HomeMy WebLinkAbout2021-10-05 Finance Committee Agenda Packet1
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FINANCE COMMITTEE
Tuesday, October 5, 2021
Special Meeting
Virtual
6:00 PM
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CALL TO ORDER
ORAL COMMUNICATIONS
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ACTION ITEMS
1.Staff and the Utilities Advisory Commission Recommend That the
Finance Committee Recommend the City Council Approve Design
Guidelines for the 2022 Electric Cost of Service and Rates Analysis
2.Modifications to University Avenue and California Avenue Parking
Policies to Expand Eligibility for City Garage Parking Permits and
Update Parking Permit Fees, Modify the Downtown and Evergreen Park
Mayfield Residential Preferential Parking (RPP) Programs to Reduce
Employee Parking in these RPP Districts and Update RPP Permit Fees,
Memo
Presentation
2
Finance Committee Special Meeting October 5, 2021
and Develop a Parking In-Lieu Program for the California Avenue
Business District (Continued From November 9, 2020)
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City of Palo Alto (ID # 13544)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 10/5/2021
City of Palo Alto Page 1
Title: Staff and the Utilities Advisory Commission Recommend That the
Finance Committee Recommend the City Council Approve Design Guidelines
for the 2022 Electric Cost of Service and Rates Analysis
From: City Manager
Lead Department: Utilities
Executive Summary
Electric rates were last adjusted when an 8% rate increase went into effect on July 1, 2019.
Staff intends to complete an electric rate cost of service analysis (COSA) in advance of future
rates and necessary adjustments. The primary goal of any COSA is to review the allocation of
costs to customer classes, and the electric rate design, to ensure customers are charged
according to the cost to serve them. This COSA will include a review of the rate design issues
created by increasing building electrification, electric vehicle (EV) penetration, EV charging
needs and microgrids, and time of use (TOU) rate designs in preparation for the deployment of
automated metering infrastructure (AMI). This report discusses the existing rate design,
provides an overview of the issues to be addressed in the COSA analysis and sets forth work
plans for addressing various types of rate design issues.
Background
COSAs allocate costs among customer classes and are the foundation for equitable and
constitutionally compliant rates. COSAs gained a more important role for California publicly-
owned gas and electric utilities after the passage of Proposition 26 (2010). Proposition 26
added provisions to the State Constitution essentially defining every local government fee or
charge as a tax, requiring voter approval, unless one of seven exceptions apply. Municipal
electric rates that do not exceed the reasonable costs to the local government of providing
electric service are one exception from the constitutional definition of a tax, and its voter
approval requirements.
The current rates, which were last changed on July 1, 2019, are based on a COSA performed in
2015/2016 (“City of Palo Alto Electric Cost of Service and Rate Study” drafted by EES Consulting,
Inc.1). The fundamental structure of the City’s current rates has remained the same since the
early 1980s, though the commodity, distribution, and public benefits portions of the rates were
1 Staff Report 6857 http://www.cityofpaloalto.org/civicax/filebank/documents/52274
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“unbundled,” or separated out, as a result of California’s deregulation of the electric market in
the late 1990s. Like many utilities, Palo Alto had declining block rates (rates that decreased with
increasing consumption) for all customers until the late 1970s, at which point the City switched
to the current system. For residents, the current system includes inclining block rates (rates
that increase with consumption, more commonly called tiered rates), and for the more diverse
non-residential customer classes, flat seasonal rates with demand charges for larger customers.
As Palo Alto transitioned to its current rate design, fixed charges for both types of customers
were switched to minimum charges and eventually eliminated. The main driver for these
changes was to encourage conservation, within the context of a cost-based rate structure.
Palo Alto now has flat to declining electric loads, as larger, industrial usage is replaced with
smaller commercial and residential uses, and the influx of more electric appliances is offset by
improvements in efficiency. The direction many utilities are taking in California is towards
implementing TOU rates, to better reflect the cost of power being faced by utilities as well as
stresses on the California power grid. Palo Alto will seek to implement these kinds of rates as
well in the future, as the City’s Advanced Metering Infrastructure (AMI) program progresses
over the next five years, and meters capable of providing time-based (interval) data are
deployed. Many utilities are also implementing fixed charges, instead of minimum charges, to
better fund operations, maintenance and capital costs which do not decrease as less power is
used. These trends and pricing methods will be evaluated as part of this COSA.
Discussion
The following sections provide a review of the current rate structure and a discussion of rate
design issues affecting the utility in the short term and in the long term. They also include a
work plan and a proposed set of COSA and rate design policy objectives to guide the COSA.
Summary of Existing Rate Structure
Table 1, below, summarizes the number of customers on each electric rate schedule and the
percentage of the City’s sales volume they represent. Currently the electric rate for separately
metered residential customers (Rate Schedule E-1) has two tiers, with rates that increase when
customer use exceeds roughly 330 kilowatt-hours (kWh) per month. Non-residential customers’
rates are flat (not tiered) and are higher during the summer. Larger non-residential customers
are billed based on their peak demand (the highest fifteen minutes of consumption in the
month, measured in kilowatts, or kW) in addition to their monthly energy use. These demand
charges are higher in the summer than in the winter, just like the energy charges.
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Table 1: Existing Electric Rate Schedules
Rate Applicability Description
Number of
customers(1)
Share of
sales(1)
E-1 Separately metered
residential customers
Two-tiered rate
25,300 20%
E-2 Small non-residential
customers and master
metered multi-family
customers
Flat energy charge that varies
seasonally
3,060 5%
E-4 Demand-metered non-
residential customers, peak
demand <1000 kW
Flat energy and demand charges
that vary seasonally
860 30%
E-7 Demand-metered non-
residential customers, peak
demand >1000 kW
Flat energy and demand charges
that vary seasonally
70 45%
(1) FY 2021
The City also has several optional and special use rate schedules. Both the E-4 and E-7 customer
classes have optional time-of-use (TOU) rate schedules, as well as charges for standby service
(maintenance of utility distribution system capacity to serve energy when on-site generation is
offline). The E-14 rate establishes charges for street and highway lighting, and the E-16 rate
covers unmetered electrical equipment such as billboards, wireless antennas, and traffic
cameras. There are also generation-related rates, such as the E-3, E-NSE and E-EEC rates. The
E-3 rate establishes wholesale energy purchase prices for certain types of customer-owned
generating facilities. The City designed this schedule to comply with the Public Utility
Regulatory Policies Act of 1978 (PURPA), which Congress enacted to encourage domestic
energy resources and promote competition for electric generation, but no customers are on
this rate at this time. The E-NSE and E-EEC rates establishes the City’s purchase price for surplus
generation from customer-owned net-metered solar systems under NEM-1 and NEM-2
(successor) programs. As part of the last COSA update, the City implemented a Hydro Adjuster
rate (E-HYD) to be activated during times of very low, or very high, hydroelectric generation
conditions. Lastly, the voluntary PaloAltoGreen rate is still available for certain commercial
customers who want it for sustainability reporting purposes.
COSA and Rate Design Policy Objectives
In the past, the UAC, Finance Committee and City Council have expressed concern about having
limited ability to make changes to proposed rate structures once a COSA is completed. Staff
agrees and has committed to having policy discussions with the UAC, Finance Committee and
Council prior to embarking on a COSA. Staff is proposing a set of Design Guidelines (Attachment
A) to guide its work over the next year. The proposed guidelines are:
Guideline 1. Rates must be based on the cost of providing service.
Guideline 2. The effect of proposed rate design changes on low income customers should be
considered, to the extent permissible within a cost-based rate structure.
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Guideline 3. Rates should not create unnecessary barriers to building and vehicle
electrification, including public EV charging, while remaining cost-based.
Guideline 4. Rates should not create unnecessary barriers to on-site generation and storage
while simultaneously avoiding subsidies between customer classes.
Guideline 5. The COSA and rate design should support a transition to more time variant rates
(such as TOU, seasonal, etc.) as AMI infrastructure is deployed.
Guideline 6. The COSA should provide support for a transition to fixed or minimum monthly
charges
Guideline 1: Rates to be based on the cost of service
The goal of a COSA is to identify the costs associated with serving each customer class and
the rates required to recover those costs. In compliance with Prop. 26, rates cannot be
structured solely to achieve policy objectives unless they are also cost-based, absent voter
approval. The COSA has become an important tool for demonstrating that utility rates are
based on the cost of service. As a result, this guideline must be the overriding one for the
COSA.
Guideline 2: Impact on low income customers
Changes in rate design can have different impacts on customers who use different amounts
of electricity. Staff intends to evaluate the impact of any recommended rate design changes
on low-income consumers and may recommend mitigation of those impacts to the extent
feasible under current law.
Guideline 3: Rates should not create unnecessary barriers to building and vehicle electrification,
including public EV charging, while remaining cost-based
Certain rate structures may disincentivize customers from taking up electrification
measures, such as tiered rates for residential customers, or demand charges for commercial
customers. Staff will evaluate existing rates designs for consistency with City electrification
goals.
The City also has DC Fast charging stations for electric vehicles. These types of customers
typically have very high 15-minute energy demand peaks, but serve a limited amount of
energy, especially while electric vehicle penetration is still relatively low. This leads to
significantly higher costs that charging station owners pass to customers, which makes
customers even less likely to use the charging station, exacerbating the issue. Staff will have
the consultant evaluate which options best address charging station owner needs, avoid
suppressing charging station demand, and are still consistent with Palo Alto’s cost structure.
Guideline 4: Rates should not create unnecessary barriers to on-site generation and storage
The City has been approached by customers looking to create or install technologies which
are not effectively accommodated by the City’s existing rate schedules, such as large-scale
solar and storage installations. Current rates include standby charges which are designed to
apply to engine generators rather than solar and storage installations, and thus need
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updating. Also, because of the dynamics of energy usage and battery storage capability,
rates need to be designed to reflect shifts in the time of day when demand peaks
throughout California, which is different from when demand peaks on Palo Alto’s system.
This will ensure the proper incentives are sent to energy storage systems.
Guideline 5: COSA and rate design should support a transition to time variant rates (such as
TOU, seasonal, etc.) as AMI infrastructure is deployed
The City’s Utilities department is planning on installing advanced, or interval, metering
within the next five years, and the trend in rates both in California as well as nationwide is a
move towards Time of Use (TOU) pricing. TOU pricing seeks to better align customer rates
with the real cost of electricity, but also generally does not involved tiered or block rate
pricing mechanisms. Tiered rate pricing can potentially place a higher cost burden on
customers moving away from natural gas and installing electric space heating, water
heating, induction cooking, etc., as well as for customers opting to own electric vehicles and
charging at home.
Staff feels it is the appropriate time to evaluate existing residential tiered rates, to see if
tiered rates should be continued or modified to reflect changing load patterns. Analysis will
also be done to see if rates should include a seasonal component or designed on a uniform
basis prior to introducing TOU rates. Other local and regional utilities who have transitioned
to TOU pricing from tiered rate mechanisms have done so through a combination of
minimizing the number of tiers, increasing tier allocation levels to make prices more
uniform, or moving to uniform rates entirely, prior to launching TOU pricing.
Guideline 6: The COSA should support a transition to fixed or minimum monthly charges
In order to adequately and fairly collect certain costs incurred by the utility regardless of
whether power is used or not (such as billing, meter reading and some distribution related
costs), staff will evaluate different means and methods of producing either a minimum or
fixed monthly charge for the various customer classes.
As part of this COSA and rates update, the consultant will address the following work plan
items:
Work Item 1: Evaluate TOU rates for all customer classes
While TOU rate options exist for the E4 and E7 rate categories currently, these should be
evaluated for the E1 and E2 categories as well. An evaluation should be made of the time
periods used, as well as the applicability of seasonal variation.
Work Item 2: Evaluate minimum charges and fixed charges
For this COSA, staff recommends evaluating the minimum charge and fixed charge as a way
of ensuring that all customer groups contribute their share of the utility’s operating costs.
This is consistent with the approach currently being implemented by PG&E and other
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investor-owned utilities, as well as a number of publicly owned utilities throughout
California. Many of these utilities are considering eventually implementing fixed charges
rather than minimum charges. Staff recommends considering whether the City should
implement a minimum charge or proposed a fixed charge instead.
Work Item 3: Evaluate the division of distribution costs between demand and energy charges
For customers with demand metering (E4 and E7), an evaluation will be made as to the
allocation of charges between energy (kWh) and demand (kW).
Work Item 4: Update rates for large scale energy storage and intermittent generation, such as
solar photovoltaic (PV) and microgrids
As mentioned in Guideline 4 above, new and existing rates for microgrids, battery storage,
as well as standby rates, need to be evaluated and implemented.
Work Item 5: Update rates to accommodate public vehicle charging
As mentioned in Guideline 3 above, new or modified cost of service-based rates should be
implemented to help facilitate and foster the growth of DC fast charging stations.
Work Item 6: Evaluate rates for electrified homes and vehicles
While this may be covered under the evaluation of TOU options, until such time that AMI
can be implemented, an evaluation should be made to see if other rate options are
applicable for these types of customers (such as different rate tiers, uniform rates and/or
seasonal pricing).
Commission Review and Recommendation
The UAC reviewed these guidelines at its September 1, 2021 meeting. The UAC made several
inquiries, including whether rates items such as critical peak pricing could be investigated, as
well as minimum vs. fixed charge options. Commissioners wanted the COSA to provide
flexibility for future rate options, ensure that under-collection of costs didn’t take place, and
provide proper incentives as well as cost allocation to customers. There were a variety of
questions about rates for resiliency investments, setting rates on a geographic basis, and the
future of net energy metering.
Chair Forsell moved staff’s recommendation with the addition of a sixth guideline supporting a
transition to fixed or minimum charges. The motion carried 5-0 with Commissioners Scharff and
Smith absent.
Next Steps
After receiving the Finance Committee’s recommendation, staff will take the COSA design
guidelines to the City Council for consideration. The COSA is expected to be completed within
FY 2022 so that updated rates can be adopted as part of the FY 2023 budget process or soon
thereafter.
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Resource Impact
The work associated with this project will be absorbed using existing staff and contract budgets.
Any new rates adopted as a result will be designed to generate adequate sales revenue to fund
the electric utility’s operations in FY 2023 and beyond. As discussed in the FY 2022 Electric
Utility Financial Plan (Staff Report 118872), for FY 2023, the utility is currently projected to need
roughly 5% more sales revenue than is generated by current rates. Expenses are projected to
exceed revenues, with reserves being used to moderate customer impacts as rates are brought
to parity over several years.
Policy Implications
The process of adopting these design guidelines provides the UAC, Finance Committee and City
Council an opportunity to provide policy guidance to staff before work begins on the COSA.
Environmental Review
Adoption of these Design Guidelines for the 2022 Electric Utility Cost of Service and Rate
Analysis does not meet the definition of a project, under Public Resources Code Section 21065
and CEQA Guidelines Section 15378(b)(5), because it is an administrative governmental activity
which will not cause a direct or indirect physical change in the environment, thus no
environmental review is required.
Attachments:
• Attachment A: Proposed Electric Rate Design Guidelines
2 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports-
cmrs/2021/id-11887.pdf
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Attachment A
Design Guidelines for the 2022 Electric Utility Cost of Service and Rate Analysis
1. Rates must be based on the cost of providing service. This is the overriding principle for the
cost of service analysis (COSA); all other rate design considerations are subsidiary to this
basic premise.
2. The effect of proposed rate design changes on low income customers should be considered,
to the extent permissible within a cost-based rate structure.
3. Rates should not create unnecessary barriers to building and vehicle electrification,
including public vehicle charging, while remaining cost-based.
4. Rates should not create unnecessary barriers to on-site generation and storage while
simultaneously avoiding subsidies between customer classes.
5. The COSA and rate design should support a transition to more time variant rates (such as
TOU, seasonal, etc.) as AMI infrastructure is deployed.
6. The COSA should provide support for a transition to fixed or minimum monthly charges.
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City of Palo Alto (ID # 12348)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 10/5/2021
City of Palo Alto Page 1
Title: Modifications to University Avenue and California Avenue Parking
Policies to Expand Eligibility for City Garage Parking Permits and Update
Parking Permit Fees, Modify the Downtown and Evergreen Park Mayfield
Residential Preferential Parking (RPP) Programs to Reduce Employee Parking
in these RPP Districts and Update RPP Permit Fees, and Develop a Parking In-
Lieu Program for the California Avenue Business District (Continued From
November 9, 2020)
From: City Manager
Lead Department: Transportation Department
Recommendation
Staff recommends that the Finance Committee discuss and provide a recommendation to the
City Council to direct staff to:
1) Refer to the PTC the development of measures to alleviate parking requirements on
businesses in the California Avenue area, such as by establishing a parking in-lieu fee
program for that area.
2) Adopt an ordinance amending the FY 2022 Municipal Fee Schedule to adjust employee
parking permit fees, as follows, to better align parking prices with City transportation and
mobility goals as outlined in detail in Table 7 and summarized below:
a) Increase the price of Employee Parking Permits in the Residential Preferential Parking
Program for Downtown, Evergreen Park-Mayfield, and South Gate district;
b) Increase the price of Reduced-Price Employee Parking Permits in the RPP programs for
RPP Downtown, Evergreen Park-Mayfield, and South Gate districts;
c) Increase the price of Employee Parking Permits in both All Downtown and SOFA Lots
and Garages Annual Parking Permit (aka University Avenue Garage Permit) and
California Avenue Area All Garages and Lots (aka California Avenue Garage Permit);
d) Establish a Reduced-Price Employee Parking Permit in both All Downtown and SOFA Lots
and Garages Annual Parking Permit (aka University Avenue Garage Permit) and
California Avenue Area All Garages and Lots (aka California Avenue Garage Permit); and
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e) Eliminate first free annual residential permit in all RPP programs without employee
subsidies, consistent with RPP districts in College Terrace, Crescent Park, and Old Palo
Alto that do not provide for employee permits.
3) Adopt resolutions and direct the City Manager to authorize modifications to the Residential
Preferential Parking (RPP) program and commercial district employee permit allocations, as
follows:
a) Reduce employee RPP permits in the Downtown RPP by setting a cap at issuance of 580
Downtown Employee RPP permits.
b) Reduce employee RPP permits in the Evergreen Park-Mayfield (EPM) RPP by eliminating
permits in residential zones A-F, retaining employee parking permits in employee Zone
G along El Camino Real, and:
i) Employee permits in Zone G shall be available only to employees/employers that are
located on or near to El Camino Real; and
ii) Authorize staff to pursue expansion of Zone G to the West side of El Camino Real,
between Park Boulevard and Stanford Avenue, if necessary, and approved by
Caltrans and reviewed by Stanford University
c) Maximize the parking capacity utilization in University Ave. garages/lots by increasing
the caps of employee parking permits in the public garages/lots by approximately 500 in
the commercial district (to a total of 3,326).
d) Maximize the parking capacity utilization in California Ave. garages/lots by increasing
the caps of employee parking permits in the public garages/lots by approximately 490 in
the commercial district (to a total of 1,075).
4) Expand the current boundaries for the Downtown and SOFA Lots and Garages Annual
Parking Permit (aka University Avenue Garage Permit) and California Avenue Area All
Garages and Lots (aka California Avenue Garage Permit) to include and align with the
existing Residential Preferential Parking (RPP) boundaries for the Downtown and Evergreen
Park-Mayfield districts.
These actions follow a series of parking management strategies identified over the past two
years intended to better align current ordinance provisions and permit pricing with City parking
program goals. This topic was previously discussed by the City Council on November 9, 2020
where no action was taken so that staff could further refine the proposals.
Executive Summary
Parking management strategies, targeted parking supply investments, and transportation
demand management programs allow the City to utilize a variety of tools and strategies to
address parking and traffic issues prioritized by the City’s Comprehensive Plan, and to pursue
Sustainability and Environmental goals with parking management tools outlined in the
Transportation Element section of the Plan.
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The recommended pricing and employee allocation adjustments address current administrative
feasibility and financial sustainability concerns, accommodate demand for employee and visitor
parking while decreasing impact of businesses on local RPP districts. Reducing parking
requirements in the California Ave. commercial parking district for retail and restaurant uses
encourages new businesses and the use of alternative modes. These planned programmatic
changes and actions address the City’s goals for encouraging attractive, convenient, efficient
and innovative parking solutions for all users, while also protecting residential areas from
parking impacts of nearby businesses and uses.
Additional changes to commercial parking policies are expected and will be developed with
stakeholder input via an RFI for commercial pilot options, separate from the actions here.
Background
In the context of community and economic recovery from the pandemic and the evolving
climate into the future, staff recommends Council approval to develop a parking in-lieu
program for California Avenue. This commercial district rarely experiences new development in
part due to parking requirements, the size of parcels, and limited opportunities to provide
private off-street parking.
Several years ago, the City had an active parking assessment district and property owners that
participated in this program were able to meet parking requirements through this program. The
proceeds from that assessment were dedicated toward paying bond obligations that were used
to finance the building of a 2-story garage (Ted Thompson garage, Lot C3). This debt matured
several years ago and so the assessment district was retired. Since that time, any new use or
business intensification cannot proceed if the proposed use has any parking requirement higher
than the previous use allowed. For instance, a restaurant, which requires a higher parking
requirement, cannot occupy a former retail storefront space, which has a lower parking
requirement, unless the owner of that space is able to provide additional parking.
These requirements have constrained changes in the California Avenue, especially in the
current environment with COVID-19 which has called for changes in behavior including social
distancing. Tenants and property owners may find it beneficial to allow a business to locate or
expand into adjacent storefronts. With incentives the City has already implemented, an in-lieu
parking program, and consideration of other factors, some individuals may find opportunity in
vacant storefronts.
Parking Funding Background
Parking management strategies enacted in the City of Palo Alto have included the
establishment of both commercial and residential parking programs. Residential Preferential
Parking (RPP) programs established via Ordinance #5294 are intended to restore and enhance
the quality of life in residential neighborhoods by reducing the impact of parking associated
with nearby businesses and institutional uses. Parking programs established to form the
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University Avenue (Resolution #8034) and California Avenue (Resolution #7230) Parking
Assessment Districts provided funding for parking structure construction in their respective
commercial areas via issuance of debts and levying assessments on local business in both.
These provide parking supply for both visitor use, and district employee use via reserved
spaces.
Separately, the City currently has three funds that track the following parking programs: the
University Parking Permit (Fund 236), California Avenue Parking Permit (Fund 237), and the
Residential Preferential Parking Program (Fund 239). The financial accounting of the collection
of revenues, payment of expenses, and funding of parking related Capital Improvement
Projects (CIPs) is managed in these funds. Historically, the parking funds have been financially
insolvent with expenses exceeding revenues, when the fund is running in a deficit position, a
transfer from the General Fund is adopted by the City Council as part of the annual budget
process.
Full price employee parking permits and daily permits sales generate the main source of
revenue in both the University and California Avenue Parking Permit Funds. Low income
employee permits are not currently available in these commercial areas. In the Downtown,
Evergreen Park-Mayfield, and Southgate RPP districts, in which the City currently offers
employee permits, the City offers both full price and reduced-price (low-income) employee
parking permits. In addition, resident, guest, and daily permits are sold throughout the RPP
districts. Any fund balances in the commercial districts has historically been planned for capital
investment and start-up costs of new program such as the potential infrastructure for paid
parking. Historically the RPP Program Fund only operates in a positive financial position when
sufficient employee permits are sold.
Historically, parking pricing for employee permits was determined by the commercial or
residential areas and relative to business traffic and parking demand: the price for employee
permits in California Avenue geographic area is currently approximately half the price of a
University Avenue permit. As RPP programs were established, employee permit pricing
mirrored that of the nearest commercial district. Original allotments of employee permits were
established upon an assessment of apparent need established by a planning process.
TABLE 1: CURRENT (ACTIVE) FY2022 EMPLOYEE AND RESIDENTIAL ANNUAL PERMIT PRICING
PARKING DISTRICT
EMPLOYEE
PERMITS
(FULL PRICE)
EMPLOYEE
PERMITS
(REDUCED PRICE)
RESIDENTIAL
PERMITS
NUMBER OF
EMPLOYEE
PERMITS
AVAILABLE
University Avenue $806 None N/A 2,826
California Avenue $403 None N/A 585
RESIDENTIAL PREFERENTIAL PARKING (RPP) PROGRAMS
College Terrace None None $50 None
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Downtown $806 $100 $50
(first one free)
1,000
(+200 in reserve)
Crescent Park None None $50 None
Evergreen Park/Mayfield $403 $50 $50
(first one free)
250 for Zones A-F;
40 for Zone G
Southgate $403 $50 $50
(first one free) 25
Old Palo Alto None None $50 None
Parking citations for infractions in the University and California Avenue commercial parking
districts are issued by Police Department’s Community Service Officers (Parking Enforcement)
and the expenses for enforcement and citation revenue collected is accounted for in the
general fund. Parking citations and enforcement in the RPP districts is done primarily by a
contracted service provider, LAZ Parking, and both the expenses and revenue is accounted for
in the RPP fund (the exception is the Crescent Park No Overnight Parking Program, which is
enforced by Palo Alto Police Department, and revenues go to the general fund). Due to the
pandemic, parking enforcement was suspended March 16, 2020 (resuming October 1, 2021)
allowing the public to park on- and off-street without time restrictions. As a result, all permit
sales revenues and citation revenues have been severely reduced during the pandemic.
Discussion
The following report details recommendation considerations in three main parts:
1. California Avenue In-Lieu Parking Program Proposal
Consistent with Policy T5.1.2: Consider creating new ways of meeting parking requirements for
retail, restaurant, and other types of business uses as a means to encourage new businesses
and the use of alternative modes. Existing parking requirements for the California Avenue area
are found at PAMC 18.52.040. Establishment of an in-lieu parking program would be a valuable
economic development and sustainability tool. Details of this conceptual in-lieu parking
program are summarized below.
The conceptual, limited, in-lieu parking program as contemplated by staff would only apply to
changes in uses in existing buildings that would intensify the use in terms of parking demand;
new building construction would not be eligible. The program would apply to ground floor uses
and only those uses that meet the City’s retail, retail-like or expanded retail definition approved
by City Council. The cost per space would be calculated based on the current rate for an in-lieu
parking space established for the downtown in-lieu program (~$112K/space) and could be paid
upfront as in the existing in-lieu program or paid in annual installments extended over a certain
number of years. The ability to reduce the upfront cost, and pay over time, may be important
as a high initial cost may discourage participation. Importantly, as with the downtown program,
no physical parking space is dedicated to a property owner or a tenant. Instead the surplus
public parking in the area would absorb the parking demand generated by the more intense
use. Unlike the downtown program, the in-lieu payments could be spread over time and
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ongoing, potentially ending when a new land use is introduced to the tenant space that has a
comparable or lower parking requirement than the land use that existed prior to participation
in the program or when the property owner has paid the full value of the parking. Staff
anticipates that businesses with direct street access to California Avenue would be eligible and
possibly some properties on adjacent side streets. The program as envisioned could
accommodate up to 100 parking spaces (the upper limit of the program is determined, in part,
by bond financing rules).
If Council is interested in advancing this concept, additional staff work and legal review is
needed. Staff from Planning and the Office of Transportation will engage with the Planning and
Transportation Committee and stakeholders to create an implementable program.
Establishment of a parking in-lieu program in the California Avenue area could create a new
long-term revenue stream that could be dedicated towards the 30 year debt associated with
the new California Avenue garage which has an annual debt service of $2.4 million.
California Avenue Garages/Lots and the Evergreen Park-Mayfield RPP
The California Avenue Business District, immediately adjacent to the Evergreen Park and
Mayfield neighborhoods, has regularly attracted business visitor and employee parkers, who,
for lack of the right incentives offered, utilize residential blocks for trips that could be better
suited by parking facilities in the main commercial area, especially to avoid commercial time-
based restrictions. Commercial time restrictions, when needed, prioritize turnover and ease of
parking space discovery to facilitate customer and employee trip satisfaction. Residential on-
street curb parking, in turn, with RPP programming, prioritizes longer stays and facilitates short
visitor trips. The RPP program design in Palo Alto facilitates flexibility and adaptability in
meeting parking demand while centering resident experience and quality of life.
Discussions amongst City staff and community stakeholders regarding parking availability in the
California Avenue commercial district and its surrounding neighborhoods led in recent years to
Council decisions to increase parking supply in the California Avenue Business District by
constructing a new parking garage at 350 Sherman Avenue (as part of the Public Safety Building
project), and to establish the EPM RPP district in 2017. The EPM RRP program provides both
residential and employee parking permits in the area, while the California Avenue Business
District (California Avenue parking facilities) provides visitor and employee parking in surface
lots and garages. Again, the current design of these programs prioritize commercial district
parking facilities for higher turnover uses and employee parking; and, residential parking for
convenient access for residents and resident visitors (EPM RPP program information).
Together, the new California Avenue Parking Garage (as part of the California Avenue Business
District) and the EPM RPP program provide City staff the ability to effectively manage parking
impacts in both residential and commercial zones in the area, especially with the regular
parking occupancy monitoring being implemented. City Council has previously recognized the
need to be flexible with the number of employee permits made available in the Evergreen Park-
Mayfield Residential Preferential Parking Program. After establishing the EPM as an RPP district
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(Resolution No. 9739), Council approved a district redesign by creating additional zones,
including a new Employee Parking Zone G (CMR 8893) on El Camino Real.
The completion of 350 Sherman Avenue Garage adds approximately 316 new parking spaces
(its ~626 total spaces replace 310 pre-existing spaces) to the California Avenue commercial
district, as well as opportunities to utilize a new Parking Guidance System (PGS) to manage the
City’s parking facilities more efficiently. The PGS is equipped with optical sensors to detect
parking occupancy, as well as software capabilities for managing visitor parking stays and
payments. Light-emitting diode (LED) lights indicate availability and other information to
parkers.
The additional parking supply provided by the new garage allows the City to reduce the number
of employee permits made available in the EPM RPP A-F zones, in line with expectations of
residential stakeholders outlined in the City’s parking management work plan (prioritized
Parking Work Plan). Staff will evaluate the impact of the recommended permit reduction and
phasing and consider additional reductions each year. Staff believes, at this time, that the
existing garages and lots along with the new California garage on Sherman provides sufficient
space for shifting, thus reducing, approximately 250 of the 290 EPM RPP, Zones A-F, employee
permit holders and all garage waitlisted employees/ employers (pre-pandemic the waitlist was
228). The remaining 40 employee permits are located on or near El Camino Real and would be
best accommodated as they are now in Zone G. In the past, a 60% show rate for permit spaces
has been typical (not all permit holders arrive each day), such that the added supply should be
sufficient to accommodate both permit and visitor uses, including spaces proposed in the
potential in lieu program described in CMR 11702 and above. Note that in the California
Avenue parking district, employee garage and lot permits are valid in any public garage/lot in
the district (California Avenue parking facilities).
Currently, there are 453 garage and lot permits that have been sold in the California Avenue
parking district, and the cap is 585 permits (pre-pandemic), which typically sells out. Using our
60% show-rate, allocating 490 additional permits in the new parking garage will sufficiently
provide parking spaces in the district new and waitlisted employees to purchase permits, as
well as new uses allowed via the to be developed in-lieu fee program.
Staff will monitor demand for these permits and recommend decreasing availability as
reasonable. If there is additional demand for employee permits in EPM/Zone G, staff will
coordinate with Stanford University and Caltrans on the possibility of expanding Zone G to the
West side of El Camino Real on the block between Park Boulevard and Stanford Avenue.
Staff will be reviewing parking occupancy over the next year to evaluate garage/lot parking
capacity to further maximize usage. While future usage trends are especially uncertain in the
current economic context, the technology systems installed provide staff the ability to monitor
usage trends over time, and to make future recommendations based on more complete usage
and parking availability data.
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TABLE 2: Expanded Parking Supply in the California Avenue Business District
Previous parking lot supply at Lots 6 and 7 (removed and replaced) 310
Previous total parking supply in the California Avenue Business District (including
Lots 6 and 7)
922
New 350 Sherman Avenue parking supply 626
New total parking supply in the California Avenue Business District 1,238
Additional parking supply in the California Avenue Business District provided by
the new garage at 350 Sherman Ave.
316
TABLE 3: Parking Demand, FY 2020-21
Total waitlisted California Avenue Business District employees (pre-pandemic to
current, a significant number are expected to no longer need permits)
~370
Total employee RPP permits currently in the EPM District (40 in Zone G, adjacent
to ECR)
290
2. Increased Price of All Employee Permits and Expand Commercial District Boundaries
Staff recommends implementing Council approved employee permit pricing rate increases
throughout the City in sync with new permit sales cycles coming online throughout Fiscal Year
2022, as stated in the adopted FY 2021 Municipal Fee Schedule. This action consolidates
demand for on-street spaces into the RPP program’s permit sales, enabling parking occupancy
rates and availability to be understood more fully, before any future pricing adjustments or
parking enhancements to be considered in light of future documented demand for street space
(via LPR enabled parking occupancy monitoring).
Additionally, if, as a City, it is a goal to have long-term employee parking occur in the garages
and lots, the financial incentives through permit pricing for that behavior should not cost less to
park in the residential zones than in the parking garages and lots. Similarly, as the City strives to
meet GHG reduction goals and minimize the environmental impacts of single-occupancy
vehicles, parking pricing should be closely considered with comparative pricing of transit and
other peer parking pricing. The proposed price increases, as demonstrated in the table below,
compare reasonably with other monthly and annual City parking rates in the region, and
Caltrain pricing.
TABLE 4: Caltrain, Garage & Lot Parking Monthly Pricing Comparison Table
Monthly Costs
Palo Alto (current) $33 - $67
Palo Alto (proposed) $54 - $84
Mountain View $61
Redwood City $40 - $100
San Jose $50 - $125
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* Travel to Palo Alto assumes 1-3 zones fare
Staff relatedly recommends the City eliminate the first free annual residential permit in all RPP
programs, to remain consistent with RPP districts in College Terrace, Crescent Park, and Old
Palo Alto that do not have employee permit subsidization.
TABLE 5: PROPOSED FY 2022 Changes to Employee and Residential Annual Permit Pricing and
Employee Permit Availability
Parking District
Employee
Permits
(Full Price/yr)
Employee
Permits
(Reduced
Price/yr)
Residential
Permits
(price/yr)
Number of
Employee Permits
Available
University Avenue $806 $900 N/A $225 N/A 2,826 3,326
California Avenue $403 $650 N/A $162.50 N/A 585 1,075
Residential Preferential Parking
College Terrace None None $50 None
Downtown $806 $1050 $806 $262.50 $50
(first one free)
1,000 580
(+200 in reserve)
Crescent Park None None $50 None
Evergreen
Park/Mayfield $403 $750 $806 $187.50 $50
(first one free)
250 0 for Zones A-
F; 40 for Zone G
(expand)
Southgate $403 $750 $806 $187.50 $50
(first one free) 25
Old Palo Alto None None $50 None
Current Parking Context
San Francisco $100 - $530
Caltrain* Monthly Costs
$38.40 - $92.40
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Due to the pandemic, parking enforcement was suspended March 16, 2020 (resuming October
1, 2021) allowing the public to park on- and off-street without time restrictions. As a result, all
permit sales revenue has been severely reduced during this time.
Reduced-Price Employee Parking Permits in Commercial Districts
Recognizing the economic constraints of low wage earners, the City reduced the cost of parking
permits in the RPP zones for qualified individuals. An individual qualifies as low-income if total
annual income is equal to or less than $50,000, or if they earn a pre-tax hourly wage equal to or
less than double the greater of the City or State minimum wage. An applicant must provide
proof of income. There is no cap on the number of low-income permits that are issued. To
accommodate the shift of permit allocation from residential parking districts to commercial
garages and lots, staff recommends establishing a reduced-price permit for low-income
workers, which currently only exists for employees in the RPP districts.
3. Modifications to RPP and Commercial District Employee Permit Allocations
In early 2014, the City began significant efforts to address the parking and traffic challenges,
particularly in the Downtown core, through a strategic multi-pronged approach of parking
management, parking supply and transportation demand management programs. The strategy
includes implementation of the Downtown Residential Preferential Parking (RPP) Program,
which went into effect in September 2015. The introduction of this program has required the
development and launch of a new online permit sales website and sales support, installation of
signage in any new permit areas, negotiation and oversight of an enforcement contract, and
extensive community outreach and data collection.
Phase 1 of the program regulated non-resident parking around the Downtown commercial core
by introducing Resident and Employee Parking Permits and restricting non-permit holders to
two-hour parking between the hours of 8:00am and 5:00pm on Monday through Friday.
Resident Parking Permits are for residents who live within the Downtown RPP program area
while the Employee Parking Permits are for any individuals who are employed within and
commuting to the Downtown area. Phase 2 of the program, which went into effect on April 1,
2016, capped the number of Employee Parking Permits at 2,000 and established ten Employee
Parking Zones in an effort to better distribute non-resident parkers. Eligibility Areas, which can
petition to join the program administrative, were also created as part of Phase 2 of the
program.
Over time, the employee RPP permit caps have been reduced, both naturally and through a
reduction in cap. In February 2016 the City Council directed that the number of Employee
Parking Permits be reduced by 10% per year. In 2016, the cap was 2,000 permits and in 2021
the cap, as set by Resolution 9782 is 1,000 employee permits with 200 held in reserve. RPP
permit sales have consistently decreased, and the most recent permit sales (pre-pandemic) was
approximately 760 permits.
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In the Downtown commercial parking district, there are 11 parking garages/lots that are utilized
for permit parking. In these garages, there are 1,758 permit spaces and 1,790 permits currently
sold, however the permits typically sell out (pre-pandemic). Pre-pandemic, there was also a
waiting list for 354 permits. At this time, however, garages have sufficient capacity available to
accommodate the additional recommended employee permits and accommodate waiting list
permits. Staff recommends setting a Downtown RPP cap of 580. This recommendation will be
re-evaluated post-pandemic using parking occupancy data in the garages/lots and RPP districts.
4. Expanded Commercial District Employee Eligibility Boundaries
Finally, the eligibility boundaries to purchase an off-street parking permit are determined based
on an outdated business assessment district boundary map for the University Ave. and
California Ave. commercial corridors. Staff recommends expanding the current boundaries to
match the existing Residential Preferential Parking (RPP) boundaries for the Downtown and
Evergreen Park-Mayfield districts. Expanding eligibility allows new and smaller businesses
residing beyond the traditional commercial core access to the City's parking facilities, relieving
on-street parking demand.
Resource Impact
The Parking Fund Balances table below compares two scenarios and estimates parking fund
solvency from FY 2022 through FY 2025 for University Avenue, California Avenue, and the RPP
parking districts. Fund balance actuals are presented for FY2021 and fund balance estimates for
FY 2022 through FY 2025.
• Scenario A assumes that no adjustments are made to any parking permit policies related
to any of the parking districts. The projected impact is a continuing decrease in the
ending fund balance of all parking funds through FY 2025. Notably, the University
Avenue Fund could no longer support operating expenses starting in FY 2024.
• Scenario B assumes that the recommendations presented in this staff report are
implemented in FY 2022. All funds would remain solvent through FY 2025.
Further details for each scenario are located after the table below.
TABLE 6: PARKING FUNDS PROJECTED FUND BALANCES
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Scenario actuals estimates estimates estimates estimates
University Avenue
A: No Changes 1,501,000 1,026,000 322,000 (412,000) (765,000)
B: Recommendations 1,569,000 1,409,000 1,217,000 995,000
California Avenue
A: No Changes 422,000 360,000 290,000 212,000 127,000
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B: Recommendations 408,000 387,000 358,000 321,000
RPPs
A: No Changes 133,000 202,000 257,000 148,000 25,000
B: Recommendations 268,000 388,000 344,000 287,000
In Scenario A, University Avenue fund balance is projected to decrease by 32% from FY 2021 to
FY 2022 and would decrease by another 69% in the following year. In FY 2024 it is projected
that the fund would require a subsidy to meet operational costs. Both the California Avenue
and RPP fund balance will decrease over time through FY 2025 by 70% and 81% respectively
(compared to FY 2021). Future increases in the cost of labor, consultant contracts and
programmatic parking improvements will accelerate the projected downward trend.
Under Scenario B, all fund balances are still projected to decrease annually, but at a much
slower rate, and would remain solvent through FY 2025. Recommended reductions of available
employee permits in the Downtown and EPM RPP districts would significantly reduce cost
recovery mechanisms in the RPP fund. As the table indicates, the RPP program fund balance
would continue to decrease through FY 2025 but still meet its operation obligations.
TABLE 7: SUMMARY OF PROPOSED PRICING ADJUSTMENTS & TIMELINE
FEE
CURRENT
RATE
PROPOSED
RATE
IMPLEMENTATION
SCHEDULE
All Downtown and SOFA Lots and Garages:
Annual Parking Permit (University Ave.) $806/yr $900/yr 1/1/2022
(sales begin 12/1/22)
All Downtown and SOFA Lots and Garages:
Annual Parking Permit - Reduced None
75% off Annual
Permit
(currently $225)
1/1/2022
(sales begin 12/1/22)
California Avenue Area All Garages and Lots:
Annual Parking Permit $403/yr $650/yr 1/1/2022
(sales begin 12/1/22)
California Avenue Area All Garages and Lots:
Annual Parking Permit – Reduced None
75% off Annual
Permit
(currently $162.50)
1/1/2022
(sales begin 12/1/22)
Downtown RPP:
Full Price Employee Parking Permit $806/yr $1,050/yr 4/1/2022
(sales begin 3/1/22)
Downtown RPP:
Reduced-Price Employee Parking Permit $50/yr
75% off Full Price
Annual Permit
(currently $262.50)
4/1/2022
(sales begin 3/1/22)
Downtown RPP:
Annual Resident Parking Permit
$50/yr
1st one free $50/yr 1/1/2022
Evergreen Park - Mayfield RPP:
Full Price Employee Parking Permit $403/yr $750/yr 4/1/2022
(sales begin 3/1/22)
Evergreen Park - Mayfield RPP:
Reduced-Price Employee Parking Permit $25/yr
75% off Full Price
Annual Permit
(currently $187.50)
4/1/2022
(sales begin 3/1/22)
Evergreen Park - Mayfield RPP:
Annual Resident Parking Permit
$50/yr
1st one free $50/yr 1/1/2022
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Southgate RPP:
Full Price Employee Parking Permit $403/yr $750/yr 4/1/2022
(sales begin 3/1/22)
Southgate RPP:
Reduced Price Employee Parking Permit $25/yr
75% off Full Price
Annual Permit
(currently $187.50)
4/1/2022
(sales begin 3/1/22)
Southgate RPP:
Annual Resident Parking Permit
$50/yr
1st one free $50/yr 1/1/2022
No budget amendments are required at this time. However, budget alignments will be needed
in the various parking fund in order to implement changes recommended for consideration by
this report. Finance Committee’s endorsement of staff’s recommended changes to the City’s
permit parking program aligns with the City’s parking pricing incentive goals and will move the
program toward continuing financial viability. The specific timeline and resource impacts
depend on the actions taken by the City Council based on staff recommendations in this
memorandum.
Should Council approve recommendation in this report the following budget adjustments are
needed:
• Increase FY 2022 adopted permit revenue amounts for the University and California
Avenue Parking Funds due to increased permit prices and permit capacity
• Decrease FY2022 adopted permit revenue amount for the RPP Fund due to reduced
available employee permits
• Parking permit fee adjuments in the FY 2022 Municipal Fee Schedule to reflect
recommneded permit price changes
• Expenses are not expected to increase as permit and enforcement service contracts are
in place and funded to carry out the recommended program changes.
In addition, as an employer in the City, the City purchases employee permits for it’s employees
at a cost of approximately $438,300 annually. Assuming no change in quantities, these price
increases will increase the City/s cost for employee permits in the University Avenue area as
well. This additional cost would be factored into the next FY 2023 annual budget process
should these increased fees be approved.
If staff receive direction to design an in-lieu program, additional staff resources will be needed.
Stakeholder Engagement
The recommended action is a result of expectations of residential stakeholders outlined in the
City’s parking management work (prioritized Parking Work Plan), reflecting outreach and
community engagement processes documented at the outset of the planning processes that
created the citywide RPP program as well as subsequent RPP planning study (Residential
Preferential Parking Program Review).
Policy Implications
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The following Comprehensive Plan programs and policies are relevant to parking management
policies:
Policy T5.1.2: Consider reducing parking requirements for retail and restaurant uses as a way
to encourage new businesses and the use of alternative modes.
Policy T-5.5 Minimize the need for employees to park in and adjacent to commercial centers,
employment districts and schools
Policy T-5.11 Work to protect residential areas from parking impacts of nearby businesses and
uses, recognizing that fully addressing some existing intrusions may take time.
Policy B-1.2 Promote Palo Alto’s image as a business-friendly community. Assume an active role
in fostering businesses, including small start-ups, entrepreneurs, and innovative businesses.
Policy B-1.3 Engage with all stakeholders in the community, including businesses of all sizes,
local retailers, the public, and City decision-makers in order to understand the challenges
businesses and employers face.
Policy B-2.3 Recognize that employers, businesses and neighborhoods share many values and
concerns, including traffic and parking issues and preserving Palo Alto’s livability, and need to
work together with a priority on neighborhood quality of life.
Policy B-3.3 Develop strategies for promoting businesses and employers that generate revenues
that will support a full range of high-quality City services, including retain and attract revenue-
generating businesses.
Policy B-4.2 Attract and support small businesses, start-ups, non-profit organizations, and
professional services, which are vital to a diverse and innovative economy.
Environmental Review
The recommended action is exempt from the requirements of the California Environmental
Quality Act (CEQA) pursuant to Section 15061(b)(3) of Title 14 of the California Code of
Regulations since it can be seen with certainty that there is no possibility the proposed minor
modifications to this existing program will have a significant effect on the environment. If the
action is found to be a project, it is categorically exempt pursuant to Section 15301 in that the
program modifications will have a minor impact on existing facilities.
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TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: PLANNING &
DEVELOMENT SERVICES
DATE: OCTOBER 5, 2021 ID# 12348
SUBJECT: AGENDA ITEM NO. 2 - Modifications to University Avenue and California Avenue
Parking Policies to Expand Eligibility for City Garage Parking Permits and Update
Parking Permit Fees, Modify the Downtown and Evergreen Park Mayfield
Residential Preferential Parking (RPP) Programs to Reduce Employee Parking in
these RPP Districts and Update RPP Permit Fees, and Develop a Parking InLieu
Program for the California Avenue Business District (Continued From November
9, 2020)
This memo supplements the Finance Committee’s October 5th staff report and is intended to
provide additional background on the California Avenue parking challenges and how it relates to
future parking policy direction identified in that report.
California Avenue Assessment District
Since the 1970s until a few years ago, property owners within the California Avenue Assessment
District paid an annual assessment to pay off bonds used to finance parking improvements in the
area. Development within this assessment boundary benefit from reduced parking requirements
(compared to the rest of the City) and owners were allowed to buy into the program when a new
use required additional parking. This ‘in-lieu’ payment concept is akin to the downtown in-lieu
program but regulatorily different. Where the Downtown in-lieu program continues, the
California Avenue program ended when the bond was paid. The California Avenue Assessment
District is simply no longer extant. Accordingly, there is no mechanism in place today for the City
to receive payment for – or for property owners to request – in-lieu parking on California Avenue.
The inability to offset parking requirements for new uses or development through fee payment
has frustrated some property managers and owners and essentially freezes in place a baseline
level of land use and land use intensity along California Avenue. For instance, similarly parked
land uses can only replace similarly parked land uses and not land uses that require more parking
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spaces. Retail can replace retail, but restaurant cannot replace retail because it has a higher
parking standard.1
The table below provides a summary of permitted and conditionally permitted uses in the
California Avenue area and their associated required parking requirements:
Land Use Typical Parking
Requirement (not
including Downtown)
California Avenue
Assessment District
Boundary
Commercial recreation (>5K=CUP) 1 space / 4-person capacity same
Personal Service 1 space / 200 square feet 1 space / 450 square feet
Retail (intensive: i.e.; shoe store) 1 space / 200 square feet 1 space / 240 square feet
Retail (extensive: i.e.; furniture
store)
1 space / 350 square feet same
Restaurant 1 space / 60 square feet
(plus 1 / 200 SF for other
areas)
1 space / 155 square feet
If the Council finds the existing mix and intensity of land uses sufficient and appropriate for
California Avenue, then no changes are needed to these parking requirements. The current policy
will limit any significant changes in the type or intensity of land uses and discourage
redevelopment or new construction in California Avenue. Lot consolidation is challenging and
would likely be required for any significant redevelopment to meet off-site parking requirements.
If there is no change to the status quo, the Council’s deliberation on the City’s parking policies as
provided in the October 5th staff report can continue without consideration of any intensification
on California Avenue.
However, if the Council is interested in some allowance for a change in land use intensity on
California Avenue, there are some policy considerations that should be factored in the broader
parking policy discussion. Below are some options for the Finance Committee to consider:
Land Use and Parking Options – Former California Avenue Assessment District
1. Blended Parking Rate. This approach would establish the same parking requirement for a
certain set of land uses in order to allow for continued interchangeability of uses, such as
retail, restaurant, personal service. For example, the parking requirement for all these
1 The former California Avenue Parking Assessment District’s parking requirements addressed a variety of land
uses, including financial institutions and office. For the purpose of this memorandum and the associated parking
policy program, staff will focus on ground floor, retail and retail-like land uses on California Avenue; commercial
office is not the focus or intent of the discussion points in this memorandum.
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uses could be changed to 1 space / 200 square feet. This policy would facilitate timely
land use conversions enabling property owners and managers to respond more quickly to
economic market conditions and reduce tenant space vacancies; however, the
implications of this policy could be profound in the California Avenue area without an
aggressive and comprehensive parking policy program. A blended parking rate for
California Avenue could result in many more restaurant conversions and expansions,
which typically required more parking space and may strain parking resources during peak
periods. Staff does not recommend this policy option at this time.
2. Formal Parking In-Lieu Program. Downtown (University Avenue) has an in-lieu parking
program that creates an opportunity for a property owner to pay an in-lieu fee instead of
providing parking spaces otherwise needed onsite for a new development or change in
land use. Payment is made through an in-lieu parking fee that adjusts annually through
changes in the construction index and set at the completion of any City parking garages.
The current fee is approximately $116,000 per space. The owner paying for an in-lieu
parking space does not get dedicated access to parking spaces in any City garage and is
not guaranteed any parking space will be available. The fee satisfies the zoning
requirement for required parking and the money is used to help pay for public parking
within the district.
Establishing an in-lieu parking program for California Avenue is feasible and requires
considerable City resources for stakeholder engagement, analysis, legal support and
administration. Understanding existing and future parking demand based on the desired
number of new parking spaces anticipated and the effectiveness and commitment to
parking policies for the California Avenue would factor into a study that would begin to
define the program, its regulatory structure and ultimate fee.
There are many details that would need to be understood and addressed before
establishing a formal program. Moreover, if the cost for an in-lieu fee is similar to the cost
for the Downtown program, it is not anticipated a similar program would be successful in
California Avenue. The ability to pay over $100,000 for one parking space for a typical
restaurant owner is not feasible given the relatively low margins associated with the
industry. Also, retail to restaurant conversions likely require several parking spaces
further increasing the fee. Property owners would similarly be less motivated to pay the
in-lieu parking expense as their return on cost would likely be too low. If there were
Council interest in advancing this program, an initial understanding would be needed on
the proposed parking requirements for the various land uses in the California Avenue
area.
DocuSign Envelope ID: 128A43F0-2B0F-4772-8377-E3FA3C3B386D
At this time, staff does not recommend this option.
3. Subscription In-Lieu Program. Information on this option is provided in the October 5th
Finance Committee report and is an option that staff conceptually supports, though a
considerable amount of research is needed should the Finance Committee and Council
support this alternative. In summary, the subscription in-lieu program would apply to
existing buildings and land uses on the ground floor with frontage or access to California
Avenue. The program could be used to off-set the zoning standard parking requirement.
Similar to the in-lieu parking program for University Avenue, participants would not be
guaranteed or assigned any public parking spaces and there would be a fee required.
However, unlike University Avenue, the fee, conceptually, would be set at a more
attainable level such that a restaurant tenant or property owner could sustain an ongoing
subscription for required parking spaces to accommodate a change in land use. If the
more intense use gives way to a less intense use, the entity paying for the subscription
could cancel relieving the party of future payments.
As noted in the staff report, depending on other parking strategies the Council ultimately
adopts, staff anticipates the new parking garage could potentially accommodate up to
100 parking spaces in this subscription program. The principal reason for adopting this
policy is to facilitate or encourage more restaurants on California Avenue. However, the
Council may have other policy interests where such a program combined with other policy
changes, such as encouraging other activities on California Avenue such as educational,
community center, or entertainment uses, may warrant continued consideration.
Importantly, there is not a model for this program in the City’s current regulatory
framework and significant staff analysis is required, including legal review, land use
analysis and determining how to set the subscription fee in compliance with Proposition
26. Because of the significant work effort and potential implications for California Avenue
specifically, and the City’s overall approach toward a parking policy generally in this area,
staff would need Council direction to further explore this option.
Summary
If the Finance Committee or Council are not interested in land use policy changes for California
Avenue, then the deliberation on the City’s parking policy solutions for the California Avenue area
does not need to consider allocating 100 or so spaces to facilitate more intense uses (restaurants)
on California Avenue.
If there is interest to accommodate some land use intensification on California Avenue, the
subscription based in-lieu parking program may provide a way to meter those conversions in a
DocuSign Envelope ID: 128A43F0-2B0F-4772-8377-E3FA3C3B386D
manner that supports other parking policy interests in the neighborhood without negatively
impacting parking resources.
_______________________ _________________________
JONATHAN LAIT ED SHIKADA
Planning & Development Services Director City Manager
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Jonathan Lait
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Interim Director Planning and Community
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City of Palo Alto
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