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2014-04-07 City Council Agenda Packet
CITY OF PALO ALTO CITY COUNCIL Special Meeting Council Conference Room April 7, 2014 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 April 7, 2014 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. REVISED PUBLIC COMMENT Members of the public may speak to agendized items; up to three minutes per speaker, to be determined by the presiding officer. If you wish to address the Council 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, but it is very helpful. TIME ESTIMATES Time estimates are provided as part of the Council's effort to manage its time at Council meetings. Listed times are estimates only and are subject to change at any time, including while the meeting is in progress. The Council reserves the right to use more or less time on any item, to change the order of items and/or to continue items to another meeting. Particular items may be heard before or after the time estimated on the agenda. This may occur in order to best manage the time at a meeting or to adapt to the participation of the public. To ensure participation in a particular item, we suggest arriving at the beginning of the meeting and remaining until the item is called. 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 up to three minutes for concluding remarks after other members of the public have spoken. Call to Order Study Session 6:00-7:00 PM 1. Study Session with the Public Art Commission COUNCIL CHAMBERS Special Orders of the Day 7:00-7:10 PM 2. Proclamation National Crime Victims Week 7:10-7:15 PM 3. Selection of Applicants to Interview on April 16, 2014 for the Public Art Commission, Library Advisory Commission and the Human Relations Commission 2 April 7, 2014 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. 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 7:15-7:25 PM Oral Communications 7:25-7:40 PM Members of the public may speak to any item not on the agenda. Council reserves the right to limit the duration of Oral Communications period to 30 minutes. Minutes Approval 7:40-7:45 PM February 10, 2014 March 3, 2014 Consent Calendar 7:45-7:50 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 4. Policy and Services Committee Recommendation to Accept the Auditor's Office Quarterly Report as of December 31, 2013 5. Approval of a Five-Year Contract with Oracle America, Inc., for Software Program Technical Support Services in the Amount not to Exceed $563,600 6. Adoption of Budget Amendment Ordinance in the Amount of $2,257,200 and Approval of Wastewater Treatment Enterprise Fund Contract with Anderson Pacific in the Total Amount of $2,052,000 for the DMF Optimization & Secondary Clarifiers Improvement Project at the Regional Water Quality Control Plant CIP WQ-80021 Plant Equipment Replacement 7. Finance Committee Recommendation to Accept the Inventory Management Audit 8. Approval of Wastewater Treatment Enterprise Fund Contract with Monterey Mechanical Co. in the Total Amount of $374,100 for the Secondary Clarifier Number 1 Mechanism Replacement Project at the Regional Water Quality Control Plant - Capital Improvement Program Project WQ-80021 3 April 7, 2014 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. Adoption of a Resolution Approving Amendment No. 1 to the 2009 California Oregon Transmission Project Long-Term Layoff Agreement to Authorize the City of Roseville's Withdrawal and Provide the City of Palo Alto with Voting Rights on Project Improvements and Financing 10. Adoption of a Budget Amendment Ordinance in the Amount of $880,271 to CIP SD-10101, Offset by a Reduction to CIP SD-06101, and Approval of a Contract with Ranger Pipelines, Inc. in the Amount of $1,516,610 for the Southgate Neighborhood Storm Drain Improvement and Green Street Project, Capital Improvement Program Project SD-10101 11. Consideration of an Appeal of the Director's Individual Review Approval of a Two-Story, Single Family Home Located at 4055 Second Street 12. Approval of a Contract Amendment to S13148916 with AECOM for Consulting Services in the Amount of $21,500 to Complete a Risk Assessment for Hazardous Materials at Communications and Power Industries (CPI) located at 607-811 Hansen Way 13. Title: Recommendation from the Council Appointed Officers Committee (CAO Committee) that Council Exercise an Option to Extend for One Year a Consulting Contract with Sherry L. Lund Associates for a Total Cost Not to Exceed $58,161 for: 1) Consulting Services related to the 2013-2014 Annual Performance Reviews for Three Council Appointed Officers for a Total Cost Not to Exceed $31,588; 2) Mid-year Performance Review Updates for a Total Cost Not to Exceed $8,003; 3) Solicitation of Staff Feedback Related to Performance Evaluations for a Total Cost Not to Exceed $10,070; 4) As Needed Consulting Services for Compensation, Organizational Development and Human Resources Consulting for a Total Not to Exceed Cost of $6,000; and 5) Additional Services for a Total Cost Not to Exceed $2,500; and Authorize Use of Council Contingency Funds of Up to $50,000 for Necessary Work Before July 1, 2014 14. Approval of Purchase Order for Annual Computer Replacement Equipment with Golden Gate Systems, LLC in the Amount of $422,231 15. Approval of Amendment No. 1 To Compucom Contract No. C12144913 In An Amount of $50,000 plus a 10% contingency for unforeseen expenses for Microsoft Azure Services Until June 2015 for additional disaster recovery for file services. 4 April 7, 2014 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. 16. Second Reading: Adoption of a Park Improvement Ordinance for the Design of the Scott Park Capital Improvement Project (First Reading: March 17, 2014 PASSED: 8-0 Price absent) 17. Approval of a Water Enterprise Fund Contract with URS Corporation in the Total Amount of $1,009,854 for the Design and Construction Management Services for Coating and Seismic Upgrades of Four Existing City Reservoirs and Rehabilitation of Three Receiving Stations, Project WS-07000, WS-08001 and WS-09000 18. Appointment of City Auditor and Approval of Employment Agreement Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 7:50-8:00 PM 19. PUBLIC HEARING: TEFRA Hearing Regarding Conduit Financing for the Stevenson House Project Located at 455 East Charleston Road Palo Alto, and Approving the Issuance of Revenue Bonds by the California Municipal Finance Authority for the Purpose of Financing the Acquisition and Rehabilitation of a Multifamily Rental Housing Facility 20. PUBLIC HEARING: TEFRA Hearing Regarding Conduit Financing for the Stanford Affordable Apartments Project Located at 2450, 2470 AND 2500 El Camino Real Palo Alto, and Approving the Issuance of Revenue Bonds by the California Municipal Finance Authority for the Purpose of Financing the Acquisition, Construction and Development of a Multifamily Rental Housing Facility (Staff requests this item be continued to a date uncertain) 8:00-8:30 PM 21. From Policy and Services Committee: Staff Requests Direction From Council on the Naming of the Main Library and Colleagues' Memo from Council Members Klein and Price Regarding the Renaming 8:30-9:30 PM 22. Finance Committee Recommendation to Approve the Fiscal Years 2015 to 2024 General Fund Long Range Financial Forecast State/Federal Legislative Discussion and Potential Action Council Member Questions, Comments and Announcements Members of the public may not speak to the item(s) 5 April 7, 2014 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. Closed Session Public Comments: Members of the public may speak to the Closed Session item(s); three minutes per speaker. 23. CONFERENCE WITH CITY ATTORNEY – EXISTING LITIGATION City of Palo Alto v. Regional Water Quality Control Board, San Francisco Bay Region: Petition for Review and Reconsideration of Failure to Act on Application for Section 401 Water Quality Certification of the City of Palo Alto Municipal Golf Course Reconfiguration Project, and Request to Hold Petition in Abeyance (petition filed April 1, 2014, before the California State Water Resources Board) Request for Reconsideration to the Regional Water Quality Control Board, San Francisco Bay Region (letter filed April 1, 2014) Authority: Government Code section 54956.9 24. CONFERENCE WITH REAL PROPERTY NEGOTIATORS, CALIFORNIA GOVERNMENT CODE SECTION 54956.8 Property: U.S. Post Office, 380 Hamilton Avenue, Palo Alto 94301 Agency Negotiators: James Keene, Lalo Perez, Hamid Ghaemmaghami, Joe Saccio, Hillary Gitelman, Aaron Aknin, Meg Monroe, Molly Stump, Cara Silver Negotiating Parties: City of Palo Alto and United States Post Office Under Negotiation: Purchase and Lease-Back: Price and Terms of Payment Adjournment AMERICANS WITH DISABILITY ACT (ADA) Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance. 6 April 7, 2014 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Additional Information Supplemental Information Standing Committee Meetings Policy and Services Committee Meeting- CANCELLED Regional Housing Mandate Committee Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Informational Report Informational Report on Request for Proposals for Installation and Operation of Photovoltaic Facilities at City Owned Parking Garages City of Palo Alto Utilities Quarterly Update for the Second Quarter of Fiscal Year 2014 Informational Report - County of Santa Clara Expressway Study Update and Page Mill Rd & I-280 Traffic Signal Improvements Public Letters to Council Set 1 Set 2 City of Palo Alto (ID # 4638) City Council Staff Report Report Type: Study Session Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: Study Session Meeting Date 4/7/2014 Title: Study Session with the Public Art Commission From: City Manager Lead Department: Community Services Potential List of Topics for Joint Meeting with the Public Art Commission I. Highlights of the Past Year II. Current Projects III. Future Projects IV. Council Questions Attachments: Public Art Commission Study Session Agenda (DOCX) PAC Joint Meeting April 7.2014_Final(PDF) IS POSTED IN ACCORDANCE WITH GOVERNMENT CODE SECTION 549524.2(a) OR SECTION 54956 54954.2(a) OR SECTION 54956 CITY COUNCIL AND PUBLIC ART COMMISSION STUDY SESSION MEETING APRIL 7, 2014 Palo Alto Civic Center Council Conference Room 6:00 PM Meeting 250 Hamilton Avenue I. ROLL CALL II. AGENDA CHANGES, REQUESTS, DELETIONS III. ORAL COMMUNICATIONS Members of the public are invited to address the commission on any subject not on the agenda. A reasonable time restriction may be imposed at the discretion of the Chair. The Commission reserves the right to limit oral communications period to 15 minutes. IV. BUSINESS Below are the potential topics of discussion for the joint study session with the Public Art Commission scheduled for April 7, 2014 at 6:00 PM: 1) Highlights from the past year 2) Current Projects 3) Future Projects 4) Council questions 1 Palo Alto Public Art Commission Joint Meeting with Council April 7, 2014 Council Conference Room 2 Agenda Year in Review Database Coming Soon Planning Discussion 3 Since Our Last Meeting Public Art in Private Development Ordinance Many Projects Completed and Installed: Hoover Park Juana Briones Park Mitchel Park Library & Community Center King Plaza Civic Center 4 Hoover Park Wild by Beth Nybeck 5 Mitchell Park Library & Community Center Arpeggio V by Bruce Beasley 6 Mitchell Park Library & Community Center Cloud Forest by Roger Stoller 7 Mitchell Park Library & Community Center Wise & Whimsy by Brad Oldham 8 Juana Briones Park Apricot Tree of Life by Morgan Bricca and Jennifer Schultz with the Girl Scout Troop 61624 9 King Plaza – City Hall Aurora by Charles Gadeken Aurora, 2011 Image by Jason Chinn 10 The Collection Significant Donations: Universal Woman by Nathan Oliveira and Eastern Memories by Bill Barrett Public Art Website / Database launch Universal Woman, 2008 Nathan Oliveira, 8’ tall 11 In Progress Permanently Sited Artworks: Palo Alto Municipal Golf Coarse City Hall Lobby New Media Artwork Magical Bridge Playground El Camino Park Newell Street Bridge 12 Permanently Sited Artworks Main Library / Art Center California Avenue Fountain 13 Temporary Installations Projects by Ala Ebtekar and Anthony Discenza 14 Other Ongoing Projects Governance Outreach Processes Refine % for Art Documents & Policies Continue Improvement of Website & Database Maintenance of the Collection 15 Planning Hands, 2010 Christian Moeller & Fentress Architects The Mineta San Jose International Airport 16 Bay Lights, 2013 by Leo Villareal, San Francisco Crown Fountain, 2004 by Jaume Plensa, Chicago 17 Sea Song, 2009 by Cliff Garten Studio, Santa Monica 18 Questions/Discussion City of Palo Alto (ID # 4634) City Council Staff Report Report Type: Special Orders of the Day Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: Proclamation National Crime Victims Week Title: Proclamation National Crime Victims Week From: City Manager Lead Department: Police Attachments: National Crime Victims Week (DOC) CITY OF PALO ALTO PROCLAMATION NATIONAL CRIME VICTIMS WEEK APRIL 6-12, 2014 Whereas, Americans are victims of more than 22 million crimes each year, and these crimes also affect family members, friends, neighbors, and co-workers; and Whereas, crime can leave a lasting physical, emotional, or financial impact on people of all ages and abilities, and of all economic, racial, and social backgrounds; and Whereas, in addition to these challenges, crime victims face criminal, military, and juvenile justice systems that, at times, ignore their rights and treat them with disrespect; Whereas, in 1984, the Crime Victims Fund was established by the Victims of Crime Act (VOCA) to provide a permanent source of support for crime victim services and compensation through fines and penalties paid by convicted federal offenders; and Whereas, the Crime Victims Fund provides victim assistance to more than 3.5 million crime victims annually and also provides compensation funds to thousands of crime victims each year for reimbursement of expenses related to their victimization; and Whereas, National Crime Victims’ Rights Week, April 6-12, 2014, provides an opportunity to celebrate the energy, creativity, and commitment that launched the victims’ rights movement, inspired its progress, and continues to advance the cause of justice for crime victims; and Whereas, Victim Witness Assistance Program, A Program of FACES is joining forces with victim service providers, criminal justice agencies, and concerned citizens throughout Santa Clara County and America to raise awareness of victims’ rights and observe National Crime Victims’ Rights Week. NOW, THEREFORE, I, Nancy Shepherd, Mayor of the City of Palo Alto, on behalf of the City Council do hereby proclaim April 6-12, 2014 as National Crime Victim’s Rights Week, and express our appreciation for those victims and crime survivors who have turned personal tragedy into a motivating force to improve our response to victims of crime and build a more just community. Presented: April 7, 2014 ______________________________ Nancy Shepherd Mayor CITY OF PALO ALTO OFFICE OF THE CITY CLERK April 7, 2014 The Honorable City Council Palo Alto, California Selection of Applicants to Interview on April 16, 2014 for the Public Art Commission, Library Advisory Commission and the Human Relations Commission Enclosed are: 1) Five applications submitted for four terms (Collins, Richter, Ross, Usich), ending on April 30, 2017 on the Public Art Commission; 2) Five applications for three terms (Hochberg, Landauer, Train) ending on April 30, 2017 on the Library Advisory Commission; and 3) Three applications submitted for two terms (Ezran, Savage), ending on April 30, 2017 on the Human Relations Commission. At the Council Meeting on Monday, April 7, 2014, the City Council will select the candidates to be interviewed for the Public Art Commission, Human Relations Commission, and Library Advisory Commission, with the interview date of Wednesday, April 16, 2014. Each Council Member will receive a selection sheet to use for determining who will be chosen for an interview. The requested action is for each Council Member to fill out the selection sheet. The City Clerk will announce the results. Candidates who receive four or more votes will be scheduled for an interview. The applicants are as follows: Public Art Commission Amanda Beard Ross Christine Miller Kelly Jim Migdal Jeanine (Savannah) Murphy Dara Olmsted Silverstein Library Advisory Commission June Loy Jack Sweeney Don McDougall Doug Hagan Alan Jerome Bennett Human Relations Commission Daryl Savage Mehdi Alhassani Page 2 Matthew Mori ATTACHMENTS: Kelly, Christine Miller (PDF) Migdal, Jim (PDF) Murphy, Jeanine (PDF) Ross, Amanda Beard (PDF) Silverstein, Dara Olmsted (PDF) Bennett, Alan Jerome LAC (PDF) Hagan, Doug LAC (PDF) Loy, June LAC (PDF) McDougall, Don LAC (PDF) Sweeney, Jack LAC (PDF) Alhassani, Mehdi HRC (PDF) Mori, Matthew HRC (PDF) Savage, Daryl HRC - Redacted (PDF) Department Head: Donna Grider, City Clerk Page 3 i>~~~~n~Ph~l~~~'P-" • · · ··. Name: Address: Phone 1: Phone2: E-mail: Are you Do you have any relatives or members of your household who are employed by the City of Palo Alto, who are currently serving on the City Council, or who are Board or Commission Members? NO Are you available and committed to complete the term applied for? '/ ~~ California state law requires awolnted .Board and Commission Members to file a detailed disclosure of their financial interests, Fair Political Practices Commission, Conflict of Interest, Form 700. Do you have an investment -In, or do you serve as an officer or director of, a company doing business in Palo Alto which you believe is likely to; 1)engage In business with the City, 2) provide products or services for City . "--· -~--·········· ..... . ...... .......... ... ............ ... I'JO ··-·""·"·Y'-F-~!! !l.f v!.ll_!! \-.'! H l'-·!t-J-:.1.1 ! r_-:;:.!1.!1.-! !f.·G, i_!l_l yo_IJ_! l.nt¥!! !C_.·t,!! t-'P-'f.U'_;! q; !! ! r t.Hl.l !"\W.' ~ N 0 Community Group , Email from City Clerk .6i()Aito~ 'Dally Post . Other: v :u, ,. 6()\.tL -A 'Oct'e.INI <M4!I ~t eo~iS"S't':pllleV, . -~~nt~~~~~'i&#~;~~'S!~~:.~~~~~~~r~~,._t?~~!~~~~~R·~,t~~~~~;H,t~~~~~i:o:~.#~~t~~~!:o.rat:r~~!~t~c,.. . ~ '8YA ~M w~~-\,11) U.V\A~ i1y iA S+ LolA's, ?~+\~~ \~"12_ .; ~'Yf\-iVnM ~~D\ C.DU~ of M i" SA41\~u·so,V\i\~rv l~c;~ ~ ~·-Za>T -. l:WJ.IelO~J t>..S ~ a.v-h'Yf /M..J. Jt~l~e.r fov-~-Lt.t 2/:J"fr$. (l0£0Jt.ovt~~~J ~~> :c UA.Vv~ ~ -tt~ iA 'Dt{* o-f W-t··t:'Des i~ ~ ~ 'J"ose Stdt ~ve.ts'fc:t. · '!·~1~~\cr~~~,~~~tA~G. ~h~~~~~\:.~~~ ~fP"~~~~ ,_ 1\-s. Present or Last Employer: ')j"$ (.t Se,koo l ».f /Jrv+ + \)e S ; ~V\ : Occupation: LevhiY~ _ :t. ~~ \A. -+W ~stv iAJ 'Qt~ i &" t>~. ,r~~~1~.~~~~i~t.\;b~~.~~~ ,.tt te~t . -;t:. V~tur fuy II\N1 S-o~;~'s 'Pdo ~ L..\~ ~ -\u.MS-J: ~ itc.cz_ ~si~~ t19o~""~ ~(Q~ ~~- .;I: cf..M ~ c.o-c..t..~~ of ~t-S~ ?\Awt-·s'1V\LfS'e ·~. :r: ~~~Wet:> V1>D~··~) ~'1-~l~V--1-~~.iF E·mail: Are you a Palo Alto Resident? yes Do you have any relatives or members of your household who are employed by the City of Palo Alto, who are currently serving on the City Council, or who are Board or Commission Members? No Are you available and committed to complete the term applied for? Yes California state law requires appointed Board· and Commission Members to file a detailed disclosure of their financial interests, Fair Political Practices Commission, Conflict of Interest, Form 700. Do you have an investment In, or do you serve as an officer or director of, a company doing business in Palo Alto which you believe Is likely to; 1) engage In business with the City, 2) provide products or services for City projects, or 3) be affected by decisions of the board you are applying for? No. Excluding your principal residence, do you own real property in Palo Alto? No. : Community Group ~ Email from City Clerk : Palo Alto Weekly article in weekly about 1% \ Dally Post . Other:·----------------------------..,_ . Grew up surrounded by art, raised by a sculptor in Chicago, a city with rich tradition of pubJic art. Have built small private collection of sculpture, paintings, drawings and photographs. Enthusiast who regularly attends : museum and gallery exhibits in and outside of the US. Am familiar with the different models for acquisition, : stipends, artists in residence etc. Degrees in History (BA, a1;1d International Relations, MA). Career : in tech creating'and negotiating partnerships with a wide variety of companies in consumer /mobile internet. ; Present or Last Employer: Facebook. Inc. , Occupation: Director of Business Development. Responsible for negotiating partnerships with Facebook's most strategic relationships. Volunteer coach, For the past 4 years have coached teams for YBall, NJB Basketball, A Y SO youth soccer. ¢1assroom volunteer for 3rd grade math at Addison ,~ctiveparent in fundraising, planning for events at Addison, co-managing the school's fall event-the Hoe-Down and Guns and Whiskey ~ most sought after auction event. Sponsor· a college _student via Meritus a non-profit that provides funding for college. · Also support Bay Area youth educational opportunities· through ·philanthropic-commitments ·to SummerSearch and -KIPP ·Bay-Area; -· -----,. · Address: Phone 1: Phone2: E·mail: 1 AMCJ JD .At~ Date: 312412014 Signature: _ _L~--------,(1-(/---------- WebTV Networks. Inc. lacqujred by MicrosofQ Mountain VIew. CA. 1997-1999 Senior Manager, Strategic Partnerships Managed four reports responsible for distribution partnerships on the Web TV platform. • Exceeded revenue targets for distribution deals with eBay, Amazon, CTW, Classifieds 2000, and lnfoseek • Managed RFP process and closed multi-million dollar deal with First USA for credit card marketing • Implemented plan to improve customer experience and create new monetization stream for email • Managed Interactive TV relationships with USA Networks, WarnerBro~. CTW Arthur D. Little. Inc. San Francisco. CA 1995-1997 Manager, promoted from Consultant Led engagement teams with technology cliepts, representing $1 .8 million in last 12 months at firm. Developed sales presentations, scoped and budgeted projects and delivered findings to executive management. • For Pacific Bell, developed strategy for ISP business, modeling investment requirements and revenues for different options; sold follow-on strategy for delivery of value-added services • For Hutchison Whampoa, valued market opportunities and ROI for a Canadian wireless license acquisition • For Smart Valley, led engagement to assess performance of one of first Public Access Networks • Wrote and published articles in trade publications to generate marketing San Francisco Consulting Group (acgujred by KPMG\ San Francisco. CA 1991-1994 Consultant, promoted from Analyst Conducted business strategy and market assessments for network operators and technology companies. • For PacTel Video Services, developed requirements for billing, customer care, and provisioning. • For France Telecom, led business process benchmarking effort, conducting client work in French • For NEC and Pac Bill Information Services, drove efforts to optimize of customer support operations Baln & Company Boston. MA. 1989-1990 Associate Consultant Conducted financial, competitive and operational analysis for Fortune 100 companies, including Anheuser- Busch, Sara Lee and Emerson Electric. Education Yale University, New Haven, CT. 1987-1989 MA, International Relations Teaching Assistant In Comparative Politics. Summer Intern In Deutscher Bundestag, conducting research on labor relations policy · Macalester College. Saint Paul. MN 1982-1986 BA, History, magna cum laude Phi Beta, Kappa; awarded Highest Honors for senior thesis, written in French Other Languages: fluent in French, good knowledge of German, conversational Spanish Honors: Fulbright Scholar, Relms, France 1986-87 · Interests: Daughters (8,11) and related volunteering, swimming, tennis, surfing, photography, K-12 education . (investors In KIPP, SummerSearch and Meritus) Do you have any your are are currently serving on the City Council, or who are Board or Commission Members? Are you available and committed to complete the term applied for? California state law requires appointed Board and Commission Members to file a detailed disclosure of their financial interests, Fair Political Practices Commission, Conflict of Interest, Form 700. Do you have an investment in, or do you serve as an officer or director of, a company doing business in Palo Alto which you believe is likely to; 1) engage in business with the City, 2) provide products or services for City projects, or 3) be affected by decisions of the board you are applying for? Excluding your principal residence, do you own real property in Palo Alto? Community Group Email from City Clerk Palo Alto Weekly · :~:;o•tili~ ~ E-mail: March 1 0, 2014 Subject: Application to serve on the Public Art Commission To the appointment committee: My Name is Jeanine (Savannah) Murphy and I am writing this to you because of my strong desire to serve on the Public Art Commission. Whilst I might not possess all of the requirements that you would outline as requirements to fulfill the position, let me assure you that I am someone that will work and get the job done. Here are skills and benefits that I can bring to the Committee: a.) A strong desire to participate b.) Tenacity and experience with building rapport and breaking down barriers c.) A winning track record of building powerful and winning relationships d.) A desire to give back to the community I plan to live through retirement e.) A background in Global Sales Management supporting 3 different start up organizations As a founding member of a Children's Foundation, I understand the value of giving back. It is now time for me to give back to my city directly. I strongly encourage your consideration. Sincerely, ~tUJ MAJJ1__ Jeanine (Savannah) Murphy J Are you a Palo Alto Resident? e Do you have any relatives or members of your household who are employed by the City of Palo Alto, who are currently serving on the City Council, or who are board members or commissioners? '· e Are you available and committed to complete the term applied for? e California state law requires appointed board and commission members to file a detailed disclosure of their finaticial interests, Fair Political Practices Commission, Conflict of Interest, Form 700. Do you have an investment in, or do you serve as an officer or director of, a company doing business in Palo Alto which you believe is likely to; 1) engage in business with the City, 2) provide products or services for City projects, or 3) be affected by decisions of the board or commission you are applying for? If you answered yes, you may wish to consult with the City Attorney before filing this application. Please contact the City Attorney's Office at 650-329-. 2171. e Excluding your principal residence, do you own real property in Palo Alto or within two miles of Palo Alto? EMPLOYMENT Present or last employer ) X X · ·-)une of Company: . Alfred Dunhill (London) Occupation: Accessories Director X X X (If retired, indicate former occupation) Signature of Applicant _;;;.;:AB;.;.;;_;.R!;;....o.;;..::s;;:;.s ____________ _ Date: 17 Mar 2011 Please Return to: Office of the City Clerk 250 Hamilton A venue Palo Alto, CA 94301 650-329~2571 CITY OF PALO ALTO PUBLIC ART COMMISSION SUPPLEMENTAL QUESTIONNAIRE Name: Amanda Beard Ross Date: 17 March 2011 \ i Please print or type your answers to the following questions and submit with your completed application. You may submit additional sheets, if necessary, to complete your answers. · 1. Have you attended the following meeting? Yes No • Public Art Commission (Date: ______ 4 X 2. How did you Learn about the vacancy on the Public Art Commission? Community G.roup: _x_ Palo Alto Weekly: __ Palo Alto Weekly Online: __ Email from City Clerk: __ Library Bulletin Board: __ Fogster.com: __ Other, Please Specify: -----------,.------------------ 3. Describe your involvement in community activities, volunteer and civic organizations: Please see attached for all responses. 4. What is it about the Public Art Commission that interests you? What qualities, experience and expertise would you bring to the Public Art Commission? -1- 5. How would you see your role as board member when recommending policy and working with the Council? If it were necessary to change current roles, .how would you approach makillg such changes? . 6. What are the current issues facing the Public Art Commission? · 7. What are your feelings about Palo Alto's current inventory/collection of Art in Public Places? What suggestions would you have for increasing the availability of more Art in Public Places? · 8. If appointed, what specific goals would you like to see the Public Art Commission achieve? -2- 17 March 2011 Palo Alto Public Art Commission application continued \ J 3. Describe your involvement in community activities, volunteer and civic organizations: ' I am an active parent of a kindergartener in the Spanish Immersion PrQgram at Escondido School and have a preschooler at Phillips Brooks School in Menlo Park who will begin at Escondido next year. ·Additionally, our newest family member and I have begun parenting classes at Pre-School Family School. We are members of St Albert the Great Catholic church and at the Cantor Art Museum at Stanford. 4. What is it about the Public Art Commission that interests you? What qualities, experience and expertise would you bring to the Public Art Commission? Firstly, the arts are a passion of mine and one I want to commit myself more formally to in our community. I believe the commission performs the vital role of making art present, available, and relevant to us in our daily lives. My entire, former professional career has been spent in the creative field (see most recent cv attached). As a former designer, I feel I can bririg the perspective of the creative process -from inspiration to execution/completion -to the commission and to the decisions it faces. Likewise, I can offer "design thinking" to confront some of the challenges the organization itself may have. · As a member of the community, I want to see art in all of our public spaces and live in a community that visibly values expression and creativity. I enjoy art-seeing it, experiencing it, "doing" it. In fact, I'd like to be an artist when I grow up. Finally, most importantly, as a parent, I want my children to grow up in an area in which they can see (and touch) someone's work and expression of thought and see that it is valued and important and vital to their lives. 5. How would you see your role as board member when recommending policy and working with the Council? If it were necessary to change current roles, how would you approach making such changes? I would view the first part of the term as being there to listen and learn from the other commission members. If changes were necessary, I would approach them calmly and rationally. -3- ) 6. What are the current issues facing the Public Art Commission? This requires a bit of study on my part-I would imagine that the commission, like most public organizations right now -has budgetary issues. I also feel that there is constant pressure to bring more art to the public conscious-certainly something I'd like to see- and the challenges incurred. 7. What are your feelings about Palo Alto's current inventory/collection of Art in Public Places? . What suggestions would you have for increasing the availability of more Art in Public Places? There is some fantastic and worthwhile art here in our public spaces though, again, I need to do a bit more "work" to seek it out. In order to increase the availability, I would suggest getting the community committed to the idea that we need more art firstly. One way to do this is through the schools and our children. We all know that the budgets for art and art te~chers in our community are being cut -why not make the creation of art a "civic duty" of some sort? How about an artist in residence program at our schools with the project culmination being an exhibition of the work? Documentation of the work could be presented in collaboration with the students. Other thoughts: A partnership with another city where work can be shared and can travel to/from us ) A partnership with private industry Partnership with Stanford (lively Arts) or the Cantor Arts Center 8. If appointed, what specific goals would you like to see the Public Art Commission achieve? 1 would like the Public Art Commission to work to bring more art to our community, to continue to maintain the high level of aesthetic integrity and to be innovative in its processes and projects. -4- Application to Serve on the Library Advisory Commission Personal Information Name: Doug Hagan Address: 7 49 Seneca St Palo Alto CA 94301 Phone 1: 650 326 2367 Phone 2:415 994 2367 E-mail: doughagan@yahoo.com Are you a Palo Alto Resident? YES --'l Do you have any relatives or members of your household who are employed by the City of Palo Alto, who are currently serving on the City Council, or who are Board or Commission Members? NO Are you available and committed to complete the term applied for? YES California state law requires appointed Board and Commission Members to file a detailed disclosure of their financial interests, Fair Political Practices Commission, Conflict of Interest, Form 700. Do you have an investment in, or do you serve as an officer or director of, a company doing business in Palo Alto which you believe is likely to; 1) engage in business with the City, 2) provide products or services for City projects, or 3) be affected by decisions of the board or commission you are applying for? NO Excluding your principal residence, do you own real property in Palo Alto? NO How did you Learn about the vacancy on the Library Advisory Commission? Community Group Email from City Clerk X Palo Alto Weekly X Daily Post · Other: ____________________ ~---------- List relevant education, training, experience, certificates of training, licenses, or professional registration: BA, Honors, Urban Studies, University of Pennsylvania MBA, Entrepreneurial Management, The Wharton School, University of Pennsylvania Member, IEEE, Institute of Electrical and Electronics Engineers Employment Present or Last Employer: KRYT AR, Inc. Occupation: As President of KRYTAR, Inc. I lead the management team and direct strategy and operations at this technology company. My previous experience includes 20 years in technology, management consulting, and marketing/business development both domestically and internationally. Describe your Involvement in community activities, volunteer and civic organizations: I am Chair of the Board of Directors for ZeroDivide and have served on the Board for 10 years. ZeroDivide is a social enterprise focused on creating social change in underserved communities through the transformative power of technology. I also enjoy the opportunity to serve as a Fellow In the Leadership Palo Alto Class of 2014, which has offered leadership development combined with a deeper understanding of Palo Alto. In addition, I have served as a PTA volunteer at Addison School in the PAUSD, as well as a volunteer Coach for Soccer (AYSO) and Baseball (PALL}. Through the Addison PTA I have received an introduction to the Developmental Assets framework for youth, and through coaching I have participated in seminars with the Positive Coaching Alliance for youth. 1. What is it about the library Advisory Commission that is compatible with your experience and of specific Interest to you, and why? Since I was young, I have had an interest in and love for libraries. Now as a parent, I love libraries for what they offer my family, and as a citizen of Palo Alto, I see our libraries as places that are essential community institutions and increasingly home for programs and resources for the engagement and betterment of everyone in the community. The Library Advisory Commission has a unique and important role in serving our local libraries and patrons in the community. I am interested in contributing my experience to the Library Advisory Commission serving our community. Through my leadership role on the Board at ZeroDivide over the last decade, I have had the opportunity to support underserved communities through the transformatlve power of technology. With ZeroDivide, I attended the Public Library Association Annual Conference in a convening for libraries to collaborate to deliver community health outcomes. Through a partnership between OCLC, The Institute for Museum and Libraries Services (IMLS), and ZeroDivlde. the program "Health Happens in libraries" was established to focus on public library eHealth services and staff capacity to respond to patron needs regarding the Affordable Care Act. This collaboration engages public libraries and their facilities to explore programs to meet local health needs. This experience has provided me an important perspective on how libraries meet community needs along with a deeper understanding of the potential for technology, programs and resources to enhance the impact of libraries on the community. Professionally, I have 20 years of experience in the technology industry in marketing and partnership development. I would be interested in contributing to the library Advisory Commission my background in leading marketing/outreach, segmentation, strategic planning, and promotion programs as Palo Alto Libraries looks to communicate about its new and redeveloped branches. In addition, after the openings, as Palo Alto Libraries may look at new and expanded uses, incorporating new technology, and working with the community to find out what they would like to see, I would be interested in contributing to the Library Advisory Commission my leadership experience in strategic planning, partnerships and technology. 2. Please describe an Issue that recently came before the Commission that is of particular Interest to you and describe why you are interested in it. If you have never been to a Commission meeting you can view an archive here: LINK. An issue that recently came before the Library Advisory Commission that is both important to the community and Interesting to me was Library Publicity and Marketing Strategies and how that relates to Library Advisory Commission priorities. This is important for the community as the new branch at Mitchell Park Is opened and the Main Library completes its redevelopment. These important events mark both a renewed commitment to Libraries in Palo Alto and the opportunity for expanded uses of the new spaces incorporating new programs, partnerships and technology. It is interesting to me as an area where I would be excited to make an immediate contribution to the work of the Library Advisory Commission though my professional background in marketing and outreach/promotion to support the priority for promoting openings, and my background in partnerships and technology to support the priority for new and expanded uses. In addition, and focused on the longer term efforts of the Library Advisory Commission, my work with ZeroDivide provides me a unique perspective on how a mission driven organization undertakes strategic planning to meet the ever changing needs of a diverse community. 3. If appointed, what specific goals would you like to see the Library Advisory Commission achieve, and why? How would you suggest accomplishing this? If appointed, I would be interested in supporting the priorities City Council and the Library Advisory Commission are focused on achieving. A specific goal I would like to see the Library Advisory Commission achieve is the goal of renewing the Palo Alto Libraries strategic plan. With this strategic plan, Palo Alto Libraries would survey and identify the different segments within the community and the services to meet their needs. It would also explore how libraries might expand their impact in the community through programs and resources that address important new literacies, such as digital literacy and health literacy. I would be excited to participate with the Library Advisory Commission in this capacity and contribute my experience at ZeroDivide in strategic planning in a mission driven organization. I would also like to see Palo Alto Library Advisory Commission achieve the goal of supporting youth development in Palo Alto by taking full advantage of the opportunity libraries have to support Development Assets for youth. In the birthplace of Silicon Valley and in area surrounded by technology companies, I see the potential to further distinguish our libraries through the expansion of technology programs, partnerships and resources in support of the youth developmental assets. Existing programs like MakeX provide a solid foundation to build on to offer more opportunities to keep libraries at the center of our communities, whether it is offering more devices, or computer labs that make the most of our new spaces, or a Palo Alto library app the turns the Palo Alto library card into a digital membership. I would be excited to be a part of the Library Advisory Commission and leverage my background in technology and partnerships, as well as build upon my experience with the Development Assets for youth. If appointed I would also like to see the Palo Alto Library Advisory Commission achieve the goal of expanding outreach to underserved populations. Libraries are unique public places where everyone has the opportunity to learn and grow, and Palo Alto libraries can be leveraged for its diverse patrons with a variety of needs. Emerging programs that provide new literacies around citizenship, life skills, digital literacy and health literacy are opportunities I believe are worth exploring further as Palo Alto looks to make the most of its new spaces and enhance its uses for everyone in the community. I would be interested in supporting the work of the Palo Alto library commission in all its work, including how to reach the broadest community of patrons, and contributing my experience exploring both the challenges and opportunities of reaching diverse patrons through literacy programs such as "Health Happens in Libraries." 4. Library Advisory Commission Members work with the documents listed below. If you have experience with any of these documents, please describe that experience. Experience with these documents Is not required for selection. Library Service Model Analysis and .Recommendations LINK Library Technology Plan LINK My experience with the documents is in reading them and reviewing the recommendations. If appointed to the Palo Alto Library Commission, I would be excited to support the progress that has been made to achieve the plans and look forward to the opportunity to participate in the development of future plans for the next exciting chapter in Palo Alto Libraries and their important role in the community. Consent to Publish Personal Information on the City of Palo Alto Website California Government Code Section 6254.21 states, in part, "No state or local agency shall post the home address or telephone number of any elected or appointed official on the Internet without first obtaining the written permission of that individual." The full code is attached. This consent form will not be redacted and will be attached to the Application and posted to the City's website. The full code can be read here: UNK Read the code, and check only ONE option below: June Loy, page 2 of 2 lnterTrust Technologies Corporation, Santa Clara, CA InterTrust is a pioneer in Digital Rights Management (DRM) solutions. InterTrust's DRM solutions involve complex technology that use cryptography, tamper-resistance techniques, and distributed networking. SDKs provide Java, C++, C, COM, and XML Interfaces for UNIX and Windows platforms. lhe company currently focuses on their large patent portfolio. Director, Technical Communications, Training, and Usability: 1998-2003 • Directed and managed the Product Documentation, Training, and Usability departments. • Planned and directed the development of all product documentation, print and online. Our SDK and application documentation was highly rated by InterTrust customers. • Directed development of documents for the MetaTrust Certification Program. • Established a usability program, providing analysis, recommendations, testing, and messaging to Product Development and also directed development of an online customer survey. Manager, Technical Communications: 1996-1998 • Established publications team and documentation development processes. • Established corporate style guide, trademark and logo guidelines, and document templates. • Established single source development process for hard copy, HTML, and Help. • Planned and directed development of a 3,500-page documentation set for a first-generation DRM solution. The set included user guides, programming guides, and system administration guides, for both UNIX and Windows, and was very well received by customers. • Wrote Product Technical Overview, Product Description, Security Ovei'VIew, and Release Notes. Unisys Corporation, San Jose, CA Unlsys Is a leading supplier of computer systems to both government and private sectors. At its San Jose facility, Unisys first produced proprietary desktop hardware and software developed by Convergent Technologies. In 1994, Unlsys began production of Windows PC products. Publications Manager, CTOS and PC DMsions: 1994-1996 • Managed desktop, server, and networking product documentation for two different divisions and provided direction for a team of twenty writers, editors, and artists. Documentation Included hardware installation guides, networking guides; programming guides, and operating systeni manuals. Work involved regular coordination with remote sites. • Regularly tested documentation for usability through customer surveys and out-of-box audit. • . Managed translation of manuals into French, Italian, German, Spanish, and Japanese. Section Manager, CTOS DiVision: 1989-1994 • Coordinated documentation Integration efforts after Unlsys/Convergent Technologies merger. • Established common standards for information development among four publications groups. • Managed publication by Prentice-Hall of open-standards documentation for CTOS, the Convergent/Unlsys operating system, and coauthored a trade publication, Exploring eros. • Managed conversion of a 3,000 page print documentation set to online HTML-Iike presentation. • Recruited and retained writers who regularly received awards In STC publications competitions. Convergent Technologies Corporation, San Jose,· CA Convergent Technologies .was a leading supplier of networked computer systems to banks and point-of-sale retailers. They developed the Intel-based eros operating system and implemented a full suite of programming languages, LAN and WAN networking software, and office applications. Writing Manager, CTOS Division: 1985-1989 • Built and managed a team of more thc:tn 10 writers. • Planned and managed development of 3,000 page operating system documentation suite. • Managed programming language, networking, microprocessor, and application documentation. Education M.A., Library Science, Rosary College (now Dominican University), River Forest, IL. B.A., Sociology, B.A., Anthropology (Cum Laude) Knox College, Galesburg, IL (Phi Beta Kappa). Name: June Loy Address: Phone 1: Phone 2: E-mail: Are you Do you have any relatives or members of your household who are employed by the City of Palo Alto, who are currently serving on the City Council, or who are Board or Commission Members? No · Are you available and committed to complete the term applied for? Yes. California state law requires appointed Board and Commission Members to file a detailed disclosure of their financial interests, Fair Political Practices Commission, Conflict of Interest, Form 700. Do you have an investment in, or do you serve as an officer or director of, a company doing business in Palo Alto which you believe is likely to; 1) engage in business with the City, 2) provide products or services for City projects, or 3) be affected by decisions of the board or commission you are applying for? No Excluding your principal residence, do you own real property in Palo Alto? No Community Group Email from City Clerk Palo Alto Weekly Through the Weekly Daily Post Other: _____________________________ _ Director, Technical Communications-Juniper Networks 2004·2012. See resume for similar employment. Experience on the board of a volunteer organization, as well as some experience with the PTA, etc. Worked for 2 yef!rs as the Assistant Head of the Sun-Times Newspaper Library in Chicago. Master's Degree in Library Science Present or Last Employer: Juniper Networks • ended in November 201.1 Occupation: Executive, specializing in Technical Communications and Technical Publications In recent years the demands of my job limited time for volunteer positions. I worked with the foreign language program sponsored by the PTA at Ohlone school in the late 80's. I spent about 3 years working with the Pittsburgh Organization for Childbirth Education, which also did new parent counseling. I was on the board of the organization as served as the Vice-President itl the last year before my family moved to California. · providing the following alternate information and request that they use the following contact information instead. Address: Phone 1: Phone2: E~mail: Signature:__,.,_tJ~e ... ~-. ...-E-~~~L.t---____ Oate: !lia:dt..L:l ~ zotj 2. Please describe an issue that recently came before the Commission that is of particular interest to you and describe why you are interested .in it. If you have never been to a Commission meeting you can view an archive here: LINK. The delay in the Mitchell Park construction is the single biggest issue currently. However, I am uncertain how the LAC can impact this issue or how it could have prevented the issue. 3. If appointed, what specific goals would you like to see the Library Advisory Commission achieve, and why? How would you suggest accomplishing this? Continue to help the library provide the highest quality programs and materials to all residents. And to make certain the Library adopts current technology without impacting the availability of materials in traditional formats, I have no political or personal agenda regarding the Library. My goal is to support the community and help the libraries continue their very valuable services for the future. 4. Library Advisory Commission Members work with the documents listed below. If you have experience with any of these documents, please describe that experience. Experience with these documents is not required for selection. Library Service Model Analysis and Recommendations LINK Library Technology Plan LINK I reviewed the Library Technology Plan which provides highly detailed plans for implementing tools and technologies, but the plan does not appear to go beyond 2013. Consent to Publish Personal Information on the City of Palo Alto Website California Government Code Section 6254.21 states, in part, "No state or local agency shall post the home address or telephone number of any elected or appointed official on the Internet without first obtaining the written permission of thatindividual." The full code is attached. This consent form will not be redacted and will be attached to the Application and posted to the City's website. The full code can be read here: LINK Read the code, and check only ONE option below: I give permission for the City of Palo Alto to post to the City's website the attached Board and Commi~sion Application intact. I have read and understand my rights under Government Code Section 6254.21. I may revoke this permission at any time by providing written notice to the Palo Alto City Clerk. OR _L I request that the City of Palo Alto redact my home address, phone numbers, and email address from the attached Board and Commission Application prior to posting to the City's website. I am . providing the following alternate information and request that they use the following contact information instead. Address: I do not have an alternative address or phone number Phone 1: Phone 2: E-mail: Signature:------------------~----Date: ____ _ ( ~·-,-;-.-... ·- providing the following alternate information and request that they use the following contact information instead. Address: 4000 Middlefield Road , T2, Palo Alto, CA 94303 Phone1:6506877544 Phone2: E~mail: mehdi33@gmail.com Signature:~~ Date: California state law requires appointed board and commission members to file a detailed disclosure of their financial interests, Fair Political Practices Commission, Conflict of Interest, Form 700. Do you have an investment in, or do you serve as an officer or director of, a company doing business in Palo Alto which you believe is likely to; 1) engage in business with the City, 2) provide products or services for City projects, or 3) be affected by decisions of the board or commission you are applying for? I work for Palantir Technologies, a software company based in Palo Alto. While the city is not one of our customers, we do try to partner with the Palo Alto on various projects including donating software to the police department, hosting events in our space, and consulting on water conservation. 1. What is it about the Human Relations Commission that is compatible with your experience and of specific interest to you, and why? I have been to virtually every kind of community event that exists in America: From 4th of July parades in Iowa to Pride parades·in Minneapolis: From Sunday mornings at a Baptist church in North Carolina to community meetings in Palo Alto. I went to these places on a mission to help people, especially new participants, become more civically involved, at the time trying to encourage them to vote in the Presidential elections. I am a big believer that greater community involvement leads to better policy decisions and better outcomes for a city. The Human Relations Commission interests me because in this time of growth and transition for Palo Alto, we are in a unique position to piay a pivotal role in educating Palo Altans on the critical issues our city is tackling. The City Council's approach to updating the Comprehensive Plan through the 'Our Palo Alto' initiative reflects a similar understanding. I believe that the HRC, through broad based outreach, educational initiatives, and mediations will also play an important role in helping us engage citizens and encourage policies that will benefit all residents of Palo Alto. I believe my experience of outreach would add value to the HRC by being able to engage historically less active communities, particularly youth. Even at my current company, Palantir Technologies, we have over 240 Palo Alto residents, very few of whom are as civically engaged as they could be. I believe I can expand the committee's outreach ability and enable it to further its mission. 2. Please describe an issue that recently came before the Commission that is of particular interest to you and describe why you are interested in it. If you have never been to a Commission meeting you can view an archive here: LINK. One of the issues in which I think the Human Relations Commission has shown exemplary leadership on is conducting a deep and holistic study on the housing issues in Palo Alto through the Housing Learning Series that has occurred over the past several months. The HRC has invited a diverse group of speakers- from non-profit leaders to public officials to regional experts, and this has given citizens a much deeper understanding of some Palo Alto's housing issues. Specifically, the HRC did a tremendous job in inviting speakers that shed light on lesser-understood issues such as the homeless. Hearing Gary Goodman talk about the cases he deals with in the courts and the great work Downtown Streets is doing was incredibly beneficial. Moreover, as the Buena Vista issue, Measure D, and 801 Alma have shown us, people feel strongly about housing policies and it is imperative we get them right. Moreover, given the continued job growth and rising housing demands -the way we address these issues will have implications for years to come. The discussions hosted by the HRC were a very critical piece in solving this problem. 3. If appointed, what specific goals would you like to see the Human Relations Commission achieve, and why? How would you suggest accomplishing this? 1) I believe the HRC can continue to broaden its engagement to a wider base of citizens. Anecdotally in my conversations with fellow residents, a lot of Palo Altans have strong opinions on issues but don't know that there are avenues like the HRC where they can get involved and engage on those issues. 2) Updating the Housing Element-Although this responsibility also falls on other committees/city government bodies as well, I believe the review of the Housing Element in the Comprehensive plan is one of the most important things the city will work over the next two years and as previously mentioned -will have implications that last well beyond that. I hope to help the HRC continue to be leaders in educating Palo Alto on these issues so we can encourage the city to enact the best policies. 4. Human Relations Commission Members work with the documents listed below. If you have experience with ~ny of these documents, please describe that experience. Experience wlth'these documents is not required for selection. I have familiarized myself with the documents below as I regularly attend city council meetings and heard them discussed at great length. I have also spent time studying them on my own to better grasp and understand the cities approach to policies .. ; i/ CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR April 7, 2014 The Honorable City Council Palo Alto, California Policy and Services Committee Recommendation to Accept the Auditor's Office Quarterly Report as of December 31, 2013 The Office of the City Auditor recommends acceptance of the Auditor’s Office Quarterly Report as of December 31, 2013. At its meeting on February 18, 2014, the Policy and Services Committee approved and unanimously recommended the City Council accept the report. The Policy and Services Committee minutes are included in this packet. Respectfully submitted, Houman Boussina Acting City Auditor ATTACHMENTS: Attachment A: Auditor's Office Quarterly Report as of December 31, 2013 (PDF) Attachment B: Policy and Services Committee Meeting Minutes Excerpt (February 18, 2014) (PDF) Department Head: Houman Boussina, Acting City Auditor Page 2 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR February 18, 2014 The Honorable City Council Attention: Policy & Services Committee Palo Alto, California Auditor's Office Quarterly Report as of December 31, 2013 RECOMMENDATION The Office of the City Auditor recommends the Policy and Services Committee review and recommend to the City Council acceptance of the Auditor’s Office Quarterly Report as of December 31, 2013. SUMMARY OF RESULTS In accordance with the Municipal Code, the City Auditor prepares an annual work plan and issues quarterly reports to the City Council describing the status and progress towards completion of the work plan. This report provides the City Council with an update on the second quarter of FY 2014. ATTACHMENTS: Attachment A: Auditor's Office Quarterly Report as of December 31, 2013 (PDF) Department Head: Houman Boussina, Acting City Auditor Attachment A Page 2 Attachment A “Promoting honest, efficient, effective, and fully accountable city government." Attachment A 2 Fiscal Year (FY) 2014 Second Quarter Update (October – December 2013) Overview The audit function is essential to the City of Palo Alto’s public accountability. As mandated by the City Charter and Municipal Code, the mission of the Office of the City Auditor (OCA) is to promote honest, efficient, effective, and fully accountable city government. We conduct performance audits and reviews to provide the City Council and City management with information and evaluations regarding the effectiveness and efficiency with which resources are employed, the adequacy of the system of internal controls, and compliance with policies and procedures and regulatory requirements. Taking appropriate action on our audit recommendations will help the City to reduce risks and protect its good reputation. Former City Auditor Jim Pelletier left the office on September 12, 2013. Houman Boussina, Senior Performance Auditor, has been appointed as Acting City Auditor until the recruitment for a new City Auditor is completed. Audits Below is a summary of our audit work for the second quarter of FY 2014 (as of December 31, 2013): Title Objective(s) Start Date End Date Status Results/Comments Contract Oversight Audit: Trenching and the Installation of Electric Substructure This audit was initiated based on concerns raised in a hotline investigation. The audit objective was to determine if the Utilities Department effectively managed its $1.9 million contract with Casey Construction, Inc. for trenching services and the installation of electric substructure, in accordance with contract terms, the City of Palo Alto Municipal Code (Municipal Code), and relevant policies and procedures. 1/2013 10/2013 Complete The audit findings indicate that the Utilities Department and ASD should improve internal controls to ensure the City’s contracts are appropriately awarded and managed in accordance with the Municipal Code, contract terms, and other applicable policies and procedures. In this report, the Office of the City Auditor provided six recommendations to improve contract oversight practices within the City. Finance Committee approval: 11/05/2013 City Council acceptance date: 12/16/2013 Attachment A 3 Title Objective(s) Start Date End Date Status Results/Comments Inventory Management Audit (formerly Utilities Asset Management) To determine if the City had adequate controls to ensure accuracy and completeness of inventory records, accountability for inventory transactions, and safeguarding of inventory. 2/2013 12/2013 Complete Scheduled for presentation to the Finance Committee on February 18, 2014. The audit findings indicate that ASD and other City departments with inventory management roles and responsibilities should improve controls to ensure accuracy and completeness of inventory records, accountability for inventory transactions, and safeguarding of inventory. In this report, the Office of the City Auditor provides 14 recommendations to improve inventory management at the City. Performance Report (formerly the Service Efforts & Accomplishments report) / Citizen Centric Report To provide consistent, reliable information on the performance of City services to assist users in assessing whether the City is achieving its goals and objectives in an efficient and effective manner and to assist the City in meeting its responsibilities to be publicly accountable in the stewardship over public resources. 8/2013 2/2014 In Process Scheduled for presentation to the City Council on February 24, 2014. These reports for FY 2013 will provide comprehensive and historical data and analysis that is not available in any other single report in the City. The reports will be available online and in hardcopy. The FY 2013 Performance Report will continue with last year’s redesigned format to provide an additional focus on performance management. Solid Waste Program Audit To determine whether there are adequate controls in place to effectively manage the City’s Solid Waste Program to ensure sufficient revenue to recover the cost of services while pursuing zero waste goals in accordance with applicable laws, regulations, and City policies and procedures. 5/2013 3/2014 In Process To be determined (TBD) Attachment A 4 Other Monitoring and Administrative Assignments Below is a summary of other assignments as of the second quarter of FY 2014 (as of December 31, 2013): Title Objective(s) Status Results/Comments Sales and Use Tax Allocation Reviews The OCA conducts sales and use tax monitoring in-house and also contracts with an outside vendor. Ongoing The OCA continues to submit inquiries to the State Board of Equalization. As of the end of the second quarter, the City received $99,261 in total Sales and Use Tax Recoveries. Due to processing lags at the State Board of Equalization, there are 45 potential misallocations waiting to be researched and processed (18 from OCA and 27 from the vendor). Total Sales and Use Tax Recoveries: FY 2014 ($47,161 from OCA inquiries and $52,100 from vendor inquiries). Quarterly Reporting Each quarter, the OCA provides Quarterly Status Updates and Sales Tax Digest Summaries for Council review. Ongoing Quarterly reports are published on the OCA website at www.cityofpaloalto.org/gov/depts/aud/reports/default.asp. City Auditor Advisory Roles Provide guidance and advice to key governance committees within the City. Ongoing The City Auditor is an advisor to the following: Utilities Risk Oversight Committee, the Library Bond Oversight Committee, the Information Technology Governance Review Board, and the Information Security Steering Committee. Attachment A 5 Fraud, Waste, and Abuse Hotline Administration On August 16, 2012, we launched the City’s Fraud, Waste, and Abuse Hotline. As of December 31, 2013, we have received a total of nine complaints, all of which have been closed. The chart below summarizes the status of complaints received in each fiscal year. Source: City of Palo Alto hotline case management system as of December 31, 2013 The hotline review committee (composed of the City Auditor, the City Attorney, and the City Manager or their designees) meets as needed to review all activity related to the hotline. During the second quarter of FY 2014, there was one new complaint (complaint number 9) submitted and three complaints were closed (including complaint number 9). Below is a summary of hotline activity during the second quarter of FY 2014 (as of December 31, 2013):1 Complaint Number Category Date Opened Status Action Taken 5 Policy Violation/Theft of Time 2/2013 Closed Unsubstantiated – Closed 7 Policy Violation/Theft of Time 5/2013 Closed Unsubstantiated – Closed 9 Policy Violation/Other 11/2013 Closed Referred Source: City of Palo Alto hotline case management system activity (October 1, 2013 through December 31, 2013) 1 This table includes cases opened, closed, or ongoing during the quarter. Cases closed in prior periods are not included. 7 2 0 1 2 3 4 5 6 7 8 FY 2013 FY 2014 Status of Complaints Received in Fiscal Year Closed Complaints Open Complaints (none) Attachment A POLICY AND SERVICES COMMITTEE MINUTES EXCERPT Page 1 of 3 Special Meeting February, 18 2014 Chairperson Price called the meeting to order at 7:24 P.M. in the Council Conference Room, 250 Hamilton Avenue, Palo Alto, California. Present: Klein, Price (Chair), Schmid Absent: Scharff Agenda Items 1. Auditor's Office Quarterly Report as of December 31, 2013. Houman Boussina, Acting City Auditor, indicated the Quarterly Report was a standard report which provided an update regarding Audit Reports, other monitoring and administrative assignments, and Fraud, Waste and Abuse Hotline administration. Council Member Schmid noticed the Report contained only one audit on the schedule; the Solid Waste Program Audit. No other major audit items were identified for the third and fourth quarters. Mr. Boussina reported the information indicated only the audits in process or completed during the period of the Report. The Annual Work Plan contained a more comprehensive list of audits planned for the upcoming year. Council Member Schmid asked if other audits were in process at the current time. Mr. Boussina noted the Audit Office completed the Inventory Management Audit; was scheduled to present the Performance Report on March 10, 2014; and was completing field work and preparing a report for the Solid Waste Program Audit. Council Member Schmid inquired whether the City Auditor was working on any Special Advisory Memorandums (SAM). Attachment B MINUTES EXCERPT Page 2 of 3 Policy and Services Committee Special Meeting Minutes Excerpt 2/18/2014 Mr. Boussina stated none were currently in process. Staff was contemplating one SAM, and one was listed in the Work Plan. Council Member Schmid liked SAMs and hoped they could be effective. He noted the Inventory Management Audit and Contract Oversight Audit were filled with impacts and asked if the Audits were reported to the Finance Committee. Mr. Boussina answered yes. Council Member Schmid felt the Auditor should also report out to the Policy and Services Committee. Mr. Boussina understood from the prior City Auditor that audits concerning Utilities would be heard by the Finance Committee and most other audits by the Policy & Services Committee. Council Member Schmid indicated the Solid Waste Program Audit may or may not be a Utility audit. Mr. Boussina explained the Audit concerned the Refuse Fund and Enterprise Fund. Council Member Schmid agreed it was an Enterprise Fund, but not necessarily a Utility Fund. Presenting the Audit to the Policy & Services Committee would be valuable as it concerned zero waste goals of the City. Complaint Number 9 regarding the Hotline was noted as entered and closed during the quarter. Yet, the complaint was referred. He requested clarification. Mr. Boussina felt the complaint was important but not necessarily appropriate for the Hotline Committee to address. People Strategies and Operations was the appropriate department to address the complaint. The Hotline Committee considered the issues and agreed that would be the appropriate course of action. Council Member Schmid requested Staff express the action differently in future reports; perhaps note a complaint was being reviewed by the appropriate department. Chair Price noted the City was impacted by reporting from the State Board of Equalization with respect to Sales and Use Tax allocation reviews. Staff could not provide information to the public or address potential misallocations until it received reporting from the State Board of Equalization. Attachment B MINUTES EXCERPT Page 3 of 3 Policy and Services Committee Special Meeting Minutes Excerpt 2/18/2014 Mr. Boussina concurred. Chair Price inquired whether it was an ongoing issue. Mr. Boussina replied yes. MOTION: Council Member Klein moved, seconded by Council Member Schmid to recommend the City Council approve the Auditor’s Office Quarterly Reports as of December 31, 2013. MOTION PASSED: 3-0 Scharff absent Attachment B City of Palo Alto (ID # 4454) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: Oracle Maintenance & Support Title: Approval of a Five-Year Contract with Oracle America, Inc., for Software Program Technical Support Services in the Amount not to Exceed $563,600 From: City Manager Lead Department: IT Department Recommendation Staff recommends that Council approve and authorize the City Manager or designee to execute the attached five-year license and support contract with Oracle America, Inc., in an amount not to exceed $563,600 for the life of the contract subject to the annual appropriation of funds. Staff also recommends that Council approve, and authorize the City Manager or designee to approve a 10% contingency in the event additional services need to be added in the amount of $56,360. Recommended Motion Staff recommends that Council consider the following motions: 1. Authorize the City Manager or designee to execute the attached five-year license and support contract with Oracle America, Inc., in an amount not to exceed $563,600 for the life of the contract subject to the annual appropriation of funds; and 2. Approve, and authorize the City Manager or designee to approve a 10% contingency in the event additional services need to be added in the amount of $56,360. City of Palo Alto Page 2 Background The City has been using Oracle databases since 2000 for various data systems around the City such as our SAP and SCADA systems. This contract is necessary to continue receiving updates to software, software patches and technical support for the Oracle products licensed under this contract. The existing license and support contract expired on March 16th, 2014 (contract S11139794). A true-up process was performed in March with the License Management Team at Oracle to make sure that the City is paying for the correct necessary licenses. The results of that true-up are still being processed. However, in order to stay current on maintenance and support, staff is requesting approval to enter into a five-year agreement with Oracle. If additional costs are determined as a result of the true-up process, staff will produce a separate CMR at the appropriate time. Discussion By entering into a five-year contract term with Oracle instead of a one year term, the City will be able to generated approximately $35,000 in savings as summarized in the table below. The change in costs per year will be a 1% IFR (Inflationary Uplift Rate), versus a 3% IFR per year. City of Palo Alto Page 3 Pricing: SUPPORT TERM DATES 1 % -5 YR CONTRACT 3 %- STD UPLIFT SAVINGS MAR 17 2014-MAR 16 2015 $110,487.99 $112,675.87 $2,187.88 MAR 17 2015-MAR 16 2016 $111,592.86 $116,056.14 $4,463.28 MAR 17 2016-MAR 16 2017 $112,708.78 $119,537.82 $6,829.04 MAR 17 2017-MAR 16 2018 $113,835.86 $123,123.95 9,288.09 MAR 17 2018-MAR 16 2019 $114,974.21 $126,817.66 $11,843.45 TOTAL $563,599.70 $598,211.44 $34,611.74 Resource Impact The funds for the payment of this contract for FY 2014 are budgeted in the IT Technology Fund. For the next fiscal year, the costs for the contract will be included in the FY 2015 Proposed Budget scheduled for release on May 5, 2014. For future budget cycles, funding for this contract is subject the City Council appropriation of funds. If additional costs are determined as a result of the license true-up process, as described above, staff will bring forward a separate CMR for City Council consideration and describe any resource impact at that time. Environmental Review Approval of these contracts do not constitute a project under the California Environmental Quality Act (CEQA); therefore, no Environmental Assessment is required. Attachments: City of Palo Alto 5 Year Oracle Quote (PDF) Page 1 of 8 Support Service Number: 1844903 RL_Specified_Agreement_v020413 21-Nov-13 Sherrie Wong CITY OF PALO ALTO INFORMATION TECHNOLOGY SERVICES 250 HAMILTON AVENUE SECOND FLOOR PALO ALTO CA 94301 United States Dear Sherrie Wong The technical support services provided under support service number 1844903 will expire,or have expired,on 16-Mar-14.Please find attached an ordering document for the renewal of these technical support services.If applicable,the attached ordering document may include technical support services that you have requested to order that are in addition to the technical support services that you are renewing. To prevent interruption to and/or termination of technical support services,please complete your order for the renewal of technical support services,identified in the ordering document,by issuing a form of payment acceptable to Oracle in accordance with the Order Processing Details section of the ordering document on or before 15-Feb-14. If you have questions regarding your order or require further information,please contact me at the e-mail address or telephone number provided below. Regards, Ellen Segur Oracle Support Services E-mail: ellen.segur@oracle.com Tel.: 916-315-5470 Fax: Page 2 of 8 Support Service Number: 1844903 RL_Specified_Agreement_v020413 GENERAL INFORMATION OFFER EXPIRATION ORACLE: Oracle America, Inc. Support Service Number:1844903 Oracle Support Sales Representative: Ellen Segur Offer Expires:16-Mar-14 Telephone:916-315-5470 Fax: E-mail:ellen.segur@oracle.com CUSTOMER: CITY OF PALO ALTO CUSTOMER QUOTE TO CUSTOMER BILL TO Account Contact:Sherrie Wong Account Contact:ACCOUNTS PAYABLE Account Name:CITY OF PALO ALTO Account Name:CITY OF PALO ALTO Address: INFORMATION TECHNOLOGY SERVICES Address:PO BOX 10250 250 HAMILTON AVENUE SECOND FLOOR PALO ALTO CA 94301 United States PALO ALTO CA 94303 United States Telephone:650 617-3152 Telephone: Fax:650 690-0775 Fax: E-mail:Sherrie.Wong@CityofPal oAlto.org E-mail: "You" and "Your" as referenced in this ordering document refers to the Customer identified in the table above. Oracle may provide certain notices about technical support services via e-mail. Accordingly, please verify and update the Customer Quote To and Customer Bill To information in the above table to help ensure that You receive such communications from Oracle. If changes are required to the Customer Quote To and Customer Bill To information, please e-mail or fax the updated information, with Your support service number 1844903, to Your Oracle Support Sales Representative identified in the table above. Page 3 of 8 Support Service Number: 1844903 RL_Specified_Agreement_v020413 SERVICE DETAILS Program Technical Support Services Service Level:Software Update License & Support Product Description CSI #Qty License Metric License Level / Type Start Date End Date Price SQL*PLUS - Developer 3069563 13 FULL USE 17-Mar-14 16-Mar-19 14,473.40 Programmer - Developer 3069563 19 FULL USE 17-Mar-14 16-Mar-19 8,350.03 Oracle Database Enterprise Edition - Universal Power Unit 3069563 960 FULL USE 17-Mar-14 16-Mar-19 97,973.78 Discoverer Administration Edition - Named User 3069563 2 FULL USE 17-Mar-14 16-Mar-19 5,092.61 WebDB Enterprise Edition - Nonstandard User 3069563 4 FULL USE 17-Mar-14 16-Mar-19 1,836.99 ORACLE SERVER EE 8I 8.1 17793491 1100 CONCUR RENT DEVICE FULL USE 17-Mar-14 16-Mar-19 167,000.77 DIAGNOSTICS PACK 1.5 3069563 1100 CONCUR RENT DEVICE FULL USE 17-Mar-14 16-Mar-19 11,133.38 TUNING PACK 1.5 3069563 1100 CONCUR RENT DEVICE FULL USE 17-Mar-14 16-Mar-19 11,133.38 DEVELOPER REL1.0 3069563 1 DEVELOP ER FULL USE 17-Mar-14 16-Mar-19 6,680.03 Designer - Developer 3069563 1 FULL USE 17-Mar-14 16-Mar-19 8,906.70 REPORTS V2.5 3069563 1 DEVELOP ER FULL USE 17-Mar-14 16-Mar-19 4,155.37 Reports Server - Universal Power Unit 3069563 500 FULL USE 17-Mar-14 16-Mar-19 2,041.12 Forms Server - Universal Power Unit 3069563 500 FULL USE 17-Mar-14 16-Mar-19 2,041.12 Application Server Enterprise Edition - Universal Power Unit 3069563 960 FULL USE 17-Mar-14 16-Mar-19 32,541.39 Application Server Enterprise Edition - Concurrent Device 3069563 1100 FULL USE 17-Mar-14 16-Mar-19 22,266.77 Tuning Management Pack - Universal Power Unit 3069563 960 FULL USE 17-Mar-14 16-Mar-19 16,939.00 Diagnostic Management Pack - Universal Power Unit 3069563 960 FULL USE 17-Mar-14 16-Mar-19 16,938.94 Oracle Database Standard Edition - Named User Plus Perpetual 13920513 50 FULL USE 17-Mar-14 16-Mar-19 16,273.49 Page 4 of 8 Support Service Number: 1844903 RL_Specified_Agreement_v020413 Program Technical Support Services Service Level:Software Update License & Support Product Description CSI #Qty License Metric License Level / Type Start Date End Date Price Spatial and Graph - Named User Plus Perpetual 18309686 50 FULL USE 17-Mar-14 16-Mar-19 5,610.54 Partitioning - Processor Perpetual 18309686 4 FULL USE 17-Mar-14 16-Mar-19 22,442.17 Oracle Database Enterprise Edition - Processor Perpetual 18309686 4 FULL USE 17-Mar-14 16-Mar-19 89,768.72 Program Technical Support Fees:USD 563,599.70 Total Price:USD 563,599.70 Plus applicable tax Please note the following: ·If You have questions regarding the Services Details section of this ordering document, or believe that corrections are required, please contact Your Oracle Support Sales Representative identified on the first page of this ordering document. ·Please review Oracle's technical support policies, including the Lifetime Support Policy, before entering into this ordering document. If Your programs and/ or hardware are identified in Oracle's Lifetime Support policy they may move to a different services level during the term of the services purchased under this ordering document. If extended support is offered, an additional fee will be charged for such support if ordered. If You would like to purchase extended support please contact Your Oracle Support Sales Representative identified on the first page of this ordering document. ·If Oracle accepts Your order, the start date set forth in the Services Detail table above shall serve as the commencement date of the technical support services and the technical support services ordered under this ordering document will be provided through the end date specified in the table for the applicable programs and/ or hardware. ·If any of the fields listed in the Services Detail table above are blank, then such fields do not apply for the applicable programs and/or hardware for which You are purchasing technical support services. Page 5 of 8 Support Service Number: 1844903 RL_Specified_Agreement_v020413 TECHNICAL SUPPORT SERVICES TERMS If the Customer and the Customer Quote To name identified in the General Information table above are not the same,CITY OF PALO ALTO represents that Customer has authorized CITY OF PALO ALTO to execute this ordering document on Customer's behalf and to bind Customer to the terms described herein.CITY OF PALO ALTO agrees that the services ordered are for the sole benefit of Customer and shall only be used by Customer.CITY OF PALO ALTO agrees to advise Customer of the terms of this ordering document as well as any communications received from Oracle regarding the services. If the Customer and the Customer Bill To name identified in the General Information table above are not the same,Customer agrees that:a)Customer has the ultimate responsibility for payments under this ordering document;and b)any failure of CITY OF PALO ALTO to make timely payment per the terms of this ordering document shall be deemed a breach by Customer and,in addition to any other remedies available to Oracle,Oracle may terminate Customer's technical support service under this ordering document. Technical support is provided under Oracle's technical support policies in effect at the time the services are provided.The technical support policies are subject to change at Oracle's discretion;however, Oracle will not materially reduce the level of services provided for supported programs and/or hardware during the period for which fees for technical support have been paid.You should review the technical support policies prior to entering into this ordering document.The current version of the technical support policies may be accessed at http://www.oracle.com/us/support/policies/index.html. The technical support services acquired under this ordering document are governed by the terms and conditions of the US-TSRAv121510-201180-13-MAR-2012 ("agreement").Any use of the programs and/or hardware,which includes updates and other materials provided or made available by Oracle as a part of technical support services,is subject to the rights granted for the programs and/or hardware set forth in the order in which the programs and/or hardware were acquired. This ordering document incorporates the agreement by reference.In the event of inconsistencies between the terms contained in this ordering document and the agreement,this ordering document shall take precedence. Page 6 of 8 Support Service Number: 1844903 RL_Specified_Agreement_v020413 ORDER PROCESSING DETAILS Your order is subject to Oracle's acceptance.Your order is deemed to be placed when You provide Oracle with details for payment (e.g.,Your purchase order,Your check,a credit card confirmation or payment confirmation for the order as detailed below).Once placed,Your order shall be non-cancelable and the sums paid nonrefundable,except as provided in the agreement. Please note that if the pre-tax value of this ordering document is USD $2,000 or less,the technical support services ordered (i)must be paid by credit card;or (ii)You must renew Your support via the Oracle Store.Please contact Your Oracle Support Sales Representative for details regarding renewing Your support via the Oracle Store. Technical Support fees are invoiced Quarterly in Arrears.All fees payable to Oracle are due within 30 NET from date of invoice. Oracle will issue an invoice to You upon receipt of a purchase order or a form of payment acceptable to Oracle.You agree to pay any sales,value-added or other similar taxes imposed by applicable law, except for taxes based on Oracle's income.If CITY OF PALO ALTO is a tax exempt organization,a copy of CITY OF PALO ALTO's tax exemption certificate must be submitted with CITY OF PALO ALTO's purchase order,check,credit card or other acceptable form of payment Purchase Order If the technical support services on this ordering document will be ordered and paid under a purchase order,the purchase order must include the following information: -Support Service Number:1844903 -Total Price:USD 563,599.70 (excluding applicable tax) -Local Tax,if applicable In issuing a purchase order,CITY OF PALO ALTO agrees that the terms of this ordering document and the agreement supersede the terms in the purchase order or any other non-Oracle document,and no terms included in any such purchase order or other non-Oracle document shall apply to the technical support services ordered under this ordering document. Please e-mail or fax the purchase order to Oracle in accordance with the Remittance Details section below.If the pre-tax value of this ordering document is USD $2,000 or less,the technical support services ordered must be renewed via the Oracle Store.Please contact Your Oracle Support Sales Representative for details regarding renewing Your support via the Oracle Store. Check If the technical support services on this ordering document will be ordered and paid by check,the check must include the following information: -Support Service Number:1844903 -Total Price:USD 563,599.70 (excluding applicable tax) -Local Tax,if applicable In issuing a check,CITY OF PALO ALTO agrees that only the terms of this ordering document and the agreement shall apply to the technical support services ordered under this ordering document.No terms attached or submitted with the check shall apply. Page 7 of 8 Support Service Number: 1844903 RL_Specified_Agreement_v020413 Please mail check payments in accordance with the Remittance Details section below. Credit Card Confirmation If the technical support services on this ordering document will be ordered and paid by credit card,please complete the information in this section and return it to Oracle in accordance with the Remittance Details section below.The credit card used to make payment must be valid for the entire support services term. Please note that Oracle is unable to process credit card transactions of USD $100,000 or greater. __________________________________ Credit Card Number __________________________________ Expiration Date __________________________________ Billing Address (associated with Credit Card) __________________________________ City, State, and Zip (associated with Credit Card) __________________________________ Authorized Signature __________________________________ Name In issuing this credit card confirmation,CITY OF PALO ALTO agrees that only the terms of this ordering document and the agreement shall apply to the technical support services ordered under this ordering document.No terms attached or submitted with the credit card confirmation shall apply. Remittance Details Purchase orders,credit card details,or payment confirmation for the technical support services ordered under this ordering document should be sent to: Attn:Ellen Segur Oracle Support Services Fax: E-mail:ellen.segur@oracle.com Checks for the technical support services ordered under this ordering document should be sent to: AK,AZ,CA,HI,ID,NV,OR,UT,WA: Oracle America,Inc PO Box 44471 San Francisco,CA 94144-4471 All Other States: Oracle America,Inc PO Box 203448 Dallas,TX 75320-3448 Page 8 of 8 Support Service Number: 1844903 RL_Specified_Agreement_v020413 City of Palo Alto (ID # 4582) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: BAO & Contract for DMF Optimization & Secondary Clarifiers Improvements Title: Adoption of Budget Amendment Ordinance in the Amount of $2,257,200 and Approval of Wastewater Treatment Enterprise Fund Contract with Anderson Pacific in the Total Amount of $2,052,000 for the DMF Optimization & Secondary Clarifiers Improvement Project at the Regional Water Quality Control Plant CIP WQ-80021 Plant Equipment Replacement From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council: 1. Approve the attached Budget Amendment Ordinance (BAO) in the amount of $2,257,200 (Attachment A) to provide an additional appropriation for CIP WQ-80021, Plant Equipment Replacement project, by increasing the project funding from $5,088,141 to $7,345,341 while decreasing funding in CIP WQ-04011, Facility Equipment Assessment and Retrofit by $2,257,200 from $3,333,719 to $1,076,519; 2. Approve, and authorize the City Manager or his designee to execute the attached Wastewater Treatment Enterprise Fund contract with Anderson Pacific Engineering Construction, Inc. (Attachment B) in the total amount of $2,052,000 for the DMF Optimization & Secondary Clarifiers CIP Project at the Regional Water Quality Control Plant (WQ‐80021); and 3. Approve, and authorize the City Manager or his designee to negotiate and execute, one or more change orders to the contract with Anderson Pacific Engineering Construction, Inc. for related, additional but unforeseen work City of Palo Alto Page 2 which may develop during the project, the total value of which shall not exceed $205,200. Background The DMF (dual media filters) removes suspended solids from the upstream secondary clarifiers prior to discharge to the Bay. The media clogs after a number of hours of operation and is then backwashed with clean final effluent to restore the filter for further operation. This project will optimize secondary clarifier and DMF performance by increasing the mean run time between backwashes, shorten the length of a backwash, reduce the quantity of backwash water recycled through the plant, and reduce plant energy demands. This project is consistent with the Plant’s Long Range Facilities Plan (LRFP) completed October 2012 and accepted by Council on July 2, 2012 (staff report ID#2914). The LRFP identified the need to use ongoing CIP wastewater treatment projects to reinvest in the DMF and clarifiers, to rehabilitate these facilities, and to keep these facilities in a state of proper maintenance and operational readiness. In addition, on April 1, 2013, Council approved a contract with Kennedy-Jenks Consultants (staff report ID# 3573) to prepare construction bid documents for the process design modifications to optimize the performance of the DMF and make improvements to the Secondary Clarifiers. Along with the optimization components described above, the project will retire the 33-year old DMF surface wash pumps and rehabilitate ancillary systems in the DMF and clarifiers. Discussion The work to be performed under this contract is to make modifications to the Secondary Clarifiers (weirs, scum drives, mechanical piping and valves, and concrete) to improve their performance, and to install air blowers with mechanical piping for a new air scour system to optimize the performance of the DMFs. The work involves major mechanical equipment and piping, electrical installation, and minor site concrete and structural modifications. Summary of Bid Process Bid Name/Number DMF Optimization and Secondary Clarifiers City of Palo Alto Page 3 Improvement Project (IFB #153205) Proposed Length of Project 15 months Number of Bids Mailed to Contractors 9 Number of Bids Mailed to Builder’s Exchanges 9 Total Days to Respond to Bid 26 Pre-Bid Meeting Yes Number of Company Attendees at Pre-Bid Meeting 7 Number of *Bids Received: 6 Bid Price Range From a low of $2,052,000 to a high of $2,527,000. *Bid summary provided in Attachment C. Staff has reviewed all bids submitted and recommends that the bid of $2,052,000 submitted by Anderson Pacific Engineering Construction, Inc. be accepted and that Anderson Pacific Engineering Construction, Inc. be declared the lowest responsible bidder. The bid is 5.5% below the engineer's estimate of $2,172,000. Staff confirmed with the Contractor's State License Board that the contractor has an active license on file. Staff also checked references supplied by the contractor for previous work performed, including other work with the City, and found no significant complaints. Timeline The work is planned to be completed by July 31, 2015. Resource Impact Funding in the amount of $2,257,200 for the construction of DMF Optimization and Secondary Clarifiers Improvement Project will be added to the Plant Equipment Replacement CIP Project (WQ-80021) as recommended in the City of Palo Alto Page 4 attached BAO, offset by a reduction to the Facility Equipment Assessment and Retrofit Project (WQ-04011) to fund the contract with Anderson Pacific Engineering Construction, Inc. The actions recommended in this report result in a net zero impact to the Wastewater Treatment Fund Reserve. Policy Implications Authorization of this project does not represent a change in existing City policies. Environmental Review The recommended action is exempt from review under the California Environmental Quality Act pursuant to CEQA Guidelines Section 15301 (b), which includes maintenance of publicly‐owned wastewater facilities involving negligible expansion. Attachments: Attachment A: BAO (for C14153205) (PDF) Attachment B: Anderson Pacific - C14153205 (PDF) Attachment C: Bid Summary IFB-153205 (PDF) ORDINANCE NO.xxxx ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING THE BUDGET FOR THE FISCAL YEAR 2014 TO PROVIDE AN APPROPRIATION OF $2,257,200 TO CAPITAL IMPROVEMENT PROGRAM PROJECT NUMBER WQ-80021, DUAL MEDIA FILTER OPTIMIZATION AND SECONDARY CLARIFIERS PROJECT, OFFSET BY A REDUCTION TO WQ-04011, FACILITY EQUIPMENT ASSESSMENT AND RETROFIT PROJECT, IN THE WASTEWATER TREATMENT FUND. 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 10, 2013 did adopt a budget for fiscal year 2014; and B. In July 2012, the City Council accepted the Long Range Facility Plan for the Regional Water Quality Control Plant; and, C. The Long Range Facility Plan identified the need to use ongoing CIP Wastewater Treatment projects to reinvest in the Dual Media Filter (DMF) and clarifiers, to rehabilitate these facilities, and to keep these facilities in a state of proper maintenance and operational readiness. The DMF removes suspended solids from the upstream secondary clarifiers prior to discharge to the bay; and D. In April 2013, the City Council approved a contract with Kennedy-Jenks Consultants to prepare construction bid documents for the process design modifications to optimize the performance of the Dual Media Filter (DMF) and make improvements to the Secondary Clarifiers; and, E. A project has been developed to optimize the secondary clarifiers and DMF performance by making modifications to the Secondary Clarifiers (weirs, scum drives, mechanical piping and valves, and concrete) to improve their performance and to install air blowers with mechanical piping for a new air scour system to optimize the performance of the DMFs; and F. Staff seeks City Council approval to authorize the City Manager or his designee to execute a contract with Anderson Pacific Engineering Construction, Inc. in the total amount of $2,052,000 for the DMF Optimization and Secondary Clarifiers project at the Regional Water Quality Control Plant; and G. Staff seeks City Council approval to authorize the City manager or his designee to negotiate and execute one or more change orders to the contract with Anderson Pacific Engineering Construction, Inc. for related, additional but unforeseen work which may develop during the project, the total value of which shall not exceed $205,200; and H. The sum of $2,257,200 is recommended to be added to the Plant Equipment Replacement project (WQ-80021) with an offsetting reduction to the Facility Equipment Assessment and Retrofit Project (WQ-04011); and I. City Council authorization is needed to amend the 2014 budget as hereinafter set forth. SECTION 2. The sum of Two Million Two Hundred Fifty Seven Thousand and Two Hundred Dollars ($2,257,200) is hereby appropriated to CIP Project WQ-80021, Plant Equipment Replacement Project, increasing the project from $5,088,141 to $7,345,341. SECTION 3. The sum of Two Million Two Hundred Fifty Seven Thousand and Two Hundred Dollars ($2,257,200) is hereby reduced from CIP Project WQ-04011, Facility Equipment Assessment and Retrofit Project, decreasing the project from $3,333,719 to $1,076,519. SECTION 4. As provided in Section 2.04.330 of the Palo Alto Municipal Code, this ordinance shall become effective upon adoption. SECTION 5. The Council of the City of Palo Alto hereby finds that the recommended action is exempt from review under the California Environmental Quality Act pursuant to CEQA Guidelines Section 15301 (b), which includes maintenance of publicly-owned wastewater facilities involving negligible expansion. INTRODUCED AND PASSED: 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 Invitation for Bid (IFB) Package 1 Rev. January 2014 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT Contract No. C14153205 City of Palo Alto DMF Optimization & Secondary Clarifiers Improvements Project Invitation for Bid (IFB) Package 2 Rev. January 2014 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT TABLE OF CONTENTS SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS. ...................................................... 5 1.1 Recitals. ............................................................................................................................................ 5 1.2 Definitions. ...................................................................................................................................... 5 SECTION 2 THE PROJECT. ............................................................................................................... 5 SECTION 3 THE CONTRACT DOCUMENTS. ...................................................................................... 6 SECTION 4 CONTRACTOR’S DUTY. .................................................................................................. 7 SECTION 5 PROJECT TEAM. ............................................................................................................ 7 6.1 Time Is of Essence. ........................................................................................................................ 7 6.2 Commencement of Work. ........................................................................................................... 7 6.3 Contract Time. ................................................................................................................................ 7 6.4 Liquidated Damages. .................................................................................................................... 8 6.4.1 Other Remedies. ................................................................................................... 8 6.5 Adjustments to Contract Time. .................................................................................................. 8 SECTION 7 COMPENSATION TO CONTRACTOR. ............................................................................. 8 7.1 Contract Sum. ................................................................................................................................. 8 7.2 Full Compensation. ....................................................................................................................... 8 SECTION 8 STANDARD OF CARE. .................................................................................................... 9 SECTION 9 INDEMNIFICATION. ...................................................................................................... 9 9.1 Hold Harmless. ............................................................................................................................... 9 9.2 Survival. ........................................................................................................................................... 9 SECTION 10 NONDISCRIMINATION. ............................................................................................... 9 SECTION 11 INSURANCE AND BONDS. ........................................................................................... 9 SECTION 12 PROHIBITION AGAINST TRANSFERS............................................................................ 10 SECTION 13 NOTICES ……………………………………………………………………………………………………………………. 10 13.1 Method of Notice ………………………………………………………………………………………………………………10 13.2 Notice Recipents ……………………………………………………………………………………………………………….10 13.3 Change of Address. ..................................................................................................................... 11 SECTION 14 DEFAULT. .................................................................................................................... 11 Invitation for Bid (IFB) Package 3 Rev. January 2014 CONSTRUCTION CONTRACT 14.1 Notice of Default. ........................................................................................................................ 11 14.2 Opportunity to Cure Default. ................................................................................................... 11 SECTION 15 CITY'S RIGHTS AND REMEDIES. ................................................................................... 11 15.1 Remedies Upon Default. ........................................................................................................... 11 15.1.1 Delete Certain Services. ...................................................................................... 11 15.1.2 Perform and Withhold. ....................................................................................... 11 15.1.3 Suspend The Construction Contract. ................................................................. 12 15.1.5 Invoke the Performance Bond. .......................................................................... 12 15.1.6 Additional Provisions. ......................................................................................... 12 15.2 Delays by Sureties. ...................................................................................................................... 12 15.3 Damages to City. .......................................................................................................................... 13 15.3.1 For Contractor's Default. .................................................................................... 13 15.3.2 Compensation for Losses. ................................................................................... 13 15.4 Suspension by City ...................................................................................................................... 13 15.4.1 Suspension for Convenience. ...................................................................................... 13 15.5 Termination Without Cause. .................................................................................................... 13 15.5.1 Compensation. ..................................................................................................... 14 15.5.2 Subcontractors. .................................................................................................... 14 15.6 Contractor’s Duties Upon Termination. ................................................................................ 14 SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES. ................................................................... 15 16.1 Contractor’s Remedies. ............................................................................................................. 15 16.1.1 For Work Stoppage. ............................................................................................. 15 16.1.2 For City's Non-Payment. ..................................................................................... 15 16.2 Damages to Contractor. ............................................................................................................. 15 SECTION 17 ACCOUNTING RECORDS. ............................................................................................. 15 17.1 Financial Management and City Access. ............................................................................... 15 17.2 Compliance with City Requests. .........................................................................................…...16 SECTION 18 INDEPENDENT PARTIES. ............................................................................................. 16 SECTION 19 NUISANCE. .................................................................................................................. 16 SECTION 20 PERMITS AND LICENSES. ............................................................................................. 16 SECTION 21 WAIVER. ..................................................................................................................... 16 SECTION 22 GOVERNING LAW AND VENUE. .................................................................................. 16 Invitation for Bid (IFB) Package 4 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 23 COMPLETE AGREEMENT. ............................................................................................ 17 SECTION 24 SURVIVAL OF CONTRACT. ........................................................................................... 17 SECTION 25 PREVAILING WAGES. .................................................................................................. 17 SECTION 26 NON APPROPRIATION. ............................................................................................... 17 SECTION 27 AUTHORITY. ................................................................................................................ 17 SECTION 28 COUNTERPARTS .......................................................................................................... 18 SECTION 29 SEVERABILITY. ............................................................................................................ 18 SECTION 30 STATUTORY AND REGULATORY REFERENCES . ........................................................... 18 SECTION 31 WORKERS’ COMPENSATION CERTIFICATION............................................................... 18 Invitation for Bid (IFB) Package 5 Rev. January 2014 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT THIS CONSTRUCTION CONTRACT entered into on March ___, 2014 (“Execution Date”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("City"), and ANDERSON PACIFIC ENGINEERING CONSTRUCTION INC. ("Contractor"), is made with reference to the following: R E C I T A L S: A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. Contractor is a corporation duly organized and in good standing in the State of Calilfornia, Contractor’s License Number245215. Contractor represents that it is duly licensed by the State of California and has the background, knowledge, experience and expertise to perform the obligations set forth in this Construction Contract. C. On 01/29/2014, City issued an Invitation for Bids (IFB) to contractors for the DMF Optimization & Secondary Clarifiers ImprovementsProject (“Project”). In response to the IFB, Contractor submitted a Bid. D. City and Contractor desire to enter into this Construction Contract for the Project, and other services as identified in the Contract Documents for the Project upon the following terms and conditions. NOW THEREFORE, in consideration of the mutual promises and undertakings hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed by and between the undersigned parties as follows: SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS. 1.1 Recitals. All of the recitals are incorporated herein by reference. 1.2 Definitions. Capitalized terms shall have the meanings set forth in this Construction Contract and/or in the General Conditions. If there is a conflict between the definitions in this Construction Contract and in the General Conditions, the definitions in this Construction Contract shall prevail. SECTION 2 THE PROJECT. The Project is the DMF Optimization & Secondary Clarifiers Improvements Project, located at Palo Alto Regional Water Quality Control Plant (RWQCP), 2501 Embarcadero Way, Palo Alto, CA. 94303 ("Project"). Invitation for Bid (IFB) Package 6 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 3 THE CONTRACT DOCUMENTS. 3.1 List of Documents. The Contract Documents (sometimes collectively referred to as “Agreement” or “Bid Documents”) consist of the following documents which are on file with the Purchasing Division and are hereby incorporated by reference. 1) Change Orders 2) Field Orders 3) Contract 4) Bidding Addenda 5) Special Provisions 6) General Conditions 7) Project Plans and Drawings 8) Technical Specifications 9) Instructions to Bidders 10) Invitation for Bids 11) Contractor's Bid/Non-Collusion Affidavit 12) Reports listed in the Contract Documents 13) Public Works Department’s Standard Drawings and Specifications (most current version at time of Bid) 14) Utilities Department’s Water, Gas, Wastewater, Electric Utilities Standards (most current version at time of Bid) 15) City of Palo Alto Traffic Control Requirements 16) City of Palo Alto Truck Route Map and Regulations 17) Notice Inviting Pre-Qualification Statements, Pre-Qualification Statement, and Pre- Qualification Checklist (if applicable) 18) Performance and Payment Bonds 3.2 Order of Precedence. For the purposes of construing, interpreting and resolving inconsistencies between and among the provisions of this Contract, the Contract Documents shall have the order of precedence as set forth in the preceding section. If a claimed inconsistency cannot be resolved through the order of precedence, the City Invitation for Bid (IFB) Package 7 Rev. January 2014 CONSTRUCTION CONTRACT shall have the sole power to decide which document or provision shall govern as may be in the best interests of the City. SECTION 4 CONTRACTOR’S DUTY. Contractor agrees to perform all of the Work required for the Project, as specified in the Contract Documents, all of which are fully incorporated herein. Contractor shall provide, furnish, and supply all things necessary and incidental for the timely performance and completion of the Work, including, but not limited to, provision of all necessary labor, materials, equipment, transportation, and utilities, unless otherwise specified in the Contract Documents. Contractor also agrees to use its best efforts to complete the Work in a professional and expeditious manner and to meet or exceed the performance standards required by the Contract Documents. SECTION 5 PROJECT TEAM. In addition to Contractor, City has retained, or may retain, consultants and contractors to provide professional and technical consultation for the design and construction of the Project. The Contract requires that Contractor operate efficiently, effectively and cooperatively with City as well as all other members of the Project Team and other contractors retained by City to construct other portions of the Project. SECTION 6 TIME OF COMPLETION. 6.1 Time Is of Essence. Time is of the essence with respect to all time limits set forth in the Contract Documents. 6.2 Commencement of Work. Contractor shall commence the Work on the date specified in City’s Notice to Proceed. 6.3 Contract Time. Work hereunder shall begin on the date specified on the City’s Notice to Proceed and shall be completed not later than July 31,2015 (except clarifier No. 1 to be completed bt Dec. 5, 2014). By executing this Construction Contract, Contractor expressly waives any claim for delayed early completion. Invitation for Bid (IFB) Package 8 Rev. January 2014 CONSTRUCTION CONTRACT 6.4 Liquidated Damages. Pursuant to Government Code Section 53069.85, if Contractor fails to achieve Substantial Completion of the entire Work within the Contract Time, including any approved extensions thereto, City may assess liquidated damages on a daily basis for each day of Unexcused Delay in achieving Substantial Completion, based on the amount of five hundred dollars ($500.00) per day, or as otherwise specified in the Special Provisions. Liquidated damages may also be separately assessed for failure to meet milestones specified elsewhere in the Contract Documents, regardless of impact on the time for achieving Substantial Completion. The assessment of liquidated damages is not a penalty but considered to be a reasonable estimate of the amount of damages City will suffer by delay in completion of the Work. The City is entitled to setoff the amount of liquidated damages assessed against any payments otherwise due to Contractor, including, but not limited to, setoff against release of retention. If the total amount of liquidated damages assessed exceeds the amount of unreleased retention, City is entitled to recover the balance from Contractor or its sureties. Occupancy or use of the Project in whole or in part prior to Substantial Completion, shall not operate as a waiver of City’s right to assess liquidated damages. 6.4.1 Other Remedies. City is entitled to any and all available legal and equitable remedies City may have where City’s Losses are caused by any reason other than Contractor’s failure to achieve Substantial Completion of the entire Work within the Contract Time. 6.5 Adjustments to Contract Time. The Contract Time may only be adjusted for time extensions approved by City and memorialized in a Change Order approved in accordance with the requirements of the Contract Documents. SECTION 7 COMPENSATION TO CONTRACTOR. 7.1 Contract Sum. Contractor shall be compensated for satisfactory completion of the Work in compliance with the Contract Documents the Contract Sum of Two Million Seventy-seven Thousand Dollars ($2,052,000.00). [This amount includes the Base Bid and Additive Alternate _____] 7.2 Full Compensation. The Contract Sum shall be full compensation to Contractor for all Work provided by Contractor and, except as otherwise expressly permitted by the terms of the Contract Documents, shall cover all Losses arising out of the nature of the Work or from the acts of the elements or any unforeseen difficulties or obstructions which may arise or be encountered in performance of the Work until its Acceptance by City, all risks connected with the Work, and any and all expenses incurred due to suspension or discontinuance of the Work, except as expressly provided herein. The Contract Sum may only be adjusted for Change Orders approved in accordance with the requirements of the Contract Documents. Invitation for Bid (IFB) Package 9 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 8 STANDARD OF CARE. Contractor agrees that the Work shall be performed by qualified, experienced and well-supervised personnel. All services performed in connection with this Construction Contract shall be performed in a manner consistent with the standard of care under California law applicable to those who specialize in providing such services for projects of the type, scope and complexity of the Project. SECTION 9 INDEMNIFICATION. 9.1 Hold Harmless. To the fullest extent allowed by law, Contractor will defend, indemnify, and hold harmless City, its City Council, boards and commissions, officers, agents, employees, representatives and volunteers (hereinafter individually referred to as an “Indemnitee” and collectively referred to as "Indemnitees"), through legal counsel acceptable to City, from and against any and liability, loss, damage, claims, expenses (including, without limitation, attorney fees, expert witness fees, paralegal fees, and fees and costs of litigation or arbitration) (collectively, “Liability”) of every nature arising out of or in connection with the acts or omissions of Contractor, its employees, Subcontractors, representatives, or agents, in performing the Work or its failure to comply with any of its obligations under the Contract, except such Liability caused by the active negligence, sole negligence, or willful misconduct of an Indemnitee. Contractor shall pay City for any costs City incurs to enforce this provision. Except as provided in Section 9.2 below, nothing in the Contract Documents shall be construed to give rise to any implied right of indemnity in favor of Contractor against City or any other Indemnitee. Pursuant to Public Contract Code Section 9201, City shall timely notify Contractor upon receipt of any third-party claim relating to the Contract. 9.2 Survival. The provisions of Section 9 shall survive the termination of this Construction Contract. SECTION 10 NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, 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. 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 will comply with all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 11 INSURANCE AND BONDS. Within ten (10) business days following issuance of the Notice of Award, Contractor shall provide City with evidence that it has obtained insurance and shall submit Performance and Payment Bonds satisfying all requirements in Article 11 of the General Conditions. Invitation for Bid (IFB) Package 10 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 12 PROHIBITION AGAINST TRANSFERS. City is entering into this Construction Contract in reliance upon the stated experience and qualifications of the Contractor and its Subcontractors set forth in Contractor’s Bid. Accordingly, Contractor shall not assign, hypothecate or transfer this Construction Contract or any interest therein directly or indirectly, by operation of law or otherwise without the prior written consent of City. Any assignment, hypothecation or transfer without said consent shall be null and void, and shall be deemed a substantial breach of contract and grounds for default in addition to any other legal or equitable remedy available to the City. The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of Contractor or of any general partner or joint venturer or syndicate member of Contractor, if the Contractor is a partnership or joint venture or syndicate or co-tenancy shall result in changing the control of Contractor, shall be construed as an assignment of this Construction Contract. Control means more than fifty percent (50%) of the voting power of the corporation or other entity. SECTION 13 NOTICES. 13.1 Method of Notice. All notices, demands, requests or approvals to be given under this Construction Contract shall be given in writing and shall be deemed served on the earlier of the following: (i) On the date delivered if delivered personally; (ii) On the third business day after the deposit thereof in the United States mail, postage prepaid, and addressed as hereinafter provided; (iii) On the date sent if sent by facsimile transmission; (iv) On the date sent if delivered by electronic mail; or (v) On the date it is accepted or rejected if sent by certified mail. 13.2 Notice Recipients. All notices, demands or requests (including, without limitation, Change Order Requests and Claims) from Contractor to City shall include the Project name and the number of this Construction Contract and shall be addressed to City at: To City: City of Palo Alto City Clerk 250 Hamilton Avenue P.O. Box 10250 Palo Alto, CA 94303 Copy to: City of Palo Alto Public Works Administration 2501 Embarcadero Way Palo Alto, CA 94303 Attn: Tom Kapushinski In addition, copies of all Claims by Contractor under this Construction Contract shall be provided to the following: Palo Alto City Attorney’s Office 250 Hamilton Avenue P.O. Box 10250 Palo Alto, California 94303 Invitation for Bid (IFB) Package 11 Rev. January 2014 CONSTRUCTION CONTRACT All Claims shall be delivered personally or sent by certified mail. All notices, demands, requests or approvals from City to Contractor shall be addressed to: Anderson Pacific engineering construction, Inc. 1390 Norman Avenue Santa Clara, CA 95054 Email: pea@andpac.com 13.3 Change of Address. In advance of any change of address, Contractor shall notify City of the change of address in writing. Each party may, by written notice only, add, delete or replace any individuals to whom and addresses to which notice shall be provided. SECTION 14 DEFAULT. 14.1 Notice of Default. In the event that City determines, in its sole discretion, that Contractor has failed or refused to perform any of the obligations set forth in the Contract Documents, or is in breach of any provision of the Contract Documents, City may give written notice of default to Contractor in the manner specified for the giving of notices in the Construction Contract, with a copy to Contractor’s performance bond surety. 14.2 Opportunity to Cure Default. Except for emergencies, Contractor shall cure any default in performance of its obligations under the Contract Documents within two (2) Days (or such shorter time as City may reasonably require) after receipt of written notice. However, if the breach cannot be reasonably cured within such time, Contractor will commence to cure the breach within two (2) Days (or such shorter time as City may reasonably require) and will diligently and continuously prosecute such cure to completion within a reasonable time, which shall in no event be later than ten (10) Days after receipt of such written notice. SECTION 15 CITY'S RIGHTS AND REMEDIES. 15.1 Remedies Upon Default. If Contractor fails to cure any default of this Construction Contract within the time period set forth above in Section 14, then City may pursue any remedies available under law or equity, including, without limitation, the following: 15.1.1 Delete Certain Services. City may, without terminating the Construction Contract, delete certain portions of the Work, reserving to itself all rights to Losses related thereto. 15.1.2 Perform and Withhold. City may, without terminating the Construction Contract, engage others to perform the Work or portion of the Work that has not been adequately performed by Contractor and withhold the cost Invitation for Bid (IFB) Package 12 Rev. January 2014 CONSTRUCTION CONTRACT thereof to City from future payments to Contractor, reserving to itself all rights to Losses related thereto. 15.1.3 Suspend The Construction Contract. City may, without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, suspend all or any portion of this Construction Contract for as long a period of time as City determines, in its sole discretion, appropriate, in which event City shall have no obligation to adjust the Contract Sum or Contract Time, and shall have no liability to Contractor for damages if City directs Contractor to resume Work. 15.1.4 Terminate the Construction Contract for Default. City shall have the right to terminate this Construction Contract, in whole or in part, upon the failure of Contractor to promptly cure any default as required by Section 14. City’s election to terminate the Construction Contract for default shall be communicated by giving Contractor a written notice of termination in the manner specified for the giving of notices in the Construction Contract. Any notice of termination given to Contractor by City shall be effective immediately, unless otherwise provided therein. 15.1.5 Invoke the Performance Bond. City may, with or without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, exercise its rights under the Performance Bond. 15.1.6 Additional Provisions. All of City’s rights and remedies under this Construction Contract are cumulative, and shall be in addition to those rights and remedies available in law or in equity. Designation in the Contract Documents of certain breaches as material shall not waive the City’s authority to designate other breaches as material nor limit City’s right to terminate the Construction Contract, or prevent the City from terminating the Agreement for breaches that are not material. City’s determination of whether there has been noncompliance with the Construction Contract so as to warrant exercise by City of its rights and remedies for default under the Construction Contract, shall be binding on all parties. No termination or action taken by City after such termination shall prejudice any other rights or remedies of City provided by law or equity or by the Contract Documents upon such termination; and City may proceed against Contractor to recover all liquidated damages and Losses suffered by City. 15.2 Delays by Sureties. Time being of the essence in the performance of the Work, if Contractor’s surety fails to arrange for completion of the Work in accordance with the Performance Bond, within seven (7) calendar days from the date of the notice of termination, Contractor’s surety shall be deemed to have waived its right to complete the Work under the Contract, and City may immediately make arrangements for the completion of the Work through use of its own forces, by hiring a replacement contractor, or by any other means that City determines advisable under the circumstances. Contractor and its surety shall be jointly and severally liable for any additional cost incurred by City to complete the Work following termination. In addition, City shall have the right to use any materials, supplies, and equipment belonging to Contractor and located at the Worksite for the purposes of completing the remaining Work. Invitation for Bid (IFB) Package 13 Rev. January 2014 CONSTRUCTION CONTRACT 15.3 Damages to City. 15.3.1 For Contractor's Default. City will be entitled to recovery of all Losses under law or equity in the event of Contractor’s default under the Contract Documents. 15.3.2 Compensation for Losses. In the event that City's Losses arise from Contractor’s default under the Contract Documents, City shall be entitled to deduct the cost of such Losses from monies otherwise payable to Contractor. If the Losses incurred by City exceed the amount payable, Contractor shall be liable to City for the difference and shall promptly remit same to City. 15.4 Suspension by City 15.4.1 Suspension for Convenience. City may, at any time and from time to time, without cause, order Contractor, in writing, to suspend, delay, or interrupt the Work in whole or in part for such period of time, up to an aggregate of fifty percent (50%) of the Contract Time. The order shall be specifically identified as a Suspension Order by City. Upon receipt of a Suspension Order, Contractor shall, at City’s expense, comply with the order and take all reasonable steps to minimize costs allocable to the Work covered by the Suspension Order. During the Suspension or extension of the Suspension, if any, City shall either cancel the Suspension Order or, by Change Order, delete the Work covered by the Suspension Order. If a Suspension Order is canceled or expires, Contractor shall resume and continue with the Work. A Change Order will be issued to cover any adjustments of the Contract Sum or the Contract Time necessarily caused by such suspension. A Suspension Order shall not be the exclusive method for City to stop the Work. 15.4.2 Suspension for Cause. In addition to all other remedies available to City, if Contractor fails to perform or correct work in accordance with the Contract Documents, City may immediately order the Work, or any portion thereof, suspended until the cause for the suspension has been eliminated to City’s satisfaction. Contractor shall not be entitled to an increase in Contract Time or Contract Price for a suspension occasioned by Contractor’s failure to comply with the Contract Documents. City’s right to suspend the Work shall not give rise to a duty to suspend the Work, and City’s failure to suspend the Work shall not constitute a defense to Contractor’s failure to comply with the requirements of the Contract Documents. 15.5 Termination Without Cause. City may, at its sole discretion and without cause, terminate this Construction Contract in part or in whole upon written notice to Contractor. Upon receipt of such notice, Contractor shall, at City’s expense, comply with the notice and take all reasonable steps to minimize costs to close out and demobilize. The compensation allowed under this Paragraph 15.5 shall be the Contractor’s sole and exclusive compensation for such termination and Contractor waives any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect or incidental damages of any kind resulting from termination without cause. Termination pursuant to this provision does not relieve Contractor or its sureties from any of their obligations for Losses arising from or related to the Work performed by Contractor. Invitation for Bid (IFB) Package 14 Rev. January 2014 CONSTRUCTION CONTRACT 15.5.1 Compensation. Following such termination and within forty-five (45) Days after receipt of a billing from Contractor seeking payment of sums authorized by this Paragraph 15.5.1, City shall pay the following to Contractor as Contractor’s sole compensation for performance of the Work : .1 For Work Performed. The amount of the Contract Sum allocable to the portion of the Work properly performed by Contractor as of the date of termination, less sums previously paid to Contractor. .2 For Close-out Costs. Reasonable costs of Contractor and its Subcontractors: (i) Demobilizing and (ii) Administering the close-out of its participation in the Project (including, without limitation, all billing and accounting functions, not including attorney or expert fees) for a period of no longer than thirty (30) Days after receipt of the notice of termination. .3 For Fabricated Items. Previously unpaid cost of any items delivered to the Project Site which were fabricated for subsequent incorporation in the Work. .4 Profit Allowance. An allowance for profit calculated as four percent (4%) of the sum of the above items, provided Contractor can prove a likelihood that it would have made a profit if the Construction Contract had not been terminated. 15.5.2 Subcontractors. Contractor shall include provisions in all of its subcontracts, purchase orders and other contracts permitting termination for convenience by Contractor on terms that are consistent with this Construction Contract and that afford no greater rights of recovery against Contractor than are afforded to Contractor against City under this Section. 15.6 Contractor’s Duties Upon Termination. Upon receipt of a notice of termination for default or for convenience, Contractor shall, unless the notice directs otherwise, do the following: (i) Immediately discontinue the Work to the extent specified in the notice; (ii) Place no further orders or subcontracts for materials, equipment, services or facilities, except as may be necessary for completion of such portion of the Work that is not discontinued; (iii) Provide to City a description in writing, no later than fifteen (15) days after receipt of the notice of termination, of all subcontracts, purchase orders and contracts that are outstanding, including, without limitation, the terms of the original price, any changes, payments, balance owing, the status of the portion of the Work covered and a copy of the subcontract, purchase order or contract and any written changes, amendments or modifications thereto, together with such other information as City may determine necessary in order to decide whether to accept assignment of or request Contractor to terminate the subcontract, purchase order or contract; (iv) Promptly assign to City those subcontracts, purchase orders or contracts, or portions thereof, that City elects to accept by assignment and cancel, on the most favorable terms reasonably possible, all subcontracts, purchase orders or contracts, or portions thereof, that City does not elect to accept by assignment; and (v) Thereafter do only such Work as may be necessary to preserve and protect Work already in progress and to protect materials, plants, and equipment on the Project Site or in transit thereto. Invitation for Bid (IFB) Package 15 Rev. January 2014 CONSTRUCTION CONTRACT Upon termination, whether for cause or for convenience, the provisions of the Contract Documents remain in effect as to any Claim, indemnity obligation, warranties, guarantees, submittals of as-built drawings, instructions, or manuals, or other such rights and obligations arising prior to the termination date. SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES. 16.1 Contractor’s Remedies. Contractor may terminate this Construction Contract only upon the occurrence of one of the following: 16.1.1 For Work Stoppage. The Work is stopped for sixty (60) consecutive Days, through no act or fault of Contractor, any Subcontractor, or any employee or agent of Contractor or any Subcontractor, due to issuance of an order of a court or other public authority other than City having jurisdiction or due to an act of government, such as a declaration of a national emergency making material unavailable. This provision shall not apply to any work stoppage resulting from the City’s issuance of a suspension notice issued either for cause or for convenience. 16.1.2 For City's Non-Payment. If City does not make pay Contractor undisputed sums within ninety (90) Days after receipt of notice from Contractor, Contractor may terminate the Construction Contract (30) days following a second notice to City of Contractor’s intention to terminate the Construction Contract. 16.2 Damages to Contractor. In the event of termination for cause by Contractor, City shall pay Contractor the sums provided for in Paragraph 15.5.1 above. Contractor agrees to accept such sums as its sole and exclusive compensation and agrees to waive any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect and incidental damages, of any kind. SECTION 17 ACCOUNTING RECORDS. 17.1 Financial Management and City Access. Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Construction Contract in accordance with generally accepted accounting principles and practices. City and City's accountants during normal business hours, may inspect, audit and copy Contractor's records, books, estimates, take-offs, cost reports, ledgers, schedules, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Project. Contractor shall retain these documents for a period of three (3) years after the later of (i) Final Payment or (ii) final resolution of all Contract Disputes and other disputes, or (iii) for such longer period as may be required by law. Invitation for Bid (IFB) Package 16 Rev. January 2014 CONSTRUCTION CONTRACT 17.2 Compliance with City Requests. Contractor's compliance with any request by City pursuant to this Section 17 shall be a condition precedent to filing or maintenance of any legal action or proceeding by Contractor against City and to Contractor's right to receive further payments under the Contract Documents. City many enforce Contractor’s obligation to provide access to City of its business and other records referred to in Section 17.1 for inspection or copying by issuance of a writ or a provisional or permanent mandatory injunction by a court of competent jurisdiction based on affidavits submitted to such court, without the necessity of oral testimony. SECTION 18 INDEPENDENT PARTIES. Each party is acting in its independent capacity and not as agents, employees, partners, or joint ventures’ of the other party. City, its officers or employees shall have no control over the conduct of Contractor or its respective agents, employees, subconsultants, or subcontractors, except as herein set forth. SECTION 19 NUISANCE. Contractor shall not maintain, commit, nor permit the maintenance or commission of any nuisance in connection in the performance of services under this Construction Contract. SECTION 20 PERMITS AND LICENSES. Except as otherwise provided in the Special Provisions and Technical Specifications, The Contractor shall provide, procure and pay for all licenses, permits, and fees, required by the City or other government jurisdictions or agencies necessary to carry out and complete the Work. Payment of all costs and expenses for such licenses, permits, and fees shall be included in one or more Bid items. No other compensation shall be paid to the Contractor for these items or for delays caused by non-City inspectors or conditions set forth in the licenses or permits issued by other agencies. SECTION 21 WAIVER. A waiver by either party of any breach of any term, covenant, or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant, or condition contained herein, whether of the same or a different character. SECTION 22 GOVERNING LAW AND VENUE. This Construction Contract shall be construed in accordance with and governed by the laws of the State of California, and venue shall be in a court of competent jurisdiction in the County of Santa Clara, and no other place. Invitation for Bid (IFB) Package 17 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 23 COMPLETE AGREEMENT. This Agreement represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This Agreement may be amended only by a written instrument, which is signed by the parties. SECTION 24 SURVIVAL OF CONTRACT. The provisions of the Construction Contract which by their nature survive termination of the Construction Contract or Final Completion, including, without limitation, all warranties, indemnities, payment obligations, and City’s right to audit Contractor’s books and records, shall remain in full force and effect after Final Completion or any termination of the Construction Contract. SECTION 25 PREVAILING WAGES. This Project is not subject to prevailing wages. The Contractor is not required to pay prevailing wages in the performance and implementation of the Project, because the City, pursuant to its authority as a chartered city, has adopted Resolution No. 5981 exempting the City from prevailing wages. The City invokes the exemption from the state prevailing wage requirement for this Project and declares that the Project is funded one hundred percent (100%) by the City of Palo Alto. This Project remains subject to all other applicable provisions of the California Labor Code and regulations promulgated thereunder. Or The Contractor is required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and Section 1773.1 of the California Labor Code. Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of worker needed to execute the contract for this Project from the Director of the Department of Industrial Relations. Copies of these rates may be obtained at the Purchasing Office of the City of Palo Alto. Contractor shall provide a copy of prevailing wage rates to any staff or subcontractor hired, and shall pay the adopted prevailing wage rates as a minimum. Contractor shall comply with the provisions of Sections 1775, 1776, 1777.5, 1810, and 1813 of the Labor Code. SECTION 26 NON APPROPRIATION. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that the City does not appropriate funds for the following fiscal year for this event, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Construction Contract are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 27 AUTHORITY. The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. Invitation for Bid (IFB) Package 18 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 28 COUNTERPARTS This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement. SECTION 29 SEVERABILITY. In case a provision of this Construction Contract is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected. SECTION 30 STATUTORY AND REGULATORY REFERENCES. With respect to any amendments to any statutes or regulations referenced in these Contract Documents, the reference is deemed to be the version in effect on the date that the Contract was awarded by City, unless otherwise required by law. SECTION 31 WORKERS’ COMPENSATION CERTIFICATION. Pursuant to Labor Code Section 1861, by signing this Contract, Contractor certifies as follows: “I am aware of the provisions of Section 3700 of the 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 code, and I will comply with such provisions before commencing the performance of the Work on this Contract.” IN WITNESS WHEREOF, the parties have caused this Construction Contract to be executed the date and year first above written. CITY OF PALO ALTO ____________________________ City Manager APPROVED AS TO FORM: ____________________________ Senior Asst. City Attorney APPROVED: ____________________________ Public Works Director CONTRACTOR By:___________________________ Name:________________________ Title:__________________________ Date: _________________________ Bid Item Description Engineer's Estimate Anderson Pacific Pacific Infrastructure Myers & Sons Monterey Mechanical Disney Construction JMB Construction R&W Concrete Base DMF & Clarifiers $2,172,000 $2,052,000 $2,060,000 $2,275,000 $2,456,000 $2,472,000 $2,527,000 Total Bid $2,172,000 $2,052,000 $2,060,000 $2,275,000 $2,456,000 $2,472,000 $2,527,000 $0 Remarks Apparent low bidder Highest bidder DI D N O T BI D ( S u b - Co n t r a c t o r ) Bid Summary for DMF Optimization & Secondary Clarifiers Improvements Project (IFB-153205) CIP WQ-80021 Plant Equipment Replacement City of Palo Alto, Public Works Department - RWQCP Attachment C CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR April 7, 2014 The Honorable City Council Palo Alto, California Finance Committee Recommendation to Accept the Inventory Management Audit The Office of the City Auditor recommends acceptance of the Inventory Management Audit. At its meeting on February 18, 2014, the Finance Committee approved and unanimously recommended the City Council accept the report. The Finance Committee minutes are included in this packet. Respectfully submitted, Houman Boussina Acting City Auditor ATTACHMENTS: Attachment A: Inventory Management Audit (PDF) Attachment B: Finance Committee Meeting Minutes Excerpt (February 18, 2014) (PDF) Department Head: Houman Boussina, Acting City Auditor Page 2 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR February 18, 2014 The Honorable City Council Attention: Finance Committee Palo Alto, California Inventory Management Audit In accordance with the Fiscal Year 2013 Annual Audit Work Plan, the Office of the City Auditor has completed the Inventory Management Audit. The audit report presents five findings with a total of fourteen recommendations. The Office of the City Auditor recommends the Finance Committee review and recommend to the City Council acceptance of the Inventory Management Audit. We thank the staff of the Administrative Services Department, the Utilities Department, the Public Works Department, and the Information Technology Department for their time, information, and cooperation during the audit process. ATTACHMENTS: Attachment A: Inventory Management Audit (PDF) Department Head: Houman Boussina, Acting City Auditor Attachment A Page 2 Attachment A 0 Houman Boussina, Acting City Auditor Mimi Nguyen, Senior Performance Auditor December 2013 Office of the City Auditor INVENTORY MANAGEMENT AUDIT Attachment A 0 November 2012 Attachment A 1 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 1 SUMMARY OF RESULTS The Administrative Services Department (ASD) and other City departments with inventory management roles and responsibilities should improve controls and oversight. ASD should promote and enforce citywide inventory management standards and continually improve processes using the City’s SAP inventory system. The audit report indicates: At least $4.2 million in inventory was not managed using the City’s SAP inventory system, which if used could have provided transparency, accountability, and operational efficiencies. ASD should improve controls to ensure the accuracy of inventory records. We found an overall inventory record accuracy rate of 89 percent. About $100,000 out of the $3.6 million in recorded inventory sampled was inaccurate. More than 50 percent of the City’s stock materials, or about $2.5 million in inventory, had not turned over in a one-year period as of May 12, 2013 indicating the City’s warehouses had significant quantities of unused or infrequently used inventory. The City should improve physical security over its inventory. At least $4.2 million in inventory was not managed using the City’s SAP Enterprise Resource Planning (SAP) inventory management system. The City’s Comprehensive Annual Financial Report indicated $3.6 million in inventory as of June 30, 2013. In this report, the Office of the City Auditor (OCA) provides 14 recommendations to improve management of the City’s inventory. Page two of this executive summary presents highlights of findings and recommendations in this report. Inventory turnover decreased from 87 percent in Fiscal Year 2007 to 64 percent in Fiscal Year 2013 (as of April 19, 2013), indicating decreased efficiency and effectiveness of inventory management practices. The City’s average inventory meanwhile increased from about $2.5 million in FY 2007 to over $3.6 million in FY 2013, a 46 percent increase. Office of the City Auditor EXECUTIVE SUMMARY – INVENTORY MANAGEMENT AUDIT Audit Objective: To determine if the City has adequate controls to ensure accuracy and completeness of inventory records, accountability for inventory transactions, and safeguarding of inventory. Source: City of Palo Alto financial records Attachment A 2 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 2 REPORT HIGHLIGHTS Finding 1: ASD and City departments should implement inventory management policies and procedures citywide to achieve the City’s inventory goals and objectives (Page 9) We identified at least $4.2 million in inventory that is not managed using the City’s SAP inventory system. The inventory was managed by the following City departments: Utilities Department - $2.5 million Public Works Department - $773,000 Information Technology (IT) Department - $919,000 The Utilities Department disposed of at least $30,000 in unused materials past their expiration dates. Finding 1 Recommendations: ASD and City departments should implement the City’s inventory management policies and procedures citywide to achieve inventory goals and objectives. ASD should review its inventory accounting policies and correct any misstatements in the City’s accounting records. Finding 2: ASD should improve controls to ensure the accuracy of recorded inventory (Page 15) Inventory records were inaccurate for 20 of 182 materials in our sample, indicating an 89 percent accuracy rate. Finding 2 Recommendation: ASD should update and enforce inventory count policies and procedures to help ensure consistent and accurate inventory records. Finding 3: Inventory records do not evidence accountability for all inventory transactions (Page 19) From January 1, 2007 through April 19, 2013: About $1.0 million in inventory was issued without reservations evidencing the need and authorization. Individuals reserved and issued about $1.1 million in RWQCP Warehouse inventory (72 percent of the total inventory issued) and about $321,000 in MSC Warehouse inventory (2.1 percent of the total inventory issued). Staff used a generic user account that was accessible using a shared password to issue about $8.5 million in inventory (58 percent of inventory issued). Finding 3 Recommendations: ASD should update and enforce inventory transaction policies and procedures to ensure there is proper authorization and accountability for all transactions. ASD should avoid use of generic user accounts. ASD should consult with the IT Department to determine an appropriate alternative to using a generic account to issue inventory. Finding 4: The City’s warehouses have significant quantities of unused or infrequently used inventory (Page 21) More than 50 percent of the City’s 4,383 stock materials, or about $2.5 million in inventory, had not turned over in a one-year period as of May 12, 2013. Inventory turnover decreased from 87 percent in Fiscal Year 2007 to 64 percent in Fiscal Year 2013 (as of April 19, 2013), indicating decreased efficiency and effectiveness of inventory management practices. Finding 4 Recommendations: ASD should identify, formalize, and communicate inventory management goals and objectives to City departments. ASD should update existing policies and develop new policies and procedures to address the following: a) roles and responsibilities for managing inventory levels, b) management of slow-moving or dead stock, and c) transitioning to new materials. Finding 5: The City should improve physical security over its inventory (Page 25) A large number of cards granted access to the MSC and the MSC Warehouse, including cards without adequate identifying information needed to uniquely link activity with an individual. While only 6 City employees were assigned to work at the MSC Warehouse, 71 cards provided access to the facility. Finding 5 Recommendations: The Public Works Department should: Perform a citywide physical access risk assessment. Develop policies and procedures to address the management of citywide physical security. Configure the fleet access control system to support the City’s security goals and objectives or determine if the AMAG Technology, Inc. Symmetry Security Management System (SMS) should replace it. Review and update SMS access authorization records to ensure access card holders can be uniquely identified. Assess the adequacy of records of individuals assigned keys and take necessary corrective action to ensure the accuracy and completeness of the records. Improve physical security at the City Hall storage area. This document represents a limited summary of the audit report and does not include all of the information available in the full report. The full report can be found on the Office of the City Auditor website at: http://www.cityofpaloalto.org/gov/depts/aud/reports/performance.asp Attachment A 3 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 3 TABLE OF CONTENTS EXECUTIVE SUMMARY ......................................................................................................................................................... 1 INTRODUCTION ................................................................................................................................................................... 5 AUDIT OBJECTIVE ......................................................................................................................................................................... 5 BACKGROUND.............................................................................................................................................................................. 5 AUDIT SCOPE AND LIMITATIONS ...................................................................................................................................................... 6 AUDIT METHODOLOGY .................................................................................................................................................................. 7 CITY AUDITOR’S CONCLUSION ......................................................................................................................................................... 7 FINDINGS FINDING 1: ASD AND CITY DEPARTMENTS SHOULD IMPLEMENT INVENTORY MANAGEMENT POLICIES AND PROCEDURES CITYWIDE TO ACHIEVE THE CITY’S INVENTORY GOALS AND OBJECTIVES ......................................................................................................................... 9 FINDING 2: ASD SHOULD IMPROVE CONTROLS TO ENSURE THE ACCURACY OF RECORDED INVENTORY .......................................................... 15 FINDING 3: INVENTORY RECORDS DO NOT EVIDENCE ACCOUNTABILITY FOR ALL INVENTORY TRANSACTIONS .................................................. 19 FINDING 4: THE CITY’S WAREHOUSES HAVE SIGNIFICANT QUANTITIES OF UNUSED OR INFREQUENTLY USED INVENTORY .................................. 21 FINDING 5: THE CITY SHOULD IMPROVE PHYSICAL SECURITY OVER ITS INVENTORY.................................................................................... 25 ATTACHMENT 1: CITY MANAGER’S ACTION SUMMARY ..................................................................................................... 29 In accordance with the Fiscal Year 2013 Annual Audit Work Plan, the Office of the City Auditor has completed this Inventory Management Audit. We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We would like to thank the staff of the Administrative Services Department, the Utilities Department, the Public Works Department, and the Information Technology Department for their time, information, and cooperation during the audit process. Attachment A 4 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 4 Page intentionally left blank Attachment A 5 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 5 INTRODUCTION Audit Objective The objective of the audit was to determine if the City has adequate controls to ensure accuracy and completeness of inventory records, accountability for inventory transactions, and safeguarding of inventory. Background According to the Palo Alto Municipal Code (Municipal Code), the Administrative Services Department (ASD) is responsible for all purchases required by various departments, offices, and units of the City, and for the operation and maintenance of the City's warehouse and storage facilities, which according to the City’s financial records as of June 30, 2013, contained about $3.6 million in General Fund inventory. The City's Stores Warehouses (Stores), a division of ASD, is the warehousing and logistical arm of the City, housing over 3,500 items at two facilities located at the Municipal Services Center (MSC) and the Regional Water Quality Control Plant (RWQCP). Stores is responsible for all shipping, receiving, and delivery of materials in addition to daily deliveries to over 30 City locations, library book transfers, the delivery of City Council and special packets, and facilitation of all surplus sales. There are four storekeepers and one warehouse supervisor responsible for the City’s warehouse operations. The Public Works Department is responsible for the maintenance, security, and safety of City structures where the City’s inventory is stored. The Government Accountability Office (GAO) provides an executive guide applicable to governmental and nongovernmental agencies holding inventory or property and equipment.1 The guide indicates that the lack of reliable information impairs the government‘s ability to: Know the quantity, location, condition, and value of assets it owns. Safeguard its assets from physical deterioration, theft, loss, or mismanagement. Prevent unnecessary storage and maintenance costs or purchase of assets already on hand. Determine the full costs of government programs that use these assets. ASD has adopted the City’s SAP Enterprise Resource Planning (SAP) system and has developed inventory management policies and procedures to manage the City’s inventory. SAP supports processes and functions that can help ensure efficient and effective management of inventory as summarized in Exhibit 1. 1 GAO-02-447G: Executive Guide - Best Practices in Achieving Consistent, Accurate Physical Counts of Inventory and Related Property (March 2002) Attachment A 6 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 6 Exhibit 1: Summary of SAP Inventory Functions INVENTORY CONTROL DESCRIPTION OF INVENTORY FUNCTION IN SAP Goods Movement Transaction resulting in change in stock. Goods Receipt Posting receipt of goods, increasing warehouse stock. Goods Issue Posting material withdrawal or issue, reducing warehouse stock. Return Delivery Returning delivered goods to the vendor. Stock Transfer Removal of material from one storage location to another. Reservation Request to the warehouse for withdrawal of material at a specified date. Physical Inventory Recording and posting actual stock levels based on counting, weighing, or measuring at a given storage location at a specific time through periodic inventory, continuous inventory, cycle counting, and inventory sampling methodology. Batch Handling Ability to manage stock by various levels of detail or if precise identification is required. Print Function Document printing for physical goods movement. Material Master Contains information on all the materials stored. It is the central source for retrieving material-specific data. Archiving Track the archiving of material documents and physical inventory documents. Reporting Range of functions and reports that provide extensive information on all materials and their stock data. Audit Scope and Limitations The City’s policies and procedures do not define “inventory.” The audit covered the City’s inventory, defined as supplies and materials that have not been placed into operation, primarily at the MSC and the RWQCP. The audit assessed the adequacy of inventory management and safeguarding controls. It did not address the following areas: Disposition and use of materials subsequent to issuance by the City’s warehouses. Management of materials not in inventory that the department has already identified as surplus or obsolete. Staffing and inventory carrying costs, such as the cost to store, handle, and protect inventory or costs associated with obsolescence. Processes to determine if materials should be stocked and the appropriateness of stocking levels and the reorder point for materials. Organization and the condition of the City’s inventory. Application of the City’s 2 percent surcharge policy. Stores charges departments a 2 percent markup in addition to the average cost identified in SAP for supplies and materials.2 2 This policy is also discussed in the Audit of Contract Oversight: Office Supplies issued in November 2012. ASD indicated it would review the practice of storing office supplies. Attachment A 7 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 7 Audit Methodology To conduct this audit, we performed the following: Reviewed inventory management guidelines set forth by the Government Accountability Office (GAO) and the Government Finance Officers Association (GFOA), the SAP Library (online guidance for the SAP system), and surveys and reports on inventory management practices and physical security. Reviewed the Municipal Code and the City's inventory management and physical security policies, procedures, and processes. Interviewed Administrative Services Department (ASD), Utilities Department, Public Works Department, and Information Technology (IT) Department staff responsible for managing and safeguarding the City’s inventory and associated assets. Reviewed inventory reported in the City’s financial records and analyzed inventory data in the City's SAP system. Assessed the accuracy and completeness of inventory records. Analyzed access authorization records for selected points of access at the MSC. Consulted with the City’s external auditing firm, Macias Gini & O’Connell, LLP (MGO), regarding presentation of inventory in the City’s financial statements. City Auditor’s Conclusion We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. These audit findings indicate that ASD and other City departments with inventory management roles and responsibilities should improve controls to ensure accuracy and completeness of inventory records, accountability for inventory transactions, and safeguarding of inventory. In addition, ASD should promote and enforce citywide inventory management standards and continually improve processes using the City’s SAP inventory system. In this report, the Office of the City Auditor provides 14 recommendations to improve inventory management at the City. We recommend that other City departments with inventory management roles and responsibilities review this report and implement the recommendations where applicable. Attachment A 8 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 8 Page intentionally left blank Attachment A 9 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 9 Finding 1: ASD and City departments should implement inventory management policies and procedures citywide to achieve the City’s inventory goals and objectives We identified at least $4.2 million in City department inventory that was not managed using the City’s SAP inventory system, which if used could have provided transparency, accountability, and operational efficiencies. The Administrative Services Department (ASD) has not effectively enforced inventory policies and procedures citywide, and City departments have not implemented sufficient inventory management controls. Moreover, our audit scope was limited because more than half of the City’s inventory was not managed using the SAP inventory system. The inventory we identified that was not included in the SAP inventory system was managed by the following City departments (Exhibit 2):3 Utilities Department - $2.5 million Public Works Department - $773,000 Information Technology Department - $919,000 In order to assess completeness of the City’s inventory data in SAP and the adequacy of oversight, we surveyed selected locations at the City’s Municipal Services Center (MSC) and Regional Water Quality Control Plant (RWQCP). Exhibit 3 shows aerial views of these locations, with the City’s two main warehouses outlined in red. We identified at least $4.2 million in inventory at these locations that was not managed using the City’s SAP inventory system (highlighted in yellow in Exhibit 3). 3 The City’s Comprehensive Annual Financial Report indicated $3.6 million in inventory as of June 30, 2013. To the extent reasonable and practical, we valued the inventory we identified that was not managed using the SAP inventory system by referring to purchase orders, comparable items in inventory, and staff estimates. Exhibit 2: The City did not use its SAP inventory system to manage more than half of its inventory3 Exhibit 3: Aerial view of the MSC and RWQCP sites, which serve as the City’s two primary locations for storage of inventory. Warehouses are outlined in red. Yellow indicates inventory we identified that was not managed using SAP Municipal Services Center (MSC) Regional Water Quality Control Plant (RWQCP) Source: Google Maps labeled by the Office of the City Auditor Attachment A 10 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 10 The Municipal Code indicates that ASD is responsible for operating and maintaining the warehouse and storage facilities of the City. The City has adopted and implemented SAP, which supports inventory management processes and functions needed to ensure the efficient and effective management of inventory, as summarized in the Background section of this report. In addition, ASD has developed inventory management and accounting policies and procedures. However, ASD has not clearly defined, communicated, and enforced its inventory goals and objectives citywide resulting in inconsistencies in inventory processes, management, and controls. ASD should promote and enforce citywide inventory management standards and continually improve processes using the City’s SAP inventory system. While we noted varying degrees of oversight for the $4.2 million in inventory that was not managed using the SAP inventory system, we found that City departments did not have adequate systems to manage and safeguard the inventory and to ensure the consistent and appropriate treatment of the inventory from a financial accounting perspective. The lack of reliable and complete inventory data may impair the City‘s ability to:4 Know the quantity, location, condition, and value of its inventory. Safeguard its inventory from physical deterioration, including possible theft, loss, or mismanagement. Prevent unnecessary storage and maintenance costs or purchase of inventory already on hand. Determine the full costs of government programs that use these assets. The Utilities Department stored over $82,000 in inventory at an unsecured location without oversight. We identified at least $82,000 in unsecured inventory stored along the north side of the City’s MSC Warehouse (Exhibit 4). Staff and non-employees could access these materials, which are not dispensed or accounted for using the City’s SAP inventory system. The City also stocked these same materials at the adjacent MSC Warehouse structure. We identified 223 materials with unit values from 11 cents to $162. The materials at this site were not subject to the City’s inventory management controls and were subject to potential misuse or theft. In addition, inconsistent with the City’s accounting policy, these materials were prematurely recorded as expenditures when they were purchased. 4 GAO-02-447G: Executive Guide - Best Practices in Achieving Consistent, Accurate Physical Counts of Inventory and Related Property (March 2002). Exhibit 4: The Utilities Department stored materials at an unsecured location adjacent to the City’s MSC Warehouse Attachment A 11 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 11 The Utilities Department disposed of at least $30,000 in unused materials past their expiration dates. The Utilities Department stores materials in numerous sheds and shelves located at the MSC (Exhibit 5). The Utilities Department does not maintain an inventory of these items. Due to the magnitude and nature of these materials, it was not practical to count or value them; however, in our opinion, the Utilities Department should establish and enforce appropriate inventory controls over these materials. We observed Utilities Department staff purge at least 250 electrical items worth approximately $30,000 from various storage sheds and bins subject to our audit. Staff stated these items had never been used but had expired (the shelf life for most of the electrical materials was printed on each item). In addition, during the purging process, Utilities Department staff returned to the MSC Warehouse 720 items valued at approximately $35,000. The Utilities Department has not managed its meters and transformers using an inventory management system with sufficient controls. We found 594 new electric, gas, and water meters not inventoried or managed using an inventory management system. The 594 meters, valued at approximately $112,000, consisted of: 462 electric meters ($85,000) 49 gas meters ($14,000) 83 water meters ($13,000) The Utilities Department did not have adequate documentation to account for its meters. The meters were disorganized and managed using an undocumented manual process. Due to a lack of storage space within the meter shops, meters were stored in unsecured locations at the MSC. Exhibit 5: The Utilities Department stores materials at the MSC that are not managed using an inventory system Exhibit 6: New and used gas meters stored outside the meter shop Exhibit 7: New electric meters stored inside and outside the meter shop . Attachment A 12 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 12 Transformer inventory, pending installation or use in emergencies, is not managed using the City’s SAP inventory system. The available transformer inventory records indicate a lack of key inventory controls consistent with the City’s SAP inventory system and inventory policies and procedures. The Utilities Department provided two lists of transformer inventory; one was dated June 5, 2013 and the second September 3, 2013. The earlier list indicated 367 transformers while the second list indicated 421. We valued the 421 transformers at approximately $2.3 million. These lists did not evidence basic inventory management controls, and we could not independently reconcile these lists based on available SAP inventory data. In response to our concerns, staff investigated and provided an explanation for the variances. Staff indicated that the transformer inventory list was being updated as a result of a process change, a general clean-up of the data, and a verification/identification of transformers. The Public Works Department did not use the City’s SAP inventory system to manage at least $773,000 in materials, including emergency replacement parts at the RWQCP. During our survey of the RWQCP, we identified 20 materials, including high value emergency replacement parts, which were not included in the City’s SAP inventory system. The Public Works Department uses a manual tracking process that is inconsistent with inventory management goals and objectives to track these items. Moreover, these materials were prematurely recorded as expenditures when they were purchased, a practice that is inconsistent with the City’s accounting policy for inventory. Exhibit 8: Transformers stored at the MSC Exhibit 9: High value emergency replacement parts and materials at the RWQCP Attachment A 13 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 13 The Information Technology (IT) Department did not use the City’s SAP inventory system to manage at least $919,000 in materials. We found an estimated $919,000 in IT Department inventory at the MSC Warehouse that was not managed using the City’s SAP inventory system or any formal, defined process (Exhibit 10).5 The items included new computers, monitors, and accessories that may have a higher susceptibility to theft. These materials were prematurely recorded as expenditures when they were purchased, a practice that is inconsistent with the City’s accounting policy for inventory. In addition, we noted the IT Department stores other inventory at an inadequately secured City Hall storage area without any formal inventory controls (Finding 5). 5 Our audit identified an estimated $619,000 in IT Department inventory; however, Stores staff stated the department had subsequently increased its inventory at the warehouse. The IT Department estimated the additional inventory was worth $300,000. Finding 1 Recommendations to City Management: 1.ASD and City departments should implement the City’s inventory management policies and procedures citywide to achieve inventory goals and objectives. 2.ASD should review its inventory accounting policies and correct any misstatements in the City’s accounting records. Exhibit 10: IT Department inventory at the MSC Warehouse not managed using the SAP inventory system Attachment A 14 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 14 Page intentionally left blank Attachment A 15 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 15 Finding 2: ASD should improve controls to ensure the accuracy of recorded inventory We found an overall inventory record accuracy rate of 89 percent based on a statistical sample of inventory records as of April 19, 2013. About $100,000 out of the $3.6 million in recorded inventory sampled was inaccurate, indicating a dollar-based error rate of about 2.7 percent.6 Inaccurate inventory records may cause financial misstatement and operational inefficiencies. The error rate we detected may not be indicative of the true error in the City’s inventory records because the City did not use its SAP inventory system to manage all inventories and as a result, we could not include most of the city's inventory in our testing (Finding 1). According to the Government Accountability Office (GAO), inventory record accuracy goals should be set at 95 percent or higher, and there should be other performance expectations and accountability and responsibility for the overall physical counts. We found variances between our counts and the City’s inventory records for 20 of 182 materials in our sample, indicating an overall count accuracy rate of 89 percent.7 As shown in Exhibit 11, the 22 percent error rate for the RWQCP Warehouse was significantly greater than the 8 percent error rate for the MSC Warehouse.8 The City’s SAP system and staff rely on accurate inventory records to ensure stock materials are replenished at the appropriate time and to determine the quantity to order. In addition, inaccurate inventory records may result in inaccuracies in the City’s financial statements. From a monetary perspective, we found about $52,000 in error in a statistical sample of 182 materials, which indicates with 95 percent confidence that as of April 19, 2013, about 2.7 percent or approximately $100,000 of the $3.6 million in the City’s recorded general fund inventory was in error and that the error could be as high as approximately $181,000.9 6 We calculated inventory accuracy in terms of both dollars and the percent of materials with an accurate count indicated in the SAP system. The dollar- based error rate is important from a financial statement perspective. The record error rate is more important from an operational efficiency perspective. 7 The sample of 182 materials was selected out of a total population of 4,526 materials valued at about $3.6 million. 8 Some materials associated with the warehouse locations were stored offsite. 9 The absolute value of the error was used as the basis for the projection. There is no lower bound on the error estimate because both overstatement and understatement pose operational risk and may indicate theft, mismanagement, and/or a poor control environment. Exhibit 11: Inventory Record Accuracy Rates at the City’s Warehouses9 Source: Office of the City Auditor counts and analysis of inventory records in SAP 92% 78% 8% 22% 0% 25% 50% 75% 100% MSC Warehouse RWQCP Warehouse Inaccurate Accurate GAOTarget: 95% or higher Attachment A 16 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 16 We also noted the following issues affecting the accuracy of the City’s inventory records during our counts: $4,373 in MSC Warehouse inventory was identified in SAP as “deleted/obsolete.” According to staff, the inventory was not available to issue. Documentation of the authorization to remove these items from inventory was not available. Inventory records did not indicate the specific location for 10 RWQCP Warehouse materials valued at $823. Some of these items were not found during the audit. 14 materials at the MSC and RWQCP Warehouses were identified in inventory records as "in stock" but without a recorded value. Some appeared obsolete, but others appeared valuable. ASD policies and procedures do not ensure implementation of key control elements for maintaining an accurate inventory as set forth by the GAO. In addition, ASD has not implemented performance measures, such as inventory count accuracy rate, to help ensure the effectiveness and efficiency of warehouse operations are evaluated and appropriately communicated to management. Based on our observations and discussions with staff, we identified the following areas for improvement: The issuance of materials at the RWQCP Warehouse is significantly less controlled than at the MSC Warehouse. In contrast to the MSC Warehouse where most materials are issued to staff based on reservations previously entered in the SAP system that document the requisition, the RWQCP Warehouse operates as an “open warehouse” where departmental staff enter the warehouse, take materials, and record what they have taken on a manual sign-out sheet at the front counter.10 A single storekeeper is responsible for retrospectively entering the issuance of materials and accounting for any variances between physical counts and the inventory records in SAP. Physical inventory counts conducted by warehouse staff were not “blind” or sufficiently documented.11 Staff was aware of the inventory records in SAP when performing physical counts. Because the record of on-hand quantity was provided to staff counting inventory, there was a risk that staff may not have actually performed the count or may have made incorrect assumptions. Physical inventory count records in SAP did not indicate the reason for any discrepancies and did not provide assurance that the person performing physical inventory counts did not enter the adjusting entries in SAP. Without adequate controls to ensure the person performing inventory counts does not enter adjusting entries and that there is a documented reason for discrepancies between counts and inventory records, there is a risk that the individual counting inventory could misappropriate items and make adjustments in SAP to hide the theft. In addition, ASD did not ensure all City inventory, including inventory held at off-site locations, was subject to physical counts. 10 Reservations in SAP represent requests to the warehouse to keep materials ready for withdrawal at a later date and for a certain purpose. SAP also uses reservation information to ensure required materials are available and procured in time. SAP allows goods to be issued without reservations. 11 A “blind count” is a physical inventory taken by personnel who perform a hands-on count of inventory without access to the quantities currently shown in electronic or other inventory systems. Blind counts offer the greatest degree of assurance of accurate and reliable counts. Attachment A 17 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 17 Finding 2 Recommendation to City Management: 3.ASD should update and enforce inventory count policies and procedures to help ensure consistent and accurate inventory records. The update should at minimum require blind inventory counts, sufficient documentation of counts and adjustments, and appropriate segregation of duties. ASD should consider implementing controls included in the GAO publication titled “Executive Guide Best Practices in Achieving Consistent, Accurate Physical Counts of Inventory and Related Property.” Attachment A 18 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 18 Page intentionally left blank Attachment A 19 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 19 Finding 3: Inventory records do not evidence accountability for all inventory transactions From January 1, 2007 through April 19, 2013, about $1.0 million in inventory was issued without proper authorization and adequate documentation of the need. Other key control weaknesses, such as the use of generic user accounts in SAP and inadequate segregation of incompatible duties, increased the risk of fraud and abuse. In addition, the City has not used its SAP inventory system to appropriately manage and safeguard all inventories (Finding 1). The City’s SAP system provides opportunities to implement automated controls over inventory transactions. These controls, such as reservations to document the request and authorization for issuing materials and uniquely identifying user accounts to ensure activity in SAP can be linked to individuals, ensure accountability and transparency for inventory transactions, reducing the risk of fraud and abuse. Our audit indicates that from January 1, 2007 through April 19, 2013: About $1.0 million in inventory was issued without SAP reservations, which should be used to document and evidence the need and authorization for inventory transactions.12 The available reservation records in SAP did not appear to be consistently filled out, with some not indicating important information such as the “goods recipient” and “unloading point.” According to the Warehouse Supervisor, all inventory issued should be supported by reservation records in SAP. We did not find sufficient policies and procedures addressing the use of reservations. Staff stated that the warehouse will issue inventory when requested regardless of who made the reservation and may also issue materials without reservations. Moreover, there is no process to restrict the amount of inventory staff issues based on the reservation or to reconcile differences between amounts issued and amounts reserved. Segregation of duties had not been established. An individual both reserved and issued about $1.1 million in RWQCP Warehouse inventory (72 percent of the total inventory issued) while at least five individuals both reserved and issued about $321,000 in MSC Warehouse inventory (2.1 percent of the total inventory issued). The lack of separation of these functions suggests inventory transactions were not appropriately authorized and raises the risk of misappropriation. Our review of staff functions further raises concerns for both locations: At the RWQCP, there is only one storekeeper who has custody of the inventory, performs counts, and also makes adjustments retrospectively to inventory through issuance of goods. The warehouse is operated as an “open” warehouse where departmental staff can take inventory materials as needed without entering reservations in SAP. Staff signs out on a manual tracking sheet materials it removes from the warehouse, and the storekeeper enters reservations based on the sign-out sheets 12 Reservations in SAP represent requests to the warehouse to keep materials ready for withdrawal at a later date and for a certain purpose. SAP also uses reservation information to ensure required materials are available and procured in time. SAP allows goods to be issued without reservations. Attachment A 20 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 20 instead of requiring reservations ahead of time. The storekeeper indicated he also enters reservations to issue materials retrospectively to appropriately charge the departmental group he assumes removed the material(s) when there are discrepancies between his physical counts and inventory records in SAP. At the MSC, four of the six employees at the warehouse have responsibility for the custody of assets and inventory counts, which are incompatible duties. Three of the six employees also have authority to make adjustments to inventory records. Staff used a generic user account in SAP known as “Stores1” that is accessible using a shared password to issue about $8.5 million in inventory (net), which is about 58 percent of all inventory issued from January 1, 2007 through April 19, 2013. The Stores1 account was also used to document receipt of some inventory and also to issue some reservations. Unique user IDs should be used to identify specific users responsible for inventory transactions. Staff cites convenience as the main factor for using the Stores1 account. Individuals who made adjustments to inventory records also recorded the receipt of goods in SAP. These duties should be separated to reduce the risk that an individual could misappropriate and write off inventory. Finding 3 Recommendations to City Management: ASD should: 4.Update and enforce inventory transaction policies and procedures to ensure there is proper authorization and accountability for all transactions. The update should, at minimum, require approved reservations prior to issuance of inventory and separation of the following incompatible roles: a) custody of inventory, b) counting of inventory, and c) making adjustments to inventory. 5.Avoid use of generic user accounts. ASD should consult with the IT Department to determine an appropriate alternative to using a generic account to issue inventory. Attachment A 21 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 21 Finding 4: The City’s warehouses have significant quantities of unused or infrequently used inventory More than 50 percent of the City’s 4,383 stock materials had not turned over in a one-year period as of May 12, 2013. In monetary terms, the City had approximately $2.5 million in inventory, equivalent to about 71 percent of total recorded inventory, which had not been issued in a one-year period. In addition, while the City’s inventory levels have increased by over $1.0 million since FY 2007, the turnover of inventory has steadily declined. Inventory efficiency measures, such as inventory turnover, indicate the ability of an organization to meet its needs with as little inventory as possible. Inventory that does not move may indicate a waste of resources including: 1) funds that are spent for inventory that is not needed, 2) materials that may become obsolete, and 3) space being used to store unneeded items. The City has had low inventory turnover and excess dead stock, indicating inventory levels are not optimized. The City had approximately $2.5 million in dead stock (about 71 percent of total recorded inventory) during the period from May 12, 2012, through May 12, 2013. Dead stock refers to inventory that has not been issued in a reasonable period of time, such as a one-year period. While some dead stock is expected, especially in the case of critical spare inventory, it generally indicates inefficient levels of inventory. Our observations and interviews with staff indicate there is overcrowding at the RWQCP Warehouse. The City’s 2012 Long Range Facilities Plan for the RWQCP stated the existing warehouse facilities were inadequate and estimated $3.0 million in costs for a space expansion project. Improved management of inventory levels may lower dead stock and result in an increase in available space. The City also has a large number of materials in inventory that is not issued on a regular basis (slow-moving inventory). More than 50 percent of the City’s materials had not been issued in more than one year as of May 12, 2013. The City’s SAP system indicated only about 35 percent of materials had been issued within a 180-day period. Exhibit 13 shows the approximate time since the City last issued materials it keeps in stock. Exhibit 12: Warehouse overcrowding at the RWQCP Exhibit 13: Approximate time since the City’s 4,383 materials were last issued Source: City of Palo Alto SAP standard report as of May 12, 2013 180 days or less 1,512 materials 35% 181 days to 1 year 567 materials 13% >1 year to 2 years 579 materials 13% >2 yrs to 3 yrs 343 materials 8% >3 yrs to 4 yrs 185 materials 4% >4 years 1,197 materials 27% 180 days or less (35%) 181 days to 1 year (13%) >1 year to 2 years (13%) >2 years to 3 years (8%) >3 years to 4 years (4%) >4 years (27%) Attachment A 22 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 22 Overall inventory turnover at the City decreased from 87 percent in fiscal year 2007 to 64 percent in fiscal year 2013 (as of April 19, 2013), indicating decreased efficiency in the City’s management of inventory.13 Inventory turnover levels for warehouses may vary. A 2011 ScottMadden, Inc. report on materials management indicates that while inventory turnover ranged from 600 to 900 percent for commercial warehouses, turnover ranged from 60 to 140 percent for utility warehouses.14 According to staff, the majority (about 85 percent) of the City’s inventory is associated with its utilities.15 The City’s overall turnover of 64 percent is at the lower end of these ranges. Exhibit 14 shows average inventory has increased from about $2.5 million in FY 2007 to over $3.6 million in FY 2013, a 46 percent increase, while inventory turnover has decreased 23 percent, from 87 percent to 64 percent. The City issued about 64 percent of its average inventory during FY 2013 which may indicate the City may not be meeting the needs of departments with as little inventory as possible and/or that City departments have not sufficiently used and leveraged the City’s inventory. Exhibit 14: The City’s decreasing inventory turnover percentage16 Source: City of Palo Alto financial records 13 Inventory turnover indicates how often inventory is consumed. It is the cost of inventory issued divided by average inventory during a specified period. 14 ScottMadden, Inc. is an energy consulting firm that publishes benchmarking reports on inventory management practices including inventory optimization practices and performance within the electric and gas utility industry. Utility warehouses include transmission and distribution warehouses. 15 Our analysis indicates that as of April 19, 2013, the City had approximately $1.4 million (about 38 percent of its $3.6 million in recorded inventory) in materials such as electric cables and wires associated with its electric utility. Other categories with large dollar amounts also appeared associated with the City’s utilities. 16 Cost of Inventory Issued indicates the total average cost of inventory issued to City departments each fiscal year. FY 13 data is as of April 19, 2013. Attachment A 23 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 23 Based on our observations and discussions with staff, we identified the following areas for improvement to ensure the City maintains optimum levels of inventory: The Utilities Department and ASD did not ensure that about $130,000 in cable was used prior to transitioning to a new type of cable, resulting in dead stock and potential waste. A standard SAP report identified about $130,000 in dead stock for a type of cable, ranking the material as the highest dead-stock value item (Exhibit 15). The report stated 100 percent of the material was dead stock, indicating there had been no issuance of the cable in at least one year. Staff stated the Engineering Division directed the transition to a new type of cable, and neither Engineering nor Operations were aware there was a significant amount of existing cable remaining. Staff stated the remaining cable was usable; however, staff did not appear to know how to appropriately resolve the concern raised by our audit and suggested the cable could be discarded. Engineering, Operations, and Stores staff should ensure, when possible, stock is consumed before a replacement material is introduced to avoid potential waste. Obsolete reservations in the City’s SAP system may result in overstocking and could have resulted in over $200,000 in unnecessary purchases. During the audit, staff was preparing to purchase $357,015 in two types of cable identified in a standard SAP report as having a combined $150,000 in dead stock. These items were ranked as the second and third highest dead stock value items. In response to our concerns that obsolete SAP reservations may have resulted in unnecessary system-generated orders, staff reviewed and cleared outstanding reservations, resulting in a reduction of the total purchase order amount for these two materials from $357,015 to $128,370. Staff stated there is no process to ensure old reservations are reviewed and deleted. Also, staff has not configured SAP to expire outstanding reservations. ASD should use standard SAP inventory reports to help improve management of inventory levels. Staff has relied on an annual informal process of soliciting departmental feedback to determine and monitor the appropriateness of stocking levels. During the audit, we identified SAP standard reports that staff should strongly consider incorporating into the City’s inventory management processes. These include reports that identify slow- moving inventory and dead stock. ASD should review and update SAP settings that prompt material orders. Our review of selected SAP settings for materials suggests staff has not adequately customized or adjusted the settings to ensure the City purchases needed quantities of materials at the appropriate time. The City’s SAP system is generally configured to plan material orders when stock levels fall below the designated reorder point, with the goal of replenishing inventory to the maximum level, in addition to any external requirements (e.g., reservations) that may exist Exhibit 15: Dead stock of $130,000 (cable #35372) Exhibit 16: Dead stock of $150,000 (cables #35374 and #35361) Attachment A 24 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 24 within the planned delivery time. According to staff, SAP parameters are based on information in manual forms submitted by City departments. Our review of current SAP settings suggests generic and/or unrealistic values have been entered. A detailed review of the City’s implementation of SAP for inventory management, the appropriateness of parameters submitted by departments, and the accuracy of parameters entered into SAP is beyond the audit scope. According to a ScottMadden, Inc. report, survey results indicate utilities organizations are using a mix of system-based calculations and employee judgment to set inventory levels, and this approach yields the best performance results. The report indicates using manual calculations alone yielded the poorest performance results. Roles and responsibilities for monitoring and correcting inventory levels have not been formalized. Our discussions with ASD and Utilities Department staff suggest roles and responsibilities for maintaining appropriate inventory levels have not been adequately defined and communicated. ASD should ensure policies and procedures address roles and responsibilities for warehouse staff and client City departments. Finding 4 Recommendations to City Management: 6.ASD should identify, formalize, and communicate inventory management goals and objectives to City departments. 7.ASD should update existing policies and develop new policies and procedures to address the following: Roles and responsibilities for managing inventory levels Management of slow-moving or dead stock Transitioning to new materials 8.ASD should consult with the IT Department and other City departments to ensure staff: Identifies and uses key SAP inventory management reports. Appropriately configures and updates SAP parameters affecting inventory levels. Attachment A 25 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 25 Finding 5: The City should improve physical security over its inventory We found a large number of cards granted access to the MSC and the MSC Warehouse facility, including cards without adequate identifying information needed to uniquely link activity with an individual. We also noted other security concerns, including an inadequate process to update and restrict access levels using the City’s card access system, inadequate record keeping for the City’s physical keys, an ineffective camera monitoring system, and the use of a fleet access control system at the MSC that has had key functionality disabled. The City uses the MSC as a secured location to safeguard not only inventory, but other sensitive and strategic areas and key assets such as transformers and cable needed to maintain the City’s electric infrastructure. The Public Works Department should collaborate with the Utilities Department, IT Department, the Office of Emergency Services, and the Police Department to perform a comprehensive physical security risk assessment for the MSC in order to prioritize and remedy access control weaknesses. The security concerns raised in this audit also apply to other City facilities. While only 6 City employees were assigned to work at the MSC Warehouse, 71 cards provided access to the facility. The City uses an AMAG Technology, Inc. Symmetry Security Management System (SMS) to secure 84 points of entry citywide. We selected for review three access points, including the MSC Warehouse. While 6 City employees were assigned to work at the MSC Warehouse, 71 cards provided access to the site of which 59 were associated with City employees.17 We could not associate 12 of the cards with any City employee.18 In response to our audit, staff reported that the number of people with access to the warehouse has been reduced to 38 City employees, all of which are uniquely identified. 17 In some instances more than one card was assigned to an individual. We estimate approximately 55 employees had access to the MSC Warehouse. 18 “Non-employee access cards” include some cards that do not uniquely identify an individual and include shared and group cards. Exhibit 17: 71 cards provided access to the MSC Warehouse17,18 Source: AMAG Technology, Inc. Symmetry Security Management System records for the City of Palo Alto as of March 11, 2013 59 cards 83% 12 cards 17% Access Cards -MSC Warehouse City employee access cards Non-employee access cards Attachment A 26 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 26 A large number of cards provided access to the MSC. We found about 61 percent of the 1,417 City employees as of March 12, 2013, or 858 employees, had card access to the MSC Main Walk-in Entrance. We could not associate 429 cards providing access to the MSC Main Walk-in Entrance with City employees. We also noted the following in our limited review of access cards: Some cards are assigned without sufficient identifying information. Some cards indicated generic first and last names such as "Roto Rooter," "Contractor Greenwaste," "3732R facilities," and "School Distr Palo Alto." Some cards appeared to be assigned to more than one person (shared or group cards). Standards on security emphasize that access privileges should be limited to those that the user genuinely needs to complete job responsibilities. Security standards also indicate that users should be uniquely identifiable, so that they can be linked to their actions. Exhibit 18 summarizes the number of City employee and non-employee access cards for three selected MSC entrances. Exhibit 18: Card access for three MSC entrances19,20 Source: AMAG Technology, Inc. Symmetry Security Management System records for the City of Palo Alto as of March 11, 2013 We found the City does not have policies and procedures addressing access controls and security at the MSC. Specifically, procedures do not exist to ensure proper operation and management of SMS or the City’s fleet access control system. Access to City facilities is initially granted based on an access authorization form City departments submit to the Public Works Department. There are no further proactive measures to monitor or appropriately restrict access levels unless either a departmental supervisor submits a new form or Public Works 19 In some instances more than one card was assigned to an individual. We estimate approximately 858 employees had access to the “MSC Main Walk-in Entrance,” 857 employees had access to the “MSC Main Vehicle Inner Entry Gate,” and 55 employees had access to the “MSC Warehouse.” 20 “Non-employee access cards” include some cards that do not uniquely identify an individual and include shared and group cards. Attachment A 27 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 27 Exhibit 19: Inadequate fencing allows access to IT assets Department staff receives an automated email from the IT Department indicating an employee departure. Moreover, the Public Works Department has not required City departments to specify a business need when access is requested for employees or other individuals and entities. The Municipal Code indicates that each department head and council-appointed officer is responsible for securing city-owned property. It also indicates the Public Works Department is responsible to maintain all public structures owned or operated by the City, including the security and safety of these structures. SMS provides a full range of capabilities to control access at a detailed level and to generate reports to assess and monitor access levels and activity. We found no evidence of formalized processes that leverage these SMS capabilities. We also noted the following access control weaknesses during our limited review: The City uses a fleet access control system (a Fleet Data Systems, LLC solution) that provides remote (hands- free) access to the MSC for approximately 350 vehicles according to staff. The system is informally managed and does not have the capability to generate reports on card holders and/or activity. The vendor stated City staff has disabled the ability of the system to run reports. Staff stated the City is transferring all vehicle access control to SMS. The City has not effectively secured IT inventory and other departmental items at a City Hall storage area. Staff did not have a record of individuals assigned keys for this location. Inside the storage area, we noted inadequate fencing (height is too low) used to secure highly desirable IT inventory (Exhibit 19). Moreover, the IT Department did not have a process or formal records to track movement of inventory from this storage location. In response to audit, staff reported and we verified that card access control has been added for the storage area and the “IT cage” and that the fence has been extended to the ceiling. According to staff, the City has an ineffective camera surveillance system it plans to replace at the MSC. Staff stated the current system does not have adequate coverage and does not record in poorly lit areas. Attachment A 28 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 28 Finding 5 Recommendations to City Management: The Public Works Department should: 9.Perform a citywide physical access risk assessment in collaboration with the Utilities Department, Office of Emergency Services, IT Department, and the Police Department in order to effectively identify, prioritize, and address access control weaknesses. 10.Develop policies and procedures to address the management of citywide physical security. Policies and procedures should address: a.Designation of roles and responsibilities to ensure physical security controls appropriately restrict and monitor access. b.Management (administration) and proper use of the City’s access control systems. c.Processing departmental requests to grant or modify employees’ physical access. d.Granting restricted access to non-employees. e.Ensuring access is timely modified or revoked when roles and responsibilities change. 11.Configure the fleet access control system to support the City’s security goals and objectives or determine if the AMAG Technology, Inc. Symmetry Security Management System should replace it. 12.Review and update AMAG Technology, Inc. Symmetry Security Management System access authorization records to ensure access card holders can be uniquely identified. Access cards (especially generic or group cards) should only be assigned with a documented and approved business need. 13.Assess the adequacy of records of individuals assigned keys and take necessary corrective action to ensure the accuracy and completeness of the records. The Public Works Department should identify and prioritize replacement or rekeying of locks for high risk areas if records do not identify who is in possession of the keys or if the keys issued were of the type that can be duplicated. 14.Improve physical security at the City Hall storage area. Appropriate actions include, but are not limited to, enforcing appropriate key or card access controls and securing areas that have inadequate fencing. Attachment A 29 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 ATTACHMENT 1: City Manager’s Action Summary In response to the Audit Recommendations in this report, the City Manager has agreed to take the following actions. We will review and report progress on implementation of these recommendations during our audit recommendation follow-up process. Finding # Recommendation City Manager’s Action Plan Target Date 1 1. ASD and City departments should implement the City’s inventory management policies and procedures citywide to achieve inventory goals and objectives. Citywide policies and procedures will be reviewed, updated, and shared with all departments cited in this Audit. Inventory goals and objectives will be stressed and implemented where it is cost-effective to do so. June 30, 2014 1 2. ASD should review its inventory accounting policies and correct any misstatements in the City’s accounting records. ASD has reviewed issues raised by the Auditor and has found no material misstatements in its FY 2013 financial records and CAFR. ASD believes its accounting policies are reasonable. Accounting policies and records, however, will be reviewed as staff responds to Recommendation 1. May 31, 2014 2 3. ASD should update and enforce inventory count policies and procedures to help ensure consistent and accurate inventory records. The update should at minimum require blind inventory counts, sufficient documentation of counts and adjustments, and appropriate segregation of duties. ASD should consider implementing controls included in the GAO publication titled “Executive Guide Best Practices in Achieving Consistent, Accurate Physical Counts of Inventory and Related Property.” ASD has implemented blind inventory counts and appropriate segregation of duties at the MSC warehouse and will continue to improve. Limited staffing at the MSC does make segregation of duties challenging. To achieve greater accuracy in counts at the RWQCP warehouse as well as segregation of duties, additional staffing is necessary. Staff from Public Works and ASD propose to evaluate the costs and benefits of the recommendation and report back to Council. Staff will strive to implement controls cited in GAO publication and inform Council of its progress. June 30, 2014 Attachment A 30 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 Finding # Recommendation City Manager’s Action Plan Target Date 3 4. ASD should update and enforce inventory transaction policies and procedures to ensure there is proper authorization and accountability for all transactions. The update should, at minimum, require approved reservations prior to issuance of inventory and separation of the following incompatible roles: a) custody of inventory, b) counting of inventory, and c) making adjustments to inventory. ASD will reassess its transaction policies and procedures to ensure proper authorization and accountability within its warehouses and whether additional FTE will be needed to achieve the separation of the “incompatible” roles. Systems, current and new, will be assessed to maximize use of the reservation system. There may be situations, like an emergency, where goods may be withdrawn without a reservation. Staff will work to reconcile this situation. June 30, 2014 3 5. ASD should avoid use of generic user accounts. ASD should consult with the IT Department to determine an appropriate alternative to using a generic account to issue inventory. ASD is working with IT and SAP personnel to change user accounts from generic to specific, identifiable staff. January 31, 2014 4 6. ASD should identify, formalize, and communicate inventory management goals and objectives to City departments. Once current policies and procedures are reviewed and updated and inventory management goals and objectives are reaffirmed, they will be discussed and left with departments. June 30,2014 4 7. ASD should update existing policies and develop new policies and procedures to address the following: Roles and responsibilities for managing inventory levels Management of slow-moving or dead stock Transitioning to new materials ASD will update its policies & procedures, to include a review of Muni Code requirements, and work with departments to: a) clearly define responsibilities for managing inventory levels; b) periodic reports will be sent to departments to identify dead stock; c) departments will coordinate with ASD when new materials are ordered and replace old inventory. June 30, 2014 4 8. ASD should consult with the IT Department and other City departments to ensure staff: Identifies and uses key SAP inventory management reports. ASD has worked and will continue to work with SAP staff to use and develop SAP inventory management reports. A list of these reports will be included by Target Date. March 31, 2014 Attachment A 31 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 Finding # Recommendation City Manager’s Action Plan Target Date Appropriately configures and updates SAP parameters affecting inventory levels. Parameters affecting inventory levels will be explored and updated as needed. 5 9. The Public Works Department should perform a citywide physical access risk assessment in collaboration with the Utilities Department, Office of Emergency Services, IT Department, and the Police Department in order to effectively identify, prioritize, and address access control weaknesses. Public Works has and is interacting with departments to address access control weaknesses. Hard keys are being transitioned to a card entry system. A thorough review of those with access cards to the MSC warehouse has been conducted and the number of people with access has been reduced. A cage extension and a card access system have been added to a City Hall storage facility for IT equipment. Public Works will be working with other departments to identify further improvements such as an improved camera system at the MSC. December 31, 2014 5 10. The Public Works Department should develop policies and procedures to address the management of citywide physical security. Policies and procedures should address: a. Designation of roles and responsibilities to ensure physical security controls appropriately restrict and monitor access. b. Management (administration) and proper use of the City’s access control systems. c. Processing departmental requests to grant or modify employees’ physical access. d. Granting restricted access to non- Public Works staff will make improvements to existing policies and procedures to address citywide physical security. The department is in the process of working with IT, OES, and Police to address items a-e. PW is, for example, evaluating non-employee access to CNG filling equipment. December 31, 2014 Attachment A 32 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 Finding # Recommendation City Manager’s Action Plan Target Date employees. e. Ensuring access is timely modified or revoked when roles and responsibilities change. 5 11. The Public Works Department should configure the fleet access control system to support the City’s security goals and objectives or determine if the AMAG Technology, Inc. Symmetry Security Management System should replace it. Prior to audit, PW staff was in the process of converting the Fleet access control system to the AMAG system. The AMAG technology access control system is expected to be implemented by FY end. June 30, 2014 5 12. The Public Works Department should review and update AMAG Technology, Inc. Symmetry Security Management System access authorization records to ensure access card holders can be uniquely identified. Access cards (especially generic or group cards) should only be assigned with a documented and approved business need. Public Works will evaluate the current access control data base and remove any access cards that are not uniquely identified. Only uniquely identified access cards will be issued in the future. June 30, 2014 5 13. The Public Works Department should assess the adequacy of records of individuals assigned keys and take necessary corrective action to ensure the accuracy and completeness of the records. The Public Works Department should identify and prioritize replacement or rekeying of locks for high risk areas if records do not identify who is in possession of the keys or if the keys issued were of the type that can be duplicated. PW will review physical key records and update them to reflect the current issuance of keys. The current key system is in process of being replaced, card readers will be added to key locations, and cameras will be installed in specific locations. The latter will be done in concert with Police, OES, and IT. December 31, 2014 Attachment A 33 City of Palo Alto | Office of the City Auditor | Inventory Management Audit December 2013 Finding # Recommendation City Manager’s Action Plan Target Date 5 14. The Public Works Department should improve physical security at the City Hall storage area. Appropriate actions include, but are not limited to, enforcing appropriate key or card access controls and securing areas that have inadequate fencing. A review of City storage areas is underway. As stated above IT equipment at City Hall is now caged and will be caged at MSC warehouse as well. Public Works is evaluating new access controls. December 31, 2014 Attachment A FINANCE COMMITTEE MINUTES EXCERPT Page 1 of 10 Regular Meeting Tuesday, February 18, 2014 Roll Call Chairperson Berman called the meeting to order at 7:17 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California. Present: Berman (Chair), Burt, Holman, Kniss Absent: Oral Communications None Agenda Items 2. Inventory Management Audit 3. Staff Response to Inventory Management Audit Houman Boussina, Acting City Auditor, reported that management requested the City Auditor consider the audit. The audit was conducted in accordance with the annual Work Plan. The objective of the inventory management audit was to determine if the City had adequate controls to ensure accuracy and completeness of inventory records, accountability for inventory transactions, and safeguarding of inventory. The City included inventory primarily at the Municipal Services Center (MSC) and the Regional Water Quality Control Plant. It was important to consider the areas outside the scope of the audit. Those areas included disposition and use of materials after leaving the City's warehouses; management of surplus or obsolete materials; staffing; inventory carrying costs; the appropriateness of stocking levels and reorder points; organization and condition of inventory; and a 2 percent surcharge policy. The audit risk assessment process identified the other areas of risk. Although the areas were excluded from the audit, they could be addressed in future special advisory memoranda and/or audit reports. Attachment B MINUTES EXCERPT Page 2 of 10 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 Mimi Nguyen, Senior Performance Auditor, indicated Finding 1 found that at least $4.2 million in inventory, more than half of total inventory, was not subject to consistent or adequate inventory management controls. The lack of reliable and complete inventory data could impair the City's ability to know the quantity, location, condition and value of inventory. Finding 2 found that inventory records were inaccurate for 20 of 182 materials in the sample, indicating an 89 percent accuracy rate overall for the $3.6 million in recorded inventory. Inaccurate inventory records could result in financial misstatements and operational inefficiencies. Finding 3 found from January 1, 2007 through April 19, 2013 about $1 million in inventory was issued without reservations evidencing the need and authorization. Also about $8.5 million in inventory, about 58 percent of total inventory issued, was processed using a generic user account accessed with a shared password. In addition, Staff performed incompatible duties in managing and processing inventory. Controls ensuring accountability and transparency of inventory transactions reduced the risk of fraud and abuse and helped ensure materials were appropriately and timely procured and made available. Finding 4 found that more than 50 percent of the City's 4,383 stock materials, $2.5 million in inventory, had not turned over in a one-year period. Inventory turnover decreased from 87 percent in FY 2007 to 64 percent in FY 2013. Inventory that did not move could indicate a waste of resources. Finding 5 found that there were a large number of cards granting access to the MSC and the MSC warehouse, including cards without adequate identifying information. Other security concerns were noted. Physical security controls were required to safeguard and protect the City's inventory and sensitive and strategic sites. As a result of the audit, the City Auditor made 14 recommendations addressed to the Administrative Services Department (ASD), Utility Department, Public Works Department, and Information Technology (IT) Department. James Keene, City Manager, believed Staff's response could answer Finance Committee (Committee) questions. Joe Saccio, Assistant Director of Administrative Services, acknowledged that management requested the audit and requested the Auditor review controls, policies and procedures. Staff could not find any material misstatements in financial statements. Staff implemented locked doors and gates and security cards to protect Utility, IT and Public Works goods. New containers and new storage units were provided at the Regional Water Quality Control Plant for storage of items outside the warehouse. Warehouse management and department users were in the process of clearing aged and unused inventory for return or surplus sales. Attachment B MINUTES EXCERPT Page 3 of 10 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 Vice Mayor Kniss asked Mr. Saccio to include in his responses the systems Staff utilized. Mr. Saccio reported that Staff did not utilize SAP for all items of inventory. Staff would utilize SAP for IT equipment stored at the warehouse. Other databases and systems were used to track transformers and meters. Staff would review SAP's current uses and review the costs and benefits of continuing use of SAP, enhancing SAP or using other software. The City had a decentralizing system for tracking and managing goods. He inquired whether he provided the information Vice Mayor Kniss sought. Vice Mayor Kniss responded no. Mr. Saccio reported that Staff accounted for the $919,000 of IT equipment. At the time of the audit, the goods were not being tracked in SAP. That was an omission; however, goods were manually tracked. One solution was to incorporate identification of IT goods in SAP. The Auditor recommended blind counts, and that was implemented. Public Works would institute a card reader system and replace a hard key system. Staff purged users originally identified for entry into the warehouse to active users and only people who needed access to the warehouse. Staff needed to review all procedures and policies and to document all roles and responsibilities of everyone in the departments. Staff needed enhanced communication and procedures among all departments. Staff needed system modifications and enhancements, whether in SAP or other systems, to address issues raised in the audit. Staff would generate periodic reports for users of inventory, so they could have accurate information regarding inventory. The Public Works Department would implement physical security measures and coordinate with the Emergency Response Department. Staff worked to safeguard City assets within existing budgetary and organizational constraints. Staff acknowledged that improvements could and would be made. The Auditor noted that $4.2 million in inventory was not recorded in SAP. That did not mean that the City lost $4.2 million in inventory. More than $900,000 in IT goods were stored at the warehouse, but were not recorded in the inventory system. Remaining items were accounted for in a different system. Lalo Perez, Director of Administrative Services Department and Chief Finance Officer, explained that the City's practice for many years was to expense out some inventory items. When items were expensed out, they were not tracked in inventory. Staff wanted to track inventory in SAP if possible; however, SAP might not be the most practical method for some areas of the City. Attachment B MINUTES EXCERPT Page 4 of 10 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 Mr. Keene noted that SAP was implemented in 2003 to integrate many different systems. The City underfunded the investment in SAP and training, such that former, parallel practices remained in use. Some problems would be simple to remedy. He suggested the various departments explain their reasons for doing things in certain ways and whether the additional cost to implement every level of control was worthwhile. Council Member Holman did not find a Staff response to the disposition and use of materials after leaving warehouses. She inquired whether the levels of inventory were appropriate, given the dollar amount of inventory. Mr. Perez requested the Auditor clarify disposition and use of materials. Council Member Holman clarified that she wanted to know whether an item was utilized for a City project once it was checked out of inventory. Vice Mayor Kniss asked if Council Member Holman wanted to know if Staff implemented a system to track each item. Council Member Holman replied yes. Mr. Boussina recognized this as an important element of safeguarding and appropriately using inventory. The audit stopped at inventory management. This was one reason Staff needed solid controls over the movement of inventory. Once transactions were recorded, Staff should know inventory was going out for an approved and authorized purpose and cause. Mr. Perez reported some items could be found in a tracking system. For transformers, the Utility Department was required by regulatory mandate to track them. One of the challenges of using SAP was the checking in and out of inventory during repairs to equipment. Some items were not tracked and Staff did not know where those items would eventually be used. Council Member Holman expressed concern over the lack of inventory tracking and control. She asked if levels of inventory were appropriate and if there was a definition of surplus. Mr. Perez indicated there was a policy and procedure regarding surplus inventory. Surplus was an item no longer needed for City operations. Staff had to determine whether an item had a value or not. Based on thresholds for value, the determination of whether an item was surplus was made by the warehouse supervisor or Mr. Perez. In terms of inventory, Staff worked with departments to identify inventory. As a result of the audit process, Staff was receiving better cooperation. Attachment B MINUTES EXCERPT Page 5 of 10 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 Mr. Boussina identified what appeared to be inventory, essentially materials that were stored but not placed into operation, along the side of the building. The inventory was open to the MSC yard and accessible. He understood the items were expensed and were accessible to trucks for reloading and restocking. The items were not subject to inventory management control. The audit team physically counted and valued the items. It was not practical to audit them in the same way as the areas in Findings 2-5. James Allen, Water Quality Control Plant Manager, reported stock items in SAP were assigned to a specific work order when taken from stock. Staff could track the specific stock item to a specific corrective repair. Certain stock items, such as latex gloves and housekeeping supplies, were not tracked. Council Member Holman agreed consumables were a different category. Mr. Allen added that consumables were taken from City stock. Council Member Holman reiterated her question regarding the level of inventory. Mr. Allen stated that much of the wastewater treatment equipment was kept on hand in case of a corrective repair. That equipment may not be needed for 10-30 years. Recently dead stock valued at approximately $21,000 was identified because of obsolete equipment. He did not believe that amount was excessive in terms of the entire Wastewater Treatment Fund. He believed the amount of inventory was appropriate. Tom Marshall, Assistant Director for Utilities Engineering, noted the largest and most expensive item the department was holding was transformers. Transformers were needed to replace failures in the field and for new customer connections. A typical lead time to obtain a transformer was six to nine months, resulting in the need for a large inventory. Council Member Holman was not sure that transformers and items for emergency repairs approached the amount of inventory in terms of dollar investment. An incorrect amount of inventory was a systemic issue. She was shocked by the number of access cards issued and the use of a generic account accessible by a shared password to issue $8.5 million in inventory. She requested more information regarding warehouse expansion at the Regional Water Quality Control Plant prior to any money being spent. Her overarching concern was the culture of the system; that Staff did not raise concerns before the audit was performed. Attachment B MINUTES EXCERPT Page 6 of 10 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 Mr. Saccio did not deny that the list of people with access was too great. During business hours, no one accessed the warehouse unless accompanied by a warehouse person responsible for inventory. Only a bona fide supervisor in charge of a specific project could enter the warehouse at night during an emergency. Some protections were in place to safeguard inventory. Staff did not believe many goods were being removed through theft. Mr. Keene suggested department heads address practices that evolved within departments and became ingrained. The Chief Financial Officer (CFO) was frustrated by the pace of the integration effort and requested an audit. The audit was transparency on a management issue. There was not a systematic way to verify risks with the use of old systems. Vice Mayor Kniss felt Staff provided more of a problem than an answer. If SAP was not sufficient or not operating correctly, it was the City Manager's problem. Clearly there were many problems and few, if any, answers. She was attempting to understand who was responsible for the outcome. Within six months, the Committee should hear Staff's detailed responses and solutions. Council Member Burt heard a number of responses, but no answers. In 2007 the City had an annual inventory turnover of 87 percent, which dropped to 64 percent in 2013. Staff's responses did not explain what changed between 2007 and 2013. He inquired about changes in the respective departments that would account for a lower turnover rate. Dean Batchelor, Assistant Director for Utilities Operations, reiterated that $82,000 in inventory was unsecure and unaccounted for. The items were mostly truck stock pieces, nuts, bolts, washers, connectors. The highest limit item in there was $165. Council Member Burt noted approximately $8 million in total inventory between Utilities and General Fund. He inquired about the amount of inventory carried by Utilities. Mr. Batchelor answered approximately $5-$6 million. He reported $2.1 million of inventory was transformers. Transformers were tracked on a monthly basis through Access programs, because of the testing aspects of it. Council Member Burt asked if those were in place in 2007. Mr. Batchelor indicated Utilities did not have as much stock and did not perform as many rebuilds in 2007. Attachment B MINUTES EXCERPT Page 7 of 10 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 Council Member Burt remarked that a lower turnover of inventory resulted in more stock. If there were sound operational reasons for deliberately higher stock, he would have put that in the report. He did not hear any reasons for needing more stock. Mr. Marshall did not have an explanation for having more stock and less turnover in the warehouse. Utilities Staff could request ASD assistance to determine what was in the warehouse and why it was there. Typically Utilities Staff told ASD Staff which materials to stock and the number of items to be stocked. Council Member Burt asked when Staff received the audit report. Mr. Marshall responded December 2013. Council Member Burt inquired about progress in understanding the reasons for a lower rate of turnover. Mr. Marshall reported Staff was reviewing inventory in the warehouse to determine the items that needed to be stocked. Mr. Allen noted the Water Quality Control Plant identified $21,000 in dead stock. Those items were needed to repair the wastewater treatment plant and might be kept for 50 years or the life of the equipment. Council Member Burt remarked that Staff was turning over inventory at a significantly slower rate and carrying more inventory today. Either some fundamental change in operational needs occurred or the City was carrying too much inventory because Staff was sloppy. Mr. Allen reported Staff performed a complete review of all stock items and evaluated the number of items needed for each stock item. Council Member Burt agreed that possibly the Water Quality Control Plant did not have a decrease in turnover. He inquired whether its turnover rate decreased. Mr. Allen did not know. Some of the equipment did have a use, even if the resale value was low, and should not be discarded. That could contribute to the decreased turnover rate. If Staff included non-stock inventory, items that were expensed out, then the Water Quality Control Plant would have an even lower turnover rate. Turnover may not be a good method to benchmark the efficiency of the warehouse. Attachment B MINUTES EXCERPT Page 8 of 10 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 Council Member Burt inquired whether the methodology for determining turnover rate remained the same from 2007 to 2013. He did not find any information indicating changes in the methodology between 2007 and 2013. Mr. Perez needed to provide better analytics. Staff could present that information when they returned to the Committee. Council Member Burt inquired whether Staff analyzed inventory turnover by department. Mr. Boussina indicated that inventory turnover was reported at a higher level in the report; however, he could break it out by department. Council Member Burt believed that was a necessary first step in order to figure out where to focus. Mr. Perez would identify the big ticket items versus general inventory ordered by all departments. Staff could provide specific details and factual numbers. Mr. Keene commented that updating and reporting regarding the audit would continue. Staff was not in a position to work out all issues before presenting the audit. Working through recommendations, responses and solutions would take focus, time and effort. Staff's responses at the current time would not satisfy the Committee. Staff wanted the themes of Committee questions in order to respond to them at a later time. Council Member Burt related his experience with inventory management issues in other organizations. Mr. Keene noted a number of different solutions would be needed. Council Member Burt felt metrics could be beneficial. One department could require a lower rate of turnover of materials by the nature of its work. Compiling a department-by-department baseline was one important measurement to establish the goal. He did not hear a Staff response regarding the use of technology beyond using or not using SAP. In industrial operations, technology had improved greatly. Once set up, new technology was easier to use than old methods. MOTION: Vice Mayor Kniss moved, seconded by Chair Berman to recommend that Staff return to the Finance Committee within six months with the answers on how to correct the audit findings, incorporating measurements, detailing in an easy to understand way how the audit findings will be fixed. Attachment B MINUTES EXCERPT Page 9 of 10 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 Vice Mayor Kniss believed Staff's responses and solutions should return to the Committee. Clearly Staff had an idea of what they could do, but no clear idea of what they would do. Mr. Saccio noted Staff provided an action plan to the auditor on each recommendation and timeline. Staff viewed responses to the audit as a work in progress. Vice Mayor Kniss stated at some point solutions were needed. Chair Berman inquired about a timeframe for providing the audit to the Council. Mr. Perez recalled that in past actions the Committee accepted the report but conditioned it upon Staff returning with an update. The report would go to the Council and Staff would return within six months to provide a status update. Chair Berman asked Vice Mayor Kniss if that action coincided with her intentions in the Motion. Vice Mayor Kniss agreed with the plan. The audit may not be resolved in six months. Council Member Burt discussed the report aptly. Staff ought to be able to utilize technology for tracking inventory. MOTION RESTATED: Vice Mayor Kniss moved, seconded by Chair Berman to direct Staff to return to the Finance Committee within six months with an indication of how the audit findings will be tracked or systematized so Staff will know what is in inventory; 2) to accept the Audit; and 3) forward the Audit to the full Council. Mr. Keene asked if the audit would be forwarded to the Council. Mr. Perez answered yes. It would be placed on the Consent Calendar. Mr. Keene inquired about the Council's action with respect to the audit. Mr. Perez reported the Council could accept the audit. Mr. Keene did not wish to have a Council discussion if the Committee had a good direction for Staff. Vice Mayor Kniss indicated the goal was for Staff to return to the Committee. Mr. Keene reiterated that Staff knew the problem, but not the detailed steps to resolve it. Attachment B MINUTES EXCERPT Page 10 of 10 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 Chair Berman remarked that the City purchased SAP in order to integrate all departments. All departments should utilize the same solution. Obviously Staff did not know what inventory was on the shelves. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER 1) to have this Item go to Council under the Consent Calendar; 2) to include these Minutes when the Item goes before Council; 3) to have Staff respond within six months to the Finance Committee; and 4) to have Staff account for the level of inventory, the culture of responsibility and accountability, and the tracking and disposition of the materials posted at the warehouse. Mr. Keene reported that technology could be utilized to implement the redesign of systems. The City could have some software capacity that was not being used. Staff was assessing the future of SAP and methods to support change efforts. MOTION AS AMENDED PASSED: 4-0 Attachment B City of Palo Alto (ID # 4504) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: Secondary Clarifier No. 1 Mechanism Replacement Title: Approval of Wastewater Treatment Enterprise Fund Contract with Monterey Mechanical Co. in the Total Amount of $374,100 for the Secondary Clarifier Number 1 Mechanism Replacement Project at the Regional Water Quality Control Plant - Capital Improvement Program Project WQ-80021 From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council: 1. Approve and authorize the City Manager or his designee to execute the attached Wastewater Treatment Enterprise Fund contract with Monterey Mechanical Co. (Attachment A) in the total amount of $374,100 for the Secondary Clarifier Number 1 Mechanism Replacement Project at the Regional Water Quality Control Plant (CIP WQ-80021); and 2. Authorize the City Manager or his designee to negotiate and execute one or more change orders to the contract with Monterey Mechanical Co. for related, additional but unforeseen work which may develop during the project, that the total value of which may not exceed $37,410. Background The Regional Water Quality Control Plant (Plant) treated an average of 20 million gallons of wastewater each day during 2013. Secondary clarifier mechanisms are a vital part of the Plant’s treatment process removing sludge from wastewater before it enters the San Francisco Bay. The Plant has six clarifiers and keeps two of the six clarifiers empty and in standby mode. It is important to have reduntant equipment available for unexpected equipment failure, routine equipment City of Palo Alto Page 2 rotation, and extra capacity for high flows. Discussion The work to be performed under this contract is the replacement of the rotating mechanism for the Secondary Clarifier Number 1 Mechanism at the Plant. The existing clarifier mechanism was installed in 1972 and was rehabilitated in 1999. The mechanism has reached the end of its useful life and can no longer be repaired to operate as designed. Summary of Bid Process Bid Name/Number Secondary Clarifier No. 1 Mechanism Replacement IFB# 152871 Proposed Length of Project 15 months Number of Bids Mailed to Contractors 7 Number of Bids Mailed to Builder’s Exchanges 12 Total Days to Respond to Bid 28 Pre-Bid Meeting Yes Number of Company Attendees at Pre-Bid Meeting 14 Number of *Bids Received: 7 Bid Price Range From a low of $374,100 to a high of $550,000. *Bid summary provided in Attachment B. Staff has reviewed all bids submitted and recommends that the bid of $374,100 submitted by Monterey Mechanical Co. be accepted and that Monterey Mechanical Co. be declared the lowest responsible bidder. The bid is 25% below the engineer's estimate of $500,000. The adjacent Clarifier No. 2 mechanism was replaced in 2008 for a similar price of $377,000. Staff is confident that the contractor’s bid of $374,100 to replace Clarifier No. 1 is responsive. Staff confirmed with the Contractor's State License Board that the contractor has City of Palo Alto Page 3 an active license on file. Staff checked references supplied by the contractor for previous work performed and found no significant complaints. Timeline The fieldwork will take place between approximately April 1, 2015 and July 31, 2015. Resource Impact Funds for this project are included in the Wastewater Treatment Enterprise Fund Capital Improvement Program Project WQ-80021 budget. Policy Implications Authorization of this project does not represent a change in existing City policies. Environmental Review The recommended action is exempt from review under the California Environmental Quality Act pursuant to CEQA Guidelines Section 15301 (b), which includes maintenance of publicly-owned wastewater facilities involving negligible expansion. Attachments: Attachment A: Construction Contract Secondary Clarifier No. 1 Mechanism Replacement (DOCX) Attachment B: Bid Evaluation Secondary Clarifier No. 1 Mechanism Replacement (PDF) Invitation for Bid (IFB) Package 1 Rev. January 2014 CONSTRUCTION CONTRACT Attachment A CONSTRUCTION CONTRACT Contract No. C14152871 City of Palo Alto and Monterey Mechanical Co. Secondary Clarifier No. 1 Mechanism Replacement Project Invitation for Bid (IFB) Package 2 Rev. January 2014 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT TABLE OF CONTENTS SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS. ......................................................... 5 1.1 Recitals. ................................................................................................................................................... 5 1.2 Definitions. ............................................................................................................................................ 5 SECTION 2 THE PROJECT. .................................................................................................................... 5 SECTION 3 THE CONTRACT DOCUMENTS. ......................................................................................... 6 SECTION 4 CONTRACTOR’S DUTY. ...................................................................................................... 7 SECTION 5 PROJECT TEAM. ................................................................................................................. 7 6.1 Time Is of Essence. .............................................................................................................................. 7 6.2 Commencement of Work. ................................................................................................................ 7 6.3 Contract Time. ...................................................................................................................................... 7 6.4 Liquidated Damages. .......................................................................................................................... 8 6.4.1 Other Remedies. ....................................................................................................... 8 6.5 Adjustments to Contract Time. ....................................................................................................... 8 SECTION 7 COMPENSATION TO CONTRACTOR. ................................................................................ 8 7.1 Contract Sum. ....................................................................................................................................... 8 7.2 Full Compensation. ............................................................................................................................. 8 SECTION 8 STANDARD OF CARE. ........................................................................................................ 9 SECTION 9 INDEMNIFICATION. ........................................................................................................... 9 9.1 Hold Harmless. ..................................................................................................................................... 9 9.2 Survival. .................................................................................................................................................. 9 SECTION 10 NONDISCRIMINATION. ................................................................................................... 9 SECTION 11 INSURANCE AND BONDS. ............................................................................................... 9 SECTION 12 PROHIBITION AGAINST TRANSFERS............................................................................... 10 SECTION 13 NOTICES ……………………………………………………………………………………………………………………. 10 13.1 Method of Notice ………………………………………………………………………………………………………………10 13.2 Notice Recipents ……………………………………………………………………………………………………………….10 13.3 Change of Address. ........................................................................................................................... 11 SECTION 14 DEFAULT. ......................................................................................................................... 11 Invitation for Bid (IFB) Package 3 Rev. January 2014 CONSTRUCTION CONTRACT 14.1 Notice of Default. .............................................................................................................................. 11 14.2 Opportunity to Cure Default. ........................................................................................................ 11 SECTION 15 CITY'S RIGHTS AND REMEDIES. ...................................................................................... 12 15.1 Remedies Upon Default. ................................................................................................................. 12 15.1.1 Delete Certain Services. .......................................................................................... 12 15.1.2 Perform and Withhold. ........................................................................................... 12 15.1.3 Suspend The Construction Contract. .................................................................... 12 15.1.5 Invoke the Performance Bond. ............................................................................. 12 15.1.6 Additional Provisions. ............................................................................................. 12 15.2 Delays by Sureties. ............................................................................................................................ 12 15.3 Damages to City. ................................................................................................................................ 13 15.3.1 For Contractor's Default. ........................................................................................ 13 15.3.2 Compensation for Losses. ...................................................................................... 13 15.4 Suspension by City ............................................................................................................................ 13 15.4.1 Suspension for Convenience. .......................................................................................... 13 15.5 Termination Without Cause. ......................................................................................................... 14 15.5.1 Compensation. ......................................................................................................... 14 15.5.2 Subcontractors. ........................................................................................................ 14 15.6 Contractor’s Duties Upon Termination. ..................................................................................... 14 SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES. ...................................................................... 15 16.1 Contractor’s Remedies. ................................................................................................................... 15 16.1.1 For Work Stoppage. ................................................................................................. 15 16.1.2 For City's Non-Payment. ......................................................................................... 15 16.2 Damages to Contractor. .................................................................................................................. 15 SECTION 17 ACCOUNTING RECORDS. ................................................................................................ 15 17.1 Financial Management and City Access. ................................................................................... 15 17.2 Compliance with City Requests. ................................................................................................... 16 SECTION 18 INDEPENDENT PARTIES. ................................................................................................. 16 SECTION 19 NUISANCE. ...................................................................................................................... 16 SECTION 20 PERMITS AND LICENSES. ................................................................................................ 16 SECTION 21 WAIVER. .......................................................................................................................... 16 SECTION 22 GOVERNING LAW AND VENUE....................................................................................... 16 Invitation for Bid (IFB) Package 4 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 23 COMPLETE AGREEMENT. ................................................................................................ 17 SECTION 24 SURVIVAL OF CONTRACT. ............................................................................................... 17 SECTION 25 PREVAILING WAGES. ...................................................................................................... 17 SECTION 26 NON APPROPRIATION. ................................................................................................... 17 SECTION 27 AUTHORITY. .................................................................................................................... 17 SECTION 28 COUNTERPARTS .............................................................................................................. 18 SECTION 29 SEVERABILITY. ................................................................................................................. 18 SECTION 30 STATUTORY AND REGULATORY REFERENCES . ............................................................. 18 SECTION 31 WORKERS’ COMPENSATION CERTIFICATION. ................................................................ 18 Invitation for Bid (IFB) Package 5 Rev. January 2014 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT THIS CONSTRUCTION CONTRACT entered into on February 19, 2014 (“Execution Date”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("City"), and Monterey Mechanical Co. ("Contractor"), is made with reference to the following: R E C I T A L S: A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. Contractor is a Company duly organized and in good standing in the State of California, Contractor’s License Number388361. Contractor represents that it is duly licensed by the State of California and has the background, knowledge, experience and expertise to perform the obligations set forth in this Construction Contract. C. On January 7, 2014, City issued an Invitation for Bids (IFB) to contractors for the Secondary Clarifier No. 1 Mechanism Replacement (“Project”). In response to the IFB, Contractor submitted a Bid. D. City and Contractor desire to enter into this Construction Contract for the Project, and other services as identified in the Contract Documents for the Project upon the following terms and conditions. NOW THEREFORE, in consideration of the mutual promises and undertakings hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed by and between the undersigned parties as follows: SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS. 1.1 Recitals. All of the recitals are incorporated herein by reference. 1.2 Definitions. Capitalized terms shall have the meanings set forth in this Construction Contract and/or in the General Conditions. If there is a conflict between the definitions in this Construction Contract and in the General Conditions, the definitions in this Construction Contract shall prevail. SECTION 2 THE PROJECT. The Project is the Secondary Clarifier No. 1 Mechanism Replacement Project, located at 2501 Embarcadero Way, Palo Alto, CA. ("Project"). Invitation for Bid (IFB) Package 6 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 3 THE CONTRACT DOCUMENTS. 3.1 List of Documents. The Contract Documents (sometimes collectively referred to as “Agreement” or “Bid Documents”) consist of the following documents which are on file with the Purchasing Division and are hereby incorporated by reference. 1) Change Orders 2) Field Orders 3) Contract 4) Bidding Addenda 5) Special Provisions 6) General Conditions 7) Project Plans and Drawings 8) Technical Specifications 9) Instructions to Bidders 10) Invitation for Bids 11) Contractor's Bid/Non-Collusion Affidavit 12) Reports listed in the Contract Documents 13) Public Works Department’s Standard Drawings and Specifications (most current version at time of Bid) 14) Utilities Department’s Water, Gas, Wastewater, Electric Utilities Standards (most current version at time of Bid) 15) City of Palo Alto Traffic Control Requirements 16) City of Palo Alto Truck Route Map and Regulations 17) Notice Inviting Pre-Qualification Statements, Pre-Qualification Statement, and Pre- Qualification Checklist (if applicable) 18) Performance and Payment Bonds 3.2 Order of Precedence. For the purposes of construing, interpreting and resolving inconsistencies between and among the provisions of this Contract, the Contract Documents shall have the order of precedence as set forth in the preceding section. If a claimed inconsistency cannot be resolved through the order of precedence, the City Invitation for Bid (IFB) Package 7 Rev. January 2014 CONSTRUCTION CONTRACT shall have the sole power to decide which document or provision shall govern as may be in the best interests of the City. SECTION 4 CONTRACTOR’S DUTY. Contractor agrees to perform all of the Work required for the Project, as specified in the Contract Documents, all of which are fully incorporated herein. Contractor shall provide, furnish, and supply all things necessary and incidental for the timely performance and completion of the Work, including, but not limited to, provision of all necessary labor, materials, equipment, transportation, and utilities, unless otherwise specified in the Contract Documents. Contractor also agrees to use its best efforts to complete the Work in a professional and expeditious manner and to meet or exceed the performance standards required by the Contract Documents. SECTION 5 PROJECT TEAM. In addition to Contractor, City has retained, or may retain, consultants and contractors to provide professional and technical consultation for the design and construction of the Project. The Contract requires that Contractor operate efficiently, effectively and cooperatively with City as well as all other members of the Project Team and other contractors retained by City to construct other portions of the Project. SECTION 6 TIME OF COMPLETION. 6.1 Time Is of Essence. Time is of the essence with respect to all time limits set forth in the Contract Documents. 6.2 Commencement of Work. Contractor shall commence the Work on the date specified in City’s Notice to Proceed. 6.3 Contract Time. Work hereunder shall begin on the date specified on the City’s Notice to Proceed and shall be completed not later than July 31, 2015. within calendar days () after the commencement date specified in City’s Notice to Proceed. By executing this Construction Contract, Contractor expressly waives any claim for delayed early completion. Invitation for Bid (IFB) Package 8 Rev. January 2014 CONSTRUCTION CONTRACT 6.4 Liquidated Damages. Pursuant to Government Code Section 53069.85, if Contractor fails to achieve Substantial Completion of the entire Work within the Contract Time, including any approved extensions thereto, City may assess liquidated damages on a daily basis for each day of Unexcused Delay in achieving Substantial Completion, based on the amount of five hundred dollars ($500) per day, or as otherwise specified in the Special Provisions. Liquidated damages may also be separately assessed for failure to meet milestones specified elsewhere in the Contract Documents, regardless of impact on the time for achieving Substantial Completion. The assessment of liquidated damages is not a penalty but considered to be a reasonable estimate of the amount of damages City will suffer by delay in completion of the Work. The City is entitled to setoff the amount of liquidated damages assessed against any payments otherwise due to Contractor, including, but not limited to, setoff against release of retention. If the total amount of liquidated damages assessed exceeds the amount of unreleased retention, City is entitled to recover the balance from Contractor or its sureties. Occupancy or use of the Project in whole or in part prior to Substantial Completion, shall not operate as a waiver of City’s right to assess liquidated damages. 6.4.1 Other Remedies. City is entitled to any and all available legal and equitable remedies City may have where City’s Losses are caused by any reason other than Contractor’s failure to achieve Substantial Completion of the entire Work within the Contract Time. 6.5 Adjustments to Contract Time. The Contract Time may only be adjusted for time extensions approved by City and memorialized in a Change Order approved in accordance with the requirements of the Contract Documents. SECTION 7 COMPENSATION TO CONTRACTOR. 7.1 Contract Sum. Contractor shall be compensated for satisfactory completion of the Work in compliance with the Contract Documents the Contract Sum of three hundred seventy four thousand one hundred Dollars ($374,100). [This amount includes the Base Bid and Additive Alternates.] 7.2 Full Compensation. The Contract Sum shall be full compensation to Contractor for all Work provided by Contractor and, except as otherwise expressly permitted by the terms of the Contract Documents, shall cover all Losses arising out of the nature of the Work or from the acts of the elements or any unforeseen difficulties or obstructions which may arise or be encountered in performance of the Work until its Acceptance by City, all risks connected with the Work, and any and all expenses incurred due to suspension or discontinuance of the Work, except as expressly provided herein. The Contract Sum may only be adjusted for Change Orders approved in accordance with the requirements of the Contract Documents. Invitation for Bid (IFB) Package 9 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 8 STANDARD OF CARE. Contractor agrees that the Work shall be performed by qualified, experienced and well-supervised personnel. All services performed in connection with this Construction Contract shall be performed in a manner consistent with the standard of care under California law applicable to those who specialize in providing such services for projects of the type, scope and complexity of the Project. SECTION 9 INDEMNIFICATION. 9.1 Hold Harmless. To the fullest extent allowed by law, Contractor will defend, indemnify, and hold harmless City, its City Council, boards and commissions, officers, agents, employees, representatives and volunteers (hereinafter individually referred to as an “Indemnitee” and collectively referred to as "Indemnitees"), through legal counsel acceptable to City, from and against any and liability, loss, damage, claims, expenses (including, without limitation, attorney fees, expert witness fees, paralegal fees, and fees and costs of litigation or arbitration) (collectively, “Liability”) of every nature arising out of or in connection with the acts or omissions of Contractor, its employees, Subcontractors, representatives, or agents, in performing the Work or its failure to comply with any of its obligations under the Contract, except such Liability caused by the active negligence, sole negligence, or willful misconduct of an Indemnitee. Contractor shall pay City for any costs City incurs to enforce this provision. Except as provided in Section 9.2 below, nothing in the Contract Documents shall be construed to give rise to any implied right of indemnity in favor of Contractor against City or any other Indemnitee. Pursuant to Public Contract Code Section 9201, City shall timely notify Contractor upon receipt of any third-party claim relating to the Contract. 9.2 Survival. The provisions of Section 9 shall survive the termination of this Construction Contract. SECTION 10 NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, 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. 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 will comply with all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 11 INSURANCE AND BONDS. Within ten (10) business days following issuance of the Notice of Award, Contractor shall provide City with evidence that it has obtained insurance and shall submit Performance and Payment Bonds satisfying all requirements in Article 11 of the General Conditions. Invitation for Bid (IFB) Package 10 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 12 PROHIBITION AGAINST TRANSFERS. City is entering into this Construction Contract in reliance upon the stated experience and qualifications of the Contractor and its Subcontractors set forth in Contractor’s Bid. Accordingly, Contractor shall not assign, hypothecate or transfer this Construction Contract or any interest therein directly or indirectly, by operation of law or otherwise without the prior written consent of City. Any assignment, hypothecation or transfer without said consent shall be null and void, and shall be deemed a substantial breach of contract and grounds for default in addition to any other legal or equitable remedy available to the City. The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of Contractor or of any general partner or joint venturer or syndicate member of Contractor, if the Contractor is a partnership or joint venture or syndicate or co-tenancy shall result in changing the control of Contractor, shall be construed as an assignment of this Construction Contract. Control means more than fifty percent (50%) of the voting power of the corporation or other entity. SECTION 13 NOTICES. 13.1 Method of Notice. All notices, demands, requests or approvals to be given under this Construction Contract shall be given in writing and shall be deemed served on the earlier of the following: (i) On the date delivered if delivered personally; (ii) On the third business day after the deposit thereof in the United States mail, postage prepaid, and addressed as hereinafter provided; (iii) On the date sent if sent by facsimile transmission; (iv) On the date sent if delivered by electronic mail; or (v) On the date it is accepted or rejected if sent by certified mail. 13.2 Notice Recipients. All notices, demands or requests (including, without limitation, Change Order Requests and Claims) from Contractor to City shall include the Project name and the number of this Construction Contract and shall be addressed to City at: To City: City of Palo Alto City Clerk 250 Hamilton Avenue P.O. Box 10250 Palo Alto, CA 94303 Copy to: City of Palo Alto Public Works Administration 250 Hamilton Avenue Palo Alto, CA 94301 Attn: Patrick Carter AND City of Palo Alto Regional Water Quality Control Plant 2501 Embarcadero Way Palo Alto, CA 94303 Attn: Tom Kapushinski Invitation for Bid (IFB) Package 11 Rev. January 2014 CONSTRUCTION CONTRACT City of Palo Alto Utilities Engineering 250 Hamilton Avenue Palo Alto, CA 94301 Attn: In addition, copies of all Claims by Contractor under this Construction Contract shall be provided to the following: Palo Alto City Attorney’s Office 250 Hamilton Avenue P.O. Box 10250 Palo Alto, California 94303 All Claims shall be delivered personally or sent by certified mail. All notices, demands, requests or approvals from City to Contractor shall be addressed to: Monterey Mechanical Co. 8275 San Leandro Street Oakland, CA 94621 13.3 Change of Address. In advance of any change of address, Contractor shall notify City of the change of address in writing. Each party may, by written notice only, add, delete or replace any individuals to whom and addresses to which notice shall be provided. SECTION 14 DEFAULT. 14.1 Notice of Default. In the event that City determines, in its sole discretion, that Contractor has failed or refused to perform any of the obligations set forth in the Contract Documents, or is in breach of any provision of the Contract Documents, City may give written notice of default to Contractor in the manner specified for the giving of notices in the Construction Contract, with a copy to Contractor’s performance bond surety. 14.2 Opportunity to Cure Default. Except for emergencies, Contractor shall cure any default in performance of its obligations under the Contract Documents within two (2) Days (or such shorter time as City may reasonably require) after receipt of written notice. However, if the breach cannot be reasonably cured within such time, Contractor will commence to cure the breach within two (2) Days (or such shorter time as City may reasonably require) and will diligently and continuously prosecute such cure to completion within a reasonable time, which shall in no event be later than ten (10) Days after receipt of such written notice. Invitation for Bid (IFB) Package 12 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 15 CITY'S RIGHTS AND REMEDIES. 15.1 Remedies Upon Default. If Contractor fails to cure any default of this Construction Contract within the time period set forth above in Section 14, then City may pursue any remedies available under law or equity, including, without limitation, the following: 15.1.1 Delete Certain Services. City may, without terminating the Construction Contract, delete certain portions of the Work, reserving to itself all rights to Losses related thereto. 15.1.2 Perform and Withhold. City may, without terminating the Construction Contract, engage others to perform the Work or portion of the Work that has not been adequately performed by Contractor and withhold the cost thereof to City from future payments to Contractor, reserving to itself all rights to Losses related thereto. 15.1.3 Suspend The Construction Contract. City may, without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, suspend all or any portion of this Construction Contract for as long a period of time as City determines, in its sole discretion, appropriate, in which event City shall have no obligation to adjust the Contract Sum or Contract Time, and shall have no liability to Contractor for damages if City directs Contractor to resume Work. 15.1.4 Terminate the Construction Contract for Default. City shall have the right to terminate this Construction Contract, in whole or in part, upon the failure of Contractor to promptly cure any default as required by Section 14. City’s election to terminate the Construction Contract for default shall be communicated by giving Contractor a written notice of termination in the manner specified for the giving of notices in the Construction Contract. Any notice of termination given to Contractor by City shall be effective immediately, unless otherwise provided therein. 15.1.5 Invoke the Performance Bond. City may, with or without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, exercise its rights under the Performance Bond. 15.1.6 Additional Provisions. All of City’s rights and remedies under this Construction Contract are cumulative, and shall be in addition to those rights and remedies available in law or in equity. Designation in the Contract Documents of certain breaches as material shall not waive the City’s authority to designate other breaches as material nor limit City’s right to terminate the Construction Contract, or prevent the City from terminating the Agreement for breaches that are not material. City’s determination of whether there has been noncompliance with the Construction Contract so as to warrant exercise by City of its rights and remedies for default under the Construction Contract, shall be binding on all parties. No termination or action taken by City after such termination shall prejudice any other rights or remedies of City provided by law or equity or by the Contract Documents upon such termination; and City may proceed against Contractor to recover all liquidated damages and Losses suffered by City. 15.2 Delays by Sureties. Invitation for Bid (IFB) Package 13 Rev. January 2014 CONSTRUCTION CONTRACT Time being of the essence in the performance of the Work, if Contractor’s surety fails to arrange for completion of the Work in accordance with the Performance Bond, within seven (7) calendar days from the date of the notice of termination, Contractor’s surety shall be deemed to have waived its right to complete the Work under the Contract, and City may immediately make arrangements for the completion of the Work through use of its own forces, by hiring a replacement contractor, or by any other means that City determines advisable under the circumstances. Contractor and its surety shall be jointly and severally liable for any additional cost incurred by City to complete the Work following termination. In addition, City shall have the right to use any materials, supplies, and equipment belonging to Contractor and located at the Worksite for the purposes of completing the remaining Work. 15.3 Damages to City. 15.3.1 For Contractor's Default. City will be entitled to recovery of all Losses under law or equity in the event of Contractor’s default under the Contract Documents. 15.3.2 Compensation for Losses. In the event that City's Losses arise from Contractor’s default under the Contract Documents, City shall be entitled to deduct the cost of such Losses from monies otherwise payable to Contractor. If the Losses incurred by City exceed the amount payable, Contractor shall be liable to City for the difference and shall promptly remit same to City. 15.4 Suspension by City 15.4.1 Suspension for Convenience. City may, at any time and from time to time, without cause, order Contractor, in writing, to suspend, delay, or interrupt the Work in whole or in part for such period of time, up to an aggregate of fifty percent (50%) of the Contract Time. The order shall be specifically identified as a Suspension Order by City. Upon receipt of a Suspension Order, Contractor shall, at City’s expense, comply with the order and take all reasonable steps to minimize costs allocable to the Work covered by the Suspension Order. During the Suspension or extension of the Suspension, if any, City shall either cancel the Suspension Order or, by Change Order, delete the Work covered by the Suspension Order. If a Suspension Order is canceled or expires, Contractor shall resume and continue with the Work. A Change Order will be issued to cover any adjustments of the Contract Sum or the Contract Time necessarily caused by such suspension. A Suspension Order shall not be the exclusive method for City to stop the Work. 15.4.2 Suspension for Cause. In addition to all other remedies available to City, if Contractor fails to perform or correct work in accordance with the Contract Documents, City may immediately order the Work, or any portion thereof, suspended until the cause for the suspension has been eliminated to City’s satisfaction. Contractor shall not be entitled to an increase in Contract Time or Contract Price for a suspension occasioned by Contractor’s failure to comply with the Contract Documents. City’s right to suspend the Work shall not give rise to a duty to suspend the Work, and City’s failure to suspend the Work shall not constitute a defense to Contractor’s failure to comply with the requirements of the Contract Documents. Invitation for Bid (IFB) Package 14 Rev. January 2014 CONSTRUCTION CONTRACT 15.5 Termination Without Cause. City may, at its sole discretion and without cause, terminate this Construction Contract in part or in whole upon written notice to Contractor. Upon receipt of such notice, Contractor shall, at City’s expense, comply with the notice and take all reasonable steps to minimize costs to close out and demobilize. The compensation allowed under this Paragraph 15.5 shall be the Contractor’s sole and exclusive compensation for such termination and Contractor waives any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect or incidental damages of any kind resulting from termination without cause. Termination pursuant to this provision does not relieve Contractor or its sureties from any of their obligations for Losses arising from or related to the Work performed by Contractor. 15.5.1 Compensation. Following such termination and within forty-five (45) Days after receipt of a billing from Contractor seeking payment of sums authorized by this Paragraph 15.5.1, City shall pay the following to Contractor as Contractor’s sole compensation for performance of the Work : .1 For Work Performed. The amount of the Contract Sum allocable to the portion of the Work properly performed by Contractor as of the date of termination, less sums previously paid to Contractor. .2 For Close-out Costs. Reasonable costs of Contractor and its Subcontractors: (i) Demobilizing and (ii) Administering the close-out of its participation in the Project (including, without limitation, all billing and accounting functions, not including attorney or expert fees) for a period of no longer than thirty (30) Days after receipt of the notice of termination. .3 For Fabricated Items. Previously unpaid cost of any items delivered to the Project Site which were fabricated for subsequent incorporation in the Work. .4 Profit Allowance. An allowance for profit calculated as four percent (4%) of the sum of the above items, provided Contractor can prove a likelihood that it would have made a profit if the Construction Contract had not been terminated. 15.5.2 Subcontractors. Contractor shall include provisions in all of its subcontracts, purchase orders and other contracts permitting termination for convenience by Contractor on terms that are consistent with this Construction Contract and that afford no greater rights of recovery against Contractor than are afforded to Contractor against City under this Section. 15.6 Contractor’s Duties Upon Termination. Upon receipt of a notice of termination for default or for convenience, Contractor shall, unless the notice directs otherwise, do the following: (i) Immediately discontinue the Work to the extent specified in the notice; (ii) Place no further orders or subcontracts for materials, equipment, services or facilities, except as may be necessary for completion of such portion of the Work that is not discontinued; (iii) Provide to City a description in writing, no later than fifteen (15) days after receipt of the notice of termination, of all subcontracts, purchase orders and contracts that are outstanding, including, without limitation, the terms of the original price, any changes, payments, balance owing, the status of the portion of the Work covered and a copy of Invitation for Bid (IFB) Package 15 Rev. January 2014 CONSTRUCTION CONTRACT the subcontract, purchase order or contract and any written changes, amendments or modifications thereto, together with such other information as City may determine necessary in order to decide whether to accept assignment of or request Contractor to terminate the subcontract, purchase order or contract; (iv) Promptly assign to City those subcontracts, purchase orders or contracts, or portions thereof, that City elects to accept by assignment and cancel, on the most favorable terms reasonably possible, all subcontracts, purchase orders or contracts, or portions thereof, that City does not elect to accept by assignment; and (v) Thereafter do only such Work as may be necessary to preserve and protect Work already in progress and to protect materials, plants, and equipment on the Project Site or in transit thereto. Upon termination, whether for cause or for convenience, the provisions of the Contract Documents remain in effect as to any Claim, indemnity obligation, warranties, guarantees, submittals of as-built drawings, instructions, or manuals, or other such rights and obligations arising prior to the termination date. SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES. 16.1 Contractor’s Remedies. Contractor may terminate this Construction Contract only upon the occurrence of one of the following: 16.1.1 For Work Stoppage. The Work is stopped for sixty (60) consecutive Days, through no act or fault of Contractor, any Subcontractor, or any employee or agent of Contractor or any Subcontractor, due to issuance of an order of a court or other public authority other than City having jurisdiction or due to an act of government, such as a declaration of a national emergency making material unavailable. This provision shall not apply to any work stoppage resulting from the City’s issuance of a suspension notice issued either for cause or for convenience. 16.1.2 For City's Non-Payment. If City does not make pay Contractor undisputed sums within ninety (90) Days after receipt of notice from Contractor, Contractor may terminate the Construction Contract (30) days following a second notice to City of Contractor’s intention to terminate the Construction Contract. 16.2 Damages to Contractor. In the event of termination for cause by Contractor, City shall pay Contractor the sums provided for in Paragraph 15.5.1 above. Contractor agrees to accept such sums as its sole and exclusive compensation and agrees to waive any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect and incidental damages, of any kind. SECTION 17 ACCOUNTING RECORDS. 17.1 Financial Management and City Access. Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Construction Contract in accordance with generally accepted accounting principles and practices. City and City's accountants during normal business hours, may inspect, audit and copy Contractor's records, books, estimates, take-offs, cost reports, ledgers, schedules, correspondence, instructions, drawings, receipts, subcontracts, purchase Invitation for Bid (IFB) Package 16 Rev. January 2014 CONSTRUCTION CONTRACT orders, vouchers, memoranda and other data relating to this Project. Contractor shall retain these documents for a period of three (3) years after the later of (i) Final Payment or (ii) final resolution of all Contract Disputes and other disputes, or (iii) for such longer period as may be required by law. 17.2 Compliance with City Requests. Contractor's compliance with any request by City pursuant to this Section 17 shall be a condition precedent to filing or maintenance of any legal action or proceeding by Contractor against City and to Contractor's right to receive further payments under the Contract Documents. City many enforce Contractor’s obligation to provide access to City of its business and other records referred to in Section 17.1 for inspection or copying by issuance of a writ or a provisional or permanent mandatory injunction by a court of competent jurisdiction based on affidavits submitted to such court, without the necessity of oral testimony. SECTION 18 INDEPENDENT PARTIES. Each party is acting in its independent capacity and not as agents, employees, partners, or joint ventures’ of the other party. City, its officers or employees shall have no control over the conduct of Contractor or its respective agents, employees, subconsultants, or subcontractors, except as herein set forth. SECTION 19 NUISANCE. Contractor shall not maintain, commit, nor permit the maintenance or commission of any nuisance in connection in the performance of services under this Construction Contract. SECTION 20 PERMITS AND LICENSES. Except as otherwise provided in the Special Provisions and Technical Specifications, The Contractor shall provide, procure and pay for all licenses, permits, and fees, required by the City or other government jurisdictions or agencies necessary to carry out and complete the Work. Payment of all costs and expenses for such licenses, permits, and fees shall be included in one or more Bid items. No other compensation shall be paid to the Contractor for these items or for delays caused by non-City inspectors or conditions set forth in the licenses or permits issued by other agencies. SECTION 21 WAIVER. A waiver by either party of any breach of any term, covenant, or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant, or condition contained herein, whether of the same or a different character. SECTION 22 GOVERNING LAW AND VENUE. This Construction Contract shall be construed in accordance with and governed by the laws of the State of California, and venue shall be in a court of competent jurisdiction in the County of Santa Clara, and no other place. Invitation for Bid (IFB) Package 17 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 23 COMPLETE AGREEMENT. This Agreement represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This Agreement may be amended only by a written instrument, which is signed by the parties. SECTION 24 SURVIVAL OF CONTRACT. The provisions of the Construction Contract which by their nature survive termination of the Construction Contract or Final Completion, including, without limitation, all warranties, indemnities, payment obligations, and City’s right to audit Contractor’s books and records, shall remain in full force and effect after Final Completion or any termination of the Construction Contract. SECTION 25 PREVAILING WAGES. This Project is not subject to prevailing wages. The Contractor is not required to pay prevailing wages in the performance and implementation of the Project, because the City, pursuant to its authority as a chartered city, has adopted Resolution No. 5981 exempting the City from prevailing wages. The City invokes the exemption from the state prevailing wage requirement for this Project and declares that the Project is funded one hundred percent (100%) by the City of Palo Alto. This Project remains subject to all other applicable provisions of the California Labor Code and regulations promulgated thereunder. Or The Contractor is required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and Section 1773.1 of the California Labor Code. Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of worker needed to execute the contract for this Project from the Director of the Department of Industrial Relations. Copies of these rates may be obtained at the Purchasing Office of the City of Palo Alto. Contractor shall provide a copy of prevailing wage rates to any staff or subcontractor hired, and shall pay the adopted prevailing wage rates as a minimum. Contractor shall comply with the provisions of Sections 1775, 1776, 1777.5, 1810, and 1813 of the Labor Code. SECTION 26 NON APPROPRIATION. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that the City does not appropriate funds for the following fiscal year for this event, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Construction Contract are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 27 AUTHORITY. The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. Invitation for Bid (IFB) Package 18 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 28 COUNTERPARTS This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement. SECTION 29 SEVERABILITY. In case a provision of this Construction Contract is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected. SECTION 30 STATUTORY AND REGULATORY REFERENCES. With respect to any amendments to any statutes or regulations referenced in these Contract Documents, the reference is deemed to be the version in effect on the date that the Contract was awarded by City, unless otherwise required by law. SECTION 31 WORKERS’ COMPENSATION CERTIFICATION. Pursuant to Labor Code Section 1861, by signing this Contract, Contractor certifies as follows: “I am aware of the provisions of Section 3700 of the 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 code, and I will comply with such provisions before commencing the performance of the Work on this Contract.” IN WITNESS WHEREOF, the parties have caused this Construction Contract to be executed the date and year first above written. CITY OF PALO ALTO ____________________________ Purchasing Manager City Manager APPROVED AS TO FORM: ____________________________ Senior Asst. City Attorney APPROVED: ____________________________ Public Works Director CONTRACTOR By:___________________________ Name:________________________ Title:__________________________ Date: _________________________ Bid Item Description Engineer's Estimate Monterey Mechanical Co. Pacific Infrastructure Corp. D.W. Nicholson Corp. TNT Industrial Contractors Inc. NMI Industrial Holdings Inc. Blocka Construction Anderson Pacific Construction Inc. Base Remove and Replace Secondary Clarifier No. 1 Mechanism 500,000$ 338,000$ 342,000$ 393,000$ 420,000$ 450,044$ 466,000$ 255,000$ Add Alt. Upgrade price for 304 stainless steel feedwell, center cage, and rake arms - 36,100$ 42,000$ 16,000$ 23,800$ 53,844$ 46,300$ 295,000$ Total Bid 500,000$ 374,100$ 384,000$ 409,000$ 443,800$ 503,888$ 512,300$ 550,000$ Remarks Low bidder High bidder Bid Summary for Secondary Clarifier No. 1 Mechanism Replacement Project (IFB 152871) CIP WQ-80021 (Wastewater Treatment Enterprise Fund) City of Palo Alto, Public Works Department - RWQCP Attachment B City of Palo Alto (ID # 4547) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: Approval of Amendment No. 1 to the California Oregon Transmission Project Long-term Layoff Title: Adoption of a Resolution Approving Amendment No. 1 to the 2009 California Oregon Transmission Project Long-Term Layoff Agreement to Authorize the City of Roseville's Withdrawal and Provide the City of Palo Alto with Voting Rights on Project Improvements and Financing From: City Manager Lead Department: Utilities Recommendation Staff recommends approval of the attached resolution amending its participation in the California Oregon Transmission Project (COTP) and the 2009 Long-term Layoff Agreement (2009 LTLA) which returned Palo Alto’s share of the COTP to Modesto Irrigation District (MID), Turlock Irrigation District (TID), and Sacramento Municipal Utility District (SMUD). Council’s adoption of this resolution will approve Amendment No. 1 to the Long-Term Layoff Agreement By and Among the Transmission Agency of Northern California and Certain of its Members, Namely the City of Palo Alto, the City of Roseville, the Modesto Irrigation District, the Turlock Irrigation District, and the Sacramento Municipal Utility District (Attachment B) to: 1. Allow the City of Roseville’s withdrawal from the 2009 LTLA and return Roseville’s COTP entitlement rights and obligations to Roseville; 2. Provide Palo Alto the ability to vote “no” on COTP improvements during the term of the 2009 LTLA; 3. Grant Palo Alto the right to vote on COTP refinancing and future extensions of COTP indebtedness; 4. Delegate authority to the City Manager, or his designee, to negotiate and execute additional Long-Term Layoff Agreement amendments in order to maintain the value of the City’s COTP layoff. City of Palo Alto Page 2 Executive Summary The California Oregon Transmission Project (COTP) was built to facilitate the import of abundant and low cost electricity from the Northwest into Northern California. For many years, the City of Palo Alto Utilities (CPAU) utilized its 50 MW share of the COTP to import resources to meet its customers’ electric load. Since then, changes in the CPAU’s electric portfolio, a narrowing in the differential between wholesale electric prices in the Northwest and Northern California, along with increased regulatory requirements for use of COTP and imports led to a dramatic change in the value of COTP to the City, and therefore a lack of utilization. As a result, in 2009, the City, along with the City of Roseville, executed a fifteen year layoff of each party’s full share of COTP to Modesto Irrigation District (MID), Turlock Irrigation District (TID) and Sacramento Municipal Utility District (SMUD). The City of Roseville has since requested the return of its COTP entitlement rights in order to participate in a new long-term layoff of its share of COTP, however this time as a recipient of additional capacity. Thus, Roseville wishes to withdraw from the 2009 Long-Term Layoff Agreement. To affect Roseville’s withdrawal, the original participants to the 2009 LTLA, including the City, must agree to amend the 2009 LTLA. Staff was able to use the opportunity to amend the 2009 LTLA to improve the City’s position under the 2009 LTLA by negotiating the right to provide input on matters pertaining to debt refinancing and capital improvements associated with its share of COTP, even during the layoff term, when all COTP costs are being borne by MID, TID and SMUD, the parties receiving the laid-off rights. Background The Transmission Agency of Northern California (TANC) is a California Joint Powers Agency, whose member owners include MID, TID, SMUD and the Cities of Alameda, Biggs, Gridley, Healdsburg, Lodi, Lompoc, Palo Alto, Redding, Roseville, Santa Clara, and Ukiah. TANC currently owns and operates approximately 87 percent of the COTP, a 1600 MW, 340 mile long electric transmission line from the California-Oregon Border (COB) to the 500 kilovolt Tracy substation in Northern California. The City is a signatory to TANC’s 1990 Project Agreement No. 3 (PA3) (Resolution No. 6877, adopted March 26, 1990). PA3 provides the City a share of approximately 50 MW, or 3.7%, of TANC’s entitlement on the COTP. Since the project was built, the value to the City has eroded, resulting in several short and long- term layoffs over the life of the project. Most recently, in 2007 the City saw the value of its share of COTP decrease significantly due to a narrowing of the wholesale electric price differential between the Northwest and California, an increase in regulatory restrictions on the use of transmission, and more importantly the City’s change in electric supply needs, including a permanent assignment of its participation in the Seattle City Light Exchange Agreement. At the time, staff projected that the costs associated with owning and operating COTP would far City of Palo Alto Page 3 exceed any value that could be derived from utilizing the transmission, and as such COTP was deemed a stranded asset. More recently, other TANC members, including Santa Clara and Alameda, also located within the California Independent System Operator’s (CAISO’s) balancing authority, have come to the same conclusion and are laying off their shares of the COTP. In January 2009, Council approved the City’s participation in the 2009 LTLA as developed and administered by TANC (CMR: 100:09, Resolution No. 8900). Through the layoff, the City gave up its full 50 MW share, including voting rights on the project, in exchange for the layoff recipients taking on all obligations (i.e., debt, capital and operation and maintenance costs). The layoff term is fifteen years, effective January 2009. The layoff is set to expire in 2024, near the same time as the termination of the project’s debt service. Discussion The value of COTP for certain TANC member owners, namely those operating within the Balancing Authority of Northern California (BANC), including the City of Roseville, TID, MID and SMUD, has improved, while the value to owners operating within the CAISO continues to erode. As such, COTP owners operating within the CAISO, namely Santa Clara, Alameda, Healdsburg, Lodi, Lompoc, Ukiah and Plumas Sierra, desire to lay off their participation in COTP to owners operating within BANC. A new long-term layoff of COTP between MID, TID, SMUD and the Cities of Alameda, Biggs, Gridley, Healdsburg, Lodi, Lompoc, Redding, Roseville, Santa Clara, and Ukiah for a term of 25 to 29 years and a maximum capacity of 200 MW is expected to be in effect on July 1, 2014 (2014 LTLA). Prior to executing the 2014 LTLA , Amendment 1 to the 2009 Long-Term Layoff Agreement (Attachment B) is necessary to allow City of Roseville to withdraw from the existing layoff and participate, as a recipient of additional capacity, in the new layoff. The original Long Term Layoff Agreement Council approved in 2009 did not permit Palo Alto to vote on any matters related to Project Agreement No. 3, so long as the other members were not in default. This Amendment 1 includes language to grant certain new voting rights to Palo Alto, including: 1. The ability to cast a “no” vote on project improvements (also known as “Additions and Betterments”) during the term of the 2009 LTLA; and 2. The right to vote Palo Alto’s 3.685 percentage COTP share before the layoff on the question of whether TANC should be permitted to extend the term of COTP’s indebtedness beyond its current maturity in 2024. While staff does not contemplate further modifications to the 2009 LTLA at this time, a delegation of authority to the City Manager, or his designee, to further amend the 2009 layoff under certain conditions, will provide for the efficient management of the City’s laid-off share City of Palo Alto Page 4 through the remainder of the term. Any further amendments sought will be undertaken to maintain the layoff’s expected value to the City and shall be in writing, accomplished in accordance with the terms of this first amendment and shall not cause the amendment as modified to exceed the limits of the authority granted by the council. Further amendments would also require approval by the City Attorney’s Office, TANC and the 2009 LTLA participants. This delegation of authority to the City Manager is permitted by Section 2.30.290 of the City’s Municipal Code. Resource Impacts Approval of attached resolution approving Amendment No. 1 to the 2009 LTLA will not impact the value to the City expected under the 2009 LTLA and in fact, entitles the City to certain voting rights that were precluded in the original layoff. Policy Impacts Approval of the attached resolution is in support of the Council-approved Long-term Electric Acquisition Plan and CPAU’s Strategic Plan. Environmental Impacts Approval of the attached resolution permitting Roseville to withdraw from its 2009 Long Term Layoff Agreement and return its COTP share to certain project participants does not meet the California Environmental Quality Act’s (CEQA) definition of “project” under California Public Resources Code Sec. 21065, thus no environmental review is required. TANC certified the Final Environmental Impact Report for the COTP in 1988. Attachments: Attachment A: Resolution Approving Amendment No. 1 and Delegation of Authority (PDF) Attachment B: 2009 LTLA Amendment No. 1 (PDF) Attachment A * NOT YET APPROVED * 120319 dm 6053004 Final 1 Resolution No. _________ Resolution of the Council of the City of Palo Alto Approving Amendment No. 1 to the 2009 California Oregon Transmission Project Long-Term Layoff Agreement with Certain Other Members of the Transmission Agency of Northern California to Allow the City of Roseville’s Withdrawal and Provide the City of Palo Alto With Voting Rights on Project Improvements and Financing R E C I T A L S A. The City of Palo Alto (“City”), a municipal utility and a chartered city, became a founding member of the Transmission Agency of Northern California (“TANC”) in 1984, to facilitate construction and joint ownership of transmission projects. B. The City of Palo Alto, the California cities of Alameda, Biggs, Gridley, Healdsburg, Lodi, Lompoc, Redding, Roseville, Santa Clara, and Ukiah; the Modesto Irrigation District (“MID”); the Turlock Irrigation District (“TID”); and the Sacramento Municipal Utility District (“SMUD”) are also members of TANC. C. TANC currently owns approximately 87 percent of the California-Oregon Transmission Project (“COTP”), a 500-kV transmission line that interconnects with the Bonneville Power Administration at the Captain Jack Substation in Southern Oregon and with Pacific Gas & Electric Company in California at the Tesla Substation. D. The City became a participant in the COTP in 1990, by executing Project Agreement No. 3 (PA3) and has a 3.6815%, or approximately 50 MW, share of TANC’s current entitlement to transfer capability on the COTP. E. Due to changes in the value of the COTP to the City’s electric portfolio in 2009 the City, along with the City of Roseville, executed the Long-Term Lay-off Agreement (“2009 LTLA”) to transfer each party’s full COTP entitlement and obligations to MID, TID and SMUD for fifteen years (Resolution No. 8900). F. The City of Roseville wishes to reclaim its share of COTP and as such has requested Amendment No. 1 to 2009 LTLA (Attachment B), requiring approval from all signatories of the 2009 LTLA, including the City. G. Additionally, the City has requested certain amendments to the 2009 LTLA, included within Amendment No. 1, to retain rights to vote on matters related to COTP improvements and debt refinancing. H. Lastly, to ensure efficient management of the 2009 LTLA through the remaining term of this 2014 amendment, the City Manager is seeking authority to make further amendments to the 2009 Long Term Layoff Agreement under certain conditions. Attachment A * NOT YET APPROVED * 120319 dm 6053004 Final 2 The Council of the City of Palo Alto RESOLVES as follows: SECTION 1. The Council approves Amendment No. 1 to the 2009 Long Term Layoff Agreement by and Among the Transmission Agency of Northern California, and Certain of its Members. SECTION 2. As permitted by Section 2.30.290 of the City’s Municipal Code, the Council delegates authority to the City Manager, or his designee, to execute further amendments to the 2009 Long Term Layoff Agreement as needed to maintain the value of the City’s laid-off COTP share through the remaining term of the Long Term Layoff Agreement. Any further amendments shall be in writing, accomplished in accordance with the terms of Amendment No. 1 and shall not cause the amendment as modified to exceed the limits of the authority granted by the Council. Further amendments shall also require approval by the City Attorney’s Office, TANC and the other 2009 Long Term Layoff Agreement participants. SECTION 3. The Council finds that the adoption of this resolution does not constitute a project under Section 21065 of the California Environmental Quality Act (CEQA) and the CEQA Guidelines, and therefore, no environmental assessment is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services EXECUTION ORIGINAL Amendment No. 1 Long-Term Layoff Agreement By and Among The Transmission Agency of Northern California And certain of its Members Namely The City of Palo Alto The City of Roseville The Modesto Irrigation District The Turlock Irrigation District and The Sacramento Municipal Utility District EXECUTION ORIGINAL i TABLE OF CONTENTS RECITALS ............................................................................................................................................. 1 AGREEMENT ...................................................................................................................................... 1 Section 1. Effective Date .............................................................................................................. 1 Section 2. Return of ROSEVILLE’s COTP Interests, Rights and Obligations ..................... 1 Section 3. Modification of LTLA Provisions Made Unnecessary by this Amendment No. 1 ..................................................................................................... 2 Section 4. Integration ................................................................................................................... 3 SIGNATURES ...................................................................................................................................... 4 EXECUTION ORIGINAL 1 This Amendment No. 1 of the January 28, 2009 Long Term Layoff Agreement (“LTLA”), entered into by and among the Transmission Agency of Northern California (“TANC”) and certain of its members, namely the City of Palo Alto (“PALO ALTO”), the City of Roseville (“ROSEVILLE”), the Modesto Irrigation District (“MODESTO”), the Turlock Irrigation District (“TURLOCK”), and the Sacramento Municipal Utility District (“SMUD”), referred to as “Party” or “Parties,” as of the Effective Date defined in Section 1 of this Amendment No. 1, with regard to the following: RECITALS: A. In section 3.a. of the LTLA, ROSEVILLE laid off all of ROSEVILLE’s use of its interests, rights, and obligations under TANC Project Agreement No. 3 associated with ROSEVILLE’s 2.1119 Participation Percentage in TANC’s entitlement to Transfer Capability on the California-Oregon Transmission Project (“COTP”) for the fifteen (15) year term of the LTLA. B. MODESTO, TURLOCK, and SMUD accepted and assumed all of the use of ROSEVILLE’s interests, rights, and obligations transferred to TANC and by TANC to MODESTO, TURLOCK, and SMUD for the term of the LTLA. C. ROSEVILLE has asked to reverse the layoff effected in the LTLA on the Effective Date of this Amendment No. 1 and MODESTO, TURLOCK, and SMUD are willing to transfer the interests, rights, and obligations back to ROSEVILLE on such date. NOW THEREFORE, in consideration of the premises described in the recitals, and in consideration of the terms, covenants, and conditions that are set out below, the Parties have entered into this AGREEMENT: Section 1. Effective Date. This Amendment No. 1 shall become effective and enforceable on July 1, 2014 at 0001 hours Pacific Prevailing Time following the due execution and delivery of this Amendment No. 1 to TANC or the date on which this Amendment No. 1 is duly executed and delivered to TANC if July 1, 2014 passes without such execution and delivery (hereinafter “Effective Date”). Section 2. Return of ROSEVILLE’s COTP Interests, Rights and Obligations. Except as otherwise set forth in this Amendment No. 1, on the Effective Date: i) MODESTO transfers the 0.2373 Participation Percentage in TANC’s entitlement to Transfer Capability on the COTP, accepted and assumed in the LTLA, to TANC; EXECUTION ORIGINAL 2 ii) TURLOCK transfers the 0.9373 Participation Percentage in TANC’s entitlement to Transfer Capability on the COTP, accepted and assumed in the LTLA, to TANC; and iii) SMUD transfers the 0.9373 Participation Percentage in TANC’s entitlement to Transfer Capability on the COTP, accepted and assumed in the LTLA, to TANC. Such transfers include all of the interests, rights, and obligations associated with ROSEVILLE’s Participation Percentage laid off in Section 3 of the LTLA. TANC hereby transfers at that instant the sum of the returned Participation Percentages from MODESTO, TURLOCK, and SMUD, being 2.1119, to ROSEVILLE. ROSEVILLE hereby accepts and assumes at that instant all of the interests, rights, and obligations associated with its 2.1119 Participation Percentage under the provisions of TANC Project Agreement No. 3. Section 3. Modification of LTLA Provisions Made Unnecessary by this Amendment No. 1. a. Section 3.a. of the LTLA, entitled “Layoff of ROSEVILLE’s COTP Interests, Rights, and Obligations,” and Section 3.b. of the LTLA, entitled “Return of ROSEVILLE’s Interests, Rights, and Obligations, are hereby deleted from the LTLA. b. Section 3.e. of the LTLA, entitled “Project Agreement No. 3 Appendix C,” is hereby modified to state that a revised APPENDIX C showing the effect of the return of ROSEVILLE’s 2.1119 Participation Percentage has been approved by the TANC Commission and attached to and incorporated into this Amendment No. 1 as ATTACHMENT A. c. Section 3.f. of the LTLA, entitled “Billings and Payments,” is hereby modified to state that ROSEVILLE shall resume the performance of its obligations under TANC Project Agreement No. 3 on the Effective Date of this Amendment No 1. d. Section 3.g. of the LTLA, entitled “Additions, Betterments, and Replacements,” is hereby modified to: i) state that, between the effective date of the LTLA and this Amendment No. 1, TANC has not approved any Additions, Betterments, or Replacements, as defined in TANC Project Agreement No. 3; ii) delete ROSEVILLE from (iv) and (v) of section 3.g.; iii) delete ROSEVILLE from section 3.h., entitled “Default”; and iv) delete ROSEVILLE and any associated conjunction or preposition from Section 5 entitled “No Assignment Without Consent,” and from Section 6 entitled “Long-Term Layoff to Third Parties Not an Assignment.” EXECUTION ORIGINAL 3 e. Section 3.i.(i), of the LTLA is hereby deleted and replaced with the following: In the absence of a default under this Agreement, Palo Alto shall not have any rights to vote on any matter related to TANC Project Agreement No. 3; provided, however, that Palo Alto shall retain voting rights related to Additions and Betterments to be considered for approval under TANC Project Agreement No. 3, but their percentage of such vote will be zero (0) percent in order to fulfill the meaning of Opposing Member. Absent any vote to contrary, the vote of Palo Alto shall be deemed to be a “no” vote. If TANC were to consider extending the term of the outstanding Indebtedness for the COTP beyond the current maturity in 2024, then PALO ALTO shall be entitled to vote the 3.6815 Participation Percentage it held before the layoff on the question of the extension of the term of the Indebtedness, and the Participation Percentages of the DISTRICTS shall be reduced on such question by subtracting the Participation Percentages they had accepted from PALO ALTO. Section 4. Integration. Except as amended and modified by this Amendment No. 1, the LTLA remains in full force and effect, without change to any of its provisions other than the text expressly altered by this Amendment No. 1. On the Effective Date this Amendment No. 1 and the LTLA shall be one, integrated agreement. EXECUTION ORIGINAL 4 The Parties have duly executed and delivered this Amendment of their authorized representatives set forth below. TRANSMISSION AGENCY OF TURLOCK IRRIGATION DISTRICT NORTHERN CALIFORNIA By: By: Its: Its: Dated: Dated: CITY OF PALO ALTO SACRAMENTO MUNICIPAL UTLITY DISTRICT By: By: Its: Its: Dated: Dated: CITY OF ROSEVILLE MODESTO IRRIGATION DISTRICT By: By: Its: Its: Dated: Dated: City of Palo Alto (ID # 4495) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: Approval of Contract and BAO for Southgate Storm Drain Improvements Title: Adoption of a Budget Amendment Ordinance in the Amount of $880,271 to CIP SD-10101, Offset by a Reduction to CIP SD-06101, and Approval of a Contract with Ranger Pipelines, Inc. in the Amount of $1,516,610 for the Southgate Neighborhood Storm Drain Improvement and Green Street Project, Capital Improvement Program Project SD-10101 From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council: 1.Adopt the attached Budget Amendment Ordinance (BAO) (Attachment A) in the amount of $880,271 for the Southgate Neighborhood Storm Drain Improvement and Green Street Project (SD-10101) to increase the project appropriation from $1,085,839 to $1,966,110, offset by a reduction to Storm Drain System Replacement and Rehabilitation Project (SD-06101) by $880,271,reducing the appropriation from $1,680,974 to $800,703;and 2.Approve and authorize the City Manager or his designee to execute the attached contract with Ranger Pipelines,Inc.(Attachment B) in the amount of $1,516,610 for the Southgate Neighborhood Storm Drain Improvement and Green Street Project, Capital Improvement Program Project SD-10101; and 3.Authorize the City Manager or his designee to negotiate and execute one or more change orders to the contract with Ranger Pipelines,Inc.for related, additional but unforeseen work which may develop during the project, the City of Palo Alto Page 2 total value of which shall not exceed $151,661. 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 1920s, relies on surface gutter flows. 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, resulting in severe ponding along neighborhood streets during and immediately following storm events. The objectives of the Southgate Neighborhood Storm Drain Improvement and Green Street Project (Project)are:(1) to address the storm drainage deficiencies within the Southgate neighborhood, (2) to provide improved drainage performance through the use of innovative techniques that minimize storm runoff and improve storm water quality, and (3) to provide a facility that is eligible to serve as one of the pilot “green street” projects within the Bay Area region mandated by the Municipal Regional Storm Water Discharge Permit (MRP) issued by the San Francisco Bay Regional Water Quality Control Board (Water Board). The MRP issued to Bay Area communities by the Water Board in 2009 included a provision requiring the implementation of a number of pilot “Green Street” projects in the region by the end of 2014, including a minimum of two projects within Santa Clara County. “Green streets” incorporate low impact development (LID) techniques for site design and storm water treatment, including minimization of impervious area, storm water infiltration and reuse, and use of features that enhance bicycle and pedestrian traffic. The project has been designed to conform to the MRP’s “green street” requirements, and will serve as one of the required pilot projects. On November 21, 2011, Council awarded a contract with RBF Consulting, Inc. to perform a feasibility study and preliminary design for the project (SR:2196). The scope of work specified under the contract included feasibility analysis, City of Palo Alto Page 3 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 was 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. On March 18, 2013, Council approved an amendment to the contract with RBF Consulting, Inc.(SR: 3569) for consultant services to provide final plans, specifications, and cost estimate for the design elements to be incorporated into the Project. The innovative drainage system improvements proposed for the Southgate neighborhood include the following key elements: a.Bio-retention areas, vegetated planters constructed as extensions of the existing planter strips,at 18 selected sites that will intercept, filter, and infiltrate existing gutter flows. b.Reconstruction of selected crosswalks using permeable interlocking concrete pavers that will intercept and infiltrate storm runoff. c.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, drainage swale that will filter and infiltrate storm runoff. d.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. The key storm drain improvement and green street elements of the Project will occur at the following intersections as shown on the attached Location Map (Attachment D). a)Intersection of Portola Avenue and Miramonte Avenue City of Palo Alto Page 4 b)Intersection of Madrono Avenue and Miramonte Avenue c)Intersection of Escobita Avenue and Miramonte Avenue d)Intersection of Castilleja Avenue and Miramonte Avenue e)Intersection of Madrono Avenue and Sequoia Avenue f)Intersection of Escobita Avenue and Sequoia Avenue g)Intersection of Castilleja Avenue and Sequoia Avenue The project was previously advertised for construction bids, with the bid opening held on October 22, 2013. In the initial round of bidding, the City received two bids which exceeded the engineer’s estimate by over one million dollars. The available project budget was not sufficient to fund a contract with the lowest bidder. Subsequently,the bid documents were revised to make the project more efficient and attractive to potential bidders. Originally, the project had been merged together with related street resurfacing and curb and gutter replacement elements into a single project in an effort to achieve better project coordination. Since the scope of work for the consolidated project included a wide variety of elements that required multiple types of specialized construction expertise, each of the two bidders proposed to utilize several subcontractors resulting in higher mark-ups on the various project components. In order to lower subcontractor mark-ups, staff elected to split the construction documents into separate bid packages for each of the primary work elements (pavement resurfacing, curb and gutter replacement, and drainage and green street improvements). The project scope has now been focused mainly on the storm drain improvement and green street elements, with the street resurfacing and curb and gutter replacement work bid as separate contracts. The three individual projects will be scheduled and coordinated in a manner that reduces the disruption to neighborhood residents. The initial bid documents were also evaluated in order to identify additional methods for reducing project costs. As a result,some of the non-essential design elements were eliminated as they were judged to be functionally redundant. The resulting streamlined project scope retains the elements needed to achieve the project goals. In addition, based on conversations with the initial project bidders, some of the project specifications identified as overly restrictive were revised to provide greater flexibility to contractors while maintaining core requirements for quality control. Staff achieved further project cost reductions by modifying the bid schedule to separate out some of the less essential items in the scope of work City of Palo Alto Page 5 as add alternate bid items. The changes to the project specifications maintained the recommendations received during the outreach efforts with the public. Discussion Bid Process Staff compiled a new set of streamlined bid documents for the Southgate Neighborhood Storm Drain Improvement and Green Street Project (Project) in early January 2014. On January 22, 2014, a notice inviting formal bids (IFB) for the Project was posted at City Hall and sent to 12 builder's exchanges and 21 contractors. The bidding period was 27 days. Bids were received from two contractors on February 18, 2014, as listed on the attached Bid Summary (Attachment C). Bid Name/Number Southgate Neighborhood Storm Drain Improvement and Green Street Project Capital Improvement Program Project SD-10101/IFB # 151848 Proposed Length of Project 120 calendar days Number of Bids Mailed to Contractors 21 Number of Bids Mailed to Builders’ Exchanges 12 Total Days to Respond to Bid 27 Pre-Bid Meeting?No Number of Company Attendees at Pre- Bid Meeting N/A Number of Bids Received 2 Bid Price Range $1,516,610-$1,629,448 Staff has reviewed all bids submitted and recommends that the bid of $1,516,610 submitted by Ranger Pipelines,Inc.be accepted and that Ranger Pipelines, Inc.be declared the lowest responsible bidder. Staff recommends that the contract scope of work include the Base Bid plus Add Alternate Bid Item C (the replacement of the paseo walkway with permeable materials). The low bid is 53% City of Palo Alto Page 6 percent above the engineer’s estimate of $989,310. Although the lowest bid is substantially higher than the estimated project cost, staff recommends that the contract be awarded because 1) the project has already been advertised for bidding two times, and it is unlikely that another round of bidding would result in lower prices, 2) execution of this Project is critical to the City’s goal of completing the storm drain improvements pledged to ratepayers in the 2005 Storm Drainage Fee ballot measure, and 3) there is available funding in the Storm Drainage Fund capital budget that can be shifted to this project from a lower-priority capital project through a budget amendment ordinance. The change order amount of $151,661 (which equals 10 percent of the total contract) is requested for related, additional but unforeseen work which may develop during the project. Staff confirmed with the Contractor's State License Board that the contractor has an active license on file. Staff also contacted the listed references for Ranger Pipelines, Inc.and found that they have performed satisfactorily on past construction projects for other clients, including multiple projects for the City’s Utilities Department. Project Coordination The Project has been coordinated with the Southgate residents from its initial conceptual stage through the final design stage. There were six public outreach meetings conducted with neighborhood residents in conjunction with the project. During these community meetings, City staff and the project consultant presented design concepts and details and solicited the recommendations and concerns of the neighborhood residents. At the final community meeting in September 2013, the final project design was presented to the neighborhood. This project has also been coordinated with staff from the street resurfacing section of the Public Works Engineering Services Division and the Transportation Division. In order to improve surface drainage, several blocks of street pavement within the neighborhood will be resurfaced and extended sections of damaged curb and gutter will be replaced along with the proposed storm drain and green street improvements. Pavement resurfacing and curb and gutter replacement will be performed on the following streets via separate contracts that will be closely coordinated with this Project: Street From To 1.Castilleja Street Churchill Ave Park Blvd City of Palo Alto Page 7 2.Escobita Avenue Miramonte Ave Sequoia Ave 3.Madrono Avenue Miramonte Ave Sequoia Ave 4.Miramonte Street Portola Ave Castilleja Ave 5.Portola Avenue Miramonte St Sequoia Ave 6.Sequoia Avenue Portola Ave Madrono Ave As noted above, the project has been scheduled and coordinated with two separate contracts for street resurfacing and curb and gutter replacement. The coordination and timing of these projects will result in a streamlined process that minimizes the impacts of the construction operation to the neighborhood. In addition, the project has also been closely coordinated with the Urban Forestry and Storm Drain Maintenance sections of the Public Works Public Services Division, the Utilities Department, and the Community Services Department Parks Division. Prior to the start of construction, staff will also coordinate with and notify neighborhood residents regarding the project implementation schedule. Flyers and door hangers will be distributed to residents throughout the project area before commencement of work, and updated project information will be added to a project-specific website. Resource Impact At the recommendation of the Storm Drain Oversight Committee, funds earmarked for innovative storm drain improvements as part of the Storm Drainage Fee increase approved by a majority of property owners in 2005 were allocated to the Capital Project SD-10101, Southgate Neighborhood Storm Drain Improvements Project,as part of the FY 2012 budget process. Of the $1,738,271 recommended for expenditure on the contract with Ranger Pipelines, Inc. ($1,516,610),contract contingency ($151,661), construction testing and fees ($60,000), and administrative costs ($10,000),$858,000 in remaining funds is available in the Southgate Neighborhood Storm Drain Improvements Project budget. The remainder of the funds required to pay for project costs is recommended to be provided with the approval of an attached Budget Amendment Ordinance (Attachment A), which increases the budget for this project by $880,271 and reduces Capital Project SD-06101, Storm Drain System Replacement and Rehabilitation, by the same amount. Specifically, the Southgate Neighborhood Storm Drain Improvements Project (SD-10101) project is City of Palo Alto Page 8 recommended to be increased by $880,271 from $1,085,839 to $1,966,110, offset by a reduction to Storm Drain System Replacement and Rehabilitation Project (SD-06101) by $880,271 reducing the appropriation from $1,680,974 to $800,703. No impact is anticipated from the proposed reduction to the Storm Drain System Replacement and Rehabilitation project, as the remaining balance in the project, together with the anticipated FY 2015 allocation for this annually recurring project, is expected to be sufficient for the storm drain replacement and rehabilitation needs for the coming year. Project Costs and Funding Summary: Itemized Breakdown of Project Costs A.CONSTRUCTION Construction Contract $1,516,610.00 Contingency (10%)$151,661.00 Subtotal $1,668,271.00 B. CONSTRUCTION TESTING AND FEES Soil Testing, Construction and Materials Testing $30,000.00 Water Meter Installation and Fees $30,000.00 Subtotal $60,000.00 C. ADMINISTRATIVE COSTS Public Outreach Material and Printing $10,000.00 GRAND TOTAL PROJECT COSTS $1,738,271.00 FUNDING SOURCES SD 10101 (Remaining Available Funding)$858,000.00 SD 06101 (Tranferred through BAO)$880,271.00 TOTAL FUNDING $1,738,271.00 Policy Implications The recommendation does not represent any changes to existing City policies. Environmental Review Public Works staff prepared and submitted an Architectural Review application in December 2012 that was conditionally approved by Planning staff. This project is categorically exempt from the provisions of the California City of Palo Alto Page 9 Environmental Quality Act (CEQA) under Section 15303 of the CEQA Guidelines. Courtesy Copies Storm Drain Oversight Committee Attachments: ·A -Budget Amendment Ordinance (DOC) ·B -IFB Construction Contract Template January 2014 (DOCX) ·C -Bid Summary (PDF) ·D -Location Map (PDF) Attachment A ORDINANCE NO.xxxx ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING THE BUDGET FOR THE FISCAL YEAR 2014 TO PROVIDE AN APPROPRIATION OF $880,271 TO CAPITAL IMPROVEMENT PROGRAM PROJECT NUMBER SD-10101, SOUTHGATE NEIGHBORHOOD STORM DRAIN IMPROVEMENTS PROJECT,OFFSET BY A REDUCTION TO CAPITAL IMPROVEMENT PROGRAM PROJECT NUMBER SD-06101, STORM DRAIN SYSTEM REPLACEMENT AND REHABILITATION PROJECT IN THE STORM DRAINAGE FUND. 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 10, 2013 did adopt a budget for fiscal year 2014; and B.In fiscal year 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,as severe ponding along neighborhood streets occurs immediately following storm events; and C. The Municipal Regional Storm Water Discharge Permit issued by the San Francisco Regional Water Quality Control board to Bay Area Communities in 2009 included a provision requiring the implementation of a number of pilot “green street” projects in the region by the end of 2014, including a minimum of two projects within Santa Clara County. “Green streets’ incorporate low impact development techniques for site design and storm water treatment, including minimization of impervious area, storm water infiltration and reuse, and use of features that enhance bicycle and pedestrian traffic; and D. On November 11, 2011 the City Council awarded a contract with RBF Consulting, Inc. to perform a feasibility study and preliminary design for a project to address storm drainage deficiencies within the Southgate neighborhood, provide improved drainage performance through the use of innovative techniques that minimize storm runoff and improve storm water quality, and provide a facility that is eligible to serve as one of the pilot “green street” projects within the Bay Area region mandated by the Municipal Regional Storm Water Discharge Permit; and E. On March 18, 2013 the City Council approved an amendment to the contract with RBF Consulting, Inc. to provide final plans, specifications, and cost estimates for the design elements to be incorporated into the project; and F. On January 22, 2014 a notice inviting formal bids for the project was posted at City Hall and sent to twelve builder’s exchanges and twenty one contractors; and G. Staff has reviewed all bids submitted and recommends that the bid of $1,516,610 submitted by Ranger Pipelines, Inc. be accepted and that Ranger Pipelines, Inc. be declared the lowest responsible bidder; and H. Staff seeks approval for the City Manager or his designee to negotiate one or more change orders to the contract with Ranger Pipelines, Inc. for related, but unforeseen work (contingency) which may develop during the project, the total value of which shall not exceed $151,661, or ten percent; and I. An offsetting reduction to the Storm Drain System Replacement and Rehabilitation project is recommended to support the increase to the Southgate Neighborhood Storm Drain Improvements Project, with no anticipated impact to the delivery of the seven high-priority storm drain-related capital improvement projects identified in 2005 at the time of the election to increase monthly storm drain fees. SECTION 2.The sum of Eight Hundred Eighty Thousand, Two Hundred Seventy One Dollars ($880,271) is hereby appropriated to CIP Project SD-10101, Southgate Neighborhood Storm Drain Improvements Project, increasing the funding for this project to $1,966,110. SECTION 3.The Sum of Eight Hundred Eighty Thousand, Two Hundred Seventy One Dollars ($880,271) is hereby reduced from the CIP Project SD-06101, Storm Drain System Replacement and Rehabilitation Project, reducing the funding for this project to $800,703. SECTION 4. As provided in Section 2.04.330 of the Palo Alto Municipal Code, this ordinance shall become effective upon adoption. SECTION 5.This project is categorically exempt from the provisions of the California Environmental Quality Act (CEQA) under section 15303 of the CEQA Guidelines. INTRODUCED AND PASSED: 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 Invitation for Bid (IFB) Package 1 Rev. January 2014 CONSTRUCTION CONTRACT Attachment B CONSTRUCTION CONTRACT Contract No. C14151848 City of Palo Alto Southgate Neighborhood Storm Drain Improvement And Green Street Project SD 10101 Invitation for Bid (IFB) Package 2 Rev. January 2014 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT TABLE OF CONTENTS SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS.........................................................5 1.1 Recitals...................................................................................................................................................5 1.2 Definitions.............................................................................................................................................5 SECTION 2 THE PROJECT.....................................................................................................................5 SECTION 3 THE CONTRACT DOCUMENTS..........................................................................................6 SECTION 4 CONTRACTOR’S DUTY......................................................................................................7 SECTION 5 PROJECT TEAM.................................................................................................................7 6.1 Time Is of Essence...............................................................................................................................7 6.2 Commencement of Work.................................................................................................................7 6.3 Contract Time.......................................................................................................................................7 6.4 Liquidated Damages..........................................................................................................................8 6.4.1 Other Remedies........................................................................................................8 6.5 Adjustments to Contract Time.......................................................................................................8 SECTION 7 COMPENSATION TO CONTRACTOR.................................................................................8 7.1 Contract Sum........................................................................................................................................8 7.2 Full Compensation..............................................................................................................................8 SECTION 8 STANDARD OF CARE.........................................................................................................9 SECTION 9 INDEMNIFICATION...........................................................................................................9 9.1 Hold Harmless......................................................................................................................................9 9.2 Survival...................................................................................................................................................9 SECTION 10 NONDISCRIMINATION....................................................................................................9 SECTION 11 INSURANCE AND BONDS...............................................................................................9 SECTION 12 PROHIBITION AGAINST TRANSFERS..............................................................................10 SECTION 13 NOTICES …………………………………………………………………………………………………………………….10 13.1 Method of Notice ………………………………………………………………………………………………………………10 13.2 Notice Recipents ……………………………………………………………………………………………………………….10 13.3 Change of Address............................................................................................................................11 SECTION 14 DEFAULT.........................................................................................................................11 Invitation for Bid (IFB) Package 3 Rev. January 2014 CONSTRUCTION CONTRACT 14.1 Notice of Default...............................................................................................................................11 14.2 Opportunity to Cure Default.........................................................................................................11 SECTION 15 CITY'S RIGHTS AND REMEDIES.......................................................................................12 15.1 Remedies Upon Default..................................................................................................................12 15.1.1 Delete Certain Services...........................................................................................12 15.1.2 Perform and Withhold............................................................................................12 15.1.3 Suspend The Construction Contract.....................................................................12 15.1.5 Invoke the Performance Bond...............................................................................12 15.1.6 Additional Provisions..............................................................................................12 15.2 Delays by Sureties.............................................................................................................................12 15.3 Damages to City.................................................................................................................................13 15.3.1 For Contractor's Default.........................................................................................13 15.3.2 Compensation for Losses........................................................................................13 15.4 Suspension by City............................................................................................................................13 15.4.1 Suspension for Convenience...........................................................................................13 15.5 Termination Without Cause..........................................................................................................14 15.5.1 Compensation..........................................................................................................14 15.5.2 Subcontractors.........................................................................................................14 15.6 Contractor’s Duties Upon Termination.....................................................................................14 SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES.......................................................................15 16.1 Contractor’s Remedies....................................................................................................................15 16.1.1 For Work Stoppage..................................................................................................15 16.1.2 For City's Non-Payment..........................................................................................15 16.2 Damages to Contractor...................................................................................................................15 SECTION 17 ACCOUNTING RECORDS.................................................................................................15 17.1 Financial Management and City Access....................................................................................15 17.2 Compliance with City Requests....................................................................................................16 SECTION 18 INDEPENDENT PARTIES..................................................................................................16 SECTION 19 NUISANCE.......................................................................................................................16 SECTION 20 PERMITS AND LICENSES.................................................................................................16 SECTION 21 WAIVER...........................................................................................................................16 SECTION 22 GOVERNING LAW AND VENUE......................................................................................16 Invitation for Bid (IFB) Package 4 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 23 COMPLETE AGREEMENT................................................................................................17 SECTION 24 SURVIVAL OF CONTRACT...............................................................................................17 SECTION 25 PREVAILING WAGES.......................................................................................................17 SECTION 26 NON APPROPRIATION....................................................................................................17 SECTION 27 AUTHORITY.....................................................................................................................17 SECTION 28 COUNTERPARTS..............................................................................................................18 SECTION 29 SEVERABILITY.................................................................................................................18 SECTION 30 STATUTORY AND REGULATORY REFERENCES ..............................................................18 SECTION 31 WORKERS’ COMPENSATION CERTIFICATION.................................................................18 Invitation for Bid (IFB) Package 5 Rev. January 2014 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT THIS CONSTRUCTION CONTRACT entered into on March 17, 2014 (“Execution Date”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("City"), and Ranger Pipelines Inc. ("Contractor"), is made with reference to the following: R E C I T A L S: A.City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B.Contractor is a Corporation duly organized and in good standing in the State of California, Contractor’s License Number 417996. Contractor represents that it is duly licensed by the State of California and has the background, knowledge, experience and expertise to perform the obligations set forth in this Construction Contract. C.On January 22, 2014, City issued an Invitation for Bids (IFB) to contractors for the Southgate Neighborhood Storm Drain Improvement and Green Street Project (“Project”). In response to the IFB, Contractor submitted a Bid. D.City and Contractor desire to enter into this Construction Contract for the Project, and other services as identified in the Contract Documents for the Project upon the following terms and conditions. NOW THEREFORE, in consideration of the mutual promises and undertakings hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed by and between the undersigned parties as follows: SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS. 1.1 Recitals. All of the recitals are incorporated herein by reference. 1.2 Definitions. Capitalized terms shall have the meanings set forth in this Construction Contract and/or in the General Conditions. If there is a conflict between the definitions in this Construction Contract and in the General Conditions, the definitions in this Construction Contract shall prevail. SECTION 2 THE PROJECT. The Project is the construction of Southgate Neighborhood Storm Drain Improvement and Green Street Project,located at the Southgate Neighborhood in Palo Alto, CA.("Project"). Invitation for Bid (IFB) Package 6 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 3 THE CONTRACT DOCUMENTS. 3.1 List of Documents. The Contract Documents (sometimes collectively referred to as “Agreement” or “Bid Documents”) consist of the following documents which are on file with the Purchasing Division and are hereby incorporated by reference. 1)Change Orders 2)Field Orders 3)Contract 4)Bidding Addenda 5)Special Provisions 6)General Conditions 7) Project Plans and Drawings 8) Technical Specifications 9)Instructions to Bidders 10)Invitation for Bids 11)Contractor's Bid/Non-Collusion Affidavit 12) Reports listed in the Contract Documents 13) Public Works Department’s Standard Drawings and Specifications (most current version at time of Bid) 14)Utilities Department’s Water, Gas, Wastewater, Electric Utilities Standards (most current version at time of Bid) 15) City of Palo Alto Traffic Control Requirements 16) City of Palo Alto Truck Route Map and Regulations 17)Notice Inviting Pre-Qualification Statements, Pre-Qualification Statement, and Pre- Qualification Checklist (if applicable) 18)Performance and Payment Bonds 3.2 Order of Precedence. For the purposes of construing, interpreting and resolving inconsistencies between and among the provisions of this Contract, the Contract Documents shall have the order of precedence as set forth in the preceding section. If a claimed inconsistency cannot be resolved through the order of precedence, the City Invitation for Bid (IFB) Package 7 Rev. January 2014 CONSTRUCTION CONTRACT shall have the sole power to decide which document or provision shall govern as may be in the best interests of the City. SECTION 4 CONTRACTOR’S DUTY. Contractor agrees to perform all of the Work required for the Project, as specified in the Contract Documents, all of which are fully incorporated herein. Contractor shall provide, furnish, and supply all things necessary and incidental for the timely performance and completion of the Work, including, but not limited to, provision of all necessary labor, materials, equipment, transportation, and utilities, unless otherwise specified in the Contract Documents. Contractor also agrees to use its best efforts to complete the Work in a professional and expeditious manner and to meet or exceed the performance standards required by the Contract Documents. SECTION 5 PROJECT TEAM. In addition to Contractor, City has retained, or may retain, consultants and contractors to provide professional and technical consultation for the design and construction of the Project. The Contract requires that Contractor operate efficiently, effectively and cooperatively with City as well as all other members of the Project Team and other contractors retained by City to construct other portions of the Project. SECTION 6 TIME OF COMPLETION. 6.1 Time Is of Essence. Time is of the essence with respect to all time limits set forth in the Contract Documents. 6.2 Commencement of Work. Contractor shall commence the Work on the date specified in City’s Notice to Proceed. 6.3 Contract Time. Work hereunder shall begin on the date specified on the City’s Notice to Proceed and shall be completed not later than . within One Hundred Twenty calendar days (120) after the commencement date specified in City’s Notice to Proceed. By executing this Construction Contract, Contractor expressly waives any claim for delayed early completion. Invitation for Bid (IFB) Package 8 Rev. January 2014 CONSTRUCTION CONTRACT 6.4 Liquidated Damages. Pursuant to Government Code Section 53069.85, if Contractor fails to achieve Substantial Completion of the entire Work within the Contract Time, including any approved extensions thereto, City may assess liquidated damages on a daily basis for each day of Unexcused Delay in achieving Substantial Completion, based on the amount of Five Hundred dollars ($500.00) per day, or as otherwise specified in the Special Provisions. Liquidated damages may also be separately assessed for failure to meet milestones specified elsewhere in the Contract Documents, regardless of impact on the time for achieving Substantial Completion. The assessment of liquidated damages is not a penalty but considered to be a reasonable estimate of the amount of damages City will suffer by delay in completion of the Work. The City is entitled to setoff the amount of liquidated damages assessed against any payments otherwise due to Contractor, including, but not limited to, setoff against release of retention. If the total amount of liquidated damages assessed exceeds the amount of unreleased retention, City is entitled to recover the balance from Contractor or its sureties. Occupancy or use of the Project in whole or in part prior to Substantial Completion, shall not operate as a waiver of City’s right to assess liquidated damages. 6.4.1 Other Remedies. City is entitled to any and all available legal and equitable remedies City may have where City’s Losses are caused by any reason other than Contractor’s failure to achieve Substantial Completion of the entire Work within the Contract Time. 6.5 Adjustments to Contract Time. The Contract Time may only be adjusted for time extensions approved by City and memorialized in a Change Order approved in accordance with the requirements of the Contract Documents. SECTION 7 COMPENSATION TO CONTRACTOR. 7.1 Contract Sum. Contractor shall be compensated for satisfactory completion of the Work in compliance with the Contract Documents the Contract Sum of One Million Five Hundred Sixteen and Six Hundred Ten Dollars ($1,516,610). [This amount includes the Base Bid and Additive Alternates C.] 7.2 Full Compensation. The Contract Sum shall be full compensation to Contractor for all Work provided by Contractor and, except as otherwise expressly permitted by the terms of the Contract Documents, shall cover all Losses arising out of the nature of the Work or from the acts of the elements or any unforeseen difficulties or obstructions which may arise or be encountered in performance of the Work until its Acceptance by City, all risks connected with the Work, and any and all expenses incurred due to suspension or discontinuance of the Work, except as expressly provided herein. The Contract Sum may only be adjusted for Change Orders approved in accordance with the requirements of the Contract Documents. Invitation for Bid (IFB) Package 9 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 8 STANDARD OF CARE. Contractor agrees that the Work shall be performed by qualified, experienced and well-supervised personnel. All services performed in connection with this Construction Contract shall be performed in a manner consistent with the standard of care under California law applicable to those who specialize in providing such services for projects of the type, scope and complexity of the Project. SECTION 9 INDEMNIFICATION. 9.1 Hold Harmless. To the fullest extent allowed by law, Contractor will defend, indemnify, and hold harmless City, its City Council, boards and commissions, officers, agents, employees, representatives and volunteers (hereinafter individually referred to as an “Indemnitee” and collectively referred to as "Indemnitees"), through legal counsel acceptable to City, from and against any and liability, loss, damage, claims, expenses (including, without limitation, attorney fees, expert witness fees, paralegal fees, and fees and costs of litigation or arbitration) (collectively, “Liability”) of every nature arising out of or in connection with the acts or omissions of Contractor, its employees, Subcontractors, representatives, or agents, in performing the Work or its failure to comply with any of its obligations under the Contract, except such Liability caused by the active negligence, sole negligence, or willful misconduct of an Indemnitee. Contractor shall pay City for any costs City incurs to enforce this provision. Except as provided in Section 9.2 below, nothing in the Contract Documents shall be construed to give rise to any implied right of indemnity in favor of Contractor against City or any other Indemnitee. Pursuant to Public Contract Code Section 9201, City shall timely notify Contractor upon receipt of any third-party claim relating to the Contract. 9.2 Survival. The provisions of Section 9 shall survive the termination of this Construction Contract. SECTION 10 NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, 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. 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 will comply with all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 11 INSURANCE AND BONDS. Within ten (10) business days following issuance of the Notice of Award, Contractor shall provide City with evidence that it has obtained insurance and shall submit Performance and Payment Bonds satisfying all requirements in Article 11 of the General Conditions. Invitation for Bid (IFB) Package 10 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 12 PROHIBITION AGAINST TRANSFERS. City is entering into this Construction Contract in reliance upon the stated experience and qualifications of the Contractor and its Subcontractors set forth in Contractor’s Bid. Accordingly, Contractor shall not assign, hypothecate or transfer this Construction Contract or any interest therein directly or indirectly, by operation of law or otherwise without the prior written consent of City. Any assignment, hypothecation or transfer without said consent shall be null and void, and shall be deemed a substantial breach of contract and grounds for default in addition to any other legal or equitable remedy available to the City. The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of Contractor or of any general partner or joint venturer or syndicate member of Contractor, if the Contractor is a partnership or joint venture or syndicate or co-tenancy shall result in changing the control of Contractor, shall be construed as an assignment of this Construction Contract. Control means more than fifty percent (50%) of the voting power of the corporation or other entity. SECTION 13 NOTICES. 13.1 Method of Notice. All notices, demands, requests or approvals to be given under this Construction Contract shall be given in writing and shall be deemed served on the earlier of the following: (i)On the date delivered if delivered personally; (ii)On the third business day after the deposit thereof in the United States mail, postage prepaid, and addressed as hereinafter provided; (iii)On the date sent if sent by facsimile transmission; (iv)On the date sent if delivered by electronic mail; or (v)On the date it is accepted or rejected if sent by certified mail. 13.2 Notice Recipients. All notices, demands or requests (including, without limitation, Change Order Requests and Claims) from Contractor to City shall include the Project name and the number of this Construction Contract and shall be addressed to City at: To City:City of Palo Alto City Clerk 250 Hamilton Avenue P.O. Box 10250 Palo Alto, CA 94303 Copy to: City of Palo Alto Public Works Administration 250 Hamilton Avenue Palo Alto, CA 94301 Attn: Joe Teresi AND City of Palo Alto Utilities Engineering 250 Hamilton Avenue Palo Alto, CA 94301 Invitation for Bid (IFB) Package 11 Rev. January 2014 CONSTRUCTION CONTRACT Attn: In addition, copies of all Claims by Contractor under this Construction Contract shall be provided to the following: Palo Alto City Attorney’s Office 250 Hamilton Avenue P.O. Box 10250 Palo Alto, California 94303 All Claims shall be delivered personally or sent by certified mail. All notices, demands, requests or approvals from City to Contractor shall be addressed to: Ranger Pipelines Inc. 1790 Yosemite Avenue San Francisco, CA 94124 Att’n: Thomas Grover 13.3 Change of Address. In advance of any change of address, Contractor shall notify City of the change of address in writing. Each party may, by written notice only, add, delete or replace any individuals to whom and addresses to which notice shall be provided. SECTION 14 DEFAULT. 14.1 Notice of Default. In the event that City determines, in its sole discretion, that Contractor has failed or refused to perform any of the obligations set forth in the Contract Documents, or is in breach of any provision of the Contract Documents, City may give written notice of default to Contractor in the manner specified for the giving of notices in the Construction Contract, with a copy to Contractor’s performance bond surety. 14.2 Opportunity to Cure Default. Except for emergencies, Contractor shall cure any default in performance of its obligations under the Contract Documents within two (2) Days (or such shorter time as City may reasonably require) after receipt of written notice. However, if the breach cannot be reasonably cured within such time, Contractor will commence to cure the breach within two (2) Days (or such shorter time as City may reasonably require) and will diligently and continuously prosecute such cure to completion within a reasonable time, which shall in no event be later than ten (10) Days after receipt of such written notice. Invitation for Bid (IFB) Package 12 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 15 CITY'S RIGHTS AND REMEDIES. 15.1 Remedies Upon Default. If Contractor fails to cure any default of this Construction Contract within the time period set forth above in Section 14, then City may pursue any remedies available under law or equity, including, without limitation, the following: 15.1.1 Delete Certain Services. City may, without terminating the Construction Contract, delete certain portions of the Work, reserving to itself all rights to Losses related thereto. 15.1.2 Perform and Withhold. City may, without terminating the Construction Contract, engage others to perform the Work or portion of the Work that has not been adequately performed by Contractor and withhold the cost thereof to City from future payments to Contractor, reserving to itself all rights to Losses related thereto. 15.1.3 Suspend The Construction Contract. City may, without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, suspend all or any portion of this Construction Contract for as long a period of time as City determines, in its sole discretion, appropriate, in which event City shall have no obligation to adjust the Contract Sum or Contract Time, and shall have no liability to Contractor for damages if City directs Contractor to resume Work. 15.1.4 Terminate the Construction Contract for Default. City shall have the right to terminate this Construction Contract, in whole or in part, upon the failure of Contractor to promptly cure any default as required by Section 14. City’s election to terminate the Construction Contract for default shall be communicated by giving Contractor a written notice of termination in the manner specified for the giving of notices in the Construction Contract. Any notice of termination given to Contractor by City shall be effective immediately, unless otherwise provided therein. 15.1.5 Invoke the Performance Bond. City may, with or without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, exercise its rights under the Performance Bond. 15.1.6 Additional Provisions. All of City’s rights and remedies under this Construction Contract are cumulative, and shall be in addition to those rights and remedies available in law or in equity. Designation in the Contract Documents of certain breaches as material shall not waive the City’s authority to designate other breaches as material nor limit City’s right to terminate the Construction Contract, or prevent the City from terminating the Agreement for breaches that are not material. City’s determination of whether there has been noncompliance with the Construction Contract so as to warrant exercise by City of its rights and remedies for default under the Construction Contract, shall be binding on all parties. No termination or action taken by City after such termination shall prejudice any other rights or remedies of City provided by law or equity or by the Contract Documents upon such termination; and City may proceed against Contractor to recover all liquidated damages and Losses suffered by City. 15.2 Delays by Sureties. Invitation for Bid (IFB) Package 13 Rev. January 2014 CONSTRUCTION CONTRACT Time being of the essence in the performance of the Work, if Contractor’s surety fails to arrange for completion of the Work in accordance with the Performance Bond, within seven (7) calendar days from the date of the notice of termination, Contractor’s surety shall be deemed to have waived its right to complete the Work under the Contract, and City may immediately make arrangements for the completion of the Work through use of its own forces, by hiring a replacement contractor, or by any other means that City determines advisable under the circumstances. Contractor and its surety shall be jointly and severally liable for any additional cost incurred by City to complete the Work following termination. In addition, City shall have the right to use any materials, supplies, and equipment belonging to Contractor and located at the Worksite for the purposes of completing the remaining Work. 15.3 Damages to City. 15.3.1 For Contractor's Default. City will be entitled to recovery of all Losses under law or equity in the event of Contractor’s default under the Contract Documents. 15.3.2 Compensation for Losses. In the event that City's Losses arise from Contractor’s default under the Contract Documents, City shall be entitled to deduct the cost of such Losses from monies otherwise payable to Contractor. If the Losses incurred by City exceed the amount payable, Contractor shall be liable to City for the difference and shall promptly remit same to City. 15.4 Suspension by City 15.4.1 Suspension for Convenience. City may, at any time and from time to time, without cause, order Contractor, in writing, to suspend, delay, or interrupt the Work in whole or in part for such period of time, up to an aggregate of fifty percent (50%) of the Contract Time. The order shall be specifically identified as a Suspension Order by City. Upon receipt of a Suspension Order, Contractor shall, at City’s expense, comply with the order and take all reasonable steps to minimize costs allocable to the Work covered by the Suspension Order. During the Suspension or extension of the Suspension, if any, City shall either cancel the Suspension Order or, by Change Order, delete the Work covered by the Suspension Order. If a Suspension Order is canceled or expires, Contractor shall resume and continue with the Work. A Change Order will be issued to cover any adjustments of the Contract Sum or the Contract Time necessarily caused by such suspension. A Suspension Order shall not be the exclusive method for City to stop the Work. 15.4.2 Suspension for Cause. In addition to all other remedies available to City, if Contractor fails to perform or correct work in accordance with the Contract Documents, City may immediately order the Work, or any portion thereof, suspended until the cause for the suspension has been eliminated to City’s satisfaction. Contractor shall not be entitled to an increase in Contract Time or Contract Price for a suspension occasioned by Contractor’s failure to comply with the Contract Documents. City’s right to suspend the Work shall not give rise to a duty to suspend the Work, and City’s failure to suspend the Work shall not constitute a defense to Contractor’s failure to comply with the requirements of the Contract Documents. Invitation for Bid (IFB) Package 14 Rev. January 2014 CONSTRUCTION CONTRACT 15.5 Termination Without Cause. City may, at its sole discretion and without cause, terminate this Construction Contract in part or in whole upon written notice to Contractor. Upon receipt of such notice, Contractor shall, at City’s expense, comply with the notice and take all reasonable steps to minimize costs to close out and demobilize. The compensation allowed under this Paragraph 15.5 shall be the Contractor’s sole and exclusive compensation for such termination and Contractor waives any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect or incidental damages of any kind resulting from termination without cause. Termination pursuant to this provision does not relieve Contractor or its sureties from any of their obligations for Losses arising from or related to the Work performed by Contractor. 15.5.1 Compensation. Following such termination and within forty-five (45) Days after receipt of a billing from Contractor seeking payment of sums authorized by this Paragraph 15.5.1, City shall pay the following to Contractor as Contractor’s sole compensation for performance of the Work : .1 For Work Performed. The amount of the Contract Sum allocable to the portion of the Work properly performed by Contractor as of the date of termination, less sums previously paid to Contractor. .2 For Close-out Costs. Reasonable costs of Contractor and its Subcontractors: (i)Demobilizing and (ii)Administering the close-out of its participation in the Project (including, without limitation, all billing and accounting functions, not including attorney or expert fees) for a period of no longer than thirty (30) Days after receipt of the notice of termination. .3 For Fabricated Items. Previously unpaid cost of any items delivered to the Project Site which were fabricated for subsequent incorporation in the Work. .4 Profit Allowance. An allowance for profit calculated as four percent (4%) of the sum of the above items, provided Contractor can prove a likelihood that it would have made a profit if the Construction Contract had not been terminated. 15.5.2 Subcontractors. Contractor shall include provisions in all of its subcontracts, purchase orders and other contracts permitting termination for convenience by Contractor on terms that are consistent with this Construction Contract and that afford no greater rights of recovery against Contractor than are afforded to Contractor against City under this Section. 15.6 Contractor’s Duties Upon Termination. Upon receipt of a notice of termination for default or for convenience, Contractor shall, unless the notice directs otherwise, do the following: (i)Immediately discontinue the Work to the extent specified in the notice; (ii)Place no further orders or subcontracts for materials, equipment, services or facilities, except as may be necessary for completion of such portion of the Work that is not discontinued; (iii)Provide to City a description in writing, no later than fifteen (15) days after receipt of the notice of termination, of all subcontracts, purchase orders and contracts that are outstanding, including, without limitation, the terms of the original price, any changes, payments, balance owing, the status of the portion of the Work covered and a copy of Invitation for Bid (IFB) Package 15 Rev. January 2014 CONSTRUCTION CONTRACT the subcontract, purchase order or contract and any written changes, amendments or modifications thereto, together with such other information as City may determine necessary in order to decide whether to accept assignment of or request Contractor to terminate the subcontract, purchase order or contract; (iv)Promptly assign to City those subcontracts, purchase orders or contracts, or portions thereof, that City elects to accept by assignment and cancel, on the most favorable terms reasonably possible, all subcontracts, purchase orders or contracts, or portions thereof, that City does not elect to accept by assignment; and (v)Thereafter do only such Work as may be necessary to preserve and protect Work already in progress and to protect materials, plants, and equipment on the Project Site or in transit thereto. Upon termination, whether for cause or for convenience, the provisions of the Contract Documents remain in effect as to any Claim, indemnity obligation, warranties, guarantees, submittals of as-built drawings, instructions, or manuals, or other such rights and obligations arising prior to the termination date. SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES. 16.1 Contractor’s Remedies. Contractor may terminate this Construction Contract only upon the occurrence of one of the following: 16.1.1 For Work Stoppage. The Work is stopped for sixty (60) consecutive Days, through no act or fault of Contractor, any Subcontractor, or any employee or agent of Contractor or any Subcontractor, due to issuance of an order of a court or other public authority other than City having jurisdiction or due to an act of government, such as a declaration of a national emergency making material unavailable. This provision shall not apply to any work stoppage resulting from the City’s issuance of a suspension notice issued either for cause or for convenience. 16.1.2 For City's Non-Payment. If City does not make pay Contractor undisputed sums within ninety (90) Days after receipt of notice from Contractor, Contractor may terminate the Construction Contract (30) days following a second notice to City of Contractor’s intention to terminate the Construction Contract. 16.2 Damages to Contractor. In the event of termination for cause by Contractor, City shall pay Contractor the sums provided for in Paragraph 15.5.1 above. Contractor agrees to accept such sums as its sole and exclusive compensation and agrees to waive any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect and incidental damages, of any kind. SECTION 17 ACCOUNTING RECORDS. 17.1 Financial Management and City Access. Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Construction Contract in accordance with generally accepted accounting principles and practices. City and City's accountants during normal business hours, may inspect, audit and copy Contractor's records, books, estimates, take-offs, cost reports, ledgers, schedules, correspondence, instructions, drawings, receipts, subcontracts, purchase Invitation for Bid (IFB) Package 16 Rev. January 2014 CONSTRUCTION CONTRACT orders, vouchers, memoranda and other data relating to this Project. Contractor shall retain these documents for a period of three (3) years after the later of (i) Final Payment or (ii) final resolution of all Contract Disputes and other disputes, or (iii) for such longer period as may be required by law. 17.2 Compliance with City Requests. Contractor's compliance with any request by City pursuant to this Section 17 shall be a condition precedent to filing or maintenance of any legal action or proceeding by Contractor against City and to Contractor's right to receive further payments under the Contract Documents. City many enforce Contractor’s obligation to provide access to City of its business and other records referred to in Section 17.1 for inspection or copying by issuance of a writ or a provisional or permanent mandatory injunction by a court of competent jurisdiction based on affidavits submitted to such court, without the necessity of oral testimony. SECTION 18 INDEPENDENT PARTIES. Each party is acting in its independent capacity and not as agents, employees, partners, or joint ventures’ of the other party. City, its officers or employees shall have no control over the conduct of Contractor or its respective agents, employees, subconsultants, or subcontractors, except as herein set forth. SECTION 19 NUISANCE. Contractor shall not maintain, commit, nor permit the maintenance or commission of any nuisance in connection in the performance of services under this Construction Contract. SECTION 20 PERMITS AND LICENSES. Except as otherwise provided in the Special Provisions and Technical Specifications, The Contractor shall provide, procure and pay for all licenses, permits, and fees, required by the City or other government jurisdictions or agencies necessary to carry out and complete the Work. Payment of all costs and expenses for such licenses, permits, and fees shall be included in one or more Bid items. No other compensation shall be paid to the Contractor for these items or for delays caused by non-City inspectors or conditions set forth in the licenses or permits issued by other agencies. SECTION 21 WAIVER. A waiver by either party of any breach of any term, covenant, or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant, or condition contained herein, whether of the same or a different character. SECTION 22 GOVERNING LAW AND VENUE. This Construction Contract shall be construed in accordance with and governed by the laws of the State of California, and venue shall be in a court of competent jurisdiction in the County of Santa Clara, and no other place. Invitation for Bid (IFB) Package 17 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 23 COMPLETE AGREEMENT. This Agreement represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This Agreement may be amended only by a written instrument, which is signed by the parties. SECTION 24 SURVIVAL OF CONTRACT. The provisions of the Construction Contract which by their nature survive termination of the Construction Contract or Final Completion, including, without limitation, all warranties, indemnities, payment obligations, and City’s right to audit Contractor’s books and records, shall remain in full force and effect after Final Completion or any termination of the Construction Contract. SECTION 25 PREVAILING WAGES. This Project is not subject to prevailing wages. The Contractor is not required to pay prevailing wages in the performance and implementation of the Project, because the City, pursuant to its authority as a chartered city, has adopted Resolution No. 5981 exempting the City from prevailing wages. The City invokes the exemption from the state prevailing wage requirement for this Project and declares that the Project is funded one hundred percent (100%) by the City of Palo Alto. This Project remains subject to all other applicable provisions of the California Labor Code and regulations promulgated thereunder. Or The Contractor is required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq.and Section 1773.1 of the California Labor Code. Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of worker needed to execute the contract for this Project from the Director of the Department of Industrial Relations.Copies of these rates may be obtained at the Purchasing Office of the City of Palo Alto.Contractor shall provide a copy of prevailing wage rates to any staff or subcontractor hired, and shall pay the adopted prevailing wage rates as a minimum.Contractor shall comply with the provisions of Sections 1775, 1776, 1777.5, 1810, and 1813 of the Labor Code. SECTION 26 NON APPROPRIATION. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that the City does not appropriate funds for the following fiscal year for this event, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Construction Contract are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 27 AUTHORITY. The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. Invitation for Bid (IFB) Package 18 Rev. January 2014 CONSTRUCTION CONTRACT SECTION 28 COUNTERPARTS This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement. SECTION 29 SEVERABILITY. In case a provision of this Construction Contract is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected. SECTION 30 STATUTORY AND REGULATORY REFERENCES. With respect to any amendments to any statutes or regulations referenced in these Contract Documents, the reference is deemed to be the version in effect on the date that the Contract was awarded by City, unless otherwise required by law. SECTION 31 WORKERS’ COMPENSATION CERTIFICATION. Pursuant to Labor Code Section 1861, by signing this Contract, Contractor certifies as follows: “I am aware of the provisions of Section 3700 of the 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 code, and I will comply with such provisions before commencing the performance of the Work on this Contract.” IN WITNESS WHEREOF, the parties have caused this Construction Contract to be executed the date and year first above written. CITY OF PALO ALTO ____________________________ Purchasing Manager City Manager APPROVED AS TO FORM: ____________________________ Senior Asst. City Attorney APPROVED: ____________________________ Public Works Director RANGER PIPELINES, INC. By:___________________________ Name:________________________ Title:__________________________ Date: _________________________ Item No. Description Quantity Unit UNIT PRICE EXTENSION UNIT PRICE EXTENSION UNIT PRICE EXTENSION 1 Mobilization 1 LS $125,000.00 $125,000.00 $75,000.00 $75,000.00 $70,000.00 $70,000.00 2 Traffic Control 1 LS $5,000.00 $5,000.00 $15,000.00 $15,000.00 $80,000.00 $80,000.00 3 Inert Soils Recycling 1 LS $92,352.00 $92,352.00 $500.00 $500.00 $0.01 $0.01 222,352.00 $90,500.00 $150,000.01 4 Potholing 16 EA $350.00 $5,600.00 $800.00 $12,800.00 $300.00 $4,800.00 5 Adjust Existing Gas Valve Box to Grade 4 EA $300.00 $1,200.00 $930.00 $3,720.00 $350.00 $1,400.00 6 Adjust Existing Anode Box to Grade 2 EA $300.00 $600.00 $500.00 $1,000.00 $350.00 $700.00 7 Adjust Existing Water Valve Box to Grade 3 EA $300.00 $900.00 $500.00 $1,500.00 $250.00 $750.00 8 Bioretention Facilities 3,194 SF $30.00 $95,820.00 $40.00 $127,760.00 $103.00 $328,982.00 9 Permeable Interlocking Concrete Pavement 3,152 SF $26.00 $81,952.00 $45.00 $141,840.00 $83.00 $261,616.00 10 Aggregate Columns 721 LF $18.00 $12,978.00 $300.00 $216,300.00 $45.00 $32,445.00 11 4" Type A Vertical Curb and Gutter, per CN 21 and 21A 1,050 LF $72.00 $75,600.00 $68.00 $71,400.00 $85.00 $89,250.00 12 4" Type A Vertical Curb and Gutter, per CN 26 and 26A 125 LF $52.00 $6,500.00 $68.00 $8,500.00 $55.00 $6,875.00 13 4" Concrete Curb Adjacent to Existing Sidewalk with Dowel, per CN 22 450 LF $21.00 $9,450.00 $60.00 $27,000.00 $22.00 $9,900.00 14 4" Concrete Curb Adjacent to Landscape Area, per CN 23 175 LF $21.00 $3,675.00 $60.00 $10,500.00 $22.00 $3,850.00 15 Concrete Curb Ramp, per CN 32 7 EA $3,500.00 $24,500.00 $6,100.00 $42,700.00 $3,500.00 $24,500.00 16 Concrete Curb Ramp, per CN 33 5 EA $3,500.00 $17,500.00 $6,100.00 $30,500.00 $4,000.00 $20,000.00 17 Concrete Curb Ramp, per CN 34 2 EA $2,500.00 $5,000.00 $6,100.00 $12,200.00 $2,500.00 $5,000.00 18 Concrete Sidewalk 900 SF $10.00 $9,000.00 $18.00 $16,200.00 $12.00 $10,800.00 19 Concrete Driveway 160 SF $12.00 $1,920.00 $35.00 $5,600.00 $14.00 $2,240.00 20 1' Concrete Band Adjacent to Permeable Interlocking Concrete Pavement 600 LF $16.00 $9,600.00 $50.00 $30,000.00 $135.00 $81,000.00 21 Concrete Valley Gutter 335 LF $38.00 $12,730.00 $120.00 $40,200.00 $160.00 $53,600.00 22 Miscellaneous Sidewalks, per CN 31 370 SF $10.00 $3,700.00 $18.00 $6,660.00 $25.00 $9,250.00 23 Paint Red Curb 300 LF $4.00 $1,200.00 $5.00 $1,500.00 $2.00 $600.00 $379,425.00 $807,880.00 $947,558.00 24 Sheeting, shoring and bracing 1 LS $6,000.00 $6,000.00 $10,000.00 $10,000.00 $6,900.00 $6,900.00 25 12" HDPE Sorm Drain Pipe 460 LF $240.00 $110,400.00 $550.00 $253,000.00 $227.00 $104,420.00 26 6" HDPE Storm Drain Pipe (Perforated) 123 LF $76.00 $9,348.00 $530.00 $65,190.00 $143.00 $17,589.00 27 Catch Basin 2 EA $3,200.00 $6,400.00 $5,500.00 $11,000.00 $3,354.00 $6,708.00 28 Storm Drain Manhole 3 EA $6,000.00 $18,000.00 $8,500.00 $25,500.00 $8,165.00 $24,495.00 29 CSP Riser and Pipe Connection 4 EA $1,300.00 $5,200.00 $3,600.00 $14,400.00 $1,840.00 $7,360.00 30 Concrete Collar for Storm Drain Connection 4 EA $1,100.00 $4,400.00 $3,600.00 $14,400.00 $2,070.00 $8,280.00 31 Removal of Existing Tree 1 EA $850.00 $850.00 $3,000.00 $3,000.00 $1,000.00 $1,000.00 32 Relocate Existing 6" ACP Water Main per City Standards 2 EA $13,500.00 $27,000.00 $15,000.00 $30,000.00 $20,700.00 $41,400.00 SOUTHGATE NEIGHBORHOOD STORM DRAIN IMPROVEMENT AND GREEN STREET PROJECT (REBID) - SD 10101 (February 18, 2014) Subtotal Subtotal (Lowest Bidder) Schedule I: GENERAL CIVIL IMPROVEMENTS DRAINAGE IMPROVEMENTS Engineer's Estimate RANGER PIPELINES GOLDEN BAY CONSTRUCTION BASE BID 33 Relocate Existing 1" Copper Water Service per City Standards 2EA $2,900.00 $5,800.00 $6,800.00 $13,600.00 $2,990.00 $5,980.00 34 Removal and Plugging of Abandoned 4" Water Pipe 2 EA $6,100.00 $12,200.00 $4,500.00 $9,000.00 $5,635.00 $11,270.00 $205,598.00 $449,090.00 $235,402.00 35 Landscape Planting 1 LS $30,991.00 $30,991.00 $10,000.00 $10,000.00 $27,000.00 $27,000.00 36 Irrigation (Bioretention) 1 LS $58,764.00 $58,764.00 $10,000.00 $10,000.00 $46,000.00 $46,000.00 37 Irrigation (Main Line) 1 LS $58,764.00 $14,281.00 $15,000.00 $15,000.00 $61,000.00 $61,000.00 38 Plant Establishment-270 Days 1 LS $2,898.00 $2,898.00 $5,000.00 $5,000.00 $11,000.00 $11,000.00 106,934.00 $40,000.00 $145,000.00 $914,309.00 $1,387,470.00 $1,477,960.01 A 1 Traffic Control 1 LS $5,000.00 $5,000.00 $500.00 $500.00 $1,589.00 $1,589.00 2 Inert Soils Recycling 1 LS $7,307.00 $7,307.00 $500.00 $500.00 $0.01 $0.01 3 Potholing 2 EA $350.00 $700.00 $800.00 $1,600.00 $300.00 $600.00 4 Adjust Existing Water Valve Box to Grade 1 EA $300.00 $300.00 $500.00 $500.00 $250.00 $250.00 5 Bioretention Facilities 195 SF $30.00 $5,850.00 $40.00 $7,800.00 $103.00 $20,085.00 6 Aggregate Columns 25 LF $18.00 $450.00 $180.00 $4,500.00 $45.00 $1,125.00 7 4" Type A Vertical Curb and Gutter, per CN 21 and 21A 66 LF $72.00 $4,752.00 $68.00 $4,488.00 $85.00 $5,610.00 8 4" Type A Vertical Curb and Gutter, per CN 26 and 26A 19 LF $52.00 $988.00 $68.00 $1,292.00 $55.00 $1,045.00 9 4" Concrete Curb Adjacent to Existing Sidewalk with Dowel, per CN 22 40 LF $21.00 $840.00 $60.00 $2,400.00 $22.00 $880.00 10 4" Concrete Curb Adjacent to Landscape Area, per CN 23 6 LF $21.00 $126.00 $60.00 $360.00 $22.00 $132.00 11 Concrete Curb Ramp, per CN 32 1 EA $3,500.00 $3,500.00 $4,800.00 $4,800.00 $3,500.00 $3,500.00 12 Concrete Sidewalk 64 SF $10.00 $640.00 $18.00 $1,152.00 $10.00 $640.00 13 Concrete Driveway 168 SF $12.00 $2,016.00 $35.00 $5,880.00 $12.00 $2,016.00 14 Concrete Valley Gutter 71 LF $37.00 $2,627.00 $120.00 $8,520.00 $145.00 $10,295.00 15 Landscape Planting 1 LS $2,454.00 $2,454.00 $5,000.00 $5,000.00 $1,400.00 $1,400.00 16 Irrigation (Bioretention) - Drip Irrigation System 1 LS $439.00 $439.00 $7,500.00 $7,500.00 $3,400.00 $3,400.00 17 Irrigation (Main Line) 1 LS $3,641.00 $3,641.00 $5,000.00 $5,000.00 $11,800.00 $11,800.00 18 Plant Establishment-270 Days 1 LS $1,500.00 $1,500.00 $1,500.00 $1,500.00 $700.00 $700.00 $43,130.00 $63,292.00 $65,067.01 B 1 Traffic Control 1 LS $5,000.00 $5,000.00 $500.00 $500.00 $4,400.00 $4,400.00 2 Inert Soils Recycling 1 LS $14,649.00 $14,649.00 $500.00 $500.00 $0.01 $0.01 3 Permeable Interlocking Concrete Pavement 1,706 LS $26.00 $44,356.00 $35.00 $59,710.00 $83.00 $141,598.00 4 Concrete Curb Ramp per CN34 6 EA $2,500.00 $15,000.00 $4,800.00 $28,800.00 $2,500.00 $15,000.00 5 1' Concrete Band Adjacent to Permeable Interlocking Concrete Pavement 329 LF $16.00 $5,264.00 $50.00 $16,450.00 $135.00 $44,415.00 6 6" HDPE Storm Drain pipe (Perforated) 200 LF $76.00 $15,200.00 $25.00 $5,000.00 $143.00 $28,600.00 $99,469.00 $110,960.00 $234,013.01 Subtotal TOTAL (BASE BID) Subtotal LANDSCAPE IMPROVEMENTS Subtotal B Subtotal A CROSSWALKS WITH UNDERDRAIN IN CASTILLEJA AVENUE BIORETENTION WITH INFILTRATION COLUMNS IN MIRAMONTE/MARIPOSA ADDITIVE BID C 1 Traffic Control 1 LS $5,000.00 $5,000.00 $500.00 $500.00 $1,338.00 $1,338.00 2 Inert Soils Recycling 1 LS $9,301.00 $9,301.00 $500.00 $500.00 $0.01 $0.01 3 Potholing 2 EA $350.00 $700.00 $800.00 $1,600.00 $300.00 $600.00 <Did not use updated bid form 4 4" Type A Vertical Curb and Gutter, per CN 21 and 21A 14 LF $72.00 $1,008.00 $68.00 $952.00 $85.00 $1,190.00 5 Concrete Sidewalk 71 SF $10.00 $710.00 $18.00 $1,278.00 $10.00 $710.00 6 Concrete Driveway 66 SF $12.00 $792.00 $35.00 $2,310.00 $12.00 $792.00 7 4" Concrete Curb Adjacent to Rock Swale 470 LF $10.00 $4,700.00 $60.00 $28,200.00 $23.00 $10,810.00 8 Under Sidewalk Drain 2 EA $3,000.00 $6,000.00 $5,000.00 $10,000.00 $2,604.00 $5,208.00 9 Rock Swale 18 CY $375.00 $6,750.00 $150.00 $2,700.00 $322.00 $5,796.00 10 Adjust Exisitng Anode Box to Grade 1 EA $300.00 $300.00 $500.00 $500.00 $350.00 $350.00 11 Permeable Interlocking Concrete Pavement 1408 SF $26.00 $36,608.00 $35.00 $49,280.00 $83.00 $116,864.00 12 Aggregate Columns 174 LF $18.00 $3,132.00 $180.00 $31,320.00 $45.00 $7,830.00 $75,001.00 $129,140.00 $151,488.01 $217,600.00 $450,568.03 $1,131,909.00 GRAND TOTAL (BASE BID + ADDITIVE BID) $303,392.00 $1,690,862.00 $1,928,528.04 TOTAL (ADDITIVE BID) Subtotal C PASSEO PASSAGEWAY Softball Diamond seball Diamond CHURCHILL AVENU E M A D R O N O A V E N U E MANZANITA AVENUE P O R T O L A A V E N U E MIR A M O N T E A V E N U E P O R T O LA A V E N U E E L C A M IN O R E A L MA STREET ALM A STREET C HURCHILL AVEN UE ALM A STREET MARIPOSA AVENUE CASTILLEJA AVENUE CASTILLEJA AVENUE E S C O BIT A A V E N U E E S C O BIT A A V E N U E MIR A M O N T E A V E N U E MIR A M O NT E A V E N UE S E Q U O IA A V E N U E M A D R O N O A V E N U E EL C A MIN O R E A L PARK AVENUE E L C A MIN O R E A L PARK BOULE BIRCH STREET C OLERIDGE AVENUE E MERS ON STREET LO WELL AVENUE ALMA STREET M ARIPOSA AVEN UE S E Q U OI A A V E N U E P A R K B O U L E V A R D BIRCH STREET LELAND AVENUE LAND AVENUE CHURCHILL AVEN UE PENINSULA C ORRIDOR JOINT PO W ERS BOARD PO WERS BOARD PENINSULA CO RRIDOR JOINT PO WERS BO AR D EL C A MIN O R E A L 10' Path 10' Path 10' Path IM SOUTH C of C This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. 0' 264' LOCATION MAP Southgate Neighborhood CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2013 City of Palo Alto scarlet, 2013-10-11 15:40:18 (\\cc-maps\gis$\gis\admin\meta\view.mdb) City of Palo Alto (ID # 4564) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: Appeal of Director's Approval of Two Story Home at 4055 Second St. Title: Consideration of an Appeal of the Director's Individual Review Approval of a Two-Story, Single Family Home Located at 4055 Second Street. From: City Manager Lead Department: Planning and Community Environment Recommended Motion Staff recommends that Council consider the following motion: Decline to hear the appeal of the Director of Planning and Community Environment’s approval of an Individual Review (IR) application (file 13PLN-00404) for a new two-story home at 4055 Second Street, thereby upholding the Director’s approval by adopting the findings and recommendation of the Director. Executive Summary This request is an appeal of the Director’s approval of a Single Family Individual Review (IR) application for a new two-story home with an attached one-car garage at 4055 Second Street. Four or more Council Members’ votes would be needed to remove this item off the consent calendar to set the matter for a future hearing. The home would have 2,285 square feet of floor area on a 5,117 square foot lot. The appellants object to the construction of a two-story home in a one-story neighborhood, and express a desire for the Council to request the applicant submit an application for a one-story home. The appellants’ main contact is Ms. Reuter, the owner of a one-story home located directly west of the proposed home. The appellant group includes the owners of three homes on Park Boulevard located behind the project (Ms. Velkoff, the Jeongs, and Mr. Tojo and Ms. Ichiriu). The appellants were mailed all decision and hearing notices regarding the project. The Manager of Advance Planning conducted the requested Director’s Hearing and upheld the City of Palo Alto Page 2 tentative approval, adding two approval conditions intended to further minimize the home’s massing. The Director’s approval letter (Attachment A) re-confirms that the project meets the IR guidelines and complies with R-1 Zone development standards. The February 19, 2014 approval letter includes two approval conditions (#9 and #10) imposed upon the applicant following the Director’s Hearing conducted on February 6, 2014. The appeal letter (Attachment B) sets forth the appellants’ position. Background Council Review Authority The City’s Individual Review (IR) procedure provides for City Council “call up” of appeals. When the Director approves an IR application after a Director’s Hearing and a directly affected property owner appeals the decision, the project is placed before Council on the consent calendar for final action. If four Council members vote to remove the project from the consent calendar, a hearing by City Council would need to be scheduled for a subsequent date. Otherwise, the item may be approved on consent calendar, so that the Director’s decision stands and no hearing is held. If the Council agrees to hear an appeal, a hearing is scheduled as soon as practical (PAMC 18.77.075). Project Review and Director’s Approval The IR application for a two-story home with attached, single-car garage was submitted on September 30, 2013. The home was designed to meet the City’s R-1 Zone Development Standards. Written comments were received October 22, 2013 from Ms. Reuter and Ms. Ichiriu (along with signatures of 30 neighbors), prior to the submittal of plan revisions. The concerns expressed at that time included that the house: (1) is too massive, (2) violates the neighbor privacy by direct views into one-story homes, (3) does not meet the two main IR goals of compatibility with neighborhood pattern (mass, scale and streetscape), and consideration of neighbors’ privacy, and (4) is a different style than the neighborhood’s mid-century homes with two car garages. City of Palo Alto Page 3 The appellants also asked about the single-story rezoning process as an option for the neighborhood and were informed a meeting could be arranged with management staff to discuss the process; however, the appellant noted it was unnecessary. The project planner’s letter dated October 29, 2013 informed the applicant of the incomplete application status and noted that the project design did not meet all IR guidelines. The staff determined the revised plans submitted December 11, 2013 were compliant with the IR guidelines. Specifically, the plans better addressed: (1) the privacy guideline, given a four inch increase in the height of side facing window sills, and (2) the massing guideline, given a reduction in the second floor mass via floor plan adjustment and corresponding reduction in the number of gables. On December 13, 2013, the project planner emailed the appellants the revised electronic plans, describing changes made since the original submittal, and requested input. Ms. Reuter’s email on December 19, 2013 asks whether the applicant considered a one-story home and why a one- story approach was rejected, and expressed her concern about the project planner’s communication with a neighbor to the rear, to which the project planner immediately replied. The tentative approval letter, signed on December 19, 2013 by the Chief Planning Official, acting as the Director’s designee, was mailed December 27, 2013, in order to allow the 14-day hearing request period to end well after the holidays. On January 10, 2014, prior to the effective date of the approval (14 days after the mailing of the tentative approval), the appellants requested a Director’s Hearing. The applicant and appellants attended the hearing. Following the February 6, 2014 Director’s Hearing, the hearing officer (Advance Planning Manager acting as the Director’s Designee) approved the application, adding conditions #9 and #10. These conditions required a lowering of the front eave and a change from clay tile to a shingle roof. On March 5, 2014, the appellants submitted the appeal to Council requesting that the applicant be required to instead build a one-story addition, in order to avoid: (1) having a two story home with a one-car garage on a block of one-story homes with two-car garages, (2) placement of demolition debris in a landfill, and (3) the potential for invasion of privacy and blockage of sunlight. One of the appellants also stated concerns with communication regarding the application. Discussion The IR program applies to construction of two-story homes and second story additions, and is intended to mitigate effects on neighboring homes (Palo Alto Municipal Code § 18.12.110(a)). City of Palo Alto Page 4 Development applications subject to IR must be consistent with these guidelines (PAMC § 18.12.110(d)). The IR program is “intended only to mitigate the effects of second story construction” (PAMC § 18.12.110(a)). The IR program does not have a provision to deny second story additions or two-story homes because the neighborhood is developed with one-story homes. Only implementation of a single story overlay rezoning could prevent the construction of a two-story home. IR Guidelines and Project Design The project meets all five of the IR guidelines and complies with the R-1 Zone District regulations for development. The IR guidelines include criteria related to: basic site planning; neighborhood compatibility for height, mass and scale; resolution of architectural form, massing and roof lines; visual character of street facing facades and entries; and placement of second-story windows and decks for privacy. Massing The appellants’ challenge raises issues surrounding the introduction of a two-story home on a block of one-story homes. The appellants have been consistently opposed to a two-story home. The proposal just meets the maximum floor area standard; the proposed lot coverage is also near the maximum allowable coverage. The applicant changed the floor plans after receiving the City’s October 29, 2014 correspondence, to create a less prominent second floor, with a corresponding reduction in the number of gables, thereby reducing the building mass and meeting the IR guidelines. Privacy The privacy guideline has been met with the design. Second floor bedroom egress windows are placed on the front and rear walls of the home. Windows of second floor rooms facing side property lines have high sills (five feet above finished floor), designed to mitigate potential privacy impacts. The sill height of these windows was 4’8” in the original submittal; the plans approved in December showed five foot sill heights. The second floor setback is at least 15 feet from the side property line adjoining 4043 Second Street (Ms. Reuter’s home). Four of the five windows on this side wall will have five foot sill heights; these windows are to be located in two bedrooms and a bathroom. The fifth window serves a stairwell; a person next to the window wall at the mid-point stair landing would not be able to look down out of the window, given the window’s sill height. The second floor on the other side of the home would be located 11 feet from the side property line, and the three windows on that side also incorporate high sills (five feet from the finished floor). The rear wall City of Palo Alto Page 5 of the second floor is proposed at 38 feet from the rear property line, with one bedroom window to provide egress, and one bathroom window. Garage The guidelines encourage garages to be designed as subordinate to the house; the proposed one-car garage will appear subordinate to the house. However, a one-car garage is a departure from the pattern of two-car garages on the block. The second required parking space is uncovered, located adjacent to the garage, behind the front setback. Alternative To Staff Recommendation The Council’s alternative to the staff recommendation is outlined in Municipal Code Section 18.77.075(g)(2): “Remove the recommendation from the consent calendar, which shall require four votes, and set the application for a new hearing before the City Council, following which the City Council shall adopt findings and take action on the application.” If the Council so directs, staff will identify a date for the hearing and will provide appropriate public notice in advance of the hearing. POLICY IMPLICATIONS The appeal is based on the desire for a one-story house in a one-story neighborhood. The Director’s decision to approve the application is consistent with staff’s implementation of the Individual Review Guidelines, and with the policies and intent of the Individual Review Process. ENVIRONMENTAL REVIEW This project is exempt from the provision of the California Environmental Quality Act (CEQA) per Section 15303(a) of the CEQA Guidelines. Attachments: Attachment A: Director Approval Letter dated February 19 (PDF) Attachment B: Appellant's Letter dated March 5 (PDF) Attachment C: Project Plans (TXT) 10134.txt Project Plans Page 1 City of Palo Alto (ID # 4576) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: AECOM Contract Amendment Title: Approval of a Contract Amendment to S13148916 with AECOM for Consulting Services in the Amount of $21,500 to Complete a Risk Assessment for Hazardous Materials at Communications and Power Industries (CPI) located at 607-811 Hansen Way. From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the Council authorize the City Manager or his designee to approve Amendment Two of contract S13148916 with AECOM in the amount of $21,500 which extends the contract to December 31, 2014 to complete the work on the Risk Assessment and processing regulatory implementations. When added to the existing contract, this amendment brings the contract to an amount not to exceed $98,500. Background This is a request for a second amendment to the contract between the City of Palo Alto and AECOM to provide services of a qualified hazardous material specialist to prepare a technical assessment of the risks associated with the storage, handling and disposal for hazardous materials at Communications and Power Industries, Inc. (CPI) located at 607- 811 Hansen Way. Council approval is necessary for this amendment because the request will bring the total of this contract to $98,500. At Council direction, in September 2012 the City of Palo Alto entered into a contract with AECOM to provide the services of a qualified hazardous material specialist to prepare a technical assessment of the risks associated with the storage, handling and disposal of hazardous materials at CPI and to assist the City in determining appropriate zoning standards regarding the proximity of hazardous materials operations to residential uses. The amount of the initial contract was time and materials not to exceed $50,000. Progress on this contract was delayed because of negotiations with CPI for access to documents and the site. In addition, after a meeting with the Barron Park neighbors, the AECOM’s scope of work was refined. On August 15, 2013 the contract was amended for an additional time and City of Palo Alto Page 2 materials not to exceed $27,000. This was done at the City Manager level since the total amount of the contract was still below $85,000. This second amendment to the contract is to request a time extension to December 31, 2014 for the contract and for $21,500 (contract total $98,500) for AECOM to complete the following tasks: Respond in writing to the questions asked by the neighbor’s following the release of the technical risk assessment report (FAQs); Complete an additional air dispersion model of a scenario; Attendance at one City Council and Planning and one Transportation Commission meeting; and Additional administrative tasks, such as providing required documentation for a Public Records Request regarding the project. Project Progress Report The City Council requested periodic updates on the progress of this project. At the last update in August 2013, staff reported that the consultant had begun the required document review, an initial CPI site visit has taken place in July, City staff met with a group of Barron Park neighbor’s to discuss the scope of work in July and the Consultant made a second trip to CPI in order to review documents on their premises in August. Since that time, the technical report was released and a Barron Park Community Meeting to discuss this report was held on February 20, 2014. (http://www.cityofpaloalto.org/CPI) The City’s technical risk assessment consultants, AECOM, and Fire and Planning Department staff attended the February 20th community meeting. Approximately 31 residents were in attendance. Prior to the meeting the public was invited to submit questions on the technical risk assessment report. Those questions, as well as questions received during and after the meeting, were addressed in the presentation and/or have been answered in an FAQ document that will be posted on the City’s website shortly (http://www.cityofpaloalto.org/CPI) The technical risk assessment and associated documentation was tentatively scheduled for Council review on April 21, 2014, and is now anticipated on May 12, 2014 so as to allow for completion of the supplemental modelling. Staff will also be a presenting a recommendation regarding the framework for proposed zoning changes. Following direction from Council, Planning staff will embark immediately on processing regulatory implementations for Planning and Transportation Commission and City Council consideration. Resource Impact The funds to support this contract are available within the Planning and Community Environment Department’s Fiscal Year 2014 Operating Budget. No additional funding is needed. Attachments: City of Palo Alto Page 3 Attachment A: AECOM Contract Amendment 2 (PDF) ATTACHMENT A City of Palo Alto (ID # 4642) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: Approval of Amendment No. 3 to Contract of Sherry L. Lund & Associates Title: Recommendation from the Council Appointed Officers Committee (CAO Committee) that Council Exercise an Option to Extend for One Year a Consulting Contract with Sherry L. Lund Associates for a Total Cost Not to Exceed $58,161 for: 1) Consulting Services related to the 2013-2014 Annual Performance Reviews for Three Council Appointed Officers for a Total Cost Not to Exceed $31,588; 2) Mid-year Performance Review Updates for a Total Cost Not to Exceed $8,003; 3) Solicitation of Staff Feedback Related to Performance Evaluations for a Total Cost Not to Exceed $10,070; 4) As Needed Consulting Services for Compensation, Organizational Development and Human Resources Consulting for a Total Not to Exceed Cost of $6,000; and 5) Additional Services for a Total Cost Not to Exceed $2,500; and Authorize Use of Council Contingency Funds of Up to $50,000 for Necessary Work Before July 1, 2014 From: City Manager Lead Department: City Attorney Unanimous Recommendation from CAO Committee On April 3, 2014, the CAO Committee voted 4-0 to recommend that Council: 1) Exercise an Option to Extend a Consulting Contract with Sherry L. Lund Associates for One Year ending June 30, 2015, for a Total Cost Not to Exceed $58,161, for the following elements: a. Consulting Services related to Council Appointed Officers’ the 2013-2014 Annual Performance Reviews for Three Council Appointed Officers for a Total Cost Not to Exceed $31,588; City of Palo Alto Page 2 b. Mid-year Performance Review Updates for a Total Cost Not to Exceed $8,003; c. Solicitation of Staff Feedback Related to Performance Evaluations for a Total Cost Not to Exceed $10,070; d. As-Needed Services for Compensation, Organizational Development and Human Resources Consulting for a Total Not to Exceed $6,000; and e. Additional Services for a Total Cost Not to Exceed $2,500. 2) Authorize Use of Council Contingency Funds of Up to $50,000 for Necessary Work to be Performed Prior to July 1, 2014. 3) Add an additional closed session in August for the purpose of City Auditor goal setting. Background and Discussion In April 2012, Council entered into a consulting contract with Sherry L. Lund Associates for performance reviews of Council Appointed Officers. The term of the contract was one year with two one-year options to extend. In March 2013, Council exercised the first option to extend the contract for Year Two services. In November 2013, Council added $10,000 to Year Two to fund additional services related to compensation, organizational development and general human resources consulting. On April 3, 2014, the Council Appointed Officers (CAO) Committee met with Sherry Lund to discuss Council exercising the final one-year option to extend the contract for Year Three services. Year Three services include the same four components utilized by the Council last year. This year’s proposal incorporates a 6% increase in Ms. Lund’s hourly rate (from $250 to $265), which had not been increased since 2006. The hours anticipated for several of the components have been reduced, resulting in a total contract cost that is less than last year’s total cost. The four components include: The first component is the Annual Evaluation process that begins in April and includes the CAO’s thought process concerning their self-evaluation, input on their concerns, and feedback regarding each other. As in prior years, the Council will 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. In addition, Ms. Lund will work with the Council and new City Auditor to establish goals and expectations for that position. City of Palo Alto Page 3 The second component is a mid-year check-in for all four CAOs, which will typically occur in the December timeframe. The third component is 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. To control costs, Ms. Lund uses a hybrid approach that combines written surveys and interviews. The fourth component includes as-needed services, which may include compensation work, organizational development and general human resources consulting. Finally, the amendment includes $2,500 in additional services, if needed and authorized in writing in accord with standard contractual requirements. Resource Impact The current balance of the City Council Contingency is $205,000, sufficient to fund the contract as recommended in this report. Attachments: Sherry Lund Amend No. 3 Final (PDF) 04-03-14 Draft Motions (DOC) AMENDMENT NO.3 TO CONTRACT NO. S12145456 BETWEEN THE CITY OF PALO ALTO AND SHERRY L. LUND ASSOCIATES This Amendment No.3 to Contract No. S12145456 ("Contract") is entered into April _, 2014, by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("CITY"), and SHERRY 1. LUND ASSOCIATES, a sole Proprietor, located at 247 La Cuesta Drive, Portola Valley, CA 94028 ("CONSULTANT"). RECIT ALS: WHEREAS, in Apri120 12, the Contract was entered into between the parties for the provision of performance evaluation services for Council Appointed Officers (CAOs), with an initial contract term of one year with two options to extend for one additional year each, and a budget of not to exceed $42.405; and WHEREAS, in March 2013, the parties amended the Contract to exercise the first option and extend the term ofthe Contract for one year (July 2013 through June 2014) and adopt a scope of services, schedule and budget of not to exceed $51,850 for the second year of services; and WHEREAS, in November 2013, the parties amended the Contract to increase the scope of services and budget for year two by an additional Ten Thousand Dollars ($10,000) for a total year two not to exceed amount of $61,850; and WHEREAS, the parties now wish to amend the Contract to exercise the second option and extend the term ofthe Contract for one year (July 2014 through June 2015) and adopt a scope of services, schedule and budget of not to exceed $58,161 for the third year of services. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the parties agree: SECTION 1. 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); for year two shall not exceed Forty Nine Thousand Three Hundred Fifty Dollars ($49,350.00); and for year three shall not exceed Fifty- Five Thousand Six Hundred Sixty-One Dollars ($55,661.00), 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 those additional services and reimbursable expenses for year one shall not exceed Three Thousand Eight Hundred and Fifty-Five Dollars ($3,855) for a total contract not to exceed amount of Forty Two Thousand Four Hundred and Five Dollars ($42,405.00); for year two shall not exceed Twelve Thousand Five Hundred ($12,500) 1 for a total contract not to exceed amount of Sixty-One Thousand Eight Hundred Fifty Dollars ($61,850.00); and for year three shall not exceed Two Thousand Five Hundred Dollars ($2,500.00) for a total contract not to exceed amount of Fifty-Eight Thousand One Hundred Sixty-One Dollars ($58,161.00). 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 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 2. The following exhibits to the Contract are hereby amended to read as set forth in the attachments 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 3. 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 SHERRY 1. LUND ASSOCIATES Purchasing Manager Z~STOFORM: /(Jq City Attorney Attachments: EXHIBIT "A": SCOPE OF SERVICES EXHIBIT "B": SCHEDULE OF PERFORMANCE EXHIBIT "C": COMPENSATION 2 Year One 0412412012 to 0613012013 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 intemalliaison 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 -Petformance 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. 3 Year One 0412412012 to 0613012013 2. PROJECT ELEMENT #2: Mid-Year Check-In Performance Discussions (Nov.lDec. 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. 4 Year One 0412412012 to 0613012013 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/intemalliaison 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. 5 Year Two 0412412013 to 0613012014 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 intemalliaison 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 -Petformance 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. 6 Year Two 0412412013 to 0613012014 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. Phase V-Supplemental Consulting and Coaching Consultant agrees to provide supplemental coaching and performance consulting services as requested by the Council. 7 Year Two 0412412013 to 0613012014 2. PROJECT ELEMENT #2: Mid-Year CAD Check-In Performance Updates (Nov.lDec. Timeframe) Phase I -Advance Preparation for Discussions Consultant: • Interviews each Councilmember for 45-60 minutes to gather update feedback on the four CADs, including a) whether CAD is on track with goals/objectives, b) whether Councilmember wishes to make any changes/course corrections in Councilmember expectations or CAD performance, and c) whether 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 CAD 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 CAD for feedback and discussion Phase III -Wrap Up Consultant: • Documents agreed-upon Council feedback • Answers follow-up questions with CADs • Refines process for future, as requested by Council Year Two 0412412013 to 0613012014 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 inclu~e it in Council's feedback package • 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 9 Year Three 0412412014 to 0613012015 EXHIBIT "A" SCOPE OF SERVICES Project Steps and Consultant Responsibilities PROJECT ELEMENT #1 and lA: CAO Annual Performance Evaluations for City Manager, City Attorney, and City Clerk; City Auditor Orientation to Evaluation Process, Goal-Setting and Refinement of Evaluation Criteria Phase I -Preparation for Review Session -City Manager, City Attorney, and City Clerk In this phase, Consultant takes the following steps for the City Manager, City Attorney, and City Clerk reviews: • Works with internal liaison to schedule project meetings and milestones. • Solicits CAO self-evaluations, reviews them and provides feedback and advice when requested. • Assures CAO questions/concerns are clarified and raised with Council during closed seSSIOns. • Prepares and distributes binders to Council, including instructions, CAO self-evaluations, blank evaluation, and brief staff feedback summary (if Project Element #3 is elected) in hard copy. Distributes soft copies of forms. • Collects evaluation feedback from CAOs on their CAO peers. • 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 materials for closed review sessions which enables Council members to focus their discussion efficiently. Phase II -Closed Session Performance Review Session In this phase, Consultant: • Provides facilitation and technical assistance during closed session Council performance review meetings with City Manager, City Attorney, and City Clerk. 10 • Documents agreed-upon unified Council feedback for written reviews and goals for the City Manager, City Attorney, and City Clerk. Phase III -Post-Session Wrap-Up In this phase, for the City Manager, City Attorney, and City Clerk process, 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. • Solicits feedback to refine future process. 11 Year Three 0412412014 to 0613012015 Phase I -Background, Orientation and Refinement of Evaluation Criteria for City Auditor Consultant takes the following steps for the City Auditor Orientation to Evaluation Process, Goal- Setting and Refinement of Evaluation Criteria: • Meets with new Auditor when hired to get to know each other, orient himJher to the evaluation process, hear hislher concerns, answer questions, and have a first discussion on evaluation criteria. • Works with Auditor to refine evaluation criteria. • Around 90-120 days (timing as determined in conjunction with the CAO Chair), meets with Auditor again to debrief Auditor's preliminary assessment of environment, staff, and workload plus hislher draft goals. • Conducts brief phone interviews with Council members to understand their expectations and desired goals for the Auditor. • Summarizes collective goals/desires/issues from Auditor and Council members, and sends out to all parties. Phase II -Closed Session Goal-Setting In this phase, Consultant: • Provides facilitation and technical assistance in closed session with Council and Auditor, in order to arrive at mutually agreed-upon goals. Phase III -Post-Session Wrap-Up In this phase, Consultant: • Prepares summary from the closed session and distributes it to all parties. • Debriefs with Auditor to answer any remaining questions. 12 Year Three 0412412014 to 0613012015 PROJECT ELEMENT #2: Mid-Year CAO Performance Updates Project Steps and Consultant Responsibilities Phase I -Advance Preparation for Discussions Consultant shall meet with the CAO Committee to review and potentially revise the process for Mid- Year CAO Performance Updates. In this phase and subject to any revisions the CAO Committee may direct, Consultant: • Interviews each Council member individually to gather update feedback on each of the four CAOs. • Interviews each CAO to capture questions or issues that they would like to raise with the Council. • Summarizes Council feedback and CAO questions and prepare agendas and materials for closed sessions-all of which support an efficient and effective discussion. Phase II -Closed Session Performance Update Discussions In this phase, Consultant: • Provides facilitation and technical assistance to Council and CAOs as needed in closed seSSIOn 13 Year Three 0412412014 to 0613012015 Phase III -Post-Session Wrap-Up In this phase, Consultant: • Documents agreed-upon Council feedback. • Answers follow-up questions with CAOs. • Uses feedback from Council and CAOs about how the process worked to refine it for the future. PROJECT ELEMENT #3: Staff Member Input for CAO Annual Performance Reviews Project Steps and Consultant Responsibilities Consultant provides the following services: • Introduces the process with staff members, in person or by writing. • Meets with each CAO individually to gather background about staff context. • For City Manager staff:, City Clerk, and City Auditor: Conducts individual interviews of direct reports of approximately one hour in length. • For City Attorney, City Clerk, and City Auditor staff: Asks staff members to respond in writing to 4-6 targeted questions that require comments. Reads comments and follows-up with selected brief spot phone interviews to resolve questions, and expand examples. • Provides follow-up consulting as needed under Project Element 4, billed by the hour. 14 Year Three 0412412014 to 0613012015 PROJECT ELEMENT #4: Compensation, Organizational Development, and Human Resources Consulting Consultant provides the following services, billed hourly, as required: • Provides follow-up consulting as needed following Staff Member Input process. • Provides advice to CAOs on leadership and management questions throughout the year. • Provides compensation consulting as follows: o Defines compensation data and format needed from HR and Finance Departments. o Provides analysis and technical consulting to CAO Committee and Council. o Consults with CAO Committee and with Council on CAO compensation during closed session meetings. • Provides organizational development and human resource consulting as directed by the CAO Chair and/or Council, or if the City is at risk. • Meets with individual Council members as required to respond to questions and provide advice. • Works with CAO Chair to prepare for meetings and to consult on process. 15 Year One 0412412012 to 0613012013 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 Wed., May 16 Thurs., June 11 Wed., June 13 Thurs., June 14 Thurs., June 21 Tues. July 3 Wed., July 11 Thurs., July 12 City Manager and City Attorney final self-evaluation due to Sherry Binders and blank evaluation package (instructions, eval form, last year's review, contract) for City Manager and City Attorney go to Council for completion City Clerk and City Auditor final self-evaluation due to Sherry Blank evaluation package for City Clerk and City Auditor goes to Council for completion CC evaluations of City Manager are due to Consultant (completed between May 13 and June 14) CC evaluation City Attorney are due to Consultant (completed between May 18 and June 21) Council receives feedback summaries for City Manager and City Attorney (for reading prior to July 11 and July 12 closed sessions). 5 p.m. Closed Session Review of City Manager 5 p.m. Closed Session Review of City Clerk and City Attorney 16 Year One 0412412012 to 0613012013 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 Wed., Aug. 29 Thurs., Aug. 30 Council receives summary of City Clerk and City Auditor feedback (for reading prior to Aug. 29 and 30 closed sessions) 5 p.rn. Closed Session Review of City Clerk 5 p.rn. 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 17 Year Two 0412412013 to 0613012014 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. 18 Year Three 0412412014 to 0613012015 EXHIBIT "B" SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services in Project Elements #1, #2, #3 and #4 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, in consultation with CONSULTANT. 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. A preliminary and approximate schedule of work for Project Elements #1, #2, and #3 follows, subject to revision as mutually agreed upon by CONSULTANT and CITY: Note: Important Council Deadlines are in Bold Face Closed Session Council Meetings are in Bold Face Italics April Consultant prepares CAO staff members for interviews/surveys and gets on their schedules; meets with CAOs to prepare them for deadlines, gather context on staff and background for upcoming review process. May Fri., June 6 Mon., June 9 Consultant collects staff feedback and prepares summaries City Manager, City Attorney, City Clerk, final self-evaluation due to Consultant Binders and blank evaluation package (instructions, eval form, staff feedback summary, last year's review, contract) for City Manager, Attorney, and Clerk go to Council 19 June 17 -30 Tues., July 1 Mon., Aug. 4 Wed. ,Aug. 6 Wed., Aug. 13 Wed., Aug. 13 Wed.; Aug. 20 TBD TBD Mon. Sept. 8 Year Three 0412412014 to 0613012015 Consultant interviews Council to collect feedback for City Manager, Attorney, and Clerk; Council Members make corrections to Consultant drafts Council summer meeting break begins Council returns from summer meeting break City Clerk and City Attorney eval summary package in Council packet (for reading prior to Aug. 14 closed session) City Manager eval summary package goes in Council packet (for reading prior to Aug. 20 closed session) Closed Session Review of City Clerk and City Attorney Closed Session Review of City Manager Closed Session Preliminary Review of City Auditor & Goal Setting Closed Session to discuss CAD compensation Final evaluation documents to Council for signature and filing. 20 Year One 0412412012 to 0613012013 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 Services, including reimbursable expenses, does not exceed $38,550.00 and the total compensation for Additional Services does not exceed $42,405.00. 21 Year One 0412412012 to 0613012013 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 22 Year One 0412412012 to 0613012013 CANCELLATIONIRESCHEDULING POLICY CancellationlRescheduling 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 1 st, 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. 23 Year One 0412412012 to 0613012013 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. 24 Year One 0412412012 to 0613012013 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". 25 Year Two 0412412013 to 0613012014 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 $61,850.00. 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 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 $61,850.00. 26 Year Two 0412412013 to 0613012014 BUDGET SCHEDULE Task 1 PROJECT ELEMENT #1: Task 2 PROJECT ELEMENT #2: Task 3 PROJECT ELEMENT #3: Sub-total Basic Services Reimbursable Expenses Total Basic Services and Reimbursable expenses Mid-Year Contract Amendment to fund compensation, organizational development and HR consulting services Additional Services (Not to Exceed) Maximum Total Compensation NOT TO EXCEED AMOUNT $32,300.00 $7,550.00 $9,500.00 $49,350.00 $0.00 $49,350.00 $10,000 $2,500.00 $61,850.00 27 Year Two 0412412013 to 0613012014 CANCELLATIONIRESCHEDULING 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 1 st, 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. 28 Year Two 0412412013 to 0613012014 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 CONSULT ANT 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. 29 Year Two 0412412013 to 0613012014 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-l. 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". 30 Year Three 0412412014 to 0613012015 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 CONSULT ANT under this Agreement for all services described in Exhibit "A" ("Basic Services") and reimbursable expenses shall not exceed $55,661.00. 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 $58,161.00. 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 Services, including reimbursable expenses, does not exceed $55,661.00 and the total compensation for Additional Services does not exceed $2,500.00. 31 Year Three 0412412014 to 0613012015 BUDGET SCHEDULE NOT TO EXCEED AMOUNT Task 1 $31,588.00 PROJECT ELEMENT #1: Annual CAO Process for 3 CAO's for 2013-2014 review period Goal-setting and Refine Review Criteria (Compensation not included -see Task 4) Task 2 PROJECT ELEMENT #2: Mid-Year Performance Update Task 3 PROJECT ELEMENT #3: Staff feedback for annual CAO process Sub-total Basic Services PROJECT ELEMENT #4: Compensation, Organizational Development and HR Consulting Reimbursable Expenses Total Basic Services Plus Element #4 and Reimbursable expenses Additional Services Maximum Total Compensation $8,003.00 $10,070.00 $49,661.00 $6,000.00 $0.00 $55,661.00 $2,500.00 $58,161.00 32 Year Three 0412412014 to 0613012015 CANCELLATIONIRESCHEDULING POLICY CancellationlRescheduling 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 1 st, 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 $265 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. 33 Year Three 0412412014 to 0613012015 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 subj ect 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. 34 Year Three 0412412014 to 0613012015 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 ofthe 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". 35 Council Appointed Officers Committee MOTIONS 1 Special Meeting Thursday, April 3, 2014 Chairperson Scharff called the meeting to order at 10:06 A.M. in the Council Conference Room, 250 Hamilton Avenue, Palo Alto, California. Present: Klein, Kniss, Scharff (Chair), Shepherd Absent: Oral Communications None Agenda Items 1. Discussion and Possible Action to Recommend that Council Exercise an Option to Extend for One Year a Consulting Contract with Sherry L. Lund Associates for a Total Cost Not to Exceed $58,161 for: 1) Consulting Services related to the 2013-2014 Annual Performance Reviews for Three Council Appointed Officers for a Total Cost Not to Exceed $31,588; 2) Mid-year Performance Review Updates for a Total Cost Not to Exceed $8,003; 3) Solicitation of Staff Feedback Related to Performance Evaluations for a Total Cost Not to Exceed $10,070; 4) As Needed Consulting Services for Compensation, Organizational Development and Human Resources Consulting for a Total Not to Exceed Cost of $6,000; and 5) Additional Services for a Total Cost Not to Exceed $2,500; and Authorize Use of Council Contingency Funds for Necessary Work Before July 1, 2014. MOTION: Mayor Shepherd moved, seconded by Vice Mayor Kniss to forward to the City Council to: 1) Exercise an option to extend a consulting contract with Sherry L. Lund Associates for one year ending June, 30, 2015, for a total cost not to exceed $58,161 for the following elements: a. Consulting Services related to Council Appointed Officers’ the 2013-2014 Annual Performance Reviews for Three Council Appointed Officers for a Total Cost Not to Exceed $31,588; 2 April 3, 2014 b. Mid-year Performance Review Updates for a Total Cost Not to Exceed $8,003; c. Solicitation of Staff Feedback Related to Performance Evaluations for a Total Cost Not to Exceed $10,070; d. As-Needed Services for Compensation, Organizational Development and Human Resources Consulting for a Total Not to Exceed $6,000; and e. Additional Services for a Total Cost Not to Exceed $2,500, and 2) Add an additional Closed Session meeting, in August, for City Auditor goal setting. MOTION PASSED: 4-0 MOTION: Vice Mayor Kniss moved, seconded by Mayor Shepherd to forward to the City Council to authorize use of Council Contingency funds for necessary work to be performed prior to July 1, 2014. MOTION PASSED: 4-0 Adjournment: The meeting was adjourned at 10:56 A.M. City of Palo Alto (ID # 4592) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: Approval of Purchase Order for Annual Computer Replacement Equipment Title: Approval of Purchase Order for Annual Computer Replacement Equipment with Golden Gate Systems, LLC in the Amount of $422,231 From: City Manager Lead Department: IT Department Recommendation Staff recommends that Council approve, and authorize the City Manager or his designee to execute the attached Purchase Order with Golden Gate Systems LLC in the amount of $422,230 to purchase 254 laptop computers and equipment including monitors, mouse devices, and laptop cases for replacement of desktop computer equipment which is at the end of its useful life. Staff also recommends that Council approve, and authorize the City Manager or a designee to execute, change orders for unexpected or unforeseen equipment needs in an amount not to exceed $42,223. Executive Summary Staff computers are currently on a four-year replacement schedule. As part of a mobile-first strategy, computers that are at the end-of-useful-life are replaced with laptop computers and extended with flat screen monitors, when needed. The transition to laptop computers from desktop computers aids in increased productivity and 90% less energy use. Background A Request for Quotation (RFQ) was submitted on 02/03/14, with responses due back on 02/18/14. Five vendors responded to the RFQ with the following costs: City of Palo Alto Page 2 Vendor Name: Cost: Golden Gate Systems LLC $422,230.31 New Tech Solutions $423,605.17 CDW Government LLC $441,782.61 Howard Technology Solutions $449,610.56 IT Management Corporation $508,561.61 Discussion To ensure proper support and maintenance, one-quarter of the City’s computer inventory is replaced annually, and accordingly, this contract will purchase 254 laptop computers, 100 mouse devices, 200 monitors, 254 port replicators, 100 neoprene laptop cases and 254 laptop warranties. . As current desktop computers reach the end of their useful lives, most will be replaced with laptop computers. These laptops will use up to 90% less power than desktops and will enable staff to access their applications and information without being tethered to a fixed location. In response to the Auditor’s Office recent inventory audit, staff implemented the following improvements: -Utilization of SAP to automate the tracking of computer inventory. Equipment will be entered into SAP as a stock item. IT staff will then request equipment to be delivered via a material reservation. This will automate the current manual process for requesting, tracking, and maintaining inventory levels. -Once IT staff receives computer equipment, equipment will be asset tagged and tracked via an automated inventory management system that tracks all computers on the City’s network. -While a new cage is being built at the Stores Warehouse to secure and contain IT equipment, IT will request small shipments of equipment from the supplier. This will reduce the risk of any potential theft while equipment is stored at the warehouse. Resource Impact City of Palo Alto Page 3 Funding of $477,925 was allocated for computer replacement in the FY 2014 Technology Fund operating budget. The cost of this contract, including the contingency funding ($464,453) is available within this budgeted allocation. Buying the laptops in bulk from Golden Gate, the City is saving approximately $50,750, rather than buying these laptops individually through Toshiba. Environmental Review Approval of this purchase order does not constitute a project under the California Environmental Quality Act (CEQA); therefore, no Environmental Assessment is required. Attachments: Golden Gate RFQ Response (PDF) City of Palo Alto (ID # 4473) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: Approval of an amendment to Compucom contract Title: Approval of Amendment No. 1 To Compucom Contract No. C12144913 In An Amount of $50,000 plus a 10% contingency for unforeseen expenses for Microsoft Azure Services Until June 2015 for additional disaster recovery for file services. From: City Manager Lead Department: IT Department Recommendation Staff recommends that Council consider the following motion: Staff recommends that Council approve and authorize the City Manager or designee to execute, the attached amendment number one in the amount of $50,000 to Compucom System, Inc. contract C12144913 for a one-year commitment for Microsoft Azure Cloud Services, increasing overall compensation to $100,000 for Azure Services (when added to an existing contract). Approve a 10% contingency of $5,000 in addition to the contract amount. Executive Summary In alignment with the City of Palo Alto (the City) Information Technology Department's (IT) "Cloud First" strategy, IT seeks to purchase Microsoft Azure services in support of a redundant disaster recovery solution. Background In 2013, an immediate need to add file server storage to the City network was identified. Four separate stand-alone network file servers had reached capacity and hardware end of life. A Microsoft Azure-integrated storage device was selected to address the storage, fault-tolerance and backup problem. City of Palo Alto Page 2 In June of 2013, IT purchased a similar $50,000 commitment to Microsoft Azure Services to support the replacement of the aging file services infrastructure for a period of one year. Azure Services are a part of contract C12144913 with Compucom. The City “piggybacked” onto this Riverside County contract on February 1, 2012 for a five year term ending January 31, 2017. The City also uses this contract for its Microsoft volume licensing maintenance and support. Discussion The IT File Services Replacement Project is currently underway. In the event of catastrophe, if the hardware in the City Hall data center is destroyed or inaccessible, standby hardware integrated with the Microsoft Azure Cloud is necessary to take the place of the disabled primary device. In this way, a provision for disaster recovery is established. The original strategy for disaster recovery became non-viable because Microsoft had not yet announced the date of the release of the virtual storage solution (StorSimple), which would be preferable to the proposed storage device/cloud solution. While IT has repeatedly asked for this communication, Microsoft is unable to provide a reliable date. Therefore IT recommends the option of a device with storage in the Microsoft Azure Cloud, which requires the Microsoft Azure services being requested this other option. This revised strategy has benefits for our overall disaster recovery plans. Timeline Following the execution of the contract, an implementation start date in May 2014 is anticipated. A storage device will be installed at an off-site location to be determined and redundant storage services will be configured in the Microsoft Azure cloud. Completion of the disaster recover infrastructure is expected by June 2014, with go-live tentatively scheduled for June 2014. Resource Impact The funding source for this amendment is the Disaster Recovery CIP TE-01012-300. It is anticipated any future needs for this work will be funded by the Disaster Recovery CIP. Policy Implications City of Palo Alto Page 3 This agreement is consistent with existing City policy. Environmental Review This request for additional funding for Microsoft Azure services is not subject to CEQA pursuant to Title 14 California Code of Regulations Section 15061(b)(3), and it can be seen with certainty that there is no possibility of a significant effect on the environment. Attachments: 01 - Original Microsoft Services Agreement for Azure (PDF) 02 - Original PO C12144913 Compucom Systems (PDF) City of Palo Alto Additional Azure Quote (PDF) Quoted to:City of Palo Alto Adding Azure Revision #4 Date 3/21/2014 EA# 5872289 Quantity Part #Description Unit Price Ext. Price Year 1 Annual Payment (4 months) 125 6QK-00001 Azure Monetary Commit ShrdSvr ALNG SubsVL MVL Commitment $398.00 49,750.00$ Product-total 49,750.00$ Sub-Total 49,750.00$ Tax -$ Shipping Please write "electronic delivery only" on your PO No Charge Total 49,750.00$ Prices good for 30 days Quoted by Miles Allarea, CompuCom Systems Inc., 7171 Forest Lane, Dallas, TX 75230 CompuCom - software quote Phone Phone 916-934-6023 miles.allarea@compucom.com Pass-Through Warranty and Other Rights. As a reseller, end-user warranties and liabilities (with respect to any third party hardware and software products provided by CompuCom) shall be provided as a pass-through from the manufacturer of such products. All software products are subject to the license agreement of the applicable software supplier, as provided with the software packaging or in the software at time of shipment. CompuCom provides no independent warranties, indemnities or liabilities. Public Sector Disclosure: CompuCom may receive incentive fees for public sector EA transactions. Important: Please provide the email address of the recipient designated to receive a CompuCom "order confirmation" Please fax your POs to Client Assistance Center at 800-366-9994. You may call 800-400- 9852, option 2, to check status on orders. CITY OF PALO ALTO OFFICE OF THE CITY CLERK April 7, 2014 The Honorable City Council Palo Alto, California Second Reading: Park Improvement Ordinance for the Design of the Scott Park Capital Improvement Project (First Reading: March 17, 2014 PASSED: 8-0 Price absent) ATTACHMENTS: Scott Park Ordinance (PDF) Department Head: Donna Grider, City Clerk Page 2 ATTACHMENT A City of Palo Alto (ID # 4444) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: Seismic Upgrade Project (Phase 2) Title: Approval of a Water Enterprise Fund Contract with URS Corporation in the Total Amount of $1,009,854 for the Design and Construction Management Services for Coating and Seismic Upgrades of Four Existin g City Reservoirs and Rehabilitation of Three Receiving Stations, Project WS-07000, WS-08001 and WS-09000 From: City Manager Lead Department: Utilities Recommendation Staff recommends that Council approve and authorize the City Manager or his designee to execute the attached professional services agreement with URS Corporation (Attachment A) in the amount of $1,009,854 for engineering services to design and construction manage the coating and seismic upgrades of four existing City water reservoirs and rehabilitation of three water receiving stations. Due to the project complexity, staff recommends that Council authorize the City Manager or his designee to negotiate and execute changes to the contract with URS for additional unforeseen services that may be required during the design and construction management phases (contingency), the total value of which shall not exceed $100,985 or 10% of the proposal cost (RFP #152781). Background The City of Palo Alto maintains a water system consisting of five receiving stations from the SFPUC’s Hetch Hetchy aqueduct system and seven reservoirs. The City’s primary source of potable water, since 1962, has been the Hetch Hetchy aqueduct system. Prior to 1962, the City was dependent upon a local well system for water supply. Of the seven existing reservoirs, five of those were constructed in the 1960s. Mayfield City of Palo Alto Page 2 Reservoir, the City’s oldest reservoir, was constructed in the late 1920s and was retrofitted this past year for seismic upgrades. Four of the City’s reservoirs are above ground circular steel tanks, two are above ground concrete tanks (Mayfield and Boronda Reservoirs) and one is a below grade concrete tank (El Camino Park Reservoir, completed in 2013). The City’s receiving stations were constructed in the late 1950s when the City connected to the Hetch Hetchy system. Each station is an underground vault containing valves, flow meters, piping and other miscellaneous equipment. Although the City’s water system has been properly maintained over the years, the system is aging and needs extensive rehabilitation work in order to ensure that these critical components continue to function during a major seismic event. This project (RFP #152781) will bring the four existing steel tanks (Corte Madera, Park, Dahl, and Montebello reservoirs) and the three (of the five) existing receiving stations (California, Page Mill, and Arastradero turnouts) to current seismic code, thus improving the performance reliability of these existing facilities. The overall work associated with the new consultant contract design and construction management services includes seismic retrofitting and recoating of four existing reservoirs (Corte Madera, Park, Dahl, and Montebello Reservoirs), and rehabilitaton of three receiving stations (California Receiving Station, Page Mill Receiving Station and Arastradero Receiving Station). Discussion Description of the Project A portion of the work associated with this project was originally included in the “Assessment, Design and Construction Management Services for Coating and Seismic Upgrades of Six Existing Reservoirs and Rehabilitation of Three Receiving Stations” Project (CMR 139:10) that was approved by Council on March 8, 2010. After the original contract was signed and accepted by the City, staff determined that, because of newly identified operational constraints of the City’s water system, there would be a need for additional inspections and construction oversight during the construction period. Operational constraints of the City’s water system prohibit taking all of the existing reservoirs and receiving stations out of service simultaneously for rehabilitation. Therefore, in order to minimize operations exposure of low water supply, the rehabilitation construction scheduling of the six existing reservoirs and three receiving stations needed to be staggered such that no two reservoirs and no two receiving stations are offline at the same time. In addition, the City determined that retrofit work on a reinforced concrete tank is far more specialized than retrofit work on a steel tank. In order to limit operational risks and ensure competitive bidding on the project, the City directed URS Corporation to divide the bid ready documents developed under the original contract into two packages to be put out for bid: one for all work associated with the Mayfield and Boronda Reservoirs; and the other for all work associated with the four steel tank City of Palo Alto Page 3 reservoirs and three receiving stations. To accommodate this request, additional project management, design and construction management services, not included in the original scope of work, are needed. In addition, the project duration needs to be extended by approximately three years. Table 1 shows a timeline of events associated with this project. Table 1: Contract Timeline Date Milestone Description March 8, 2010 Council Approves Contract C10131413 with URS Corp. for “Assessment, Design and Construction Management Services for Coating and Seismic Upgrades of Six Existing Reseroirs and Rehabilitation of Three Receiving Stations” Project (CMR 139:10) in the amount of $482,393. URS Corp. directed to provide two separate bid packages; one for Mayfield and Boronda Reservoirs and one for the four steel tanks and three receiving stations. December 21, 2011 Notice to Proceed is issued to Anderson Pacific Engineering Construction, Inc. (AP) for construction at Mayfield and Boronda Reservoirs. Construction at Mayfield Reservoir begins May 2012. URS Corp. providing construction management and support services as part of original contract during construction. April 23, 2013 Utilities approves additional services in the amount of $80,399 for additional design and construction management services associated with providing two separate bid packages for the project. This amount was part of the original Contract amount of $482,393. Funding was part of original contract contingency that was approved by Council on 3/8/10. May 16, 2013 City terminates construction contract with AP upon completion of the Mayfield Reservoir work. Due to unforeseen issues arising from construction leaks found at the Mayfield Reservoir, City determined it would be more cost- effective to remove the Boronda Reservoir work from AP’s contract and rebid as separate project. September 19, 2013 URS Corp provides City staff with additional scope and costs associated with further separating construction into two separate bid packages (1) Boronda seismic retrofit separatefrom Mayfield All approved contingency funds encumbered during previous task. New cost and scope includes further separating out both Boronda City of Palo Alto Page 4 seismic retrofit; 2) rehabilitation of four steel tanks/three receiving stations. Total costs associated with this change equal $487,724, nearly doubling cost of original contract. Reservoir and four steel tanks/three receiving stations into separate bid packages. November 12, 2013 Purchasing Department, City Attorney, and Utilities agree to re-bid additional services required to finish project management, design and construction management work associated with the four steel tanks and three receiving stations. Due to the proposed 100% increase in compensation to complete the contract, and to ensure contract transparency and cost- competitiveness, Utilities separates the additional services into two separate contracts; Amendment #1 to the original contract (Boronda Reservoir) and second contract for remaining work (four steel tanks and three receiving stations). December 17, 2013 Cityissues Request for Proposal (RFP) for design and construction management services associated with four steel tanks and three receiving stations (RFP #152781). As requested by Purchasing Department, RFP prepared and issued by City for work associated with remaining steel tanks and receiving stations. RFP included a four week bid period. January 13, 2014 Council approves Amendment #1 to URS Contract C10131413 in the amount of $84,660 for additional design and construction management services associated with separating out the Boronda Reservoir work into a separate bid package (Staff Report #4369). Amendment #1 to Contract C10131413 includes all work needed to produce separate bid package for Boronda Reservoir and provide project management and construction support during Boronda Reservoir construction. January 14, 2014 Utilities receives one proposal, from URS Corp., in response to the RFP (RFP #152781) . Other potential bidders explained their decisionto decline to submit a bid was based on URS’s recongnized qualifications based on estensive experience and City of Palo Alto Page 5 knowledge of the City’s water system gained through the work on the original contract. April 7, 2014 Request for Council to approve a contract with URS for professional services. Contract will design and manage construction for the coating and sesimic upgrades for four existing reservoirs and three water receiving stations. Under the original contract, certain field conditions, identified during the Mayfield Reservoir retrofit, provided staff with better insights into the involved nature of the construction work, including the need for increased inspections and associated cost increases. The increased inspection requirement and the staggering of work on the facilities to minimize operation risks had the effect of doubling the original contract cost. Because of the cost doubling, on December 17, 2013, staff issued a new RFP for all remaining work associated with four steel tanks and three receiving stations. URS Corporation has completed all pre-design activities, including design and construction management services associated with the seismic upgrade of the Mayfield Reservoir, which was part of the original contract (CMR 139:10). URS Corporation has also completed all design services associated with the seismic upgrade work at the Boronda Reservoir, which was also part of the original contract. Construction at the Boronda Reservoir is expected to commence in the Summer of 2014. All construction management services for work at Boronda reservoir will be completed as part of the amended original contract (Amendment 1, Staff Report ID# 4369). Furthermore, URS Corporation completed approximately 70% of the design for the four steel tank reservoirs and three receiving stations as part of the original contract. Below is a description of the scope of services needed for this new consultant services contract. Consultant’s Scope of Services A Request for Proposals (RFP #152781) was issued on December 17, 2013 seeking consultant services for the design and construction management of seismic upgrades and recoating of four existing City reservoirs and rehabilitation of three receiving stations. The scope of work requires consultant services to prepare specifications for key equipment and materials, analyze construction, operations and maintenance costs and prepare a risk management plan to ensure quality of materials and construction. The consultant will also assist staff with project bidding, contractor selection, construction inspection, commissioning, start up and testing. In addition to these scope of work items, below is a list of additional activities included in the project scope: City of Palo Alto Page 6 Design: For this phase of work, the consultant will perform the following tasks: Evaluate and recommend suitable coating systems for each reservoir and recommend materials, methods and/or equipment to rehabilitate or replace any structural members, piping or equipment needing repair or replacement. Analyze whether the reservoirs and control valve vault structures and equipment comply with current seismic standards. Evaluate alternatives and make recommendations for bringing the reservoirs and/or control valve vaults into compliance with current seismic code. Evaluate and recommend suitable coatings for the piping, equipment and doors in the underground receiving stations. Evaluate and recommend materials, methods and/or equipment to rehabilitate or replace any structural, piping or equipment needing repair or replacement. Evaluate the best method to remove the existing paint from the walls and floors of the receiving station vaults. Evaluate alternatives and make recommendations to repair leaks, eliminate water seepage and/or repair or replace the associated drainage facilities. Construction Management: The consultant will provide all construction management services for this work. This includes conducting preconstruction and construction meetings, construction administration, inspection services, testing services, processing change orders and dispute resolution. The deliverables will include: 1. Design and As-Built Drawings 2. Construction Bid Documents 3. A Final Report upon Project Completion Attachment A, the Agreement, contains a complete description of the scope of services. Due to the specialized nature of the services and special equipment, services of an expert consultant are required. Solicitation Process Summary of Solicitation Process City of Palo Alto Page 7 Proposal Title Design and Construction Management Services for Coating and Seismic Upgrades of Four Existing City Reservoirs and Rehabilitation of Three Receiving Stations Proposal Number 152781 Proposed Length of Project 3 Years Number of Proposals mailed &/or emailed 29 Total Days to Respond to Proposal 28 Pre-proposal Meeting Date January 7, 2014 Number of Company Attendees at Pre-proposal Meeting 2 Number of Proposals Received: 1 Company Name Location (City, State) Amount* URS Corporation San Francisco, CA $1,009,854 *Based on scope of work. See Cost of Services below. Cost of Services As shown in the table above, URS Corporation submitted a proposal for $1,009,854. The final not to exceed budget for basic services listed in Exhibit A of the Agreement is $1,009,854. Due to the complexity of this project, staff recommends that Council authorize the City Manager or his designee to negotiate and execute changes to the contract with URS for additional unforeseen services that may be required during the design and construction management phases, the total value of which shall not exceed $100,985 or 10% of the proposal cost (RFP #152781). Additional services not included within the scope of services in the contract, but that are determined by the City to be necessary for its proper completion, will be paid on a time and material basis using the consultant’s Charge Rates schedule shown in Exhibit C-1 to the Agreement. The consultant shall not commence with additional services before the City approves of them in advance and in writing. The City may require the consultant to submit a written proposal detailing the proposed maximum compensation for any additional services as well. The total budget amount proposed for this project is $1,110,839, comprising $1,009,854 for the basic services and $100,985 for additional services, if needed. The consultant’s proposal price was based on certain modifications to the scope of services provided in the City’s original proposal. The RFP process allows the City to negotiate the price of the work, and the scope of work, upon selection of the successful firm. The price for the City of Palo Alto Page 8 negotiated scope is $1,009,854. Resource Impact The funds for this project are from CIP WS-07000, WS-08001 and WS-09000. Current staffing levels and the level of expertise needed to see this project through to completion prevent City staff from being able to perform this work. Policy Implications The approval of this Water Enterprise Fund professional services contract is consistent with the existing City policies. This recommendation is consistent with the Council-approved Utilities Strategic Plan (Staff Report 1880), especially Key Strategy No. 1, “Ensure a high level of system reliability in a cost effective and timely manner.” Environmental Review Council’s award of this contract is categorically exempt from review under the California Environmental Quality Act, under Section 15301 (repair and maintenance of existing facilities) of the CEQA Guidelines. Attachments: Attachment A: URS Contract (PDF) Attachment B: Consultant Agreement Justification (PDF) CITY OF PALO ALTO CONTRACT NO. C14152781 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND URS CORPORATION DBA URS CORPORATION AMERICAS FOR PROFESSIONAL SERVICES This Agreement is entered into on this 7th day of April, 2014, (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and URS CORPORATION DBA URS CORPORATION AMERICAS, a Nevada corporation, located at 1333 Broadway, Suite 800, Oakland, CA 94612 ("CONSULTANT"). RECITALS The following recitals are a substantive portion of this Agreement. A. CITY intends to upgrade four existing city reservoirs and rehabilitate three receiving stations (“Project”) and desires to engage a consultant to provide design and construction management services in connection with the Project (“Services”). B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Services. C. CITY in reliance on these representations desires to engage CONSULTANT to provide the Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described in Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY. SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through April 3, 2017 unless terminated earlier pursuant to Section 19 of this Agreement. SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit “B”, attached to and made a part of this Agreement. Any Services for which times for performance are not specified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner Professional Services Rev. Nov. 1, 2011 1 based upon the circumstances and direction communicated to the CONSULTANT. CITY’s agreement to extend the term or the schedule for performance shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT. SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A”, including both payment for professional services and reimbursable expenses, shall not exceed One Million Nine Thousand Eight Hundred Fifty Four Dollars ($1,009,854.00). In the event Additional Services are authorized, the total compensation for services and reimbursable expenses shall not exceed One Hundred Thousand Nine Hundred Eighty Five Dollars ($100,985.00). The applicable rates and schedule of payment are set out in Exhibit “C-1 and C-1A”, entitled “HOURLY RATES SCHEDULE,” which is attached to and made a part of this Agreement. Additional Services, 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 the prior written authorization of CITY. Additional Services shall mean any work that is 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”. SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly invoices to the CITY describing the services performed and the applicable charges (including an identification of personnel who performed the services, hours worked, hourly rates, and reimbursable expenses), based upon the CONSULTANT’s billing rates (set forth in Exhibit “C-1”). If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT’s payment requests shall be subject to verification by CITY. CONSULTANT shall send all invoices to the City’s project manager at the address specified in Section 13 below. The City will generally process and pay invoices within thirty (30) days of receipt. SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be performed by CONSULTANT or under CONSULTANT’s supervision. CONSULTANT represents that it possesses the professional and technical personnel necessary to perform the Services required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subconsultants, if permitted, have and shall maintain during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All of the services to be furnished by CONSULTANT under this agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances. SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement. CONSULTANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services. Professional Services Rev. Nov. 1, 2011 SECTION 8. ERRORS/OMISSIONS. CONSULTANT shall correct, at no cost to CITY, any and all errors, omissions, or ambiguities in the work product submitted to CITY, provided CITY gives notice to CONSULTANT. If CONSULTANT has prepared plans and specifications or other design documents to construct the Project, CONSULTANT shall be obligated to correct any and all errors, omissions or ambiguities discovered prior to and during the course of construction of the Project. This obligation shall survive termination of the Agreement. SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works project, CONSULTANT shall submit estimates of probable construction costs at each phase of design submittal. If the total estimated construction cost at any submittal exceeds ten percent (10%) of the CITY’s stated construction budget, CONSULTANT shall make recommendations to the CITY for aligning the PROJECT design with the budget, incorporate CITY approved recommendations, and revise the design to meet the Project budget, at no additional cost to CITY. SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in performing the Services under this Agreement CONSULTANT, and any person employed by or contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act as and be an independent contractor and not an agent or employee of the CITY. SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any interest in this Agreement nor the performance of any of CONSULTANT’s obligations hereunder without the prior written consent of the city manager. Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any assignment made without the approval of the city manager will be void. SECTION 12. SUBCONTRACTING. CONSULTANT shall not subcontract any portion of the work to be performed under this Agreement without the prior written authorization of the city manager or designee. CONSULTANT shall be responsible for directing the work of any subconsultants and for any compensation due to subconsultants. CITY assumes no responsibility whatsoever concerning compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a subconsultant. CONSULTANT shall change or add subconsultants only with the prior approval of the city manager or his designee. SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign Craig Smith as the Project Manager to have supervisory responsibility for the performance, progress, and execution of the Services to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause the substitution of the project director, project coordinator, or any other key personnel for any reason, the appointment of a substitute project director and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY’s project manager. CONSULTANT, at CITY’s request, shall promptly remove personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the Professional Services Rev. Nov. 1, 2011 adequate or timely completion of the Project or a threat to the safety of persons or property. The City’s project manager is Romel Antonio, Utilities Department, Engineering Division, 1007 Elwell Court, Palo Alto, CA 94303, Telephone: (650)566-4518. The project manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. The CITY may designate an alternate project manager from time to time. SECTION 14. OWNERSHIP OF MATERIALS. Upon delivery, all work product, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials and copyright interests developed under this Agreement shall be and remain the exclusive property of CITY without restriction or limitation upon their use. CONSULTANT agrees that all copyrights which arise from creation of the work pursuant to this Agreement shall be vested in CITY, and CONSULTANT waives and relinquishes all claims to copyright or other intellectual property rights in favor of the CITY. Neither CONSULTANT nor its contractors, if any, shall make any of such materials available to any individual or organization without the prior written approval of the City Manager or designee. CONSULTANT makes no representation of the suitability of the work product for use in or application to circumstances not contemplated by the scope of work. SECTION 15. AUDITS. CONSULTANT will permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, CONSULTANT’s records pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. SECTION 16. INDEMNITY. 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. The acceptance of CONSULTANT’s services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. Professional Services Rev. Nov. 1, 2011 SECTION 18. INSURANCE. 18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit "D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY as an additional insured under any general liability or automobile policy or policies. 18.2. All insurance coverage required hereunder shall be provided through carriers with AM Best’s Key Rating Guide ratings of A-:VII or higher which are licensed or authorized to transact insurance business in the State of California. Any and all contractors of CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above. 18.3. Certificates evidencing such insurance shall be filed with CITY concurrently with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days’ notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the CONSULTANT’s receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Purchasing Manager during the entire term of this Agreement. 18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss caused by or directly arising and resulting from the negligent act or omissions of consultant, agents, employees or subcontractors, including such damage, injury, or loss arising after the Agreement is terminated or the term has expired. SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES. 19.1. The City Manager may suspend the performance of the Services, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior written notice thereof to CONSULTANT. Upon receipt of such notice, CONSULTANT will immediately discontinue its performance of the Services. 19.2. CONSULTANT may terminate this Agreement or suspend its performance of the Services by giving thirty (30) days prior written notice thereof to CITY, but only in the event of a substantial failure of performance by CITY. 19.3. Upon such suspension or termination, CONSULTANT shall deliver to the City Manager immediately any and all copies of studies, sketches, drawings, computations, and other Professional Services Rev. Nov. 1, 2011 data, whether or not completed, prepared by CONSULTANT or its contractors, if any, or given to CONSULTANT or its contractors, if any, in connection with this Agreement. Such materials will become the property of CITY. 19.4. Upon such suspension or termination by CITY, CONSULTANT will be paid for the Services rendered or materials delivered to CITY in accordance with the scope of services on or before the effective date (i.e., 10 days after giving notice) of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that portion of CONSULTANT’s services which are of direct and immediate benefit to CITY as such determination may be made by the City Manager acting in the reasonable exercise of his/her discretion. The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 19.4, 20, and 25. 19.5. No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Agreement. SECTION 20. NOTICES. All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows: To CITY: Office of the City Clerk City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 With a copy to the Purchasing Manager To CONSULTANT: Attention of the project director at the address of CONSULTANT recited above SECTION 21. CONFLICT OF INTEREST. 21.1. In accepting this Agreement, CONSULTANT covenants that it presently has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services. 21.2. CONSULTANT further covenants that, in the performance of this Agreement, it will not employ subconsultants, contractors or persons having such an interest. CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California. 21.3. If the Project Manager determines that CONSULTANT is a “Consultant” as that term is defined by the Regulations of the Fair Political Practices Commission, CONSULTANT shall be required and agrees to file the appropriate financial disclosure documents required by the Professional Services Rev. Nov. 1, 2011 Palo Alto Municipal Code and the Political Reform Act. SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. CONSULTANT acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the City’s Environmentally Preferred Purchasing policies which are available at the City’s Purchasing Department, incorporated by reference and may be amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of the City’s Zero Waste Program. Zero Waste best practices include first minimizing and reducing waste; second, reusing waste and third, recycling or composting waste. In particular, Consultant shall comply with the following zero waste requirements: • All printed materials provided by Consultant to City generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, shall be double-sided and printed on a minimum of 30% or greater post-consumer content paper, unless otherwise approved by the City’s Project Manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post-consumer material and printed with vegetable based inks. • Goods purchased by Consultant on behalf of the City shall be purchased in accordance with the City’s Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Office. • Reusable/returnable pallets shall be taken back by the Consultant, at no additional cost to the City, for reuse or recycling. Consultant shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. SECTION 24. NON-APPROPRIATION 24.1. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Agreement are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 25. MISCELLANEOUS PROVISIONS. 25.1. This Agreement will be governed by the laws of the State of California. Professional Services Rev. Nov. 1, 2011 25.2. In the event that an action is brought, the parties agree that trial of such action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California. 25.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties. 25.4. This document represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the parties. 25.5. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants of the parties. 25.6. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto will remain in full force and effect. 25.7. All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and will be deemed to be a part of this Agreement. 25.8 If, pursuant to this contract with CONSULTANT, City shares with CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d) about a California resident (“Personal Information”), CONSULTANT shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform City immediately upon learning that there has been a breach in the security of the system or in the security of the Personal Information. CONSULTANT shall not use Personal Information for direct marketing purposes without City’s express written consent. 25.9 All unchecked boxes do not apply to this agreement. 25.10 The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. 25.11 This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement on the date first above written. Professional Services Rev. Nov. 1, 2011 CITY OF PALO ALTO ____________________________ City Manager APPROVED AS TO FORM: __________________________ Senior Asst. City Attorney URS CORPORATION DBA URS CORPORATION AMERICAS By:___________________________ Name:_________________________ Title:________________________ Attachments: EXHIBIT “A”: SCOPE OF WORK EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION EXHIBIT “C-1”: SCHEDULE OF HOURLY RATES – CONSTUCTION MANAGMENT EXHIBIT “C-1A”: SCHEDULE OF HOURLY RATES – DESIGN EXHIBIT “D”: INSURANCE REQUIREMENTS Professional Services Rev. Nov. 1, 2011 EXHIBIT “A” SCOPE OF SERVICES TASK 1 – PROJECT MANAGEMENT CONSULTANT will provide the following project management services: 1. Invoicing a.The monthly invoice shall be itemized by task, by employee/classification hours worked and reimbursable expenses by type of expense. Subcontractor costs shall be similarly itemized by task, and the subcontractor’s invoice (with any backup data) shall be attached to the consultant’s invoice. b. Progress Report: Along with its monthly billing, the consultant shall provide a summary of the work done, and milestone accomplishments attained, during the corresponding billing period. 2. Work Plan and Project Schedule a.Project Schedule. Prepare and submit with the monthly invoice: i.A Work Breakdown Structure (WBS) chart identifying the required tasks and deliverables for the Project, ii.A Program Evaluation and Review Technique (PERT) chart scheduling logic, sequences, and duration of the tasks and deliverables including identifying the critical path of the schedule, iii.A Gantt chart in MS Project representing the duration of the Project tasks, deliverables and milestones against the progression of time and identifying critical path tasks. TASK 2 – DESIGN SERVICES CONSULTANT will provide the following design services: 1.Design Plans and Specifications: CONSULTANT will prepare plans and specification at the 90% and 100% stages of design. For each submittal CONSULTANT will provide 10 hardcopy sets and 2 electronic sets of the plans and specification for review and comment by City staff. 2.Bid Documents: CONSULTANT will provide 10 hardcopy sets of the bid package, 20 CD copies of the plans and specifications in PDF format and 2 electronic copies of the plans and specifications in AutoCAD (latest) and MS Word format. CONSULTANT shall work closely with the City’s Purchasing Department during this task to ensure all pertinent information is included in the bid package. Bid and Contract Award Services during bidding and award include: •Provide and submit bid documents to City’s Purchasing Division. •Preparation of addenda to be submitted to City’s Purchasing Division. Professional Services Rev. Nov. 1, 2011 •The printing and mailing of bid documents and addenda shall be coordinated with the City’s Purchasing Department, which has the responsibility to prepare the Information for Bidders (IFB) bid package. •Attend pre-bid meeting. •Bid analysis and recommendation for award. •Prepare a construction set of plans and specifications incorporating the addenda. •Provide 10 sets of conformed drawings and 2 CD copies of the conformed plans and specifications in MS Word and PDF format. 3.Meetings and Coordination during Design Phase: CONSULTANT will establish the meeting agenda beforehand (coordinating with engineering staff) and prepare and distribute meeting minutes. Meetings include: a.Project Kickoff Meeting: This will be the first formal meeting with City staff (e.g. Utilities Engineering and Operations, Open Space, etc.) and any outside stakeholders, to orient them on the project and exchange information. The meeting agenda will be prepared and distributed at least 2 days before the kickoff meeting. CONSULTANT shall distribute the work plan and a baseline project schedule before or during the meeting. b.Regular Project Meetings: CONSULTANT and City staff will meet regularly during design. We have assumed meetings will be bi-weekly. Meeting may be on-site or via tele-conference. c.90% Design Meeting: CONSULTANT will conduct a meeting with Engineering and/or Operations staff to explain the progress and pertinent issues, and to take verbal comments from City staff. TASK 3 – CONSTRUCTION MANAGEMENT AND SUPPORT CONSULTANT will provide the following Construction Management services: 1.Preconstruction Conference: CONSULTANT’s Design Project Manager and Construction Manager/Resident Engineer shall attend a Preconstruction Conference with the Contractor and City staff. CONSULTANT shall prepare the meeting agenda, conduct the meeting and submit meeting minutes to all attendees and the City within 7 calendar days of the meeting. 2.Construction Administration: CONSULTANT will furnish general administrative services to provide for organized execution of work and retrieval of information. Such services shall include the following: a. Contractor’s Payment Requests. i.Evaluate monthly progress payment requests from the Contractor and recommend payment. ii.Provide a brief written summary of the construction budget status transmitting the Contractor’s monthly Payment Request to the City. The transmittal sheet shall tabulate current and cumulative amounts expended and or remaining and the percentage of the overall budget expended. Professional Services Rev. Nov. 1, 2011 b. Review and approve the Contractor’s construction schedule, updates, and revisions in accordance with the contract documents. c. Issue Notice to Proceed. d.Correspondence and File Maintenance. i.Review and route project correspondence furnished by the Contractor. ii.Maintain Project Records: Maintain files of project records including daily logs, inspection reports, photos, measurement of quantities, construction effort, project costs, schedules and correspondence and documentation of all major decisions and actions. Logs, inspection reports and other items should be in hardcopy and electronic files. e.Prepare Monthly Reports: Prepare and submit to the CITY a monthly progress report including Construction progress summary and schedule; construction cash flow and payments; and summary logs for change orders, RFIs and RFPs. f.Claims Management: Identify potential claims and make recommendations to resolve them. 3.Field Services a.CONSULTANT/City Construction Review Meeting: On a weekly basis, before the Construction Progress Meeting for that week, meet with City project staff to walk the construction site and discuss the progress meeting agenda and construction issues, so that CONSULTANT and City staff are fully prepared for the progress meeting with a common understanding of the issues. Upon City request, CONSULTANT design staff from the various disciplines will be expected to attend the CONSULTANT/City and Construction Progress Meetings on an as needed basis to assist in resolving construction problems/issues and/or to inform City project staff as to technical considerations, potential long term impacts and/or possible alternatives to construction problems and/or issues. b. Construction Progress Meetings: The CONSULTANT’s Construction Manager/Resident Engineer shall schedule and run weekly Construction Progress Meetings at the job site with the Contractor and City staff. The weekly meetings will review construction progress and construction activities, and discuss and/or resolve construction questions and issues. 4.Inspection: CONSULTANT shall provide construction inspection to monitor that the Contractor’s work for compliance with the contract documents. a.Video Documentation. Prepare a video of initial site conditions prior to Contractor’s commencement of construction. Visual documentation shall be accompanied by verbal recorded description of existing conditions. b. Field Changes. Coordinate and document all field changes to the Drawings and Specifications. c.Specialty Inspections. Coordinate specialty inspection services such as structural, geotechnical, mechanical, electrical and instrumentation experts, as needed. Professional Services Rev. Nov. 1, 2011 d. Inspection Reports. Prepare Daily Inspection Reports and prepare a summary Weekly Inspection Report. The Construction Manager/Resident Engineer shall review the weekly reports prior to distribution to the City. e.Permits. Monitor Contractor compliance with construction permits. Assess and recommend course of action to City if the permit requirements are not being met by the Contractor. f.Monitor Construction Record Drawings. Monitor Contractor’s construction record drawings, making sure they are thorough, accurate and are updated regularly. 5.Testing a.Independent Compliance Testing. The Contractor is responsible for materials, concrete and soils compaction confirmation tests. However, periodic independent testing may be required for soils compliance tests and other field conditions. CONSULTANT has included in this proposal a budget allowance for independent testing by Consultant. b.The CONSULTANT’s Inspector shall be present at all equipment and material testing performed by the Contractor and/or the Manufacturer. 6. Review of Contractor’s Submittals: CONSULTANT will review shop drawing, product data, quality control, factory testing and manufacturer’s O&M manual submittals to verify conformance with the intent of the contract documents. Submittals shall be reviewed and marked-up with appropriate comments. CONSULTANT will provide one hardcopy of the reviewed submittal with the Contractor’s documentation, and an electronic copy of the Consultant’s submittal review comments. 7.Requests For Information (RFI): CONSULTANT will respond to Contractor’s Requests for Information (RFIs). RFIs shall be received by and tracked through the CM field office. The CONSULTANT Project Manager or his design team representative shall issue interpretations and clarifications of the contract documents and prepare sketches to clarify contract documents where necessary. 8.Change Order Requests: CONSULTANT will review changes to the contract requested by the Contractor in order to determine the validity of the request. If it a preliminary determination is made that the request is worthy of further review, the CONSULTANT’s Construction Manager/Resident Engineer shall issue a formal Request for Proposal (RFP) to the contractor. 9.Change Orders a. The CONSULTANT’s Construction Manager/Resident Engineer (CM/RE) shall receive the Proposed Change Order (PCO) from the Contractor and shall log each PCO onto a detailed spreadsheet for tracking purposes. In addition, the CM/RE shall evaluate the PCO for impact on design, construction methods and activities, cost, schedule, and environmental and public concerns. The Construction Manager will negotiate with the Contractor the cost and time extension of the Contract associated with the change order, and shall make a recommendation in writing to the City for acceptance or denial. An assessment and recommendation to approve the change shall be transmitted to the City which documents the scope of additional or deleted work, the Consultant’s estimate of cost impact and all other impacts of the change, and Professional Services Rev. Nov. 1, 2011 Professional Services Rev. Nov. 1, 2011 b.Where the PCO requires redesign, the CONSULTANT’s design staff shall prepare change order specifications, drawings, and/or sketches, along with an estimate of additional costs. c.Any field changes for which a change order is not issued will be checked by Construction Manager for general compliance with the intent of the design. 10.Final Testing and Startup a.The Construction Manager/Resident Engineer shall provide startup assistance, and coordinate any specified vendor training. b.Operations and Maintenance Manual. Prepare an operations and maintenance manual for the new equipment constructed under this project. The organization, format, and layout of the Manual shall be coordinated with the City. c.Provide process operation training during startup. This training does not replace the individual equipment manufacturer training provided by the Contractor. 11.Construction Project Closeout: It is CONSULTANT understands that there will be a separate construction project closeout for each of the two construction projects. a.Project Completion. The Construction Manager/Resident Engineer shall schedule and conduct project completion inspections, issue punch lists, and recommend final acceptance by the City. The Consultant Project Manager and required discipline engineers shall be present during the final project “walk-through” inspections with the Construction Manager/Resident Engineer and the City. b.Final Report. The Consultant shall prepare a Final Report that includes: Summary of the work performed including change orders, project cost and schedule analysis, closeout and acceptance documentation, and final resolution of any claims or disputed work. c.Provide a complete set of all records of the project, indexed and properly filed, and a listing of warranties provided under the project including the items covered and the warranty duration. d.As-Built Record Drawings. CONSULTANT will provide 5 hardcopy sets, one set of Mylar reproducible drawings and a CD(s) containing AutoCAD files of the Construction Record Drawings. Construction Record Drawings will be prepared from field markups, verified by the Construction Manager/Resident Engineer, provided by the Contractor. TASK 4 – DISPUTE RESOLUTION CONSULTANT will provide additional miscellaneous specialty services when requested by the City’s Project Manager. Miscellaneous additional services, which may be required, include but are not limited to: specialized inspection and testing services, expert witness, additional but unforeseen and unanticipated project design and construction-related work. EXHIBIT “B” SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services so as to complete each milestone within the number of days/weeks specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed. Milestones Completion No. of Days/Weeks From NTP 1. Task One - Project Management 2. Task Two - Design 3. Task Three – Construction Management & Support 4. Task Four – Dispute Resolution 36 months Professional Services Rev. Nov. 1, 2011 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. Compensation shall be calculated based on the hourly rate schedule attached as exhibit C-1 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” (“Basic Services”) and reimbursable expenses shall not exceed $1,009,854.00. 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 $1,110,839.00. 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 Services, including reimbursable expenses, does not exceed $1,009,854.00 and the total compensation for Additional Services does not exceed $100,985.00 BUDGET SCHEDULE NOT TO EXCEED AMOUNT Task 1 $42,133.00 (Project Management) Task 2 $95,792.00 (Design) Task 3 $863,811.00 (Construction Management & Support) Task 4 $8,113.00 (Dispute Resolution) Sub-total Basic Services $1,009,854.00 Total Basic Services and Reimbursable expenses $1,009,854.00 Additional Services (Not to Exceed) $100,985.00 Maximum Total Compensation $1,110,839.00 Professional Services Rev. Nov. 1, 2011 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: 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 $250.00 shall be approved in advance by the CITY’s project manager. 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. 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 Professional Services Rev. Nov. 1, 2011 EXHIBIT “C-1” HOURLY RATE SCHEDULE - CONSTRUCTION MANAGEMENT RATES Professional Services Rev Nov. 1, 2011 2014 SCHEDULE OF FEES AND CHARGES FOR PROGRAM, PROJECT AND CONSTRUCTION MANAGEMENT SERVICES, SAN FRANCISCO, CA The following describes the basis for compensation for service performed from January 1, 2014 to December 31, 2014. This Schedule of Fees and Charges will be adjusted annually on January 1 of each subsequent year to reflect merit and economic salary increases, and changes in the expected level and mode of operations for the new year: The new Schedule of Fees and Charges will apply to existing and new assignments. PERSONNEL CHARGES The charge for all time required in the performance of the Scope of Service, including office and travel time, will be at the Unit Price Hourly rates set forth below for the labor classifications indicated. Labor Classification Hourly Rate Principal $275 Program Manager $240 Senior Project Manager $200 Project Manager $180 Controls Manager $190 Assistant Project Manager $150 Senior Project Engineer $130 Project Engineer $105 Senior Construction Manager $180 Construction Manager $160 Senior Inspector 1,*$135 Inspector 1,*$110 Senior Cost Engineer/Estimator $150 Cost Engineer/Estimator $125 Senior Scheduling Engineer $150 Scheduling Engineer $125 Field Engineer $125 Contracts Manager $150 Contracts Administrator $110 Systems Manager $125 PC Technician/MIS *$90 Graphics Specialist *$90 Field Technician 1,*$85 Support Staff *$80 URS LABORATORY SERVICES AND SPECIALIZED EQUIPMENT CHARGES Charges for laboratory services and testing equipment will be charged at standard usage rates. Rate schedules are available upon request. SUBCONSULTANTS AND OTHER PROJECT COSTS The administrative and markup cost of processing subconsultant invoices and other direct costs (ODCs) incurred by URS on the project will be charged at cost plus 10% Document Reproduction In-house reproduction of letter-sized pages will be charged at $0.10 a page for black and white and $1.50 a page for color. Larger sized pages will be $2.50 a page. Vehicles and Mileage The mileage charge for personal vehicles used on project assignments will be the current mileage rate established by the Internal Revenue Service for tax purposes. 1. Positions within these categories may be subject to Prevailing Wages as determined by the Department of Industrial Relations. * Overtime (hours worked in excess of eight (8) hours per day) by exempt personnel will be charged at the above straight time hourly rate. Overtime by non- exempt personnel (classifications identified by an asterisk “*”) will be charged at 1.5 times the above hourly rates. This fee schedule contains confidential URS business information and is not to be copied or distributed for any purpose other than the use intended in this contract or proposal. EXHIBIT “C-1A” HOURLY RATE SCHEDULE - DESIGN RATES Professional Services Rev Nov. 1, 2011 URS CORPORATION BAY AREA OPERATIONS 2014 SCHEDULE OF FEES AND CHARGES The following describes the basis for compensation for services performed during the fiscal year 2014. This Schedule of Fees and Charges will be adjusted annually on January 1st to reflect merit and economic salary increases, and changes in the expected level and mode of operations for the new year. The new Schedule of Fees and Charges will apply to existing and new assignments. PERSONNEL CHARGES The charge for all time required in the performance of the Scope of Services, including office, field and travel time, will be at the Unit Price Hourly Rates set forth below for the labor classifications indicated. Labor Classification Hourly Rates Clerk*55 Staff Administrator* 77 Word Processor/Project Assistant/Editor* 100 CADD Technician/Illustrator* 87 Project Administrator/Controller 114 Technician*89 Sr. CADD Technician/Sr. Illustrator/Designer* 128 Sr. Technician* 124 Sr. Designer/Lab, Field, or CADD Supervisor 142 Staff Professional 100 Professional 137 Project Professional 168 Senior Project Professional 192 Consulting Project Professional 216 Project Manager 195 Senior Project Manager 224 Principal Professional/Project Director 263 Charges for contract personnel under URS supervision and using URS facilities will be made according to the hourly rate corresponding to their classification. When staffs are performing field work on projects, a minimum daily charge of 4 hours will apply. When URS staff appear as expert witnesses at court trials, arbitration hearings and depositions, their time will be charged at $375 per hour. Overtime (hours worked in excess of eight (8) hours per day) by exempt personnel will be charged at the above straight time hourly rate. Overtime by non-exempt personnel (classifications identified by an asterisk “*”) will be charged at 1.5 times the above hourly rates. URS LABORATORY SERVICES The charges for laboratory testing performed at URS facilities set forth in the accompanying Signet Testing Labs Fee Schedule. OTHER PROJECT CHARGES Subcontracts and other Non-Salary Expenses The cost of services subcontracted by URS to others and other outside costs incurred by URS that are directly identifiable to the project, will be charged at cost plus 10%. Document Reproduction In-house reproduction will be charges a $0.10 per page for black and white, and $1.00 per page for color. In addition to the above, the following charges will apply to plots generated by the CADD and GIS systems. Plot Size Paper Mylar Smaller than D-size $3.00 $9.00 D-size $6.00 $18.00 Larger than D-size $1.00/ft2 $3.50/ft2 Specialized Equipment The use of specialized URS equipment will be the fixed rental rates consistent with prevailing market rates. Vehicles and Mileage The mileage charges for personal vehicles used on project assignments will be the current mileage rate established by the Internal Revenue Service for tax purposes. URS owned vehicles used on project assignments will be charged at $90 per day, with a minimum charge of one- half day. This Fee Schedule contains confidential business information and is not to be copied or distributed for any purpose other than the use intended in this contract. EXHIBIT “D” 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 WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: REQUIRED TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURRENCE AGGREGATE YES YES WORKER’S COMPENSATION EMPLOYER’S LIABILITY STATUTORY STATUTORY YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON-OWNED BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE 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 (30) DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A BLANKET CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS AND SIRS RANGE FROM $10 TO $25 MILLION DOLLARS. II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. B. CROSS LIABILITY Professional Services Rev Nov. 1, 2011 THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. NOTICES SHALL BE MAILED TO: PURCHASING AND CONTRACT ADMINISTRATION CITY OF PALO ALTO P.O. BOX 10250 PALO ALTO, CA 94303 Professional Services Rev Nov. 1, 2011 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 WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: REQUIRED TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURRENCE AGGREGATE YES YES WORKER’S COMPENSATION EMPLOYER’S LIABILITY STATUTORY STATUTORY YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON-OWNED BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE 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 BLANKET CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS RANGE FROM $10 - $25 MILLION DOLLARS. II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. B. CROSS LIABILITY Rev. 11/07 INSURANCE REQUIREMENTS THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. NOTICES SHALL BE MAILED TO: PURCHASING AND CONTRACT ADMINISTRATION CITY OF PALO ALTO P.O. BOX 10250 PALO ALTO, CA 94303. Rev. 11/07 The original contract for this project included assessment, design and construction management services for seismic upgrades of six existing reservoirs (Mayfield, Corte Madera, Boronda, Park, Dahl and Montebello Reservoirs), recoating of four steel tank reservoirs (Corte Madera, Park, Dahl and Montebello Reservoirs) and rehabilitation of three receiving stations (Page Mill, Arastradero and California Receiving Stations). All assessment activities were completed by the consultant (URS Corporation) as part of the original contract which including Amendment 1 was for a total of $567,053. In addition to this, the consultant provided design and construction management services for the Mayfield Reservoir work and is in the process of providing design and construction management services for the Boronda Reservoir work as part of the original contract. Due to recently identified operational constraints and unforeseen conditions in the field, additional design and construction management services are required to see the project through to completion. Because these additional services have doubled the cost of the project, the City issued a Request for Proposal (RFP) for the remaining work in December 2013. URS Corporation was the only consulting firm that provided a proposal in conjunction with this RFP. URS Corporation will provide all design and construction management services for the remaining four steel tanks and three receiving stations work which the proposed cost in this CMR is for $1,009,854 plus 10% contingency ($100,985). City staff anticipates construction on this project to begin in early 2015. The consultant will provide project management, design and construction management services for the coating and seismic upgrades of four steel tank reservoirs and three receiving stations. Since the design was 70% completed as part of the original contract, URS Corporation will complete the design and assist the City with bidding services. In addition, URS Corporation will provide additional construction management and inspections during the construction period. City staff has requested that URS Corporation provide an on-site inspector at least three days a week during construction. This contract will also allow URS Corporation to provide additional services for unforeseen issues that may arise in the field during construction. Consultant services for this project were planned. Current staffing levels and the level of expertise needed for design and construction management of this project prevents City staff from being able to perform this work ourselves. Funds for the original contract were approved by Council in March 2010. A Request for Proposal (RFP) was issued by the Purchasing Department for this work in December 2013. The RFP was out for bid for approximately four weeks. Because of their experience and working knowledge of City’s water system, URS Corporation was the only firm to submit a proposal for this project. Other firms indicated that their costs would be much higher than URS Corporation because they would need to put in a lot of time upfront to review the assessment documents and 70% design plans provided by URS Corporation. URS Corporation is currently working on two projects (Well Rehabilitation Project & Seismic Upgrade Project) with the City of Palo Alto Utilities Department. In addition, URS Corporation is working with the San Francisco Public Utilities Commission (SFPUC) on rehabilitating and retrofitting Sutro Reservoir and East Bay Municipal Utility District on retrofitting all of their existing reservoirs. The City of Palo Alto’s Utility Department has been pleased with the performance of URS Corporation on the two current projects (Well Rehabilitation Project & Seismic Upgrade Project). In addition, both SFPUC and EBMUD have indicated that URS Corporation has done an excellent job in both engineering and construction management for their projects. The term of this agreement is approximately 3 years. The Utilities Department is anticipating this project to be completed by February 15, 2017. Costs were determined based on assessment hours, design hours, project management and construction management efforts needed to see the project through to completion. Staff does not anticipate the need for any amendments to the agreement at this time. None. City of Palo Alto (ID # 4628) City Council Staff Report City of Palo Alto Page 1 Report Type: Consent Calendar Meeting Date: 4/7/2014 Summary Title: City Auditor Employment Agreement Title: Appointment of City Auditor and Approval of Employment Agreement From: City Manager Lead Department: Human Resources Recommended Motion Move to appoint Ms. Harriet Richardson as City Auditor, with a start date of April 15, 2014, and approve the attached Employment Agreement including a salary of $167,500. Recommendation and Discussion After a national search and interviews of a number of finalists, the has Council selected Harriet Richardson to serve as Palo Alto’s City Auditor. Ms. Richardson brings extensive experience in government auditing, including with the City of Berkeley, Washington State, Atlanta, Georgia, and the City and County of San Francisco, Attached is an at-will Employment Agreement setting terms of employment, including a salary of $167,500. Resource Impact The FY 2014 Adjusted Budget for the City Auditor’s Office is sufficient to cover the costs of this employment contract. Environmental Review City of Palo Alto Page 2 Appointment of the City Auditor and approval of the Employment Agreement will not result in any environmental impact. Attachment: Employment Agreement Between City of Palo Alto and Harriet Richardson Attachments: PDF Employment Auditor-Richardson-3_27_14 v2 (PDF) 1 111108 sh 8261759 EMPLOYMENT AGREEMENT BETWEEN CITY OF PALO ALTO AND HARRIET RICHARDSON THIS AGREEMENT is between the City of Palo Alto, a municipal corporation and chartered city (“City”) and Harriet Richardson (“Richardson”). It is effective on the latest date next to the signatures on the last page. This Agreement is entered into on the basis of the following facts: A. City, acting by and through its City Council, wishes to employ Richardson as its City Auditor, subject to the terms and conditions set forth in this Agreement, the Palo Alto Municipal Code and the Charter of the City of Palo Alto (the “Charter”). B. Under the Charter, the City Auditor is appointed by and serves at the pleasure of the City Council. Notwithstanding any provision of the City of Palo Alto Merit System Rules and Regulations, the City Auditor serves on an at-will basis, with no expectation of continued employment, and with no right to pre-or post-separation due process or appeal. C. Richardson desires to be employed by the City as its City Auditor, subject to the terms and conditions in this Agreement, the Palo Alto Municipal Code, the Charter, the Palo Alto Merit System Rules and Regulations as they are applicable to Council-appointed officers, and all other applicable laws, resolutions, and policies. D. The City and Richardson wish to establish specific terms and conditions relating to compensation and benefits, performance evaluations, and related matters. BASED UPON THE FOREGOING, THE CITY AND RICHARDSON AGREE AS FOLLOWS: 1. Employment. The City appoints Richardson as its City Auditor for an indefinite term to begin on __________, 2014. If Richardson does not actually report for or start work on __________, 2014, the employment start date will be the date, if any, that is mutually agreed by the parties. 2. Duties of the City Auditor. Richardson will perform the duties established for the City Auditor by the Charter, the Palo Alto Municipal Code, direction given by the City Council, and as otherwise provided by law, ordinance, or regulation. Richardson agrees to comply with all federal, state and local laws, ordinances, rules and regulations applicable to or associated with these duties. 2.1. Full Energy and Skill. Richardson will devote her full energy, skill, ability, and productive time to the performance of her duties. 2 111116 sh 8261759 2.2. No Conflict. Richardson will not engage in any employment, activity, consulting service, or other enterprise, for compensation or otherwise, which is actually or potentially in conflict with or which interferes with the performance of her duties. Richardson acknowledges that she is subject to the various conflict of interest requirements found in the California Government Code and state and local policies and regulations. 2.3 Permission Required For Outside Activities. Richardson will not engage in any employment, activity, consulting service, or other enterprise, for compensation or not, without written permission of the City Council. 3. Compensation. While performing the duties of City Auditor, Richardson will be compensated as provided in this Section 3. 3.1. Compensation. Richardson will receive an initial gross base annual salary of One Hundred Sixty Seven Thousand Five Hundred Dollars ($167,500.00), beginning on the Employment Start Date. This amount is subject to authorized or required deductions and withholding, prorated and paid on City’s regular paydays. Richardson is an exempt employee under applicable wage and hour law and her base salary shall be compensation for all hours worked. The City agrees that the amount of Richardson’s base annual salary will not decrease, except as part of a permanent decrease that is consistent with the Fair Labor Standards Act and that is applicable to either all Council Appointed Officers or all City Executive Staff (including Council Appointed Officers). 3.2. Salary Adjustments. Not less than once each year, the City Council will meet with Richardson for the purpose of evaluating her performance. The City Council will act in good faith in determining whether to increase the salary of Richardson, but the ultimate decision in this regard is within the sole discretion of the City Council. 4. Benefits and Allowances. Richardson will be eligible for, and shall receive, all regular benefits (i.e., health insurance, PERS contributions to the extent paid by the City, etc.) and vacation, sick leave, and management leave, as are generally provided to management employees under the City Council-approved Compensation Plan for Management and Professional Personnel and Council Appointees, as it currently exists and may be changed from time to time. 5. Additional Benefits and Allowances. In addition to the benefits specified in section 4, Richardson will receive the following additional benefits and allowances: 5.1. Parking. The City will provide parking at the Civic Center at no cost to Richardson. 5.2. Deferred Compensation. The City will pay a total of Five Hundred Dollars ($500.00) per month into an Internal Revenue Code section 457 deferred compensation plan or an Internal Revenue Code section 401(a) defined contribution plan established for Richardson. Richardson will specify how the payment is to be divided between the two plans. The City shall take all actions necessary to establish the section 401(a) plan with ICMA- 3 111116 sh 8261759 Retirement Corporation, or other mutually acceptable trustee, for the benefit of Richardson, including any administrative or setup fees. 5.3. Vacation Accrual. Notwithstanding the Management and Professional Personnel and Council Appointees Compensation Plan and based on service with prior public agency employers, Richardson’s vacation accrual rate will be calculated at the rate of one hundred and sixty (160) hours annually, prorated and credited each pay period. The maximum vacation leave balance allowed for Richardson is four hundred and eighty (480) hours. 5.5. Sick Leave Accrual. Richardson will accrue sick leave at a rate of 3.7 hours per bi-weekly pay period based on a forty-hour per designated workweek schedule. Richardson may, if necessary, use up to forty-eight hours of sick leave at any time during the first six months of employment. Use of sick leave shall be subject to the policies and procedures set forth in the Merit System Rules and Regulations. 5.6. Relocation and Temporary Housing Expenses. The City will provide Richardson with a total amount not to exceed five thousand dollars ($5,000) for relocation and temporary housing expenses, paid on a reimbursement basis for actual costs incurred. The City shall reimburse Richardson for relocation expenses actually incurred as described in Section B (“Basic Package”) and C (“Optional Package”) of the City’s Relocation Expense Policy (Policy & Procedure 2-08). 6. Additional Expenses of Employment. The City shall pay the cost of any fidelity or other bonds required by law for the City Auditor. 7. Duration of Employment. Richardson understands and agrees that she has no constitutionally protected property or other interest in her employment as City Auditor. Richardson waives any and all rights, if any, under the Merit System Rules and Regulations, including without limitation, the right to pre-or post-disciplinary due process. Richardson understands and agrees that she works at the will and pleasure of the City Council and that she may be terminated or asked to resign at any time, with or without cause. Richardson may terminate this agreement (terminating all employment) upon 30 days written notice to the City Council. 7.1. Severance Pay. If Richardson is asked to resign or is terminated as City Auditor she shall receive a cash severance payment or payments (without interest) at intervals specified by Richardson, equaling three (3) months salary and benefits at the date of termination. The monthly non-salary benefits shall be those specified in sections 4 and 5. All normal withholdings as required by law shall be made with respect to any amounts paid under this section. 7.2 Non-Payment of Severance Under Certain Conditions. If the City terminates Richardson for conduct that would otherwise constitute a felony, regardless of whether Richardson is actually convicted on a felony charge, the City shall not owe and Richardson shall not receive any severance pay. 4 111116 sh 8261759 8. Miscellaneous. 8.1. Notices. Notices given under this Agreement shall be in writing and shall be either: a) served personally; or b) sent by facsimile (provided a hard copy is mailed within one (1) business day); or c) delivered by first-class United States mail, certified, with postage prepaid and a return receipt requested; or d) sent by Federal Express, or some equivalent private mail delivery service. Notices shall be deemed received at the earlier of actual receipt or three (3) days following deposit in the United States mail, postage prepaid. Notices shall be directed to the addresses shown below, provided that a party may change such party’s address for notice by giving written notice to the other party in accordance with this subsection. CITY: Attn: Mayor City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 Phone: (650) 329-2226 Fax: (650) 328-3631 RICHARDSON: Harriet Richardson 250 Hamilton Avenue Palo Alto, CA 94301 8.2. Entire Agreement/Amendment. This Agreement constitutes the entire understanding and agreement between the parties as to those matters contained in it, and supersedes any and all prior or contemporaneous agreements, representations and understandings of the parties. This Agreement may be amended at any time by mutual agreement of the parties, but any such amendment must be in writing, dated, and signed by the parties and attached hereto. 8.3. Applicable Law and Venue. This Agreement shall be interpreted according to the laws of the State of California. Venue of any action regarding this Agreement shall be in the proper court in Santa Clara County. 8.4. Severability. In the event any portion of this Agreement is declared void, such portion shall be severed from this Agreement and the remaining provisions shall remain in effect, unless the result of such severance would be to substantially alter this Agreement or the obligations of the parties, in which case this Agreement shall be immediately terminated. 8.5. Waiver. Any failure of a party to insist upon strict compliance with any term, undertaking, or condition of this Agreement shall not be deemed to be a waiver of such term, undertaking, or condition. To be effective, a waiver must be in writing, signed and dated by the parties. 8.6. Representation by Counsel. Richardson and the City acknowledge that they each did, or had the opportunity to, consult with legal counsel of their respective choices with respect to the matters that are the subject of this Agreement prior to executing it. 5 111116 sh 8261759 8.7. Section Headings. The headings on each of the sections and subsections of this Agreement are for the convenience of the parties only and do not limit or expand the contents of any such section or subsection. Dated: _______________ CITY OF PALO ALTO By Nancy Shepherd, Mayor Dated: _______________ RICHARDSON Harriet Richardson ATTEST: City Clerk APPROVED AS TO FORM: By: City Attorney City of Palo Alto (ID # 4606) City Council Staff Report Report Type: Action Items Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: PUBLIC HEARING: TEFRA Hearing Regarding Conduit Financing for The Stevenson House Project Title: PUBLIC HEARING: TEFRA Hearing Regarding Conduit Financing for the Stevenson House Project Located at 455 East Charleston Road Palo Alto, and Approving the Issuance of Revenue Bonds by the California Municipal Finance Authority for the Purpose of Financing the Acquisition and Rehabilitation of a Multifamily Rental Housing Facility From: City Manager Lead Department: Administrative Services Recommended Motion Staff recommends that Council consider the following motion: to adopt a resolution approving the issuance of the bonds by the California Municipal Finance Authority (CMFA) for the benefit of Palo Alto Senior Housing Project, Inc. Stevenson House LP (Borrower). Recommendation Staff recommends that Council: 1) Conduct a public hearing under the requirements of the Tax Equity and Fiscal Responsibility Act of 1983 (TEFRA) and the Internal Revenue Code of 1986, as amended (Code); and 2) Adopt a resolution (Attachment A) approving the issuance of the bonds by the California Municipal Finance Authority (CMFA) for the benefit (Borrower). Executive Summary The City has received a request to conduct a TEFRA hearing in order for the Stevenson House LP to issue tax exempt bonds (through a conduit agency) to acquire and rehabilitate a 120 unit multifamily rental housing facility for seniors. Per federal law, a local jurisdiction must pass a resolution approving the issuance of these bonds. Staff recommends approval of the City of Palo Alto Page 2 resolution. The City bears no financial, legal or moral liability for these bonds. Background The Related Companies of California, working with the Palo Alto Senior Housing Project, Inc., (PASHPI) a California nonprofit public benefit corporation, requested that the CMFA serve as the municipal issuer of bonds for the Stevenson House project in an aggregate principal amount not to exceed $23,000,000 of tax exempt revenue bonds. Proceeds from the issuance of the bonds will be used to: (1) finance the acquisition and rehabilitation of a 120 unit multifamily rental housing facility for seniors located at 455 East Charleston Road in the City of Palo Alto, known as Stevenson House; and (2) pay certain expenses incurred in connection with the issuance of the Bonds. The facility to be financed is to be owned by PASHPI Stevenson House LP, a California limited partnership. The facility will be managed by the Borrower or another entity selected by the Borrower. All or a portion of the rental units in the facility will be rented to seniors of low or very low income. In order for all or a portion of the bonds to qualify as tax-exempt bonds, the City of Palo Alto must conduct a public hearing (TEFRA Hearing), providing the members of the community an opportunity to speak in favor of or against the use of tax-exempt bonds for the financing of the project. Prior to the hearing, reasonable notice must be provided to the members of the community. Following the close of the TEFRA hearing, an “applicable elected representative” of the governmental unit hosting the proposed project must provide its approval of the issuance of the bonds for the financing of the project. Discussion Since the facilities to be financed with the proceeds of the CMFA’s debt are located within the jurisdiction of the City of Palo Alto, the City has been asked to conduct a TEFRA hearing and adopt a resolution (Attachment A) that approves both the issuance of bonds by the CMFA for the benefit of PASHPI Stevenson House LP. As cited in the published notice of March 21, 2014 in the Palo Alto Weekly, the public hearing is simply an opportunity for all interested persons to speak or to submit written comments concerning the proposal to issue the debt and the nature or location of the facility to be financed; however there is no formal obligation on the part of the borrower or the Council to respond to any specific comments made during the hearing or submitted in writing. The bonds are intended to finance the acquisition, and rehabilitation of a multifamily rental housing facility located at 455 East Charleston Road, Palo Alto, California 94306. City of Palo Alto Page 3 The CMFA is a joint exercise of powers authority that the City became a member of on April 14, 2008. The Joint Exercise of Powers Agreement provides that the CMFA is a public entity, separate and apart from each member executing such agreement. The debts, liabilities and obligations of the CMFA do not constitute debts, liabilities or obligations of the members executing such agreement. The bonds to be issued by the CMFA for the project will be the sole responsibility of the borrower, and the City of Palo Alto will have no financial, legal, moral obligation, liability or responsibility for the project or the repayment of the bonds for the financing of the project. All financing documents with respect to the issuance of the bonds will contain clear disclaimers that the bonds are not obligations of the City of Palo Alto or the State of California but are to be paid for solely from funds provided by the borrower. The City is in no way exposed to any financial liability by reason of its membership in the CMFA. In addition, participation by the City in the CMFA does not impact the City’s appropriations limits and will not constitute any type of indebtedness by the City. Outside of holding the TEFRA hearing, adopting the required resolution, no other participation or activity of the City or the City Council with respect to the issuance of the bonds will be required. Based on the benefits of the project to the Palo Alto community and the lack of any financial obligations on the part of the City, staff recommends that Council approve the attached resolution. Resource Impact As stated, the City will incur no financial obligation from approval of the recommendations. The Related Companies of California, working with the Palo Alto Senior Housing Project, Inc. is requesting authority to issue up to $23 million in bonds through the CMFA. The City will receive a fee for its services when the bonds are issued. The City would receive approximately $12,500 if the par amount of the bonds issued is $20 million. Policy Implications Actions recommended in this report are consistent with Council’s prior actions in supporting non-profit financings under the TEFRA (e.g., approving tax-exempt financing through the California Municipal Finance Authority for the Stevenson House project, CMR: 184:08). Environmental Review Action on this item does not constitute a project under Section 21065 of the Public Resources Code. Attachments: Attachment A: Resolution Stevenson House TEFRA (PDF) NOT YET APPROVED Resolution No. ______ Resolution Of The Council Of The City Of Palo Alto Approving The Issuance Of Multifamily Housing Revenue Bonds By The California Municipal Finance Authority For The Purpose Of Financing The Acquisition And Rehabilitation Of A Multifamily Rental Housing Facility Known As Stevenson House A. Pursuant Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “Act”), certain public agencies (the “Members”) have entered into a Joint Exercise of Powers Agreement, effective on January 1, 2004 (the “Agreement”) in order to form the California Municipal Finance Authority (the “Authority”), for the purpose of promoting economic, cultural and community development, and in order to exercise any powers common to the Members, including the issuance of bonds, notes, or other evidences of indebtedness. B. The City of Palo Alto (the “City”) is a member of the Authority. C. The Authority is authorized to issue and sell revenue bonds for the purpose, among others, of financing or refinancing the acquisition, construction and rehabilitation of multifamily rental housing projects. D. The Related Companies of California, working with the Palo Alto Senior Housing Project, Inc., a California nonprofit public benefit corporation, has requested that the Authority issue one or more series of revenue bonds in an aggregate principal amount not to exceed $23,000,000 (the “Bonds”), and lend the proceeds of the Bonds to PASHPI Stevenson House LP, a California limited partnership (the “Borrower”) for the purpose of financing the costs of the acquisition and rehabilitation of a 120 unit multifamily residential rental housing facility for seniors located at 455 East Charleston Road in the City known as Stevenson House (the “Project”), to be owned by the Borrower and to be operated by the Borrower or another entity selected by the Borrower. E. In order for the interest on Bonds to be tax-exempt, section 147(f) of the Internal Revenue Code of 1986, as amended (the “Code”) requires that an “applicable elected representative” of the governmental unit, the geographic jurisdiction of which contains the site of Project to be financed with the proceeds of the Bonds, hold a public hearing on the issuance of the Bonds and approve the issuance of the Bonds following such hearing. F. The Authority has determined that the City Council (the “Council”) is an “applicable elected representative” for purposes of holding such hearing. G. The Authority has requested that the Council approve the issuance of the Bonds by the Authority in order to satisfy the public approval requirements of section 147(f) of the Code and the requirements of Section 4 of the Agreement. 1 140305 jb 0131185 NOT YET APPROVED H. Notice of such public hearing has been duly given as required by the Code and the Council has heretofore held such public hearing at which all interested persons were given an opportunity to be heard on all matters relative to the financing of the Project and the and the Authority’s issuance of the Bonds therefore, and the Council now desires to approve the issuance of the Bonds by the Authority. The City Council of the City of Palo Alto RESOLVES as follows: SECTION 1: The Council hereby approves the issuance of the Bonds by the Authority for the purpose of providing funds to make a loan to the Borrower to enable the Borrower to finance costs of the Project. It is the purpose and intent of the Council that this Resolution constitute approval of the issuance of the Bonds (a) by the “applicable elected representative” of the governmental unit having jurisdiction over the area in which the Project is located in accordance with section 147(f) of the Code, and (b) by the Council in accordance with Section 4 of the Agreement. SECTION 2: The issuance of the Bonds shall be subject to approval of the Authority of all financing documents relating thereto to which the Authority is a party. The City shall have no responsibility or liability whatsoever with respect to repayment or administration of the Bonds. SECTION 3: The adoption of this Resolution shall not obligate the City or any department thereof to (i) provide any financing to acquire or rehabilitate the Project; (ii) approve any application or request for or take any other action in connection with any planning approval, permit or other action necessary for the acquisition, rehabilitation or operation of the Project; (iii) make any contribution or advance any funds whatsoever to the Authority; or (iv) take any further action with respect to the Authority or its membership therein. SECTION 4: The officers of the City are hereby authorized and directed to do any and all things and to execute and deliver any and all agreements, documents and certificates which they deem necessary or advisable in order to carry out, give effect to and comply with the terms and intent of this Resolution and the financing transaction approved hereby. SECTION 5: The City Clerk is hereby directed to forward a certified copy of this Resolution to the bond counsel for the Bonds, addressed as follows: Paul J. Thimmig, Esq. Quint & Thimmig LLP 900 Larkspur Landing Circle, Suite 270 Larkspur, CA 94339-1726 2 140305 jb 0131185 NOT YET APPROVED SECTION 6: This Resolution shall take effect immediately upon its adoption. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ____________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ___________________________ Senior Assistant City Attorney City Manager or Designee ___________________________ Director of Administrative Services 3 140305 jb 0131185 City of Palo Alto (ID # 4643) City Council Staff Report Report Type: Action Items Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: PUBLIC HEARING: TEFRA Hearing for the Stanford Affordable Apartments Project Title: PUBLIC HEARING: TEFRA Hearing Regarding Conduit Financing for the Stanford Affordable Apartments Project Located at 2450, 2470 AND 2500 El Camino Real Palo Alto, and Approving the Issuance of Revenue Bonds by the California Municipal Finance Authority for the Purpose of Financing the Acquisition, Construction and Development of a Multifamily Rental Housing Facility (Staff requests this item be continued to a date uncertain) From: City Manager Lead Department: Administrative Services Staff recommends that the following item/hearing (ID #4605) be pulled from City Council’s April 7, 2014 agenda: PUBLIC HEARING: TEFRA Hearing Regarding Conduit Financing for the Stanford Affordable Apartments Project Located at 2450, 2470 AND 2500 El Camino Real Palo Alto, and Approving the Issuance of Revenue Bonds by the California Municipal Finance Authority for the Purpose of Financing the Acquisition, Construction and Development of a Multifamily Rental Housing Facility It was learned early this week that this project has not yet received all of the City reviews and required approvals to move forward. Once the project has completed these, a TEFRA hearing will be rescheduled and a newspaper posting to that effect will be republished. City of Palo Alto (ID # 4620) City Council Staff Report Report Type: Action Items Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: Renaming Main Library Title: From Policy and Services Committee: Staff Requests Direction From Council on the Naming of the Main Library and Colleagues' Memo from Council Members Klein and Price Regarding the Renaming(Continued from March 3, 2014) From: City Manager Lead Department: Library Recommendation Staff seeks direction regarding selection of a possible new name for the Main Library as described in the Discussion section. Background On August 23 and September 27, 2012, Library Advisory Commission (LAC) discussed possibilities for renaming the Main Library and recommended “Rinconada” to tie into the neighboring park while reflecting the history of the land grant name for that area. On June 13, 2013, the Palo Alto Historical Association Board reviewed the suggested change and confirmed the historical accuracy and appropriateness of that name choice. Following the City’s procedure for renaming resources, the LAC submitted the proposal to City Council for consideration at its September 9, 2013 meeting. Council then referred the issue to Policy and Services Committee for direction and action. Based on the outcome of the vote at the December 10, 2013 Policy and Services Committee meeting, the matter was sent back to the City Council for consideration and direction. At its regular December 19, 2013 meeting, the LAC reaffirmed its recommendation of the name “Rinconada” as an appropriate suggestion and seeks Council approval for this change. Discussion In 2012, the Library Advisory Commission (LAC) discussed the subject of renaming the Main Library at two meetings, reviewing historical names from Palo Alto’s past, considering personal City of Palo Alto Page 2 names, and the implications that renaming the facility may have. Following presentations by local historian Steve Staiger and Community Services Director Greg Betts, the LAC voted to recommend the name “Rinconada” in place of “Main” Library. Following the approval of this selection, the LAC forwarded the name to the Palo Alto Historical Association (PAHA) Board for their review and approval. The PAHA Board approved the suggestion, noting that this name is historically accurate. They have continued to support the suggestion; if another name were suggested, the PAHA Board would consider that for historical accuracy too. The name Rinconada comes from the Spanish for “elbow” or “inside corner.” The land upon which the original Palo Alto town was developed was originally part of the Rancho Rinconada del Arroyo de San Francisquito land grant. The Park name came from a contest held by the Chamber of Commerce to rename the City's Waterworks Park in the mid-1920's. Other names considered included Newell, Embarcadero, and Community Center (the neighborhood in which the library is located). The name “Rinconada Library” was selected because of geographic location/adjacency to Rinconada Park, Pool, and Fire Station. The LAC was guided by Policy and Procedures 1-15/MGR (revised in April 2008) regarding naming City-Owned Land and Facilities Policy Statement. The policy outlines certain criteria for renaming, three of which the LAC felt relevant to the library facility: The name should, if possible, have or preserve the geographic, historic or landmark connotation of particular significance to the area in which the land or facility is located. Consideration may be given to naming the City-owned land or facility after an individual when the land or facility, or the money for its purchase, has been donated by the individual. Names honoring individual or families, other than those of recognized historic importance, must be supported by compelling reasons. The LAC and staff have researched possible issues: The Palo Alto Library Foundation (PALF) created, with City Council’s approval, a naming process to use for fundraising for the Measure N bond projects. This includes naming rooms for large donations. In discussion with the PALF Board, they likewise could have foreseen requesting a building be named for a particularly large donation to their fundraising efforts, which benefit Downtown, Main, and Mitchell Park libraries, specifically. Past foundation requests for building support outside of the library fundraising have included foundations which use the name(s) of influential figures in Palo Alto history. These foundations have indicated that they have specific restrictions on the use of the names; potentially selecting those names could create logistical problems for the name change process. City of Palo Alto Page 3 The Library Service Model Analysis and Recommendations (LSMAR) report, approved by the City Council in 2006, included Council’s conceptual approval of key concepts, including one that noted that upgrading Mitchell Park Library’s resources should not downgrade the Main Library. Referral to Policy & Services Committee At its September 9, 2013 meeting, City Council referred this issue to the Policy and Services Committee for discussion, consideration, and further recommendation, with the following motion: “To refer this item to the Policy and Services Committee with directions that they work with Palo Alto Historical Association to bring a recommendation to the City Council to rename the Main Library for a distinguished person in Palo Alto history or recommend the continued use of the name Main Library if an appropriate individual cannot be determined.” Because the Policy and Services Committee voted 2-2 on the motion, the discussion returns to City Council. The LAC, at its regular December 19, 2013 meeting, discussed the progress of the possible renaming at the Council level and the reaffirmed its recommendation of the name “Rinconada” as an appropriate suggestion and seeks Council approval for this change. LAC unanimously passed the following motion: “Recognizing that the Policy and Services Committee could not reach consensus, the Library Advisory Commission (‘LAC’) is respectfully resubmitting its recommendation of adopting a name change for the library facility at 1213 Newell Road to ‘Rinconada.’ This recommendation is consistent with the total makeover of the facility with modifications from the ground up. The reasons for renaming this facility from its current title of ‘Main’ are many fold: The name Rinconada is consistent with the location-related naming theme of other library branches; Upon reopening it will no longer be the largest branch; The branch will not house library administration; The title ‘Main’ is not descriptive to users; Although a diminished issue under the current administration, the ‘Main’ title has previously created issues with staff morale; Under Parks and Services’ Rinconada Long-Range Plan, this facility will be part of that plan’s improvements and renovations where all of the local facilities such as the Park space, Swimming Pool, Tennis Courts and Zoo will be branded under the Rinconada name; and Finally, Rinconada has historical significance as part of Rancho Rinconada del Arroyo de San Francisquito land grant. City of Palo Alto Page 4 In addition to these issues, the Council's desire to rename the Newell Road facility after an individual may create an implicit conflict with the Palo Alto Library Foundation’s ‘Launch our Libraries’ naming opportunities campaign.” Attached are the renewed LAC recommendation, documents related to the discussions, as well as the City’s policy regarding how to change named resources. Policy Implications The item is now before City Council for direction and action. Should the Council decide to pursue renaming the library for a person of historical interest, they would need to override the policy requirements, declining the recommendation from the LAC as well as the endorsement by PAHA. Resource Impact There will be impacts to costs related to print materials, though these are used less frequently than in the past. Changing the name will require staff time as it relates to web-based information and other promotional materials, though again, it is expected that this will be relatively minimal. Signage for the renovated building is included in the Measure N budget and these changes can be incorporated at this time. Environmental Review (If Applicable) This does not constitute a project under the California Environmental Quality Act. Therefore, no environmental assessment is needed. Attachments: Attachment A: Colleagues' Memo (PDF) Attachment B: 02/18/2014 LAC Memorandum to City Council (PDF) Attachment C: Excerpt from Working Minutes of 12/10/2013 Policy and Services Committee Meeting (PDF) Attachment D: Excerpt from Action Minutes of 09/09/2013 City Council Meeting (PDF) Attachment E: 06/13/2013 Email Correspondence from Steve Staiger, Historian, Palo Alto Historical Association (PDF) Attachment F: 09/27/2012 Library Advisory Commission Meeting Minutes and Packet Information (PDF) Attachment G: 08/23/2012 Library Advisory Commision Meeting Minutes and Packet Information (PDF) City of Palo Alto Page 5 Attachment H: Palo Alto Library Foundation "Launch our Libraries" Naming Recognition Schedule (PDF) Attachment I: City Policy and Procedure 1-15, Naming City-Owned Land and Facilities (PDF) Attachment J: Public Letters to Council (PDF) City of Palo Alto Office of the Mayor and City Council Memorandum to Colleagues From Council Members Klein and Price Re: Item 22, Renaming of Main Library The Policy and Services Committee deadlocked in attempting to fulfill the Council's direction to find an appropriate person in Palo Alto's history to honor by using that person's name as the new name for Main Library. In order to move this matter forward at Monday's Council meeting we will move that Main Library be re-named in honor of Palo Alto's most beloved architect Birge Clark. Printed with soy·based inks on 100% recycled paper processed without chlorine. P.O. Box 10250 Palo Alto, CA 94303 650.329.2477 650.328.3631 fax TO: FROM: DATE: SUBJECT: Summary: CITY OF PALO ALTO MEMORANDUM HONORABLE CITY COUNCIL LIBRARY ADVISORY COMMISSION FEBRUARY 18, 2014 Library Advisory Commission resubmission of the name "Rinconada" for the library facility at 1213 Newell Road and its rationale With the projected opening of an expanded Mitchell Park branch, the question of renaming the Main Library has been pending for over two years. At our January 2012 joint meeting with City Council, it was suggested that the Library Advisory Commission (LAC) should consider changing the name of the library facility at 1213 Newell Road. LAC recommended renaming this library as the Rincon ada Branch. After considering LAC's recommendation and debating the issue, Council referred the question to the Policy and Sentices Committee for further review. A deadlocked Committee has referred the matter back to Council to again consider this question in 2014. As between honoring an "individual" or associating the branch with a "location", LAC respectfully reiterates our recommendation of "Rinconada" and articulates the facts, policies and reasoning that support our conclusion. Background: It may be useful to chronicle the work done by LAC at a series of meetings in 2012 and 2013. This effort was guided by Policy and Procedures 1-15/MGR (revised in April 2008) regarding naming City-Owned Land and Facilities Policy Statement. The policy enumerates certain criteria, three of which were deemed relevant to the library facility: • The name should, if possible, haveor preserve the geographic, historic or landmark connotation of particular significance to the area in which the land or facility is located. • Consideration may be given to naming the City-owned land or facility after an individual when the land or facility, or the money for its purchase, has been donated by the individual. • Names honoring individual or families, other than those of recognized historic importance, must be supported by compelling reasons. Page 1 of4 J At the July 26, 2012 meeting, LAC scheduled renaming of the branch as a discussion item for August 23, 2012 and requested information regarding the history of the name and any policy requirements that should be considered. On August 23, 2012, LAC reviewed materials related to the history of naming the "Main" Library, discussed a number of possible names, requested additional clarification regarding the origin of certain other local names, studied the process for naming City- owned land and facilities, and noted details of the Rincon ada "campus" idea of the Park and Services Long Range Plan. Further discussion was scheduled for the September 27, 2012 meeting. During the intervening month, individual Commissioners performed informal outreach with library patrons, Newell area residents, book groups and library staff. Additionally, library staff along with Steve Staiger, local historian and librarian with Palo Alto Historical Association (PAHA), gathered information regarding local history related to the facility and neighborhood. On September 27, 2012, LAC received input from and held discussions with Steve Staiger and Greg Betts, Director of the Community Services Department. These discussions considered the historical significance of some possible names, the future CSD Rinconada branding, timeframe, sign age and way finding, and integration of the Library and Art Center. At its September 9, 2013 meeting, Council rejected the LAC's recommendation of "Rinconada"and referred the issue to the Policy and Services Committee for it to either propose the name of a distinguished person in Palo Alto's history or retain the name, "Main." At its meeting on December 10, 2013, the Committee was deadlocked, and had to refer the question back to the full Council. LAC unanimously passed the following motion at our December 19, 2013 meeting: Recognizing that the Policy and Services Committee could not reach consensus, the Library Advisory Commission (LAC) is respectfully resubmitting its recommendation ofadopting a name change for the library facility at 1213 Newell Road to "Rinconada." This recommendation is consistent with the total makeover of the facility with modifications from the ground up. The reasons for renaming this facility from its current title of "Main" are many fold: • The name Rinconada is consistent with the location-related naming theme of other library branches; • Upon reopening it will no longer be the largest branch; • The branch will not house library administration; • The title "Main" is not descriptive to users; • Although a diminished issue under the current administration, the "Main" title has previously created issues with staff morale; Page 2 of4 ( • Under Parks and Services' Rinconada Long-Range Plan, this facility will be part ofthat plan's improvements and renovations where all ofthe local facilities such as the Park space, Swimming Pool, Tennis Courts and Zoo will be branded under the Rinconada name; and • Finally, Rinconada has historical significance as part of Rancho Rinconada del Arroyo de San Francisquito land grant. In addition to these issues, the Council's desire to rename the Newell Road facility after an individual may create an implicit conflict with the Palo Alto Library Foundation's "Launch our Libraries" naming opportunities campaign. Prior to adopting our recommendation, LAC identified the following observations: • The function of the "Main" Library, like its neighborhood of "Community Center" and the memory of such, has changed. Community Center historically housed city hall and other functions in the Newell Ave. neighborhood which have since relocated; consequently, few residents even remember such history or are aware ofthe community center designation. • Names considered historically significant to the neighborhood included Dr. William Newell, the early purchaser of the property, but was eliminated as "Newell" was not descriptive given the distance of Newell Road from East Palo Alto to Jordan Middle School. Other individuals of importance to the local neighborhood --such as Duveneck, Greer, Hopkins, Rengstorff, Soto and Stanford --were eliminated for other reasons. • A historically significant name was "Ohlone" for the native residents. This area has known Indian mounds with a commemorative plaque erected at Middlefield Road and Embarcadero Road. "Ohlone" was eliminated as confusing with the previously recognized location of Ohlone Elementary School at 950 Amarillo Ave. • Many of Palo Alto's parks, schools and streets have been given the name of historically significant individuals. However, the most local park, Rinconada, is currently subject to an extensive review under a long-term plan and is retaining its name with the addition ofthe words "Cultural Center." • Fire stations and library branches are generally named for location (except the name of Children's library branch which was selected by the funding donor, Lucie Stern). • During discussions with Council, we were specifically directed to look at the historical figures David Packard and William.Hewlett. These were eliminated because neither of these individuals was particularly tied to libraries. Palo Alto with its rich history of inventors who contributed jobs, recognition and revenue to the City has benefitted from a number of visionaries such as Hewlett, Jobs, Packard, the Varian brothers, and many Page 3 of4 POLICY AND SERVICES COMMITTEE MINUTES EXCERPT Page 1 of 5 Special Meeting December 10, 2013 Chairperson Kniss called the meeting to order at 6:11 P.M. in the Council Conference Room, 250 Hamilton Avenue, Palo Alto, California. Present: Holman, Klein, Kniss (Chair), Price Absent: Agenda Items 1. (Former Agenda Item Number 3) Discussion and Consideration of Recommendations to City Council on Renaming the Main Library. Monique Ziesenhenne, Library Director, reported Main Library construction was on schedule and on budget. Main Library was scheduled to reopen by the end of 2014. Council Member Klein originally suggested renaming Main Library. The Library Advisory Commission (LAC) considered options and recommended the name Rinconada based on geographical location. The Palo Alto Historical Association (PAHA) confirmed the recommendation in June 2013. In September 2013, the Council referred the item to the Policy and Services Committee (Committee) for further discussion. The City's renaming policy allowed buildings to be renamed for historically significant people. There had been some question as to whether that was acceptable. According to the policy, the Council referred a renaming idea to the relevant Commission. The Commission then made a recommendation, subject to PAHA review, to the Council for approval. The Committee could refer suggestions to LAC in order to follow the process as stated in the policy. Palo Alto Library Foundation (PALF) fundraising efforts included naming rights for rooms. In addition, an extremely large donation could receive naming rights to the facility in question. PALF fundraising efforts close at the end of 2013. Council Member Kniss asked if PALF received any extremely large donations. Ms. Ziesenhenne indicated the Morgan Family Foundation donated $1.5 million. The Committee could suggest a new name, allow community MINUTES EXCERPT Page 2 of 5 Policy and Services Committee Special Meeting Minutes Excerpt 12/10/2013 members to suggest names, accept the previous recommendation, retain the name Main, or do something else. Chair Kniss noted the Council would need to override policy requirements if it chose to rename the library for a person of historical interest. She inquired whether Ms. Ziesenhenne would recommend returning the item to LAC and PAHA. Ms. Ziesenhenne felt LAC and PAHA would approve it if it was part of the process. LAC discussed the possibility of recommending the name Rinconada again. Chair Kniss asked if LAC was definitive regarding the name Rinconada. Ms. Ziesenhenne stated LAC did appreciate it. Chair Kniss asked if PAHA was comfortable with the name Rinconada. Ms. Ziesenhenne answered yes. Council Member Klein reported the Council referred the item to the Committee with directions that it work with PAHA to bring a recommendation to the Council to rename the Main Library for a distinguished person in Palo Alto history or to recommend the continued use of the name Main Library if an appropriate individual could not be determined. That direction was more specific than what Staff suggested. The Committee's mandate was to find a distinguished person in Palo Alto history and to recommend that name for renaming Main Library. The Committee's action would be consistent with the process for names. PAHA viewed it's role as approving, not suggesting, a name. Council Member Price inquired whether the final point regarding past foundation requests referred to PALF. Ms. Ziesenhenne replied no. It referred to other foundations outside the Library. Other foundations made requests for naming where the foundation specified how the name could be used. Council Member Price posed a scenario of naming the library for a historical person whose family previously formed a foundation using the same name. She asked if the City could determine whether there were restrictions on the use of a name in such a scenario. Ms. Ziesenhenne assumed a family would be happy to have a library named in honor of their family member, but there could be an issue. Some people wanted to control the use of names. MINUTES EXCERPT Page 3 of 5 Policy and Services Committee Special Meeting Minutes Excerpt 12/10/2013 Chair Kniss reiterated the Council's direction. Council Member Klein knew of several historical people he would support naming the library after. He did not believe Staff liked the idea. The City would need family permission or acceptance prior to using a name. He suggested David Packard, Bill Hewlett, and Russel Lee. Now was an appropriate time to honor a Palo Alto resident. Johnson Park was named for Frances Johnson, the first female OB-GYN in the area. Council Member Holman added that Ms. Johnson lived in the neighborhood. Chair Kniss preferred the name Main Library. Mr. Packard was influential in the community; however, he lived in Los Altos. She thought of Dr. Lee in relation to the clinic rather than Palo Alto. In addition, many things were named for both Mr. Packard and Mr. Hewlett. It was interesting that Council Member Klein suggested names of people who did not donate funds to the library. Council Member Holman agreed with Chair Kniss. Naming buildings for people was a good idea; however, the particular names did not resonate with the library. She could not suggest a name of a person who had been associated with the library. One Council Member suggested Edward Durell Stone, the architect of significant buildings in the community. Council Member Price agreed with Council Member Klein. The City could find a better name than Main. Council Member Klein's suggestions were reasonable candidates. She preferred someone associated with the library, but she did not know of anyone who met that criteria. The library should be named after an individual who had an important role in the Valley or the immediate area. James Keene, City Manager, suggested Staff could assist the Committee with developing criteria, following up with PAHA or other entities, or researching names. It would be awkward if Staff compiled a list of names and omitted someone of some importance. An individual should have some association with the library or the symbolism of libraries. Libraries played an important role in society and in democracy. Herb Borock reported in the case of a tie vote, the Committee should forward the item to the Council without a recommendation. The Council had a policy for naming and renaming facilities. The policy required a compelling reason to rename a facility. If the Council did not wish to follow its policy, then it should change the policy first. MINUTES EXCERPT Page 4 of 5 Policy and Services Committee Special Meeting Minutes Excerpt 12/10/2013 Chair Kniss liked the name Rinconada. She questioned whether other libraries should be renamed. Council Member Klein believed it would be inappropriate for the Committee to recommend the name remain the same, because that was not consistent with Council direction. To keep the name Main, the Committee would have to make a finding that there was not an appropriate individual to name the library after. Chair Kniss clarified that the Council directed the Committee to work with PAHA to bring a recommendation to the Council. The Committee had not worked with PAHA. She asked if PAHA had provided a recommendation. Ms. Ziesenhenne reported Staff's contact with PAHA concerned the name Rinconada. Staff could prepare a list of names and establish criteria and involve PAHA. She was seeking clarification of the Committee's preference for a name. Council Member Klein indicated the Council made that decision. Chair Kniss reiterated that the Council directed the Committee to work with PAHA to present a recommendation. The direction was not as prescriptive as Council Member Klein suggested. Council Member Klein stated he would be happy to work with PAHA. He was frustrated that PAHA only confirmed LAC's recommendation. He and another Committee Member could work with PAHA to develop a list of names. Sheila Tucker, Assistant to the City Manager, reported the current policy required Staff to work with PAHA. PAHA should conduct a public hearing and confirm that any recommended names met the criteria of appropriate significance. Perhaps Council direction was for the Committee to work with PAHA to ensure PAHA conducted a public hearing and to ensure any name met criteria. Council Member Klein did not believe that had been done either. Chair Kniss indicated the direction also stated the Committee could recommend the continued use of the name Main Library. Council Member Klein disagreed. The direction stated if the name of an appropriate individual could not be determined. Chair Kniss reiterated that two Committee Members did not believe there was an appropriate individual to name the library after. MINUTES EXCERPT Page 5 of 5 Policy and Services Committee Special Meeting Minutes Excerpt 12/10/2013 Council Member Klein asked if Chair Kniss moved to continue using the name Main Library. Chair Kniss did not believe the discussion was finished. Council Member Klein agreed the Committee could make that finding. It would be a disingenuous finding, because Chair Kniss stated her preference for the name Main. PALF was consulted and did not object to renaming Main. MOTION: Council Member Klein moved, seconded by Council Member Price to recommend to the City Council to direct the Policy and Services Committee to follow a process set out by the Council to consult with the Palo Alto Historical Association (PAHA) to come up with some recommendations for names of a distinguished person in Palo Alto history whose name would assume the presently named Palo Alto Main Library. Chair Kniss stated the Committee had not worked with PAHA. Council Member Klein clarified that the Motion directed the Committee to work with PAHA. Chair Kniss stated the Motion was to work with PAHA to identify a name. She would not support the Motion, because it was not necessary to work with PAHA or to identify the name of an individual. Council Member Holman suggested the name be Carnegie in honor of the former library. She concurred with Chair Kniss' interpretation of Council direction. A great deal of time had been spent on the topic. She would accept retaining the name Main Library. MOTION FAILED: 2-2 Holman, Kniss no Cheng, Evelyn From: Sent: To: Subject: Staiger, Steve Thursday, June 13, 2013 1:45 PM Cheng, Evelyn rename of Main Library The Palo Alto Historical Association board met yesterday and discussed the proposed renaming ofthe Main Library. The board agreed that the proposed new name (Rinconada) is historically appropriate for the library on Newell Road and will support its adoption. Steve Staiger Palo Alto Historical Association Landmarks and Streets Committee, chair 1 APPROVED MINUTES Library Advisory Commission (LAC) September 27, 2012 Downtown Library Community Room 270 Forest Avenue 7:00p.m. Commissioners Present: Leonardo Hochberg, Eileen Landauer, Bob Moss, Theivanai Palaniappan, Mary Beth Train Tolulope Akinola, Noel Bakhtian Commissioners Absent: Staff Present: Council Liaison: Monique le Conge, Evelyn Cheng, Greg Betts Greg Schmid CALL TO ORDER -Palaniappan called the meeting to order at 7:22 p.m. ORAL COMMUNICATIONS-A member of the public spoke about his idea to have library used as incubator space, tapping into the City's vibrant network. AGENDA CHANGES, REQUESTS, DELETIONS-Item marked as "7e" in the LAC packet should go with "7d". BUSINESS 1. Approval of draft minutes of Regular Meeting on August 23, 2012. • Without corrections, Hochberg moved to approve minutes of Regular Meeting on August 23, 2012. Train seconded . Minutes were approved unanimously. 2. Continuing Discussion: Possible name change for Main • Following the August 2012 LAC meeting , le Conge invited Steve Staiger, local historian, and Greg Betts, Director, Community Services Department (CSD), to the meeting to provide additional information that would be useful in the LAC discussion regarding choice of names for the library. • Staiger provided a historical perspective of some of the possible names for Main Library, their meaning, origin and/or historic nature of the name, e.g . Rinconada, Newell, Embarcadero and Community Center. • Betts gave a brief discussion on the intent of CSD's Rinconada signage plan and way-finding program, with the increasing awareness of 1 Rinconada Park as a kid-centric campus. Betts said after consideration of several names, the direction is heading to branding the area as "Rinconada Cultural Park" but the process requires numerous steps, including the review/approval by the different Boards and Commission (e.g. Architectural Review Board and the Historic Review Board). • Discussion followed, with members of the LAC providing comments and asking questions about project timeframe, placement of signage, and how best to integrate the Main Library and Art Center to the area, as well as possible names the Commission should consider for renaming the facility. • Landauer presented a file she received from an individual while asking the community about their opinion on a new name for the Main Library. Included in the file were names of Palo Alto neighborhoods and fire stations at parks, and a proposed solution to have the remodeled facility be integral to Rinconada Park. • Commissioners agreed that the name "Rinconada" has historical value, is consistent with the area and would tie in well. • MOTION: Moss moved, Train seconded "The LAC recommends to City Council, when Main Library's renovation is complete, to rename the facility 'Rinconada Library'." • Discussion followed, with Commissioners expressing their preference to keep the Motion to renaming the facility only and to leave the effective date unspecified to give it more flexibility. • AMENDMENT: Landauer moved, Train seconded Removing from the Motion "when Main Library's renovation is complete" Amendment Passed: 4-1 (Moss opposing) MOTION, as Amended, passed, 5-0. • le Conge said the City has a policy for naming city-owned land and facilities, which establishes criteria to guide Commissions in recommending names to the Council for approval. "The commission shall conduct a public hearing, confirm that the recommended name meets the criteria of appropriate significance, select recommendation(s) provided by the Historical Association, and shall forward its recommendation to the City Council." (Policy and Procedures 1-15/MGR) 2 • Staff will confirm with the City Clerk's Office on next steps to move the LAC's recommendation forward. 3. Presentation on Axis 360-Amy Glaza. Baker & Taylor • le Conge announced that Agenda item no. 3 will be re-scheduled since presenter, Amy Glaza of Baker & Taylor, was unable to come to the meeting. 4. Additional Information: Draft Library Statistics for FY2012 • Following Councilmember Schmid's suggestion at the August meeting, staff prepared updated statistics for FY2009, FY2011 and FY2012. FY2009 is the last year that all five Palo Alto branch libraries were open. • Commissioners appreciate seeing the numbers and noted that customer visits and checkout of materials held up very well even when libraries closed. However, reference and database searches as well as public PC sessions have gone down. • le Conge said that going forward, statistical information on basic upper level elements (e.g. circulation, visitor counts, program attendance) will be provided to the LAC on a quarterly basis. Statistical highlights are posted on the Library's website and will be included in the City's new Open Data platform soon. 5. Continuing Discussion: Economic Impact of eBooks • To broaden the discussion of eBooks and economic impacts, staff provided a comparison of eBook costs versus book costs, and developed comments regarding actions and future thinking about eBooks, as well as articles of interest. • Discussion followed, with members of the LAC providing comments, asking clarification and questions about costs/pricing, advantages of providing eBooks, and limits to checkouts. Commissioners noted the high cost of purchasing eBooks as compared to book costs. • le Conge said that there are changes on a day-to-day basis and staff will continue to keep the LAC informed and updated on eBooks and its impact on libraries. 6. 2012 LAC's Joint Meeting with City Council • The LAC agreed to schedule their joint meeting with City Council at the start of 2013 when new Council members are on board and libraries are set to close and/or open. 3 • Staff will check with the City Clerk's Office on available dates in the January/February timeframe and advise the Commissioners. • Priority setting for the joint meeting with City Council will be discussed at the next LAC meeting. • Hochberg said several years ago, the LAC Chair and Vice Chair had an informal dialogue with Council Members Elect on library issues -this was part of the Commission's outreach activities which he felt was effective and helpful. 7. 2012 LAC Priorities • The subcommittees presented thejr final update/report to close out their work, following the 6-month term for special committees and to be consistent with the policy and procedures established by City Council. Community Relations/Advocacy (members: Train, Bakhtian) -The LAC Advocacy template was revised, incorporating the comments and recommendations from the Commissioners, and Train will provide the final draft at the October meeting. Finance (Landauer, Palaniappan) -The focus was narrowed to evaluating options for pilots at Mitchell Park to highlight and assist with planning for staffing and funding issues at the time all branches are open. The subcommittee recommends when Mitchell Park and Temporary Main open, staff should continue to evaluate and pilot services that may have minimal funding impacts by either utilizing volunteers or by tapping into private funding sources. Virtual Library (members: Akinola, Hochberg) -Hochberg and Akinola will continue to interact with staff and work on finalizing the identification of issues before moving forward with establishing a special committee. ByLaws (member: Moss) -After final review of the Bylaws MOTION: Moss moved, Hochberg seconded "the LAC adopt the Bylaws as presented." Motion passed, 5-0. • 2013 LAC Priorities. Commissioners agreed to table this item for the October meeting. LIBRARY DIRECTOR'S REPORT 4 le Conge provided a written report (included in packet) on recent library activities of interest in September, as well as follow-up on items previously discussed/requested by the LAC, which include Request for Information (RFI) process before selecting an Integrated Library System (ILS) will start in January 2013. Google Cloud Print is available at the Mitchell Park Library, for up to 15 pages per Google account per day. Google provides all the necessary supplies. LiquidSpace reservations have been extended to 7 days in advance. -Wifi data use cannot be tracked currently, but may be possible when city-wide upgrades to a standardized system is completed. OTHER REPORTS Commissioner reports and questions: • Moss expressed his concern about the construction progress report for Mitchell Park Library and the media broadcasting system at Downtown Library which is still not fully functional. • Moss attended the September 12 Friends of the Palo Alto Library (FOPAL) Board meeting; Train announced that the Library Foundation Board did not meet this month, a retreat is planned early next year. Council Liaison Report: Schmid addressed Moss' concern about the status of the Mitchell Park construction project and mentioned some of the highlights in Staff Report #3125 (Mitchell Park Construction Contract Bi-Monthly Report). COMMENTS AND ANNOUNCEMENTS • le Conge said the City Clerk's Office is asking the LAC's help in recruiting applicants interested in serving in one unexpired term ending January 31, 2014 (Bakhtian's). • Library has a new subscription service called Credo Reference which is a great resource for students working on special projects. Topic pages pull together links to Palo Alto library books, full text magazine articles and news and images to complement projects. AGENDA for meeting on October 25, 2012: The items suggested for the meeting are: • 2012-13 LAC Priorities 5 • Presentation on Axis 360 • Joint Meeting with City Council Hochberg moved to adjourn. THE MEETING WAS ADJOURNED AT 10:37 p.m. 6 LOBRARY PALO ALTO CITY September 13, 2012 TO: Library Advisory Commission FROM: Monique le Conge, Library Director RE: Naming Information, Main Library Following up on the August 2012 LAC meeting, I've asked Steve Staiger to find some answers for you based on your question, regarding possible names for Main Library. Here are his notes: Rinconada comes from the Spanish for elbow or inside corner. The land upon which the original Palo Alto town was developed was originally part of the Rancho Rinconada del Arroyo de San Francisquito land grant. The Park name came from a contest held by the Chamber of Commerce to rename the City's Waterworks Park in the mid 1920's. Newell is named for Dr. Newell, an early resident of the area, who bought land in the 1860's from the Soto/Greer family. His home is today the oldest home in Palo Alto, located on Edgewood near Newell Road (Zuckerberg is the current owner). Embarcadero Road (rough Spanish of "road to landing") is the name for the path that led to the small boat landing on San Francisquito Creek where Capt. John Greer sailed in the early 1850's and found his love, Maria Soto). Present day Newell Road was once part of the Embarcadero as it turned left and led to the landing located just downstream of the present-day Newell Bridge. Community Center: I'm not sure of how this name came about, but my guess is that Carol Blitzer of the Palo Alto Weekly may have had something to do with it. Prior to the Weekly's series of articles on various P A neighborhoods there were neighborhoods without accepted names. In order to cover the entire community, Carol gave names to neighborhoods that did not have common or officially accepted names. This may be one of those names of 15 -20 years ago. The area was originally called Alba Park back in the first decade(s) of the 20th century when that was the name of the subdivision being promoted just outside the original town of Palo Alto. APPROVED MINUTES Library Advisory Commission (LAC) August 23, 2012 Downtown Library Community Room 270 Forest Avenue 7:00p.m. Commissioners Present: Leonardo Hochberg, Eileen Landauer, Bob Moss, Theivanai Palaniappan, Mary Beth Train Tolulope Akinola, Noel Bakhtian Commissioners Absent: Staff Present: Monique le Conge, Evelyn Cheng Council Liaison: Greg Schmid CALL TO ORDER -Palaniappan called the meeting to order at 7:07 p.m. ORAL COMMUNICATIONS-None AGENDA CHANGES, REQUESTS, DELETIONS-None BUSINESS 1. Approval of draft minutes of Regular Meeting on July 26, 2012 • Without corrections, Train moved to approve minutes of Regular Meeting on July 26, 2012. Moss seconded. Minutes were approved unanimously. 2. Economic Impact of eBooks • le Conge presented basic data for the collection development and use of eBooks, started in Palo Alto in 2007, and the economic impact of providing such in the Library, from the customers' view and on staffs ability to provide services, and how to achieve greater success in the future. • Additional documents were provided/referenced: e.g. American Library Association's report on eBook Business Models for Public Libraries (August, 2012); Library Journal's "eBooks Choices and the Soul of Librarianship-the Digital Shift" (July 2012); Pew report "Libraries, Patrons, and eBooks" (http:l/libraries.pewinternet.org/2012/06/22/libraries- patrons-and-e-books/) 1 • Discussion followed, with members of the LAC asking questions/clarification about the use of eBooks and the impact on libraries. • le Conge said the Library offers access to four vendor databases for online readable eBooks and one for downloadable ones. A comparison of costs by vendor, including budgetary and statistical information can be provided for continued discussion at the next LAC meeting in September. 3. Draft Library Statistics for FY2012 • le Conge prepared a draft of the statistics the Library has to date regarding circulation, attendance, programs, and services, for the fiscal year covering 2011-2012. • le Conge added that the draft will not be considered complete until the library submits its annual data to the California State Library and collection counts, budgetary information, and other statistics will be included in that final report. • FY2011/12 highlights increase in customer use of library facilities, materials and many services, in part due to the re-openings of the renovated College Terrace Library in November 2010 and Downtown Library in July 2011; increase in program activity with the new 60-seat community meeting room at Downtown Library; and additional volunteer opportunities at both renovated branches. Overall checkouts of library materials increased 5.6%, branch visits increased 8.6%. • Graphs comparing checkouts and visits at each branch library in the last eight fiscal years (FY2005-2012) were also provided, to show the impact of the various branch closings and re-openings during that time. In 2015, the Library would have a full year of having all branches open and expects to show significant impact on Palo Alto. • Commissioners commended staff for increasing the number of programs and new library cardholders, and asked questions/clarification about the various data collected. • Schmid said it would be helpful to include 2009 statistics since all Palo Alto libraries were open that year and use that as a standard for comparison. le Conge said she will have these available at the September meeting. • Palaniappan asked about meeting room reservations at Downtown Library and allowing customers more flexibility to make reservations. Currently, the public can make reservations three days in advance. le Conge said she will have staff look into changing the policy. 2 • Hochberg asked if it would be possible to collect the data use at each library branch and include this in the Library's annual data collection; le Conge said she will check with the City's IT department. • leConge also provided two weeks of use statistics on Freegal and Discover and Go, the Library's most recently-added online services. (Freegal is a new music download service; Discover and Go provides free and discount passes to a wide variety of Bay Area museums and other cultural destinations) 4. Possible Name Change for Main Library • le Conge prepared materials related to the history of the naming of Main Library as requested by the LAC at the July 2012 meeting. Clipping files from 1955 and 1958 were i!lcluded, showing in essence · that the Main Library was named for its function at the time. • Discussion followed, with members of the LAC giving comments/suggestions for possible name change for the library and asking questions about origin of some names (e.g. Rinconada, Newell, Embarcadero, neighborhood name of Community Center), the process, if any, for naming City-owned land and facilities, and how this was handled in the past. • le Conge said she will find out from Steve Staiger, local historian and librarian, where some of the names come from, and invite him to the September meeting to answer additional historic questions from the Commission. • Moss said since the names of other branches in Palo Alto are location- related, it would make sense to keep that approach. • le Conge will put together a list of names with their historical perspective for further discussion at the September meeting. As part of the discussion, the Commissioners agreed that it would be helpful to get a better understanding of the Rinconada "campus" idea and the corresponding signage plan to help inform their decision regarding choice of names. 5. LAC Priorities a) LAC ByLaws (member: Moss) Moss provided a revised draft of the proposed revisions to the LAC Bylaws, incorporating the comments/recommendations from the City Attorney's Office. 3 Commissioners asked for clarification on Section 6 -Agendas, specifically on the preparation of agenda items, i.e. if other Commissioners can provide input/suggestion outside the public meeting. - A clean copy of the LAC Bylaws will be provided at the next meeting for the LAC's final review and adoption, and the City Attorney's clarification on Section 6. b) Community Relations/Advocacy (members:Train, Bakhtian) -Train presented the subcommittee's updated presentation template/talking points that can be used as a tool to promote library awareness and the role of the Commission to the community, including sample elevator pitches. Members of the LAC gave feedback and asked questions about various slides in the presentation, and agreed to continue their review/discussion at the next meeting in September. Since Bakhtian has resigned from the Commission and is moving to another state, Hochberg offered to help Train revise the presentation template. c) Finance (members: Landauer, Palaniappan) Landauer gave a brief update of the subcommittee's research work and web browsing. She also met with staff to discuss plans and directions for services, technology and staffing when Mitchell Park opens. Landauer added that she has an idea on how the subcommittee can move ahead but will need to discuss this first with Palaniappan to see if this is the right path to pursue, as well as with le Conge to see if their plan fits within the overall long-term vision of the library. Discussion to continue at the next LAC meeting in September. d) Virtual Library (members: Akinola, Hochberg) Hocberg said the subcommittee intends to work with staff on the mock up of the virtual branch soon. LIBRARY DIRECTOR'S REPORT le Conge provided a written report (included in packet) on recent activities of interest in August, and made special mention of the following events: 4 -August 27, An Evening with Tomi Reichental, 7 p.m., Downtown Library. Reichental is a Holocaust survivor and will share the story of his past. November 2-4, 2012 California Library Association (CLA) Annual Conference, San Jose, CA, with Jonathan Reichental as CLA Master Speaker. OTHER REPORTS Commissioner reports and questions: 1. Moss gave a brief background on Cable Co-op's "Nine Libraries Project" in 2004 and a status update on the grant awarded to Palo Alto Library, where public dollars are being used effectively for the purchase of technical furniture and equipment in libraries. 2. Moss said the Friends of the Palo Alto Library (FOPAL) Board did not meet in July; Train attended the Palo Alto Library Foundation (PALF) Board meeting held on August 14. Council Liaison Report: Schmid said he uses the Library's services and resources to entertain his grandchildren when they visit and/or go on long trips. COMMENTS AND ANNOUNCEMENTS Marissa Moss, author and daughter of Commissioner Moss, will be participating in the Oshman Family Jewish Community Center's Litquake (literary festival) event on August 26. Hochberg said he was pleased to see more children using the kids' area at Downtown Library and cannot wait until Mitchell Park Library opens. AGENDA for meeting on September 27, 2012: The items suggested for the meeting are: • Continuing discussion: Economic impact of eBooks • Continuing discussion: Possible name change for Main Library • Information on Google Cloud Print • Presentation on Axis 360 • Updates from LAC Subcommittees Train moved to adjourn. THE MEETING WAS ADJOURNED AT 9:38p.m. 5 L()BRARY PALO ALTO CITY August 16, 2012 TO: Library Advisory Commission FROM: Monique le Conge, Library Director RE: Main Library, Naming Information At the July 2012 Library Advisory Commission meeting, I was asked to prepare material related to the history of the naming of Main Library in preparation for a discussion on the matter. At the January 2012 joint meeting with the City Council, it was suggested that perhaps changing the name could be considered in the near future, coinciding the building construction projects and I believe this was suggested by Councilmember Klein earlier than that. This was mentioned again by Ned Himmel at the July 2012 LAC meeting. This information is presented with the assistance of Kathy Shields and Anita Delaney, both Senior Librarians at Main Library, and Steve Staiger, local historian and librarian. In essence, Steve Staiger ascertained from his clipping files that Main Library came about its name without much thought or discussion. It seems that it was named for its function at the time. The two articles attached reference the "main library" and the "Main Library." Apparently, the original Carnegie library was the main library in Palo Alto. Then, the city built a new larger facility, which was to act as the new main library. One interesting side note is that a planning consultant for the library thought that one large library would meet the Palo Alto community needs. He also thought the library should be built with the population of 85,000 in mind, though made no formal recommendation. An October 1957 report prepared by the City Manager's Office, titled "Library Facilities in the Downtown Palo Alto Area" likewise calls the Carnegie building the main library and discusses the new planned facility, to be called a main library, with the Carnegie building to become the "downtown" library. This information is likewise conveyed in Palo Alto and Its Libraries: A Long-Time Love Affair, by Tom Wyman. These documents will be available at the August LAC meeting. Please let me know if you require any additional information. 'I Launch our Libraries Naming opportunities associated with this campaign Palo Alto Library Foundation, April 2010 The campaign has three levels of visionary gifts. Specific amounts within that level will vary depending on the size and purpose of the room. Level 1 $100,000 to $250,000 Level 2 $400,000 to $500,000 Level 3 $1,000,000 to $2,000,000 Downtown Library El Camino Real Kids Place Carnegie Room University Room Program room (60) Children's room (16 plus floor seating) Group study room (6) Conference Room (8) Mitchell Park Library and Community Center Library Kids Place Ventura Room Teen Zone Midtown Room Greenmeadow Room Barron Park Room Fairmeadow Room Palo Verde Room Green Acres Community Center El Palo Alto Room (E&W) The Drop Matadero Room (N&S) The Courtyard Oak Room Adobe Room The Court Main Library Embarcadero Room Teen Zone Duveneck Room Crescent Park Room St. Francis Room Leland Manor Room Notes: Children's area (72 plus floor seating) Technology learning center (22) Teen area (31) Program room (60) Second floor group study room (10) First floor group study room (8) Second floor group study room (8) Children's study room (6) Intensive Roof Garden Multi-purpose event room (300) Teen game room (varies with activity) Large classroom with technology (60) Courtyard Program room (36) Art classroom (28) with patio Outdoor half basketball court New wing (100) Teen room (TBD) Group study room (6) Group study room (6) Group study room (4) Group study room (4) Numbers in parentheses are the capacities of the rooms Subject to approval by the City Council Campaign Gift Level 2 ' Level 1 Level 1 Level 1 Level 3 Level 2 Level 2 Level 2 Level 1 Level 1 Level 1 Level 1 Level 1 Level 3 Level 2 Level 2 Level 1 Level 1 Level 1 Level 1 Level 3 Level 1 Level 1 Level 1 Level 1 Level 1 All gifts will be to the campaign, not to a particular library or for particular items Some donors at this level may wish to remain anonymous It is not expected that all or even most of these areas will receive a naming gift ) ) POLICY AND PROCEDURES 1-15/MGR Revised: April 2008 NAMING CITY-OWNED LAND AND FACILITIES POLICY STATEMENT The purpose of this policy is to ensure that City-owned land and facilities, when named for individuals, are persons who have made significant contributions or performed services deemed to have been of major importance to the community. This policy establishes uniform procedures for the naming of City-owned land and facilities as set forth by Council Resolution No. 6211, approved on December 12, 1983, and revised by Council on April 12, 2004. The policy is applicable to new and existing City-owned land and facilities. The policy provides a mechanism for citizens to suggest names which they believe should be considered for new City facilities or land acquisitions and for the renaming of existing facilities and lands. The policy also establishes criteria which will guide the Historical Association and the appropriate City Commission or Committee in recommending names to the Council for approval. Naming and renaming City-owned land and facilities shall be the responsibility of the City Council. However, places within City-owned land or facilities, such as a room or patio within a building or a trail or athletic field within a park, which do not require formal dedication by the City Council, may be named by the City Manager or his/her designee, subject to final approval by the City Council via the consent calendar. This process does not apply to the naming of streets which will continue to be processed through the Plaiming and Community Environment Department (Policy and Procedure 1-16: Naming of City Streets). The naming of a street may be considered an appropriate alternative means of honoring an individual. The City Council has determined that significant individual, family or foundation contributions to the construction/renovation of City facilities can be recognized through the naming of said facilities after these groups. This document outlines the procedure to be followed when a fund- raising group or board, with the approval of the City Council, embarks upon a capital campaign for the purpose of securing private funds for the acquisition of land, renovation/expansion of an existing building, or the construction of a new facility, and wishes to offer naming opportunities in recognition of significant donations of money or land. The City Council has determined that significant contributions from corporations or corporate foundations to capital campaigns will not be accepted in exchange for the ability to name entire facilities in recognition of these corporate entities.-However, the City Council has agreed to allow naming recognition of corporate or commercial entities in facility interiors or on sub-facilities as described in this policy. Business logos associated with any benefactor seeking naming rights shall not be allowed on any City owned land, facility, building or sub-facility under this policy. Page 1 of8 POLICY AND PROCEDURES 1-15/MGR Revised: April2008 The City may remove any business name from a City facility or property if the business declares bankruptcy and goes out of business. The City may remove any individual name from a City facility or property if the person is convicted of a felony or other crime of moral turpitude. If a name is removed under this provision, the City shall not be required to return the donation. SECTION 1: PROCEDURE FOR NAMING NEW FACILITIES OR CITY-OWNED LANDS In cases involving a major capital fundraising campaign, there will be a separate and different procedure from the one outlined below. Section 3 below on "Naming Recognition for Capital Campaigns" further outlines this process. A. Responsibility of the Project Manager Implementation of this policy is the responsibility of the department in which the project to be named is managed. In the instance of a new City-owned land or facility, the project manager should incorporate the process for naming into the project schedule so the naming is accomplished in a timely manner. 1. Requests concerning a name to be given to the City-owned land or facility shall be made in writing on an approved suggestion form to the City Clerk. a. The project manager should alert the City Clerk when to expect the submission of names and the anticipated time frame for the naming process. b. The project manager may submit suggested names on an approved suggestion form on behalf of staff or citizens who have been involved in the project development. c. In some instances, it may be appropriate to actively solicit suggestions and, in those cases, the project manager should specify a time frame for submissions and method of notification. d. All submittals, whether from an individual or an organization, must include the name and address ofthe submitter. No anonymous submittals will be accepted. e. All suggestions will be given the same consideration without regard to the nomination source. 2. The project manager is responsible for conveying the name suggestion forms from the City Clerk to the Palo Alto Historical Association and presenting the recommendations from the Historical Association to the appropriate commission or committee whose sphere of influence is most closely associated with the facility in question. The Parks and Recreation Commission shall review name suggestions for acquired land to be dedicated as a park, recreational facilities, community centers and interpretive centers. The Library Page 2 of8 ) ) ) POLICY AND PROCEDURES 1-15/MGR Revised: April 2008 Advisory Commission shall review name suggestions for library facilities. The Public Art Commission shall review name suggestions for art facilities. The Policy and Services Committee shall review name suggestions for police, fire or utility facilities as well as major civic complexes. a. The Historical Association may also originate suggestions for names or provide suggestions for appropriate alternatives as part of its recommendations. b. The project manager shall assure that adequate time is allowed for the Historical Association and the appropriate commission or committee to evaluate the recommended names. c. The Historical Association shall determine if the suggested names meet the criteria of appropriate significance, and shall submit the recommendations to the appropriate commission or committee together with the rationale for the recommendations. The response from the Historical Association shall acknowledge all the names that are submitted, but recommend only those which it feels meet the criteria and warrant serious consideration. B. Responsibility of the Reviewing Commission Or Committee 1. The commission or committee shall conduct a public hearing, confirm that the recommended names meet the criteria of appropriate significance, select recommendation(s) provided by the Historical Association, and shall forward its recommendation to the City Council. The report from the commission or committee shall acknowledge all of the recommended names together with their evaluation, but present only the name(s) which it feels best meets the criteria and merits serious consideration by the City Council. 2. Once approved, a transmittal and resolution will be prepared by staff for consideration and approval by the City Council. The transmittal shall include a narrative of historic reference prepared by the Palo Alto Historical Association for the name, a copy of the name suggestion form, and minutes of the Commission meeting when the recommendation was discussed. C. Criteria The following criteria shall be used in selecting an appropriate name for City-owned land and facilities. 1. The name should, if possible, have or preserve the geographic, environmental (relating to natural or physical features), historic or landmark connotation of . particular significance to the area in which the land or facility is located, or for the City as a whole. Either connotation is equally valid. Page 3 of8 POLICY AND PROCEDURES 1-15/MGR Revised: April 2008 2. Acknowledgement of contributions: Consideration may be given to naming the City- owned land or facility after an individual when the land or facility, or the money for its purchase, has been donated by the individual, or when otherwise warranted by some contribution or service which is deemed to be of major and lasting significance to the acquisition of that piece of land, or planning, development, construction or renovation of that particular facility. Donation of land or resources shall not constitute an obligation by the City to name the land or facility or any portion thereof, after an individual, family, or individual/family foundation. City-owned lands, parks, or entire facilities shall not be named for benefactor organizations, groups or businesses, but in special cases, may. be considered for sub-facilities such as rooms or playgrounds. In cases involving a major capital fundraising campaign, see Section 3 below -Naming Recognition for Capital Campaigns. 3. Names honoring individuals or families, other than those of recognized historic importance, must be supported by compelling reasons. 4. In the event the City-owned land or facility was formerly school property or had other ownership such that the name of the school, building or site has community significance or community recognition, consideration may be given to preserving that name. 5. The City encourages naming which reflects the City's ethnic and cultural diversity. 6. No City-owned land or facility shall be named after a seated elected or appointed official. 7. No City-owned land or facility shall be named after a person whose contribution to the City of Palo Alto was or is a part ofthat individual's normal duties as an employee of the City. An exception may be made for former such employees who have contributed volunteer services of an exceptional nature beyond their normal duties. 8. When naming sub-facilities or interior spaces, such as rooms or playgrounds, after corporate or commercial entities or foundations, these entities must abide by the City's anti-discrimination policy. D. Council Action 1. The recommendations received from the Historical Association and the commission or committee shall be placed on the Council agenda for final approval. 2. Action by the Council shall be by Council Resolution. E. Follow-up to Selection of the Name 1. The above-described process for selecting an appropriate name should precede the preparation of a park dedication ordinance. Page 4 of8 ) ) . t ) POLICY AND PROCEDURES 1-15/MGR Revised: April 2008 2. Subsequent to approval by the City Council, the name for the City-owned land or facility shall be conveyed to the Department of Public Works for incorporation in City official maps and plans, and to the Palo Alto Historical Association for its records. F. Naming Places Within City-owned Land or Facilities· In the case of places within City-owned land or facilities, where the policy does not require a . Council resolution, responsibility for requesting Council approval of the new name shall reside with the department head who manages the land or facility. Ideally, the naming of features within a park and specific trails or facilities within open space lands will occur during the master plan or site plan process. Names within parks should be appropriate to the park by reflecting the expression of the place (topography, geology, natural features), flora and fauna, or history of the area. In advance of the naming, the department head shall send a memorandum to the City Manager advising of the proposed action and requesting approval. The City Manager will then seek approval of the name from the City Council via the consent calendar. SECTION 2: PROCEDURE FOR RENAMING EXISTING FACILITIES OR CITY- OWNED LANDS Existing place names are deemed to have historic recognition. City policy is not to change the name of any existing facilities or City-owned land, particularly one whose name has City or regional significance, unless there are compelling reasons to do so. Further, the City will consider renaming to commemorate a person or persons only when the person or persons have made major, overriding contributions to the City and whose distinctions are as yet unrecognized. A. Renaming Suggestions 1. All requests concerning a new name to be given to the City-owned land or facility shall be made in writing on an approved suggestion form to the City Clerk. The suggestion must detail how the proposed name change is consistent with the criteria, the purpose of the name change, and how the new name is directly associated with the land or facility. 2. All submittals, whether from an individual, organization or City staff, must include the name and address or the submitter. No anonymous submittals will be accepted. 3. The City Council shall initiate the renaming process by referral of the public or staff request to the commission or committee whose sphere of influence is most closely associated with the facility in question. Council can also initiate the renaming of lands or a facility without a public request whenever deemed necessary or in the best interest of the City of Palo Alto, following established criteria. Once the referral is made by the City Page 5 of 8 POLICY AND PROCEDURES 1-15/MGR Revised: April 2008 Council to a specific commission or committee, the commission or committee will await comment and evaluation of the new name from the Palo Alto Historical Association. B. Responsibility of the Project Manager 1. The City Clerk is responsible for conveying the name suggestion form(s) received by the deadline to the Project Manager, who will be responsible for forwarding to the Palo Alto Historical Association and then transmitting the recommendation(s) from the Palo Alto Historical Association to the appropriate commission or committee as outlined in Section A above. 2. The recognized neighborhood association in the vicinity of the land or facility will be notified of the proposed name change at the time the reviewing commission or committee receives the report from the Historical Association. C. Responsibility of the Reviewing Commission Or Committee 1. The commission or committee shall conduct a public hearing, confirm that the suggested name(s) meet the criteria of appropriate significance, select recommendation(s) from the names provided by the Historical Association, and shall forward its recommendation to the City Council. The report from the commission or committee shall acknowledge any recommended names together with its evaluation, but present only the name or names which it feels best meets the criteria and merits serious consideration by the Council. 2. Once approved, a transmittal and resolution will be prepared by staff for consideration and approval by the City Council. The transmittal shall include a narrative of historic reference for the name or names, together with a copy of the name suggestion form. D. Criteria Each application for renaming a city park or facility must meet the criteria in this policy, but meeting all criteria does not ensure renaming. City-owned lands and facilities may be renamed for an individual(s) under the following conditions. Where the individual: 1. Has made lasting and significant contributions to the protection of natural or cultural resources of the City of Palo Alto, or 2. Has made substantial contributions to the betterment of a specific facility or park, consistent with the established standards for the facility, or 3. Has made substantial contributions to the advancement of commensurate types of recreational opportunities within the City of Palo Alto. Page 6 of8 ) ) ) ) E. Council Action POLICY AND PROCEDURES 1-15/MGR Revised: April 2008 1. The recommendations received from the Palo Alto Historical Association and commission or committee shall be submitted for Council approval. 2. Action by the Council shall be by Council Resolution. F. Follow-up to Selection ofName 1. Subsequent to approval by the City Council, the new name for the City-owned land or facility shall be conveyed t<;> the Department of Public Works for incorporation in City official maps and plans, and to the Palo Alto Historical Association for its records. NOTE: Questions and/or clarification of this policy should be directed to the City Manager's Office. SECTION 3: PROCEDURE FOR OFFERING NAMING RECOGNITION FOR SIGNIFICANT DONATIONS TO CAPITAL FUNDRAISING CAMPAIGNS This section applies to any organized fundraising initiated by th,e City, a Board/Commission or other group whose sole purpose is to· support City programs and operations in support of the renovation/expansion of an existing building, the constmction of a new facility, the acquisition of a building/land, or the furnishings, fixtures and equipment in said facilities. · A. Responsibility of the staff liaison to the Board, Commission, Task Force or group conducting the Capital Campaign Implementation of this policy is the responsibility of department in which the project to be acquired/constmcted/renovated is managed. A staff liaison appointed to work with the board/committee will guide them through the process and manage appropriate contacts with other departments as necessary during the acquisition, design and constmction process. This will ensure that appropriate information and materials are provided to the group and that oppottunities and expectations are clear, understandable, and feasible within the framework of the project. B. . When a Capital Campaign is initiated by the City, a Commission or other group whose sole purpose is to support City programs and operations, accommodations to the procedures outlined in Sections 1 and 2 shall be made as follows: a. The organizing body may meet and discuss preliminary plans with the City's liaison, Department Head and the City Attorney's office in order to facilitate any "silent" fundraising period. b. The organizing body shall request authorization from the City Council for a Naming Recognition Plan in support of a specific project. They shall provide the following information in their request: Page 7 of8 POLICY AND PROCEDURES 1-15/MGR Revised: April 2008 1. Name of the organizing body; 11. Purpose o'f the campaign; 111. Monetary goal of the campaign; IV. Expected tem1 ofthe campaign; v. Plan for naming recognition including a schedule of naming opportunities and associated gift levels vi. Maintenance/replacement of naming recognition items -City staff shall work with the organizing body to ensure that the plan includes acknowledgement of the maintenance responsibilities associated with any naming recognition items within the facility. c. Once the Naming Recognition Schedule has been approved by the City Council, the fund-raising body shall have the authority to proceed with making commitments for naming opportunities with potential donors subject to final Council review. d. The naming of a facility or sub-facility will not occur until the pledged donation is received. e. Consistent with the Gifts to the City policy, all gifts paid directly to the City shall beduly reported to the Administrative Services Department (ASD) Director and recognized appropriately in accordance with that policy (Policies and Procedures 1-18). If a donation was given anonymously, the donor's identity shall be protected to the extent possible. f. Under this procedure, the organizing body must present a final report to the City Council for approval, detailing the funds received and any namjng opportunities granted, along with a timeline for the completion of the recognition. The group may also come to the Council at any time during the capital campaign for approval of one or more naming recognition items. All naming recognition must be adopted by resolution of the City Council. The City Manager or designee can also request that any donations and associated naming recognitions be brought to the City Council at an earlier point in the capital campaign for approval. C. The one exception to this procedure shall be for the naming of an entire building as recognition for a significant monetary or land contribution. If a fund-raising group secures a donation significant enough to warrant naming the entire facility in recognition of that individual, family or foundation, this should be presented directly to the City Council for approval separately and as soon as possible after this type of donation is secured. As part of this approval process, the Council may solicit input from the Palo Alto Historical Association or the appropriate board/commission. Consistent with the policy statement, the City will not recognize significant corporate donations by naming an entire facility in honor of these entities. D. In cases of major building reconfigurations or disasters that destroy or damage portions of the building, the City reserves the right to remove and not replace naming recognitions. However, the City will consider the original donation intent in these instances and make accommodations as feasible. Page 8 of8 ) ) Criteria for renaming existing facilities of parks: POLICY AND PROCEDURES 1-15/MGR Revised: April 2008 Each application for renaming a city park or facility must meet the criteria listed above, but meeting all criteria does not ensure renaming. Existing place names are deemed to have historic recognition. City policy is not to change the name of any existing facilities or City-owned land, particularly one whose name has City or regional significance, unless there are compelling reasons to do so. Further, the City will consider renaming to commemorate a person or persons only when the person or persons have made major, overriding contributions to the City and whose distinctions are as yet unrecognized. City-owned lands and facilities may be renamed for an individual(s) under the following conditions. Where the individual: I. Has made lasting and significant contributions to the protection of natural or cultural resources of the · City of Palo Alto, or 2. Has maqe substantial contributions to the betterment of a specific facility or park, consistent with the established standards for the facility, or 3. Has made substantial contributions to the advancement of commensurate types of recreational opportunities within the City of Palo Alto. Suggestions for naming or renaming City-owned lands or facilities shall be evaluated on the basis of the above criteria and upon appropriate documentation. Person making the name suggestion (required): Address (required): __________________________ _ Contact phone number (required): _____________________ _ E-mail (not required): ____________________________ _ Location of site or facility to be named: ____________________ _ Suggested name (required): ________________________ _ Biographical information: (Explain) _____________________ _ Civic involvement: (Explain) _______________________ _ Page 2 of3 ) ) POLICY AND PROCEDURES 1-15/MGR Revised: April 2008 Connection to the facility: (Please explain in depth) _______________ _ Reason for Nomination (required): _____________________ _ A?ditional Comments (additional information may be attached): __________ _ Date Received by the City Clerk: _______________ _ Submitted to Palo Alto Historical Association: __________ _ Date scheduled for review by commission: ____________ _ Page 3 of3 City of Palo Alto (ID # 4525) City Council Staff Report Report Type: Action Items Meeting Date: 4/7/2014 City of Palo Alto Page 1 Summary Title: Fiscal Years 2015 to 2024 General Fund Long Range Financial Forecast Title: Finance Committee Recommendation to Approve the Fiscal Years 2015 to 2024 General Fund Long Range Financial Forecast From: City Manager Lead Department: Administrative Services Recommendation The Finance Committee and staff recommend that Council review and accept the Fiscal Years 2015 to 2024 General Fund Long Range Financial Forecast. Recommended Motion The Finance Committee and staff recommend that Council consider the following motion: Accept the Fiscal Years 2015 to 2024 General Fund Long Range Financial Forecast. Executive Summary The Fiscal Year 2015-2024 General Fund Long Range Financial Forecast (Attachment A), which marks the beginning of the FY 2015 budget planning process, projects a slight General Fund surplus of $1.3 million in FY 2015. Based on this analysis, staff will develop the FY 2015 Proposed Budget in alignment with the City Council priorities as approved by the City Council on February 1, 2014: 1. Comprehensive planning and action on land use and transportation: the Built Environment, Transportation, Mobility, Parking and Livability 2. Infrastructure Strategy and Funding 3. Technology and the Connected City City of Palo Alto Page 2 Concurrently, the City Council has directed staff to develop Our Palo Alto, a comprehensive and multi-faceted resident engagement process, develop a Transportation Demand Management program, and address parking within the City. Further, the City is facing major challenges to maintain its infrastructure, experiences growing unfunded liabilities for pension and retiree healthcare benefits, and seeks to remain a competitive employer to keep and attract a talented workforce. These strategic long-term efforts will require additional funding in the FY 2015 Proposed Budget and beyond. As in past years, staff updated the City’s Long Range Financial Forecast (LRFF) based on current information compiled from various sources and used available tools to project revenues and expenditures. The Long Range Financial Forecast allows staff and Council members to understand the long-term results of past decisions and identify issues that must be addressed in the near and long term, including the availability of funds. The Forecast is not a prediction or a commitment of resources; rather, it is a reasonable snapshot of the City’s future financial condition based on various assumptions and currently available data. A continuously improving economic climate is noted by the majority of national, State, regional, and local economic indicators. This Forecast assumes a continued, gradual growth of the national economy with positive impacts to the local economy, which is reflective in staff’s estimates of the economically sensitive revenue estimates. As the table below depicts, based on the FY 2015 Forecast Budget, staff anticipates a General Fund surplus of approximately $1.3 million for FY 2015 and surpluses in all out-years of the Forecast. During this Forecast Period, surpluses range between $1.3 million and $8.9 million with an approximate cumulative one-time surplus of $47.5 million. Assuming funding the General Fund Stabilization Reserve at the City Council approved target level of 18.5 percent of General Fund operating expenditures, $9.4 million would have to set aside. With this set-aside, the one-time resources projected in this Forecast would decrease by $9.4 million from $47.5 million to $38.1 million. The table also depicts the concept of a net operating margin. The operating margin reflects the variance between the projected General Fund revenues and expenditures for each year of the forecast or the annual surplus or deficit. With the concept of the net operating margin, the year over year change in the annual surpluses and deficits, it is assumed that each shortfall is addressed completely with ongoing solutions in the year it appears and that each surplus is completely expended with ongoing expenditures. For example, if the City spends the currently projected FY 2015 surplus of $1.3 million, the available projected surplus for FY 2016 will only by approximately $3.1 million. In subsequent fiscal years, the net operating margin is estimated to range between slight deficits and slight surpluses. Based on these assumptions, the City of Palo Alto Page 3 cumulative Net Operating Margin, or ongoing surplus, during the Forecast Period is approximately $7.6 million. FY 2015-2024 Base Long Range Financial Forecast 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Revenues $166,306 $166,982 $175,269 $181,439 $187,159 $193,184 $199,502 $204,898 $210,886 $217,948 $225,519 Total Expenditures 160,433 165,711 170,852 176,730 182,876 189,195 195,343 200,978 205,839 211,126 216,619 Net One-Time Surplus (Shortfall)$5,873 $1,270 $4,417 $4,708 $4,284 $3,988 $4,159 $3,920 $5,047 $6,822 $8,900 Cumulative One-Time Surplus (Shortfall)$47,516 Net Operating Margin $0 $0 $3,147 $291 ($425)($295)$171 ($239)$1,127 $1,775 $2,078 Cumulative Net Operating Margin $7,630 Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures. Although this Forecast presents a positive fiscal outlook for the City’s General Fund, it is important to note that it does not include the following potential impacts, which can increase or decrease the projected annual surpluses, to the FY 2015 Budget and the out-years of the Forecast: (1) ongoing labor negotiations; (2) updated Retiree Healthcare Plan Actuarial Valuation; (3) impacts due to assumption of control of the Palo Alto Airport; (4) savings from Third Tier Pension Plan; (5) Cadillac Healthcare Federal Excise Tax; (6) dedication of increased Transient Occupancy Tax (TOT) revenue to fund a new Public Safety Building as approved by the City Council on March 3, 2014 (this additional TOT is expected to be generated starting FY 2015 as new hotels are opened); (7) additional funding and/or higher annual debt service for the Golf Course reconfiguration project; (8) the potential acquisition of the downtown Palo Alto Post Office; (9) potential termination of the Fire Services Contract with Stanford University; (10) results of ongoing negotiations for a long-term lease for the Cubberley property between the City and the Palo Alto Unified School District; and (11) changes in the local, regional, and national economy. Consistent with the 2013-2023 Long Range Financial Forecast, the methodology for calculating changes for out-years of the Forecast (FY 2016 to FY 2024) are based on a historical analysis of increases using the Compounded Annual Growth Rate (CAGR) with adjustments factored in for known items. By using an historical average growth rate that incorporates the up and down cycles over the past 10 or 20 years, there is no single year in which a downturn is depicted. Instead, past downturns (e.g. dot-com bust and Great Recession) have been factored into the compound growth rate used to forecast future revenue streams. Staff performed a reasonableness test of the results and made appropriate changes to the CAGR analysis as discussed in the report. Towards the end of this report, staff also presents an alternative FY 2015-2024 Long Range Financial Forecast, which assumes that the City Council dedicate a substantial portion of the estimated increase in TOT revenue towards the funding of annual debt service payments in the City of Palo Alto Page 4 amount of $2.5 million. This annual debt service, over 30 years, is estimated to generate approximately $34 million in Certificates of Participation to partially fund the cost of a new Public Safety building. In this alternative Forecast, with the dedication of the increased TOT receipts towards an annual debt service of $2.5 million, surpluses range between $1.3 million and $6.4 million with an approximate cumulative one-time surplus of $25.0 million, approximately $23 million less than the base model and the cumulative Net Operating Margin is reduced by $2.5 million, from $7.6 million to $5.1 million. FY 2015-2024 Alternative Long Range Financial Forecast 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 TOT from New Hotels 297 1,546 2,626 3,111 3,597 3,783 3,981 4,192 4,415 4,653 4,906 Total Revenues $166,306 $166,982 $175,269 $181,439 $187,159 $193,184 $199,502 $204,898 $210,886 $217,948 $225,519 Estimated Debt Service for Public Safety Building 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Total Expenditures 160,433 165,711 173,352 179,230 185,376 191,695 197,843 203,478 208,339 213,626 219,119 Net One-Time Surplus (Shortfall)$5,873 $1,270 $1,917 $2,208 $1,784 $1,488 $1,659 $1,420 $2,547 $4,322 $6,400 Cumulative One-Time Surplus (Shortfall)$25,016 Net Operating Margin $0 $0 $647 $291 ($425)($295)$171 ($239)$1,127 $1,775 $2,078 Cumulative Net Operating Margin $5,130 At this time, staff projects $5.9 million in excess revenues and expenditure savings in the General Fund for FY 2014. This amount does assume forthcoming recommendations to adjust revenues and does not include expenditure increase recommendations included in the FY 2014 Midyear Budget Review as approved by the Finance Committee on March 18, 2014. Further, these projected excess revenues do not include increased costs in the current fiscal year due to approval of the contract with the Service Employees International Union. During the next two months, staff will continue to monitor revenue sources as well as update revenues and expenditures, as applicable, based on newly available information and include these updates in the FY 2015 Proposed Budget scheduled for release on May 5, 2014. Finance Committee Review and Recommendation At the February 18, 2014 Finance Committee meeting, the Finance Committee approved by unanimous vote that the attached Fiscal Years 2015 to 2024 General Fund Long Range Financial Forecast (see Attachment B for the Minutes Excerpt) be forwarded to the City Council for consideration. As part of the approval, the Finance Committee asked staff to add a discussion of the Compound Annual Growth Rate in the Executive Summary, further describe potential City of Palo Alto Page 5 impacts to the Forecast, and add two alternative Forecast analyses. The attached Forecast includes these additions, as requested by Committee. Attachments: Attachment A - Fiscal Years 2015-2024 General Fund Long Range Financial Forecast (DOC) Attachment B - Finance Excerpt (PDF) Attachment A Fiscal Years 2015-2024 General Fund Long Range Financial Forecast Executive Summary The Fiscal Year 2015-2024 General Fund Long Range Financial Forecast, which marks the beginning of the FY 2015 budget planning process, projects a slight General Fund surplus of $1.3 million in FY 2015. Based on this analysis, staff will develop the FY 2015 Proposed Budget in alignment with the City Council priorities as approved by the City Council on February 1, 2014: 1. Comprehensive planning and action on land use and transportation: the Built Environment, Transportation, Mobility, Parking and Livability 2. Infrastructure Strategy and Funding 3. Technology and the Connected City Concurrently, the City Council has directed staff to develop Our Palo Alto, a comprehensive and multi- faceted resident engagement process, develop a Transportation Demand Management program, and address parking within the City. Further, the City is facing major challenges to maintain its infrastructure, experiences growing unfunded liabilities for pension and retiree healthcare benefits, and seeks to remain a competitive employer to keep and attract a talented workforce. These strategic long- term efforts will require additional funding in the FY 2015 Proposed Budget and beyond. As in past years, staff updated the City’s Long Range Financial Forecast (LRFF) based on current information compiled from various sources and used available tools to project revenues and expenditures. The Long Range Financial Forecast allows staff and Council members to understand the long-term results of past decisions and identify issues that must be addressed in the near and long term, including the availability of funds. The Forecast is not a prediction or a commitment of resources; rather, it is a reasonable snapshot of the City’s future financial condition based on various assumptions and currently available data. A continuously improving economic climate is noted by the majority of national, State, regional, and local economic indicators. This Forecast assumes a continued, gradual growth of the national economy with positive impacts to the local economy, which is reflective in staff’s estimates of the economically sensitive revenue estimates. As the table below depicts, based on the FY 2015 Forecast Budget, staff anticipates a General Fund surplus of approximately $1.3 million for FY 2015 and surpluses in all out-years of the Forecast. During this Forecast Period, surpluses range between $1.3 million and $8.9 million with an approximate cumulative one-time surplus of $47.5 million. Assuming funding the General Fund Stabilization Reserve at the City Council approved target level of 18.5 percent of General Fund operating expenditures, $9.4 million would have to set aside. With this set-aside, the one-time resources projected in this Forecast would decrease by $9.4 million from $47.5 million to $38.1 million. Attachment A The table also depicts the concept of a net operating margin. The operating margin reflects the variance between the projected General Fund revenues and expenditures for each year of the forecast or the annual surplus or deficit. With the concept of the net operating margin, the year over year change in the annual surpluses and deficits, it is assumed that each shortfall is addressed completely with ongoing solutions in the year it appears and that each surplus is completely expended with ongoing expenditures. For example, if the City spends the currently projected FY 2015 surplus of $1.3 million, the available projected surplus for FY 2016 will only by approximately $3.1 million. In subsequent fiscal years, the net operating margin is estimated to range between slight deficits and slight surpluses. Based on these assumptions, the cumulative Net Operating Margin, or ongoing surplus, during the Forecast Period is approximately $7.6 million. FY 2015-2024 Base Long Range Financial Forecast 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Revenues $166,306 $166,982 $175,269 $181,439 $187,159 $193,184 $199,502 $204,898 $210,886 $217,948 $225,519 Total Expenditures 160,433 165,711 170,852 176,730 182,876 189,195 195,343 200,978 205,839 211,126 216,619 Net One-Time Surplus (Shortfall)$5,873 $1,270 $4,417 $4,708 $4,284 $3,988 $4,159 $3,920 $5,047 $6,822 $8,900 Cumulative One-Time Surplus (Shortfall)$47,516 Net Operating Margin $0 $0 $3,147 $291 ($425)($295)$171 ($239)$1,127 $1,775 $2,078 Cumulative Net Operating Margin $7,630 Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures. Although this Forecast presents a positive fiscal outlook for the City’s General Fund, it is important to note that it does not include the following potential impacts, which can increase or decrease the projected annual surpluses, to the FY 2015 Budget and the out-years of the Forecast: (1) ongoing labor negotiations; (2) updated Retiree Healthcare Plan Actuarial Valuation; (3) impacts due to assumption of control of the Palo Alto Airport; (4) savings from Third Tier Pension Plan; (5) Cadillac Healthcare Federal Excise Tax; (6) dedication of increased Transient Occupancy Tax (TOT) revenue to fund a new Public Safety Building as approved by the City Council on March 3, 2014 (this additional TOT is expected to be generated starting FY 2015 as new hotels are opened); (7) additional funding and/or higher annual debt service for the Golf Course reconfiguration project; (8) the potential acquisition of the downtown Palo Alto Post Office; (9) potential termination of the Fire Services Contract with Stanford University; (10) results of ongoing negotiations for a long-term lease for the Cubberley property between the City and the Palo Alto Unified School District; and (11) changes in the local, regional, and national economy. Consistent with the 2013-2023 Long Range Financial Forecast, the methodology for calculating changes for out-years of the Forecast (FY 2016 to FY 2024) are based on a historical analysis of increases using the Compounded Annual Growth Rate (CAGR) with adjustments factored in for known items. By using an historical average growth rate that incorporates the up and down cycles over the past 10 or 20 years, there is no single year in which a downturn is depicted. Instead, past downturns (e.g. dot-com bust and Great Recession) have been factored into the compound growth rate used to forecast future revenue streams. Staff performed a reasonableness test of the results and made appropriate changes to the CAGR analysis as discussed in the report. Attachment A Towards the end of this report, staff also presents an alternative FY 2015-2024 Long Range Financial Forecast, which assumes that the City Council dedicate a substantial portion of the estimated increase in TOT revenue towards the funding of annual debt service payments in the amount of $2.5 million. This annual debt service, over 30 years, is estimated to generate approximately $34 million in Certificates of Participation to partially fund the cost of a new Public Safety building. In this alternative Forecast, with the dedication of the increased TOT receipts towards an annual debt service of $2.5 million, surpluses range between $1.3 million and $6.4 million with an approximate cumulative one-time surplus of $25.0 million, approximately $23 million less than the base model and the cumulative Net Operating Margin is reduced by $2.5 million, from $7.6 million to $5.1 million. FY 2015-2024 Alternative Long Range Financial Forecast 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 TOT from New Hotels 297 1,546 2,626 3,111 3,597 3,783 3,981 4,192 4,415 4,653 4,906 Total Revenues $166,306 $166,982 $175,269 $181,439 $187,159 $193,184 $199,502 $204,898 $210,886 $217,948 $225,519 Estimated Debt Service for Public Safety Building 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Total Expenditures 160,433 165,711 173,352 179,230 185,376 191,695 197,843 203,478 208,339 213,626 219,119 Net One-Time Surplus (Shortfall)$5,873 $1,270 $1,917 $2,208 $1,784 $1,488 $1,659 $1,420 $2,547 $4,322 $6,400 Cumulative One-Time Surplus (Shortfall)$25,016 Net Operating Margin $0 $0 $647 $291 ($425)($295)$171 ($239)$1,127 $1,775 $2,078 Cumulative Net Operating Margin $5,130 At this time, staff projects $5.9 million in excess revenues and expenditure savings in the General Fund for FY 2014. This amount does assume forthcoming recommendations to adjust revenues and does not include expenditure increase recommendations included in the FY 2014 Midyear Budget Review as approved by the Finance Committee on March 18, 2014. Further, these projected excess revenues do not include increased costs in the current fiscal year due to approval of the contract with the Service Employees International Union. During the next two months, staff will continue to monitor revenue sources as well as update revenues and expenditures, as applicable, based on newly available information and include these updates in the FY 2015 Proposed Budget scheduled for release on May 5, 2014. Economic Outlook In preparing the 2015-2024 Long Range Financial Forecast, staff reviewed key economic indicators and measures available for the national, state, and local economy. Overall, as has been reported in various media outlets and economic forecast publications, on national, state, and local levels, the nation, State, and region are experiencing positive economic growth, which has accelerated after the first years following the deep recession. Attachment A National Growth in the U.S. economy has increased in each of the four quarters of 2013, with GDP growing by a 3.2 percent annual rate in the fourth quarter of 2013, which is up from the 2.8 percent growth in the third quarter. It is anticipated that growth for the rest of 2014 will be in the 3.0 percent rangei, with growth for 2014 and 2015 between 3 and 4 percentii. The growth in GDP can be attributed to many factors, including rising home prices, reduced unemployment, and increasing corporate profits, however not all facets of the economy are improving at the same level, and certain pressures remain which have prevented economic indicators to fully return to pre-recession levels. Supporting the higher expected growth in GDP, Lynn Franco, Director of Economic Indicators at The Conference Board reports that “Consumer confidence advanced in January for the second consecutive month. Consumers’ assessment of the present situation continues to improve, with both business conditions and the job market rated more favorably. Looking ahead six months, consumers expect the economy and their earnings to improve, but were somewhat mixed regarding the outlook for jobs. All in all, confidence appears to be back on track and rising expectations suggest the economy may pick up some momentum in the months aheadiii.” The national unemployment rate in December 2013 was 6.7 percent. This is 18 percent lower than the rate of 7.9 percent in December 2012iv. UCLA Anderson Forecast projects that the U.S. unemployment rate will decline to 6 percent by yearend 2015v. As the following table illustrates, unemployment rates have been lower for workers with higher levels of education, which has benefited Palo Alto. U.S. Unemployment Rates by Education Level Education Level Aug. 2011 Aug. 2012 Aug. 2013 Less than High School 14.2% 12.0% 11.3% High School 9.3% 8.7% 7.6% Some College 8.2% 6.6% 6.1% Bachelor’s Degree or Higher 4.3% 4.1% 3.5% Source: Bureau of Labor Statistics as sourced in Beaconomics Fall 2013 The increase in U.S. home prices is evidence of an improving economy. Prices surged by 11.0 percent in December as compared to the prior year. While Nevada led all states with growth of 23.9 percent, California was second in the nation with growth of 19.7 percent, according to analytics consulting firm CoreLogicvi. Also of note is the fact that corporate profits are 25 percent higher than at their pre- recession peakvii. While GDP growth, declining unemployment, and rising home prices and corporate profits indicate a rebounding economy, it should be noted that there are other economic measures that have not seen such marked improvement. Americans continue to be hampered by weak pay, tepid hiring, as well as by government spending cuts to programs such as food stampsviii. For instance, the current national Attachment A median income is lower than it was in June 2009, the ending month of the recession, and in the past twelve months median salaries have not kept up with inflationix. Economists and investors consider non-defense capital goods orders to be one of the most important economic indicators, as it shows the level that businesses are investing in machinery, technology, and other items, and it signals the manufacturing sector’s health. Orders in this category fell by 1.3 percent from August to September. Analysts attributed this decline to business worries related to the federal government shutdown. However, 3rd quarter activity reflects a continuation of the up-and-down trend seen this year. State While the national economic measures indicate an economy on the rebound, tapered by sluggish improvements in a number of areas, the important economic measures for the state have shown more consistent gains. In 2013, California became the 8th largest world economy again. GDP is expected to grow by 2.9 percent in 2013, and improve even more significantly in 2014 to growth of 3.9 percent. The unemployment rate in California fell to 8.3 percent in December 2013, down from 8.5 percent in November 2013 and 9.8 percent in December 2012. The 1.5 percent year-over-year decline outpaced the national drop of 1.2 percentx. July 2013 marked the 36th consecutive month of employment growth in the statexi. UCLA Anderson Forecast predicts that the state unemployment will drop to 8.2 percent in 2014 and 7.3 percent in 2015. While these rates will still exceed the predicted national average, the pace at which California is projected to improve nearly doubles the national forecasted rates. Overall, California has added back nearly two-thirds of the jobs lost during the Great Recession. The employment recovery remains broad-based across all sectors and regions, according to Beacon Economics; however UCLA Anderson points to a continued bifurcation between fast-growing coastal regions and still-struggling inland areas. As noted previously, the growth in California home prices is second in the nation, and by December 2013 the median home price rose to $365,000, a 22 percent increase over December 2012xii and a more dramatic increase of 60 percent over the April 2009 low point of $221,000xiii. While home prices have been rapidly rising, the state home ownership rate of 55 percent is still well below the housing bubble high of 60.2 percentxiv. Since 2011 single-family home prices have increased by 25 percent. While continued growth is expected in 2014, the pace of growth is projected to decrease to 7 percent due to increased supplyxv. California taxable sales have expanded over 34 percent since 2009, exceeding the pre-recession peak by 4.7 percent, and hotel occupancy across the state has demonstrated consistent gains and remains above 70 percentxvi. Attachment A Local The positive impacts from an improving national and state economy, as outlined above, have been especially apparent at the local level. Silicon Valley employment is robust, with unemployment rates in the region lower than both the national and state averages. Palo Alto employment rates significantly outperform both San Jose and San Francisco. Bay Area Non-Adjusted Unemployment Rates Area Oct. 2012 April 2013 Oct. 2013 San Jose 8.9% 7.2% 7.1% San Francisco 6.8% 5.4% 5.4% Palo Alto 4.2% 3.4% 3.4% Source: Bureau of Labor Statistics Between October 2012 and October 2013, the Palo Alto non-adjusted unemployment rate decreased by 24 percent from 4.2 percent to 3.4 percent. As the chart below depicts, in January 2011, the Palo Alto non-adjusted unemployment rate was at 5.7 percent. Attachment A According to the UCLA Anderson Forecast, the improved employment figures in the Bay Area will be sustained and unemployment rates will continue to decline over the next two years. As of January 2014, Zillow.com reported that the median sale price for Palo Alto homes was $1.83 million, up 20.4 percent from last year’s $1.5 million median price, and Palo Alto commercial real estate spaces continue to have high occupancy rates. With improved employment and home prices, activity in Palo Alto has increased significantly. The national, state, and local economic measures and indicators described above were all considered in the development of the 2015-2024 Long Range Financial Forecast. Staff then reviewed historical collection patterns and factors specific to Palo Alto (e.g. new hotels in development, sales tax from local businesses, and homeownership data) in preparing the Forecast revenue estimates. Overall tax revenue over the ten years in this forecast exceeds the tax revenues in the previous Long Range Financial Forecast by $106.7 million. Improvements were assumed in all tax categories (Sales, Property, Transient Occupancy, and Utility User Tax) except for the Documentary Transfer Tax. Fiscal Year 2015-2024 General Fund Long Range Financial Forecast The FY 2015-2024 General Fund Long Range Financial Forecast projects a General Fund surplus in the amount of $1.3 million for FY 2015 and surpluses in all subsequent years of the Forecast. During this Forecast Period, surpluses range between $1.3 million and $8.9 million with an approximate cumulative one-time surplus of $47.5 million (see table below). By City Council approved policy, the General Fund Budget Stabilization Reserve (BSR) is maintained in the range of 15 to 20 percent of General Fund operating expenditures, with a target of 18.5 percent. Assuming the 18.5 percent in this Forecast, the BSR would have to increase from $30.7 million in FY 2015 to $40.1 million in FY 2024. So, over the Forecast period, about $9.4 million would have to be set aside to adequately fund the BSR, reducing the one-time resources projected in this Forecast from $47.5 million to $38.1 million. The table also depicts the concept of a net operating margin. The operating margin reflects the variance between the projected General Fund revenues and expenditures for each year of the forecast or the annual surplus or deficit. With the concept of the net operating margin, the year over year change in surpluses and deficits, it is assumed that each shortfall is addressed completely with ongoing solutions in the year it appears and that each surplus is completely expended with ongoing expenditures. 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Revenues $166,306 $166,982 $175,269 $181,439 $187,159 $193,184 $199,502 $204,898 $210,886 $217,948 $225,519 Total Expenditures 160,433 165,711 170,852 176,730 182,876 189,195 195,343 200,978 205,839 211,126 216,619 Net One-Time Surplus (Shortfall)$5,873 $1,270 $4,417 $4,708 $4,284 $3,988 $4,159 $3,920 $5,047 $6,822 $8,900 Cumulative One-Time Surplus (Shortfall)$47,516 Net Operating Margin $0 $0 $3,147 $291 ($425)($295)$171 ($239)$1,127 $1,775 $2,078 Cumulative Net Operating Margin $7,630 Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures. Attachment A For example, as shown in the graph below, if the City spends the currently projected FY 2015 surplus of $1.3 million, the available projected surplus or net operating margin for FY 2016 will only be approximately $3.1 million. In subsequent fiscal years, the net operating margin is estimated to range between slight deficits and slight surpluses. Based on these assumptions, the cumulative Net Operating Margin, or ongoing surpluses, during the Forecast Period is approximately $7.6 million. It should be noted though, that this Forecast, as outlined in the following sections of this report does not include the following potential impacts to the FY 2015 Budget and the out-years of the Forecast: (1) Labor negotiations: After release of the Forecast to the Finance Committee, the City Council approved a contract with the Service Employees International Union and is scheduled to enter in negotiation with its other bargaining units during the remainder of the current fiscal year. Any additional costs beyond the 2% projected increase in salary and benefits, unless offset with other benefits savings, will result in additional costs to the General Fund. (2) Retiree Healthcare Plan Actuarial Valuation: The City’s actuary is currently finalizing the Retiree Healthcare Plan Actuarial Valuation. The report is scheduled for Finance Committee review in spring. (3) Palo Alto Airport: during the last two fiscal years, the General Fund loaned operating funds to the Airport in anticipation of taking over control of the Palo Alto Airport in 2014. The Forecast assumes a loan amount of $300,000. If this loan amount is not sufficient, an increased loan amount will result in additional costs to the General Fund. (4) Third Tier Pension Plan: the CalPERS valuations as of June 30, 2012 and related rate projections do not include any pension savings from the Third Tier Pension Plan, since the third tier plan became effective January 1, 2013. The City’s actuary projects only slight decreases to the City Contribution rates primarily in the out-years of the Forecast due to the Third Tier Pension Plan. Attachment A (5) Cadillac Healthcare Federal Excise Tax: Beginning 2018, a 40 percent excise tax will be imposed on the value of health insurance benefits that exceed a certain threshold. It is expected that this tax will be included in the cost of the health care premiums. CalPERS plans to design healthcare premiums to stay below the threshold and discussions are in the preliminary stage. (6) Partial funding of new Public Safety Building with increased Transient Occupancy Tax (TOT) revenue from new hotels: The City Council has approved a recommendation to dedicate additional TOT receipts generated from new hotels to fund a new Public Safety Building. The Alternative Forecast Model at the end of the report depicts the impact to the Long Range Financial Forecast for dedicating this additional revenue to fund a new Public Safety Building. (7) Golf Course Reconfiguration Project: The Capital Improvement project (PG-13003) to renovate the Golf Course assumes revenues from the San Francisquito Creek Joint Powers Authority ($3 million) and from soil imports ($1.3 million). As reported to the City Council on February 3, 2014, the revenue generated from soil imports at that time amounted to $200,000. If any of these revenues are not received prior to contract award, the Infrastructure Reserve would have to advance funds. If not all planned revenues are received, the City may have to issue more debt, which will result in a higher annual debt service. The Forecast assumes an annual debt service payment of $400,000 starting in FY 2016 offset with higher estimated revenues compared to FY 2013, the last year of full operation of the Golf Course. In Fiscal Year 2014, under the modified layout, the Golf Course has received approximately $80,000 less in revenue per month. (8) Acquisition of the downtown Palo Alto Post Office: The City may acquire the downtown Palo Alto Post Office with the plan to relocate staff from leased facilities. The acquisition would be financed through issuance of debt with the annual debt service paid through lease cost savings. If the Palo Alto Post Office is acquired, it would require substantial improvements and while the City pays the annual debt service and will also have to continue paying for leasing the existing facilities. Staff is reviewing potential strategies, which would reduce the impact to the General Fund in the short term. (9) Fire Services Contract with Stanford University: The term of the Fire Response service contract between the City and Stanford is through September 30, 2026; however, at Stanford’s request, the two parties have been in negotiations over the past year to restructure the contract. On October 8, 2013, the City received a Notice of Termination letter from Stanford with the intention to terminate the contract with the City no sooner than one year and no later than two years from the date of the notice. In order to plan for a possible termination of services, the City requested that Stanford inform the City of the final termination date at least three months in advance to allow for a structured potential reduction in force in the City's Fire Department. On November 20, 2013, Stanford issued a Request for Proposal (RFP) for Delivery of Fire Department Services for the campus with a proposal submission deadline of January 31, 2014. The City submitted a proposal in response to the RFP by the due date. This Forecast assumes Attachment A the continuation of the contract, because staff believes that the City of Palo Alto is best suited to provide Fire Protection Services to Stanford. For Fiscal Year 2014, the City is receiving approximately $8 million in net revenue. (10) Cubberley Lease: The City is currently in negotiation with the Palo Alto Unified School District (PAUSD) regarding the Cubberley property. If the City and PAUSD can agree on a long-term lease, and after an infrastructure condition assessment of the property, additional funds may be needed to fund capital improvements and ongoing maintenance of the site. (11) Changes in the local, regional, and national economy: This Forecast assumes a steadily growing local economy. Any changes may have positive or negative impacts on economically sensitive revenues such as Sales Tax and the Transient Occupancy Tax. At this time, staff projects $5.9 million in excess revenues and expenditure savings in the General Fund for FY 2014. This amount does assume forthcoming recommendations to adjust revenues and does not include expenditure increase recommendations included in the FY 2014 Midyear Budget Review as approved by the Finance Committee on March 18, 2014. Further, these projected excess revenues do not include increased costs in the current fiscal year due to approval of the contract with the Service Employees International Union. The next section of the report discusses the analysis and assumptions of major revenue and expenditure categories. The Forecast model can be found in Attachment A. Consistent with the 2013-2023 Long Range Financial Forecast, the methodology for calculating changes for out-years of the Forecast (FY 2016 to FY 2024) are based on a historical analysis of increases using the Compounded Annual Growth Rate (CAGR) with adjustments factored in for known items. Staff performed a reasonableness test of the results. Revenues The tables below highlight the annual revenue estimates and year over year increases for this Forecast. Compared to FY 2014 projected, FY 2015 revenues are estimated to increase by $0.7 million, or approximately 0.4 percent. Based on the economic analysis presented in the previous section of this report, revenue estimates, which are primarily linked to the performance of the regional and local economy, are reflective of a gradually growing economy, the current increases in home prices, and the future opening of hotels. Since FY 2010, when the Great Recession severely impacted City tax revenues, there has been a steady recovery in these resources. In fact, in such areas as transient occupancy and documentary transfer taxes gains have outpaced previous projections, reflecting a robust real estate and business environment. Some tax revenues will be adjusted upward at midyear and the Long Range Financial Forecast reflects these positive trends. Attachment A Adopted Projected 2014 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Revenues Sales Taxes $23,846 $27,352 $25,660 $26,256 $26,711 $27,269 $27,915 $28,599 $29,317 $30,091 $30,903 $31,769 Property Taxes 29,613 30,250 31,835 33,541 35,353 37,264 39,297 41,464 43,774 46,107 48,503 51,088 Transient Occupancy Tax 11,545 12,318 14,156 16,487 17,645 18,848 19,822 20,863 21,965 23,137 24,382 25,709 Documentary Transfer Tax 5,699 7,395 7,414 6,562 6,619 6,685 6,792 6,914 7,052 7,222 7,431 7,654 Utility User Tax 11,013 11,386 11,285 11,761 12,373 12,584 12,973 13,384 13,815 14,264 14,628 15,097 Other Taxes & Fines 2,107 2,107 2,206 2,228 2,251 2,273 2,296 2,319 2,342 2,365 2,389 2,413 Subtotal: Taxes 83,823 90,808 92,556 96,835 100,951 104,923 109,095 113,543 118,265 123,186 128,236 133,730 Charges for Services 16,203 15,252 14,098 17,250 18,005 18,296 18,594 18,901 19,216 19,540 19,873 20,215 Stanford Fire and Dispatch Services 8,176 7,332 7,782 8,015 8,256 8,504 8,759 9,021 9,292 9,571 9,858 10,154 Permits & Licenses 8,346 7,777 7,355 7,207 7,064 6,911 7,153 7,403 7,699 8,084 8,489 8,913 Return on Investment 769 701 685 699 716 733 751 770 790 814 840 869 Rental Income 12,891 14,010 14,080 14,490 14,852 15,223 15,604 15,994 15,151 14,626 14,992 15,367 From Other Agencies 253 313 253 253 254 255 256 258 259 261 262 264 Charges to Other Funds 10,574 10,574 11,081 11,443 11,846 12,267 12,699 13,112 13,494 13,840 14,198 14,570 Other Revenues 2,010 2,010 1,480 1,510 1,540 1,571 1,602 1,634 1,667 1,700 1,734 1,769 Total Non-Tax Revenues 59,221 57,969 56,813 60,867 62,532 63,759 65,418 67,093 67,569 68,436 70,246 72,120 Operating Transfers-In 17,529 17,529 17,612 17,567 17,956 18,478 18,671 18,866 19,064 19,263 19,465 19,670 Total Source of Funds $160,573 $166,306 $166,982 $175,269 $181,439 $187,159 $193,184 $199,502 $204,898 $210,886 $217,948 $225,519 The upward trend of the City’s tax revenues is expected to continue over the next 10 years. These tax revenues have significantly improved since the beginning of the Great Recession. The table below illustrates the steady growth projected for the General Fund’s revenue streams, by percentage, from FY 2015 through FY 2024. Adopted Projected 2014 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Revenues Sales Taxes -6.87%6.82%-6.19%2.32%1.73%2.09%2.37%2.45%2.51%2.64%2.70%2.80% Property Taxes 3.03%5.25%5.24%5.36%5.40%5.41%5.46%5.51%5.57%5.33%5.20%5.33% Transient Occupancy Tax 6.96%14.13%14.92%16.47%7.02%6.82%5.17%5.25%5.28%5.34%5.38%5.44% Documentary Transfer Tax -16.31%8.60%0.26%-11.50%0.87%1.00%1.60%1.80%2.00%2.40%2.90%3.00% Utility User Tax 1.40%4.84%-0.89%4.22%5.20%1.71%3.09%3.17%3.22%3.25%2.55%3.21% Other Taxes & Fines -2.11%-2.11%4.72%1.00%1.00%1.00%1.00%1.00%1.00%1.00%1.00%1.00% Subtotal: Taxes -1.34%6.88%1.93%4.62%4.25%3.93%3.98%4.08%4.16%4.16%4.10%4.28% Charges for Services -9.24%-14.57%-7.56%22.36%4.38%1.61%1.63%1.65%1.67%1.69%1.70%1.72% Stanford Fire and Dispatch Services 2.89%-7.73%6.14%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00% Permits & Licenses -3.42%-10.00%-5.43%-2.01%-1.99%-2.16%3.50%3.50%4.00%5.00%5.00%5.00% Return on Investment -18.89%-26.10%-2.20%2.00%2.38%2.41%2.46%2.51%2.66%3.01%3.26%3.36% Rental Income 0.09%8.78%0.50%2.91%2.50%2.50%2.50%2.50%-5.27%-3.47%2.50%2.50% From Other Agencies 6.31%31.88%-19.39%0.30%0.35%0.40%0.45%0.50%0.55%0.60%0.65%0.70% Charges to Other Funds -9.51%-9.51%4.79%3.27%3.52%3.55%3.52%3.25%2.92%2.56%2.59%2.62% Other Revenues 29.29%29.29%-26.37%2.00%2.00%2.00%2.00%2.00%2.00%2.00%2.00%2.00% Total Non-Tax Revenues -4.09%-6.11%-1.99%7.14%2.73%1.96%2.60%2.56%0.71%1.28%2.65%2.67% Operating Transfers-In -12.06%-12.06%0.48%-0.26%2.21%2.91%1.05%1.05%1.05%1.05%1.05%1.05% Total Source of Funds -3.64%-0.20%0.41%4.96%3.52%3.15%3.22%3.27%2.70%2.92%3.35%3.47% During last year’s Finance Committee discussions, it was recommended that staff consider use of a historical annual growth rate derived for each tax revenue source to project future revenue streams. This methodology was used in the final forecast presented for Fiscal Years 2013 to 2023 and has been used in this forecast as well. The Compound Annual Growth Rates (CAGR) utilized in this forecast are cited in each revenue section. It is worth noting that in past forecasts a recession and falloff in economically sensitive revenues was assumed once every nine years. While staff did not pretend to predict the exact timing of the recession, its inclusion in the forecast was to send a signal that a cyclical event, whereby revenues can drop dramatically, will inevitably occur. By using an historical average growth rate that incorporates the up and down cycles over the past 10 or 20 years, there is no single year in which a downturn is depicted. Instead, past downturns (e.g. dot-com bust and Great Recession) have been factored into the compound growth rate used to forecast future revenue streams. Attachment A The graph below depicts a historical and projected view of the five major General Fund tax revenues. It includes 10 years of actual revenue history; the projections for the remainder of FY 2014 based on actual data available for the first six months of the fiscal year; as well as the projections for FY 2015 and the subsequent years of the Forecast, based on current available data and application of the CAGR methodology. The following section is a detailed discussion of General Fund Tax revenue and other major revenue sources by category. Sales Tax The table below shows that sales taxes have improved markedly since FY 2010. Between FY 2010 and FY 2014, the Sales Tax receipts are projected to increase by nearly $10 million or 53 percent, with significant increases in FY 2013 and the estimate for FY 2014. Results for FY 2013 were $3.6 million over those in FY 2012. This growth was primarily due to unexpected receipts from a single vendor in the last two quarters of FY 2013. Staff was able to meet with the vendor and gain a better understanding of their sales model, the basis of receipts for the last two quarters of FY 2013, the first two quarters of FY 2014, the last two quarters of FY 2014, and on a go forward basis. A FY 2014 midyear, upward adjustment in sales tax will be recommended for City Council consideration. FY 2010 FY 2011 FY 2012 FY 2013 FY 2014* Revenue (in millions) $17.9 $20.6 $22.0 $25.6 $27.4 *projected revenue based on currently available information Attachment A However, staff believes that such marked year over year sales tax increases are not sustainable. After controlling for the new revenue discussed above, the sales tax picture is of some concern. In the past several quarters, revenues from a few key electronics firms and an auto dealer have fallen significantly. Unlike TOT, documentary, and property taxes, this revenue source is not demonstrating significant growth. Historically, the top ten vendors within Palo Alto have generated nearly 38-40 percent of sales tax revenues (excludes county pool revenue). This shows that the City is vulnerable to swings in the performance of crucial firms. Further trend data is needed before a determination can be made as to whether the falloffs in electronic sales are cyclical or ongoing. Additionally, consumers continue to shift their purchases from brick and mortar to online retailers. On a positive note, restaurants and apparel stores have shown increases. The Sales Tax generated by Palo Alto consumers, who may purchase goods from online retailers, may only partially benefit the City of Palo Alto. Unless the point of sale for online retailers is within Palo Alto, the City will not receive the full sales tax amounts generated through the online purchases. The CAGR applied to the period FY 2015 through FY 2024 is 2.5 percent which is in line with last year’s forecast and with historical growth rates. Property Tax Following a historical pattern during recessions, property tax revenues decreased ever so slightly between FY 2010 and FY 2011. Unlike many hard-hit jurisdictions, the City’s property values did not fall precipitously and maintained their worth. Since FY 2011, revenues have solidly increased due to short supply and strong demand. Between FY 2010 and FY 2014, the Property Tax receipts are projected to increase by over $4 million or 16.5 percent, with marked increases in FY 2013 and the estimate for FY 2014. Residential properties for sale continue to receive multiple offers with bids and final sale prices exceeding list prices. According to one Real Estate Web Site, home sale values surged from $1.23 million in 2009 to $1.8 million in 2013. A recent article in the Silicon Valley Business Journal indicated that a commercial property on Lytton Avenue probably sold for more than $1,000 per square foot, a noteworthy amount. Results below demonstrate the resiliency of the residential and commercial market in Palo Alto. A FY 2014 midyear, upward adjustment in property tax will be recommended for City Council consideration. FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Revenue (in millions) $26.0 $25.7 $26.5 $28.7 $30.3* *projected revenue based on currently available information The City’s forecast for FY 2014 is based on historical trends and information garnered quarterly from the County on appeals, additions to the roll, and movement in assessed values. Staff does contact the School District for their assumptions in property tax growth. Last year, however, PAUSD’s expected growth rate for FY 2014 was well below the City’s assumed growth rate. The CAGR applied to the period FY 2015 through FY 2024 is 5.4 percent which is higher than the 5.0 percent utilized in last year’s forecast. A buoyant residential and commercial property market that is Attachment A borne out by the number and value of documentary transfer tax transactions indicates that a higher growth rate is warranted at this time. In January, staff hired a consultant who can provide historical data on the number and value of transactions and the “hidden” value that can be realized in the upcoming years due to Proposition 13. As staff engages with the consultant, a better understanding of the assessed valuations can be achieved, which will result in a refinement of the property tax revenue estimate analysis for future long-range financial plans. Transient Occupancy Tax Despite the recessionary period, as outlined in the table below, during the last five years the City’s Transient Occupancy Tax (TOT) receipts performed very well. Between FY 2010 and FY 2014, TOT receipts are projected to increase by over $5 million or 78 percent, with an annual growth rate of 11 percent to 19 percent. Occupancy levels have risen considerably since FY 2010 continuing an approach toward full capacity in FY 2014. Anecdotal information indicates that bookings are increasing in the customarily weak weekend period. With demand increasing due to a vibrant business environment, both in Palo Alto and on the Peninsula, average daily room rates have increased as well, contributing to higher tax receipts. A FY 2014 midyear, upward adjustment in TOT receipts will be recommended for City Council consideration. FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Revenue (in millions) $6.9 $8.1 $9.7 $10.8 $12.3* Avg. Daily Room Rate $139 $147 $165 $182 $198 YTD Occupancy Percentage 66% 73% 79% 80% 82% YTD *projected revenue based on currently available information The Forecast includes estimated revenues for all of the new hotels the City anticipates opening through FY 2018. These include: The Epiphany, Hilton Garden Inn, Hilton Homewood Suites, Staybridge Suites, and a Westin Annex. It is important that the City Council has approved an infrastructure funding plan which dedicates revenue from the new hotels to fund the construction of a new Public Safety building. Although, the recent annual growth rate has been between 11 percent and 19 percent, the underlying CAGR used in last year’s forecast was 4.9 percent and staff has used the same percentage growth rate in this forecast, primarily due to the economic sensitivity of this revenue source. Documentary Transfer Tax This economically sensitive revenue source has experienced ups and downs tied to the City’s housing market. Between FY 2010 and FY 2014, Documentary Transfer Tax receipts are projected to double from $3.7 million to $7.4 million, with an annual growth rate ranging from -8 percent to 42 percent. Expecting this somewhat unpredictable revenue to revert more toward the mean annual increases in FY 2014 staff budgeted $5.7 million. It now appears reasonable to assume collections will exceed the prior year and yield approximately $7.4 million. Through November 2013, transactions and transaction value exceeded the same prior year period by 9.4 and 52.7 percent, respectively. A FY 2014 midyear, upward adjustment in Documentary Transfer Tax receipts will be recommended for City Council consideration. At this time, given activity in the market, staff anticipates FY 2015 revenues of $7.4 million. Attachment A FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Revenue (in millions) $3.7 $5.2 $4.8 $6.8 $7.4* *projected revenue based on currently available information The CAGR applied in the FY 2013 LRFF was 7.4 percent. Staff has not replicated this growth rate in projecting revenues through FY 2023, but has projected higher revenue levels that range from $6.5 to $7.6 million. These levels are appreciably higher than those experienced from FY 2010 to FY 2012 and will be dependent on high transaction values and volume in the local housing market. Utility Users Tax The City’s utility tax revenue is based on a 5 percent tax on electric, water, gas and telephone usage. The revenue anticipated from utility usage is based on the Utilities Department’s 5 year revenue and rate projections. These numbers could change as the department discusses its proposed rate plan with the Utilities Advisory Commission and the Council during the annual budget process. UUT from utility usage will be adjusted slightly upward at midyear to $8.2 million and is anticipated to remain relatively flat at $8.3 million in FY 2015. Telephone receipts showed an uptick in FY 2013 which will result in an adjustment at midyear from $2.8 million to $3.1 million. Unfortunately, there is little data available from telecommunications providers that can provide more informed projections so a similar level of revenue is anticipated in FY 2015. A FY 2014 midyear, upward adjustment in this tax category of less than $0.4 million will be recommended for City Council consideration. Other Taxes & Fines Staff anticipates that revenue in this category will increase slightly in FY 2015 to $2.2 million. The largest source of revenue in this category is derived from parking violations revenue, which staff is estimating to be $1.7 million in FY 2015, a slight increase from the FY 2014 estimate of $1.6 million. Other revenue items in this category, such as traffic violations, administrative citations, and library fines and fees, also continue to grow, contributing to a 1.0 percent annual growth in this category over the 10 year forecast. Charges for Services In FY 2014, total revenues in this category are projected to decrease by $1.0 million. In the forthcoming FY 2014 Midyear Budget Review, staff will bring forward recommendations to decrease the revenue estimate for this revenue categories for the reasons outlined below. First, $0.5 million of the revenue estimate decrease is attributed to staff vacancies and the temporary closure of the Palo Alto Animal Services spay and neuter clinic. More information regarding the status of filling these positions and timing of the clinic’s reopening will be included in the midyear budget report. The second contributing factor to the decrease in the FY 2014 projected revenue estimate in this category is due to planning and development services charges. This revenue stream is expected to Attachment A decrease by $0.5 million and is based on the first and second quarter actual receipts and reflects a decline in development activity in comparison with the previous year. A continued revenue decrease is included in the FY 2015 Forecast Budget. Compared to the FY 2014 Projected revenue estimate, the FY 2015 Forecast revenue estimate is net decreased by an additional $1.2 million. The $1.2 million decrease includes a downward projection of planning and development services charges (decrease of an additional $0.5 million) and a downward projection of golf course revenue estimate (decrease of $1.5 million) due to the Golf Course Reconfiguration Project (decrease of $1.5 million). The revenue decreases total $2.0 million and is offset primarily with assumed revenue from spay and neuter clinic (increase of $0.5 million assumes a reopening of the clinic) and Fire Plan Inspection Services (increase of $0.1 million to align the budgeted revenue with historical trends). In the outer years, the forecast assumes roughly a 1.7 percent annual increase in this revenue category beginning FY 2018 through 2024. This assumes that the Golf Course Reconfiguration project is completed in FY 2016 and golf related revenue is equivalent to previous levels. Stanford Fire and Dispatch Services The City has two separate agreements with Stanford University to provide Fire Response services and Dispatch services. As part of these agreements to reimburse the City for Stanford’s proportional share of these services, Stanford is charged 30.3 percent of the Fire Department’s net cost and 16 percent of the Police Department’s Communication and Dispatch Division. The FY 2015 base assumes a reimbursement of $7.8 million, which is a 4.8 percent decrease from the FY 2014 adopted amount of $8.2 million. Staff will recommend adjusting this revenue to $7.3 million in the FY 2014 Midyear Budget Review report. There are two main drivers for this $844,000 downward adjustment. This downward adjustment is related to FY 2013 and FY 2014 activity and billing corrections. The adjustment related to FY 2013 totals $427,000 and is due to higher than anticipated revenue (paramedic and plan check) and a correction to the contract annual billing. In FY 2014, the reimbursement from Stanford was reviewed and revenue from Stanford was reduced to align revenue and expense with budgeted cost and results in a $417,000 decrease. The total $844,000 adjustment will be recommended as part of the FY 2014 Midyear Report. This will bring the FY 2014 reimbursement from Stanford for both services to $7.3 million. Compared to the FY 2014 projected, the FY 2015 reimbursement from Stanford is projected to increase by 6.1 percent. This is a result of increases in salary and benefit costs offset by an increased revenue credit for paramedic transports and hazardous materials inspections. The term of the Fire Response service contract between the City and Stanford is through September 30, 2026; however, at Stanford’s request, the two parties have been in negotiations over the past year to restructure the contract. On October 8, 2013, the City received a Notice of Termination letter from Stanford with the intention to terminate the contract with the City no sooner than one year and no later Attachment A than two years from the date of the notice. In order to plan for a possible termination of services, the City requested that Stanford inform the City of the final termination date at least three months in advance to allow for a structured potential reduction in force in the City's Fire Department. On November 20, 2013, Stanford issued a Request for Proposal (RFP) for Delivery of Fire Department Services for the campus with a proposal submission deadline of January 31, 2014. The City submitted a proposal in response to the RFP by the due date. The FY 2015 budget assumes the continuation of the contract, because staff believes that the City of Palo Alto is best suited to provide Fire Protection Services to Stanford. A modest annual increase of 3.0 percent has been built into the outer years to account for increasing salary and benefit costs based on currently available information. Permits and Licenses Revenue from permits and licenses has experienced consistent growth over the past several years, primarily due to increased Development Services activity. In FY 2013, Permits and Licenses revenue increased by 19.6 percent from FY 2012 levels. The increase was attributable to a heightened amount of development activity coupled with the newly established citywide Technology Enhancement Fee, which increased the majority of City fees by 5 percent. Based on year-to-date activity levels, FY 2014 revenues are projected to decrease by 5.4 percent from the adopted budget revenue estimate. The decline is attributable to lower than budgeted Development Services activity, and downward adjustments made to a number of Police and Fire Department fees in order to ensure cost-recovery. In FY 2015, revenues in this category are expected to decrease an additional $0.4 million, or 5.4 percent, from the FY 2014 projected level. It is assumed in the forecast that development related revenues will not exceed development related expenditures, and revenues will fluctuate between declines of approximately 2 percent in Fiscal Years 2016-2018, with increases ranging between 3.5-5 percent in Fiscal Years 2019 through 2024. Return on Investment Interest earnings continue to drop and will continue to be depressed as a consequence of the Federal Reserve’s quantitative easing policy. General Fund income from this source has dropped from $1.6 million in FY 2010 to $0.9 million in FY 2012 and to an expected $0.7 million in FY 2014. As the Federal Reserve unwinds its easing (which it has begun) and rates begin to increase (which they have not as of this writing), the City expects to experience a gradual increase in this income stream. Rental Income The largest source of rental income comes from the City’s Enterprise Funds and the Cubberley Community Center. Compared to the FY 2014 Adopted Budget, rental income will increase from $12.9 million to $14.1 million, or 9 percent. An assessment of all General Fund properties that was conducted in FY 2014 which results in an ongoing increase of approximately $1.2 million in rental income to the General Fund for FY 2014. Of this amount, $0.6 million increase is from the Utilities Funds, $60,000 from the Public Works Enterprise Funds, and $0.5 million from the Internal Service Funds. Staff will recommend a $1.2 million revenue increase as part of the FY 2014 Midyear Budget Review. Please note that the $0.5 million rent revenue increase to the General Fund from the Internal Service Funds will be Attachment A recommended to be offset with an increase in allocated charges of $0.2 million which will results in an overall $1.0 million net positive impact to the General Fund. For this forecast period, a 2.5 percent growth was assumed for all rental properties, except for the Refuse Fund rent which is assumed to remain constant until FY 2021 to account for the closing costs related to the Middlefield Well landfill site. Revenue from Other Agencies Included in this category is funding from Community Services Outreach theatre programs, reimbursements from the Palo Alto Unified School District (PAUSD) for various events, State of California grants for Police, and Libraries and Community Services. Many of these revenue streams are difficult to predict and are dedicated often to specific purposes. In this category revenues over the past 5 fiscal years have ranged from $80,000 to $350,000. This forecast assumes $253,000 for FY 2015 with a growth rate slightly lower than 1 percent in subsequent years due to the unpredictability of this funding source. Charges to Other Funds Approximately 87 percent of this category is General Fund administrative cost plan charges to the Enterprise and Internal Service Funds. The FY 2015 projected amount is $11.1 million, an increase of 4.9 percent, from the FY 2014 adopted budget level. The increase is primarily attributable to increased salary and benefit costs in the internal support departments. The forecast includes increases ranging between 2.5-3.5 percent each year based primarily on assumed increases in salary and fringe costs. Other Revenues Major revenue sources in this category are Animal Services charges to Los Altos and Los Altos Hills, reimbursements from PAUSD for its share of Cubberley and athletic field maintenance, donations from non-profits for City libraries, and miscellaneous revenues. The FY 2014 adopted budget includes a one- time $0.5 million donation from the Palo Alto Library Foundation, which is removed in the FY 2015 base. The FY 2015 projected revenue is $1.5 million, with a 2 percent annual increase forecasted beginning FY 2016. Operating Transfers In Operating Transfers include the equity transfer from the Electric and Gas Funds as well as transfers from the University Ave Parking Permit Fund. In accordance with a methodology approved by Council in June 2009, the equity transfer is calculated by applying a rate of return to the capital asset base of the Electric and Gas Funds. This rate of return is based on PG&E's rate of return on equity as approved by the California Public Utilities Commission (CPUC). The equity transfer from the Electric and Gas Funds is projected to increase from $17.0 million in FY 2014 to $17.1 million in FY 2015. Using the Utility Department’s projections from the Electric and Gas Five Year Financial Forecasts as approved by the City Council in spring 2013, the equity transfer is projected to decrease slightly in FY 2016 (0.3 percent) and then increase by one to two percent over the forecast period. Attachment A Expenditure Cost Elements The General Fund expenditure categories have been adjusted with FY 2014 Adopted Budget one-time expenditures and major cost elements, including adjustments to the City’s allocated charges and cost plan, library closures and reopening, rent to non-General Fund departments and funds, and the Golf Course Reconfiguration project and associated debt issuance. The tables below display the General Fund expense forecast. Compared to FY 2014 projected, FY 2015 expenditures are estimated to increase by $5.3 million, or 3.3 percent primarily due to increased salary and benefits, rents and leases, and allocated charges costs from Enterprise Funds and Internal Service Funds as well as a change in the budgeting methodology for vacant positions. The change in budgeting methodology for vacant positions, which assumes that for vacant positions as of August 2013, the full cost of benefits will be included in departmental budgets, is offset with a higher assumed vacancy savings factor for departments based on a historical analysis. As part of the FY 2015 Proposed Budget process, this information will be updated. Adopted Projected 2014 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Expenditures Salaries $62,720 $61,899 $62,884 $64,094 $65,329 $66,588 $67,872 $69,183 $70,519 $71,882 $73,273 $74,691 Benefits 36,927 36,327 41,646 43,765 46,915 50,269 53,734 57,392 60,053 62,110 64,285 66,595 Subtotal: Salaries and Benefits 99,647 98,226 104,529 107,859 112,243 116,857 121,606 126,575 130,572 133,992 137,558 141,286 Contract Services 13,341 13,763 12,522 13,222 13,552 13,891 14,238 14,594 14,959 15,333 15,717 16,109 Supplies & Materials 3,912 3,924 3,408 3,530 3,618 3,709 3,801 3,896 3,994 4,094 4,196 4,301 General Expense 4,869 5,346 4,858 5,009 5,135 5,265 5,399 5,106 5,236 5,369 5,506 5,647 Cubberley Lease 7,268 7,268 7,486 7,711 7,942 8,180 8,426 8,678 8,939 9,207 9,483 9,768 Rents & Leases 1,210 1,210 1,354 1,395 1,437 1,480 1,524 1,570 1,617 1,666 1,716 1,767 Facilities & Equipment 476 553 469 489 502 514 527 540 554 568 582 596 Allocated Charges 14,927 15,075 15,354 15,662 15,975 16,294 16,620 16,953 17,292 17,637 17,990 18,350 Total Non-Sal/Ben Exps Before Transfers46,003 47,139 45,452 47,017 48,161 49,334 50,536 51,338 52,590 53,873 55,189 56,538 Operating Transfers Out 843 1,842 2,071 1,976 1,976 1,976 1,976 1,976 1,976 1,738 1,738 1,738 Transfer to Infrastructure 13,226 13,226 13,659 14,000 14,351 14,709 15,077 15,454 15,840 16,236 16,642 17,058 Total Use of Funds $159,719 $160,433 $165,711 $170,852 $176,730 $182,876 $189,195 $195,343 $200,978 $205,839 $211,126 $216,619 Adopted Projected 2014 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Expenditures Salaries 9.64%8.21%0.26%1.92%1.93%1.93%1.93%1.93%1.93%1.93%1.93%1.94% Benefits -2.08%-3.67%12.78%5.09%7.20%7.15%6.89%6.81%4.64%3.42%3.50%3.59% Subtotal: Salaries and Benefits 4.99%3.49%4.90%3.19%4.06%4.11%4.06%4.09%3.16%2.62%2.66%2.71% Contract Services 16.89%20.59%-6.14%5.59%2.50%2.50%2.50%2.50%2.50%2.50%2.50%2.50% Supplies & Materials 34.74%35.13%-12.90%3.59%2.50%2.50%2.50%2.50%2.50%2.50%2.50%2.50% General Expense 47.15%61.56%-0.22%3.10%2.52%2.53%2.54%-5.43%2.53%2.54%2.55%2.56% Cubberley Lease 2.45%2.45%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00% Rents & Leases 5.00%5.00%11.94%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00%3.00% Facilities & Equipment -35.71%-25.30%-1.41%4.25%2.50%2.50%2.50%2.50%2.50%2.50%2.50%2.50% Allocated Charges -14.57%-13.72%2.87%2.00%2.00%2.00%2.00%2.00%2.00%2.00%2.00%2.00% Total Non-Sal/Ben Exps Before Transfers4.35%6.93%-1.20%3.44%2.43%2.44%2.44%1.59%2.44%2.44%2.44%2.44% Operating Transfers Out -70.25%-34.95%145.77%-4.59%0.00%0.00%0.00%0.00%0.00%-12.05%0.00%0.00% Transfer to Infrastructure -40.58%-40.58%3.27%2.50%2.50%2.50%2.50%2.50%2.50%2.50%2.50%2.50% Total Use of Funds -2.66%-2.23%3.75%3.10%3.44%3.48%3.46%3.25%2.88%2.42%2.57%2.60% Salary and Benefits The table above depicts the salaries and benefits costs for the next ten years. Over the Forecast period, the salaries and benefits cost gradually increase in comparison to the total expenditure budget. In Fiscal Year 2015, salaries and benefits costs represent 63% of the expenditure budget; in Fiscal Year 2024, the Attachment A salaries and benefits cost represent 65% of the budget. In the same period, though, the benefits cost as a percentage of total salaries and benefits costs increase from 40% in FY 2015 to 47% in FY 2024. Over the Forecast period, salaries compounded growth is 19% versus a compounded growth in benefits costs of 60%. The following sections describe the assumed increases in salary and benefits costs and depict the reasons for the faster increasing benefits costs versus salaries costs. Salary The Forecast is consistent with the City’s change in salary budget methodology that was implemented as part of the FY 2014 Adopted Budget. As such, positions are budgeted at actual rate of pay including benefits as of fall 2013. Then, by position, salary costs are updated in accordance with applicable Memoranda of Understanding between the City and its bargaining groups. The Forecast also assumes a pay-for-performance increase for Management and Professional employees. Consistent with the previous forecast, this Forecast includes a salary reserve that accounts for a potential employee salary increases. This salary reserve is set aside for planning purposes only and does not reflect a commitment from the City to increase employees’ salaries and associated benefits. Any changes to employees’ salaries and benefits are part of the meet and confer process with the City’s employee groups, as applicable. The pending negotiations with labor groups may impact the salary costs for FY 2015 Budget. Any such impacts will be included, as necessary, in the development of the FY 2015 Proposed Budget, which is scheduled for release to the City Council early May 2014. Benefits Pension The forecast includes the most recent pension rates from CalPERS which, compared to the FY 2014 rates, represent a 1.5 percentage point increase in pension contribution rate for miscellaneous groups (from 24.60 percent to 26.12 percent) and 6.1 percentage point increase in the pension contribution rate for safety groups (from 33.44 percent to 39.52 percent) for FY 2015. As presented to the Finance Committee at the December 3, 2013 Finance Committee Meeting (Item 3), the primary reasons for the increase in the City’s contribution rates for FY 2015 was the 0.1 percent investment earnings for FY 2012 partially offset with the 12 percent investment earnings for FY 2013. Starting with FY 2016, increases to the City contribution rate are primarily due to actuarial assumption and valuation policy changes. In March 2012 the CalPERS Board reduced the earnings interest assumption rate or discount rate from 7.75 percent to 7.5 percent, and subsequently approved a two-year optional phase-in of the associated rate increases. Further, at the March 18, 2013 CalPERS Board Meeting, the Board approved new demographic assumptions, which will increase the City’s Pension Contribution rates starting FY 2017. The City’s pension contribution rates in this Forecast include the CalPERS Board approval of the demographic assumption changes. Specifically, with FY 2017 and FY 2020, the pension contribution rate will increase by 1.0 percentage point annually for the miscellaneous groups and 1.4 percentage points annually for the safety groups. Attachment A The below table outlines the City’s pension contribution rates used in the forecast where rates for FY 2021 and beyond assume a 5 percent point increase for miscellaneous and a 7 percent point increase for safety. FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Miscellaneous Employees 24.600%26.122%27.600%29.000%30.500%31.900%33.400%33.400%33.400%33.400% Demographic Assumptions (5% smoothed over 5 years starting FY 2017)1.000%2.000%3.000%4.000%5.000%5.000%5.000% Total Rate for Miscellaneous Employees 24.600%26.122%27.600%30.000%32.500%34.900%37.400%38.400%38.400%38.400% Safety Employees 33.440%39.528%42.100%44.600%47.200%49.700%52.200%52.200%52.200%52.200% Demographic Assumptions (7% smoothed over 5 years starting FY 2017) 1.400%2.800%4.200%5.600%7.000%7.000%7.000% Total Rate for Safety Employees 33.440%39.528%42.100%46.000%50.000%53.900%57.800%59.200%59.200%59.200% During the last year, CalPERS closed the 30-year amortization period and changed the smoothing period from fifteen to five years. By closing the 30-year amortization period, given today’s actuarial assumptions and valuation policies, CalPERS requires that the annual required contribution be set at a level which ensures that the unfunded liability will be paid off at the end of the amortization period. By reducing the smoothing period from fifteen to five years, any actuarial and discount rate assumptions as well as gains and losses are accounted for in the pension contribution rates within five years. CalPERS believes that these new policies will provide less volatility in extreme years where significant gains or losses are realized, helps improve the funded status, adds additional transparency to member agencies’ future contribution requirements, and suppresses assumption changes through automatic smoothing. These rates do not assume any potential rate increases from likely future assumption changes, any positive impacts of the California Public Employees’ Pension Reform Act (PEPRA) of 2013, or any changes to participant demographics. The PEPRA mandated third pension tier (2 percent at 62) for new employees went into effect on January 1, 2013. The pension rates included in this forecast represents actuarial data as of June 30, 2012 and the rates that incorporate this savings will not be available until the valuation that will set the FY 2016 rates (available sometime early winter 2014). Healthcare In previous Forecasts, a 10 percent annual increase for health care costs was assumed. A 10-year historical trend analysis indicated that an 8 percent inflation factor is more in line with actual trends experienced by the City. Therefore, this Forecast assumes an annual health care cost inflator of 8 percent. Consistent with the previous forecast and with historical trends, the 2015-2024 Long Range Financial Forecast assumes a 4 percent increase for dental and vision costs for outer years. This Forecast includes the Annual Required Contribution from the May 2012 actuarial valuation for the City’s retiree healthcare plans. The data used in this valuation is based on information as of June 30, 2011. An updated valuation report is scheduled for release in May 2014. Any changes in costs due to the new valuation will be incorporated in the FY 2015 Proposed Budget. Attachment A The Affordable Care Act includes provisions which stipulate that the City offers healthcare benefits for specific hourly staff meeting certain work-schedule requirements. At this time, staff has identified six employees eligible for this program with a cost to the City of approximately $60,000 per year. As part of the development of the FY 2015 Proposed Budget, this cost will be further analyzed. The FY 2014 projected budget includes an additional $1.5 million in salary and benefits savings offset with higher than anticipated expenditures in the non-salary expenditure categories. Staff will provide an update to this amount in the midyear report. Contract Services The FY 2014 Adopted Budget included $13.7 million to fund contract services. The FY 2015 Forecast budget for Contract Services is adjusted for one-time expenditures as included in the FY 2014 Adopted Budget (e.g.: $0.8 million for projects in the Planning and Community Environment Department such as a community engagement process for the Arts and Innovation District Area (27 University Avenue), downtown parking study, Comprehensive Plan update, and Climate Protection Plan update) or ongoing expenditures approved by the City Council after the adoption of the budget (e.g.: $0.4 million for landscape services at parks and City facilities). These adjustments result in a net decrease of $1.2 million in contract expenses to $12.5 million for the FY 2015 Forecast Budget. In the out-years of the Forecast, 2.5 percent of annual growth for contract services is assumed. This is aligned to the 20 year historical average of the San Francisco Metropolitan Statistical Area Consumer Price Index – All Urban Consumers of 2.6 percent. Supplies & Materials This category remains at $3.9 million in the FY 2014 Adopted budget and the projection for the current year. Compared to the FY 2014 Adopted, the FY 2015 Forecast Budget is decreased by $0.5 million primarily due to the removal of the purchase of library materials funded through a donation from the Palo Alto Library Foundation. For the out-years of the Forecast, it is assumed that costs will increase based on the 2.5 percent annual increase. General Expense This category includes costs for travel and meetings, telephone and non-city utilities, contingency accounts, subsidies and grants provided through the Human Resource Allocation Process, and debt service payments for the Master Lease-Purchase Agreement related to the golf course. Projected FY 2014 expenses are $5.3 million, which are primarily due to a one-time $0.6 million increase for the November 2013 Measure D election costs. This amount was removed from the FY 2015 Forecast budget. Beginning FY 2016, this category assumes an annual 2.5 percent increase. Cubberley Lease The forecast assumes a 3.0 percent annual CPI increase for the lease payments to the Palo Alto Unified School District (PAUSD) for the Cubberley facility. This results in a $0.2 million increase from $7.3 million to $7.5 million in the Cubberley lease expense in FY 2015. Attachment A Rents & Leases Rent and Lease expenses for FY 2015 are estimated to increase by $144,000 from the FY 2014 level of $1.2 million to account for higher lease costs for the Development Center. From FY 2016 onwards, this expense is expected to increase by 3.0 percent per year. Facilities & Equipment Facilities and equipment expenses for FY 2014 is projected to be $0.5 million and will remain consistent in FY 2015 onward. The base model assumes a 3.0 percent annual increase starting in FY 2016. Allocated Charges Allocated charges represent expense allocations by the City’s enterprise and internal services funds for services and products they provide to General Fund departments. In FY 2015, these charges are estimated at $15.3 million including utilities usage (28.1 percent or $4.3 million), liability insurance (4.6 percent or $0.7 million), technology costs (35.9 percent, or $5.5 million), vehicle equipment and replacement costs (24.8 percent or $3.8 million), and other costs (6.5 percent, or $1.0 million). The FY 2015 charges of the forecast updates the revenue and expense for these cost plans based on the most current information available at the time of Forecast development. Growth of 2.0 percent is anticipated in the outer years, which is based on the average annual expense growth over the forecast period. Operating Transfers Out Operating Transfers Out include transfers from the General Fund to the Debt Service Fund, Technology Fund, and Airport Fund. FY 2014 projected transfers out total $1.8 million which is an increase of $1.0 million compared to the FY 2014 adopted budget amount. This increase represents the estimated technology fee proceeds generated from the majority of Municipal Fees and collected in the General Fund. As part of the FY 2014 Midyear Budget Review, staff will bring forward recommendations to transfer this estimated amount from the General Fund to the Technology Fund for citywide technology initiatives. In FY 2015, an increase in this expense category of $0.3 million is assumed due to the anticipated issuance of debt related to the golf course reconfiguration, increasing the total amount for the FY 2015 Forecast Budget to $2.1 million. Projected FY 2014 and FY 2015 transfers out include a $0.1 million annual transfer to the Technology Fund for the Library Virtual Branch. This transfer is projected to end in FY 2016 lowering the transfers out to $2.0 million. Debt service payments for the 2002 issuance of certificates of participation for the Downtown Parking Improvement Project end in FY 2022. As a result, transfers to the Debt Service Fund decrease by $0.2 million and overall transfers out decrease to $1.8 million. A $0.3 million transfer to the Airport Fund from the General Fund is included in FY 2014 projected amounts and it is unknown when the Airport Fund will be self-sustaining; therefore, this transfer continues in FY 2015 and the outer years of this Forecast. Staff is evaluating the potential costs to Attachment A operate the Palo Alto Airport and will bring forward funding recommendations and potential increased loan amounts as part of the FY 2015 Proposed Budget. Transfer to Infrastructure In FY 2014, adopted and projected transfers to the capital project fund remain at $13.2 million and increase by $0.4 million, or 3.3 percent, in FY 2015. Future year projections are based on anticipated 2.5 percent CPI increases. Alternative FY 2015-2024 Long Range Financial Forecast Additional Transient Occupancy Tax Receipts – Public Safety Building During the last year, the City’s Infrastructure Committee discussed the City’s infrastructure needs and potential funding sources. One of the potential funding sources identified is a projected increase in Transient Occupancy Tax (TOT) receipts due to several new hotels scheduled to open during the next few years. The table below provides an alternative FY 2015-2024 Long Range Financial Forecast view which identifies the estimated additional TOT receipts starting in the current fiscal year escalated by the Compound Annual Growth Rate assumed in this Forecast as well as the annual debt service of $2.5 million. With a conservative approach, staff estimates that the issuance of approximately $33.6 million in Certificates of Participation to fund a Public Safety building will require an annual debt service of $2.5 million for 30 years. In this alternative Forecast, with the dedication of the increased TOT receipts towards an annual debt service of $2.5 million, surpluses range between $1.3 million and $6.4 million with an approximate cumulative one-time surplus of $25.0 million, approximately $23 million less than the base model. The cumulative Net Operating Margin is reduced by $2.5 million to $5.1 million from $7.6 million. 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 TOT from New Hotels 297 1,546 2,626 3,111 3,597 3,783 3,981 4,192 4,415 4,653 4,906 Total Revenues $166,306 $166,982 $175,269 $181,439 $187,159 $193,184 $199,502 $204,898 $210,886 $217,948 $225,519 Estimated Debt Service for Public Safety Building 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Total Expenditures 160,433 165,711 173,352 179,230 185,376 191,695 197,843 203,478 208,339 213,626 219,119 Net One-Time Surplus (Shortfall)$5,873 $1,270 $1,917 $2,208 $1,784 $1,488 $1,659 $1,420 $2,547 $4,322 $6,400 Cumulative One-Time Surplus (Shortfall)$25,016 Net Operating Margin $0 $0 $647 $291 ($425)($295)$171 ($239)$1,127 $1,775 $2,078 Cumulative Net Operating Margin $5,130 Higher Pension Contributions This Forecast assumes the higher pension contributions due to the updated demographic assumptions as approved by the CalPERS Board on February 18, 2014 and a discount rate (interest earnings assumption of the CalPERS investment portfolio) of 7.5%. A lowering of the discount rate to 7.25% would increase the City’s unfunded liability and result in an increased annual required contribution. Attachment A Based on the CalPERS issued Valuations for Miscellaneous and Safety employees as of June 30, 2012 and the provided sensitivity analysis, the annual required contributions would increase by approximately $2.1 million from $17.3 million to $19.4 million in FY 2015. Major Tax Revenue Sensitivity Analysis As discussed in this Forecast, the FY 2015 total tax receipts are estimated to generate approximately $92.6 million. This assumes an average tax receipts annual growth of 1.93% from FY 2014 Year-End projections to FY 2015. The year over year assumed growth in total tax revenues is between 1.93% and 4.62% for the Forecast period. All other assumptions remaining the same, if tax revenue receipts growth falls short by one percentage point from 1.93% to 0.93% in FY 2015, the loss in revenue would be approximately $0.9 million. However, a year over year loss of one percentage point in annual revenue growth would result in a cumulative revenue loss of approximately $61 million. Such a loss in revenue growth would erase the cumulative one-time surpluses of $47.5 million as depicted in this Forecast and result in cumulative one-time deficits of $13.5 million. Conclusion Although this Forecast projects a slight General Fund surplus of $1.3 million for FY 2015 and overall a positive financial outlook for the City, a cautionary note needs to be struck. The City Council has directed staff to develop Our Palo Alto, a comprehensive and multi-faceted resident engagement process, develop a Transportation Demand Management program, and address parking within the City. These directions are aligned with the City Council priorities as approved during the City Council retreat on February 1. 2014: 1. Comprehensive planning and action on land use and transportation: The Built Environment, Transportation, Mobility, Parking and Livability 2. Infrastructure Strategy and Funding 3. Technology and the Connected City Further, the City is facing major challenges to maintain its infrastructure, experiences growing unfunded liabilities for pension and retiree healthcare benefits, and seeks to remain a competitive employer to keep and attract a talented workforce. These strategic long-term efforts will require additional funding in the FY 2015 Proposed Budget and beyond. During the next two months, staff will continue to monitor revenue sources as well as update revenues and expenditures, as applicable, based on newly available information. This updated information will be reflected in the FY 2015 Proposed Budget, which is scheduled to be released to the City Council early May 2014. i UCLA Anderson Forecast, News Release of December 5, 2013 Attachment A ii UCLA Anderson Forecast, News Release of September 12, 2013 iii The Conference Board, Consumer Confidence Survey, January 28, 2014, http://www.conference-board.org/data/consumerconfidence.cfm iv Bureau of Labor Statistics, January 28, 2014 v UCLA Anderson Forecast, News Release of December 5, 2013 vi CoreLogic Home Price Index Report, December 2013 vii Beaconomics, Fall 2013 viii MuniServices Economic Overview, 3Q2013 News ix Ibid. x The Weekly Briefing, CA State Treasurer’s Office, Jan. 27, 2014 xi The Weekly Briefing, CA State Treasurer’s Office, Nov. 4, 2013 xii The Weekly Briefing, CA State Treasurer’s Office, Jan. 27, 2014 xiii Beaconomics, Fall 2013 xiv Ibid. xv The 2014-15 Budget: California’s Fiscal Outlook. California Legislative Analyst’s Office, November 20, 2013 xvi Beaconomics, Fall 2013 FINANCE COMMITTEE MINUTES EXCERPT Page 1 of 9 Regular Meeting Tuesday, February 18, 2014 Roll Call Chairperson Berman called the meeting to order at 7:14 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California. Present: Berman(Chair), Burt, Holman, Kniss Absent: Agenda Items 1. Review of Long Range Financial Forecast for Fiscal Years 2015 to 2024. Walter Rossmann, Director, Office of Management and Budget, reported that the Long Range Financial Forecast (LRFF) was the first step in planning the Fiscal Year (FY) 2015 Budget. It allowed Staff and Council Members to understand the long-term results of past decisions and to look forward to the next ten fiscal years. The LRFF was not a prediction or a commitment of resources; rather it was a reasonable snapshot of a moment in time based on available data. The General Fund Operating Margin represents the surpluses and deficits resulting each fiscal year. The General Fund Net Operating Margin was a year-over-year comparison of the surpluses and deficits. For FY 2015, Staff projected a surplus of $1.3 million. The cumulative surplus over ten years was $38.1 million, assuming the Council funded the Budget Stabilization Reserve (BSR) at the target level of 18.5 percent. Given the needs of the organization, the Net Operating Margin assumes that the City Council will fully allocate available resource every year. In FY 2016, the FY 2015 projected surplus of $1.3 million would not be available if the Council chose to spend those funds. Therefore, the surplus of $4.4 million in FY 2016 would be reduced by $1.3 million to $3.1 million. As surpluses are spent, the LRFF model shows that the City alternates between slight surpluses and slight deficits over the next ten years. It was important to consider the long-term outlook. In the outer years, the City seemed to gain some surpluses; however, the majority of the Attachment B MINUTES EXCERPT Page 2 of 9 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 cumulative surplus of $7.6 million was actually $5 million in the final three years of the LRFF. Staff began building the FY 2015 forecast by assuming the same service levels as in FY 2014. The FY 2015 LRFF did not include ongoing labor negotiations. Any agreement beyond the 2 percent salary increase contained within the LRFF would impact the surplus. Funding the healthcare long-term liability could impact the LRFF. Assuming control of the Palo Alto Airport could have an impact on the General Fund, because the Airport Fund could not sustain expenditures with revenues in the first few years. The LRFF also did not contain information regarding third tier pensions. As more and more employees moved to the third tier, the change would have a positive impact long-term on the LRFF. Staff did not know if the City would be exposed to the Healthcare Cadillac Tax, which is scheduled to be charged in 2018. The California Public Employees' Retirement System (CalPERS) indicated it would set plans in such a way that employers would not bear the tax. In addition, the LRFF did not dedicate additional Transient Occupancy Tax (TOT) revenues from new hotels to partially fund a new Public Safety Building. The Golf Course Reconfiguration Project was not fully included in the LRFF. The City's acquisition of the Post Office and the potential provision of fire services to Stanford University could impact the General Fund and LRFF. Any economic downturn could also affect revenues. The local economy in Palo Alto had improved substantially. An improved economy created problems related to parking and provision of transportation services. Based on trends, underlying data, and revenues received through December 2013, Staff projected revenue estimates for FY 2014 year-end as well as for FY 2015. Revenue projections beyond FY 2015 are primarily based on the compound annual growth rate with reasonable adjustments based on underlying data. Property tax revenue showed a steady increase. Some of the recent spike in sales tax was due to one company. Those one- time receipts resulted in downward adjustments of Sales Tax for FY 2015 in comparison to FY 2014 year-end projections. The Utility User Tax (UUT) year over year revenue estimates grow very slowly because they depend on, for example, the amount of electric or gas consumption and the unit costs for electric and gas. The TOT increased when new hotels opened, then tapered off to a regular growth rate. Staff believed the amount of Documentary Transfer Tax received was above the norm; therefore, Staff projected a slight decrease in FY 2016. In projecting major expenditures, Staff reviewed one-time adjustments and salary increases. Beyond FY 2015, Staff assumed a 2 percent annual growth in salaries; CalPERS projections; an 8 percent annual growth rate for healthcare costs; and a 2.5 percent Consumer Price Index (CPI) increase. The CalPERS contribution rate for Public Safety Employees is 39.5 percent in FY 2015 and 59.2 percent in FY 2023. The contribution rate for Miscellaneous Employees is 26.1 percent and 38.4 percent in FY 2015, an increase of 56 percent during the Forecast period. The rates did not include any assumptions regarding third tier Attachment B MINUTES EXCERPT Page 3 of 9 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 pensions. The alternative model included funding for a Public Safety Building. Issuing Certificates of Participation (COP) in FY 2016 to fund approximately $34 million for a Public Safety Building would translate to approximately $2.5 million in debt service. The projected operating margin surplus of $4.4 million would decrease to $1.9 million and the net operating margin surplus would decrease to $650,000. If TOT revenues were utilized to fund a Public Safety Building, then the net operating margin for the alternative model varied between slight surpluses and slight deficits. Staff projected an additional surplus for FY 2014 of $5.9 million, primarily driven by higher than anticipated revenues. The LRFF assumed technical adjustments for rent charge increases, Stanford fire service decreases, and such items. Not included in this year-end projection are any recommendation from the City Manager regarding adjustments to the FY 2014 Budget. Chair Berman introduced the members of the Finance Committee (Committee). Vice Mayor Kniss noted economic downturns were unpredictable, and the City experienced two incredible downturns in the prior 15 years. Lalo Perez, Administrative Services Director and Chief Finance Officer, explained that recessions historically occurred approximately every nine years. The Committee directed Staff to review compound annual growth for the prior 10 and 20 years to account for possible recessions. The range for the Budget Stabilization Reserve (BSR) was 15 percent to 20 percent with a goal of 18.5 percent. The City Manager had the discretion to recommend to the Council to transfer funds above 18.5 percent to infrastructure. Council Member Holman suggested Staff include information regarding assumptions and their bases in the Staff Report. Mr. Perez could make the information prominent and include the table of compound annual growth. James Keene, City Manager, suggested Staff include a sensitivity analysis chart that could demonstrate the impact of a recession and the multiplier effect. Mr. Perez felt including a sensitivity analysis chart for the top five revenue sources would be appropriate. Council Member Holman noted property taxes increased steeply while Documentary Transfer Taxes remained flat. She inquired whether the two taxes should be relational. Attachment B MINUTES EXCERPT Page 4 of 9 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 Mr. Perez explained that Staff noticed a high percentage of properties assessed at $600,000. As those properties sold, they most likely would be reassessed at market value. However, homeowners were not selling their property; instead, they were renting their property. Joe Saccio, Assistant Director of Administrative Services, indicated Staff increased revenues to approximately $7.4 million in FY 2014. After FY 2016, Staff did not increase the Documentary Transfer Tax by the historical compound annual growth rate. In FY 2016, Staff believed revenues would revert to the mean and decrease to $6.6 million. Staff attempted to reset the base amount in order to have a realistic projection. Tarun Narayan, Senior Management Analyst, added that the Documentary Transfer Tax above the mean is more like one-time revenue unlike property tax. Council Member Holman inquired whether TOT was based on the current rate. Mr. Saccio reported the TOT projection was based on the current rate of 12 percent. Council Member Holman requested Staff comment on the reliability of the UUT projections. Mr. Saccio indicated Staff assumed small or no increases in water, gas and electric rates in preparing the LRFF. Depending on usage, revenue would remain relatively flat. With respect to the telephone component of UUT, Staff did not have good data regarding potential increases. The general view was that the UUT would remain flat with perhaps some modest increases. Council Member Holman asked if Staff had an update regarding phone usage and related taxes. Mr. Saccio responded no. Council Member Burt stated residents had reduced water and electricity consumption on a per capita basis. He asked about gross consumption as a City with a population increase. Mr. Saccio utilized the Utility Department's five-year forecast in compiling the LRFF. The Utility Department's forecast included consumption factors. Attachment B MINUTES EXCERPT Page 5 of 9 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 Mr. Perez added that the Utility Department would provide an update regarding rates at the Finance Committee's (Committee) April 15, 2014 meeting. Council Member Burt remarked that the rate of increase for UUT was higher than he would have assumed based on commodity assumptions. Mr. Saccio would review the matter. Anticipated rate increases would need to be factored into increases. Council Member Burt recalled that drought conditions were a driver toward permanent efficiency with respect to water consumption. He suspected that water consumption would be lower in 2024 than the projection. Mr. Keene believed the City's method for pricing water was not appropriate as fixed costs for delivering water were built into the rate. Large increases in water rates were planned for the next five-year period. He presumed the increases were included in the projection. Council Member Burt commented that water rates would level off in the next few years with completion of the Hetch Hetchy rebuild. Remaining increases could account for much of the projected increase. Mr. Perez reported the Committee previously directed Staff to provide benchmarking in comparison to cities similar to Palo Alto. Utilities Staff would report on that at the April 15, 2014 meeting. Mr. Saccio noted after 2015-2016 electric increases ranged from 3.6-6 percent, water increases from 3.8-7 percent, and gas increases around 1-2 percent. Council Member Burt asked if that was per annum. Mr. Saccio indicated the increases ranged over that period. He did not have a per annum percentage of increase. Council Member Burt inquired about the number of years in the time period. Mr. Saccio answered through 2023. Council Member Burt calculated a rate increase of slightly more than 0.5 percent per year over eight years. Chair Berman asked if that increase applied to water rates as well. Attachment B MINUTES EXCERPT Page 6 of 9 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 Mr. Saccio reported the high range was 7 percent from 2016-2017 to 2017- 2018 for water rates with a lower percentage increase of approximately 3.8 percent. Council Member Burt inquired whether TOT revenues from three new hotels were assumed in the LRFF and whether those funds were dedicated to a Public Safety Building. Mr. Narayan noted TOT revenue from a total of five hotels was included in the LRFF. Council Member Burt commented that dedication of TOT revenue to a Public Safety Building was considered in the alternative model. Mr. Saccio added that Staff provided the Infrastructure Committee with a lower number for new hotel revenue to support infrastructure than what was contained in the LRFF. Council Member Burt inquired about the amount Staff utilized for debt service. Mr. Saccio explained that beginning in FY 2017 Staff expected to receive almost $700,000 more than identified funds for debt service support. Council Member Burt asked if Staff anticipated 30 percent more income from new hotels than the amount budgeted for debt service. Mr. Perez reported the market changed as a result of municipal bankruptcy cases; therefore, interest rates may not be the same as anticipated. The City's rating could be different, and Staff wished to be cautious. Council Member Burt noted the LRFF utilized CalPERS' official position of a 7.5 percent rate of return. The Committee may want to discuss relying solely on CalPERS projections; calculating and utilizing a more conservative projection; or not paying down unfunded liabilities. Mr. Perez reported Staff was discussing those topics with the Chief Actuary at CalPERS and requested CalPERS provide options for agencies. If CalPERS provided options, then Staff could present those options to the Council. CalPERS was listening to Staff and others. Council Member Burt believed long-term infrastructure liabilities had revenues that offset expenses. If the City purchased the Post Office, avoiding high lease rates would offset the expense of the capital cost and renovations. If the City could eliminate the cost of the covenant not to Attachment B MINUTES EXCERPT Page 7 of 9 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 develop at Cubberley, then it could set aside $2 million a year toward capital expenditures. Mr. Perez agreed that avoiding the cost of leases could pay for the debt service for acquisition of the Post Office. Renovating the Post Office would require a couple of years; therefore, the City would have two years of debt service with no income. Staff was reviewing options for purchasing the Post Office, including a cash purchase. Chair Berman asked if cash would be withdrawn from the BSR for the Post Office purchase. Mr. Perez did not want to utilize BSR cash as a first option, but would suggest the use of Stanford funds and Infrastructure Reserve funds. Utilizing those funds would then place limitations on other projects. Mr. Keene suggested Staff could include in the LRFF some strategic scenarios on a number of issues to contrast the status quo with alternatives. That could be helpful for the Council in speaking to the community about priorities or choices. He asked if the LRFF included increased maintenance for Cubberley. Mr. Perez indicated the LRFF did not include Cubberley maintenance on the operating side. Mr. Keene reported many drivers were not included in the LRFF, because the City did not have a plan to make the ongoing investments. Staff estimated the ongoing deficit for unfunded maintenance at Cubberley to be $16-$17 million, and that amount would continue to grow. He inquired whether Staff had a forecast for the Airport. Mr. Rossmann answered no. Mr. Keene stated the Airport was another example of shortfalls the City would have to consider. Mr. Rossmann explained the Airport was not included in the forecast because it was a different fund. The Airport could have an impact on the General Fund. Mr. Keene noted the City had many commitments with volatility and obligations. Demonstrating some of those in the LRFF would be helpful. Mr. Perez added that some of the areas would become known within the next few months, and Staff could begin placing them in the LRFF. Attachment B MINUTES EXCERPT Page 8 of 9 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 Council Member Burt felt the $2 million a year from the covenant not to develop at Cubberley could be utilized to reduce deferred maintenance costs. He requested a graphic representation of the accelerated maintenance of streets so the public could see the accomplishments. The amount of funds allotted for maintaining streets after the goal was accomplished would be more than the amount needed. Hypothetically, those capital improvement dollars could be reallocated to other needs while maintaining excellent streets from 2020 onward. He did not believe that projection was included in the LRFF. Mr. Perez concurred and would provide a projection as part of the Proposed Budget document. Council Member Burt recalled the City's deliberate actions that resulted in the current financial circumstance. He inquired about the amount of a deficit had the City not made changes. Mr. Rossmann reported the City would be paying approximately $750,000 more today in pension benefits alone. Council Member Burt felt the Council, community and Staff should see those numbers. He asked if Staff thought a deficit could be more than $10 million. Mr. Saccio agreed that the City positioned itself through reductions and retirement plans to save a great deal of money. Council Member Burt requested a rough calculation of the amount of a deficit. Mr. Perez could provide a point in time number from a few years ago. Council Member Burt remarked that the Council was proceeding with much of the infrastructure backlog. The City was moving in the direction of exceptional services and strong infrastructure. Chair Berman inquired about hiring a consultant regarding property tax and Proposition 13. Mr. Perez indicated Staff was considering other data, because people were holding their homes. The GIS map contained permits obtained for particular property, and Staff wanted to add the assessed valuation. Staff was attempting to obtain additional information to have more data for projections. Mr. Narayan explained that Staff could utilize data such as the number of residential properties valued at less than $600,000 and a five-year history of Attachment B MINUTES EXCERPT Page 9 of 9 Finance Committee Regular Meeting Minutes Excerpt 2/18/2014 residential property sales to refine projections for Documentary Transfer Tax and property tax. Council Member Holman noted that assessed value was different for remodel and demolition of residential properties. She was not confident that the Building Department was aware of situations where homes were technically demolished rather than remodeled. Mr. Perez discussed that with Planning Staff. Having that information on the GIS would hopefully assist the Building Department. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to forward the Long Range Financial Forecast to the Council as an Action Item. Council Member Holman suggested the Motion incorporate the points Committee members made during the discussion. Mr. Perez added that Staff would outline information they could not include in the LRFF and would provide that information in the Budget or further reports. Vice Mayor Kniss commented that Proposition 13 changed everything. MOTION PASSED: 4-0 Mr. Keene noted in 2009 27 percent of Palo Alto single-family residential properties were assessed at under $200,000. Vice Mayor Kniss felt that information needed to be woven into budget information. Council Member Holman added that commercial properties were more extreme. Chair Berman announced Agenda Item Numbers 2 and 3 would be heard together. Attachment B