."
Schedule M ___ Party A is a Governmental Entity or Public Power System
X Party B is a Governmental Entity, Schedule M Applicable
Part A Part A of Schedule M is amended by including the following definition for the term “Act”:
“Act” means the Constitution of the State of California, the California statute(s), charter
and municipal ordinances under which Party B was created, organized and authorized to
enter into this Master Agreement and each Transaction thereunder
Part A is further amended by adding the following sentence at the end of the definition of the
term “Special Fund”:
“Party A has conducted such investigation as it deems necessary of the City of Palo
Alto Enterprise Fund and the Act under which such Fund was established to determine,
for its purposes under this Agreement, that such Fund meets this definition of Special
Fund.”
Part C Part C of Schedule M is amended by adding the phrase in line 7 “and to the extent applicable,”
immediately following the word “limitation” in clause (i).
Part D Section 3.4 is modified by inserting a period after “Master Agreement” in line 7 and deleting the
rest of the sentence.
Part E X Section 3.6 under Part E of Schedule M applies; however, the portion of that provision
following the semicolon on the eighth line thereof is replaced in its entirety with the
following:
“any breach of clause (ii) of this provision shall be deemed to have arisen
during a fiscal period of Governmental Entity or Public Power System for
which such budgetary approval or certification of its obligations under this
Master Agreement is required to be in effect and an Event of Default shall be
deemed to have occurred for purposes of Section 5.1 under which
Governmental Entity or Public Power System shall be treated as the Defaulting
Party.”
Part F ___ Add Section 8.4. If not checked, inapplicable.
Part G Part G does not apply.
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Schedule P SCHEDULE P
PRODUCTS AND RELATED DEFINITIONS
The following defined terms are added to Schedule P:
“CAISO” means the California Independent System Operator Corporation, or its
successor.
“CAISO Tariff” means the Federal Energy Regulatory Commission-approved tariff of
CAISO, including all CAISO protocols, as the same may be amended from time to time.
“CAISO Energy” means a Transaction in which the Seller shall sell and the Buyer shall
purchase a quantity of Energy equal to the hourly quantity without Ancillary Services (as defined
in the CAISO Tariff) that is or will be scheduled as a schedule coordinator to schedule
coordinator transaction pursuant to the CAISO Tariff as amended from time to time for which the
only excuse for failure to deliver or receive is an “Uncontrollable Force” (as defined in the
CAISO Tariff) called by the CAISO in accordance with the CAISO Tariff.
“HLH (Heavy Load Hour)” is defined as energy delivered from hours ending (HE)
0700- 2200 Monday-Saturday, excluding NERC holidays, PPT.
“IST” means Inter-Scheduling Coordinator Trade shall mean a trade between
Scheduling Coordinators of Energy or Ancillary Services in accordance with the CAISO Tariff.
“LLH (Light Load Hour)” is defined as energy delivered from hours ending (HE) 0100-
0600 and 2300-2400 Monday-Saturday, all day Sunday and NERC holidays, PPT.
“NP15 Zone Delivery Point” means the NP15 Zone; provided, however, if CAISO
implements trading hubs under a locational marginal pricing design during the Delivery Period,
the Delivery Point shall be the Existing Zone Generation NP15 Trading Hub (“NP15 EZ Gen
Hub”), as such trading hub is contemplated by the CAISO in its filing made to the FERC dated
March 15, 2005 (“Comprehensive Design Proposal for Inter-Scheduling Coordinator Trades
Under the California Independent System Operator Corporation’s Market Redesign and
Technology Upgrade, Docket No. ER02-1656-025”); provided further, if the NP15 EZ Gen Hub
(under any name) is not established as part of a market redesign that is implemented during the
Delivery Period, the Parties agree to promptly work together in good faith to designate an
alternate Delivery Point to reasonably approximate the characteristics of the NP-15 Zone.
"West Firm", or “WSPP Schedule C” or “Schedule C” or “WSPPC-Firm” or any
similar description means with respect to a Transaction, a Product that is or will be scheduled as
firm energy consistent with the most recent rules adopted by the WECC for which the only
excuses for failure to deliver or receive are if an interruption is (i) due to an Uncontrollable Force
as provided in Section 10 of the WSPP Agreement; or (ii) where applicable, to meet Seller's
public utility or statutory obligations to its customers. Notwithstanding any other provision in this
Agreement, if Seller exercises its right to interrupt to meet its public utility or statutory
obligations, Seller shall be responsible for payment of damages for failure to deliver firm energy
as provided in Article 4 of this Agreement.
"WECC" means the Western Electricity Coordinating Council.
"WSPP Agreement" means the Western Systems Power Pool Agreement as amended
from time to time.
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EXHIBIT A
MASTER POWER PURCHASE AND SALE AGREEMENT CONFIRMATION LETTER
EXHIBIT B
RESOURCE ADEQUACY (“RA”) CAPACITY
The Parties acknowledge and agree that after the execution of this Master Agreement, they may
enter into one or more contracts or confirmations concerning Resource Adequacy, which
products, terms, conditions and definitions shall be documented in an Resource Adequacy Form
of Confirmation (“RA Confirm”) or substantially similar form executed as of the Confirmation
Effective Date containing terms and conditions substantially similar to those set forth in the RA
Confirm attached at Exhibit B.
EXHIBIT C
RENEWABLE ENERGY CERTIFICATE (“REC”)
On or after the Effective Date, Party B may secure the appropriate authorization and approval to
buy and/or sell RECs (bundled and unbundled); provided, however, that the purchase and/or sale
of such RECs shall be subject to the approval of Party B’s City Manager. The form of any REC
purchase and/or sale transaction shall be mutually agreed to by the Parties.
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CITY OF PALO ALTO RFP # __________
IN WITNESS WHEREOF, the Parties have caused this Master Agreement to be duly executed as of the date first above
written.
Party B: City of Palo Alto
Approval as to Form:
By: ……………………………..
Name: Grant Kolling
Title: Sr. Asst. City Attorney
Date: _________, 2013
Party A:
By: ……………………………..
Name: ……………………………..
Title: ……………………………..
Date: ________, 2013
Party B: City of Palo Alto
Approval by City Manager:
By: ……………………………..
Name: James Keene
Title: City Manager
Date: ________, 2013
Party B: City of Palo Alto
Approval by Mayor:
By: ……………………………..
Name: James Keene, City Manager, for
Title: Mayor
Date: ________, 2013
Party B: City of Palo Alto
Approval by Administrative Services Director:
By: ……………………………..
Name: Lalo Perez
Title: Administrative Services Director
Date: _________, 2013
Party B: City of Palo Alto
Approval by Utilities Director:
By: ……………………………..
Name: Valerie Fong
Title: Utilities Director
Date: _______, 2013
DISCLAIMER: This Master Power Purchase and Sale Agreement was prepared by a committee of
representatives of Edison Electric Institute (“EEI”) and National Energy Marketers Association (“NEM”)
member companies to facilitate orderly trading in and development of wholesale power markets. Neither EEI
nor NEM nor any member company nor any of their agents, representatives or attorneys shall be responsible for
its use, or any damages resulting therefrom. By providing this Agreement EEI and NEM do not offer legal advice
and all users are urged to consult their own legal counsel to ensure that their commercial objectives will be
achieved and their legal interests are adequately protected.
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CITY OF PALO ALTO RFP # __________
EXHIBIT A
IRREVOCABLE NON-TRANSFERABLE STANDBY LETTER OF CREDIT
DATE OF ISSUANCE: ____________________
[Address]
Re: Credit No.________________
We (the “Issuing Bank”) hereby establish our Irrevocable Non-Transferable Standby Letter of Credit in your
favor for the account of ________________ (“Account Party”), for the aggregate amount not exceeding ____________
United States Dollars ($______) (the “Initial Available Amount”), available to you (“Beneficiary”) at sight upon
demand at our counters at [specify location] on or before the expiration hereof against presentation to us of the
Beneficiary’s signed and dated statement referencing our Letter of Credit No. ________________, stating the amount of
the demand and reading as follows:
“An Event of Default (as defined in the Master Agreement dated as of _________ between Beneficiary and
Account Party, as the same may have been amended (the “Master Agreement”)) has occurred and is
continuing with respect to Account Party under the Master Agreement and Account Party has failed to make all
payments due and owing to Beneficiary in accordance with the terms of the Master Agreement.”
[OR]
“An Early Termination Date (as defined in the Master Agreement dated as of ________ between Beneficiary
and Account Party, as the same may have been amended (the “Master Agreement”)) has occurred as a result of
a Termination Event (as defined in the Master Agreement) and Account Party has failed to make all payments
due and owing to Beneficiary in accordance with the terms of the Master Agreement.”
The Initial Available Amount shall automatically be reduced by the amount of any and all drawings paid from
time-to-time through the Issuing Bank referencing this Letter of Credit No. ________ (as so reduced, the “Available
Amount”). Partial drawings and multiple presentations are permitted from time-to-time hereunder up to the then-
outstanding Available Amount.
This Letter of Credit shall expire _________________(____) days from the date of issuance, but shall
automatically extend without amendment for additional __________ (______)-day periods from such original expiration
date or any subsequent expiration dates, if Beneficiary and Account Party have not received, at least ninety (90) days
prior to any such expiration date, notice of our intention not to renew.
We hereby agree with you that documents drawn under and in compliance with the terms of this Letter of Credit
shall be duly honored upon presentation as specified.
The Issuing Bank shall have a reasonable amount of time, not to exceed three (3) banking days following the
date of its receipt of documents from Beneficiary, to examine the documents and determine whether to take up or refuse
the documents and to inform Beneficiary thereof accordingly.
Except so far as otherwise stated, this Letter of Credit is subject to the International Standby
Practices, I.C.C. Publication No. 590 (“ISP98”). As to matters not covered by ISP98, the laws of
the State of New York, without regard to the principles of conflicts of laws thereunder, shall govern
all matters with respect to this Letter of Credit.
This Letter of Credit may not be amended, changed or modified without the express written consent of the
Beneficiary, the Issuing Bank and the Account Party.
[BANK SIGNATURE]
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EXHIBIT B
GUARANTY
THIS GUARANTY (this “Guaranty”), dated as of _____, ____ (the “Effective Date”), is made by NEXTERA
ENERGY CAPITAL HOLDINGS, INC. (“Guarantor”), in favor of the City of Palo Alto, California
(“Counterparty”).
RECITALS:
A. WHEREAS, Counterparty and Guarantor’s indirect, wholly-owned subsidiary NEXTERA ENERGY POWER
MARKETING, LLC (“Obligor”) have entered into, or concurrently herewith are entering into, that certain
Master Power Purchase and Sale Agreement [dated/entered into/effective as of] ______________ ______,
20__ (the “Underlying Agreement”); and
B. WHEREAS, Counterparty and Obligor may from time to time enter into one or more transactions pursuant and
subject to the terms of the Underlying Agreement (the “Transactions”), which Transactions would be
evidenced by one or more confirmations entered into by Obligor and Counterparty in accordance with the
Underlying Agreement (which documentation shall, together with the Underlying Agreement, collectively be
referred to hereinafter as the “Agreement”); and
C. WHEREAS, Guarantor will directly or indirectly benefit from the Transactions to be entered into between
Obligor and Counterparty pursuant to the Agreement.
NOW THEREFORE, in consideration of the foregoing premises and as an inducement for Counterparty’s execution,
delivery and performance of the Agreement, and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Guarantor hereby agrees for the benefit of Counterparty as follows:
* * *
1. GUARANTY. Subject to the terms and provisions hereof, Guarantor hereby absolutely and
irrevocably guarantees the timely payment when due of all obligations owing by Obligor to Counterparty
arising pursuant to the Agreement on or after the Effective Date (the “Obligations”). This Guaranty shall
constitute a guarantee of payment and not of collection. The liability of Guarantor under this Guaranty shall
be subject to the following limitations:
(a) Notwithstanding anything herein or in the Agreement to the contrary, the maximum aggregate
obligation and liability of Guarantor under this Guaranty, and the maximum recovery from Guarantor
under this Guaranty, shall in no event exceed __________________ [spell out the dollar amount]
U.S. Dollars (U.S. $__________) (the “Maximum Recovery Amount”).
(b) The obligation and liability of Guarantor under this Guaranty is specifically limited to payments
expressly required to be made under the Agreement, as well as costs of collection and enforcement of
this Guaranty (including attorney’s fees) to the extent reasonably and actually incurred by the
Counterparty (subject in all instances, to the limitations imposed by the Maximum Recovery Amount
as specified in Section 1(a) above). In no event, however, shall Guarantor be liable for or obligated to
pay any consequential, indirect, incidental, lost profit, special, exemplary, punitive, equitable or tort
damages.
2. DEMANDS AND PAYMENT.
(a) If Obligor fails to pay any Obligation to Counterparty when such Obligation is due and owing under
the Agreement (an “Overdue Obligation”), Counterparty may present a written demand to Guarantor
calling for Guarantor’s payment of such Overdue Obligation pursuant to this Guaranty (a “Payment
Demand”).
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CITY OF PALO ALTO RFP # __________
(b) Guarantor’s obligation hereunder to pay any particular Overdue Obligation(s) to Counterparty is
conditioned upon Guarantor’s receipt of a Payment Demand from Counterparty satisfying the
following requirements: (i) such Payment Demand must identify the specific Overdue Obligation(s)
covered by such demand, the specific date(s) upon which such Overdue Obligation(s) became due
and owing under the Agreement, and the specific provision(s) of the Agreement pursuant to which
such Overdue Obligation(s) became due and owing; (ii) such Payment Demand must be delivered to
Guarantor in accordance with Section 9 below; and (iii) the specific Overdue Obligation(s) addressed
by such Payment Demand must remain due and unpaid at the time of such delivery to Guarantor.
(c) After issuing a Payment Demand in accordance with the requirements specified in Section 2(b) above,
Counterparty shall not be required to issue any further notices or make any further demands with
respect to the Overdue Obligation(s) specified in that Payment Demand, and Guarantor shall be
required to make payment with respect to the Overdue Obligation(s) specified in that Payment
Demand within five (5) Business Days after Guarantor receives such demand. As used herein, the
term “Business Day” shall mean all weekdays (i.e., Monday through Friday) other than any
weekdays during which commercial banks or financial institutions are authorized to be closed to the
public in the State of Florida or the State of New York.
3. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants that:
(a) it is a corporation duly organized and validly existing under the laws of the State of Florida and has
the corporate power and authority to execute, deliver and carry out the terms and provisions of the
Guaranty;
(b) no authorization, approval, consent or order of, or registration or filing with, any court or other
governmental body having jurisdiction over Guarantor is required on the part of Guarantor for the
execution and delivery of this Guaranty; and
(c) this Guaranty constitutes a valid and legally binding agreement of Guarantor, enforceable against
Guarantor in accordance with the terms hereof, except as the enforceability thereof may be limited by
the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general principles of equity.
4. RESERVATION OF CERTAIN DEFENSES. Without limiting Guarantor’s own defenses and
rights hereunder, Guarantor reserves to itself all rights, setoffs, counterclaims and other defenses to which
Obligor is or may be entitled arising from or out of the Agreement, except for defenses (if any) based upon
the bankruptcy, insolvency, dissolution or liquidation of Obligor or any lack of power or authority of Obligor
to enter into and/or perform the Agreement.
5. AMENDMENT OF GUARANTY. No term or provision of this Guaranty shall be amended,
modified, altered, waived or supplemented except in a writing signed by Guarantor and Counterparty.
6. WAIVERS AND CONSENTS. Subject to and in accordance with the terms and provisions of this
Guaranty:
(a) Except as required in Section 2 above, Guarantor hereby waives (i) notice of acceptance of this Guaranty; (ii)
presentment and demand concerning the liabilities of Guarantor; and (iii) any right to require that any action or
proceeding be brought against Obligor or any other person, or to require that Counterparty seek enforcement of
any performance against Obligor or any other person, prior to any action against Guarantor under the terms
hereof.
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CITY OF PALO ALTO RFP # __________
(b) No delay by Counterparty in the exercise of (or failure by Counterparty to exercise) any rights hereunder shall
operate as a waiver of such rights, a waiver of any other rights or a release of Guarantor from its obligations
hereunder (with the understanding, however, that the foregoing shall not be deemed to constitute a waiver by
Guarantor of any rights or defenses which Guarantor may at any time have pursuant to or in connection with
any applicable statutes of limitation).
(c) Without notice to or the consent of Guarantor, and without impairing or releasing Guarantor’s obligations under
this Guaranty, Counterparty may: (i) change the manner, place or terms for payment of all or any of the
Obligations (including renewals, extensions or other alterations of the Obligations); (ii) release Obligor or any
person (other than Guarantor) from liability for payment of all or any of the Obligations; or (iii) receive,
substitute, surrender, exchange or release any collateral or other security for any or all of the Obligations.
7. REINSTATEMENT. Guarantor agrees that this Guaranty shall continue to be effective or shall be
reinstated, as the case may be, if all or any part of any payment made hereunder is at any time avoided or
rescinded or must otherwise be restored or repaid by Counterparty as a result of the bankruptcy or insolvency
of Obligor, all as though such payments had not been made.
8. TERMINATION. Guarantor may terminate this Guaranty by providing a written termination notice
to Counterparty specifying the date upon which such termination will take effect (provided that no such
termination shall take effect prior to 5:00 p.m. (Eastern Prevailing Time) on the fifth (5th) Business Day after
the termination notice has been delivered to Counterparty in accordance with Section 9 hereof). Upon the
effectiveness of such termination, Guarantor shall have no further liability hereunder, except as may pertain
pursuant to the last sentence of this paragraph. No such termination shall affect Guarantor's liability with
respect to any Obligations arising under any Transactions entered into prior to the time such termination is
effective, which Obligations shall remain subject to this Guaranty.
Unless terminated earlier, this Guaranty and the Guarantor’s obligations hereunder will terminate automatically and
immediately [upon the [second] anniversary of the Effective Date/at 11:59:59 Eastern Prevailing Time [_______,
20__]]; provided, however, that no such termination shall affect Guarantor's liability with respect to any Obligations
arising under any Transactions entered into prior to the time the termination is effective, which Obligations shall remain
subject to this Guaranty.
9. NOTICE. Any Payment Demand, notice, request, instruction, correspondence or other document to
be given hereunder (herein collectively called “Notice”) by Counterparty to Guarantor, or by Guarantor to
Counterparty, as applicable, shall be in writing and may be delivered either by (i) U.S. certified mail with
postage prepaid and return receipt requested, or (ii) recognized nationwide courier service with delivery
receipt requested, in either case to be delivered to the following address (or to such other U.S. address as may
be specified via Notice provided by Guarantor or Counterparty, as applicable, to the other in accordance with
the requirements of this Section 9):
TO GUARANTOR: * TO COUNTERPARTY:
NextEra Energy Capital Holdings, Inc.
700 Universe Blvd.
Juno Beach, Florida 33408
Attn: Treasurer
City of Palo Alto
250 Hamilton Avenue, 3rd Floor
Palo Alto, CA 94301
Attn: Senior Assistant City
Attorney/Utilities
[Tel: (561) 694-6204 -- for use in
connection with courier deliveries]
[Tel: (___) ___-___ -- for use in
connection with courier deliveries]
* (NOTE: Copies of any Notices to Guarantor under this Guaranty shall also be sent via facsimile to
ATTN: Contracts Group, Legal, Fax No. (561) 625-7504 and ATTN: Credit Department, Fax No.
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CITY OF PALO ALTO RFP # __________
(561) 625-7642. However, such facsimile transmissions shall not be deemed effective for delivery
purposes under this Guaranty.)
Any Notice given in accordance with this Section 9 will (i) if delivered during the recipient's normal business hours on
any given Business Day, be deemed received by the designated recipient on such date, and (ii) if not delivered during the
recipient's normal business hours on any given Business Day, be deemed received by the designated recipient at the start
of the recipient's normal business hours on the next Business Day after such delivery.
10. MISCELLANEOUS.
(a) This Guaranty shall in all respects be governed by, and construed in accordance with, the law of the
State of New York, without regard to principles of conflicts of laws thereunder (other than Sections 5-
1401 and 5-1402 of the New York General Obligations Law).
(b) This Guaranty shall be binding upon Guarantor and its successors and permitted assigns and inure to
the benefit of and be enforceable by Counterparty and its successors and permitted assigns.
Guarantor may not assign this Guaranty in part or in whole without the prior written consent of
Counterparty. Counterparty may not assign its rights or benefits under this Guaranty in part or in
whole without the prior written consent of Guarantor.
(c) This Guaranty embodies the entire agreement and understanding between Guarantor and
Counterparty and supersedes all prior agreements and understandings relating to the subject matter
hereof.
(d) The headings in this Guaranty are for purposes of reference only, and shall not affect the meaning
hereof. Words importing the singular number hereunder shall include the plural number and vice
versa, and any pronouns used herein shall be deemed to cover all genders. The term "person" as used
herein means any individual, corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated association, or government (or any agency or political subdivision thereof).
(e) Wherever possible, any provision in this Guaranty which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any one jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
(f) Counterparty (by its acceptance of this Guaranty) and Guarantor each hereby irrevocably: (i) consents
and submits to the exclusive jurisdiction of the United States District Court for the Southern District
of New York, or if that court does not have subject matter jurisdiction, to the exclusive jurisdiction of
the Supreme Court of the State of New York, New York County (without prejudice to the right of any
party to remove to the United States District Court for the Southern District of New York) for the
purposes of any suit, action or other proceeding arising out of this Guaranty or the subject matter
hereof or any of the transactions contemplated hereby brought by Counterparty, Guarantor or their
respective successors or assigns;; and (ii) waives (to the fullest extent permitted by applicable law)
and agrees not to assert any claim that it is not personally subject to the jurisdiction of the above-
named courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue
of the suit, action or proceeding is improper or that this Guaranty or the subject matter hereof may not
be enforced in or by such court.
(g) COUNTERPARTY (BY ITS ACCEPTANCE OF THIS GUARANTY) AND GUARANTOR EACH
HEREBY IRREVOCABLY, INTENTIONALLY AND VOLUNTARILY WAIVES THE RIGHT
TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING BASED ON, OR
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CITY OF PALO ALTO RFP # __________
ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS GUARANTY OR THE
AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PERSON RELATING HERETO
OR THERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO GUARANTOR’S
EXECUTION AND DELIVERY OF THIS GUARANTY.
* * *
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty on _____________, 20__, but it is effective as of
the Effective Date.
NEXTERA ENERGY CAPITAL HOLDINGS, INC.
By:_______________________________________
Name:____________________________________
Title:______________________________________
THIS PAGE WAS INTENTIONALLY LEFT BLANKED.
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CITY OF PALO ALTO RFP # __________
MASTER POWER PURCHASE AND SALE AGREEMENT
(EEI Version 2.1, modified 4/25/00)
COVER SHEET
This Master Power Purchase and Sale Agreement (“Master Agreement”) is made as of the following date: _____ __,
2013 (“Effective Date”). The Master Agreement, together with the exhibits, schedules, annexes and any written
supplements hereto, the Party A Tariff, if any, the Party B Tariff, if any, any designated collateral, credit support or
margin agreement or similar arrangement between the Parties and all Transactions (including any confirmations accepted
in accordance with Section 2.3 hereto) shall be referred to as the “Agreement.” The Parties to this Master Agreement are
the following:
Name: PacifiCorp (“Counterparty ” or
“Party A”)
Name: City of Palo Alto (“Counterparty” or “Party B”)
All Notices:
Attn: ______________________________
Phone: ________________________
Facsimile: ______________________
E-mail: ____________________________
Duns _________________________
Federal Tax ID Number: ____________
All Notices:
Attn: Assistant Director, Resource Management
Department of Utilities
City of Palo Alto
250 Hamilton Avenue, 3rd Floor
Palo Alto, CA 94301
Phone: 650-329-2214
Facsimile: 650-326-1507
Duns: 17-892-8479
Federal Tax ID Number: 94-6000389
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: ___________________________
Phone: ____________________________
Facsimile: ______________________
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Senior Assistant City, Attorney/Utilities
City of Palo Alto
Phone: 650-329-2171
Facsimile: 650-329-2646
Invoices:
Attn: __________________________
Phone: _____________________________
Facsimile: _______________________
E-mail: _________________________
Duns __________________________
Federal Tax ID Number: ______________
Invoices:
Attn: Power Accounts Administrator
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678-6420
Phone: (916) 781-4224/3636
Facsimile: (916) 781-4225
Day Ahead Pre-Scheduling:
Attn: _______________________________
Phone: _____________________________
Facsimile: ___________________________
E-mail: _____________________________
Day Ahead Pre-Scheduling:
Confirmations:
Attn: Pre-Scheduler Desk
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4211/4230/4232
Facsimile: 916-781-4255
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Real Time Scheduling:
Attn: _______________________________
Phone: _____________________________
Facsimile: ___________________________
E-mail: _____________________________
Real Time Scheduling:
Attn: Chief Dispatcher/Scheduler
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4237/3636
Facsimile: 916-781-4226
Payments:
Attn: ________________________________
Phone: ______________________________
Facsimile: ____________________________
E-mail: ______________________________
Payments:
Attn: Accounts Payable
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4237/3636
Facsimile: 916-781-4226
Wire Transfer:
BNK _______________________________
ABA: _______________________________
ACCT: ______________________________
Confirmation _________________________
Wire Transfer:
Deposit to Northern California Power Agency, “to the
benefit of City of Palo Alto”
BNK U.S. Bank
ABA: 121122676
ACCT: 1-534-0216-2744
Attn: Cyndy Husebye
U.S. Bank
555 SW Oak Street, Suite 400
Portland, OR. 97204
Phone: 877-295-2509
Facsimile: 877-324-1680
Credit and Collections:
Attn: _______________________________
Phone: _____________________________
Facsimile: ___________________________
Credit and Collections:
Attn: Power Accounts Analyst
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4221/4224
Facsimile: 916-781-4255
The Parties hereby agree that the General Terms and Conditions are incorporated herein, as selected, modified and
amended by the following specific provisions, as provided for in such General Terms and Conditions:
Party A Tariff: FERC Electric Rate Schedule ___, dated ______________, Docket Number: ER__-___-___
Party B Tariff: N/A
Article One
General Definitions Section 1.1 is amended to add to the end thereof: “Notwithstanding the foregoing, in the case of
Party A, “Affiliate” means PacifiCorp and its direct and indirect subsidiaries.”
Section 1.4 “Business Day” Delete the first sentence and replace it to read as follows: “Business
Day” means any day except a Saturday, Sunday, the Friday immediately following the
Thanksgiving holiday or a Federal Reserve Bank Holiday.
Section 1.10 is amended by adding after “the price” in line 1 the words “, which shall not be
changed on the basis of any and all AB 32 fees” and substituting “U.S. $” for “$U.S.” in line 1.
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Section 1.11 is amended by adding the following after “Party” in the third line: “after using
commercially reasonable efforts to mitigate costs”.
Section 1.12 is amended by deleting in the fourth line the word “issues” and replacing it with the
word “issuer”.
Section 1.24 is amended adding the following after “Costs”: “calculated in a commercially
reasonable manner based on the prime rate of interest as published from time to time under the
Wall Street Journal for such period and such calculation will be equal to the net present value of
the economic gain to it.” and by adding before the period at the end thereof the following: “in
accordance with Section 5.2”.
Section 1.27 is amended to read as follows:
"Letter(s) of Credit" means one or more irrevocable, transferable standby letters of credit issued
by a U.S. commercial bank with such bank having a credit rating of at least A from S&P and A2
from Moody's, and having total assets (net of reserves) of at least $10,000,000,000 and
acceptable to the Party in whose favor the letter of credit is issued, and the acceptance of the
issuing bank shall not be unreasonably withheld. Costs of a letter of credit shall be borne by the
applicant for such letter of credit.
Section 1.28 is amended by adding the following after “Costs”: "calculated in a commercially
reasonable manner based on the prime rate of interest as published from time to time under the
Wall Street Journal for such period and such calculation will be equal to the net present value of
the economic loss to it.” and by adding before the period at end thereof the following: “in
accordance with Section 5.2”.
Section 1.45 is amended by adding the following sentence at the end of that provision:
“Performance Assurance means collateral in the form of either cash, Letter(s) of Credit,
or other security, which form is determined by the Party issuing the collateral in its sole
discretion and is reasonably acceptable to the requesting Party.”
Section 1.46 is amended by adding before the period at the end thereof the following:
“; provided that the failure to comply with any requirement of this Master Agreement or
a Transaction, including the requirements of Article 8, before the expiration of the time
period expressly specified for such compliance in this Master Agreement or the
Transaction, if any, shall not be considered an Event of Default unless and until the
applicable time period has expired without compliance”.
Section 1.50 is amended by deleting the reference to “Section 2.4” and replacing it with “Section
2.5”.
Section 1.51 is amended by (a) inserting the phrase “for delivery” in the second line after the
word “purchases” and before the phrase “at the Delivery Point”, and (b) deleting the phrase “at
Buyer’s option” in the fifth line and inserting in their place the following: “absent a purchase”.
Section 1.53 is amended by (a) deleting the phrase “at the Delivery Point” in the second line, and
(b) deleting the phrase “at Seller’s option” in the fifth line and inserting in their place the
following: “absent a sale, assuming a sale could not have been made in a commercially
reasonable manner.”
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Section 1.56 is amended by deleting the words “pursuant to Section 5.2” and by adding before
the period at the end thereof the following: “, as determined in accordance with Section 5.2.”
Section 1.60 is amended by inserting the words “in writing” immediately following the words
“agreed to”.
Article Two
Transaction Terms
and Conditions
Section 2.1 shall be amended by deleting the second sentence thereof.
For purposes of Section 2.3, Party B requires that all Transactions be confirmed in writing.
Accordingly, the provision is amended by striking the word “may” from the first line thereof and
replacing it with the word “shall.”
For purposes of Section 2.3, all references to Seller shall be instead to Party A.
X Optional provision in Section 2.4. If not checked, inapplicable.
A new Section 2.6 is added to Article Two, worded as follows:
“2.6 No Oral Agreements or Modifications. Notwithstanding anything to the contrary in
this Master Agreement, including in this Article Two, this Master Agreement and any and
all Transactions may not be orally amended or modified, including by Recording pursuant
to Section 2.5.”
Article Three
Obligations and
Deliveries
Market Redesign. A new Section 3.4 shall be added as follows:
“3.4: Market Redesign. In the event the current definition of the Delivery Point set
forth in a Transaction is modified, redefined, replaced or eliminated in the Transmission
Provider’s or other applicable tariff, the Parties agree to promptly negotiate in good
faith to designate an alternate Delivery Point that reasonably approximates the
characteristics of the originally designated Delivery Point so that the Parties shall be in
the same economic position after such designation as they were at the time the Parties
entered into such Transaction, or as mutually agreed to by the Parties.”
Article Four
Remedies for Failure
to Deliver or
Receive
X Accelerated Payment of Damages. If not checked, inapplicable.
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A new Section 4.3 is added to Article Four, worded as follows:
“4.3 Suspension of Performance. In addition to the remedies provided pursuant to
Sections 4.1, 4.2 and 5.7, if Seller or Buyer fails to schedule, deliver or receive all or part
of the Product pursuant to a Transaction for a period of three (3) or more consecutive days,
and such failure is not excused under the terms of the Product, by Force Majeure, by the
other Party’s failure to perform or by agreement of the Parties, then upon one (1) Business
Day’s prior written notice, and for so long as the non-performing Party fails to perform,
the performing Party shall have the right to suspend its performance under such
Transaction. In the event the performing Party suspends performance pursuant to this
Section 4.3, it shall not be obligated to resume performance until it has received notice
from the non-performing Party at least one (1) Business Day prior to the date upon which
the non-performing Party intends to resume its performance; provided that, if the
performing Party has entered into a replacement contract with a term of 31 days or less,
the performing Party may resume performance at the end of the term of such replacement
contract. Remedies available under this provision to the performing Party are in addition
to, not in replacement of, other remedies specified in this Agreement.”
Article Five
Events of Default;
Remedies
X Cross Default provision of Section 5.1(g) shall apply for both Party A and Party B.
Cross Default amount for each shall be $70,000,000.
Section 5.1(g) is amended by inserting, “or any Affiliate of such Party” after the first appearance
of the word “Party” in subsections (i) and (ii).
Section 5.1 is further amended by replacing the period at the end of subsection (h) with a semi-
colon, and adding new subsections “(i),” “(j)" , “(k)” and “(l)”, which read as follows:
"(i) during any consecutive ninety (90) day period, there have occurred five (5) or more
“Seller Failures” as that term is used in Section 4.1, under any or all Transactions,
regarding which the Seller shall be deemed to be the Defaulting Party, and Buyer shall
also be entitled to its remedies under Section 4.1;"
"(j) during any consecutive ninety (90) day period, there have occurred five (5) or more
“Buyer Failures” as that term is used in Section 4.2 under any or all Transactions,
regarding which the Buyer shall be deemed to be the Defaulting Party, and Seller shall
also be entitled to its remedies under Section 4.2;”
"(k) a representation or warranty with respect to the Defaulting Party's financial statement or
position that is false or materially misleading; or"
“(l) revocation by the Federal Energy Regulatory Commission of Party A’s authorization to
make sales and market-based rates.”
Section 5.2 is amended in line 3 by changing “right (i) to” to “right to (i)” and by adding the
following sentence to the end of that provision:
“If the Non-Defaulting Party’s aggregate Gains exceed its aggregate Losses and Costs,
if any, resulting from the termination of this Agreement, the Settlement Amount shall be
zero, notwithstanding any provision of this Agreement to the contrary.”
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Section 5.3 is amended by inserting the phrase “plus, at the option of the Non-Defaulting Party,
any cash or other form of security then available to the Defaulting Party pursuant to
Article Eight”, between the words “that are due to the Non-Defaulting Party,”, and “plus
any and all other amounts” in the sixth line thereof.
The following is added to the end of Section 5.4:
"Notwithstanding any provision to the contrary contained in this Agreement, the Non-
Defaulting Party shall not be required to pay to the Defaulting Party any amount under
Article 5 until the Non-Defaulting Party receives confirmation satisfactory to it acting in
its reasonable discretion (which may include an opinion of its counsel) that all other
obligations of any kind whatsoever of the Defaulting Party to make any payments to the
Non-Defaulting Party under this Agreement or otherwise which are due and payable as
of the Early Termination Date (including for these purposes amounts payable pursuant
to Excluded Transactions) have been fully and finally performed."
Section 5.6 Closeout Setoff
___ Option A (Applicable if no other selection is made.)
X Option B - Affiliates shall have the meaning set forth in the Master Agreement unless
otherwise specified as follows: Option B is amended as set forth in Article 10 below.
___ Option C (No Setoff)
Section 5.6 is further amended by inserting before the last sentence in Option B:
“At the election of the Non-Defaulting Party, all obligations owing by or to an Affiliate
of a Party shall be treated as if they were owing by or to the Party itself for purposes of
set-off.”
Article Six
Payment and Netting 6.4 is amended by deleting “and owing to each other on the same date”.
Section 6.8 is amended by deleting the words, “may by agreement of the Parties,” in line 3 and
inserting in their place the word “shall”.
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Article Seven
Limitations The fifteenth and sixteenth lines of Section 7.1 are amended by deleting "UNLESS
EXPRESSLY HEREIN PROVIDED,".
The following is added to the end of Article Seven:
"7.2. Disclaimer of Warranties. PARTY A AND PARTY B EACH ACKNOWLEDGE THAT
IT HAS ENTERED INTO THIS AGREEMENT AND IS CONTRACTING FOR THE
PRODUCTS BASED SOLELY UPON THE EXPRESS REPRESENTATIONS AND
WARRANTIES HEREIN AND, SUBJECT THERETO, ACCEPTS SUCH PRODUCTS “AS-
IS” AND “WITH ALL FAULTS”. PARTY A AND PARTY B EACH EXPRESSLY
DISCLAIM ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL,
EXPRESS OR IMPLIED, RELATING TO SUCH PRODUCTS, INCLUDING, WITHOUT
LIMITATION, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO
CONFORMITY TO MODELS OR SAMPLES, MERCHANTABILITY, OR FITNESS FOR
ANY PARTICULAR PURPOSE. "
Article Eight 8.1 Party A Credit Protection
Credit and Collateral
Requirements
Financial Information from Party B, Section 8.1(a)
___ Option A
X Option B Specify: Audited financial statements for City of Palo Alto and for City of
Palo Alto Enterprise Fund
___ Option C
Credit Assurances from Party B, Section 8.1(b)
Not Applicable
X Applicable
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Collateral Threshold for Party B, Section 8.1(c)
___ Not Applicable
_X_ Applicable
If applicable, complete the following:
Party B Collateral Threshold: means with respect to Party B, at any time the amount specified in
the table below under the relevant heading opposite the lower of the issuer ratings at that time
assigned by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc.
(“S&P”) or Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation (“Moody’s”)
to the General Obligation bonds of Party B; provided, that (a) if the General Obligation bonds of
Party B are no longer rated by S&P or Moody’s, the Threshold with respect to Party B will be
zero dollars and (b) if an Event of Default or Potential Event of Default with respect to Party B
has occurred and is continuing, the Threshold with respect to such party shall be zero dollars.
S&P Rating Moody’s Rating Threshold
AA+ or above Aa1 or above $40,000,000
A+, AA- or AA A1, Aa3 or Aa2 $35,000,000
A- and A A3 and A2 $30,000,000
BBB+ Baa1 $25,000,000
BBB Baa2 $12,500,000
BBB- Baa3 $ 5,000,000
Below BBB- (or rating Below Baa3 (or rating $ 0 (zero)
suspended or withdrawn suspended or withdrawn
by both S&P and by both S&P and
Moody’s) Moody’s)
Party A Independent Amount: $0
Party A Rounding Amount: $100,000
Party A Minimum Transfer Amount: $100,000
Downgrade Event, Section 8.1(d):
__ Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party B only if (i) Party B’s underlying issuer rating on its
General Obligation bonds by S&P or Moody's is respectively below BBB- or Baa3, or (ii)
both S&P and Moody's refuse to rate Party B's General Obligation bonds, or (iii) Party B’s
City Council no longer has the legal authority under the Act, as defined by Schedule M, to
adjust electric rates as necessary to recover Party B’s costs of providing retail electric service
to its customers.
Guarantor for Party B, Section 8.1(e): N/A
Guarantee Amount: N/A
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8.2 Party B Credit Protection:
Financial Information from Party A, Section 8.2(a):
__ Option A
X Option B Specify: Audited financial statements to be provided by Party A as described
in Section 8.2(a) shall be for Party A or parent entity, if any, providing credit support.
___ Option C
Credit Assurances from Party A, Section 8.2(b):
___ Not Applicable
X Applicable
Collateral Threshold for Party A, Section 8.2(c ):
___ Not Applicable
X Applicable
If applicable, complete the following:
Party A Collateral Threshold: means with respect to Party A, at any time the amount specified in
the table below under the relevant heading opposite the lower of the ratings at that time assigned
by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (“S&P”)
or Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation (“Moody’s”) to the
long term, senior, unenhanced, unsecured debt securities or obligations of Party A; provided, that
(a) if the long term, senior, unenhanced, unsecured debt securities of Party A is no longer rated
by one of S&P or Moody’s, the Threshold with respect to Party A will be zero dollars and (b) if
an Event of Default or Potential Event of Default with respect to Party A has occurred and is
continuing, the Threshold with respect to such party shall be zero dollars.
S&P Rating Moody’s Rating Threshold
AA+ or above Aa1 or above $40,000,000
A+, AA- or AA A1, Aa3 or Aa2 $35,000,000
A- and A A3 and A2 $30,000,000
BBB+ Baa1 $25,000,000
BBB Baa2 $12,500,000
BBB- Baa3 $ 5,000,000
Below BBB- (or rating Below Baa3 (or rating $ 0 (zero)
suspended or withdrawn suspended or withdrawn
by both S&P and by both S&P and
Moody’s) Moody’s)
Party A Independent Amount: $0
Party A Rounding Amount: $100,000
Party A Minimum Transfer Amount: $100,000
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Downgrade Event, Section 8.2(d):
___ Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party A only if the Credit Rating of Party A or Party
A’s Guarantor falls below BBB- from S&P or Baa3 from Moody's or if the unenhanced,
unsecured senior long-term debt securities or obligations of Party A or Party A’s
Guarantor ceases to be rated by either S&P or Moody's.
Guarantor for Party A, Section 8.2(e):
X Guarantor for Party A: N/A______________________
Article Ten
Section 10.1 is amended by replacing “upon (thirty) 30 days’ prior written notice” in lines 2 and
3, with “, which termination shall be effective immediately upon receipt of written notice
thereof”.
Section 10.2(viii) is amended by adding to the end: “;information and explanations of the terms
and conditions of each such Transaction shall not be considered investment or trading advice or a
recommendation to enter into that Transaction; no communication (written or oral) received from
the other Party shall be deemed to be an assurance or guarantee as to the expected results of that
Transaction; and the other Party is not acting as a fiduciary for or an adviser to it in respect of
that Transaction;”
Section 10.2 (ix) is amended by adding after the words, “it is”, the following, “or it shall be
deemed for all purposes to be”.
Section 10.2 shall be amended by deleting the “and” at the end of sub-section 10.2(xi), replacing
the period at the end of subsection 10.2(xii) with a semi-colon, and adding a new sub-section
(xiii) as follows:
“Notwithstanding any provision in this Agreement to the contrary, all information, statements,
reports and similar materials, conveyed by Party A orally or in writing in response to a bid
solicitation document [invitation for bids or request for proposals or combination thereof] of
Party B to demonstrate Party A’s financial condition, are true and accurate in all material
respects. Any representation made by Party A regarding its financial performance or condition
(“Financial Representation”) as an inducement to Party B during the solicitation, bidding or
negotiation of any transaction entered into under this Master Agreement shall be deemed to be
repeated and reaffirmed, as of the date of the applicable Transaction Confirmation entered into as
the outcome of such bid, except as changed by Party A in writing, for example by updated
financial statements, and to be incorporated as a representation of Party A or related party, who
makes the Financial Representation in that Transaction Confirmation without the need for any
further action by either Party; and”
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Section 10.4 shall be amended by inserting the phrase "To the extent permitted by law," at the
beginning of each of the first two sentences, and substituting the word, “each” for “Each” after
the insertion of each such phrase.
The following is added to the end of Section 10.4: “In the event of any inconsistency between
the terms hereof and the terms of any FERC-filed tariff from which Party B purchases
transmission or transmission-related services from Party A’s transmission function, the terms of
such FERC-filed tariff shall prevail with respect to that purchase of transmission or transmission-
related services from Party A’s transmission function.
Section 10.5 shall be amended by deleting clause (ii) and the portion of clause (iii) prior to the
words “provided, however”, and replacing them with the following: “(ii) transfer or assign this
Agreement to an Affiliate of such Party so long as (x) such Affiliate’s creditworthiness is equal
to or higher than that of such Party or the Guarantor as of the Effective Date and the date of
entering into each Transaction under this Agreement, if any, for such Party, or (y) the obligations
of such Affiliate are guaranteed by such Party or its Guarantor, if any, in accordance with a
guaranty agreement in form and substance satisfactory to the other Party, and (iii) transfer or
assign this Agreement to any person or entity succeeding to all or substantially all of the assets of
such Party whose creditworthiness is equal to or higher than that of such Party or its Guarantor,
if any, as of the Effective Date and the effective date of any such transfer or assignment.
Section 10.6 is amended by deleting the words “New York” from the fourth line thereof and
replacing it with the word “California.”
Further, Section 10.6 is amended by deleting the last sentence thereof and replacing it with the
following sentence:
“With respect to any proceeding in connection with any claim, counterclaim, demand,
cause of action, dispute and controversy arising out of or relating to this Agreement, the
Parties hereby consent to the exclusive jurisdiction of the federal courts sitting in the
Northern District of the State of California; provided, however, that if the federal courts
sitting in the Northern District of the State of California refuse jurisdiction, the Parties
agree to the exclusive jurisdiction of the state courts sitting in the County of Santa
Clara, State of California.”
Section 10.8 shall be amended by deleting its penultimate sentence in its entirety and replacing it
with the following sentences: “The indemnity provisions of this Agreement shall survive the
termination of this Agreement for the period of the applicable statute of limitations. The audit
provisions of this Agreement shall survive the termination of this Agreement for a period of
twelve (12) months.”
Section 10.10 shall be amended to include the at the end of the first sentence:
“as amended by the Bankruptcy Code Amendments of 2005, and that each believes that it is a
“forward contract merchant” under statutory and decisional law in effect as of the Effective
Date”
Confidentiality
X Confidentiality Applicable, subject Section
10.11 as amended.
If not checked, inapplicable.
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Section 10.11 shall be replaced in its entirety with the following:
“Party A acknowledges that Party B is subject to California Constitution Article 1,
Section 3, and the California Public Records Act, Cal. Gov. Code § 6250 et seq.
(“Public Records Act”) in regard to the documents comprising this Master Agreement
and the Transactions, which items may constitute public records subject to inspection
and copying by the public under the authority of the California Constitution and the
Public Records Act. Party B shall, consistent with those laws, use reasonable efforts to
provide Party A with notice of any third party request to inspect and copy any of the
documents that comprise this Master Agreement and the Transactions, which Party A
might deem confidential and exempt from disclosure, in order that Party A may timely
seek to protect those documents from disclosure to the third party. Party A
acknowledges and agrees that Party B shall not be liable to Party A if Party B makes
disclosure in accordance with the California Constitution and/or the Public Records Act
before Party A has timely obtained an order to prevent Party B from making the
requested disclosure to the third party.”
A new Section 10.12 shall be added to Article 10 as follows:
"10.12. No Agency. In performing their respective obligations hereunder, neither Party
is acting, or is authorized to act, as the agent of the other Party.”
A new Section 10.13 shall be added to Article 10 as follows:
10.13 Dispute Resolution. In the event of any controversy or claim, whether based in contract,
tort, or otherwise, arising out of or based upon, or relating to this Agreement or the scope,
breach, termination or validity of each of them (a “Dispute”), the Parties will resolve such
Dispute in the following manner:
10.13.1 Negotiation. The Parties will attempt in good faith to resolve the Dispute promptly by
negotiations between duly authorized representatives of the Parties who have authority to settle
the Dispute. When a Party believes there is a Dispute, that Party will give the other Party written
notice describing the Dispute with reasonable particularity. Within thirty (30) Days after receipt
of such notice, the receiving Party will submit a written response to the other Party.
10.13.2 Mediation. If the Dispute is not resolved within forty-five (45) Days of the date of the
response given pursuant to Section 10.13.1, or such additional time, if any, that the Parties
mutually agree to in writing, the Parties shall try in good faith to settle the Dispute by mediation.
The form of mediation and the mediator(s) selected to resolve the Dispute shall be acceptable to
both Parties.
10.13.3 Additional Rights. If the Dispute is not resolved through mediation within ninety (90)
Days after the first meeting of the Parties and mediator(s), or such additional time, if
any, that the Parties mutually agree to in writing, either Party shall be free to pursue any
and all legal actions and remedies as it may deem necessary.
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A new Section 10.14 shall be added to Article 10 as follows:
10.14: “The Parties acknowledge and agree that any purchase of power made pursuant to Party
B’s Request for Proposals and under this Agreement and any Transaction shall be executed and
delivered in compliance with applicable laws and regulations in effect at the time this
Agreement is signed by the Parties and at the time of entering into any particular Transaction,
including, but not limited to, Senate Bill 1368 (California Public Utilities Code section 8340 et
seq.) and related regulations (Title 20, Sections 2900 – 2930 of the California Code of
Regulations), as amended, to the extent such laws and regulations, including SB 1368 and related
regulations, apply or are deemed to apply to this Agreement and any Transaction. To the extent
SB 1368 and related regulations require Party B as a local publicly owned electric utility to
submit a compliance filing in accordance with such laws, Party A, upon the request of Party B,
shall in good faith provide promptly to Party B (to the extent Party B lacks such information) the
information to the extent Party A has knowledge of or access to such information, and shall work
cooperatively with and provide commercially reasonable assistance to Party B in Party B’s
compliance with such laws. A failure by Party A to provide such information which is within
its possession or knowledge shall constitute a default under this Agreement.”
A new Section 10.15 shall be added to Article 10 as follows:
10.15: “The Parties intend that the standard of review for changes to any rate, charge,
classification, term or condition of this Agreement at FERC shall be the most stringent standard
permissible under applicable law. As to the Parties, it is understood and agreed that the standard
is the “Mobile-Sierra public interest” standard of review, as stated by the United States Supreme
Court in Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish
County, Nos. 06-1457, 128 S.Ct. 2733 (2008), and consistent with the order of the Supreme
Court in NRG Power Marketing, LLC, et al., v. Maine Public Utilities Commission et al., No. 08-
674, 130 S.Ct. 693 (2010) (“NRG Order”). As to all other persons, the Parties intend and agree
that the same standard, to the maximum degree as may be made applicable to other than the
Parties, apply, to the maximum degree permitted under the NRG Order.”
A new Section 10.16 shall be added to Article 10 as follows:
10.16 ““AB 32 fees” means the regulatory assessments, charges, fees imposts and/or taxes
imposed upon and required to be paid by suppliers of energy in accordance with the Global
Warming Solutions Act of 2006, Chapter 488, Statutes 2006, including, without limitation, the
Compliance Offset Protocols, which shall not be a basis for changing the Contract Price, defined
in Section 1.10 of the General Terms and Conditions, and that are in effect as of the Effective
Date of this Agreement and/or the date the Parties enter into each Transaction hereunder.”
A new Section 10.17 shall be added to Article 10 as follows:
“Index Transactions. If the Contract Price for a Transaction is determined by reference to a
Price Source, then:
(a) Market Disruption. If a Market Disruption Event occurs on any one or more days
during a Determination Period (each day, a “Disrupted Day”), then:
The fallback Floating Price, if any, specified by the Parties in the
relevant Confirmation shall be the Floating Price for each
Disrupted Day.
If the Parties have not specified a fallback Floating Price, then the
Parties will endeavor, in good faith and using commercially reasonable
efforts, to agree on a substitute Floating Price, taking into consideration,
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CITY OF PALO ALTO RFP # __________
without limitation, guidance, protocols or other recommendations or
conventions issued or employed by trade organizations or industry
groups in response to the Market Disruption Event and other prices
published by the Price Source or alternative price sources with respect
to the Delivery Point or comparable Delivery Points that may permit the
Parties to derive the Floating Price based on historical differentials.
If the Price Source retrospectively issues a Floating Price in respect of a
Disrupted Day (a “Delayed Floating Price”) before the Parties agree on
a substitute Floating Price for such day, then the Delayed Floating Price
shall be the Floating Price for such Disrupted Day. If a Delayed Price is
issued by the Price Source in respect of a Disrupted Day after the Parties
agree on a substitute Floating Price for such day, the substitute Floating
Price agreed upon by the Parties will remain the Floating Price without
adjustment unless the Parties expressly agree otherwise.
If the Parties cannot agree on a substitute Floating Price and the Price
Source does not retrospectively publish or announce a Floating Price, in
each case, on or before the fifth Business Day following the first Trading
Day on which the Market Disruption Event first occurred or existed,
then the Floating Price for each Disrupted Day shall be determined by
taking the arithmetic mean of quotations requested from four leading
dealers in the relevant market that are unaffiliated with either Party
and mutually agreed upon by the Parties (“Specified Dealers”),
without regard to the quotations with the highest and lowest values,
subject to the following qualifications:
o If exactly three quotations are obtained, the Floating Price for
each such Disrupted Day will be the quotation that remains
after disregarding the quotations having the highest and lowest
values.
o If fewer than three quotations are obtained, the Floating Price
for each such Disrupted Day will be the average of the
quotations obtained.
o If the Parties cannot agree upon four Specified Dealers, then
each of the Parties will, acting in good faith and in a
commercially reasonable manner, select up to two Specified
Dealers separately, and those selected dealers shall be the
Specified Dealers.
Unless otherwise agreed, if at any time the Parties agree on a substitute
Floating Price for any Disrupted Day, then such substitute Floating Price
shall be the Floating Price for such Disrupted Day, notwithstanding the
subsequent publication or announcement of a Delayed Floating Price by
the relevant Price Source or any quotations obtained from Specified
Dealers.
"Determination Period" means each calendar month a part or all of which is within
the Delivery Period of a Transaction.
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CITY OF PALO ALTO RFP # __________
"Exchange" means, in respect of a Transaction, the exchange or principal trading
market specified as applicable to the relevant Transaction.
"Floating Price" means a Contract Price specified in a Transaction that is based
upon a Price Source.
"Market Disruption Event" means, with respect to any Price Source, any of the
following events:
(a) the failure of the Price Source to announce, publish or make available the
specified Floating Price or information necessary for determining the
Floating Price for a particular day;
(b) the failure of trading to commence on a particular day or the permanent
discontinuation or material suspension of trading in the relevant options
contract or commodity on the Exchange, RTO or in the market specified for
determining a Floating Price;
(c) the temporary or permanent discontinuance or unavailability of the Price
Source;
(d) the temporary or permanent closing of any Exchange or RTO specified
for determining a Floating Price; or
(e) a material change in the formula for or the method of determining the
Floating Price by the Price Source or a material change in the composition
of the Product.
"Price Source" means, in respect of a Transaction, a publication or such other origin of
reference, including an Exchange or RTO, containing or reporting or making
generally available to market participants (including by electronic means) a price,
or prices or information from which a price is determined, as specified in the
relevant Transaction.
“RTO” means any regional transmission operator or independent system operator.
“RTO Transaction” means a Transaction in which the Price Source is an RTO.
"Trading Day" means a day in respect of which the relevant Price Source ordinarily
would announce, publish or make available the Floating Price.
(b) Corrections to Published Prices. If the Floating Price published, announced or
made available on a given day and used or to be used to determine a relevant price is
subsequently corrected by the relevant Price Source (i) within 30 days of the
original publication, announcement or availability, or (ii) in the case of RTO
Transactions only, within such longer time period as is consistent with the RTO’s
procedures and guidelines, then either Party may notify the other Party of that
correction and the amount (if any) that is payable as a result of that correction. If,
not later than thirty (30) days after publication or announcement of that correction, a
Party gives notice that an amount is so payable, the Party that originally either
received or retained such amount will, not later than three (3) Business Days after
such notice is effective, pay, subject to any applicable conditions precedent, to the
other Party that amount, together with interest at the Interest Rate for the period
from and including the day on which payment originally was (or was not) made to
but excluding the day of payment of the refund or payment resulting from that
correction. Notwithstanding the foregoing, corrections shall not be made to any
Floating Prices agreed upon by the Parties or determined based on quotations from
Specified Dealers pursuant to paragraph (a) above unless the Parties expressly agree
otherwise.
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CITY OF PALO ALTO RFP # __________
(c) Rounding. When calculating a Floating Price, all numbers shall be rounded to
four (4) decimal places. If the fifth (5th) decimal number is five (5) or greater, then
the fourth (4th) decimal number shall be increased by one (1), and if the fifth (5th)
decimal number is less than five (5), then the fourth (4th) decimal number shall
remain unchanged.”
A new Section 10.18 is added as follows:
"The Parties understand and agree that the Transactions under this Agreement are physical
transactions for deferred delivery, and that the Parties contemplate making or taking physical
delivery of electric energy products; provided, however, that nothing in this Agreement,
including this Section 10.18, prohibits the Parties from engaging in Transactions that are or
maybe determined to be swaps if they so desire. Party B is a commercial entity engaged in the
business of delivering electricity to retail customers and buying electricity products with the
intention of routinely taking delivery in order to provide service to its retail electric customers.
Schedule M
___ Party A is a Governmental Entity or Public Power System
X Party B is a Governmental Entity, Schedule M Applicable
Part A Part A of Schedule M is amended by including the following definition for the term “Act”:
“Act” means the Constitution of the State of California, the California statute(s), charter
and municipal ordinances under which Party B was created, organized and authorized to
enter into this Master Agreement and each Transaction thereunder
Part A is further amended by adding the following sentence at the end of the definition of the
term “Special Fund”:
“Party A has conducted such investigation as it deems necessary of the City of Palo
Alto Enterprise Fund and the Act under which such Fund was established to determine,
for its purposes under this Agreement, that such Fund meets this definition of Special
Fund.”
Part C Part C of Schedule M is amended by adding the phrase in line 7 “and to the extent applicable,”
immediately following the word “limitation” in clause (i).
Part D Section 3.4 is modified by inserting a period after “Master Agreement” in line 7 and deleting the
rest of the sentence.
Part E X Section 3.6 under Part E of Schedule M applies; however, the portion of that provision
following the semicolon on the eighth line thereof is replaced in its entirety with the
following:
“any breach of clause (ii) of this provision shall be deemed to have arisen
during a fiscal period of Governmental Entity or Public Power System for
which such budgetary approval or certification of its obligations under this
Master Agreement is required to be in effect and an Event of Default shall be
deemed to have occurred for purposes of Section 5.1 under which
Governmental Entity or Public Power System shall be treated as the Defaulting
Party.”
Part F ___ Add Section 8.4. If not checked, inapplicable.
17
CITY OF PALO ALTO RFP # __________
Part G Part G does not apply.
Schedule P
SCHEDULE P
PRODUCTS AND RELATED DEFINITIONS
The following defined terms are added to Schedule P:
“CAISO” means the California Independent System Operator Corporation, or its
successor.
“CAISO Tariff” means the Federal Energy Regulatory Commission-approved tariff of
CAISO, including all CAISO protocols, as the same may be amended from time to time.
“CAISO Energy” means a Transaction in which the Seller shall sell and the Buyer shall
purchase a quantity of Energy equal to the hourly quantity without Ancillary Services (as defined
in the CAISO Tariff) that is or will be scheduled as a schedule coordinator to schedule
coordinator transaction pursuant to the CAISO Tariff as amended from time to time for which the
only excuse for failure to deliver or receive is an “Uncontrollable Force” (as defined in the
CAISO Tariff) called by the CAISO in accordance with the CAISO Tariff.
Schedule P, “Products and Related Definitions” is modified by inserting the following
at its end:
“Other Products and Service Levels: If the Parties agree to a service level defined by a
different agreement (e.g., the WSPP Agreement, the ERCOT Wholesale Electricity Enabling
Agreement, etc.) for a particular Transaction, then, unless the Parties expressly state and agree
that all the terms and conditions of such other agreement will apply, such reference to a service
level/product shall be defined by such other agreement, including, if applicable, the regional
reliability requirements and guidelines as well as the excuses for performance, Force Majeure,
Uncontrollable Forces, or other such excuses applicable to such other agreement, to the extent
inconsistent with the terms of this Agreement, but all other terms and conditions of this
Agreement shall remain applicable.”
“HLH (Heavy Load Hour)” is defined as energy delivered from hours ending (HE)
0700- 2200 Monday-Saturday, excluding NERC holidays, PPT.
“IST” means Inter-Scheduling Coordinator Trade shall mean a trade between
Scheduling Coordinators of Energy or Ancillary Services in accordance with the CAISO Tariff.
“LLH (Light Load Hour)” is defined as energy delivered from hours ending (HE) 0100-
0600 and 2300-2400 Monday-Saturday, all day Sunday and NERC holidays, PPT.
“NP15 Zone Delivery Point” means the NP15 Zone; provided, however, if CAISO
implements trading hubs under a locational marginal pricing design during the Delivery Period,
the Delivery Point shall be the Existing Zone Generation NP15 Trading Hub (“NP15 EZ Gen
Hub”), as such trading hub is contemplated by the CAISO in its filing made to the FERC dated
March 15, 2005 (“Comprehensive Design Proposal for Inter-Scheduling Coordinator Trades
Under the California Independent System Operator Corporation’s Market Redesign and
Technology Upgrade, Docket No. ER02-1656-025”); provided further, if the NP15 EZ Gen Hub
(under any name) is not established as part of a market redesign that is implemented during the
Delivery Period, the Parties agree to promptly work together in good faith to designate an
alternate Delivery Point to reasonably approximate the characteristics of the NP-15 Zone.
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CITY OF PALO ALTO RFP # __________
"West Firm", or “WSPP Schedule C” or “Schedule C” or “WSPPC-Firm” or any
similar description means with respect to a Transaction, a Product that is or will be scheduled as
firm energy consistent with the most recent rules adopted by the WECC for which the only
excuses for failure to deliver or receive are if an interruption is (i) due to an Uncontrollable Force
as provided in Section 10 of the WSPP Agreement; or (ii) where applicable, to meet Seller's
public utility or statutory obligations to its customers. Notwithstanding any other provision in this
Agreement, if Seller exercises its right to interrupt to meet its public utility or statutory
obligations, Seller shall be responsible for payment of damages for failure to deliver firm energy
as provided in Article 4 of this Agreement.
"WECC" means the Western Electricity Coordinating Council.
"WSPP Agreement" means the Western Systems Power Pool Agreement as amended
from time to time.
EXHIBIT A
MASTER POWER PURCHASE AND SALE AGREEMENT CONFIRMATION LETTER
EXHIBIT B
RESOURCE ADEQUACY (“RA”) CAPACITY
The Parties acknowledge and agree that after the execution of this Master Agreement, they may
enter into one or more contracts or confirmations concerning Resource Adequacy, which
products, terms, conditions and definitions shall be documented in an Resource Adequacy Form
of Confirmation (“RA Confirm”) or substantially similar form executed as of the Confirmation
Effective Date containing terms and conditions substantially similar to those set forth in the RA
Confirm attached at Exhibit B.
EXHIBIT C
RENEWABLE ENERGY CERTIFICATE (“REC”)
On or after the Effective Date, Party B may secure the appropriate authorization and approval to
buy and/or sell RECs (bundled and unbundled); provided, however, that the purchase and/or sale
of such RECs shall be subject to the approval of Party B’s City Manager and all other relevant
internal approvals of both parties. Party B’s execution of a Confirmation shall constitute a
statement by Party B that it has all required approvals. The form of any REC purchase and/or
sale transaction shall be mutually agreed to by the Parties.
19
CITY OF PALO ALTO RFP # __________
IN WITNESS WHEREOF, the Parties have caused this Master Agreement to be duly executed as of the date first above
written.
Party B: City of Palo Alto
Approval as to Form:
By: ……………………………..
Name: Grant Kolling
Title: Sr. Asst. City Attorney
Date: _________, 2013
Party A:
By: ……………………………..
Name: ……………………………..
Title: ……………………………..
Date: ________, 2013
Party B: City of Palo Alto
Approval by City Manager:
By: ……………………………..
Name: James Keene
Title: City Manager
Date: ________, 2013
Party B: City of Palo Alto
Approval by Mayor:
By: ……………………………..
Name: James Keene, City Manager, for
Title: Mayor
Date: ________, 2013
Party B: City of Palo Alto
Approval by Administrative Services Director:
By: ……………………………..
Name: Lalo Perez
Title: Administrative Services Director
Date: _________, 2013
Party B: City of Palo Alto
Approval by Utilities Director:
By: ……………………………..
Name: Valerie Fong
Title: Utilities Director
Date: _______, 2013
DISCLAIMER: This Master Power Purchase and Sale Agreement was prepared by a committee of
representatives of Edison Electric Institute (“EEI”) and National Energy Marketers Association (“NEM”)
member companies to facilitate orderly trading in and development of wholesale power markets. Neither EEI
nor NEM nor any member company nor any of their agents, representatives or attorneys shall be responsible for
its use, or any damages resulting therefrom. By providing this Agreement EEI and NEM do not offer legal advice
and all users are urged to consult their own legal counsel to ensure that their commercial objectives will be
achieved and their legal interests are adequately protected.
THIS PAGE WAS INTENTIONALLY LEFT BLANKED.
FIRST AMENDED AND RESTATED MASTER POWER
PURCHASE AND SALE AGREEMENT
(EEl Version 2.1, modified 4/25/00)
AMENDED AND RESTATED COVER SHEET
This First Amended and Restated Master Power Purchase and Sale Agreement ("First Amended and Restated Master Agreement") is made as of the following date_____________________________ the (“Effective Date”), and amends, restates and supersedes in its entirety that certain Master Power Purchase and Sale Agreement made as of July 5, 2007
(“Master Agreement”). This First Amended and Restated Master Agreement, together with the exhibits, schedules,
annexes and any written supplements hereto, the Party A Tariff, any designated collateral, credit support or margin
agreement or similar arrangement between the Parties and all Transactions (including any confirmations accepted in
accordance with Section 2.3 hereto) shall be referred to as the “Agreement.” The Parties to this First Amended and Restated
Master Agreement are the following:
Name: Powerex Corp. ("Powerex" or "Party A") Name: City of Palo Alto ("Counterparty" or "Party B")
All Notices:
Attn: Legal Services Department
Suite 1300 - 666 Burrard Street
Vancouver, B. C. V6G 2X8
Phone: 604.891.6090
Facsimile: 604.891.5006
Duns 25-330-1949
Federal Tax ID Number: 98-0164470
All Notices:
Attn: Assistant Director, Resource Management
Department of Utilities
City of Palo Alto
250 Hamilton Avenue, 3rd Floor
Palo Alto, CA 94301
Phone: 650-329-2214
Facsimile: 650-326-1507
Duns: 17-892-8479
Federal Tax ID Number: 94-6000389
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Risk Manager
Phone: 604.891.5047
Facsimile: 604.891.5056
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Senior Assistant City Attorney/Utilities
City of Palo Alto
Phone: 650-329-2171
Facsimile: 650-329-2646
Invoices:
Attn: Finance Dept.
Phone: 604.895.7018
Facsimile: 604.891.6011
Email: powerex.finance@powerex.com
Invoices:
Attn: Power Accounts Administrator
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: (916) 781-4224/3636
Facsimile: (916) 781-4255
Scheduling:
Attn: Schedulers
Phone: 604.891.6005
Facsimile: 604.891.5045
Scheduling:
Attn: Chief Dispatcher/Scheduler
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: (916) 781-4237/3636
Facsimile: (916) 781-4226
Payments:
Attn: Finance Department
Phone: 604.891.6063
Facsimile: 604.891.6011
Payments:
Attn: Power Accounts Administrator
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: (916) 781-4224/3636
Facsimile: (916) 781-4255
1
Wire Transfer:
BNK: Wells Fargo Bank
ABA: 026005092 SWIFT PNBPUS3NNYC
Beneficiary’s Bank: Bank of Montreal
ACCT: 001 00040 4625335
Beneficiary’s Bank: Bank of Montreal
Bank Code: 001 Transit Code: 00040
ACCT: 4625335 SWIFT BOFMCAM2
Powerex Corp.
Wire Transfer:
Deposit to Northern California Power Agency, "to the
benefit of City of Palo Alto"
BNK U.S. Bank
ABA: 121122676
ACCT: 1-534-0216-2744
Attn: Cyndy Husebye
U.S. Bank
555 S.W. Oak Street, Suite 400
Portland, OR 97204
Phone: 877-295-2509
Facsimile: 877-324-1680
Credit and Collections:
Attn: Credit Risk Dept.
Phone: (604) 895-7093
Facsimile: 604.891.5025
Credit and Collections:
Attn: Power Accounts Administrator
Northern California Power Agency
180 Cirby Way
Roseville, CA 95678
Phone: 916-781-4224/3636
Facsimile: 916-781-4255
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Director, Risk Management
Phone: (604) 891- 5047
Facsimile: (604) 891-5056
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Senior Assistant City Attorney
City of Palo Alto
Phone: 650-329-2171
Facsimile: 650-329-2646
The Parties hereby agree that the General Terms and Conditions are incorporated herein, as selected, modified and
amended by the following specific provisions, as provided for in such General Terms and Conditions:
Party A Tariff: FERC Rate Schedule No. 1, effective March 1, 2012, Docket No. ER11-2664-001
Party A shall provide to Party B a copy of its current Tariff and any and all amendments with its
bid in response to Party A's request for proposals and in any event no later than thirty (30) Days
before the execution of this Agreement.
Party B Tariff: N/A
ARTICLE ONE GENERAL DEFINITIONS
Section 1.4 “Business Day” Delete the first sentence and replace it to read as follows: “Business
Day” means any day except a Saturday, Sunday, the Friday immediately following the
Thanksgiving holiday or a Federal Reserve Bank Holiday.
Section 1.10 is amended by adding after “the price” in line 1 the words, “, including any and
all AB 32 fees” and substituting “U.S. $” for “$U.S.” in line 1.
Section 1.11, line 3: after "Party" add "after using commercially reasonable efforts to
mitigate such costs".
Section 1.12 is revised to read as follows:
"1.12 "Credit Rating" means, with respect to Party A or Party A's Guarantor, if any,
on any date of determination, the rating then assigned by Moody's or S&P to its
senior unsecured, long-term debt obligations (not supported by insurance provider
enhancement) or if Party A or its Guarantor does not have a rating for its
senior unsecured long-term debt, then the issuer or corporate credit rating assigned
by S&P, or the issuer rating assigned by Moody's. With respect to Party B, on any
date of determination, the rating then assigned by Moody's or S&P to its utility
revenue bonds (not supported by insurance provider enhancement) or if Party B
does not have a rating for its utility revenue bonds, then the issuer or corporate
credit rating assigned by S&P, or the issuer rating assigned by Moody's. In the
event that a party or a party's Guarantor has multiple ratings, the lower rating
shall prevail.
Section 1.24, line 3: after "commercially reasonable manner" add "in accordance with Section
5.2".
Section 1.26, line 4: delete "plus two percent (2%)."
Section 1.27, line 3: after "in a form" add "and in an amount". Section 1.27 is revised by (A)
deleting the word "transferable" in the first line and replacing it with "non-transferable", (B)
adding the phrase ", a Canadian commercial bank" in the second line immediately after the
words "U.S. commercial bank", and (C) adding the phrase "and at least $10 billion in total
assets" in the third line immediately after the word "Moody's".
Section 1.28, line 3: after "commercially reasonable manner "add "and in accordance with
Section 5.2".
Section 1.44, line 1: delete "means the tariff, if any, specified in the Cover Sheet for Party B"
and replace with "is not applicable."
Section 1.45 is modified by deleting and replacing in its entirety, so the provision now reads:
“Performance Assurance means collateral in the form of either cash or Letter(s) of Credit, , which
form is determined by the Party issuing the collateral in its sole discretion and is reasonably
acceptable to the requesting party.”
Section 1.50: delete "2.4" and replace with "2.5".
Section 1.51, line 2: after "purchases" add "for delivery"; line 5: delete "at Buyer's option" and
replace with "absent a purchase".
Section 1.53, line 2: delete "at the Delivery Point"; line 5: after "third party" add "purchaser"
and delete "at Seller's option" and replace with "absent a sale, assuming a sale could not have
been made in a commercially reasonable manner."
Section 1.60, line 1: after "agreed to" add "in writing".
ARTICLE TWO TRANSACTION TERMS AND CONDITIONS
Section 2.2 is revised by deleting the sentence "Any inconsistency between any terms of
this First Amended and Restated Master Agreement and any terms of the Transaction
shall be resolved in favor of the terms of such Transaction." in the last two lines
Section 2.3, line 1: delete "may confirm" and replace with "shall confirm in
writing
Section 2.3 (throughout): substitute "Party A" for "Seller" and "Party B" for
"Buyer".
Section 2.3 is revised by (A) adding the following sentence as the first sentence of the
section: "The Parties agree that a written Confirmation is required for all Transactions of one
week or longer." and (B) adding the phrase ", provided Seller does not object to it
within two (2) Business Days of receipt", in the fifteenth line after the words "Buyer's
Confirmation shall".
X Optional provision in Section 2.4. If not checked,
inapplicable.
A new Section 2.6 is added to Article Two, worded as follows:
“2.6 No Oral Agreements or Modifications. Notwithstanding anything to the contrary in
this Master Agreement, including in this Article Two, this Master Agreement and any and
all Transactions may not be orally amended or modified, including by Recording pursuant to
Section 2.5.”
ARTICLE FOUR REMEDIES FOR FAILURE TO DELIVER/RECEIVE
X Accelerated Payment of Damages. If not checked, inapplicable.
Each of Section 4.1 and Section 4.2 are revised so that the words "five (5) Business Days" in
the fifth line of each section are deleted and replaced with "two (2) Business Days".
Section 4.3 is added to Article Four, as follows:
"4.3 Consequence of Failing to Deliver/Receive. Notwithstanding, and in addition to the
remedies provided pursuant to, Sections 4.1, 4.2 and 5.7, if Seller or Buyer fails to schedule,
deliver or receive all or part of the Product pursuant to a Transaction for a period of three (3)
or more consecutive days, and such failure is not excused under the terms of the Product, by
Force Majeure, by the other Party's failure to perform or by agreement of the Parties, then
upon one (1) Business Day's prior written notice, and for so long as the non-performing Party
fails to perform, the performing Party shall have the right to suspend its performance under
such Transaction. In the event the performing Party suspends performance pursuant to this
Section 4.3, it shall not be obligated to resume performance until it has received notice from
the non-performing Party at least one (1) Business Day prior to the date upon which the non-
performing Party intends to resume its performance; provided that, if the performing Party
has entered into a replacement contract with a term of 31 days or less, the performing Party
may resume performance at the end of the term of such replacement contract. Remedies
available under this provision to the performing Party are in addition to, not in replacement
of, other remedies specified in this Agreement."
ARTICLE FIVE EVENTS OF DEFAULT; REMEDIES
X Cross Default provision of Section 5.1(g) shall apply for both Party A and Party B.
Cross Default amount for each shall be $45,000,000.
Section 5.l(c), line 4: after "the exclusive remedy for which" add", until the number of failures
to deliver/receive reaches the number set forth in Section 5.1(i) or Section 5.1(j)''.
Section 5.l(g), lines 3 and 10: after "such Party" add "or any Affiliate of such Party".
Section 5.1(i), Section 5.1(j), Section 5.1(k), Section 5.1(1) and Section 5.l(m) are added to
Section 5.1, as follows:
“(i): during any consecutive 90-day period, on five (5) or more calendar days, a "Seller
Failure(s)" (as that term is used in Section 4.1) has occurred under any and all
Transactions, regarding which the Seller shall be deemed to be the Defaulting Party and
Buyer shall also be entitled to its remedies under Section 4.1. For greater certainty, the
Parties agree that multiple Seller Failures occurring on one (1) calendar day shall be
considered only one (1) Seller Failure for the purposes of this section;
(j) during any consecutive 90-day period, on five (5) or more calendar days, a "Buyer
Failure(s)" (as that term is used in Section 4.2) has occurred under any or all
Transactions, regarding which the Buyer shall be deemed to be the Defaulting Party and
Seller shall also be entitled to its remedies under Section 4.2. For greater certainty, the
Parties agree that multiple Buyer Failures occurring on one (1) calendar day shall be
considered only one (1) Buyer Failure for the purposes of this section;
(k) a representation or warranty with respect to the Defaulting Party's financial statements
(consolidated or unconsolidated balance sheet, income statement and statement of cash
flow) or position that is false or materially misleading;
(1) revocation by the Federal Energy Regulatory Commission of Party A's authorization to
make sales at market-based rates; or
(m) a Letter of Credit Failure that is not cured within three (3) Business Days after the
occurrence thereof.”
Section 5.2, line 4: after "the right" add", but not the obligation"; line 14, add after the second
sentence, the following: "A calculation shall be deemed made in a commercially reasonable
manner if the Non-Defaulting Party has secured at least one competitive price quote, in writing,
from a third party energy seller, supplier or marketer. No Settlement Amount shall be due or
payable to the Defaulting Party for any Terminated Transaction. If the Non-Defaulting Party's
aggregate Gains exceed its aggregate Losses and Costs, if any, resulting from the termination of
this Agreement, the Settlement Amount shall be zero, notwithstanding any provision of this
Agreement to the contrary."
Section 5.3, line 6: after "Non-Defaulting Party" add "plus, at the option of the Non-Defaulting
Party, any cash or other form of security then available to the Defaulting Party pursuant to
Article Eight."; line 10, after last sentence, add "No Termination Payment shall be due or
payable to the Defaulting Party for any Terminated Transaction."
Section 5.6 Closeout Setoff
Option A (Applicable if no other selection is made.)
X Option B - Affiliates shall have the meaning set forth in the Agreement unless otherwise
specified as follows: Option B is amended as set forth in Article 10 below.
In line 2, after "Defaulting Party" add "otherwise". In line 8, add a new sentence: "At the Non-
Defaulting Party's election, any and all obligations owing by or to an Affiliate of a Party shall be
treated as if such obligations owed by or to the Party itself for purposes of setoff."
Option C (No Setoff)
The following is added as a new Section 5.8:
"5.8 Letter of Credit Failure. For the purposes of this Article Five, "Letter of Credit
Failure" shall mean, with respect to a Party that has provided a Letter of Credit as
Performance Assurance.
(a) a failure to renew or substitute a Letter of Credit by no later than fifteen
Business Days prior to expiry thereof;
(b) the issuer of such Letter of Credit fails to maintain a long-term senior
unsecured debt or deposit rating of at least "A-" by S&P or at least "A3" by
Moody's and fails to maintain at least $10 billion in total assets;
(c) the issuer of the Letter of Credit fails to comply with or perform its obligations
under such Letter of Credit if such failure continues after the lapse of any
applicable grace period;
(d) the issuer of such Letter of Credit disaffirms, disclaims, repudiates or rejects, in
whole or in part, or challenges the validity of, such Letter of Credit;
(e) such Letter of Credit shall expire or terminate, or shall fail or cease to be in full
force and effect for purposes of this Agreement (other than in accordance with
its terms) at any time during the term of the Agreement or any outstanding
Transaction; or
(f) any event analogous to an event specified in Subsection 5.1(d) or (f) of
this Agreement occurs with respect to the issuer of such Letter of Credit.
However, no Letter of Credit Failure will occur with respect to a Letter of Credit after
the time such Letter of Credit is required to be cancelled or returned in accordance with
the terms of this Agreement."
ARTICLE SIX PAYMENT AND NETTING
Section 6.8, line 3: Delete "may by agreement of the Parties" and replace with "shall".
ARTICLE EIGHT CREDIT AND COLLATERAL REQUIREMENTS
8.1 Party A Credit Protection:
(a) Financial Information of Party B:
- Option A
X Option B Specify: Audited financial statements for City of Palo Alto and for City of Palo Alto Enterprise Fund
- Option C
In Option B: line 1: delete "120 days" and replace with "180 days". In line 3 insert a period
(.) after the capitalized term "Cover Sheet" and delete the remainder of that sentence in its
entirety.
(b) Credit Assurances by Party B:
X Not Applicable
- Applicable
(c) Collateral Threshold for Party B:
____ Not Applicable
X Applicable
If applicable, complete the following:
Party B Collateral Threshold: means with respect to Party B, at any time the amount specified in
the table below under the relevant heading opposite the lower of the ratings at that time assigned
by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (“S&P”)
or Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation (“Moody’s”) to the
Credit Rating of Party B; provided, that (a) if the utility revenue bond of Party B is no longer
rated by one of S&P or Moody’s, the Threshold with respect to Party B will be zero dollars and
(b) if an Event of Default or Potential Event of Default with respect to Party B has occurred and
is continuing, the Threshold with respect to such party shall be zero dollars.
S&P Rating Moody’s Rating Threshold
AA- or above Aa3 or above $25,000,000
A-, A or A+ A3, A2 or A1 $20,000,000
BBB+ Baa1 $10,000,000
BBB Baa2 $5,000,000
BBB- Baa3 $ 2,500,000
Below BBB- (or rating Below Baa3 (or rating $ 0 (zero)
suspended or withdrawn suspended or withdrawn
by both S&P and by both S&P and
Moody’s) Moody’s)
Party B Independent Amount: N/A
Party B Rounding Amount: $250,000
Party B Minimum Transfer Amount: $1.00
(d) Downgrade Event:
Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party B only if(i) Party B's underlying Credit Rating
falls below BBB- or Baa3, as the case may be.
Guarantor for Party B, Section 8.1(e): N/A
Guarantee Amount: N/A
Section 8.1(d) is revised so that the words "or a guaranty" in the fourth line after the words
"Performance Assurance" are deleted and the phrase "or fails to maintain such Performance
Assurance or other credit assurance for so long as the Downgrade Event is continuing" is added
in the fifth line after the phrase "within three (3) Business Days of receipt of notice".
8.2 Party B Credit Protection:
(a) Financial Information of Party A:
Option A
X Option B Specify: Audited Financial statements to be provided by Party A shall be for Party A or any corporate parent or entity providing credit support. Option B shall be modified by deleting all references to "consolidated" therein.
Option C
In Option B: line 1: Delete "120 days" and replace with"140 days" and replace
"60 days" in line 3 with "90 days".
(b) Credit Assurances by Party A:
X Not Applicable
Applicable
(c) Collateral Threshold for Party A:
Not Applicable
X Applicable
If applicable, complete the following:
Party A Collateral Threshold: means with respect to Party A, at any time the amount specified
in the table below under the relevant heading opposite the lower of: (i) Credit Ratings and
(ii) the amount of the dollar limit in the guarantee provided by Party A 's Guarantor;
provided, that (a) if Party A's Guarantor is no longer rated by one of S&P or Moody's, the
Threshold with respect to Party A will be zero, and (b) if an Event of Default or Potential
Event of Default with respect to Party A has occurred and is continuing, the Threshold with
respect to such party shall be zero.
S&P Rating Moody’s Rating Threshold
AA- or above Aa3 or above $25,000,000
A-,A or A+ A3, A2 or A1 $20,000,000
BBB+ Baa1 $10,000,000
BBB Baa2 $5,000,000
BBB- Baa3 $ 2,500,000
Below BBB- (or rating Below Baa3 (or rating $ 0 (zero)
suspended or withdrawn suspended or withdrawn
by both S&P and by both S&P and
Moody’s) Moody’s)
Party A Independent Amount: $N/A
Party A Rounding Amount: $250,000
Party A Minimum Transfer Amount: $1.00
(d) Downgrade Event:
Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party A only if the Credit Rating of Party A or
Party A's Guarantor falls below BBB- from S&P or Baa3 from Moody's or if Party
A or Party A's Guarantor ceases to be rated by either S&P or Moody's, other than
due to repayment of indebtedness.
(e) Guarantor for Party A:
X Guarantor for Party A: British Columbia Hydro and Power
Authority
Guarantee Amount: In a form and amount as agreed to between the
Parties, and as subject to Section 8.2(c).
Section 8.2(c) is revised by adding the following paragraph after the first
paragraph:
Party A may at any time and from time to time (including at the time of a request by Party
B for Performance Assurance) give notice to Party B of its intent to increase the amount of
the guarantee provided by Party A's Guarantor up to the amount set forth in the table on the
Cover Sheet opposite the Credit Rating for Party A's Guarantor. No such increase shall
become effective until Party A shall have provided Party B with a new guaranty or an
amended guaranty (in form and substance acceptable to Party B). If the operation of the
foregoing results in the sum of Party A Performance Assurance and Party A's Collateral
Threshold being in excess of its Termination Payment plus Party A's Independent Amount,
if any, (rounding upwards for any fractional amount to the next Party A Rounding
Amount) Party A shall have the right to request Performance Assurance be reduced accordingly.
Section 8.2 (d) is revised so that the words "or a guaranty" in the fourth line after the
words "Performance Assurance" are deleted and the phrase "or fails to maintain such
Performance Assurance or other credit assurance for so long as the Downgrade Event is
continuing" is added in the fifth line after the phrase "within three (3) Business Days of
receipt of notice".
ARTICLE TEN MISCELLANEOUS
_ Confidentiality Applicable If not checked, inapplicable. Confidentiality does not apply.
Section 10.1, line 2: delete "upon (thirty) 30 days' prior written notice" and replace with "which
termination shall be effective immediately upon receipt of written notice thereof.”
Section 10.2 (xiii) is added to Article 10, as follows:
"Notwithstanding any provision in this Agreement to the contrary, all information,
statements, reports and similar materials, conveyed by Party A in writing in response to
a bid solicitation document [invitation for bids or request for proposals or combination
thereof] of Party B to demonstrate that Party A's financial condition, are true and
accurate in all material respects. Any written representation made by a Party regarding
its financial performance or condition or that of its corporate parent ("Financial
Representation") as an inducement to the other Party during the solicitation, bidding or
negotiation of any transaction entered into under this First Amended and Restated
Master Agreement shall be deemed to be repeated and reaffirmed, as of the date of the
applicable Transaction Confirmation and to be incorporated as a representation of the
Party making the Financial Representation into that Transaction Confirmation without
the need for any further action by either Party."
h
Section 10.2 (ix) is amended by adding after the words, “it is”, the following, “or it shall be
deemed for all purposes to be”.
Section 10.4, line 1: after "Each Party" add "to the extent permitted by applicable law".
Section 10.5, line 4: delete "without relieving itself from liability hereunder" and replace with
"provided that the assigning party agrees to remain liable for the obligations assigned to the
assignee"; line 6: delete clause (ii); line 8, change the numbering of clause (iii) to clause (ii), and
delete "transfer or assign ... of such Party" and replace with "transfer or assign this Agreement
to an Affiliate of such Party so long as either that Affiliate's credit rating equals or exceeds the
rating of the Party and/or the Guarantor as of the Effective Date or that Affiliate's obligation is
guaranteed by the Party or the Guarantor in accordance with a guaranty agreement to any person
or entity succeeding to all or substantially all of the assets of a party whose creditworthiness
rating equals or exceeds that of the Party and/or the Guarantor as of the Effective Date."
Section 10.6, line 4: delete "New York" and replace with "California."; Line 5, delete second
sentence and replace with: "With respect to any proceeding in connection with any claim,
counterclaim, demand, cause of action, dispute and controversy arising out of or relating to this
Agreement, the Parties hereby consent to the exclusive jurisdiction of the federal courts sitting in
the Northern District of the State of California.”
Section 10.8, line 4: after "with Section 2.3)" add "line 18: delete 6th sentence; line 30: delete
last sentence and replace with "The indemnity provisions of this Agreement shall survive the
termination of this Agreement for the period of the applicable statute of limitations. The audit
provisions of this Agreement shall survive the termination of this Agreement for a period of
twelve (12) months."
Section 10.10 is replaced in its entirety, as follows:
"10.10 Bankruptcy Issues. The Parties acknowledge and agree that (i) any Transaction with a
maturity date more than two days after the date the Transaction is entered into constitutes a
"forward contract" within the meaning of the United States Bankruptcy Code (the "Bankruptcy
Code"); (ii) all payments made or to be made by one Party to the other Party pursuant to this
Agreement are "settlement payments" within the meaning of the Bankruptcy Code; and (iii) all
transfers of Performance Assurance by one Party to the other Party under this Agreement are
"margin payments" within the meaning of the Bankruptcy Code."
Section 10.11 shall be replaced in its entirety with the following:
"Party A acknowledges that Party B is subject to California Constitution Article 1, Section 3, and the
California Public Records Act, Cal. Gov. Code § 6250 et seq. (“Public Records Act”) in regard to the
documents comprising this Master Agreement and the Transactions, which items may constitute
public records subject to inspection and copying by the public under the authority of the California
Constitution and the Public Records Act. Party B shall, consistent with those laws, use reasonable
efforts to provide Party A with notice of any third party request to inspect and copy any of the
documents that comprise this Master Agreement and the Transactions, which Party A might deem
confidential and exempt from disclosure, in order that Party A may timely seek to protect those
documents from disclosure to the third party. Party A acknowledges and agrees that Party B shall not
be liable to Party A if Party B makes disclosure in accordance with the California Constitution and/or
the Public Records Act before Party A has timely obtained an order to prevent Party B from making
the requested disclosure to the third party.”
Section 10.12 is added to Article 10, as follows:
"10.12. No Agency. In performing their respective obligations hereunder, neither Party is
acting, or is authorized to act, as agent of the other Party."
Section 10.13 is added to Article 10, as follows:
10.13 Dispute Resolution. In the event of any controversy or claim, whether based in
contract, tort, or otherwise, arising out of or based upon, or relating to this Agreement or the
scope, breach, termination or validity of each of them (a "Dispute"), the Parties will resolve
such Dispute in the following manner:
(a) The Parties will attempt in good faith to resolve the Dispute promptly by
negotiations between duly authorized representatives of the Parties who have authority to
settle the Dispute. When a Party believes there is a Dispute, that Party will give the other
Party written notice describing the Dispute with reasonable particularity. Within thirty (30)
Days after receipt of such notice, the receiving Party will submit a written response to the
other Party.
(b) If the Dispute is not resolved within forty-five (45) Days of the date of the
response given pursuant to Section 10.13.1, or such additional time, if any, that the Parties
mutually agree to in writing, the Parties shall try in good faith to settle the Dispute by
mediation. The form of mediation and the mediator(s) selected to resolve the Dispute shall
be acceptable to both Parties.
(c) If the Dispute is not resolved through mediation within ninety (90) Days after the
first meeting of the Parties and mediator(s), or such additional time, if any, that the Parties
mutually agree to in writing, either Party shall be free to pursue any and all legal actions and
remedies as it may deem necessary.
Section 10.14 is added to Article 10, as follows:
Index Transactions. If the Contract Price for a Transaction is determined by reference to a
Price Source, then:
(a) Market Disruption. If a Market Disruption Event occurs on any one or more days
during a Determination Period (each day, a “Disrupted Day”), then:
The fallback Floating Price, if any, specified by the Parties in the relevant
Confirmation shall be the Floating Price for each Disrupted Day.
If the Parties have not specified a fallback Floating Price, then the Parties will
endeavor, in good faith and using commercially reasonable efforts, to agree on a substitute
Floating Price, taking into consideration, without limitation, guidance, protocols or other
recommendations or conventions issued or employed by trade organizations or industry groups
in response to the Market Disruption Event and other prices published by the Price Source or
alternative price sources with respect to the Delivery Point or comparable Delivery Points that
may permit the Parties to derive the Floating Price based on historical differentials.
If the Price Source retrospectively issues a Floating Price in respect of a
Disrupted Day (a “Delayed Floating Price”) before the parties agree on a substitute Floating
Price for such day, then the Delayed Floating Price shall be the Floating Price for such
Disrupted Day. If a Delayed Price is issued by the Price Source in respect of a Disrupted Day
after the Parties agree on a substitute Floating Price for such day, the substitute Floating Price
agreed upon by the Parties will remain the Floating Price without adjustment unless the Parties
expressly agree otherwise.
If the Parties cannot agree on a substitute Floating Price and the Price
Source does not retrospectively publish or announce a Floating Price, in each case, on or before
the fifth Business Day following the first Trading Day on which the Market Disruption Event
first occurred or existed,
then the Floating Price for each Disrupted Day shall be determined by taking the arithmetic
mean of quotations requested from four leading dealers in the relevant market that are
unaffiliated with either Party and mutually agreed upon by the Parties (“Specified Dealers”),
without regard to the quotations with the highest and lowest values, subject to the following
qualifications:
o If exactly three quotations are obtained, the Floating Price for each such Disrupted Day
will be the quotation that remains after disregarding the quotations having the highest and
lowest values.
o If fewer than three quotations are obtained, the Floating Price for each such Disrupted Day
will be the average of the quotations obtained.
o If the Parties cannot agree upon four Specified Dealers, then each of the Parties will, acting
in good faith and in a commercially reasonable manner, select up to two Specified Dealers
separately, and those selected dealers shall be the Specified Dealers.
Unless otherwise agreed, if at any time the Parties agree on a substitute
Floating Price for any Disrupted Day, then such substitute Floating Price shall be the Floating
Price for such Disrupted Day, notwithstanding the subsequent publication or announcement of a
Delayed Floating Price by the relevant Price Source or any quotations obtained from Specified
Dealers.
"Determination Period" means each calendar month a part or all of which is within the Delivery Period
of a Transaction.
"Exchange" means, in respect of a Transaction, the exchange or principal trading market specified as
applicable to the relevant Transaction.
"Floating Price" means a Contract Price specified in a Transaction that is based upon a Price
Source.
"Market Disruption Event" means, with respect to any Price Source, any of the following events:
(a) the failure of the Price Source to announce, publish or make available the specified Floating Price or
information necessary for determining the Floating Price for a particular day;
(b) the failure of trading to commence on a particular day or the permanent discontinuation or material
suspension of trading in the relevant options contract or commodity on the Exchange, RTO or in the
market specified for determining a Floating Price;
(c) the temporary or permanent discontinuance or unavailability of the Price
Source;
(d) the temporary or permanent closing of any Exchange or RTO specified for determining a Floating
Price; or
(e) a material change in the formula for or the method of determining the Floating Price by the Price
Source or a material change in the composition of the Product.
"Price Source" means, in respect of a Transaction, a publication or such other origin of reference,
including an Exchange or RTO, containing or reporting or making generally available to market
participants (including by electronic means) a price,
or prices or information from which a price is determined, as specified in the relevant
Transaction.
“RTO” means any regional transmission operator or independent system operator.
“RTO Transaction” means a Transaction in which the Price Source is an RTO.
"Trading Day" means a day in respect of which the relevant Price Source ordinarily would announce,
publish or make available the Floating Price.
(b) Corrections to Published Prices. If the Floating Price published, announced or made available on a
given day and used or to be used to determine a relevant price is subsequently corrected by the relevant
Price Source (i) within 30 days of the original publication, announcement or availability, or (ii) in the
case of RTO Transactions only, within such longer time period as is consistent with the RTO’s
procedures and guidelines, then either Party may notify the other Party of that correction and the
amount (if any) that is payable as a result of that correction. If, not later than thirty (30) days after
publication or announcement of that correction, a Party gives notice that an amount is so payable, the
Party that originally either received or retained such amount will, not later than three (3) Business Days
after such notice is effective, pay, subject to any applicable conditions precedent, to the other Party that
amount, together with interest at the Interest Rate for the period from and including the day on which
payment originally was (or was not) made to but excluding the day of payment of the refund or
payment resulting from that correction. Notwithstanding the foregoing, corrections shall not be made
to any Floating Prices agreed upon by the Parties or determined based on quotations from Specified
Dealers pursuant to paragraph (a) above unless the Parties expressly agree otherwise.
(c) Rounding. When calculating a Floating Price, all numbers shall be rounded to four (4) decimal
places. If the fifth (5th) decimal number is five (5) or greater, then the fourth (4th) decimal number
shall be increased by one (1), and if the fifth (5th) decimal number is less than five (5), then the fourth
(4th)] decimal number shall remain unchanged.
Section 10.15 shall be added to Article 10 as follows:
10.15: "The Parties acknowledge and agree that any purchase of power made pursuant to Party
B's Request for Proposals and under this Agreement and any Transaction shall be executed and
delivered in compliance with applicable laws and regulations in effect at the time this
Agreement is signed by the Parties and at the time of entering into any particular Transaction,
including, but not limited to, Senate Bill 1368 (California Public Utilities Code section 8340 et
seq.) and related regulations (Title 20, Sections 2900-2930 of the California Code of
Regulations), as amended, to the extent such laws and regulations, including SB 1368 and related
regulations, apply or are deemed to apply to this Agreement and any Transaction. To the extent
SB 1368 and related regulations require Party B as a local publicly owned electric utility to
submit a compliance filing in accordance with such laws, Party A, upon the request of Party B,
shall in good faith provide promptly to Party B (to the extent Party B lacks such information) the
information to the extent Party A has knowledge of or access to such information. A failure by
Party A to provide such information which is within its possession or knowledge shall constitute
a default under this Agreement."
Section 10.16 shall be added to Article 10 as follows:
10.16: “The Parties intend that the standard of review for changes to any rate, charge, classification,
term or condition of this Agreement at FERC shall be the most stringent standard permissible under
applicable law. As to the Parties, it is understood and agreed that the standard is the “Mobile-Sierra
public interest” standard of review, as stated by the United States Supreme Court in Morgan Stanley
Capital Group Inc. v. Public Utility District No. 1 of Snohomish County, Nos. 06-1457, 128 S.Ct.
2733 (2008), and consistent with the order of the Supreme Court in NRG Power Marketing, LLC, et
al., v. Maine Public Utilities Commission et al., No. 08-674, 130 S.Ct. 693 (2010) (“NRG Order”).
As to all other persons, the Parties intend and agree that the same standard, to the maximum degree as
may be made applicable to other than the Parties, apply, to the maximum degree permitted under the
NRG Order.”
Section 10.17 shall be added to Article 10 as follows:
10.17 ““AB 32 fees” means the regulatory assessments, charges, fees imposts and/or taxes imposed
upon and required to be paid by suppliers of energy in accordance with the Global Warming Solutions
Act of 2006, Chapter 488, Statutes 2006, including, without limitation, the Compliance Offset
Protocols, which shall be included (or be deemed included to the extent they are not expressly
included) in the Contract Price, defined in Section 1.10 of the General Terms and Conditions, and that
are in effect as of the Effective Date of this Agreement and/or the date the Parties enter into each
Transaction hereunder.”
Section 10.18 is added as follows:
"The Parties understand and agree that the Transactions under this Agreement are physical
transactions for deferred delivery, and that the Parties contemplate making or taking physical
delivery of electric energy products; provided, however, that nothing in this Agreement, including
this Section 10.18 prohibits the Parties from engaging in Transactions that are or may be
determined to be swaps in they so desire. Party B is a commercial entity engaged in the business
of delivering electric energy to its retail customers and buying electricity products with the
intention of routinely taking delivery in order to provide service to its retail electric customers."
SCHEDULE M
- Party A is a Governmental Entity or Public Power System
X Party B is a Governmental Entity, Schedule M Applicable
X Add Section 3.6. If not checked, inapplicable.
- Add Section 8.6. If not checked, inapplicable.
A., pertaining to the definitions in Article One, is amended, in part, as follows:
"Act" is amended in its entirety, as follows: ""Act" means applicable California and local
laws, including but not limited to the California Constitution, the California Government
Code, the California Public Utilities Code, the Charter of the City of Palo Alto and the
Palo Alto Municipal Code under which Party B was created, organized and authorized to
enter into this First Amended Master Agreement and each Transaction hereunder."
"Special Fund", line 5: Add a second sentence, as follows: "For purposes of this
Schedule M, Party A acknowledges that Party B's Enterprise Fund meets the definition
of "Special Fund."
C., pertaining to the representations and warranties to Section 10.2, is amended, as follows:
Line 7: after "without limitation" add "and to the extent applicable,".
D., pertaining to Section 3.4, is amended, as follows:
Line 8: after "Agreement" add "to the extent the same are not codified in the Palo Alto
Municipal Code" and delete the rest of the paragraph, including clause (ii).
E., pertaining to the addition of Section 3.6, is amended, as follows:
Lines 8- 12 shall be amended in its entirety, as follows:
"any breach of clause (ii) herein shall be deemed to have arisen during a fiscal period
of Governmental Entity or Public Power System for which such budgetary approval or
certification of its obligations under this First Amended and Restated Master
Agreement is required to be in effect and an Event of Default shall be deemed to have
occurred for purposes of Section 5.1 under which Governmental Entity or Public
Power System shall be treated as the Defaulting Party."
G., pertaining to Section 10.6, does not apply.
SCHEDULE P PRODUCTS AND RELATED DEFINITIONS
The following defined terms are added to Schedule P:
“CAISO” means the California Independent System Operator Corporation, or its
successor.
“CAISO Tariff” means the Federal Energy Regulatory Commission-approved tariff of
CAISO, including all CAISO protocols, as the same may be amended from time to time.
“CAISO Energy” means a Transaction in which the Seller shall sell and the Buyer shall
purchase a quantity of Energy equal to the hourly quantity without Ancillary Services (as defined
in the CAISO Tariff) that is or will be scheduled as a schedule coordinator to schedule
coordinator transaction pursuant to the CAISO Tariff as amended from time to time for which the
only excuse for failure to deliver or receive is an “Uncontrollable Force” (as defined in the
CAISO Tariff) called by the CAISO in accordance with the CAISO Tariff.
“HLH (Heavy Load Hour)” is defined as energy delivered from hours ending (HE)
0700- 2200 Monday-Saturday, excluding NERC holidays, PPT.
“IST” means Inter-Scheduling Coordinator Trade shall mean a trade between
Scheduling Coordinators of Energy or Ancillary Services in accordance with the CAISO Tariff.
“LLH (Light Load Hour)” is defined as energy delivered from hours ending (HE) 0100-
0600 and 2300-2400 Monday-Saturday, all day Sunday and NERC holidays, PPT.
“NP15 Zone Delivery Point” means the NP15 Zone; provided, however, if CAISO
implements trading hubs under a locational marginal pricing design during the Delivery Period,
the Delivery Point shall be the Existing Zone Generation NP15 Trading Hub (“NP15 EZ Gen
Hub”), as such trading hub is contemplated by the CAISO in its filing made to the FERC dated
March 15, 2005 (“Comprehensive Design Proposal for Inter-Scheduling Coordinator Trades
Under the California Independent System Operator Corporation’s Market Redesign and
Technology Upgrade, Docket No. ER02-1656-025”); provided further, if the NP15 EZ Gen Hub
(under any name) is not established as part of a market redesign that is implemented during the
Delivery Period, the Parties agree to promptly work together in good faith to designate an
alternate Delivery Point to reasonably approximate the characteristics of the NP-15 Zone.
"West Firm", or “WSPP Schedule C” or “Schedule C” or “WSPPC-Firm” or any
similar description means with respect to a Transaction, a Product that is or will be scheduled as
firm energy consistent with the most recent rules adopted by the WECC for which the only
excuses for failure to deliver or receive are if an interruption is (i) due to an Uncontrollable Force
as provided in Section 10 of the WSPP Agreement; or (ii) where applicable, to meet Seller's
public utility or statutory obligations to its customers. Notwithstanding any other provision in this
Agreement, if Seller exercises its right to interrupt to meet its public utility or statutory
obligations, Seller shall be responsible for payment of damages for failure to deliver firm energy
as provided in Article 4 of this Agreement.
"WECC" means the Western Electricity Coordinating Council.
"WSPP Agreement" means the Western Systems Power Pool Agreement as amended
from time to time.
EXHIBIT A FIRST AMENDED AND RESTATED MASTER POWER PURCHASE AND SALE
AGREEMENT CONFIRMATION LETTER
EXHIBIT B RESOURCE ADEQUACY (“RA”) CAPACITY
The Parties acknowledge and agree that after the execution of this Master Agreement, they may
enter into one or more contracts or confirmations concerning Resource Adequacy, which products,
terms, conditions and definitions shall be documented in an Resource Adequacy Form of
Confirmation (“RA Confirm”) or substantially similar form executed as of the Confirmation
Effective Date containing terms and conditions substantially similar to those set forth in the RA
Confirm attached at Exhibit B.
EXHIBIT C RENEWABLE ENERGY CERTIFICATE (“REC”)
On or after the Effective Date, Party B may secure the appropriate authorization and approval to
buy and/or sell RECs (bundled and unbundled); provided, however, that the purchase and/or sale
of such RECs shall be subject to the approval of Party B’s City Manager. The form of any REC
purchase and/or sale transaction shall be mutually agreed to by the Parties.
IN WITNESS WHEREOF, the Parties have caused this First Amended and Restated Master Agreement to be duly executed as of
the date first above written.
Party B: City of Palo Alto
Approval as to Form:
By: ……………………………..
Name: Grant Kolling
Title: Sr. Asst. City Attorney
Date: _________, 2013
Party A: Powerex Corp.
By: ……………………………..
Name: ……………………………..
Title: ……………………………..
Date: ________, 2013
Party B: City of Palo Alto
Approval by City Manager:
By: ……………………………..
Name: James Keene
Title: City Manager
Date: ________, 2013
Party B: City of Palo Alto
Approval by Mayor:
By: ……………………………..
Name: James Keene, City Manager, for
Title: Mayor
Date: ________, 2013
Party B: City of Palo Alto
Approval by Administrative Services Director:
By: ……………………………..
Name: Lalo Perez
Title: Administrative Services Director
Date: _________, 2013
Party B: City of Palo Alto
Approval by Utilities Director:
By: ……………………………..
Name: Valerie Fong
Title: Utilities Director
Date: _______, 2013
DISCLAIMER: This Master Power Purchase and Sale Agreement was prepared by a committee of representatives of
Edison Electric Institute (“EEI”) and National Energy Marketers Association (“NEM”) member companies to facilitate
orderly trading in and development of wholesale power markets. Neither EEI nor NEM nor any member company nor
any of their agents, representatives or attorneys shall be responsible for its use, or any damages resulting therefrom. By
providing this Agreement EEI and NEM do not offer legal advice and all users are urged to consult their own legal counsel
to ensure that their commercial objectives will be achieved and their legal interests are adequately protected.
THIS PAGE WAS INTENTIONALLY LEFT BLANKED.
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CITY OF PALO ALTO RFP #145153
THIRD AMENDED AND RESTATED MASTER POWER PURCHASE AND SALE AGREEMENT
(EEI Version 2.1, modified 4/25/00)
AMENDED AND RESTATED COVER SHEET
This Third Amended and Restated Master Power Purchase and Sale Agreement (“Third Amended and Restated Master
Agreement”) is entered into as of ________, 2013 (the “Effective Date”), and amends, restates and supersedes in its
entirety that certain Amended and Restated Master Power Purchase and Sale Agreement made as of February 8, 2004, as
amended on July 5, 2007 (“Amended and Restated Master Agreement”). This Third Amended and Restated Master
Agreement, together with the exhibits, schedules, annexes and any written supplements hereto, the Party A Tariff, any
designated collateral, credit support or margin agreement or similar arrangement between the Parties and all Transactions
(including any confirmations accepted in accordance with Section 2.3 hereto) shall be referred to as the “Agreement.”
The Parties to this Third Amended and Restated Master Agreement are the following:
Name: Shell Energy North America (US), L.P. (“Shell
Energy” or “Party A”)
Name: City of Palo Alto (“Counterparty” or “Party B”)
All Notices:
Attn: Contracts North America
Street: 1000 Main, 12th Floor
City: Houston, Texas 77002
Phone: 877-504-2491
Facsimile: (713) 767-5414
Duns: 83-756-5548
Federal Tax ID Number: 76-0480645
All Notices:
Attn: Assistant Director, Resource Management
Department of Utilities
City of Palo Alto
250 Hamilton Avenue, 3rd Floor
Palo Alto, CA 94301
Phone: (650) 329-2214
Facsimile: (650) 326-1507
Duns: 17-892-8479
Federal Tax ID Number: 94-6000389
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: General Counsel
Phone: (713) 767-5400
Facsimile: 713-230-2900
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Senior Assistant City Attorney/Utilities
City of Palo Alto
Phone: (650) 329-2171
Facsimile: (650) 329-2646
Invoices:
Attn: Power Accounting
Phone: (713) 767-5400
Facsimile: (713) 767-5414
Invoices:
Attn: Power Accounts Administrator
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678-6420
Phone: (916) 781-4224/3636
Facsimile: (916) 781-4225
Real Time Scheduling:
Attn: 24 Hour Operations (Houston, Texas)
Phone: 1-800-267-2562
Facsimile: (713) 767-5415
Attn: 24 Hour Operations (San Diego, California)
Phone: 1-858-320-1500; Fax: 858-320-1550
Real Time Scheduling:
Attn: Chief Dispatcher/Scheduler
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678-6420
Phone: (916) 781-4237/3636
Facsimile: (916) 781-4226
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CITY OF PALO ALTO RFP #145153
Payments:
Attn: Power Accounting
Phone: (713) 767-5400
Facsimile: (713) 767-5414
Payments:
Attn: Accounts Payable
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: (916) 781-4237/3636
Facsimile: (916) 781-4226
Wire Transfer:
BNK: Citibank, N.A.
ABA: 021000089
ACCT: 30603873
Wire Transfer:
Deposit to Northern California Power Agency, “to the
benefit of City of Palo Alto”
BNK: U.S. Bank
ABA: 121122676
ACCT: 1-534-0216-2744
Attn: Cyndy Husebye
U.S. Bank
555 SW Oak Street, Suite 400
Portland, OR 97204
Phone: 877-295-2509
Facsimile: 877-324-1680
Credit and Collections:
Attn: Director – Credit Risk Management
Phone: 713-767-5400
Facsimile: 713-230-7925
Credit and Collections:
Attn: Power Accounts Administrator
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: (916) 781-4221/4224
Facsimile: (916) 781-4225
The Parties hereby agree that the General Terms and Conditions are incorporated herein, as selected, modified and
amended by the following specific provisions, as provided for in such General Terms and Conditions:
Party A Tariff: Rate Schedule FERC No. 1, dated December 2, 1995, Docket Number ER96-25-000, as amended
Party B Tariff: N/A
Article One
General Definitions Section 1.1 “Affiliates” is amended by adding the following to the end of the paragraph:
“Notwithstanding the foregoing with respect to Shell Energy, “Affiliates” shall mean Shell
Energy and its subsidiaries for purposes of Section 5.6 and Section 10.2(vi).”
Section 1.4 “Business Day” Delete the first sentence and replace it to read as follows: “Business
Day” means any day except a Saturday, Sunday, the Friday immediately following the
Thanksgiving holiday or a Federal Reserve Bank Holiday.
Section 1.10 “Contract Price” is amended by substituting “U.S. $” for “$U.S.” in line 1.
Section 1.11 “Costs” is amended by adding the following after “Party” in the third line: “after
using commercially reasonable efforts to mitigate costs.”
Section 1.12 “Credit Rating” is amended by deleting in the fourth line the word “issues” and
replacing it with the word “issuer”.
Section 1.24 “Gains” is amended by adding before the period at the end thereof the following:
“in accordance with Section 5.2”.
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CITY OF PALO ALTO RFP #145153
Section 1.27 “Letter(s) of Credit” is amended by (a) deleting the phrase “or a foreign bank with a
U.S. branch” and replacing it with the phrase “or a U.S. branch of a foreign bank (which is not
an Affiliate of either Party)” and (b) inserting the phrase “and in an amount” in the third line
after the word “form” and before the word “acceptable”.
Section 1.28 “Losses” is amended by adding before the period at end thereof the following: “in
accordance with Section 5.2”.
Section 1.45 “Performance Assurance” is amended by deleting it and replacing it in its entirety
with the following:
“Performance Assurance” means collateral in the form of either cash or Letter(s) of Credit,
which form is to be determined by the Party issuing the collateral in its sole discretion and is
reasonably acceptable to the requesting Party.”
Section 1.46 “Potential Event of Default” is amended by adding before the period at the end
thereof the following:
“provided that the failure to comply with any requirement of this Third Amended and Restated
Master Agreement or a Transaction, including the requirements of Article 8, before the
expiration of the time period expressly specified for such compliance in this Third Amended and
Restated Master Agreement or the Transaction, if any, shall not be considered a Potential Event
of Default unless and until the applicable time period has expired without compliance”.
Section 1.50 “Recording” is amended by deleting the reference to “Section 2.4” and replacing it with
“Section 2.5”.
Section 1.51 “Replacement Price” is amended by (a) inserting the phrase “for delivery” in the
second line after the word “purchases” and before the phrase “at the Delivery Point”, and (b)
deleting the phrase “at Buyer’s option” in the fifth line and inserting in their place the following:
“absent a purchase”.
Section 1.53 “Sales Price” is amended by (a) deleting the phrase “at the Delivery Point” in the
second line; and (b) deleting the phrase “at Seller’s option” in the fifth line and inserting in place
thereof the following: “absent a sale, assuming a sale could not have been made in a
commercially reasonable manner.”
Section 1.56 “Settlement Amount” is amended by deleting the words “pursuant to Section 5.2”
and by adding before the period at the end thereof the following: “, as determined in accordance
with Section 5.2.”
Article Two
Transaction Terms
and Conditions
2.2 Governing Terms. Add the following as a separate second paragraph
The Parties confirm that this Master Agreement shall supersede and replace the following prior
master power purchase and sale agreements between the Parties:
(1) The WSPP Agreement
(2) The Amended and Restated Master Agreement referenced in the first paragraph of this
Agreement.
The Parties further agree that upon the satisfaction of the condition precedent set forth in Section
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CITY OF PALO ALTO RFP #145153
10.17, except as agreed between the Parties in writing, any Transaction for the purchase or sale
of electric energy, capacity or other related products which is entered into before, on and after
the Effective Date of this Third Amended and Restated Master Agreement shall be governed by
this Third Amended and Restated Master Agreement, and is part of this single integrated
agreement between the Parties consistent with the first paragraph of this Section 2.2.
For purposes of Section 2.3 Confirmation, Party B requires that all Transactions be confirmed in
writing. Accordingly, the provision is amended by striking the word “may” from the first line
thereof and replacing it with the word “shall.”
X Optional provision in Section 2.4. If not checked, inapplicable.
Section 2.4 is amended by deleting on the seventh line immediately after the words “unless
agreed to” the words “either orally or”.
A new Section 2.6 is added to Article Two, worded as follows:
“2.6 No Oral Agreements or Modifications. Notwithstanding anything to the contrary in this
Master Agreement, including in this Article Two, this Master Agreement and any and all
Transactions may not be orally amended or modified, including by Recording pursuant to
Section 2.5.”
Article Three
Section 3.3 Force Majeure shall be amended by deleting from the last sentence the words
“resume performance of” and replacing them with the word “make up”.
Article Four
Remedies for Failure
to Deliver or
Receive
X Accelerated Payment of Damages. If not checked, inapplicable.
A new Section 4.3 is added to Article Four, worded as follows:
“4.3 Suspension of Performance. Notwithstanding, and in addition to the remedies provided
pursuant to Sections 4.1, 4.2 and 5.7, if Seller or Buyer fails to schedule, deliver or receive all or
part of the Product pursuant to a Transaction for a period of three (3) or more consecutive days
during a Delivery Period, and such failure is not excused under the terms of the Product, by the
other Party’s failure to perform or by agreement of the Parties, then upon one (1) Business Day
prior notice, and for so long as the non-performing Party fails to perform, the performing Party
shall have the right to suspend its performance under such Transaction. In the event the
performing Party suspends performance pursuant to this Section 4.3, it shall not be obligated to
resume performance until it has received notice from the non-performing Party at least one (1)
Business Day prior to the date upon which the non-performing Party intends to resume its
performance; provided that, if the performing Party has entered into a replacement contract with
a term of 31 days or less, the performing Party may resume performance at the end of the term of
such replacement contract. Remedies available under this provision to the performing Party are
in addition to, not in replacement for, other remedies specified in this Third Amended and
Restated Master Agreement.”
Article Five
Events of Default;
Remedies
X Cross Default provision of Section 5.1(g) shall apply to both Party A and Party B. The
Cross Default amount for each shall be $25,000,000.
Section 5.1(b) shall be amended by adding the words “and such breach has a material adverse
effect upon the Party to whom such representation or warranty was made”.
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CITY OF PALO ALTO RFP #145153
Section 5.1(g) shall be amended by (a) deleting in lines eight and nine the words “or becoming
capable of at such time of being declared” and (b) inserting, “or any Affiliate of such Party” after
the first appearance of the word “Party” in subsections (i) and (ii).
Section 5.1(h)(i) shall be amended by adding the words “and such breach has a material adverse
effect upon the Party to whom such representation or warranty was made”.
Section 5.1(h)(v), the last sentence, shall be amended by adding the words “made in connection
with this Third Amended and Restated Master Agreement” immediately after the words “any
guaranty”.
Section 5.1 shall be further amended by replacing the period at the end of subsection (h) with a
semi-colon, and adding new subsections “(i),” “(j)”, “(k)” and “(l)”, which read as follows:
“(i) during any consecutive ninety (90) day period, there have occurred five (5) or more
“Seller Failures” as that term is used in Section 4.1, under any or all Transactions,
regarding which the Seller shall be deemed to be the Defaulting Party, and Buyer shall
also be entitled to its remedies under Section 4.1;”
“(j) during any consecutive ninety (90) day period, there have occurred five (5) or more
“Buyer Failures” as that term is used in Section 4.2 under any or all Transactions,
regarding which the Buyer shall be deemed to be the Defaulting Party, and Seller shall
also be entitled to its remedies under Section 4.2;”
“(k) a representation or warranty with respect to the Defaulting Party's financial statement or
position that is false or materially misleading; or”
“(l) with respect to Party A, FERC shall have revoked Party A’s authorization to make sales
of electricity at market-based rates;”
Section 5.2 Declaration of an Early Termination Date and Calculation of Settlement Amounts is
amended by: (a) deleting the last sentence and replacing it with the following:
“The Non-Defaulting Party shall calculate, in a commercially reasonable manner, a Settlement
Amount for each such Terminated Transaction or group of Terminated Transactions as of the
Early Termination Date (or, to the extent that in the reasonable opinion of the Non-Defaulting
Party certain of such Terminated Transactions or group of Terminated Transactions are
commercially impracticable to liquidate and terminate or may not be liquidated and terminated
under applicable law on the Early Termination Date, then each such Transaction or group of
Terminated Transactions (individually, an “Excluded Transaction” and collectively, the
“Excluded Transactions”) shall be terminated as soon thereafter as reasonably practicable), and
upon termination shall be deemed to be a Terminated Transaction or group of Terminated
Transactions and the Termination Payment payable in connection with all such Terminated
Transactions or group of Terminated Transactions shall be calculated in accordance with Section
5.3 below. The Gains and Losses for each Terminated Transaction or group of Terminated
Transactions shall be determined by calculating, in a commercially reasonable manner, the
amount that would be incurred or realized to replace or to provide the economic equivalent of the
remaining payments or deliveries in respect of that Terminated Transaction or group of
Terminated Transactions. The Non-Defaulting Party (or its agent) may determine its Gains and
Losses by reference to information either available to it internally or supplied by one or more
third parties including, without limitation, quotations (either firm or indicative) of relevant rates,
prices, yields, yield curves, volatilities, spreads or other relevant market data in the relevant
markets. Third parties supplying such information may include, without limitation, dealers in
the relevant markets, end-users of the relevant product, information vendors and other sources of
market information. Notwithstanding the foregoing, the Non-Defaulting Party’s determination
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CITY OF PALO ALTO RFP #145153
of Gains and Losses for each Terminated Transaction or group of Terminated Transactions shall
be comparable to that which would have been obtained by comparing the value of the remaining
term, transaction quantities, and transaction prices under each Terminated Transaction or group
of Terminated Transactions had it not been terminated to the equivalent quantities and relevant
market prices for the remaining term which are reasonably expected to be available in the market
under a replacement contract for each Terminated Transaction or group of Terminated
Transactions; and (b) adding the following sentence to the end of that provision. If the Non-
Defaulting Party’s aggregate Gains exceed its aggregate Losses and Costs, if any, resulting from
the termination of this Third Amended and Restated Master Agreement, the Settlement Amount
shall be zero, notwithstanding any provision of this Third Amended and Restated Master
Agreement to the contrary.”
Section 5.3 Net Out of Settlement Amounts is amended by inserting the phrase “plus, at the
option of the Non-Defaulting Party, any cash or other form of security then available to the
Defaulting Party pursuant to Article Eight,” between the words “that are due to the Non-
Defaulting Party,” and “plus any and all other amounts” in the sixth line thereof.
Section 5.4 shall be amended by adding the following at the end:
“The Termination Payment shall bear interest at the Interest Rate from the date upon which
notice is effective until paid. Notwithstanding any provision to the contrary contained in this
Third Amended and Restated Master Agreement, the Non-Defaulting Party shall not be required
to pay to the Defaulting Party any amount under Article 5 until the Non-Defaulting Party
receives confirmation satisfactory to it acting in its reasonable discretion that all other
obligations of any kind whatsoever of the Defaulting Party to make any payments to the Non-
Defaulting Party or any of its Affiliates under this Third Amended and Restated Master
Agreement or otherwise which are due and payable as of the Early Termination Date (including
for these purposes amounts payable pursuant to Excluded Transactions) have been fully and
finally performed.”
Section 5.6 Closeout Setoff
___ Option A (Applicable if no other selection is made.)
X Option B - Affiliates shall have the meaning set forth in the Agreement unless otherwise
specified as follows: With respect to Shell Energy, “Affiliates” shall mean Shell Energy
and its subsidiaries.
___ Option C (No Setoff)
Section 5.7 shall be amended by deleting in the fifth line the number “ten (10)” and replacing it
with the number “twenty (20)”.
Article Six
Section 6.4 Disputes and Adjustments of Invoices shall be amended by deleting in the second
line the words “on the same date” and by adding in the third line the words “during any given
month” immediately after the words “all Transactions”.
Section 6.8 Transaction Netting is amended by deleting the words, “may by agreement of the
Parties,” and inserting in their place the word “shall”.
Article Seven Section 7.1 Limitations of Remedies, Liability and Damages shall be amended by (i) deleting in
the fifteenth line the words, “UNLESS EXPRESSLY HEREIN PROVIDED”, (ii) adding in the
nineteenth line the words “PROVIDED, HOWEVER, NOTHING IN THIS SECTION SHALL
AFFECT THE ENFORCEABILITY OF THE PROVISIONS OF SECTIONS 4.1 AND 4.2 OF
THIS THIRD AMENDED AND RESTATED MASTER AGREEMENT RELATING TO
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CITY OF PALO ALTO RFP #145153
REMEDIES FOR FAILURE TO DELIVER/RECEIVE, AND CALCULATION AND
PAYMENT OF THE TERMINATION PAYMENT IN SECTIONS 5.2 AND 5.3” immediately
after the words “ANY INDEMNITY PROVISION OR OTHERWISE”, and (iii) adding at the
end of the last sentence the words “AND ARE NOT PENALTIES”.
Article Eight 8.1 Party A Credit Protection:
Credit and Collateral
Requirements
Financial Information from Party B, Section 8.1(a)
___ Option A
X Option B Specify: Audited financial statements for City of Palo Alto and for City of
Palo Alto Enterprise Fund; provided, however that such entity shall only be required to
deliver the financial statements indicated in Section 8.1(a)(i); no quarterly financial
statements shall be required.
___ Option C
Credit Assurances from Party B, Section 8.1(b)
X Not Applicable
___ Applicable
Collateral Threshold for Party B, Section 8.1(c)
X Not Applicable
___ Applicable
Party B Independent Amount: N/A
Party B Rounding Amount: N/A
Party B Minimum Transfer Amount: N/A
Downgrade Event, Section 8.1(d):
__ Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party B only if (i) Party B’s underlying rating, determined
without reference to third party credit enhancement, on its utility revenue bonds (“Debt”) by
S&P or Moody’s is below BBB+ or Baa1, or (ii) Party B’s Debt ceases to be rated by both
S&P and Moody’s, or (iii) Party B’s City Council no longer has the legal authority under the
Act, as defined by Schedule M, to adjust electric rates as necessary to recover Party B’s
costs of providing retail electric service to its customers.
Section 8.1(d) is amended by adding in the fifth line the phrase “or fails to maintain such
Performance Assurance or guaranty or other credit assurance for so long as the Downgrade
Event is continuing” immediately after the words “receipt of notice”.
Guarantor for Party B, Section 8.1(e): N/A
Guarantee Amount: N/A
8.2 Party B Credit Protection:
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CITY OF PALO ALTO RFP #145153
Financial Information from Party A, Section 8.2(a):
X Option A
Option B Specify:
Option C:
Credit Assurances from Party A, Section 8.2(b):
Not Applicable
X Applicable
Collateral Threshold for Party A, Section 8.2(c):
___ Not Applicable
X Applicable
If applicable, complete the following:
Party A Collateral Threshold: means with respect to Party A, the lowest of (i) the amount
specified in the table below under the relevant heading opposite the highest of the ratings at that
time assigned by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies,
Inc. (“S&P”) and Moody’s Investors Service, Inc. (“Moody’s”) to the long term, senior,
unenhanced, unsecured debt securities of Party A, or (ii) if an Event of Default with respect to
Party A has occurred and is continuing, the Threshold with respect to such Party shall be zero.
S&P Rating Moody’s Rating Threshold
AA- or above Aa3 or above $50,000,000
A- to A+ A3 to A1 $30,000,000
BBB+ Baa1 $25,000,000
BBB Baa2 $10,000,000
BBB- Baa3 $ 2,500,000
Below BBB- Below Baa3 $ 0 (zero)
Party A Independent Amount: $0
Party A Rounding Amount: $100,000
Party A Minimum Transfer Amount: $250,000
Downgrade Event, Section 8.2(d):
___ Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party A only if the Credit Rating of Party A falls
below BBB- from S&P or Baa3 from Moody’s or if the unenhanced, unsecured senior
long-term debt obligations of Party A ceases to be rated by either S&P or Moody’s.
Section 8.2(d) is amended by adding in the fifth line the phrase “or fails to maintain such
Performance Assurance or guaranty or other credit assurance for so long as the Downgrade
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CITY OF PALO ALTO RFP #145153
Event is continuing” immediately after the words “receipt of notice”.
Guarantor for Party A, Section 8.2(e): Not Applicable
Guarantor for Party A: Not Applicable
Section 8.3 shall be amended by adding the following at the end:
“Notwithstanding the foregoing, (i) such rights and remedies may only be exercised upon
Performance Assurance provided by or on behalf of the Defaulting Party and in the possession
of, or maintained for the benefit of, the Non-Defaulting Party or its agent, (ii) the Non-
Defaulting Party may not exercise such rights and remedies against the Defaulting Party and/or
Performance Assurance provided by or on behalf of the Defaulting Party so long as the
Defaulting Party has paid all of its obligations under this Third Amended and Restated Master
Agreement then due, and (iii) the Secured Party may apply the proceeds of the collateral realized
upon the exercise of such rights and remedies in such order as it may elect.”
Article Ten
Miscellaneous Section 10.1 Term of Master Agreement is amended by replacing “upon (thirty) 30 days’ prior
written notice” in lines 2 and 3, with “, which termination shall be effective immediately upon
receipt of written notice thereof”.
Section 10.2 Representations and Warranties
Section 10.2(iii) shall be amended by adding the word “ordinance,” after the words “any law,” in
line 5 thereof.
Section 10.2(ix) shall be amended by adding after the words, “it is”, the following, “or it shall be
deemed for all purposes to be”.
Section 10.2(xi) shall be amended by deleting the “and” at the end of sub-section 10.2(xi).
Section 10.2(xii) shall be amended by replacing the period at the end of subsection 10.2(xii) with
a semicolon as follows “; and”.
Section 10.2(xiii) Section 10.2 shall be further amended by adding the following provision:
“(xiii) Notwithstanding any provision in this Agreement to the contrary, all information,
statements, reports and similar materials, conveyed by either Party in writing with respect to an
invitation for bids, request for proposals or combination thereof, or in response to a bid
solicitation document, that demonstrates such Party’s financial condition, are true and accurate in
all material respects. Any representation made by a Party regarding its financial performance or
condition or that of its corporate parent, if any, (“Financial Representation”) as an inducement to
the other Party during the solicitation, bidding or negotiation of any Transaction entered into
under this Master Agreement, and shall be deemed to be repeated and reaffirmed, as of the date
of the applicable Transaction Confirmation and to be incorporated as a representation of each
Party who makes the Financial Representation in that Transaction Confirmation without the need
for any further action by either Party.”
Section 10.4 Indemnity shall be amended by inserting the phrase “To the extent not prohibited
by law” at the beginning of each of the first two sentences.
Section 10.5 Assignment shall be amended by deleting clause (ii) and the portion of clause (iii)
prior to the words “provided, however”, and replacing them with the following:
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CITY OF PALO ALTO RFP #145153
“(ii) transfer or assign this Third Amended and Restated Master Agreement to an Affiliate of
such Party so long as (x) such Affiliate’s creditworthiness is equal to or higher than that of such
Party or the Guarantor, if any, as of the Effective Date hereof, for such Party, or (y) the
obligations of such Affiliate are guaranteed by such Party or its Guarantor, if any, in accordance
with a guaranty agreement in form and substance satisfactory to the other Party; and
(iii) transfer or assign this Third Amended and Restated Master Agreement to any person or
entity succeeding to all or substantially all of the assets of such Party whose creditworthiness is
equal to or higher than that of such Party or its Guarantor, if any, as of the Effective Date
hereof.”
Section 10.6 Governing Law is amended by deleting the words “New York” from the fourth line
thereof and replacing them with the word “California.”
Further, Section 10.6 is amended by adding the following new sentence at the end thereof:
“With respect to any proceeding in connection with any claim, counterclaim, demand, cause of
action, dispute and controversy arising out of or relating to this Third Amended and Restated
Master Agreement, the Parties hereby consent to the exclusive jurisdiction of the federal courts
sitting in the Northern District of the State of California; provided, however, that if such federal
courts sitting in the Northern District of the State of California refuse jurisdiction, the Parties
agree to the exclusive jurisdiction of the state courts sitting in the County of Santa Clara, State of
California.”
Section 10.8 General shall be amended by deleting the penultimate sentence in its entirety and
replacing it with the following sentences: “The indemnity provisions of this Third Amended and
Restated Master Agreement shall survive the termination of this Third Amended and Restated
Master Agreement for the period of the applicable statute of limitations. The audit provisions of
this Third Amended and Restated Master Agreement shall survive the termination of this Third
Amended and Restated Master Agreement for a period of twelve (12) months.”
Section 10.10 of the Master Agreement is replaced in its entirety with the following:
“10.10 Bankruptcy Issues. The Parties acknowledge and agree that (i) any Transaction with a
maturity date more than two days after the date the Transaction is entered into constitutes a
"forward contract" within the meaning of the United States Bankruptcy Code (the “Bankruptcy
Code”); (ii) all payments made or to be made by one Party to the other Party pursuant to this
Agreement are "settlement payments" within the meaning of the Bankruptcy Code; and (iii) all
transfers of Performance Assurance by one Party to the other Party under this Agreement are
"margin payments" within the meaning of the Bankruptcy Code.”
Confidentiality
X Confidentiality Applicable, subject Section
10.11 as amended.
If not checked, inapplicable.
Section 10.11 shall be replaced in its entirety with the following:
“Party A acknowledges that Party B is subject to California Constitution Article 1,
Section 3, and the California Public Records Act, Cal. Gov. Code § 6250 et seq.
(“Public Records Act”) in regard to the documents comprising this Third Amended and
Restated Master Agreement and the Transactions, which items may constitute public
records subject to inspection and copying by the public under the authority of the
California Constitution and the Public Records Act. Party B shall, consistent with those
laws, use reasonable efforts to provide Party A with notice of any third party request to
inspect and copy any of the documents that comprise this Third Amended and Restated
Master Agreement and the Transactions, which Party A might deem confidential and
exempt from disclosure, in order that Party A may timely seek to protect those
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documents from disclosure to the third party. Party A acknowledges and agrees that
Party B shall not be liable to Party A if Party B makes disclosure in accordance with the
California Constitution and/or the Public Records Act before Party A has timely
obtained an order to prevent Party B from making the requested disclosure to the third
party.”
The following provision is added as Section 10.12:
Index Transactions. If the Contract Price for a Transaction is determined by reference to a
Price Source, then:
(a) Market Disruption. If a Market Disruption Event occurs on any one or more days
during a Determination Period (each day, a “Disrupted Day”), then:
The fallback Floating Price, if any, specified by the Parties in the
relevant Confirmation shall be the Floating Price for each
Disrupted Day.
If the Parties have not specified a fallback Floating Price, then the
Parties will endeavor, in good faith and using commercially reasonable
efforts, to agree on a substitute Floating Price, taking into consideration,
without limitation, guidance, protocols or other recommendations or
conventions issued or employed by trade organizations or industry
groups in response to the Market Disruption Event and other prices
published by the Price Source or alternative price sources with respect
to the Delivery Point or comparable Delivery Points that may permit the
Parties to derive the Floating Price based on historical differentials.
If the Price Source retrospectively issues a Floating Price in respect of a
Disrupted Day (a “Delayed Floating Price”) before the Parties agree on
a substitute Floating Price for such day, then the Delayed Floating Price
shall be the Floating Price for such Disrupted Day. If a Delayed Price is
issued by the Price Source in respect of a Disrupted Day after the
Parties agree on a substitute Floating Price for such day, the substitute
Floating Price agreed upon by the Parties will remain the Floating Price
without adjustment unless the Parties expressly agree otherwise.
If the Parties cannot agree on a substitute Floating Price and the Price
Source does not retrospectively publish or announce a Floating Price, in
each case, on or before the fifth Business Day following the first
Trading Day on which the Market Disruption Event first occurred or
existed,
then the Floating Price for each Disrupted Day shall be determined by
taking the arithmetic mean of quotations requested from four leading
dealers in the relevant market that are unaffiliated with either Party
and mutually agreed upon by the Parties (“Specified Dealers”),
without regard to the quotations with the highest and lowest values,
subject to the following qualifications:
o If exactly three quotations are obtained, the Floating Price for
each such Disrupted Day will be the quotation that remains
after disregarding the quotations having the highest and lowest
values.
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CITY OF PALO ALTO RFP #145153
o If fewer than three quotations are obtained, the Floating Price for
each such Disrupted Day will be the average of the quotations
obtained.
o If the Parties cannot agree upon four Specified Dealers, then each
of the Parties will, acting in good faith and in a commercially
reasonable manner, select up to two Specified Dealers
separately, and those selected dealers shall be the Specified
Dealers.
Unless otherwise agreed, if at any time the Parties agree on a substitute
Floating Price for any Disrupted Day, then such substitute Floating Price
shall be the Floating Price for such Disrupted Day, notwithstanding the
subsequent publication or announcement of a Delayed Floating Price by
the relevant Price Source or any quotations obtained from Specified
Dealers.
"Determination Period" means each calendar month a part or all of which is within
the Delivery Period of a Transaction.
"Exchange" means, in respect of a Transaction, the exchange or principal trading
market specified as applicable to the relevant Transaction.
"Floating Price" means a Contract Price specified in a Transaction that is based
upon a Price Source.
"Market Disruption Event" means, with respect to any Price Source, any of the
following events:
(a) the failure of the Price Source to announce, publish or make available the
specified Floating Price or information necessary for determining the
Floating Price for a particular day;
(b) the failure of trading to commence on a particular day or the permanent
discontinuation or material suspension of trading in the relevant options
contract or commodity on the Exchange, RTO or in the market specified for
determining a Floating Price;
(c) the temporary or permanent discontinuance or unavailability of the Price
Source;
(d) the temporary or permanent closing of any Exchange or RTO specified
for determining a Floating Price; or
(e) a material change in the formula for or the method of determining the
Floating Price by the Price Source or a material change in the composition
of the Product.
"Price Source" means, in respect of a Transaction, a publication or such other origin
of reference, including an Exchange or RTO, containing or reporting or making
generally available to market participants (including by electronic means) a price,
or prices or information from which a price is determined, as specified in the
relevant Transaction.
“RTO” means any regional transmission operator or independent system operator.
“RTO Transaction” means a Transaction in which the Price Source is an RTO.
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CITY OF PALO ALTO RFP #145153
"Trading Day" means a day in respect of which the relevant Price Source ordinarily
would announce, publish or make available the Floating Price.
(b) Corrections to Published Prices. If the Floating Price published, announced or
made available on a given day and used or to be used to determine a relevant price
is subsequently corrected by the relevant Price Source (i) within 30 days of the
original publication, announcement or availability, or (ii) in the case of RTO
Transactions only, within such longer time period as is consistent with the RTO’s
procedures and guidelines, then either Party may notify the other Party of that
correction and the amount (if any) that is payable as a result of that correction. If,
not later than thirty (30) days after publication or announcement of that correction, a
Party gives notice that an amount is so payable, the Party that originally either
received or retained such amount will, not later than three (3) Business Days after
such notice is effective, pay, subject to any applicable conditions precedent, to the
other Party that amount, together with interest at the Interest Rate for the period
from and including the day on which payment originally was (or was not) made to
but excluding the day of payment of the refund or payment resulting from that
correction. Notwithstanding the foregoing, corrections shall not be made to any
Floating Prices agreed upon by the Parties or determined based on quotations from
Specified Dealers pursuant to paragraph (a) above unless the Parties expressly agree
otherwise.
(c) Rounding. When calculating a Floating Price, all numbers shall be rounded to
four (4) decimal places. If the fifth (5th) decimal number is five (5) or greater, then
the fourth (4th) decimal number shall be increased by one (1), and if the fifth (5th)
decimal number is less than five (5), then the fourth (4th)] decimal number shall
remain unchanged.
A new Section 10.13 is added as follows:
“10.13. No Agency. In performing their respective obligations hereunder, neither Party
is acting, or is authorized to act, as agent of the other Party.”
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CITY OF PALO ALTO RFP #145153
A new Section 10.14 shall be added to Article 10 as follows:
10.14 Dispute Resolution. In the event of any controversy or claim, whether based in contract,
tort, or otherwise, arising out of or based upon, or relating to this Agreement or the scope,
breach, termination or validity of each of them (a “Dispute”), the Parties will resolve such
Dispute as set forth below; provided, however, that nothing in this Section 10.14 shall prevent or
preclude a Party from pursuing the rights and remedies set forth under Article Five.
10.14.1 Negotiation. The Parties will attempt in good faith to resolve the Dispute promptly by
negotiations between duly authorized representatives of the Parties who have authority to settle
the Dispute. When a Party believes there is a Dispute, that Party will give the other Party written
notice describing the Dispute with reasonable particularity. Within thirty (30) Days after receipt
of such notice, the receiving Party will submit a written response to the other Party.
10.14.2 Mediation. If the Dispute is not resolved within forty-five (45) Days of the date of the
response given pursuant to Section 10.13.1, or such additional time, if any, that the Parties
mutually agree to in writing, the Parties shall try in good faith to settle the Dispute by mediation.
The form of mediation and the mediator(s) selected to resolve the Dispute shall be acceptable to
both Parties.
10.14.3 Additional Rights. If the Dispute is not resolved through mediation within ninety (90)
Days after the first meeting of the Parties and mediator(s), or such additional time, if any, that
the Parties mutually agree to in writing, either Party shall be free to pursue any and all legal
actions and remedies as it may deem necessary.
A new Section 10.15 shall be added to Article 10 as follows:
10.15: “The Parties acknowledge and agree that any purchase of power made pursuant to Party
B’s Request for Proposals under this Agreement as well as any Transaction hereunder shall be
executed and delivered in compliance with applicable laws and regulations in effect at the time
this Agreement is signed by the Parties and at the time any Transaction is executed, including
Senate Bill 1368 (California Public Utilities Code section 8340 et seq.) and Title 20, Sections
2900 et seq. of the California Code of Regulations, as amended, to the extent that such laws and
regulations, including SB 1368, apply or are deemed to apply to this Agreement and any
Transaction. To the extent said regulation requires Party B as a local publicly owned electric
utility to submit a compliance filing in accordance with such laws, Party A, upon the request of
Party B, shall in good faith promptly provide to Party B (to the extent Party B lacks such
information) the information to the extent Party A has knowledge of or access to such
information. A failure by Party A to provide such information which is within its possession or
knowledge shall constitute a default under this Agreement.”
A new Section 10.16 shall be added to Article 10 as follows:
“10.16 Mobile-Sierra. The Parties intend that the standard of review for changes to any rate,
charge, classification, term or condition of this Agreement at FERC shall be the most stringent
standard permissible under applicable law. As to the Parties, it is understood and agreed that the
standard of review shall solely be the application of the “Mobile-Sierra” public interest standard
of the “just and reasonable” standard of review, as stated by the United States Supreme Court in
United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956), and Federal Power
Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956), and clarified by Morgan Stanley
Capital Group, Inc. v. Public Util. Dist. No. 1 of Snohomish, 554 U.S. 527, 128 S.Ct. 2733
(2008); and consistent with the order of the Supreme Court in NRG Power Marketing, LLC, et
al., v. Maine Public Utilities Commission et al., No. 08-674, 130 S.Ct. 693 (2010) (“NRG
Order”). As to all other persons, the Parties intend and agree that the same standard, to the
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CITY OF PALO ALTO RFP #145153
maximum degree as may be made applicable to other than the Parties, apply, to the maximum
degree permitted under the NRG Order.
A new Section 10.17 is added as follows:
“10.17. Condition Precedent. It shall be a condition precedent to the effectiveness of this Third
Amended and Restated Master Agreement and each Transaction that Party A shall have received
a copy of a resolution authorizing Party B to enter into this Third Amended and Restated Master
Agreement with Party A.
A new Section 10.18 is added as follows:
"10.18. Commercial Entity. The Parties understand and agree that the Transactions under this
Agreement are physical transactions intended for delivery or deferred delivery, and that the
Parties contemplate making or taking physical delivery of electric energy; provided, however,
that the Parties understand that certain Transactions may be determined to be swaps by a third
party such as the Commodities Futures Trading Commission, regardless of either Party’s intent.
Party B is a commercial entity engaged in the business of delivering electricity to retail
customers and buying electricity products with the intention of routinely taking delivery in order
to provide service to its retail electric customers."
Schedule M ___ Party A is a Governmental Entity or Public Power System
X Party B is a Governmental Entity, Schedule M Applicable
Part A Part A of Schedule M is amended by including the following definition for the term “Act”:
“Act” means the Constitution of the State of California, the California statute(s) and
municipal ordinances under which Party B was created, organized and authorized to enter into
this Third Amended and Restated Master Agreement and each Transaction thereunder.
Part A is further amended by adding the following sentence to the end of the definition of the
term “Special Fund”:
“Party A has conducted such investigation as it deems necessary of the City of Palo Alto
Enterprise Fund and the Act under which such Special Fund was established to determine, for
its purposes under this Third Amended and Restated Master Agreement, that such Special
Fund meets this definition of Special Fund.”
Part C Part C of Schedule M is amended by adding the phrase “and to the extent applicable,”
immediately following the word “limitation” in clause (i).
Part E X Section 3.6 under Part E of Schedule M applies; however, the portion of that provision
following the semicolon on the eighth line thereof is replaced in its entirety with the
following:
“any breach of clause ‘(ii)’ of this provision shall be deemed to have arisen during a fiscal
period of Governmental Entity or Public Power System for which such budgetary approval or
certification of its obligations under this Third Amended and Restated Master Agreement is
required to be in effect and an Event of Default shall be deemed to have occurred for
purposes of Section 5.1 under which Governmental Entity or Public Power System shall be
treated as the Defaulting Party.”
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Part F ___ Add Section 8.4. If not checked, inapplicable.
Part G Part G does not apply.
Schedule P
Products and
Related Definitions
SCHEDULE P
PRODUCTS AND RELATED DEFINITIONS
The following defined terms are added to Schedule P:
"CAISO Energy" means with respect to any Transaction, a Product under which the
Seller shall sell and the Buyer shall purchase a quantity of energy equal to the hourly
quantity without Ancillary Services (as defined in the Tariff) that is or will be scheduled
as a schedule coordinator to schedule coordinator transaction pursuant to the applicable
tariff and protocol provisions of the California Independent System Operator
Corporation ("CAISO") (as amended from time to time, the "Tariff") for which the only
excuse for failure to deliver or receive is an "Uncontrollable Force" (as defined in the
Tariff).
“HLH (Heavy Load Hour)” is defined as hours ending (HE) 0700 through HE 2200 PPT
Mondays through Saturdays, excluding NERC Holidays.
“IST” means “Inter-Scheduling Coordinator Trade” as defined in the Tariff.
“LLH (Light Load Hour)” is defined as hours ending HE 0100 through HE 0600 PPT and HE
2300 through HE 2400 Monday through Saturday, and all hours on Sundays and NERC
Holidays.
“NERC Holidays” for each year shall be the holidays for such year set forth or described on the
North America Electric Reliability Council (“NERC”) website at www.nerc.com.
“NP15 Zone Delivery Point” means the Zone Generation NP15 Trading Hub (“NP15 EZ Gen
Hub”), as such trading hub is contemplated by the CAISO in its filing made to the FERC dated
March 15, 2005 (“Comprehensive Design Proposal for Inter-Scheduling Coordinator Trades
Under the California Independent System Operator Corporation’s Market Redesign and
Technology Upgrade, Docket No. ER02-1656-025).
“Other Products” If the Parties agree to a service level/product defined by reference to a different
agreement (for example, the WSPP Agreement) for a particular Transaction, then, unless the
Parties expressly state and agree that all the terms and conditions of such other agreement will
apply, such reference to a service level/product shall be as defined by such other agreement,
including if applicable, the regional reliability requirements and guidelines as well as the specific
excuses for performance, Force Majeure, Uncontrollable Forces, or other such excuses
applicable to such other agreement, to the extent inconsistent with the terms of this Agreement,
but all other terms and conditions of this Agreement remain applicable.
“PPT’ means Pacific Prevailing Time.
“Resource Adequacy (“RA”) Capacity” means with respect to a negotiated RA transaction, the
products, terms, conditions and definition set forth in an RA Confirm, substantially in the form
of Exhibit B, executed as of the Confirmation Effective Date.
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CITY OF PALO ALTO RFP #145153
"West Firm” or any similar description means with respect to a Transaction, a Product that is or
will be scheduled as firm energy consistent with the most recent rules adopted by the WECC for
which the only excuses for failure to deliver or receive are if an interruption is (i) due to an
Uncontrollable Force as provided in Section 10 of the WSPP Agreement; or (ii) where
applicable, to meet Seller's public utility or statutory obligations to its customers.
Notwithstanding any other provision in this Agreement, if Seller exercises its right to interrupt to
meet its public utility or statutory obligations, Seller shall be responsible for payment of damages
for failure to deliver firm energy as provided in Article 4 of this Agreement.
"WECC" means the Western Electricity Coordinating Council, formerly Western Systems
Coordinating Council, or its successor.
"WSPP Agreement" means the Western Systems Power Pool Agreement as amended from time
to time.
EXHIBIT B
RESOURCE ADEQUACY (“RA”) CAPACITY
The Parties acknowledge and agree that after the execution of this Master Agreement, they may
enter into one or more contracts or confirmations concerning RA, which products, terms,
conditions and definitions shall be documented in an Resource Adequacy Form of Confirmation
(“RA Confirm”) or substantially similar form executed as of the Confirmation Effective Date
containing terms and conditions substantially similar to those set forth in the RA Confirm
attached at Exhibit B.
EXHIBIT C
RENEWABLE ENERGY CERTIFICATE (“REC”)
On or after the Effective Date, Party B may secure the appropriate authorization and approval to
buy and/or sell RECs (bundled and unbundled); provided, however, that the purchase and/or sale
of such RECs shall be subject to the approval of Party B’s City Manager. The form of any REC
purchase and/or sale transaction shall be mutually agreed to by the Parties.
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CITY OF PALO ALTO RFP #145153
IN WITNESS WHEREOF, the Parties have caused this Third Amended and Restated Master Agreement to be duly
executed as of the Effective Date.
Party B: City of Palo Alto
Approval as to Form:
By: ……………………………..
Name: Grant Kolling
Title: Sr. Asst. City Attorney
Date: ____________, ____
Party A: Shell Energy North America (US), L.P.
By: ……………………………..
Name: ……………………………..
Title: ……………………………..
Date: ____________, ____
Party B: City of Palo Alto
Approval by City Manager:
By: ……………………………..
Name: James Keene
Title: City Manager
Date: ____________, ____
Party B: City of Palo Alto
Approval by Administrative Services Director:
By: ……………………………..
Name: Lalo Perez
Title: Administrative Services Director
Date: ____________, ____
Party B: City of Palo Alto
Approval by Utilities Director:
By: ……………………………..
Name: Valerie Fong
Title: Utilities Director
Date: ____________, ____
DISCLAIMER: This Master Power Purchase and Sale Agreement was prepared by a committee of
representatives of Edison Electric Institute (“EEI”) and National Energy Marketers Association (“NEM”)
member companies to facilitate orderly trading in and development of wholesale power markets. Neither EEI
nor NEM nor any member company nor any of their agents, representatives or attorneys shall be responsible for
its use, or any damages resulting therefrom. By providing this Agreement EEI and NEM do not offer legal advice
and all users are urged to consult their own legal counsel to ensure that their commercial objectives will be
achieved and their legal interests are adequately protected.
THIS PAGE WAS INTENTIONALLY LEFT BLANKED.
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CITY OF PALO ALTO RFP # __________
MASTER POWER PURCHASE AND SALE AGREEMENT
(EEI Version 2.1, modified 4/25/00)
COVER SHEET
This Master Power Purchase and Sale Agreement (“Master Agreement”) is made as of the following date: _____ __,
2013 (“Effective Date”). The Master Agreement, together with the exhibits, schedules, annexes and any written
supplements hereto, the Party A Tariff, if any, the Party B Tariff, if any, any designated collateral, credit support or
margin agreement or similar arrangement between the Parties and all Transactions (including any confirmations accepted
in accordance with Section 2.3 hereto) shall be referred to as the “Agreement.” The Parties to this Master Agreement are
the following:
Name: Turlock Irrigation District(“Counterparty ” or
“Party A”)
Name: City of Palo Alto (“Counterparty” or “Party B”)
All Notices:
Attn: Resource Planning Department Manager
Phone: 209-883-8348
Facsimile: 209-656-2147
E-mail: wgmanuel@tid.org
Duns 046004933
Federal Tax ID Number: 94-6001460
All Notices:
Attn: Assistant Director, Resource Management
Department of Utilities
City of Palo Alto
250 Hamilton Avenue, 3rd Floor
Palo Alto, CA 94301
Phone: 650-329-2214
Facsimile: 650-326-1507
Duns: 17-892-8479
Federal Tax ID Number: 94-6000389
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Assistant General Manager, Resource
Planning Management and Rates
Phone: 209-883-8210
Facsimile: 209-656-2147
With additional Notices of an Event of Default or
Potential Event of Default to:
Attn: Senior Assistant City, Attorney/Utilities
City of Palo Alto
Phone: 650-329-2171
Facsimile: 650-329-2646
Invoices:
Attn: Michelle Gonzales
333 East Canal Drive
PO Box 949
Turlock, CA 95380
Phone: 209-883-8315
Facsimile: 209-656-2147
E-mail: mgonzales@tid.org
Duns 046004933
Federal Tax ID Number: 94-6001460
Invoices:
Attn: Power Accounts Administrator
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678-6420
Phone: (916) 781-4224/3636
Facsimile: (916) 781-4225
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CITY OF PALO ALTO RFP # __________
Day Ahead Pre-Scheduling:
Attn: Scheduling Department
Phone: 209-883-8399
Facsimile: 209-656-2195
E-mail:scheduling@tid.org
Day Ahead Pre-Scheduling:
Confirmations:
Attn: Pre-Scheduler Desk
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4211/4230/4232
Facsimile: 916-781-4255
Real Time Scheduling:
Attn: Scheduling Department
Phone: 209-883-8507
Facsimile: 209-656-2195
E-mail: scheduling@tid.org
Real Time Scheduling:
Attn: Chief Dispatcher/Scheduler
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4237/3636
Facsimile: 916-781-4226
Payments:
Attn: Michelle Gonzales
333 East Canal Drive
PO Box 949
Turlock, CA 95380
Phone: 209-883-8315
Facsimile: 209-656-2147
E-mail: mgonzales@tid.org
Payments:
Attn: Accounts Payable
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4237/3636
Facsimile: 916-781-4226
Wire Transfer:
BNK Bank of America
ABA: 0260-0959-3
ACCT: 0832280151
Wire Transfer:
Deposit to Northern California Power Agency, “to the
benefit of City of Palo Alto”
BNK U.S. Bank
ABA: 121122676
ACCT: 1-534-0216-2744
Attn: Cyndy Husebye
U.S. Bank
555 SW Oak Street, Suite 400
Portland, OR. 97204
Phone: 877-295-2509
Facsimile: 877-324-1680
Credit and Collections:
Attn: Don Swanson
333 East Canal Drive
PO Box 949
Turlock, CA 95380
Phone: 209-883-8209
Facsimile: 209-656-2158
Credit and Collections:
Attn: Power Accounts Analyst
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Phone: 916-781-4221/4224
Facsimile: 916-781-4255
The Parties hereby agree that the General Terms and Conditions are incorporated herein, as selected, modified and
amended by the following specific provisions, as provided for in such General Terms and Conditions:
Party A Tariff: N/A
Party B Tariff: N/A
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CITY OF PALO ALTO RFP # __________
Article One
General Definitions Section 1.4 “Business Day” Delete the first sentence and replace it to read as follows: “Business
Day” means any day except a Saturday, Sunday, the Friday immediately following the
Thanksgiving holiday or a Federal Reserve Bank Holiday.
Section 1.10 is amended by substituting “U.S. $” for “$U.S.” in line 1
Section 1.11 is amended by adding the following after “Party” in the third line: “after using
commercially reasonable efforts to mitigate costs”.
Section 1.12 is amended by deleting in the fourth line the word “issues” and replacing it with the
word “issuer”.
Section 1.24 is amended by adding before the period at the end thereof the following: “in
accordance with Section 5.2”.
Section 1.27 is amended by inserting the phrase “and in an amount” in the third line after the
word “form” and before the word “acceptable”.
Section 1.28 is amended by adding before the period at end thereof the following: “in accordance
with Section 5.2”.
Section 1.45 is replaced by the following sentence:
“Performance Assurance means collateral in the form of either cash or Letter(s) of
Credit, which form is to be determined by the Party issuing the collateral in its sole
discretion and is reasonably acceptable to the Requesting Party.”
Section 1.46 is amended by adding before the period at the end thereof the following:
“; provided that the failure to comply with any requirement of this Master Agreement or
a Transaction, including the requirements of Article 8, before the expiration of the time
period expressly specified for such compliance in this Master Agreement or the
Transaction, if any, shall not be considered a Potential Event of Default unless and until
the applicable time period has expired without compliance”.
Section 1.50 is amended by deleting the reference to “Section 2.4” and replacing it with “Section
2.5”.
Section 1.51 is amended by (a) inserting the phrase “for delivery” in the second line after the
word “purchases” and before the phrase “at the Delivery Point”, and (b) deleting the phrase “at
Buyer’s option” in the fifth line and inserting in their place the following: “absent a purchase”.
Section 1.53 is amended by (a) deleting the phrase “at the Delivery Point” in the second line, (b)
adding the words “and losses” after the words “transmission charges” in the fourth line and (c)
deleting the phrase “at Seller’s option” in the fifth line and inserting in their place the following:
“absent a sale, assuming a sale could not have been made in a commercially reasonable manner”.
Section 1.56 is amended by deleting the words “pursuant to Section 5.2” and by adding before
the period at the end thereof the following: “, as determined in accordance with Section 5.2”.
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Article Two
Transaction Terms
and Conditions
For purposes of Section 2.3, Party B requires that all Transactions be confirmed in writing.
Accordingly, the provision is amended by striking the word “may” from the first line thereof and
replacing it with the word “shall.”
For purposes of Section 2.3, all references to Seller shall be instead to Party A and all references
to Buyer shall be instead to Party B
X Optional provision in Section 2.4. If not checked, inapplicable.
A new Section 2.6 is added to Article Two, worded as follows:
“2.6 No Oral Agreements or Modifications. Notwithstanding anything to the contrary in
this Master Agreement, including in this Article Two, this Master Agreement and any and
all Transactions may not be orally amended or modified, including by Recording pursuant
to Section 2.5.”
Article Four
Remedies for Failure
to Deliver or
Receive
X Accelerated Payment of Damages. If not checked, inapplicable.
A new Section 4.3 is added to Article Four, worded as follows:
“4.3 Suspension of Performance. In addition to the remedies provided pursuant to
Sections 4.1, 4.2 and 5.7, if Seller or Buyer fails to schedule, deliver or receive all or part
of the Product pursuant to a Transaction for a period of three (3) or more consecutive days,
and such failure is not excused under the terms of the Product, by Force Majeure, by the
other Party’s failure to perform or by agreement of the Parties, then upon one (1) Business
Day’s prior written notice, and for so long as the non-performing Party fails to perform,
the performing Party shall have the right to suspend its performance under such
Transaction. In the event the performing Party suspends performance pursuant to this
Section 4.3, it shall not be obligated to resume performance until it has received notice
from the non-performing Party at least one (1) Business Day prior to the date upon which
the non-performing Party intends to resume its performance; provided that, if the
performing Party has entered into a replacement contract with a term of 31 days or less,
the performing Party may resume performance at the end of the term of such replacement
contract. Remedies available under this provision to the performing Party are in addition
to, not in replacement of, other remedies specified in this Agreement.”
Article Five
Events of Default;
Remedies
X Cross Default provision of Section 5.1(g) shall apply for both Party A and Party B.
Cross Default amount for each shall be $20,000,000.
Section 5.1(g) is amended by inserting, “or any Affiliate of such Party” after the first appearance
of the word “Party” in subsections (i) and (ii)..
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CITY OF PALO ALTO RFP # __________
Section 5.1 is further amended by replacing the period at the end of subsection (h) with a semi-
colon, and adding new subsections “(i),” “(j)" , and “(k)” , which read as follows:
"(i) during any consecutive ninety (90) day period, there have occurred five (5) or more
“Seller Failures” as that term is used in Section 4.1, under any or all Transactions,
regarding which the Seller shall be deemed to be the Defaulting Party, and Buyer shall
also be entitled to its remedies under Section 4.1;"
"(j) during any consecutive ninety (90) day period, there have occurred five (5) or more
“Buyer Failures” as that term is used in Section 4.2 under any or all Transactions,
regarding which the Buyer shall be deemed to be the Defaulting Party, and Seller shall
also be entitled to its remedies under Section 4.2;”
"(k) a representation or warranty with respect to the Defaulting Party's financial statement or
position that is false or materially misleading."
Section 5.2 is amended in line 3 by changing “right (i) to” to “right to (i)” and by adding the
following sentence to the end of that provision:
“If the Non-Defaulting Party’s aggregate Gains exceed its aggregate Losses and Costs,
if any, resulting from the termination of this Agreement, the Settlement Amount shall be
zero, notwithstanding any provision of this Agreement to the contrary.”
Section 5.3 is amended by inserting the phrase “plus, at the option of the Non-Defaulting Party,
any cash or other form of security then available to the Defaulting Party pursuant to Article
Eight”, between the words “that are due to the Non-Defaulting Party,”, and “plus any and all
other amounts” in the sixth line thereof.
Section 5.6 Closeout Setoff
___ Option A (Applicable if no other selection is made.)
X Option B - Affiliates shall have the meaning set forth in the Master Agreement unless
otherwise specified as follows: Option B is amended as set forth in Article 10 below.
___ Option C (No Setoff)
Section 5.6 is further amended by inserting before the last sentence in Option B:
“At the election of the Non-Defaulting Party, all obligations owing by or to an Affiliate
of a Party shall be treated as if they were owing by or to the Party itself for purposes of
set-off.”
Article Six Section 6.8 is amended by deleting the words, “may by agreement of the Parties,” in line 3 and
inserting in their place the word “shall”.
Article Eight 8.1 Party A Credit Protection
Credit and Collateral
Requirements
Financial Information from Party B, Section 8.1(a)
___ Option A
X Option B Specify: Audited financial statements for City of Palo Alto and for City of
Palo Alto Enterprise Fund
___ Option C
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CITY OF PALO ALTO RFP # __________
Credit Assurances from Party B, Section 8.1(b)
___ Not Applicable
X Applicable
Collateral Threshold for Party B, Section 8.1(c)
____ Not Applicable
X Applicable
If applicable, complete the following:
Party B Collateral Threshold: means with respect to Party B, at any time the amount specified in
the table below under the relevant heading opposite the lower of the ratings at that time assigned
by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (“S&P”)
or Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation (“Moody’s”) to the
long term, senior, unenhanced and not supported by any third party enhancement, debt securities
or obligations (“Debt”) of Party B; provided, that (a) if the Debt of Party B is no longer rated by
either S&P or Moody’s, the Threshold with respect to Party B will be zero dollars and (b) if an
Event of Default or Potential Event of Default with respect to Party B has occurred and is
continuing, the Threshold with respect to such party shall be zero dollars.
S&P Rating Moody’s Rating Threshold
AA+ or above Aa1 or above $45,000,000
A+ A1 $35,000,000
A- A3 $25,000,000
BBB+ Baa1 $15,000,000
BBB Baa2 $10,000,000
BBB- Baa3 $ 5,000,000
Below BBB- (or rating Below Baa3 (or rating $ 0 (zero)
suspended or withdrawn suspended or withdrawn
by both S&P and by both S&P and
Moody’s) Moody’s)
Party B Independent Amount: $0
Party B Rounding Amount: $100,000
Downgrade Event, Section 8.1(d):
__ Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party B only if (i) Party B’s underlying rating on Debt by
S&P or Moody's is respectively below BBB- or Baa3, or (ii) both S&P and Moody's refuse
to rate Party B's Debt, or (iii) Party B’s City Council no longer has the legal authority under
the Act, as defined by Schedule M, to adjust electric rates as necessary to recover Party B’s
costs of providing retail electric service to its customers.
Guarantor for Party B, Section 8.1(e): N/A
Guarantee Amount: N/A
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CITY OF PALO ALTO RFP # __________
8.2 Party B Credit Protection:
Financial Information from Party A, Section 8.2(a):
__ Option A
X Option B Specify: Audited financial statements to be provided by Party A as described
in Section 8.2(a) shall be for Party A.
___ Option C
Credit Assurances from Party A, Section 8.2(b):
___ Not Applicable
X Applicable
Collateral Threshold for Party A, Section 8.2(c ):
___ Not Applicable
X Applicable
If applicable, complete the following:
Party A Collateral Threshold: means with respect to Party A, at any time the amount specified in
the table below under the relevant heading opposite the lower of the ratings at that time assigned
by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (“S&P”)
or Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation (“Moody’s”) to the
Debt of Party A; provided, that (a) if the Debt of Party A is no longer rated by either S&P or
Moody’s, the Threshold with respect to Party A will be zero dollars and (b) if an Event of
Default or Potential Event of Default with respect to Party A has occurred and is continuing, the
Threshold with respect to such party shall be zero dollars.
S&P Rating Moody’s Rating Threshold
AA+ or above Aa1 or above $45,000,000
A+ A1 $35,000,000
A- A3 $25,000,000
BBB+ Baa1 $15,000,000
BBB Baa2 $10,000,000
BBB- Baa3 $ 5,000,000
Below BBB- (or rating Below Baa3 (or rating $ 0 (zero)
suspended or withdrawn suspended or withdrawn
by both S&P and by both S&P and
Moody’s) Moody’s)
Party A Independent Amount: $0
Party A Rounding Amount: $100,000
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Downgrade Event, Section 8.2(d):
___ Not Applicable
X Applicable
If applicable, complete the following:
X It shall be a Downgrade Event for Party A only if the Credit Rating of Party A falls
below BBB- from S&P or Baa3 from Moody's or if the unenhanced, unsecured senior
long-term debt securities or obligations of Party A ceases to be rated by either S&P or
Moody's.
Guarantor for Party A, Section 8.2(e):
Guarantor for Party A: NA
Guarantee Amount: NA
Article Ten
Section 10.1 is amended by replacing “upon (thirty) 30 days’ prior written notice” in lines 2 and
3, with “, which termination shall be effective immediately upon receipt of written notice
thereof”.
Section 10.2 (ix) is amended by adding after the words, “it is”, the following, “or it shall be
deemed for all purposes to be”.
Section 10.2 shall be amended by deleting the “and” at the end of sub-section 10.2(xi), replacing
the period at the end of subsection 10.2(xii) with “; and”, and adding a new sub-section (xiii) as
follows:
“Notwithstanding any provision in this Agreement to the contrary, all information, statements,
reports and similar materials, conveyed by either Party orally or in writing in response to a bid
solicitation document [invitation for bids or request for proposals or combination thereof] of
either Party to demonstrate such Party’s financial condition, are true and accurate in all material
respects. Any representation made by such Party regarding its financial performance or
condition (“Financial Representation”) as an inducement to other Party during the solicitation,
bidding or negotiation of any transaction entered into under this Master Agreement shall be
deemed to be repeated and reaffirmed, as of the date of the applicable Transaction Confirmation
and to be incorporated as a representation of such Party or related party, who makes the Financial
Representation in that Transaction Confirmation without the need for any further action by either
Party.”
Section 10.4 shall be amended by inserting the phrase "To the extent permitted by law," at the
beginning of each of the first two sentences, and substituting the word, “each” for “Each” after
the insertion of each such phrase.
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CITY OF PALO ALTO RFP # __________
Section 10.5 shall be amended by deleting clause (ii) and the portion of clause (iii) prior to the
words “provided, however”, and replacing them with the following: “(ii) transfer or assign this
Agreement to an Affiliate of such Party so long as (x) at the time of transfer or assignment such
Affiliate’s creditworthiness is equal to or higher than that of such Party or its Guarantor, if any,
as of the Effective Date, or (y) the obligations of such Affiliate are guaranteed by such Party or
its Guarantor, if any, in accordance with a guaranty agreement in form and substance satisfactory
to the other Party, and (iii) transfer or assign this Agreement to any person or entity succeeding
to all or substantially all of the assets of such Party whose creditworthiness, at the time of
transfer or assignment, is equal to or higher than that of such Party or its Guarantor, if any, as of
the Effective Date”.
Section 10.6 is amended by deleting the words “New York” from the fourth line thereof and
replacing it with the word “California.”
Further, Section 10.6 is amended by deleting the last sentence thereof and replacing it with the
following sentence:
“With respect to any proceeding in connection with any claim, counterclaim, demand,
cause of action, dispute and controversy arising out of or relating to this Agreement, the
Parties hereby consent to the exclusive jurisdiction of the federal courts sitting in the
Northern District of the State of California; provided, however, that if the federal courts
sitting in the Northern District of the State of California refuse jurisdiction, the Parties
agree to the exclusive jurisdiction of the state courts sitting in the County of Santa
Clara, State of California.”
Section 10.8 is modified by adding before the word “constitute” in line four of Section 10.8, “,all
financial and other information, explanations, statements, reports provided by one party to the
other in connection therewith”
Section 10.8 shall be amended by deleting its penultimate sentence in its entirety and replacing it
with the following sentences: “The indemnity provisions of this Agreement shall survive the
termination of this Agreement for the period of the applicable statute of limitations. The audit
provisions of this Agreement shall survive the termination of this Agreement for a period of
twelve (12) months.”
Section 10.10 shall be amended to include the at the end of the first sentence:
“as amended by the Bankruptcy Code Amendments of 2005, and that each believes that it is a
“forward contract merchant” under statutory and decisional law in effect as of the Effective
Date”
Confidentiality
X Confidentiality Applicable, subject Section
10.11 as amended.
If not checked, inapplicable.
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CITY OF PALO ALTO RFP # __________
Section 10.11 shall be replaced in its entirety with the following:
“Each Party acknowledges that the other Party is subject to California Constitution
Article 1, Section 3, and the California Public Records Act, Cal. Gov. Code § 6250 et
seq. (“Public Records Act”) in regard to the documents comprising this Master
Agreement and the Transactions, which items may constitute public records subject to
inspection and copying by the public under the authority of the California Constitution
and the Public Records Act. Each Party shall, consistent with those laws, use
reasonable efforts to provide the other Party with notice of any third party request to
inspect and copy any of the documents that comprise this Master Agreement and the
Transactions, which such other Party might deem confidential and exempt from
disclosure, in order that such Party may timely seek to protect those documents from
disclosure to the third party. Each Party acknowledges and agrees that other Party shall
not be liable to it if the other Party makes disclosure in accordance with the California
Constitution and/or the Public Records Act before it has timely obtained an order to
prevent the other Party from making the requested disclosure to the third party.”
A new Section 10.12 shall be added to Article 10 as follows:
"10.12. No Agency. In performing their respective obligations hereunder, neither Party
is acting, or is authorized to act, as the agent of the other Party.”
A new Section 10.13 shall be added to Article 10 as follows:
10.13 Dispute Resolution. In the event of any controversy or claim, whether based in contract,
tort, or otherwise, arising out of or based upon, or relating to this Agreement or the scope,
breach, termination or validity of each of them (a “Dispute”), the Parties will resolve such
Dispute in the following manner:
10.13.1 Negotiation. The Parties will attempt in good faith to resolve the Dispute promptly by
negotiations between duly authorized representatives of the Parties who have authority to settle
the Dispute. When a Party believes there is a Dispute, that Party will give the other Party written
notice describing the Dispute with reasonable particularity. Within thirty (30) Days after receipt
of such notice, the receiving Party will submit a written response to the other Party.
10.13.2 Mediation. If the Dispute is not resolved within forty-five (45) Days of the date of the
response given pursuant to Section 10.13.1, or such additional time, if any, that the Parties
mutually agree to in writing, the Parties shall try in good faith to settle the Dispute by mediation.
The form of mediation and the mediator(s) selected to resolve the Dispute shall be acceptable to
both Parties.
10.13.3 Additional Rights. If the Dispute is not resolved through mediation within ninety (90)
Days after the first meeting of the Parties and mediator(s), or such additional time, if
any, that the Parties mutually agree to in writing, either Party shall be free to pursue any
and all legal actions and remedies as it may deem necessary.
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CITY OF PALO ALTO RFP # __________
A new Section 10.14 shall be added to Article 10 as follows:
10.14: “The Parties acknowledge and agree that any purchase of power made by a Party under
this Agreement and any Transaction shall be executed and delivered in compliance with
applicable laws and regulations in effect at the time this Agreement is signed by the Parties and
at the time of entering into any particular Transaction, including, but not limited to, Senate Bill
1368 (California Public Utilities Code section 8340 et seq.) and related regulations (Title 20,
Sections 2900 – 2930 of the California Code of Regulations), as amended, to the extent such
laws and regulations, including SB 1368 and related regulations, apply or are deemed to apply to
this Agreement and any Transaction. To the extent SB 1368 and related regulations require a
Party (“Required Party”) as a local publicly owned electric utility to submit a compliance filing
in accordance with such laws, the other Party (“Providing Party”), upon the request of the
Required Party, shall in good faith provide promptly to the Required Party (to the extent the
Required Party lacks such information) the information to the extent Providing Party has
knowledge of or access to such information, and shall work cooperatively with and provide
commercially reasonable assistance to Required Party in Required Part’s compliance with such
laws. A failure by Providing Party to provide such information which is within its possession or
knowledge shall constitute a default under this Agreement.”
A new Section 10.15 shall be added to Article 10 as follows:
10.15: “The Parties intend that the standard of review for changes to any rate, charge,
classification, term or condition of this Agreement at FERC shall be the most stringent standard
permissible under applicable law. As to the Parties, it is understood and agreed that the standard
is the “Mobile-Sierra public interest” standard of review, as stated by the United States Supreme
Court in Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish
County, Nos. 06-1457, 128 S.Ct. 2733 (2008), and consistent with the order of the Supreme
Court in NRG Power Marketing, LLC, et al., v. Maine Public Utilities Commission et al., No. 08-
674, 130 S.Ct. 693 (2010) (“NRG Order”). As to all other persons, the Parties intend and agree
that the same standard, to the maximum degree as may be made applicable to other than the
Parties, apply, to the maximum degree permitted under the NRG Order.”
A new Section 10.16 shall be added to Article 10 as follows:
10.16 “Notwithstanding anything in this Agreement to the contrary, with respect to a
Transaction , Buyer shall not be liable to pay Seller in addition to the Contract Price for any AB
32 fees as defined herein. “AB 32 fees” means the regulatory assessments, charges, fees imposts
and/or taxes imposed upon and required to be paid by suppliers of energy in accordance with the
Global Warming Solutions Act of 2006, Chapter 488, Statutes 2006, including, without
limitation, the Compliance Offset Protocols, which shall be included (or be deemed included to
the extent they are not expressly included) in the Contract Price, defined in Section 1.10 of the
General Terms and Conditions, and that are in effect as of the date the Parties enter into such
Transaction.”
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CITY OF PALO ALTO RFP # __________
A new Section 10.17 shall be added to Article 10 as follows:
The payment obligations of Party A to Party B under this Agreement shall be special, limited
obligations of Party A, and shall be payable as provided in the Bond Agreement from Revenues,
and not out of any other funds or moneys of Party A not pledged thereto. The payment
obligations of Party A under this Agreement shall not be payable from or secured by the general
fund or other moneys of Party A, and shall not constitute an indebtedness or obligation of Party
A for which the full faith and credit or taxing power of Party A are pledged. Party B shall not
have any right to compel any exercise of the taxing power of Party A to make any payments due
under this Agreement. For purposes of this Section 10.17, the capitalized term Bond Agreement
shall mean Turlock Irrigation District’s Resolution No. 86-164, adopted on May 20, 1986, as
supplemented and amended from time to time, and any successor such resolution or trust
agreement. For purposes of this Section 10.17, the capitalized term Revenues shall have the
meaning given such term in the Bond Agreement.
A new Section 10.18 is added as follows:
"The Parties understand and agree that the Transactions under this Agreement are physical
transactions for deferred delivery, and that the Parties contemplate making or taking physical
delivery of electric energy products; provided, however, that nothing in this Agreement,
including this Section 10.18, prohibits the Parties from engaging in Transactions that are or may
be determined to be swaps if they so desire. The Parties are both commercial entities engaged in
the business of delivering electric energy to its retail load and routinely makes or takes delivery
of electric energy in order to provide service to its retail electric customers."
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CITY OF PALO ALTO RFP # __________
A new Section 10.19 is added as follows:
Index Transactions. If the Contract Price for a Transaction is determined by reference to a
Price Source, then:
(a) Market Disruption. If a Market Disruption Event occurs on any one or more days
during a Determination Period (each day, a “Disrupted Day”), then:
The Fallback Floating Price, if any, specified by the Parties in the
relevant Confirmation shall be the Floating Price for each
Disrupted Day.
If the Parties have not specified a Fallback Floating Price, then the
Parties will endeavor, in good faith and using commercially reasonable
efforts, to agree on a substitute Floating Price, taking into consideration,
without limitation, guidance, protocols or other recommendations or
conventions issued or employed by relevant trade organizations or
industry groups in response to the Market Disruption Event and other
prices published by the Price Source or alternative price sources with
respect to the Delivery Point or comparable Delivery Points that may
permit the Parties to derive the Floating Price based on historical
differentials.
If the Price Source retrospectively issues a Floating Price in respect of a
Disrupted Day (a “Delayed Floating Price”) before the Parties agree on
a substitute Floating Price for such day, then the Delayed Floating Price
shall be the Floating Price for such Disrupted Day. If a Delayed Price is
issued by the Price Source in respect of a Disrupted Day after the Parties
agree on a substitute Floating Price for such day, the substitute Floating
Price agreed upon by the Parties will remain the Floating Price without
adjustment unless the Parties expressly agree otherwise.
If the Parties cannot agree on a substitute Floating Price and the Price
Source does not retrospectively publish or announce a Floating Price, in
each case, on or before the fifth Business Day following the first
Trading Day on which the Market Disruption Event first occurred or
existed, then the Floating Price for each Disrupted Day shall be
determined by taking the arithmetic mean of quotations requested from
four leading dealers in the relevant market that are unaffiliated with
either Party and mutually agreed upon by the Parties (“Specified
Dealers”), without regard to the quotations with the highest and lowest
values, subject to the following qualifications:
o If exactly three quotations are obtained, the Floating Price for
each such Disrupted Day will be the quotation that remains
after disregarding the quotations having the highest and lowest
values.
o If fewer than three quotations are obtained, the Floating Price
for each such Disrupted Day will be the average of the
quotations obtained.
o If the Parties cannot agree upon four Specified Dealers, then each
of the Parties will, acting in good faith and in a commercially
reasonable manner, select up to two Specified Dealers
separately, and those selected dealers shall be the Specified
Dealers.
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CITY OF PALO ALTO RFP # __________
Unless otherwise agreed, if at any time the Parties agree on a substitute
Floating Price for any Disrupted Day, then such substitute Floating Price shall
be the Floating Price for such Disrupted Day, notwithstanding the subsequent
publication or announcement of a Delayed Floating Price by the relevant Price
Source or any quotations obtained from Specified Dealers
"Determination Period" means each calendar month a part or all of which is within
the Delivery Period of a Transaction.
"Exchange" means, in respect of a Transaction, the exchange or principal trading
market specified as applicable to the relevant Transaction.
"Floating Price" means a Contract Price specified in a Transaction that is based
upon a Price Source.
"Market Disruption Event" means, with respect to any Price Source, any of the
following events:
(a) the failure of the Price Source to announce, publish or make available the
specified Floating Price or information necessary for determining the
Floating Price for a particular day;
(b) the failure of trading to commence on a particular day or the permanent
discontinuation or material suspension of trading in the relevant options
contract or commodity on the Exchange, RTO or in the market specified for
determining a Floating Price;
(c) the temporary or permanent discontinuance or unavailability of the Price
Source;
(d) the temporary or permanent closing of any Exchange or RTO specified
for determining a Floating Price; or
(e) a material change in the formula for or the method of determining the
Floating Price by the Price Source or a material change in the composition
of the Product.
"Price Source" means, in respect of a Transaction, a publication or such other origin of
reference, including an Exchange or RTO, containing or reporting or making
generally available to market participants (including by electronic means) a price,
or prices or information from which a price is determined, as specified in the
relevant Transaction.
“RTO” means any regional transmission operator or independent system operator.
“RTO Transaction” means a Transaction in which the Price Source is an RTO.
"Trading Day" means a day in respect of which the relevant Price Source ordinarily
would announce, publish or make available the Floating Price.
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CITY OF PALO ALTO RFP # __________
(b) Corrections to Published Prices. If the Floating Price published, announced or
made available on a given day and used or to be used to determine a relevant price is
subsequently corrected by the relevant Price Source (i) within 30 days of the
original publication, announcement or availability, or (ii) in the case of RTO
Transactions only, within such longer time period as is consistent with the RTO’s
procedures and guidelines, then either Party may notify the other Party of that
correction and the amount (if any) that is payable as a result of that correction. If,
not later than thirty (30) days after publication or announcement of that correction, a
Party gives notice that an amount is so payable, the Party that originally either
received or retained such amount will, not later than three (3) Business Days after
such notice is effective, pay, subject to any applicable conditions precedent, to the
other Party that amount, together with interest at the Interest Rate for the period
from and including the day on which payment originally was (or was not) made to
but excluding the day of payment of the refund or payment resulting from that
correction. Notwithstanding the foregoing, corrections shall not be made to any
Floating Prices agreed upon by the Parties or determined based on quotations from
Specified Dealers pursuant to paragraph (a) above unless the Parties expressly agree
otherwise.
(c) Rounding. When calculating a Floating Price, all numbers shall be rounded to
four (4) decimal places. If the fifth (5th) decimal number is five (5) or greater, then
the fourth (4th) decimal number shall be increased by one (1), and if the fifth (5th)
decimal number is less than five (5), then the fourth (4th) decimal number shall
remain unchanged.
Schedule M X Party A is a Governmental Entity or Public Power System
X Party B is a Governmental Entity, Schedule M Applicable
Part A Part A of Schedule M is amended by including the following definition for the term “Act”:
“Act” means the Constitution of the State of California, the California statute(s), charter
and municipal ordinances under which Party B was created, organized and authorized to
enter into this Master Agreement and each Transaction thereunder
Part A is further amended by adding the following sentence at the end of the definition of the
term “Special Fund”:
“Party A has conducted such investigation as it deems necessary of the City of Palo
Alto Enterprise Fund and the Act under which such Fund was established to determine,
for its purposes under this Agreement, that such Fund meets this definition of Special
Fund.”
Part C Part C of Schedule M is amended by adding the phrase in line 7 “and to the extent applicable,”
immediately following the word “limitation” in clause (i).
Notwithstanding anything herein to the contrary, Party B hereby acknowledges and agrees that
Party A has not made the representations and warranties described in (v)(a), (v)(b), (v)(c), and
(vi) of Part C of Schedule M.
Part D Section 3.4 is modified by inserting a period after “Master Agreement” in line 7 and deleting the
rest of the sentence.
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CITY OF PALO ALTO RFP # __________
Part E X Section 3.6 under Part E of Schedule M applies to Party B only; however, the portion of
that provision following the semicolon on the eighth line thereof is replaced in its
entirety with the following:
“any breach of clause (ii) of this provision shall be deemed to have arisen
during a fiscal period of Governmental Entity or Public Power System for
which such budgetary approval or certification of its obligations under this
Master Agreement is required to be in effect and an Event of Default shall be
deemed to have occurred for purposes of Section 5.1 under which
Governmental Entity or Public Power System shall be treated as the Defaulting
Party.”
Part F ___ Add Section 8.4. If not checked, inapplicable.
Part G Part G does not apply.
Schedule P SCHEDULE P
PRODUCTS AND RELATED DEFINITIONS
The following defined terms are added to Schedule P:
“CAISO” means the California Independent System Operator Corporation, or its
successor.
“CAISO Tariff” means the currently effective Federal Energy Regulatory Commission-
approved tariff of CAISO, including all CAISO protocols, as the same may be amended from
time to time.
“CAISO Energy” means a Transaction in which the Seller shall sell and the Buyer shall
purchase a quantity of Energy equal to the hourly quantity without Ancillary Services (as defined
in the CAISO Tariff) that is or will be scheduled as a schedule coordinator to schedule
coordinator transaction pursuant to the CAISO Tariff as amended from time to time for which the
only excuse for failure to deliver or receive is an “Uncontrollable Force” (as defined in the
CAISO Tariff) called by the CAISO in accordance with the CAISO Tariff.
“Heavy Load Hour” or “HLH”” is defined as the hours ending (HE) 0700- 2200
Monday-Saturday, excluding NERC holidays, PPT.
“Inter-Scheduling Coordinator Trade” or “IST” means a trade between Scheduling
Coordinators of Energy or Ancillary Services in accordance with the CAISO Tariff.
“Light Load Hour” or “LLH” is defined as the hours ending (HE) 0100- 0600 and 2300-
2400 Monday-Saturday, all day Sunday and NERC holidays, PPT.
“NP15 Zone” means the Existing Zone Generation NP15 Trading Hub (“NP15 EZ Gen
Hub”), as such trading hub is contemplated by the CAISO in its filing made to the FERC dated
March 15, 2005 (“Comprehensive Design Proposal for Inter-Scheduling Coordinator Trades
Under the California Independent System Operator Corporation’s Market Redesign and
Technology Upgrade, Docket No. ER02-1656-025”); provided further, if the NP15 EZ Gen Hub
(under any name) is not established as part of a market redesign that is implemented during the
Delivery Period, the Parties agree to promptly work together in good faith to designate an
alternate Delivery Point to reasonably approximate the characteristics of the NP-15 EZ Gen Hub.
“Other Products and Service Levels: If the Parties agree to a service level/product
defined by a different agreement (e.g., the WSPP Agreement, etc.) for a particular Transaction,
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CITY OF PALO ALTO RFP # __________
then such reference to a service level/product shall be defined by such other agreement,
including, if applicable, the regional reliability requirements and guidelines as well as the excuses
for performance, Force Majeure, Uncontrollable Forces, or other such excuses applicable to such
other agreement, to the extent inconsistent with the terms of this Agreement, but all other terms
and conditions of this Agreement shall remain applicable including, without limitation, Section
2.2.”
"West Firm", or “WSPP Schedule C” or “Schedule C” or “WSPPC-Firm” means with
respect to a Transaction, a Product that is or will be scheduled as firm energy consistent with the
most recent rules adopted by the WECC for which the only excuses for failure to deliver or
receive are if an interruption is due to an Uncontrollable Force as provided in Section 10 of the
WSPP Agreement.
"WECC" means the Western Electricity Coordinating Council, or its successor.
"WSPP Agreement" means the Western Systems Power Pool Agreement as amended
from time to time.
EXHIBIT A
MASTER POWER PURCHASE AND SALE AGREEMENT CONFIRMATION LETTER
EXHIBIT B
RESOURCE ADEQUACY (“RA”) CAPACITY
The Parties acknowledge and agree that after the execution of this Master Agreement, they may
enter into one or more contracts or confirmations concerning Resource Adequacy, which
products, terms, conditions and definitions shall be documented in an Resource Adequacy Form
of Confirmation (“RA Confirm”) or substantially similar form executed as of the Confirmation
Effective Date containing terms and conditions substantially similar to those set forth in the RA
Confirm attached at Exhibit B.
EXHIBIT C
RENEWABLE ENERGY CERTIFICATE (“REC”)
On or after the Effective Date, Party B may secure the appropriate authorization and approval to
buy and/or sell RECs (bundled and unbundled); provided, however, that the purchase and/or sale
of such RECs by Party B shall be subject to the approval of Party B’s City Manager. The form
of any REC purchase and/or sale transaction shall be mutually agreed to by the Parties.
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IN WITNESS WHEREOF, the Parties have caused this Master Agreement to be duly executed as of the date first above
written.
Party B: City of Palo Alto
Approval as to Form:
By: ……………………………..
Name: Grant Kolling
Title: Sr. Asst. City Attorney
Date: _________, 2013
Party A:
By: ……………………………..
Name: James Farrar
Title: Assistant General Manager, Planning & Rates
Date: ________, 2013
Party B: City of Palo Alto
Approval by City Manager:
By: ……………………………..
Name: James Keene
Title: City Manager
Date: ________, 2013
Party B: City of Palo Alto
Approval by Mayor:
By: ……………………………..
Name: James Keene, City Manager, for
Title: Mayor
Date: ________, 2013
Party B: City of Palo Alto
Approval by Administrative Services Director:
By: ……………………………..
Name: Lalo Perez
Title: Administrative Services Director
Date: _________, 2013
Party B: City of Palo Alto
Approval by Utilities Director:
By: ……………………………..
Name: Valerie Fong
Title: Utilities Director
Date: _______, 2013
DISCLAIMER: This Master Power Purchase and Sale Agreement was prepared by a committee of
representatives of Edison Electric Institute (“EEI”) and National Energy Marketers Association (“NEM”)
member companies to facilitate orderly trading in and development of wholesale power markets. Neither EEI
nor NEM nor any member company nor any of their agents, representatives or attorneys shall be responsible for
its use, or any damages resulting therefrom. By providing this Agreement EEI and NEM do not offer legal advice
and all users are urged to consult their own legal counsel to ensure that their commercial objectives will be
achieved and their legal interests are adequately protected.
City of Palo Alto (ID # 3576)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/18/2013
City of Palo Alto Page 1
Summary Title: Golf Course Contracts
Title: Finance Committee Recommendation of a Five-year Contract Extension
for the Palo Alto Golf Course Management Services Agreement with Brad
Lozares (Lozares); Amendment to Golf Course Pro Shop Lease with Lozares to
Reduce the Term of the Option to Extend the Lease From Ten Years to Five
Years; and Five-Year Contract Extension for the Golf Course Maintenance
Services Contract with Valley Crest Golf
From: City Manager
Lead Department: Community Services
Recommendation
The Finance Committee and staff recommend that the Council:
1. Approve and authorize the City Manager or his designee to execute the Amendment No.
6 to the Management Agreement for Golf Course professional services with Brad
Lozares Golf Shop in the amount of $2,058,073 (Attachment A) and the Amendment No.
4 to Lease of the Palo Alto Golf Pro Shop premises with Brad Lozares for a term of 5
years, beginning May 1, 2013 ending April 30, 2018 (Attachment B).
2. Approve, and authorize the City Manager or his designee to execute the Amendment
No. 1 to the General Services Agreement with ValleyCrest Golf Course Maintenance, Inc.
in the amount of $4,072,533 and for a term of 5 years, beginning May 1, 2013 ending
April 30, 2018 (Attachment C).
Background
There are four separate, but related, contracts applicable to the Palo Alto Golf Course:
1. Golf Course Maintenance Services Agreement (expires April 30, 2013) - ValleyCrest Golf
is the service provider. (Existing Contract- Attachment D)
2. Golf Course Management Services Agreement (expires April 30, 2013) - Brad Lozares is
the current services provider. The management services agreement provides Golf
Course and driving range management, Golf Course marshaling, Golf Course revenue
City of Palo Alto Page 2
collection, customer service, starting time coordination and cart rental services.
(Existing contract- Attachment E)
3. Golf Pro Shop Lease (expires April 30, 2013, with a current 10-year extension option) -
Lozares is the tenant, and has conditionally agreed to reduce the lease term extension
from ten years to five years, pending Council approval of the five-year extension of the
Golf Management Services Agreement (Item 1, above).
4. The Food and Beverage Services Lease between the City and R&T Restaurant (expires
April 30, 2018). This Lease is not being amended at this time and is only mentioned as a
reference point for the relevant golf course contracts’ expiration dates falling on April
30, 2018.
One of staff’s primary goals in negotiating these contracts was to have them expire on the same
date.
Staff from Administrative Services, Community Services, City Attorney’s Office, and City
Manager’s Office have carefully considered the pros and cons of a Request for Proposal (RFP)
for both the Golf Professional management services and the Turf and Landscape maintenance
services and have concluded that, on the cusp of a major proposed reconfiguration of the golf
course, now is not the preferred time to conduct the RFP process for these two particular
contracts. The timing of the reconfiguration construction project has not yet been finalized, and
there is some uncertainty of the level of service needed during golf course construction at this
time. If these contract extensions are approved, staff recommends conducting an RFP in April
2018 when all four Golf Course contracts, as outlined above, are expected to expire.
Coordinating the concurrent expiration of the four contracts will provide an opportune time to
attract more interest in bidding on an RFP, because it could well include the entire golf course
operation. In addition, maintaining continuity with the current contractors during the
reconfiguration process will enable certain services, such as the Golf Course driving range, to be
maintained throughout the process. The increased ease of coordination with vendors that are
already familiar with the current operation will be invaluable as the City navigates the multi-
agency reconfiguration process.
Staff came to this conclusion for several reasons which are summarized below:
1. San Francisquito Creek Flood Management Levee Project
The San Francisquito Creek flood control project managed by the San Francisquito Creek Joint
Powers Authority (SFCJPA) presents significant unknown factors, including, without limitation,
City of Palo Alto Page 3
the timing of the project, impact on the golf course operation during construction, and the
quality and performance of the yet to be reconfigured golf course. These unknown factors
make it very difficult to prepare a clear and accurate RFP scope of services for Golf Professional
management services and Golf Course maintenance services; it consequently will be difficult to
evaluate submittals to determine which is most favorable to the City.
The upcoming levee capital improvement work will have a direct impact on the operation of the
golf course during staging and construction. The golf course may be closed for as long as 12 to
18 months to complete the Option G design work. The proposed levee work would directly
affect the golf course and thus it could adversely affect the City’s ability to successfully conduct
an RFP for management services to the extent interest in bidding on an RFP is dampened.
The SFCJPA at this point believes that it will start the two-year construction process on the
levee in April 2014. If the SFCJPA timeline is accurate, the one-year golf course construction
project would also begin in April 2014.
2. National Golf Foundation Recommendation
Extending the terms of the Lozares and Valley Crest contracts beyond the construction period
of the golf course reconfiguration project was recommended by the National Golf Foundation
(an independent consultant who performed Financial Pro Forma and Supporting Analysis for
Reconfiguration Options concerning the reconfiguration project); as well, independent golf
course financial consultant, Richard Thorman, and Golf Course architect, Forrest Richardson,
who were all asked to provide their professional opinions. The consultants agree that the
substantial disruption in business, the unknown impacts of timing and project design, and the
time consuming and costly work involved to produce and conduct an RFP process without
affording potential bidders access to all the information needed, for example, how a new
facility will produce cash flow, could make it challenging for the City to enter into the well-
informed and negotiated agreements.
It was recommended by these consultants that the City wait until after the renovation is
completed, and the improved facility has been up and running for a year before considering a
substantive change in maintenance and operating structure. If the City renegotiates the
management services agreement with Lozares for another five years, the City will be aware of
the performance of the new golf course design, have all contracts expire concurrently, and be
better prepared to negotiate management services agreement and/or lease terms and
conditions that will best meet the City’s needs and interests.
City of Palo Alto Page 4
These professional consultants further recommended that extending the golf course
maintenance contract with Valley Crest Golf for another five years will also benefit the City. The
independent consultants pointed out how critical it is to have the contracted Golf
Superintendent responsible for maintaining the course involved and present during the
construction of the new course. Having the current Superintendent, who knows and intimately
understands the landscape of the golf course, with a vested interest in the outcome of the
project on hand, will be a tremendous benefit to the City.
3. Lozares Pro Shop Lease and Management Agreement
Mr. Lozares indicated he would exercise, and indeed did exercise, the ten-year extension option
on his lease for the Pro-Shop, but also indicated he would effectively agree to revise the ten-
year option to a five-year option under Amendment No. 6. If the City were to competitively bid
the management services agreement and award the contract to a firm other than Lozares, that
firm would need to negotiate a sublease for a period of ten years from Lozares, or the new
operator would have to negotiate a separate mobile trailer outside of the Golf Shop leased
premises. This is very likely to be a disincentive for any third party considering a proposal for
the management services agreement and would be cumbersome at best for customer service
at the golf course.
Ideally, all four golf course contracts (management services agreement, Pro-Shop lease, Golf
Course maintenance services, and food & beverage services concessions) would be aligned to
concurrently expire. This would create an opportunity for a comprehensive RFP to manage the
entire golf course operation.
The current tax exempt debt represented by the Certificates of Participation, that funded the
1998 Golf Course renovations, restricts the City from entering into a long-term lease agreement
for a firm to manage the entire golf course operation. This tax exempt debt is set to expire in
2018. If all of the golf course contracts expire at the same time, the City would have much more
flexibility in issuing a comprehensive RFP to manage the golf course at that time.
Extending the Lozares agreements will also benefit the City, because the City would have a
contractor who is well-respected and trusted by the Palo Alto golf community, which may be
valuable during the transition period associated with the reconfiguration and disruption during
construction. One of staff’s goals is ramp up play activity as swiftly as possible after
construction is completed, and it is believed the current Golf Pro is in the best position to do so.
In addition, staff believes it would be more effective to issue a comprehensive golf course RFP
in 2018 when the levee work has been completed and there is no potential for disputes
regarding the Pro-Shop lease and management services agreement to arise.
City of Palo Alto Page 5
4. Food and Beverage Service
Food and Beverage service is often a central element of a golf course operation. Since the
current contract for the Bay Café expires on April 30, 2018, it would be advantageous to have
the other contracts expire at the same time to attract more interest in bidding on an RFP that
includes the entire golf course operation.
Discussion
Golf Course Management Services Agreement and Pro Shop Lease
The Community Services and Administrative Services Departments met with Lozares in seven
separate sessions to negotiate the terms of a five-year contract extension for Golf Management
Services and the Pro-Shop lease. As part of the contract extension, Lozares agreed to reduce
the length of the option to extend the Pro-Shop lease from ten years to five years (expiring in
2018). Given the pending golf course reconfiguration project, which will require closing the
majority of the golf course, the contract is set up in three distinct phases:
Phase 1: Pre-Golf Course Construction.
Time frame: May 1, 2013 until golf course reconfiguration construction begins (Estimated time
frame for start of construction: April 2014).
Phase I Elements & Background:
Lozares will continue to perform golf management services during Phase I. Mr. Lozares enjoys
an excellent reputation among the local golfing community. His outstanding customer service
helps keep golfers returning to play at Palo Alto. This is especially valuable because of the
uncertainty of the timing of the SFJPA project and golf reconfiguration project, which has
caused some golfers to look elsewhere to book tournament events. City survey cards
consistently illustrate that Lozares’s customer service ranks good to excellent. Fourteen times
Lozares Golf Shop has been named as one of the top 100 golf shops in the country. He was
named the Golf Professional of the Year by Professional Golf Association in 2001.
Terms of Agreement: (Phase I terms are the same as the existing agreement)
i. Management fee : $345,333 annual (This is the fixed amount that the
City pays to Lozares)
ii. Cart rental revenue: 60% for the City and 40% for Lozares
iii. Driving range revenue: 62% for the City and 38% for Lozares
City of Palo Alto Page 6
iv. Green fees: 100% to City
v. Pro-shop rent: $2,000 per month or 4% of gross revenue whichever is
higher
The table below shows the estimated compensation using revenue figures from FY12 actuals
and FY13 adopted budget.
Phase I: No Changes to Current Calculation
Contractor Compensation FY2012 Actuals FY2013 Budget
38% of Driving Range Revenue $135,126 $148,200
40% of Cart/Club Rental Revenue $120,490 $148,000
Fixed Fee $345,333 $345,333
TOTAL Estimated $600,949 $641,533
Phase II: During Construction.
Time frame: First day of golf course reconfiguration construction until the reopening of the golf
course (Estimated time frame: April 2014 through April 2015).
Phase II Elements & Background:
During the closure of the golf course or during reconfiguration construction Lozares will
continue to work on future tournament bookings, implementation and marketing of the
renovated Palo Alto Golf Course, provide management and full operation and equipment
for the Driving Range, support the Palo Alto Golf Course web site, respond to golf inquiries,
provide professional services for golf instruction, and broadcast e-mail blasts weekly on the
weekly progress of the course renovation.
Terms of Agreement:
i. Management fee : $30,500 annual
ii. Range revenue: 15% for the City and 85% for Lozares
iii. Pro-shop rent - $1,500 per month or 4% of gross revenue whichever is higher.
During the slow golf activity months of November, December and January
Lozares will only be required to pay 4% of gross revenue.
iv. There will be no Green fee or cart revenue due to construction work
City of Palo Alto Page 7
During this time is it expected that the main source of revenue will be from activity on the
driving range, which is not a part of the reconfiguration project. The contractor will retain some
staff to maintain operations at the range, which includes helping customers, processing
payments, providing golf ball clean up services, and range maintenance. The increased share of
range revenue to the contractor acts as an incentive to encourage activity greater than the
National Golf Foundation’s revenue projections. The table below includes a sensitivity analysis
which shows the potential compensation to the contractor and additional revenue to the City
based on range activity.
Phase II: Increased Share of Range Revenue, Reduced Fixed Fee
NGF Estimate in
Construction
Year (FY14)
35% of FY12
Activity
50% of FY12
Activity
70% of FY12
Activity
Range Revenue Estimate $82,400 $124,458 $177,797 $248,916
Contractor Compensation
85% of Range Revenue $70,040 $105,789 $151,127 $211,578
Fixed Annual Fee $30,500 $30,500 $30,500 $30,500
Total Estimated $100,540 $136,289 $181,627 $242,078
Additional City Revenue $0 $6,309 $14,310 $24,977
Phase III: Post Construction.
Time frame: Reopening of the reconfigured golf course (Estimated time frame: April 2015
through April 30, 2018).
Phase III Elements & Background:
In addition to ensuring the City is able to cover all operational costs at the Golf Course (including old and
new debt service) and generating a surplus, an important goal of the City’s negotiating team was to
create an agreement that creates a stronger tie between overall golf play activity that benefits the City
(productivity) and provides compensation for the contractor. A primary element of this proposal is the
inclusion of variable compensation based for Green Fees and Play Cards. The inclusion of this new
City of Palo Alto Page 8
revenue stream is tied to a reduction in other variable compensation rates for both Driving Range and
Cart Rentals.
Terms of Agreement:
i. Management fee : $300,000 annual
ii. Range revenue: 80% for the City and 20% for Lozares
iii. Cart rental revenue: 80% for the City and 20% Lozares
iv. Green fee revenue: 95% for the City and 5% for Lozares
v. Pro-shop rent: $3,000 per month or 5% of gross revenue whichever is higher
vi. credit card fees to be split between City and Brad according to the agreed
breakdown split of all revenue sources
vii. On-site club rentals and pull cart revenues will be considered as part of the
merchandise revenue from the Pro Shop, which the City receives 5% of the
gross merchandise revenue or $3,000 per month- whichever is greater.
A comparison of the above terms and those in the Phase I category above provides a clear picture of
how the Pro contract will change after the new course opens.
Financial Implications:
The table below is based on the revenue and expense projections modeled by the National Golf
Foundation consultant and presented to Council on July 23, 2012 (Attachment F). Staff has
used NGF’s revenue forecasts and calculated the expected compensation to the Golf Pro based
on the new contractual terms. Compared to the current contract (Phase I contract), staff
estimates savings to the City of at least $50,000 annually.
Phase III: Added Golf Fee to Variable Compensation, Reduced Fixed Fee
NGF Revenue Projections First Year of New
Course
(NGF FY15)
Second Year of
New Course
(NGF FY16)
Last Year of
Contract
(NGF FY17)
Green Fees $2,341,500 $2,510,600 $2,680,900
Driving Range $353,400 $377,400 $401,900
Cart/Club Rentals
$286,100 $307,300 $353,900
Contractor Compensation
5% of Green Fee Revenue $117,075 $125,530 $134,045
City of Palo Alto Page 9
20% of Driving Range Revenue $70,680 $75,480 $80,380
20% of Cart/Club Rental Revenue $57,220 $61,460 $70,780
Fixed Fee $300,000 $300,000 $300,000
TOTAL Estimated $544,975 $562,470 $585,205
The golf course management services contract cost is predicated on the assumption that the
contract phases will have the following durations: Phase I – one year; Phase II – one year; and
Phase III-- three years. The contract cost also includes a 10% contingency. The scheduling of the
golf course reconfiguration and the duration of the phases cannot be determined at this time.
Staff has presented a contract costs based on our best estimate. Depending on how the
reconfiguration schedule changes, staff may need to return to Council with a Budget
Amendment Ordinance.
IRS Requirements
Because the Golf Course has been previously funded by publicly financed bonds, the City must
adhere to IRS tax regulations that concern the compensation structure for Golf Management
contracts. The variable compensation (based on revenue) portion must not exceed the amount
that is provided by the fixed fee. The requirements do allow for a two-year period during
closure or renovations for the compensation to be developed outside of the traditional
structure, which the City has utilized in the Phase II component. The Administrative Services
Department consulted with bond counsel and has confirmed that the planned agreement
meets the requirements of the Internal Revenue Code of 1986, as amended.
Golf Maintenance Agreement
The Community Services and Administrative Services Departments met with Valley Crest Golf
numerous times to negotiate the terms of a five-year contract extension for the Golf Course
Maintenance at the Palo Alto Golf Course. Since Valley Crest Golf has very successfully
maintained the golf course for the past two and one-half years, significant improvements have
taken place. Sustaining Valley Crest’s excellent maintenance service throughout the completion
of the golf course reconfiguration, and the period of time after the new course opens and a
new level of business stabilizes, will be valuable to the City. Valley Crest staff has intimate
knowledge of the difficult irrigation system and how to keep it functioning until replacement,
water management specific to this unique environment, drainage, growing conditions, sensitive
wildlife habitat, and wetland areas. Valley Crest has established good working relationships
throughout the City, which will all be beneficial during the reconfiguration project. Its staff has
participated in all the meetings with the SFCJPA and the planning process for the
reconfiguration of the golf course. It has provided agronomic and environmental expertise
when needed.
City of Palo Alto Page 10
Given the pending golf course reconfiguration project, which will require closing the majority of
the golf course for approximately one year, the contract is set up in three phases:
Phase I: Pre-golf course construction.
Time frame: May 1, 2013 until golf course reconfiguration construction begins (Estimated to be
April 2014).
Phase I Elements & Background:
Valley Crest will continue to perform the same golf maintenance services during Phase I as they
did in the pervious contract. City staff has received numerous customer compliments regarding
the service Valley Crest provides.
Terms of Agreement: (Phase I terms are the same as the existing agreement)
i. Annual fee of $750,000
Total anticipated costs for Phase I = $750,000
Financial Implications:
The last two years of the previous Golf Course Maintenance contract also had an annual fee of
$750,000.
Phase II: During Construction.
Time frame: First day of golf course reconfiguration construction until the reopening of the golf
course. Anticipated duration of Phase II is one year.
Phase II Elements & Background:
During the closure of the golf course, Valley Crest will continue maintaining the putting
green and associated irrigation, driving range, landscaping around the parking lot/Pro-Shop,
and general site safety and aesthetics. The Valley Crest Golf Superintendent will also be on-
site daily to monitor, serve as a consultant on the reconfiguration project, and document
the irrigation construction which will improve response times to future irrigation issues.
Valley Crest will also be responsible for caring for the newly established natural turf after it
is ready for mowing, which is referred to as the grow-in process (prior to the opening of the
new course). The grow-in period requires frequent fertilizing and adding other
City of Palo Alto Page 11
amendments, along with higher maintenance to ensure that the new turf is properly
established.
Terms of Agreement:
I. Monthly fee $18,158 for first 7 months of phase II.
ii. Five month grow-in period: $415,000 (lump sum)
Total anticipated costs for Phase II = $542,106
Phase III: Post Construction.
Time frame: Reopening of the reconfigured golf course through April 30, 2018.
Phase III Elements & Background:
One of the main goals of the City’s negotiating team was to ensure that the City controlled
maintenance costs while at the same time made improvements in the level of service to reflect
the investment in the new and improved golf course.
For several years Canada geese and the feces they produce have been the number one
complaint about the Palo Alto Golf Course. The most effective technique to address the goose
loitering problem has been the use of specially trained herding dogs. At a cost of approximately
$20,000 per year, the City has contracted with a private company that brings trained dogs to
the course to encourage the geese to leave or migrate. In this new contract, Valley Crest will be
required to have its own trained dog on-site.
The second most common complaint at the golf course has been ground squirrels and the holes
and tunnels they produce. The new contract will provide for on-going rodent control consistent
with the City’s Integrated Pest Management (IPM) Policy.
In addition, Valley Crest will also be purchasing new maintenance equipment, some specifically
specified by the City which will provide improved quality course conditions. Valley Crest will
also be responsible for maintaining lower weed thresholds at the golf course.
Terms of Agreement:
I. Annual fee: $796,262 (Initial yearly/monthly pricing shall be fixed for the first 18
months thereafter CPI (Consumer Price Index for all Urban Consumers – San
Jose/Sunnyvale/Santa Clara) will be applied on a yearly basis. CPI approximately
1.34%.
City of Palo Alto Page 12
Year 1= 796,262
Year 2= 801,597
Year 3= 812,338
Total anticipated costs for Phase III= $2,410,197.
Total costs for all three phases of Valley Crest Golf maintenance contract is $3,702,303 plus
10% contingency = $4,072,533
The golf course maintenance contract cost is predicated on the assumption that the contract
phases will have the following durations: Phase I – one year, Phase II – one year, and Phase III--
three years. It also includes a 10% contingency. The scheduling of the golf course
reconfiguration and the duration of the phases is uncertain. Staff has presented a contract costs
based on our best estimate. Depending on how the reconfiguration schedule changes staff may
need to return to Council with a Budget Amendment Ordinance.
Finance Committee
On March 5, 2013, the Finance Committee reviewed the golf course contracts. The minutes
from the meeting are in Attachment G. The Finance Committee approved a motion
unanimously (4-0) to recommend that City Council approve, and authorize the City Manager, or
his designee, to execute, the appropriate amendment to the General Services Agreement for
Golf Course management services with Brad Lozares in the amount of $2,058,073 and the
appropriate amendment to lease of the Palo Alto Golf Pro Shop premises with Brad Lozares for
a term of 5 years, beginning May 1, 2013 ending April 30, 2018; as well, approve, and authorize
the City Manager, or his designee to execute, the appropriate amendment to the General
Services Agreement with ValleyCrest Golf in the amount of $4,072,533 and for a term of 5
years, beginning May 1, 2013 ending April 30, 2018.
The Committee appreciated the concept of extending the contracts to 2018 in order to afford
the City an opportunity to conduct an RFP that could include the entire golf course operation.
The Committee also liked that the Golf Management Agreement with Lozares would have lower
costs for the City and would now provide more incentive for Lozares to provide a high quality
golf experience and help increase the number of rounds played at the course.
There was a discussion on the maintenance costs in Phase III. It seemed counterintuitive that
the maintenance costs would increase in Phase III of the new contract, considering the new
course will have approximately 35 fewer acres of managed turf. Staff explained that, while
City of Palo Alto Page 13
there is a reduction in managed turf, there are a few factors that would require additional
labor, that would include: higher level of service commensurate with a higher quality new golf
course (on-site geese herding dog, lower thresholds for weeds, etc.); and the current course is
very flat, straight and simple, while the new course will be have a lot of undulations and
interest that will require more maintenance.
The Committee pointed out that the City would have had more leverage and possibly
negotiated a better deal if it had gone out to bid. Staff pointed out that NGF had anticipated
higher costs for contract maintenance contract (FY15 $825,000, FY16 $837,000, and FY17
$862,000), while staff was able to negotiate with Valley Crest below this amount (FY 15
$796,262, FY16 $801,597, and FY17 $812,338).
Resource Impact
The Fiscal Year 2013 Adopted Budget shows an overall net income to the City for the Golf
Course Operations of $271,745. For Phase I of the Lozares contract, this is estimated to remain
the same as the terms of the contract will not change. As well, the maintenance and
professional contracts discussed in this report have been formulated to account for reduced
activity during construction periods.
For the construction period of the course, there will be no green fee or cart rental revenue. It is
also anticipated that there will be a decrease in range revenue. The National Golf Foundation
projected a 77% decrease in Range revenue; however, through the inclusion of revenue
incentives in the Lozares contract, the City is hopeful that the contractor will be able to diminish
the impact on range activity.
Looking ahead to the reopening of the course, City Staff were able to negotiate contracts below
National Golf Foundations expenditure projections. Attachment H provides an update to the
original NGF projections for the new course with the negotiated contract terms. The estimated
annual savings to the City as a result of contract negotiations is approximately $50,538 to
$107,895, which would result in a total of $661,127 over the first seven years of the new golf
course.
It is important to note that the SFCJPA creek flood protection project and City Golf Course
construction start dates and timelines have not been finalized at this time. Currently, the Office
of Management and Budget is projecting budget figures for a closure of the course in spring of
2014.
City of Palo Alto Page 14
In addition, the speedy completion of construction is vital to minimizing the impact on the
general fund operating budget. NGF projected that the new course would generate
approximately $251,708 gross revenues each month during the first year. The potential loss of
this revenue with fixed maintenance and operational costs in place will cause the impact on the
general fund to grow with each additional month of closure.
If the course reconfiguration timeline is changed, staff will submit a Budget Amendment
Ordinance to Council to account for the impact of any changes may have to the operating
budget.
Policy Implications
The project is consistent with Policy C-26 of the Comprehensive Plan, which encourages
maintaining and enhancing existing park facilities.
Attachments:
Attachment A - Golf Management Contract Lozares 2013-2018 (PDF)
Attachment B - Lease Amendment No 4 Final Brad Lozares Golf Shop (DOCX)
Attachment C - Golf Maintenance Valley Crest 2013-2018 (PDF)
Attachment D - Golf Valley Crest Contract and Staff Report (PDF)
Attachment E - Golf Course Contract Management Services Dec 2010- Lozares (PDF)
Attachment F - Golf National Golf Foundation Report April 2012 (PDF)
Attachment G - Finance Committee Minutes 03-05-13 Excerpt Item 2 Lozarez Lease
(DOC)
Attachment H - Update to the National Golf Foundations Expenditure Projections (PDF)
ATTACHMENT B
1
AMENDMENT NO. 4 TO LEASE #211 BETWEEN
THE CITY OF PALO ALTO AND BRAD LOZARES
THIS AMENDMENT NO. 4 TO LEASE #211, dated, for convenience, March __,
2013, is entered into by the CITY OF PALO ALTO, a California chartered municipal corporation
(the "CITY"), and BRAD LOZARES (“TENANT”) (individually, a “Party” and, collectively, the
“Parties”), in reference to the following facts:
RECITALS:
A. On March 16, 1998, the Parties entered into Lease #211 (the “Lease”), by which
Section IV provides for a term of fifteen (15) years, commencing May 1, 1998 and expiring on
April 30, 2013. Section VI provides for an option to the TENANT to extend the term of the Lease
for one ten-year period, provided certain conditions have been met (the “Option”).
B. The Parties wish to amend the Lease to change the Option to reduce the option
term from ten (10) years to five (5) years. The TENANT will provide the CITY with prior written
notice to exercise the Option.
AGREEMENT:
SECTION 1. Section VI. OPTION TO EXTEND is amended in its entirety to read, as
follows:
“TENANT shall have the option to extend this Lease term for an additional five (5) years
if the following conditions have been satisfied:
A. TENTANT has, to the satisfaction of the City Manager, faithfully performed each and
every condition of this Lease throughout the Lease term. The City Manager’s
assessment of TENANT’s performance shall be final and conclusive and shall be
based on information received from CITY’s staff, and other that may have knowledge
of TENANT’S performance; and
B. TENANT has submitted to CITY, a written notice of TENANT’S intent to extend the
Lease in accordance with the terms of this clause, on or before thirty (30) days prior
to the end of the Lease term set forth in Clause IV (Term).
CITY may notify TENANT if TENANT’S performance has not been acceptable in
accordance with subparagraph A of this clause within two (2) months of receipt of
TENANT’S notice of intent to extent this Lease. CITY’S failure to notify shall not be
deemed or construed as CITY’S approval of TENANT’S option to extend.”
SECTION 2. Except as amended herein by this Amendment No. 4 to Lease #211 and
consistent herewith, the terms of the Lease, as modified by Amendment Nos. 1, 2 and 3, shall
remain in full force and effect.
ATTACHMENT B
2
IN WITNESS WHEREOF, the Parties have by their duly appointed representatives
executed this Amendment No. 4 to Lease #211 in Palo Alto, County of Santa Clara, State of
California, on the date first above stated.
CITY OF PALO ALTO TENANT
___________________________ ___________________________
City Manager BRAD LOZARES
APPROVED AS TO FORM
___________________________
Senior Asst. City Attorney
APPROVED:
____________________________
Director of Administrative Services
____________________________
Director of Community Services
The final General Services Agreement with ValleyCrest is attached as Attachment B.
RECOMMENDATION
Staff recommends that the Council:
1. Authorize the City Manager or his designee to execute the General Services Agreement
(Attachment B) in the amount of $1,850,000 with ValleyCrest for a term of 30 months
beginning November 1, 2010 ending April 30, 2013, and the sale of used golf course
maintenance equipment (Attachment D) to ValleyCrest for $125,000; and
2. Authorize the City Manager or his designee to negotiate and execute one or more change
orders to the contract with ValleyCrest Golf Maintenance for related, additional but
unforeseen work that may develop during the term, the total value of which shall not
exceed $185,000 (10% Contingency).
ATTACHMENTS
Attachment A
Attachment B
Attachment C
Attachment D
CMR 382:10, October 18, 2010, recommending approval of a General
Services Agreement with ValleyCrest
Final version of the General Services Agreement between the City of Palo
Alto and ValleyCrest, also provided to Council on October'18
Supplemental Council' Memo, October 18, 2010, summarizing key
contract revisions
List of used City Golf Course maintenance equipment to be sold to
ValleyCrest
/~!/ //J P~PMrnDBY: __________ (_"~,/~~~~~ /.~~ __ ~~~~ __ ~~~ ______ _
ROBDEGEUS
DEPARTMENT HEAD APPROVAL:
Division Manager, Recreation Services
~ '!:1izJ (~';) ~T~ -----------
rector, ommunity Services
Department
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CITY MANAGER APPROV AL: ----"~~/:-:)-~-t~'f-M-¥:..-/--;/ ",4~~.~<:::::~L:"'::'·~""/_//~)--t.---f~ft::::, "::.::..'?'L~ ____ _
City Manager
CMR390:10 20f2
ATTACHMENT A
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: COMMUNITY SERVICES
DATE: OCTOBER 18, 2010 CMR: 382:10
REPORT TYPE: ACTION
SUBJECT: Approval of a General Services Agreement with ValleyCrest Golf Course
Maintenance, Inc. in the Amount of $1,850,000 for Maintenance Services and
Sale of Used City Golf Course Maintenance Equipment for· $125,000; and
Referral of Golf Course Financial Planning Issues to the Finance Committee
EXECUTIVE SUMMARY
Due to the ongoing fiscal challenges facing the City of Palo Alto's (City) General Fund the
Community Services Department (CSD) recommended, and the Council approved, the
exploration of "contracting out" Palo Alto Municipal Golf Course ("Golf Course") maintenance
services during the 2011 budget process. The",recommendation to explore private maintenance
was also suggested in the findings of the Golf Course operational study conducted by Economic
Research Associates (ERA) in 2008. The Executive Summary of the ERA study is attached as
Attachment A.
This report describes the Request For Proposal (RFP) process for Golf Course maintenance that
has resulted in the recommendation of an award of contract to ValleyCrest Golf Course
Maintenance, Inc. (ValleyCrest) to assume Golf Course maintenance responsibilities, beginning
November 1, 2010 for a 30-month term ending on ·or soon after April 30, 2013 at a cost of
$1,850,000 and a purchase of used golf course equipment at a cost of $125,000. ValleyCrest is
recommended for an award of contract due to its extensive golf course maintenance services
experience, low cost proposal relative to the public maintenance option, and its commitment to
enhance the City's existing Integrated Pest Management (IMP) program, customer service and,
most importantly, to improve the quality of Golf Course maintenance services to ensure the Golf
Course will remain competitive with neighboring golf courses. The proposed contract between
the City and ValleyCrest is attached as Attachment B.
The report also discuses related Golf Course issues that require the Council's direction and
action in the near future. The current outstanding issues include:
• The need for flood control project mitigation, not only for the physical disruption to the
Golf Course but also for anticipated revenue losses from decreased play during levee
reconstruction; and
CMR382:10 10f8
ATTACHMENT A
• Consideration of the establishment of an infrastructure reserve for the Golf Course to pay
for capital improvements from positive Golf Course cash flow to reduce the need for
future capital improvement-related debt.
Staff requests that these two items be referred to the Finance Committee for further discussion.
Finally, the report also discusses the intent to make coterminous both the Golf Professional
contract with Brad Lozares and the Pro-Shop lease agreement with Brad Lozares, so the
agreements will terminate concurrently in the month of April 2013. Staff will make a
recommendation to the Council before the end of calendar year 2010.
RECOMMENDATION
Staff recommends that the Council:
1. Authorize the City Manager or his designee to execute the General Services Agreement
(Attachment B) in the amount of $1,850,000 with ValleyCrest for a term of 30 months
beginning November 1, 2010 ending April 30, 2013, and the sale of used golf course
maintenance equipment (Attachment C) to ValleyCrest for $125,000; and
2. Authorize the City Manager or his designee to negotiate and execute one or more change
orders to the contract with ValleyCrest Golf, Inc., for related, additional but unforeseen
work that may develop during the project, the total value of which shall not exceed
$185,000 (10% Contingency); and
3. Refer to the Finance Committee the question, of how staff should propose fair and
reasonable mitigation for anticipated lost revenues at the Golf Course during the San
Francisquito Creek Joint Powers Authority's (JPA) flood control project.
4. Refer to the Finance Committee the question of whether staff should develop for the
Council's approval a proposal to establish a new infrastructure reserve fund in the
amount of the annual savings above the fully loaded operating costs of the Golf Course
for the eventual replacement of anticipated infrastructure needs at the Palo Alto
Municipal Golf Course.
BACKGROUND
The Golf Course was constructed in the mid-1950's on 184 acres of flat former salt-marsh and
bay fill. The course was designed by noted golf course architect William R. Bell of Pasadena,
California. The Golf Course was designed as an I8-hole facility with a par of 72. The Golf
Course is a classic I8-hole championship course that measures over 6,800 yards from the back
tees. The facility includes a large practice putting green, a three-building Eichler-designed-
clubhouse/golf shop complex and parking lot. In the mid 1970's, improvements were made to
replace the clubhouse buildings. At that time, holes 3, 10, 11, & 18 were renovated under the
direction of golf architect Robert Trent Jones, Jr.
The Golf Course is a City of Palo Alto General Fund operation. All excess revenues or shortages
are returned to the City'S General Fund. The Golf Course currently generates sufficient revenues
to support debt service, direct and indirect expenses, and City cost plan charges. There is no
reserve or replacement fund for the Golf Course, consequently; additional debt service is taken
on by the Golf Course when new capital improvement needs arise. The debt service for the
Certificates of Participation, which represents approximately $570,000 annually, will be fully
retired in June 30, 2018.
CMR382:1O 20f8
ATTACHMENT A
Presently, the City has entered into both a Golf Professional management agreement and a Pro
Shop lease agreement with Brad Lozares (Lozares) for golf operations. As a result of Internal
Revenue Services (IRS) debt issuance limitations, the management agreement and the lease for
the building are separate contracts. The management agreement includes the following
responsibilities: reservations; green fees collection; starting; and marshalling services. The lease
agreement for the building includes: responsibility for managing golf cart rentals; the driving
range; merchandise sales; and instruction services. The Lozares management agreement with the
City for operating the Golf Course expires December 31, 2010. The lease agreement with
Lozares for lease of the building expires in April 2013. The building lease also includes an
option to extend the term of the concession 10 additional years, if the option is exercised at the
City's sole discretion.
There is also a separate lease agreement with R&T Restaurant Corporation (R&T) for food and
beverage services at the Golf Course. The R&T lease agreement for food and beverage
operations expires April 20, 2018.
Currently Golf Course turf and irrigation maintenance services are provided by CSD's Parks,
Open Space and Golf Division. CSD oversees daily turf and ground maintenance operations that
include coordination of services between the tenants and City maintenance staff in order to
provide a seamless experience for visitors to the Golf Course. The Real Estate Division of the
Administrative Services Department oversees tenant leases. The Club House and Pro Shop
building rriaintenance (exterior) and janitorial services are provided by the City's Public Works
Department, Facilities Management Division.
In 2007, the City Council authorized staff to proceed with an operational analysis of the Golf
Course. The operational analysis was conducted by Economics Research Associates (ERA)
(Attachment A), and provided information on the Bay Area golf market and conditions of the
Golf Course facility; and the current and alternative operating models available for the Golf
Course.
The ERA study was presented to the City Council on November 17, 2008 (CMR: 446:08;
Attachment D). The study concluded that, despite a Bay Area wide decline in golf play, the Golf
Course performance has been relatively strong when compared with similar municipal facilities
in the market area. The recommendations to sustain the long-term viability of the golf course
program from the staff report are summarized below:
1. Retain a golf course design consultant to work with the JPA and the City's staffs to
design an environmentally friendly flood control project that will balance flood control
and recreational use solutions and also benefit the Golf Course.
2. Recalculate the Cost Plan allocation for the Golf Course to a more traditional golf
course operation allocation. This would allow for excess funds to be set aside to
establish a replacement reserve to fund ongoing minor capital improvement and/or
more intensive maintenance.
3. Align the two tenant leases and management contract so they expire concurrently. This
would allow consideration of other, potentially more effective and efficient, operating
options and a smoother transition of operation, should that be deemed advantageous in
the future.
CMR382:10 30f8
ATTACHMENT A
4. Commit to a plan of cost-neutral capital improvements to ensure the Golf Course
remains competitive. That is, proceed with improvements that are economically
justified by increased net operating income stemming from the improvements.
5. Direct Community Services and other relevant City staff to work in cooperation with
the labor union to further evaluate the advantages and disadvantages of private versus
public maintenance.
Since the 2008 Golf Course study was presented to Council, the Golf Course has continued to
experience a decline in annual rounds of play from 74,000 in 2008, to 72,000 in 2009, and to
68,500 in 2010. In order to keep the Golf Course financially viable budget cuts were made in
2009 and 2010 that continued to erode the resources available for the City-operated maintenance
program. Although the Golf Course managed to end FY 2010 with net revenues of $77,000, this
was achieved with a 40% reduction in staff, which is less than the level of staff needed to
provide comprehensive quality Golf Course maintenance.
As the FY 2011 budget process began, it became clear the City needed to make significant
structural budget reductions to the General Fund with an anticipated deficit of $7.3 million. As
CSD considered alternatives for budget reductions, the "contracting out" of Golf Course
maintenance services was recommended, not only for the potential cost savings, but also to
return maintenance levels to a standard that allows the Golf Course to remain competitive with
the objective of increasing golf rounds, which has been compromised through numerous years of
program budget cuts.
Staff recommends the approval of a Golf Course maintenance services agreement with
ValIeyCrest and replacing in-house maintenance staff with contract personnel. Below, staff will
provide information on the process that was used to arrive at this recommendation and will
discuss the progress and current thinking on the other recommendations listed above, stemming
from the ERA Golf Course study .
. DISCUSSION
The process for exploring "contra~t out" Golf Course maintenance services began in spring 2010
by notifying SEIU of the City's intent to explore contract maintenance services for the Golf
Course. The City and SEIU engaged in a discussion about the City's financial challenges and
rationale for the need to consider an alternative service delivery for Golf Course maintenance.
Although some ideas were discussed to mitigate the need for contracting out Golf Course
maintenance, such as a regional golf course maintenance agreement between several neighboring
cities, this suggestion was deemed by the City to be financially infeasible.
CSD staff prepared a detailed scope of service, with input from several other City departments
including Public Works, Utilities and Administrative Services (ASD). The Request for Proposal
(RFP) was released in June. A mandatory pre-solicitation meeting was held at the Golf Course
which included a tour of the Golf Course that allow all interested parties to walk the Golf Course
and ask specific questions during the hole-by-hole walk. Five potential bidders attended the pre-
bid meeting. Four proposals were received in August when the responses to the RFP were due.
CSD assembled an evaluation panel to evaluate the proposals. The eight member panel included
members of the Golf Advisory Committee, CSD Director, Palo Alto's Golf Course
CMR382:1O 40f8
ATTACHMENT A
Superintendent, Recreation Division Manager and the Parks, Open Space and Golf Division
Manager. The stated RFP criteria used to evaluate the proposals were:
A. Quality and completeness of proposal;
B. Qualifications & experience of proposer in providing Golf Course Maintenance
Services as stated in this RFP; including experience and qualifications of project
manager & key staff to be assigned to project;
C. Similar experience and expertise in the type of work required, with the City, or with
other municipal golf courses or private golf courses;
D. Demonstrated understanding of the scope of services requested, timeframes,
scheduling ability, ability to provide back up or follow up services, if needed;
E. References/Financial stability of Firm; and
F. The Cost to the City.
Of the four proposals, based on the RFP criteria above, two were determined by the evaluation
panel as more responsive to the RFP. The proposals were submitted by Lozares and ValleyCrest.
Both companies were invited to interview with the panel; the interviews occurred in Septymber.
At the conclusion of the interviews each company was asked to provide a Best and Final
proposal with an emphasis on reducing overall costs with minimal or no impact to the scope of
services defined in the RFP. The "Best and Final" offers were received in mid September.
Concurrently, reference checks were made and, where feasible, site visits were conducted to
evaluate maintenance levels at other golf courses maintained by the firms.
At the conclusion of the RFP process ValleyCrest was unanimously determined by the
evaluation panel to have provided the most complete responsive proposal and thereby it
recommended ValleyCrest as the party to provide private Golf Course maintenance services to
the City. The factors that weighed most heavily on the ValleyCrest recommendation was the
depth of experience exhibited by ValleyCrest and the proposed overall cost savings, which is
approximately $300,000 below the Lozares' "Best and Final" proposal, and approximately
$500,000 below what it would cost the City to continue Golf Course maintenance services in-
house over the 30-month term of the proposed contract. Furthermore, the ValleyCrest
management team displayed a commitment to customer service and high quality maintenance
that the City desires for the Golf Course. ValleyCrest is very interested in working closely with
the City's water quality control program, environmental goals and the IMP program. ValleyCrest
brings a wealth of knowledge and expertise in horticulture and agronomy that staff believe will
serve the City well as we continue push the boundaries toward excellence in Golf Course
maintenance, sustainability and environmental conservation.
ValleyCrest Golf Course Maintenance is one of five operating divisions of the ValleyCrest
Holding Co. and Subsidiaries. It is the country's largest horticulture maintenance, golf course
maintenance and construction company. ValleyCrest currently maintains· over fifty golf
CMR382:10 50f8
ATTACHMENT A
properties located in California, Texas, Florida, Georgia, North Carolina, South Carolina,
Pennsylvania, New Jersey, Massachusetts and Michigan.
Furthermore, ValleyCrest is open and enthusiastic to providing displaced City Golf Course
maintenance staff with an opportunity to join the ValleyCrest Company. Staff was very
encouraged to hear this and will work with ValleyCrest to connect displaced employees with
ValleyCrest. Of the seven regular staff affected by contracting out Golf Course maintenance four
have already made the decision to retire, one has found other employment, and one has bumping
rights per the SEIU labor agreement with the City and will move to the Parks, Open Space and
Golf division of CSD. The remaining staff member will be laid-off as of November 1, 2010;
however, staff is hopeful that a vacancy may emerge in the Parks Open Space and Golf division
over the next month that will provide an opportunity for a transition.
As CSD staff will need to maintain the Golf Course until the effective date of the transition to
ValleyCrest, the proposed negotiated sale of City-owned Golf Course maintenance equipment to
ValleyCrest is preferred for the effective and efficient transition from public to private
maintenance. The City's Public Works fleet management staff valued the existing Golf Course
equipment, staff then negotiated a fair and reasonable price with ValleyCrest, which has agreed
to pay $125,000 for all major equipment.
As described in the contract (Attachment B), ValleyCrest will occupy the Golf Course
maintenance yard and facilities therein to deliver the Golf Course maintenance services. The City
Attorney's office, ASD Budget and Purchasing Divisions together with Risk Management
provided support in drafting the contract, including review and approval of the occupancy terms
and insurance requirements for use of the City facilities and property.
A third party furniture, fixtures and equipment consultant will be retained by the City to
determine the fair market value (FMV) of all other minor items (tools, supplies and materials)
that remain at the Golf Course maintenance yard. ValleyCrest has agreed to pay for the
remaining items based on this FMV independent furniture, fixtures and equipment consultant's
valuation, This will be completed on or before November 1,2010. .
Discussion of Related Golf Course Issues
The topics below relate to the staff recommendations from the 2008 ERA Golf Course study,
summarized on page 3 of this staff report and in CMR: 446:08 Operational Analysis of the City
of Palo Alto Municipal Golf Course (Attachment D) The action items before Council at this time
is the recommendation refer items 1 and 2 below to the Finance Committee for further
discussion.
1. San Francisquito Creek Joint Powers Authority -Flood Control
The Council has requested that the JP A retain a golf course design consultant to work with the
Joint Powers Authority andCity staff to design an environmentally friendly flood control project
that will balance flood control and recreational use solutions and that will also benefit the Golf
Course. The JPA has been very supportive of the City'S need for fair and reasonable mitigation
measures to the Golf Course for levee improvements; the impact to the Golf Course will include
the need to re-design 4 to 6 holes due to levee realignment and encroachment onto the Golf
Course. The JP A hopes to begin work in summer 2011, but the likelihood of this occurring is
CMR382:1O 6.of8
ATTACHMENT A
unknown at this time. The impact and related mitigation to the physical impacts to the Golf
Course is moving in a positive direction and staff is confident that a workable win/win design
will be developed. However, the loss of City revenue during the levee reconstruction is difficult
to quantify. Staff does not have a specific recommendation to mitigate expected lost revenues at
this time but does want to bring this issue to the Council's attention and ask that this issue be
referred to the Finance Committee. A possible mitigation to consider is to seek additional and
more comprehensive Golf Course design and planning beyond mitigating for the golf holes
impacted by levee realignment. For a point of reference, during the major capital improvements
at the Golf Course in 1998-99 the City experienced a 25% reduction in annual play; such a
reduction today would translate to $500,000 annually in lost revenues. Staff is working with the
JP A to explore appropriate mitigations as the timeline and levee design work progresses and look
forward to discussing options with the Finance Committee.
2. Golf Course Infrastructure Reserve
Regarding the revision of the Cost Plan allocation for the Golf Course to a more traditional golf
course operation allocation will occur with the reduction of 7 Full Time Equivalent (FTE) to .45
FTE staff previously dedicated to the in-house Golf Course maintenance operation, as city Cost
Plan is allocated based on FTE. The result of the Cost Plan revision, coupled with the lower
. overall cost of private Golf Course maintenance, will be a positive cash flow for the Golf Course,
if annual rounds played hold steady at 68,000 or more. It is recommended that revenues above
and beyond the cost of operating the Golf Course be considered for a infrastructure reserve for
ongoing capital improvement needs· for the Golf Course. This recommendation aims to reduce
the need for debt when the 1998 bond debt of $~70,000 annually expires in 2018. The Golf
Course Advisory Committee believes creating an infrastructure reserve, paid for by the golfing
community, as a very important step for the long-term financial health of the Golf Course. Staff
recommends that this item also be referred to the Finance Committee for further discussion
Other related items for that staff would like Council to be aware of are:
3. Aligning Golf Course Contracts -Food and Beverage, Professional Services, Golf Course
Maintenance and Pro Shop
The recommendation to align the two tenant leases and management contract at the Golf Course,
so they will expire concurrently, remains a staff recommendation. Specifically alignment of
contracts would allow consideration of other, potentially more effective and efficient, operating
options and a smoother transition of operation, should that be deemed advantageous in the future.
The ValleyCrest maintenance contract is strategically aligned with the existing lease agreement
with Brad Lozares for operating the Pro-Shop. Moreover, staff intends to bring an extension of
the existing management agreement with Lozares to the Council before the end of 2010 to align
the management agreement with the Pro-Shop Lease and the proposed ValleyCrest maintenance
agreement expiration date. This would result in 3 of the 4 Golf Course contracts to expire at the
same time, April 2013. The lease with R&T Restaurant Corporation, who operates the Bay Cafe,
has a term that expires in 2018; options for re-aligning this lease with the other three Golf Course
contracts is also being considered.
4. Capital Improvement
Lastly regarding the recommendation to commit to a plan of cost neutral capital improvements,
to ensure the Golf Course remains competitive, the only CIP improvements recommended at this
CMR382:10 70f8
perfonned by the Contractor, for which payment would result in a sum total exceeding the maximum
amount of compensation set forth in this Agreement for perfonnance of the Services, shall be performed at
no additional cost to the City, except as expressly provided in this Agreement. The Contractor
acknowledges that the City has infonned it that the current Palo Alto municipal golf course (the "Golf
Course") configurations could be changed or re-designed after the: Effective Date, and that the City's
collaboration with the San Francisquito Creek Joint Powers Authority (the "JP A") to implement any
reasonably necessary flood control measures with respect to the San Francisquito Creek, which lies
adjacent to the Golf Course, could result in the temporary closure of one or more areas of the Golf Course
and, consequently, could affect ona temporary or periodic basis the' Contractor's duties and obligation to
perfonn the Services hereunder. In that event, the Parties shall in good faith timely negotiate an adjustment
to the Services, including, without limitation, the compensation otherwise payable to the Contractor, as set
forth in this Agreement, in order to reflect any changes, including, without limitation, modifications to the
scope of the Services.
The City has set aside the sum of One Hundred Eighty-Five Thousand Dollars ($185,000.00) for
the Contractor's perfonnance of Additional Services, if any may be required to be performed by
the Contractor. The Contractor shall provide any Additional Services only after receipt of the prior
written authorization of the City Manager or designee. Thereafter, the Contractor, at the City's
request, shall submit a detailed written proposal, including a description of the Additional
Services' scope of services, 'schedule, level of effort, and the maximum compensation, including
reimbursable expenses. Such compensation shall be based on the hourly rates set forth in Exhibit .
"C" or, if such rates are not applicable, a negotiated lump sum. The City shall not authorize, and
the Contractor shall not perfonn, any Additional Services, for which any payment would cause the
total :\um compensation for Additional Services to exceed the amount of $185,000.00. Payments
for Additional Services shall be subject to in the provisions of this Agreement.
6. COMPENSATION DURING ADDITIONAL TERMS.
C! CONTRACTOR'S compensation rates for each additional tenn shall be the same as the original
tenn;OR .
13 The Contractor's compensation rates shall be adjusted effective on the commencement of each
Additional Term, if any. The lump sum compensation amount, hourly rates, or fees, whichever is
applicable as set forth in section 5 above, shall be adjusted by a percentage equal to the change in
the Consumer Price Index for Urban Wage Earners and Clerical Workers for the San Francisco-
Oakland-San Jose area, published by the United States Department of Labor Statistics (CPI) which
is published most iliunediately preceding the commencement of the applicable Additional Term,
which shall be compared with the CPI published most immediately preceding the commencement
date of the then expiring tenn. Notwithstanding the foregoing, in no event shall the Contractor's
compensation rates be increased by an amount exceeding five percent (5%) of the rates in effect
during the immediately preceding Tenn. Any adjustment to the Contractor's compensation rates
shall be reflected in a written amendment to this Agreement.
7. INVOICING. The Contractor shall send all invoices to the City, Attention: the Golf Services Manager
(the "GSM"). The present GSM is Joseph Vallaire, Golf Course Superintendent, CommunitY Services
Dept., Parks and Golf Division, Telephone: 650-329-2175. The invoices: (a) shall be submitted in arrears
for the Services performed; (b) shall not be submitted more frequently than monthly; and (c) shall provide a
detailed statement of the Services perfonned during the invoice period. which statement may be subject to
verification by the City Manager or City Auditor or designee. The City shall pay the undisputed amount of
any invoice within thirty (30) days of its receipt.
GENERAL TERMS AND. CONDITIONS
A. ACCEPTANCE. The Contractor accepts and agrees to the general terms and conditions of this
Agreement, Sections A through AA, inclusive. This Agreement includes Sections 1 through 6 above, these
general terms and conditions, and the attached exhibits and any amendments thereto.
B. QUALIFICATIONS. the Contractor represents and warrants that (1) it has the expertise and
2 Rev. January 11.2010
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Maintenance\Cl 1 136681 Valleycrest GC Maintenance Agreement FINAL 1 0.12.201 O.doc
K. AUDITS. The City and its authorized representatives may audit, at.any reasonable time during the Term
. and for three (3) years after the date of final payment, the Contractor's records pertaining to matters
covered by this Agreement. The Contractor shall maintain accurate books and records in accordance with
generally accepted accounting principles for at least three (3) following the expiration or earlier termination
of this Agreement.
. L. NO IMPLIED WAIVER. No payment, partial payment, acceptance, or partial acceptance by the City shall
operate as a waiver.on the part of the City of any of its rights under this Agreement.
M. INSURANCE. The City, at its sole cost, sliall purchase and maintain in full force during the Term, the
insurance coverage described in Exhibit "D". Insurance must be provided by companies with a Best's Key
rating of A-:VII or higher and which are otherwise acceptable to the City's Risk Manager .. The Risk
Manager must approve deductibles and self-insured retentions. In addition, all policies, endorsements,
. certificates and/or binders are subject to approval by the Risk Manager as to form and content. The
Contractor shall obtain a policy endorsement naming the City of Palo Alto as an additional insured under
any general liability or automobile policy. The Contractor shall obtain an endorsement stating that the
insurance is primary coverage and will not be canceled or materially reduced in coverage or limits until
after providing thirty (30) days' prior written notice of the cancellation or modification to the Risk
Manager. The Contractor shall provide certificates of such policies or other evidence of coverage
satisfactory to the Risk Manager, together with the required endorsements and evidence of payment of
premiums, to the City concurrently with the execution of this Agreement and shall during the Term provide
current certificates evidencing the required insurance coverage and endorsements to the Risk Manager.
The Contractor shall include all subcontractors as insured under its policies or shall obtain and provide to
the City separate certificates and endorsements for each subcontractor that meet all the requirements of this
section. The procuring of such required policies of insurance shall not operate to limit the Contractor's
liability or obligation to indemnify the City under this Agreement.
N. HOLD ~ARMLESS. To the fullest extent permitted by law and without limitation by the provisions of
Section M relating to insurance, the Contractor shall indemnify, defend and hold harmless the City, its
officials, officers, employees and agents from and against any and all damages, demands, claims, injuries,
losses, or liabilities of any nature, includfug death or injury to any person, property damage or any other
loss, including, without limitation, damages, penalties, fines and judgments, associated investigation and
administrative expenses and defense costs, including, but not limited to reasonable attorney's fees, courts
costs and costs of al~rnative dispute resolution), arising out of, or resulting in any way from or in
connection with the performance of this Agreement. The Contractor's obligations under this Section N
apply regardless of whether or not liability is caused or contributed to by any negligent (passive or active)
act or omission of the City, except that the Contractor shall not be obligated to indemnify for liability
arising from the sole negligence or 'willful misconduct of the City. The acceptance of the Services by the'
City shall not operate as a waiver of the right of indemnification. The provisions of this Section shall
survive the completion of the Services or the earlier termination of this Contract.
O. NON-DISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, the Contractor
certifies that in the performance of this Agreement, it shall not discriminate in the employment of any
person.because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual
orientation, housing status, marital status, familial status, weight or height of such person. The Contractor
acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto
Municipal Code, relating to Nondiscrimination Requirements and the penalties for violation thereof, and it
agrees to meet the requirements of Section 2.30.510 pertaining to nondiscrimination in employment.
P. WORKERS' COMPENSATION. The Contractor, by executing this Agreement, certifies that it is aware
of the provisions of the California Labor Code, which require every employer to be insured against liability
for workers' compensation or to undertake self-insurance in accordance with the provisions of that the
Labor Code, and certifies that it will comply with such provisions, as applicable, before commencing and
during the performance of the Services. .
Q. TERMINATION. The City Manager may terminate this Agreement without cause by giving ten (10)
days' prior written notice thereof to the Contractor. If the Contractor fails to perform any of its material
obligations under this Agreement, in a4dition to all other remedies provided by law, the City Manager may
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available for inspection at the Purchasing Division.
• Reusable/returnable pallets shall be returned by the Contractor, at no additional cost to the City,
for reuse or recycling. The Contractor shall provide documentation from the facility, which
accepts the pallets, verifying that pallets are not being improperly disposed. .
x; AUTHORITY. The individual(s) executing this Agreement represent and warrant that they have the legal
capacity and du~ authority to do so on behalf of the Contractor.
Y. CONTRACT TERMS: All unchecked boxes do not apply to this Agreement.
Z. STORAGE AND MAINTENANCE FACILITIES. The City hereby grants a license and right of entry to
the Contractor to access, occupy and use the site of the Facilities (the "Site"), which comprise several
building facilities, including sheds and shops, and the two surrounding areas that are bounded by chain-link
fencing and that straddle the Golf Course holes and the Palo Alto airport, which the City shall make
available to the Contractor during the Term at no additional cost to the Contractor. The Contractor shall
maintain the Site and the Facilities in the same condition existing' as of the date· when the Contractor is
takes possession thereof, ordinary wear and tear excepted. The Contractor shall use due care and caution
with respect to (1) whenever its employees. agents. representatives, contactors or subcontractors use the
equipment maintenance shop, depic!ed in Exhibit "G"· and located closest to the Palo Altp airport above-
ground jet fuel storage tanks (the "Fnel Tanks"), for purposes of performing equipment repairs as a part of .
the Services, (2) the fertilizer storage shed. in which fertilizer and other potentially hazardous materials are
stored, and (3) the oil storage shed, to ensure that the potential for accidental ignition and resulting frre-
related damage and hazardous materials losses will be substantial mitigated. The Contractor will exercise
such due care as, for example, the Contractor shall close the roll-down door of the equipment maintenance
shop, located closest to the Fuel Tanks, whenever an ignition source such as an acetylene torch is used
therein for equipment welding purposes, and whenever using and ensuring the utility and integrity of sand
bags and other materials that are located around catch basins in the event of a chemical spill. Th<l City will
conduct quarterly inspections of the Site and the Facilities, including the Fuel Facility, upon prior
reasonable notice given to the Contractor.
AA.FUEL FACILITmS. Nothing in this Section AA 0.1 other provision of this Agreement shaH be deemed or
. construed to require the Contractor to purchase from the City any fuel for sue by any equipment or vehicle
or other instrument that the Contractor uses to provide the Services. The City shall retain ownership and
control of the card reader, fuel pump and fuel tank (collectively, the "Fuel Facility") located at the Site. The
Contractor acknowledges and agrees that, if the Contractor uses the Fuel Facility to withdraw fuel, then it
shall compensate the City for the quantities of fuel at the charges then in effect. The Contractor
acknowledges and agrees that the City currently imposes a fuel charge, which inCdrporates the cost of fuel
delivery, fuel commodity charge, based on the Oil Price Information Service Index) and direct overhead
costs (the "Fuel Price"). For Fuel Price e~ate disclosure purposes only, the City represents that the Fuel
Price for August 2010 was $3.43 for unleaded gasoline and $3.12 for diesel fuel. Notwithstanding any
provision in this Agreement to the contrary, the Contractor further acknowledges and agrees that .the City
shall access the Fuel Facility for its own purposes and it has permitted the golf course operator and Pro-
Shop tenant, currently Brad Lozares, to enter upon the Site and use the Fuel Facility, and that the City will
not require the Contractor to assume any such fueling obligation with resPt:ct to the operator-tenant
Lozares.
IN WITNESS WHEREOF, the Parties hereto have by their duly authorized representatives executed this Agreement
on the date first above written. .
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the public, the Contractor's employees, agents, representatives, contractor
and subcontractors as well as by any other entity present or occurring in at
the Golf Course or the Site, including a complete written report thereof to
the GSM within twenty-four (24) hours following the occurrence of such
event.
1.2 PROTECTION OF PROPERTY
1.2.1 During Periods of Inclement Weather:
The Contractor will provide supervisory inspection of the Golf Course
during regular hours to prevent or minimize possible damage. The
Contractor shall submit a report identifying any storm damage to the GSM,
which shall be attached to a site map" that identifies the location of
damage." The Contractor's employees shall continue to perform the
Services that are or will not be affected by such inclement weather (e.g.,
"clean-up a·nd. facility maintenance, as well as work caused by the
inclement weather). ""
1.2:2 The Contractor shall exercise due care during the performance of the
Services in protecting from damage all existing facilities, structures and
utilities, including both aboveground and underground City property. Any
damage to. the City's property that is determined to be caused by the
" Cantractor's act or omission shall be corrected and paid far by the
Contractor, upon request, at no cost to. the City.
1.2.3 If the City requests or directs the Co.ntractar to. perfarm Services wark in a
specified area, then the Contractor shall be responsible for verifying and
locating (and markin"g by USA) any underground utility systems and far
taking reasonable precautians whenever its employees are or will be·
working in these areas. Any damage or problems shall be reported
immediately to the GSM.
1.3 INTEGRATED PEST MANAGEMENT.
1.3.1 The Contractor shall satisfy and athelWise comply with the follawing IPM
provisians:
a. T\1e Cantractar must wark clasely with the GSM and the City's IPM
Coordinatar (the "IPMC") to achieve annual IPM goals which strive
to. reduce the amaunt and taxicity of pesticides that are used while
maintaining the health and aesthetics of the Golf Course. The
Cantractar must attend annually City IPM meeting, caordinate with
the IPMC an annual goals, and meet quarterly to track progress on
annual gaals and troubleshaot IPM problems and respond to public
requests.
b. Within thirty (30) days of the Effective Date and annually on the
anniversary date (Navember 1st or as othelWise specified) af this ,
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beneficial insects (or other invertebrates). Selective applications of
the least-toxic pesticides may be used only when non-chemical
control measures have been exhausted. The following products
shall not be used for insect control:
i. Products labeled with the signal word "danger"
ii. Organophosphate products (e.g.,diazinon or
chlopyrifos) . .
iii. Carbamate products (e.g., carbaryl)
iv. Pyrethroid-containing products
Biological controls will be based upon sound information such as
that provided by the University of California. The CSD staff will
provide Site-specific historical data for known infestations. .
i.. The Contractor must provide regular pesticide reporting information
in electronic format using the City's Contractor's Pesticide
Application Form (Attachment 2) and to be emailed to the GSM and
the IPMC by the 15th day of each month for the previous month's
work, unless it is otherwise agreed to and approved by the IPMC.
The Contractor must also have internet access and the ability to
ehter pesticide use information online if the City provides that·
reporting mechanism. "
j. For the City's Annual Pest Management and IPM Report, the
Contractor must also provide information confirming appropriate
training of staff, an annual inventory of hazardous materials and
hazardous wastes to ensure expired or prohibited products are
appropriately disposed and a written summary of the ·challenges
and successes of IPM program efforts annually. The brief report
format (Attachment 2) shal~ be provided by the City, and shall be
. due to the IPMC by December 3.1 of each year.
k. In accordance with the City's shared Municipal Regional Storm
water permit, IPM training must be provided to the Contractor's staff
at a minimum of once every three (3) years, or at a minimum of one
time during the Term, as shall be established by the GSM.
I. . Requests for information from the GSM or IPMC must be
responded to within 48 hours .
. All materials used shall be in strict accordance with and applied within the
standards set forth in the EPA regulations and the California Food and
Agricultural Code.
The Contractor is responsible for obtaining a'lI required permits and maintaining
the required usage documentation and to comply with all requests from the Santa
Clara County Agricultural Department to fnspect records, licenses, training
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· . pursuant to the contract.
1.4.2 Each internal combustion engine used for any purpose on the job or
related to the job shall be equipped with a 'muffler of a type recommended
by the manufacturer of such equipment. No .internal combustion engine
shall be operated on the project without said muffler.
1.5 EQUIPMENT AND ACCESSORIES
1.5.1 The Contractor shall provide all necessary equipmentneeded to perform
the Services as set forth in this Exhibit "A".
1.5.2 As of tlie Effective Date, the Contractor shall purchase from the City the
equipment, listed in Attachment A, in the "as-is", "where-is" condition in the
amount of $125,000, which sum shall be paid to the City on or before the
Effective Date. The Contractor will assume all rights and obligations
relating to the equipment as of the Effective Date. To the extent that the
City will require the Contractor to execute a bill of sale for such equipment,
the Contractor will execute and deliVer the same promptly to the City.
1.5.3 A third party 'furnishings, fixtures and equipment' consultant will value the
remaining supplies, materials and minor tools and equipment (not the
subject of the .sale and purchase) at the Site that is related to Golf Cours~
maintenance. The Contractor shall pay the City for the cost of the .'
independent consultant's valuation by the Effective Date or as soon as
practicable as agreed to by the City.
1.5.4 The Contractor shall take all necessary precautions for safe operation of
purchased equipment and the protection of the public from injury and
damage from such equipment.
1.5.5 All accessory equipment must be maintained in a clean, safe, functioning
condition at all times and repainted as required to present an aesthetically
pleasing appearance. .
1.5.6 The Contractor shall be responsible for the repair and repl.acement of Golf
Course signage, shoe brushes, trash receptacles, ash urns, greens cups,
NCGA tee markers, benches, s~nd rakes, flags and poles, ball washers,
fairway yardage poles, and sprinkler yardage markers.
1.6 INQUIRIES AND COMPLAINTS .;
1 ~6.1 The Contractor shall have at the Golf Course and the Site designated
responsible management personnel who will be authorized to take the
necessary action regarding inquiries and complaints that may be received
by the City, the golf course management services professional and/or
patrons during regular business hours. Copies of any and all public
correspondence will be provided to the GSM.
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All maintenance employees shall present a neat, well-groomed
appearance at all times.
The Contractor's employees shall act in a courteous, professional manner
at all times. Every effort shall be made to perform the work while creating
minimum disturbance to the golfers. Any Contractor employee, who is
determined by the GSM to be incompete-nt, disorderly, and intemperate or
otherwise behaves objectionably, upon request of the G8M, shall be
immediately removed by the Contractor from the Golf Course crew and
replaced with a satisfactory replacement.
The Superintendent will attend and participate in bi-weekly Golf Course
management/tenant meetings, monthly Golf Advisory Committee meetings
and other Golf Course-related meetings, whenever the subject of Golf
_ Course maintenance will be a topic or related topic of discussion.
The Superintendent shall play the Golf Course in order to be able to
discuss-the Golf Course conditions with the golf course services
professiOnal and golfer patrons and experience first-hand the playing
conditions. Rounds shall be limited to the weekdays, and in no event more
than four (4) complimentary rollnds a month, subject to space availability,
and no advance reservations will be permitted. All other Contractor
maintenance staff assigned to duties at the Golf Course may play two (2)
complimentary rounds a month, weekdays only, subject to space
availability, and no advance reservations.
The Contractor's staff, who will be assigned to duties at the Golf Course,
shall be fingerprinted before they will be permitted to commencing work on
behalf of the Contractor at the Golf Course. The Contractor will confirm, in
writing, of such fingerprinting, upon request of the G8M.
1.7.2 Uniforms: The Contractor shall pay for and bear the maintenance cost of
uniforms for all employees working on the Golf Course.
The uniform shall be worn as a complete unit and be fitted properly. The
uniform shall be cleaned and pressed with no rips, tears or permanent
stains present. The uniform shall include an inSignia or logo that refers to
"City of Palo Alto Municipal Golf Course."
In cool weather when a jacket or sweatshirt is needed, the jacket or
sweatshirt shall be worn as the outer garment. All shirts and jackets shall
have the golf course logo and the worker's first name on them.
Protective golf staff equipment shall be determined by the Contractor
when working on the golf Gourse. When working elsewhere at the facility,
but not within the actual field of play, a cotton uniform cap with either of
the golf course logos may be worn, but must be worn with the bill facing
forward at all times.
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·2.0.4 The Contractor shall perform any required maintenance activities,
including, but not limited to, ropes, stakes, traffic control, turf aerification,
and overseeding as a result of golf cart use on the Golf Course. .
2.0.5 The Contractor shall-meet weekly with the golf professional to coordinate
golf events and maintenance activities.
2.1 MAINTENANCE RECORDS
The Contractor shall provide the GSM with a written schedule of the work
to be performed during the following month, which shall include, but is not
limited to: general Golf Course maintenance, aerification, tree trimming,
pond maintenance, herbicide/insecticide application, fertilization and
replacement of plants with ~right colors. The report shall be provided in a
format developed by the Contractor and approved by th~ GSM. If the
Contractor finds that it is not possible to maintain the submitted .schedule,
the GSM shall be advised, and arevised schedule shall be submitted.
2.1.1 The Contractor shall maintain and keep current a log that records all on-
going, seasonal and additional work, and maintenance functions
performed on a daily basis by the Contractor's personnel. The report shall
be in a form and content acqeptable to the GSM and shall be submitted to
the City concurrent with the monthly invoicing. The monthly payment will .
not be made until such rep'ort is received by the City. .
2.2 TREES'
2.2.1 Trees trimmed as needed. All tree trimming activities shall be performed
on a schedule approved by the GSM and in accordance with the tree,
shrub and other wood plan maintenance pruning practices outlined by the
American National Standards Institute, Inc. (ANSI) and International·
Society of Arboriculture (ISA) Best Management Practices standards.
However, such trimming and pruning is a minimum level and shall not
relieve the Contractor of other responsibilities set forth herein. The
Contractor shall consult with the City's Managing Arborist on issues
concerning the removal or treatment of trees at the Golf Course.
2.2.2 Trees shall be kept in healthy condition and pruned as required to remove
broken or diseased branches. The Contractor shall develop a pruning .
program, which will promote proper tree scaffolding, strength, and
. appearance consistent with its intended use. The Contractor shall prune
trees to allow wind to pass through the tree, reducing and preventing B-
"sail" effect when needed.
2.2.3 Trees located adjacent to vehicular and/or pedestrian traffic ways shall be
maintained so as not to obstruct vehicle and/or pedestrian visibility and
clearance. Trees interfering with airport tower vision must be trimmed and
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2.2.14 The Parties agree that the annual compensation provided her~in includes
an amount not to exceed $13,000 annually, allocated for the arbor care,
including tree planting, stump grinding and major tree trimming, and
associated green waster disposal for ~rees above 15 feet from the ground.
2.3· SHRUBS The Contractor shall:
2.3.1 Pr~ne shrubs to retain as much of the natural informal appearance as
possible.
2.3.2 Shrubs used as formal hedges or screens shall be pruned as required to
present a neat, uniform appearance. .
2.3.3 Remove any spent blossoms or dead flower stocks as required to present
a neat, clean appearance.
2.3.4 Plants growing over curbing and/or sidewalks shall be trimmed on a
natural taper rather than vertical so as not to appear to be hedged.
2.3.5 Schedule the application of a commercial fertilizer as often as required to
promote optimum growth and healthy appearance to all shrubs.
2.3.6 Any plant requiring removal shall be replaced by the Contractor.
2.4 GROUND COVER -NATIVE GRASSES
2.4.1 Apply all chemical control (e.g. pesticides) as required and in
conformance with the Golf Course Integrated Pest Management Plan that
will be approved each year (Section 1.3) to contro"l or prevent pest
infestations to protect ornamental planti~gs.
2.4.2 Trim ground cover adjacent to walks, walls and/or fences as required for
general containment to present a neat, clean appearance.
2.4.3 Cultivate and/or spray herbicide to remove broad-leafed and grass weeds
as required (and in conformance with the Golf Course Integrated Pest
Management Plan that will be approved each "year (Section 1.3). Shrub
beds shall be maintained in a weed free condition.
2.4.4 Keep ground cover trimmed back from all controller units, valve boxes,
quick couplers, or other appurtenances or fixtures. Do not allow ground
covers to grow up trees·, into curbs, or on structures or walls. Keep
trimmed back· approximately 4 inches from structure or walls.
2.4.5 Fertilization: Schedule fertilization of all ground cover areas with a
commercial fertilizer as often as required to promote healthy appearance.
Any fertilizer or chemicals must be applied is strict adherence with
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2.6.1.3 The soil moisture content on greens, tees and fairWays shall be checked
regularly and appropriate adjustments made. Adequate soil moisture shall
" be determined by visual observation, plant resiliency, and turgidity,
examining cores removed by soil probe, moisture sensing devices and
programming irrigation controllers accordingly.
2.6.1.4 The Contractor shall obserVe and note deficiencies occurring from the
original design of facilities and review these find ings with the "GSM so
necessary improvements can be considered.
2.6.1.5 All" leaking or defective valves, lines, sprinkler heads, and quick cquplers
shall be repaired within twenty-four "(24) hours at the expense of the
Contractor. A report of such repairs shall be given to the GSM weekly.
2.6.1.6 The Contractor shall turn off all controllers when it is not necessary to
irrigate due to adequate rainfall.
2.6.1.7 The Contractor shall monitor reclaimed water and potable water.
Reclaimed water shall not exceed 65% and potable water costs shall not
exceed $250,000. The Contractor shall notify GSM if these costs exceed
$225,000. As conditions dictate GSM may approve additional potable
water use.
2.6.1.8. The City acknowledges that the adequacy of water supply and quality
cannot be guara~teed for water irrigation purposes and that, after the
Effective Date, the City may adopt water usage restrictions and take other
measures that could impact the amount of water available for irrigation
purposes at the Golf Course. In the event that the City becomes aware of
a decrease in the water supply, then the City will inform the Contractor of
such occurrence, and the Parties promptly will use reasonable efforts to
ascertain the effect, if any, of the decrease in water supply on the
standards of maintenance to which the Contractor is required to adhere in
t~e performance of the Services. To the extent practicable, the City will
endeavor to prioritize water usage in order to cause the least impact to the
water supply available to the Golf Course, and the Contractor's obligation
to adhere to the standards of maintenance will be evaluated by the City
under then prevailing conditions of a decrease in water supply for irrigation
purposes.
2.6.2 SYSTEM MAINTENANCE
" The Contractor is aware of the current location and general condition of
the Golf Course's water irrigation system and accepts the system in its
"as-is" "where-is" conditions, and agrees to be fully responsibility for the
repair and maintenance of the system. Any required replacements,
repairs, and maintenance to existing components of the system to ensure
the system remains in operation are the sole responsibility of the
Contractor. Appropriate personnel shall be trained in the use of the master
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drafted annually and following specifications for rodent control. Damage to
public or private property due to"erosion "as a result of rodent activity shall"
be repaired at the Contractor's expense.
The Contractor will use reasonable" efforts to several times daily remove
the geese from the Golf Course. The Contractor shall contact the Palo Alto
Airport Tower for their approval whenever there are attempts to remove
the geese from the Golf Course. Goose guano shall be cleaned on an as-
needed basis on the Tees, Greens, Approaches, Fairways, and Cart
Paths, using best management practices.
2.8 WEED CONTROL OF PAVED SURFACES
The Contractor shall control all weeds growing in cracks, expansion joints
and other hard surfaces by the use of mechanical weed control or with
limited use of chemicals in accordance with the Golf Course IPM Plan.
2.9 WEED CONTROL IN LANDSCAPE AREAS
Weed control in landscaped areas shall be accomplished by mulching and
the use of mechanical weed eradication.
2.10 STRING TRIMMERS
Care shall be exercised with regard to the use of string trimmers to
prevent damage to building surfaces, walls, header board, light fixtures,
signage, etc. A minimum of 12" bare soil or mulched buffer zone shall be
maintained around the circumference at the base of all trees in
I"andscaped areas.
2.11 GREENS
Maintain all turf in accordance with playability and industry wide standards
as determined by the GSM, observing the following minimum "
requirements:
2.11.1 Greens shall be mowed daily in the s!Jmmer (March 1 -o.ctober 31) and a
minimum ofthree (3) times per week during the winter (November 1 -
February 28) with an approved greens reel type mower at a height of 130
or as recommended by the superintendent and approved by the GSM.
Frequencies and height of cut may be modified from time to time as
deemed necessary by the golf course superintendent with the prior
approval of the GSM. All grass clippings must be" collected and removed
from the site during each mowing operation, including dispersed in a
method to prevent unplayable conditions. Greens must be mowed, and
rolled if performed, prior to first golfer of day reaching each respective
green, including the putting green. Care will be given on clean-up lap
mowing to reduce turf loss and playability.
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square feet shall be applied per growing month. Typically, a variety of
granular slow release types of material or liquid sprayable fertilizer may
be utilized. Use of materials to control salt damage and water infiltration
shall be applied to meet the requirements of the turf and playable
conditions. Fertilizer shall be applied every 3-4 weeks during the active
growing season and every five (5) weeks for the remainder of the year.
2.11.7 Treat greens with proper chemicals to control insects, disease, weeds
and other pests in conformance with the City's IPM Plan.
2.11.8 Greens shall be kept free of non-native and/or invasive grasses and/or
broadleaf weeds that tend to creep in from the edges. A threshold level of
0-2% has been set for weeds and disease: Insect threshold has been set
at 0-5%. No foreign grass encroachment from collars.
2.11.·9 EC readings should be taken during spring and fall to determine salts
levels and if they are above normal, corrective action taken to reduce to
appropriate levels to promote optimum health of the turf.
2.11.10 Green speed should be consistent daily on all greens with the difference
between the lowest green speed and the highest green speed no more
than one (1) foot in variance on the stimp meter through out golf course.
G'reen speeds should be no lower than 8 feet in average daily during the
months of May, June, July, August, September, and October, and no
lower than 8 feet 6 inches daily for the other months. Green speeds
should be maintained as high as agronomic conditions and play
conditions allow.
2.11.11 Debris from trees shall be cleared prior to mowing and .during day as
needed, no standing water or severe turf loss areas, pest and vandal
damage to be repaired, and bare and stressed areas sodded or plugged
to ensure quality playing conditions.
2.11.12 Ball marks shall b~ repaired daily.
2.12 COLLARS, APPROACH, BANKS AND GREEN SURROUNDS
Maintain all turf in accordance with playability and industry wide
standards as determined by the GSM observing the following minimum
requirements:
2.12.1 Collars shall be mowed a minimum of two (2) times each week during the
summer (March 1 -October 31) and one (1) to two (2) times each week
during the winter to (November 1 -February. 28) maintain a height of %
. inch, mowing with a triplex mower.
2.12.2 Green surrounds shall be mowed a minimum of two (2) times each week
in the summer (March 1 -October 31) and one (1) to two (2) times per
week in the winter (November 1 -February 28) to maintain a height of 1
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2.13 TEE MAINTENANCE
Maintain all turf in accordance with playability and industry-wide standards
as determined by the GSM observing the following minimum
requirements:
2.13.1 Service tees daily by moving tee markers, removing trash and checking
benches and ball washers. Change tee towels and water weekly and .
keep ball washers filled to proper level with wate(andappropriate
cleaning agent. Tee markers shall be moved daily to healthy turf areas,
placed at appropriate direction to play. Tee markers placed in healthy
areas with tee markers .set flat to ground and direction of play .•
2.13.2 Mow tees two (2) times weekly in the summer (March 1 -Octob~r 31) and
one (1) to two (2) times weekly in the winter (November 1 -February 28)
with reel type mower, with baskets, at height of 112 inch or a height as
recommended by the superintendent and approved by the GSM. All grass
clippings will be collected and dispersed properly for playable conditions.
2.13.3 Aerify and topdress tees, with sand and mulch pre-approved by the GSM,
at least two (2) times per year, or more frequently if needed, using the
appropriate equipment with the minimum of inte'rference to play.
Aerification shall be carried out with a minimum of interference to play and
plugs removed the same day. Aerification shall be in conjunction with the
golf professional and the GSM. All aerification hole sizes, with a minimum
of 518 inch utilized, and spoil locations shall be pre-approved by the GSM.
Care should be taken to have as minimal disturbance to tee surface from
manual and equipment applications during aerification process. Bare
areas sodded and leveled.
2.13.4 Fertilization frequency, materials and analysis shall be determined·from
results of annual soil nutrient level testing and growing conditions at the
time of treatment. Under normal conditions, 0.50 to 0.75 pounds of actual
nitrogen 'per thousand square feet shall be applied every 6-8 weeks during
the active growth season and every 8-10 weeks during the remainder of
the year. Typically combinations of granular slow release type of
materials may be utilized.
2.13.5 Repair worn and damaged turf areas as they occur by topdressing.
overseeding or resoddingto ensure playability at all times. No standing
water or mud holes and pest and vandal damage repaired. .
2.13.6 Tees shall be overseeded, with approved perennial rye seed by the GSM,
following aerification and before topdressing at a rate of 9 Ibs. per
thousand square feet of tee area.
2.13.7 Treat tees for control of insects, disease, weeds and other pests as
necessary to maintain healthy turf. All treatments shall be in compliance
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recommended to promote turf growth, improve water infiltration, and
improve salt damage. .
2.14.30verseed all fairways.once per year, in fall and at a preapproved date with
the GSM and golf professional, with perenial rye grass, pre-approved by
the GSM, at a minimum rate of 400 Ibs. per acre. All seed shall be slit
seeded into the soil to ensure adequate soil and seed contact. A post
seed application offertilizer (15-15:-15 or equivalent) shall be applied with
four (4) weeks of the overseed process at a rate of one (1) Ib per thousand
of nitrogen. Overseed andtopdress (or re-sod) of worn or bare areas of
fairways as necessary.
2.14.4 Treat turf to control weeds, invasive grasses (Le. Kikuyu), diseases,
insects, and other pests as necessary to maintain fairway threshold level.
A threshold level of 35% for weeds, 50% for disease and 40% for insects
has been set. Spot spraying by location basis as needed when thresholds
are exceeded. All treatments shall be in compliance with the IPM Plan.
2.14.5 A proper fertilizing and nutrient program shall be performed per soil testing
recommendations each calendar year. Fertilization shall be performed a
minimum of every 8-10 weeks during the active growth season and every
10-12 week during the remainder of the year.
2.14.6 Policing to control litter shall be done on a regular basis for the removal of
all paper, leaves, cans, bottles, tree branches, etc.
2.14.7 Excessive turf clippings shall be dispersed by a method of dragging,
baskets, vacuumed or blown to ensure proper playable conditions are·
provided. Grounds under repair painted with appropriate white turf paint
and roped off neatly and consistently throughout the golf course. Grounds
under repair include those under repair by the Contractor and those areas
where turf is at a level that is not consistent with other associated turf
areas. Yardage markers and sprinkler head yardage markers in place and
maintained. Cart traffic management devices in place; bare or stressed
areas properly addressed. No standing water or mud holes. Pest and
vandal damage repaired.
2.14.8 Excessive turf clippings shall be dispersed by a method of dragging,
baskets, vacuumed or blown to ensure proper playable conditions are
provided. Grounds·under repair painted with appropriate white turf paint
and roped off neatly and consistently throughout the golf course. Grounds
under repair include those under repair by the Contractor and those areas
where turf is at a level that is not consistent with other associated turf
areas. Yardage markers and sprinkler head yardage markers in place and
maintained. Cart traffic management devices in place; bare qr stressed
areas properly addressed. No standing water or mud holes. Pest and
vandal damage repaired.
29 Rev. January 11,2010
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other related applications for the golf course. The report will conform to
the requirements of the IPM Plan.
2.16.5 The Contractor shall flush drainage inlets once a year.
2.16.6 The Contractor shall utilize wood chipping machinery to produce wood
chips from tree pruning and care. Wood chips may be spread throughout
golf course in preapproved areas by the GSM. No permanent dumping of
course debris such as branches, wood stumps, etc. is approved on the
property. The Contractor is responsible for costs associated with any
removal of debris. Any other course-generated debris such as earthen
spoils shall be dispersed at locations and with methods preapproved by
the GSM.
2.16.7 Turf areas surrounding the clubhouse shall be mowed one (1) time per
. week at a height of 1-1/4 inches ..
2.16.8 The Contractor shall provide, at its sole expense, an effective goose
control program to mitigate goose activities, including, but not limited to,
the use of control dogs, motorized hand controlled boats, noise makers,
and other methods.
2.17 SAND BUNKERS
2.17.1 Sand bunkers shall be cleaned and raked by mechanical method or by
hand a minimum of three (3) times per week with Fridays being one of the
three days. No eXCeSS sand buildup on high side.
2.17.2 Sand depth shall be randomly checked monthly for depth of sand and
shall be maintained no less than four inches (4") deep. Additional sand
will be added at the Contractor's expense.
2.17.3 Turf shall be mechanically edged along sand bunker edges monthly, or
more frequently if required, to ensure a neat appearance. Care shall be
taken to maintain the design outline of the bunkers to insure the integrity
of the bunker shape. Bunkers should have 1" lip on lower side. Chemical
control of sand edges through use of a non-selective herbicide or growth
regulator around sand bunkers shall be allowed with preapproval of GSM.
2.17.4 Excess sand in the turf surrounding the trap shall be removed on a regular
basis.
2.17.5 A minimum of two (2) to five (5) rakes are to be available, depending on
bunker size, at all sand bunkers at all times. Rakes properly maintained.
(Color and style are subject to GSM approval.)
2.17.6 Bunker sand shall be cultivated as needed, or at a minimum of once per
. month, to ensure sand is not compacted. Methods should be used to not
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2.18.3.1 All periphery areas shall be maintained in a manner consistent to
industry standards to ensure a healthy and aesthetically pleasing
appearance at all times.
2.18.3.2 Areas shall be mowed, weeded, cleared of litter and other debris on a
regular basis (a minimum of once per week). Watering should occur if
the area is covered by the irrigation system.
2.18.3.3 Special attention shall be given to periphery areas adjacent to public
roadways since these areas are highly visible to the general public and
constitute a "first impression" of the overall service level of the course:
. 2.18.3.4 All areas are to be inspected for erosion problems and repaired as needed.
2.19 PARKING LOTS
2.19.1 Parking lots shall be maintained in a safe condition for use by both
vehiCles and pedestrians, and Cleaned each day to ensure.a clean, crisp.
appearance free from litter, debris, ano weeds including all landscaped
planters on or adjacent to the lots (including the traffic island on
Embarcadero Way near the primary entrance to the Golf Course) ..
2.19.2 All parking lot lighting shall be inspected daily and repaired as needed or
reported to the City's PW Facilities Maintenance Division.
2.19.3 "Disabled Parking" signage and other signage shall be rllaintained in
accordance with all City, County, and State regulations.
2.19.4 All parking lot signage shall remain in place, maintained and readable.
2.19.5 Parking lot asphalt shall be inspected daily by the Contractor. The City's
PW Facility Maintenance Division shall be called for the performance of
repairs .. The lots shall be generally ·maintained free of debris, litter, leaves,
and trimmings. The Contractor shall inspect and clean the lots daily.
2.20 GRAFFITI.
2.20.1 The Golf Course shall be inspected daily for evidence of graffiti. Special
attention shall be given to restrooms, signs, markers, block walls, curbing,
paving, tees, utility poles/boxes and/or any other structures or fixtures.
2.20.2 All graffiti shall be removed within twenty-four (24) hours of detection.
2.20.3 Graffiti requiring paint over shall be painted over with a color consistent
with ·that of the original surface.
2.20.4 Graffiti on non-painted surfaces shall be removed by sand or water
blasting and area returned to the preexisting condition.
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City shall make available for use by the Contractor, at no charge to .
. the Contractor, the Site and Facilities for the storage Qf golf courseMrelated
equipment, materials and/or supplies. The Facilities will be available to the
Contractor on an "as is" basis. The Contractor will conform its use of the
Facilities to all applicable laws, rules and regulations regarding the storage
of materials on the City's premises, including, but not limited to, the .storage
of hazardous, toxi·c or flammable materials. The City assumes no
responsibility for any theft, .
destruction or damage to the Contractor'.s personal property that is stored
at the Facilities. The Contractor will return the facility to the City in its
original condition as of the date of commencement of the contract
between the City and the Contractor, normal wear and tear excepted.
2.23.1.1 Permitted Usage: The Contractor may use the Site and the
Facilities .
for the following uses: Storage, Files, Office area or other similar
uses. The Facility may not be used for any other purposes
without the City Manager or designee's prior written consent,
which may be granted or denied at the City's sole discretion.
2.23.1.2 Prohibited Uses. The Contractor shall not use the Site and the
Facilities for any purpose not expre~sly permitted hereunder.
The Contractor shall not create,. cause, maintain or permit any
nuisance or waste in, on, or about the Site or the Facilities, or
permit or allow the Site or the Facilities to be used for any
unlawful or immoral purpose. The Contractor shall not do or
permit to be done anything in any manner which unreasonably
disturbs the users of the City's property or the occupants of
. neighboring property. Specifically, and without limiting the
.. above, the Contractor shall not cause the emanation of any foul
odor or excessively loud noise,·vibration, power emission, or
other item to emanate from the Site or the Facilities. No
materials or articles of any nature shall be stored outside of or
upon any portion of the Site or the Facilities. The Contractor will
riot use the Site or the Facilities in a manner that will increase
the risk of fire, cost of fire insurance or improvements thereon.
No unreasonable sign or placard shall be painted·, inscribed or
placed in, on or about the Site or the Facilities and no tree or
shrub thereon shall be destroyed or removed or qther waste
committed at the Site or the Facilities. No bicycles,
motorcycles, automobiles or other mechanical means of
transportation shall be placed in stored facilities at the Site,
except for the garage or driveway. No repair, overhaul or
modification of any motor vehicle shall take place in the
Facilities or the surrounding property or the street in front of
Facilities. The Contractor, at its sole cost and expense, shall
keep the Site and -the Facilities in as good as the condition as of
the Effective Date, excepting damage resulting from ordinary
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responsibility of the Contractor, including telephone, gas, potable water,
sewer, and trash, except as otherwise agreed to, in writing, by the City ..
The City will provide electrical service to the Site and the Facilities without
an additional charge to the Contractor in excess of the compensation
payable under Section 5 and Exhibit "C".
2.23.10 Adherence to all City, County, and State regulations for proper storage
and disposal of materials is required.
2.24 CLUBHOUSE AND FACILITY LIGHTING
All lighting systems shall be inspected by the Contractor on a regular basis
for faulty bulbs, fixtures or other malfunctions repaired and/or replaced as
needed by the City's PW Facility Maintenance Division.
2.24.1 Walkways, breezeway, surroundings, ramps, driving range walkway and
tees cleaned of litter, dirt, and landscape debris daily. All garbage
containers at clubhouse and surrounding area must be emptied daily.
2.24.2 Exterior lighting working and scheduled properly. Report needed repairs
to the City's PW Facility Maintenance Division.
2.24.3 All signage accurate and readable.
2.24.4 A threshold of 50% has been set for disease and weeds 60% for insects .
. Spot spraying by location basis only when thresholds are exceeded. Any
use of pesticides must conform to the IPM policies and procedures.
2.25 NETS/FENCES/GATES
2.25.1 The Contractor will be responsible for net repair and material costs on
. holes 3,6,10, and Driving Range.
2.25.2 All fences and gates shall be inspected regularly with repairs made as
needed to ensure a safe, secure and aesthetically pleasing condition at all
times, no holes in fences. Repairs and materials are the responsibility of
the Contractor.
2.26 POND MAINTENANCE
2.26.1 Algae and cattail control program shall be maintained as approved by the
GSM.
2.26.2 Pond shall be inspected daily with all visible litter/trash removed upon
detection.
2.26.3 Pond water levels shall be maintained to ensure bank stability and
aesthetic.
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The City will be responsible for the repairs and maintenance of the building
. exteriors and interiors of the Clubhouse, Restrooms and Storage Facility .
. 2.30 GOLF COURSE WETLAND AREAS
Wetland areas shall not be disturbed by vehicular traffic, fertilizers,
pesticides and equipment. Litter and debris must be removed daily.
Wetland signage must be clean, readable and placed along both sides of
Wetlands. Replacements 9f all signage will the responsibility of the
Contractor.
V. GENERAL CONDITIONS
A. Permits/Parking
The Contractor shall be issued a free maintenance permit from the City's
Department of Transportation. This will allow the Contractor's crews to
use City parking facilities at no charge during the term of this contract and
only while dOing landscape maintenance work for the City's Open Space
and Parks Division.
B. Payments and Inspection
Payment will be made for work satisfactorily completed as called for in this
contract. The City's Representative shall inspect and notify the Contractor·
of any unsatisfactory work. Unsatisfactory work shall be corrected within
24 hours. The Contractor or the Contractor's representative shall. meet
with a representative from the City at least once a month during the life of
this contract to inspect Work performed ..
The Contractor will bill the City by the 5th of the month following service.
The City will pay the Contractor on a monthly basis for labor, eqUipment
and materials provided during the monthly billing period.
C. Use of Sanitary Landfill
The refuse disposal facilities of the city of Palo Alto Sanitary Landfill
located adjacent to East Embarcadero Road in said City will be made
available to the Contractor through the 2011 calendar year for the disposal
of all trees, rubbish and construction debris generated on work site. The
Contractor shall pay all dump fees. The Contractor shall at its sale
expense load, haul and deposit said rubbish and debris during normal
landfill operating hours. All landfill regulations will apply to all debris
deposited by the Contractor. Any questions regarding landfill rules and
regulations shall be directed. to the Landfill Supervisor. A digest of the
refuse disposed area rules and regulations have been appended to this
contract. At the end of the 2011 calendar year, the Contractor shall at is
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EXIllBITB
SCHEDULE OF PERFORMANCE
The Contractor Shall perfonn the Services so as to. complete each task within the time
period sp·ecified in the Scope of Services, attached to this Agreement as Exhibit "A".
The Contractor shall provide the specified services according to the frequency and
schedule specified in Exhibit "A". . .
the Contractor shall execute the use of proper knowledge, skills, materials and equipment
of a timely basis to maintain all areas in a clean; safe, healthy, and aesthetically
acceptable manner during the entire term of this contract. The Contractor agrees to be
continuously alert in locating and defining problems and agrees to exercise prompt and
proper corrective action,. Action times will be prioritized, and low priority items will be
given a time line for corrections. .
Upon request, the Contractor shall provide a detailed schedule of work consistent with
completing the required Services as needed.
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EXHIBITD
INSURANCE REQUIREMENTS
CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM
OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE
SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST'S KEY RATING OF A-:VII, OR
HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF
CALIFORNIA.
AWARD IS CONTINGENT ON COMPLIANCE WIlli CITY'S INSURANCE REQUIREMENTS, AS SPECIFIED,
BELOW'
MINIMUM LIMITS
REQUIRED TYPE OF COVERAGE REQUIREMENT EACH
YES
YES
YES
YES
NO
YES
OCCURRENCE AGGREGATE
WORKER'S COMPENSATION STATUTORY
EMPLOYER'S LIABILITY STATUTORY
BODILY INJURY $1,000,000 $1,000,000
GENERAL LIABILITY, INCLUDING
PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE $1,000,000 $1,000,000
PROPERTY DAMAGE BLANKET
CONTRACTUAL, AND FIRE LEGAL B9DIL Y INJURY & PROPERTY $1,000,000 $1,000,000
LIABILITY DAMAGE COMBINED.
BODILY INJURY $1,000,000 $1,000,000 -EACH PERSON $1,000,000 $1,000,000
AUTOMOBILE LIABILITY, -EACH OCCURRENCE $1,000,000 $1,000,000
INCLUDING ALL OWNED, HIRED, PROPERTY DAMAGE $1,000,000 $1,000,000 NON-OWNED
BODILY INJURY AND PROPERTY $1,000,000 $1,000,000
DAMAGE, COMBINED
PROFESSIONAL LIABILITY,
INCLUDING, ERRORS AND
OMISSIONS, MALPRACTICE (WHEN
APPLICABLE), AND NEGLIGENT
PERFORMANCE ALL DAMAGES $1,000,000
THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT
ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND
EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE
INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND
ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS'
COMPENSATION, EMPLOYER'S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS
ADDITIONAL INSUREDS CITY· ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES.
I. INSURANCE COVERAGE MUST INCLUDE:
A. A PROVISION FOR A WRITTEN THIRTY DAY ADVANCE NOTICE TO CITY OF CHANGE
IN COVERAGE OR OF COVERAGE CANCELLATION; AND
B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE
FOR CONTRACTOR'S AGREEMENT TO INDEMNiFY CITY.
C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY'S PRIOR APPROVAL.
II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED
COVERAGE.
III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO
"ADDITIONAL INSUREDS"
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EXHIBITE
BONDS
[ATTACH BOND FORMS IF BONDS ARE REQUIRED]
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Division contact/ext:
Date: October 1,2010
2010
ATTACHMENT 2
Annual Division IPM Summary and
Prohibited Pesticide Inventory Report
Please complete the/ollowing information and submit to Julie Weiss by December 31,2010
.1) Please list and describe the pest problem trends your division dealt with this year, including peak season
problems and non-chemical/structural/landscape solutions that were used ..
2) Which IPM pesticide alternatives were considered and tested? What was their effectiveness?
3) Were any new rPM plans created or revisions made to existing plans? (IPM plans that were submitted last year
will be annexed in this year's Amiual Report unless divisions submit.revised versions).
4) What training programs are you interested in receiving for your staff or program this year?
5) Per new 2009 Stormwater Permit requirements, please answer the following:
a. How many of your employees apply pesticides?
b. Please confirm that these employees will have been informed of and read the City's rPM Policy by
December 31, 2009 (see policy statement below).
D Yes DNa
Per CMR 343-01:
The City of Palo Alto will carry out its pest management operations using reduced-risk [PM techniques to reduce or
eliminate chemicals to the maximum extent. Chemicals will be used only as a last resort/or pest management
problems. Each division that applies pesticides will maintain an active IPM plan to ensure the long-term prevention or
suppression of pest problems with minimum negative impact on human health, non~target organisms, and the
environment.
The City will actively pilot non-toxic alternatives for structural and landscape pest control, seeking to use tile most
recent technology, best management practices and lea$ttoxic methods for all pest control measures.
The City will use appropriate venues to educate staff and the public about its [PM commitment in an effort to role
model less toxic approaches to structural and landscaping pest controL
c. Please confirm that these employees have been trained in some form of IPM practices in the last
three years (please submit training agendas or training description).
expire concurrently on April 30, 2013 (Attachment A). This recommendation IS
consistent with the recommendations in the 2008 Golf Course study.
RECO~~NDATION. .. .
Sta,f, recoiiifnends that the CounCIl approve and authorIze the CIty Manager or hIS
de~g'I;lee to execute the attached Amendment No.5 to the Management Agreement with
Brad Lozares (Golf Professional) for golf course professional services at the Palo Alto
Municipal Golf Course, 1875 Embarcadero Road (Golf Course), to extend the term of the
contract for 28-months to April 30, 2013 (Attachment A).
BACKGROUND
On March 16, 1998, the City issued tax-exempt bonds to finance Golf Course
improvements. Prior to the bonds being issued, the City and the Golf Professional had
operated under one lease agreement for both professional management services and the
lease of the City-owned Pro Shop facility. When the bonds were issued in 1998, IRS
regulations required that there be two agreements: a management agreement for Golf
Course professional services and a separate lease to operate the golf retail establishment
(Pro Shop).
In 1998, Council approved a 20.;.month management agreement and a 15-year lease with
the Golf Professional. The original management agreement was amended three times
prior to Council approval of a new restated management agreement (Agreement) on
January 27, 2003. The new Agreement set the fixed fee to be paid to the City Contractor
at $322,251 and removed the annual CPI adjustment. Cart rentals and driving range fees
were split, with the Golf Professional receiving 40 percent of the revenue and the City
receiving 60 percent. The agreement also provided a productivity reward equal to a stated
dollar amount based on increases of golf rounds, power golf cart rentals 'and driving
range sales. The agreement has been extended 4 times since 2006 as summarized below:
1. Amendment No. 1 -May, 2006. Council approved an agreement which: 1)
extended the term for an additional eighteen months; 2) increased the fixed fee
compensation by three percent to $27,333.00; and 3) reimbursed the Golf
Professional for 60 percent of the bank's credit card merchant charges attributed to
the golf cart rentals.
2. Amendment No 2 -May 2007. Council approved an agreement which: 1)
extended the term for one year to December 31, 2008; and 2) increased the fixed
fee compensation by two percent to $28,213.46.
3. Amendment No 3 -October 2008. Council approved an agreement which: 1)
extended the agreement for one year to December 31, 2009; 2) increased the fixed
fee by two percent to $28,777.73; and 3) adjusted the Golf Professional's
productivity reward to reflect current market conditions.
CMR: 440:10 Page 2 of7
4. Agreement No 4 -November 2009. Council approved an agreement which: 1)
extended the term for one year to December 31, 2010 at the same monthly fixed
rate as 2008 of$28,777.73.
The short term amendments to the Golf Professional contract have been a factor of
uncertain economic conditions over the past several years. In response to the uncertain
economic conditions, Council authorized a Golf Course study to examine the Bay Area
golf market and conditions of the Palo Alto Golf Course facility as well as the current and
alternative operating models available for the Golf Course. The study was conducted in
2008.
As stated in the Executive Summary the study recommended several actions for future
success of the Golf Course that included making relatively minor but strategic
investments in the Golf Course infrastructure and operating structure along with actively
participating in the planning of flood control alternatives for San Francisquito Creek to
find a balanced flood control/recreational use solution that would benefit the Golf
Course. Additional recommendations include aligning tenant contracts to expire
concurrently and to evaluate options to enhance Golf Course maintenance, including the
advantages and disadvantages of private versus public maintenance.
DISCUSSION
Staff have been working on the recommendations from the Golf Course study and have
made progress on several fronts. Regarding the San Francisquito Creek flood control,
Council has requested that the Joint Powers Authority (JPA) retain a golf course design
consultant to work with the JP A and City staff to design an environmentally friendly
flood control project that will balance flood control and recreational use solutions that
will also benefit the Golf Course. The JPA has been very supportive of the City's need
for fair and reasonable mitigation measures to the Golf Course for levee improvements.
The known impacts to the Golf Course at this time will include the need to redesign four
to six holes due to levee realignment and encroachment onto the Golf Course.
The Golf Course study also recommended the City consider contracting out Golf Course
maintenance to improve cost recovery and the overall standard of maintenance. In the
2011 Budget process Council approved the contracting out of Golf Course maintenance
and a contract with ValleyCrest was approved on October 25, 2010, to assume Golf
Course maintenance responsibilities CMR: 390: 10. Recognizing that Brad Lozares would
participate in the RFP process for the Golf Course maintenance contract, staff postponed
recommending the alignment of Brad Lozares' Golf Professional agreement with the Pro
Shop lease pending the outcome of the Golf Course maintenance contract.
With the contracting of the Golf Course maintenance complete, staff now recommends
aligning the two tenant contracts with Brad Lozares to expire concurrently. Aligning the
CMR: 440:10 Page 3 of7
Golf Professional agreement to expire on April 30, 2013 would align three of the four
principal agreements the City has to operate at the Golf Course:
1. Pro Shop Lease (expires April 30, 2013)
2. Golf Course Maintenance (expires April 30, 2013)
3. Golf Professional Services (will expire April 30, 2013 if approved)
4. Restaurant Concessionaire (expires 2018)
The fourth principal agreement the City has to operate the Golf Course is between R&T
Restaurant Corporation and the City to operate the Bay Cafe; the current term of this
agreement expires in 2018.
Aligning the City contracts that keep the Golf Course operational gives the City
flexibility in bidding more than one element of the Golf Course operation when the terms
expire. This mayor may not be of interest to the City in April 2013, but the alignment of
the various Golf Course contracts provides the opportunity to consider alternative
operating models
Regarding the Golf Course budget, in Fiscal Year 2010 revenues exceeded expenses by
$76,000. It is estimated that Fiscal Year 2011 revenues will exceed expenses by
$300,000.
Compensation for Brad Lozares' services includes a fixed management fee of $28,777. 73
per month for a total of $805,776 for the 28-month term and percentage fees based on
Golf Course productivity. The fixed fee has not increased since 2008 and no increases are
recommended for this amendment. The percentage fees also remain unchanged in this
agreement. The percentage fees are a revenue share between the City and Brad Lozares
for Driving Range revenue at 62% to the City, and 38% to Brad Lozares; and Cart Rental
revenue at 60% to the City and 40% to Brad Lozares. Revenue to Brad Lozares in
percentage fees over the term of the contract is estimated to be $681,333 in addition to
the fixed management fee.
The service level the Golf Professional and his staff provide is very professional and
greatly appreciated by our golfing patrons. The Golf Professional is very well regarded
throughout the golf community for outstanding customer service. The drop in the number
of annual rounds played, from a high of over 100,000 in. the late 1980's to its current
level of approximately 70,000 rounds in Palo Alto, echoes a national trend in the decline
of rounds of golf due to the proliferation of new courses in the 1980's and 1990's and
other economic factors. The Palo Alto Golf Course still ranks financially in the top ten
municipal golf courses in the Bay Area.
The current Management Agreement will expire on December 31, 2010. In order for the
Golf Professional to manage the Golf Course and receive compensation, IRS rules
CMR: 440:10 Page 4 of7
AMENDMENT NO.5 TO MANAGEMENT AGREEMENT
C3150541A, BETWEEN THE CITY OF PALO ALTO AND BRAD
LOZARES GOLF SHOP FOR PROFESSIONAL SERVICES AT 1875
EMBARCADERO ROAD, PALO ALTO
THIS AMENDMENT NO.5 to the Management Agreement C3150541A,
between the City of Palo Alto and Brad Lozares Golf Shop for Professional Services at
the Palo Alto Municipal Golf Course, ("Agreement,") is made and entered into this 7th
day of December, 2010, by and between the City of Palo Alto, a municipal corporation
(the "CITY") and Brad Lozares ("GOLF PROFESSIONAL").
RECITALS
A. GOLF PROFESSIONAL has assumed responsibility for and continued the
operation and management of course play for the Golf Course facility on behalf of
the CITY on the terms and conditions set forth in the Management Agreement
dated January 28,2003.
B. On May 15, 2006, the parties amended the Agreement to extend the term
December 31, 2007, and to increase the fixed fee to $27,660.25 per month and
reimburse GOLF PROFESSIONAL for sixty percent (60%) of finance charges
associated with the payment of service charges for golf carts by credit card.
C. On May 15, 2007, the parties amended the Agreement to extend the term to
December 31, 2008, and to increase the fixed fee to $28,213.46 per month.
D. On October 20, 2008, the parties amended the Agreement to extend the term to
December 31, 2009, and to increase the fixed fee to $28,777.73 per month.
E. On December 7, 2009 the parties amended the Agreement to extend the term for
one year to December 31, 2010 at the same fixed level of compensation
established in 2008 of $28,777.73 per month.
F. The parties now wish to amend the Agreement to extend the term of the
agreement to April 30, 2013 at the same fixed level of compensation as
established in 2008 of $28,777.73 per month.
NOW, THEREFORE, in consideration of the terms, conditions, and
provisions of this Amendment, the parties agree as follows:
SECTION 1. Section III ("Term") is amended in its entirety to read, as follows:
"III. TERM
The term of this Agreement shall commence on January 8, 2003 and end on April
30,2013.
SECTION 2. Section IV, A ("Compensation"), is amended in its entirety to read
as follows:
"IV. COMPENSATION
During the term of the Agreement, GOLF PROFESSIONAL shall receive a fixed
fee and percentage fees, as defined below (collectively the "Management Fee").
A. Fixed Fee
GOLF PROFESSIONAL shall receive a fixed fee during the term of this
Agreement for GOLF PROFESSIONAL's Golf Course and driving range
management, Golf Course marshaling and starting and cart rental services.
The fixed fee for the term of this agreement will be $805,776.44. The
fixed fee will be paid in twenty-eight equal monthly installments.
During the eighteen-month extension term from July 1, 2006 to
December 31, 2007, GOLF PROFESSIONAL shall receive
a fixed fee payable monthly in the amount of $27,660.25.
During the twelve-month extension term from January 1, 2008 to
December 31, 2008, GOLF PROFESSIONAL shall receive a
fixed fee in the amount of $28,213.46, monthly.
During the twelve-month extension term from January 1, 2009 to
December 31, 2009, GOLF PROFESISONAL shall receive a
fixed fee, in the amount of $28,777.73, monthly.
During the twelve-month extension term from January 1, 2010 to
December 31, 2010, GOLF PROFESISONAL shall receIve a
fixed fee, in"the amount of $28,777.73, monthly.
During the twenty-:eight month extension term from January 1,
2011 to April 30, 2013, GOLF PROFESISONAL shall receive a
fixed fee, in the amount of $28,777.73, monthly.
The CITY shall forward the fixed fee by the 5th working day of
the CITY's working month for the amount due for that month to
the GOLF PROFESSIONAL. If not received within ten calendar
days after the fifth working day of the month, a late charge of one
percent of monthly payment due and unpaid plus an administrative
fee of $45.00 shall be added to the payment due and unpaid, and
the total monthly sum shall become immediately due and payable
to GOLF PROFESSIONAL. The parties agree that such late
charges represent a fair and reasonable estimate of the costs that
GOLF PROFESSIONAL will incur by reason of the CITY's late
payments and that acceptance of such late charges in no event
constitutes a waiver of the CITY's default with respect to such
overdue payment, nor prevents GOLF PROFESSIONAL from
exercising any of the other rights and remedies granted hereunder
or by any provision oflaw."
B. Percentage Fees
In addition to the fixed fee, GOLF PROFESSIONAL shall receive
38% percent of the gross revenues of the driving range and retain
40% of the gross revenue of the golf carts, golf club and pull cart
rentals. Percentage fees for each month will be <;alculated and paid
no later than the lOth day of the following month. In no event,
-however, shall the cumulative percentage fees paid to GOLF
PROFESSIONAL for a single calendar year exceed the total fixed
fee payments described in section IV-A herein for that same
calendar year.
C. GolfCart Fuel Reimbursement
GOLF PROFESSIONAL shall reimburse the CITY quarterly for
fuel supplied to gas golf carts. Reimbursement shall be at the
current retail full service pump price on the date of billing for
unleaded . fuel, determined quarterly by the CITY. GOLF
PROFESSIONAL shall reimburse the CITY by no later than by the
20th day of the month following the close of
each quarter.
D. Productivity Reward (Incentives)
In order to enhance overall golf division business incomes,
customer service and golf professional revenues, a productivity
reward equal to a stated dollar amount based on increases of golf
rounds, gross power golf cart rentals and driving range sales
becomes effective with this agreement. In addition to the fixed and
percentage fees, the golf professional shall receive the following
productivity rewards based on exceeding the following baselIne
golf rounds and gross sales:
PAID GOLF ROUNDS: (FEE, DISCOUNT CARD & REPLAY ROUNDS)
* Greater than 72,000 rounds $3.00 PER ROUND
Financial Pro Formas and Supporting
Analysis for Reconfiguration Options
A, D, F, G
For Palo Alto Municipal
Golf Course
Prepared For:
City of Palo Alto
Rob de Geus, Division Manager
Recreation & Golf Services
1305 Middlefield Road
Palo Alto, CA 94301
Prepared By:
1150 South U.S. Highway One, Suite 401
Jupiter, FL 33477
(561) 744-6006
April, 2012
Financial Pro Formas and Supporting Analysis for
Reconfiguration Options A, D, F, G
Palo Alto Municipal Golf Course
Table of Contents
INTRODUCTION ....................................................................................................................... 1
PALO ALTO MUNICIPAL GOLF COURSE RECONFIGURATION OPTIONS.......................... 2
Goals and Objectives.......................................................................................................... 2
Option A.............................................................................................................................. 3
Additional Work .............................................................................................................................4
Option D.............................................................................................................................. 4
Additional Work .............................................................................................................................5
Option F.............................................................................................................................. 5
Additional Work .............................................................................................................................6
Option G ............................................................................................................................. 7
Additional Work .............................................................................................................................8
Deferment of Certain Improvements ................................................................................... 9
MARKET OVERVIEW ..............................................................................................................10
Demographics Summary....................................................................................................10
Golf Market Overview.........................................................................................................11
National Trends in Golf Demand and Supply..............................................................................11
Local and Regional Golf Supply and Demand Indicators............................................................13
Competitive Golf Market.....................................................................................................15
Summary Information – Primary Competitors.............................................................................16
Summary of Findings – Primary Competitors .............................................................................18
Palo Alto Golf Course Market Positioning Assessment ......................................................19
FINANCIAL PERFORMANCE MODELS FOR PALO ALTO GOLF COURSE.........................20
Recent Historical Palo Alto GC Performance .....................................................................20
Projections Based on “Option A”........................................................................................22
Key Assumptions.........................................................................................................................22
Pro Forma Estimate for ‘Option A’ Scenario – FY2012 – FY2021..............................................26
Projections Based on “Option D”........................................................................................29
Key Assumptions.........................................................................................................................29
Pro Forma Estimate for ‘Option D’ Scenario – FY2012 – FY2021..............................................32
Projections Based on “Option F” ........................................................................................35
Key Assumptions.........................................................................................................................35
Pro Forma Estimate for ‘Option F’ Scenario – FY2012 – FY2021..............................................36
Projections Based on “Option G”........................................................................................39
Key Assumptions.........................................................................................................................39
Pro Forma Estimate for ‘Option G’ Scenario – FY2012 – FY2021 .............................................42
Financial Projections Summary..........................................................................................45
Summary of Options....................................................................................................................45
Summary Results........................................................................................................................46
Justifications for Revenue Projections ........................................................................................47
Other Considerations Regarding Improvement Options.............................................................48
Option “G” Sensitivity Analysis...........................................................................................49
Option “G” Sensitivity Analysis - Summary for 2017...................................................................49
Option G Sensitivity Spreadsheets..............................................................................................50
OTHER ISSUES AND CONSIDERATIONS..............................................................................56
Market Position / Re-Branding Opportunity........................................................................56
Economics of Potential Long-Term / Additional Improvements...........................................58
Cart Storage Building ..................................................................................................................58
Expanded Meeting Space ...........................................................................................................59
Range Performance Center ........................................................................................................59
Management Structure.......................................................................................................60
Long Range Concerns.......................................................................................................61
Potential Economic Development Of The Airport & Golf “Baylands Gateway” Area............64
Private Funding Possibilities ..............................................................................................65
APPENDICES...........................................................................................................................66
Appendix A – Comparative Supply Ratios – Palo Alto GC & Key Municipal Competitors...67
Appendix B – Comparative Scoring of Reconfiguration Options.........................................68
Appendix C – Water & Power Use Discussion & Assumptions...........................................71
Appendix D – Review Of Probable Cost Estimates ............................................................73
Appendix E – Potential Long-Term Master Plan Improvements..........................................75
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 1
Introduction
National Golf Foundation Consulting, Inc. was retained by the City of Palo Alto in furtherance of
the City’s due diligence relative to the San Francisquito Creek Flood Control Project, which will
involve the reconfiguration of six or more holes at the Palo Alto Golf Course. NGF’s objective
was to help the City identify the expected financial impact from the improvements related to the
reconfiguration work under Plan Options A, D, F, and G.
Specifically, NGF has crafted 10-year cash flow pro formas that project the estimated net
financial impact of the proposed improvements, allowing the City to evaluate each of the four
reconfiguration options under consideration from an objective standpoint. Our analysis includes
expected impact on rounds played, fee structure, revenue generation, operating expenses, and
capital spending/debt. The pro formas also provide an estimate for lost revenues during the time
that the course is impacted and/or closed.
Other aspects of the NGF review include:
A market overview of the Palo Alto area, with an emphasis on area demographics
and key golf demand and supply indicators.
A competitive review, including a qualitative assessment of the impact that the
potential reconfigurations would have on Palo Alto Golf Course’s market/competitive
position.
A review of Forrest Richardson’s work regarding the potential implications from the
renovation options on facility branding and marketing.
NGF will also offer its opinion about the long-term implications and potential financial
impact of improvements associated with the longer range master plan, including
clubhouse expansion, cart storage, event areas, range performance center, range
enlargement, entry/parking, and the youth training area.
NGF will evaluate relevant options available to the City of Palo Alto for the continued
operation of Palo Alto Golf Course, including (but not limited to) continuing on an as-
is basis or outsourcing all management and maintenance to a full-service
management company. Viable options will be identified, and a discussion of the
costs, benefits, and financial implications of each operating scenario presented.
The study effort was managed by NGF Director of Consulting Services Richard B. Singer and
Senior Project Director Ed Getherall. Activities conducted in completion of this report included:
field research; statistical and financial analysis; meetings with key City staff from the Recreation
& Golf Services, Administration, Community Services, and Finance Departments; meetings with
the Head Golf Professional, Golf Course Superintendent, and ValleyCrest Area Director; a tour
of the golf course; and, interviews with area golfers.
Following is the consultants’ report summarizing key findings and recommendations.
Throughout this report, we may refer to shortened names for: the City of Palo Alto (“City”), the
Palo Alto Municipal Golf Course (“Palo Alto Golf Course”, “Palo Alto GC” or “PAGC”), and
National Golf Foundation Consulting, Inc. (“NGF Consulting” or “NGF”).
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 2
Palo Alto Municipal Golf Course
Reconfiguration Options
NGF Consulting was provided four course reconfiguration options prepared by Forrest
Richardson, ASGCA. These options were identified by the titles “Option A,” Option D,” “Option
F” and “Option G,” and each have unique characteristics. The options represent four possible
scenarios for adjusting the course to accommodate the SFCJPA flood mitigation project.
Options A, D, F and G were culled from seven proposed alternatives (Options B, C, and E were
eliminated prior to our review) as the most viable and potentially opportune for the City.
The process for developing options has been thorough, with extensive input from golfers, staff,
concessionaires and the public at large. NGF Consulting has reviewed notes and summaries
from these meetings to better understand the goals and objectives desired by those who will
use and operate the facility following reconfiguration.
GOALS AND OBJECTIVES
Among the goals and objectives set forth to guide the design process for reconfiguration
options, in addition to the fundamental goal to accommodate the flood project, included:
Establish a more natural, aesthetic landscape that incorporates a “Baylands” theme
Improve tree care and variety via a theme to use appropriate tree selection
Find ways to eliminate geese and burrowing animals from ruining the course
Improve bunkers (condition, strategy and aesthetics)
Improve overall course conditioning (drainage, irrigation, turf, etc.)
Adjust yardage so the course is shorter for beginners, women and seniors
Create a “wow factor” to remain competitive with other regional facilities
Add interest to the course strategy (dog-legs, differentiation of holes, etc.)
Find ways to offer player development opportunities (short game area, range, etc.)
Additionally, there was a strong desire to address long range issues that face the aging facility
beyond those on the golf course itself. The City commissioned its own scope of work to address
these issues concurrently with the course reconfiguration planning. These long range areas
included the following:
Clubhouse planning
Entry, parking and signage
Practice areas
Cart storage and staging
On-course restrooms
Branding and image
Trail connections from the Baylands and existing trails
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 3
The objective of the additional long-range planning was to look beyond the golf course to ensure
that reconfiguration options would not preclude improvements to the areas on the above list.
Specific goals and objectives included the following:
Find ways to bring non-golfers to the facilities (group events, restaurant, etc.)
Expand the clubhouse to seat 200 so larger groups can be accommodated
Develop areas to hold multiple outings/events simultaneously
Improve the arrival experience, entry aesthetics, trail connections and security
Develop a cart storage area/facility
Make overall improvements to the clubhouse and grounds (exterior and interior)
Improve and expand the practice range
Create new player development and practice opportunities
Plan for upgrading the on-course restroom facility
Develop a new brand and image consistent with the reconfiguration goals and design
A common thread among the long range planning components was a strong design to return the
facilities, with golf course approaching its 60th year and the clubhouse its 30th, to a “Point of
Pride” status within the community. Along with this primary objective come the benefits of
leveraging the facility for economic development, tourism and as a home to annual and special
events. Secondarily, the community has a strong desire to see the golf course be more
compatible with the Baylands environment. This goal is echoed by Mr. Richardson in his
reconfiguration options, each of which adds more naturalized areas to the golf course. In
addition, long range design concepts associated with the clubhouse, entry and image go hand-
in-hand with this goal.
OPTION A
Option A represents the minimum reconfiguration in order to facilitate the San Francisquito
Creek realignment as required by the SFCJPA. This option shifts holes laterally from west to
east, retaining much of the same routing of the existing course. Golf holes are moved away from
the levee on a minimal basis. Improvements are primarily restricted to the holes moved, with the
remaining holes largely unchanged. Bunker work and naturalization enhancements are made
throughout the course in order to provide a more consistent golf experience and landscape.
The highlights of changes in this option include:
6.5 golf holes relocated
5 new greens constructed
Par 72
6,900 / 6,500 / 5,200 yards
All bunkers reconstructed and/or new
38.5 acres transformed to naturalized areas (non-managed turf)
Revised Hole No. 18 (naturalized hazard)
Adjusted Hole No. 12
Adjusted Hole Nos. 13 and 14
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 4
The total projected cost for this option is $3,537,622, including all professional fees,
project management and contingency.
Additional Work
Additional (“alternate”) items within the golf course itself may be undertaken by the City
concurrently with the development of Option A. These optional items include:
Sand capping of new turf areas (new fairways to be constructed)
Use (spreading) of imported soil from the Stanford University Medical Center Project
Reconstruction of all greens (13 additional to those covered)
Re-turfing of all existing fairways (23.5 acres additional)
Replacement of the balance of the existing irrigation system
Reconstruction and features at the existing practice green area
Construction of a new on-course restroom facility
Projected Cost for Additional Items: $ 3,250,500
Among the additional (alternate) work, Mr. Richardson and NGF recognize that the full
replacement of the existing irrigation system will become an eventual necessity. Our
understanding is that the existing system, installed in 1998, presents regular issues due to
deteriorating pipe fittings. Now entering its 14th year of service, the system is on the decline due
to the high salts inherent within the soils. Even if the balance of the system remains in
commission for another six years (20 years is a reasonable longevity for irrigation systems)
there exists good probability that emergency repairs and costs may escalate. For this reason,
we have studied this additional cost ($857,500) as an alternative scope to be considered for
Option A.
OPTION D
Option D represents an enhanced reconfiguration version from Option A. This option facilitates
the San Francisquito Creek realignment as required by the SFCJPA. The primary difference
from Option A is that Option D realigns holes with more variety, departing from the common
parallel routing of the existing course. Golf holes are moved away from the levee, but go beyond
Option A to form new views and variation. Bunker work and naturalization enhancements are
made throughout the course in order to provide a more consistent golf experience and
landscape. These are more prevalent than that afforded through Option A.
The highlights of changes in this option include:
8.5 golf holes relocated
8 new greens constructed
Par 72
6,900 / 6,400 / 5,000 yards
All bunkers reconstructed and/or new
43 acres transformed to naturalized areas (non-managed turf)
New Island Green Hole No. 13 (elevated tee and Bay view)
New Double Green Nos. 3 and 15
New Hole No. 5 (elevated green and Bay View)
New Hole No. 7 (split fairway)
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 5
New Hole No. 18 (par-5 and naturalized hazard)
New Hole No. 4
New Hole No. 17
New Hole No. 16
Future space afforded for a new practice green/short game area
The total projected cost for this option is $4,118,748, including all professional fees,
project management and contingency.
Additional Work
Additional (“alternate”) items within the golf course itself may be undertaken by the City
concurrently with the development of Option D. These optional items include:
Sand capping of new turf areas (new fairways to be constructed)
Use (spreading) of imported soil from the Stanford University Medical Center Project
Reconstruction of all greens (10 additional to those covered)
Re-turfing of all existing fairways (21.5 acres additional)
Replacement of the balance of the existing irrigation system
Reconstruction and features at the existing practice green area
Construction of a new on-course restroom facility
Future development of a new practice green/short game area
Projected Cost for Additional Items: $ 3,096,250
As with Option A, we recognize that the full replacement of the existing irrigation system will
become an eventual necessity. The same comments apply to Option D as noted for Option A.
We have studied the additional cost ($740,000), which is lower for Option D as more of the
existing system is covered within areas impacted by the reconfiguration, as an alternative scope
to be considered for Option D.
OPTION F
Option F represents an opportunity to remove land from golf course use and transform it to use
for athletic field(s). This option was added to the reconfiguration scope of the golf course
architect based on previous studies with the same objective. For Option F, a general constraint
placed on the planning work was to retain yardage (6,800 yards) and a par of 72. Safety from
the new trail system and within adjoining holes was to be maintained with no compromise to
standard guidelines.
Option F facilitates the San Francisquito Creek realignment as required by the SFCJPA. The
option is primarily distinguished by the removal of approximately 2.5 acres from the golf course
parcel. This land area is shown as athletic field use, accommodating a full NCAA sized soccer
field or combination of fields and field types of the same proportion and area. This area would
have limited room for parking expansion.
Option F realigns holes with more variety than in Option A. As with Option D, the reconfiguration
departs from the common parallel routing of the existing course. Golf holes are moved away
from the levee to form new views and variation. Bunker work and naturalization enhancements
are made throughout the course in order to provide a more consistent golf experience and
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 6
landscape. As a result of the “domino effect” of moving holes to make room for the athletic field
area, these enhancements are as prevalent as that afforded through Option D.
The highlights of changes in this option include:
12.5 golf holes relocated
12 new greens constructed
Par 72
6,700 / 6,300 / 5,000 yards
All bunkers reconstructed and/or new
43.4 acres transformed to naturalized areas (non-managed turf)
New Island Green Hole No. 13 (elevated tee and Bay view)
New Double Green Nos. 3 and 15
New Hole No. 5 (elevated green and Bay View)
New Hole No. 7 (split fairway)
Revised Hole No. 18 (naturalized hazard)
New Hole No. 4
New Hole No. 17
New Hole No. 16
New Hole No. 3
New Hole No. 3
New Hole No. 15
New practice green/short game area developed along with reconfiguration
Temporary preparation of the athletic field area (not field development or
improvement)
The total projected cost for this option is $5,855,454, including all professional fees,
project management and contingency.
Additional Work
Additional (“alternate”) items within the golf course itself may be undertaken by the City
concurrently with the development of Option F. These optional items include:
Sand capping of new turf areas (new fairways to be constructed)
Use (spreading) of imported soil from the Stanford University Medical Center Project
Reconstruction of all greens (6 additional to those covered)
Re-turfing of all existing fairways (21.5 acres additional)
Replacement of the balance of the existing irrigation system
Reconstruction and features at the existing practice green area
Construction of a new on-course restroom facility
Projected Cost for Additional Items: $ 2,530,000
As with Options A and D, we recognize that the full replacement of the existing irrigation system
will become an eventual necessity. The same comments apply to Option F as noted for previous
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 7
options. We have studied the additional cost ($425,000), which is lower for Option F (than for A
or D) as more of the existing system is covered within areas impacted by the reconfiguration, as
an alternative scope to be considered for Option F.
OPTION G
Option G represents a plan to remove more land from golf course use, transforming this land to
use for multiple athletic field and non-golf recreation purposes. This option was added to the
reconfiguration scope of the golf course architect based on the direction of the City to
investigate whether the viability of the golf course could be preserved while opening more area
(than with Option F) for non-golf recreation.
The constraint placed on the planning work was to retain a regulation layout with a par of 70 or
71. Safety from the new trail system and within adjoining holes was to be maintained with no
compromise to standard guidelines.
NGF Consulting was in the very early stages of our consulting work for the City when Option G
was put into motion. Among the foremost questions we were asked was whether a significantly
shorter course and/or a significantly lower par would be advisable for the City of Palo Alto. Our
conclusion was that the Palo Alto market, especially in the City’s situation as a single-course
owner, is best served in this locale by a regulation 18-hole golf course with a par of 72 being
preferred. This conclusion is based on several factors, including the following:
A strong history of this golf course producing annual rounds in excess of 80,000
Stated preferences by the current customer base to maintain length and par
Viability to host group golf events “demanding” a full-length course experience
Competitiveness to area courses
Long term viability to host regional events (qualifying, larger tournaments, etc.)
Regional offerings of shorter courses
Plan options that accommodate more flexible (shorter) yardages flexibility as part of
the reconfiguration work
NGF Consulting shared this conclusion with the City and the golf course architect,
recommending that Option G should, if possible, preserve a regulation length of about 6,500
yards (back tees) and a par of 72 preferred. If pressed to choose between a reduction in par (to
71) or a reduction in yardage lower than 6,500, we opined that it would be better to preserve
yardage at 6,500 and allow par to drop to 71. (Note: A par 71 course measuring 6,500 yards is
perceived as more difficult, and can be marketed such, than a course measuring the same
yardage but holding a par of 72. This is because the ratio of par to yardage is more
challenging.)
Option G also facilitates the San Francisquito Creek realignment as required by the SFCJPA.
The option involves the removal of approximately 10.5 acres from the golf course parcel. This
land area is shown as athletic field use (three full sized NCAA soccer fields or combination of
fields and field types of the same proportion and area), and additionally shows areas for a small
playground, wetlands park and picnic space, and trails connecting to the San Francisquito
Creek levee trails, Baylands and neighborhood.
Option G realigns holes with more variety than in Option A. As with Option D and F, the
reconfiguration departs from the common parallel routing of the existing course. Golf holes are
moved away from the levee to form new views and variation. Bunker work and naturalization
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 8
enhancements are made throughout the course in order to provide a more consistent golf
experience and landscape. As with Option F, but to an even greater extent, virtually all areas of
the existing course would be reconstructed, enhanced and improved.
The highlights of changes in this option include:
18 golf holes relocated
18 new greens constructed
Par 71
6,600 / 6,100 / 5,000 yards
All bunkers reconstructed and/or new
43 acres transformed to naturalized areas (non-managed turf)
Irrigated Turf Reduced from 135 acres to 92 acres
New Island Green Hole No. 12 (elevated tee and Bay view)
New Double Green Nos. 3 and 15
New Hole No. 5 (elevated green and Bay View)
New Hole No. 7 (split fairway)
New Hole No. 18 (par-5, naturalized hazard)
New Hole No. 4
New Hole No. 14
New Hole No. 10
New Hole No. 17
New Hole No. 16
New Hole No. 3
New Hole No. 3
New Hole No. 15
New practice green/short game area developed along with reconfiguration
Full irrigation system replacement (all areas of the 18-hole golf course)
Reconstruction and features at the existing practice green area
Construction of a new on-course restroom facility
Temporary preparation of the field/recreation area (not field development or
improvement)
The total projected cost for this option is $7,573,262, including all professional fees,
project management and contingency.
Additional Work
Additional (“alternate”) items within the golf course itself may be undertaken by the City
concurrently with the development of Option G. These optional items include:
Sand capping of new turf areas (new fairways to be constructed)
Use (spreading) of imported soil from the Stanford University Medical Center Project
Reconstruction of all greens (3 additional to those covered)
Re-turfing of all existing fairways (21.5 acres additional)
Replacement of the balance of the existing irrigation system
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 9
Projected Cost for Additional Items: $ 1,675,236
Unlike other options, Option G includes full irrigation replacement. This is because there is no
viable method of leaving only three golf holes without replacement. Variables include pumping
pressure, control zones and other logistics that had to be considered.
DEFERMENT OF CERTAIN IMPROVEMENTS
Other additional work listed under each option above has not been incorporated to the pro
formas prepared by NGF Consulting due to the complexity of attaching incremental rounds,
revenues and expenses to these improvements. However, both NGF and Mr. Richardson
believe that deferring some or all of the alternative (optional) improvements, including long-
range work to the clubhouse building, grounds, entry, practice areas, etc., will likely have a
negative affect on revenues and constrain somewhat the City’s ability to “re-brand” Palo Alto
GC.
Over the years, NGF Consulting has witnessed the implications of rounds and revenues on golf
facilities that have deferred maintenance and/or capital improvements. Eventually, golf course
conditions and/or the overall golf experience fall to a level where rounds, pricing and, as a
result, revenues are constrained, as is the municipality’s ability to effectively market the golf
course as anything other than a “value” provider. Golf consumers begin to migrate away from
facilities that are not well maintained when there are other proximate facilities offering better
conditions and/or equal or even slightly higher price points.
Among the optional/alternative improvements associated with Palo Alto Golf Course, we find the
most pressing are:
Course conditions, especially greens, drainage and turf condition
Yardage flexibility (to attract beginners, youth, women and seniors)
Geese and burrowing animal intrusion and damage
On-course restroom replacement
Clubhouse condition and available space
Most of the above are well corrected or mitigated though the reconfiguration options. However,
replacement of the irrigation system, as an example, is not fully afforded within the base work of
Options A, D and F. Especially in the case of A and D, this alternate cost may be prudent to
examine closer as conditions cannot dramatically improve course-wide without a plan to replace
the system. If the system is allowed to run for a long period without replacement, revenue is
bound to drop incrementally as turf conditions decline. In terms of substantive clubhouse
improvements, such as expanding the meeting space, improvements are not likely to pay for
themselves under the current operating structure whereby only 7% of food & beverage revenue
accrues to the City.
Yardage flexibility is accommodated in most of the options, but more so as more work is
covered. Options D, F and G adequately allow for more flexibility and will therefore have the
potential to attract more player types. The geese and burrowing animal issues, according to the
golf course architect, will be positively mitigated by all reconfiguration options. Yet, plan options
with more area impacted will likely result in more appropriate habitat and areas for these
animals to use rather than the turf areas currently intended for golfers.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 10
Market Overview
Below, NGF Consulting provides a summary of key “external” factors that characterize the trade
area in which the Palo Alto Golf Course operates. We include basic demographic variables that
have the potential to affect the economic performance of the golf facility, as well as an analysis
of supply and demand indicators in the public golf market.
DEMOGRAPHICS SUMMARY
Utilizing research materials provided by Applied Geographic Solutions, Inc. (a supplier of
demographic research based on U.S. Census results), NGF Consulting has examined relevant
characteristics of the local population. In the following tables, NGF Consulting indicates the
population, median age, and median household income trends for San Mateo and Santa Clara
counties, as well as the 3-, 10-, and 15- mile market rings surrounding the golf course and the
total United States.
Palo Alto Golf Course 3 mi 10 mi 15 mi
San
Mateo
County
Santa
Clara
County U.S.
Summary Demographics
Population 1990 Census 94,021 697,234 1,482,687 649,622 1,496,702 248,710,012
Population 2000 Census 100,652 765,828 1,662,257 707,161 1,682,585 281,421,906
CAGR 1990-2000 0.68%0.94% 1.15%0.85% 1.18%1.24%
Population 2010 Census 104,099 806,139 1,750,080 718,376 1,781,728 308,699,447
CAGR 2000-2010 0.34%0.51% 0.52%0.16% 0.57%0.93%
Population 2016 Projected 105,110 817,407 1,775,178 725,980 1,805,397 325,288,086
CAGR 2010-2016 0.16%0.23% 0.24%0.18% 0.22%0.88%
Median HH Inc $94,304 $96,743 $91,334 $88,233 $88,860 $53,908
Median Age 37.5 37.2 37.1 39.4 36.2 36.9
CAGR = Compound Annual Growth Rate
From the data collected for this study, NGF Consulting has made the following observations
regarding the demographics of Palo Alto and surrounding areas:
The 10-mile and 15-mile markets around Palo Alto GC are dense, with 2010
estimates of about 806,000 and 1.775 million residents, respectively, in these two
submarkets. The 10-mile market has added more than 40,000 net new residents
since 2006, while the 15-mile market grew by nearly 88,000 people. Population
growth is projected to be very moderate through 2016.
The Median Ages in the subject market areas are generally similar to the national
median age of 36.9 years, though San Mateo County overall is significantly higher at
39.4 years. In general, the propensity to play golf with greater frequency increases
with age, making relatively older markets more attractive to golf facility operators, all
other factors being equal.
Median Household Incomes in the area are much higher than the national median.
For instance, the 10-mile market exhibits incomes nearly 80% higher than the
national median income of $53,908. In general, higher income residents are more
likely to participate in golf, and they play more frequently than lower income
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 11
residents. These high figures are mitigated considerably by the very high cost of
living in the Bay Area.
GOLF MARKET OVERVIEW
Below we provide an overview of recent and emerging national trends with respect to golf
participation and municipal golf, as well as a summary of golf demand and supply indicators in
the local markets for Palo Alto Golf Course. NGF Consulting utilizes predictive models as
benchmarks for estimating potential market strength. The methodology for determining the
relative strength of the subject market is described in the following section.
National Trends in Golf Demand and Supply
Participation
Golf participation in the U.S. has grown from 3.5% of the population in the early 1960s to about
9.2% of the population today. NGF estimates that the number of golfers fell slightly in 2011 to
26.1 million; it was encouraging news that the number of golfers gained in 2010-11 held steady
vs. previous years while the number of lost golfers dropped significantly. For research purposes,
a golfer is defined as a person age 6 or above who plays at least one round of golf in a given
year.
All U.S. Golfers
(in millions)
1985 1990 1995 2000 2005 2010
All golfers age 6+ 19.5 27.4 24.7 28.8 30.0 26.1
Source: National Golf Foundation
The number of rounds of golf also fell 2.3% during the past year, from 486 million in 2009 to 475
million in 2010 (most recent year NGF has published), corroborating the decline in the number
of golfers. In the Pacific Region, which includes California, the statistics are somewhat more
favorable:
Regional Profile
Participation Rate Number of Golfers Percent of Golfers
Total Annual
Rounds (millions)
Pacific Region 7.3% 3,276,000 12.5% 50.4
United States 9.2% 26,122,000 100.0% 475.0
Source:Golf Participation in the U.S., 2011 edition, National Golf Foundation
Considering the severity of the recession and its effects on both discretionary income and time,
golf has held up rather well. Multiple NGF studies of golfers since 2008 would attribute the
gradual decline in golfers and rounds primarily to the impact of lower job security and concern
over personal finances, not waning appeal for the game.
Over the past 50 years, golf demand grew at about 4% per year while facility supply grew at
about 2% per year. However, since 1990, the situation has reversed – demand has grown at
only 0.5% per year while facility supply has grown at 1.4% per year. With the increase in supply,
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 12
we are seeing a marked increase in competition, and the supply is greater than the demand in
some markets.
In addition to increased competition, other factors have contributed to a decline in the number of
rounds per course nationally from 2002 to 2011. In the NGF’s most recent survey of core golfers
conducted in September 2011, we found that fearful financial outlooks, weak consumer
confidence, and negative golfer attitudes have also played a role. The combination of these has
caused many golf facilities to become distressed, particularly those that have a high debt load
because of higher construction costs and the perceived need to build high-end courses.
The number of golf course closings quadrupled from an annual average of 24 courses per year
in the 1993-2001 time period to more than 100 courses in 2005.In 2006, there was negative
net growth in golf facilities for the first time in six decades, with 146 18-hole equivalents
closing and 119.5 opening. In 2007, there were 113 openings and 121.5 closures, and in
2008, 72 golf course openings and 106 closures. In 2009, 49.5 openings minus 139.5 closures
equated to a net loss of 90 18-hole equivalents. Closures continue to be disproportionately
public, stand-alone 9-hole facilities or short courses (executive or par-3 length) with a value
price point. Net growth in supply has been negative now for four consecutive years, with the
largest drop of 90 courses in 2009. However, U.S. openings averaged 200+ (net) for 20 years,
and total 18-hole equivalent supply is up 5% since 2000, indicating a slow market correction is
underway. In October 2011, NGF projected 2011 net growth of about negative 106.5 (openings
minus closings), and projected actual closures for 2011 would be closer to 150.
NGF estimates that national rounds played experienced an overall drop from 2000 to 2010 of
-9.5%. By the end of 2011, rounds had further declined 2.5% in the U.S., but rounds in the
Pacific Region had increased 1.2% and California was up 2.3%.
On the positive side, the growth in golf course development has slowed considerably nationally
and in the majority of local markets, a trend that should help ease some of the competitive
pressure. Another positive trend is the aging of America. Baby Boomers are rapidly approaching
retirement age when golf activity flourishes. The baby boomers represent not only the largest
single demographic in the US, but they also approach retirement age with more disposable
income than any previous generation.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 13
Local and Regional Golf Supply and Demand Indicators
The following table summarizes some key golf supply and demand measures for the local
markets based on NGF research and golf demand predictive models.
Palo Alto Golf Course 3 mi 10 mi 15 mi
San
Mateo
County
Santa
Clara
County U.S.
Golf Demand Indicators
# of Golfing Households 6,989 55,008 116,506 49,136 116,439 21,237,600
Number of Rounds Played 226,453 1,769,537 3,717,852 1,571,308 3,765,371 498,831,616
Golfing Household Index 101 104 103 105 106 100
Rounds Played Index 140 142 141 143 146 100
Golf Supply Summary
Total Golf Facilities 2 13 25 14 33 15,902
Public Golf Facilities 2 8 16 6 20 11,633
Private Golf Facilities 0 5 9 8 13 4,269
Total Golf Holes 36 207 378 279 576 268,443
Public Golf Holes 36 117 225 108 342 191,214
Private Golf Holes 0 90 153 171 234 77,229
Household/Golf Supply Indicators
Households per 18 Holes: Total 19,132 25,655 29,805 16,754 19,127 7,733
Households per 18 Holes: Public 19,132 45,390 50,073 43,282 32,214 10,856
Households per 18 Holes: Private NA 59,007 73,636 27,336 47,082 26,879
Households Supply Index: Total 242 325 378 212 242 100
Households Supply Index: Public 171 405 447 387 288 100
Households Supply Index: Private 0 221 275 102 176 100
Golf Course Construction Activity 2001-2010
Total holes added past 10 years 0 0 18 0 72 24,318
Public holes added past 10 years 0 0 0 0 54 17,469
Private holes added past 10 years 0 0 18 0 18 6,849
Percent Total Holes Added 0.00%0.00%4.80%0.00%12.50%9.10%
Percent Public Holes Added 0.00%0.00%0.00%0.00%15.80%9.10%
Percent Private Holes Added NA 0.00%11.80%0.00%7.70%8.90%
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 14
Golf participation rates in the subject markets around Palo Alto GC are very similar to
the national benchmark, while rounds demanded per household are about 40%
higher than the national figure. The high rounds demanded per household are
indicative of the year-round golf climate, the high number of golf courses, and a
demographic profile that is generally conducive to high golf demand, particularly as it
relates to median household income.
There are thirteen total, including eight public, golf facilities (including Palo Alto GC)
in the 10-mile market area, while there are 25 total facilities, including 21 public,
within 15 miles of Palo Alto GC.
As the tables indicates, the subject markets have significantly more households per
18 holes of golf than the nation overall. For example, in the 10-mile market area
surrounding Palo Alto GC, there are nearly four times as many households per total
18 holes and 4.5 times as many households per public 18 holes than in the overall
U.S. (We contrast these supply ratios to some of Palo Alto’s key competitors in
Appendix A).
There was a spate of new golf course construction in the Bay Area in the 1990s and
early 2000s. For the nine-county Bay Area region, 27 total golf facilities were added
between 1997 and 2006. This included 6 private (comprising 90 holes) and 21 public
(360 holes) facilities. However, as with the rest of the country, new golf course
construction has slowed to a crawl in the subsequent years, and the NGF database
reveals no new golf course projects currently in planning or under construction within
15 miles of Palo Alto GC.
Palo Alto and the greater Bay Area are home to a large number of major corporate
and public employers, including many high-tech and internet companies. These large
employers are prime targets for soliciting tournament/outing play, and could be a key
element to boosting play levels and revenues at the Baylands GC. Outings are
generally sold at the highest green fee, and also expose a number of golfers to the
facility for the first time.
Visitors to the Palo Alto area have the potential to significantly impact demand at golf
courses. Though visitation numbers were not available for Palo Alto specifically, it is
estimated that about sixteen million people visit San Francisco alone each year, and
the overall Bay Area has considerably more visitors than that. NGF research shows
that roughly one-third of all golfers participate in the activity while traveling, playing
.557 rounds per day of travel. This supplemental market should be a target of
marketing efforts once the improved Baylands Golf Club is opened.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 15
COMPETITIVE GOLF MARKET
One of the objectives of this effort is to identify any opportunities that may exist for the improved
“Baylands Golf Club” to increase market share, fees and revenues. In this section, we present
an overview of the public access golf market in which the current Palo Alto GC operates, with a
focus on key competitors. The map below shows the location of these facilities in relation to
Palo Alto Golf Course.
In the tables that follow, NGF Consulting presents summary operational information for the golf
facilities identified as direct competition to the Palo Alto Golf Course. NGF Consulting identified
the primary competitors based on a number of factors, including price point, location, NGF
experience in this market, and input from both facility management and City staff.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 16
Summary Information – Primary Competitors
The table below provides summary information regarding the golf courses we have identified as
Palo Alto GC’s primary competitors.
Palo Alto Municipal Golf Course Key Competitors – Summary Information
Golf Facility Location Type
Year
Open Par / Slope
Front Tee /
Back Tee
Location Relative
to PAGC*
Palo Alto Municipal Golf Course Palo Alto MU 18H 1956 72 / 122 5,744 / 6,833 --
Crystal Springs Golf Course Burlingame MU 18H 1924 72 / 127 5,580 / 6,628 16 mi NW
Poplar Creek Golf Course San Mateo MU 18H 1933 70 / 115 4,768 / 6,042 14.5 mi NW
San Jose Municipal Golf Course San Jose MU 18H 1968 72 / 119 4,200 / 6,700 13 mi SE
Santa Clara Golf & Tennis Club Santa Clara MU 18H 1987 72 / 118 5,521 / 6,723 8.5 mi SE
Santa Teresa Golf Club San Jose DF 27H 1963 71 / 126 4,011 / 6,742 24.5 mi SE
Shoreline Golf Links Mountain View MU 18H 1983 72 / 129 5,437 / 6,996 2.5 mi SE
Spring Valley Golf Course Milpitas DF 18H 1956 70 / 113 5,453 / 6,116 15 mi E
Sunnyvale Golf Course Sunnyvale MU 18H 1969 70 / 118 5,170 / 5,742 5.5 mi SE
*Air miles from subject site, rounded to half-mile; actual driving distances will likely be greater.
Type: DF – Daily Fee; MU – Municipal
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 17
The table below shows summary facility information regarding Palo Alto Municipal Golf Course and its primary competitors. Reported
rounds for 2007 are from the 2008 Economic Research Associates report to the City. Average green/cart revenue per round for San
Jose and Santa Teresa are estimated based on ERA 2007 numbers.
Summary Operating Data – Palo Alto Municipal Golf Course and Primary Competitors
Golf Facility
Total 2007
Rounds
Total 2011
Rounds
Average
Green / Cart
Fee per
Round
18-Hole
Resident
Green Fee
(WD/WE)
18-Hole
Non-
Resident
Green Fee
(WD/WE)
Per Person
18-Hole Cart
Fee
18-Hole
Twilight
Green Fee
(WD/WE)
18-Hole
Senior
Resident
Green Fee
(WD/WE)
18-Hole
Super-Twi
Green Fee
(WD/WE)
Palo Alto Municipal GC 76,241 66,740 $30.20 / $4.50 $37/$47 $39/$49 $14 $30/$34 $28/DNA1 $26/$28
Crystal Springs Golf Course 73,654 63,000* $24 / $8 DNA $44/$66 $16 $36/$43 $30/DNA $26/$36
Poplar Creek Golf Course 86,315 70,709 $33.11 / N/A $33$45 $38/$53 $13.50 $27/$33 $22/DNA1 $19/$25
San Jose Municipal GC 86,991 78,000* $32 / $5 DNA $37/$51 $14 $26/$33 $23/DNA $20/$24
Santa Clara Golf & Tennis 87,120 81,000 $26 / $10 $25/$34 $37/$50 $14 $17/$23 res
$26/$29 n/r DNA2 $12/$14 res
$16/$18 n/r
Santa Teresa Golf Club 75,0003 65,000*$29.60 / $5.70 DNA $40/$46/$60 $13.50 $25/$29/$34 DNA $17/$19/$25
Shoreline Golf Links 67,135 50,000 $28 / $5.60 $31/$47 $38/$54 $12 $25/$28 $21/DNA1 $17/$17
Spring Valley Golf Course N/A N/A N/A DNA $37/$55 $14 DNA/$45 $28 M-F $27/$30
Sunnyvale Golf Course 80,513 72,535 $28 / $4.50 DNA/$44 $35/$48 $13.50 $25/$26 res
$25/$30 n/r DNA1 $16/$20
KEY
*NGF Consulting estimate N/A – Information not available DNA – Does not apply / Not offered
Note: For San Jose, Santa Teresa, “afternoon” rates used for twilight and “twilight” for supertwilight; for Spring Valley, “midday” and afternoon used for twi / supertwi.
1 Non-resident seniors pay $33 at Palo Alto, $28 at Shoreline; senior discounts at Poplar Creek are for residents only.
2 Santa Clara offers senior monthly ticket; Sunnyvale offers senior discount card.
3 Rounds listed are for regulation 18-hole course only.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 18
Summary of Findings – Primary Competitors
Based on data reported to NGF Consulting by area golf operators, Palo Alto Golf
Course is positioned quite similarly to its chief municipal competitors. The reported
average green fee revenue per round among the subject municipal facilities in 2011
generally fell between $28 and $32, while average cart revenue per round was most
commonly between $4.50 and $5.70.
Posted green fees have been generally flat in this market for the last several years,
with only periodic marginal increases aimed at cost recovery at some courses.
Non-resident green fees fall within a relatively narrow range among Palo Alto GC
and its municipal competitors, but NGF did note that Palo Alto is at the low end of the
non-resident pricing spectrum, particularly on weekends. We believe that an
improved and re-branded Palo Alto facility should be able to absorb $5 to $10
increases for non-resident rounds, depending on the reconfiguration option chosen
and varying by fee category.
Of the municipal golf courses profiled (leased Santa Teresa excluded), all but San
Jose Municipal offered a fee discount for residents (Sunnyvale restricted the discount
to weekends).
Most people NGF spoke to consider the city of Mountain View’s Shoreline Golf Links
Course to be Palo Alto GC’s most direct competitor. Shoreline’s reputation in terms
of maintenance standards has reportedly taken a hit in recent years, and the golf
course appeared to be in only fair condition during NGF’s visit. Shoreline has
dropped about one-third of its rounds since the mid 2000s and was the least active
facility among the key competitors in 2011, with a reported 50,000 rounds. Due to its
location, Shoreline probably suffers more than most Bay Area golf courses with the
Canadian Geese problem. There were also a large number of coots on the course
during our visit.
As was the case with nearly every golf market NGF examined nationally, average
annual rounds played at many Bay Area golf courses dropped by 25% or more
between the late 1990s / 2000 and the middle part of the 2000s. Based on rounds
reported to NGF as part of this study effort, rounds played among the direct
competitive set have continued to decline since the 2006-07 time period, though
variations in the most recent years are at least partly attributable to weather
variations.
Even with the falling activity levels, rounds played per 18 holes among the subject
municipal golf courses remain among the highest we’ve observed anywhere in the
U.S. Santa Clara Golf & Tennis and San Jose Municipal, at ±80,000 rounds in recent
years, are currently the most active among the competitive set.
Because of heightened competition and today’s economic realities, fee discounting
(e.g., through internal yield management, use of internet wholesalers such as
golfnow.com), even among high-end daily fee courses, is now common in the Bay
Area golf market. As a result, the lines can become blurred between “rack” rates and
what the majority of customers are actually paying for a round of golf. This disparity
is not common among the municipal golf courses we surveyed.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 19
PALO ALTO GOLF COURSE MARKET POSITIONING ASSESSMENT
NGF has attempted to provide a qualitative, or subjective, review of how Palo Alto GC, under
both its current configuration and the alternate reconfiguration options being considered, stacks
up against its key competitors as identified above. The objective of this relative assessment is to
provide some justification for assuming an increase in market share (and sustainable green
fees) for Palo Alto GC, especially with the more intensive renovation options.
NGF Consulting has scored the key competitors to the plan options (A, D, F and G) for Palo Alto
GC. A baseline score is also provided for the existing Palo Alto golf course and facility. This
scoring has been accomplished by looking at the amenities, course quality and reputation
associated with each competitive facility. Reliance has been made on available reviews, NGF
data, discussions with Bay Area golf writers/course reviewers and our visits to the subject
courses.
To rank the reconfiguration plans for Palo Also we relied on the schematic planning work
developed as of this date, together with our ratings for the plan options. Scores are expressed
as A+, A, A-, B+, B, etc. through D-. Because of the options (alternate) work to be considered,
no overall “average” grade is provided. Rather, categories of comparisons are provided. Such
scorings are both subjective and objective, combining impressions with facts about the facilities,
and in this case, proposed plans. Because of the subjective component of this review, personal
opinion and disagreement with some of the relative scoring should be expected. As such, the
scoring should be used as a method for the reader to form opinions in combination with the
other reporting covered within this report.
Comparison of Palo Alto GC to Key Competitors
Golf Facility
Clubhouse
Facilities
Practice
Facilities
Consumer
Reputation
Golf
Conditions*
Palo Alto (Existing) C- C+ C+ C
Palo Alto (Option A) C- C+ B B-
Palo Alto (Option D) C- C+ A- B+
Palo Alto (Option F) C- B A A-
Palo Alto (Option G) C- B+ A+ A
San Jose Golf Course D A- A- B-
Santa Clara Golf & Tennis B A- A- C+
Shoreline Golf Links B+ B+ C C-
Sunnyvale Golf Course C- D- D- C+
Crystal Springs Golf Course A- B+ B+ B
Poplar Creek Golf Course A- D B- B
Santa Teresa Golf Club B- B B- B-
Spring Valley B- B- C+ C+
*As observed January-February 2012
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 20
Financial Performance
Models for Palo Alto Golf Course
As part of this study effort, NGF Consulting has prepared an analysis to show what the potential
economic performance of Palo Alto Municipal Golf Course could be considering the
reconfiguration options presented in this report. In this section, we estimate the facility’s
economic performance based on a set of assumptions that may or may not become reality. We
feel that these estimates represent the best effort to create a “fair estimate of performance” for
this facility based on our understanding of the golf facility operation, its place in the market and
the changes proposed in the various renovation options.
The Palo Alto Municipal GC performance has been projected under the assumption that the
operation is continued ‘as-is’ with three separate contracts for maintenance, pro shop and
food/beverage. The basic contract terms in place in FY2012 are assumed to continue through
FY2021. The NGF has also assumed a “standard” set of external assumptions for regional
economic performance, consumer discretionary income, and weather, with neither severe
declines nor increases in any of these measures through 2021.
RECENT HISTORICAL PALO ALTO GC PERFORMANCE
In order to put the pro forma projections in context, we have summarized the five-year
performance history of Palo Alto GC in the table below.
Palo Alto Municipal Golf Course
Historical Revenue Performance (2008-2011)
Revenues FY2008 FY2009 FY2010 FY2011
Green Fees $2,169,230 $2,073,809 $1,958,234 $1,859,473
Cart Fees 345,656 313,224 339,090 302,815
Driving Range 346,447 365,908 399,773 343,878
Monthly Play Cards 161,368 161,544 135,848 154,933
Tournament / League Fees 2,227 2,651 1,921 2,190
Class Program / Other Fees 0 0 0 11,844
Total Golf Course Revenues $3,024,928 $2,917,136 $2,834,866 $2,675,133
Other Revenue
Merchandise Sales 718,450 737,050 684,725 663,400
Food Sales 667,000 0 610,725 637,800
Liquor Sales 172,000 0 141,850 149,000
F & B Concession Payments
Fixed Lease $0 $43,811 $0 $0
Variable Portion $58,730 $0 $52,680 $55,076
Utility Payment $25,920 $19,440 $28,080 $25,920
Total F & B Concession Payments $84,650 $63,251 $80,760 $80,996
Pro Shop Concession Payments
Fixed Lease $0 $0 $0 $0
Merchandise (4%) $28,738 $29,482 $27,389 $26,536
Total Pro Shop Concession Payments $28,738 $29,482 $27,389 $26,536
Total Gross Margin to City $3,138,316 $3,009,869 $2,943,015 $2,782,665
Rounds Played 77,989 75,511 69,791 67,381
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 21
Palo Alto Municipal Golf Course
Historical Expense and Net Income Performance (2008-2011)
Expenses FY2008 FY2009 FY2010 FY2011
Salaries & Benefits $951,786 $929,335 $721,596 $259,455
Range Fees 138,579 152,745 142,267 130,152
Cart Fees 131,789 127,836 121,630 117,529
Club Fees 6,473 6,198 5,424 5,576
Fixed Lozares Management Fee 373,435 409,989 388,898 381,544
Contract Maintenance ---475,000
Repairs & maintenance 34,791 39,295 33,321 21,943
Advertising & Publish 5,560 6,583 4,299 10,765
Supplies and Materials 129,891 144,037 119,458 43,742
Gen., Rents, Fac. & Equip 5,959 2,736 944 675
Water Expense 279,326 409,132 271,495 361,870
Other Direct Charges 36,998 39,255 38,882 45,263
Indirect Charges 108,641 132,072 110,343 102,571
Total City Operating Expenses $2,203,228 $2,399,213 $1,958,557 $1,956,085
Net Income From Operations (Loss)$935,088 $610,656 $984,458 $826,580
Income from Sale of Property $35,230
D/S Income $33,629 $32,855 $32,200 $0
Total Non-Operating 33,629 32,855 32,200 35,230
Total Income (Incl. Non-operating)$968,717 $643,511 $1,016,658 $861,810
Debt Service $559,795 $555,686 $560,674 $559,539
Payment to General Fund $94,849 $94,849 $47,684 $94,849
Cost Plan Charges $337,590 $318,969 $332,155 $41,455
Total Debt / Other Charges $992,234 $969,504 $940,513 $695,843
Net Income or (Loss)($23,517)($325,993)$76,145 $165,967
Source: City of Palo Alto
Rounds played at Palo Alto GC decreased steadily from FY2008 to FY2011, falling by a
total of 10,608, or 13.6%. During the same time, both golf revenues and net income from
operations declined by 11.6%.
Despite the significant decline in rounds and revenues, net income after debt service,
general fund payments and cost plan charges improved by nearly $500,000 between
FY2009 and FY2011 due to a reduction in operating expenses and a significant
decrease in cost plan charges associated with the conversion to privatized golf course
maintenance.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 22
PROJECTIONS BASED ON “OPTION A”
NGF Consulting has created a cash flow model for the continued operation of Palo Alto
Municipal Golf Course (to be re-branded as “Baylands Golf Club) under the assumption of the
“Option A” improvements. These improvements assume the basic minimum upgrades needed
to improve the facility within the SFCJPA flood mitigation project, with no substantial change to
the character of the golf course. The NGF revenue estimate has been combined with the
present operating structure to provide a full estimate of Baylands GC performance for the next
10 years, assuming successful completion of the “Option A” upgrades. The NGF has projected
growth to over $2.8 million in total gross facility revenue to the City (from all sources) by 2016.
Key Assumptions
The Base assumptions in preparing the projected financial performance estimates covers
several categories, including rounds activity, green fees, average revenues (carts, range,
concessions, etc.), total revenue, expenses, capital and debt. Under all scenarios, we have
assumed use of more complimentary and discount rounds in the initial years after reopening for
the purposes of gaining back lost customers, stimulating trial, and general promotions.
Rounds Performance
The rounds activity performance assumptions include:
Rounds in FY2012 assume a 3% reduction from FY2011 total rounds based on
actual performance in the first 6 months of FY2012 as reported by staff.
Rounds in FY2013 assume ‘as-is’ operation on 18 holes for the first 9 months, then
operation on only 9 holes for the last 3 months. During the last three months a
reduction of 50% off historical rounds for the corresponding month is assumed. All
rounds from April-June 2013 are assumed to be 9-hole rounds.
Rounds in FY2014 assume operation on 9 holes for the first 6 months, then
operation with an upgraded 18 holes for January-June 2014. All rounds from July-
December 2013 are assumed to be 9-hole rounds with a reduction of 50% off
historical totals for the corresponding month.
Rounds projections assume increases to a stabilized level of 68,200 by 2017.
The overall distribution of rounds by category is shown in the table below:
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 23
Palo Alto Municipal Golf Course (Baylands GC)
Projected Activity for Option A (2012-2021)
As-Is
9-Mos. 18-H /
3 Mos. 9-H
6-Mos. 18-H /
6 Mos. 9-H
Operate on 18-holes with
modest upgrade
to the golf course design
FY2012 FY2013 FY2014 FY2015 FY2016
FY2017
-2021
Weekday
18-Hole 5,400 3,500 2,200 5,200 5,300 5,600
Senior Non-Resident 6,300 4,200 2,300 5,850 6,200 6,500
9-Hole 1,500 6,400 11,500 1,500 1,600 1,700
Senior 900 600 500 900 1,000 1,000
Junior 1,400 1,000 600 1,350 1,400 1,500
Early Bird 700 500 300 600 700 700
Twilight 11,300 7,800 4,500 10,800 11,000 11,600
Specials 7,500 5,400 3,500 9,400 7,600 8,000
Junior Card 1,100 800 500 1,050 1,200 1,200
Senior Card 800 600 400 900 1,000 1,000
Non-Resident Senior Card 4,000 2,600 1,500 3,750 4,000 4,200
Sub-Total Weekday 40,900 33,400 27,800 41,300 41,000 43,000
Weekend
18-Hole 10,200 7,000 4,000 8,550 9,800 10,300
9 Hole 1,900 8,700 12,500 1,850 2,000 2,100
Junior 800 600 400 800 900 900
Twilight 6,200 4,100 2,400 5,800 6,000 6,400
Sub-Total Weekend 19,100 20,400 19,300 17,000 18,700 19,700
Complimentary Play 2,500 1,700 1,200 2,500 2,500 2,500
Tournaments 2,200 1,500 1,000 2,000 2,500 3,000
TOTAL ROUNDS 64,700 57,000 49,300 62,800 64,700 68,200
Average Fees / Revenue
The average green fees per round by category are shown in the table that follows. Key
assumptions driving this estimate include:
There is no change in average fees for FY2012 over FY2011.
The only adjustment in FY2013 is for the 9-hole rate, which has been adjusted
downward to reflect the various forms of discounting expected to be present when
the facility is operating on only 9 holes in the final 3 months of FY2013 and the first 6
months of FY2014. NGF has assumed 9-hole green fee will go as low as $12.00 per
round in some discount categories (e.g., late afternoon replay rate).
Upon re-opening on 18 holes (assumed January 1, 2014), average fees in each
category are increased approximately 5% over FY2012 (rounded).
For FY2015 through FY2021, NGF has assumed 1% annual increases in all fee
categories.
Average Cart fee and driving range revenue per round in FY2012 is based on the
actuals in FY2011. For FY2013, average cart / range revenue per round is reduced
by 20% (from 2011) to reflect the operation on only 9 holes the last 3 months. For
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 24
FY2014, average cart and range revenue is reduced by 30% (from FY2011) to reflect
6 months on 9 holes. By FY2015, average cart and range revenue is restored at the
2011 level and then increased by 1% per year through 2021.
Average merchandise sales in FY2012 are based on the actual in FY2011. Average
sales are reduced by 20% (from 2011) in FY2013 to reflect 9 holes-only the last 3
months, and 30% in FY2014 to reflect 6 months on 9 holes. By FY2015, average
sales are restored to the 2011 level with 1% increases through 2021.
Average food and bar sales in FY2012 are based on the actual in FY2011. Average
sales are reduced by 20% (from 2011) in FY2013 to reflect 9 holes-only the last 3
months, and 30% in FY2014 to reflect 6 months on 9-holes. By FY2015, average
sales are restored to the 2011 level with 1% increases through 2021.
The average green fees by category and ancillary revenue per round are shown in
the table below (assume 1% annual increases for FY2018-2021 as noted):
Palo Alto Municipal Golf Course (Baylands GC)
Projected Average Green Fees for Option A (2012-2021)
As-Is
9-Mos.
18-H /3
Mos. 9-H
6-Mos.
18-H /6
Mos. 9-H
Operate on 18-holes with
modest upgrade to the golf
course design
FY2012 FY2013 FY2014 FY2015 FY2016 FY2017
Weekday
18-Hole $37.00 $37.00 $39.00 $39.39 $39.78 $40.18
Senior Non-Resident $32.00 $32.00 $33.50 $33.84 $34.17 $34.52
9-Hole $23.00 $18.00 $17.00 $25.00 $25.25 $25.50
Senior $28.00 $28.00 $29.50 $29.80 $30.09 $30.39
Junior $14.75 $14.75 $15.50 $15.66 $15.81 $15.97
Early Bird $23.00 $23.00 $24.00 $24.24 $24.48 $24.73
Twilight $30.00 $30.00 $31.50 $31.82 $32.13 $32.45
Specials $19.00 $19.00 $20.00 $20.20 $20.40 $20.61
Junior Card $19.70 $19.70 $20.75 $20.96 $21.17 $21.38
Senior Card $23.50 $23.50 $24.75 $25.00 $25.25 $25.50
Non-Resident Senior Card $27.50 $27.50 $29.00 $29.29 $29.58 $29.88
Weekend
18-Hole $47.00 $47.00 $49.50 $50.00 $50.49 $51.00
9 Hole $27.00 $24.75 $25.75 $28.75 $29.04 $29.33
Junior $15.80 $15.80 $16.50 $16.67 $16.83 $17.00
Twilight $34.00 $34.00 $35.75 $36.11 $36.47 $36.83
Tournaments $34.60 $34.60 $36.50 $36.87 $37.23 $37.61
Avg. Cart Fee / Round $4.54 $3.63 $3.18 $4.54 $4.58 $4.63
Avg. Range Revenue / Round $5.15 $4.12 $3.61 $5.15 $5.20 $5.26
Merchandise Sales / Round $9.94 $7.95 $6.96 $9.94 $9.94 $10.14
Food per Round $9.56 $7.64 $6.69 $9.56 $9.65 $9.75
Bar per Round $2.23 $1.79 $1.56 $2.23 $2.26 $2.28
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 25
Other Revenue Assumptions
Total green fee revenue includes all discount (10-play) cards and monthly passes.
Ancillary revenue per round (carts, merchandise, range, food, bar, other) is derived
from total rounds, including complimentary rounds.
Concession revenue to the City of Palo Alto assumes the same current contract
basics through FY2021,with no minimums after April 2013. The City is assumed
to collect: (1) 7% of all F & B revenue; and (2) 4% of merchandise sales.
Expense Assumptions
Labor expenses are for City oversight only. These include allocations for contract
oversight, Parks and Recreation Director, Division manager, etc. The estimate is
intended to include both salary and benefits allocation and is increased by 4.5% per
year through FY2021.
Commissions paid to the pro shop vendor include 38% of driving range gross
revenue and 40% of gross cart revenue (as per contract).
The pro shop management fee is fixed at $28,775 per month for the full duration of
the NGF projection.
Reimbursements for merchant fees (mostly credit card fees) are assumed to be
1.4% of total facility revenue.
Contract maintenance expense to the City of Palo Alto assumes:
$62,500 per month for FY2012.
$62,500 per month for the first 9 months, then $37,500 per months for the
last 3 months of FY2013.
$37,500 per month for the first 6 months, then $66,667 per months for the
last 6 months of FY2014.
$66,667 per month in FY2015, growing at 1.5% annually through 2021.
Other expenses such as repairs, maintenance, supplies, club fees, materials and
other indirect expenses are all based on actual figures for FY2011 with 20%
reduction in FY2013 and 30% reduction in FY2014, returning to FY2011 levels in
FY2015 plus 1.5% increases assumed through FY2021.
Advertising and publishing expense is reduced by 50% during construction and
operation on 9 holes, totaling 15% reduction in FY2013. Upon re-opening the golf
course this expense is assumed to increase to $45,000 to account for enhanced
marketing of the upgraded facility and re-theme as “Baylands GC.” Advertising and
publishing expense is then reduced in subsequent years to a “standard” of around
$17,000 per year.
Water expense has been highly variable and NGF projections are based on the 4-
year average (2008-2011), with assumptions of reductions in use as described
previously:
25% reduction during construction
28% reduction upon re-opening
Annual increases are assumed at 20% for 2013, 15% for 2014, 9% for 2015,
3% for 2016, 2% for 2017 and 4.5% for FY2018 through FY2021.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 26
Other direct charges (including electric) are based on actual figures for FY2011 with
20% reduction in FY2013 and 30% reduction in FY2014. A slight reduction expected
upon re-opening the golf course in FY2015 (as described by the architect). Annual
increase of 1.5% is assumed from FY2015 through FY2021.
Debt Service and Other Non-Operating Expense Assumptions
Non-operating revenue attributed to debt service is assumed to continue at 6% of
debt service payment as long as payments continue (through FY2019).
Debt service payments were provided by the City of Palo Alto.
The payment to the General Fund ($94,849) expires after FY2012.
There is a new payment of ± $107,000 to the General Fund from FY2015 – FY2019
for repayment of a loan for the difference between the estimated capital cost for
Option A and the expected reimbursement from the SFCJPA.
The Cost Plan Charges are based on actual 2011 charges with historical 3% growth
through the end of FY2021.
The NGF has added a new “Operating & Capital Reserve” line to the pro forma
beginning in FY2015, set at 10% of green fee revenue.
Option A also assumes that the full irrigation replacement will be completed in
FY2020 (or by 2020) at a cost of $750,000 (real 2012 dollars).
Pro Forma Estimate for ‘Option A’ Scenario – FY2012 – FY2021
Utilizing the above assumptions and activity/revenue estimates, NGF Consulting has prepared a
pro forma for the next 10 years of operation, including FY2012 (already underway). The table
shows that the renovated Baylands Golf Club could produce net income to the City in the range
of $690,000 to $950,000 (before debt, cost plan and reserve) through the term of the current
debt program. After the City is no longer responsible for debt payments (beginning in FY2020),
the facility is expected to produce net income to the City, after all expenses and charges, in the
range of ±$620,000, although a one-time expense of $750,000 is projected for 2020 to upgrade
the irrigation system. As this is a projection, all figures after FY2012 have been rounded to the
nearest $100 for simplicity.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 27
Palo Alto Golf Course Revenue / Expense - Option A
Revenues
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Golf Course Revenues
Green Fees (Incl. Cards) $2,016,537 $1,960,100 $1,605,200 $1,313,900 $1,967,700 $2,090,000 $2,233,100 $2,255,400 $2,278,000 $2,300,700 $2,323,800
Cart Fees 302,799 293,500 206,900 156,600 284,900 296,500 315,600 318,800 322,000 325,200 328,500
Driving Range 343,911 333,400 235,000 177,800 323,600 336,700 358,500 362,100 365,700 369,400 373,100
Tournament / League Fees 2,196 2,100 1,900 1,600 2,100 2,100 2,200 2,200 2,200 2,200 2,200
Other 11,813 11,500 8,100 6,100 11,100 11,500 12,300 12,300 12,600 12,600 12,800
Total Golf Course Revenues $2,677,256 $2,600,600 $2,057,100 $1,656,000 $2,589,400 $2,736,800 $2,921,700 $2,950,800 $2,980,500 $3,010,100 $3,040,400
Concession Payments
Food and Beverage Concession
Variable Portion $55,076 $53,400 $37,600 $28,500 $51,800 $53,900 $57,400 $58,000 $58,600 $59,200 $59,700
Utility Payment $25,920 $25,900 $26,400 $26,400 $26,900 $26,900 $27,400 $27,400 $27,900 $27,900 $28,500
Total from F & B Concession $80,996 $79,300 $64,000 $54,900 $78,700 $80,800 $84,800 $85,400 $86,500 $87,100 $88,200
Pro Shop Lease
Merchandise (4%) $26,536 $25,700 $18,100 $13,700 $25,000 $25,700 $27,700 $27,700 $28,200 $28,200 $28,800
Total From Pro Shop Concession $26,536 $25,700 $18,100 $13,700 $25,000 $25,700 $27,700 $27,700 $28,200 $28,200 $28,800
Total Gross to City $2,784,788 $2,705,600 $2,139,200 $1,724,600 $2,693,100 $2,843,300 $3,034,200 $3,063,900 $3,095,200 $3,125,400 $3,157,400
Operating Expenses
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Salaries & Benefits $259,455 $139,000 $145,300 $151,800 $158,600 $165,700 $173,200 $181,000 $189,100 $197,600 $206,500
Range Fees 130,152 126,700 89,300 67,600 123,000 127,900 136,200 137,600 139,000 140,400 141,800
Cart Fees 117,529 117,400 82,800 62,600 114,000 118,600 126,200 127,500 128,800 130,100 131,400
Club Fees 5,576 5,700 4,600 4,000 5,700 5,800 5,900 6,000 6,100 6,200 6,300
Fixed Lozares Management Fee 345,333 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300
Merchant Fees Reimbursement 36,211 36,400 28,800 23,200 36,300 38,300 40,900 41,300 41,700 42,100 42,600
Contract Maintenance 475,000 750,000 675,000 625,000 800,000 812,000 824,200 836,600 849,100 861,800 874,700
Repairs & maintenance 21,943 22,300 17,800 15,600 22,300 22,600 22,900 23,200 23,500 23,900 24,300
Advertising & Publish 10,765 10,900 9,300 45,000 30,000 17,000 17,300 17,600 17,900 18,200 18,500
Supplies and Materials 44,417 45,100 36,100 31,600 45,100 45,800 46,500 47,200 47,900 48,600 49,300
Water Expense 361,870 246,000 277,400 207,000 195,000 200,900 204,900 214,100 223,700 233,800 244,300
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 28
Palo Alto Golf Course Revenue / Expense - Option A
Revenues
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Other Direct Charges (Incl. Electric) 45,263 45,900 36,700 32,100 44,700 45,400 46,100 46,800 47,500 48,200 48,900
Indirect Charges 102,571 104,100 83,300 72,900 104,100 105,700 107,300 108,900 110,500 112,200 113,900
Total City Operating Expenses $1,956,085 $1,994,800 $1,831,700 $1,683,700 $2,024,100 $2,051,000 $2,096,900 $2,133,100 $2,170,100 $2,208,400 $2,247,800
Net Income From Operations (Loss)$828,703 $740,700 $333,200 $66,600 $694,700 $818,100 $963,200 $956,700 $951,000 $917,000 $909,600
Non-operating
Income from Sale of Property 35,230
D/S Income $0 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0
Total Non-operating $35,230 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0
Total Income (Incl. Non-operating)$863,933 $656,200 $299,900 $30,700 $651,700 $770,300 $908,200 $899,200 $890,900 $854,200 $844,000
Debt Service $559,539 $499,000 $428,200 $429,000 $428,200 $430,800 $432,200 $432,300 $431,200 $0 $0
Payment to General Fund $94,849 $94,800 $0 $0 $107,600 $107,600 $107,600 $107,600 $107,600 $0 $0
New Debt Service $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Additional Capital $0 $0 $0 $0 $0 $0 $0 $0 $0 $750,000 $0
Reserve for Replacement $0 $0 $0 $0 $196,800 $209,000 $223,300 $225,500 $227,800 $230,100 $232,400
Cost Plan Charges $41,455 $42,700 $44,000 $45,300 $46,700 $48,100 $49,500 $51,000 $52,500 $54,100 $55,700
Total Debt / Other Charges $695,843 $636,500 $472,200 $474,300 $779,300 $795,500 $812,600 $816,400 $819,100 $1,034,200 $288,100
Net Income or (Loss)$168,090 $104,200 ($139,000)($407,700)($84,600)$22,600 $150,600 $140,300 $131,900 ($117,200)$621,500
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 29
PROJECTIONS BASED ON “OPTION D”
The NGF cash flow model for operation under “Option D” assumes a more significant upgrade
to the facility with a “more dramatic transformation” as described by the golf course architect.
The NGF revenue estimate has been combined with the present operating structure to provide a
full estimate of Baylands GC performance for the next 10 years, assuming successful
completion of the “Option D” upgrades. The NGF has projected growth to over $3.0 million in
total gross revenue (from all sources) to the City by 2016.
Key Assumptions
The Base assumptions in preparing the projected financial performance match those presented
in the projection for Option A,except the following changes noted below:
Rounds Performance
The rounds activity performance assumptions include:
Rounds in FY2013 assume ‘as-is’ operation on 18 holes for the first 9 months, then
operation on only 9 holes for the last 3 months. During the last three months a
reduction of 50% off historical rounds for the corresponding month is assumed. All
rounds from April-June 2013 are assumed to be 9-hole rounds.
Rounds in FY2014 assume operation on 9 holes for the first 7 months, then
operation with an upgraded 18 holes for February - June 2014. All rounds from July
2013 through January 2014 are assumed to be 9-hole rounds with a reduction of
50% off historical totals for the corresponding months.
Rounds in FY2015 through FY2021 assume increases to a stabilized level of 73,300
by 2017.
The overall distribution of rounds by category is shown in the table below:
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 30
Palo Alto Municipal Golf Course (Baylands GC)
Projected Activity for Option D (2012-2021)
As-Is
9-Mos. 18-
H /3 Mos.
9-H
5-Mos. 18-
H /7 Mos.
9-H
Operate on 18-holes with upgraded
golf design and more appealing
features
FY2012 FY2013 FY2014 FY2015 FY2016
FY2017
-2021
Weekday
18-Hole 5,400 3,500 1,800 5,500 5,800 6,100
Senior Non-Resident 6,300 4,200 2,100 6,200 6,550 6,900
9-Hole 1,500 6,400 11,000 1,600 1,600 1,700
Senior 900 600 300 1,100 1,150 1,200
Junior 1,400 1,000 400 1,350 1,400 1,500
Early Bird 700 500 200 800 850 900
Twilight 11,300 7,800 3,700 11,200 11,750 12,400
Specials 7,500 5,400 3,000 7,550 8,000 8,400
Junior Card 1,100 800 400 1,150 1,250 1,300
Senior Card 800 600 300 1,000 1,050 1,100
Non-Resident Senior Card 4,000 2,600 1,200 3,950 4,200 4,400
Sub-Total Weekday 40,900 33,400 24,400 41,400 43,600 45,900
Weekend
18-Hole 10,200 7,000 3,500 9,900 10,450 11,000
9 Hole 1,900 8,700 11,900 2,000 2,150 2,200
Junior 800 600 300 900 950 1,000
Twilight 6,200 4,100 2,100 6,000 6,350 6,700
Sub-Total Weekend 19,100 20,400 17,800 18,800 19,900 20,900
Complimentary Play 2,500 1,700 1,000 2,500 2,500 2,500
Tournaments 2,200 1,500 800 3,000 3,500 4,000
TOTAL ROUNDS 64,700 57,000 44,000 65,700 69,500 73,300
Average Fees / Revenue
The average green fees per round by category are shown in the table that follows. Key
assumptions driving this estimate include:
The only adjustment in FY2013 is for the 9-hole rate, which has been adjusted
downward to reflect the various forms of discounting expected to be present when
the facility is operating on only 9 holes in the final 3 months of FY2013 and the first 7
months of FY2014.
Upon re-opening on 18 holes (assumed January 1, 2014), average fees in each
category are increased approximately 10% over FY2012 (rounded).
Average Cart fee and driving range revenue per round in FY2012 is based on the
actuals in FY2011. For FY2013, average cart / range revenue per round is reduced
by 20% (from 2011) to reflect the operation on only 9 holes the last 3 months. For
FY2014, average cart and range revenue is reduced by 30% (from FY2011) to reflect
7 months on 9 holes. By FY2015, average cart and range revenue is restored at the
2011 level and then increased by 1% per year through 2021.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 31
Average merchandise sales in FY2012 are based on the actual in FY2011. Average
sales are reduced by 20% (from 2011) in FY2013 to reflect 9 holes-only the last 3
months, and 30% in FY2014 to reflect 7 months on 9 holes. By FY2015, average
sales are restored to the 2011 level with 1% increases through 2021.
Average food and bar sales in FY2012 are based on the actual in FY2011. Average
sales are reduced by 20% (from 2011) in FY2013 to reflect 9 holes-only the last 3
months, and 30% in FY2014 to reflect 7 months on 9 holes. By FY2015, average
sales are restored to the 2011 level with 1% increases through 2021.
The average green fees by category and ancillary revenue per round are shown in
the table below (assume 1% annual increases for FY2018-2021 as noted):
Palo Alto Municipal Golf Course (Baylands GC)
Projected Average Green Fees for Option D (2012-2021)
As-Is
9-Mos.
18-H /3
Mos. 9-H
5-Mos.
18-H /7
Mos. 9-H
Operate on 18-holes with
upgraded golf design and more
appealing features
FY2012 FY2013 FY2014 FY2015 FY2016 FY2017
Weekday
18-Hole $37.00 $37.00 $41.00 $41.41 $41.82 $42.24
Senior Non-Resident $32.00 $32.00 $35.00 $35.35 $35.70 $36.06
9-Hole $23.00 $18.00 $17.00 $25.00 $25.25 $25.50
Senior $28.00 $28.00 $31.00 $31.31 $31.62 $31.94
Junior $14.75 $14.75 $16.25 $16.41 $16.58 $16.74
Early Bird $23.00 $23.00 $25.50 $25.76 $26.01 $26.27
Twilight $30.00 $30.00 $33.00 $33.33 $33.66 $34.00
Specials $19.00 $19.00 $21.00 $21.21 $21.42 $21.64
Junior Card $19.70 $19.70 $21.75 $21.97 $22.19 $22.41
Senior Card $23.50 $23.50 $26.00 $26.26 $26.52 $26.79
Non-Resident Senior Card $27.50 $27.50 $30.00 $30.30 $30.60 $30.91
Weekend
18-Hole $47.00 $47.00 $52.00 $52.52 $53.05 $53.58
9 Hole $27.00 $24.75 $27.25 $28.75 $29.04 $29.33
Junior $15.80 $15.80 $17.50 $17.68 $17.85 $18.03
Twilight $34.00 $34.00 $37.50 $37.88 $38.25 $38.64
Tournaments $34.60 $34.60 $38.00 $38.38 $38.76 $39.15
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 32
Expense Assumptions
Contract maintenance expense to the City of Palo Alto assumes:
$62,500 per month for FY2012.
$62,500 per month for the first 9 months, then $37,500 per months for the
last 3 months of FY2013.
$37,500 per month for the first 7 months, then $71,000 per months for the
last 5 months of FY2014.
$71,000 per month in FY2015, growing at 1.5% annually through 2021.
Other expenses such as repairs, maintenance, supplies, club fees, materials and
other indirect expenses are all based on actual figures for FY2011 with 20%
reduction in FY2013 and 30% reduction in FY2014, returning to FY2011 levels in
FY2015 plus 1.5% increases assumed through FY2021.
Water expense has been highly variable and NGF projections are based on the 4-
year average (2008-2011), with assumptions of reductions in use as described
previously:
25% reduction during construction
32% reduction upon re-opening
Annual increases are assumed at 20% for 2013, 15% for 2014, 9% for 2015,
3% for 2016, 2% for 2017 and 4.5% for FY2018 through FY2021.
Other direct charges (including electric) are based on actual 2011 totals, based on
actual figures for FY2011 with 20% reduction in FY2013 and 30% reduction in
FY2014. A slight reduction expected upon re-opening the golf course in FY2015 (as
described by the architect). Annual increase of 1.5% is assumed from FY2015
through FY2021.
Debt Service and Other Non-Operating Expense Assumptions
There is a new payment of ± $223,700 to the General Fund from FY2015 – FY2019
for repayment of a loan for the difference between the estimated capital cost for
Option D and the expected reimbursement from the SFCJPA.
Option D also assumes that the full irrigation replacement will be completed in
FY2020 (or by 2020) at a cost of $500,000 (real 2012 dollars).
Pro Forma Estimate for ‘Option D’ Scenario – FY2012 – FY2021
Utilizing the above assumptions and activity/revenue estimates, NGF Consulting has prepared a
pro forma for the next five years of operation, including FY2012 (already underway). The table
shows that with a more comprehensive renovation, the Baylands GC could produce net income
to the City in the range of $930,000 to $1.27 million (before debt, cost plan and reserve) through
the term of the current debt program. After the City is no longer responsible for debt payments
(beginning in FY2020), the facility is expected to produce net income to the City in the range of
$915,000 per year, although there is a one-time expense of $500,000 for irrigation in 2020.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 33
Palo Alto Golf Course Revenue / Expense - Option D
Revenues
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Golf Course Revenues
Green Fees (Incl. Cards) $2,016,537 $1,960,100 $1,605,200 $1,213,500 $2,204,500 $2,361,900 $2,522,200 $2,547,500 $2,572,900 $2,598,700 $2,624,600
Cart Fees 302,799 293,500 206,900 139,700 298,100 318,500 339,200 342,600 346,100 349,500 353,000
Driving Range 343,911 333,400 235,000 158,700 338,600 361,700 385,300 389,200 393,100 397,000 401,000
Tournament / League Fees 2,196 2,100 1,900 1,400 2,200 2,300 2,400 2,400 2,400 2,400 2,400
Other 11,813 11,500 8,100 5,500 11,600 12,300 13,200 13,200 13,500 13,500 13,800
Total Golf Course Revenues $2,677,256 $2,600,600 $2,057,100 $1,518,800 $2,855,000 $3,056,700 $3,262,300 $3,294,900 $3,328,000 $3,361,100 $3,394,800
Concession Payments
Food and Beverage Concession
Variable Portion $55,076 $53,400 $37,600 $25,400 $54,200 $57,900 $61,700 $62,300 $62,900 $63,600 $64,200
Utility Payment $25,920 $25,900 $26,400 $26,400 $26,900 $26,900 $27,400 $27,400 $27,900 $27,900 $28,500
Total from F & B Concession $80,996 $79,300 $64,000 $51,800 $81,100 $84,800 $89,100 $89,700 $90,800 $91,500 $92,700
Pro Shop Lease
Merchandise (4%) $26,536 $25,700 $18,100 $12,200 $26,100 $27,600 $29,700 $29,700 $30,300 $30,300 $30,900
Total From Pro Shop Concession $26,536 $25,700 $18,100 $12,200 $26,100 $27,600 $29,700 $29,700 $30,300 $30,300 $30,900
Total Gross to City $2,784,788 $2,705,600 $2,139,200 $1,582,800 $2,962,200 $3,169,100 $3,381,100 $3,414,300 $3,449,100 $3,482,900 $3,518,400
Operating Expenses
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Salaries & Benefits $259,455 $139,000 $145,300 $151,800 $158,600 $165,700 $173,200 $181,000 $189,100 $197,600 $206,500
Range Fees 130,152 126,700 89,300 60,300 128,700 137,400 146,400 147,900 149,400 150,900 152,400
Cart Fees 117,529 117,400 82,800 55,900 119,200 127,400 135,700 137,000 138,400 139,800 141,200
Club Fees 5,576 5,700 4,600 4,000 5,700 5,800 5,900 6,000 6,100 6,200 6,300
Fixed Lozares Management Fee 345,333 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300
Merchant Fees Reimbursement 36,211 36,400 28,800 21,300 40,000 42,800 45,700 46,100 46,600 47,100 47,500
Contract Maintenance 475,000 750,000 675,000 595,800 852,000 864,800 877,800 891,000 904,400 918,000 931,800
Repairs & maintenance 21,943 22,300 17,800 15,600 22,300 22,600 22,900 23,200 23,500 23,900 24,300
Advertising & Publish 10,765 10,900 9,300 45,000 30,000 17,000 17,300 17,600 17,900 18,200 18,500
Supplies and Materials 44,417 45,100 36,100 31,600 45,100 45,800 46,500 47,200 47,900 48,600 49,300
Water Expense 361,870 246,000 277,400 204,000 161,000 165,800 169,100 176,700 184,700 193,000 201,700
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 34
Palo Alto Golf Course Revenue / Expense - Option D
Revenues
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Other Direct Charges (Incl. Electric) 45,263 45,900 36,700 32,100 43,500 44,200 44,900 45,600 46,300 47,000 47,700
Indirect Charges 102,571 104,100 83,300 72,900 104,100 105,700 107,300 108,900 110,500 112,200 113,900
Total City Operating Expenses $1,956,085 $1,994,800 $1,831,700 $1,635,600 $2,055,500 $2,090,300 $2,138,000 $2,173,500 $2,210,100 $2,247,800 $2,286,400
Net Income From Operations (Loss)$828,703 $710,800 $307,500 ($52,800)$906,700 $1,078,800 $1,243,100 $1,240,800 $1,239,000 $1,235,100 $1,232,000
Non-operating
Income from Sale of Property 35,230
D/S Income $0 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0
Total Non-operating $35,230 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0
Total Income (Incl. Non-operating)$863,933 $740,700 $333,200 ($27,100)$932,400 $1,104,600 $1,268,500 $1,266,700 $1,264,900 $1,235,100 $1,232,000
Debt Service $559,539 $499,000 $428,200 $429,000 $428,200 $430,800 $423,200 $432,300 $431,200 $0 $0
Payment to General Fund $94,849 $94,800 $0 $0 $223,700 $223,700 $223,700 $223,700 $223,700 $0 $0
Additional Capital $0 $0 $0 $0 $0 $0 $0 $0 $0 $500,000 $0
Reserve for Replacement $0 $0 $0 $0 $220,500 $236,200 $252,200 $254,800 $257,300 $259,900 $262,500
Cost Plan Charges $41,455 $42,700 $44,000 $45,300 $46,700 $48,100 $49,500 $51,000 $52,500 $54,100 $55,700
Total Debt / Other Charges $695,843 $636,500 $472,200 $474,300 $919,100 $938,800 $948,600 $961,800 $964,700 $814,000 $318,200
Net Income or (Loss)$168,090 $104,200 ($139,000)($501,400)$13,300 $165,800 $319,900 $304,900 $300,200 $421,100 $913,800
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 35
PROJECTIONS BASED ON “OPTION F”
The NGF cash flow model for operation under “Option F” assumes a more significant upgrade to
the facility, with a two-thirds complete renovation the addition of a soccer field and a comparable
“dramatic transformation” as proposed in Option D. The NGF estimate shows the Baylands GC
revenue performance under Option F over the next 10 years would be comparable to Option D.
Key Assumptions
The Base assumptions in preparing the projected financial performance match those presented
in the projection for Option D,except the following changes noted below:
Rounds and Average Fee Performance
The rounds activity and average fee performance assumptions are the same as proposed in
“Option D,” except:
Rounds in FY2014 assume operation on 9 holes for the first 9 months, then
operation with an upgraded 18 holes for April - June 2014. All rounds from July 2013
through March 2014 are assumed to be 9-hole rounds with totals reduced by 50% for
each corresponding month.
Palo Alto Municipal Golf Course (Baylands GC)
Projected Activity for Option F (2012-2021)
As-Is
9-Mos. 18-
H /3 Mos.
9-H
3-Mos. 18-
H /9 Mos.
9-H
Operate on 18-holes with nearly
complete renovation
FY2012 FY2013 FY2014 FY2015 FY2016
FY2017
-2021
Weekday
18-Hole 5,400 3,500 1,000 5,500 5,800 6,100
Senior Non-Resident 6,300 4,200 1,100 6,200 6,550 6,900
9-Hole 1,500 6,400 12,800 1,600 1,600 1,700
Senior 900 600 200 1,100 1,150 1,200
Junior 1,400 1,000 300 1,350 1,400 1,500
Early Bird 700 500 200 800 850 900
Twilight 11,300 7,800 2,000 11,200 11,750 12,400
Specials 7,500 5,400 2,200 7,550 8,000 8,400
Junior Card 1,100 800 300 1,150 1,250 1,300
Senior Card 800 600 200 1,000 1,050 1,100
Non-Resident Senior Card 4,000 2,600 800 3,950 4,200 4,400
Sub-Total Weekday 40,900 33,400 21,100 41,400 43,600 45,900
Weekend
18-Hole 10,200 7,000 2,100 9,900 10,450 11,000
9 Hole 1,900 8,700 13,700 2,000 2,150 2,200
Junior 800 600 200 900 950 1,000
Twilight 6,200 4,100 1,000 6,000 6,350 6,700
Sub-Total Weekend 19,100 20,400 17,000 18,800 19,900 20,900
Complimentary Play 2,500 1,700 1,100 2,500 2,500 2,500
Tournaments 2,200 1,500 500 3,000 3,500 4,000
TOTAL ROUNDS 64,700 57,000 39,700 65,700 69,500 73,300
Average green and ancillary fees in “Option F” are identical to those presented for
“Option D.”
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 36
Expense Assumptions
Contract maintenance expense to the City of Palo Alto assumes:
$62,500 per month for FY2012
$62,500 per month for the first 9 months, then $37,500 per months for the
last 3 months of FY2013
$37,500 per month for the first 9 months, then $66,667 per months for the
last 3 months of FY2014
$66,667 per month in FY2015, growing at 1.5% annually through 2021.
Other expenses such as repairs, maintenance, supplies, club fees, materials and
other indirect expenses are all based on actual figures for FY2011 with 20%
reduction in FY2013 and 40% reduction in FY2014, returning to FY2011 levels in
FY2015 plus 1.5% increases assumed through FY2021.
Water expense has been highly variable and NGF projections are based on the 4-
year average (2008-2011), with assumptions of reductions in use as described
previously:
20% reduction during construction
32% reduction upon re-opening
Annual increases are assumed at 20% for 2013, 15% for 2014, 9% for 2015,
3% for 2016, 2% for 2017 and 4.5% for FY2018 through FY2021
Other direct charges (including electric) are based on actual 2011 totals, based on
actual figures for FY2011 with 20% reduction in FY2013 and 40% reduction in
FY2014. A slight reduction expected upon re-opening the golf course in FY2015 (as
described by the architect). Annual increase of 1.5% is assumed from FY2015
through FY2021.
Debt Service and Other Non-Operating Expense Assumptions
The NGF has assumed that the $2,855,400 in additional cost needed to complete
Option F, over and above the amount estimated to be reimbursed by the SFCJPA,
will be funded via the issuance of a new debt program (revenue or General
Obligation Bond), with terms of 4.5% interest for 20 years, with payments beginning
in FY2015.
Option F also assumes that the full irrigation replacement will be completed in
FY2020 (or by 2020) at a cost of $250,000 (real 2012 dollars).
Pro Forma Estimate for ‘Option F’ Scenario – FY2012 – FY2021
Based on the inputs described above, the pro forma estimate for future performance under
“Option F” shows that with this more comprehensive renovation, the Baylands GC could
produce net income to the City in the range of $960,000 to $1.34 million (before existing and
new debt, cost plan and reserve) through the term of the current debt program. After the City is
no longer responsible for its older (1999 issue) debt payments, beginning in FY2020, the facility
is expected to produce net income to the City in the range of $720,000 per year, although there
is a one-time expense of $250,000 for irrigation in 2020.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 37
Palo Alto Golf Course Revenue / Expense - Option F
Revenues
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Golf Course Revenues
Green Fees (Incl. Cards) $2,016,537 $1,960,100 $1,605,200 $969,500 $2,204,500 $2,361,900 $2,522,200 $2,547,500 $2,572,900 $2,598,700 $2,624,600
Cart Fees 302,799 293,500 206,900 126,100 298,100 318,500 339,200 342,600 346,100 349,500 353,000
Driving Range 343,911 333,400 235,000 143,200 338,600 361,700 385,300 389,200 393,100 397,000 401,000
Tournament / League Fees 2,196 2,100 1,900 1,300 2,200 2,300 2,400 2,400 2,400 2,400 2,400
Other 11,813 11,500 8,100 4,900 11,600 12,300 13,200 13,200 13,500 13,500 13,800
Total Golf Course Revenues $2,677,256 $2,600,600 $2,057,100 $1,245,000 $2,855,000 $3,056,700 $3,262,300 $3,294,900 $3,328,000 $3,361,100 $3,394,800
Concession Payments
Food and Beverage Concession
Variable Portion $55,076 $53,400 $37,600 $22,900 $54,200 $57,900 $61,700 $62,300 $62,900 $63,600 $64,200
Utility Payment $25,920 $25,900 $26,400 $26,400 $26,900 $26,900 $27,400 $27,400 $27,900 $27,900 $28,500
Total from F & B Concession $80,996 $79,300 $64,000 $49,300 $81,100 $84,800 $89,100 $89,700 $90,800 $91,500 $92,700
Pro Shop Lease
Merchandise (4%) $26,536 $25,700 $19,300 $15,400 $28,100 $28,900 $29,700 $29,700 $30,300 $30,300 $30,900
Total From Pro Shop Concession $26,536 $25,700 $19,300 $15,400 $28,100 $28,900 $29,700 $29,700 $30,300 $30,300 $30,900
Total Gross to City $2,784,788 $2,705,600 $2,139,200 $1,305,300 $2,962,200 $3,169,100 $3,381,100 $3,414,300 $3,449,100 $3,482,900 $3,518,400
Operating Expenses
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Salaries & Benefits $259,455 $139,000 $145,300 $151,800 $158,600 $165,700 $173,200 $181,000 $189,100 $197,600 $206,500
Range Fees 130,152 126,700 89,300 54,400 128,700 137,400 146,400 147,900 149,400 150,900 152,400
Cart Fees 117,529 117,400 82,800 50,400 119,200 127,400 135,700 137,000 138,400 139,800 141,200
Club Fees 5,576 5,700 4,600 3,400 5,700 5,800 5,900 6,000 6,100 6,200 6,300
Fixed Lozares Management Fee 345,333 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300
Merchant Fees Reimbursement 36,211 36,400 28,800 17,400 40,000 42,800 45,700 46,100 46,600 47,100 47,500
Contract Maintenance 475,000 750,000 675,000 537,500 800,000 812,000 824,200 836,600 849,100 861,800 874,700
Repairs & maintenance 21,943 22,300 17,800 13,400 22,300 22,600 22,900 23,200 23,500 23,900 24,300
Advertising & Publish 10,765 10,900 9,300 45,000 30,000 17,000 17,300 17,600 17,900 18,200 18,500
Supplies and Materials 44,417 45,100 36,100 21,700 45,100 45,800 46,500 47,200 47,900 48,600 49,300
Water Expense 361,870 246,000 280,400 217,600 182,400 187,900 191,700 200,300 209,300 218,700 228,500
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 38
Palo Alto Golf Course Revenue / Expense - Option F
Revenues
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Other Direct Charges (Incl. Electric) 45,263 45,900 36,700 22,000 42,500 43,100 43,700 44,400 45,100 45,800 46,500
Indirect Charges 102,571 104,100 83,300 50,000 104,100 105,700 107,300 108,900 110,500 112,200 113,900
Total City Operating Expenses $1,956,085 $1,994,800 $1,834,700 $1,529,900 $2,023,900 $2,058,500 $2,105,800 $2,141,500 $2,178,200 $2,216,100 $2,254,900
Net Income From Operations (Loss)$828,703 $710,800 $304,500 ($224,600)$938,300 $1,110,600 $1,275,300 $1,272,800 $1,270,900 $1,266,800 $1,263,500
Non-operating
Income from Sale of Property 35,230
D/S Income $0 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0
Total Non-operating $35,230 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0
Total Income (Incl. Non-operating)$863,933 $740,700 $330,200 ($198,900)$964,000 $1,136,400 $1,300,700 $1,298,700 $1,296,800 $1,266,800 $1,263,500
Debt Service $559,539 $499,000 $428,200 $429,000 $428,200 $430,800 $423,200 $432,300 $431,200 $0 $0
Payment to General Fund $94,849 $94,800 $0 $0 $0 $0 $0 $0 $0 $0 $0
Additional Capital $0 $0 $0 $0 $0 $0 $0 $0 $0 $250,000 $0
New Debt Service $0 $0 $0 $0 $219,500 $219,500 $219,500 $219,500 $219,500 $219,500 $219,500
Reserve for Replacement $0 $0 $0 $0 $220,500 $236,200 $252,200 $254,800 $257,300 $259,900 $262,500
Cost Plan Charges $41,455 $42,700 $44,000 $45,300 $46,700 $48,100 $49,500 $51,000 $52,500 $54,100 $55,700
Total Debt / Other Charges $695,843 $636,500 $472,200 $474,300 $914,900 $934,600 $944,400 $957,600 $960,500 $783,500 $537,700
Net Income or (Loss)$168,090 $104,200 ($142,000)($673,200)$49,100 $201,800 $356,300 $341,100 $336,300 $483,300 $725,800
NOTE: Option F would likely include additional revenue from soccer fields of approximately $78,000 per field per year.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 39
PROJECTIONS BASED ON “OPTION G”
The NGF projection model for “Option G” represents a significant change from other options
presented. This option would involve a complete renovation of the Palo Alto Municipal Golf
Course (to be re-branded as “Baylands Golf Club). The project would involve a full closure of
the golf course from April 2013 through March 2014, re-opening as a brand new golf course with
the highest quality golf features commanding higher fees than any other option presented. The
full golf course irrigation system would be replaced and three new soccer fields would be added
to the site. Subsequent to the initial draft report, the City Finance Committee recommended that
this option include rebuilding of all 18 greens, re-turfing of all fairways, construction of an on-
course restroom, and rebuilding the practice green area. These changes should further enhance
the product’s marketability and the golfer experience.
The NGF revenue estimate has been combined with the present operating structure to provide a
full estimate of Baylands GC performance for the next 10 years, assuming successful
completion of the proposed “Option G” upgrades. The NGF has projected growth to almost $3.2
million in total gross revenues (from all sources) to the City by 2016.
Key Assumptions
The Base assumptions in preparing the projected financial performance estimates covers
several categories, including rounds activity, green fees, average revenues (carts, range,
concessions, etc.), total revenue, expenses, capital and debt.
Rounds Performance
The rounds activity performance assumptions include:
Rounds in FY2012 assume a 3% reduction from FY2011 total rounds based on
actual performance in the first 6 months of FY2012.
Rounds in FY2013 assume ‘as-is’ operation on 18 holes for the first 9 months. The
golf course then closes entirely for the next 12 months (April 2013 –March 2014), re-
opening as an upgraded new facility on April 1, 2014.
Upon re-opening, rounds are assumed to grow to 67,900 in FY2015, stabilizing at
75,700 rounds by 2017.
The overall distribution of rounds by category is shown in the table below:
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 40
Palo Alto Municipal Golf Course (Baylands GC)
Projected Activity for Option G (2012-2021)
As-Is
9-Mos. 18-
H / 3 Mos.
closed
3-Mos. 18-
H / 9 Mos.
Closed
Operate on 18-holes with maximum
renovation and upgrade
FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 -2021
Weekday
18-Hole 5,400 4,000 1,000 5,500 5,800 6,100
Senior Non-Resident 6,300 4,700 1,300 6,200 6,550 6,900
9-Hole 1,500 1,100 400 1,550 1,600 1,700
Senior 900 600 250 1,100 1,150 1,200
Junior 1,400 1,000 400 1,450 1,500 1,600
Early Bird 700 500 200 800 850 900
Twilight 11,300 8,400 2,800 11,500 12,150 12,800
Specials 7,500 5,600 2,200 7,650 8,050 8,500
Junior Card 1,100 800 300 1,150 1,250 1,300
Senior Card 800 600 200 1,000 1,050 1,100
Non-Resident Senior Card 4,000 3,000 1,000 4,000 4,300 4,500
Sub-Total Weekday 40,900 30,300 10,050 41,900 44,250 46,600
Weekend
18-Hole 10,200 7,600 2,500 10,050 10,650 11,200
9 Hole 1,900 1,400 500 2,000 2,100 2,200
Junior 800 600 200 900 950 1,000
Twilight 6,200 4,600 1,500 6,050 6,350 6,700
Sub-Total Weekend 19,100 14,200 4,700 19,000 20,050 21,100
Complimentary Play 2,500 1,800 650 3,500 3,500 3,500
Tournaments 2,200 1,600 600 3,500 4,000 4,500
TOTAL ROUNDS 64,700 47,900 16,000 67,900 71,800 75,700
Average Fees / Revenue
The average green fees per round by category are shown in the table that follows. Key
assumptions driving this estimate include:
There is no change in average fees for FY2012 over FY2011.
Upon re-opening on 18 holes (assumed April 1, 2014), average fees in each
category are increased approximately 15% over FY2012 (rounded).
For FY2015 through FY2021, NGF has assumed 1% annual increases in all fee
categories.
All other ancillary revenue centers mirror estimates made in Options D and F.
The average green fees by category and ancillary revenue per round are shown in
the table below (assume 1% annual increases for FY2018-2021 as noted):
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 41
Palo Alto Municipal Golf Course (Baylands GC)
Projected Average Green Fees for Option G (2012-2021)
As-Is
9-Mos. 18-
H / 3 Mos.
closed
3-Mos. 18-
H / 9 Mos.
Closed
Operate on 18-holes with
maximum renovation and
upgrade
FY2012 FY2013 FY2014 FY2015 FY2016 FY2017
Weekday
18-Hole $37.00 $37.00 $42.50 $42.93 $43.35 $43.79
Senior Non-Resident $32.00 $32.00 $37.00 $37.37 $37.74 $38.12
9-Hole $23.00 $18.00 $24.00 $25.00 $25.25 $25.50
Senior $28.00 $28.00 $32.00 $32.32 $32.64 $32.97
Junior $14.75 $14.75 $17.00 $17.17 $17.34 $17.52
Early Bird $23.00 $23.00 $26.50 $26.77 $27.03 $27.30
Twilight $30.00 $30.00 $34.50 $34.85 $35.19 $35.55
Specials $19.00 $19.00 $22.00 $22.22 $22.44 $22.67
Junior Card $19.70 $19.70 $22.50 $22.73 $22.95 $23.18
Senior Card $23.50 $23.50 $27.00 $27.27 $27.54 $27.82
Non-Resident Senior Card $27.50 $27.50 $31.50 $31.82 $32.13 $32.45
Weekend
18-Hole $47.00 $47.00 $54.00 $54.54 $55.09 $55.64
9 Hole $27.00 $24.75 $28.50 $28.75 $29.04 $29.33
Junior $15.80 $15.80 $18.00 $18.18 $18.36 $18.55
Twilight $34.00 $34.00 $39.00 $39.39 $39.78 $40.18
Tournaments $34.60 $34.60 $40.00 $40.40 $40.80 $41.21
Other Revenue Assumptions
Total green fee revenue includes all discount (10-play) cards and monthly passes.
Ancillary revenue per round (carts, merchandise, range, food, bar, other) is derived
from total rounds, including complimentary rounds.
Concession revenue to the City of Palo Alto assumes the same current contract
basics through FY2021,with no minimums after April 2013. The City is assumed
to collect: (1) 7% of all food and beverage revenue; and (2) 4% of merchandise
sales.
Expense Assumptions
Labor expenses are for City oversight only. These include allocations for contract
oversight, Parks and Recreation Director, Division manager, etc. The estimate is
intended to include both salary and benefits allocation and is increased by 4.5% per
year through FY2021.
Commissions paid to the pro shop vendor include 38% of driving range gross
revenue and 40% of gross cart revenue (as per contract).
The pro shop management fee is fixed at $28,775 per month while the golf course is
open. No management fees are assumed for April 2013 through March 2014.
Reimbursements for merchant fees (mostly credit card fees) are assumed to be
1.4% of total facility revenue.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 42
Contract maintenance expense to the City of Palo Alto assumes:
$62,500 per month for FY2012
$62,500 per month for the first 9 months of FY2013
No contract maintenance expense for April 2013 through March 2014
$68,750 per month (fixed) upon re-opening in April 2014 (3 months in
FY2014), then $68,750 per month in FY2015, growing at 1.5% annually
through 2021
Other expenses such as repairs, maintenance, supplies, club fees, materials and
other indirect expenses are all based on actual figures for FY2011 with 20%
reduction in FY2013 and 70% reduction in FY2014, returning to FY2011 levels in
FY2015 plus 1.5% increases assumed through FY2021.
Advertising and publishing expense is reduced by 50% during construction and
operation on 9 holes, totaling 15% reduction in FY2013. Upon re-opening the golf
course this expense is assumed to increase $45,000 to account for enhanced
marketing of the upgraded facility and re-theme as “Baylands GC.” Advertising and
publishing expense is then reduced in subsequent years to a “standard” of around
$17,000 per year.
Water expense has been highly variable and NGF projections are based on the 4-
year average (2008-2011), with assumptions of reductions in use as described
previously:
60% reduction during construction
32% reduction upon re-opening
Annual increases are assumed at 20% for 2013, 15% for 2014, 9% for 2015,
3% for 2016, 2% for 2017 and 4.5% for FY2018 through FY2021
Other direct charges (including electric) are based on actual 2011 totals, based on
actual figures for FY2011 with 20% reduction in FY2013 and 70% reduction in
FY2014. A slight reduction expected upon re-opening the golf course in FY2015 (as
described by the architect). Annual increase of 1.5% is assumed from FY2015
through FY2021.
Debt Service and Other Non-Operating Expense Assumptions
The NGF has assumed that the $4,570,000 in additional cost needed to complete
Option G, over and above the amount reimbursed by the SFCJPA, will be funded via
the issuance of a new debt program (revenue or General Obligation Bond), with
terms of 4.5% interest for 20 years, with payments beginning in FY2015.
Pro Forma Estimate for ‘Option G’ Scenario – FY2012 – FY2021
Based on the inputs described above, the pro forma estimate for future performance under
“Option G” shows that with this complete renovation, the Baylands GC could produce net
income to the City in the range of $1.07 to $1.42 million (before existing and new debt, cost plan
and reserve) through the term of the current debt program that ends in 2019. After the City is no
longer responsible for its older (1999 issue) debt payments, the facility is expected to produce
net income to the City, after all expenses and other charges, in the range of $740,000 per year.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 43
Palo Alto Golf Course Revenue / Expense - Option G
Revenues
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Golf Course Revenues
Green Fees (Incl. Cards) $2,016,537 $1,960,100 $1,445,100 $544,300 $2,341,500 $2,510,600 $2,680,900 $2,707,800 $2,734,800 $2,762,200 $2,789,800
Cart Fees 302,799 293,500 173,900 72,600 311,100 332,300 353,900 357,400 361,000 364,600 368,200
Driving Range 343,911 333,400 197,500 82,400 353,400 377,400 401,900 405,900 410,000 414,100 418,200
Tournament / League Fees 2,196 2,100 1,600 500 2,200 2,400 2,500 2,500 2,500 2,500 2,500
Other 11,813 11,500 6,800 2,800 12,000 12,700 13,700 13,700 13,900 13,900 14,200
Total Golf Course Revenues $2,677,256 $2,600,600 $1,824,900 $702,600 $3,020,200 $3,235,400 $3,452,900 $3,487,300 $3,522,200 $3,557,300 $3,592,900
Concession Payments
Food and Beverage Concession
Variable Portion $55,076 $53,400 $31,600 $13,200 $56,600 $60,400 $64,400 $65,000 $65,700 $66,300 $67,000
Utility Payment $25,920 $25,900 $26,400 $26,400 $26,900 $26,900 $27,400 $27,400 $27,900 $27,900 $28,500
Total from F & B Concession $80,996 $79,300 $58,000 $39,600 $83,500 $87,300 $91,800 $92,400 $93,600 $94,200 $95,500
Pro Shop Lease
Merchandise (4%) $26,536 $25,700 $15,400 $6,600 $28,900 $29,500 $30,700 $30,700 $31,300 $31,300 $31,900
Total From Pro Shop Concession $26,536 $25,700 $15,400 $6,600 $28,900 $29,500 $30,700 $30,700 $31,300 $31,300 $31,900
Total Gross to City $2,784,788 $2,705,600 $1,898,100 $748,600 $3,130,700 $3,351,200 $3,575,400 $3,610,400 $3,647,100 $3,682,800 $3,720,300
Operating Expenses
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Salaries & Benefits $259,455 $139,000 $145,300 $151,800 $158,600 $165,700 $173,200 $181,000 $189,100 $197,600 $206,500
Range Fees 130,152 126,700 75,100 31,300 134,300 143,400 152,700 154,200 155,800 157,400 158,900
Cart Fees 117,529 117,400 69,600 29,000 124,400 132,900 141,600 143,000 144,400 145,800 147,300
Club Fees 5,576 5,700 4,600 1,700 5,700 5,800 5,900 6,000 6,100 6,200 6,300
Fixed Lozares Management Fee 345,333 345,300 259,000 86,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300
Merchant Fees Reimbursement 36,211 36,400 25,500 9,800 42,300 45,300 48,300 48,800 49,300 49,800 50,300
Contract Maintenance 475,000 750,000 562,500 206,300 825,000 837,400 850,000 862,800 875,700 888,800 902,100
Repairs & maintenance 21,943 22,300 17,800 6,700 22,300 22,600 22,900 23,200 23,500 23,900 24,300
Advertising & Publish 10,765 10,900 8,700 45,000 30,000 17,000 17,300 17,600 17,900 18,200 18,500
Supplies and Materials 44,417 45,100 36,100 13,500 45,100 45,800 46,500 47,200 47,900 48,600 49,300
Water Expense 361,870 246,000 250,900 133,000 183,000 188,500 192,300 201,000 210,000 219,500 229,400
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 44
Palo Alto Golf Course Revenue / Expense - Option G
Revenues
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Other Direct Charges (Incl. Electric) 45,263 45,900 36,700 13,800 41,500 42,100 42,700 43,300 43,900 44,600 45,300
Indirect Charges 102,571 104,100 83,300 31,200 104,100 105,700 107,300 108,900 110,500 112,200 113,900
Total City Operating Expenses $1,956,085 $1,994,800 $1,575,100 $759,400 $2,061,600 $2,097,500 $2,146,000 $2,182,300 $2,219,400 $2,257,900 $2,297,400
Net Income From Operations (Loss)$828,703 $710,800 $323,000 ($10,800)$1,069,100 $1,253,700 $1,429,400 $1,428,100 $1,427,700 $1,424,900 $1,422,900
Non-operating
Income from Sale of Property 35,230
D/S Income $0 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0
Total Non-operating $35,230 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0
Total Income (Incl. Non-operating)$863,933 $740,700 $348,700 $14,900 $1,094,800 $1,279,500 $1,454,800 $1,454,000 $1,453,600 $1,424,900 $1,422,900
Debt Service $559,539 $499,000 $428,200 $429,000 $428,200 $430,800 $423,200 $432,300 $431,200 $0 $0
Payment to General Fund $94,849 $94,800 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Debt Service $0 $0 $0 $0 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300
Operating & Capital Reserve $0 $0 $0 $0 $234,200 $251,100 $268,100 $270,800 $273,500 $276,200 $279,000
Cost Plan Charges $41,455 $42,700 $44,000 $45,300 $46,700 $48,100 $49,500 $51,000 $52,500 $54,100 $55,700
Total Debt / Other Charges $695,843 $636,500 $472,200 $474,300 $1,060,400 $1,081,300 $1,092,100 $1,105,400 $1,108,500 $681,600 $686,000
Net Income or (Loss)$168,090 $104,200 ($123,500)($459,400)$34,400 $198,200 $362,700 $348,600 $345,100 $743,300 $736,900
NOTE: Option G would likely include additional revenue from soccer fields estimated by City at approximately $78,000 per field per year ($234,000 for 3 fields).
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 45
FINANCIAL PROJECTIONS SUMMARY
Summary of Options
Comparative table for options in 2015 and 2020 are shown below:
Summary in 2015
Summary in FY2015
Modest Upgrade
Option
A
More
significant
upgrade / nicer
features
Option
D
Nearly
complete
renovation
Option
F
Maximum
renovation
Option
G
TOTAL ROUNDS 62,800 65,700 65,700 67,900
ANNUAL ROUNDS REVENUE $1,967,709 $2,204,512 $2,204,512 $2,341,455
AVERAGE GREEN FEE PER ROUND $31.33 $33.55 $33.55 $34.48
Revenues FY2015
Projected
FY2015
Projected
FY2015
Projected
FY2015
Projected
Total Golf Course Revenues $2,589,400 $2,855,000 $2,855,000 $3,020,200
Concessions
Total from F & B Concession $78,700 $81,100 $81,100 $83,500
Total From Pro Shop Concession $25,000 $26,100 $26,100 $27,000
Total Gross to City $2,693,100 $2,962,200 $2,962,200 $3,130,700
Expenses
Water 195,000 161,000 182,400 225,600
Maintenance Contract 800,000 852,000 800,000 825,000
Total to Pro Shop Contract 618,600 633,200 633,200 646,300
All Other Expenses 410,500 409,300 408,300 407,300
Total City Operating Expenses 2,024,100 2,055,500 2,023,900 2,104,200
Net Income From Operations (Loss)$669,000 $906,700 $938,300 $1,026,500
Total Income (Incl. Non-operating)$694,700 $932,400 $964,000 $1,052,200
Total Debt/Other Charges $779,300 $1,501,100 $914,900 $1,016,600
Net Income or (Loss)($84,600)($568,700)$49,100 $35,600
Footnotes Partial irrigation Partial irrigation Potential for
additional
$78,000 Soccer
revenue
Potential for
additional
$234,000
Soccer revenue
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 46
Summary in 2020
Summary in FY2020
Modest Upgrade
Option
A
More
significant
upgrade / nicer
features
Option
D
Nearly
complete
renovation
Option
F
Maximum
renovation
Option
G
TOTAL ROUNDS 68,200 73,300 73,300 75,700
ANNUAL ROUNDS REVENUE $2,300,746 $2,598,658 $2,598,658 $2,762,185
AVERAGE GREEN FEE PER ROUND $33.74 $35.45 $35.45 $36.49
Revenues FY2015
Projected
FY2015
Projected
FY2015
Projected
FY2015
Projected
Total Golf Course Revenues $3,010,100 $3,361,100 $3,361,100 $3,557,300
Concessions
Total from F & B Concession $87,100 $91,500 $91,500 $94,200
Total From Pro Shop Concession $28,200 $30,300 $30,300 $31,300
Total Gross to City $3,125,400 $3,482,900 $3,482,900 $3,682,800
Expenses
Water 233,800 193,000 218,700 219,500
Maintenance Contract 861,800 918,000 861,800 888,800
Total to Pro Shop Contract 657,900 683,100 683,100 698,300
All Other Expenses 454,900 453,700 452,500 451,300
Total City Operating Expenses $2,208,400 $2,247,800 $2,216,100 $2,257,900
Net Income From Operations (Loss)$917,000 $1,235,100 $1,266,800 $1,424,900
Total Income (Incl. Non-operating)$917,000 $1,235,100 $1,266,800 $1,424,900
Total Debt/Other Charges $1,034,200 $814,000 $783,500 $681,600
Net Income or (Loss)($117,200)$421,100 $483,300 $743,300
Footnotes Partial irrigation Partial irrigation Potential for
additional
$78,000 Soccer
revenue
Potential for
additional
$234,000
Soccer revenue
Summary Results
The results of the NGF Consulting financial projections for Palo Alto Golf Course, based on the
various reconfiguration options and the analysis and assumptions presented in this report, show
that the facility will generate, to varying degrees based on the renovation option, improved
rounds and revenue performance compared to the base “as is” scenario. In relation to
estimating lost rounds and revenues during construction, NGF has assumed for all options
under which the facility will remain open for 9-hole play that the City will still be able to provide a
quality golf experience that is minimally disruptive to the golfer.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 47
Key observations regarding projected “Baylands Golf Club at Palo Alto” financial performance:
NGF has estimated that total revenues to the City will decrease by varying amounts
during construction for the four options evaluated. For instance, under Option A, the
total two-year cumulative reduction in gross revenue to the City is nearly $1.5 million.
This is based on estimated FY 2012 gross revenues. However, because of expense
reductions (e.g., range and cart payments, contract maintenance, water, indirect
charges) during the time of construction, net income from operations (before debt,
other costs) is estimated to decrease by ±$1.08 million over the two-year period,
based on actual estimated FY 2012 net operating income.
Option G, which involves a 12-month closure of all 18 holes, naturally results in the
greatest reduction in revenue, with only $748,600 gross income from operations in
FY 2014, when the course is closed for 9 months. The two-year cumulative loss in
gross revenue to the City, using FY 2012 as a base, is estimated at nearly $2.7
million, while the loss in net income is estimate at ± $1.1 million.
Rounds played, after years of decline, are projected to rebound under all of the
reconfiguration options, with options D and F at stabilized total rounds at 73,300,
representing a 5,100 round improvement over Option A. Option G – full renovation –
results in the highest stabilized activity level, at nearly 76,000 annual rounds.
Option D, which is expected to cost ±$600,000 more than base Option A, is
projected to produce significantly higher net operating income than Option A,
resulting in a quick pay back of the investment.
Stabilized Net Operating Income (before debt and other costs such as capital,
reserve, and cost plan) is projected to be highest under Option G, with 2021 NOI
projected at about $1.42 million. Option F is second with ±$1.26 million, followed
closely by Option D at about $1.23 million.
After additional debt associated with improvements is considered, Option G is
projected to produce overall Net Income to the City that is moderately lower than that
of Option D. However, further down the road when the debt for Option G is paid off, it
is expected to produce the highest Net Income for the City of Palo Alto.
Justifications for Revenue Projections
NGF is confident, given the inputs (e.g., expected quality and appeal following improvements)
for each option, that the rounds, fees, revenues, and expenses projected under each scenario
are reasonable and achievable. The highest stabilized rounds activity we have projected under
any scenario was less than 76,000 total rounds, a level that was achieved as recently as 2007-
08 (and was far exceeded in the past) with a product that was inferior to what a reconfigured
and re-branded golf course will bring to market. Also, we feel we have been conservative in
terms of the fee increases that the improved facility will be able to sustain. Likewise, we believe
it is more difficult to estimate the impact on revenues during the time of construction, as there
are many variables, not the least of which are golfer behavior and preferences.
Pro formas are, by their nature, models based on a set of assumptions that may or may not
become reality and which are subject to a number of uncontrollable factors (e.g., weather
variations, the economy, quality/quantity of the competition), but NGF believes that our
projections represent a “reasonable” estimate of performance for the “Baylands” facility based
on the factors discussed in this report. Among the factors considered when crafting our
projections for each model are:
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 48
Expected higher quality of the Palo Alto Municipal Golf Course (level of improvement
depends on intensity of Reconfiguration Option chosen, level of “additional” work).
Re-branding and effective marketing of the “Baylands Golf Club at Palo Alto”, along
with more proactive direct selling of larger tournaments and events.
Reinventing the product should re-energize the current customer base, resulting in
increased frequency of play, and also position the facility to compete more effectively
for non-resident rounds. Results of ERA’s 2008 survey revealed that the number one
reason Palo Alto GC was not the primary course of respondents was “course
quality/play experience”. Maintenance conditions that will position the facility in the
mid-to-upper tier of municipal golf courses in this market.
Non-resident green fees at Palo Alto, especially on weekends, are at the low end of
the price range among the direct municipal competitors. With an improved product,
there should be little resistance to modest price increases at the “Baylands”.
Maintaining a strong price/value proposition will ensure that the improved golf course
remains very competitive in the area market despite expected modest fee increases.
Palo Alto Municipal Golf Course is operating at rounds levels that are will below peak
levels from 1990s and early-to-mid 2000s. The facility has achieved rounds played
levels close to what NGF Consulting is projecting under the most favorable option as
recently as FY 2008.
The Bay Area remains one of the most active markets for municipal golf in the
nation. At the peak of the market, Palo Alto and several of its chief competitors
realized annual activity levels approaching, or even exceeding, 100,000 rounds.
Though play levels may never approach these extraordinary numbers again, we
believe the market has the potential to make a recovery.
NGF believes there is a lack of truly outstanding direct competitors to Palo Alto GC.
Also, it is likely that no new golf course inventory will be added to this market for the
foreseeable future.
Potential for regional economic recovery, increased discretionary income, etc. The
Bay Area and Silicon Valley have some specific economic attributes that act as
natural demand drivers for quality golf courses, including high incomes, an extremely
robust corporate presence, and one very high visitation numbers.
Other Considerations Regarding Improvement Options
Aside from the expected economic impact of the various base Reconfiguration Options, there
remain questions that will need to be addressed as the City weighs the reconfiguration options,
their respective forecasts in terms of rounds/revenue and what additional work will still be
required in the instance of doing less now and deferring certain improvements to later. The
overriding decision to be made is plan option (A, D, F or G) to go with and how that fundamental
decision will affect future decisions. For example, reconfiguration Option A, while least costly of
those to be considered, precludes routing improvements beyond those of the few holes being
shifted and places overall restrictions on future improvements to the golf asset. Largely, the golf
course would remain the same in its anatomy for the long term under A, but of course the golf
course may be in much better condition and may be complemented by better support amenities
in the future. The misconnection may be the course itself — much nicer, but as our grading
exercise concludes, not to the level of the other options because of their improvements to hole-
orientation, variety and excitement.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 49
The success rate for increased revenues, better reputation and the ability to be true to the idea
of a transformed golf experience, increases with a more intensive re-working of the golf course.
The decision on which option to adopt will need to take into account many factors, together with
the financial forecasts prepared.
OPTION “G” SENSITIVITY ANALYSIS
As noted, pro forma projections have been made under a set of assumptions that may or may
not come to fruition. Also, projections are subject to several uncontrollable factors such as
yearly weather variations, economic conditions, and the nature of the competition. Therefore, in
the interest of conservatism we have prepared a sensitivity analysis for Option G (identified by
the City as the preferred option) of two key variables related to revenues – rounds played and
average green fee. Specifically, we have run three scenarios that present deviations from the
“base” model presented above: (1) Rounds reduced to moderately lower than projected FY 12
performance, continuing downward trend; (2) Average green fee increasing over current by just
less than half the 15% projected increase in base model; and (3) Rounds and average green
fees both lower, in combination. Because of the virtually limitless number of combinations, other
variables, such as fixed operating expenses, remain the same as in the base scenario.
The sensitivity scenarios reveal that the lower than projected (base) green fee growth would
result in a reduction in net income of approximately 47% over the base case. Reduced rounds
result in a ±$500,000 reduction in net income, while the “worst case” – both rounds and green
fee increases below the projected base model – produces about $640,000 lower net income.
Option “G” Sensitivity Analysis - Summary for 2017
Summary in FY2017
Expected Case
Option G
Reduced
Rounds
Option G
Reduced Fees
Option G
Reduced
Rounds + Fees
Option G
TOTAL ROUNDS 75,700 63,100 75,700 63,100
ANNUAL ROUNDS REVENUE $2,680,949 $2,221,879 $2,487,511 $2,062,380
AVERAGE GREEN FEE PER ROUND $35.42 $35.21 $32.86 $32.68
Revenues FY2017
Projected
FY2017
Projected
FY2017
Projected
FY2017
Projected
Total Golf Course Revenues $3,452,900 $2,865,400 $3,259,500 $2,705,900
Concessions
Total from F & B Concession $91,800 $81,100 $91,800 $81,100
Total From Pro Shop Concession $30,700 $25,600 $30,700 $25,600
Total Gross to City $3,575,400 $2,972,100 $3,382,000 $2,812,600
Expenses
Total City Operating Expenses 2,146,000 2,088,800 2,143,300 2,086,600
Net Income From Operations (Loss)$1,429,400 $883,300 $1,238,700 $726,000
Total Income (Incl. Non-operating)$1,454,800 $908,700 $1,264,100 $751,400
Total Debt/Other Charges $1,092,100 $1,046,200 $1,072,800 $1,030,200
Net Income or (Loss)$362,700 ($137,500)$191,300 ($278,800)
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 50
Option G Sensitivity Spreadsheets
Palo Alto Golf Course Revenue / Expense - Option G (Reduced Rounds Sensitivity)
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Total Rounds 66,740 64,700 47,900 16,000 53,150 58,100 63,100 67,900 67,900 67,900 67,900
Golf Course Revenues
Green Fees (Incl. Cards) $2,016,537 $1,960,100 $1,445,100 $544,300 $1,810,100 $2,013,600 $2,221,900 $2,424,700 $2,448,900 $2,473,400 $2,498,200
Cart Fees 302,799 293,500 173,900 72,600 243,600 268,900 295,000 320,600 323,800 327,000 330,300
Driving Range 343,911 333,400 197,500 82,400 276,600 305,400 335,000 364,100 367,700 371,400 375,100
Tournament / League Fees 2,196 2,100 1,600 500 1,700 1,900 2,100 2,200 2,200 2,200 2,200
Other 11,813 11,500 6,800 2,800 9,400 10,300 11,400 12,300 12,500 12,500 12,800
Total Golf Course Revenues $2,677,256 $2,600,600 $1,824,900 $702,600 $2,341,400 $2,600,100 $2,865,400 $3,123,900 $3,155,100 $3,186,500 $3,218,600
Concession Payments
Food and Beverage Concession
Variable Portion $55,076 $53,400 $31,600 $13,200 $44,300 $48,900 $53,700 $58,300 $58,900 $59,500 $60,100
Utility Payment $25,920 $25,900 $26,400 $26,400 $26,900 $26,900 $27,400 $27,400 $27,900 $27,900 $28,500
Total from F & B Concession $80,996 $79,300 $58,000 $39,600 $71,200 $75,800 $81,100 $85,700 $86,800 $87,400 $88,600
Pro Shop Lease
Merchandise (4%) $26,536 $25,700 $15,200 $6,400 $21,100 $23,100 $25,600 $27,500 $28,100 $28,100 $28,600
Total From Pro Shop Concession $26,536 $25,700 $15,200 $6,400 $21,100 $23,100 $25,600 $27,500 $28,100 $28,100 $28,600
Total Gross to City $2,784,788 $2,705,600 $1,898,100 $748,600 $2,433,700 $2,699,000 $2,972,100 $3,237,100 $3,270,000 $3,302,000 $3,335,800
Operating Expenses
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Salaries & Benefits $259,455 $139,000 $145,300 $151,800 $158,600 $165,700 $173,200 $181,000 $189,100 $197,600 $206,500
Range Fees 130,152 126,700 75,100 31,300 105,100 116,100 127,300 138,400 139,700 141,100 142,500
Cart Fees 117,529 117,400 69,600 29,000 97,400 107,600 118,000 128,200 129,500 130,800 132,100
Club Fees 5,576 5,700 4,600 1,700 5,700 5,800 5,900 6,000 6,100 6,200 6,300
Fixed Lozares Management Fee 345,333 345,300 259,000 86,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300
Merchant Fees Reimbursement 36,211 36,400 25,500 9,800 32,800 36,400 40,100 43,700 44,200 44,600 45,100
Contract Maintenance 475,000 750,000 562,500 206,300 825,000 837,400 850,000 862,800 875,700 888,800 902,100
Repairs & maintenance 21,943 22,300 17,800 6,700 22,300 22,600 22,900 23,200 23,500 23,900 24,300
Advertising & Publish 10,765 10,900 8,700 45,000 30,000 17,000 17,300 17,600 17,900 18,200 18,500
Supplies and Materials 44,417 45,100 36,100 13,500 45,100 45,800 46,500 47,200 47,900 48,600 49,300
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 51
Palo Alto Golf Course Revenue / Expense - Option G (Reduced Rounds Sensitivity)
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Water Expense 361,870 246,000 250,900 133,000 183,000 188,500 192,300 201,000 210,000 219,500 229,400
Other Direct Charges (Incl. Electric) 45,263 45,900 36,700 13,800 41,500 42,100 42,700 43,300 43,900 44,600 45,300
Indirect Charges 102,571 104,100 83,300 31,200 104,100 105,700 107,300 108,900 110,500 112,200 113,900
Total City Operating Expenses $1,956,085 $1,994,800 $1,575,100 $759,400 $1,995,900 $2,036,000 $2,088,800 $2,146,600 $2,183,300 $2,221,400 $2,260,600
Net Income From Operations (Loss)$828,703 $710,800 $323,000 ($10,800)$437,800 $663,000 $883,300 $1,090,500 $1,086,700 $1,080,600 $1,075,200
Non-operating
Income from Sale of Property 35,230
D/S Income $0 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0
Total Non-operating $35,230 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0
Total Income (Incl. Non-operating)$863,933 $740,700 $348,700 $14,900 $463,500 $688,800 $908,700 $1,116,400 $1,112,600 $1,080,600 $1,075,200
Debt Service $559,539 $499,000 $428,200 $429,000 $428,200 $430,800 $423,200 $432,300 $431,200 $0 $0
Payment to General Fund $94,849 $94,800 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Debt Service $0 $0 $0 $0 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300
Operating & Capital Reserve $0 $0 $0 $0 $181,000 $201,400 $222,200 $242,500 $244,900 $247,300 $249,800
Cost Plan Charges $41,455 $42,700 $44,000 $45,300 $46,700 $48,100 $49,500 $51,000 $52,500 $54,100 $55,700
Total Debt / Other Charges $695,843 $636,500 $472,200 $474,300 $1,007,200 $1,031,600 $1,046,200 $1,077,100 $1,079,900 $652,700 $656,800
Net Income or (Loss)$168,090 $104,200 ($123,500)($459,400)($543,700)($342,800)($137,500)$39,300 $32,700 $427,900 $418,400
NOTE: Option G would likely include additional revenue from soccer fields of approximately $78,000 per field per year ($234,000 for 3 fields).
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 52
Palo Alto Golf Course Revenue / Expense - Option G (Reduced Fees Sensitivity)
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Total Rounds 66,740 64,700 47,900 16,000 67,900 71,800 75,700 75,700 75,700 75,700 75,700
Golf Course Revenues
Green Fees (Incl. Cards) $2,016,537 $1,960,100 $1,445,100 $503,800 $2,172,600 $2,329,500 $2,487,500 $2,512,400 $2,537,500 $2,562,900 $2,588,500
Cart Fees 302,799 293,500 173,900 72,600 311,100 332,300 353,900 357,400 361,000 364,600 368,200
Driving Range 343,911 333,400 197,500 82,400 353,400 377,400 401,900 405,900 410,000 414,100 418,200
Tournament / League Fees 2,196 2,100 1,600 500 2,200 2,400 2,500 2,500 2,500 2,500 2,500
Other 11,813 11,500 6,800 2,800 12,000 12,700 13,700 13,700 13,900 13,900 14,200
Total Golf Course Revenues $2,677,256 $2,600,600 $1,824,900 $662,100 $2,851,300 $3,054,300 $3,259,500 $3,291,900 $3,324,900 $3,358,000 $3,391,600
Concession Payments
Food and Beverage Concession
Variable Portion $55,076 $53,400 $31,600 $13,200 $56,600 $60,400 $64,400 $65,000 $65,700 $66,300 $67,000
Utility Payment $25,920 $25,900 $26,400 $26,400 $26,900 $26,900 $27,400 $27,400 $27,900 $27,900 $28,500
Total from F & B Concession $80,996 $79,300 $58,000 $39,600 $83,500 $87,300 $91,800 $92,400 $93,600 $94,200 $95,500
Pro Shop Lease
Merchandise (4%) $26,536 $25,700 $15,200 $6,400 $27,000 $28,500 $30,700 $30,700 $31,300 $31,300 $31,900
Total From Pro Shop Concession $26,536 $25,700 $15,200 $6,400 $27,000 $28,500 $30,700 $30,700 $31,300 $31,300 $31,900
Total Gross to City $2,784,788 $2,705,600 $1,898,100 $708,100 $2,961,800 $3,170,100 $3,382,000 $3,415,000 $3,449,800 $3,483,500 $3,519,000
Operating Expenses
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Salaries & Benefits $259,455 $139,000 $145,300 $151,800 $158,600 $165,700 $173,200 $181,000 $189,100 $197,600 $206,500
Range Fees 130,152 126,700 75,100 31,300 134,300 143,400 152,700 154,200 155,800 157,400 158,900
Cart Fees 117,529 117,400 69,600 29,000 124,400 132,900 141,600 143,000 144,400 145,800 147,300
Club Fees 5,576 5,700 4,600 1,700 5,700 5,800 5,900 6,000 6,100 6,200 6,300
Fixed Lozares Management Fee 345,333 345,300 259,000 86,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300
Merchant Fees Reimbursement 36,211 36,400 25,500 9,300 39,900 42,800 45,600 46,100 46,500 47,000 47,500
Contract Maintenance 475,000 750,000 562,500 206,300 825,000 837,400 850,000 862,800 875,700 888,800 902,100
Repairs & maintenance 21,943 22,300 17,800 6,700 22,300 22,600 22,900 23,200 23,500 23,900 24,300
Advertising & Publish 10,765 10,900 8,700 45,000 30,000 17,000 17,300 17,600 17,900 18,200 18,500
Supplies and Materials 44,417 45,100 36,100 13,500 45,100 45,800 46,500 47,200 47,900 48,600 49,300
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 53
Palo Alto Golf Course Revenue / Expense - Option G (Reduced Fees Sensitivity)
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Water Expense 361,870 246,000 250,900 133,000 183,000 188,500 192,300 201,000 210,000 219,500 229,400
Other Direct Charges (Incl. Electric) 45,263 45,900 36,700 13,800 41,500 42,100 42,700 43,300 43,900 44,600 45,300
Indirect Charges 102,571 104,100 83,300 31,200 104,100 105,700 107,300 108,900 110,500 112,200 113,900
Total City Operating Expenses $1,956,085 $1,994,800 $1,575,100 $758,900 $2,059,200 $2,095,000 $2,143,300 $2,179,600 $2,216,600 $2,255,100 $2,294,600
Net Income From Operations (Loss)$828,703 $710,800 $323,000 ($50,800)$902,600 $1,075,100 $1,238,700 $1,235,400 $1,233,200 $1,228,400 $1,224,400
Non-operating
Income from Sale of Property 35,230
D/S Income $0 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0
Total Non-operating $35,230 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0
Total Income (Incl. Non-operating)$863,933 $740,700 $348,700 ($25,100)$928,300 $1,100,900 $1,264,100 $1,261,300 $1,259,100 $1,228,400 $1,224,400
Debt Service $559,539 $499,000 $428,200 $429,000 $428,200 $430,800 $423,200 $432,300 $431,200 $0 $0
Payment to General Fund $94,849 $94,800 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Debt Service $0 $0 $0 $0 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300
Operating & Capital Reserve $0 $0 $0 $0 $217,300 $233,000 $248,800 $251,200 $253,800 $256,300 $258,900
Cost Plan Charges $41,455 $42,700 $44,000 $45,300 $46,700 $48,100 $49,500 $51,000 $52,500 $54,100 $55,700
Total Debt / Other Charges $695,843 $636,500 $472,200 $474,300 $1,043,500 $1,063,200 $1,072,800 $1,085,800 $1,088,800 $661,700 $665,900
Net Income or (Loss)$168,090 $104,200 ($123,500)($499,400)($115,200)$37,700 $191,300 $175,500 $170,300 $566,700 $558,500
NOTE: Option G would likely include additional revenue from soccer fields estimated by City to be approximately $78,000 per field per year ($234,000 for 3 fields).
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 54
Palo Alto Golf Course Revenue / Expense - Option G (Reduced Rounds + Fees Sensitivity)
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Total Rounds 66,740 64,700 47,900 16,000 53,150 58,100 63,100 67,900 67,900 67,900 67,900
Golf Course Revenues
Green Fees (Incl. Cards) $2,016,537 $1,960,100 $1,445,100 $503,800 $1,680,700 $1,869,300 $2,062,400 $2,250,400 $2,272,900 $2,295,600 $2,318,600
Cart Fees 302,799 293,500 173,900 72,600 243,600 268,900 295,000 320,600 323,800 327,000 330,300
Driving Range 343,911 333,400 197,500 82,400 276,600 305,400 335,000 364,100 367,700 371,400 375,100
Tournament / League Fees 2,196 2,100 1,600 500 1,700 1,900 2,100 2,200 2,200 2,200 2,200
Other 11,813 11,500 6,800 2,800 9,400 10,300 11,400 12,300 12,500 12,500 12,800
Total Golf Course Revenues $2,677,256 $2,600,600 $1,824,900 $662,100 $2,212,000 $2,455,800 $2,705,900 $2,949,600 $2,979,100 $3,008,700 $3,039,000
Concession Payments
Food and Beverage Concession
Variable Portion $55,076 $53,400 $31,600 $13,200 $44,300 $48,900 $53,700 $58,300 $58,900 $59,500 $60,100
Utility Payment $25,920 $25,900 $26,400 $26,400 $26,900 $26,900 $27,400 $27,400 $27,900 $27,900 $28,500
Total from F & B Concession $80,996 $79,300 $58,000 $39,600 $71,200 $75,800 $81,100 $85,700 $86,800 $87,400 $88,600
Pro Shop Lease
Merchandise (4%) $26,536 $25,700 $15,200 $6,400 $21,100 $23,100 $25,600 $27,500 $28,100 $28,100 $28,600
Total From Pro Shop Concession $26,536 $25,700 $15,200 $6,400 $21,100 $23,100 $25,600 $27,500 $28,100 $28,100 $28,600
Total Gross to City $2,784,788 $2,705,600 $1,898,100 $708,100 $2,304,300 $2,554,700 $2,812,600 $3,062,800 $3,094,000 $3,124,200 $3,156,200
Operating Expenses
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Salaries & Benefits $259,455 $139,000 $145,300 $151,800 $158,600 $165,700 $173,200 $181,000 $189,100 $197,600 $206,500
Range Fees 130,152 126,700 75,100 31,300 105,100 116,100 127,300 138,400 139,700 141,100 142,500
Cart Fees 117,529 117,400 69,600 29,000 97,400 107,600 118,000 128,200 129,500 130,800 132,100
Club Fees 5,576 5,700 4,600 1,700 5,700 5,800 5,900 6,000 6,100 6,200 6,300
Fixed Lozares Management Fee 345,333 345,300 259,000 86,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300
Merchant Fees Reimbursement 36,211 36,400 25,500 9,300 31,000 34,400 37,900 41,300 41,700 42,100 42,500
Contract Maintenance 475,000 750,000 562,500 206,300 825,000 837,400 850,000 862,800 875,700 888,800 902,100
Repairs & maintenance 21,943 22,300 17,800 6,700 22,300 22,600 22,900 23,200 23,500 23,900 24,300
Advertising & Publish 10,765 10,900 8,700 45,000 30,000 17,000 17,300 17,600 17,900 18,200 18,500
Supplies and Materials 44,417 45,100 36,100 13,500 45,100 45,800 46,500 47,200 47,900 48,600 49,300
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 55
Palo Alto Golf Course Revenue / Expense - Option G (Reduced Rounds + Fees Sensitivity)
FY2011
Actual
FY2012
Projected
FY2013
Projected
FY2014
Projected
FY2015
Projected
FY2016
Projected
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
Water Expense 361,870 246,000 250,900 133,000 183,000 188,500 192,300 201,000 210,000 219,500 229,400
Other Direct Charges (Incl. Electric) 45,263 45,900 36,700 13,800 41,500 42,100 42,700 43,300 43,900 44,600 45,300
Indirect Charges 102,571 104,100 83,300 31,200 104,100 105,700 107,300 108,900 110,500 112,200 113,900
Total City Operating Expenses $1,956,085 $1,994,800 $1,575,100 $758,900 $1,994,100 $2,034,000 $2,086,600 $2,144,200 $2,180,800 $2,218,900 $2,258,000
Net Income From Operations (Loss)$828,703 $710,800 $323,000 ($50,800)$310,200 $520,700 $726,000 $918,600 $913,200 $905,300 $898,200
Non-operating
Income from Sale of Property 35,230
D/S Income $0 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0
Total Non-operating $35,230 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0
Total Income (Incl. Non-operating)$863,933 $740,700 $348,700 ($25,100)$335,900 $546,500 $751,400 $944,500 $939,100 $905,300 $898,200
Debt Service $559,539 $499,000 $428,200 $429,000 $428,200 $430,800 $423,200 $432,300 $431,200 $0 $0
Payment to General Fund $94,849 $94,800 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Debt Service $0 $0 $0 $0 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300
Operating & Capital Reserve $0 $0 $0 $0 $168,100 $186,900 $206,200 $225,000 $227,300 $229,600 $231,900
Cost Plan Charges $41,455 $42,700 $44,000 $45,300 $46,700 $48,100 $49,500 $51,000 $52,500 $54,100 $55,700
Total Debt / Other Charges $695,843 $636,500 $472,200 $474,300 $994,300 $1,017,100 $1,030,200 $1,059,600 $1,062,300 $635,000 $638,900
Net Income or (Loss)$168,090 $104,200 ($123,500)($499,400)($658,400)($470,600)($278,800)($115,100)($123,200)$270,300 $259,300
NOTE: Option G would likely include additional revenue from soccer fields estimated by City at approximately $78,000 per field per year ($234,000 for 3 fields).
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 56
Other Issues and Considerations
MARKET POSITION / RE-BRANDING OPPORTUNITY
NGF Consulting has reviewed the image and brand recommendations made to the City as part
of the expanded scope of services to address long range considerations. We conclude that
closer integration of the golf course to the Palo Alto Baylands Preserve, “The Baylands”, should
positively affect the City’s efforts to brand this area as a destination for Palo Alto residents and
visitors alike. Celebrated as an open space and nature preserve area, the Baylands represents
a rich and positive locale within Palo Alto and the Silicon Valley Region and will be enhanced
with an improved and re-branded golf product.
Currently, Palo Alto Municipal Golf Course effectively lacks a brand image, and the facility is
very closely associated with the long-time golf concessionaire – so much so that the website
address for the golf course is bradlozaresgolfshop.com, and recorded phone messages mention
only the golf shop and not the golf course. We believe that a name change to “Baylands Golf
Club at Palo Alto” represents a positive move that will have the effect of repositioning the golf
course, distancing it from a “muni” layout. Additionally, it will signal a transformation from an
older, “worn down” layout to one that has renewed excitement and positive change. The
recommendation to retain “Palo Alto” as part of the course image and brand is a good way to
connect with the existing name, as well as the City itself. Use of “Golf Club” in lieu of “Golf
Course” is an additional signal that the golf experience is not only something new, but at a
higher quality.
The marketing theme “Public only in price, access and pride”is an excellent message to remind
the customer that the golf facility remains accessible, open to the public and priced to provide
one of the better golfing values in the Bay Area. This message also reinforces the
transformation, ideally a win-win for the golf consumer to receive high quality at a “municipal”
price point.
Sample magazine ads provided as part of the Marketing and Theme recommendations hit on
important concepts, including:
Silicon Valley Location
Tradition – The design legacy of Billy Bell
The Transformation (i.e., the changes)
The “Green” Environmental Commitment of the Facility
Our belief is that proper implementation (adequate budgets, quality control and proper media
placement) of the program will have a dramatic effect on driving new business to the “new” golf
facility. Equally important will be the affect that these messages and the new brand will have on
existing customers, and residents of Palo Alto and its neighboring communities who currently
play golf elsewhere. In essence, the program for re-branding, introducing a new image and
theme, and the marketing program, has the potential to have a very positive affect on rounds
and associated revenues.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 57
A commitment on the City’s part to becoming certified with Audubon international as a
“Sanctuary Golf Facility” is an integral part of the ability to market the course as a “green” aware
and operated golf facility. This goal should be undertaken regardless of which reconfiguration
option is opted by the City and should be workable given the operation and/or marketing
budgets afforded. (Note: Beginning this process now, prior to any reconfiguration work, will help
guide the reconfiguration work and will also establish a greater degree of improvement by which
to attain the Audubon status for the facility).
Plan Option A poses the greatest challenge to be consistent with the image, brand and
marketing changes recommended because it does not go as deep into the many areas of the
course in terms of new features and reconstructed areas. However, the fact that Plan Option A
will dramatically reduce turf through the course-wide work to create native areas and new
“Baylands” themed areas should be an adequately appreciated change. Plan Options D, F and
G will have no issues aligning with any of the themes and messages recommended.
With emphasis on a quality, outstanding golf facility, the City may be able to realize what we
have referred to as a “destination” public golf experience. In the Bay area we would point to
such courses as Pasatiempo in Santa Cruz and Harding Park in San Francisco as meeting this
definition. These two courses are good examples of courses that have attained a reputation
through the following attributes:
Legacy of the original design
Transformation from marginal to excellent conditions
Commitment by the municipal owners to reinvest in the assets
Quality rebuilding efforts
Good marketing of the finished courses and facilities
While both of the above examples are classic era designs (Pasatiempo by Alister MacKenzie,
and Harding Park by Willie Watson) it is still appropriate to reference their successes relative to
what Palo Alto Golf Course could attain. Whether undertaken under one, larger reinvestment
project, or carried out over time, the potential transformation of Palo Alto Golf Course is
bolstered by a number of factors inherent in the facility:
A design legacy that can be leveraged — William P. and William F. Bell, the former
responsible for designs such as Stanford, Riviera and Bel-Air
A location that sits at the heart of Silicon Valley
A seaside setting that has greater potential to take advantage of its natural
landscape — the Baylands environment, Bay and adjoining Sanfrancisquito Creek
A population base that is robust for golf rounds by non-residents
A location that is in one of the top tourist areas in the nation
Obviously, undertaking more intensive reconfiguration (such as with Plan G) will transform more
of the existing course and is likely to meet this goal on a stronger basis. So, too, may investing
in more of the alternate, optional improvements, including many of the long range improvements
before the City for consideration.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 58
ECONOMICS OF POTENTIAL LONG-TERM / ADDITIONAL IMPROVEMENTS
Forrest Richardson has proposed that the City study the feasibility of certain facility
improvements that are in addition to the base improvements recommended within
Reconfiguration Options A, D, F, and G (please see Appendix E for summary table of potential
improvements and estimated costs). Though NGF believes that many of these improvements
would improve the overall quality of the golfer (and non-golf customer) experience, as well as
the image of the facility in the eyes of area golfers, it is not practical to assign incremental
rounds played and revenue dollars to many of these improvements (e.g., exterior and entry
upgrades, signage/parking, rebuilding practice greens, “alternate” golf course improvements,
designated youth area). Practically, these improvements, to varying degrees individually and
certainly as a sum of their parts, are likely to draw more patrons overall, keep them on-site
longer, and increase their propensity to spend while at the golf course.
We have confined our break-even analysis to several potential improvements that tie more
directly to revenue: (1) The cart storage building; (2) Expanded meeting space; and (3) Range
Performance Center.
Cart Storage Building
At just $4.54 per round in FY 2011, the average gross cart fee revenue per round at Palo Alto
Golf Course significantly trails the average of its chief competitive set (see ERA 2008 report for
City). While the low cart utilization is partially a function of the “walkability” of the golf course,
ridership and revenues have also likely been constrained by the very limited cart storage. Palo
Alto GC has only 46 carts available, some of which are older gasoline powered carts stored in
open storage outside the clubhouse (fewer than 35 carts can be stored below the clubhouse). A
more typical inventory for most regulation length 18-hole golf courses is ±70 carts. We are told
that for larger tournaments, additional carts must be leased and brought in from off-site. In
summary, NGF believes it is likely that the limited cart inventory and storage space available
has constrained ridership and may have actually negatively affected demand for daily fee and,
especially, tournament play on occasion.
As part of Forrest Richardson’s overall capital improvement plan for Palo Alto GC, he has
included construction of a new cart storage building at an estimated cost of $440,000. In the
table below, we illustrate the number of years it will take for the City to break even on this
investment, assuming different levels of incremental gross cart rental revenue per round, the
current rent percentage of 60%, and stabilized rounds activity under Options D and F – 73,300
rounds. Of course, as noted, it is possible that having additional carts will have a positive effect
on rounds played as well, but for purposes of conservatism we are illustrating only increases in
cart revenue per round. We also assume that all expenses associated with the cart lease and
maintenance will remain the responsibility of the vendor, and that there will be no incremental
City operating costs associated with the new building.
Palo Alto Golf Course
Break-Even Analysis for Cart Storage Building
Average Gross Cart Revenue Per Round Increase
$0.50 $1.00 $1.50 $2.00 $2.50
Incremental Gross Revenue* $36,650 $73,300 $109,950 $146,600 $183,250
Incremental Revenue to City* $21,990 $43,980 $65,970 $87,960 $109,950
Years to B/E* 20.0 10.0 6.7 5.0 4.0
*Assumes $440,000 estimated cost and stabilized rounds played of 73,300 from Options D,F
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 59
Expanded Meeting Space
The existing restaurant at Palo Alto GC has limited meeting space that has significantly
constrained meeting and banquet business at the facility. Not being able to accommodate larger
events of ±250 people precludes the facility from competing for the most lucrative, high margin
food & beverage business. As such, expanding the meeting/banquet space is another
component of the long range improvement plan prepared for the City by Mr. Richardson.
Based on the estimated cost provided of $1.7 million, and assuming the City incurs all of the
cost of the improvement, the annual debt service on a 20-year note at 3.5% would be $120,000
(rounded). NGF has calculated that the incremental annual gross food & beverage revenue
necessary to generate $120,000 in additional rents to the City to meet the annual debt service is
more than $1.71 million. This calculation is based on the current rent percentage of 7%.
In its 2008 study, ERA noted: “Based on the experience of similar golf course oriented banquet
facilities and the demographics of the area, expanding the clubhouse to accommodate special
events with up to 250 attendees would add $600,000 to $700,000 in annual special event
revenue. This rental income would justify about one-half of the cost of the improvements.” NGF
concurs that achieving this level of incremental gross revenue would likely be an achievable
goal, but with updated cost estimates, this level of revenue would justify only about 40% of the
investment cost. Therefore, the balance of the City investment in the expanded facility would
have to be justified through the incremental rounds and associated revenues attributable directly
to the expanded meeting facilities. Based on current and projected average green + cart (City
share) fee revenue per round, it would take 2,000 to 3,000 of these rounds to help fund the
expanded facilities. Of course, the equation would change markedly if gross revenues accrued
to the City under an alternate operating structure.
Range Performance Center
In the table below, we provide a similar break-even analysis to the one for the cart storage
building. Mr. Richardson’s cost estimate for the range performance center, plus the additional 6-
bay range expansion (we assume both are undertaken together), is $600,000. In the table
below, we illustrate the number of years it will take for the City to break even on this investment,
assuming different levels of incremental gross driving range revenue per round (gross per round
was $5.15 in FY 11), the rent percentage of 62%, and stabilized rounds activity under Options D
and F – 73,300 rounds. Of course, it cannot be determined what percentage of range activity is
a function of number of bays as opposed to rounds played, so we have chosen to do a
sensitivity analysis by increasing average revenue per round rather than per tee station. Another
factor driving this methodology is that the performance center bays will be used for teaching,
and will likely have less utilization than the already existing bays.
We also assume that all incremental expenses associated with the expanded range remain the
responsibility of the concessionaire, and that there will be no incremental City operating costs
associated with the new building. Finally, we assume that the City receives no lesson revenue.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 60
Palo Alto Golf Course – B/E Analysis for Range Performance Center + 6-Bay Expansion
Average Gross Range Revenue Per Round Increase
$0.50 $0.75 $1.00 $1.25 $1.50
Incremental Gross Revenue* $36,650 $54,975 $73,300 $91,625 $109,950
Incremental Revenue to City* $22,723 $34,085 $45,446 $56,808 $68,169
Years to B/E* 26.4 17.6 13.2 10.6 8.8
*Assumes $600,000 estimated cost and stabilized rounds played of 73,300 from Options D,F
MANAGEMENT STRUCTURE
NGF was told that some City staff would like to further explore - via issuance of an RFP in
advance of the Pro Shop and Maintenance agreements expiring in April, 2013 - the implications
of changing the operating structure at Palo Alto Golf Course to a management contract. We
have been asked to offer our opinion as to whether this type of structure would be more
effective, or produce higher net operating income to the City, than the current “hybrid” structure
that involves both a management fee and a concession on the golf operations side, privatized
maintenance, and a separate food & beverage concession.
As Economic Research Associates (ERA) noted in their 2008 Operations Review of the Palo
Alto Municipal Golf Course, the current agreement for golf operations evolved due to IRS
regulations related to the tax-exempt financing utilized for the late 1990s renovation of the golf
course. Specifically, at least 50% of the compensation within a management agreement must
be fixed fee in such a case. ERA, after doing the full operations analysis, concluded that the
current pro shop deal was “slightly favorable” to the concessionaire.
After running cash flow models under various operating scenarios, ERA concluded that City Net
Income was maximized with private maintenance (subsequently put in place) and “market rate”
concession terms. However, they also noted that “market rate”, which involved lower
concession rents to the City and an elimination of the management fee, was not permissible by
the IRS without a restructuring of the current debt. ERA concluded that, among the operating
models that were permissible within the current debt framework, the structure that is now in
place at Palo Alto Golf Course – no change in contract terms, but with private maintenance –
produced the highest City Net Income. A full-service Management Agreement produced the
second highest City Net Income.
Without doing a full operations review, NGF does not have sufficient information to critically
evaluate ERA’s analysis or to identify the operating structure that would be the best fit for Palo
Alto GC. While there are a number of advantages to the full service management contract
structure, it is also true that “no one size fits all”. There are many factors and variables to
consider when evaluating options, and it would be unfair to both the City and the current
vendors for a consultant to make a recommendation regarding the optimal structure without
being retained to do a full facility analysis. Carefully evaluating the value proposition that each of
the current vendors brings to the table would be just one component of such an analysis. For
instance, the golfer survey that ERA implemented as part of their 2008 study showed that Brad
Lozares was rated quite high by golfers, indicating considerable goodwill and “equity” built up in
the golf shop. Similarly, NGF has been told of improved maintenance conditions (as well as
considerable cost savings) since ValleyCrest was brought on.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 61
Having said that, we do feel confident recommending that the City retain the current
structure at least through the completion of the renovation project.However, delaying
consideration of a fundamental change in operating structure should not preclude
modifying terms. For instance, the City and the golf vendor may come to an agreement
resulting in lowering the management fee to reflect reduced responsibilities and
concession revenues during renovation (especially under Option G), while still adhering
to IRS guidelines.Not only will the project substantially disrupt business, but significant
unknowns include the timing of the project and how the newly improved facility will cash flow
after being brought back to market and “re-branded”. Also, the food & beverage contract doesn’t
expire until 2018, so some of the advantages of the single operator management structure may
be lessened unless an early termination to the agreement can be successfully negotiated with
the current vendor. Finally, negotiating a new agreement during construction, when proposers
themselves will not have full information about how the improved facility will cash flow, may
result in the City not entering into the best deal possible.
NGF believes that these are just a few of the important variables that make issuing an RFP at
this stage less than optimal. We recommend that the City wait until after renovation is
completed and the improved facility has been up and running for a year or more before
considering a substantive change in structure. This strategy will provide additional information
that will put the City in a better position to make an informed decision regarding operating
structure (for instance, the City may find that the improved “Baylands Golf Club” has significant
upside revenue potential, thus making it relatively more attractive to control all revenues under
the management contract structure).
LONG RANGE CONCERNS
Concerns raised through the public process of reviewing reconfiguration options have included
the following long term implications:
High salts present in the native soils
Intrusion by geese and burrowing animals
Potential for the adjacent airport to negatively affect the golf experience
In essence, the question raised is: “Can the Palo Alto Golf Course be expected to become a
significantly better golf experience given these issues?”
NGF Consulting relies on the opinions of professionals associated with individual golf facilities to
address certain questions. For example, in the case of the high salts we look to agronomists,
the course superintendent and/or the golf course architect. In the case of animal intrusion,
because these are often site specific, we look to nearby facilities to see how they have dealt
with the issue.
High Salts
Soils high in salts are not uncommon to golf courses located along coastal waterways and
oceans. In the case of Palo Alto the soils are not only affected by the location by San Francisco
Bay, but by the poorly draining soil types. Additionally, the use of effluent (recycled) water,
which typically has higher salt content, exacerbates the condition. While our work has not
included agronomic evaluation, we have endeavored to understand the general situation by
comparing outcomes we have observed at other golf operations.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 62
“Links courses,” those layouts along the dunes formed coasts of the British Isles and similar
locales around the world, are prone to salty soils. Yet, with their sandy soil basis, these sites
support good turf because the salts are leached regularly downward by natural rains. This is the
hallmark of links courses, and why their development on these natural, sandy soils were so
appropriate. When soils are not sandy and porous, the build-up of salts becomes problematic.
This is the case at Palo Alto Golf Course, where management over the years has been to
periodically irrigate with fresh water, driving salts downward, and to add gypsum to the soils.
Additionally, the most recent remodeling work added a cap of sand and better soil mix to several
fairways, making them much easier to manage and support healthy turf. These best practices
have resulted in reasonably healthy turf growth despite the salty soil conditions.
According to staff, while salts are high, the turf has “learned” to adapt. There is a definite
difference between fairways where the sand cap has been placed and areas where drainage is
not as good and where older native soils are present. Also, Paspalum turf varieties have
flourished at the golf course in a few areas. These areas appear to have much better success
rates of healthy growth because the nature of Paspalum grass is to tolerate salts to a
significantly higher degree.
NGF Consulting posed the question of managing high salts to Forrest Richardson & Associates,
specifically asking what additional measures would be afforded through the reconfiguration
options to address this issue. The response summary is as follows:
Management of existing sand capping and healthy turf rootzone material (the
uppermost layers of rootzone) will be managed through the reconfiguration, replacing
that material as “topsoil” to new fairway and turf areas; this cost is represented in the
probable cost estimates presented to the City for reconfiguration options.
New soils will be imported as possible within the budgets, potentially from the
Stanford University Medical Center project(s); these additional costs (and revenue
potential) have been accounted in probable cost estimates.
Paspalum turfgrass will be used to sod all new areas of fairways, roughs and tees
(Note: The specific variety is yet to be determined).
The irrigation system will provide dual watering capabilities, able to deliver potable
water to selected areas and a mix of effluent (higher salt counts) and fresh water;
this capability allows flushing (leaching of salts downward) as is being done
currently.
Significantly improved drainage is afforded in each reconfiguration option, helping to
prevent build-up of salts by quicker transportation of surface water away from turf
areas and the soil rootzone, and thereby reducing the build-up of salts that occurs
when water is allowed to stand and slowly seep into the rootzone.
These are prudent measures that are common among golf course sites with high salts present
in the soil. Additionally, we understand that the City has a goal to reduce salt counts within its
effluent water system, a goal that is not necessarily aimed at improving conditions at the golf
course, but will have a definite value to City’s golf operation asset.
While the success rate of overall condition improvement cannot be guaranteed, we can look at
comparable operations where high salts are effectively managed. There are numerous
examples of this throughout California, including the Bay Area. California examples include
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 63
Monarch Bay (San Leandro), Las Positas (Livermore), Metropolitan (Oakland), Olivas Links and
Buenaventura (Ventura), and Irvine (Shady Canyon Club).
Many courses with salt issues are turning to Paspalum turfgrass as an answer. Some of the
example courses cited have moved to 100% Paspalum grass. NGF Consulting notes that this
trend is widespread in Florida, the Caribbean, Mexico, South Texas, and Hawaii. In Hawaii, for
example, Paspalum varieties have literally transformed the golf landscape from a struggling
Bermudagrass region to one that now predominantly uses Paspalum in order to overcome high
salts from water, soils and the proximity to the ocean. Even in Monterey we are seeing
Paspalum use. At the Monterey Peninsula Club, for example, some areas located on the shore
that were never in good condition, have been completely re-planted with Paspalum and are now
in excellent condition.
Our conclusion is that Palo Alto can enjoy a good success over the long term at the existing golf
course site. Managing salts will have a good result, not only through good maintenance
practices, but in combination with the reconfiguration work, which should make the City’s efforts
to manage salts more productive, less costly and, ultimately, more impacting to a positive golf
experience.
Our caution is that the plan options (A, D, F and G) each have an associated result that is
specific to the investment. Plan A, for example, addresses only a minority of the course turf
areas (drainage, rootzone, topsoil management, irrigation, etc.) and will therefore not produce
positive results across the full golf course. Plan G, at the other end of the spectrum, resolves
virtually all areas.
Animal Intrusion
Managing Canadian Geese infestation is often dependent on regulations and restriction placed
on locales. Our advice to the City is to study available mitigation measures and to carefully note
the measures taken by neighboring courses. Geese populations have been successfully
managed through the following measures:
Trained dogs, such as border collies
Reducing standing water and open water (ponds, lakes, swamps)
Increasing habitat surrounding the golf course that will appeal to geese populations
Implementing noise, reflective or other repellants
Sterilization agents to stop generational return of geese to the golf course areas
Among the most successful operations in Northern California are the courses of the Monterey
Peninsula, notably Pebble Beach Companies and the private clubs in the area. With few
exceptions, these operators have used trained dogs to manage geese away from their turf
areas. An on-site dog specifically trained to manage geese populations remains the most
efficient measure to rid geese infestation from golf courses in the U.S. Not only is this method
humane, but it has the benefit of a lower cost than many other measures, and is less
interruptive to the golf experience. We understand there is added complexity relative to the
adjacent airport operation and the requirements associated with making sure that geese are not
diverted to the airport, but away from both the golf course and the airport. For this reason, we
recommend that the City take a look at jointly working out a plan for both the golf and airport
needs.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 64
With regard to the ground squirrel infestation, we understand that this is being met with ongoing
mitigation efforts that are allowed under state guidelines. Also, the increase of naturalized areas
afforded by all reconfiguration options will help drive habitat away from turf and in-play areas of
the golf course.
Airport Effects
Many golf facilities are located immediately adjacent to airports, and yet enjoy a good reputation
and high quality of golfing experience. We see no undue negative associated with the relatively
small private plane airport, especially given that the flight paths do not directly overtop the golf
course itself.
Moreover, Silicon Valley appears to be utilizing the airport for corporate flights in favor of the
larger regional airports that pose delays and complexities due to their scheduled, commercial
flight business. This fact may actually prove beneficial to the golf operation should the golf
course and its facilities be elevated a “destination” level of quality and reputation. The result with
nominal airport use is that more visitors to Palo Alto will know about the golf course and be able
to get a firsthand view of its offerings.
Summary
Based on experience and input from Forrest Richardson, NGF Consulting believes that long-
term mitigation of the concerns of this site is workable and worth the premiums required for
maintenance and management. In many cases, golf courses are located on degraded land
because that land cannot be used for other purposes. We suspect this is the case in Palo Alto
and would find it difficult to justify alternate solutions to the renovations that might be
considered: (a) continued operation in a declined state; (b) abandonment of the asset in favor of
a new location, given land values in the area; or (c) abandonment of the recreation amenity
altogether, given its high use and the financial forecasts presented.
POTENTIAL ECONOMIC DEVELOPMENT OF THE AIRPORT & GOLF
“BAYLANDS GATEWAY” AREA
The golf course “corner” and shared entry with the airport are considered a “gateway” to the
Baylands Preserve areas. As such, this intersection has great potential to become more than
just a golf clubhouse and airport with nominal retail offerings.
According to the Community Services Department, forward and creative thinking has been
aimed at the potential for this area to become a more user-friendly and service-oriented
destination. Thus far, thinking has included whether the area could support a modest collection
of cafes, retail shops, and perhaps even a hotel. While no formal plans have been
commissioned, the City has discussed a general, long range approach to looking more in depth
at this possibility.
Such development, especially if it included a small hotel, would add natural demand drivers in
immediate proximity to the golf course, thus resulting in increased rounds and revenues. As an
example, a 130-room business hotel in a high demand locale may have as many as 28,000
room nights based on an average 60% occupancy rate. Using a multiplier of 1.3 guests per
room, this equates to approximately 36,000 guests per year. Using a percentage of 10% golfers
and assuming that the golf course could get even 20% of these guests to play, the resulting
bump would be near 1,000 additional golfers per year. Also, these golfers would comprise non-
residents paying the highest applicable rates, and traveling golfers typically exhibit less price
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 65
sensitivity and would be likely to also spend money on the practice range, pro shop, and/or
restaurant.
PRIVATE FUNDING POSSIBILITIES
Of course, aside from receiving compensatory money from the San Francisquito Creek Joint
Powers Authority, the City may have to grapple with how to fund additional money required if
Reconfiguration Options D, F, or G is chosen, and/or if any work identified as “additional” or
“alternate” in this report it undertaken. One of the mechanisms that would obviously be very
preferable to the City is raising private money to fund some, or even all, of the needed money.
Based on preliminary discussion held between Forrest Richardson, NGF, and the City, the
private funding mechanism may take a combination of the following avenues that the City will
have to explore further:
Naming rights for some components of the facility (e.g., range performance center,
certain holes, tee markers, designated youth area); this may be feasible do to the
number of very wealthy individuals in Palo Alto, as well as the very strong corporate
(especially high-tech/ internet-based) presence.
Grants – for example, the First Tee, which is very active in the area.
Lease-Back – some within the City have mentioned the possibility of finding a
design/build entity that might be interested in undertaking all of the improvements,
including soccer fields if Option F or G is chosen, and restructuring the financing
package to get the entire project, including some or all optional master plan
improvements, done at one time. In this case, the ±$3 million the City receives from
the SFCJPA could be used toward paying off the old debt and a new arrangement
put in place for the work to rebuild the golf course.
The Stanford Soil Import is a wildcard in the equation. It could bring revenue into the
equation, but likely not more than $500,000. This may provide a partial funding
mechanism to help pay for some of the miscellaneous suggested work that will not
have a revenue stream attached directly to it (entry experience, trails, signage,
parking, etc.).
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 66
Appendices
APPENDIX A – COMPARATIVE SUPPLY RATIOS – PALO ALTO GC & KEY
MUNICIPAL COMPETITORS
APPENDIX B – COMPARATIVE SCORING OF RECONFIGURATION OPTIONS
APPENDIX C – WATER & POWER USE DISCUSSION & ASSUMPTIONS
APPENDIX D – REVIEW OF PROBABLE COST ESTIMATES
APPENDIX E – POTENTIAL LONG-TERM MASTER PLAN IMPROVEMENTS
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 67
APPENDIX A – COMPARATIVE SUPPLY RATIOS – PALO ALTO GC & KEY
MUNICIPAL COMPETITORS
NGF has presented a comparison of some key golf supply measures for Palo Alto GC and its
key municipal competitors, with the 5-mile radius around each facility the basis for comparison.
We note that all of the subject facilities, except for Santa Teresa, have very high
household/supply ratios, which is one of the key factors that explains the very high rounds
figures realized per 18 holes among municipal golf courses in this market.
Also of note, in its 2009 publication “The Future of Public Golf in America,” NGF hypothesized
that the best predictor of a public golf course’s success was the number of golfers per 18 holes
within a 10-mile radius, with 4,000 identified as the key number for projected financial stability.
As shown in the second table below, all of the subject courses (again with exception of Santa
Teresa) exceed this number for the 5-mile market.
Golf Facility Supply – 2011 (5-Mile Radius)
5-mile Rings
Total No. of
Golf Facilities
Total No. of
Golf Holes
Households
per 18 holes
Households
per 18 Hole
Index
(US=100)
Palo Alto Golf Course 4 72 19,836 251
Poplar Creek Golf Course 5 81 17,942 227
San Jose Municipal Golf Course 6 90 31,377 398
Santa Clara Golf & Tennis Club 6 90 21,027 266
Santa Teresa 6 135 7,841 99
Shoreline Golf Links 4 72 24,206 307
Sunnyvale Golf Course 8 126 19,435 246
Source: National Golf Foundation
Golfers per 18 Holes (5-Mile Radius)
5-mile Rings
Golfing
Households
Est. No. of
Golfers1 Total 18-H
Equivalent
Golfers per
18 holes
Palo Alto Golf Course 14,206 21,309 4 5,327
Poplar Creek Golf Course 14,243 21,365 4.5 4,748
San Jose Municipal Golf Course 30,527 45,791 5 9,158
Santa Clara Golf & Tennis Club 17,855 26,783 5 5,357
Santa Teresa 12,250 18,375 7.5 2,450
Shoreline Golf Links 16,695 25,043 4 6,261
Sunnyvale Golf Course 24,118 36,177 7 5,168
Total U.S. “Threshold” for Successful Public Golf (10-mile Ring) 4,000
1 Golfing Households x 1.5
Source: National Golf Foundation
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 68
APPENDIX B – COMPARATIVE SCORING OF RECONFIGURATION
OPTIONS
As a useful tool in formulating pro forma projections, NGF has compared the Reconfiguration
Options using a “scorecard approach” whereby attributes and benefits are assigned scores (1-
10). This method allows a side-by-side comparison, providing a way to review pluses and
minuses associated with each option. We base our scoring on several factors, including the
following:
Details presented (plans, conceptual images, etc.)
Public comments and historical use of the facility (rounds and use)
NGF Market Analysis (local and regional trends and golf participation)
Competition within the market area
Details and other givens regarding the changes to take place (golf design consultant
involved, how far along the proposed changes have been studied, budgets, etc.)
Long term viability of the changes and market acceptance
Known preferences of golfers relative to course conditioning, consistency, etc.
Quality of the consultants involved
In situations where golf facilities are proposed to be reconfigured, there are both subjective and
objective considerations. Additionally, there is often difficulty in verifying to what degree
proposed changes will be carried out. Fortunately in the case of the Palo Alto Golf Course, the
City and SFCJPA have accommodated a very thorough process and detail so we are able to
look at the plans, before and after images, and other documentation that quantify the changes
associated with the options.
Scoring is one factor considered in estimating potential changes in the financial performance of
the golf facility. For example, a golf course with significantly more practice opportunities,
especially when such use is in demand, will potentially bring in new use and associated
revenue. In the case of a significant transformation of a golf course from an average or below
average experience to one with new holes, views and overall landscape improvement, it is likely
that an increase in use and/or revenue will be realized. And, where we can see potential to
market the facility beyond the immediate area, it is possible to realize an added price-per-round
for non-resident use. In this latter example we often cite the ability of golf courses such as
Torrey Pines to adopt a green fee structure that holds low rates for residents of the area while
charging market rates that are very high for players from out of state. In the case of Torrey
Pines, the gap between resident rates and visitor rates are among the widest in the golf
business. Though this type of gap will not be realistic for Palo Alto, we do expect that,
depending on the reconfiguration option chose, non-residents will effectively be “subsidizing” to
some degree a high quality, but still affordable, golf experience for city residents.
The following ratings use a 1-10 scale where 1 is the lowest and 10 is the highest. This ranking
includes some financial considerations, but is ancillary to the pro forma financial analysis for
each option. The rankings here are used to form some of the forecasts within the pro forma
analyses. Scoring is based on the base reconfiguration work for each option (i.e., less all
optional/alternate work listed). A summary table of rankings is presented following the category
descriptions.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 69
The following are categories used to form the scoring:
Yardage & Par –Accommodation of yardage (regulation length) for a course and par
that will be viable and competitive within the market and region
Interruption of Play During Reconfiguration – Ability of the plan to retain some holes
(9-hole play) and practice during reconfiguration work
Consistency of Bunkers & Hazards – Overall impact of the plan relative to bunker
consistency, aesthetics and other hazards
Consistency of Greens – Overall result of greens quality and consistency
Drainage Improvement – Overall positive impact on drainage; eliminating wet
conditions
Irrigation Improvement – Overall positive impact on irrigation control, consistency
and associated turf quality
Pace-of-Play – Degree to which the plan accommodates positive pace-of-play and
long range ability to manage for good pace
Improved Visual Impact –Overall landscape enhancements (added naturalizes
areas and visual impact)
Improved Views – Accommodation of more views to the Bay and territorial vistas
Improved Golf Experience Impact -Overall plan benefits to strategy, excitement of
holes, variation of direction, orientation to wind, etc.)
Competitiveness with Area Courses –Ability of the course to compete with courses
in the immediate area
Competitiveness with Regional Courses –Ability of the course to compete with
courses in the region
Likelihood for Destination Visits –Ability of the course to attract specific visits
expressly to play the course
Ability to Leverage “Green” Marketing –Consistency of the plan with a “green”
environmental message (Baylands tie-in, more naturalized areas, natural landscape,
etc.)
Consistency with Long Range Planning –Integration of the plan with future planning
(clubhouse, practice, etc.)
Turf Reduction (irrigation) –Reduction of managed turf acreage for less water use
and reduced pumping
Turf Reduction (managed care) –Reduction of managed turf in relation to the ability
to shift maintenance emphasis from out-of-play areas to golf features and areas
more appreciated by the golfer
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 70
Comparative Scoring of Reconfiguration Options
Option A Option D Option F Option G
Yardage & Par 8 8 8 6
Interruption of Play during Reconfiguration 5 4 3 1
Consistency of Bunkers & Hazards 7 8 9 10
Consistency of Greens 3 5 6 8
Drainage Improvement 4 6 8 9
Irrigation Improvement 3 6 7 10
Pace-of-Play 5 10 7 7
Improved Visual Impact 4 6 7 8
Improved Views 2 7 7 8
Improved Golf Experience Impact 3 7 8 8
Competitiveness with Area Courses 5 8 8 8
Competitiveness with Regional Courses 2 6 7 8
Likelihood for Destination Visits 1 5 7 7
Ability to Leverage “Green” Marketing 5 7 8 9
Consistency with Long Range Planning 7 9 9 9
Turf Reduction (irrigation) 4 6 8 9
Turf Reduction (managed care) 4 7 8 9
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 71
APPENDIX C – WATER & POWER USE DISCUSSION & ASSUMPTIONS
NGF Consulting was not charged with a full water or power use analysis. However, forecasting
costs associated with each reconfiguration option requires reasonable estimates on the affects
of a more efficient irrigation system combined with less turf acreage.
Our conclusions on water and power use are based on the following assumptions, derived from
City Staff and the golf course architect/design team:
Current irrigation (managed) turf acreage: 135
New irrigation areas efficiency over/above the existing system: +10%
Current irrigation inefficiency due to leaks and breaks (loss): -5%
Current power inefficiency: -10%
New power efficiency realized with full course better watering times/durations: +15%
Annual cost for irrigation repair due to age and condition: $30,000
Using the data and assumptions, NGF Consulting has developed the following forecast for
water and power use differences with each reconfiguration option.
Option A
Total irrigated turf following reconfiguration: 96.5 acres
Water use reduction based on new irrigated acreage: 28%
Approximate area of reconfigured course with new irrigation system: 35 acres
Percentage of irrigated Area with New Irrigation: 36%
Water use reduction of new usage based on efficiencies of new system area: 3.6%
(10% efficiency x 36% = 3.6%)
Water efficiency of new usage gained due to fewer leaks/breaks: 2% (5% efficiency x
36% = 2%)
Power efficiency realized with better watering times/duration: +5%
Conclusions
Reduced Water Cost Est. (effluent) $ - 0 -
Reduced Water Cost Est. (potable) $72,800 (28% x $260,000)
Reduced Water Cost Est. (potable efficiencies) $5,645 ([3.6% + 2%] x $100,800)
Reduced Power Cost Est. (efficiencies realized) $1,200(5% x $24,000)
Total Est. Reduction in Water & Power Cost $79,645 / annual
Option D
Total irrigated turf following reconfiguration: 92 acres
Water use reduction based on new irrigated acreage: 32%
Approximate area of reconfigured course with new irrigation system: 40 acres
Percentage of irrigated Area with New Irrigation: 43%
Water use reduction of new usage based on efficiencies of new system area: 4.3%
(10% efficiency x 43% = 4.3%)
Water efficiency of new usage gained due to fewer leaks/breaks: 2% (5% efficiency x
43% = 2%)
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 72
Power efficiency realized with better watering times/duration: +10%
Conclusions
Reduced Water Cost Est. (effluent) $- 0 -
Reduced Water Cost Est. (potable) $83,200 (32% x $260,000)
Reduced Water Cost Est. (potable efficiencies) $7,258 ([4.3% + 2%] x $115,200)
Reduced Power Cost Est. (efficiencies realized) $2,400 (10% x $24,000)
Total Est. Reduction in Water & Power Cost $92,858 / annual
Option F
Total irrigated turf following reconfiguration: 91.5 acres
Water use reduction based on new irrigated acreage: 32%
Approximate area of reconfigured course with new irrigation system: 58 acres
Percentage of irrigated Area with New Irrigation: 63%
Water use reduction of new usage based on efficiencies of new system area: 6%
(10% efficiency x 63% = 6.3%)
Water efficiency of new usage gained due to fewer leaks/breaks: 3% (5% efficiency x
63% = 3%)
Power efficiency realized with better watering times/duration: +12.5%
Conclusions
Reduced Water Cost Est. (effluent) $ - 0 -
Reduced Water Cost Est. (potable) $83,200 (32% x $260,000)
Reduced Water Cost Est. (potable efficiencies) $10,711 ([6.3% + 3%] x $115,200)
Reduced Power Cost Est. (efficiencies realized)$ 3,000 (12.5% x $24,000)
Total Est. Reduction in Water & Power Cost $96,911 / annual
Option G
Total irrigated turf following reconfiguration: 92 acres
Water use reduction based on new irrigated acreage: 32%
Approximate area of reconfigured course with new irrigation system: 92 acres
Percentage of irrigated Area with New Irrigation: 100%
Water use reduction of new usage based on efficiencies of new system area: 10%
(10% efficiency x 100% = 10%)
Water efficiency of new usage gained due to fewer leaks/breaks: 5% (5% efficiency x
100% = 5%)
Power efficiency realized with better watering times/duration: +15%
Conclusions
Reduced Water Cost Est. (effluent) $ - 0 -
Reduced Water Cost Est. (potable) $83,200 (32% x $260,000)
Reduced Water Cost Est. (potable efficiencies) $23,040 ([15% + 5%] x $115,200)
Reduced Power Cost Est. (efficiencies realized) $3,600 (15% x $24,000)
Total Est. Reduction in Water & Power Cost $109,840 / annual
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 73
APPENDIX D – REVIEW OF PROBABLE COST ESTIMATES
NGF Consulting has reviewed the probable cost estimates provided to the City for
reconfiguration Options A, D, F, and G. In order to objectively evaluate proposed budgets we
look for a baseline of comparison. The best resources are similar public sector golf course
projects involving reconfiguration. All golf course projects are unique, as are the conditions of
the site, construction costs, availability of construction materials (sand, proximity of sod growing,
etc.), and terrain. Additionally, in a situation where the proposed modifications to the course are
underway, as in this case, we look to other projects by the same golf course architect.
The best comparisons are three projects by Forrest Richardson, ASGCA:
Buenaventura Golf Course (City of Ventura, California)
Peacock Gap Golf Course (San Rafael, California – privately owned)
Olivas Links (City of Ventura, California)
The Buenaventura project was undertaken to rebuild an existing 18-hole facility originally
designed by William P. and William F. Bell. The scope was to largely retain hole corridors
through existing mature trees, but to re-turf all of the golf course. The project involved
approximately 88 acres of full re-turfing, greens rebuilding (19), new ponds (3) and complete
rebuilding of all features (bunkers, tees and fairways). This project had a stated budget of $4.5
million which also included site work for a new maintenance area, a new maintenance building
and improvements to the entry and parking areas. The work was completed in 2005 and was
funded by the City of Ventura through a capital bond program. NGF was told that the golf course
specific work totaled approximately $3.6 million and the market conditions at that time were very
similar to current conditions.
The Peacock Gap project was a complete re-build of an 18-hole golf course (also an original
design of William F. Bell), associated re-routing work for safety reasons, a new pond, new
drainage, full new irrigation system, and all new features including a new practice range. The
total acreage involved was approximately 94 acres and included similar naturalized area
development as has been proposed for Palo Alto. The project was carried out over two phases
beginning in 2004 for a reported investment of $5.1 million. Of note is that topsoil management
was very similar to that covered in the Palo Alto Probable Cost Estimates.
The Olivas Links project is most similar to Palo Alto among these three examples. This course
was originally designed by William P. and William F. Bell and also borders a river at its estuary
termination point. The course was prone to flooding and had very poor soil conditions as a result
of effluent irrigation and inherent salts by way of its seaside locale. Also a part of the capital
bond program of the City of Ventura, this 2006-07 work was contracted at $5 million in terms of
direct golf course improvements. These included full re-building using on-site soils. Paspalum
grass was used for fairways, with Bentgrass on the greens. Our estimation of the timing of this
work was that it fell during the most aggressive contracting time in the past 10-15 years. The
work appears to have been publically bid with six qualified bids, each very close to the lowest
bid at the $5 million point. The City spent additional funds to relocate and replace their
maintenance facility over and above the golf course construction contract.
Though there are variables that could affect cost, such as the ultimate timing of the project and
a change in regional economic conditions, NGF’s general assessment given our exchanges with
Forrest Richardson on this matter is that the probable cost estimates prepared for the City
(Options A, D, F and G) appear to cover the scope of the work shown for the options, and are
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 74
conservative in approach. According to representatives of the Golf Course Builders Association
of America (GCBAA) the Bay Area represents one of the most costly working locales in
Northern California based on available labor, housing and the general cost of fuel, operations
and logistics. We note that the architect, recognizing this reality, has included a significant
degree of project management and contingency in estimates prepared for the City - important
components that we often see omitted at this stage of planning.
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 75
APPENDIX E – POTENTIAL LONG-TERM MASTER PLAN IMPROVEMENTS
The tables below summarize some of the long-term and/or optional improvements that have
been presented by Forrest Richardson to the City of Palo Alto for consideration.
Clubhouse Improvements
Exterior Condition & Upgrades - Estimate: $250,000 Aesthetic improvement to facings, color, materials
Replace, upgrade landscaping
Expand Meeting Spaces - Estimate: $1,700,000 Current Space: 75 in one room + 70 on patio
Expand main pavilion room to hold 200
Expand/open patio to hold 100 additional (300 total)
Create outdoor wedding garden
Reconfigure grill as potential restaurant space (60)
Reconfigure bar as pub seating w/ patio for 60 addl.
Expand/improve kitchen
Expand/screen service yard
Expand/open patio to hold 100 additional (300 total)
Golf Shop Upgrades - Estimate: $100,000 Expand office/storage
Free-up 1,000 s.f. retail space
Create Cart Storage Building - Estimate: $440,000 Currently storage for 15 carts; balance kept outdoors and
leased temporarily as needed for groups
New building for 70 carts
Arrival & Entry Improvements
New Entry, Signage and Parking - Estimate:
$400,000 New entry
New signage
Resurfaced parking w/ Landscaping & Lighting (expand
to 300 spaces)
New Entry, Signage and Parking - Estimate:
$200,000 New trail connections (to Baylands, etc.)
Bike racks, signage, etc.
Practice Facility Improvements
Range Performance Center - Estimate: $500,000 New building & hitting bays for Instruction
Small meeting spaces and offices
Range Expansion - Estimate: $100,000 (6) Additional hitting bays (adjusted netting to north)
Rebuild Existing Practice Green - Estimate:
$180,000 New green complex as short game area
Create Designated Youth Area - Estimate: $200,000 Along Embarcadero (2 Acres)
Range Performance Center - Estimate: $500,000 New building & hitting bays for Instruction
Small meeting spaces and offices
National Golf Foundation Consulting, Inc. – City of Palo Alto Report – 76
Other “Alternate” Improvements
On-course Restroom Replacement - Estimate: $95,000 New structure and demo existing
Replace Balance of Irrigation System (Varies w/ Plan Option)Complete new system & control
Rebuild All Greens on Course (Varies w/ Plan Option)Rebuild all greens to USGA specs
Resod all Fairways on Course (Varies w/ Plan Option)New and consistent turf variety throughout
New Event Practice Green/Area - Estimate: $80,000 Separate event green and area (Plan D only)
Sand Plate New Fairways (Varies w/ Plan Option)Sand cap to 6 in.
ATTACHMENT G
FINANCE COMMITTEE
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Regular Meeting
Tuesday, March 5, 2013
Five-year Contract Extension for the Palo Alto Golf Course Management
Services Agreement with Brad Lozares (Lozares); Amendment to Golf Course
Pro Shop Lease with Lozares to Reduce the Term of the Lease From Ten
Years to Five Years; and Five-Year Contract Extension for the Golf Course
Maintenance Services Contract with Valley Crest Golf.
Daren Anderson, Division Manager for Open Space and Golf stated there
were four separate, but related contracts at the golf course; 1) Golf course
maintenance services with Valley Crest Golf, which expires in April 30, 2013, 2)
Golf course management services with Brad Lozares, expires April 30, 2013, 3)
Golf course pro shop lease, Brad Lozares is the tenant. This also expires on April
30, 2013, but Lozares had an option for a ten year extension which would until
2023 (through negotiations, Lozares had agreed to reduce the term to five years
pending this contract extension), and 4) Food and Beverage Services lease with
R&T Restaurant. This lease expires in 2018. Staff carefully considered the pros
and cons of conducting a Request for Proposal for the management and
maintenance services. The issue was vetted with the City Manager’s Office, with
the Administrative Services Division, and with the City Attorney’s Office. The
compelling reasons for extending the existing contracts rather than conducting an
RFP were; 1) The City was on the cusp of a major reconfiguration of the golf
course, 2) The timing of the reconfiguration had not been finalized, 3) The new
golf course performance was still undetermined in terms of number of rounds of
golf and revenue generation; which would make it difficult to evaluate submittals
to determine which is most favorable to the City, 4) The food and beverage
services lease was set to expire in April 2018. Food and beverage service is often
a central element of a golf course operation. If all the contracts were to expire on
April 2018, it would be more attractive to contractors bidding on an RFP that
included all the components of the golf course operation, 5) Lozares would
exercise his option for a ten-year extension on his lease of the pro shop. It would
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be exceedingly difficult to go out to bid for golf management services, because it
would require either a sublease out of the pro shop from Lozares, or operating
out of a mobile trailer, and 6) The independent consultant, The National Golf
Foundation, hired to perform the Golf Course Financial Pro Forma, as well as an
independent golf course financial consultant Richard Thorman, and Golf Course
Architect Forrest Richardson all agreed that because of the aforementioned
reasons the City should wait until the renovation is complete, and the improved
golf course has been up and running for a year, before considering a substantial
change in maintenance and operating structure. These consultants also
recommended extending the golf maintenance contract, citing how critical would
be to have the contracted superintendent involved and present for the
construction of the new course. If these contracts were extended for five years as
proposed, the Staff recommendation is to conduct a Request for Proposal (RFP) in
April 2018, when all four golf course contracts would be set to expire. This would
be the opportune time to conduct an RFP. The golf course reconfiguration would
have been completed likely giving at least two years to see how many rounds and
how much revenue the new course would generate. Having all the contracts
expire would likely attract more interest in bidding on an RFP because it could
include the entire golf course operation. The advantage of having one contractor
running the entire golf course operation is there would be a unified vision and
goal that was focused on the entire experience at the golf course. In negotiating
with both Brad Lozares and Valley Crest, Staff broke the terms of contract into
phases associated with the golf course reconfiguration; Phase I) Pre Construction
would take place from May 1, 2013 to the day construction starts, Phase II) During
Construction (anticipated to be 1 year), and Phase III) Post construction through
April 30, 2018. The City negotiating team negotiated a 5 year extension with
Lozares who agreed to reduce the term of his pro shop lease down from ten years
to five. During Phase I: Lozares would continue to provide the same services
previously provided and receive the same level of compensation, a fixed
management fee of $345,333 per year, 40 percent of the Driving Range revenue,
and 38 percent of the golf cart rental revenue. One hundred percent of the green
fees would still go to the City; and per the terms of his pro shop lease Lozares
pays $2,000 per month or 4 percent of the gross revenue from pro shop
merchandise sales, whichever is higher. The Impacts of Phase I include Fiscal Year
(FY) 2012 actuals, Lozares’s total compensation fixed fee, and the variable fees of
carts and range were $600,949. The budgeted amount for FY 13 is $641,533.
During Phase II: Lozares’ compensations changes significantly. The fixed fee
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would drop to $30,500 per year. The Driving Range would be the main source of
revenue because it will not close during the renovation. There will be no green
fee or cart revenue because the course will be closed. The percentage shifts on
the split on the Range to 15 percent for the City and 85 percent for Lozares.
Lozares would cover the full costs for maintaining and staffing the Range; and
spend approximately $90,000 per year to operate the driving range. This revenue
split will also help serve as incentive for Lozares to help encourage range activity.
The pro shop lease terms would change to $1,500 per month or four percent; and
during the slow months of November, December and January. Lozares would only
be required to pay four percent of gross revenue due to reduced visitation to the
course. Impacts of Phase II include the course closure leaving the driving range as
the only revenue source. Projections for revenue in FY 2014 were $82,400 (25
percent of FY 2012’s range revenue). If the revenue generated 35 percent of what
was earned in FY 2012, Lozares would make $105,789 and the City would make 15
percent or $18,668. For Phase III (post construction through April 2018) the City’s
negotiating team’s goal was to create an agreement to cover operational
expenses, generate a surplus, and unify the interests of the Contractor with that
of the City. The key element was to reduce the fixed management fee (the
money the contractor received regardless of how well business was going); and
include a small percentage of the green fees with a corresponding reduction in
the other variable compensation (cart rentals and driving range revenue)
including; 1) The fixed management fee was $300,000 (about $45,000 less than
the previous contract), 2) The Range revenue split would change to 80 percent
City; 20 percent for Lozares, 3) Cart rental 80 percent City; 20 percent for Lozares,
4) Green Fees would be 95 percent to the City; 5 percent for Lozares, 5) Pro Shop
rent was $3,000 per month or 5 percent of gross revenue of pro shop
merchandise whichever is greater. This would be a $1,000 per month increase
over the previous lease agreement. It was intended to reflect the increase in
value of the facility due to the City’s investment in the reconfigured course, 6)
Credit card fees will be split between the City and Lozares according to the
percentage split of all revenue sources, and 7) On site club rentals and pull cart
revenues will be considered part of the merchandise revenue from pro shop.
Impacts from Lozares Agreement included, compared to the current contract
(Phase I contract), an estimated savings to the City of at least $50,000 annually.
The overall compensation to Lozares in FY 2012 was $600,949. Lozares’s
estimated overall compensation in FY 2015 is $544,975 and in FY16 $562,470.
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Vice Mayor Shepherd pointed out that the proposal would decrease Lozares’s
income from $641,000 to $544,000 in 2015. She asked what his reaction to
that was.
Mr. Anderson said it was a tough negotiation. There were times when he was
ready to say, ‘we won’t bid on phase III, get someone else’. But the value
was that now if he over performs he had a chance to get extra money. It put
the risk and burden on him.
Vice Mayor Shepherd asked if there had been consideration that the contract
had been off balance to this point previously.
Mr. Anderson agreed the contract was generous and agreed that the recent
negotiation was better focused.
Lalo Perez, Director of Administrative Services said part of the reason that
Staff pursued this option, was prior to contracting out the maintenance of
the golf course, the compensation to Mr. Lozares maintained, and he had no
reductions, while the City made reductions and staffing and operating
reductions.
Council Member Schmid said this showed that Lozares wasn’t making a lot of
money, but still a substantial amount. He asked if Staff had considered what
action could be taken if Mr. Lozares simply cut back on services.
Mr. Anderson said they did. Lozares has been in his position for 31 years.
His reputation is top notch in the golf course community. He insisted the
contract would only be successful if he could still operate with the quality he
expects.
Council Member Schmid confirmed that Staff was comfortable that it would
still be quality experience.
Mr. Perez said Lozares provided the Staff at the Club House that checked
guests in, registered them to play, provided lessons, and the coins for the
range, but they were not the Staff on the golf course itself.
Council Member Schmid asked if his Staff picked up the balls on the range.
Mr. Perez replied yes, the Lozares Staff provided that service. He needed the
balls to be picked up otherwise he wouldn’t have buckets of balls available.
Council Member Schmid asked if there were a problem on the course who
would manage it.
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Mr. Anderson replied the Lozares team would. They also provided a
marshaling service. They follow the golfers and keep people on track. The
other, separate service is the maintenance, and they do all the things from
keeping the sand in the bunkers raked and not too hard.
Council Member Schmid asked if we would see the marshals disappearing.
Mr. Anderson answered no.
Chair Burt said that the marshals were volunteers. They did not receive out
of pocket pay.
Council Member Berman said he liked the idea of it being more incentive
based. That will give Lozares reason to make it a high quality golf course.
He said that credit card fees will be split in phase III between the City and
Lozares. He asked if the City was covering all of that now.
Mr. Anderson said the arrangement under the existing contract the City split
the fees for cart rental but not the driving range. Phase 3 incorporated all of
it.
Council Member Berman said he thought this was a great idea to get
everything aligned for 2018.
Chair Burt clarified that Lozares did not have responsibility for the quality of
the course. But there was an incentive with the new contract for him to
participate in the driving of play, the rounds, and the management part of
the front end.
Council Member Berman said somewhere in the report it said that during this
down year that he would set up tournaments, once the course was back on
line.
Chair Burt asked if they also would receive separate revenue from lessons
that is 100 percent theirs.
Mr. Anderson said yes. There was one other revenue stream during Phase II,
the Pro-shop, which would still be open, although it would be limited
capacity due to the construction on the course.
Chair Burt asked if lessons would still be offered during the down time.
Mr. Anderson said yes.
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Draft Excerpt 03-05-13, Item 2
Chair Burt asked to confirm that in the capital plan there was no plan to redo
the driving range.
Mr. Anderson said that is correct.
Chair Burt said they had to consider the future of the building as well as the
driving range which could potentially come out of the operating revenue.
Mr. Perez said Staff was discussing a reserve style process to accommodate
needs such as replacement of the range.
Mr. Anderson said Lozares was looking at making some improvements to the
range, such as adding bays and improvements to the teaching center, since
they have a vested interest. However, they wouldn’t do that unless they had
an extended contract that would allow them to recoup their investment.
Chair Burt asked if the range was perceived to be the best profit center.
Mr. Anderson said it was highly profitable, but not compared to the green
fees.
Chair Burt said not revenue, but profit.
Mr. Anderson said yes. The driving range made approximately $30,000 per
bay, per year.
Chair Burt said it was his understanding from other courses that often the
driving range was the largest net producer. He asked what percent of
rounds used carts.
Mr. Anderson said he didn’t have that information at the time.
Chair Burt said they had a moderate projection of an increase on 2013 over
2012 revenues. He asked if that seemed to be the current trend.
Mr. Anderson said those projections may not be on track. Staff had some
challenges with the golf course revenue. The unpredictability of when this
golf course reconfiguration was going to happen has scared away
tournaments and revenue has dropped.
Chair Burt said this as in 2013, which ended in June. That preceded the
earliest possible construction. He asked if FY 2013 was already being
affected.
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Rob DeGeus, Recreation Manager said there had been a decrease in play for
a number of reasons. One reason was that it was public knowledge that
construction would start. There was a very bad month last quarter, which
was a big golf month. There was a mosquito epidemic, and the geese
continued to be a challenge. They were down 10 percent from last year.
Mr. Anderson discussed the golf course maintenance contract. He said Staff
met numerous times with Valley Crest to negotiate the terms of a five year
extension. Phase I was the continuation of the same level of service as under the
previous contract and the annual fee of $750,000 was the same. In Phase II,
though the golf course would be closed for reconfiguration, Valley Crest would
continue maintaining the putting green and the associated irrigation, the driving
range turf areas, and the landscaping around the parking lot and pro shop. The
Valley Crest Golf Superintendant will also be on site daily to monitor and serve as
a consultant on the reconfiguration project. He explained that in Phase II Staff
estimated there would be seven months where Valley Crest would have the
aforementioned duties. The rate for those months would be $18,158 per month.
At the end of the seven months the construction contractor would begin to turn
over completed sections of established turf for Valley Crest to maintain, mow,
and grow-in. The cost for the five month grow-in would be $415,000. Almost half
this sum was materials. The newly established turf required a lot of additives and
fertilizers to get the turf healthy and fully established for play. The total
anticipated costs for Phase II is $542,106. In Phase III the negotiating team’s goal
was to control maintenance costs while making improvements in the level of
service to reflect the investment in the new and improved course. The levels of
service changes were designed to address the most frequent complaints at the
golf course. The most frequent complaint as the presence of Canada Geese and
their feces. The most effective technique has been the use of trained herding
dogs. The City hired a company to come for an hour every day. The cost has been
approximately $20k per year, and while it has helped to some degree, one hour a
day wasn’t sufficient to fully address the problem. In Phase III Valley Crest will
have their own trained dog on site. Another example of increased level of service
would be the decreased weed threshold levels in order to keep the new course
weed free. The annual Phase III fee would be $796,262 for the first 18 months,
and then it would increase by Consumer Price Index, which is approximately 1.34
percent. The total costs for Phase III (anticipated to be three years) would be
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$2,410,197. The total cost for all three phases for Valley Crest plus 10 percent
contingency would be $4,072,533.
Council Member Schmid asked if Staff was asking the Committee to sign off
on the contracts. There was a year in there when the revenues go close to
zero. And the losses were the first part of the 9 month period with a loss of
$460,000 and three months of the next year $23,000 he asked if that
amount was covered.
Mr. Perez said it was not. There were two concerns: one was the loss and
the second was concerning potential project delays. If there were delays to
this project the incremental increase would be significant. This was
considered an infrastructure project with the goal of paying for itself.
However, if the income was not coming in then the City would have to make
a determination on how to cover that.
Council Member Schmid asked if certificates of participation were being
issued prior work being started.
Mr. Perez said that would probably be the case.
Council Member Schmid confirmed this project would not be drawing on the
general fund at all.
Mr. Perez answered that was the intent. Staff would need to look at all the
alternatives and get a recommendation to Council.
Council Member Schmid said there will be big upfront payments both for
contractor and the ongoing payments.
Mr. Perez confirmed that was correct. Staff had done a great job trying to
maintain this contract to a reasonable level. Lozares had done a great job
over many years and had a great reputation.
Council Member Schmid said the issue was that Phase II was from April
2014 to April 2015 as it ended Phase III would start. So all of a sudden
there would be full costs, with revenues immediately at full revenues. It
seems that the golf course would need to be resold to the community and
ramped up.
Mr. Perez answered that Staff worked to add a sensitivity factor into the
numbers. Those factors were imbedded. Discussions with the consultant
indicated that the novelty of a new reconfigured golf course would cause
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people to want to come play.
Council Member Schmid said Rob DeGeus made the point that the
anticipation of construction was causing a 10 percent decline.
Mr. Perez said yes the financial concern was through 2018 because of the
original debt that would expire in 2018. There would not be relief until
2018, in the neighborhood of close to $400,000. So there was certainly a
period of concern.
Joe Saccio, Assistant Director of Administrative Services said when Staff
talked with Lozares about the contract the topic of ramping up became a
very important point. It was great keeping them there because they have
contacts in the community; they are respected by golfers in the community.
Also they intend to do a marketing campaign just before the course opens
again to attract everyone back. So that was a concern during the discussion,
and hopefully he ramps up slowly as well based on business. Staff definitely
included that point in the discussion.
Council Member Schmid discussed the potential for additional soccer revenue
at $230,000.
Mr. DeGeus said that the National Golf Foundation Report referenced the
10.5 acres that the City carved out of the golf course property. The City
would have the potential to build the athletic fields at some point in the
future. There is not funding for that at this time and there is no design for it.
But if was built, it could generate $200,000 in revenue to help offset the
costs of maintaining those athletic fields.
Council Member Schmid asked if soccer players pay substantial amounts.
Mr. DeGeus answered that they play a fee to use the fields. Any time there
was a group of 25 people or more they were required to get a permit to
participate.
Council Member Schmid said at the Baylands the City was giving park land
at no cost to the water treatment plant, yet the soccer users would be
paying. It seems inequitable to treat two different groups differently.
Chair Burt said the City did not charge park users out there.
Mr. DeGeus said they charged organized sports groups only.
Council Member Schmid said there might be a way of getting some rent from
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other users of the Baylands Park, and sharing the costs.
Chair Burt said he wanted to focus on the maintenance costs in Phase III. He
said they switched from Valley Crest from previously having in-house staff.
He asked if Staff found the quality of maintenance comparable, better or
worse to what we had before.
Mr. Anderson said it was better, largely because they could afford to have
more Staff.
Chair Burt said when the National Golf Foundation had projected a lowered
operating cost, as well as higher number of rounds and higher green fees.
The profit was three factors, and the lower costs were attributable to the
fewer acres to be managed, 8 or so acres that go to flood control, the 10 or
so acres that were for playing fields, and an additional 30 plus acres that
would move from turf to natural vegetation that would not only require
lower expenses in water, pesticide, and fertilizer, but he thought the labor
would be lower. He was expecting that as a result they would see the
maintenance costs go down. The Lozares contract looked good, counter to
his assumptions.
Mr. Anderson agreed. There as a turf reduction; there will be more
naturalized areas that will require less water. That is one of the big savings
that isn’t evident the contract itself. But there will be water savings from 35
acres that will no longer be manicured turf. So while there will be less
maintenance, the costs increase rather than decrease because the higher
level of service. The new course will be maintained at a higher level
Chair Burt said this course was going from moderate to low end of public
courses to one that will be a better public course on the peninsula. In some
ways it will rival some of the private courses. That in itself meant that it
must be maintained at a higher quality than in the past. That would mean
that the offset of higher quality maintenance versus quite a lot less, 50 acres
out of 160 something acres, almost 1/3 less acreage that needs active
maintenance of turf and greens. He was surprised that the maintenance
costs go up as a result of those two trade off factors.
Mr. De Geus said one of the challenges was that they don’t have the new
golf course yet. So Valley Crest was contemplating how much it was going to
cost, they were hedging their bet; not really sure what was going to be out
there and what would be involved in the maintenance. The current golf
course, although it was a lot more acres of grass to mow, was very flat, very
straight, and very easy. The new golf course had a lot of undulations and a
lot of natural areas that would require a different type of maintenance and a
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lot of time to maintain. That was a piece that added costs.
Chair Burt asked if Phase III went out to multiple bidders.
Mr. De Geus said it was only negotiated with Valley Crest.
Mr. Perez said this would allow Staff to prepare for the RFP process in 2018.
Staff can take advantage of this experience; and build requirements based
on this commitment. And that the good thing is that the City is not locked
into a long period of time.
Chair Burt asked why they needed three years to have a good sense of how
to go out for an RFP.
Mr. Perez answered that they will align all the services at the same time, so
they can have the comprehensive management of the golf course.
Chair Burt said so there was a negotiation, but it was with a single bidder.
That was always an odd negotiation. It seems to me that they would have
leverage that if they agree to not send this out to multiple bids, that they
might be able to negotiate more favorable maintenance terms. He expressed
concern with the maintenance contract. It was hard to judge based on the
limited information that the Finance Committee Members had. They had two
options: send it out for multiple bids for this Phase III, or have better terms
for Phase III based on a negotiated single bid.
Mr. De Geus said he recalled it a little differently. They anticipated that the
maintenance costs would remain the same and actually rise slightly. He said
that in 2015 there would be maintenance costs of $825,000, then it would
go to $837,000, and then $862,000.
Chair Burt said they anticipated higher maintenance costs in the contract.
Mr. De Geus agreed.
Chair Burt said they could choose to go out for multiple bids.
Mr. De Geus said there is an advantage to having them here. They want
someone who knew the golf course, the irrigation system, someone who has
helped Staff inspect and oversee the construction of the course.
Chair Burt said that they have resulted in a considerable cost savings to the
City which Staff said would be higher quality maintenance. He said they had
two options: Accept the maintenance agreement as it was, or ask Staff to go
DRAFT EXCERPT
Page 12 of 13
Finance Committee Regular Meeting
Draft Excerpt 03-05-13, Item 2
back and attempt to negotiate a better year one through three of Phase III
maintenance contact terms in exchange for granting a three year Phase III
contract.
Mr. Anderson said they were approximately $30,000 below the projected FY
2015 contract costs. They projected $825,000 for contract maintenance
services, come in at $796,000.
Council Member Berman asked if there was any time table backstop for
going back to them for negotiations.
Mr. Anderson answered no. Staff negotiated with them just like Lozares.
Chair Burt said Staff didn’t have the leverage of going out for bids. In
negotiations having a competitor mattered.
Mr. Anderson said with both Lozares and Valley Crest Staff discussed the
issue of going out for bids. Lozares was a little more challenging because he
had the Pro Shop lease, but with Valley Crest that specter was out there and
was voiced in the very beginning.
Vice Mayor Shepherd said Phase I is $750,000, which is the standard
contract; and then it went down to $542,000, but a lot of this went into
materials in order to feed the new system, so they actually do have a
course. She was concerned that this was just to get us to 2018 to go out for
the whole sweep of contracts. There would be a period of time with some
fragility, where there might be shifting months. There was a reliability of
being able to work with this contractor. She assumed that Phase II meant
they would have to shift their own workers or lay people off and then bring
them all back. So it was a volatile period. She noticed that there was an
increase of 6 percent over the $750,000, which was not out of the range of
cost of living. And then it went to a .06 percent for some reason, and then
1.3 percent in the last year.
Mr. Anderson answered it was the best deal they could offer.
Vice Mayor Shepherd said she was fine with this, understanding that in 2018
that it would be going out. She hoped that it is a good decision to go out for
all four bids at one time. And it would give Staff some experience so that
when dealing with all four.
Mr. Perez said that they would make it as the preferable option, but they
would not decline somebody from providing specific pieces, if they want to
just bid on the maintenance or just the management. Staff wanted to keep
DRAFT EXCERPT
Page 13 of 13
Finance Committee Regular Meeting
Draft Excerpt 03-05-13, Item 2
all options available
Chair Burt acknowledged that both parties had an interest in not changing to
a different maintenance supplier.
Council Member Schmid said he assumed that the $750,000 included the
$20,000 dog?
Mr. Anderson answered that the $20,000 dog service was picked up by the
City under the current contract. And the Phase III contract will include the
dog service.
Chair Burt asked if there was any interest in reconsidering the maintenance
contract that has been negotiated.
Council Member Berman said there was no down side to that, other than
May 1, 2013 was the beginning of the new contract. The City could ask them
to go back and try again, but they would have to come back pretty soon.
Chair Burt said with the clarifications that it is below the anticipated budget.
MOTION: Vice Mayor Shepherd moved, seconded by Council Member
Schmid to recommend the City Council approve:
1. The proposed five-year contract extension for the Palo Alto Golf Course
management services agreement with Brad Lozares (Lozares), and the
proposed amendment to the existing lease agreement for the Golf
Course Pro Shop with Lozares to reduce the term of the lease from ten
years to five years;
2. Review the proposed five-year contract extension for the Golf Course
maintenance services contract with Valley Crest Golf;
3. Recommend that Council approve, and authorize the City Manager or
his designee to execute, the amendment to the General Services
Agreement for Golf Course management services with Brad Lozares in
the amount of $2,058,073 and the amendment to lease of the Palo
Alto Golf Pro Shop premises with Brad Lozares for a term of 5 years,
beginning May 1, 2013 ending April 30, 2018; and
4. Recommend that Council approve, and authorize the City Manager or
his designee to execute, the amendment to the General Services
Agreement with Valley Crest Golf in the amount of $4,072,533 and for
a term of 5 years, beginning May 1, 2013 ending April 30, 2018.
MOTION PASSED: 4-0
City of Palo Alto (ID # 3466)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/18/2013
City of Palo Alto Page 1
Summary Title: BAO for Infrastructure Reserve in FY 2013
Title: Adoption of a Budget Amendment Ordinance in the Amount of $2.2
Million to Utilize the Additional Funds Added to the Infrastructure Reserve in
FY 2013 for Infrastructure "Keep-up" to address street and sidewalk
problems and to accelerate street and sidewalk improvements
From: City Manager
Lead Department: Public Works
Recommendation
To address the recommendations of the Infrastructure Blue Ribbon Commission,
Council transferred an additional $2.2 million to the Infrastructure Reserve in the
current FY 2013 budget, but those funds were not allocated to specific projects.
This report recommends that the $2.2 million be added primarily to the Street
Maintenance and Sidewalk Repair programs, with a small amount to be used for
planting and maintaining trees.
Staff recommends that Council approve the following motion:
“I move that the additional $2.2 million placed in the Infrastructure Reserve as
part of the Fiscal Year 2013 budget be used to further accelerate the City’s
progress toward excellent street conditions, to improve the City’s sidewalks, and
to plant and maintain trees, as described in the attached Budget Amendment
Ordinance.”
Executive Summary
City Council added $2.2 million to the FY 2013 Capital Budget in response to the
recommendations of the Infrastructure Blue Ribbon Commission, but did not
City of Palo Alto Page 2
allocate the funds to specific projects. This report recommends that the funds be
used primarily for the Street Maintenance and Sidewalk Repair programs, with a
small amount to be used for planting and maintaining trees. These
recommendations are consistent with the IBRC recommendations and Council
direction, as further described in the Policy Implications section of the report.
Background
Palo Alto’s Infrastructure Blue Ribbon Commission (IBRC) completed its task of
analyzing and making recommendations to address the City’s unfunded
infrastructure needs in late 2011. The IBRC Final Report concluded that, at FY
2012 funding rates, there was a continuing annual shortfall of $2.2 million below
the funding that would be needed to “keep up” with infrastructure maintenance
needs. This $2.2 million figure was estimated as $1.6 million in Operating
Maintenance and $0.6 million in Planned Capital Improvement Program (CIP)
Maintenance. The IBRC Final Report also pointed out that an estimated $1.5
million of the $2.2 million was needed to prevent “pop-up” projects that are
typically funded during the course of each fiscal year from reducing the funding
available for infrastructure maintenance. During the FY 2013 budget process, an
additional $2.2 million was transferred to the Infrastructure Reserve to fund the
IBRC recommendation. The additional funding was not allocated to any specific
projects at that time. This staff report recommends allocating the FY 2013 funding
to CIP programs and operating budget areas for uses that will help to keep up
with maintenance needs and to accelerate the City’s progress toward improving
the condition of City streets and sidewalks.
Discussion
Staff’s recommendations in this report will add funding to the following areas:
Project Area Funding Level
Addition to Street Maintenance Program $1,053,000
Addition to Sidewalk Repairs Program $1,000,000
Addition to Budget for Asphalt Materials Purchase $70,000
Tree Pruning and Planting $77,000
Sum:$2,200,000
City of Palo Alto Page 3
Most of the funding is proposed to be used for the City’s streets and sidewalks
programs. Streets and sidewalks are the most visible and ubiquitous elements of
the City’s infrastructure assets and their condition are of particular concern to the
public. In FY 2011, the City Council increased the annual Street Maintenance
Program budget from $1.9 million to $3.7 million to facilitate a new goal of
increasing the citywide average Pavement Condition Index (PCI) score to 85,
representing excellent pavement condition, by 2021. Significant progress toward
the goal has been made, with the PCI increasing from 72 in 2009 to an expected
77 in 2012. The proposed addition to the Street Maintenance Program budget
will bring the FY 2013 funding level to over $4.7 million, and will further
accelerate progress toward the 2021 PCI goal. The proposed additional streets
and sidewalks work is being recommended because it will address areas that are
currently outside the scope of the Public Works Streets work group, which repairs
potholes and damaged sidewalks, or by the Street Maintenance and Sidewalk
Repair CIP programs.
Each of the items recommended for funding is described in greater detail below.
Addition of $1,053,000 to the Street Maintenance Program Budget
Staff is proposing to increase the FY 2013 budget for the Street Maintenance
Program by $1,053,000. The additional funding would be used to make repairs to
streets that are on the list of “base failure” areas. Base failures are areas where
the load bearing “base” of the roadway is compromised and can no longer
support the weight of the traffic or the road structure itself. Palo Alto’s 473 lane-
miles of streets include 17 lane-miles of Portland Cement Concrete (PCC) streets,
and 111 lane-miles of PCC streets that have been overlaid with asphalt concrete.
PCC streets are extremely durable, and many of the PCC streets in Palo Alto are
90 or more years old. PCC streets, however, are much more expensive than
asphalt streets to repair and replace. For example, an asphalt street “grind and
overlay” typically costs about $3.50 per square foot, while PCC street replacement
may cost as much as $15 per square foot. City staff typically surveys all Palo Alto
streets on a two year basis and uses the data to generate the City’s PCI score. The
last survey identified a number of base failure areas, most of which are on PCC or
PCC overlaid with asphalt streets. These types of street failures are some of the
City of Palo Alto Page 4
most visible street problems, and can be hazards to both motorists and bicyclists.
In many of these cases, the overall street PCI is relatively high, so that the streets
are not prioritized for repair in the Street Maintenance Program’s 5-year plan.
Staff recommends that the $1,053,000 addition to the Street Maintenance
Program’s FY 2013 budget be used to augment existing funding to allow the repair
of base failures on 43 blocks of PCC and PCC overlaid with asphalt streets. Public
Works staff is in the process of inspecting and measuring the base failure
locations to determine quantities and a cost estimate, after which a procurement
process will be initiated to engage a contractor to complete the repairs.
Addition of $1,000,000 to Sidewalk Repair Program Budget
Staff is proposing to increase the FY 2013 budget for the Sidewalk Repairs
Program by $1,000,000. The additional funding would be used for three
purposes:
1.Alleviate a backlog list of “hot spot” sidewalk problems that have been
temporarily repaired but are in need of replacement, while first providing
an opportunity for the public to report additional problems that are not yet
on the backlog list;
2.Ensure that heavily used sidewalks on streets surrounding Palo Alto schools
meet the same standards that are applied in the citywide “district” sidewalk
repair and replacement program; and
3.Accelerate the district-based sidewalk repair and replacement program as
recommended by IBRC.
The Sidewalk Repairs Program manages an annual contract for sidewalk repair
and replacement in 23 districts throughout the City. The sidewalk district
program was initiated in 1986, and there are six districts remaining before the
program will have completed the full cycle of districts. When a sidewalk district is
scheduled for work, the entire district is inspected and areas to be replaced are
marked for repair. Minor sidewalk uplifts are corrected by grinding the sidewalk
down.The quantities of sidewalk repairs are then assembled and packaged into
an Invitation for Bid (IFB) that then becomes a contract with a firm specializing in
concrete work. Because the district-based sidewalk program began 27 years ago,
there are many areas of sidewalk in need of repair in districts that were
City of Palo Alto Page 5
completed early in the program, typically due to tree root uplift. The Streets work
group in the Public Services Division of Public Works includes a four-person team
dedicated to repair of sidewalk tripping hazards that are reported by the public.
Upon receiving a report of a sidewalk problem, the area is visited and assessed.
Minor problems are repaired by grinding or by placement of asphalt concrete.
More serious problems are temporarily repaired with asphalt concrete, and
placed on a “hot spot” list of sidewalk sections in need of full replacement. Public
Works has a goal of replacing hot spot sidewalk sections within three months of
their temporary repair, with no replacements exceeding six months.
Over the past two years, the hot spot backlog list has grown to the extent that
the delay between temporary repair and replacement is currently approximately
one year. The primary reason for the longer backlog list is that Public Works
supervisors inspecting sidewalks in response to reports from the public have
instituted a practice, to incorporate efficiency and cost effectiveness, of
inspecting the entire block for additional problem areas, rather than only
observing the sidewalk in front of the address or home that reported an issue.
Public Works staff is in the process of inspecting and marking out the hot spot
sidewalk replacement locations to determine quantities and a cost estimate, after
which a procurement process will be initiated to engage a contractor to complete
the repairs. Staff is also planning to engage the public in this effort by publicizing
the program, providing the sidewalk locations and photos on the Sidewalk Repairs
Program web page, and requesting that the public report additional “hot spot”
sidewalk problems so that they can be included in the contract.
The sidewalk district program that is managed by the Sidewalk Repairs Program
uses more stringent criteria than the hot spot list for determining when sidewalks
require replacement. Typically, about thirty percent of the sidewalk surfaces in a
district are replaced. Sidewalks on streets surrounding schools are used heavily
by children walking and biking to and from school. Staff proposes to use a portion
of the additional FY 2013 sidewalks funding to repair and replace sidewalks
around Palo Alto’s twelve elementary schools, three middle schools, and two high
schools using the same criteria that are used in the district program. This
approach will ensure that these heavily used sidewalks are in excellent condition.
Staff has begun inspecting sidewalks in school areas in coordination with the Safe
Routes to School program to determine quantities and a cost estimate. It is
City of Palo Alto Page 6
envisioned that the same contractor engaged to perform sidewalk hot spot
repairs will also conduct the repairs around schools.
The annual base funding amount for the district-based sidewalk repair and
replacement program is $725,000. The program is intended to operate on a 30
year cycle to reduce tripping hazards and achieve Americans with Disabilities Act
(ADA) standards. IBRC recommended that the current funding level for the
program be increased by $287,000 (in 2012 dollars) to maintain a 30 year cycle
going forward from 2012. IBRC also identified a backlog or “catch-up” estimated
amount of $3.7 million that represents the funding that would be needed if the
original 23 district cycle was to be completed in 2016, which is 30 years from the
1986 start of the sidewalk district program. Staff recommends that the
$1,000,000 addition to the FY 2013 Sidewalk Repairs Program budget fund the
hot spot and school area repair contract described above, with the balance of the
funding used to accelerate the sidewalk district program work. Staff will also be
proposing an increase in the Sidewalk Repairs Program in the FY 2014 Capital
Budget.
Addition of $70,000 to Budget for Asphalt Materials Purchase
The Streets work group in the Public Services Division of Public Works is
responsible for repairing potholes, resurfacing small areas of streets that are
distressed, and maintaining bicycle and pedestrian pathways throughout the City.
City staff performs this work and the asphalt and cement materials used are
procured through an annual purchase order with a building materials supplier.
Over the past several years the unit price for asphalt, which is tied to the price of
oil, has increased significantly. However, the operating budget amount utilized
for that annual purchase order has remained constant at $154,000 due to budget
concerns. At mid-year in FY 2012 and in FY2013, the operating budget was
increased by $25,000 to allow for purchase of asphalt. However, that timeframe
coincided with the point at which the closed Palo Alto landfill stopped accepting
concrete and asphalt demolition materials for recycling, and the budget increase
of $25,000 has instead been used to pay for hauling of demolition materials to
another recycling facility. This situation has resulted in the Streets work group
running out of budget for asphalt and cement prior to the fiscal year end in FY
2012 and FY 2011. In FY 2012, the Streets group was unable to purchase these
City of Palo Alto Page 7
materials for the last three months of the fiscal year. The budget for FY 2013 is
expected to run out at the same time in the fiscal year. Insufficient budget for
purchasing asphalt and cement prevents the Streets work group from keeping up
with street and pathway maintenance needs. The addition of $70,000 to this
budget item, which will be requested for the FY 2014 budget as well, will ensure
that the group’s productivity is continued throughout the fiscal year. Public
Services Streets and the Street Maintenance Program staff will continue to
improve the coordination between the two groups. With the additional funding
for asphalt materials, the two groups will work together to repair minor to
moderate street surface failures, allowing the annual Preventive Maintenance
contract managed by the Street Maintenance Program to cover a greater area
and accelerating the progress toward the City’s goal of achieving “excellent”
pavement condition throughout the City.
Addition of $77,000 to Budget For Tree Pruning and Planting
The proposed El Camino Real comprehensive tree pruning project will include 697
trees, ranging from recently planted in need of structure training to large mature
trees, that require canopy cleaning and selective reduction of limbs that could
pose a future risk if neglected. The work is required to keep up with the Urban
Forestry group’s seven-year cycle for tree pruning. Work history differs by
individual; however, each tree will benefit from an inspection followed by
specifically designed pruning. Targeted specific pruning is anticipated to reduce
future risk of failure, increase safety for vehicles, improve health and structure of
the trees, and increase potential longevity for trees. The estimated total cost is
$60,000.
The proposed Page Mill Road tree planting will establish 72 new trees from
Foothill Parkway to El Camino Real. The work is needed to ensure that planting of
new trees keep up with tree removals occurring throughout the City. These trees
will serve multiple purposes as a welcome corridor, a link between the nature of
the foothills to the cosmopolitan business district, a recreational amenity for
active bicycle enthusiasts, and a signature planting for naturalists. Canopy and
Stanford University groups have already expressed interest in participating. The
estimated cost is $17,000 using 15 gallon trees.
City of Palo Alto Page 8
Timeline
Following adoption of the BAO by City Council, staff will issue a notice to proceed with
the El Camino Real tree pruning and Page Mill Road tree planting work. This work is
expected to be completed in June 2013. Staff will continue to evaluate the sidewalk
and street repair work. It is expected that the bid packages for this work will be
completed in May 2013, with work to begin in June or July 2013.
Resource Impact
The $2.2 million for this BAO has been added to the General Fund budget base in FY
2013 and will be transferred annually to the Infrastructure Reserve. This ensures
enhanced funding for “keep up” work recommended by IBRC and implemented by the
Council.
Policy Implications
Council added the $2.2 million to the Infrastructure Reserve in FY 2013 to fund
the annual gap in infrastructure maintenance “keep-up” that was identified by
IBRC. In selecting the work to be completed in FY 2013 with the $2.2 million,
Public Works and Community Services staff met to identify unfunded keep-up
needs. Unlike “catch-up” infrastructure maintenance needs, which are detailed in
the IBRC Final Report and supporting materials, unfunded keep-up needs have
not been individually identified. The recommendations in this report are primarily
intended to address keep-up needs, but some of the recommendations address
areas that would be considered catch-up work. The IBRC recommendation to add
$2.2 million annually for keep-up maintenance was also intended to account for
an estimated $1.5 million in annual “pop-up” projects that are approved by
Council during the fiscal year. The lack of such projects in FY 2013 to date
provides further support for using some of the funding for catch-up needs.
It is important to note that in many instances it is difficult to distinguish between
keep-up and catch-up maintenance. For instance, the proposed repairs to base
failures on concrete streets correct problems analogous to potholes on asphalt
streets that are repaired by the Streets work group, but which the group has not
been able to repair because of the size and/or complexity of the work. While
repairing this backlog of sites could be characterized as catch-up, it also keeps up
with ongoing street failures in a similar manner to the Streets work group repairs
of potholes. The key difference is that potholes are repaired on an ongoing,
City of Palo Alto Page 9
continuous basis, while the list of base failure repairs is proposed to be addressed
through one short-term contract.
Staff believes that the proposed uses of the $2.2 million are consistent with the
IBRC recommendation and with Council’s intent in adding the additional funding.
Environmental Review
This project is categorically exempt from the California Environmental Quality Act
(CEQA) under Section 15301c of the CEQA guidelines as repair, maintenance
and/or minor alteration of the existing facilities and no further environmental
review is necessary.
Attachments:
·Attachment A-Budget Amendment Ordinance (DOC)
Attachment A
ORDINANCE NO.xxxx
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING THE BUDGET FOR THE FISCAL YEAR 2013 TO
PROVIDE AN APPROPRIATION OF $2,200,000 FROM THE
CAPITAL PROJECTS FUND INFRASTRUCTURE RESERVE FOR
INFRASTRUCTURE MAINTENANCE NEEDS
The Council of the City of Palo Alto does ordain as follows:
SECTION 1. The Council of the City of Palo Alto finds and
determines as follows:
A. Pursuant to the provisions of Section 12 of Article
III of the Charter of the City of Palo Alto, the Council on
June 18, 2012 did adopt a budget for fiscal year 2013; and
B.In fiscal year 2013, an additional transfer of
$2,200,000 from the General Fund to the Capital Projects Fund
was made to address the City’s infrastructure maintenance
needs as recommended by the Infrastructure Blue Ribbon
Commission (IBRC). However, this additional funding was not
appropriated to any specific CIP projects or operating budget
areas; and
C. The funding of $2,200,000 will now be added to the
following CIP projects and Public Works operating budget
areas; and
Project Area Amount
Tree Pruning on El
Camino Real (operating
budget)
$60,000
Tree Planting on Page
Mill Road (operating
budget)
$17,000
Asphalt Materials
(operating budget)$70,000
CIP PO-89003, Sidewalk
Repairs $1,000,000
CIP PE-86070, Street
Maintenance $1,053,000
Total $2,200,000
Attachment A
D. City Council authorization is needed to amend the 2013
budget as hereinafter set forth.
SECTION 2.The sum of Sixty Thousand Dollars ($60,000) is
hereby appropriated to the Public Works Department operating
budget for tree pruning on El Camino Real.
SECTION 3.The sum of Seventeen Thousand Dollars
($17,000) is hereby appropriated to the Public Works
Department operating budget for tree planting on Page Mill
Road.
SECTION 4.The sum of Seventy Thousand Dollars ($70,000)
is hereby appropriated to the Public Works Department
operating budget for asphalt materials.
SECTION 5.The sum of One Million Dollars ($1,000,000) is
hereby appropriated to CIP Project PE-89003, Sidewalk Repairs.
SECTION 6.The sum of One Million Fifty-Three Thousand
Dollars ($1,053,000) is hereby appropriated to CIP Project PE-
86070, Street Maintenance.
SECTION 7.The Capital Fund Infrastructure Reserve is
hereby reduced by Two Million Two Hundred Thousand Dollars
($2,200,000) to Fourteen Million Three Thousand Five Hundred
Seventy Dollars ($14,003,570).
SECTION 8. As specified in Section 2.28.080(a) of the
Palo Alto Municipal Code, a two-thirds vote of the City
Council is required to adopt this ordinance.
SECTION 9. As provided in Section 2.04.330 of the Palo
Alto Municipal Code, this ordinance shall become effective
upon adoption.
SECTION 10.The above referenced project areas are
categorically exempt from the California Environmental Quality
Act (CEQA)under Section 15301c of the CEQA Guidelines as
repair, maintenance and/or minor alteration of the existing
facilities and no further environmental review is necessary.
INTRODUCED AND PASSED:
Attachment A
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:
_________________________
City Clerk
__________________________
Mayor
APPROVED AS TO FORM:
_________________________
Senior Assistant City
Attorney
__________________________
City Manager
__________________________
Director of Public Works
__________________________
Director of Administrative
Services
CITY OF PALO ALTO OFFICE OF THE CITY CLERK
March 18, 2013
The Honorable City Council
Palo Alto, California
Recommendation from the Council Appointed Officers Committee to
Exercise an Option to Extend for One Year a Consulting Contract with
Sherry L. Lund Associates for a Total Cost Not to Exceed $49,350 for; 1)
Consulting Services related to the 2012-2013 Annual Performance
Reviews for Four Council Appointed Officers for a Total Cost Not to
Exceed $32,300; 2) Solicitation of Staff Feedback Related to
Performance Evaluations for a Total Cost Not to Exceed $9,500; and 3)
Mid-year Performance Review Updates for a Total Cost Not to Exceed
$7,550
Recommendation:
The CAO Committee recommends that Council:
1) Exercise an Option to Extend for One Year for Consulting Services related to the 2012-2013
Annual Performance Reviews for Four Council Appointed Officers for a Total Cost Not to Exceed
$32,300;
2) Solicitation of Staff Feedback Related to Performance Evaluations for a Total Cost Not to
Exceed $9,500; and
3) Mid-year Performance Review Updates for a Total Cost Not to Exceed $7,550, and
4) Use Council Contingency Funds for the unbudgeted amount of $7,000.
Discussion
On March 6, 2013 the Council Appointed Officers (CAO) Committee met with Sherry Lund to
discuss Council exercising the option to extend her contract for one year.
Ms. Lund provided three components for review and consideration by the Committee. The first
component was the Annual Evaluation Proposal that would begin in April and include the CAO’s
thought process concerning their self-evaluation, input on their concerns, and feedback
regarding each other. Council would receive the information and provide feedback to Ms. Lund
during the annual review. Ms. Lund will be present during the final review between each CAO
and the Council. This work would be performed for a total cost not to exceed $32,300.
Page 2
This year the annual Evaluation Proposal reflected a five (5%) percent increase in the fee from
last year. The fee had remained constant for the past five years. Ms. Lund had also included an
additional 10 hours ($2,500) for compensation-related work and meetings that might be
required. If this work is not performed the City will not be charged for it. The only change to
the process itself is to formalize that Ms. Lund will be collecting feedback from Council through
the interview process that was used last year rather than the questionnaires that had been
used in past years. The change proved to be more efficient and effective for the final two
reviews last year.
The CAO Committee on a 4-0 vote approved this component.
The second component was a proposal by Ms. Lund for gathering Staff feedback regarding the
CAO’s. The purpose of this additional component is to provide better input to the internal
leadership portion of the performance review. Ms. Lund stated that choosing a methodology to
get feedback from staff is critical to achieve a quality outcome. A written survey is the simplest
and most inexpensive way to gather feedback, but it has a high potential for abuse and is
problematic in a variety of ways. Conducting interviews overcomes most of the disadvantages
of written surveys. An experienced interviewer can assess the context of the comments. Ms.
Lund felt that clearly conducting interviews is a superior solution from a methodology
perspective. However, Ms. Lund’s initial proposal to keep costs down was a hybrid approach of
surveys combined with spot check interviews. The Committee after speaking with Ms. Lund felt
that given the minimal increase in cost to do it right warranted the small increase in cost of
$2,500. Ms. Lund will now personally interview all 30 direct reports of the CAO’s rather than
use a survey.
The CAO Committee on a 4-0 vote approved the solicitation of staff feedback through the
interview process for a total cost not to exceed $9,500.
The third component is a mid-year check-in; which will typically occur in the December
timeframe. The CAO Committee agreed to approve a mid-year performance evaluation for all
CAO’s for a total cost not to exceed $7,550. This is a change from last year as the City Clerk did
not have a mid-year review last year.
The CAO Committee on a 4-0 vote approved recommending to the City council that all four
CAO’s have a mid-year performance review for a total cost not to exceed $7,500.
ATTACHMENTS:
Sherry Lund Amendment No. One (PDF)
Sherry Lund cover letter to CAO Committee (DOCX)
CAO Annual Evaluation Process 2012-13 (DOCX)
Sherry Lund CAO Staff Feedback Revised 3-7-13 (DOCX)
Page 3
Sherry Lund CAO Mid-year Update Discussions (DOCX)
March 6, 2013 CAO Meeting Minutes (DOC)
Department Head: Donna Grider, City Clerk
Page 4
1 Revision July 25, 2012
AMENDMENT NO. 1 TO CONTRACT NO. S12145456
BETWEEN THE CITY OF PALO ALTO AND
SHERRY L. LUND ASSOCIATES
This Amendment No. 1 to Contract No. S12145456 (“Contract”) is entered into
March , 2013, by and between the CITY OF PALO ALTO, a California chartered municipal
corporation (“CITY”), and SHERRY L. LUND ASSOCIATES, a sole Proprietor, located at 247 La
Cuesta Drive, Portola Valley, CA 94028 (“CONSULTANT”).
R E C I T A L S:
WHEREAS, the Contract was entered into between the parties for the provision of
performance evaluation services for Council Appointed Officers (CAOs); and
WHEREAS, the parties wish to amend the Contract to exercise the first option to
extend for one year and make other changes described herein;
NOW, THEREFORE, in consideration of the covenants, terms, conditions, and
provisions of this Amendment, the parties agree:
SECTION 1. Section 2 is hereby amended to read as follows:
“SECTION 2. TERM. The term of this Agreement shall be from the date of its full
execution through June 30, 2014 with the option to extend the Agreement for one (1), one-year
extension, unless terminated earlier pursuant to Section 19 of this Agreement.
SECTION 2. Section 4 is hereby amended to read as follows:
“SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be
paid to CONSULTANT for performance of the Services described in Exhibit “A”, including both
payment for professional services and reimbursable expenses for year one shall not exceed Thirty
Eight Thousand Five Hundred and Fifty Dollars ($38,550.00) and for year two shall not exceed Forty
Nine Thousand Three Hundred Fifty Dollars ($49,350.00), assuming that no
cancellation/rescheduling of fees due to CITY’s missing project milestones would apply. In the event
Additional Services are authorized the total compensation for services and reimbursable expenses for
year one shall not exceed Forty Two Thousand Four Hundred and Five Dollars ($42,405.00) and for
year two shall not exceed Fifty One Thousand Eight Hundred Fifty Dollars ($51,850.00).
Additional Services, as defined in Exhibit C, if any, shall be authorized in accordance with and
subject to the provisions of Exhibit “C”. CONSULTANT shall not receive any compensation for
Additional Services performed without prior written authorization of CITY. Additional Services
2 Revision July 25, 2012
shall mean any work that is determined by CITY to be necessary, but which is not included within
the Scope of Services described in Exhibit “A”.”
SECTION 3. The following exhibit(s) to the Contract is/are hereby amended to read
as set forth in the attachment(s) to this Amendment, which are incorporated in full by this reference:
a. Exhibit “A” entitled “SCOPE OF SERVICES”
b. Exhibit “B” entitled “SCHEDULE OF PERFORMANCE.”
c. Exhibit “C” entitled “COMPENSATION”.
SECTION 4. Except as herein modified, all other provisions of the Contract,
including any exhibits and subsequent amendments thereto, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have by their duly authorized representatives
executed this Amendment on the date first above written.
CITY OF PALO ALTO
____________________________
Purchasing Manager
APPROVED AS TO FORM:
_____________________________
Senior Asst. City Attorney
SHERRY L. LUND ASSOCIATES
By:___________________________
Name:_________________________
Title:________________________
Attachments:
EXHIBIT “A”: SCOPE OF SERVICES
EXHIBIT “B”: SCHEDULE OF PERFORMANCE
EXHIBIT "C": COMPENSATION
3 Revision July 25, 2012
Year One
04/24/2012 to 06/30/2013
EXHIBIT “A”
SCOPE OF SERVICES
1. PROJECT ELEMENT #1: CAO Annual Performance Evaluations (June/July
Timeframe)
Phase I – Preparation for Review Session
Consultant:
Works with internal liaison to develop contract and schedule project meetings and
milestones.
Solicits CAO self-evaluations, reviews them and provides feedback and advice.
Assures CAO questions are clarified and raised with Council.
Prepares and distributes binders to Council, including instructions, CAO self-
evaluations and blank evaluation hard copies. Distributes soft copies of forms on the
same day.
Reviews Council evaluation feedback; meets with each Council member in person or
by phone to refine and clarify written feedback prior to performance review session.
Compiles written comments and numerical feedback from Council and develops a
written evaluation summary for each CAO. Prepares and sends confidential hardcopy
packet with this information prior to each CAO review session.
Prepares information for closed review sessions that enable Council members to focus
their discussion efficiently.
Phase II – Performance Review Session
Consultant:
Provides facilitation and technical assistance as needed during closed session Council
performance review meetings with each CAO.
Phase III - Post-Session Wrap-Up
Consultant:
Documents agreed-upon unified Council feedback for written reviews.
Meets with each CAO to debrief evaluation meetings.
Prepares final evaluation file copies and obtains necessary signatures. Copies are
given to CAO Committee Chair for filing and to each individual CAO. Final action
on Council agenda is scheduled with Liaison.
Follows up with CAO Chair to debrief and solicit any additional process
improvements.
4 Revision July 25, 2012
2. PROJECT ELEMENT #2: Mid-Year Check-In Performance Discussions (Nov./Dec.
Timeframe)
The Mid-Year is a simpler, more streamlined process than the annual review, and it has a different
purpose. Mid-Year discussions allow CAOs and Council to do four things: 1) Provide answers to
CAOs’ performance-based questions from the entire Council; 2) Address any misalignments in
expectations;
3) Discuss goals that require mutual involvement and participation; and 4) Address emergent
issues. They allow Council to more actively support and manage performance rather than letting a
goal potentially drift for an entire year.
Consultant:
Gathers feedback from CAOs and Council Members in advance.
Creates a summary of key issues for discussion and distributes it to Council and CAOs in
advance.
Facilitates closed session meetings.
Provides post-meeting summaries.
3. PROJECT ELEMENT #3: Staff Member Input for CAO Annual Performance Reviews
1. Interview CAOs to get their context and input for employee feedback (e.g., who, if
anyone, is on a performance plan, any other circumstances I should know about.
2. Attend a meeting of each CAO with those being surveyed to introduce myself, describe
what we are doing and why. Input will be gathered from the direct reports of the City
Manager (12), the City Attorney (9), and the City Auditor (6). In the latter two cases, all
employees in the department are also all direct reports. I would also gather input from all
4 employees in the City Clerk’s office. They are not all direct reports, but the small
numbers make it essential to include everyone in order to preserve anonymity.
3. Collect written feedback through a combination of a few (probably 5-6) simple written
survey questions. I will make some brief follow-up phone calls to explore resulting
questions that may arise in the written feedback, and to gather more examples to clarify
patterns of comments. Staff feedback will be anonymous to CAOs and to Council but not
to the Consultant.
Council members will receive a brief (1-3 pages) summary to inform their annual review
feedback to CAOs. Due to the highly confidential nature of this assignment, I personally perform
all work on this contract.
5 Revision July 25, 2012
4. CITY OF PALO ALTO (Client) Responsibilities
In order to support the success of the project and to stay within quoted costs, Client agrees to:
Assure involved parties a) are available for one-on-one and group meetings; and b) complete
evaluations on time in order to meet project milestones.
Identify a project manager/internal liaison who can schedule appointments and provide
support in getting evaluation items on Council agendas.
Provide an efficient and coordinated contracting process through a single liaison.
Provide meeting space and A-V equipment required.
Commit to a professional and respectful process.
6 Revision July 25, 2012
Year Two
04/24/2013 to 06/30/2014
EXHIBIT “A”
SCOPE OF SERVICES
1. PROJECT ELEMENT #1: CAO Annual Performance Evaluations (April-August
Timeframe)
Phase I – Preparation for Review Session
Consultant:
Works with internal liaison to schedule project meetings and milestones.
Solicits CAO self-evaluations, reviews them and provides feedback and advice.
Works with CAOs and Council, as needed to refine performance measures.
Assures CAO questions are clarified and raised with Council
Prepares and distributes binders to Council, including instructions, CAO self-
evaluations, blank evaluation, and staff feedback summary in hard copy.
Distributes soft copies of forms on the same day.
Meets with each Council member by phone or in person to collect evaluation
feedback on each CAO.
Compiles written comments and numerical feedback from Council and develops a
written evaluation summary for each CAO. Prepares and sends confidential soft
copy and hard copy packet and with this information prior to each CAO review
session.
Prepares information for closed review sessions which enables Councilmembers
to focus their discussion efficiently.
Phase II – Performance Review Session
Consultant:
Provides facilitation and technical assistance during closed session Council
performance review meetings, and performance goal-setting with each CAO.
Documents agreed-upon unified Council feedback for written reviews and goals.
7 Revision July 25, 2012
Phase III – Post-Session Wrap-Up
Consultant:
Meets with CAOs to debrief evaluation meetings.
Prepares final evaluation file copies and obtains necessary signatures. Copies are
given to CAO Committee Chair for filing and to each individual CAO. Final
action on Council agenda is scheduled with City Liaison.
As needed, meets with CAO Chair and/or Committee members to get additional
feedback and/or refine future process.
Phase IV – Compensation Analysis, Discussions and Potential Action
Consultant:
Provides guidance and format to City HR staff member, who collects competitive
compensation data and formats it as requested by Consultant.
Analyzes results and works with CAO Chair to prepare for closed session
discussions.
Documents decisions. CAO Chair works with internal staff to agendize
compensation items for Council meetings and to prepare any resulting changes in
contracts.
Performs other compensation-related tasks as requested by CAO Chair or Council.
2. PROJECT ELEMENT #2: Mid-Year CAO Check-In Performance Updates (Nov./Dec.
Timeframe)
Phase I – Advance Preparation for Discussions
Consultant:
Interviews each Councilmember for 45-60 minutes to gather update feedback on
the four CAOs, including a) whether CAO is on track with goals/objectives, b)
whether Councilmember wishes to make any changes/course corrections in
Councilmember expectations or CAO performance, and c) whether
8 Revision July 25, 2012
Councilmember wishes to provide other feedback
Interviews each CAO for 30 minutes to see if there are questions or issues they
would like to raise with the Council
Summarize Council feedback and CAO questions and prepare agendas and
materials for closed sessions to support efficient and effective discussion
Phase II – Closed Session Performance Check-in Discussions
Consultant:
Meets with Council in closed session to agree on update feedback
Meets with Council and each CAO for feedback and discussion
Phase III – Wrap Up
Consultant:
Documents agreed-upon Council feedback
Answers follow-up questions with CAOs
Refines process for future, as requested by Council
3. PROJECT ELEMENT #3: Staff Member Input for CAO Annual Performance
Reviews
Consultant:
Attends each CAO’s staff meeting to introduce self, explain purpose of soliciting
feedback and process
One-on-one with each CAO, listen to CAO’s perspective and weigh context
For Attorney, Auditor and Clerk – Ask staff members to respond in writing to 4-6
targeted questions that require comments. Read comments and follow-up with
brief phone interviews.
For Manager – Conduct individual interviews of approximately one-hour in length
Summarize final feedback and include it in Council’s feedback package
9 Revision July 25, 2012
Provide follow-up consulting as requested
4. CITY OF PALO ALTO (Client) Responsibilities
In order to support the success of the project and to stay within quoted costs, Client agrees to:
Assure involved parties a) are available for one-on-one and group meetings; and
b) complete evaluations on time in order to meet project milestones.
Identify an internal liaison that can schedule appointments and provide support in
getting evaluation items on Council agendas.
Provide meeting space and A-V equipment required.
Commit to a professional and respectful process
10 Revision July 25, 2012
Year One
04/24/2012 to 06/30/2013
EXHIBIT “B”
SCHEDULE OF PERFORMANCE
CONSULTANT shall perform the Services so as to complete milestones within the number of
days/ weeks as mutually agreed upon by both the CONSULTANT and CITY. A specific
schedule will be determined based on the scheduling demands of the City Council and the
Council Appointed Officers. The time to complete each milestone may be increased or
decreased by mutual agreement of the project managers for CONSULTANT and CITY so long as
all work is completed within the term of the Agreement. CONSULTANT shall provide a
detailed schedule of work within 2 weeks of receipt of the notice to proceed.
PROJECT ELEMENT #1:
Note: Important Council Deadlines are in Bold Face
Closed Session Council Meetings are in Bold Face Italics
Mon., May 14 City Manager and City Attorney final self-evaluation due to Sherry
Wed., May 16 Binders and blank evaluation package (instructions, eval form, last
year’s review, contract) for City Manager and City Attorney go to Council
for completion
Thurs., June 11 City Clerk and City Auditor final self-evaluation due to Sherry
Wed., June 13 Blank evaluation package for City Clerk and City Auditor goes to Council for
completion
Thurs., June 14 CC evaluations of City Manager are due to Consultant (completed between
May 13 and June 14)
Thurs., June 21 CC evaluation City Attorney are due to Consultant (completed
between May 18 and June 21)
Tues. July 3 Council receives feedback summaries for City Manager and City Attorney
(for reading prior to July 11 and July 12 closed sessions).
11 Revision July 25, 2012
Wed., July 11 5 p.m. Closed Session Review of City Manager
Thurs.,July 12 5 p.m. Closed Session Review of City Clerk and City Attorney
Thurs. Aug. 9 CC evaluations of City Clerk and City Auditor are due to Consultant
(completed between June 13 and – Aug. 9, which provides the option to
complete before the Council’s meeting break or after the break is
underway)
Friday, Aug. 24 Council receives summary of City Clerk and City Auditor feedback
(for reading prior to Aug. 29 and 30 closed sessions)
Wed., Aug. 29 5 p.m. Closed Session Review of City Clerk
Thurs., Aug. 30 5 p.m. Closed Session Review of City Auditor
By Mon., Sept. 10 Obtain signatures on reviews before Council meeting for filing in order to
complete process
PROJECT ELEMENT #2:
Nov. (dates TBD) – Gather feedback from CAOs and Council for Mid-Year Performance
Discussions
Dec. (dates TBD) – Facilitate Mid-Year Performance Discussions
PROJECT ELEMENT #3:
By April 12: Interview CAOs
By April 12: Attend Meeting Of Each CAO
By April 27: Collect Written Feedback
By May 13 for City Manager and City Attorney
By June 16 for City Clerk and City Auditor: Provide Council Members With Brief
Summary of Results to be included in the evaluation package they receive, asking them
for feedback on each CAO
12 Revision July 25, 2012
Year Two
04/24/2013 to 06/30/2014
EXHIBIT “B”
SCHEDULE OF PERFORMANCE
CONSULTANT shall perform the Services in Project Elements #1, #2 and #3 so as to
complete milestones within the number of days/weeks as mutually agreed upon by both
CONSULTANT and CITY. A specific schedule will be determined based on the scheduling
demands of the City Council and the Council Appointed Officers. The time to complete
each milestone may be increased or decreased by mutual agreement of the project managers
for CONSULTANT and CITY so long as all work is completed within the term of this
Agreement.
CONSULTANT shall propose a detailed schedule of work for Project Elements #1, #2 and
#3 within 2 weeks of receipt of the notice to proceed, subject to Council approval.
13 Revision July 25, 2012
Year One
04/24/2012 to 06/30/2013
EXHIBIT “C”
COMPENSATION
The CITY agrees to compensate the CONSULTANT for professional services performed in
accordance with the terms and conditions of this Agreement, and as set forth in the budget
schedule below for each task.
The compensation to be paid to CONSULTANT under this Agreement for all services
described in Exhibit “A” (“Basic Services”) and reimbursable expenses shall not exceed
$38,550.00. CONSULTANT agrees to complete all Basic Services, including reimbursable
expenses, within this amount. In the event CITY authorizes any Additional Services, either
due to expanded scope or due to the CITY’S not meeting project milestones, the maximum
compensation shall not exceed $42,405.00. Any work performed or expenses incurred for
which payment would result in a total exceeding the maximum amount of compensation set
forth herein shall be at no cost to the CITY.
CONSULTANT shall perform the tasks and categories of work as outlined and budgeted
below. The CITY’s Project Manager may approve in writing the transfer of budget amounts
between any of the tasks or categories listed below provided the total compensation for Basic
14 Revision July 25, 2012
Services, including reimbursable expenses, does not exceed $38,550.00 and the total
compensation for Additional Services does not exceed $42,405.00.
BUDGET SCHEDULE NOT TO EXCEED AMOUNT
Task 1 $26,000.00
PROJECT ELEMENT #1:
Task 2 $6,550.00
PROJECT ELEMENT #2:
Task 3 $6,000.00
PROJECT ELEMENT #3:
Sub-total Basic Services $38,550.00
Reimbursable Expenses $0.00
Total Basic Services and Reimbursable expenses $38,550.00
Additional Services (Not to Exceed) $3,855.00
Maximum Total Compensation $42,405.00
15 Revision July 25, 2012
CANCELLATION/RESCHEDULING POLICY
Cancellation/Rescheduling Policy: There is no charge made if an onsite consulting date can be
mutually rescheduled by Client and Consultant within 3 weeks of the original date; if the
session cannot be rescheduled during this time frame, the cancellation schedule applies. (For
example: If a consulting date has been set for June 1st, the mutually agreed upon rescheduled
date must fall between June 2-22nd. A rescheduled date later than June 22nd would incur a
cancellation/rescheduling fee as indicated below).
Fees for cancellation (or rescheduling as previously described) for any reason are applied on
the following schedule, which reflects both advance preparation and exclusive holding of a
date for a client: 6 weeks in advance - 25% fee; 5 weeks in advance - 50% fee; 4 weeks in
advance - 100% fee. A cancellation fee also applies to individual appointments missed
without 24 hours notice based on an hourly rate of $250 per hour multiplied by the number of
hours scheduled for the missed appointment. Expenses will be charged according to their cost
accrued at time of cancellation.
16 Revision July 25, 2012
REIMBURSABLE EXPENSES
The administrative, overhead, secretarial time or secretarial overtime, word processing,
photocopying, in-house printing, insurance and other ordinary business expenses are included
within the scope of payment for services and are not reimbursable expenses. CITY shall
reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for
which CONSULTANT shall be reimbursed are: None
A. Travel outside the San Francisco Bay area, including transportation and meals, will be
reimbursed at actual cost subject to the City of Palo Alto’s policy for reimbursement of travel
and meal expenses for City of Palo Alto employees.
B. Long distance telephone service charges, cellular phone service charges, facsimile
transmission and postage charges are reimbursable at actual cost.
All requests for payment of expenses shall be accompanied by appropriate backup information.
Any expense anticipated to be more than $0.00 shall be approved in advance by the CITY’s
project manager.
17 Revision July 25, 2012
ADDITIONAL SERVICES
The CONSULTANT shall provide additional services only by advanced authorization from the
CITY’s project manager or council member direction. The parties recognize that on occasion the
CONSULTANT may be directed to immediately perform Additional Services and in such cases it is
not possible to obtain a written proposal in advance. However, when timing permits before
performing Additional Services, the CONSULTANT, at the CITY’s project manager’s request, shall
submit a detailed written proposal including a description of the scope of services, schedule, level of
effort, and CONSULTANT’s proposed maximum compensation, including reimbursable expense,
for such services based on the rates set forth in Exhibit C-1. The additional services scope, schedule
and maximum compensation shall be negotiated and agreed to in writing by the CITY’s Project
Manager and CONSULTANT prior to commencement of the services. Payment for additional
services is subject to all requirements and restrictions in this Agreement
Work required because the following conditions are not satisfied or are exceeded shall be considered
as additional services:
1. Re-work that results from City Council members, officials, or City staff not
performing their responsibilities as set forth in Exhibit A, Paragraph 4 in a timely fashion (thus
requiring re-work in order to complete the project);
2. Meetings missed without 24 hours notice; and
3. Additional scope of services not covered in Exhibit A.
18 Revision July 25, 2012
Year Two
04/24/2013 to 06/30/2014
EXHIBIT “C”
COMPENSATION
The CITY agrees to compensate the CONSULTANT for professional services performed in
accordance with the terms and conditions of this Agreement, and as set forth in the budget
schedule below for each task.
The compensation to be paid to CONSULTANT under this Agreement for all services
described in Exhibit “A” (“Basic Services”) and reimbursable expenses shall not exceed
$49,350.00. CONSULTANT agrees to complete all Basic Services, including reimbursable
expenses, within this amount. In the event CITY authorizes any Additional Services, either
due to expanded scope or due to the CITY’S not meeting project milestones, the maximum
compensation shall not exceed $51,850.00. Any work performed or expenses incurred for
which payment would result in a total exceeding the maximum amount of compensation set
forth herein shall be at no cost to the CITY.
CONSULTANT shall perform the tasks and categories of work as outlined and budgeted
below. The CITY’s Project Manager may approve in writing the transfer of budget amounts
19 Revision July 25, 2012
between any of the tasks or categories listed below provided the total compensation for Basic
Services, including reimbursable expenses, does not exceed $49,350.00 and the total
compensation for Additional Services does not exceed $51,850.00.
BUDGET SCHEDULE NOT TO EXCEED AMOUNT
Task 1 $32,300.00
PROJECT ELEMENT #1:
Task 2 $7,550.00
PROJECT ELEMENT #2:
Task 3 $9,500.00
PROJECT ELEMENT #3:
Sub-total Basic Services $49,350.00
Reimbursable Expenses $0.00
Total Basic Services and Reimbursable expenses $49,350.00
Additional Services (Not to Exceed) $2,500.00
Maximum Total Compensation $51,850.00
20 Revision July 25, 2012
CANCELLATION/RESCHEDULING POLICY
Cancellation/Rescheduling Policy: There is no charge made if an onsite consulting date can be
mutually rescheduled by Client and Consultant within 3 weeks of the original date; if the
session cannot be rescheduled during this time frame, the cancellation schedule applies. (For
example: If a consulting date has been set for June 1st, the mutually agreed upon rescheduled
date must fall between June 2-22nd. A rescheduled date later than June 22nd would incur a
cancellation/rescheduling fee as indicated below).
Fees for cancellation (or rescheduling as previously described) for any reason are applied on
the following schedule, which reflects both advance preparation and exclusive holding of a
date for a client: 6 weeks in advance - 25% fee; 5 weeks in advance - 50% fee; 4 weeks in
advance - 100% fee. A cancellation fee also applies to individual appointments missed
without 24 hours notice based on an hourly rate of $250 per hour multiplied by the number of
hours scheduled for the missed appointment. Expenses will be charged according to their cost
accrued at time of cancellation.
21 Revision July 25, 2012
REIMBURSABLE EXPENSES
The administrative, overhead, secretarial time or secretarial overtime, word processing,
photocopying, in-house printing, insurance and other ordinary business expenses are included
within the scope of payment for services and are not reimbursable expenses. CITY shall
reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for
which CONSULTANT shall be reimbursed are: None
A. Travel outside the San Francisco Bay area, including transportation and meals, will be
reimbursed at actual cost subject to the City of Palo Alto’s policy for reimbursement of travel
and meal expenses for City of Palo Alto employees.
B. Long distance telephone service charges, cellular phone service charges, facsimile
transmission and postage charges are reimbursable at actual cost.
All requests for payment of expenses shall be accompanied by appropriate backup information.
Any expense anticipated to be more than $0.00 shall be approved in advance by the CITY’s
project manager.
22 Revision July 25, 2012
ADDITIONAL SERVICES
The CONSULTANT shall provide additional services only by advanced authorization from the
CITY’s project manager or council member direction. The parties recognize that on occasion the
CONSULTANT may be directed to immediately perform Additional Services and in such cases it is
not possible to obtain a written proposal in advance. However, when timing permits before
performing Additional Services, the CONSULTANT, at the CITY’s project manager’s request, shall
submit a detailed written proposal including a description of the scope of services, schedule, level of
effort, and CONSULTANT’s proposed maximum compensation, including reimbursable expense,
for such services based on the rates set forth in Exhibit C-1. The additional services scope, schedule
and maximum compensation shall be negotiated and agreed to in writing by the CITY’s Project
Manager and CONSULTANT prior to commencement of the services. Payment for additional
services is subject to all requirements and restrictions in this Agreement
Work required because the following conditions are not satisfied or are exceeded shall be
considered as additional services:
1. Re-work that results from City Council members, officials, or City staff not
performing their responsibilities as set forth in Exhibit A, Paragraph 4 in a timely
fashion (thus requiring re-work in order to complete the project);
2. Meetings missed without 24 hours notice; and
3. Additional scope of services not covered in Exhibit A.
247 La Cuesta Drive
Portola Valley, CA 94028
(650) 619-5500 fax (650) 561-8414
sherrylund@aol.com
February 25, 2013
Mayor Greg Scharff
Chairperson, Council/CAO Committee
City of Palo Alto City Council
250 Hamilton Avenue
Palo Alto, CA 94301
Dear Mayor Scharff--
I am attaching three proposals for the CAO annual performance management process. I am
submitting these separately to allow the CAO Committee and/or Council to consider each
component without delaying decisions on the others. I would highlight the following changes:
This year, the annual evaluation proposal reflects a 5% increase, for the first time in the
last 5 years of consulting on that process. There is also up to 10 hours or $2,500 included
this year for compensation-related work and meetings that may be required. The only
change to the process itself is the collection of feedback through interviews rather than
questionnaires. This change proved to be more efficient and effective for the final two
reviews last year.
The staff feedback component was included for the first time last year. There is an
addition of up to 4 hours or $1,000 for any follow-up work that may be required.
The mid-year update discussions cost remains the same.
Please let me know if there is additional information I can provide. I will be attending the CAO
meeting on March 6 to respond to any questions from the CAO Committee.
Thank you for your assistance and best regards,
Sherry Lund
Principal
247 La Cuesta Drive
Portola Valley, CA 94028
(650) 619-5500 fax (650) 561-8414
sherrylund@aol.com
February 23, 2013
Mayor Greg Scharff
Chairperson, Council/CAO Committee
City of Palo Alto City Council
250 Hamilton Avenue
Palo Alto, CA 94301
Dear Mayor Scharff:
Following is a proposal for the annual CAO performance review process. It includes the
project description, timeline, benefits, project phases, tasks and consultant responsibilities,
client responsibilities, project cost and assumptions, consultant qualifications, and next steps for
the Council’s consideration. I am submitting separate proposals for gathering input from CAO
staff members and mid-year performance update discussions for ease of Council’s consideration
of each individual component of Council’s performance management process.
Project Description
The four CAOs control the major financial and human resources in executing the Council’s
vision and priorities. Performance evaluation is an important opportunity for CAOs to get
Council’s unified feedback on the past year. More importantly, it is the only opportunity to get
unified feedback about expectations of performance going forward. Focus, clarity and
alignment are critical to deploying financial and human capital efficiently and effectively;
they are particularly critical when resources are limited.
At the end of FY 2012-2013, the City Council will be evaluating the performance of four
Council Appointed Officers (CAOs). I propose a similar evaluation process to that used in
FY 2011-2012, with one change. That is to collect all Council feedback through interviews.
Doing so has proven to be a more time-efficient method and requires less follow-up than
written questionnaires.
Timeline
Last year, Council considered alternate timeframes for conducting annual CAO performance
reviews and concluded that they wish to keep the review process on the same schedule. This
means that the process would be completed by the end of July, or before the Council goes on
Sherry L. Lund Associates Proposal: 2012-2013 CAO Annual Review Process Page 2
its annual meeting break. I suggest that, to make the process as easy on Council as possible
during a busy time, the work kicks off in early to mid-May. Starting then means that a
contract would need to be initiated by mid-April.
Benefits
The primary benefits I bring to the process are as follows:
1. The ability to leverage Council’s time to best use. Council has a exceptionally heavy
work load with major budgetary and other issues in front of you.
2. Knowledge of your Council objectives, your unique City culture, your CAOs,
plus technical expertise in executive evaluation and work with Councils and Boards.
3. The ability to be efficient in helping Council deliver a quality process and
outcomes.
4. Assurance of a safe, professional, and mutually respectful environment for review
discussions/feedback. I serve as an advocate for all points of view being heard within
a professional and respectful environment.
I can work flexibly with you to make any changes in the process that you may desire within
the framework of maintaining a quality process.
Project Phases, Tasks, and Consultant Responsibilities
In addition to the specific project steps listed below, I, as Consultant, prepare for all meetings
and communications; serve as project manager; and assure a sound methodology for the review
process as a whole. The following performance evaluation project steps correspond to the last
three years’ process:
Phase I – Preparation for Review Session
In this phase, Consultant:
Works with internal liaison to schedule project meetings and milestones.
Solicits CAO self-evaluations, reviews them and provides feedback and advice.
Works with CAOs and Council, as needed, to refine performance measures.
Assures CAO questions are clarified and raised with Council.
Prepares and distributes binders to Council, including instructions, CAO self-
evaluations, blank evaluation, and, if elected, staff feedback summary in hard
copy. Distributes soft copies of forms on the same day.
Meets with each Council member by phone or in person to collect evaluation
feedback on each CAO.
Compiles written comments and numerical feedback from Council and develops a
written evaluation summary for each CAO. Prepares and sends confidential soft
copy and hard copy packet and with this information prior to each CAO review
session.
Prepares information for closed review sessions which enables Councilmembers to
focus their discussion efficiently.
Sherry L. Lund Associates Proposal: 2012-2013 CAO Annual Review Process Page 3
Phase II – Performance Review Session
In this phase, Consultant:
Provides facilitation and technical assistance during closed session Council
performance review meetings, and performance goal-setting with each CAO.
Documents agreed-upon unified Council feedback for written reviews and goals.
Phase III - Post-Session Wrap-Up
In this phase, Consultant:
Meets with CAOs to debrief evaluation meetings.
Prepares final evaluation file copies and obtains necessary signatures. Copies are
given to CAO Committee Chair for filing and to each individual CAO. Final
action on Council agenda is scheduled with City Liaison.
As needed, meets with CAO Chair and/or Committee members to get additional
feedback and/or refine future process.
Phase IV - Compensation Analysis, Discussions and Potential Action
Timing of compensation discussions in the process is driven by CAO and Council
schedules. These discussions may either occur between Phase II and III or after Phase III.
In this phase, Consultant:
Provides guidance and format to City HR staff member, who collect competitive
compensation data and formats it as requested by Consultant.
Analyzes results and works with CAO Chair to prepare for closed session
discussions.
Documents decisions. CAO Chair works with internal staff to agendize
compensation items for Council meetings and to prepare any resulting changes in
contracts.
Performs any other task required.
Client Responsibilities
In order to support the success of the project, Client agrees to:
Assure involved parties a) are available for one-on-one and group meetings; and b)
complete evaluations on time in order to meet project milestones.
Identify an internal liaison that can schedule appointments and provide support in
getting evaluation items on Council agendas.
Provide meeting space and A-V equipment required.
Commit to a professional and respectful process.
Sherry L. Lund Associates Proposal: 2012-2013 CAO Annual Review Process Page 4
Project Cost and Assumptions
Annual Evaluation Cycle - The CAO annual evaluation process can be completed for a
project fee not to exceed $ 32,300.00, which includes expenses and includes the following:
o $ 27,300.00 - $ 29,800.00 - Annual evaluations for the four CAOs. The higher
number in the range includes up to 10 hours or $ 2,500 for possible client-driven
additional services. These may include meetings cancelled without notice;
additional work or re-work resulting from Council or City staff not performing
their responsibilities in a timely fashion; and meeting client requests for out of
scope services.
o Up to 10 hours or $ 2,500.00 estimated for compensation-related work.
Additional work required would be billed at $250/hour.
This quotation is based on the work as previously described and cannot be unbundled
without re-quotation.
Options for gathering feedback from the CAO Direct Reports and for Mid-Year Check-In
Discussions are addressed in separate proposals in order to facilitate Council’s individual
consideration of each component.
Cost Assumptions - The following assumptions have been considered in pricing this proposal:
There will be compensation analysis and discussion work required this year.
Competitive data will be gathered and formatted by City HR staff, with Consultant
specifying what is needed.
Meetings missed without 24 hours notice and re-work that is caused by the Council
or City employees missing meetings and deadlines will be billed beyond the
quoted project fee at discounted public sector rate of $250/hr. (private sector rate is
$375/hr.).
Consultant Qualifications:
I believe my skills and experience remain a good match for this work, as I offer:
Five years of continuity in working with the City of Palo Alto Council and CAOs
on performance management. An insider’s understanding of City culture and citizen
expectations with the outsider’s ability to be fully objective about the process and
relationships.
Deep and broad experience in performance management (including executive
evaluation), executive coaching, negotiation, interpersonal communication,
rewards and recognition, and career development – all important components of
this project.
Sherry L. Lund Associates Proposal: 2012-2013 CAO Annual Review Process Page 5
Thirty-five years experience in organizational consulting--with twenty-three years
consulting experience in my own firm—for a broad variety of organizations in the
public and private sector:
o Public sector/non-profit experience examples include: Cities of Fremont, Santa
Rosa, Dublin, San Ramon, Sausalito, Sonoma, Mission Viejo, Tracy, Fairfield,
Union City, CA; plus the City of Tualatin, OR; Counties of Santa Clara, San
Mateo, Alameda and Riverside, CA; BAAQMD, Sonoma County WMA,
Carnegie Mellon University (Provost), the Dr. Susan Love Research Foundation,
the Council on Foundations, S. H. Cowell Foundation, and the University of
California.
o Global private sector examples include: Intel, HP, Acco Brands, Cisco Systems,
Seagate, The Gap, Levi Strauss, Driscoll’s, Xoma, Genelabs, among many others.
This broad experience allows me to collect best practices from many sources and to
avoid getting locked into the paradigms and traditions of a single type of organization.
Next Steps
Upon acceptance of this proposal by the CAO Committee and Council, the next steps are to:
1. Execute a contract per your internal procedure.
2. Develop a project schedule that is based on availability of all parties; revise it, as
necessary, with Council at the earliest meeting possible. Please note that a schedule
cannot be confirmed until the contracting process is complete.
I would be very pleased to work with the Council and the CAOs again on the annual review
process. Please let me know if I may provide additional information.
Best regards,
Sherry Lund
Principal
247 La Cuesta Drive
Portola Valley, CA 94028
(650) 619-5500 fax (650) 561-8414
sherrylund@aol.com
March 7, 2013
Mayor Greg Scharff
Chairperson, Council/CAO Committee
City of Palo Alto City Council
250 Hamilton Avenue
Palo Alto, CA 94301
Dear Mayor Scharff:
Based on direction given by the Council/CAO Committee on March 6, I have updated this proposal.
The purpose of these changes is to reflect the Committee’s desire to optimize the methodology for
the City Manager’s staff. The change, on page 3, is to add Project Step 3B and on page 4, to adjust
the cost accordingly.
As part of my proposal for the CAO annual performance review process, I’m including a
separate cost quotation for gathering feedback from staff members. The purpose of this
additional component is to provide better input to the internal leadership portion of the
performance review. I am submitting separate proposals for the annual review cycle and mid-
year performance update discussions for ease of Council’s consideration of each individual
component of Council’s performance management process.
Project Context
City Councils hold CAOs accountable for staff leadership, yet Councilmembers often feel they
do not have enough balanced contact with staff members to assess this factor. Council members
are usually able to directly observe CAO interaction with members of the public, other
community stakeholders, and members of governmental agencies. The one aspect of
performance that they rarely have the opportunity to directly observe or assess is staff leadership.
Often impressions of leadership are formed based on occasional casual conversations that may
not be at all representative of the collective staff’s views.
Councils do not generally need deep and detailed information. They need to have enough
balanced feedback to conclude that leadership is solid, that there are early signs of a potential
problem that merits a mention, or that there is a clear problem that requires an action plan or
Sherry L. Lund Associates Proposal: 2012-2013 CAO Staff Feedback Option Page 2
intervention. Councils typically don’t engage in offering detailed leadership advice to their
CAOs, but they may direct an individual to address an issue or pattern of issues,and/ or to seek
outside assistance.
Project Methodology
Choosing a methodology to get feedback from the staff level is critical to achieve a quality
outcome. Whatever methodology is used needs to include a well-executed process, careful
question construction, the ability to verify the accuracy of the messages in context, and useful
results. To do otherwise leads to poor outcomes and legal risk.
One of the simplest and most inexpensive ways to gather feedback is through a written survey.
However, there is a great deal of potential for abuse in gathering multi-rater feedback through
written survey questions alone. Some of the more problematic aspects are:
There is no interpretive context for comments, e.g., whether feedback from an individual
is merited or is vindictive and personal.
If responses are unclear, too general, or don’t provide examples, there is no opportunity
to ask follow-up questions.
Written feedback alone is more reliable in an organization with a history and culture of
giving and receiving performance feedback across all levels. People who know that they
will both be givers and receivers of feedback tend to use feedback constructively rather
than to punish.
Conducting interviews overcomes most of the disadvantages of written surveys. An experienced
interviewer can assess the context of comments, e.g.:
Is feedback coming from a staff member who is on a performance plan himself/herself?
Is the CAO striking the right balance of leadership while executing Council’s vision for
change? E.g., is the leader advancing change, dealing with collective bargaining, reorgani-
zing staff and processes to achieve efficiencies/effectiveness)? CAOs are delivering a lot of
difficult news in today’s economic climate, but skilled leaders manage to find the right
balance and speed of change while maintaining the respect of their teams and stakeholders.
Are the staff member’s expectations reasonable, compared to other organizations and
generally accepted good leadership behavior?
Clearly, conducting interviews is a better solution from a methodology perspective. However,
the logistics of interviewing approximately 30 direct reports for the four CAOs becomes a heavy,
cumbersome, and more expensive process. The CAO Committee asked me how I could most
optimize the staff feedback process, given the uneven scope and responsibilities of the CAOs.
Therefore, I recommend a blended approach.
Sherry L. Lund Associates Proposal: 2012-2013 CAO Staff Feedback Option Page 3
I am proposing using the process we used last year for the City Attorney, City Auditor, and City
Clerk. Combining both written survey feedback with some brief interviews maintains the
integrity of the process while balancing time and cost factors.
Because the City Manager’s staff is larger, and because the scope of the job is so much broader
than the other CAOs, I am proposing conducting individual interviews, approximately one hour
in length, to gather feedback from his direct reports. This approach allows for a more in-depth
assessment.
Project Steps
I propose the following process, as described in the steps below:
Step 1: During each CAO’s staff meeting, I introduce myself, the purpose for
soliciting feedback, and the process.
Step 2: One-on-one with each CAO, I listen to the CAO’s perspective and weigh that
as I consider context. As part of my regular meetings with CAOs to kick off the annual
evaluation process, I now talk with them about context that they feel I should be aware of
(from their perspective). I can simply expand that discussion at no added cost.
Step 3A (for Attorney, Auditor, and Clerk’s staff only): I ask staff members to
respond in writing to 4-6 targeted questions that require comments. Comments, not
ratings, are required to formulate a clear plan for change. Responses are submitted to me
with names attached, so that I am able to follow up with questions. However, all
feedback reported to Council and CAOs is anonymous.
Step 3B (for City Manager’s staff only): I conduct individual interviews of
approximately one hour in length. These longer, in-person interviews provide a more
robust method of collecting feedback, reflective of the City Manager’s greater breadth
and scope of leadership.
Step 4 (for Attorney, Auditor, and Clerk’s staff only): I read comments and follow
up with brief phone interviews. In these interviews, I probe more deeply, fleshing out
examples and testing assumptions to validate messages and themes. (Note that this step
does not apply to the City Manager’s staff, as
Step 5: I summarize final feedback and include it in Council’s feedback package.
Step 6: I provide follow-up consulting as needed.
Timeline
This process would be started at the front end of the annual review process (May-June) in order
to seamlessly integrate it into the annual CAO review process.
Sherry L. Lund Associates Proposal: 2012-2013 CAO Staff Feedback Option Page 4
Cost
This project can be completed for a project price of $ 9,500. That total includes Steps 1-5 for
$8,500, plus for Step 6 (follow-up consulting), up to 4 hours or $1,000. All expenses are
included. This quotation represents consideration for volume pricing as an add-on to the
annual evaluation process. Please note that price quoted is a package price for all 4 CAOs as
described above and cannot be unbundled without re-quoting.
Next Steps
Upon acceptance of this proposal by Council, the next steps are to:
1. Execute a contract per your internal procedure.
2. Develop a project schedule, based on availability of all parties; revise it, as necessary,
with Council at the earliest meeting possible. Please note that a schedule cannot be
confirmed until the contracting process is complete.
It would be a pleasure to work with the Council and the CAOs on this component of the CAO
review process. I would be happy to provide whatever additional information you may need.
Best regards,
Sherry Lund
Principal
247 La Cuesta Drive
Portola Valley, CA 94028
(650) 619-5500 fax (650) 561-8414
sherrylund@aol.com
February 23, 2013
Mayor Greg Scharff
Chairperson, Council/CAO Committee
City of Palo Alto City Council
250 Hamilton Avenue
Palo Alto, CA 94301
Dear Mayor Scharff:
Following is a proposal for 2012-2013 mid-year CAO performance review updates for
consideration by the CAO Committee and City Council. I am submitting separate
proposals for the annual review cycle and for gathering input from CAO staff members for
ease of Council’s consideration of each individual component of Council’s performance
management process.
Project Description
When an employee reports to a single manager, performance dialogue typically happens
throughout the course of normal work and one-on-one meetings. When an employee
reports to a group, these same opportunities do not exist. CAOs may have frequent
conversations with individual Council members, but rarely have the opportunity to get
unified feedback from their collective bosses.
CAOs manage significant human and financial resources in the City. In a highly
dynamic environment with nine bosses, a year is a long time to go between performance
dialogue. Mid-year check-in discussions allow for course correction, reprioritization,
and early intervention so that performance is actively managed and resources are
correctly deployed. While Council has the opportunity to give feedback to CAOs, CAOs
also have the opportunity to raise questions and check assumptions that help guide their
performance for the rest of the year. The process itself is simpler and more streamlined
than the annual performance review process.
During 2012-2013, you would like to schedule mid-year check-in review discussions
for the City Manager, City Attorney, City Auditor, and City Clerk (the latter is an
addition this year).
Sherry L. Lund Associates Proposal: 2012-2013 CAO Midyear Updates Page 2
Timeline
Preparation work for this project would begin in November, with discussions held in
December, 2013.
Project Steps and Consultant Responsibilities
Step 1: Advance Preparation for Discussions
Advance preparation allows both Council and CAOs to use group time effectively
and efficiently. To prepare, I do the following:
Interview each Council member individually for 45-60 minutes to gather
update feedback on the four CAOs. The key questions are:
o Do you feel this CAO is on track with the goals and objectives?
o Are there any changes/course corrections you would like to make in
your expectations or the CAO’s performance?
o Is there any other feedback you would like to provide?
Interview each CAO (30 minutes each) to see if there are questions or issues
that they would like to raise with the Council. Examples may include getting
clarity on performance goals and priorities,
Summarize Council feedback and CAO questions and prepare agendas and
materials for closed sessions—all of which support an efficient and effective
discussion.
Step 2: Closed Session Performance Check-in Discussions
The discussions are a simpler version of the annual review, but the discussion format
is generally the same. I do the following:
Meet with Council in closed session to agree on update feedback, then bring
in each CAO individually for feedback and discussion.
Provide facilitation and technical assistance as needed during the discussions.
Based on the differing scope of responsibilities and number of direct reports, I
suggest allocating closed session time as follows: two hours for the City Manager;
one and one-half hours for the City Attorney; one and one-half hours for the City
Auditor; and one hour for the City Clerk.
Step 3: Post-Session Wrap-Up
Sherry L. Lund Associates Proposal: 2012-2013 CAO Midyear Updates Page 3
Upon completion of the closed session discussions, I do the following:
Document agreed-upon Council feedback.
Answer follow-up questions with CAOs.
Use feedback from Council and CAOs about how the process worked to refine
it for the future.
Due to the highly confidential nature of this assignment, I personally perform all work on
this contract.
Client Responsibilities
In order to support the success of the project, Client agrees to:
Assure involved parties are available for one-on-one and group meetings.
Identify an internal liaison that can schedule appointments and schedule closed
sessions.
Provide meeting space and A-V equipment required.
Commit to a professional and respectful process.
Project Cost
This project can be completed for a project fee of $7,550.00 which includes expenses --
$ 6,550 for the City Manager, City Attorney, City Auditor and $ 1,000 for the addition of
the City Clerk this year. This quotation is offered based on economies of scale for at
least three CAOs, and cannot be unbundled without re-quotation.
Meetings missed without 24 hours notice and re-work that result from missed meetings and
deadlines will be billed beyond the quoted project fee at discounted public sector rate of
$250/hr. (private sector rate is $375/hr.).
Next Steps
Upon acceptance of this proposal, the next steps is to execute a contract per the City’s
internal procedure.
I would be pleased to help you implement this next refinement of the CAO performance
review process. Please let me know if I may provide additional information.
Sincerely,
Sherry Lund
Principal
Council Appointed Officers Committee
DRAFT MINUTES
Page 1 of 7
Special Meeting
Wednesday, March 6, 2013
Chairperson Scharff called the meeting to order at 5:04 P.M. in the Council
Conference Room, 250 Hamilton Avenue, Palo Alto, California.
Present: Berman, Holman, Kniss, Scharff (Chair)
Absent:
AGENDA ITEMS
1. Discussion and Recommendation to the City Council to Amend the
Contract with Sherry Lund Associates to Exercise an Option to Extend
for One Year for a Total Cost Not to Exceed $46,850 for 1) Consulting
Services related to the 2012-2013 Annual Performance Reviews for
Four Council Appointed Officers for a Total Cost Not to Exceed
$32,300, 2) Solicitation of Staff Feedback Related to Performance
Evaluations for a Total Cost Not to Exceed $7,000, and 3) Mid-year
Performance Review Updates for a Total Cost Not to Exceed $7,550.
Sherry Lund, Sherry Lund Associates, spoke on the proposed performance
process for the four Council Appointed Officer’s (CAO) reviews. She provided
three components for review and consideration. The first component was the
annual review process which would begin in the April timeframe; included in
the process was the CAO’s thought process on their self-evaluation, input on
their concerns, and feedback regarding each other. Council would receive
the information and provide feedback on how to proceed. She would
typically be present during the final review between the CAO and the
Council. The second component was a Staff feedback component; a 360
review approach. The purpose of a 360 was to provide feedback on staff
leadership. In the review process she ties the feedback to themes and looks
for discrepancies from the employees. The third component was a mid-year
check-in; typically in the December timeframe. The annual review was more
Council driven where the CAO’s received feedback directly from Council;
DRAFT MINUTES
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Council Appointed Officers Special Meeting
Draft Minutes March 6, 2013
however, a year from one review to the next was a staggering distance so
she believed the mid-year would solve the dilemma of staying on task with
the course directed by Council during the last annual review.
Mayor Scharff felt the first discussion should be around the annual
performance evaluation contract. He noted the existing contract allowed for
an amendment to extend the term. He asked if there were elements being
requested in the amendment which were not covered in the current contract.
Ms. Lund noted the contract negotiated in 2012 was for a term of up to a
three year period but did not speak to the possible fund amount changing
each year. As far as the terms of the contract, no, she did not request
renegotiation.
Council Member Holman stated in the six years Ms. Lund had been
performing the CAO review process Council had expressed confidence in her
work and if Council were to take on the task it would be an overload on
them.
Council Member Kniss asked how the CAO reviews were completed prior to
Ms. Lund.
Ms. Lund clarified her understanding was a recruiter had been hired to
perform the review process and once they had retired she was brought on
board. She was unfamiliar with the process the previous person used;
although, the output she had seen appeared to be a series of ratings with a
few paragraphs explaining the ratings.
Council Member Kniss asked the length of time Ms. Lund had been in the
profession.
Ms. Lund said she had been a professional evaluator for over 35 years.
Council Member Kniss asked if Ms. Lund utilized the 360 degree review
process and feedback.
Ms. Lund stated she used the 360 degree feedback in her executive coaching
processes. The product she preferred was from the Center for Creative
Leadership which was a very robust product and at a higher cost to perform
for individuals.
Mayor Scharff believed the 360 degree process would be a valuable
discussion for the second component.
DRAFT MINUTES
Page 3 of 7
Council Appointed Officers Special Meeting
Draft Minutes March 6, 2013
MOTION: Mayor Scharff moved, seconded by Council Member Holman to
recommend the City Council exercise the option to extend the evaluator
contract for one-year for the consulting services related to the 2012-2013
Annual Performance Reviews for four Council Appointed Officers for a total
cost not to exceed $32,300.
MOTION PASSED: 4-0
Mayor Scharff asked for clarification on the additional evaluation cost of
$7,000 related to the Staff feedback. He requested other options for Staff
feedback and their possible costs.
Ms. Lund mentioned Council had discussed some form of Staff feedback
during her tenure but had struggled with adding more funds and
determining the appropriate change to the process. For the 2012 evaluation
processes she devised a survey and distributed it to the direct reports for
feedback. Once she received the surveys’ back she made a few phone calls
where she felt it was necessary. Other options would include the 360 degree
feedback which would typically take an individual 45 minutes to complete
the questionnaire, so as not to take away from the work flow of an
organization select individuals would be selected to complete the
information. She felt the 360 degree process was better suited as a
developmental tool than as an evaluation one, it would add significantly to
the cost, and to the time Council would need to review the evaluation
process.
MOTION: Council Member Holman moved, seconded by Council Member
Kniss to recommend the City Council approve the solicitation of Staff
feedback related to performance evaluations for a total cost not to exceed
$7,000.
Council Member Holman said the term used in Ms. Lund’s explanation was a
modified 360 degree process.
Ms. Lund said yes, the idea was to use the feedback to fill in the missing
information, not to perform an exhaustive process on each CAO.
Council Member Holman found the survey information from the 2012
evaluations helpful.
Mayor Scharff asked whether the 360 degree process as approved was the
correct balance or should there be more added for certain CAO’s given two
DRAFT MINUTES
Page 4 of 7
Council Appointed Officers Special Meeting
Draft Minutes March 6, 2013
CAO groups were small, one was middle sized, but one was significantly
larger.
Ms. Lund would not propose a process that she did not feel was viable. She
acknowledged it would be helpful to have additional feedback to perform a
greater degree of evaluation for the City Manager’s Office because he
manages many more employees. In order to survey a larger number of
employees in a single organization she felt the better approach would be for
an organizational survey. If the question was how the CAO was performing
as a leader, their direct Staff would provide the most valuable information.
Mayor Scharff stated one of the Council’s most important activities was to
effectively manage the CAO’s. He was anticipating Ms. Lund to strike the
correct balance to assist Council with the task.
Council Member Holman wanted to confirm her understanding of Ms. Lund’s
suggestion of not performing a full 360 degree but for an organization the
size of the City Managers’ to perform an organizational survey specifically
designed towards that office.
Mayor Scharff believed suggesting the organizational survey was part of the
scope of the agenda. The scope was concerning what the City Council
desired Ms. Lund to do for them with respect to the CAO evaluations. If she
wished to return with a proposal for the organization survey, he was
supportive.
Council Member Holman suggested amending the Motion or making a second
Motion.
Ms. Lund agreed the perfect balance had not been struck; however, she
believed they had reached a reasonable indicator. The City Manager has a
huge organization and manages the lion’s share of the City’s assets. Ideally
her preference would be one-on-one interviews with his Staff and sample
survey’s.
Mayor Scharff asked the cost for an individual interview process.
Ms. Lund noted for the City Manager’s organization alone, an additional cost
for 10 hours or $2,500.
Mayor Scharff recommended amending the Motion from $7,000 to not to
exceed $9,500.
DRAFT MINUTES
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Council Appointed Officers Special Meeting
Draft Minutes March 6, 2013
Council Member Holman requested Ms. Lund to provide specific language on
what she would be performing so the language in the Motion was adequately
reflected.
Ms. Lund stated the Amendment would cover performing one hour one-on-
one individual interviews with each one of the City Manager’s direct reports.
Council Member Kniss asked for clarification on the City Manager’s
evaluation process, if Ms. Lund would sit down with each individual direct
report to have a more clarifying discussion with them.
Ms. Lund stated yes. That process would present her with a more robust
opportunity to gather more specific feedback and her experience has told
her there was no substitute for a one-on-one conversation.
Council Member Kniss asked if the employee was aware that their responses
were completely anonymous in the process.
Ms. Lund said yes, they were totally anonymous. The information reported
to the Council was on the theme of the leadership not individual statements.
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to change the total not to exceed cost from
$7,000 to $9,500 for individual interviews with each of the City Manager’s
direct reports.
MOTION AS AMENDED PASSED: 4-0
Council Member Holman asked for clarification on the organization survey.
Ms. Lund stated it was a process to receive feedback from every level of a
single organization.
Council Member Holman asked if that process would not only cover the
layers but also as an example; how the City Attorney’s office responds to
department requests.
Ms. Lund stated the organization survey could be set-up in the manner
which best suits the City Council’s desired end result. An organizational
survey was a large process to deploy. She stated she no longer performs
such large tasks.
DRAFT MINUTES
Page 6 of 7
Council Appointed Officers Special Meeting
Draft Minutes March 6, 2013
Council Member Holman asked if Ms. Lund would be the appropriate person
to request returning with a proposal or would she recommend someone else.
Ms. Lund would be happy to recommend names of people who perform
those types of surveys. She offered to coordinate with the chosen person to
speed up their process.
Mayor Scharff was interested in exploring the concept prior to making a
decision without sufficient data. He asked Ms. Lund if she would facilitate the
process by supplying names, cost options, and the benefits. He noted being
uncomfortable handing over the process to a person the City was unfamiliar
with as well as the individual being unfamiliar with the City’s process.
Ms. Lund was not interested in employing an individual as a subcontractor.
Mayor Scharff clarified the City would deal directly with the individual
whereas Ms. Lund would act as the Human Resources department for the
CAO’s.
Ms. Lund agreed to perform preliminary scouting to locate costs, because
the scope varies and depending on the size of the survey the cost could
significantly range.
Council Member Kniss asked if Ms. Lund had seen an organizational survey
completed in a governmental type of organization.
Ms. Lund mentioned her thought process on the survey was whether the
people in place to take action were capable of driving the results. The
purpose of such a survey was for positive change and action. Her
experience has shown smaller focused processes were better for achieving
best practice outcomes. The two goals she would ask a client who wished to
perform such a survey was 1) what was the driving force for requesting the
possible organizational changes and 2) were the individuals in charge
resigned to drive the changes.
Council Member Kniss felt the process being used was sufficient and the
additional organizational survey was consumptive. She was not against an
organizational survey but believed she was not familiar enough to make a
decision at the moment.
Council Member Holman felt there were too many unknown variables to
make a decision and recommended gathering more information. She
requested information on whether other city entities had completed an
organizational survey and how they felt it assisted the organization.
DRAFT MINUTES
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Council Appointed Officers Special Meeting
Draft Minutes March 6, 2013
Ms. Lund did not have ample data to supply a response to the Committee
but was willing to send out feelers and retrieve the necessary figures and
statistics to return with a satisfactory report. She recommended putting the
concept on hold until further notice.
Mayor Scharff suggested directing the Chair to discuss the goals and ability
to put the results in motion with Ms. Lund and make a determination on
whether to have her return for further discussion. He had concerns with
going before Council with an expense of $40,000 for an un-vetted process.
Ms. Lund noted the amount could be from $40,000 to $70,000.
Mayor Scharff stated the recommendation to Council would need to be clear
in the sense of why the Committee recommended it. The other concern was
the cost for Ms. Lund’s time and efforts for gathering the information.
Council Member Holman did not feel it was fair for Ms. Lund to report to the
Committee on resources without compensating her. She requested Ms. Lund
simply supply resources of persons the Committee could contact for further
information.
Ms. Lund said in reviewing her client list she did not believe any of the cities
she works with have performed an organization survey.
Council Member Kniss agreed to have the Chair engage in an off-line
conversation with Ms. Lund regarding the organizational survey and return
to the Committee if they felt there was merit.
MOTION: Council Member Holman moved, seconded by Council Member
Kniss to recommend the City Council approve the mid-year performance
review updates for a total cost not to exceed $7,550.
MOTION PASSED: 4-0
ADJOURNMENT: Meeting adjourned at 5:46 P.M.
City of Palo Alto (ID # 3624)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/18/2013
City of Palo Alto Page 1
Summary Title: Role of Council Liaision to Palo Alto Boards and Commissions
Title: Policy & Services Committee Recommendation to Approve Revisions to
Section 2.4 of the City Council Protocols Setting Forth the Conduct of Council
Liaisons to Palo Alto Boards and Commissions
From: City Manager
Lead Department: City Manager
Recommendation
Draft motion:
Approve revisions, as recommended by the Policy and Services Committee, to Section 2.4 of the
City Council Protocols regarding the conduct of Council liaisons to Boards and Commissions
(Attachment A).
Background
At its January 28, 2013 meeting, the City Council referred to the Policy and Services Committee
discussion of the Council liaison role for: 1) boards and commissions, and; 2) community groups
to which council members are designated. The Council asked the Committee to review and
consider the definition and responsibilities and authority of Council liaisons and to return to
Council in March 2013.
Discussion
Section 2.4 of the City Council Protocols sets forth the conduct of Council liaisons to Palo Alto
Boards and Commissions. The Policy & Services Committee identified a Council liaison role in
what could be defined as three separate levels or tiers:
Tier 1 - Those at the City level who are appointed by the Mayor and City Council such as
the City’s Boards and Commissions.
Tier 2 – Those at the county, state and federal levels that may be selected by those other
than the Mayor, have predictable involvement, and Council members may vie for
appointments.
Tier 3 – Community based organizations with whom we have a less clearly defined role.
City of Palo Alto Page 2
The Policy and Services Committee recommends that Section 2.4 be revised to:
1. Identify that there are three tiers of Council liaison roles (as defined above).
2. Clarify Tier 1 liaisons should represent the position of Council in areas involving policy
issues. While meeting attendance is important for Tier 1 liaisons, time demands and
competing conflicts may impact liaison attendance at regular meetings.
3. Clarify Tier 2 liaisons should represent the position of Council in areas involving policy
issues where available, but have discretion in representing the City on issues that the
Council has not taken a policy position on a matter. Meeting attendance is expected for
Tier 2 liaisons, understanding time demands and competing conflicts may impact liaison
attendance from time to time.
4. Clarify Tier 3 liaisons should use their judgment regarding scheduled meetings of their
assigned community based organization. Understanding policy issues are less likely to
arise, Tier 3 liaisons should use discretion in sharing individual views and positions.
5. Add a new provision regarding the terms of appointments. For City Boards,
Commissions and community based organizations, appointment of Council liaisons
should not exceed a period of two years. This would not apply to Tier 2 roles as terms
are not typically at the discretion of the City.
6. Clarify/clean up Section 2.4 (A) and 2.4 (C). The provisions are inconsistent and
confusing. Move Section 2.4(A) to end.
The recommended revisions to Section 2.4 of the City’s Council protocols are included as
Attachment A. Attachment B provides a list of the City’s roster of boards, commissions and
committees as of January 2013 sorted by each of the three tiers.
Attachments:
Attachment A- Revisions to Section 2.4 (PDF)
Attachment B- City Roster (PDF)
Attachment C- 02-12-13 P&S Action Minutes (DOC)
Attachment A. Recommended Revisions to Section 2.4 of the City Council Protocols
2.4 ‐Conduct with Palo Alto Boards and Commissions
The City has established several Boards and Commissions as a means of gathering more
community input. Citizens who serve on Boards and Commissions become more involved in
government and serve as advisors to the City Council. They are a valuable resource to the City’s
leadership and should be treated with appreciation and respect. Council Members serve as
liaisons to Boards and Commissions, according to appointments made by the Mayor, and in this
role are expected to represent the full Council in providing guidance on Council processes or
actions to the Board or Commission. Refrain from speaking for the full Council on matters for
which the full council has not yet taken a policy position. In other instances, Council Members
may attend Board or Commission meetings as individuals, and should follow these protocols:
A. If Attending a Board or Commission Meeting, Identify Your Comments as Personal Views
or Opinions. Council Members may attend any Board or Commission meeting, which are always
open to any member of the public. Any public comments by a Council Member at a Board or
Commission meeting, when that Council Member is not the liaison to the Board or Commission
should make a point to clearly state it is an individual opinion and not a representation of the
feelings of the entire City Council.
A. Three Tiers of Council Liaisons. There are three liaison tiers:
Tier 1 – Those at the City level who are appointed by the Mayor and City Council i.e., the City’s
Boards and Commissions.
Those at the City level
Tier 2 – Those at the county, state and federal levels that may be selected by those other than
the Mayor, have predictable involvement, and Council members may vie for
appointments.Those at the countylevel that are typically selected by those other than the
Mayor, have less predictable involvement, and Council members vie for appointments
Tier 3 – Community based organizations with whom Council Members have a less clearly
defined role.
A. B. Liaison Term. For Tiers 1 and 3, liaison appointments shall not exceed a period of two years.
This does not apply to Tier 2 appointments because the terms are not typically at the City’s
discretion.
BC. Refrain from Lobbying Board and Commission Members. It is inappropriate for a Council
Member to contact a Board or Commission member to lobby on behalf of an individual,
business, or developer, or to advocate a particular policy perspective. It is acceptable for
Council Members to contact Board or Commission members in order to clarify a position
taken by the Board or Commission.
DC. Remember that Boards and Commissions are Advisory to the Council as a Whole, not
toas Individual Council Members. The City Council appoints individuals to serve on Boards
and Commissions based in part on particular areas of expertise. In areas involving policy
Attachment A. Recommended Revisions to Section 2.4 of the City Council Protocols
issues, and it is the responsibility of Boards and Commissions to follow policy established by
a majority of the Council. Tier 1 Liaisons should communicate the majority position of
Council, despite their personal views or votes. Council Members should not feel they have
the power or right to unduly influence Board and Commission members. A Board and
Commission appointment should not be used as a political reward.
ED. Concerns about an Individual Board or Commission Member Should be Pursued with
Tact. If a Council Member has concerns with a particular Board or Commission member
fulfilling his or her roles and responsibilities and is comfortable in talking with that
individual privately, the Council Member should do so. Alternatively, or if the problem is not
resolved, the Council Member should consult with the Mayor, who may address the issue to
the Council as appropriate.
FE. Be Respectful of Diverse Opinions. A primary role of Boards and Commissions is to
represent many points of view in the community and to provide the Council with advice
based on a full spectrum of concerns and perspectives. Council Members may have a closer
working relationship with some individuals serving on Boards and Commissions, but must
be fair to and respectful of all citizens serving on Boards and Commissions.
GF. Keep Political Support Away from Public Forums. Board and Commission members may
offer political support to a Council Member, but not in a public forum while conducting
official duties. Conversely, Council Members may support Board and Commission members
who are running for office, but not in an official forum in their capacity as a Council
Member.
HG. Maintain an Active Liaison Relationship.
Appointed Council liaisons or alternates are encouraged to attend all regularly scheduled
meetings of their assigned Board or Commission.
1. Tier 1 liaisons and alternates should represent the majority position of Council in areas involving
policy issues. While meeting attendance is important for Tier 1 liaisons, time demands and
competing conflicts may impact liaison attendance at regular meetings.
2. Tier 2 liaisons should represent the majority position of Council in areas involving policy issues
where available, but have discretion in representing the City on issues that the Council has not
taken a policy position on a matter. Meeting attendance is expected for Tier 2 liaisons,
understanding time demands and competing conflicts may impact liaison attendance from time
to time.
3. Clarify Tier 3 liaisons should use their judgment regarding scheduled meetings of their assigned
community based organization. Understanding policy issues are less likely to arise, Tier 3 liaisons
should use discretion in sharing individual views and positions.
IG. If Attending a Board or Commission Meeting in Non‐Liaison Capacity. , Identify Your
Comments as Personal Views or Opinions. Council Members may attend any Board or
Commission meeting, which are always open to any member of the public. Any public
comments by a non‐liaison Council Member at a Board or Commission meeting, when that
Attachment A. Recommended Revisions to Section 2.4 of the City Council Protocols
Council Member is not the liaison to the Board or Commission should be identified as an
individual opinion unless the majority of the Council has taken a policy position on the
matter. If the majority of the Council has taken a position, the non‐liaison should also
communicate the position taken by the majority of the Council. make a point to clearly state
it is an individual opinion and not a representation of the feelings of the entire City Council.
Attachment B. City Roster ‐ January 2013
Tiers 1, 2 and 3
CATEGORY AGENCY APPOINTED
BY
Council
Liaison
TERM
1BOARDS &
COMMISSIONS
Architectural Review Board (ARB) Mayor 1 year
2BOARDS &
COMMISSIONS
Historic Resources Board (HRB) Mayor Liz Kniss 1 year
3BOARDS &
COMMISSIONS
Human Relations Commission (HRC) Mayor Liz Kniss 1 year
4BOARDS &
COMMISSIONS
Library Advisory Commission (LAC) Mayor Gail Price 1 year
5BOARDS &
COMMISSIONS
Parks and Recreation Commission (PARC) Mayor Greg Schmid 1 year
6BOARDS &
COMMISSIONS
Planning & Transportation Commission
(P&TC)
Mayor 1 year
7BOARDS &
COMMISSIONS
Public Art Commission (PAC)Mayor Karen Holman 1 year
8BOARDS &
COMMISSIONS
Storm Drain Oversight Committee (STOC) Mayor 1 year
9BOARDS &
COMMISSIONS
Utilities Advisory Commission (UAC) Mayor Greg Scharff 1 year
10 COUNTY Santa Clara County Cities Association Mayor Greg Scharff 1 year
11 COUNTY Santa Clara County Cities Association,
Legislative Action Committee
Mayor Greg Scharff 1 year
12 COUNTY Santa Clara County Emergency
Preparedness Council
Mayor Pat Burt 1 year
13 COUNTY Santa Clara Valley Water District
Commission
Mayor Greg Schmid 1 year
14 COUNTY SCVWD Lower Peninsula Flood Control &
Watershed Advisory Committee
Mayor Karen Holman 1 year
15 COUNTY Valley Transportation Authority, El
Camino Real Rapid Transit Policy
Advisory Board
Mayor Liz Kniss 1 year
16 COUNTY Valley Transportation Authority, Policy
Advisory Committee
Mayor Gail Price 1 year
17 REGIONAL, STATE
AND FEDERAL
Association of Bay Area Governments Mayor Greg Schmid 1 year
18 REGIONAL, STATE
AND FEDERAL
Bay Area Air Quality Mangement District Agency Liz Kniss 1 year
19 REGIONAL, STATE
AND FEDERAL
Bay Area Regional Water System and
Financiang Authority
Full Council Larry Klein 4 year
20 REGIONAL, STATE
AND FEDERAL
Bay Area Water Supply and Conservation
Agency
21 REGIONAL, STATE
AND FEDERAL
Bay Area Water System Conservation
Agency
Full Council Larry Klein 4 year
Tier 1
Tier 2
1 of 2 3/11/2013
Attachment B. City Roster ‐ January 2013
Tiers 1, 2 and 3
CATEGORY AGENCY APPOINTED
BY
Council
Liaison
TERM
22 REGIONAL, STATE
AND FEDERAL
Bay Conservation and Development
Commission
Agency Greg Scharff
23 REGIONAL, STATE
AND FEDERAL
League of California Cities, Peninsula
Division
Mayor Karen Holman 1 year
24 REGIONAL, STATE
AND FEDERAL
National League of Cities Energy,
Environmental, and Natural Resources
Steering Committee
Agency Larry Klein
25 REGIONAL, STATE Northern California Power Agency Mayor Greg Scharff 1 year
26 REGIONAL, STATE
AND FEDERAL
Peninsula Cities Consortium Mayor Pat Burt 1 year
27 REGIONAL, STATE
AND FEDERAL
Peninsula Rail Program Policy Maker
Workgroup
Agency Pat Burt
28 REGIONAL, STATE
AND FEDERAL
San Francisco Bay Area Regional Water
System Financing Authority
Agency Larry Klein
29 REGIONAL, STATE
AND FEDERAL
San Francisquito Creek Joint Powers
Authority
Mayor Pat Burt 1 year
30 REGIONAL, STATE
AND FEDERAL
Santa Clara County Cities Association,
Cities Selection Committee
Agency Greg Scharff
31 REGIONAL, STATE
AND FEDERAL
Silicon Valley Regional Interoperability
Authority
Agency Greg Scharff 10/31/2013
32 REGIONAL, STATE
AND FEDERAL
Transmission Agency of Northern
California
Mayor Greg Scharff 1 year
33 REGIONAL, STATE
AND FEDERAL
Valley Transportation Authority,
Authority Board
Agency Gail Price
34 CITY & LOCAL Art Center Foundation Mayor Greg Schmid 1 year
35 CITY & LOCAL Avenidas Mayor Larry Klein 1 year
36 CITY & LOCAL Board of Realtors Mayor Liz Kniss 1 year
37 CITY & LOCAL Business Association of California Mayor Karen Holman 1 year
38 CITY & LOCAL Caltrain Policy Maker Committee Mayor Greg Scharff 1 year
39 CITY & LOCAL Chamber of Commerce Mayor Marc Berman 1 year
40 CITY & LOCAL Grand Boulevard Task Force Mayor Greg Schmid 1 year
41 CITY & LOCAL Junior Museum & Zoo Mayor Marc Berman 1 year
42 CITY & LOCAL Lytton Gardens Mayor Greg Schmid 1 year
43 CITY & LOCAL Midpeninsula Community Media Center Mayor Liz Kniss 1 year
44 CITY & LOCAL Neighbors Abroad Mayor Liz Kniss 1 year
45 CITY & LOCAL Palo Alto Community Child Care Mayor Nancy
Shepherd
1 year
46 CITY & LOCAL Palo Alto Downtown Business &
Professional Association (BID)
Mayor Liz Kniss 1 year
47 CITY & LOCAL Palo Alto Housing Corporation Mayor Liz Kniss 1 year
48 CITY & LOCAL Palo Alto/Stanford Citizen Corps Council Agency Greg Schmid 1 year
49 CITY & LOCAL Stanford University Mayor Greg Scharff 1 year
Tier 3
2 of 2 3/11/2013
POLICY AND SERVICES COMMITTEE
ACTION MINUTES
Page 1 of 2
Regular Meeting
February 12, 2013
MOTION: Council Member Klein moved, seconded by Council Member Price
to move Agenda Item No. 3- Discussion and Review of the Legislative Action
Program Manual and the 2013 Federal and State Legislative Priorities
forward to be heard first, followed by Agenda Item No. 2- Auditor's Office
Quarterly Report as of December 31, 2012 and Revised Workplan, and hear
Agenda Item No. 1-Referral from City Council to Establish a Definition of
Council Liaison Role for Boards and Commissions and Community Groups
that Council Members are designated to in Section 2.4 in the City Council
Protocol last.
MOTION PASSED: 3-0 Holman absent
Agenda Items
1. (Former Number Three) Discussion and Review of the Legislative
Action Program Manual and the 2013 Federal and State Legislative
Priorities.
MOTION: Council Member Price moved, seconded by Council Member Klein
to recommend the City Council approve the Legislative Program Action
Manual, the 2013 Federal Legislative priorities and review of 2012 activities,
and the 2013 State Legislative priorities and review of 2012 activities
MOTION PASSED: 3-0 Holman absent
2. Auditor's Office Quarterly Report as of December 31, 2012 and Revised
Workplan.
MOTION: Council Member Price moved, seconded by Council Member Klein
to recommend the City Council acceptance of the Auditor’s Office Quarterly
Report as of December 31, 2012 and Revised Workplan, to include deferring
the Development Center Process for one year.
MOTION PASSED/FAILED: 3-0 Holman absent
ACTION MINUTES
Page 2 of 2
Policy and Services Committee Regular Meeting
Action Minutes 02/12/13
3. (Former Number One) Referral from City Council to Establish a
Definition of Council Liaison Role for Boards and Commissions and
Community Groups that Council Members are designated to in Section
2.4 in the City Council Protocols.
MOTION: Council Member Klein moved, seconded by Council Member Price
to direct Staff to prepare a draft of revised section 2.4 in accordance with
tonight’s discussions.
MOTION PASSED: 3-0 Holman absent
ADJOURNMENT: Meeting adjourned at 9:17 PM.
City of Palo Alto (ID # 3471)
City Council Staff Report
Report Type: Action Items Meeting Date: 3/18/2013
City of Palo Alto Page 1
Summary Title: Downtown Parking Near-Term Actions
Title: Downtown Parking Update and Direction Regarding Near-Term Parking
Actions
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
Staff recommends a MOTION that Council direct staff to evaluate and implement near-term (1-
6 months) downtown parking improvements, including but not limited to:
a) an attendant parking trial in select downtown parking garages or lots (Lot R),
b) a City commitment for reducing 50-100 employee permit spaces in the City Hall garage,
c) evaluation of a potential public-private partnership for a new parking garage on Lot P,
d) evaluation of restrictions on the creation/use of transfer of development rights (TDR),
e) eliminating or revising zoning exemptions from parking requirements, and
f) initiating parking restrictions and/or permit parking in adjacent residential
neighborhoods,
and to present the measures to the Planning and Transportation Commission for input.
Although they represent distinct options, Council may discuss and approve items a), b), and c)
in one motion. To ensure compliance with conflict of interest laws, Council should discuss and
approve items d), e), and f) to allow Council Member and staff recusals, as described below.
Executive Summary
On November 13, 2012, Council considered several approaches to address downtown parking
concerns, including an evaluation of the City’s Downtown Development Cap, as required by the
Comprehensive Plan and Zoning Ordinance.
City of Palo Alto Page 2
At the same time, however, downtown parking shortages continue to be exacerbated by
ongoing development. The report proposes that several near-term actions be evaluated for
Council consideration and then implemented over the next six-month period. Among the
actions are: a) implementing a trial attendant parking program in one parking garage; b) a City
commitment to reduce 50-100 employee permit spaces in the City Hall garage; and c) exploring
a potential public-private partnership for a new parking garage on Lot P. The report also
proposes: d) evaluating restrictions on the creation/use of transfer of development rights
(TDRs); e) eliminating or revising zoning exemptions from parking requirements; and f) initiating
parking restrictions and/or permit parking in adjacent residential neighborhoods. The report
further notes that City staff is also releasing 174 additional permit spaces in parking garages
over the month of March.
Conflicts of Interest
The following Council Members and the City Manager have potential conflicts of interest in one
or more of the near-term actions presented in this report. Although these actions are
presented in a single agenda item, they represent independent issues for Council consideration.
Staff recommends the following recusals in an abundance of caution in light of the actions
presented here, some of which are framed broadly due to the preliminary nature of the policy
discussion. Staff will revisit and update the potential for conflicts each time an item comes
before Council and key staff for consideration. Staff anticipates that the Council will consider a
number of distinct matters relating to downtown parking and development in the coming
months. As those matters become more defined, and in some cases focus on narrower
geographic areas, specific neighborhoods or particular properties, the currently-recused Council
Members and key staff may be eligible to participate.
Mayor Scharff has an interest in real property at 616 University Ave, which is within 500 feet of
the eastern edge of the Commercial Downtown District. Staff recommends that Mayor Scharff
recuse himself from discussions of items (e) and (f).
Vice Mayor Shepherd has an interest in real property at 550 Hamilton Ave, which is within 500
feet of the eastern edge of the Commercial Downtown District. Staff recommends that Vice
Mayor Shepherd recuse herself from discussions of items (e) and (f).
Council Member Holman has received income within the past twelve months from the Palo Alto
History Museum, which may be impacted by item (d). Council Member Holman also has an
interest in her residence, which is within 500 feet of a residential neighborhood adjacent to the
Commercial Downtown District. Staff recommends that Council Member Holman recuse herself
from discussions of items (d) and (f).
City of Palo Alto Page 3
Council Member Berman has an interest in his residence, which is in a neighborhood adjacent
to the Commercial Downtown District. Staff recommends that Council Member Berman recuse
himself from discussions of item (f).
City Manager Keene has an interest in his residence, which is within 500 feet of the eastern
edge of the Commercial Downtown District. Staff recommends that City Manager Keene recuse
himself from discussions of items (e) and (f).
Background
Downtown Palo Alto is a vibrant, pedestrian and transit-oriented mix of retail, restaurant,
services, office and moderate density residential uses, surrounded by lower density residential
neighborhoods to the north, south, and east. In the past two years, the success of downtown
business and new development has presented challenges to nearby residential neighborhoods
and, to some extent, to the business environment itself. Most of these impacts are related to
parking and traffic, but the visual impacts and mix of uses downtown have also been of some
concern. The University Avenue Caltrain station and Intermodal Center has also been studied to
identify improvements that will allow the center to adequately serve increased ridership
associated with future growth and changing mode splits from vehicles to trains and buses.
Several efforts are underway to analyze various potential growth opportunities and impacts in
or near downtown, including the Arts and Innovation District (27 University Avenue) site
planning and transit center upgrade, the Downtown Development Cap Study, and ongoing
parking and zoning analyses. The Downtown Development Cap Study Request for Proposal will
be released before the end of March, and a separate Information item in the Council’s agenda
packet outlines the background and scope of work for that study. Ongoing parking and zoning
studies are discussed below.
Parking Studies
Transportation staff has conducted periodic parking inventories of public parking garages and
lots, as well as street parking downtown and in residential neighborhoods over the past two
Street) and WC (Cowper-Webster). Other garages and lots are nearly fully parked at those
hours. Attachment A depicts current waiting list numbers for permits for the various lots and
garages, and staff notes that the numbers have decreased considerably due to continued staff
efforts to open additional permit spaces and the recent implementation of the City’s new
permitting software. Attachment B provides a map that depicts the latest levels of saturation
for parking on the streets, approximately from San Francisquito Creek to Embarcadero Road
and from Alma Street to Middlefield. The map shows saturation rates less than 50%, 50-85%,
and above 85% for each side of each block. Over the past two years, the degree of saturation
City of Palo Alto Page 4
has progressively moved closer to Embarcadero to the south and to the creek on the north.
While staff has not defined a specific parking “deficit,” these maps and trends do indicate
extensive intrusion into neighborhoods that is being exacerbated by additional development.
Staff expects to continue to monitor parking space occupancy at least twice per year.
Parking Garage Analysis
Staff has retained engineering consultant assistance to evaluate five (5) City parking lots for
feasibility to construct parking structures on each. The five lots are: Lot D (Hamilton at
Waverley), Lot E (Gilman at Bryant), Lot G (Gilman at Waverley), Lot P (High between Hamilton
and University), and Lot U (Urban Lane). Each of these lots is being examined as to the potential
number of parking spaces that could be constructed, constraints or obstacles to construction,
and costs. Staff expects an interim report to Council in May.
Zoning Evaluation
Several zoning ordinance provisions related to parking are currently under review or will be for
downtown. These include:
A moratorium on the use of the “1:1 FAR” parking exemption while the downtown
studies are underway; staff notes that the two potential “exception” requests (135
Hamilton Avenue and 636 Waverley Avenue) are pending those applicants’ attempts
to identify means to provide the necessary parking, thereby avoiding the need for
exceptions;
Review of other parking exceptions, such as those related to transferable development
rights (TDRs), as part of the Development Cap Study;
Evaluation of applying the ground floor (GF) retail overlay to Emerson Street between
Hamilton Avenue and Forest Avenue (the PTC recommended approval on March 5 and
the Council will consider the item in April); and
Evaluation of the treatment of nonconforming land uses and changes in uses with
respect to parking requirements and impacts.
More comprehensive analysis of parking ratios and the Development Cap are planned as part of
the Downtown Development Cap Study.
Development Project Status
Downtown development, in particular office development, is highly desired by existing and new
firms, most often those with a technology focus. As reported in the latest Downtown
Monitoring Report (Attachment E), vacancy rates are below 2% for office uses and lease rates
are in the $6 to $6.50 range, among the highest in the country. Many of the newer office
City of Palo Alto Page 5
developments, however, have not provided parking to the level required by the zoning code, as
exemptions are provided for transferable development rights and other provisions. Many
approved or upcoming projects have potential to add to the square footage of office space
downtown or to impact downtown or nearby parking or traffic:
A. Approved and Under Construction but not Occupied
355 Alma Street (Lytton Gateway)
278 University Avenue
180 Hamilton Avenue (Casa Olga: hotel)
456 University Avenue (Varsity Theater office space)
564 University Avenue
B. Approved but Not Yet Under Construction
668 Ramona Street (Pacific Art League)
135 Hamilton Avenue (Keenan)
C. Pending or Preliminary Review, Not Approved
636 Waverley Avenue (Kleiman)
611/651 Cowper Street
537 Hamilton Avenue
240-248 Hamilton Avenue
261 Hamilton Avenue (University Arts)
456 University Avenue (Varsity Theater retail space)
500 University Avenue
Attachment C provides a more thorough outline of the projects, proposed square footages, and
estimates of unparked spaces, the summation of which is a potential 665 spaces for which
parking is not currently available. The total increase in net square footage of non-residential
square footage for projects on the list (but not included in the Downtown Monitoring Report) is
just over 95,000 square feet, above the existing 223,000 square feet approved under the
Downtown Development Cap and reflected in the Downtown Monitoring Report. Staff is also
aware of projects in the formative stages that amount to approximately 13,500 square feet of
potential additional office development, but which have not yet been submitted for
entitlements (which would bring the total subject to the Development Cap to just over 330,000
City of Palo Alto Page 6
square feet). The list does not include residential use or uses that have converted to office from
less intense retail or service uses.
In addition, potential impacts are expected from other large projects in the area, each of which
will require extensive environmental analysis, but which will also need to be considered in
conjunction with other development impacts in and around downtown. These potential
projects include 27 University Avenue, 395 Page Mill Road (Jay Paul), Page Mill/El Camino Real
(VTA Lot), and projects under review in Menlo Park.
Discussion
Staff believes that the Development Cap Study will provide information relevant to existing and
projected conditions and development scenarios, and the Request for Proposal for the
Development Cap Study will be released later in March. Staff also proposes, however, the study
and implementation of several near-term (1-6 months) measures to relieve some of the current
parking impacts on neighborhoods, or at least to minimize further impacts from upcoming
development.
Near Term Parking Improvements (1-6 months)
Staff believes that, given the extent of parking intrusion into neighborhoods around downtown
and the need for additional downtown parking management, there are several measures
available to help alleviate (or at least plan to alleviate) such impacts. A few of these are outlined
below and staff requests Council direction, where necessary, to pursue these measures within
the coming 1-6 months, working with the Planning and Transportation Commission and
affected interests.
Open Downtown Permit Spaces (Immediate): Staff is increasing permit sales at Lots S/L (Bryant
Street) and WC (Cowper/Webster) by a total of 174 spaces by the end of March. This should
further reduce the waiting lists for parking structures. No Council authorization is necessary for
this action.
Attendant Parking Trial (3 months): Staff will work with the Downtown Parking Assessment
District representatives to explore a trial attendant parking trial, most likely in the parking
garage in Lot R (High Street between Hamilton and University Avenues). Such a program could
increase the capacity of the garage by another 20%, but would likely require an increase in
permit fees to support the cost.
City Staff TDM (6 months): Staff will present to Council a plan for a City employee incentive and
transportation demand management (TDM) program designed to reduce City employee parking
downtown, particularly in the City Hall garage, by 50-100 spaces, which would then be available
for permit parking for others in downtown.
City of Palo Alto Page 7
Consider Agreement for Development of Downtown Parking Garage at Lot P (3 months): Staff
will bring to Council a proposal by Chop Keenan, owner of the 135 Hamilton Avenue property,
for a public-private partnership for a new parking garage on surface Lot P on High Street
between Hamilton Avenue and University Avenue. The proposal would provide a mix of spaces
devoted to the 135 Hamilton Avenue project, but with a net increase in City spaces at a cost per
parking space substantially less than for a City-constructed garage and in a timeframe sooner
than the City could build such a facility. Mr. Keenan has provided a brief outline (Attachment D)
of key terms for consideration, but understands that the City will require a thorough review
process and deliberations as to the viability and desirability of pursuing such an agreement. The
agreement, if eventually approved, would also serve to eliminate a need for a parking exception
for the 135 Hamilton project. Staff will also present a status report at that time regarding the
ongoing study of parking garage opportunities and constraints.
Consider Restriction on Transfer of Development Rights: Staff will also evaluate whether to
restrict the creation and/or use of TDRs, which allow added square footage without requiring
parking.
Eliminate or Modify Downtown Parking Exemptions (3-6 months): Staff will bring forward to
staff and Planning and Transportation Commission proposals to further minimize the potential
for use of parking exemptions. This will include permanent elimination of the “1:1 FAR”
exemption and another that allows 200 square feet exempt from parking on many sites.
Residential Parking Restrictions (6 months): Staff will work with the affected neighborhoods
(and business interests) to identify options to implement parking restrictions in Downtown
residential areas to relieve intrusion from downtown employees and others. Some options may
include time restrictions (e.g., 4-hour parking), parking on dedicated sides of the street for
residents, whether to allow limited employee parking with higher permit costs, etc. Staff will
present options to Council for adoption if supported by residents, and assuring that the permit
process is cost-neutral to the City.
Staff believes that any or all of these efforts could proceed ahead of the Downtown
Development Cap Study to provide near-term relief for parking concerns.
Next Steps
The following next steps are anticipated relative to Downtown parking, traffic, zoning, and
development issues:
Release a minimum of 174 additional permit parking spaces in garage lots S/L (Bryant
Street) and WC (Cowper/Webster) by the end of March.
Release Development Cap Study Request for Proposal (RFP) by end of March.
Return to Council on April 15 with a proposed study plan process for the Arts and
Innovation District (27 University Avenue).
City of Palo Alto Page 8
Present to Council an overview of the ongoing study of parking garage opportunities and
constraints by May 15.
Return with specifics of an outline for the Lot P garage by May 15.
Return to Council with a proposed outline of Downtown Stakeholder Task Force by May
15, and finalize the Task Force by July 1.
Initiate a trial attendant parking program in at least one garage by July 1.
Develop City staff incentives and TDM to free up parking spaces at City Hall by
September 1.
Develop parking restrictions or permit parking provisions for presentation to Council by
September 1.
Develop zoning ordinance amendments timed for Planning and Transportation
Commission review and Council action by October 1.
Staff expects that the first phase of the Downtown Development Cap Study (data-gathering)
will be underway by June 1.
Resource Impact
Funding for most of the proposed near-term improvements is available through current staffing
and budgets, but additional funding may be required for implementation of the attendant
parking trial and residential permit parking program. The former would likely require some
increase in parking permit fees, and the latter will be funded through a combination of permit
fees and funding available from the Lytton Gateway Project.
Policy Implications
The 1986 Downtown Study included a 12-point Public Parking Program that is outlined in the
Comprehensive Plan. Many of these measures have been implemented since the 1986 study,
but nonetheless require additional attention as downtown development intensifies.
Environmental Review
Environmental review is not required in order for the Council to review at this time. All
proposed projects and policy changes, however, will need to be fully reviewed per the
provisions of the California Environmental Quality Act (CEQA). The exact type of review will not
be determined until the specific changes or projects are proposed and associated impacts are
identified.
Attachments:
Attachment A: Wait List for Downtown Parking Permits, March 2013 (PDF)
City of Palo Alto Page 9
Attachment B: Parking on Neighborhood Streets, November 2012 (PDF)
Attachment C: Pending Project Parking Impacts, March 2013 (PDF)
Attachment D: Proposed Lot P Public/Private Parking Structure, Letter from Chop
Keenan, March 6, 2013 (PDF)
Attachment E: March 11, 2013 Downtown Monitoring Report to Council (PDF)
Attachment F: November 13, 2012 Council Action Minutes (PDF)
Downtown Parking Space and Permit Inventory
Last Update: 3-12-2013
Letter Name Hourly Permit Total
Q Alma/High (North)-134 134 205 245 0
R Alma/High (South)77 134 211 200 215 56
S Bryant St 381 307 688 575 615 4
WC Cowper/Webster 201 388 589 630 700 0
CC City Hall 187 519 706 820 820 46
B Ramona/University 63 -63 ---
800 800 High St 10 53 63 66 75 54
Total No. Parking Spaces:932 1522 2454 Increase:174
Letter Name Hourly Permit Total
O Emerson/High 78 -78 ---
A Emerson/Lytton 68 -68 ---
C Ramona/Lytton 50 -50 ---
F Florence/Lytton 46 -46 ---
H Cowper/Waverly 90 -90 ---
D Hamilton/Waverly 86 -86 ---
E/G Gilman St -87 87 130 140 1
P High/Hamilton 51 -51 ---
KT Lytton/Kipling-Waverly 40 67 107 96 110 5
N Emerson/Ramona 48 -48 ---
X Sheridan Hotel -36 36 55 65 5
Total No. Parking Spaces:557 190 747 Increase:34
Permit Wait List
(as of 3-12-13)
Proposed Max #
Permits
Spring 2013
Stepped Release
Permit Wait List
(as of 2-27-13)
Parking Garages Parking Space Allocations
Ex. Max # Permit
Proposed Max #
Permits
Spring 2013
Stepped Release
Parking Lots Parking Space Allocations
Ex. Max # Permit
PROJECT ADDRESS ZONING TOTAL NON-OCCUPIED NON-
RESIDENTIAL AREA (SF)
PARKING
REQUIRED
ON-SITE
PARKING
SPACES
PARKING
IMPACT*
APPROVED (UNDER CONSTRUCTION, NOT OCCUPIED)
564 University CDCP 7,917 32 0 32
278 University CDCGFP 18,206 73 0 73
180 Hamilton (1) CDCP 86 hotel rooms plus 1,300 restaurant 91 0 91
355 Alma CDCP 49,863 166 144 22
456 University (office)(2)CDCFP 24,961 100 0 100
APPROVED (NOT YET UNDER CONSTRUCTION)
135 Hamilton CD-C(P)19,960 80 19 61
668 Ramona (3)CDCP 12,546 50 0 50
SUBMITTED, PENDING REVIEW
611 Cowper/651 Cowper CD-C (P)27,984 112 52 60
537 Hamilton CD-C (P)9,979 38 18 20
240-248 Hamilton CD-C (GF) (P)11,527 46 0 46
456 University (retail)(2)CD-C(GF)(P)14,140 57 0 57
261 Hamilton CD-C(GF)(P)10,000 40 7 33
636 Waverley CD-C(P)5,270 18 18 0
500 University CD-C(GC)(P)10,709 43 23 20
TOTAL 665
*Note: Parking impact does not imply non-compliance with parking requirements.
All projects would comply with code requirements, based on parking district assessments, reductions, exceptions, and/or on-site spaces provided.
(1) Casa Olga
(2) Varsity Theater
(3) Pacific Art League
KEENAN LAND VOMPANY
March 06, 2013
Mr. Curtis Williams
Director of Planning and Community Environment
City of Pa 10 Alto
250 Hamilton Avenue
Palo Alto, CA 94301
Re: Proposed Lot P Public/Private Parking Structure
Dear Curtis:
I would like to propose a public/private partnership for the development of a parking structure on Lot P.
This development would provide an on-site capacity of 145 self-park or 194 stacked/tandem spaces;
increasing the existing day-time capacity of 51 stalls by 60% (31 stalls) and night-time capacity by 184 %
(94 stalls). Project development is based on the following terms and conditions:
1. City contributes $ 1M toward the construction costs.
2. 135 Hamilton (Hamilton & High, LLC or other Keenan entity) shall contribute the balance of all
costs (hard and soft) estimated to be $ 7.989M.
3. City to sell 135 Hamilton up to 7,500 square feet of its TOR's at $ 90 per square foot.
4. 135 Hamilton shall contract with the general contractor and oversee construction through
completion.
5. 135 Hamilton shall have an appurtenant exclusive parking easement in perpetuity for Floors 4
and 5 (63 self-park spaces or 93 stacked spaces), between the hours of 6:00 AM to 6:00 PM
Monday through Friday. After 6:00 PM on weekdays and all hours on weekends Floors 4 and 5
are open to the public. This easement is to provide a stack/tandem parking operation serving
the commercial occupants at 135 Hamilton Avenue. A stack/tandem parking operation allows
users to self-park until the zone is full. Subsequent users park in the drive aisles and leave their
keys with an attendant.
6. The parking structure will be made of natural concrete with screened open areas and wall
sections in context with the surrounding neighborhood. The structure will be inviting and
brightly illuminated with all interior walls and ceilings painted white. The first floor level will
feature floor-to-floor dimensions ranging from a minimum of 11' to a maximum of 16' to allow
garbage/refuse trucks to service adjacent buildings behind the structure.
7. The City shall be responsible for the general operation of the parking structure, including all
maintenance, repairs and replacements. 135 Hamilton shall pay its pro-rata share of operating
expenses including water, electricity, sweeping, elevator maintenance, general maintenance,
and insurance (including earthquake estimated to be $ 10,OOO/yr.) for Floors 4 and 5. 135
Hamilton's share of operating expenses shall not include trash pick-up, city administration or
police patrol.
700 EMERSON STREET. PALO ALTO, CALIFORNIA 94301 • TELEPHONE (650) 614-6246 • TELECOPY (650) 326-2920
8. In the event this parking structure proposal is approved by the City Council, then the
subterranean parking at 135 Hamilton shall not be constructed other than four on-grade parking
spaces to serve the residential units where the subterranean ramp was to be built.
9. Regarding Lot P, the city shall waive all city fees, surcharges, costs, taxes, levies and
assessme nts.
ven:i rs
, f~ ~~
Chop Keenan
. !
City of Palo Alto (ID # 3462)
City Council Informational Report
Report Type: Informational Report Meeting Date: 3/11/2013
March 11, 2013 Page 1 of 9
(ID # 3462)
Title: Downtown Monitoring Report 2011-2012
Subject: Downtown Monitoring Report 2011-2012
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
This is an informational report and no Council action is required.
Executive Summary
The annual Commercial Downtown (CD) Monitoring Report tracks total non-residential growth
in the commercial downtown area (CD-C and CD-C(GF)(P)zones) and office and retail vacancy
rates in CD-C and CD-C (GF)(P) zones. Through mid-December of 2012, there was a 2.8 percent
vacancy rate within the Ground Floor Overlay District and a 1.6 percent overall vacancy rate in
the Commercial Downtown (CD) zoning district. In this monitoring cycle, approximately 49,860
square feet of space was approved or added to the total downtown non-residential square
footage. An additional 11,790 square feet of new non-residential development can be
accommodated before the re-evaluation limit of 235,000 square feet growth limit is reached.
Background
Annual monitoring of available space in Commercial Downtown (CD) zoning area was
established in 1998 by Comprehensive Plan Programs L-8 and L-9. These programs require
reporting of non-residential development activity and trends within the CD zone district.
Staff regularly has tracked vacancy rates, changes in floor area and parking in the CD district
resulting from approved development to comply with the Comprehensive Plan programs and to
determine the ground floor vacancy rate in the CD zone district. The zoning code included an
exception process to allow office development on the first floor if the ground floor vacancy rate
exceeds 5%.
In 2009, the City Council adopted zoning ordinance amendments to enhance protection of retail
uses in downtown commercial districts to ensure that retail uses are retained and viability
enhanced during the economic downturn and beyond. The ordinance also eliminated an
exception process triggered when the GF vacancy rate is found to be greater than 5% during
the annual monitoring. A map of the districts subject to the amendments was included in the
Council report (CMR 20:09), available on the City’s website.
March 11, 2013 Page 2 of 9
(ID # 3462)
Staff completed field visits for this 2011-2012 monitoring period in mid-December 2012.
Telephone interviews and email exchanges with local real estate leasing agents were also
compiled at the same time to determine current vacancy rates and prevailing rents. This report
also includes cumulative data on developments in the Commercial Downtown (CD) zone from
January 1987 through August 31, 2012 and has specific data on vacancy information and rental
rates through December 2012.
Discussion
The economic conditions of the Palo Alto downtown area are continuing to improve since last
year. Currently there is a 2.8 percent vacancy within the Ground Floor Overlay District and a 1.6
percent overall vacancy in the Commercial Downtown (CD) zoning district. This is a noticeable
drop of 2 percent vacancy in the Ground Floor Overlay District from last year. This number is
close to the 2006-2007 period vacancy rate, before the economic downturn. The retail rental
rates ranged from $3.00 to $6.50 per square foot based on the location, and office rental rates
ranged from $4.00 to $7.00 per square foot during this reporting period. Office rental rates
have increased marginally from last year and retail rental rates have remained steady through
the 2011-2012 monitoring period. The following table shows the approximate total vacant
square foot and percentage of vacancy from 2006.
TABLE 1: Total Vacancy in CD-C & CD-C (GF) (P) Zones in Downtown Palo Alto
Year
Total CD-C
Vacant
(SQFT)
% of CD-C
Vacancy
Total CD-C (GF)
(P) Vacant
(SQFT)
% of CD-C (GF)
(P) Vacancy
2006-2007 88,368 2.63 18,330 2.94
2007-2008 120,004 3.60 26,294 4.21
2008-2009 212,189 6.39 56,109 8.99
2009-2010 85,271 2.56 37,888 6.91
2010-2011 66,226 2.0 26, 290 4.8
2011-2012 52,368 1.6 15,550 2.8
Source: City of Palo Alto’s Planning Department.
Non-Residential Development Activity
The 1986 Downtown Study (and Comprehensive Plan and Zoning Ordinance) incorporated a
growth limit of 350,000 square feet of additional floor area above the total floor area existing in
1986, and provided for a re-evaluation of the CD regulations when net new development
reaches 235,000 square feet. Since 1986, a total of 223,210 square feet of non-residential floor
March 11, 2013 Page 3 of 9
(ID # 3462)
area has been added in the Downtown CD-C zoned area. In the past two monitoring cycles from
2009-2011, approximately 34,650 square feet of net new commercial floor area was added with
a few major contributing projects such as 524 Hamilton Avenue and 265 Lytton Avenue. In this
current cycle, 2011-2012, approximately 49,860 square feet of net new commercial floor area
has been added through one major project, 335-355 Alma Street.
Based on this recent monitoring, an additional 11,790 square feet of new non-residential
development remains for development before the re-evaluation limit of 235,000 square feet
growth limit is reached. Staff notes that the 135 Hamilton Avenue project was recently
approved (though parking issues haven’t been resolved), which would increase the total by
approximately 20,000 square feet, to about 245,000 square feet, in excess of the re-evaluation
threshold. Staff has developed a scope of work for the new Development Cap Study and will
initiate work in the next couple of months.
TABLE 2: Total Non-Residential SQFT Added in Downtown Palo Alto since 2006.
Year
Total Non-Residential SQFT
Added in CD-C
Total Non-Residential SQFT Left to
Reach the Re-evaluation Limit*
2006-2007 195 129,055
2007-2008 7,480 121,575
2008-2009 25,280 96, 295
2009-2010 21,150 75, 145
2010-2011 13,500 61,645
2011-2012 49,860* 11,790
Source: City of Palo Alto’s Planning Department
*Projects filed as of August 2012.
Below is a list of significant projects in the downtown CD-C zone area that added more than
5,000 square feet since 2006.
325 Lytton Ave--17,515 square feet
310 University Ave--7,481 square feet
265 Lytton Ave—21,151 square feet
524 Hamilton Avenue—9,345 square feet
355 Alma Street—49,860 square feet
Demonstrating Special Public Benefits
The Downtown Study reserved 100,000 square feet of the 350,000 square foot growth limit to
be used for projects demonstrating special public benefits. Since 1986, eleven projects in the
March 11, 2013 Page 4 of 9
(ID # 3462)
Downtown area have been developed under the Planned Community zoning that requires a
finding of public benefit. Six of the projects exceeded the non-residential floor area that would
otherwise be allowed under zoning by a total of 66,915 square feet. The total changes in
square footage of these projects are shown in the fourth column of Attachment C. The
remaining five projects were mixed-use projects that did not exceed allowable non-residential
floor areas. All of the projects either provided parking or paid a fee in-lieu of providing parking.
Only one project; 355 Alma Street, in this current cycle added square feet demonstrating public
benefit and provided in-lieu fees for parking.
Projects Qualifying for Seismic, Historic or Minor Expansion Exemptions
The Downtown Study designated 75,000 square feet of the 350,000 square foot cap for projects
that qualify for seismic, historic or minor expansion exemptions in order to encourage these
upgrades. Since 1986, 93,931 square feet have been added in this category. Two projects, 524
Hamilton Avenue and 668 Ramona, used close to 5000 square feet of Transfer Development
Rights (TDR) square footage. This year’s only approved project, 335-355 Alma Street, did not
add any square feet in this category. These projects are shown in the fifth column of
Attachment C.
Parking Inventory
The 1986 Downtown Study set performance measures that established that new commercial
development in the Downtown should not increase the total parking deficit beyond that was
existing or approved through May 1986, or 1,601 spaces. This base “deficit” number was
determined by counting the number of commercially bound vehicles (employees, customers,
etc.) parked in residential neighborhoods. Increases or reductions to the deficit are determined
by comparing the total number of commercial parking spaces constructed in the downtown
area with the amount of new commercial square footage constructed. In general, for every 250
square feet of commercial development, an additional parking space should be constructed.
There are certain projects that qualify for exemptions to parking requirements, which add to
the deficit. Conversely, parking improvements that are independent of development reduce
the deficit.
As noted above, certain projects are exempt from providing parking or a portion thereof, which
increases the deficit. The City tracks these exemptions, and at the end of the 2003 monitoring
period, the City determined a re-evaluation of the parking exemption regulations would be
undertaken when the unmet parking demand resulting from exemptions reaches a cumulative
450 spaces. Currently, the unmet parking demand resulting from exemptions is 350 parking
spaces.
In 2003, the City opened two new parking structures located at 528 High Street and 445 Bryant
Street. This added a total of 713 net new parking spaces. Other improvements that have
occurred since 1986 include a 2-floor addition to the Cowper/Webster Garage and significant
restriping of on-street parking spaces by the City’s Transportation Division. Per the
methodology prescribed in the 1986 downtown study, the total cumulative parking deficit has
been “reduced” from 1,601 in 1986 to 901 in 2012. Attachment D is a chart that details the CD
March 11, 2013 Page 5 of 9
(ID # 3462)
(Commercial Downtown) parking deficit. Although defined as a deficit reduction, there is a
general understanding that commercial parking intrusion into residential neighborhoods has
increased since that time. Staff believes that the parking intrusion is not accurately depicted in
Attachment D, as it likely doesn’t include factors such as a) increased employee density
downtown, b) conversions of existing retail or underused office space to more intensive office
uses, c) conversions of prior residential hotel uses to true hotel uses, and d) parking in
neighborhoods from areas other than the downtown business, such as for Caltrain commuters,
Palo Alto Medical Foundation, and/or Stanford. A better estimate of parking intrusion will be
developed as part of the Downtown Development Cap Study.
Recently, staff has been directed by City Council to undertake a site and feasibility study to
evaluate the possibility of construction of additional public parking structures in and around the
Downtown area, and to consider expansion of existing parking capacity through the use of
attendant parking at existing structures. In addition, City Council directed staff to conduct a re-
evaluation of the 1986 Downtown Development Cap Study. This study examined parking,
traffic and land use conditions of the Downtown area and restricting future non-residential
development to a total of 350,000 square feet in the Downtown CD-C zone area. The proposed
re-evaluation study will also include analysis of existing and projected traffic, parking capacity,
and the impacts from application of parking exemptions under transfer of development rights
and other code provisions.
Vacancy Rate for Ground Floor (GF) Combining District
The Ground Floor Combining District (GF) was created to encourage active pedestrian uses in
the Downtown area such as retail, eating and drinking and personal services. There is
approximately 548,675 square feet of total Ground Floor area in the CD-C (GF) (P) zoning
district after the adoption of the amended ordinance in December 2009.
Staff surveyed downtown CD-C (GF) (P) zoned areas to assess vacancy in the second week of
December 2012. Staff also consulted local real-estate agents and other databases and compiled
a list of only five properties in the CD-C (GF) (P) area, which met the requirements for vacancy.
The total vacancy amounted to 15,550 square feet.
TABLE 3: Vacant Property Listings for Only Ground Floor (GF) Spaces in
CD-C (GF) (P) Combining District.
(As of December 14, 2012)
Address Vacant Square Feet
575 High 4,437
174 University 2,300
March 11, 2013 Page 6 of 9
(ID # 3462)
355 University 3,694
429-447 University 3,300
436-440 University 1,818
Source: City of Palo Alto’s Planning Department
This results in a GF vacancy rate of approximately 2.8 percent this year; 2 percent less than
previous year’s vacancy rate.
FIGURE1. Vacancy Rates in CD-C and CD-C (GF)(P) Zones Since 2006
Source: City of Palo Alto’s Planning Department
Vacancy Rate for Entire CD District
The entire CD area contains approximately 3,850,000 gross square feet of floor area, including
approximately 330,000 square feet within the SOFA CAP Phase 2 area. About 525,000 square
March 11, 2013 Page 7 of 9
(ID # 3462)
feet is used for religious or residential purposes or is vacant and not available for occupancy.
Thus, the net square footage of available commercial space is approximately 3,325,000 square
feet.
Staff conducted a field survey in mid-December 2012 and communicated with local real estate
agents during same time to assess overall vacancies in the downtown area. In this monitoring
cycle there was a total vacancy of 52,368 square feet. This vacancy equals a rate of 1.6 percent
compared to 2.0 percent in last year’s monitoring report. The overall CD-C vacancy rate has
reduced considerably since the 2008-2009 period, close to a drop of 5 percent.
Table 4 was compiled based on staff conducted fieldwork, researches of different real estate
websites and responses received from local downtown real estate agents.
TABLE 4: Vacant Property Listings for Rest of Commercial Downtown (CD).
(As of December 14, 2012))
Includes Upper Floor Office Space in CD-C (GF) (P) Combining District and all floors of CD-C (P) District
Address
Zoning District
Vacant Square Feet
526 Bryant CD-C (GF)(P) 5,753
542 Emerson CD-C(GF) (P) 1,850
385 Forest CD-C (GF)(P) 2,038
201-225 Hamilton CD-C (GF)(P) 8,660
205 Hamilton CD-C (GF)(P) 9,857
437 Lytton CD-C (P) 1,204
550 Lytton CD-C (P) 2,662
355 University CD-C (GF)(P) 4,795
CD – Commercial Downtown, (C) – Commercial,
GF – Ground Floor Combining District, P - Pedestrian Overlay
March 11, 2013 Page 8 of 9
(ID # 3462)
Trends in Use Composition
The primary observation of change in the use composition of Downtown was, in this cycle
about 48,360 square feet of new non-residential use was added through the 355 Alma Street
project. Since the enactment of new CD zoning regulations in 1986, the total floor area devoted
to higher-intensity commercial uses such as office, retail, eating/ drinking and housing has
increased, while the total floor area in lower-intensity commercial uses like manufacturing,
warehousing and business services has decreased (see Attachment E).
Retail Rents
Retail rental rates have marginally increased since last year’s monitoring report. According to
the data gathered during December 2012 staff survey of commercial real estate agents offering
properties for lease in Downtown, rents for retail space are generally ranging from $3.00 to
$6.00 per square foot triple net (i.e. rent plus tenant assumption of insurance, janitorial
services and taxes). The lower end of this range is generally for spaces in older buildings and
away from University Avenue. Retail rental rates on core downtown University Avenue goes up
to $5.00 to $6.50. For some vacant properties outside the downtown core, rental rates are
lower and listed as negotiable.
Office Rents
Based on the information gathered from commercial real estate agents listing properties for
lease in Downtown, rents for Class A Downtown office space (i.e. newer and/or larger buildings
on University Avenue and Lytton Avenues) and Class B office space (i.e. older and/or smaller
buildings further from University Avenue) are ranging from $3.75 to $7.00 per square foot triple
net, more or less similar to last year’s monitoring cycle.
Timeline
This is an annual report.
Resource Impact
This report has no impact on resources, though the implications of reduced vacancy rates have
positive impacts on the City’s property and sales tax receipts.
Policy Implications
This report on the Commercial Downtown (CD) zoning area is mandated by Comprehensive
Plan Programs L-8 and L-9 and by the Downtown Study approved by the City Council on July 14,
1986.
Environmental Review
This is an informational report only and is exempted from CEQA review.
March 11, 2013 Page 9 of 9
(ID # 3462)
Courtesy Copies:
Planning and Transportation Commission
Architectural Review Board
Palo Alto Chamber of Commerce
Palo Alto Board of Realtors
Palo Alto Downtown Business & Professional Association
Downtown North Neighborhood Association
Professorville Neighborhood
University Park Neighborhood Association
Attachments:
Attachment A: Downtown Study Summary (PDF)
Attachment B: Map of Downtown CD(C) District (PDF)
Attachment C: Non-Residential Square Footage (PDF)
Attachment D: Parking Changes (PDF)
Attachment E: Changes by Land Use Category (PDF)
ATTACHMENT A
DOWNTOWN STUDY RESULTS SUMMARY (July 1986)
The following are the primary measures adopted as a result of the study:
1. A new Commercial Downtown (CD) zoning district, including three sub districts (CD-C, CD-S and CD-N), was created and
applied to most of the Downtown area previously zoned Community Commercial (CC) or Service Commercial (CS). The basic provisions of the CD district include floor area ratios (FARs) that are more restrictive than in the previous CC and CS
zones, limits to project size and to the overall amount of future development, and special development regulations for sites
adjacent to residential zones.
2. Growth limits were applied to the CD district restricting future development to a total of 350,000 square feet beyond what was existing or approved in May 1986 and providing for a re-evaluation of the CD regulations when new development reaches
235,000 square feet. In addition, 100,000 square feet of the total new floor area was reserved for projects demonstrating
special public benefits and 75,000 square feet for projects which qualify for seismic, historic or minor expansion exemptions.
3. Exemptions to the floor area ratio restrictions of the CD zone were established for certain building expansions involving historic structures, seismic rehabilitation, provision of required handicapped access, or one-time additions of 200 square feet or
less.
4. New parking regulations were established for the University Avenue Parking Assessment District that requires new non-
residential development to provide parking at a rate of one space per 250 square feet of floor area. Exemptions to this requirement are provided for certain increases in floor area related to provision of handicapped access, seismic or historic
rehabilitation, one-time minor additions (200 square feet or less) and development of vacant land previously assessed for
parking. The regulations also permit, in certain instances, off-site parking and parking fees in lieu of on-site parking.
5. Performance measures were established that specify that new development in the Downtown should not increase the total parking deficit beyond that expected from development that was existing or approved through May, 1986 (1600 spaces) and that call for re-evaluation of the parking exemption regulations when the unmet parking demand, resulting from exemptions,
reaches one half (225 parking spaces) of the minimum 450 parking spaces deemed necessary for construction of a new public
parking structure. Staff was directed to monitor the parking deficit.
6. A new Ground Floor (GF) Combining District was created and applied to the area along University Avenue and portions of the
major side streets between Lytton and Hamilton Avenues, in order to restrict the amount of ground floor area devoted to uses
other than retail, eating and drinking or personal service.
7. Staff was directed to monitor the Downtown area in terms of development activity, vacancy rates, sales tax revenues, and commercial lease rates to facilitate evaluation of the effectiveness of the new regulations.
8. Staff was directed to undertake a site and feasibility study to evaluate an additional public parking structure elsewhere in the
Downtown, to consider development of a parking facility on public lots S, L and F, and to explore the possibility of leasing or
purchasing privately-owned vacant lots suitable as parking structure sites. 9. Policies and regulations were adopted which encourage Planned Community (PC) zoning for parking structures and limit
underground parking to two levels below grade, unless there is proof that regular pumping of subsurface water will not be
necessary.
10. A Twelve-Point Parking Program was adopted to increase the efficiency of existing parking.
11. Traffic policies were adopted which prohibit new traffic signals on portions of Alma Street and Middlefield Road, and prohibit
a direct connection from Sand Hill Road to Palo Alto/Alma Street. In addition, new signs were approved directing through
traffic off of University Avenue and onto Hamilton and Lytton Avenues. 12. Staff and the Architectural Review Board (ARB) were directed to consider the possibility of an Urban Design Plan for
Downtown and to develop design guidelines for commercial structures in neighborhood transition areas and for driveways
which cross pedestrian walkways.
13. A temporary Design and Amenities Committee was created and charged with developing an incentive program (including FAR increases of up to 1.5) to encourage private development to provide a variety of public amenities in the Downtown area.
14. Staff was directed to study possible restrictions on the splitting and merging of parcels as well as the establishment of
minimum lot sizes in the new CD district.
Page 1
ATTACHMENT C
CD NON-RESIDENTIAL CHANGE IN SQUARE FOOTAGE 09/01/86 TO 08/31/12
Project Address Zoning Date Approved Public Benefit
Bonus Non
Residential
Square Footage
Seismic, Historic,
or Minor Bonus
Square Footage
Net change in
non-Residential
Floor Area
520 Ramona Street A
CDCGFP
11/20/84
-
400
+400
220 University Avenue
CDCGFP
2/5/87
-
65
+65
151 Homer Avenue CDSP 3/17/88 - - -9,750
314 Lytton Avenue
CDCP
5/5/88
-
-
-713
247-275 Alma Street
CDNP
8/4/88
-
-
+1,150
700 Emerson Street CDSP 9/15/88 - - +4,000
431 Florence Street
CDCP
9/15/88
-
2,500
+2,500
156 University Avenue
CDCGFP
12/15/88
-
4,958
+4,958
401 Florence Street
CDCP
3/2/89
-
2,407
+2,407
619 Cowper Street
CDCP
5/6/89
-
-
+2,208
250 University Avenue PC-3872 5/15/89 11,000B 300 +20,300
550 University Avenue
CDCP
6/1/89
-
-
-371
Page 2
Project Address Zoning Date Approved Public Benefit
Bonus Non
Residential
Square Footage
Seismic, Historic,
or Minor Bonus
Square Footage
Net change in
non-Residential
Floor Area
529 Bryant Street
PC-3974
5/3/90
2,491C
2,491
+2,491
305 Lytton Avenue
CDCP
9/28/90
-
200
+200
550 Lytton AvenueDE
CDCP
10/22/90
-
-
+4,845
531 Cowper Street
PC-4052
5/21/91
9,000
475
+9,475
540 Bryant Street
CDCGFP
3/24/92
-
404
+404
530/534 Bryant Street
CDCGFP
4/15/93
-
432
+432
555 Waverley Street/425
Hamilton AvenueE
CDCP 9/21/93 - - +2,064
201 University Avenue CDCGFP 11/18/93 - 2,450 +2,450
Page 3
Project Address Zoning Date Approved Public Benefit
Bonus Non
Residential
Square Footage
Seismic, Historic,
or Minor Bonus
Square Footage
Net change in
non/Residential
Floor Area
518 Bryant Street CDCGFP 3/3/94 - 180 +180
245 Lytton Avenue CDCP 7/21/94 - - -21,320
400 Emerson StreetEF
PC-4238
9/19/94
-
200
+4,715
443 Emerson Street
CDCGFP
1/5/95
-
26
+26
420 Emerson Street
CDCP
3/16/95
-
125
+125
340 University Avenue
CDCGFP
4/6/95 - -
-402
281 University Avenue
CDCGFP
4/20/95
- -
-2,500
456 University Avenue
CDCGFP
5/18/95
-
7,486
+7,486
536 Ramona Street CDCGFP 7/11/95 - 134 +134
725/753 Alma Street
PC-4283
7/17/95
-
-
-1,038
552 Emerson Street
CDCGFP
7/18/95
-
177
+177
483 University Avenue G
PC-4296
10/2/95
3,467C
2,789
+7,289
424 University Avenue
CDCGFP
9/21/95
-
2,803
+2,803
Page 4
Project Address Zoning Date Approved Public Benefit
Bonus Non
Residential
Square Footage
Seismic, Historic,
or Minor Bonus
Square Footage
Net change in
non/Residential
Floor Area
901/909 Alma Street E,F PC-4389 8/1/96 - - +4,425
171 University Avenue
CD-C(GF)(P)
9/19/96
-
1,853
+1,853
401 High Street
CD-C(P)
10/3/96
-
350
+350
430 Kipling Street D,H CD-C(P) 10/22/96 - 200 +1,412
460-476 University
Avenue
CD-C(GF)(P)
3/20/97
-
1,775
+1,775
400 Emerson Street D
PC-4238
3/21/97
-
-
+2,227
275 Alma Street CD-N(P) 7/8/97 - 200 +3,207
390 Lytton Avenue
PC-4436
7/14/97
8,420C
689
+17,815
411 High Street H
CDCP
12/18/97
-
2,771
+2,771
530 Ramona CDCGFP 05/20/99 - 2852 +2852
705 Alma St CDSP 09/21/99 - 2814 +2814
200 Hamilton Ave CDCP 10/21/99 - 10913 +10913
550 Lytton Ave CDCP 08/11/00 - - +93
Page 5
Project Address Zoning Date Approved Public Benefit
Bonus Non
Residential
Square Footage
Seismic, Historic,
or Minor Bonus
Square Footage
Net change in
Non Residential
Floor Area
437 Kipling St CDCGFP 02/01/01 - - +945
701 Emerson St CDSP 05/29/01 - - +434
723 Emerson St CDSP 05/29/01 - - +400
880 - 884 Emerson St CDSP 05/29/01 - - +312
539 Alma St CDCGFP 10/23/01 - 2,500 +2,500
270 University Ave CDCGFP 11/01/01 - 2,642 +2,642
901 High St. E, F CDSP 12/12/02 - - +12,063
800 High St. I PC-4779 02/03/03 - - -15,700
164 Hamilton Ave CDCP 01/13/05 - - -2,799
335 University Ave CDCGFP 08/10/05 - 4,500J +5,249
382 University Ave CDCGFP 07/27/06 - 194 +194
102 University Ave CDCGFP 10/10/2006 - - +8
325 Lytton Ave CDCP 5/2006 - - +17,515
Page 6
Project Address Zoning Date Approved Public Benefit
Bonus Non
Residential
Square Footage
Seismic, Historic,
or Minor Bonus
Square Footage
Net change in
Non Residential
Floor Area
310 University Ave CDCGFP 07/31/2008 - 7,481 +7,481
317-323 University Ave CDCGFP 01/2008 - 2,500 +3,290
564 University Ave CDCP 7/2008 - 2,500 +4,475
278 University CDCGFP 11/2008 - - +137
265 Lytton CDCP 7/2010 - 3,712 +21,151
340 University CDCP 12/2010 - - -1,360
524 Hamilton CDCP 2/2011 - 5,200 +9,345
630 Ramona CDCP 6/2011 - 437 +437
668 Ramona CDCP 7/2011 - 4,940 +4,940
661 Bryant CDCP 2/2011 - 1,906 0
335-355 Alma CDCP 8/11 9,700 - 49,863
Totals 1986-2012 44,078 93,931 223,219
A: Project approved during the Downtown Moratorium (9/84 to 9/86), but was not included in the Downtown EIR’s “pipeline projects.” As a result, the project is counted among
the CD District’s nonresidential development approvals since the enactment of the Downtown Study Policies in 1986 B: Through Assessment District project provided additional 64 public parking spaces as part of public benefit instead of required 44 private spaces
C: Project exceeded square footage otherwise allowed by zoning
Page 7
D: Project converted residential space to non-residential space. Net non-residential space counts toward the 350,000 square foot limit
E: Project included covered parking that counts as floor area but not counted 350,000 square foot limit F: Project was approved pursuant to PAMC Sections 18.83.120 or 18.83.130 which allow for a reduction in the number required parking spaces for shared parking facilities, joint
use parking facilities, or substitution of 8 bike parking spaces for one vehicle space. G. In addition, project paid in-lieu fee for loss of 2 on-site parking spaces
H: In addition, projects paid in-lieu fee for loss of 4 on-site spaces I: Part of the SOFA 2 CAP J: Transfer of Development Right (TDR) agreement with 230 and 232 Homer Avenue. 5000 total sq ft of TDR but only 4,500 sq. ft used for Non Residential Floor Area.
Page 8
Page 1
CD PARKING DEFICIT FROM 9/1/86 to 8/31/2012 ATTACHMENT D
PROJECT
ADDRESS
ZONING
NET CHANGE
IN NON/
RESIDENTIAL
FLOOR AREA
ADDED
PARKING
REQUIRED
NET
ADDED
PARKING
SPACES
PARKING
EXEMPTIONS
PER 18.52.060
OF PAMC
NET
DEFICIT
CHANGE
TOTAL
CUMULATIVE
DEFICIT
1986 deficit
1,601
520 Ramona
StreetA
CDCGFP +400 2 0 0 +2 1,603
220 University
Avenue
CDCGFP
+65
0
0
0
0
1,603
151 Homer
Avenue
CDSP
-9,750
0
11
0
-50
1,553
314 Lytton
Avenue
CDCP
-713
0
0
0
-3
1,550
247-275 Alma
Street
CDNP
+1,150
5
5
0
0
1,550
700 Emerson Street
CDSP
+4,000
16
16
0
0
1,550
431 Florence St
CDCP
+2,500
10
0
10
+10
1,560
Page 2
PROJECT
ADDRESS
ZONING
NET CHANGE
IN NON/
RESIDENTIAL
FLOOR AREA
ADDED
PARKING
REQUIRED
NET
ADDED
PARKING
SPACES
PARKING
EXEMPTIONS
PER 18.52.060
OF PAMC
NET
DEFICIT
CHANGE
TOTAL
CUMULATIVE
DEFICIT
156 University
Avenue
CDCGFP +4,958 20 0 20 +20 1,580
401 Florence
Street
CDCP
+2,407
10
0
10
+10
1,590
619 Cowper Street
CDCP
+2,208
9
9
0
0
1,590
250 University Avenue
PC-3872
+20,300
103
131B
0
-28
1,562
550 University
Avenue
CDCP
-371
0
0
0
-1
1,561
529 Bryant
Street
PC-3974
+2,491
10
0
10
+10
1,571
520 Webster
StreetC
PC-3499
0
0
163
0
-163
1,408
305 Lytton Ave
CDCP
+200
1
0
1
+1
1,409
550 Lytton
Avenue
CDCP
+4,845
19
19
0
0
1,409
Downtown
Extensive restriping by Transportation Division of on and off/street parking
-96
1,313
Page 3
PROJECT
ADDRESS
ZONING
NET CHANGE
IN NON/
RESIDENTIAL
FLOOR AREA
ADDED
PARKING
REQUIRED
NET
ADDED
PARKING
SPACES
PARKING
EXEMPTIONS
PER 18.52.060
OF PAMC
NET
DEFICIT
CHANGE
TOTAL
CUMULATIVE
DEFICIT
531 Cowper
Street
PC-4052 +9,475 38 0 2 +38 1,351
540 Bryant
Street
CDCGFP
+404
2
0
2
+2
1,353
530/534 Bryant Street
CDCGFP
+432
2
0
2
+2
1,355
555 Waverley Street/425
Hamilton
AvenueD
CDCP
+2,064
8
0
0
+8
1,363
201 University
Avenue
CDCGFP +2,450 10 0 10 +10 1,373
518 Bryant Street
CDCGFP
+180
1
0
1
+1
1,374
245 Lytton Ave
CDCP
-21,320
90
149
0
-59
1,315
400 Emerson
Street
PC-4238
+4,715
18
5
1
+14
1,329
443 Emerson
Street
CDCGFP +26 0 0 0 0 1,329
Page 4
PROJECT
ADDRESS
ZONING
NET CHANGE
IN NON/
RESIDENTIAL
FLOOR AREA
ADDED
PARKING
REQUIRED
NET
ADDED
PARKING
SPACES
PARKING
EXEMPTIONS
PER 18.52.060
OF PAMC
NET
DEFICIT
CHANGE
TOTAL
CUMULATIVE
DEFICIT
420 Emerson
Street
CDCP +125 1 0 1 +1 1,336
340 University
Avenue
CDCGFP -402 0 0 0 -2 1,334
281 University Avenue
CDCGFP
-2,500
0
0
0
-10
1,324
456 University
Avenue
CDCGFP
+7,486
30
0
30
+30
1,354
536 Ramona
Street
CDCGFP
+134
1
0
1
+1
1,355
725-753 Alma
Street
PC-4283
-1,038
7
7
0
-11
1,344
552 Emerson
Street
CDCGFP
+177
1
0
1
+1
1,345
483 University
Avenue
PC-4296
+7,289
29
-2E
11
+31
1,376
424 University Avenue
CDCGFP
+2,803
11
0
11
+11
1,387
901/909 Alma
PC-4389
+4,425
18
18
0
0
1,387
Page 5
PROJECT
ADDRESS
ZONING
NET CHANGE
IN NON/
RESIDENTIAL
FLOOR AREA
ADDED
PARKING
REQUIRED
NET
ADDED
PARKING
SPACES
PARKING
EXEMPTIONS
PER 18.52.060
OF PAMC
NET
DEFICIT
CHANGE
TOTAL
CUMULATIVE
DEFICIT
StreetD
171 University
Avenue
CDCGFP +1,853 7 0 7 +7 1,394
401 High Street
CDCP
+350
1
0
1
+1
1,395
430 Kipling
Street
CDCP
+1,412
5
-4E
1
+10
1,405
460/476
University
Avenue
CDCGFP
+1,775
7
0
7
+7
1,412
400 Emerson
Street
PC-4238
+2,227
9
0
0
+9
1,421
275 Alma
StreetF
CDNP +3,207 0 0 1 +1 1,422
390 Lytton
Avenue
PC-4436 +17,815 74 50 3 +27 1,449
411 High Street
CDCP
+2,771
0
-4E
11
+15
1,464
530 Ramona CDCGFP 2852 11 0 11 +11 1475
Page 6
PROJECT
ADDRESS
ZONING
NET CHANGE
IN NON/
RESIDENTIAL
FLOOR AREA
ADDED
PARKING
REQUIRED
NET
ADDED
PARKING
SPACES
PARKING
EXEMPTIONS
PER 18.52.060
OF PAMC
NET
DEFICIT
CHANGE
TOTAL
CUMULATIVE
DEFICIT
705 Alma St CDSP 2814 11 0 11 +11 1486
200 Hamilton
Ave
CDCP 10,913 44 3E 35 +41 1527
550 Lytton Ave CDCP 93 0 0 0 0 1527
528 High St PF 0 0 138 G 0 -138 1389
445 Bryant PF 0 0 575 G 0 -575 814
437 Kipling St CDCGFP 945 4 0E 2 +4 818
701 Emerson St CDSP 434 2 1 1 +1 819
723 Emerson St CDSP 400 2 2 0 0 819
880 / 884
Emerson St
CDSP 312 2 5 0 -3 816
Page 7
PROJECT
ADDRESS
ZONING
NET CHANGE
IN NON/
RESIDENTIAL
FLOOR AREA
ADDED
PARKING
REQUIRED
NET
ADDED
PARKING
SPACES
PARKING
EXEMPTIONS
PER 18.52.060
OF PAMC
NET
DEFICIT
CHANGE
TOTAL
CUMULATIVE
DEFICIT
539 Alma St CDCGFP 2,500 10 0 10 +10 826
270 University
Ave
CDCGFP 2,642 11 0E 11 +11 837
SUBTOTAL
86-02
106,930 672 1297 236 -764 837
901 High St. CDSP 12,063 59D 60 0 -1 836
800 High St. H PC-4779 -15,700 0 63 0 -63 773
164 Hamilton Ave CDCP -2499 0 0 0 0 773
335 University
AveI
CDCGFP 5,249 0 0 0 0 773
Page 8
PROJECT
ADDRESS
ZONING
NET CHANGE
IN NON/
RESIDENTIAL
FLOOR AREA
ADDED
PARKING
REQUIRED
NET
ADDED
PARKING
SPACES
PARKING
EXEMPTIONS
PER 18.52.060
OF PAMC
NET
DEFICIT
CHANGE
TOTAL
CUMULATIVE
DEFICIT
382 University
Ave
CDCGFP 194 0 0 1 +1 774
102 University
Ave
CDCGFP 8 0 0 0 0 774
310 University
Ave
CDCGFP 7,481 30 0 30 +30 804
317-323
University Ave
CDCGFP 3,290 0 0 0 0 804
564 University Ave CDCP 4,475 10 0 10 +10 814
325 Lytton Ave CDCP 17,515 110 6 0 -6 808
265 Lytton CDCP 21,151 106 52 0 +54 860
278 University CDCGFP +137 1 0 1 +1 861
340 University CDCP -1,360 861
524 Hamilton CDCP +9,345 31 8 23 +23 884
Page 9
PROJECT
ADDRESS
ZONING
NET CHANGE
IN NON/
RESIDENTIAL
FLOOR AREA
ADDED
PARKING
REQUIRED
NET
ADDED
PARKING
SPACES
PARKING
EXEMPTIONS
PER 18.52.060
OF PAMC
NET
DEFICIT
CHANGE
TOTAL
CUMULATIVE
DEFICIT
630 Ramona CDCP +437 2 0 2 +2 886
668 Ramona CDCP +4,940 20 0 20 +20 906
661 Bryant CDCP 0 0 0 0 0 906
Downtown Extensive restriping by Transportation Division of on and off/street parking
-32 874
180 Hamilton
Avenue
CDCP 0 0 0 5 +5 879
355 Alma Street CDCP +49,863 166 144 22 +22 901
TOTAL 223,219 1,077 1,816 350 676 901
A: Project approved during the Downtown Moratorium (9/84 to 9/86, but was not included in the Downtown EIR’s “pipeline projects.”) As a result, the project is counted among the CD District’s nonresidential development approvals since the enactment of the Downtown Study Policies in 1986
B: Through Assessment District project provided additional 64 public parking spaces as part of public benefit C: Addition of 2 levels of parking to Cowper/Webster garage
D: Project was approved pursuant to PAMC Sections 18.83.120 or 18.83.130 which allow for a reduction in the number required parking spaces for shared
parking facilities, joint use parking facilities, or substitution of 8 bike parking spaces for one vehicle space.
Page 10
E. Project removed existing on-site spaces or met required parking by paying in-lieu fee
F: Site had existing parking sufficient to allow expansion G: Construction of 2 city parking lots. 528 High completed on Aug. 2003 and 445 Bryant completed on Nov. 2003
H: Part of the SOFA 2 CAP
I: As per PAMC 18.87.055, the TDR area transferred to the site does not increase the number of automobile parking spaces required for the additional floor area.
Page 11
ATTACHMENT E
Commercial Downtown (CD) and SOFA 2 CAP Floor Area by Use Category
Use Category Area (October 1986)
Area (October 2012)
Area Change, percentage
1. Offices 1,100,000 1,400,000 27% % 2. Retail 500,000 625,000 25.00%
3. Eating & Drinking 150,000 275,000 83.33%
4. Financial Services 200,000 200,000 0.00%
5. Business Services 150,000 175,000 16.67%
6. Basement Storage 175,000 100,000 -42.86%
7. Hotels 100,000 150,000 50.00%
8. Personal Services 75,000 125,000 66.67%
9. Utility Facility 150,000 100,000 -33.33%
10. Public Facilities 50,000 75,000 50.00%
11. Automotive Services 150,000 50,000 -66.67%
12. Recreation/Private Club 25,000 50,000 100.00%
13. Theaters 50,000 25,000 -50.00%
14. Warehousing &
Distribution
50,000 25,000 -50.00%
15. Manufacturing 50,000 0 -100.00%
16. Religious Institutions 50,000 25,000 -50.00%
17. Multi-Family Residential 250,000 400,000 50.00%
18. Single Family
Residential
50,000 25,000 -50.00%
19. Vacant & Under
Construction
150,000 50,000 -66.66%
20. Vacant & For Sale 0 0
21. Vacant & Available 150,000 100,000 -33.33%
Total 3,625,000 3,875,000 5.52%
ADJUSTED TOTAL: (Deduct
residential uses, religious institutions,
vacant & for sale and vacant & under construction.)
3,125,000 3,350,000
(Rounded to the nearest 25,000 square feet)
* The above table is rounded to the nearest 25,000 square feet and was based on a table originally prepared in 1986. Over the years, because of the rounding to 25,000
square foot increments, the table has had a greater margin of error. Staff attempted to update the table from the beginning in 1998; therefore the numbers may not compare
directly to tables prepared prior to the 1998 report.
CITY OF PALO ALTO CITY COUNCIL
ACTION MINUTES
Special Meeting
November 13, 2012
The City Council of the City of Palo Alto met on this date in the Council
Chambers at 5:38 P.M.
Present: Burt, Espinosa, Holman, Klein, Price, Scharff, Schmid, Shepherd,
Yeh
Absent:
Special Orders of the Day
1. Community Celebration and City Council Resolution 9297 entitled
“Resolution of the Council of the City of Palo Alto Honoring Former
Mayor Gary Fazzino”.
MOTION: Council Member Espinosa moved, seconded by Council
Member Shepherd to approve the Resolution honoring former Mayor Gary
Fazzino.
MOTION PASSED: 9-0
Council took a break from 6:53 P.M until 7:15 P.M.
Consent Calendar
MOTION: Council Member Espinosa moved, seconded by Council
Member Price to approve Agenda Item Nos. 2-4.
Council Member Klein advised he would not be participating in Agenda
Item No. 3 as his wife is on staff at Stanford University.
Mayor Yeh advised he would not be participating in Agenda Item No. 3 as
his wife was a Stanford University student.
2. Approval of Assistance to Firefighters Grant to Purchase Multi-Band
Portable Radios, With Matching City Funds of 20 Percent for an amount
Not to Exceed of $46,000.
November 13, 2012
3. Approval of Stanford University Medical Center Annual Report and
Compliance with the Development Agreement.
4. Acceptance of a Final Map Street Dedication at 382 and 384 Curtner
Avenue.
MOTION PASSED for Agenda Item Nos. 2 and 4: 9-0
MOTION PASSED for Agenda Item No. 3: 7-0 Klein, Yeh not
participating
Agenda Changes, Additions and Deletions
7. Adoption of a Budget Amendment Ordinance and Approval of a Loan
Request From Palo Alto Housing Corporation in the Amount of
$5,820,220 for the Acquisition of 567-595 Maybell Avenue (continued
from November 5, 2012-staff request item be continued to November
19, 2012).
MOTION: Mayor Yeh moved, seconded by Council Member Espinosa to
continue Agenda Item Number 7 to November 19, 2012.
MOTION PASSED: 9-0
Action Items
5. Public Hearing: Approval of a Record of Land Use Action for a Site and
Design Application for the San Francisquito Creek Joint Powers
Authority's (JPA) Initial Flood Protection Project (Highway 101 to San
Francisco Bay), Adoption of a Park Improvement Ordinance for
Modifications to the Palo Alto Municipal Golf Course and the John
Fletcher Byxbee Recreation Area, and Adoption of a Resolution 9296
entitled “Resolution of the Council of the City of Palo Alto Authorizing
an Exception to Palo Alto Municipal Code Chapter 10.48 to Allow
Transfer of Soil from the Stanford University Medical Center
Construction Project to the Palo Alto Golf Course and Adjacent Areas”.
MOTION: Council Member Holman moved, seconded by Mayor Yeh to
continue this item to a date to be determined by Staff to allow; 1) Staff
time to discuss with JPA and determine means of discussion regarding the
EIR, 2) consider the timing, staging, and the route of the fill, and 3)
negotiations of any fees collected as a result of the fill.
November 13, 2012
Mayor Yeh withdrew his second for the Motion.
MOTION FAILED DUE TO THE LACK OF SECOND
MOTION: Vice Mayor Scharff moved, seconded by Council Member Price
to: 1) Approve a Record of Land Use Action approving the Site and
Design application for the San Francisquito Creek Joint Powers Authority
(JPA) initial flood protection project (Highway 101 to San Francisco Bay)
based upon the findings and conditions in the Record of Land Use Action;
2)Adopt the attached Park Improvement Ordinance for modifications to
the Palo Alto Municipal Golf Course and the John Fletcher Byxbee
Recreation Area, and 3) altering language in the Record of Land Use,
Section 7-Conditions of Approval, Item 8 to delete the word “consider”
and change “adding” to “add”.
MOTION PASSED: 8-1 Holman no
Mayor Yeh and Council Member Klein left the meeting at 8:40 P.M.
MOTION: Vice Mayor Scharff moved, seconded by Council Member Price
to adopt the resolution authorizing an exception to Chapter 10.48 [Trucks
and Truck Routes] of the Palo Alto Municipal Code for the limited purpose
of allowing a transfer of soil from the Stanford University Medical Center
construction project along Oregon Expressway to the Palo Alto Golf
Course and adjacent areas.
AMENDMENT: Council Member Holman moved, seconded by Council
Member Schmid that acceptance of fill prior to necessary need for
construction project should not interfere with playability of the golf course
AMENDMENT WITHDRAWN BY THE MAKER
AMENDMENT: Council Member Burt moved, seconded by Council
Member Holman that prior to accepting fill that would impact golf course
play, Staff would bring a cost benefit analysis back to Council for approval
prior to accepting a fill contract.
AMENDMENT PASSED: 5-2 Price, Shepherd no, Klein, Yeh not
participating
MOTION AS AMENDED PASSED: 7-0 Klein, Yeh not participating
Mayor Yeh and Council Member Klein returned to the meeting at 9:06
November 13, 2012
P.M.
6. Update of Parking Program and Review and Direction on Parking Policy
Strategies (continued from November 5, 2012).
MOTION: Council Member Shepherd moved, seconded by Council
Member XXXX to direct Staff to handle the parking policy strategies as
presented.
MOTION FAILED DUE TO THE LACK OF A SECOND
MOTION: Council Member Klein moved, seconded by Council Member
Schmid that this item would end no later than 11:30 P.M.
MOTION PASSED: 7-2 Holman, Scharff no
MOTION: Vice Mayor Scharff moved, seconded by Council Member
Shepherd to accept Staff recommendations to: 1) Complete parking
study and then come back to Council for determination of Trial Parking
Attendant Program in report to Council in 6 months, 2) Refer the
Development of an RFP for Downtown Cap Study to the Planning &
Transportation Commission to review the scope of work, 3) Refer the
zoning evaluation and TDM program to the Planning & Transportation
Commission to review scope of work, 4) RFP for Garage Access/Revenue
Controls, focus on parking monitoring below and report to Council in 6
months, 5) Technology: parking monitoring, develop RFP through PTC,
6) Refer Electric Vehicle charging stations to the Planning &
Transportation Commission and they are to provide a report to Council in
3 months, 7) Bicycle Parking Stations continue to pursue opportunities, 8)
Policy: on street accessible parking to PTC and report to Council in 3
months, 9) Refer short term residential parking strategies, to the Planning
& Transportation Commission and then report to Council,, 10) Delete the
recommendation regarding Professorville Permits-No Driveway Home, and
11) California Avenue permit Management work with Cal Ave Merchants,
report to Council in 6 months.
AMENDMENT: Council Member Holman moved, seconded by Council
Member Burt to include Recommendation Number 10- Professorville
Permits-No Driveway Home to Planning and Transportation Commission
and report to City Council.
November 13, 2012
AMENDMENT PASSED: 5-4 Klein, Price, Scharff Shepherd no
MOTION PASSED: 8-1 Holman no
Council Member Questions, Comments and Announcements
Council Member Price reported out on the November 1, 2012 Santa Clara
Valley Transportation Authority Board meeting, the Board approved the
optimal solution for the Bus Rapid Transit program.
Council Member Holman spoke about the passing of former Council
Member Ellen Fletcher and requested the meeting to be adjourned in her
honor.
Mayor Yeh stated that the Council would also be honoring Ms. Fletcher at
the next City Council meeting with a Resolution.
Council Member Burt stated the service for Ms. Fletcher would be held on
Sunday, November 18, 2012 at the Center for Jewish Life.
Adjournment: The meeting was adjourned the meeting in memory of
Ellen Fletcher at 11:35 P.M.
City of Palo Alto (ID # 3625)
City Council Staff Report
Report Type: Action Items Meeting Date: 3/18/2013
City of Palo Alto Page 1
Summary Title: Infrastructure Projects For Public Opinion Research
Title: Infrastructure Committee Recommendation to Modify List of Projects
Approved by Council for Public Opinion Research for a Potential
Infrastructure Revenue Ballot Measure
From: City Manager
Lead Department: Public Works
Recommendation
Infrastructure Committee and staff recommend that Council approve one of the
following motions:
Draft Motion: I move that the Council:
Accept the list of projects approved by the Infrastructure Committee on March 7,
2013 for the public opinion research firm to use in development of polling
questions on a potential ballot measure to fund infrastructure needs.
or
Accept the list of projects approved by the Infrastructure Committee on March 7,
2013 for the public opinion research firm to use in development of polling
questions on a potential ballot measure to fund infrastructure needs, amended as
follows.
Executive Summary
Staff is working with Fairbank, Maslin, Maullin, Metz and Associates (FM3) to
conduct opinion research that will assess the level of public support for various
infrastructure projects for a potential ballot measure to fund infrastructure needs.
Council approved a list of fourteen projects for polling on September 18, 2012.
On March 7, 2013, the Infrastructure Committee recommended some
modifications to the list including removal of four projects and the addition of
City of Palo Alto Page 2
three projects. This report recommends that the Council approve the project list
as modified by the Infrastructure Committee.
Background
On September 18, 2012, the Council adopted a high level plan and timeline for
consideration of an infrastructure revenue measure to fund infrastructure needs.
The staff report provided information on each project that the Infrastructure Blue
Ribbon Commission (IBRC)had previously identified, and for project needs
identified since the publication of the IBRC’s Final Report in December 2011. Staff
recommended eleven projects for public opinion research polling. Council added
three additional projects and directed staff to implement the plan and timeline.
The project list approved for polling by Council in September 2012 is as follows:
·Public Safety Building
·Bicycle/Pedestrian Transportation Plan
·Bike Bridge
·Byxbee Park
·Fire Stations
·Streets (accelerate resurfacing and Charleston/Arastradero)
·Sidewalks (surface catch-up)
·Cubberley (replace/expand)
·Parks catch-up
·Animal Services Center
·Playing Fields
·Post Office
·Ventura Community Center
·School Childcare Sites
Discussion
At the Infrastructure Committee meeting on March 7, 2013,staff reviewed the
changes to the projects and funding sources that have occurred since the projects
were last reviewed by Council on September 18, 2012. The staff report is
provided as Attachment A. The Infrastructure Committee voted to recommend
City of Palo Alto Page 3
removal of four projects from the list. The Committee also recommended adding
three other projects for polling. It should be noted that these additions will
require additional policy discussions before any final decision to include the
projects in an infrastructure revenue measure. The rationale for removing and
adding the projects is provided below. In two cases, the removal of Byxbee Park
and the addition of the History Museum, the Committee approved the changes by
a vote of 3-1. The remaining changes were approved unanimously.
Byxbee Park: Remove
The Byxbee Park project is recommended to be removed from the project list
primarily due to the uncertainty regarding a potential Energy/Compost Facility on
the ten acres that was set aside for a potential facility by the passage of Measure
E in November 2011. Most recently, Council has directed staff to seek regulatory
approval for postponing capping of the remaining uncapped portion of the landfill
until the 2014 construction season. Staff recommends that Council determine
whether an Energy/Compost Facility will be pursued on the ten acre site before
preparing the final plan for completing Byxbee Park. The Infrastructure
Committee voted 3-1 to remove Byxbee Park from the project list, with Vice
Mayor Shepherd dissenting.
Cubberley Replace/Expand: Remove
The Cubberley Replace/Expand project is recommended to be removed from the
project list because the ultimate decisions about uses and funding mechanisms
for the Cubberley site have not been made. The Cubberley Community Advisory
Committee’s Final Report recommends against funding improvements to
Cubberley through a ballot measure in the near future, citing time constraints and
general uncertainty about the project.
Post Office: Remove
The Post Office project is recommended to be removed from the project list
because staff analysis indicates that if given the opportunity to purchase the Post
Office, the purchase and improvement costs for the site could be satisfied by
savings on lease payments for other spaces leased by the City and revenue from
renting back a portion of the building to the Postal Service. Depending on factors
such as the ultimate cost to purchase and renovate the Post Office, simple
payback periods ranged from ten to fifteen years and the internal rate of return
(IRR) ranged from 4.15% to 8.9%. Additionally, the Postal Service is expected to
place the Post Office on the market for sale through a competitive bid process as
City of Palo Alto Page 4
early as May 2013, a timeframe which is incongruous with planning for a future
infrastructure revenue measure.
School Childcare Sites: Remove
Upgrades or renovations to the School Childcare Sites are recommended to be
removed from the project list. The twelve School Childcare Sites are provided by
Palo Alto Unified School District (District) in accordance with the Cubberley Lease
and Covenant Not To Develop, which provides for annual payments by the City to
the District, currently totaling approximately $0.6 million, to provide the sites.
Those payments will continue if the Cubberley agreement is extended.
Downtown Parking Garage and California Avenue Parking Garage: Add
Recognizing the Council priority of “Future of Downtown and California Avenue”,
the Infrastructure Committee recommends adding consideration of a new
Downtown Parking Garage and a new California Avenue Parking Garage to the
polling list. The Committee recognized that public funding of new parking garages
would be a departure from the current policy of funding garages through parking
assessment districts, and discussed the need for a broader policy discussion to
determine whether parking garage projects are appropriate for an infrastructure
revenue measure. Estimated costs for new parking garages have not yet been
developed. The current estimated cost for parking garages is $60,750 per
incremental space, consistent with the In-Lieu Fee Parking Program for Downtown.
Incremental spaces are used because future parking garages are likely to be built
on existing surface parking lot sites and the size and amount of parking spaces that
can be realized at each site varies. While potential garage locations and sizes have
not yet been identified, these figures suggest rough costs for garages of different
sizes, i.e. $12 million for 200 incremental spaces, $24 million for 400 incremental
spaces.
History Museum: Add
The Palo Alto History Museum (History Museum) is a nonprofit organization
working to raise funds to restore the historic Roth building and to open the Palo
Alto History Museum there. Development plans for the proposed project were
approved in March 2011 for Architectural Review, Minor Exceptions, and a
Conditional Use Permit. The project has secured approximately $3.5 million in
donations and pledges, and plans to raise approximately $0.8 million through the
sale of Transferable Development Rights. The estimated cost for the project is
approximately $7 million. Staff has not reviewed detailed cost estimates for the
City of Palo Alto Page 5
project and has not confirmed whether the estimate contains appropriate
construction contingencies and has been escalated to reflect current construction
cost conditions. The Infrastructure Committee recommended adding the History
Museum to the project list for public opinion polling, where the project would
consist of providing the remaining funding to allow the History Museum to
proceed. The Infrastructure Committee voted 3-1 to add the History Museum to
the project list, with Vice Mayor Shepherd dissenting.
With the changes to the project list recommended by the Infrastructure
Committee, the updated recommended project list for public opinion polling is as
follows:
·Public Safety Building
·Bicycle/Pedestrian Transportation Plan
·Bike Bridge
·Fire Stations
·Streets (accelerate resurfacing and Charleston/Arastradero)
·Sidewalks (surface catch-up)
·Parks catch-up
·Animal Services Center
·Playing Fields
·Ventura Community Center
·Downtown Parking Garage
·California Avenue Parking Garage
·History Museum
Timeline
Upon approval by Council of the project list for public opinion polling, staff will
work with FM3 to develop the survey objectives and questions. Survey objectives
will be presented to the Infrastructure Committee prior to finalization of the
questions. Public opinion polling is tentatively planned for April 2013. Staff
anticipates returning to Council in early June to present the results of the survey.
Resource Impact
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Contracts with FM3 for public opinion research and with TBWB strategies for
educational outreach services have been approved by Council. Use of other
resources is not proposed at this time.
Policy Implications
Funding of Downtown and California Avenue parking garages through an
infrastructure revenue ballot measure would be a change from the past practice
of using assessment districts to fund parking projects. Conducting polling on
these projects would gauge the level of public support, but a discussion on the
potential change in policy would be warranted prior to any decision to place these
projects on a ballot measure.
Attachments:
·A -Staff Report 3589 (PDF)
City of Palo Alto (ID # 3589)
Committee for Potential Infrastructure Finance Measure
Staff Report
Report Type: Meeting Date: 3/7/2013
City of Palo Alto Page 1
Summary Title: Infrastructure Projects Update
Title: Update on the Infrastructure Projects to be Evaluated in the City’s
Baseline Public Opinion Survey and Consideration of any Committee
Recommendations to the City Council on the Project List
From: City Manager
Lead Department: Public Works
Recommendation and Draft Motion:
Draft Motion: I move that the Committee:
Accept the list of projects approved by Council on September 18, 2012 for the
public opinion research firm to use in development of polling questions on a
potential ballot measure to fund infrastructure needs.
or
Accept the list of projects approved by Council on September 18, 2012 for the
public opinion research firm to use in development of polling questions on a
potential ballot measure to fund infrastructure needs, amended as follows, and
forward to the full Council for consideration:
Background
On September 18, 2012, staff presented to the Council a summary of
infrastructure project status and potential funding sources. Staff also presented a
subset of the full list of infrastructure projects, with a recommendation that these
projects be the basis for the public opinion research firm to use in development of
polling questions on a potential ballot measure to fund infrastructure. The
Council approved the list, with the addition of three projects: acquisition of the
Post Office, improvements to Ventura Community Center, and improvements to
the twelve childcare centers located at Palo Alto elementary schools.
City of Palo Alto Page 2
As approved by Council on September 18, 2012, the project list for public opinion
research is as follows:
1.Public Safety Building
2.Bicycle/Pedestrian Transportation Plan
3.Bike Bridge
4.Byxbee Park
5.Fire Stations
6.Streets (accelerate resurfacing and Charleston/Arastradero)
7.Sidewalks (surface catch-up)
8.Cubberley (replace/expand)
9.Parks catch-up
10.Animal Services Center
11.Playing Fields
12.Post Office
13.Ventura Community Center
14.School Childcare Sites
Discussion
There are a number of variables and factors at play that may offset the costs of
the projects and the need for a finance measure. Staff is providing an update on
the projects and potential funding sources to facilitate the Committee discussion
on the final list of projects to be evaluated in the City’s baseline public opinion
survey.
Project Summary Sheets
An updated set of project sheets is provided as Attachment A. The document is
provided in same format as the information provided to Council at its September
18th meeting. Each project sheet includes a project description; estimated cost
and basis for the cost estimate; identified and potential funding sources to offset
the project cost; and other variables or consideration that may impact timing,
cost, or viability. Note that the Ventura Community Center and School Childcare
Sites projects, which were added by Council, do not yet have sheets as staff is
working to develop project scopes and costs. A one-page summary of the
projects and costs is also provided (Attachment B) in the format requested by
Council on September 18, 2012.
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Project Cost Estimate Refinement
Staff has contracted with Siegfried Engineering, Inc. to assist staff in reviewing
and refining the project cost estimates for the projects that have been identified
for public opinion polling. The scope of this work includes the following:
·Standardize the methodology used for each estimate.
·Create a base unit cost based in 2014 dollars.
·Create a set of assumptions for cost escalation over time specifically to the
midpoint of construction or designated point in time.
·Set a consistent design contingency percentage as a factor of construction
costs.
·Set a consistent construction contingency percentage as a factor of
construction costs.
·Set a consistent construction management, inspection, testing, and
construction administration percentage as a factor of construction costs.
·Set a consistent set of guidelines and a percentage for the involvement of
public art elements as a factor of construction costs.
Siegfried is also working with staff to develop new project cost estimates for the
Ventura Community Center and School Childcare Sites. This work is expected to
be completed by the end of March 2013 and the Project Summary Sheets will be
updated accordingly at that time.
Potential Funding Sources
Table 1 provides an updated list of potential funding sources that could be used
for infrastructure projects that are in addition to the funding sources listed on the
project summary sheets.
Table 1. Potential Funding Sources
Funding Source Description Amount
Stanford Medical
Center
Development
Agreement:
Infrastructure
The Stanford Medical Center Development
Agreement provides payment of $23.2M for
use in connection with infrastructure,
sustainable neighborhoods and communities,
and affordable housing.Two payments of
$7.7M have been received, and the third is
estimated to be received in January 2018.
$23.2M
City of Palo Alto Page 4
Funding Source Description Amount
Stanford Medical
Center
Development
Agreement:
Sustainability
The Stanford Medical Center Development
Agreement provides payment of $12M for use
in projects and programs for a sustainable
community.Two payments of $4M have been
received, and the third is estimated to be
received in January 2018.
$12.0M
Infrastructure
Reserve
The Infrastructure Reserve was created as a
mechanism to accumulate funding for
infrastructure projects, and is funded each
year by a transfer from the General Fund to
the Capital Projects Fund.The Infrastructure
Reserve balance at the end of FY2013 is
projected to be $14.0M. Staff recommends
that $1.5M to $2M be kept in reserves for
unanticipated capital expenses.
$14.0M
Community Centers
Development
Impact Fee
These fees are intended to fund development
and improvements to community centers, art
centers, nature centers, civic theatres or other
facilities that can host classes, studios and
educational exhibits for public enjoyment,
recreation and education.The fund currently
contains $1.7M that is not committed to
specific projects.
$1.7M
Parks Development
Impact Fee
These fees are intended to be used to fund
acquisition of land for new or expanded parks
and for improvements for neighborhood and
district parks in order to expand the
recreational capacity of the park or provide
new sports and recreation facilities.The intent
of the fee is to mitigate for the expansion of
the population by new development with the
creation of new recreational facilities.The
fund currently contains $0.8M that is not
committed to specific projects.
$0.8M
City of Palo Alto Page 5
Funding Source Description Amount
One Bay Area Grant
(OBAG)
Nondiscretionary
Funds
OBAG is a new program administered by VTA
that will fund local road reconstruction and
rehabilitation, bicycle, pedestrian, streetscape,
and Safe-Routes-to-School projects that are
eligible for Federal Surface Transportation
Program (STP), Congestion Mitigation Air
Quality (CMAQ) or Transportation.Palo Alto’s
automatic allocation share of the funds is
expected to be a total of $1.0M to be used
over the next four years and other funds will
be available on a competitive basis.
$1.0M
Vehicle Registration
Fee Guarantee Fund
The new $10 addition to vehicle license fees
passed by voters will be used to fund local
road improvements and repairs.Palo Alto is
expected to receive $0.36M per year (with no
sunset date)resulting in funding of $1.8M over
the course of the FY13-17 Capital
Improvement Program Project (CIP)Plan.
$1.8M
These potential funding sources total $54.5 million. Staff has not proposed
allocating the funds to specific projects at this time pending the results of the
public opinion polling to be conducted in Spring 2013. Administrative Services
Department is scheduled to bring a staff report to Council in April detailing the
status of the Stanford University Medical Center (SUMC) Mitigation Funds and the
recommended policies and process for considering allocation of those funds. In
summary, the staff report will note that one idea for use of the SUMC funds is for
One Bay Area Grant (OBAG) project matching funds pending decisions on the
OBAG applications submitted by the City. Those decisions are expected in April or
May 2013. It is envisioned that the Infrastructure Committee and the City’s new
Sustainability Board will provide input to Council on potential allocation of funds
for infrastructure projects.
Development impact fees are another potential funding mechanism for certain
infrastructure projects. As shown in Table 1, there are currently uncommitted
Parks and Community Center development impact fees totaling $2.5 million.
City of Palo Alto Page 6
However, these funds may be needed for completion of the El Camino Park
project and for Furniture, Fixtures, and Equipment (FFE) for the Mitchell Park
Library and Community Center and Main Library Renovation projects. Staff is
working on an update to the City’s development impact fees that will focus future
fees to meet unfunded infrastructure project needs. It is also noteworthy that
the projected Infrastructure Reserve balance for the end of FY 2013 is $14.0
million, as compared to the projected $5.9 million that was reported on
September 18, 2012. The increase is primarily the result of the transfer of $7.6
million from the General Fund at the close of FY 2012.
Timeline
Public opinion polling is tentatively planned for April 2013. In the event that the
Infrastructure Committee recommends any changes to the list of projects for
public opinion polling, staff would take the recommendation to Council for its
approval. Such action is not anticiated to delay opinion polling.
Attachments:
·A -Infrastructure Project Sheets (PDF)
·B -Project Summary Sheet (PDF)
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Public Safety Building
(revised 2/26/2013)
Construction of a new public safety building approximately 44,420 SF with 147 secured parking spaces
and 44 unsecured parking spaces. The building and parking area is comparable to the program
verification study prepared by Ross Druilis Cusenberry Architecture in May 2012 which includes Fire
Administration. The IBRC 2011 Report found that the current facility failed to meet essential building
codes and OSHA requirements, had insufficient space, inadequate and difficult to use EOC.
Funding Source: This worksheet displays the project costs included in the Jay Paul public/private
partnership proposal that was presented to Council on 9/10/12 and would only be applicable if a
public/private partnership is pursued. If pursued, City costs for the project may change based on
negotiation of public benefits for the proposed project. The City cost could go down. At the same time,
if this approaches is unsuccessful, the City could be faced with funding the $47 million cost through a
Finance measure. The greater cost and size of the project will limit the flexibility of options the City may
be able to choose from.
*Developer estimate, does not include contingency
Other Considerations
City staff estimate the project cost for a typical design-bid-build project implementation for a
building of approximately the same size, including land acquisition, to be $57M. Although staff have
not conducted a detailed review of the public/private partnership project cost estimate of $47M, it
$27M
$20M
Public Safety Building
Total Estimate: $47M*
Public/Private Partnership
Total Additional Need
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
appears that the $10M difference may be due to lack of contingencies and estimated soft costs,
such as design, environmental assessment, and construction management, that are lower than
those the City uses in its cost estimates. Additionally, the developer’s cost estimate for the project
incorporates their stated ability to build the project more cheaply and efficiently.
The Jay Paul proposal was prescreened by City Council in September 2012, and the Planning and
Transportation Commission (PTC) began the project initiation hearing on February 6, 2013. The PTC
initiation hearing was continued to a future date. The current project schedule as prepared by
Planning estimates an EIR hearing by the PTC in September 2013, with a potential project approval
hearing by City Council in February 2014.
Relocation of the police department to a new public safety building would make approximately
22,600 of the current public safety building available for lease. Leased at $5/SF, this could generate
$1.4M/year in revenue that could be used to fund projects or to leverage Certificates of
Participation, depending on the size of the funding needed.
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Fire Stations
(revised 2/26/2013)
Two Fire Stations, numbers 3 and 4, have been identified as needing replacement. Fire Station #3,
known as the Rinconada Fire Station and located at 799 Embarcadero Road, was constructed in 1948.
Station #4, known as the Middlefield Fire Station, is located at 3600 Middlefield Road and was
constructed in 1953. A needs assessment study by RRM Design Group in April 2005 determined that
both buildings had structural deficiencies and that the sites had a potential for liquefaction (ground
instability) during a seismic event. Neither building meets the current building code for essential
services facilities
Funding Sources: No funding sources have been committed. Potential funding sources include Stanford
mitigation funds and public/private partnerships
*Fire Station #3 estimated at $6.7M, Station #4 estimated at $7.5M
Other Considerations
At the fourth Council Retreat on infrastructure, there was enthusiasm for the idea of using
replacement of the fire stations to incorporate community health services that would reflect Palo
Alto’s changing demographics. Some potential funding sources include: federal, state, and local
grants, Stanford mitigation funds and public/ private partnerships
$14.2M
Total Cost: $14.2M*
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Byxbee Park
(revised 2/26/2013)
As envisioned by the original artist and landscape architect, the completion of Byxbee Park would occur
following capping of the remainder of the landfill (Phase 2C) and would consist of a network of white
oyster shell-lined trails with wooden viewing platforms. The hilltops would also be accented with small
soil mounds called “hillocks” to be used for planting wildflowers. Additionally, the parking lot for the
park would be expanded
Funding Sources: No funding sources have been committed. Potential funding sources include federal,
state, and local grants, Stanford mitigation funds and parks development impact fees
* Staff revision of 1991 estimate by Hargreaves Associates.
Other Considerations
Final closure (capping) of the landfill was originally scheduled for 2012, but Council has directed staff
to seek regulatory approvals to postpone capping until the 2014 construction season to allow
consideration of an Energy/Compost Facility following the passage of Measure E in 2011.
CIP PE-13020, Byxbee Park Trails, was budgeted at $250,000 in FY2013 to begin constructing trails
on the recently opened former landfill areas (Phase 2A and 2B). This work may reduce the cost of a
future Byxbee Park project.
Total Cost: $3.6M*
$3.6M
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Bike/ Pedestrian Plan
(revised 2/26/2013)
The Palo Alto Bicycle and Pedestrian Transportation Plan 2012 expands the City’s existing bicycle
infrastructure and proposes to implement a network of new on-street and off-street facilities for all user
levels. Key components of the plan include 52 miles of new or enhanced multi-use paths, bicycle lanes,
and bicycle boulevards, and new barrier crossings at a number of locations. Barrier crossings account
for about three-fourths of the total estimated cost for implementing the plan.
Funding Sources: A $1.5M grant was approved by Santa Clara County in November 2012 to fund the
Matadero Creek Trail, a component of the Bicycle and Pedestrian Transportation Plan. Additional
potential funding sources include federal, state and local grants, Stanford mitigation funds,
development impact fees, and public/private partnerships.
* Planning level estimate from Bicycle and Pedestrian Plan completed in 2012
Other Considerations
The estimated cost of $25M differs from the previous figure of $35M because the $10M Highway
101 at Adobe Creek Bike Bridge project, which is shown as a separate project, is part of the Bicycle
and Pedestrian Plan and was included in the original $35M estimate.
$1.5M
$23.5M
Total Cost: $25M*
Santa Clara County Grant Funding
Total Additional Need
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Bike Bridge
(revised 2/26/2013)
This project would build a year-round, grade-separated pedestrian and bicycle crossing of Highway 101
at Adobe Creek to connect South Palo Alto neighborhoods with the Baylands Nature Preserve and
recreational and employment opportunities. The overcrossing is generally proposed as a 12-18’ wide
pedestrian and bicycle bridge which would include a minimum 10’ wide travel way that would allow for
a shared facility. Preliminary design and environmental assessment started in July 2012.
Funding Sources: A $4M grant was approved by Santa Clara County in November 2012 to fund the
Highway 101 Pedestrian/Bicycle Overcrossing. The grant proposal included a commitment of $1M from
Development Impact Fees to further the design. A $4M One Bay Area Grant (OBAG) application is being
submitted in early March 2013. Additional potential funding sources include Stanford mitigation funds,
development impact fees, and public/private partnerships.
* Feasibility Study completed in 2011, estimated at $6-10 Million, including $2M for design
Other Considerations
The OBAG grant application is due on March 5, 2013. Staff expects that decisions on award of
grants will be made in April or May 2013.
$1M
$4M
$4M
$0.35 $0.65
Total Cost $10M*
Santa Clara County Grant
Funding
OBAG Grant Request
Impact Fees
Existing CIP Funding
Total Additional Need
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Surface Catch Up
(revised 2/26/2013)
IBRC evaluated the maintenance needs of City streets and sidewalks as well as other surface facilities
such as parking lots and off-road trails. The Surface Catch-up estimate includes all deferred
maintenance that is not currently scheduled in the FY13-17 CIP Plan. The surface needs include $3.7M
in sidewalk repairs, resurfacing of over 30 parking lots, approximately 9 miles of off-road trail repairs,
traffic signals, intersection improvements and traffic calming improvements. The estimate does not
include annual street maintenance.
Funding Sources: No funding sources have been committed.
* Staff Estimate based on 2011 construction costs.
Other Considerations
The surface catch-up estimate includes approximately $1M in costs for maintenance of Downtown
and California Avenue parking assessment district lots. These costs may be funded through parking
permit revenues.
Total Cost: $8.8M*
$8.8M
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Parks Catch-up
(2/26/2013)
IBRC evaluated the maintenance needs of City parks and open space facilities. The Parks Catch-up
estimate includes all deferred maintenance that is not currently scheduled in the FY13-17 CIP Plan. The
parks and open space needs include turf, irrigation and playground replacement, pathway, tennis and
basketball court resurfacing, and replacement of miscellaneous amenities such as benches, drinking
fountains, lighting, signage, and trash receptacles.
Funding Sources: No funding sources have been committed. Parks development impact fees are not
available for maintenance costs.
* Staff Estimate based on 2011 construction costs.
Other Considerations
Parks catch-up is reduced from the $14.5M figure used by IBRC due to Parks projects added to the
FY13-17 CIP Plan.
Total Cost: $9.8M*
$9.8M
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Buildings Catch-up
(revised 2/26/2013)
IBRC evaluated the maintenance needs of all City buildings. The Buildings Catch-up estimate includes all
deferred maintenance that is not currently scheduled in the FY13-17 CIP Plan, with the exception of
deferred maintenance for Cubberley Community Center. Deferred maintenance requirements include
roofing, HVAC, electrical and plumbing replacements. Interior and exterior improvements such as
painting and carpet replacement are also included.
Funding Sources: No funding sources have been committed.
* Kitchell Report completed in 2008 with IBRC and staff assessment.
Other Considerations
The Catch-up estimate includes about $900,000 for Municipal Services Center (MSC) deferred
maintenance. This deferred maintenance would not be needed if a decision is made to move
forward with replacement of the MSC. Additionally, staff will evaluate whether MSC deferred
maintenance should be funded by the General Fund CIP Program.
Total Cost: $4.5M*
$4.5M
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Post Office
(revised 9/13/2012)
Acquisition of post office property and renovation of existing building.
Funding Sources: Potential annual lease payments of $1.2M/year could be used if Development Center
and Elwell Ct. office space uses were to be relocated to a City-acquired Post Office building.
* Staff Estimate
Other Considerations
Potential for avoided annual lease payments of $1.2M if Development Center and Elwell Court office
space were to be relocated to City-acquired Post Office
Total Cost: $10M*
$10M
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Charleston/Arastradero
(revised 2/26/2013)
Landscaping, lighting and signal and signage improvements along the entire Charleston/Arastradero
Corridor will allow for up to 7-8 feet bike lanes on both sides of the street. The landscape median
provides a permanent improvement to transition from four travel lanes to three along the entire
corridor. Addition of pedestrian crossing refuge islands, enhanced crosswalks, bulb-outs and bike
boulevard signage are also included. The project’s goals are to reduce commute speeds and improve
school related traffic congestion.
Funding Sources: A Safe Routes to School grant was approved in the amount of $0.45M to improve
Charleston Road from Alma Street to Middlefield Road. A $0.35M Environmental Enhancement and
Mitigation Program (EEMP) grant application was submitted in January 2013. A $5.5M One Bay Area
Grant (OBAG) application and a $0.5M Vehicle Emissions Reductions Based at Schools (VERBS) grant
application are being submitted in early March 2013. Development impact fees from the
Charleston/Arastradero Corridor Pedestrian and Bicyclist Safety Fund totaling $0.25M have been
included in the FY 2013 CIP Plan for design of the Corridor plan, and an addition $0.57M is currently
available in the Fund.
*Staff prepared cost estimate in 2009
Other Considerations
Project cost increased from $6.1M because scheduled Charleston work was removed from the FY13-
17 CIP Plan.
The OBAG grant application is due on March 5, 2013. Staff expects that decisions on award of
grants will be made in April or May 2013. Award of EEMP grants is expected in September 2013.
$450,000 $350,000
$5,500,000
$500,000.00
$250,000.00
$570,000.00
$2,130,000.00
Total Cost $9.75M*
Safe Routes to School
Grant Funding
EEMP Grant Request
OBAG Grant Request
VERBS Grant Request
Existing CIP Funding
Charleston/Arastradero
Fund
Total Additional Need
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Cubberley Replace/Expand
(revised 2/26/2013)
This project would completely replace the existing Cubberley Community Center with a new community
center on the City-owned portion and new middle and high schools on the PAUSD-owned portion.
Funding Sources: No funding sources have been committed. Potential funding sources include federal,
state and local grants, Stanford mitigation funds, development impact fees from the Community Center
Fund, and public/private partnerships. The City’s share of the project for the Community Center is $83M
of the $200M.
* Planning level estimate completed in 2012.
Other Considerations
The project would be coordinated in cooperation with PAUSD if the Cubberley process ultimately
yields a decision to pursue [up to] complete replacement and expansion of Cubberley Community
Center. The Cubberley Community Advisory Committee is expected to make its recommendations
to Council in March 2013.
$117M
$83M
Total Cost: $200M*
School District
Total Additional Need
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Cubberley Deferred Maintenance
(revised 2/26/2013)
All maintenance required for Cubberley Community Center including HVAC, electrical and plumbing
replacements, parking lot resurfacing, tennis courts and field repairs. Cubberley Deferred Maintenance
includes both the City and PAUSD-owned portions of the Cubberley property.
Funding Sources: No funding sources have been committed.
* Kitchell Report completed in 2008, and some staff assessment
Other Considerations
Addressing Cubberley deferred maintenance may not be necessary if Council decides to pursue
complete replacement and expansion of Cubberley Community Center. Likewise, deferred
maintenance on the PAUSD-owned portion of the property may not be necessary if Council decides
not to renew the existing lease. The Cubberley Community Advisory Committee is expected to
make its recommendations to Council in March 2013.
Total Cost: $6.9M*
$6.9M
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Animal Services Center
(revised 2/26/2013)
Construction of a new Animal Services Center at the former Los Altos Treatment Plant site.
Funding Sources: No funding sources have been committed. Potential funding sources include federal,
state and local grants, Stanford mitigation funds, and public/private partnerships.
* Staff prepared cost estimate in 2009
Other Considerations
This project assumes relocation of the Animal Services Center to the Los Altos Treatment Plant site
along with relocation of the MSC to allow auto dealer use for the East Bayshore site. No project is
needed if relocation of the MSC does not occur.
The estimate of $6.9M is based on an Animal Services Center sized to serve Palo Alto, Mountain
View, Los Altos, and Los Altos Hills. Given the ongoing discussions resulting from Mountain View
ending its participation, a smaller facility with a lower cost may be built if the project moves
forward. However, it is also possible that the City may enter into contracts with other jurisdictions
that would offset the loss of revenue from Mountain View.
Total Cost: $6.9M*
$6.9M
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Civic Center
(revised 2/26/2013)
The waterproofing membrane that is beneath the Civic Center plaza deck is in need of replacement in
order to prevent the current leakage of water into the garage area. The current leakage may eventually
degrade the reinforcing steel that holds the deck structure together. The membrane has a lifespan of
approximately 30 years and is the original installation from the 1969 Civic Center construction.
Funding Sources: No funding sources have been committed.
* Ferrari Moe estimate in 2004, adjusted for inflation in 2008
Other Considerations
Total Cost: $16M*
$16M
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Los Altos Treatment Plant
(revised 2/26/2013)
The Los Altos Treatment Plant (LATP) property contains a former wastewater treatment facility on a 6.5
acre portion of the site known as Area B. This project will initiate the development permit process to
maximize usable land on Area B. The project will produce and execute plans to remediate historical
contamination on the site, demolish the remaining treatment plant structures, and fill low areas
including the former sludge ponds. Mitigation of wetland impacts will also be coordinated on the site
following CEQA analysis. The mitigation is expected to include the creation of additional wetlands in the
portion of the LATP site known as Area A. Conceptual design and environmental clearance for the
project are included in the scope of work for a contract that will be brought to Council for approval in
March 2013.
Funding Sources: No funding sources have been committed.
* Staff prepared estimate in 2008
Other Considerations
Following completion of the project, the land would be available for City use, sale, or lease to a
third-party, generating undetermined revenues.
The General Fund and the Refuse Fund each own half of the LATP property.
Total Cost: $2M*
$2M
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Airport
(revised 9/13/2012)
Resurfacing of runway and taxiways and construction of 12,000 SF terminal building
Funding Sources: The project is expected to be funded through Airport revenues upon transfer of the
Airport to City operation.
* Staff prepared estimate in 2012
Other Considerations
Total Cost: $5M*
$5M
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Playing Fields (at Golf Course)
(revised 2/26/2013)
10.5 acres of existing Golf Course land is being set aside as part of the Golf Course reconfiguration
project for potential playing fields. The fields will be constructed when/if funding becomes available
Funding Sources: No funding sources have been committed. Potential funding sources include Stanford
mitigation funds, parks development impact fees, and public/private partnerships.
* very preliminary estimate based on artificial turf playing fields
Other Considerations
Preliminary estimates range from $2M - $6M, with the $2M estimate representing three turf
playing fields and the $6M estimate representing three artificial turf playing fields. These
estimates do not include other amenities such as parking and lighting that would be associated
with the project. Staff intends to work to develop conceptual plans and more precise cost
estimates in the near future.
Total Cost: $6M*
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Golf Course
(revised 2/26/2013)
The Golf Course project will reconfigure the entire Golf Course allowing a more Baylands-oriented
golfing experience with significantly more naturalized areas and a smaller turf footprint (less
fertilization, pesticide application and water use). The project will also set aside 10.5 acres for possible
playing fields or other recreational facilities. The primary purpose of the Golf Course project is to
accommodate the San Francisquito Creek Joint Powers Authority (SFCJPA) levee re-alignment project,
which will encroach onto the existing Golf Course for critical flood control measures.
Funding Sources: Staff estimate $3.2M will be paid by the SFCJPA as mitigation for the levee
realignment project. The remaining $4.4M of construction costs will likely be financed through
Certificates of Participation or other means over 20 years, with the debt payments to come from Golf
Course revenues. Funding for the estimated $0.5M design cost is not yet identified.
* Forrest Richardson estimate in 2012. $500,000 is design cost estimates
Other Considerations
Does not include conceptual plans for 10.5 acres of land set aside to become potential playing
fields if/ when funding becomes available.
Final amount of SFCJPA mitigation is under negotiation.
$3.2M
$4.4M
$0.5M
Total Project $8.1M*
SFCJPA Mitigation
Certificates of
Participation
Existing CIP Funding
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Municipal Services Center
(revised 2/26/2013)
Complete replacement of Municipal Services Center based on study completed by Leach Mounce
Architects in 2003.
Based on IBRC recommendation, CIP PE-12004 was created for a MSC Facilities Study to analyze options
for locating City functions, personnel and equipment currently housed at MSC/ASC.
Funding Sources: This project is expected to be funded by Enterprise Funds if implemented.
* Leach Mounce Architects estimate in 2003 adjusted by staff for inflation
Other Considerations
A complex study of the MSC property is currently budgeted for FY 2013. Staff is finalizing the scope
and expects to release an RFP in Spring 2013.
Total Cost: $93M*
$93M
The project information and cost estimate information on this sheet represent staff’s best information at this time.
Staff will continue to refine the information as new and more precise information becomes available.
Regional Water Quality Control Plant (RWQCP)
(revised 9/13/2012)
The recently completed Regional Water Quality Control Plant Long Range Facilities Plan projects project
needs over the next 50 years, including retiring of the sewage sludge incinerators, addition of nutrient
removal treatment processes, reverse osmosis membrane treatment for recycled water, and a number
of other projects.
Funding Sources: Palo Alto contributes 35% of the flow to the RWQCP, and would therefore be
responsible for 35% of the project costs. The RWQCP partner cities would fund the remaining 65%. Palo
Alto project costs would likely be funded through Utility Revenue bonds and/or the State Revolving
Fund.
* Long Range Facilities Plan report in 2012.
Other Considerations
Total Cost: $250M*
$250M
Infrastructure Project Summary Sheet
(all costs/revenues in millions of dollars)
Project
Estimated
Cost
Potential
Funding Net Cost
Importance
Ranking
Public Support
Ranking
Annual
Operating
Revenue
Other One
Time Costs
Public Safety Building 47 27 20 tbd tbd 1.4 tbd
Bike/Pedestrian Plan 25 1.5 23.5 tbd tbd
Bike Bridge 10 9.35 0.65 tbd tbd
Byxbee Park 3.6 0 3.6 tbd tbd
Fire Stations 14.2 0 14.2 tbd tbd
Streets 1 9.75 7.62 2.13 tbd tbd
Sidewalks (surface catch-up) 2 3.7 0 3.7 tbd tbd
Cubberley Replace/Expand 200 117 83 tbd tbd
Parks Catch Up 9.8 0 9.8 tbd tbd
Animal Services Center 6.9 0 6.9 tbd tbd
Playing Fields (at Golf Course)6 0 6 tbd tbd tbd
Post Office 10 0 10 tbd tbd 1.2 3
Ventura Community Center tbd tbd tbd tbd tbd
School Childcare Centers tbd tbd tbd tbd tbd
Surface Catch Up 5.1 0 5.1
Buildings Catch Up 4.5 0 4.5
Cubberley Deferred Maintenance 6.9 0 6.9
Civic Center 16 0 16
Los Altos Treatment Plant 2 0 2 tbd
Airport 5 5 0
Golf Course 8.1 8.1 0
Municipal Services Center 93 93 0
Regional Water Quality Control Plant 88 88 0
Energy/Compost Facility 100 100 0
Sum:674.6 456.6 218.0 2.6 3
1 Streets project is defined as completion of the Charleston/Arastradero project with acceleration of the overall street resurfacing program;
this placeholder estimate is for the Charleston/Arastradero project and does not yet include additional cost for accelerated resurfacing
2 Sidewalks catch-up is included in the Surface Catch-up project summary sheet, and represents the additional funding needed to complete
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The project information and cost estimate information on this sheet represent staff’s best information at this
time. Staff will continue to refine the information as new and more precise information becomes available.