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HomeMy WebLinkAbout2014-06-09 City Council Agenda PacketCITY OF PALO ALTO CITY COUNCIL Special Meeting Council Chambers June 9, 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 June 9, 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. 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. 1.THIS ITEM HAS BEEN REMOVED Study Session 6:00-7:00 PM 2.Joint Meeting with the Architectural Review Board REVISED Call to Order 2 June 9, 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. Special Orders of the Day 7:00-7:30 PM 3.Palo Alto Apps Challenge 2014 - Finalist Recognition 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 7:30-7:40 PM Oral Communications 7:40-7:55 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 7:55-8:00 PM April 21, 2014 Consent Calendar 8:00-8:05 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 4.Request for Approval of Agreement No. C15154285 Between the City of Palo Alto and the Midpeninsula Community Media Center, Inc. for Cablecasting Services in the Amount of $125,000 Per Year for a Total not to Exceed $375,000 from July 1, 2014 Through June 30, 2017 5.Approval of a One – Year Extension of the Building Permit and the Option to Lease Agreement Between the City of Palo Alto and the Palo Alto History Museum for the Roth Building, 300 Homer Avenue 6.Utilities Advisory Commission Recommendation that the City Council Adopt a Resolution Terminating PaloAltoGreen’s Full Needs Program for Residential Electric Customers and Reinstating the Full Needs Program for Commercial and Master-Metered Multi-Family Electric Customers by Repealing Rate Schedule E-1-G and Amending Rate Schedules E-2-G, E-4-G, E-7-G, and E-18-G 7.Approval of a Three-Year Contract with Northwest Woodlands Services, Inc. in the Amount not to Exceed $552,950 for Trail Maintenance in the Baylands Nature Preserve, Pearson-Arastradero Preserve, Foothills Park and Grounds Maintenance in Utility Reservoir Sites 3 June 9, 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. 8. Parks and Recreation Commission Recommendation to Adopt a Park Improvement Ordinance for Hopkins Park 9. Council Review of an Appeal of the Director of Planning and Community Environment's Decision Approving Architectural Review of the Demolition of Approximately 290,220 s.f. of Existing R&D/Office Space and Construction of 180 Dwelling Units Which Includes 68 Detached Single-Family Units and 112 Multi-Family Units Located at 1451-1601 California Avenue, as Part of the 2005 Mayfield Development Agreement. Environmental Assessment: City of Palo Alto/Stanford Development Agreement and Lease Project Environmental Impact Report (State Clearinghouse No. 2003082103). 10. Adoption of Ordinance Amending Section 22.04.270 By Adding Subsection 22.04.270(C) To Prohibit the Feeding of Wildlife And Feral Animals in Palo Alto Parks And Open Space Areas 11. Finance Committee Recommendation that Council Adopt a Resolution Approving the Fiscal Year 2015 Financial Plans and Reserve Management Policies for the Electric, Gas, Wastewater Collection and Water Utilities, With No Rate Increases Proposed for Fiscal Year 2015 12. Approve and Authorize the City Manager or his Designee to Execute Contract Amendment No. 2 to Contract C10135025 in the Amount of $336,172 with Alta Planning + Design, for Preliminary Design and Environmental Assessment Services for the Pedestrian & Bicycle Overpass at Highway 101 (CIP PE-11011) 13. Approval of Consent to Assignment of Power Purchase Agreement with Brannon Solar LLC to CRE-Kettleman Holdco LLC and Approval of Amended and Restated Power Purchase Agreement with EE Kettleman Land, LLC 14. Award of Contract with Ross McDonald Company, Inc., in the Amount of $606,913 for Custom Casework for the Rinconada Library (CIP PE- 11000 and LB-11000) 15. Adoption of an Ordinance Authorizing the Operation, Management and Control of the Palo Alto Airport by the City of Palo Alto and Amending Section 2.08.190 of Chapter 2.08 of Title 2 of the Palo Alto Municipal Code to Add the Palo Alto Airport to the Duties of the Director of Public Works 4 June 9, 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. Accept the Retiree Healthcare Plan GASB 45 Actuarial Valuation as of June 30, 2013 and Approve Full Funding of the Annual Required Contribution Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 8:05-8:15 PM 17. Public Hearing – Assessment for California Avenue Area Parking Bonds – Plan G: FY 2014-2015; Adoption of a Resolution Confirming Engineer’s Report and Assessment Roll, California Avenue Parking Project No. 92-13 (For Fiscal Year 2014-2015) 8:15-9:15 PM 18. Review and Approval of the Revised Draft Infrastructure Project Funding Proposal (CONTINUED FROM JUNE 2, 2014) 9:15-10:45 PM 19. Public Hearing: Adoption of Budget Amendment Ordinance for FY 2015, including Adoption of Operating and Capital Budgets and Municipal Fee Schedule; Adoption of five Resolutions, including: Adopting a Dark Fiber Rate Increase of 2.6% and Amending Utility Rate Schedules EDF- 1 and EDF-2; Amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage) to Increase Storm Drain Rates by 2.6 Percent Per Month Per Equivalent Residential Unit for Fiscal Year 2015; Amending the 2012-2013 Compensation Plan for Management and Professional Adopted by Resolution No. 9357 to Add One New Position and Change the Title of Two Positions; Amending the 2013-2015 Memorandum of Agreement Service Employees International Union (SEIU), Adopted by Resolution No. 9398 to Add One New Position and Correct the Salary of One Position; and Amending the Terms for the Utility Management Professional Association, Adopted by Resolution No. 9359 to Correct the Salary for One Position and Add Two New Position 10:45-11:30 PM 20. City Manager Update and Possible Council Direction on Negotiations with PAUSD Regarding Cubberley Community Center and Ventura School (COUNCIL MAY CONSIDER THIS ITEM IN WHOLE OR PART IN CLOSED SESSION CONFERENCE WITH PROPERTY NEGOTIATORS) Inter-Governmental Legislative Affairs Council Member Questions, Comments and Announcements 11:30-11:40 PM Members of the public may not speak to the item(s) 5 June 9, 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 21. CONFERENCE WITH REAL PROPERTY NEGOTIATORS, CALIFORNIA GOVERNMENT CODE SECTION 54956.8 Properties: Cubberley Community Center, 4000 Middlefield Road, Palo Alto 94306 (including 8 acres owned by the City of Palo Alto and remaining acres owned by the Palo Alto Unified School District); and Ventura School site, 3990 Ventura Court, Palo Alto 94306 Agency Negotiators: James Keene, Lalo Perez, Joe Saccio, Hamid Ghaemmaghami, Greg Betts, Rob De Geus, Thomas Fehrenbach, Molly Stump Negotiating Parties: City of Palo Alto and Palo Alto Unified School District Under Negotiation: Lease and/or Purchase/Sale* Price and Terms of Payment *Purchase/sale is listed to comply with Brown Act legal requirements, and include various types of transactions including but not limited to easements, options, rights of first refusal and land exchanges. 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 June 9, 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 CANCELLED Regional Housing Mandate Committee Meeting, June 12, 2014 Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Informational Reports Downtown Cap Study, Phase I Adoption of a Resolution Determining the Proposed Calculation of the Appropriations Limit for Fiscal Year 2015 Public Letters to Council Set 1 City of Palo Alto (ID # 4771) City Council Staff Report Report Type: Study Session Meeting Date: 6/9/2014 City of Palo Alto Page 1 Summary Title: Joint Meeting with ARB/Council Title: Joint Meeting with the Architectural Review Board From: City Manager Lead Department: Planning and Community Environment June 9, 2014 Study Session Agenda Potential Topics for Discussion A. Overview/Update – ARB Presentation a. Role and Purview of the ARB b. Summary of past 2 years c. ARB Process: Hearings and Results d. Challenges B. Council Questions and Comments C. Public Comments City of Palo Alto (ID # 4614) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/9/2014 City of Palo Alto Page 1 Summary Title: Approval of Agreement with Media Center Title: Request for Approval of Agreement No. C15154285 Between the City of Palo Alto and the Midpeninsula Community Media Center, Inc. for Cablecasting Services in the Amount of $125,000 Per Year for a Total not to Exceed $375,000 from July 1, 2014 Through June 30, 2017 From: City Manager Lead Department: IT Department Recommendation: Staff recommends that the City Council approve, and authorize the City Manager or his designee to execute: 1) Agreement No. C15154285 between the City of Palo Alto and the Midpeninsula Community Media Center, Inc., in an amount not to exceed $125,000 per year ($375,000 for a three- year term), from July 1, 2014 through June 30, 2017, for cablecasting services subject to appropriation of funds. 2) A contract contingency in the amount of $10,000 to cover related, additional but unforeseen cablecasting service needs. Background: In 1983, a Joint Powers Agreement (JPA) was entered into by Palo Alto, Menlo Park, East Palo Alto, Atherton and San Mateo and Santa Clara Counties for the purposes of obtaining cable television service for residents, businesses, and institutions within all or a portion of these jurisdictions. The City of Palo Alto (City) has been given the sole authority to act on behalf of the JPA member communities. Cable franchise holders provide various forms of compensation (e.g., franchise fees; public, education, and government (PEG) fees and channels, etc.) to pay for access to and use of the JPA’s public rights-of-way. The City’s Cable Television Ordinance provides that the City may designate a nonprofit Community Access Organization to operate and administer its PEG facilities, equipment and channels. In 1991, the City Council designated the Mid-Peninsula Access Corporation (MPAC) as its Community Access Organization. In 2000, as part of the sale of the Cable Co-op system to AT&T, a new nonprofit, the Silicon Valley Community Communications (SVCC) was formed. City of Palo Alto Page 2 AT&T made a charitable donation of $17 million to SVCC. In August 2001, MPAC merged with SVCC and was renamed the Midpeninsula Community Media Center, Inc. (Media Center). Since that time, the Media Center has served as the Community Access Organization for the JPA. In this role, the Media Center administers the JPA’s seven local PEG channels, broadcasts local community programs, offers video production classes and workshops to community members, and provides local election coverage. In 2013, the Media Center cablecasted a total of 833 community programs and provided gavel-to-gavel coverage of 365 local government meetings. Palo Alto forwards all PEG fees received from franchise holders (Comcast and AT&T) to the Media Center in support of these services. These fees total approximately $340,000 annually. The AT&T donation was used by the Media Center to purchase a state-of-the-art facility (studio, video production and training facility) located at 900 San Antonio Road in Palo Alto. The donation monies are also used, on an ongoing basis, to fund a portion of the Media Center’s annual operating expenditures. Since the Media Center owns its video production facility and has ongoing income from the AT&T donation to supplement its operating expenditures, there is a significant barrier to entry for any other provider of this service. The City’s existing CAO agreement with the Media Center expires on June 30, 2018. The City has a separate agreement with the Media Center for cablecasting and other production services in the amount of $125,000 per year. This agreement is set to expire on June 30, 2014. Discussion: Staff requests that Council approve a three-year agreement between the City and the Media Center, in an amount not to exceed $125,000 annually, starting on July 1, 2014. This agreement funds: 1) cablecasting of Palo Alto City Council, Council Committee and Board and Commission meetings; 2) cablecasting of the Mayor’s State of the City address; 3) cablecasting of the annual City Council retreat; 4) cablecasting of Palo Alto special events, programs and activities; 5) I-Net operational support services; and 6) web indexing and archiving services. The Media Center will bill for these services monthly based upon the standard rates established in the CAO agreement with the JPA. Resource Impact: Funds for this agreement are included in the Information Technology Department’s Fiscal Year Proposed Budget, which is subject to City Council adoption on June 16, 2014. These expenditures are offset by franchise fee revenue received from Comcast and AT&T. This revenue is estimated to be approximately $824,000 for Fiscal Year 2015. Environmental Review: This approval of the contract is not considered a project under the California Environmental Quality Act; therefore, no environmental assessment is required. Attachments:  Attachment A - Contract Between City of Palo Alto and Media Center (PDF) City of Palo Alto (ID # 4703) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/9/2014 City of Palo Alto Page 1 Summary Title: Palo Alto Historical Museum Extension of the Option to Lease and the Building Permit Title: Approval of a One – Year Extension of the Building Permit and the Option to Lease Agreement Between the City of Palo Alto and the Palo Alto History Museum for the Roth Building, 300 Homer Avenue From: City Manager Lead Department: Administrative Services RECOMMENDATION Staff recommends that Council authorize the City Manager to grant an extension of one additional year to allow the Palo Alto Historical Museum (PAHM) more time to obtain the building permit and to exercise the option to lease the Roth Building as well as to raise funds for the rehabilitation of the building. EXECUTIVE SUMMARY The Palo Alto History Museum (PAHM) proposed to restore, preserve, and rehabilitate the City’s Roth Building as a museum. PAHM’s proposal was accepted by the Council in April 2004. On June 22, 2007, the City granted PAMC a two year Option to Lease which has been extended several times. In the past ten years, PAHM has been utilizing various strategies and methods to raise sufficient capital for renovation of the Roth Building and operation of a historical museum. As part of its financing plan, which was presented, the Palo Alto Historical Museum (PAHM) has requested more time to update the Council on its current status, recent developments, and how it intends to move forward in completing the rehabilitation of the Roth Building and maintaining ongoing operations. The current period to exercise the lease and obtain a building permit will expire on June 30, 2014. The City has extended the Option to Lease and the Building Permit several times to allow PAHM to meet its goals and objectives. BACKGROUND Background information on the Roth Building since the City’s acquisition in April 2000 as well as communication with the Palo Alto History Museum is extensive. Specifically, since 2007 City staff and Museum personnel have examined a variety of proposals to fund the capital and City of Palo Alto Page 2 operating needs of a Roth Building historical museum. Additional background information can be found in Attachments A and B (CMRs 2197 and 2891). In April 2000, the City Council approved the $1,957,000 purchase of the Roth Building and its 0.41 acre site for potential development as a “public facility or alternative use if a public facility is not feasible,” in conjunction with the South of Forest Avenue Coordinated Area Plan (SOFA CAP). After an RFP for use of the Roth Building was distributed, PAHM's proposal to restore, preserve and improve the historic Roth Building for use as a history museum was accepted by the City Council in April 2004. After negotiations between PAHM and City staff, an option agreement was executed on June 22, 2007. There have been a series of option agreement extensions as PAHM has attempted to fulfill the requirements of the original agreement with the City. In the past nine years, PAHM has been working on completing the tasks that would enable them to renovate the Building and operate a history museum at the site. Fundraising efforts slowed during the recession. More recently and during a series of meetings with the City Manager and staff, PAHM has presented a new board and a series of innovative strategies to refocus its fund raising efforts and begin work on this project. In a recent study session which took place on March 24, 2014, PAHM presented to the Council an update of its activities regarding new board members, new vision, and fund raising progress. DISCUSSION The Museum has now requested an additional extension of the Option term to June 30, 2015, to provide more time for reaching the fund raising goal of $7.2 million. During the option period, the Museum must continue to refine its business plan, raise necessary funds for the renovation, and any other discretionary approvals that may be required for the project and provide evidence of sufficient financial security and working capital to complete, operate and maintain the project. This extension provision allows for the City Manager to administratively grant one extension. Possible future extensions must be approved by the City Council. The Museum reports the following and potential resources: Financials – Capital Campaign 1) Building Project Total $7.20 M 2) Capital project investment, architectural, arborist, $0.6 M City fees, and contractors, etc. 3) Funding Sources Identified: Transfer Development Rights $1.0 M Archives 0.3 M Project gifts in hand 0.4 M Pledges in hand 2.5 M Total: $4.2 M Capital funding gap $2.4 M City of Palo Alto Page 3 As stated in the Museum’s study session the need for another option term extension is due to the continued difficulty in fundraising. In summary, the Museum notes the challenge to fundraising but is confident that its fundraising goal is within reach by the end of the next fiscal year, and that all remaining option conditions will be met and permits granted to enable the Museum to sign the lease and begin construction on the rehabilitation of the building in the close future. TIMELINE Staff will return to Council in the future to report on new efforts by PAHM to raise funds to complete this project. In the meantime, the Palo Alto Historical Museum will continue its fundraising efforts until it is ready to exercise its option to enter into a long term lease with the City for the Roth Building. RESOURCE IMPACT At this time, there is no budget impact from this report. The Museum’s request to the City to provide a one-time grant of $2.4 million for capital costs would affect the City’s capital/infrastructure plans and operating budget. It should be noted that the City is in the process of prioritizing its infrastructure projects and developing a financing plan for the coming years. Any City funding for the Roth Building will impact that process and planning. Some of the Council members requested staff to work with PAHM to explore the potential for additional funding by the City to assist the PAHM toward the completion of rehabilitation of the Roth Building. Staff will review and explore potential options that may become available knowing the significant financial challenges already identified as unfunded. Extension of the Option will require that the City continue to provide minor maintenance to the building such as repairing/replacement of broken windows, repairing roof leaks, both as needed, and providing minimal heat/ventilation in the finished areas to try to prevent further deterioration of the finishes. The estimated cost to the City for this maintenance and periodic monitoring is approximately $5,000 annually, which will be covered through existing resources. POLICY IMPLICATIONS The proposed extension to the Option to Lease and the building permit does not represent any changes to existing City policy. ENVIRONMENTAL REVIEW Extension of an option is categorically exempt from the requirements of the California Environmental Quality Act under Article 19, Section 15301, existing facilities. Attachments:  ATTACHMENT A: CMR 2197 (PDF)  ATTACHMENT B: CMR 2891 (PDF)  ATTACHMENT C: Option Extension PAHM December 2014 (DOCX) City of Palo Alto (ID # 2197) Finance Committee Staff Report Report Type:Meeting Date: 10/18/2011 October 18, 2011 Page 1 of 10 (ID # 2197) Summary Title: Historic Tax Credit Program Use for Roth Building Title: Palo Alto Historic Musuem’s Proposal to Use Federal Historic Tax Credit Program for Adaptive Reuse of Roth Building From:City Manager Lead Department: Administrative Services Recommendation Staff recommends that the Finance Committee review and provide input on the Historic Tax Credit financing plan developed by the Palo Alto History Museum. Background In April 2000, the City Council approved the $1,957,000 purchase of the Roth Building and its 0.41 acre site for potential development as a “public facility or alternative use if a public facility is not feasible,” in conjunction with the South of Forest Avenue Coordinated Area Plan (SOFA CAP). On May 20, 2002, Council approved a Request for Proposals (RFP) and directed staff to solicit proposals for the lease of the Roth Building. The RFP specified that: preference be given to non-profit groups located in or serving Palo Alto; that the property be improved and operated at no cost to the city; and that public access to the Roth Building restrooms by users of the neighboring park be provided. In response to the RFP, one proposal was received in November 2003. The Palo Alto History Museum (PAHM) proposed to restore, preserve and improve the historic Roth Building for use as a museum. PAHM’s proposal was accepted by the Council in April 2004, at which time staff sent the Museum a draft Option Agreement for its review. In February 2006, staff received the Museum’s proposed changes to the draft option including a request that the City contribute up to $300,000 to repair leaking and drainage problems at the Roth building. On July 10, 2006, Council created a Capital Improvement Program (CIP) for Roth Building maintenance in the amount of $415,000 to provide funding for interim measures to prevent further deterioration of the building until the Museum takes over the site. On May 14, 2007, Council authorized the Mayor to execute the Option Agreement and approved a City contribution of $150,000 for repair of the leaking and drainage problems. The Option Agreement was executed on June 22, 2007 with a twenty-four month term. 1 Packet Pg. 2 ATTACHMENT A October 18, 2011 Page 2 of 10 (ID # 2197) When the twenty four month period ended, the Museum requested additional extensions which were granted by the City Manager through December 2011. The Museum cited difficulties with fund raising due to the severe economic downturn and was in the process of developing a new financing plan that is discussed in this report. On April 12, 2010, Council approved the nomination of the Category 2 Roth Building to the National Register of Historic Places and transmittal of letter of support to the State Historical Resources Commission. The Roth Building was recently listed on the National Register of Historic Places, joining several other listed Palo Alto structures such as the Norris House, the University Avenue CalTrain station and the United States Post office on Hamilton Avenue. On March 21, 2011, in compliance with conditions of the Option Agreement and the Palo Alto Municipal Code (PAMC) Section 18, development plans for the Museum’s proposed project were conditionally approved for Architectural Review, Minor Exceptions, and a Conditional Use Permit (CUP). The proposed project includes the rehabilitation of the 19,182 square foot Roth Building and a 1,462 square foot addition for use as a museum including gallery space, office space for museum staff, and offices for future subtenants, a community meeting room, a gift shop, café, restrooms, archive storage space, and mechanical/ utility spaces. Minimal exterior modifications on the east side will accommodate a public restroom and a code-required second stairway. On March 29, 2011, final approval of the CUP for the project was appealed in accordance with Title 18 of the Palo Alto Municipal Code. This appeal focused on parking concerns. A public hearing on the appeal was held on June 8, 2011 before the Planning and Transportation Commission (PTC), which recommended that Council deny the appeal. Subsequently, the Council accepted the PTC recommendation and denied the appeal. Discussion To obtain additional financing for capital improvements to the Roth Building, the Palo Alto History Museum (Museum) has solicited the services of Christine Fedukowski Consulting (CFC). In describing its services CFC states that it, “works with developers, governmental agencies, community redevelopment agencies, and investors involved in redevelopment of urban and rural communities that focus on urban infill projects, including new construction and adaptive reuse of historic properties. CFC works with its clients to find financing solutions for these complex projects. Guided by the client’s strategic vision, it manages the financing process from beginning to end, to identify sources, structure the capital transaction, and close financing that includes federal and state historic tax credits, new markets tax credits, other state and local government incentives, as well as conventional financing” CFC is proposing that the Museum participate in the Federal Historic Preservation Tax Incentives program and utilize the Historic Tax Credit (HTC) to obtain additional funds to reuse and rehabilitate the Roth Building. 1 Packet Pg. 3 ATTACHMENT A October 18, 2011 Page 3 of 10 (ID # 2197) CFC, the Museum’s Board President, and staff from Administrative Services and the Attorney’s Office have met on several occasions to understand the HTC, its requirements, and the legal structures necessary to fulfill all obligations. This program is complex in that numerous federal and IRS criteria must be followed carefully and in that several different “ownership” structures could be utilized. The fundamental principle of the HTC program is that it provides federal tax credits to encourage the private rehabilitation of historic structures. Under the HTC an “Investor” (such as a bank or corporation) invests funds in an historic building rehabilitation project in exchange for a federal tax credit. The amount and timing of such an investment is dependent on an investor’s need for a tax credit. Per CFC, HTCs have been utilized as part of an overall financing program for historic rehabilitation of the Fox Tucson Theater in Tucson, Arizona; the Arctic Club Hotel in Seattle, Washington; and Mayo Building in Tulsa, Oklahoma (see response to Question 9 below for HTC use in California). There are an array of requirements to obtain the tax credits and investor financing. The following represent a sampling of the most important provisions (a detailed “Program Overview” and preliminary “Proposed Roth Building Rehabilitation” can be found in Attachment A) follows: ·The HTC can only be used by a taxpayer that owns and rehabilitates a historic building ·Qualified buildings must by “certified historic structures” (Roth Building qualifies) ·HTC is limited to 20 percent of “qualified rehabilitation expenditures” ·The IRS requires that the project include: o substantial rehabilitation o qualified rehabilitation expenditures o building must be depreciable, so it must be income producing or used in a business o tax exempt entities cannot lease more than 50 percent of the rentable area… o “economic substance” on a pre-tax basis whereby project must demonstrate over a projected holding period of 32 years a 3 percent return on the investor equity investment. Project must have economic purpose beyond tax benefit by generating profits o HTC is generally claimed in year building is placed in service o Claimer of HTC must retain ownership for the property for at least five years after occupancy or tax credits are subject to recapture o HTC can be recaptured or returned to federal government if the project is sold before the end of the minimum 5 year holding period or if the property ceases to be income-producing 1 Packet Pg. 4 ATTACHMENT A October 18, 2011 Page 4 of 10 (ID # 2197) Based on the above, intricate criteria it appears that the Museum would have to work closely with a consultant as well as its partners or investors to comply with federal regulations. In addition, the Museum would need to secure the legal, financial and administrative expertise necessary to fulfill federal requirements. In addition to the challenge of complying with all federal regulations, CFC states that “a recurring challenge in using the tax credits is identifying an entity that can use the credits and forming a partnership that includes that entity.” Since non-profits such as the Museum cannot make use of the HTC, it is necessary to partner with an entity that can. The typical partner is one that makes an equity investment in the project in return for the tax credits. CFC refers to this as “syndication” of the tax credit. This syndication has 2 basic structures that can be developed into different ownership arrangements. These are the “Single-Entity” and “Master Tenant Lease” structures. In both structures a limited liability company (LLC) must be formed. CFC states that ‘in the Single Entity, the Project Sponsor is the managing member and the tax credit investor is the Investor Member of the LLC that owns and operates the building. Each is allocated, according to their percentage member interest, the tax credits, and other benefits and obligations of the project, including: 1) profits and losses; 2) depreciation; and 3) cash flow.” In the Master Tenant Lease arrangement, the LLC that owns the building enters into a long- term lease with a master tenant entity. The LLC landlord would own the property (via fee simple title or long-term leasehold interest) and passes through the HTC to the Master Tenant entity. CFC is recommending the Master Tenant entity structure. For more detailed information on the substance of the HTC program, please see Attachment A. In addition, CFC has provided the following WEB sites that describe the program: National Park Service -Technical Preservation Services: Historic Preservation Tax Incentives. http://www.nps.gov/history/hps/tps/tax/. Within that site: Program Summary: Click on "About the Tax Incentives" -PDF format is in the left hand column. For more Detailed IRS Matters: Click on "IRS Connection:" http://www.nps.gov/history/hps/tps/tax/IRS.htm (in the left hand column) California Office of Historic Preservation: Mills Act Property Tax Abatement Program:http://ohp.parks.ca.gov/?page_id=21412. Based on the multifaceted aspects of the HTC program and staff’s unfamiliarity with it, several key questions were posed to CFC. It is important to note that this would be the first transaction involving the HTC for the City. Also based on staff’s limited research this program appears to be more widely used in privately-owned, rather than publicly-owned buildings. It appears that in California, the publicly-owned scenarios involve redevelopment agencies. The questions and responses follow: 1 Packet Pg. 5 ATTACHMENT A October 18, 2011 Page 5 of 10 (ID # 2197) Question 1 Recognizing the potential for additional funding for the Museum to rehabilitate the Roth building, City staff views the tax incentive model as outlined by CFC as extremely complex. There are numerous and strict regulations that must be followed; partnerships to be developed; and legal questions to be resolved.At a minimum, expert consultant and legal advice will be required to guide the Museum through the historic tax credit process and to demonstrate to the IRS that it is compliant with the terms of for obtaining the tax credit. It appears that consultant expertise will be required on an ongoing basis and that the Museum will incur an ongoing cost. Response 1 CFC has been engaged by Palo Alto History Museum ("PAHM") and continues to work on the required materials, anticipating submitting investor proposals once there is approval of this concept from the city staff and Finance Committee of their willingness to consider this structure. Also, the consultant expertise is required only through closing the transaction, to negotiate and finalize the transaction and to help put in place accounting processes and procedures to follow after construction completion. And, most of the consultant fee is earned and payable, if and when the transaction closes, so no significant monies are owed unless an HTC investment is obtained. Please note also, that using the HTC benefits does not preclude seeking other alternative financing options -whether grants or gifts (public and private). As a matter of fact, many organizations use the HTC investment to leverage other monies. Although complex, with the help of the consultant, as well as the investors themselves, many smaller, non-profit organizations in California and across the country have done this. For example, with respect to a small group being able to successfully complete an investor syndication,CFC has worked with, two such groups -one, a small parish in Washington, D.C. that did a $3 million rehabilitation of 2 townhouses for use as a senior center; and the second, a small San Antonio nonprofit in San Antonio providing early childcare that did a $6 million rehabilitation. Question 2 Is the Museum prepared to take on the responsibilities described above and as discussed by the consultant? Response 2 Yes, the museum is prepared to do this, as evidenced by engaging the consultant and bringing capacity to its board that includes a CPA. Question 3 Does PAHM want to pursue the HTC program or, given its complexities, pursue alternative financing options? 1 Packet Pg. 6 ATTACHMENT A October 18, 2011 Page 6 of 10 (ID # 2197) Response 3 Yes, it has analyzed the options, and concluded it wants to pursue the HTC, and also will continue to pursue all other alternative financing options. Furthermore, PAHM has structured its consultant agreement so that no significant costs will be incurred prior to receipt of a term sheet, which will detail the investment terms, from a bona-fide, third-party, established Historic Tax Credit Investor. Question 4: From CFC’s materials, the federal HTC program’s goals are twofold: 1) to rehabilitate an historic building and 2) to house an ongoing enterprise capable of generating an annual return of 2% to 3% of the amount invested in the project.This return is payable from cash flow at the end of the year.Also, CFC states that there is a “requirement that the tax credit investor demonstrate that the Project has ‘economic substance’ or profit motive above and beyond the tax credit….” Has the Museum and consultant performed the financial analysis to demonstrate that the 2% to 3% rate of return is feasible and ongoing? Response 4 That analysis is in process, and based on preliminary projections, the project should meet these requirements --however, the assumptions and analysis will be revised based on the final project construction budget and post-construction operating projections, such to include lease agreements, event rental fees, admissions (suggested donation), building operating costs, etc. Note also that this “profit motive” is typically determined using a projected holding period of at least 30 to 50 years, with project cash flow increasing significantly in later years (years 25 and on). Finally, to put this concept of “profit motive” in context, it is helpful to understand that a key purpose of the economic substance requirement of the Internal Revenue Code,is not necessarily to limit this tax benefit to only highly profitable ventures, but rather to preclude so- called "sham transactions," that became prevalent prior to the 1986 Tax Reform Act, and purposely created money-losing ventures solely as tax shelters. Question 5 Is PAHM prepared to take steps necessary to create and follow a business model that will meet the profile of an enterprise as described in the consultant’s discussion of the tax credit program? Response 5 Yes, PAHM recognizes the need to retain the business skills on staff and board necessary for this business model. And, to specifically address the “profit-motive” IRS requirement, prior to closing the transaction, the tax credit investor will require an opinion from tax counsel and tax accountant that the transaction complies with all rules and regulations. Question 6 CFC has generated a number of potential ownership structures the Museum can use to 1 Packet Pg. 7 ATTACHMENT A October 18, 2011 Page 7 of 10 (ID # 2197) facilitate the HTC financing.It is unclear to staff which model is optimal and which protects the City’s ultimate ownership of the Roth property.It appears that either the Single Entity or Master Tenant ownership structures will maintain a to-be-created “PAHM Rehab, LLC” as the property owner, but the question remains as to who will own the property should there be a recapture of the tax credit or if the LLC fails to meet the IRS requirements? Response 6 The Master Tenant structure will be used. As to the second question, the transaction structure contemplates that City of Palo Alto is fee simple owner and enters into a long-term lease (at least 50 years) with the LLC, the Lessee. So, that leads to the question, “what happens if the PAHM affiliate, that controls the LLC, fails to meet its obligations to the HTC investor”? In that event, the HTC investor could seek to remove PAHM-affiliate as controlling member, which, if successful, would result in the HTC investor taking control of the project. However, PAHM would take steps to mitigate possible adverse effects even if such were to occur, by providing language in the transaction documents to insure rights and remedies with respect to potential removal of the PAHM-affiliate as general partner, such as: 1.The HTC investor would still be bound by the terms and conditions of the lease agreement, as well as all city requirements with respect to zoning, parking, use, etc., that are imposed on all property owners and users. 2.While the HTC investor would require that it have the right to take control, the conditions under which such could happen would be specifically defined, and such right could be exercised only if PAHM-affiliate (A) were grossly negligent;and (B) such negligence had a material adverse affect on the HTC investor. In other words, simply failing to meet attendance goals, or generate sufficient cash flow to pay the annual return, would likely not be sufficient grounds to remove PAHM-affiliate. 3.Typically, the HTC investment is made by a financial institution's community development corporation, which requires that such investments be made only for projects that provide tangible community and public benefit and/or serve the public welfare. As such, for both business and regulatory reasons, the HTC investor’s and City’s project goals are aligned: (a) maintaining the structure in a manner consistent with the Secretary Standards of Rehabilitation; (b) using the building to provide space for a museum, and supporting amenities –or similar activity –that provides community benefit, including accessibility to low-to moderate income persons; and (c) having an overall operating strategy that supports the City’s economic development objectives. Question 7 CFC estimates that an equity investment of $1.08 million from an outside institution is possible. From prior information, it appears that $4.75 million in donations has been pledged.Together these sources total $5.85 million.The project apparently needs $6.3 million so an additional $0.45 million is yet to be identified. Staff’s understanding is that the Museum has been asked to identify a complete financing plan before approaching Council.What is the Museum’s plan 1 Packet Pg. 8 ATTACHMENT A October 18, 2011 Page 8 of 10 (ID # 2197) for raising the additional financing? Response 7 Additional financing will come from philanthropic contributions from major gifts from corporations, foundations, and/or individuals. A broad-based community campaign will be launched shortly to target approximately $250,000. Question 8 In the current economic environment, what is the likelihood of finding a bank or corporation willing to invest in the project for the tax credit? Response 8 Right now, there continues to be HTC investors active in the market. And, it is this upfront work we are doing that takes the longest. Once there is an understanding with the city as to the required structure, we would be able to obtain a detailed proposal from the investor before the city had to move to the next step of its approval process. Since a key piece of PAHM’s financing plan rests on a complicated, but viable tax credit program, PAHM staff recommend that an option extension be approved and that the Finance Committee and the full Council have additional time to review, raise questions,and provide input on the funding plan. Question 9 This tax credit program is geared toward incentivizing private sector investment in historic renovation. Can you please identify three public sector projects in California where this funding approach has been utilized?It would also be helpful to have a specific city staff contact/reference. Response 9 Please see the following California projects and contacts/references: Fox Oakland Theater, rehabilitation of historic theater and adjacent new construction using federal historic and new markets tax credits. The Oakland Redevelopment Agency (ORA) owns the building and entered into a long-term lease with a non-profit sponsor. ORA also provided bond financing for a significant part of the project. Contact: Patrick Lane, Oakland Redevelopment Agency: 510-238-7362 pslane@oakland.net.com. Ferry Building (and adjacent Piers 1, 3, 5). Rehabilitation of piers and buildings in San Francisco using Federal historic tax credits. Contact: Kathleen Diehep -415-274-0536 kathleen.diohep@sfport.com 1 Packet Pg. 9 ATTACHMENT A October 18, 2011 Page 9 of 10 (ID # 2197) REA Building, Sacramento. Rehabilitation using Federal Historic Tax Credits. The rehabilitation was done through an Owner Participation Agreement with the redevelopment agency, which also provided financing for the project. Contact: Roberta Deering, Preservation Director, City of Sacramento: 916-808-8259 rdeering@cityofsacramento.org Question 10 a) This transaction appears to be more complicated than even a city-sponsored bond financing/COPs transaction or a private-sponsored “TEFRA” bond transaction. b) In these types of transactions, the City typically engages bond counsel and a financial advisor with significant expertise. Will these types of consultants be involved in preparing the documentation or is tax counsel only used to issue an opinion letter? c) Who will pay for legal counsel? Response 10 a) There is complexity to the HTC transaction, especially when public and/or private non-profit organizations are involved, but it is assured that as the transaction moves forward, with the support of the investor and project sponsor tax counsel, the City will better understand and become more comfortable with it. This is especially true since you are familiar with bond and COP financing. CTC believes the City will find the HTC quite simple by comparison. Moreover, there is no financial liability on the part of the city. b) Since there is no bond or financing provided by the City, CTC does not expect such counsel or advisors will be necessary for the City, unless the City decides to hire such expertise. As to the transaction documents,the investor’s tax counsel will prepare almost all documentation, except for the PAHM-affiliate entity documents and the lease agreement between the city and PAHM. For your approval, investor or PAHM counsel will make revisions to the lease agreement required to comply with IRC. The investor counsel will issue the opinion letter on behalf of the investor. Also, if you would like to engage tax counsel with HTC expertise, we can provide referrals. c) There is no set procedure, everything is a negotiation. Our aim, however, would be to provide as much counsel as possible to the City, so that the City or outside counsel are reviewing rather than creating documentation. While I've seen costs for bond counsel at around $100,000 for the City's specific HTC aspects of this transaction (if a city chooses to engage outside counsel), CTC expects such cost to be minimal for Palo Alto since outside counsel would be reviewing, rather than preparing documents. The City’s counsel would focus primarily on the city's lease agreement and its consent to assignment. Conclusion and Recommendation As stated above, the HTC program is new to City staff, although the program has been used in 1 Packet Pg. 10 ATTACHMENT A October 18, 2011 Page 10 of 10 (ID # 2197) other California jurisdictions and the CFC and the History Museum have been responsive to staff questions. At this time, it appears prudent for the Finance Committee to become familiar with the HTC program, ask questions, and request additional information where needed. Staff would then return to the Finance Committee for its recommendation on whether or not to move the History Museum’s financing proposal on to the full Council. Resource Impact All costs associated with CFC are being paid by PAHM. In its current financing proposal, there are no requests for financing from the City. The City may incur, however, costs for outside experts (e.g., financial advisor and legal to advise staff and to review documents should PAHM’s historical tax credit financing plan move forward. Policy Implications The City’s goal of preserving the historical Roth structure would be achieved by PHM financing, especially since the HTC program is, by design, meant for such purpose. Although the ownership structure proposed by CFC preserves ownership of the land through a long-term lease, it is possible that tenants could change should PHM not be able to fulfill its commitments. In this situation, it is the investor and not the City that would determine the new tenant. The Finance Committee and Council should discuss this possible scenario. Attachments: ·-a:Attachment A: Public Private Partnership, The City of Palo Alto and Palo Alto History Museum, Tax Incentives for Adaptive Reuse….(PDF) Prepared By:Joe Saccio, Assistant Director of Administrative Services Department Head:Lalo Perez, Director City Manager Approval: ____________________________________ James Keene, City Manager 1 Packet Pg. 11 ATTACHMENT A 1.a Packet Pg. 12 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 13 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 14 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 15 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 16 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 17 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 18 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 19 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 20 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 21 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 22 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 23 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 24 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 25 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 26 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 27 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 28 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 29 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 30 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 31 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 32 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 33 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 34 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 35 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 36 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A 1.a Packet Pg. 37 -: A t t a c h m e n t A : P u b l i c P r i v a t e P a r t n e r s h i p , T h e C i t y o f P a l o A l t o a n d P a l o A l t o H i s t o r y M u s e u m , T a x I n c e n t i v e s f o r A d a p t i v e R e u s e … . ( 2 1 9 7 : ATTACHMENT A City of Palo Alto (ID # 2891) Finance Committee Staff Report Report Type: Action ItemsMeeting Date: 6/19/2012 June 19, 2012 Page 1 of 5 (ID # 2891) Summary Title: PA History Museum Business Plan for Roth Building Title: Palo Alto History Museum's Business Plan for a Roth Building Lease From: City Manager Lead Department: Administrative Services Recommendation After the Finance Committee’s (FC) review of Palo Alto History Museum’s (PAHM) business plan for the Roth Building and the historic tax credit program, PAHM is requesting that the FC recommend to the Council: 1. that the PAHM be given approval to pursue a historical tax credit with an investor and that the lease be amended to facilitate this tax credit by extending the term to 50 years and by assigning the lease to a newly formed Limited Liability Company (LLC) 2. that the lease also be amended to permit PAHM to sublease some of the space to for-profit institutions Executive Summary At the Finance Committee’s (FC) request and as a condition of its lease option agreement on the Roth Building, the PAHM has submitted its Business Plan. Staff has generated a series of questions on the plan and PAHM has decided to respond to these at the FC meeting of June 5, 2012. Responses to these questions are necessary to evaluate the viability of the business plan and to PAHM moving forward with leasing and rehabilitating the Roth Building. In addition, there are outstanding issues surround the lease option agreement that require resolution in the near future. Background Background information on the Roth Building since the City’s acquisition in April 2000 as well as interaction with the Palo Alto History Museum is extensive and long standing. After an RFP for use of the Roth Building was distributed, Council accepted PAHM’s proposal in April 2004. Instead of presenting the history of dealings with PAMF here, staff has attached the last City Manager Report to the Finance Committee (Attachment A). This contains pertinent background information and a summary of the Federal Historic Tax Credit (FHTC) Program that ATTACHMENT B June 19, 2012 Page 2 of 5 (ID # 2891) PAHM proposes to use to partially fund capital improvements to the Roth Building. Questions from staff on the FHTC and responses from PAHM in Attachment A are most helpful in understanding this relatively complex program. At the October 18, 2011 FC meeting, PAHM’s consultant was present to respond to the Committee’s questions on the FHTC. Most of these focused on the legal and business relationships involved in structuring the tax credit. For example, further information on the Master Tenant structure and the relationship between PAHM and the investor was requested. In particular, the Finance Committee wanted confirmation that the City’s vision for the Roth Building would be maintained during the 50 year lease period, particularly in the event of a default by the investor. In addition, the FC queried representatives from PAHM on its business plan for the Roth Building and requested information on the projected budgets for running and maintaining operations at the Roth Building (Attachment B – Minutes from October meeting). PAHM responded that it was developing a Business Plan and would deliver it to the FC before expiration of its current option to lease. Discussion On April 4, 2012, City staff met with PAHM to review their preliminary business plan and to take stock of all remaining information needs to fulfill the option requirements. After the meeting, staff sent to PAHM a series of questions on their pro-forma that would be helpful in assessing the viability of the business plan. Staff has selected the most pertinent questions for FC consideration (below) and PAHM responded to questions in the attachments to the May 23 Business Plan (Attachment C) and will be available to answer questions at the June 5 FC meeting. Revenues and Sources of Income 1. Staff believes Council gave firm direction that occupants of the Roth Building were to be non-profits, yet a for-profit entity is proposed as a tenant. This change in direction needs justification and discussion with Council for their approval. Does this change have any impact on the historical credit proposal and structure? 2. Does a 5% annual lease escalation conform to other office leases in the area? This amount is higher than the average CPI of around 3% over the last decade. 3. What is the % contingency built into the $6.3 million project cost and when was project cost last estimated? 4. On facility rental, does $40,000 reflect competition from other local facilities trying to generate income? 5. What is the source of grants starting at $100,000? Are the increments shown in years 2+ realistic given challenges facing grant institutions? ATTACHMENT B June 19, 2012 Page 3 of 5 (ID # 2891) 6. In general, what are the Museum’s back-up plans should some of the more key revenue assumptions not materialize e.g. grants, donations, facility rentals? 7. We do not believe “in-kind” contributions should appear as a source of revenue. By definition, these are donations of goods and services and not cash. What the Council and institution investing in the operation for a tax credit will want to see is the availability of revenue (cash flow) to cover expenses. At best, in kind donations offset potential expenses. Expenses 8. Please inform as to level of FTE for the Admin Assistant and Archivist. We assume Executive Director will be full-time. 9. Please check benefit rate. While it may include all of the basics like social security, Medicare, worker’s compensation, is there the possibility of additional, if minimal, health care coverage, especially for the Executive Director? General 10. If there is a requirement that revenues must equal a minimum of 75% to obtain historical credit benefits, it appears that with an $11,000 shortfall in revenue this target would not be met. It would appear there’s not much margin for error in meeting this target. Is the Historical Museum confident this requirement can be met over time? 11. A Finance Committee member expressed a desire to have a firm, written commitment for occupancy of the museum by a revenue generator e.g. Chamber of Commerce. Does Museum intend to address this? The information requested is important to understand the ability of PAHM to renovate the Roth Building, meet the terms of an historical tax credit agreement, fulfill the lease agreement with the City, and to provide services to its customers. In addition to the attached pro-forma, staff is providing a letter and information from PAHM that it wanted the Finance Committee to have (Attachment D). It is important to note that PAHM’s consultant on the tax credit will be present on June 19 to answer questions in this important area of the financing. This will be the first tax credit transaction in which the City has participated. In addition to transmitting PAHM’s Business Plan, there are a number of outstanding issues surrounding requirements in the option to lease. PAHM and City staff met on May 23 to discuss these issues and they will be brought to Council’s attention if they cannot be resolved. Conclusion and Recommendation Since the October 2011 Finance Committee meeting, two different Council Members, unfamiliar with the Historical Tax Credit Program, have joined the Committee. While background material has been provided, it is likely that additional questions will be raised on ATTACHMENT B June 19, 2012 Page 4 of 5 (ID # 2891) June 19 on the tax credit program as well as on PAHM’s Business Plan. A consultant will be present to answer questions on the tax credit. While the City has not participated in this type of financing in the past, PAHM has made its consultant available to City staff and staff believes this portion of the Business Plan is viable. Staff recommends that the Finance Committee meeting receive PAMF responses to staff questions on June 19. This will provide Committee members and staff information necessary to assess the viability of PAHM’s Business Plan. The PAHM is asking that Council allow subleases to for-profit institutions in contrast to Council’s original direction to sublease exclusively to non- profits. At this time, it appears appropriate to extend the lease option for another six months (through December 31, 2012) in case the FC has additional questions on the Business Plan or requires additional information before a recommendation is sent to the full Council. Resource Impact A more thorough understanding of PAHM’s Business Plan will be available once questions posed by staff and the Finance Committee are answered. Other, potential financial issues will be addressed when other outstanding lease questions are brought to Council’s attention in the future. All costs associated with exploring the historical tax credit program are being paid by PAHM. The City may incur, however, costs for outside experts (e.g., financial advisor and legal to advise staff and to review documents should PAHM’s historical tax credit financing plan move forward. Policy Implications The PAHM is requesting an exception to previous Council policy that the Roth Building be used solely to house non-profit entities. To generate the targeted revenue level needed for the tax credit program, PAHM is proposing in its Business Plan renting to a for profit entity. The City’s goal of preserving the historical Roth structure could be achieved by PAHM financing, especially since the HTC program is, by design, meant for such purpose. Although the ownership structure proposed by PAMF and its historical tax credit consultant preserves ownership of the land through a long-term lease, it is possible that tenants could change should PAHM not be able to fulfill its commitments. In this situation, it is the investor and not the City that would determine the new tenant. The Finance Committee and Council should be aware of this possible scenario. Attachments: Attachment A: ID# 2197 (PDF) Attachment B: Excerpt minutes from October 18, 2011 (PDF) Attachment C: PAHM Business Plan (PDF) Attachment D: Letter from PAHM Dated May 18, 2012 (PDF) ATTACHMENT B June 19, 2012 Page 5 of 5 (ID # 2891) Prepared By: Joe Saccio, Assistant Director of Administrative Services Department Head: Lalo Perez, Chief Financial Officer City Manager Approval: ____________________________________ James Keene, City Manager ATTACHMENT B City of Palo Alto (ID # 2197) Finance Committee Staff Report Report Type:Meeting Date: 10/18/2011 October 18, 2011 Page 1 of 10 (ID # 2197) Summary Title: Historic Tax Credit Program Use for Roth Building Title: Palo Alto Historic Musuem's Proposal to Use Federal Historic Tax Credit Program for Adaptive Reuse of Roth Building From:City Manager Lead Department: Administrative Services Recommendation Staff recommends that the Finance Committee review and provide input on the Historic Tax Credit financing plan developed by the Palo Alto History Museum. Background In April 2000, the City Council approved the $1,957,000 purchase of the Roth Building and its 0.41 acre site for potential development as a “public facility or alternative use if a public facility is not feasible,” in conjunction with the South of Forest Avenue Coordinated Area Plan (SOFA CAP). On May 20, 2002, Council approved a Request for Proposals (RFP) and directed staff to solicit proposals for the lease of the Roth Building. The RFP specified that: preference be given to non-profit groups located in or serving Palo Alto; that the property be improved and operated at no cost to the city; and that public access to the Roth Building restrooms by users of the neighboring park be provided. In response to the RFP, one proposal was received in November 2003. The Palo Alto History Museum (PAHM) proposed to restore, preserve and improve the historic Roth Building for use as a museum. PAHM’s proposal was accepted by the Council in April 2004, at which time staff sent the Museum a draft Option Agreement for its review. In February 2006, staff received the Museum’s proposed changes to the draft option including a request that the City contribute up to $300,000 to repair leaking and drainage problems at the Roth building. On July 10, 2006, Council created a Capital Improvement Program (CIP) for Roth Building maintenance in the amount of $415,000 to provide funding for interim measures to prevent further deterioration of the building until the Museum takes over the site. On May 14, 2007, Council authorized the Mayor to execute the Option Agreement and approved a City contribution of $150,000 for repair of the leaking and drainage problems. The Option Agreement was executed on June 22, 2007 with a twenty-four month term. ATTACHMENT B October 18, 2011 Page 2 of 10 (ID # 2197) When the twenty four month period ended, the Museum requested additional extensions which were granted by the City Manager through December 2011. The Museum cited difficulties with fund raising due to the severe economic downturn and was in the process of developing a new financing plan that is discussed in this report. On April 12, 2010, Council approved the nomination of the Category 2 Roth Building to the National Register of Historic Places and transmittal of letter of support to the State Historical Resources Commission. The Roth Building was recently listed on the National Register of Historic Places, joining several other listed Palo Alto structures such as the Norris House, the University Avenue CalTrain station and the United States Post office on Hamilton Avenue. On March 21, 2011, in compliance with conditions of the Option Agreement and the Palo Alto Municipal Code (PAMC) Section 18, development plans for the Museum’s proposed project were conditionally approved for Architectural Review, Minor Exceptions, and a Conditional Use Permit (CUP). The proposed project includes the rehabilitation of the 19,182 square foot Roth Building and a 1,462 square foot addition for use as a museum including gallery space, office space for museum staff, and offices for future subtenants, a community meeting room, a gift shop, café, restrooms, archive storage space, and mechanical/ utility spaces. Minimal exterior modifications on the east side will accommodate a public restroom and a code-required second stairway. On March 29, 2011, final approval of the CUP for the project was appealed in accordance with Title 18 of the Palo Alto Municipal Code. This appeal focused on parking concerns. A public hearing on the appeal was held on June 8, 2011 before the Planning and Transportation Commission (PTC), which recommended that Council deny the appeal. Subsequently, the Council accepted the PTC recommendation and denied the appeal. Discussion To obtain additional financing for capital improvements to the Roth Building, the Palo Alto History Museum (Museum) has solicited the services of Christine Fedukowski Consulting (CFC). In describing its services CFC states that it, “works with developers, governmental agencies, community redevelopment agencies, and investors involved in redevelopment of urban and rural communities that focus on urban infill projects, including new construction and adaptive reuse of historic properties. CFC works with its clients to find financing solutions for these complex projects. Guided by the client’s strategic vision, it manages the financing process from beginning to end, to identify sources, structure the capital transaction, and close financing that includes federal and state historic tax credits, new markets tax credits, other state and local government incentives, as well as conventional financing” CFC is proposing that the Museum participate in the Federal Historic Preservation Tax Incentives program and utilize the Historic Tax Credit (HTC) to obtain additional funds to reuse and rehabilitate the Roth Building. ATTACHMENT B October 18, 2011 Page 3 of 10 (ID # 2197) CFC, the Museum’s Board President, and staff from Administrative Services and the Attorney’s Office have met on several occasions to understand the HTC, its requirements, and the legal structures necessary to fulfill all obligations. This program is complex in that numerous federal and IRS criteria must be followed carefully and in that several different “ownership” structures could be utilized. The fundamental principle of the HTC program is that it provides federal tax credits to encourage the private rehabilitation of historic structures. Under the HTC an “Investor” (such as a bank or corporation) invests funds in an historic building rehabilitation project in exchange for a federal tax credit. The amount and timing of such an investment is dependent on an investor’s need for a tax credit. Per CFC, HTCs have been utilized as part of an overall financing program for historic rehabilitation of the Fox Tucson Theater in Tucson, Arizona; the Arctic Club Hotel in Seattle, Washington; and Mayo Building in Tulsa, Oklahoma (see response to Question 9 below for HTC use in California). There are an array of requirements to obtain the tax credits and investor financing. The following represent a sampling of the most important provisions (a detailed “Program Overview” and preliminary “Proposed Roth Building Rehabilitation” can be found in Attachment A) follows: ·The HTC can only be used by a taxpayer that owns and rehabilitates a historic building ·Qualified buildings must by “certified historic structures” (Roth Building qualifies) ·HTC is limited to 20 percent of “qualified rehabilitation expenditures” ·The IRS requires that the project include: o substantial rehabilitation o qualified rehabilitation expenditures o building must be depreciable, so it must be income producing or used in a business o tax exempt entities cannot lease more than 50 percent of the rentable area… o “economic substance” on a pre-tax basis whereby project must demonstrate over a projected holding period of 32 years a 3 percent return on the investor equity investment. Project must have economic purpose beyond tax benefit by generating profits o HTC is generally claimed in year building is placed in service o Claimer of HTC must retain ownership for the property for at least five years after occupancy or tax credits are subject to recapture o HTC can be recaptured or returned to federal government if the project is sold before the end of the minimum 5 year holding period or if the property ceases to be income-producing ATTACHMENT B October 18, 2011 Page 4 of 10 (ID # 2197) Based on the above, intricate criteria it appears that the Museum would have to work closely with a consultant as well as its partners or investors to comply with federal regulations. In addition, the Museum would need to secure the legal, financial and administrative expertise necessary to fulfill federal requirements. In addition to the challenge of complying with all federal regulations, CFC states that “a recurring challenge in using the tax credits is identifying an entity that can use the credits and forming a partnership that includes that entity.” Since non-profits such as the Museum cannot make use of the HTC, it is necessary to partner with an entity that can. The typical partner is one that makes an equity investment in the project in return for the tax credits. CFC refers to this as “syndication” of the tax credit. This syndication has 2 basic structures that can be developed into different ownership arrangements. These are the “Single-Entity” and “Master Tenant Lease” structures. In both structures a limited liability company (LLC) must be formed. CFC states that ‘in the Single Entity, the Project Sponsor is the managing member and the tax credit investor is the Investor Member of the LLC that owns and operates the building. Each is allocated, according to their percentage member interest, the tax credits, and other benefits and obligations of the project, including: 1) profits and losses; 2) depreciation; and 3) cash flow.” In the Master Tenant Lease arrangement, the LLC that owns the building enters into a long- term lease with a master tenant entity. The LLC landlord would own the property (via fee simple title or long-term leasehold interest) and passes through the HTC to the Master Tenant entity. CFC is recommending the Master Tenant entity structure. For more detailed information on the substance of the HTC program, please see Attachment A. In addition, CFC has provided the following WEB sites that describe the program: National Park Service -Technical Preservation Services: Historic Preservation Tax Incentives. http://www.nps.gov/history/hps/tps/tax/. Within that site: Program Summary: Click on "About the Tax Incentives" -PDF format is in the left hand column. For more Detailed IRS Matters: Click on "IRS Connection:" http://www.nps.gov/history/hps/tps/tax/IRS.htm (in the left hand column) California Office of Historic Preservation: Mills Act Property Tax Abatement Program:http://ohp.parks.ca.gov/?page_id=21412. Based on the multifaceted aspects of the HTC program and staff’s unfamiliarity with it, several key questions were posed to CFC. It is important to note that this would be the first transaction involving the HTC for the City. Also based on staff’s limited research this program appears to be more widely used in privately-owned, rather than publicly-owned buildings. It appears that in California, the publicly-owned scenarios involve redevelopment agencies. The questions and responses follow: ATTACHMENT B October 18, 2011 Page 5 of 10 (ID # 2197) Question 1 Recognizing the potential for additional funding for the Museum to rehabilitate the Roth building, City staff views the tax incentive model as outlined by CFC as extremely complex. There are numerous and strict regulations that must be followed; partnerships to be developed; and legal questions to be resolved.At a minimum, expert consultant and legal advice will be required to guide the Museum through the historic tax credit process and to demonstrate to the IRS that it is compliant with the terms of for obtaining the tax credit. It appears that consultant expertise will be required on an ongoing basis and that the Museum will incur an ongoing cost. Response 1 CFC has been engaged by Palo Alto History Museum ("PAHM") and continues to work on the required materials, anticipating submitting investor proposals once there is approval of this concept from the city staff and Finance Committee of their willingness to consider this structure. Also, the consultant expertise is required only through closing the transaction, to negotiate and finalize the transaction and to help put in place accounting processes and procedures to follow after construction completion. And, most of the consultant fee is earned and payable, if and when the transaction closes, so no significant monies are owed unless an HTC investment is obtained. Please note also, that using the HTC benefits does not preclude seeking other alternative financing options -whether grants or gifts (public and private). As a matter of fact, many organizations use the HTC investment to leverage other monies. Although complex, with the help of the consultant, as well as the investors themselves, many smaller, non-profit organizations in California and across the country have done this. For example, with respect to a small group being able to successfully complete an investor syndication,CFC has worked with, two such groups -one, a small parish in Washington, D.C. that did a $3 million rehabilitation of 2 townhouses for use as a senior center; and the second, a small San Antonio nonprofit in San Antonio providing early childcare that did a $6 million rehabilitation. Question 2 Is the Museum prepared to take on the responsibilities described above and as discussed by the consultant? Response 2 Yes, the museum is prepared to do this, as evidenced by engaging the consultant and bringing capacity to its board that includes a CPA. Question 3 Does PAHM want to pursue the HTC program or, given its complexities, pursue alternative financing options? ATTACHMENT B October 18, 2011 Page 6 of 10 (ID # 2197) Response 3 Yes, it has analyzed the options, and concluded it wants to pursue the HTC, and also will continue to pursue all other alternative financing options. Furthermore, PAHM has structured its consultant agreement so that no significant costs will be incurred prior to receipt of a term sheet, which will detail the investment terms, from a bona-fide, third-party, established Historic Tax Credit Investor. Question 4: From CFC’s materials, the federal HTC program’s goals are twofold: 1) to rehabilitate an historic building and 2) to house an ongoing enterprise capable of generating an annual return of 2% to 3% of the amount invested in the project.This return is payable from cash flow at the end of the year.Also, CFC states that there is a “requirement that the tax credit investor demonstrate that the Project has ‘economic substance’ or profit motive above and beyond the tax credit….” Has the Museum and consultant performed the financial analysis to demonstrate that the 2% to 3% rate of return is feasible and ongoing? Response 4 That analysis is in process, and based on preliminary projections, the project should meet these requirements --however, the assumptions and analysis will be revised based on the final project construction budget and post-construction operating projections, such to include lease agreements, event rental fees, admissions (suggested donation), building operating costs, etc. Note also that this “profit motive” is typically determined using a projected holding period of at least 30 to 50 years, with project cash flow increasing significantly in later years (years 25 and on). Finally, to put this concept of “profit motive” in context, it is helpful to understand that a key purpose of the economic substance requirement of the Internal Revenue Code,is not necessarily to limit this tax benefit to only highly profitable ventures, but rather to preclude so- called "sham transactions," that became prevalent prior to the 1986 Tax Reform Act, and purposely created money-losing ventures solely as tax shelters. Question 5 Is PAHM prepared to take steps necessary to create and follow a business model that will meet the profile of an enterprise as described in the consultant’s discussion of the tax credit program? Response 5 Yes, PAHM recognizes the need to retain the business skills on staff and board necessary for this business model. And, to specifically address the “profit-motive” IRS requirement, prior to closing the transaction, the tax credit investor will require an opinion from tax counsel and tax accountant that the transaction complies with all rules and regulations. Question 6 CFC has generated a number of potential ownership structures the Museum can use to ATTACHMENT B October 18, 2011 Page 7 of 10 (ID # 2197) facilitate the HTC financing.It is unclear to staff which model is optimal and which protects the City’s ultimate ownership of the Roth property.It appears that either the Single Entity or Master Tenant ownership structures will maintain a to-be-created “PAHM Rehab, LLC” as the property owner, but the question remains as to who will own the property should there be a recapture of the tax credit or if the LLC fails to meet the IRS requirements? Response 6 The Master Tenant structure will be used. As to the second question, the transaction structure contemplates that City of Palo Alto is fee simple owner and enters into a long-term lease (at least 50 years) with the LLC, the Lessee. So, that leads to the question, “what happens if the PAHM affiliate, that controls the LLC, fails to meet its obligations to the HTC investor”? In that event, the HTC investor could seek to remove PAHM-affiliate as controlling member, which, if successful, would result in the HTC investor taking control of the project. However, PAHM would take steps to mitigate possible adverse effects even if such were to occur, by providing language in the transaction documents to insure rights and remedies with respect to potential removal of the PAHM-affiliate as general partner, such as: 1.The HTC investor would still be bound by the terms and conditions of the lease agreement, as well as all city requirements with respect to zoning, parking, use, etc., that are imposed on all property owners and users. 2.While the HTC investor would require that it have the right to take control, the conditions under which such could happen would be specifically defined, and such right could be exercised only if PAHM-affiliate (A) were grossly negligent;and (B) such negligence had a material adverse affect on the HTC investor. In other words, simply failing to meet attendance goals, or generate sufficient cash flow to pay the annual return, would likely not be sufficient grounds to remove PAHM-affiliate. 3.Typically, the HTC investment is made by a financial institution's community development corporation, which requires that such investments be made only for projects that provide tangible community and public benefit and/or serve the public welfare. As such, for both business and regulatory reasons, the HTC investor’s and City’s project goals are aligned: (a) maintaining the structure in a manner consistent with the Secretary Standards of Rehabilitation; (b) using the building to provide space for a museum, and supporting amenities –or similar activity –that provides community benefit, including accessibility to low-to moderate income persons; and (c) having an overall operating strategy that supports the City’s economic development objectives. Question 7 CFC estimates that an equity investment of $1.08 million from an outside institution is possible. From prior information, it appears that $4.75 million in donations has been pledged.Together these sources total $5.85 million.The project apparently needs $6.3 million so an additional $0.45 million is yet to be identified. Staff’s understanding is that the Museum has been asked to identify a complete financing plan before approaching Council.What is the Museum’s plan ATTACHMENT B October 18, 2011 Page 8 of 10 (ID # 2197) for raising the additional financing? Response 7 Additional financing will come from philanthropic contributions from major gifts from corporations, foundations, and/or individuals. A broad-based community campaign will be launched shortly to target approximately $250,000. Question 8 In the current economic environment, what is the likelihood of finding a bank or corporation willing to invest in the project for the tax credit? Response 8 Right now, there continues to be HTC investors active in the market. And, it is this upfront work we are doing that takes the longest. Once there is an understanding with the city as to the required structure, we would be able to obtain a detailed proposal from the investor before the city had to move to the next step of its approval process. Since a key piece of PAHM’s financing plan rests on a complicated, but viable tax credit program, PAHM staff recommend that an option extension be approved and that the Finance Committee and the full Council have additional time to review, raise questions,and provide input on the funding plan. Question 9 This tax credit program is geared toward incentivizing private sector investment in historic renovation. Can you please identify three public sector projects in California where this funding approach has been utilized?It would also be helpful to have a specific city staff contact/reference. Response 9 Please see the following California projects and contacts/references: Fox Oakland Theater, rehabilitation of historic theater and adjacent new construction using federal historic and new markets tax credits. The Oakland Redevelopment Agency (ORA) owns the building and entered into a long-term lease with a non-profit sponsor. ORA also provided bond financing for a significant part of the project. Contact: Patrick Lane, Oakland Redevelopment Agency: 510-238-7362 pslane@oakland.net.com. Ferry Building (and adjacent Piers 1, 3, 5). Rehabilitation of piers and buildings in San Francisco using Federal historic tax credits. Contact: Kathleen Diehep -415-274-0536 kathleen.diohep@sfport.com ATTACHMENT B October 18, 2011 Page 9 of 10 (ID # 2197) REA Building, Sacramento. Rehabilitation using Federal Historic Tax Credits. The rehabilitation was done through an Owner Participation Agreement with the redevelopment agency, which also provided financing for the project. Contact: Roberta Deering, Preservation Director, City of Sacramento: 916-808-8259 rdeering@cityofsacramento.org Question 10 a) This transaction appears to be more complicated than even a city-sponsored bond financing/COPs transaction or a private-sponsored “TEFRA” bond transaction. b) In these types of transactions, the City typically engages bond counsel and a financial advisor with significant expertise. Will these types of consultants be involved in preparing the documentation or is tax counsel only used to issue an opinion letter? c) Who will pay for legal counsel? Response 10 a) There is complexity to the HTC transaction, especially when public and/or private non-profit organizations are involved, but it is assured that as the transaction moves forward, with the support of the investor and project sponsor tax counsel, the City will better understand and become more comfortable with it. This is especially true since you are familiar with bond and COP financing. CTC believes the City will find the HTC quite simple by comparison. Moreover, there is no financial liability on the part of the city. b) Since there is no bond or financing provided by the City, CTC does not expect such counsel or advisors will be necessary for the City, unless the City decides to hire such expertise. As to the transaction documents,the investor’s tax counsel will prepare almost all documentation, except for the PAHM-affiliate entity documents and the lease agreement between the city and PAHM. For your approval, investor or PAHM counsel will make revisions to the lease agreement required to comply with IRC. The investor counsel will issue the opinion letter on behalf of the investor. Also, if you would like to engage tax counsel with HTC expertise, we can provide referrals. c) There is no set procedure, everything is a negotiation. Our aim, however, would be to provide as much counsel as possible to the City, so that the City or outside counsel are reviewing rather than creating documentation. While I've seen costs for bond counsel at around $100,000 for the City's specific HTC aspects of this transaction (if a city chooses to engage outside counsel), CTC expects such cost to be minimal for Palo Alto since outside counsel would be reviewing, rather than preparing documents. The City’s counsel would focus primarily on the city's lease agreement and its consent to assignment. Conclusion and Recommendation As stated above, the HTC program is new to City staff, although the program has been used in ATTACHMENT B October 18, 2011 Page 10 of 10 (ID # 2197) other California jurisdictions and the CFC and the History Museum have been responsive to staff questions. At this time, it appears prudent for the Finance Committee to become familiar with the HTC program, ask questions, and request additional information where needed. Staff would then return to the Finance Committee for its recommendation on whether or not to move the History Museum’s financing proposal on to the full Council. Resource Impact All costs associated with CFC are being paid by PAHM. In its current financing proposal, there are no requests for financing from the City. The City may incur, however, costs for outside experts (e.g., financial advisor and legal to advise staff and to review documents should PAHM’s historical tax credit financing plan move forward. Policy Implications The City’s goal of preserving the historical Roth structure would be achieved by PHM financing, especially since the HTC program is, by design, meant for such purpose. Although the ownership structure proposed by CFC preserves ownership of the land through a long-term lease, it is possible that tenants could change should PHM not be able to fulfill its commitments. In this situation, it is the investor and not the City that would determine the new tenant. The Finance Committee and Council should discuss this possible scenario. Attachments: ·Attachment A: Public Private Partnership, The City of Palo Alto and Palo Alto History Museum, Tax Incentives for Adaptive Reuse….(PDF) Prepared By:Joe Saccio, Assistant Director of Administrative Services Department Head:Lalo Perez, Director City Manager Approval: James Keene, City Manager ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B ATTACHMENT B 10 18 2011 Finance 1 FINANCE COMMITTEE Special Meeting October 18, 2011 Chairperson Scharff called the meeting to order at 5:10 p.m. in the Council Conference Room, 250 Hamilton Avenue, Palo Alto, California. Present: Scharff (Chair), Schmid, Shepherd, Yeh (arrived at 6:43 p.m.) Absent: Oral Communications None Agenda Items 1. Palo Alto Historic Museum’s Proposal to Use Federal Historic Tax Credit Program for Adaptive Reuse of Roth Building Assistant Director of Administrative Services, Joe Saccio gave a brief introduction to familiarize the Finance Committee with the Federal Historic Tax Credit Program which the museum was proposing to receive partial funding to restore the Roth Building. He expressed that City Staff had met with Museum Executive Board Members and a consultant with Christine Fedukowski Consulting (CFC) to achieve a better understanding of the program. Christine Fedukowski, Consultant for CFC, announced her role was to bring tax credit equity to the project and structure a financial package for the City. She noted although the program was new to Palo Alto it was established in 1976 and reformed in 1986 to correlate with the tax reforms. She noted prior to requesting a formal approval, her firm would provide specific investors, terms, and structure. She stated the Council would have seen a number of reiterations of the documentation. In order to take advantage of the tax credit program the entity, the Palo Alto History Museum, would need to be made into a Limited Liability Company (LLC), because to participate in the ATTACHMENT B 10 18 2011 Finance 2 program they needed to be a taxpaying entity. The tax credit amount was equal to the 20 percent of the qualified costs which were costs associated with the building, landscaping and new construction would not be qualified costs. The property owner could claim the tax credit, they were required to own the property prior to the start of the construction and for 5 years. She explained if the taxpayer claimed a credit but the tax liability was less than the tax credit they could carry the credit forward for up to 20 years and it could be carried back for one year. Council Member Shepherd said the tax laws with the Internal Revenue Service (IRS) were currently in flux and asked where the information was. She asked where the responsibility towards the new LLC would be in the event things shift again as they had previously. Ms. Fedukowski said there were 1,037 federal tax credits and tax deductions on the books and there were no indications of the Historic Tax Credit presently. Council Member Shepherd asked what would happen if the laws changed. Ms. Fedukowski said if the laws were to change the responsibility would be on the investor. Within the document there was a section explaining, in the event there was a recapture of some kind and the tax credit was not available because of a change in the law, the firm would seek to put the burden on the shoulders of the investors. Council Member Shepherd asked whether that information would be a part of the LLC agreement. Ms. Fedukowski confirmed it would be. Council Member Shepherd said with respect to the rehabilitation costs, the conversation was restricted to the building and not the land acquisition. Ms. Fedukowski stated yes. Chair Scharff said the Palo Alto Historic Museum was leasing the building for a term of 40 years so therefore they would be receiving the tax credit, not the City of Palo Alto. Ms. Fedukowski agreed. Chair Scharff asked how the City had an interest. Ms. Fedukowski clarified the City had a role as the landlord. ATTACHMENT B 10 18 2011 Finance 3 Chair Scharff asked for clarification that the Master Leasing Agreement required a minimum of 50 years. Ms. Fedukowski confirmed that 50 years was a typical minimum. She said for federal income tax purposes the owner of the property needed to be deemed the taxpayer. It had been generally agreed that a lessee who held a long-term lease holding interest would be deemed to have ownership for federal income tax purposes. She noted there was a threshold of a 50 year lease so if the lease was only 40 years there would be a change and the federal government would be looking for a 50 year lease. She mentioned the investors and the firm would be having discussions regarding who the project sponsor was going to be, their capacity to build the museum, the ability to complete the project on time and budget, who was on the project teams, and on a global basis what were the community benefits. Council Member Shepherd understood the Chamber of Commerce was planning on becoming a tenant and asked whether they would then become a tenant of the LLC. Ms. Fedukowski said they would. Chair Scharff asked if the firm would be returning to the Council to inform them whether or not the Palo Alto History Museum met the investor criteria. Ms. Fedukowski said she could. Chair Scharff asked for an understanding as to why the firm took over the project. Ms. Fedukowski said because with all of the work the Palo Alto History Museum Staff and Board Members had accomplishment to date the next step was for assistance with financing. This was where the tax credit program came in. They needed the firms’ expertise. It was the influence the museum had in Palo Alto, the overall business plan they had put together, and the funds they had already earned that made it an easy decision for the firm to participate. They had also taken their plight through the National Parks Service requirement to get the property listed on the Register which was a huge step. They put together an eight member team on the construction side with Vance Brown as the general contractor who was a highly recommended expert in Historic Preservation. The firm was currently working to refine the operations and the business plan. Council Member Shepherd asked for clarification on an example; the cost of renovation was $10 million and the History Museum had $6 million with a need for $4 million. That amount came in and the outside investor received 20 percent of the $4 million as a tax credit. ATTACHMENT B 10 18 2011 Finance 4 Ms. Fedukowski corrected the statement saying if the project was $10 million the investor would receive a tax credit on $2 million as the aggregate. Council Member Shepherd said the investor received a tax credit on the project as a whole even though their portion of it was $4 million. Ms. Fedukowski said it was a significant dollar amount which was about 20 percent of the total construction amount excluding acquisition. Council Member Shepherd said it was approximately a $10 million investment based on the City’s investment and the renovation costs. Ms. Fedukowski explored the basic partnership structure of the LLC; the property seller was at the top, the property was sold into an LLC, the managing member the investor member, and then the tenants that leased from the LLC. The investor member would be looking to contribute the historic tax credit equity, to receive the tax credits, and in addition they would receive a return of two to three percent annually. At the beginning of the partnership there would be an option that would provide each partner, the developer and the investor, to buyout their interests at a specified period. Chair Scharff asked for clarification regarding the investor’s right to buyout the non- profit. Ms. Fedukowski said the investor had the right to put its interest to the non-profit. The investor had the right to force the non-profit to buy them out, not the other way around. Chair Scharff asked under what terms that would occur. Ms. Fedukowski explained it was a negotiated price, in a typical real estate deal which was anywhere between five to fifteen percent of the equity invested; for a non-profit deal it could range from $5,000 to $10,000. Chair Scharff confirmed the buyout could occur after the first five years. Ms. Fedukowski said one of the requirements of the tax credit was the taxpayer must own the property for five years. She noted the museum would have the right to buyout the investor at the five year timeframe. If for some reason the investor did not exercise their option after the five year term, the museum had the same buyout rights. Council Member Shepherd said there would be two investors, the History Museum and ATTACHMENT B 10 18 2011 Finance 5 a for-profit industry. Ms. Fedukowski confirmed yes, that would be the structure. Council Member Shepherd said in the agreement the two investors would own 99.99 percent of the LLC. Ms. Fedukowski clarified the manager, which would be the museum affiliate, would own .01 percent interest. Council Member Shepherd said the History Museum would be a .01 percent interest holder and the investor would come up with all of the cash. Ms. Fedukowski said no, the investor’s cash would be equal to the 20 percent of the tax credit allowance. Council Member Shepherd asked how the manager member integrated their fundraising dollars into the rehabilitation. If the managing member raised ample funds and the property was in the tax credit arena for the required five year term, could they then not convert back to a non-profit and out of the LLC. Ms. Fedukowski said that was correct. Council Member Shepherd said the tax credit was just for five years. Ms. Fedukowski agreed and noted there was to be an option agreement so that each partner had a mechanism to cause the investor to exit the partnership. Council Member Shepherd confirmed that would occur only after the five year term had extended. Ms. Fedukowski said that was correct, the usual time was five years and two months by the time of completion. Council Member Shepherd said the for-profit entity would leave the project and invest in another project elsewhere. Ms. Fedukowski said the institutions had well established programs through their Community Development Corporations and had regulatory obligations to make investments in those types of private/public partnerships. Council Member Shepherd asked how the investments were captured. ATTACHMENT B 10 18 2011 Finance 6 Ms. Fedukowski said through the Community Revitalization Act. She discussed the single entity ownership. She hoped to show how the tax credit investor and the project sponsor, the City of Palo Alto and the Palo Alto History Museum, came together in the newly formed Roth Building Rehabilitation LLC. The City as one of the project sponsors was the landlord, while the Palo Alto History Museum as the other project sponsor was the property owner or lessee who was responsible for fundraising. The funds collected through the contributions would likely make a loan or an equity project contribution. Between the landlord and the property owner was the property manager which was the Palo Alto History Museum as the sole owner of the 5013C was the sole member of the manager LLC. Chair Scharff asked for clarification on following the money. When the LLC was formed, he asked how would the Palo Alto History Museum get its equity contributions into the LLC so the work could be completed. Ms. Fedukowski said the Palo Alto History Museum would make an equity contribution into the Rehabilitation LLC. Chair Scharff asked how they held an equity contribution of .01 percent and yet were able to make a contribution of $4.5 million while the star venture equity made a contribution of $2 million, and one person received 99.99 percent and the other .01 percent. Ms. Fedukowski understood it was a difficult scenario to consider but this project was not typical for an LLC. Chair Scharff asked if the IRS was satisfied with the situation of the manner in which the LLC was set-up. Ms. Fedukowski said yes. Council Member Shepherd asked if this type of LLC was specifically spelled out in the IRS code. Ms. Fedukowski said no, but in a partnership interest it was an allocation of various economic benefits. Council Member Shepherd said if a donor made a contribution of $1 million to the History Museum, the donor received a tax deduction, while the museum took the funds to create a loan to the manager LLC. ATTACHMENT B 10 18 2011 Finance 7 Ms. Fedukowski clarified there would probably be an equity contribution involved. Council Member Shepherd said an equity contribution of .01 percent in a taxable contribution meant they would receive deductions based on their sizable equity contribution. Ms. Fedukowski said as in any property statement there were revenue and operating expenses and income. If it appeared as though there would be cash flow, there would be other fees such as an administration fee or developer fee and those would be distributed to the other partner to pay them for their obligation. Council Member Shepherd asked if the obligation was to manage the property. Ms. Fedukowski said that was correct. She said with this specific project the cash flow would not be much to speak of. Council Member Shepherd stated her confusion on how she could make a taxable exempt donation that transitioned itself into an LLC. Ms. Fedukowski said the donor’s charitable contribution was tax exempt and was going to a non-profit organization for the purpose of rehabilitation. Council Member Shepherd agreed but the non-profit transitioned their $5 million into the manager LLC as an equity investment. That money would be used and mingled with other funds. Ms. Fedukowski said that was correct. She said this type of LLC had been practice with both large and small groups and it was done under a corporate charter, in this case the Palo Alto History Museum. They could not take the funds and enter into a joint ventures partnership to develop retail outlets; the money needed to follow its purpose. Chair Scharff asked the relevance of the Chamber of Commerce. Ms. Fedukowski said their role would be as a tenant. Council Member Shepherd said the History Museum itself would be a renter or would have a lease with the City. Ms. Fedukowski said that was correct. Chair Scharff asked if there were real numbers for the Finance Committee to review. ATTACHMENT B 10 18 2011 Finance 8 Ms. Fedukowski said there were not real numbers available yet. Council Member Shepherd inquired as to the single entity method where there was a need for a two to three percent return. Ms. Fedukowski clarified the return was on the equity investment. Council Member Schmid asked what the scenario would be if the investor and the non- profit went bankrupt after only two years. He asked what the City’s liability would be in that circumstance. Ms. Fedukowski said in any lease there was a built-in clause with details on default or bankruptcy. The landlord had the right to terminate. Council Member Schmid asked what would occur if the non-profit closed down, the investor went into bankruptcy, and the investor held 99.99 percent of controlling interest in the property while the City held the 50 year lease and was the responsible party. He asked if the bankruptcy court decide the fate of the property. Ms. Fedukowski stated she was uncertain of the proper answer for that specific scenario although said she would research and return with a response. She said if the investor had the interest in an entity that held the ownership lease, the terms and conditions of that lease recited that if the tenants went into default the lease holder or in this case, the City had the right to terminate the lease. Council Member Schmid asked if the ownership of the property resided with the investor. Ms. Fedukowski said the ownership resided with the City. Council Member Schmid corrected the lease was held by the City and that held a financial interest which the bankruptcy court was interested in. Chair Scharff said the lease was of value and it would be assigned to someone else which would not impact the City because they then would be receiving rent from that other entity. Council Member Schmid asked if the ownership of the lease had the ability to control who resided with the investor, the one who held 99.99 percent of the controlling interest. Steve Staiger, Historian, Palo Alto Historical Association clarified if the non-profit was unable to fulfill their obligation, the City had two interests, 1) they were the ultimate ATTACHMENT B 10 18 2011 Finance 9 landlord and 2) they controlled how the building was used. Council Member Schmid said there was a financial interest; the non-profit was required to make a three percent payment per year with a buyout clause written for a later period. There was no monetary connection to the timeline. He wanted to know if there was a value placed on the property interest if the City would be financially responsible to the investor if the non-profit defaulted. Mr. Staiger said the building had a Use-Permit which determined the type of use that could occur within the structure. If the investor attempted to alter the use of the building the City would not allow it and therefore would not be financially responsible for the investor. Council Member Schmid asked what the City’s ultimate financial responsibility or liability for loss was if things went wrong. Senior Assistant City Attorney, Cara Silver noted that was a concern that had been explored at the Staff level and it was still being reviewed; although, they felt the City would be able to build-in certain protections within the lease agreement. Chair Scharff asked for clarification on which lease agreement. Ms. Silver clarified between the landlord, the City of Palo Alto and the LLC, which was the tenant of record on the property. The protections built-in to the lease agreement would state that the property was required to be used for the 50 years or the term of the lease as a history museum so in the event the Roth Building non-profit entity lost control or if a for-profit investor went bankrupt or was bought out of the partnership their interest would be assigned. Staff felt the protections set forth in the lease agreement would be suitable to protect the City’s interest. Council Member Schmid said it would be helpful from a risk point of view to have a financial prospectus for the history museum and what type of budget they had. Ms. Fedukowski said pending approval of the matter providing that information would be the next step. In order to get to a point where all of the numbers and the tax credit information were in a complete package the firm needed to identify the Finance Committee and Council’s overall willingness to pursue the project. Council Member Schmid acknowledged most of the risk with these types of projects was done with non-profit entities with uncertain cash-flow. He said all of the examples given were with for-profit entities such as restaurants and caterers. ATTACHMENT B 10 18 2011 Finance 10 Ms. Fedukowski said if an investor participated in the program they recognized the entity was a non-profit and explained part of the process might be there needed to be a sum of the equity set aside as a reserve. She noted if there was a partnership and the revenues were such that were not able to achieve the two to three percent, that in and of itself would not be a reason for the investor to seek control of the partnership unless there was gross neglect on the part of the museum. Council Member Schmid asked if going out of business would be considered gross negligence. Ms. Fedukowski conceded that would not be considered negligent. Council Member Shepherd asked if the firm was looking at partners with corporate social responsibility dollars where a company had set aside certain pieces of their corporate status to show they were benefactoring a position in human resource projects. She said the tax credit was not recognized and yet the corporate entities contributing through donations were still seeking a two to three percent return on the cash-flow. She asked if there was a way for the City to be a part of the manager LLC scenario in order to recapture the lease and re-manage the project in the event there was a default. Ms. Fedukowski said even in the manager LLC the sole member would need to make the election to have the revenues to be treated as taxable but the expenses depreciation should more than off-set any revenue. Council Member Shepherd asked for a scenario in selling the Roth Building. Ms. Fedukowski noted it was ultimately a business decision. Chair Scharff said he did not see a strong risk to the City as long as the lease was well drawn. If the history museum did not provide their obligations, the City terminated their lease and the building belonged to the City again. Ms. Fedukowski clarified if the tenant defaulted, the City could terminate. Ms. Silver agreed and added the risk appeared to be during the five year period because after that the investor had received their tax credit and the history museum would have the ability to buyout the investor. Chair Scharff asked if Staff could draft a lease agreement encompassing all suspected risks to the City. ATTACHMENT B 10 18 2011 Finance 11 Ms. Silver believed so and was going to review the bankruptcy risk mentioned previously. Council Member Shepherd said if the City did not notify the bankruptcy court correctly then typically there were no rights extended for the year. Council Member Schmid asked for clarification that the funds being expended by the investor were not considered donations because they were expecting a 36 percent cash return which placed the City somewhat in the business world so Council could not assume a well written lease could pull the City out. In the report provided to the Committee the IRS rules cited it was required the project include a depreciable building, was income producing, sustained ownership over a period of at least five years, and supply a regular return on the investment. Chair Scharff said those were requirements for the museum not the City. Council Member Schmid said the IRS would only accept the tax credit program if the project entering into the program was a profit venture on the property. Ms. Fedukowski said the key concept was depreciable property, property used in a trade or rental not a personal property and in this incident it would be rental property. With respect to the return, the IRS were referring to economic self stems which were really for taxpayer protection to avoid what were called fraud transactions. She noted the two to three percent was calculated over a projected period of 32 years. Chair Scharff asked for clarification on the two to three percent return, asking if there was a certain regulation. Ms. Fedukowski clarified whether it was a two or three percent return was a negotiated amount. Chair Scharff said the IRS did not have a guideline; it was typically what was negotiated between the parties. Ms. Fedukowski said that was correct and the typical market was two to three percent. Chair Scharff was aware the history museum had a Use Permit and asked if the firm was familiar with the document and what it allowed them to do. He was aware the museum had plans to lease portions of the building to other tenants and he asked if that was within their purview. Ms. Silver said there was office use contemplated by the Use Permit although she did ATTACHMENT B 10 18 2011 Finance 12 not believe there was currently a Café allowed. Chair Scharff recommended reviewing the terms of the Use Permit during the renegotiation of the lease. He felt the risk to the City was minimal, but was unclear about the viability of the deal. He said the history museum in itself would not be adding additional funding so in order for them to be able to make the lease payment it came down to the other tenants. Ms. Fedukowski said that was correct. Chair Scharff stated he would be supportive of the project; however, there were concerns with the amount of time the City legal team and Staff was spending without a business plan or budget in place. Council Member Shepherd said her perspective was the investments were in the leases themselves not whether the History Museum collected donations or were able to raise revenues based on events. It was the fact that they had three leases with cash flowing to the project at two to three percent; that was the business plan. Chair Scharff asked Ms. Fedukowski what their next steps were. Ms. Fedukowski said they would be looking deeper into the City risks and the bankruptcy concept. She explained there would be some importance to the revenues collected by the museum which would also include the donations. Council Member Shepherd said at the end of the five years the museum could transition the LLC out since the history museum did not need the depreciation. She asked how the City was being reimbursed for the Staff’s time. City Manager, James Keene clarified the City would not be reimbursed for the Staff time because the information being collected was considered part of the Palo Alto process. Council Member Shepherd stated her concern for the amount of Staff time being spent on the project that had not been approved as of yet when there were other projects of high level importance being pushed aside. Director of Administrative Services, Lalo Perez noted there had been more time invested on the project thus far since it was an unfamiliar process. He realized the importance of the museum to the community so it was felt due diligence was necessary at the $30,000 level to see what the requirements were but he understood at this point he and his Staff needed to focus on the detail of investors, financial plan, and other ATTACHMENT B 10 18 2011 Finance 13 processes. According to Ms. Fedukowski before she could move forward they needed to receive a sense of approval from the governing body. Council Member Shepherd asked how this project rose to the priority level with so many other projects not getting the attention they deserved. Mr. Perez said the nexus was the lease options and how to get to the next step to get the museum to the long-term lease without realizing the time constraint it would entail. Council Member Shepherd felt there needed to be a clear prioritization list and she recommended it go through the Policy & Services Committee. She said the City resources were thin and there were losses in the process of budgetary cutbacks. Mr. Keene said he understood the prior investment of Staff time it had taken to reach where the project was being brought to the Finance Committee but with that being said, it had reached the point where there needed to be a decision on whether or not to move forward with it. Council Member Shepherd asked if there should be a dollar value placed on the Staff time being spent from this point forward so the community understood the issues were brought before the Council and Committees and a value was placed on them. Chair Scharff shared the concern over Staff time being spent and the concern was raised when there were discussions of the City paying for outside experts at a premium cost. If the museum had come before the Committee with the three tenant leases in hand his comfort level would have been higher. Council Member Schmid said as you look around the City and see City owned property on long-term leases for the community good; Avenidas, the Art Center, elder people’s homes, Little League fields and they came from a point in time when the City made a commitment to turn property over to a non-profit. The museum was the first in a long time and he felt it was central to the life of the community and worthwhile that Staff did what was necessary to ensure success but he agreed there needed to be a business plan in place to verify viability. Chair Scharff asked what was needed from the Committee to move the project forward. Mr. Perez said Staff could return to the Finance Committee once they received the business plan and had time to review it. ATTACHMENT B 10 18 2011 Finance 14 Ms. Fedukowski said the Committee had provided the requested information needed to move forward and build a viable business plan. MOTION: Council Member Schmid moved, seconded by Chair Scharff that the Finance Committee 1) Accept the Historic Tax Credit Financing Plan 2) Encourage the History Museum to return to the Finance Committee with a Business Plan as soon as possible, and 3) direct Staff to be sensitive to the amount of time spent on the Item. Mr. Keene understood and appreciated the Council’s sensitivity to Staff’s capacity. He informed the Finance Committee Staff did not have the resources to take actions that would be of benefit. The driving force was the building of tremendous City asset that had fallen on hard times and was in disrepair. Chair Scharff requested to see signed Letters of Intent (LOI) from the intended tenants of the building when Staff returned with the Item. INCORPORATION INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER: Track Staff Time Spent on the Item and Present Finance Committee with a Report of Staffing Costs to the City. MOTION PASSED: 2-1 Shepherd no, Yeh abstain ATTACHMENT B 'Progrlllll ......... . Admission Fees Mernberships ! §p(lciill.t;~~.6.ts ........... . · Spea~(lr§eries,()ther . .., Camps, Classes, Other . Sub·Total' ; Leasing,Mg! F~es; Sales .' j .. Fa9i1i!x.R(lf)!.a1 . Board Room · 6iiic:e$p~~~Xnon~pr()fiil.· i 1000 i (lffice Space (for·profit) 'T'i3i6; :9afe§p?ge ..... ····· ..... .... . .. ;2~01 Book Store 'Archive Manaqement · Sub·Totall : b()n?lion~:f6~i\ljduai~ ..... . ... i' ;Grants 0 25,025" .2,50Q: 3,500' $31,025, 40,000. .10,9Qo' 30,000 79,266[ §,QQOj 5,000: 27,666' $196200' i PALO ALTO HISTORY MUSEUM 5-YEAR OPERATING PROFORMA: 2013 -2018 M 12 0' 0 31,795: ~3,385: 2,750 3,025 3,328 3,660 3,850, 4,235 4,659' 5,124 $34,600 $37,255: $39,782, $42,169 42,000 44,100, 46,305' 48,620 . 10,500' 11,025 11,576 12,155 ~1,~6Q 33,075 34,729' 36,465 83,160' il7,318' 91,684 96,268 6,666, 7,960; 7,500; 8,666 .. fQoQ' .~,QQO 9,000 j,006; 27,000' 27,000; 27,000: 27,000' ; $207 160, $217518 $227794; $237508, : : . , 3$,990;50,000: '60,QOO! 65,000' · Endowment Income i 125,000 145,000, 160,000: 170,0. 6.0.' '10 O~~~2~5~,6~bO~!~iil'~"~2~t,@00~-6~ Ii ~~ .. ~35~0~6~61' ~~'ii *+""';~f'<""~""'L, !Benefits @ ; ProfessfonalFees · A~~2~nt(jrit~1,~gal .......... ' IT, Web Design, Book Store • Administrative Tel(lp~ori~jll1t~rnet Organiz(jtion§lIO!Jes . , Postage~Supplies Ins -0&0 Sub·TotaL · Travef and Entertainmeflt Sub·Total ~<lrkeiin9 . PR.Il\dvertising ................. . • Postage, Printing, Design Sub·TotaL Utilities i:iectric, water, gas,etal ........ . .' ...... .. Sub·Totai: Collection/Exhibits 28%' IO,oQO; 20,000: 27,600: 117,000: 1,500~ 2,000, 3,500' 2,SOO .. 306: 4,5001 .3,Q90 ; 750' 11,050: 5:000; t,OO() , 12,000: 1~,O()(): .. 2,QQoi 6,009) 5,006; 31,000' 30,000 30,000 : 72,100 20,600: 27,810 120,510: J,5Z§ 2,000' 3,575' ... '2,625 500 4.725 3.!.1(i0; 1,000 12,000' 5:09Q; 7,350 12,350: 18,540 2,066 26,o6b., 5,250: 45,850) 33,000 33,000 : .. 74,2.§3i 21,218; 28,6441 124,125; 34,755 .. .. 1,§!i4: 2,000; 3,654' , 2,756: 600: 4,961' 3,307 1,000: 12,624 . 5,500; 7,71'( 13,217: 19,467 ?,1?? ?7.0QO, 5,512. 54,101 : 3~,300. 36,300' 35,797 .V36 2,000 3,736: 2,894 600: 5,209 3,473 {soD 13,676; 6,60.0; 8,103; 14,103) 39,930 39,930 1,829 ;i,oilO: 3,823, 3,639; . 600 5,470 3,646 1,500' 14,255 6,000 8,508' 14,508, 21,462 . '2,251' 49:000, 43,923 43,923 10,090 10,000 10,000' 20,000 Cllrator.Col1.sultant 10,000 10,000 20,000 • 20,000 • Exhibit.-.Consultant 20,000 20,000 10% increases 2,500 2,625 2,756: 32,500; 32,625 32,756: ,.!.·ln~s~u~ra;!!.n!Cec:,:e ___ --:::-;--;;:--:--c';-_-;-__ ""'~;-;-__ 2~~ __ 2~:,-_--:",2~,829::;4 ... , __ ~3""0,,,3:;c9~ ____ 5% incre.ases Sub·Totar: 32,894 33,039 SURPLU§; $118,108 $163,241, $185,180 s FF GG HH II ATTACHMENT B PALO ALTO HISTORY MUSEUM PROJECT Five Year Proforma KEY A Consistent with Lease Agreement B Survey of local area museums and historical associations This calculation demonstrates 500 at an average membership of $50 each. C Anticipated but, conservatively, not included in budget D Nearby Woman's Club speaker series, as example E Survey of local area museums F The Museum performed survey of other area facilities for both rates and availability. There is a scarcity of available venues in the area, and, additionally, the Museum offers unique possibilities. G The Museum performed survey of other area facilities for both rates and availability. H Non-profit office. Dedicated second floor office space (800 sq ft) is supplemented by shared use of second floor board room, staff break room and staff shower plus ground floor open office (200 sq ft). Rate is calculated at $2.50 sq ft. Commercial office realtors indicate inflation rate is low, but demand is high. 3% -5% inflation range is typical. For-profit office. Dedicated second floor office space is supplemented by shared use of board room, staff break room and staff shower. Rate is calculated at $5.00 sq. ft. Commercial office realtors indicate inflation rate is low, but demand in high. 3% -5% inflation range is typical. Comment: The intention of including only non-profits in leased space is well meaning. However, non-profits cannot typically pay market rents. The Museum renting to another non-profit (at $2.50 -$3 sq. ft.) means one non-profit is subsidizing another non-profit. Higher rental income from for-profit tenants ($5 -6 sq. ft.) makes our project viable for ITC investors. J Calculated at minimal income based on interviews with local museum cafe operators K Calculated at minimal income based on survey of local area museums L Established and ongoing M Responses from local museums N The Museum has successfully received grants, including one for $250,000 in the fall without having a facility. We believe, based on other museums' experience, that a functioning museum will help draw more attention and more grant monies to support our exhibits and programs. o Year two: $250,000 endowment @ 4% return Year three: $500,000 endowment @5% return Year four: $540,000 endowment @ 5% return Year five: $700,000 endowment @ 5% return P Full time position. Wage & Benefit Survey of No. California Non-Profit Organizations and local survey Q Part time. ATTACHMENT B PALO ALTO HISTORY MUSEUM PROJECT R Part time. This has been a steady source of revenue for over 20 years S 28% based on Wage & Benefit Survey of No. California Non-Profit Organizations and includes a minimal benefit package T Based on current and researched future needs U Based on local research V Based on current and anticipated need W Current and anticipated X Current and researched rates Y Current and anticipated Z Minimal allowance AA Estimated based on materials anticipated BB Estimates from local service providers CC Estimates from local service providers DD Estimates from local service providers EE Estimates from local providers FF City of Palo Alto -estimated rate based on approved plans GG Professional consultant responses based on antiCipated need HH Professional conSUltant responses based on anticipated need II Estimates from local service providers ATTACHMENT B PALO ALTO HISTO Y MUSEUM HONORARY CHAIRS DEAN CLARK HEWLETT LEE WILLIAM E. ROTH PROJECT DIRECTOR KAREN HOLMAN BOARD OF DIRECTORS STEVE STAIGER President GAIL WOOLLEY Vice President DIANA WAHLER Treasurer BARIJARA WALLACE Secretary SUSAN BEALL NANCY BJORK GLORIA BROWN BETH BUNNENBERG DEANNA DICKMAN GARY FAZZINO MARGARET FEUER NANCY HUBER DOUG KREITZ SHULAMITH RUBINFIEN TOM WYMAN BOARD OF ADVISORS JIM BAER GWEN BARRY MARILYN BAURlEDEL BERN BEECHAM FAITH BELL GREG & JULIE BROWN LOREN BROWN DAVID BUBENIK CAROLYN CADDES WANDA CAVANAUGH MARGARET CHAI MALONEY CAROLYN LOUGEE CHAPPELL VICKY CHING MALCOLM CLARK ANNE CRIBBS ANDY DOTY SID ESPINOSA MEGAN SWEZEY FOGARTY HILLARY FREEMAN CRYSTAL GAMAGE DR. JIM GIBBONS GEORGIE GLEIM BOB GRIMM BIRTHARVEY ANDY HERTZFELD LAURA JONES JEANNE D. KENNEDY DUDLEY KENWORTHY HaN. LIZ KNISS PHILLIP LEE, M.D. MILLIE MARlO JOYCE MCCWRE PEGGY McKEE JIM MITCHELL PHYLLIS MUNSEY BEv NELSON ENID PEARSON NANCY & STEVE PLAYER EMILY RENZEL DICK ROSENBAUM MICHAEL SANTULLO HON. 10E SIMITIAN SUSAN' SWEENEY LEONARD WARE SAM & KIM WEBSTER ROBERTA YEE CONNIE YOUNG Yu May 18, 2012 To Members of the Palo Alto Finance Committee, In the process of creating the Palo Alto History Museum, one of the funding mechanisms identified was the Historic Investment Tax Credit Although the process to obtain this benefit is complex, it is worthwhile because the benefit is so large. The Museum hired Chris Fedukowski, an experienced tax credit consultant, to execute this process. The Museum Board hopes the following will answer any questions that the Finance Committee might have as we seek your support for this program. With any start-up, such as the Museum, it takes considerable effort and time to lay the groundwork for later success. Once we were granted the Option to Lease in June 2007, the following steps were taken: • Work began on researching the Roth Building's history and archi tecture so it migh t be determined eligibile for the National Register, which in turn would make the project eligible for Investment Tax Credits. We presented an extensive set of documents and photographic evidence that determined eligibility and the Roth Building is now listed on the National Register of Historic Places; • Planning began with the project architect to develop a restoration plan appropriate for a museum in a National Register Building; • A professional Investment Tax Credit advisor was brought on to help navigate the necessary steps, including developing a 5-year budget as part of a package to secure an investor; • Architectural plans were completed, submitted to the City, and have received final approvals from all City departments. While the Museum Board has been very conservative in including only $850,000 in our capital gifts estimate, the Investment Tax Credit is may be as much as $l.2M (20% of qualified capital improvements) for the restoration of the Roth Building for use as our local history museum. Although the process may seem complex, the Museum is paving the way for the City to potentially use its new understanding of Historical Investment Tax Credits to facilitate the rehabilitation of the Downtown Post Office or Lucie Stern Community Center and thus provide the opportunity for millions of dollars of infrastructure funding. The Museum Board respectfully seeks your support for the Investment Tax Credit program. It's conservative. It's significant. It can bring money to this and other City projects. Respectfully submitted, PO Box 676 PALO ALTO, CALIFORNIA 94302 650.322.3°89 MUSEUM@PAHISTORYMUSEUM.ORG ATTACHMENT B Palo Alto History Museum c/o Steve Staiger 300 Homer Ave. Palo Alto, CA 94301 Dear Mr. Staiger, I have prepared the following in response to your request for an estimate of the potential lease rates for office suites that may be made available at 300 Homer Avenue Palo Alto, the future location of the Palo Alto History Museum. Two suites are being considered. Suite B3 Ii Location: Floor 2 at the Homer/Bryant corner of the building II Configuration: Five private spaces .. Window line: Two spaces without windows, one with two small high on wall windows, and one with one high and one typical height window .. Entrance: Within the museum staff suite .. Other: Shared use of break room and conference room .. Size: Approximately 8805f Suite B1 .. Location: Floor 2 at Channing/Waverley corner of building .. Configuration: Open floor plan Ii Window line: Good windows on both exterior walls .. Entrance: Off floor 2 lobby .. Other: Private balcony and shared use of break room and conference room .. Size: Approximately 1320sf Potential tenants are as follows: Ii Suite B3: Non-profit or for-profit business entity .. Suite B1: For-profit business entity Non-Profit: In addition to Suite B3 the non-profit would lease an additional approximately 200sf on the first floor for interfacing with the public. The space would be well suited for a non-profit needing space to meet with the public and private space for its staff. It is estimated that the triple net market value would be in the $5.00/sfto $S.50/sf per month range. (Under a triple net lease all operating expenses born by the landlord are passed through to the tenant ona pro rata basis in the form of additional rent). The total monthly rent would be about $5,400 to $6,000. ATTACHMENT B For-profit entity: Suite B3 has identity issues for a private entity. It has a weak entry and is located in museum not an office building. This and the poor parking would render the rate in the $4.50/sfto $S.OO/sfrange or $4,000 to $4,400 per month. Suite B1 would have greater appeal due to the stronger entrance and window line. In addition, many office users prefer the open landscape configuration. The estimated value of the spaces is $5.00/sfto $5.50/sf or $6,600 or $7,300 per month. These are rather rough estimates in today's dollars. As the project progresses, I would be pleased to update and refine these estimates. Sincerely, Steve Pierce Owner-Broker ATTACHMENT B ... <1""!"''''' 'P .. _.:.~ ",'~i ,t~" I 1", __ .1. THE ROTH BUILDING PAL.O AL. TO HfZSTORY MUSEUM + OJ M_t: •• I ,,..-,. ~ ....... \;:U ,;UM ... V.II .. FA!""""*, fo;r. ..,.. ... IHIRfto{ SE":::OI\ o Fi.Oi.m, :"LAi\: '\oi:\ Y f:'f, .. 1i'n'1 ' .. --J 4] ': j,~' '~ ATTACHMENT B PALO ALTO HISTORY MUSEUM PROJECT Historic Preservation Investment Tax Credit Program Described The Federal Historic Preservation Tax Incentives Program began in 1976 as a way to encourage private investment in America's downtowns at a time when they were suffering. Strip mall development was diverting business away from core business districts. Recognizing that downtowns commonly were comprised of historic buildings, a plan was developed to incentivize the restoration of the business core. The program was later expanded to allow broader community investment. One of the federal government's most successful and cost-effective community revitalization programs, the Preservation Tax Incentives reward private investment in rehabilitating historic properties such as offices, rental housing, and retail stores. Abandoned or under-used schools, warehouses, factories, churches, retail stores, apartments, hotels, houses, and offices in many cities have been restored to life in a manner that retains their historic character. The Federal Historic Preservation Tax Incentives program encourages private sector investment in the rehabilitation and re-use of historic buildings. Each year, approximately 1000 projects qualify for the Credits, leveraging nearly $4 billion annually in private investment in the rehabilitation of historic buildings across the country. A local example of a project that utilized tax credits is 520 Ramona Street, former site of Chantilly Restaurant. The Tax Credit is calculated at 20% of the project's qualified preservation costs. ATTACHMENT B 6, Museum flltr iger BASE the new homE; H new design analys1s sho\'lis our ;1 '21){jj,~J i~nEaSUr\~ ATTACHMENT B PALO ALTO HOUSING 725 Alma Street· Palo Alto, CA 94501 • (650) 321-9709 • Fax (650) 321·4341 November to, 2011 Mr. Steve Staiger Palo Alto History Museum P,O. Box 676 Palo Alto, CA 94302 Re: Letter of Intent to Lease Parking Spaces at 2501270 Homer, Palo Alto to History Museum/Chamber of Commerce ~. Dear Mr. Staiger This Letter ofIntent signifies Palo Alto Housing Corporation's (PAHC) interest in leasing up to 12 parking spaces to the History Museum/Chamber of Commerce. The parking spaces are located in the underground garage at 2501270 Homer in Palo Alto and are currently assigned as guest parking for Oak Court Apartments. At this time, Oak Court is sufficiently parked for both its residents and guests. Hence, we are pleased to be able to share our space with the exciting museum. As discussed during preliminary meetings with staff at Palo Alto Housing Corporation (PARC) and the History Museum, these parking spaces will be leased in the fall of20]2 with the completion of construction of the History Museum. Parking spaces will be leased for employees of the History Museum and Chanlber of Commerce at a rate consistent with that charged by the City of Palo Alto lots. Specifics of the rental agreement, including the indemnification agreement & insurance requirements, etc, will be finalized prior 10 commencement of the rental period. Thank you for your interest in leasing these parking spaces and we look forward to working with your agency. Should you have any questions or concerns, please contacts do not hesitate to contact us. Sincerely, PALO ALTO HOUSING CORPORATION ~ Candice R. Gonzalez Executive Director ATTACHMENT B ATTACHMENT C June 1, 2014 Gail Wooly Palo Alto History Museum P.O. Box 676 Palo Alto, CA 94301 Re: Extension of the Period of Option to Lease – City of Palo Alto (City) and Palo Alto History Museum (PAHM) Dear Ms. Wooly: City has received your May 23, 2014 email request on behalf of Palo Alto History Museum for extension of the option period to lease from the City for the Roth Building. Based on the outcome of our meetings, mutual understanding, according to the latest PAHM’s business plan and presentation to City Council, PAHM will continue its efforts to raise funds to undertake the historical renovation phase of this important project. Pursuant to Section 6.4.1 of the Option Agreement between City of Palo Alto and Palo Alto History Museum dated June 22, 2007, I hereby approve the extension of the option period to lease between the City and PAHM for an additional six (6) months to December 30, 2014. Sincerely, James Keene City Manager CC: Lalo Perez Molly Stump Hamid Ghaemmaghami 6.4 Extension of Option Upon receipt of the written request of MUSEUM stating the reasons therefore, the City Manager or designee shall be empowered to extend the Option Term as follows: 6.4.1 The City Manager or designee, shall grant in writing, an extension of the Option Term for a reasonable period of time, as determined by the City Manager or his, designee, in the event MUSEUM is delayed in fulfilling the conditions precedent to the exercise of the Option by reason of any cause not the fault of, or within the control of, MUSEUM or its agents or employees; or City of Palo Alto (ID # 4718) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/9/2014 City of Palo Alto Page 1 Council Priority: Environmental Sustainability Summary Title: Modifications to Electric PaloAltoGreen Program Title: Utilities Advisory Commission Recommendation that the City Council Adopt a Resolution Terminating PaloAltoGreen’s Full Needs Program for Residential Electric Customers and Reinstating the Full Needs Program for Commercial and Master-Metered Multi-Family Electric Customers by Repealing Rate Schedule E-1-G and Amending Rate Schedules E-2-G, E-4-G, E- 7-G, and E-18-G From: City Manager Lead Department: Utilities Recommendation Staff and the Utilities Advisory Commission recommend that Council adopt a resolution (Attachment A) terminating the currently suspended PaloAltoGreen Full Needs Program for residential customers on Rate Schedule E-1-G, and reinstating the PaloAltoGreen Full Needs Program for commercial and master-metered multi-family customers. Executive Summary The PaloAltoGreen (PAG) program launched in 2003, providing City of Palo Alto Utilities (CPAU) customers an opportunity to voluntarily pay a premium to receive renewable electricity sufficient to eliminate the greenhouse gas (GHG) emissions associated with their use of electricity. The PAG program offered customers two options—“Full Needs” whereby 100% of their electric usage could be covered, or “Block Purchases” whereby customers could purchase renewable energy in 1,000 kilowatt-hour (kWh) increments. Given the City’s adoption of a carbon neutral electric portfolio policy, in September 2013 Council lowered the rate premium for the Block Purchase option from $15 to $2 per 1,000 kWh block and suspended the Full Needs option for all CPAU electric customers, while staff took time to evaluate alternatives. Those alternatives included replacing the program with a PAG Gas program, or repurposing the program in some way, including as a community solar donation program. City of Palo Alto Page 2 In April 2014, Council approved the PaloAltoGreen Gas (PAG Gas) program, which will be launched in July 2014. The PAG Gas program will provide the City’s natural gas customers the opportunity to offset greenhouse gas (GHG) emissions associated with their natural gas usage. Staff expects that many of the PAG participants who also have natural gas service will find PAG Gas program an attractive program and will participate in the new voluntary PAG Gas program. Now that the City’s electric supply is carbon neutral, CPAU’s residential electric customers no longer need to participate in PAG in order to eliminate the GHG emissions associated with their electric usage. As such, staff recommends terminating the residential Full Needs program by repealing Rate Schedule E-1-G. However, many of CPAU’s commercial customers continue to get value from the PAG electric program because participating allows them to meet corporate sustainability goals and federal “green certification” requirements. While the Block Purchase option has remained available to commercial customers since Council suspended the Full Needs portion of PAG, many commercial electric customers prefer to cover 100% of their electric usage and would like the convenience of the Full Needs option. Thus, staff recommends retaining the Full Needs option for commercial and master-metered residential customers. Background The PaloAltoGreen (PAG) program launched in 2003 and provided City of Palo Alto Utilities (CPAU) customers an opportunity to voluntarily pay a premium to receive renewable electricity in the form of Renewable Energy Certificates (RECs). The PAG program offered two options: 1. Block Purchase—under this option commercial customers of any size, and multi-family residential customers, could purchase blocks of renewable energy in 1,000 kilowatt hour (kWh) increments at a fixed per-block rate at a rate premium of $15 per 1,000 kWh block; or 2. Full Needs—under this option all electric customers could receive renewable energy offsets equivalent to 100% of their electric usage at a rate of 1.5 cents per kWh. The PAG electric program was one of the most successful voluntary renewable energy programs in the nation. However, after having made the decision to have an entirely carbon- neutral electric portfolio, the Council voted in September 2013 to suspend the Full Needs portion of the PAG program for all electric customers (Staff Report #4041). At the same time, Council directed staff to develop the PAG Gas program and to recommend how to allocate accumulated revenues associated with the PAG program. However, the Block Purchase option was kept active for commercial customers, since that that option is valuable to those customers seeking to achieve and maintain Leadership in Energy and Environmental Design (LEED) certification and to receive recognition from the Environmental Protection Agency’s Green Power Partnership Program. Many of CPAU’s larger commercial and retail chain customers also have corporate sustainability goals that can be met by participation in PAG. In September 2013 when the Full Needs option was suspended, the Block Purchase City of Palo Alto Page 3 rate was reduced from $15 to $2 per 1,000 kWh block to reflect the City’s lower cost of procuring RECs and the accumulated revenues from the Block Purchase option. Discussion In April 2014, Council approved a plan to refund the accumulated revenues associated with the PAG Full Needs program to that program’s participants (Staff Report #4609). The refunds will be returned as a bill credit and are expected to be disbursed starting in July 2014. Also in April 2014, Council approved the PAG Gas program, which will be launched in July 2014 (Staff Report #4596) and will provide the City’s natural gas customers the opportunity to reduce or eliminate greenhouse gas emissions related to their natural gas usage. Therefore, the final outstanding issue is what to do with the suspended PAG Full Needs option. Staff considered several alternatives, including: 1. Automatically enroll former PAG Full Needs participants in the PAG Gas program; 2. Automatically enroll former PAG Full Needs participants in a solar donation program which would collect funds based on energy usage. 3. Terminate the suspended PAG Full Needs program for all customers. 4. Terminate the suspended PAG Full Needs program for residential customers on Rate Schedule E-1-G, but reinstate the Full Needs program for commercial customers so as to meet their needs for this option. 1. Automatic Enrollment in PAG Gas Staff does not recommend this alternative for several reasons. Automatically enrolling customers who voluntarily signed up for one program into another program poses policy issues, and administrative and communication challenges. Customers who enrolled in PAG did so in order to receive renewable energy and to reduce or eliminate GHG emissions associated with their electric usage. Although participating in a program that reduces GHG emissions associated with gas usage is certainly related, automatic enrollment fails to offer the level of customer choice that CPAU feels is appropriate. Further, if the City were to automatically enroll customers in the PAG Gas program, which is slated to begin in July 2014, new staff resources would need to be allocated to facilitate this process, since automatic enrollment would need to include an opt-out mechanism. Given the lack of resources and other workload priorities, implementing this alternative would cause a delay in the launching of the PAG Gas program. 2. Automatic Enrollment in Solar Donation Programs As part of implementing a Local Solar Plan, staff is developing new programs, including a Solar Donation Program, to be launched in July 2015. One mechanism to fund such a program could be voluntary donations on participants’ Utilities bills. However, even if such a donation program were developed, staff would not recommend that participants on the suspended PAG program be automatically enrolled in the new program for the same reasons as described City of Palo Alto Page 4 above. In addition, continuation of the suspension for another year could cause confusion with the launch in July 2014 of the PAG Gas program. 3. Terminate the PAG Full Needs program for All Customers This alternative involves repealing the PAG Full Needs option for all customers and taking all participants off the currently suspended PAG Full Needs program. This alternative requires little administrative effort and gives former participants the greatest flexibility in deciding if and how they would like to support renewable resources in the future. The PAG brand can still potentially be used for other sustainability efforts, and will be used for marketing the new PAG Gas program. However, this alternative does not provide commercial customers the convenient option of selecting the Full Needs option to meet their corporate sustainability goals. 4. Terminate the PAG Full Needs program for Residential Customers, but reinstate the Full Needs Option for Commercial Customers This alternative involves repealing the PAG Full Needs rate option only for residential customers on Rate Schedule E-1-G. The Full Needs option1 would be reinstated for commercial customers since some of those customers requested that this option be made available. Recommendation Staff recommends alternative 4. Recently staff has gotten feedback from commercial customers who want an option where they can simply elect to supply 100% of their electric use with renewable resources rather than purchasing renewable energy in “Blocks”. In the interest of responsive customer service, staff recommends reinstating the requested option. The PAG Block Purchase option will also continue to be available to commercial customers. Commission Review and Recommendation The Utilities Advisory Commission (UAC) reviewed the staff proposal at its May 7, 2014 meeting. Commissioners asked several clarifying questions about how the accumulated net revenues for the Full Needs program are being dispensed with and whether automatically moving current PAG customers into PAG Gas was evaluated. Staff replied that Council approved a plan to return the accumulated funds and that automatic enrollment in the PAG Gas program was not advisable. The commission expressed that it was somewhat sad to see such a successful program end, but were happy that the PAG Gas program would be launched in July when the bill credits would be distributed. They also suggested retaining the successful PaloAltoGreen “brand” as much as possible for future use. The UAC voted unanimously (by a vote of 5 to 0 with Commissioners Chang and Hall absent) to recommend that Council terminate the suspended PAG Full Needs program for residential 1 Note that the Full Needs Option is called the “100% Renewable Option” on Rate Schedules E-2-G, E-4-G, E-7-G, and E-18-G. City of Palo Alto Page 5 customers and reinstate the suspended PAG Full Needs program for commercial customers. The draft notes from the UAC’s May 7, 2014 meeting are provided as Attachment D. Timeline Providing Council approves the termination of the PAG Full Needs option for residential customers on Rate Schedule E-1-G, staff will begin notifying participants. The Full Needs option for commercial customers would be reinstated effective July 1, 2014. At the same time, the PAG Gas program would be launched. Also, in July 2014, the bill credits for the PAG Full Needs program will be provided to eligible customers. The communication effort for the simultaneous activities for these programs is being closely coordinated. All residential participants of the suspended Full Needs program will be told that the Full Needs program is terminated, they will be thanked for their participation and will be told that they will be receiving a bill credit reflecting their contribution to the accumulated revenues associated with the Full Needs PAG program. At the same time, they will be encouraged to participate in the new PAG Gas program. Resource Impact At the time that Council suspended the PAG Full Needs option in September 2013, all revenues and expenses associated with the program ceased for the remainder of fiscal year (FY) 2014. No revenues and expenses associated with PAG Full Needs were included in the FY 2015 budget, however reinstatement of the PAG Full Needs program for commercial customers will not involve significant extra staff resources and will have little, if any, budget impact. Policy Implications Terminating the PAG Full Needs option for residential customers and reinstating it for commercial customers is consistent with the Council-approved 2011 Utilities Strategic Plan’s customer service and cost management objectives. Environmental Review Given that the electric supply portfolio is carbon neutral as of 2013, terminating the Full Needs option for CPAU residential customers will not increase GHG emissions associated with the City’s electric supply portfolio. To the extent that some commercial customers opt for the Full Needs part of the PAG program who previously might have contracted for less coverage, the reinstatement of the Full Needs option will increase support of wind and solar energy facilities in the state, further reducing global GHG emissions. Terminating the Full Needs portion of the PAG Program for residential customers does not meet the California Environmental Quality Act‘s (CEQA) definition of a “project” under California Public Resources Code Sec. 21065, thus no environmental review is required. In the alternative, this action is categorically exempt from CEQA under Section 15307 of the CEQA Guidelines, as an action taken by a regulatory agency for the protection of natural resources, City of Palo Alto Page 6 and under Section 15308, as an action taken by a regulatory agency for the protection of the environment. Attachments:  Attachment A: Resolution Terminating PAG Full Needs for Residents and Reinstating PAG Full Needs for Commercial Customers (PDF)  Attachment B: Rate Schedules E-2-G, E-4-G, E-7-G, and E-18-G in Redline/Strikeout Format (PDF)  Attachment C: Clean Rate Schedules E-2-G, E-4-G, E-7-G, and E-18-G (PDF)  Attachment D: Excerpted Draft UAC Minutes of 5-7-14 (PDF) * NOT YET APPROVED * ATTACHMENT A Resolution No. _________ Resolution of the Council of the City of Palo Alto Terminating PaloAltoGreen’s Full Needs Program for Residential Electric Customers and Reinstating the Full Needs Program for Commercial and Master- Metered Multi-Family Electric Customers by Repealing Rate Schedule E- 1-G and Amending Rate Schedules E-2-G, E-4-G, E-7-G and E-18-G R E C I T A L S A. In an effort to provide the City of Palo Alto Utilities (“City”) electric customers the option to voluntarily reduce greenhouse gas emissions associated with their electricity use, in 2003 the City launched the PaloAltoGreen Program. B. Prior to September 10, 2013, City electric customers could opt in to the PaloAltoGreen Program in two ways. The “Full Needs” option allowed customers to receive renewable energy equivalent to 100 percent of their needs in exchange for paying an additional 1.5 cents per kilowatt hour (“kWh”) assessed on their full load. The “Block Purchase” option allowed commercial customers and customers at master-metered multi-family facilities to receive renewable energy in blocks of 1,000 kWh at a fixed per-block rate of $15 per 1,000 kWh. C. Approximately 20 percent of the City’s electric utilities customers participated in PaloAltoGreen, representing approximately 8 percent of the City’s electric load and making the PaloAltoGreen Program one of the most successful green energy programs in the United States. D. In March 2011, the City unanimously approved the Long-term Electric Acquisition Plan (LEAP), a strategic planning document focused on how the City’s Utilities Department (CPAU) can successfully balance environmental and economic sustainability as it provides electric service to CPAU customers. LEAP was updated in April 2012 through Resolution 9241. As part of LEAP Climate Protection Strategy #5, staff was directed to evaluate PaloAltoGreen program design and recommend modifications, as appropriate, including constructing PaloAltoGreen to assist in meeting Renewable Portfolio Standard (“RPS”) goals. E. In March 2013, the City unanimously approved the Carbon Neutral Plan (Resolution 9322) directing staff to achieve carbon neutrality for the electric portfolio by 2013 through a combination of hydroelectric resources, long-term renewable resources and short-term renewable energy resources and/or renewable energy certificates (“RECs”). The Carbon Neutral Plan further directed staff to redesign PaloAltoGreen in the context of achieving carbon neutrality for the electric supply portfolio. F. The City’s increasing RPS and the adoption of the Carbon Neutral Plan made the PaloAltoGreen program less necessary for most customers who wish to eliminate the greenhouse gas emissions associated with their electric usage. G. On September 9, 2013, the City Council approved Resolution No. 9372 to suspend the PaloAltoGreen’s Full Needs Program for all electric customers and retain PaloAltoGreen’s Commercial Customer Block Purchase option, while reducing the Block Purchase Rate from $15 per 1,000 kWh to $2 per 1,000 kWh. 1 140513 jb 6053047 * NOT YET APPROVED * H. Through Resolution No. 9372, Utility Rate Schedule E-1-G (Residential Green Power Electric Service) was repealed effective September 10, 2013, until further action of the Council of the City of Palo Alto, and Utility Rate Schedules E-2-G, E-4-G, E-7-G, and E-18-G were amended to suspend the Full Needs option and reduce the Commercial Electric Block Rate from $15 per 1,000 kWh to $2 per 1,000 kWh. I. Since PaloAltoGreen’s Full Needs Program was suspended in September 2013, former Full Needs Program participants have neither paid for nor received additional renewable energy in the form of RECs to “green up” the greenhouse gas emissions associated with their electric usage. J. Commercial customers seeking to achieve and maintain Leadership in Energy and Environmental Design (LEED) certification and/or receive recognition from the Environmental Protection Agency’s Green Power Partnership Program have expressed a desire to continue to purchase renewable energy beyond that offered by the City’s standard electric portfolio. Some of these customers have indicated an interest in purchasing renewable energy or RECs equivalent to 100 percent of their electric usage, as opposed to purchasing a set quantity of blocks through the Commercial Customer Block option. K. On May 7, 2014, the Utilities Advisory Commission voted unanimously (by a vote of 5 to 0 with Commissioners Chang and Hall absent) to recommend that Council adopt a resolution terminating PaloAltoGreen’s Full Needs Program for Residential Electric Customers Effective July 1, 2014 and reinstating PaloAltoGreen’s Full Needs Program for Commercial and Master-Metered Multi-Family Electric Customers, by Repealing Rate Schedule E-1-G and Amending Rate Schedules E- 2-G, E-4-G, E-7-G, and E-18-G. The Council of the City of Palo Alto hereby RESOLVES as follows: SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-1-G (Residential Green Power Electric Service) is hereby repealed. SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-2-G (Small Commercial Green Power Electric Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule E-2-G, as amended, shall become effective July 1, 2014. SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-4-G (Medium Commercial Green Power Electric Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule E-4-G, as amended, shall become effective July 1, 2014. SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-7-G (Large Commercial Green Power Electric Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule E-7-G, as amended, shall become effective July 1, 2014. SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-18-G (Municipal Green Power Electric Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule E-18-G, as amended, shall become effective July 1, 2014. 2 140513 jb 6053047 * NOT YET APPROVED * SECTION 6. The Council finds that the adoption of this resolution repealing and amending PaloAltoGreen’s electric rates is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. I5273(a), because it does meet the definition of a “project” requiring environmental review. Given that the electric supply portfolio is carbon neutral as of 2013, terminating the Full Needs option for residential customers will not increase GHG emissions associated with the City’s electric supply portfolio. To the extent that some commercial customers opt for the Full Needs option through the PAG program who previously might have contracted for less coverage, the reinstatement of that option will increase support of wind and solar energy facilities in the state, and further reduce GHG emissions. In the alternative, terminating the Full Needs portion of the PAG Program for residential customers and reinstating the Full Needs option for commercial and master-metered multi-family customers is categorically exempt from CEQA under Section 15307 of the CEQA Guidelines, as an action taken by a regulatory agency for the protection of natural resources, and under Section 15308, as an action taken by a regulatory agency for the protection of the environment. 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 3 140513 jb 6053047 SMALL COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-2-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20143 Supersedes Sheet No E-2-G-1 dated 79-1-200913 Sheet No E-2-G-1 A. APPLICABILITY: This schedule applies to the following Customers receiving Electric Service from the City of Palo Alto Utilities under the Palo Alto Green Program: 1. Small commercial Customers receiving Nnon-Demand Metered electric service; for small commercial Customers 2. and Customers with accounts at Master-metered multi-family facilities receiving retail energy services from the City of Palo Alto Utilities under the Palo Alto Green Program. Palo Alto Green provides for either the purchase of enough renewable energy credits (RECs) to match 100% of the energy usage at the facility every month, or for the purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the production of renewable energy, increase the financial value of power from renewal sources, and create a transparent and sustainable market that encourages new development of wind and solar power. B. TERRITORY: This rate schedule applies everywhere the City of Palo Alto provides electric Electric serviceService. C. UNBUNDLED RATES: 1. 100% Renewable Option: Per kilowatt-hour (kWh) Commodity Distribution Public Benefits Palo Alto Green Charge Total Summer Period $0.08219 $0.05505 $0.00321 $0.0020 $0.14245 Winter Period 0.07406 0.04934 0.00321 0.0020 0.12861 1. The 100% Renewable/ Full Green option was suspended by City Council on 9-9-2013 2. 1000 kWh Bblock Purchase Ooption: Per kilowatt-hour (kWh) Commodity Distribution Public Benefits Total Summer Period $0.08219 $0.05505 $0.00321 $0.14045 Winter Period 0.07406 0.04934 0.00321 0.12661 SMALL COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-2-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20143 Supersedes Sheet No E-2-G-2 dated 79-1-200913 Sheet No E-2-G-2 Palo Alto Green Charge (per 1000 kWh block) $2.00 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. 2. Seasonal Rate Changes The Summer Period is effective May 1 to October 31 and the Winter Period is effective from November 1 to April 30. When the billing period includes use in both the Summer and Winter Periods, usage will be prorated based upon the number of days in each seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Palo Alto Green Program Description and Participation Palo Alto Green provides for either the purchase of enough renewable energy credits (RECs) to match 100% of the energy usage at the facility every month, or for the purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the production of renewable energy, increase the financial value of power from renewable sources, and create a transparent and sustainable market that encourages new development of wind and solar power. Customers choosing to participate shall fill out a Palo Alto Green Power Program application provided by the Customer Service Center. Customers may request at any time, in writing, a change to the number of blocks they wish to purchase under the Palo Alto Green Program. 4. Maximum Demand Meter Whenever the monthly use of energy has exceeded 8,000 kWh for three consecutive months, a maximum Demand Meter will be installed as promptly as is practicable and thereafter continued in service until the monthly use of energy has fallen below 6,000 SMALL COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-2-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20143 Supersedes Sheet No E-2-G-3 dated 79-1-200913 Sheet No E-2-G-3 kWh for twelve consecutive months, whereupon, at the option of the City, it may be removed. The maximum Demand in any month will be the maximum average power in kilowatts taken during any 15-minute interval in the month, provided that in case the load is intermittent or subject to violent fluctuations, the City may use a 5-minute interval. A thermal-type Demand Meter which does not reset after a definite time interval may be used at the City's option. The billing Demand to be used in computing charges under this schedule will be the actual maximum Demand in kilowatts for the current month. An exception is that the billing Demand for Customers with Thermal Energy Storage (TES) will be based upon the actual maximum Demand of such Customers between the hours of noon and 6 pm on weekdays. {End} MEDIUM COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-4-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20134 Supersedes Sheet No E-4-G-1 dated 29-510-2013 Sheet No E-4-G-1 A. APPLICABILITY: This schedule applies to Demand Metered Secondary Electric Service for Customers with a Maximum Demand below 1,000 kilowatts (kW) who receive power under the Palo Alto Green Program. This schedule applies to three-phase Electric Service and may include Service to Master- metered multi-family facilities or other facilities requiring Demand-Metered Services, as determined by the City. B. TERRITORY: The rate schedule applies everywhere the City of Palo Alto provides Electric Service. C. UNBUNDLED RATES: 1. 100% Renewable Option: Commodity Distribution Public Benefits Palo AltoGreen Charge Total Summer Period Demand Charge (per kW) $5.31 $15.23 $20.54 Energy Charge (per kWh) 0.06083 0.01767 0.00321 0.0020 0.08371 Winter Period Demand Charge (per kW) $4.80 $9.04 $13.84 Energy Charge (per kWh) 0.05281 0.01716 0.00321 0.0020 0.075181. The 100% Renewable/ Full Green option was suspended by City Council on 9-9-2013 2. 1000 kWh block Block Purchase Ooption: Commodity Distribution Public Benefits Total Summer Period Demand Charge (per kW) $5.31 $15.23 $20.54 Energy Charge (per kWh) 0.06083 0.01767 0.00321 0.08171 Palo Alto Green Charge (per 1000 kWh block) $2.00 Winter Period Demand Charge (per kW) $4.80 $9.04 $13.84 Energy Charge (per kWh) 0.05281 0.01716 0.00321 0.07318 MEDIUM COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-4-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20134 Supersedes Sheet No E-4-G-2 dated 29-510-2013 Sheet No E-4-G-2 Palo Alto Green Charge (per 1000 kWh block) $2.00 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges, and/or taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. 2. Seasonal Rate Changes The Summer Period is effective May 1 to October 31 and the Winter Period is effective from November 1 to April 30. When the billing period includes use both in the Summer and the Winter Periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Maximum Demand Meter Whenever the monthly use of energy has exceeded 8,000 kilowatt-hours for three consecutive months, a Maximum Demand Meter will be installed as promptly as is practicable and thereafter continued in Service until the monthly use of energy has dropped below 6,000 kilowatt-hours for twelve consecutive months, whereupon, at the option of the City, it may be removed. The Maximum Demand in any month will be the maximum average power in kilowatts taken during any 15-minute interval in the month, provided that in case the load is intermittent or subject to violent fluctuations, the City may use a 5-minute interval. A thermal-type Demand Meter, which does not reset after a definite time interval, may be used at the City's option. The Billing Demand to be used in computing charges under this schedule will be the actual Maximum Demand in kilowatts for the current month. An exception is that the Billing Demand for Customers with Thermal Energy Storage (TES) will be based upon the actual Maximum Demand of such Customers between the hours of noon and 6 PM on weekdays. 4. Power Factor MEDIUM COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-4-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20134 Supersedes Sheet No E-4-G-3 dated 29-510-2013 Sheet No E-4-G-3 For new or existing Customers whose Demand is expected to exceed or has exceeded 300 kilowatts for three consecutive months, the City has the option of installing applicable Metering to calculate a Power Factor. The City may remove such Metering from the Service of a Customer whose Demand has dropped below 200 kilowatts for four consecutive months. When such Metering is installed, the monthly Electric bill will include a “Power Factor Adjustment”, if applicable. The adjustment will be applied to a Customer’s bill prior to the computation of any primary voltage discount. The Power Factor Adjustment is applied by increasing the total energy and Demand charges for any month by 0.25 percent or (1/4) for each one percent (1%) that the monthly Power Factor of the Customer’s load was less than 95%. The monthly Power Factor is the average Power Factor based on the ratio of kilowatt-hours to kilovolt-ampere hours consumed during the month. Where time-of-day Metering is installed, the monthly Power Factor shall be the Power Factor coincident with the Customer's Maximum Demand. 5. Changing Rate Schedules Customers may request a rate schedule change at any time to any applicable full-service rate schedule as is applicable to their kilowatt-Demand and kilowatt-hour usage profile. 6. Palo Alto Green Program Description and Participation Customers choosing to participate shall fill out a Palo Alto Green Power Program application provided by the Customer Service Center. Customers may request at any time, in writing, a change to the number of blocks they wish to purchase under the Palo Alto Green Program. Palo Alto Green provides for either the purchase of enough renewable energy credits (RECs) to match 100% of the energy usage at the facility every month, or for the purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the production of renewable energy, increase the financial value of power from renewal sources, and creates a transparent and sustainable market that encourages new development of wind and solar. Customers choosing to participate shall fill out a Palo Alto Green Power Program application provided by the Customer Service Center. Customers may request at any time, in writing, a change to the number of blocks they wish to purchase under the Palo Alto Green Program. MEDIUM COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-4-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20134 Supersedes Sheet No E-4-G-4 dated 29-510-2013 Sheet No E-4-G-4 7. Primary Voltage Discount Where delivery is made at the same voltage as that of the line from which the Service is supplied, a discount of 2.5 percent for available line voltages above 2 kilovolts will be allowed provided the City is not required to supply Service at a particular line voltage where it has, or will install, ample facilities for supplying at another voltage equally or better suited to the Customer's electrical requirements. The City retains the right to change its line voltage at any time after providing reasonable advance notice to any Customer receiving a discount hereunder and affected by such change. The Customer then has the option to change the system so as to receive Service at the new line voltage or to accept Service (without voltage discount) through transformers to be supplied by the City subject to a maximum kilovolt-ampere size limitation. 8. Standby Charge a. Applicability: The standby charge, subject to the exemptions in subsection D(8)(e), applies to Customers that have a non-utility generation source interconnected on the Customer’s side of the City’s revenue Meter and that occasionally require backup power from the City due to non-operation of the non-utility generation source. b. Standby Charges: Commodity Distribution TotalStandby Charge (per kW of Reserved Capacity) Summer Period $0.69 $15.23 $15.92 Winter Period $0.63 $9.04 $9.67 c. Meters: A separate Meter is required for each non-utility generation source. d. Calculation of Maximum Demand Credit: (1) In the event the Customer’s Maximum Demand (as defined in Section D.3) occurs when one or more of the non-utility generators on the Customer’s side of the City’s revenue Meter are not operating, the Maximum Demand will be reduced by the sum of the Maximum Generation of those non-utility generators, but in no event MEDIUM COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-4-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20134 Supersedes Sheet No E-4-G-5 dated 29-510-2013 Sheet No E-4-G-5 shall the Customer’s Maximum Demand be reduced below zero. (2) If the non-utility generation source does not operate for an entire billing cycle, the standby charge does not apply and the Customer shall not receive the Maximum Demand credit described in this Section. e. Exemptions: (1) The standby charge shall not apply to backup generators designed to operate only in the event of an interruption in utility Service and which are not used to offset Customer electricity purchases. (2) The standby charge shall not apply if the Customer meets the definition of an “Eligible Customer-generator” as defined in California Public Utilities Code Section 2827(b)(4), as amended. (3) The applicability of these exemptions shall be determined at the discretion of the Utilities Director. {End} LARGE COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20134 Supersedes Sheet No E-7-G-1 dated 29-510-2013 Sheet No E-7-G-1 A. APPLICABILITY: This schedule applies to Demand Metered Service for large commercial Customers who choose Service under the Palo Alto Green Program. A Customer may qualify for this rate schedule if the Customer’s Maximum Demand is at least 1,000KW per month per site, who have sustained this Demand level at least 3 consecutive months during the last twelve months B. TERRITORY: The rate schedule applies everywhere the City of Palo Alto provides Electric Service. C. UNBUNDLED RATES: 1. 100% Renewable Option: Commodity Distribution Public Benefits Palo Alto Green Charge Total Summer Period Demand Charge ( per kW) $6.42 $12.55 $18.97 Energy Charge (per kWh) 0.05562 0.01825 0.00321 0.0020 0.07908 Winter Period Demand Charge (per kW) $5.50 $6.04 $11.54 Energy Charge (per kWh) 0.04990 0.01898 0.00321 0.0020 0.07409 The 100% Renewable/ Full Green option was suspended by City Council on 9-09-2013 1.2. 1000 kWh block oBlock Purchase Option: Commodity Distribution Public Benefits Total Summer Period Demand Charge (per kW) $6.42 $12.55 $18.97 Energy Charge (per kWh) 0.05562 0.01825 0.00321 0.078708 Palo Alto Green Charge (per 1000 kWh block) $2.00 Winter Period Demand Charge (per kW) $5.50 $6.04 $11.54 Energy Charge (per kWh) 0.04990 0.01898 0.00321 0.07209 LARGE COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20134 Supersedes Sheet No E-7-G-2 dated 29-510-2013 Sheet No E-7-G-2 Palo Alto Green Charge (per 1000 kWh block) $2.00 D. SPECIAL NOTES: 1. Calculation of Charges The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. 2. Seasonal Rate Changes The Summer Period is effective May 1 to October 31 and the Winter Period is effective from November 1 to April 30. When the billing period includes use both in the Summer and the Winter Periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Maximum Demand Meter Whenever the monthly use of energy has exceeded 8,000 kilowatt-hours for three consecutive months, a Maximum Demand Meter will be installed as promptly as is practicable and thereafter continued in Service until the monthly use of energy has dropped below 6,000 kilowatt-hours for twelve consecutive months, whereupon, at the option of the City, it may be removed. The Maximum Demand in any month will be the maximum average power in kilowatts taken during any 15-minute interval in the month, provided that in case the load is intermittent or subject to violent fluctuations, the City may use a 5-minute interval. A thermal-type Demand Meter which does not reset after a definite time interval may be used at the City's option. The Billing Demand to be used in computing charges under this schedule will be the actual Maximum Demand in kilowatts for the current month. An exception is that the Billing Demand for Customers with Thermal Energy Storage (TES) will be based upon the actual Maximum Demand of such Customers between the hours of noon and 6 PM on weekdays. LARGE COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20134 Supersedes Sheet No E-7-G-3 dated 29-510-2013 Sheet No E-7-G-3 4. Request for Service Qualifying Customers may request Service under this schedule for more than one Account or one Meter if the Accounts are at one site. A site shall be defined as one or more utility Accounts serving contiguous parcels of land with no intervening public right-of-ways (e.g. streets) and have a common billing address. 5. Power Factor For new or existing Customers whose Demand is expected to exceed or has exceeded 300 kilowatts for three consecutive months, the City has the option of installing applicable Metering to calculate a Power Factor. The City may remove such Metering from the Service of a Customer whose Demand has dropped below 200 kilowatts for four consecutive months. When such Metering is installed, the monthly Electric bill shall include a “Power Factor Adjustment”, if applicable. The adjustment shall be applied to a Customer’s bill prior to the computation of any primary voltage discount. The Power Factor Adjustment is applied by increasing the total energy and Demand charges for any month by 0.25 percent or (1/4) for each one percent (1%) that the monthly Power Factor of the Customer’s load was less than 95%. The monthly Power Factor is the average Power Factor based on the ratio of kilowatt-hours to kilovolt-ampere hours consumed during the month. Where time-of-day Metering is installed, the monthly Power Factor shall be the Power Factor coincident with the Customer's Maximum Demand. 6. Changing Rate Schedules Customers may request a rate schedule change at any time to any applicable full service rate schedule as is applicable to their kilowatt-Demand and kilowatt-hour usage profile 7. Palo Alto Green Program Description and Participation Palo Alto Green provides for either the purchase of enough renewable energy credits (RECs) to match 100% of the energy usage at the facility every month, or for the purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the production of renewable energy, increase the financial value of power from renewal sources, and creates a transparent and sustainable market that encourages new development of wind and solar. LARGE COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20134 Supersedes Sheet No E-7-G-4 dated 29-510-2013 Sheet No E-7-G-4 Customers choosing to participate shall fill out a Palo Alto Green Power Program application provided by the Customer Service Center. Customers may request at any time, in writing, a change to the number of blocks they wish to purchase under the Palo Alto Green Program. Palo Alto Green provides for either the purchase of enough renewable energy credits (RECs) to match 100% of the energy usage at the facility every month, or for the purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the production of renewable energy, increase the financial value of power from renewal sources, and creates a transparent and sustainable market that encourages new development of wind and solar. 8. Primary Voltage Discount Where delivery is made at the same voltage as that of the line from which the Service is supplied, a discount of 2 1/2 percent for available line voltages above 2 kilovolts will be allowed; provided, however, the City is not required to supply Service at a qualified line voltage where it has, or will install, ample facilities for supplying at another voltage equally or better suited to the Customer's Electrical requirements. The City retains the right to change its line voltage at any time after providing reasonable advance notice to any Customer receiving a discount hereunder and affected by such change. The Customer then has the option to change the system so as to receive Service at the new line voltage or to accept Service (without voltage discount) through transformers to be supplied by the City subject to a maximum kilovolt-ampere size limitation. 9. Standby Charge a. Applicability: The standby charge, subject to the exemptions in subsection D(9)(e), applies to Customers that have a non-utility generation source interconnected on the Customer’s side of the City’s revenue Meter and that occasionally require backup power from the City due to non-operation of the non-utility generation source. b. Standby Charges: Commodity Distribution TotalStandby Charge (per kW of Reserved Capacity) Summer Period $0.84 $12.55 $13.39 Winter Period $0.72 $6.04 $6.76 LARGE COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20134 Supersedes Sheet No E-7-G-5 dated 29-510-2013 Sheet No E-7-G-5 c. Meters: A separate Meter is required for each non-utility generation source. d. Calculation of Maximum Demand Credit: (1) In the event the Customer’s Maximum Demand (as defined in Section D.3) occurs when one or more of the non-utility generators on the Customer’s side of the City’s revenue Meter are not operating, the Maximum Demand will be reduced by the sum of the Maximum Generation of those non-utility generators, but in no event shall the Customer’s Maximum Demand be reduced below zero. (2) If the non-utility generation source does not operate for an entire billing cycle, the standby charge does not apply and the Customer shall not receive the Maximum Demand credit described in this Section. e. Exemptions: (1) The standby charge shall not apply to backup generators designed to operate only in the event of an interruption in utility Service and which are not used to offset Customer electricity purchases. (2) The standby charge shall not apply if the Customer meets the definition of an “Eligible Customer-generator” as defined in California Public Utilities Code Section 2827(b)(4), as amended. (3) The applicability of these exemptions shall be determined at the discretion of the Utilities Director. {End} MUNICIPAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-18-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20134 Supersedes Sheet No E-18-G-1 dated 79-10-200913 Sheet No E-18-G-1 A. APPLICABILITY: This schedule applies to service for buildings and facilities owned and/or operated by the City of Palo Alto receiving power under the Palo Alto Green Program. B. TERRITORY: This rate schedule applies anywhere the City of Palo Alto provides electric Electric serviceService. C. UNBUNDLED RATES: 1. 100% Renewable Option: Per kilowatt-hour (kWh) Commodity Distribution Public Benefits Palo Alto Green Charge Total Summer Period $0.06686 $0.04472 $0.00321 $0.0020 $0.11679 Winter Period 0.05369 0.03559 0.00321 0.0020 0.9449 The 100% Renewable/ Full Green option was suspended by City Council on 9-9-2013 1.2. 1000 kWh block Block Purchase Ooption: Per kilowatt-hour (kWh) Commodity Distribution Public Benefits Total Summer Period $0.06686 $0.04472 $0.00321 $0.11479 Winter Period 0.05369 0.03559 0.00321 0.09249 Palo Alto Green Charge (per 1000 kWh block) $2.00 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate cost components as calculated under Section C. MUNICIPAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-18-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20134 Supersedes Sheet No E-18-G-2 dated 79-10-200913 Sheet No E-18-G-2 2. Seasonal Rate Changes The Summer Period is effective May 1 to October 31 and the Winter Period is effective from November 1 to April 30. When the billing period includes use both in the Summer and the Winter periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Power Factor For new or existing Customers whose Demand is expected to exceed or has exceeded 300 kilowatts for three consecutive months, the City has the option to install applicable Metering to calculate a power factor. The City may remove such Metering from the service of a Customer whose Demand has been below 200 kilowatts for four consecutive months. When such Metering is installed, the monthly electric bill shall include a “power factor penalty”, if applicable. The penalty adjustment shall be applied to a Customer’s bill prior to the computation of any primary voltage discount. The power factor penalty is applied by increasing the total energy and Demand charges for any month by 0.25 percent (0.25%) for each one percent (1%) that the monthly power factor of the Customer’s load was less than 95%. The monthly power factor is the average power factor based on the ratio of kilowatt hours to kilovolt-ampere hours consumed during the month. Where time-of-day Metering is installed, the monthly power factor shall be the power factor coincident with the Customer's maximum Demand. 4. Palo Alto Green Program Description and Participation Palo Alto Green provides for either the purchase of enough renewable energy credits (RECs) to match 100% of the energy usage at the facility every month, or for the purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the production of renewable energy, increase the financial value of power from renewal sources, and create a transparent and sustainable market that encourages new development of wind and solar power. Customers choosing to participate shall fill out a Palo Alto Green Power Program application provided by the Customer Service Center. Customers may request at any time, in writing, a change to the number of blocks they wish to purchase under the Palo Alto Green Program. Palo Alto Green provides for either the purchase of enough renewable energy credits (RECs) to match 100% of the energy usage at the facility every month, or for the purchase of 1000 MUNICIPAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-18-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 97-10-20134 Supersedes Sheet No E-18-G-3 dated 79-10-200913 Sheet No E-18-G-3 kilowatt-hour (kWh) blocks. These REC purchases support the production of renewable energy, increase the financial value of power from renewal sources, and create a transparent and sustainable market that encourages new development of wind and solar power. 5. Primary Voltage Discount Where delivery is made at the same voltage as that of the line from which the service is supplied, a discount of 2 1/2 percent for available line voltages above 2 kilovolts will be allowed provided the City is not required to supply service at a particular line voltage where it has, or will install, ample facilities for supplying at another voltage equally or better suited to the Customer's electrical requirements. The City retains the right to change its line voltage at any time after providing reasonable advance notice to any Customer receiving a discount hereunder and affected by such change. The Customer then has the option to change his system so as to receive service at the new line voltage or to accept service (without voltage discount) through transformers to be supplied by the City subject to a maximum kilovolt-ampere (kVA) size limitation. {End} SMALL COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-2-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-2-G-1 dated 9-1-2013 Sheet No E-2-G-1 A. APPLICABILITY: This schedule applies to the following Customers receiving Electric Service from the City of Palo Alto Utilities under the Palo Alto Green Program: 1. Small commercial Customers receiving Non-Demand Metered electric service; and 2. Customers with accounts at Master-metered multi-family facilities. B. TERRITORY: This rate schedule applies everywhere the City of Palo Alto provides Electric Service. C. UNBUNDLED RATES: 1. 100% Renewable Option: Per kilowatt-hour (kWh) Commodity Distribution Public Benefits Palo Alto Green Charge Total Summer Period $0.08219 $0.05505 $0.00321 $0.0020 $0.14245 Winter Period 0.07406 0.04934 0.00321 0.0020 0.12861 2. 1000 kWh Block Purchase Option: Per kilowatt-hour (kWh) Commodity Distribution Public Benefits Total Summer Period $0.08219 $0.05505 $0.00321 $0.14045 Winter Period 0.07406 0.04934 0.00321 0.12661 Palo Alto Green Charge (per 1000 kWh block) $2.00 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. SMALL COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-2-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-2-G-2 dated 9-1-2013 Sheet No E-2-G-2 2. Seasonal Rate Changes The Summer Period is effective May 1 to October 31 and the Winter Period is effective from November 1 to April 30. When the billing period includes use in both the Summer and Winter Periods, usage will be prorated based upon the number of days in each seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Palo Alto Green Program Description and Participation Palo Alto Green provides for either the purchase of enough renewable energy credits (RECs) to match 100% of the energy usage at the facility every month, or for the purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the production of renewable energy, increase the financial value of power from renewable sources, and create a transparent and sustainable market that encourages new development of wind and solar power. Customers choosing to participate shall fill out a Palo Alto Green Power Program application provided by the Customer Service Center. Customers may request at any time, in writing, a change to the number of blocks they wish to purchase under the Palo Alto Green Program. 4. Maximum Demand Meter Whenever the monthly use of energy has exceeded 8,000 kWh for three consecutive months, a maximum Demand Meter will be installed as promptly as is practicable and thereafter continued in service until the monthly use of energy has fallen below 6,000 kWh for twelve consecutive months, whereupon, at the option of the City, it may be removed. The maximum Demand in any month will be the maximum average power in kilowatts taken during any 15-minute interval in the month, provided that in case the load is intermittent or subject to violent fluctuations, the City may use a 5-minute interval. A thermal-type Demand Meter which does not reset after a definite time interval may be used at the City's option. The billing Demand to be used in computing charges under this schedule will be the actual maximum Demand in kilowatts for the current month. An exception is that the billing Demand for Customers with Thermal Energy Storage (TES) will be based upon SMALL COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-2-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-2-G-3 dated 9-1-2013 Sheet No E-2-G-3 the actual maximum Demand of such Customers between the hours of noon and 6 pm on weekdays. {End} MEDIUM COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-4-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-4-G-1 dated 9-10-2013 Sheet No E-4-G-1 A. APPLICABILITY: This schedule applies to Demand Metered Secondary Electric Service for Customers with a Maximum Demand below 1,000 kilowatts (kW) who receive power under the Palo Alto Green Program. This schedule applies to three-phase Electric Service and may include Service to Master- metered multi-family facilities or other facilities requiring Demand-Metered Services, as determined by the City. B. TERRITORY: The rate schedule applies everywhere the City of Palo Alto provides Electric Service. C. UNBUNDLED RATES: 1. 100% Renewable Option: Commodity Distribution Public Benefits Palo AltoGreen Charge Total Summer Period Demand Charge (per kW) $5.31 $15.23 $20.54 Energy Charge (per kWh) 0.06083 0.01767 0.00321 0.0020 0.08371 Winter Period Demand Charge (per kW) $4.80 $9.04 $13.84 Energy Charge (per kWh) 0.05281 0.01716 0.00321 0.0020 0.07518 2. 1000 kWh Block Purchase Option: Commodity Distribution Public Benefits Total Summer Period Demand Charge (per kW) $5.31 $15.23 $20.54 Energy Charge (per kWh) 0.06083 0.01767 0.00321 0.08171 Palo Alto Green Charge (per 1000 kWh block) $2.00 Winter Period Demand Charge (per kW) $4.80 $9.04 $13.84 Energy Charge (per kWh) 0.05281 0.01716 0.00321 0.07318 Palo Alto Green Charge (per 1000 kWh block) $2.00 MEDIUM COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-4-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-4-G-2 dated 9-10-2013 Sheet No E-4-G-2 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges, and/or taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. 2. Seasonal Rate Changes The Summer Period is effective May 1 to October 31 and the Winter Period is effective from November 1 to April 30. When the billing period includes use both in the Summer and the Winter Periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Maximum Demand Meter Whenever the monthly use of energy has exceeded 8,000 kilowatt-hours for three consecutive months, a Maximum Demand Meter will be installed as promptly as is practicable and thereafter continued in Service until the monthly use of energy has dropped below 6,000 kilowatt-hours for twelve consecutive months, whereupon, at the option of the City, it may be removed. The Maximum Demand in any month will be the maximum average power in kilowatts taken during any 15-minute interval in the month, provided that in case the load is intermittent or subject to violent fluctuations, the City may use a 5-minute interval. A thermal-type Demand Meter, which does not reset after a definite time interval, may be used at the City's option. The Billing Demand to be used in computing charges under this schedule will be the actual Maximum Demand in kilowatts for the current month. An exception is that the Billing Demand for Customers with Thermal Energy Storage (TES) will be based upon the actual Maximum Demand of such Customers between the hours of noon and 6 PM on weekdays. 4. Power Factor MEDIUM COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-4-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-4-G-3 dated 9-10-2013 Sheet No E-4-G-3 For new or existing Customers whose Demand is expected to exceed or has exceeded 300 kilowatts for three consecutive months, the City has the option of installing applicable Metering to calculate a Power Factor. The City may remove such Metering from the Service of a Customer whose Demand has dropped below 200 kilowatts for four consecutive months. When such Metering is installed, the monthly Electric bill will include a “Power Factor Adjustment”, if applicable. The adjustment will be applied to a Customer’s bill prior to the computation of any primary voltage discount. The Power Factor Adjustment is applied by increasing the total energy and Demand charges for any month by 0.25 percent or (1/4) for each one percent (1%) that the monthly Power Factor of the Customer’s load was less than 95%. The monthly Power Factor is the average Power Factor based on the ratio of kilowatt-hours to kilovolt-ampere hours consumed during the month. Where time-of-day Metering is installed, the monthly Power Factor shall be the Power Factor coincident with the Customer's Maximum Demand. 5. Changing Rate Schedules Customers may request a rate schedule change at any time to any applicable full-service rate schedule as is applicable to their kilowatt-Demand and kilowatt-hour usage profile. 6. Palo Alto Green Program Description and Participation Palo Alto Green provides for either the purchase of enough renewable energy credits (RECs) to match 100% of the energy usage at the facility every month, or for the purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the production of renewable energy, increase the financial value of power from renewal sources, and creates a transparent and sustainable market that encourages new development of wind and solar. Customers choosing to participate shall fill out a Palo Alto Green Power Program application provided by the Customer Service Center. Customers may request at any time, in writing, a change to the number of blocks they wish to purchase under the Palo Alto Green Program. 7. Primary Voltage Discount Where delivery is made at the same voltage as that of the line from which the Service is supplied, a discount of 2.5 percent for available line voltages above 2 kilovolts will be allowed provided the City is not required to supply Service at a particular line voltage where MEDIUM COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-4-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-4-G-4 dated 9-10-2013 Sheet No E-4-G-4 it has, or will install, ample facilities for supplying at another voltage equally or better suited to the Customer's electrical requirements. The City retains the right to change its line voltage at any time after providing reasonable advance notice to any Customer receiving a discount hereunder and affected by such change. The Customer then has the option to change the system so as to receive Service at the new line voltage or to accept Service (without voltage discount) through transformers to be supplied by the City subject to a maximum kilovolt-ampere size limitation. 8. Standby Charge a. Applicability: The standby charge, subject to the exemptions in subsection D(8)(e), applies to Customers that have a non-utility generation source interconnected on the Customer’s side of the City’s revenue Meter and that occasionally require backup power from the City due to non-operation of the non-utility generation source. b. Standby Charges: Commodity Distribution TotalStandby Charge (per kW of Reserved Capacity) Summer Period $0.69 $15.23 $15.92 Winter Period $0.63 $9.04 $9.67 c. Meters: A separate Meter is required for each non-utility generation source. d. Calculation of Maximum Demand Credit: (1) In the event the Customer’s Maximum Demand (as defined in Section D.3) occurs when one or more of the non-utility generators on the Customer’s side of the City’s revenue Meter are not operating, the Maximum Demand will be reduced by the sum of the Maximum Generation of those non-utility generators, but in no event shall the Customer’s Maximum Demand be reduced below zero. (2) If the non-utility generation source does not operate for an entire billing cycle, the standby charge does not apply and the Customer shall not receive the Maximum Demand credit described in this Section. e. Exemptions: MEDIUM COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-4-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-4-G-5 dated 9-10-2013 Sheet No E-4-G-5 (1) The standby charge shall not apply to backup generators designed to operate only in the event of an interruption in utility Service and which are not used to offset Customer electricity purchases. (2) The standby charge shall not apply if the Customer meets the definition of an “Eligible Customer-generator” as defined in California Public Utilities Code Section 2827(b)(4), as amended. (3) The applicability of these exemptions shall be determined at the discretion of the Utilities Director. {End} LARGE COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-7-G-1 dated 9-10-2013 Sheet No E-7-G-1 A. APPLICABILITY: This schedule applies to Demand Metered Service for large commercial Customers who choose Service under the Palo Alto Green Program. A Customer may qualify for this rate schedule if the Customer’s Maximum Demand is at least 1,000KW per month per site, who have sustained this Demand level at least 3 consecutive months during the last twelve months B. TERRITORY: The rate schedule applies everywhere the City of Palo Alto provides Electric Service. C. UNBUNDLED RATES: 1. 100% Renewable Option: Commodity Distribution Public Benefits Palo AltoGreen Charge Total Summer Period Demand Charge ( per kW) $6.42 $12.55 $18.97 Energy Charge (per kWh) 0.05562 0.01825 0.00321 0.0020 0.07908 Winter Period Demand Charge (per kW) $5.50 $6.04 $11.54 Energy Charge (per kWh) 0.04990 0.01898 0.00321 0.0020 0.07409 2. 1000 kWh Block Purchase Option: Commodity Distribution Public Benefits Total Summer Period Demand Charge (per kW) $6.42 $12.55 $18.97 Energy Charge (per kWh) 0.05562 0.01825 0.00321 0.07708 Palo Alto Green Charge (per 1000 kWh block) $2.00 Winter Period Demand Charge (per kW) $5.50 $6.04 $11.54 Energy Charge (per kWh) 0.04990 0.01898 0.00321 0.07209 Palo Alto Green Charge (per 1000 kWh block) $2.00 LARGE COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-7-G-2 dated 9-10-2013 Sheet No E-7-G-2 D. SPECIAL NOTES: 1. Calculation of Charges The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. 2. Seasonal Rate Changes The Summer Period is effective May 1 to October 31 and the Winter Period is effective from November 1 to April 30. When the billing period includes use both in the Summer and the Winter Periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Maximum Demand Meter Whenever the monthly use of energy has exceeded 8,000 kilowatt-hours for three consecutive months, a Maximum Demand Meter will be installed as promptly as is practicable and thereafter continued in Service until the monthly use of energy has dropped below 6,000 kilowatt-hours for twelve consecutive months, whereupon, at the option of the City, it may be removed. The Maximum Demand in any month will be the maximum average power in kilowatts taken during any 15-minute interval in the month, provided that in case the load is intermittent or subject to violent fluctuations, the City may use a 5-minute interval. A thermal-type Demand Meter which does not reset after a definite time interval may be used at the City's option. The Billing Demand to be used in computing charges under this schedule will be the actual Maximum Demand in kilowatts for the current month. An exception is that the Billing Demand for Customers with Thermal Energy Storage (TES) will be based upon the actual Maximum Demand of such Customers between the hours of noon and 6 PM on weekdays. LARGE COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-7-G-3 dated 9-10-2013 Sheet No E-7-G-3 4. Request for Service Qualifying Customers may request Service under this schedule for more than one Account or one Meter if the Accounts are at one site. A site shall be defined as one or more utility Accounts serving contiguous parcels of land with no intervening public right-of-ways (e.g. streets) and have a common billing address. 5. Power Factor For new or existing Customers whose Demand is expected to exceed or has exceeded 300 kilowatts for three consecutive months, the City has the option of installing applicable Metering to calculate a Power Factor. The City may remove such Metering from the Service of a Customer whose Demand has dropped below 200 kilowatts for four consecutive months. When such Metering is installed, the monthly Electric bill shall include a “Power Factor Adjustment”, if applicable. The adjustment shall be applied to a Customer’s bill prior to the computation of any primary voltage discount. The Power Factor Adjustment is applied by increasing the total energy and Demand charges for any month by 0.25 percent or (1/4) for each one percent (1%) that the monthly Power Factor of the Customer’s load was less than 95%. The monthly Power Factor is the average Power Factor based on the ratio of kilowatt-hours to kilovolt-ampere hours consumed during the month. Where time-of-day Metering is installed, the monthly Power Factor shall be the Power Factor coincident with the Customer's Maximum Demand. 6. Changing Rate Schedules Customers may request a rate schedule change at any time to any applicable full service rate schedule as is applicable to their kilowatt-Demand and kilowatt-hour usage profile 7. Palo Alto Green Program Description and Participation Palo Alto Green provides for either the purchase of enough renewable energy credits (RECs) to match 100% of the energy usage at the facility every month, or for the purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the production of renewable energy, increase the financial value of power from renewal sources, and creates a transparent and sustainable market that encourages new development of wind and solar. LARGE COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-7-G-4 dated 9-10-2013 Sheet No E-7-G-4 Customers choosing to participate shall fill out a Palo Alto Green Power Program application provided by the Customer Service Center. Customers may request at any time, in writing, a change to the number of blocks they wish to purchase under the Palo Alto Green Program. 8. Primary Voltage Discount Where delivery is made at the same voltage as that of the line from which the Service is supplied, a discount of 2 1/2 percent for available line voltages above 2 kilovolts will be allowed; provided, however, the City is not required to supply Service at a qualified line voltage where it has, or will install, ample facilities for supplying at another voltage equally or better suited to the Customer's Electrical requirements. The City retains the right to change its line voltage at any time after providing reasonable advance notice to any Customer receiving a discount hereunder and affected by such change. The Customer then has the option to change the system so as to receive Service at the new line voltage or to accept Service (without voltage discount) through transformers to be supplied by the City subject to a maximum kilovolt-ampere size limitation. 9. Standby Charge a. Applicability: The standby charge, subject to the exemptions in subsection D(9)(e), applies to Customers that have a non-utility generation source interconnected on the Customer’s side of the City’s revenue Meter and that occasionally require backup power from the City due to non-operation of the non-utility generation source. b. Standby Charges: Commodity Distribution TotalStandby Charge (per kW of Reserved Capacity) Summer Period $0.84 $12.55 $13.39 Winter Period $0.72 $6.04 $6.76 c. Meters: A separate Meter is required for each non-utility generation source. d. Calculation of Maximum Demand Credit: (1) In the event the Customer’s Maximum Demand (as defined in Section D.3) LARGE COMMERCIAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-7-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-7-G-5 dated 9-10-2013 Sheet No E-7-G-5 occurs when one or more of the non-utility generators on the Customer’s side of the City’s revenue Meter are not operating, the Maximum Demand will be reduced by the sum of the Maximum Generation of those non-utility generators, but in no event shall the Customer’s Maximum Demand be reduced below zero. (2) If the non-utility generation source does not operate for an entire billing cycle, the standby charge does not apply and the Customer shall not receive the Maximum Demand credit described in this Section. e. Exemptions: (1) The standby charge shall not apply to backup generators designed to operate only in the event of an interruption in utility Service and which are not used to offset Customer electricity purchases. (2) The standby charge shall not apply if the Customer meets the definition of an “Eligible Customer-generator” as defined in California Public Utilities Code Section 2827(b)(4), as amended. (3) The applicability of these exemptions shall be determined at the discretion of the Utilities Director. {End} MUNICIPAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-18-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-18-G-1 dated 9-10-2013 Sheet No E-18-G-1 A. APPLICABILITY: This schedule applies to service for buildings and facilities owned and/or operated by the City of Palo Alto receiving power under the Palo Alto Green Program. B. TERRITORY: This rate schedule applies anywhere the City of Palo Alto provides Electric Service. C. UNBUNDLED RATES: 1. 100% Renewable Option: Per kilowatt-hour (kWh) Commodity Distribution Public Benefits Palo Alto Green Charge Total Summer Period $0.06686 $0.04472 $0.00321 $0.0020 $0.11679 Winter Period 0.05369 0.03559 0.00321 0.0020 0.9449 2. 1000 kWh Block Purchase Option: Per kilowatt-hour (kWh) Commodity Distribution Public Benefits Total Summer Period $0.06686 $0.04472 $0.00321 $0.11479 Winter Period 0.05369 0.03559 0.00321 0.09249 Palo Alto Green Charge (per 1000 kWh block) $2.00 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate cost components as calculated under Section C. 2. Seasonal Rate Changes The Summer Period is effective May 1 to October 31 and the Winter Period is effective from MUNICIPAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-18-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-18-G-2 dated 9-10-2013 Sheet No E-18-G-2 November 1 to April 30. When the billing period includes use both in the Summer and the Winter periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates therein. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Power Factor For new or existing Customers whose Demand is expected to exceed or has exceeded 300 kilowatts for three consecutive months, the City has the option to install applicable Metering to calculate a power factor. The City may remove such Metering from the service of a Customer whose Demand has been below 200 kilowatts for four consecutive months. When such Metering is installed, the monthly electric bill shall include a “power factor penalty”, if applicable. The penalty adjustment shall be applied to a Customer’s bill prior to the computation of any primary voltage discount. The power factor penalty is applied by increasing the total energy and Demand charges for any month by 0.25 percent (0.25%) for each one percent (1%) that the monthly power factor of the Customer’s load was less than 95%. The monthly power factor is the average power factor based on the ratio of kilowatt hours to kilovolt-ampere hours consumed during the month. Where time-of-day Metering is installed, the monthly power factor shall be the power factor coincident with the Customer's maximum Demand. 4. Palo Alto Green Program Description and Participation Palo Alto Green provides for either the purchase of enough renewable energy credits (RECs) to match 100% of the energy usage at the facility every month, or for the purchase of 1000 kilowatt-hour (kWh) blocks. These REC purchases support the production of renewable energy, increase the financial value of power from renewal sources, and create a transparent and sustainable market that encourages new development of wind and solar power. Customers choosing to participate shall fill out a Palo Alto Green Power Program application provided by the Customer Service Center. Customers may request at any time, in writing, a change to the number of blocks they wish to purchase under the Palo Alto Green Program. MUNICIPAL GREEN POWER ELECTRIC SERVICE UTILITY RATE SCHEDULE E-18-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No E-18-G-3 dated 9-10-2013 Sheet No E-18-G-3 5. Primary Voltage Discount Where delivery is made at the same voltage as that of the line from which the service is supplied, a discount of 2 1/2 percent for available line voltages above 2 kilovolts will be allowed provided the City is not required to supply service at a particular line voltage where it has, or will install, ample facilities for supplying at another voltage equally or better suited to the Customer's electrical requirements. The City retains the right to change its line voltage at any time after providing reasonable advance notice to any Customer receiving a discount hereunder and affected by such change. The Customer then has the option to change his system so as to receive service at the new line voltage or to accept service (without voltage discount) through transformers to be supplied by the City subject to a maximum kilovolt-ampere (kVA) size limitation. {End} ATTACHMENT D EXCERPTED DRAFT MINUTES OF THE MAY 7, 2014 UTILITIES ADVISORY COMMISSION SPECIAL MEETING ITEM 2: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt a Resolution Terminating PaloAltoGreen’s Full Needs Program for Residential Electric Customers and Reinstating the Full Needs Program for Commercial and Master-Metered Multi-Family Electric Customers by Repealing Rate Schedule E-1-G and Amending Rate Schedules E-2-G, E-4-G, E-7-G, and E-18-G Assistant Director Jane Ratchye explained that staff now recommends terminating the suspended Full Needs part of the voluntary PaloAltoGreen (PAG) program for residents. She said that Council suspended the Full Needs program for both residential and commercial customers in September 2013 primarily because the electric supply portfolio is 100% carbon neutral as of 2013. Ratchye said that the Block program for commercial customers is still active and has customers who value it for attaining and maintaining LEED certification and for recognition under the EPA’s Green Power Partnership program. Ratchye noted that Council approved the PAG Gas program to be launched in July so that customers can reduce or eliminate the greenhouse gas emissions associated with their use of natural gas. She said the remaining question is what to do with suspended Full Needs program. Staff recommends terminating the Full Needs program for residential customers, but reactivating it for commercial customers since staff has heard they like the 100% green option. Commissioner Eglash asked if there were any unspent funds to deal with. Ratchye replied that, consistent with UAC recommendation, Council approved the plan to return those funds for the Full Needs program. She added that the communications are being coordinated so that PAG participants will receive a letter thanking them for participation, advising them that the program has been terminated and to expect a bill credit for accumulated net revenue, and, finally, inviting them to participate in the new PAG Gas program being launched in July. Commissioner Eglash asked if there was no good alternative to returning the money such as redirecting the unspent funds elsewhere. Ratchye replied that these alternatives were evaluated, but that redirecting the funds to another use would have been administratively burdensome. Ratchye added that staff also evaluated redesigning the program to one that would collect donations for solar systems to be installed on local schools and non-profits and a solar donation program is part of the recently adopted Local Solar Plan, but that program was delayed. Commissioner Waldfogel asked if we had made an affirmative decision to not simply move the funds and customers into a successor program such as PAG Gas. Ratchye replied that, on advice from the City Attorney, it was not a viable option. Commissioner Waldfogel stated that the City of Palo Alto Utilities (CPAU) should retain the PaloAltoGreen brand as an umbrella brand for all of CPAU’s sustainability programs. Chair Cook agreed with his colleagues and noted that it is a bittersweet moment to shut down a very successful program. He added that he is glad that the PAG Gas program is launching in July and sees it as a good follow-on program. ACTION: Commissioner Eglash made a motion that the UAC recommend that Council approve staff’s recommendation to terminate the suspended PaloAltoGreen Full Needs program for residential customers and reinstate the suspended PaloAltoGreen Full Needs program for commercial customers by repealing and amending the appropriate rate schedules. Commissioner Melton seconded the motion. The motion carried unanimously (5-0) with Commissioners Chang and Hall absent. City of Palo Alto (ID # 4745) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/9/2014 City of Palo Alto Page 1 Summary Title: Open Space Trail Contract Title: Approval of a Three-Year Contract with Northwest Woodlands Services, Inc. in the Amount not to Exceed $552,950 for Trail Maintenance in the Baylands Nature Preserve, Pearson-Arastradero Preserve, Foothills Park and Grounds Maintenance in Utility Reservoir Sites From: City Manager Lead Department: Community Services Recommendation Staff recommends that Council: 1. Approve, and authorize the City Manager or his designee to execute, the attached three-year contract with Northwest Woodland Services, Inc. in the amount of $552,950, subject to the annual appropriation of funds, for trail maintenance in the Baylands Nature Preserve, Pearson-Arastradero Preserve, Foothills Park and ground maintenance in utility reservoir sites (Attachment A). 2. Authorize the City Manager or his designee to negotiate and execute one or more change orders to the contract with Northwest Woodland Services, Inc. for related, additional but unforeseen work which may develop during the project, the total value of which shall not exceed $46,295. Discussion The work to be performed under this three-year contract (Attachment A) is for annual and one-time maintenance of trails in Foothills Park, the Pearson-Arastradero Preserve and the Baylands Nature Preserve. Annual work includes grooming of trail treads, improving and cleaning drainages and clearing vegetation growing into the trail corridor. One-time maintenance includes adding aggregate to select trails in the Pearson-Arastradero Preserve to improve drainage and stability in wet weather and inspecting and repairing foot bridges in Foothills Park. The scope also includes a day rate with equipment for unscheduled but ongoing grounds maintenance in Open Space. This includes tree clearing and brush chipping, picnic and campground maintenance (replacing tables, BBQ’s, retaining walls and City of Palo Alto Page 2 erosion structures, repairing fencing and other structures) and maintaining trail treads in the Baylands Nature Preserve. There is also a day rate with equipment for the City of Palo Alto Utilities Department used for the maintenance of road and trail surfaces, roadside drainage ditches and culverts in the Pearson-Arastradero Preserve and Foothills Park that provide access to utility sites and for ground maintenance in Hale Well and Mayfield Reservoir Sites. Summary of Bid Process On March 26, an RFQ was sent out to 3 Bidders for Open Trail Maintenance:  Northwest Woodland Services, Inc.  Loral Landscaping, Inc.  Gachina Landscape Management A non-mandatory bidders conference was held on April 1, 2014. No bidders attended the conference. There were no questions submitted from the bidders. Bids were due April 8, 2014. Northwest Woodland Services submitted the only bid. An award was made to Northwest Woodland Services in the amount of $552,950. Resource Impact Funds for the Open Space portion of this project ($509,245) are programmed in the Proposed Capital Budget in project OS-0001 (Open Space Trails and Amenities). Funds for the Utilities Water, Gas, and Wastewater portion ($90,000) are programmed in the Proposed Capital Budget in project GS-11002 (Gas System Improvement). Expenditures over the three years of the contract are subject to the annual appropriation of funds. Policy Implications This recommendation does not represent any change to existing City policies. Improvement of approved trails is consistent with Comprehensive Plan Policy N-1: Manage existing public open space areas and encourage the management of private open space areas in a manner that meets habitat protection goals, public safety concerns, and low impact recreation needs. All work proposed in this contract is consistent with the adopted Arastradero Preserve Trails Management Plan, the Foothills Park Trail Maintenance Plan and the Foothills Wildland Fire Management Plan. Environmental Review This award of contract is not a project as defined by the California Environmental Quality Act (CEQA); and therefore is not subject to CEQA requirements or environmental review. Attachments:  Attachment A - Trail Contract Signed 2014 (PDF)  Attachment B Bid Summary RFP153910 Open Space Maintenance (DOCX) Attachment B Bid Summary RFP153910 Open Space Maintenance On March 26, an RFQ was sent out to 3 Bidders for Open Trail Maintenance:  Northwest Woodland Services  Loral Landscaping, Inc.  Gachina Landscape Management A non-mandatory Bidders Conference was held on April 1, 2014 in which no Bidders attended. We also did not receive any questions from the Bidders. Bids were due April 8, 2014 in which we received only 1 bid from Northwest Woodland Services. An award was made to Northwest Woodland Services in the amount of $552,950. City of Palo Alto (ID # 4750) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/9/2014 City of Palo Alto Page 1 Summary Title: Park Improvement Ordinance for Hopkins Park Title: Parks and Recreation Commission Recommendation to Adopt a Park Improvement Ordinance for Hopkins Park From: City Manager Lead Department: Community Services Recommendation Staff recommends that Council adopt a Park Improvement Ordinance (Attachment A) for the construction of improvements at Hopkins Park (Capital Improvement Project (G- 11000). Background Hopkins Park is 12.4 acres and is largely undeveloped. Located along San Francisquito Creek, the park consists of three separate developed areas along Palo Alto Avenue (at Webster Street, Cowper Street and Middlefield Road). The existing park amenities consist of two park destination signs, a park trail, two grass meadow areas, a picnic table, and three benches. The Hopkins Park CIP approved $95,000 in 2013 for repairing some of the existing park features. It included replacing the old picnic tables and benches, and replacing the outdated galvanized irrigation system. The year-to-date remaining balance is $82,500. Discussion A public meeting was held on Tuesday August 26th, 2013. Draft plans for the park improvements were shared with the community participants. The design received general support from all participants. There were numerous comments and suggestions from the meeting participants that included trail size and configuration, plant species recommendations, and adding interpretive signs that address the history of the park, ecology of the creek, or other topics of interest. Staff discussed the issue of adding a dog off-leash area to the park. The meeting participants did not think a dog off-leash area would be appropriate at this site. Also, due to the 100’ set back requirements from the creek, a dog off-leash area is not possible at this site. One meeting participant, who City of Palo Alto Page 2 works with Acterra (the City’s stewardship partner at the Pearson Arastradero Preserve) on restoration projects, submitted a list of suggested plant species to staff to consider for the project. The contract landscape architect incorporated the input from the public meeting and revised the park design accordingly (Attachment B). The park is improved by adding new irrigation, landscaping, interpretive signs (not yet designed), trails, and new benches, picnic tables, and trash/recycling cans. On February 25, 2014, the Commission reviewed and supported the plans for the park improvements. The Commission commented that retaining the grass was good because it is visually appealing, and that the project will be a tremendous improvement to the park. On April 22, 2014, the Commission voted 7:0 to recommend that Council adopt the Park Improvement Ordinance. The Commission didn’t have any further questions or comments about this project. Resource Impact The Hopkins Park CIP (PG-11000) has $95,000 allocated for the improvements, with a year-to-date remaining balance of $82,500. Policy Implications This project is consistent with the City’s Comprehensive Plan: POLICY L-7: Evaluate changes in land use in the context of regional needs, overall City welfare and objectives, as well as the desires of surrounding neighborhoods. POLICY L-61: Promote the use of community and cultural centers, libraries, local schools, parks, and other community facilities as gathering places. Ensure that they are inviting and safe places that can deliver a variety of community services during both daytime and evening hours. PROGRAM L-70: Study the potential for landscaping or park furniture that would promote neighborhood parks as outdoor gathering places and centers of neighborhood activity. Environmental Review The adoption of the ordinance is not a project and is not subject to environmental review under provisions of the California Environmental Quality Act (CEQA). Attachments:  Attachment A- Park Improvement Ordinance (PDF) City of Palo Alto Page 3  Attachment B- Hopkins Design (PDF) SITE MAP DATE: SCALE: DRAWN: 850 STANNAGE AVE. #4 ALBANY, CA 94706 (510) 525-1913 eddie@echaudesign.comwww.echaudesign.com EDDIE CHAU DESIGN REV:DESCRIPTION AND DATE: HO P K I N S P A R K L A N D S C A P E I M P R O V E M E N T S Pa l o A l t o , C A H O P K I N S P A R K LA N D S C A P E I M P R O V E M E N T S Construction Bid Set Prepared for City of Palo Alto, CA Open Space, Parks, and Golf Division Dec. 13, 2013 SHEET INDEX: L0.0 COVER SHEET L1.0 SITE 1 - DEMOLITION AND REMOVAL PLAN L1.1 SITE 1 - LAYOUT AND MATERIALS PLAN L1.2 SITE 1 - IRRIGATION PLAN L1.3 SITE 1 - PLANTING PLAN L2.0 SITE 2 - DEMOLITION AND REMOVAL PLAN L2.1 SITE 2 - LAYOUT AND MATERIALS PLAN L2.2 SITE 2 - IRRIGATION PLAN L2.3 SITE 2 - PLANTING PLAN L3.0 SITE 3 - DEMOLITION AND REMOVAL PLAN L3.1 SITE 3 - LAYOUT AND MATERIALS PLAN L3.2 SITE 3 - IRRIGATION PLAN L3.3 SITE 3 - PLANTING PLAN L4.0 IRRIGATION DETAILS L4.1 IRRIGATION DETAILS AND NOTES L5.0 CONSTRUCTION DETAILS CONTACT: JEANETTE SERNA, Program Assistant Open Space, Parks and Golf Division (650)496-5916 jeanette.serna@cityofpaloalto.org EDDIE CHAU, Landscape Architect Eddie Chau Design (510)525-1913 eddie@echaudesign.com IVY MUNION, Irrigation Designer ISC Group, Inc. (925)371-8230 ivy@isc-groupinc.com CO V E R S H E E T L0.0 SITE #3 SITE #1 SITE #2 SITE 1 - Palo Alto Ave. and Cowper St. SITE 2 - Palo Alto Ave. and Webster St. SITE 3 - Palo Alto Ave. and Middlefield Rd. Construction Bid Set 12/13/13 DATE: SCALE: DRAWN: 850 STANNAGE AVE. #4ALBANY, CA 94706 (510) 525-1913eddie@echaudesign.com www.echaudesign.com EDDIE CHAU DESIGN REV:DESCRIPTION AND DATE: HO P K I N S P A R K L A N D S C A P E I M P R O V E M E N T S SI T E # 1 Pa l o A l t o A v e . a n d C o w p e r S t . Pa l o A l t o , C A SI T E # 1 DE M O L I T I O N A N D RE M O V A L P L A N L1.0 PA L O A L T O A V E N U E BEN C H B E N C H REMOVE EX. TRASH REMOVE EX. BENCH AND CONCRETE PAD REMOVE EX. BENCH REMOVE EX. CONCRETE RELOCATE EX. PARK SIGN EX. SIGN TO REMAIN EX. TREES TO REMAIN EX. TURF TO REMAIN. TRENCH IN EXISTING TURF TO INSTALL NEW IRRIGATION. SEE NOTES. DEMOLITION NOTES: 1.FIELD VERIFY WITH LANDSCAPE ARCHITECT EXTENT OF ALL ITEMS TO BE REMOVED OR RELOCATED. 2.TRENCH IN EXISTING TURF TO INSTALL NEW IRRIGATION. FILL AND COMPACT TRENCHES AFTER INSTALLATION AND SEED OVER TRENCH LINES. DO NOT REMOVE EXISTING TURF. 3.REMOVE ALL DEMOLITION DEBRIS, CONCRETE, WOOD, AND OTHER DELETERIOUS MATERIALS FROM SITE. DISPOSE MATERIAL AT AN APPROVED RECYCLING FACILITIES. 4.PROTECT ALL TREES AND PLANT MATERIALS NOT TO BE REMOVED FROM SITE. REPLACE ALL DAMAGED PLANT MATERIAL AT CONTRACTOR COST. 5.FINE GRADE AND RAKE SOIL SMOOTH AFTER DEMOLITION. 6.PROTECT TREES BY ERECTING TEMPORARY CHAIN LINK FENCE BARRIER AROUND THEM. BARRIER SHALL REMAIN IN PLACE FOR THE DURATION OF CONTRUCTION. THE AREA WITHIN DRIPLINE OF TREES SHALL NOT BE USED FOR STAGING OF MATERIALS OF ANY KIND. COMPACTION OF ROOT SYSTEM WILL DAMAGE TREES. 7.VERIFY LOCATION OF UTILITY LINES PRIOR TO CONSTRUCTION. 8. CLEARLY MARK PEDESTRIAN TRAFFIC ZONES AND CLOSED CONSTRUCTION AREAS WITH BARRIERS, FENCING, CONSTRUCTION TAPE, AND/OR SIGNAGE. REVIEW CONSTRUCTION CIRCULATION WITH CITY AND LANDSCAPE ARCH. REMOVE EX. IRRIG. HEADS 64 64 65 65 6 5 6 5 6 5 65 WM JP FEET 0 8' 10' 20' N Construction Bid Set 12/13/13 1/8" = 1'-0" DATE: SCALE: DRAWN: 850 STANNAGE AVE. #4ALBANY, CA 94706 (510) 525-1913eddie@echaudesign.com www.echaudesign.com EDDIE CHAU DESIGN REV:DESCRIPTION AND DATE: HO P K I N S P A R K L A N D S C A P E I M P R O V E M E N T S SI T E # 1 Pa l o A l t o A v e . a n d C o w p e r S t . Pa l o A l t o , C A SI T E # 1 LA Y O U T P L A N L1.1 PA L O A L T O A V E N U E 10 ' O .C . TY P . 44'- 6 " 41'- 3 " 37'- 9 " 33'- 2 " 26'- 0 "15'- 0 " 19'- 8 " 30'- 3 " 36'- 0 " 41'- 2 " 45'- 5 " 48'- 9 " 4'- 6 " 13'-0" 1 0 ' - 0 " 26'-0" 7'-0" 4'- 9 " 12'- 6 " 13'- 3 " 13 ' - 0 " 9'-9" 4'-10" 7 ' - 0 " 14 ' - 7 " 6'-0" 6'-0 " 14'- 0 " 1 4 ' - 0 " 6'-0 " 5 ' - 0 " 5'-0" 8' - 9 " 14 ' - 0 " 5'- 0 " BASELINE AT CURB LAWN P.A. P.A. P.A. P.A. PRODUCT LIST: TYPE QTY.MANUFACTURER MODEL PICNIC TABLE 2 DUMOR, INC.100-60PL-S-2, SURFACE MOUNTED, RECYCLED PLASTIC, GREY COLOR BENCH 2 DUMOR, INC.11-60PL-S2, SURFACE MOUNTED, RECYCLED PLASTIC, GREY COLOR RECEPTACLE 1 DUMOR, INC.148-32-FTO, BLACK AND PT-DOME TOP WITH SELF CLOSING DOOR, BLACK 1 DUMOR, INC.148-32-FTO, BLUE AND PT-DOME TOP WITH SELF CLOSING DOOR, BLUE DECOMPOSED GRANITE LYNGSO GARDEN TAN DECOMPOSED GRANITE OR APPROVED EQUAL W/STABILIZER MATERIALS SCORE JOINTS @ 6' O.C. AT CONCRETE EDGES DECOMPOSED GRANITE PATH W/ CONCRETE EDGE CONCRETE PAD (TYP) CONCRETE PAD (TYP) STEEL EDGE DECOMPOSED GRANITE PATH W/ CONCRETE EDGE (SEE BID ALT. NOTE) FUTURE INTERPRETIVE PANEL PICNIC TABLE PICNIC TABLE BENCH BENCH P.A. P.A. - PLANTING AREA LAYOUT NOTES: 1.ALL DIMENSIONS ARE TO FINISH FACE OF WALL OR SIMILAR UNLESS OTHERWISE NOTED. 2.REPORT DISCREPANCIES BETWEEN LANDSCAPE LAYOUT PLAN AND ACTUAL FIELD CONDITIONS TO LANDSCAPE ARCHITECT IMMEDIATELY. WORK DIRECTLY WITH LANDSCAPE ARCHITECT AND/OR CITY TO RESOLVE DISCREPANCIES OR QUESTIONS. 3.STAKE OR MARK LAYOUT PRIOR TO CONSTRUCTION AND VERIFY WITH CITY OR LANDSCAPE ARCHITECT. 4.PROTECT TREES, STRUCTURES, PAVING OR OTHER SITE FEATURES FROM DAMAGE. CONTRACTOR TO REPAIR OR REPLACE DAMAGE AT HIS COST. 5.PERFORM ALL WORK NECESSARY AND REQUIRED FOR THE PROJECT SHOWN ON DRAWINGS. 6.UNDERGROUND UTILITIES: VERIFY UTILITY LOCATIONS AND PROCEED WITH CAUTION. CONTRACTOR IS RESPONSIBLE FOR DAMAGE TO UNDERGROUND UTILITIES AND SHALL REPLACE OR REPAIR SAME AT HIS EXPENSE. 7.CODE COMPLIANCE: ALL WORK SHALL COMPLY WITH ALL APPLICABLE BUILDING CODES AND TRADE STANDARDS WHICH GOVER THIS WORK. THIS INCLUDES BUT IS NOT LIMITED TO LOCAL AND STATE MECHANICAL, ELECTRICAL, PLUMBING, AND BUILDING CODES AND REGULATIONS. 8.PROVIDE CERTIFICATE TO CITY SHOWING PROOF OF WORKMANS COMPENSATION INSURANCE FOR ALL EMPLOYEES ON THIS JOB PRIOR TO WORK. 9. MAINTAIN SITE IN A CLEAN AND SAFE CONDITION. TRASH, LITTER, AND DEBRIS MUST BE CLEANED UP DAILY. 10.COORDINATE ALL DELIVERIES, STAGING, HAULING, AND SEQUENCING OF WORK WITH SUBS AS REQUIRED TO AVOID CONFLICTS OF ACCESS, ROAD USE, AND GENERAL DISRUUPTION TO NEIGHBORHOOD DURING CONSTRUCTION. FLAGMEN MAY BE REQUIRED TO INSURE NEIGHBORS' ACCESS TO ROADS DURING CONSTRUCTION. 1 L5 4 L5 1 L5 2 L5 2 L5 3 L5 3 L5 8'-6" BID ALTERNATE: BID CONCRETE EDGERS AT DECOMPOSED GRANITE PATHS AS STEEL EDGER. RELOCATED SIGN RECYCLING AND TRASH RECEPTACLES 39'- 0 " WM JP FEET 0 8' 10' 20' N Construction Bid Set 12/13/13 1/8" =1'-0" DATE: SCALE: DRAWN: 850 STANNAGE AVE. #4 ALBANY, CA 94706 (510) 525-1913 eddie@echaudesign.comwww.echaudesign.com EDDIE CHAU DESIGN REV:DESCRIPTION AND DATE: HO P K I N S P A R K L A N D S C A P E I M P R O V E M E N T S SI T E # 1 Pa l o A l t o A v e . a n d C o w p e r S t . Pa l o A l t o , C A SI T E # 1 PL A N T I N G P L A N L1.3FEET 0 8' 10' 20' N PA L O A L T O A V E N U E WM JP LAWN 3 CERCIS CANADENSIS 'FOREST PANSY' EX. CEDARS 6 PRUNUS ILICIFOLIA 31 MUHLENBERGIA RIGENS 15 ARCTOSTAPHYLOS 'HOWARD McMINN' 6 PRUNUS ILICIFOLIA 17 ARCTOSTAPHYLOS 'HOWARD McMINN' 10 HESPERALOE PARVIFLORA PLANT LIST: QTY.SIZE WATER USE BOTANIC NAME COMMON NAME TREES: 3 24" B VERY LOW CERCIS CANADENSIS 'FOREST PANSY'EASTERN REDBUD SHRUBS AND GRASSES: 32 1 GAL VERY LOW ARCTOSTAPHYLOS 'HOWARD McMINN'MANZANITA 10 1 GAL LOW HESPERALOE PARVIFLORA RED YUCCA 31 1 GAL LOW MUHLENBERGIA RIGENS DEER GRASS 12 5 GAL LOW PRUNUS ILICIFOLIA HOLLYLEAF CHERRY PLANT NOTES: 1.LAYOUT IN ADVANCE ALL PLANT MATERIAL PER PLANTING PLAN. LANDSCAPE ARCHITECT TO APPROVE LOCATION OF PLANT MATERIAL PRIOR TO PLANTING. CONTRACTOR TO NOTIFY LANDSCAPE ARCHITECT A MINIMUM OF ONE WEEK IN ADVANCE OF PLANTING DATES. 2.AMENDMENT: DIESTEL STRUCTURED COMPOST AND VERMI GREEN COMPOST 50/50 RATIO, 3.75 CUBIC FEET PER 1000 SF. OR APPROVED EQUAL. SOURCE: LYNGSO GARDEN MATERIALS, REDWOOD CITY (650)364-1730 3.PLANTING HOLES FOR TREES AND SHRUBS TO BE TWICE ROOTBALL WIDTH AND EQUAL TO ROOTBALL DEPTH. ALL 15G AND LARGER PLANTS TO BE PLANTED ON NATIVE SOIL, EXCEPT WHERE PLANTING IN FILL. 4.FOR TOP OF ROOTBALLS: PLANT ALL 1 AND 5 GALLON CANS 1/2" ABOVE THE GROUND. PLANT ALL 15 GALLONS, 2" ABOVE THE GROUND. PLANT ALL 24" BOX TREES AND LARGER , 4" ABOVE THE GROUND. BRING MULCH AND SOIL AMENDMENT AROUND AND OVER EXPOSED ROOT BALL. KEEP MULCH AWAY FROM BASE OF TRUNKS AND STEMS. 5.FERTILIZER: FERTILIZE WITH AGRIFORM TABLETS (20-10-5). USE ONE TABLET FOR ONE GALLON, THREE TABLETS FOR FIVE GALLON, FIVE TABLETS FOR 15 GALLON, EIGHT TABLETS FOR 24" BOX, TWELVE TABLETS FOR 36" BOX PLANTS. (GLACIAL ROCK DUST MAY BE SUBSTITUTED FOR FERTILIZER TABLETS. APPLY AT SUPPLIER RECOMMENDED RATES.) 6.MULCH: APPLY 1/4" FIR CHIP MULCH OVER ALL PLANTING AREAS TO A DEPTH OF TWO INCHES AND THREE INCHES AT TREES. PULL BARK 6" AWAY FROM BASE OF ALL PLANTS. 7.LANDSCAPE CONTRACTOR WILL REPLACE ALL DEAD PLANTS AND PLANTS NOT IN VIGOROUS CONDITION AS DIRECTED BY LANDSCAPE ARCHITECT. PLANTS USED FOR REPLACEMENT SHALL BE OF THE SAME KIND AND SIZE SPECIFIED AND PLANTED AS SPECIFIED ABOVE. ALL REPLACEMENT OF PLANTS SHALL BE DONE BEFORE FINAL ACCEPTANCE. 8.PROVIDE PLANT GUARANTEE PROPOSAL WITH BID. (MINIMUM 6 MONTHS FOR PLANTS UP TO 15 GALLON, 1 YEAR FOR 24" BOX OR LARGER. Construction Bid Set 12/13/13 1/8" =1'-0" DATE: SCALE: DRAWN: 850 STANNAGE AVE. #4ALBANY, CA 94706 (510) 525-1913eddie@echaudesign.com www.echaudesign.com EDDIE CHAU DESIGN REV:DESCRIPTION AND DATE: HO P K I N S P A R K L A N D S C A P E I M P R O V E M E N T S SI T E # 2 Pa l o A l t o A v e . a n d W e b s t e r S t . Pa l o A l t o , C A DE M O L I T I O N A N D RE M O V A L P L A N L2.0 FEET 0 8' 10' 20' N PAL O AL T O AV E N U E WM 62 62 62 REMOVE EX. PALM (SEE BID ALT. NOTE) REMOVE EX. SHRUBS REMOVE EX. BENCH, TABLE, AND CONCRETE REMOVE EX. TRASH EX. HEDGE TO REMAIN EX. HEDGE TO REMAIN RELOCATE EX. SIGN DEMOLITION NOTES: 1.FIELD VERIFY WITH LANDSCAPE ARCHITECT EXTENT OF ALL ITEMS TO BE REMOVED OR RELOCATED. 2.TRENCH IN EXISTING TURF TO INSTALL NEW IRRIGATION. FILL AND COMPACT TRENCHES AFTER INSTALLATION AND SEED OVER TRENCH LINES. DO NOT REMOVE EXISTING TURF. 3.REMOVE ALL DEMOLITION DEBRIS, CONCRETE, WOOD, AND OTHER DELETERIOUS MATERIALS FROM SITE. DISPOSE MATERIAL AT AN APPROVED RECYCLING FACILITIES. 4.PROTECT ALL TREES AND PLANT MATERIALS NOT TO BE REMOVED FROM SITE. REPLACE ALL DAMAGED PLANT MATERIAL AT CONTRACTOR COST. 5.FINE GRADE AND RAKE SOIL SMOOTH AFTER DEMOLITION. 6.PROTECT TREES BY ERECTING TEMPORARY CHAIN LINK FENCE BARRIER AROUND THEM. BARRIER SHALL REMAIN IN PLACE FOR THE DURATION OF CONTRUCTION. THE AREA WITHIN DRIPLINE OF TREES SHALL NOT BE USED FOR STAGING OF MATERIALS OF ANY KIND. COMPACTION OF ROOT SYSTEM WILL DAMAGE TREES. 7.VERIFY LOCATION OF UTILITY LINES PRIOR TO CONSTRUCTION. 8. CLEARLY MARK PEDESTRIAN TRAFFIC ZONES AND CLOSED CONSTRUCTION AREAS WITH BARRIERS, FENCING, CONSTRUCTION TAPE, AND/OR SIGNAGE. REVIEW CONSTRUCTION CIRCULATION WITH CITY AND LANDSCAPE ARCH. EX. UTILITY LINES, CABLES, AND POST TO REMAIN EX. TREES TO REMAIN (TYP) EX. LAWN TO REMAIN BID ALTERNATE : BID RELOCATION OF EXISTING PALM INSTEAD OF REMOVAL. EX. TREE TO REMAIN Construction Bid Set 12/13/13 1/8" = 1'-0" DATE: SCALE: DRAWN: 850 STANNAGE AVE. #4ALBANY, CA 94706 (510) 525-1913eddie@echaudesign.com www.echaudesign.com EDDIE CHAU DESIGN REV:DESCRIPTION AND DATE: HO P K I N S P A R K L A N D S C A P E I M P R O V E M E N T S SI T E # 2 Pa l o A l t o A v e . a n d W e b s t e r S t . Pa l o A l t o , C A LA Y O U T P L A N L2.1 FEET 0 8' 10' 20' N PAL O AL T O AV E N U E WM 11'- 0 " EX. SIGN RELOCATED SIGN MULCH PRODUCT LIST: TYPE QTY.MANUFACTURER MODEL PICNIC TABLE 1 DUMOR, INC.100-60PL-S-2, SURFACE MOUNTED, RECYCLED PLASTIC, GREY COLOR BENCH 1 DUMOR, INC.11-60PL-S2, SURFACE MOUNTED, RECYCLED PLASTIC, GREY COLOR RECEPTACLE 1 DUMOR, INC.148-32-FTO, BLACK AND PT-DOME TOP WITH SELF CLOSING DOOR, BLACK 1 DUMOR, INC.148-32-FTO, BLUE AND PT-DOME TOP WITH SELF CLOSING DOOR, BLUE DECOMPOSED GRANITE LYNGSO GARDEN TAN DECOMPOSED GRANITE OR APPROVED EQUAL W/STABILIZER MATERIALS 10'- 0 " 10'- 0 " REFERENCE POINT - C.L. OF UTILITY POLE 8'-9" 11' - 8 " 10 ' - 0 " 10 ' - 0 " 10 ' - 0 " 10' - 0 " 1'-4 " 9'- 8 " 14'-0 " 11 ' - 8 " 20'-3" 35'-3" 2 7 ' - 6 " 41'-0" 45'-5" 48'-4" 44'-10" 15'-7" 12 ' - 0 " 6'-0" 6' - 0 " 6 ' - 0 " 10'-3" 7'-0" 4' - 3 " 2'-0 " BASE LINE - ALIGNED W/ FRONT EDGE OF CURB TRASH AND RECYLCING RECEPTACLES GRASS P.A. P.A. P.A. P.A. SCORE JOINTS @ 6' O.C. AT CONCRETE EDGES DECOMPOSED GRANITE PATH W/ CONC. EDGE (SEE BID ALT. NOTE) CONCRETE PAD 6" CONCRETE EDGE (SEE BID ALT. NOTE) FUTURE INTERPRETIVE PANEL P.A. - PLANTING AREA LAYOUT NOTES: 1.ALL DIMENSIONS ARE TO FINISH FACE OF WALL OR SIMILAR UNLESS OTHERWISE NOTED. 2.REPORT DISCREPANCIES BETWEEN LANDSCAPE LAYOUT PLAN AND ACTUAL FIELD CONDITIONS TO LANDSCAPE ARCHITECT IMMEDIATELY. WORK DIRECTLY WITH LANDSCAPE ARCHITECT AND/OR CITY TO RESOLVE DISCREPANCIES OR QUESTIONS. 3.STAKE OR MARK LAYOUT PRIOR TO CONSTRUCTION AND VERIFY WITH CITY OR LANDSCAPE ARCHITECT. 4.PROTECT TREES, STRUCTURES, PAVING OR OTHER SITE FEATURES FROM DAMAGE. CONTRACTOR TO REPAIR OR REPLACE DAMAGE AT HIS COST. 5.PERFORM ALL WORK NECESSARY AND REQUIRED FOR THE PROJECT SHOWN ON DRAWINGS. 6.UNDERGROUND UTILITIES: VERIFY UTILITY LOCATIONS AND PROCEED WITH CAUTION. CONTRACTOR IS RESPONSIBLE FOR DAMAGE TO UNDERGROUND UTILITIES AND SHALL REPLACE OR REPAIR SAME AT HIS EXPENSE. 7.CODE COMPLIANCE: ALL WORK SHALL COMPLY WITH ALL APPLICABLE BUILDING CODES AND TRADE STANDARDS WHICH GOVER THIS WORK. THIS INCLUDES BUT IS NOT LIMITED TO LOCAL AND STATE MECHANICAL, ELECTRICAL, PLUMBING, AND BUILDING CODES AND REGULATIONS. 8.PROVIDE CERTIFICATE TO CITY SHOWING PROOF OF WORKMANS COMPENSATION INSURANCE FOR ALL EMPLOYEES ON THIS JOB PRIOR TO WORK. 9. MAINTAIN SITE IN A CLEAN AND SAFE CONDITION. TRASH, LITTER, AND DEBRIS MUST BE CLEANED UP DAILY. 10.COORDINATE ALL DELIVERIES, STAGING, HAULING, AND SEQUENCING OF WORK WITH SUBS AS REQUIRED TO AVOID CONFLICTS OF ACCESS, ROAD USE, AND GENERAL DISRUUPTION TO NEIGHBORHOOD DURING CONSTRUCTION. FLAGMEN MAY BE REQUIRED TO INSURE NEIGHBORS' ACCESS TO ROADS DURING CONSTRUCTION. 1 L5 2 L5 PICNIC TABLE BENCH 3 L5 3 L5 EX. UTILITIES BID ALTERNATE: BID CONCRETE EDGERS AS STEEL EDGER Construction Bid Set 12/13/13 1/8" = 1'-0" DATE: SCALE: DRAWN: 850 STANNAGE AVE. #4ALBANY, CA 94706 (510) 525-1913eddie@echaudesign.comwww.echaudesign.com EDDIE CHAU DESIGN REV:DESCRIPTION AND DATE: HO P K I N S P A R K L A N D S C A P E I M P R O V E M E N T S SI T E # 2 Pa l o A l t o A v e . a n d W e b s t e r S t . Pa l o A l t o , C A PL A N T I N G P L A N L2.3 FEET 0 8' 10' 20' N PAL O AL T O AV E N U E WM 11'- 0 " 9 ARCTOSTAPHYLOS 'HOWARD McMINN' EX. HEDGES 14 MUHLENBERGIA RIGENS 6 MAHONIA AQUIFOLIUM 'COMPACTA' 2 CEANOTHUS G.H. 'YANKEE POINT' 4 ERIGERON GLAUCA 12 MIMULUS GUTTATUS PLANT LIST: QTY.SIZE WATER USE BOTANIC NAME COMMON NAME TREES: 1 36" BOX LOW QUERCUS AGRIFOLIA COAST LIVE OAK SHRUBS AND GRASSES: 9 1 GAL VERY LOW ARCTOSTAPHYLOS 'HOWARD McMINN'MANZANITA 1 5 GAL LOW CEANOTHUS GRISEUS HORIZONTALIS CEANOTHUS 'YANKEE POINT' 4 1 GAL LOW ERIGERON GLAUCA SEASIDE DAISY 6 1 GAL MED MAHONIA AQUIFOIUM 'COMPACTA''COMPACT OREGON GRAPE HOLLY 12 1 GAL LOW MIMULUS GUTTATUS COMMON MONKEY FLOWER 14 1 GAL LOW MUHLENBERGIA RIGENS DEER GRASS LAWN MULCH PLANT NOTES: 1.LAYOUT IN ADVANCE ALL PLANT MATERIAL PER PLANTING PLAN. LANDSCAPE ARCHITECT TO APPROVE LOCATION OF PLANT MATERIAL PRIOR TO PLANTING. CONTRACTOR TO NOTIFY LANDSCAPE ARCHITECT A MINIMUM OF ONE WEEK IN ADVANCE OF PLANTING DATES. 2.AMENDMENT: DIESTEL STRUCTURED COMPOST AND VERMI GREEN COMPOST 50/50 RATIO, 3.75 CUBIC FEET PER 1000 SF. OR APPROVED EQUAL. SOURCE: LYNGSO GARDEN MATERIALS, REDWOOD CITY (650)364-1730 3.PLANTING HOLES FOR TREES AND SHRUBS TO BE TWICE ROOTBALL WIDTH AND EQUAL TO ROOTBALL DEPTH. ALL 15G AND LARGER PLANTS TO BE PLANTED ON NATIVE SOIL, EXCEPT WHERE PLANTING IN FILL. 4.FOR TOP OF ROOTBALLS: PLANT ALL 1 AND 5 GALLON CANS 1/2" ABOVE THE GROUND. PLANT ALL 15 GALLONS, 2" ABOVE THE GROUND. PLANT ALL 24" BOX TREES AND LARGER , 4" ABOVE THE GROUND. BRING MULCH AND SOIL AMENDMENT AROUND AND OVER EXPOSED ROOT BALL. KEEP MULCH AWAY FROM BASE OF TRUNKS AND STEMS. 5.FERTILIZER: FERTILIZE WITH AGRIFORM TABLETS (20-10-5). USE ONE TABLET FOR ONE GALLON, THREE TABLETS FOR FIVE GALLON, FIVE TABLETS FOR 15 GALLON, EIGHT TABLETS FOR 24" BOX, TWELVE TABLETS FOR 36" BOX PLANTS. (GLACIAL ROCK DUST MAY BE SUBSTITUTED FOR FERTILIZER TABLETS. APPLY AT SUPPLIER RECOMMENDED RATES.) 6.MULCH: APPLY 1/4" FIR CHIP MULCH OVER ALL PLANTING AREAS TO A DEPTH OF TWO INCHES AND THREE INCHES AT TREES. PULL BARK 6" AWAY FROM BASE OF ALL PLANTS. 7.LANDSCAPE CONTRACTOR WILL REPLACE ALL DEAD PLANTS AND PLANTS NOT IN VIGOROUS CONDITION AS DIRECTED BY LANDSCAPE ARCHITECT. PLANTS USED FOR REPLACEMENT SHALL BE OF THE SAME KIND AND SIZE SPECIFIED AND PLANTED AS SPECIFIED ABOVE. ALL REPLACEMENT OF PLANTS SHALL BE DONE BEFORE FINAL ACCEPTANCE. 8.PROVIDE PLANT GUARANTEE PROPOSAL WITH BID. (MINIMUM 6 MONTHS FOR PLANTS UP TO 15 GALLON, 1 YEAR FOR 24" BOX OR LARGER. 1 QUERCUS AGRIFOLIA Construction Bid Set 12/13/13 1/8" = 1'-0" DE M O L I T I O N A N D RE M O V A L P L A N L3.0 DATE: SCALE: DRAWN: 850 STANNAGE AVE. #4ALBANY, CA 94706 (510) 525-1913eddie@echaudesign.comwww.echaudesign.com EDDIE CHAU DESIGN REV:DESCRIPTION AND DATE: HO P K I N S P A R K L A N D S C A P E I M P R O V E M E N T S SI T E # 3 Pa l o A l t o A v e . a n d M i d d l e f i e l d A v e . Pa l o A l t o , C A FEET 0 8' 10' 20' N Construction Bid Set 12/13/13 PA L O AL T O AV E N U E MIDDLE F I E L D AVEN U E BUILDING BUILDING WM DYH 60 60 60 60 59 EX. SIGN TO REMAIN ALL TREES TO REMAIN EXCEPT WHERE NOTED EX. DIRT PATH AND EDGING TO BE REMOVED REMOVE EX. TREE REMOVE EX. TREE REMOVE IVY AND MULCH IN THIS AREA REMOVE IVY AND MULCH IN THIS AREA REMOVE EX. SHRUBS AT SIGN DEMOLITION NOTES: 1.FIELD VERIFY WITH LANDSCAPE ARCHITECT EXTENT OF ALL ITEMS TO BE REMOVED OR RELOCATED. 2.TRENCH IN EXISTING TURF TO INSTALL NEW IRRIGATION. FILL AND COMPACT TRENCHES AFTER INSTALLATION AND SEED OVER TRENCH LINES. DO NOT REMOVE EXISTING TURF. 3.REMOVE ALL DEMOLITION DEBRIS, CONCRETE, WOOD, AND OTHER DELETERIOUS MATERIALS FROM SITE. DISPOSE MATERIAL AT AN APPROVED RECYCLING FACILITIES. 4.PROTECT ALL TREES AND PLANT MATERIALS NOT TO BE REMOVED FROM SITE. REPLACE ALL DAMAGED PLANT MATERIAL AT CONTRACTOR COST. 5.FINE GRADE AND RAKE SOIL SMOOTH AFTER DEMOLITION. 6.PROTECT TREES BY ERECTING TEMPORARY CHAIN LINK FENCE BARRIER AROUND THEM. BARRIER SHALL REMAIN IN PLACE FOR THE DURATION OF CONTRUCTION. THE AREA WITHIN DRIPLINE OF TREES SHALL NOT BE USED FOR STAGING OF MATERIALS OF ANY KIND. COMPACTION OF ROOT SYSTEM WILL DAMAGE TREES. 7.VERIFY LOCATION OF UTILITY LINES PRIOR TO CONSTRUCTION. 8. CLEARLY MARK PEDESTRIAN TRAFFIC ZONES AND CLOSED CONSTRUCTION AREAS WITH BARRIERS, FENCING, CONSTRUCTION TAPE, AND/OR SIGNAGE. REVIEW CONSTRUCTION CIRCULATION WITH CITY AND LANDSCAPE ARCH. EX. PLANTING AT STREET EDGE TO REMAIN EX. PLANTING AT STREET EDGE TO REMAIN 1/8" = 1'-0" PL A N T I N G P L A N L3.3 DATE: SCALE: DRAWN: 850 STANNAGE AVE. #4ALBANY, CA 94706 (510) 525-1913eddie@echaudesign.comwww.echaudesign.com EDDIE CHAU DESIGN REV:DESCRIPTION AND DATE: HO P K I N S P A R K L A N D S C A P E I M P R O V E M E N T S SI T E # 3 Pa l o A l t o A v e . a n d M i d d l e f i e l d A v e . Pa l o A l t o , C A FEET 0 8' 10' 20' N 8 RIBES SANGUINEUM 1 CEANOTHUS 'R.H.' 7 CISTUS 'SUNSET' 1 MANZANITA 'DR. HURD' PLANT LIST: QTY.SIZE WATER USE BOTANIC NAME COMMON NAME SHRUBS : 1 15 GAL LOW CEANOTHUS 'RAY HARTMAN'CEANOTHUS 7 5 GAL LOW CISTUS 'SUNSET'MAGENTA ROCKROSE 9 1 GAL LOW MAHONIA REPENS OREGON GRAPE 1 15 GAL LOW MANZANITA 'DR. HURD'DR. HURD MANZANITA 8 1 GAL LOW RIBES SANGUINEUM FLOWERING CURRANT 6 5 GAL MED WOODWARDIA FIMBRIATA WESTERN CHAIN FERN PLANT NOTES: 1.LAYOUT IN ADVANCE ALL PLANT MATERIAL PER PLANTING PLAN. LANDSCAPE ARCHITECT TO APPROVE LOCATION OF PLANT MATERIAL PRIOR TO PLANTING. CONTRACTOR TO NOTIFY LANDSCAPE ARCHITECT A MINIMUM OF ONE WEEK IN ADVANCE OF PLANTING DATES. 2.AMENDMENT: DIESTEL STRUCTURED COMPOST AND VERMI GREEN COMPOST 50/50 RATIO, 3.75 CUBIC FEET PER 1000 SF. OR APPROVED EQUAL. SOURCE: LYNGSO GARDEN MATERIALS, REDWOOD CITY (650)364-1730 3.PLANTING HOLES FOR TREES AND SHRUBS TO BE TWICE ROOTBALL WIDTH AND EQUAL TO ROOTBALL DEPTH. ALL 15G AND LARGER PLANTS TO BE PLANTED ON NATIVE SOIL, EXCEPT WHERE PLANTING IN FILL. 4.FOR TOP OF ROOTBALLS: PLANT ALL 1 AND 5 GALLON CANS 1/2" ABOVE THE GROUND. PLANT ALL 15 GALLONS, 2" ABOVE THE GROUND. PLANT ALL 24" BOX TREES AND LARGER , 4" ABOVE THE GROUND. BRING MULCH AND SOIL AMENDMENT AROUND AND OVER EXPOSED ROOT BALL. KEEP MULCH AWAY FROM BASE OF TRUNKS AND STEMS. 5.FERTILIZER: FERTILIZE WITH AGRIFORM TABLETS (20-10-5). USE ONE TABLET FOR ONE GALLON, THREE TABLETS FOR FIVE GALLON, FIVE TABLETS FOR 15 GALLON, EIGHT TABLETS FOR 24" BOX, TWELVE TABLETS FOR 36" BOX PLANTS. (GLACIAL ROCK DUST MAY BE SUBSTITUTED FOR FERTILIZER TABLETS. APPLY AT SUPPLIER RECOMMENDED RATES.) 6.MULCH: APPLY 1/4" FIR CHIP MULCH OVER ALL PLANTING AREAS TO A DEPTH OF TWO INCHES AND THREE INCHES AT TREES. PULL BARK 6" AWAY FROM BASE OF ALL PLANTS. 7.LANDSCAPE CONTRACTOR WILL REPLACE ALL DEAD PLANTS AND PLANTS NOT IN VIGOROUS CONDITION AS DIRECTED BY LANDSCAPE ARCHITECT. PLANTS USED FOR REPLACEMENT SHALL BE OF THE SAME KIND AND SIZE SPECIFIED AND PLANTED AS SPECIFIED ABOVE. ALL REPLACEMENT OF PLANTS SHALL BE DONE BEFORE FINAL ACCEPTANCE. 8.PROVIDE PLANT GUARANTEE PROPOSAL WITH BID. (MINIMUM 6 MONTHS FOR PLANTS UP TO 15 GALLON, 1 YEAR FOR 24" BOX OR LARGER. 6 WOODWARDIA FIMBRIATA 9 MAHONIA REPENS PA L O AL T O AV E N U E MIDDLE F I E L D AVEN U E BUILDING BUILDING WM DYH Construction Bid Set 12/13/13 1/8" = 1'-0" City of Palo Alto (ID # 4827) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/9/2014 City of Palo Alto Page 1 Summary Title: Appeal of AR Approval for 1451-1601 Cal Ave Title: Council Review of an Appeal of the Director of Planning and Community Environment's Decision Approving Architectural Review of the Demolition of Approximately 290,220 s.f. of Existing R&D/Office Space and Construction of 180 Dwelling Units which Includes 68 Detached Single-Family Units and 112 Multi-Family Units Located at 1451-1601 California Avenue, as part of the 2005 Mayfield Development Agreement. Environmental Assessment: City of Palo Alto/Stanford Development Agreement and Lease Project Environmental Impact Report (State Clearinghouse No. 2003082103). From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that Council uphold the Director of Planning and Community Environment’s decision to approve the Architectural Review application for demolition of approximately 290,220 sf of existing R&D/Office Space and construction of 180 dwelling units on a 16.96 acre site located at 1451-1601 California Avenue, as part of the 2005 Mayfield Development Agreement (Attachment A). Executive Summary The Council is requested to review the appeal (Attachment B) of the Director of Planning and Community Environment’s (Director’s) architectural review approval (Attachment A), consistent with the recommendation of the Architectural Review Board (ARB), and consider whether or not to pull the item off the Consent Calendar. If removed from the Consent Calendar by a vote of three or more Council members, the Council may discuss the appeal on the same night and decide on whether to uphold or overturn the Director’s decision based upon evidence presented at the ARB hearing. Alternatively, the Council may decide to hear the project “de novo” at a new public hearing set for a future date. If this option (a “de novo” hearing) is selected, the Council should schedule the project for a date certain, and will be able to consider any additional evidence presented at the appeal hearing and since the ARB hearing(s). The June 23, 2014 Council hearing date, scheduled for review of the Tentative Map for this project, would be recommended for such a hearing. City of Palo Alto Page 2 The appealed project approved by the Director is the demolition of approximately 290,220 sf of existing R&D/Office Space and the construction of 180 dwelling units, both multi-family units and single family detached units, on a site of nearly 17 acres, located at 1451-1601 California Avenue, as part of the 2005 Mayfield Development Agreement. The Architectural Review Board (ARB) recommended project approval and the Planning Director approved this project on April 18, 2014. The application was then appealed to the Council on May 2nd. The reasons for the appeal are described in the appellant’s correspondence (Attachment B). This item was scheduled on the consent calendar on June 2nd. At that time, staff requested a continuance to June 9th to allow time for review of the appeal by various Transportation and Fire Department experts. Background Fred Balin (Appellant), a resident of College Terrace, submitted a letter of appeal on May 2, 2014, within the 14 day appeal period. The appellant’s objection is related to four main topics: 1) Compliance with Fire Code Provisions, 2) Unsafe routes to schools and the Stanford campus, 3) Traffic congestion on Columbia Street, and 4) Use of mirrors as safety device at the garage entrance and exit for Multi-Family Building #1. The appellant had previously submitted a letter (Attachment C) to the Director of Planning on March 29, 2014, and spoke at the ARB’s March 20th hearing, outlining similar objections to the project. Council Review Authority The Council is requested to review the appeal of the Director of Planning and Community Environment’s architectural review approval, provided as Attachment A. The project is the demolition of approximately 290,220 sf of existing R&D/Office Space and construction of 180 dwelling units at 1451-1601 California Avenue, as per the 2005 Mayfield Development Agreement. Approval and implementation of this project would result in the provision of 68 detached single-family residential units and 112 multi-family residential units. As required by Palo Alto Municipal Code Chapter 18.77, Section 18.77.070 (f), this appeal was placed on the Council consent calendar within 30 days. This section of the Municipal Code states that Council may: 1) Adopt the findings and the decision of the Director; or 2) Remove the appeal from the consent calendar, which shall require three votes, and: a) Discuss the appeal and adopt findings and take action on the appeal based upon the evidence presented at the ARB hearing; or b) Direct that the appeal be set for a new hearing before the City Council, following which the City Council shall adopt findings and take action on the application. The evidence presented at the ARB hearing includes the project plans, ARB staff report and neighbor correspondence (Attachment D). ARB meeting minutes (Attachments E) reflecting the City of Palo Alto Page 3 public testimony and ARB deliberations are provided for Council consideration. Included in Attachment D (March 20th ARB staff report) is staff’s Environmental Confirmation Memo. Project Description The project includes the demolition of approximately 290,220 square feet of existing office and R&D buildings and the construction of 180 residential units comprised of 68 two-story, single family detached dwelling units and 112 multi-family dwelling units, located within two (2) three- and four-story buildings. Additionally, the project will include a 2,582 square feet community center, a 1,709 square foot fitness building, and approximately 2.67 acres in common usable open space. Infrastructure development on the 17 acre site will include private streets, sidewalks, landscaping, storm water treatment, and underground utilities, as further described in the Applicant’s project description included in Attachment D. Access to the interior of the development is located at three separate private street entrances from California Avenue. Each entrance is designed as an extension of the existing College Terrace grid pattern of residential streets at Columbia, Bowdoin and Amherst Streets. All single family residences will have side-by-side, two car garages, and 57 of the 68 single family residences will also have two-car driveway aprons. Multi-family residential parking spaces will be provided in a one level underground parking garage located under each multi- family residential building. Two parking spaces will be provided for each multi-family residential unit. The entire development will provide 108 visitor parking spaces located along the private streets within the development. ARB Review Process and Purview In 2005, the City of Palo Alto and Stanford University entered into the Mayfield Development Agreement (MDA), part of which provided Stanford with vested rights to build 250 housing units on two sites in the Stanford Research Park, as further described in the ARB staff report (Attachment D). Additional information regarding the MDA and associated Environmental Impact Report are located on the City’s website at: http://www.cityofpaloalto.org/gov/topics/projects/landuse/mayfield.asp As permitted in the MDA, the Applicant elected to use the AS2 Alternative Development Standards contained in the Palo Alto Municipal Code (PAMC) Chapter 18.60. The AS2 development standards table [PAMC Section 18.60.060(A)] outlines the physical constraints for the project. The AS2 standards establish the permitted residential and accessory uses, setbacks, building heights, parking ratios, design standards for residences along California Avenue, maximum floor area ratio (FAR), maximum site coverage, and minimum usable open space. The only limitation on uses is the prohibition against any age-restricted housing. At this time, the housing is anticipated to be leased to Stanford faculty. MDA Prescribed Review Process City of Palo Alto Page 4 The MDA prescribed the review process, limiting the ARB’s purview, and therefore the Council’s purview, to the following project elements:  Determine whether the project complies with the AS2 development standards and Architectural Review findings; and  Review and approve the lighting, noise levels, landscaping, and selection of the exterior materials and finishes of the buildings and other structures; and  Review is limited to the California Avenue edge of the California Sites, and then only to the extent that the projects submitted for approval do not already:  “Approximate the horizontal rhythm of building-to-side yard setback and façade areas, including the relationship of first and second stories, of California Avenue residential properties; and  Reflect the eclectic nature of the design of residences on the north side of the street and include similar opportunities for landscaping.” ARB Review and Recommendation At the March 20th ARB hearing, the ARB members unanimously approved the proposed project. The March 20, 2014 staff report and verbatim meeting minutes are provided for Council review, along with correspondence received prior to the ARB hearing (Attachment D and E). After discussions with both the applicant and the neighborhood, and refinement of the conditions of approval, the Director approved the project on April 18, 2014 as recommended by the ARB. Discussion Major Architectural Review requires the City to make 16 findings. (See Attachment A.) The appeal relates to Finding #10 which states: “Access to the property and circulation thereon are safe and convenient for pedestrians, cyclists and vehicles.” The appellant’s objections are related to four main topics as discussed below and further described in the appeal letter (Attachment B). 1) Fire Code provisions – the appellant asserts they have not been followed, 2) Unsafe routes to school and the Stanford campus, 3) Congestion on Columbia Street, and 4) The use of mirrors as a safety device at the garage entrance and exit for multi-family building #1. 1) Fire Code Provisions (a) Turnaround Provision for Dead End Roads Fire Code Section D103.4 of Appendix D states that “Dead-end fire apparatus access roads in excess of 150 feet shall be provided with width and turnaround provisions in accordance with Table D103.4” (Attachment B) The Appeal assumes that the entire 250+-foot length of Driveways A and B constitute fire access roads so that turnarounds are required. It is a generally accepted interpretation of City of Palo Alto Page 5 Appendix D, Section D103.4 to consider as Fire Access Roads those portions of the road or driveway needed for fire vehicles to reach within ‘pre-connect’ hose distance of the structures on site. PAMC Section 15.05.110 further establishes 150 feet as the maximum distance from the exterior wall of building to the fire vehicle access road. This could be considered the distance a firefighter must travel on foot from the vehicle. In the review of the ARB proposal, the Fire Marshal determined that fire vehicles would not need to travel more than 150 feet along the driveways in question, in order to meet this ‘hose reach’ requirement. The Fire Marshal respectfully disagrees that the entire length of Driveways A and B need to be considered Fire Access Roads for purposes of determining whether a turnaround is necessary. (b) Minimum Road Width When Hydrants Present Fire Code Section D103.1 of Appendix D states that “where a fire hydrant is located on a fire apparatus access road, the minimum road width shall be 26 feet exclusive of shoulders” (Attachment B). The Appeal indicates that the minimum road width on Columbia and Amherst Streets is 24 feet where 26 feet is required. Palo Alto Municipal Code (PAMC) Section 15.05.120 requires fire apparatus access roads to have an unobstructed width of 20 feet. This allows one fire department vehicle to pass another vehicle. Appendix D requires the roadway to be increased to 26 feet where hydrants are located. This is generally required for a distance of 20 feet on either side of the hydrant, as shown in Figure D103.1 of Attachment B. The remaining roadway width may be 20 feet. The intent is to provide additional clearance at fire hydrants for hydrant operations and for another fire department vehicle to pass. The proposed roadway widths were reviewed by the Fire Marshal as a part of the ARB review process, to ensure that the intent of this requirement is met. It is a generally accepted interpretation of Appendix D, Section D103.1 to consider rolled curbs and/or engineered sidewalks to be included in road width, as the only specific prohibition in that section is against using (unpaved) road shoulders to comply with the required width. The Fire Marshal respectfully disagrees with the Appellant’s assertion that the only method to provide 26 feet of fire access width for Columbia and Amherst Streets is to have the 26 feet measured between the curbs. The proposed width will provide adequate area to park emergency vehicles and operate a hydrant. As both of the above Fire Code Sections are locally adopted, the Palo Alto Fire Department is within their purview to make these determinations. 2) Unsafe Routes to School and Campus As noted by the appellant, Palo Alto Unified School District has yet to assign the home school for the future California Avenue housing site(s). It is also true that the existing “Walk and Roll” Maps for Escondido School show Bowdoin and Hanover as suggested routes, however these City of Palo Alto Page 6 maps do not account for the new California Avenue housing. The maps are for existing conditions based on existing housing and were developed through a community outreach process with current students and parents of Escondido School. The City will update the maps, and implement any necessary improvements, when new housing comes on-line or as parent input regarding new travel patterns is identified. After thorough review of the project, Transportation staff concluded that while pedestrian may use any one of the three project intersections, a majority of them would use Columbia Street, as this is the most direct path to Escondido School/Stanford University from the new housing sites main entry. Columbia Street also serves as the most direct route between Stanford Avenue and South California Avenue west of Hanover Street. Therefore, several transportation conditions have been included in the project, such as new pedestrian crossings at all three intersections and appropriate signage at the Colombia Street intersection, to ensure adequate pedestrian facilities are include in the project as a safety improvement for the existing and future communities. Planning for the most appropriate pedestrian facilities through the planning review process is consistent with the City’s “Complete Streets” policies. 3) Congestion on Columbia Street As noted by the appellant, the Circulation and Access analysis (Analysis) concluded that 66 percent of the project traffic is likely to use the Columbia Street entrance/exit to gain access to the property, while the appellant believes this number would be closer to 75 percent. While we all agree a majority would use the Columbia Street entrance, the City does not agree that it will be an area of “potential gridlock.” As described in the analysis, the AM peak hour is estimated at 39 outbound trips, of which approximately 26 would use the Columbia Street exit, which is roughly one vehicle every two minutes. During the PM peak hour, there would be an estimated 61 inbound trips, of which approximately 40 vehicles would enter the site at Columbia Street, which is less than one vehicle per minute. In addition, the site’s interconnected streets would allow vehicles to use any of the three California Avenue access points. This redundancy in access provides another safeguard against any congestion on Columbia Street. A concern regarding the safety of bicyclists and pedestrians on Columbia Street was also expressed. As noted in staff’s March 20th staff report to the ARB, the 12 foot proposed lane widths of the Columbia Street extension are the same width as the existing portion of Columbia Street (36 feet within a 60 foot right of way (ROW)). The existing Columbia Street width includes space for parallel parking on both sides of the street. The proposed Columbia extension would be 24 feet wide, consisting of two 12 foot wide travel lanes, where it intersects California Avenue, and would widen to 36 feet (58 ft ROW) after the street entrance, to allow parking on both sides of the street. While not required per the MDA, these street widths comply with the Private Streets ordinance in that private streets serving five or more lots must have a ROW width of no less than thirty-two feet. The narrow curb-to-curb dimensions at the Columbia Street entrance will ensure ingress/egress is not slowed by cars trying to parking or enter the street, and will provide for a safer bicycle and pedestrian environment given the City of Palo Alto Page 7 shorter crossing distance. The network of inter-connected streets also provides redundancy for bicycle and pedestrian traffic rather than forcing them onto any particular street. The appeal states that “to more equally disperse travel in and out of the project, a 4th curb cut should be added near Dartmouth Street…” Transportation staff reviewed the analysis during the ARB process, and determined, based on the trip generation estimates, that the project will not create “gridlock” and does not need additional access capacity. 4) Use of Mirrors at the Garage Entrance and Exit for Multi-Family Building #1. The appellant also takes issue with the City’s requirement that the project install mirrors leading into the garage of the Multi-Family Building #1. He claims this measure is not effective as mirrors can be vandalized. While the City agrees mirrors can be vandalized, such vandalism is more likely to happen in locations that are open to the public, versus this situation where the mirrors are located in an area only used by the building’s residents. Stanford, as the sole property owner, will be responsible for maintaining the mirrors in good order. With regard to the appellant’s statement that the Hexagon circulation report should have considered a straight driveway in lieu of a 90 degree turn, there is no requirement that Hexagon consider all possible solutions to the problem staff initially identified. Hexagon’s responsibility was to assess the adequacy of the site plan proposed by the applicant. During the ARB process, the Transportation Division staff reviewed the proposed 24 foot wide driveway and determined that it would provide adequate turning radius for large vehicles, such as an SUV or large pick-up truck. The requirement of mirrors is an extra safety precaution. Stanford could also install “bottdots” along the center line of the driveway to help ensure drivers stay in their own lane as they enter and exit the garage, but these would also be an additional safety precaution. Resource Impact One time revenues would include development impact fees of approximately $376,126.84. Policy Implications The appeal is based on four main issues that were taken into consideration prior to the Director’s approval. The Director’s decision to approve the application is consistent with both staff and ARB’s recommendation to approve the project based upon the ARB findings and subject to the conditions of approval. Environmental Review In conformance with the California Environmental Quality Act (CEQA), an Environmental Impact Report was certified by the City Council for the Mayfield Development Agreement in 2005. The City of Palo Alto/Stanford Development Agreement and Lease Project Environmental Impact Report (EIR) (State Clearinghouse No. 2003082103) concluded that the proposed project would not have a significant effect on the environment with mitigation as proposed except there City of Palo Alto Page 8 would be significant and unavoidable Noise impacts, due to the use of heavy equipment during construction. The certified, Final EIR is available for review on the City’s web site at: http://www.cityofpaloalto.org/gov/topics/projects/landuse/mayfield.asp Per the attached Environmental Confirmation Memo (Attachment D), there are no substantive changes to the previously approved project or circumstances under which the project is being undertaken and no new information, therefore the EIR provides the necessary environmental clearance for this subject project. All mitigation measures as stated in the approve Mitigation Monitoring and Reporting Program (MMRP) (Attachment D) would be incorporated into the project as conditions of approval. Public Outreach The property owners and occupants within a 1,800 foot radius were sent public hearing notices for the ARB hearing and this Council hearing. Staff has been available to discuss the proposal with interested members of the public and has emailed the appellant with information as requested. The Council Agenda has been available on the City‘s website, which includes a copy of the staff report. Courtesy Copy Fred Balin, appellant Christopher Wuthmann, applicant Attachments:  Attachment A: Director's Approval Letter, April 18, 2014 (PDF)  Attachment B: Appeal of May 14, 2014 (PDF)  Attachment C: Appellant's March 29, 2014 email (PDF)  Attachment D: Architectural Review Board Staff Report, March 20, 2014 with attachments (PDF)  Attachment E: Architectural Review Board minutes of March 20, 2014 (PDF)  Attachment F: Transportation Division response (PDF)  Attachment G: Fire Department response (PDF)  Attachment H: Hexagon response to traffic questions (PDF)  Attachment I: RJA response to fire code questions (PDF)  Attachment J: Project Plans (for Councilmembers and Libraries only) (TXT) Attachment A Attachment B 1 Gerhardt, Jodie From:Gitelman, Hillary Sent:Monday, March 31, 2014 7:46 AM To:Fred Balin Cc:Nickel, Eric; Gerhardt, Jodie Subject:RE: Submittal Prior to Director's Decision: Mayfield Upper Cal Ave Housing / Review of Site-Circulation Analysis and Related Conditions of Approval Thanks, Fred.  We will consider this material in our decision.  Hillary  Hillary Gitelman | Planning Director | P&CE Department   250 Hamilton Avenue | Palo Alto, CA 94301 T: 650.329.2321 |E: hillary.gitelman@cityofpaloalto.org Please think of the environment before printing this email – Thank you! From: Fred Balin [mailto:fbalin@gmail.com] Sent: Saturday, March 29, 2014 3:53 PM To: Gitelman, Hillary Cc: Nickel, Eric Subject: Submittal Prior to Director's Decision: Mayfield Upper Cal Ave Housing / Review of Site-Circulation Analysis and Related Conditions of Approval Director Gitelman, The body of this email and three attachments constitutes the submittal of my wife Ann and I from an experienced and highly regarded transportation planning and traffic engineering expert with regard to the site- circulation analysis and associated conditions of approval for the Upper California Avenue Mayfield Development Agreement housing site (17 acres, 180 housing units at 1451, 1501, and 1601 California Avenue). The materials in this submittal, include: 1. This section of introductory and summary material, 2. The analysis from Tom Brohard, of Tom Brohard and Associates, dated today and that follows below within the body of this email 3. Three attachments as PDF files: (a) 2013 Ca Fire Code Appendix D.pdf (b) Escondido Elem School Walk-Bike Routes.pdf (c) Brohard 2011 08 Short.pdf I ask that this material be considered as part of the Director's Decision and become part of the record for that decision. In this regard, kindly acknowledge via return email that you have received the material (e.g., the full text of this email -- my intro and Mr. Brohard's analysis -- and the three attachments.) Mr. Brohard's analysis is split into four areas, and it cites various conflicts, errors, omissions and deficiencies for correction prior to project approval. Attachment C 2 Of special note is Mr. Brohard's citation of two sections of the 2013 California Fire Code to which he writes: "it appears that the Proposed Project does not comply." Those two sections of the 2013 Fire Code are described in Part 4) below and include: (a) Section D103.1 relating to minimum road width where a fire hydrant is located on a fire apparatus access road, and (b) Section D103.4 relating to "dead end" fire access roads with a length between 151 and 500 feet and associated requirements for a turnaround area. These two 2013 California Fire Code section regulations are included in the corresponding attachment to this email. A violation of the Fire Code cannot be waived, and if Mr. Brohard is correct, would require that the project be denied, and a compliant revision of the plans be provided. I have taken the liberty of cc'ing Fire Chief Nickel on this email to expedite his receipt of this material. I trust that this and all elements of Mr. Brohard's review will be given proper and full consideration prior to Director's Decision. Thank you, Fred Balin 2385 Columbia Street Palo Alto, CA 94306 650-565-8120 (lan) 650-520-4879 (cel) Begin forwarded message: From: "Tom Brohard" <tbrohard@earthlink.net> Subject: Mayfield California Avenue Housing Project - Traffic and Transportation Comments Date: March 29, 2014 8:46:31 AM PDT To: "Fred Balin" <fbalin@gmail.com> Fred ‐     I, Tom Brohard, am a licensed Traffic Engineer in California and a licensed Civil Engineer in California and Hawaii. As  indicated on the attached resume, I have over 40 years of professional experience and have served a number of  communities as their City Traffic Engineer. During my career, I have reviewed numerous traffic studies for various public  projects and for private developments.     As you requested and authorized, I have reviewed various documents associated with the development of 180  residential dwelling units in the Mayfield California Avenue Housing Project located at 1451, 1501, and 1601 California  Avenue in the City of Palo Alto. I have specifically focused on the site‐specific circulation analysis described in the  Development Agreement and the related conditions of approval, the March 20, 2014 Staff Report to the Architectural  Review Board including various attachments, and the current Site Plans for the Proposed Project. I have also reviewed  other documents including the “Walk and Roll to School” Map for Escondido Elementary School (from the School’s  website) as well as provisions of the City’s Fire Code. In my review, I have also viewed the area streets using Google  Earth photographs taken in March 2011.  3    The following conflicts, errors, omissions, and deficiencies must be corrected before the City of Palo Alto considers  approval of this Proposed Project:     1) Conflicting and Confusing Recommendations for Traffic Control at California/Columbia  a. Page 8 of the Staff Report indicates that students would likely cross California at Columbia when walking to  and from school. In direct conflict, the attached “Walk and Roll to School” Map published by Escondido  Elementary School identifies Bowdoin, not Columbia, as the suggested route for elementary students  walking or biking to school. Children walking or biking to Escondido Elementary School should use Bowdoin  rather than Columbia as they would cross Stanford at the existing three‐way STOP with yellow school  crosswalks at Bowdoin rather than at Stanford/Columbia without STOP signs or crosswalks.  b. Page 8 of the Staff Report states “The City has included a condition of approval for installation of STOP signs  and crosswalks at this intersection.” Condition 14.a requires four crosswalks but does not require “STOP”  signs other than for traffic exiting the site as indicated in Condition 14.b (there is already an existing STOP  sign on Columbia at California). The requirement to potentially install STOP signs on California at Columbia  could be inferred from Page 8 of the Staff Report but has not been included in the Conditions of Approval or  other documents. STOP signs on California at Columbia to create a four‐way STOP should not be installed as  there has been no analysis of this intersection to support the additional STOP signs.  c. Columbia does provide the primary vehicle and pedestrian access to the multi‐family buildings within the  Proposed Project. The various documents indicate that pedestrians will use the Columbia/California  intersection to reach nearby tennis courts as well as to reach parks in the area. The neighborhood parks are  shown on the “Walk and Roll to School” Map and Columbia west of California is not the most direct route to  these facilities.  d. Condition of Approval 14.a requires installation of four crosswalks at California/Columbia, together with  “Pedestrian Crossing Ahead” signs on California. With elementary children crossing California at Bowdoin as  suggested by Escondido Elementary School, there will not be a concentration of pedestrians at Columbia.  Pedestrians will use other area streets to reach tennis courts and area parks. Crosswalks are used to help  direct pedestrians on a particular path to their destination but Columbia west of California is not the best  choice. Four marked pedestrian crosswalks should not be painted at Columbia/California.     2) Mirrors at the Garage Entrance/Exit for Multi‐Family Building #1 ‐ Condition of Approval 14.d requires that mirrors  shall be installed on the driveway leading into the garage of Multi‐Family Building #1 because of the lack of sight  distance at this corner. In my experience, mirrors require high levels of maintenance as they are usually vandalized  (glass lenses are broken, stainless steel lenses are covered with black spray paint, and lenses may be turned out of  adjustment or stolen). Instead of facing these continuing issues and potential liability, the driveway entrance/exit  could easily be redesigned to provide a straight driveway into and out of the garage for Multi‐Family Building #1  rather than the current design which involves an unnecessary 90 degree turn. A straight driveway has been  proposed for the driveway serving Multi‐Family Building #2 directly across Columbia and the same should be  considered for access to the garage for Multi‐Family Building #1. The Circulation and Access Report included as  Attachment H should have considered this in lieu of mirrors, but it did not.     3) Internal Intersections and Street Segment Deficiencies – Geometry for the internal streets is shown on Grading  Plans C3 and C4. The Circulation and Access Report omits discussion and analyses of these important topics:  a. Columbia is only 24 feet wide between curbs from California to Driveway A, a distance of 150 feet which is  longer than “near the entrance” indicated in the various reports. Stopping and parking of vehicles must be  prohibited on both sides of this portion of Columbia to provide one moving traffic lane in each direction.  b. Amherst is also only 24 feet wide between curbs just east of California for about 30 feet. Stopping and  parking of vehicles must be prohibited on both sides of this portion of Amherst toprovide one moving traffic  lane in each direction.  c. The width of residential driveways A, B, C, and D are proposed to be 24 feet wide. Stopping and parking of  vehicles must be prohibited on both sides of this portion of residential driveways A, B, C, and D to  provide one moving traffic lane in each direction.  4 d. Bulbouts are located at various intersections and knuckles (90 degree turns) within the project. Each of  these should be signed and marked to reduce the possibility of being struck by vehicles.  e. Pedestrian ramps are located at various intersections and knuckles within the project. All pedestrian ramps  must be perpendicular to the roadways and the diagonal ramp at the Amherst/Holly knuckle must be  modified. Illustrations within the site plans show marked crosswalks at the pedestrian ramps but marked  crosswalks are not needed within the Proposed Project.  f. A tot lot is located immediately adjacent to Columbia opposite Madrone. Provisions must be included to  contain the children within this lot so they cannot enter the adjacent streets.     4) Fire Code Provisions Have Not Been Followed – On November 18, 2013, the City of Palo Alto adopted the 2013  California Fire Code. It appears that the Proposed Project does not comply with the following requirements within  the City’s Fire Code:  a. Section D103.1 requires that the minimum road width shall be 26 feet where a fire hydrant is located on the  fire access road. Figure C8 in the Site Plans provides the California Avenue Fire Access Map showing the  location of hydrants within the Proposed Project. With widths of 24 feet as discussed above, both Columbia  and Amherst do not comply with this requirement and they must be widened by 2 feet to 26 feet between  curbs.  b. Table D103.4 in Section D103.4 requires that Dead End Fire Access Roads between 151 and 500 feet long  must have turnaround provisions at the end of the road. Residential Driveways A and B are each about 250  feet in length from Columbia. Accordingly, both of these roadways must have either a 120‐foot  Hammerhead, 60‐foot “Y” or 96‐foot diameter cul‐de‐sac in accordance with Figure D103.1.     If there are questions regarding the findings of my review of the traffic and transportation aspects of the Mayfield  California Avenue Housing Project, please call contact me at your convenience.     Tom Brohard, Principal  Tom Brohard and Associates  81905 Mountain View Lane  La Quinta, California 92253‐7611  (760) 398‐8885  tbrohard@earthlink.net           City of Palo Alto (ID # 4552) Architectural Review Board ARB Staff Report Report Type: Meeting Date: 3/20/2014 City of Palo Alto Page 1 Summary Title: Mayfield California Avenue Sites (1451-1601 California Avenue) Title: Mayfield California Avenue Sites (1451-1601 California Avenue) [13PLN- 00234]: Request by Chris Wuthmann of Stanford Real Estate on behalf of the Board of Trustees of Leland Stanford Jr. University for Architectural Review of the demolition of approximately 290,000 square feet of existing R&D/office space and construction of 180 dwelling units, which includes 68 detached single family units and 112 multi-family units, as part of the 2005 Mayfield Development Agreement. Zone: RP(AS2) From: Jodie Gerhardt Lead Department: Architectural Review Board RECOMMENDATION Staff recommends that the Architectural Review Board (ARB) recommend the Director of Planning and Community Environment approve the proposed project, based upon the Architectural Review findings (Attachment D) and subject to the conditions of approval (Attachment E). EXECUTIVE SUMMARY The ARB is requested to review this single-family and multi-family residential, market-rate housing project, submitted by Stanford University (Applicant). The ARB’s purview is limited by an existing Development Agreement (Mayfield Development Agreement). The project is the replacement of an office and research & development campus with 180 residential units, a community center, a fitness building, swimming pool, and open space amenities including a park, tot lots, courtyards and tree-lined walkway. The development is to be served by private streets with sidewalks, and the multi-family component is proposed at the back portion of the site. All 68 of the detached single family homes would have two car garages and most would have driveway aprons, while the two, two- and three-story, multi-family buildings (containing 112 dwelling units) would provide below grade parking facilities. Visitor parking is to be Attachment D City of Palo Alto Page 2 provided along the private streets, which would be accessible from California Avenue and aligned with College Terrace streets (Columbia, Bowdoin and Amherst). The proposed development is consistent with the Palo Alto Comprehensive Plan, Zoning Ordinance, Mayfield Development Agreement and Performance Criteria. Therefore Staff is recommending approval of the proposed Architectural Review (AR) application. The Applicant will submit a Tentative Map for staff review, Planning and Transportation Commission (PTC) recommendation, and City Council approval. The Director’s decision on the AR application is appealable to City Council. BACKGROUND Mayfield Development Agreement In 2005, the City of Palo Alto and Stanford University entered into the Mayfield Development Agreement (MDA). Under the terms of the MDA, Stanford University was to lease to the City of Palo Alto the 6-acre Mayfield site, located at the corner of Page Mill Road and El Camino Real, for $1 per year for 51 years. Stanford was to construct soccer fields on the Mayfield site at its expense and turn the fields over to the City upon completion, which was done in 2006. In turn, the MDA provided Stanford with vested rights to build 250 housing units on two sites in the Stanford Research Park, where R&D/office buildings exist today. Stanford was also granted the right to relocate 300,000 square feet (sf) of R&D/office space elsewhere in the Stanford Research Park, which is less than the amount of commercial area to be demolished at the two designated housing sites. In addition, the City accepted the lease of the Mayfield soccer fields as mitigation for any potential community service impacts upon the City resulting from all future development at Stanford, as authorized by the General Use Permit, which was approved by the County of Santa Clara in December of 2000. The designated housing sites are commonly known as 2450, 2470, and 2500 El Camino Real (collectively referred to as the “El Camino Sites”), and 1451, 1501 and 1601 California Avenue (collectively referred to as the “California Sites”). As required by the MDA, Stanford has submitted applications for Architectural Review for at least 185 of the 250 housing units by the end of 2013. These projects include the subject project for 180 units on the California Sites, and a second project for a new mixed use building including ground floor commercial and 70 below market rate housing units on the El Camino Sites (Application # 13PLN-00469). Additional information regarding the MDA and associated Environmental Impact Report are located on the City’s website at: http://www.cityofpaloalto.org/gov/topics/projects/landuse/mayfield.asp Review Process and ARB Purview City of Palo Alto Page 3 As permitted in the MDA, the Applicant has elected to use the AS2 Alternative Development Standards contained in the Palo Alto Municipal Code (PAMC) Chapter 18.60. The modified Architectural Review process, as prescribed in the Development Agreement, applies to this development proposal. The AS2 development standards table [PAMC Section 18.60.060(A)] outlines the physical constraints for the project. The AS2 standards establish the permitted residential and accessory uses, setbacks, building heights, parking ratios, design standards for residences along California Avenue, maximum floor area ratio (FAR), maximum site coverage, and minimum usable open space. The only limitation on uses is the prohibition against any age- restricted housing. At this time, the housing is anticipated to be for Stanford faculty. The MDA addresses the review process, which limits the ARB’s purview to the following project elements:  Determine whether the project complies with the AS2 development standards and Architectural Review findings; and  Review and approve the lighting, noise levels, landscaping, and selection of the exterior materials and finishes of the buildings and other structures; and  Review is limited to the California Avenue edge of the California Sites, and then only to the extent that the projects submitted for approval do not already:  “Approximate the horizontal rhythm of building-to-side yard setback and façade areas, including the relationship of first and second stories, of California Avenue residential properties; and  Reflect the eclectic nature of the design of residences on the north side of the street and include similar opportunities for landscaping.” Site Information The project site is a 17 acre site located on the southwestern side of California Avenue, one parcel south of the California Avenue/Hanover Street intersection. The project site is comprised of three commercial parcels (site) (1451, 1501 and 1601 California Avenue) developed with three buildings containing a total of 290,220 square feet of floor area within one and two-story office and research and development (R&D) buildings, and surface parking lots. The site is surrounded by a mix of residential and commercial buildings; one and two-story single family residences along California Avenue to the west (College Terrace), two-story office and R&D buildings to the east along Page Mill Road, two-story office buildings to the north along City of Palo Alto Page 4 Hanover Street, and a multi-story residential development to the south (Peter Coutts Circle; Stanford Lands). Project Description The project includes the demolition of approximately 290,220 square feet of existing office and R&D buildings and the construction of 180 residential units comprised of 68 two-story, single family detached dwelling units and 112 multi-family dwelling units located within two (2) three- and four-story buildings. Additionally, the project will include a 2,582 square feet community center, a 1,709 square foot fitness building, and approximately 2.67 acres in common usable open space. Infrastructure development on the 17 acre site will include private streets, sidewalks, landscaping, storm water treatment, and underground utilities (Project Description provided as Attachment A). Access to the interior of the development is located along California Avenue at three separate private street entrances. Each entrance is designed as an extension of the existing College Terrace grid pattern of residential streets at Columbia, Bowdoin and Amherst Streets. All single family residences will have side-by-side, two car garages and 57 of the 68 single family residences will also have two-car driveway aprons. Multi-family residential parking spaces will be provided in a one level underground parking garage located under each multi-family residential building. Two parking spaces will be provided for each multi-family residential unit. The entire development will provide 108 visitor parking spaces located along the private streets within the development. DISCUSSION Zoning Compliance A summary indicating the project’s conformance with the Development Standards of the Alternative Standards Overlay District (AS2), set forth in PAMC Chapter 18.60, is provided on Sheet G.01 of the project plans and in Attachment C. Staff has reviewed the zoning information provided by the applicant and has determined that the proposed project is in compliance with the applicable AS2 development standards. The project has also been reviewed with respect to the City’s Performance Criteria (PAMC Chapter 18.23) and Parking Facility Design Standards (PAMC Chapter 18.54). Height and Massing City of Palo Alto Page 5 The height and massing of the residential buildings are driven by the terms of the MDA, particularly in relation to California Avenue edge of the project and how buildings must relate to the College Terrace residences located directly across the street from the development. The MDA states: “Dwelling units along California Avenue shall be detached and shall reflect the eclectic nature of the design of residences on the north side of the street. Buildings shall approximate the horizontal rhythm of building-to-side yard setback and façade areas, and the relationship of upper and lower stories, of California Avenue residential properties located across the street from, or in the vicinity of the Upper California Site. The development pattern shall provide similar opportunities for landscaping. At the applicant’s election, some or all buildings along California Avenue may be two stories. Automobile access may be from the rear of the dwellings.” The Applicant worked to accomplish this requirement along the California Avenue edge of the project through the use of a variety of single family floor plans, style types, front setbacks and building heights. The California Avenue edge of the project would be developed with 12 detached single family dwelling units, varying in height from one to two-stories, all of which would be below the required 30 foot height limit. Homes would range in size from 1,884 square feet to 2,719 square feet with only four of the 12 two-car garage doors facing California Avenue. As shown on Sheets SF.9 through SF.36, the project design includes 11 different floor plans with 29 different architectural styles, a variety of which would be used along California Avenue. It should be noted that all commercial properties on the southern side of California Avenue are required to maintain a 50 foot landscaping setback. The existing two-story commercial building to the northeast of this property is located approximately 55 feet from the front property line. The proposed single family home on Lot 1 would have a 20 foot setback, consistent with the zoning standards. Staff would appreciate receiving the ARB’s comments on the front setback and left side elevation of this home, as it would be visible from the public right of way. Although, several existing trees are proposed to be retained in this area, which will help buffer the home from the street. Parking City of Palo Alto Page 6 Per the AS2 standards, dwelling units with two (2) or more bedrooms must provide two (2) parking spaces per unit and 0.25 parking spaces for guests in an area with unrestricted access. As noted above, the proposed project would include a two car garage for all single family dwelling units and two parking spaces per multi-family dwelling unit in a one level underground parking garage. The entire development would provide 108 visitor parking spaces located along the private streets within the development, for a total of 0.6 guest parking spaces per unit. While the MDA has no requirement for bicycle parking, the applicant is proposing to provide 112 spaces. Lighting As shown on Sheet L3, proposed lighting would include pole lighting as well as building mounted and bollard style lights. All lighting would be directed downward to ensure very minimal spillover of light across property lines. All proposed lighting would be installed along the private street and drive aisles, with additional lighting surrounding the two multi-family buildings. The lighting would provide an average ‘foot-candle’ of 0.49 across the entire site. The proposed street lights along California Avenue would cast a light of 0.30 foot-candle onto the properties across the street, which is needed for safe travel on this main thoroughfare. Noise Section 9.10.040 of the Palo Alto Municipal Code limits noise generation to no more than 6 dB above the local ambient when adjacent to residential development, and no more than 8 dB when adjacent to commercial development. The existing ambient noise level in the area is approximately 60 Ldn. Post-construction noise from the project would primarily emanate from standard residential mechanical equipment, such as HVAV units. Commercial rooftop mechanical equipment normally generates 60 to 75 dBA at 50 feet. While residential development utilizes equipment for heating and cooling, these units are normally smaller than commercial equipment and generate less noise. For single family homes, the City requires any noise producing equipment be placed within the buildable area. During the Building permit phase, Planning will ensure the projects adherence to this regulation. For the multi-family units, most of the mechanical equipment is proposed to be located within the underground parking garage. Any additional mechanical elements, if and when proposed, would be required to be screened from public view in accordance with PAMC Section 18.23.050, and would be subject to Architectural Review and review of the equipment and equipment housing to ensure noise ordinance compliance. Regarding construction noise, the EIR found that the proposed development would result in significant impacts. Housing would be built within 100 feet of residential property lines. Consequently, construction noise would have potential to impact existing sensitive receptors located across the street, even with noise mitigation measures. These temporary increases in noise levels could substantially exceed ambient noise levels. Construction of the site could also City of Palo Alto Page 7 create vibration for adjacent sites. However, since construction would be outside of sleep hours, this was considered acceptable, and a less than significant impact. During the Building Permit review process, the Applicant will be required to create a Construction Logistic Plan that will include best management practices and subject to the review and approval of the Public Works Director. The Applicant team is already starting to think through the logistics. Some options include (1) developing the homes in phases, which would increase the length of construction noise, or (2) concurrent development of all homes and structures, thereby creating an intense but reduced construction period. The Applicant team is also looking to provide a construction service road, for a limited period, directly to Page Mill Road through the property located at 1450 Page Mill, as this site is also owned and controlled by Stanford. These and other options will be reviewed as a part of the Logistics Plan review by the Department of Public Works during the Building Permit process. Landscaping As previously mentioned, the project provides 2.67 acres of common usable open space. Common areas include a central park area including a community building and swimming pool, two tot lots, a tree lined mews area, recreation courtyard around the fitness building, and separate courtyards within each multi-family building. Planter strips with tree lined sidewalks are proposed throughout most of the development as well as approximately two acres of open space devoted to landscaped perimeter setbacks. A comprehensive landscape plan is provided in the plan set along with tree disposition sheets. The City Arborist has some minor concerns about the survivability of several of the existing trees that are to remain. The Applicant and it’s consulting arborist, the City Arborist and project planner will continue to work together to ensure the tree protection fencing is adequately placed to ensure that the protected and designated trees will remain in good condition. Building Design and Materials The plan for the 68 single family dwelling units includes 11 different floor plans with 29 different architectural styles, a variety of which would be used along California Avenue. Exterior wall materials would include stucco; painted horizontal fiber cement siding (with various exposures from 4" to 7" to 10.75", varied from smooth to wood-textured); painted fiber cement sidewall shingle siding; vertical board & batten siding; and stained cedar horizontal siding. Roofing will include red clay tile, asphalt shingles, standing seam metal, and flat concrete tiles. Roof pitches, fascia/barge board and rain gutter profiles & details will vary by style. Accent materials will include brick, tile, river rock, and ledger stone veneers. All windows on single family residences will be wood-clad windows (Anderson 400 series). Window trims will vary by elevation condition. Window shape and divided lite (exterior applied) conditions will vary by elevation. City of Palo Alto Page 8 The Multi-family building will have a combination of traditional and contemporary materials. The Applicant’s goal was to select durable materials that will retain the highest level of quality over time. Cement fiber panels, siding (vertical and horizontal), and cement plaster are the primary wall materials. Additionally, stone tile and cementitious panels would be used as accent materials at prominent locations on the buildings. Weather-resistive fiber reinforced horizontal screens, metal railings, and cement panel railings would be installed on balconies and along open-air corridors. Exposed wood rafters at select locations are intended to add interest and warmth to the material palette. Finally, board-formed concrete at the base of the building would complete the palette; the Applicant’s intention is to provide a clean look at the ground level. Additional detail for both the single family and multi-family residential buildings will be shown on the color and materials board that will be presented at the ARB hearing. Trash Disposal and Recycling Placement of trash enclosures for the multi-family dwellings is proposed to be within the parking garage, screened from public view per PAMC Section 18.23.020. As shown on Sheet MF.5, these containers will need to be moved up to the auto court area in front of the multi- family buildings on collection days. The trash and recycling facilities for single family homes are to be provided on each of the leased properties, and also would be screened from public view. Circulation and Access The site would be developed with private, inter-connecting streets that would access California Avenue at three locations. These access points would be aligned directly across from the existing public streets (Amherst, Bowdoin, and Columbia Streets). The existing roadway of Amherst Street is 24 feet wide (60 ft Right of Way (ROW)). The proposed Amherst extension would be 24 feet wide, consisting of two 12 foot wide travel lanes, where it intersects California Avenue and would widen to 36 feet (53 ft ROW) after the street entrance to allow parking on both side. The existing roadways of Bowdoin and Columbia Streets are 36 feet wide (60 ft ROW), which includes space for parallel parking on both sides of the street. On the project site, Bowdoin would be 36 feet wide (58 ft ROW) allowing for parking on both sides, Columbia would be 24 feet wide, consisting of two 12 foot wide travel lanes, where it intersects California Avenue and would widen to 36 feet (58 ft ROW) after the street entrance to allow parking on both side of the street. These street widths comply with the Private Streets ordinance in that private streets serving five or more lots shall have a ROW of no less than thirty-two feet wide. Per the Development Agreement, a project level access and circulation analysis is required. The City’s traffic analysis is limited to this analysis as other aspects of traffic were certified in the EIR. The access and circulation analysis concluded that 66 percent of the project traffic is likely to use the Columbia Street entrance/exit to gain access to the property. This is also the likely intersection students would use when walking to school. Therefore, the City has included a City of Palo Alto Page 9 condition of approval for installation of stop signs and crosswalks at this intersection. In addition to the circulation analysis, the memo also provided an analysis related to total vehicle trips. Staff only utilized this part of the analysis to confirm that the total vehicle trips generated by this project are less than the total analyzed in the adopted EIR. Subdivision The Applicant plans to enter into individual ground leases for the single-family, faculty dwelling units, and will submit a Tentative Subdivision Map (Tentative Map) for review by staff and the PTC after review of the development plans by the Architectural Review Board per the MDA. ENVIRONMENTAL REVIEW In conformance with the California Environmental Quality Act (CEQA), an Environmental Impact Report was certified by the City Council for the Mayfield Development Agreement in 2005. The City of Palo Alto/Stanford Development Agreement and Lease Project Environmental Impact Report (EIR) (State Clearinghouse No. 2003082103) concluded that the proposed project would not have a significant effect on the environment with mitigation as proposed except there would be significant and unavoidable Noise impacts, due to the use of heavy equipment during construction. The certified, Final EIR is available for review on the City’s web site at: http://www.cityofpaloalto.org/gov/topics/projects/landuse/mayfield.asp Per the attached Environmental Confirmation Memo (Attachment F), there are no substantive changes to the previously approved project or circumstances under which the project is being undertaken and no new information, therefore the EIR provides the necessary environmental clearance for this subject project. All mitigation measures as stated in the approve Mitigation Monitoring and Reporting Program (MMRP) (Attachment G) would be incorporated into the project as conditions of approval. PUBLIC OUTREACH The property owners and occupants within a 1,800 foot radius were sent public hearing notices for the ARB hearing. Staff has been available to discuss the proposal with interested members of the public and has emailed the College Terrace Neighborhood multiple times to answer questions and inform them of this public hearing. The applicant has also met with members of the College Terrace Residences’ Association. Signage has been posted at the site to inform the public about the proposed project. The ARB Agenda has been available on the City‘s website, which includes a copy of the staff report. Over the past few months, residents have expressed concern about the following items: 1. construction traffic, 2. increased cut-through traffic, City of Palo Alto Page 10 3. visitor parking supply, 4. lack of sidewalks on both sides of the extension of Amherst Street and Holly Way, 5. desire for improvements to the existing bike trail that leads to Kite Hill area (off-site), 6. addition of a Spine Road that would serve to break up the existing mega-blocks (no such City Policy). Items 1, 2, and 3 were addressed as a part of the 2005 MDA and EIR and are not under the purview of this ARB review. Items 1 is also subject to the review and approval of the Public Works Director. Off-site improvements such as 5 & 6 are also beyond the scope of this review. Area residents have also had the opportunity to review the applicant’s traffic memo, dated December 11, 2013. They continue to have concerns about the traffic analysis that was done as a part of the EIR and have responded with two letters. The applicants concerns as they relate to the traffic analysis are attached to this report. The applicant’s response to their concerns is also attached. COURTESY COPY Christopher Wuthmann: cwuthman@stanford.edu Prepared by: Jodie Gerhardt, AICP, Planner Reviewed by: Amy French, AICP, Chief Planning Official Approved by: Aaron Aknin, AICP, Assistant Director Cara Sliver, Senior Assistant City Attorney Attachments:  Attachment A: Applicant's Project Description 10-16-13 (PDF)  Attachment B: Project Location (PDF)  Attachment C: Zoning Compliance Table (DOC)  Attachment D: ARB Findings (DOC)  Attachment E: Conditions of Approval (DOC)  Attachment F: Environmental Confirmation Memo (DOC)  Attachment G: Mitigation Monitoring and Reporting Program (PDF)  Attachment H: Access and Circulation Analysis, March 10, 2014 (PDF)  Attachment I: CTRA comments on Access and Circulation Analysis (PDF)  Attachment J: Applicant's response to CTRA's comment letters (PDF) City of Palo Alto Page 11  Attachment K: Development Plans (Board Members Only)* (TXT) City of Palo Alto Page 1 1 Thursday, March 20, 2014, Meeting 2 8:30 AM, Council Chambers 3 4 Public Hearings: 5 6 1451-1601 California Avenue [13PLN-00433]: Request by Chris Wuthmann of Stanford 7 Real Estate on behalf of the Board of Trustees of Leland Stanford Jr. University for Architectural 8 Review of the demolition of approximately 290,220 square feet of existing R&D/office space and 9 construction of 180 dwelling units, which includes 68 detached single family units and 112 10 multi-family units, as part of the 2005 Mayfield Development Agreement. Environmental 11 Assessment: City of Palo Alto/Stanford Development Agreement and Lease Project 12 Environmental Impact Report (State Clearinghouse No. 2003082103). Zone: RP(AS2) 13 14 Chair Lippert: Ok, we’ll move on to Item 2. This is a public hearing a major review for 1451-15 1601 California Avenue: Request by Chris Wuthmann of Stanford Real Estate on behalf of the 16 Board of Trustees of Leland Stanford Junior University for Architectural Review of the demolition 17 of approximately 290,220 square feet of existing R&D/office space and construction of 180 18 dwelling units, which includes 68 detached single family units and 112 multi-family units, as 19 part of the 2005 Mayfield Development Agreement. Environmental Assessment: City of Palo 20 Alto/Stanford Development Agreement and Lease Project Environmental Impact Report (EIR). 21 Do I have to read the State Clearinghouse number? Do I have to read the State Clearinghouse 22 number on the, ok. And it’s zone district RP(AS2). And with that Ms. Gerhardt if you’d like to 23 introduce the project please? 24 25 Jodie Gerhardt, Senior Planner: Thank you. The project site is a 17 acre site located at the 26 southwest side of California Avenue and it comprises three commercial properties at 1451, 27 1501, and 1601 California Avenue. They are currently developed with three office buildings and 28 surface parking lots. The site is surrounded by single family homes to the west, office buildings 29 to the east and north, and a multi-story residential development to the south. The proposed 30 project is the replacement of these office buildings with 180 residential units. This would 31 include 68 single family homes and 112 multi-family dwelling units. There are also included in 32 the project a community center, a fitness building, swimming pool, and approximately 2.7 acres 33 of useable open space, which includes a central park, tot lots, courtyards, and walkways. The 34 site would be developed with private streets that are interconnecting and would access 35 California Avenue at three locations. These access points would be aligned directly across from 36 the existing public streets of Amherst, Bowdoin, and Columbia. 37 38 The plan for the 68 dwelling units includes 11 different floor plans and 29 different architectural 39 styles a variety of which will be used along California Avenue. And we do have a display up on 40 the wall here for you to take a look at if you’d like. All of the detached homes would have two 41 car garages and many of them would have driveway aprons as well. For the multi-family units 42 they would also be provided with two parking spaces in below grade parking basements. Also 43 on the private streets there would be 108 visitor parking spaces, which is above the 44 ARCHITECTURAL REVIEW BOARD EXCERPT MEETING MINUTES Attachment E City of Palo Alto Page 2 requirement and Stanford has included 112 bicycle spaces mostly in the basement of the multi-1 family buildings. 2 3 We have preformed an access and circulation analysis, which concluded that a majority of the 4 traffic would be using the Columbia Street access point given that’s the direct route to the 5 multi-family buildings. This is also a likely intersection for students to be using to walk to 6 school. And so the City has included a condition of approval for installation of crosswalks and 7 appropriate signage at this intersection. 8 9 This proposed site is part of the Mayfield Development Agreement that was put together in 10 2005 with the City of Palo Alto and Stanford University. Under the terms of the agreement 11 Stanford constructed a soccer field at the corner of Page Mill and El Camino. In turn the 12 Development Agreement provided Stanford with the vested rights to build 250 housing units on 13 two sites in the Research Park area. The first site is the subject site that we’re discussing today 14 and the second housing site would be 2450 through 2500 El Camino Real, which will be the 15 subject of a future Architectural Review Board (ARB) hearing. 16 17 The ARB is requested to review the proposed 180 housing development; however, your purview 18 is limited based upon that Development Agreement to the three following project elements: we 19 are to determine the project’s compliance with the AS2 Development Standards and 20 Architectural Review findings; number two, we are to review and approve the lighting, noise, 21 landscaping, and selection of exterior materials and finishes of the building and other 22 structures; and three, limit review to the California edge of the property to determine if the 23 project approximates the horizontal rhythm of building to side yard setback and façade areas 24 including the relationship of the first and second stories and reflects the eclectic nature of the 25 design of the residence across the street. 26 27 Staff has found that the project is in conformance with the AS2 standards as further described 28 in Attachment C. As far as landscaping several existing trees will remain and the City Arborist 29 and staff will continue to work with the applicant to ensure that there’s adequate tree 30 protection fencing. Regarding the height and massing of the dwelling units we do believe that 31 the proposal on California Avenue does reflect the eclectic nature of the homes across the 32 street, but we would ask you to take a detailed review of that. 33 34 And for environmental as was stated an EIR has been prepared for this project. There have 35 been some updated reports since that time. Staff reviewed all of those reports, preformed an 36 environmental confirmation memo, and determined that none of the impacts or conclusions in 37 the EIR have changed and therefore all of the mitigation measures from the MMRP will be 38 incorporated into the project as conditions of approval. 39 40 We also the project was also noticed to an 1,800 foot radius. The College Terrace residents 41 were also separately noticed. We do have several comment letters that we recently received 42 and these have been at places. We also have color and material boards if you’d like to take a 43 look at those. And we have had some discussions, recent discussions with Stanford. They do 44 have some minor concerns about the conditions of approval. I think there’s just some small 45 tweaks about when exactly things have to be turned in and how exactly mechanical equipment 46 has to be screened. They can discuss those in further detail, but I think they are minor enough 47 that staff feels comfortable discussing those with the applicant after the hearing should you 48 recommend approval. We could work out those minor changes after the hearing and move 49 forward with the project. So staff is recommending approval of the proposed project and 50 City of Palo Alto Page 3 asking the ARB to recommend approval to the Director of Planning based on the architectural 1 review findings and the conditions of approval. Thank you. 2 3 Chair Lippert: Thank you. And before we move forward do any of my colleagues have 4 disclosures they wish to make? 5 6 Board Member Gooyer: Yes, I got a telephone call from Mr. Wuthmann I think it was Tuesday 7 and we talked for 10 minutes, something like that on the phone. 8 9 Chair Lippert: Do you have any disclosures? 10 11 Board Member Malone Prichard: I did meet with the applicant actually about another project 12 and we briefly discussed this project, but no information was exchanged that is not in the 13 packet. 14 15 Chair Lippert: Vice-Chair Popp? 16 17 Vice-Chair Popp: My disclosure is the same as Clare’s. I met with the applicant about a 18 separate project and during that discussion we referred to this project, but no additional 19 information was shared. 20 21 Chair Lippert: Board Member Lew? 22 23 Board Member Lew: And I exchanged e-mails with the applicant, but no information that’s not 24 in the packet was exchanged. 25 26 Chair Lippert: And I’ll disclose I was not contacted. I feel left out. Ok, before we get going 27 here I see we have somebody here from Transportation staff. Are they here to speak on this 28 item also? Do you have anything that you want to add before we go to the applicant’s 29 presentation? You can join staff at the table. You’re a staff member. 30 31 Rafael Ruiz, Transportation Engineer: Rafael Ruiz from Transportation Department; I don’t have 32 anything to add, just here if you have any questions. To answer any questions you may have. 33 34 Chair Lippert: Ok, and if there are members of the public that have questions for Transportation 35 staff he’s here as well. And then Ms. Gerhardt I have a couple of questions before we get, 36 procedural questions. Is this the only public hearing for this item or does this go to Planning 37 and Transportation? What is the route? What is the… this goes to City Council? 38 39 Ms. Gerhardt: The proposed development the ARB would be the final decision body unless the 40 project was appealed. There is a tentative map and a final map that will go through the 41 standard process, but as far as design the ARB is the main decision body. 42 43 Chair Lippert: Ok. And then with regard to the development agreement that’s already been 44 bundled up and put to bed and with regard to the EIR the EIR period is closed and that’s been 45 bundled up and put to bed as well, correct? Ok. Staff is nodding their head, so I just wanted 46 to (interrupted) 47 48 Unidentified Male: That is correct. 49 50 City of Palo Alto Page 4 Chair Lippert: I just want to make that very clear. Ok, with that we will have a presentation by 1 the applicant and then what I would, you’ll have 10 minutes. And then what I’d like to do is I 2 know that there’s a representative here from Stanford and they had some minor concerns and I 3 think we just simply have Stanford raise what their minor, present what their minor concerns 4 are and then I’ll open the public hearing because I want to be able to have the public be able to 5 respond to both the applicant as well as any of Stanford’s concerns. 6 7 Chris Wuthmann, Stanford Real Estate: Good morning, I’m Chris Wuthmann. Thank you for this 8 opportunity to be with you Board Members. I’m with Stanford University Real Estate and 9 manager of the California Avenue/Mayfield Housing Project. As has been mentioned this 10 housing development is a second obligation following the soccer fields that we are fulfilling 11 under the Development Agreement that the City initiated over 10 years ago regarding the 12 future of the Stanford Research Park. The purpose of the agreement was to achieve 13 community and environmental benefits and specific rules were set to enable and govern 14 implementation over 25 years. We appreciate the work that staff has done reviewing these 15 rules and their application as this project’s been developed and also the feedback that you gave 16 us at the preliminary ARB and that we’ve received from the College Terrace neighborhood as 17 expressed over many meetings. 18 19 We would like to emphasize to College Terrace that this ARB meeting is not the end of our 20 dialog with College Terrace. An important requirement of the Development Agreement’s 21 mitigation plan is City approval of a detailed construction traffic management plan after City 22 approval of such and before grading and building permits. Stanford and the City will be 23 working on this over the coming months and we hereby reiterate our commitment to include 24 College Terrace in the discussions involvement development of this plan. When construction 25 commences we will maintain an informational construction website and 24/7 hotline number 26 whereby concerns can be brought to our immediate attention and receive response throughout 27 the project’s duration. This has been a successful means of regular communications most 28 recently used for the Olmsted and Comstock housing projects on the north side of College 29 Terrace. Ok? 30 31 This major, these major ARB plans represent project revisions and refinements in three main 32 areas to respond to the preliminary ARB and staff and College Terrace comments. First, find 33 California Avenue frontage. We’ve reduced the number of front driveways from seven to four 34 out of 12 houses. We have refined roof pitches and we have resized a large gap that existed 35 between two of the houses in the area of greater topography. We’ve enhanced the quality and 36 balance of the exterior materials of all of the homes including incorporating some contemporary 37 materials and styles along with the traditional plans. And finally we have brought as 38 recommended a child’s play area forward to Columbia Street for better visibility and access. 39 Our project team will now illustrate these moves as well as address adherence to the 40 Development Agreement requirements. 41 42 Ron Nestor, William Hezmalhalch Architects: Good morning, my name is Ron Nestor. I’m a 43 Senior Principal with William Hezmalhalch Architects and joining me today is my partner Bill 44 Hezmalhalch and we are the designers of the single family homes. The California Avenue 45 frontage is composed of three blocks that match the street grid of College Terrace. On the 46 three blocks there are 12 single family homes along California Avenue. The ARB asked us to 47 include the first home on Amherst at the intersection of California as a 13th home for your 48 review. These 13 homes comprise seven different floor plans in 11 architectural styles. Three 49 of them are one story homes and two homes have had their roof pitches reduced as suggested 50 City of Palo Alto Page 5 by the ARB. Per the requirements of the AS2 standards the homes reflect the eclectic nature of 1 the design of residences on the north side of the street. Next slide. 2 3 The project will preserve street trees plus add additional street trees to fill in gaps. The homes 4 will have a broadly diverse array of exterior materials, colors, textures, roof forms, roofing, 5 accent elements and details authentic to their particular styles. And you see a sampling of that 6 on the bottom of the wall there. They will also have a high level of individualized front yards 7 with additional trees, customized paving, and landscape. Of the 12 California frontage homes 8 only 4 have garages and driveways oriented to California. Maintaining the continuity of the 9 parkway and providing maximum street tree opportunities. Next slide. 10 11 The homes approximate the horizontal rhythm of building to side yard setback and façade areas 12 and the relationship of upper and lower stories of residential properties located across the 13 street from or in the vicinity of the site. And distances between houses on California Avenue 14 vary from about 10 feet up to 27 feet in areas where rear garages occur. On this block 15 between Bowdoin and Amherst the homes have been repositioned to lessen a large gap as 16 suggested by ARB and a Spanish style courtyard home has been introduced in the middle of the 17 block. Next slide. 18 19 This photo montage was requested by the City and it shows the end of California at Amherst 20 Street, the existing house to the right, the pathway to Kite Hill in the center and the 1st house 21 or the 13th house shown to the left. And the uphill site of Amherst is designed to reflect 22 existing Amherst with uphill sloping front yards. Next slide. 23 24 This slide demonstrates some of the variety of homes along California Avenue. The first 25 example is a Spanish style home with red clay tile roof, Santa Barbara finish stucco, ornamental 26 tile and iron detailing, and a wood trimmed Spanish bay window. Another example is a split 27 level brick Prairie house at the corner of Amherst that features extensive brick detailing, cast 28 stone caps and detail elements, a broad porch, and a second floor roof balcony. And a third 29 example is a Craftsman style home that features fiber cement shingle siding with an articulated 30 brick base, painted wood trim with distinctive Craftsman shaped details, and textured asphalt 31 shingled roofing. And now let me introduce David Israel. 32 33 David Israel, BAR Architects: Good morning, I’m David Israel, Principal in charge with BAR 34 Architects in San Francisco. We’ve been responsible for the multi-family housing component as 35 well as the fitness facility and the community recreation building. In response to the input that 36 we received from ARB the primary changes to the multi-family have included further enrichment 37 and variety in the materials applied to include a combination of cement fiber panels both 38 horizontal and vertical, cementitious siding, individual board siding as well as board form 39 concrete at the base of the building, and stone accent panels both at entry and major arrival 40 points in the project. I’d be happy to answer any other specific questions when we get to that 41 point. Thank you very much. 42 43 Paul Lettieri, The Guzzardo Partnership: I’m Paul Lettieri with The Guzzardo Partnership, 44 Landscape Architects. One of the things that we’ve emphasized in the plan I think it’s pretty 45 obvious when you look at it is that we have a really strong street tree pattern that we’ve been 46 able to create all the way through this site including California Avenue, which includes retaining 47 existing trees as well as supplementing with new trees. And that whole tree pattern will be 48 worked on with Dave Dockter in some detail going forward in terms of species and details. 49 50 City of Palo Alto Page 6 We’ve also have a really diverse and varied plant palette partially along California Avenue with 1 draught tolerant California natives, naturalized plant material, and really sort of semi-custom 2 yard design for each one of those houses. The landscape design is trying to be as varied as the 3 housing design is so that they really do feel like individual homes that were built over time. 4 And that rationale will continue through the rest of the site as well relative to the single family. 5 6 The tot lot idea that was talked about we’ve, I don’t know if you can see it on the plan… 7 [unintelligible] this doesn’t work does it? Here we go. We’ve moved it out to Columbia so that 8 it is more inclusive and more visible as opposed to where it was before, which is sort of hidden 9 back here with these homes. Hierarchically the Columbia entry now has a 12 foot or 11 and a 10 half foot wide planting strip in it as opposed to the typical 5 foot wide one that’s elsewhere. It 11 sort of moves the pedestrians a bit further away from the street so as you, where there’s no 12 parking that’s the condition that we have, which is true at the throat of the entryway. We’re 13 saving on the order of 203 trees on the site, saving or relocating. And we can go to the next 14 one. 15 16 We’ve also updated the lighting a bit. One of the comments we had was to try to have a little 17 bit more modern kind of light fixtures and so this is illustrative of the more modern light fixtures 18 that would be on the site. And also the orange dots show onsite bike racks. There’s three 19 locations shown on the plan where there’s bike racks. There are also 112 bike parking spaces 20 under the multi-family building split roughly equally. And also the blue dot, which is very 21 difficult to see on the screen here is up here, which is really just (interrupted) 22 23 Chair Lippert: Can you wrap it up please? 24 25 Mr. Lettieri: I am wrapping it up. The, which is where the trash pickup would be on pickup day 26 only. Otherwise the trash is stored under the multi-family building, brought out, picked up, and 27 then put back. And with that I’d like to thank you for your attention and our whole team is 28 here and would be happy to answer any questions you have. 29 30 Chair Lippert: Thank you very much. Yeah. Chris did you want to just very briefly outline the 31 concerns that Stanford had just so we’ve got those on the record? 32 33 Julie Jones, Perkins Coie: Hi, I’m Julie Jones from Perkins Coie working with Stanford on this 34 project and on the Mayfield Development Agreement. We just got I think as everyone did the 35 conditions of approval on Monday afternoon. We hadn’t had a chance to see them before then 36 and we haven’t had a chance to talk with staff about what our concerns are and resolving them. 37 Most of them are completely minor technical points. The other points in here that I had noticed 38 and we haven’t yet had a chance to go through are things like construction noise. We think 39 that there are some statements made about construction noise for example that we think are 40 not quite matching what’s in the construction ordinance, the noise ordinance. We don’t intend 41 to have construction from 8:00 a.m. to 8:00 p.m. Monday through Friday. Our understanding 42 of the requirements is 8:00 a.m. to 6:00 p.m. That’s just an example of the kind of thing that 43 we’d like to clean up. There’s an indemnity provision in here that we haven’t seen in other 44 Mayfield approvals, so we want to discuss that with the City. There are some timing questions 45 and kind of minor I think there are some tree questions that we’d like to resolve. But as I say 46 we haven’t had a chance to discuss those yet with staff and anticipate that we would be able to 47 do that in the next few days and clean these up. 48 49 Chair Lippert: I appreciate that. What I want to try to avoid is if we do move forward and we 50 do approve the project today I want to avoid any substantive changes that would have to 51 City of Palo Alto Page 7 return either to the Board or the subcommittee. And so that’s really the main reason why I 1 want them on the record. Do you have anything else that you want to add to that? 2 3 Ms. Jones: I don’t and I think all of the types of things that we’re talking about are types of 4 issues that are not within the scope of what ARB is discussing. They are much more the type of 5 ordinary staff various City department conditions of approval that you would see in any project. 6 So I don’t think that there’s anything in here that would involve coming back to ARB for further 7 discussion, but of course we would discuss that with the City. 8 9 Chair Lippert: Ok. I see that we have Cara Silver here today. Cara is there anything that you 10 need to add to that as well from a legal point of view? Ok, great. Thank you very much. With 11 that what I will do is I’m going to open the public hearing. I have a number of speaker cards. 12 You’ll all have three minutes apiece. If anyone has not handed in a speaker card then please 13 do so at this time. The first speaker will be Brent Barker followed by Margit Aramburu. 14 15 Brent Barker: Good morning Chairman Lippert and Board Members. Thank you for the 16 opportunity to speak. My name is Brent Barker. I’m President of the College Terrace Resident’s 17 Association. You’re going to hear three sets of issues today. The first set really within the 18 purview of the ARB and other concerns outside. The construction traffic before the project 19 begins and the traffic after the project begins and there were the two conditions that we set 20 forward in a petition to Stanford University about three/four weeks ago signed by 600 residents 21 of College Terrace expressing our concerns. We wanted all traffic off of California Avenue, all 22 construction traffic and we were hoping for a relief road if you will or route outside after the 23 construction was complete. Now we have a commitment from President Hennessy that there 24 will be a construction road corridor coming in off of Page Mill Road until September 30, 2015. 25 If the construction were to start tomorrow that would give us roughly an 18 month window and 26 we’ll see that narrow because the construction is not going to start right away. We’re looking 27 for more. We’d like to have more. We have met with the City and with Stanford this past week 28 to begin the process of the construction management plan and this is an ongoing plan and 29 we’re actually quite pleased with the reception that we’ve gotten. 30 31 The second issue, the traffic coming out afterwards is a much more sharply divided issue and it 32 really stems from one single number that got baked into the Mayfield Agreement in 2005. So it 33 has the imprimatur of law, but to give you an analogy that expresses the pretzel of logic that 34 goes with this is a landlord speaks to his tenant, says “You’ve been renting for 12 years the 35 rent’s been $1,000 a month and I want to reduce that.” He says, “Great, what?” “To $1,400.” 36 He says, “Wait a minute, that’s an increase.” “No, because I have a legal paper here that says 37 I can charge you $3,400 a month and I’m going to reduce that $2,000 and down to $1,400.” 38 And the tenant says, “Wait a minute, that’s an increase.” And the landlord said, “No, that’s a 39 reduction.” And that’s where we are. That’s kind of a silly analogy, but that’s where we’re 40 divided. And we would hope that if we’re right and Stanford is wrong and that there’s a surge 41 of traffic coming out of this project after completion that the City and Stanford will work with us 42 to mitigate this. If you can’t do the mitigation with a road coming out before then you’ll work 43 with us afterwards. Thank you. 44 45 Chair Lippert: Thank you very much. Margit Aramburu followed by Ed Schmidt. 46 47 Margit Aramburu: I always know who they’re calling. Thank you. Margit Aramburu, I live at 48 227 Amherst Street. I’m also on the College Terrace Resident’s Association Board as a Stanford 49 Research Park Observer and I have been participating representing the Board in the discussions 50 City of Palo Alto Page 8 with Stanford and we’ve also met with the City to talk about the project. And I wanted to talk 1 today briefly about two issues. 2 3 Noise, the staff report says the ambient noise on California is about 60, the EIR noise levels 4 monitored by the EPI Associates are almost 57.6, but two recent ambient noise studies have 5 been done on California Avenue that are much lower, they are 46 and 48. So we’d like to 6 recommend that a new ambient noise study be done as a reference point when all commercial 7 or all the business activities leave the project site and then that would be an appropriate 8 reference for the conditions that are in the staff conditions of approval. And then I also thank 9 you for correcting that construction only goes until 6:00 p.m. When I saw the 8:00 p.m. my 10 eyes kind of rolled around in my head. So that would be extremely helpful to correct the 11 Condition of Approval 8A. And then adding the new ambient noise level could be added to Staff 12 Approval 9. 13 14 And then at the last meeting the Board talked a lot about connectivity and linkages and there is 15 a condition at the City for them to review the streets linking up to the public streets and the 16 curb cuts, etcetera. For local schools we’re still waiting to hear because the School District has 17 not yet decided if the children will go to Nixon up that Kite Hill Path, which you’d hope would 18 get redone, which is not yet been proposed or to Escondido. For both those options we would 19 like to support continued work on a safe path to school for the children. For Nixon students 20 they would definitely need to redo that Kite Hill Path and to get children to Escondido we do 21 believe there should be a crosswalk. I’m not sure if there should be one at Columbia, maybe it 22 should be at Bowdoin which links directly to a crosswalk across Stanford. 23 24 For sidewalks I really want to emphasize that the City, the Draft Environmental Impact Report 25 (DEIR) talked about that the City would require sidewalks where there are none and I really 26 would like to require, have the Board recommend sidewalks on all the new streets including 27 both sides of Amherst and Holly. Right now they only have one side of Holly and one side of 28 Amherst and I think that is a big mistake and not consistent with the EIR. And we for bikeways 29 we’d like to have safety; we’d like to have a painted bikeway on California Avenue. Right now 30 the EIR also said that there were bikeways adjacent to all the residential sites and there are, if 31 it is it’s only in our mind because there is no designated bikeway and we will have a lot more 32 bikes coming out of the project. 33 34 And finally I’m concerned about the street design. They are all different widths and then a lot 35 of them have the bulb at the entrance. So if they could be consistent with each other and with 36 the existing College Terrace streets that would be very helpful. Thank you. 37 38 Chair Lippert: Thank you. Ed Schmidt followed by Travis Giggy. 39 40 Ed Schmidt: Hi, I’m Ed Schmidt and I’ve been a Columbia, I’ve lived at Columbia Street for the 41 last 27 years. I’ve been a resident in Palo Alto for the last 45. That’s it. Thank you. 42 43 I’ve worked in an industry where there was a lot of scrutiny, peer review, and things like that 44 and when I read the, this last report by Hexagon I was really appalled by the way they’ve 45 stretched the truth and made it, made exaggerations like the example that Brent started talking 46 about and I will continue here. The Traffic Engineers Institute have put together a set of tables 47 and this is how they misused them. They put down all the data from different square footage 48 of different in this case office buildings. Instead of using Research and Development (R&D) 49 facilities they use office building tables. Those are the data points that are exposed and then 50 they do the best curve fit through that, those data points. Let me see if I can [unintelligible] 51 City of Palo Alto Page 9 this… I don’t know if you can see the yellow line there, but it does cover all those points and 1 then that yellow triangle is the estimated points based on the amount of square footage that 2 the buildings that are being torn down would have and they say, ok, well that’s the amount of 3 traffic that’s produced there. Well, that wasn’t done. The, that red line was produced as some 4 average value giving you the red triangle, which is almost twice as big as the yellow triangle. 5 So that’s just an example. 6 7 I think that we have been realistic in our approach. We’ve actually gone ahead and looked at a 8 neighboring community to help address how much traffic is going to be going toward Stanford 9 University and away from University. This is the current College Terrace traffic routes. We’re 10 asking for more cut through curb cuts allowing, and we’re asking also Stanford to be generous 11 and give up a strip of land 24 feet wide by a couple of hundred feet long to allow people to 12 come out of that Mayfield Housing Project onto Page Mill Road and then can go down Peter 13 Coutts or anyplace else in the area. A number of questions that we had were which way are 14 the traffic going? And the Hexagon report as well as Stanford have concluded that almost 15 nothing is going toward Stanford, everything is going in the other direction. We did a study at 16 Peter Coutts and we showed that the traffic was approximately split. 17 18 Chair Lippert: Could you wrap that up please? 19 20 Mr. Schmidt: Ok. Is the desire to make every nickel count so strong that we can’t put a few 21 more curb cuts and access to Page Mill to diffuse the truck and later the residential traffic? If 22 we are right and Stanford is wrong how will Stanford or the City of Palo Alto mitigate the 23 problem after the Mayfield facility housing is completed under its current design? 24 25 Chair Lippert: Thank you very much. Travis Giggy followed by Douglas Shaker. 26 27 Travis Giggy: I’d like to give permission to Fred Balin to speak on my behalf. 28 29 Chair Lippert: Ok. Fred, you’re at the end so… Douglas Shaker followed by Eric Carlson. 30 31 Douglas Shaker: I’m Doug Shaker. I live at the corner of College and Hanover so I’m someone 32 who would be significantly impacted by the traffic flow through the neighborhood. I’m not 33 really qualified to comment on process. I have to say that aesthetically I kind of like it. If 34 that’s the main characteristic that you’re passing on it looks like a nice project. I’m not qualified 35 to read the traffic projections that have been made in the EIR or the criticisms thereto, but to 36 me as a citizen, as a resident the idea that the traffic through the neighborhood won’t be 37 significantly increased kind of strains my credulity. I don’t have any concerns about pedestrian 38 or bike traffic. I do have concerns about vehicular traffic. 39 40 In some ways I guess what I just want to say is the traffic is, turns out to be really bad College 41 Terrace is relatively well organized and politically active. I’ve heard people of other 42 neighborhoods in Palo Alto say why does College Terrace always get what they want? Well, 43 we’re well organized and politically active. And I believe there will be a response if the traffic 44 through the neighborhood is excessive. I for one would be interested in more traffic bumps on 45 California Avenue or closure of more Amherst or Bowdoin or Columbia or all three with bollards. 46 I just, I’m heavily concerned that additional traffic through the neighborhood will make it 47 dangerous and less livable and I know that College Terrace will respond if that’s what actually 48 happens. So I think a more useful thing would be if we were to address that before the project 49 is built rather than after. Thank you. 50 51 City of Palo Alto Page 10 Chair Lippert: Thank you very much. Eric Carlson followed by Stewart Carl. 1 2 Eric Carlson: Good morning Board Members, my name is Eric Carlson. I moved to College 3 Terrace in June 2010. I live at 1532 South California Avenue so I am at ground zero. I am 4 right in between Columbia Avenue and Bowdoin Avenue. So I’m one of those eclectic houses 5 across the street from the housing development. I live there with my wife and two daughters, 6 my fifth grade daughter and my eighth grade daughter. Next door to us is a single mom with 7 her daughter who is 14 years old and on the corner of California and Bowdoin is a house with 8 three girls under the age of 7. So on the block directly across the street from the only two out 9 of the three outlets of the 180 housing units live seven girls and we’re not an exception to the 10 neighborhood; seven young girls who are learning to bike ride, who are learning to roller blade, 11 who are having lemonade stands out in the front. What I’d like to say is that one of the things 12 I love about College Terrace is that the children use the neighborhood. They are growing up 13 there and in fact we are teaching them to cross the streets and look both ways and so forth and 14 no doubt about that, that plays a role, but my hope is that as a neighbor Stanford University 15 they would recognize that, they would want to do everything possible to ensure the safety of 16 the children in the neighborhood and in fact having only two outlets or three outlets going 17 directly onto California Avenue is a compromise to that safety. The fact is is that with more 18 outlets out to Page Mill or perhaps down to Hanover the traffic would be relieved and the safety 19 of our children will be better ensured. Thank you. 20 21 Chair Lippert: Thank you very much. Eric, I’m sorry, Stewart Carl followed by Ann, oh, Ann 22 Lafargue, I’m not even going to go for the middle name, Balin. 23 24 Stewart Carl: Hi, my name’s Stewart Carl and since this is an ARB I’ll address the architectural 25 issue. I would like to strongly disagree with the architects and staff that they have managed to 26 capture the character of College Terrace. As I look at the project what it feels like to me is I 27 have this impression of camouflage. During World War II you would from a distance put 28 different coverings on things to disguise them as something else and that’s really what I feel 29 like this project is, it’s a kind of a Disneyland version of College Terrace and they’ve really failed 30 to capture the real character of our neighborhood. And I think the reason that is is because 31 College Terrace has 800 house and probably 800 architects. And what we have is one 32 architect, 13 floor plans, and a variety of fake architectural styles applied to the outside of the 33 houses. And I think that’s why they have failed to capture the true nature of our neighborhood, 34 which grew organically. Really what we have here is a Planned Community (PC) disguised or 35 camouflaged to look like College Terrace. Thank you. 36 37 Chair Lippert: Thank you very much. Ann La… 38 39 Ann Lafargue -Balin: Lafargue (interrupted) 40 41 Chair Lippert: Lafargue, that’s a F. Ok, thank you. Lafargue -Balin. Yes, ok. Great. 42 43 Ms. Lafargue -Balin: Good morning Board, my name is Ann Lafargue -Balin and I’m a native 44 Palo Altoan. I live on the corner of Columbia and California Avenue and I would basically agree, 45 I wouldn’t say maybe Disneyland, but I would agree with Stewart that it’s a proximity. It 46 doesn’t feel authentic. I still feel the ARB, sorry, Stanford, the applicant, architects have not 47 really gone and done outreach enough since the last meeting with you to talk with us. There’s 48 really the architect the builder or the applicant could have done more regarding these fronting 49 properties. So on block one, Dartmouth to Columbia in College Terrace the styles are European 50 Cottage, Cape Cod, and Bungalow. There are four parcels proposed for the Mayfield site. 51 City of Palo Alto Page 11 Therefore the horizontal rhythm of the building to side yard setback loses much meaning when 1 side yards across California Avenue are offset. Shouldn’t there only be three homes on the 2 Mayfield site as well? 3 4 We live in a single story California Bungalow built in 1918 with 100 foot section on California 5 Avenue that includes the main house and detached two car garage. See the photos. Ok. The 6 proposed Mayfield single family home across the street on Lot 4 it’s called Lane Woods under 7 Floor Plan 9SF.18 is two stories high and the massing and relationship of first and second 8 stories does not approximate ours as we have no second story. We have a simple, gable 9 pitched roof. Lane Woods has a dormer, a second story with a dormer. As for the façade our 10 front door and entranceway is on Columbia Street. So again, there is no approximation. The 11 one story Spanish style home on Lot 3 is much more compatible. We ask that you recommend 12 that the Spanish style be across from our home at the corner of Columbia Street. Either one of 13 the two Plan 9 buildings on this block is better suited across from the Cape Cod in the center of 14 the block. The others should be removed and a single story structure should be placed as the 15 third and final Mayfield house on the block across from the European Cottage at the corner of 16 Dartmouth and Columbia. Thank you. 17 18 Chair Lippert: Thank you. Getting down to the bottom of the list here so if there are any other 19 speakers, members of the public that wish to speak to this item please fill out a speaker card 20 and give it to the clerk. We’ll go with Karina Cheng followed by Fred Balin. 21 22 Karina Cheng: Hello Board I’m Karina Cheng. I’m born and raised on 2321 Amherst Street since 23 the Fifties, so my comparison is fields and horses from El Camino all the way past 280. 280 24 was not built so the sound level was quite different. I’d like to speak to the plans that were 25 submitted by Stanford and specifically in the street scene that they showed driving up California 26 Avenue what they omitted was the transformer that will be three feet by three feet by three 27 feet with an eight foot clearance. Your landscaping drawings conveniently show it covered by 28 shrubs. In the plans it states that there must be an eight foot clearance facing down towards El 29 Camino for electrical access and I confirmed that with the City of Palo Alto Utilities Engineering. 30 So the landscape drawings are misleading regarding the visible nature of that and so that’s not 31 consistent with the rhythm and harmony of the neighborhood. 32 33 I’d also like to talk about the two story garages, the two car garages. There are four 2 car 34 garages on California Avenue and they all have a second story above them. If you look at the 35 existing homes there’s only three houses that I can see that had 2 car garages. The one that 36 the Balin’s have has nothing above it. It’s freestanding; it’s one story for 2 car garage. There’s 37 another one, but it’s behind the house at Dartmouth and California so it’s hidden from the 38 street. There may be other ones that I couldn’t see and the only other one between Amherst 39 and Bowdoin is recessed into the ground so that the residential floor that’s above it is really a 40 first floor. So the massing is quite different. 41 42 Also on parking the AS2 states that no parking is permitted within the 20 foot setback. Two of 43 the four garages facing California have wide aprons, wider than a driveway. They take up over 44 35 percent possibly 50 percent of the fronting width of the lot and will presumably be used for 45 parking besides turning around. I’d also like to mention that there’s a house at Lot 7; oh, I sent 46 a handout to you so it should be in your packet. There’s a porte-cochère at Lot 7. For those of 47 us who don’t know what a porte-cochère is when you go to a gas station you’re standing under 48 that roof, that’s a porte-cochère. So across there’s Plan 7 has a house that’s 46 feet wide 49 including a 19 foot wide porte-cochère. I would like somebody to point out to me anywhere in 50 City of Palo Alto Page 12 College Terrace that has a gas station roof 19 feed wide at the front of the lot. I would propose 1 that that should be removed. There are other Plan 7’s that don’t have it. 2 3 And then I’d also like to just point out that there are air conditioners in the fronts of the house 4 that create noise; again, no air conditioners in the front of the house. They could like the rest 5 of the homes they could be moved to the back, 8 of the 12 houses have the air conditioner in 6 the back. The ones on the side should go to the back and please have Stanford observe the 7 fence laws and observe the site distance triangles so that cars can back out of the driveway 8 without having their view obscured by the fences. Thank you very much. 9 10 Chair Lippert: Thank you. Ok, we have Fred Balin and Fred Balin is actually going to be 11 speaking for Doria Summa, [unintelligible], and Travis Giggy. So you will have a total of nine 12 minutes Mr. Balin. 13 14 Fred Balin: This will be under six, please don’t till we’re all cued up. 15 16 Chair Lippert: And following Mr. Balin will be Lee Brokaw. 17 18 Mr. Balin: Six minutes, go. Fred Balin, College Terrace Board, good morning. 180 units of 19 Mayfield housing all Stanford facility and family. Amherst, Bowdoin, and Columbia Streets, the 20 ABC streets blocked at Stanford Avenue. Dartmouth also blocked at Werry Park. Rotate 45 21 degrees for the schematic. The most direct route to and from campus, Escondido, and Bing 22 schools is through the ABC street segments then down College Avenue and across Hanover, 23 next Harvard or further down. Note the U-shape with horizontal ABC street rungs. Here it is 24 again amid green icon housing units whose vehicles must access it. 180 housing units in 25 Mayfield as well as 201 in College Terrace. Mayfield almost doubles the number of homes and 26 arguably doubles the number of vehicle trips along this ladder shaped corridor. 27 28 But now look inside Mayfield; 68 single family, 112 multi-family residences. As the vehicles exit 29 they will distribute towards Stanford or down California Avenue, but first all of them will 30 traverse the smaller more congested Mayfield streets with 75 percent on the Columbia Street 31 extension because it is the route to the garage under the multi-family complex. Crowded? Not 32 to worry, alternate modes of travel we are assured will handle it. But our resident team sat 33 outside Peter Coutts housing next door to us for two days counting cars and the reductions 34 were much, much less than claimed by Stanford’s consultants that were claimed for Mayfield. 35 And we also recorded the directionality; as Ed Schmidt pointed out about 50/50 to or from Page 36 Mill Road or Stanford Avenue. 37 38 A Mayfield only easement from the rear to Page Mill Road would ease internal traffic 39 congestion. The University calls this an incompatible use, but at the Mayfield/El Camino site the 40 only road will be rear easements, will be via a rear easement between the surrounding banks. 41 Eduardo Martinez, as courteous and respected a Planning Commissioner as you will find said, 42 “Our hands are tied, but Stanford your hands are not. Your response that it’s incompatible to 43 do this or that strikes me as very arrogant. Go back to your community and to your neighbors 44 and make it work better for them.” 45 46 And what about access for emergency vehicles and potential evacuation? The California Code 47 allows an exception to a second access road if there are sprinklers in the multi-story building, 48 but should it be invoked if the travel is longer and more congested? Here’s the code. What can 49 be done? 50 51 City of Palo Alto Page 13 Review Board Members skillfully address the items within your purview, but you have a right, 1 even an obligation to speak to the needs of future residents. July 2013 Vice-Chair Lew, 2 generally the smaller the block pattern the better. Planners and urban designers do agree with 3 that. The giant superblocks are really not good urban design. You want smaller. The 4 community is looking for something like that too and I just don’t want to preclude future things 5 that could happen. It seems like the underlying structure should have more connectivity. Staff, 6 Transportation, and Planning your analysis of mitigations are limited to the number and 7 locations of curb cuts and the connections of onsite streets and drives to the public street 8 system. Both are inadequate. The top heavy Columbia Street distribution requires a curb cut 9 at Dartmouth with connections to the adjacent driveway so that the garbage trucks don’t have 10 to back out [unintelligible] other trucks onto Columbia and also circulation to the rear with a 11 new garage lane and a curb cut out and away from California Avenue. 12 13 Stanford faculty interested in the housing ask any questions until you are satisfied this project 14 will work for you. Stanford powers that be respectfully stop telling us that all is fine. When 600 15 of your neighbors sign a petition and say there is a problem then there is a problem. I played 16 hooky yesterday so I could study the plans at our lovely College Terrace Branch Library. It 17 stands there today because at least two generations of residents fought the City’s considerable 18 attempts to consolidate it. That included the late Jim Culpepper whose notable efforts 19 preserved Kite Hill as open space so future Peter Coutts residents could enjoy it as well. 20 21 Stanford you’ve helped us with funding for traffic calming and the parking permit program that 22 has helped protect and enhance the neighborhood. Work together with the community now to 23 ensure this project is a success by implementing the needed changes or at a minimum redesign 24 it with an enhanced internal circulation contingency plan as well as secure an easement on the 25 adjacent parcel so in the event after occupancy your consultants analyses prove invalid we 26 together with our new Mayfield neighbors are not here again upset but with very limited 27 options. Thank you. 28 29 Chair Lippert: There’ll be no applause. This is a public hearing and what it does is it 30 discourages other members of the public from speaking whether you express emotion either by 31 clapping or jeering it’s just not appropriate here. So I appreciate your compliance with that. 32 Mr. Brokaw you’ll be our last speaker unless I get another speaker card and then we will take a 33 five minute recess and then reconvene. 34 35 Lee Brokaw: My name’s Lee Brokaw. I’ve lived for 40 years at 2080 Hanover and that’s halfway 36 between Stanford and College. I lived there when it was a raceway before Jim Culpepper was 37 able to get the barricades in to have traffic calming. And what we have right now with the 38 mothers in the SUV’s and the one child per vehicle dropping kids off at 8:00 for Escondido 39 School sometimes parking in our driveways when we come out and say, “But you can’t park 40 here.” And they say, “Don’t worry, I’ll be right back. I’m walking my kid to school.” We’ve got 41 a bottleneck of traffic at 8:00. The traffic impact from this additional housing on Hanover 42 Street is going to be a nightmare. 43 44 The Fire Department and the paramedics multiple times a day go roaring down Hanover Street 45 to parts unknown toward Stanford campus. When they have not been going by with their lights 46 flashing I have walked out into the street and stopped them and I have said “What are you 47 going to do when you have an emergency at 8:00 in the morning and Hanover Street is bumper 48 to bumper people trying to get through that intersection at Stanford and Hanover? How are 49 you going to do your emergency service?” And they said “We are extremely worried. Please 50 take this to the powers to be at the City. We can’t do anything, you guys can. You can get 51 City of Palo Alto Page 14 Stanford to play ball with us.” Apparently the deal on housing is already set, but you actually, 1 they actually have to come to you to get permission to do what they’re doing and I think the 2 traffic is the biggest issue. There needs to be another way out. At the Escondido meeting I 3 asked some representative from Stanford why aren’t you cutting California Avenue up to Peter 4 Coutts so people can come out and go left up to Peter Coutts? And he said the hill was too 5 steep. I guess the traffic engineers that built San Francisco streets have a little bit better 6 handle on hills than the ones that work for Stanford. 7 8 Chair Lippert: Thank you Mr. Brokaw. Ok, we’re at an hour and a half for our meeting this 9 morning so we’ll take a five minute break so that we can use the restrooms. 10 11 THE BOARD TOOK A BREAK 12 13 Carina Chiang: Hello Board, thank you. I wanted to point out that for Lot 21, the one which is 14 uphill at the top of California Avenue and Amherst it has a, if you look at that drawing over 15 there, the driveway is as soon as you get into the lot, into the property and it’s somewhat 16 obscured by trees and shrubs. So when the car there needs to back out it’s going to be a blind 17 backing out. So for the safety it might be worth considering flipping it so that the driveway’s a 18 little bit further in and they get a little bit more distance to see as the cars are coming into the 19 property. 20 21 I’d also like to point out in the lengthy handout that I sent you the reason I cited so many 22 different sheets is that there is a great deal of inconsistency between the way given lots and 23 the layout of the property is portrayed. You’ll see for example on Lot 8 the air conditioner 24 moves around to different locations: side of the house, back of the house… so I don’t see how 25 that can be a commitment to the design as design elements are being moved. Also for the four 26 properties that have the driveways facing onto California Avenue if you look at the different 27 drawings the location of the [widen] aprons changes and in some cases those [widen] aprons 28 have multiple wide driveway aprons cutting into California Avenue for a single property. So that 29 seems to be in violation of AS2 with the parking and the excessive amounts of parking within 30 that 20 foot setback. 31 32 Also as we look at the different drawings we see that one of the properties crosses into the 33 setback line. So again I don’t see consistency amongst the drawings and that’s a concern. As 34 far as the fences go I wanted to point out that the fences on California Avenue on the existing 35 homes they’re all 36 inches or below and two of the three of those are open fences, they are 36 like 40 to 60 percent open space and the one solid one is heavily covered with vegetation. 37 What Stanford is proposing are fences up to 42 inches. So I’m talking about the ones that are 38 facing the streets. Thank you very much. 39 40 Chair Lippert: Thank you. Ok, with that I don’t have any other speaker cards so I will close the 41 public hearing. And at this point I’m going to give Stanford five minutes to sort of make some 42 closing statements and also any additional comments you want to make with regard to anything 43 that the members of the public have addressed here today. So you have five minutes. 44 45 Mr. Wuthmann: Sure, we remain ready to answer questions that you may have of course. We 46 have not prepared a closing statement so this could be ad hoc. I would welcome anybody on 47 the team that feels that there’s an objective correction that needs to be made to come up and 48 offer that. One that I would make off the top has to do with the statement about our street 49 widths. There is an implication that they are less than the corresponding street widths across 50 the street in College Terrace the Amherst, Bowdoin, Columbia street widths. Our street widths 51 City of Palo Alto Page 15 are actually, our travel lanes and street widths are equal to or larger than those existing in 1 College Terrace. We do have two streets, Amherst and Columbia where we have not had 2 parallel street parking at the street entrances to smooth the turning in and out of our project 3 for safety reasons and then open up to street parking once you get into the site. Our travel 4 lanes at those “narrow entrances” are actually 12 foot travel lanes versus the 11 foot travel 5 lanes otherwise in our project and otherwise in College Terrace. So we actually have larger 6 travel lanes for better and safer turning. Once inside our project we have 11 foot travel lanes 7 and 7 foot parking, which is equal to College Terrace actually. So that’s a correction I wanted 8 to make. 9 10 A statement with respect to the one sidewalk on Amherst; the reason that was done is that’s 11 the area of greatest topography in our site and so some of our lots are lost to slope. In an 12 interest of maintaining reasonable lot sizes there we looked at the possibility of just one 13 sidewalk on that lot to leave as much land in this topographic area for lot area and we felt since 14 this, the sidewalks on this block serve the fewest number of residences in the project that one 15 sidewalk on that block would be appropriate. 16 17 With respect to the extensive traffic conversations again these topics were extensively dealt 18 with during the Development Agreement analysis and adoption in the EIR and Development 19 Agreement process. I will say that as required we’ve had a third party access a circulation 20 memo done, a technical engineering memo done for Transportation. Two thirds of the units 21 are on Columbia Street. The projection there is that during the a.m. peak one vehicle will be 22 coming out Columbia Street every minute and three quarters and that’s the peak hour traffic on 23 Columbia to answer that question what kind of traffic will there be on Columbia? Staff has 24 recommended in the conditions of approval the addition of crosswalks and a stop sign on 25 California Avenue as a condition on our project. We did not object to that and if staff requires it 26 and College Terrace neighbors support it we certainly will comply with that. Yes? Thanks. 27 28 Jean McCown, Stanford University: I wanted to comment on one aspect of some of the 29 concerns that you heard and this has to do with this question of how will faculty residents who 30 live in these new homes get to their, get to campus? It’s not in your purview, but I just want to 31 make two quick points. Our data over the last 10 years and this is actual data of our 32 transportation demand programs has shown that we have succeeded in dropping the drive 33 alone percentage of people who come to campus to work from 70 percent, so 70 percent in 34 2000 a single person would drive in a car to get to campus. It’s now under 50 percent. It’s 35 now like 48 percent as a result of a myriad of different programs. I won’t get into the details. 36 37 Secondly faculty members who live on [unintelligible] campus neighborhoods including the 38 neighborhoods up near Peter Coutts and within a mile and a half I believe of campus only 36 39 percent of the faculty who are eligible to buy a parking permit to park on campus actually buy a 40 parking permit. I think that’s an indicator and that’s actually real data, is an indicator of the 41 extent to which our nearby faculty members take advantage of the closeness to be able to walk 42 and get to their work walking and bicycling or taking Marguerite and not driving. 43 44 Chair Lippert: I have just a quick question, a follow up. Does Mar… as part of this proposal is 45 the Marguerite Shuttle going to be (interrupted) 46 47 Ms. McCown: It currently runs right there to the corner of California and Hanover. I think 48 whether an even more specific shuttle might serve that, the new residents there is something 49 we’re definitely open to. Right now there is a Marguerite Shuttle service that comes California 50 Ave. to Hanover and over into the Research Park and back onto campus. 51 City of Palo Alto Page 16 1 Chair Lippert: Yeah, I’m familiar with the one that runs into the Research Park. So it is possible 2 to divert or readjust the routes? 3 4 Ms. McCown: Yeah, I mean again whether that walking down to the corner of Hanover to get 5 is… whether we need to adjust that will be certainly something we’d be open to looking at. 6 7 Chair Lippert: Thank you very much. Ok, with that I’d like staff to take a moment to address 8 some of the traffic issues. Mr. Aknin? 9 10 Aaron Aknin, Assistant Director: Thank you and good morning. As we heard today and as 11 we’ve heard over the last six months or so as we’ve been meeting with College Terrace folks 12 there really are a number of concerns, but there’s two primary concerns as they relate to traffic. 13 First is the overall traffic patterns and the second is traffic as it relates to during the 14 construction period. So this has been said before by staff, but it is worth reiterating because I 15 sense the frustration and I understand the frustration on the resident’s behalf. The limit of our 16 traffic review is limited by the EIR that was publicly reviewed and approved in 2005 as well as 17 the Development Agreement. And it really boils down to one key number and that is are the 18 total number of units that were approved and reviewed from a traffic standpoint consistent with 19 what is being proposed today by Stanford and the answer is yes. In fact there’s less units than 20 we reviewed and approved by the EIR a number of years ago. 21 22 The second is the limitation of our review was to access and circulation. We did do that review 23 and there are conditions related to crosswalks and stop signs that are proposed within the 24 conditions of approval as it relates to access and circulation. So that review was both done by 25 our third party consultant as well as verified by our in house staff. As it relates to construction 26 traffic we’ve had a number of meetings including a kickoff meeting with some of the College, 27 the most involved College Terrace folks earlier this week with our Public Works staff as well as 28 Planning staff and we are committed and we encourage the College Terrace residents to remain 29 committed to having these meetings and better understanding how we could relieve any 30 temporary construction traffic to the best of our legal abilities. And that’s going to be working 31 with our Public Works staff to the maximum extent possible during this process. So with that I 32 will turn it over to our Senior Assistant City Attorney. 33 34 Cara Silver, Senior Assistant City Attorney: Thank you Aaron. Cara Silver, Senior Assistant City 35 Attorney. I thought it would be helpful to frame the purview issues and the legal framework 36 that we’re operating under here. As we’ve discussed there is a Development Agreement that 37 was entered into a number of years ago that limits the City’s ability to review these projects. 38 And the reason why a Development Agreement was entered into of course is it was in 39 connection with the earlier Mayfield Playing Fields and in exchange for granting the public 40 benefit of the Mayfield Soccer Field the City agreed to essentially freeze the zoning entitlements 41 for Stanford University on these housing sites and some other commercial property in the 42 Research Park. So it’s essentially a contract, which is a little bit different than a more typical 43 zoning application. It’s important to keep that framework in mind. 44 45 In connection with the Development Agreement an EIR was conducted and the particular 46 housing project that was proposed in the Development Agreement was analyzed as Aaron 47 mentioned. The housing project was analyzed with even more units on this particular site. A 48 full EIR was done and what’s important to note in that EIR is that the EIR not only assumed the 49 baseline traffic situation, but it also projected future traffic impacts. So as the City grows of 50 course additional traffic is added and so the future base, the future traffic conditions were 51 City of Palo Alto Page 17 considered in the EIR that was conducted in 2005. The EIR also assumed that the housing 1 would be dedicated to faculty and so it assumed traffic patterns going to the University. So all 2 of that was discussed in the EIR. 3 4 To satisfy staff’s concern that there could be new circumstances or new information that had 5 developed over the period of time since the EIR was conducted staff conducted additional 6 research. And once an EIR is certified there are three limited situations where further 7 environmental review can take place. Those three situations we’ve discussed before, but just to 8 review is: Number 1 if there is new or more severe impacts identified with a particular project 9 that is being proposed; if there is a change in circumstances; or Number 3 if there is new 10 information. And staff went through the project in great detail and determined that none of 11 those three circumstances applied here and therefore additional environmental review was not 12 required. And there is an environmental memo attached to your packet with all of that staff 13 work in it. 14 15 That being said there is… given the fact that the environmental review is really not on the table 16 at this point of course the ARB’s purview is limited to the AS2 standards that were identified in 17 the Development Agreement. Those AS2 standards of course are very limited and there is 18 however you do need to make your typical architectural review findings. Finding 10 relates to 19 internal circulation and it requires you to look at the access to the property and circulation 20 thereon are safe and convenient for pedestrians, cyclists, and vehicles. In recognition of this 21 finding staff requested Stanford to prepare a separate circulation study and that’s also attached 22 in your staff report and there are some recommendations that the consultant is making with 23 respect to that finding that will improve the situation. And really as to the traffic issues that’s 24 the limited purview of the ARB is the review of that particular study and recommendations on 25 that finding. However, instead what the ARB should of course focus on is the AS2 standards 26 and the particular area that the staff report discusses on let’s see, on Page 3. Thank you. 27 28 Chair Lippert; Ok. With that we will return to the Board for any questions and comments. And 29 I think I’m going to begin with Board Member Malone Prichard. And you’ll have a soft five 30 minutes. 31 32 Board Member Malone Prichard: I don’t believe I’ll need the full five minutes. In recognition of 33 the very strict limits I have only looked at the structures along the California edge of the 34 California sites because the rest of the project is not within our purview as my understanding. I 35 feel that the architect here has done a very good job of staying within the requirements of the 36 Development Agreement and indeed being lower than the heights allowed and less units than 37 allowed, etcetera. I had a couple of small questions. I assume we’re going to do a round two 38 or aren’t we? 39 40 Chair Lippert: Yeah. 41 42 Board Member Malone Prichard: Ok, so I have very, very small questions for round two, detail 43 oriented. I am in support of all of the findings that the staff has put forward and that’s all I 44 have to say at this point. 45 46 Chair Lippert: Vice-Chair Popp. 47 48 Vice-Chair Popp: Thank you. I want to start out by expressing my appreciation for everyone 49 who’s come here today and it’s always great to see a turnout and it’s important to understand 50 what your concerns are. And while I share many of the concerns, maybe not all, but many of 51 City of Palo Alto Page 18 the concerns I want to be really clear about what our role is here today. And our role is outside 1 of many of the things that you talked about. We are very limited in terms of what we can 2 respond to and what we have purview over and it’s challenging for me to hear comments that 3 we have no ability to respond to. And so I want to just acknowledge that I hear you and I 4 understand what your concerns are, but the Development Agreement is the Development 5 Agreement. That process occurred and we are where we are today. 6 7 With that I will echo the comments made by Clare. I’m appreciative of the design and the 8 character of this project. I think that what I see is a project that is within the limitations or less 9 than in many cases the constraints that would be what many developers would go right up 10 against the maximums in terms of height and floor area and all these things. And so I’m 11 appreciative of where we are and I have a couple of other minor comments, but I’ll leave that 12 till the next round. 13 14 Chair Lippert: Ok. Board Member Gooyer. 15 16 Board Member Gooyer: I have to agree with my colleagues. I know there was some concern 17 expressed by some of the audience indicating that the architects was only one architectural 18 firm, they really haven’t caught the essence of the adjoining neighborhood, but actually having 19 done this for numerous years I think the architect did a very commendable job coming up with 20 the variety that’s there and the I think relative accuracy of the variety that’s been shown. So 21 actually I have to commend them that once this gets built or if it gets built in this exact 22 configuration in 20 years it won’t, it definitely in fact almost immediately it won’t look like a PC. 23 I think it will have a tendency to blend in with the adjoining neighborhood. 24 25 I don’t know if this is the time, but a couple of small comments I guess. One of the a question 26 came up about Lot 1 as far as the side elevation of the particular residence and I do agree that 27 looking through this all the other lots that are a corner situation 4, 5, 8, 17, 20, and 21 do a 28 pretty good job at treating the corners or sort of the two sides are enhanced, but that isn’t the 29 case on Lot 1 and I think that probably can get some enhancement. I don’t think it needs to go 30 that far, but it’s more the articulation to get it up to that. 31 32 Also a couple of other things on going through the various styles the Prairie style I think to 33 make it a little bit more realistically Prairie style the pitch of the roof probably ought to be a 34 little flatter and the overhang a little bit larger. The Monterey Progressive I think you call it, I’m 35 not a big fan of combining hip and gable roofs or ends on the same roof so I think it ought to 36 be either one or the other. And all the other ones I think I’m relatively happy with so I think 37 that’s fine at this point. 38 39 Chair Lippert: Board Member Lew. 40 41 Board Member Lew: Great, so I have a couple questions for Stanford and this is just based on 42 the conditions of approval that I looked at today. So I think the staff is requiring a car wash 43 and I think it’s come up on some of our other big housing projects and I was wondering where 44 that was going to be located? 45 46 Mr. Wuthmann: Yes, we have discussed this with staff. It will be located in one of the 47 underground garages underneath one of the multi-family buildings, what we call Building 2 in 48 particular. 49 50 City of Palo Alto Page 19 Board Member Lew: Great, thank you. I have more questions for you Chris, thanks. And then 1 on [unintelligible] there are no fence details. I think there are descriptions of them and there 2 are some illustrative (interrupted) 3 4 Mr. Wuthmann: Correct. 5 6 Board Member Lew: Things like fences in some of the drawings. I think that, I was wondering 7 if that could be included or are you intending that to be included in the future submittal or 8 conditions of approval? The actual fence designs. 9 10 Mr. Wuthmann: Are you suggesting property line fences dividing houses or front yard 11 (interrupted) 12 13 Board Member Lew: Actually like all of that I mean that’s normally so on a regular project, not 14 this particular one, but I mean on other projects we would normally review them. I know this is 15 a little different case, but I think that we have if I’m reading this correct we do have the full 16 purview over landscaping? 17 18 Mr. Wuthmann: Yes. It’s correct, we have not detailed out all of the possibilities given the 19 amount of variety we will have. We do have some suggested details included in the plans. 20 Obviously we will comply with City ordinances with respect to fence heights and so forth, lines 21 of sight. Those will obviously have to be developed in the building permit submittal plans, but 22 we have not and we’ll be working with staff and being held to those standards in that process. 23 24 Board Member Lew: Great. And then I guess I have a question for you and maybe this is also 25 both for staff. There was a description saying that there’s no parking in the front setback along 26 California Avenue and [unintelligible] I guess maybe clarify for staff is that the parking is the 27 covered, is it just covered parking like the parking garage has to be at a setback? Right, but 28 the driveway? 29 30 Ms. Gerhardt: The required parking, single family homes are required to have one covered 31 space one uncovered. These have (interrupted) 32 33 Board Member Lew: Two. 34 35 Ms. Gerhardt: Two car garages so the driveway spaces are extra and not required. 36 37 Board Member Lew: Got it. That was my understanding too. Thank you. And I was wondering 38 also is there any, was there any discussion about mailboxes? So central… I mean now the Post 39 Office is requiring like central mailbox clusters and my main concern is that it’s if you’re doing 40 one for the whole project they’re big and they take up usually like parking spaces and whatnot. 41 And I was wondering if there was any general idea about how that would happen. 42 43 Mr. Wuthmann: We have not succeeded in having a conversation yet with the Postal Service. 44 45 Board Member Lew: They are very difficult. 46 47 Mr. Wuthmann: You may be aware that that’s difficult even after many requests. Our recent 48 project on the other side of College Terrace, the Olmsted Terrace on Stanford Avenue 39 49 homes, but again a small subdivision there we succeed in having clusters of mailboxes rather 50 City of Palo Alto Page 20 than one mailbox for the 39 homes. We hope to succeed in receiving approval of the same 1 kind of approach in this community. 2 3 Board Member Lew: Ok. How am I doing on time? I might wait until the next round. 4 5 Chair Lippert: You have another minute. Go ahead. But it’s soft. 6 7 Board Member Lew: Yeah, I know. I will wait. 8 9 Chair Lippert: Ok. 10 11 Mr. Wuthmann: Chairman Lippert may I just mention that in response to we had a backup slide 12 response to Board Member Gooyer’s comment about Lot 1 and how it will look driving up 13 California Avenue. It’s actually illustrated there. There’s very, very dense vegetation and some 14 major trees that Urban Forester wants us to retain and we will be retaining, so it will be actually 15 largely obscured. That said we will look at the articulation of that side of the house. Yep. 16 17 Board Member Gooyer: Yeah, I’m sorry I don’t buy there’s a tree in the way so I don’t need to 18 do the architecture behind it so… 19 20 Chair Lippert: Yeah, trees die. Ok, first of all I want to thank the applicant as well as the 21 members of the public for coming today. The elephant in the room obviously is traffic and 22 while we don’t directly have any purview over those issues today we’re here to review the 23 architecture and the quality and character of the development these issues will need to be 24 addressed because they are the most obvious. And so my suggestion to members of the 25 public, particularly Stanford is that with regard to traffic the impacts are that the neighbors 26 have concerns about going through the College Terrace neighborhood. So I think that Stanford 27 needs to enter into a dialogue with the residents there and begin to talk about and address the 28 concerns because they are simply not going to go away. 29 30 The flip side of that however is that I’m really appreciative of Jean McCown’s comments with 31 regard to some of the programs that Stanford has in place and the number of Stanford faculty 32 and workers that actually commute to the campus and how they do so. I know that Stanford 33 has a very robust Transportation Demand Management (TDM) program as well as an iPhone 34 and I assume Android app that actually tracks and monitors their employees because they do 35 get renumerated for their ability to use the TDM program. And so it’s to those I guess 36 resident’s benefit to find alternative means of transportation because they are actually 37 monitored and they are renumerated by the University to do that. So I think part of the 38 problem has been ultimately taken care of. Ultimately I think the Marguerite Shuttle will also 39 assist in trying to mitigate some of those impacts as well. Perhaps something can be done in a 40 dialogue with the College Terrace residences. 41 42 With regard to the design I, you’ve listened to our comments and you’ve come back. You’ve 43 addressed the majority of the concerns. I have a few very minor concerns that maybe the 44 project architects and planners Paul can you just briefly go through and talk a little bit about 45 how pedestrians and cyclists are going to be able to move through the site because that’s 46 ultimately important. Yeah. You’re the landscape architect, right? 47 48 Mr. Lettieri: Yeah. Yes I am. Thank you. Maybe the overall plan would be good, yes? 49 50 City of Palo Alto Page 21 Chair Lippert: Yes because particularly what’s important is how they move to El Camino Real 1 and how they move to Stanford University. 2 3 Mr. Lettieri: Well I mean I need to use the mouse. We have bicycles are really going to be 4 shared on the road all through the site because we have relatively low traffic counts on the 5 majority of the site. We have significant pedestrian circulation all the way around. We’ve got 6 sidewalks adjacent to all of the streets with the exception of the, on the right side of the plan 7 on Amherst. And we also have interconnections which are a little bit harder to see on the plan, 8 so that’s why I wanted the mouse. So we have a connection here that would take you between 9 homes down some stairs into this central open space, which has there’s a bunch of existing 10 oaks in this area that we’re saving. This coloration is those trees. So you can come down into 11 the space and walk over to the community center or walk out to California. You could also 12 obviously walk out to California this way, but you have this kind of internal circulation crossings 13 and the intersections have been enhanced to help slow down traffic at those points that we 14 think are major pedestrian crossings as at Columbia, here as well. 15 16 All the sidewalks are separated from the curb five feet nominally with the exception of Columbia 17 which is 12 to the face of curb so 11 and a half feet of planting area in that zone. So there’s, 18 and there are sidewalks on both sides. Circulation through the site even if you exit the multi-19 family you can come out this way and walk out to California on either one of these streets. And 20 internally the pedestrian circulation through the cottage patch area takes you out through a 21 little plaza space out to the street here as well. So we think we have a pretty good network of 22 pedestrian circulation all the way through and the ability to walk anywhere you want on the site 23 was out really a lot of conflicts with vehicles. 24 25 Chair Lippert: I just want to make one other statement here, which is a number of years ago 26 the City Council had actually requested that when new developments move forward actually I 27 think there might even be an ordinance on it that they follow the street patterns of existing 28 streets to reinforce those streets. And so in case of looking at this with regard to all of the 29 College Terrace streets those are meant to reinforce the existing street network. 30 31 Mr. Lettieri: Yes, absolutely. 32 33 Chair Lippert: Ok, we’ll go to a second round of questions and comments and hopefully a 34 Motion here and maybe we can get this wrapped up. Board Member Malone Prichard. 35 36 Board Member Malone Prichard: So as far as the design of the homes themselves the, just for 37 the public’s benefit these are not required to match the exact spacing and design of the other 38 houses. They are just supposed to approximate the rhythm and reflect the eclectic nature. I 39 do believe they’ve done a very good job of that. 40 41 The smaller items I have to talk about one of them is the fences along California. I was having 42 some difficulty understanding where exactly the fences are. I don’t know Paul if you want to 43 get up and talk a little more about that? But I’m specifically interested in there’s some corner 44 lots, Bowdoin and California, Columbia and California, Dartmouth and California, and all of the 45 houses on Block 1 some of the drawings appear to show fences coming all the way out to the 46 front property line. I was wondering if that was really the intent or if that’s just a drafting 47 glitch? 48 49 Mr. Lettieri: There’s a variety of fences and there’s also a number of lots that have no fences as 50 well. Again, picking up on the eclectic aspect and having a relationship to what’s happening in 51 City of Palo Alto Page 22 College Terrace so they’re not out to the property line. I’m not sure which lot you’re seeing 1 does that. We’re about five feet behind the sidewalk in just about every case where there’s a 2 fence. Looking at the corner of Columbia and California we do have a fence that returns, but 3 it’s five feet away from the sidewalk. It’s just sort of shown as a typical little fence diagram 4 with a little box with a line and box and a line (interrupted) 5 6 Board Member Malone Prichard: Yeah, with the dots in it. 7 8 Mr. Lettieri: Yeah. The other places where you’ll see just simple lines or just header boards 9 that are dividing plant material separations. 10 11 Board Member Malone Prichard: Ok. So I may have been reading some header boards there. I 12 was just concerned. I didn’t want this to feel more closed off than the rest of the neighborhood 13 again trying to reflect the eclecticism. If you look at and this may not be your drawing… 14 15 Mr. Lettieri: Oh it’s, no it’s not. 16 17 Board Member Malone Prichard: That one, SF.7A, thank you. If you look at the corner there 18 I’m seeing fencing all along and you’re right it is five feet back from the sidewalk but all along 19 that corner sort of closing off the front yard. I’m not sure any of the other projects do that 20 across the street. 21 22 Mr. Lettieri: At the corners? Which lot are you looking at in that? 23 24 Board Member Malone Prichard: That’s Lot 8. 25 26 Mr. Lettieri: Lot 8, ok. Yeah and (interrupted) 27 28 Board Member Malone Prichard: Lot 5 the same thing. 29 30 Mr. Lettieri: And there’s steps coming out. Lot 8 is one of those lots that also has a step in the 31 house itself, so there’s steps coming out to California so the garage entrance is flush with the 32 street coming in. But you’re right in that it does go all the way around, but it is also setback. 33 34 Board member Malone Prichard: So I wanted (interrupted) 35 36 Mr. Lettieri: It’s a yeah, low, it’s a yeah low decorative. These are not (interrupted) 37 38 Board Member Malone Prichard: It is a low fence, ok. There was one sheet note that showed it 39 as a six foot fence elsewhere. 40 41 Mr. Lettieri: No, no, no, no, no, no, no. Never is a six foot fence in the front. The only six foot 42 fences we have are property line fences that are behind; they start at the garage or a little 43 behind the garage between lots. Nothing in the foreground behind, in front of that. The 44 maximum height of those fences is 42 inches and those will probably vary too. There will 45 probably be some 36 inch high ones and some 42 inch high ones and I don’t think it’s our intent 46 to have any completely solid fences going down the entire space. It’s wood pickets, some 47 metal, there might be depending on the Santa Barbara house has some little bit of stucco, but 48 it’s still going to be low and it’s probably unlikely to be continuous either. So we’re trying to 49 have transparency there and have plant material do some separation. We have some hedges 50 on some of the houses that don’t have fences. We don’t have much in the way of hedges on 51 City of Palo Alto Page 23 the ones that have fences. There’s grass plantings that are in a row, so not really a hedge. So 1 that’s kind of how that works. 2 3 Board member Malone Prichard: Well, that’s what I’m looking for is some transparency on the 4 front so. 5 6 Mr. Lettieri: Yes, absolutely. 7 8 Board Member Malone Prichard: Great. Air conditioning unit locations I also picked out that 9 they seem to jump around a little bit. I just want to be sure that when they are placed that 10 they’re able to be meeting the noise ordinance. So that’s just a comment and something for 11 staff to follow up on. 12 13 And then the other one was just a finding comment on, not a finding, sorry. A condition of 14 approval comment on Page 10 of the conditions of approval and the Urban Forestry there’s a 15 comment about the landscape plans. And I believe it should clarify that we are reviewing the 16 landscape along the California Avenue frontage only. That’s Comment 59B. And that’s all. 17 18 Chair Lippert: Thank you very much. Vice-Chair Popp. 19 20 Vice-Chair Popp: Thank you very much. I too feel that the diversity of materials is very 21 reflective of Palo Alto and I think the richness of the landscape is pretty great. I like the limited 22 driveways and I think that the major contrast that I see here is that the cars and the driveways 23 are basically hidden off of California Avenue as you drive up that you won’t see those in the 24 same way that you do on the opposite side of the street. So I see some great improvements 25 there. 26 27 I’d like to ask staff I think Margit Aramburu handed you something as she was finishing. She 28 mentioned two additional studies that were done about noise. Do you have any information 29 about who performed those studies or what that was? Was it a professional study that was 30 done or something that was more ad hoc or how was that? 31 32 Ms. Gerhardt: We just received the studies a minute ago so I don’t, I haven’t had time to 33 review them. It looks like JET Mechanical did a sound level test at 1601 California and then 34 there’s a I guess a chiller maybe was going in at I don’t have an address for the second one. 35 36 Vice-Chair Popp: It’s just not clear what those are about yet, but ok. Thank you. I appreciate 37 that. That’s just what I needed to know. 38 39 The only comment that I have I think that isn’t resolved for me that hasn’t been mentioned 40 already is the issue of the building attached lighting on the houses along California Avenue. I 41 saw in your photometric study you’ve got information about the beams spread from the street 42 lighting, but I didn’t see identification of the types of light fixtures that will be mounted on the 43 house or what they will be. Did I miss that in the package? Or it’s a pretty thick little book 44 here so I’ll admit I may have missed something, but if that’s not detailed if you want to describe 45 that a little bit that would be great. Otherwise I think that’s something we’ll just ask you to 46 provide for us or provide for staff review to make sure that it complies with the night sky 47 regulations. 48 49 Chair Lippert: Does the house architect want to respond to that at all? 50 51 City of Palo Alto Page 24 Mr. Nestor: These frankly have not been selected at this point. They’ll be appropriate to the 1 individual styles of the houses. We are aware of dark sky ordinances so they will be shielded 2 where possible and they’re going to be typical of the kind of fixtures you would find in the 3 neighborhood or a typical house. 4 5 Vice-Chair Popp: Great. Alright, thank you very much. I think that’s all I have. Thank you. 6 7 Chair Lippert: Board Member Gooyer. 8 9 Board Member Gooyer: I don’t have any additional comments at this point. 10 11 Chair Lippert: Ok. Board Member Lew. 12 13 Board Member Lew: So I have some questions about the or maybe one question about the 14 materials for the multi-family housing. So I think I just have a comment first on the material is 15 that I think that, I think generally the palette is fairly handsome. I think there’s, we have a lot 16 of multi-family projects in the vicinity and a lot of them are pretty ugly. They all used like 17 cement board, but I think that your addition of board formed concrete stone and also having 18 like the vertical siding actually helped give it more richness and character than the typically very 19 blocky looking things that we’ve been seeing in the area. I do have a question about the 20 vertical siding. I was wondering if that is hardy panel and if it is like the vertical siding is a 21 panel not siding so I was wondering how are you doing all the joints because typically there 22 would be a baton or a vinyl channel or whatnot. 23 24 Mr. Israel: There will be, it will be a board and baton pattern. So we’re definitely using vertical 25 boards to express that verticality. It’s not just a curve in a panel. 26 27 Board Member Lew: Good, that’s great because there’s one, there are a couple of those hardy 28 panel things that don’t, would not pass muster here on the Board. So that’s a good answer. 29 30 And then you’re also showing two choices in railings and I was wondering if that’s are you 31 asking us for this or these are things you’re considering (interrupted) 32 33 Mr. Israel: Those are things we’ve been considering. WE haven’t studied them in detail so if 34 any of the members of the Board have specific preferences along that line we know what they 35 are not going to be, but we have not designed them specifically. 36 37 Board Member Lew: Great. And then on are there I think you’re showing that both buildings 38 are the same architecturally, but I was wondering are there variations between the two 39 buildings? 40 41 Mr. Israel: 8There’s variation in scale and how the materials, how they’re placed and where 42 they’re placed and obviously differences in the geometries. But we are trying to share that 43 characteristic so that it doesn’t get overly busy. 44 45 Board Member Lew: Ok that’s what, thank you for mentioning that. I think there are projects 46 here in Palo Alto that were not designed by you, but are too busy. And they made a whole 47 bunch of patterns in order to mask the bulk, but there’s no genuine variety. So at the end of 48 the day all the things that they did still look like a big bulky building and the, I think that the 49 key is just to [unintelligible] choice is just to figure out the right balance and I think that is the 50 from what I’m seeing I’m thinking you’re on the right track. I think that you’re doing the right 51 City of Palo Alto Page 25 moves from what I’m seeing. We don’t have all the plans or anything of your building so I can’t 1 really tell. I can’t make a complete judgment on that (interrupted) 2 3 Mr. Israel: Well thank you, but it is something that the Board mentioned last time. If you recall 4 we had a palette of materials and colors and I think the Board specifically referenced adding a 5 little additional richness and a little additional variety, which we responded to and think the 6 outcome of that has actually been quite successful and it has tended to warm up the character 7 of homes and so we’re quite pleased with that direction that we received. 8 9 Board Member Lew: Great. So thank you for that. And then I have some comments just on 10 the houses. One is I think you have a [unintelligible] some very interesting floor plans and 11 that’s not our purview, but it’s an interesting mix. I think you have done a good job of 12 providing a good mix of styles and although I don’t, I think that the adjacent neighbors are 13 complaining that it’s not, it doesn’t perfectly match and I think I would actually agree with them 14 that it doesn’t perfectly match what’s on the other side of the street I do feel like it does 15 capture the eclectic nature of College Terrace and College Terrace is very, very eclectic and I 16 mean I’d be hard pressed to figure out exactly what’s going on exactly in College Terrace, but I 17 think that you have more variety than we’ve seen in most of the other housing projects in Palo 18 Alto and the details, sort of illustrative details that you’re showing on the houses I think is at a 19 higher level than we typically see on other comparable projects. I think it’s basically it’s like all 20 it’s looking and just saying it’s generally the trend is looking good. Some of them are better 21 than others. I hope that the ones I think Board Member Gooyer mentioned a couple of them 22 and I agree with him. I think that I hope that those can look a little bit better going forward. 23 And I do like that you have a mix of one and two story houses. That’s sort of unusual these 24 days, but I think it’s very important to do that. 25 26 And I do have a question about let’s see… the, I guess this is a landscaping question. Your I 27 guess it’s Lots P1 and P10. I’m not sure if this may be out of our purview, but if it’s landscaping 28 maybe it’s in our purview. So I do support your shifting of the tot lot and I think the only thing 29 that I think makes it confusing is maybe trying to find the entrances to those houses. Like if 30 you were a visitor how would you kind of know to sort of go through the little tot lot to get to a 31 house? 32 33 Mr. Lettieri: Well you don’t actually go through the tot lot. I saw that comment. 34 35 Board Member Lew: Yeah. 36 37 Mr. Lettieri: Graphically it may be a little hard to see it, but we have a big probably transplanted 38 oak in the middle of that little plaza. There’s a, it says parent/guardian area with sea wall and 39 furniture. So you walk in through that space, which is outside the tot lot and then 40 [unintelligible] curve your way into the that paseo that runs through. You have some direction 41 from the folks that live there I think in terms of walking in at that spot. Tot lot will be 42 something that’s visible. It has a landmark to it so you can say it’s at the tot lot not through 43 the tot lot. And that’s the only, and that walkway is also connected to the crosswalk that goes 44 across Columbia so that even if you parked as a visitor on one of the streets anywhere you 45 would be able to walk across the street, either crosswalk and walk into that space. It is a little 46 bit, it’s a more secluded sort of little neighborhood there, but it’s still pretty accessible. 47 48 Board Member Lew: Can I say in a lot of developments like this there’s usually like some sort of 49 arbor or something to sort of pop out. 50 51 City of Palo Alto Page 26 Mr. Lettieri: Yeah we’re kind of using the, we’re really kind of using the tot lot furniture as that 1 marker because they’ll be, there’s three or four pieces of equipment there and we didn’t want 2 to just use the architectural analogy to busy up that whole thing with yet another structure. 3 (interrupted) 4 5 Board Member Lew: Right [unintelligible] 6 7 Mr. Lettieri: [Unintelligible] the play structure actually even though you don’t walk under them 8 or through them will be pretty visible. It won’t be screened out above eye level. You’ll be able 9 to see them when you drive in even. I think that’s important just from a neighborhood 10 surveillance eyes on the street sort of approach. 11 12 Board Member Lew: And is the tot lot fenced? 13 14 Mr. Lettieri: Yes. 15 16 Board Member Lew: Ok. 17 18 Mr. Lettieri: The fence is shown on the plans. Low fence. 19 20 Board Member Lew: Got it. Yeah, I saw that I just wasn’t sure exactly what that (interrupted) 21 22 Mr. Lettieri: And there’s a gate off that little parent/guardian area so that you would walk in 23 through a gate into the play zone itself. 24 25 Board Member Lew: Thanks. 26 27 Mr. Lettieri: You’re welcome. 28 29 Chair Lippert; Ok, I’ve got just a couple of questions. First of all I’m in agreement with Board 30 Member Popp’s comment with regard to the light fixtures. I think it’s particularly important and 31 integral to the design of the house. You just don’t simply go down to Home Depot and slap a 32 light fixture on there. So that’s something that’s particularly important to me. 33 34 In terms of the quality and character of a project what I tell my own clients there are three 35 things, four things that you’ll how should we say, either appreciate or curse me to my grave. 36 And those are your faucets because you touch them every single morning and if they’re hollow 37 you’ll know it and you’ll like go “Why did I put this faucet in?” The second thing is the 38 doorknobs. If they’re hollow you’ll curse me and everyday say, “Why did I bother to put those 39 in?” and you’ll change those out. We don’t have any purview over those. Your light fixtures 40 are particularly important because you turn them on every day and if they don’t look good and 41 they don’t create good lighting again you’re going to curse me. And so the last thing are the 42 windows and so I want to find out from the architect what kind of windows are we looking at 43 here in terms of this project? And when I say windows I’m very mindful that when you put 44 windows in a house you’re buying a car. 45 46 Mr. Nestor: Yes, the windows are set to be Andersen 400 Series windows. So they’re pretty 47 high quality windows. 48 49 Chair Lippert: So they are all clad aluminum? Ok, and then what about the exterior of the 50 houses? They are all integral stucco unless you’re using some other material? 51 City of Palo Alto Page 27 1 Mr. Nestor: That’s right. 2 3 Chair Lippert: Ok, great. And then the last question is the roof. I notice that you’re using some 4 comp shingle there and some of the roofs are tile and then there’s another one that’s a 5 cementitious material and then there’s a comp shingle. 6 7 Mr. Nestor: That’s right. 8 9 Chair Lippert: So any possibility of using like a simulated wood shingle on some of those? 10 11 Mr. Nestor: I suppose we can talk about that for sure. 12 13 Chair Lippert; Ok, because I think that that’s pretty important especially in… you know you’ve 14 gone to the length of putting a tile on the Spanish (interrupted) 15 16 Mr. Nestor: Clay tile, not concrete tile. 17 18 Chair Lippert: Correct, on those houses and then just simply for the Bungalow style I mean the 19 Arts and Crafts and the Prairie style houses, not so much on the Prairie style houses, but I think 20 on the Arts and Crafts style houses it would benefit from having some sort of simulated wood 21 shingle perhaps. 22 23 Mr. Nestor: Good suggestion. We will talk about that for sure. 24 25 Chair Lippert; Ok. So with that do I have a Motion? Mr. Popp. Vice-Chair Popp. 26 27 MOTION 28 29 Vice-Chair Popp: Yeah, I would be happy to make a Motion. So I’d like to move that we 30 approve this project based on the recommendations in the architectural review findings and 31 subject to the conditions of approval and any alterations that occur in further discussion of that 32 as long as it doesn’t substantially change an aspect which would be important for the ARB to 33 consider with the following items to be returned to staff for review, which would include the 34 fences and their details, material, placement and height. That we adjust in Attachment E, the 35 Conditions of Approval, Item Number 59B in the first sentence insert between the word “curb” 36 and “shall” the statement “along California Avenue.” That the building mounted fixtures for the 37 residential units along Cal Avenue, the light fixtures, excuse me, the light fixtures be submitted 38 for review and confirmation of their compliance with the requirements and that the composition 39 shingle roof be reconsidered for something of a different material and quality that might be 40 more compatible with the other roofs. That’s it. 41 42 Chair Lippert: Do I have a second on that? 43 44 SECOND 45 46 Board Member Gooyer: I’ll second. 47 48 Chair Lippert; Board Member Gooyer do you wish to speak to that? The second? 49 50 Board Member Gooyer: Yes. 51 City of Palo Alto Page 28 1 Chair Lippert: Do you have anything you want to add? 2 3 Board Member Gooyer: No, I’m fine. 4 5 Chair Lippert: Ok, great. Anything you want to say? Ok. Any other Board Members? Any 6 discussion? Ok. So with that do you have anything you want? 7 8 Board Member Lew: I just wanted to clarify so in our findings I just want to clarify that it’s of 9 the limit, it’s the limited purview that we have and that staff is actually reviewing a more 10 broader scope than what we have had to review, right? So. 11 12 Vice-Chair Popp: Right. My Motion is only in respect of the items which are within the ARB’s 13 purview today. Do I need to read those or? 14 15 Amy French, Chief Planning Official: Staff is reviewing the rest of the project for compliance 16 with City codes and standards for sure. So it’s just that the architectural review findings do not 17 have to be made for the remainder of this site. 18 19 Mr. Aknin: You don’t have to reiterate them. We know. 20 21 Vice-Chair Popp: Great, thank you. 22 23 Chair Lippert: So with that we’ll vote on this, on the Motion. All those in favor say Aye (aye). 24 Opposed? Ok and that passes 5-0-0-0, unanimously it passed. So thank you very much. 25 26 MOTION PASSED (5-0-0-0) 27 1 Gerhardt, Jodie From:Rius, Rafael Sent:Thursday, May 29, 2014 5:05 PM To:Gerhardt, Jodie Subject:California Avenue - Mayfield Housing Appeal Response Hi Jodie,  In response to the Appeal of the approval for this project, the Transportation Department Staff has the following  responses to the issues related to transportation.  These points are general responses to the concerns, and remain  consistent with our previous discussions and  from an email on May 15, 2014.  Walk and Roll Maps: The existing Walk and Roll Maps for Escondido School do not account for the new California Avenue/Mayfield housing project.  The maps are for existing conditions based on existing housing and developed through a community outreach process from current students/parents  of Escondido School.  PAUSD has yet to assign the home school for the future California Avenue housing site(s).  The City will update the maps when new housing comes on‐line or as parent input regarding new travel patterns is identified.  Regardless of the Walk and Roll Maps, the City’s general practice is to provide adequate pedestrian facilities and to bring substandard facilities up to current design standards and regulations. Marked Pedestrian Crossings at S California Avenue & Columbia Street: Columbia St is the most direct path to Escondido School and from a large portion of the new housing sites main entry. Columbia Street also serves as the most direct route between Stanford Avenue and South California Avenue west of Hanover Street so adequate pedestrian crossing facilities are proposed as a safety improvement for the existing and future communities.  Accommodating all modes of travel including appropriate pedestrian access with accessible ramps connecting to and from new project sites is consistent with the city’s “Complete Streets” policies as well as general best design practices.  The alternative of not providing adequate and accessible pedestrian facilities would go against the City’s policies as well as several state and federal requirements. Congestion on Columbia Avenue: Staff agrees with the assessment and estimated traffic demands presented by the applicant’s transportation consultant.  The amount of vehicles anticipated during the peak hours are not anticipated to result in severe congestion or potentially significant impacts.  The proposed street widths are ideal and typical of local residential streets for both motor vehicle and bicycle use. Please feel free to contact me to discuss if you have any questions.  Thanks,  Rafael  ____________________________ Rafael Rius, P.E. Transportation Project Engineer City of Palo Alto, Planning and Transportation 250 Hamilton Avenue, 5th Floor Palo Alto, California 94301t. 650.329.2305 f. 650.617.3108 Attachment F MEMORANDUM Date: May 15th, 2014 To: Jodie Gerhardt From: Rich Dean Subject: Cal Ave/Mayfield Project Appeal Response Dear Jodie, Below is the official response from the fire department regarding the fire items as they relate to the Cal Ave/Mayfield project appeal. I contacted California State Fire Marshal Tonya Hoover who put me in contact with Chief Kevin Reinertson, Code Development and Analysis Division. Chief Reinertson confirmed that the State of California does not adopt Section 503 or Appendix D. We are not in conflict with the California Fire Code. 1)Fire Code Provisions (a) Turn Around Provision for Dead End Roads Fire Code Section D103.4 of Appendix D states that “Dead-end fire apparatus access roads in excess of 150 feet shall be provided with width and turnaround provisions in accordance with Table D103.4” (Attachment B) The Appeal assumes that the entire 250+-foot length of Driveways A and B constitute fire access roads so that turnarounds are required. It is a generally accepted interpretation of Appendix D, Section D103.4 to only consider as Fire Access Roads the portions of the road or driveway needed for fire vehicles to reach within pre-connect hose distance of the structures on site. PAMC Section 15.05.110 further establishes 150 feet as the maximum distance from the exterior wall of building to the fire vehicle access road. This could be considered the distance a firefighter must travel on foot from the vehicle. In the review of the ARB proposal, the Fire Marshal determined that fire vehicles would not need to travel more than 150 feet along the driveways in question to meet this hose reach requirement. Additionally, Section 503.1.1 allows the Fire Code Official to increase the 150’ length if the building is equipped with an approved automatic fire sprinkler system which is the case for this project. The Fire Marshal respectfully disagrees that the entire length of Driveways A and B need to be considered Fire Access Roads for purposes of determining whether a turnaround is necessary. The Fire Marshal further maintains that turnarounds for Driveway A & B would only serve as a post incident convenience but would not improve emergency operations. Attachment G (b) Minimum Road Width When Hydrants Present – As noted in the appellant’s attachments, Fire Code Section D103.1 of Appendix D states that “where a fire hydrant is located on a fire apparatus access road, the minimum road width shall be 26 feet exclusive of shoulders” (Attachment B) The Appeal indicates that the minimum road width on Columbia and Amherst Streets is 24 feet where 26 feet is required. Palo Alto Municipal Code (PAMC) Section 15.05.120 requires fire apparatus access roads to have an unobstructed width of 20 feet. This allows one fire department vehicle to pass another vehicle. Appendix D requires the roadway to be increased to 26 feet where hydrants are located. This is generally for 20 feet before and after the hydrant, as shown in Figure D103.1 of Attachment B. The remaining roadway may be 20 feet in width. The intent is to provide additional clearance directly at fire hydrants for hydrant operations and to have another fire department vehicle pass. The proposed roadway widths were reviewed by the Fire Marshal as a part of the ARB process to ensure that the intent of this requirement is met. It is a generally accepted interpretation of Appendix D, Section D103.1 to consider rolled curbs and/or engineered sidewalks to be included in road width, as the only specific prohibition in that section is against using (unpaved) road shoulders to comply with the required width. The Fire Marshal respectfully disagrees that the only method to provide 26 feet of fire access width for Columbia and Amherst Streets is to have 26 feet in between the curbs. The proposed width will provide adequate area to park emergency vehicles and operate a hydrant. As both of the above Fire Code Sections are locally adopted, the Palo Alto Fire Department is within their purview to make these determinations and is not in conflict with the California Fire Code. Sincerely, Rich Dean Acting Deputy Chief, Fire Marshal Palo Alto Fire Department Office 650.329.2347 Fax 650.327.6951 Cell 650.444.5092 May 19, 2014 Mr. Chris Wuthmann Stanford Real Estate 3160 Porter Drive, Suite 200 Palo Alto, CA 94304 Re: Response to Appeal Filed with the City of Palo Alto in Connection with the Director’s Decision on the California Avenue Housing Project Dear Mr. Wuthmann: Hexagon Transportation Consultants, Inc. has reviewed the appeal filed with the City of Palo Alto by Mr. Fred Balin on May 2, 2014 regarding the decision by the Director of Planning and Community Environment to approve the residential development at 1451, 1501 and 1601 S. California Avenue. The site is identified as the location for development under the Mayfield Development Agreement (MDA) finalized between Stanford University and the City of Palo Alto in 2005. The appeal comments on the memorandum prepared by Hexagon to comply with the MDA’s requirement for a site-specific circulation analysis. We appreciate this opportunity to respond to those comments. One of the areas addressed by the appeal is titled “Congestion on Columbia Street.” As noted in our report, the Columbia Street access point will likely be used by significantly more residents than the Amherst Street and Bowdoin Street access points, but we do not agree that it will be “congested” or an area of “potential gridlock”. As calculated in our report, during the AM peak hour there would be an estimated 39 outbound trips, of which approximately 26 would use the Columbia Street exit, which is roughly one vehicle every two minutes. During the PM peak hour, there would be an estimated 61 inbound trips, of which approximately 40 vehicles would enter the site at Columbia Street, which is less than one vehicle per minute. Based on these estimates, Columbia Street would clearly not be “congested” or “gridlocked”. The appeal states that Columbia Street is the “sole vehicular access into and out of the two underground garages serving the 112 multi-family units.” That is not correct. The circulation plan for the site allows vehicles from anywhere within the site to use any of the three access points. Although we would expect that most residents will use the access point closest to their home, a resident could choose to use any of the three streets leading in and out of the site. This redundancy in access provides another safeguard against any congestion on Columbia Street. If there is a brief period when multiple vehicles are headed towards the Columbia exit point, a vehicle from one of the multi-family garages could easily use Bowdoin Street instead. Further, the site plan does not “force” bicycle and pedestrian traffic onto any particular street. Bicycles heading toward campus may choose to use the Amherst, Bowdoin or Columbia Street access points if they are going to Stanford Avenue because all three connect to College Avenue. Similarly, pedestrians will be able to cross California Avenue at Amherst, Bowdoin, and Columbia Streets, as the project will provide crosswalks at all three streets as required by 14c of the Conditions of Approval associated with the Architectural Review approval of the project. Attachment H Mr. Chris Wuthmann May 19, 2014 Page 2 of 3 The appeal states that “to more equally disperse travel in and out of the project, a 4th curb cut should be added near Dartmouth Street…” Hexagon does not believe there is any need to provide a fourth access point to the project site. The connectivity of the project’s internal circulation already provides multiple access points, as noted above. Further, the trip generation estimates for the project do not indicate any need for additional capacity. There is no requirement that the project to be designed such that the three access points would be utilized equally; the presence of multi-family residences on the site means that one street will be more heavily used than the other two, but that does not mean it will be overly congested. The appeal states that a fourth access point is also needed for fire access to the residences on Driveways A and B. It is Hexagon’s understanding that the Palo Alto Fire Department was consulted with regard to emergency vehicle access to the project and that they found that the proposed access was adequate. Hexagon defers to the local fire department on matters related to fire access and meeting the provisions of the fire code. The section of the appeal related to the fire code states that a fourth curb cut “opens the option to provide even more relief from an overly and unnecessarily crowded and narrow Columbia Street within the project…” We note that the 12-foot lane widths of Columbia Street where it enters the site are the same width as the existing portion of Columbia, and that Columbia Street will be 36 feet wide within the project where on-street parking is permitted. The appeal also takes issue with the City’s requirement that the project install mirrors leading into the garage of the Multi-Family Building #1. The traffic engineer who reviewed Hexagon’s report noted that mirrors are frequently vandalized. Mirrors in locations that are open to the public are more likely to be vandalized than mirrors in locations used only by a building’s residents, but Hexagon agrees that Stanford will need to maintain the mirrors in good order. With regard to the appeal’s statement that Hexagon’s report should have considered a straight driveway in lieu of a 90 degree turn, there is no requirement that Hexagon consider all possible solutions to the problem we initially identified. Hexagon’s responsibility was to assess the adequacy of the site plan proposed by the applicant. The first site plan we reviewed provided only a 20-foot wide driveway, which would not have provided adequate turning radius for large vehicles, such as an SUV or large pick-up truck. The applicant modified the building design and site plan to provide 24-foot wide driveways, which would provide an adequate turning radius. The addition of mirrors is an extra safety precaution. Stanford could also install “bottdots” along the center line of the driveway to help ensure drivers stay in their own lane as they enter and exit the garage, but these would also be an additional safety precaution. The appeal also includes a section titled “Inappropriate Safe Route to School and Campus.” Hexagon did not define a Safe Route to School as part of its memo. Palo Alto has a process for designating safe routes to school that includes input from its Safe Routes to School team, school staff, and input from parents and students. That process will commence when it is determined which school the site’s children will attend and was not addressed in our memo. As noted above, the provision of crosswalks across California Street is based on the engineering judgment, as articulated in the City of Palo Alto’s Conditions of Approval, that the project should include crosswalks at its access points. Mr. Chris Wuthmann May 19, 2014 Page 3 of 3 We appreciate this opportunity to provide comments on the appeal. Please feel free to contact us if you have any further comments or questions. Sincerely, HEXAGON TRANSPORTATION CONSULTANTS, INC. Gary Black, President © 2014 Rolf Jensen & Associates, Inc. All Rights Reserved May 21, 2014 Via Email: cwuthman@stanford.edu Mr. Chris Wuthmann Stanford University Real Estate 390 Serra Mall Stanford, CA 94305 CALIFORNIA AVENUE FACULTY HOUSING 1451, 1501, 1601 CALIFORNIA AVENUE, PALO ALTO CA Dear Mr. Wuthmann: At your request, we are addressing the two Fire Code items in Mr. Fred Balin’s Appeal of Director’s Decision on this property, dated May 2, 2014. Mr. Balin’s Appeal states: 1A – Residential driveways A and B are about 250 feet in length from Columbia Street. As these driveways exceed 150 in length, a turnaround is necessary for fire department vehicles by Appendix D, Section 103.4 and Table 103.4. 1B – Appendix D, Section 103.4 requires that the main fire access road be 26 feet where a fire hydrant is located. Apparently, the proposed development has roadway where the width is 24 feet. CALIFORNIA BUILDING CODE It is important to note that the State of California does not adopt Appendix D of the fire Code. In addition, the State of California does not adopt Section 503 of the model Fire Code (International Fire Code [IFC]) titled Fire Apparatus Access Roads. The State of California has not mandated any provisions in regards to fire apparatus access roads. Because it is the City of Palo Alto, rather than the State of California, that has adopted Appendix D and Section 503, all requirements are interpreted by the local authority. Attachment I CALIFORNIA AVENUE FACULTY HOUSING S63559 – Page 2 1451, 1501, 1601 CALIFORNIA AVENUE, PALO ALTO, CA May 21, 2014 TURNAROUND PROVISIONS FOR DEAD-END ROADS The Appeal indicates that, based upon Appendix D, Table 103.4, dead-end fire access roads 151 to 500 feet long must have turnaround provisions at the end of the road. The Appeal assumes that the entire 250+-foot length of Driveways A and B constitute fire access roads so that turnarounds are required. The Palo Alto Fire Department has instead treated as fire access roads only those portions of the driveways necessary to meet distance reach requirements. When establishing fire department vehicle access, it is important to evaluate the entire site. The City of Palo Alto has adopted and amended IFC Section 503, Fire Apparatus Access Roads, as part of the Fire Code. This section establishes the starting point to determine fire department vehicle access limits. Section 503.1.1 (Municipal Code §15.05.110) establishes 150 feet as the maximum distance from the exterior wall of building to the fire vehicle access road. This could be considered the distance a firefighter must travel on foot from the vehicle. It is not the intent of the code to require all dead-end streets or driveways longer than 150 feet to include a turnaround. The travel distance to the exterior wall, along with a maximum 150 feet dead-end “drive” distance is used. This is the common practice in use by fire departments in reviewing fire department vehicle access limits. Again, it is not the intent of the Fire Code to limit the dead-end distance of the road or driveway, but rather the combined distance of on-foot firefighter travel and the maximum dead-end distance permitted. It is our understanding that this is how the fire department reviewed the drawings. ROADWAY WIDTH The Appeal indicates that the minimum road width on Columbia and Amherst Streets is 24 feet where 26 feet is required by Appendix D, Section D103.1. Palo Alto’s version of Fire Code (CFC) Section 503.2.1 (Municipal Code § 15.05.120) requires fire apparatus access roads to have an unobstructed width of 20 feet. This allows one fire department vehicle to pass another. Appendix D requires the roadway to be increased to 26 feet where hydrants are located. This is generally for 20 feet before and after the hydrant. The remaining roadway may be 20 feet in width. The intent is to provide additional clearance directly at fire hydrants for hydrant operations and to have another fire department vehicle pass. 10797.txt Note only. Page 1 City of Palo Alto (ID # 4742) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/9/2014 City of Palo Alto Page 1 Summary Title: Ordinance to Prohibit the Feeding of Wildlife and Feral Animals in Parks and Open Space Areas Title: Adoption of Ordinance Amending Section 22.04.270 By Adding Subsection 22.04.270(C) To Prohibit The Feeding Of Wildlife And Feral Animals In Palo Alto Parks And Open Space Areas From: City Manager Lead Department: Community Services Recommendation Staff recommends that Council adopt an amendment to section 22.04.270 of Title 22 of the Palo Alto Municipal Code (PAMC) by adding subsection 22.04.270(c) (Attachment A), prohibiting the feeding of wildlife and feral animals at Palo Alto’s Parks and Open Space areas. Executive Summary Since 2006, Staff has been educating park visitors about the harm that comes from feeding wildlife and feral animals. Feeding wildlife and feral animals is harmful to the animals, and it can sometimes be harmful to park visitors and park amenities. The vast majority of other cities prohibit feeding wildlife in city parks. The proposed ordinance would prohibit feeding wildlife and feral animals in Palo Alto parks and open space areas. The Parks and Recreation Commission, the Santa Clara Valley Audubon Society, the Sierra Club, the Citizens Committee to Complete the Refuge, the Palo Alto Humane Society, and the Friends of the Palo Alto Animal Shelter support the proposed ordinance (Attachment B). Background The vast majority of city, county, state, and federal parks prohibit feeding wildlife; however, Palo Alto does not have ordinances prohibiting this activity. In 2006, Palo Alto Open Space staff began an educational campaign aimed at discouraging visitors from feeding wildlife at the Baylands Duck Pond. A combination of permanent and rotating educational signage (in English and Spanish) has been used at the Duck Pond. Rangers talk with people feeding wildlife and explain the many reasons not to feed the animals. City of Palo Alto Page 2 Rangers and naturalists discuss the feeding issue on many of their interpretive programs. Seven years of educating the public on this issue has diminished the number of people feeding wildlife, however the problem still persists. The Baylands Duck Pond is one of the major attractions in the Baylands Nature Preserve. Originally constructed as a salt water swimming pool in the early 1930s, the Duck Pond was quickly inundated with waterfowl making it no longer suitable for public swimming. Feeding the ducks, geese, and squirrels at the Duck Pond became a common activity. Up until the 1960s, it was common for visitors to feed wildlife at most parks. However, advances in environmental awareness led to changes in the way park visitors interacted with wildlife. It became clear that feeding wildlife was not in the best interest of the animals or the people feeding them. Feeding wildlife and feral animals is a problem that affects more than just the Baylands Duck Pond. Feeding wildlife and feral animals is causing problems in our urban parks and our open space areas. People feeding corvids (crows, ravens, jays) and gulls attract these nuisance species to our neighborhoods, parks, and natural areas. These aggressive species prey on nesting birds throughout Palo Alto, consuming eggs and chicks of songbirds, raptors, and endangered species in the Baylands. There are a multitude of reasons for prohibiting feeding wildlife. It is harmful to the animals, it presents safety issues for park visitors, and it negatively impacts park amenities. The foremost reason to prohibit feeding wildlife is that it can be harmful to the animals. The water quality degradation and crowding that result from feeding ducks and geese are conditions that often lead to the spread of waterfowl diseases such as avian cholera and botulism. Wild ducks are adapted to a diet of insects, mollusks and aquatic vegetation. Canada geese feed on shoots, seeds, bulbs, insects, crustaceans, and mollusks. Stale bread and other highly processed human foods negatively impact their health. When birds feed on scattered corn or bread, they eat in the same place where they defecate. Diseases, generally not transmissible in a wild setting, spread readily in these overcrowded and unsanitary conditions. Feeding also causes large groups of birds to fight over the hand-outs, which leads to competition, stress, and injuries. Park Rangers regularly remove sick, injured, and dead birds from the Duck Pond that are a direct result of the intense aggression and competition that occurs when waterfowl populations become concentrated. Every year staff finds dozens of severely injured female ducks each spring that have been attacked by gangs of aggressive drakes (male ducks). Feeding wildlife presents safety issues for park visitors. There have been several cases (at the Baylands Nature Preserve) of waterfowl with aspergillosis and whipworm, which are diseases that are communicable to humans. Large domestic geese accustomed to being fed, often act aggressively towards humans. City of Palo Alto Page 3 There have been several complaints from park visitors at Mitchell Park about aggressive squirrels, including one report of a bite in 2010. In response to the squirrel bite, staff posted signs at Mitchell Park requesting that people not feed squirrels. Other examples of safety problems stemming from feeding wildlife can be found at the Pearson Arastradero Preserve, Foothills Park, Palo Alto Golf Course, and the Palo Alto Airport. There is an annual problem of overly aggressive coyotes at Pearson Arastradero Preserve. Staff believes that the coyotes, who behave aggressively towards visitors who have dogs with them, are protecting dens. However, park visitors have been found feeding coyotes at the preserve, which only complicates and increases the problem. Each year for the last three years staff had to close several sections of trails at the Pearson Arastradero Preserve due to the aggressive coyote behavior. Visitors have also been seen feeding deer at Foothills Park. While this hasn’t resulted in a problem yet, there are numerous examples from other parks where deer, especially during mating season, have injured humans. At the Palo Alto Golf Course, visitors have fed grey foxes, a practice which has led to aggressive animal behavior and a loss of their natural fear of humans. There have been several reports of foxes taking food out of golf carts, and boldly approaching people who have food. The Palo Alto Airport is currently struggling with ways to deal with Canada Geese and the safety risk they pose to pilots. Palo Alto, in cooperation with the United States Fish and Wildlife Service and the City of Mountain View, has been oiling (to prevent the geese eggs from hatching) Canada Geese eggs in the Palo Alto Flood Basin for six years. Feeding wildlife is also harmful to the park amenities. Park benches and pathways around the Duck Pond are often covered with bird feces. Staff and volunteers spend numerous hours each year pressure washing walkways and benches to remove the accumulated bird waste. The Duck Pond aerator, required to keep the water quality safe for wildlife, is frequently down for repairs due to plastic bread bags (left from people feeding wildlife) clogging the aerator. Staff also spends many hours removing the algae that are caused, in part, by the enormous amounts of bird waste that accumulate in the Duck Pond. The empty plastic food bags are also commonly found in the marsh at the Baylands Nature Preserve. Canada Geese are the number one complaint of the golfers at the Palo Alto Golf Course. The great quantities of geese guano discourage many golfers from playing the course. The City spends approximately $20,000 per year for a dog service to chase geese off of the golf course. Our ordinances and policies should be consistent with our management City of Palo Alto Page 4 actions. If we are attempting to control Canada Geese, we should not be allowing supplemental feeding, which only encourages more geese to stop migrating. Education Most visitors feed animals because they want to connect and care for the wildlife. Unfortunately, feeding wildlife is actually doing more harm than good. The Rangers and Naturalists teach visitors about beneficial ways of connecting with wildlife, such as bird watching, nature photography, and volunteering in habitat protection projects. Educational signs (Attachment C includes two examples) have been installed to explain the reasons why feeding wildlife is harmful. Public education is a critical component in gaining compliance with the proposed ordinance. Staff will continue educating park visitors about the harmful effects of feeding wildlife through their interpretive programs. In the seven years that the Palo Alto Park Rangers have been educating park visitors about the harmful effects of feeding wildlife, we have received a tremendous amount of positive feedback from park visitors concerning the concept of prohibiting feeding of wildlife throughout Palo Alto Parks and Open Space. The vast majority of the visitors contacted and educated by Park Rangers comply with our request to avoid feeding wildlife. Most visitors ask why we haven’t made a law prohibiting feeding. Unfortunately there are still a small percentage of visitors who insist on feeding wildlife, in spite of educational efforts. An ordinance is necessary to ensure compliance from these visitors. The proposed ordinance is suggested after years of analyzing the harmful effects of feeding wildlife at the Baylands Duck Pond, and growing problems at our other parks and open space areas. The choice to prohibit feeding in Palo Alto’s parks and open space areas was given great consideration. The biologists and experts from the agencies that are responsible for our wildlife (California Fish and Game, the US Fish & Wildlife Service, and Ducks Unlimited) all advise against the feeding of wildlife and feral animals. There are numerous agencies that have ordinances that prohibit feeding wildlife including: all National Parks, all California State Parks, City of Santa Clara, City of Walnut Creek, City of Mountain View Shoreline Park, City of Fremont, City of Sunnyvale Baylands Park, Marin County Parks, San Mateo County Parks, Santa Clara County Parks, East Bay Regional Parks, and Midpeninsula Regional Open Space District. Why Alternatives to Prohibiting Feeding, Like Selling Bird Seed, Won’t Work Some agencies, such as the City of Fremont, have experimented with interim measures rather than directly prohibiting feeding wildlife. City of Fremont tried to limit feeding wildlife by selling bird food at Lake Elizabeth with the hope that people would use the bird feed instead of bread, pastries, and other unhealthy foods. However, they found that this did not reduce visitors feeding unhealthy food, and it did not solve all the other problems associated with providing supplemental food. Artificial food supply, healthy or City of Palo Alto Page 5 not, will cause competition among the wildlife, which can cause injuries and stress to birds and wildlife. Feeding ducks and geese also disrupts migration patterns; and it provides an environment where disease is easily spread. As a result, Fremont has stopped selling bird food. Discussion Staff presented this issue to the Parks and Recreation Commission (Commission) on May 28, 2013. The Commission supported the idea, and suggested that staff contact the Audubon Society to ensure that the proposed ordinance was broad enough to fully address the issue. Staff consulted with the Santa Clara Valley Audubon Society, and amended the staff report and proposed ordinance to include their suggestions regarding feral animals. Often times, feral animals (roosters, turtles, rabbits, cats, etc.) are abandoned in parks and open space areas. Sometimes, these animals are former pets and associate people with food. Park visitors often feed these animals, which causes many of the same problems that come from feeding wildlife. Some feral animals, such cats, can pose a serious threat to native wildlife. A 2013 three-year Fish and Wildlife Service-funded study estimates that cats kill from 1.4 billion to as many as 3.7 billion birds in the continental U.S. each year. When people set out feral cat feeding stations in or in the vicinity of nature preserves or parks, they unwittingly do tremendous damage to the bird population, too. Cat feeding stations also lure in other pests and predator species such as rats, skunks, raccoons, opossums, and nuisance birds. Unfortunately, feeding cats does not stop them from hunting wildlife, and this is a problem in riparian ecosystems, wetlands and marshes - ecosystems that are critical for native wildlife foraging, nesting and rearing young and for wildlife movement. The problem is especially acute in the Baylands, where grassland and wetland bird species nest on the ground, and are very vulnerable to predation by cats. Endangered mammal species in the Baylands (such as the salt marsh harvest mouse) are also susceptible to cat predation. At the Baylands (home to over 100 different bird species) feral cat feeding stations have been an on and off problem for many years. Staff returned to the Commission on August 27, 2013, and the Commission voted 6:1 to recommend that Council adopt the proposed ordinance. Commissioner Ashlund, the one no-vote, said she felt that staff should consult with animal welfare groups to learn more about options for reducing the feral cat population, and moving feral cats outside of parks. Animal Welfare Outreach On October 2, 2013, staff met with Carole Hyde, Executive Director of the Palo Alto Humane Society, and with Scottie Zimmerman, Board Member of the Friends of the City of Palo Alto Page 6 Palo Alto Animal Shelter, to discuss the proposed ordinance and how it might affect the care and feeding of feral cats in Palo Alto dedicated park and open space lands. Ms. Hyde and Ms. Zimmerman explained their real concern with the proposed ordinance for prohibition of feeding of cats in parks and open space land is that it might lead to a gradual program to remove feral cat population control, either by prohibiting care or disbanding programs that are currently providing volunteer animal control of the community’s feral cats in urban areas and non-parkland. They explained that Palo Alto doesn’t have a large feral cat problem. Ms. Hyde and Ms. Zimmerman said that they aren’t aware of any legitimate feral cat feeding currently taking place in any of Palo Alto’s Baylands, parks or open space areas; and that they support keeping feeding out of any sensitive areas where wildlife might be impacted. Staff noted that the proposed ordinance allows for feeding of wildlife or feral animals in parks or open space lands if permitted by the Director of Community Services. Staff suggested a compromise of allowing cat welfare advocates to submit requests for permits to feed feral cats in parks and open space areas. Ms. Hyde didn’t think such permits would be needed very often, but having the flexibility to feed in order to trap a feral cat in an urban park would be beneficial, as opposed to letting the cats continue to breed. There are approximately 150 feral cats in Palo Alto according to their analysis. Without the volunteer feral cat groups (which monitor, feed, and trap, neuter, and release feral cats, and remove litters of kittens for adoption) there would be no controls on the growth of homeless cat populations at all. This is not a function performed by any city, county, or state employees. Ms. Hyde and Ms. Zimmerman explained the Palo Alto Humane Society expends approximately $40,000 each (normal) year at the Palo Alto Animal Services clinic in vouchers for people to have their animals spayed and neutered. They pointed out that this is a tremendous gift to the City because it not only reduces the number of homeless animals in the city, but also covers costs that (in some cases) would otherwise have to be paid by Palo Alto Animal Services, such as the considerable expenses associated with holding and euthanizing feral cats. Ms. Hyde and Ms. Zimmerman said they could support the proposed ordinance if it was made clear that staff did not intend to prohibit feral cat support elsewhere in the City, and if cat welfare advocates could submit permit requests to feed when necessary in certain parks and open space areas. Community Services Director Greg Betts confirmed that Community Services has no plans to prohibit cat feeding elsewhere in the City, and that cat welfare advocates may submit requests for permits to feed feral cats in parks and open space areas. Each City of Palo Alto Page 7 permit request will be considered on a case-by-case basis supported by justification provided by the applicant. On April 22, 2014, staff returned to the Commission to share the understanding regarding animal welfare advocates being allowed to submit permit requests to feed feral animals in parks. The Commission voted 7:0 to recommend that Council adopt the ordinance. The Commission noted that they like the ordinance and the agreement with the animal welfare group. Staff clarified that permits would not be issued to feed feral animals in areas near sensitive wildlife, nor would permits be issued to sustain a cat colony in a park or open space area. The Commission suggested staff consider an increase in friendly Rangers outreach on weekends for the first six weeks to help break bad habits of feeding wildlife. Staff confirmed that Rangers will make an extra effort to educate park visitors about this important subject. The Commission also requested that staff continue to engage children and service groups in helping to teach people not to feed the wildlife, particularly at the Duck Pond. Staff noted that we will continue to work with the Environmental Volunteers and Save the Bay to incorporate the message regarding feeding wildlife to the numerous children and families that participate in their programs. Timeline There will be a three-month grace period where verbal and written warnings will be used before using adminstrative citations to seek compliance with the ordianance. Resource Impact No staffing increases are proposed to enforce the ordinance. However, staff expects there will be a slight increase in the number of Ranger patrols of the Duck Pond (which is the most common area for park visitors to feed wildlife). Staff also expects a reduction in staff time spent cleaning guano from pathways and benches, and collecting injured and dead birds from around the Duck Pond. The fine imposed for an administrative citation is currently $250 for violation of this ordinance. To implement this ordinance, $2,500.00 would be used from the Open Space and Parks operating budget to design, fabricate, and install additional signage. Policy Implications The proposed ordinance is consistent with Goal N-1 of the Comprehensive Plan, which encourages the management of Open Space in such a way as to protect our natural resources and provide a source of beauty and enjoyment for Palo Alto residents. The ordinance is also consistent with Goal N-4 of the Comprehensive Plan, which encourages water resources to be prudently managed as to sustain plant and animal life. Environmental Review City of Palo Alto Page 8 This project is not subject to environmental review under provisions of the California Environmental Quality Act (CEQA). The proposed ordinance would improve the health and well-being of wildlife, improve the water quality of the Baylands Duck Pond and Boronda Lake, and improve public safety by limiting the potential dangerous interaction by that comes from providing food to wildlife. Attachments:  Attachment A-- Ordinance (PDF)  Attachment B- Letter of Support (PDF)  Attachment C- Example Signs (PDF) *NOT YET APPROVED* 130819 dm 00710269 Formatted: Font: +Body (Calibri) Formatted: Centered Ordinance No. ____ Ordinance of the Council of the City of Palo Alto Amending Section 22.04.270 by Adding Subsection 22.04.270(c) to Prohibit the Feeding of Wildlife and Feral Animals in City Parks and Open Spaces The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Section 22.04.270 of Chapter 22.04 of Title 22 Parks is hereby amended by adding Section 22.04.270(c), to read: “22.04.270 Flora, fauna., feeding of wildlife (a) No person other than a duly authorized city employee or any persons participating in city-sponsored activities shall dig, remove, destroy, injure, mutilate or cut any tree, plant, shrub, bloom or flower, or any portion thereof, growing in any park or open space lands, without the written consent of the director. (b) No person shall take, seize, molest, injure, or hunt a bird, reptile, or animal in any city park or opens space lands, except as authorized by park regulations or bywith the written consent of the director. (c) No person shall feed, cause to be fed, scatter or leave food, seed or other matter edible to any wildlife animal, including any bird or feral animal, including any feral cat, in any park or open space lands or building located within a park or open space lands, without the written consent of the director.” // // // // // // // // // Formatted: Font: +Body (Calibri) Formatted: Indent: Left: 0.5", No bullets or numbering, Adjust space between Latin and Asian text, Adjust space between Asian text and numbers Formatted: Indent: Left: -0.25", First line: 0.75", No bullets or numbering *NOT YET APPROVED* 130819 dm 00710269 Formatted: Font: +Body (Calibri) Formatted: Centered SECTION 2. The Council finds that the adoption of this ordinance is not a project for the purposes of the California Environmental Quality Act. SECTION 3. This ordinance shall be effective on the thirty-first day after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: __________________________ ____________________________ Senior Asst. City Attorney City Manager ____________________________ Director of Community Services ____________________________ Director of Administrative Services Formatted: Underline     August 27, 2013 Parks and Recreation Commission City of Palo Alto Re: Please Recommend to Council a no feeding wildlife and feral animals ordinance Dear Chair Lauing and Commissioners, The Sierra Club, Santa Clara Valley Audubon Society, and the Citizens Committee to Complete the Refuge thank you for the opportunity to support the proposed ordinance to disallow feeding of wildlife and feral animals in Palo Alto parks. The Vision of the City of Palo Alto Natural Environment Element of the Comprehensive Plan is: “Palo Alto will respect and manage natural resources in a way that sustains the natural environment and protects our foothills, baylands, creeks, parks, wildlife and open space legacy… Even in built-up areas, a network of parks will provide access to nature….” The Staff Report for Item IV-3 on the September 27th Agenda (“Recommend to Council a no feeding wildlife and feral animals ordinance”) provides analysis that clearly shows the risks associated with feral cats in parks and open space. These risks include potentially adverse impacts of feral cat parasites to public and environmental health. In addition, cats impose devastating impacts on populations of birds and wildlife. We believe that the proposed ordinance would help implement the vision as directed by the Natural Environment Element of the Comprehensive Plan, and we are glad to support an ordinance that would promote protection of our natural resources. Thank you, Gita Dev, Sustainable Land Use Committee Sierra Club, Loma Prieta Chapter    2   Shani Kleinhaus, Environmental Advocate Santa Clara Valley Audubon Society Eileen McLaughlin, Board Member Citizens Committee to Complete the Refuge City of Palo Alto (ID # 4799) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/9/2014 City of Palo Alto Page 1 Summary Title: Electric, Gas, Wastewater Collection, and Water Utility Financial Plans Title: Finance Committee Recommendation that Council Adopt a Resolution Approving the Fiscal Year 2015 Financial Plans and Reserve Management Policies for the Electric, Gas, Wastewater Collection and Water Utilities, With No Rate Increases Proposed for Fiscal Year 2015 From: City Manager Lead Department: Utilities Recommendation Staff, the Finance Committee, and the Utilities Advisory Commission (UAC) recommend that the City Council adopt a resolution (Attachment A) approving the proposed Fiscal Year (FY) 2015 Electric, Gas, Wastewater Collection, and Water Utility Financial Plans and Reserve Management Policies, which include no rate increases proposed for FY 2015. Executive Summary Every year staff presents financial forecasts for the Electric, Gas, Wastewater Collection, and Water Utilities to the Finance Committee and recommends any rate adjustments required to maintain their financial health. This year, staff prepared expanded forecasts, which will now be called “Financial Plans,” that include a more comprehensive overview of the utility’s operations, both retrospective and prospective. The Financial Plans are intended to be a reference for UAC and Council members as they review the budget and staff’s rate adjustment recommendations. The Financial Plans, which keep rates for all utilities unchanged for FY 2015, include a set of Reserves Management Practices describing the financial reserves for each utility and the management practices for those reserves. The proposed Reserves Management Practices include improvements to the structure of each utility’s reserves, and replace the current Council-approved reserve guidelines. Many of the proposed improvements to the reserves are responsive to recommendations made by the City Auditor in the December 2012 Utilities Reserves Audit. If the City Council approves the new reserve guidelines, they will be included in the Fiscal Year 2015 Adopted Budget. Both the UAC and the Finance Committee voted unanimously to recommend that Council City of Palo Alto Page 2 approve the proposed Financial Plans. A full discussion of the Financial Plans is provided in the report to the Finance Committee, which is provided as Attachment F. Commission and Committee Review and Recommendations Staff presented the Financial Plans for the Electric, Gas, Wastewater Collection, and Water Utilities to the UAC at its March 26, 2014 meeting. Staff’s presentation to the UAC included a projected 4% rate increases for the Water and Wastewater Collection Utilities. The UAC voted (4-1: Commissioner Melton opposed, Commissioners Chang and Waldfogel absent) to recommend that Council adopt the proposed Financial Plans, modified to include no rate increases for FY 2015 for the Water and Wastewater Collection Utilities. The minutes of the UAC’s March 26, 2014 meeting are provided as Attachment H. Staff agreed with the UAC’s recommendation and modified the Financial Plans for the Water and Wastewater Collection Utilities. Staff presented the attached Financial Plans to the Finance Committee at its April 15, 2014 meeting. At that meeting Commissioner Hall discussed the UAC recommendation. Finance Committee members asked various questions but were generally supportive of the staff proposal and UAC recommendation. After discussion, the Finance Committee unanimously recommended Council approve the proposed Financial Plans. The minutes of the Finance Committee’s April 15, 2014 meeting are provided as Attachment I. Attachments:  Attachment A: Resolution Approving the FY 2015 Electric, Gas, Wastewater Collection, and Water Utility Financial Plans (PDF)  Attachment B: FY 2015-2019 Electric Utility Financial Plan (PDF)  Attachment C: FY 2015-2021 Gas Utility Financial Plan (PDF)  Attachment D: FY 2015-2019 Wastewater Collection Utility Financial Plan (PDF)  Attachment E: FY 2015-2021 Water Utility Financial Plan (PDF)  Attachment F: April 15, 2014 Finance Committee Staff Report ID #4583 Regarding the FY 2015 Utilities Financial Plans (without attachments) (PDF)  Attachment G: Utilities Reserves Audit Findings and Recommendations (Excerpt) (PDF)  Attachment H: Excerpted Final UAC Minutes of March 26, 2014 (PDF)  Attachment I: Excerpted Draft Minutes of April 15, 2014 Finance Committee Meeting (PDF) Attachment A NOT YET APPROVED Resolution No. _________ Resolution of the Council of the City of Palo Alto Approving the Fiscal Year 2015 Financial Plans and Reserve Management Policies for the Electric, Gas, Wastewater Collection, and Water Utilities, With No Rate Increases Proposed for Fiscal Year 2015 R E C I T A L S A. Each year the City of Palo Alto (“City”) assesses the financial position of its utilities with the goal of ensuring adequate revenue to fund operations. This includes making long-term projections of market conditions, assessing the physical condition of the system and other factors that could affect utility costs, and setting rates adequate to recover these costs. This task is undertaken with the goal of providing safe, reliable, and sustainable utility services at competitive rates. B. This year, staff has developed expanded forecasts, called “Financial Plans,” that include a more comprehensive overview of the utility’s operations, for Council’s adoption starting in FY 2015. C. The City uses reserves to protect against contingencies and to manage other aspects of its operations, and regularly assesses the adequacy of these reserves and the management practices governing their operation. The status of utility reserves and their management practices are included in Reserves Management Practices which are attached to and made a part of the FY 2015 Financial Plans. D. The 2012 Utilities Reserves Audit performed by the City Auditor included recommendations related to the management of utility reserves. Staff has changed to the structure of the utility reserves and the practices for managing them in response to this audit, and has incorporated these changes into the FY 2015 Financial Plans and Reserves Management Practices. E. Staff presented the Financial Plans for the Electric, Gas, Wastewater Collection, and Water Utilities to the UAC at its March 26, 2014 meeting. Staff’s proposal included a projected 4% rate increases for the Water and Wastewater Collection Utilities. The UAC voted 4-1 (with Melton opposed and Commissioners Chang and Waldfogel absent) to recommend that Council adopt the proposed Financial Plans, modified to remove the rate increases. F. Staff presented the modified Financial Plans to the Finance Committee at its April 15, 2014 meeting, and the Finance Committee voted unanimously to recommend that Council approve the proposed Financial Plans, with no proposed rate increases for Fiscal Year 2015. 140522 dm 6053060 1 Attachment A NOT YET APPROVED The Council of the City of Palo Alto RESOLVES as follows: SECTION 1. The Council hereby adopts the FY 2015 to FY 2019 Electric Utility Financial Plan, including the Electric Utility Reserves Management Practices. These Electric Utility Reserves Management Practices replace previously adopted Reserves Policies for the Electric Utility. SECTION 2. The Council hereby adopts the FY 2015 to FY 2021 Gas Utility Financial Plan, including the Gas Utility Reserves Management Practices. These Gas Utility Reserves Management Practices replace previously adopted Reserves Policies for the Gas Utility. SECTION 3. The Council hereby adopts the FY 2015 to FY 2019 Wastewater Collection Utility Financial Plan, including the Wastewater Collection Utility Reserves Management Practices. These Wastewater Collection Utility Reserves Management Practices replace previously adopted Reserves Policies for the Wastewater Collection Utility. SECTION 4. The Council hereby adopts the FY 2015 to FY 2021 Water Utility Financial Plan, including the Water Utility Reserves Management Practices. These Water Utility Reserves Management Practices replace previously adopted Reserves Policies for the Water Utility. / / / / / / / / / / / / / / / / / / / / 140522 dm 6053060 2 Attachment A NOT YET APPROVED SECTION 5. 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 140522 dm 6053060 3 ELECTRIC UTILITY FINANCIAL PLAN FY 2015 TO FY 2019 TABLE OF CONTENTS Definitions and Abbreviations ............................................................................................................................... 2 Executive Summary ............................................................................................................................................... 3 Current State of the Utility .................................................................................................................................... 4 Section I. Utility Overview ......................................................................................................................................... 4 Section II. Current Rates and Competitiveness ......................................................................................................... 5 Section III. Rate Design ............................................................................................................................................. 6 Section IV. Current Utility Financial Status ............................................................................................................... 7 Section V. Status of Reserves .................................................................................................................................... 8 Section VI. Status of Bond Covenants ..................................................................................................................... 10 Looking Back ........................................................................................................................................................ 10 Section VII. Background .......................................................................................................................................... 10 Section VIII. Historical Expenses and Revenues ....................................................................................................... 13 Looking Forward .................................................................................................................................................. 15 Section IX. Five Year Financial Forecast .................................................................................................................. 15 1. Overview ...................................................................................................................................................... 15 2. Commodity Supply Costs ............................................................................................................................. 16 3. Operations and Maintenance Costs ............................................................................................................ 17 4. Capital Improvement Program (CIP) ............................................................................................................ 17 5. General Fund Equity Transfer ...................................................................................................................... 18 Section X. Revenue Requirement and Revenue Sources ......................................................................................... 18 Section XI. Projected Consumption ......................................................................................................................... 21 Section XII. Long-term Outlook ............................................................................................................................... 22 Section XIII. Risk Assessment................................................................................................................................... 23 Section XIV. Communications Plan ......................................................................................................................... 25 Appendices .......................................................................................................................................................... 26 Appendix A: Electric Utility Financial Forecast Detail .............................................................................................. 27 Appendix B: Electric Utility Capital Improvement Program (CIP) Detail .................................................................. 28 Appendix C: Electric Utility Reserves Management Practices .................................................................................. 30 Appendix D: Electric Utility Bond Covenant Details ................................................................................................. 34 Appendix E: Description of Electric Utility Cost Categories ...................................................................................... 36 Appendix F: Samples of Recent Electric Utility Outreach Communications ............................................................. 37 ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 2 | P a g e DEFINITIONS AND ABBREVIATIONS CAISO: California Independent System Operator CIP: Capital Improvement Program CPAU: City of Palo Alto Utilities Department CPUC: California Public Utilities Commission CVP: Central Valley Project GWh: a gigawatt-hour, equal to 1,000 MWh or 1,000,000 kWh. Commonly used for discussing total monthly or annual electric load for the entire city, or the monthly or annual output of an electric generator. kWh: a kilowatt-hour, the standard unit of measurement for electricity sales to customers. kW: a kilowatt, a unit of measurement used in reference a customer’s peak demand (the highest 15 minute average consumption level in a month), which is used for billing large and mid-size commercial customers. kV: a kilovolt, one thousand volts, a unit of measurement of the voltage at which a section of the distribution system operates. The transmission system operates at 115-500 kV, and this is lowered to 60 kV in the subtransmission section of the Electric Utility’s distribution section, then 12 kV or 4 kV in the rest of the distribution system, and finally 120, 240, or 480 volts at the electric outlet. MWh: a megawatt-hour, equal to 1,000 kWh. Commonly used for measuring wholesale electricity purchases. MW: a megawatt, equal to 1,000 kW. Commonly used when discussing maximum electricity demand for all customers in aggregate. PG&E: Pacific Gas and Electric REC: Renewable Energy Certificate RPS: Renewable Portfolio Standard Subtransmission System: The section of the Electric Utility’s distribution system that operates at 60 kV and which interfaces with PG&E’s transmission system. Transmission System: Sections of the electric grid that operate at high voltages, generally 115 kV or more. The voltage at the intersection of the Electric Utility’s distribution system and PG&E’s transmission system is 115 kV. The Electric Utility does not own or operate any transmission lines. UCC: Utility Control Center SCADA: Supervisory Control and Data Acquisition system, the system of sensors, communications, and monitoring stations that enables system operators to monitor and operate the system remotely. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 3 | P a g e WAPA, or Western: Western Area Power Administration, the agency that markets power from CVP hydroelectric generators and other hydropower owned by the Bureau of Reclamation. EXECUTIVE SUMMARY This document presents a financial plan for the City of Palo Alto’s Electric Utility for the next five years. The plan includes revenues to cover the costs of operating the utility safely over that time while adequately investing for the future. It also addresses the financial risks facing the utility over the short term and long term, and includes measures to mitigate and manage those risks. Over the next five fiscal years staff projects that total costs for the Electric Utility will rise by 3 to 4% per year as more renewable projects begin operation. Transmission costs are also projected to contribute to those increases. Operations and Capital Improvement Program (CIP) costs are projected to increase at 3% per year. To match revenues to these rising costs, the financial plan includes the rate trajectory shown in Table 1. This trajectory includes no planned rate increase for FY 2015. This will allow the utility to draw down accumulated reserves. For FY 2016 to FY 2019, rates are projected to increase 2 to 3% each year. This is equivalent to $0.90 to $1.36 per month for the median residential customer’s monthly electric bill. Table 1: Projected Electric Rate Trajectory for FY 2015 to FY 2019 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 0% 3% 3% 3% 2% This Financial Plan includes a set of Electric Utility Reserves Management Practices. These set forth the reserves held by the Electric Utility, their purposes, and guidelines for managing them. The Reserves Management Practices make the following changes to the utility’s existing reserves structure: 1. The addition of an Operations Reserve, a CIP Reserve, and an Unassigned Reserve to the Distribution Fund; 2. The addition of an Operations Reserve, a Hydro Stabilization Reserve, and an Unassigned Reserve to the Electric Supply Fund; 3. The closure of the Central Valley Project (CVP) Reserve and the transfer of all funds ($314,000) into the new Supply Operations Reserve; and 4. The closure of the Emergency Plant Replacement Reserve and the transfer of all funds ($1 million) into the new Distribution Operations Reserve. In addition, the plan includes the following transfers: 1. Transfer $9.1 million from the Distribution Rate Stabilization Reserve to the Distribution Operations Reserve; 2. Transfer $28 million from the Supply Rate Stabilization Reserve to the Hydro Stabilization Reserve; and 3. Transfer $19.6 million from the Supply Rate Stabilization Reserve to the Supply Operations Reserve. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 4 | P a g e CURRENT STATE OF THE UTILITY SECTION I. UTILITY OVERVIEW The City of Palo Alto’s Electric Utility provides electric service to the residents, businesses, and other electric customers in Palo Alto. There are roughly 29,300 customers connected to the electric system, 26,500 (90%) of which are residential and 2800 (10%) of which are non- residential. Residential customers consumed 187 gigawatt-hours (GWh) in FY 2013, approximately 20% of the electricity sold, while non-residential customers consumed 84% or 760 GWh. Residential customers use electricity primarily for lighting, refrigeration, electronics, and air conditioning.1 Non-residential customers use the majority of their electricity for cooling, ventilation, lighting, office equipment (offices), cooking (restaurants), and refrigeration (grocery stores).2 The Electric Utility receives electricity at a single connection point with Pacific Gas and Electric’s (PG&E’s) transmission system. From there the electricity is delivered to customers through nearly 470 miles of distribution lines, of which 223 miles (48%) are overhead lines and 245 miles (52%) are underground. The Electric Utility also maintains six substations, 2,004 overhead line transformers, 1,075 underground and substation transformers, and the associated electric services (which connect the distribution lines to the customers’ homes and businesses). These lines, substations, transformers, and services, along with their associated poles, meters, and other associated electric equipment, represent the vast majority of the infrastructure used to deliver electricity in Palo Alto. The City of Palo Alto Utilities Department (CPAU) manages an ongoing CIP to repair and replace that equipment over time. CIP expense accounts for 8% of the utility’s expenditures. In addition to the CIP, the Electric Utility performs a variety of maintenance and monitoring activities on the system. The entire system is monitored from the Utility Control Center (UCC) using the Supervisory Control and Data Acquisition System (SCADA), and staff members at the UCC help coordinate the routing of power through the system in response to outages and to accommodate routine maintenance activities. Other staff members perform routine maintenance and testing of the substations, test and replace meters, investigate customer inquiries and complaints related to power quality, clear vegetation from overhead lines, and diagnose outages and perform emergency repairs. The utility shares the costs of other operational activities such as customer service, billing, meter reading, supply planning, and energy efficiency with the City’s other utilities. These maintenance and operations expenses, as well as associated administration, debt service, rent, and other costs, make up 25% of the utility’s expenses. Electric supply represents the majority of the Electric Utility’s costs. Nearly 60% of the utility’s costs are related to purchasing electricity and transporting it to Palo Alto. Roughly 50% of the electricity is supplied from hydroelectric resources, 21% from Renewable Portfolio Standard (RPS) eligible renewables, with the remainder purchased in the market from unspecified 1 Source: Residential Appliance Saturation Survey, California Energy Commission, 2010 2 Source: Statewide Commercial End Use Study, California Energy Commission report, 2006. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 5 | P a g e generating sources. Under the City’s Carbon Neutral Plan, the amount of electricity from RPS- eligible sources will rise to nearly 50% by FY 2017. In the meantime, CPAU purchases renewable energy certificates (RECs) corresponding to its market purchases. Since its inception the Electric Utility has provided an annual return to the City’s General Fund. This equity transfer is calculated based on the net book value of the utility’s capital assets. The transfer accounts for 10% of the utility’s expenses. SECTION II. CURRENT RATES AND COMPETITIVENESS CPAU’s last electric rate change took effect on July 1, 2009. Table 2, below, summarizes the current rates for the four largest customer classes. The Electric Utility also has specialty rates for smaller groups of customers. These include variations on its primary rates, such as time of use rates, the PaloAltoGreen rates, and solar net metering. Another specialty rate is the E-18 municipal electric rate. Table 2: Current Electric Rates (12/1/13) Rate Component Units E-1 (Residential) E-2 (Small Commercial) E-4 (Med. Commercial) E-7 (Large Commercial) Demand (Summer) $/kW N/A N/A 20.54 18.97 Demand (Winter) $/kW N/A N/A 13.84 11.54 Energy (Summer) Tier 1 $/kWh 0.09524 0.14045 0.08171 0.07808 Tier 2 $/kWh 0.13020 N/A N/A N/A Tier 3 $/kWh 0.17399 N/A N/A N/A Energy (Winter) Tier 1 $/kWh Same as summer energy 0.12661 0.07318 0.07209 Tier 2 $/kWh N/A N/A N/A Tier 3 $/kWh N/A N/A N/A Tier amounts: Tier 1 kWh/day 0-10 N/A N/A N/A Tier 2 kWh/day 10-20 N/A N/A N/A Tier 3 kWh/day >20 N/A N/A N/A Table 3 presents the median residential bills for Palo Alto, PG&E, and the City of Santa Clara (Silicon Valley Power) for several usage levels. For the median consumption level the annual bill for calendar year 2013 was $511.42 under current CPAU rates, 23% lower than the annual bill for a PG&E customer with the same consumption and roughly the same as the annual bill for a City of Santa Clara customer. The bill calculations for PG&E customers are based on PG&E Climate Zone X, which includes most surrounding comparison communities. Rates shown below were effective January 1, 2014. Only a single winter month and a single summer month is shown due to the fact that PG&E’s rates vary frequently due to rate adjustment mechanisms. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 6 | P a g e Table 3: Residential Monthly Electric Bill Comparison ($/mo) Season Usage (kwh) Palo Alto PG&E Santa Clara Winter (January) 300 28.57 39.69 31.90 (Median) 453 48.14 61.57 48.76 650 75.11 122.14 70.47 1200 170.80 319.20 131.08 Summer (July) 300 28.57 $ 39.69 31.90 (Median) 365 36.69 48.72 39.06 650 75.11 127.42 70.47 1200 170.80 326.22 131.08 Table 4, below, shows the average monthly electric bill for commercial customers for various usage levels for the same period. Bills for small commercial customers in Palo Alto are 35% below what they would be in PG&E territory and 18% below what they would be in Santa Clara (Silicon Valley Power). For large commercial customers, rates are 23% below PG&E’s and are comparable to Santa Clara’s (lower, for the largest commercial customers). Table 4: Commercial Monthly Electric Bill Comparison (3/1/14, $/mo) Usage (kwh/mo) Palo Alto PG&E Santa Clara 1,000 134 205 164 160,000 19,267 25,096 18,904 500,000 55,895 73,029 57,069 2,000,000 195,395 255,231 220,654 PG&E currently has recently stated its intention to file an application with the California Public Utilities Commission (CPUC) that would reduce the number of residential tiers from four to two, and allow all customers to opt for time-of-use pricing. If approved by the SFPUC, such changes would be phased in, possibly as soon as 2015. SECTION III. RATE DESIGN The Electric Utility’s current rate structure and methodology are consistent with the cost of service analysis (COSA) update in 2007 by Boris Metrics. Staff plans to review and update this cost of service study in 2014. Before conducting this new cost of service study, staff will review current rates and the scope of the study with the UAC and Council to determine UAC and Council policy priorities. There are a variety of rate-related topics currently being discussed by investor- and publicly-owned utilities across California, including the pros and cons of tiered rate structures, the impact of customer-owned generation (like net-metered solar) on rates and revenues, and rate design for electric vehicles. With the Electric Utility’s carbon neutral electric supply, some customers may be interested in gas to electric fuel switching, and the impact of rate design on this decision also bears some discussion. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 7 | P a g e SECTION IV. CURRENT UTILITY FINANCIAL STATUS In FY 2013, electric supply costs represented nearly 60% of the Electric Utility’s costs. Operations and CIP represented one quarter of the costs, and the remaining costs were for administration and overhead (7%) and the General Fund equity transfer (10%), as shown in Figure 2. These expenditures are also displayed by category of expenditure in Figure 1. The vast majority of the utility’s revenue came from sales of electricity (92%), with the remainder coming from capacity and connection fees (2%), and other sources (6%). Table 5 summarizes the Electric Utility’s financial outlook for FY 2014. Electric supply costs are projected to be $1.3 million lower than the adopted budget. While higher costs are projected due to low output from hydroelectric resources, lower than forecasted transmission costs will provide some relief, and the cost of renewable energy is forecasted to be much lower ($3.2 million) due to the delayed start of the San Joaquin renewable energy facility and termination of the Crazy Horse renewable energy project. Commercial load is growing more slowly than anticipated and, when combined with a shift in commercial consumption patterns, staff is anticipating sales revenue to be $5.0 million lower than forecast. Other expenses are projected to be approximately $5.4 million under budget due to savings in a variety of operations budgets. Figure 2: FY 2013 Costs by Activity Electric Supply, 57% GF Xfer, 10% CIP, 8% Operations, 18% Admin/ Overhead, 7% Figure 1: FY 2013 Costs by Category Electric Supply, 57% GF Xfer, 10% CIP, 8% Supplies/ Materials / Other, 5% Salaries/ Benefits, 9% Other, 4% Admin/ Overhead, 7% Table 5: Projected Electric Utility Net Revenue, FY 2014 Electric - Operating Activity All figures in thousands $ (000’s) Adopted Budget FY 2014 Unaudited Actuals Jul 13-Dec13 Projected Activity Jan 14-Jun 14 Projected FY 2014 Activity Variance to Budget Net Sales * 117,019 59,222 52,774 111,996 (5,023) Other revenues 15,920 7,271 9,504 16,775 855 Purchase cost to serve retail load (72,224) (34,485) (36,448) (70,933) 1,291 Other expenses ** (62,935) (32,365) (25,124) (57,489) 5,446 Surplus Energy costs (2,304) (831) (437) (1,268) 1,036 Surplus Energy revenues 2,316 544 519 1,063 (1,253) Total (2,208) (644) 788 144 2,352 * Includes misc. sales, adjustments, discounts, and bad debt ** Includes reserve transfers, salaries, allocated charges, other misc. expenses and encumbrances ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 8 | P a g e SECTION V. STATUS OF RESERVES Table 6, below, shows the projected status of the Electric Utility’s reserves at the end of FY 2014. Total reserves at the end of FY 2014 are projected to be $143.7 million, of which $70.3 million will be in the Rate Stabilization Reserves. As detailed in Appendix C: Electric Utility Reserves Management Practices and in Table 4 below, staff has proposed various changes to the Electric Utility reserves: 1. The addition of an Operations Reserve, a CIP Reserve, and an Unassigned Reserve to the Distribution Fund; 2. The addition of an Operations Reserve, a Hydro Stabilization Reserve, and an Unassigned Reserve to the Electric Supply Fund; 3. The closure of the CVP Reserve and the transfer of all funds ($314,000) into the new Supply Operations Reserve; and 4. The closure of the Emergency Plant Replacement Reserve and the transfer of all funds ($1 million) into the new Distribution Operations Reserve. In addition, the plan includes the following transfers: 1. Transfer $9.1 million from the Distribution Rate Stabilization Reserve to the Distribution Operations Reserve; 2. Transfer $28 million from the Supply Rate Stabilization Reserve to the Hydro Stabilization Reserve; and 3. Transfer $19.6 million from the Supply Rate Stabilization Reserve to the Supply Operations Reserve. The addition of an Operations Reserve, CIP Reserve, and Unassigned Reserve will add transparency and simplify reserves management by providing separate reserves for various functions that are currently all served by the Rate Stabilization Reserves. The Operations Reserve will be used to manage contingencies and absorb normal year-to-year cost and revenue fluctuations. The CIP Reserve will hold funds for expenditure on future budgeted CIP projects. The Rate Stabilization Reserve will be used to smooth the transition to higher rates. If the utility accumulates reserves that are not designated for a specific purpose, these will be placed in the Unassigned Reserve until those funds are either designated for a specific purpose or returned to ratepayers. Creating separate CIP, Rate Stabilization, and Unassigned Reserves allows the utility to set minimum and maximum guidelines for the Operations Reserve and set forth clear actions to be taken when it is over or under those levels. If funds are to be held for a specific purpose (for example, a future CIP project) these can be held in a separate reserve designed for that purpose (in this example, the CIP Reserve). Without a separate reserve, those funds would be held in the Operations Reserve and could cause it to exceed its maximum guideline, making it difficult to treat the maximum guideline as a clear limit on the size of the reserve. This proposal also adds transparency, since the public will be able to see the various purposes for which the utility is holding reserves. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 9 | P a g e This plan also involves merging the existing Emergency Plant Replacement Reserve into the Distribution Operations Reserve. Currently the Emergency Plant Replacement Reserve holds $1 million, enough to pay the City’s insurance deductible in the event of a loss of utility equipment due to an insurable loss. Staff believes that even at minimum levels the Operations Reserve has adequate funding to cover the insurance deductible, making the Emergency Plant Replacement Reserve duplicative. This plan also establishes a Hydro Stabilization Reserve. This is part of the development of a comprehensive strategy for dealing with the fluctuations in costs created by the utility’s hydroelectric resources. The costs of these resources are largely fixed and must be paid Table 6: Projected Electric Utility Reserves, 6/30/2014 ($000) Projected Reserve Levels Proposed Reallocation of Reserves Projected After Reallocation Electric Supply Fund Reappropriations & Commitments 200 N/A 200 Electric Special Projects Reserve* 53,356 N/A 53,356 CVP Reserve 314 -314 (closed) Rate Stabilization Reserve 61,200 -51,407 13,916 Hydro Stabilization Reserve (new) 28,000 28,000 Operations Reserve (new) 19,598 19,598 Unassigned Reserve (new) 0 Total 115,070 0 115,070 Supply Operations Reserve: Days of Expense 90 days Supply Operations Reserve: Minimum 60 days Supply Operations Reserve: Target 90 days Supply Operations Reserve: Maximum 120 days Electric Distribution Fund Reappropriations & Commitments 16,645 N/A 16,645 Underground Loan Reserve 738 0 738 Emergency Plant Replacement 1,000 -1,000 (closed) Public Benefit Reserve 1,103 0 1,103 CIP Reserve (new) 0 0 Rate Stabilization Reserve 9,138 -9,138 0 Operations Reserve (new) 10,138 10,138 Unassigned Reserve (new) 0 0 Total 28,625 0 28,625 Dist. Operations Reserve: Days of Expense 92 days Dist. Operations Reserve: Minimum 60 days Dist. Operations Reserve: Target 90 days Dist. Operations Reserve: Maximum 120 days *Previously the Calaveras Reserve. See Staff Report ID#2160, November 1, 2011 ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 10 | P a g e regardless of the amount of power they generate. That generation is highly variable. When production is lower than average, CPAU incurs additional costs because it is forced to buy market energy to replace the lost production. When production is higher than average, CPAU purchases less market energy and sells surplus energy in the spot markets. The Hydro Stabilization Reserve is one of several tools that can be used to balance out these fluctuations from year to year. The guidelines for this reserve will likely be revised in the future when CPAU establishes a more comprehensive hydro balancing strategy. This plan will leave 90 days of expenses in the Supply Operations Reserve and 92 days of expenses in the Distribution Operations Reserve, which is within the long term guidelines set forth in Appendix C: Electric Utility Reserves Management Practices. $13.9 million will be retained in the Supply Rate Stabilization Reserve to be drawn down in future years. SECTION VI. STATUS OF BOND COVENANTS The Electric Utility’s annual debt service is $100,000 per year. This is related to the 2007 Electric Utility Clean Renewable Energy Tax Credit Bonds, Series A, which will require payments through 2021. This $1.5 million issuance was to fund a portion of the construction costs of solar demonstration projects at the Municipal Services Center, Baylands Interpretive Center, and Cubberley Community Center. The total capacity of these projects was 250 kilowatt (kW). The City is in compliance with all covenants on the bond. Additional detail is provided in Appendix D. LOOKING BACK SECTION VII. BACKGROUND On January 16, 1900, Palo Alto began operating its own electric system. One of the earliest sources of Palo Alto's electricity was a steam engine that was later replaced by a diesel engine in 1914 due to rising fuel oil costs. As demand for electricity and the population continued to grow, CPAU connected to PG&E’s system in the early 1920s. Power from PG&E proved more economical than the diesel engines, and by the late 1920s CPAU was using its own diesel engines only during peak demand periods. At that time CPAU owned 45 miles of distribution lines and the City used 9.7 GWh annually, less than 1% of today’s annual consumption. The diesel engines remained in operation until 1948, when they were retired. From 1950 to 1970 electric consumption in Palo Alto grew dramatically, just as it did throughout the rest of the country. In 1970 total annual sales were 602 GWh, twenty times the 1950 sales of 30 GWh. Some of that growth was related to a development boom in Palo Alto, which doubled the number of customers. Some was related to the proliferation of electric appliances, as evidenced by the fact that residential customers were using three times more electricity in 1970 than they had been in 1950. But the most notable factor was the growth of industry in Palo Alto during that time. By 1970, commercial customers were using 20 times more electricity per customer than they had been in 1950. These decades also saw several other notable events, including: ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 11 | P a g e  1964: CPAU entered into a favorably priced 40 year contract with the Federal Bureau of Reclamation to purchase power from the Central Valley Project (CVP).  1968: Palo Alto joined several other small municipal utilities to form the Northern California Power Agency (NCPA), a joint action agency intended to make the group less vulnerable to actions by private utilities and to enable investment in energy supply projects.  1965: The City began a long-term program to underground its overhead utility lines (Ordinance 2231) Palo Alto’s first new power plant investment in over 50 years came in the mid-80s. Palo Alto joined other NCPA members to invest in the construction and operation of the Calaveras Hydroelectric Project on the Stanislaus River in the Sierra-Nevada Mountains. The project commenced operation in 1990. The 1980s also saw an increased focus on infrastructure maintenance. In 1987 the UCC was built to house the terminals for a new SCADA system, which enabled utility staff to monitor the distribution system in real time, improving response time to outages. CPAU also commenced a preventative maintenance and planned replacement program for its underground system in the early 1990s. In the early 1990s the CPUC issued a ruling to deregulate the electric industry in California, and in 1996 the State legislature passed Assembly Bill 1890, which, among other things, created the California Independent System Operator (CAISO) to operate the transmission system and the Power Exchange to facilitate wholesale energy transactions. This restructuring was anticipated to bring lower costs to consumers, and while CPAU was not required to participate in the industry restructuring, in 1997 the Council approved a Direct Access Program for the Electric Utility3 that enabled CPAU to sell electricity outside its service territory and allowed customers within CPAU’s service territory to choose other providers. The utility unbundled its electric rates, creating separate supply and distribution components, which would enable customers to receive only distribution service while purchasing the electricity itself from another provider. The energy crisis in 2000 to 2001 led to the suspension of competition by the CPUC in September 2001 as wholesale energy prices skyrocketed. The Electric Utility was less impacted than other utilities by the 2000 to 2001 energy crisis thanks to the Calaveras project and its contract with the Western Area Power Administration (WAPA)4 for CVP hydropower. In 2001 CPAU began planning for the impacts associated with the new terms of its contract with WAPA, set to take effect in 2005. The previous contract had provided 90% of Palo Alto’s power supply at favorable rates, and PG&E, as a party to the contract, had provided supplemental power to balance the monthly variability of CVP generation. The new contract would provide only a third of Palo Alto’s requirement, and the monthly variability in CVP generation would be passed directly through to Palo Alto. As a result, electric supply costs were going to increase and CPAU would need to begin more actively managing its supply portfolio. CPAU began purchasing power from marketers and also investigated building a power plant in Palo Alto or partnering in the development of a gas power plant elsewhere. Climate change was also becoming more of a concern to the community, and gradually CPAU shifted its focus to the 3 Implementation of Direct Access for Electric Utility Customers, CMR:460:97, December 1, 1997 4 The Western Area Power Administration is an office of the Department of Energy created in the 1970s to market power from various hydroelectric projects operated by the Federal Government, including the CVP. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 12 | P a g e procurement of renewable energy, with its first contract for wind power commencing in 2005. In 2002 CPAU adopted a goal of achieving 20% of its energy supply from renewables by 2015. In 2011 this goal was increased to 33% by 2015, and in 2013 the City adopted a plan to make its electric supply 100% carbon neutral, which it achieves through the combination of its hydroelectric supplies, purchases of long-term renewable energy supplies, and short-term renewable energy supplies via RECs to meet the balance of its needs. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 13 | P a g e SECTION VIII. HISTORICAL EXPENSES AND REVENUES The Electric Utility maintains separate funds for its electric supply portfolio expenses and its distribution operations and CIP expenses. Table 7 shows the Electric Utility’s expenses and revenues for the past five years. Total costs for this utility have decreased 11% since 2009, but there were a variety of notable cost increases and decreases that contributed to this net change. Commodity costs decreased Table 7: Electric Utility Historical Expenses ($000) *2009 costs are modified to remove the effects of a one-time, $2.9 million transfer between the Supply and Distribution Funds which affects the Other Misc. Rev and Other Transfers Out categories. 2009*2010 2011 2012 2013 1 Sales of Utilities 2 Retail Sales 104,637 112,105 110,915 108,344 109,189 3 Surplus Energy Sales 3,312 1,354 3,680 2,323 1,127 4 Total, Sales of Utilities 107,949 113,459 114,595 110,667 110,316 6 Interest+Investment Gain/Loss 7,712 5,749 3,203 4,099 (1,497) 7 Other Revenues: 8 Carbon Allowance Revenue - - - - 2,713 9 Service Connection Charges 1,053 1,042 1,329 1,468 1,987 10 CVP O&M Loan Credit 7,174 6,550 4,763 4,856 5,509 11 Other Misc. Rev. / Transfers In 3,245 3,744 1,559 2,126 1,510 12 Total, Other Revenues 11,473 11,336 7,651 8,450 11,720 13 Total Sources of Funds 127,134 130,544 125,449 123,216 120,538 14 Purchases of Utilities 15 Purchases to Serve Load 71,738 60,876 51,605 50,660 54,063 16 Surplus Energy Cost 3,305 1,439 4,879 3,198 1,740 17 CVP O&M Loan Advance 7,306 6,398 4,763 4,866 5,511 18 Total, Purchases of Utilities 82,348 68,713 61,247 58,724 61,314 19 Joint Venture Debt Service 8,086 7,819 7,243 8,803 9,166 20 Administration 6,591 2,766 6,689 7,738 9,034 19 Customer Service 1,651 1,897 1,882 1,909 2,007 21 Demand Side Management 3,409 4,048 3,491 5,010 3,530 20 Engineering (Operating)1,055 1,245 1,200 1,204 1,278 22 Operations & Maintenance 8,590 8,794 9,197 9,290 9,505 21 Resource Management 2,063 3,033 2,380 2,654 3,024 22 Rent 3,253 3,813 3,498 3,598 3,704 20 General Fund Transfers 9,268 11,120 11,195 11,587 11,768 23 Other Transfers Out 3,395 785 995 299 322 24 Capital Improvement Programs 9,912 12,598 13,877 7,974 9,775 25 Total Uses of Funds 139,611 126,633 122,896 118,790 124,425 26 Into/ (Out of) Reserves (12,477) 3,911 2,553 4,427 (3,887) Fiscal Year ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 14 | P a g e by 22% over that time due to decreases in electricity market prices related to declines in the cost of natural gas. These decreases were offset by increases in the equity transfer to the General Fund and non-commodity operations costs. The FY 2010 through FY 2013 equity transfers were over 20% higher than the FY 2009 transfer due to a change in methodology adopted in 2009 and first taking effect in FY 2010. Excluding one-time transfers in 2009, non- commodity costs5 increased by roughly 2% per year from 2009 - 2013. Total revenues decreased 5% from FY 2009 to FY 2013, but this was due primarily to a decline in the interest income/investment category. Sales revenues increased over that period due to a rate increase on July 1, 2009. In FY 2013 the Electric Utility began receiving revenue related to the sale of carbon allowances allocated to it as part of the State’s cap and trade program. In FY 2013 the interest income category was affected by the recognition of mark to market decreases in the value of the City’s investment portfolio, though the value of the portfolio was still positive. Given that the City holds its investments to maturity these unrealized gains and losses do not impact the utility’s long term financial position. 5 All cost categories in Table 7 aside from Purchases of Utilities, Joint Venture Debt Service, CIP, and Equity Transfers ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 15 | P a g e LOOKING FORWARD SECTION IX. FIVE YEAR FINANCIAL FORECAST 1. OVERVIEW Staff has prepared a forecast of costs and revenues through FY 2019. As shown in Table 8 (and Appendix A: Electric Utility Financial Forecast Detail), total uses of funds for the Electric Table 8: Five Year Electric Utility Financial Forecast Summary Actual Adopted Projected 2013 2014 2014 2015 2016 2017 2018 2019 1 % CHG IN TOTAL SYSTEM RETAIL RATE 0%0%0%0%3%3%3%2% 2 TOTAL AVERAGE RATE ($/KWH)0.115$ 0.119$ 0.116$ 0.116$ 0.119$ 0.122$ 0.126$ 0.129$ 3 COMMODITY COST ($/KWH)0.052$ 0.063$ 0.063$ 0.061$ 0.062$ 0.064$ 0.066$ 0.065$ 4 SALES IN GWH 947 981 965 963 963 965 968 972 5 CHANGE IN RETAIL SALES REVENUE (90) - - (86) 3,089 3,085 4,114 2,571 6 Sales of Utilities 7 Retail Sales 109,189 116,630 111,711 111,530 114,469 117,751 122,226 125,316 8 Surplus Energy Sales 1,127 2,316 1,063 2,395 2,750 4,867 6,763 6,769 9 Total, Sales of Utilities 110,316 118,946 112,774 113,925 117,219 122,618 128,989 132,085 10 Interest+Investment Gain/Loss (1,497) 3,199 3,199 1,663 2,181 2,396 2,753 2,722 11 Other Revenues: 12 Carbon Allowance Revenue 2,713 4,296 4,296 3,910 3,976 4,299 4,493 4,611 13 Service Connection Charges 1,987 1,160 2,499 2,269 2,269 2,269 2,269 2,269 14 CVP O&M Loan Credit 5,509 6,000 5,407 6,000 6,000 6,000 6,000 6,000 15 Other Misc. Rev. / Transfers In 1,510 1,660 1,745 (52) 131 1,748 1,748 1,748 16 Total, Other Revenues 11,720 13,116 13,947 12,127 12,377 14,316 14,510 14,628 17 Total Sources of Funds 120,538 135,260 129,919 127,715 131,777 139,330 146,252 149,436 18 Purchases of Utilities 19 Purchases to Serve Load 54,063 66,205 65,454 63,372 64,801 67,002 68,975 68,102 20 Surplus Energy Cost 1,740 2,304 1,268 2,595 3,026 4,926 6,663 6,586 21 CVP O&M Loan Advance 5,511 6,000 5,407 6,000 6,000 6,000 6,000 6,000 22 Total, Purchases of Utilities 61,314 74,509 72,129 71,967 73,828 77,928 81,638 80,688 23 Joint Venture Debt Service 9,166 9,024 9,024 9,028 9,040 8,854 8,855 8,709 24 Administration (CIP + Operating)9,034 7,174 8,001 8,241 8,489 8,743 9,006 9,276 25 Customer Service 2,007 2,219 2,252 2,319 2,389 2,460 2,534 2,610 26 Demand Side Management 3,530 4,214 4,326 6,152 6,139 5,659 5,731 5,846 27 Engineering (Operating)1,278 1,605 1,522 1,567 1,614 1,663 1,713 1,764 28 Operations & Maintenance 9,505 10,602 9,458 9,742 10,035 10,336 10,646 10,965 29 Resource Management 3,024 5,347 3,213 1,894 1,951 2,009 2,069 2,131 30 Rent 3,704 3,819 3,819 3,934 4,052 4,173 4,299 4,428 31 General Fund Transfers 11,768 11,203 11,203 11,098 11,017 10,886 10,815 10,853 32 Other Transfers Out 322 123 281 123 123 123 123 123 33 Capital Improvement Programs 9,775 8,605 4,547 7,467 6,662 9,192 9,842 10,842 34 Total Uses of Funds 124,425 138,445 129,775 133,532 135,337 142,025 147,270 148,235 35 Into/ (Out of) Reserves (3,887) (3,185) 144 (5,818) (3,560) (2,696) (1,019) 1,201 Fiscal Year ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 16 | P a g e Utility are projected to increase by 3% to 4% per year through FY 2019. The cost of purchased power (which includes Purchases of Utilities and Joint Venture Debt Service) is projected to increase at 5%. Non-commodity costs are projected to rise by 3% per year, and CIP costs are increasing by 2% per year. Sales revenues will need to increase by 2 to 3% per year for FY 2016 to FY 2019 to match these cost increases. 2. COMMODITY SUPPLY COSTS Table 9 shows the projected costs for the electric supply portfolio. These costs are increasing by 5% per year, on average, mainly due to increases in renewable energy costs as various renewable projects come online to fulfill the City’s carbon neutral and RPS goals. Transmission charges are also projected to increase as new transmission lines are built throughout California to accommodate new renewable projects. Table 9: Electric Supply Portfolio Costs, FY 2015 to FY 2019 ($000) FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Hydroelectric (Calaveras + Western) 23,294 23,007 22,464 23,221 23,595 23,882 Renewable / Carbon Neutral / PA Green 16,569 16,939 21,276 26,080 33,481 33,520 Market Purchases 19,892 16,207 13,338 10,992 7,978 7,996 Transmission 13,038 14,850 15,821 16,394 15,219 14,013 Capacity Purchases 1,107 1,383 1,320 1,406 1,491 1,213 NCPA Scheduling and Operations 1,846 2,609 2,648 2,688 2,730 2,772 Central Valley Project O&M Advance 5,407 6,000 6,000 6,000 6,000 6,000 TOTAL 81,153 80,995 82,868 86,782 90,494 89,397 As shown in Table 10, the utility gets 54% of its energy from hydroelectric projects in a normal year (FY 2014 has been dry). Renewables are currently 21% of the portfolio, and are projected to rise to 46% in FY 2019. The remainder comes from unspecified market sources.6 The amount of market energy is projected to steadily decrease until 2017, when all energy is projected to come from hydro and renewable resources in an average hydro year. Table 10: Projected Electric Supply Sources, FY 2015 to FY 2019 (GWh) FY 2014 Adopted FY 2014 Projected FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Load 1013 994 994 994 996 999 1003 Hydro 488 400 476 491 537 537 542 Renewables 243 204 236 287 358 468 467 Market Purchases 283 390 282 216 101 0 0 Total Resources 1013 994 994 994 996 1005 1010 6 Under the City’s Carbon Neutral Plan, CPAU purchases RECs corresponding to the amount of market energy it purchases. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 17 | P a g e 3. OPERATIONS AND MAINTENANCE COSTS Operations costs include the Customer Service, Demand Side Management, Operations and Maintenance, Engineering, Resource Management, and Administration categories in Table 8, above. Rent and transfers are also included in Operations costs (excluding the General Fund equity transfer). Appendix E: Description of Electric Utility Cost Categories includes detailed descriptions of these cost categories. Operations costs are projected to increase by 3% per year. Salary and benefits, inflation, and other assumptions match those used in the City’s long- range financial forecast. 4. CAPITAL IMPROVEMENT PROGRAM (CIP) The Electric Utility’s CIP is shown in Table 11, and consists of the following programs and budgets:  System Capacity and Reliability: CPAU monitors the distribution system and identifies sections that need upgrades to increase reliability or to provide additional capacity to deliver power. This category includes activities such as upgrading and replacing transformers, replacing distribution lines to increase capacity, improving system protection schemes (fuses, switches, etc.), and upgrading substation equipment.  Smart Grid and Advanced Metering: This project includes the cost of future upgrades to the distribution system and metering infrastructure to take advantage of advances in automation, sensing, and metering technologies. CPAU is currently operating pilot programs to determine the scope of the upgrades.  4/12 kilovolt (kV) Conversion: The distribution system currently has some sections that operate at 4 kV and some at 12 kV. CPAU is converting the 4 kV sections of the system to enable them to connect to the rest of the system more effectively, providing greater reliability. Operating the system at 12 kV also lowers energy losses.  Undergrounding: This category includes projects to move sections of the overhead system underground. These projects are generally funded in part by phone and cable companies, whose systems are undergrounded at the same time.  Underground System Rebuilding: Underground sections of the distribution system require periodic replacement due to the wear on the system associated with exposure to soil and water.  Software and Equipment: This category includes the costs of upgrades to the software, communications, and remote monitoring equipment used to monitor the system and plan upgrades. It includes the cost of upgrades to the SCADA system.  Customer Connections: This represents the cost when the Electric Utility installs new services or upgrades existing services at a customer’s request in response to development or redevelopment. Because the Electric Utility charges a fee to these customers to cover the cost, these are considered to be “customer-funded” projects.  One-time Projects: This category represents occasional large projects that do not fall into any other category. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 18 | P a g e Excluding smart grid projects, CIP spending is expected to increase by 3% per year through FY 2019. Smart grid upgrades, particularly in later years, are projected to cost substantial amounts of money, but CPAU does not have precise cost estimates yet. CPAU expects to finance these projects from the Electric Special Projects Reserve, transfers from the water and gas funds, and possibly through bond financing. Excluding smart grid updates, the CIP plan for FY 2015 to FY 2019 is primarily funded by utility rates, but other sources of funds include connection fees (for Customer Connections), phone and cable companies (primarily for undergrounding), and other funds (for smart grid). The details of the plan are shown in Appendix B: Electric Utility Capital Improvement Program (CIP) Detail. Table 11: Budgeted Electric Utility CIP Spending 5. GENERAL FUND EQUITY TRANSFER The City calculates the equity transfer from its Electric Utility based on a rate of return on the net book value of the utility’s capital assets7. The Council adopted this methodology in 2009 and it was first used in FY 2010. The equity transfer decreased in FY 2014 because it is benchmarked to PG&E’s return on equity, which decreased at that time. Changes in the equity transfer in later years of the forecast are related to forecasted changes in the net book value of the utility’s capital assets based on projected depreciation and capital spending. SECTION X. REVENUE REQUIREMENT AND REVENUE SOURCES 7 For more detail, see City Manager’s Report 260:09, Finance Committee, May 26, 2009. Project Category Current Budget* Spending, Curr. Yr Remain. Budget Committed FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 One-time Projects 1,258 (3) 1,255 887 - - - - - Smart Grid/Advanced Metering 1,477 (100) 1,377 183 - 500 3,000 3,000 3,000 System Capacity & Reliability 6,853 (1,858) 4,995 2,655 3,615 3,530 3,345 3,195 3,895 4/12 kV Conversion 999 - 999 - - 170 800 - - Undergrounding 2,039 (19) 2,020 3 800 100 300 2,150 2,500 Underground Rebuilding 3,645 (162) 3,483 - 1,175 800 500 - - Software & Equipment 680 (26) 654 175 325 330 535 325 330 Customer Connections 3,911 (1,215) 2,695 725 3,300 3,400 3,500 3,600 3,700 TOTAL 20,863 (3,383) 17,479 4,628 9,215 8,830 11,980 12,270 13,425 *Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 19 | P a g e The Electric Utility’s costs and revenues from FY 2013 through FY 2019 are shown in Figure 3 below. Revenues are currently below costs, but adequate reserves mean no rate increase is necessary in FY 2015. Rate increases for FY 2016 to FY 2019 are forecasted to be 2 to 3%. Each rate increase will increase the median residential monthly electric bill by $0.90 to $1.36 per month. This rate trajectory draws the Supply Rate Stabilization Reserve down to zero by FY 2019, as shown in Figure 4. Figure 5 shows the change in Distribution Fund reserves over the forecast period. These figures also include the proposed reallocations of reserves described in Section V. Status of Reserves. Figure 3: Electric Utility Revenue and Cost Projections ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 20 | P a g e Figure 4: Electric Supply Fund Reserves Figure 5: Electric Distribution Fund Reserves Proposed reallocation (see Section V. Status of Reserves) Projected FY 2014 year-end reserves under existing reserves structure Proposed reallocation (see Section V. Status of Reserves) Projected FY 2014 year-end reserves under existing reserves structure ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 21 | P a g e SECTION XI. PROJECTED CONSUMPTION Electricity consumption in Palo Alto is fairly stable due to the city’s moderate climate. Summer air conditioning loads, which have a major impact on other utilities’ load profiles, are moderate. Consumption is projected to stay stable over the forecast period, with growth being offset by energy efficiency savings. Consumption of electricity for electric vehicles is projected to more than double each year through the end of the forecast period, but this and other load growth is offset by improved building code standards, energy efficiency, and substantial numbers of rooftop solar installations. The total annual output of Palo Alto’s net metered rooftop solar installations8 is projected to be 20.6 GWh by FY 2019, or roughly 2.1% of annual sales, while annual savings from energy efficiency measures are projected to be 80 GWh (nearly 8% of annual sales) by that time. Figure 6 presents the historical electric consumption levels (with and without energy efficiency, solar, and electric vehicles included) from FY 2004 through FY 2013 and projections for FY 2014 through FY 2023. Consumption levels are projected to be 3% higher in FY 2019 than they were in FY 2013, the most recent year for which complete data is available. Figure 6: Historic and Projected Electric Consumption 8 This does not include Palo Alto CLEAN (feed-in tariff) projects, which are included in the supply forecast rather than the demand forecast. Actual Forecast ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 22 | P a g e SECTION XII. LONG-TERM OUTLOOK This forecast covers the period from FY 2015 through FY 2019, but there are also various long- term developments that may create new costs for the utility over the next 5 to 35 years. While it is challenging to accurately forecast the impact these events will have on the utility’s costs, it is worth noting them as future milestones and keeping them in mind for long-term planning purposes. For the supply portfolio, the 2020s will see a number of notable events. The contract with WAPA for power from the CVP will expire in 2024. Working with WAPA and internally to determine the future relationship with WAPA after 2024 will be important in the years leading up to the contract expiration, especially because this resource represents nearly 40% of the electric portfolio, and represents the utility’s largest source of carbon-free electricity. The utility’s three earliest and lowest cost renewable contracts will also begin expiring around that time, with the first contract expiring in 2021 and the last in 2028. These three contracts, plus one more expiring in 2030, currently provide 17% to 18% of the energy for the utility’s supply portfolio at prices under $65 per megawatt-hour (MWh). It is difficult to know what renewable energy prices will be when those contracts expire. Although recent prices have been in that range, and costs may decrease in the future, current renewable projects also benefit from a wide range of tax and other incentives that may or may not be available in the 2020s. The costs of the Calaveras hydro project will also change, with debt service costs dropping by half in 2025 as some of the debt is paid off, with all debt retired by the end of 2032 (assuming no new debt is issued). The project will only be 40 years old at that time. Calaveras debt service represents roughly 70% of the annual costs of that project (and nearly 7% of the utility’s total costs), so when the debt is retired, the project could be a low-cost asset for the utility, providing carbon free energy equal to 13% of the Electric Utility’s supply needs in an average year. Another factor that may affect the utility’s supply costs in the long run is carbon allowance revenue. Currently the Electric Utility receives $3 to 5 million per year in revenue from allocated carbon allowances under the State’s cap-and-trade program. It uses that revenue to pay for energy efficiency and to purchase renewable energy to support the utility’s Carbon Neutral Plan. That revenue source is expected to continue through 2020, but there is no provision for the continuation of these allocations past 2020. If the Electric Utility no longer received these allowances, it would have to fund these programs from sales revenues. Transmission costs are also continuing to rise. If the State continues to increase mandates or incentives for renewable energy development, integrating these new projects into the transmission grid will be an ever increasing challenge, some costs of which will be borne by Palo Alto. In addition to the costs of new transmission lines that will need to be built, flexible resources will be required to balance rapid changes in wind or solar output throughout the day. Palo Alto will likely bear some of the costs of these new lines and resources. CPAU is also currently investigating installing a second transmission interconnection for Palo Alto, which could be funded by the Electric Special Projects reserve. Over the next several years the Electric Utility will continue to execute its usual monitoring, repair, and replacement routine for the distribution system. However, the utility will also likely ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 23 | P a g e begin the rollout of various smart grid technologies, and will also start monitoring the growth of electric vehicle ownership and gas to electric fuel switching in Palo Alto. In the next 10 to 20 years, these factors may begin to create notable increases in electric consumption and have a variety of impacts on the distribution system. As housing stock is turned over, however, stricter building codes may help to counteract load growth, as may the increasing number of rooftop solar installations. The utility has already started to take some of these factors into account in its long term planning processes, but will need to continue to incorporate these long-term issues into its planning methodologies. Looking out toward 2050 and beyond, if the State were to adopt climate goals consistent with Executive Orders S-3-05 and B-16-2012 (which state a goal of reducing GHG emissions to 80 percent below 1990 levels by 2050), or if similar local goals were adopted, it is conceivable that electricity could replace natural gas and petroleum almost entirely. Many, if not most, vehicles would use electricity, though hydrogen is another potential fuel source under development and other technologies might be developed. This scenario would require careful planning for the associated load growth to make sure the distribution system did not end up overloaded, or conversely, to avoid overinvestment. SECTION XIII. RISK ASSESSMENT Each year staff performs a risk assessment to assess the possible contingencies that could affect the utility’s financial position. The contingencies associated with Distribution Fund activities are assessed separately from Supply Fund contingencies. The Operations Reserves are projected to be adequate to manage these contingencies over the entire forecast period. As shown in Table 12, staff performs an annual assessment of financial risks for the Distribution Fund due to: 1. the maximum observed one-year distribution revenue variance over the past five years; and 2. an increase of 10% of planned system improvement CIP expenditures for the budget year. Table 12: Electric Distribution Fund Risk Assessment ($000) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total Revenue 42,531 42,524 42,597 43,743 45,406 Max. Historical Revenue Variance 8% 8% 8% 8% 8% Budget-to-Actual Risk 3,402 3,402 3,408 3,499 3,632 System Rehabilitation CIP Budget 5,102 4,297 6,827 7,477 8,477 CIP Contingency @10% 510 430 683 748 848 Total Risk Assessment Value 3,912 3,832 4,091 4,247 4,480 Projected Distribution Operations Reserve Level 11,140 12,460 12,339 12,017 11,474 ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 24 | P a g e There are a variety of risks associated with the Supply Fund, which contains the Electric Utility’s supply portfolio. These risks are shown below in Table 13. Because of the high range of uncertainty in energy price predictions more than three years in the future, this risk assessment is only performed for the first two fiscal years of the forecast period. It is important to note that the likelihood of all of these adverse scenarios occurring simultaneously and to the degree described in Table 13 is very low. Of the risks faced by the Electric Utility’s Supply Fund, the risk of a dry year with very low hydroelectric output is the largest, accounting for nearly half the total cost of all adverse outcomes. Since the utility’s costs for its hydroelectric resources are almost entirely fixed, costs do not decline when the output of those resources are low, but the utility still needs to buy market power to replace the lost output. The converse happens when hydroelectric output is higher than average. Risks associated with hydroelectric output account for $9.3 million (45%) of FY 2015 contingencies. Of the remaining risks for FY 2015, $3.3 million (16%) is related to the projected costs if transmission cost increases are at the high end of staff’s current forecast. Another $3.1 million (15%) is related to the possibility of changes to WAPA rates for CVP hydropower, and $1.7 million (8%) is related to fluctuations in various market prices. $2.0 million (10%) relates to the risk associated with the failure of all of the utility’s existing landfill gas projects and the costs associated with replacing that energy at current renewable market prices, though it is highly unlikely that all three projects would fail. Table 13: Electric Supply Fund Risk Assessment Categories of Electric Supply Cost Uncertainties Estimates of Adverse Outcomes (M$) Notes FY 2015 FY 2016 1. Load Net Revenue 0.1 0.2 Revenue loss from load decreases (net of reduction in energy purchases) 2. Production from Hydroelectric Resources: Western & Calaveras 9.3 12.8 Lower than forecasted hydro 3. Renewable Production: Landfill & Wind 0.4 0.4 Higher than forecasted renewable output 4. Carbon Neutral Cost 0.3 0.4 Higher than forecasted market prices for RECs 5. Market Price 0.9 1.8 Higher than forecasted market prices for energy 6. Local Capacity 0.5 0.9 Higher than forecasted market prices for local capacity 7. Transmission/CAISO 3.3 4.1 High-end transmission forecast scenario 8. Plant Outage 1.0 1.0 Uninsured losses from Calaveras plant outage 9. Western Cost 3.1 3.5 Risk of rate adjustments from Western 10. Supplier Default 2.0 2.0 Consequences of project failure and supplier default for below market renewables currently in operation Electric Supply Fund Risks $20.9 million $27.1 million Projected Supply Operations + Hydro Stabilization Reserve Levels $47.6 million $48.3 million ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 25 | P a g e SECTION XIV. COMMUNICATIONS PLAN The FY2015 Electric Utility communications strategy covers four primary areas: rates, efficiency, operations/infrastructure and safety. CPAU has not had an electric rate increase since 2009 and does not expect one in the upcoming year, so there is no need for formal “rate change” communications at this time, but website and community education about rates is ongoing. CPAU has been and will continue to communicate about the March 2013 decision to only purchase carbon-neutral electric supplies, which includes apprising the public of major renewable energy purchase agreements. Electric use efficiency incentives are promoted year- round; promotional activity includes bill inserts, website pages, email blasts, Home Energy Reports and the use of social media. To keep customers apprised of the status and accomplishments of capital improvement projects, a network of project web pages are maintained; traffic is driven to the website via ads in publications, newspaper inserts, social media and email blasts. Safety topics are emphasized year-round and, while print materials and website pages still feature prominently, CPAU is turning the outreach emphasis to direct mail, newspaper inserts, social media including video, cable TV, community safety/emergency preparation meetings and updates to neighborhood groups. This year, one prominent campaign drew public attention to the ongoing issue of electrical safety in storms, with the substation crew used as mascots for materials helping people prepare for and stay safe during windy, wet weather. Also, the ongoing “Keep Calm and...” campaign theme was used to launch a new LED light bulb discount program, the latest technology to be added to the list of efficiency improvements for which rebates are offered. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 26 | P a g e APPENDICES Appendix A: Electric Utility Financial Forecast Detail Appendix B: Electric Utility Capital Improvement Program (CIP) Detail Appendix C: Electric Utility Reserves Management Practices Appendix D: Electric Utility Bond Covenant Details Appendix E: Description of Electric Utility Cost Categories Appendix F: Samples of Recent Electric Utility Outreach Communications ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 27 | P a g e APPENDIX A: ELECTRIC UTILITY FINANCIAL FORECAST DETAIL Actual Adopted Projected 2013 2014 2014 2015 2016 2017 2018 2019 1 % CHG IN TOTAL SYSTEM RETAIL RATE 0%0%0%0%3%3%3%2% 2 TOTAL AVERAGE RATE ($/KWH)0.115$ 0.119$ 0.116$ 0.116$ 0.119$ 0.122$ 0.126$ 0.129$ 3 COMMODITY COST ($/KWH)0.052$ 0.063$ 0.063$ 0.061$ 0.062$ 0.064$ 0.066$ 0.065$ 4 SALES IN GWH 947 981 965 963 963 965 968 972 5 CHANGE IN RETAIL SALES REVENUE (90) - - (86) 3,089 3,085 4,114 2,571 6 Sales of Utilities 7 Retail Sales 109,189 116,630 111,711 111,530 114,469 117,751 122,226 125,316 8 Surplus Energy Sales 1,127 2,316 1,063 2,395 2,750 4,867 6,763 6,769 9 Total, Sales of Utilities 110,316 118,946 112,774 113,925 117,219 122,618 128,989 132,085 10 Interest+Investment Gain/Loss (1,497) 3,199 3,199 1,663 2,181 2,396 2,753 2,722 11 Other Revenues: 12 Carbon Allowance Revenue 2,713 4,296 4,296 3,910 3,976 4,299 4,493 4,611 13 Service Connection Charges 1,987 1,160 2,499 2,269 2,269 2,269 2,269 2,269 14 CVP O&M Loan Credit 5,509 6,000 5,407 6,000 6,000 6,000 6,000 6,000 15 Other Misc. Rev. / Transfers In 1,510 1,660 1,745 (52) 131 1,748 1,748 1,748 16 Total, Other Revenues 11,720 13,116 13,947 12,127 12,377 14,316 14,510 14,628 17 Total Sources of Funds 120,538 135,260 129,919 127,715 131,777 139,330 146,252 149,436 18 Purchases of Utilities 19 Purchases to Serve Load 54,063 66,205 65,454 63,372 64,801 67,002 68,975 68,102 20 Surplus Energy Cost 1,740 2,304 1,268 2,595 3,026 4,926 6,663 6,586 21 CVP O&M Loan Advance 5,511 6,000 5,407 6,000 6,000 6,000 6,000 6,000 22 Total, Purchases of Utilities 61,314 74,509 72,129 71,967 73,828 77,928 81,638 80,688 23 Joint Venture Debt Service 9,166 9,024 9,024 9,028 9,040 8,854 8,855 8,709 24 Administration (CIP + Operating)9,034 7,174 8,001 8,241 8,489 8,743 9,006 9,276 25 Customer Service 2,007 2,219 2,252 2,319 2,389 2,460 2,534 2,610 26 Demand Side Management 3,530 4,214 4,326 6,152 6,139 5,659 5,731 5,846 27 Engineering (Operating)1,278 1,605 1,522 1,567 1,614 1,663 1,713 1,764 28 Operations & Maintenance 9,505 10,602 9,458 9,742 10,035 10,336 10,646 10,965 29 Resource Management 3,024 5,347 3,213 1,894 1,951 2,009 2,069 2,131 30 Rent 3,704 3,819 3,819 3,934 4,052 4,173 4,299 4,428 31 General Fund Transfers 11,768 11,203 11,203 11,098 11,017 10,886 10,815 10,853 32 Other Transfers Out 322 123 281 123 123 123 123 123 33 Capital Improvement Programs 9,775 8,605 4,547 7,467 6,662 9,192 9,842 10,842 34 Total Uses of Funds 124,425 138,445 129,775 133,532 135,337 142,025 147,270 148,235 35 Into/ (Out of) Reserves (3,887) (3,185) 144 (5,818) (3,560) (2,696) (1,019) 1,201 SUPPLY FUND 36 Reappropriations & Commitments 1,220 1,220 1,220 1,220 1,220 1,220 1,220 1,220 37 Electric Special Projects 51,838 51,838 53,356 53,356 53,356 53,356 53,356 53,356 38 Central Valley Project 314 314 - - - - - - 39 Rate Stabilization 65,323 61,305 13,916 8,205 2,596 - - - 40 Hydro Stabilization - - 28,000 28,000 28,000 28,000 28,000 28,000 41 Operations - - 19,598 19,593 20,322 20,343 19,647 21,391 42 Unassigned - - - - - - - - 43 TOTAL, SUPPLY FUND 118,695 114,676 116,090 110,373 105,494 102,919 102,222 103,967 44 Risk Assessment Value (Supply)20,913 25,014 45 Hydro + Operations Reserve Level 47,598 47,593 48,322 48,343 47,647 49,391 46 Supply Operations Reserve: 47 Min (60 Days Commodity/Operations)13,065 13,062 13,548 14,110 14,725 14,563 48 Target (90 Days Commodity/Operations)19,598 19,593 20,322 21,165 22,087 21,844 49 Max (120 Days Commodity/Operations)26,131 26,123 27,095 28,220 29,449 29,126 DISTRIBUTION FUND 50 Reappropriations & Commitments 16,645 16,645 16,645 16,645 16,645 16,645 16,645 16,645 51 Plant Replacement 1,000 1,000 0 0 0 0 0 0 52 Underground Loan 738 738 738 738 738 738 738 738 53 Public Benefits 2,197 1,215 1,103 - - - - - 54 Rate Stabilization 3,705 5,520 - - - - - - 55 Capital Improvement Program - - - - - - - - 56 Operations - - 10,138 11,140 12,460 12,339 12,017 11,474 57 Unassigned - - - - - - - - 58 TOTAL, DISTRIBUTION FUND 24,286 25,119 28,625 28,523 29,843 29,722 29,400 28,857 59 Risk Assessment Value (Distribution)3,913 3,832 4,090 4,247 4,480 60 Distribution Operations Reserve: 61 Min (60 Days O&M)6,594 6,972 7,081 7,108 7,240 7,401 62 Target (90 Days O&M)9,892 10,458 10,621 10,662 10,860 11,102 63 Max (120 Days O&M)13,189 13,944 14,162 14,216 14,480 14,802 Fiscal Year ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 28 | P a g e APPENDIX B: ELECTRIC UTILITY CAPITAL IMPROVEMENT PROGRAM (CIP) DETAIL Project #Project Name Reappropriated / Carried Forward from Previous Years Current Year Funding Budget Amendments Spending, Current Year Remaining in CIP Reserves Commitments FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 ONE-TIME PROJECTS EL-10009 Street Light Sys Conversion Project 2,158,383 500,000 (1,400,000) (3,391) 1,254,992 886,590 - - - - - Subtotal, One-time Projects 2,158,383 500,000 (1,400,000) (3,391) 1,254,992 886,590 - - - - - SMART GRID AND ADVANCED METERING EL-11014 Smart Grid Technology Installation 272,345 1,000,000 - (84,069) 1,188,276 169,913 - 500,000 3,000,000 3,000,000 3,000,000 EL-10008 Advanced Metering Infrastructure 204,597 - - (15,948) 188,649 13,000 - - - - - Subtotal, Customer Connections 476,942 1,000,000 - (100,017) 1,376,925 182,913 - 500,000 3,000,000 3,000,000 3,000,000 SYSTEM CAPACITY & RELIABILITY EL-89038 Substation Protection Improvements 310,552 275,000 - (72,432) 513,120 215,565 280,000 290,000 300,000 300,000 300,000 EL-89044 Substation Facility Improvements 132,205 180,000 - (53,007) 259,198 107,349 185,000 190,000 195,000 195,000 195,000 EL-98003 Electric System Improvements 2,004,352 2,400,000 (900,000) (589,138) 2,915,214 1,843,781 2,450,000 2,500,000 2,550,000 2,600,000 2,650,000 EL-04012 Utility Site Security 495,996 - - (7,692) 488,304 420,628 250,000 250,000 - - - EL-06001 230 kV Electric Intertie 162,523 - - (10,414) 152,109 - 50,000 - - - - EL-11015 Reconductor 60kV Overhead Sys 1,448,301 - (350,000) (1,030,994) 67,307 62,257 - - - - - EL-12002 Hanover 22 - Xfrmr Replacement 94,009 - - (87,329) 6,680 5,653 - - - - - EL-13002 Quarry/Hopkins Substation 60kV Line - - - - - - - - - 100,000 750,000 EL-13004 Hansen Way/Hanover 12kV Ties 75,000 200,000 (275,000) - - - - - - - - EL-13005 Colorado 20/21-Xfrmr Replacement - - - - - - - - - - - EL-13006 Sand Hill / Quarry 12 kV Tie 49,891 200,000 - (6,494) 243,397 - - - - - - EL-13007 Underground Dist. System Security 300,000 - - - 300,000 - - 300,000 300,000 - - EL-14005 Reconfigure Quarry Feeders - 50,000 - (49) 49,951 - 400,000 - - - - EL-15000 Colorado/Hopkins Sys. Improvement - - - - - - 50,000 - - - - EL-15001 Substation Battery Replacement - - - - - - 400,000 - - - - Subtotal, System Capacity & Reliability 5,072,829 3,305,000 (1,525,000) (1,857,549) 4,995,280 2,655,233 3,615,000 3,530,000 3,345,000 3,195,000 3,895,000 4/12 KV CONVERSION EL-08000 E. Charleston 4/12kV 314,115 - 100,000 - 414,115 - - - - - - EL-09002 Middlefield/Colorado 4/12 kV - - - - - - - - - - - EL-09004 W. Charleston/Wilkie Way 4/12 kV 635,000 - (500,000) - 135,000 - - - - - - EL-12003 Hopkins Substation Rebuild - - - - - - - - - - - EL-13000 Edgewood/Wildwood 4/12 kV Tie - - - - - - - 50,000 400,000 - - EL-14000 Coleridge/Cowper/Tennyson 4/12 kV - - - - - - - 120,000 400,000 - - EL-14004 Maybell 1&2 4/12 kV Conversion - 450,000 - - 450,000 - - - - - - Subtotal, 4/12 kV Conversion 949,115 450,000 (400,000) - 999,115 - - 170,000 800,000 - - UNDERGROUNDING EL-06002 UG District 45 144,856 - - (3,651) 141,205 2,961 - - - - - EL-08001 UG District 42 - - - - - - - - 150,000 150,000 2,000,000 EL-11009 UG District 43 - - - - - - - - 150,000 2,000,000 500,000 EL-11010 UG District 47 1,794,260 - - (15,101) 1,779,159 2 400,000 - - - - EL-12001 UG District 46 99,883 - - - 99,883 - 400,000 100,000 - - - Subtotal, Undergrounding 2,038,999 - - (18,752) 2,020,247 2,963 800,000 100,000 300,000 2,150,000 2,500,000 ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 29 | P a g e Project #Project Name Reappropriated / Carried Forward from Previous Years Current Year Funding Budget Amendments Spending, Current Year Remaining in CIP Reserves Commitments FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 UNDERGROUND REBUILDING EL-04010 Foothills System Rebuild 35,587 75,000 - (15,148) 95,439 - - - - - - EL-05000 El Camino Underground Rebuild 396,287 - 75,000 (40,024) 431,263 - - - - - - EL-09000 Middlefield Underground Rebuild (42,073) 200,000 - (62,895) 95,032 - 250,000 - - - - EL-09003 Rebuild UG Dist 17 (Downtown)484,429 - (400,000) 11,847 96,276 - - - - - - EL-10006 Rebuild UG Dist 24 926,881 - - (34,920) 891,961 - 850,000 - - - - EL-11001 Torreva Court Rebuild 7,195 - - (8,029) (834) - - - - - - EL-11003 Rebuild UG Dist 15 469,210 - - - 469,210 - - - - - - EL-11004 Hewlett Subdivision Rebuild 181,363 - (120,000) (12,772) 48,591 - - - - - - EL-11006 Rebuild UG Dist 18 242,955 200,000 - - 442,955 - 75,000 - - - - EL-11007 Rebuild Greenhouse Condo Area 347,384 - - - 347,384 - - - - - - EL-11008 Rebuild UG Dist 19 104,880 - - - 104,880 - - - - - - EL-12000 Rebuild UG Dist 12 11,185 450,000 - - 461,185 - - - - - - EL-13003 Rebuild UG Dist 16 - - - - - - - 300,000 - - - EL-14002 Rebuild UG Dist 20 - - - - - - - 500,000 500,000 - - EL-16000 Rebuild UG Dist 26 - - - - - - - 500,000 - - - Subtotal, Underground Rebuilding 3,165,283 925,000 (445,000) (161,941) 3,483,342 - 1,175,000 800,000 500,000 - - SCADA & COMMUNICATIONS EL-02010 SCADA System Upgrade 149,498 - 30,000 (2,788) 176,710 118,347 60,000 65,000 270,000 60,000 65,000 EL-89031 Communications System 30,071 - 60,000 (1,021) 89,050 - 100,000 100,000 100,000 100,000 100,000 Subtotal, Ongoing 179,569 - 90,000 (3,809) 265,760 118,347 160,000 165,000 370,000 160,000 165,000 SOFTWARE EL-02011 Electric Utility GIS 35,892 225,000 - (22,577) 238,315 56,381 165,000 165,000 165,000 165,000 165,000 EL-13008 Upgrade Electric Estimating System 150,000 - - - 150,000 - - - - - - Subtotal, Customer Connections 185,892 225,000 - (22,577) 388,315 56,381 165,000 165,000 165,000 165,000 165,000 CUSTOMER CONNECTIONS (FEE FUNDED) EL-89028 Electric Customer Connections 110,546 2,200,000 1,600,000 (1,215,232) 2,695,314 725,355 3,300,000 3,400,000 3,500,000 3,600,000 3,700,000 Subtotal, Customer Connections 110,546 2,200,000 1,600,000 (1,215,232) 2,695,314 725,355 3,300,000 3,400,000 3,500,000 3,600,000 3,700,000 GRAND TOTAL 14,337,557 8,605,000 (2,080,000) (3,383,268) 17,479,289 4,627,782 9,215,000 8,830,000 11,980,000 12,270,000 13,425,000 Funding Sources Connection Fees 1,000,000 725,000 1,500,000 1,550,000 1,600,000 1,650,000 1,700,000 Other Companies (Phone/CATV Co.)160,000 - 370,000 230,000 190,000 900,000 960,000 Other Utility Funds (Smart Grid)666,667 - - - - - - Utility Rates 6,778,333 (2,805,000) 7,345,000 7,050,000 10,190,000 9,720,000 10,765,000 CIP-RELATED RESERVES DETAIL 6/30/2013 (Actual)12/31/2013 Reappropriations 12,236,059 12,851,507 Commitments 2,101,498 4,627,782 ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 30 | P a g e APPENDIX C: ELECTRIC UTILITY RESERVES MANAGEMENT PRACTICES The following reserves management practices are used when developing the Electric Utility Financial Plan: Section 1. Definitions a) “Financial Planning Period” – The Financial Planning Period is the range of future fiscal years covered by the Financial Plan. For example, if the Financial Plan delivered in conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019, FY 2015 to FY 2019 would be the Financial Planning Period. b) “Fund Balance” – As used in these Reserves Management Practices, Fund Balance refers to the Utility’s Unrestricted Net Assets. c) “Net Assets” - The Government Accounting Standards Board defines a Utility’s Net Assets as the difference between its assets and liabilities. d) “Unrestricted Net Assets” - The portion of the Utility’s Net Assets not invested in capital assets (net of related debt) or restricted for debt service or other restricted purposes. Section 2. Supply Fund Reserves The Electric Supply Fund Balance is reserved for the following purposes: a) For existing contracts, as described in Section 4 (Reserve for Commitments) b) For operating and capital budgets reappropriated from previous years, as described in Section 5 (Reserve for Reappropriations) c) For special projects for the benefit of the Electric Utility ratepayers, as described in Section 6 (Electric Special Projects Reserve) d) For year to year balancing of costs associated with the Electric Utility’s hydroelectric resources, as described in Section 7 (Hydro Stabilization Reserve) e) For rate stabilization, as described in Section 11 (Rate Stabilization Reserves) f) For operating contingencies, as described in Section 12 (Operations Reserves) g) Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 13 (Unassigned Reserves). Section 3. Distribution Fund Reserves The Electric Distribution Fund Balance is reserved for the following purposes: a) For existing contracts, as described in Section 4 (Reserves for Commitments) b) For operating and capital budgets reappropriated from previous years, as described in Section 5 (Reserves for Reappropriations) c) As an offset to underground loan receivables, as described in Section 8 (Underground Loan Reserve) d) To hold Public Benefit Program funds collected but not yet spent, as described in Section 9 (Public Benefits Reserve) e) For future year expenditure on the Electric Utility’s Capital Improvement Program (CIP), as described in Section 10 (CIP Reserve) f) For rate stabilization, as described in Section 11 (Rate Stabilization Reserves) ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 31 | P a g e g) For operating contingencies, as described in Section 12 (Operations Reserves) h) Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 14 (Unassigned Reserves). Section 4. Reserves for Commitments At the end of each fiscal year the Electric Supply Fund and Electric Distribution Fund Reserves for Commitments will be set to an amount equal to the total remaining spending authority for all contracts in force for the Electric Supply Fund and Electric Distribution Fund, respectively, at that time. Section 5. Reserves for Reappropriations At the end of each fiscal year the Electric Supply Fund and Electric Distribution Fund Reserves for Reappropriations will be set to an amount equal to the amount of all remaining capital and non-capital budgets that will be reappropriated to the following fiscal year for each Fund in accordance with Palo Alto Municipal Code Section 2.28.090. Section 6. Electric Special Projects Reserve The Electric Special Projects Reserve (ESP Reserve) will be managed in accordance with the policies and timelines set forth in Resolution 9206 (Resolution of the Council of the City of Palo Alto Approving Renaming the Calaveras Reserve to the Electric Special Project Reserve and Adoption of Electric Special Project Reserve Guidelines). These policies and timelines are included below as amended to refer to the reserves structure set forth in these Reserves Management Practices: a) The purpose of the ESP Reserve is to fund projects that benefit electric ratepayers; b) The ESP Reserve funds must be used for projects of significant impact; c) Projects proposed for funding must demonstrate a need and value to electric ratepayers. The projects must have verifiable value and must not be speculative, or he high-risk in nature; d) Projects proposed for funding must be substantial in size, requiring funding of at least $1 million; e) The preferred projects to be funded by the ESP Reserve must be identified by end of FY 2015; f) Any uncommitted funds remaining at the end of FY 2020 will be transferred to the Electric Supply Operations Reserve and the ESP Reserve will be closed; and g) Funds may be used for analysis and pilot projects which would be the basis for planned large projects. Section 7. Hydro Stabilization Reserve Supply cost savings and surplus energy sales revenue associated with higher than average generation from hydroelectric resources may be added to the Electric Supply Fund’s Hydro Stabilization Reserve by action of the City Council and held to offset higher commodity supply costs during years of lower than average generation. Withdrawal of funds from the Hydro Stabilization Reserve requires action by the City Council. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 32 | P a g e Section 8. Underground Loan Reserve At the end of each fiscal year, the Underground Loan Reserve will be adjusted by the principal payments made against outstanding underground loans. Section 9. Public Benefits Reserve The Public Benefits Reserve will be increased by the amount of unspent Public Benefits Revenues remaining at the end of each fiscal year. Expenditure of these funds requires action by the City Council. Section 10. CIP Reserve Funds may be added to the Electric Distribution Fund CIP Reserve by action of the City Council and held for future year expenditure on the Electric Utility’s CIP Program. Withdrawal of funds from the CIP Reserve requires City Council action. If there are funds in the CIP Reserve at the end of any fiscal year, any subsequent Electric Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. Section 11. Rate Stabilization Reserves Funds may be added to the Electric Supply or Distribution Fund’s Rate Stabilization Reserves by action of the City Council and held to manage the trajectory of future year rate increases. Withdrawal of funds from either Rate Stabilization Reserve requires action by the City Council. If there are funds in either Rate Stabilization Reserve at the end of any fiscal year, any subsequent Electric Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. Section 12. Operations Reserves The Electric Supply Fund and Electric Distribution Fund Operations Reserves are used to manage normal variations in the costs of providing electric service and as a reserve for contingencies. Any portion of the Electric Utility’s Fund Balance not included in the reserves described in Section 4 to Section 11 above will be included in the appropriate Operations Reserve unless the reserve has reached its maximum level as set forth in Section 12 (e) below. Staff will manage the Operations Reserves according to the following practices: a) The following guideline levels are set forth for the Electric Supply Fund Operations Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of Operations and Maintenance (O&M) and commodity expense forecasted for that year in the Financial Plan. Minimum Level 60 days of Supply Fund O&M and commodity expense Target Level 90 days of Supply Fund O&M and commodity expense Maximum Level 120 days of Supply Fund O&M and commodity expense ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 33 | P a g e b) The following guideline levels are set forth for the Electric Distribution Fund Operations Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of O&M and commodity expense commodity expense forecasted for that year in the Financial Plan. Minimum Level 60 days of Distribution Fund O&M Expense Target Level 90 days of Distribution Fund O&M Expense Maximum Level 120 days of Distribution Fund O&M Expense c) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Supply Fund or Distribution Fund’s Operations Reserve are lower than the minimum level set forth above, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered within six months of the end of the fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the following fiscal year. For example, if the Operations Reserve is below its minimum level at the end of FY 2014, staff must present a plan by December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In addition, staff may present an alternative plan that takes longer than one year to replenish the reserve. d) Target Level: If, at the end of any fiscal year, either Operations Reserve is higher or lower than the target level, any Financial Plan created for the Electric Utility shall be designed to return both Operations Reserves to their target levels by the end of the forecast period. e) Maximum Level: If, at any time, either Operations Reserve reaches its maximum level, no funds may be added to this Reserve. Any further increase in that fund’s Fund Balance shall be automatically included in the Unassigned Reserve described in Section 13, below. Section 13. Unassigned Reserves If the Operations Reserve in either the Electric Supply Fund or the Electric Distribution Fund reaches its maximum level, any further additions to that fund’s Fund Balance will be held in the Unassigned Reserve. If there are any funds in either Unassigned Reserve at the end of any fiscal year, the next Financial Plan presented to the City Council must include a plan to assign them to a specific purpose or return them to the Electric Utility ratepayers by the end of the first fiscal year of the next Financial Planning Period. For example, if there were funds in the Unassigned Reserves at the end of FY 2016, and the next Financial Planning Period is FY 2017 through FY 2021, the Financial Plan shall include a plan to return or assign the funds in the Unassigned Reserve by the end of FY 2017. Staff may present an alternative plan that retains these funds or returns them over a longer period of time. Section 14. Intra-Utility Transfers between Supply and Distribution Funds Transfers between Electric Distribution Fund Reserves and Electric Supply Fund Reserves are permitted if consistent with the purposes of the two reserves involved in the transfer. Such transfers require action by the City Council. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 34 | P a g e APPENDIX D: ELECTRIC UTILITY BOND COVENANT DETAILS The Electric Utility currently makes payment on one bond issuance, the 2007 Electric Utility Clean Renewable Energy Tax Credit Bonds, Series A. This $1.5 million bond issuance was to fund a portion of the construction costs of solar demonstration projects at the Municipal Services Center, Baylands Interpretive Center, and Cubberley Community Center. The capacity of these projects totaled 250 kW. In exchange for funding part of the construction costs Electric Utility receives the RECs from these projects. The bonds were Clean Renewable Energy Bonds (CREBs), meaning they are interest free (the investors receive a tax credit from the federal government). This bond issuance is secured by the net revenues of the Electric Utility. Debt service for this bond continues through 2021, and for the financial forecast period is as follows: Table 14: Electric Utility Debt Service ($000) FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 2007 Clean Renewable Energy Bonds 100 100 100 100 100 100 The 2007 bonds include a covenant stating that the Electric Utility will maintain a debt coverage ratio of 125% of debt service. The current financial plan complies with this covenant throughout the forecast period, as shown in Table 15. Table 15: Electric Utility Debt Service Coverage Ratio ($000) FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Revenues 129,919 127,715 131,777 139,330 146,252 149,436 Expenses (Excluding CIP and Debt Service) (125,128) (125,965) (128,575) (132,733) (137,328) (137,293) Net Revenues 4,791 1,750 3,202 6,597 8,924 12,143 Debt Service 100 100 100 100 100 100 Coverage Ratio 4791% 1750% 3202% 6597% 8924% 12143% The Electric Utility’s reserves and net revenue are also pledged as security for the bond issuances listed in Table 16, even though the Electric Utility is not responsible for the debt service payments. The Electric Utility’s reserves or net revenues would only be called upon if the responsible utilities are unable to make their debt service payments. Staff does not currently foresee this occurring. Amounts advanced from one utility to pay debt service for another utility will be repaid by the borrowing fund. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 35 | P a g e Table 16: Other Issuances Secured by Electric Utility’s Revenues or Reserves Bond Issuance Responsible Utilities Annual Debt Service ($000) Secured by Electric Utility’s: Net Revenues Reserves 1995 Utility Revenue Bonds, Series A Storm Drain $680 Yes No 1999 Utility Revenue Bonds, Series A Storm Drain Wastewater Collection Wastewater Treatment $1,207 No Yes 2009 Water Revenue Bonds (Build America Bonds) Water $1,977* No Yes 2011 Utility Revenue Refunding Bonds, Series A Gas Water $1,457 No Yes *Net of Federal interest subsidy ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 36 | P a g e APPENDIX E: DESCRIPTION OF ELECTRIC UTILITY COST CATEGORIES This appendix describes the activities associated with the various cost categories referred to in this Financial Plan. Customer Service: This category includes the Electric Utility’s share of the call center, meter reading, collections, and billing support functions. Billing support encompasses staff time associated with bill investigations and quality control on certain aspects of the billing process. It does not include maintenance of the billing system itself, which is included in Administration. This category also includes CPAU’s key account representatives, who work with large commercial customers who have more complex requirements for their electric services. Resource Management: This category includes supply portfolio management, energy procurement, rate setting, and tracking of legislation and regulation related to the electric industry. Operations and Maintenance: This category includes the costs of a variety of distribution system maintenance activities, including:  monitoring the substations and performing routine maintenance;  performing preventative maintenance on the system;  monitoring the system’s status from the UCC using SCADA;  maintaining the SCADA system;  investigating outages and other customer complaints and performing emergency repairs;  clearing vegetation near overhead power lines; and  testing and replacing meters to ensure accurate sales metering. Administration: Accounting, purchasing, legal, and other administrative functions provided by the City’s General Fund staff, as well as shared communications services, Utilities Department administrative overhead and billing system maintenance costs. Demand Side Management: Includes the cost of administering energy efficiency programs and the direct cost of rebates paid. Includes solar rebates. Engineering (Operating): The Electric Utility’s engineers focus primarily on the CIP, but a small portion of their time is spent assisting with distribution system maintenance. APPENDIX F: SAMPLES OF RECENT ELECTRIC UTILITY OUTREACH COMMUNICATIONS GAS UTILITY FINANCIAL PLAN FY 2015 TO FY 2021 TABLE OF CONTENTS Definitions and Abbreviations ............................................................................................................2 Executive Summary ............................................................................................................................3 Current State of the Utility .................................................................................................................4 Section I. Utility Overview ......................................................................................................................... 4 Section II. Current Rates and Competitiveness ......................................................................................... 5 Section III. Rate Design ............................................................................................................................. 6 Section IV. Current Utility Financial Status ............................................................................................... 7 Section V. Status of Reserves .................................................................................................................... 8 Section VI. Debt Service .......................................................................................................................... 10 Looking Back .................................................................................................................................... 10 Section VII. Background .......................................................................................................................... 10 Section VIII. Historical Expenses and Revenues ...................................................................................... 11 Looking Forward .............................................................................................................................. 13 Section IX. Seven Year Financial Forecast ............................................................................................... 13 1. Overview ....................................................................................................................................... 13 2. Commodity Supply Costs .............................................................................................................. 13 3. Operations .................................................................................................................................... 14 4. Capital Improvement Program (CIP) ............................................................................................ 15 5. General Fund Equity Transfer ....................................................................................................... 16 Section X. Revenue Requirement and Revenue Sources ......................................................................... 16 Section XI. Projected Consumption ......................................................................................................... 18 Section XII. Long-term Outlook ............................................................................................................... 18 Section XIII. Risk Assessment .................................................................................................................. 19 Section XIV. Communications Plan ......................................................................................................... 20 Appendices ...................................................................................................................................... 21 Appendix A: Gas Utility Financial Forecast Detail ................................................................................... 22 Appendix B: Gas Utility Capital Improvement Program (CIP) Detail ....................................................... 23 Appendix C: Gas Utility Reserves Management Practices ....................................................................... 25 Appendix D: Gas Utility Debt Service Details ........................................................................................... 28 Appendix E: Description of Gas Utility Cost Categories ........................................................................... 30 Appendix F: Gas Utility Communications Samples .................................................................................. 31 GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 2 | P a g e DEFINITIONS AND ABBREVIATIONS ABS: Acrylonitirile butydene styrene, a plastic gas main material CARB: California Air Resources Board CIP: Capital Improvement Program CPAU: City of Palo Alto Utilities Department CPUC: California Public Utilities Commission Crossbore: A crossbore exists when one utility line has been drilled or “bored” through a portion of another line. Gas crossbores can occur in sewer lines as a result of “horizontal boring” construction practices. Distribution: transportation of gas to customers. GMR Program: Gas Main Replacement Program Local Transportation: transportation of gas to Palo Alto across PG&E’s distribution system from PG&E City Gate. Malin: a delivery hub referred to in gas purchase contracts and located in Malin, Oregon, where the northern end of PG&E’s Redwood Transmission Pipeline is located. MMBtu: Millions of British thermal units, a unit of gas measurement equal to ten therms. Commonly used for high volume gas measurement. Wholesale purchases of gas from suppliers are typically measured in MMBtu. PE or HDPE: Polyethylene, a gas main material (more specifically, High-Density Polyethylene) PG&E: Pacific Gas and Electric PG&E City Gate, or City Gate: a delivery hub referred to in gas purchase contracts. Any gas delivered to PG&E’s distribution system (such as gas delivered at the southern end of PG&E’s Redwood Transmission Pipeline) is said to have been delivered at PG&E City Gate. PVC: Polyvinyl chloride, a plastic gas main material Therms: The standard unit of measurement for natural gas sales to customers, equal to 100,000 British thermal units. Measures the heating value of the gas, rather than its volume. Transmission: transportation of gas between major gas delivery hubs via a gas transmission pipeline, such as PG&E’s Redwood pipeline. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 3 | P a g e EXECUTIVE SUMMARY This document presents a financial plan for the City of Palo Alto’s Gas Utility for the next seven years. The plan uses a seven year forecast period to show the complete drawdown of the Rate Stabilization Reserve by FY 2021. The plan provides revenues to cover the costs of operating the utility safely over that time while adequately investing for the future. It also addresses the financial risks facing the utility over the short term and long term, and includes measures to mitigate and manage those risks. Over the next seven fiscal years staff projects that the Gas Utility will see non-commodity costs rising at roughly 3% per year, though this will be partially offset by a reduction in costs associated with the projected completion of the crossbore inspection program in FY 2017. To match revenues to rising costs, the financial plan includes the rate trajectory shown in Table 1. This trajectory includes no planned rate increase for FY 2015 to FY 2017. This will allow the utility to draw down accumulated reserves, which result from the fact that new gas main replacement projects were not added in FY 2014 and FY 2015 in order to complete an unusually large project, replacing the last of the ABS plastic mains in Palo Alto. For FY 2018 to FY 2021, rates are projected to increase 3 to 4% each year. This is equivalent to $1.13 to $1.60 per month for the median residential customer’s monthly gas bill. Table 1: Projected Gas Rate Trajectory for FY 2015 to FY 2021 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 0% 0% 0% 3% 3% 4% 3% This Financial Plan includes a set of Gas Utility Reserves Management Practices. These set forth the reserves held by the Gas Utility, their purposes, and guidelines for managing them. The Reserves Management Practices make the following changes to the utility’s existing reserves structure: 1. The addition of an Operations Reserve, a Capital Improvement Program (CIP) Reserve, and an Unassigned Reserve; 2. The closure of the Supply Rate Stabilization Reserve and the transfer of all funds into the Operations Reserve; and 3. The closure of the Emergency Plant Replacement Reserve and the transfer of all funds into the new Operations Reserve. This plan includes $8.5 million to fund the new Operations Reserve, which will come from the Emergency Plant Replacement and Rate Stabilization reserves. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 4 | P a g e CURRENT STATE OF THE UTILITY SECTION I. UTILITY OVERVIEW The City of Palo Alto’s Gas Utility, operated by the City of Palo Alto Utilities Department (CPAU) provides natural gas service to the residents, businesses, and other gas customers in Palo Alto. Over 25,600 customers are connected to the natural gas system, approximately 23,900 (93%) of which are residential and 1700 (7%) of which are non-residential. Residential customers consume about 14 million therms of gas per year, 46% of the gas sold, while non-residential customers consume 54% (about 16.4 million therms). Residential customers use gas primarily for space heating (42% of gas consumed) and water heating (48%), with the remainder consumed for other purposes such as cooking, laundry, and heating pools and spas. Non- residential customers use gas for space and water heating (73% of gas consumed), cooking (20%), and industrial processes (6%).1 The Gas Utility receives gas at the four receiving stations within Palo Alto where CPAU’s distribution system connects with Pacific Gas and Electric’s (PG&E’s) system. These receiving stations are jointly operated by CPAU and PG&E. CPAU purchases gas from a variety of natural gas marketers, with PG&E providing only local transportation service (transportation from the PG&E City Gate gas delivery hub across PG&E’s distribution system to Palo Alto). CPAU also has transmission rights on PG&E’s transmission pipeline from Malin, Oregon to PG&E City Gate, allowing it to purchase lower priced gas at that location throughout the year. CPAU does not produce or store any natural gas, and purchases gas in the monthly and daily spot markets. The cost of the purchased gas is passed through directly to customers through a rate adjuster that varies monthly with market prices. The cost of purchased gas and PG&E local transportation service accounts for roughly one third of the utility’s expenditures. To deliver gas from the receiving stations to its customers, the utility owns 210 miles of gas mains (which transport the gas to various parts of the city) and 25,460 gas services (which connect the gas mains to the customers’ gas lines). These mains and services, along with their associated valves, regulators, and meters, represent the vast majority of the infrastructure used to deliver gas in Palo Alto. CPAU has an ongoing CIP to repair and replace it over time. CIP expense accounts for 20% of the utility’s expenditures. In addition to the CIP, the Gas Utility performs a variety of maintenance activities related to the system, such as monitoring the system for leaks, testing and replacing meters, monitoring the condition of steel pipe, and building and replacing gas services for buildings being built or redeveloped throughout the city. The utility also shares the costs of other system-wide operational activities (such as customer service, billing, meter reading, supply planning, energy efficiency, equipment maintenance, and street restoration) with the City’s other utilities. These maintenance and operations expenses, as well as associated administration, debt service, rent, and other costs, make up another 30% of the utility’s expenses. In addition to these ongoing 1 Source: Statewide Commercial End Use Study, California Energy Commission report, 2006. Statistics shown are for end users in PG&E Climate Zone 4, the Peninsula, where Palo Alto is located. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 5 | P a g e activities, CPAU has been implementing a program to find and replace crossbores over the last several years. Since its inception the Gas Utility has provided an annual return to the City’s General Fund. This is calculated based on the net book value of the utility’s capital assets. This equity transfer to the General Fund accounts for 15% of the utility’s expenses. SECTION II. CURRENT RATES AND COMPETITIVENESS On July 1, 2012 CPAU restructured its rates to allow the commodity component to vary monthly to match changes in gas market prices. In addition, monthly service charges were increased to recover the cost providing gas service to customers. Subsequently, on January 1, 2013, CPAU changed the local transportation component of its rate to reflect changes to PG&E’s local transportation rates. Table 2, below, summarizes the current rates for all customer classes. Table 2: Current Gas Rates Rate Component Units G-1 (Residential) G-2 (Small Commercial) G-3 (Large Commercial) Last Changed Service Charge $/month 9.88 74.86 361.18 7/1/2012 Distribution (Tier 1) $/therm 0.3883 0.5638 0.5562 7/1/2012 Distribution (Tier 2) $/therm 0.9037 N/A N/A 7/1/2012 Local transportation $/therm 0.0435 0.0435 0.0435 1/1/2013 Administrative $/therm 0.0074 0.0074 0.0074 7/1/2012 Commodity $/therm 0.5339 (Feb. 2014) 0.5339 (Feb. 2014) 0.5339 (Feb. 2014) (varies monthly)2 Tier 1 amount Winter Therms/day 2 N/A N/A 7/1/2012 Summer Therms/day 0.667 N/A N/A 7/1/2012 Table 3 presents the winter and summer residential bills for Palo Alto and PG&E for several usage levels. The annual gas bill for the median residential customer for calendar year 2013 was $450.37, 9% higher than the annual bill for a PG&E customer with the same consumption. The bill calculations for PG&E customers are based on PG&E Climate Zone X, which includes most surrounding comparison communities. Because both utilities’ rates vary from month to month, only a single sample month is shown for each season. 2 For historic commodity rates see the City’s website: http://www.cityofpaloalto.org/gov/depts/utl/residents/rates.asp GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 6 | P a g e Table 3: Residential Monthly Natural Gas Bill Comparison ($/month) Season Usage (therms) Palo Alto PG&E Zone X % Difference Winter (Jan 2014) 30 37.40 33.86 10% (Median) 54 59.42 60.96 -3% 80 93.58 96.47 -3% 150 193.88 197.73 -2% Summer (Jul 2013) 10 18.20 10.66 71% (Median) 18 24.85 19.29 29% 30 39.99 35.88 11% 45 60.20 56.63 6% Table 4, below, shows the annual average monthly gas bill for commercial customers for various usage levels for the same period. Bills for Palo Alto customers at the usage levels shown are 23% to 44% higher than under PG&E’s rates. Table 4: Commercial Monthly Average Gas Bill Comparison (CY 2013, $/month) Usage (therms/mo) Palo Alto PG&E % Difference 500 621 490 27% 5,000 5,539 4,495 23% 10,000 11,004 8,189 34% 50,000 54,626 38,001 44% PG&E currently has two applications under consideration with the California Public Utilities Commission (CPUC) that, if approved, will narrow the gap between its rates and CPAU’s. The first, its 2014 General Rate Case application, requests rate increases that would increase its residential customers’ bills by 16% on average and its commercial customers’ bills by 8 to 30% depending on usage level and type of service received. Those increases are intended to take effect in 2014, though the case is still underway. The second, its 2015 Gas Transmission and Storage (GT&S) application, requests an increase for residential bills by another 13% and commercial bills by 16 to 20%. The GT&S application would also increase PG&E’s local transportation rates for Palo Alto, but since these are a small part of the Gas Utility’s costs the overall impact on Palo Alto customer bills will be much smaller. In both cases the increases are mainly related to improvements to PG&E’s pipeline safety and maintenance practices. SECTION III. RATE DESIGN The Gas Utility’s current rates were structured based on the methodology from the April 2012 Gas Utility Cost of Service Study completed by Utility Financial Solutions.3 Staff tentatively plans to review this cost of service study in two to three years unless any major changes occur to the utility’s operations or customer base that would necessitate an earlier study. The State’s cap- 3 Staff Report ID#2812, Finance Committee, May 17, 2012 GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 7 | P a g e and-trade program is one factor that could prompt such an update. Starting in 2015 gas utilities will be required to purchase carbon allowances equal to the carbon emissions associated with the gas they deliver. The California Air Resources Board’s (CARB’s) current draft proposal is to allocate some allowances to affected gas utilities, just as it did for electric utilities. Some of these allowances could be used for compliance, but some allowances must be sold in the quarterly allowance auctions. The Gas Utility is required to use revenue from these sales for the benefit of gas ratepayers or return it to them directly. Designing rates to accomplish this could require an update to the cost of service study. Before any such update, staff will review current rates and the scope of the study with the UAC and Council to determine UAC and Council policy priorities. SECTION IV. CURRENT UTILITY FINANCIAL STATUS In FY 2013, gas purchases represented a third of the Gas Utility’s costs, with CIP and Operations together representing another 39%. The remaining costs were for administration, overhead, and other costs (12%), and the General Fund equity transfer (15%), as shown in Figure 2. These expenditures are also displayed by category of expenditure in Figure 1. The utility’s revenue in FY 2013 came almost entirely from gas sales (96%), with the remainder coming from capacity and connection fees (2%), and other sources (2%). For FY 2013 expenses exceeded revenues by $4.7 million, as compared to the $3.4 million planned in the FY 2013 adopted budget (to draw down reserves). This resulted in reserves totaling $31.7 million as of June 30, 2013, $11.3 million of which was in the Rate Stabilization Reserve. Total uses of funds were $39.8 million, which was $1.3 million lower than budgeted. This was mainly a result of savings in gas supply costs. Total sources of funds were $34.3 million, which was $4.9 million lower than budgeted. This was due in part to the fact that the Gas Utility passed the supply cost savings directly on to its customers, but also because gas sales were 5% lower than budgeted. For FY 2014 net revenues are expected to be $4.0 million, $400,000 greater than the $3.6 million projected in the budget. This is due to projected savings of $1.0 million in various operating budgets, offset in part by slightly lower than projected sales revenue. Figure 2: FY 2013 Costs by Activity Gas Purchases, 34% GF Transfer, 15% CIP, 19% Operations, 20% Other, 1% Admin/ Overhead, 11% Figure 1: FY 2013 Costs by Category Gas Purchases, 34% GF Transfer, 15% CIP, 19% Supplies/ Materials / Other, 7% Salaries/ Benefits, 14% Admin/ Overhead, 11% GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 8 | P a g e Table 5: Projected Net Revenue, FY 2014 Gas - Operating Activity All figures in thousands $ (000’s) Adopted Budget FY 2014 Unaudited Actuals Jul 13-Dec 13 Projected Activity Jan 14-Jun 14 Projected FY 2014 Activity Variance to Budget Net Sales * 37,343 14,389 22,358 36,746 (597) Other revenues 1,523 727 753 1,480 (43) Purchase costs (15,171) (6,259) (8,895) (15,154) (17) Other expenses ** (20,097) (9,827) (9,269) (19,095) 1,002 Total 3,598 (970) 4,948 3,978 380 * Includes misc. sales, adjustments, discounts, and bad debt ** Includes reserve transfers, salaries, allocated charges, other misc. expenses and encumbrances SECTION V. STATUS OF RESERVES Table 6, below, shows the projected status of the Gas Utility’s reserves at the end of FY 2014. Total reserves at year end (June 30, 2014) are projected to be $30.0 million, of which $16.2 million will be in the Rate Stabilization Reserves. This plan includes changes to the structure of the utility’s reserves, as detailed in Appendix C: Gas Utility Reserves Management Practices and in Table 6 below, including: 1. The additions of an Operations Reserve, a Capital Improvement Program (CIP) Reserve, and an Unassigned Reserve; 2. The closure of the Supply Rate Stabilization Reserve and the transfer of all funds into the Operations Reserve; and 3. The closure of the Emergency Plant Replacement Reserve and the transfer of all funds into the new Operations Reserve. The additions of an Operations Reserve, CIP Reserve, and Unassigned Reserve will add transparency and simplify reserves management by providing separate reserves for various functions that are currently all served by the Rate Stabilization Reserves. The Operations Reserve will be used to manage contingencies and absorb normal year to year cost and revenue variances. The CIP Reserve will hold funds for expenditure on future budgeted CIP projects. The Rate Stabilization Reserve will be used to smooth the transition to higher rates. If the utility accumulates reserves that are not designated for a specific purpose, these will be placed in the Unassigned Reserve until those funds are either designated for a specific purpose or returned to ratepayers. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 9 | P a g e Table 6: Projected Reserves, 6/30/2014 ($000) Projected Reserve Levels Proposed Reallocation of Reserves Projected After Reallocation Gas Supply Fund Reappropriations + Commitments 0 N/A 0 Supply Rate Stabilization Reserve 5,600 -5,600 (closed) Total 5,600 -5,600 0 Gas Distribution Fund Reappropriations + Commitments 19,363 N/A 19,363 Emergency Plant Replacement 1,000 -1,000 (closed) CIP Reserve (new) 0 0 Rate Stabilization Reserve 10,637 -2,946 $7,691 Operations Reserve (new) +8,546 $8,546 Unassigned Reserve (new) 0 0 Total 30,000 +5,600 35,600 Operations Reserve: Days of Expense 90 days Operations Reserve: Minimum 60 days Operations Reserve: Target 90 days Operations Reserve: Maximum 120 days Creating separate CIP, Rate Stabilization, and Unassigned Reserves allows the utility to set minimum and maximum guidelines for the Operations Reserve and set forth clear actions to be taken when it is over or under those levels. If funds are to be held for a specific purpose (for example, a future CIP project) these can be held in a separate reserve (in this example, the CIP Reserve). Without a separate reserve, those funds would be held in the Operations Reserve and could cause it to exceed its maximum guideline, making it difficult to treat the maximum guideline as a clear limit on the size of the reserve. This proposal also adds transparency, since the public will be able to see the various purposes for which the utility is holding reserves. This plan also involves merging the existing Emergency Plant Replacement Reserve into the Operations Reserve. Currently the Emergency Plant Replacement Reserve holds $1 million, enough to pay the City’s insurance deductible in the event of a loss of utility equipment due to an insurable loss. Staff believes that even at minimum levels the Operations Reserve has adequate funding to cover the insurance deductible, making the Emergency Plant Replacement Reserve duplicative. The Supply Rate Stabilization Reserve (S-RSR) will also be closed at the end of FY 2014 and the balance (projected to be $5.6 million) transferred to the Operations Reserve. The S-RSR is no longer necessary because the adoption of a pass-through, month-varying commodity rate component has eliminated nearly all gas price risk. As gas market prices change, so does the rate component, passing the changes through to customers almost immediately. What little intra-month price risk remains can be balanced using the Operations Reserve. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 10 | P a g e To complete the funding of the Operations Reserve, $2.9 million will be transferred from the Distribution Rate Stabilization Reserve (which will now simply be called “the Rate Stabilization Reserve”), retaining $7.7 million in the Rate Stabilization Reserve to be drawn down over future years as rates increase. Combined with the $1 million from the Emergency Plant Replacement Reserve and the funds from the S-RSR, the Operations Reserve’s initial funding will be $8.5 million, the target level set forth in Appendix C: Gas Utility Reserves Management Practices (90 days of commodity and O&M expense). SECTION VI. DEBT SERVICE The Gas Utility’s annual debt service is roughly $800,000 per year. This is related to one bond issuance that will require payments through 2026. This issuance, the 2011 Series A Utility Revenue Refunding Bonds, was a joint issuance between the Gas and Water Utilities refinancing the 2002 Utility Revenue Bonds, Series A, which was issued to finance various capital improvements for both systems. The City is in compliance with all covenants on the bond. Additional detail is provided in Appendix D. LOOKING BACK SECTION VII. BACKGROUND On September 22, 1917, the City of Palo Alto issued a bond to purchase the property of Palo Alto Gas Company and continue it as a municipal enterprise. At the time, the system comprised 21 miles of mains, 1,900 meters, and was valued at $65,500. PG&E supplied the gas, which was synthesized from coal at its Potrero facility. Almost immediately the City faced challenges. Losses were at nearly 25% according to PG&E’s master meter, and PG&E had filed with the Railroad commission (the forerunner to today’s Public Utilities Commission) to increase rates by nearly 72.5%. Despite these initial hurdles, Palo Alto’s system grew tremendously, and by 1924 revenues had exceeded those of the electric utility. Sales were such that the annual reports of the time noted gas usage “appears to be greater than that of any other city in the state, showing that gas is a very popular form of fuel in Palo Alto.” Just prior to the acquisition of the neighboring town of Mayfield’s gas system (around today’s California Avenue) in 1929, the miles of main in service and customers connections had doubled. Notable changes to the gas supply itself came in 1930, when PG&E ceased supplying purely manufactured (or coal) gas from its Potrero Hill facility in San Francisco and instead switched to natural gas. In 1935, a supplementary butane injection system (later retired) was purchased from Standard Oil to mitigate large wintertime peaks. Gas sales were at 248,658 million cubic feet (MCF) with 4,849 active services. Early gas mains in Palo Alto were made of steel, but in the 1950s, like many other utilities, CPAU switched to ABS plastic. CPAU switched to PVC plastic in the early 1970s, but over 45 miles of ABS mains had already been installed. A 1990 evaluation of the system found a steadily increasing rate of gas leaks associated with those mains, something that other gas utilities had also been experiencing. To reduce leaks, CPAU accelerated its main replacement program from GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 11 | P a g e 7,000 feet (1.3 miles) of replacements per year to 20,000 feet (3.8 miles) per year. This would enable the utility to replace all of its ABS and its most vulnerable steel and PVC mains with polyethylene (PE) mains over the course of the following 36 years.4 As of 2013 the Gas Utility had replaced over 94 miles of steel, ABS, and PVC mains, which represents 45% of the system. The last ABS main replacement projects are currently underway. This was an example of how local control of its Gas Utility has provided Palo Alto residents with substantial benefits. During the 1990s and 2000s, while CPAU was increasing its main replacement rate to ensure a robust gas distribution system, PG&E was underspending on safety-related infrastructure, according to a recent audit.5 In the 1990s, while grappling with the issues surrounding its distribution system, CPAU was also participating in major changes to the structure of the gas industry in California. Until 1988 CPAU had a formal policy of setting its rates equal to PG&E’s rates and successfully did so with the exception of one year in the mid-1970s. At times this led to inadequate revenue (1974 to 1981) as PG&E, the City’s only gas supplier as well as its competitor, regularly filed requests with the CPUC to increase the wholesale gas supply rates charged to the Gas Utility. In the 1990s, as the CPUC began deregulating the natural gas industry in California, the Gas Utility was to begin purchasing gas from suppliers other than PG&E. In 1997 the CPUC adopted the “Gas Accord,”6 which enabled the Gas Utility (along with other local transportation-only customers) to obtain transmission rights on PG&E’s Redwood transmission pipeline running from Malin, Oregon into California. In 2000 to 2001 the California Energy Crisis occurred, causing major disruptions to the Gas Utility’s supply costs. Wholesale gas prices rose over 500% between January 2000 and January 2001. The Council approved drawing down reserves to provide ratepayer relief, and for two years following the crisis CPAU rates were above PG&E’s as reserves were replenished. In April 2001 the Council approved a hedging practice of buying fixed price gas one to three years into the future. After reaching a low point in October 2001, prices continued to rise, and as a result the CPAU hedging strategy frequently resulted in a wholesale supply cost advantage compared to PG&E until prices began to decline steeply in 2008. At that point the Gas Utility’s wholesale supply costs became higher than market gas prices due to fixed price contracts entered into prior to 2008. As a result the Gas Utility’s wholesale supply costs were higher than PG&E’s for several years. In July 2012 Council approved a plan to formally cease the hedging strategy and pass wholesale gas costs directly to customers through a rate that varied month by month. The last fixed price gas purchased under the hedging strategy was delivered in October 2013. SECTION VIII. HISTORICAL EXPENSES AND REVENUES Table 7 shows the Gas Utility’s expenses and revenues for the past five years. Total costs for this utility have decreased 13% since 2009, but there were a variety of notable cost increases 4 Staff Report CMR:183:0. Infrastructure Review and Update, March 1, 1990 5 Focused Financial Audit of The Pacific Gas & Electric Company’s Gas Distribution Operations, Overland Consulting , made available through a CPUC Administrative Law Judge’s ruling on A12-11-009/I13-03-007 on 5/31/2013 6 CPUC decision 97-08-055. Since then, the Gas Accord has been amended four times, with the most recent being Gas Accord V, application A.09-09-013 GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 12 | P a g e and decreases that contributed to this net change. Commodity costs decreased by 46% over that time due to decreases in gas market prices, but this was offset by increases in the equity transfer to the General Fund and the cost of distribution fund operations. The FY 2010 through FY 2013 equity transfers were nearly twice as large as the 2009 transfer due to a change in methodology adopted in 2009 and first taking effect in FY 2010. Distribution operations costs7 were nearly 35% higher in 2013 than they were in 2009, but much of this was related to spending on the crossbore program. Excluding the crossbore program, distribution operations costs have increased 4% per year on average since 2009. Sales revenues decreased in FY 2009 due to a rate decrease prompted by declining gas market prices, and again in FY 2013 as the utility switched to a pass-through commodity rate. FY 2013 sales volumes were also lower than normal due to warmer than average weather. Table 7: Gas Utility Historical Expenses 7 Administration, Demand Side Management, Engineering, O&M, and Resource Management categories in Table 8 2009 2010 2011 2012 2013 1 2 Utilities Retail Sales 47,250 43,244 42,855 41,034 33,759 3 Service Connection & Capacity Fees 462 451 516 592 731 4 Other Revenues & Transfers In 161 1,713 203 103 830 5 Interest plus Gain or Loss on Investment 1,614 1,342 821 1,119 (239) 6 Total Sources of Funds 49,487 46,750 44,396 42,847 35,081 7 8 Purchases of Utilities: 9 Supply Commodity 24,486 21,846 20,732 15,356 12,461 10 Supply Transportation 544 620 706 879 994 11 Total Purchases 25,029 22,466 21,438 16,235 13,455 12 13 Administration (CIP + Operating)2,181 2,494 2,895 3,473 4,273 14 Customer Service 1,168 1,134 1,230 1,270 1,358 15 Demand Side Management 365 428 563 614 630 16 Engineering (Operating)310 266 280 333 340 17 Operations and Maintenance 3,234 3,942 3,297 5,032 4,940 18 Resource Management 672 696 1,039 729 506 19 Debt Service Payments 521 505 488 406 296 20 Rent 205 320 230 230 219 21 Transfers to General Fund 3,135 5,300 5,304 6,006 5,971 22 Other Transfers Out 1,648 407 614 170 207 23 Capital Improvement Programs 7,407 2,389 8,325 7,821 7,562 24 Total Uses of Funds 45,875 40,348 45,704 42,320 39,756 25 26 Into/ (Out of) Reserves 3,612 6,402 (1,308)528 (4,675) Fiscal Year GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 13 | P a g e LOOKING FORWARD SECTION IX. SEVEN YEAR FINANCIAL FORECAST 1. OVERVIEW Staff has prepared a forecast of costs and revenues through FY 2021. As shown in Table 8 (and Appendix A: Gas Utility Financial Forecast Detail), total costs for the Gas Utility are projected to be at or below FY 2013 levels through FY 2019. Operations costs are projected to increase at 3% per year, but this will be offset by a reduction in costs associated with the projected completion of the crossbore program by the end of FY 2017. In addition, future ongoing CIP spending is expected to be lower than it was in FY 2013, a year that saw the commencement of an unusually large gas main replacement project. The combination of these factors, as well as the projected accumulation of reserves due to lower CIP budgets in FY 2015 and FY 2016, mean that CPAU will not need to raise non-commodity rates until FY 2018. FY 2018 through FY 2021 will see 3% to 4% non-commodity rate increases as revenues are brought in line with expenses. Table 8: Seven Year Gas Financial Forecast Summary *The rate change line shows the combined effect of commodity and non-commodity rate changes for FY 2013. For current and future years, only non-commodity rate changes are shown. Commodity rates will vary monthly with market prices. 2. COMMODITY SUPPLY COSTS The Gas Utility purchases much of its gas for delivery at Malin, which is almost always cheaper than PG&E City Gate, even including the costs of transmission from Malin to City Gate. Gas is purchased on a month-ahead and day-ahead basis in the spot market. Commodity costs are Actual Adopted Proj.Proj.Proj.Proj.Proj.Proj.Proj.Proj. 2013 2014 2014 2015 2016 2017 2018 2019 2020 2021 1 RATE CHANGE (%)*-13%0%0%0%0%0%3%3%4%3% 2 SALES IN THOUSAND THERMS 28,901 30,011 28,771 28,881 28,939 28,995 29,060 29,110 29,160 29,200 3 4 Utilities Retail Sales 33,759 37,343 36,746 34,942 35,150 34,874 36,197 37,864 39,718 41,164 5 Service Connection & Capacity Fees 731 579 580 602 640 662 686 706 706 706 6 Other Revenues & Transfers In 830 129 112 262 262 262 262 412 412 412 7 Interest plus Gain or Loss on Investment (239)815 693 226 324 321 315 282 261 244 8 Total Sources of Funds 35,081 38,865 38,131 36,032 36,376 36,119 37,460 39,264 41,096 42,526 9 10 Purchases of Utilities: 11 Supply Commodity 12,461 13,793 13,724 12,484 12,504 12,165 12,236 12,603 12,981 13,169 12 Supply Transportation 994 1,377 1,429 1,248 1,522 1,571 1,622 1,673 1,726 1,780 13 Total Purchases 13,455 15,170 15,153 13,731 14,026 13,736 13,858 14,276 14,708 14,950 14 15 Administration (CIP + Operating)4,273 3,352 3,891 4,036 4,156 4,290 4,428 4,571 4,719 4,871 16 Customer Service 1,358 1,383 1,409 1,524 1,568 1,632 1,699 1,769 1,842 1,918 17 Demand Side Management 630 1,318 610 628 647 667 687 708 730 752 18 Engineering (Operating)340 366 308 319 328 340 353 367 381 396 19 Operations and Maintenance 4,940 4,031 5,060 5,142 5,292 5,491 4,698 4,883 5,076 5,276 20 Resource Management 506 728 522 758 780 809 840 871 904 938 21 Debt Service Payments 296 801 802 803 804 803 802 801 801 803 22 Rent 219 225 225 232 239 246 253 261 269 277 23 Transfers to General Fund 5,971 5,811 5,786 5,650 5,802 6,102 6,342 6,644 6,968 7,306 24 Other Transfers Out 207 472 206 213 219 225 232 239 246 254 25 Capital Improvement Programs 7,562 1,595 240 1,816 5,224 4,714 4,822 4,942 4,942 4,942 26 Total Uses of Funds 39,756 35,253 34,212 34,853 39,086 39,057 39,015 40,332 41,584 42,682 27 28 Into/ (Out of) Reserves (4,675)3,612 3,919 1,179 (2,710)(2,937)(1,554)(1,068)(488)(156) Fiscal Year GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 14 | P a g e expected to stay steady or decline slightly over the next several years. Figure 2, below, shows the projected gas prices used to generate this forecast. Projections for transmission costs associated with transporting gas over PG&E’s Redwood transmission pipeline are based on rates adopted in the most recent update to the Gas Accord. Local transportation costs decrease on January 1, 2015 due to the expiration of a temporary adder to PG&E’s local transportation rate,8 but in December 2014 PG&E applied to the CPUC to more than double local transportation costs. In the past the CPUC has only partially approved such applications, so for future years, staff assumes a one-time 50% increase in local transportation costs in FY 2016, escalating at 3% per year in subsequent years. Figure 2: Wholesale Gas Price Projections 3. OPERATIONS Operations costs include the Customer Service, Demand Side Management, Operations and Maintenance, Engineering, Resource Management, and Administration categories in Table 8, above. Debt service, rent, and transfers are also included in Operations costs (excluding the General Fund equity transfer). Appendix E: Description of Gas Utility Cost Categories includes detailed descriptions of the activities associated with these cost categories. Operations costs are projected to increase by 3% per year. Salary and benefits, inflation, and other assumptions match those used in the City’s long-range financial forecast. Operations costs for FY 2015 to FY 2017 include funding for the crossbore program. In the 1970s CPAU, like many other utilities, adopted horizontal drilling as an alternative to trenching when installing new gas services. This created the possibility of crossbores, which happen when a gas service is bored through a sewer lateral. Though crossbores are very rare, they can create a dangerous situation when a contractor attempts to clear a blocked sewer line, because 8 California Public Utilities Commission Advice Letter 3430-G, effective January 1, 2014. Also see CPUC Decision 12- 12-30 regarding the Pipeline Safety Enhancement Plan Adder. $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 City Gate Malin GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 15 | P a g e if the crossbored gas service is damaged during the line clearing it can result in a gas leak. CPAU has been inspecting new gas services since 2001, and in 2011 began video inspections of the sewer laterals at the location of horizontally-drilled gas services installed before 2001. This inspection program has cost roughly $1 million per year since FY 2012, and will likely require additional funding in future years to complete. 4. CAPITAL IMPROVEMENT PROGRAM (CIP) The Gas Utility’s CIP program consists of the following programs and budgets:  The Gas Main Replacement Program, under which the Gas Utility replaces aging gas mains  Customer Connections, which covers the cost when the Gas Utility installs new services or upgrades existing services at a customer’s request in response to development or redevelopment. The Gas Utility charges a fee to these customers to cover the cost of these projects.  Ongoing Projects, which covers the cost of routine meter, regulator, and service replacement, minor projects to improve reliability or increase capacity, and other general improvements.  Tools and Equipment, which covers the cost of capitalized equipment, such as directional boring equipment.  One-time Projects, which represents occasional large projects that do not fall into any other category. Table 9 shows the current status of these project categories and future budgeted spending. Table 9: Budgeted Gas CIP Spending The Gas Main Replacement (GMR) Program is in the process of reaching a major milestone, the replacement of the last gas mains made from ABS plastic. The program to replace ABS and other low-performing materials in the system started in the 1990s (see Section VII. Background for more detail). CPAU has temporarily slowed down its new CIP appropriations in this category in order to finish the last major ABS main replacement project and to catch up on a backlog of projects that has accumulated due to staffing issues. A lower rate of ongoing spending on main replacement is projected after this project is complete, approximately three miles of main each year, or 1.5% of the system. With the replacement of all ABS mains with PE plastic, the material at high risk for failure is removed leaving only PVC plastic, steel (wrapped, with cathodic protection), and PE mains. The next focus of the GMR program will be PVC mains. CPAU will perform a study in 2014 to determine which areas of the system to prioritize. Project Category Current Budget* Spending, Curr. Yr Remain. Budget Committed FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 One Time Projects 42 - 42 - 150 - - - - Gas Main Replacement 15,377 (1,429) 13,948 11,623 603 4,161 3,650 3,785 3,878 Tools And Equipment 589 (35) 554 318 100 100 100 100 100 Ongoing Projects 1,117 (157) 960 236 737 763 785 809 833 Customer Connections 820 (370) 449 11 752 790 812 836 861 TOTAL 17,944 (1,991) 15,953 12,188 2,341 5,813 5,347 5,530 5,673 *Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 16 | P a g e Ongoing Projects, Tools and Equipment, and Customer Connections are projected to cost approximately $1.2 million in FY 2015 and increase by 3% per year through the end of the forecast period. In practice, these projects can fluctuate dramatically depending on system conditions and the pace of development and redevelopment in the city. It is worth noting that the Customer Connections program is paid for through fee revenue, so when costs go up, so does fee revenue. Aside from customer connections and some transfers from other funds, the CIP plan for FY 2015 to FY 2019 is funded by utility rates. The details of the plan are shown in Appendix B: Gas Utility Capital Improvement Program (CIP) Detail. 5. GENERAL FUND EQUITY TRANSFER The City calculates the equity transfer from its Gas Utility based on a rate of return on the net book value of the utility’s capital assets9. Council adopted this methodology in 2009 and it was first used for FY 2010. Based on forecasted rates of capital investment and depreciation, the equity transfer is projected to increase by 3% to 5% per year over the forecast period. SECTION X. REVENUE REQUIREMENT AND REVENUE SOURCES The Gas Fund’s costs and revenues from FY 2013 through FY 2021 are shown in Figure 3 below. Only distribution rate changes are shown. Revenues will be sufficient to cover costs FY 2014 and FY 2015, but the utility will draw down reserves in the following two fiscal years. From FY 2018 to FY 2021 rates will need to increase 3% to 4% per year to match revenues to costs. Each of the projected FY 2018 to FY 2021 rate increases will increase the median residential monthly gas bill by $1.13 to $1.60 per month. 9 For more detail, see City Manager’s Report 260:09, Finance Committee, May 26, 2009. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 17 | P a g e Figure 3: Gas Utility Revenue and Cost Projections This rate trajectory draws the Rate Stabilization Reserve down to zero by FY 2021, as shown in Figure 4. Figure 4 also includes the proposed reallocations of reserves described in Section V. Status of Reserves. Figure 4: Gas Utility Revenue and Cost Projections $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 2013 2014 2014 2015 2016 2017 2018 2019 2020 2021 Act.Adopt.Proj.Projected $( M i l l i o n s ) Purchases CIP Operations GF Transfers Debt Service Revenue 0%0%0%0%3%3%0% 4%3% Projected FY 2014 year-end reserves under existing reserves structure Proposed reallocation (see Section V. Status of Reserves) GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 18 | P a g e SECTION XI. PROJECTED CONSUMPTION Gas usage in Palo Alto is volatile, varying with both the economic and weather conditions. After a significant drop in usage from 40.7 million therms in FY 1999 to 31.5 million therms in FY 2004, gas usage stabilized somewhat, but continued with its general downward trend, decreasing by 3.2% in total during the next five years as a result of continued investments in energy efficiency (EE), reaching 30.5 million therms in FY 2009. Gas consumption is projected to stay stable over the forecast period, with growth being offset by gas efficiency savings. Figure 5 presents the historical gas consumption levels (with and without the gas EE programs) from FY 2004 through FY 2012 and projections for FY 2014 through FY 2021. Figure 5: Historic and Projected Gas Consumption SECTION XII. LONG-TERM OUTLOOK In the longer term (5 to 35 years) it is very difficult to predict the Gas Utility’s commodity costs. A variety of long-term trends could affect commodity costs either positively or negatively. Continuing improvement in gas extraction technology, such as fracking, could continue to 20.0 22.0 24.0 26.0 28.0 30.0 32.0 34.0 FY 2 0 0 4 FY 2 0 0 5 FY 2 0 0 6 FY 2 0 0 7 FY 2 0 0 8 FY 2 0 0 9 FY 2 0 1 0 FY 2 0 1 1 FY 2 0 1 2 FY 2 0 1 3 FY 2 0 1 4 FY 2 0 1 5 FY 2 0 1 6 FY 2 0 1 7 FY 2 0 1 8 FY 2 0 1 9 FY 2 0 2 0 FY 2 0 2 1 Th e r m s Mi l l i o n s Gas Sales w/o EE Gas Sales Actual Forecast GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 19 | P a g e create generous supplies of gas, but these technologies are also under greater scrutiny with respect to their environmental impacts. On the demand side, a continued shift from coal to natural gas for electricity generation or an increase in manufacturing in the U.S. might drive up natural gas prices, but other factors might drive gas demand lower. It is also difficult to predict the magnitude of the additional cost impacts associated with cap and trade over the long term. In the face of this uncertainty, CPAU is able to protect the financial position of the Gas Utility by continuing its current strategy of passing these costs directly to its customers via month-varying rate adjustment mechanisms. As discussed in Section IX. Seven Year Financial Forecast, the future CIP investment needs for the Gas Utility may be lower than in the past. The Gas Utility has replaced all of its ABS gas mains and its most problematic steel and PVC mains as well. The PE pipe that is replacing it is expected to have at least a fifty year lifetime, and there is growing evidence that it may last much longer than that. This would result in lower CIP investment over the long term. CPAU is performing a study in 2014 to develop its future main replacements priorities and strategy. Long term state or local climate goals could also have a major impact on the Gas Utility. Assembly Bill 32 (AB32) set a goal of reducing greenhouse gas (GHG) emissions to 1990 levels by 2020 and then maintaining those reductions. The City has similar goals in its December 2007 Climate Protection Plan, in which it set a goal of lowering emissions to 15% below 2005 levels by 2020. As a community Palo Alto achieved these goals in 2012 even with continued use of natural gas for heating, cooking, and industrial processes. If stricter goals are enacted at the state or local level, however, it could lead to stranded investment and higher rates as the costs of the distribution system are recovered over a lower sales base. One example of a stricter standard is the one the Governor has stated: reducing GHG emissions to 80 percent below 1990 levels by 2050.10 This goal, or less ambitious interim goals, would require legislation to implement, but it is instructional that in the recent discussion draft of its scoping plan update CARB says that to meet them, natural gas use would have to be “mostly phased out.”11 As stewards of the Gas Utility, the City should continue to stay aware of developments in state climate planning, participate as a stakeholder, and consider these types of impacts and ways to mitigate them when developing its own sustainability goals. SECTION XIII. RISK ASSESSMENT Staff performs an annual assessment of financial risks for the Gas Utility due to: 1. the maximum observed one-year distribution revenue variance over the past five years; and 2. an increase of 10% of planned system improvement CIP expenditures for the budget year. Commodity price risk is not included in the risk assessment because these costs are passed directly to customers each month. Table 10 summarizes the risk assessment calculation for the Gas Utility. The Operations Reserve is projected to be adequate to manage these levels of risk over the entire forecast period. 10 Executive Orders S-3-05 and B-16-2012. 11 Climate Change Scoping Plan, First Update, Discussion Draft for Public Review and Comment, California Air Resources Board, October 2013, pg 88. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 20 | P a g e Table 10: Gas Utility Risk Assessment ($000) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Total Revenue 20,870 20,910 20,923 22,141 23,373 24,783 25,975 Max. Historical Revenue Variance 5% 5% 5% 5% 5% 5% 5% Budget-to-Actual Risk 1,044 1,046 1,046 1,107 1,169 1,239 1,299 System Rehabilitation CIP Budget 1,816 5,224 4,714 4,822 4,942 4,942 4,942 CIP Contingency @10% 182 522 471 482 494 494 494 Total Risk Assessment Value 1,226 1,568 1,517 1,589 1,663 1,733 1,793 Projected Operations Reserve Level 8,380 8,465 8,588 8,556 8,331 8,761 9,092 SECTION XIV. COMMUNICATIONS PLAN The FY2015 Gas Utility communications strategy covers four primary areas: rates, efficiency, operations/infrastructure and safety. Since CPAU has moved to market pricing for commodity rates, and because there are no projected distribution rate changes over this forecast period, there is no need for formal “rate change” communications at this time, but website and community education about rates is ongoing. Changes to the commodity rates are posted monthly on the City’s website. Gas use efficiency incentives are promoted year-round, but most heavily during winter months to impact heating activities; promotional activity includes bill inserts, website pages, email blasts, Home Energy Reports and the use of social media. To keep customers apprised of the status and accomplishments of capital improvement projects, a network of project web pages are maintained; traffic is driven to the website via ads in publications, newspaper inserts, social media and email blasts. Safety topics are emphasized year-round and, while print materials and website pages still feature prominently, CPAU is turning the outreach emphasis to direct mail, newspaper inserts, social media including video, cable TV, community safety/emergency preparation meetings and updates to neighborhood groups. Stepping up efforts to promote gas safety education, staff focused on youth, obscured meters and anyone who digs. For younger “customers-to-be” CPAU created a Home Safety Detective campaign that included special tool kits to help them identify home safety problems. Meter access awareness was raised via materials featuring photos of the unbelievable ways people obstruct access to their meters, including using them as bike racks and building storage sheds around them. Residents of all ages, as well as construction companies etc. were targeted by the pirate-themed “Call 811 Before you Dig” campaign which emphasized the dangers of doing any kind of serious excavation without having underground utilities marked first. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 21 | P a g e APPENDICES Appendix A: Gas Utility Financial Forecast Detail Appendix B: Gas Utility Capital Improvement Program (CIP) Detail Appendix C: Gas Utility Reserves Management Practices Appendix D: Gas Utility Debt Service Details Appendix E: Description of Gas Utility Cost Categories Appendix F: Gas Utility Communications Samples GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 22 | P a g e APPENDIX A: GAS UTILITY FINANCIAL FORECAST DETAIL Actual Adopted Proj.Proj.Proj.Proj.Proj.Proj.Proj.Proj. 2013 2014 2014 2015 2016 2017 2018 2019 2020 2021 1 RATE CHANGE (%)*-13%0%0%0%0%0%3%3%4%3% 2 SALES IN THOUSAND THERMS 28,901 30,011 28,771 28,881 28,939 28,995 29,060 29,110 29,160 29,200 3 4 Utilities Retail Sales 33,759 37,343 36,746 34,942 35,150 34,874 36,197 37,864 39,718 41,164 5 Service Connection & Capacity Fees 731 579 580 602 640 662 686 706 706 706 6 Other Revenues & Transfers In 830 129 112 262 262 262 262 412 412 412 7 Interest plus Gain or Loss on Investment (239)815 693 226 324 321 315 282 261 244 8 Total Sources of Funds 35,081 38,865 38,131 36,032 36,376 36,119 37,460 39,264 41,096 42,526 9 10 Purchases of Utilities: 11 Supply Commodity 12,461 13,793 13,724 12,484 12,504 12,165 12,236 12,603 12,981 13,169 12 Supply Transportation 994 1,377 1,429 1,248 1,522 1,571 1,622 1,673 1,726 1,780 13 Total Purchases 13,455 15,170 15,153 13,731 14,026 13,736 13,858 14,276 14,708 14,950 14 15 Administration (CIP + Operating)4,273 3,352 3,891 4,036 4,156 4,290 4,428 4,571 4,719 4,871 16 Customer Service 1,358 1,383 1,409 1,524 1,568 1,632 1,699 1,769 1,842 1,918 17 Demand Side Management 630 1,318 610 628 647 667 687 708 730 752 18 Engineering (Operating)340 366 308 319 328 340 353 367 381 396 19 Operations and Maintenance 4,940 4,031 5,060 5,142 5,292 5,491 4,698 4,883 5,076 5,276 20 Resource Management 506 728 522 758 780 809 840 871 904 938 21 Debt Service Payments 296 801 802 803 804 803 802 801 801 803 22 Rent 219 225 225 232 239 246 253 261 269 277 23 Transfers to General Fund 5,971 5,811 5,786 5,650 5,802 6,102 6,342 6,644 6,968 7,306 24 Other Transfers Out 207 472 206 213 219 225 232 239 246 254 25 Capital Improvement Programs 7,562 1,595 240 1,816 5,224 4,714 4,822 4,942 4,942 4,942 26 Total Uses of Funds 39,756 35,253 34,212 34,853 39,086 39,057 39,015 40,332 41,584 42,682 27 28 Into/ (Out of) Reserves (4,675)3,612 3,919 1,179 (2,710)(2,937)(1,554)(1,068)(488)(156) 29 30 Reappropriations + Commitments 19,363 19,363 19,363 19,363 19,363 19,363 19,363 19,363 19,363 19,363 31 Plant Replacement 1,000 1,000 0 0 0 0 0 0 0 0 32 CIP Reserve 0 0 0 0 0 0 0 0 0 0 33 Rate Stabilization 11,318 14,916 7,691 9,036 6,379 3,508 1,980 587 0 0 34 Operations Reserve 0 0 8,546 8,380 8,591 8,718 8,690 8,994 9,133 9,054 35 Unassigned 0 0 0 0 0 0 0 0 0 0 36 Total Reserves 31,681 35,279 35,600 36,779 34,332 31,589 30,033 28,945 28,496 28,417 37 38 Short Term Risk Assessment Value 39 40 Operations Reserve Guidelines 41 Min (60 Days Commodity + O&M)5,697 5,587 5,727 5,812 5,793 5,996 6,209 6,396 42 Target (60 Days Commodity + O&M)8,546 8,380 8,591 8,718 8,690 8,994 9,313 9,594 43 Max (60 Days Commodity + O&M)11,395 11,174 11,454 11,624 11,586 11,993 12,417 12,792 44 Fiscal Year GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 23 | P a g e APPENDIX B: GAS UTILITY CAPITAL IMPROVEMENT PROGRAM (CIP) DETAIL Project #Project Name Reappropriated / Carried Forward from Previous Years Current Year Funding Budget Amendments Spending, Current Year Remaining in CIP Reserve Fund Commitments FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 ONE TIME PROJECTS GS-09000 Gas Station 1 Rebuild 6,630 - - - 6,630 - - - - - - GS-08000 Gas Station 2 Rebuild 10,023 - - - 10,023 - - - - - - GS-10000 Gas Station 3 Rebuild 8,489 - - - 8,489 - - - - - - GS-11001 Gas Station 4 Rebuild 16,898 - - - 16,898 - - - - - - GS-13003 COBUG emissions equipment 315,000 - (315,000) - - - - - - - - GS-15001 Security at Receiving Stations - - - - - - 150,000 - - - - Subtotal, One-time Projects 357,040 - (315,000) - 42,040 - 150,000 - - - - GAS MAIN REPLACEMENT (GMR) PROGRAM GS-07002 GMR - Project 17 52 - - - 52 - - - - - - GS-08011 GMR - Project 18 250,254 - 18,445 (264,026) 4,673 - - - - - - GS-09002 GMR - Project 19 2,717,475 - - 800,073 3,517,548 2,051,126 - - - - - GS-10001 GMR - Project 20 6,519,842 - - (287,812) 6,232,030 6,032,679 - - - - - GS-11000 GMR - Project 21 5,870,532 - - (1,677,169) 4,193,363 3,539,566 - - - - - GS-12001 GMR - Project 22 - - - - - - 602,575 3,540,000 - - - GS-13001 GMR - Project 23 - - - - - - - 620,650 3,010,000 - - GS-14003 GMR - Project 24 - - - - - - - - 640,000 3,100,000 - GS-15000 GMR - Project 25 - - - - - - - - - 685,000 3,200,000 GS-16000 GMR - Project 26 - - - - - - - - - - 678,200 Subtotal, Gas Main Replacement Program 15,358,156 - 18,445 (1,428,935) 13,947,666 11,623,371 602,575 4,160,650 3,650,000 3,785,000 3,878,200 TOOLS AND EQUIPMENT GS-13002 General Shop Equipment/Tools 50,000 - - - 50,000 - 100,000 100,000 100,000 100,000 100,000 GS-01019 Global Positioning System 82,448 - - - 82,448 2,810 - - - - - GS-02013 Directional Boring Machine 520,764 - (295,000) - 225,764 221,228 - - - - - GS-03007 Directional Boring Equipment 199,252 - (155,000) (25,002) 19,250 18,948 - - - - - GS-03008 Polyethylene Fusion Equip.36,397 - - (8,582) 27,815 22 - - - - - GS-14004 Gas Distribution System Model - 150,000 - (1,392) 148,608 75,000 - - - - - Subtotal, Tools and Equipment 888,861 150,000 (450,000) (34,976) 553,885 318,008 100,000 100,000 100,000 100,000 100,000 GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 24 | P a g e Project #Project Name Reappropriated / Carried Forward from Previous Years Current Year Funding Budget Amendments Spending, Current Year Remaining in CIP Reserve Fund Commitments FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 ONGOING PROJECTS GS-11002 Gas System Improvements 220,760 212,000 - (114,552) 318,208 235,607 218,600 225,158 231,913 238,870 246,036 GS-03009 System Ext. - Unreimbursed 265,061 178,000 (200,000) (40,137) 202,924 - 183,500 192,675 198,500 204,455 210,590 GS-80019 Gas Meters and Regulators 366,015 325,000 (250,000) (1,959) 439,056 - 334,650 344,690 355,030 365,681 376,652 Subtotal, Ongoing Projects 851,836 715,000 (450,000) (156,648) 960,188 235,607 736,750 762,523 785,443 809,006 833,278 CUSTOMER CONNECTIONS (FEE FUNDED) GS-80017 Gas System Extensions 89,552 730,000 - (370,054) 449,498 10,946 752,000 789,600 812,000 836,360 861,450 Subtotal, Customer Connections 89,552 730,000 - (370,054) 449,498 10,946 752,000 789,600 812,000 836,360 861,450 GRAND TOTAL 17,545,445 1,595,000 (1,196,555) (1,990,613) 15,953,277 12,187,932 2,341,325 5,812,773 5,347,443 5,530,366 5,672,928 Funding Sources Connection Fees 580,000 - 602,000 639,600 662,000 686,360 861,450 Utility Rates 893,200 (1,196,555) 1,438,305 4,640,442 4,870,635 4,007,000 4,007,000 CIP-RELATED RESERVES DETAIL 6/30/2013 (Actual)12/31/2013 Reappropriations 4,980,445 3,765,345 Commitments 12,565,000 12,187,932 GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 25 | P a g e APPENDIX C: GAS UTILITY RESERVES MANAGEMENT PRACTICES The following reserves management practices shall be used when developing the Gas Utility Financial Plan: Section 1. Definitions a) “Financial Planning Period” – The Financial Planning Period is the range of future fiscal years covered by the Financial Plan. For example, if the Financial Plan delivered in conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019, FY 2015 to FY 2019 would be the Financial Planning Period. b) “Fund Balance” – As used in these Reserves Management Practices, Fund Balance refers to the Utility’s Unrestricted Net Assets. c) “Net Assets” - The Government Accounting Standards Board defines a Utility’s Net Assets as the difference between its assets and liabilities. d) “Unrestricted Net Assets” - The portion of the Utility’s Net Assets not invested in capital assets (net of related debt) or restricted for debt service or other restricted purposes. Section 2. Supply Fund Reserves The Gas Utility’s Supply Fund Balance is reserved for the following purposes: a) For existing contracts, as described in Section 4 (Reserves for Commitments) b) For operating and capital budgets reappropriated from previous years, as described in Section 5 (Reserves for Reappropriations) Section 3. Distribution Fund Reserves The Gas Utility’s Distribution Fund Balance is reserved for the following purposes: a) For existing contracts, as described in Section 4 (Reserves for Commitments) b) For operating and capital budgets reappropriated from previous years, as described in Section 5 (Reserves for Reappropriations) c) For future year expenditure on the Gas Utility’s Capital Improvement Program (CIP), as described in Section 6 (CIP Reserve) d) For rate stabilization, as described in Section 7 (Rate Stabilization Reserve) e) For operating contingencies, as described in Section 8 (Operations Reserve) f) Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 9 (Unassigned Reserves). Section 4. Reserves for Commitments At the end of each fiscal year the Gas Supply Fund and Gas Distribution Fund Reserves for Commitments will be set to an amount equal to the total remaining spending authority for all contracts in force for the Gas Supply Fund and Gas Distribution Fund, respectively, at that time. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 26 | P a g e Section 5. Reserves for Reappropriations At the end of each fiscal year the Gas Supply Fund and Gas Distribution Fund Reserves for Reappropriations will be set to an amount equal to the amount of all remaining capital and non-capital budgets that will be reappropriated to the following fiscal year for each fund in accordance with Palo Alto Municipal Code Section 2.28.090. Section 6. CIP Reserve Funds may be added to or withdrawn from the CIP Reserve by action of the City Council and held for future year expenditure on the Gas Utility’s CIP Program. Withdrawal of funds from the CIP Reserve requires Council action. If there are funds in the CIP Reserve at the end of any fiscal year, any subsequent Gas Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. Section 7. Rate Stabilization Reserve Funds may be added to the Rate Stabilization Reserve by action of the City Council and held to manage the trajectory of future year rate increases. Withdrawal of funds from the Rate Stabilization Reserve requires Council action. If there are funds in the Rate Stabilization Reserve at the end of any fiscal year, any subsequent Gas Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. Section 8. Operations Reserve The Operations Reserve is used to manage normal variations in costs and as a reserve for contingencies. Any portion of the Gas Utility’s Fund Balance not included in the reserves described in Section 4 to Section 7 above will be included in the Operations Reserve unless this reserve has reached its maximum level as set forth in Section 8 (d) below. Staff will manage the Operations Reserve according to the following practices: a) The following guideline levels are set forth for the Operations Reserve. These guideline levels are calculated in for each fiscal year of the Financial Planning Period based on the levels of Operations and Maintenance (O&M) and commodity expense commodity expense forecasted for that year in the Financial Plan. Minimum Level 60 days of O&M and commodity expense Target Level 90 days of O&M and commodity expense Maximum Level 120 days of O&M and commodity expense b) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Operations Reserve are lower than the minimum level set forth above, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered within six months of the end of the fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the following fiscal year. For example, if the Operations Reserve is below its minimum level at the end of FY 2014, staff must present a plan by GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 27 | P a g e December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In addition, staff may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve. c) Target Level: If, at the end of any fiscal year, the Operations Reserve is higher or lower than the target level, any Financial Plan created for the Gas Utility shall be designed to return the Operations Reserve to its target level by the end of the forecast period. d) Maximum Level: If, at any time, the Operations Reserve reaches its maximum level, no funds may be added to this Reserve. Any further increase in the Gas Utility’s Fund Balance shall be automatically included in the Unassigned Reserve described in Section 9, below. Section 9. Unassigned Reserve If the Operations Reserve reaches its maximum level, any further additions to the Gas Utility’s Fund Balance will be held in the Unassigned Reserve. If there are any funds in the Unassigned Reserve at the end of any fiscal year, the next Financial Plan presented to the City Council must include a plan to assign them to a specific purpose or return them to the Gas Utility ratepayers by the end of the first fiscal year of the next Financial Planning Period. For example, if there were funds in the Unassigned Reserves at the end of FY 2015, and the next Financial Planning Period is FY 2016 through FY 2020, the Financial Plan shall include a plan to return or assign any funds in the Unassigned Reserve by the end of FY 2016. Staff may present an alternative plan that retains these funds or returns them over a longer period of time. Section 10. Intra-Utility Transfers between Supply and Distribution Funds The Gas Utility records costs in two separate funds: the Gas Supply Fund and the Gas Distribution Fund. At the end of each fiscal year staff is authorized to transfer an amount equal to the difference between Gas Supply Fund costs and Gas Supply Fund Revenues from the Gas Distribution Fund Operations Reserve to the Gas Supply Fund or vice versa. Such transfers shall be included in the ordinance closing the budget for the fiscal year. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 28 | P a g e APPENDIX D: GAS UTILITY DEBT SERVICE DETAILS The Gas Utility currently makes debt service payments on one bond issuance, the 2011 Series A Utility Revenue Refunding Bonds. This bond issuance was to refinance the $18 million principal remaining on the Utility Revenue Bonds, 2002 Series A issued for the Gas and Water Utilities to finance various improvements to the distribution systems. $9.4 million of this issuance was secured by the net revenues of the Gas Utility. Debt service for this bond for the financial forecast period is shown in Table 11. Debt service on this bond will continue through 2026. Table 11: Gas Utility Debt Service FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 2011 Utility Revenue Refunding Bonds, Series A 802 803 804 803 802 801 801 803 The 2011 bonds include two covenants stating that 1) the Gas Utility will maintain a debt coverage ratio of 125% of debt service, and 2) that the City will maintain “Available Reserves”12 equal to five times the annual debt service. The current financial plan complies with these covenants throughout the forecast period, as shown in Table 12 and Table 13. Table 12: Debt Service Coverage Ratio ($000) FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Revenues 38,131 36,032 35,869 35,596 36,920 36,588 38,871 41,934 Expenses (Excluding CIP and Debt Service) (33,171) (32,235) (32,549) (33,014) (32,847) (31,901) (33,605) (36,342) Net Revenues 4,960 3,797 3,320 2,582 4,073 4,687 5,266 5,592 Debt Service 802 803 804 803 802 801 801 803 Coverage Ratio 618% 473% 413% 322% 508% 585% 657% 696% Table 13: Debt Service Minimum Reserves ($000) FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Gas Utilitya 16,237 17,416 14,972 12,231 10,678 9,604 9,167 9,092 Debt Serviceb 802 803 804 803 802 801 801 803 Reserves Ratioc 20x 22x 19x 15x 13x 12x 11x 11x a) CIP, Rate Stabilization, Operations, and Unassigned Reserves b) Gas Utility’s share of the debt service on the 2011 bonds. c) Calculated using only Gas Utility reserves. The actual reserves ratio for the 2011 bonds is calculated based on the combined Electric, Gas, and Water Utility reserves and debt service and is higher than shown here. The Gas Utility’s reserves and net revenue are also pledged as security for the bond issuances listed in Table 14, even though the Gas Utility is not responsible for the debt service payments. The Gas Utility’s reserves or net revenues would only be called upon if the responsible utilities are unable to make their debt service payments. Staff does not currently foresee this 12 Available Reserves as defined in the 2011 bonds include the reserves for the Water, Electric, and Gas Utilities GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 29 | P a g e occurring. Amounts advanced from one utility to pay debt service for another utility will be repaid by the borrowing fund. Table 14: Other Issuances Secured by Gas Utility’s Revenues or Reserves Bond Issuance Responsible Utilities Annual Debt Service ($000) Secured by Gas Utility’s: Net Revenues Reserves 1995 Series A Utility Revenue Bonds Storm Drain $680 Yes No 1999 Utility Revenue Bonds, Series A Wastewater Collection Wastewater Treatment Storm Drain $1,207 No Yes 2009 Water Revenue Bonds (Build America Bonds) Water $1,977* No Yes *Net of Federal interest subsidy GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 30 | P a g e APPENDIX E: DESCRIPTION OF GAS UTILITY COST CATEGORIES This appendix describes the activities associated with the various cost categories referred to in this Financial Plan. Customer Service: This category includes the Gas Utility’s share of the call center, meter reading, collections, and billing support functions. Billing support encompasses staff time associated with bill investigations and quality control on certain aspects of the billing process. It does not include maintenance of the billing system itself, which is included in Administration. This category also includes CPAU’s key account representatives, who work with large commercial customers who have more complex requirements for their gas services. Resource Management: This category includes gas procurement, contract management, rate setting, and tracking of legislation and regulation related to the gas industry. Operations and Maintenance: This category includes the costs of a variety of distribution system maintenance activities, including:  surveying the gas system (50% of the system each year) and repairing any leaks found;  investigating reports of damaged mains or services and perform emergency repairs;  building and replacing gas services for new or redeveloped buildings; and  testing and replacing meters to ensure accurate sales metering. This category also includes a variety of functions the utility shares with other City utilities, including:  the Field Services team (which does field research of various customer service issues);  the Cathodic Protection team (which monitors and maintains the systems that prevent corrosion in metal pipes and reservoirs); and  the General Services team (which manages and maintains equipment, paves and restores streets after gas, water, or sewer main replacements, and provides welding services, including certified gas line welding services) Administration: Accounting, purchasing, legal, and other administrative functions provided by the City’s General Fund staff, as well as shared communications services and Utilities Department administrative overhead and billing system maintenance costs. Demand Side Management: Includes the cost of administering gas efficiency programs and the direct cost of rebates paid. Engineering (Operating): The Gas Utility’s engineers focus primarily on the CIP, but a small portion of their time is spent assisting with distribution system maintenance. APPENDIX F: GAS UTILITY COMMUNICATIONS SAMPLES WASTEWATER COLLECTION UTILITY FINANCIAL PLAN FY 2015 TO FY 2019 TABLE OF CONTENTS Definitions and Abbreviations ............................................................................................... 2 Executive Summary ............................................................................................................... 2 Current State of the Utility .................................................................................................... 3 Section I. Utility Overview ........................................................................................................... 3 Section II. Current Rates and Competitiveness ........................................................................... 4 Section III. Rate Design ............................................................................................................... 5 Section IV. Current Utility Financial Status ................................................................................. 5 Section V. Status of Reserves ...................................................................................................... 7 Section VI. Debt Service .............................................................................................................. 8 Looking Back ......................................................................................................................... 8 Section VII. Background .............................................................................................................. 8 Section VIII. Historical Expenses and Revenues ........................................................................ 10 Looking Forward .................................................................................................................. 10 Section IX. Five Year Financial Forecast .................................................................................... 10 1. Overview ...................................................................................................................... 10 2. Treatment Costs ........................................................................................................... 11 3. Operations .................................................................................................................... 12 4. Capital Improvement Program (CIP) ............................................................................ 12 Section X. Revenue Requirement and Revenue Sources ........................................................... 14 Section XI. Risk Assessment ...................................................................................................... 15 Section XII. Long-term Outlook ................................................................................................. 16 Section XIII. Communications Plan ........................................................................................... 16 Appendices ......................................................................................................................... 17 Appendix A: Wastewater Collection Financial Forecast Detail .................................................. 18 Appendix B: Wastewater Collection Utility Capital Improvement Program (CIP) Detail .......... 19 Appendix C: Wastewater Collection Utility Reserves Management Practices .......................... 20 Appendix D: Wastewater Collection Debt Service Details ......................................................... 23 Appendix E: Sample of Wastewater Collection Outreach Materials ......................................... 25 WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 2 | P a g e DEFINITIONS AND ABBREVIATIONS CCF – the standard unit of measurement for water delivered to water customers. Equal to one hundred cubic feet, or roughly 748 gallons. When water usage is used to assess wastewater charges for commercial customers, it is measured in CCF. CIP – Capital Improvement Program CPAU – City of Palo Alto Utilities Department FOG – Fats, oils, and grease. When flushed into the sewer system, these materials accumulate in parts of the sewer system and create blockages. RWQCP – Regional Water Quality Control Plant, the wastewater treatment plant owned and operated by the City of Palo Alto that serves Palo Alto and several surrounding communities. EXECUTIVE SUMMARY This document presents a financial plan for the City of Palo Alto’s Wastewater Collection Utility for the next five years. It provides revenues to cover the costs of operating the utility safely over that time while adequately investing for the future. It also addresses the financial risks facing the utility over the short term and long term, and includes measures to mitigate and manage those risks. Over the next five fiscal years staff projects that the Wastewater Collection Utility will see wastewater treatment costs rising 4% to 5% per year and other costs rising at roughly 3% per year. To match revenues to these rising costs, the financial plan includes the rate trajectory shown in Table 1. No increase is planned for FY 2015, and for FY 2016 to FY 2019 rates are projected to increase 7% per year. These projected rate increases are equivalent to an increase of $2.05 to $2.51 per month for a residential customer’s sewer bill. This rate trajectory will allow the utility to draw down accumulated reserves, which resulted from the fact that staff did not add a new sewer main replacement project in FY 2014 and a one-time decrease in treatment costs related to a change in billing methodology by Palo Alto’s Regional Water Quality Control Plant (RWQCP). Table 1: Projected Wastewater Collection Rate Trajectory for FY 2015 to FY 2019 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 0% 7% 7% 7% 7% In addition, this Financial Plan includes the Wastewater Collection Utility Reserves Management Practices. These set forth the various reserves held by the Wastewater Collection Utility, their purposes, and guidelines for managing them. The Reserves Management Practices make the following changes to the utility’s existing reserves structure: o The addition of an Operations Reserve, a Capital Improvement Program (CIP) Reserve, and an Unassigned Reserve WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 3 | P a g e o The merger of the Emergency Plant Replacement Reserve into the new Operations Reserve To fund the new Operations Reserve, a transfer of $2.7 million from the Rate Stabilization Reserve to the Operations Reserve is included in this plan. CURRENT STATE OF THE UTILITY SECTION I. UTILITY OVERVIEW The City of Palo Alto’s Wastewater Collection Utility, operated by the City of Palo Alto Utilities Department (CPAU) provides sewer service to the residents and businesses of Palo Alto. It is distinct from the Wastewater Treatment Utility, operated by the City of Palo Alto Public Works Department, which provides treatment services for surrounding communities in addition to Palo Alto. Nearly 27,200 customers are connected to the sewer system, approximately 25,600 (94%) of which are residential and 1,600 (6%) of which are non-residential. Residential customers pay a flat fee for service. Non-residential customers are billed for sewer service based on their metered winter water usage. There is little variability in revenues for this utility. The Wastewater Collection Utility delivers all the wastewater it collects to the RWQCP, a treatment plant run by the City of Palo Alto under a partnership agreement with several surrounding communities. Palo Alto is responsible for 38% to 40% of the wastewater sent to the RWQCP. The cost of running the RWQCP is contained in the Wastewater Treatment Utility and is not described in detail in this Financial Plan, but since these costs are a major driver of CPAU’s sewer rates there is some discussion of future trends in treatment costs in Section IX. Five Year Financial Forecast. Treatment costs make up nearly half of the Wastewater Collection Utility’s expenses. To collect wastewater from its customers and deliver it to the Regional Water Quality Control Plant (RWQCP), the utility owns roughly 18,000 sewer laterals (which collect wastewater from customers’ plumbing systems) and 217 miles of sewer mains (which transport the waste to the treatment plant). These laterals and mains, along with the associated manholes and cleanouts, represent the vast majority of infrastructure used to collect wastewater in Palo Alto. CPAU conducts a sewer rehabilitation and replacement program to replace mains over time as they deteriorate or to increase capacity. For more discussion of this program, see Section IX. Five Year Financial Forecast. CIP expense accounts for roughly a quarter of the utility’s expenditures. In addition to its CIP, CPAU performs various maintenance activities on the sewer system. These include inspecting and repairing sewer laterals, responding to sewer overflows, regularly cleaning sections of the system heavily impacted by fats, oils, and grease (FOG), and building and replacing sewer laterals for new or redeveloped buildings. The utility also shares the costs of other operational activities (such as customer service, billing, equipment maintenance, and street restoration) with the City’s other utilities. These maintenance and operations expenses, as well as associated administration, debt service, rent, and other costs, make up another quarter of the utility’s expenses. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 4 | P a g e SECTION II. CURRENT RATES AND COMPETITIVENESS The current rates were adopted July 1, 2012, when CPAU increased sewer rates by 5%. The rate change included a revenue-neutral change to the billing methodology for commercial customers. CPAU now bases its sewer rates for commercial customers on the previous winter’s water use as opposed to the water use in the actual billing month. This closely approximates non-irrigation water consumption, which represents actual sewer use. Table 2, below, summarizes the current rates for all customer classes. CPAU has three sewer rate schedules: one for residents (S-1), one for commercial customers (S-2), and a special schedule for restaurants (S-6), which discharge higher than average strengths of grease and oil and therefore have a greater impact on the sewer system. CPAU also maintains a rate schedule for industrial dischargers (S-7), but there are currently no customers required to be on this rate schedule. Table 2: Current Sewer Rates (Effective 7/1/2012) Rate Component Units S-1 (Residential) S-2 (Commercial) S-6 (Restaurant) Monthly Service Charge $/month 29.31 29.31 29.31 Quantity Rate $/CCF - 5.65 8.73 Table 3 shows the sewer bills for residential customers compared to what they would be under surrounding communities’ rate schedules. The annual sewer bill for a Palo Alto customer is $351.72 under current rates, 30% lower than the average neighboring community. Palo Alto has the third lowest monthly rate of the group. Table 3: Residential Monthly Sewer Bill Comparison Palo Alto Neighboring Communities Neighboring Community Average Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward 29.31 68.33 63.09 26.10 32.36 33.00 27.27 41.69 Based on rates as of January 1, 2014 Table 4 compares the sewer bills for two classes of commercial customers to what they would be under surrounding communities’ rate schedules. Note that other communities often have specific rates for industrial customers that discharge high intensity wastewater, such as food processors or chemical or electronics manufacturers, but Palo Alto does not currently have any customers that require these special rates. The annual bill for the median Palo Alto commercial customer is $949, 10% above the average neighboring community. For the average restaurant the annual bill is $5,867, 7% above the average neighboring community. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 5 | P a g e Table 4: Commercial Monthly Sewer Bill Comparison Palo Alto Neighboring Communities Neighboring Community Average Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward General Commercial $79.10 $120.80 $82.88 $54.40 $49.84 $53.71 $69.76 $71.90 Restaurant $488.88 $527.52 $703.92 $372.40 $199.36 $420.84 $515.20 $456.54 Based on rates as of January 1, 2014 SECTION III. RATE DESIGN The Wastewater Collection Utility’s rates are evaluated and implemented in compliance with the cost of service requirements and procedural rules set forth in the California Constitution (Proposition 218). Current rates were structured based on the methodology from the January 2011 Wastewater Collection Utility Cost of Service & Rate Study completed by Utility Financial Solutions1. Staff tentatively plans to review and update this cost of service study in 2 to 3 years, unless any major changes occur to the utility’s operations or customer base that would necessitate an earlier study. Before conducting any new cost of service study, staff will review current rates and the scope of the study with the UAC and Council to determine UAC and Council policy priorities. SECTION IV. CURRENT UTILITY FINANCIAL STATUS In FY 2013, treatment costs represented nearly half of the Wastewater Collection Utility’s costs, with the CIP being the next largest expense (23% of costs), then Operations (16%), and finally administration, overhead, and other costs (14%), as shown in Figure 2. These expenditures are also displayed by category of expenditure in Figure 1. The utility’s revenue in FY 2013 came primarily from sewer charges (88%), with the remainder coming from capacity and connection fees (9%), and other sources (3%). 1 Staff Report ID#1399, Finance Committee, March 1, 2011 WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 6 | P a g e Table 5 contains a summary of the Wastewater Collection Utility’s financial outlook for FY 2014. Sales are very stable since 53% of sales are to residential customers, whose rate consists of fixed monthly service charges. A component of business sales revenues is based on winter water use levels, which are fairly stable as well. For FY 2014, sales revenues are projected to be $602,000 below budget due to a decrease in commercial sales related to lower winter water consumption by those customers. This is offset by an increase in connection and capacity fees associated with new development and redevelopment. Staff is projecting a one-time reduction in treatment costs of $1.3 million associated with a change in billing methodology by the RWQCP. As a result, net revenue is projected to be $3.3 million, $1.5 million higher than budgeted. However, FY 2014 is an atypical year. Due to staffing constraints, CPAU’s Sewer Rehabilitation and Replacement Program, which costs roughly $3 million per year, has been put on hold for a year while staff completes a backlog of projects from prior years. If the program had been funded at its usual rate, and treatment costs were at normal levels, revenues would not cover all costs this fiscal year. Table 5: Projected Net Revenue, FY 2014 Wastewater Collection - Operating Activity All figures in thousands ($000’s) Adopted Budget FY 2014 Unaudited Actuals Jul 13-Dec13 Projected Activity Jan 14-Jul 14 Projected FY 2014 Activity Variance to Budget Net Sales to date 15,010 7,265 7,143 14,408 (602) Other revenues to date 1,534 1,415 779 2,194 660 Treatment costs to date (8,589) (4,295) (2,957) (7,251) 1,338 Other expenses to date (6,120) (2,786) (3,262) (6,048) 72 Total 1,835 1,600 1,703 3,303 1,468 Figure 2: FY 2013 Costs by Activity Treatment, 47% CIP, 23% Operations, 16% Admin/ Overhead, 11% Other, 3% Figure 1: FY 2013 Costs by Category Treatment, 47% CIP, 23% Supplies/ Materials / Other, 5% Salaries/ Benefits, 14% Admin/ Overhead, 11% WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 7 | P a g e SECTION V. STATUS OF RESERVES Table 6, below, shows the projected status of the Wastewater Collection Utility’s reserves at the end of FY 2014. Total reserves at year end (6/30/2014) are projected to be $19.6 million, of which $7.4 million will be in the Rate Stabilization Reserve. As detailed in Appendix C: Wastewater Collection Utility Reserves Management Practices and in Table 6, this plan includes changes to the structure of the utility’s reserves, including: 1. Adding an Operations Reserve, CIP Reserve, and Unassigned Reserve 2. Merging the Emergency Plant Replacement Reserve into the Operations Reserve Table 6: Projected Reserves, 6/30/2014 Projected Reserve Levels (Current Reserves Structure) ($000) Proposed Reallocation of Reserves ($000) Projected Reserve Levels (Proposed Reserves Structure) ($000) Reserve for Reappropriations 8,443 N/A 8,443 Reserve for Commitments 2,727 N/A 2,727 Emergency Plant Replacement 1,000 -1,000 (closed) CIP Reserve (new) 0 0 Rate Stabilization Reserve 7,407 -2,728 4,679 Operations Reserve (new) 3,728 3,728 Unassigned Reserve (new) 0 0 Total 19,577 19,577 Operations Reserve: Days of Expense 105 days Operations Reserve: Minimum 60 days Operations Reserve: Target 105 days Operations Reserve: Maximum 150 days The addition of an Operations Reserve, CIP Reserve, and Unassigned Reserve will add transparency and simplify reserves management by providing separate reserves for various functions that are currently all served by the Rate Stabilization Reserve. The Operations Reserve will be used to manage contingencies and absorb normal year to year cost and revenue variances. The CIP Reserve will hold funds for expenditure on future budgeted CIP projects. The Rate Stabilization Reserve will be used to smooth the transition to higher rates. If an unexpected windfall results in the utility accumulating reserves that are not designated for a specific purpose, these will be placed in the Unassigned Reserve until those funds are either designated for a specific purpose or returned to ratepayers. Creating separate CIP, Rate Stabilization, and Unassigned Reserves allows the utility to set minimum and maximum guidelines for the Operations Reserve and set forth clear actions to be taken when it is over or under those levels. If funds are required for a specific purpose (for example, a future CIP project) these can be held in a separate reserve (in this example, the CIP WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 8 | P a g e Reserve). Without a separate reserve, those funds would end up in the Operations Reserve and would cause it to exceed its maximum guideline, making it difficult to treat the maximum guideline as a clear limit on the size of the reserve. This proposal also adds transparency, since the public will be able to see the various purposes for which the utility is holding reserves. This plan also involves merging the existing Emergency Plant Replacement Reserve into the Operations Reserve. Currently the Emergency Plant Replacement Reserve holds $1 million, enough to pay the City’s insurance deductible in the event of a loss of utility equipment due to an insurable loss. Staff believes that even at minimum levels the Operations Reserve has adequate funding to cover the insurance deductible, making the Emergency Plant Replacement Reserve duplicative. To provide initial funding to the Operations Reserve, $2.7 million will be transferred from the Rate Stabilization Reserve to the Operations Reserve, retaining $4.7 million in the Rate Stabilization Reserve to be drawn down over future years as rates increase. Combined with the $1 million from the Emergency Plant Replacement Reserve, the Operations Reserve’s initial funding will be $3.7 million, the target level set forth in Appendix C: Wastewater Collection Utility Reserves Management Practices (105 days of commodity and O&M expense). SECTION VI. DEBT SERVICE The Wastewater Collection Utility’s annual debt service is roughly $128,000 per year. This is related to one bond issuance that will require payments through 2024. This issuance, the 1999 Utility Revenue Bonds, Series A, is a joint issuance between the Storm Drain, Wastewater Treatment, and Wastewater Collection Utilities refinancing several different earlier bond issuances. The City is in compliance with all covenants on that bond. Additional detail is provided in Appendix D. LOOKING BACK SECTION VII. BACKGROUND The Wastewater Utility commenced operation in 1899 to serve Palo Alto and Stanford. In its first three decades the system grew to 60 miles of sewers. Raw sewage was discharged into Mayfield Slough at the edge of the Bay. In the 1930s, at the behest of the State Department of Health, Palo Alto built the South Bay’s first wastewater treatment plant. At that time the sewer system served 20,500 Stanford and Palo Alto residents and a cannery. The plant was upgraded twice in the 1940s and 1950s to increase capacity.2 At the same time, the postwar population and industrial boom in the 1950s required rapid expansion of the sewer system. In the first half of the 1960s Palo Alto’s area doubled, as did wastewater flows, overwhelming the capacity of several of the utility’s “trunk lines,” which are the largest diameter main sewer lines carrying wastewater to the treatment plant. This prompted the City, in 1965, to perform the first of its 2 Long Range Facilities Plan for the Regional Water Quality Control Plant, August 2012, Carollo Engineers, pp 2-1 through 2-2 WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 9 | P a g e sewer master plans to identify needed capacity improvements. At that point the Wastewater Utility’s system comprised more than 150 miles of sewer mains.3 In 1968 the City signed agreements with the Cities of Mountain View and Los Altos to build a new regional treatment plant, the RWQCP, which is still in operation today. Since 1940 the City had been providing treatment services to the East Palo Alto Sanitary District through an existing agreement, and was also serving Stanford University by transporting wastewater across the City’s sewer system to the treatment plant. Both of these organizations became partners in the RWQCP as well. At the same time the Town of Los Altos Hills became the sixth partner as it signed an agreement with the City to connect the Town’s sewer system to the City’s sewer system to carry wastewater to the new RWQCP. The current agreements for the RWQCP extend through 2035.4 In the 1980s the City directed increased attention to the condition of its sewer system, performing a series of studies of groundwater inflow and infiltration into the system. The study found high rates of infiltration, estimating that as much as 40% of the water going to the RWQCP from Palo Alto’s system was groundwater and stormwater rather than wastewater.5 In some parts of Palo Alto the ground had subsided due to groundwater pumping by the water utility, and though that practice had ceased many years earlier as the water utility switched to the Hetch Hetchy system, parts of the city had already subsided two to five feet. This subsidence had damaged several parts of the collection system, leading to reduced slopes for sewer mains that caused reductions in capacity. In response to these studies the City commenced an accelerated sewer system rehabilitation program.6 At that point the sewer system comprised over 190 miles of mains.7 The final study of the 1980s, a Master Plan study in 1988, recommended a variety of capacity expansions, and in the 1990s the City completed about half of them. However, a 2004 Master Plan update found that the accelerated sewer rehabilitation plan started in the early 1990’s had substantially reduced infiltration, easing the capacity problems that had led the to the recommended capacity increases in the 1988 study. Several of the outstanding projects were canceled and replaced with a different set of projects.8 At the same time the City updated its hydraulic model and developed greater capacity to do system planning in house. Today, with a system comprising 217 miles of sewer mains, the Wastewater Collection Utility continues to serve over 27,000 Palo Alto residences and businesses, and transports wastewater to the RWQCP for Stanford University and the Town of Los Altos Hills. 3 Wastewater Collection and Storm Drainage, 1965, Brown and Caldwell Consulting Engineers, pp 4, 6-7, 143 4 Long Range Facilities Plan for the Regional Water Quality Control Plant, August 2012, Carollo Engineers, pg 2-2 5 Wastewater Collection System Master Plan – Capacity Assessment, January 2004, MWH Americas, Inc., pg ES-2 6 CMR 183:90, Infrastructure Review and Update, March 1, 1990 7 Master Plan of the Wastewater Collection System, December 1988, Camp Dresser & McKee, Inc., pg 1-2 8 Wastewater Collection System Master Plan – Capacity Assessment, January 2004, MWH Americas, Inc., pg ES-3 WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 10 | P a g e SECTION VIII. HISTORICAL EXPENSES AND REVENUES Table 7 shows the Wastewater Collection Utility’s expenses and revenues for the past five years. Treatment charges made up 40% of total expenses in FY 2009, but have been increasing by 6% per year on average, rising to 47% of total expenses in FY 2013. Total costs for this utility have increased 3.5% per year on average over the last four years, almost entirely due to these increases in treatment costs. Excluding treatment costs, costs for this utility have stayed stable since 2009. Revenues increased in FY 2010 and FY 2013, primarily due to rate increases. One item of note is the negative interest earned in FY 2013, which represents a decrease in the market value of the City’s investment portfolio that accounting rules require the City to recognize at the end of each fiscal year. Given that the City holds its investments to maturity these “mark to market” gains and losses do not impact the utility’s long term financial position. Table 7: Historical Expenses, Wastewater Collection Utility LOOKING FORWARD SECTION IX. FIVE YEAR FINANCIAL FORECAST 1. OVERVIEW Staff has prepared a forecast of costs and revenues through FY 2019. As shown in Table 8 (and Appendix A), the Wastewater Collection Utility’s total costs are projected to increase by 4% per year on average for FY 2015 through FY 2019. The utility’s sales revenue will need to increase 2009 2010 2011 2012 2012 2013 5 RETAIL SALES REVENUE 13,744 14,490 14,287 14,371 14,094 15,019 6 CONNECTION AND CAPACITY FEES 601 469 1,081 740 989 1,609 7 OTHER / TRANSFERS IN 254 278 307 278 264 545 8 INTEREST 805 674 454 480 494 (211) 9 TOTAL SOURCES OF FUNDS 15,403 15,910 16,129 15,868 15,841 16,963 10 11 PURCHASES/CHARGES OF UTILITIES (TREATMENT)6,131 6,519 7,414 7,954 8,895 8,314 12 ALLOCATED CHARGES (CIP&OPERATING)639 1,535 1,787 1,522 791 1,926 13 CUSTOMER SERVICE 301 239 281 266 72 1 14 DISTRIBUTION OPERATIONS 2,157 1,997 2,227 2,425 2,466 2,617 15 ENGINEERING (OPERATING)283 220 195 393 258 271 16 DEBT SERVICE 128 128 128 128 128 128 17 RENT 109 115 115 106 106 110 18 OTHER/ TRANSFERS OUT 732 168 267 88 88 147 19 CAPITAL IMPROVEMENT FUNDING 4,871 4,935 4,630 4,274 4,274 4,094 21 TOTAL USES OF FUNDS 15,352 15,856 17,044 17,157 17,079 17,610 22 23 INTO / (OUT OF) RESERVES 52 54 (914) (1,288) (1,238) (647) Fiscal Year WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 11 | P a g e by 5% annually, on average, through FY 2019. Although costs are rising at only 4% per year, revenues are currently below costs in a normal year.9 Over the last several years actual costs for operations, maintenance, and CIP have been relatively low. The cost of maintaining and replacing the distribution system in FY 2013 was almost the same as it was in FY 2009, and this has offset the rising cost of treatment. This was likely due to the economic downturn, which led to lower costs for services and materials. Staff is starting to see indications that this trend is reversing. Prices are rising for contract services and materials, and this means that the utility is more likely to see rising costs in the future. If costs for operations, maintenance, and CIP increase more quickly than projected in this plan, either due to the improving economy or other factors, larger rate increases may be required. Table 8: Five Year Financial Forecast Summary 2. TREATMENT COSTS Treatment expenses represent the Wastewater Collection Utility’s share of the costs of operating the RWQCP. Per the partnership agreements between Palo Alto and its partner agencies, these charges are assessed based on a formula that takes into account the total amount of wastewater delivered, the amount of organic material in it, its ammonia content, and the total suspended solids it is carrying. The Wastewater Collection Utility’s assessed share of the RWQCP’s revenue requirement fluctuates in the 38% to 40% range. Mountain View is 9 Note that FY 2014 is atypical because staff did not commence a new sewer system replacement project as it normally does each year and treatment costs are projected to be low due to a one-time savings related to a change in treatment billing methodology. Actual Adopted Projected 2013 2014 2014 2015 2016 2017 2018 2019 1 2 % CHANGE IN RETAIL RATE 5.0%0.0%0.0%0.0%7.0%7.0%7.0%7.0% 3 PROJECTED CHANGE IN RETAIL SALES REVENUE 715 - - - 1,051 1,125 1,204 1,288 4 5 RETAIL SALES REVENUE 15,019 15,010 14,402 15,010 16,018 17,140 18,340 19,624 6 CONNECTION AND CAPACITY FEES 1,609 861 1,527 1,287 1,328 1,369 1,409 1,439 7 OTHER / TRANSFERS IN 545 302 302 271 271 271 271 271 8 INTEREST (211) 371 371 238 245 253 277 271 9 TOTAL SOURCES OF FUNDS 16,963 16,544 16,601 16,806 17,862 19,032 20,297 21,605 10 11 PURCHASES/CHARGES OF UTILITIES (TREATMENT)8,314 8,589 7,251 8,501 8,926 9,372 9,840 10,332 12 ALLOCATED CHARGES (CIP&OPERATING)1,926 1,699 2,333 2,410 2,481 2,566 2,655 2,747 CUSTOMER SERVICE 1 227 229 238 245 255 265 276 13 DISTRIBUTION OPERATIONS 2,617 2,545 2,557 2,628 2,704 2,808 2,915 3,028 ENGINEERING (OPERATING)271 301 232 240 247 256 266 277 14 DEBT SERVICE 128 129 129 129 128 128 128 128 15 RENT 110 122 122 125 129 133 137 141 16 OTHER/ TRANSFERS OUT 147 108 108 108 108 108 108 108 17 CAPITAL IMPROVEMENT FUNDING 4,094 989 989 4,067 4,185 4,306 4,421 4,540 ALLOWANCE FOR UNSPENT CAPITAL FUNDS - (650) (86) (104) (122) (140) (158) 18 TOTAL USES OF FUNDS 17,610 14,708 13,299 18,359 19,048 19,810 20,597 21,420 19 20 INTO / (OUT OF) RESERVES (647) 1,835 3,303 (1,552) (1,186) (778) (300) 186 Fiscal Year WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 12 | P a g e the other large agency served by the RWQCP (38% of the revenue requirement for FY 2013) with other agencies (Stanford, Los Altos, East Palo Alto, and Los Altos Hills) making up the remainder of the flow to the treatment plant. In the next five years treatment costs are expected to rise 4% to 5% per year, primarily due to increased CIP spending by the RWQCP. In the longer term, treatment costs are expected to continue to rise at that rate as major upgrade and replacement projects are undertaken at the plant. These costs are described in more detail in Section XII. Long-term Outlook. 3. OPERATIONS Operations costs include the Customer Service, Distribution Operations, Engineering, and Allocated Charges categories in Table 8, above. Debt service, rent, and transfers are also included in this category. Customer Service costs are primarily related to the call center and collections on delinquent accounts. The Distribution Operations category includes preventative and corrective maintenance on mains and laterals, investigation of sewer overflows, regular cleaning of heavily impacted sections of the sewer system, and services shared with other utilities (such as street restoration and equipment maintenance). Allocated Charges include the costs of accounting, purchasing, legal, and other administrative functions provided by the City’s General Fund staff, as well as shared communications services and Utilities Department administrative overhead and billing system maintenance costs. Operations costs are projected to increase by 3% per year, on average, over the forecast period. Underlying these projections are salary and benefit, consumer price index, and other cost projections obtained from the City’s long-range financial forecast. 4. CAPITAL IMPROVEMENT PROGRAM (CIP) The Wastewater Collection Utility’s CIP consists of the following programs:  The Sewer System Replacement/Rehabilitation Program, under which the Wastewater Collection Utility replaces aging sewer mains  Customer Connections, which covers the cost when the Wastewater Collection Utility installs new services or upgrades existing services at a customer’s request in response to development or redevelopment. CPAU charges a fee to these customers to cover the cost of these projects.  Ongoing Projects, which covers the cost of replacing degraded manholes and sewer laterals, as well as the cost of capitalized tools and equipment. The Sewer System Replacement and Rehabilitation Program funds the replacement of deteriorating sewer mains and projects to increase capacity in various parts of the sewer system. The sewer system consists of over 217 miles of mains, and CPAU uses a variety of tools to establish which sections are in need of replacement. Maintenance statistics (such as records of the location and number of sewer overflows on the system) and videotape of sewer mains during regular cleaning can reveal areas with large amounts of deteriorating pipe. CPAU uses a scoring system to prioritize which mains to replace first, and coordinates with the Public Works WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 13 | P a g e street maintenance program to avoid cutting into newly repaved streets. A major goal of the program is to minimize groundwater and rainwater infiltration. As mains deteriorate they begin to allow groundwater and rainwater to infiltrate the system. Some level of infiltration is expected on any sewer system, but if there is too much, the combined flow of wastewater and groundwater/rainwater can overwhelm the capacity of various parts of the sewer system. Reducing infiltration can reduce the need to expand the system to accommodate increased flow. To achieve this goal, deteriorating mains are either repaired with a plastic lining or replaced. CPAU replaces or repairs approximately 25,000 feet of main per year, or 2.5% of the system. The program also funds sewer capacity improvements. CPAU uses a hydraulic model, data from various flow meters on the system, and land use data to identify sections of the system that are being overloaded. When sewer mains are operating at or above their capacity on a regular basis it will increase the likelihood of sewer overflows. The Division also does occasional comprehensive master plan studies to identify necessary capacity improvements, most recently in 2004. That study identified eight projects, three of which have been completed. The remaining four projects are low priority projects and will be scheduled and planned as the need arises. Ongoing Projects and Customer Connections are projected to cost approximately $750,000 in FY 2015 and increase by 2.4% each year through the end of the forecast period. Actual expenses for these projects fluctuate annually depending on how many defective laterals or manholes are discovered during routine maintenance, as well as how much development and redevelopment is going on that prompts the replacement or upgrade of sewer laterals. It is worth noting that property owners pay a fee for sewer lateral replacement or expansion during redevelopment, so when costs go up, so does fee revenue. Aside from customer connections, the CIP plan for FY 2015 to FY 2019 is funded by sewer rates and capacity fees. The details of the plan are shown in Appendix B: Wastewater Collection Utility Capital Improvement Program (CIP) Detail. Table 9: Projected CIP Spending Project Category Current Budget* Spending, Curr. Yr Remain. Budget**Committed FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Sewer Rehab/Augmentation 9,988 (1,708) 8,280 2,900 3,320 3,420 3,523 3,620 3,722 Ongoing Projects 1,333 (38) 1,295 719 375 382 389 396 403 Customer Connections 188 (98) 89 - 372 383 394 405 416 TOTAL 11,508 (1,844) 9,665 3,619 4,067 4,185 4,306 4,421 4,541 *Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year **Equal to CIP Reserves (Reserve for Reappropriations + Reserve for Commitments). See Table 27. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 14 | P a g e SECTION X. REVENUE REQUIREMENT AND REVENUE SOURCES The revenue requirement is the total amount of revenue that must be collected from customers in order to meet the planned expenditures for the Wastewater Collection Utility. Costs for the Wastewater Collection Utility are projected to increase by 4% per year through FY 2019. Without rate increases, by FY 2019 costs would exceed revenues by nearly $5 million per year. Matching costs to revenues by FY 2019 will require 7% increases in sales revenues each year for FY 2016 to FY 2019, as shown in Figure 4, below. The plan assumes no rate increase in FY 2015, which will draw down accumulated reserves, which resulted from the fact that staff did not add a new sewer main replacement project in FY 2014 and a one-time decrease in treatment costs related to a change in billing methodology by Palo Alto’s Regional Water Quality Control Plant (RWQCP). Each of the projected FY 2016 to FY 2019 rate increases will increase residential sewer bills by $2.05 to $2.51 per month. Figure 3: Wastewater Collection Fund Revenue and Cost Projections Figure 4 also shows the reserve reallocations that implement the proposed Reserves Management Practices. The utility has seen substantial increases in connection and capacity fees in recent years, offsetting the need for increased sales revenue, and these are reflected in the current financial forecast. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 15 | P a g e Figure 4: Wastewater Collection Reserves Projections SECTION XI. RISK ASSESSMENT Staff performs an annual assessment of risks for the Wastewater Collection Utility. For this evaluation, staff estimates the revenue shortfall due to: 1. the maximum observed budget-to-actual variance in one year during the past five years; 2. an increase of 10% of planned system improvement CIP expenditures for the budget year; and 3. an increase of 10% in the planned expenditure for treatment costs. Table 10 summarizes the risk assessment calculation for the Wastewater Collection Utility. The Operations Reserve is projected to be adequate to manage these levels of risk over the entire forecast period. Table 10: Wastewater Collection Risk Assessment FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total Revenue ($000) 15,020 16,028 17,150 18,350 19,634 Max. Historical Budget-to-Actual variance 10% 10% 10% 10% 10% Budget-to-Actual Risk ($000) 1,502 1,603 1,715 1,835 1,963 System Rehabilitation CIP Budget ($000) 3,695 3,802 3,912 4,016 4,124 CIP Contingency @10% ($000) 370 380 391 402 412 Treatment Budget ($000) 8,501 8,926 9,372 9,840 10,332 Treatment Cost Contingency @10% ($000) 850 893 937 984 1,033 Total risk assessment value ($000) 2,722 2,876 3,043 3,221 3,408 Projected Operations Reserve Level ($000) 4,136 4,305 4,495 4,590 4,776 Projected FY 2014 year-end reserves under existing reserves structure Proposed reallocation (see Section V. Status of Reserves) WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 16 | P a g e SECTION XII. LONG-TERM OUTLOOK In the longer term (5 to 35 years) the primary factor that could lead to increased costs for the Wastewater Collection Utility are major upgrades at the RWQCP, a share of which will be allocated to the utility as part of treatment costs. These upgrades includes replacement or rehabilitation of the parts of the facility that pump raw sewage to the main treatment works (the headworks), separate out primary sludge (the primary settling tank), process sludge (the biosolids facility), and treat wastewater (the fixed film reactors). Upgrades to the laboratories and operational buildings are planned as well. In addition, the 72-inch regional trunk sewer line flowing into the plant needs to be evaluated and rehabilitated. Based on detailed project cost projections provided by RWQCP staff, treatment costs are likely to continue to increase by roughly 5% per year through at least 2030. Two of Palo Alto’s comparison cities, Mountain View and Los Altos, are partners in the RWQCP and will see similar increases, but other comparison agencies may not. SECTION XIII. COMMUNICATIONS PLAN The FY 2015 Wastewater Collection Utility communications strategy covers three primary areas: rates, operations and infrastructure, and safety. There is no need for formal “rate change” communications at this time, but website and community education about rates is ongoing. Sewer maintenance and safety promotional activity includes bill inserts, website pages, email blasts, and the use of social media. To keep customers apprised of the status and accomplishments of CIP projects, a network of project web pages are maintained; traffic is driven to the website via ads in publications, newspaper inserts, social media and email blasts. Safety topics are emphasized year-round and, while print materials and website pages still feature prominently, CPAU is turning the outreach emphasis to direct mail, newspaper inserts, and social media including video, cable TV, community safety/emergency preparation meetings and updates to neighborhood groups. One major issue for the wastewater utility is handling sewer back-ups due to FOG (fats, oil and grease) and trash being dumped down drains and toilets. Inspired by a story about a monstrous “fatberg” in London sewers, staff incorporated that concept into outreach ranging from advertisements to 3D models for workshops and schools visits. To address another continuing outreach goal of educating customers about the utility’s gas-sewer line crossbore inspection program, including the importance of calling Utilities first when there is a sewer back-up, staff ran a successful campaign featuring one of our primary sewer repair crewmen. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 17 | P a g e APPENDICES Appendix A: Wastewater Collection Financial Forecast Detail Appendix B: Wastewater Collection Utility Capital Improvement Program (CIP) Detail Appendix C: Wastewater Collection Utility Reserves Management Practices Appendix D: Wastewater Collection Debt Service Details Appendix E: Sample of Wastewater Collection Outreach Materials WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 18 | P a g e APPENDIX A: WASTEWATER COLLECTION FINANCIAL FORECAST DETAIL Actual Adopted Projected 2013 2014 2014 2015 2016 2017 2018 2019 1 2 % CHANGE IN RETAIL RATE 5.0%0.0%0.0%0.0%7.0%7.0%7.0%7.0% 3 PROJECTED CHANGE IN RETAIL SALES REVENUE 715 - - - 1,051 1,125 1,204 1,288 4 5 RETAIL SALES REVENUE 15,019 15,010 14,402 15,010 16,018 17,140 18,340 19,624 6 CONNECTION AND CAPACITY FEES 1,609 861 1,527 1,287 1,328 1,369 1,409 1,439 7 OTHER / TRANSFERS IN 545 302 302 271 271 271 271 271 8 INTEREST (211) 371 371 238 245 253 277 271 9 TOTAL SOURCES OF FUNDS 16,963 16,544 16,601 16,806 17,862 19,032 20,297 21,605 10 11 PURCHASES/CHARGES OF UTILITIES (TREATMENT)8,314 8,589 7,251 8,501 8,926 9,372 9,840 10,332 12 ALLOCATED CHARGES (CIP&OPERATING)1,926 1,699 2,333 2,410 2,481 2,566 2,655 2,747 CUSTOMER SERVICE 1 227 229 238 245 255 265 276 13 DISTRIBUTION OPERATIONS 2,617 2,545 2,557 2,628 2,704 2,808 2,915 3,028 ENGINEERING (OPERATING)271 301 232 240 247 256 266 277 14 DEBT SERVICE 128 129 129 129 128 128 128 128 15 RENT 110 122 122 125 129 133 137 141 16 OTHER/ TRANSFERS OUT 147 108 108 108 108 108 108 108 17 CAPITAL IMPROVEMENT FUNDING 4,094 989 989 4,067 4,185 4,306 4,421 4,540 ALLOWANCE FOR UNSPENT CAPITAL FUNDS - (650) (86) (104) (122) (140) (158) 18 TOTAL USES OF FUNDS 17,610 14,708 13,299 18,359 19,048 19,810 20,597 21,420 19 20 INTO / (OUT OF) RESERVES (647) 1,835 3,303 (1,552) (1,186) (778) (300) 186 21 24 ENDING COMMITMENTS & REAPPROPRIATIONS 11,228 11,228 11,228 11,228 11,228 11,228 11,228 11,228 23 ENDING PLANT REPLACEMENT RESERVE 1,000 1,000 - - - - - - ENDING CIP RESERVE - - - - - - - - 22 ENDING RATE STABILIZATION RESERVE 4,104 5,940 4,679 2,719 1,363 395 - - ENDING OPERATIONS RESERVE - - 3,728 4,136 4,305 4,495 4,590 4,776 25 UNASSIGNED RESERVES - - - - - - - - 26 RISK ASSESSMENT VALUE 2,736 2,424 2,230 2,722 2,876 3,043 3,221 3,409 27 28 OPERATIONS RESERVE GUIDELINES 29 MIN (60 DAYS TREATMENT/O&M EXP)2,253 2,255 2,130 2,363 2,460 2,569 2,682 2,801 TARGET (105 DAYS TREATMENT/O&M EXP)2,736 3,947 3,728 4,136 4,305 4,495 4,694 4,901 30 MAX (150 DAYS TREATMENT/O&M EXP)4,506 5,638 5,326 5,909 6,151 6,422 6,705 7,002 31 Fiscal Year WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 19 | P a g e APPENDIX B: WASTEWATER COLLECTION UTILITY CAPITAL IMPROVEMENT PROGRAM (CIP) DETAIL Project #Project Name Reappropriated / Carried Forward from Previous Years Current Year Funding Budget Amendments Spending, Current Year Remaining in CIP Reserve Fund Commitments FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 SEWER SYSTEM REHABILITATION AND AUGMENTATION (SSR/A) PROGRAM WC-07004 SSR/A - Project 20 96,044 - - (39,003) 57,041 18,227 - - - - - WC-08012 SSR/A - Project 21 188,809 - - - 188,809 - - - - - - WC-09001 SSR/A - Project 22 933,552 - - (845,532) 88,020 428,577 - - - - - WC-10002 SSR/A - Project 23 2,371,195 - - (426,685) 1,944,510 2,148,790 - - - - - WC-11000 SSR/A - Project 24 2,944,416 - - (198,486) 2,745,930 78,705 - - - - - WC-12001 SSR/A - Project 25 3,143,801 - - (197,850) 2,945,951 217,301 - - - - - WC-13001 SSR/A - Project 26 - 310,000 - - 310,000 8,806 3,000,000 - - - - WC-14001 SSR/A - Project 27 - - - - - - 320,000 3,090,000 - - - WC-15001 SSR/A - Project 28 - - - - - - - 330,000 3,183,000 - - WC-16001 SSR/A - Project 29 - - - - - - - - 340,000 3,270,000 - WC-17001 SSR/A - Project 30 - - - - - - - - - 350,000 3,361,500 WC-19001 SSR/A - Project 31 - - - - - - - - - - 360,000 Subtotal, Sewer Rehab./Augmentation 9,677,817 310,000 - (1,707,556) 8,280,261 2,900,406 3,320,000 3,420,000 3,523,000 3,620,000 3,721,500 ONGOING PROJECTS WC-13002 Fusion & Gen. Equip./Tools 28,132 - - - 28,132 45,625 50,000 50,000 50,000 50,000 50,000 WC-15002 WW System Improvements 244,249 218,000 - (12,984) 449,265 - 225,000 232,000 239,000 246,000 253,000 WC-99013 Sewer / Manhole Rehab.1,142,571 100,000 (400,000) (24,550) 818,021 673,161 100,000 100,000 100,000 100,000 100,000 Subtotal, Ongoing Projects 1,414,952 318,000 (400,000) (37,534) 1,295,418 718,786 375,000 382,000 389,000 396,000 403,000 CUSTOMER CONNECTIONS (FEE FUNDED) WC-80020 Sewer System Extensions 76,638 361,000 (250,000) (98,488) 89,150 - 372,000 383,000 394,000 405,000 416,000 Subtotal, Customer Connections 76,638 361,000 (250,000) (98,488) 89,150 - 372,000 383,000 394,000 405,000 416,000 GRAND TOTAL 11,169,407 989,000 (650,000) (1,843,577) 9,664,829 3,619,192 4,067,000 4,185,000 4,306,000 4,421,000 4,540,500 Funding Sources Connection Fees 750,000 (250,000) 871,000 894,000 917,000 940,000 957,800 Funded by Rates and Other Revenue 628,000 (400,000) 3,695,000 3,802,000 3,912,000 4,016,000 4,124,500 CIP-RELATED RESERVES DETAIL 6/30/2013 (Actual)12/31/2013 Reappropriations 8,442,650 6,045,637 Commitments 2,726,756 3,619,192 WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 20 | P a g e APPENDIX C: WASTEWATER COLLECTION UTILITY RESERVES MANAGEMENT PRACTICES The following reserves management practices shall be used when developing the Wastewater Collection Utility Financial Plan: Section 1. Definitions a) “Financial Planning Period” – The Financial Planning Period is the range of future fiscal years covered by the Financial Plan. For example, if the Financial Plan delivered in conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019, FY 2015 to FY 2019 would be the Financial Planning Period. b) “Fund Balance” – As used in these Reserves Management Practices, Fund Balance refers to the Utility’s Unrestricted Net Assets. c) “Net Assets” - The Government Accounting Standards Board defines a Utility’s Net Assets as the difference between its assets and liabilities. d) “Unrestricted Net Assets” - The portion of the Utility’s Net Assets not invested in capital assets (net of related debt) or restricted for debt service or other restricted purposes. Section 2. Reserves The Wastewater Collection Utility’s Fund Balance is reserved for the following purposes: a) For existing contracts, as described in Section 3 (Reserve for Commitments) b) For operating and capital budgets reappropriated from previous years, as described in Section 4 (Reserve for Reappropriations) c) For future year expenditure on the Wastewater Collection Utility’s Capital Improvement Program (CIP), as described in Section 5 (CIP Reserve) d) For rate stabilization, as described in Section 6 (Rate Stabilization Reserve) e) For operating contingencies, as described in Section 7 (Operations Reserve) f) Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 8 (Unassigned Reserves). Section 3. Reserve for Commitments At the end of each fiscal year the Reserve for Commitments will be set to an amount equal to the total remaining spending authority for all contracts in force for the Wastewater Collection Utility at that time. Section 4. Reserve for Reappropriations At the end of each fiscal year the Reserve for Reappropriations will be set to an amount equal to the amount of all remaining capital and non-capital budgets that will be reappropriated to the following fiscal year in accordance with Palo Alto Municipal Code Section 2.28.090. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 21 | P a g e Section 5. CIP Reserve Funds may be added to or withdrawn from the CIP Reserve by action of the City Council and held for future year expenditure on the Wastewater Collection Utility’s CIP Program. Withdrawal of funds from the CIP Reserve requires Council action. If there are funds in the CIP Reserve at the end of any fiscal year, any subsequent Wastewater Collection Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. Section 6. Rate Stabilization Reserve Funds may be added to the Rate Stabilization Reserve by action of the City Council and held to manage the trajectory of future year rate increases. Withdrawal of funds from the Rate Stabilization Reserve requires Council action. If there are funds in the Rate Stabilization Reserve at the end of any fiscal year, any subsequent Wastewater Collection Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. Section 7. Operations Reserve The Operations Reserve is used to manage normal variations in costs and as a reserve for contingencies. Any portion of the Wastewater Collection Utility’s Fund Balance not included in the reserves described in Section 3 to Section 6 above will be included in the Operations Reserve unless this reserve has reached its maximum level as set forth in Section 7(d) below. Staff will manage the Operations Reserve according to the following practices: a) The following guideline levels are set forth for the Operations Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of Operations and Maintenance (O&M) and commodity expense forecasted for that year in the Financial Plan. Minimum Level 60 days of O&M and commodity expense Target Level 105 days of O&M and commodity expense Maximum Level 150 days of O&M and commodity expense b) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Operations Reserve are lower than the minimum level set forth above, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered within six months of the end of the fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the following fiscal year. For example, if the Operations Reserve is below its minimum level at the end of FY 2014, staff must present a plan by December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In addition, staff may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve. c) Target Level: If, at the end of any fiscal year, the Operations Reserve is higher or lower than the target level, any Financial Plan created for the Wastewater Collection Utility shall be designed to return the Operations Reserve to its target level within four years. d) Maximum Level: If, at any time, the Operations Reserve reaches its maximum level, no funds may be added to this Reserve. Any further increase in the Wastewater Collection WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 22 | P a g e Utility’s Fund Balance shall be automatically included in the Unassigned Reserve described in Section 8, below. Section 8. Unassigned Reserve If the Operations Reserve reaches its maximum level, any further additions to the Wastewater Collection Utility’s Fund Balance will be held in the Unassigned Reserve. If there are any funds in the Unassigned Reserve at the end of any fiscal year, the next Financial Plan presented to the City Council must include a plan to assign them to a specific purpose or return them to the Wastewater Collection Utility ratepayers by the end of the first fiscal year of the next Financial Planning Period. For example, if there were funds in the Unassigned Reserves at the end of FY 2015, and the next Financial Planning Period is FY 2016 through FY 2020, the Financial Plan shall include a plan to return or assign any funds in the Unassigned Reserve by the end of FY 2016. Staff may present an alternative plan that retains these funds or returns them over a longer period of time. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 23 | P a g e APPENDIX D: WASTEWATER COLLECTION DEBT SERVICE DETAILS The Wastewater Collection Utility currently makes payment on its share of one bond issuance, the 1999 Utility Revenue Bonds, Series A, which is due to be retired in 2024. This $17.7 million issuance refinanced various earlier Storm Drain, Wastewater Treatment, and Wastewater Collection Utility bond issuances. The Wastewater Collection Utility’s share of the issuance was roughly $1.9 million, which represented the second refinancing of the remaining principal of a 1990 bond issuance that itself was a refinancing of a 1985 issuance that financed a variety of improvements to the sewer system. The cost of debt service for the Wastewater Collection Utility’s share of this bond issuance for the financial forecast period is as follows: Table 11: Wastewater Collection Utility Debt Service ($000) FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 1999 Utility Revenue Bonds, Series A 129 128 129 128 128 128 The 1999 Utility Revenue Bonds include two covenants stating that 1) the Wastewater Collection Utility will maintain a debt coverage ratio of 125% of debt service, and 2) that the City will maintain “Available Reserves”10 equal to five times the annual debt service. The current financial plan maintains compliance with both covenants throughout the forecast period. Compliance with covenant one is shown below in Table 12, below. Due to the small size of the annual debt service payment for these bonds, the Wastewater Collection Utility’s Operations Reserve alone more than satisfies the second covenant at more than 30 times annual debt service throughout the forecast period. Table 12: Debt Service Coverage Ratio ($000) FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Revenues 16,601 16,806 17,862 19,032 20,297 21,605 Expenses (Excl. CIP and Debt Service) (14,169) (14,248) (14,839) (15,498) (16,187) (16,909) Net Revenues 2,432 2,558 3,023 3,534 4,110 4,696 Debt Service 129 128 129 128 128 128 Coverage Ratio 1885% 1998% 2343% 2761% 3211% 3669% The Wastewater Collection Utility’s reserves (but not its net revenues) are also considered security for the Storm Drain and Wastewater Treatment Utilities’ shares of the debt service on the 1999 bonds. Throughout the term of the bonds there remains a small risk that the Wastewater Collection Utility’s reserves could be called upon to make a debt service payment on behalf of one of those utilities if it cannot meet its debt service obligations. Staff does not 10 Available Reserves as defined in the 1999 Utility Revenue Bonds included reserves for the Water, Wastewater Treatment, Wastewater Collection, Refuse, Storm Drain, Electric, and Gas Utilities WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 24 | P a g e foresee this occurring based on the current financial condition of those utilities. If the Wastewater Collection Utility’s reserves were used this way, any amounts advanced would have to be repaid by the borrowing utility. One other bond series is secured by the net revenues (but not the reserves) of the Wastewater Collection Utility. The 1995 Series A Utility Revenue Bonds issued for the Storm Drain utility was secured by the net revenues of the City’s “Enterprise,” which was defined as the City’s water, gas, wastewater, storm drain, and electric utilities, and are senior to the 1999 bonds referenced above. Debt service payments of roughly $680,000 per year are made on the 1995 Series A bonds by the City’s Storm Drain Utility, and staff does not currently foresee any risk of that utility being unable to make payment. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN APPENDIX E: SAMPLE OF WASTEWATER COLLECTION OUTREACH MATERIALS WATER UTILITY FINANCIAL PLAN FY 2015 TO FY 2021 TABLE OF CONTENTS Definitions and Abbreviations ............................................................................................... 2 Executive Summary ............................................................................................................... 2 Current State of the Utility .................................................................................................... 3 Section I. Utility Overview ........................................................................................................... 3 Section II. Current Rates and Competitiveness ........................................................................... 4 Section III. Rate Design ............................................................................................................... 6 Section IV. Current Utility Financial Status ................................................................................. 7 Section V. Status of Reserves ...................................................................................................... 8 Section VI. Debt Service .............................................................................................................. 9 Looking Back ....................................................................................................................... 10 Section VII. Background ............................................................................................................ 10 Section VIII. Historical Expenses and Revenues ........................................................................ 11 Looking Forward .................................................................................................................. 12 Section IX. Seven Year Financial Forecast ................................................................................. 12 1. Overview ...................................................................................................................... 12 2. Water Purchase Costs .................................................................................................. 13 3. Operations .................................................................................................................... 13 4. Capital Improvement Program (CIP) ............................................................................ 14 Section X. Revenue Requirement and Revenue Sources ........................................................... 15 Section XI. Risk Assessment ...................................................................................................... 17 Section XII. Communications Plan ............................................................................................ 18 Appendices ......................................................................................................................... 19 Appendix A: Water Utility Financial Forecast Detail ................................................................. 20 Appendix B: Water Utility Capital Improvement Program (CIP) Detail ..................................... 21 Appendix C: Water Utility Reserves Management Practices ..................................................... 23 Appendix D: Water Utility Debt Service Details ......................................................................... 26 Appendix E: Description of Water Utility Cost Categories ......................................................... 28 Appendix F: Sample of Water Utility Outreach Communications ............................................. 29 WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 2 | P a g e DEFINITIONS AND ABBREVIATIONS BAWSCA: Bay Area Water Supply and Conservation Agency CCF: one hundred cubic feet, the standard unit of measurement for water delivered to water customers. Equal to roughly 748 gallons. CIP: Capital Improvement Program CPAU: City of Palo Alto Utilities Department O&M: Operations and Maintenance SFPUC: San Francisco Public Utilities Commission SFWD: San Francisco Water Department WSIP: the SFPUC’s Water System Improvement Program to seismically strengthen the Hetch Hetchy regional water system. EXECUTIVE SUMMARY This document presents a Financial Plan for the City’s Water Utility for the next seven years. The seven-year time frame is meant to show the stabilization of water purchase costs in FY 2020, when the last debt associated with the San Francisco Public Utility Commission’s (SFPUC’s) Water System Improvement Program (WSIP) is projected to be issued. The City’s Financial Plan provides revenues to cover the costs of operating the utility safely over that time while adequately investing for the future. It also addresses the financial risks facing the utility over the short term and long term, and includes measures to mitigate and manage those risks. Over the next seven fiscal years staff projects that the Water Utility will see water purchase costs rising 9.5% per year through FY 2020. Operations costs are projected to rise at roughly 3% per year. Capital Improvement Program (CIP) costs are assumed to increase by 9.5% per year on average in this Financial Plan, but there is significant uncertainty in these projections. Costs per mile of main are increasing, and a 25-year main replacement program initiated in 1993 is nearing completion. CPAU will initiate a master planning process in FY 2015 to re-evaluate the current state of the distribution system and determine the necessary rate of main replacement in future years. This could result in substantially higher CIP expenses than are currently forecasted. To match revenues to these rising costs, the Financial Plan includes the rate trajectory shown in Table 1. This trajectory includes a 0% rate increase in FY 2015. While there are uncertainties regarding future CIP costs (pending the completion of the distribution system master plan, slated for FY 2015), as well as the potential for the SFPUC establishing mandatory restrictions in water consumption at their April meeting, the utility currently has adequate reserves to defer a rate increase at this time. This will allow CPAU to wait until the distribution master planning study is complete to gain more certainty about future CIP costs. For FY 2016 to FY 2020, rates are projected to increase 5% to 7% each year. After that, rate increases are expected to reflect inflation. Each annual increase during FY 2016 to FY 2020 is WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 3 | P a g e equivalent to an increased cost of $4.00 to 5.00 per month for a median residential customer’s water bill. Table 1: Projected Water Rate Trajectory for FY 2015 to FY 2019 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 0% 7% 6% 6% 6% 5% 1% This Financial Plan includes the Water Utility Reserves Management Practices, which describes the various reserves held by the Water Utility, their purposes, and guidelines for managing them. The Reserves Management Practices make the following changes to the utility’s existing reserves structure: 1. The addition of an Operations Reserve, a CIP Reserve, and an Unassigned Reserve 2. The merger of the Emergency Plant Replacement Reserve into the new Operations Reserve Under this plan, the initial funding for the Operations Reserve will be $8.6 million, $7.6 million from the Rate Stabilization Reserve, and $1 million from the Emergency Plant Replacement Reserve. With this initial funding the Operations Reserve will be at its target level. In addition, a $6 million transfer from the Rate Stabilization Reserve to the CIP Reserve preserves funding for future CIP projects that may be identified during the master planning process. CURRENT STATE OF THE UTILITY SECTION I. UTILITY OVERVIEW The City of Palo Alto’s Water Utility provides water service to the residents and businesses of Palo Alto, plus a handful of residential customers not in Palo Alto (Los Altos Hills, primarily). Nearly 20,300 customers are connected to the water system, approximately 16,500 (81%) of which are separately metered residential customers and 3,800 (19%) of which are commercial, master-metered residential, irrigation and fire service customers. The use of water is fundamental in people’s daily lives. Most individuals require a modest amount of water for drinking, cooking, bathing and general cleaning, as winter time usage levels can attest to. A large measure of Palo Alto’s water usage is used for irrigation, and that amount is heavily weather dependent. Therefore, there is significant variability in the amount of water that is demanded from the system, month to month and year to year. To deliver water to its customers, the utility owns roughly 233 miles of mains (which transport the water from the SFPUC meters at the City’s borders to the customer’s service laterals and meters), eight wells (to be used in emergencies), five water storage reservoirs (also for emergency purposes) and several tanks used to moderate pressure and deal with peaks in flow and demand (due to fire suppression, heavy usage times, etc.). These represent the vast majority of the infrastructure used to distribute water in Palo Alto. The City of Palo Alto’s Utilities Department (CPAU) conducts a water main replacement program to replace mains over time as they deteriorate or to increase capacity. CIP expense accounts for around six percent of WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 4 | P a g e the utility’s expenditures, though CIP spending has varied substantially from year to year recently due to the seismic rehabilitation of Palo Alto’s emergency water supply system. In addition to its CIP, CPAU performs various maintenance activities on the water system. These include inspecting and repairing water mains, laterals and meters, monitoring water quality, monitoring the different pressure zones, and building and replacing water laterals and mains for new or redeveloped buildings. The utility also shares the costs of other operational activities (such as customer service, billing, equipment maintenance, and street restoration) with the City’s other utilities. These maintenance and operations expenses, as well as associated administration, debt service, rent, and other costs, make up just under half of the utility’s expenses. The Water Utility purchases all of the water it delivers from the SFPUC, which owns and operates the Hetch Hetchy reservoir in Yosemite, CA. CPAU is one of several agencies that purchase water from the SFPUC, all of whom are members of the Bay Area Water Supply and Conservation Agency (BAWSCA). Palo Altans use roughly 7% of the water delivered by the SFPUC to BAWSCA member agencies. Purchase costs make nearly half of the Water Utility’s expenses. SECTION II. CURRENT RATES AND COMPETITIVENESS The current rates were adopted July 1, 2013, when CPAU increased water rates by 7%. Table 2, below, summarizes the current rates for all customer classes. CPAU has five rate schedules: one for separately metered residents (W-1), one for commercial and master-metered multi-family residential customers (W-4), and specific schedules for irrigation-only services (W-7), services to fire sprinkler systems in buildings and private hydrants (W-3), and for service to fire hydrant rental meters used for construction (W-2). All customers pay a monthly customer charge, based on the size of their inlet meter. All customers are also charged for each CCF (one hundred cubic feet) of water used. Separately metered residential customers are charged on a tiered basis, with the first 0.2 CCF/day (6 CCF for a 30 day billing period) at a lower price, and all other units used at a higher rate. All other customers, including commercial customers, pay a uniform price for each CCF used. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 5 | P a g e Table 3 shows the current water bills for residential customers compared to what they would be under surrounding communities’ rate schedules. CPAU has the highest monthly bills of the group, although bills for smaller water users are less than in some surrounding communities. Table 4 shows the annual average monthly water bill for commercial customers for various water usage levels. Redwood City is notable in that their irrigation rates are set on a budget basis, and as such each parcel has a unique baseline value. For purposes of this comparison, the budget was assumed to be equal to the usage amount. Table 2: Water Rates (Effective 7/1/2013) W-1 (Separately Metered Res.) W-4 (Commercial/ Master- metered Residential) W-7 (Irrigation) W-3 (Fire) W-2 (Hydrant) Meter Size Monthly Service Charge ($/month based on meter size) 5/8” 14.67 14.67 14.67 50.00 3/4” 19.51 19.51 19.51 1” 29.18 29.18 29.18 1 ½” 53.37 53.37 53.37 2” 82.39 82.39 82.39 3.03 3” 174.29 174.29 174.29 125.00 4” 309.72 309.72 309.72 18.78 6” 633.80 633.80 633.80 54.55 8” 1,165.86 1,165.86 1,165.86 116.24 10” 1,843.02 1,843.02 1,843.02 209.03 12” 2,423.45 2,423.45 2,423.45 337.65 Volumetric Rate ($ / CCF) Uniform 6.15 7.52 10.00 6.15 Tier 1 4.99 Tier 2 7.58 Table 3: Residential Monthly Water Bill Comparison Residential monthly bill comparison ($/month) * As of February 1, 2014 Usage (CCF/month) Palo Alto Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward 4 34.63 35.20 36.78 26.14 26.80 13.56 23.60 (Winter median) 7 52.19 50.78 48.08 40.30 36.65 23.73 39.65 (Annual median) 9 67.35 61.17 56.18 49.74 43.24 30.51 50.35 (Summer median) 14 105.25 88.38 80.30 73.34 60.50 47.46 78.98 25 188.63 148.89 153.23 153.56 98.89 84.75 151.58 * All comparisons using 5/8” meter size WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 6 | P a g e SECTION III. RATE DESIGN The Water Utility’s rates are evaluated and implemented in compliance with the cost of service requirements and procedural rules set forth in the California Constitution under Article 13 (per Proposition 218). Current rates were structured based on the methodology from the March 2012 Palo Alto Water Cost of Service & Rate Study by Raftelis Financial Consultants, Inc 1. Staff plans to review and update this cost of service study in 2 to 3 years, unless any major changes occur to the utility’s operations or customer base that would necessitate an earlier study. Before conducting any new cost of service study, staff will review current rates and the scope of the study with the Utilities Advisory Commission (UAC) and Council to determine UAC and Council policy priorities. California is currently experiencing a severe drought. On January 31, 2014, the SFPUC requested a 10% voluntary reduction. In April, the SFPUC will announce to BAWSCA members whether they will face mandatory restrictions. Currently, Palo Alto is following a Stage 1 drought response as outlined in the City’s Urban Water Management Plan,2 which seeks to achieve 10% voluntary reductions through outreach and increased rebates for water conservation measures. If the SFPUC asked for mandatory reductions, the City would likely follow a Stage 2 response, seeking 10 to 20% mandatory reductions in usage. In addition to doing outreach and offering higher rebates, drought rate schedules would be imposed and the City would increase its enforcement of the water use ordinance. Staff is not anticipating the need for a Stage 3 response (20 to 35% reduction) or Stage 4 response (35 to 50%) at this time. CPAU is also investigating the feasibility of separating out its wholesale water purchase costs on the retail rate schedules. Doing so would allow the utility to use a simpler notification process 1 Staff Report ID#2676, Finance Committee, April 18, 2012 2 Staff report ID#1688, City Council, 6/13/2011 Table 4: Commercial Monthly Water Bill Comparison Commercial/Multi-Family and Irrigation bill comparison ($/month) As of February 1, 2014 Usage (CCF/month) Palo Alto Redwood City Menlo Park Hayward Mountain View Los Altos Santa Clara Commercial (W-4) (5/8” meters) (Annual median) 12 88.47 72.70 81.42 71.40 67.44 55.58 40.68 (Annual average) 64 408.27 409.75 371.96 354.80 312.88 250.20 216.96 Irrigation (W-7) (1 ½” meters) (Winter median) 9 121 167 100 76 86 73 31 (Summer median) 37 332 313 256 229 218 178 125 (Winter average) 56 474 412 362 332 308 249 190 (Summer average) 199 1,550 1,157 1,161 1,121 982 785 675 WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 7 | P a g e when changing rates solely to pass through increased wholesale water costs. It would also make the reason for such rate increases more transparent to customers. SECTION IV. CURRENT UTILITY FINANCIAL STATUS In FY 2013, water purchase costs represented nearly half of the Water Utility’s costs (47%), with O&M costs being the next largest expense (21%), then Other costs (debt service, rent and transfers) at 17%, followed by administration (9%) and CIP costs (6%), as shown in Figure 2. These figures are also shown by expenditure category in Figure 1. The utility’s revenue in FY 2013 was primarily from water charges (92%), with the remainder from capacity and connection fees (5%), and other sources (3%). Table 5 contains a summary of the Water Utility’s financial outlook for FY 2014 as of Q2. Water sales have been higher than budget estimates due to dry weather conditions. However, with voluntary restrictions called for the by SFPUC (and the potential for larger cutbacks should further precipitation fail to arrive), water sales are projected to decrease by the end of the year. SFPUC rates for FY 2014 are lower than budget projections, however. This was due to a temporary discount of the water rates to return excess funds collected by the SFPUC in the previous fiscal year. As a result, despite lower consumption, water purchase costs are estimated to be $1.7 million below budget. Purchase costs and sales revenues may end up higher than forecasted if customers do not make the requested voluntary reductions. The increases to “Other revenue” reflect higher connection fee income to date. Included in “Other expenses” are proposed CIP cost increases of $3.97 million dollars. These are related to a budget adjustment to a water main replacement project as well as funding for main replacements as part of the California Avenue Streetscape Project. Figure 2: FY 2013 Costs by Activity Water Purchases, 47% CIP, 6% Admin/ Overhead, 9% Operations , 21% Other, 17% Figure 1: FY 2013 Costs by Category Water Purchases, 47% CIP, 6% Admin/ Overhead, 9% Salaries/ Benefits, 17% Supplies, Equip, & Other, 20% WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 8 | P a g e Table 5: Projected Water Utility Net Revenue, FY 2014 Water - Operating Activity All figures in thousands ($ 000’s) Adopted Budget FY 2014 Unaudited Actuals Jul 13-Dec13 Projected Activity Jan 14-Jun 14 Projected FY 2014 Activity Variance to Budget Net Sales to date * 36,781 22,403 14,378 36,781 - Other revenues to date 2,598 2,452 432 2,883 285 Purchase costs to date (16,708) (8,696) (6,299) (14,995) 1,713 Other expenses to date ** (22,390) (19,829) (5,122) (24,951) (2,560) Total 281 (3,670) 3,389 (281) (562) * Includes misc. sales, adjustments, discounts, and bad debt ** Includes reserve transfers, salaries, allocated charges, other misc. expenses, and encumbrances SECTION V. STATUS OF RESERVES Table 6, below, shows that the projected balance of the Water Utility’s reserves at the end of FY 2014 is $33.4 million. As detailed in Appendix C: Water Utility Reserves Management Practices and in Table 6, this plan includes changes to the structure of the utility’s reserves, including: 1. Adding an Operations Reserve, a CIP Reserve, and an Unassigned Reserve; and 2. Merging the Emergency Plant Replacement Reserve into the Operations Reserve. The additions of an Operations Reserve, a CIP Reserve, and an Unassigned Reserve will add transparency and simplify reserves management by providing separate reserves for various functions that are currently all served by the Rate Stabilization Reserve. The Operations Reserve will be used to manage contingencies and absorb normal year-to-year cost and Table 6: Projected Water Utility Reserves, 6/30/2014 Projected Reserve Levels (Current Reserves Structure) ($000) Proposed Reallocation of Reserves ($000) Projected Reserve Levels (Proposed Reserves Structure) ($000) Reserve for Re-appropriations * 10,423 - 10,423 Reserve for Commitments * 4,976 - 4,976 Emergency Plant Replacement 1,000 -1,000 (closed) CIP Reserve (new) 6,000 6,000 Rate Stabilization Reserve 16,991 -13,556 3,435 Operations Reserve (new) 8,556 8,556 Unassigned Reserve (new) - 0 Total 33,390 0 33,390 * Balances at the end of FY 2013. Final FY 2014 to be determined. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 9 | P a g e revenue variances. The CIP Reserve will hold funds for expenditure on future CIP projects which are larger than usual, but not expected to be debt funded. The Rate Stabilization Reserve will be used to smooth the transition to higher rates. If the utility accumulates reserves that are not immediately designated for a specific purpose, these will be placed in the Unassigned Reserve until those funds are either designated for a specific purpose or returned to ratepayers. Creating separate CIP, Rate Stabilization, and Unassigned Reserves allows the utility to set minimum and maximum guideline levels for the Operations Reserve and set forth clear actions to be taken when it is over or under those levels. If funds are required for a specific purpose (for example, a future CIP project) these can be held in a separate reserve (in this example, the CIP Reserve). Without a separate reserve, those funds would end up in the Operations Reserve and would cause it to exceed its maximum guideline, making it difficult to treat the maximum guideline as a clear limit on the size of the reserve. This proposal also adds transparency, since the public will be able to see the various purposes for which the utility is holding reserves. This plan also involves merging the existing Emergency Plant Replacement Reserve into the Operations Reserve. Currently the Emergency Plant Replacement Reserve holds $1 million, enough to pay the City’s insurance deductible in the event of a loss of utility equipment due to an insurable loss. Staff believes that even at minimum levels the Operations Reserve has adequate funding to cover the insurance deductible, making the Emergency Plant Replacement Reserve duplicative. To manage uncertainty in future CIP funding levels, this plan allocates $6 million to the CIP Reserve from the Rate Stabilization Reserve. This funding amount will be revised following the completion of the water distribution system master plan. The Operations Reserve’s initial funding will be $8.6 million, the target level set forth in Appendix C: Water Utility Reserves Management Practices (90 days of commodity and operations and maintenance (O&M) expense), with $7.6 million transferred from the Rate Stabilization Reserve and $1 million from the Emergency Plant Replacement Reserve. The Rate Stabilization Reserve will retain $3.4 million to be drawn down over future years. SECTION VI. DEBT SERVICE The Water Utility’s annual debt service is roughly $3.2 million per year. This is related to two bond issuances, one requiring payments through 2026, the other through 2035. The first issuance, the 2011 Utility Revenue Refunding Bond, Series A, was a joint issuance between the Water and Gas Utilities refinancing the 2002 Utility Revenue Bonds, Series A, which was issued to finance various capital improvements for both systems. The second, larger issuance is the 2009 Water Revenue Bond, Series A (Direct Payment Build America bond) used to finance construction of the Emergency Water Supply and Storage project (the El Camino Reservoir, new wells, rehabilitation of existing wells and tanks, etc.) The City is in compliance with all covenants on both bonds. Additional detail is provided in Appendix D. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 10 | P a g e LOOKING BACK SECTION VII. BACKGROUND The Water Utility was established on May 9, 1896, two years after the City was incorporated. Voters of the 750 person community approved a $40,000 bond to buy local, private water companies who operated one or more shallow wells to serve the nearby residents. The City grew and the well system expanded until nine wells were in operation in 1932. Palo Alto began receiving water from the San Francisco Water Department (SFWD) in 1937 to supplement these sources. A 1950 engineering report noted, “the capricious alternation of well waters and the San Francisco Water Department water… has made satisfactory service to the average customer practically impossible”. By 1950, only eight wells were still in operation. Despite this, groundwater production increased in the 1950’s leading to lower groundwater tables and water quality concerns. In 1962, a survey of water softening costs to City customers determined that the City should purchase 100% of its water supply needs from the SFWD. A 20-year contract was signed with San Francisco, and the City’s wells were placed in standby condition. The SFWD later became known as the SFPUC. Since 1962 (except for some very short periods) the City’s entire supply of potable water has come from the SFPUC. As the City grew, so did the number of mains in the system. The system of mains expanded along with the town, while existing sections of the system continued to age. In the mid-1980s, the number of breaks in cast iron mains installed during the 1940s and earlier started to accelerate. In FY 1994, to combat deterioration of older sections of the system, an analysis of cost effective system improvements was performed and the rate of main replacement was increased from one mile per year to three. A plan to replace 75 miles of deficient mains within 25 years was begun. In 1999, a study of system reliability concluded that major upgrades were needed to the distribution system to provide adequate water supply during a natural disaster. This ultimately resulted in the $40 million Emergency Water Supply and Storage Project, still underway, which involved a new underground reservoir in El Camino Park, the siting and construction of several emergency supply wells, and the upgrade of several existing wells and the Mayfield pump station. At the same time that CPAU was evaluating the reliability of its own system, the SFPUC, in consultation with BAWSCA members, was evaluating the reliability of the Hetch Hetchy water system, which crosses two major fault lines between the Sierras and the Bay Area. That evaluation concluded that major upgrades to the system were required. This planning process culminated in the SFPUC’s $4.6 billion Water System Improvement Project (WSIP), which is ongoing. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 11 | P a g e SECTION VIII. HISTORICAL EXPENSES AND REVENUES Table 7 shows the Water Utility’s expenses and revenues for the past five years. Water supplies made up 33% of total expenses in FY 2009, but have been increasing by 18.4% per year on average, rising to 47% of total expenses in FY 2013. Total costs for this utility have risen 8% on average over the last four years, mainly due to increasing water supply costs. Excluding water supply, CIP and debt service costs (the 2009 bond resulted in large financing costs starting in 2010), costs for this utility have increased by 5% annually on average since 2009. Rate increases occurred in all years except 2011, with sales dropping in 2010. Connection and capacity fee income has also been on the rise. One item of note is the negative interest earned in FY 2013, which represents a decrease in the market value of the City’s investment portfolio that accounting rules require the City to recognize at the end of each fiscal year. Given that the City holds its investments to maturity these “mark to market” gains and losses do not impact the utility’s long term financial position. Table 7: Historical Expenses, Water Collection Utility ($000) 2009 2010 2011 2012 2013 6 REVENUE 7 Utilities Retail Sales 25,198 24,541 24,821 30,674 34,765 8 Service Connection & Capacity Fees 848 694 1,146 1,445 1,918 9 Other Revenues plus Transfers In 1,640 1,951 1,706 995 3,196 10 Interest & Gain or Loss on Investment 1,788 1,572 727 673 -205 11 Sub Total 29,474 28,758 28,400 33,787 39,674 12 13 Total Sources of Funds 29,474 28,758 28,400 33,787 39,674 14 OPERATING EXPENSE 15 Water Supply Purchases 8,443 9,061 10,678 14,889 16,605 16 Administration 2,162 2,168 2,559 2,774 3,181 17 Customer Service 1,436 1,372 1,476 1,545 1,585 18 Engineering (Operating)333 263 247 301 339 19 Operations & Maintenance 4,040 4,257 4,885 4,901 4,944 20 Resource Management 394 486 576 553 558 21 Debt Service & Other Related 426 1,589 2,143 2,064 1,950 22 Rent 1,919 2,107 2,122 2,157 1,912 23 Transfers Out *4,554 282 442 104 2,055 24 CIP (Non Bond)2,605 6,189 5,348 4,369 2,345 25 Sub Total 26,312 27,775 30,476 33,657 35,473 26 27 Total Uses of Funds 26,312 27,775 30,476 33,657 35,473 28 29 Into/ (Out of) Reserves 3,162 983 (2,077)131 4,201 Fiscal Year WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 12 | P a g e LOOKING FORWARD SECTION IX. SEVEN YEAR FINANCIAL FORECAST 1. OVERVIEW Staff has prepared a forecast of costs and revenues through FY 2021. As shown in Table 8 (and Appendix A), the Water Utility’s total costs are projected to increase by roughly 3.5% to 4% per year on average for FY 2015 through FY 2021. The forecast assumes a sales revenue decrease in FY 2015 due to voluntary water use restrictions. Although most costs are rising at only 4% per year, revenues are currently below costs in a normal year. Also noticeable are the lower than budgeted purchase costs for FY 2014 (due to the SFPUC water rates being much lower than forecast), and higher CIP spending in FY 2014 as well (the result of new funding for the California Avenue project, as well as increased costs for existing water main replacement projects). Over the last several years actual costs for operations, maintenance, and CIP have been lower, likely due to the economic downturn, which led to lower costs for services and materials. Staff is starting to see indications that this trend is reversing. Prices are rising for contract services and materials, and this indicates that the utility will see rising costs in the future. If costs for operations, maintenance, and CIP increase more quickly than projected in this plan, either due to the improving economy or other factors, larger rate increases may be required. Table 8: Seven Year Water Utility Financial Forecast Summary ($000) Actual Adopted Projected 2013 2014 2014 2015 2016 2017 2018 2019 2020 2021 1 % CHANGE IN RETAIL RATE 15%7%7%0%7%6%6%6%5%1% 2 SALES UNITS (THOUSAND CCFs)4,880 4,808 4,808 4,300 4,751 4,798 4,845 4,893 4,941 4,990 3 REVENUE 4 Utilities Retail Sales 36,062 36,781 36,781 33,001 38,973 41,675 44,651 47,875 50,709 51,706 5 Service Connection & Capacity Fees 1,918 868 1,153 1,100 1,117 1,136 1,156 1,176 1,198 1,219 6 Other Revenues plus Transfers In 1,877 1,048 1,048 1,055 1,063 1,071 1,082 1,093 1,075 1,075 7 Interest & Gain or Loss on Investment -218 682 682 487 589 623 722 718 714 694 8 Sub Total 39,639 39,379 39,664 35,643 41,741 44,506 47,610 50,863 53,695 54,694 9 CIP Bond Proceeds / Reserve 0 0 0 0 0 0 0 0 0 0 10 Total Sources of Funds 39,639 39,379 39,664 35,643 41,741 44,506 47,610 50,863 53,695 54,694 11 OPERATING EXPENSE 12 Water Supply Purchases 16,605 16,708 14,995 16,521 19,789 20,016 21,248 24,208 25,664 24,811 13 Administration 2,423 2,793 2,490 2,583 2,660 2,745 2,833 2,924 3,018 3,115 14 Customer Service 1,585 1,988 1,740 1,806 1,858 1,932 2,008 2,088 2,160 2,234 15 Engineering (Operating)339 356 294 305 314 326 339 351 365 379 16 Operations & Maintenance 4,944 5,851 5,111 6,345 6,530 6,777 7,033 7,300 7,578 7,867 17 Resource Management 558 625 549 569 586 608 631 655 680 705 18 Debt Service & Other Related 3,219 3,220 3,220 3,219 3,223 3,219 3,223 3,221 3,221 3,221 19 Rent 1,912 1,969 1,969 2,028 2,089 2,151 2,216 2,282 2,351 2,421 20 Transfers Out *-3,521 362 362 369 376 384 391 399 407 415 21 CIP 2,345 5,201 9,171 5,045 6,779 7,013 8,228 8,224 8,470 8,724 22 Total Uses of Funds 30,409 39,073 39,901 38,790 44,204 45,170 48,149 51,653 53,913 53,893 Fiscal Year WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 13 | P a g e 2. WATER PURCHASE COSTS While water itself is essentially a ‘free’ resource, resulting from snow melt in the Sierras, the cost of maintaining the reservoirs and pipelines which supply that water are not. Currently, the SFPUC is in the midst of a $4.6 billion dollar capital improvement program (the WSIP) to upgrade and seismically retrofit the regional water system. The vast majority of costs are being collected via a volumetric (per CCF) charge, rather than through monthly fixed charges. Wholesale water rate projections are dependent on water usage, and as usage falls, the volumetric rates will necessarily rise. Figure 3 shows the SFPUC’s latest wholesale water rate projection compared to the projection from a year ago. Figure 3: Projected SFPUC rate changes Part of the reason this plan contains a seven year view for the Water Utility is to show that, based on the SFPUC’s projections, wholesale water rate increases are expected to peak in FY 2020. Until then, purchase costs are expected to rise 9.5% per year on average. 3. OPERATIONS Operations costs include the Customer Service, Operations and Maintenance, Engineering, Resource Management, and Administration categories in Table 8, above. Debt service, rent, and transfers are also included in Operations costs. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 14 | P a g e Appendix E: Description of Water Utility Cost Categories includes detailed descriptions of the activities associated with these cost categories. Operations costs are projected to increase by 3.5% per year, on average, over the forecast period. Underlying these projections are salary and benefit, consumer price index, and other cost projections obtained from the City’s long-range financial forecast. 4. CAPITAL IMPROVEMENT PROGRAM (CIP) The Water Utility’s CIP consists of the following programs and budgets:  The Water System Replacement/Rehabilitation Program, under which the Water Utility replaces aging water mains  Customer Connections, which covers the cost when the Water Utility installs new services or upgrades existing services at a customer’s request in response to development or redevelopment. CPAU charges a fee to these customers to cover the cost of these projects.  Ongoing Projects, which covers the cost of replacing old/under-recording meters and degraded boxes and covers, as well as the cost of capitalized tools and equipment.  One Time Projects, which cover specific, non-recurring replacement of system resources (such as water tank re-coatings) Table 9 outlines the current FY 2014 adopted budget, with actuals and remaining budget as of December 31, 2013. Also included is the five year CIP spending plan, although these figures are preliminary pending budget discussions starting in May. The ‘committed’ column represents open contracts for which work has not yet been completed or invoices paid. Table 9: Budgeted Water Utility CIP Spending ($000) *Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year **Equal to Reserve for Reappropriations + Reserve for Commitments. The Water System Replacement and Rehabilitation Program funds the replacement of deteriorating water mains. The water system consists of over 236 miles of mains, approximately 2000 fire hydrants, and over 20,000 metered service connections spanning 9 pressure zones over a 26 square mile service area. CPAU utilizes an asset management database in conjunction with hydraulic modeling software in prioritizing capital improvements. Mains are selected by researching the maintenance history of the system and identifying those that are undersized, corroded, and subject to recurring breaks. CPAU uses a scoring system based on criticality in order to prioritize which mains to replace first, and coordinates with the Public Works street maintenance program to avoid cutting into newly repaved streets. CPAU replaces approximately 3 miles of main per year, or 1.3% of the system. Project Category Current Budget* Spending, Curr. Yr Remain. Budget Committed FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 One Time Projects 13,656 (1,579) 12,076 4,023 2,980 - - - - Water Main Replacement 6,460 (262) 6,197 374 - 4,836 4,635 6,126 6,048 Ongoing Projects 3,708 (712) 2,996 755 1,625 1,483 1,906 1,617 1,686 Customer Connections 449 (240) 209 11 450 460 473 486 500 TOTAL 24,272 (2,794) 21,478 5,163 5,055 6,779 7,014 8,228 8,234 WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 15 | P a g e Costs for the water main replacement program are increasing for a variety of reasons:  Fire Code regulations now mandate fire sprinklers for new residential units. To accommodate increased fire flows, new main replacement projects require larger diameter pipe.  CPAU has switched to high-density polyethylene (HDPE) for its mains. Installation costs for this material are slightly higher, though lifecycle costs are lower, and the material performs better. Joints in distribution mains are the most likely place for failure, and sections of HDPE pipe can be fused together rather than connected with fittings. In the long run, this will reduce losses and maintenance costs.  To take full advantage of HDPE’s fusibility, CPAU is now replacing the services along with the water mains with new HDPE services. In the past, the existing services were reconnected, regardless of the material. This new practice costs more in the short run, but will provide long term benefits.  Lastly, as the economy begins to recover, costs have begun to escalate. These factors have created some uncertainty in future main replacement costs. In addition, the 25 year main replacement program initiated in 1993 is nearing completion. This makes it a good time to re-evaluate the program. CPAU will initiate a master planning process in FY 2015 to evaluate the current state of the distribution system and determine the necessary rate of main replacement in future years. This could result in higher CIP expenses than are currently forecasted. Ongoing Projects and Customer Connections are projected to cost approximately $1.8 million in FY 2015 and increase by 3.5% each year through the end of the forecast period. Actual expenses for these projects fluctuate annually depending on how many defective meters are discovered and replaced during routine maintenance, as well as how much development and redevelopment is going on that prompts the replacement or upgrade of water services. It is worth noting that property owners pay a fee for water service replacement or expansion during redevelopment, so when costs go up, so does fee revenue. Aside from customer connections, the CIP plan for FY 2015 to FY 2019 is funded by utility rates and capacity fees. The details of the plan are shown in Appendix B: Water Utility Capital Improvement Program (CIP) Detail. SECTION X. REVENUE REQUIREMENT AND REVENUE SOURCES The revenue requirement is the total amount of revenue that must be collected in order to meet the planned expenditures for the Water Utility. Costs for the Water Utility are projected to increase by 4% per year or more through FY 2020, as shown in Figure 4, below. As previously mentioned, future CIP spending levels are uncertain, and CPAU will complete a distribution system master plan in the upcoming year to determine future year CIP needs. The High Cost scenario in Figure 4 shows the necessary rate increases under a higher CIP cost scenario in which the master planning process reveals a need for accelerated main replacement and the replacement of one of the major mains in the foothills. With a 0% increase in FY 2015, matching costs to revenues by FY 2021 will require 5 to 7% increases in sales revenues each WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 16 | P a g e year for FY 2016 to FY 2020. Each of the projected FY 2016 to FY 2020 rate increases will increase median residential water bills by $4.00 to $5.00 per month. Figure 4: Water Fund Revenue and Cost Projections Figure 5 illustrates how the existing reserves would be reallocated according to the proposed Reserves Management Practices and how the balances of the different reserves would change over the financial forecast period. For the Water Fund, the CIP reserve would be drawn down by FY 2019 and the Rate Stabilization Reserve would be drawn down by FY 2016. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 17 | P a g e Figure 5: Water Fund Revenue and Cost Projections SECTION XI. RISK ASSESSMENT Staff performs an annual assessment of risks for the Water Utility. For this evaluation, staff estimates the revenue shortfall due to: 1. the maximum observed budget-to-actual variance in one year during the past ten years; 2. an increase of 10% of planned system improvement CIP expenditures for the budget year; Table 10 summarizes the risk assessment calculation for the Water Utility. The Operations Reserve is projected to be adequate to manage these risks over the entire forecast period. Table 10: Water Risk Assessment ($000) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total Revenue $33,001 $38,973 $41,675 $44,651 $47,875 Max. Historical Budget-to-Actual variance 12% 12% 12% 12% 12% Revenue Budget-to-Actual Risk 4,010 4,735 5,063 5,425 5,817 System Rehabilitation CIP Budget $5,045 $6,779 $7,013 $8,228 $8,224 CIP Contingency @10% 505 678 701 823 822 Total Risk Assessment value 4,514 5,413 5,765 6,248 6,639 Projected Operations Reserve Level 8,321 7,382 7,718 9,179 10,389 Projected FY 2014 year-end reserves under existing reserves structure Proposed reallocation (see Appendix C: Water Utility Reserves Management Practices) WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 18 | P a g e SECTION XII. COMMUNICATIONS PLAN The FY 2015 Water Utility communications strategy covers these primary areas: water conservation, drought, rates, operations and infrastructure, and safety. Drought and water efficiency are at the forefront of today’s communications, with 10% voluntary restrictions underway and a “Keep Calm and Save Water” campaign being pushed by Customer Service and Marketing. CPAU is constantly updating its website with new information as it arises, and Staff is planning for what may be needed should the SFPUC call for mandatory cutbacks at their April announcement. There is no need for formal “rate change” communications at this time, but website and community education about rates is ongoing. Water conservation activity includes bill inserts, website pages, email blasts, and the use of social media. To keep customers apprised of the status and accomplishments of CIP projects, a network of project web pages are maintained; traffic is driven to the website via ads in publications, newspaper inserts, social media and email blasts. Safety topics are emphasized year-round and, while print materials and website pages still feature prominently, CPAU is turning the outreach emphasis to direct mail, newspaper inserts, and social media including video, cable TV, community safety/emergency preparation meetings and updates to neighborhood groups. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 19 | P a g e APPENDICES Appendix A: Water Utility Financial Forecast Detail Appendix B: Water Utility Capital Improvement Program (CIP) Detail Appendix C: Water Utility Reserves Management Practices Appendix D: Water Utility Debt Service Details Appendix E: Description of Water Utility Cost Categories Appendix F: Sample of Water Utility Outreach Communications WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 20 | P a g e APPENDIX A: WATER UTILITY FINANCIAL FORECAST DETAIL Actual Adopted Projected 2013 2014 2014 2015 2016 2017 2018 2019 2020 2021 1 % CHANGE IN RETAIL RATE 15%7%7%0%7%6%6%6%5%1% 2 SALES UNITS (THOUSAND CCFs)4,880 4,808 4,808 4,300 4,751 4,798 4,845 4,893 4,941 4,990 3 REVENUE 4 Utilities Retail Sales 36,062 36,781 36,781 33,001 38,973 41,675 44,651 47,875 50,709 51,706 5 Service Connection & Capacity Fees 1,918 868 1,153 1,100 1,117 1,136 1,156 1,176 1,198 1,219 6 Other Revenues plus Transfers In 1,877 1,048 1,048 1,055 1,063 1,071 1,082 1,093 1,075 1,075 7 Interest & Gain or Loss on Investment -218 682 682 487 589 623 722 718 714 694 8 Sub Total 39,639 39,379 39,664 35,643 41,741 44,506 47,610 50,863 53,695 54,694 9 CIP Bond Proceeds / Reserve 0 0 0 0 0 0 0 0 0 0 10 Total Sources of Funds 39,639 39,379 39,664 35,643 41,741 44,506 47,610 50,863 53,695 54,694 11 OPERATING EXPENSE 12 Water Supply Purchases 16,605 16,708 14,995 16,521 19,789 20,016 21,248 24,208 25,664 24,811 13 Administration 2,423 2,793 2,490 2,583 2,660 2,745 2,833 2,924 3,018 3,115 14 Customer Service 1,585 1,988 1,740 1,806 1,858 1,932 2,008 2,088 2,160 2,234 15 Engineering (Operating)339 356 294 305 314 326 339 351 365 379 16 Operations & Maintenance 4,944 5,851 5,111 6,345 6,530 6,777 7,033 7,300 7,578 7,867 17 Resource Management 558 625 549 569 586 608 631 655 680 705 18 Debt Service & Other Related 3,219 3,220 3,220 3,219 3,223 3,219 3,223 3,221 3,221 3,221 19 Rent 1,912 1,969 1,969 2,028 2,089 2,151 2,216 2,282 2,351 2,421 20 Transfers Out *-3,521 362 362 369 376 384 391 399 407 415 21 CIP 2,345 5,201 9,171 5,045 6,779 7,013 8,228 8,224 8,470 8,724 22 Total Uses of Funds 30,409 39,073 39,901 38,790 44,204 45,170 48,149 51,653 53,913 53,893 23 Into/ (Out of) Reserves 9,230 306 (236)(3,146)(2,463)(664)(539)(790)(218)801 24 Ending Commitments/Reappropriations 15,401 15,401 15,401 15,401 15,401 15,401 15,401 15,401 15,401 15,401 25 Ending Plant Replacement Reserve 1,000 1,000 0 0 0 0 0 0 0 0 26 Ending CIP Reserve 0 0 6,000 6,000 5,000 4,000 2,000 0 0 0 27 Ending Rate Stabilization Reserve 17,227 17,533 3,435 524 0 0 0 0 0 0 28 Ending Operations Reserve 0 0 8,556 8,321 7,382 7,718 9,179 10,389 10,170 10,972 29 Unassigned Reserves 0 0 0 0 0 0 0 0 0 0 30 Total Unrestricted Reserves 33,628 33,935 33,392 30,246 27,783 27,119 26,580 25,790 25,572 26,373 31 Risk Assessment Value 0 4,991 0 4,514 5,413 5,765 6,248 6,639 7,008 7,154 32 Operations Reserve Guidelines 33 Min (60 Days Commodity/O&M Exp)5,704 5,547 6,152 6,272 6,562 7,139 7,470 7,425 7,615 34 Target (90 Days)8,556 8,321 9,228 9,409 9,844 10,708 11,205 11,138 11,422 35 Max (120 Days)11,408 11,094 12,304 12,545 13,125 14,278 14,940 14,850 15,230 Fiscal Year WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 21 | P a g e APPENDIX B: WATER UTILITY CAPITAL IMPROVEMENT PROGRAM (CIP) DETAIL Project #Project Name Reappropriated / Carried Forward from Previous Years Current Year Funding Budget Amendments Spending, Current Year Remaining in CIP Reserve Fund Commitments FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 ONE TIME PROJECTS WS-07000 Regulation Station Imp.307,595 - - - 307,595 - - - - - - WS-07001 Water Recycling Facilities 394,518 - - (3,937) 390,581 192,338 - - - - - WS-08001 Water Reservoir Coating 2,272,154 - - - 2,272,154 - 750,000 - - - - WS-09000 Seismic Water System 4,066,673 - 500,000 - 4,566,673 - 2,230,000 - - - - WS-11001 Vacuum Excavation Equip.- - - - - - - - - - - WS-13003 GPS Equipment Upgrade 200,000 - - - 200,000 - - - - - - WS-13004 Asset Mgmt. Mobile Sys.100,000 - - - 100,000 - - - - - - WS-13006 Meter Shop Renovations 87,148 200,000 - (3,099) 284,049 209,875 - - - - - WS-08002 Emergency Water Supply 5,527,447 - - (1,572,113) 3,955,334 3,620,659 - - - - - Subtotal, One-time Projects 12,955,535 200,000 500,000 (1,579,149) 12,076,386 4,022,872 2,980,000 - - - - WATER MAIN REPLACEMENT PROGRAM WS-08017 WMR - Project 22 - - - - - - - - - - - WS-09001 WMR - Project 23 124,689 - - (11,510) 113,179 299,262 - - - - - WS-10001 WMR-Project 24 396,726 - - (185,786) 210,940 23,334 - - - - - WS-11000 WMR-Project 25 696,378 2,736,906 2,000,000 (65,185) 5,368,099 1 - - - - - WS-12001 WMR- Project 26 - 505,000 - - 505,000 51,047 - 4,396,800 - - - WS-13001 WMR - Project 27 - - - - - - - 439,680 4,111,740 - - WS-14001 WMR - Project 28 - - - - - - - - 523,000 5,568,744 - WS-15002 WMR - Project 29 - - - - - - - - - 556,874 5,498,160 WS-16001 WMR - Project 30 - - - - - - - - - - 549,816 WS-19001 WMR-Project 31 - - - - - - - - - - - Subtotal, Water Main Replacement Prog.1,217,793 3,241,906 2,000,000 (262,481) 6,197,218 373,644 - 4,836,480 4,634,740 6,125,618 6,047,976 WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 22 | P a g e Appendix B: Water Utility Capital Improvement Program (CIP) Detail (Continued) Project #Project Name Reappropriated / Carried Forward from Previous Years Current Year Funding Budget Amendments Spending, Current Year Remaining in CIP Reserve Fund Commitments FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 ONGOING PROJECTS WS-80014 Services/Hydrants 15,341 229,000 - (56,091) 188,250 - 236,000 243,080 250,400 263,000 270,000 WS-80015 Water Meters 433,642 379,000 (200,000) (67,125) 545,517 279,971 386,000 393,080 400,372 407,000 415,000 WS-02014 W-G-W Utility GIS Data 57,964 275,000 - (56,618) 276,346 169,144 302,500 332,750 366,025 402,628 442,890 WS-13002 Equipment/Tools 28,132 - - - 28,132 - 50,000 50,000 411,174 50,000 50,000 WS-11003 Dist. Sys. Improvements 334,883 218,000 1,372,272 (185,272) 1,739,883 182,862 225,000 232,000 239,000 247,000 254,000 WS-11004 Supply Sys. Improvements 346,964 218,000 - (347,085) 217,879 123,131 425,000 232,000 239,000 247,000 254,000 Subtotal, Ongoing Projects 1,216,926 1,319,000 1,172,272 (712,191) 2,996,007 755,108 1,624,500 1,482,910 1,905,971 1,616,628 1,685,890 CUSTOMER CONNECTIONS (FEE FUNDED) WS-80013 Water System Extensions 8,973 440,000 - (240,135) 208,838 10,946 450,000 460,000 473,000 486,000 500,000 Subtotal, Customer Connections 8,973 440,000 - (240,135) 208,838 10,946 450,000 460,000 473,000 486,000 500,000 GRAND TOTAL 15,399,226 5,200,906 3,672,272 (2,793,956)21,478,448 5,162,570 5,054,500 6,779,390 7,013,711 8,228,246 8,233,866 Funding Sources Connection/Capacity Fees 709,000 - 878,000 899,840 921,000 943,000 960,000 Other Utility Funds (Asset Mgmt, GIS Systems)292,000 201,667 221,833 244,017 268,418 295,260 Utility Rates 5,200,906 3,672,272 3,974,833 5,657,717 5,848,694 7,016,828 6,978,606 CIP-RELATED RESERVES DETAIL 6/30/2013 (Actual)12/31/2013 Reappropriations (excl. Bond Funded)10,423,078 16,315,878 Commitments (excl. Bond Funded)4,976,148 5,162,570 WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 23 | P a g e APPENDIX C: WATER UTILITY RESERVES MANAGEMENT PRACTICES The following reserves management practices shall be used when developing the Water Utility Financial Plan: Section 1. Definitions a) “Financial Planning Period” – The Financial Planning Period is the range of future fiscal years covered by the Financial Plan. For example, for the Water Utility Financial Plan delivered in conjunction with the FY 2015 budget, FY 2015 to FY 2021 is the Financial Planning Period. b) “Fund Balance” – As used in these Reserves Management Practices, Fund Balance refers to the Utility’s Unrestricted Net Assets. c) “Net Assets” - The Government Accounting Standards Board defines a Utility’s Net Assets as the difference between its assets and liabilities. d) “Unrestricted Net Assets” - The portion of the Utility’s Net Assets not invested in capital assets (net of related debt) or restricted for debt service or other restricted purposes. Section 2. Reserves The Water Utility’s Fund Balance is reserved for the following purposes: a) For existing contracts, as described in Section 3 (Reserve for Commitments) b) For operating and capital budgets re-appropriated from previous years, as described in Section 4 (Reserve for Re-appropriations) c) For future year expenditure on the Water Utility’s Capital Improvement Program (CIP), as described in Section 5 (CIP Reserve) d) For rate stabilization, as described in Section 6 (Rate Stabilization Reserve) e) For operating contingencies, as described in Section 7 (Operations Reserve) f) Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 8 (Unassigned Reserves). Section 3. Reserve for Commitments At the end of each fiscal year the Reserve for Commitments will be set to an amount equal to the total remaining spending authority for all contracts in force for the Water Utility at that time. Section 4. Reserve for Re-appropriations At the end of each fiscal year the Reserve for Re-appropriations will be set to an amount equal to the amount of all remaining capital and non-capital budgets that will be re- appropriated to the following fiscal year in accordance with Palo Alto Municipal Code Section 2.28.090. Section 5. CIP Reserve Funds may be added to or withdrawn from the CIP Reserve by action of the City Council and held for future year expenditure on the Water Utility’s CIP Program. If there are funds in WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 24 | P a g e the CIP Reserve at the end of any fiscal year, any subsequent Water Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the next Financial Planning Period. Section 6. Rate Stabilization Reserve Funds may be added to the Rate Stabilization Reserve by action of the City Council and held to manage the trajectory of future year rate increases. Withdrawal of funds from the Rate Stabilization Reserve requires Council action. If there are funds in the Rate Stabilization Reserve at the end of any fiscal year, any subsequent Water Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the next Financial Planning Period. Section 7. Operations Reserve The Operations Reserve is used to manage normal variations in costs and as a reserve for contingencies. Any portion of the Water Utility’s Fund Balance not included in the reserves described in Section 3-Section 6 above will be included in the Operations Reserve unless this reserve has reached its maximum level as set forth in Section 7(d) below. Staff will manage the Operations Reserve according to the following practices: a) The following guideline levels are set forth for the Operations Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of Operations and Maintenance (O&M) and commodity expense forecasted for that year in the Financial Plan. Minimum Level 60 days of O&M and commodity expense Target Level 90 days of O&M and commodity expense Maximum Level 120 days of O&M and commodity expense b) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Operations Reserve are lower than the minimum level set forth above, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered within six months of the end of the fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the following fiscal year. For example, if the Operations Reserve is below its minimum level at the end of FY 2014, staff must present a plan by December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In addition, staff may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve. c) Target Level: If, at the end of any fiscal year, the Operations Reserve is higher or lower than the target level, any Financial Plan created for the Water Utility shall be designed to return the Operations Reserve to its target level within four years. d) Maximum Level: If, at any time, the Operations Reserve reaches its maximum level, no funds may be added to this reserve. Any further increase in the Water Utility’s Fund Balance shall be automatically included in the Unassigned Reserve described in Section 8, below. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 25 | P a g e Section 8. Unassigned Reserve If the Operations Reserve reaches its maximum level, any further additions to the Water Utility’s Fund Balance will be held in the Unassigned Reserve. If there are any funds in the Unassigned Reserve at the end of any fiscal year, the next Financial Plan presented to the City Council must include a plan to assign them to a specific purpose or return them to the Water Utility ratepayers by the end of the first fiscal year of the next Financial Planning Period. For example, if there were funds in the Unassigned Reserves at the end of FY 2015, and the next Financial Planning Period is FY 2016 through FY 2021, the Financial Plan shall include a plan to return or assign any funds in the Unassigned Reserve by the end of FY 2016. Staff may present an alternative plan that retains these funds or returns them over a longer period of time. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 26 | P a g e APPENDIX D: WATER UTILITY DEBT SERVICE DETAILS The Water Utility currently makes payment on its share of two bond issuances. The first is the 2009 Water Revenue Bond, Series A, issued for $35 million, and to be retired by 2035. As part of the ‘Build America’ bond program, there is an interest payment subsidy from the Federal Government of 35%. There is always the possibility that the federal government will choose to stop payment on this subsidy. The automatic federal spending cuts under the Budget Control Act (BCA) of 2011 have already reduced the subsidy by $50,000 per year, and if planned cuts through 2021 proceed without amendment, staff estimates that the subsidy would be reduced by over $200,000 per year by 2021. The Bipartisan Budget Act of 2013, which relieved some of the discretionary spending cuts in the 2011 BCA, did not affect automatic cuts to the subsidy, and actually extended the automatic cuts through 2023. The second bond issuance is the 2011 Utility Revenue Refunding Bond, Series A, which is to be retired in 2026. This $17.2 million issuance refinanced an earlier Water and Gas Utility bond issuance, the 2002 Utility Revenue Bonds, Series A, which was issued to finance various capital improvements for both systems. The Water Utility’s share of the issuance was roughly $7.8 million. The cost of debt service for the Water Utility’s share of these bond issuances for the financial forecast period is as follows: Table 11: Water Utility Debt Service FY 2014 ($000) FY 2015 ($000) FY 2016 ($000) FY 2017 ($000) FY 2018 ($000) FY 2019 ($000) FY 2020 ($000) FY 2021 ($000) 2009 Water Revenue Bonds, Series A 1,977 1,986 2,002 2,012 2,031 2,046 2,064 2,079 2011 Utility Revenue Bonds, Series A 656 656 657 657 656 654 656 657 Both the 2009 and 2011 Bonds include the following covenants: 1) net revenues plus Available Reserves shall at least equal 125% of the maximum annual debt service, and 2) Available Reserves shall be at least 5 times the maximum annual debt service. Note that “Available Reserves,” as defined for both bonds, is defined as reserves for the Water, Gas and Electric systems, not just the Water system. The current Financial Plan maintains compliance with these covenants throughout the forecast period. Due to the relatively small size of the annual debt service payments for these bonds in relation to the size of Available Reserves, ($149.5 million at the end of FY 2013, over 55 times the maximum annual debt service alone), the Water Utility more than satisfies both covenants. The Water Utility’s Operations Reserve satisfies the first covenant on its own at more than 3 times annual debt service throughout the forecast period. The net revenues (but not the reserves) of the Water Utility are also pledged for one other bond as shown in Table 12 below, even though the Water Utility is not responsible for the debt WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 27 | P a g e service payments. The Water Utility’s reserves or net revenues would only be called upon if the responsible utilities are unable to make their debt service payments. Staff does not currently foresee this occurring. Requirements of the California Constitution require that any amounts advanced from one utility to pay debt service for another utility must be repaid by the borrowing fund. Table 12: Other Issuances Secured by Water Utility’s Revenues or Reserves Bond Issuance Responsible Utilities Annual Debt Service ($000) Secured by Water Utility’s: Net Revenues Reserves 1995 Series A Utility Revenue Bonds Storm Drain $680 Yes No WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 28 | P a g e APPENDIX E: DESCRIPTION OF WATER UTILITY COST CATEGORIES This appendix describes the activities associated with the various cost categories referred to in this Financial Plan. Customer Service: This category includes the Water Utility’s share of the call center, meter reading, collections, and billing support functions. Billing support encompasses staff time associated with bill investigations and quality control on certain aspects of the billing process. It does not include maintenance of the billing system itself, which is included in Administration. This category also includes CPAU’s key account representatives, who work with large commercial customers who have more complex requirements for their water services. Resource Management: This category includes water procurement, contract management, water resource planning, rate setting, interaction with BAWSCA, the SFPUC, and the SCVWD, and tracking of legislation and regulation related to the water industry. Operations and Maintenance: This category includes the costs of a variety of distribution system maintenance activities, including:  investigating reports of damaged mains or services and perform emergency repairs;  testing and operating valves;  monitoring water quality and reservoir levels;  monitoring the status of the different pressure zones;  flushing water at hydrants and other closed end points of the system;  building and replacing water services for new or redeveloped buildings; and  testing and replacing meters to ensure accurate sales metering. This category also includes a variety of functions the utility shares with other City utilities, including:  the Field Services team (which does field research of various customer service issues);  the Cathodic Protection team (which monitors and maintains the systems that prevent corrosion in metal tanks and reservoirs); and  the General Services team (which manages and maintains equipment, paves and restores streets after gas, water, or sewer main replacements, and provides welding services) Administration: Accounting, purchasing, legal, and other administrative functions provided by the City’s General Fund staff, as well as shared communications services, CPAU administrative overhead, and billing system maintenance costs. Engineering (Operating): The Water Utility’s engineers focus primarily on the CIP, but a small portion of their time is spent assisting with distribution system maintenance. APPENDIX F: SAMPLE OF WATER UTILITY OUTREACH COMMUNICATIONS City of Palo Alto (ID # 4583) Finance Committee Staff Report Report Type: Action Items Meeting Date: 4/15/2014 City of Palo Alto Page 1 Summary Title: Electric, Gas, Wastewater Collection, and Water Utility Financial Plans Title: Utilities Advisory Committee Recommendation that Council Adopt a Resolution Adopting the Electric, Gas, Wastewater Collection, and Water Utility Financial Plans From: City Manager Lead Department: Utilities Recommendation Staff and the Utilities Advisory Commission (UAC) request that the Finance Committee recommend that Council adopt a resolution (Attachment A) adopting the Electric, Gas, Wastewater Collection, and Water Financial Plans (Attachments B, C, D, and E, respectively). Executive Summary Every year staff presents the Finance Committee with financial forecasts for its Electric, Gas, Wastewater Collection, and Water Utilities and recommends any rate adjustments required to maintain their financial health. This year, staff is presenting expanded forecasts, which will now be called “Financial Plans,” that include a more comprehensive overview of the utility’s operations, both retrospective and prospective. The Financial Plans are intended to be a reference for UAC and Council members as they review the budget and staff’s rate adjustment recommendations. This year’s Financial Plans keep rates unchanged for FY 2015. Each Financial Plan contains a set of Reserves Management Practices (RPs) describing the reserves for each utility and the management practices for those reserves. The proposed RPs include improvements to the structure of each utility’s reserves, and replace the current reserve guidelines. Many of the proposed improvements to the reserves are responsive to recommendations made by the City Auditor in the December 2012 Utilities Reserves Audit. City of Palo Alto Page 2 Staff presented these Financial Plans to the UAC at its March 26, 2013 meeting. Staff’s presentation to the UAC included a projected 4% rate increases for the Water and Wastewater Collection Utilities. The UAC voted to recommend that Council adopt the proposed Financial Plans, modified to include no rate increases for the Water and Wastewater Collection Utilities. Background To ensure adequate revenue to fund the safe operation of the utility and prudent capital replacement, staff performs a financial forecast each year for the Electric, Gas, Wastewater Collection, and Water Utilities and recommends rate changes as needed. The City also maintains a variety of reserves for these utilities for contingencies and other purposes. The current reserves are shown in Table 1, below. Table 1: List of Utilities Reserves Reserve Electric Gas Wastewater Collection Water Reappropriations x x x x Commitments x x x x Emergency Plant Replacement x x x x Rate Stabilization x x x x Electric Special Projects* x Underground Loan x Public Benefit Program x Central Valley Project x *formerly the Calaveras Reserve Staff has reviewed its existing system of financial forecasting and each utility’s reserves structure to identify possible improvements. This review was prompted in part by the Utilities Reserves Audit completed in December 2012 by the City Auditor. The report included two findings and five recommendations focused on 1) more clearly articulating the criteria for setting Rate Stabilization Reserve (RSR) targets, and 2) comprehensively reporting on all other reserves, especially those related to the Capital Improvement Program (CIP). A summary of the City Auditor’s recommendations is included in Attachment F. The reserves proposals and financial forecasts in this report have been reviewed internally by the City’s Administrative Services Department and the Office of the City Auditor. The Office of the City Auditor’s preliminary response was that staff’s proposed reserves structure, once fully implemented, would satisfy the recommendations of the Utilities Reserves Audit pending a full review to be completed later this year. City of Palo Alto Page 3 The UAC reviewed the reserves proposals in this report at its January 8, 2014 meeting, and the preliminary financial forecasts at its February 12, 2014 meeting. The Finance Committee reviewed the preliminary financial forecasts and reserves proposals at its March 4, 2014 meeting. On March 26, 2014, staff presented Financial Plans to the UAC that included 4% rate increases for the Wastewater Collection and Water Utilities for FY 2015. The UAC recommended that the Council approve amended Financial Plans that include no projected rate increases for the Wastewater Collection and Water Utilities for FY 2015. Discussion Projected Rate Increases Table 2 shows the projected rate adjustments included in the Financial Plans and their impact on the median residential bill (electric, gas, sewer, and water, not including refuse or storm drain). Staff is proposing to keep rates unchanged for FY 2015 for all utilities, with the caveat that water rates may require additional adjustment in the event the San Francisco Public Utilities Commission (SFPUC) calls for increases in water conservation goals, an announcement that is not expected until April 15. The projected water and sewer rate increases for FY 2016 through FY 2019 are higher than they would be if FY 2015 water and sewer rates were raised by 4% as proposed to the UAC. Table 2: Projected Rate Adjustments FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Electric Utility 0% 3% 3% 3% 2% Gas Utility* 0% 0% 0% 3% 3% Wastewater Collection Utility 0% 7% 7% 7% 7% Water Utility 0% 7% 6% 6% 6% Estimated Bill Impact (%)** 0% 5% 4% 5% 5% Estimated Bill Impact ($/mo)** $0.00 $8.05 $7.84 $9.43 $9.47 * Gas rate changes are shown with commodity rates held constant. Actual commodity rates will vary monthly with wholesale market fluctuations ** estimated impact on median residential bill (electric, gas, wastewater collection, water) The cost basis for these projected rate adjustments is as follows: Electric Utility: Renewable energy costs are projected to rise over the next several years as staff continues to implement the City’s Renewable Portfolio Standard (RPS) and Carbon City of Palo Alto Page 4 Neutral Plan. Transmission costs are also expected to rise. Staff projects roughly 2% to 3% annual increases in Operating and CIP costs over the forecast period. Gas Utility: Operating and CIP costs are projected to increase roughly 2% to 3% annually. There will be additional costs in FY 2015 through FY 2017 for the crossbore program, but these will be funded from reserves and savings from lower CIP spending in FY 2014 and FY 2015. The lower CIP spending is due to a temporary slowdown in new main replacement projects to enable staff to manage an unusually large main replacement project begun in FY 2013 that will replace all remaining ABS plastic pipe in the distribution system. New main replacement projects will recommence in FY 2016, likely at a lower spending level. Wastewater Collection Utility: Wastewater treatment costs are projected to rise 4% to 5% per year over the forecast period as the Regional Water Quality Control Plant (RWQCP) ramps up capital spending on a variety of projects to refurbish aging parts of the facility. Operating and CIP costs for the sewer system are projected to increase roughly 2% to 3% annually. The utility has accumulated reserves due to a temporary reduction in CIP spending in FY 2014 (related to staff vacancies), and will draw these reserves down over the course of the forecast period to smooth the transition to higher rates. Water Utility: The main driver for the water utility’s expenses over the next several years is the cost of water. Wholesale water costs are projected to rise 7.5% per year, on average, through FY 2021, which is when the SFPUC is projected to complete its Water System Improvement Program (WSIP). Because of the length of this project, the water financial forecasts are for seven years in order to show that wholesale water costs are projected to stabilize in FY 2020 and FY 2021. Operating and CIP costs are projected to rise roughly 2% annually over that time. The Water Utility financial forecast also includes a loss of revenue for FY 2015 associated with the 10% voluntary reductions currently being requested by the SFPUC this year. If deeper, mandatory reductions are required, staff will need to amend its forecast. Changes from Preliminary Forecast Staff has made some changes from the preliminary forecasts, some of which were discussed at the Finance Committee’s March 4, 2014 meeting. The forecasted costs for the Gas and Water Utilities changed notably from the preliminary forecast, which affected the projected rate increases for those utilities. Gas Utility: The costs of the crossbore program had been overestimated in the preliminary forecast. Correcting the projection reduced the forecasted rate increases in later years. Water Utility: Bids received for a Water Utility capital project in mid-February prompted staff to revisit its Water Utility CIP cost projections. Costs of main replacement have risen for a variety of reasons. In addition, there is some uncertainty in the scope of a major future water main replacement project. Staff had planned to complete a water system City of Palo Alto Page 5 study in 2016 to revisit its CIP plan and its assumptions about the necessary rate of future main replacement. Staff intends to accelerate the schedule for that study, postponing new main replacement until it is completed. Staff has analyzed a variety of CIP cost scenarios, some of which lead to high rate increases in future years if the City keeps rates unchanged in FY 2015. These potential higher costs are shown in the Financial Plan. Changes to Reserves Structures Each Financial Plan includes Reserves Management Practices (RPs) defining the utility’s reserves and the way they are to be managed. These RPs replace previous adopted utility reserve policies and include changes to the structure of the utilities reserves from current reserve policies. These changes are summarized below, and are described in more detail in the “Status of Reserves” sections of the Financial Plans. The primary change relates to the RSRs. Of all the reserves, the current RSRs require the most active management and monitoring, and they serve multiple purposes: 1. To plan for certain known future occurrences that are of a one-time nature; 2. To smooth the transition to higher rates if the expense is of an ongoing nature; 3. To ensure funds are available to cover short-term situations when expenditures exceed revenues; and 4. To provide a depository of excess funds when expenditures are less than revenues. The RSRs have a set of Council-approved minimum and maximum guidelines. The Utilities Reserves Audit raised a concern with the fact that reserves have sometimes been below the minimum or above the maximum guidelines. This is a result of the fact that they serve multiple purposes. For example, if staff allows funds to accumulate for rate stabilization purposes, the RSR may exceed the maximum guideline, but this may be a reasonable course of action from a financial planning perspective. The proposed RPs include separate reserves for each of these functions: a CIP reserve for future large one-time CIP projects, a Rate Stabilization Reserve to hold funds for rate stabilization, an Operations Reserve for contingencies, and an Unassigned Reserve for funds that are to be assigned a purpose or returned to ratepayers. The other notable change applicable to all utilities is the merger of the Emergency Plant Replacement Reserve into the Operations Reserve. Currently each utility’s Emergency Plant Replacement Reserve holds $1 million, enough to cover the City’s insurance deductible in case of an insurable loss of utility facilities. The Operations Reserves of each utility are adequate to cover the insurance deductible, making the Emergency Plant Replacement reserves unnecessary. City of Palo Alto Page 6 The RPs include other reserves changes specific to the Electric and Gas Utilities described in more detail in the Electric Utility and Gas Utility Financial Plans, which are: 1. Combining the Gas Supply and Gas Distribution Reserves; 2. Closing the Central Valley Project Reserve; and 3. Adding a Hydro Stabilization Reserve for the Electric Utility. Table 3 summarizes the changes to the structure of the reserves for the Electric, Gas, Wastewater Collection, and Water Utilities that would be made with the adoption of the proposed Financial Plans. City of Palo Alto Page 7 Table 3: Financial Plan Utilities Reserves Policy Changes Current Policy Proposed Policy Maintain Reserves for Reappropriations and Commitments per City accounting practices No change CIP Reserve, Operations Reserve, and Unassigned Reserve do not currently exist Add CIP Reserve, Operations Reserve, and Unassigned Reserve RSR acts as the contingency reserve as well as repository of funds for 1) future one-time costs, 2) rate stabilization, or 3) future return to ratepayers. Operations Reserve acts as the contingency reserve, while CIP, Rate Stabilization, and Unassigned Reserves serve the other three purposes. Maintain Emergency Plant Replacement reserve to cover insurance deductible for insurable losses Close Emergency Plant Replacement Reserves. Operations Reserve will cover insurance deductible for any insurable losses. As the contingency reserve, RSR has minimum and maximum guidelines, as shown in Table 4 No min/max guidelines for the Rate Stabilization Reserve. As the contingency reserve, Operations Reserve has the minimum and maximum guidelines shown in Table 4. Guidelines for RSR (contingency reserve) defined as a percentage of annual sales revenue Guidelines for Operations Reserve (new contingency reserve) defined as a number of days of operations and maintenance and commodity expense Separate reserves are maintained for Gas Distribution and Gas Supply Funds Only one set of reserves will be maintained (in the Gas Distribution Fund) Maintain Central Valley Project Reserve Close Central Valley Project Reserve No Hydroelectric Stabilization Reserve Add Hydroelectric Stabilization Reserve to Electric Supply Fund The purpose of the Electric Special Project Reserve (formerly the Calaveras Reserve) is to fund significant projects that benefit electric ratepayers. No change Table 4 shows the contingency reserve guidelines under the current and proposed reserves structure. It shows the current minimum and maximum guidelines for the RSRs (the current contingency reserves), and the proposed minimum, maximum, and target guidelines for the Operations Reserves (the proposed contingency reserves). Note that the current and proposed policies use different methodologies for calculating the guidelines. Currently the guidelines are calculated as a percentage of revenue. Staff proposes to calculate reserve levels based on a number of days of O&M and commodity expense. To illustrate the difference, Table 4 shows the FY 2015 guideline levels as calculated under each methodology. City of Palo Alto Page 8 Table 4: Proposed Changes to Utilities Contingency Reserve Guidelines Current Policy Proposed Policy Contingency Reserve Name Guidelines (% annual sales revenue) FY 2015 Level ($000) Contingency Reserve Name Guidelines (days O&M / commodity expense) FY 2015 Level ($000) Electric Distribution RSR Electric Distribution Operations Reserve Minimum 15% 6,380 Minimum 60 6,594 Target N/A Target 90 9,892 Maximum 30% 12,760 Maximum 120 13,189 Electric Supply RSR Electric Supply Operations Reserve* Minimum 50% 31,668 Minimum 60 13,065 Target N/A Target 90 19,598 Maximum 100% 63,337 Maximum 120 26,131 Gas Distribution RSR Gas Operations Reserve Minimum 15% 3,154 Minimum 60 5,587 Target N/A Target 90 8,380 Maximum 30% 6,308 Maximum 120 11,174 Gas Supply RSR Reserve closed Minimum 25% 3,433 Target N/A Maximum 50% 6,866 Wastewater Collection RSR Wastewater Collection Operations Reserve Minimum 15% 2,343 Minimum 60 2,363 Target N/A Target 105 4,136 Maximum 30% 4,686 Maximum 150 5,909 Water RSR Water Operations Reserve Minimum 15% 5,103 Minimum 60 6,152 Target N/A Target 90 9,228 Maximum 30% 11,863 Maximum 120 12,304 *The proposed new Hydro Stabilization and Supply Operations Reserves together address the contingencies currently addressed by the Electric Supply RSR, which is why the Supply Operations Reserves minimums are lower than the current Supply RSR minimums. Commission Review and Recommendation The UAC reviewed the Financial Plans (including proposed changes to the reserves structure) at its March 26, 2014 meeting. At that meeting staff recommended a 4% increase in water rates based on the updates to the CIP forecast discussed above, and a projected 4% rate increase for the Wastewater Collection Utility to reduce subsequent year rate increases. The UAC voted 4-1 to recommend that Council approve the Financial Plans, modified to include no projected rate increases for the Wastewater Collection and Water Utilities. While the UAC understood why City of Palo Alto Page 9 staff was recommending a 4% rate increase for the water and wastewater utilities, and understood the potential for higher projected rate increases in the future without FY 2015 rate increases, several Commissioners felt that the community would not accept rate increases until more concrete information about future CIP costs was available. Aside from the recommendation that projected rates for the water and wastewater utility not increase in FY 2015, the UAC recommended approval of all other aspects of the Financial Plans, including the changes to the reserves structures. The draft minutes of the UAC’s March 26, 2014 meeting are provided as Attachment G. Timeline The Council will consider the UAC and Finance Committee recommendations at its June 16, 2014 meeting along with the FY 2015 Budget. Resource Impact The impact on revenues from changes in rates are described in the attached Financial Plans. Policy Implications The attached Financial Plans include RPs that will modify Council policy with respect to the structure of the financial reserves for the Electric, Gas, Wastewater Collection, and Water Utilities. These RPs replace the current reserve guidelines, which were last updated by Council in June 2009 (CMR: 281:09). There is no proposed change to Council policy with respect to the Electric Special Projects Reserve (formerly the Calaveras Reserve), which was last updated by Council in November 2011 (Staff Report #2160). Environmental Review The Finance Committee’s review of these Financial Plans does not meet the definition of a project, pursuant to Section 21065 of the California Environmental Quality Act, thus no environmental review is required. Attachments: Attachment A: Resolution Adopting Financial Plans (PDF) Attachment B: Electric Utility Financial Plan (PDF) Attachment C: Gas Utility Financial Plan (PDF) Attachment D: Wastewater Utility Financial Plan (PDF) Attachment E: Water Utility Financial Plan (PDF) Attachment F: Utilities Reserves Audit Findings and Recommendations (Excerpt) (PDF) City of Palo Alto Page 10 Attachment G: Excerpted DRAFT UAC Minutes of March 26, 2014 (PDF) 1 December2012 SUMMARYOFRESULTS REPORTHIGHLIGHTS Opportunitiesforimprovingandstrengtheningofinternal controlsareprovidedinthefollowingfindings: RECOMMENDATIONS TheOfficeoftheCityAuditor(OCA)recommends thefollowingactions: FINDING1:RateStabilizationReservesarenotconsistently maintained within Councilapproved guidelines.The City doesnotcurrentlyhaveaformal,comprehensivereserve policy for its utility funds. Key City documents show inconsistencyincommunicationoftheCity’sreservepolicy decisions.RateStabilizationReservebalanceswereoften outside of Councilapproved guideline ranges. Reserve balances are inconsistently reported and do not always reconcile, primarily due to the exclusion of Capital ImprovementProgram(CIP)carryforwardreserves. Establishing a more comprehensive reserve policy, with effectivesupportingprocedures,theCityCouncilandthe UtilitiesDepartmentcouldbenefitfromhavingclearcriteria tocommunicate,manage,andmonitorutilityreserves. FINDING2:CapitalImprovementProgramreservesarenot consistently and clearly reported to Council.The reports issued regarding CIP are not sufficient to adequately support effective financial and project planning. Improvements to the consistency and completeness of reporting CIP carryforward reserve balances could better supporttheCityCouncil’soperatingbudget,capitalbudget, andreservesprocesses. TheUtilitiesDepartmentshouldestabl ishformal andcomprehensivepoliciesandproceduresfor itsUtilityReserves. TheUtilitiesDepartmentshouldreevaluateand determinetheuseofreservebalanceguidelines, updatingtheCity’sresolutionandthelanguage inkeyCitydocumentsaccordingly. TheUtilitiesDepartmentshouldrevisititsannual riskassessmentmodeltodetermin e,establish, anddocume ntappropriatelevelsofutilityfund workingcapitalheldinunrestrictedreserves. The Utilities Department should revisit and update the 5year financial projection rate making worksheets to completely state all reservebalancesconsistentwiththeCity’skey financialdocumentsandimprovevisibilityover allunrestrictedreserves. The Utilities Department should develop a mechanism to consistently and clearly report Capital Improvement Program carryforward reservestotheoversightbodies. Thisdocumentrepresentsalimitedsummaryoftheauditreportand doesnotincludeallofthe informationavailableintheful lreport. Thefullreportcanbefoundonthe OfficeoftheCityAuditorwebsiteat:http://www.cityofpaloalto.org/depts/aud/audit_reports.asp OfficeoftheCityAuditor EXECUTIVESUMMARY–UTILITIESRESERVESAUDIT Summary of Audit Objectives: To assess the appropriateness and adequacy of utilities reserves, reservepolicies,reserveguidelines,andusageofreserves. Attachment A ATTACHMENT H EXCERPTED FINAL MINUTES OF THE MARCH 26, 2014 UTILITIES ADVISORY COMMISSION SPECIAL MEETING ITEM 3: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Approve the Fiscal year 2015 Electric, Gas, Wastewater, and Water Financial Plans and Reserve Management Policies Senior Resource Planner Jon Abendschein stated that staff was recommending that the UAC approve the Financial Plans, including the Reserves Management Practices. The Reserves Management Practices were the same that the UAC had reviewed in its previous two meetings, and involved changes to the structure of the reserves. He noted that the current financial forecasts had changed from the preliminary financial forecasts provided to the UAC in February. The biggest changes to the preliminary financial forecasts were for the Wastewater Collection and Water Utilities. The Water Utility was seeing increases in the cost of existing projects, including water main replacement projects. There were also uncertainties about the future costs for the water main replacement program, and costs had been increasing for this program. As a result, CPAU plans to perform a new CIP study in 2014. Staff recommended a 4% water rate increase in Fiscal Year (FY) 2015 to put the utility in a better position to deal with increased main replacement costs. The proposed increase would go into effect on November 1, 2014, which would give staff time to develop drought rates in the event the SFPUC called for mandatory 20% water consumption reductions at its April meeting. Staff also proposed a 4% wastewater rate increase to spread the Wastewater Collection Utility rate increases over five years rather than four. The rate increase would take effect at the same time as the water rate increase so that the Proposition 218 notice requirements could be coordinated. Public Comment Helen MacKenzie, President of the Garden Club of Palo Alto, noted that she sent a letter to the UAC and Council calling for a revision of water rates. She believed that residential customers were paying a disproportionate share of the water costs. The tiered rates were a penalty for residential consumption. Commercial customers paid a flat volumetric rate which provided no incentive to conserve water. She objects to the proposed rate increase since there was too much uncertainty to support the proposal. She noted that the communication with staff has been cordial and professional. Finally, she congratulated the City on receiving the water conservation award recently. Vice Chair Foster asked how long it had been since the City had gone a year without a water rate increase. Abendschein said that the last time would have been several years ago. Vice Chair Foster indicated that he supported no rate increase for water or wastewater in FY 2015 given the uncertainty in the CIP costs in general. He understood that with no rate increase in FY 2015, larger rate increases may be required in subsequent years. Commissioner Melton asked whether the reason for the Wastewater Collection rate increase was because it could be coordinated with the water rate increase. Abendschein said that the cost and time associated with Prop 218 noticing was substantial, so it made sense to coordinate with the Water Utility. Without a rate increase, the Wastewater Collection Utility would see 7% rate increases in future years, and a rate increase in FY 2015 could reduce future year rate increases. Commissioner Melton suggested that the UAC defer the decision until more information is known. Abendschein said that staff had done substantial analysis, and while they were not ready to put out firm numbers, they were confident that the risk of higher CIP costs was much higher than the possibility of lower CIP costs. Changing rates require substantial lead time, so it didn’t make sense to defer the decision. Commissioner Melton asked if decisions by the SFPUC about mandatory consumption reductions could change the ratemaking decision. Abendschein said that if drought rates were required rates would rise, but not revenues. The 4% increase was a revenue increase, while drought rates did not involve an increase in revenue. Drought rates recover the same revenue over a smaller number of sales units. Director Fong added that doing the 4% rate increase this year would mitigate the bill impacts in future years. Commissioner Hall, referring to wastewater, said that treatment costs are rising every year from 2014 to 2019 and it appears that the costs are rising substantially over that period. He asked why they are going up so high and so consistently. Abendschein said that the treatment costs are rising primarily due to planned CIP projects at the water quality control plant. Commissioner Hall stated that these are pass-through costs to the water utility and the utility is not able to control these costs. Abendschein said that the utility staff had influence just like the other partners in the Regional Water Quality Control Plant (RWQCP). Commissioner Hall stated that he would like to have more information on these costs to discuss them in detail and ideally hear from staff from the RWQCP. Abendschein noted that the financial plan describes these costs and that the City's Budget has additional information. Commissioner Hall stated that he would not support the 4% rate increase proposal. He noted that Palo Alto already had very high water rates, and staff needed to provide more analysis to demonstrate why rates were higher. Commissioner Hall said that there was not enough information to support the 4% water rate increase at this time. Commissioner Eglash stated that the report and analysis was excellent. He understood and sympathized with the proposal for a 4% rate increase, but stated that he could not support the proposal. It was realistic and rational to support rate increases due to current costs and even for known future costs. However, if the future costs were uncertain, he said that this was not a powerful enough reason to support a rate increase. He understood it was possible, and perhaps likely, that the increased CIP costs would materialize, and understood that a rate increase now would reduce future year rate increases, but that until the costs were certain an increase would be difficult to explain to the community. He did not support any rate increases for FY 2015. Chair Cook said that the report was excellent and noted that we do talk about the idea of smoothing rate increases over multiple years and this seems to be the reason for the rate increase proposal. He stated that it appeared that the rate increase was associated with costs that were not yet certain, so he was not comfortable with raising rates at that time. Commissioner Eglash commented that he wanted to make sure to commend staff for looking forward and for alerting the UAC to the potentially higher rate increases, and that his lack of support for the proposal was not intended as a criticism, but that more certainty in the magnitude of the future cost was required before the community could accept the increases. Commissioner Hall added that he agreed that staff was doing the type of forecasting it should be doing, but that the UAC had the burden of explanation to the community and that there was not enough information yet to justify the rate increase. Commissioner Melton wanted to know if staff would provide a next step decision on what it would be recommending to the Council. Director Fong stated that staff would have to consider its recommendation but was not prepared to make a decision that night. She suggested the possibility of working closely with a couple of Commission Members to allow further assessment of upcoming CIP costs, and she reminded Commissioner Melton that staff was beginning a study to firm up those costs. Commissioner Melton said those studies would take several months. Director Fong confirmed that was the case. Commissioner Melton said that the information would not be available for them to make decisions about FY 2015 rates. Director Fong noted that CPAU was able to do mid-year rate increases. Commissioner Melton asked whether it was possible to delay the decision on rate increases until the new information was available. Commissioner Eglash stated that his intent was to recommend 0% rate increases for FY 2015, and his expectation would be that staff would return with better information on CIP costs to enable them to set FY 2016 rates. If extraordinary information revealed a need to increase rates mid-way through the fiscal year, that was always something that could be done. ACTION: Commissioner Eglash moved to recommend that Council approve the Financial Plans for the Electric, Gas, Wastewater Collection, and Water Utilities, but with 0% rate increases for all utilities for FY 2015. Vice Chair Foster seconded the motion. The motion passed (4-1, with Melton opposed and Commissioners Chang and Waldfogel absent). FINANCE COMMITTEE DRAFT EXCERPT Page 1 of 5 Special Meeting April 15, 2014 4. Utilities Advisory Committee Recommendation that Council Adopt a Resolution Adopting the Electric, Gas, Wastewater Collection, and Water Utility Financial Plans Jon Abendschein, Senior Resource Planner reported the Financial Plans presented plans for the next several years for each Utility; a set of Reserve Management Practices meant to replace previously adopted management practices; and some changes to the Reserve structures. All of which were discussed at the Finance Committee's (Committee) March 2014 meeting. The Financial Plans contained a zero percent recommended rate increase, consistent with the recommendation of the Utilities Advisory Commission (UAC). In Staff's recommendation to the UAC, Staff proposed a four percent rate increase for Wastewater Collection and Water Utilities in order to reduce future rate increases by spreading the rate increases over more years. Uncertainty in future capital costs were another reason for the recommendation. The UAC indicated future year rate increases were manageable with a zero percent rate increase even with higher future capital costs, and recommended determining future Water Utility Capital Costs before raising rates. To determine those costs, Staff was conducting a study of the Water Distribution System to establish the correct rate of water main replacement and was redesigning replacement projects in hopes of soliciting more competition and obtaining lower costs. Staff was also planning a Seismic Study on larger concrete transmission pipes to determine whether sections of the system needed relining or replacing. By the end of 2014, Staff expected to finish the seismic evaluation of transmission lines and have preliminary results of the distribution System Study. If the Committee recommended adoption of the Financial Plans, then Staff planned on presenting them to the Council with the Budget for adoption. Garth Hall, Utilities Advisory Commissioner, indicated the UAC supported Staff's recommendations for modifying Reserve Management Practices. Staff identified that costs for Electric and Gas Utilities could be sustained for Fiscal Year (FY) 2015 without a rate increase. The UAC did not support a four percent increase in rates for Wastewater Collection and Water Utilities because there was insufficient time to validate whether those cost trends justified a rate increase. Cost trends resulted in potential water rate DRAFT EXCERPT Page 2 of 5 increases for FY 2016 and beyond. The UAC felt it was practical to increase Wastewater Collection rates when Water Rates increased. Typically the UAC was not exposed to Wastewater Treatment costs when reviewing Wastewater Rate increases. The UAC requested Committee direction for future Wastewater Rate increases regarding whether to accept treatment costs as provided or to review and validate them. Herb Borock noted Staff included in its recommendation to the UAC a rate increase for Water and Wastewater Collection Utilities; however, the Agenda Item title for the Committee did not include that explanation. That did not satisfy Brown Act requirements. He did not believe approving Financial Plans that included plans for future year rate increases satisfied the requirement that the Council initiate Proposition 218 ratepayer approval process. Jessica Mullen, Senior Deputy City Attorney indicated the City Attorney's Office reviewed Agenda titles and determined they were properly noticed. From a Brown Act perspective, the Item was properly agendized. Rates embedded in the presentation were projected rate increases for discussion purposes. If a rate increase was proposed, the Item returned to all Committees for review and notice under Proposition 218. Vice Mayor Kniss confirmed this was a plan and that there were two different ideas for this plan. Mr. Hall understood there was one plan, which was Staff recommendation of a zero rate increases across all four Utilities and adoption of the Financial Plans including the reserve fund structures. Vice Mayor Kniss inquired whether the UAC was comfortable with that. Mr. Hall responded yes. Council Member Burt suggested Staff indicate in the summary of future Staff Reports a recommendation of a rate increase. Staff needed to elaborate on replacing versus relining pipes and designing main replacement to solicit more competition and lower costs. Tomm Marshall, Assistant Director of Engineering explained that the transmission line to the reservoir located in the Foothills was a concrete pipe. Staff was reviewing whether to reline part or all of the line, so that in a seismic event, the pipe remained intact. Staff planned on conducting a study and obtaining recommendations as to whether it could be relined or had to be replaced with pipe resistant to seismic events. DRAFT EXCERPT Page 3 of 5 Council Member Burt inquired about the need for Staff to reexamine the approach to designing main replacement. Mr. Marshall reported Staff was reviewing the possibility of using high density polyethylene pipe. Staff planned on considering other types of pipe and making decisions based on long-term availability of the system and longevity of the system. Polyethylene pipe was more expensive on the front-end, but it provided a longer service life. Council Member Burt asked if that was a part of the cast iron main replacement program that began in 1992. Mr. Marshall indicated cast iron mains were being replaced with different types of plastic pipes. Council Member Burt inquired about the progress of the replacement program Mr. Marshall stated Staff had completed a significant portion of the replacement project. If replacement continued at the current pace, it was scheduled to be completed by 2020. The number of leaks decreased considerably in the last 20 years and Staff attempted to ensure the City obtained as much life from the current system as possible. Council Member Burt noted that the City was in the normal range on water leakage, while Santa Clara County was below average. He assumed Staff reviewed the tradeoff of capital investment versus commodity loss. Mr. Marshall believed that was a Risk and Reliability Assessment. That amount of water loss was not a result of leakage. Staff was balancing that with capital costs. Council Member Burt remarked that the difference was appreciable. Mr. Marshall explained there was a difference between lost water and unaccounted for water. Council Member Holman felt a more specific Agenda Item title would capture the attention and interest of the public. The Staff Report did not mention reserve adjustments. Line replacements ended in 2020; yet, the projected rate adjustments extended through 2019. Mr. Marshall reported replacements did not end. The replacement of cast iron pipe was to be complete in 2020. Another group of pipes needed replacing after cast iron pipes. DRAFT EXCERPT Page 4 of 5 Council Member Holman noted the rise in Water Utility rates were based on investment in infrastructure. She asked if there was a method to project whether rates would decrease after 2019 or 2020. Mr. Abendschein believed there was a misconception that higher spending at the current time was short-term or temporary. There were two major infrastructure investments occurring: the Palo Alto system and the Hetch Hetchy system. The Hetch Hetchy project was funded through debt, and that debt was issued over the course of several years. He said that by 2020, most of the debt would have been issued; therefore, rates would stabilize but would not decrease. The City's capital spending was stable, and Staff expected spending to change slightly depending on the results of the study, but no large future decrease in annual capital investment was expected. Council Member Holman inquired about charging a higher rate to outlying areas of the City as rates were based on cost of service. Mr. Abendschein explained that one of the major reasons for having pipes in outlying areas was to reach reservoirs in the Foothills. Mr. Marshall added that the reservoirs in the Foothills provided fire protection in case of a catastrophic event. The whole system benefited from those pipes. Council Member Holman asked if those pipes were commingled with the delivery system on a day-to-day basis for utility users in the outlying areas. Mr. Marshall answered yes. The City utilized those pipes and reservoirs daily to maintain potable water. Chair Berman inquired whether rates would stabilize rather than decrease because of Hetch Hetchy and City infrastructure improvements. Mr. Abendschein replied yes. Chair Berman asked if rates would stabilize once all bonds were issued to finance Hetch Hetchy infrastructure improvements. Mr. Abendschein responded yes. Council Member Burt inquired whether the stabilization of rates projected for 2021 indicated that rate increases were not a result of the City's infrastructure maintenance or replacement program. DRAFT EXCERPT Page 5 of 5 Mr. Abendschein answered yes, though there was some uncertainty regarding the necessary future spending levels for the City's infrastructure program. Council Member Burt suggested Staff consider whether slowing the pace of infrastructure projects between FY 2016-2020, in effect moving some work into FY 2021-2025, reduced rate increases in FY 2016-2020. Staff did not need to respond as they did not have costs for infrastructure improvements and the consequence of slowing the pace of work. MOTION: Vice Mayor Kniss moved, seconded by Chair Berman that the Finance Committee recommend the City Council adopt a Resolution adopting the Electric, Gas, Wastewater Collection, and Water Financial Plans. Council Member Burt felt the Motion should state there were no rate increases for any of the utilities in FY 2015 because the community needed to be made aware of that fact. Vice Mayor Kniss asked if that was included in the Motion. Council Member Burt replied no. MOTION PASSED: 4-0 City of Palo Alto (ID # 4585) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/9/2014 City of Palo Alto Page 1 Summary Title: Approve Contract Amendment with Alta Planning +Design for Bike Bridge Title: Approve and Authorize the City Manager or his Designee to Execute Contract Amendment No. 2 to Contract C10135025 in the Amount of $336,172 with Alta Planning + Design, for Preliminary Design and Environmental Assessment Services for the Pedestrian & Bicycle Overpass at Highway 101 (CIP PE-11011) From: City Manager Lead Department: Public Works Recommendation Staff recommends that the City Council approve and authorize the City Manager or his designee to execute,Amendment No. 2 (Attachment A) in the amount of $336,172 to Contract No. C10135025 with Alta Planning + Design, for a total not to exceed amount of $713,800,for completion of additional studies and environmental analysis required by Caltrans for the Highway 101 at Adobe Creek bicycle and pedestrian overcrossing. Executive Summary This report provides a project update and identifies the milestones necessary to complete the environmental assessment and initiate a design competition. Delays in completing the environmental assessment have occurred due to the need for additional studies required for National Environmental Protection Act (NEPA) environmental compliance. NEPA certification is required for the project as $4 million of the project construction funding will be coming from federal grant funds being administered by Caltrans. In June 2013, staff projected that construction of the project would be completed in Spring 2017. The current schedule anticipates completion in Summer 2018. City of Palo Alto Page 2 Additional analysis has focused on documenting potential impacts at the southwest corner of the bridge connection within the baylands next to the San Francisco Bay Trail adjacent to Adobe Creek. The additional studies initiated last summer and fall are being finalized for submittal to Caltrans for their review. In order to compensate the consultant for these extra studies, staff reassigned tasks from the contract to perform the additional studies. At this time, staff is requesting approval of a contract amendment with Alta Planning + Design to allow completion of the remaining project environmental and planning work. The construction footprint for bridge alignments has been informally vetted with Caltrans and other partner agencies. Background Council authorized a contract with Alta Planning + Design in Spring 2012 for preliminary design and environmental assessment of the Adobe Creek overcrossing.The contract scope of work included an environmental assessment of bridge alternatives and a feasibility study of a closed section of the Adobe Creek Reach trail between West Meadow and West Bayshore Roads, as follows: ·Review of structural bridge types, preliminary design, cost options and constructability review of bridge alternatives over the freeway with various bridge ramp configurations ·Arborist, geotechnical, hazardous materials and traffic study reports ·Recommendation based on environmental analysis and community feedback of bridge options ·Feasibility, conceptual design and cost estimates to install a bike trail along Adobe Creek The City included a NEPA process in the scope of work in order to allow the City to seek both state and federal funding. Following the project’s September 2012 public scoping meeting that was attended by Caltrans, the City and Caltrans staff agreed that the following studies would be added to Alta’s scope of work to satisfy NEPA requirements: ·Environmental Commitments Record, Visual Impact Assessment ·Paleontology Study ·Section 4 (f) letter documenting park impacts ·Natural Environment Study Report City of Palo Alto Page 3 ·Hazardous Waste Initial Site Assessment ·Joint CEQA/NEPA environmental checklist to streamline environmental review These studies were authorized by City staff using the Alta contract’s Additional Services budget. In early 2013,Caltrans requested that a Historic Properties Survey Report and Archeological Survey Report be completed. These studies were also initiated using the Additional Services budget. In June 2013, staff updated City Council on the project status and schedule, and obtained Council approval to conduct a design competition to determine the bridge design. Staff also informed Council that $4 million in federal grant funding had just been awarded to the project through the One Bay Area Grant (OBAG) program. At that time, it was expected that the environmental review would be completed in December 2013, and staff planned to return to Council following its summer break with the design competition details. Although much of the Additional Services budget had been expended by the requests for additional studies, at the time of the June 2013 Council update staff believed that the project was on track to complete the environmental review process as scheduled. Over the Summer of 2013, as Caltrans began reviewing the reports that had been completed, Caltrans staff raised concerns that further studies were needed to properly evaluate the project. These concerns stemmed from the Baylands setting of the proposed east landing, and also resulted from review of reports by specialized staff within the Caltrans organization who had not been involved in the earlier discussions about the reports that were needed. Over the course of several months, the following reports were requested: ·Natural Environment Study revisions, including new Biological Assessment ·Complete Arborist Report ·Preliminary Jurisdictional Wetland delineation ·Noise Impacts Evaluation Technical Memorandum ·Floodplain Hydraulic Study & Floodplain Encroachment Report ·Water Quality Assessment Report ·Preliminary Storm Water Data Report ·Transportation Management Plan Report City of Palo Alto Page 4 Additionally, Caltrans requested that the City prepare a Design Exception Fact Sheet, Traffic Management Plan, Utilities Right-of-Way Data Fact Sheet, and Initial Risk Management Plan, and conduct soil borings and testing that were initially planned to be part of a later design phase and were not included in the original preliminary design scope of work. Since Summer 2013,City staff have been in ongoing discussions with Caltrans about the additional requested studies and their associated schedule impacts. Work on many of the reports has already been authorized by administratively moving funds within the existing contract with Alta. Finalization of Amendment No. 2 to the Alta contract has also been delayed due to the need to replace the original environmental assessment subconsultant, who had proposed what staff believed to be highly excessive fees for the additional work, and to secure additional subconsultants for the biological assessment work who have expertise in the Baylands area and are trusted by Caltrans and the relevant regulatory agencies. Staff also wished to secure the informal vetting of the Baylands-area bridge landing that resulted from the March 2014 site visit of staff from the various regulatory agencies, as further described later in this report. City staff has also been in discussions with the Santa Clara Valley Transportation Authority (VTA), who have extensive experience with similar bridge projects within the state right-of-way, and recommends entering into a cooperative agreement with VTA. The agreement would provide VTA’s expertise to help streamline project approvals; provide peer review and technical assistance; and serve as a liaison with agencies such as Caltrans, state and federal Fish and Wildlife when needed. This support will reinforce the City’s efforts to maintain and obtain the required agency approvals. Staff had intended to bring a cooperative agreement for Council approval with the Alta contract amendment, but needed to bring the amendment to Council prior to finalizing the agreement to avoid further project delays. Staff plans to return soon to Council with a cooperative agreement with VTA that is expected to include a fee of approximately $50,000 to provide the services listed above. Discussion Amendment No. 2 to Alta Contract The current contract allows the City to proceed with Alta for a second amendment to their scope of services. City of Palo Alto Page 5 Scope for the second amendment includes: ·Additional project management to respond to Caltrans information requests in 2013 and to complete this phase; ·Adobe Creek environmental analysis; ·Additional design reports and design competition guidelines; ·Caltrans special studies, design and technical reports requested in 2013; and ·Two year time extension to the contract to complete the project environmental and preliminary design phase. All studies require Caltrans approval before the draft EIR/EA is circulated to the public. Alta’s revised scope was reviewed by Caltrans and contains the necessary work to complete the EIR/EA by the end of 2015. This significantly impacts the project timeline,primarily by adding time for Caltrans review of reports reflected in greater detail in the new project schedule. However, removal of some slack in the previous schedule and continuation of design during the completion of the environmental review process result in an overall expected project delay of about 15 months, as compared to the 2 year delay in the environmental review. Agency Coordination After discussions with Caltrans staff last summer and fall, in November 2013, HT Harvey and Associates, sub-consultant to Alta, began additional analysis on potential baylands impacts to habitat and species such as the Tar Plant, Salt Marsh Harvest Mouse and the California Clapper Rail. Caltrans, consultants and staff met on site in February to review the preliminary information. This was followed with an informal multi-agency site meeting in March 2014 with staff from Caltrans, the State and Federal Fish and Wildlife Services, the Regional Water Quality Control Board, and the Santa Clara Valley Transportation Authority (VTA). No apparent significant bridge construction footprint impacts to special status plants or species are likely to be identified within the various bridge alignments. Staff now has preliminary agency input that the baylands southwest corner may be used for a bridge/trail connection. See Attachment B for the proposed project boundary. Design Competition City of Palo Alto Page 6 The design competition was expected to begin in summer 2013. This timing was based on the anticipated completion of the environmental studies in late 2013. The project delay caused by the need to complete additional studies has also delayed the initiation of the design competition. However, the preliminary agency and community input on the alternatives now provides the basis to use bridge alignment 1 for the competition as anticipated, and the design competition can now commence.The competition will run in tandem with the environmental analysis. Staff will return with a professional services agreement with the American Institute of Architects California Council (AIA CC) to manage the competition. The cost to manage a nine month process to solicit local, national and international designers, as presented to Council in 2013, is estimated at $150,000. The AIA CC will partner with the San Francisco and Santa Clara chapters to market the competition and solicit local designers. Resource Impact Funds for this project are included in the Highway 101 Pedestrian/Bicycle Overpass Project Capital Improvement Program Project,PE-11011. Funds for the Adobe Creek feasibility study are included in the Transportation and Parking Improvements Capital Improvement Program Project, PL-12000. Table 1: Alta Contract Funding FUNDING PE-11011 673,800$ PL-12000 40,000$ TOTAL =$713,800 Grant funding has been secured to fund $8 million of the $10 million total project cost. Previous budget appropriations to the project and the anticipated Council infrastructure funding plan are expected to fully fund the project at the $10 million project cost. However, staff remains attentive to potential public-private partnerships and additional grant opportunities that may further offset project costs. Table 2 below summarizes the project funding sources that total $10 million. Table 2: Project Funding Sources Source Funding Santa Clara County Recreation Trails $4 million City of Palo Alto Page 7 program grant OneBayArea Grant program $4 million City funds (CIP appropriations and Council infrastructure funding plan) $2 million Sum:$10 million It is important to note that the $10 million total project cost is a planning level estimate that is now several years old. The estimate does not include construction cost inflation, the current higher cost bidding environment, or the likely cost impacts of building in the Baylands area. Although the proposed contract amendment represents an approximate $300,000 increase to design costs, staff is not proposing an increase to the total project cost estimate from the increase because the base estimate is not precise enough to reflect such changes. Policy Implications The project is consistent with the goals, policies and programs of the Comprehensive Plan. Goal T-3 Facilities, Services and Programs that Encourage and Promote Walking and Bicycling Goal T-14 Improve pedestrian and bicycle access to and between local destinations, including public facilities, schools, parks, open space, employment districts, shopping centers, and multi- model transit stations. Timeline Staff anticipates the preliminary design and environmental assessment to be completed in early 2016,depending on input from regulatory agencies, City Council, boards and commissions, and the community. An environmental impact report (EIR) and an environmental assessment (EA) will be prepared for this project in compliance with CEQA and NEPA accordingly. The tentative project milestones to complete the project are as follows (see Attachment C for a detailed tentative schedule): ·Commence design competition (Summer 2014) City of Palo Alto Page 8 ·Meetings with community and project review by Architectural Review Board, Palo Alto Bicycle Advisory Committee, Parks and Recreation Commission, Planning and Transportation Commission (2014-2015); ·Preparation of 15% design, design guidelines, alternatives, estimates and environmental studies (Spring 2014; expected to be received in late June) ·Complete design competition process/enter into design contract (Early 2015) ·Public Circulation of Draft EIR /EA (Spring 2015); ·Environmental assessment and Planning and Transportation Commission review (Summer 2015); ·Circulation of Final EIR/EA/Complete Public Review (End of 2015); ·Completion of 35% preliminary design, estimates and environmental assessment (Summer 2015); ·Completion of 100% design and construction bid documents (Fall 2016) ·Begin Construction (Early 2017) ·Complete Construction (Summer 2018) The timeline is largely driven by multiple Caltrans and regulatory agency reviews that occur throughout the environmental review and design process. Staff has used standard Caltrans review times to build the schedule, but will work closely with Caltrans and the regulatory agencies to expedite the reviews wherever possible so that the project can be delivered to the public at the earliest time. Environmental Review The approval of this contract amendment is not a project for CEQA purposes, so no environmental review is required for approval of this consultant agreement. Yet this contract does contemplate and includes environmental review for both CEQA and NEPA purposes in regard to the task to be performed. CEQA and NEPA require that the assessment identify and discuss significant environmental effects that cannot be avoided if the proposed bridge project is implemented, and CEQA and NEPA will be addressed at that time. Attachments: ·A -Amendment No. 2 signed by ALTA (PDF) ·B -Project Boundary Map (PDF) ·C -Project Schedule (PDF) Attachment A AMENDMENT NO.2 TO CONTRACT NO. C10135025 BETWEEN THE CITY OF PALO ALTO AND ALTA PLANNING + DESIGN This Amendment No.2 to Contract No. C10135025 ("Contract") is entered into on February 24, 2014 by and between the CITY OF PALO ALTO, a charter city and a municipal corporation of the State of California ("CITY"), and Alta Planning + Design, a corporation in the State of California, located at 2560 9th Street, Suite 212, Berkeley, California 94710 ("CONSULTANT"). R E CIT A LS: WHEREAS, the Contract was entered into between the parties for the provision of profession consulting design services for the Highway 101 underpass/overpass pedestrian/bicycle feasibility study ("Project"); and WHEREAS, the parties wish to amend the Contract to increase the scope of services, schedule of performance and compensation; NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the parties agree: SECTION 1. Section 1, SCOPE OF SERVICES is hereby amended to add the following: Consultant shall perform the services described in Exhibit "A" as revised in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of the CITY. SECTION 2. Section 3, SCHEDULE OF PERFORMANCE, is hereby amended to add the following: Time is of the essence in the performance of services. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit "B", as revised, attached to and made part of this Agreement. Any Services for which times for performance are not specified in the Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner 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 the CONSULTANT. SECTION 3. Section 4, NOT TO EXCEED COMPENSATION, is hereby amended to read as follows: The compensation to be paid to CONSULTANT for performance of the Services described in exhibits "A", including both payment for professional services and reimbursable expenses, shall not exceed three hundred six thousand one hundred seventy two dollars ($306,172.00). In the event 1 140221 smOIO Additional Services are authorized, the total compensation for services and additional and , reimbursable expenses shall not exceed three hundred thirty six thousand one hundred seventy two dollars ($336,172.00). The applicable rates and schedule of payments are set out in Exhibit "C" and "C-1", as revised, which are attached to and made part of this Agreement. Additional Services, if any, shall be authorized in accordance with and subject to the provisions of Exhibit "C" and Exhibit "C-1". 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 ItA". SECTION 4. Section 12, SUBCONTRACTING, is hereby amended to read as follows: Notwithstanding Section 11 above, CITY agrees that sub-consultants may be used to complete the Services. The sub-consultants authorized by CITY to perform work on this Project are: 1. Mark Thomas and Company 2. Dudek, ESA and HT Harvey & Associates 3. Parikh 4. Rodkin & lllingsworth 5. Wreco -Transportation, Civil and Structural Engineering, Survey Support -Environmental Analysis -Geotechnical Engineering Support -Noise -Hydraulics CONSULTANT shall be responsible for directing the work of any sub-consultants and for any compensation due to sub-consultants. CITY assumes no responsibility whatsoever concerning compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a sub- consultant. CONSTULANT shall change or add sub-consultants only with the prior approval of the city manager or his designee. II SECTION 5. Section 13, PROJECT MANAGEMENT, is hereby amended to read as follows: . _=' C0NSUL TANT will assign Randy Anderson as the project director to have supervisory responsibility ,;' ' ,." ".; r • for the performance, progress and execution of the Services and Casey Hildreth as the project coordinator 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 adequate or timely completion of the Project or a threat to the safety of person or property. The CITY's project manager is Elizabeth Ames, Public Works Department, Engineering Services Division, at P.O. Box 10250, Palo Alto, CA 94303, Telephone: 650.329.2502. The project manger will be the point of contact with respect to performance, progress and execution of the Services. The project engineer is Hung Nguyen, Telephone: 650.329.2548. The CITY may designate an alternate project manager from time to time. 2 140221 smOlO SECTION 6. The following exhibit(s) to the Contract is/are hereby amended to read as set forth in the attachment(s) to this Amendment, which are incorporated in full by this reference: a. Exhibit "A" entitled "SCOPE OF SERVICES". b. Exhibit "B" entitled "SCHEDULE OF PERFORMANCE". c. Exhibit "C" entitled "COMPENSATION". d. Exhibit "C-1" entitled "HOURLY RATE SCHEDULE". SECTION 7. Except as herein modified, all other provisions ofthe 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 APPROVED: City Manager APPROVED AS TO FORM: Senior Asst. City Attorney Attachments: EXHIBIT "A": SCOPE OF SERVICES EXHIBIT "B": PROJECT SCHEDULE EXHIBIT "C": COMPENSATION EXHIBIT "C-111; HOURLY RATE SCHEDULE 14022] smOIO ALTA PLANNING + DESIGN 3 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 EXHIBIT A City of Palo Alto Highway 101 Pedestrian/Bicycle Overcrossing Preliminary Design & Environmental Assessment / Adobe Creek Reach Trail 15% Design Scope of Work Revised 112014 (Amendment No.2) This revised scope of work modifies, clarifies, and supersedes the City of Palo Alto Highway 101 PedestrianlBicycle Overcrossing Preliminary Design & Environmental Assessment! Adobe Reach Trail Feasibility Study & 30% Design Scope of Work, dated May 24, 2012. The following scope of work is necessary to address changes to the project and environmental review process that have occurred since work began on the project in 2012. General InformationJBackground The Highway 101 PedestrianlBicycle Overcrossing Feasibility Study was completed and approved by the City Council in November 2011. The result of the feasibility study was the preference for an overcrossing at the Adobe Creek location to provide year-round access for pedestrians and cyclists over Highway 101. Integral to the bridge overcrossing design is the desire for a trail connection along Adobe Creek from the existing seasonal underpass to E. Meadow Drive utilizing the existing Santa Clara Valley Water District (SCVWD, or "Water District") maintenance road. To ensure appropriate integration and coordination, both the bridge and trail are included in "the Project." The next steps for implementation of the Project are to refine and evaluate bridge alignment!design alternatives; identify a preferred alternative with community input; prepare initial trail plans, conduct environmental review, initiate the Caltrans permitting and approval processes, and develop a memorandum of understanding with the Water District. Environmental and design considerations developed within this phase will also be used as the basis for a separate bridge design competition led by the City. The City, as 10ca1lead agency, and Caltrans, as acting federal lead agency, initially determined that the proposed Highway 101 pedestrian/bicycle bridge at Adobe Creek warranted completion of a joint California Environmental Quality ActlNational Environmental Policy Act (CEQAlNEPA) compliance document. This decision has been validated by the subsequent award of federal transportation funds associated with the Valley Transportation Authority's OneBayArea grant program (OBAG), which formally triggers the NEP A process. Because this project crosses over Highway 101, a Caltrans facility, the project must comply with Caltrans procedures as outlined in the Caltrans' Project Development Procedures Manual (PDPM) dated September 29, 2011. Upon review of this manual and in consultation with Caltrans staff, this project is expected to require the development and approval of a Permit Engineering Evaluation Report (PEER) in addition to the joint NEP A/CEQA document. Only portions of the PEER evaluation are included in the current scope of work. Alta Planning + Design City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 Services Alta Planning + Design will serve as the Prime Consultant and provide project management, planning, design, public outreach, and data collection services. Mark Thomas and Company, Inc. (MTCo) will provide engineering, survey, and structural design services including Caltrans coordination. ESA, HT Harvey & Associates, and Dudek will provide environmental documentation services along with technical support from Rodkin & lllingsworth (Noise), Wreco (Hydraulics), and Parikh Consultants (Geotechnical). The Consultant team will be mentioned as "Consultant" hereafter. Consultant services will consist of preliminary design & engineering, public involvement, and evaluation of three feasible overcrossing alignment alternatives within the vicinity of Adobe Creek, followed by the development and support of a preferred alternative to support environmental review and the bridge design competition. Ajoint CEQAlNEPA environmental assessment will be conducted along with data collection of pedestrian, bicycle, motor vehicle, and leisureirecreational activities and needs to inform the project's basis of design, outreach, and mitigations. Initial design development of the proposed Adobe Creek Reach Trail will also be performed along with coordination with the Water District on a long term maintenance and management strategy. Specific elements and deliverables of the current scope of work are provided below. Task I-Project Initiation / Management Task 1 includes project kickoff and scoping activities, ongoing project oversight, and an initial site visit to collect data from which decisions can be made. Task 1.1 Project Kickoff/Scoping An organization and scoping meeting will be held with staff and others (asdirect,ed) to: a. Introduce key staff accessible to the consultant team b. Review objectives of the project c. Review scope of services d. Confirm project area limits e. Collect available data and published materials f. Establish meeting and presentation schedule g. Establish communication channels with other departments h. Review and list State and Federal required elements 1. Review and list all applicable design and planning standards j. Coordinate with City departments and other agencies Task 1.2 Project Management This task includes overall project oversight and quality control, as well as regular meetings/calls with the Public Works Department, other City departments and agencies, sub consultants, and potential vendors. The Consultant shall prepare a detailed schedule for the immediate and potential final design processes. Project coordination activities will result in a comprehensive project work plan, schedule, submittals, project meetings, and agendas, minutes and information. This schedule will be monitored and updated as the project progresses. Throughout the duration of design of this project, the Consultant Team will coordinate and communicate with the following entities as needed: • • City of Mountain View, City of East Palo Alto, City of Palo Alto (other departments) Agency stakeholders [Caltrans, Santa Clara Valley Water District (SCVWD), Pacific Gas & Electric (pG&E) and other utility providers, US Army Corps of Engineers (Army Corps), San Francisco Bay Conservation and Development Commission (BCDC), and the Valley Transportation Authority (VTA)] Alta Planning + Design 2 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 '. Others as identified by Consultant and City Task 1.3 Site Visit The Consultant Team will conduct a site visit and inventory of the overcrossing and project area that will include site photography, assessment of traffic, bicycling patterns, pedestrian/leisure activities, aerial utilities, mature vegetation, drainage, and other features and information. These activities will result in a site analysis diagram to be used for decision-making throughout the preliminary design phase. Task 1 Deliverables: • Project schedule and work plan (through final design phase) • Project coordination including regular City Public Works meetings/calls, schedule tracking and updates, agendas, meeting minutes and document preparation for each task • One kickoff meeting / One site investigation meeting Task 2 -Survey & Site Investigation 2.1 Base Mapping & Initial Topographic Survey The Consultant shall provide topographic mapping for the project limits of-the Adobe Creek Overcrossing and Reach Trail projects, at 1"=40' scale with l' contours. The Consultant shall prioritize the collection of existing survey data from Caltrans, including for the Highway 101 Auxiliary Lane Project, and perform conform topographic surveys to supplement existing base survey information at locations where elevations of features need to be more precisely determined for design purposes. 2.2 Utilities The consultant shall survey the locations of surface-visible utilities not shown on existing maps and provide inverts of accessible gravity utilities along the two frontage roads. The Consultant shall consult with PG&E to determine the feasibility of raising the existing 60kV lines and necessary horizontal and vertical clearance distances. For activities requiring work on land not controlled by the City, the Consultant will obtain the necessary written permission to 'enter the premises. 2.3 Right of Way Sufficient street monuments will be located so that the right-of-way lines of Highway 101 and the adjacent properties of the parcels affected by the proposed crossing may be geo-referenced to the topogmphic surveys. Right of way determination will be based on the locations of these monuments along with title reports, available maps and documents from Santa Clam County Official Records and Caltrans records. Property ownership will be based upon title reports and Assessor's information. Plat exhibits and legal descriptions for parcel acquisitions, including tempomry construction easements, shall be prepared by the Consultant. It is assumed that only Assessor's Parcel Number 127-10-103 may be affected by acquisition, and the maximum number of plats and legal descriptions is two. Task 2.4 Preliminary Geotechnical Report Consultant shall prepare the Preliminary Foundation Recommendation Report for the Bridge (Advanced Planning Study (APS) Report. The potential geotechnical/geologic impacts and mitigations will be discussed on a broad basis including but not limited to geology, seismic impacts, groundwater conditions, etc. for the proposed structure foundations. Generally, the geotechnical issues relevant to the proposed project are presented in a qualitative manner with no specific design recommendations. Certain design assumptions are made as to the type of foundations, approximate pile lengths and approximate slope angles. These are helpful in defming the overall design and evaluating the cost impacts. The report will be based Alta Planning + Design 3 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 on site review and readily available data including as-built Log of Test Borings from existing projects and other Caltrans records. No field exploration work will be completed at this time. Task2.4b Soil Borings and Lab Testing (Optional) A preliminary geotechnical report was prepared for the project as part of the original scope of work. This report investigates general soil conditions, soils engineering properties and recommendations for foundation support of the proposed structure based on readily available data including as-built Log of Test Borings from any past projects. Caltrans may recommend additional field exploration (boring) and laboratory testing to further determine soil properties and design recommendations. This exploration may require permits, and shall be performed under the direction of a field engineer or geologist, who will classify and continuously log the soils encountered during drilling, and supervise the collection of soils at various depths for visual examination. A placeholder task item and fee estimate have 1?een provided to perform limited boring and testing activities (estimated for up to three locations) if requested by the City to help inform the Project. If exercised by the City, the Consultant shall prepare a more detailed fee based on a confirmed scope/extent determined by Consultant and City. Task 2.5 Prelimlnary Environmental Review Project Description A detailed description of the proposed project shall be developed in consultation with the City to form the basis for future environmental assessment. The project description shall include the assumed physical characteristics of the proj ect, including proposed width and height of overpass, area of footings, etc. Maps and graphics of the general project alignment shall be included to illustrate the text. The project description shall be refmed based on selection of a preferred alignment for proceeding with Tasks 5 and 6. Phase I Initial Site Assessment The Phase I Initial Site Assessment (ISA) study shall focus on the proposed crossing and related improvements only. The ISA shall be prepared to identify potential hazardous waste sites and evaluate environmental factors that may have impacted the soil groundwater quality at the site. The study shall include data collection (VISTA report) and documents research including historical land use based on study of aerial photographs !II1d other relevant agency documents. No field exploration and/or testing are proposed in this subtask. The potential for hazardous materials shall be assessed to include potential impacts and mitigation measures discussed on a broad basis including but not limited to an evaluation of: • • potential for soil conditions to include aerial deposited lead, metals and petroleum hydrocarbons within project boundaries . Investigate soil within, project boundaries, to determine if soil should be classified as a hazardous waste in accordance with California Code of Regulations, Title 22. Initial Environmental Assessment The Consultant shall evaluate each alternative project layout and identify potential environmental constraints to assist in the determination (and evaluation) of the community preferred project alignment. This evaluation shall assume complete build-out of the Route 101 auxiliary lanes and the Adobe Creek Reach Trail. The evaluation shall also consider potential impacts from nearby land use changes in the FabianlMeadow Circle and Shoreline sub-areas, and other projects and factors identified by the City and Consultant. Alta Planning + Design 4 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 The discussion of potential environmental impacts at each location would be refined at this stage of the planning process and information that has been developed on alignment footprints. Subterranean impacts will also be considered at this stage, as will any suggested mitigation for likely environmental impacts. The initial discussion of impacts would be refined to the level of a CEQAINEP A annotated outline approved by Caltrans from November 2012 .in Task 6. . Visual Impact Analysis Consultant shall prepare a draft and final Visual Impact Assessment Report (VIA) for up to three potential alignments, in conformance· with Caltrans standards. Task 2.6 Traffic and Circulation Study Corisultant shall develop a traffic and circulation technical memorandum that shall include an assessment of bicycle/pedestrian and traffic counts (including an assessment of seasonal variation), a summary of existing parking supply and utilization within the project area, and a description of conformance to local and regional transportation plans and policies. Preliminary identification oftemporary construction impacts and development of an initial Highway 101 traffic control plan shall also be prepared using bridge assumptions developed in coordination with the City. The description of impacts and traffic control plan shall be revised in Tasks 5 and 6 upon selection and refinement of a preferred alignment. This subtask includes the following activities: • Manage and incorporate seasoni;ll bicycle/pedestrian counts • • • • • • • Conduct parking occupancy surveys (detailed scope to be determined in coordination with City staff) for the perimeter parking as well as in the adjacent neighborhoods near the proposed overcrossing (up to ~ mile from project area) Review and synthesize the following information: City of Palo Alto Highway 101 Pedestrian/Bicycle Overcrossing Feasibility Study Relevant design guidelines & standards (City, Caltrans, CAMUTCD, AASHTO, SCVWD, VTA, etc.) City of Palo Alto, City of Mountain View General Plan circulation and open space elements, and relevant park, bicycle & pedestrian, and strategic master plans Parking and transportation program uses in the area, including SCVWD maintenance activities Existing traffic data: o Review current and planned pedestrian and bicycle routes with volumes and destinations. This review would consider where there are existing connections, or could logically be connections for pedestrians and cyclists to access and circulate through the adjacent neighborhoods, commercial, and park areas o Inventory existing traffic control features (within one mile of project area) o Existing/collected counts and parking studies o Traffic crash data/analysis Task 2 Deliverables: • • • • Site Topographic and Utility Survey Base Map, existing Cross Sections, plan and profile drawings in AutoCAD, 1 "=40' scale Phase lISA, Project Description, VIA, and Initial Environmental Evaluation Preliminary Bridge Foundation Report Alta Planning + Design 5 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 • Traffic & Circulation Study • 10 (5 draft/5 final) sets of information, schedules, reports, drawings as noted Assumptions: • Surveys will be conducted in State Plane Coordinates and NAVD'88 datum • Title Reports will be provided by the City Exclusions: • Caltrans encroachment permits, night surveys and lane closures • Comer Records and Record of Surveys for monument perpetuation • Digital ortho-rectified photo and color, aerial photos • Catenary surveys (pG&E) • Elevations of the channel below the water level • Traffic modeling and new vehicle traffic counts Task 3 -Schematics and Preliminary Engineering Task 3.1 Propose Bridge Alternatives Two alternative bridge plans will be developed based on the information and evaluation of elements from Tasks 1 and 2, and from outreach to key agencies and/or property owners. Bridge span/approach ramps shall include options with landings: • Two geometric alignments of the bridge over Highway 101 • Two geometric alignments of the approach ramps • Two dimensional images of each alternative where appropriate (1:40 scale plan. 1:10 scale section, up to one photo simulation) Revise/Expand Site Analysis Diagram and Circulation Study: • Identification of how bridge approach ramps relates to connecting neighborhoods, businesses and adjacent trails and roadways • Circulation & access for bridge users, summarizing anticipated pedestrian, bicycle and ADA movements, location of ramps, stairs, walls, etc. Initial Agency/Stakeholder Review • Submit necessary information for the relocation or adjustment of affected utilities to the City • The Consultant shall assist in coordinating the processing of required agreements • The Consultant shall attend up to three (3) coordination meetings with the affected utility companies, agencies or other key stakeholders Task 3.2 Bridge and Value Engineering Report In an effort to reduce project costs and solidify project design assumptions, Consultant shall provide a report outlining the type of bridge structure(s) and the optimum construction methodes). • Structural design and estimates • Discussion of various bridge structure types (concrete, steel, pre-cast concrete, etc.) • Recommended bridge loading including maintenance vehicle and landscaping loads • Caltrans and AASHTO regulations • Comparative merits and deficiencies of each type, including aesthetic considerations • Constructability issues related to each structure type including construction impacts, design integration and sequencing • FabricationlErectionIPhasing plan for each structure type Alta Planning + Design 6 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 • Costs of each structure type, including life-cycle costs, incorporating maintenance and repair • Recommended structure type This investigation will help define the overall design program, preferred alignment, and cost impact evaluation. Detailed geotechnical design and bridge foundation reports will be prepared· during the final design phase. Task 3.3 Preliminary Cost Estimates The Consultant shall prepare an estimate of probable cost based on the preferred design and available information on sub-surface and right-of-way conditions. The Consultant shall clearly state unit cost assumptions based on recent over-crossing experience in the area. Consultant shall use its in-house database of construction cost estimates for design and operating elements of trail, pedestrian, and bikeway facilities. . Task 3.4 Decision Matrix The Consultant shall develop a decision matrix of cost estimates, opportunities and constraints of the various design components that characterize and contrast the pros and cons of the alternatives. Task 3 Deliverables: • Site constraints/opportunities evaluation -geotechnical, structural design, utilities, right-of-way, circulation • Plan, section and elevation drawings (at 1"= 40' or 1"=10') of two alternative bridge alignments/structures • • • Project cost estimate, maintenance and operating costs for each alternative Bridge & Value Engineering Report Decision matrix of opportunities and constraints and costs of each bridge alternative Task 4 -Community Participation Bridge and civil/landscape design concepts shall be presented to the public throughout the preliminary design stage, and shall be refined based on city comments and feedback from each community, board, and commission meeting as necessary. Consultant is responsible for preparation of meeting materials and presentations. Task 4.1 Initial Public Workshop After City staff review of the site analysis, parking/traffic study, and initial bridge alignment and ramp alternatives, the Consultant shall prepare and facilitate one community meeting to gather information and suggestions and the project goals and objectives from the community. The public workshop process and outcomes shall be documented and summarized for City and public review, with photos and illustrated plans/maps to accompany a written memorandum. Task 4.2 Board/Commission/Council Meetings The Consultant shall present draft and preferred bridge alternatives, existing conditions data, landscape and civil design concepts, and public outreach summaries to various boards, commissions, and advisory committees, and to City Council. Attendance at up to eleven (11) meetings is budgeted, as detailed in Task 4 Deliverables. Task 4 Deliverables: • Presentation Graphics, Community Workshop Facilitation, and Meetings Documentation Alta Planning + Design 7 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 • Meeting Attendance and Presentation: o Up to 2 Palo Alto Bicycle Advisory Commission Meetings (3 color sets) o Up to 2 Parks & Recreation Commission Meetings (8 color sets) o Up to 2 Planning & Transportation Commission Meetings (9 color sets) o Up to 2 Architectural Review Board Meeting (12 color sets) o Up to 2 Design Competition Advisory Committee meetings o Up to I City Council Meeting Task 5 -Preliminary Design Task S.l Select Preferred Alignment After review of the alternative alignments developed in Task 3 and feedback collected from Task 4, the Consultant shall identity and present a preferred alignment for approval by the City. The primary goals of this task are to finalize geometry and preferred circulation, and to establish requirements that allow the right-of-way engineering and environmental review process to proceed. Task S.2 Preliminary Bridge and Geometric Drawings In consultation with the City, the Consultant shall prepare preliminary trail design and bridge plans. Drawings shall be formatted for consistency with Caltrans' standards and future preparation of a Permit Engineering Evaluation Report in a later project phase. Anticipated plan sheets for submittal to the City shall include the following: Number of Sheets for 15% 1. Title Sheet ! 1 2. Typical Cross Sections 2 3. Layout and Profiles (including 2 curve and line tables) 4. Drainage and Grading Plans 2 5. Stage Construction Plan 1 6. Pavement Delineation 1 I 8. Structural Plans 3 10. Traffic Circulation and 4 Signage Total Sheets 16 • Plans shall be drafted and prepared consistent with the requirements of Caltrans Bridge Design Details Manual and in anticipation of Permit Engineering Evaluation Report (PEER) requirements • Drawings shall include profile and super elevation diagrams, and preliminary construction details (footings, falsework and superstructure) • Specifications, where required, shall use the most current version available of the Standard Special Provisions from Caltrans Task S.3 City/Agency Review • Consultant shall attend up to 4 meetings with City, Caltrans, SCVWD, PG&E and other agencies to resolve issues identified during the preliminary design review • Consultant shall attend up to 4 City staff coordination meetings (in-person), and additional conference calls as requested, to review the products of Task 5. Up to 3 iterations of the products (admin / public / fmal drafts) are budgeted, based on response to consolidated, internally-consistent comments from the City. Alta Planning + Design 8 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 • The Consultant team shall consult with PG&E to determine the feasibility of raising the existing 60kV lines and necessary horizontal and vertical clearance distances. For activities requiring work on land not controlled by the City, the Consultant shall obtain the necessary written permission to enter the premises. Task 5.4 Cost Estimates • Prepare an estimate of probable project and construction costs. This estimate shall be based upon a quantity estimate prepared by the design engineer and unit cost information for each of the materials. • Consultant shall perform quality control and review of preliminary plans, specifications and cost estimates Task 5.5 Preliminary Design Report I Guidelines Consultant shall work with the City to determine the appropriate format for documenting preliminary design plans, cost estimates, public outreach, and priority/potential design features for the bridge overcrossing and related improvements. Although completion of the Caltrans PEER review process is not anticipated in the current scope of services, supportive elements will be developed including: • Project description, purpose and need • Existing facility background information • Description of the preferred alternative • Preferred alternative preliminary cost estimates • Proposed non-standard features and existing non-standard features to remain • Alternatives reviewed during the preliminary design phase, including community involvement • Environmental determination • Anticipated funding sources • Anticipated project delivery schedule To the extent practical within the budget and in coordination with the City, the Consultant shall consider the following information when developing the preliminary design report: • • • • • • • • Architectural guidelines and opportunities for exterior paved areas, planting and irrigation, approach ramps, railing and stair design, lighting and stair and ramp accessibility requirements Historical land use and adjacent land use information Mature vegetation, wind/sun orientation and exposure Visual corridors and viewer sensitivities for the project vicinity Easement acquisition and right-of-way issues Code and regulation requirements from the City, Army Corps, BCDC, Caltrans, SCVWD, State Architect and various agencies Storm water objectives and other storm water compliance improvement considerations (NPDES) Applicable City sustainability efforts and requirements Consultant shall prepare Administrative Draft, Public Review Draft and Final Report versions based on single sets of consolidated, internally consistent comments provided by the City and other entities approved by the Consultant. Task 5.6 Standards Fact Sheets for Design Exceptions to Mandatory and Advisory Consultant shall prep'are design exceptions to proposed non-standard features as well as existing non- standard features to remain within the project limits as shown on the Proposed GAD. Fact Sheets are critical elements of the GAD and must be approved by Caltrans before they will sign and approve the Project Report. Consultant shall submit and process these fact sheets for Caltrans' approval and shall meet Alta Planning + Design 9 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 with Caltrans HQ Geometrician for any Mandatory Design Exceptions (freeway median shoulder width) and Caltrans, District 4 Design for any Advisory Design Exceptions (Falsework Opening). Task 5.7 Traffic Management Plan Report/Construction Staging Plan Consultant shall prepare TMP Data Sheet in accordance with Caltrans requirements for the preferred bridge alignment, with the assumption of a concrete bridge type that requires a center column within the median of Highway 101. Consulta..'lt shall submit TMP Data Sheet and coordi..'late with Caltrans for approval of the TMP Data Sheet. Consultant shall request from Caltrans the 7-Day/24-hours counts for this report and shall prepare Traffic Management Plan for approval by Caltrans. Also, as part of the TMP, Consultant shall provide a conceptual construction staging plan for the construction of the new POC within State Right of Way. Task 5.8 Prepare Right of Way Data Form Consultant shall provide time and materials technical assistance to the City to prepare and revise (as necessary) a Right of Way Data Form for Caltrans approval. Task 5.9 Prepare Initial Risk Management Plan Consultant shall prepare initial Risk Management Plan for Caltrans approval for the proposed preferred alternative. Task 5 Deliverables: • Preferred Alignment Graphics & Presentation Materials • Attendance and summary for up to 8 agency/city meetings • Preliminary Design Plans (up to 15 copies and electronic PDF) • Preliminary Project Cost Estimate Summary • Transportation Management Plan Report • Design Exception Fact Sheets • Caltrans UtilitylROW Data Form and Initial Risk Management Plan • Admin DraftlDraft/Final Design Guidelines Report (electronic PDF, final source files) Assumptions: . • Property assessments, title searches and reports to be provided by the City • Technical Reports to be revised based on not more than two rounds of consolidated comments from City/Caltrans Task 6 Prepare EIRIEA Task 6.1 Identify CEQAlNEPA Requirements The City, as local lead agency, and Caltrans, as acting federal lead agency, have determined that the proposed Highway 101 pedestrian/bicyclc bridge at Adobe Creek warrants completion of a joint California Environmental Quality ActlNational Environmental Policy Act (CEQAlNEPA) annotated outline. The following tasks are included to prepare for and understand the required elements of the Em.. • Kick-offMeeting -work Program Refinement • EIR Schedule • Refine Project Description • Preparation of Notice of Preparation (NOP) and Initial Study Checklist (IS) using City of Palo Alto's checklist template • Public Scoping Meeting Alta Planning + Design 10 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 • Caltrans coordination and follow-up to confirm list of required technical studies The environmental documentation budget assumes a project footprint encompassing both the potential bridge alignments and the Adobe Creek Reach Trail. Task 6.2 Evaluation of Alternatives • Identification of Alternatives (no action/no project, 3 build alternatives, allernatives considered but dropped) • Comparative Evaluation of Alternatives Task 6.3 Prepare EIRIEA Consultant shall prepare draft and final Environmental Impact Reports (CEQA) and Environmental Assessments (NEP A). These reports are anticipated to include the following elements: 6.3.1 Description of Proposed Project • Introduction • Purpose and Need • Project Description including column in center of the freeway • Alternatives • Topic Areas with Negligible Potential Impact (Le., agricultural and forest resources, noise, and mineral resources) • Permits and Approvals Needed 6.3.2 Description of Affected Environment, Environmental Consequences, and Avoidance, Minimization, and/or Mitigation Measures Human Environment • Land Use • Growth (Population and Housing) • Community Impacts (Recreation) • UtilitieslEmergency Services (public Services, and Utilities/Service Systems) • Traffic and Transportation/Pedestrian and Bicycle Facilities • Visual/Aesthetics • Cultural Resources Physical Environment • Hydrology and Floodplain Alta Planning + Design 11 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 • Water Quality and Storm Water Runoff • Geology/SoilslSeismic/fopography • Hazardous WastelMaterials • Noise (if necessary) • Air Quality • Energy Biological Environment • Natural Communities • Wetlands and Other Waters • Plant Species • Animal Species • Threatened and Endangered Species • Invasive Species 6.3.3 Project Consistency with Local and Regional Plans • City of Palo Alto General Plan, Zoning Ordinance, Bicycle and Pedestrian Transportation Plan and Other Local Plans • Pertinent Regional Plans 6.3.4 CEQAlNEP A Required Assessment Conclusions • Growth-Inducing Effects • Significant Unavoidable Adverse Impacts • Irreversible Environmental Changes • Cumulative Impacts • Effects Found Not to be Significant 6.3.5 Preparation of the EAlEIR • Conduct all document coordination including collection of all comments • Prepare all responses to comments for each revision Alta Planning + Design 12 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 • Meeting/Citv Involvement: Collect and forward comments to consultant, meet to . discuss appropriate level of response to comments and format for preparing the Administrative and Final EAlEIR. Scope assumes no more than 20 public comment letters and further assumes no substantive issues would be introduced during the public comment process. 6.3.6 Administrative Draft EAlEm • First Administrative Draft EAlEIR • Second Administrative Draft EAlEIR • Screen Check Draft EAlEIR Public Release Draft EAlEIR Deliverables: • Twenty (20) printed copies of First Administrative Draft EAIEIR in Microsoft Word format • One (1) CD containing a copy of the First Administrative Draft EAlEIR in Microsoft Word and Adobe PDF formats • Twenty (20) printed copies of Second Administrative Draft EAlEIR in Microsoft Word format • One (1) CD containing a copy of the Second Administrative Draft EAIEIR in Microsoft Word and Adobe PDF formats. • Two (2) printed copies ofthe Screen check Draft EAIEIR • Fifty (50) printed copies of the Public Release Draft EAIEIR • Two (2) unbound copies of the Public Release Draft EAlEIR • One (1) CD containing a copy of the Public Release Draft EAlEIR in Microsoft Word and Adobe PDF formats • Distribution of the Public Release Draft EAlEIR (other than to the City of Palo Alto) 6.3.7 Final EAlEm • Prepare Administrative Final EAlEIR and Mitigation Monitoring and Reporting Plan (MMRP) • Prepare Final EAIEIR, Mitigation Monitoring and Reporting Plan (MMRP) and Notice of Determination (NOD) • Assumes up to 250 pages and up to 5 color graphics) Deliverables: • Twenty Five (25) printed copies Alta Planning + Design 13 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 • Two (2) unbound copies ofthe Administrative Final ENEIR and MMRP • One (1) CD containing a copy of the Administrative Final EAIEIR in Microsoft Word and Adobe PDF formats • Fifty (50) printed copies • Two (2) unbound copies of the Final EAlEIR • One (1) CD containing a copy of the Final EAlEIR in Microsoft Word and Adobe PDF format • One (1) printed copy of each of the dra.~ and final NOD Task 6.4 Meetings and Public Hearings • Staff Meetings (up to 10) • Public Hearings (up to 2) Task 6.5 Special Studies Consultant shall prepare several special studies to inform the environmental analysis, satisfy Caltrans requirements for preparation of the EAlEIR, and assist in the planning and the design documents. These studies include: Task 6.5.1 Section 4(f) Report Consultant shall prepare a letter 4(f) report, describing de minimis impacts under Section 4(f). Task 6.5.2 Environmental Commitments Record The Environmental Commitments Record will be prepared by Caltrans. Consultant shall provide limited support .. Task 6.5.3 Paleontology Study Consultant shall prepare a report that focuses on the touch down areas only. Task 6.5.4 Natural Environment Study (initial) An initial NBS report shall be prepared from material developed within the EIRIEA analysis. (See also Task 6.5.5.3) Task 6.5.5 Biological Resources Technical Studies Task 6.5.5.1. Project Coordination and Meetings Consultant shall attend meetings and/or participate in calls to discuss biological issues related to the Project, as desired by the City. Consultant shall assume attendance at three meetings, including preparation 8J."1d travel time, as follows: 1. An initial site visit with the regulatory agencies (attended by the Project Principal), ifrequested Alta Planning + Design 14 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 2. A field meeting with a Caltrans representative following our field surveys to discuss findings and to make sure Caltrans is comfortable with the species and habitat determinations to be included in the Natural Environment Study (NES) and Biological Assessment (BA) prior to the reports being revised/prepared (attended by the Project Principal and Project Manager) 3. A field meeting with U. S. Army Corps of Engineers (USACE) staff to verify the delineation of wetlands and other waters of the U.S. following submittal of the delineation report and Application for Preliminary Jurisdictional Determination to the USACE (attended by Consultant BotanylW etlands Principal) 4. Identification of required permits from Caltrans and/or other regulatory agencies. 5. A field meeting with the City's arborist to' clarify items included in the City's arborist report is included separately under Task 6. Attendance at any additional meetings, if requested, shall be billed on an hourly basis. Limited time for coordination and communication (e.g., conference calls) with the City is included separately in the tasks listed below. Task 6.5.5.2. Background Review and Field Surveys Sub task 2a. Background Review Consultant's ecologists shall review relevant background information concerning potential biological resources in the Biological Study Area (BSA) and immediate vicinity including the Project Boundary that includes staging/laydown and construction work areas. These sources shall include previous reports prepared for the Project (e.g., the draft Natural Environment Study and Arborist Report) and for projects completed by the Consultant in the BSA (e.g., PG&E Hydrotest L-101 Segment Project and the U.S. Highway 101 Auxiliary Lanes Project: State Route 85 to Embarcadero Road). Additional sources of information shall be reviewed, which may include U.S. Geological Survey quadrangle maps, U . .s. Fish and Wildlife Service (USFWS) National Wetland Inventory Maps, resource agency data (e.g., California Department of Fish and Wildlife (CDFW) California Natural Diversity Database [CNDDB]), other technical literature related to the biotic resources of the Project viCinity, regiOlial planning documents (palo Alto Comprehensive Plan, EIR's from the region, etc.), and. species data compiled by the California Native Plant Society (CNPS), the Santa Clara Valley Audubon Society, San Francisco Estuary Institute or other public interest groups. Subtask 2b. Wildlife Reconnaissance-level Survey Following the background review (Task 1), the Consultant's wildlife ecologists, a general wildlife ecologist and a salt-marsh harvest mouse (Reithrodontomys raviventris) expert, shall conduct a single, reconnaissance-level field survey of the BSA to examine the site for its suitability to support sensitive or special-status wildlife species that could be affected by the Project. Based on preliminary guidance provided by Caltrans, the Santa Clara Valley Transportation Authority (VTA), and the USFWS, such species include the San Francisco common yellowthroat (Geothlypis trichas sinuosa), northern harrier (Circus cyaneus), California clapper rail (Rallus longirostris obsoletus), pallid bat (Antrozous pallidus), Yuma myotis (Myotis yumanensis), western pond turtle (Actinemys marmorata), California least tern (Sterna antillarum browni), western snowy plover (Charadrius alexandrinus nivosus), white-tailed kite (Elan us leucurus), California black rail (Laterallus jamaicensis coturniculus), steelhead (Oncorhynchus mykiss), green sturgeon (Acipenser medirostris), and long fin smelt (Spirinchus thaleichthys). The general wildlife ecologist shall also assess the potential for other nesting birds to occur on or very near the Alta Planning + Design 15 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 BSA.Because the Project is within range of the salt marsh harvest mouse, during the site visit, Consultant's salt marsh harvest mouse expert shall also evaluate whether the mouse could be present in wetlands in the BSA or in areas immediately adjacent to the site (which could serve as a potential source for the mouse to enter the BSA), and if so, whether the mouse could reach the BSA and in the Project Boundary. While the majority of the BSA consists of upland habitat, the outer Palo Alto Flood Control Basin contains pickleweed habitat suitable for the mouse, and an assessment of whether portions of the Basin closer to the BSA is suitable for the mouse is thus necessary. A focused survey for this species (e.g., trapping surveys) is not included in this scope of work. Subtask 2c. Botany Reconnaissance-level Survey and Wetland Delineation The Consultant's plantlwetla.'1d ecologists shall conduct a single, reconnaissance-level field survey of the BSA to examine the site for its suitability to support special-status plant speci.es and sensitive habitats (e.g., CDFW sensitive pla.'lt communities) that could be affected by the Project. According to the consultant knowledge of the BSA, existing. background information, and Environmental Science Associates' analysis and Caltrans' input, the only special-status plant species likely to occur in the BSA to be Congdon's tarplant (Centromadia parryi ssp. congdonii). This species has a flowering period of June- November and should be detectable during our surveys this fall. The Consultant shall conduct focused surveys for this species in the BSA during our site visit. Due to the presence of wetland and riparian habitats including Barron and Adobe Creeks within the BSA, and potentially in the Project Boundary, during the site visit, the Consultant's plant/wetland ecologists shall also delineate areas within the BSA boundaries that meet the regulatory definition of Waters of the United States and State, including wetlands. The delineation will require the collection of data in the field relative to vegetation, soils, and hydrology to document site conditions. All work shall be completed according to methodologies outlined in the USACE 1987 Wetland Delineation Manual and other USACE guidance. The delineation shall be be limited to the area within the Project's BSA. To limit the effort necessary to perform this delineation, the Consultant's plant/wetland ecologists shall perform this delineation by building upon mapping of Waters of the United States and State that the Consultant have conducted recently in the BSA for other projects (e.g., PG&E Hydrotest L-IOI Segment Project and U.s. Highway 101 Auxiliary Lanes Project: State Route 85 to Embarcadero Road); however, during the site visit the Consultant's shall ecologists shall field verify whether existing conditions have changed since previous mapping efforts, and shall refine boundaries accordingly, if necessary. Task 6.5.5.3. Natural Environment Study Revisions Following the completion of the field work described in Tasks 2a-2c, and meeting with the Caltrans representative, the Consultant shall revise the NES, as needed, for both content and to comply with Caltrans Standard Environmental Reference (SER) guidelines and Caltrans' 2009 NES format. Although the presence or absence of special-status species may not differ from those in the draft NES for some species, the Consultant shaH include more detail in the NES, including information provided by the agencies, and expand the discussion of why species may be present or absent in order to address special-status species brought up by agencies that have reviewed the document (e.g., Caltrans, VTA, and the USFWS). For example, the Consultant shall include more detail assessing whether habitat conditions on the site could support special-status species, proximity to areas of known occurrence of special-status species, and presence or absence of barriers to dispersal from areas of known occurrence to the BSA. The NES shall include an impact analysis discussing which biological resources would be impacted by the proposed Project and shall identify appropriate mitigation measures for these impacts. Graphics shall be produced to portray the site vicinity, habitat types, CNDDB records for special-status species, and impact areas. The Consultant shall assume that revisions to the report may be necessary based on comments from the City, Caltrans, and/or VTA and comments from L1.e USACE. This task shall include time to respond to two rounds of comments from the City, Caltrans, andlor VTA as necessary Deliverable: Alta Planning + Design 16 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 • Draft NES and Final NES in .pdffonnat Task 6.5.5.4. Preparation U. S. Fish and Wildlife Service Biological Assessment Consultant shall prepare a draft biological assessment (BA) document according to Caltrans SER guidelines and Caltrans' 2011 BA fonnat for the purpose of facilitating section 7 consultation with the USFWS. A Biological Assessment for consultation with the National Marine Fisheries Service is not anticipated to be needed. Although anadromous fish such as steelhead may have historically occurred in Adobe Creek in the Project boundary, creek channelization and flood control projects have created barriers and degraded habitat quality enough to preclude anadromous fish from inhabiting creeks in the Project boundary. Based on the Consultant understanding of the Project and the potential biological issues involved, it is expected that the only federally listed species with any potential to occur in the vicinity of the Project is the salt marsh harvest mouse. However, the BA shall address in detail both the salt marsh harvest mouse and the California clapper rail, due to preliminary concerns raised by the USFWS regarding the California clapper rail. The BA shall include a description of the Project; background information regarding the salt marsh harvest mouse and California clapper rail and their 'potential occurrence and distribution in the Project boundary, including agency-provided information; an analysis of potential Project effects on these species (if any); and avoidance, minimization, and compensatory mitigation measures proposed for these species (if determined to be necessary). The BA shall also include a species table addressing the potential for occurrence of all federally listed, proposed, and candidate species known to occur or potentially occurring in the general vicinity of the Project boundary. Consultant shall assume that revisions to the report may be necessary based on two rounds of comments from the City, Caltrans, ,and/or VTA. This task shall include time to respond to comments from the City, Caltrans, and/or VTA as necessary. Consultant shall also discuss State-listed species such as the salt marsh harvest mouse (which is also federally listed and will be addressed in the BA) and the California black rail. Potential for occurrence of, and impacts to, these species shall be adqressed in the revised NES (Task 3). Deliverables: • Draft BA and Final BA in .pdfformat Task 6.5.5.5. Prepare Wetland Delineation Report and Application for Preliminary Jurisdictional Determination Consultant shall prepare a report summarizing the results of our delineation of wetlands and other waters of the U.S./State and an application for a Preliminary Jurisdictional Determination for the Project. This report shall be prepared according to Caltrans SER guidelines and to report specifications developed by the San Francisco District of the USACE and thus will be of sufficient detail for agency review and a jurisdictional determination. The report shall include a brief description of existing conditions, description of field techniques employed in the delineation, wetland data sheets, and copies of aerial photographs, maps which show the extent of jurisdictional waters in the BSA, and information provided by the USACE. During preparation of the report, information obtained during our field survey relative to plants, hydrology and soils, and evidence gathered regarding past and current land management practices shall be compared to recent regulations/policies/agency guidance (e.g., SW ANCC/exemptions [i.e., fanning and ranching activities]) to arrive at an accurate and fair mapping of the extent and distribution of Waters of the U.S./State. ' Alta Planning + Design 17 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 Consultant shall assume that revisions tothe report may be necessary based on two rounds of comments from the City, Caltrans, and/or VTA and two rounds of comments from the USACE. This task shall include time to respond to comments from the City, Cal trans, and/or VTA as necessary. Deliverables: • Draft and Final Application for Preliminary Jurisdictional Determination in .pdfformat. Task 6.5.5.6. Complete Arborist Report Consultant shall complete the arborist's Tree Survey Report for the Project. The report shall be prepared by a registered consulting arborist. The completed report shall be based on the June 2013 tree inventory and brief report prepared by Walter Passmore, Urban Forester for the City of Palo Alto and shall include the items for survey reports that are required by the City's Tree Technical Manual as follows. 1. Purpose of the report: This section shall include additional information about the purpose of the tree survey and report. 2. Site plan: Consultant shall revise the site plan for readability when printed in color at 11x17 inches. Tree numbers shall be enlarged and the groups of trees identified in the arborist's report shall be delineated on the map. If possible, existing property lines, structures, and utility services shall also be shown. 3. Tree inventory data: Consultant shall coordinate with Walter Passmore, the Urban Forester for the City of Palo Alto who prepared the inventory, to clarify some of the categories used in his report. Consultation with Mr. Passmore shall be conducted with Consultant arborist at the Project site. The completed Tree Survey Report shallinclude a definition of each of the category ratings (good, fair, poor, and critical) to assist readers of the report in better understanding how tree health and structural condition were assessed. Consultant shall also request clarification regarding the ownership of trees (especially trees 63-95, which are located north of Adobe Creek and west of Highway 101 --the majority of which are located on private property, according to the arborist's report). The completed report shall also include information about trees currently inventoried by the City of Palo Alto and contained in the Tree Keeper inventory management program (shown on the map as green dots). 4. Recommendations and conclusions: The completed Tree Survey Report shall provide recommendations regarding the suitability for preservation of individual trees andlor groups of trees based on their health, structural condition, and protected tree status. A separate list of all protected trees shall be included. Consultant shall assume that revisions to the report may be necessary based on one round of comments from the City, Caltrans, and/or VTA. Deliverables: • Draft and Final Tree Survey Report in .pdfformat. Alta Planning + Design 18 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 Limitations/Assumptions: • The City will provide access to the BSA. • Electronic files of the BSA boundary will be provided. It is assumed the limits of the BSA will be similar in size to the BSA boundaries included in Environmental Science Associates' 9 May 2013 NBS report, and will include all staging, laydown, and access areas. • One no-build alternative and up to three design-build alternatives will be evaluated as part of the impact evaluation for the NBS and BA. • There will be one round of review of draft reports from the City, Caltrans, and/or VTA and one round of review of draft reports from the regulatory agencies. However additional rounds of review might be necessary. If requested by the City, the Consultant shall be paid based on hourly rates. • Caltrans will conduct ESA Section 7 consultation. • No permitting with resource agencies is included in this scope. • Focused surveys for any species and a mitigation monitoring plan are outside of the proposed scope of work. • For Task 6.5.4.6: o The completed Tree Survey Report shall be based on requirements outlined in the City of Palo Alto's Tree Technical Manual (Standards & Specifications, Palo Alto Municipal Code, Chapter 8.10.030) and according to the standards of the American Society of Consulting Arborists. o A tree appraisal report (i.e., a report assessing the monetary value of each individual tree) is not required for the Project at this time, and is not typically included in an arborist's report. Trees to be removed shall be confirmed with the City. o The City will provide the Counsultant with the maps and GIS layers required to reproduce and edit the site plan, including information about trees in the project area that are part of the Tree Keeper inventory management program. If any of these additional services in the bullets above are desired, the City will request for a proposal for these services at an hourly basis. Task 6.5.6 Floodplain Hydraulic Study & Floodplain Encroachment Report The Location Hydraulic Study is intended to discuss the following items: the risks associated with implementation of the action,the impacts on natural and beneficial floodplain values, the support of probable incompatible floodplain development, measures to minimize floodplain impacts associated with the action, and measures to restore and preserve the natural and beneficial floodplain values impacted by the action. Alta Planning + Design 19 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 Consultant shall perform a floodplain risk assessment to evaluate the potential impacts from the proposed Project Alternatives to floodplain development and habitat values, recommend potential mitigation measures to mitigate the floodplain impacts, and prepare a Location Hydraulic Study Report that will . summarize the floodplain impacts and recommended mitigation measures. The study shall evaluate potential changes in floodplain hydraulics for the creek bridge crossing due to the proposed improvement alternatives. The Location Hydraulic Study Report shall be prepared in accordance with Caltrans guidelines and requirements. The project is located within the FEMA 100-year coastal floodplain which is controlled by the San Francisco Bay tide level and wave run-up conditions. Therefore, the project is not expected to impact 100- year water levels and the Consultant shall assume the project will not constitute a significant floodplain encroachment as defined in 23CFR, Section 650.1 05( q). Consultant shall assume up to two conference calls with City/project staff. Task 6.5.7 Water Quality Assessment Report (WQAR) Consultant shall assess project related effects on water quality and complete a Caltrans Water Quality Assessment Report (wQAR). The WQAR shall be prepared in accordance with Caltrans Standard Environmental Review (SER) guidance and follow the agency's recommended format. In preparing the document, Consultant shall assess such factors as the scale and scope of the project, the existing setting, and the potential impacts to water quality to determine the appropriate level of detail to meet the requirements of a WQAR. Consultant shall discuss and evaluate the existing and post-project water quality of the site, including the location and character of relevant surface water features and associated water qUality. Information to be acquired as part of the WQAR includes local climatic data, local surface hydrology, specifications on storm water drainage, existing water quality, and current surface water drainage patterns. This information is essential for developing the Affected Environment section of the WQAR. As part of the Affected Environment section, Consultant shall also identify and descnbe the local, regional, state, and federal agencies that may have jurisdiction over the project with respect to water quality and also describe relevant existing beneficial uses and water quality objectives. Consultant shall assess the environmental consequences from the proposed project and alternatives based on an evaluation of the effects the project would have on local and downstream water quality. Local water quality could be impacted through conducting work within or near creek channels, discharging a substantial amount of pollutants (including sediment) into a creek; modifying the natural flow of the water or flood control capacity of local flood plains or flood conveyance structures; or depositing substantial amounts of new material into a creek or channel. Environmental consequences assessed as part of the WQAR would include consideration of whether degradation of water quality could result from short-term (during construction) or long-term presence of the completed project. The assessment of environmental consequences should also include consideration of cumulative impacts to local and regional water qUality. Task 6.5.8 Preliminary Stormwater Data Report Consultant shall prepare an initial Stormwater Data Report (SWDR) Long Form as required by Caltrans. This report shall include the following: • Project description, general topography, climate • Evaluation Document Form (EDF) • SW 1-3 • DPP-l Part (1 &2, and only what's applied) • T-l, only applicable part Alta Planning + Design 20 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 • Risk level (assume construction date, and other factors are available from water qualitY tool on Caltrans' webpage) • BMP cost estimate (% of total cost) • Exhibit showing increased/changed impervious area Assumptions: Level of effort required by Caltrans for the SWDR will be consistent with the project's preliminary concept design level status, and will not require project information that is typically associated with 35% design plans (e.g. 35% drainage plans). Alta Planning + Design 21 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 Task 6.5.9 Cultural Resources (Archeological and -Historic Properties Reports) Because the City of Palo Alto is seeking federal funding for the project, the nature of required environmental analysis and documentation has changed. In addition to those studies identified in Work Order #2, Caltrans has requested technical studies for cultural resources for compliance with Section 106 of the National Historic Preservation Act. Caltrans requires the development of two Areas of Potential Effects (APE), including both graphics and narrative descriptions, one for each of Archaeological and Architectural Resources, and a Historic Properties Survey Report (HPSR). The HPSR shall report the results of the built environment survey and summarize and include as attachments an Archaeological Survey Report (ASR). Consultant shall prepare all such reports in accordance with Caltrans Standard Environmental Reference (SER) guidelines. Task 6.5.9.1 Establish Archaeological and Architectural Areas of Potential Effects Consultant shall build upon the work performed to date to further delineate and describe in writing the project, and potential disturbance area and establish an Archaeological Area of Potential Effects and an Architectural Area of Potential Effects (APE). The Archaeological APE shall consist of the area of direct impact and shall include both vertical and horizontal ground disturbance, as well as construction staging areas. The Architectural APE shall consist of the area of direct and indirect impact, vertical and horizontal ground disturbance areas, and include properties immediately adjacent to the project that would potentially be adversely affected (if any such properties exist). The architectural APE shall also consider potential visual effects base on the verticality of the proposed project. APE map(s) and narrative APE text shall be submitted to the City and Caltrans for approval signatures prior to conducting field work. Task 6.5.9.2 Archaeological Survey Report (ASR) Background research for the ASR (and the HPSR) shall include a records search at the California Historical Resources Information System (CHRIS) at the Northwest Information Center at Sonoma State University. The records search shall identify previously recorded cultural resources within or near the Archaeological and Architectural (pursuant to Task 6.5.B., below) APEs, and determine whether the APEs and vicinity have been previously surveyed up to current standards. The purpose of the records search is to identify any previously recorded cultural resources within Yl-mile of the APEs in order to (1) determine whether known cultural resources had been recorded within or adjacent to the APEs; (2) assess the likelihood of unrecorded cultural resources based on historical references and the distribution of environmental settings of nearby sites; and (3) develop a context for identification and preliminary evaluation of cultural resources. In addition to the CHRIS search, Consultant shall contact the Native American Heritage Commission (NAHC) to determine if there are resources in the APE are known to be of particular concern to local Native Americans. Consultant shall conduct a preliminary assessment of the potential for buried archaeological sites in the Archaeological APE using relevant maps and documents (e.g., archaeological studies, geologic reports, Quaternary geologic maps, historic shoreline maps, Santa Clara County Soil Survey). The assessment results shall be developed in a GIS format, and presented as a map that shows the age and extent of archaeologically sensitive landforms in and near the APE. The map shall be accompanied by text that describes the map units and explains the estimated archaeological potential of each. A qualified archaeologist shall complete an intensive pedestrian survey of the APE. The archaeologist shall inspect all areas of exposed ground for the presence of archaeological resources. Areas of dense vegetation shall be inspected as closely as possible and any exposed cut banks in adjacent drainages shall be carefully examined for the presence of buried cultural resources. If an archaeological resource is encountered, a preliminary assessment of site boundaries shall be made through surface inspection. A map shall be prepared depicting site boundaries in relation to the APE, and the site shall be recorded on a standard Archaeological Site Record (DPR 523c). Alta Planning + Design 22 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 The ASR shall include results of background research, the buried site sensitivity study, descriptions offield work, findings, appropriate maps and photos, and a record of Native American contact. If an archaeological resource is identified, the ASR shall include appropriate background research, and site records. A cover letter shall detail management recommendations, which could include avoidance or test excavations to detelIDine site significance. Task 6.5.9.3 Historic Properties Survey Report (HPSR) A qualified architectural historian shall conduct an intensive survey of the Architectural APE .. The HPSR shall be accompanied by maps, documentation of contact efforts, and a summary of identification efforts and findings. The cultural resources inventory results shall be documented in the HPSR. The ASR shall be included, as appendix to the HPSR. AHistoric Resources Evaluation Report (HRER) will not be needed and no fOlIDal detelIDination of effects (Finding of Effects Report) will be necessary. The HPSR shall present the results of the background research, inventory, conclusion of the evaluations, and DPR 523 fonns (if necessary). Assumptions • Consultant shall prepare one administrative draft and one fmal version of the above cultural resource studies. Two rounds of City and Caltrans reviews .. • Two telephone and one in person meetings between Consultant and Caltrans' cultural resources staffs. • No direct pa,rticipation in SHPO consultation. If requested by the City and Caltrans, SHPO consultation assistance will be completed under a separate scope and budget. • Consultant shall survey and evaluate the Adobe Creek (Barron Creek) canal and buildings 45 years old or older within the Architectural APE. N~ more than six (6) buildings and structures will be surveyed and evaluated. If requested, Consultant shall survey and evaluate additional buildings and structures under a separate scope of work. Consultant shall assumeHighway 101 bridges over Adobe/Barron Creek have been previously identified in the Caltrans Historic Bridge Inventory as ineligible for listing in the National and California Registers and the Adobe Creek canal shalluot require fOlIDal evaluation. • The HPSR shall provide preliminary resource eligibility evaluations for archaeological sites. In the event the proposed project will not avoid archaeological sites, fonnal eligibility evaluations and consideration of adverse affects will be recommended. This work would be carried out under a separate scope and budget that details the specific historical and/or field research methods appropriate to the types of resources requiring evaluation. • In the event that the built environment inventory identifies any resources that are potentially eligible for the National Register, Caltrans will require a Finding of Effect Report (FOE) .. Furthermore, if a subsequent FOE is prepared and it is detelIDined that the project would cause adverse affects, City will request Consultant to assist with the preparation of treatment documents (Historic Properties Treatment Plan and Memorandum of Agreement) to minimize such affects. These additional deliverables shall be prepared under a separate sc~pe and cost. • Caltrans may require presence/absence testing in the area of direct impact prior to approval of the project, or the execution of ari agreement document to complete historic property identification pursuant to 36 CFR 800.4(b)(2). If required, City will request proposal from Consultant under a separate scope and cost. Task 6.5.9.4 Cultural Resources Testing / Agreements (Optional) Caltrans may require presence/absence testing in the area of direct impact prior to approval of the project, or the execution of an agreement document to complete historic property identification pursuant to 36 CFR Alta Planning + Design 23 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 800.4(b)(2). This optional task includes a placeholder cost for testing (coordinated with Task 2Ab) and an agreement document in case these are required by Ca!trans. Task 6.5.10 Air Quality Study (Optional) As an optional task to be exercised by the City upon its discretion, Consultant shall prepare an air quality technical report, which shall include a description of local and regional climate, meteorology and topography, and air quality conditions and recent trends in the San Francisco Bay Area Air Basin and project area. Additionally, the report shall include a description of applicable federal, state and local air quality policies, regulations, and standards. Consultant shall estimate emissions associated with the construction phase of the proposed proj ect using the California Emissions Estimator Model (CalEEMod) land use and air emissions model. The emission estimates shall be based on information provided by the City or default values in the CalEEMod. Consultant shall then evaluate the significance of the construction emissions based on significance thresholds established by the Bay Area Air Quality Management District (BAAQMD). The BAAQMD adopted revised significance thresholds in 2010, which were the subject of a legal challenge; a recent Court of Appeal decision overturned a lower court decision that resulted in the 2010 significance thresholds being revoked. To date, however, the BAAQMD has not reinstated the thresholds. Thus, Consultant shall use the appropriate construction emission thresholds at the time the technical report is prepared. The operation of the proposed project would not generate new emissions. Thus, the operational impacts shall be evaluated qualitatively. The air quality technical report shall discuss the project's consistency with plans and strategies to meet ambient air quality standards for ozone and particulate matter, both of which are nonattainment pollutants in the San Francisco Bay Area Air Basin. For the NEPA analysis, Consultant shall prepare a discussion of the applicability of the federal transportation conformity regulations to the proposed project. Greenhouse Gases and Climate Change The air quality technical report shall include an assessment of the project in relation to its greenhouse gas (GHG) emissions and the potential contribution to impacts on global climate change. This section of the report shall include a description of global climate change, summarizing the scientific and fundamentals and emission inventories at the global, national, state, and local levels. It shall also include Ii summary of the key federal, state, and local regulatory actions as the regulatory setting for this topic .. Consultant shall calculate the proposed GHG emissions associated with construction of the project using CalEEMod. As noted above, the operational of the proposed project shall not generate new emissions, but the project would assist in reducing regional GHG emissions. The impact analysis shall reflect the topics in Appendix G of the CEQA Guidelines; specifically, whether a project would (a) generate greenhouse gas emissions, either directly or indirectly, that may have a significant impact on the environment and (b) conflict with an applicable plan, policy or regulation adopted for the purpose of reducing the emissions of greenhouse gases. The BAAQMD current (2012) CEQA Guidelines recommends incorporating best management practices to reduce GHG emissions and does not establish a numeric threshold. Task 6 Deliverables: • Kick-off Meeting attendance/agenda/notes • Scoping Meeting attendance/agenda/notes • Administrative EIR Project Description & Refined EIR Project Description • Notice of Preparation and Distribution List • Initial Study Checklist • Materials for Public Scoping Meeting including PowerPoint Presentation, Sign-in Sheets and Comment Cards rot Special Studies (see above for details) • Twenty (20) printed copies and electronic versions of First Administrative Draft EIRIEA Alta Planning + Design 24 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 • Twenty (20) printed copies and electronic copies (PDF, Word) of Second Administrative Draft EIRIEA • Two (2) printed copies of the Screen check Draft EIRIEA • Fifty (50) printed copies and electronic files (PDF, Word) of the Public Release Draft EIRIEA • Distribution of the Public Release Draft EIRIEA (other than to the City of Palo Alto) • Twenty Five (25) printed copies and electronic files (PDF, Word) of Administrative Final EIRIEA andMMRP • Fifty (50) printed copies and electronic files of Final EIRIEA • One (I) printed copy of each of the draft and final NOD Assumptions: • The project description shall not change substantively during the preparation ofthe Initial Study or EIR. • Consultant shall be responsible for preparing all CEQA-required notices of environmental documents, for hand-recording public comments received at the public hearing on the Draft EIR, and for copies of materials required for community meetings on the environmental review (e.g., summary tables, agendas, etc.). • Work shall not be stopped or slowed by circumstances outside the consultant's control. Additional administrative, management, scheduling, and rescheduling costs caused by any external delay shall be recoverable by consultant as extra work. • Meeting/City Involvement: Collect and forward comments to consultant, meet to discuss appropriate level of response to comments and format for preparing the Administrative and Final EIRIEA. Scope assumes no more than 20 public comment letters and further assumes no substantive issues would be introduced during the public comment process. Task 8 -Adobe Reach Trail Feasibility & Design The Adobe Creek Reach Trail project, as currently envisioned by the City, will be approximately 650-ft in length and located along the eastern/southern portion of Adobe Creek along the SCVWD maintenance road. Projected design elements include: • Upgrade of maintenance road to meet Caltrans' Class I Trail standards • Decorative Guard Rail along creek • Landscaping • Access gate to Creek Landing • Enhanced Trail Gate Access at W Bayshore Drive • Enhanced Pedestrian Crossing at E Meadow Drive • Sidewalk Improvements along W Bayshore Drive Task 8.1 Project Management, Scoping, and Initiation • Project Kickoff Meeting • Revised scope • Project design and construction schedule • Regular, ongoing conference calls to review project status and deliverables Task 8.2 Trail Conceptual Design & Feasibility The Consultant shall conduct the following activities to ensure a feasible trail design that is compliant with applicable agency requirements, forms, and agreements: • Research and summarize the necessary features, guidelines, agreements, and processes for completing a successful trail project along the SCVWD Adobe Creek maintenance road. • Conduct an initial topographic survey and preparation of a basemap (accomplished in conjunction with Task 2.1 above -cost to be apportioned between projects). Alta Planning + Design 25 City of Palo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 • Develop initial schematic plans and graphics for presentation and discussion purposes, including up to one photo simulation or rendering • Provide preliminary project cost estimates, prepared by a professional cost estimating firm • Coordinate with environmental review team, as necessary Based on the above, Consultant shall work with the City to develop an initial draft MOU and other required elements as identified by the Consultant and City Task 8.3 City/Agency Review and Coordination • Attend and facilitate up to 4 meetings with CitY and/or SCVWD staff; provide summary meeting notes • Revise feasibility study, and conceptual design based on agency/City feedback • Assist with the refmement and fmalization of SCVWD MOU and related trail use agreements Task 8.4 Board/Commission/Council Meetings • Prepare, attend, present, and summarize for the following City review meetings: o Up to 2 P ABAC meetings o Up to 2 PRC meetings o Up to 1 Planning and Transportation Meetings o Up to 1 City Council Meeting Task 8.5 Preliminary Trail Design (15% Plans) • Prepare preliminary trail plan sheets: Number of Sheets for 15% 1. Title Sheet and Notes 1 2. Trail Layout & Demo 2 3. Utilities & Drainage 2 4. Pavement & Markings 2 5. Details (Misc.) 2 Total Sheets 9 • Consultant shall prepare revised cost estimates based on 15% design and quantities • Attend one meeting with City to review the plans and estimate • Revise the plans based on one consolidated, internally consistent set of comments. Additional revisions will be billed on a time and materials basis. Task 8.6 Prepare Final Report / Grant Application Consultant shall work with City staff to incorporate elements of the trail design into a project memorandum (integrated into Task 5.5 deliverable) or into a SCVWD grant application package. Task 8 Deliverables: • Kickoff meeting attendance/agenda/notes • Final scope and project schedule • Preliminary cost estimate • Assist preparation of SCVWD MOU, related trail use agreements • Agency coordination meeting attendance and summaries • 15% Design Plan Sheets (5 full size and 5 half size sets, plus pdf and CAD files) • Updated cost estimate • Presentation graphics and materials Alta Planning + Design 26 City ofPaJo Alto Highway 101 Overcrossing and Reach Trail at Adobe Creek Jan 2014 • Final Project Memorandum or grant application package Alta Planning + Design 27 Task Nam'e Ta.k 5 Preliminary Engineering Value Engineering Memo Revised De!iverable City review and comment (feeds guidelines task) 15% Plan Sat Prepare initial plan set CIty/Agel"C)' :'Bvlew and comment Revise 15'110 plan set Transportation Management Plan (TMP) Develop initia! draft Clty/Callrans review and comment Consultant revise Clty/Callrans 2nd review and comment Final deliverable Onlgn Exception Fact Sheet Develop initial draft Clty/Caltrans review and comment Consultant revise CitylCaltrans 2nd review and comment Final deliverable Risk Management Plan Develop initial draft Clty/Callrans review and comment Consultant revise Clly/Caltrans 2nd review a!1d comme1t Final deliverable ROW Data Sheet Develop initial draft Clty/Caltrans review and comment Consultant revise Clty/Caltrans 2nd review and comment Final deliverable Dellign Guldelinell Develop initial draft City review and comment (feeds guidelines task) Meetings Finalize gulde:ines De.lgn Competition AlA Contract Preparations Innlal call for concepts Short list & Finalist compet~ion cali Final Subm~1 Jury selection Council approval Task 6 Environmental Docwnentation Special Studies Paleontology Consultant deliverable Caltrans 2nd Review Consuitant revise Final Deliverable Hazardous MaterialsllSA Consultant deliverable Caitrans 2nd Review Consultant revise 2/11/2014 EXHmITB PROJECT SCHEDULE Duration 1B4days 23 days 13 days 10 days 50 days 15 days 25 days 10 days 100 days 25 days 30 days 15 days 20 days 10 days 100 days 25 days 30 days 15 days 20 days 10 days 100 days 25 days 30 days 15 days 20 days 10 days 100 days 25 days 30 days 15 days 20 days 10 days 70 days 30 days 20 days 10 days 10 days 176 days 35 days 45 days 35 days 20,days 30 days 10 days 1 day 554 days? 267 daye? 39 days 1 da) 20 days 10 days 5 days 44 days ida) 20 days 10 days Start Finish Wad 1/1/14 Men 9/15114 Wed 1/1/1~ Fri 1131/1~ Wed 1/1/14 i'r: 1/1711~ Moo 1120114 Fr11131/1~ Mon 213114 Fri 4111/1~ Mon 213114 Fri 2121/14 Men 2124114 Frl3l28/14 Mon 3/31/14 Frl4/11/14 Mon 2117/14 Fr17/4114 Mon 2117/14 Fri 3/21/14 Mon3l24/14 FrlSI2I14 Moo 515114 Fri 5/23/~4 Mon 6126114 Fri 6120114 Mon 6123114 Fri 7/4/14 Mon2l17/14 F~ 7/4114 Mon2l17/14 Fri 3/21/14 Mon3l24/14 Frl512114 Moo 515/14 Frl 5/23/14 Mon5l26/14 Frl6120114 Mon 6123114 Frl7/4/14 Mon 2117/14 Fri 7/4114 Mon 2117/14 Fri 3121/14 Mon 3124/14 Fri S12/14 Mon 515114 Fri 5123/14 Mon 5126114 Fri 6120/14 Moo 6123/14 Fri7/4/14 Mon 2117/14 Fr17/4114 Mon 2117/14 Fri 3121/14 Mon 3124114 Frl5l2l14 Mon 515114 Fri 5/23/14 Mon 6126/14 Fri 6/20114 Mon6123114 Fr1714114 Mon 1/13114 Fr14l18114 Mon 1/13114 Fri 2121/14 Mon 2124114 Frl 3/2~114 Mon 3124/14 Fri4/4/14 Mon4l7/14 Fri 4/18114 Mon 1/13/14 Mon 9/15114 Mon 1/13/14 Fri 2128/14 MOIl 3/3/14 Fri 5/2114 Mon5l5l14 Frl6I20/14 Mon 6/23/14 Fri 7/18/14 Mon 7121114 Fri 8/29/14 Mon 9/1/14 Frl9/12114 Mon 9/15/14 Mon 9/15/14 Thu 811/13 Tue 9/15/15 Thu 811/13 Fri 818/14 Wad 12111/13 Mon 213/1~ Wed 12111/13 Wed 12/11/13 Tue 12117/13 Mon 1/13/14 Tue 1/14/14 Men 1127114 Tue 1128114 Mon2l3/14 Wed 1214113 Mon 213/1~ Wed 1214113 Wed 1214/13 Tue 12117/13 Moo 1/13/14 Tue 1/14/14 Mon 1/27/14 lof4 Task Name Final Deliverable Visual Impact Assessment Consultant deliverable City/caltranslPublic Review Consultant revise Final deliverable Preliminary Geotechnical Consultant prepare Consultant deliverable City/Caltrans Review Consultant revise Final deliverable Supplementary Geotechnical (If needed) Permits and borings Lab testing Initial deliverable CHy/Caltrans review Consultant revise CHy/Caltrans 2nd review and comment Final deliverable Natural Environment Study Consultant prepare Consultant initHaI deliverable Clty/Caltrans/Public Review Consultant revise Consultant 2nd deliverable City/caltransiPublic Review Final deliverable Section 4(f) Consultant prepare Consultant InKltal deliverable CHy/caltranslPublic Review Consultant revise Clty/Caltrans 2nd review and comment Final deliverable Archeological Survey Report (ASR) ConsuRent prepare Consuliant initital deliverable Caltrans. Review Consultant revise (extended If added requirements) Consultant 2nd deliverable City/CaltranslPublic Review Final deliverable Historic Property Survey Report (HPSR) Consultant prepare Consultant inHital deliverable CHy/CaltranslPubilc Review ConsuRent revise (extended if added requirements) ConsuRent 2nd deliverable Clty/Caltrans/Publ1c Review Final deliverable Water Quality Assessment Report Consultant prepare Consultant initHaI deliverable City/CaitranslPublic Review Consultant revise 2/11/2014 EXHIBITB PROJECT SCHEDULE Duration 5 days 40 days 5 days 30 days 5 days o days 120 days 10 days 5 days 25 days 5 days o days 105 days 20 days 5 days 10 days 25 days 10 days 25 days 10 days 100 days 35 days 5 days 25 days 5 days 5 days 25 days o days 93 days 23 days 5 days 25 days 10 days 25 days 5 days 141 days 27 da)'l! 1 da} 25 days 30 days 5 days 25 days 5 days 141 days 27 days 1 day 25 days 30 days 5 days 25 days 5 days 101 days 25 days 5 days 25 days 10 days Start Finish Tue 1128114 Mon 213/14 Mon 12130/13 Fri 2121114 Mon 12130/13 Frl113114 Mon 1/6/14 Fr12114/14 Mon 2117/14 Fri 2121114 Fri 2121/14 Frl2l21/14 Mon 9/16/13 Fr12l28/1~ Mon 9/16113 Fri 9/27/13 Mon 1/13114 Frl1/17/14 Mon 1120114 Fri 2I21/1~ Mon 2/24114 Fri 2I2B/1~ Fri 2128114 Fr12l2B/14 Mon 3/3/1~ Fri 7/25114 Mon 313/14 Fr13/28114 Mon 3/31114 Frl4I4/14 Mon4n114 Fri 4118114 Mon4121/14 Fri 5/23/14 Mon 5126/14 Fr16/6/14 Mon 619/14 Fri 7/11114 Mon 7/14/14 Fr17/25/14 Mon 12116113 Fri 51211~ Mon 12116113 Fri 1131/1~ Mon 213114 Frl2l7/14 Mon 2110114 Frl3/14114 Mon 3/17/14 Fri 3/21/14 Men 3124114 Fr13128114 Mon 3131/14 Frl512114 Fri 512114 Fr1512114 Wed 12118113 Fr14l25114 Wed 12118/13 Frl1/17114 Mon 1120/14 Fri 1124/14 Mon 1127/14 Frl2I28114 Mon 313114 Fri 3/14114 Mon 3/17114 Fri 4/18/14 Mon4/21/14 Frl4/25/14 Mon 10nl13 Mon 4121/14 Mon 10/7/13 Tue 11/12113 Wed 11/13/13 Wed 11/13/13 Tue 12117/13 Mon 1/20/14 Tue 1/21/14 Mon 313/14 Tue3l4/14 Mon 3/10114 Tue 3111/14 Mon 4/14/14 Tue4115114 Mon 4121114 Mon 10nl13 Mon 4/21/14 Mon 10nl13 Tue 11/12113 Wed 11/13/13 Wed 11"113113 Tue 12117/13 Mon 1/20/14 Tue 1/21/14 Mon 313114 Tue 314/14 Mon 3/10114 Tue 3/11/14 Mon 4/14114 Tue 4/15114 Mon 4/21/14 Mon 2I17/1~ Mon 7/711~ Mon 2117114 Fri 3121114 Mon 3124/14 Fit 3I2811~ Mon 3131114 Fri 512114 Mon 515/14 Fri 5/16/14 2of4 Task Name Consultant 2nd deliverable CllylCaltranslPublic Review Final deliverable StormWlllar Data Report long Fonn Consulla!ll ;1repare Consultant in~ital deliverable Clty/CallranslPublic Review Consultant revise Consultant 2nd deliverable Clty/Caltrans/Public Review Final deilverable Hydraulic Floodplain Report Consultant prepare Consultant Inttltal deliverable City/CaltranslPublic Review Consultant revise Consultant 2nd deliverable Cily/Cailrans/Pubilc Review Finai deliverabie Wellands Delineilion Consultant prepare Consultant inkltal deliverable Clty/CaltranslPubl1c Review Consultant revise Consultant 2nd deli~ble Clty/Caltransl?ublic Review Final deliverable NolseSludy Consultant prepare Consultant initital deliverable Clly/CaitranslPublic Review Consultant revise Consullant 2nd dell~ble City/CaltranslPutllic Review Final deliverable Biological Assessment Report (BA) Consultant prepare Consultant inttltal deliverable Clty/Caltrans Review Informal consultation wi:h DFW Consultant revise Consultant 2nd deliverable Clty/Caltrans/Public Review Consultant revise Flr-al deliverable Arborist Report Revised Deliverable Clty/Cattrans rev'.ew Final Deliverabie Assessment of Alternatives Consultant pl'8pare Consultant ir.~ttal deliverable CIty/Caltrar.s Review Consultant flIYlse Consultant 2nd deliverable City/Caltrans Review 2/11/2014 EXHmITB PROJECT SCHEDULE Duration 5days 25 days 6 days 101 days 25 days 5 days 25 days 10 days 5 days 25 days e days 101 days 25 days 6 days 25 days 10 days 5 days 25 days 6 days 110 days 25 days 5 days 30 days 10 days 5 days 30 days 5 days 100 days 25 days 5 days 25 days 10 days 5 days 25 days 5 days 115 days 20 days 5 d&yll 25 days 10 days 10 days 5 days 25 days 10 days 5 days 70 days 25 days 35 days 10 days 110 dlYS 26 days 5 days 30 days 10 days 5 days 30 days . Start Finish Mon6l19/14 Frl5/23114 Mon 6126114 Fri 6/27/14 Mon 6130/14 Mon 717114 Mon 2117/14 ilion 7m1. Mon 2117/14 Fri 3121/14 Mon 3124/14 Fri 3128/14 Mon3l31/14 Frl51211~ Mon5l5/14 Fri 5116/14 Mon 6119114 Fri 5123114 Mon 6126114 Fr! 6127/14 Mon 6/30/14 Mon 717114 -Mon 2117/14 Mon 7{7f14 Mon 2117/14 Fri3/21/14 Mon 3124114 Fr13/28114 Mon3l31/14 Fri 512114 Moo 515114 Fri 5/16114 Mon 5119114 Frl5/23/14 Mon 6126/14 Fri 6127/14 Mon 6/30114 Moo 717114 Mon 12130/13 Frl6l30/14 Mon 12130113 Fri 1/31114 Mon213114 Fri 217/14 Mon2l10/14 Fri 3121/14 Mon3l24/14 Frl4/4/14 Mon4l7/14 Fri 4/11/14 Man 4114114 · Fri 5123114 Mon 5126/14 Fri 5/30/14 Mon 1/13/14 Frl5/30/14 Mon 1/13114 Frl2I14114 Mon2l17/14 Fri 2/21114 Mon2l24114 Fri 3/28/14 Mon3l31/14 Frt 4/11114 Moo 4114114 Fri 4118/14 Mon4l21/14 Fri 5123/14 Mon 5126114 Frl5l30/14 Mon 313/14 Fr18lB/1. Mon 313114 Fri 3128/14 Mon3l31/14 Frl4/4/14 Mon4nJ14 FrI5/9/1. Mon5J12114 Frl5I23114 Mon 5126114 Fri 816114 Mon 619/14 Fri 6/13114 Mon 6116/14 Fri 7/18114 Mon 7121/14 Fr1B/1/14 Mon 8/4114 Fri 818114 Mon 12116/13 Frl3121/14 Mon 12116113 Frl1/17114 Mon 1120/14 Fr13/7/14 Mon 3110/14 Fri 3/21/14 Mon 3117114 Fri 8115/14 Mon 3117/14 Frl4/18/14 Mon 4/21/14 Frl4125/14 Mon 4128114 Frl6/6/14 Mon 619/14 Frl6I20/14 Mon 6123114 Fri 6127/14 Mon 6130114 FrlB/8/14 30f4 Task Narne .. Final deliverable Admin Draft EIRIEA Consultant prepare Consultant initital deliverable Clty/CaltranslPubllc Review Second Admin Draft EIRIEA Consultant prepare Consultant inltltal deliverable Clty/Caltrans/Public Review Screencheck Draft EIRIEA Consultant prepare Consultant initital deliverable Staff review Public Release Draft EIRIEA Consultant prepare Final deliverable Release to Public Public Review/PT&C MeetinglHearlng Public reviewlcomments PT&C meeting Consultant Prepare Comment Responses City reviews Final EIRIEA Consultant revise Consultant deliverable First CaltranslCity reviews final deliverable Consultant revise Consultant deliverable Second CaitranslCity reviews final deliverable FEIR Circulation City CounCil Meeting Task 8 Adobe Creek Reach Trail Trail concept memorandum Preprare deliverable Additional survey Conduct survey Revise base maps 15% Plan Set Prepare inHial plan set CitylAgency review and comment Revise 15% plan set Prepare final reportlMOU/Grant application Determine scope Prepare draft deliverable CitylAgency review and comment Finalize deliverable 2/11/2014 EXHmITB PROJECT SCHEDULE Duration . 5 days 60 days 20 days 5 days 35 days 40 days 10 days 5 days 25 days 20 days 5 days 5 days 10 days 11 days 5 days 5 days 1 day 66 days 45 days 1 day 15 days 5 days 80 days 10 days 5 days 25 days 10 days 5 days 25 days 15 days o days 155 days 15 days 15 days 15 days 5 days 10 days 70 days 25 days 35 days 10 days 80 days 10 days 15 days 45 days 10 days Start Mon 8111/14 Mon 8118/14 Mon 8118/14 Moo 9115114 Mon 9122114 Mon 11/10/14 Mon 11/10/14 Mon 11124114 Mon 1211/14 Mon 1/5115 Mon 1/5115 Mon 1/12115 Mon 1/19/15 Mon 1/19/15 Mon 1119115 Mon 1126/15 Mon 212115 Tue2l3/15 Tue 213115 Tue4m15 Wed 4/8/15 .Wed 4129/15 Wed 516115 Wed 516115 Wed 5/20115 Wed 5127/15 Wed 7/1/15 Wed 7/15115 Wed 7/22115 Wed 8126/15 Tue 9115/15 Mon 12130/13 Mon 12130113 Mon 12130/13 Mon 1/27/14 Mon 1/27/14 Mon 213114 Mon 2117/1~ Mon 2117/14 Mon 3124114 Mon 5112114 Mon 4114114 Mon4/14114 Mon4128114 Mon 5/19114 Mon 7/21/14 Finish Fri 8115/14 Frll1m14 Frl9/12114 Fri 9119114 Fri llm14 Fr11/2115 Fri 11121114 Fri 11128114 Frl112/15 Frl1130/H Fri 119/15 Frl1/16/15 Fri 1/30115 Mon 212115 Frll/23115 Fri 1/30/15 Mon 212115 Tue 5/5115 Mon 4161tE Tue 4/7/15 Tue4128/15 Tue 515/15 Tue 8/25115 Tue5l19/15 Tue 5/26/15 Tue 6130115 Tue 7/14/15 Tue 7/21/15 Tue 8125115 Tue 9/15115 Tue 9/15115 Fri 8I1/1~ Frll/17/1~ Fri 1/17114 Frl2I14114 Fri 1/31/14 Fri 2114114 Frl5/23/14 Fri 3121/14 Fri 519114 Frl5I23114 Frl 8Il/1~ Fri 4/25114 Frl5/16/14 Fri 7/18/14 Fri 811/14 4of4 EXHIBITC COMPENSATION EXHIBIT C-1 HOURLY RATE SCHEDULE Alta Planning + Design Standard Billing Rates California Projects - Alta P1a!lning + Design Classification Rate Classification Rate Senior Principal $285 Graphics I $90 Principal I $210 Admin I $85 Principal II $185 Planner II $90 Senior Associate Planner $160 Designer II $90 Senior Associate Designer $160 Engineer II $95 Senior Associate Engineer $165 Graphics II $80 Senior Associate Admin $160 Admin II $75 Associate I $140 Junior Planner $75 Associate II $125 Junior Designer $75 Senior Planner $110 Junior Engineer $75 Senior DeSigner $110 Junior Graphics $55 Senior Engineer $115 Junior Admin $45 Senior Admin $100 Intern Planner $45 Planner I $100 Intern Designer $45 Designer I $100 Intern Engineer $45 Engineer I $105 Intern Graphics $35 Intern Admin $30 The charges per hour shown are effective through December 31,2014 and subject to revision annually thereafter. Sub consultant fees shall be charged at actual cost. Expenses: Reimbursable expenses shall be charged at actual cost. Mileage on project tasks shall be charged at the IRS standard rate. Reproduction Costs: Color copies $0.50/page Black and white copies $O.lO/page 24" x 36" large format plot $15.00/sheet 36" x 48" large format plot $30.00/sheet City of Palo Alto, CA Source: Google Maps, ESRI 2013, HT Harvey & AssociatesDate: 2/2014 Highway 101 Overcrossing & Trail at Adobe Creek Project Boundary I 0 200100Feet East Meadow Drive Ea s t M e a d o w C i r c l e Fa b i a n W a y Ea s t B a y s h o r e R o a d W e s t B a y s h o r e R o a d Sa n F r a n c i s c o B a y T r a i l San F r a n c i s c o B a y T r a i l Ado b e C r e e k Ad o b e C r e e k Ba r r o n C r e e k W e s t B a y s h o r e R o a d Palo Alto Baylands E a s t B a y s h o r e R o a d 11 22 33 Project Boundary Alignment Alternatives LEGEND Project Boundary Diked Brackish Marsh Ruderal Riparian Creek Developed/ Landscaped Alignment Alternatives LEGEND edge of delineated wetland Proposed Class I Trail 1-1 D , - - - D ATTACHMENT C Palo Alto Bicycle/Pedestrian Overpass Project Project Schedule No.Task Name Duration Start Finish 1 Task 5 Preliminary Engineering 263 days Wed 1/1/14 Mon 1/5/15 2 Value Engineering Memo 23 days Wed 1/1/14 Fri 1/31/14 3 Revised Deliverable 13 days Wed 1/1/14 Fri 1/17/14 4 City review and comment (feeds guidelines task) 10 days Mon 1/20/14 Fri 1/31/14 5 15% Plan Set 40 days Mon 5/19/14 Fri 7/11/14 6 Prepare initial plan set 15 days Mon 5/19/14 Fri 6/6/14 7 City/Agency review and comment 20 days Mon 6/9/14 Fri 7/4/14 8 Revise 15% plan set 5 days Mon 7/7/14 Fri 7/11/14 9 Transportation Management Plan (TMP) 115 days Mon 5/19/14 Fri 10/24/14 10 Develop initial draft 25 days Mon 5/19/14 Fri 6/20/14 11 City/VTA comments 10 days Mon 6/23/14 Fri 7/4/14 12 Caltrans review and comment 30 days Mon 7/7/14 Fri 8/15/14 13 Consultant revise 15 days Mon 8/18/14 Fri 9/5/14 14 City/VTA 2nd review and comment 5 days Mon 9/8/14 Fri 9/12/14 15 Caltrans 2nd review and comment 20 days Mon 9/15/14 Fri 10/10/14 16 Final approval 10 days Mon 10/13/14 Fri 10/24/14 17 Design Exception Fact Sheet 115 days Mon 5/19/14 Fri 10/24/14 18 Develop initial draft 25 days Mon 5/19/14 Fri 6/20/14 19 City reviews and comments 10 days Mon 6/23/14 Fri 7/4/14 20 Caltrans review and comment 30 days Mon 7/7/14 Fri 8/15/14 21 Consultant revise 15 days Mon 8/18/14 Fri 9/5/14 22 City/VTA 2nd review and comment 5 days Mon 9/8/14 Fri 9/12/14 23 Caltrans 2nd review and comment 20 days Mon 9/15/14 Fri 10/10/14 24 Final Approval 10 days Mon 10/13/14 Fri 10/24/14 25 Risk Management Plan 115 days Mon 5/19/14 Fri 10/24/14 26 Develop initial draft 25 days Mon 5/19/14 Fri 6/20/14 27 City/VTA review and comment 10 days Mon 6/23/14 Fri 7/4/14 28 Caltrans review and comment 30 days Mon 7/7/14 Fri 8/15/14 29 Consultant revise 15 days Mon 8/18/14 Fri 9/5/14 30 City/VTA 2nd review and comment 5 days Mon 9/8/14 Fri 9/12/14 31 Caltrans 2nd review and comment 20 days Mon 9/15/14 Fri 10/10/14 32 Final Approval 10 days Mon 10/13/14 Fri 10/24/14 33 ROW Data Sheet 110 days Mon 5/19/14 Fri 10/17/14 34 Research Record Right of Way Information 10 days Mon 5/19/14 Fri 5/30/14 35 Create Base Map w/ Topo, R/W, Property Lines, Utilities 10 days Mon 6/2/14 Fri 6/13/14 36 Consultant deliverable 5 days Mon 6/16/14 Fri 6/20/14 37 City reviews and comments 5 days Mon 6/23/14 Fri 6/27/14 38 Caltrans review and comment 30 days Mon 6/30/14 Fri 8/8/14 39 Consultant revise 15 days Mon 8/11/14 Fri 8/29/14 40 City/VTA 2nd review and comment 5 days Mon 9/1/14 Fri 9/5/14 41 Caltrans 2nd review and comment 20 days Mon 9/8/14 Fri 10/3/14 42 Final Approval 10 days Mon 10/6/14 Fri 10/17/14 43 Design Guidelines 74 days Mon 2/24/14 Thu 6/5/14 44 Develop initial draft 30 days Mon 2/24/14 Fri 4/4/14 45 City reviews and comments (feeds guidelines task)10 days Mon 4/7/14 Fri 4/18/14 46 Developed formatted draft 23 days Mon 4/21/14 Wed 5/21/14 47 Meeting with Caltrans to discuss 1 day Thu 5/22/14 Thu 5/22/14 48 Finalize guidelines 10 days Fri 5/23/14 Thu 6/5/14 49 Design Competition 160 days Mon 5/26/14 Mon 1/5/15 50 AIA Contract 21 days Mon 5/26/14 Mon 6/23/14 51 Preparations 45 days Tue 6/24/14 Mon 8/25/14 52 Initial call for concepts 35 days Tue 8/26/14 Mon 10/13/14 53 Short list & Finalist competition call 20 days Tue 10/14/14 Mon 11/10/14 54 Final Submittal 30 days Tue 11/11/14 Mon 12/22/14 5/9/2014 1 of 6 ATTACHMENT C Palo Alto Bicycle/Pedestrian Overpass Project Project Schedule No.Task Name Duration Start Finish 55 Jury selections of design winner 9 days Tue 12/23/14 Fri 1/2/15 56 Council approval 0 days Mon 1/5/15 Mon 1/5/15 57 Design Phase 440 days Mon 1/5/15 Fri 9/9/16 58 Notice to Proceed 25 days Mon 1/5/15 Fri 2/6/15 59 35% PS&E 150 days Mon 2/9/15 Fri 9/4/15 60 Preprare 35% Plans and Specifications 120 days Mon 2/9/15 Fri 7/24/15 61 Prepare 35% Cost Estimate 50 days Mon 5/18/15 Fri 7/24/15 62 Submit Structure Type Selection to Caltrans 1 day Mon 7/27/15 Mon 7/27/15 63 Submit Advance Planning Study to Caltrans 1 day Mon 7/27/15 Mon 7/27/15 64 Caltrans review and comment 30 days Mon 7/27/15 Fri 9/4/15 65 Design Review Committee Meeting 1 day Mon 7/27/15 Mon 7/27/15 66 Architectural Board Meeting (1st & 3rd Thurs) 1 day Thu 6/18/15 Thu 6/18/15 67 65% PS&E 120 days Mon 9/7/15 Fri 2/19/16 68 Preprare 65% Plans and Specifications 60 days Mon 9/7/15 Fri 11/27/15 69 Prepare 65% Cost Estimate 30 days Mon 10/19/15 Fri 11/27/15 70 Design Review Committee Meeting 1 day Mon 11/30/15 Mon 11/30/15 71 Architectural Board Meeting (1st & 3rd Thurs) 1 day Thu 11/5/15 Thu 11/5/15 72 Submit 65% PS&E to Caltrans for review 5 days Mon 11/30/15 Fri 12/4/15 73 Submit Revised Structure Type Selection to Caltrans 5 days Mon 11/30/15 Fri 12/4/15 74 Submit Revised Advance Planning Study to Caltrans 5 days Mon 11/30/15 Fri 12/4/15 75 Caltrans reviews and comments 25 days Mon 12/7/15 Fri 1/8/16 76 Response to Caltrans 65% comments 10 days Mon 1/11/16 Fri 1/22/16 77 Caltrans review responses to 65% comments 20 days Mon 1/25/16 Fri 2/19/16 78 100% PS&E 105 days Mon 2/22/16 Fri 7/15/16 79 Preprare 100% Plans ans Specifications 40 days Mon 2/22/16 Fri 4/15/16 80 Prepare 100% cost estimate 20 days Mon 3/21/16 Fri 4/15/16 81 Submit 100% PS&E to Caltrans for Review 5 days Mon 4/18/16 Fri 4/22/16 82 Caltrans reviews 100% PS&E 30 days Mon 4/25/16 Fri 6/3/16 83 Response to Caltrans 100% comments 10 days Mon 6/6/16 Fri 6/17/16 84 Caltrans review responses to 100% comments 20 days Mon 6/20/16 Fri 7/15/16 85 Final Construction Document 40 days Mon 7/18/16 Fri 9/9/16 86 Prerpare Final Construction Document 35 days Mon 7/18/16 Fri 9/2/16 87 Submit Final Construction Document to City 5 days Mon 9/5/16 Fri 9/9/16 88 E-76 Authorization Process for Construction 85 days Mon 6/6/16 Fri 9/30/16 89 Submit & Process E-76 package with Caltrans 15 days Mon 6/6/16 Fri 6/24/16 90 Prerpare CTC funds approval package 10 days Mon 6/27/16 Fri 7/8/16 91 Submit CTC funds package to CTC 0 days Fri 7/8/16 Fri 7/8/16 92 CTC/HQ review funds application package 60 days Mon 7/11/16 Fri 9/30/16 93 CTC authorizes funds 0 days Fri 9/30/16 Fri 9/30/16 94 Obtain Authorization to Proceed (E-76) 0 days Fri 9/30/16 Fri 9/30/16 95 Obtain Caltrans Encroachment Permit 61 days? Mon 6/6/16 Mon 8/29/16 96 Adress City/Caltrans comments from 100% PS&E 10 days Mon 6/6/16 Fri 6/17/16 97 Prepare Caltrans Encroachment Permit Application 10 days Mon 6/20/16 Fri 7/1/16 98 Submit Caltrans Encroachment Permit Application 1 day? Mon 7/4/16 Mon 7/4/16 99 Caltrans reviews Encroachment Permit 30 days Tue 7/5/16 Mon 8/15/16 100 Revise PS&E per Caltrans Final Comments 10 days Tue 8/16/16 Mon 8/29/16 101 Obtain Caltrans Encroachment Permit 0 days Mon 8/29/16 Mon 8/29/16 102 Bidding and Construction Phase 511 days Mon 10/3/16 Mon 9/17/18 103 City advertises for bids 26 days Mon 10/3/16 Mon 11/7/16 104 Prerpare Addendum and Clarifications (bid period) 18 days Mon 10/10/16 Wed 11/2/16 105 Bid Opening 0 days Mon 11/7/16 Mon 11/7/16 106 City review bids 5 days Tue 11/8/16 Mon 11/14/16 107 Council Awards Construction contract 0 days Mon 11/14/16 Mon 11/14/16 108 Process Contractor document 20 days Tue 11/15/16 Mon 12/12/16 5/9/2014 2 of 6 ATTACHMENT C Palo Alto Bicycle/Pedestrian Overpass Project Project Schedule No.Task Name Duration Start Finish 109 Issue Notice to Proceed (Construction) 10 days Tue 12/13/16 Mon 12/26/16 110 Construction 390 days Tue 12/27/16 Mon 6/25/18 111 Rain days allowance 40 days Tue 6/26/18 Mon 8/20/18 112 Substantial completion 0 days Mon 8/20/18 Mon 8/20/18 113 Punch list items 20 days Tue 8/21/18 Mon 9/17/18 114 Completion 0 days Mon 9/17/18 Mon 9/17/18 115 Task 6 Environmental Documentation 745 days Mon 9/16/13 Fri 7/22/16 116 Special Studies 381 days Mon 9/16/13 Mon 3/2/15 117 Paleontology 39 days Wed 12/11/13 Mon 2/3/14 118 Consultant deliverable 1 day Wed 12/11/13 Wed 12/11/13 119 Caltrans 2nd Review 20 days Tue 12/17/13 Mon 1/13/14 120 Consultant revise 10 days Tue 1/14/14 Mon 1/27/14 121 Final Deliverable 5 days Tue 1/28/14 Mon 2/3/14 122 Hazardous Materials/ISA 44 days Wed 12/4/13 Mon 2/3/14 123 Consultant deliverable 1 day Wed 12/4/13 Wed 12/4/13 124 Caltrans 2nd Review 20 days Tue 12/17/13 Mon 1/13/14 125 Consultant revise 10 days Tue 1/14/14 Mon 1/27/14 126 Final Deliverable 5 days Tue 1/28/14 Mon 2/3/14 127 Visual Impact Assessment 306 days Mon 12/30/13 Mon 3/2/15 128 Consultant deliverable 5 days Mon 12/30/13 Fri 1/3/14 129 City Reviews 20 days Mon 1/6/14 Fri 1/31/14 130 Caltrans Reviews 40 days Mon 2/3/14 Fri 3/28/14 131 Consultant revise 20 days Mon 1/5/15 Fri 1/30/15 132 Caltrans 2nd review 20 days Mon 2/2/15 Fri 2/27/15 133 Final Approval 1 day Mon 3/2/15 Mon 3/2/15 134 Preliminary Geotechnical 165 days Mon 9/16/13 Fri 5/2/14 135 Consultant prepare 10 days Mon 9/16/13 Fri 9/27/13 136 Consultant deliverable 5 days Mon 1/13/14 Fri 1/17/14 137 City Reviews 5 days Mon 1/20/14 Fri 1/24/14 138 Caltrans Review 25 days Mon 2/3/14 Fri 3/7/14 139 Consultant revise 8 days Wed 3/26/14 Fri 4/4/14 140 Caltrans 2nd review 20 days Mon 4/7/14 Fri 5/2/14 141 Final deliverable 0 days Fri 5/2/14 Fri 5/2/14 142 Supplementary Geotechnical (if needed) 115 days Mon 5/19/14 Fri 10/24/14 143 Permits and borings 20 days Mon 5/19/14 Fri 6/13/14 144 Lab testing 5 days Mon 6/16/14 Fri 6/20/14 145 Initial deliverable 10 days Mon 6/23/14 Fri 7/4/14 146 City/VTA review and comment 10 days Mon 7/7/14 Fri 7/18/14 147 Caltrans review and comment 30 days Mon 7/21/14 Fri 8/29/14 148 Consultant revise 10 days Mon 9/1/14 Fri 9/12/14 149 Caltrans 2nd review 20 days Mon 9/15/14 Fri 10/10/14 150 Final approval 10 days Mon 10/13/14 Fri 10/24/14 151 Archeological Survey Report (ASR) 171 days Mon 10/7/13 Mon 6/2/14 152 Consultant prepare 27 days Mon 10/7/13 Tue 11/12/13 153 Consultant initital deliverable 1 day Wed 11/13/13 Wed 11/13/13 154 Caltrans Review 25 days Tue 12/17/13 Mon 1/20/14 155 Consultant revise 40 days Tue 1/21/14 Mon 3/17/14 156 Consultant 2nd deliverable 5 days Tue 3/18/14 Mon 3/24/14 157 Caltrans 2nd review 20 days Tue 3/25/14 Mon 4/21/14 158 SHPO Concurrence 30 days Tue 4/22/14 Mon 6/2/14 159 Historic Property Survey Report (HPSR) 171 days Mon 10/7/13 Mon 6/2/14 160 Consultant prepare 27 days Mon 10/7/13 Tue 11/12/13 161 Consultant initital deliverable 1 day Wed 11/13/13 Wed 11/13/13 162 City/Caltrans/Public Review 25 days Tue 12/17/13 Mon 1/20/14 5/9/2014 3 of 6 ATTACHMENT C Palo Alto Bicycle/Pedestrian Overpass Project Project Schedule No.Task Name Duration Start Finish 163 Consultant revise (extended if added requirements) 40 days Tue 1/21/14 Mon 3/17/14 164 Consultant 2nd deliverable 5 days Tue 3/18/14 Mon 3/24/14 165 Caltrans 2nd review 20 days Tue 3/25/14 Mon 4/21/14 166 SHPO Concurrence 30 days Tue 4/22/14 Mon 6/2/14 167 Water Quality Assessment Report 110 days Mon 5/19/14 Fri 10/17/14 168 Consultant prepare 25 days Mon 5/19/14 Fri 6/20/14 169 Consultant initital deliverable 5 days Mon 6/23/14 Fri 6/27/14 170 City reviews and comments 10 days Mon 6/30/14 Fri 7/11/14 171 Caltrans review and comment 30 days Mon 7/14/14 Fri 8/22/14 172 Consultant revise 5 days Mon 8/25/14 Fri 8/29/14 173 Consultant 2nd deliverable 5 days Mon 9/1/14 Fri 9/5/14 174 Caltrans 2nd review 20 days Mon 9/8/14 Fri 10/3/14 175 Final approval 10 days Mon 10/6/14 Fri 10/17/14 176 Stormwater Data Report Long Form 110 days Mon 5/19/14 Fri 10/17/14 177 Consultant prepare 25 days Mon 5/19/14 Fri 6/20/14 178 Consultant initital deliverable 5 days Mon 6/23/14 Fri 6/27/14 179 City reviews and comments 10 days Mon 6/30/14 Fri 7/11/14 180 Caltrans review and comment 30 days Mon 7/14/14 Fri 8/22/14 181 Consultant revise 5 days Mon 8/25/14 Fri 8/29/14 182 Consultant 2nd deliverable 5 days Mon 9/1/14 Fri 9/5/14 183 Caltrans 2nd review 20 days Mon 9/8/14 Fri 10/3/14 184 Final approval 10 days Mon 10/6/14 Fri 10/17/14 185 Hydraulic Floodplain Report 110 days Mon 5/19/14 Fri 10/17/14 186 Consultant prepare 25 days Mon 5/19/14 Fri 6/20/14 187 Consultant initital deliverable 5 days Mon 6/23/14 Fri 6/27/14 188 City reviews and comments 10 days Mon 6/30/14 Fri 7/11/14 189 Caltrans review and comment 30 days Mon 7/14/14 Fri 8/22/14 190 Consultant revise 5 days Mon 8/25/14 Fri 8/29/14 191 Consultant 2nd deliverable 5 days Mon 9/1/14 Fri 9/5/14 192 Caltrans 2nd review 20 days Mon 9/8/14 Fri 10/3/14 193 Final approval 10 days Mon 10/6/14 Fri 10/17/14 194 Wetlands Delineation 105 days Mon 3/31/14 Fri 8/22/14 195 Consultant prepare 20 days Mon 3/31/14 Fri 4/25/14 196 Consultant initital deliverable 5 days Mon 4/28/14 Fri 5/2/14 197 City reviews and comments 10 days Mon 5/5/14 Fri 5/16/14 198 Caltrans review and comment 30 days Mon 5/19/14 Fri 6/27/14 199 Consultant revise 5 days Mon 6/30/14 Fri 7/4/14 200 Consultant 2nd deliverable 5 days Mon 7/7/14 Fri 7/11/14 201 Caltrans 2nd review 20 days Mon 7/14/14 Fri 8/8/14 202 Final approval 10 days Mon 8/11/14 Fri 8/22/14 203 Noise Study 120 days Mon 3/31/14 Fri 9/12/14 204 Consultant prepare 40 days Mon 3/31/14 Fri 5/23/14 205 Consultant initital deliverable 5 days Mon 5/26/14 Fri 5/30/14 206 City reviews and comments 10 days Mon 6/2/14 Fri 6/13/14 207 Caltrans review and comment 30 days Mon 6/16/14 Fri 7/25/14 208 Consultant revise 5 days Mon 7/28/14 Fri 8/1/14 209 Consultant 2nd deliverable 5 days Mon 8/4/14 Fri 8/8/14 210 Caltrans 2nd review 20 days Mon 8/11/14 Fri 9/5/14 211 Final approval 5 days Mon 9/8/14 Fri 9/12/14 212 Arborist Report 90 days Mon 2/3/14 Fri 6/6/14 213 Revised Deliverable 35 days Mon 2/3/14 Fri 3/21/14 214 City reviews 15 days Mon 3/24/14 Fri 4/11/14 215 Caltrans review 30 days Mon 4/14/14 Fri 5/23/14 216 Final approval 10 days Mon 5/26/14 Fri 6/6/14 5/9/2014 4 of 6 ATTACHMENT C Palo Alto Bicycle/Pedestrian Overpass Project Project Schedule No.Task Name Duration Start Finish 217 Natural Environment Study 124 days Mon 4/14/14 Thu 10/2/14 218 Consultant prepare 20 days Mon 4/14/14 Fri 5/9/14 219 Consultant initital deliverable 5 days Mon 5/12/14 Fri 5/16/14 220 City reviews and comments 5 days Mon 5/19/14 Fri 5/23/14 221 Caltrans review and comment 25 days Mon 5/26/14 Fri 6/27/14 222 Consultant revise 5 days Mon 6/30/14 Fri 7/4/14 223 Consultant 2nd deliverable 5 days Mon 7/7/14 Fri 7/11/14 224 Caltrans 2nd review 25 days Mon 7/14/14 Fri 8/15/14 225 Caltrans issues letter of Concurrence 34 days Mon 8/18/14 Thu 10/2/14 226 Biological Assessment Report (BA) 200 days Mon 4/21/14 Fri 1/23/15 227 Consultant prepare 20 days Mon 4/21/14 Fri 5/16/14 228 Consultant initital deliverable 5 days Mon 5/19/14 Fri 5/23/14 229 City reviews and comments 10 days Mon 5/26/14 Fri 6/6/14 230 Caltrans review/Formal consultation with DFW 120 days Mon 6/9/14 Fri 11/21/14 231 Consultant revise 10 days Mon 11/24/14 Fri 12/5/14 232 Consultant 2nd deliverable 5 days Mon 12/8/14 Fri 12/12/14 233 SHPO provides Biological Opinions 30 days Mon 12/15/14 Fri 1/23/15 234 Assessment of Alternatives 90 days Mon 5/19/14 Fri 9/19/14 235 Consultant prepare 5 days Mon 5/19/14 Fri 5/23/14 236 Consultant initital deliverable 5 days Mon 5/26/14 Fri 5/30/14 237 City/VTA review and comment 10 days Mon 6/2/14 Fri 6/13/14 238 Caltrans review and comment 30 days Mon 6/16/14 Fri 7/25/14 239 Consultant revise 5 days Mon 7/28/14 Fri 8/1/14 240 Consultant 2nd deliverable 5 days Mon 8/4/14 Fri 8/8/14 241 Caltrans 2nd review 20 days Mon 8/11/14 Fri 9/5/14 242 Final approval 10 days Mon 9/8/14 Fri 9/19/14 243 Admin Draft EIR/EA 70 days Fri 10/3/14 Thu 1/8/15 244 Consultant prepare 20 days Fri 10/3/14 Thu 10/30/14 245 Consultant initital deliverable 5 days Fri 10/31/14 Thu 11/6/14 246 City/VTA review and comment 15 days Fri 11/7/14 Thu 11/27/14 247 Caltrans review and comment 30 days Fri 11/28/14 Thu 1/8/15 248 Second Admin Draft EIR/EA 51 days Fri 1/9/15 Fri 3/20/15 249 Consultant prepare 10 days Fri 1/9/15 Thu 1/22/15 250 Consultant initital deliverable 5 days Fri 1/23/15 Thu 1/29/15 251 City/VTA review and comment 10 days Fri 1/30/15 Thu 2/12/15 252 Caltrans review and comment 26 days Fri 2/13/15 Fri 3/20/15 253 Screencheck Draft EIR/EA 25 days Mon 3/23/15 Fri 4/24/15 254 Consultant prepare 5 days Mon 3/23/15 Fri 3/27/15 255 Consultant initital deliverable 5 days Mon 3/30/15 Fri 4/3/15 256 City/VTA review 15 days Mon 4/6/15 Fri 4/24/15 257 Public Release Draft EIR/EA 11 days Mon 4/27/15 Mon 5/11/15 258 Consultant prepare 5 days Mon 4/27/15 Fri 5/1/15 259 Final deliverable 5 days Mon 5/4/15 Fri 5/8/15 260 Release to Public 1 day Mon 5/11/15 Mon 5/11/15 261 Public Review/PT&C Meeting/Hearing 66 days Tue 5/12/15 Tue 8/11/15 262 Public review/comments 45 days Tue 5/12/15 Mon 7/13/15 263 PT&C meeting (2nd or last Wednesday) 1 day Tue 7/14/15 Tue 7/14/15 264 Consultant Prepare Comment Responses 15 days Wed 7/15/15 Tue 8/4/15 265 City reviews 5 days Wed 8/5/15 Tue 8/11/15 266 Final EIR/EA 98 days Wed 8/12/15 Fri 12/25/15 267 Consultant revise 10 days Wed 8/12/15 Tue 8/25/15 268 Consultant deliverable 5 days Wed 8/26/15 Tue 9/1/15 269 City/VTA review and comment 10 days Wed 9/2/15 Tue 9/15/15 270 Caltrans review and comment 30 days Wed 9/16/15 Tue 10/27/15 5/9/2014 5 of 6 ATTACHMENT C Palo Alto Bicycle/Pedestrian Overpass Project Project Schedule No.Task Name Duration Start Finish 271 Consultant revise 10 days Wed 10/28/15 Tue 11/10/15 272 Consultant deliverable 4 days Wed 11/11/15 Mon 11/16/15 273 Second Caltrans reviews 20 days Tue 11/17/15 Mon 12/14/15 274 Final approval 9 days Tue 12/15/15 Fri 12/25/15 275 FEIR Circulation 15 days Mon 12/28/15 Fri 1/15/16 276 City Council Meeting 0 days Fri 1/15/16 Fri 1/15/16 277 ROW Certification 135 days Mon 1/18/16 Fri 7/22/16 278 Hire third party agent 5 days Mon 1/18/16 Fri 1/22/16 279 Consultant preprares 40 days Mon 1/25/16 Fri 3/18/16 280 Consultant deliverable 5 days Mon 3/21/16 Fri 3/25/16 281 City/VTA review and comment 10 days Mon 3/28/16 Fri 4/8/16 282 Caltrans review and comment 30 days Mon 4/11/16 Fri 5/20/16 283 Consultant revise 10 days Mon 5/23/16 Fri 6/3/16 284 City/VTA 2nd review and comment 10 days Mon 6/6/16 Fri 6/17/16 285 Caltrans 2nd review and comment 20 days Mon 6/20/16 Fri 7/15/16 286 Final Approval 5 days Mon 7/18/16 Fri 7/22/16 287 Task 8 Adobe Creek Reach Trail 260 days Mon 12/30/13 Fri 12/26/14 288 Trail concept memorandum 15 days Mon 12/30/13 Fri 1/17/14 289 Preprare deliverable 15 days Mon 12/30/13 Fri 1/17/14 290 Additional survey 15 days Mon 1/27/14 Fri 2/14/14 291 Conduct survey 5 days Mon 1/27/14 Fri 1/31/14 292 Revise base maps 10 days Mon 2/3/14 Fri 2/14/14 293 15% Plan Set 80 days Mon 5/19/14 Fri 9/5/14 294 Prepare initial plan set 35 days Mon 5/19/14 Fri 7/4/14 295 City/Agency review and comment 35 days Mon 7/7/14 Fri 8/22/14 296 Revise 15% plan set 10 days Mon 8/25/14 Fri 9/5/14 297 Prepare final report/MOU/Grant application 80 days Mon 9/8/14 Fri 12/26/14 298 Determine scope 10 days Mon 9/8/14 Fri 9/19/14 299 Prepare draft deliverable 15 days Mon 9/22/14 Fri 10/10/14 300 City/Agency review and comment 45 days Mon 10/13/14 Fri 12/12/14 301 Finalize deliverable 10 days Mon 12/15/14 Fri 12/26/14 5/9/2014 6 of 6 City of Palo Alto (ID # 4710) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/9/2014 City of Palo Alto Page 1 Council Priority: Environmental Sustainability Summary Title: Assignment of Brannon Solar Power Purchase Agreement Title: Approval of Consent to Assignment of Power Purchase Agreement with Brannon Solar LLC to CRE-Kettleman Holdco LLC and Approval of Amended and Restated Power Purchase Agreement with EE Kettleman Land, LLC From: City Manager Lead Department: Utilities Recommendation Staff recommends that Council adopt the attached resolution to: 1. Approve the attached Consent to Assignment Agreement (the Consent) (Attachment B) under which the City consents to the assignment of the Power Purchase Agreement (Original PPA) with Brannon Solar, LLC (Brannon) to CRE-Kettleman HoldCo LLC (CRE Holdco) and acknowledges the merger of CRE HoldCo into EE Kettleman Land, LLC (ProjectCo), the latter of which will hold the Amended and Restated Power Purchase Agreement (Amended and Restated PPA) with the City. 2. Approve the attached Amended and Restated PPA with ProjectCo (Attachment C), which will replace the Original PPA, will move the project to a new location (New Site), extend the Commercial Operation Date deadline from August 1, 2014 to June 1, 2015 in exchange for an administrative payment of $300,000, and will increase the energy output from the project by approximately 5%, resulting in a higher not to exceed amount under the Amended and Restated PPA of $116 million. 3. Waive the application of the investment-grade credit rating requirement of Section 2.30.340(c) of the Palo Alto Municipal Code, which applies to energy companies that do business with the City, as ProjectCo will provide a $400,000 letter of credit as a development assurance deposit, and a subsequent $400,000 letter of credit as a performance assurance deposit. City of Palo Alto Page 2 4. Delegate to the City Manager or his designee, the authority to execute on behalf of the City the Consent with Brannon, CRE, CRE HoldCo and ProjectCo and the Amended and Restated PPA with ProjectCo, including the one contract term extension available to the City under the Amended and Restated PPA, and any documents necessary to administer the agreements that are consistent with the Palo Alto Municipal Code and City Council approved policies. Executive Summary In November 2012, Council approved the PPA with Brannon to obtain all of the electric output of a solar photovoltaic (PV) electric generating facility over a 25-year term, with an additional five-year extension term option available for the project. The PPA included a milestone for the project to achieve its commercial operation date (COD) by August 1, 2014. Brannon, which is a wholly-owned subsidiary of Changzhou Trina Solar Energy Co., Ltd., a vertically integrated Chinese solar panel manufacturer, originally planned to develop the 20- megawatt (MW) project at a site in western Fresno County. However, the company recently experienced problems with higher than expected interconnection costs, which led to an inability to obtain construction financing for the project. In order to overcome this challenge, Brannon negotiated an Asset Purchase Agreement (Attachment D) with CRE-Kettleman Holdco LLC (CRE Holdco), through which it agreed to transfer all of the rights and obligations associated with the Original PPA to CRE Holdco. Pursuant to Section 10.1 of the Original PPA, the City’s consent is required for such an assignment of the PPA rights and obligations to occur, but the City may not unreasonably withhold or delay such consent. Upon assuming the rights and obligations of the Original PPA, CRE Holdco intends to merge into ProjectCo (Merger), and then move the project to a nearby site in Kings County, where ProjectCo has already achieved most of the development milestones necessary to bring the project to fruition (including obtaining site control, a Conditional Use Permit, and an executed interconnection agreement). The Amended and Restated PPA will be held post-Merger by and in the name of ProjectCo. At the new location, the project is expected to be operational by June 1, 2015. As compensation for receiving this ten-month extension to the Original PPA’s COD deadline, CRE Holdco has agreed to make a one-time administrative payment of $300,000 to the City. In order to acknowledge the change in ownership of the PPA, consent to the change in the site location of the project, extend the COD deadline to June 1, 2015, and make other immaterial contractual changes, staff and CRE Holdco desire to replace the Original PPA with an amended and restated version with substantially similar terms. When operational, the project—which will be known as “EE Kettleman Land LLC” (referred to in this staff report and the Consent as “ProjectCo”) at the new location—will provide about 5% of City of Palo Alto Page 3 the City’s total electric needs, and will increase the City’s renewable resources from 25% to 30% of its total needs. As provided for in the attached resolution and the transaction documents, staff recommends that the City condition its Consent and acknowledgment of the various changes in control described herein upon ProjectCo’s execution of the Amended and Restated PPA, and upon the City’s receipt of the $300,000 Administrative Payment in connection with the COD deadline extension. Background As part of ongoing efforts to meet the City’s Renewable Portfolio Standard (RPS) of providing at least 33% of electric sales from qualifying renewable resources by 2015, Council in November 2012 approved a PPA with Brannon (Original PPA) to acquire all of the electricity generated by a solar PV facility (Resolution 9294, Staff Report 3223). The Original PPA included several project development “milestones” and established deadlines for their completion. The milestones included: obtaining site control, obtaining all necessary permits, executing an interconnection agreement with the California Independent System Operator (CAISO) and the owner of the local transmission system, obtaining construction financing, starting construction, and achieving commercial operation. For Brannon, the COD deadline is August 1, 2014. Discussion Brannon Project Development Both before and after executing the Original PPA with the City in November 2012, the Brannon development team worked to complete many of the project development milestones specified in the PPA. To date, they have obtained site control, obtained a Conditional Use Permit from Fresno County, and executed an interconnection agreement with CAISO and the owner of the transmission system in the area (PG&E). Unfortunately, the interconnection agreement called for the project to pay greater than expected costs in order to interconnect to the electric grid. As a result of these increased costs, Brannon was unable to find any investors willing to finance the construction of the project when it sought to do so last year. PPA Assignment from Brannon to CRE Holdco, and Merger of CRE Holdco into ProjectCo Unable to obtain construction financing for the project due to excessive development costs at the original site location, and unable to move the project to another site given the Original PPA timeline for achieving COD, Brannon began to look for another development company to whom it could sell the Original PPA, and who could then successfully develop the project. Recently, Brannon informed the City that it had found such a company: CRE Holdco, which is a wholly-owned subsidiary of Houston-based Centaurus Renewable Energy, LLC (CRE). Brannon and CRE Holdco have agreed to the terms of an Asset Purchase Agreement, by which Brannon will sell and assign all of the rights, duties, obligations and interests in the Original PPA to CRE Holdco, and CRE Holdco will agree to assume all such rights, duties, obligations and interests. However, a condition of the closing of said Asset Purchase Agreement is that the City provides City of Palo Alto Page 4 its consent to this assignment. (Pursuant to Section 10.1 of the Original PPA, the City’s consent is required for such an assignment of the PPA rights and obligations to occur, but the City may not unreasonably withhold or delay such consent.) Simultaneously with the City providing its consent to the assignment of the Original PPA and the close of the Asset Purchase Agreement between Brannon and CRE Holdco, CRE Holdco will enter into a Membership Interest Purchase and Sale Agreement for the purchase of all of the outstanding membership interests in ProjectCo, which owns all of the assets associated with the development of a 20 MWAC solar PV generation facility to be located at a site near Kettleman City, in Kings County, California. Upon closing of the acquisition of the membership interests in Kettleman, CRE intends to merge CRE Holdco and ProjectCo—with ProjectCo being the surviving entity. The City’s Amended and Restated PPA will be with ProjectCo post-merger. Pursuant to Section 10.1 of the Original PPA and as a condition to the closing of the Asset Purchase Agreement, Brannon, CRE, and CRE Holdco have requested that the City (i) consent to Brannon’s assignment of all of the rights, duties, obligations and interests in the Original PPA to CRE Holdco, and (ii) acknowledge the merger of CRE Holdco into Kettleman. Amended and Restated PPA with ProjectCo Upon CRE Holdco’s assumption of the rights and obligations of the Original PPA, and CRE Holdco’s merger with ProjectCo, the combined entity intends to move the project to the site near Kettleman City noted above,1 where it has already achieved most of the development milestones necessary to bring the project to fruition (including obtaining site control, a Conditional Use Permit, and an executed interconnection agreement). However, due to PG&E’s interconnection construction schedule, the project is not expected to begin operating until June 1, 2015. As such, the parties have requested that the original COD deadline of August 1, 2014 be moved to June 1, 2015. COD Deadline Extension and Administrative Payment In order to compensate the City for granting a ten-month extension to the COD deadline provided in the Original PPA, as well as for the staff time required to negotiate and seek approval of the Consent and the Amended and Restated PPA with ProjectCo, CRE Holdco has agreed to make a one-time administrative payment of $300,000 to the City. This amount is similar to what the City would have recovered through the liquidated damages provisions of the Original PPA if the project had experienced a ten-month delay beyond the original COD deadline. In addition, the City will receive the $300,000 up-front shortly after executing the Amended and Restated PPA, and will retain the full amount even if the new project begins 1 Both the Original PPA and the Amended and Restated PPA permit the project developer to move the project from the location originally specified to an alternate location. However, as a condition to this site change ability, the City must provide its written consent to the move – and such consent may not be unreasonably withheld. The Amended and Restated PPA with ProjectCo defines the project site as the Kings County location, and the City’s approval of the Amended and Restated PPA will, in effect, provide the written consent required by the PPA to the move from the original Fresno County location. City of Palo Alto Page 5 operating earlier than June 1, 2015. Finally, as under the Original PPA, the Amended and Restated PPA requires ProjectCo to post a development assurance security of $400,000 from which the City can draw liquidated damages payments in the event that the new project is delayed beyond the new COD deadline. Increase in Not to Exceed Cost from $91 Million to $116 Million Under Resolution 9294, the Not to Exceed Cost authority for the Original PPA was $91 million. This amount was based on the expected energy output at the original site (approximately 50,700 MWh per year) and the base contract term of 25 years. Under the attached resolution, the Not to Exceed Cost authority requested for the Amended and Restated PPA is $116 million. This increase in spending authority is due to two factors: (a) the moderately higher energy output of the project at the new site (approximately 53,500 MWh per year), and (b) staff’s desire to have enough spending authority for the entire 30-year contract term, such that a new resolution is not necessary in the event that the City chooses to exercise the five-year extension term option. Differences between Original PPA and Amended and Restated PPA In order to acknowledge the change in ownership of the PPA, consent to the change in the site location of the project, and make other immaterial contractual changes, staff requested that CRE Holdco replace the Original PPA with an amended and restated version, rather than extensively amending the Original PPA. In addition to providing greater clarity, the Amended and Restated PPA is more consistent with the form of the PPAs the City has negotiated for other solar PV projects in 2013 and 2014. This will also facilitate the administration and management of the Amended and Restated PPA. However, all of the material commercial terms will remain the same as in the Original PPA—including the contract price ($77.00 per MWh) and term, the project size, and the liquidated damages provisions. And, as at the originally planned site, the project will provide the City with renewable energy, but not capacity rights. Finally, the Original PPA included a provision enabling Brannon to terminate the contract without penalty in the event that it was unable to satisfactorily obtain construction financing for the project. However, in the Amended and Restated PPA, staff negotiated the removal of this termination right. CRE Holdco/ProjectCo has agreed to eliminate this provision because its parent company, CRE, is able and willing to self-finance the project, rather than rely on third- party financing (although it reserves the right to bring in third-party financing if it finds that it would be financially beneficial to do so). Staff feels that the elimination of the financing termination right from the Amended and Restated PPA results in a significantly more viable project. Waiver of PAMC Section 2.30.340(c) Investment-Grade Credit Rating Requirement The risks to the City of entering into the proposed PPA are that the supplier defaults or is unable to perform according to the terms of the contract. If this occurs, the City might need to buy renewable energy from another supplier in order to meet its RPS obligations under State City of Palo Alto Page 6 law or to meet the City’s RPS goals. These risks are minimized by the terms of the Original PPA, all of which are also features of the Amended and Restated PPA:  The City is not at risk for paying for output that is not delivered.  The development assurance deposit funds (here, $400,000) provide some degree of assurance that the project will be completed. If it is not, then the City would be able to access the development deposit funds of up to $400,000 to help offset the cost of procuring replacement renewable energy.  Once the project becomes operational, a new performance assurance deposit (also $400,000) will be posted by ProjectCo and can be used by the City to cover operational and performance risk. Staff believes this amount is sufficient to cover these risks. In addition, the risks to the City are further minimized under the Amended and Restated PPA given that ProjectCo’s parent company has the resources to self-finance the construction of the project—and has committed to do so. In general, businesses in the renewable industry lack extensive financial and operational track records, and because of the capital-intensive nature of these projects, they tend to be highly leveraged as well. The companies discussed here are not investment grade and have a higher projected default rates than the City’s regular electric and gas suppliers. However, under the terms of the PPA, if the project does not come to fruition according to the construction start and commercial operation date milestones set forth in the PPA or if the supplier defaults at any time during the term of the agreement, the City can access the then current development assurance funds provided by the letter of credit. For these reasons, staff recommends that the Council waive the investment-grade credit requirement for public agency contracts required under Section 2.20.340(c) of the Palo Alto Municipal Code. This conforms to Council action on prior renewable resource contracts with similar characteristics (CMR:461:04, CMR:100:05, CMR:350:05, CMR:343:09, CMR:226:10, Staff Report 3223, and Staff Report 3845). Conclusion If Council approves the attached Consent and the Amended and Restated PPA with ProjectCo, the City is highly likely to begin receiving relatively low-cost renewable energy from the project by mid-2015—under the same commercial terms as those originally agreed to with Brannon. If Council approves the Consent, it will only become effective as of: (a) the closing of the transactions contemplated by the Asset Purchase Agreement, including the full execution of the PPA Assignment Agreement between Brannon and CRE Holdco; (b) execution of the Amended and Restated PPA by ProjectCo and the City; and (c) CRE HoldCo remitting the Administrative Payment to the City. If these events have not occurred by August 31, 2014, the Consent approved by Council will expire. City of Palo Alto Page 7 If Council declines to approve the Consent and/or the Amended and Restated PPA with ProjectCo, Brannon will likely terminate the Original PPA (without penalty) owing to its inability to obtain construction financing for the project at the original site. In that event, staff would need to quickly attempt to procure additional renewable energy to replace the energy that the Brannon project would have delivered. The cost of these replacement supplies could be more or less than the cost of the output from the Kettleman project under the terms of the Amended and Restated PPA. The timing of the energy deliveries for the replacement supplies could be earlier or (more likely) later than under the Amended and Restated PPA. Resource Impact Approving the recommendation will result in a very small increase in the City’s supply levels of renewable electric generation and thus likely also a very small increase in its electric supply costs. Declining to approve the recommendation could result in either an increase or a decrease in the City’s electric supply costs to replace the generation that would have been provided by the Kettleman project, and would likely result in the City having to purchase a significant volume of renewable energy certificates (RECs) in order to meet its RPS target in 2015. Policy Implications Approval of the Consent and the the proposed amendments is in conformance with the City’s Long-term Electric Acquisition Plan (LEAP), specifically the City’s RPS target of meeting at least 33% of the electric sales from renewable energy by 2015 (Staff Report 2710). Approval of the proposed amendments would also further the City’s efforts to achieve a carbon neutral electric supply portfolio entirely through the acquisition of additional “hard resources” that supply the City with both energy and environmental attributes (Staff Report 3550). Environmental Review Approval of the Consent and the Amended and Restated PPA does not meet the definition of a project under the California Environmental Quality Act (CEQA), pursuant to Public Resources Code Section 21065. However, the City intends to receive output from a project that will constitute a project for the purposes of CEQA. The project developer will be responsible for acquiring necessary environmental reviews and permits on the project to be developed. Attachments:  Attachment A: Resolution Approving the Kettleman PPA and Assignment of the Brannon PPA (PDF)  Attachment B: Consent Agreement to Assignment of Brannon PPA (PDF)  Attachment C: Amended and Restated PPA with EE Kettleman Land LLC (PDF)  Attachment D: Asset Purchase Agreement between Brannon and CRE Holdco (PDF) NOT YET APPROVED Resolution No. ______ Resolution of the Council of the City of Palo Alto Consenting to the Assignment of the Power Purchase Agreement with Brannon Solar, LLC to CRE-Kettleman Holdco, LLC and Approving the Amended and Restated Power Purchase Agreement with EE Kettleman Land, LLC for the Purchase of Solar Electricity R E C I T A L S A. On November 5, 2012, Council approved the power purchase agreement (“Original PPA”) with Brannon Solar LLC (“Brannon” or “Seller”) for the purchase of electricity from a 20 MW(ac) photovoltaic (“PV”) solar electric generating facility (“Original Plant”) originally planned to be built and located at the intersection of Davidson Avenue and W. Ballard Avenue, Firebaugh, Fresno County, as more particularly described in Exhibit A to the Original PPA (“Original Site”). B. The term of the Original PPA is for a base of twenty-five years, with an additional five-year extension term available at the City’s sole option (“Extension Option”) at a cost not to exceed $91 million, with a Commercial Operation Date (COD) of August 1, 2014. C. The definition of “Site” in the Original PPA permits Seller to build the Original Plant at an alternate location, provided that the City provides written consent to the site change, which consent shall not be unreasonably withheld. D. Under section 10.1 of the Original PPA, the City must consent in writing prior to any assignment of the rights and obligations of the Original PPA to another party. E. The City has been informed that Brannon and CRE-Kettleman Holdco, LLC (“CRE Holdco” or “New Seller”) now desire to enter into an Asset Purchase Agreement by which Brannon will sell and assign the Original PPA to CRE Holdco. F. CRE Holdco further desires to enter into a Membership Interest Purchase and Sale Agreement for the purchase of all of the outstanding membership interests in EE Kettleman Land, LLC (“ProjectCo”) which owns all of the assets associated with the development of an approximate 20 MW(ac) solar PV power generation facility (the “New Plant”) to be located at a site near Kettleman City, California (the “New Site”). G. Upon closing of the acquisition of the membership interests in ProjectCo, CRE- Kettleman California, LLC (CRE), the parent company of CRE Holdco, intends to merge CRE Holdco with and into ProjectCo (the “Merger”). H. The City and CRE Holdco wish to enter into an amended and restated PPA (the “Amended and Restated PPA”) which shall be held post-Merger by and in the name of ProjectCo and will replace the Original PPA, and among other things, account for the relocation to the New Site, the associated change in the expected energy production of the New Plant, 140603 jb 0180043 1 NOT YET APPROVED and the elimination of New Seller’s financing termination right pursuant to Section 4.3(k) of the Original PPA. I. The solar insolation is moderately higher at the New Site than at the Original Site, resulting in an approximately 5% increase in expected annual energy production from the New Plant compared to the Original Plant, which results in a cost not to exceed $116 million under the Amended and Restated PPA. J. The New Plant is expected to begin commercial operations no later than June 1, 2015, which represents a ten-month delay from the COD deadline provided in the Original PPA. K. In order to compensate the City for granting a ten-month extension to the COD deadline, as well as for the staff time and resources associated with negotiating and seeking approval of the consent to assignment agreement and the Amended and Restated PPA, CRE Holdco will make a one-time administrative payment of $300,000 to the City (the “Administrative Payment”). L. The City has agreed to consent to the assignment of the Original PPA to CRE HoldCo and acknowledges the Merger on the terms and conditions set forth in the Consent to Assignment Agreement by and between the City, Brannon, CRE, CRE HoldCo and ProjectCo, conditioned on and pursuant to the terms of the Amended and Restated PPA which will be held post-Merger by and in the name of ProjectCo, and upon the City’s receipt of the Administrative Payment from CRE HoldCo. The Council of the City of Palo Alto RESOLVES as follows: SECTION 1. The Council approves the Consent to Assignment Agreement by and between the City, Brannon, CRE, CRE HoldCo and ProjectCo and acknowledges the Merger conditioned on and pursuant to the terms of the Amended and Restated PPA which will be held post-Merger by and in the name of ProjectCo, and upon receipt of the Administrative Payment from CRE HoldCo. SECTION 2. The Council approves the Amended and Restated PPA between EE Kettleman Land, LLC, as seller, and the City of Palo Alto, as buyer. The delivery term of the amended PPA is up to thirty (30) years, commencing upon the commercial operation date of the planned electric generation facility, which date is expected to be no later than June 1, 2015. Spending authority under the Amended and Restated PPA shall not exceed one hundred sixteen million dollars ($116,000,000). SECTION 3. The Council delegates to the City Manager, or his designee, the authority to execute the Consent to Assignment Agreement and the Amended and Restated PPA on behalf of the City, and the authority to execute any documents necessary to administer the Amended and Restated PPA that are consistent with the Palo Alto Municipal Code and City Council approved policies. 140603 jb 0180043 2 NOT YET APPROVED SECTION.4 As permitted by section 2.30.290 of the Palo Alto Municipal Code, the Council delegates to the City Manager, or his designee, the authority to exercise the Extension Option as defined herein, to extend the twenty-five year base contract to a thirty year contract term for the City. SECTION 5. With respect to the Council’s approval of the Consent to Assignment Agreement, acknowledgement of the Merger and approval of the Amended and Restated PPA, the Council waives the creditworthiness requirements of Palo Alto Municipal Code section 2.30.340(c) as applied to CRE HoldCo and ProjectCo. SECTION 6. Approval of the Consent to Assignment Agreement and the Amended and Restated PPA does not meet the definition of a project under the California Environmental Quality Act (CEQA), pursuant to Public Resources Code Section 21065. However, the City intends to receive output from a project that will constitute a project for the purposes of CEQA. The project developer will be responsible for acquiring necessary environmental reviews and permits on the project to be developed. 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 140603 jb 0180043 3 EXECUTION COUNTERPART 53677964_1 HOU:3429648.6 CONSENT TO ASSIGNMENT AGREEMENT This CONSENT TO ASSIGNMENT AGREEMENT (the “Consent”) is made by and among the CITY OF PALO ALTO, a California chartered municipal corporation (the “City”), BRANNON SOLAR, LLC, a Delaware limited liability corporation (“Brannon”), CRE-KETTLEMAN CALIFORNIA LLC, a Delaware corporation (“CRE”), CRE- KETTLEMAN HOLDCO LLC, a Delaware limited liability corporation (“CRE Holdco”), and EE KETTLEMAN LAND LLC, a Delaware corporation (“ProjectCo”) (sometimes referred to individually, a “Party” and, collectively, the “Parties”), in reference to the following facts and circumstances: RECITALS A. City and Brannon Solar, LLC, an indirect subsidiary of Trina, entered into a Power Purchase Agreement, dated as of November 5, 2012 (“Original PPA”) with respect to the Output of a photovoltaic solar power generation facility (“Original Plant”) originally planned to be built and located at the intersection of Davidson Avenue and W. Ballard Avenue, Firebaugh, Fresno County, as more particularly described in Exhibit A to the Original PPA (“Original Site”). B. Pursuant to Section 10.1 of the Original PPA, the City must consent in writing prior to any assignment of the rights and obligations of the Original PPA. C. The City has been informed that Brannon and CRE Holdco now desire to enter into an Asset Purchase Agreement (“Asset Purchase Agreement”) by which Brannon will sell and assign the Original PPA to CRE Holding, and a condition of the closing of said Asset Purchase Agreement is that this Consent be obtained from City. D. In connection with that sale, Brannon desires to transfer and assign its rights, duties, obligations and interests in the Original PPA to CRE Holdco, and CRE Holdco desires to assume all such rights, duties, obligations and interests in the Original PPA (collectively, “Assignment and Assumption”). E. CRE Holdco further desires to enter into a Membership Interest Purchase and Sale Agreement, dated as of June ___, 2014 (“MIPSA”) for the purchase of all of the outstanding membership interests in ProjectCo which owns all of the assets associated with the development of an approximate 20MWAC photovoltaic solar power generation facility (inclusive of interconnection) (the “New Plant”) to be located at a site near Kettleman City, California (the “New Site”). F. Upon closing of the acquisition of the membership interests in ProjectCo, CRE intends to merge CRE Holdco with and into ProjectCo (the “Merger”). G. Pursuant to Section 10.1 of the Original PPA and as a condition to the closing of the Asset Purchase Agreement, Brannon, CRE, and CRE Holdco have requested the City (i) to consent to Assignment and Assumption in accordance with the terms of an Assignment and Assumption of Power Purchase Agreement substantially in the form attached hereto as Exhibit A (“PPA Assignment Agreement”), (ii) to acknowledge the Merger of CRE Holdco into ProjectCo; and (iii) to extend the Commercial Operation Date (“COD”) of August 1, 2014 in the Original PPA to June 1, 2015 for the New Plant in the Amended and Restated Power Purchase Agreement (“Amended and Restated PPA”), substantially in the form attached hereto as Exhibit B, to be entered into between City and ProjectCo. CONSENT TO ASSIGNMENT AGREEMENT 2 HOU:3429648.6 H. The City has agreed (i) to consent to Assignment and Assumption and (ii) to acknowledge the Merger on the terms and conditions set forth in this Consent, and pursuant further to the terms of the Amended and Restated PPA, to be entered into between City and ProjectCo. I. The City has agreed to the requested COD extension to June 1, 2015, conditioned upon receipt by City of the Administrative Payment set forth in Section 3 of this Consent, offered by CRE Holdco to provide adequate consideration to compensate the City for financial and other harm suffered as a result of the delayed COD, which is difficult and impractical to quantify at this time, including, without limitation, the City’s estimate of staff time spent negotiating and seeking approval for the Consent to Assignment and Amended and Restated PPA Brannon, CRE and CRE Holdco have sought to date. NOW THEREFORE, in consideration of the above referenced Recitals and the following mutual covenants, commitments and obligations, the Parties agree, as follows: 1. Consent to Transfer, Assignment and Assumption. City hereby (i) consents to Assignment and Assumption and (ii) acknowledges the Merger of CRE Holdco with and into ProjectCo, as defined in the above referenced Recitals. The City’s consent is based on the following representations: (a) Made by Brannon, in connection with Assignment and Assumption, that all the rights, duties, obligations and interests of Brannon to perform under the terms of the Original PPA shall be transferred and assigned to CRE Holdco in connection with the execution of the Asset Purchase Agreement and Assignment and Assumption are executed. (b) Made by CRE Holdco, in connection with Assignment and Assumption, that all the rights, duties, obligations and interests of Brannon to perform under the terms of the Original PPA shall be assumed and performed by CRE Holdco in connection with the execution of the Asset Purchase Agreement and Assignment and Assumption. CRE Holdco agrees to undertake any and all action(s) necessary to meet the terms and conditions of the Original PPA referred to in this Consent. (c) Made by CRE Holdco, that all the rights, duties, obligations and interests of CRE Holdco to perform under the terms of the Original PPA shall become the obligations of ProjectCo by operation of law from and after the effectuation of the Merger of CRE Holdco with and into ProjectCo. (d) Made by ProjectCo that, from and after the Merger, all the rights, duties, obligations and interests of CRE Holdco to perform under the terms of the Original PPA shall be assumed and performed by ProjectCo by operation of law. (e) Made by CRE Holdco and ProjectCo, that ProjectCo agrees to undertake any and all action(s) necessary to meet the terms and conditions of the Original PPA referred to in this Consent. (f) Made by CRE Holdco and ProjectCo, that ProjectCo will enter into and comply with all terms set forth in the Amended and Restated PPA approved by City on June 9, 2014, including, without limitation, all Milestone and Development Liquidated Damages CONSENT TO ASSIGNMENT AGREEMENT 3 HOU:3429648.6 provisions, the applicability of which CRE Holdco and ProjectCo agree not to disclaim for reasons related to Assignment and Assumption or the Merger or any reason not otherwise provided for in the Amended and Restated PPA. 2. Effectiveness. This Consent shall only become effective as of: (a) the closing of the transactions contemplated by the Asset Purchase Agreement, including, but not limited to, the full execution of a PPA Assignment Agreement for Assignment and Assumption; (b) execution of the Amended and Restated PPA by ProjectCo and the City; and (c) CRE Holdco remits the Administrative Payment to the City in accordance with the terms set forth in Section 3 of this Consent. For the avoidance of doubt, this Consent shall expire as of August 31, 2014 if it has not become effective in accordance with this section. 3. Administrative Payment. (a) No later than 4 p.m. Pacific Standard Time on the Effective Date set forth in the Amended and Restated PPA, CRE HoldCo agrees to remit to the City a payment of three hundred thousand dollars ($300,000) to the following account: Bank: Wells Fargo Bank, N.A. Bank Routing Number: 121 000 248 Account Number: 412 107 6145 Beneficiary Account Name: City of Palo Alto Type of Account: Checking Bank Address, City, State: 420 Montgomery Street San Francisco, CA 94104 Federal Tax ID #: 94 6000 389 (b) The City’s agreement to extend the COD in the Amended and Restated PPA to June 1, 2015 shall not be construed as a waiver or relinquishment of any of the City’s rights or CRE Holdco or ProjectCo obligations under the terms and conditions of the Amended and Restated PPA. 4. Notice. All notices hereunder will be given in writing and directed as follows: To CITY: To CRE: CRE-Kettleman California LLC City of Palo Alto 250 Hamilton Avenue, 8th Floor Palo Alto, California 94301 ATTN: Senior Deputy City Attorney c/o Centaurus Renewable Energy LLC Williams Tower 2800 Post Oak Blvd, Ste. 225 Houston, TX 77056 CONSENT TO ASSIGNMENT AGREEMENT 4 HOU:3429648.6 To BRANNON: To CRE Holdco: Brannon Solar, LLC c/o Trina Solar US Development, LLC 100 Century Center, Suite 501 San Jose, CA 95112 Attn: President-Americas CRE-Kettleman Holdco LLC c/o Centaurus Renewable Energy LLC Williams Tower 2800 Post Oak Blvd, Ste. 225 Houston, TX 77056 To: Project Co: EE Kettleman Land, LLC c/o Centaurus Renewable Energy LLC Williams Tower 2800 Post Oak Blvd, Ste. 225 Houston, TX 77056 5. General Provisions. (a) Definition of Terms. Terms used but not defined herein have the meanings set forth in the Amended and Restated PPA. (b) Entire Agreement. This Consent embodies the entire agreement between the Parties as to the subject matter hereof. No verbal agreements or conversation with any officer, agent or employee of City prior to execution of this Consent shall affect or modify any of the terms or obligations contained in this Consent. Any such verbal agreement shall be considered as unofficial information and in no way binding upon City. (c) Amendment. The Consent may only be amended by written agreement executed by all Parties. (d) Compliance with Law. Each Party will conduct the activities contemplated by this Consent in accordance with all applicable laws, regulations and other requirements to which it is subject. (e) Assignment. Neither Party may assign or transfer this Consent or any of the rights or interests in this Consent without the prior written consent of the other Party. (f) Severability. The partial or total invalidity of one or more parts of this Consent will not affect the intent or validity or remaining parts of this Consent. (g) Choice of Law, Venue. This Consent will be deemed a contract under the laws of the State of California and for all purposes shall be interpreted in accordance with such laws. Proper venue for legal action regarding this Consent will be the state courts of California or in the United States District Court for the Northern District of California in the County of Santa Clara, State of California. CONSENT TO ASSIGNMENT AGREEMENT 5 HOU:3429648.6 (h) Counterparts. This Consent may be signed in multiple counterparts, which shall, when executed by all Parties, constitute a single binding agreement. (i) Authority. The individuals executing this Consent represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. In WITNESS WHEREOF, the Parties have executed this Consent as of the Effective Date. BRANNON SOLAR, LLC By: __________________________________ Name: Title: CITY OF PALO ALTO _________________________________ JAMES KEENE, City Manager CRE-KETTLEMAN CALIFORNIA LLC By: Centaurus Renewable Energy LLC, Its sole member APPROVED AS TO FORM: _________________________________ Senior Deputy City Attorney By: ______________________________ Keith Holst, Manager By: _______________________________ Stephen H. Douglas, Manager APPROVED: _________________________________ VALERIE FONG, Director of Utilities CRE-KETTLEMAN HOLDCO LLC By: CRE-Kettleman California LLC By: Centaurus Renewable Energy LLC, its sole member By: ________________________ Keith Holst, Manager By: ________________________ Stephen H. Douglas, Manager EE KETTLEMAN LAND, LLC BY: CRE-KETTLEMAN HOLDCO LLC By: CRE-Kettleman California LLC By: Centaurus Renewable Energy LLC, its sole member By: ________________________ Keith Holst, Manager By: ________________________ Stephen H. Douglas, Manager CONSENT TO ASSIGNMENT AGREEMENT 6 HOU:3429648.6 EXHIBIT A ASSIGNMENT AND ASSUMPTION OF POWER PURCHASE AGREEMENT This ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”), dated as of June __, 2014 (the “Closing Date”), by and between Brannon Solar, LLC, a Delaware limited liability company (“Assignor”), and CRE-Kettleman Holdco LLC, a Delaware limited liability company (“Assignee”). RECITALS A. Assignor is the owner and signatory to that certain Power Purchase Agreement, dated as of November 5, 2012 (the “Power Purchase Agreement”) entered into with the City of Palo Alto. B. Pursuant to and in accordance with the provisions of that certain Asset Purchase Agreement dated as of June __, 2014, by and between Assignor and Assignee (the “Purchase Agreement”), Assignor has agreed to sell, convey, transfer, assign and deliver to Assignee, and Assignee has agreed to purchase, acquire and accept from Assignor, all of Assignor’s right, title and interest in and to the Power Purchase Agreement, free and clear of all Liens, upon the terms and conditions set forth in the Purchase Agreement and in this Agreement. NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein, and of the mutual promises and covenants contained in this Agreement, the adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. All capitalized terms not otherwise defined herein have the respective meanings given to them in the Purchase Agreement. 2. Assignment. Effective as of the Closing Date: (a) Assignor hereby sells, conveys, transfers, assigns and delivers to Assignee all of Assignor’s right, title and interest in and to the Power Purchase Agreement, free and clear of all Liens (the “Assignment”). (b) Assignee hereby accepts the Assignment and assumes all duties and obligations of the Assignor under the Power Purchase Agreement. 3. Waiver of Separate Transfer Instrument. The parties to this Agreement acknowledge and agree that their mutual execution and delivery of this Agreement shall be sufficient to evidence and effectuate the Assignment, and that they shall not require (as between them) any separate or additional instrument of transfer in connection with the Assignment. 4. Further Assurances. On and after the Closing Date, the parties hereto shall take any and all further actions, including but not limited to the execution of additional instruments or documents, that may be reasonably requested in writing by any one of them to effectuate or evidence the Assignment or the other actions expressly contemplated by this Agreement. CONSENT TO ASSIGNMENT AGREEMENT 7 HOU:3429648.6 5. Conflict with Organizational Document. To the extent any provision of this Agreement is inconsistent with any of the Organizational Documents of the Assignor, the provisions of this Agreement shall control. 6. Coordination with Purchase Agreement. Assignor and Assignee acknowledge and agree that this Agreement is delivered pursuant to, and is subject to, all of the terms, conditions, and limitations set forth in the Purchase Agreement, which are by this reference incorporated in and made part of this Agreement. Nothing in this Agreement shall be deemed to supersede, enlarge, or modify any of the provisions of the Purchase Agreement. If any conflict arises between the terms of the Purchase Agreement and the terms of this Agreement, the terms of the Purchase Agreement shall govern and control. 7. Miscellaneous. (a) This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. (b) This Agreement shall be construed and enforced in accordance with the Laws of the State of New York without giving effect to the choice of law principles thereof. (c) This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. (d) This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement. [Signature Page Follows] CONSENT TO ASSIGNMENT AGREEMENT 8 HOU:3429648.6 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. ASSIGNOR Brannon Solar, LLC By: _________________________________________ Name: Title: ASSIGNEE CRE-Kettleman Holdco LLC By: CRE-Kettleman California LLC, its sole member By: Centaurus Renewable Energy LLC, its sole member By: _________________________________________ Name: Keith Holst Title: Manager By: _________________________________________ Name: Stephen H. Douglas Title: Manager CONSENT TO ASSIGNMENT AGREEMENT 9 041014 JRM 0180041 HOU:3429648.6 EXHIBIT B AMENDED AND RESTATED POWER PURCHASE AGREEMENT i AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 EXECUTION COUNTERPART AMENDED AND RESTATED POWER PURCHASE AGREEMENT Between The City of Palo Alto and EE KETTLEMAN LAND LLC Dated as of June ___, 2014 TABLE OF CONTENTS Page ii AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 ARTICLE I DEFINITIONS .............................................................................................. 6 ARTICLE II TERM, PURCHASE AND SALE ............................................................... 19 2.1 Term ....................................................................................................... 19 2.2 Purchase and Sale of the Output ............................................................ 19 2.3 Price........................................................................................................ 21 2.4 Tax Credits and Incentives ..................................................................... 21 2.5 Right of First Refusal for Expansion Plant and Expansion Plant Output ..................................................................................................... 22 2.6 Refurbishment of Plant ........................................................................... 23 ARTICLE III METERING AND BILLING ....................................................................... 23 3.1 Metering Requirements ........................................................................... 23 3.2 Billing ...................................................................................................... 24 ARTICLE IV SELLER'S OBLIGATIONS ....................................................................... 25 4.1 Development, Finance, Construction and Operation of the Plant ........... 25 4.2 General Obligations ................................................................................ 28 4.3 Construction Milestones .......................................................................... 30 4.4 Obligation to Schedule and Deliver ......................................................... 31 ARTICLE V BUYER’S OBLIGATIONS ......................................................................... 34 5.1 Delivery and Transmission ...................................................................... 34 5.2 Taxes ...................................................................................................... 35 5.3 Notification of Transmission Outages ..................................................... 35 ARTICLE VI FORCE MAJEURE .................................................................................. 35 6.1 Remedial Action ...................................................................................... 35 6.2 Notice ...................................................................................................... 35 6.3 Termination Due To Force Majeure Event .............................................. 36 ARTICLE VII DEFAULT/REMEDIES/TERMINATION .................................................. 36 7.1 Events of Default by Buyer ..................................................................... 36 7.2 Events of Default by Seller ...................................................................... 36 7.3 Termination for Default, Etc. ................................................................... 37 7.4 Damages ................................................................................................ 39 7.5 Indemnification ........................................................................................ 40 7.6 Buyer’s Right to Operate ......................................................................... 41 TABLE OF CONTENTS Page iii AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 ARTICLE VIII REPRESENTATIONS AND WARRANTIES .......................................... 42 8.1 Seller’s Representations and Warranties ................................................ 42 8.2 Buyer Representations and Warranties .................................................. 44 ARTICLE IX DEVELOPMENT AND PERFORMANCE ASSURANCE ......................... 45 9.1 Forms of Assurance ................................................................................ 45 9.2 Managing Assurances ............................................................................ 45 9.3 Development Liquidated Damages ......................................................... 46 9.4 Performance Liquidated Damages ......................................................... 46 ARTICLE X MISCELLANEOUS ................................................................................... 47 10.1 Assignment ............................................................................................. 47 10.2 Financing ................................................................................................ 48 10.3 Notices .................................................................................................... 48 10.4 Captions .................................................................................................. 50 10.5 No Third Party Beneficiary ...................................................................... 50 10.6 No Dedication ......................................................................................... 50 10.7 Entire Agreement; Integration ................................................................. 50 10.8 Applicable Law ........................................................................................ 51 10.9 Venue ..................................................................................................... 51 10.10 Nature of Relationship ............................................................................ 51 10.11 Good Faith and Fair Dealing; Reasonableness ...................................... 51 10.12 Severability ............................................................................................. 51 10.13 Confidentiality ......................................................................................... 52 10.14 Cooperation ............................................................................................ 53 10.15 Mobile Sierra Doctrine ............................................................................ 53 10.16 Counterparts ........................................................................................... 54 10.17 Immunity Waiver ..................................................................................... 54 10.18 Debt Liability Disclaimer .......................................................................... 54 EXHIBITS A-1 Plant Site Description A-2 Site Drawings B Environmental Attribute Transfer from Seller to Buyer C Insurance Coverages D Scheduling Protocols E COD Certification E-1 Form of Monthly Report TABLE OF CONTENTS Page iv AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 F-1 Form of Letter of Credit F-2 Form of Escrow Agreement G Expected Annual Net Energy Production 5 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 AMENDED AND RESTATED POWER PURCHASE AGREEMENT This Amended and Restated Power Purchase Agreement (the “Agreement”), dated as of June ___, 2014 (the “Effective Date”), is entered into by and between the City of Palo Alto, a California chartered municipal corporation (“Buyer”), and EE Kettleman Land LLC, a Delaware limited liability company (“Seller”) (individually, a “Party” and, collectively, the “Parties”). RECITALS: 1. Buyer and Brannon Solar, LLC, a Delaware limited liability company (“Brannon”) entered into that certain Power Purchase Agreement, dated as of November 5, 2012 (“Original Agreement”) with respect to the Output of a photovoltaic solar power generation facility (“Original Plant”) originally planned to be built and located at the intersection of Davidson Avenue and W. Ballard Avenue, Firebaugh, Fresno County, as more particularly described in Exhibit A to the Original PPA (“Original Site”). 2. Pursuant to an Asset Purchase Agreement, dated as of the Effective Date, by and between Brannon and CRE-Kettleman Holdco LLC (“CRE”), Brannon desires to assign the Original Agreement to CRE. 3. Pursuant to section 10.1 of the Original Agreement, Buyer must consent in writing prior to any assignment of the rights and obligations of the Original Agreement. 4. Buyer entered into a Consent to Assignment/Assumption Agreement as of the Effective Date with Brannon and CRE to provide the Buyer’s consent to the assignments set forth in these Recitals. 5. Seller now intends to develop, finance, build, own and operate a solar photovoltaic electric generating facility (the “Plant”), to be located at the Site. 6. Buyer is engaged in the procurement and supply of electricity to residential and commercial customers in Palo Alto, California. 7. Buyer wishes to purchase the Output of the Plant and intends to resell related Energy to its residential and commercial customers. 8. Buyer is willing to purchase, and Seller is willing to sell, the Output of the Plant, on the terms and conditions and at the prices set forth in this Agreement. 6 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 9. Buyer is purchasing this Output to meet Buyer’s needs at a known price and timing. 10. Subject to the approval by the city council fo the City of Palo Alto of this Agreement and the Consent to Assignment/Assumption Agreement between Buyer, Brannon, and CRE, this Agreement amends, restates and replaces the Original Agreement, and the Original Agreement shall be of no further force or effect. NOW THEREFORE, in consideration of the recitals above and the following covenants, terms and conditions, the Parties agree: AGREEMENT: ARTICLE I DEFINITIONS The following initially capitalized terms, whenever used in this Agreement, not otherwise defined in the preamble or herein, have the meanings set forth below, unless the context of their use otherwise indicates. The terms “includes” and “including” mean to include, “without limitation.” AC: Alternating current. Agreement: Has the meaning set forth in the preamble, and includes all exhibits and appendices thereto, as may be amended from time to time. Buyer: The City of Palo Alto and any successor or permitted assignee. CAISO: The California Independent System Operator Corporation, or its functional successor. CAISO Tariff: The CAISO FERC Electric Tariff, First Replacement Volume No. 1, as it may be amended, supplemented or replaced (in whole or in part) from time to time. Calculation Period: The twenty-four (24) month periods (i.e., two full Contract Years) ending on (and including) each anniversary of the Commercial Operation Date, commencing at the second anniversary of the Commercial Operation Date. Calculation Period Deemed Delivered Energy Amount: For each Calculation Period, an amount expressed in MWh equal to the sum of (i) the total Energy 7 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 actually delivered by Seller to the Point of Interconnection in such Calculation Period plus (ii) the Seller Excused Energy Amount for such Calculation Period. CARB: Has the meaning set forth in the definition of EA Agency. CEC: Has the meaning set forth in the definition of EA Agency. CEQA: The California Environmental Quality Act. Change in Law: The enactment or issuance of any new law or regulation, the amendment, alteration, modification or repeal of any existing law or regulation or any authoritative interpretation of any existing law or regulation issued by a competent court, tribunal or Governmental Authority contrary to the existing official interpretation thereof, in each case coming into effect after the Effective Date and which must be complied with in order for the Plant to be constructed and operated lawfully. Change of Control: Any circumstance in which the Ultimate Parents Ownership Percentage ceases to be equal to or greater than fifty percent (50%). COD Certification: Seller’s certification of Commercial Operation in the form set forth in Exhibit E-2, duly executed by Seller and the licensed professional engineer. Commercial Operation: The condition of the Plant, whereupon (a) it is certified by Seller to be complete in accordance with manufacturers’ recommendations except for punch list items and (b) Seller has delivered to Buyer the COD Certification. Commercial Operation Date: The date upon which Commercial Operation first occurs, as notified to Buyer in the COD Certification in accordance with Section 4.3(h). Commercially Reasonable Efforts Standard: Has the meaning set forth in Section 7.6. Construction Start Date: The date on which Seller delivers to Buyer a copy of the Notice to Proceed that Seller has delivered to the EPC Contractor for the Plant. Contract Year: Successive periods of twelve (12) consecutive months, with the first such period (i.e., the first Contract Year) beginning at 12:00 a.m. on the day immediately following the Commercial Operation Date and ending at 11:59:59 p.m. on the anniversary of the Commercial Operation Date, and each successive twelve (12) consecutive month period thereafter until the end of the Term. 8 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Contractual Obligations: As to Seller, any material agreement, instrument or undertaking to which Seller is a party or by which it or any of its Plant property is bound. Costs: With respect to a non-defaulting Party, reasonably documented (a) brokerage fees, commissions and other similar third party transaction costs and expenses reasonably incurred by such Party either in terminating any arrangement entered into pursuant to this Agreement or entering into new arrangements which replace this Agreement (including, in the case of Seller as the Non-Defaulting Party, tax recapture costs) and (b) all reasonable attorneys’ fees and expenses incurred by the non-defaulting Party in connection with the termination of this Agreement. CPUC: Has the meaning set forth in the definition of EA Agency. CRE: Has the meaning set forth in the Recitals. Daily LD Amount: For each day for which delay liquidated damages are payable under Section 9.3, an amount equal to the total amount of Development Assurance required hereunder divided by 365. Development Assurance: The amount to be posted or deposited by Seller in accordance with Article IX of this Agreement, which amount shall be equal to $400,000.00 (determined by taking the product of $20.00 per kW AC and 20,000 kW). Discretionary Curtailment: Has the meaning set forth in Section 4.4(c). Dispatch Down Period: The period of curtailment of delivery of Energy from the Plant resulting from (a) curtailment ordered by the CAISO (whether directly or through a Plant Scheduling Coordinator or the Participating Transmission Owner), for any reason, including, but not limited to, any system emergency as defined in the CAISO Tariff (“System Emergency”), any warning of an anticipated System Emergency, or any warning of an imminent condition or situation which could jeopardize the CAISO’s or Participating Transmission Owner’s electric system integrity or the integrity of other systems to which the CAISO or Participating Transmission Owner is connected; (b) curtailment ordered by the Participating Transmission Owner or distribution operator (if interconnected to distribution or sub-transmission system) for any reason, including but not limited to, (i) any situation that affects normal function of the electric system including, but not limited to any abnormal condition that requires action to prevent circumstances such as equipment damage, loss of load, or abnormal voltage conditions, (ii) any warning, forecast or anticipation of conditions or situations that jeopardize the Participating 9 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Transmission Owner’s electric system integrity or the integrity of other systems to which the Participating Transmission Owner is connected; or (iii) as a result of scheduled or unscheduled maintenance or construction on the Participating Transmission Owner’s transmission facilities or distribution operator’s facilities that prevents the delivery or receipt of Energy to or at the Point of Interconnection; or (c) curtailment in accordance with Seller’s obligations under its interconnection agreement with the Participating Transmission Owner or distribution operator; provided, that any of the foregoing events (a) through (c) shall not have been primarily caused by the acts or omissions of Buyer, in which case any such event shall be deemed an Economic Curtailment. Notwithstanding the foregoing, Dispatch Down Periods shall not include periods of curtailment of delivery of Energy from the Plant resulting from circumstances commonly referred to as economic curtailment (“Economic Curtailment”), where Buyer or its designee (as the Scheduling Coordinator) submits an economic or similar bid in the applicable CAISO market that results in otherwise available Energy not being scheduled or awarded in such CAISO market. EA Agency: Any local, state or federal entity, or any other Person, that has responsibility for or jurisdiction over a program involving transferability of Environmental Attributes, including, without limitation, the Clean Air Markets Division of the United States Environmental Protection Agency (the “EPA”), the California Energy Resources Conservation and Development Commission (the “CEC”), the California Public Utilities Commission (the “CPUC”), the California Air Resources Board (“CARB”), and any successor commission or agency thereto. Buyer shall not be deemed to be an EA Agency. Early Termination Date: Has the meaning set forth in Section 7.3. Economic Curtailment: Has the meaning set forth at the end of the definition of Dispatch Down Period. Effective Date: Has the meaning set forth in the preamble of this Agreement. Eligible Renewable Energy Resource or ERR: Has the meaning set forth in California Public Utilities Code Section 399.12 and California Public Resources Code Section 25741, as either code provision is amended or supplemented from time to time. Energy: The electricity generated by the Plant and delivered to Buyer by the Seller, pursuant to this Agreement, at the Point of Interconnection, as expressed in units of kilowatt-hours (kWh) or megawatt-hours (MWh), including Test Energy. Environmental Attributes: Any and all credits, benefits, emissions reductions, offsets, and allowances, howsoever entitled, attributable to the generation from the 10 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Plant or Expansion Plant(s) (to the extent of sales to Buyer of Expansion Plant Output pursuant to Section 2.5), and its displacement of conventional energy generation. Environmental Attributes include, without limitation, Renewable Energy Credits, and all of the following: (a) any avoided emissions of pollutants to the air, soil or water such as sulfur oxides (SOx), nitrogen oxides (NOx), carbon monoxide (CO) and other pollutants; (b) any avoided emissions of carbon dioxide (CO2), methane (CH4) and other greenhouse gases (GHGs) that have been determined by the United Nations Intergovernmental Panel on Climate Change to contribute to the actual or potential threat of altering the Earth’s climate by trapping heat in the atmosphere; and (c) the reporting rights to these avoided emissions such as Green Tag Reporting Rights. “Green Tag Reporting Rights” are the right of a “Green Tag” purchaser to report the ownership of accumulated Green Tags in compliance with federal or state law, if applicable, and to a federal or state agency or any other party at the Green Tag purchaser’s discretion, and include without limitation those Green Tag Reporting Rights accruing under Section 1605(b) of the Energy Policy Act of 1992 and any present or future federal, state, or local law, regulation or bill, and international or foreign emissions trading program. Green Tags are accumulated on kWh basis and one Green Tag represents the Environmental Attributes associated with one (1) MWh of energy. Environmental Attributes do not include (i) any energy, capacity, reliability or other power attributes from the Plant or Expansion Plant(s) or (ii) Incentives or any other tax credits associated with the construction or operation of the Plant, Expansion Plant(s), or any other associated contract or right, and other financial incentives in the form of credits, rebates, reductions, or allowances associated with the Plant, Expansion Plant(s), or any other associated contract or right, that are applicable to a state or federal income taxation obligation. Environmental Attributes Reporting Rights: All rights to report ownership of the Environmental Attributes to any person or entity, under Section 1605(b) of the Energy Policy Act of 1992 or otherwise. Environmental Laws: Any and all federal, state and local laws, including statutes, regulations, rulings, orders, administrative interpretations and other governmental restrictions and requirements relating to the discharge of air pollutants, water pollutants or process waste water or otherwise relating to the environment or hazardous substances, as amended from time to time. EPA: Has the meaning set forth in the definition of EA Agency. EPC Contract: The Seller’s engineering, procurement and construction contract with the EPC Contractor. EPC Contractor: An engineering, procurement, and construction contractor, or if not utilizing an engineering, procurement, and construction contractor, the entity 11 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 having lead responsibility for the management of overall construction activities, selected by Seller, with substantial experience in the engineering, procurement, and construction of utility-scale solar photovoltaic power plants. Event of Default: Has the meaning set forth in Article VII. Expansion Plant: Any expansion of the Plant from its Initial Capacity, or any other solar photovoltaic electricity generating facility owned or controlled by Seller or its affiliates, located at the Site. Each such expansion of the Plant or additional facility shall be deemed to be an “Expansion Plant.” Expansion Plant Output: All capacity, energy, associated Environmental Attributes, ancillary services, contributions towards resource adequacy or reserve requirements (if any) and any other reliability or power attributes produced by Seller at any Expansion Plant. Expected Annual Net Energy Production: For each period of two successive Contract Years, it is the sum of the expected annual net energy production in AC Megawatt-hours for such two Contract Years, including the effects of first year 0.7% panel performance degradation and subsequent 0.7% panel annual performance degradation, as represented in Exhibit G. Extension Term: Has the meaning set forth in Section 2.1. FERC: The Federal Energy Regulatory Commission and its successor organization, if any. Force Majeure Event: Any act or event that delays or prevents a Party from timely performing obligations under this Agreement or from complying with conditions required under this Agreement to the extent that such act or event is reasonably unforeseeable and beyond the reasonable control of and without the fault or negligence of the Party relying thereon as justification for such delay, nonperformance, or noncompliance. (a) Force Majeure Events typically include: (i) acts of God or the elements, extreme or severe weather conditions, explosion, fire, epidemic, landslide, mudslide, sabotage, lightning, earthquake, flood or similar cataclysmic event, acts of public enemy, war, blockade, civil insurrection, riot, civil disturbance or strike or other labor difficulty caused or suffered by a Party; 12 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 (ii) any restraint or restriction imposed by law or by rule, regulation or other acts or omissions of Governmental Authorities, whether federal, state or local which by exercise of due diligence and in compliance with applicable law a Party could not reasonably have been expected to avoid and to the extent which, by exercise of due diligence and in compliance with applicable law, has been unable to overcome (so long as the affected Party has not applied for or assisted such act by a Governmental Authority); and (iii) electric transmission interruptions or curtailments (not including any such interruption or curtailment that results from the negligence or contractual breach of the Party affected); (b) The term “Force Majeure Event” does not include: (i) economic conditions that render a Party’s performance of this Agreement at the Price unprofitable or otherwise uneconomic (including Buyer’s ability to buy Energy or Environmental Attributes at a lower price, or Seller’s ability to sell Energy or Environmental Attributes at a higher price, than the Price); (ii) a governmental act by Buyer that delays or prevents Buyer from timely performing its obligations under this Agreement; (iii) a Plant equipment failure, except any such failure caused by an event or circumstance that meets the requirements set forth in this “Force Majeure Event” definition; (iv) failure or delay in grant of Permits, except, in any case, if caused by an event or circumstance that meets the requirements set forth in this “Force Majeure Event” definition; (v) Discretionary Curtailment or eEconomic Curtailment; or (vi) failures or delays by the Participating TO, the CAISO in entering into, or performing under, any agreements with Seller contemplated by this Agreement. Forecasting Service: Has the meaning set forth in Section 4.4(d). FPA: Has the meaning set forth in Section 8.1(b)(i). Full Capacity Deliverability Status: Has the meaning set forth in the CAISO Tariff. GAAP: Generally Accepted Accounting Principles. Gains: With respect to a Party, an amount equal to the present value of the economic benefit to it, if any (exclusive of Costs), resulting from the termination of the Agreement for the remainder of the Term, determined in a commercially reasonable manner. Factors used in determining economic benefit may include 13 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 reference to information supplied by one or more third parties, including quotations (either firm or indicative) of relevant rates, prices, yields, yield curves, volatilities, spreads or other relevant market data in the relevant markets, market price referent, market prices for a comparable transaction, forward price curves based on economic analysis of the relevant markets, settlement prices for a comparable transaction at liquid trading hubs (e.g., NYMEX), all of which should be calculated for the remainder of the Term to determine the value of the Output. A Party shall use commercially reasonable efforts to obtain third party information in order to determine Gains and shall use information available to it internally for such purpose only if it is unable, after using commercially reasonable efforts, to obtain relevant third party information. Governmental Authority: Any federal or state government, or political subdivision thereof, including, without limitation, any municipality, township or county, or any entity or authority exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including, without limitation, any corporation or other entity owned or controlled by any of the foregoing. Incentives: Any and all tax credits (including Section 45 Credits and Section 48 Credits), deductions, allowances, depreciation and exemptions applicable to federal, state and local taxes and any other payment, credit, deduction, benefit, grant or monetary incentive provided by any federal, state or local governmental authority or any Person, whether now in effect or arising in the future, in each case arising from the activities contemplated by this Agreement, including any “Renewable Energy Production Incentive Payments” from the U.S. Department of Energy and any “Energy Investment Tax Credit” described in Section 48 of the Internal Revenue Code of 1986, as it may be amended or supplemented from time to time. Notwithstanding the foregoing, Incentives shall not include anything that qualifies as Output as defined herein (including any Environmental Attributes). Indemnified Party: Has the meaning set forth in Section 7.5. Indemnifying Party: Has the meaning set forth in Section 7.5. Initial Capacity: The installed capacity of the Plant, determined as of the Commercial Operation Date, which shall not to be less than 19 MW AC or more than 21 MW AC, and shall be determined based upon the sum of the nameplate ratings (AC) of all Plant inverters. As of the Effective Date, the Parties expect that the Initial Capacity shall be 20 MW AC. Initial Term: Has the meaning set forth in Section 2.1. 14 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Interconnection Agreement: The agreement to be entered into among Seller, the Participating TO and CAISO pursuant to which Seller, the Participating TO and CAISO set forth the terms and conditions for Interconnection of the Plant to the Participating TO’s system, as amended from time to time. Lender(s): Any Person(s) providing money or extending credit (including any capital lease) to or for the benefit ofSeller, including in the form of debt or tax equity, for (a) the construction, refurbishment, repair or repowering of the Plant, (b) the term or permanent financing of the Plant or any refinancing thereof, or (c) working capital or other ordinary business requirements for the Plant. “Lender(s)” shall not include any trade creditor(s) of Seller. Losses: With respect to a Party, an amount equal to the present value of the economic loss to it, if any (exclusive of Costs), resulting from the termination of this Agreement for the remainder of the Term, determined in a commercially reasonable manner. Factors used in determining the loss of economic benefit may include reference to information supplied by one or more third parties, including quotations (either firm or indicative) of relevant rates, prices, yields, yield curves, volatilities, spreads or other relevant market data in the relevant markets, market price referent, market prices for a comparable transaction, forward price curves based on economic analysis of the relevant markets, settlement prices for a comparable transaction at liquid trading hubs (e.g. NYMEX), all of which should be calculated for the remainder of the Term to determine the value of the Output. A Party shall use commercially reasonable efforts to obtain third party information in order to determine Losses and shall use information available to it internally for such purpose only if it is unable, after using commercially reasonable efforts, to obtain relevant third party information. If the non-defaulting Party is the Seller, then in addition to lost payments for Output pursuant to this Agreement, “Losses” shall also include any associated loss of Incentives, including investment tax credits and other lost tax benefits. Milestones: Has the meaning set forth in Section 4.3(b). MW: Megawatt (AC). MWh: Megawatt-hour (AC). NCPA: The Northern California Power Agency, a California joint powers agency. Notice to Proceed: The notice provided by Seller to the EPC Contractor following execution of the EPC Contract between Seller and such EPC Contractor and satisfaction of all conditions to performance of such contract, by which Seller authorizes such EPC Contractor to begin construction of the Project without any delay or waiting periods. 15 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Operations Assumption Notice: Has the meaning set forth in Section 7.6(b). Option Exercise Notice: Has the meaning set forth in Section 2.1(b). Outage: A physical state in which all or a portion of the Plant is unavailable to provide Energy to the Point of Interconnection, or in which any portion of the Participating TO System is unavailable to receive Energy, to the extent that the unavailability affects the Participating TO System’s ability to accept delivery of Energy at the Point of Interconnection, whether planned or unplanned. Output: All actual capacity of the Initial Capacity, and all associated Energy, as well as the following (as associated with the Initial Capacity and/or associated Energy): Environmental Attributes; ancillary services; contributions towards resource adequacy or reserve requirements (if any); and any other reliability or power attributes. Participating TO or Participating Transmission Owner: Pacific Gas & Electric Company, a California corporation, or any successor thereto acting as transmission provider from the Site to the CAISO grid. Participating TO System: The transmission system owned by the Participating TO. Parties: Buyer and Seller, and their respective successors and permitted assignees. Party: Buyer or Seller, and each such Party’s respective successors and permitted assignees. Performance Assurance: The amount to be posted or deposited by Seller in accordance with Article IX of this Agreement, which amount shall be equal to $400,000 (determined by taking the product of $20.00 per kW AC and 20,000 kW). Permits: All material federal, state or local authorizations, certificates, permits, licenses and approvals required by any Governmental Authority for the construction, ownership, operation and maintenance of the Plant, including any such permits or approvals required under CEQA. Person: An individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity. PIRP: Has the meaning set forth in Section 4.4(a). 16 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Plant: The power generation facilities described in the Recitals to be constructed and owned by Seller and located on the Site for the generation and delivery of electricity, including the step-up transformer, revenue quality meter and all other facilities up to the Point of Interconnection, but not including any Expansion Plant. Point of Interconnection: The point on the electrical system where the Plant is physically interconnected with the Participating TO System, which is anticipated to be at the high side of Seller’s step-up transformer at the Plant, located at CAISO Queue Position number 625, will be at the tower (approximately) #74/4 on Pacific Gas and Electric Company’s (PG&E’s) Henrietta – Tulare Lake 70kV Transmission Line in Kings County, CA.. Price: The price set forth in Section 2.3. Prudent Utility Practice: Those practices, methods and equipment, as changed from time to time, that: (a) when engaged in are commonly used in the United States of America in prudent electrical engineering and operations to operate solar photovoltaic plant generation electric equipment and related electrical equipment lawfully and with safety, reliability, efficiency and expedition; or (b) in the exercise of reasonable judgment considering the facts known, when engaged in could have been expected to achieve the desired result consistent with applicable law, safety, reliability, efficiency and expedition. Prudent Utility Practices are not limited to an optimum practice, method, selection of equipment or act, but rather are a range of acceptable practices, methods, selections of equipment or acts. QF: Has the meaning set forth in Section 8.1. REC or Renewable Energy Credit: Has the meaning set forth in California Public Utilities Code Section 399.12(h) and CPUC Decision 08-08-028, as may be amended from time to time or as further defined or supplemented by applicable law. Requirements of Laws: Collectively, any federal, state or local law, treaty, franchise, rule or regulation, or any order, writ, judgment, injunction, decree, award or determination of any arbitrator or court or other Governmental Authority, in each 17 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 case applicable to or binding upon Seller or Buyer or any of its property or to which Seller or Buyer or any of its respective properties are subject. SCADA: Has the meaning set forth in Section 3.1. Scheduling Coordinator: NCPA or any agent or successor thereof, or such other scheduling coordinator as may be designated by Buyer in accordance with this Agreement. Section 45 Credits: Those tax credits available under Section 45 of Subtitle A, Chap. 1A, Part IV of the Internal Revenue Code of 1986, as amended, or any other similar state, federal or local tax credits, deductions, payments or benefits arising from the generation and sale of electricity using qualifying renewable resources, not including any Environmental Attributes. Section 48 Credits: Those tax credits available under Section 48(a)(3)(A)(i) and 48(a)(5) of the Internal Revenue Code of 1986, as amended, or any other similar state, federal or local tax credits, deductions, payments or benefits arising from the investment in qualifying energy properties, not including any Environmental Attributes. Seller: EE Kettleman Land LLC, a Delaware limited liability company, and any successor or permitted assignee. Seller Excused Energy Amount: Means, for each Calculation Period, an amount expressed in MWh, equal to the aggregate amount of reduction(s) in delivered Energy during such Calculation Period as a result of Dispatch Down Periods, Discretionary Curtailments, Economic Curtailments, Force Majeure Events, Buyer’s breach or default hereunder or failure to accept delivered Energy, or outages to the local transmission or distribution system. No less frequently than quarterly during each year, Seller shall calculate and provide notice to Buyer of the then cumulative amount of the Seller Excused Energy Amount for such year, along with an explanation in reasonable detail of the calculation thereof based on historical Plant data, meteorological data, output projections (including by the CAISO, if applicable) and other relevant data. The calculation shall be subject to review and approval by Buyer, not to be unreasonably withheld. Shortfall: Has the meaning set forth in Section 9.4. Site: The real property on which the Plant is to be built and located at 28990 Hwy 41, Kings County, CA 93239, California as more particularly described in Exhibit A, or such other real property selected by Seller to which Buyer consents in writing which consent shall not be unreasonably withheld. . 18 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 System Emergency: Has the meaning set forth in the definition of Dispatch Down Period. Term: Has the meaning set forth in Section 2.1. Termination Payment means, with respect to the non-defaulting Party, the sum of (a) the Losses or Gains, and Costs, expressed in U.S. Dollars, which such Party incurs as a result of the termination of this Agreement pursuant to Section 7.3, plus (b) all amounts then owed to the non-defaulting Party by the defaulting Party. If the non-defaulting Party’s aggregate Gains exceed its aggregate Losses and Costs, if any, resulting from such termination of this Agreement, the amount for preceding clause (a) shall be zero. Test Energy: Energy (to the extent available) generated by the Plant and delivered to the Point of Interconnection prior to the Commercial Operation Date. Two Year Minimum Production Threshold: For each Calculation Period, an amount (in MWhs) equal to seventy percent (70%) of the Expected Annual Net Energy Production for such Calculation Period (i.e., for the avoidance of doubt, the sum of 70% of the Expected Annual Net Energy Production for the first Contract Year of such Calculation Period plus 70% of the Expected Annual Net Energy Production for the second Contract Year of such Calculation Period). Ultimate Parents: means: (a) CRE and (b) any successor entity to CRE with which or into which CRE is merged, consolidated or combined, or which acquires all or substantially all of the assets of CRE (as applicable). Ultimate Parents Ownership Percentage: means the percentage of the outstanding equity interests (inclusive of both voting and economic rights) in Seller that are owned individually or jointly by the Ultimate Parents (together, in the aggregate), directly or indirectly through one or more intermediate entities; provided that in calculating such percentage owned by the Ultimate Parents, for all purposes of the foregoing: (a) any ownership interest in Seller held by one or both Ultimate Parents indirectly through one or more intermediate entities shall be counted towards such Ultimate Parents’ ownership interest in Seller only if such Ultimate Parents (together, in the aggregate) directly or indirectly own fifty percent (50%) or more of the outstanding equity voting and economic interests in each such intermediate entity; and (b) ownership interests in Seller owned directly or indirectly by any Lender (including any tax equity provider) shall be excluded from the total outstanding equity interests in Seller. 19 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 WECC: Has the meaning set forth in the definition of WREGIS. WREGIS: The Western Renewable Energy Generation Information System, an independent, renewable energy tracking system for the region, administered by the Western Electricity Coordinating Council (“WECC”). WREGIS tracks renewable energy generation from units that register in the system using verifiable data and creates RECs for this generation. WREGIS was developed through a collaborative process between the Western Governors’ Association, the Western Regional Air Partnership, and the CEC. ARTICLE II TERM, PURCHASE AND SALE 2.1 Term (a) This Agreement shall be effective upon its execution by authorized representatives of the Parties and, unless earlier terminated pursuant to an express provision of this Agreement, shall continue until the twenty-fifth (25th) anniversary of the Commercial Operation Date (“Initial Term”). Buyer shall have the option to extend the Initial Term for up to an additional five (5) year extension term following the Initial Term (“Extension Term”). (b) Subject to this Section 2.1, if Buyer desires to extend this Agreement into the Extension Term it shall exercise such option by a written notice (“Option Exercise Notice”) delivered to the Seller by not later than three hundred sixty-five (365) days prior to the end of the Initial Term. (c) The Initial Term, together with the Extension Term, if any, is referred to herein as the “Term.” For the avoidance of doubt, the maximum Term shall not extend past the thirtieth (30th) anniversary of the Commercial Operation Date. 2.2 Purchase and Sale of the Output (a) Commencing on the Commercial Operation Date and continuing during the Term, Seller shall sell and deliver at the Point of Interconnection, and Buyer shall purchase, accept from Seller at the Point of Interconnection and pay for, the entire Output produced during the Term pursuant to the terms of this Agreement. Prior to the 20 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Commercial Operation Date, Buyer shall purchase and accept from Seller at the Point of Interconnection and pay for, the Output relating to any Test Energy pursuant to the terms of this Agreement; provided that the decision to produce and deliver Test Energy hereunder shall be at the sole discretion of the Seller. All Test Energy shall be scheduled in accordance with the procedures set forth in Exhibit D. Seller shall not sell to any other party, and Buyer may claim credit for, the Output, as may be available to Buyer from time to time. (b) During the Term, Seller shall sell and transfer to Buyer, and Buyer shall purchase and receive from Seller, all right, title and interest in and to the Environmental Attributes associated with the Output, if any, whether now existing or subsequently generated or acquired (other than by direct purchase from a third party) by Seller, or that hereafter come into existence, during the Term, as a component of the Output purchased by Buyer from Seller hereunder. Subject to Section 2.2(d), Seller agrees to transfer and make such Environmental Attributes available to Buyer immediately to the fullest extent allowed by applicable law upon Seller’s production or acquisition of the Environmental Attributes. Seller shall not assign, transfer, convey, encumber, sell or otherwise dispose of all or any portion of the Environmental Attributes to any Person other than Buyer. Seller makes no written or oral representation or warranty, either express or implied, regarding the current or future existence of any Environmental Attributes. (c) During the Term, Seller shall not report to any person or entity that the Environmental Attributes granted hereunder to Buyer belong to anyone other than Buyer, and Buyer may report under any program that such Environmental Attributes purchased hereunder belong to it. (d) Seller will document the production of Environmental Attributes under this Agreement by delivering with each invoice to Buyer such attestations or other documents as may be required by Exhibit B. Exhibit B shall be updated or changed by the Parties, as necessary, to ensure that Buyer receives full and complete title to, and the ability to record with any EA Agency as its own, all of the Environmental Attributes purchased hereunder. At Buyer’s request, the Parties, each at their own expense, shall execute all such documents and instruments in order to transfer the Environmental Attributes, specified in this Agreement, to Buyer or its designees, as Buyer may reasonably request. In the event of the promulgation of a scheme involving Environmental Attributes administered by an EA Agency, 21 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 upon notification by an EA Agency that any transfers contemplated by this Agreement will not be recorded, the Parties shall promptly cooperate in taking all reasonable actions necessary so that such transfer can be recorded. Each Party shall promptly give the other Party copies of all documents it submits to the EA Agency to effectuate any transfers. (e) As between the Parties, Seller shall be deemed to be in exclusive control (and responsible for any damages or injury caused thereby) of all Energy prior to the Point of Interconnection, and Buyer shall be deemed to be in exclusive control (and responsible for any damages or injury caused thereby) of all Energy at and from the Point of Interconnection. Seller shall deliver all Energy and other Output free and clear of all liens created by any Person other than Buyer. Title to and risk of loss as to all Energy shall pass from Seller to Buyer at the Point of Interconnection. 2.3 Price Subject to any performance related adjustments under the provisions of Section 9.4, during the period of delivery of any Test Energy and the entire Term, for Energy delivered or tendered to Buyer at the Point of Interconnection, Buyer shall pay Seller a price per MWh of Energy (“Price”) equal to Seventy-Seven Dollars ($77.00) per MWh. The Price shall be the total compensation owed by Buyer for the Output delivered or tendered to Buyer during the period of delivery of any Test Energy and during the Term. 2.4 Tax Credits and Incentives Buyer agrees and acknowledges that all Incentives shall be owned by Seller. Buyer shall not claim Incentives. Buyer agrees to cooperate with Seller, as may be necessary to allow maximization of the value of, and realization of, all Incentives; provided that Buyer shall not be required to incur additional costs or accept any diminution in value of its rights under this Agreement or of the Output purchased hereunder. In addition, Buyer shall not take any action (except as otherwise permitted under this Agreement), that would in any way reduce or eliminate the availability to Seller of any Incentives, including the Section 45 Credits and the Section 48 Credits, and Buyer shall forego any credits or benefits available to it (other than Environmental Attributes), including rights to purchase of Test Energy, to the extent necessary to allow Seller to obtain the full benefit of the Incentives, but in no event shall Buyer be required to forego receipt of Output after the Commercial Operation Date. 22 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 2.5 Right of First Refusal for Expansion Plant and Expansion Plant Output (a) During the Term, Seller may, in exercising its sole discretion, determine, from time to time, to develop, finance, construct and/or operate an Expansion Plant. Each time such a determination is made, Seller shall notify Buyer of such determination and shall offer, in writing, to sell the Expansion Plant Output to Buyer. The offer shall include the price to be paid by Buyer for the Expansion Plant Output, the term of the proposed power purchase agreement, and the other principal terms and conditions of the proposed sale. If Buyer wishes to accept such offer to purchase all (but not less than all) of the Expansion Plant Output, Buyer shall so notify Seller within sixty (60) days of its receipt of such offer. Buyer and Seller shall promptly thereafter enter into good faith negotiation of a definitive power purchase agreement, incorporating the terms of such offer. Until a power purchase agreement for an Expansion Plant is executed, Seller’s proposal, accepted by Buyer (including any modifications agreed upon in writing by both Parties), shall control all dealings between the Parties relating to the Expansion Plant. Should any issue arise that is not covered by such documentation, the terms of this Agreement shall apply. (b) If Buyer does not accept Seller’s offer to purchase the Expansion Plant Output within sixty (60) days of receipt of Seller’s offer, Seller shall be deemed authorized to offer to sell that portion of the Expansion Plant Output to one or more third parties at a price and on other terms and conditions which, taken as a whole, are at least as favorable to Seller as the price and other terms and conditions set forth in Seller’s offer to Buyer. If Seller offers to disaggregate the Expansion Plant Output for the purpose of selling the same to multiple independent buyers, Seller shall notify Buyer, in writing, of the terms and conditions of such offers, and Buyer shall again have the right of first refusal consistent with the terms set forth above for each of the lesser amounts being offered to the third parties. If Buyer does not purchase the Expansion Plant Output and Seller sells such Expansion Plant Output to a third party, Seller shall promptly certify, in writing, to Buyer that the terms and conditions of sale of such Expansion Plant Output to such third party, taken as a whole, are at least as favorable to Seller as the price and other terms and conditions set forth in Seller’s offer to Buyer. Upon the sale of such Expansion Plant Output in compliance with this Agreement, Buyer shall have no further rights to be offered or to purchase such Expansion Plant Output. Buyer’s refusal, in writing, of the Expansion 23 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Plant Output from one Expansion Plant shall not affect Buyer’s right to purchase the Expansion Plant Output from a subsequently developed Expansion Plant under the terms of this Agreement. Seller shall not sell or provide the Expansion Plant Output to any third party, unless Seller can do so without compromising in any material way its ability to provide the Output to Buyer hereunder. The materiality of any such impact shall be determined by Buyer, acting in its reasonable discretion, such determination to be provided within 45 days, as the same may be extended by mutual written agreement of the Parties. 2.6 Refurbishment of Plant During the Term, Seller may refurbish the Plant, alter components of the Plant, replace components of the Plant, add additional solar modules or inverters, or replace solar modules or inverters with more powerful solar modules or inverters, etc. in order to increase the Plant estimated peak AC capability up to the lesser of the Initial Capacity or to the amount allowed by the Interconnection Agreement. However, Seller may not perform any refurbishment to increase capacity higher than the Initial Capacity without the prior consent of Buyer not to be unreasonably withheld, and Buyer has the right, in its sole discretion, to accept or decline to permit any such refurbishment that may increase the Initial Capacity. ARTICLE III METERING AND BILLING 3.1 Metering Requirements The transfer of Energy from Seller to Buyer shall be measured by revenue quality metering equipment at the Point of Interconnection or another nearby location reasonably acceptable to the Parties. Such metering equipment, including any equipment required for communicating meter data (e.g., a dedicated data line) to Buyer or the CAISO, shall be selected, provided, installed, owned, maintained and operated, at Seller’s sole cost and expense, by Seller or its designee in accordance with applicable CAISO rules. Seller shall exercise reasonable care in the maintenance and operation of any such metering equipment, and shall test and verify the accuracy of each meter at least annually. Seller shall inform Buyer in advance of the time and date of these tests, and shall permit Buyer to be present at such tests and to receive the results of such tests. Subject to Buyer paying the cost of any update or upgrade to such metering equipment pursuant to a new requirement of the CAISO, the Participating 24 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 TO or any other Governmental Authority, adopted after the Commercial Operation Date, each of Seller’s meters shall be accurate to the metering specifications then in effect for CAISO meter accuracy. Seller shall further install and maintain all equipment and data circuits necessary to transmit all monitored real time supervisory control and data acquisition (“SCADA”) system data and real time data from the CAISO meter to the CAISO and Scheduling Coordinator, while adhering to both CAISO and Scheduling Coordinator’s communications protocols. Seller shall provide Buyer with a copy of each certificate of compliance issued by CAISO, if any. Buyer and Scheduling Coordinator shall be provided access to all monitored SCADA points to be used at their discretion in real time monitoring. Buyer, at its sole cost and expense, may install and maintain check meters and all associated measuring equipment necessary to permit an accurate determination of the quantities of Energy delivered under this Agreement, provided the referenced equipment does not interfere with Seller’s metering equipment. Seller shall permit Buyer or Scheduling Coordinator or its agent access to Seller’s Plant for the purpose of installing and maintaining such check meters. Seller shall submit to the CAISO, or allow the CAISO to retrieve, any meter data required by the CAISO related to the Plant output in accordance with the CAISO’s settlement and billing protocol and meter data tariffs. Buyer shall have reasonable access to relevant meters and associated facilities, as well as real time access to all meter data, as is necessary for Buyer or Scheduling Coordinator or its agent to perform its duties as scheduling coordinator and comply with the requirements of the CAISO Tariff. 3.2 Billing Seller shall provide to Buyer on or before the tenth (10th) day of each month an invoice for the prior month based upon meter data for Energy delivered in such calendar month (taking into account any line losses to the Point of Interconnection), enclosing reasonably appropriate supporting CAISO documentation and any corresponding attestation that may be required pursuant to Section 2.2(d). Such invoice may be transmitted by e-mail to settlements@ncpa.com, or to any other e-mail address designated, in writing, by Buyer, with a copy to be delivered in the mail of the United States Postal Service or other entity to the notice address designated below. Should either Seller or Buyer determine at a later date, but in no event later than two (2) years after the original invoice date, that the invoice amount was incorrect, that Party shall promptly notify, in writing, the other Party of the error. If the amount invoiced was lower than the amount that should have been invoiced, then Buyer shall, upon receiving verification of the error and supporting documentation from Seller, pay any undisputed 25 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 portion of the difference within thirty (30) days of receipt of verification. If the amount invoiced was higher than the amount that should have been invoiced, then Seller shall, upon receiving verification of the error and supporting documentation from Buyer, pay any undisputed portion of the difference within thirty (30) days of receipt of verification. Any such adjusted amount owing by Seller or Buyer shall be subject to the interest rate as designated in Section 3.3, running from the original due date of payment. 3.3 Payment For Energy delivered to Buyer pursuant to this Agreement, Buyer or its agent shall pay Seller by electronic transfer of funds by the later of the 20th day of the month or the 10th day after the invoice is received in accordance with Section 3.2. If such due date falls on a weekend or legal holiday, such due date shall be the next day which does not fall on a weekend or legal holiday. Payments made after the due date shall be considered late and shall bear interest on the unpaid balance at an annual rate equal to two percent (2%) plus the average daily prime rate as determined from the "Money Rates" section of The Wall Street Journal for the days of the late payment period multiplied by the number of days elapsed from and including the day after the due date, to and including the payment date. Interest shall be computed on the basis of a 365-day year. In the event this index is discontinued or its basis is substantially modified, the Parties shall agree on a substitute equivalent index. Should Buyer in good faith dispute the amount of an invoice, Buyer or its agent may withhold such disputed portion of the invoice until the dispute is resolved by mediation, arbitration or other permissible method. Such disputed amounts shall bear interest at the interest rate described above. Failure of Buyer or its agent to withhold any amount shall not constitute a waiver of Buyer’s right to challenge such amount. Both Parties shall maintain all records relating to the other Party or this Agreement for a minimum of two (2) years after the expiration or earlier termination of the Term, and shall permit the other Party, upon reasonable notice, to inspect and audit such records as the requesting Party deems reasonably necessary to protect its rights. ARTICLE IV SELLER'S OBLIGATIONS 4.1 Development, Finance, Construction and Operation of the Plant During the Term, Seller shall: (a) Develop, finance and construct the Plant. 26 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 (b) Provide Buyer with access to a “real time” Plant monitoring system (which, at a minimum, shall provide “real time” information regarding the net output of the Plant) that is anticipated to be internet protocol-based and include any applicable alarms required by Prudent Utility Practice. (c) Seek, obtain, maintain, comply with and, as necessary, renew and modify from time to time, all Permits, certificates or other authorizations, including preparation of any and all necessary CEQA documentation, which are required by any Requirements of Laws or Governmental Authority as prerequisites to Seller’s performance of this Agreement and to meeting Seller's obligation to operate the Plant consistently with the terms of this Agreement. (d) Operate, maintain, and repair the Plant in accordance with this Agreement, all Requirements of Laws applicable to Seller or the Plant, Contractual Obligations, Permits and in accordance with Prudent Utility Practice, including with respect to efforts to maintain availability of the Expected Annual Net Energy Production subject to normal system wear-and-tear and panel degradation factor. (e) Obtain and maintain the policies of insurance in amounts and with coverages as set forth in Exhibit C. (f) Operate and maintain in a manner consistent with Prudent Utility Practice the facilities it will own and otherwise cooperate with the Participating TO in the physical interconnection of the Plant to the Participating TO System in accordance with the Interconnection Agreement. (g) By October 1st of each year of the Term, provide each of Buyer and Scheduling Coordinator with an annual projection of scheduled Outages for the following calendar year. Should Seller make any changes to such projection, it will notify Buyer and Scheduling Coordinator of such changes at least fourteen (14) days in advance of any newly scheduled or rescheduled Outage. If Buyer requests a change to the scheduled date of any Outage (including to a date set forth in a change notice from Seller), Seller shall consider such request in good faith and notify Buyer of its decision within seven (7) days of receipt of Buyer’s request. In no instance other than Saturdays, Sundays and federal holidays during the period of reliability accounting (initially the period between June 1st and September 30th but subject to changes selected at Buyer’s 27 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 reasonable discretion for conforming to CAISO availability assessment) will Seller schedule Outages of more than twenty-four (24) hours during the Term. In connection with any Outage in excess of one (1) MW of Plant capacity, whether a scheduled or unscheduled Outage, Seller shall notify Buyer and Scheduling Coordinator, as soon as practicable, of the percentage of Plant (based on percentage of Energy loss) expected to be out of service and how long the Outage is expected to last. If the Outage is total and is due to failure of the Plant rather than the transmission and distribution system beyond the Point of Interconnection, Seller shall give Buyer and Scheduling Coordinator at least four (4) hours’ prior notice before re-energizing the Plant. In addition, Seller will comply with Scheduling Coordinator’s scheduling protocols, as may be changed from time to time. A copy of the current version of Scheduling Coordinator’s scheduling protocols, which the Parties agree are reasonable, is attached as Exhibit D; provided, during the Term, Buyer shall provide Seller with any revised scheduling protocols to the extent Scheduling Coordinator provides the same to Buyer. (h) Negotiate and enter into an Interconnection Agreement with the Participating TO to enable Seller to transmit Energy to the Point of Interconnection and into the CAISO-controlled grid. Seller shall be responsible for and pay all costs and charges arising under the Interconnection Agreement in compliance with the Interconnection Agreement and associated rules and requirements; provided that if Buyer chooses in its sole discretion to request Seller to pursue Full Capacity Deliverability Status for the Plant and its associated Output during the Term, Seller shall take all reasonable actions to pursue such status and (1) all costs associated with any transmission upgrades (including reasonable expenses of Seller) to enable Full Capacity Deliverability Status for the Plant shall be the responsibility of Buyer and (2) to the extent that Seller thereafter receives from the Participating TO or CAISO any reimbursement for such costs funded by Buyer, then Seller shall forward such reimbursed amounts to Buyer. (i) Negotiate and enter into a Participating Generator Agreement and a Meter Service Agreement for CAISO Metered Entities with the CAISO, the load control area operator for the Participating TO System, to which the Plant is interconnected. Buyer shall pay for or reimburse Seller for any such costs or charges associated with these agreements, except to the extent such cost or charge is required to be paid by Seller under this Agreement in Sections 3.1 and 4.1(h). 28 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Seller shall cooperate with Buyer to minimize any such costs as are to be reimbursed by Buyer. (j) Coordinate all Plant start-ups and shut-downs, in whole or in part, with Buyer in accordance with CAISO scheduling protocols and the reasonable protocols established by Buyer that are not inconsistent with the CAISO Tariff and CAISO procedures. (k) Fund and maintain the Development Assurance to assure Seller’s timely development of the Plant, including the performance of all construction tasks, and fund and maintain the Performance Assurance to assure Seller’s delivery of the Output to Buyer in accordance with Article IX. (l) During the Term, Seller shall take all actions reasonably necessary to maintain the Plant’s status as an Eligible Renewable Energy Resource. 4.2 General Obligations (a) Seller shall obtain in its own name and at its own expense any and all pollution or environmental credits or offsets necessary to operate the Plant in compliance with the Environmental Laws (b) Seller shall keep complete and accurate operating and other records and all other data for the purposes of proper administration of the Agreement, including such records as may be required by any Governmental Authority or Prudent Utility Practice. (c) Seller shall continue to (i) preserve, renew and keep in full force and effect its organizational existence and good standing, and take all reasonable action to maintain all applicable Permits, rights, privileges, licenses and franchises necessary or desirable in the ordinary course of its business; (ii) comply with all Requirements of Laws applicable to Seller or the Plant; and (iii) comply with all Contractual Obligations related to the operation and maintenance of the Plant. (d) Seller shall provide to Buyer such other information regarding the permitting, engineering, construction or operations of the Plant as Buyer may from time to time reasonably request, subject to licensing or other restrictions of Seller or a third party with respect to confidentiality, disclosure or use; provided, nothing herein will limit Buyer’s right to agree to confidentiality or sign a confidentiality 29 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 agreement in connection therewith before acquiring knowledge of such information. (e) Seller shall enter into any agreements with the CAISO required by the CAISO for generators delivering power into the CAISO-controlled grid. Except for such costs and charges as are expressly identified in this Agreement as Seller’s costs, Buyer shall reimburse Seller for all costs and charges under such agreements. Seller shall cooperate with Buyer to minimize any such costs as are to be reimbursed by Buyer. (f) Within thirty (30) days after execution of this Agreement, Seller shall provide to Buyer a copy of Seller’s most current annual financial statements available. Thereafter, from time to time at the request of Buyer (no more frequently than annually), Seller shall provide to Buyer a copy of Seller’s most current annual financial statements, within four (4) months following the end of each fiscal year of Seller, including audited statements prepared in accordance with GAAP if available, including for all periods of time during the Term after the Plant achieves Commercial Operation. Additionally, by no later than forty-five (45) days after the end of each fiscal quarter, Seller shall also provide an unaudited quarterly financial statement of Seller. Such quarterly financial statements shall be certified by an officer of Seller as fairly presenting the financial condition of Seller subject only to what would typically be included in year-end audit adjustments and footnotes. (g) Within fifteen (15) days of the later of (i) obtaining the authority to construct for the Plant from the applicable Governmental Authority or (ii) Seller’s receipt of the system impact and facility cost studies from the Participating TO, Seller shall specify the then expected Initial Capacity of the Plant (which shall be subject to the limits set forth in the definition of Initial Capacity). At that time, Seller shall provide to Buyer a letter stating the then expected Initial Capacity of the Plant in MW AC and specifying other material key Plant design details. (h) At the reasonable request of Buyer during the Term Seller shall in good faith evaluate and consider proposals for adding a battery storage unit to the Plant, provided that Seller shall not be required to add any such storage unit to the Plant unless and until Seller, Buyer and any Lenders each (in their sole and absolute discretion) approves the technical details of such unit and appropriate amendments to this Agreement related to such unit, including additional compensation related to such unit. 30 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 4.3 Construction Milestones (a) The Parties agree that time is of the essence in the performance of Seller’s obligations under this Agreement, and certain milestones (“Milestones”) for the development and construction of the Plant must be achieved in a timely fashion or Buyer shall suffer damages which are difficult to estimate with reasonable certainty. Seller shall provide Buyer with documentation satisfactory to Buyer, acting in the reasonable exercise of its discretion, to support the achievement of Milestones by the dates set forth below. (b) The following events are all of the Milestones: (i) By the Effective Date, Seller shall have obtained Site Control. (ii) By August 31, 2014, Seller shall have obtained all Permits necessary, in final form, to commence construction of the Plant. (iii) By December 1, 2014, Seller shall have commenced construction of the Plant. (iv) By June 1, 2015, Seller shall achieve Commercial Operation. (c) Starting on the Effective Date, Seller shall provide to Buyer written monthly progress reports concerning the progress towards completion of the Milestones which shall be in form and substance substantially in the form set forth in Exhibit E-1, and include such additional information as reasonably required by Buyer in its sole discretion. In addition, within five (5) business days of the completion of each Milestone, Seller shall provide a certification to Buyer (along with any supporting documentation), stating Seller’s achievement or satisfaction of the Milestone. Seller shall provide to Buyer additional information concerning Seller’s progress towards,, or confirmation of, achievement of the Milestones, as Buyer may reasonably request from time to time. (d) Upon becoming aware that it will, or is reasonably likely to, fail to achieve the Milestone by the required date, for any reason including Force Majeure Event, Seller shall so notify Buyer, in writing, as soon as is reasonably practical. Such notice shall provide information regarding the cause of the delay, provide a revised estimated date 31 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 for achievement of the Milestone, and otherwise describe Seller’s plan for meeting the Milestone. (e) In the event that: a Force Majeure Event causes any delay to the achievement of any Milestone then, and in any such case, each Milestone deadline may be extended in Buyer’s reasonable discretion by that number of days the applicable Force Majeure Event actually delays completion of such Milestone. Notwithstanding the foregoing, (1) in no event shall the combined extensions under this Section 4.3(e) for any individual Milestone arising from Force Majeure Events exceed six (-6) months in the aggregate, and (2) if on any given day two or more events cause delay to a Milestone at the same time (i.e., occur concurrently), Seller shall only be entitled to one day of delay for such day. (f) Should Seller fail to satisfy the Milestone set forth in Section 4.3(b)(iii) for more than twelve (12) months, Buyer may terminate this Agreement upon written notice to Seller of such termination. (g) Seller covenants that it will diligently pursue to completion the Milestone as set forth in Section 4.3(b). (h) Seller shall provide written notice to Buyer thirty (30) days in advance of the anticipated Commercial Operation Date, and shall provide Buyer with reasonable written weekly updates thereafter on the status of Seller’s progress in achieving Commercial Operation until the week preceding the Commercial Operation Date. On the Commercial Operation Date, Seller shall deliver to Buyer by facsimile, with originals to follow by hand-delivery, courier or mail service, the COD Certification signifying achievement of Commercial Operation. 4.4 Obligation to Schedule and Deliver (a) Scheduling. During the Term, Buyer shall provide (or cause to be provided), at its own expense, all Scheduling Coordinator services necessary for both the delivery and receipt of Energy (from the Plant) at the Point of Interconnection in accordance with all applicable CAISO and related protocols. Seller shall sign and deliver documentation, if any, that are required to (i) designate and otherwise verify that Buyer or its designee is Scheduling Coordinator on behalf of Seller for the Plant and (ii) allow Buyer to perform its various Scheduling Coordinator duties. 32 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Buyer shall appoint NCPA to act as Scheduling Coordinator for Buyer but reserves the right to substitute any other qualified entity as Scheduling Coordinator for the Plant upon reasonable advance notice to Seller. (b) General Confirmations. The Parties acknowledge their general understanding and intent, subject to the terms and conditions of this Agreement, as follows: (i) Seller shall use all reasonable efforts consistent with Prudent Utility Practice to maximize the output of Energy from the Plant; (ii) Subject to Buyer’s role as Seller’s Scheduling Coordinator and the other provisions hereof, Seller shall be responsible to arrange for, and shall bear all risks associated with, delivery of all Plant Energy to the Point of Interconnection; (iii) Buyer shall be obligated to pay for all Energy delivered to the Point of Interconnection; and (iv) Buyer shall be responsible to arrange for, and shall bear all risks associated with, acceptance and transmission of Energy at and from the Point of Interconnection. (c) Buyer Curtailment Rights. (i) Mandatory Dispatch Down Periods. Seller shall reduce delivery amounts as directed by the CAISO, Participating TO, or any successor thereof during any Dispatch Down Period. (ii) Discretionary Curtailments and Economic Curtailment. (A) Buyer may require Seller to curtail deliveries of Energy from the Plant to the Point of Interconnection for any reason in Buyer’s reasonable discretion (a “Discretionary Curtailment”) by delivering a dispatch notice to Seller, provided that (1) such Discretionary Curtailments shall be limited to a quantity of not more than 10% of the Expected Annual Net Energy Production in each Contract Year; and (2) the dispatch notices shall be consistent with the operational characteristics set forth in Exhibit D. Seller shall reduce the Plant’s delivered Energy by the amount and for the period set forth in each dispatch notice. 33 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 (B) In addition to paying Seller for all Energy actually delivered hereunder, Buyer shall pay Seller, on the date payment would otherwise be due in respect of each month in which any Discretionary Curtailment or Economic Curtailment occurred, an amount equal to the product of (1) the amount of Energy that Seller could reasonably have delivered to Buyer but for such Discretionary Curtailment and/or Economic Curtailment and (2) the Price. (iii) Failure to Comply. If Seller fails to comply with a dispatch notice that meets the requirements for a Discretionary Curtailment, then, for the amount of Energy (in MWhs) that the Plant delivered in contradiction to the dispatch notice, Seller shall pay Buyer the greater of: (A) 200% of the aggregate Price for such MWhs plus any penalties or other charges actually incurred resulting from Seller’s failure to comply with the dispatch notice; and (B) the CAISO’s Real-Time Market (as defined in the CAISO Tariff) price for the applicable PNode for such MWhs plus any penalties or other charges actually incurred resulting from Seller’s failure to comply with the dispatch notice. (d) Forecast Fee. The Parties acknowledge that PIRP or its successor program, by means of a contract with a forecasting service (the “Forecasting Service”) develops high quality forecasts for day-ahead and/or hour ahead scheduling for CAISO operations. Buyer, or Scheduling Coordinator, shall bear all forecast fees imposed by CAISO for use of the Forecasting Service up to $0.10/MWh. If such fees exceed this amount, the Parties will each be responsible for 50% of such excess. With respect to the Energy to be sold under this Agreement: (i) If requested, Seller agrees to provide the Forecasting Service with sufficient data to support a reasonably accurate and unbiased forecast; and (ii) Buyer, as part of its Scheduling Coordinator services, will use the forecasts developed by the Forecasting Service, which are most applicable to the Plant as the Plant’s “Energy 34 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Schedule” for the CAISO Day-Ahead and/or Hour-Ahead markets. ARTICLE V BUYER’S OBLIGATIONS 5.1 Delivery and Transmission Except for Seller’s obligations pursuant to Sections 3.1, 4.1(h), 4.1(i) and 4.4(d) , Buyer shall be solely responsible for paying costs and charges associated with the delivery and receipt of Energy under this Agreement at the Point of Interconnection and for the transmission and delivery of Energy from the Point of Interconnection to any other point downstream of the Point of Interconnection (including, without limitation, transmission costs and charges, competition transition charges, applicable control area service charges, transmission congestion charges, inadvertent energy flows, any other CAISO charges related to the transmission of such Energy by the CAISO and any charge assessed or collected in the future pursuant to any utility tariff or rate schedule, however defined, for transmission or transmission-related service rendered by or for any transmission-owning or operating entity). Buyer shall be responsible for the Scheduling Coordinator function. The NCPA, acting on behalf of Buyer, shall be Scheduling Coordinator for the transmission of Energy from the Plant in accordance with applicable CAISO rules. Buyer’s duties as Scheduling Coordinator shall be limited to those duties as are specifically required of scheduling coordinators in the CAISO Tariff and the CAISO protocols. Commercial arrangements for such transmission and delivery services will be coordinated and settled by the Scheduling Coordinator directly with the CAISO or other third parties. At the option of Buyer, the Plant may be included within NCPA’s metered sub-system in connection with the scheduling of power over the CAISO grid and related functions; provided that such inclusion shall have no adverse effect on the Plant’s operations or Seller (or any such effect shall be fully mitigated by Buyer). Seller will do all things reasonably needed to allow Buyer to comply with any obligations, and minimize any potential liability, under the CAISO Tariff; provided, that if such actions require any actions beyond the giving of notices, then Buyer shall reimburse Seller for all reasonably incurred out-of-pocket costs and charges of such actions. If and to the extent that Seller fails to comply with the notice provisions in Section 4.1(g) concerning Outages or with its obligations as outlined in the previous sentence, Seller shall be wholly responsible for all imbalances, deviations, or any other CAISO charges or penalties associated with such Outage or CAISO Tariff obligation (it being understood, however, that all such charges and penalties (if any) shall be 35 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 borne by Buyer if Seller has not failed to comply with such provisions or obligations). 5.2 Taxes Buyer shall pay and be fully responsible for any sales, use, gross receipts, utility or other taxes, assessments or fees, if any, incurred or imposed on the sale or transfer of Output from Seller to Buyer under this Agreement. Buyer shall not be responsible for any taxes measured on the net income of Seller or ad valorem taxes paid by Seller that are associated with Seller’s rights and privileges relating to the Site. 5.3 Notification of Transmission Outages Buyer will exercise reasonable efforts to provide Seller with as much advance notice as practicable of any Outage on the Participating TO System or other transmission or delivery facilities which is reasonably likely to result in a Dispatch Down Period. ARTICLE VI FORCE MAJEURE 6.1 Remedial Action Subject to the limitation on extensions of Milestones set forth in Section 4.3(e), a Party shall not be liable to the other Party if the Party is prevented from performing its obligations hereunder due to a Force Majeure Event. The Party rendered unable to fulfill an obligation by reason of a Force Majeure Event shall take all action necessary to remove such inability with all due speed and diligence. The non-performing Party shall be prompt and diligent in attempting to mitigate the effects of and to remove the cause of its failure to perform, and nothing herein shall be construed as permitting that Party to continue to fail to perform after said cause has been removed. Notwithstanding the foregoing, the existence of a Force Majeure Event shall not excuse any Party from its obligations to make payment of amounts due hereunder. 6.2 Notice In the event of any delay or nonperformance resulting from a Force Majeure Event, the Party suffering the Force Majeure Event shall, as soon as practicable under the circumstances, notify the other Party, in writing, of the 36 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 nature, cause, date of commencement thereof and the anticipated extent of any delay or interruption in performance. 6.3 Termination Due To Force Majeure Event If a Party is prevented in a material respect from performing any material obligations under this Agreement due to a Force Majeure Event lasting for a period of twelve (12) consecutive months or longer, the unaffected Party may terminate this Agreement, without liability of either Party to the other, upon thirty (30) days’ prior written notice at any time following expiration of such period of twelve (12) consecutive months, provided that the Force Majeure Event is continuing at the time of such notice. ARTICLE VII DEFAULT/REMEDIES/TERMINATION 7.1 Events of Default by Buyer The following shall each constitute an “Event of Default” by Buyer: (a) Buyer breaches any material obligation (other than one covered by Section 7.1(b) or (c) of this Agreement) and fails to cure such breach within thirty (30) days after written notification of breach by Seller or, if the breach cannot be cured within thirty (30) days, such longer period as may be necessary to cure such breach as long as Buyer is exercising diligent efforts to cure such breach. (b) Buyer fails to make any payment due under this Agreement within thirty (30) days after written notice that such payment is due. (c) The initiation of an involuntary proceeding against Buyer under the bankruptcy or insolvency laws, which involuntary proceeding remains unresolved for sixty (60) consecutive days, or in the event of the initiation by Buyer of a voluntary proceeding under the bankruptcy or insolvency laws. 7.2 Events of Default by Seller The following shall each constitute an “Event of Default” by the Seller: (a) Seller breaches any material obligation (other than ones covered by Sections 7.2(b), (c), (d), (e) or (f) of this Agreement or for which a remedy is specified) and fails to cure such breach within thirty (30) 37 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 days after written notification of breach by Buyer or, if the breach cannot be cured within thirty (30) days, such longer period as may be necessary to cure such breach as long as Seller is exercising diligent efforts to cure such breach. (b) Seller fails to make any payment due under this Agreement within thirty (30) days after written notice that such payment is due. (c) The initiation of an involuntary proceeding against Seller under the bankruptcy or insolvency laws, which involuntary proceeding remains unresolved for sixty (60) consecutive days, or in the event of the initiation by Seller of a voluntary proceeding under the bankruptcy or insolvency laws. (d) Except as otherwise excused under this Agreement, Seller sells or transfers the Output (or any individual component thereof) or Expansion Plant Output (or any individual component thereof) or the right to the Output (or any individual component thereof) or Expansion Plant Output (or any individual component thereof), to the extent that such Expansion Plant Output is purchased by Buyer, to any Person other than Buyer. (e) Seller fails to comply with the terms of Buyer’s right of first refusal as described in Section 2.5 of this Agreement. (f) Subject to Section 7.4(c) and 9.3, Seller fails, for any reason other than an unauthorized act or omission by Buyer, to achieve the Commercial Operation Date by the applicable Milestone deadline as set forth in Section 4.3(b)(iv), as such deadline may be extended in accordance with Section 4.3(e) 7.3 Termination for Default, Etc. (a) Declaration of Early Termination Date. If an Event of Default with respect to a defaulting Party shall have occurred and has not been cured, the non-defaulting Party shall have the right: (i) to send notice, designating a day, no earlier than ten (10) days after the day such notice is deemed to be received and no later than twenty (20) days after such notice is deemed to be received, as an early termination date of this Agreement (“Early Termination Date”), 38 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 (ii) to terminate this Agreement and end the Term effective as of the Early Termination Date and collect the Termination Payment, which shall be calculated in accordance with Section 7.3(b) below or as otherwise expressly provided in this Agreement; (iii) to the extent of amounts due to the non-defaulting Party, withhold any payments due to the defaulting Party under this Agreement; and (iv) suspend performance (v) exercise any other right or remedy available at law or in equity to the extent otherwise permitted under this Agreement.. (b) Calculation of Termination Payment. The non-defaulting Party shall calculate, in a commercially reasonable manner, a Termination Payment as of the Early Termination Date. Third parties supplying information for purposes of the calculation of Gains or Losses may include dealers in the relevant markets, end-users of the relevant product, information vendors and other sources of market information. If the non-defaulting Party uses the market price for a comparable transaction to determine the Gains or Losses, such price should be determined by using the average of market quotations provided by three (3) or more bona fide unaffiliated market participants. If the number of available quotes is three, then the average of the three quotes shall be deemed to be the market price. Where a quote is in the form of bid and ask prices, the price that is to be used in the averaging is the midpoint between the bid and ask price. The quotes obtained shall be: (i) for a like amount, (ii) of the same Output, (iii) at the same (or a reasonably equivalent) Pnode (as defined in the CAISO Tariff), and (iv) for the remainder of the Term, or in any other commercially reasonable manner. The Gains and Losses shall be calculated as the difference, plus or minus, between the economic value of the remainder of the Term of the Agreement and the equivalent quantities and relevant market prices for the same term that either are quoted by a bona fide market participant, as provided above, or which are reasonably expected to be available in the market for a replacement contract for the Agreement. The Termination Payment shall be the sole and exclusive remedy available to the non-defaulting Party in connection with its termination of this Agreement and shall not include consequential, incidental, punitive, exemplary, indirect or business interruption damages; provided that, if Seller is the defaulting Party, 39 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Buyer terminates this Agreement, and Buyer has paid for interconnection capital costs arising under the Interconnection Agreement pursuant to Section 4.1(h) for which Buyer has not received reimbursement under Section 4.1(h), then Seller shall also reimburse Buyer pro rata for any such costs paid for by Buyer (assuming twenty-five (25) years of Plant operations). The non-defaulting Party shall not have to enter into replacement transactions to establish a Termination Payment. (c) Notice of Termination Payment. As soon as practicable after delivery of a notice of termination, notice shall be given by the non-defaulting Party to the defaulting Party of the amount of the Termination Payment due from the defaulting Party to the non-defaulting Party, if any. The notice shall include a written statement explaining in reasonable detail the calculation of such amount and the sources for such calculation. The Termination Payment shall be made to the non-defaulting Party, as applicable, thirty (30) days after such notice is effective. (d) Disputes Regarding Termination Payment. If the defaulting Party disputes the non-defaulting Party’s calculation of the Termination Payment, in whole or in part, the defaulting Party shall, within fifteen (15) days of receipt of the non-defaulting Party’s calculation of the Termination Payment, provide to the non-defaulting Party a detailed written explanation of the basis for such dispute. Following delivery of such a notice, disputes regarding the Termination Payment shall be resolved in accordance with Section 10.9. 7.4 Damages (a) Except as otherwise provided herein, the rights and remedies of a Party pursuant to this Article VII shall be cumulative and in addition to the rights of the Parties otherwise provided in this Agreement. (b) Except as otherwise specifically and expressly provided in the Agreement, neither Party shall be liable to the other Party under this Agreement for any indirect, special or consequential damages, including, without limitation, loss of use, loss of revenues, loss of profit, interest charges, cost of capital or claims of its customers or members to which service is made. Except as set forth in Article IX and except to the extent Seller violates its undertaking not to provide or sell rights to part or all of the Output to a party other than Buyer, Seller shall not be liable to Buyer for failure to provide any specific amount of Output hereunder. 40 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 (c) In the event that Seller fails to meet the Commercial Operation Date by the applicable Milestone deadline (as extended under Section 4.3), Seller shall pay Buyer liquidated damages as set forth in Article IX. (d) The Parties agree that the Termination Payment above, and the liquidated damages set forth in Sections 9.3 and 9.4, are reasonable and represent a fair and genuine estimate of the damages that either Party will suffer upon the termination of this Agreement or Buyer will suffer upon the failure of Seller to achieve Commercial Operation by the agreed upon date(s). The Parties acknowledge that it would be impracticable or extremely difficult to fix actual damages in such circumstances, and therefore they have deemed the liquidated damages set forth above to be the amount of damage sustained by Buyer or Seller upon the occurrence of such circumstances. The Parties further agree that payment of such amounts shall be as and for liquidated damages and not as a penalty (and are a sole and exclusive remedy upon a termination hereof, and under Sections 9.3 and 9.4 hereof), and are therefore not subject to avoidance under California Civil Code section 1671. 7.5 Indemnification (a) Up to and including the Commercial Operation Date, the Seller shall indemnify, defend, and hold harmless the Buyer, its officers, agents and employees from any claim, liability, loss, injury or damage arising out of, or in connection with, the negligence, willful misconduct or violation of applicable law by Seller and/or its agents, employees or sub-contractors, excepting only loss, injury or damage caused by the negligence, willful misconduct or violation of applicable law of personnel employed by the Buyer to the extent caused by such negligence, willful misconduct or violation of applicable law of Buyer’s employed personnel. (b) After the Commercial Operation Date, each Party (“Indemnifying Party”) shall defend, indemnify and hold harmless the other Party and its officers, directors, employees, agents, affiliates and representatives (each, an “Indemnified Party”) from and against any and all losses, including but not limited to losses arising from personal injury or death, or damage to property, but only to the extent such losses result from or arise out of the negligence, willful misconduct or violation of applicable law by the Indemnifying Party, its employees, subcontractors or agents. If an Indemnified Party 41 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 determines that it is entitled to defense and indemnification under this Article, such Indemnified Party shall promptly notify the Indemnifying Party in writing of the losses, and provide all reasonably necessary or useful information, and authority to settle and/or defend the losses. No settlement that would impose costs or expense upon the Indemnified Party shall be made without such Party’s prior written consent. 7.6 Buyer’s Right to Operate (a) Subject to Section 7.6(b), if, following the Commercial Operation Date, Seller (i) fails to maintain Seller’s Calculation Period Deemed Delivered Energy Amount at or above the Seller’s Two Year Minimum Production Threshold or (ii) fails to generate Energy for sixty (60) consecutive days and such failure in the foregoing clauses (i) and (ii), as applicable, is not primarily the result of Force Majeure or any act or omission of Buyer, then Buyer or its designee may, but shall not be obligated to, assume operational control of the Plant from Seller; provided that Buyer shall not be permitted to take control so long as Seller or any of Seller’s Lenders are using commercially reasonable efforts to remedy the failures described in (i) or (ii) above consistent with Prudent Utility Practice (the “Commercially Reasonable Efforts Standard”). Buyer, its officers, employees, agents, contractors and designees shall have the unrestricted right to enter the Plant to the extent necessary to operate the Plant in accordance with the foregoing. Upon the exercise of this right, Buyer or its designee shall at all times operate the Plant, using Prudent Utility Practice, and shall comply, to the extent commercially practicable, with the terms of this Agreement. Notwithstanding the foregoing, Seller shall not be excused from any obligation or remedy available to Buyer as a result of Buyer’s operation of, or election not to operate, the Plant. Buyer shall pay Seller the applicable rate for Output provided hereunder, less any reasonable costs incurred by Buyer to operate the Plant. Buyer shall indemnify and hold Seller harmless from any liability to third parties arising out of Buyer’s failure to operate the Plant using Prudent Utility Practice. Upon Buyer’s reasonable satisfaction that Seller has the ability to operate the Plant in accordance with this Agreement, Seller shall resume operational control. (b) Prior to exercising any rights under this Section 7.6 (including taking any action to assume operational control of the Plant), Buyer shall first provide at least forty-five (45) days prior written notice to Seller identifying in reasonable detail the reasons why Buyer believes that 42 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Seller has not satisfied the Commercially Reasonable Efforts Standard to remedy Plant failures (an “Operations Assumption Notice”). If, prior to the expiration of such forty-five (45) day (or longer) period, either Seller or its Lenders responds to Buyer’s Operations Assumptions Notice and states in reasonable detail reasons why Seller or its Lenders dispute Buyer’s assertion that Seller and its Lenders have not satisfied the Commercially Reasonable Efforts Standard, then Buyer shall refrain from exercising any rights under this Section 7.6 until such dispute is resolved in writing by both Parties mutually, or Buyer has obtained a court confirmation of its position in the manner contemplated by Section 10.9. (c) Should Seller’s Lender(s) refuse to finance the Plant, or materially condition such financing, solely as a result of this Section 7.6, and Seller gives Buyer reasonable prior written notice of such refusal to finance, Buyer shall have the following options: (i) renegotiate this Section 7.6 with Seller and Lender(s) in a manner mutually acceptable; (ii) arrange for financing for the Plant under materially equivalent terms and conditions as the Lender(s) were prepared to provide but for this Section 7.6; (iii) delete this Section 7.6 in its entirety (which deletion will not require Seller’s additional consent); or (iv) terminate this Agreement without liability of one Party to the other. If Buyer fails to elect and complete one of these options within sixty (60) days of written notice from Seller, Seller shall have the right to terminate this Agreement without liability of one party to the other. To the extent that Seller fails to accomplish financing pursuant to the Milestone set forth at Section 4.3(b)(iii), and such delays are attributable to the discussion and negotiation with Lender(s) of this Section 7.6, then Seller shall be entitled to such reasonable time to arrange for the financing of the Plant upon final resolution of matters related to this Section 7.6. ARTICLE VIII REPRESENTATIONS AND WARRANTIES 8.1 Seller’s Representations and Warranties Seller represents and warrants to Buyer that as of the Effective Date: (a) Seller is duly organized and validly existing as a limited liability company under the laws of Delaware, and has the lawful power to engage in the business it presently conducts and contemplates 43 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 conducting in this Agreement, and Seller is duly qualified in California and each jurisdiction wherein the nature of the business transacted by it makes such qualification necessary; (b) Seller has the legal power and authority to make and carry out this Agreement and to perform its obligations hereunder; all such actions have been duly authorized by all necessary proceedings on its part. As of the Effective Date, either: (i) (A) the Plant shall on the Commercial Operation Date be a "qualifying small power production facility" (“QF”) as that term is defined in Section 3(17)(C) of the Federal Power Act (“FPA”) and will be entitled to all of the exemptions from regulation provided in 18 CFR §§ 292.601(c) and 292.602 applicable to a QF with the capacity of the Plant; and (B) no approval (except with respect to "qualifying small power production facility" status and market-based rate authorization under Section 205 of the FPA) with respect to this Agreement is required from FERC; or (ii) (A) Seller shall on the Commercial Operation Date be an "exempt wholesale generator" as that term is defined in Section 1262(6) of the Public Utility Holding Company Act of 2005, and (B) no approval (except with respect to "exempt wholesale generator" status and market based rate authorization under Section 205 of the FPA) with respect to this Agreement is required from FERC. In the event that the Plant is not a "qualifying small power production facility" that is exempt from Sections 205 and 206 of the FPA on the Commercial Operation Date or any date thereafter, Seller shall make appropriate filings under the Federal Power Act within sixty (60) days so as to comply with applicable law, subject at all times to the provisions of Section 10.15 of this Agreement; (c) The execution, delivery and performance of this Agreement by Seller will not conflict with its governing documents, any applicable laws, or any covenant, agreement, understanding, decree or order to which Seller is a party or by which it is bound or affected; (d) This Agreement has been duly and validly executed and delivered by Seller and, as of the Effective Date, constitutes a legal, valid and binding obligation of Seller, enforceable in accordance with its terms against Seller, except to the extent that its enforceability may be 44 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally or by general principles of equity; and (e) There are no actions, suits, proceedings or investigations pending or, to the knowledge of Seller, threatened, in writing, against Seller, at law or in equity, before any Governmental Authority, which individually or in the aggregate are reasonably likely to have a materially adverse effect on the business, properties or assets or the condition, financial or otherwise, of Seller, or to result in any impairment of Seller’s ability to perform its obligations under this Agreement. 8.2 Buyer Representations and Warranties Buyer represents and warrants to Seller that as of the Effective Date: (a) Buyer is a municipal corporation, duly organized and validly existing, and has the lawful power to engage in the business it presently conducts and contemplates conducting in this Agreement; (b) Buyer has the legal power and authority to make and carry out this Agreement and to perform its obligations hereunder and all such actions have been duly authorized by all necessary proceedings on its part; (c) The execution, delivery and performance of this Agreement by Buyer will not conflict with its governing documents, any applicable laws or any covenant, agreement, understanding, decree or order to which Buyer is a party or by which it is bound or affected; (d) This Agreement has been duly and validly executed and delivered by Buyer and, as of the Effective Date, constitutes a legal, valid and binding obligation of Buyer, enforceable in accordance with its terms against Buyer, except to the extent that its enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally or by general principles of equity; and (e) There are no actions, suits, proceedings or investigations pending or, to the knowledge of Buyer, threatened, in writing, against Buyer, at law or in equity, before any Governmental Authority, which individually or in the aggregate are reasonably likely to have a materially adverse effect on the business, properties or assets or the 45 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 condition, financial or otherwise, of Buyer, or to result in any impairment of Buyer’s ability to perform its obligations under this Agreement. ARTICLE IX DEVELOPMENT AND PERFORMANCE ASSURANCE 9.1 Forms of Assurance Seller shall maintain the Development Assurance and the Performance Assurance as follows: (a) The Development Assurance shall be deposited by electronic transfer to Buyer’s designated account with Wells Fargo NA or posted in the form of a letter of credit or escrow account (in substantially the form of agreements set forth on Exhibit F-1 and F-2 hereto) with Wells Fargo NA or such other banking institution reasonably acceptable to Buyer, as security for the timely development of the Plant. The transfer or posting shall occur within thirty (30) days after the Effective Date, and the Development Assurance will be maintained to and including the Commercial Operation Date. (b) The Performance Assurance shall be deposited by electronic transfer to Buyer’s designated account with Wells Fargo NA or otherwise posted in the form of a letter of credit or escrow account (in substantially the form of agreements set forth on Exhibit F-1 and F-2 hereto) with Wells Fargo NA or other banking institution reasonably acceptable to Buyer, as security for the performance of the Seller to meet its obligations during the period commencing one day after the Commercial Operation Date and ending at the expiration of the Term. The Performance Assurance shall be deposited or posted within thirty (30) days after the Commercial Operation Date and shall be maintained until the end of the Term. 9.2 Managing Assurances Within ten (10) days after the occurrence of the Commercial Operation Date Buyer shall notify Seller’s banking institution that the Development Assurance (which shall be the full amount of the Development Assurance, plus interest under the applicable account, less any undisputed liquidated damages incurred under this Agreement) shall be returned to Seller. Buyer may either make, or request Seller’s banking institution to make, 46 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 withdrawals from the Development Assurance and Performance Assurances in accordance with this Agreement and, if applicable, the terms of the letter of credit or escrow agreement. Seller shall provide additional funds (or availability thereof) in order to maintain such assurance (at the amounts thereof set forth in the definitions of Development Assurance and Performance Assurance, as applicable) at all times during when Seller must maintain Development Assurance and Performance Assurance, as specified in Section 9.1. Such additional deposits or availability shall occur within fifteen (15) days of any withdrawals from such accounts causing the account balance to fall below said amounts. Within thirty (30) days after the expiration or earlier termination of this Agreement, Buyer will return to Seller any undisputed amount of the Development Assurance and/or Performance Assurance, as the case may be. 9.3 Development Liquidated Damages In the event that Seller fails to meet the Commercial Operation Date by the applicable Milestone deadline, as set forth in Sections 4.3(b)(iv), as such deadline may be extended in accordance with Section 4.3(e), Seller shall be liable for liquidated damages in the amount equal to the Daily LD Amount for each day that Seller is late in satisfying the Milestone. So long as Seller is paying such liquidated damages on a monthly basis after failing to meet the relevant Milestone deadline (as such Milestone deadline may have been extended per Section 4.3(e)), Buyer shall not be permitted to terminate this Agreement for up to twelve (12) months. If after twelve (12) months following the relevant Milestone deadline (as such Milestone may have been extended per Section 4.3(e)) Seller has failed to achieve the relevant Milestone, or if for any reason Seller fails to pay, or discontinues paying, the liquidated damages provided for above, Buyer may terminate this Agreement by written notice to Seller. This twelve (12) month period shall not be further extened as a result of a Force Majeure Event.Within thirty (30) days of the receipt of the termination notice, Seller shall pay Buyer a lump sum equal to the amount of the Development Assurance minus any Daily LD Amounts, if any, previously paid to Buyer. No other damages or remedy shall be available to Buyer on the basis of such failure to meet the Milestone set forth in Section 4.3(b)(iv) or termination of this Agreement based on Seller’s failure to achieve Commercial Operation within twelve (12) months of that Milestone deadline. 9.4 Performance Liquidated Damages Seller guarantees that the Calculation Period Deemed Delivered Energy Amount for each two-year Calculation Period shall be no less than the Two Year Minimum Production Threshold for such Calculation Period, all in 47 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 accordance with this Section 9.4. If, for any Calculation Period, the Calculation Period Deemed Delivered Energy Amount is less than the Two Year Minimum Production Threshold (any such shortfall, in MWh, a “Shortfall”), then Seller may cure such Shortfall by paying or crediting Buyer liquidated damages based on the amount of such Shortfall in an amount equal to the product of (i) the amount of such Shortfall multiplied by (ii) the per MWh Price in this Agreement multiplied by a factor of 1.2. Except as otherwise expressly stated in Section 7.6, the foregoing shall be Buyer’s sole remedy for any Shortfall or failure to produce the Output or failure to maintain any specified Two Year Minimum Production Threshold. If for any two-year Calculation Period Seller is obligated to pay or credit any Shortfall damages hereunder, then, for purposes of calculating the Calculation Period Deemed Delivered Energy Amount for the immediately succeeding Calculation Period, the amount of the Calculation Period Deemed Delivered Energy Amount for the first year in such succeeding Calculation Period shall be deemed to be equal to the greater of (a) the actual Calculation Period Deemed Delivered Energy Amount for such first year and (b) seventy percent (70%) of the Expected Annual Net Energy Production for such first year. ARTICLE X MISCELLANEOUS 10.1 Assignment The rights and obligations of this Agreement may not be assigned by either Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed. Any Change of Control of Seller (whether voluntary or by operation of law) will be deemed an assignment and will require the prior written consent of Buyer, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, Seller may use subcontractors without Buyer’s consent to comply with the terms of this Agreement, provided that notwithstanding the use of those subcontractors, Seller shall remain responsible for all of its obligations under this Agreement. Buyer may furthermore use any agent it so designates for scheduling and billing purposes, so long as Buyer remains responsible for all of its obligations under this Agreement. Any purported assignment of this Agreement in the absence of the required consent, except as provided in 10.2, shall be void. In determining whether to provide its consent to any proposed assignment of this Agreement or Change of Control, Buyer may request Seller to provide financial statements of the proposed assignee or new controlling party, or other relevant information, as the case may be. 48 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 10.2 Financing Notwithstanding Section 10.1, Seller may, without the consent of Buyer, collaterally assign its rights under this Agreement to Lender(s) as collateral security in connection with any financing of the construction, purchase or operation of the Plant, provided that such Lender(s) or its designee agree(s), in writing, that upon assuming any of Seller’s prospective rights under this Agreement, such Lender(s) also shall be bound by all of Seller’s prospective obligations under this Agreement. Notwithstanding any such assignment, Seller’s obligations under this Agreement shall continue in their entirety in full force and effect and Seller shall remain fully liable for all of its obligations under or relating to this Agreement. Each such collateral assignment and any purchaser or transferee shall be subject to Buyer’s rights and defenses hereunder and under applicable law. Seller shall provide prior written notice to Buyer at least ten (10) business days prior to any such collateral assignment. In order to facilitate the obtaining of financing of the Plant, Buyer shall execute, upon request, a commercially reasonable consent to assignment, with respect to a collateral assignment hereof (and estoppel in mutually agreeable form) to Lenders in connection with the documentation of the financing or refinancing for the Plant, including tax equity. Any assignment in violation of this Agreement shall be void, ab initio. Buyer shall consider in good faith any amendments to this Agreement proposed by Seller which relate to financing of the Plant or other amendments requested by Seller in order to receive or maintain financing from Lenders. 10.3 Notices Any notice, demand, request, or communication required or authorized by this Agreement shall be delivered either by hand, facsimile, overnight courier or mailed by certified mail, return receipt requested with postage prepaid, to: City of Palo Alto 250 Hamilton Avenue, 8th Floor Palo Alto, CA 94301 Attention: Senior Deputy City Attorney / Utilities Fax: (650) 329-2646 on behalf of Buyer; with a copy to: 49 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 City of Palo Alto 250 Hamilton Avenue, 3rd Floor Palo Alto, CA 94301 Attention: Director of Utilities Fax: (650) 329-2946 and to: Northern California Power Agency 651 Commerce Drive Roseville, CA 95678-6411 Attention: Power Contracts Administrator Fax: (916) 783-7693 and to: EE Kettleman Land LLC c/o Centaurus Renewable Energy LLC Williams Tower 2800 Post Oak Blvd, Ste. 225 Houston, TX 77056 Attention: Keith Holst Telephone: (713) 554 0539 Email: KHolst@centcap.net Attention: Stephen H. Douglas Email: SDouglas@centaurusenergy.com Telephone: (713) 554-1352 And to: Clēnera Renewable Energy LLC 60 E Rio Salado Pkwy #900 Tempe, AZ 85281 Attention: Jason Ellsworth Email: jason@clenera.com Main: (480) 478-1647 with a copy to: Andrews Kurth LLP 600 Travis Street, Suite 4200 Houston, TX 77002 50 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Attention: Peter del Vecchio Email: pdelvecchio@andrewskurth.com Telephone: (713) 220-3901 on behalf of Seller. The designation and titles of the person to be notified or the address of such person may be changed at any time by written notice delivered in the manner set forth in this Section 10.3. Any such notice, demand, request, or communication shall be deemed received (i) if delivered by hand by a Party or sent by facsimile or email or (ii) upon receipt by the receiving Party if sent by courier or U.S. mail. 10.4 Captions All titles, subject headings, section titles and similar items are provided for the purpose of reference and convenience and are not intended to be inclusive, definitive or to affect the meaning of the contents or scope of the Agreement. 10.5 No Third Party Beneficiary No provision of the Agreement is intended to, nor shall it in any way, inure to the benefit of any customer, property owner or any other third party, so as to constitute any such Person a third party beneficiary under the Agreement, or of any one or more of the terms hereof, or otherwise give rise to any cause of action in any Person not a Party hereto. 10.6 No Dedication No undertaking by one Party to the other under any provision of the Agreement shall constitute the dedication of that Party's system or any portion thereof to the other Party or to the public or affect Seller as an independent entity and not a public utility. 10.7 Entire Agreement; Integration This Agreement, together with all exhibits and Appendices attached hereto, constitutes the entire agreement between the Parties and supersedes any and all prior oral or written understandings. No amendment, addition to or modification of any provision hereof shall be binding upon the Parties, and neither Party shall be deemed to have waived any provision or any remedy available to it, unless such amendment, addition, modification or waiver is 51 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 made, in writing, and signed by a duly authorized officer or representative of the Parties. 10.8 Applicable Law The Agreement is made in the State of California and shall be interpreted and governed by the laws of the State of California and/or the laws of the United States, as applicable. 10.9 Venue The Parties hereby submit to the exclusive jurisdiction of the federal courts for the Northern District of the State of California; provided, however, that if such federal courts sitting in the Northern District of the State of California refuse jurisdiction, the Parties agree to the exclusive jurisdiction of the state courts sitting in the County of Santa Clara, State of California. 10.10 Nature of Relationship The duties, obligations and liabilities of the Parties are intended to be several and not joint or collective. The Agreement shall not be interpreted or construed to create an association, joint venture, fiduciary relationship or partnership between Seller and Buyer or to impose any partnership obligation or liability or any trust or agency obligation or relationship upon either Party. Seller and Buyer shall not have any right, power or authority to enter into any agreement or undertaking for, or act on behalf of, or act as or be an agent or representative of or otherwise bind the other Party. 10.11 Good Faith and Fair Dealing; Reasonableness The Parties agree to act reasonably and in accordance with the principles of good faith and fair dealing in the performance of this Agreement. Unless expressly provided otherwise in this Agreement, (i) wherever the Agreement requires the consent, approval or similar action by a Party, such consent, approval or similar action shall not be unreasonably withheld or delayed, and (ii) wherever the Agreement gives a Party a right to determine, require, specify or take similar action with respect to matters, such determination, requirement, specification or similar action shall be reasonable. 10.12 Severability 52 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Should any provision of the Agreement be or become void, illegal or unenforceable, the validity or enforceability of the other provisions of the Agreement shall not be affected and shall continue in full force and effect. The Parties will, however, use their best endeavors to agree on the replacement of the void, illegal, or unenforceable provision(s) with legally acceptable clauses which correspond as closely as possible to the sense and purpose of the affected provision. 10.13 Confidentiality (a) The Buyer is a public agency subject to the disclosure requirements of the California Public Records Act (“CPRA”). If Seller’s proprietary information is contained in documents or information submitted to Buyer, and Seller claims that such information falls within one or more CPRA exemptions, Seller must clearly mark such information “CONFIDENTIAL AND PROPRIETARY,” and identify the specific lines containing the information. Buyer shall disclose such information to third parties only to the extent required by California law (including, without limitation, the California Constitution, the California Public Records Act and the Brown Act). (b) In the event of a request for such information, the Buyer will make best efforts to provide notice to Seller prior to such disclosure. If Seller contends that any documents are exempt from the CPRA and wishes to prevent disclosure, it is required to obtain a protective order, injunctive relief or other appropriate remedy from a court of law in Santa Clara County before the Buyer’s deadline for responding to the CPRA request. If Seller fails to obtain such remedy within Buyer’s deadline for responding to the CPRA request, Buyer may disclose the requested information. Seller further agrees that Buyer shall have no liability to Seller arising out of any disclosure by Buyer of any Seller information. (c) Notwithstanding the foregoing, either Party may disclose this Agreement to its representatives (or any affiliate), the Northern California Power Agency or its representatives, or to any Lender(s) or potential Lender(s) or Plant investors or their representatives; provided that prior to such disclosure, the recipient shall agree, in writing, to keep the material confidential under terms no less stringent than as set forth in this Section 10.13. Buyer also shall be permitted to disclose this Agreement and related information to the City Council of Palo Alto for the express purpose of obtaining approval to execute this Agreement; provided that in connection with 53 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 such disclosure Buyer shall only disclose such information to the extent required by California law (including, without limitation, the California Constitution, the California Public Records Act and the Brown Act). Each Party shall be bound by its obligations of confidentiality hereunder for a period of two (2) years from the expiration or earlier termination of this Agreement . (d) Notwithstanding anything to the contrary in this Section 10.13, nothing shall restrict any Party from using or disclosing confidential information in any manner it chooses which (i) is or becomes generally available to the public other than as a result of a disclosure directly or indirectly by the disclosing Party or its representative; (ii) was within the using or disclosing Party’s possession prior to it being furnished hereunder, provided that such information is not subject to another confidentiality agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, any other party with respect to such information; (iii) is rightfully obtained by a Party from third parties authorized to make such disclosure without restriction; or (iv) is legally required to be disclosed by judicial or other governmental action as determined by such Party’s attorney acting in good faith (including, but not limited to, the California Constitution, the California Public Records Act and the Brown Act). 10.14 Cooperation The Parties agree to reasonably cooperate with each other in the implementation and performance of the Agreement. Such duty to cooperate shall not require either Party to act in a manner inconsistent with its rights under the Agreement. 10.15 Mobile Sierra Doctrine Notwithstanding any other provision of this Agreement, the Parties intend that the standard of review for changes to any rate, charge, classification, term or condition of this Agreement proposed by a Party shall be the “Mobile-Sierra public interest” standard of review, as stated by the United States Supreme Court in Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish County, 554 U.S. 1164 (2008) and consistent with the order of the Supreme Court in NRG Power Marketing LLC, et al. v. Maine Public Utilities Commission et al., No. 08-674, 130 S.Ct 693 (2010) (“NRG Order”). Any modifications proposed by a non-contracting third party or FERC acting sua sponte shall be the most stringent standard permissible under applicable law. 54 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 10.16 Counterparts This Agreement may be executed in two or more counterparts and by different Parties on separate counterparts, all of which shall be considered one and the same agreement and each of, which shall be deemed an original. 10.17 Immunity Waiver Each Party will comply with all applicable lawful federal, state and local laws, ordinances, resolutions, rate schedules, rules and regulations that may affect its rights and obligations under this Agreement. Buyer warrants and covenants that with respect to its contractual obligations hereunder and performance thereof, it will not claim immunity on the grounds of sovereignty or similar grounds with respect to itself or its revenues or assets from (a) suit, or (b) jurisdiction of court (including a court located outside the jurisdiction of its organization). 10.18 Debt Liability Disclaimer For the avoidance of doubt, the Buyer, including, but not limited to, any source of funding for Buyer, any General Fund or any special self insurance program, is not liable for any debts, liabilities, settlements, liens, or any other obligations of the Seller or its heirs, successors or assigns. In relation to this Agreement, the Buyer shall not be liable for and shall be held harmless and indemnified by Seller for (a) any claims or damages arising out of any other contract to which Seller is a party, and (b), subject to 7.5(b), any tortious action or inaction, negligent error in judgment, act of negligence, intentional tort, negligent mistakes or other acts taken or not taken by the Seller, its employees, agents, servants, invitees, guests or anyone acting in concert with or on behalf of the Seller. 10.19 No Implied Waiver of Breach The waiver of any breach of a specific provision of this Agreement does not constitute a waiver of any other breach of that term or any other term of this Agreement. [signature page follows] 55 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written. 56 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 SELLER EE KETTLEMAN LAND LLC By: Name: Title: Date: By: Name: Title: Date: BUYER CITY OF PALO ALTO APPROVAL AS TO FORM: By: Name: Title: Senior Deputy City Attorney Date: CITY OF PALO ALTO APPROVAL BY ADMINISTRATIVE SERVICES DIRECTOR By: Name: Lalo Perez Title: Administrative Services Director Date: CITY OF PALO ALTO APPROVAL BY UTILITIES DIRECTOR By: Name: Valerie Fong Title: Utilities Director Date: CITY OF PALO ALTO APPROVAL BY CITY MANAGER By: Name: James Keene Title: City Manager Date: CITY OF PALO ALTO APPROVAL BY MAYOR: By: Name: Title: Mayor Date: 57 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 EXHIBIT A-1 PLANT SITE DESCRIPTION “Real property in the unincorporated area of the County of Kings, State of California, described as follows: THE WEST HALF OF THE NORTHEAST QUARTER, THE NORTH HALF OF THE SOUTHWEST QUARTER, THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER, THE SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER, THE SOUTHWEST QUARTER OF THE SOUTHEAST QUARTER, THE NORTHEAST QUARTER OF THE NORTHEAST QUARTER AND THAT PART OF THE NORTHWEST QUARTER LYING SOUTH AND THE EAST OF THE SWAMP AND OVERFLOW LINE IN SECTION 32, TOWNSHIP 21 SOUTH, RANGE 19 EAST, MOUNT DIABLO BASE AND MERIDIAN, IN THE COUNTY OF KINGS, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL PLAT THEREOF. EXCEPTING ALL OIL, GAS AND OTHER HYDROCARBONS AND MINERALS IN AND UNDER ALL OF THE SAID REAL PROPERTY, EXCEPT THE SAID WATER WELL PARCELS, AND FIFTY PER CENT (50%) OF ALL OIL, GAS, OTHER HYDROCARBONS AND MINERALS IN AND UNDER THE SAID WATER WELL PARCELS. THERE IS HEREBY EXPRESSLY RESERVED UNTO THE GRANTOR ALL SAID OIL, GAS, OTHER HYDROCARBONS AND MINERALS IN AND UNDER THE SAID REAL PROPERTY, EXCEPTING THE WATER WELL PARCELS; AND THE SAID GRANTOR SHALL AT ALL TIMES HAVE THE RIGHT TO ENTER ON THE SAID REAL PROPERTY, EXCEPTING THE SAID WATER WELL PARCELS, AND TAKE ALL OF THE USUAL, NECESSARY AND CONVENIENT MEANS TO EXPLORE, TEST, SURVEY AND DRILL FOR, PRODUCE, EXTRACT, AND TAKE OIL, GAS, ASPHALTUM AND OTHER HYDROCARBONS, AND ALL MINERALS OF EVERY KIND FROM, AND TO STORE SAME UPON, THE SAID REAL PROPERTY, EXCEPTING SAID WATER WELL PARCELS, AND ALSO THE RIGHT TO ENTER UPON SAID REAL PROPERTY, EXCEPTING THE SAID WATER WELL PARCELS, FOR THE SAID PURPOSES, AND TO CONSTRUCT, USE, MAINTAIN, ERECT, REPAIR, REPLACE AND REMOVE THEREON AND THEREFROM, ALL PIPE LINES, TELEPHONE AND TELEGRAPH LINES, TANKS, MACHINERY, BUILDINGS AND OTHER STRUCTURES AND EQUIPMENT, EXCEPTING THE SAID WATER WELL PARCELS, PROVIDED, HOWEVER, THAT THE GRANTOR SHALL NOT HAVE THE RIGHT TO CONSTRUCT, USE, OR MAINTAIN ON THE SAID REAL PROPERTY, AN OIL PIPE LINE PUMPING STATION, REFINERY OR GASOLINE ABSORPTION PLANT; AND THE GRANTOR SHALL ALSO 58 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 HAVE, AND THERE IS HEREBY RESERVED TO IT, RIGHTS-OF-WAY FOR PASSAGE OVER, UPON AND ACROSS, AND INGRESS TO AND FROM ALL OF SAID REAL PROPERTY, FOR ANY AND ALL OF THE PURPOSE MENTIONED IN THIS PARAGRAPH 3. SUCH OIL BOOSTER PLANTS AS ARE REQUIRED MAY BE CONSTRUCTED, MAINTAINED AND OPERATED ON SAID REAL PROPERTY AT LOCATIONS PLACED SO AS TO INTERFERE AS LITTLE AS REASONABLY POSSIBLE WITH GRANTEE'S OPERATIONS THEREON. THE EXERCISE OF ANY OF THE SAID RIGHTS BY THE GRANTOR SHALL BE CONSIDERED PART OF ITS "OPERATIONS FOR THE PRODUCTION OF OIL"; BUT THIS SENTENCE SHALL BE WITHOUT PREJUDICE TO THE GENERALITY OF SAID EXPRESSION, RESERVED IN DEED FROM BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION RECORDED JUNE 18, 1937 IN BOOK 169, PAGE 500 OF OFFICIAL RECORDS. ALSO EXCEPTING AN UNDIVIDED ONE-HALF INTEREST IN AND TO ALL OF THE OIL, GAS AND OTHER MINERALS AND MINERAL RIGHTS OF WHATEVER NATURE AND DESCRIPTION IN OR UNDER SAID LANDS, RESERVED IN DEED FROM SECURITY COMPANY RECORDED APRIL 12, 1947 IN BOOK 372, PAGE 158 OF OFFICIAL RECORDS. ALSO EXCEPT THOSE PORTIONS DESCRIBED IN FINAL ORDER OF CONDEMNATION RECORDED JANUARY 08, 1970 IN BOOK 947, PAGE 48 OF OFFICIAL RECORDS. ALSO EXCEPTING THE FOLLOWING:
 1. ALL GROUND WATER RIGHT APPURTENANT TO SAID LAND, OR PART AND PARCEL THEREOF, BOTH APPROPRIATIVE AND OVER LYING CORRELATIVE, TOGETHER WITH THE RIGHT TO ENTER UPON SAID LAND AND DRILL WELLS THEREON AND PRODUCE AND TAKE THEREFROM GROUND WATER UNDERLYING SAID LAND AND TO TRANSPORT SAID WATER TO OTHER LANDS WHETHER OVERLYING THE SAME UNDERGROUND BODY OF WATER UNDERLYING SAID LAND OR NOT, AND TOGETHER WITH AN EASEMENT FOR A RIGHT OF WAY, IN GROSS, TO LAY, CONSTRUCT, OPERATE, MAINTAIN, REPAIR, REPLACE, AND REMOVE ALL PIPE LINES, PUMPS, AND OTHER FACILITIES NECESSARY OR CONVENIENT FOR ANY AND ALL SUCH PURPOSES, AND INCIDENTALLY THERETO TO CONSTRUCT ROADS AND TO ENTER UPON THE LAND WITH VEHICLES AND EQUIPMENT, ALL AS MAY BE CONVENIENT FOR THE REASONABLE EXERCISE OF THE RIGHTS AND EASEMENT HEREIN RESERVED. WITHOUT LIMITING THE SCOPE OF THE EASEMENT AND RIGHTS HEREIN RESERVED, SUCH EASEMENT AND RIGHT-OF- WAY SHALL BE AT LEAST THIRTY (30) FEET IN WIDTH ALONG THE PRESENTLY EXISTING WATER PIPE LINE AS SHOWN IN EXHIBIT B TO THE WATER AGREEMENT (HEREINAFTER DEFINED) AND SHALL ALSO ENCOMPASS A 59 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 CIRCLE OF AT LEAST ONE HUNDRED (100) FEET IN RADIUS AROUND EACH OF THE PRESENTLY EXISTING WELL SITES AS SHOWN ON EXHIBIT B TO THE WATER AGREEMENT. 2. ALL OIL, GAS AND OTHER HYDROCARBONS; (II) GEOTHERMAL RESOURCES AS DEFINED IN § 6903 OF THE CALIFORNIA PUBLIC RESOURCES CODE; AND (III) ALL OTHER MINERALS, WHETHER SIMILAR TO THOSE HEREIN SPECIFIED OR NOT, WITHIN OR THAT MAY BE PRODUCED FROM SAID LAND. 3. THE RIGHT FROM TIME TO TIME TO ENTER UPON THE SURFACE OF SAID LAND (I) FOR THE PURPOSE OF EXPLORATION FOR OIL, GAS, AND OTHER HYDROCARBONS AND OTHER MINERALS (INCLUDING THE RIGHT TO CONDUCT GEOPHYSICAL TESTS AND STUDIES); (II) TO DRILL AND MAINTAIN OIL AND GAS WELLS INTO AND THROUGH THE SURFACE OF THE LAND; (III) TO PRODUCE, EJECT, STORE AND REMOVE FROM AND THROUGH SUCH WELLS OR WORKS OIL, GAS, WATER, AND OTHER SUBSTANCES INCIDENTAL TO EXPLOITATION OF OIL, GAS AND OTHER MINERALS; AND (IV) TO CONSTRUCT AND MAINTAIN ON THE SURFACE OF SAID LAND SUCH FACILITIES AS MAY BE REASONABLY NECESSARY OR CONVENIENT FOR THE DISCOVERY OR EXPLOITATION OF OIL, GAS, AND OTHER HYDROCARBONS AND MINERALS (WHETHER OR NOT SUCH OIL, GAS, AND OTHER HYDROCARBONS ARE RESERVED HEREIN), INCLUDING, WITHOUT LIMITATION, THE RIGHT TO CONSTRUCT FACILITIES INCIDENTAL TO EXTRAORDINARY RECOVERY METHODS. THE RIGHTS HEREIN EXCEPTED AND RESERVED SHALL INCLUDE, WITHOUT LIMITATION, AN EASEMENT AND RIGHT OF WAY OVER AND ACROSS THE LAND HEREINABOVE DESCRIBED FOR NECESSARY OR CONVENIENT ROADS, PIPE LINES, POWER, DRILLING RIGS, PRODUCTION EQUIPMENT AND FACILITIES, TELEPHONE AND TELEGRAPH LINES. THE EXERCISE OF THE RIGHT HEREIN EXCEPTED AND RESERVED SHALL BE WITHOUT COST OR CHARGE TO GRANTOR, OR ITS SUCCESSORS AND ASSIGNS, EXCEPT AS HEREINAFTER EXPRESSLY PROVIDED. GRANTOR SHALL NOT, HOWEVER, IN THE EXERCISE OF THE RIGHTS HEREIN RESERVED, DAMAGE OR DISTURB BUILDINGS OR PERMANENT STRUCTURES ON SAID LAND. GRANTOR OR ITS SUCCESSORS AND ASSIGNS SHALL, WHENEVER POSSIBLE, LOCATE ANY AND ALL PIPE LINES, FUEL OR ELECTRICAL LINES, AND RIGHTS-OF-WAY ALONG THEN EXISTING ROADWAYS, CANAL BANKS OR OTHER NONFARM AREAS SO AS NOT TO INTERFERE UNREASONABLY WITH THE SURFACE USE OF SAID LAND FOR FARMING. ANY PERMANENT PIPE LINES NOT LOCATED OR ALIGNED ALONG THEN EXISTING ROADWAYS, CANAL BANKS OR IN OTHER UNCULTIVATED AREAS SHALL BE LOCATED BELOW PLOW DEPTH. UPON COMPLETION OF EXPLORATION OR PRODUCTION OPERATIONS, AS THE CASE MAY BE, 60 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 GRANTOR, OR US SUCCESSORS AND ASSIGNS, SHALL RESTORE THE SURFACE AS NEARLY AS REASONABLY PRACTICABLE TO ITS CONDITION PRIOR TO THE COMMENCEMENT OF ANY OF THE OPERATIONS OF GRANTOR OR ITS SUCCESSORS AND ASSIGNS, ALL RESERVED AND EXCEPTED IN DEEDS RECORDED JANUARY 31, 1980 IN BOOK 1167, PAGE 944 AS INSTRUMENT NO. 80-1374; JANUARY 31, 1980 IN BOOK 1167, PAGE 965 AS INSTRUMENT NO. 80-1375; JANUARY 31, 1980 IN BOOK 1168, PAGE 1 AS INSTRUMENT NO. 80- 1376; JANUARY 31, 1980 IN BOOK 1168, PAGE 22 AS INSTRUMENT NO. 80-1377; JANUARY 31, 1980 IN BOOK 1168, PAGE 43 AS INSTRUMENT NO. 80-1378; JANUARY 31, 1980 IN BOOK 1168, PAGE 64 AS INSTRUMENT NO. 80-1379; JANUARY 31, 1980 IN BOOK 1168, PAGE 85 AS INSTRUMENT NO. 80-1380; JANUARY 31, 1980 IN BOOK 1168, PAGE 128 AS INSTRUMENT NO. 80-1382 AND JANUARY 31, 1980 IN BOOK 1168 PAGE 150 AS INSTRUMENT NO. 80-1383, ALL OF OFFICIAL RECORDS. ALSO EXCEPT THAT PORTION CONVEYED TO THE STATE OF CALIFORNIA BY GRANT DEED RECORDED JUNE 25, 2001 AS INSTRUMENT NO. 01-12105 OF OFFICIAL RECORDS. ALSO EXCEPT THAT PORTION CONVEYED TO THE STATE OF CALIFORNIA BY GRANT DEED RECORDED SEPTEMBER 16, 2004 AS INSTRUMENT NO. 04-27752 OF OFFICIAL RECORDS. APN: 036-210-030-000” 61 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 EXHIBIT A-2 SITE DRAWINGS Seller shall provide to Buyer final Site Drawings prior to the Commercial Operation Date. 62 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 EXHIBIT B Environmental Attribute Transfer from Seller to Buyer Participation in the Western Renewable Energy Generation Information System. Seller shall, at its sole expense take all actions and execute all documents or instruments necessary to ensure that all WREGIS Certificates associated with all Renewable Energy Credits corresponding to all delivered Energy are issued and tracked for purposes of satisfying the applicable requirements of the California Renewables Portfolio Standard and transferred in a timely manner to Buyer for Buyer’s sole benefit. Seller shall comply with all applicable laws, including, without limitation, the WREGIS Operating Rules, regarding the certification and transfer of such WREGIS Certificates to Buyer and Buyer shall be given sole title to all such WREGIS Certificates. Seller shall be deemed to have satisfied the warranty in this EXHIBIT B, paragraph (h) provided that Seller fulfills its obligations under this EXHIBIT B, paragraphs (a) through (h) below. In addition: (a) Prior to the initial Energy delivery date, Seller shall register the Plant with WREGIS and establish an account with WREGIS (“Seller’s WREGIS Account”), which Seller shall maintain until the end of the Term. Seller shall transfer the WREGIS Certificates using “Forward Certificate Transfers” (as described in the WREGIS Operating Rules) from Seller’s WREGIS Account to the WREGIS account(s) of Buyer or the account(s) of a designee that Buyer identifies by Notice to Seller (“Buyer’s WREGIS Account”). Seller shall be responsible for all expenses associated with registering the Plant with WREGIS, establishing and maintaining Seller’s WREGIS Account, paying WREGIS Certificate issuance and transfer fees, and transferring WREGIS Certificates from Seller’s WREGIS Account to Buyer’s WREGIS Account. (b) Seller shall cause Forward Certificate Transfers to occur on a monthly basis in accordance with the certification procedure established by the WREGIS Operating Rules. Since WREGIS Certificates will only be created for whole MWh amounts of Energy generated, any fractional MWh amounts (i.e., kWh) will be carried forward until sufficient generation is accumulated for the creation of a WREGIS Certificate. (c) Seller shall, at its sole expense, ensure that the WREGIS Certificates for a given calendar month correspond with the delivered Energy for such calendar month as evidenced by the Plant’s metered data. (d) Due to the ninety (90) day delay in the creation of WREGIS Certificates relative to the timing of invoice payment under Article 3, Buyer shall make an invoice payment for a given month in accordance Article 3 before the WREGIS Certificates for such month are formally transferred to Buyer in accordance with the WREGIS Operating Rules and this EXHIBIT B. 63 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Notwithstanding this delay, Buyer shall have all right and title to all such WREGIS Certificates upon payment to Seller in accordance with Article 3. (e) A “WREGIS Certificate Deficit” means any deficit or shortfall in WREGIS Certificates delivered to Buyer for a calendar month as compared to the delivered Energy for the same calendar month (“Deficient Month”), after taking into account applicable delays in the issuance of WREGIS Certificates referenced in the prior paragraph or otherwise arising under WREGIS Operating Rules. If any WREGIS Certificate Deficit is caused, or the result of any action or inaction, by Seller, then Seller shall take all actions reasonably necessary to remedy such circumstances and failure to do so shall be a breach hereunder by Seller. (f) Without limiting Seller’s obligations under this EXHIBIT B, to the extent a WREGIS Certificate Deficit is caused by an error or omission of WREGIS, the Parties shall cooperate in good faith to cause WREGIS to correct its error or omission. (g) If WREGIS changes the WREGIS Operating Rules after the Effective Date or applies the WREGIS Operating Rules in a manner inconsistent with this EXHIBIT B after the Effective Date, the Parties promptly shall modify this EXHIBIT B as reasonably required (i) to cause and enable Seller to transfer to Buyer’s WREGIS Account a quantity of WREGIS Certificates for each given calendar month that corresponds to the delivered Energy in the same calendar month or (ii) as may otherwise be reasonably appropriate to address such inconsistency. (h) Seller warrants that all necessary steps to allow the renewable energy credits transferred to Buyer to be tracked in the Western Renewable Energy Generation Information System will be taken prior to the first delivery under this Agreement. 64 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 EXHIBIT C INSURANCE COVERAGES At its own expense, Seller shall secure and maintain during the Term the following insurance with the coverage amounts indicated for occurrences during and arising out of Seller’s performance of this Agreement. Such insurance shall be placed with responsible and reputable insurance companies in compliance with Requirements of Laws applicable to Seller. (a) Workers’ Compensation/Employer’s Liability. Seller shall maintain Workers’ Compensation Insurance and Employer’s Liability Insurance which comply with Requirements of Laws applicable to Seller. (b) Automobile Liability. Seller shall maintain Automobile Liability Insurance in compliance with Requirements of Laws applicable to Seller, including coverage for owned, non-owned and hired automobiles for both bodily injury (including death) and property damage, including automobile liability contractual endorsement and uninsured/underinsured motorist protection endorsements. (c) Third Party Liability. Seller shall maintain third party liability insurance in compliance with Requirements of Laws applicable to Seller on a project-specific basis covering against legal responsibility to others as a result of bodily injury, property damage and personal injury arising from the operation and maintenance of the Plant. Such policy shall be written with a limit of liability not less than $10,000,000 and a deductible not to exceed $10,000. Such liability may be in any combination of primary and excess/umbrella. Coverage shall include, but not be limited to, premises/operations, explosion, collapse, underground hazards, broad form property damage and personal injury liability. Such coverage shall not contain exclusions for punitive or exemplary damages. (d) Property Insurance. Seller shall maintain third party property insurance on a project-specific basis covering cost of repairing Plant and or interconnection equipment to operational condition. Such policy shall be written with coverage sufficient to replace and rebuild the Plant. Coverage shall include, but not be limited to, fire, storm damage, equipment failure, damage to equipment precluding operation under prudent utility practice, premises/operations, explosion, collapse, underground hazards, broad form property damage. Upon the request from Buyer, Seller shall provide Buyer with applicable insurance certificates confirming the insurance coverages required above. 65 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 EXHIBIT D SCHEDULING PROTOCOLS Following the Effective Date, the Parties will agree on Exhibit D (Scheduling Protocols), which shall be consistent with the CAISO Tariff, any applicable PIRP rules and procedures, customary industry practice, and the Plant’s operational parameters (including as to levels and timing of curtailments), such agreement not to be unreasonably withheld by either Party. 66 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 EXHIBIT E-1 Form of Monthly Report Monthly Progress Report [Project Name] [Month] Pursuant to Section 4.3(c) of the [Project Name] PPA, [Project Entity] provides the following status updates on the progress of [Project Name] Project, whose guaranteed Commercial Operation Date is June 1, 2015 [Section 4.3(b)(iv)]. For additional questions on this progress report, please contact [Name] at [contact information]. PPA Section Milestone Discussion 4.3(b)(i) By the Effective Date, Seller shall have obtained Site Control. Current status [details] Updates since last Monthly Progress Report [details] 4.3(b)(ii) By August 31, 2014, Seller shall have obtained all Permits necessary, in final form, to commence construction of the Plant. Current status [details] Updates since last Monthly Progress Report [details] 4.3(b)(iii) By December 1, 2014, Seller shall have commenced construction of the Plant. Current status [details] Updates since last Monthly Progress Report [details] 4.3(b)(iv) By June 1, 2015, Seller shall achieve Commercial Operation Current status [details] Updates since last Monthly Progress Report 67 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 EXHIBIT E-2 COD CERTIFICATION Commercial Operation Date: [______] This certification (“Certification”) of Commercial Operation is delivered by ___________ (“Seller”) to The City of Palo Alto (“Buyer”) in accordance with the terms of that certain Power Purchase Agreement dated as of the Execution Date (“Agreement”) by and between Seller and Buyer. All capitalized terms used in this Certification but not otherwise defined herein shall have the respective meanings assigned to such terms in the Agreement. Seller hereby certifies and represents to Buyer the following: 1. The Plant equipment representing _________ MW AC of Initial Capacity has been installed, tested and is capable of generating energy in accordance with the manufacturer’s specifications. 2. The Plant is substantially complete and capable of delivering Energy as described in the Agreement. 3. The CAISO has provided notification of Commercial Operation in accordance with the CAISO Tariff, and documentation of such notification is attached hereto or shall be provided to Buyer promptly upon Seller’s receipt thereof. EXECUTED by SELLER this ________ day of _____________, 20__. By: _________________________________ Name: ______________________________ Title: ______________________________ The undersigned, a licensed professional engineer, hereby certifies that, to its current knowledge, the foregoing is substantially true and correct. [LICENSED PROFESSIONAL ENGINEER] By: _________________________________ 68 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 Name: ______________________________ Title: ______________________________ 69 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 EXHIBIT F-1 FORM OF LETTER OF CREDIT If Seller elects to deliver Development Assurance or Performance Assurance in the form of a letter of credit pursuant to Section 9.1 of this Agreement, such letter of credit shall be a standby letter of credit in a form which is customary in the U.S. banking industry and reasonably acceptable to Buyer (such acceptance not to be unreasonably withheld). 70 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 EXHIBIT F-2 FORM OF ESCROW AGREEMENT If Seller elects to deliver Development Assurance or Performance Assurance in the form of an escrow agreement pursuant to Section 9.1 of this Agreement, such escrow agreement shall be in a form which is customary in the U.S. banking industry and reasonably acceptable to both Parties (such acceptance not to be unreasonably withheld by either Party). 71 AMENDED AND RESTATED POWER PURCHASE AGREEMENT [v. 3-2014] HOU:3428558.6 EXHIBIT G EXPECTED ANNUAL NET ENERGY PRODUCTION Contract Year Expected Annual Net Energy Production (in MWh) 1 53,454 2 53,080 3 52,708 4 52,339 5 51,973 6 51,609 7 51,248 8 50,889 9 50,533 10 50,179 11 49,828 12 49,479 13 49,133 14 48,789 15 48,447 16 48,108 17 47,771 18 47,437 19 47,105 20 46,775 21 46,448 22 46,123 23 45,800 24 45,479 25 45,161 26 44,845 27 44,531 28 44,219 29 43,910 30 43,602 Note: The above amounts for Expected Annual Net Energy Production assume an Initial Capacity of 20 MW AC. If the Initial Capacity of the Plant as of the Commercial Operation Date is greater or less than 20 MW AC, then the amounts above shall be proportionally adjusted. AK Draft 06/02/14 Redacted Version 000046.5 HOU:3443209.1 ASSET PURCHASE AGREEMENT by and among TP-CA SOUTH LLC and PRB MEMBER, LLC, as Owners, BRANNON SOLAR, LLC, as Seller and CRE-KETTLEMAN HOLDCO LLC as Buyer ___________________________________ Dated as of June [12], 2014 ___________________________________ PURCHASED ASSET Power Purchase Agreement dated November 5, 2012 by and between Seller and the City of Palo Alto ____________________________________ ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA TABLE OF CONTENTS -i- HOU:3443209.1 ARTICLE I DEFINITIONS .......................................................................................................... 1 Section 1.1 Specific Definitions ........................................................................................ 1 Section 1.2 Construction ................................................................................................... 8 ARTICLE II PURCHASE AND SALE OF PURCHASED ASSET ............................................ 9 Section 2.1 Purchase and Sale ........................................................................................... 9 Section 2.2 Purchase Price .............................................................................................. 10 Section 2.3 Further Assurances ....................................................................................... 10 Section 2.4 Transfer Taxes .............................................................................................. 10 ARTICLE III CLOSING ................................................................................................................ 10 Section 3.1 Closing Date ................................................................................................. 10 Section 3.2 Conditions Precedent to the Obligations of Buyer ....................................... 10 Section 3.3 Conditions Precedent to the Obligations of Seller ....................................... 11 Section 3.4 Buyer’s Closing Deliveries .......................................................................... 11 Section 3.5 Seller’s Closing Deliveries ........................................................................... 12 ARTICLE IV COVENANTS OF SELLER ................................................................................... 14 Section 4.1 Maintenance of Original PPA ...................................................................... 14 ARTICLE V REPRESENTATIONS AND WARRANTIES OF OWNERS AND SELLER ................................................................................................................... 14 Section 5.1 Organization, Authority, Validity and Non-Contravention .......................... 15 Section 5.2 Purchased Asset ............................................................................................ 15 Section 5.3 No Adverse Order or Injunctions ................................................................. 15 Section 5.4 Solvency ....................................................................................................... 14 Section 5.5 Litigation ...................................................................................................... 16 Section 5.6 No Conflicts ................................................................................................. 16 Section 5.7 Third Party Consents .................................................................................... 16 Section 5.8 Original PPA ................................................................................................ 16 Section 5.9 Brokers ......................................................................................................... 17 Section 5.10 Due Diligence ............................................................................................... 17 Section 5.11 Disclosure ..................................................................................................... 17 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER ................................ 17 Section 6.1 Organization, Authority, Validity and Non-Contravention .......................... 17 Section 6.2 No Adverse Order or Injunctions ................................................................. 18 Section 6.3 Solvency ....................................................................................................... 18 ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA TABLE OF CONTENTS (continued) Page -ii- HOU:3443209.1 Section 6.4 Third Party Consents .................................................................................... 18 ARTICLE VII CONFIDENTIAL INFORMATION ..................................................................... 18 Section 7.1 Confidential Information .............................................................................. 18 Section 7.2 Public Announcements ................................................................................. 19 ARTICLE VIII FURTHER ASSURANCES .................................................................................... 19 Section 8.1 Further Assurances ....................................................................................... 19 ARTICLE IX INDEMNIFICATION ............................................................................................. 19 Section 9.1 Indemnity by Seller ...................................................................................... 19 Section 9.2 Indemnity by Buyer Parent........................................................................... 20 Section 9.3 Claims for Indemnification .......................................................................... 20 Section 9.4 Response Notice; Uncontested Claims ......................................................... 20 Section 9.5 Survival ........................................................................................................ 21 Section 9.6 Limitation of Liability .................................................................................. 21 Section 9.7 Exclusive Remedy ........................................................................................ 21 Section 9.8 Third Person Claims ..................................................................................... 21 Section 9.10 Subrogation .................................................................................................. 23 Section 9.11 Mitigation ..................................................................................................... 23 ARTICLE X TERMINATION ..................................................................................................... 23 Section 10.1 Termination by Mutual Consent................................................................... 23 Section 10.2 Termination by Seller or Buyer .................................................................... 23 Section 10.3 Effect of Termination; Liability and Fees .................................................... 24 Section 10.4 Post-Termination Obligations ...................................................................... 24 ARTICLE XI NOTICES ................................................................................................................. 24 Section 11.1 Notices .......................................................................................................... 24 ARTICLE XII MISCELLANEOUS ................................................................................................ 25 Section 12.1 Successors and Assigns ................................................................................ 25 Section 1.2 Further Assurances ....................................................................................... 25 Section 12.3 Limitation of Liability .................................................................................. 25 Section 12.4 Waiver .......................................................................................................... 25 Section 12.5 Entire Agreement; Amendments; Attachments ............................................ 26 ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA TABLE OF CONTENTS (continued) Page -iii- HOU:3443209.1 Section 12.6 Severability................................................................................................... 26 Section 12.7 Governing Law; Jurisdiction ........................................................................ 26 Section 12.8 WAIVER OF JURY TRIAL ........................................................................ 26 Section 12.9 Section Headings .......................................................................................... 26 Section 12.10 Counterparts ................................................................................................. 26 Section 12.11 No Third Party Beneficiaries ........................................................................ 26 Section 12.12 No Joint Venture .......................................................................................... 26 Section 12.13 Expenses ....................................................................................................... 26 Section 12.14 Specific Performance; Remedies .................................................................. 26 EXHIBITS - To be attached EXHIBIT A Form of PPA Assignment EXHIBIT B Form of PPA Amendment EXHIBIT C Copy of Seller’s Standby Letter of Credit EXHIBIT D Copy of Substitute PPA Collateral EXHIBIT E Form of Consent to Assignment Agreement SCHEDULES [TO BE ADDED] HOU:3443209.1 ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of June [12] , 2014] (“Effective Date”), is made by and between TP-CA SOUTH LLC, a Delaware limited liability company (“TP-CA South”) and PRB MEMBER, LLC, a Delaware limited liability company (“PRB Member”) (PRB Member together with TP-CA South, “Owners”), BRANNON SOLAR, LLC, a Delaware limited liability company (“Seller”) and CRE-KETTLEMAN HOLDCO LLC, a Delaware limited liability company (“Buyer”). Owners, Buyer and Seller are each a “Party” and collectively the “Parties”. RECITALS WHEREAS, Seller owns certain project development assets associated with the development of a photovoltaic solar power generation facility with an estimated aggregate nameplate capacity of approximately 20 MWAC to be located in Fresno County, California (the “Project”), including, but not limited to the Original PPA (defined below); WHEREAS, Owners collectively own, beneficially and of record, all of the issued and outstanding membership and other equity interests of any kind of the Seller (the “Membership Interests”); and WHEREAS, Seller desires to sell, and Buyer desires to purchase, on the terms and subject to the conditions of this Agreement, the Original PPA. NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein, and of the mutual promises and covenants contained in this Agreement, the adequacy and sufficiency of which are hereby acknowledged, the Parties agree as follows: ARTICLE I DEFINITIONS Section 1.1 Specific Definitions. As used in this Agreement, the following terms have the meaning ascribed to them below: “Action” means any litigation, cause of action, arbitration, audit, hearing, claim, suit, demand, charge, complaint, dispute, grievance, investigation or proceeding (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Authority, arbitrator or any other Person. “Affiliate” means, with respect to any Person, any other Person which directly or indirectly controls, is controlled by or is under common control with such Person. As used in this definition, “control” (including, its correlative meaning “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies of a Person, whether through the ownership of voting securities, or otherwise by agreement. “Agreement” has the meaning given to it in the Preamble. “Amended and Restated PPA” means the Amended and Restated Power Purchase Agreement, dated [May__, 2014] by and between the City of Palo Alto and CRE Holdco, amending and restating the Original PPA in substantially the form set forth hereto as Exhibit B. ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 2 HOU:3443209.1 “Applicable Law” means all federal, state, local, county or municipal laws, statutes, codes, acts, treaties, ordinances, orders, judgments, writs, decrees, injunctions, rules, regulations, and requirements (including all Environmental Laws) of all regulatory and other Governmental Authorities having jurisdiction over Seller, Buyer, or the Original PPA. “Assets” means, with respect to any Person, all right, title and interest of such Person in and to assets and rights of any kind, whether tangible or intangible, real or personal, including land and properties (or interests therein, including rights of way, leaseholds and easements), buildings, equipment, machinery, improvements, fixtures, Contracts, intellectual property, inventory, books and records, proprietary rights, return and other rights under or pursuant to all warranties, representations and guarantees, cash, accounts receivable, deposits and prepaid expenses. “Assumed Liabilities” means (i) the obligation of the Seller to pay discharge and perform when due any obligation of the Seller under the Original PPA from and after the Closing Date, and (ii) all Liabilities with respect to Taxes related to the Purchased Asset for any period or portions thereof beginning after the Closing Date, and “Assumed Liabilities” shall include no other Liability, any such other Liability constituting “Excluded Liabilities.” “Business Day” means a day other than Saturday and Sunday on which national banks are not required or authorized by law or executive order to close in the State of California. “Buyer” has the meaning given to it in the Preamble. “Buyer Ancillary Agreements” means all agreements, instruments and documents being or to be executed and delivered by Buyer or an Affiliate of Buyer under this Agreement or in connection herewith, including but not limited to the PPA Assignment. “Buyer Indemnified Party” has the meaning given to it in Section 9.1. “Buyer Parent” means Centaurus Renewable Energy LLC, a Delaware limited liability company. “Claim” has the meaning given to it in Section 9.3. “Claim Notice” has the meaning given to it in Section 9.3. “Claimed Amount” has the meaning given to it in Section 9.3. “Closing” has the meaning given to it in Section 3.1. “Closing Date” has the meaning given to it in Section 3.1. “Closing Payment” has the meaning given to it in Section 2.2(b). “Code” means the Internal Revenue Code of 1986, as amended. “Commercial Operation Date” has the meaning given to it in the Original PPA.. “Commercially Reasonable Efforts” means efforts which are reasonable with respect to the actions to be taken pursuant to this agreement and which do not require the performing Party to expend material funds or incur material obligations. ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 3 HOU:3443209.1 “Consent to Assignment” means the Consent to Assignment Agreement in substantially the form attached hereto as Exhibit E. “Contested Amount” has the meaning given to it in Section 9.4. “Contract” means any legally binding contract, agreement, license, sublicense, assignment, purchase agreement, indenture, lease, sublease, instrument of Indebtedness, security agreement, purchase order, sales order, offer to sell, option, right of first refusal, distribution agreement, right to discounts, maintenance agreement or undertaking or instrument of any kind, obligation or other arrangement or agreement, in each case whether oral or written, including any amendments and other modifications thereto. “Daily LD Amounts” has the meaning given to such term in the Amended and Restated PPA. “Disclosure Schedules” means the schedules listed on Schedule 1 delivered to Buyer on behalf of Seller on the Closing Date. “Effective Date” has the meaning given to it in the Preamble. “Employee Benefit Plan” means an “employee benefit plan” within the meaning of Section 3(3) of ERISA, any specified fringe benefit plan as defined in Section 6039D of the Code, and any other bonus, incentive compensation, deferred compensation, profit-sharing, stock-option, stock-appreciation right, stock-bonus, stock-purchase, employee-stock-ownership, savings, severance, change in control, supplemental unemployment, layoff, salary-continuation, retirement, pension, health, life-insurance, disability, accident, group-insurance, vacation, holiday, sick-leave, fringe-benefit, or welfare plan, and any other employee compensation or benefit plan, Contract (including any collective bargaining agreement), policy, practice, commitment or understanding (whether qualified or non-qualified, currently effective or terminated, written or unwritten) and any trust, escrow or other agreement related thereto. “Environmental Attributes” means any and all credits, benefits, emissions reductions, offsets and allowances of any kind (including all Renewable Energy Credits), howsoever entitled, attributable to the Project or the electric energy, capacity or other generator-based products produced therefrom, including (i) any avoided emissions of pollutants to the air, soil or water, such as sulfur oxides, nitrogen oxides and carbon monoxide, and any rights related thereto, (ii) any avoided emissions of methane, carbon dioxide and other “greenhouse gases” that have been determined by the United Nations Intergovernmental Panel on Climate Change or any other governmental, quasi- governmental or non-governmental agency or body to contribute to the actual or potential threat of altering the Earth’s climate by trapping heat in the atmosphere, and any rights related thereto, (iii) any reporting rights relating to the reduction of “greenhouse gases” under Section 1605(b) of the National Energy Policy Act of 1992 or under any other federal, state, local or foreign law, rule or regulation related to the reduction of air pollutants or “greenhouse gases” or the trading of emissions or emissions credits, including so-called “green tags” or “green certificates,” and (iv) any credits, certificates or similar instruments issued pursuant to a federal or state renewable portfolio standard or analogous program. “Environmental Laws” means all Applicable Laws (including rules, regulations, codes, plans, injunctions, judgments, orders, ordinances, decrees, rulings and charges thereunder) of Governmental Authorities (and all agencies thereof) concerning pollution or protection of health, natural resources, or the environment, including laws relating to emissions, discharges, releases, or threatened releases of Hazardous Materials into the air, surface water, ground water, lands or subsurface, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of Hazardous Materials, including the Comprehensive Environmental Response, Compensation and Liability ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 4 HOU:3443209.1 Act, the Resource Conservation and Recovery Act, the Clean Air Act, and the Clean Water Act, each as amended, and any analogous state or local laws and regulations. “Excluded Assets” means any and all Assets of the Seller other than the Purchased Asset, including but not limited to the following: (i) any equity purchase, equity option and equity incentive plans; (ii) all Contracts (other than the Original PPA), including but not limited to the Interconnection Agreement; the Purchase and Sale agreement and Escrow Instructions dated September 23, 2010, between Westlands Water District and Pacific Valley, LLC for purchase of APN# 011-050-09 and the Option and Access Agreement and Joint Escrow Instructions dated September 11, 2012 between John David Moitozo, Michelle Lynette Costa and Brannon Solar LLC, (iii) any Employee Benefit Plan, (iv) all refunds, rebates or similar payments of Taxes to the extent such Taxes were paid by or on behalf of Seller; (v) all Tax Returns of Seller; (vi) all bank accounts of Seller; (vii) any books and records related to the business of Seller that Seller is required by law to retain; (viii) Organizational Documents of the Seller; (ix) all rights of Seller under this Agreement, including the right to receive the Purchase Price hereunder; (x)any lease of or right to acquire any Real Property; (xi) Claims related specifically to the Excluded Assets or to the Excluded Liabilities; (xii) all intellectual property associated with the ownership and development of the Project or any Seller Asset including designs, drawings, financial analysis, business plans, economic and technical projections, (xiii) the Conditional Use Permit #3344 issued to Brannon Solar, LLC issued by Fresno County and (xiv) any other Assets described on the Disclosure Schedule. “Excluded Liabilities” means all Liabilities other than the Assumed Liabilities, including but not limited to the following: (i) all Liabilities with respect to Indebtedness or capital leases, including but not limited to Indebtedness evidenced by a note, bond, indenture or similar instrument, obligations under financing leases, Liabilities secured by and Lien on any property, or guarantee obligations; (ii) all Liabilities with respect to Taxes related to the Purchased Asset for any period or portion thereof ending (or deemed to end) on or before the Closing Date, with respect to Taxes of Seller whether before, on or after the Closing Date; (iii) all Liabilities relating to, or occurring or existing in connection with, or arising out of, the ownership and operation of the Excluded Assets, whether before, on or after, the Closing Date; (iv) all Liabilities arising out of or in connection with Claims for personal injuries, property damage or losses that involve the use of the Purchased Asset in connection with Seller’s business on or prior to the Closing Date; (v) all Liabilities relating to any Action relating to the Seller’s business; (vi) all Liabilities arising out of, relating to, or occurring or existing in connection with the employment, compensation, benefits, severance or termination of employment of employees of the Seller’s business; (vii) all Liabilities arising out of, relating to, or occurring or existing in connection with, any Employee Benefit Plan; (viii) all amounts, including accounts payable, due from the Seller’s business to third parties, and (ix) any liabilities associated with any release of Hazardous Material, violation of any Environmental Laws, or other environmental contamination on Seller Real Property . “GAAP” means the generally accepted accounting principles in the United States of America, as in effect from time to time, consistently applied. “Governmental Authority” means any (i) federal, state, county, municipal or local government (whether domestic or foreign) or any political subdivision thereof, (ii) any court or administrative tribunal, (iii) any other governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body, agency, bureau, taxing authority or entity of competent jurisdiction, or (iv) any arbitrator with authority to bind a Party at law. “Guaranteed COD” means the later of June 1, 2015 or that date plus any extensions, grace periods, extensions required or permitted due to the payment by the Seller of Daily LD Amounts pursuant ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 5 HOU:3443209.1 to Section 9.3 of the Amended and Restated PPA or such other date that is permitted pursuant to the Amended and Restated PPA or agreed to by the City of Palo Alto. “Hazardous Material” means (i) any petroleum, petroleum constituents or petroleum products, flammable, ignitable, corrosive or explosive substances or materials, radioactive materials, biohazardous materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs), (ii) any chemicals or other materials or substances which are defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants” or words of similar import under any Environmental Law, and (iii) any other chemical or other material or substance, exposure to which is prohibited, limited or regulated by any Governmental Authority under any Environmental Law. “Indebtedness” of any Person means: (i) all obligations of such Person for borrowed money or overdrafts or advances of any kind, and all accrued but unpaid redemption or prepayment premiums or penalties and any other fees and expenses paid to satisfy such obligations; (ii) all obligations of such Person evidenced by bonds, debentures, notes, mortgages, deeds of trust or similar instruments; (iii) obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business); (iv) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed; and (v) all obligations of such Person guaranteeing any Indebtedness or other obligation of any other Person in any manner, whether directly or indirectly. The Indebtedness of any Person shall include all accrued but unpaid interest and the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. “Indemnified Party” has the meaning given to it in Section 9.3. “Indemnifying Party” has the meaning given to it in Section 9.3. “Indemnity Period” has the meaning given to it in Section 9.5(b). “Interconnection Agreement” means that certain Small Generator Interconnection Agreement dated February 1, 2012, by and among the Seller, the California Independent System Operator Corporation, and the Interconnection Utility. “Interconnection Utility” means Pacific Gas and Electric Company. “Knowledge” means the actual knowledge, without requirement of investigation and the review of relevant documents, materials and other information in their possession, (a) as to the Owners and the Seller, any of the Persons listed in Schedule 1.1(a), and (b) as to Buyer, any of the Persons listed in Schedule 1.1 (b). “Liabilities” of any Person means any Indebtedness, obligation, duty or liability of any nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious, derivative, joint, several or secondary liability and including Tax), regardless of whether such Indebtedness, obligation, duty or liability would be required to be disclosed on ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 6 HOU:3443209.1 a balance sheet prepared in accordance with GAAP and regardless of whether such Indebtedness, obligation, duty or liability is immediately due and payable. “Lien” means any mortgage, deed of trust, lien (choate), pledge, charge, security interest, assessment, reservation, assignment, hypothecation, or any preference, priority or preferential arrangement of any kind or nature whatsoever including the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. “Losses” has the meaning given to it in Section 9.1. “Material Adverse Effect” means any event, occurrence, development, or change in the Original PPA, that, individually or in the aggregate, (a) is or could reasonably be expected to be materially adverse to the ability of Seller to consummate the Transactions and to satisfy all of Seller’s obligations pursuant to this Agreement, and (b) has or could reasonably be expected to have a material and adverse effect on the Original PPA. Provided, however, none of the following, either alone or in combination will constitute or be considered in determining if there has been, a Material Adverse Effect: any event, change, circumstance, or effect that does not affect the Original PPA in a materially disproportionate manner relative to other power purchases agreements in California resulting from or related to (i) a outbreak or escalation of war or major hostilities or acts of terrorism; (ii) changes in any Law or enforcement or interpretation of any Law; (iii) general circumstances affecting the development, construction and operation of solar power projects in of California; (iv) changes in financial markets, general economic conditions (including prevailing electricity rates, fuel costs, commodity prices, equipment availability, labor availability, interest rates, and exchange rates), regulatory requirements or political conditions; (v) failure of the Buyer to meet any published or internally prepared projections, budget, development plan, revenue or earning forecast or other financial performance measure or operating statistic; (vi) the general availability of credit or financing for solar power projects; or (vii) any action or inaction taken in accordance with this Agreement or at the written request or consent of Buyer. “Membership Interests” has the meaning given to it in the recitals. “MWAC” means alternating current (peak) megawatt. “New Site” means the “Site” as defined and described in the Amended and Restated PPA. “New Site Interconnection Agreement” means the Small Generator Interconnection Agreement, by and among the Buyer (or its Affiliate), the California Independent System Operator Corporation, and the Interconnection Utility and reasonably approved by Buyer as amended and issued by PG&E with respect to the New Site. “Notice” has the meaning given at Section 11.1. “Organizational Documents” means, with respect to a particular Person (other than a natural person), the certificate or articles of incorporation, the certificate or articles of organization, bylaws, partnership agreement, limited liability company agreement, operating agreement, stockholders’ agreement, trust agreement and/or similar organizational documents or agreements, as applicable, of such Person, including all amendments thereto. “Original PPA” means the Power Purchase Agreement, dated as of November 5, 2012, by and between the City of Palo Alto, California and the Seller. The Original PPA constitutes the sole “Purchased Asset” under this Agreement. ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 7 HOU:3443209.1 “Owners” has the meaning provided in the preamble. “Party” or “Parties” have the meanings given to them in the preamble. “Person” means any natural person, corporation, limited liability company, partnership, firm, association, Governmental Authority or any other entity whether acting in an individual, fiduciary or other capacity. “PPA Assignment” means the Assignment of Original PPA materially in the form attached at Exhibit A. “Prime Rate” means the annual rate of interest published in The Wall Street Journal as the prime lending rate or “prime rate.” “Project” has the meaning given to it in the recitals. “Purchase Price” has the meaning given to it in Section 2.2. “Purchased Asset” means the Original PPA, and any rights associated with the Original PPA, including but not limited to the Renewable Energy Credits. “Real Property” means all estates, interests and rights of the Seller in and to any real property. “Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing. “Renewable Energy Credit” or “REC”, means any credit, certificate, renewable energy certificate, allowance or similar right that is related to the Environmental Attributes, whether arising pursuant to law, regulation, certification, markets, trading, off set, private transaction, renewable portfolio standards, voluntary programs or otherwise. “Response Notice” has the meaning given to it in Section 9.4. “Seller” has the meaning given to it in the Preamble. “Seller Indemnified Party” has the meaning given to it in Section 9.2. “Seller Ancillary Agreements” means all agreements, instruments and documents being or to be executed and delivered by the Seller or an Affiliate of the Seller under or in connection with this Agreement, including the PPA Assignment. “Seller’s Standby Letter of Credit” means the Seller’s Standby Letter of Credit to the benefit of the City of Palo Alto, CA, in the amount of $400,000, dated December 10, 2012 securing the Seller’s obligations pursuant to the Original PPA, a copy of which is attached at Exhibit C. “Signing Payment” has the meaning given to it in Section 2.2. “Substitute PPA Collateral” has the meaning provided in Section 3.4(b) “Tax” and “Taxes” means (i) any and all taxes, fees, levies, duties, tariffs, imposts and other charges of any kind (whether or not imposed on Seller or on any of its Affiliates), imposed by any Governmental Authority or taxing authority, including, without limitation, taxes or other charges on, ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 8 HOU:3443209.1 measured by, or with respect to income, franchise, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes; license, registration and documentation fees; and customs duties, tariffs and similar charges; (ii) any Liability for the payment of any amounts of the type described in (i) as a result of being a member of, or a successor to a member of, an affiliated, combined, consolidated or unitary group for any taxable period; (iii) any Liability for the payment of any amounts of the type described in (i) as a result of being a person required by Applicable Law to withhold or collect taxes imposed on another person; (iv) any Liability for the payment of amounts of the type described in (i), (ii) or (iii) as a result of being a transferee of, or a successor in interest to, any person or as a result of an express or implied obligation to indemnify any person; and (v) any and all interest, penalties, additions to tax and additional amounts imposed in connection with or with respect to any amounts described in (i), (ii), (iii) or (iv). “Tax Return” means any return, report, statement, form or other documentation (including any additional or supporting material and any amendments or supplements) filed or maintained, or required to be filed or maintained, with respect to or in connection with the calculation, determination, assessment or collection of any Taxes. “Third Party Claim” has the meaning given to it in Section 9.8(a). “Third Party Claim Response Period” has the meaning given to it in Section 9.8(a). “Threshold” has the meaning given to it in Section 9.6. “Touchpoint Schedule” means the schedule prepared by Buyer and submitted to PG&E with respect to a New Site Interconnection Agreement for use in connection with the Amended and Restated PPA. “Transaction” means all of the actions required by this Agreement, including Closing and the execution, delivery and performance of the Buyer Ancillary Agreements and the Seller Ancillary Agreements. “Transfer Taxes” means all transfer, documentary, sales, use, gross receipts, stamp, registration, value added, recording, escrow and other similar taxes and fees incurred in connection with the Transaction. Section 1.2 Construction. (a) Headings and the rendering of text in bold and/or italics are for convenience and reference purposes only and do not affect the meaning or interpretation of this Agreement. (b) A reference to an Exhibit, Schedule, Article, Section or other provision shall be, unless otherwise specified, to exhibits, schedules, articles, sections or other provisions of this Agreement, which exhibits and schedules are incorporated herein by reference. (c) Any reference in this Agreement to another Contract or document shall be construed as a reference to that other Contract or document as the same may have been, or may from time to time be, varied, amended, supplemented, substituted, novated, assigned or otherwise transferred. ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 9 HOU:3443209.1 (d) Any reference in this Agreement to “this Agreement,” “herein,” “hereof” or “hereunder” shall be deemed to be a reference to this Agreement as a whole and not limited to the particular Article, Section, Exhibit, Schedule or provision in which the relevant reference appears and to this Agreement as varied, amended, supplemented, substituted, novated, assigned or otherwise transferred from time to time. (e) References to any Party shall, where appropriate, include any successors, transferees and permitted assigns of the Party. (f) References to the term “includes” or “including” mean “includes, without limitation” or “including, without limitation.” (g) Words importing the singular include the plural and vice versa and the masculine, feminine and neuter genders include all genders. (h) If the time for performing an obligation under this Agreement occurs or expires on a day that is not a Business Day, the time for performance of such obligation shall be extended until the next succeeding Business Day. (i) References to any statute, code or statutory provision are to be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or reenacted, and include references to all bylaws, instruments, orders and regulations for the time being made thereunder or deriving validity therefrom unless the context otherwise requires. (j) References to any amount of money mean a reference to the amount in United States Dollars. ARTICLE II PURCHASE AND SALE OF PURCHASED ASSET Section 2.1 Purchase and Sale. (a) Subject to the terms and conditions set forth in this Agreement and in consideration of the Purchase Price and Buyer covenants contained in this Agreement, Owners shall cause Seller to sell, assign, convey, deliver and transfer on the Closing to Buyer, and Buyer shall purchase, acquire and accept on the Closing from the Seller, all of the right, title and interest of Seller in the Original PPA. The Parties agree that the Original PPA shall be the only “Purchased Asset,” and that all other Assets, properties, rights business or interests of the Seller shall be “Excluded Assets.” (a) The Purchased Asset shall not include any Excluded Assets. (b) Subject to the terms and conditions set forth in the Agreement, Buyer agrees to assume and pay, discharge and perform when due, and shall assume only the Assumed Liabilities. Seller shall retain, and be responsible for paying, performing and discharging when due, and Buyer shall not assume or have any responsibility for, any Liabilities of Seller relating to, or occurring or existing in connection with, or arising out of the ownership of the Purchased Asset prior to the Closing Date or with respect to the Excluded Liabilities, whether before, on or after the Closing Date. Section 2.2 Purchase Price. In consideration of the purchase by Buyer and sale by Seller of the Purchased Asset pursuant to Section 2.1, on or prior to Closing the Buyer shall complete the undertakings included in this section and pay Seller by wire transfer of immediately available funds to the bank account designated in writing by Seller in Schedule 2.2, the Signing Payment and the Closing Payment (in aggregate the “Purchase Price”) as follows: ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 10 HOU:3443209.1 (a) Signing Payment & Deliveries. On the Effective Date, Buyer shall pay Seller, $[REDACTED](the “Signing Payment”). The Signing Payment shall be non-refundable unless this Agreement is terminated pursuant to Section 10.2 (e), in which case Seller shall be obligated to refund the Signing Payment to Buyer within ten (10) Business Days following such termination. (b) Closing Payment. On the Closing Date, Buyer shall pay Seller, $ REDACTED (the “Closing Payment”). (The Closing Payment comprises $ REDACTED plus $ REDACTED provided by the Buyer to offset a portion of Seller’s loss of certain deposits previously made by Seller in connection with Network Upgrade pursuant to Interconnection Agreement. Buyer will have no further obligations to Seller in respect of deposits made under Interconnection Agreement.) Section 2.3 Further Assurances. At any time, and from time to time after the Closing Date, at Buyer’s reasonable request, Seller shall promptly execute, acknowledge as necessary and deliver all such documents, assurances and instruments of sale, transfer, conveyance, assignment and confirmation as are reasonably required, and take all such other actions as Buyer may reasonably request, to transfer, convey, deliver, assign and confirm Buyer’s right, title and interest to the Purchased Asset, and to otherwise effect the Transactions. Section 2.4 Transfer Taxes. All Transfer Taxes shall be borne by the Seller. The Parties shall reasonably cooperate in mitigating any Transfer Taxes and in the preparation, execution and filing of all Tax Returns, applications or other documents with respect to any such Transfer Taxes. ARTICLE III CLOSING Section 3.1 Closing Date. The consummation of the Transactions (the “Closing”) shall take place on a date selected by Buyer in the state of California or by means of an electronic closing room maintained by Buyer’s counsel and with Seller’s reasonable approval, no later than three (3) Business Days after Notice by each Party to the other Party that the conditions set forth in Sections 3.2 and 3.3 have been met (“Closing Date”). The Closing shall be effective as of 12:01 a.m. on the Closing Date. Each Party may deliver documents, instruments and certificates required to be delivered at the Closing to the place of Closing by electronic transmission on or before the Closing Date except the Substitute PPA Collateral which Buyer must be deliver in whatever form is required by the Amended and Restated PPA. Section 3.2 Conditions Precedent to the Obligations of Buyer. Buyer’s obligation to consummate the Transaction is subject to the satisfaction, or Buyer’s waiver, in its reasonable discretion, of the following conditions prior to or concurrently with the Closing: (a) Representations and Warranties. Each representation and warranty made by Seller and the Owners in this Agreement shall be true and correct as of the Closing Date. (b) Performance. Seller shall have performed and complied, in all material respects, with the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Seller at or before the Closing. (c) Litigation; Orders and Laws. There shall not be any Action (filed by a Person other than Buyer or any of its Affiliates), law or order, judgment, decree or ruling of a Governmental Authority restraining, enjoining or otherwise prohibiting or making illegal or threatening to restrain, enjoin or otherwise prohibit or make illegal the consummation of the Transaction. ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 11 HOU:3443209.1 (d) No Material Adverse Effect. Since the Effective Date, no change or events shall have occurred, which, individually or in the aggregate with any such other changes or events, is or is reasonably likely to have a Material Adverse Effect on the Purchased Asset. (e) Approval of PPA Transfer. The City of Palo Alto shall have executed and delivered (i) the Consent to Assignment, and (ii) the Amended and Restated PPA. (f) Touchpoint Schedule. Buyer shall have received Touchpoint Schedule in form and substance reasonably satisfactory to Buyer confirming interconnection pursuant to New Site Interconnection Agreement completion no later than May 30, 2015. (g) Closing Deliverables. Buyer shall have received all the items set forth in Section 3.4. Section 3.3 Conditions Precedent to the Obligations of Seller. Seller’s obligation to consummate the Transaction is subject to the satisfaction or waiver by Seller in its reasonable discretion, of the following conditions prior to or concurrently with the Closing: (h) Representations and Warranties. Each representation and warranty made by Buyer herein shall be true and correct as of the Closing Date. (i) Performance. Buyer shall have performed and complied, in all material respects, with the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Buyer at or before the Closing, including but not limited to payment of the Purchase Price and delivery of the Substitute PPA Collateral to the City of Palo Alto. (j) Litigation; Orders and Laws. There shall not be any Actions (filed by a Person other than Seller or any of its Affiliates), law or order, judgment, decree or ruling of a Governmental Authority restraining, enjoining or otherwise prohibiting or making illegal or threatening to restrain, enjoin or otherwise prohibit or make illegal the consummation of the Transaction. (k) Closing Deliverables. Seller shall have received all the payments and items set forth in Sections 2 and 3.4. Section 3.4 Buyer’s Closing Deliveries. At the Closing, Buyer shall deliver, or cause to be delivered, to Seller all of the following: (l) the Closing Payment in accordance with Section 2.2(b); (m) Buyer shall deliver to the City of Palo Alto, California and provide Seller with a true and correct copy of an Irrevocable Standby Letter Of Credit (“Substitute PPA Collateral”) in the form and issued by a financial institution acceptable to Palo Alto, in the amount of $400,000, materially in the form provided at Exhibit D, all in a manner and form sufficient to replace and cause the prompt, unconditional release of all of the Seller’s Standby Letter of Credit dated December 10, 2012 securing the Seller’s obligations pursuant to the Original PPA. (n) a certificate, dated as of the Closing Date, executed by a duly authorized officer or manager of Buyer, certifying as follows: (i) that the representations and warranties made by Buyer in this Agreement that are qualified with respect to materiality shall be true and accurate in all respects, and the ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 12 HOU:3443209.1 representations and warranties made by Buyer in this Agreement that are not so qualified shall be true and accurate in all material respects, as of the Closing Date (or on the date when made in the case of any representation and warranty which specifically relates to an earlier date) as though made on and as of the Closing Date; and (ii) that Buyer has performed and complied with, in all material respects, the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Buyer at or before the Closing; (o) a certificate, dated as of the Closing Date, executed by a duly authorized officer or manager of Buyer, certifying that attached thereto is: (i) a true, accurate and complete copy of the certificate issued by the Secretary of State of the State of Delaware, dated as of a recent date prior to the Closing Date, certifying that Buyer is validly existing and in good standing under the laws of the State of Delaware; (ii) a true, accurate and complete copy of the certificate of formation of Buyer, as in effect on the Closing Date, certified as of a recent date prior to the Closing Date by the Secretary of State of the State of Delaware; (iii) a true, accurate and complete copy of the limited liability company agreement of Buyer, as in effect on the Closing Date; and (iv) a true, accurate and complete copy of the resolutions of the member(s) or manager(s) of Buyer duly authorizing the execution, delivery and performance by Buyer of this Agreement, the Buyer Ancillary Agreements to which it is a party and the Transactions, and that such resolutions are in full force and effect as of the Closing Date; (p) a certificate, dated as of the Closing Date, executed by a duly authorized officer or manager of Buyer Parent, certifying that attached thereto is: (i) a true, accurate and complete copy of the certificate issued by the Secretary of State of the State of Delaware, dated as of a recent date prior to the Closing Date, certifying that Buyer Parent is validly existing and in good standing under the laws of the State of Delaware; (ii) a true, accurate and complete copy of the certificate of formation of Buyer Parent, as in effect on the Closing Date, certified as of a recent date prior to the Closing Date by the Secretary of State of the State of Delaware; (iii) a true, accurate and complete copy of the limited liability company agreement of Buyer Parent, as in effect on the Closing Date; and (iv) a true, accurate and complete copy of the resolutions of the member(s) or manager(s) of Buyer Parent duly authorizing the execution, delivery and performance by Buyer of this Agreement, the Buyer Ancillary Agreements to which it is a party and the Transactions, and that such resolutions are in full force and effect as of the Closing Date; (q) a copy of the Substitute PPA Collateral; and (r) a counterpart signature page to the PPA Assignment, duly executed by Buyer. Section 3.5 Seller’s Closing Deliveries. At the Closing, Seller shall deliver, or cause to be delivered, to Buyer all of the following: (s) a counterpart signature page to the PPA Assignment, together (i) with a true and complete copies of the PPA, and (ii) a certificate executed by an authorized officer of the Seller certifying that the PPA has not been amended or modified or any of its provisions waived nor excused, except as set forth in the Amended and Restated PPA; (t) [Reserved] ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 13 HOU:3443209.1 (u) a certificate, dated as of the Closing Date, executed by a duly authorized officer or manager of Seller, certifying, subject to such exceptions as are disclosed in the Disclosure Schedules, that: (i) the representations and warranties made by Seller and Owners in this Agreement that are qualified with respect to materiality shall be true and accurate in all respects, and the representations and warranties made by Seller and Owners in this Agreement that are not so qualified shall be true and accurate in all material respects, on and as of the Closing Date (or on the date when made in the case of any representation and warranty which specifically relates to an earlier date) as though made on and as of the Closing Date; (ii) Seller has performed and complied with, in all material respects, the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Seller at or before the Closing; and (iii) to Seller’s Knowledge no Material Adverse Effect exists, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to result in a Material Adverse Effect; (v) a certificate, dated as of the Closing Date, executed by a duly authorized officer or manager of the Seller, certifying that attached thereto is: (i) a true, accurate and complete copy of the certificate issued by the Secretary of State of the State of Delaware, dated as of a recent date prior to the Closing Date, certifying that the Seller is validly existing and in good standing under the laws of the State of Delaware; (ii) a true, accurate and complete copy of the certificate of formation of the Seller, as in effect on the Closing Date, certified as of a recent date prior to the Closing Date by the Secretary of State of the State of Delaware; and (iii); a true, accurate and complete copy of the resolutions of the member(s) or manager(s) of the Seller duly authorizing the execution, delivery and performance by the Seller of any agreement, document or certificate to be delivered by the Seller hereunder on the Closing Date, and that such resolutions are in full force and effect as of the Closing Date; (w) a certificate, dated as of the Closing Date, executed by a duly authorized officer or manager of TP-CA South LLC , certifying that attached thereto is: (i) a true, accurate and complete copy of the certificate issued by the Secretary of State of the State of Delaware, dated as of a recent date prior to the Closing Date, certifying that TP-CA South LLC is validly existing and in good standing under the laws of the State of Delaware; (ii) a true, accurate and complete copy of the certificate of formation of TP-CA South LLC , as in effect on the Closing Date, certified as of a recent date prior to the Closing Date by the Secretary of State of the State of Delaware ; (iii) a true, accurate and complete copy of the limited liability company agreement of TP-CA South LLC , as in effect on the Closing Date; and (iv) a true, accurate and complete copy of the resolutions of the member(s) or manager(s) of TP-CA South LLC , as applicable, duly authorizing the execution, delivery and performance by Seller of this Agreement, the Seller Ancillary Agreements to which TP- CA South LLC is a party and the Transactions, and that such resolutions are in full force and effect as of the Closing Date; and (x) a certificate, dated as of the Closing Date, executed by a duly authorized officer or manager of PRB Member, LLC, certifying that attached thereto is: (i) a true, accurate and complete copy of the certificate issued by the Secretary of State of the State of California, dated as of a recent date prior to the Closing Date, certifying that PRB Member, LLC is validly existing and in good standing under the laws of the State of California; (ii) a true, accurate and complete copy of the certificate of formation of ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 14 HOU:3443209.1 PRB Member, LLC, as in effect on the Closing Date, certified as of a recent date prior to the Closing Date by the Secretary of State of the State of California; (iii) a true, accurate and complete copy of the limited liability company agreement of PRB Member, LLC, as in effect on the Closing Date; and (iv) a true, accurate and complete copy of the resolutions of the member(s) or manager(s) of PRB Member, LLC, as applicable, duly authorizing the execution, delivery and performance by Seller of this Agreement, the Seller Ancillary Agreements to which PRB Member, LLC is a party and the Transactions, and that such resolutions are in full force and effect as of the Closing Date; (y) any other documents, third party consents or instruments reasonably required by Buyer to consummate the transactions contemplated by this Agreement. ARTICLE IV COVENANTS OF SELLER Section 4.1 Maintenance of Original PPA. From the Effective Date until the earlier of Closing or termination of this Agreement: (a) Seller shall not take any or omit taking any Commercially Reasonable action that could reasonably be expected to cause a Seller breach of the Original PPA; (b) Seller shall not amend, modify or change the Original PPA, other than as provided in this Agreement, without the prior written consent of Buyer, which consent shall not be unreasonably withheld, delayed or conditioned. ARTICLE V REPRESENTATIONS AND WARRANTIES OF OWNERS AND SELLER Owners and Seller represent, warrant and covenant to Buyer that, subject to such exceptions as are specifically disclosed in the Disclosure Schedules, all of the following are true and correct as of the Closing Date: Section 5.1 Organization, Authority, Validity and Non-Contravention. (a) TP-CA South LLC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. PRB Member, LLC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Owners have all requisite limited liability company power and authority to carry on their respective business as it is currently conducted and to own, lease and operate its Assets where such Assets are now owned, leased or operated. (b) The Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite limited liability company power and authority to carry on its business as it is currently conducted and to own, lease and operate its Assets, including the Original PPA, where such Assets are now owned, leased or operated. The Seller is duly qualified or licensed to do business in and is in good standing in each jurisdiction in which the Assets owned, leased or operated by it or the nature of the business conducted by it makes such qualification or license necessary, except in such jurisdictions where the failure to be so duly qualified or licensed or in good standing would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Original PPA. ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 15 HOU:3443209.1 (c) Seller has all requisite limited liability company power and authority to execute and deliver this Agreement and the Seller Ancillary Agreements, to perform its obligations hereunder and thereunder and to consummate the Transactions. The execution, delivery and performance by Seller of this Agreement and the Seller Ancillary Agreements to which Seller or any of their Affiliates is a party and the consummation of the Transactions have been duly authorized by all necessary limited liability company action on the part of Seller or such Affiliate. (d) This Agreement has been duly executed and delivered by Seller and constitutes the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors’ rights and subject to general equitable principles. Upon execution and delivery of the Seller Ancillary Agreements to which Seller or any of its Affiliates is a party, each of the Seller Ancillary Agreements will constitute the legal, valid and binding obligation of Seller or such Affiliate, enforceable against Seller or such Affiliate in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors’ rights and subject to general equitable principles. (e) None of the execution and delivery by Seller of this Agreement or any of the Seller Ancillary Agreements to which Seller or any of its Affiliates is a party, the performance of the obligations of Seller or any of its Affiliates hereunder or thereunder, nor the consummation of the Transactions by Seller or any of its Affiliates will (a) conflict with or result in any violation or breach of or default under (or constitute an event that, with notice or lapse of time or both, would constitute a default under) or give rise to a right of termination, cancellation, modification or acceleration of any obligation, to any put or call or similar rights, or to loss of a benefit under, any provision of the Organizational Documents of Seller, (b) result in any violation or breach of or default under (or constitute an event that, with notice or lapse of time or both, would constitute a default under) or give rise to a right of termination, cancellation, modification or acceleration of any obligation, with respect to the Purchased Asset, (c) result in the imposition or creation of any Lien upon or with respect to the Purchased Asset, or (d) conflict with or result in the violation of any Applicable Law to which Seller is subject. Section 5.2 Purchased Asset. No other Persons own or have any interest in, or option or other right (contingent or otherwise), including any right of first refusal or right of first offer, to acquire the Purchased Asset. Section 5.3 No Adverse Order or Injunctions. Seller is not a party to, subject to or bound by any Contract with, or any judgment, order, writ, prohibition, injunction or decree of any court or other Governmental Authority, which (a) would prevent or materially and adversely affect the execution, delivery or performance of this Agreement or any applicable Seller Ancillary Agreements by Seller or any of its Affiliates, or the transfer, conveyance and sale of the Purchased Asset by Seller to Buyer pursuant to the terms hereof or (b) have a Material Adverse Effect on the Purchased Asset. Section 5.4 Solvency. No petition or notice has been presented, no order has been made and no resolution has been passed for the bankruptcy, liquidation, winding-up or dissolution of Seller. No receiver, trustee, custodian or similar fiduciary has been appointed over the whole or any part of Seller’s Assets, including the Purchased Asset. Seller has no plan or intention of, or has received any notice that any other Person has any plan or intention of, filing, making or obtaining any such petition, notice, order or resolution or of seeking the appointment of a receiver, trustee, custodian or similar fiduciary. Section 5.5 Litigation. There is no Action in which Seller has appeared or has been named or served as a party (either as a plaintiff or defendant) or, to Seller’s Knowledge, threatened before any court ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 16 HOU:3443209.1 or Governmental Authority, including Actions with respect to the Purchased Asset. Neither Seller nor the Seller has received notice of any judgment, order, decree, injunction or order entered against Seller with respect to the Purchased Asset. Section 5.6 No Conflicts. None of the execution and delivery by Seller or any of its Affiliates of this Agreement or any of the Seller Ancillary Agreements to which Seller or any of its Affiliates is a party, the performance of the obligations of Seller or any of its Affiliates hereunder or thereunder, nor the consummation of the Transactions by Seller or any of its Affiliates will: (i) conflict with or result in any violation or breach of or default under (or constitute an event that, with notice or lapse of time or both, would constitute a default under) or give rise to a right of termination, cancellation, modification or acceleration of any obligation, to any put or call or similar rights, or to loss of a benefit under, the Purchased Asset; or (ii) conflict with or result in the violation of any Applicable Law to which the Seller is subject with respect to the Purchased Asset. Section 5.7 Third Party Consents. To Seller’s Knowledge, Schedule 5.7 sets forth a true, correct and complete list of all consents, approvals, authorizations, waivers, licenses, registrations, declarations, qualifications, filings or notices of or to Persons, including Governmental Authorities, that to Seller’s Knowledge are required in connection with the execution and delivery by Seller or any of its Affiliates of this Agreement or any of the Seller Ancillary Agreements to which Seller or any of its Affiliates is a party, the performance of the obligations of Seller or any of its Affiliate hereunder or thereunder or the consummation by Seller or any of its Affiliates of the Transactions (including the sale of all of the Purchased Asset to Buyer). All such consents, approvals, authorizations, waivers, licenses, registrations, declarations, qualifications, filings or notices have been obtained and made free of any term, condition, restriction or imposed liability. Section 5.8 Original PPA. (a) The Original PPA is in full force and effect, and constitutes a legal, valid, binding and enforceable Contract as to the Seller, and to Seller’s Knowledge, the City of Palo Alto, and will not be rendered invalid or unenforceable as a result of the Transactions, except, in each case, as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors’ rights and subject to general equitable principles. (b) Neither the Seller, nor to Seller’s Knowledge, any other Party, is in breach of or in default under the Original PPA and no event has occurred which with the passage of time or giving of notice or both would constitute such a default, result in a loss of rights or permit termination, modification or acceleration under, or result in the creation of any Lien under the Original PPA. (c) True, correct and complete copies of the Original PPA and any amendments thereto have been previously delivered to Buyer. Section 5.9 Brokers. Neither Seller nor any of its Affiliates has engaged any broker, finder or agent in connection with the Transactions so as to give rise to any claim against Buyer or any of its Affiliates for any brokerage or finder’s commission, fee or similar compensation. Section 5.10 Due Diligence. Seller have made available for Buyer’s review all material information in its possession and requested by Buyer in connection with Buyer’s due diligence examination of the Seller and the Purchased Asset. To Seller’ Knowledge, none of the information ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 17 HOU:3443209.1 provided by Seller to Buyer contains any materially untrue or incorrect statement of fact, or omits to state any material fact reasonably necessary to make the information, in light of the circumstances in which it was provided, not misleading, which such untrue or incorrect statement or omission could reasonably be expected to result in a Material Adverse Effect on the Purchased Asset. Section 5.11 Disclosure. To Seller’s Knowledge, no representation or warranty by Seller contained in this Agreement or any statement or certificate furnished or to be furnished by or on behalf of Seller to Buyer in connection with or pursuant to this Agreement contains or will contain any untrue statement of a material fact, or omits or will omit to state any material fact reasonably required to make such statement not misleading. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents, warrants and covenants to Seller that all of the following are true and correct as of the Closing Date: Section 6.1 Organization, Authority, Validity and Non-Contravention. (a) Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer has all requisite limited liability company power and authority to carry on its business as it is currently conducted. (b) Buyer has all requisite limited liability company power and authority to execute and deliver this Agreement and the Buyer Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the Transactions. The execution, delivery and performance by Buyer of this Agreement and the Buyer Ancillary Agreements to which Buyer is a party and the consummation of the Transactions have been duly authorized by all necessary limited liability company action on the part of Buyer. (c) This Agreement has been duly executed and delivered by Buyer and constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors’ rights and subject to general equitable principles. Upon execution and delivery of the Buyer Ancillary Agreements to which Buyer or any of its Affiliates is a party, each of the Buyer Ancillary Agreements will constitute the legal, valid and binding obligation of Buyer or such Affiliate, enforceable against Buyer or such Affiliate in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors’ rights and subject to general equitable principles. (d) None of the execution and delivery by Buyer of this Agreement or any of the Buyer Ancillary Agreements to which Buyer or any of Buyer’s Affiliates is a party, the performance of the obligations of Buyer or any of Buyer’s Affiliates hereunder or thereunder, nor the consummation of the Transactions by Buyer or any of Buyer’s Affiliates will (i) conflict with or result in any violation or breach of or default under (or constitute an event that, with notice or lapse of time or both, would constitute a default under) any provision of the Organizational Documents of Buyer, or (ii) conflict with or result in the violation of any Applicable Law to which Buyer is subject. Section 6.2 No Adverse Order or Injunctions. Buyer is not a party to, subject to or bound by any Contract with, or any judgment, order, writ, prohibition, injunction or decree of any court or other ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 18 HOU:3443209.1 Governmental Authority, which would prevent or materially and adversely affect the execution, delivery or performance of this Agreement or any applicable Buyer Ancillary Agreements by Buyer. Section 6.3 Solvency. No petition or notice has been presented, no order has been made and no resolution has been passed for the bankruptcy, liquidation, winding-up or dissolution of Buyer. No receiver, trustee, custodian or similar fiduciary has been appointed over the whole or any part of Buyer’s Assets or the income of Buyer. Buyer has no plan or intention of, or has received any notice that any other Person has any plan or intention of, filing, making or obtaining any such petition, notice, order or resolution or of seeking the appointment of a receiver, trustee, custodian or similar fiduciary. Section 6.4 Third Party Consents. There are no consents, approvals, authorizations, waivers, licenses, registrations, declarations, qualifications, filings or notices of or to Persons, including Governmental Authorities, that are required in connection with the execution and delivery by Buyer of this Agreement or any of the Buyer Ancillary Agreements, the performance of the obligations of Buyer hereunder or thereunder or the consummation by Buyer of the Transactions. ARTICLE VII CONFIDENTIAL INFORMATION Section 7.1 Confidential Information. (a) Each Party and their Affiliates (each a “Recipient”) agree that each will treat in confidence all documents, materials and other information that is proprietary and/or non-public related to the past, present or future business activities of a Party which it obtains from another Party (“Discloser”) (“Confidential Information”) (it being understood that all confidential information relating to the Seller, the Project or the Assets, including the books and records of the Seller, shall be Seller’s confidential information). The obligation of a Recipient to treat such documents, materials and other information in confidence shall not apply to any information which (a) has become generally known or available within the industry or the public through no act or omission of a Discloser, (b) was in the Recipient’s possession on a non-confidential basis before receipt from a Disclosure or (c) was rightfully received by the Recipient from a third party who became aware of it through no act or omission of Recipient and who is not under an obligation of confidentiality to the Discloser or (d) was independently developed by the Recipient.. (b) After Closing, each Recipient shall maintain any Confidential Information that has been or will be disclosed directly or indirectly to it in confidence and may not disclose or cause such Confidential Information or to be disclosed by them to any third party without Discloser’s prior written consent, provided that a Recipient may disclose the Confidential Information to Persons who provide legal, accounting, or other services to Seller in connection with Seller’s evaluation or implementation of the transactions contemplated by this Agreement. (c) Recipients will not make use of any Confidential Information except in connection with the transactions contemplated by this Agreement, unless specifically authorized to do so in writing. (d) The Parties acknowledge that a breach of the covenants contained in this Section 7.1 will cause irreparable damage to a Discloser, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, each Party agrees that if a Recipient breaches any of the covenants contained in this Section 7.1, in addition to any remedy that may be available at law or in equity, the Discloser involved shall be entitled to seek specific performance and injunctive relief, without posting bond or other security. ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 19 HOU:3443209.1 Section 7.2 Public Announcements. All public announcements by a Party in relation to this Agreement shall be discussed in advance between, and approved by, the other Party (such approval not to be unreasonably withheld, conditioned or delayed). ARTICLE VIII FURTHER ASSURANCES Section 8.1 Further Assurances. From time to time following the Closing, each Party agrees (a) to furnish upon request to the other Party such further information, (b) to execute and deliver to the other Party such other documents, and (c) to do such other acts and things, in each case as either Party may reasonably request for the purpose of effectuating the Transactions. ARTICLE IX INDEMNIFICATION Section 9.1 Indemnity by Seller. Seller shall indemnify, defend, reimburse and hold harmless Buyer and Buyer’s Affiliates (including, without limitation, the Seller after Closing), together with their respective members, shareholders, managers, directors, officers, employees, agents, advisors, attorneys, accountants and consultants (each a “Buyer Indemnified Party”) from and against any and all claims, damages, penalties, awards, settlement payments, losses, Liabilities, costs, deficiencies and expenses 2 (including reasonable investigative costs, settlement costs and any reasonable outside legal, accounting or other expenses for investigating or defending any actions or threatened actions) (collectively, the “Losses”) to which any Buyer Indemnified Party becomes subject, which Losses arise out of or are incurred in connection with any of the following: (a) any breach of any representation or warranty made by Seller in this Agreement; (b) any breach of any covenant, agreement or obligation (and, for the avoidance of doubt, not including any of the representations or warranties) of Seller contained in this Agreement; (c) any fraud, intentional misrepresentation or willful misconduct by Seller in connection with this Agreement or the Transactions; (d) any claims, actions or suits made by third parties (before or after the Closing Date) against any Buyer Indemnified Party to the extent arising out of the acts or omissions of Seller prior to or on the Closing; (e) the Excluded Liabilities; and (f) any Taxes of the Seller, and any Taxes to which the Purchased Asset may be subject, assessed or otherwise encumbered, in each instance with respect to taxable periods or portions thereof ending on or before the Closing Date. Section 9.2 Indemnity by Buyer Parent. Buyer Parent shall indemnify, defend, reimburse and hold harmless Seller and Seller’s Affiliates, together with their respective members, shareholders, managers, directors, officers, employees, agents, advisors, attorneys, accountants and consultants (each a “Seller Indemnified Party”) from and against any and all Losses to which any Seller Indemnified Party becomes subject, which Losses arise out of or are incurred in connection with any of the following: (a) any breach of any representation or warranty made by Buyer in this Agreement; ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 20 HOU:3443209.1 (b) any breach of any covenant, agreement or obligation (and, for the avoidance of doubt, not including any of the representations or warranties) of Buyer contained in this Agreement; (c) any fraud, intentional misrepresentation or willful misconduct by Buyer in connection with this Agreement or the Transactions; (d) any claims, actions or suits made by third-parties (before or after the Closing Date) against any Seller Indemnified Party with respect to Assumed Liabilities; and (e) any Taxes of the Seller, and any Taxes to which the Assets of the Seller may be subject, assessed or otherwise encumbered, in each instance with respect to taxable periods or portions thereof beginning after the Closing Date. Section 9.3 Claims for Indemnification. If Buyer or Seller seeks indemnification under this Article VIII (in either case, the “Indemnified Party”), the Indemnified Party shall give written notice (a “Claim Notice”) to the Party from which it seeks the indemnity (the “Indemnifying Party”) as soon as practicable after the Indemnified Party becomes aware of any fact, condition or event which may give rise to Losses for which indemnification may be sought under this Article IX (a “Claim”). The failure of the Indemnified Party to give a Claim Notice to the Indemnifying Party hereunder shall not affect such Indemnified Party’s rights to indemnification hereunder, except to the extent that the Indemnifying Party is materially prejudiced by such failure. Each Claim Notice (i) shall constitute a certification by such Indemnified Party that such Indemnified Party is entitled to indemnification, compensation or reimbursement under Sections 9.1 or 9.2, (ii) shall contain a brief description of the circumstances supporting such certification that such Indemnified Party is so entitled to indemnification, compensation or reimbursement, (iii) shall, to the extent possible, contain a good faith, non-binding, preliminary estimate of the amount of Losses such Indemnified Party claims to have so incurred or suffered (the “Claimed Amount”), and (iv) in the event a court or other tribunal of competent jurisdiction determines that such indemnification, compensation or reimbursement to the Indemnified Party is unwarranted or unsubstantiated, shall constitute the Indemnified Party’s undertaking to repay any and all amounts paid to the Indemnified Party plus interest on such amount at the Prime Rate plus 3% from the date amounts have been paid to the Indemnified Party through the date such amounts have been repaid to the Indemnifying Party. Section 9.4 Response Notice; Uncontested Claims. Within ten (10) Business Days after receipt by the Indemnifying Party of a Claim Notice, such Indemnifying Party may deliver to the Indemnified Party a written response (the “Response Notice”) in which such Indemnifying Party: (a) agrees that the Indemnified Party is entitled to the full Claimed Amount, (b) agrees that the Indemnified Party is entitled to part, but not all, of the Claimed Amount (such amount agreed to under (a) or (b), the “Agreed Amount”), or (c) indicates that the Indemnifying Party disputes the entire Claimed Amount. Any part of the Claimed Amount that is not agreed to pursuant to the Response Notice shall be the “Contested Amount.” If the Parties are unable to resolve the dispute relating to any Contested Amount within thirty (30) days after the delivery of the Response Notice, then the Parties shall be entitled to resort to any legal remedy available to such Parties to resolve such dispute. Section 9.5 Survival (a) Survival of Covenants and Agreements. Each covenant and agreement of the Parties contained in this Agreement will survive the Closing pursuant to the terms of such covenant or agreement, if specified, or if not so specified until the later of (a) full performance of the covenant or agreement; or (b) for the period of the statute of limitations (plus any extensions or waivers thereof) ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 21 HOU:3443209.1 applicable to that covenant or agreement; provided, however, that the indemnification covenant set forth in Sections 9.1(c) and 9.2(c) (Fraud) shall survive indefinitely. (b) Survival of Representations and Warranties. The representations and warranties set forth by each Party in this Agreement (unless otherwise expressly set forth herein) shall survive until the REDACTED; provided, however, that (x) the representations or warranties made by Seller in Sections 5.1 (Organization, Authority, Validity and Non-Contravention), 5.2 (Purchased Asset), 5.8 (Original PPA) and 5.9 (Brokers) shall survive indefinitely, and (y) the representations or warranties made by Buyer in Section 6.1 (Organization, Validity and Authority) shall survive indefinitely, (each, an “Indemnity Period”). (c) Claims for Breach. No Claim for indemnification under this Article IX for the breach of a representation of warranty by a Party may be asserted following the expiration of the relevant Indemnity Period related to such representation or warranty; provided, however, that as to any matters with respect to which a bona fide Claim Notice shall have been given or an action at law or in equity shall have commenced before the end of the relevant Indemnity Period, survival shall continue (but only with respect to, and to the extent of, such Claim) until the date of the final resolution of such Claim or action, including all applicable periods for appeal. Section 9.6 Limitation of Liability. None of the Buyer Indemnified Parties will have any rights or remedies against Seller pursuant to Section 9.1(a) until the aggregate amount of all Claims that may be made by the Buyer Indemnified Parties pursuant to Section 9.1(a) exceeds $ REDACTED (the “Threshold”); provided, however, that once the Threshold is exceeded, then the Buyer Indemnified Parties shall be entitled to be paid, and Seller shall pay the full amount of all such Claims from the first dollar of such Claims. The aggregate liability of the Seller on a joint and several basis for any and all indemnifiable Loss shall be limited to an amount equal to REDACTED; provided, however, the limitations set forth in this Section 9.6 shall not apply to any obligation of Seller to indemnify, defend and hold harmless the Buyer Indemnified Parties pursuant to Section 9.1(c). Section 9.7 Exclusive Remedy. Except for Claims based on fraud, intentional misrepresentation or willful misconduct, after the Closing, the rights of any Buyer Indemnified Party or Seller Indemnified Party under this Article IX shall be the exclusive remedy of each such indemnified party with respect to any monetary claims resulting from or relating to any misrepresentation, breach of warranty or failure to perform any covenant or agreement contained in this Agreement; provided, however, that the foregoing shall not limit the availability to any Party of injunctive and other equitable relief with respect to any breach of this Agreement, including a claim for specific performance. Section 9.8 Third Person Claims. (a) If any claim or demand in respect of which an Indemnified Party might seek indemnity under this Article IX is asserted against such Indemnified Party by a Person other than a Party (a “Third Party Claim”), the Indemnified Party shall give a Claim Notice, including copies of all relevant pleadings, documents and information, to the Indemnifying Party within five (5) Business Days following the receipt of notice of the Third Party Claim by the Indemnified Party; provided, that, the failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent that the Indemnifying Party is materially prejudiced by such failure. The Indemnifying Party shall have ten (10) Business Days after its receipt of such Claim Notice (the “Third Party Claim Response Period”), within which to give notice to the Indemnified Party, in writing, either denying its obligations to, or agreeing to fully, indemnify and defend the Third Party Claim under this Article IX. ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 22 HOU:3443209.1 (b) Subject to Section 9.8(c), if the Indemnifying Party notifies the Indemnified Party that it agrees to fully indemnify and defend the Indemnified Party against the Third Party Claim within the Third Party Claim Response Period then the Indemnifying Party may assume the conduct and control through counsel reasonably acceptable to the Indemnified Party of the defense of such Third Party Claim and shall at its expense defend such Third Party Claim by all appropriate proceedings, which proceedings will be diligently prosecuted to a final conclusion or will be settled, and shall pay all Losses of the Indemnified Party incurred or accrued and paid and resulting or arising from such Third Party Claim; provided, that, unless consented to by the Indemnified Party (which consent shall not be unreasonably withheld, conditioned, or delayed), the Indemnifying Party shall not enter into any settlement that (i) does not fully, finally and unconditionally release the Indemnified Party from all Liability with respect to such Third Party Claims, or (ii) requires a non-monetary commitment by the Indemnified Party, including but not limited to compliance with an injunction or other equitable relief. If the Indemnifying Party assumes the defense of such Third Party Claim, the Indemnifying Party shall be responsible for posting any bonds or other security required in connection with such Third Party Claim. The Indemnified Party will reasonably cooperate in such defense, including making available to the Indemnifying Party all records and documents within the Indemnified Party’s control or that it can reasonably obtain relating to the Third Party Claim, and all costs or expenses incurred or accrued and paid by the Indemnified Party at the request of the Indemnifying Party shall be paid by the Indemnifying Party promptly as statements are received. An Indemnified Party, at its expense, may participate in, but not control, any defense or settlement of any Third Party Claim conducted by the Indemnifying Party pursuant to this Section 9.8(b) or take any other actions it reasonably believes to be necessary or appropriate to protect its interests. (c) If (i) the Indemnifying Party fails to assume the defense of a Third Party Claim in accordance with Section 9.8(b) within the Third Party Claim Response Period, (ii) an Indemnified Party determines in good faith that an adverse determination with respect to the proceeding giving rise to such claim for indemnification would be materially detrimental to or injure the Indemnified Party’s reputation or future business prospects, (iii) the Claim for indemnification relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation, (iv) the Third Party Claim seeks an injunction or equitable relief against the Indemnified Party, (v) under applicable standards of professional conduct, a conflict of interest on any significant issue related to such proceeding exists between the Indemnifying Party, on the one hand, and an Indemnified Party, on the other hand, or (vi) the Indemnifying Party is failing to vigorously prosecute or defend such Third Party Claim, then, in each case, upon notice to the Indemnifying Party, the Indemnified Party may, in its sole discretion, retain counsel satisfactory to it to assume such defense on behalf of and for the sole account and risk of the Indemnifying Party, and in the case of clauses (i) through (vi) the Indemnifying Party shall pay all reasonable fees and expenses of such counsel for the Indemnified Party, and the Indemnifying Party and the Indemnified Party shall cooperate in the defense of any such matter. In the event that the Indemnified Party assumes the conduct and control of the defense of a Third Party Claim, then the Indemnifying Party shall not be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld). (d) If the Indemnifying Party notifies the Indemnified Party that it acknowledges its obligation to indemnify and defend the Indemnified Party with respect to a Third Party Claim, the Losses of the Indemnified Party incurred or accrued and paid and resulting from or arising out of such Third Party Claim in the amount finally determined will be conclusively deemed a Loss of the Indemnifying Party under this Article IX, and the Indemnifying Party shall pay the full amount of such Losses to the Indemnified Party on demand. Section 9.9 Subrogation. To the extent that an Indemnifying Party makes or is required to make any indemnification payment to an Indemnified Party, upon full payment of such required indemnification payment, the Indemnifying Party shall be entitled to exercise, and shall be subrogated to, ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 23 HOU:3443209.1 any rights and remedies (including rights of indemnity, rights of contribution and other rights of recovery) that the Indemnified Party or any of the Indemnified Party’s Affiliates may have against any other Person with respect to any losses, circumstances or matter to which such indemnification payment is directly or indirectly related. Section 9.10 Mitigation. Each of the Parties agrees to take Commercially Reasonable steps to mitigate their respective Losses upon and after becoming aware of any fact, condition or event which may give rise to Losses for which indemnification may be sought under this Article IX. ARTICLE X TERMINATION Section 10.1 Termination by Mutual Consent. This Agreement may be terminated at any time prior to the Closing Date by the mutual written consent of Seller and Buyer. Section 10.2 Termination by Seller or Buyer. This Agreement may be terminated at any time prior to the Closing Date upon written notice from the terminating Party to the other Party (which notice shall specify the subsection(s) of this Section 10.2 that are the basis for the termination) as follows: (a) by Seller or Buyer if any court of competent jurisdiction in the United States or other Governmental Authority shall have issued an Order or taken any other action permanently restraining, enjoining or otherwise prohibiting the transaction and such Order or other action shall have become final and non-appealable; (b) by Seller if the Closing does not occur by May 31, 2014 (unless Seller has extended such deadline); provided that, if Seller terminates this Agreement pursuant to this Section 10.2(b) prior to June 30, 2014, (i.e. as opposed to termination for a Buyer material breach as permitted in Section 10.2(d)) Seller shall promptly refund the Signing Payment to Buyer upon demand. (c) by Buyer if the Closing does not occur by May 31, 2014 (unless Buyer has extended such deadline); (d) by Seller in the event of a material breach of any covenant or agreement to be performed or complied with by Buyer pursuant to the terms of this Agreement or of any representation or warranty of Buyer contained in this Agreement, which breach (i) has continued without cure for a period of twenty (20) days following written notice thereof by Seller to Buyer or cannot be cured and (ii) would result in a condition to Closing set forth in Article III not being satisfied (which condition has not been waived in writing); or (e) by Buyer in the event of a material breach of any covenant or agreement to be performed or complied with by Seller pursuant to the terms of this Agreement, which breach (i) has continued without cure for a period of twenty (20) days following written notice thereof by Buyer to such Seller or cannot be cured and (ii) would result in a condition to Closing set forth in Article VI not being satisfied (which condition has not been waived in writing). Section 10.3 Effect of Termination; Liability and Fees. Termination of this Agreement pursuant to Section 10.1 or Section 10.2 shall terminate all obligations of the Parties and this Agreement shall forthwith become wholly void and of no further force and effect, and there shall be no liability under this Agreement on the part of any Party, except that the obligations under Article VII (Confidential Information) and Article XII (Miscellaneous), and Sections, 2.2 (Purchase Price), 3.4 (Substitute PPA ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 24 HOU:3443209.1 Collateral) 10.3 (Effect of Termination), 10.4 (Post Termination Obligations) and 11.1 (Notices) of this Agreement shall survive termination. Section 10.4 Post-Termination Obligations. Upon delivery of written notice of termination in accordance with Section 10.1 or Section 10.2, all information received or accumulated by Buyer or its representatives in connection with the Seller, Seller Affiliates and the Assets shall be treated as Confidential Information, which obligation shall remain in full force and effect, notwithstanding the termination of this Agreement, and Buyer shall return or destroy all such Confidential Information in accordance with the terms and conditions of Article VII. ARTICLE XI NOTICES Section 11.1 Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and may be given by any of the following methods (“Notice”): (a) personal delivery, (b) overnight or certified mail, postage prepaid, return receipt requested, or (c) next day air courier service. Notices shall be sent to the appropriate Party at its address or email address given below (or at such other addresses for such Party as shall be specified by notice given hereunder). All such Notices shall be deemed effective upon (i) actual receipt or rejection. If to Buyer, to: CRE Holding Company c/o Centaurus Renewable Energy LLC 2800 Post Oak Boulevard, Suite 225 Houston, Texas 77056 Attn: Keith Holst and Stephen Douglas Email: kholst@centcap.com Email: sdouglas@centaurusenergy.com with a copy to: Andrews Kurth LLP 600 Travis Street, Suite 4200 Houston, Texas 77002 Attn: Peter del Vecchio Email: pdelvecchio@andrewskurth.com or to such other Person or address as Buyer shall designate in writing. If to Seller, to: TP-CA South, LLC c/o Trina Solar US Development, LLC 100 Century Center, Suite 501 San Jose, CA 95112 Attn: President - Americas With a copy not constituting Notice to: Trina Solar (U.S.) Inc. 100 Century Center Court, Suite 501 San Jose, California 95112 Attention: U.S. Legal Director ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 25 HOU:3443209.1 and PRB Member, LLC c/o Pacific Valley, LLC 115 W. Canon Perdido Street Santa Barbara, CA 93101 Attn: Dan Firestone or to such other Person or address as Seller or Owner shall designate in writing. ARTICLE XII MISCELLANEOUS Section 12.1 Successors and Assigns. This Agreement shall be binding upon all of the Parties and their permitted successors and assigns, if any. No Party may assign any of its or their rights or obligations under this Agreement, in whole or in part, to any other Person without the written consent of the other Parties; provided, however, that Buyer may assign all of its rights or obligations under this Agreement to any Buyer Affiliate without the written consent of Seller. Section 12.2 Further Assurances. From time to time, each Party agrees (a) to furnish upon reasonable request to the other Party such further information, (b) to execute and deliver to the other Party such other documents, and (c) to do such other acts and things, in each case as either Party may reasonably request for the purpose of more fully effectuating the transactions contemplated by this Agreement. After the Closing, and upon prior reasonable request, each Party shall exercise Commercially Reasonable Efforts to cooperate with the other Party, at the requesting Party’s expense (including out-of- pocket expenses to third parties incurred by any party), in furnishing non-confidential and non-privileged records, information, testimony and other assistance in connection with any inquiries, actions, audits, proceedings or disputes involving any of the parties (other than in connection with disputes between the Parties) and based upon contracts, arrangements or acts of Seller, which were in effect or occurred on, prior to, or after the Closing and which relate to the Projects, including arranging discussions with (and calling as witnesses) officers, directors, employees, agents, and representatives of the Seller. Section 12.3 Limitation of Liability. NO PARTY SHALL BE LIABLE TO ANY OTHER PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES OF ANY CHARACTER, RESULTING FROM, ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY INCIDENT TO ANY ACT OR OMISSION OF A PARTY RELATED TO THE PROVISIONS OF THIS AGREEMENT, IRRESPECTIVE OF WHETHER CLAIMS OR ACTIONS FOR SUCH LOSSES ARE BASED UPON CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR ANY OTHER THEORY AT LAW OR EQUITY. Section 12.4 Waiver. No failure on the part of any Person to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any Person in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. No Person shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such Person; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given. ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 26 HOU:3443209.1 Section 12.5 Entire Agreement; Amendments; Attachments. This Agreement and all exhibits and schedules hereto, represents the entire understanding and agreement between the Parties with respect to the subject matter hereof and supersedes all prior oral and written and all contemporaneous oral negotiations, commitments and understandings between the Parties. Buyer and Seller may amend or modify this Agreement, in such manner as may be agreed upon, by a written instrument executed by Buyer and Seller, and any such amendment or modification so effected shall be enforceable in all respects on the Parties to this Agreement. If the provisions of any exhibit or schedule are inconsistent with the provisions of this Agreement, the provisions of this Agreement shall prevail. The exhibits and schedules attached hereto are hereby incorporated as integral parts of this Agreement. Section 12.6 Severability. Any provision of this Agreement which is invalid, illegal or unenforceable shall be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof or rendering that or any other provision of this Agreement invalid, illegal or unenforceable. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the Transactions are fulfilled to the fullest extent possible. Section 12.7 Governing Law; Jurisdiction. This Agreement shall be construed and enforced in accordance with the laws of the Delaware without giving effect to the choice of law principles thereof. Each Party consents to personal jurisdiction in any action brought in any court, federal or state, within Wilmington, Delaware having subject matter jurisdiction arising under this Agreement, and each of the Parties agrees that any action instituted by either of them against the other with respect to this Agreement will be instituted exclusively in a court, federal or state, within Wilmington, Delaware. Each of the Parties irrevocably waives the defense of an inconvenient forum to the maintenance of any such action. Section 12.8 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT A PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION RESULTING FROM, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE CONTEMPLATED TRANSACTIONS. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (a) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (b) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (c) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (d) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.8. Section 12.9 Section Headings. The Section headings are for the convenience of the Parties and in no way alter, modify, amend, limit or restrict the contractual obligations of the Parties. Section 12.10 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall be one and the same document. This Agreement is effective upon delivery of one executed counterpart from each Party to the other Parties. The signatures of all Parties need not appear on the same counterpart. The delivery of signed counterparts by facsimile or email transmission that includes a copy of the sending Party’s signature(s) is as effective as signing and delivering the counterpart in person. ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 27 HOU:3443209.1 Section 12.11 No Third Party Beneficiaries. This Agreement is entered into for the sole benefit of the Parties, and no other Person shall be a direct or indirect beneficiary of, or shall have any direct or indirect cause of action or claim in connection with, this Agreement. Section 12.12 No Joint Venture. Each Party will perform all obligations under this Agreement as an independent contractor. Nothing herein contained shall be deemed to constitute any Party a partner, agent or legal representative of the other Party or to create a joint venture, partnership, agency or any relationship between the Parties. Section 12.13 Expenses. Except as otherwise specifically provided elsewhere in this Agreement, each Party shall pay all of its own costs and expenses incurred by it incident to the negotiation, drafting or performance of its obligations hereunder, including the fees and disbursements of its attorneys, accountants, financial advisors, experts, consultants, contractors and representatives, employed or retained by the respective Parties in connection with the transactions contemplated hereby, whether or not the transactions contemplated by this Agreement are consummated. Section 12.14 Specific Performance; Remedies. Each of the Parties acknowledges that the other Party would be damaged irreparably in the event that the Party’s obligations under this Agreement are not performed in accordance with their specific terms or are otherwise breached, that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss, and that any defense in any action for specific performance, that a remedy at law would be adequate is waived. Accordingly, each of the Parties agree that the other Party shall be entitled to seek the remedy of specific performance, in addition to any rights or remedies at law or in equity, and the other Party shall also be entitled to recover its reasonable out-of-pocket costs and expenses incurred directly in connection with obtaining such specific performance if it prevails. No delay or forbearance by the other Party in the exercise or enforcement of any right or remedy hereunder shall be deemed a waiver by the other Party of its rights hereunder to exercise or enforce such right or remedy. [SIGNATURE PAGE FOLLOWS] ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA 28 HOU:3443209.1 This Agreement has been duly executed by the Parties as of the Effective Date. OWNERS: TP-CA SOUTH LLC By: _______________________________ Name: Mark Mendenhall Title: President Trina Solar US Development, LLC PRB MEMBER, LLC By: _______________________________ Name: David Saul Title: CEO, Pacific Valley, LLC SELLER: BRANNON SOLAR, LLC By its members: TP-CA SOUTH LLC By: _______________________________ Name: Mark Mendenhall Title: President Trina Solar US Development, LLC PRB MEMBER, LLC By: _______________________________ Name: David Saul Title: CEO, Pacific Valley, LLC TP-CA SOUTH LLC ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA i HOU:3443209.1 BUYER: CRE-KETTLEMAN HOLDCO LLC By: CRE-Kettleman California LLC, its sole member By: Centaurus Renewable Energy LLC, its sole member By: _______________________________ Name: Keith Holst Title: Manager By: _______________________________ Name: Stephen H. Douglas Title: Manager ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA i HOU:3443209.1 Schedule 1 List of Disclosure Schedules & Exhibits The following “Schedules” have been prepared in connection with the Asset Purchase Agreement, dated as of may [ ], 2014 Among TP-CA South LLC, and PRB Member, as “Owners”, Brannon Solar, LLC, as “Seller” and CRE-Kettleman Holdco LLC as “Buyer” (“Agreement”) and constitutes the Seller Disclosure and Exception Schedules referred to in the Agreement. Initially capitalized terms used in these schedules and not other wised defined have the meanings ascribed in the Agreement. The representations of Seller in the Agreement are made subject to the exceptions and qualifications set forth in these Schedules. The Schedules are qualified in their entirety by the specific provisions of the Agreement and are not intended and shall not be construed to constitute separate representations or warranties of the Seller. The section numbers used in this Schedule refer to the sections in the Agreement. Headings have been inserted in this Schedule for convenience and reference only. The information provided in these Schedules is being provided solely for the purpose of making disclosure to the Buyer under the Agreement. Seller assumes no obligations to any person not a party to the Agreement for the accuracy of this information. The information is Confidential Information under the Agreement was not prepared or disclosed with a view to its potential disclosure to others. Subject to Applicable Law, this information is disclosed in confidence for the purposes contemplated in the Agreement. The following Schedules are included. Schedule 1.1 (a) Seller’s Knowledge Persons Schedule 1.1 (b) Buyer’s Knowledge Persons Schedule 5.7 List of Third Party Consents required to Transaction ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA ii HOU:3443209.1 Schedule 1.1(a) Seller Knowledge Parties Pete Alyanakian David Saul Schedule 1.1(b) Buyer Knowledge Parties Jason Ellsworth Keith Holst Schedule 2.2 - Seller Bank Information for Payment Account Name: Brannon Solar, LLC Bank of America – Private Banking Los Angeles, CA ABA: 026009593 Account No: 11543-63862 Schedule 5.7 - List of Third Party Consents required to Transaction 1. Consent to Assignment Agreement executed by the City of Palo Alto 2. Amended and Restated PPA executed by the City of Palo Alto. ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA i HOU:3443209.1 Exhibit A FORM OF PPA ASSIGNMENT ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA i HOU:3443209.1 Exhibit B FORM OF AMENDED AND RESTATED PPA [TO BE ATTACHED] ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA i HOU:3443209.1 Exhibit C COPY OF SELLER STANDBY LOC (dated December 10, 2012) [To Be Attached] ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA i HOU:3443209.1 Exhibit D COPY OF SUBSTITUTE PPA COLLATERAL [To Be Attached] ASSET PURCHASE AGREEMENT BRANNON SOLAR - CLENERA ii HOU:3443209.1 Exhibit E Form of Consent to Assignment Agreement City of Palo Alto (ID # 4788) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/9/2014 City of Palo Alto Page 1 Summary Title: Rinconada Library Custom Casework Title: Award of Contract with Ross McDonald Company, Inc., in the Amount of $606,913 for Custom Casework for the Rinconada Library (CIP PE-11000 and LB-11000) From: City Manager Lead Department: Library Recommendation Staff recommends that Council: 1. Approve, and authorize the City Manager or designee to execute, the attached contract (Attachment A) with Ross McDonald Company, Inc., in the amount of $606,913 for custom casework for the Rinconada Library Project (PE-11000 and LB-11000). 2. Authorize the City Manager or designee to negotiate and execute one or more change orders to the contract with Ross McDonald Company, Inc., for related, additional but unforeseen work which may develop during the project, the total value of which shall not exceed $60,700. Discussion The work to be performed under the contract is for custom casework (built-in furnishings such as reception and express checkout counters) that will be part of the Rinconada Library project. The contract includes the fabrication and installation of 541 pieces of 30 different types of custom casework items consisting of a variety of sizes, colors, and materials. Custom casework includes all of the furniture-like items that are built into the facility to meet specific design needs and library uses. Many items are public service counters or parts of library shelving which must be secured to the structure for seismic stability. Other items are custom tables, special display racks and items that are in sizes not feasible for standard furniture. The low bid on the project of $606,913 is 19% higher than the engineer’s estimate of $508,409. Staff believes there are several reasons why bids came in higher than the estimate. The architect indicated that its estimate was based on actual prices from the Mitchell Park Library and Community Center (MPLCC). The custom casework for MPLCC was priced in early 2012. City of Palo Alto Page 2 For this estimate, the architect inflated the 2012 prices by 10%, but also indicated that a fabricator recommended inflating those prices by 22%. Furthermore, due to the nature of the unique custom pieces it is still very difficult to estimate costs. Individually, some of the custom casework items were priced below the estimate, while others came in higher than the estimate. Bid Name: IFB Number 153870 Main [Rinconada] Library Renovation Project Custom Casework Proposed Length of Project: 130 days Number of Bids Mailed to Contractors: 8 Number of Bids Mailed to Builder’s Exchanges: 0 Total Days to Respond to Bid: 21 Pre-Bid Meeting? No Number of Bids Received: 1 Bid Price Range: $606,913 *the bid form submitted by Ross McDonald Company, Inc. is included as Attachment B Staff has reviewed the single bid submitted and recommends that the bid of $606,913 submitted by Ross McDonald Company, Inc., be accepted and that Ross McDonald Company, Inc., be declared the lowest responsible bidder. Staff confirmed with the Contractor's State License Board that the contractor has an active license on file. Resource Impact Funding in the amount of $269,797 including a 10% contingency for the bondable portions of this work is available in Capital Improvement Program Project PE-11000. Funding in the amount of $397,807 including a 10% contingency for the non-bondable items is available in Capital Improvement Program Project LB-11000. Because this non-bondable expenditure is higher than anticipated, some non-bondable standard furniture items will be modified to include less expensive alternatives. These standard furniture items include but are not limited to modular staff office furniture. The bondable casework was estimated at $250,000 and was included in the Measure N bond estimate prepared in 2008. The funding amount of $269,797 will not impact any other bondable portions of the project. Policy Implications Approval of this contract is consistent with Council’s previous direction on the library’s projects and will further the projects identified in Measure N. The cost of casework was included in the Measure N bond estimate and does not represent a change in City policy. Timeline Rinconada Library is currently under construction and is expected to be opened to the public in December 2014. The casework will be installed during the summer and fall of this year. City of Palo Alto Page 3 Environmental Review On July 21, 2008, the Council confirmed the Director of Planning and Community Environment’s approval of a 2007 Addendum to the 2002 final Environmental Impact Report for the Main Library. Main Library is now officially named Rinconada Library. Attachments:  Attachment A: Rinconada Library Custom Casework Project Contract (PDF)  Attachment B: Submitted Bid Form from Ross McDonald for IFB153870 (PDF)   Invitation for Bid (IFB) Package  1 Rev. January 2014  CONSTRUCTION CONTRACT                      CONSTRUCTION CONTRACT    Contract No. C14153870        City of Palo Alto    And    Ross McDonald Company, Inc.      PROJECT  Rinconada Library Renovation Custom Casework 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 June 5, 2014 (“Execution Date”) by and between the CITY  OF PALO ALTO, a California chartered municipal corporation ("City"), and Ross McDonald Company, 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 314333. 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 April 22, 2014 , City issued an Invitation for Bids (IFB) to contractors for the  (“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 Rinconada Library Renovation Custom Casework (“Project”), located at 1213 Newell  Road, Palo Alto, CA.      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    19) Insurance Forms    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    Invitation for Bid (IFB) Package  7 Rev. January 2014  CONSTRUCTION CONTRACT    preceding section.  If a claimed inconsistency cannot be resolved through the order of precedence, the City  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 130  calendar days (130) 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 Six Hundred Six Thousand Nine Hundred and Thirteen  Dollars ($606,913.00).      [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: Matt Raschke        AND    [Include Construction Manager, If Applicable.]       City of Palo Alto     Utilities Engineering     250 Hamilton Avenue    Invitation for Bid (IFB) Package  11 Rev. January 2014  CONSTRUCTION CONTRACT       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:       Ross McDonald Company, Inc.     1154 Stealth Street     Livermore, Ca 94551     Attn: Robert Schmidt      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      Ross McDonald Company, Inc.    By:___________________________    Name:________________________    Title:__________________________    Date: _________________________        City of Palo Alto (ID # 4879) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/9/2014 City of Palo Alto Page 1 Summary Title: Ordinance Amending PAMC 2.08.190 Adding Airport to PW Director Duties Title: Adoption of an Ordinance Authorizing the Operation, Management and Control of the Palo Alto Airport by the City of Palo Alto and Amending Section 2.08.190 of Chapter 2.08 of Title 2 of the Palo Alto Municipal Code to Add the Palo Alto Airport to the Duties of the Director of Public Works From: City Manager Lead Department: Public Works Recommendation Staff recommends that the Council adopt the attached ordinance (Attachment A), finding and declaring that the City of Palo Alto (the “City”) intends to accept the operation, management and control of the Palo Alto Airport (“PAO”) after the cancellation of the ground lease between the City, as landlord, and the County of Santa Clara (County), as tenant (Lease), and amending Section 2.08.190 of Chapter 2.08 of Title 2 of the Palo Alto Municipal Code, to revise the organizational divisions of the Public Works Department and add the Palo Alto Airport to the duties of the Director of Public Works (the “Director”). Background Section 2.08.190 outlines the duties of the Director and the names of divisions within the department. In 2010, the Director reorganized the Public Works Department from eight divisions to three divisions, namely, Engineering Services, Environmental Services, and Public Services; however, this reorganization has not been sanctioned by ordinance amending Section 2.08.190. In 2013, the Director hired an Airport Manager, who began serving as the City’s liaison to the County to assist with the early termination of the Lease in order that the City may assume the sole operation, management and control of PAO. The Airport Division is the Department’s fourth Division. The attached ordinance will amend the Public City of Palo Alto Page 2 Works Department’s organization chart, reducing from eight divisions to four divisions. Discussion The State of California, Department of Transportation, Division of Aeronautics, has issued an Airport Permit for a Public-Use Airport for PAO (the “Permit”). The Permit identifies the City as the owner of PAO and the County of Santa Clara as the operator of PAO. It is anticipated that the City will assume the sole operation, management and control of PAO in August 2014 under the auspices of the Public Works Department. Therefore, the duties of the Director are being updated to reflect the additional duties of operating, managing and controlling PAO. The operation of PAO as a public use airport requires compliance with federal, state, and local laws, rules, regulations, policies, assurances, terms and conditions. In assuming the operation, management and control of PAO, the City is required to comply with all applicable federal, state and local laws, rules, regulations, policies, assurances, terms and conditions in exercising the operation and management of PAO, including awarding contracts, leases and licenses and issuing permits. Policy Implications These recommendations are consistent with City policies, which require active positions to be listed in the Table of Organization. Resource Impact There is no resource impact associated with this recommendation or report. As outlined in the Fiscal Year 2015 Proposed Budget document, in order to assume control of the Palo Alto Airport and support Airport operations, a loan of $560,000 from the General Fund is recommended for Fiscal Year 2015. Environmental Review This adoption of the ordinance is not considered a project under the California Environmental Quality Act; therefore, no environmental review is required. Attachments:  Attachment A - Draft Ordinance (PDF) *****NOT YET APPROVED***** Ordinance No. Ordinance of the Council of the City of Palo Alto Authorizing the Operation, Management and Control of the Palo Alto Airport By the City of Palo Alto and Amending Section 2.08.190 of Chapter 2.08 of Title 2 of the Palo Alto Municipal Code to Add the Palo Alto Airport to the Duties of the Director of Public Works The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Findings. (A) The Palo Alto Historical Society reports in PALO ALTO A Centennial History (1993), at 161-163, that a municipal airport has existed in Palo Alto since the early 1930s. Its operation as a municipal airport was suspended during World War II. A part of the airport then was located in San Mateo County. In 1946, the airport opened with two runways, but, by the early 1950s, one of two runways was relocated to make room for the Palo Alto Municipal Golf Course. Since 1963, the airport has operated wholly within Santa Clara County. Since 1967, federal air controllers have operated at the airport. (B) Palo Alto Airport (“PAO”) is located at 1925 Embarcadero Road, Palo Alto, County of Santa Clara, State of California; it has a bearing of Latitude: 37° 27' 40” N and Longitude: 122° 06' 54” W. PAO is approved for day and night use. Runway 13/31 is 2,443 feet in length; left traffic is assigned to Runway 13 and right traffic is assigned to Runway 31. (C) Pursuant to California Public Utilities Code Section 21662, the State of California, Department of Transportation, Division of Aeronautics, has issued an Airport Permit for a Public-Use Airport for PAO (the “Permit”). The Permit identifies the City of Palo Alto (the “City”) as the owner of PAO and the County of Santa Clara (the “County”) as the operator of PAO. PAO is maintained in accordance with Title 21, Sections 3525 through 3560 of the California Code of Regulations. (D) Pursuant to California Constitution Article 11, Sections 5, 7 and 9, and California Government Code Sections 50001 and 50470 through 50485.14, the City, as a chartered city and a local agency, is empowered to use land that it owns as a site for an airport. That includes, without limitation, the power and right to construct improvements, incur and issue debt, levy taxes, permit rental car agencies and aircraft maintenance on-site, grant leases and licenses to the State of California and the United States of America, and in the interest of the public health, safety and welfare, regulate airport hazards and adopt airport zoning regulations, in the ownership, operation, management and control of an airport. 1 140603 sdl 00710406 (E) Pursuant to Article II of the Charter of the City of Palo Alto, the government of the City of Palo Alto has and may exercise all powers necessary and appropriate to a municipal corporation which are not prohibited by the California Constitution. This power includes the power and right to operate a municipal airport. (F) Pursuant to Palo Alto Municipal Code (“PAMC”) Section 2.08.050(a), the City Manager is authorized to adopt rules and regulations regarding the public’s use of any city- owned real property, building, structure or facility. Pursuant to PAMC Section 2.08.190(a)(1) the director of public works-city engineer is responsible for the construction, maintenance and repair, and improvement of all city facilities and property owned or operated by the City. Under both of these PAMC provisions, the City is authorized to own, operate, manage and control a municipal airport. (G) In 1967, the City, as landlord, and the County, as tenant, entered into a ground lease of PAO (the “Lease”). The City and the County (the “Parties”) intend to early terminate the Lease in order that the City may assume sole operation, management and control of PAO. To effectuate that purpose, the Parties will enter into a Termination, Assignment and Assumption Agreement and several other contracts that will effectively transfer the operation, management and control of PAO from the County to the City between August 2014 and December 2014 (the “Effective Transfer Date”). (H) The operation of PAO as a public airport requires compliance with federal, state, and local laws, rules, regulations, policies, assurances, terms and conditions. The City recognizes that its ability to regulate operations at PAO is significantly limited by federal law, including, without limitation, by the provisions of 49 U.S.C. sections 40101 through 46507, 14 C.F.R. part 16 et seq. and the orders of the Federal Aviation Administration (“FAA”). (I) In assuming operation, management and control of PAO, the City is required to comply with all applicable federal, state and local laws, rules, regulations, policies, assurances, terms and conditions in exercising the operation and management of PAO, including, without limitation, awarding contracts, leases and licenses and issuing permits on a nondiscriminatory basis. SECTION 2. The Council of the City of Palo Alto hereby declares that the City of Palo Alto, California has the legal authority under California law, the Charter of the City of Palo Alto, and the Palo Alto Municipal Code to own, operate, manage, control, plan, design, construct, maintain, repair and improve a municipal airport, including the Palo Alto airport. The Council hereby authorizes the City Manager and his designee, the Director of Public Works or his designee, the Airport Division manager, to assume and undertake the full and complete operation, management and control of PAO promptly upon the Effective Transfer Date in accordance with applicable federal, state and local laws, rules, regulations, policies, assurances, terms and conditions. 2 140603 sdl 00710406 SECTION 3. Section 2.08.190 of Chapter 2.08 of Title 2 of the Palo Alto Municipal Code is amended to read, as follows: 2.08.190 Department of Public Works. (a) The department of public works shall be under the direction of the director of public works-city engineer, who shall be accountable to the city manager. The duties of the director of public works shall be as follows: (1) To be responsible for the planning, design, construction, maintenance, repair and improvement of all city facilities and property owned or operated by the city, except as otherwise provided in this code; (2) To assist with the preparation of the capital improvement program and assist the city manager, as directed, in reviewing capital project budget requests; (3) To provide engineering services as required including development and implementation of capital improvement program projects; (4) To provide permitting and inspection services relating to private construction of public facilities and private construction affecting city property; (5) To inspect all construction work done by or for the city and require compliance with all contracts made in connection therewith; (6) To prepare or cause to be prepared all official maps of the city and to keep and maintain such records as are necessary for the fulfillment of the department's function; (7) To operate the physical plant regarding the assignment of space, the maintenance of the buildings, and the recommendation of such rules and regulations as are proper for the efficient use of the facilities; (8) To maintain all public structures owned or operated by the city, and to establish a maintenance program including janitorial services, security and safety, for the upkeep of all public structures owned or operated by the city, and to report the condition of such structures; (9) To schedule repairs and preventative maintenance to ensure that the streets and sidewalks are maintained in a safe, and structurally sound, and sanitary manner, and to maintain all markings for traffic control painted or placed upon the streets or curbs; 3 140603 sdl 00710406 (10) To maintain trees, parking lots, paved bicycle paths, and underpasses in a safe and aesthetic manner; and to maintain trees adjacent to electric power lines in order to minimize electrical outages caused by tree limbs; (11) To coordinate the needs of the city departments in their requirements for motorized equipment, to operate the city garage, actively supervise a preventative maintenance program, keep the operating records of all motorized equipment used or operated by the city, monitor the use of pool cars, and maintain fuel sites at city facilities; (12) To be responsible for the management, regulation, operation, system rehabilitation, and capital improvements of the storm and surface water management enterprise, and to coordinate related activities with interested municipalities or special districts; (13) To be responsible for refuse collection, source reduction, recycling, landfill operations, street sweeping, and long term resource recovery and disposal activities of the refuse enterprise; (14) To be responsible for the operation of the regional water quality control plant, on behalf of the city and its partner agencies within the regional service area; the permitting and enforcement of regulations with respect to industrial discharges into the sewer system; and the development of programs and treatment methods to ensure the maximum feasible compliance with regulations protecting the San Francisco Bay and environment; (15) To perform or cause to be performed all duties required by this code or other law of the city engineer, superintendent of public works, the superintendent or manager of the water quality control plant, and the street superintendent; (16) To be responsible for the general aviation operation and management of the Palo Alto municipal airport, the adoption and enforcement of general aviation rules and regulations applicable to invitees and third parties doing general aviation-related business at the airport, and the management and control of all general aviation- and non-general aviation- related leases, licenses, permits, easements and other contracts and authorizations issued to or in connection with invitees and third parties doing business at the airport. (1617) To perform such other duties as may be required. (b) For organizational purposes, the department of public works shall consist of the following divisions: public works administration, engineering services, storm and surface water management, facilities management, operations, refuse, water quality control, and equipment management; public services; environmental services; and airport. 4 140603 sdl 00710406 SECTION 4. The Council finds that the amendment to Section 2.08.190 of Chapter 2.08 of Title 2 of the Palo Alto Municipal Code does not meet the definition of a project under the California Environmental Quality Act pursuant to California Public Resources Code Section 21065 and, therefore, no environmental impact assessment is necessary. SECTION 5. This ordinance shall become effective upon the expiration of thirty (30) days from its passage. INTRODUCED: PASSED: AYES: NOES: ABSTENTIONS: ABSENT: ATTEST: ____________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ____________________________ Senior Assistant City Attorney City Manager ____________________________ Director of Public Works 5 140603 sdl 00710406 City of Palo Alto (ID # 4891) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/9/2014 City of Palo Alto Page 1 Summary Title: Retiree Healthcare Valuation Report Title: Accept the Retiree Healthcare Plan GASB 45 Actuarial Valuation as of June 30, 2013 and Approve Full Funding of the Annual Required Contribution From: City Manager Lead Department: Administrative Services Recommendation Staff and the Finance Committee recommend that Council accept the June 30, 2013 actuarial valuation of Palo Alto’s Retiree Healthcare Plan and approve full funding of the Annual Required Contribution for Fiscal Year 2015 and Fiscal Year 2016. Executive Summary At the May 27, 2014 Finance Committee Meeting, the Finance Committee reviewed the June 30, 2013 actuarial valuation of Palo Alto’s Retiree Healthcare Plan and recommended that the City Council approve full funding of the Annual Required Contribution for Fiscal Year 2015 and Fiscal Year 2016. BACKGROUND GASB 45 requires the City to complete an actuarial study on a biennial basis, to determine the retiree medical liability and how much the City should be setting aside each year to fund the annual required contribution (ARC). DISCUSSION At the May 27, 2014 Finance Committee Meeting, the Finance Committee reviewed the June 30, 2013 actuarial valuation of Palo Alto’s Retiree Healthcare Plan (see Attachment A) and recommended that the City Council approve full funding of the Annual Required Contribution for Fiscal Year 2015 and Fiscal Year 2016 (see Attachment B, Minutes Excerpt). The attached Finance Committee Report and Retiree Healthcare Plan valuation provided by Bartel Associates, the City’s actuary, provides a summary and detail of the current plan status and annually required contributions. For Fiscal Year 2015, the annual required contribution (ARC) is set at $14.3 million for all funds and for Fiscal Year 2016, the annual required contribution is set at $14.7 million. City of Palo Alto Page 2 The report also details the various reasons for the change of the Unfunded Actuarial Liability (UAL). In comparison to the last report, as of June 30, 2011, the UAL net increased by approximately $20 million from $123.3 million to $143.5 million primarily due to the inclusion of a new actuarial standard of practice regarding the implied subsidy. The implied subsidy added $41.4 million to the liability. According to the Bartel Associates’ web site, “CalPERS…blends active employees with pre-Medicare retirees and charges them the same medical premium…However, younger employees on average are…subsidizing older employees and retirees … The Implied Subsidy is the difference between average retiree claims and premiums charged by…CalPERS.” Without this new actuarial standard of practice, the UAL would have decreased. RESOURCE IMPACT The Fiscal Year 2015 Proposed Budget includes the cost to fully fund the Annual Required Contribution of $14.3 million for all funds ($9.6 million for the General Fund). If this report is approved by the City Council, the Fiscal Year 2016 Proposed Budget will include $14.8 million to fund the ARC for all funds ($10.0 million for the General Fund). ENVIRONMENTAL REVIEW The action recommended is not a project for the purposes of the California Environmental Quality Act. Attachments:  Attachment A: Retiree Healthcare Valuation Staff Report to Finance Committee May 27, 2014 (PDF)  Attachment B: 05-27-14 FCM transcript excerpt (DOCX) City of Palo Alto (ID # 4833) Finance Committee Staff Report Report Type: Action Items Meeting Date: 5/27/2014 City of Palo Alto Page 1 Summary Title: Retiree Healthcare Plan Actuarial Valuation Title: Accept the Retiree Healthcare Plan GASB 45 Actuarial Valuation as of June 30, 2013 From: City Manager Lead Department: Administrative Services RECOMMENDED MOTION The Finance Committee accepts the June 30, 2013 actuarial valuation of Palo Alto’s Retiree Healthcare Plan and recommends that the City Council approve full funding of the Annual Required Contribution (ARC) for Fiscal Year 2015 and Fiscal Year 2016. RECOMMENDATION Staff recommends that the Finance Committee accepts the June 30, 2013 actuarial valuation of the Palo Alto’s Retiree Healthcare Plan and recommends to the City Council to fully fund the Annual Required Contribution for Fiscal Year 2015 and Fiscal Year 2016. EXECUTIVE SUMMARY This report provides the Finance Committee with the actuarial study results required by the Government Accounting Standards Board's (GASB) Statement No. 45, Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions. (See Attachment A: June 30, 2013 GASB 45 Actuarial Valuation) The results of this study as compared to the 2011 study show a 9.6 percent increase in citywide costs, with the Annual Required Contribution (ARC) increasing from $13.0 million in FY 2014 to $14.3 million in FY 2015. In addition, the City’s actuarial unfunded liability is valued at $143.6 million as of June 30, 2013, a 16 percent increase over the $123.3 million unfunded liability as of June 30, 2011. The increase in the actuarial unfunded liability is primarily due to an upcoming actuarial standard which requires that actuaries need to account for the “implied subsidy” in the analysis of the unfunded liability. According to the Bartel Associates’ web site, “CalPERS…blends active employees with pre- Medicare retirees and charges them the same medical premium…However, younger employees on average are…subsidizing older employees and retirees … The Implied Subsidy is the difference between average retiree claims and premiums charged by…CalPERS.” Attachment A City of Palo Alto Page 2 BACKGROUND GASB 45 requires the City to complete an actuarial study on a biennial basis, to determine the retiree medical liability and how much the City should be setting aside each year to fund the annual required contribution (ARC). Funding the ARC, as determined by Bartel Associates, City’s actuary, is paramount so that the City pays off the unfunded liability within 30 years. In Fiscal Year 2008, the City established an irrevocable trust with California Employers Retirees Benefit Trust (CERBT) for retiree medical benefits. In Fiscal Year 2008, the City transferred $33.8 million to the trust, with annual contributions each year thereafter. As of June 30, 2013, the market value of the trust was $60.1 million, with a projected June 30, 2014 value of $73.1 million. In comparison, the Actuarially Accrued Liability (AAL) for Retiree Medical was valued for June 30, 2013 at $203.6 million, indicating a 29% funded ratio. For June 30, 2014, that AAL is projected at $213.5 million, indicating a 34% funded ratio per the report submitted by Bartel Associates (see slide 25 of Attachment A). DISCUSSION Bartel Associates completed a June 30, 2013 actuarial valuation for the City on May 20, 2014 (Attachment A) that valued the City's unfunded retiree medical liability at $143.5 million, compared to the unfunded liability of $123.3 million on January 1, 2011 – an increase of $20 million or 16%. The Annual Required Contribution (ARC) associated with the valuation is $14.3 million for FY 2015 for all funds. This is an increase of $1.3 million (10%) over the FY 2014 ARC of $13.0 million. The General Fund’s portion of the citywide ARC is $9.6 million representing a $0.6 million, or 6 percent, increase over the FY 2014 General Fund ARC of $9.1 million. The FY 2016 ARC for all funds is projected at $14.8 million, with the General Fund’s portion at $10.0 million. The net increase in the City’s retiree medical liability between the 2011 and 2013 valuations is attributable to the actuarial valuation changes, demographic changes, and investment returns. The primary increase to the City’s unfunded liability is due to the “implied subsidy”, change in the benefits structure, and mortality improvements partially offset with lower than expected healthcare premiums, positive investment returns, , demographic changes, and the recently approved agreement with the Service Employees International Union (SEIU) contract. 1. Implied Subsidy: The new Implied Subsidy valuation adds $41.4 million to the liability and $3.5 million to the citywide ARC (slide 45). According to the Bartel Associates’ web site, “CalPERS…blends active employees with pre-Medicare retirees and charges them the same medical premium…However, younger employees on average are…subsidizing older employees and retirees … The Implied Subsidy is the difference between average retiree claims and premiums charged by…CalPERS.” Attachment A City of Palo Alto Page 3 Cities will soon be required to account for the “implied subsidy” contained in active employees’ retiree medical premiums, as part of their retiree medical liability. The Actuarial Standards Board’s new Actuarial Standard of Practice (ASOP 6) requires inclusion of the Implied Subsidy for valuations after March 31, 2015. Agencies are also encouraged to make the change earlier if possible. Staff recommends adopting this change as part the FY 2015 ARC calculation. 2. Mortality Improvements: Mortality improvement (people are living longer) projections for actives and retirees added $5.3 million to the unfunded liability and $0.6 million to the ARC. 3. Healthcare Premiums: Less-than-expected increases in CalPERS premiums reduced the unfunded liability by $35.7 million. 4. Investment Return: Increase in market value of the CERBT from $49.2 million on June 30, 2012 to $60.1 million on June 30, 2013 (22 percent increase), due to increased contributions from the City and investment returns. (See slide 22 in Attachment A for details regarding annual returns on CERBT.) 5. Memorandum of Agreement with SEIU The recently adopted agreement with SEIU, which includes fixed healthcare premium amounts for each of the next two years, reduced about $1.9 million of the unfunded liability. The change in the valuation results is summarized by the table on slide 25 of Bartel Associates’ report (see below): Attachment A City of Palo Alto Page 4 RESOURCE IMPACT The Fiscal Year 2015 Proposed Budget includes the cost to fully fund the Annual Required Contribution of $14.3 million for all funds ($9.6 million for the General Fund). If this report is approved by the City Council, the Fiscal Year 2016 Proposed Budget will include $14.8 million to fund the ARC for all funds ($10.0 million for the General Fund). ENVIRONMENTAL REVIEW The action recommended is not a project for the purposes of the California Environmental Quality Act. Attachments:  Attachment A: Bartel Associates, Retiree Healthcare Valuation (as of June 30, 2013) Report (PDF) Attachment A CITY OF PALO ALTO RETIREE HEALTHCARE PLAN June 30, 2013 GASB 45 Actuarial Valuation Presented by John E. Bartel, President Prepared by Deanna Van Valer, Assistant Vice President & Actuary Mary Beth Redding, Assistant Vice President & Actuary Adam Zimmerer, Actuarial Analyst Bartel Associates, LLC May 20, 2014 Agenda O:\Clients\City of Palo Alto\Projects\OPEB\2013 Val\Reports\BA PaloAltoCi 14-05-20 OPEB 6-30-13 Final Results.docx Topic Page Benefit Summary 1 Implied Subsidy 6 Participant Statistics 9 Actuarial Assumptions Highlights 15 Actuarial Methods 20 Assets 22 Results 25 Assumption Sensitivities 42 Benefit Sensitivities 47 Actuarial Certification 49 Exhibits 50 Results by Fund and Department E-41 Attachment A May 20, 2014 1 BENEFIT SUMMARY  Eligibility  Retire directly from the City under CalPERS (age 50 and 5 years of CalPERS service or disability)  Medical Provider  CalPERS health plans (PEMHCA)  CalPERS administrative fees paid by City  Retiree Medical Hired < 1/1/04 (1/1/05 SEIU, 1/1/06 PAPOA)  GROUP 1: Retired < 1/1/07 (3/1/09 for PAPOA) • Full premium up to family coverage  GROUP 2: Retired between 1/1/07 (3/1/09 for PAPOA) and 5/1/11 (12/1/11 for IAFF) • Same as above but premium limited to 2nd most expensive Basic (non-Medicare) medical plan in the Bay Area Region (Blue Shield in 2012 & 2013, United Healthcare for 2014)  GROUP 3: Retired ≥ 5/1/11 (12/1/11 for IAFF) • 90% of premium up to 90% of Group 2 cap • PAPOA gets 100% (same as Group 2) • SEIU limited to dollar caps subject to bargaining for 2014 and later (see slide #3) May 20, 2014 2 BENEFIT SUMMARY  Retiree Medical Hired ≥ 1/1/04 (1/1/05 SEIU, 1/1/06 PAPOA)  GROUP 4: Vesting schedule (based on all CalPERS Service)1: Years of Service % < 10 0% 10 50% ↓ ↓ > 20 100%  100% vesting for disability retirements  Vesting applies to 100/90 formula amounts: 2012 2013 2014 Single $ 566 $ 622 $ 642 2-Party 1,074 1,183 1,218 Family 1,382 1,515 1,559  If have 20 years City service do not need to retire directly from City  Dental, Vision & Medicare Part B  None 1 Minimum 5 years City Service. Attachment A May 20, 2014 3 BENEFIT SUMMARY  Surviving Spouse Benefit  100% of retiree benefit continues to surviving spouse if retiree elects CalPERS pension survivor allowance  Waived Re- election  Waived retirees/beneficiaries may re-elect coverage at a future date  Pay-As-You- Go ($000s) (Cash only)  FY 2013/14 $8,800 estimated from data  FY 2012/13 $8,766 (from CAFR)  FY 2011/12 $8,165 (from CAFR)  FY 2010/11 $6,216  FY 2009/10 $5,519  SEIU Group 3 Medical Benefit  100% of premium limited to fixed dollar caps (which will be subject to bargaining) 2014 2015 Single $ 688 $ 708 2-Party 1,375 1,415 Family 1,788 1,840  Affects all SEIU Group 3 retirees and active employees May 20, 2014 4 BENEFIT SUMMARY Changes to Prior Valuation Benefit Group Prior Benefit Current Benefit  Group 3 Non- Safety  Full premium (up to family coverage) limited to 2nd most expensive Basic (non-Medicare) plan in Bay Area Region in 2011  All premium increases starting 1/1/11 shared evenly between City and employee, up to 10% of increase per year  90% of premium (up to family coverage) limited to 90% of 2nd most expensive Basic (non- Medicare) medical plan in the Bay Area Region  Group 4 Non- Safety  Vesting schedule applied to 2011 100/90 formula amounts  All premium & 100/90 formula increases starting 1/1/11 shared evenly between City and employee, up to 10% of increase per year  Vesting schedule applied to 100/90 formula amounts (additional detail on slide 2) Attachment A May 20, 2014 5 BENEFIT SUMMARY Monthly Benefit Cap Amounts 2013 20142 Group Single 2-Party Family Single 2-Party Family Group 13 $1,083.11 $2,166.22 $2,816.09 $ 836.59 $1,673.18 $2,175.13 Group 2 784.63 1,569.26 2,040.04 764.24 1,528.48 1,987.02 Group 34 706.17 1,412.33 1,836.04 687.82 1,375.63 1,788.32 Group 45 622.00 1,183.00 1,515.00 642.00 1,218.00 1,559.00 % Decrease from Group 1 Group 2 28% 28% 28% 9% 9% 9% Group 3 35% 35% 35% 18% 18% 18% Group 4 43% 55% 46% 23% 27% 28% 2 Large drop in most expensive premiums in 2014 due to PERS premium methodology change. 3 No cap for Group 1. Amount shown is most expensive Non-Medicare Bay Area region premium. 4 Except PAPOA 5 Assuming 20 years of service/100% vesting May 20, 2014 6 IMPLIED SUBSIDY  Background • For PEMHCA, employer cost for allowing retirees to participate at active rates. • GASB 45 defers to actuarial standards of practice. • Actuarial Standards of Practice No. 66 (ASOP 6) allows community rated plans to value their liability using premiums, resulting in no implied subsidy. 6 Measuring Retiree Group Benefits Obligations and Determining Retiree Group Benefits Plan Costs or Contributions. 25 30 35 40 45 50 55 60 65 Blended Premium $610 $610 $610 $610 $610 $610 $610 $610 $610 Cost by Age $343 $398 $442 $486 $586 $652 $752 $885 $1,041 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,100 Attachment A May 20, 2014 7 IMPLIED SUBSIDY  In April 2012, Actuarial Standards Board released 2nd Exposure Draft for ASOP 6: • Would require implied subsidy valued for community rated plans such as PEMHCA. • Timing:  First Exposure Draft issued April 2012 (July 15, 2012 comment deadline)  Second Exposure Draft issued March 2013 (August 30, 2013 comment deadline)  Final Standard issued May 2014  Effective date March 31, 2015 with earlier implementation encouraged  Implied Subsidy impact depends on a number of factors including: • CalPERS provided information • Miscellaneous/Safety mix • Active/retiree proportions • Level of pre-funding May 20, 2014 8 IMPLIED SUBSIDY Estimated 2013/14 Implied Subsidy Transfer for Medical Coverage For Illustrative Purposes Only (Amounts in 000’s) Before GASB 45 Actives Retirees Total  Total Premium7 $ 15,343 $ 9,006 $ 24,349  Member Contribution8 - (103) (103)  Employer Contribution 15,343 8,903 24,246 After GASB 45 Actives Retirees Total  Total Premium $ 15,343 $ 9,006 $ 24,349  Member Contribution - (103) (103)  Implied Subsidy Transfer (1,852) 1,852 -  Employer Contribution 13,491 10,755 24,246 7 Estimated premium based on the 6/30/13 participant data and 2013 &2014 premiums 8 Assumes no member contribution for actives Attachment A May 20, 2014 9 PARTICIPANT STATISTICS Participant Statistics 9 From 1/1/09 Milliman report 10 1 retiree with missing birth date assumed to retire at average retirement age 11 Excludes 3 retirees with missing retirement date 12 All retirements included. Disability retirement data unreliable. 6/30/099 6/30/11 6/30/13  Actives • Count 955 923 948 • Average Age 45.3 44.7 45.2 • Average City Service 11.2 10.8 10.8 • Average PERS Service 13.7 11.7 • Average Salary $103,602 $86,007 $86,271 • Total Salary (000’s) $98,940 $79,384 $81,785  Retirees: • Count 710 860 968 • Average Age10 67.2 67.0 68.2 • Average Retirement Age11 o Service n/a 55.512 57.8 o Disability n/a n/a 45.3 May 20, 2014 10 PARTICIPANT STATISTICS Participant Statistics June 30, 2013 13 Group 3 PAPOA have Group 2 benefits 14 Actual 2012/13 pay paid for those hired < 7/1/12. New hire pay is annualized. 15 1 retiree with missing birth date assumed to retire at average retirement age 16 Excludes 3 retirees with missing retirement date Group 1 Group 2 Group 313 Group 4 Total  Actives • Count n/a n/a 518 430 948 • Average Age n/a n/a 49.1 40.6 45.2 • Average Entry Age n/a n/a 32.0 35.4 33.5 • Average City Service n/a n/a 16.5 4.0 10.8 • Average PERS Service n/a n/a 17.1 5.2 11.7 • Average Salary n/a n/a $92,284 $79,027 $86,271 • Total Salary (000’s)14 n/a n/a $47,803 $33,982 $81,785  Retirees: • Count 617 308 34 9 968 • Average Age15 72.6 61.0 56.0 56.1 68.2 • Avg Service Ret Age16 57.9 58.0 55.7 57.5 57.8 • Avg Disability Ret Age 45.2 46.8 47.5 31.1 45.3 Attachment A May 20, 2014 11 PARTICIPANT STATISTICS Participant Statistics June 30, 2013 17 Actual 2012/13 pay paid for those hired < 7/1/12. New hire pay is annualized. 18 1 retiree with missing birth date assumed to retire at average retirement age 19 Excludes 3 retirees with missing retirement date Miscellaneous Police Fire Total  Actives • Count 765 82 101 948 • Average Age 46.4 38.5 42.1 45.2 • Average City Service 10.8 10.0 12.2 10.8 • Average PERS Service 11.7 10.8 12.8 11.7 • Average Salary $80,179 $117,217 $107,291 $86,271 • Total Salary (000’s)17 $61,337 $9,612 $10,836 $81,785  Retirees: • Count 690 121 157 968 • Average Age18 68.9 64.4 67.6 68.2 • Avg Service Ret Age19 58.8 52.1 54.5 57.8 • Avg Disability Ret Age 48.4 40.6 47.3 45.3 May 20, 2014 12 PARTICIPANT STATISTICS Participant Statistics June 30, 2011 20 1 retiree with missing birth date assumed to retire at average retirement age 21 Excludes 3 retirees with missing retirement date. All retirements included. Data on disability retirements unreliable. Miscellaneous Police Fire Total  Actives • Count 737 82 104 923 • Average Age 45.7 38.2 43.4 44.7 • Average City Service 10.4 10.8 14.0 10.8 • Average PERS Service 13.8 11.4 15.0 13.7 • Average Salary $78,762 $117,924 $112,185 $86,007 • Total Salary (000’s) $58,047 $9,670 $11,667 $79,384  Retirees: • Count 659 87 114 860 • Average Age20 67.5 63.0 67.2 67.0 • Average Retirement Age21 57.2 47.9 52.1 55.5 Attachment A May 20, 2014 13 PARTICIPANT STATISTICS Data Reconciliation 6/30/2011 to 6/30/2013 Actives Retirees Disabled Benefic. Total  June 30, 2011 923 787 73 - 1,783 • New Hires/Rehires 143 - - - 143 • Disabled (7) - 7 - - • Terminated22 (62) - - - (62) • Died with Benefic.23 - (56) (3) 59 - • Died, no Beneficiary (28) (2) (30) • Retired (50) 50 - - - • Reinstatement 1 (1) - - - • Retired  Disabled (84) 84 - • Adjustment/Other - 34 21 27 82  June 30, 2013 948 702 180 86 1,916 22 All actives in June 30, 2011 valuation and not in June 30, 2013 valuation assumed terminated. 23 Retirees in the June 30, 2011 valuation not in the June 30, 2013 valuation assumed deceased. May 20, 2014 14 PARTICIPANT STATISTICS Medical Plan Participation – January 1, 2014 Non-Waived Participants Retirees Medical Plan Actives < 6524 ≥ 6525 Total Miscellaneous/Safety M S M S M S M S Anthem BC Select 1% 1% 0% 0% 0% 0% 0% 0% Anthem BC Traditional 19% 17% 6% 11% 0% 0% 4% 9% Blue Shield 12% 3% 27% 18% 33% 16% 29% 18% Blue Shield NetValue 6% 4% 1% 4% 0% 0% 0% 3% Kaiser 37% 32% 28% 15% 27% 41% 28% 20% PERS Choice 13% 1% 29% 0% 23% 9% 27% 2% PERS Select 0% 0% 1% 0% 0% 0% 0% 0% PERSCare 2% 1% 2% 2% 16% 22% 6% 6% PORAC 1% 35% 2% 47% 1% 13% 2% 41% United Healthcare 10% 7% 4% 4% 1% 0% 3% 3% Total 100% 100% 100% 100% 100% 100% 100% 100% 24 Only includes employees who retired on or after June 30, 2008. 25 Only includes retirees up to age 70. Attachment A May 20, 2014 15 ACTUARIAL ASSUMPTIONS HIGHLIGHTS June 30, 2011 Valuation June 30, 2013 Valuation  Valuation Date  June 30, 2011  Fiscal Years 2012/13 & 2013/14 ARCs (end of year)  1 year lag  June 30, 2013  Fiscal Years 2014/15 & 2015/16 ARCs (end of year)  1 year lag  Funding Policy  Full Pre-funding through CalPERS trust (CERBT)  Asset allocation #1 beginning 6/30/2011  Same  Discount Rate  7.61% (no Margin for Adverse Deviation)  Same  Sensitivity analysis at 7.25%  Payroll Increases  Aggregate Increases – 3.25%  Merit Increases – CalPERS 1997-2007 Experience Study  Same May 20, 2014 16 ACTUARIAL ASSUMPTIONS HIGHLIGHTS June 30, 2011 Valuation June 30, 2013 Valuation  Increase to Dollar Caps for SEIU Group 3  N/A  ½ of Medical Trend, not less than assumed inflation (3.0%). Increase is for purposes of financial projection only and does not imply any obligation to increase the cap in the future  Medical Trend Increase from Prior Year Year Non-Medicare Medicare 2011 Premiums 2012 Premiums 2013 9.0% 9.4% 2014 8.5% 8.9% 2015 8.0% 8.3% 2016 7.5% 7.8% 2017 7.0% 7.2% 2018 6.5% 6.7% 2019 6.0% 6.1% 2020 5.5% 5.6% 2021+ 5.0% 5.0% Increase from Prior Year Year Non-Medicare Medicare 2011 n/a 2012 n/a 2013 Premiums 2014 Premiums 2015 8.0% 8.3% 2016 7.5% 7.8% 2017 7.0% 7.2% 2018 6.5% 6.7% 2019 6.0% 6.1% 2020 5.5% 5.6% 2021+ 5.0% 5.0% Attachment A May 20, 2014 17 ACTUARIAL ASSUMPTIONS HIGHLIGHTS June 30, 2011 Valuation June 30, 2013 Valuation  Participation at Retirement  DOH < 1/1/04: 100%  DOH > 1/1/04: 95%  Employees with cost sharing: reduce above %’s by 5%  Groups 1 & 2: already retired  Group 3: 90%  Group 4: 85% May 20, 2014 18 ACTUARIAL ASSUMPTIONS HIGHLIGHTS June 30, 2011 Valuation June 30, 2013 Valuation  Retirement, Mortality, Termination, Disability  CalPERS 1997-2007 Experience Study Misc Fire Police Benefit 2.7%@55 3%@50 3%@50 2%@6026 ERA27 57.5 54.5 54.0  CalPERS 1997-2007 Experience Study  Includes fully generational mortality projected with Scale AA  Sensitivity analysis without mortality projection Misc Fire & Police Tier 1 2.7%@55 3%@50 ERA27 59.3 55.7 & 54.5 Tier 2 2%@6026 3%@5528 ERA 61.1 n/a & 59.7 PEPRA29 2.5%@67 2.7%@57 ERA 61.0 n/a & 56.8 26 Applies to non-PEPRA (Classic) employees hired after 7/17/2010 27 Expected Retirement Age 28 Applies to non-PEPRA (Classic) Police employees hired after 12/7/2012 and Fire employees hired after 6/7/2012 29 Applies to employees hired after 1/1/2013 and considered “New Members” under PEPRA Attachment A May 20, 2014 19 ACTUARIAL ASSUMPTIONS HIGHLIGHTS June 30, 2011 Valuation June 30, 2013 Valuation  Medical Plan at Retirement & Retirees Attaining age 65  Rates based on elections in June 30, 2011 data (see slide E-34 for further details)  Rates based on elections in January 2014 (see slide E-34 for further details)  Family Coverage at Retirement  Actives • Misc : 10% until age 65 • Safety : 20% until age 65  Retirees: based on current elections until age 65  Actives • Misc : 15% until age 65 • Safety : 40% until age 65  Retirees: based on current elections until age 65  Waived Retiree Re-election  N/A  Pre-65 – 20% re-elect at age 65  Post-65 – 0%  CalPERS Service  City service plus ½ service between age 30 and City hire date  Actual data May 20, 2014 20 ACTUARIAL METHODS Method June 30, 2011 Valuation June 30, 2013 Valuation  Cost Method  Entry Age Normal Level % of Pay  Same  Unfunded Liability Amortization  30 years open period30  30 years closed period  Sensitivity analysis: 25 & 20 year periods  Actuarial Asset Value  Market Value of Assets31  Same  Future New Entrants  Closed group – no new participants  Same  Implied Subsidy  No implied subsidy valued  Implied subsidy valued  Sensitivity: no implied subsidy 30 30-year open amortization period meets GASB 45 accounting standards but results in negative amortization and does not meet a funding policy consistent with paying off the City’s unfunded liability. 31 Using Market Value of Assets to determine the ARC will result in more volatile future ARCs than if a smoothed Market Value were used. Attachment A May 20, 2014 21 ACTUARIAL METHODS Method June 30, 2011 Valuation June 30, 2013 Valuation  Plan Continuance  For purposes of financial projections, the plan and benefits are assumed to continue unchanged. The calculation of this accounting obligation does not imply that there is any legal liability to provide or continue providing the benefits valued. May 20, 2014 22 ASSETS Market Value of Plan Assets – CERBT (Amounts in 000’s) 2010/11 2011/12 2012/13 Projected 2013/1432  MVA (Beg. of Year) $ 34,014 $ 44,774 $ 49,238 $ 60,070 • Contributions 2,447 4,419 5,248 4,149 • Benefit Payments33 - - - - • Admin. Expenses (50) (52) (80) (95) • Investment Return 8,363 97 5,664 9,017  MVA (End of Year) 44,774 49,238 60,070 73,141  Approx. Annual Return 24.4% 0.1% 11.2% 14.7% 32 Projected from actual 12/31/2013 balance using assumed rate of return for last half of fiscal year. 33 Benefit Payments made outside of trust by City. Refer to Slide 3 for fiscal year amounts. Attachment A May 20, 2014 23 ASSETS Historical Assets (Amounts in 000’s) $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 6/30/07 6/30/08 6/30/09 6/30/10 6/30/11 6/30/12 6/30/13 Proj 6/30/14 Market Value of Assets May 20, 2014 24 ASSETS Historical Returns34 34 Projected return for 2013/14 uses actual investment return for first half of fiscal year and assumed rate of return for last half of fiscal year 08/09 09/10 10/11 11/12 12/13 Proj 13/14 Assets -22.5% 15.1% 24.4% 0.1% 11.2% 14.7% Expected Return 7.75% 7.75% 7.75% 7.61% 7.61% 7.61% (30%) (20%) (10%) 0% 10% 20% 30% Attachment A May 20, 2014 25 RESULTS Actuarial Obligations (Amounts in 000’s) 6/30/11 Valuation 6/30/13 Valuation 6/30/11 Projected 6/30/12 6/30/13 Projected 6/30/14  Present Value of Benefits • Actives $ 87,186 $ 105,008 • Retirees 115,644 139,378 • Total 202,830 244,386  Actuarial Accrued Liability • Actives 52,409 64,264 • Retirees 115,644 139,378 • Total 168,053 $ 177,304 203,642 $ 213,458  Actuarial Value of Assets 44,774 52,331 60,070 73,124  Unfunded AAL 123,279 124,973 143,572 140,333  Funded Ratio 27% 30% 29% 34%  Normal Cost 5,091 5,674  Pay-As-You-Go Cost (Cash) 8,944 8,903 9,152  Pay-As-You-Go Cost (IS) 1,852 1,916 May 20, 2014 26 RESULTS Historical Funded Status (Amounts in 000’s) $0 $50,000 $100,000 $150,000 $200,000 $250,000 1/1/09 1/1/11 6/30/11 6/30/13 Retiree pay-go Retiree AAL less pay-go Active AAL MVA Attachment A May 20, 2014 27 RESULTS Actuarial Gain/Loss (Amounts in 000’s) AAL (AVA) UAAL  Actual 6/30/11 $ 168,053 $ (44,774) $ 123,279  Expected 6/30/14 195,805 (67,114) 128,691  Assumption Changes • Participation at Retirement (6,859) (6,859) • Family Coverage at Retirement 876 876 • Medical Plan Election (897) (897) • Projected Mortality Improvement 5,290 5,290  Contribution (Gain)/Loss (1,095) (1,095)  Investment (Gain)/Loss (3,734) (3,734)  Plan Changes • Benefit Changes → Slide 4 18,687 18,687 • Implied Subsidy 43,448 43,448 • SEIU Agreement Change (1,944) (1,944)  Experience (Gains)/Losses • Premiums/Caps < Expected (35,674) (35,674) • Demographic & Other (5,276) (1,199) (6,475)  Total (Gain)/Loss 17,652 (6,011) 11,641  Projected 6/30/14 213,458 (73,124) 140,334 May 20, 2014 28 RESULTS Schedule of Funding Progress (Amounts in 000’s) Actuarial Valuation Date Actuarial Value of Assets (a) Entry Age Actuarial Accrued Liability (b) Unfunded Actuarial Accrued Liability (b-a) Funded Ratio (a/b) Covered Payroll (c) UAAL as Percentage of Covered Payroll ((b-a)/c) 1/1/2011 $ 40,213 $ 165,660 $ 125,447 24.3% $ 98,940 126.8% 6/30/2011 44,774 168,053 123,279 26.6% 80,664 152.8% 6/30/2013 60,070 203,642 143,572 29.5% 81,785 175.5% Attachment A May 20, 2014 29 RESULTS Annual Required Contribution (ARC) (Amounts in 000’s) 6/30/11 Valuation 6/30/13 Valuation 2012/13 2013/14 2014/15 2015/16  ARC - $ • Normal Cost $ 5,091 $ 5,256 $ 5,674 $ 5,880 • UAAL Amortization 7,665 7,779 8,607 8,887 • Total 12,756 13,035 14,282 14,767  Projected Payroll 83,285 85,992 87,187 90,021  ARC - %Pay • Normal Cost 6.1% 6.1% 6.5% 6.5% • UAAL Amortization 9.2% 9.1% 9.9% 9.9% • Total 15.3% 15.2% 16.4% 16.4% May 20, 2014 30 RESULTS Annual Required Contribution (ARC) (Amounts in 000’s) $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 09/10 10/11 11/12 12/13 13/14 14/15 15/16 Normal Cost 3,478 3,478 4,782 5,091 5,256 5,674 5,880 Amortization 6,308 6,308 7,802 7,665 7,779 8,607 8,887 ARC 9,786 9,786 12,584 12,756 13,035 14,282 14,767 Attachment A May 20, 2014 31 RESULTS Amortization Bases & Payments (000’s Omitted) 6/30/2011 Valuation 6/30/2013 Valuation 6/30/2012 6/30/2013 6/30/2014 6/30/2015  UAAL Balance $ 124,973 $ 126,819 $ 140,333 $ 142,405  Amortization Payment - $ 7,665 7,779 8,607 8,887  Amortization Period 30 30 30 29 May 20, 2014 32 RESULTS This page intentionally blank Attachment A May 20, 2014 33 RESULTS Estimated Net OPEB Obligation/(Asset) Illustration (Amounts in 000’s) 6/30/11 Valuation 6/30/13 Valuation CAFR 2012/13 Estimate 2013/14 Estimate 2014/15 Estimate 2015/16  NOO/(NOA) at Beginning of Year $(21,271) $(21,851) $(22,174) $(22,501)  Annual OPEB Cost • Annual Required Contribution 12,756 13,035 14,282 14,767 • Interest on NOO (1,619) (1,663) (1,687) (1,712) • NOO Adjustment 2,057 1,340 1,360 1,404 • Annual OPEB Cost 13,194 12,712 13,954 14,459  Contributions • Cash Benefit Payments35 8,766 8,886 9,152 9,841 • Implied Subsidy Benefit Payments36 - - 1,916 2,102 • Trust Funding 5,008 4,149 3,214 2,824 • Total Contributions 13,774 13,035 14,282 14,767  NOO/(NOA) at End of Year (21,851) (22,174) (22,501) (22,809) 35 Estimated cash payments shown for all years after 2012/13. Actual cash payments should be used for OPEB footnote. 36 Use amounts listed here for 2014/15 and 2015/16 OPEB footnotes. May 20, 2014 34 RESULTS Estimated Full ARC Funding Projection (Amounts in 000’s) FYE Begin Year NOO ARC AOC Contribution Pay ARC % of Pay Cash BP IS BP Pre- Funding Total 2015 $(22,174) $14,282 $13,954 $9,152 $1,916 $3,214 $14,282 $87,187 16.4% 2016 (22,501) 14,767 14,459 9,841 2,102 2,824 14,767 90,021 16.4% 2017 (22,809) 15,269 14,984 10,640 2,387 2,242 15,269 92,947 16.4% 2018 (23,095) 15,790 15,529 11,388 2,631 1,771 15,790 95,967 16.5% 2019 (23,356) 16,328 16,096 12,056 2,835 1,437 16,328 99,086 16.5% 2020 (23,587) 16,883 16,684 12,672 3,026 1,185 16,883 102,307 16.5% 2021 (23,786) 17,456 17,294 13,291 3,251 914 17,456 105,632 16.5% 2022 (23,949) 18,047 17,926 13,882 3,507 658 18,047 109,065 16.5% 2023 (24,070) 18,656 18,581 14,545 3,838 273 18,656 112,609 16.6% 2024 (24,145) 19,285 19,261 15,132 4,081 72 19,285 116,269 16.6% Attachment A May 20, 2014 35 RESULTS Actuarial Obligations June 30, 2013 (Amounts in 000’s) Benefits < Age 65 Benefits > Age 65 Total  Present Value of Benefits • Actives $ 58,253 $ 46,755 $ 105,008 • Retirees 48,165 91,212 139,378 • Total 106,418 137,968 244,386  Actuarial Accrued Liability • Actives 34,085 30,179 64,264 • Retirees 48,165 91,212 139,378 • Total 82,250 121,391 203,642  Normal Cost 2014/15 3,289 2,386 5,674 May 20, 2014 36 RESULTS Actuarial Obligations June 30, 2013 (Amounts in 000’s) Group 1 Group 2 Group 337 Group 4 Total  Present Value of Benefits • Actives $ - $ - $ 74,267 $ 30,741 $105,008 • Retirees 65,602 63,910 8,511 1,355 139,378 • Total 65,602 63,910 82,778 32,096 244,386  Actuarial Accrued Liability • Actives - - 55,118 9,145 64,264 • Retirees 65,602 63,910 8,511 1,355 139,378 • Total 65,602 63,910 63,629 10,500 203,642  Normal Cost 2014/15 - - 2,962 2,712 5,674  NC as % of Payroll 6.3% 6.9% 6.6% 37 PAPOA Group 3 members have Group 2 benefits. There are 39 PAPOA Group 3 active members. Attachment A May 20, 2014 37 RESULTS Actuarial Obligations June 30, 2013 (Amounts in 000’s) Misc Safety Total  Present Value of Benefits • Actives $ 74,520 $ 30,488 $ 105,008 • Retirees 90,106 49,272 139,378 • Total 164,626 79,760 244,386  Actuarial Accrued Liability • Actives 47,555 16,709 64,264 • Retirees 90,106 49,272 139,378 • Total 137,661 65,981 203,642  Actuarial Value of Assets38 40,773 19,298 60,070  Unfunded AAL 96,888 46,683 143,572  Normal Cost 2014/15 4,041 1,634 5,674  Pay-As-You-Go Cost 2014/15 7,592 3,476 11,068 38 Allocated in proportion to the Actuarial Accrued Liability before SEIU benefit change. May 20, 2014 38 RESULTS Annual Required Contribution (ARC) 2014/15 Fiscal Year (Amounts in 000’s) Misc Safety Total  ARC - $ • Normal Cost $ 4,041 $ 1,634 $ 5,674 • UAAL Amortization39 5,811 2,795 8,607 • ARC 9,852 4,429 14,282  Projected Payroll 65,389 21,799 87,187  ARC - % • Normal Cost 6.2% 7.5% 6.5% • UAAL Amortization 8.9% 12.8% 9.9% • ARC 15.1% 20.3% 16.4% 39 Allocated in proportion to the Actuarial Accrued Liability before SEIU benefit change. Attachment A May 20, 2014 39 RESULTS Actuarial Obligations June 30, 2013 (Amounts in 000’s) FCA IAFF M/C PAPOA PMA SEIU UMPA Total  PVB • Actives $ 820 $15,400 $18,811 $12,239 $1,458 $49,863 $6,416 $105,008 • Retirees 814 24,825 43,500 18,502 407 50,307 1,022 139,378 • Total 1,634 40,225 62,311 30,741 1,865 100,170 7,438 244,386  AAL • Actives 721 9,077 11,373 5,380 1,122 31,773 4,818 64,264 • Retirees 814 24,825 43,500 18,502 407 50,307 1,022 139,378 • Total 1,535 33,902 54,873 23,882 1,529 82,080 5,840 203,642  AVA40 449 9,915 16,049 6,985 447 24,517 1,708 60,070  UAAL 1,086 23,987 38,824 16,897 1,082 57,563 4,132 143,572  NC 14/15 25 759 1,122 761 56 2,689 264 5,674  Pay-Go 57 1,745 3,448 1,302 19 4,372 125 11,068 40 Allocated in proportion to the Actuarial Accrued Liability before SEIU benefit change. May 20, 2014 40 RESULTS Annual Required Contribution (ARC) 2014/15 Fiscal Year (Amounts in 000’s) FCA IAFF M/C PAPOA PMA SEIU UMPA Total  ARC - $ • Normal Cost $ 25 $ 759 $1,122 $ 761 $ 56 $ 2,689 $ 264 $ 5,674 • UAAL Amort41 65 1,437 2,292 1,015 68 3,470 261 8,607 • ARC 90 2,195 3,414 1,776 124 6,159 526 14,282  Proj. Payroll 642 10,570 21,287 8,805 1,260 39,170 5,454 87,187  ARC - % • Normal Cost 3.9% 7.2% 5.3% 8.7% 4.4% 6.9% 4.8% 6.5% • UAAL Amort 10.1%13.6% 10.7% 11.5%5.4% 8.9%4.8% 9.9% • ARC 14.0% 20.8% 16.0% 20.2%9.8% 15.7% 9.6% 16.4% 41 Allocated in proportion to the Actuarial Accrued Liability before SEIU benefit change. Attachment A May 20, 2014 41 RESULTS Annual Required Contribution (ARC) 2015/16 Fiscal Year (Amounts in 000’s) FCA IAFF M/C PAPOA PMA SEIU UMPA Total  ARC - $ • Normal Cost $ 25 $ 783 $1,164 $ 787 $ 58 $ 2,783 $ 280 $ 5,880 • UAAL Amort 67 1,483 2,367 1,049 70 3,581 270 8,887 • ARC 92 2,266 3,531 1,836 128 6,364 550 14,767  Proj. Payroll 663 10,913 21,979 9,091 1,301 40,443 5,631 90,021  ARC - % • Normal Cost 3.7% 7.2% 5.3% 8.7% 4.4% 6.9% 5.0% 6.5% • UAAL Amort 10.1%13.6% 10.8%11.5%5.4% 8.9% 4.8% 9.9% • ARC 13.8% 20.8% 16.1% 20.2% 9.8% 15.7% 9.8% 16.4% May 20, 2014 42 ASSUMPTION SENSITIVITIES Discount Rate Sensitivity (Amounts in 000’s) Discount Rate 7.61% 7.25%  PVPB @ 6/30/13 $ 244,386 $ 257,348  AAL @ 6/30/13 • AAL 203,642 212,483 • Assets 60,070 60,070 • Unfunded AAL 143,572 152,413  2014/15 ARC • Normal Cost $ 5,674 $ 6,081 • UAAL Amort. 42 8,607 8,790 • Total ARC 14,282 14,871 • ARC – % of pay 16.4% 17.1% 42 Amortized over 30 years Attachment A May 20, 2014 43 ASSUMPTION SENSITIVITIES Mortality Projection Sensitivity (Amounts in 000’s) Mortality Projection Included Not Included  PVPB @ 6/30/13 $ 244,386 $ 236,653  AAL @ 6/30/13 • AAL 203,642 197,379 • Assets 60,070 60,070 • Unfunded AAL 143,572 137,309  2014/15 ARC • Normal Cost $ 5,674 $ 5,484 • UAAL Amort. 43 8,607 8,183 • Total ARC 14,282 13,667 • ARC – % of pay 16.4% 15.7% 43 Amortized over 30 years May 20, 2014 44 ASSUMPTION SENSITIVITIES Amortization Period Sensitivity (Amounts in 000’s) Amortization Period 30 Years 25 Years 20 Years  PVPB @ 6/30/13 $ 244,386 $ 244,386 $ 244,386  AAL @ 6/30/13 • AAL 203,642 203,642 203,642 • Assets 60,070 60,070 60,070 • Unfunded AAL 143,572 143,572 143,572  2014/15 ARC • Normal Cost $ 5,674 $ 5,674 $ 5,674 • UAAL Amort. 8,607 9,495 10,873 • Total ARC 14,282 15,169 16,547 • ARC – % of pay 16.4% 17.4% 19.0% Attachment A May 20, 2014 45 ASSUMPTION SENSITIVITIES Implied Subsidy Sensitivity (Amounts in 000’s) Implied Subsidy Included Not Included  PVPB @ 6/30/13 $ 244,386 $ 197,307  AAL @ 6/30/13 • AAL 203,642 162,199 • Assets 60,070 60,070 • Unfunded AAL 143,572 102,129  2014/15 ARC • Normal Cost $ 5,674 $ 4,871 • UAAL Amort. 44 8,607 5,942 • Total ARC 14,282 10,813 • ARC – % of pay 16.4% 12.4% 44 Amortized over 30 years May 20, 2014 46 ASSUMPTION SENSITIVITIES Combination Sensitivity (Amounts in 000’s) Discount Rate 7.61% 7.25% Amortization Period 30 Years 25 Years Mortality Projection Yes Yes Implied Subsidy Yes Yes  PVPB @ 6/30/13 $ 244,386 $ 257,348  AAL @ 6/30/13 • AAL 203,642 212,483 • Assets 60,070 60,070 • Unfunded AAL 143,572 152,413  2014/15 ARC • Normal Cost $ 5,674 $ 6,081 • UAAL Amort. 8,607 9,749 • Total ARC 14,282 15,830 • ARC – % of pay 16.4% 18.2% Attachment A May 20, 2014 47 BENEFIT SENSITIVITIES Benefit Sensitivity – SEIU Agreement (Amounts in 000’s) Benefits Prior Current Change  PVPB @ 6/30/13 $ 246,665 $ 244,385 $ 2,280  AAL @ 6/30/13 • AAL 205,388 203,641 1,747 • Assets 60,070 60,070 - • Unfunded AAL 145,318 143,571 1,747  2014/15 ARC • Normal Cost $ 5,720 $ 5,675 $ 45 • UAAL Amort.45 8,725 8,607 118 • Total ARC 14,445 14,282 163 • ARC – % of pay 16.6% 16.4% 0.2% 45 Amortized over 30 years. Previous estimates amortized SEIU plan change over 15 years. May 20, 2014 48 BENEFIT SENSITIVITIES Benefit Sensitivity – SEIU Agreement (SEIU Only) (Amounts in 000’s) Benefits Prior Current Change  PVPB @ 6/30/13 $ 102,450 $ 100,170 $ 2,280  AAL @ 6/30/13 • AAL 83,827 82,080 1,747 • Assets 24,517 24,517 - • Unfunded AAL 59,310 57,563 1,747  2014/15 ARC • Normal Cost $ 2,734 $ 2,689 $ 45 • UAAL Amort. 46 3,588 3,470 118 • Total ARC 6,322 6,159 163 • ARC – % of pay 7.3% 7.0% 0.3% 46 Amortized over 30 years. Previous estimates amortized SEIU plan change over 15 years. Attachment A May 20, 2014 49 ACTUARIAL CERTIFICATION This report presents the City of Palo Alto’s Retiree Healthcare Plan (“Plan”) June 30, 2013 actuarial valuation. The purpose of this valuation is to:  Determine the Governmental Accounting Standards Board Statement Nos. 43 and 45 June 30, 2013 Benefit Obligations,  Determine the Plan’s June 30, 2013 Funded Status, and  Calculate the 2014/15 and 2015/16 Annual Required Contributions. The report provides information intended for reporting under GASB 43 and 45, but may not be appropriate for other purposes. Information provided in this report may be useful to the City for the Plan’s financial management. Future valuations may differ significantly if the Plan’s experience differs from our assumptions or if there are changes in Plan design, actuarial methods, or actuarial assumptions. The project scope did not include an analysis of this potential variation. The valuation is based on Plan provisions, participant data, and asset information provided by the City as summarized in this report, which we relied on and did not audit. We reviewed the participant data for reasonableness. To the best of our knowledge, this report is complete and accurate and has been conducted using generally accepted actuarial principles and practices. Additionally, in our opinion, actuarial methods and assumptions comply with GASB 43 and 45. As members of the American Academy of Actuaries meeting the Academy Qualification Standards, we certify the actuarial results and opinions herein. Respectfully submitted, John E. Bartel, ASA, MAAA, FCA President Bartel Associates, LLC May 20, 2014 Deanna Van Valer, ASA, MAAA, EA, FCA Assistant Vice President Bartel Associates, LLC May 20, 2014 Mary Elizabeth Redding, FSA, MAAA, EA, FCA Assistant Vice President Bartel Associates, LLC May 20, 2014 May 20, 2014 50 EXHIBITS Topic Page Premiums E- 1 Data Summary E- 5 Actuarial Assumptions E-31 Results by Fund E-42 Results by GF Department E-46 Definitions E-50 Attachment A May 20, 2014 E-1 PREMIUMS 2012 PEMHCA Monthly Premiums Bay Area Non-Medicare Eligible Medicare Eligible Medical Plan Single 2-Party Family Single 2-Party Family Blue Shield Access+ $711.10 $1,422.20 $1,848.86 $337.99 $675.98 $1,013.97 Blue Shield NetValue 611.59 1,223.18 1,590.13 337.99 675.98 1,013.97 Kaiser 610.44 1,220.88 1,587.14 277.81 555.62 833.43 PERS Choice 574.15 1,148.30 1,492.79 383.44 766.88 1,150.32 PERS Select 487.39 974.78 1,267.21 383.44 766.88 1,150.32 PERSCare 1,029.23 2,058.46 2,676.00 432.43 864.86 1,297.29 PORAC 556.00 1,041.00 1,323.00 418.00 833.00 1,331.00 May 20, 2014 E-2 PREMIUMS 2013 PEMHCA Monthly Premiums Bay Area Non-Medicare Eligible Medicare Eligible Medical Plan Single 2-Party Family Single 2-Party Family Blue Shield $ 784.63 $1,569.26 $2,040.04 $261.32 $522.64 $ 783.96 Blue Shield NetValue 670.21 1,340.42 1,742.55 261.32 522.64 783.96 Kaiser 668.63 1,337.26 1,738.44 288.37 576.74 865.11 PERS Choice 667.03 1,334.06 1,734.28 325.74 651.48 977.22 PERS Select 487.20 974.40 1,266.72 325.74 651.48 977.22 PERSCare 1,083.11 2,166.22 2,816.09 370.43 740.86 1,111.29 PORAC 581.00 1,088.00 1,382.00 418.00 833.00 1,331.00 Attachment A May 20, 2014 E-3 PREMIUMS 2014 PEMHCA Monthly Premiums Bay Area Non-Medicare Eligible Medicare Eligible Medical Plan Single 2-Party Family Single 2-Party Family Anthem Select $657.33 $1,314.66 $1,709.06 $341.12 $682.24 $1,023.36 Anthem Traditional 728.41 1,456.82 1,893.87 341.12 682.24 1,023.36 Blue Shield Access+ 836.59 1,673.18 2,175.13 298.21 596.42 894.63 Blue Shield NetValue 704.01 1,408.02 1,830.43 298.21 596.42 894.63 Kaiser 742.72 1,485.44 1,931.07 294.97 589.94 884.91 United Healthcare 764.24 1,528.48 1,987.02 193.33 386.66 579.99 PERS Choice 690.77 1,381.54 1,796.00 307.23 614.46 921.69 PERS Select 661.52 1,323.04 1,719.95 307.23 614.46 921.69 PERSCare 720.04 1,440.08 1,872.10 327.36 654.72 982.08 PORAC 634.00 1,186.00 1,507.00 397.00 791.00 1,264.00 May 20, 2014 E-4 PREMIUMS PEMHCA Monthly Premium Increases Bay Area Non-Medicare Eligible Medicare Eligible Medical Plan 2012 2013 2014 2012 2013 2014 Blue Shield 5.3% 10.3% 6.6% 0.1% (22.7%) 14.1% Blue Shield NetValue 5.2% 9.6% 5.0% 0.1% (22.7%) 14.1% Kaiser 7.3% 9.5% 11.1% (1.6%) 3.8% 2.3% PERS Choice 1.9% 16.2% 3.6% 2.0% (15.1%) (5.7%) PERS Select (1.1%) (0.1%) 35.8% 2.0% (15.1%) (5.7%) PERSCare 15.1% 5.2% (33.5%) (0.3%) (14.3%) (11.6%) PORAC 5.5% 4.5% 9.1% 0.0% 0.0% (5.0%) Attachment A May 20, 2014 E-5 DATA SUMMARY Medical Plan Participation – June 30, 2013 Non-Waived Participants Retirees Medical Plan Actives < 65 ≥ 65 Total Miscellaneous/Safety M S M S M S M S Blue Shield 46% 32% 35% 31% 25% 18% 29%24% Blue Shield NetValue 1% 1% 0% 0% 0% 1% 0%0% Kaiser 37% 31% 31% 13% 25% 26% 27%20% PERS Choice 15% 1% 29% 4% 17% 17% 22%11% PERS Select 0% 0% 0% 0% 0% 0% 0%0% PERSCare 0% 0% 3% 20% 33% 34% 21%27% PORAC 1% 35% 2% 33% 0% 5% 1%18% Total 100% 100% 100% 100% 100% 100% 100%100% May 20, 2014 E-6 DATA SUMMARY Medical Plan Participation – June 30, 2011 Non-Waived Participants Retirees Medical Plan Actives < 65 ≥ 65 Total Miscellaneous/Safety M S M S M S M S Blue Shield 47% 32% 34% 28% 20% 25% 27% 27% Blue Shield NetValue 1% 0% 0% 0% 0% 1% 0% 0% Kaiser 36% 28% 30% 13% 24% 23% 27% 18% PERS Choice 16% 2% 26% 8% 18% 11% 22% 9% PERS Select 0% 0% 0% 0% 0% 0% 0% 0% PERSCare 0% 0% 6% 25% 37% 36% 23% 30% PORAC 1% 38% 3% 26% 0% 3% 1% 15% Total 100% 100% 100% 100% 100% 100% 100% 100% Attachment A May 20, 2014 E-7 DATA SUMMARY Active Medical Coverage - Miscellaneous Medical Plan Single 2-Party Family Waived Total Blue Shield 86 72 156 - 314 Blue Shield NetValue 1 1 3 - 5 Kaiser 70 59 123 - 252 PERS Choice 32 26 43 - 101 PERS Select 2 - - - 2 PERSCare - - 1 - 1 PORAC 4 3 2 - 9 Waived - - - 81 81 Total 195 161 328 81 765 % as of June 30, 2013 25% 21% 43% 11% 100% % as of June 30, 2011 21% 22% 47% 10% 100% May 20, 2014 E-8 DATA SUMMARY Active Medical Coverage - Safety Medical Plan Single 2-Party Family Waived Total Blue Shield 13 4 37 - 54 Blue Shield NetValue 1 - - - 1 Kaiser 12 7 33 - 52 PERS Choice - 1 1 - 2 PERS Select - - - - - PERSCare - - - - - PORAC 10 7 42 - 59 Waived - - - 15 15 Total 36 19 113 15 183 % as of June 30, 2013 20% 10% 62% 8% 100% % as of June 30, 2011 23% 10% 64% 4% 100% Attachment A May 20, 2014 E-9 DATA SUMMARY Retiree Medical Coverage47 - Miscellaneous Medical Plan Single 2-Party Family Waived Total <65 65+ <65 65+ <65 65+ <65 65+ Blue Shield 38 54 35 35 15 5 - - 182 Kaiser 38 44 24 46 14 4 - - 170 PERS Choice 34 31 29 33 8 2 - - 137 PERS Select 1 - - - - - - - 1 PERSCare 6 77 2 46 - 1 - - 132 PORAC 3 - 1 1 1 - - - 6 Waived - - - - - - 14 48 62 Total 120 206 91 161 38 12 14 48 690 % as of June 30, 2013 46% 48% 35% 38% 14% 3% 5% 11% 100% % as of June 30, 2011 47% 54% 40% 44% 14% 2% 0% 0% 100% 47 Approximately 69% of retirees have coverage in a Bay Area region plan. The rest are in other state regions or out of state. May 20, 2014 E-10 DATA SUMMARY Retiree Medical Coverage48 - Safety Medical Plan Single 2-Party Family Waived Total <65 65+ <65 65+ <65 65+ <65 65+ Blue Shield 11 13 7 11 20 - - - 62 Blue Shield NetValue - 1 - - - - - - 1 Kaiser 3 14 5 19 8 2 - - 51 PERS Choice 1 8 2 14 2 1 - - 28 PERSCare 15 27 7 18 2 1 - - 70 PORAC 9 2 13 3 18 2 - - 47 Waived - - - - - - 3 16 19 Total 39 65 34 65 50 6 3 16 278 % as of June 30, 2013 31% 43% 27% 43% 40% 4% 2% 11% 100% % as of June 30, 2011 40% 49% 29% 47% 30% 3% 0% 0% 100% 48 Approximately 51% of retirees have coverage in a Bay Area region plan. The rest are in other state regions or out of state. Attachment A May 20, 2014 E-11 DATA SUMMARY Retirees Medical Coverage by Age – Miscellaneous Age Single 2-Party Family Waived Total Under 50 3 - 1 2 6 50-54 14 8 8 6 36 55-59 42 33 16 5 96 60-64 61 50 13 1 125 65-69 61 65 9 12 147 70-74 61 35 2 5 103 75-79 30 32 - 4 66 80-84 24 19 1 13 57 85 & Over 30 10 - 14 54 Total 326 252 50 62 690 Average Age 69.5 68.7 60.3 74.2 68.9 May 20, 2014 E-12 DATA SUMMARY 0 20 40 60 80 100 120 140 160 <50 50-54 55-59 60-64 65-69 70-74 75-79 80-84 ≥85 Nu m b e r Age Retiree Age Distribution Miscellaneous 6/30/11 Valuation 6/30/13 Valuation Attachment A May 20, 2014 E-13 DATA SUMMARY Retirees Medical Coverage by Age – Police Age Single 2-Party Family Waived Total Under 50 2 2 3 - 7 50-54 10 3 7 1 21 55-59 5 4 10 - 19 60-64 11 6 1 1 19 65-69 5 7 2 3 17 70-74 7 4 - 2 13 75-79 4 3 - 1 8 80-84 8 1 - 2 11 85 & Over 4 2 - - 6 Total 56 32 23 10 121 Average Age 66.9 65.3 54.9 69.4 64.4 May 20, 2014 E-14 DATA SUMMARY 0 5 10 15 20 25 <50 50-54 55-59 60-64 65-69 70-74 75-79 80-84 ≥85 Nu m b e r Age Retiree Age Distribution Police 6/30/11 Valuation 6/30/13 Valuation Attachment A May 20, 2014 E-15 DATA SUMMARY Retirees Medical Coverage by Age – Fire Age Single 2-Party Family Waived Total Under 50 1 1 3 - 5 50-54 2 2 15 1 20 55-59 3 9 9 - 21 60-64 5 7 2 - 14 65-69 6 14 2 3 25 70-74 10 14 2 1 27 75-79 14 11 - 2 27 80-84 3 9 - 2 14 85 & Over 4 - - - 4 Total 48 67 33 9 157 Average Age 72.3 69.7 55.4 71.5 67.6 May 20, 2014 E-16 DATA SUMMARY 0 5 10 15 20 25 30 <50 50-54 55-59 60-64 65-69 70-74 75-79 80-84 ≥85 Nu m b e r Age Retiree Age Distribution Fire 6/30/11 Valuation 6/30/13 Valuation Attachment A May 20, 2014 E-17 DATA SUMMARY Retirees Medical Coverage by Age – Total Age Single 2-Party Family Waived Total Under 50 6 3 7 2 18 50-54 26 13 30 8 77 55-59 50 46 35 5 136 60-64 77 63 16 2 158 65-69 72 86 13 18 189 70-74 78 53 4 8 143 75-79 48 46 - 7 101 80-84 35 29 1 17 82 85 & Over 38 12 - 14 64 Total 430 351 106 81 968 Average Age 69.4 68.6 57.6 73.3 68.2 May 20, 2014 E-18 DATA SUMMARY 0 20 40 60 80 100 120 140 160 180 200 <50 50-54 55-59 60-64 65-69 70-74 75-79 80-84 ≥85 Nu m b e r Age Retiree Age Distribution Total 6/30/11 Valuation 6/30/13 Valuation Attachment A May 20, 2014 E-19 DATA SUMMARY Actives by Age and Service – Miscellaneous City Service Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total < 25 6 5 - - - - - 11 25-29 10 23 6 1 - - - 40 30-34 9 32 27 14 - - - 82 35-39 8 28 28 29 4 - - 97 40-44 5 21 22 32 12 4 - 96 45-49 3 24 22 34 16 16 4 119 50-54 5 22 23 36 29 28 17 160 55-59 2 13 20 18 16 7 14 90 60-64 - 5 9 16 12 6 3 51 ≥ 65 - 1 3 4 3 5 3 19 Total 48 174 160 184 92 66 41 765 May 20, 2014 E-20 DATA SUMMARY Actives by Age and Service – Police City Service Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total < 25 1 - - - - - - 1 25-29 - 4 2 - - - - 6 30-34 2 11 15 - - - - 28 35-39 - 3 1 10 1 - - 15 40-44 2 1 3 4 1 2 - 13 45-49 - - - 1 6 5 - 12 50-54 - 1 1 1 1 1 - 5 55-59 - - - 1 - - 1 2 60-64 - - - - - - - - ≥ 65 - - - - - - - - Total 5 20 22 17 9 8 1 82 Attachment A May 20, 2014 E-21 DATA SUMMARY Actives by Age and Service – Fire City Service Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total < 25 - 1 - - - - - 1 25-29 - 7 2 - - - - 9 30-34 - 6 6 1 - - - 13 35-39 - 3 4 1 - - - 8 40-44 - 4 6 11 6 - - 27 45-49 1 - 2 6 10 10 2 31 50-54 - - 1 2 3 1 2 9 55-59 - - - - - - 1 1 60-64 - - - - - 1 1 2 ≥ 65 - - - - - - - - Total 1 21 21 21 19 12 6 101 May 20, 2014 E-22 DATA SUMMARY Actives by Age and Service – Total City Service Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total < 25 7 6 - - - - - 13 25-29 10 34 10 1 - - - 55 30-34 11 49 48 15 - - - 123 35-39 8 34 33 40 5 - - 120 40-44 7 26 31 47 19 6 - 136 45-49 4 24 24 41 32 31 6 162 50-54 5 23 25 39 33 30 19 174 55-59 2 13 20 19 16 7 16 93 60-64 - 5 9 16 12 7 4 53 ≥ 65 - 1 3 4 3 5 3 19 Total 54 215 203 222 120 86 48 948 Attachment A May 20, 2014 E-23 DATA SUMMARY 0 20 40 60 80 100 120 140 160 180 <25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-65 ≥65 Nu m b e r Age Active Age Distribution Miscellaneous 6/30/11 Valuation 6/30/13 Valuation May 20, 2014 E-24 DATA SUMMARY 0 50 100 150 200 250 0-4 5-9 10-14 15-19 20-24 >25 Nu m b e r Service Active Service Distribution Miscellaneous 6/30/11 Valuation 6/30/13 Valuation Attachment A May 20, 2014 E-25 DATA SUMMARY 0 5 10 15 20 25 30 <25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-65 ≥65 Nu m b e r Age Active Age Distribution Police 6/30/11 Valuation 6/30/13 Valuation May 20, 2014 E-26 DATA SUMMARY 0 5 10 15 20 25 30 0-4 5-9 10-14 15-19 20-24 >25 Nu m b e r Service Active Service Distribution Police 6/30/11 Valuation 6/30/13 Valuation Attachment A May 20, 2014 E-27 DATA SUMMARY 0 5 10 15 20 25 30 35 <25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-65 ≥65 Nu m b e r Age Active Age Distribution Fire 6/30/11 Valuation 6/30/13 Valuation May 20, 2014 E-28 DATA SUMMARY 0 5 10 15 20 25 30 35 0-4 5-9 10-14 15-19 20-24 >25 Nu m b e r Service Active Service Distribution Fire 6/30/11 Valuation 6/30/13 Valuation Attachment A May 20, 2014 E-29 DATA SUMMARY 0 50 100 150 200 250 <25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-65 ≥65 Nu m b e r Age Active Age Distribution Total 6/30/11 Valuation 6/30/13 Valuation May 20, 2014 E-30 DATA SUMMARY 0 50 100 150 200 250 300 0-4 5-9 10-14 15-19 20-24 >25 Nu m b e r Service Active Service Distribution Total 6/30/11 Valuation 6/30/13 Valuation Attachment A May 20, 2014 E-31 ACTUARIAL ASSUMPTIONS June 30, 2011 Valuation June 30, 2013 Valuation  Valuation Date  June 30, 2011  Fiscal Years 2012/13 & 2013/14 ARCs (end of year)  1 year lag  June 30, 2013  Fiscal Years 2012/13 & 2013/14 ARCs (end of year)  1 year lag  Funding Policy  Full Pre-funding through CalPERS trust (CERBT)  Asset allocation #1 beginning 6/30/2011  Same  General Inflation  3.00%  Same  Discount Rate  7.61% (no Margin for Adverse Deviation)  Same  Payroll Increases  Aggregate Increases – 3.25%  Merit Increases – CalPERS 1997-2007 Experience Study  Same May 20, 2014 E-32 ACTUARIAL ASSUMPTIONS June 30, 2011 Valuation June 30, 2013 Valuation  Increase to Dollar Caps for SEIU Group 3  N/A  ½ of Medical Trend, not less than assumed inflation (3.0%). Increase is for purposes of financial projection only and does not imply any obligation to increase the cap in the future.  Medical Trend Increase from Prior Year Year Non-Medicare Medicare 2011 Premiums 2012 Premiums 2013 9.0% 9.4% 2014 8.5% 8.9% 2015 8.0% 8.3% 2016 7.5% 7.8% 2017 7.0% 7.2% 2018 6.5% 6.7% 2019 6.0% 6.1% 2020 5.5% 5.6% 2021+ 5.0% 5.0% Increase from Prior Year Year Non-Medicare Medicare 2011 n/a 2012 n/a 2013 Premiums 2014 Premiums 2015 8.0% 8.3% 2016 7.5% 7.8% 2017 7.0% 7.2% 2018 6.5% 6.7% 2019 6.0% 6.1% 2020 5.5% 5.6% 2021+ 5.0% 5.0% Attachment A May 20, 2014 E-33 ACTUARIAL ASSUMPTIONS June 30, 2011 Valuation June 30, 2013 Valuation  Mortality, Termination, Disability  CalPERS 1997-2007 Experience Study  CalPERS 1997-2007 Experience Study  Includes fully generational mortality projected with Scale AA  Retirement  CalPERS 1997-2007 Experience Study Misc Fire Police Benefit 2.7%@55 3%@50 3%@50 2%@6049 ERA50 57.5 54.5 54.0  CalPERS 1997-2007 Experience Study Misc Fire & Police Tier 1 2.7%@55 3%@50 ERA 59.3 55.7 & 54.5 Tier 2 2%@6049 3%@55 ERA 61.1 n/a & 59.7 PEPRA51 2.5%@67 2.7%@57 ERA 61.0 n/a & 56.8 49 Applies to employees hired after July 17, 2010 50 Expected Retirement Age 51 Applies to employees hired after 1/1/13 and considered “New Hires” under PEPRA May 20, 2014 E-34 ACTUARIAL ASSUMPTIONS June 30, 2011 Valuation June 30, 2013 Valuation  Medical Plan at Retirement & Retirees Attaining age 65  Miscellaneous: <65 65+ Blue Shield 35% 20% Kaiser 25% 25% PERS Choice 30% 20% PERSCare 10% 35%  Safety: <65 65+ Blue Shield 35% 20% Kaiser 25% 25% PERS Choice 20% 20% PERSCare 10% 35% PORAC 10% 0%  Miscellaneous: <65 65+ Anthem Tradition 5% 0% Blue Shield 25% 30% Kaiser 30% 25% PERS Choice 30% 25% PERSCare 5% 20% United HC 5% 0%  Safety: <65 65+ Anthem Tradition 10% 0% Blue Shield 20% 20% Blue Shield NV 5% 0% Kaiser 15% 35% PERS Choice 0% 10% PERSCare 0% 25% PORAC 45% 10% United HC 5% 0% Attachment A May 20, 2014 E-35 ACTUARIAL ASSUMPTIONS June 30, 2011 Valuation June 30, 2013 Valuation  Participation at Retirement  DOH < 1/1/04: 100%  DOH > 1/1/04: 95%  Employees with cost sharing: reduce above %’s by 5%  Groups 1 & 2: already retired  Group 3: 90%  Group 4: 85%  Medicare Eligible Rate  Actives hired < 4/1/86: • Miscellaneous – 80% • Safety – 90%  Actives hired > 4/1/86: 100%  Retirees < 65: 90%  Everyone eligible for Medicare will elect Part B coverage  Same  Spousal Coverage at Retirement  Currently covered: based on current elections  Currently waived: 80%  Same May 20, 2014 E-36 ACTUARIAL ASSUMPTIONS June 30, 2011 Valuation June 30, 2013 Valuation  Family Coverage at Retirement  Actives • Misc : 10% until age 65 • Safety : 20% until age 65  Retirees: based on current elections until age 65  Actives • Misc : 15% until age 65 • Safety : 40% until age 65  Retirees: based on current elections until age 65  Waived Retiree Re-election  N/A  Pre-65 – 20% re-elect at age 65  Post-65 – 0%  CalPERS Service  City service plus ½ service between age 30 and City hire date  Actual data Attachment A May 20, 2014 E-37 ACTUARIAL ASSUMPTIONS June 30, 2011 Valuation June 30, 2013 Valuation  2014/15 HMO Medical Claims Costs PEMHCA Implied Subsidy Estimate  Monthly claims costs estimated from Bartel Associates PEMHCA client database and PEMHCA premiums Bay Area Region – Non-Medicare Eligible BS Access+ BS NetValue Kaiser Age M F M F M F 45 $533 $645 $485 $587 $531 $642 55 890 900 810 819 886 896 60 1,137 1,063 1,034 967 1,131 1,058 Bay Area Region – Medicare Eligible BS Access+ BS NetValue Kaiser Age M F M Age M F 65 $306 $284 $306 $284 $295 $273 70 288 275 288 275 277 265 75 360 322 360 322 347 311 80 386 342 386 342 372 330 85 384 341 384 341 370 329 90 365 319 365 319 352 307 May 20, 2014 E-38 ACTUARIAL ASSUMPTIONS June 30, 2011 Valuation June 30, 2013 Valuation  2014/15 PPO Medical Claims Costs PEMHCA Implied Subsidy Estimate  Monthly claims costs estimated from Bartel Associates PEMHCA client database and PEMHCA premiums Bay Area Region – Non-Medicare Eligible PERS Choice PERSCare PORAC Age M F M F M F 45 $518 $567 $563 $616 $526 $577 55 766 741 832 804 780 754 60 920 851 999 924 934 865 Bay Area Region – Medicare Eligible PERS Choice PERSCare PORAC Age M F M Age M F 65 $302 $316 $322 $337 $407 $426 70 288 306 306 326 387 413 75 324 338 346 360 437 455 80 335 348 357 371 452 469 85 331 344 353 367 446 463 90 315 322 335 343 424 433  Missing PERS Group  Retirees missing PERS group assumed to be Misc unless fund designates Police or Fire  N/A (none missing) Attachment A May 20, 2014 E-39 ACTUARIAL ASSUMPTIONS June 30, 2011 Valuation June 30, 2013 Valuation  Surviving Spouse Participation  100%  Same  Missing Bargaining Unit  Retirees missing bargaining unit assumed to be SEIU unless fund designates Police (PAPOA) or Fire (IAFF)  Retirees missing bargaining unit assumed to have the same BU as in the prior valuation if available; otherwise, assumed to be SEIU unless fund designates Police (PAPOA) or Fire (IAFF)52  Missing Fund  Retirees missing fund assumed to be 80% GF, 10% Elec, and 10% WWT  Retirees missing fund assumed to be 90% GF, 5% Elec, and 5% UTL52 52 Fewer than 10% of retirees have missing Bargaining Unit, Fund or Department. Does not affect results, but does affect internal cost allocations used by the City. May 20, 2014 E-40 ACTUARIAL ASSUMPTIONS June 30, 2011 Valuation June 30, 2013 Valuation  Missing Department  Liability for retirees assumed to be 80% GF from above assumption allocated proportionately across all Departments  Liability for retirees assumed to be 90% GF from above assumption allocated proportionately across all Departments52  Spouse Age  Actives – Males 3 years older than females  Retirees – Males 3 years older than females if spouse birth date not available  Same  Future New Participants  None – Closed Group  Same Attachment A May 20, 2014 E-41 RESULTS BY FUND Actuarial Accrued Liability (AAL) (Amounts in 000’s) January 1, 2011 June 30, 2011 June 30, 2013 7.75% 7.61% 7.61%  Airport $ - $ - $ -  CIP 2,362 2,411 3,058  Elec53,54 16,004 16,216 23,260  Gas53 6,106 6,254 8,596  GF55 115,628 116,987 136,011  ISF – Technology 2,038 2,111 3,921  ISF – Vehicle 1,383 1,422 1,421  ISF – Printing & Mailing - - 825  Refuse 4,835 4,939 6,100  Storm Drain 1,448 1,468 811  Water53 5,087 5,200 5,518  WWC53 2,062 2,165 2,028  WWT 8,707 8,879 12,094  Total 165,660 168,053 203,642 53 AAL for UTL employees allocated to Elec, Gas, Water, and WWC in proportion to each Fund’s AAL 54 Assets for Fiber Optics Fund appropriated to Elec in 1/1/11 & 6/30/11 valuations due to no Fiber Optics employees in data 55 Assets for Printing & Mailing Fund appropriated to GF in 1/1/11 & 6/30/11 valuations due to no P&M employees in data May 20, 2014 E-42 RESULTS BY FUND Annual Required Contribution (ARC) (Amounts in 000’s) 6/30/11 Valuation 6/30/13 Valuation 2012/13 2013/14 2014/15 2015/16  Airport $ - $ - $ 12 $ 12  CIP 214 219 241 249  Elec53,54 1,082 1,106 1,589 1,644  Gas53 450 460 611 636  GF55 8,896 9,084 9,648 9,970  ISF – Technology 218 224 311 320  ISF – Vehicle 116 119 91 93  ISF – Printing & Mailing - - 62 64  Refuse 376 385 375 387  Storm Drain 106 108 65 68  Water53 409 419 294 305  WWC53 196 201 140 146  WWT 691 707 842 873  Total 12,754 13,033 14,282 14,767 Attachment A May 20, 2014 E-43 RESULTS BY FUND Unfunded Actuarial Accrued Liability (UAAL) (Amounts in 000’s) January 1, 2011 June 30, 2011 June 30, 2013 7.75% 7.61% 7.61%  Airport $ - $ - $ -  CIP 1,796 1,808 2,232  Elec56,57 10,464 10,200 15,520  Gas56 3,950 3,878 5,522  GF58 91,718 90,149 99,712  ISF - Technology 1,106 1,059 2,539  ISF - Vehicle 749 726 526  ISF – Printing & Mailing - - 548  Refuse 3,437 3,400 4,073  Storm Drain 1,161 1,145 340  Water56 3,466 3,399 3,187  WWC56 1,263 1,270 822  WWT 6,338 6,243 8,552  Total 125,448 123,277 143,572 56 UAAL for UTL employees allocated to Elec, Gas, Water, and WWC in proportion to each Fund’s UAAL 57 Assets for Fiber Optics Fund appropriated to Elec in 1/1/11 & 6/30/11 valuations due to no Fiber Optics employees in data 58 Assets for Printing & Mailing Fund appropriated to GF in 1/1/11 & 6/30/11 valuations due to no P&M employees in data May 20, 2014 E-44 RESULTS BY FUND This page intentionally blank Attachment A May 20, 2014 E-45 RESULTS BY GF DEPARTMENT Actuarial Accrued Liability (AAL) (Amounts in 000’s) January 1, 2011 June 30, 2011 June 30, 2013 7.75% 7.61% 7.61%  ASD $ 9,051 $ 9,003 $ 7,900  ATT 1,879 1,899 1,876  AUD 137 143 380  CLK 841 849 975  COU 1,787 1,802 1,337  CSD 12,403 12,529 14,375  FIR 31,517 32,030 39,946  HRD 3,066 3,057 2,818  LIB 4,020 4,061 4,750  MGR 1,801 1,829 1,824  PLA 6,826 6,916 7,524  PLN 241 242 -  POL 30,928 31,396 38,532  PWD 11,131 11,231 13,776  Total 115,628 116,987 136,012 May 20, 2014 E-46 RESULTS BY GF DEPARTMENT Annual Required Contribution (ARC) (Amounts in 000’s) 6/30/11 Valuation 6/30/13 Valuation 2012/13 2013/14 2014/15 2015/16  ASD $ 585 $ 597 $ 557 $ 574  ATT 148 151 150 155  AUD 13 13 36 37  CLK 78 80 84 86  COU 133 136 86 89  CSD 890 908 981 1,015  FIR 2,374 2,423 2,614 2,699  HRD 202 205 198 205  LIB 458 469 458 466  MGR 146 149 130 134  PLA 546 559 557 576  PLN 11 11 - -  POL 2,490 2,544 2,813 2,907  PWD 822 839 986 1,027  Total 8,896 9,084 9,650 9,970 Attachment A May 20, 2014 E-47 RESULTS BY GF DEPARTMENT Unfunded Actuarial Accrued Liability (UAAL) (Amounts in 000’s) January 1, 2011 June 30, 2011 June 30, 2013 7.75% 7.61% 7.61%  ASD $ 7,180 $ 6,938 $ 5,790  ATT 1,490 1,463 1,378  AUD 109 111 279  CLK 667 655 717  COU 1,417 1,389 982  CSD 9,838 9,654 10,507  FIR 25,000 24,682 29,328  HRD 2,433 2,356 2,069  LIB 3,189 3,129 3,475  MGR 1,428 1,410 1,339  PLA 5,414 5,329 5,511  PLN 191 186 -  POL 24,533 24,194 28,248  PWD 8,829 8,654 10,091  Total 91,717 90,150 99,714 May 20, 2014 E-48 RESULTS BY GF DEPARTMENT This page intentionally blank Attachment A May 20, 2014 E-49 DEFINITIONS  GASB 45 Accrual Accounting • Project future employer-provided benefit cash flows for current active employees and current retirees • Discount projected cash flow to valuation date using discount rate (assumed return on assets used to pay benefits) and other actuarial assumptions to determine present value of projected future benefits (PVB) • Allocate PVB to past, current, and future periods using the actuarial cost method • Actuarial cost method used for this valuation is the Entry Age Normal Cost method which determines Normal Cost as a level percentage of payroll (same method used by CalPERS) • Normal Cost is amount allocated to current fiscal year • Actuarial Accrued Liability (AAL) is amount allocated to prior service with employer • Unfunded AAL (UAAL) is AAL less plan assets pre-funded in a segregated and restricted trust  PayGo Cost • Cash subsidy is the pay-as-you-go employer benefit payments for retirees • Implied subsidy is the difference between the actual cost of retiree benefits and retiree premiums subsidized by active employee premiums May 20, 2014 E-50 DEFINITIONS Present Value of Benefits Present Value of Benefits (With Plan Assets) Unfunded Actuarial Accrued Future Normal Costs Normal Cost Assets Present Value of Benefits (Without Plan Assets) Unfunded Actuarial Accrued Liability Future Normal Costs Normal Cost Attachment A May 20, 2014 E-51 DEFINITIONS  Annual Required Contribution (ARC) • “Required contribution” for the current period including:  Normal Cost  Amortization of: - Initial UAAL - AAL for plan, assumption, and method changes - Experience gains/losses (difference between expected and actual) - Contribution gains/losses (difference between ARC and contributions) • ARC in excess of pay-as-you-go costs not required to be funded  Net OPEB Obligation (NOO) • Net OPEB Obligation is the accumulated amounts expensed but not funded • Net OPEB Asset if amounts funded exceed those expensed  Annual OPEB Cost (AOC) • Expense for the current period including:  ARC  Interest on NOO  Adjustment of NOO • NOO adjustment prevents double counting of expense since ARCs include an amortization of prior contribution gains/losses previously expensed Attachment A Attachment B 1 Special Meeting Tuesday, May 27, 2014 AGENDA ITEMS 1. Accept the Retiree Healthcare Plan GASB 45 Actuarial Valuation as of June 30, 2013. Vice Mayor Kniss requested Mr. Bartel discuss approaches for mortality improvement and his preferred approach. John Bartel, Bartel Associates, LLC, reported there were two issues where he recommended changes that increased liability. When actuarial studies determined people were living longer, actuaries improved the mortality rates to take that into account. An actuarial standard of practice required actuaries to do one of two things. Actuaries could indicate mortality would not continue to improve, in which case the actuary did not factor it in. Actuaries could indicate mortality would continue to improve, in which case actuaries had to take it into account. The California Public Employees' Retirement System (CalPERS) relatively recently adopted changes which would increase the City's pension contributions. By and large CalPERS accepted actuaries' recommendation to anticipate future mortality improvement. Actuaries expected mortality to gradually improve, with the bigger improvement happening for people who were 25 today as opposed to people who were 85 today. He recommended the City adopt mortality improvement in the prior valuation; however, the Council decided not to take his recommendation. He was recommending it again, because he felt it was the right approach. The City had a relatively complicated benefits structure based on bargaining group, date of retirement, and date of hire. Historically for agencies that participated in the Public Employees Medical and Hospital Care Act (PEMHCA), the unfunded liability was tied to the premium paid. An actuarial standard of practice allowed actuaries to use premiums to determine the liability under specific circumstances. A subsequent revision to that standard of practice required actuaries not to value using premiums. Under CalPERS the premium for a 60-year-old was the same as the premium for a 25-year-old. The premium for the 60-year- old was not sufficient to cover expected claims. The premium for the 25- year-old was more than sufficient to cover expected claims. Premiums of young, active employees subsidized the medical benefits for older employees and retirees. The difference between the amount of expected claims and the amount of premiums was referred to as the implied subsidy. Because of the actuarial standard of practice, actuaries included an increase in the liability for the difference between expected claims and premiums. The City's liability increased because of that change. However, the City's liability decreased, because CalPERS restructured premiums. MINUTES 2 May 27, 2014 Council Member Burt inquired whether the deficit would remain the same if the City ended the program today, because the City was required to cover everybody in the program. Mr. Bartel answered yes. Council Member Burt asked if a fraction of the deficit would remain should the City reduce the number of incoming employees versus outgoing ones. Mr. Bartel replied theoretically yes. The standard of practice did not allow actuaries to perform the calculation in that manner. In calculating the implied subsidy, the standard of practice required actuaries to take into account the demographics of all PEMHCA participants. Council Member Burt was attempting to frame the reality of the deficit. He wanted to ensure the Finance Committee (Committee) understood the implication of that. Mr. Bartel stated Council Member Burt provided a good description. The implied subsidy would almost certainly be an ongoing benefit. Council Member Burt believed that if the City workforce continued to grow in population, then the City would have over a long period of time more new employees than outgoing employees. Rather than there being a point in time where the City would have a deficit, the City would actually have a rolling process that could favor retirees. On the other hand at the present time, it was properly defined as the implied subsidy was part of an unfunded liability. Mr. Bartel noted the City workforce was becoming more and more mature. The active population in the prior valuation was slightly more than 900 and about 950 in the June 30, 2013 valuation. The City shifted from 860 retirees to 968 retirees. The City had more retirees than active employees. Council Member Burt suggested two factors for that shift. One was the older average age of existing workers. Another was the granting of full retirement benefits at 50 years of age for Public Safety Employees and 55 years of age for non-Public Safety Employees. Mr. Bartel indicated another dynamic in the workforce was more generous benefits for retirees than active employees. Council Member Burt stated over the last decade more employees retired earlier and lived longer. MINUTES 3 May 27, 2014 Mr. Bartel clarified that employees were living longer, but not retiring quite as early. Active employees comprised Group 3 and Group 4, and retirees comprised Group 1 and Group 2. The City had a legacy liability for the retiree population. It was the dynamic of all retirees, particularly the ones in Group 1 and Group 2, that created the legacy liability. Chair Berman asked if Group 5 was the total. Mr. Bartel answered yes, there was no Group 5. Council Member Holman understood there were two ways to look at the issue: unfunded liability and pay-to-play. The issue was not just the average age of the retiree, but their dependents as well. Mr. Bartel found dependents to be similar in ages with some exceptions. Approximately 43 percent of non-Public Safety Employees were active employees with family coverage, and 17 percent were retirees with family coverage. Less than 10 percent of non-Public Safety Employees had family coverage, but the vast majority were under age 65. Public Safety Employees were retiring early and maintaining family coverage. Of the 765 active employees, 107 had more than 20 years of service. The City was hiring younger Public Safety Employees who remained with the City. Vice Mayor Kniss asked if a prior Council made the decision not to accept improved mortality as a factor. Mr. Bartel reported in the last valuation, he factored in mortality but not future improvement. Vice Mayor Kniss inquired whether improvement meant living longer. Mr. Bartel defined improvement as living longer in the future, future life expectancy. Vice Mayor Kniss asked if the difference in cost was based on the Council's not accepting the recommendation regarding improved mortality. Mr. Bartel indicated that was one of the differences. Vice Mayor Kniss felt it was a major difference. Mr. Bartel advised that the single biggest difference was the implied subsidy. MINUTES 4 May 27, 2014 Vice Mayor Kniss understood implied subsidy and improved mortality were associated. Mr. Bartel indicated the implied subsidy stopped when people were eligible for Medicare at age 65. If people lived into their 80s, it did not matter whether they lived to be 83 or 85 from the implied subsidy standpoint. Vice Mayor Kniss stated it was very similar to the Affordable Care Act (ACA). Mr. Bartel agreed. Council Member Burt noted a higher percentage of Fire Employees had more than 20 years of service than Miscellaneous Employees. Mr. Bartel explained that cities typically hired groups of Public Safety Employees. Each group was similar to a bubble working through the system. The City should ensure it had recruits in the pipeline to replace a group at retirement. Council Member Holman recalled a table that showed the City was hiring more younger employees. Mr. Bartel reported that despite having a large number of employees aged 50-54, the City had a relatively flat distribution at the younger ages. Council Member Holman asked if the number of years of service on page E19 meant service with any city or the City of Palo Alto.. Mr. Bartel responded service with the City of Palo Alto. Council Member Holman felt page E23 indicated the City was hiring older employees, while page E25 indicated the City was hiring younger employees. Mr. Bartel indicated the City was not necessarily hiring older people, but that people on average were a little older. He included the implied subsidy in the valuation of the actuarial standard of practice. A change in the amortization period had no impact on the City's 2014-2015 contribution. He recommended not utilizing a rolling 30-year amortization period. Whether or not the City utilized a rolling amortization period, the 2014-2015 contribution would remain the same. For 2015-2016 and beyond, the contribution would be slightly higher with a rolling amortization period. He recommended the Council institute a policy to pay off the unfunded liability. Lalo Perez, Chief Financial Officer, added that not utilizing a rolling amortization period would match CalPERS' policy. MINUTES 5 May 27, 2014 Mr. Bartel reported the valuation included the mortality change and leaving the discount rate (long-term rate of return on plan assets) at 7.61 percent. He would recommend 7 or 7 1/4 percent; however, CalPERS was currently using 7.5 percent. He utilized 7.61 percent because of Council direction from two years ago. He continued the prior valuation's expectation for healthcare increases. The new agreement with Service Employees International Union (SEIU) resulted in a new assumption that the increase in the dollar cap for SEIU would be half of the medical trend. The Committee should not presume benefits would increase, because the information was included for financial purposes. The City invested funds with the California Employers' Retiree Benefit Trust (CERBT), where the investment return with the exception of 2011-12 was quite good. He supported the City setting aside funds for future obligations. He projected the City would be 34 percent funded on June 30, 2014. The City was ahead of most agencies in the state. The column labeled 6/30/13 Valuation contained obligations as of June 30, 2013. They did not include future accruals. The City's liability for people already receiving benefits more than doubled the amount for active employees; therefore, it was important for the City to set aside money. The City set aside $60 million and had an unfunded liability of $143.6 million. He projected the unfunded liability to decrease at June 30, 2014 to approximately $140 million. The City's contribution would increase from $13 million to $14.3 million. The City's liability was slightly larger because he included the implied subsidy. The City's payroll did not grow as much; therefore, the percentage of payroll increased appreciably. Because the City prefunded, the additional amount of prefunding decreased over the next decade. In about 11 years, the City would contribute less than the pay-as- you-go amount. Vice Mayor Kniss asked if other cities were including improved mortality in their valuations. Mr. Bartel reported cities would be required to include improved mortality on the pension side because of CalPERS changes. With respect to the retiree medical obligation, actuaries were beginning to factor in mortality improvement. Virtually all his clients recognized mortality improvement; however, not all actuarial firms were recommending use of improved mortality. Vice Mayor Kniss hoped the Committee would include mortality improvement after hearing Mr. Bartel's explanation. Mr. Bartel indicated improved mortality increased liability. While it was good for the individual, it was not necessarily good for the City. MINUTES 6 May 27, 2014 Mr. Perez advised that the unfunded liability as of June 30, 2011 was $123 million. As of June 30, 2013, the unfunded liability was $143.572 million, which included $43 million for the implied subsidy. One could say that number would have been $100 million without the change; however, it was an actuarial standard of practice requirement. The contribution funded ratio would have been 38 percent versus 29 percent. Staff recommended accounting for the implied subsidy in the current year, even though it was not required until the following year. Council Member Burt noted local newspapers had not appreciated that distinction. The Staff Report did not draw it out clearly. He encouraged Staff to broadcast the message in a clear and simple way. Mr. Bartel agreed the City would have had a significant reduction absent the change. Council Member Holman recalled that CalPERS was currently using 7.5 percent for the discount rate, and Mr. Bartel recommended a 7-7.2 percent rate. She inquired whether the 7.61 percent rate was used because the Council approved it two years ago. Mr. Perez reported CalPERS did not change the rate of return assumption. The third quarter returns for the CERBT was $60 million at the beginning of the fiscal year and earned $7.778 million. He was comfortable with a discount rate of 7.61 percent for the next two years, because the City was closing the amortization period, accepting mortality change, and accepting the implied subside early. Chair Berman asked if Staff recommended accepting the closed amortization period. Mr. Perez answered yes. Chair Berman reiterated that the recommendation was to accept a closed amortization period and mortality rate, retain the discount rate, and change subsidization accounting. Mr. Perez concurred. Mr. Bartel was only 50 percent confident in a discount rate of 7.61 percent, because it did not allow a margin for adverse deviation. Chair Berman recalled the CERBT balance was $60 million and increased by $7 million. He asked how that amount would reach $73.1 million by June 30, 2104. MINUTES 7 May 27, 2014 Mr. Perez explained the $73.1 million amount was a projection of the balance at the end of June 30, 2014. Mr. Keene reported earnings in the first half of the year were much higher than in the second half. The balance probably would not reach the projected amount. Mr. Perez added that the City contributed $4.7 million and would continue to contribute. The projected balance was a combination of earnings and contributions. Chair Berman inquired about the dollar impact of a closed amortization period on 2015-2016. Mr. Bartel indicated a closed amortization period had a minor impact on 2015-2016 and no impact on 2014-2015. The impact modestly increased over the ten-year projection. Closing the amortization period kept the Annual Required Contribution (ARC) as a percentage of pay constant. With a rolling amortization period, the cost relative to pay actually decreased. In about ten years, the City's contribution could be $200,000 or $300,000 higher because of the closure. Chair Berman asked if the City was prefunding more. Mr. Bartel stated that was exactly what the City was doing. It was not just prefunding more; it was a policy to pay off the unfunded liability. Chair Berman believed closing the amortization period was a prudent fiscal policy. Mr. Bartel agreed. MOTION: Chair Berman moved, seconded by Council Member Burt that the Finance Committee accept the June 30, 2013 actuarial valuation of Palo Alto’s Retiree Healthcare Plan and recommend that the City Council approve full funding of the Annual Required Contribution (ARC) for Fiscal Year 2015 and Fiscal Year 2016. MOTION PASSED: 3-0, Kniss Absent City of Palo Alto (ID # 4708) City Council Staff Report Report Type: Action Items Meeting Date: 6/9/2014 City of Palo Alto Page 1 Summary Title: California Avenue Parking Assessments Title: Public Hearing –Assessment for California Avenue Area Parking Bonds –Plan G: FY 2014-2015; Adoption of a Resolution Confirming Engineer’s Report and Assessment Roll, California Avenue Parking Project No. 92-13 (For Fiscal Year 2014-2015) From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council adopt the attached Resolution (Attachment A) confirming the Engineer's Report and Assessment Roll for California Avenue District, Project No. 92-13. Background By virtue of the prior establishment of the assessment district and issuance of debt, Council action is required to levy assessments for the active parking project in the California Avenue area. These assessments will be utilized for the payment of principal and interest on bonds for capital improvements pursuant to the attached resolution. These funds are separate and distinct from permit fees that are used to pay for operation and maintenance of parking facilities. The active project is listed and described as follows: 1.California Avenue District, Ted Thompson Parking Structure, Project 92-13: Construction of a two-level parking structure on Cambridge Avenue between Birch Street and Nogal Lane. Parking bonds issued under Bond Plan G (Section 13.16.150, Palo Alto Municipal Code) require that a public hearing be held annually (the second Monday in June) City of Palo Alto Page 2 on the assessments, which must be levied to pay principal and interest on the bonds. The purpose of the public hearing is to allow each property owner the opportunity to question the computation of his/her assessment and the elements which comprise it, that is, the square footage of each occupied building, the off- street parking requirements for the usage, and the off-street parking provided. Assessments are levied on the basis of building square footage, with a credit given for the off-street parking provided by the property owner. Additional details about the Parking Assessment District-Plan G bond capital improvement program projects can be found in Attachment B. Discussion The assessment rates for FY 2015 (Attachment C) per square foot of adjusted building area and the amount levied for the project is: PROJECT ASSESSMENT RATE PER ADJUSTED BUILDING SQUARE FOOTAGE DOLLARS LEVIED 1.California Avenue District, Ted Thompson Parking Structure, Project 92-13 $10.43* $0.061** Total: $125,882.80 $ 41,960.97 $167,843.77 *Rate per weighted assessment factor. **Rate per land square footage. Approximately $341,000 in excess construction funds in the California Avenue District bond fund for the Ted Thompson parking garage, Project 92-13, was used to reduce the tax roll required to pay off the bonds sold to finance the project. To equalize assessments, the funds were spread uniformly over the duration of the bonds (20 years) beginning with the 1996 assessments. Attachment D lists any changes made to the assessment rolls in response to new information. The estimated assessments were sent to property owners within the California Avenue district on May 20, 2014. A map of the District is contained in Attachment E. Estimated assessments may be modified due to recent changes in business site conditions (square footage, vacancy, etc.), which are brought to staff's attention by property owners after the estimated assessments are prepared. As of the date of publication of this staff report, Attachment D does not City of Palo Alto Page 3 list any assessment roll changes. Because the hearing itself is the legally prescribed process by which questions about the basis of assessment and the property owners' individual circumstances may be heard, it may be necessary to have an updated Attachment D available “at places” at the Council meeting that reflects changes brought to staff's attention since the Council packet was delivered. The public hearing for the assessment district may need to be continued if last minute information brought forward by property owners cannot be verified and included in the amended rolls prior to the hearing. Resource Impact The project is funded by the assessment district and no City General Fund monies are involved. Although assessments are generally subject to Proposition 218, this particular assessment is exempt from Proposition 218 since all of the assessment proceeds are pledged to repay bond indebtedness issued prior to enactment of Proposition 218. Parking district maintenance costs, including sweeping, landscaping, signing and lighting are paid for by parking permit fees associated with the California Avenue Parking District. These are separate from the funds used to pay for construction of the parking garage. Policy Implications Approval of this action does not represent any change to existing City policies. Timeline The assessments will be sent to the Santa Clara County Tax Collector in July and will appear on the October property tax bills. Environmental Review Approval of assessments is exempt by from the California Environmental Quality Act (CEQA). Attachments: ·A -Resolution -Cal Ave Park Bonds Plan G 2 (PDF) ·B -Parking Assessment Area District-Plan (PDF) ·C -Assessment Rates FY 2013-2014 (PDF) ·D -Amendments (PDF) ·E -Califonia Avenue Parking Assessment District Map (PDF) RESOLUTION NO. __ ----'- RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO CONFIRMING ENGINEER'S REPORT AND ASSESSMENT ROLL CALIFORNIA AVENUE PARKING ASSESSMENT DISTRICT NO. 92-13 (For Fiscal Year 2014-15) THE COUNCIL OF THE CITY OF PALO ALTO DOES RESOLVE as follows: Section 1: After proceedings conducted pursuant to the Palo Alto Municipal Code, a public hearing has been duly held on the Engineer's Report and assessment roll prepared for the above fiscal year to pay the principal and interest on bonds issued pursuant to Resolution of Intention No. 7930, adopted by the Council of the City of Palo Alto on August 9, 1993; Section 2: This Council has heard all persons having an interest in any real property within the parking assessment district; has heard all objections,protests, or other written communications from any persons interested in the real property within the district; has taken and received oral and documentary evidence pertaining to the matters contained in the report; and has remedied and corrected any errors or informalities in the report and revised and corrected any of the acts or detemiinations of the various City officials as contained therein; Section 3: The Engineer's Report and assessment roll, and each of the assessments therein as fully revised and corrected, is hereby approved and confirmed and adoption of this Resolution constitutes the levy of the assessments for fiscal year 2014-15. II II II II II II II II II II -1- Section 4: The report together with the certificate of the City Clerk as to the fact and date of approval by this Council, shall forthwith be delivered to the County of Santa Clara, and the proper County officer shall cause to be posted to the tax rolls, in the column provided therefor the amount of each of the assessments proposed to be levied and collected for the fiscal year as set forth in the report as confirmed. INTRODUCED AND PASSED: _____ , 2014 AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Jones Hall, A Professional Law Corporation -2- APPROVED: Mayor City Manager Director of Public Works Director of Administrative Services Senior Asst. City Attorney Attachment B CAPITAL IMPROVEMENT PROJECT FINANCED BY ASSESSMENT PROCEDURES USING G-BONDS CALIFORNIA AVENUE AREA BOND ISSUE AMOUNT OF BOND ISSUE PURPOSE OF ISSUE DATE ISSUED DATE OF MATURITY INTEREST RATE California Avenue Project 92-13 (Ted Thompson Garage) $2,055,000 Construction of a future two level parking structure on lot C-3 and the two parcels acquired by project 86-01. 11/93 09/02/2015 3.4% - 5.4% Attachment C CALIFORNIA AVENUE AREA PARKING DISTRICT ANNUAL ASSESSMENT RATES Project 92-13 LAND ASSESSMENT w (!) ~ I-0 0 u.. O.OB w I-(0 0::: 1'1 " CJl LO (0 0 0 0 « 0 !Xl !Xl (0 !Xl CJl 0 ::J I-!Xl (0 0 (0 (0 ~ " LO LO 0 (0 LO LO (0 0 1'1 v LO LO 0 0 0 0 0 v LO 0 0 0 0 en ~ N LO LO 0 0 0 0 LO 0 LO LO 0 0 0 0 0 0 0 0 0 0.06 1-0 0 0 0 0 0 z 0 0 ~ 0 0 0 ---.... -w I-~ ~ 0.04 l- i-Z w I-::i: en en 0.02 I-W en en « I I I I I I I I .lIZ .lIll .lIlI .llll .lll .ll2 .llJ .ll! ~ .ll§ .llZ .ll§ .Ill! .til .11 .12 .1.J .H 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 YEAR BUILDING ASSESSMENT r:r:: 0 " ~ 13.0 CJl " ~ I-1'1 ~ z 12.0 ~ !Xl CJl w ~ LO N CJl ::;: ~ LO " (0 1'1 ~ ~ !Xl ~ 0 v 0 0 ~ 0 0 0 0 w 11.0 0 ~ ~ CJl (0 ~ 1'1 0 0 ~ !Xl !Xl CJl ~ " LO ~ v CJl CJl Cl 10.0 ~ CJl ~ (0 :r: LO Cl 9.0 !Xl W 3: -w B.O ~ !z 7.0 w ::;: ~ 6.0 w U) ~ .lIZ .lIll .lIlI .llll .lll .ll2 .llJ .ll! ~ .ll§ .llZ .llll .Ill! .til .11 .12 .1.J .H 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 YEAR AB13B-2013 Page 1 of 1 Attachment D CALIFORNIA AVENUE DISTRICT AMENDMENTS PRELIMINARY ROLL Address, Parcel Number Use Square Feet Parking Reqd. Parking Prov Assessment 92-13 No amendments AMENDED ROLL Address, Parcel Number Use Square Feet Parking Reqd. Parking Prov Assessment 92-13 No amendments Ted Thomo'.on---..... Parking Garage 92-'8 = '" California Avenue Parking Assessment District ':a..rk Baulevard r--:---~-.. -.. • I . --.-.. Park Blvd -.. , : • I • • I • ~ '-----1f----' D L----' '-_--' j [ • I • • .. J .~~ ]~ ~0t ~ C-7 ~ ~~ ~ Ash ~~ EI Camino Real Public Parking Lots Currently Assessed Parking Projects Assessment District j rn Boundary _ •• _ •• _ •• _ SCALE o 100 200 300 1flO FEET • • I • • I ~ : • 1 • • I • • I • i .. - AB61507 City of Palo Alto (ID # 4889) City Council Staff Report Report Type: Action Items Meeting Date: 6/9/2014 City of Palo Alto Page 1 Summary Title: Infrastructure Funding Proposal Title: Review and Approval of the Revised Draft Infrastructure Project Funding Proposal (CONTINUED FROM JUNE 2, 2014) From: City Manager Lead Department: City Manager Recommendation Staff recommends that Council review and approve the revised draft infrastructure project funding proposal. Background At the March 3, 2013 Palo Alto City Council meeting Council reviewed a draft infrastructure project funding proposal that had been recommended by the Infrastructure Committee for Council review (Attachment A). Additionally, at the March 3, 2014 Council meeting Council considered the Infrastructure Committee’s recommendation to move forward with a three percentage point transient occupancy tax (TOT) increase. Following Council discussion at the March 3, 2014 meeting, Council approved a reduction in the proposed TOT increase from three percentage points to two percentage points. Due to this reduction in the proposed TOT increase, Council referred the draft infrastructure project funding proposal to the Infrastructure Committee for consideration of changes to the $132.2 million project list in light of the reduction in proposed TOT funding. Revised Draft Infrastructure Project Funding Proposal Reconciliation between the draft infrastructure project funding proposal presented to Council on March 3, 2014 and the Infrastructure Committee’s revised draft infrastructure project funding proposal is attached for your review (Attachment B). This attachment displays the $132.2 million in projects recommended by the Infrastructure Committee to Council on March 3, the project reductions recommended by the Infrastructure Committee to close the funding gap created by the reduction in the proposed TOT increase, and the funding sources required for the infrastructure work. City of Palo Alto Page 2 To close the $15.4 million gap, staff recommended to the Infrastructure Committee that the following projects be reduced or postponed from the $132.2 million plan. As seen below, the reduction proposed by staff at the May 20, 2014 Infrastructure Committee meeting is not $15.4 million but instead $13.9 million. This is because staff was able to identify an additional $1.5 million in funding to help offset the TOT reduction. To reconcile the delta between project costs and revenue sources, staff used its best judgment for where proposed project reductions should occur. A high level overview of staff’s justifications for the proposed project reductions are below:  There will likely be future grant opportunities to fund the Bike/Pedestrian Plan reducing the need for City funding.  Similar to other projects previously removed from the draft infrastructure project funding proposal by the Infrastructure Committee, Parks Catch-Up work and part of the proposed Byxbee Park improvement work can be either delayed or funded within the City’s Capital Plan, revenue permitting.  While in need of modernization, especially seismic improvements, Fire Station 4 remains functional and continues to provide fire suppression services in the absence of a major natural disaster. A full reconstruction of Fire Station 3 is still included in the plan. Staff Projects Proposed for Postponement Reduction (in millions) Bike/Pedestrian Master Plan $1 Parks Catch-Up $4.6 Byxbee Park $0.8 Fire Station 4 $7.5 Total $13.9 Following Committee review, and a presentation by staff on future revenue sources not identified, available, or allocated at the time of the original staff report, the Infrastructure Committee recommended that the City Council approve the revised draft infrastructure project funding proposal, including the reductions recommended by staff, with the exception of retaining Fire Station 4 in the revised draft infrastructure project funding proposal to be funded by future revenue source(s). Examples of potential future revenue sources include, but are not limited to, increases in revenue from a revised utility users tax (UUT), future development impact fees, and Police Building rent revenue once the new Public Safety Building (PSB) is constructed. A summary of the revised list of projects proposed for postponement by the Infrastructure Committee is below. Committee Projects Proposed for Postponement Reduction (in millions) City of Palo Alto Page 3 Bike/Pedestrian Master Plan $1 Parks Catch-Up $4.6 Byxbee Park $0.8 Total $6.4 The recommendation to reduce the three percentage point TOT increase to a two percentage point TOT increase has resulted in the postponement of $6.4 million worth of projects. Staff feels this is an aggressive, but realistic, reduction plan. The result of this is $125.8 million of the $132.2 million worth of projects proposed to Council on March 3, 2014 (under the assumption of a three percentage point TOT increase) will still be constructed despite a $15.4 million reduction in TOT revenue. To demonstrate that adequate resources are available for $125.8 million in infrastructure work please see the revised draft infrastructure project funding proposal (Attachment C). This attachment shows the uses and sources for the proposed projects. In the “Sources” section of the attachment, one-time funds are shown to total $53.77 million. These consist of the same sources the Infrastructure Committee has been discussing since its inception, such as Stanford Development Agreement funds and Infrastructure Reserve monies. The use of these funds is shown by year. $64.5 million will be financed using COP’s. The revenue streams necessary to support this annual debt service will be derived from new hotels tax receipts and the two percentage point TOT increase. The final $7.5 million for Fire Station 4 will be funded by future revenue sources including, but not limited to, increases in revenue from a revised UUT, future development impact fees, and Police Building rent revenue once the PSB is constructed. Again, together with available one-time funds, all of the infrastructure projects outlined in this plan can be achieved. In addition, revenues in excess of debt service in fiscal years 2016 and 2017 can be used for other projects, or to reduce out-year borrowing, on a cash flow basis. When the new PSB is built a new revenue stream will be generated by renting the old Police Building located at City Hall. Once completed and occupied, the old Police Building is conservatively estimated to yield $1.4 million annually. There are; however, multiple variables that can, and will, impact expenditures and revenue streams. Examples are, but not limited to, future construction costs, land costs, the sensitivity of TOT revenue streams to economic cycles, interest rate movements, the City’s credit rating as its borrowing increases, and the bond market’s view of municipal debt. City of Palo Alto Page 4 Another component to consider is that the resource plan discussed here does not account for other, potential significant General Fund expenditures and loans the City is considering or for which it is committed. For example, it does not incorporate a potential purchase of the downtown Post Office (PO). Although the PO will generate a rental stream justifying its purchase and eventually offsetting expected debt, the purchase will affect the near term cash flow outline presented in this report and the debt level the City will bear. Likewise, with anticipated construction of a new Golf Course, it is staff’s intent to be able to optimally balance the use of available cash to minimize capitalized interest costs as well as to cover costs by potentially advancing some funds until the Joint Powers Authority (JPA) remits its mitigation payment. This too could affect the cash flow picture. Eventually, $6.1 million of debt (excluding issuance costs and capitalized interest) will be issued to cover part of Golf Course capital costs and Golf Course revenues are expected, after ramping up rounds, to cover this debt as well as operating expenses. Finally, up-front cash will be needed to make improvements to the Airport. Eventually, 90% of the capital expenditures will be reimbursed by the federal government, but this will create a draw on cash resources in the short-term. When needs outside of the infrastructure project funding proposal are incorporated in the funding proposal, the cash flow picture becomes more complicated and dependent on the timing of projects and revenue streams. As the infrastructure project funding proposal and other projects unfold in the future, Council will see a variety of temporary “transfers” and/or “loans” via Budget Amendment Ordinances (BAO’s) to fund projects and minimize borrowing costs. In conclusion, at this point in time, despite it being an aggressive plan there are adequate resources to move forward with the projects identified in the revised draft infrastructure project funding proposal. The proposal, plus other capital acquisitions and projects, will require careful year-to-year cash flow monitoring with the objectives of minimizing debt obligations and additional expenditures. Infrastructure Committee Motions Below are the motions approved by the Infrastructure Committee at their May 20, 2014 meeting: Motion 1 Chair Klein moved, seconded by Council Member Burt, that the Infrastructure Committee recommend the City Council 1) approve the revised draft infrastructure project funding proposal, 2) approve the draft transient occupancy tax ballot language, and 3) provide direction on whether additional polling should occur including the following changes: 1) Retention of Fire Station 4 in the revised draft infrastructure project funding proposal City of Palo Alto Page 5 2) Reduction of $1 million for the Bike/Pedestrian Plan; 3) Reduction of $4.6 million in parks catch-up; 4) Reeducation of $0.8 million in Byxbee Park funding to be covered by other sources such as COPs and/or Development Impact Fees. Motion Passed: 3-1 with Scharff dissenting Motion 2 Council Member Burt moved, seconded by Council Member Berman, that the Infrastructure Committee approve the transient occupancy tax ordinance with updated changes to reflect the full retailed rent and the rent be redefined to include any form of merchant of short-term occupancy rental. Motion Passed: 4-0 Motion 3 Council Member Berman moved, seconded by Council Member Scharff for the Infrastructure Committee direct Staff to poll for the transient occupancy tax and Utilities users tax modernization. Motion Passed: 4-0 At the June 2, 2014 Council meeting the matter of direction on polling was presented to Council and the full Council directed staff to pursue polling. The results of that poll are expected to help inform Council discussion and action on ballot language for the November election at its meeting on June 16, 2014. Attachments:  A - Infrastructure Project Funding Proposal_3-3-2014 (PDF)  B - Draft Infs Project Funding Proposal vs Revised Draft Infs Project Funding Proposal_5- 20-2014 (PDF)  C - Revised Draft Infrastructure Project Funding Proposal_5-20-2014 (PDF) DRAFT Infrastructure Project Funding Proposal Status Quo Step 1 Step 2 (Public Safety Building using existing funding)(Use remaining existing funding and 3% TOT increase) Public Safety Building & Land 57 Bike Bridge 1.7 Bike/Pedestrian Plan 28.5 Byxbee Park 3.6 Funding Cal Avenue Garage (+158 spaces)9.6 New Hotels - COPs 33.6 Downtown Parking Garage (+214)13 FY 2013 Surplus 8.5 Fire Stations (2)14.2 Stanford Funds - Infrastructure 14.9 Parks Catch-up 4.6 Sum:57 Sum:75.2 Funding Stanford Funds - Infrastructure 7.2 Stanford Funds - Sustainability 12.3 Stanford Funds - Interest 1.5 Parking In-Lieu Fund 4 FY 2014 Surplus (projected)4 TOT Increase 3% - COPs 46.2 Sum:75.2 Unfunded Projects Cost Remaining Unfunded Projects Cost Remaining Unfunded Projects Cost Bike Bridge 1.7 Bike Bridge 1.7 Cal Avenue Garage (+114 spaces)6.9 Bike/Pedestrian Plan 28.5 Bike/Pedestrian Plan 28.5 Downtown Parking Garage (+89 spaces)5.4 Byxbee Park 3.6 Byxbee Park 3.6 Parks Catch-up 4.3 Cal Avenue Garage (+272 spaces)16.5 Cal Avenue Garage (+272 spaces)16.5 Sum:16.6 Downtown Parking Garage (+214 spaces)13 Downtown Parking Garage (+214 spaces)13 Downtown Parking Garage (+89 spaces)5.4 Downtown Parking Garage (+89 spaces)5.4 Fire Stations (2)14.2 Fire Stations (2)14.2 Parks Catch-up 8.9 Parks Catch-up 8.9 Public Safety Building & Land 57 Sum:91.8 Sum:148.8 Remaining Existing Funding Amount Remaining Existing Funding Amount Existing Funding Amount New hotels - COPs 33.6 Stanford Funds - Infrastructure 7.2 Infrastructure Reserve 8 Stanford Funds - Infrastructure 22.1 Stanford Funds - Sustainability 12.3 Stanford Funds - Sustainability 12.3 Stanford Funds - Interest 1.5 Stanford Funds - Interest 1.5 Parking In-Lieu Fund 4 Parking In-Lieu Fund 4 FY 2014 Surplus (projected)4 FY 2013 Surplus 8.5 Infrastructure Reserve 8 FY 2014 Surplus (projected)4 Sum:37 Infrastructure Reserve 8 Sum:94 City Hall Police Area Lease - COPs*19.6 Total Sum:113.6 Other Factors to Consider: 1) Potential costs for shuttle system improvements and parking lot 2) Potential cost of post office construction project 3) *Infrastructure Reserve of $8 million and projected $19.6 million through COPs from lease of current police space upon completion of Public Safety Building project are not allocated to projects in this scenario, allowing these funds to be programmed through a future process. 4) **Parking garage cost estimates are based on additional parking spaces and the City's In-Lieu Parking Fee ATTACHMENT B Draft Infs. Project Funding Proposal vs. Revised Draft Infs. Project Funding Proposal ‐000s‐ Projects and Costs @3% TOT @2% TOT Recommend Changes Public Safety Building 57,000                  57,000               Bike Bridge 1,700                     1,700                 Bike Ped Plan* 21,000                  20,000              (1,000)                                       Arastradero 7,500                     7,500                 Byxbee Park 3,600                     2,800                (800)                                          California Avenue Garage** 9,600                     9,600                 Downtown Parking Garage** 13,000                  13,000               Fire Stations 14,200                  14,200               Parks Catch‐Up 4,600                      ‐                    (4,600)                                       Total Costs 132,200                 125,800             (6,400)                                         1 % TOT reduction = ($15.4) million (15,400)                  ‐                      ‐                                                for project expenses New Project Total 116,800                 125,800              Sources As of 2/24/14 As of  5/20/2014 Stanford Infrastructure (SI) 22,100                  22,072              includes interest earned Stanford Sustainability (SS) 12,300                  12,400              includes interest earned Stanford Interest 1,500                      ‐                     Infrastructure Reserve 8,500                     8,500                 FY 2014 Surplus 4,000                     4,000                 Parking In‐Lieu Fees by June 30, 2014 4,041                     4,041                 Park Impact Fees ‐                         2,761                 New Hotel Revenue COPs 33,600                  33,600               TOT increase of 3%/2% 46,200                  30,800               Available revenue from TOT 126                    Future Revenue Sources TBD*** 7,500                 Grand Total 132,241             125,800         *Potential grants not reflected in above numbers. **Potential resources from public/private partnerships in building garages not reflected in above numbers. ***Potential future revenue sources may include, but are not limited to, increases in UUT revenue ,       development impact fees, and and Police Building rent revenue. ATTACHMENT C Revised Draft Infrastructure Project Funding Proposal FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Totals Uses/Projects Public Safety Building 14,900             42,100              57,000              Downtown Garage 1,300               11,700            13,000              Bike Pedestrian Plan/Arastradero 1,200                   3,200               7,700              7,700                7,700           27,500              Bike Bridge (gap funding)1,700              1,700                Byxbee Park 2,800              2,800                California Avenue Garage 9,600           9,600                Fire Station 3 670                   6,030               ‐                      ‐                6,700                Fire Station 4 7,500                Total Costs 1,200                   20,070             29,930            49,800              17,300         125,800           Sources Stanford Infrastructure 14,339           7,733             22,072            Stanford Sustainability 1,200                 3,200             7,700             300                  12,400            Infrastructure Reserve and FY 2014 Surplus 1,231             2,965             4,304              4,000         12,500            Downtown Parking In‐Lieu Fees 1,300             2,741             4,041              Park Impact Fees 2,761             2,761              Subtotal of One‐Time Funds 53,774           Finance (COP's)‐                  6,030             45,196            13,300       64,526           Future Revenue Sources TBD 7,500              Total Sources 20,070             29,930            49,800              17,300         125,800           NOT INCLUDED:  POST OFFICE, GOLF COURSE, AIRPORT City of Palo Alto (ID # 4853) City Council Staff Report Report Type: Action Items Meeting Date: 6/9/2014 City of Palo Alto Page 1 Council Priority: City Finances Summary Title: Fiscal Year 2015 Budget Adoption Title: Public Hearing: Adoption of Budget Amendment Ordinance for FY 2015, including Adoption of Operating and Capital Budgets and Municipal Fee Schedule; Adoption of five Resolutions, including: Adopting a Dark Fiber Rate Increase of 2.6% and Amending Utility Rate Schedules EDF-1 and EDF-2; Amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage) to Increase Storm Drain Rates by 2.6 Percent Per Month Per Equivalent Residential Unit for Fiscal Year 2015; Amending the 2012-2013 Compensation Plan for Management and Professional Adopted by Resolution No. 9357 to Add One New Position and Change the Title of Two Positions; Amending the 2013-2015 Memorandum of Agreement Service Employees International Union (SEIU), Adopted by Resolution No. 9398 to Add One New Position and Correct the Salary of One Position; and Amending the Terms for the Utility Management Professional Association, Adopted by Resolution No. 9359 to Correct the Salary for One Position and Add Two New Position From: City Manager Lead Department: Administrative Services Recommendation Staff and the Finance Committee recommend that Council approve the following except for the Human Services Resource Allocation Process (HSRAP) funding in the amount of $1,247,798 and staff recommends that Council approve the HSRAP funding in the amount of $1,247,798 based on previous City Council action: A. Budget Amendment Ordinance (Attachment A), which includes: 1. Exhibit 1: the City Manager’s Fiscal Year 2015 Proposed Operating and Capital Budget, previously distributed in the May 6th Council Packet; Fiscal Year 2015 Proposed Municipal Free Schedule previously distributed on May 29th 2. Exhibit 2: Amendments to the City Manager’s Fiscal Year 2015 Proposed Operating and Capital Budget City of Palo Alto Page 2 3. Exhibit 3: Revised City Table of Organization 4. Exhibit 4: Revised Municipal Fee Schedule pages B. Ordinance of the Council of the City of Palo Alto Amending Chapter 2.08 of Title 2 of the Palo Alto Municipal Code to Add Section 2.08.250 Creating a New Department of Development Services (Attachment B) C. Resolution of the Council of the City of Palo Alto Adopting a Dark Fiber Rate Increase of 2.6% and Amending Utility Rate Schedules EDF-1 and EDF-2 (Attachment C) D. Resolution of the Council of the City of Palo Alto Amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage) to Increase Storm Drain Rates by 2.6 Percent Per Month Per Equivalent Residential Unit for Fiscal Year 2015 (Attachment D) E. Resolution of the Council of the City of Palo Alto Amending the 2012-2013 Compensation Plan for Management and Professional Adopted by Resolution No. 9357 to Add One New Position and Change the Title of Two Positions (Attachment E) F. Resolution of the Council of the City of Palo Alto Amending the 2013-2015 Memorandum of Agreement Service Employees International Union (SEIU), Adopted by Resolution No. 9398 to Add One New Position and Correct the Salary of One Position (Attachment F) G. Resolution of the Council of the City of Palo Alto Amending the Terms for the Utility Management Professional Association, Adopted by Resolution No. 9359 to Correct the Salary for One Position and Add Two New Positions (Attachment G) Executive Summary The attached documents outline the amendments to the City Manager’s Fiscal Year 2015 Operating and Capital Proposed Budgets, the Fiscal Year 2015 Proposed Municipal Fee Schedule, Utility rate changes, and amendments to various employee compensation plans. Background The City Manager’s Fiscal Year 2015 Proposed Operating Budget and the Fiscal Year 2015 Proposed Capital Budget were submitted to City Council on May 6, 2014. During the month of May, the Finance Committee held hearings and reviewed the Proposed Budget, including the General Fund, Enterprise Funds, Internal Service Funds, Capital Improvement Programs, and the Municipal Fee Schedule. A total of five public hearings were held on May 13, 15, 20, 27, and 29 during which the Committee reviewed and discussed the City’s operating and capital expenditures for the next year. As a result of the hearings, the staff has recommended changes, as approved by the Finance Committee, to the Fiscal Year 2015 Proposed Budget as discussed below. Detail for these transactions is listed in the Amendments to the City Manager’s Fiscal Year 2015 Proposed Budget schedule (Attachment A, Exhibit 2). Discussion This staff report focuses primarily on the budgetary changes recommended by staff and approved by the Finance Committee during the public hearing process that followed the City of Palo Alto Page 3 submission of the original proposed budget. Certain key non-financial changes are also highlighted in this report. All other recommended changes to the proposed budget are described in the Finance Committee budget wrap memorandum (Appendix 1), which was distributed to the Finance Committee on May 29th. Adjustments to Date This section summarizes actions tentatively approved by the Finance Committee during the department budget hearings that occurred in May with final approval on May 29th. Detail in this section is organized by fund and then by department. A summary of full-time equivalent (FTE) position changes is presented following fund detail. General Fund The Fiscal Year 2015 Proposed Budget presented to City Council on May 6th was balanced with a $2.04 million contribution from the Budget Stabilization Reserve (BSR) which funded one-time expense items and the Shuttle Service Reserve. The Fiscal Year 2015 Proposed Budget projected a BSR ending balance of $29.5 million or 17.2 percent of the General Fund Proposed Operating Budget of $171.4 million. At the May 29, 2014 Finance Committee meeting, staff presented an update to the Fiscal Year 2015 projected BSR Ending Balance by increasing that projection by $2 million. As part of the ongoing monitoring of Fiscal Year 2014 revenues and expenditures, it is anticipated that the Fiscal Year 2014 budget will end with a projected surplus of $6 million. After accounting for a planned transfer of $4 million from the BSR to the Infrastructure Reserve as part of closing the Fiscal Year 2014 budget, the remaining $2 million of the Fiscal Year 2014 projected budget surplus will be carried forward to Fiscal Year 2015. As outlined in the table below, staff recommended changes as approved by the Finance Committee result in a budgetary surplus of $337,000. If the surplus is returned to the BSR, the ending balance of the BSR is $31.9 million or 18.6%. Date Dept Description Amount Proposed Budget - BSR Change ($41) 5/20 CSD Golf Course adjustments 352 5/29 PWD Remove Facilities Mgr; add contract dollars 49 5/29 CSD Add'l HSRAP (5/19 Council action)(31) 5/29 PSO Remove Sr. Mgmt Analyst; add hourly & contract funding 8 5/29 SUS Remove Mgmt Analyst; add hourly funding 0 Subtotal - Amendments to the Proposed Budget $378 Revised Proposed Budget - BSR 18.6%*$337 *If the $337,000 surplus is returned to the BSR, the BSR balance will be 18.6% of operating expenditure budget. City of Palo Alto Page 4 In addition to these changes to the Proposed Budget, staff has updated the Fiscal Year 2014 year-end results. As of the date of this report, staff projects that Fiscal Year 2014 will end with a $6 million surplus. The main drivers of this surplus are increased revenue and estimated expenditure savings in the General Fund Departments. Of this $6 million surplus, and as part of the Fiscal Year 2014 year end close, $4 million will be transferred to the Infrastructure Reserve, leaving a $2 million BSR contribution at year end. Together with this $2 million excess in Fiscal Year 2014 and the $337,000 budget surplus in the amended proposed budget, the updated year end BSR balance for Fiscal Year 2015 is $31.9 million, or 18.6 percent of the Fiscal Year 2015 Operating expenditure budget. The City’s adopted reserve policy stipulates that a reserve range of 15 to 20 percent of General Fund operating expenditures, with a target of 18.5 percent, shall be maintained. The Fiscal Year 2015 projected BSR percentage falls within this range and exceeds the targeted BSR percentage if $337,000 is returned to the BSR. Fiscal Year 2015 Revised Proposed Budget – Position Changes During the initial Finance Committee hearings, the Finance Committee raised concern regarding the total city-wide position additions in the Fiscal Year 2015 Proposed budget of 17.45 FTEs. As recommended to the Finance Committee and summarized in this memorandum, staff reviewed all position additions and proposed removal of three benefited positions from the Fiscal Year 2015 Proposed Budget. This included using the funds for 1.0 Sr. Management Analyst in People Strategy and Operations for a one-time funded consultant contract, converting 1.0 Management Analyst to one-time temporary salary, and using parts of the funds of 1.0 Facility Manager for a Facility study. After adjusting for these reductions, the net increase in positions citywide is 14.45 FTEs or an increase of 1.4 percent. The table below groups the recommended position additions by category – Council Priority/Initiative, Regulatory Requirement, Enhancing Existing Services, and Administration and Operational Oversight. It is important to note that some position additions may be included in more than one category. After accounting for recommended position increases in the Enterprise and Special Revenue funds of 5.60 FTEs, only 8.85 positions are recommended to be added to the General Fund of which 1.50 FTEs are funded through a dedicated revenue source. Therefore, the 7.35 FTE increase in positions will be paid with increased tax revenues. Of the 7.35 position additions, 5.35 positions support City Council Priorities and Initiatives, such as staffing newly renovated and expanded libraries and supporting parking and transportation initiatives. The remaining 2.0 position will expand staffing in the City Attorney’s Office and the Administration Division of the Community Services Department (CSD). CSD has the lowest ratio of management analyst support in the City given the $23 million of expenditure budget and over $6 million in revenue. It is anticipated that with the additional focus on CSD fees, staff will bring forward City of Palo Alto Page 5 recommendations for fee increases which will offset the cost of this position. -3.00 En t e r p r i s e a n d S p e c i a l R e v e n u e Fu n d s 14.45Fiscal Year 2015 Revised Proposed Budget FTE TOTAL Positions Fund Department Council Priority/ Initiatives Regulatory Requirement Enhancing Existing Service Admin. & Oper. Oversight FTE En t e r p r i s e a n d S p e c i a l R e v e n u e Fu n d s Positions Metering Technician Electric Fund Utilities X 1.00 Principal Management Analyst Enterprise Funds Utilities X 1.00 Enterprise Funds Utilities X 1.00 Laboratory Technician Wastewater Fund Public Works X 0.50 Management Analyst Airport Fund Public Works X 1.00 Coord. Transportation Sys. Mngr.General Fund Planning & Community Environment X 0.10 Public Arts Fund Community Services X 1.00 5.60 Senior Management Analyst General Fund Development Services X X 1.00 General Fund Community Services X 0.50 1.50 Library Positions (Multiple)General Fund Library X X 2.95 General Fund City Attorney X 1.00 General Fund Planning & Community Environment X 1.00 General Fund Planning & Community Environment X X 1.00 Coord. Transportation Sys. Mngr.General Fund Planning & Community Environment X 0.40 Management Analyst General Fund Community Services X X 1.00 7.35 Public Arts Manager JMZ Educators Legal Fellow En t e r p r i s e a n d S p e c i a l R e v e n u e Fu n d s Safety Officer Ge n e r a l F u n d De d i c a t e d Re v e n u e Senior Planner Land Use Analyst Staff Recommended Changes to the City Manager’s Proposed Budget Community Services Department, Golf Operations Golf Course Financials were distributed to the Finance Committee at places on May 20, 2014. The updated financials include a net $352,188 adjustment that benefits the General Fund Budget Stabilization Reserve. Due to anticipated Golf Course closure for the reconfiguration project, staff proposed an $18,188 revenue adjustment in accordance with the lease agreements with concessionaires and a $334,000 expense decrease to adjust for water usage, the Valley Crest golf maintenance contract, and range fees. Position Allocation for Development Services As included in the Fiscal Year 2015 Proposed Budget, staff recommends allocating positions, revenues, and expenditures from Planning and Community Environment (PCE) to Development Services (DS). After the publication of the Fiscal Year 2015 Proposed Budget document, staff re- examined the total transfer of positions and recommends allocating an additional 1.10 positions from PCE to DS totaling $112,795: • Reallocation of 1.0 Administrative Associate II ($98,460) • Reallocation of 0.1 Senior Planner ($14,335) Cubberley Covenant Not to Develop Reserve Adjustment (Non-Departmental) The Non-Departmental budget includes a $218,040 increase for the Cubberley Lease payment to the Palo Alto Unified School District (PAUSD). Included in this amount is $55,845 that is City of Palo Alto Page 6 associated with the Covenant Not to Develop portion of the agreement with PAUSD, which has been set aside in the Covenant Not to Develop Reserve. The remaining lease payment increase for Cubberley is $162,195. Pending negotiations with PAUSD, staff proposed that half of the $162,195 increase be allocated to the Cubberley Covenant Not to Development Reserve (see p. 399 of the Proposed Operating document for detail), which will increase the reserve from $958,679 to $1,039,776. Facilities Manager and Facility Operational Study The Proposed Budget document included a recommendation to add a Facilities Manager position. This position was intended to manage assigned maintenance activities, coordinate the City’s efforts to address Infrastructure Blue Ribbon Commission (IBRC) recommendations, and implement a sustainable maintenance program. Upon further consideration, after the release of the Proposed Operating Budget, the recommendation to fund this permanent position was amended. Instead of recommending the addition of a position at this time, staff proposes to add one time funds in the amount of $75,000 for an Operational Study of the Facilities Maintenance and Rehabilitation business area. This study is recommended to be funded by the General Fund ($49,500) and the Capital Improvement Program ($25,500). This review, which will include the Facility Capital program, will seek to identify potential operational changes, including alternative staffing levels; and organizational changes that would reduce cost, improve service delivery, and increase customer satisfaction. As a result of this adjustment, the following recommendations were approved to the Proposed Budget for the Public Works Department in the General Fund: • Eliminate the proposed addition of a Facilities Manager • Reduce Salaries and Benefits by $128,088 • Increase the proposed allocation for contract services by $49,500 • Reduce General Fund Cost Allocation Plan revenue by $30,405 Administrative Services Staffing Staff proposes a reclassification of 1.0 FTE Purchasing Manager to 1.0 FTE Chief Procurement Officer. This position is funded in the General Fund and the reclassification will not result in a change in compensation. People Strategy and Operations Staffing In the Fiscal Year 2015 Proposed Budget, staff recommended to add 1.0 Senior Management Analyst position to the People Strategy and Operations Department. Due to the City’s complex salary and benefits structure (agreements and compensation packages with 10 employee groups, three different tiers for pensions, and various tiers for healthcare benefits for active and retired employees), the intent of the position addition was to focus primarily on SAP data entry review, data analysis as it relates to citywide salaries and benefits, and review and implementation of best practices regarding policies and procedures. After further analysis, this recommendation has been revised to remove the 1.0 Senior Management Analyst position ($177,411) and use $156,000 of the funding for a consultant and $13,319 to continue funding a City of Palo Alto Page 7 0.12 hourly Management Specialist position. The remaining $8,092 will be returned to the General Fund Budget Stabilization Reserve (BSR). The consultant will conduct a comprehensive review of human resources industry best practices, primarily related to SAP data entry and analysis, and use the results to update the Department’s policies and procedures concerning overall position management. Funding for the hourly position will allow for increased capacity for analytical work related to the calculation and allocation of citywide salaries and benefits. After the conclusion of the study, staff may bring forward recommendations for implementation of best practices as part of future budget cycles. In addition, once the consultant completes the review, an evaluation will be conducted to determine the ongoing need in these areas. Additional Human Services Resource Allocation Process (HSRAP) Funding At the May 19 City Council Meeting, the City Council authorized additional funding in the amount of $31,620 for HSRAP to be recommended for allocation by the Human Relations Commission. Recommendations for the additional allocation are scheduled to be brought forward for City Council consideration in June 2014 or August 2014. With the additional amount of $31,620, the total Fiscal Year 2015 Proposed Budget allocation for HSRAP amounts to $1,247,798. At the May 29 Finance Committee Meeting, the Finance Committee unanimously (4-0) vote approved the Fiscal Year 2015 Revised Proposed Budget except for the HSRAP funding. As outlined in the attached minutes, Council Member Holman moved, seconded by Council Member Burt to return to Council for consideration of the potential of restoration of up to $200,000 in Human Services Resource Allocation Process funding to be forwarded to the Human Resources Commission for their recommendation on allocation for the “most-need” demonstrated and brought forward; the $200,000 as an “up-to,” not a “to be spent” amount. This motion failed on a vote of 2-2 with Chair Berman and Vice-Mayor Kniss not supporting the motion. Then, Chair Berman moved, seconded by Vice Mayor Kniss to recommend to the City Council tentative approval of the Human Services Resource Allocation Process Budget as proposed in the City Manager's proposed budget. This motion failed on a vote of 2-2 with Council Members Burt and Holman not supporting the motion. Therefore, the City Manager’s Fiscal Year 2015 Proposed Budget including revisions brought forward by staff was approved by the Finance Committee except for the Fiscal Year 2015 HSRAP allocation. Based on previous City Council action, staff recommends the approval of the Fiscal Year 2015 Proposed Budget allocation for HSRAP in the amount of $1,247,798. Office of Sustainability Staffing In the Fiscal Year 2015 Proposed Budget, staff recommended a one-time add of a 1.0 Management Analyst position, with 0.50 of the position funded in the Office of Sustainability, 0.25 of the position funded in Utilities Administration, 0.10 of the position funded in the Utilities Fiber Optic Fund; and 0.05 of the position funded in the Refuse Fund, Wastewater Treatment Fund, and the City Manager's Office. This position was intended to support the City of Palo Alto Page 8 Chief Sustainability Officer with identifying and pursuing foundation, government and other funding for City sustainability initiatives; prioritizing and evaluating the progress and impacts of sustainability initiatives; and developing and executing the Climate Plan and other sustainability-related strategies. As part of the revisions to the Fiscal Year 2015 Proposed Budget, staff recommended supporting this position one-time with temporary salary funding versus adding a benefited, full-time position. The cost across all funds will remain the same at $153,696. Enterprise Funds Changes to the Enterprise Funds Fiscal Year 2015 Proposed Budget are listed below. Staff Recommended Changes to the City Manager’s Proposed Budget Position Reclassification Staff proposed a reclassification of 1.0 FTE Senior Market Analyst to 1.0 FTE Business Analyst. This position is funded in the Electric, Gas, and Water Funds. The People Strategy and Operations Department conducted a position classification study and determined that the job duties performed were more in line with the Business Analyst classification description. The cost for this position reclassification including salaries and pension benefits totals $15,948 and is proposed to be funded in the following amounts by fund: Electric Fund $5,422, Gas Fund $5,263 and Water Fund $5,263. Office of Sustainability Staffing In the Fiscal Year 2015 Proposed Budget, staff recommended a one-time add of a 1.0 Management Analyst position, with 0.50 of the position funded in the Office of Sustainability, 0.25 of the position funded in Utilities Administration, 0.10 of the position funded in the Utilities Fiber Optic Fund; and 0.05 of the position funded in the Refuse Fund, Wastewater Treatment Fund, and the City Manager's Office. This position was intended to support the Chief Sustainability Officer with identifying and pursuing foundation, government and other funding for City sustainability initiatives; prioritizing and evaluating the progress and impacts of sustainability initiatives; and developing and executing the Climate Plan and other sustainability-related strategies. As part of the revisions to the Fiscal Year 2015 Proposed Budget, staff recommends supporting this position one-time with temporary salary funding versus adding a benefited, full-time position. The cost across all funds will remain the same at $153,696. Special Revenue Funds Staff Recommended Changes to the City Manager’s Proposed Budget Project Safety Net (p. 78 of the Fiscal Year 2015 Proposed Operating Budget): This program is a community-wide collaboration on suicide prevention and youth well-being. The collaboration is funded via the Stanford University Medical Center Development Agreement Funding and is managed by the Office of Human Services in the Community Services City of Palo Alto Page 9 Department. The proposed budget includes $22,031 for a part time administrative assistant, however continued funding for the program director (1 hourly FTE Management Specialist, salary and benefits: $104,934) is requested to fully support the program in Fiscal Year 2015. With this recommended continuation of the existing position, total program expense will be $241,965. Infrastructure/Capital Fund Staff Recommended Changes to the City Manager’s Proposed Budget The Finance Committee initiated a proposed change to the “Baylands Interpretive Center and Boardwalk Feasibility Study” capital project. The committee suggested that this project be split into two separate projects in order to separately display the funding for improvements to the Interpretive Center and the funding for the feasibility study of the boardwalk. This memorandum includes a recommendation to present the two capital projects in the Fiscal Year 2015 budget (Attachment A). Baylands Levee Improvements Feasibility Study Staff proposed the establishment of a project titled “Baylands Levee Improvements Feasibility Study” project (CIP PE-15028) with a total cost of $0.5 million. A corresponding reduction to the Los Altos Treatment Plant Site Development Preparation and Security Improvements Project (PE-14010) will be recommended in 2014 as part of the year-end Budget Amendment Ordinance. Facilities Manager and Facility Operational Study The Proposed Budget document included a recommendation to add a Facilities Manager position. This position was intended to manage assigned maintenance activities, coordinate the City’s efforts to address Infrastructure Blue Ribbon Commission (IBRC) recommendations, and implement a sustainable maintenance program. Upon further consideration, after the release of the Proposed Operating Budget, the recommendation to fund this permanent position was amended. Instead of recommending the addition of a position at this time, staff proposes to add one time funds in the amount of $75,000 for an Operational Study of the Facilities Maintenance and Rehabilitation business area. This study is recommended to be funded by the General Fund ($49,500) and the Capital Improvement Program ($25,500). This review, which will include the Facility Capital program, will seek to identify potential operational changes, including alternative staffing levels; and organizational changes that would reduce cost, improve service delivery, and increase customer satisfaction. As a result of this adjustment, the following recommendations were made to the Proposed Capital Budget in the Capital Improvement Fund: • Eliminate the proposed addition of a Facilities Manager • Reduce Salaries and Benefits by $65,851 City of Palo Alto Page 10 • Increase the proposed allocation for contract services by $25,500 Follow Up Items for the Finance Committee At the May 29th Finance Committee Meeting, Committee members had several questions regarding certain fees in the Fiscal Year 2015 Proposed Municipal Fee Schedule. The discussion below responds to these questions. Additionally, Committee Members pointed out inconsistencies in the proposed Municipal Fee Schedule, which will be addressed in the Fiscal Year 2015 Adopted Municipal Fee Schedule document. Certificate of Use Fee The City requires a one-time Certificate of Use be obtained by any business occupying or planning to occupy any commercial space (including portions of a building). The Fiscal Year 2014 fee for a Certificate of Use is $413 as outlined in the City Manager’s Report “Business Registry Certificate Program, is comprised of the following: Certificate of Use ($277), the Fire Departments Use & Occupancy Inspection ($135), and the SB 1186 state mandated fee ($1) for each certificate issued. As part of the Fiscal Year 2015 budget consolidation for Development Services, the Proposed Municipal Fee Schedule includes all the Certificate of Use Fee components in the Development Services Department. The Fiscal Year 2015 fee for the Certificate of Use is proposed as follows: Certificate of Use ($277), referenced on page 14-1; the Fire Departments Use and Occupancy Inspection ($143), referenced on page 16-2, and the SB 1186 state mandated fee ($1) for each certificate issued, referenced on page 14-1. Therefore, for Fiscal Year 2015, if approved by the City Council, the Certificate of Use fee, as outlined in the above referenced City Manager’s Report, is scheduled to increase by $8 from $413, to $421. Further, the Committee inquired why a one-room subtenant would be charged the same Certificate of Use Fee as a tenant with thousands of employees. As part of the review of Development Services fees in Fiscal Year 2015, staff will review this issue as well and report back to the City Council no later than spring 2015. Organic Garden Plots Fee and Low-Income Discount As outlined in the Fiscal Year 2015 Proposed Municipal Fee Schedule, a 25% or 50% fee discount through the Fee Reduction Program may be provided for low-income youth (17 and under), seniors (60 and over), and/or disabled adult residents. However, per the City Council approved fee discount program, which was approved as part of the Fiscal Year 1997 budget process, at this time, no fee discounts are offered to adults between ages 18 and 60 unless they are disabled. Alma Plaza Community Room – Room Rental Fee As outlined on p. 7-2 of the Fiscal Year 2015 Proposed Municipal Fee Schedule, the City does not charge room rental fees for City-Sponsored activities (Class I fees). It further states that City City of Palo Alto Page 11 facility use for City co-sponsored groups will be considered on a case by case basis. As part of the review of City-Sponsored activities, the Community Services Department follows the guidelines as outlined in Policy 1-29, titled Community Services Co-Sponsorship Policy. This policy defines co-sponsored organizations as follows: the organization has a state certification as a nonprofit organization (the organization may be a subgroup of a state or national nonprofit organization, provided that services are provided in Palo Alto); goals of the organization are aligned with those of the City’s Department of Community Services, or with other City policies and objectives as stated in the City’s budget document or Municipal Code, or as otherwise determined by the City Council; and the group provides programs which are compatible with those provided by the Community Services Department. Table of Organization Amended pages to the Fiscal Year 2015 Table of Organization is included with this report (see Attachment A, Exhibit 3). The table has been revised to reflect the staffing changes presented in this report. Changes reflected in the Table of Organization will be incorporated into the relevant department organization charts and the revised organization charts will be published in the adopted budget. The changes are as follows: • Reallocate 1.0 FTE Administrative Associate II from Planning and Community Environment to Development Services, $98,460 • Reallocate 0.1 FTE Senior Planner from Planning and Community Environment to Development Services, $14,335 • Reclassify 1.0 FTE Senior Market Analyst to Business Analyst in the Utilities Department (this position is equally split between the Electric Fund $5,422, Gas Fund $5,263 and Water Fund $5,263), $15,948 • Withdraw proposal to add 1.0 FTE Facilities Manager in the Public Works Department, $193,939. The cost of this position was split between the General Fund (0.66 FTE, $128,088) and Capital Improvement Fund (0.34 FTE, $65,851), with the General Fund also being reimbursed, through the Cost Allocation Plan, $49,557 • Withdraw proposal to add 1.0 Senior Management Analyst in the People Strategies and Operations Department, $177,411 fully in the General Fund • Withdraw proposal to add 1.0 Management Analyst to the Office of Sustainability, $153,696. The cost of this position was split between the General Fund (0.55 FTE, $84,982), the Utility Administration Fund (0.25 FTE, $37,099), the Fiber Optics Fund (0.10 FTE, $16,345), the Refuse Fund (0.05 FTE, $7,635), and the Wastewater Treatment Fund (0.05 FTE, $7,635), with the General Fund also being reimbursed, through the Cost Allocation Plan, $37,367 • Retitle the Manager, Purchasing & Contract Administration job classification to Chief Procurement Officer • Retitle the Division Manager Open Space to Division Manager Open Space, Parks and Golf City of Palo Alto Page 12 Compared to the Fiscal Year 2014 Adopted Budget, the Proposed Budget presented has a net 14.45 FTE increase. Below is a summary by fund of these changes. Municipal Fee Schedule On May 29th, the Finance Committee recommended that the Council adopt the changes to the Fiscal Year 2015 Proposed Municipal Fee Schedule (staff report ID #4817) with amendments (Attachment A, Exhibit 4). Major changes made to the Fiscal Year 2015 Proposed Municipal Fee Schedule include a 5.8 percent fee increase for average salary and benefits, and adjustments to achieve cost recovery in the Administrative Services, Development Services, Police, Fire, and Public Works departments; facility rental increases in the Community Services Department; and adjustments to Planning and Community Environment Impact Fees in accordance with Municipal Codes. The Fiscal Year 2015 Proposed Budget consolidates activities from Fire, Planning and Community Environment, and Public Works departments to the Development Services Department. The Fiscal Year 2015 Proposed Municipal Fee Schedule reflects this consolidation. Please refer to staff report ID #4817 for additional information. In addition to the staff report referenced above, staff recommended with an at-places memorandum (Appendix 2), and as approved by the Finance Committee, the following changes to the Proposed Municipal Fee Schedule. The recommendations are: 1. Foothills Park Rental & Reservation Fees:  Increased fees for groups of 1-25 by $4  Increased fees for groups of 26-100 (Oak Grove Only) by $5  Increased fees for groups of 101-150 (Oak Grove Only) by $7  Increased fees for Towle Camp by $5 per campsite City of Palo Alto Summary of FTE Changes General Fund Enterprise Funds Other Funds Citywide FY 2014 Adopted 577.80 354.55 87.00 1,019.35 FY 2015 Reallocations 1.93 (0.71) (1.22) 0.00 FY 2015 Net Additions 8.85 4.50 1.10 14.45 Subtotal of 2015 Changes 10.78 3.79 (0.12) 14.45 FY 2015 Proposed 588.58 358.34 86.88 1,033.80 City of Palo Alto Page 13  Increased Canoe rentals by $3 2. Art Center Rental & Reservation Fees:  Added fees for new facility rental space at the Art Center. The residential rate is $50/hr and the non-residential rate is $75/hr. 3. Arts & Sciences Activities:  Increased locker rental fees for a small locker to $15 and a large locker to $26, per season Rate Changes Staff and the Finance Committee recommend that Council approve the following Utility Rate Changes:  Fiber Optic Rate Increase (Attachment C): rates are adjusted annually based on the Consumer Price Index (CPI). The Fiber Optic Rate will increase 2.6 percent to reflect the annual CPI change. See Attachment C for more information.  Storm Drain Rate Increase (Attachment D): rates are adjusted annually based on the Consumer Price Index (CPI). The Storm Drain Rate will increase 2.6 percent to reflect the annual CPI change. See Staff Report ID #4489 for additional information. Compensation Plans Changes in the proposed Fiscal Year 2015 budget result in these amendments to the following compensation plans:  Management and Professional (Attachment E): title change for the Chief Procurement Officer classification; title change for the Division Manager Open Space, Parks and Golf classification; and add the Legal Fellow classification  Service Employees International Union (SEIU) (Attachment F): salary correction for the Overhead Underground Troubleman classification; and add the Animal Control Officer - Lead classification  Utilities Management Professional Association of Palo Alto (UMPAPA) (Attachment G): salary correction for the Senior Engineer classification; add the Utility Safety Officer classification; and add the Principal Management Analyst classification. Resource Impact The Fiscal Year 2015 Revised Proposed Budget has a surplus of $337,000, which includes a $2 million contribution from the BSR due to a projected Fiscal Year 2014 budget surplus, and results in an ending BSR balance of $31.9 million or 18.6 percent. As discussed in this report, the primary reason for the increased Fiscal Year 2015 ending BSR balance projection is an estimated $6 million Fiscal Year 2014 budget surplus, of which $4 million will be transferred to the Infrastructure Reserve and $2 million will be added to the BSR. The projected Fiscal Year 2015 ending BSR balance falls within the 15 to 20 percent range of the adopted reserve policy and exceeds the 18.5 percent target. The Proposed Capital Budget described a projected Infrastructure Reserve ending balance of City of Palo Alto Page 14 $13.1 million in Fiscal Year 2015 for the Capital Improvement Fund. The $13.1 million figure assumes a $4.0 million transfer from the General Fund as part of the Fiscal Year 2014 year-end closing process. As a result of the changes to the capital budget with the reduction of the 1.0 Facilities Manager position and the increased consultant funding for a Facilities Study, as well as the establishment of the Baylands Levee Improvements Feasibility Study, the Infrastructure Reserve balance would be reduced to $12.6 million, representing a decrease of $0.5 million. It should be noted, however, that a recommendation to reduce the Los Altos Treatment Plant Site Development Preparation and Security Improvements Project in the amount of $0.5 million will be brought forward for City Council consideration as part of the FY 2014 year-end Budget Amendment Ordinance, which, assuming acceptance, will restore the Infrastructure Reserve back to the $13.1 million level. With the continued funding of the Project Safety Net Director position, the Fiscal Year 2015 projected Community Health and Safety ending fund balance reserve in the Stanford University Medical Center Development Agreement Funding is expected to be at $3.7 million. To fund the reclassification of 1.0 FTE Senior Market Analyst to 1.0 FTE Business Analyst in the Utilities Department ($15,948), the respective Rate Stabilization Reserves will be reduced in the Electric Fund by $5,422, in the Gas Fund by $5,263, and in the Water Fund by $5,263. Environmental Review The adoption of the City’s Annual Budget is not a project under the California Environmental Quality Act. Attachments:  Attachment A - FY 2015 Budget Adoption Ordinance (DOCX)  Attachment A, Exhibit 1 - FY 2015 Proposed Budget & Muni Fee Previously Distributed (PDF)  Attachment A, Exhibit 2 - Amendments to Proposed Budget (PDF)  Attachment A, Exhibit 3 - Revised Table of Org (PDF)  Attachment A, Exhibit 4 - Revised Muni Fee Pages (PDF)  Attachment B - Development Services Department Ordinance (DOCX)  Attachment C - Reso for Dark Fiber Rate Increase (PDF)  Attachment D - Storm Drain Rate Resolution (PDF)  Attachment E - Resolution Amending the Management and Professional Compensation Plan (DOCX)  Attachment F - Resolution Amending the Service Employees International Union (SEIU) Memorandum of Agreement (DOCX)  Attachment G - Resolution Amending the Utility Management and Professional Association Agreement (DOCX)  Attachment H- Finance Committee Minutes (PDF)  Appendix 1 - Finance Committee Budget Wrap Memo (PDF)  Appendix 2 - Memos Distributed to Finance Committee At Places (PDF)  Appendix 3 - Staff Presentations to Finance Committee (PDF) ATTACHMENT A 1 ORDINANCE NO. XXXX ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO ADOPTING THE BUDGET FOR FISCAL YEAR 2015 SECTION 1. The Council of the City of Palo Alto finds and determines as follows: A. Pursuant to the provisions of Section 6(g) of Article IV of the Charter of the City of Palo Alto and Chapter 2.28 of the Palo Alto Municipal Code, the City Manager has prepared and submitted to the City Council, by letter of transmittal, a budget proposal for Fiscal Year 2015; and B. Pursuant to the provisions of Section 12 of Article III of the Charter, the Council did, on June 9 and 16, 2014, hold public hearings on the budget after publication of notice in accordance with Section 2.28.070 of the Palo Alto Municipal Code; and C. In accordance with the provisions of Chapter 8 of Division 1, of Title 7, commencing with Section 66016 of the Government Code, as applicable, the Council did on June 9 and 16, 2014, hold a public hearing on the proposed amendments to the Municipal Fee Schedule, after publication of notice and after availability of the data supporting the amendments was made available to the public at least 10 days prior to the hearing. SECTION 2. Pursuant to Chapter 2.28 of the Palo Alto Municipal Code, the following documents, collectively referred to as “the budget” are hereby approved and adopted for Fiscal Year 2015: (a) The budget document (Exhibit “1”) containing the proposed operating and capital budgets submitted on May 6, 2014, by the City Manager for Fiscal Year 2015, entitled “City of Palo Alto - City Manager’s Fiscal Year 2015 Proposed Budget and Municipal Fee Schedule” covering General Government Funds, Enterprise Funds and Internal Service Funds, a copy of which is on file in the Department of Administrative Services, to which ATTACHMENT A 2 copy reference is hereby made concerning the full particulars thereof, and by such reference is made a part hereof; and (b) The Amendments to the City Manager’s Fiscal Year 2015 Proposed Budget, attached hereto as Exhibit “2,” and made a part hereof; and (c) Changes and revised pages in the Table of Organization, attached hereto as Exhibit “3,” and made a part hereof; and (d) Revised pages of the Municipal Fee Schedule attached hereto as Exhibit “4”; and SECTION 3. The sums set forth in the budget for the various departments of the City, as herein amended, are hereby appropriated to the uses and purposes set forth therein. SECTION 4. All expenditures made on behalf of the City, directly or through any agency, except those required by state law, shall be made in accordance with the authorization contained in this ordinance and the budget as herein amended. SECTION 5. Appropriations for the Fiscal Year 2014 that are encumbered by approved purchase orders and contracts for which goods or services have not been received or contract completed, and/or for which all payments have not been made, by the last day of the Fiscal Year 2014 shall be carried forward and added to the fund or department appropriations for Fiscal Year 2015. SECTION 6. The City Manager is authorized and directed to make changes in the department and fund totals and summary pages of the budget necessary to reflect the amendments enumerated and aggregated in the budget as shown in Exhibit “2” and the Fiscal Year 2014 appropriations carried forward as provided in Section 5. SECTION 7. As specified in Section 2.04.320 of the Palo Alto Municipal Code, a majority vote of the City Council is required to adopt this ordinance. SECTION 8. As specified in Section 2.28.140(b) of the Palo Alto Municipal Code, the Council of the City of Palo Alto hereby ATTACHMENT A 3 delegates the authority to invest the City’s funds to the Director of Administrative Services, as Treasurer, in accordance with the City’s Investment Policy for Fiscal Year 2015. SECTION 9. The Council of the City of Palo Alto adopts the changes to the Municipal Fee Schedule as set forth in Exhibit “4”. The amount of the new or increased fees and charges is no more than necessary to cover the reasonable costs of the governmental activity, and the manner in which those costs are allocated to a payer bears a fair and reasonable relationship to the payer’s burden on, or benefits received from, the governmental activity. All new and increased fees shall go into effect immediately; provided that pursuant to Government Code Section 66017, all Planning Department fees relating to a “development project” as defined in Government Code Section 66000 shall become effective sixty (60) days from the date of adoption. SECTION 10. Fees in the Municipal Fee Schedule are for government services provided directly to the payor that are not provided to those not charged. The amount of this fee does not exceed the reasonable costs to the City of providing the services. Consequently, pursuant to Art. XIII C, Section 1(e)(2), such fees are not a tax. SECTION 11. The Council of the City of Palo Alto hereby finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. SECTION 12. Except as specified in Section 9, as provided in Section 2.04.330 (a)(3) of the Palo Alto Municipal Code, this ordinance shall become effective upon adoption. ATTACHMENT A 4 INTRODUCED AND PASSED: AYES: NOES: ABSTENTIONS: ABSENT: ______________________________ ______________________________ City Clerk Mayor APPROVED AS TO FORM: City Attorney APPROVED: City Manager Director of Administrative Services Attachment A, Exhibit 1 Fiscal Year 2015 City Manager’s Proposed Operating & Capital Budget These documents were originally distributed in Council Packet May 6, 2014. Printed copies are available upon request for $22 per book. The Proposed Fiscal Year 2014 Municipal Fee Schedule was distributed in Council Packet on May 29, 2014 These documents may be viewed at any City of Palo Alto Library or the City’s website: www.cityofpaloalto.org/gov/depts/asd/budget.asp ATTACHMENT A, EXHIBIT 2 6/4/2014 General Fund 2015 Category Amount Description GENERAL FUND (81,097) The Non-Departmental budget includes a $218,040 increase for the Cubberley Lease payment to the Palo Alto Unified School District (PAUSD). Included in this amount is $55,845 that is associated with the Covenant Not to Develop portion of the agreement with PAUSD,which has been set aside in the Covenant Not to Develop Reserve.The remaining lease payment increase for Cubberley is $162,195.Staff proposed that half of the $162,195 increase be allocated to the Cubberley Covenant Not to Development Reserve (see p.399 of the Proposed Operating document for detail), which will increase the reserve from $958,679 to $1,039,776. 81,097 The Non-Departmental budget includes a $218,040 increase for the Cubberley Lease payment to the Palo Alto Unified School District (PAUSD). Included in this amount is $55,845 that is associated with the Covenant Not to Develop portion of the agreement with PAUSD,which has been set aside in the Covenant Not to Develop Reserve.The remaining lease payment increase for Cubberley is $162,195.Staff proposed that half of the $162,195 increase be allocated to the Cubberley Covenant Not to Development Reserve (see p.399 of the Proposed Operating document for detail), which will increase the reserve from $958,679 to $1,039,776. - -$ 18,188 Golf Course Financials were distributed to the Finance Committee at places on May 20, 2014.The updated financials include a net $352,188 adjustment that benefits the General Fund Budget Stabilization Reserve.Due to anticipated Golf Course closure for the reconfiguration project,staff proposed an $18,188 revenue increase,which is mainly comprised of restaurant lease revenue,and a $334,000 expense decrease to adjust for water usage, the Valley Crest golf maintenance contract, and range fees. 18,188 (334,000) Golf Course Financials were distributed to the Finance Committee at places on May 20, 2014.The updated financials include a net $352,188 adjustment that benefits the General Fund Budget Stabilization Reserve.Due to anticipated Golf Course closure for the reconfiguration project,staff proposed an $18,188 revenue increase,which is mainly comprised of restaurant lease revenue,and a $334,000 expense decrease to adjust for water usage, the Valley Crest golf maintenance contract, and range fees. 31,620 At the May 19 City Council Meeting,the City Council authorized additional funding in the amount of $31,620 for HSRAP to be recommended for allocation by the Human Relations Commission. Recommendations for the additional allocation are scheduled to be brought forward for City Council consideration in June 2014 or August 2014. (302,380) 320,568$ Net Changes To (From) Reserves Source Changes Use Changes Use Changes NON-DEPARTMENTAL CITY OF PALO ALTO AMENDMENTS TO THE CITY MANAGER'S 2015 PROPOSED BUDGET Net Changes To (From) Reserves COMMUNITY SERVICES ATTACHMENT A, EXHIBIT 2 6/4/2014 General Fund 2015 Category Amount Description CITY OF PALO ALTO AMENDMENTS TO THE CITY MANAGER'S 2015 PROPOSED BUDGET Salaries and Benefits (177,411) Remove 1.00 a Senior Management Analyst position Salaries and Benefits 13,319 Increase temporary salaries to continue funding a 0.12 hourly Management Specialist position allow for increased capacity for analytical work related to the calculation and allocation of citywide salaries and benefits Contract Services 156,000 Fund a consultant to conduct a comprehensive review of human resources industry best practices, primarily related to SAP data entry and analysis, and use the results to update the Department’s policies and procedures concerning overall position management. (8,092) 8,092$ Salaries and Benefits (112,795) As included in the Fiscal Year 2015 Proposed Budget,staff recommends allocating positions,revenues,and expenditures from Planning and Community Environment (PCE)to Development Services (DS).After the publication of the Fiscal Year 2015 Proposed Budget document,staff re- examined the total transfer of positions and recommends allocating an additional 1.10 positions from PCE to DS totaling $112,795:Reallocation of 1.0 Administrative Associate II ($98,460)and Reallocation of 0.1 Senior Planner ($14,335) (112,795) 112,795$ Salaries and Benefits 112,795 As included in the Fiscal Year 2015 Proposed Budget,staff recommends allocating positions,revenues,and expenditures from Planning and Community Environment (PCE)to Development Services (DS).After the publication of the Fiscal Year 2015 Proposed Budget document,staff re- examined the total transfer of positions and recommends allocating an additional 1.10 positions from PCE to DS totaling $112,795:Reallocation of 1.0 Administrative Associate II ($98,460)and Reallocation of 0.1 Senior Planner ($14,335) 112,795 (112,795)$ Net Changes To (From) Reserves Use Changes Use Changes DEVELOPMENT SERVICES Net Changes To (From) Reserves Use Changes PLANNING & COMMUNITY ENVIRONMENT Net Changes To (From) Reserves PEOPLE STRATEGY AND OPERATIONS ATTACHMENT A, EXHIBIT 2 6/4/2014 General Fund 2015 Category Amount Description CITY OF PALO ALTO AMENDMENTS TO THE CITY MANAGER'S 2015 PROPOSED BUDGET Allocated Charges (30,405) As a result of the change from a recommended addition of a Facilities Manager to providing funding for an operational study of the Facilities Maintenance and Rehabilitation business area, as described below, the Public Works Department will realize reduced revenues through the cost allocation plan. (30,405) (128,088) The Proposed Operating Budget included a recommendation to add a Facilities Manager position, with the cost of the position split between the General Fund and the Capital Improvement Fund. Subsequent to the release of the Proposed Budget, staff determined that an operational study of the Facilities Maintenance and Rehabilitation business area needs to be completed before making adjustments to the staffing compliment. This funding represents the cost of 0.66 FTE of this position, with the other 0.34 FTE reflected in the Capital Improvement Fund. Contract Services 49,500 This funding will allow for an operational study of the Facilities Maintenance and Rehabilitation business area. This review, which will include the Facility Capital program, will seek to identify potential operational changes, including alternative staffing levels; and organizational changes that would reduce cost, improve service delivery, and increase customer satisfaction. In total, this operational study is anticipated to cost $75,000, with the difference of $25,500 recommended in the Capital Improvement Fund. (78,588) 48,183$ Total General Fund Changes to BSR 376,843$ PUBLIC WORKS Use Changes Net Changes To (From) Reserves Source Changes ATTACHMENT A, EXHIBIT 2 6/4/2014 General Fund 2015 Category Amount Description CITY OF PALO ALTO AMENDMENTS TO THE CITY MANAGER'S 2015 PROPOSED BUDGET 136,298 The Proposed Capital Budget included funding in the amount of $136,298 for a project titled "Baylands Interpretive Center Improvements and Boardwalk Feasibility Study". In order to more clearly display the cost of the Baylands Interpretive Center Improvements, a separate project (PE-15029), "Baylands Interpretive Center Improvements" was created. This action reflects the funding that was removed from the Baylands Interpretive Center Improvements and Boardwalk Feasibility Study project and added to the Baylands Interpretive Center Improvements project. (136,298) The Proposed Capital Budget included funding in the amount of $136,298 for a project titled "Baylands Interpretive Center Improvements and Boardwalk Feasibility Study". In order to more clearly display the cost of the Baylands Interpretive Center Improvements, a separate project (PE-15029), "Baylands Interpretive Center Improvements" was created. This action reflects the elimination of funding from the Baylands Interpretive Center Improvements and Boardwalk Feasibility Study project. (65,851) The Proposed Operating Budget included a recommendation to add a Facilities Manager position, with the cost of the position split between the General Fund and the Capital Improvement Fund. Subsequent to the release of the Proposed Budget, staff determined that an operational study of the Facilities Maintenance and Rehabilitation business area needs to be completed before making adjustments to the staffing compliment. This funding represents the cost of 0.34 FTE of this position, with the other 0.66 FTE reflected in the General Fund. 25,500 This funding will allow for an operational study of the Facilities Maintenance and Rehabilitation business area. This review, which will include the Facility Capital program, will seek to identify potential operational changes, including alternative staffing levels; and organizational changes that would reduce cost, improve service delivery, and increase customer satisfaction. In total, this operational study is anticipated to cost $75,000, with the difference of $49,500 recommended in the General Fund. 500,000 Provides funds for the establishment of a new project, titled "Baylands Levee Improvements Feasibility Study" (PE-15028). The cost of this project will be offset by a reduction to the Los Altos Treatment Plant (LATP) Site Development Preparation and Security Improvements project (PE-14010), which will be brought to the City Council for formal approval as part of the 2014 year-end Budget Amendment Ordinance. Source Changes 459,649 459,649$ Capital Fund Infrastructure Reserve GENERAL FUND CIP Net Changes To (From) Reserves ATTACHMENT A, EXHIBIT 2 6/4/2014 Enterprise Funds 2015 Category Amount Description ENTERPRISE FUNDS ELECTRIC FUND Salaries and Benefits 5,422 Reclassification of 1.00 Senior Market Analyst position to 1.00 Business Analyst. This cost increase reflects the change for 0.34 of the position, because it is also funded in the Gas and Water Funds. Use Changes 5,422 Net Changes To (From) Reserves (5,422) Fund Balancing Entries (5,422)Change in Fund Balance Total Electric Fund (5,422) GAS FUND 7 Salaries and Benefits 5,263 Reclassification of 1.00 Senior Market Analyst position to 1.00 Business Analyst. This cost increase reflects the change for 0.33 of the position, because it is also funded in the Electric and Water Funds. Use Changes 5,263 Net Changes To (From) Reserves (5,263) Fund Balancing Entries (5,263)Change in Fund Balance Total Gas Fund (5,263) WATER FUND 7 Salaries and Benefits 5,263 Reclassification of 1.00 Senior Market Analyst position to 1.00 Business Analyst. This cost increase reflects the change for 0.33 of the position, because it is also funded in the Electric and Gas Funds. Use Changes 5,263 Net Changes To (From) Reserves (5,263) Fund Balancing Entries (5,263)Change in Fund Balance Total Water Fund (5,263) CITY OF PALO ALTO AMENDMENTS TO THE CITY MANAGER'S 2015 PROPOSED BUDGET ATTACHMENT A, EXHIBIT 2 6/4/2014 Other Funds 2015 Category Description Salaries and Benefits 104,934 This program is a community-wide collaboration on suicide prevention and youth well-being.The collaboration is funded via the Stanford University Medical Center Development Agreement Funding and is managed by the Office of Human Services in the Community Services Department.The proposed budget includes $22,031 for a part time administrative assistant, however continued funding for the program director (1 hourly FTE Management Specialist,salary and benefits:$104,934)is requested to fully support the program in Fiscal Year 2015.With this recommended continuation of the existing position, total program expense will be $241,965. Use Changes (104,934) STANFORD UNIVERSITY MEDICAL CENTER FUND Net Changes To (From) Reserves CITY OF PALO ALTO AMENDMENTS TO THE CITY MANAGER'S 2015 PROPOSED BUDGET SPECIAL REVENUE FUNDS Amount CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET 411 Table of Organization FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % General Fund Administrative Services Account Specialist 7.00 7.00 5.95 5.95 0.00 0.00% Account Specialist - Lead 5.00 5.00 4.59 4.59 0.00 0.00% Accountant 2.00 2.00 2.00 2.00 0.00 0.00% Administrative Assistant 0.93 1.00 1.00 1.00 0.00 0.00% Administrative Associate III 1.00 1.00 1.00 1.00 0.00 0.00% Assistant Director Administrative Services 1.50 1.80 1.65 1.65 0.00 0.00% Buyer 1.95 1.95 2.00 2.00 0.00 0.00% Contracts Administrator 1.40 1.40 1.70 1.70 0.00 0.00% Director Administrative Services/CFO 0.50 0.55 0.70 0.70 0.00 0.00% Director Office of Management and Budget 1.00 1.00 1.00 1.00 0.00 0.00% Manager Accounting 1.00 1.00 1.00 1.00 0.00 0.00% Chief Procurement Officer 1.00 1.00 1.00 1.00 0.00 0.00% Manager Real Property 1.00 1.00 1.00 1.00 0.00 0.00% Payroll Analyst 2.00 2.00 2.00 2.00 0.00 0.00% Principal Management Analyst 1.00 1.00 1.00 1.00 0.00 0.00% Senior Accountant 3.00 3.00 3.00 3.00 0.00 0.00% Senior Financial Analyst 4.81 6.10 5.90 0.00 -5.90 (100.00)% Senior Management Analyst 0.00 0.00 0.00 5.90 5.90 0.00% Storekeeper - Lead 1.00 1.00 1.00 1.00 0.00 0.00% Warehouse Supervisor 0.50 0.50 0.50 0.50 0.00 0.00% Total Administrative Services 37.69 39.30 37.99 37.99 0.00 0.00% City Attorney Assistant City Attorney 1.00 1.00 1.00 1.00 0.00 0.00% City Attorney 1.00 1.00 1.00 1.00 0.00 0.00% Claims Investigator 1.00 1.00 1.00 1.00 0.00 0.00% Legal Fellow 0.00 0.00 0.00 1.00 1.00 0.00% Legal Services Administrator 1.00 1.00 1.00 1.00 0.00 0.00% Secretary To City Attorney 1.00 1.00 1.00 1.00 0.00 0.00% Senior Assistant City Attorney 2.00 2.00 2.00 2.00 0.00 0.00% Senior Deputy City Attorney 1.00 1.00 1.00 1.00 0.00 0.00% Senior Legal Secretary - Confidential 1.00 1.00 1.00 1.00 0.00 0.00% Total City Attorney 9.00 9.00 9.00 10.00 1.00 11.11% ATTACHMENT A, EXHIBIT #3 412 CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET City Auditor Administrative Assistant 1.00 1.00 1.00 1.00 0.00 0.00% City Auditor 1.00 1.00 1.00 1.00 0.00 0.00% Performance Auditor 0.00 0.50 0.50 0.50 0.00 0.00% Senior Performance Auditor 2.00 2.00 2.00 2.00 0.00 0.00% Total City Auditor 4.00 4.50 4.50 4.50 0.00 0.00% City Clerk Administrative Associate III 3.00 3.00 2.00 2.00 0.00 0.00% Assistant City Clerk 1.00 1.00 1.00 1.00 0.00 0.00% City Clerk 1.00 1.00 1.00 1.00 0.00 0.00% Deputy City Clerk 1.00 1.00 1.00 1.00 0.00 0.00% Hearing Officer 0.75 0.75 0.75 0.75 0.00 0.00% Total City Clerk 6.75 6.75 5.75 5.75 0.00 0.00% City Manager Administrative Assistant 1.00 1.00 1.00 1.00 0.00 0.00% Administrative Associate I 0.50 0.00 0.00 0.00 0.00 0.00% Administrative Associate III 1.00 1.00 1.00 1.00 0.00 0.00% Assistant City Manager/COO 1.00 1.00 1.00 2.00 1.00 100.00% Assistant to the City Manager 1.55 1.05 1.00 0.00 -1.00 (100.00)% Chief Communications Officer 0.00 1.00 1.00 1.00 0.00 0.00% Chief Sustainability Officer 0.00 0.00 0.05 0.05 0.00 0.00% City Manager 1.00 1.00 1.00 1.00 0.00 0.00% Deputy City Manager 0.50 0.50 0.00 0.00 0.00 0.00% Executive Assistant to City Manager 1.00 1.00 1.00 1.00 0.00 0.00% Manager Communications 1.00 1.00 1.00 1.00 0.00 0.00% Manager Economic Development 1.00 1.00 1.00 1.00 0.00 0.00% Total City Manager 10.05 9.55 9.05 9.05 0.00 0.00% Community Services Administrative Assistant 1.00 1.00 1.00 1.00 0.00 0.00% Administrative Associate III 0.75 0.75 0.75 0.75 0.00 0.00% Assistant Director Community Services 1.00 1.00 2.00 2.00 0.00 0.00% Building Service Person 2.00 2.00 2.00 2.00 0.00 0.00% Building Service Person-Lead 2.00 2.00 2.00 2.00 0.00 0.00% Coordinator Recreation Programs 4.00 4.00 4.00 4.00 0.00 0.00% Director Community Services 1.00 1.00 1.00 1.00 0.00 0.00% Division Manager Open Space, Parks & Golf 1.00 1.00 1.00 1.00 0.00 0.00% Division Manager, Recreations & Golf 1.00 1.00 0.00 0.00 0.00 0.00% Heavy Equipment Operator 0.00 0.00 0.07 0.07 0.00 0.00% Inspector, Field Services 2.00 2.00 2.00 2.00 0.00 0.00% FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET 413 Junior Museum & Zoo Educator 2.25 2.25 2.25 2.75 0.50 22.22% Management Analyst 0.00 0.00 0.00 1.00 1.00 0.00% Management Assistant 1.00 1.00 1.00 1.00 0.00 0.00% Manager Community Services 6.00 6.00 5.00 5.00 0.00 0.00% Manager Community Services Senior Program 3.00 3.00 4.00 5.00 1.00 25.00% Park Maintenance - Lead 1.00 1.00 1.00 1.00 0.00 0.00% Park Maintenance Person 6.00 6.00 6.00 6.00 0.00 0.00% Park Ranger 5.00 5.00 5.00 5.00 0.00 0.00% Parks/Golf Crew-Lead 2.00 2.00 2.00 2.00 0.00 0.00% Producer Arts/Science Programs 12.00 11.75 11.75 11.75 0.00 0.00% Program Assistant I 7.50 7.50 6.75 6.75 0.00 0.00% Program Assistant II 3.00 3.00 4.00 4.00 0.00 0.00% Senior Management Analyst 1.00 1.00 1.00 1.00 0.00 0.00% Sprinkler System Repairer 4.00 4.00 4.00 4.00 0.00 0.00% Superintendent Community Services 2.00 2.00 2.00 2.00 0.00 0.00% Supervisor Recreation Programs 1.00 1.00 1.00 0.00 -1.00 (100.00)% Theater Specialist 1.00 1.00 1.00 1.00 0.00 0.00% Volunteer Coordinator 0.50 0.50 0.75 0.75 0.00 0.00% Total Community Services 74.00 73.75 74.32 75.82 1.50 2.02% Development Services Administrative Assistant 0.00 0.00 0.00 1.00 1.00 0.00% Administrative Associate II 0.00 0.00 0.00 3.02 3.02 0.00% Administrative Associate III 0.00 0.00 0.00 1.01 1.01 0.00% Assistant Director Public Works 0.00 0.00 0.00 0.02 0.02 0.00% Associate Engineer 0.00 0.00 0.00 0.16 0.16 0.00% Associate Planner 0.00 0.00 0.00 0.90 0.90 0.00% Building Inspector Specialist 0.00 0.00 0.00 3.00 3.00 0.00% Building/Planning Technician 0.00 0.00 0.00 1.80 1.80 0.00% Chief Building Official 0.00 0.00 0.00 1.00 1.00 0.00% Chief Planning Official 0.00 0.00 0.00 0.20 0.20 0.00% Code Enforcement Officer 0.00 0.00 0.00 0.50 0.50 0.00% Deputy Chief/Fire Marshall 0.00 0.00 0.00 0.84 0.84 0.00% Development Project Coordinator II 0.00 0.00 0.00 2.00 2.00 0.00% Development Project Coordinator III 0.00 0.00 0.00 3.00 3.00 0.00% Development Services Director 0.00 0.00 0.00 1.00 1.00 0.00% Engineer 0.00 0.00 0.00 0.62 0.62 0.00% Engineer Technician III 0.00 0.00 0.00 2.10 2.10 0.00% Fire Fighter 0.00 0.00 0.00 1.00 1.00 0.00% Fire Inspector 0.00 0.00 0.00 4.00 4.00 0.00% Hazardous Materials Inspector 0.00 0.00 0.00 1.89 1.89 0.00% Industrial Waste Inspector 0.00 0.00 0.00 0.01 0.01 0.00% FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % 414 CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET Industrial Waste Investigator 0.00 0.00 0.00 0.21 0.21 0.00% Inspector, Field Services 0.00 0.00 0.00 0.70 0.70 0.00% Management Analyst 0.00 0.00 0.00 0.01 0.01 0.00% Manager Development Center 0.00 0.00 0.00 1.00 1.00 0.00% Manager Environmental Control Program 0.00 0.00 0.00 0.10 0.10 0.00% Manager Planning 0.00 0.00 0.00 1.80 1.80 0.00% Manager Urban Forestry 0.00 0.00 0.00 0.04 0.04 0.00% Manager Watershed Protection 0.00 0.00 0.00 0.05 0.05 0.00% Planner 0.00 0.00 0.00 0.80 0.80 0.00% Planning Arborist 0.00 0.00 0.00 0.25 0.25 0.00% Plans Check Engineer 0.00 0.00 0.00 1.00 1.00 0.00% Project Engineer 0.00 0.00 0.00 0.15 0.15 0.00% Project Manager Trees 0.00 0.00 0.00 0.07 0.07 0.00% Senior Engineer 0.00 0.00 0.00 0.68 0.68 0.00% Senior Industrial Waste Investigator 0.00 0.00 0.00 0.01 0.01 0.00% Senior Management Analyst 0.00 0.00 0.00 1.00 1.00 0.00% Senior Planner 0.00 0.00 0.00 0.40 0.40 0.00% Senior Technologist 0.00 0.00 0.00 0.50 0.50 0.00% Supervisor Inspection And Surveying 0.00 0.00 0.00 0.27 0.27 0.00% Surveyor, Public Works 0.00 0.00 0.00 0.47 0.47 0.00% Total Development Services 0.00 0.00 0.00 38.58 38.58 0.00% Library Administrative Assistant 1.00 1.00 1.00 1.00 0.00 0.00% Assistant Director Library Services 1.00 1.00 1.00 1.00 0.00 0.00% Business Analyst 1.00 1.00 1.00 1.00 0.00 0.00% Coordinator Library Programs 1.00 1.00 1.00 1.00 0.00 0.00% Director Libraries 1.00 1.00 1.00 1.00 0.00 0.00% Division Head Library Services 1.00 1.00 1.00 1.00 0.00 0.00% Librarian 5.00 5.00 5.00 6.70 1.70 34.00% Library Assistant 5.50 5.50 5.50 4.50 -1.00 (18.18)% Library Associate 4.00 5.00 5.00 7.00 2.00 40.00% Library Specialist 8.00 7.00 7.00 7.00 0.00 0.00% Management Assistant 1.00 1.00 1.00 1.00 0.00 0.00% Manager Library Services 4.00 4.00 4.00 4.00 0.00 0.00% Senior Librarian 7.75 8.25 8.25 8.50 0.25 3.03% Total Library 41.25 41.75 41.75 44.70 2.95 7.07% Office of Sustainability Assistant to the City Manager 0.00 0.50 0.00 0.00 0.00 0.00% Chief Sustainability Officer 0.00 0.00 0.50 0.50 0.00 0.00% Total Office of Sustainability 0.00 0.50 0.50 0.50 0.00 0.00% FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET 415 People Strategy and Operations Administrative Assistant 1.00 1.00 1.00 1.00 0.00 0.00% Assistant Director Human Resources 1.00 1.00 1.00 1.00 0.00 0.00% Director Human Resources/CPO 1.00 1.00 1.00 1.00 0.00 0.00% Human Resources Assistant - Confidential 5.00 4.00 4.00 4.00 0.00 0.00% Human Resources Representative 2.00 3.00 2.00 2.00 0.00 0.00% Manager Employee Benefits 0.00 0.00 1.00 1.00 0.00 0.00% Manager Employee Relations 0.00 1.00 1.00 1.00 0.00 0.00% Senior Human Resources Administrator 5.00 4.00 4.00 4.00 0.00 0.00% Senior Management Analyst 1.00 1.00 1.00 1.00 0.00 0.00% Total People Strategy and Operations 16.00 16.00 16.00 16.00 0.00 0.00% Planning and Community Environment Administrative Assistant 1.00 1.00 2.00 1.00 -1.00 (50.00)% Administrative Associate I 1.50 1.00 1.00 1.00 0.00 0.00% Administrative Associate II 3.80 3.80 3.80 1.00 -2.80 (73.68)% Administrative Associate III 1.00 1.00 2.00 2.00 0.00 0.00% Administrator Planning & Community Environment 1.00 1.00 1.00 0.00 -1.00 (100.00)% Assistant Building Official 1.00 1.00 0.00 0.00 0.00 0.00% Assistant Director Planning & Community Environment 1.00 1.00 1.00 1.00 0.00 0.00% Associate Engineer 1.00 1.00 1.00 1.00 0.00 0.00% Associate Planner 0.00 0.00 1.00 0.10 -0.90 (90.00)% Building Inspector 4.00 4.00 0.00 0.00 0.00 0.00% Building Inspector Specialist 1.00 1.00 3.00 0.00 -3.00 (100.00)% Building/Planning Technician 2.00 2.00 2.00 0.20 -1.80 (90.00)% Business Analyst 0.00 0.00 0.00 1.00 1.00 0.00% Chief Building Official 1.00 1.00 1.00 0.00 -1.00 (100.00)% Chief Planning Official 0.00 1.00 1.00 0.80 -0.20 (20.00)% Chief Transportation Official 1.00 1.00 0.90 0.50 -0.40 (44.44)% Code Enforcement Officer 2.00 2.00 2.00 1.50 -0.50 (25.00)% Coordinator Transportation System Management 0.50 0.50 0.50 0.90 0.40 80.00% Deputy City Manager 0.50 0.50 0.00 0.00 0.00 0.00% Development Project Coordinator II 0.00 0.00 2.00 0.00 -2.00 (100.00)% Development Project Coordinator III 0.00 3.00 3.00 0.00 -3.00 (100.00)% Development Services Director 0.00 1.00 1.00 0.00 -1.00 (100.00)% Director Planning/Community Environment 1.00 1.00 1.00 1.00 0.00 0.00% Engineer 1.00 1.00 1.00 0.00 -1.00 (100.00)% Engineer Technician III 1.00 1.00 0.00 0.00 0.00 0.00% Management Analyst 0.00 0.50 0.40 0.40 0.00 0.00% FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % 416 CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET Manager Development Center 0.00 1.00 1.00 0.00 -1.00 (100.00)% Manager Planning 2.00 1.00 2.00 1.20 -0.80 (40.00)% Planner 5.75 3.75 3.75 3.15 -0.60 (16.00)% Plans Check Engineer 2.00 2.00 1.00 0.00 -1.00 (100.00)% Plans Examiner 0.00 1.00 0.00 0.00 0.00 0.00% Project Engineer 1.00 1.00 1.00 1.65 0.65 65.00% Senior Management Analyst 0.00 0.00 0.00 1.00 1.00 0.00% Senior Planner 5.00 7.00 7.00 7.60 0.60 8.57% Senior Project Engineer 0.00 0.00 1.00 0.20 -0.80 (80.00)% Supervisor Building Inspection 1.00 1.00 1.00 0.00 -1.00 (100.00)% Total Planning and Community Environment 43.05 49.05 49.35 28.20 -21.15 (42.86)% Public Safety 40-Hour Training Battalion Chief 0.00 0.00 0.00 1.00 1.00 0.00% 40-Hour Training Captain 1.00 1.00 1.00 0.00 -1.00 (100.00)% Administrative Assistant 1.00 1.00 2.00 2.00 0.00 0.00% Administrative Associate II 7.00 7.00 6.00 5.00 -1.00 (16.67)% Animal Control Officer 4.50 3.50 4.00 3.00 -1.00 (25.00)% Animal Control Officer - Lead 0.00 0.00 0.00 1.00 1.00 0.00% Animal Services Specialist II 2.00 2.00 2.00 2.00 0.00 0.00% Assistant Police Chief 1.00 1.00 1.00 1.00 0.00 0.00% Battalion Chief 56-Hour Workweek 3.00 3.00 3.00 3.00 0.00 0.00% Business Analyst 1.00 1.00 2.00 2.00 0.00 0.00% Code Enforcement Officer 1.00 1.00 1.00 1.00 0.00 0.00% Communications Technician 1.00 1.00 1.00 1.00 0.00 0.00% Community Service Officer 8.50 8.50 8.50 8.50 0.00 0.00% Court Liaison Officer 1.00 1.00 1.00 1.00 0.00 0.00% Crime Analyst 1.00 1.00 1.00 1.00 0.00 0.00% Deputy Chief/Fire Marshal 0.84 0.84 0.84 0.00 -0.84 (100.00)% Deputy Director Technical Services Division 1.00 1.00 1.00 1.00 0.00 0.00% Deputy Fire Chief 2.00 2.00 2.00 2.00 0.00 0.00% Director Office of Emergency Services 1.00 1.00 1.00 1.00 0.00 0.00% Emergency Medical Services Data Specialist 0.00 1.00 1.00 1.00 0.00 0.00% Emergency Medical Services Director 1.00 1.00 1.00 1.00 0.00 0.00% Fire Apparatus Operator 30.00 30.00 30.00 30.00 0.00 0.00% Fire Captain 27.00 22.00 22.00 22.00 0.00 0.00% Fire Chief 1.00 1.00 1.00 1.00 0.00 0.00% Fire Fighter 45.00 41.00 41.00 40.00 -1.00 (2.44)% Fire Inspector 3.00 4.00 4.00 0.00 -4.00 (100.00)% Geographic Information System Specialist 0.00 1.00 1.00 1.00 0.00 0.00% FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET 417 Hazardous Materials Inspector 1.90 1.90 1.90 0.01 -1.89 (99.47)% Office of Emergency Services Coordinator 1.00 1.00 1.00 1.00 0.00 0.00% Police Agent 19.00 19.00 19.00 19.00 0.00 0.00% Police Captain 2.00 2.00 2.00 2.00 0.00 0.00% Police Chief 1.00 1.00 1.00 1.00 0.00 0.00% Police Lieutenant 5.00 5.00 5.00 5.00 0.00 0.00% Police Officer 49.00 49.00 50.00 50.00 0.00 0.00% Police Records Specialist - Lead 1.00 1.00 1.00 1.00 0.00 0.00% Police Records Specialist II 6.00 6.00 6.00 6.00 0.00 0.00% Police Sergeant 14.00 14.00 14.00 14.00 0.00 0.00% Program Assistant 0.00 1.00 1.00 1.00 0.00 0.00% Program Assistant II 1.00 1.00 1.00 1.00 0.00 0.00% Property Evidence Technician 2.00 2.00 2.00 2.00 0.00 0.00% Public Safety Dispatcher I 2.00 2.00 2.00 2.00 0.00 0.00% Public Safety Dispatcher II 14.00 14.00 14.00 14.00 0.00 0.00% Public Safety Dispatcher - Lead 5.00 5.00 4.00 4.00 0.00 0.00% Public Safety Manager I 3.00 3.00 3.00 2.00 -1.00 (33.33)% Public Safety Manager II 0.00 0.00 0.00 1.00 1.00 0.00% Senior Management Analyst 1.00 2.00 2.00 2.00 0.00 0.00% Superintendent Animal Services 1.00 1.00 1.00 1.00 0.00 0.00% Supervisor Animal Services 1.00 0.00 0.00 0.00 0.00 0.00% Veterinarian 1.00 1.00 1.00 1.00 0.00 0.00% Veterinarian Technician 2.00 2.00 2.00 2.00 0.00 0.00% Volunteer Coordinator 0.50 0.50 0.00 0.00 0.00 0.00% Total Public Safety 278.24 272.24 273.24 264.51 -8.73 (3.19)% Public Works Account Specialist 0.04 0.00 0.00 0.00 0.00 0.00% Accountant 0.02 0.00 0.00 0.00 0.00 0.00% Administrative Assistant 1.00 1.00 1.00 1.00 0.00 0.00% Administrative Associate I 0.70 0.50 0.60 0.60 0.00 0.00% Administrative Associate II 1.80 2.85 2.65 2.63 -0.02 (0.75)% Assistant Director Public Works 1.10 1.30 1.30 1.28 -0.02 (1.54)% Associate Engineer 0.10 0.10 0.30 0.30 0.00 0.00% Building Service Person 1.00 1.00 1.00 1.00 0.00 0.00% Building Service Person - Lead 2.00 2.00 1.80 1.80 0.00 0.00% Director Public Works/City Engineer 1.00 1.00 1.00 1.00 0.00 0.00% Electrician 1.00 1.00 0.80 0.80 0.00 0.00% Engineer 0.30 0.30 0.30 0.30 0.00 0.00% Engineer Technician III 3.30 3.30 3.20 1.20 -2.00 (62.50)% Equipment Operator 3.46 3.46 3.46 3.46 0.00 0.00% Facilities Carpenter 1.00 1.00 1.00 1.00 0.00 0.00% FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % 418 CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET Facilities Maintenance - Lead 2.00 2.00 1.85 1.85 0.00 0.00% Facilities Mechanic 6.00 6.00 5.55 5.55 0.00 0.00% Facilities Painter 2.00 2.00 1.75 1.75 0.00 0.00% Heavy Equipment Operator 1.90 1.90 2.13 2.13 0.00 0.00% Heavy Equipment Operator - Lead 0.85 0.85 0.85 0.85 0.00 0.00% Inspector, Field Services 1.00 1.00 1.33 0.83 -0.50 (37.59)% Management Analyst 0.55 0.60 0.60 0.60 0.00 0.00% Manager Maintenance Operations 1.72 2.10 1.95 1.95 0.00 0.00% Manager Urban Forestry 1.00 1.00 1.00 0.96 -0.04 (4.00)% Planning Arborist 1.00 1.00 1.00 0.75 -0.25 (25.00)% Project Engineer 0.20 0.20 0.30 0.30 0.00 0.00% Project Manager 0.75 1.25 1.70 0.45 -1.25 (73.53)% Project Manager Trees 0.00 0.00 0.00 1.18 1.18 0.00% Senior Accountant 0.02 0.00 0.00 0.00 0.00 0.00% Senior Engineer 0.20 1.10 1.20 1.47 0.27 22.50% Senior Financial Analyst 0.16 0.16 0.16 0.00 -0.16 (100.00)% Senior Management Analyst 0.90 0.95 0.95 1.11 0.16 16.84% Senior Project Manager 1.00 0.10 0.10 0.10 0.00 0.00% Supervisor Inspection And Surveying 0.80 0.80 0.80 0.53 -0.27 (33.75)% Surveying Assistant 0.78 0.78 0.00 0.00 0.00 0.00% Surveyor, Public Works 0.78 0.78 0.78 0.31 -0.47 (60.26)% Traffic Control Maintainer I 1.94 1.94 1.94 1.94 0.00 0.00% Traffic Control Maintainer II 2.00 2.00 2.00 2.00 0.00 0.00% Traffic Control Maintainer - Lead 1.00 1.00 1.00 1.00 0.00 0.00% Tree Maintenance Specialist 2.00 1.00 1.00 1.00 0.00 0.00% Tree Trim/Ln Clr 7.00 7.00 7.00 7.00 0.00 0.00% Tree Trim/Ln Clr-Lead 1.00 1.00 1.00 1.00 0.00 0.00% Total Public Works 56.37 57.32 56.35 52.98 -3.37 (5.98)% Total General Fund 576.40 579.71 577.80 588.58 10.78 1.87% Enterprise Funds Public Works Account Specialist 0.46 0.45 0.45 0.45 0.00 0.00% Accountant 0.23 0.40 0.40 0.40 0.00 0.00% Administrative Associate I 0.00 0.00 0.10 0.10 0.00 0.00% Administrative Associate II 3.20 2.15 2.15 2.15 0.00 0.00% Administrative Associate III 0.00 0.00 0.10 0.10 0.00 0.00% Administrator, Refuse 1.00 1.00 1.00 0.00 -1.00 (100.00)% Assistant Director Environmental Service 1.00 1.00 1.00 0.00 -1.00 (100.00)% Assistant Director Public Works 0.75 0.30 0.30 1.30 1.00 333.33% Assistant Manager WQCP 2.00 2.00 2.00 2.00 0.00 0.00% FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET 419 Assistant to the City Manager 0.10 0.10 0.00 0.00 0.00 0.00% Associate Engineer 3.30 3.00 1.50 1.35 -0.15 (10.00)% Associate Planner 1.00 1.00 0.00 0.00 0.00 0.00% Business Analyst 0.13 0.13 0.13 0.13 0.00 0.00% Buyer 1.00 1.00 1.00 1.00 0.00 0.00% Chemist 3.00 3.00 3.00 3.00 0.00 0.00% Chief Sustainability Officer 0.00 0.00 0.10 0.10 0.00 0.00% Coordinator Public Works Projects 1.00 1.00 1.00 1.00 0.00 0.00% Coordinator Zero Waste 2.00 2.00 2.00 2.00 0.00 0.00% Deputy Chief/Fire Marshal 0.08 0.08 0.08 0.08 0.00 0.00% Electrician 3.00 3.00 3.00 3.00 0.00 0.00% Electrician - Lead 2.00 2.00 2.00 2.00 0.00 0.00% Engineer 1.00 1.00 1.00 1.00 0.00 0.00% Engineer Technician III 1.40 1.30 0.30 0.20 -0.10 (33.33)% Environmental Specialist 2.00 2.00 2.00 2.00 0.00 0.00% Equipment Operator 0.54 0.54 0.54 0.54 0.00 0.00% Hazardous Materials Inspector 0.04 0.04 0.04 0.04 0.00 0.00% Heavy Equipment Operator 5.90 1.90 1.61 1.61 0.00 0.00% Heavy Equipment Operator - Lead 3.15 2.15 1.86 1.86 0.00 0.00% Industrial Waste Inspector 2.00 2.00 3.00 2.99 -0.01 (0.33)% Industrial Waste Investigator 2.00 2.00 2.00 1.79 -0.21 (10.50)% Laboratory Technician WQC 2.50 2.50 2.50 3.00 0.50 20.00% Landfill Technician 0.00 1.00 1.00 1.00 0.00 0.00% Maintenance Mechanic 7.00 7.00 7.00 7.00 0.00 0.00% Management Analyst 1.20 1.20 1.30 2.30 1.00 76.92% Manager Airport 0.00 1.00 1.00 1.00 0.00 0.00% Manager Environmental Control Program 3.00 3.00 3.00 3.90 0.90 30.00% Manager Laboratory Services 1.00 1.00 1.00 1.00 0.00 0.00% Manager Maintenance Operations 1.38 1.00 0.96 0.96 0.00 0.00% Manager Solid Waste 1.00 1.00 1.00 1.00 0.00 0.00% Manager Water Quality Control Plant 1.00 1.00 1.00 1.00 0.00 0.00% Manager Watershed Protection 1.00 1.00 1.00 0.95 -0.05 (5.00)% Program Assistant I 2.00 1.00 1.00 1.00 0.00 0.00% Program Assistant II 1.00 2.00 2.00 2.00 0.00 0.00% Project Engineer 2.00 2.00 1.85 1.81 -0.04 (2.16)% Project Manager 0.00 0.00 0.35 0.35 0.00 0.00% Refuse Disp Atten 4.00 0.00 0.00 0.00 0.00 0.00% Senior Accountant 0.23 0.30 0.30 0.30 0.00 0.00% Senior Chemist 1.00 1.00 1.00 1.00 0.00 0.00% Senior Engineer 2.25 1.90 1.80 1.76 -0.04 (2.22)% Senior Financial Analyst 0.16 0.16 0.16 0.00 -0.16 (100.00)% Senior Industrial Waste Investigator 0.00 0.00 1.00 0.99 -0.01 1.00% FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % 420 CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET Senior Management Analyst 0.10 0.05 0.05 0.21 0.16 320.00% Senior Mechanic 1.00 1.00 1.00 1.00 0.00 0.00% Senior Operator WQC 6.00 6.00 6.00 6.00 0.00 0.00% Senior Technologist 1.13 1.13 1.13 1.13 0.00 0.00% Storekeeper 1.00 1.00 1.00 1.00 0.00 0.00% Street Maintenance Assistant 2.00 2.00 0.00 0.00 0.00 0.00% Street Sweeper Operator 7.00 7.00 5.96 5.96 0.00 0.00% Supervisor Public Works 1.00 0.00 0.00 0.00 0.00 0.00% Supervisor WQCP Operations 3.00 3.00 3.00 3.00 0.00 0.00% Surveying Assistant 0.11 0.11 0.00 0.00 0.00 0.00% Surveyor, Public Works 0.11 0.11 0.11 0.11 0.00 0.00% Technologist 0.00 0.00 1.00 1.00 0.00 0.00% Traffic Control Maintainer I 0.06 0.06 0.06 0.06 0.00 0.00% WQC Plant Operator II 17.00 17.00 16.00 16.00 0.00 0.00% Total Public Works 114.51 104.06 99.19 99.98 0.79 0.80% Utilities Account Specialist 2.50 2.55 2.55 2.55 0.00 0.00% Accountant 0.75 0.60 0.60 0.60 0.00 0.00% Administrative Assistant 1.00 1.00 1.00 1.00 0.00 0.00% Administrative Associate I 2.00 2.00 1.00 0.00 -1.00 (100.00)% Administrative Associate II 7.00 7.00 6.00 6.00 0.00 0.00% Assistant Director Administrative Services 0.10 0.00 0.25 0.25 0.00 0.00% Assistant Director Utilities Customer Support Services 1.00 1.00 1.00 1.00 0.00 0.00% Assistant Director Utilities Engineering 1.00 1.00 1.00 1.00 0.00 0.00% Assistant Director Utilities Operations 1.00 1.00 1.00 1.00 0.00 0.00% Assistant to the City Manager 0.35 0.35 0.00 0.00 0.00 0.00% Associate Engineer 0.00 0.00 0.50 0.50 0.00 0.00% Asst Director Utilities/Resource Management 1.00 1.00 1.00 1.00 0.00 0.00% Business Analyst 4.87 5.87 5.87 6.87 1.00 17.04% Cathodic Protection Tech Assistant 1.00 1.00 1.00 1.00 0.00 0.00% Cathodic Technician 1.00 1.00 1.00 1.00 0.00 0.00% Cement Finisher 1.00 1.00 1.00 1.00 0.00 0.00% Chief Sustainability Officer 0.00 0.00 0.35 0.35 0.00 0.00% Contracts Administrator 1.00 1.00 0.70 0.70 0.00 0.00% Coordinator Utility Projects 4.00 4.00 6.00 7.00 1.00 16.67% Coordinator Utility Safety & Security 1.00 1.00 1.00 0.00 -1.00 (100.00)% Customer Service Representative 5.00 5.00 6.00 6.00 0.00 0.00% Customer Service Specialist 2.00 2.00 2.00 2.00 0.00 0.00% Customer Service Specialist - Lead 2.00 2.00 2.00 2.00 0.00 0.00% Deputy Chief/Fire Marshal 0.08 0.08 0.08 0.08 0.00 0.00% FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET 421 Director Administrative Services/CFO 0.15 0.25 0.20 0.20 0.00 0.00% Director Utilities 1.00 1.00 1.00 1.00 0.00 0.00% Electric Project Engineer 2.00 2.00 2.00 2.00 0.00 0.00% Electric Underground Inspector 2.00 2.00 2.00 2.00 0.00 0.00% Electric Underground Inspector-Lead 1.00 1.00 1.00 1.00 0.00 0.00% Electrician 14.00 14.00 14.00 0.00 -14.00 (100.00)% Electrician Assistant I 5.00 4.00 4.00 4.00 0.00 0.00% Electrician - Lead 6.00 6.00 6.00 0.00 -6.00 (100.00)% Engineer 4.00 4.00 4.00 4.00 0.00 0.00% Engineer Manager - Electric 1.00 1.00 1.00 1.00 0.00 0.00% Engineer Manager - WGW 1.00 1.00 1.00 1.00 0.00 0.00% Engineer Technician III 3.00 3.00 3.00 4.00 1.00 33.33% Equipment Operator 1.00 1.00 1.00 1.00 0.00 0.00% Gas System Technician 2.00 2.00 2.00 2.00 0.00 0.00% Gas System Technician II 1.00 1.00 1.00 1.00 0.00 0.00% Hazardous Materials Inspector 0.06 0.06 0.06 0.06 0.00 0.00% Heavy Equipment Operator 9.00 8.00 8.70 8.70 0.00 0.00% Inspector, Field Services 4.00 5.00 4.00 4.00 0.00 0.00% Lineperson/Cable Spl 11.00 11.00 11.00 11.00 0.00 0.00% Lineperson/Cable Spl-Lead 4.00 4.00 4.00 4.00 0.00 0.00% Maintenance Mechanic-Welding 2.00 2.00 2.00 2.00 0.00 0.00% Manager Communications 1.00 1.00 1.00 1.00 0.00 0.00% Manager Customer Service & Meter Reading 1.00 1.00 2.00 1.00 -1.00 (50.00)% Manager Electric Operations 1.00 1.00 1.00 1.00 0.00 0.00% Manager Utility Marketing Services 1.00 1.00 1.00 1.00 0.00 0.00% Manager Utility Operations WGW 1.00 1.00 1.00 1.00 0.00 0.00% Manager Utility Telecommunication 1.00 1.00 1.00 1.00 0.00 0.00% Manager, Utilities Credit & Collection 0.00 0.00 0.00 1.00 1.00 0.00% Marketing Engineer 1.00 1.00 1.00 1.00 0.00 0.00% Meter Reader 6.00 6.00 6.00 6.00 0.00 0.00% Meter Reader - Lead 1.00 1.00 1.00 1.00 0.00 0.00% Metering Technician 0.00 0.00 0.00 3.00 3.00 0.00% Metering Technician - Lead 0.00 0.00 0.00 1.00 1.00 0.00% Offset Equipment Operator 0.48 0.48 0.48 0.48 0.00 0.00% Overhead Underground Troubleman 0.00 2.00 2.00 2.00 0.00 0.00% Planner 0.30 0.30 0.30 0.30 0.00 0.00% Power Engineer 3.00 3.00 3.00 3.00 0.00 0.00% Principal Management Analyst 0.00 0.00 0.00 1.00 1.00 0.00% Program Assistant I 3.00 3.00 2.50 2.50 0.00 0.00% Project Engineer 5.00 5.00 5.00 5.00 0.00 0.00% Project Manager 0.00 0.75 0.75 0.00 -0.75 (100.00)% Project Manager Trees 0.00 0.00 0.00 0.75 0.75 0.00% FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % 422 CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET Resource Planner 5.00 5.00 5.00 5.00 0.00 0.00% Restoration Lead 1.00 1.00 1.00 1.00 0.00 0.00% SCADA Technologist 0.00 0.00 0.00 2.00 2.00 0.00% Senior Accountant 0.75 0.70 0.70 0.70 0.00 0.00% Senior Business Analyst 2.00 2.00 2.00 2.00 0.00 0.00% Senior Deputy City Attorney 1.00 1.00 1.00 1.00 0.00 0.00% Senior Electrical Engineer 4.00 4.00 4.00 4.00 0.00 0.00% Senior Engineer 0.00 0.00 0.00 4.00 4.00 0.00% Senior Financial Analyst 1.60 1.40 1.40 0.00 -1.40 (100.00)% Senior Management Analyst 1.00 1.00 1.00 2.40 1.40 140.00% Senior Marketing Analyst 1.00 1.00 1.00 0.00 -1.00 (100.00)% Senior Mechanic 1.00 1.00 1.00 1.00 0.00 0.00% Senior Performance Auditor 1.00 1.00 1.00 1.00 0.00 0.00% Senior Project Engineer 4.00 4.00 5.00 1.00 -4.00 (80.00)% Senior Resource Planner 7.00 7.00 6.00 6.00 0.00 0.00% Senior Technologist 0.87 0.87 0.87 0.87 0.00 0.00% Senior Utility Field Service Representative 1.00 1.00 1.00 1.00 0.00 0.00% Senior Water System Operator 2.00 2.00 2.00 2.00 0.00 0.00% Storekeeper 2.00 2.00 2.00 2.00 0.00 0.00% Street Light, Traffic Signal and Fiber Apprentice 0.00 0.00 0.00 1.00 1.00 0.00% Street Light, Traffic Signal and Fiber Technician 0.00 0.00 0.00 4.00 4.00 0.00% Street Light, Traffic Signal and Fiber- Lead 0.00 0.00 0.00 2.00 2.00 0.00% Substation Electrician 0.00 0.00 0.00 6.00 6.00 0.00% Substation Electrician - Lead 0.00 0.00 0.00 2.00 2.00 0.00% Supervising Electric Project Engineer 1.00 1.00 1.00 1.00 0.00 0.00% Supervising Project Engineer 1.00 1.00 0.00 0.00 0.00 0.00% Supervisor Water Trans 1.00 0.00 0.00 0.00 0.00 0.00% Supervisor WGW 5.00 0.00 0.00 0.00 0.00 0.00% Supervisor, Inspection Services 0.00 0.00 1.00 1.00 0.00 0.00% Tree Maintenance Specialist 1.75 1.00 1.00 1.00 0.00 0.00% Utilities Compliance Manager 1.00 1.00 1.00 1.00 0.00 0.00% Utilities Supervisor 5.00 11.00 11.00 11.00 0.00 0.00% Utility Account Representative 4.00 4.00 4.00 4.00 0.00 0.00% Utility Comp Technician 2.00 2.00 2.00 2.00 0.00 0.00% Utility Comp Technician - Lead 1.00 1.00 1.00 1.00 0.00 0.00% Utility Credit/Collection Specialist 1.00 1.00 2.00 2.00 0.00 0.00% Utility Engineer Estimator 4.00 5.00 5.00 5.00 0.00 0.00% Utility Field Services Representative 5.00 5.00 5.00 5.00 0.00 0.00% Utility Install Repair - Welding Cert 3.00 3.00 3.00 3.00 0.00 0.00% FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET 423 Utility Install Repair Lead - Welding Cert 2.00 2.00 2.00 2.00 0.00 0.00% Utility Install/Representative 12.00 12.00 12.00 12.00 0.00 0.00% Utility Install/Representative Assistant 1.00 1.00 1.00 1.00 0.00 0.00% Utility Install/Representative - Lead 5.00 5.00 5.00 5.00 0.00 0.00% Utility Key Account Representative 3.00 3.00 3.00 3.00 0.00 0.00% Utility Locator 3.00 3.00 3.00 3.00 0.00 0.00% Utility Safety Officer 0.00 0.00 0.00 1.00 1.00 0.00% Utility System Operator 5.00 5.00 5.00 5.00 0.00 0.00% Warehouse Supervisor 0.50 0.50 0.50 0.50 0.00 0.00% Water System Operator II 4.00 4.00 4.00 4.00 0.00 0.00% Water Meter Crs Cn Technician 3.00 3.00 2.00 2.00 0.00 0.00% Total Utilities 251.11 253.76 255.36 258.36 3.00 1.17% Total Enterprise Funds 365.62 357.82 354.55 358.34 3.79 1.07% Other Capital Administrative Associate I 0.80 1.00 0.80 0.80 0.00 0.00% Administrative Associate III 1.00 1.00 0.90 0.89 -0.01 (1.11)% Assistant Director Public Works 0.15 0.15 0.15 0.15 0.00 0.00% Associate Engineer 0.60 0.90 2.70 2.69 -0.01 (0.37)% Cement Finisher 3.00 3.00 3.00 3.00 0.00 0.00% Cement Finisher Lead 1.00 1.00 1.00 1.00 0.00 0.00% Chief Transportation Official 0.00 0.00 0.00 0.50 0.50 0.00% Contracts Administrator 0.60 0.60 0.60 0.60 0.00 0.00% Coordinator Transportation System Management 0.00 0.00 0.00 0.10 0.10 0.00% Engineer 2.70 2.70 2.70 2.08 -0.62 (22.96)% Engineer Technician III 2.30 2.40 0.50 0.50 0.00 0.00% Heavy Equipment Operator 0.20 0.20 0.20 0.20 0.00 0.00% Inspector, Field Services 0.00 0.00 0.67 0.47 -0.20 (29.85)% Landscape Architect Park Planner 1.00 1.00 1.00 1.00 0.00 0.00% Management Analyst 1.25 1.50 1.50 1.49 -0.01 (0.67)% Manager Maintenance Operations 0.90 0.90 0.90 0.90 0.00 0.00% Program Assistant I 1.00 1.00 1.00 1.00 0.00 0.00% Project Engineer 3.80 3.80 4.85 5.09 0.24 4.95% Project Manager 0.50 1.00 1.20 1.20 0.00 0.00% Senior Engineer 2.55 2.00 2.00 1.09 -0.91 (45.50)% Senior Financial Analyst 0.60 0.60 0.60 0.00 -0.60 (100.00)% Senior Management Analyst 0.00 0.00 0.00 0.60 0.60 0.00% Senior Project Engineer 0.00 0.00 0.00 0.70 0.70 0.00% Senior Project Manager 0.00 0.90 0.90 0.90 0.00 0.00% FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % 424 CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET Supervisor Inspection And Surveying 0.20 0.20 0.20 0.20 0.00 0.00% Surveying Assistant 0.11 0.11 0.00 0.00 0.00 0.00% Surveyor, Public Works 0.11 0.11 0.11 0.11 0.00 0.00% Total Capital 24.37 26.07 27.48 27.26 -0.22 (0.08)% Information Technology Administrative Assistant 1.07 1.00 1.00 1.00 0.00 0.00% Assistant Director Administrative Services 0.40 0.20 0.10 0.10 0.00 0.00% Business Analyst 1.00 1.00 1.00 0.00 -1.00 (100.00)% Desktop Technician 5.00 5.00 5.00 5.00 0.00 0.00% Director Administrative Services/CFO 0.35 0.20 0.10 0.10 0.00 0.00% Director Information Technology/CIO 1.00 1.00 1.00 1.00 0.00 0.00% Management Analyst 0.50 1.00 1.00 1.00 0.00 0.00% Manager Information Technology 3.00 4.00 4.00 4.00 0.00 0.00% Manager Information Technology Security 0.00 1.00 1.00 1.00 0.00 0.00% Principal Management Analyst 0.00 0.00 0.00 1.00 1.00 0.00% Senior Business Analyst 2.00 2.00 2.00 0.00 -2.00 (100.00)% Senior Financial Analyst 0.09 0.00 0.00 0.00 0.00 0.00% Senior Management Analyst 0.00 0.00 0.00 2.00 2.00 0.00% Senior Technologist 13.00 12.00 12.00 13.50 1.50 12.50% Technologist 3.00 3.00 4.00 2.00 -2.00 (50.00)% Total Information Technology 30.41 31.40 32.20 31.70 -0.50 (1.55)% Printing and Mailing Fund Buyer 0.05 0.05 0.00 0.00 0.00 0.00% Offset Equipment Operator 1.52 1.52 1.52 1.52 0.00 0.00% Senior Financial Analyst 0.00 0.10 0.10 0.00 -0.10 (100.00)% Senior Management Analyst 0.00 0.00 0.00 0.10 0.10 0.00% Total Printing and Mailing Fund 1.57 1.67 1.62 1.62 0.00 0.00% Special Revenue Funds Account Specialist 0.50 0.50 1.55 1.55 0.00 0.00% Account Specialist-Lead 0.00 0.00 0.41 0.41 0.00 0.00% Administrative Associate II 0.20 0.20 0.40 0.20 -0.20 (50.00)% Building Service Person - Lead 0.00 0.00 0.20 0.20 0.00 0.00% Chief Transportation Official 0.00 0.00 0.10 0.00 -0.10 (100.00)% Community Service Officer 0.50 0.50 0.50 0.50 0.00 0.00% Electrician 0.00 0.00 0.20 0.20 0.00 0.00% Facilities Maintenance - Lead 0.00 0.00 0.15 0.15 0.00 0.00% Facilities Mechanic 0.00 0.00 0.45 0.45 0.00 0.00% Facilities Painter 0.00 0.00 0.25 0.25 0.00 0.00% FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET 425 Heavy Equipment Operator 0.00 0.00 0.29 0.29 0.00 0.00% Heavy Equipment Operator - Lead 0.00 0.00 0.29 0.29 0.00 0.00% Manager Community Services Senior Program 0.00 0.00 0.00 1.00 1.00 100.00% Manager Maintenance Operations 0.00 0.00 0.19 0.19 0.00 0.00% Planner 0.95 0.95 0.95 0.75 -0.20 (21.05)% Senior Financial Analyst 0.00 0.00 0.20 0.00 -0.20 (100.00)% Senior Management Analyst 0.00 0.00 0.00 0.20 0.20 0.00% Senior Project Engineer 0.00 0.00 0.00 0.10 0.10 0.00% Street Maintenance Assistant 0.00 0.00 2.00 2.00 0.00 0.00% Street Sweeper Operator 0.00 0.00 1.04 1.04 0.00 0.00% Total Special Revenue Funds 2.15 2.15 9.17 9.77 0.60 6.54% Vehicle Replacement Fund Administrative Associate III 1.00 1.00 1.00 1.00 0.00 0.00% Assistant Director Public Works 0.00 0.25 0.25 0.25 0.00 0.00% Assistant Fleet Manager 1.00 1.00 1.00 1.00 0.00 0.00% Equipment Maintenance Service Person 2.00 2.00 2.00 2.00 0.00 0.00% Fleet Services Coordinator 2.00 2.00 2.00 2.00 0.00 0.00% Management Analyst 0.00 0.20 0.20 0.20 0.00 0.00% Manager Fleet 1.00 1.00 1.00 1.00 0.00 0.00% Mobile Service Technician 1.00 1.00 1.00 0.00 -1.00 (100.00)% Motor Equipment Mechanic II 7.00 7.00 7.00 6.00 -1.00 (14.29)% Motor Equipment Mechanic - Lead 0.00 0.00 0.00 2.00 2.00 0.00% Project Manager 0.00 0.00 0.00 1.00 1.00 0.00% Senior Financial Analyst 0.08 0.08 0.08 0.00 -0.08 (100.00)% Senior Fleet Services Coordinator 1.00 1.00 1.00 0.00 -1.00 (100.00)% Senior Management Analyst 0.00 0.00 0.00 0.08 0.08 0.00% Total Vehicle Replacement Fund 16.08 16.53 16.53 16.53 0.00 0.00% Total Other 74.58 77.82 87.00 86.88 -0.12 (0.01)% Total Citywide Positions 1,016.60 1,015.35 1,019.35 1,033.80 14.45 1.42% FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Change % 426 CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET City of Palo Alto FY 2015 Municipal Fee Schedule 4-1 Patron Facility Use Fee for Community Theatre Children's Theatre Adults Special Workshops and Presentations (including Children’s Theatre workshop fees) Resident Fee Non-Resident Fee Resident Fee Non-Resident Fee Junior Museum Science Outreach Program $1,082.00- $54,075.00 per program Fee plus up to 50%$1,082.00- $54,075.00 per program Fee plus up to 50% Junior Museum Science Outreach Unit $55.00 - $1,082.00 per unit Fee plus up to 50% (if majority of participants are non-residents) $55.00 - $1,082.00 per unit Fee plus up to 50% (if majority of participants are non- residents) Junior Museum and Zoo Group Admission (for organized groups of 15 to 25, larger groups shall be subdivided with additional group admission fee) $55.00 - $135.00 Fee plus up to 50%$55.00 - $135.00 Fee plus up to 50% Junior Museum & Zoo birthday parties $297.00 - $541.00 Fee plus up to 50%$297.00 - $541.00 Fee plus up to 50% Children's Theatre birthday parties $297.00 - $541.00 Fee plus up to 50%$297.00 - $541.00 Fee plus up to 50% Children's Theatre per show production per participant fee***** $54.00 - $324.00 Fee plus up to 50%$54.00 - $324.00 Fee plus up to 50% Administrative fee per registration, additional Children's Theatre Enrichment $54.00-$270.00/day $108.00-$540.00/day $54.00- $270.00/day $108.00-$540.00/day Tours Palo Alto & Ravenswood School Districts, $3.00 - $5.00/student $81.00 - $135/group Palo Alto & Ravenswood School Districts, $3.00 - $5.00/student $81.00 - $135/group Instructional Classes and camps**&***$6.00 - $865.00 Fee plus up to 50%$6.00 - $865.00 Fee plus up to 50% Drop-in Activities*** & ****$4.00 - $53.00 $4.00 - $53.00 $4.00 - $53.00 $4.00 - $53.00 Performing Arts Registrations $10.00 - $22.00 Arts and Sciences Activities* $5.00 - $22.00 $2.00 $5.00 - $2,100.00 Permit to perform in Arts and Sciences sponsored concert series. (Interested parties must apply and be selected by Program Coordinator.) FY 2014 FEE COMMUNITY SERVICES DEPARTMENT $0.00 - $4.00 $10.00 - $22.00 Children's Theatre Children Arts and Sciences FY 2015 FEE Admissions Visual and Performing Arts $0.00 - $27.00 $0.00 - $27.00 $2.00 Permits Ticket Processing Fee $5.00 - $22.00 $5.00 - $2,100.00 $0.00 - $4.00 ATTACHMENT A, EXHIBIT #4 City of Palo Alto FY 2015 Municipal Fee Schedule 4-2 FY 2014 FEE COMMUNITY SERVICES DEPARTMENT Arts and Sciences FY 2015 FEE Workshop Supplies $0.50 - $79.00 $0.50 - $79.00 $0.50 - $79.00 $0.50 - $79.00 Cancellation Charge Locker Rental *The Director of Community Services is authorized to offer promotional fee discounts of up to 25% for purposes of promotion and marketing of programs. Such discounts are intended to maximize revenue and/or participation. Up to 100% of fees paid Up to 100% of fees paid $15.00 (small) per season $26.00 (large) per season ***** Either fee or in-lieu funding agreement with Friends of Palo Alto Children's Theatre. **** For every 10 hours of time purchased in a Visual Arts Studio drop-in program, one hour is given free. ** Art Center Foundation members are eligible for a 20% discount on one (1) Studio class per Foundation membership year ($100.00 and above) to be reimbursed to the City from the Art Center Foundation. $21.00 - $26.00 per season *** A 25% or 50% fee discount through the Fee Reduction Program may be provided for low-income youth, seniors, and/or disabled adult residents. Income eligibility is determined using the Community Development Block Grant (CDBG) Low-Income Guidelines. The Low- Income Guidelines are established at 80% of the Santa Clara County median income level. The income level for disabled residents is established as 100% of the Santa Clara County Median Income. Each youth, senior, and/or disabled adult accepted into the program may receive an annual subsidy up to $300. Discount percentage will be based on income level. Discount may not be applied in conjunction with any other discount program. City of Palo Alto FY 2015 Municipal Fee Schedule 8-1 Resident Fee Non-Resident Fee Resident Fee Non-Resident Fee Banner Space Rental $27.00 - $108.00/week $40.50 - $162.00/week $27.00 - $108.00/week $40.50 - $162.00/week Cancellation Fee One-third of total charges One-third of total charges Cleaning and Damage Deposit $300.00 - $1,000.00 $300.00 - $1,000.00 General Liability Insurance By Quote By Quote Special Use Permit $324.00 - $2163.00 $324.00 - $2163.00 Auditorium $119.00/hour $179.00/hour $119.00/hour $179.00/hour Historic Courtyard $77.00/hour $116.00/hour $77.00/hour $116.00/hour Green Room $50.00/hour $75.00/hour $50.00/hour $75.00/hour Kitchen / Preschool Classroom $34.00/hour $51.00/hour $34.00/hour $51.00/hour Lobby $77.00/hour $116.00/hour $77.00/hour $116.00/hour Meeting Room $77.00/hour $116.00/hour $77.00/hour $116.00/hour Sculpture Garden $102.00/hour $153.00/hour $102.00/hour $153.00/hour Studio A Not Applicable Not Applicable $50/hour $75/hour Studio B Not Applicable Not Applicable $50/hour $75/hour Ceramics Studio Not Applicable Not Applicable $50/hour $75/hour Project LOOK! Studio Not Applicable Not Applicable $50/hour $75/hour Children’s Clay Studio Not Applicable Not Applicable $50/hour $75/hour Children’s Outdoor Classroom Not Applicable Not Applicable $50/hour $75/hour Science Lab $60.00/hour $90.00/hour $60.00/hour $90.00/hour Clay Room $92.00/hour $138/hour $92.00/hour $138/hour Exhibit Hall $216.00/hour $324.00/hour $216.00/hour $324.00/hour Other Rooms $60.00/hour $90.00/hour $60.00/hour $90.00/hour Zoo**$216.00/hour $324.00/hour $216.00/hour $324.00/hour Ballroom (Room S) $152.00/hour $228.00/hour $167.00/hour $249.00/hour Community Room (Room R) $110.00/hour $165.00/hour $125.00/hour $185.00/hour Fireside Room (Room D) $88.00/hour $132.00/hour $95.00/hour $145.00/hour Kitchen $32.00/hour $48.00/hour $35.00/hour $55.00/hour Patio $90.00/hour $135.00/hour $90.00/hour $135.00/hour Weddings (Saturdays & Sundays)See Package Rentals Class I - City Use and City-Sponsored Activities: No charge for facility rental for events or activities, however, fees for attendants, equipment rental, and special uses may apply. (Note: City facility use for City co-sponsored groups will be considered on a case by case basis.) Class II - 501(c)3 Non-Profit Organizations: IRS recognized non-profit 501(c)3 organizations may receive a 50% reduction on basic facility rental rates upon verification. Only facility rental rates may be reduced and all other fees, such as staffing and equipment, are charged at the full rate. Non- profit organizations charging or collecting fees or raising funds are not eligible for reduced rates and basic fees will apply. This does not apply to class registration fees. Class III - Individuals, Groups, Organizations, and Businesses not charging fees: Basic rental fees apply. COMMUNITY SERVICES DEPARTMENT Rentals and Reservations Class IV - Business or Commercial Use: Individuals, groups, organizations, and businesses charging, collecting, or raising funds may rent facilities and equipment at the basic rate plus 75%. The Art Center is not available for CLASS IV usage. FY 2015 FEEFY 2014 FEE See Package Rentals Classifications of Use and Fees Individual Spaces Art Center* Junior Museum and Zoo Lucie Stern Community Center City of Palo Alto FY 2015 Municipal Fee Schedule 8-2 COMMUNITY SERVICES DEPARTMENT Rentals and Reservations El Palo Alto Room (Ballroom)$208.00/hour $312.00/hour $208.00/hour $312.00/hour El Palo Alto East or West only $104.00/hour $156.00/hour $104.00/hour $156.00/hour Adobe North Tech Lab $104.00/hour $156.00/hour $104.00/hour $156.00/hour Adobe South or Matadero Meeting/Class Room $82.00/hour $123.00/hour $82.00/hour $123.00/hour Catering Kitchen $60.00/hour $90.00/hour $60.00/hour $90.00/hour Weddings (Saturdays & Sundays) Auditorium and Stage (fee based on number of attendees) $158.00-$2,100.00/hour $237.00-$3,150.00/hour $158.00-$2,100.00/hour $237.00-$3,150.00/hour Dance Studio (fee based on number of attendees) $32.00-$1,050.00/hour $48.00-$1,575.00/hour $32.00-$1,050.00/hour $48.00-$1,575.00/hour Castle Stage and Secret Garden (fee based on number of attendees) $315.00-$2,625.00/hour $473.00-$3,938.00/hour $315.00-$2,625.00/hour $473.00-$3,938.00/hour Auditorium and Stage (fee based on number of attendees) $210.00-$3,150.00/hour $315.00-$4,725.00/hour $210.00-$3,150.00/hour $315.00-$4,725.00/hour Green Room and Dressing Rooms (fee based on number of attendees) $42.00 - $1,050.00/hour $63.00 - $1,575.00/hour $42.00 - $1,050.00/hour $63.00 - $1,575.00/hour Rehearsal Hall (fee based on number of attendees) $42.00 - $1,050.00/hour $63.00 - $1,575.00/hour $42.00 - $1,050.00/hour $63.00 - $1,575.00/hour Lawn Bowling Green's Kitchen and Meeting Facility $110.00/hour $165.00/hour $110.00/hour $165.00/hour Baylands Nature Interpretive Center- Meeting Room $83.00/hour $94.00/hour $83.00/hour $94.00/hour Arastradero Gateway Educational Facility*** $83.00/hour Not Applicable $83.00/hour Not Applicable Foothills Nature Interpretive Center Classroom- residents only $83.00/hour Not Applicable $83.00/hour Not Applicable Mitchell and Rinconada Parks - Bowl Areas $8.00-$81.00/hour $16.00-$162.00/hour $8.00-$81.00/hour $16.00-$162.00/hour Peers Park, Mitchell Park Field House- residents only $22.00/hour Not Available $22.00/hour Not Available Alma Plaza Community Room $110.00/hour $165.00/hour $110.00/hour $165.00/hour Palo Alto Swim Club and Palo Alto Masters Swim Club $4.00-$6.00/hour per lane or $55.00 - $75.00 for all swim lanes Not Available $4.00-$6.00/hour per lane or $55.00 - $75.00 for all swim lanes Not Available 1-25 people $75.00 - $100.00/hour $95.00 - $115.00/hour $75.00 - $100.00/hour $95.00 - $115.00/hour 26-50 people $95.00 - $115.00/hour $129.00 - $145.00/hour $95.00 - $115.00/hour $129.00 - $145.00/hour 51-75 people $125.00 - $140.00/hour $169.00 - $185.00/hour $125.00 - $140.00/hour $169.00 - $185.00/hour 76-100 people $155.00 - $175.00/hour $225.00 - $245.00/hour $155.00 - $175.00/hour $225.00 - $245.00/hour Children's Theatre Community Theatre Swimming Pool Rentals – Rinconada Competition Pool or Children’s Pool See Package Rentals Mitchell Park Community Center See Package Rentals City of Palo Alto FY 2015 Municipal Fee Schedule 8-3 COMMUNITY SERVICES DEPARTMENT Rentals and Reservations 1-15 people $11.00/group $16.00/group $15.00/group $19.00/group Arbor Group Site $43.00 Not Available $43.00 Not Available East Meadow Group Site $65.00 Not Available $65.00 Not Available Pine Grove Group Site $119.00 Not Available $119.00 Not Available Redwood Group Site $97.00 Not Available $97.00 Not Available Sequoia Group Site $54.00 Not Available $54.00 Not Available Oak Grove (150 people maximum), 1-25 people $76.00 Not available $80.00 Not available 26-100 people (Oak Grove only)$130.00 Not available $135.00 Not available 101-150 people (Oak Grove only)$173.00 Not available $180.00 Not available Towle Camp $30.00 per campsite Not available $35.00 per campsite Not available Auditorium and Green Room $119.00/hour $179.00/hour $119.00/hour $179.00/hour All Available Space and Zoo**$540.00/hour $810.00hour $540.00/hour $810.00hour All Available Space and Garden (fee based on number of attendees) $1,050.00 - $5,250.00/hour $1,575.00 - $7,875.00/hour $1,050.00 - $5,250.00/hour $1,575.00 - $7,875.00/hour Weddings (Saturdays & Sundays) - Includes facility attendant $330.00/hour $495.00/hour $360.00/hour $545.00/hour Exclusive Use Package - Includes facility attendant $300.00/hour $450.00/hour $330.00/hour $495.00/hour Fireside Room and Patio Package $116.00/hour $174.00/hour $129.00/hour $189.00/hour Community Room and Patio Package $138.00/hour $207.00/hour $149.00/hour $229.00/hour Weddings (Saturdays & Sundays) - Includes facility attendant $498.00/hour $747.00/hour $498.00/hour $747.00/hour Exclusive Use Package - Includes facility attendant $473.00/hour $709.00/hour $473.00/hour $709.00/hour El Palo Alto Room & Kitchen $254.00/hour $381.00/hour $254.00/hour $381.00/hour Adobe North Tech Lab and South Meeting/Classroom $177.00/hour $265.00/hour $177.00/hour $265.00/hour Birthday Package - Includes game room, basketball court, and party host $208.00/hour $312.00/hour $208.00/hour $312.00/hour 1-25 people $90.00 - $150.00/hour $115.00 - $160.00/hour $90.00 - $150.00/hour $115.00 - $160.00/hour 26-50 people $130.00 - $190.00/hour $140.00 - $200.00/hour $130.00 - $190.00/hour $140.00 - $200.00/hour 51-75 people $170.00 - $230.00/hour $180.00 - $240.00/hour $170.00 - $230.00/hour $180.00 - $240.00/hour 76-100 people $200.00 - $260.00/hour $210.00 - $270.00/hour $200.00 - $260.00/hour $210.00 - $270.00/hour 101 people or more $250.00 - $310.00/hour $260.00 - $320.00/hour $250.00 - $310.00/hour $260.00 - $320.00/hour Children's Theatre Swimming Pool Rentals – Rinconada Complex/Exclusive Use Package – 2 hour minimum Mitchell Park Community Center Picnic Area Reservations - Mitchell Park (Arbor, East Meadow, Pine Grove, Redwood); Rinconada Park Picnic Area Reservations - Mitchell Park (Arbor, East Meadow, Pine Grove, Redwood); Rinconada Park (Sequoia) Foothills Park Reservations Package Rentals Jr. Museum and Zoo Art Center* Lucie Stern Community Center City of Palo Alto FY 2015 Municipal Fee Schedule 8-4 COMMUNITY SERVICES DEPARTMENT Rentals and Reservations Athletic Field Use Deposit $25.00 - $500.00 $37.50 - $750.00 $25.00 - $500.00 $37.50 - $750.00 Lights (Only Baseball & Softball Fields at El Camino Park and Baylands Athletic Center) $27.00/use $27.00/use Tennis Courts (USTA and Palo Alto Tennis Club only) $5.00 - $16.00/hour $8.00 - $22.50/hour $5.00 - $16.00/hour $8.00 - $22.50/hour Grass Fields $46.00 - $81.00/hour $83.00 - $162.00/hour $46.00 - $81.00/hour $83.00 - $162.00/hour Grass Fields - Palo Alto Based Non- Profit Organizations $25.00 - $54.00/hour Not Applicable $25.00 - $54.00/hour Not Applicable Grass Fields - Palo Alto Based Youth Sports Organizations (When 51% or more of participants are Palo Alto residents.) $3.00 - $27.00/hour Not Applicable $3.00 - $27.00/hour Not Applicable Synthetic Turf Fields - Stanford Palo Alto Playing Fields and Cubberley Football Field $61.00 - $162.00/hour $138.00 - $216.00/hour $61.00 - $162.00/hour $138.00 - $216.00/hour Synthetic Turf Fields - Palo Alto Based Non-Profit Organizations $44.00 - $108.00/hour Not Applicable $44.00 - $108.00/hour Not Applicable Synthetic Turf Fields - Palo Alto Based Youth Sports Organizations (When 51% or more of participants are Palo Alto residents.) $33.00 - $54.00/hour Not applicable $33.00 - $54.00/hour Not applicable Facility Attendant and/or Assistant Facility Attendant and/or Assistant - overtime and holidays Custodial Services Custodial Services – overtime and holidays Damage and Cleaning Deposit Lifeguard Lifeguard - overtime and holidays Palo Alto Junior Museum & Zoo Attendant Palo Alto Junior Museum & Zoo Attendant – overtime and holidays Park Ranger Athletic Fields $59.00/hour regular $59.00/hour regular 1)Facilities in this category include: Rental Facility Attendant Charges $30.00/hour $28.00/hour per attendant $45.00/hour $32.00/hour $48.00/hour $25.00 - $1,000.00 $20.00/hour $33.00/hour $42.00/hour per attendant $28.00/hour per attendant $42.00/hour per attendant $30.00/hour $45.00/hour $32.00/hour $48.00/hour $25.00 - $1,000.00 $20.00/hour $33.00/hour City of Palo Alto FY 2015 Municipal Fee Schedule 8-5 COMMUNITY SERVICES DEPARTMENT Rentals and Reservations Coffee Urn $11.00/use $16.50/use $11.00/use $16.50/use Easel (wooden, 3-legged) at the Art Center $4.00 per day $5.00 per day $4.00 per day $5.00 per day Grand Piano $81.00/use $121.50/use $81.00/use $121.50/use Art Center Grand Piano $77.00/use $116.00/use $77.00/use $116.00/use Portable Movie Projector - 16mm $11.00/use $16.50/use $11.00/use $16.50/use Podium with Microphone $32.00/use $48.00/use $32.00/use $48.00/use Canoe (Foothills Park)$17.00 Not Applicable $20.00 Not Applicable Personal Floatation Device (Foothills) $2.00/use Not Applicable $2.00/use Not Applicable Portable Public Address System $11.00/use $16.50/use $11.00/use $16.50/use Portable Digital Projector $65.00/use $97.50/use $65.00/use $97.50/use Built in Digital Projection System $65.00/use $97.50/use $65.00/use $97.50/use At Cubberley Center: Tables - 6' or Round (when not part of a facility rental) $6.00/table $9.00/table $6.00/table $9.00/table At Cubberley Center: Chairs - Folding Metal (when not part of a facility rental) $1.00/chair $1.50/chair $1.00/chair $1.50/chair Upright Piano $11.00/use $16.50/use $11.00/use $16.50/use Television $29.00/use $43.50/use $29.00/use $43.50/use Facility Rental Liability Insurance An optional fee for required liability insurance is charged at a rate dictated by the City’s insurance vendor. An optional fee for required liability insurance is charged at a rate dictated by the City’s insurance vendor. An optional fee for required liability insurance is charged at a rate dictated by the City’s insurance vendor. An optional fee for required liability insurance is charged at a rate dictated by the City’s insurance vendor. Gymnastics Mats $27.00/use $40.50/use $27.00/use $40.50/use Gymnastics Equipment $5.00 per piece $7.50 per piece $5.00 per piece $7.50 per piece ***Arastradero Gateway Educational Facility rental limited to educational usage. * A 15% discount on the room fee is given to those booking a space at the Art Center for 5 or more hours. ** A two-hour minimum is required for Zoo rental. 1)Permittee is required to reimburse the City for any damage or loss to facilities or equipment. Special Equipment ATTACHMENT B Not Yet Approved Ordinance No. _____ Ordinance of the Council of the City of Palo Alto Amending Chapter 2.08 of Title 2 of the Palo Alto Municipal Code to Add Section 2.08.250 Creating a New Department of Development Services The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Chapter 2.08 (Officers and Departments) of Title 2 (Administrative Code) of the Palo Alto Municipal Code is hereby amended to add Section 2.08.250 as follows: 2.08.250 Department of Development Services. (a) The department of development services shall be organized and administered under the direction of a director of development services who shall be accountable to the city manager. The duties of the director of development services shall be as follows: (1) To oversee the implementation of the Blueprint transition plan and timetable to improve and simplify the development review system; (2) To support and direct the Development Center Manager in his/her role to take actions necessary to carry out the changes in day-to-day operations; (3) To direct public information and customer service efforts and policies for matters pertaining to Development Center Operations; (4) To assure that State and County ordinances applicable to City of Palo Alto area are properly enforced; (5) To develop general policies in consultation with the City Manager and other department directors for the operation or expansion of various programs; (6) To develop staff with a high degree of professionalism, competence and sound judgment to ensure effective and efficient processing of development and construction proposals; (7) To implement and monitor the Performance Measurement Program in concert with the City Manager and other department directors to ensure there is accountability for performance of departmental functions and activities; (8) To oversee the Development Customer Advisory Group (DCAG), a multi-disciplinary customer board charged with recommending service levels changes through ongoing special revenue funds, department budgets, and fee review and recommended changes; (9) To provide advice to and cooperates with City officials, developers, and community organizations in connection with new or contemplated development projects; ATTACHMENT B Not Yet Approved (10) To direct the Development Center Manager and other staff to better advise citizens on building and development matters and supplies information and reports to help residents better understand City policy; (11) To confer with the City Manager and appropriate department directors on issues relating to various code interpretations, and timely plan review, permit issuance, inspections, and administrative matters such as fee collections; (12) To respond to Palo Alto City Council regarding major development projects and the application of procedures, codes and policies; (13) To review plans, reports, budget requests and estimates, and proposed resolutions and regulations submitted by direct reporting staff or referred by the City Manager; (14) To demonstrate continuous effort to improve operations, decrease turn-around times, streamline work processes, and work cooperatively and jointly to provide quality seamless customer service; (15) To represent the department at City Council, boards and commissions, and at professional and public meetings as required; (16) To perform such other duties as may be required. SECTION 2. The City Council finds that this project is exempt from the provisions of the Environmental Quality Act (“CEQA”). / / / / / / / / / / / / / / / / / / / / / / ATTACHMENT B Not Yet Approved SECTION 3. This ordinance shall be effective on the thirty-first day after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ____________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ____________________________ Senior Asst. City Attorney City Manager ____________________________ Director of Human Resources ____________________________ Director of Administrative Services *Not Yet Approved* ATTACHMENT _ Resolution No. _________ Resolution of the Council of the City of Palo Alto Adopting a Dark Fiber Rate Increase and Amending Utility Rate Schedules EDF-1 and EDF-2 The Council of the City of Palo Alto RESOLVES as follows: SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule EDF-1 (Dark Fiber Licensing Services) is hereby amended to read as attached and incorporated. Utility Rate Schedule EDF-1, as amended, shall become effective July 1, 2014. SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule EDF-2 (Dark Fiber Connection Fees) is hereby amended to read as attached and incorporated. Utility Rate Schedule EDF-2, as amended, shall become effective July 1, 2014. SECTION 3. The Council finds that the revenue derived from the authorized adoption enumerated herein shall be used only for the purpose set forth in Article VII, Section 2, of the Charter of the City of Palo Alto. // // // // // // // // // // // // // // 6051727 ATTACHMENT C *Not Yet Approved* SECTION 4. The Council finds that the adoption of this resolution increasing dark fiber rates by the Consumer Price Index to meet operating expenses, purchase supplies and materials, meet financial reserve needs and obtain funds for capital improvements necessary to maintain service is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing the fiber rate staff reports presented to Council, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Sr. Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services 6051727 DARK FIBER LICENSING SERVICES UTILITY RATE SCHEDULE EDF-1 A. APPLICABILITY: This rate schedule applies to customer accounts established prior to September 18, 2006, unless the customer elects to apply the EDF-3 rate to the entire customer account. This rate applies to Fiber Optic services from the City of Palo Alto Utilities (CPAU) pertaining to the City's network (Backbone and associated connections). B. TERRITORY: Within the incorporated limits of the City of Palo Alto and land owned or leased by the City. C. FEES: 1. DARK FIBER BACKBONE LICENSE FEES: The values or ranges for each of these price components are shown below: (1) Fiber Price………………………………………………………………. $327.90336.36/FM/month (2) Quantity discount ……………………………………………………… $0 to $59.84/FM/month (3) Buffer tube discount……………………………………………………….. $0 to $59.84/FM/month (4) Route length discount…………………………………………………….. $0 to $77.80/FM/month (5) Ring topology discount………………………………………………………$0 to $23.94/FM/month (6) Length of term discount…………………………………………………… $0 to $46.80/FM/month Minimum Backbone License Fee $495.93508.73/month Project Minimum Backbone Fees apply to any project proposal signed after September 18, 2006 in which the project connects with the Backbone. Description for Discounts: Quantity discount: based on an array of discounts for quantities of fiber licensed on a specific path. Buffer tube discount: discount for numbers of full buffer tubes licensed on a specific path. Route length discount: based on the route length licensed on a specific project. Ring topology discount: The ring topology discount for customers contracting for complete rings. Term discount: based on an array of discounts for contracts greater than one and less than ten years. 2. DARK FIBER LATERAL CONNECTION FEES: Customer responsibilities and fees for drop and custom cable construction are described in the CPAU Rules and Regulations, Rate Schedule EDF-2, project proposals and other associated documents. In all cases, the Licensee shall pay an annual Drop/Custom Cable Management Fee based on the follow per foot fees: (1) Drop Cable Management Fees (for the first 12-Fibers) …………………………… $0.023- $0.06/ft/month (2) Custom Cable Management Fees (for the first 12-Fibers)……………………….. $0.323/ft/month (3) Fees for additional Drop or Custom Cable fibers (each additional set of 12-Fibers) $0.06/ft/month CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No EDF-1-1 Effective 07-01-20134 dated 7-01-20123 Sheet No. EDF-1-1 DARK FIBER LICENSING SERVICES UTILITY RATE SCHEDULE EDF-1 Minimum Drop or Custom Cable Management Fees ........................................................ $245.05251.37/month Minimum Drop Cable Management Fees apply to any project proposal signed after September 18, 2006. CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No EDF-1-2 Effective 07-01-20134 dated 7-01-20123 Sheet No. EDF-1-2 DARK FIBER LICENSING SERVICES UTILITY RATE SCHEDULE EDF-1 3. EARLY TERMINATION FEES: If the Licensee chooses to terminate for convenience the License Agreement or the term of any project under the License Agreement, then the Licensee shall pay the applicable termination payment as specified in this schedule or in the License Agreement, as provided below. Unless otherwise provided in the License Agreement, the Licensee shall pay a termination fee in one of the following amounts, whichever is less: • Annual fee of the contract year that the Licensee chooses to terminates in full without term discounts, or • Remaining fees of the project term as indicated in the License Agreement. D. SPECIAL NOTES: 1. All fees must be paid to the City in accordance with the terms of the Dark Fiber License Agreement, the customer’s project proposals and all the applicable Utilities Rates, Rules, and Regulations. 2. All fees and minimum charges are subject to Consumer Price Index (CPI) adjustments, to be applied annually, except as defined by Section D.3 of this Rate Schedule. Discounts will not be modified by changes to CPI. 3. The CPI adjustment will be based on the Consumer Price Index for All Urban Consumers (CPI-U) for the San Francisco-Oakland-San Jose MSA, published by the U.S. Department of Labor, Bureau of Labor Statistics. The adjustment is calculated by dividing the most recent calendar year December CPI by the December CPI in the year rates last changed. In the event that the change between December CPI’s indicates an adjustment of less than 1% is required, a change to rate schedules may not be made for the upcoming year. Future rate changes will take the last year of change as the new base year for purposes of calculation. {End} CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No EDF-1-3 Effective 07-01-20134 dated 7-01-20123 Sheet No. EDF-1-3 DARK FIBER SERVICE CONNECTION FEES UTILITY RATE SCHEDULE EDF-2 A. APPLICABILITY: This schedule applies to all connections, expansions, and upgrades to the City's Dark Fiber network (Backbone). B. TERRITORY: All territory within the incorporated limits of the City and land owned or leased by the City. C. FEES: 1. ADVANCE ENGINEERING FEES: Advance engineering (AER) fees must be paid to start the engineering process and are non-refundable. The fees will be credited against the estimated project cost prior to the collection of the project construction fees. (1) Commercial/Industrial AER minimum fee ..................................................................... $783803.00 (2) Special conditions (requiring expert assessment) ........................................................... By Estimate 2. ESTIMATED SERVICE CONNECTION AND RECONFIGURATION FEES All estimated service connection and reconfiguration fees must be paid prior to the scheduling of any construction or reconnections to the City's Dark Fiber network. (1) Service connection (Interconnection) fee ...................................................... By Estimate (2) Reconfiguration Fees ..................................................................................... By Estimate Labor rates are subject to change as stated in the Utility Rate Schedule C-1. D. NOTES: 1. The Customer is responsible for the installation and maintenance of all ducts and pathways from the facility to the property line in compliance with City of Palo Alto Utilities Rules and Regulations and contract agreements. 2. The City shall not be held liable for delays or interruptions in service, but will make reasonable efforts to provide timely continuous service. 3. All fees are subject to Consumer Price Index (CPI) adjustments, to be applied annually. The CPI adjustment will be based on the Consumer Price Index for All Urban Consumers (CPI-U) for the San Francisco-Oakland- San Jose MSA, published by the U.S. Department of Labor, Bureau of Labor Statistics. The adjustment is calculated by dividing the most recent calendar year December CPI by the December CPI in the year rates last changed. In the event that the change between December CPI’s indicates an adjustment of less than 1% is required, a change to rate schedules may not be made for the upcoming year. Future rate changes will take the last year of change as the new base year for purposes of calculation. {End} CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No EDF-2-1 Effective 7-01-20134 dated 7-01-20123 Sheet No. EDF-2-1 1 130319 jb 0131057 Resolution No. ______ Resolution of the Council of the City of Palo Alto Amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage) to Increase Storm Drain Rates by 2.6% Per Month Per Equivalent Residential Unit for Fiscal Year 2015 The Council of the City of Palo Alto RESOLVES as follows: SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule D-1 (Storm and Surface Water Drainage) is hereby amended to read in accordance with sheet D-1-1, attached hereto and incorporated herein. The foregoing Utility Rate Schedule, as amended, shall become effective July 1, 2014. SECTION 2. The Council finds that this rate increase is being imposed to offset the effects of inflation on labor and material costs pursuant to the annual inflationary fee escalator provision of the Storm Drainage Fee ballot measure, which was approved by a majority of Palo Alto property owners on April 26, 2005. SECTION 3. The Council finds that the revenue derived from the authorized adoption enumerated herein shall be used only for the purpose set forth in Article VII, Section 2, of the Charter of the City of Palo Alto. SECTION 4. The Council finds that modification and approval of this change to the Utility Rate Schedule D-1 (Storm and Surface Water Drainage) for the purpose of meeting / / / / / / / / / / / / / / / / / / ATTACHMENT D Not Yet Approved 2 130319 jb 0131057 operating expenses is statutorily exempt from California Environmental Quality Act (CEQA) review, pursuant to Public Resources Code Section 15273(a). INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ _____________________________ Senior Asst. City Attorney City Manager _____________________________ Director of Public Works _____________________________ Director of Administrative Services GENERAL STORM AND SURFACE WATER DRAINAGE UTILITY RATE SCHEDULE D-1 CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-1-2014 Supersedes Sheet No.D-1-1 dated 7-1-2013 Sheet No. D-1-1 A. APPLICABILITY: This schedule applies to all storm and surface water drainage service, excepting only those users and to the extent that they are constitutionally exempt under the Constitution of the State of California or who are determined to be exempt pursuant to Rule and Regulation 25. B. TERRITORY: Inside the incorporated limits of the city of Palo Alto and land owned or leased by the city. C. RATES: Per Month: Storm Drainage Fee per Equivalent Residential Unit (ERU) .......................................................$12.30 D. SPECIAL NOTES: 1. An Equivalent Residential Unit (ERU) is the basic unit for computation of storm drainage fees for residential and non-residential customers. All single-family residential properties shall be billed the number of ERUs specified in the following table, based on an analysis of the relationship between impervious area and lot size for Palo Alto properties. RESIDENTIAL RATES (Single-Family Residential Properties PARCEL SIZE (sq.ft.) ERU <6,000 sq.ft. 0.8 ERU 6,000 - 11,000 sq.ft. 1.0 ERU >11,000 sq.ft. 1.4 ERU All other properties will have ERU's computed to the nearest 1/10 ERU using the following formula: No. of ERU = Impervious Area (Sq. Ft.) 2,500 Sq. Ft. 2. For more details on the storm drainage fee, refer to Utilities Rule and Regulation 25. {End} Attachment E 1 Resolution No. ______ Resolution of the Council of the City of Palo Alto Amending the 2012- 2013 Compensation Plan for Management and Professional Adopted by Resolution No. 9357 to Add One New Position and Change the Titles of Two positions The Council of the City of Palo Alto does RESOLVE as follows: SECTION 1. Pursuant to the provisions of Section 12 of Article III of the Charter of the City of Palo Alto, the 2012-2013 Compensation Plan for Management and Professional Personnel, adopted by Resolution No. 9357, is hereby amended to change the title for one position, and add one new position, as set forth in Exhibit “A”, attached hereto and incorporated herein by reference, effective with the pay period including July 1, 2014. SECTION 2. The Director of Administrative Services is authorized to implement the amended Compensation Plan as set forth in Section 1. SECTION 3. The Council finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ______________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ______________________________ Sr. Deputy City Attorney City Manager _____________________________ Director of Administrative Services/CFO ____________________________ Chief People Officer Attachment E 2 EXHIBIT 1 Management/Professional Compensation Plan Changes – Effective July 1, 2014 Job Code Classification Title Monthly Midpoint Approx. Annual Hourly TBD Legal Fellow (new classification) $7,498.40 $89,980.80 $43.26 95 Chief Procurement Officer (Title change only- previously Manager, Purchasing & Contract Administration) $10,250.25 $123,011.20 $59.14 172 Division Manager Open Space, Parks and Golf (Title change only- previously Division Manager Open Space) $10,072.40 $120,868.80 $58.11 Attachment F 1 Resolution No. ______ Resolution of the Council of the City of Palo Alto Amending the 2013- 2015 Memorandum of Agreement for SEIU Adopted by Resolution No. 9398 to Add One New Position and Correct the Salary of One Position The Council of the City of Palo Alto does RESOLVE as follows: SECTION 1. Pursuant to the provisions of Section 12 of Article III of the Charter of the City of Palo Alto, the 2013-2015 Memorandum of Agreement between the City of Palo Alto and the Service Employees’ International Union Local 521, adopted by Resolution No. 9398, is hereby amended to add one new position, as set forth in Exhibit “A”, attached hereto and incorporated herein by reference, effective with the pay period including July 1, 2014, and correct the salary of one position effective with the pay period including March 22, 2014 as set forth in Exhibit “A” attached hereto and incorporated herein by reference. SECTION 2. The Director of Administrative Services is authorized to implement the amended Compensation Plan as set forth in Section 1. SECTION 3. The Council finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ______________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ______________________________ Sr. Deputy City Attorney City Manager _____________________________ Director of Administrative Services/CFO ____________________________ Director of Human Resources/Chief People Officer Attachment F 2 EXHIBIT 1 SEIU 2013-2015 Memorandum of Agreement Change Job Code Classification Title Salary Eff. as noted in Class. Title Column Approx. Monthly Approx. Annual Salary Eff. 2014-PP26 Approx. Monthly Approx. Annual 543 Overhead Underground Troubleman (Salary Correction effective 3/22/14) Step 1 $42.59 $7,382.27 $88,587.20 Step 2 $44.83 $7,770.53 $93,246.40 Step 3 $47.19 $8,179.60 $98,155.20 Step 4 $49.67 $8,609.47 $103,313.60 Step 5 $52.28 $9,061.87 $108,742.40 Step 1 $43.65 $7,566.00 $90,792.00 Step 2 $45.95 $7,964.67 $95,575.00 Step 3 $48.37 $8,384.13 $100,609.60 Step 4 $50.91 $8,824.40 $105,892.80 Step 5 $53.59 $9,289.16 $111,469.93 TBD Animal Control Officer- Lead (New Classification effective 7/1/14) Step 1 $25.28 $4,381.87 $52,582.40 Step 2 $26.61 $4,612.40 $55,348.80 Step 3 $28.01 $4,855.07 $58,260.80 Step 4 $29.49 $5,111.60 $61,339.20 Step 5 $31.04 $5,380.02 $64,536.20 Step 1 $25.92 $4,492.80 $53,913.60 Step 2 $27.28 $4,728.53 $56,742.40 Step 3 $28.72 $4,978.13 $59,737.60 Step 4 $30.23 $5,239.87 $62,878.40 Step 5 $31.82 $5,515.47 $66,185.60 Attachment G 1 Resolution No. ______ Resolution of the Council of the City of Palo Alto Amending the Terms for the Utility Management Professional Association Adopted by Resolution No. 9359 to Correct the Salary for One Position and Add Two New Positions The Council of the City of Palo Alto does RESOLVE as follows: SECTION 1. Pursuant to the provisions of Section 12 of Article III of the Charter of the City of Palo Alto, the Terms imposing the City’s Last Best and Final offer for the Utility Management Professional Association, adopted by Resolution No. 9359, are hereby amended to correct the salary for one position effective with the pay period including December 1, 2013 and add one new position effective with the pay period including July 1, 2014, as set forth in Exhibit “A”, attached hereto and incorporated herein by reference. SECTION 2. The Director of Administrative Services is authorized to implement the amended Terms as set forth in Section 1. SECTION 3. The Council finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ______________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ______________________________ Sr. Deputy City Attorney City Manager _____________________________ Director of Administrative Services/CFO ____________________________ Director of Human Resources/Chief People Officer Attachment G 2 EXHIBIT 1 Utilities Management Professional Association of Palo Alto (UMPAPA) Term Changes– Effective pay period including December 1, 2013 Job Code Classification Title Grade Code Control Point Approx. Annual Hourly TBD Senior Engineer (salary correction) TBD $11,403.60 $136,843.20 $65.79 Utilities Management Professional Association of Palo Alto (UMPAPA) Term Changes– Effective July 1, 2014 Job Code Classification Title Grade Code Control Point Approx. Annual Hourly TBD Utility Safety Officer (new classification) TBD $8,389.33 $100,672.00 $48.40 TBD Principal Management Analyst (new classification) TBD $10,167.73 $122,012.80 $58.66 FINANCE COMMITTEE DRAFT MINUTES Page 1 of 26 Special Meeting Tuesday, May 13, 2014 Chairperson Berman called the meeting to order at 6:09 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California. Present: Berman (Chair), Holman, Kniss Absent: Burt Oral Communications None Agenda Items 1. Fiscal Year 2015 Proposed Budget Overview. James Keene, City Manager announced that previous Budget reductions and an improved economy resulted in the City not having to reduce the Budget. The Proposed Budget included automatic spending, as well as funding and position increases. Palo Alto's growing population, economy, expectations for responsiveness, and the amount of data collection required by the Council led him to recommend adding positions to support planning initiatives and management. Walter Rossmann, Director of Office of Management and Budget reported the At-Places memorandum contained a chart of positions which the Council requested the previous week. The chart provided an overview of the addition of 17.45 Full-Time Employees (FTE) by fund and by Department. Staff provided replacement pages to correct errors generated by a new publication software system. For Citywide expenditures, the total amount of all funds was $470 million. The Fiscal Year (FY) 2015 Citywide Expenditure Budget increased by $11.6 million or 2.5 percent over the previous year. The largest expenditure across all funds was salary and benefits at $150 million, or approximately one third of all expenditures. Second were utility purchases for the City's customers at $127 million or 27 percent of the Budget. The third largest expenditure was capital projects for all funds at $53 million. The Citywide expenditure view was a net transfer from Internal Service Funds. For the City’s capital program, the biggest expenditure is from the General Fund at 43 percent or $24.7 million. Overall the Capital Attachment H WORKING MINUTES Page 2 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Expenditure Budget was lower than FY 2014 by $2.5 million. While the City reduced positions to meet budget constraints, demand over the past ten years increased. In FY 2005, the City had 672 General Fund positions. The FY 2015 Proposed Budget was going to be 12 percent, or 81 positions below that amount. The Proposed Budget added 11 positions in the General Fund, primarily to support Planning, Transportation, Library, and internal support departments. In comparison to the FY 2009 Budget, the Proposed Budget contained six fewer positions. Vice Mayor Kniss requested Mr. Rossmann repeat the areas where Staff proposed adding positions. Mr. Rossmann replied Planning, Transportation, Libraries, and internal support departments. The number of General Fund positions increased by 13 positions, and the number of Enterprise Fund positions increased by four. Mr. Keene clarified that Staff proposed adding 11 new positions to the General Fund and moving 1.93 FTE from Enterprise Funds and other Funds. Mr. Rossmann noted the total proposed Citywide position change, compared to the FY 2014 Adopted Budget was a 1.7 percent increase. Proposed Staff additions supported Council priorities and initiatives; salary and personnel benefits changed by $11.4 million. At the wrap-up meeting, Staff was going to present the Retiree Healthcare Evaluation Report as of June 30, 2013. He noted that the cost for retiree healthcare increased by $2 million. Council Member Holman inquired whether the cost for salary and personnel benefits was the actual cost or the percentage of increase. Mr. Rossmann replied the percentage of increase. Council Member Holman stated the chart did not indicate that. Mr. Keene explained that the chart was an attempt to show a negative or a positive from the base. He requested Mr. Rossmann clarify the dollar amounts contained within salary and benefits. Mr. Rossmann reported the $11.3 million amount included Citywide salaries. Citywide allocated charges for the Technology Fund increased by $0.6 million. As part of developing the Budget, Staff reviewed the General Fund Cost Allocation Plan. The Proposed Budget refined the Cost Allocation Plan to align the General Fund Cost Allocation with the actual cost. Over the years, the actual cost of pensions increased. Due to changes in the valuation method as approved by the California Public Employees' Attachment H WORKING MINUTES Page 3 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Retirement System (CalPERS) Board, the City's pension contribution rates for Safety Employees increased substantially. In comparison to FY 2014, the City's pension contribution for Miscellaneous Employees increased from 24.6 percent to 26.1 percent, and from 33.4 percent to 39.5 percent for Safety Employees. Pension rates were the blended rate and included rates for Tier 2 employees. As the City hired more Tier 2 and Tier 3 employees, Staff expected the growth in pension rates to decrease. A slight reduction in healthcare costs resulted primarily from the healthcare plan choice, as part of the calendar year 2014 healthcare plan enrollment. The cost for the most popular healthcare plan increased substantially, which resulted in higher employee contributions. Based on higher costs, employees chose a lower cost plan. This also reduced the cost for the City. A second reason for the reduction in cost was the capping of the City's healthcare contribution, as part of the contract with the Service Employees International Union (SEIU). At the current time, Staff did not know if the one-year reversal of a decade- long trend was a fluke or the beginning of healthcare cost containment. There were no Utility Rate increases, except for contractual rate increases in Fiber Optics and the Consumer Price Index (CPI) increase of 2.6 percent for Storm Drain; the average utility bill for residents increased by only $0.31. Due to drought and infrastructure needs, Staff expected that water rates would increase in future years. The FY 2015 Proposed General Fund Budget was balanced. It included $169.4 million in revenues and a $2 million contribution from the Budget Stabilization Reserve (BSR) Fund to provide $171.4 million in expenditures. With the contribution from BSR, Staff proposed the BSR be approved at 17.2 percent, or $29.5 million of the General Fund Expenditure Budget. Per Council policy, the BSR needed to be maintained between 15 and 20 percent, or between $25.7 million and $34.8 million. Major tax revenues included approximately 55 percent of total sources for the General Fund. Property Tax revenues were close to 19 percent, followed by Sales Tax at 15 percent. In comparison to FY 2014, General Fund revenues increased by 5.5 percent mainly due to major tax revenue increases. Salary and benefits represented 63 percent of the General Fund Total Budget, a $7.6 million increase over the prior year Budget, primarily due to increased salary and benefits costs, as well as additional positions. Another significant change from FY 2014 was an increase in Contract Services of $1.8 million or 13.5 percent, primarily to fund Council initiatives. The transfer to infrastructure increased by almost four percent, from $13.2 million to $13.7 million, which was consistent with past Capital Improvement Plans. Public Safety's Budget represented 36 percent of the General Fund Budget. In comparison to FY 2014, the Public Safety Department's Budget increased primarily due to higher pension costs. The Public Safety Department increased salary and benefits costs; however, those costs were offset by allocated General Fund vacancy savings of approximately $400,000. Traditionally the General Fund Budget included a Attachment H WORKING MINUTES Page 4 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 certain amount of Vacancy Savings in the Budget. In past years, Vacancy Savings were included in the Non-Departmental Budget as savings. In order to better monitor departmental salary and benefits expenditures throughout the fiscal year, Vacancy Savings were now allocated to departmental budgets based on historical vacancy levels. The Proposed Budget fully established the Development Services Department. Expenditures for development-related activity did not exceed estimated revenue from development activities. In March, Staff compiled data regarding actual salaries and benefits to establish a base Budget. Analysts then updated salaries with contractually required increases, pension and healthcare cost increases, and retiree healthcare cost increases. Not all costs were automatically allocated to departmental budgets. The General Fund Salaries and Benefits Reserve was established at $2.7 million for FY 2015. It included funds to provide pay-for-performance increases for employees in the Management and Professional Fire Chiefs' Association, and Police Management Association groups of up to $550,000, if approved by the Council. It also included funds for market adjustments of up to $310,000, once the benchmark study for Management and Professional Employees was completed and approved by the Council. Vice Mayor Kniss inquired whether salary increases were subject to a benchmark study. Mr. Rossmann advised that benchmark studies were performed for SEIU and Management and Professional Employees. Salary increases were possibly contractual in nature, including step increases and merit increases. Vice Mayor Kniss asked if the benchmark study was performed for SEIU employees only. Mr. Keene reported Staff was moving toward benchmark studies to determine City salaries with respect to the market. Benchmark studies were conducted for SEIU employees and the Management and Professional Group. The $310,000 amount is a placeholder, as it was obtained in the prior benchmark study. Staff intended to follow the same process for the Management and Professional Group. Vice Mayor Kniss asked if benchmark studies would be conducted for Police and Fire. Mr. Rossmann noted Staff was currently conducting a benchmark study for Police and Fire. Consistent with the recent contract with SEIU, the Salary Reserve provided increases similar to other employee groups, in the amount of $830,000 if approved by the Council. Attachment H WORKING MINUTES Page 5 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Chair Berman inquired whether the amounts were indicated in the Budget and whether the Finance Committee (Committee) discussed the allocations. Mr. Keene explained that potential or prospective increases for FY 2015 had not been approved. They were included in the General Fund Salary and Benefits Reserve and were allocated to Departments when approved. The contractual increases for SEIU employees approved earlier in 2014 were contained in the Budget. Chair Berman requested an additional explanation of the Management and Professional Fire Chiefs' Association and Police Management Association pay- for-performance increases. Mr. Keene advised that the goal was to have City compensation levels in the mid-range of market compensation for the Bay Area. Staff planned on performing benchmark studies to determine the total compensation for comparable positions in each employee group and then they were going to adjust compensation to market levels. The $310,000 amount for the Management and Professional Group was allocated for market adjustments to compensation. The second component of pay adjustments was a salary range for every position. The $550,000 amount was allocated for that type of pay increase. The $460,000 amount was allocated for a potential across- the-board adjustment in some way. In negotiating with employee groups, it was possible that Staff may need to negotiate some type of across-the- board percentage increase. Vice Mayor Kniss presumed that the market adjustments would involve benchmarking. Step increases also seemed straightforward. She inquired whether pay-for-performance increases were decided by Department managers. Mr. Keene noted pay-for-performance increases were not automatic or routine in comparison to step increases. The supervisor determined whether or not an employee performed sufficiently in order to receive an increase. Staff did have parameters for granting pay-for-performance increases. Vice Mayor Kniss inquired whether Staff had a methodology for dividing the total amount of funds available among Departments. Mr. Keene reported Staff calculated the percentages that could be available at different performance levels, factored in the total number of employees in a group, and then monitored how that related to the employees' pay structure. Attachment H WORKING MINUTES Page 6 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Vice Mayor Kniss commented that pay could increase through three mechanisms: pay for performance, market adjustment, and step increase. Lalo Perez, Director of Administrative Services and Chief Financial Officer clarified that Management and Professional Groups and Management Association groups did not have a program for step increases. Mr. Keene added that market adjustments were only available for Below Market Rate (BMR) positions. Market adjustments were not available for positions within five percent of the Market Rate. Vice Mayor Kniss asked if Staff utilized a benchmark study. Mr. Keene answered yes. An employee in the Management and Professional Group was able to receive a market adjustment and a pay-for-performance adjustment. Vice Mayor Kniss inquired whether a pay-for-performance increase was a bonus or a pay increase. Mr. Keene reported it was not a bonus. Typically a bonus was a one-time payment. This was an adjustment to the base pay in the same way a step increase was an adjustment to base pay. Vice Mayor Kniss reiterated that a pay-for-performance increase was ongoing once it was granted. Council Member Holman asked if the first category of employees was unrepresented. Mr. Keene indicated the Management and Professional Group was unrepresented, but the Fire Chiefs' Association and Police Management Association were represented. Council Member Holman requested Staff indicate in the chart which groups were represented and the number of employees in each group. She inquired whether the $586,000 amount for SEIU employees was included in the Budget. Mr. Perez advised the amount was placed in the Reserve because the Council approved it and said it would be allocated to Departments. Council Member Holman asked if step increases were anticipated. Attachment H WORKING MINUTES Page 7 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Mr. Perez reported that employees must receive a satisfactory or better review to receive a step increase. Adjustments between steps were five percent. Council Member Holman requested Staff provide the number of employees included in the $831,000 amount. Mr. Keene indicated the amount covered Police, Fire, and Management and Professional Employees. Council Member Holman requested the number of employees. Mr. Keene believed the number of employees was approximately 400. Chair Berman inquired about amounts allocated for pay-for-performance and step increases in FY 2014. Mr. Perez reported the FY 2015 amount was approximately 2.5 percent higher than FY 2014 for the Management and Professional Group. Mr. Keene inquired whether Chair Berman meant all pay increases. Chair Berman was referring to discretionary increases. Mr. Perez explained that Staff previously budgeted salaries at the top step. The City Manager requested Staff budget the actual pay amounts. Currently, Staff estimated which employees would move from one step to another and provided more information as to what increases would occur. Mr. Keene reiterated that Staff budgeted actual salary amounts. Council Member Holman appreciated the transparency; however, additional explanation was needed for the Committee to understand the information. Mr. Keene reported that every salary for every employee and the different amounts were published on the City's web site. Staff was able to provide comparative data for each employee. Chair Berman explained that additional information put the data into context. Council Member Holman added that additional information allowed the Committee to evaluate compensation. Attachment H WORKING MINUTES Page 8 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Mr. Keene remarked that once the Council determined policies with respect to providing competitive salaries and paying employees for performance, then Staff was able to easily provide the cost. Mr. Perez indicated that salary and benefits totaled $107 million. The Salary and Benefits reserve amount represented approximately 2.5 percent of the total General Fund of salaries and benefits. Chair Berman noted that Council Members expressed confusion as to how the Salary Reserve was allocated, and remarked that the Council would have questions for Staff in that respect. Vice Mayor Kniss concurred with adding transparency; however, the number of questions indicated additional data was needed. Mr. Rossmann reported overall revenues increased by $8.8 million from the Adopted Budget of FY 2014, mainly due to increased estimated tax revenues of $9.1 million, higher rental income of $1.3 million, and higher paramedic fees of $0.6 million. Higher revenues were offset by revenue reductions from the Golf Course Reconfiguration Project and Animal Services. Major tax revenues performed quite well, primarily due to the growing local economy. The Administrative Service Department reviewed space utilized in owned buildings that came out of the General Fund buildings and based on that survey, increased charges to non-General Fund Departments equaled an increase in rental income of $1.3 million. Higher paramedic fees resulted in higher revenue trends and higher fees to offset higher salary and benefits costs. In comparison to the FY 2014 Adopted Budget, expenses increased by $11.7 million, of which $10.3 million was ongoing expenses and $1.4 million were one-time expenses. Approximately 75 percent of ongoing expenses were attributable to higher salary and benefits increases. The cost of proposed additions and the unfreezing of positions totaled approximately $1.5 million. An increase in annual retiree healthcare required contributions that totaled approximately $1 million. Other major proposed expense Items were: $1 million in reserve for the Shuttle Service Expansion; the cost for Development Services funding in the amount of $900,000 to offset estimated revenues; and $331,000 for Election Costs. The General Fund Investment Prioritization framework began with Council priorities and initiatives. Transportation funding included $1 million for expanded shuttle service and a one-time expense of $150,000 for a consultant to establish a Transportation Management Authority (TMA). The Proposed Budget provided funding for Library Staff at the Mitchell Park and Rinconada Libraries. To provide sufficient funding to assume control of the Palo Alto Airport, the Proposed Budget assumed a loan of $560,000 from the General Attachment H WORKING MINUTES Page 9 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Fund to the Airport Fund; $325,000 as an ongoing expense and $235,000 as a one-time expense. Funding for the Office of Sustainability and for elections were assumed to be one-time expenses. The Proposed Budget included funding for training and succession planning in the Fire and Police Departments because nearly 50 percent of the sworn Police force was eligible for retirement within five years. Staff recommended adding three Administrative Support Staff to General Fund Departments. In support of continuing infrastructure maintenance and investment needs, Staff recommended adding a Facility Manager in the Public Works Department, which was included in the Proposed Budget. Ongoing revenues were Major Tax Revenues, Charges for Services, and Permits and Licenses. One-time expenditures included funding for the general election, Our Palo Alto, and the one-time component of the Airport loan. The $2 million contribution from the BSR primarily funded one-time expenditures in the amount of $1.4 million. The $169.4 million in ongoing revenues funded 99 percent of expenditures, and more of the $170 million of ongoing expenditures. A slight imbalance of $600,000 existed between one-time and ongoing revenues and expenditures. Projected revenues in FY 2016 needed to be sufficiently high to pay for the additional $600,000. The Long Range Financial Forecast (LRFF) projected a $1.3 million ongoing surplus for FY 2015 and a $3.1 million ongoing surplus for FY 2016. Assuming the same level of service in FY 2016, the ongoing deficit of $600,000 had an immediate impact on the FY 2016 forecast; it reduced the projected surplus from $3.1 million to $2.5 million. The imbalance was primarily due to the uncertainty of funding needs and levels for future expanded Shuttle Services. Staff projected a FY 2016 expenditure Budget based on known cost factors. Budget hearing meetings were scheduled for May 15, 20, 27, and 29, 2014. The Proposed Budget was to be presented to the Council for adoption on June 16, 2014. Department presentations included an overview, purposes, accomplishments, initiatives, significant budget proposals, and major capital projects. Council Member Holman noted one-time expenditures totaled $1.4 million and inquired about the $2 million amount. Mr. Rossmann indicated that was the contribution from the BSR Fund. Council Member Holman stated that was not indicated. Vice Mayor Kniss requested tabs for the Budget document. Mr. Perez reiterated that Staff recommended a one-time draw from the BSR of $2 million. The Committee was able to accept the recommendation or not. If the Committee wished to provide additional funding for an Item, then Attachment H WORKING MINUTES Page 10 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 the Committee was able to recommend that funds be transferred either from the BSR Fund or the Council Contingency Fund. Staff planned on tracking any action taken by the Committee to recap the Budget at the end of each meeting or at the beginning of the next meeting. Staff requested that the Committee review, comment on, and consider each Department Budget and provide tentative approval. The Committee was able to make changes at the wrap-up meeting. He suggested the Committee consider use of a parking lot for Items needing additional thought and discussion. Two Committee Members must support moving an Item to the parking lot. At the wrap-up meeting, the Committee considered any Items placed in the parking lot. Staff was going to make note of tie votes for the Council. Chair Berman agreed to the use of a parking lot and said it would prevent the process from stalling. He requested Staff an email recap of the Budget prior to the following meeting. Mr. Perez noted the At-Places Memorandum contained an adjustment for the Non-Departmental Budget. 2. City Attorney, Operating Budget pp. 89-97. Molly Stump, City Attorney reviewed the Mission of the City Attorney's Office. Key areas of work were transactional, advice and training, and litigation and dispute resolution. City Attorney Staff helped negotiate and draft three renewable Power Purchase Agreements; drafted an Ordinance that created the Public Art Program for Private Development; assisted in negotiating and securing certification of the Housing Element; renegotiated extensive agreements related to the North California Power Agency; and assisted the Purchasing Department with updated contract documents and process work. She said in Fiscal Year (FY) 2015, the City Attorney's Office would work with the Council and the Planning Department to advance the Housing Element; work on Residential Permit Parking issues and other parking and traffic initiatives; they would help update the Comprehensive Plan; expand the polystyrene Ordinance; and work on transfer of the Airport from Santa Clara County. The Budget for the City Attorney's Office contained a significant proposal to add a legal fellowship. Staff proposed to recruit an attorney from a judicial clerkship or a top quality law school to provide high-quality work at a junior level. The position offered a moderate rate of pay and would expire after two years. If the program did not meet needs or was not efficient, then the program was to cease at the end of each fellowship period. In addition, Staff proposed increasing the City Attorney Contingency Fund on a one-time basis to fund anticipated litigation costs. Costs for outside counsel were difficult to predict with precision. The Attachment H WORKING MINUTES Page 11 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Proposed Budget funded approximately $300,000 for outside counsel services. The City Attorney drew funds from the Contingency Fund as needed and returned unused funds to the General Fund. Council Member Holman appreciated the City Attorney placing the public first in Goal Number 1. She inquired whether the fellowship salary of $90,000 included salary and benefits. Ms. Stump responded yes. To set the salary, Staff reviewed similar fellowship positions in other public agencies and Federal agencies. In order to attract quality candidates, the salary was not able to be lower than compensation offered by those agencies. MOTION: Vice Mayor Kniss moved, seconded by Council Member Holman to recommend to the City Council tentative approval of the City Attorney Budget. Vice Mayor Kniss recalled that the County of Santa Clara received 600 applications for a fellowship position. Ms. Stump advised that fellowship positions were competitive. She expected to attract strong candidates. MOTION PASSED: 3-0 Burt absent 3. City Auditor, Operating Budget pp. 99-106. Walter Rossmann, Director of Office of Management and Budget reported no changes from the Fiscal Year (FY) 2014 Adopted Budget. Council Member Holman noted the recent hiring of the new Auditor, Harriet Richardson and asked if she wished to make any changes that would impact the Budget for the City Auditor. Harriett Richardson, City Auditor felt it was too soon to know of any changes. The three-year peer review was not budgeted separately; however, she believed funds could be found within the Proposed Budget to pay for that expense. Council Member Holman requested Ms. Richardson comment on her work as City Auditor. Ms. Richardson indicated the City Auditor's Office had won awards for its work and she planned to continue that level of high quality work. The City Attachment H WORKING MINUTES Page 12 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Auditor's Office received a prestigious award for the recent Inventory Management Audit. Council Member Holman did not receive notification of that award. Ms. Richardson clarified that Mayor Shepherd planned to present the award formally at a future Council meeting. Chair Berman requested an explanation of the 40 increases in charges to other funds. Ms. Richardson reported that the cost allocation identified the amount of work the City Auditor's Office performed for other Departments. Chair Berman inquired whether Staff anticipated the City Auditor performing more work for other Departments. Mr. Rossmann explained that the allocation was based on past experience. The allocation increased because the City Auditor performed more work. In addition, Staff refined the Cost Allocation Plan to provide more accurate cost estimates. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to recommend to the City Council tentative approval of the City Auditor Budget. MOTION PASSED: 3-0 Burt absent 4. City Clerk, Operating Budget pp. 107-114. Walter Rossmann, Director of Office of Management and Budget reported no changes in the Proposed Budget for the City Clerk. Vice Mayor Kniss remarked that the recognition event for Boards and Commissions went well, and holding the State of the City Address at the Lucie Stern Community Center was effective. Council Member Holman encouraged the City Clerk to place the public aspect of her work first in Department goals. She requested comments regarding the number of employees in the City Clerk's Office. Donna Grider, City Clerk advised that one position had been eliminated. She moved to contracting transcription of Minutes to allow Staff to focus on providing service to the public. Contracting transcription of Minutes was quite successful in that Minutes were transcribed faster and in better form. Attachment H WORKING MINUTES Page 13 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 MOTION: Council Member Holman moved, seconded by Vice Mayor Kniss to recommend to the City Council tentative approval of the City Clerk Budget. Chair Berman believed the City Clerk should strive for 100 percent completion of public records requests within ten days to comply with State law. Ms. Grider explained that she was striving for 100 percent completion of requests. She clarified that all records requests were submitted to the Clerk's Office, and then Clerk Staff worked with the City Attorney and various Departments to fulfill requests. She wanted to review software to make records requests easier for Departments and for the public. Chair Berman agreed that technology could be helpful. The Key Performance Measure appeared to indicate 80 percent was the goal when it should be 100 percent. He was impressed with the Clerk's improvements concerning Boards and Commissions. MOTION PASSED: 3-0 Burt absent Vice Mayor Kniss recalled a reference in the Budget document to the number of Council meetings held in 2013. Lalo Perez, Director of Administrative Services and Chief Financial Officer suggested Vice Mayor Kniss could be referring to the number of Agenda packets produced annually. Council Member Holman felt that number was very low. Ms. Grider advised that a packet could contain Agendas for multiple meetings. She estimated Council and Standing Committee meetings would total 46 through the end of FY 2014. Chair Berman felt that number was low. Vice Mayor Kniss believed 58 meetings was a more realistic number. Ms. Grider said she would provide the number at a later time. Vice Mayor Kniss indicated the number of meetings demonstrated the amount of work necessary for each meeting. Attachment H WORKING MINUTES Page 14 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 5. City Council, Operating Budget pp. 115-118. Walter Rossmann, Director of Office of Management and Budget reported the At-Places memorandum contained two corrections. Attachment two replaced the entire City Council Budget. In Fiscal Year (FY) 2012, the City had nine Council Members. Proposals for the City Council Budget were separated by titles and provided additional information. Council Member Holman disagreed with the Mission Statement of the Council and said it was to serve the public and to ensure quality of life and so forth. She was not comfortable with the Mission Statement as provided in the Budget document. Lalo Perez, Director of Administrative Services and Chief Financial Officer recommended the Finance Committee (Committee) provide direction to Staff regarding an appropriate Mission for the Council. Council Member Holman did not have an exact Mission Statement for the Council. Chair Berman suggested the Committee discuss it further at the wrap-up meeting. Vice Mayor Kniss asked the City Manager if the City had a Mission. Mission statements were usually difficult to craft but she thought it would be a good exercise for the Council. Council Member Holman believed the Mission Statement should better reflect the view and responsibility of the Council towards the public. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to recommend to the City Council tentative approval of the City Council Budget. Council Member Holman requested clarification of Contract Services, general expense, allocated charges, and charges to other funds. She inquired about the location in the Council Budget of the relief donation to a Sister City. Mr. Rossmann advised the $10,000 donation provided to the Sister City in the Philippines was funded through the Council Contingency Fund. The donation was to be designated as an actual expense under FY 2014 expenditures; it was not going to appear in the FY 2015 Proposed Budget. Council Member Holman requested identification of Contract Services, general expenses, allocated charges, and charges to other funds. Attachment H WORKING MINUTES Page 15 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Donna Grider, City Clerk indicated contract services included Assembly Bill 1234 Training, the Police Auditor, the Council Appointed Officer (CAO) evaluator, and conflict of interest for Council Members. General expense Items were telephones, iPads, travel, meetings, special events, and meals. Mr. Rossmann added that allocated charges were Internal Service Fund charges, which Staff charged against General Fund Departments. MOTION PASSED: 3-0 Burt absent Mr. Perez requested the Finance Committee pass on Agenda Item Six and Seven, until the City Manager was able to return to the meeting. Chair Berman concurred. 8. People Strategy & Operations Department, Operating Budget pp. 209- 220. a) Employee Benefit Funds 1) General Benefits Fund, Operating Budget pp. 405-407 2) Workers Compensation Fund, Operating Budget pp. 224- 227 b) General Liability Fund, Operating Budget pp. 221-223. Kathy Shen, Director of People Strategies and Operations said the Department was moving toward use of technology to assist with employee training and communication. Spinifex software was implemented to obtain information and data from the Systems Applications and Products (SAP) system and to assist with personnel and payroll reporting. The Department was conducting total compensation studies for the Service Employees International Union (SEIU), Management and Professional Employees, Public Safety unions, and Utility Management Employees. Key recruitments in Fiscal Year (FY) 2014 were the Chief Sustainability Officer, the City Auditor, and the Planning and Community Environment Director. The Department purchased Guidespark software to share information regarding benefits with employees. Staff was preparing a total compensation statement that would allow employees to determine the value of their salaries and all benefits. Initiatives for FY 2015 included hiring a new manager of employee benefits, negotiating with employee groups, developing a comprehensive training program, succession and retention plans, and increasing workplace safety and job audits. Staff proposed adding a Senior Management Analyst to analyze employee benefit and salary data as a means to improving performance levels. Attachment H WORKING MINUTES Page 16 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Council Member Holman requested details regarding the new position. Ms. Shen reported the Senior Management Analyst would help Staff better utilize SAP and review best practices and business protocols. The Department did not have sufficient staffing to review processes and procedures. Council Member Holman suggested the position was better suited to a consultant than a Staff person. Lalo Perez, Director of Administrative Services and Chief Financial Officer viewed the position as a business manager. The City suffered quite a bit of Staff turnover and lost a great deal of institutional knowledge. The position ensured business systems were functioning well. An audit of the Department noted several areas of concern. The position ensured the City had better controls over business processes. Ms. Shen felt the person in this position should be able to direct Department operations and work closely with Administrative Services Department (ASD) because there was an ongoing need. Council Member Holman asked if the position would manage issues on an ongoing basis. Ms. Shen needed a continuous business manager who had a deep knowledge of the City's technology systems. Vice Mayor Kniss believed the title of Management Analyst was defined as whatever a Department needed to function. Council Member Holman wanted to understand whether the need was temporary or ongoing. For some high level positions, a list of job descriptions for Department heads and key Staff was helpful. Ms. Shen clarified that a Senior Management Analyst assisted with operations which could be different for each Department. The Department needed help with policies and procedures and technology and did not have sufficient Staff to focus on business practices. Council Member Holman was attempting to understand how the position would be created. Attachment H WORKING MINUTES Page 17 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Chair Berman indicated adding job descriptions or an explanation of new positions for high-level Staff would create a significantly larger Budget document. Council Member Holman hoped job descriptions existed and would be provided to the Finance Committee (Committee). Vice Mayor Kniss inquired whether job descriptions were available. Mr. Perez advised job descriptions were available online. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to recommend to the City Council tentative approval of the People Strategy & Operations Department Budget. MOTION PASSED: 3-0 Burt absent Mr. Rossmann indicated the Department Budget contained subsections, which were Internal Service Funds. The Funds were accounting mechanisms for certain expenditures. Chair Berman inquired whether the Committee needed to vote on tentative approval of the subsections. Mr. Perez replied yes. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to recommend to the City Council tentative approval of the People Strategy & Operations Department Budget including: a) Employee Benefit Funds 1) General Benefits Fund, Operating Budget pp. 405-407 2) Workers Compensation Fund, Operating Budget pp. 224- 227 b) General Liability Fund, Operating Budget pp. 221-223 MOTION PASSED: 3-0 Burt absent 9. IT Department, Operating Budget pp. 183-197 and Capital Budget pp. 352-357. Lisa Bolger, Information Technology Manager reviewed the Mission and Purpose of the Department. The Information Technology (IT) Department was comprised of five divisions. Accomplishments included the Number 1 Attachment H WORKING MINUTES Page 18 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Digital City award; implementation of a real-time, continuous threat protection platform; implementation of the Palo Alto 311 mobile app; completion of 1,100 issues; implementation of Wi-Fi in all City buildings and in Cogswell Plaza; implementation of the Tri-City Computer Aided Dispatch (CAD) system. Fiscal Year (FY) 2015 initiatives are a Fiber-to-the-Premise wireless network plan; data center and computer cloud backup; cloud-based communications and productivity suite implementation; internet redundancy implementation; and Mobile Device Management (MDM) for security enhancements. Significant Budget proposals are an information backup and storage solution, communications and productivity software, and a budget system. Vice Mayor Kniss believed connectivity was important to Palo Alto residents. She inquired about the technology surcharge fee. Lalo Perez, Director Administrative Services and Chief Financial Officer reported the City added a five percent surcharge to fees and dedicated those funds to technology initiatives that would benefit Citywide programs or areas. Vice Mayor Kniss asked if the surcharge applied to General Fund fees. Mr. Perez advised surcharges were collected on General Fund activities and then transferred to the Internal Service Fund to pay for initiatives. Vice Mayor Kniss inquired about feedback regarding the surcharge. Mr. Perez indicated the surcharge provided a mechanism for quality IT programs. Vice Mayor Kniss asked if anyone had provided negative comments regarding the surcharge. Mr. Perez explained Staff had not publicized the surcharge except at Budget hearings. Council Member Holman noted many Council decisions were based on data. Accomplishments needed to include assisting Departments in better utilizing the Systems Applications and Products (SAP) system because IT Staff worked with virtually every Department. Ms. Bolger understood data would be the driving force for future decisions. The Department earmarked and road mapped a Business Intelligence tool. Attachment H WORKING MINUTES Page 19 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 In FY 2015, IT Staff planned on scoping Business Intelligence and use by Departments. Council Member Holman inquired about prioritization of initiatives among City Departments, the Council, the public, and the media. Ms. Bolger reported the Governance Review Board vetted all initiatives and identified impacts of future initiatives. Mr. Rossmann noted the Department Budget contained two capital projects, a virtual library branch for $95,000 and radio infrastructure replacement for Public Safety at $100,000. Council Member Holman inquired about the Minutes of Budget hearings. Beth Minor, Assistant City Clerk advised that Minutes of the first hearings would be provided to the Finance Committee (Committee) at or before the final hearing. Council Member Holman requested Staff provide Minutes to the Committee prior to the final hearing. Minutes needed to be accurate due to the financial nature of the hearings. Mr. Perez reported Staff could meet with Committee Members to review Budget discussions if Committee Members were not present for hearings. Vice Mayor Kniss requested the Clerk provide a link via email to video recordings of meetings. MOTION: Chair Berman moved, seconded by Council Member Holman to recommend to the City Council tentative approval of the IT Department, Operating Budget. MOTION PASSED: 3-0 Burt absent 10. ASD Department, Operating Budget pp. 137-149. a) Printing & Mailing Fund, Operating Budget pp. 150-152. Lalo Perez, Director of Administrative Services and Chief Financial Officer reviewed the Mission and Purpose of the Administrative Services Department and said divisions of the Department included Administration, Accounting, Purchasing and Contracts, Office of Management and Budget, Property Management and Acquisition, and Treasury. The Department created a new Attachment H WORKING MINUTES Page 20 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 strategic plan to review delivery of services and to improve operational practices. The Department completed a review of Citywide procurement and was drafting recommendations. The Department instituted a pilot program utilizing digital signatures for professional service contracts. The Print and Mail Shop was certified as a green business. The Department streamlined financial reporting and worked with People Strategies and Operations to implement Spinifex. Initiatives for Fiscal Year (FY) 2015 included: implementation of the strategic plan; continuation of process improvements; preparation for succession planning; upgrading the cashier system; improvements to the inventory and procurement process; implementation of training programs; and enhancements to the Budget system. Staff proposed increasing the Budget by $20,000 for temporary staffing and $15,000 for electronic document storage. The Department needed deeper analysis regarding Property Tax to provide more accurate forecasts. Staff did not propose any new requests for the Print and Mail Shop. Vice Mayor Kniss agreed with utilizing a Property Tax consultant. Council Member Holman requested Staff explain the capabilities and function of Spinifex. Mr. Perez advised Spinifex could extract Systems Applications and Products (SAP) data and create a report of that data. Council Member Holman recalled her comments regarding demolition versus remodeling with respect to Property Tax, and asked if Staff would review that. Mr. Perez became aware of the issue while reviewing Development Impact Fees. He discussed it with the Planning Director and needed to present it to the City Attorney. Council Member Holman inquired about efforts to identify data that Spinifex could collect from across the organization and whether the new Human Resources (HR) position would have that responsibility. Mr. Perez clarified that Spinifex applied only to HR payroll data. While Staff was assessing SAP, he was reviewing software tools similar to Spinifex for procurement and inventory. No software purchases were going to be made until the assessment of SAP was complete. Council Member Holman questioned whether add-on software would enhance SAP or merely complicate it. Attachment H WORKING MINUTES Page 21 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Mr. Perez reported the Governance Review Board discussed that type of issue and said any significant change would be presented to the Council. Council Member Holman inquired whether the City Manager had comments. James Keene, City Manager responded no. Vice Mayor Kniss was not able to determine whether the City was overstaffed or understaffed and asked if Staff had a method to determine an appropriate level of staffing. Mr. Keene felt it was more art than science. Vice Mayor Kniss believed the City's higher per capita spending, in comparison to relevant cities was justified by the greater number of services the City offered. She asked if Staff could explain to the public the City's need for a higher level of staffing to operate effectively. Mr. Keene remarked that Staff performed some analysis and said controlling variables and delineating differences provided a different viewpoint. MOTION: Vice Mayor Kniss moved, seconded by Chair Berman to recommend to the City Council tentative approval of the Administrative Services Department Operating Budget and the Printing and Mailing Fund Operating Budget. MOTION PASSED: 3-0 Burt absent 6. City Manager, Operating Budget pp. 119-129. James Keene, City Manager reported the City Manager's Office was oriented toward supporting the Council while simultaneously supporting the entire organization. The City Manager's Office supported initiatives from all Departments. The City provided a wide array of services; consequently, the City Manager's Office supported a wide range of activities. Accomplishments included: progress on Technology and the Connected City initiatives; infrastructure strategy, planning, and funding; the Know Your Neighbor Grant Program; the ban on public smoking; Safe Routes to School; and the Our Palo Alto initiative. For Fiscal Year (FY) 2015, the City Manager's Office focused primarily on: supporting the Planning Department, with respect to land use and transportation issues; negotiating acquisition of the Downtown Post Office and the Cubberley lease; the San Francisquito Creek and Golf Course projects; and enhancing organizational performance and operations. Attachment H WORKING MINUTES Page 22 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 He spent a total of 375 hours attending Council and Standing Committee meetings each year and approximately three times that amount preparing for meetings. He proposed adding $150,000 to the Budget to support the Our Palo Alto initiative, converting the Assistant to the City Manager position to an Assistant City Manager position, and adding a second Assistant City Manager position. Having two Assistant City Managers allowed him more time to support the organization, Council, and to deal with strategy issues. Vice Mayor Kniss calculated the number of meetings at 125. Walter Rossmann, Director of Office of Management and Budget concurred. Vice Mayor Kniss asked if Mr. Keene spent 375 hours in Council and Committee meetings. Mr. Keene indicated he spent approximately 375 hours attending meetings. Vice Mayor Kniss noted 500 Staff Reports would be issued by the end of the fiscal year. Mr. Keene suggested those data points would make an interesting benchmark comparison. Vice Mayor Kniss believed the number of meetings held 10 and 20 years ago was substantially less. Council Member Holman preferred for Goal Numbers 1 and 2 to reference the public. They seemed to focus on the City's Management Team and Council policy direction. She inquired about the differences between the Chief Communications Officer and Communications Manager positions. She noted the public communications expenditure increased by $92,000 or 32.7 percent, and inquired about reasons for that increase. Mr. Rossmann explained that the $92,000 was a net increase resulting from an increase of $150,000 for Our Palo Alto offset by salary and benefits savings. Mr. Keene advised that the Communications Manager position was vacant. Funding for the Communications Manager position was used for contracts with a Staff Writer and a social media firm. Council Member Holman stated the Communications Manager position was included in the Full-Time Employees (FTE); however, the City was saving the benefits cost of that position. Attachment H WORKING MINUTES Page 23 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Mr. Keene did not want to eliminate the position, as it might be utilized in the future. Currently, the City was receiving more services by contracting the position. Council Member Holman inquired about efforts by the Economic Development Department to collect data regarding a business registry and use and Occupancy Permits. Mr. Perez agreed more data was needed for outreach. Thomas Fehrenbach, Manager of Economic Development focused on Sales Tax data and engaged with the business community to understand changes. Not having a business registry was a disadvantage. Mr. Keene reported Staff was attempting to increase capacity for research and analysis and to focus on data. He did not propose a Budget that would reach the needed level of data collection, analysis, and deployment in a year or two, but proposed incremental movements to change the culture to advance improvements. Council Member Holman felt the City sometimes accepted responsibility for too many initiatives. She requested clarification of the roles of two Assistant City Managers. Mr. Keene advised that assigning coordination, management, and oversight of a 16 or 17 person leadership team to one assistant was not practical. He alone was not able to meet the Council's desire for more operational oversight, while enhancing strategy and communications. Delegating some work to two assistants was the best method to handle the issue. Chair Berman asked why contract services increased dramatically. Mr. Rossmann explained that contractual services increased due to the Our Palo Alto initiative and the Legislative Advocacy Contract. Chair Berman inquired whether the line Item for salaries included the Communications Manager. Mr. Rossmann responded yes, even though the position was vacant. Salaries increased because of the City Manager's salary increase and the cost for the two Assistant City Manager positions. Council Member Holman asked if the salary increase resulted from all salary increases in the Department. Attachment H WORKING MINUTES Page 24 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Mr. Keene clarified that the largest component of the change resulted from salaries for two Assistant City Managers. Mr. Rossmann added that other salary increases had been granted and annualized for the next fiscal year. Council Member Holman noted $94,000 was the difference in salaries after subtracting the Deputy City Manager and Assistant to the City Manager positions and adding the two Assistant City Manager positions. She inquired about the salary for the two Assistant City Managers. Mr. Rossmann reported that the $94,000 would include pension costs, salary costs, and an incremental increase from an Assistant to the City Manager position to an Assistant City Manager position. Council Member Holman thought the salary amount was high. Mr. Keene felt the salary difference between an Assistant to the City Manager position and an Assistant City Manager position was probably $60,000. Chair Berman asked if those were two different roles. Mr. Keene explained that an Assistant City Manager could be Acting City Manager in his absence. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to recommend to the City Council tentative approval of the City Manager Budget. MOTION PASSED: 3-0 Burt absent 7. Office of Sustainability, Operating Budget pp. 131-136. Chair Berman announced the Office of Sustainability Budget review would be held at the meeting on May 15, 2014. 11. Non-Departmental, Operating Budget pp. 397-400. Walter Rossmann, Director of Office of Management and Budget reported that the Non-Departmental Budget contained costs not necessarily assigned to a Department. Staff proposed: adding funding for the 2014 election; reserved $950,000 from the Cubberley Covenant Not-to-Develop to be used Attachment H WORKING MINUTES Page 25 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 for maintenance and infrastructure improvements at Cubberley; and set aside funds for Shuttle Service Expansion and for a Transportation Management Authority (TMA). To fund a full-time Public Art Manager position for the Public Art Program, Staff defunded the part-time position in the General Fund and increased the General Fund subsidy to a total of $96,000. Staff proposed a one-time increase for the City Attorney Contingency Fund to fund potential litigation costs. Council Member Holman asked if the Public Art Program would reimburse the General Fund for the Public Art Manager position. Mr. Rossmann advised that administrative costs allowed by the Ordinance would fund the position. MOTION: Council Member Holman moved, seconded by Chair Berman to recommend to the City Council tentative approval of the Non-Departmental Operating Budget. Council Member Holman recalled that the Fiscal Year (FY) 2003 Budget totaled $114 million while the FY 2015 Budget totaled approximately $170 million, a 50 percent increase. It was helpful for the Finance Committee (Committee) to understand the causes of those changes. Lalo Perez, Director of Administrative Services and Chief Financial Officer would provide specific information at a later time. In the Budget 20 years ago, the percentage of salary and benefits was in the same target range as the FY 2014 Budget. Council Member Holman requested Staff extrapolate that information out 10 or 20 years. Mr. Keene said he could provide an extrapolation from the Long Range Financial Forecast. Mr. Rossmann reported in ten years the Budget would increase approximately 35 percent due to expenditures, pension cost increases, healthcare cost increases, and Consumer Price Index (CPI) increases. The increase was a sign of inflation. Council Member Holman requested a chart of that information. MOTION PASSED: 3-0 Burt absent Attachment H WORKING MINUTES Page 26 of 26 Finance Committee Special Meeting Working Minutes 05/13/2014 Future Meetings and Agendas Chair Berman reiterated that the Budget for the Office of Sustainability was continued. Lalo Perez, Director of Administrative Services and Chief Financial Officer said he would determine a date for review of the Budget for the Office of Sustainability, as public notice for the May 15, 2014 meeting had issued. James Keene, City Manager noted the next meeting was scheduled for May 15, 2014 at 6:00 P.M. ADJOURNMENT: Meeting adjourned at 9:35 P.M. Attachment H FINANCE COMMITTEE WORKING MINUTES Page 1 of 25 Special Meeting Thursday, May 15, 2014 Chairperson Berman called the meeting to order at 6:04 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California. Present: Berman (Chair), Burt, Holman, Kniss Absent: ORAL COMMUNICATIONS None AGENDA ITEMS 1. Utilities Department, pp. 337-344. Walter Rossmann, Director of Office of Management and Budget, received notification from the People Strategies and Operations Department that one position would have to be reclassified. Staff requested the Finance Committee (Committee) include the item in a Motion to tentatively approve the Utilities Department Budget. Council Member Holman requested the page number on which the modification occurred. Mr. Rossmann advised the modification was an addition to the Budget. Chair Berman asked if Staff needed a separate Motion for the modification. Mr. Rossmann indicated the Committee should include the modification within the Motion to approve the Budget tentatively. Council Member Holman requested Staff remind the Committee when they reached the portion of the Budget affected by the modification. Mr. Rossmann agreed to do so. Valerie Fong, Utilities Director, reviewed the Department's Mission. The Attachment H WORKING MINUTES Page 2 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 Administration Division was charged with overall management of the Department. The Customer Support Services Division handled billing for seven of the City's utilities, meter reading, credit and collection, efficiency and renewable energy programs and coordination of commercial fiber optic connections. The Engineering Division was responsible for managing all phases of Capital Improvement Program (CIP) projects for electric, gas, water, sewer, and fiber optic utilities and new and upgraded services to customers. The Operations Division managed all operations, maintenance, and emergency response. The Resource Management Division was responsible for long range planning, acquisition of electricity, natural gas and water, financial planning, and rate development. The Utilities Department accomplished a carbon neutral electric supply portfolio in calendar year 2013, conducted expanded youth outreach, updated Comprehensive Financial Plans and Reserve Guidelines, and continued to receive and maintain the Reliable Public Power Provider designation. Initiatives for Fiscal Year (FY) 2015 included CIP projects, emerging technology pilot programs, communication outreach, workforce development, and implementation of technology projects contained in the Utilities Information Technology Strategic Plan and Road Map. Staff proposed no rate increases for electric, gas, water, or sewer utilities. Staff requested funding for a Utilities Safety Officer position and reclassification of a Utility Safety Coordinator position to a Project Coordinator position. A Utilities Safety Officer would ensure compliance with workplace safety and environmental regulations, assist with planning and implementation of health and safety programs, and conduct emergency awareness and other safety-related training. Reclassification of the Utilities Safety Coordinator position would result in a net savings. Staff requested the reclassification in response to the audit of inventory and contract management. Staff requested a new position of Principal Management Analyst which would increase costs by $188,000 including benefits. The position would supervise the team of analysts responsible for operations, maintenance, and development and implementation of the customer service system and associated services and solutions. Initiatives for the Electric Fund were local solar programs. Staff proposed to increase funding for solar rebates by $620,000 to reflect increasing market demand. In addition, Staff requested one additional Full-Time Equivalent (FTE) for the meter shop for maintenance, installation, and programming of advanced meters. Staff proposed a $9.7 million Capital Budget for the Electric Fund. Major components of the Electric Fund Budget included customer connections, system improvements, undergrounding projects, and substation improvements. Initiatives for the Fiber Optic Fund were to complete the assessment of a Citywide wireless network and to develop a Dark Fiber Master Plan. The Fiber Optic Fund contained a Council-approved Consumer Price Index (CPI) rate increase of 2.6 percent. Staff proposed a $400,000 Capital Budget divided between customer connections and system Attachment H WORKING MINUTES Page 3 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 improvements. Within the Gas Fund, Staff was in the process of implementing the PaloAltoGreen Program and would continue to work on gas main replacement projects. Staff proposed a Capital Budget of $2.3 million divided among gas main replacement, system improvements, meter replacement, and security enhancements for four receiving stations. FY 2015 initiatives for the Wastewater Collection Fund included investigation and elimination of tree roots and rehabilitation and augmentation projects. Staff proposed a $4.1 million Capital Budget divided among system rehabilitation, system improvement, and customer connections. Each Utility Fund received reimbursement for customer connections. FY 2015 initiatives for the Water Fund were development of a Water System Master Plan and completion of the environmental review phase for the recycled water project. The Proposed Capital Budget for the Water Fund was $5.4 million divided among seismic system upgrades, reservoir coding, system improvements, meters and hydrants, Water System Master Plan, and customer connections. Council Member Burt asked how the FY 2015 initiative of communication outreach differed from other outreach. Ms. Fong wanted to receive more direct feedback from customers regarding the effectiveness of communications. Outreach would be performed through surveys. Debra Katz, Utilities Communications Manager, explained the initiative was a concerted effort to obtain feedback from customers. The Department lacked information regarding the point of interaction and communication between the customer and Staff. Staff wanted to interact with customers in customer environments such as social media, youth outreach, and community events. Council Member Burt inquired whether Staff was considering customers equally or utilizing randomized feedback. Ms. Katz reported the point of interaction feedback would not be random. Randomized methods were utilized in surveys. Staff conducted online and phone surveys to reach different groups of people. Council Member Burt heard of anecdotal incidents where residents and some businesses felt they sustained a significant unanticipated impact and acute dissatisfaction with Staff's response. Understanding interactions and any pattern to dissatisfied customer responses was a worthy goal. Ms. Katz agreed. When a customer complained, they may not be the only unhappy customer. A customer could be unhappy with the general situation or specific elements of the situation. Staff had utilized specific complaints to change a policy or procedure. Attachment H WORKING MINUTES Page 4 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 Council Member Holman noted the total cost of capital improvements increased $10 million. Ms. Fong asked if Council Member Holman was referencing to the Electric Fund CIP. Council Member Holman stated she was referring to the total cost of CIP. Mr. Rossmann indicated the dollars by expense category showed an increase of the CIP by $5 million. Chair Berman suggested Council Member Holman was referencing the Workload Measures table. Council Member Holman requested an explanation for the cost of CIP increasing from $16 million to $26 million between the FY 2014 Adopted Budget and the FY 2014 Estimated Budget. The FY 2015 Proposed Budget listed CIP as $21 million. That was a large fluctuation. Mr. Rossmann recalled in March 2014 Staff presented the Mid-Year Budget Adjustments to the Committee, which included adjustments to capital improvements. The Adjusted Budget was most likely the cause of the increase; however, he would review it. Council Member Holman believed the percentage was not large for the aggregate amount. The Department summary reported dollars by fund and total dollars by fund. The percentage of increase was 3 percent while the dollar amount increased by $7 million. She requested a broad explanation of the increase. James Keene, City Manager, noted the increase occurred in water and wastewater. Mr. Rossmann reported a Resource Management increase of $1.8 million was the major increase in the Water Fund. There were minor changes for operations and maintenance of $300,000 and for administration of $360,000. Administration usually increased through a combination of salary and benefits increases. Cost allocation charges to other Funds could increase the amount. Attachment H WORKING MINUTES Page 5 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 1. Utilities Department (continued), pp. 337-344 a) Electric Fund i) Operating Budget, pp. 345-357 ii) Capital Budget, pp. 166-218 Council Member Holman noted many areas did not increase FTEs; yet, the dollar amounts increased significantly. The salary amount for a Lineperson Cable Splicer increased to $1.1 million. She asked if that was a result of adjustments to market compensation. Mr. Keene explained the total cost for 11 Lineperson Cable Splicers was $1.138 million. Chair Berman referenced page 338 where the FY 2015 positions totaled 243.5 FTEs; however, the table on page 344 showed 271.77 FTEs. Mr. Rossmann reported the table on page 344 was the total budgeted positions in all Utility Funds. Functionally, positions in the Administrative Services Department were paid by Utility Funds but reported to the Chief Financial Officer. The table on page 338 was the total number of positions that reported directly to the Utilities Director. Chair Berman asked if that rationale applied to other Departments. Mr. Rossmann answered yes. Chair Berman inquired about a reason for the dramatic increase in retiree medical as shown in the budget summary table on page 349. Mr. Rossmann advised across all Funds retiree medical increased by $2 million over FY 2014. On May 29, 2014, Staff would present a detailed report from the City's actuary. Based on healthcare cost changes and actuarial changes, the amount increased significantly. Mr. Keene added, much of the increase was driven by changes in actuarial methodology. Chair Berman asked if a change in operations or charges resulted in the predicted 40 percent decrease in charges to other Funds. Over the previous few years, the amount was consistent. Mr. Rossmann would provide information at a later time. Usually charges to other Funds were for natural gas, electricity, etc., which the Utilities Department charged to the General Fund for consuming energy resources. Because those costs increased, this was a net number. Attachment H WORKING MINUTES Page 6 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 Vice Mayor Kniss requested Ms. Fong comment on workforce development. Ms. Fong indicated workforce development was a major initiative for the Utilities Department. Because Staff left the City's employ for other agencies, workforce development was a continuing concern. The City Manager authorized counter-actions which helped retain some Staff. Vice Mayor Kniss felt it was important to discuss in public the difficulty of attracting employees and the loss of employees to other agencies. Many times other agencies offered significantly higher salaries than Palo Alto. The City should compensate Staff at market rates. Council Member Holman was impressed by the potential net savings of $2 million annually from the kV electric interconnection project. The project would also provide a secondary source of power. She inquired about a possible implementation date. Tomm Marshall, Utilities Assistant Director, reported Staff was negotiating with Stanford University, the Department of Energy, and PG&E regarding the interconnection project. Staff made significant progress in having an alternative, outlining actions, and making interconnections. Council Member Holman requested Staff estimate a completion date. Mr. Marshall hoped to make a determination whether to proceed with the project by the end of the year. Staff identified an alternative electric supply location; however, the current location was preferred because of cost savings, reliability, and benefits to the general electric system. Council Member Holman inquired whether Utilities Staff coordinated schedules and work plans with the Public Works Department for undergrounding projects. She inquired whether the CIP amount for undergrounding projects included a cost share with the Public Works Department for street resurfacing and improvements. Mr. Marshall advised the Utilities Staff coordinated with Public Works regarding undergrounding and street paving. Utilities Staff provided advance notice to Public Works of the areas where undergrounding would occur. Typically Public Works avoided street resurfacing in those areas until undergrounding was complete. Council Member Holman asked if Utilities Staff shared their work plan for undergrounding and coordinated schedules with Public Works Staff. Attachment H WORKING MINUTES Page 7 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 Mr. Marshall replied yes. Utilities' five-year plan contained the locations of undergrounding districts and coordinated with the street paving plan. Utilities and Public Works Staff met monthly to discuss changes to schedules to remain coordinated for paving. Council Member Holman asked if costs for undergrounding were shared. Mr. Marshall answered no. Undergrounding was exempt from street cut fees. Council Member Holman inquired about a standard for above-ground devices and installations that the Council could improve such that the devices and installations would have less aesthetic impact. Mr. Marshall advised a small selection of models were available for purchase. The City purchased the standard model. There were few choices for designs. Ms. Fong added standardization was important for mutual aid and emergencies across systems. Vice Mayor Kniss requested Staff comment on smart grid technology as public comments had derided the project. The City was investing $10 million in the project over the next four years. Mr. Marshall reported the amount was a placeholder for proceeding with smart grid. Staff was in the process of implementing a pilot program. The pilot program would determine where customers would receive a benefit from the program. He did not believe Staff would proceed with the project if the pilot program did not provide a positive cost-benefit analysis. Vice Mayor Kniss asked if the $737,000 amount was funding for the pilot program. Mr. Marshall responded yes. Staff also had other pilot programs concerning the smart grid initiative. Chair Berman inquired whether Staff would provide the Council with updates regarding the pilot program. Ms. Fong indicated Staff submitted quarterly and annual updates regarding all Utility initiatives. Chair Berman asked if updates were contained within informational reports. Ms. Fong answered yes. Attachment H WORKING MINUTES Page 8 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 Mr. Rossmann referred to Chair Berman's question regarding the $200,000 decrease in charges to other Funds. A few years previously, the City developed the PaloAltoGreen Program for the Electric Fund. The program was discontinued when the Electric Fund achieved carbon neutrality, which decreased the costs to Departments. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to recommend tentative approval of the Utilities Department, Electric Fund budget to the City Council including a reclassification of 1.0 FTE Senior Market Analyst to 1.0 FTE Business Analyst. This position is funded in the Electric, Gas, and Water Funds. MOTION PASSED: 4-0 b) Fiber Optics Fund i) Operating Budget, pp. 358-363 ii) Capital Budget, pp. 222-225 Vice Mayor Kniss noted the amount of revenue from users increased approximately 2 1/2 percent. Mr. Rossmann reported the increase was based on a contractual agreement between the users and the City. Vice Mayor Kniss inquired whether Staff could do anything more to increase revenues for the City. Ms. Fong indicated revenues were approximately $4.4 million annually and expenditures were approximately $2 million annually. That was a significant return to the Fiber Optic Reserve Fund. Vice Mayor Kniss asked if the return was significant enough since users had an advantage over non-users. Tom Auzenne, Utilities Assistant Director, advised that the 2.64 percent increase was related to only one fiber optic rate schedule. That schedule was an older schedule and closed to new participants. The pricing structure was particularly advantageous for those customers. As the CPI increased over time, all users would transition to market-based costs. Vice Mayor Kniss inquired about the number of customers covered by the older rate schedule. Mr. Auzenne explained accounts and connections were different. One customer or one account could have multiple connections to multiple buildings back to the Palo Alto Internet Exchange (PAIX). The City currently Attachment H WORKING MINUTES Page 9 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 had approximately 273 connections. Connections drove profitability. Staff was in the process of increasing the connectivity capability at PAIX to increase the potential number of connections. Marketing of the Fiber Optics Fund was managed in connection with capability for construction. Staff could increase marketing and; therefore, create a larger backlog of construction, but that would probably be detrimental to the overall business. Staff could not identify an endpoint for marketing at the current time. Ms. Fong added the City was meeting demand. Vice Mayor Kniss doubted that the majority of the public knew the fiber optic ring existed. Mr. Auzenne remarked the fiber optic ring represented a strategic advantage for Palo Alto. Vice Mayor Kniss believed fiber optics was a successful business and the public should be aware of it. Chair Berman noted the Budget for Fiber Optics increased 26 percent but there was no explanation for the increase. Anna Vuong, Utilities Senior Management Analyst, reported the increase could be attributed to increases in salaries and benefits. Chair Berman noted salary and benefits increased by $200,000 and other increases totaled $300,000. Mr. Rossmann agreed the increase was significant. Staff reviewed the issue to ensure the methodology was consistent. In FY 2013 other Departments provided internal support to the Fiber Optics Fund. As Staff calculated the allocated charges, they also determined the actual activity for the prior fiscal year. That amount determined the cost for the following two fiscal years and explained the substantial increase for allocated charges. Allocated charges increased 68 percent but the overall increase was 25 percent. Council Member Burt referenced the workload measure regarding the number of connections serving individual users and asked if individual users referred to individual residential users or residential and commercial individual users combined. Ms. Fong replied residential and commercial combined. A few customers were individual residents. Mr. Auzenne added the vast majority of users were commercial customers. Attachment H WORKING MINUTES Page 10 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 Council Member Burt noticed the number of individual users increased at a higher rate than Staff projected. He asked if there were opportunities to gain more individual users. Ms. Fong indicated projections reflected the City's capabilities with respect to engineering and operations to some extent. At some point the City could consider a third party providing assistance. The City was primarily responsible for designing, engineering, maintaining, and operating the system. Council Member Burt believed the City was not gaining customers because of constraints on capital, given the operating profit. He inquired whether increasing capacity would result in higher revenues. Ms. Fong agreed it could. One consideration was Staff's ability to manage third-party contracts and to hire additional Staff. Council Member Burt wanted to know if the City would benefit from making a capital investment. Of course there would be an expense. He asked if it would be logical to expand the capacity. Vice Mayor Kniss wanted to know the answer as well. Mr. Keene commented the issue was not financial as much as strategy. Staff could review the relationship of cost and revenue and respond to the Committee. Presumably the hook up would be a one-time cost. The return would increase over time. Council Member Burt remarked another consideration was the Fiber-to-the Premise Program. Ms. Fong was not sure Staff could provide a robust response quickly. One of the Department's initiatives was to review a network plan and assess actions needed to develop it. Mr. Keene indicated Staff could quickly determine the different coefficients, revenues, and return on investment. Council Member Burt requested Staff provide an update on that issue. Vice Mayor Kniss requested Staff indicate the number of resellers and the number of individual users. It would be interesting to know the number of businesses that would locate to Palo Alto because of the fiber optic ring. Ms. Fong did not believe Staff could determine the effect of the fiber optic ring on decisions to locate to Palo Alto, because that decision was comprised Attachment H WORKING MINUTES Page 11 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 of many components. Key account representatives could have a sense of the value customers placed on the fiber optic ring. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to recommend tentative approval of the Utilities Department, Fiber Optics Fund budget to the City Council. MOTION PASSED: 4-0 c) Gas Fund i) Operating Budget, pp. 364-375 ii) Capital Budget, pp. 228-248 Council Member Holman referenced the goal concerning natural gas savings achieved through efficiency programs and asked if additional efforts could be made to increase participation. Ms. Fong reported the same trend occurred in the Electric Fund and was related to increased appliance efficiency. Council Member Holman suggested the market was saturated with users who had replaced their inefficient products. Ms. Fong advised users could replace equipment with more efficient equipment; however, the City could only claim that smaller change as actual savings. Vice Mayor Kniss supported implementation of the PaloAltoGreen Gas Program. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to recommend tentative approval of the Utilities Department, Gas Fund budget to the City Council including a reclassification of 1.0 FTE Senior Market Analyst to 1.0 FTE Business Analyst. This position is funded in the Electric, Gas, and Water Funds. Council Member Holman inquired whether gas main replacements were coordinated with the Public Works Department for street paving. Ms. Fong answered yes. MOTION PASSED: 4-0 Attachment H WORKING MINUTES Page 12 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 d) Wastewater Collection Fund i) Operating Budget, pp. 376-384 ii) Capital Budget, pp. 284-305 Council Member Burt recalled a previous problem with the quality of recycled water being traced to impurities in the collection system. He inquired about the process for the City and partner agencies to make repairs to the wastewater collection system. Mr. Marshall explained agencies paid for repairs to lines located within their jurisdictions. The treatment plant owned a collection line that ran from the Los Altos Treatment Plant to the plant. Council Member Burt asked if the City had to negotiate with partner agencies to make repairs to wastewater lines. Mr. Marshall responded yes. Council Member Burt asked if the City could mandate repairs. Mr. Marshall believed the City had to negotiate with partner agencies to make repairs. He did not believe the City had a mechanism to force agencies to make repairs. The City of Mountain View had been cooperative in working on issues. Mr. Keene could obtain more information when the Committee reviewed the Public Works Department Budget. Council Member Burt asked if the City should consider quality standards that were negotiated with partner agencies. Member agencies could choose to be less cooperative in the future and the City would not have any leverage. That would be an important issue if the City invested in the recycled water project. Mr. Keene felt that was a worthwhile point as the City would engage in conversations with partner agencies regarding an organics plan and biosolids treatment improvements needed at the treatment plant. Council Member Burt referred to Staff's achievements in decreasing the amount of total dissolved solids (TDS) and attempts to further decrease TDS. He asked if Staff had plans to reach that lower target and whether projects to do so were contained in the Capital Budget. Mr. Marshall reported an ongoing initiative was identification of infiltration of lines. In the next CIP, Staff included projects to repair areas of saltwater intrusion. Staff worked with the treatment plant to identify locations of Attachment H WORKING MINUTES Page 13 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 intrusion and then made repairs through the CIP. City wastewater lines were in good shape at the current time due to the number of repairs made in the past ten years. Council Member Burt asked if technology could determine the location of infiltration. Mr. Marshall indicated instruments measured wastewater for dissolved salts to determine intrusions into the lines. Council Member Burt believed recycling wastewater could provide a long- term transformation in the water supply. The economics of recycled water had changed over the past five years. The Santa Clara Valley Water District offered to partner with the City on a capital program for recycled water lines. He requested an analysis of the economic costs and benefits of selling recycled water as a commodity. Vice Mayor Kniss agreed that recycled water would be important in the future. She asked Staff to comment on the initiatives to investigate and eliminate tree roots. Ms. Fong advised the integrity of sewer lines was impaired by tree roots. Roots in sewer lines resulted in infiltration of elements into the sewer system. Vice Mayor Kniss inquired about the method for determining where tree roots had infiltrated sewer lines. Dean Batchelor, Director Utilities Operations, explained Staff placed a camera inside sewer lines for visual inspection. If there were roots in the line, Staff would cut remove them. If the homeowner was responsible for the area where roots infiltrated the line, Staff notified the homeowner of the problem. Vice Mayor Kniss noted sewer backups were frequent problems in the community. Council Member Holman asked if Staff anticipated recommending removal of some trees causing problems. She asked if the City should have some type of education or outreach program. Ms. Fong reported clearing sewer lines did not destroy or remove any trees. Council Member Holman reiterated that Staff would not recommend removal of trees to prevent problems. Attachment H WORKING MINUTES Page 14 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 Mr. Marshall indicated the City's policy was to replace older sewer lines with plastic lines. Older clay lines slipped together which allowed roots to enter the lines at the joints. The City required plastic pipes in new construction in an attempt to eliminate issues with tree roots. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to recommend tentative approval of the Utilities Department, Wastewater Fund budget to the City Council. MOTION PASSED: 4-0 e) Water Fund i) Operating Budget, pp. 385-395 ii) Capital Budget, pp. 252-280 Council Member Burt recalled community comments that the Council should be concerned about growth because of an inadequate water supply. The Council knew that was not the reality. He asked how Staff could spread the message that the City was not running out of water while continuing to encourage water conservation. Ms. Katz advised that the rule of thumb in advertising was people had to hear a message nine times before comprehending it. Therefore, Staff had to keep repeating the same message. Staff recently performed a random survey for the Water Utility. She was thrilled with the results of the survey, because people were generally satisfied with the Water Utility and communication. In addition responses to survey questions indicated residents listened to and understood the City's message. The vast majority of residents were getting the message. Council Member Burt agreed and suggested Staff prepare a set of Frequently Asked Questions (FAQ) that addressed misconceptions. When Staff or the Council heard these comments, they should provide the FAQs. Ms. Katz offered to put that information on the web site. Vice Mayor Kniss agreed that was one of the most important messages for Staff to work on. Council Member Holman understood water main replacements were coordinated with the Public Works Department. She inquired whether customer connections caused cuts in streets. Mr. Marshall answered yes. Because customer connections could occur at any time, Staff could not coordinate those with street paving. Most new Attachment H WORKING MINUTES Page 15 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 homes required 1 inch water service to comply with the requirement for fire sprinklers in homes. Consequently, all new homes would need new water service and the pavement would have to be cut to install the new water service. Council Member Holman asked if it was really impossible to coordinate connections with street paving. Mr. Marshall indicated it was very difficult. Many times customers installed the water service themselves and Staff had no control over that. Council Member Holman referred to the photograph regarding reservoir coding improvements in the Foothills. It stated that design elements may be subject to Architectural Review Board (ARB) review. She questioned whether the review should be conducted by the Planning and Transportation Commission (P&TC) or Parks and Recreation Commission (PARC) rather than the ARB. Mr. Marshall reported most reservoir improvements were simply relining existing tanks. In some cases Staff had to remove trees around tanks. Staff worked with PARC and complied with a review process regarding landscaping. Typically reservoir improvements were not subject to ARB review. That was a mistake in the Budget document. Council Member Holman requested Staff substitute PARC for ARB. Mr. Marshall agreed to do so. Council Member Holman noted fire hydrant replacement was subject to ARB review and asked what the ARB would review. Mr. Marshall indicated the ARB would review the placement of the fire hydrants. Council Member Holman asked if fire hydrants were not placed in the same location. Mr. Marshall advised sometimes fire hydrants had to be moved, particularly if the original location was inappropriate. Council Member Holman inquired whether those projects were coordinated with sidewalk replacement and improvements. Mr. Marshall was unsure as the Operations Division typically handled fire hydrant replacements. Attachment H WORKING MINUTES Page 16 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 Mr. Batchelor responded yes, the Utilities Department would work with the Public Works Department to relocate a fire hydrant. Typically the Operations Division would construct the sidewalk, curb, and gutter if the fire hydrant was completely removed. Council Member Holman asked if Mr. Batchelor said that Utilities coordinated with the Public Works Department. Mr. Batchelor answered yes. If Utilities removed the sidewalk or cut the curb or gutter, they would replace the sidewalk, curb and/or gutter at the expense of Utilities. The Utilities Department met with the Public Works Department monthly to discuss sidewalks and work on sidewalks. Ms. Fong added Utilities Staff worked closely with the Planning Department on sidewalk changes in the California Avenue project to coordinate water utility replacement. MOTION: Chair Berman moved, seconded by Council Member Holman to recommend tentative approval of the Utilities Department, Water Fund budget to the City Council including a reclassification of 1.0 FTE Senior Market Analyst to 1.0 FTE Business Analyst. This position is funded in the Electric, Gas, and Water Funds. MOTION PASSED: 4-0 Mr. Rossmann referred to Council Member Holman's question regarding the increase in CIP dollars. The actual amount in FY 2013 was $34.5 million. The FY 2013 Adopted Budget amount was $29.5 million. Carrying forward dollars for capital improvements from one fiscal year to the next and spending them in years after they were budgeted resulted in the actual amounts always being higher than the budgeted amount. Council Member Holman was concerned that Staff did not have the capacity to handle the spike in projects. 2. Public Safety Department, Operating Budget pp. 243-246 a) Police, Operating Budget pp. 270-283 Dennis Burns, Police Chief, reviewed the Mission, Purpose, and divisions of the Police Department. The Police Department was the only Department in the City with its own Human Resources (HR) Division as personnel law for Public Safety was technical and specific. The Dispatch Center was the third busiest in Santa Clara County. The Police Department received 147 citizen commendations in FY 2013, reduced Part 1 crimes, purchased 52 automated Attachment H WORKING MINUTES Page 17 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 external defibrillators (AED), participated in Urban Shield, and implemented the joint computer aided dispatch (CAD) system with Los Altos and Mountain View. Initiatives for Fiscal Year (FY) 2015 included additional phases of the CAD system, implementation of a cloud-based command center, and implementation of the Citizens' Academy. The Police Services Utilization Study probably would not occur as other initiatives were more necessary. The Animal Control Services Evaluation would review opportunities for public-private partnerships to manage the shelter more effectively. Staff proposed an additional $30,000 for training, cell phones for individual officers, and staffing reconfiguration and revenue realignment for Animal Control Services. Vice Mayor Kniss inquired whether cell phones for officers was an enhancement. Mr. Burns advised City cell phones would provide field access to California Department of Justice databases. Officers could work more efficiently and quickly. In addition, some work would be removed from dispatchers. Vice Mayor Kniss asked if the Department would issue a cell phone to everyone. Mr. Burns responded yes. Each officer would receive a cell phone but could not take it home. The cell phone would have specific systems that could only be used in a police officer role. Council Member Holman did not believe the Department's Purpose addressed creation of a safe environment. Traffic Services reflected a 53.4 percent change; yet, there was no change in staffing. Walter Rossmann, Director of Office of Management and Budget, reported the change was a reallocation of positions among divisions. There were four additional positions in Traffic Services, a reduction of two positions in Investigations and Crime Prevention, and a reduction of two positions in Field Services. The Department reallocated existing positions differently in the financial structure. Council Member Holman inquired about Field Services. Ron Watson, Police Captain, explained Field Services was the patrol division. The dramatic increase in Traffic Services also resulted from the unfreezing of traffic positions. Mr. Burns agreed the Department's Purpose could be worded better. Given the improved situation with vacancies, the Department would be in a Attachment H WORKING MINUTES Page 18 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 position to be proactive. Staff was working on predictive policing through the use of analytics. That would be deployed so that patrol officers would have data. Council Member Holman wanted to ensure a safe environment was a main goal of the Police Department. Council Member Burt referred to the overall reduction in Part 1 crimes and understood there were fluctuations in crime. In recent years with prison realignment, all cities in the region experienced an upswing in crimes over a two-year period. He inquired whether the reduction was part of the normal cycle or a positive trend. Mr. Watson compared the FY 2013 number with the FY 2008 number. Fluctuations occurred between those years. Even though the FY 2013 number was lower than the FY 2008 number, the number of crimes was probably trending up. With respect to prison realignment, the Department was seeing repeat offenders and offenders not receiving appropriate sentences and services. In some areas the Department would probably see increases because of prison realignment. Council Member Burt asked how often AEDs were used and how often they changed situations. Mr. Burns indicated AEDs were used probably half a dozen times since placed into use. They were good tools and the Department was fortunate to have them in patrol cars. Council Member Burt asked about the difference AEDs made in circumstances where they were used. Mr. Burns advised in some instances the AED instructed officers not to shock the person. In two cases, AEDs assisted in bringing the person back. Council Member Burt recalled the discussion in 2013 to increase School Resource Officers (SRO) if Palo Alto Unified School District (PAUSD) would share the cost. He inquired whether PAUSD agreed to share the cost. Mr. Burns answered yes. Eventually the City reached an agreement with PAUSD and hired a second SRO in March 2014. Council Member Burt noted the need for increased revenue recovery in Animal Control Services and asked if the Finance Committee (Committee) would discuss that in greater detail. Attachment H WORKING MINUTES Page 19 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 James Keene, City Manager, acknowledged the problem in the Budget; however, Staff had not developed a recommendation. Animal Control Services had not met the performance measures set by the Council. Council Member Holman added a Colleagues' Memorandum was ready for presentation to the Council on the topic. Chair Berman suggested the Department notify State legislators regarding impacts of prison realignment. He supported the return of the Traffic Team as many residents supported and appreciated that service. He inquired whether predictive analytics resulted from the relationship with the newest downtown employer. Mr. Burns obtained the product from a company called PredPol. It was a tool to be used when there was an insufficient number of police officers. Chair Berman asked when it would be instituted. Mr. Burns reported a couple of teams were currently testing it; with full implementation expected in the summer. Vice Mayor Kniss requested Staff comment on workforce. Mr. Burns explained that people applied to the Police Department year round. The Department received 3,132 online applications for police officer over three years. From that, the Department hired 19. The first step was a background check and many applicants simply did not respond to that step. Vice Mayor Kniss understood the background check narrowed the group quickly. Mr. Burns sought a certain kind of individual and it was difficult to find qualified applicants. Currently five people were out on workers' compensation, five were in training, two were in the police academy, and three positions were vacant. Vice Mayor Kniss inquired about retention. Mr. Burns advised from time to time officers moved to other agencies. The Department attempted to retain officers, because it was far easier and less expensive to retain employees. He wanted to hire entry-level officers and retain them for their entire careers. Vice Mayor Kniss asked if the Department had less of a problem with retention. Attachment H WORKING MINUTES Page 20 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 Mr. Burns responded yes, if Vice Mayor Kniss was comparing the Department to a larger metropolitan city in Santa Clara County. Council Member Holman congratulated the Police Department regarding response times to emergency and urgent calls. Chair Berman noted other revenue decreased 50 percent from FY 2014 and asked if that was a result of Animal Control Services. Mr. Rossmann replied yes. MOTION: Chair Berman moved, seconded by Council Member Holman to recommend tentative approval of the Public Safety Department, Police budget to the City Council. MOTION PASSED: 4-0 b) Fire, Operating Budget pp. 247-262 Eric Nickel, Fire Chief, reviewed the Fire Department's new Mission Statement, Purpose, and divisions. The Fire Prevention Bureau moved to Development Services for Budget purposes; however, the reporting responsibility remained with the Fire Department. The Fire Department responded to 150 fire incidents and 82 responses were within 8 minutes. Medical calls continued to increase, with the Department responding to 4,712 medical rescue calls. The Department responded to 91 percent of calls within 8 minutes and to 99 percent of paramedic calls within 12 minutes. The Fire Department provided education for and maintenance of AEDs and deployed a third ambulance company without adding positions. Because of challenges with the Santa Clara County (County) ambulance provider and being the only fire department providing ambulance service, the Department was attempting to minimize if not eliminate reliance on the County ambulance service. The Department completed a strategic planning process that began with community input. Fire Department accomplishments resulted from implementing key recommendations from the 2011 Fire Service Utilization Study and the Department continued to implement recommendations. The Fire Department was implementing a performance measuring process with a goal of providing the first quarterly Fire Department performance report to the Council in late September. The Department began a culture assessment survey, which would continue into FY 2015. An "all paramedic all the time" program would place paramedics on all engines and ladder trucks 100 percent of the time; allow the Department to deliver paramedic care 3-4 minutes faster; and allow a region-wide automatic aid agreement with two neighboring agencies. As Attachment H WORKING MINUTES Page 21 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 part of Emergency Medical Services (EMS) improvements, the Fire Department was planning a fourth cross-staffed ambulance in early 2015. Another initiative of the Fire Department was an independent assessment of services rendered as soon as services were rendered. The Department requested a nominal amount to replace old and worn out equipment and to support delivery of a new ladder truck and reclassification of one existing Captain position to a training Battalion Chief position. With almost half the sworn force eligible for retirement within five years, the Department needed to hire employees. The Department was in discussions with Mountain View regarding regionalizing key components such as training and hazardous materials response. The Department requested a public education position and funding for leadership and succession planning. Vice Mayor Kniss felt Fire Department Staff were all very professional and important to the community. The Department needed to replace retiring officers. Mr. Nickel understood the community expected a great deal from City employees. Currently, seven new employees were in the academy. Hiring those employees required six to eight months. Of the 1,154 applications received, 600 applicants were eliminated because they did not complete the application correctly. Staff interviewed 170 applicants, 12 of whom moved to background investigation. Recruiting diverse candidates was an even greater challenge. Over three years, four employees moved to other agencies in the County. Retention of employees was also a challenge. Vice Mayor Kniss inquired about reasons for not performing background investigations earlier in the process. Mr. Nickel reported investigations were expensive and covered medical, psychological, and law enforcement aspects. Vice Mayor Kniss asked if background investigations were comprehensive. Mr. Nickel answered yes. Council Member Holman asked why investigations were so expensive. Mr. Nickel explained that a proper investigation included personal interviews of the applicant and his neighbors, a credit check, and a review of online profiles and criminal activity. Fire Department personnel went into people's homes at very stressful times, and he did not want accusations of theft or inappropriate behavior. Attachment H WORKING MINUTES Page 22 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 Council Member Holman noted revenues from permits and licenses suffered a dramatic decrease and positions in Environmental Safety Management decreased significantly. Mr. Rossmann indicated revenues from permits and licenses decreased because of the transfer of revenues, expenditures, and positions to Development Services. Mr. Nickel advised fire inspections significantly decreased the prior year. In 2014 the Department performed almost 2,100 fire inspections, a 62 percent increase over FY 2008. Council Member Holman stated there was not a chart to track that. Mr. Nickel indicated the information was contained in the Service Efforts and Accomplishments (SEA) report and presented in the Budget under accomplishments. Council Member Holman felt it would be easier to track in a table. Mr. Rossmann agreed to include a measure in the Budget regarding anticipated number of inspections annually. Council Member Holman requested the table also include the number of Code enforcement actions. Mr. Nickel advised performance reporting was provided once a year. Council Member Holman congratulated the Department for decreasing overtime and response times. She questioned the goal of 93 percent for citizen ratings. Mr. Nickel concurred the goal should be higher. He was not certain how the numbers were derived. Council Member Holman understood citizen satisfaction had decreased slightly; however, the Department seemed to accept it rather than wanted to improve it. Mr. Nickel explained that quarterly reporting would demonstrate trends earlier. He did not know if Department personnel had direct contact with respondents. Council Member Holman suggested the goal should be 96 percent rather than 90 percent. Attachment H WORKING MINUTES Page 23 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 Mr. Rossmann reported the overtime expenditure was trending above Budget. Staff anticipated overtime would exceed the budgeted amount but not the entire salary and benefits Budget. Chair Berman inquired about the number of personnel out on workers' compensation. Catherine Capriles, Deputy Fire Chief, indicated five personnel were currently out. Chair Berman inquired about reasons for injuries and potential safeguards from injury. Mr. Nickel advised the only trend typical in Public Safety was older employees had a greater chance of suffering a workers' compensation injury. The number of personnel out for workers' compensation was not surprising due to the age of the force. Chair Berman appreciated and supported the community first attitude and movie nights. Mr. Nickel indicated firefighters initiated movie nights. Chair Berman agreed the community had high standards for firefighters. The Fire Department provided excellent care and attentiveness to the public. MOTION: Council Member Holman moved, seconded by Vice Mayor Kniss to recommend tentative approval of the Public Safety Department, Fire budget to the City Council. MOTION PASSED: 4-0 c) Office of Emergency Services, Operating Budget pp. 263-269. Mr. Rossmann reported no significant Budget proposals, only slightly higher salary and benefits costs. Council Member Holman requested Mr. Dueker comment on coordination with Utilities Department regarding a redundant power source. Ken Dueker, Director of Office of Emergency Services, reported the focus of best management practices was to explicitly acknowledge preparation, mitigation, and recovery phases. That was the reason for the management cycle. The Department was in support and standby mode for the initiative to identify a second interconnection source. The Department was attempting Attachment H WORKING MINUTES Page 24 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 to build robustness in the Utility Control Center (UCC) and upgrade it to a Department Operation Center (COD). Council Member Burt referred to the waste energy facility as a source for operating the wastewater treatment plant. Other nodes in the community could be served by onsite renewable generation and storage. He inquired whether those opportunities were being explored and whether any looked promising. Mr. Dueker was aggressively exploring opportunities for synergy with green and resiliency efforts. In addition, he was exploring points of tangency to leverage existing efforts for local generation, micro gridding, storage, and electric vehicles. Gaps were part of a comprehensive approach to risks to core operations. He was working with the Chief Sustainability Officer to ensure all opportunities were captured. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to recommend tentative approval of the Public Safety Department, Office of Emergency Services budget to the City Council. MOTION PASSED: 4-0 Future Meetings and Agendas Council Member Burt wanted a discussion concerning proposed staffing increases. He was interested in net changes to staffing; which positions would be full-time permanent employees, contract employees, or outside contractors; long-term commitments for any of those positions; and which positions were critical. The need for a $2 million transfer from the Budget Stabilization Reserve (BSR) Fund could be considered a $2 million deficit after several years of surpluses. Walter Rossmann, Director of Office of Management and Budget, reported page 431 provided a discussion of past actions regarding BSR levels. It ranged from 17.1 percent to 19.5 percent. Council Member Burt noted a majority of the $2 million shortfall was described as one-time expenses. A non-recurring expense and a one-time expense were not the same. He wished to review the description of those expenses as one-time expenses. James Keene, City Manager, pointed out that a recurring expense had greater implications. The election expense could be treated as a recurring expense. The willingness to fund one-time expenses was driven by the revenue stream. Attachment H WORKING MINUTES Page 25 of 25 Special Finance Committee Meeting Working Minutes 5/15/2014 Council Member Burt believed many of those expenses were periodic rather than one-time expenses. He requested additional discussion concerning reorganization of the Development Center, and asked if it would become a standalone department. Mr. Keene answered yes. In Fiscal Year 2016, the Development Center would be a separate Enterprise Fund. Council Member Burt inquired whether the Development Center would report directly to one of the two proposed Assistant City Managers or the City Manager. Mr. Keene advised that the Development Center would have a reporting relationship. Staff would present a formal, overall reporting structure for the Development Center. Council Member Holman expressed interest in understanding the new structure for the Development Center. Mr. Keene would prepare for a full discussion of the Development Center. Council Member Holman wished to hold a discussion regarding creation of a Human Services Resource Allocation Program (HSRAP) Reserve Fund. Council Member Burt indicated the Council had not discussed HSRAP funding. Mr. Keene reported HSRAP funding was scheduled for May 19, 2014. Council Member Burt suggested Staff consider including an increase in HSRAP funding in the Council discussion. Perhaps a portion of the increase could be placed in a HSRAP Reserve Fund. Mr. Rossmann announced the next Budget hearing was scheduled for May 20, 2014 at 7:00 P.M. Budgets on the Agenda included Community Services, Library, and Planning and Development Services. Staff would comment on special revenue funds. ADJOURNMENT: Meeting was adjourned at 9:10 P.M. Attachment H FINANCE COMMITTEE WORKING MINUTES Page 1 of 21 Regular Meeting Tuesday, May 20, 2014 Roll Call Chairperson Berman called the meeting to order at 7:06 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California. Present: Berman (Chair), Burt, Shepherd Absent: Holman, Kniss Mayor Shepherd was present to fill a quorum and was a voting participant in the meeting. Oral Communications None. Agenda Items 1. Office of Sustainability, Operating Budget pp. 131-136. Walter Rossmann, Director of Office of Management and Budget reported the At-Places Memorandum contained information regarding the Golf Course, reallocation of one position, expanded shuttle service funding, and Special Revenue Funds. Gil Friend, Chief Sustainability Officer reviewed the Mission and the Purpose of the Department. Accomplishments included: hiring a Chief Sustainability Officer; establishing an internal Sustainability Board; auditing the City's sustainability activities, programs and policies; and conducting a Study Session with the City Council. Initiatives for Fiscal Year (FY) 2015 were to update the Climate Action Plan and broaden it into a sustainability road map; and to develop and improve tracking and reporting systems across the City. Staff proposed an addition of 1.0 Full-Time Employee (FTE) for a Management Analyst who would identify funding opportunities, assess programs, and develop initiatives. The Proposed Budget contained funding for travel to sustainability conferences. Attachment H WORKING MINUTES Page 2 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 James Keene, City Manager was reluctant to recommend adding the Management Analyst position; however, it was to be a contract position. If grants and funding streams were not sufficient to support the position, it was a possibility that it could be eliminated. No long-term benefits were associated with the position. Council Member Burt commented that Staff proposed adding several new positions in the Budget. He inquired about a method to delineate proposed full-time, permanent benefited positions from other proposed positions. Mr. Keene planned on meeting the following day with Department Directors to discuss the positions proposed in the Budget. After that meeting, he expected to be in a better positioned to address Council Member Burt's question. One component of the issue was archaic requirements from the Council regarding the Table of Organization and how positions were listed therein. Staff had to first identify positions, and then make adjustments and reflect them in a different way. Council Member Burt believed there were two parts to the problem: the number of positions in each category and the framing of the categories. He urged Staff to state clearly that a position initially was a Temporary Contract position, even though later it could become a permanent position. Mr. Keene reported Staff discussed issuing more contracts rather than bringing on Staff people. However, the rules of the California Public Employees' Retirement System (CalPERS) restricted the City's ability to contract long-term positions. Short-term positions were not subject to as many restrictions. The City had to find a way to add capacity without adding long-term costs. Council Member Burt noted Mr. Friend anticipated part of the Management Analyst's role was seeking grants. He requested Mr. Friend comment on areas in which he anticipated pursuing grants and provide examples of available grants. Mr. Friend thought he could seek grants for such things as more effective environmentally preferable purchasing, tools to analyze and report on greenhouse gas (GHG) emissions, new financial instruments to provide market-driven financing and market feedback, and transportation alternatives. There was a host of innovations concerning analysis of need and designing new protocols for everything from parking to land use to service delivery. Demonstrating the impact and cost of actions was one of his most valuable roles as Chief Sustainability Officer. He kept the Finance Committee (Committee) informed and tried to make the list maneuverable by other organizations in the City. Attachment H WORKING MINUTES Page 3 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 Council Member Burt wanted to hear the areas in which Mr. Friend would seek grants. He inquired whether funds were available through State grants, Federal grants, or a combination of both. Mr. Friend reported the four sources for grants were State resources, Federal resources, private foundation resources, and potentially public-private partnerships. Mayor Shepherd inquired whether the Management Analyst position would work with all Departments as it was a shared expense. Mr. Friend explained that the Office of Sustainability by design was an interdisciplinary function working closely with other Departments. Most of the Department's work was leveraged through the work of the line agencies. Mayor Shepherd asked why the Department was structured as a standalone Department if expenses and work were shared across the organization. Lalo Perez, Director of Administrative Services and Chief Financial Officer advised that the costs of the Department were allocated throughout the organization. The Management Analyst position had a component of direct charges, so portions were in the General Fund, Utility Fund, and Public Works Fund. Mayor Shepherd referenced the goal regarding a work plan and the initiative regarding performance tracking systems. She inquired whether the Council would learn a new language and new baselines for tracking performance and whether the Council were going to be informed and updated throughout the year. Mr. Friend remarked that he would begin with known basics: climate performance; performance of buildings; the environmentally preferable purchasing program; and the Zero Waste Plan should be tracked. Making that data visible increased the effectiveness of those programs. He wanted to begin with familiar language and then move to things such as impact of purchasing, and then he wanted to share it in a dialog within the organization and with the broader community. There were broader questions such as understanding the impact of actions on future generations and how policies impacted that. For things like that, the goal was not to find an immediate answer but to broaden the conversation to understand risks and benefits and opportunities. Mayor Shepherd asked how the Council would be informed. Attachment H WORKING MINUTES Page 4 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 Mr. Friend requested guidance from the Council and the City Manager regarding an appropriate rhythm and interval. He did not need to provide every bit of information he learned to the Council, but neither did he want the Council to fall behind. Mr. Keene indicated Staff created the model of an internal Sustainability Board to formalize collaboration and integration within the organization. The updated and broadened Climate Action Plan would be designed to integrate the Climate Action Plan, the Zero Waste Plan, and Transportation Demand Management (TDM) initiatives. Staff wanted to analyze and assess the best methodologies for benchmarking and generating a selection of sustainability indicators; a meaningful dashboard was one method to report to the Council. MOTION: Chair Berman moved, seconded by Council Member Burt to recommend to the City Council tentative approval of the Office of Sustainability Budget. MOTION PASSED: 3-0 2. Community Services Department, Operating Budget pp. 153-167. Walter Rossmann, Director of Office of Management and Budget, reported that after releasing the Proposed Budget, Staff realized there was a slight overstatement of expenses and an understatement of revenues for the Golf Course. There was a net gain to the Budget Stabilization Reserve (BSR) Fund of $334,000. Greg Betts, Director of Community Services Department reviewed the Department's Purpose and Mission. The Administration Division was responsible for community outreach, budgeting, and policy development and included the Office of Human Services. The Arts and Sciences Division included internal and external programs and the Public Art Commission. The Open Space, Parks, and Golf Division managed parkland in 34 urban parks and cared for landscaping at more than 160 sites in the City. The Recreation Division provided services at community centers and athletic and senior programs and supported the Parks and Recreation Commission. The Department had four main values: quality of programs, relevance of programs and services, efficiency in use of resources, and partnerships. Department accomplishments included: implementation of ACTIVE Net for online registration and facility reservation; record breaking participation at the Children's Theatre, the Art Center, and the Junior Museum and Zoo; markedly increased participation in all Arts and Sciences programs; recognition of the Art Center for excellence in museum education; implementation of an online ticketing program for the Children's Theatre; implementation of Public Art Program for Private Development; and Attachment H WORKING MINUTES Page 5 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 beginning the Golf Course Reconfiguration Project. Major initiatives for Fiscal Year (FY) 2015 were: implementation of a customer service and marketing initiative; a new program for the Mitchell Park Community Center; continuation of the Golf Course Reconfiguration Project; continuation of Project Safety Net; continuation of the Parks, Open Space, Trails and Recreation Master Plan process; and fostering of partnerships. Staff proposed a new Management Analyst position, which would provide oversight of service delivery and set appropriate fees. Staff proposed expanding the hours of the Program Coordinator of Public Art Program for Private Development from part-time to full-time. Staff requested $115,000 for upkeep of new cloud-based software, which was offset by reductions in the amount of computing hardware and in-house technical assistance and elimination of an annual licensing fee of $35,000. Staff requested $54,000 to increase the hours of two part-time educators at the Junior Museum and Zoo, which would have an offset of $45,000 in revenue. A request for $40,000 in Staff material and transportation fees was offset by $70,000 in camp revenue. A request for $35,000 in additional staffing for Arts and Sciences Program camps was offset by $45,000 in revenue. Council Member Burt inquired about a projected return on investment of the new software for class registration. Lam Do, Senior Management Analyst advised a return on investment was difficult to gauge as the Department was using the system for only three months. Previously, the initial wave of camp registrations brought in $400,000-$450,000. With the new software, camp registrations brought in more than $500,000. Previously online registrations accounted for 40-45 percent of total registrations. In the past three months, online registrations increased to 50-51 percent. Council Member Burt asked if more people were registering for classes because of the new software. Mr. Do did not know if software was more efficient or people were registering sooner rather than later. Council Member Burt understood that Staff did not know if the increase would occur annually. There was a slightly different issue of whether the software would reduce costs. If software generated net positive revenue for each new participant, then more revenue provided a return on investment. He asked if the Department would make money off programs if there were more participants. Attachment H WORKING MINUTES Page 6 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 Mr. Betts answered yes. The software was able to indicate when classes were under-filled, and then Staff could create a mini campaign to increase the number of participants. Council Member Burt noted that the average number of participants per class decreased from 19 to 18. He asked if administrative costs per registrant were lower with online registration. Mr. Do did not have information per registrant. The cloud-based solution eliminated in-house Information Technology (IT) Department costs. Council Member Burt inquired whether Staff intended to quantify the cost reduction benefits of the system for the next Budget cycle. Not all new technology provided cost savings. He requested Staff attempt to determine the benefits of the software in terms of administrative cost and increased utilization of classes. Mr. Betts said he would return with that information. Council Member Burt inquired whether the private sector art program would reimburse the City for expenses associated with the Arts Manager position. Mr. Rossmann advised Staff allocated $54,000 from administrative fees and other revenues from the private art development program for the Arts Manager position. Council Member Burt asked if the City charged the program $54,000. Mr. Rossmann indicated the total estimated revenue amount was $54,000 from the program. Council Member Burt inquired whether the additional 0.5 Full-Time Employee (FTE) was largely covered by that new revenue. Rhyena Halpern, Assistant Director Community Services responded yes. Projects managed by a private developer paid the City an administrative fee of five percent. Projects managed by the City paid an administrative fee of 20 percent. The program had already received fees sufficient to pay the $54,000 cost of the position in FY 2015. Mr. Rossmann explained that $96,000 was transferred to the Public Art Fund to cover position costs. Staff increased the General Fund cost from $47,000 to fund the fully benefited position. The part-time benefited position of 0.48 FTE was going to cost about $48,000. To fund the full-time benefited position, the General Fund cost was about $45,000. Attachment H WORKING MINUTES Page 7 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 Council Member Burt asked if the two part-time to full-time positions at the Junior Museum were permanent full-time employees. Mr. Do reported the two positions were currently three-quarter regular benefited positions. They were going to move to full-time and remain regular benefited positions. Council Member Burt had heard comments that some nonprofit organizations were interested in participating in the Children's Theatre program Wing Spread. He suggested Staff begin discussions with nonprofit organizations. The City had contract employees who were in temporary positions that continued for a good number of years. He inquired whether the California Public Employees' Retirement System (CalPERS) allowed any type of 401(k) program for those employees. Lalo Perez, Director of Administrative Services and Chief Financial Officer advised that an employee who worked more than 1,000 hours had to be enrolled in CalPERS. For employees who did not work 1,000 hours, the City offered a trust similar to a 401(k) through Public Agency Retirement Services (PARS). When an employee left the City, he was able to leave the funds in PARS, roll funds to another trust, or cash out the funds. Council Member Burt was not aware the City offered such a program. Mayor Shepherd felt the Junior Museum Program was an intricate element of elementary school science education. Partners in Education (PiE) reimbursed the City for the program; however, the City still carried a cost. She asked if there was a way to reach full cost recovery for the program. Ms. Halpern reported Staff had a three-year plan to reach all elementary schools and to reach full cost recovery. The $54,000 amount was offset by $50,000. Mayor Shepherd recalled seeing a negative $9,000 amount. Ms. Halpern advised the amount was negative $4,000. Staff was exploring the possibility of increasing recovery with PiE programs. Mayor Shepherd believed the Junior Museum program was more robust than science units taught by teachers. Ms. Halpern indicated schools were very happy with the service. The City also had PiE contracts with the Children's Theatre outreach program. Mayor Shepherd asked if the revenue reduction of $1.1 million was largely the result of the Golf Course closure. Attachment H WORKING MINUTES Page 8 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 Mr. Rossmann noted Attachment A of the At-Places memorandum provided Golf Course financials. The revenue reduction of $1.5 million for the Golf Course was partially offset by revenues Mr. Betts mentioned. Mayor Shepherd was interested in methods to increase cost recovery while the Golf Course was closed. She inquired whether Staff was attempting to move to all online registrations. Mr. Betts replied no; the Department was never going to reach that point. There was a careful balance between high tech and high touch. Staff needed to answer questions and assure parents that classes were quality educational experiences. Chair Berman inquired about the additional $18,000 in revenue from restaurant and lease revenue at the Golf Course. Robert De Geus, Assistant Director Community Services explained that the amount in the Proposed Budget for the lease was based on terms of the lease agreement with the restaurant owner. Once the Golf Course closed, he thought the amount may need to be amended. The restaurant, pro shop, practice facility, and driving range remained open for most of the year. Much of the restaurant's revenue came from banquets and events not related to Golf Course play. Chair Berman asked if the original projected figures were too pessimistic and if the Proposed Budget adjusted those figures. Mr. De Geus responded yes. Chair Berman was not able to reconcile some figures. Mr. Rossmann did not update the numbers in the text but the numbers in the green row were correct. Staff was going to make that correction. Chair Berman recalled a negative reaction resulting from changes in the sports field allocation and inquired about comments. Mr. Betts explained that Staff made additional adjustments to the allocation process and had not received any emails. Staff met with the Parks and Recreation Commission to ensure fields were relevant to users. MOTION: Chair Berman moved, seconded by Council Member Burt to recommend to the City Council tentative approval of the Community Services Department Budget including an $18,188 revenue increase and a $334,000 expense decrease to adjust for water usage. Attachment H WORKING MINUTES Page 9 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 MOTION PASSED: 3-0 3. Library Department, Operating Budget pp. 199-208. Monique le Conge Ziesenhenne, Library Director reviewed the Department's Mission and Purpose. The multiyear project to update facilities allowed the Department to reach out in new ways with technology and study spaces. Staff reached out to the community, private businesses, and public nonprofit agencies to create new partnerships and programming opportunities. Use of and attendance at libraries remained steady despite facilities being closed. The Library received 800,000-900,000 physical visits and 900,000-1 million virtual visits from patrons. Approximately 1.5-1.6 million items circulated each year. Pop up story time added to a robust story time schedule which included multiple languages. The Department participated in the Silicon Valley Reads program and served as a site for the Volunteer Income Tax Assistance (VITA) program. Staff created a Library logo and brand aligned with the City's palette. In collaboration with the Art Center, Staff developed makeX, a makerspace. Initiatives for Fiscal Year (FY) 2015 included reopening Mitchell Park and Rinconada Libraries, continuing work on the Strategic Plan, replacing the online system, and continuing development of programming. Staff proposed unfreezing two full-time positions for Rinconada Library and increasing a Technical Services position to full-time. Council Member Burt believed the continued high use of library materials, even though they closed two branches implied use could be even higher when all branches were operational. He asked if Staff anticipated even higher use of materials. With respect to the third goal regarding turnover, he was interested in an analysis of turnover, why turnover would increase. He inquired about the reasons for higher use and lower turnover rates when the Department had fewer physical materials. He asked if increased use of electronic materials was a factor. Ms. Ziesenhenne felt use, turnover, and number of materials would increase. The Department was placing more materials into the stream of use. Each year the use of online materials grew exponentially. The interest and desire to use electronic materials continued to grow. She was willing to provide exact numbers at a later time. Council Member Burt asked if multiple users could borrow an ebook simultaneously or if only one user at a time could borrow it. Ms. Ziesenhenne subscribed to four or five vendors with different policies. The most common policy was one user, one title at a time. There were waiting lists for electronic copies. Attachment H WORKING MINUTES Page 10 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 Council Member Burt asked if turnover rates for ebooks was higher because they were contemporary or in demand. Ms. Ziesenhenne needed to check statistics for that. Council Member Burt understood the cost per book was higher for ebooks; however, checking in and out physical books had fairly high administrative costs. He inquired about the administrative cost per physical volume. Ms. Ziesenhenne reported the cost depended upon whether an automated materials system was used. The estimate for administrative overhead for an interlibrary loan was about $60 per title. Administrative costs for internal use was less. Council Member Burt was interested in the trends of costs: how much of increased use of materials was attributable to ebooks and how much to physical copies; the comparative costs of turning over a volume; and annualized operational costs of turning a volume over versus the higher purchase cost of an ebook. He wanted to know if continued high use of ebooks cost more or less per library use. Ms. Ziesenhenne advised that initially the amount of time required to set up accounts to borrow and download materials was high. Council Member Burt asked if a user had to set up an account only once. Ms. Ziesenhenne replied yes. Council Member Burt felt those issues were important to ongoing operational costs. The impact of these trends were unknown. He was interested in hearing a report prior to the FY 2016 Budget cycle. He inquired whether the Department utilized the clickPA, web site to promote teen programs. Ms. Ziesenhenne indicated Staff was working on that. Eric Howard, Library Assistant Director reported the Department had a robust outreach program to teens and was creating a media program. Much of the work was in process. Council Member Burt inquired about the Department's use of clickPA specifically. Mr. Howard understood Staff was making that connection. Council Member Burt asked if all programs for teens were being promoted on the clickPA web site. Attachment H WORKING MINUTES Page 11 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 Mr. Howard needed to verify if all programs were promoted on clickPA. Council Member Burt asked if some programs were promoted through clickPA. Mr. Howard answered yes. Mayor Shepherd noted Staff proposed unfreezing positions and bringing back positions, and asked if Library hours would be expanded. Ms. Ziesenhenne reported hours would remain the same. Staff wanted to review use, demand, and the effects of opening Mitchell Park Library to determine if additional hours were needed. Both Mitchell Park and Rinconada Libraries were going to be open seven days a week. Expanded hours at other branches were to return to normal when Mitchell Park and Rinconada Libraries reopened. Mayor Shepherd inquired whether after-school programs would be held at Mitchell Park Library. Ms. Ziesenhenne planned on offering homework help programs and re- establishing the Teen Advisory Board at Mitchell Park Library. Much of the programming occurred in the evenings and on weekends. Mayor Shepherd wished to be informed about after-school programs. Chair Berman inquired whether $500,000 decreases for supplies and materials and for other revenue was directly related to the Library Foundation donation. Ms. Ziesenhenne replied yes. Chair Berman asked if renovations at Rinconada Library were proceeding smoothly. James Keene, City Manager reported construction was projected to be complete by September 2014, and Staff expected to open Rinconada Library at the same time as Mitchell Park Library. MOTION: Chair Berman moved, seconded by Council Member Burt to recommend to the City Council tentative approval of the Library Department Budget. MOTION PASSED: 3-0 Attachment H WORKING MINUTES Page 12 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 4. Development Services Department, Operating Budget pp. 169-182. Walter Rossmann, Director of Office of Management and Budget recalled at the Finance Committee (Committee) meeting on March 18, 2014, Council Member Holman requested information regarding technology investments. Peter Pirnejad, Director of Development Services was going to provide that information in his presentation. Staff transferred expenditures, revenues, and positions from Public Works, Fire, and Planning Departments into Development Services. In the At-Places memorandum, Staff identified 1.1 positions, which had to be transferred from the Planning Department into Development Services, for a total cost of approximately $112,000. Peter Pirnejad, Director of Development Services reviewed the Mission and Purpose of the Department. Essentially the distinction between the Planning and Community Environment Department and Development Services was a discretionary and non-discretionary review. Divisions of the Department were Administration, Building Services, Green Building, and Graphic Information Systems (GIS). Accomplishments included launching the Accela Citizen Access (ACA) system, establishing citizen advisory groups, enhancing online customer service, and receiving various awards. On-call contracts increased from $862,000 in Fiscal Year (FY) 2011 to $1.6 million in FY 2014 to date. There was a correlation between increased staffing contracts and the increase in both complexity of permits and the number of inspections required. The Department planned to institute additional technology to support online permitting and predictive analytics. The Department reduced Electric Vehicle (EV) and Photovoltaic (PV) permitting times, the average wait time from the front counter, plan check response times, wait times on phones, and the average number of days to issue a building permit because of staffing augmentations and technology enhancements. Initiatives for FY 2015 included increasing the Department's online presence, improving the City's International Standards Organization (ISO) rating from Class 2 to Class 1, updating the Green Building Program, implementing third-party review of building inspection guidelines, conducting a cost of service study, reducing response times, and launching the Business Registry Certificate (BRC) program. Staff proposed: increasing on-call and on-site contract support services at a cost of $238,943; increasing offsite plan checks at a cost of $200,000; adding a Senior Management Analyst position; adding a third-party support team for Accela; and adding a contract Urban Forestry position. Council Member Burt requested Mr. Pirnejad provide an example of the use of predictive analytics within the Department. Attachment H WORKING MINUTES Page 13 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 Mr. Pirnejad advised that predictive analytics could help predict building activity, which could be used to determine staffing needs. Predictive analytics assisted with budgeting and staffing. Council Member Burt did not know that permitting programs had ISO ratings. He inquired about the benefits of a better ISO rating would provide. Mr. Pirnejad reported a higher ISO rating reduced insurance premiums for homeowners. Council Member Burt asked if premiums decreased because the City performed better inspections. Mr. Pirnejad remarked that the City ensured structures were safer and complied with the Building Code. Council Member Burt felt Department accomplishments should be made known to the community. He asked when the City might receive a better ISO rating. Mr. Pirnejad hoped to submit an application in August 2014. The application was to be reviewed over a few months. Council Member Burt suggested the Communications Office prepare messages to residents and the commercial community regarding the possibility of a higher ISO rating. The awards were great, but other metrics were more meaningful to clients. He encouraged Staff to identify multiple means to provide information to the public. He inquired whether the on-call contracts would be fully cost recovered. Mr. Pirnejad indicated that would be included in the cost recovery plan. Council Member Burt recalled that the Council did not agree to including the business registry in one of the software programs. He asked if that program was Accela. Mr. Pirnejad clarified that the Council did not want to include it in the Use and Occupancy permit process. Staff was creating a new process, the BRC, which was a standalone process. Staff identified a technology solution that would make it easy for the registry to interface with permitting software. Council Member Burt wanted to understand the net personnel impacts, and inquired whether a summary was available. Attachment H WORKING MINUTES Page 14 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 Mr. Rossmann reported page 182 summarized the transfers from other Departments into Development Services. The net position change into Development Services was 39.86 positions. Council Member Burt noted those were not net increases. Mr. Rossmann advised the net increase was the one extra position, the Senior Management Analyst position. Mayor Shepherd inquired about ISO. Mr. Pirnejad explained that ISO was a rating for both Fire Departments and Building Departments. Typically it was more popular in the fire realm. In the building industry, it graded compliance with building code requirements. Council Member Burt added that ISO was an acronym for the International Standards Organization. ISO circulated global standards for all sorts of industry. James Keene, City Manager noted the Utilities Department pursued ISO ratings. Mayor Shepherd asked if reduced insurance premiums would apply to new homes. Mr. Pirnejad indicated reduced premiums would apply to all residential and commercial buildings. Mayor Shepherd requested Mr. Pirnejad comment on remarks that Palo Alto's Development Services was miles ahead of any other community. Mr. Pirnejad credited the City Manager with realizing that an effective Department needed representatives from different Departments to reside at the Development Center. Technology was implemented merely to improve and streamline the process. Chair Berman worried about the impacts of construction projects on traffic. He asked if the City had a strategy for reducing construction impacts when planning larger commercial buildings. Mr. Pirnejad realized construction-related impacts happened in real time and comments needed to reach the appropriate people to take action. Staff recently launched GovDelivery and created a construction update monthly newsletter regarding construction projects. Attachment H WORKING MINUTES Page 15 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 Chair Berman felt those were good ways to provide information. He inquired about actions the City could take to ensure construction at multiple locations, in the same area, did not block traffic at the same time. Hillary Gitelman, Director of Planning and Community Environment explained that the Transportation Division and Public Works Department worked together to identify and address potential impacts of construction. Mr. Keene added that Staff had to rely on complaints from the public and notices from the Police and Public Works Departments to identify issues. Staff emphasized collaboration to be responsive. MOTION: Chair Berman moved, seconded by Mayor Shepherd to recommend tentative approval of the Development Services Department Budget to the City Council, including reallocation of 1.0 Administrative Associate II ($98,460) and 0.1 Senior Planner ($14,335) from Planning and Community Environment Department to Development Services Department. MOTION PASSED: 3-0 5. Planning and Community Environment, Operating Budget pp. 229-242. Walter Rossmann, Director of Office of Management and Budget reported a Request for Proposals (RFP) for expanded shuttle services was released and proposals were received and analyzed. Based on those proposals, Staff proposed transferring $585,000 from the Non-Departmental Budget to the Planning Department Budget. The City of East Palo Alto was interested in participating in the shuttle service. Staff proposed an amendment to the Budget for that at the appropriate time. Google expressed interest in participating in the west route of shuttle service. Staff projected a need of $1 million for expanded shuttle service; however, the full amount was not needed. Staff proposed transferring $135,000 from the shuttle reserve to the Budget Stabilization Reserve (BSR) Fund. Council Member Burt recalled his concerns at the Council discussion of expanding shuttle service. He was assured that routes were not a proposal. He subsequently saw routes characterized as a plan rather than a draft plan. In the Proposed Budget, it appeared the Finance Committee (Committee) was addressing specific routes that were been vetted. He needed to understand the status of the routes. Hillary Gitelman, Director of Planning and Community Environment understood the Council embraced the idea of an expanded shuttle service. Staff identified specific routes, some existing and some proposed. Staff committed to further discussion of new routes and proposed implementing a Attachment H WORKING MINUTES Page 16 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 shuttle program in two phases. The first phase was to occur quite soon and would include the cross-town shuttle route and the East Palo Alto route. Staff envisioned returning to the Council with a more detailed analysis of potential routes identified earlier in the year. Staff engaged a consultant to determine whether those routes were correct to achieve objectives of the program. Consultants analyzed the other routes mentioned in the memo; the west route, the University Avenue connecting route, and changes to the Embarcadero route. Once Staff received the consultants' analysis, they presented the second phase to the Council for discussion. Council Member Burt inquired about community and Council comments to consultants. The Council had not established objectives or sculpted the program around needs and objectives. Ms. Gitelman felt the Council focused on the objective of increasing shuttle ridership. Council Member Burt stated that objective was too general. Increasing ridership was not necessarily the only objective or a well refined objective. The Council was to consider who needed the shuttle most, sectors that would value and need a shuttle, and geographically underserved areas. He was concerned that the program was moving forward and the Council would not have another opportunity to vet routes. He wanted Staff to return with information regarding engaging the community to define needs, serving needs, and engaging with the Planning and Transportation Commission (PTC), and then the Council. Ms. Gitelman reported that was the type of analysis Staff would present to the Council as part of phase two. Staff intended to bifurcate the shuttle program. Moving quickly on the first phase was the logical next step. The second phase needed a great deal discussion. James Keene, City Manager indicated Staff attempted to identify the scale of funding and to ensure funding was available within the Budget. Those decisions were going to be operational at the Council. The primary motivation for the shuttle program was increasing ridership and somehow helping local traffic. There were many other issues regarding access to transportation. There were not many alternatives for shuttle routes. The Council had the opportunity to redirect Staff. Council Member Burt remarked that the Council responded to two goals: traffic congestion and parking. He feared the Council would set aside other goals that were part of a shuttle program because those goals were high on the list of priorities. Attachment H WORKING MINUTES Page 17 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 Ms. Gitelman reviewed the Department's Mission, Purpose, and Divisions. Accomplishments included: certification of the Housing Element; discussion of Transportation Demand Management (TDM) programs, parking supply, and Residential Parking Permit (RPP) programs; launch of the Downtown Coordinated Area Plan (CAP) Study; and completion of many planning applications and reviews. Initiatives for Fiscal Year (FY) 2015 were an update of the Housing Element; work on Our Palo Alto; update the Comprehensive Plan; implement an RPP Ordinance; completion of the California Avenue Streetscape Project; the expand shuttle service; and pursue parking supply enhancements. Staff proposed: reallocating revenues and expenses to Development Services; adding a Land Use Analyst to support long range planning and a Senior Transportation Planner position to support the Chief Transportation Official; funding for contracts and Our Palo Alto; funding for a TruePoint consultant to create reports for performance measures; and $150,000 to establish a Transportation Management Authority (TMA). Mayor Shepherd noted the Department was attempting to work on the Comprehensive Plan update, Housing Element update, and Our Palo Alto simultaneously. She was interested in seeing how those issues developed. Making Development Services a standalone Department was a decision; however, it made the Budget difficult to read. She understood the Council directed Staff to look for the types of shuttle services and RFPs that could make a difference to transportation and parking. This Budget allocated that type of funding. When the Council next discussed shuttle service, they planned on considering some type of share with a TMA. She inquired whether Staff would present that information as the TDM and the TMA developed. Ms. Gitelman advised that Staff would present in the current year, a couple of routes where there was potential for revenue sharing. There was an opportunity for Google to participate in a potential west route. Over the next three years, Staff viewed shuttle services as being a City funded transit program. After three years, Staff hoped the TMA would be in place and could participate. Mayor Shepherd understood the thinking behind having a shuttle from California Avenue to University Avenue. There were unique opportunities to use shuttles during the morning commute hours for secondary students. Creating a shuttle fund at the current time was wise. She asked if the Committee was approving routes or approving a Budget. Attachment H WORKING MINUTES Page 18 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 Mr. Keene reported the Committee was not approving routes. The Committee was holding an accounting discussion. The Council wanted to hold policy discussions. Mayor Shepherd indicated the Committee was not spending funds and not allocating a shuttle, just providing a Budget for shuttle service. Mr. Keene commented that by the time Budget process was complete, Staff was able to clarify funding. Staff wanted the Council to include this $1 million amount in the Budget. As Staff worked through the process, they learned what $1 million could buy. The market determined whether the amount was correct. Staff acknowledged that there were some long-shot characteristics to expanding shuttle services. Mayor Shepherd wanted to be clear that the Committee was not adopting routes. The Committee was adopting a Budget. Mr. Keene added that the memo indicated there was some consideration of routes, but that did not effectuate anything Council Member Burt remarked that the report did not state that the Committee was considering a preliminary placeholder number up to $1 million. The report delineated certain dollar amounts for certain routes. That was different from an allocation and approval of routes. The wording was clear that the $1 million was not just a budgetary placeholder. If Staff's position was to request a placeholder of $1 million for shuttles with funding and routes to be determined, then that was one discussion. A different discussion was needed for the breakdown provided in the report. Mr. Keene added that the Budget and associated reports were not perfect because of the need to coordinate Budget meetings and to provide At-Places memorandum. Some funding was to be returned to the reserve. Council Member Burt did not want it misunderstood that he misrepresented the information presented. Mayor Shepherd was providing her thoughts regarding shuttle services rather than challenging Council Member Burt's comments. Council Member Burt indicated not all routes would be implemented for the first year, and asked why Staff included the full $1 million in the Budget. Ms. Gitelman explained that Staff originally estimated the cost of the program at $1.4 million. The $1 million amount reflected some adjustment. Attachment H WORKING MINUTES Page 19 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 Council Member Burt inquired whether those were annual expenses of routes or some portion of a year's expense. Mr. Rossmann responded annual expense and said the amount needed to be adjusted. Council Member Burt stated the amounts would not be accurate for FY 2015. Mr. Keene clarified that some routes could take place in FY 2015. Council Member Burt reiterated that clearly not all of them would occur in FY 2015. Since the Budget had a deficit for FY 2015, he did not want to draw more from the BSR than was necessary. He requested Staff revise the amounts to reflect amounts needed for FY 2015. Mr. Keene said he would not have recommended drawing from the BSR if the Council did not make the decision to place excess revenue into the Infrastructure Reserve. Council Member Burt did not disagree. Mr. Keene reported the Budget Office attempted to transfer money from a shuttle reserve and identified the proposed numbers. He thought the Committee should appropriate in the Proposed Budget, $1 million for shuttle services, to demonstrate the City's commitment. Council Member Burt did not support placing $1 million in the Budget when it was not the amount the City planned to spend in FY 2015. The Budget needed to state the amount Staff reasonably anticipated spending. He inquired whether the two additional Staff positions would be permanent, full- time positions. Ms. Gitelman replied yes. Council Member Burt asked if those were the only two in the Department. Ms. Gitelman added a 0.5 position in the Safe Routes to School program. Those two positions were partially offset by some positions being supported by the Capital Improvement Fund. They were net new positions, but they were not all supported by the General Fund. Council Member Burt attempted to recall the number of positions similar to the two proposed positions for the Department prior to the recession. He asked if the additional positions were to return staffing levels to those prior to the recession. Attachment H WORKING MINUTES Page 20 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 Mr. Keene remarked that he would have to review that information. He did not believe the Department had the same number of positions allocated to advanced planning. Council Member Burt recalled adding a Parking Specialist position in FY 2014. Mr. Keene concurred. Council Member Burt understood Staff elevated the transportation position a few years ago. Mr. Keene clarified that Staff upgraded the position to be able to compete in the market. Council Member Burt requested an analysis for a future discussion. He wanted to ensure the Committee made deliberate decisions regarding long- term commitments for full-time positions. Mayor Shepherd noted the City sometimes spent money in one budgetary year for a project expected to extend over several years. She inquired whether the Committee's approval of only part of the shuttle Budget would result in half-year contracts. Mr. Keene reported answering questions was difficult without more specificity about the Council's goals in FY 2015. Staff was able to leave all money in reserves and return with Budget Amendments during the year, as contracts were awarded. Staff allocated the shuttle reserve in a Department but spent funds based on contracts awarded. Staff was able to re- appropriate funds for the next fiscal year. The numbers worked out however the funder was appropriated and spent. The real decisions about spending funds occurred at Council meetings regarding specific decisions and specific contract awards. MOTION: Council Member Burt moved, seconded by Chair Berman to recommend to the City Council tentative approval of the Planning and Community Environment Budget including reallocation of 1.0 Administrative Associate II ($98,460) and 0.1 Senior Planner ($14,335) from Planning and Community Environment Department to the Development Services Department with the exception that there will be additional Staff feedback and discussion on the Land Use Analyst and Senior Transportation Analyst positions, as well as the approximate anticipated shuttle expansion in 2015. MOTION PASSED: 3-0 Attachment H WORKING MINUTES Page 21 of 21 Finance Committee Regular Meeting Working Minutes 5/20/14 6. Special Revenue Funds, Operating Budget pp. 71-79. a) Parking District, Operating Budget pp. 75-77 b) Stanford Development Agreement Fund, Operating Budget pp. 78-79 c) Other Special Revenue Funds, Operating Budget pp. 73-74 Walter Rossmann, Director of Office of Management and Budget advised that the At-Places memorandum contained updated information. Attachment B contained three rows missing from the Budget document. Gas Tax Funds were expected to decline over the next five years, based on projections. Staff proposed a transfer of $1.9 million in Community Development funds. Staff estimated a decline in the revenue of the Housing In-Lieu Fees. Special District Fund revenues increased because of changes to rates in the parking district. Staff recommended a transfer of $0.5 million from the Special District Fund to the Capital Improvement Program Fund. The Council approved an allocation of $1.2 million annually from the Stanford University Medical Center Fund towards bike improvements. The position of Public Arts Manager was budgeted within the Public Arts Fund. Mayor Shepherd inquired about the amount for Intermodal Transit under the Stanford University Medical Center Fund. Mr. Rossmann explained the amount indicated the change in the fund balance. MOTION: Chair Berman moved, seconded by Council Member Burt to recommend tentative approval of the Special Revenue Funds Budget to the City Council. MOTION PASSED: 3-0 Chair Berman requested the At-Places memorandum be provided to absent Finance Committee Members. Future Meetings and Agendas Walter Rossmann, Director of Office of Management and Budget announced the next meeting was scheduled for 6:00 P.M. on May 27, 2014. The City's actuary was going to present information regarding the retiree health benefit valuation. Other Agenda Items were Budgets for the Capital Improvement Fund and the Public Works Department. ADJOURNMENT: Meeting adjourned at 10:17 P.M. Attachment H Finance Committee DRAFT Minutes 1 Special Meeting Tuesday, May 27, 2014 Chairperson Berman called the meeting to order at 6:05 P.M. in the Council Conference Room, 250 Hamilton Avenue, Palo Alto, California. Present: Berman (Chair), Burt, Holman, Kniss Absent: ORAL COMMUNICATIONS None. AGENDA ITEMS 1. Accept the Retiree Healthcare Plan GASB 45 Actuarial Valuation as of June 30, 2013. Vice Mayor Kniss requested Mr. Bartel discuss approaches for mortality improvement and his preferred approach. John Bartel, Bartel Associates, LLC, reported there were two issues where he recommended changes that increased liability. When actuarial studies determined people were living longer, actuaries improved the mortality rates to take that into account. An actuarial standard of practice required actuaries to do one of two things. Actuaries could indicate mortality would not continue to improve, in which case the actuary did not factor it in. Actuaries could indicate mortality would continue to improve, in which case actuaries had to take it into account. The California Public Employees' Retirement System (CalPERS) relatively recently adopted changes which would increase the City's pension contributions. By and large CalPERS accepted actuaries' recommendation to anticipate future mortality improvement. Actuaries expected mortality to gradually improve, with the bigger improvement happening for people who were 25 today as opposed to people who were 85 today. He recommended the City adopt mortality improvement in the prior valuation; however, the Council decided not to take his recommendation. He was recommending it again, because he felt it was the right approach. The City had a relatively complicated benefits structure based on bargaining group, date of retirement, and date of hire. Historically for agencies that participated in the Public Employees Medical Attachment H MINUTES 2 May 27, 2014 and Hospital Care Act (PEMHCA), the unfunded liability was tied to the premium paid. An actuarial standard of practice allowed actuaries to use premiums to determine the liability under specific circumstances. A subsequent revision to that standard of practice required actuaries not to value using premiums. Under CalPERS the premium for a 60-year-old was the same as the premium for a 25-year-old. The premium for the 60-year- old was not sufficient to cover expected claims. The premium for the 25- year-old was more than sufficient to cover expected claims. Premiums of young, active employees subsidized the medical benefits for older employees and retirees. The difference between the amount of expected claims and the amount of premiums was referred to as the implied subsidy. Because of the actuarial standard of practice, actuaries included an increase in the liability for the difference between expected claims and premiums. The City's liability increased because of that change. However, the City's liability decreased, because CalPERS restructured premiums. Council Member Burt inquired whether the deficit would remain the same if the City ended the program today, because the City was required to cover everybody in the program. Mr. Bartel answered yes. Council Member Burt asked if a fraction of the deficit would remain should the City reduce the number of incoming employees versus outgoing ones. Mr. Bartel replied theoretically yes. The standard of practice did not allow actuaries to perform the calculation in that manner. In calculating the implied subsidy, the standard of practice required actuaries to take into account the demographics of all PEMHCA participants. Council Member Burt was attempting to frame the reality of the deficit. He wanted to ensure the Finance Committee (Committee) understood the implication of that. Mr. Bartel stated Council Member Burt provided a good description. The implied subsidy would almost certainly be an ongoing benefit. Council Member Burt believed that if the City workforce continued to grow in population, then the City would have over a long period of time more new employees than outgoing employees. Rather than there being a point in time where the City would have a deficit, the City would actually have a rolling process that could favor retirees. On the other hand at the present time, it was properly defined as the implied subsidy was part of an unfunded liability. Attachment H MINUTES 3 May 27, 2014 Mr. Bartel noted the City workforce was becoming more and more mature. The active population in the prior valuation was slightly more than 900 and about 950 in the June 30, 2013 valuation. The City shifted from 860 retirees to 968 retirees. The City had more retirees than active employees. Council Member Burt suggested two factors for that shift. One was the older average age of existing workers. Another was the granting of full retirement benefits at 50 years of age for Public Safety Employees and 55 years of age for non-Public Safety Employees. Mr. Bartel indicated another dynamic in the workforce was more generous benefits for retirees than active employees. Council Member Burt stated over the last decade more employees retired earlier and lived longer. Mr. Bartel clarified that employees were living longer, but not retiring quite as early. Active employees comprised Group 3 and Group 4, and retirees comprised Group 1 and Group 2. The City had a legacy liability for the retiree population. It was the dynamic of all retirees, particularly the ones in Group 1 and Group 2, that created the legacy liability. Chair Berman asked if Group 5 was the total. Mr. Bartel answered there was no Group 5. Council Member Holman understood there were two ways to look at the issue: unfunded liability and pay-to-play. The issue was not just the average age of the retiree, but their dependents as well. Mr. Bartel found dependents to be similar in ages with some exceptions. Approximately 43 percent of non-Public Safety Employees were active employees with family coverage, and 17 percent were retirees with family coverage. Less than 10 percent of non-Public Safety Employees had family coverage, but the vast majority were under age 65. Public Safety Employees were retiring early and maintaining family coverage. Of the 765 active employees, 107 had more than 20 years of service. The City was hiring younger Public Safety Employees who remained with the City. Vice Mayor Kniss asked if a prior Council made the decision not to accept improved mortality as a factor. Mr. Bartel reported in the last valuation, he factored in mortality but not future improvement. Attachment H MINUTES 4 May 27, 2014 Vice Mayor Kniss inquired whether improvement meant living longer. Mr. Bartel defined improvement as living longer in the future, future life expectancy. Vice Mayor Kniss asked if the difference in cost was based on the Council's not accepting the recommendation regarding improved mortality. Mr. Bartel indicated that was one of the differences. Vice Mayor Kniss felt it was a major difference. Mr. Bartel advised that the single biggest difference was the implied subsidy. Vice Mayor Kniss understood implied subsidy and improved mortality were associated. Mr. Bartel indicated the implied subsidy stopped when people were eligible for Medicare at age 65. If people lived into their 80s, it did not matter whether they lived to be 83 or 85 from the implied subsidy standpoint. Vice Mayor Kniss stated it was very similar to the Affordable Care Act (ACA). Mr. Bartel agreed. Council Member Burt noted a higher percentage of Fire Employees had more than 20 years of service than Miscellaneous Employees. Mr. Bartel explained that cities typically hired groups of Public Safety Employees. Each group was similar to a bubble working through the system. The City should ensure it had recruits in the pipeline to replace a group at retirement. Council Member Holman recalled a table that showed the City was hiring more younger employees. Mr. Bartel reported that despite having a large number of employees aged 50-54, the City had a relatively flat distribution at the younger ages. Council Member Holman asked if the number of years of service on page E19 meant service with any city or the City of Palo Alto. Mr. Bartel responded service with the City of Palo Alto. Attachment H MINUTES 5 May 27, 2014 Council Member Holman felt page E23 indicated the City was hiring older employees, while page E25 indicated the City was hiring younger employees. Mr. Bartel indicated the City was not necessarily hiring older people, but that people on average were a little older. He included the implied subsidy in the valuation of the actuarial standard of practice. A change in the amortization period had no impact on the City's 2014-2015 contribution. He recommended not utilizing a rolling 30-year amortization period. Whether or not the City utilized a rolling amortization period, the 2014-2015 contribution would remain the same. For 2015-2016 and beyond, the contribution would be slightly higher with a rolling amortization period. He recommended the Council institute a policy to pay off the unfunded liability. Lalo Perez, Chief Financial Officer, added that not utilizing a rolling amortization period would match CalPERS' policy. Mr. Bartel reported the valuation included the mortality change and leaving the discount rate (long-term rate of return on plan assets) at 7.61 percent. He would recommend 7 or 7 1/4 percent; however, CalPERS was currently using 7.5 percent. He utilized 7.61 percent because of Council direction from two years ago. He continued the prior valuation's expectation for healthcare increases. The new agreement with Service Employees International Union (SEIU) resulted in a new assumption that the increase in the dollar cap for SEIU would be half of the medical trend. The Committee should not presume benefits would increase, because the information was included for financial purposes. The City invested funds with the California Employers' Retiree Benefit Trust (CERBT), where the investment return with the exception of 2011-12 was quite good. He supported the City setting aside funds for future obligations. He projected the City would be 34 percent funded on June 30, 2014. The City was ahead of most agencies in the state. The column labeled 6/30/13 Valuation contained obligations as of June 30, 2013. They did not include future accruals. The City's liability for people already receiving benefits more than doubled the amount for active employees; therefore, it was important for the City to set aside money. The City set aside $60 million and had an unfunded liability of $143.6 million. He projected the unfunded liability to decrease at June 30, 2104 to approximately $140 million. The City's contribution would increase from $13 million to $14.3 million. The City's liability was slightly larger because he included the implied subsidy. The City's payroll did not grow as much; therefore, the percentage of payroll increased appreciably. Because the City prefunded, the additional amount of prefunding decreased over the next decade. In about 11 years, the City would contribute less than the pay-as- you-go amount. Attachment H MINUTES 6 May 27, 2014 Vice Mayor Kniss asked if other cities were including improved mortality in their valuations. Mr. Bartel reported cities would be required to include improved mortality on the pension side because of CalPERS changes. With respect to the retiree medical obligation, actuaries were beginning to factor in mortality improvement. Virtually all his clients recognized mortality improvement; however, not all actuarial firms were recommending use of improved mortality. Vice Mayor Kniss hoped the Committee would include mortality improvement after hearing Mr. Bartel's explanation. Mr. Bartel indicated improved mortality increased liability. While it was good for the individual, it was not necessarily good for the City. Mr. Perez advised that the unfunded liability as of June 30, 2011 was $123 million. As of June 30, 2013, the unfunded liability was $143.572 million, which included $43 million for the implied subsidy. One could say that number would have been $100 million without the change; however, it was an accounting requirement. The contribution funded ratio would have been 38 percent versus 29 percent. Staff recommended accounting for the implied subsidy in the current year, even though it was not required until the following year. Council Member Burt noted local newspapers had not appreciated that distinction. The Staff Report did not draw it out clearly. He encouraged Staff to broadcast the message in a clear and simple way. Mr. Bartel agreed the City would have had a significant reduction absent the change. Council Member Holman recalled that CalPERS was currently using 7.5 percent for the discount rate, and Mr. Bartel recommended a 7-7.2 percent rate. She inquired whether the 7.61 percent rate was used because the Council approved it two years ago. Mr. Perez reported CalPERS did not change the rate of return assumption. The third quarter returns for the CERBT was $60 million at the beginning of the fiscal year and earned $7.778 million. He was comfortable with a discount rate of 7.61 percent for the next two years, because the City was closing the amortization period, accepting mortality change, and accepting the implied subside early. Attachment H MINUTES 7 May 27, 2014 Chair Berman asked if Staff recommended accepting the closed amortization period. Mr. Perez answered yes. Chair Berman reiterated that the recommendation was to accept a closed amortization period and mortality rate, retain the discount rate, and change subsidization accounting. Mr. Perez concurred. Mr. Bartel was only 50 percent confident in a discount rate of 7.61 percent, because it did not allow a margin for adverse deviation. Chair Berman recalled the CERBT balance was $60 million and increased by $7 million. He asked how that amount would reach $73.1 million by June 30, 2104. Mr. Perez explained the $73.1 million amount was a projection of the balance at the end of June 30, 2014. Mr. Keene reported earnings in the first half of the year were much higher than in the second half. The balance probably would not reach the projected amount. Mr. Perez added that the City contributed $4.7 million and would continue to contribute. The projected balance was a combination of earnings and contributions. Chair Berman inquired about the dollar impact of a closed amortization period on 2015-2016. Mr. Bartel indicated a closed amortization period had a minor impact on 2015-2016 and no impact on 2014-2015. The impact modestly increased over the ten-year projection. Closing the amortization period kept the Annual Required Contribution (ARC) as a percentage of pay constant. With a rolling amortization period, the cost relative to pay actually decreased. In about ten years, the City's contribution could be $200,000 or $300,000 higher because of the closure. Chair Berman asked if the City was prefunding more. Mr. Bartel stated that was exactly what the City was doing. It was not just prefunding more; it was a policy to pay off the unfunded liability. Attachment H MINUTES 8 May 27, 2014 Chair Berman believed closing the amortization period was a prudent fiscal policy. Mr. Bartel agreed. MOTION: Chair Berman moved, seconded by Council Member Burt that the Finance Committee accept the June 30, 2013 actuarial valuation of Palo Alto’s Retiree Healthcare Plan and recommend that the City Council approve full funding of the Annual Required Contribution (ARC) for Fiscal Year 2015 and Fiscal Year 2016. MOTION PASSED: 3-0 Kniss Absent 2. FY 2015 Proposed Budget Follow-Up From Last Meeting. Walter Rossmann, Director Office of Management and Budget, advised that a report was provided to address Council Member Burt's earlier question regarding the salinity level of recycled water. In addition, Council Member Burt inquired about the fiber optics program. Staff was hiring a consultant for fiber optics, and part of that would be presented to the Council by January 2015. Council Member Burt clarified that his question pertained to leverage the City had with participating agencies to assure their cooperation. Mr. Rossmann reported Staff could address the question as part of the Wastewater Treatment Fund review. The Planning and Transportation Commission (PTC) was required to review the proposed Capital Improvement Program (CIP) and Five-Year Plan. The PTC approved it and determined it conformed to the Comprehensive Plan. The at-places memorandum provided information regarding two items. One was a proposal to amend the CIP to fund the Baylands Levee Improvement Feasibility Study. Second, Staff recommended funding a consultant study before determining whether to add a position of Facilities Manager in Public Works. 3. Retiree Health Benefit Fund, Operating Budget pp.409-410. Walter Rossmann, Director Office of Management and Budget, reported Staff collected contributions from various funds as part of an allocation process. From there Staff funded directly the retiree healthcare contributions of $14.3 million based on the valuation the Finance Committee accepted earlier. Attachment H MINUTES 9 May 27, 2014 MOTION: Chair Berman moved, seconded by Council Member Holman that the Finance Committee recommend tentative approval of the Retiree Health Benefit Fund Operating Budget. MOTION PASSED: 3-0 Kniss Absent 4. General Fund Capital Budget a) Buildings and Facilities, Capital Budget pp. 58-86 b) Streets and Sidewalks, Capital Budget pp. 90-105 c) Parks and Open Space, Capital Budget pp. 108-133 d) Traffic and Transportation, Capital Budget pp. 136-151 Council Member Burt inquired about the page for the Los Altos Treatment Plant (LATP) site. Mr. Rossmann reported that particular project had no funding in Fiscal Year (FY) 2015; therefore, it was not contained in the Budget document. It could be found on page 360 of the attachment, which listed all projects with funding in the Capital Improvement Program (CIP). The LATP site did not have a project page, because additional funding was not requested in FY 2015. Council Member Burt asked if it was previously funded for $500,000. Mr. Rossmann indicated the funding amount was $1.5 million. The project had a remaining balance of $1 million. Council Member Burt stated the project was not contained in the Proposed Budget even though it had a $1 million balance. Mr. Rossmann explained that the project was not in the Proposed Budget due to Municipal Code guidelines. James Keene, City Manager, noted previous Finance Committees had discussed corrections for tracking projects. Lalo Perez, Chief Financial Officer, indicated Staff provided the status of all open CIP projects at mid-year and year end. Staff was attempting to include that information in the Budget. Council Member Burt asked if any portion of the $1 million was budgeted for the current year or outlying years. Attachment H MINUTES 10 May 27, 2014 Brad Eggleston, Assistant Director of Public Works, believed $300,000 was funded in FY 2012 or 2013 and $1.6 million was funded in FY 2014 for construction. Council Member Burt inquired whether $1 million remained budgeted for the current year. Mr. Eggleston advised that the FY 2014 Budget contained $1.6 million for construction. Council Member Burt asked about funding in FY 2015. Mr. Eggleston reported there was not a proposed amount for FY 2015. The at-places memorandum discussed funding the Levee Study using a portion of funding appropriated to the LATP project. Council Member Burt inquired whether Staff proposed using a portion of the unexpended dollars from FY 2014 for the Levee Study in FY 2015. Mr. Eggleston replied yes. Mr. Keene explained that Staff anticipated re-appropriating prior year funding for the next fiscal year when drafting the CIP; however, prior year funding was not programmed into the Budget. Staff carried forward unexpended money and planned to spend it. Council Member Holman remarked that the Planning and Transportation Commission (PTC) received the proposed CIP the prior week. She understood Staff was attempting to provide information to the PTC much earlier. Mr. Rossmann indicated the main reason for the delay in providing the report to the PTC was a lack of staffing. An outdated publication system was another problem. Eric Bilimoria, Senior Management Analyst, reported the City's overall investment towards capital projects in FY 2015 was $57.5 million. The General Fund Capital Budget contained approximately 43 percent of the City's overall 2015 Capital Budget or $24.7 million. The Finance Committee (Committee) reviewed capital programs for the Technology Fund on May 13, 2014 and various Utility Funds on May 15. Of the $24.7 million in the General Fund in FY 2015, more than half was allocated towards streets and sidewalks. The second largest funding category was traffic and transportation. The largest investment in the category was transportation and parking improvements at $2.2 million. Approximately 10 percent of the Attachment H MINUTES 11 May 27, 2014 FY 2015 Proposed Budget was directed to the unallocated salaries and benefits category. Per the Municipal Code, unspent funds for capital projects automatically carried forward to the next fiscal year as long as expenditures were incurred in the prior two years. Revenue programs in the Capital Improvement Fund for FY 2015 totaled $25.3 million with a majority coming from the annual General Fund transfer. Whenever possible and appropriate, alternative funding sources for projects were pursued. Approximately 13 percent or $3.4 million of FY 2015 revenue was projected to come from other agencies. Grant revenues would primarily support the Annual Street Maintenance Project, but would also provide funds for the Newell Road Bridge Project. Transfers from other Funds made up a significant portion of the revenue programmed in the CIP, including transfers from the University Avenue Parking Permit Fund, Stanford University Medical Center Development Agreement Fund, Citywide Transportation Impact Fee Fund, Gas Tax Fund, as well as various Enterprise Funds. These transfers, totaling $5.7 million, would support a wide variety of projects. Council Member Holman questioned whether the chart referred to transportation improvements or all of the CIP. Mr. Bilimoria advised that the chart pertained to transportation as well as all other needs within the General Fund. Council Member Holman noticed a few references to impact fees as income. Mr. Bilimoria indicated transportation impact fees contained within the Budget totaled $1.8 million. A large number of other impact fees were not included within the CIP, but were programmed for other uses. Council Member Holman understood Community Services impact fees could be utilized for Parks and Open Space Capital Projects, but she did not find them referenced in the CIP. Mr. Perez explained that the City had a Parks and Open Space impact fee and a Community Center impact fee. Council Member Holman was asking if there were other impact fees not listed in the chart. Mr. Bilimoria believed all impact fees were programmed in FY 2015. Mr. Keene clarified that the General Fund contained expenditures for a number of different categories. The chart identified only Transportation Development Impact Fees allocated as a revenue. Staff may not have allocated any other impact fee revenue in FY 2015 to the Capital Budget. Attachment H MINUTES 12 May 27, 2014 Council Member Holman found only transportation impact fees in the CIP. She requested an explanation for Staff recommending a transfer of funds from the Budget Stabilization Reserve (BSR) rather than use of impact fees. Mr. Perez reported impact fee revenue had to be used for the augmentation or expansion of a particular area. Impact fees could not be used to mainly replace an existing facility. For FY 2015, the transportation fee was the only fee used as a source of funds. Mr. Keene remarked that the City had projects that were new improvements and projects that were repairs or baseline investments. If a project was ready for construction or funding and if it could meet the test of applying impact fees, then Staff would program it. Mr. Bilimoria indicated $111.3 million was programmed for General Fund infrastructure projects over the next five years. The distribution of funds largely mirrored the FY 2015 distribution. Streets and sidewalks comprised the largest portion of planned expenditures at almost 40 percent of the CIP. Aside from the annual allocations for projects, there were two large one-time projects in the category. Approximately $8.5 million was planned for the Highway 101 Pedestrian and Bicycle Overpass Project. Primarily grants would fund the project. Funds for the design of the Charleston-Arastradero Corridor Improvements Project were also included in the category. The Infrastructure Reserve (IR) was projected to end FY 2015 with a balance of approximately $13.1 million. This amount assumed an anticipated contribution of $4 million from the General Fund as part of the FY 2014 year- end closing process. Staff made a concerted effort to program grant receipts in the years they were expected in order to provide some predictability to the IR balance. In developing the CIP, Staff programmed expenditures to ensure IR funds would be available for infrastructure projects as needed. Funding was not allocated for Cubberley Community Center in the 2015-2019 CIP due to negotiations with the Palo Alto Unified School District (PAUSD). The Proposed Operating Budget included a recommendation to reduce the Cubberley lease payment amount for FY 2015 by approximately $1 million and to set it aside for potential rehabilitation costs. Mr. Eggleston advised that a number of new General Fund projects and investments were proposed as part of the 2015-2019 CIP. One such project was a proposed increase for annual street maintenance, to be spread over three years. Chair Berman asked if Staff continued to work toward the goal of an 85 Pavement Condition Index (PCI) score through improving the PCI score of every street to 60. Attachment H MINUTES 13 May 27, 2014 Mr. Eggleston replied yes. Improving the PCI score of each street to 60 would result in an average PCI score of 85. Chair Berman remarked that the City would have lower maintenance costs if it did not allow streets to deteriorate. Mr. Eggleston reported an increase to the Transportation and Parking Improvements Project would allow for parking guidance system technology in garages and access control and revenue collection equipment. The Civic Center Fire Life Safety and Electrical Upgrades Project would upgrade equipment in need of replacement. The Embarcadero Road Improvements Project would provide funding for design of traffic signal modifications to enhance safety and address resident concerns. Staff intended to pursue grant funding for construction costs of that project. Funding for the Baylands Levee Improvement Feasibility Study was recommended. That project would be implemented in cooperation with the study being conducted by the San Francisquito Creek Joint Powers Authority. Funding was proposed for improvements to Boulware Park. Staff proposed funding for an assessment of the Civic Center Plaza deck structural system. The Palo Alto Community Gardens Irrigation System Project would allow for new irrigation systems to be installed at all three community gardens. The City was nearing the end of Library Projects funded through Measure N. Staff expected the Rinconada Library Project to be completed within budget and on schedule with its opening scheduled for December 2014. The Mitchell Park Library and Community Center Project was projected to open in November 2014. The Parks, Trails, Open Space, and Recreation Master Plan Study began in January 2014. The Eleanor Pardee Park Improvements Project was almost complete. Approximately half of the FY 2015 Capital Budget was directed towards street maintenance. The FY 2015 allocation of $6.4 million was more than triple the amount budgeted in FY 2010. Staff anticipated meeting the dual PCI goals in 2019 rather than 2021. Staff instituted the Metropolitan Transportation Commission's (MTC) Street Saver software in addition to a pavement management and maintenance system. Street Saver would model various funding and maintenance scenarios. Staff was making greater efforts to inform the community about progress on street maintenance through an improved webpage, additional website news, a utility bill insert, press releases, and PCI data for every street. With respect to an Infrastructure Management System (IMS), Staff was using a needs assessment report to assess the capabilities of existing software and reviewing additional modeling and financial forecasting tools to integrate with existing software. Staff planned a phased implementation of IMS with a goal of instituting the first phase by the end of 2014. The total catch-up amount at the end of the proposed CIP was expected to be approximately $30 million, which was a reduction of about one fourth the amount Attachment H MINUTES 14 May 27, 2014 determined in the 2011 Infrastructure Blue Ribbon Commission's (IBRC) report. Chair Berman asked if Cubberley Community Center was included in the IBRC report. Mr. Eggleston indicated the building category included Cubberley; in other places it was broken out. In developing the proposed CIP, Staff was careful to ensure that there was only minimal overlap between the CIP and the Infrastructure Funding Plan. If the Council approved the Infrastructure Funding Plan and voters approved the increased Transient Occupancy Tax (TOT), then additional projects would need to be budgeted in FY 2015. Three projects were included in the Infrastructure Funding Plan and the CIP. For the Highway 101 Bicycle and Pedestrian Overpass Project, the Infrastructure Funding Plan included $1.7 million to reimburse the IR if other opportunities were not identified. Vice Mayor Kniss noted the City had $4 million in hand and expected $4 million from One Bay Area Grant (OBAG). She asked how the $10 million amount was determined. Mr. Eggleston explained the feasibility study considered two types of designs and developed two overall cost estimates of $6 million and $10 million. Because the estimate was developed several years previously and construction would occur in the future, the cost estimate could change. Mr. Keene added that Staff was in the process of obtaining permit review by different agencies. Both the setting and soil conditions could create challenges for the project. The Council directed Staff to use a design competition for the project which could result in a variation of costs. Vice Mayor Kniss felt many people were interested in the overpass being designed and built. Council Member Holman requested a brief update on the design competition. Mr. Eggleston reported planning for the competition was delayed, but Staff expected the competition to begin in the summer of 2014. Council Member Holman inquired whether the project was awaiting California Environmental Quality Act (CEQA) and National Environmental Policy Act (NEPA) review. Mr. Eggleston replied yes. The CIP included funding for design and construction grants of $1.45 million for the Charleston-Arastradero Corridor Attachment H MINUTES 15 May 27, 2014 Project. The remaining $7.5 million was unfunded, but discussed in the Infrastructure Funding Plan. The Bicycle and Pedestrian Transportation Plan was funded in each year of the CIP in the amount of $1.2 million with additional funding provided in the Infrastructure Funding Plan. Mr. Bilimoria reported on May 14, 2014, the PTC approved the proposed CIP as consistent with the Comprehensive Plan. The PTC made some suggestions. First, funding in the CIP should be allocated for a study on the effects of sea-level rise in Palo Alto. Staff agreed. The at-places memorandum included a recommendation to establish funding for this purpose. An offsetting reduction to the LATP Site Development, Preparation, and Security Improvements Project was also recommended. The PTC also suggested an analysis be prepared showing the change from the prior CIP to the proposed CIP. The analysis was included in the at-places memorandum. Over the next year, Staff would work to enhance the clarity of and information in the Budget document. The PTC suggested the CIP Subcommittee of the PTC reconvene in 2015 to provide input on any changes to the Capital Budget document. Council Member Holman referenced page 58 regarding mitigated negative declaration if historic building. That should reference the State Historic Building Code rather than mitigation. She asked why page 61 was included in the Buildings and Facilities Section as opposed to the Parks and Open Space Section. Mr. Eggleston believed it would easily fit either category. Most likely it was included in Buildings and Facilities because the Interpretative Center was a building. Council Member Holman suggested Staff move it, if it did not create a monetary issue. She was unsure why Staff included the Interpretive Center in the Boardwalk Feasibility Study. She inquired whether the Interpretive Center building was structurally questionable much like the boardwalk. Mr. Eggleston advised that the Interpretive Center was not structurally unsound in the same way as the boardwalk. Staff wanted to evaluate the Interpretive Center while evaluating the boardwalk. Council Member Holman expressed concern regarding timeliness. The pre- design and study phase extended from fall/winter 2013 to winter 2016. Te City was losing rental income because of the state of the interior. She questioned whether work could be performed more quickly. Mr. Eggleston indicated the CIP currently was not proposing construction or design funding for the boardwalk. Design costs in FY 2015 were meant to be Attachment H MINUTES 16 May 27, 2014 applied to the Interpretive Center. The $405,000 amount should have been construction funding for the Interpretive Center in FY 2016. Council Member Holman felt the description was muddled in that it mentioned decking, exterior siding, flooring, and cabinetry improvements for the Interpretive Center. She inquired whether Staff intended to restore the interior of the Interpretive Center. Mr. Eggleston agreed the description was not clearly written. The intent was to review the entire structural system for both the Interpretive Center and boardwalk. Other needs could be identified for the Interpretive Center. Greg Betts, Director of Community Services, clarified that the project was placed in the CIP about six years ago. As the project proceeded, it changed. While the Interpretive Center was closed, Staff wanted to take advantage of the construction window to replace the siding, repair structural items, and secure the interior. There was a separate CIP project to upgrade interpretive displays. Council Member Holman was concerned about length of time to construction. Council Member Burt asked if environmental permitting applied to the boardwalk or to both the boardwalk and Interpretive Center. Mr. Eggleston did not believe permitting would apply to the Interpretive Center improvements. Council Member Burt questioned whether the Interpretive Center and boardwalk should be separate projects, because one project could delay the other. He inquired about staffing and hours of operation for the Interpretive Center Mr. Betts reported staffing had been significantly reduced. Part-time staff along with volunteers operated the Interpretive Center an additional day each week. Council Member Burt felt the Interpretive Center provided a natural opportunity for partnership with a nonprofit agency. Perhaps the nonprofit agency could even be the predominant partner. After the capital project was complete, a nonprofit group could increase staffing and expand hours of operation. Mr. Betts contacted the Youth Science Institute, Marine Science Institute, Santa Clara Valley Audubon Society, and Santa Clara County Parks regarding opportunities at the Interpretive Center. The Youth Science Attachment H MINUTES 17 May 27, 2014 Institute wanted to be heavily subsidized. Staff would continue to search for possible partners. Council Member Holman suggested the Interpretive Center and the boardwalk be separated into two projects. They did not need the same timeline. She worried that the Interpretive Center was suffering from being underutilized. Page 64 should reference the State Historic Building Code rather than mitigated negative declaration. She questioned replacement of mechanical controls at Children's Library as it was remodeled maybe six years ago. Mr. Eggleston was not familiar with the scope of the previous project and could not answer. Council Member Holman requested Staff follow up. She referred to page 66 regarding funding being dependent on the California Avenue Parking Permit Fund, and inquired whether assessment district funds or fees could be used for the project. Mr. Perez asked if Council Member Holman meant assessment district funds for the garages or fees for parking. Council Member Holman answered either. Mr. Perez indicated parking fees would be utilized for the project. The assessment for the garages had to be dedicated for the garage debt service. Council Member Holman asked if assessment funds could only be used for the garages themselves. Mr. Perez stated dedication of debt service was the only use for those funds. Council Member Holman suggested the impact analysis on page 68 state "may be exempt from CEQA," because there could be environmental impacts. The FY 2017 project to install double-pane windows at Lucie Stern Community Center on page 73 was not exempt from CEQA. The project would require design review by the Historic Resources Board (HRB). She requested Staff remove the language regarding exempt from CEQA review and add that it would require HRB review. The Municipal Services Center (MSC) Roofing Project on page 77 could require Parks and Recreation Commission (PARC) review because of the setting. Mr. Rossmann would verify information and make appropriate corrections. Attachment H MINUTES 18 May 27, 2014 Mr. Perez added that some changes would be placed in the final draft of the Proposed Budget. Council Member Holman asked if Staff would print the final version when the Council approved it. Mr. Perez was accepting the Committee's comments as stated. Council Member Burt inquired whether the Public Works Department had an internal policy to utilize variable speed motors when upgrading heating, ventilation, and air conditioning (HVAC) systems and other large motors. Mr. Eggleston was not aware of a specific policy. Staff sought energy efficient equipment when making improvements. Council Member Burt recommended Staff engage with Mr. Gil Friend, Sustainability Manager. Chair Berman noted page 64 regarding buildings systems improvement for FY 2019 mentioned Fire Station Number 4. Mr. Eggleston indicated that was another area of overlap between the Infrastructure Funding Plan and the CIP. Chair Berman asked if the FY 2016 Animal Shelter Project on page 68 was part of the MSC study. Mr. Eggleston had not started the MSC study due to higher priority projects. Staff had prepared a scope of work for the project. Chair Berman had the same question regarding the Utility Control Center; however, Staff had responded regarding the MSC study. Council Member Holman stated page 81 regarding projects exempt from CEQA could not be accurate. Perhaps PARC should be involved in some of the projects listed there. The building in the photograph was the ranger station in the Baylands, but it was not mentioned as a project. She asked if work was recommended or scheduled for that. Mr. Betts explained that the photograph was illustrative of a recently completed project. Vice Mayor Kniss inquired whether the Golf Course Resurfacing Project remained relevant given the current situation. Attachment H MINUTES 19 May 27, 2014 Mr. Perez reported resurfacing the parking lot was not included in the project. Because of issues with the permitting process, some items for the Golf Course could be delayed. Vice Mayor Kniss received notes from people indicating they wanted to raise funds to build an Animal Shelter. Because the project was projected for FY 2016, she suggested Staff contact private groups soon to allow them time to plan activities. Vice Mayor Kniss inquired about the interaction between the El Camino Real Median Landscape Improvements Project and the Grand Boulevard scheme. Jaime Rodriguez, Chief Transportation Official, indicated Staff would implement the vision of the Grand Boulevard as projects proceeded. Vice Mayor Kniss asked if the Embarcadero Road Corridor Improvements would improve traffic signal timing at Palo Alto High School. Mr. Rodriguez replied yes. In FY 2014, Staff funded design of traffic signal modifications at that intersection. Construction costs included merging the two traffic signals into one. Vice Mayor Kniss inquired about a timeline for work. Mr. Rodriguez advised that Staff's plan was to bid a project as early as the fall of 2014. Vice Mayor Kniss asked when the project would be complete. Mr. Rodriguez believed construction of signal modification would begin in the spring of 2015. The second phase included capacity improvements and overall design. Vice Mayor Kniss asked if Staff was planning to remove lights or synchronize them. Mr. Rodriguez reported Staff planned to merge the two existing traffic signals into one. Vice Mayor Kniss felt synchronizing those lights would be a major challenge, especially with the on-demand light at the Palo Alto High School crossing. Council Member Holman asked if the light at the Palo Alto High School intersection would be coordinated with the light at El Camino Real. Attachment H MINUTES 20 May 27, 2014 Mr. Rodriguez explained that the design part of the project would determine methods to synchronize the signal with the El Camino Real Corridor. Council Member Holman did not interpret the description as incorporating synchronization with the light at El Camino Real. Mr. Rodriguez indicated synchronization would occur with the signals at Palo Alto High School when the two signals were merged into one. As part of the design phase, Staff would design the intersection at El Camino Real and obtain approval from the State. Once Staff determined capacity improvements and long-term operations, they would request construction funding for the El Camino Real intersection. Vice Mayor Kniss was not sure merging the signals would be a panacea as traffic backups were phenomenal. Mr. Rodriguez commented that it was a phased improvement designed to make progress on traffic flow. Council Member Holman inquired about the meaning of widening improvements. Mr. Rodriguez advised that a September 2013 Staff Report discussed improvements along Embarcadero Road. The park strip in front of Palo Alto High School on the south side of Embarcadero Road would be an opportunity to widen Embarcadero Road. Once Staff determined a design, they could coordinate signal synchronization improvements as well. Council Member Burt asked if a new right-turn lane into Palo Alto High School would originate from El Camino Real. Mr. Rodriguez answered yes. Chair Berman clarified that cars would turn right from El Camino Real onto Embarcadero Road and then into the Embarcadero Road entrance to Palo Alto High School. Mr. Rodriguez concurred. Council Member Holman stated the Newell Road Bridge Replacement Project should be reviewed by the HRB. That bridge was constructed in 1911 and located in an established neighborhood. With respect to sidewalk repairs, the color of concrete should be a natural color to blend into the natural environment. She had concerns regarding the exact definition of street light improvements on page 101. Some neighborhoods had original lampposts Attachment H MINUTES 21 May 27, 2014 and globes. Replacing those would result in a community outcry. Replacing poles in historic districts would have an impact and require CEQA review. The description indicated the project was not subject to HRB and CEQA. Clarification of improvements and public outreach would be appropriate. Council Member Burt recommended Staff focus on a subset of street improvements so the public could understand improvements. The City was spending more for improvements than future maintenance would cost. He asked if Staff had calculated the difference between current improvement costs and future maintenance costs. Mr. Eggleston responded no. Staff worked furiously to configure data to run scenarios, but did not complete that. He hoped the amount would be half or less of current funding; however, he had no real basis for that hope. Council Member Burt remarked that $3.8 million was less than current expenditures. That funding could be utilized for another purpose in FY 2018 or 2019. Vice Mayor Kniss thought the public art project and the new developer art project offset; however, the City continued to have maintenance costs for older art pieces. Mr. Rossmann explained those capital projects linked to the City's public art project, not the developer's project. Mr. Keene noted unused appropriations from prior years currently totaled more than $600,000. The overall total was closer to $1 million. Council Member Holman asked if the Mitchell Park Improvements Project would replace equipment in-kind or with new and different equipment. In approximately 2000, fourth graders at Fair Meadow School successfully lobbied the Council not to replace play elements in Mitchell Park with different elements. If Staff intended to upgrade elements, then the PARC should review the project and Staff should conduct outreach. Daren Anderson, Parks, Community Services Division Manager, reported each CIP project for a park was reviewed by the PARC. A draft plan usually included replacement in-kind and an outreach process. Staff would draft a proposal to replace elements in-kind. Council Member Holman reiterated that the project did not indicate PARC review. Attachment H MINUTES 22 May 27, 2014 Mr. Anderson would make that change. Typically the public process resulted in changes to Staff's proposed design. Mr. Keene noted the project was programmed for FY 2018. Council Member Holman stated the Parks and Open Space Emergency Repairs Project should include PARC review. Perhaps none of the repairs would qualify for impact fee expenditures. She requested Staff provide the balance of each impact fee fund and appropriate uses of those funds. Mr. Perez had provided that information in the last few weeks, but would provide it again. The public should recognize that projects in the first year of the CIP was adopted and would occur. Projects in Years 2-5 were adopted in concept and could change. Council Member Holman requested an update regarding El Camino Park. Mr. Eggleston reported Staff was moving into the final phase of design. Funding was provided through a couple of different CIPs from FY 2013. The current plan was to complete design work by the end of 2014. Vice Mayor Kniss felt it was unusual to repair irrigation systems during a drought. Mr. Keene remarked that community gardens needed irrigation. The project addressed the potential unreliability of the irrigation system. Water could actually be wasted with the current irrigation system. Vice Mayor Kniss inquired whether Staff tracked the amount of water used in community gardens. Mr. Anderson indicated the gardens were not metered. Staff planned to install meters to track the exact amount of water being used and implement goals for gardeners. Chair Berman noticed a community garden was not located in south Palo Alto and inquired about adding one. Vice Mayor Kniss explained that community garden spaces were originally intended as extensions of parks. There was a great deal of pressure to retain those spaces as community gardens. Council Member Holman commented that community gardens functioned as parkland. She understood the PARC had considered a community garden for Attachment H MINUTES 23 May 27, 2014 south Palo Alto on the Sterling Canal property; however, there was a complication with that property. Mr. Anderson noted the Ventura Community Garden was located in south Palo Alto. The PARC currently had an ad hoc committee reviewing potential uses for Sterling Canal. The Utility Department and PG&E had easements on the property and used the area for storage. Use as a storage area could not be relinquished for other needs. Staff would continue discussions with utilities regarding potential uses for Sterling Canal. Chair Berman inquired whether the Ventura Community Garden needed improvements to its irrigation system. Mr. Anderson responded no. Council Member Burt remarked that once space was utilized for community gardens, then the gardens were valued and retained. Non-gardeners viewed them as amenities. Neighborhoods should identify areas on public-owned land as candidates for community gardens, and then Staff should facilitate a community discussion. Community gardens were a neighborhood value, and neighborhoods should decide how to utilize that space. Vice Mayor Kniss asked if the intent of the Churchill Avenue Project was to widen the roadway. Mr. Rodriguez answered yes. The project was being designed and community outreach conducted. Staff proposed widening Churchill Avenue into the park strip in front of PAUSD offices to add a right-turn lane from westbound Churchill Avenue onto northbound El Camino Real towards Town and Country Shopping Center. Vice Mayor Kniss asked if the bike lane would remain. Mr. Rodriguez replied yes. The bike lane would be placed between the new right-turn lane and the left-turn lane. Vice Mayor Kniss hoped a grade separation was in the future for this busy intersection. Council Member Holman felt the description for Pedestrian Bicycle Transportation Plan Projects was too general and suggested the description include the elements being funded. Mr. Rodriguez explained that Staff did not know which elements would be constructed until community outreach was complete. Once Staff determined Attachment H MINUTES 24 May 27, 2014 project details based on community input, then they could estimate a cost. As Staff identified plan line concepts for projects, they would build all projects in phases over several years. Mr. Keene noted the Council work plan contained a current list of projects under community outreach and anticipated design work in FY 2015. Council Member Holman commented that the description for the project on page 150 also had a general description. She believed the project was intended to be software that could direct people to parking garages and spaces. The description did not contain sufficient detail to generate public comment. Mr. Rodriguez reported Staff would present the Council with an implementation plan for the parking program in August 2014. That plan would include more details regarding recommended steps to implement technology improvements. Chair Berman asked how soon Staff could implement technology in parking garages. Mr. Rodriguez indicated many technologies would occur by the spring and summer of 2015. Staff would prepare Requests for Proposals (RFP) prior to August and be ready to issue them when the Council approved the plan. MOTION: Vice Mayor Kniss moved, seconded by Chair Berman to recommend the City Council approve the General Fund Capital Budget, including the following changes: 1) Separate the Baylands Interpretive Center improvements and the Boardwalk Feasibility Study; 2) Move the Baylands Interpretive Center improvements project to Parks and Open Space. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add the establishment of the Baylands Levee Improvements Feasibility Study. Council Member Holman inquired about using LATP funding for landscaping at Byxbee Park. Mr. Eggleston did not know at the moment the cost for landscaping Byxbee Park. He believed the estimate for the entire project was approximately $3.2 million. The Infrastructure Funding Plan proposed funding of $2.6 million for Byxbee Park. Attachment H MINUTES 25 May 27, 2014 Council Member Holman asked if the Infrastructure Funding Plan but not the ballot measure included Byxbee Park. Chair Berman understood Byxbee Park was a part of the measure as well. Mr. Eggleston explained the Infrastructure Funding Plan proposed use of Park Development Impact Fees to fund Byxbee Park. The ballot measure was being discussed as a general tax measure; therefore, it would not provide funding for specific projects. MOTION AS AMENDED PASSED: 4-0 5. Public Works Department, Operating Budget pp.285-289. a) General Fund, Operating Budget pp. 290-299 b) Refuse Fund i) Operating Budget, pp. 300-308 c) Storm Drain Fund i) Operating Budget, pp. 309-316 ii) Capital Budget, pp. 320-327 d) Wastewater Treatment Fund i) Operating Budget, pp. 317-324 ii) Capital Budget, pp. 308-316 e) Airport Fund i) Operating Budget, pp. 325-329 ii) Capital Budget, pp. 331 f) Vehicle Replacement Fund i) Operating Budget, pp. 330-335 ii) Capital Budget, pp. 338-349 Walter Rossmann, Director Office of Management and Budget, requested the Finance Committee (Committee) approve consultant funding of $75,000 for an operations study of the entire facilities operation rather than adding a full-time benefited Facilities Manager position. Mike Sartor, Director of Public Works, reviewed the Public Works Department's Mission, Purpose, and Divisions. Accomplishments for Fiscal Year (FY) 2014 included continued progress towards excellent street conditions; capping of the final section of the landfill; takeover of the Mitchell Park Library and Community Center Project; and continued construction of Rinconada Library. The Department was confident construction of the Mitchell Park Library and Community Center and the Attachment H MINUTES 26 May 27, 2014 Rinconada Library would be complete in FY 2015. Staff was developing and implementing an Infrastructure Management System (IMS) as recommended by the Infrastructure Blue Ribbon Commission (IBRC). The Department was working to gain accreditation through the American Public Works Association (APWA). The Council recently approved an Organics Facilities Plan for biosolids, food waste, and yard trimmings. In conjunction with the San Francisquito Creek Joint Powers Authority, the Department was implementing an enhanced flood warning system for San Francisquito Creek. Staff would receive training in the operation and maintenance of new library and community center buildings. During the summer of 2014, Staff would present the Urban Forest Master Plan to the Council. In the Refuse Fund, Staff expected to implement the Organics Facilities Plan, to present options for contracting residential street sweeping services, and to complete capping of the landfill. The following week Staff would discuss collection and disposal of residential waste in relation to the pilot program. Staff did not propose a Refuse Fund rate increase in FY 2015; however, Staff would propose a new rate structure for implementation in FY 2016. With respect to the Storm Drain Fund, Staff would continue work on the seven Storm Drain Capital Projects. Because the 2005 ballot measure would expire in 2017, Staff proposed updating the Storm Drain Master Plan. Additional projects were completion of the Matadero Creek Pump Station and continued funding of the annual Storm Drain System Improvements Program. In the Wastewater Treatment Fund, Staff would begin implementation of the Biosolids Facilities Plan in FY 2015. Staff would consider expanding the Polystyrene Ordinance to include food service ware, coolers, and other items. Staff proposed replacing approximately $2.5 million of plant equipment, designing the biosolids facility, and performing a facilities condition assessment and retrofit. The Airport Fund was currently working on a loan from the General Fund, until takeover of the Airport was complete. Significant Budget proposals included an additional loan to the General Fund for the Airport, adding a Management Analyst position to Airport Staff, and replacing a modular trailer used as the terminal facility. Under the Vehicle Fund, the Department was implementing recommendations from the Fleet Operational Study by proposing a replacement program for older vehicles, reclassification of existing Fleet Mechanic to Equipment Mechanic Lead, elimination of mobile service technicians, and reclassification of a Fleet Coordinator to Project Manager. Significant Budget proposals included $3.8 million for vehicle replacement and $100,000 for emergency repairs. Staff originally proposed hiring a Facilities Manager; however, Staff now proposed performing a Facilities Operational Study as noted in the at-places memorandum. Council Member Holman inquired whether the Department could collaborate with the City Auditor's Office regarding the Facilities Operational Study. Attachment H MINUTES 27 May 27, 2014 Mr. Sartor recalled the Fleet Operational Study was a result of the Fleet Operations Audit. The City Auditor recommended hiring a third-party firm with expertise in fleet operations to perform an independent study. The Facilities Operational Study would follow the same path. Council Member Holman asked if Staff would coordinate with the City Auditor's Office. Mr. Sartor agreed to provide information to the City Auditor's Office. Council Member Holman suggested the City Auditor could offer points for refinement. Mr. Sartor would ask the City Auditor to review the scope of work. Chair Berman recommended Department Performance Measures indicate no adopted goals for FY 2014 rather than FY 2015, because the Council would adopt goals for FY 2015. On page 308, the net Refuse Fund increased expenditures totaled $17,892. At the end of that text, the ongoing amount of $41,279 matched the temporary street sweeping staffing adjustment. He asked if that was a typographical error. Mr. Rossmann answered yes. Staff would make the correction. Richard Whaley, Storm Drain Oversight Committee Member, reported the Storm Drain Oversight Committee reviewed the proposed Storm Drain Fund Budget and determined it was in accordance with the ballot measure. The one difference was the Storm Drain Master Plan, which would identify potential projects for funding after 2017. Vice Mayor Kniss asked how long Mr. Whaley had served on the Storm Drain Oversight Committee. Mr. Whaley responded nine years. Chair Berman suggested "ongoing savings" should be in the parentheses at the end of Section Number 2 on the bottom of page 323. Mr. Rossmann concurred. Vice Mayor Kniss inquired whether City operation of the Airport could break even or perhaps provide a profit. Mr. Sartor understood Mr. Andrew Swanson had a three-year plan to reach profitability. Attachment H MINUTES 28 May 27, 2014 Vice Mayor Kniss recalled the County of Santa Clara (County) operated three airports by balancing profits from one airport with losses from another. Andrew Swanson, Airport Manager, reported managing the Airport and bringing it up to today's standards made it difficult to create a Budget. Staff prepared the Proposed Budget based on current County revenues. Vice Mayor Kniss felt the community supported the City's takeover of the Airport. Careful implementation was needed to make it profitable. James Keene, City Manager, indicated the Airport had a deferred maintenance issue. The City would probably receive more demands for services and feel compelled to be more responsive than the County. The Fixed-Base Operator (FBO) leases would expire in 2017. The City could renegotiate leases with more favorable terms to provide more value to the City. Council Member Burt recalled the Council reviewed old rates versus present market rates for those leases. He inquired about the amount of additional revenue the City could negotiate when renewing leases. Mr. Swanson advised that a range for potential revenue would be difficult to determine at the current time. The next step would be a full evaluation of the conditions of buildings. Council Member Burt noted the Council had a range a few years ago that might need to be refined. He requested Staff provide a range of potential additional revenue at the wrap-up meeting. The range should cover the very low end to a moderately high end. Lalo Perez, Chief Financial Officer, would provide the business plan at the wrap-up meeting. He was not sure Staff could do more than that in two days. Council Member Burt suspected numbers in the business plan should be reviewed before being published. Those numbers would be a reference point. He was agreeable to a moderately conservative estimate. Mr. Perez recommended Staff include a caveat that the numbers were compiled at an earlier time. At a later time, Staff could review those numbers. Attachment H MINUTES 29 May 27, 2014 Council Member Burt recalled another alternative was to renegotiate leases in advance of termination. Fixed-Base Operators could offer the City favorable terms which would result in sooner cash flow. Vice Mayor Kniss inquired whether the Police Department utilized only Ford Crown Victoria automobiles. Mr. Sartor indicated the Police Department was now purchasing Chevrolet Caprices. Vice Mayor Kniss understood they were similar vehicles. Mr. Sartor concurred. Council Member Burt left the meeting at 9:55 P.M. Vice Mayor Kniss asked if a hybrid vehicle could be used for some Police Department Staff. Mr. Sartor deferred the question to the Police Department. Patrol vehicles currently on the market were primarily SUV (Sport Utility Vehicle)-type vehicles. The Chevrolet Caprice was more fuel efficiently than an SUV. Vice Mayor Kniss requested the gas mileage for the Caprice. Paul Dornell, Management Specialist, believed it was 12-15 miles per gallon. Mr. Sartor was actively pursuing Compressed Natural Gas (CNG) vehicles for the transport fleet. He would also be exploring electric vehicles for the fleet. The Department relied upon the Fire Department and Police Department for recommendations regarding the types of vehicles they needed. Vice Mayor Kniss requested Staff provide the number of vehicles in Police and Fire fleets. She presumed all vehicles were large cars. Mr. Dornell indicated patrol cars comprised approximately one-third of total Police Department vehicles. Approximately 20 patrol cars were either Ford Crown Victorias or Chevrolet Caprices. The remaining Police Department fleet was comprised of different types of support vehicles. Vice Mayor Kniss asked if support vehicles could be more fuel efficient than patrol cars. Mr. Dornell advised some support vehicles were more fuel efficient. Staff would continue to explore more fuel efficient vehicles. Attachment H MINUTES 30 May 27, 2014 Vice Mayor Kniss requested Staff provide a list of the types of support vehicles. Mr. Sartor could provide that information at the wrap-up meeting. Council Member Holman requested the meaning of "equipment maintenance service per" on page 333 under staffing. Mr. Sartor stated it should be person. A portion of the word did not print. Council Member Holman asked if the Department maintained all City vehicles. Mr. Sartor replied yes. Council Member Holman noted Staff proposed $2.3 million for 32 vehicles, for an average vehicle price of $72,000; and $3.8 million for 49 vehicles, for an average vehicle price of $77,000. Some of those vehicles were fire apparatus. It appeared the City could be overspending for some vehicles. She asked if some of those vehicles could be replaced with hybrid vehicles. The Committee needed to understand the expenses for each category of vehicle. Mr. Keene urged caution when using average vehicle prices. Mr. Sartor reported one ladder truck for the Fire Department cost almost $1 million. There was a wide range of costs for vehicles. Mr. Keene would provide the Committee with a supplemental list of vehicles. Council Member Holman requested cost of vehicle by category. Mr. Perez indicated the Council first approved the Budget for vehicle purchases, and then approved the actual acquisition of vehicles. Mr. Keene added that the contract identified each vehicle being purchased. MOTION: Chair Berman moved, seconded by Council Member Holman that the Finance Committee recommend the City Council tentatively approve the Public Works Department Operating and Capital Budgets with the Staff changes to add a Facilities Manager position and Council Member comments. MOTION PASSED: 3-0 Burt Absent Attachment H MINUTES 31 May 27, 2014 Vice Mayor Kniss had requested the City Manager provide additional information regarding the 17 new positions in the Proposed Budget. Mr. Keene would provide information to the Committee by the meeting on May 29, 2014. She requested Mr. Keene correlate that information with his proposal to withdraw $2 million from the Budget Stabilization Reserve (BSR). Mr. Keene could provide detailed information regarding new positions, a number of which were contract positions. Many did not impact the General Fund. Mr. Rossmann's Budget update would influence his recommendation for use of BSR funds. FUTURE MEETINGS AND AGENDAS Lalo Perez, Chief Financial Officer, announced the next meeting was scheduled for May 29, 2014, at 6:00 P.M. ADJOURNMENT: The meeting was adjourned at 10:08 P.M. Attachment H FINANCE COMMITTEE WORKING MINUTES Page 1 of 24 Special Meeting Thursday, May 29, 2014 Chair Berman called the meeting to order at 6:10 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California. Present: Berman (Chair), Burt, Holman, Kniss Absent: ORAL COMMUNICATIONS None AGENDA ITEMS 1. Finance Committee Recommendation regarding Adoption of the FY 2015 Proposed Municipal Fee Schedule. Walter Rossmann, Office of Management and Budget Director, provided an At-Places memorandum which addressed fees for reservations at Foothills Park and for arts and science activities and new fees for individual spaces at the Art Center. Staff proposed an average 5 percent increase in fees for Foothills Park and locker rentals at the Art Center. The City had approximately 1,000 Municipal Fees covering various services. In Fiscal Year (FY) 2013 Staff began a Cost of Service Study. Based on actual data, a consultant determined the City's actual cost recovery levels. Through the annual Budget process, Staff analyzed cost recovery levels for budgeted fees. As part of the Midyear Budget Review, the Council approved funding for a technology enhancement in Development Services which would allow Staff to review fees. The FY 2015 Proposed Budget contained funding for a consultant to study the Planning and Community Environment (Planning) Department fees. Staff proposed a new Management Analyst position in the Community Services Department (CSD) to assist with administrative tasks and to analyze fees. In the Fall of 2014, Staff would return to the Council in a Study Session regarding the Cost of Service Study and return to the Finance Committee (Committee) with a final draft User Fee Cost Recovery Attachment H WORKING MINUTES Page 2 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Level Policy. The User Fee Cost Recovery Level Policy would attempt to establish policy statements regarding methods for setting fees. To facilitate the policy discussion, Staff provided additional information on cost recovery levels in the Staff Report. Staff did not consider fee changes for CSD arts and science classes, the Development Services Department, or the Planning Department. Before proposing any changes to those fees, Staff needed additional study in order to understand fees better. Within the Fire Department, Public Works Department, and Administrative Services Department (ASD), Staff analyzed cost recovery levels for fees. If the cost recovery level was below 100 percent, Staff adjusted fees by 5.85 percent in order to maintain the same cost recovery level. Staff proposed new fees in response to new programs or services and to reflect current activity levels. Staff recommended deletion of 14 fees which were obsolete or duplicative. In the Real Estate Division, Staff decreased some fees slightly because they were above cost recovery. Fire Prevention had a wide range of cost recovery levels, from 13 percent to 100 percent. Obviously Staff needed more analysis of fees to make recommendations in future cycles. Vice Mayor Kniss felt the fees appeared somewhat arbitrary. Mr. Rossmann explained the preliminary cost recovery level data was informational only as the Committee was discussing policy statements for setting fees. The fees did appear arbitrary. Staff's next steps would be understanding fees in detail and returning to the Committee and Council with a policy framework for adjusting fees. For fees significantly below cost recovery, Staff would most likely recommend implementing fee increases in phases. The item was intended to show the potential for recovering costs and increasing revenues. Vice Mayor Kniss asked if fees would be adjusted as the policy discussion progressed. Mr. Rossmann responded yes. Vice Mayor Kniss requested Staff provide information regarding fees charged by cities similar to Palo Alto. Benchmarking would be helpful. James Keene, City Manager, believed the item concerned marginal adjustments to existing fees. The bigger discussion concerned the Cost of Service Study and setting fees, but that was outside the scope of the Budget hearings. Fees should be set high enough to recover costs but not so high as to discourage the purchase of products and services. The City provided some services where the marketplace offered competition. The question then became whether to compete or move into niche areas. Attachment H WORKING MINUTES Page 3 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Lalo Perez, Chief Financial Officer, reported the two areas that produced the largest amount of revenue were Development Services and CSD. Staff requested additional positions in those Departments to perform department- level analysis of fees. Vice Mayor Kniss indicated the public always wanted to understand cost recovery. Attempting to establish some sort of policy for setting fees was important. Council Member Holman was concerned about the low cost recovery level in Development Services Fire Prevention. Staff proposed increasing fees by 5.8 percent except in the Planning Department and Development Services. She wanted to know why Staff did not propose fee increases for those two Departments when they generated the most activity. Mr. Rossmann decided to take a conservative approach. Staff had not analyzed fees in six or seven years. In order to perform that analysis, Staff needed to change the system for Development Services. At the Midyear Budget Review, the Council approved some funding for the analysis of these fees, and Staff would continue that effort in FY 2015. It was a policy choice to increase fees for CSD and the Planning Department, but there was the potential to exceed a 100 percent cost recovery level. Mr. Keene noted the City paid for the Development Services function through fees charged for services. The City could not set fees at a level higher than cost. The challenge was the large number of fees. Staff acknowledged the need to determine fee recovery as well as to obtain granular detail for drafting a Budget. The challenge was balancing cost recovery for individual fees with collective cost recovery. There could be situations where a low cost recovery level was appropriate in order to incentivize use of services. Council Member Holman believed some fees within the Planning Department and Development Services could be increased by 5.8 percent. There were a number of places where references were either missing or incorrect. She suggested moving the packet page number so it did not cover the page number. Mr. Perez understood there was a system limitation regarding page numbers. Mr. Rossmann agreed to move the footer up. Attachment H WORKING MINUTES Page 4 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Council Member Holman reiterated a number of references were missing. For example: Appeals on packet page 21 referred to page 17-7, but there was no page 17-7. Parking Fees on packet page 26 was unclear as to whether they were charged monthly. Community Gardens on packet page 34 referenced low-income youth but not low-income residents. CSD Rentals and Reservations on packet page 35 did not indicate how a neighborhood group could use facilities without a charge. The fee for the Alma Plaza Community Room was $110/hour; however, that room was a public benefit. She asked why there was a fee for a public benefit. Rob De Geus, Assistant Director of Community Services, reported CSD could provide room space for community meetings and neighborhood groups through a co-sponsorship policy. The group needed to complete a form to have the fee waived. Council Member Holman requested Staff clarify that language. She believed the canoe fee at Foothills Park packet page 39 was different in another location in the document. On packet page 47 under Planning, the text stated only a deposit would be collected. She inquired about the situation where fees outweighed the deposit. Mr. Rossmann advised that the difference would be returned to the applicant. Council Member Holman requested the text include that. Protected Tree Removal referred to page 21-6; however, there was nothing relevant on page 21-6. On packet page 49, the permit fee for commercial and multifamily projects greater than or equal to $25,000 in valuation was $230. The permit fee for single-family and two-family projects greater than $75,000 in valuation was $205. The relationship between those two fees was not right. Mr. Rossmann explained that was one of the reasons Staff needed to analyze fees more closely. He could not answer her question. Development Services intended to study fees to determine methods for setting fees and to compare them to fees in other cities. Council Member Holman asked if Staff would provide responses to Committee comments. Mr. Rossmann would note comments. Mr. Keene indicated Staff would not respond to specific Committee comments; however, Staff would analyze improvements or changes to the fee schedule overall. Attachment H WORKING MINUTES Page 5 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Council Member Holman expressed concern that the City could be losing fees while Staff analyzed data. On packet page 51, the relationship between Residential and Non-Residential fees was not right. She inquired about a fee for applicants to use City streets for construction staging and vehicles. Mike Nafziger, Senior Engineer, explained that the Construction in the Right- of-Way Fee was charged for use of the right-of-way for construction projects. Council Member Holman asked where it could be found in the fee schedule. Mr. Nafziger believed it was located in the Public Works Engineering Section. Mr. Rossmann responded packet page 105. Council Member Holman questioned moving the fee for Reactivation of Expired Building Permit Application packet page 73 from the Planning Department to Development Services when the Planning Department determined issues. Mr. Keene reported Planning Staff were placed in the Development Services Center and in the Development Services Budget. The concept for Development Services was a one-stop location even though it would have functionalities of different departments. Mr. Rossmann added that the Building Division was the core function of Development Services, and building permit fees were related to the Building Division. Council Member Holman felt Plan Review Fees found on packet page 75 were a Planning Department role. Hillary Gitelman, Director Planning and Community Environment, indicated the building permit function would be centered in Development Services. Development Services housed some Planners to review smaller ministerial projects for zoning conformance; therefore, Staff transferred some of those fees to Development Services. Council Member Holman noted references were missing on packet page 81. With respect to Development Project Preliminary Review packet page 82, she asked if there was a fee for prescreening or preliminary review by the Architectural Review Board (ARB) and potentially the Historic Resources Board (HRB). Ms. Gitelman advised there was a separate fee for the ARB preliminary review process related to prescreening for a zoning application. The Attachment H WORKING MINUTES Page 6 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Planning Department would review planning fees in the next fiscal year to ensure fee amounts were correct and fees were structured appropriately. Council Member Holman requested Staff modify the description. Mr. Keene remarked that Staff provided a simple summary of the fee structure. Actual data could provide a great deal more information. In Development Services and the Planning Department, Staff would extend and expand the Cost of Service Study to all fees in both Departments. A detailed analysis would be presented to the Committee and Council. Council Member Holman did not believe much effort would be required to clarify descriptions and references. She inquired whether the $1,082 fee for Transfer of Development Rights Projects packet page 84 included preparation of a covenant. Molly Stump, City Attorney, reported this type of legal work was custom to each project. She was not familiar with the details of the work performed to formulate fee amounts. She suggested Legal Staff were consulted regarding legal work for a typical project to support a cost recovery amount. In any given case Legal Staff could perform significantly more work, which could not be determined in advance. Council Member Holman asked if it was not possible to determine the average cost for preparing a covenant. Ms. Stump could consult with Staff. Sometimes applicants assisted Legal Staff with a draft covenant. Other projects were unique and required custom work. Council Member Holman could not identify a fee for variances. Multiple variances on the same side of a property were counted as one variance. If the City charged a fee for one variance, she was unsure if that was an accurate assessment of the amount of work performed. Fees for variances for commercial manufacturing and residential were located on packet page 87. The Housing Impact Fee packet page 89 indicated $19.31 per square foot applied to non-residential development. Not all commercial development was charged the same way and the same rates. The Housing Impact Fee seemed to indicate retail, manufacturing, and office were charged the same amount. Mr. Perez advised the fee would have its own study. Council Member Holman noted the consultant stated manufacturing did not have the same impact as office; therefore, she questioned charging all non- Attachment H WORKING MINUTES Page 7 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 residential the same fee. She understood general office was not charged a Housing Impact Fee, which needed to be clarified as well. Ms. Gitelman was undertaking a nexus study to update Housing Impact Fees. Staff was taking a regional approach by collaborating with jurisdictions in San Mateo County. Council Member Holman did not want to overcharge retail, if retail had a lesser impact than other uses, while performing the study. The City should not disincentivize income-producing uses. Ms. Gitelman commented that the study was needed to make adjustments to existing fees. Council Member Burt did not believe Staff responded to Council Member Holman's question regarding the lack of a 5.8 percent increase for Development Services fees. Mr. Perez indicated the aggregate amount of fees was at 100 percent recovery. Council Member Burt questioned whether fees should be adjusted if Staff anticipated costs would increase 5.8 percent in FY 2015. Mr. Perez projected fees would remain at 100 percent cost recovery in the aggregate amount for FY 2015 without the increase. Staff needed to review every fee and its associated expenses. Because revenues matched expenses, Staff was concerned that there was no clear justification to increase fees. Council Member Burt understood the 5.8 percent increase would be applied to all fees. He asked if the entire group should increase 5.8 percent to maintain 100 percent recovery. Mr. Keene agreed the increase should be applied to all fees if all factors other than expenses remained static. Development Services could have growth on the demand side that would not necessarily increase expenses. Council Member Burt stated issuing more permits would necessitate more people to provide permits. Each person was a 5.8 percent higher cost in FY 2015. Contract employees would be a variable expense. If Staff assumed increased productivity, then the inflationary rate for each employee would not increase. That would be a good reason for not increasing fees. Mr. Keene reported Development Services had a great deal of variability. Vacancy savings could exceed a Department-wide 5.8 percent increase in Attachment H WORKING MINUTES Page 8 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 costs. Staff drafted a balanced Budget with costs for FY 2015 that included the Staff cost increase. Council Member Burt inquired about Staff's method for including the increase. Mr. Rossmann balanced the Development Services Budget at an aggregate level. Staff reviewed actual revenues in FY 2013 and projected revenues for FY 2014 to project revenues for FY 2015. Staff reviewed expenditures and determined actual costs. Based on those two pieces, Staff balanced the Budget. Staff believed the activity level in FY 2015 would be consistent with FY 2014. Council Member Burt asked if Staff projected the activity level to be consistent. Mr. Rossmann answered yes. Council Member Burt asked if Staff projected the cost per employee to increase 5.8 percent. Mr. Rossmann replied yes. Improved efficiencies reduced costs. Council Member Burt inquired whether Staff could precisely predict the amount of improvement in productivity. As a best reasonable estimate, the increase in productivity would be approximately the same as the inflation cost per employee. He asked if that was Staff's reason for not increasing Development Center fees. Mr. Keene agreed productivity was one factor. To increase fees 5.8 percent across the board, Staff would have to adjust the Budget. Council Member Burt believed the logical adjustment would assume the cost per employee would increase. Mr. Keene indicated the question then became whether or not the City was overcharging with existing fees. Council Member Burt felt there were many explanations for increasing some fees and not others; however, Staff had not offered of those explanations. Mr. Keene remarked that Staff was working toward more accurate fees. Council Member Holman inquired whether the City was in jeopardy of overcharging other fees. Attachment H WORKING MINUTES Page 9 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Mr. Rossmann explained that Staff studied in detail and analyzed the activity of each fee for which they proposed an increase. Staff was comfortable the fees would not exceed the cost recovery level. Council Member Burt recommended Staff work toward accurate fees rather than attempting to get them right the first time. He asked if the Right-of- Way Fee on page 105 was charged per project or per day fee. Mr. Nafziger advised the fee was charged per project. The amount of offsite work that took place for a specific project was estimated, and the fee was applied to that amount of work. Council Member Burt stated the amount per project was based on the dollar amount of the project. Mr. Keene commented that a third dimension of time should be included. Council Member Burt inquired whether the City provided an incentive for projects to stay out of the right-of-way as much as possible. Mr. Nafziger reported Staff provided incentives through logistics planning and the permitting process. Staff was sensitive to concerns regarding use of the right-of-way. Council Member Burt asked if Staff engaged daily with developers using the right-of-way. Mr. Nafziger responded yes, sometimes multiple times per day. Council Member Burt noted a Use Permit packet page 48 of $277 was charged one time for any size of business. He inquired whether Mr. Pirnejad stated the amount was slightly more than $400. Mr. Perez would check with Mr. Pirnejad and provide the information. Council Member Burt asked why a one-room subtenant would be charged the same Use Permit Fee as a tenant with thousands of employees. Mr. Keene would review the Use Permit. Council Member Holman calculated the total cost of an Appeal packet page 21 as $406. Typically Appeals were placed on the Council's Consent Calendar. She felt the fee was too high and not good governance. Mr. Keene Council remarked that pricing was an expression of values and goals. There could be rationales for the amounts of fees. Attachment H WORKING MINUTES Page 10 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Council Member Holman requested Staff present any counterbalance argument for the way fees were set to the Council. Mr. Keene reported a Cost of Service Study for the Planning Department and Development Services would provide assistance with determining fees. In setting fees for other Departments, Staff had the initial Cost of Service Study and information about how fees were set. That information did not make the Council's decision to change fees easier. Staff was not in a position to accept or refute the Committee's comments. Council Member Holman believed the Appeals Fee was a governance issue rather than simply an adjustment. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to recommend the City Council approve the Fiscal Year 2015 Proposed Municipal Fee Schedule, including the changes recommended in the at- places memo. Vice Mayor Kniss asked if the Committee's acceptance of the fee schedule meant fees would be set for FY 2015 or would Staff recommend adjustments during the year. Mr. Keene reported the fees would be set for FY 2015. Staff would continue to analyze fees for the Planning Department and Development Services and would return with information. The Committee could recommend changes to some fees prior to the next Budget year. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER that there could be changes that take place midyear and Staff will come back and discuss those changes with the Finance Committee. Mr. Keene felt it would be a mistake for Staff to respond to Committee comments only, because Staff could uncover additional issues when analyzing fees. Vice Mayor Kniss inquired whether fee amounts were set but could be changed. Chair Berman indicated fees could always be updated. Mr. Keene explained that fees had to be set in order to begin collecting fees on July 1. Mr. Perez noted Staff requested funding for consultants to analyze fees for Development Services and the Planning Department and a Management Attachment H WORKING MINUTES Page 11 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Analyst position in CSD to analyze fees. Staff had data for fees in other Departments and would continue work on those as well. Council Member Holman stated the Management Analyst position in CSD was a Full-Time Equivalent (FTE). Mr. Keene explained that the Management Analyst would support the Cost of Service Study in CSD as well as fulfill other needs within CSD. Council Member Holman would support the Motion because of the language incorporated into it. Some adjustments could be made quickly and presented in a short time. MOTION AS AMENDED PASSED: 4-0 2. Budget Wrap Up. Walter Rossmann, Director Office of Management and Budget, reported Staff recommended changing a title in the Table of Organization from Purchasing Manager to Chief Procurement Officer for recruitment purposes. Staff changed the original proposal of a Facility Manager position in the Public Works Department to a consultant study for operations. In the People Strategy and Operations Department, Staff changed the original recommendation of an additional Senior Management Analyst position to a consultant contract to review best practices for Human Resources Policies and Procedures. On May 19, 2014, the Council approved additional funding for the Human Services Resource Allocation Process (HSRAP) in the approximate amount of $31,000. Staff proposed adding a temporary position in the Office of Sustainability. The Proposed Budget omitted funding for the Project Safety Net Director position; therefore, Staff requested the Finance Committee (Committee) continue funding of that position for an additional year. The Committee requested Staff separate the Baylands Interpretive Center Improvements Project from the Boardwalk Feasibility Study. The Committee requested Staff provide ten-year look-back expenditure growth versus ten-year look-forward expenditure growth. Looking back ten years, expenditures grew on average approximately 4 percent. Looking forward, Staff projected expenditures would increase 3 percent. Information in the Proposed Budget was correct regarding the City Clerk's workload measures. Staff would review new positions in the Proposed Budget. The Library Department would provide requested information regarding ebooks in the spring of 2015. The wrap-up memorandum contained information regarding shuttle program funding. Council Member Burt asked if Mr. Rossmann was providing an overview of topics the Committee would discuss in detail. Attachment H WORKING MINUTES Page 12 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Mr. Rossmann answered yes. James Keene, City Manager, clarified that Mr. Rossmann was beginning with the Proposed Budget and responding to Committee questions. The Committee would return to a detailed discussion of topics. Council Member Burt inquired whether Mr. Rossmann's summary contained all the details to be presented to the Committee. Mr. Keene replied no. Staff would hold additional discussions regarding the various topics if the Committee wished. Council Member Burt stated the report appeared to do a good job of addressing the issues; however, the Committee had not had time to review it. He wanted to know if Staff was providing an oral summary of information contained in the report. Mr. Keene indicated Mr. Rossmann was providing the topics for possible discussion. Mr. Rossmann advised that the report outlined the base funding level of shuttle services and available funding. Staff would return to the Council regarding expanded shuttle service in a separate action. The report contained information regarding potential revenue from Fixed-Base Operator (FBO) leases at the Airport. The range was based on the study performed in 2011 and current information. Staff believed the City could increase current revenues from $750,000 to $1.2 million-$1.5 million, but not until contracts expired in Fiscal Year (FY) 2018. The attachment to the report contained requested information regarding number of fleet vehicles, potential fuel efficient vehicles to add to the fleet, and average cost factors. Pages 7-10 of the report summarized actions taken by the Committee. Mr. Keene commented that Staff would guide the Committee through discussion of the various points Mr. Rossmann summarized. If the Committee wished additional discussion on a topic, Staff would move in that direction. Council Member Holman noted the Committee had no concerns regarding Proposed Budgets for the City Attorney, City Auditor and City Clerk. MOTION: Council Member Holman moved, seconded by Vice Mayor Kniss to recommend to the City Council tentative approval of the City Attorney, City Auditor, and City Clerk Budgets for Fiscal Year 2015. MOTION PASSED: 4-0 Attachment H WORKING MINUTES Page 13 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Mr. Keene recalled one proposed position was a Legal Fellow in the City Attorney's Office. Mr. Rossmann had requested Departments submit Budget proposals in December 2013. The Office of Management and Budget vetted them and met with Departments in February 2014. At the end of February, Staff provided a draft Proposed Budget to the City Manager for discussion with Department Directors. When developing the Proposed Budget, Staff estimated the ending balance of the Budget Stabilization Reserve (BSR) Fund would be $31.5 million. In the Mid-Year Budget Review, Staff reported major tax revenues were advancing more than expected. In March 2014, the BSR balance reached $36 million. However, $4 million was identified as a source for the Infrastructure Plan at that time. Therefore, when finalizing the Proposed Budget, Staff felt there would be additional revenues; however, they were not ready to include them in the Proposed Budget. Therefore, Staff proposed balancing the Budget by withdrawing $2 million from the BSR even though that would reduce the BSR below the target level of 18.5 percent. Over the prior two weeks, Staff analyzed expected tax receipts, projected charges on fees and services, and potential expenditure savings. Currently Staff believed FY 2014 would end with a BSR balance of $33.5 million, 1.1 percent above the target level of 18.5 percent. Staff believed the Budget could be balanced with one-time funds carried forward and still achieve the BSR target level of 18.5 percent for Fiscal Year 2015. Mr. Keene was forced into a position of recommending a Budget that withdrew $2 million from the BSR to balance the Budget. After additional analysis, he determined $2 million from the BSR was not needed to balance the Budget. Staff currently predicted the BSR balance would be $31.5 million. The Council had planned to place $4 million towards infrastructure projects. Another $2 million was available for infrastructure projects. After adjusting proposed new positions and reviewing funding flows for positions, only a small number of the proposed 17.5 positions affected the General Fund revenue stream. Mr. Rossmann clarified that the BSR of the Fiscal Year 2015 Revised Proposed Budget would start out with a contribution of $41,000 rather than $2 million below the 18.5 percent target level. Staff proposed a Golf Course expense adjustment, because they overfunded the Golf Course. Staff replaced the Facilities Manager position with contract dollars, which benefited the General Fund by about $50,000. Another action for consideration was HSRAP funding of $31,000. Changes in the People Strategy and Operations Department benefited the General Fund by $8,000. Staff proposed returning to the BSR approximately $337,000, which would bring the BSR Target Level to 18.7 percent. Attachment H WORKING MINUTES Page 14 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Mr. Keene recalled the Committee requested a review of positions in the Proposed Budget. When reviewing positions, Staff considered the extent to which positions were necessary because of critical Council priorities and the demands of the environment; were connected to an enhancement of services; and were necessary for stronger administrative support or operational oversight. Half a position was specifically related to a regulatory requirement. From the 17.45 positions proposed, Staff eliminated three positions. First, the Senior Management Analyst position in the People Strategy and Operations Department was replaced with contract dollars for 1 Full-Time Equivalent (FTE). Second, the Management Analyst position in the Office of Sustainability would be a one-year pilot program as a contract position. Third, the Facility Manager position in the Public Works Department was converted to contract dollars for an operational study. Staff now proposed 14.45 new FTE in the Budget. Positions totaling 5.5 FTE were funded in the Enterprise Fund. Those positions were related to growth in business operations. Funding of a Senior Management Analyst position in Development Services was offset by revenues. A half-time position at the Junior Museum and Zoo was funded primarily by Palo Alto Unified School District (PAUSD) with a cost impact of $9,000. All those changes resulted in a net of 7.45 General Fund positions supported by tax dollars. They were new positions and would place a demand on the General Fund; however, there was a good rationale for adding the positions. Of those 7.45 FTEs, 1 was a Legal Fellow in the City Attorney's Office, 2.95 were Library Staff for Mitchell Park Library and Rinconada Library, 2.5 were in the Planning Department, and 1 was in the Community Services Department. The two positions in the Planning Department were critical to meeting the Council's main objectives. Vice Mayor Kniss asked why Staff did not provide that information earlier so that the Committee could review it. Mr. Keene did not have a reason. Vice Mayor Kniss indicated that information was helpful to the Committee's understanding of the positions, their impacts, and the needs for additional positions. MOTION: Council Member Holman moved, seconded by Vice Mayor Kniss to recommend to the City Council tentative approval of the People Strategy and Operations Department Budget for Fiscal Year 2015. Council Member Holman was happy to support the Department's Proposed Budget with the change to the Senior Management Analyst position. MOTION PASSED: 4-0 Attachment H WORKING MINUTES Page 15 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Council Member Burt was glad to see a balanced Budget even with certain one-time expenses. It was important to implement Budgets that remained within revenues. The summary of various positions was helpful. He suggested the report to the Council include explanations Mr. Keene provided orally. He was glad the Proposed Budget contained fewer permanent positions and more positions with offsetting revenue streams. The report changed funding of a shuttle program from a budgeted amount to a reserve fund, which he could support. He had concerns regarding specific shuttle routes and budgeting funds in FY 2015 that would not be spent in FY 2015. Mr. Keene reported changes also encompassed Council Member Burt's concern that shuttle funding was placed in a departmental Budget. Currently Staff allocated only specific dollars for the cross-town Embarcadero Road route. Council Member Burt was comfortable with funding for a shuttle service, especially in the context of a balanced Budget. The Committee made a recommendation to the Council regarding HSRAP contract renewals prior to receiving the Budget. The Proposed Budget, with 17 proposed new positions and a deficit of $2 million, was one factor in the Council's consideration of the Committee's recommendation. When the Committee made the recommendation, there were concerns about restoring previous reductions in funding. He requested an update on the status of the Food Closet. Minka Van Der Zwaag, Community Services Senior Program Manager, indicated the Food Closet remained in jeopardy with a budget deficit of at least $70,000. With the additional allocation approved by the Council, the Human Resources Commission (HRC) could consider funding the Food Closet. Council Member Burt recalled the Council suggested the Committee's recommendation was not sufficiently detailed. He recommended the Committee reconsider additional funding for HSRAP now that the Committee had reviewed the Proposed Budget and understood general and specific needs. Council Member Holman remarked that additional funding of $200,000 would not restore HSRAP funding to the 2003 level of funding. A former Council Member informed her that prior Councils funded HSRAP at 1 percent of the General Fund Budget. She would support increasing funding, perhaps to the level of $200,000. In funding these organizations, the Council could save the community money in the long run. Vice Mayor Kniss felt the issue was the varied amounts agencies would receive. A number of agencies were almost completely funded. A number Attachment H WORKING MINUTES Page 16 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 of others were quite different. She inquired whether Council Member Burt anticipated providing each group with their original request. Council Member Burt recommended the Committee set an amount "up to" x dollars and direct the HRC to collaborate with Staff to evaluate needs and recommend amounts for agencies. Vice Mayor Kniss noted the County of Santa Clara (County) had surplus funds. The Food Closet was funded through County money or outside money. Ms. Van Der Zwaag advised that the Food Closet was not receiving any County funds. Vice Mayor Kniss asked why. Mr. Van Der Zwaag did not know. The Council's supposition that agencies were receiving a great deal of County money was incorrect. Vice Mayor Kniss requested additional information if possible. Council Member Burt would not attempt to determine how funds would be allocated. It was an "up to" amount to allow Staff and the HRC to review needs. Vice Mayor Kniss felt that was different from a proposal to save the Food Closet. Council Member Burt did not propose saving the Food Closet. Chair Berman suggested the Committee postpone the discussion until all Department Budgets were tentatively approved. Council Member Burt remarked that the wrap-up meeting was the appropriate time to consider expending additional funds. Vice Mayor Kniss added that how the Committee chose to spend funds would make a difference. Council Member Holman inquired about the role or responsibilities of a Land Use Analyst and whether the position should be a Senior Planner position. Hillary Gitelman, Director of Planning and Community Environment, indicated the position was in the Advanced Planning Group, which performed a great deal of data analysis. One employee attempted to fill the proposed position as well as a Senior Planner position. Adding a net new position in Attachment H WORKING MINUTES Page 17 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 the Advanced Planning Group would increase Staff's capacity for data analysis. The Council constantly requested the Department improve data and analyses to support planning policy decisions. Council Member Holman agreed the Council was data driven. Someone in Advanced Planning should be visionary and creative while having Senior Planner capacity. She asked if Staff was searching for a data analyst or a Senior Planner who could collect data. Ms. Gitelman advised the position was similar to a Senior Planner in terms of salary and qualifications. She was searching for a candidate with a Senior Planner mindset but willing to specialize in data and analysis. The position would be a resource for all Planning and Planning-related activities. Mr. Keene indicated the position would be part of a team and would increase Senior Planner capacity. Ms. Gitelman was attempting to increase Department capacity by freeing up Senior Planner time and adding this position. Council Member Holman believed review of development projects should be both qualitative and analytical. She wanted to know if the Land Use Analyst would be a Senior Planner that could also collect data in order to provide qualitative planning. Ms. Gitelman was attempting to increase capacity for the kind of work performed in Advanced Planning. Advanced Planning work often started with data and analyses but required good judgment and qualitative assessment. The position would help the team be better at all those elements. Mr. Keene suggested Council Member Holman's concern related to Planners having to divide their attention between analysis and visioning. In that situation, both analysis and visioning suffered. Having a person who developed expertise and capacity over time would allow more strategic land use analysis. Ms. Gitelman's idea of concentrating that ability with this person on a team was the fastest way to increase strategic capacity for land use. Council Member Holman inquired about a timeframe for creating an Enterprise Fund for Development Services. Mr. Rossmann reported Staff was reviewing revenues and expenditures within the General Fund solely for that function. For FY 2016, Staff intended to propose an Enterprise Fund for Development Services. Attachment H WORKING MINUTES Page 18 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Council Member Holman requested Staff's proposal include good data regarding how the Enterprise Fund would operate as well as qualitative components. Vice Mayor Kniss did not understand how the Airport could operate as an Enterprise Fund for the following two years. She doubted the Airport would be self-sustaining before 2017. Mr. Keene remarked that the City could establish an Enterprise Fund that lost money. Chair Berman supported the Committee's questioning of proposed new positions and the changes proposed by Staff. A responsible governing agency reduced employees in poor economic climates and increased employees in good economic climates. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to recommend to the City Council tentatively approval of all Budgets for Fiscal Year 2015, including the Community Services Department budget, with the exception of the Human Services Resource Allocation Process funding and including the recommendations in the At-place Memo on slide five. Vice Mayor Kniss concurred with Chair Berman's comments regarding hiring new employees and hoped that was explained thoroughly to the public. Council Member Holman requested Staff repeat their rationale for adding a Management Analyst position in the Community Services Department. Mr. Rossmann indicated the Community Services Department had a $23 million Budget and approximately $5 million in revenue outside golf revenues. The Department administered programs for approximately 14,000 enrollees of all ages. The Department handled approximately $34,000 in cash transactions as well as electronic transactions. The Department administered 200 contracts and managed 400 full-time, part- time, and seasonal employees. A great deal of administrative work was handled by employees with little or no training. The Department was understaffed in this type of classification. Lalo Perez, Chief Financial Officer, added that over past years the Department collapsed its management group such that more responsibility was given to fewer managers. A portion of or the entire position could be included in cost recovery levels as it serviced the entire program; however, Staff had not proposed that in the FY 2015 Budget. Attachment H WORKING MINUTES Page 19 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Council Member Holman believed PAUSD programs would also be an opportunity for cost recovery. MOTION PASSED: 4-0 Mr. Rossmann provided copies of information given to the Council on May 12, 2014. Vice Mayor Kniss recalled that the Council removed Palo Alto Community Child Care (PACCC) and Avenidas from HSRAP, but included them in the funding increase. Chair Berman reviewed the Committee's prior recommendation regarding HSRAP contract renewals, and his votes at the Committee and Council meetings. The Council approved removing PACCC and Avenidas from HSRAP; however, they remained eligible for the $31,000 approved by the Council. Ms. Van Der Zwaag added that all agencies were eligible for consideration under the Committee's protocols. Chair Berman questioned whether $200,000 in funding would be divided proportionally among HSRAP agencies, including PACCC and Avenidas. If PACCC and Avenidas received proportional shares, then only $57,000 would be available for two-year agencies. He questioned whether a funding increase now would affect funding for new agencies in the future. He questioned whether funding for existing agencies would be reduced in order to fund new agencies. Many questions needed to be considered and discussed. He questioned whether concepts for funding HSRAP were issues for the Finance Committee or the Policy and Services Committee. He supported the 2.6 percent increase, because it was equal to a Consumer Price Index (CPI) increase. He would not support additional funding of $200,000 and having the HRC determine allocations. Vice Mayor Kniss viewed HSRAP funding and the Budget as two separate items, because the Council had previously voted on HSRAP funding. Mr. Keene indicated the Council could reconsider or take up any item it chose to take up. It sounded as if the Committee could be tied on the issue of how to proceed. Vice Mayor Kniss reiterated that both the Committee and the Council had discussed and voted on HSRAP funding. The Committee was in an odd position. She suggested the Council could need a Motion to Reconsider in order to take up the item a second time. Attachment H WORKING MINUTES Page 20 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Mr. Keene wanted to understand the effect of a tie vote. He questioned whether a tie vote meant the Council assumed control of the issue from the Committee or the Committee could still influence a Council discussion. Mr. Perez reported Staff noted any tie votes on items in Committee. The Council could discuss those items again. Mr. Keene felt the issue would ultimately be resolved at the Council where the City Attorney could respond to procedural questions. There were two possibilities. As part of adopting the Budget, a Council Member could move to amend any component of the Budget including a component on which the Council had previously voted. If a Motion to Reconsider was required, then the rules for reconsideration would take effect. Council Member Burt felt the Council's discussion had a different context. If the City had a $20 million deficit, then the Council would never considered additional HSRAP funding. The Committee considered and supported additional funding prior to receiving the Proposed Budget, which showed a tentative deficit. The Council considered additional funding in the context of a Budget deficit. The conditions changed. At the Council meeting, he was prepared to compromise at $100,000, but that was never considered. He remained willing to compromise. Chair Berman stated it was clear at Council that a number of colleagues did not view $200,000 as a cap. The Committee held a detailed discussion around it being a cap. Chair Berman stated Council Member Holman proposed additional agencies. Council Member Holman clarified at Council that new programs had emerged from existing agencies, and the Council discussed that. He had worked for five or six years to reform budgets, to have a sustainable long-term program, and to invest in infrastructure. To spend millions of dollars in those areas and not spend a small amount to provide vital services to the community questioned the Council's values. Additional funding for HSRAP would be responsible and sustainable and within the Committee's prerogative. Council Member Holman stated the Committee was not proposing the Council dedicate 1 percent of the General Fund Budget for HSRAP. Even with an allocation of $200,000, the total amount of funding remained less than 1 percent. The CPI increase was logical, except it did not begin to restore previous reductions. The Committee was attempting to determine how to restore funding for HSRAP. Any nonprofit agency sought funding from a variety of sources. The recipients of HSRAP services were people in the Palo Alto community and the Council's responsibility. The Council could not pass that responsibility to other jurisdictions. The context for the Council discussion was different. Even with financial issues, the Council vote Attachment H WORKING MINUTES Page 21 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 was 4-5. The Council should reconsider HSRAP funding in the new context with some consideration of services that should be provided. Vice Mayor Kniss reported there was no Motion for her to address. Council Member Burt was willing to move restoration of the $200,000 original proposal or to compromise at $100,000. Vice Mayor Kniss needed additional information before deciding in either direction. The Council made a decision for a reason. Council Member Burt remarked that the reasons had changed. Vice Mayor Kniss did not believe those were the reasons. MOTION: Council Member Holman moved, seconded by Council Member Burt to return to Council for consideration of the potential of restoration of up to $200,000 in Human Services Resource Allocation Process funding to be forwarded to the Human Resources Commission for their recommendation on allocation for the “most-need” demonstrated and brought forward; the $200,000 as an “up-to,” not a “to be spent” amount. Council Member Burt hoped colleagues would not take a "straw man" position. Chair Berman disagreed with the characterization of a "straw man" position. Colleagues on the City Council clearly indicated they were comfortable with $200,000 or more being added to the HSRAP Budget. He agreed that the Motion did not mention new programs. He was alluding to Council Member Holman's mention at the Committee meeting of a new program that could be funded. His hypothetical question was whether an increase in funding of $200,000 for all existing agencies would affect funding the following year when new agencies submitted applications. He assumed the Council would increase funding a second time for only a small amount. That would leave very little money for new agencies. He opposed the Motion, but did not oppose the possibility of increasing funding at Council. It should be a Council discussion. He asked when the Proposed Budget was scheduled for the Council. Mr. Perez reported the first hearing was scheduled for June 9, 2014 and the final hearing for June 16. Mr. Keene noted the Council could take action at either meeting. Chair Berman wanted a comprehensive understanding of all money the City provided to agencies for human services. Attachment H WORKING MINUTES Page 22 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Ms. Van Der Zwaag advised that the only other City contractor for human services was Project Sentinel. The Council allocated $250,000 for case management of the homeless program. The Council administered Community Development Block Grant (CDBG) funding for nonprofit agencies in the community. Some nonprofit agencies, such as Downtown Streets Team, held contracts with the City. Chair Berman added Project Safety Net. Ms. Van Der Zwaag explained that it was not a nonprofit agency, but a coalition. Chair Berman asked if it provided services for human needs. Ms. Van Der Zwaag clarified that funding for Project Safety Net served human needs in the community. Chair Berman commented that the issue was not simple. He was not opposed to increasing funding methodically and intentionally; however, he wanted more information before making decisions. Council Member Holman indicated one of the HRC's primary responsibilities was review of HSRAP applications. The Committee needed to hold them in a position of authority to review organizations. The HRC evaluated organizations every two years. Ms. Van Der Zwaag reported that existing agencies received less funding when the Budget was static and a new agency identified a need that the HRC felt was sufficiently compelling to fund. During her employment with the City, no agency funded by HSRAP had been excluded from reapplying for funding. Sometimes agencies submitted an application late or grants were too small to justify an agency applying for grants. Council Member Holman reiterated that agencies were evaluated regularly. Chair Berman felt the Committee would have to discuss the issue of including Avenidas and PACCC in additional funding if the topic returned to the Council. Council Member Burt suggested PACCC and Avenidas receive the inflationary amount and the HRC and Staff recommend specific providers and consideration of specific programs. If Avenidas or PACCC identified a new program, then Avenidas or PACCC could also submit a proposal to HRC. He would not support PACCC and Avenidas receiving a pro rata share of any funding increase. Attachment H WORKING MINUTES Page 23 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 Chair Berman was not opposed to increased funding, but wanted more information before making a decision. Vice Mayor Kniss disagreed with leaving PACCC and Avenidas with only the CPI. The HRC reviewed applications carefully and determined which groups served the City best. The question was whether to reopen contracts in the midst of a two-year contract cycle. Originally, the Committee was asked to approve contracts. Ms. Van Der Zwaag advised that Staff recommended the Committee approve contracts for the second year. Theoretically, any funding increase would be the new contract amount for Year 2. Staff would amend contracts to the new contract amount. Vice Mayor Kniss expressed concern that the HRC had not provided an opinion. Ms. Van Der Zwaag noted an HRC discussion was tentatively scheduled for May 12, 2014 concerning the allocation the Committee authorized. Vice Mayor Kniss questioned whether the Committee would view employees requesting funds differently than HSRAP agencies. She asked who made funding decisions. Ms. Van Der Zwaag indicated the HRC made the original funding decision which the Committee reviewed. Council Member Burt remarked that the HRC did not state they would not like to fund programs. Vice Mayor Kniss felt the Committee was offering money to others when City employees were as needy as some of the groups. She would not support the Motion. MOTION FAILED: 2-2 Berman, Kniss no Council Member Holman asked if HSRAP funding would be presented to the Council as part of the Proposed Budget. Mr. Perez advised that the Staff Report would indicate the vote on the Motion. MOTION: Chair Berman moved, seconded by Council Member XX to approve the Human Services Resource Allocation Process funding in the budget that they carved out from the earlier Motion, as currently proposed in the City Manager's budget. Attachment H WORKING MINUTES Page 24 of 24 Finance Committee Special Meeting Working Minutes 5/29/2014 MOTION FAILED DUE TO THE LACK OF A SECOND MOTION: Chair Berman moved, seconded by Council Member XX to approve the remainder of the Human Services Resource Allocation Process budget, other than what was discussed at Council on May 19, 2014. MOTION FAILED DUE TO THE LACK OF A SECOND Vice Mayor Kniss requested Staff discuss with the City Attorney a method for bringing the matter before the Council. Mr. Perez would inform the City Attorney of the question. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to recommend to the City Council tentative approval of the Human Services Resource Allocation Process Budget as proposed in the City Manager's proposed budget. MOTION FAILED: 2-2 Burt, Holman no FUTURE MEETINGS AND AGENDAS Lalo Perez, Chief Financial Officer, announced the next meeting was scheduled for June 3, 2014. The Agenda for the meeting included the street sweeping contract, audit of solid waste, the pilot program for waste collection, and review of billing from the City Auditor. ADJOURNMENT: Meeting adjourned at 9:22 P.M. Attachment H FINANCE COMMITTEE MEETING  __5/29/2014___  [X] Placed Before Meeting  [  ] Received at Meeting  Item #2  City of Palo Alto  M E M O R A N D U M  TO:  Finance Committee  DATE:  May 29, 2014  SUBJECT: Wrap‐Up Discussion of Outstanding Issues from Prior Budget Hearing Meetings  This staff report summarizes changes to the City Manager’s Fiscal Year 2015 Proposed Budget. The first  section describes Finance Committee recommended changes made to the budget along with follow‐up  items as discussed at the Finance Committee budget hearings held on May 13, 15, 20, and 27. The  second section describes staff‐recommended changes to the proposed budget document.   The items in this memorandum and additional changes made this evening will be incorporated into the  budget adoption staff report scheduled to be presented to the City Council on June 9, 2014.  Recommended Actions  This section summarizes the outstanding decision points that are requested to be reviewed and  approved by the Finance Committee. In the May 29th staff presentation to Finance Committee, staff will  propose the following changes:  General Fund  Administrative Services Staffing  Staff proposes a reclassification of 1.0 FTE Purchasing Manager to 1.0 FTE Chief Procurement Officer.  This position is funded in the General Fund and the reclassification will not result in a change in  compensation.   People Strategy and Operations Staffing  In the Fiscal Year 2015 Proposed Budget, staff recommended to add 1.0 Senior Management Analyst  position to the People Strategy and Operations Department.  Due to the City’s complex salary and  benefits structure (agreements and compensation packages with 10 employee groups, three different  tiers for pensions, and various tiers for healthcare benefits for active and retired employees), the intent  of the position addition was to focus primarily on SAP data entry review, data analysis as it relates to  citywide salaries and benefits, and review and implementation of best practices regarding policies and  procedures.  After further analysis, this recommendation has been revised to remove the 1.0 Senior  Management Analyst position ($177,411) and use $156,000 of the funding for a consultant and $13,319  to continue funding a 0.12 hourly Management Specialist position.  The remaining $8,092 will be  returned to the General Fund Budget Stabilization Reserve (BSR).  The consultant will conduct a  comprehensive review of human resources industry best practices, primarily related to SAP data entry  and analysis, and use the results to update the Department’s policies and procedures concerning overall  position management.  Funding for the hourly position will allow for increased capacity for analytical  APPENDIX #1 2    work related to the calculation and allocation of citywide salaries and benefits.  After the conclusion of  the study, staff may bring forward recommendations for implementation of best practices as part of  future budget cycles.  In addition, once the consultant completes the review, an evaluation will be  conducted to determine the ongoing need in these areas.    Additional Human Services Resource Allocation Process (HSRAP) Funding  At the May 19 City Council Meeting, the City Council authorized additional funding in the amount of  $31,260 for HSRAP to be recommended for allocation by the Human Relations  Commission.  Recommendations for the additional allocation are scheduled to be brought forward for City Council  consideration in June 2014 or August 2014.    General Fund and Various Enterprise Funds    Office of Sustainability Staffing  In the Fiscal Year 2015 Proposed Budget, staff recommended a one‐time add of a 1.0 Management  Analyst position, with 0.50 of the position funded in the Office of Sustainability, 0.25 of the position  funded in Utilities Administration, 0.10 of the position funded in the Utilities Fiber Optic Fund; and 0.05  of the position funded in the Refuse Fund, Wastewater Treatment Fund, and the City Manager's Office.   This position was intended to support the Chief Sustainability Officer with identifying and pursuing  foundation, government and other funding for City sustainability initiatives; prioritizing and evaluating  the progress and impacts of sustainability initiatives; and developing and executing the Climate Plan and  other sustainability‐related strategies.      After further internal discussion, staff recommends supporting this position one‐time with temporary  salary funding versus adding a benefited, full‐time position.  The cost across all funds will remain the  same at approximately $155,000.    Special Revenue Funds  Project Safety Net (p. 78 of the FY 2015 Proposed Operating Budget):   This program is a community‐wide collaboration on suicide prevention and youth well‐being. The  collaboration is funded via the Stanford University Medical Center Development Agreement Funding  and is managed by the Office of Human Services in the Community Services Department.  The proposed  budget includes $22,031 for a part time administrative assistant, however continued funding for the  program director (1 hourly FTE Management Specialist, salary and benefits: $104,934) is requested to  fully support the program in Fiscal Year 2015.  With this recommended continuation of the existing  position, total program expense will be $241,965.    Capital Funds  Baylands Interpretive Center Improvements and Boardwalk Feasibility Study  On May 27, the Finance Committee recommended that the “Baylands Interpretive Center  Improvements and Boardwalk Feasibility Study” project (PE‐14018) be split into two projects in order to  reflect separately the cost of the feasibility study and the interpretive center (Attachment A).      Additional Information Requested by the Committee  The Finance Committee has requested staff provide additional information on the following items.       3    May 13, 2013  Overview of FY 2015 Proposed Budget  The Finance Committee requested additional information regarding the General Fund Salary and  Benefits Reserve, specifically, the number of Full‐Time Equivalents (FTEs) that would benefit from the  funding that is set aside in the reserve. The requested information can be found in below table:     FY 2015 Proposed General Fund Salary and Benefit Reserve  (in thousands)   Funding  FTE Cost/FTE  Contractually Obligated Funding  1) Benchmark Study (SEIU)  $           586  257.12  $       2.28   2) Salary Step Increases (SEIU, IAFF, PAPOA)  $           460  439.02  $       1.05   Subtotal Contractually Obligated Funding  $       1,046   Discretionary Funding  3) Potential Salary & Benefit Increases (MGMT, FCA,  PMA, IAFF, PAPOA)  $           831  331.46  $       2.51   4) Pay for Performance Increases (MGMT, FCA, PMA)  $           550  149.56  $       3.68   5) Potential Market Adjustments (MGMT)  $           310  137.56  $       2.25   Subtotal Discretionary Funding  $       1,691   Total General Fund Salary and Benefit Reserve  $       2,737  588.58  $       4.65     Note: The contractual increases for SEIU employees, effective July 1, 2014 and December 1, 2014, are not included in the Salary  and Benefits Reserve and have been allocated to departmental budgets in the FY 2015 Proposed Budget.    In addition, the Committee requested an update to the General Fund 10‐year Long Range Financial  Forecast (LRFF) that includes the items contained in the FY 2015 Proposed Budget. The Committee also  requested that this table include 10‐year historical revenue and expense data in chart form. The chart  below depicts the General Fund Expense growth between Fiscal Years 2005 and Fiscal Year 2024.  Fiscal  Year 2005 to 2013 data reflects actual expenditures, Fiscal Year 2014 and 2015 reflects budgeted costs,  and Fiscal Year 2016 through 2024 is projected cost in alignment with the latest LRFF.       4      The average growth of expenditures between Fiscal Years 2005 and Fiscal Year 2015 is approximately 4  percent and the average growth of expenditures between Fiscal Years 2016 and 2024 is approximately 3  percent.    As part of the Finance Committee discussion, the Finance Committee requested a breakdown of  citywide and General Fund increased Salary and Benefits Costs by category.  Please refer to Attachment  B for the requested information.      City Clerk’s Office Workload Measures  Staff has verified that the number of council agenda packets produced annually as listed under  Workload Measures on p. 112 of the Proposed Operating Budget is correct. The number of agenda  packets for each fiscal year is as follows: 57 in FY 2012, 59 in FY 2013, 59 in FY 2014, and 60 estimated in  FY 2015.     May 15, 2013  Position Additions Review  At the May 15 Finance Committee Meeting, the Committee discussed full‐time benefited position  additions. Staff has responded to this request with detailed information per position (Attachment C).    May 20, 2013  Library Department  At the May 20 Finance Committee Meeting, the Committee requested information regarding the  turnover rate for ebooks. Turnover rates measure the average number of times an item is used in a  given year. Staff has reviewed the turnover rate for ebooks and has determined the rate to be 2.09. This  number is based upon data gathered from October 2012 to September 2013, the first overlapping 12  months since the Library’s two downloadable ebook services, OverDrive and Axis 360, were offered.    In addition, staff was also requested to provide information on the administrative costs of paper books  versus ebook checkout.  The estimated cost for turning a commercial print book into a library book is  $16. This is an estimated average since many factors, such as difference in types of print books and  varied levels of labor involved to prepare each type for customer use, affect the cost.  Turning a  commercial ebook into a library ebook requires different types of tasks: an overhead cost prior to  providing the service as well as a cost for continuous support that is not otherwise required for  providing a print book.  The overhead costs include platform evaluation, contract negotiation, technical  setting up, staff training, marketing and customer training.  A more detailed study is needed for  determining the cost difference.  Staff intends to provide this information to the Finance Committee by  spring 2015.    Planning and Community Environment  Per the direction of the Finance Committee, staff has provided a more detailed description regarding  Planning and Community Environment’s proposed positions for Fiscal Year 2015:    Senior Transportation Planner ‐ 1.0 FTE   The Department is working to address community concerns about the quality and objectivity of  transportation analyses of development proposals and the addition of a senior level planning position to  the Transportation Division will support this effort.  The new position will not only oversee consultants  who work on transportation impact analyses, but also support completion of the Division’s aggressive  5    work program, including significant planning efforts related to traffic, parking, bike routes, and  transportation demand management.  The Senior Transportation Planner will support the Chief  Transportation Official, and is expected to act as the Division’s main spokesperson and point of contact  for public complaints and inquiries about traffic issues.  This will directly address goals and objectives in  the Department’s budget proposal (pp. 232‐233) to increase the public’s trust in the City’s planning  functions; expand public engagement efforts; make significant progress on critical planning and  transportation projections, including transit and transportation demand management programs and the  bike implementation plan.     Land Use Analyst – 1.0 FTE   The Advance Planning Division of the Department is the City’s “go to” place for data and analysis about  population, housing, land use, and development in the City and has responsibility for high‐profile, data‐ intensive efforts such as updating and maintaining the City’s Comprehensive Plan, tracking residential  and non‐residential development, and monitoring/informing regional planning and data collection  efforts by ABAG, MTC, Santa Clara County, the state Department of Finance, and the U.S. Census.  With  the addition of a Land Use Analyst, the Division will be able to fulfil its data collection/dissemination and  analysis functions more effectively without diverting resources from important long range planning  projects.     This position will also support the Current Planning division by providing data and support for the  objective analysis of development proposals; collaborating with other departments on mapping and GIS  efforts, such as Public Works infrastructure mapping; and disseminating data to the public through the  Department’s website.  Without this position, the Department will likely not be able to accomplish its  objective (Fiscal Year 2015 Proposed Operating Budget, p. 233) related to increasing “the amount of  planning and transportation data immediately available to the public on the department website…” and  it will not have capacity within the Advance Planning division to support its work program.    Shuttle Program Funding  At the May 20 budget hearing, the Finance Committee discussed the existing and potentially expanding  shuttle program.  In Fiscal Year 2015, the Planning and Community Environment proposed budget  includes $225,000 in funding for the existing shuttle service.  In order to set aside funds for an expanded  shuttle service, the Non‐Departmental section of the budget includes a $1 million Shuttle Service  Reserve.  As staff brings forward contract award recommendations to the City Council for the existing  route and an expanded service, related Budget Amendment Ordinance recommendations will be  brought forward transferring the related funds from the Shuttle Service Reserve to the Planning and  Community Environment Department.     The below table summarizes responses received for the shuttle service Request for Proposals (RFP),  issued this past Spring. The table includes the City’s annual cost of the existing service ($239,410 for the  Crosstown and Embarcadero routes) as well as funding available for an expanded service based on the  latest discussion with the City Council ($985,590).  It is important to note that staff intends to bring  forward recommendations for the existing service as well as the East Palo Alto route ($211,952), which,  pending East Palo Alto City Council approval in June 2014, will fully reimbursed by the City of East Palo  Alto.  Further, any expansion of the current service will be brought forward in August 2014 for City  Council consideration.      6      Route Fiscal Year 2015  Funding Available  Fiscal Year 2015  Estimated Cost  Planning and Community Environment Shuttle  Budget for Crosstown and Embarcadero  $225,000   Shuttle Service Reserve (non‐departmental) $1,000,000 Crosstown $187,410 Embarcadero $52,000 East Palo Alto $211,952 $211,952 Funding Available for Potential Expanded Service  $985,590 Total  $1,436,952 $1,436,952   May 27, 2013  Airport Fund  At the May 27 Finance Committee meeting, a question was raised about the potential revenue increases  that could be realized in the Airport Fund in future years.  It is anticipated that the City will take over  operations of the Airport from the County of Santa Clara in Fiscal Year 2015.  Staff obtained budget and  actual financial data from the County to assist in developing the Fiscal Year 2015 budget.  Revenue  streams for the County are primarily received from the 3rd party lessor for lease payments from the  Fixed Base Operators (FBOs) and tie down fees from airport users.  The agreements that the 3rd party  lessor has with the FBOs extend to Fiscal Year 2017.  As such, it will be difficult to increase revenues  from the current levels (approximately $750,000) until that time.      In October 2010 staff presented the Wiedemann Report to Council which projected approximately $1  million in revenue for Fiscal Year 2015 if the airport were under City Management and the 3rd party  lessors’ contracts were replaced.  Taking a more conservative approach, staff felt that basing the  revenue estimate on the County’s actual recent history was the most appropriate basis for projecting  revenue in Fiscal Year 2015.  Consideration was given to “buying out” the 3rd party lessor, however that  option could be costly for the City.  Prior to the leases expiring, Airport staff will develop RFPs and solicit  interest in the leases with FBOs.  With direct City management due to the replacements of the 3rd party  lessors’ contracts, as well as increases to tie down revenues once the taxiways and aprons are repairs, it  is anticipated that revenues in Fiscal Year 2018 could be increased from the current level of $750,000 to  an approximate range of $1.2 million to $1.5 million.       Vehicle Fund  At the May 27 Finance Committee meeting, questions were asked about City vehicles.  First, questions  were asked regarding the projected cost of vehicle and equipment replacements proposed for Fiscal  Year 2015 as part of CIP VR‐15000 (Proposed Capital Budget, pp. 342‐343).  A breakdown for Fiscal Year  2015, as well as the remaining four years, is attached (Attachment D).  Given the Finance Committees’  interest in the City’s complement of alternative fuel vehicles, the attachment also details the projected  fuel type for the replacement.      Second, questions were raised on the number of vehicles and equipment in the public safety fleet.  This  information is provided in Attachment E, as well as the fuel type for the vehicles and equipment.         7    Finance Committee Changes to the City Manager’s Proposed Budget  The items listed below summarize motions made and/or action items made by the Finance Committee  that result in a fiscal change or other recommended change to the Fiscal Year 2014 proposed budget.    City Attorney  Motion: On May 13, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 City Attorney budget (3‐0, 1 absent)    City Auditor  Motion: On May 13, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 City Auditor budget. (3‐0, 1 absent)    City Clerk  Motion: On May 13, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 City Clerk budget. (3‐0, 1 absent)    City Council  Motion: On May 13, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 City Council budget. (3‐0, 1 absent)    City Manager  Motion: On May 13, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 City Manager budget. (3‐0, 1 absent)    Office of Sustainability  Motion: On May 20, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Office of Sustainability budget. (3‐0, 1 absent)    Administrative Services Department  Motion: On May 13, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Administrative Services Department budget. (3‐0, 1 absent)    Community Services Department  Motion: On May 20, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Community Services Department budget. (3‐0, 1 absent)    Motion:  On May 20, 2014, the Finance Committee accepted staff’s recommendation to increase  revenue related to Golf operations by $18,188 and to decrease expense by $334,000,  resulting in a net benefit to the General Fund of $352,188. (3‐0, 1 absent)    Development Services Department  Motion: On May 20, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Development Services Department budget. (3‐0, 1 absent)       8    Motion:  On May 20, 2014, the Finanace Committee accepted staff’s recommendation to allocate  1.0 FTE Administrative Associate II and 0.1 FTE Senior Planning from the Planning and  Community Enviornment Department to the Development Services Department,  resulting in a net salary and benefits increase in the Development Services Department  of $112,795. (3‐0, 1 absent)    Library Department  Motion: On May 20, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Library Department budget. (3‐0, 1 absent)    People Strategy and Operations Department  Motion: On May 13, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 People Strategy and Operations Department budget. (3‐0, 1 absent)    Planning and Community Environment Department  Motion: On May 20, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Planning and Community Environment Department budget. (3‐0, 1 absent)    Motion:  On May 20, 2014, the Finance Committee accepted staff’s recommendation to allocate  1.0 FTE Administrative Associate II and 0.1 FTE Senior Planning from the Planning and  Community Enviornment Department to the Development Services Department,  resulting in a net salary and benefits decrease in the Planning and Commuinity  Environment Department of $112,795. (3‐0, 1 absent)    Motion: On May 20, 2014, the Finance Committee moved to direct staff to provide additional  information regarding the proposed Land Use Analyst and Senior Transportation Planner  positions and to provide the Committee with estimated anticipated expenditures for  Shuttle expansion in Fiscal Year 2015. (3‐0, 1 absent)    Public Safety  Police Department  Motion: On May 15, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Police Department budget. (4‐0)    Fire Department  Motion: On May 15, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Fire Department budget. (4‐0)    Office of Emergency Services  Motion: On May 15, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Office of Emergency Services budget. (4‐0)    Public Works Department  Motion: On May 27, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Public Works Department budget. (3‐0, 1 absent)    Motion: On May 27, the Finance Committee accepted staff’s recommendation to remove 0.66  FTE Facilities Manager from the FY 2015 Proposed Budget, totaling $128,088 in salary  9    and benefits expense, add $49,500 of contract funding for a Facilities Maintenance and  Rehabilitiation Operational Study, and reduce associated General Fund cost allocation  plan revenue by $30,405. The net General Fund benefit of these actions is $48,183. (3‐0,  1 absent)    Non‐Departmental  Motion: On May 13, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Non‐Departmental budget, including a $81,097 increase to the Convenant  Not to Develop Reserve bringing the reserve total to $1,039,776. (3‐0, 1 absent)      Enterprise Funds    Utilities Department  Motion: On May 15, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Utilities Department budget which includes the Electric, Fiber Optics, Gas,  Water, and Wastewater Collection Funds. (4‐0)    Motion:  On May 15, 2014, the Finance Committee accepted staff’s recommendation to include a  position reclassification of 1.0 FTE Senior Market Analysit to Business Aanlyst in Fiscal  Year 2015 Utilities Department Budget. This change results in a salary and benefit  increase totaling $15,948 in the Electric, Gas, and Water Funds. (4‐0)     Storm Drain Fund  Motion: On May 27, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Storm Drain Fund operating and capital budgets. (4‐0)    Refuse Fund  Motion: On May 27, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Refuse Fund budget. (4‐0)    Wastewater Treatment Fund  Motion: On May 27, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Wastewater Treatment Fund operating and capital budgets. (4‐0)    Airport Fund  Motion: On May 27, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Airport Fund budget. (4‐0)    Internal Service Funds    Information Technology Department  Motion: On May 13, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Information Technology Department budget. (3‐0, 1 absent)    Vehicle Replacement Fund  Motion: On May 27, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Vehicle Replacement Fund operating and capital budgets. (4‐0)  10      Employee Benefits Funds  Motion: On May 13, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 General Benefits, Workers’ Compensation, and Retiree Medical Funds  budget. (3‐0, 1 absent)    General Liability Fund  Motion:  On May 13, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 General Liability Fund budget. (3‐0, 1 absent)    Printing and Mailing Fund  Motion: On May 13, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Printing and Mailing Fund budget. (3‐0, 1 absent)    Capital Project Fund    Motion:  On May 27, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Capital Improvement Fund budget. (4‐0)    Motion: On May 27, the Finance Committee accepted staff’s recommendation to remove 0.34  FTE Facilities Manager from the FY 2015 Proposed Budget, totaling $65,851 in salary and  benefits expense and add $25,500 of contract funding for a Facilities Maintenance and  Rehabilitiation Operational Study. The net Infrastruction Reserve benefit of these  actions is $40,351. (4‐0)    Motion: On May 27, the Finance Committee accepted staff’s recommendation to establish a new  “Baylands Levee Improvements Feasibility Study” project (CIP PE‐15028) totaling $0.5  million. (4‐0)    Motion: On May 27, the Finance Committee recommended that the “Baylands Interpretive  Center Improvements and Boardwalk Feasibility Study” project (PE‐14018) be split into  two projects in order to reflect separately the cost of the feasibility study and the  interpretive center.  (4‐0)     Special Revenue Funds    Motion:  On May 20, 2014, the Finance Committee recommended tentative approval of the Fiscal  Year 2015 Special Revenue Fund budgets. (3‐0, 1 absent)    Position Changes  The Finance Committee has tentatively approved the following position changes:   Reallocate the 1.0 FTE Administrative Associate II from Planning and Community Environment to  Development Services, $98,460   Reallocate 0.1 FTE Senior Planner from Planning and Community Environment to Development  Services, $14,335   Reclassify 1.0 FTE Senior Market Analyst to Business Analyst in the Utilities Department (this  position is equally split between the Electric, Gas, and Water Funds), $15,948   Withdraw proposal to add 1.0 FTE Facilities Manager in the Public Works Department, $193,939.   11    The cost of this position was split between the General Fund (0.66 FTE, $128,088) and Capital  Improvement Fund (0.34 FTE, $65,851), with the General Fund also being reimbursed, through  the Cost Allocation Plan, $49,557.     Municipal Fee Schedule  Will be presented for Finance Committee review on May 29, 2014.    Finance Committee Recommended Changes to the City Manager’s Proposed Budget  The Finance Committee initiated a proposed change to the “Baylands Interpretive Center and Boardwalk  Feasibility Study” capital project.  The committee requested that this project be split into two separate  projects in order to separately display the funding for improvements to the Interpretive Center and the  funding for the feasibility study of the the boardwalk.  This memorandum includes a recommendation to  present two capital projects in the Fiscal Year 2015 budget (Attachment A).    Staff Recommended Changes to the City Manager’s Proposed Budget   Listed below is a summary of items presented to the Finance Committee at places up to the May 27,  2014 Finance Committee meetings that result in a financial change.    General Fund    Community Services Department, Golf Operations  Golf Course Financials were distributed to the Finance Committee at places on May 20, 2014. The  updated financials include a net $352,188 adjustment that benefits the General Fund Budget  Stabilization Reserve. Due to anticipated Golf Course closure for the reconfiguration project, staff  proposed an $18,188 revenue increase, which is mainly comprised of restaurant lease revenue, and a  $334,000 expense decrease to adjust for water usage, the Valley Crest golf maintenance contract, and  range fees.      Position Allocation for Development Services  As included in the Fiscal Year 2015 Proposed Budget, staff recommends allocating positions, revenues,  and expenditures from Planning and Community Environment (PCE) to Development Services (DS).   After the publication of the Fiscal Year 2015 Proposed Budget document, staff re‐examined the total  transfer of positions and recommends allocating an additional 1.10 positions from PCE to DS totaling  $112,795:      Reallocation of 1.0 Administrative Associate II ($98,460)   Reallocation of 0.1 Senior Planner ($14,335)    Cubberley Covenant Not to Develop Reserve Adjustment (Non‐Departmental)  The Non‐Departmental budget includes a $218,040 increase for the Cubberley Lease payment to the  Palo Alto Unified School District (PAUSD). Included in this amount is $55,845 that is associated with the  Covenant Not to Develop portion of the agreement with PAUSD, which has been set aside in the  Covenant Not to Develop Reserve. The remaining lease payment increase for Cubberley is $162,195.  Staff proposed that half of the $162,195 increase be allocated to the Cubberley Covenant Not to  Development Reserve (see p. 399 of the Proposed Operating document for detail), which will increase  the reserve from $958,679 to $1,039,776.     12    Facilities Manager and Facility Operational Study  The Proposed Budget document included a recommendation to add a Facilities Manager position.  This  position was intended to manage assigned maintenance activities, coordinate the City’s efforts to  address Infrastructure Blue Ribbon Commission (IBRC) recommendations, and implement a sustainable  maintenance program.  Upon further consideration, after the release of the Proposed Operating Budget,  the recommendation to fund this permanent position was amended.  Instead of recommending the  addition of a position at this time, staff proposes to add one time funds in the amount of $75,000 for an  Operational Study of the Facilities Maintenance and Rehabilitation business area.  This study is  recommended to be funded by the General Fund ($49,500) and the Capital Improvement Program  ($25,500).  This review, which will include the Facility Capital program, will seek to identify potential  operational changes, including alternative staffing levels; and organizational changes that would reduce  cost, improve service delivery, and increase customer satisfaction.  As a result of this adjustment, the  following recommendations were made to the Proposed Budget for the Public Works Department in the  General Fund:     Eliminate the proposed addition of a Facilities Manager   Reduce Salaries and Benefits by $128,088   Increase the proposed allocation for contract services by $49,500   Reduce General Fund Cost Allocation Plan revenue by $30,405    Enterprise Funds  Position Reclassification  Staff proposed a reclassification of 1.0 FTE Senior Market Analyst to 1.0 FTE Business Analyst.  This  position is funded in the Electric, Gas, and Water Funds.  The People Strategy and Operations  Department conducted a position classification study and determined that the job duties performed  were more in line with the Business Analyst classification description.  The cost for this position  reclassification including salaries and pension benefits totals $15,948 and is proposed to be funded in  equal amounts of $5,316 in the Electric, Gas, and Water Funds.    Capital Funds  Baylands Levee Improvements Feasibility Study  Staff proposed the establishment of a project titled “Baylands Levee Improvements Feasibility Study”  project (CIP PE‐15028) with a total cost of $0.5 million.  A corresponding reduction to the Los Altos  Treatment Plant Site Development Preparation and Security Improvements Project (PE‐14010) will be  recommended in 2014 as part of the year‐end Budget Amendment Ordinance.      Facilities Manager and Facility Operational Study  The Proposed Budget document included a recommendation to add a Facilities Manager position.  This  position was intended to manage assigned maintenance activities, coordinate the City’s efforts to  address Infrastructure Blue Ribbon Commission (IBRC) recommendations, and implement a sustainable  maintenance program.  Upon further consideration, after the release of the Proposed Operating Budget,  the recommendation to fund this permanent position was amended.  Instead of recommending the  addition of a position at this time, staff proposes to add one time funds in the amount of $75,000 for an  Operational Study of the Facilities Maintenance and Rehabilitation business area.  This study is  recommended to be funded by the General Fund ($49,500) and the Capital Improvement Program  ($25,500).  This review, which will include the Facility Capital program, will seek to identify potential  operational changes, including alternative staffing levels; and organizational changes that would reduce  cost, improve service delivery, and increase customer satisfaction.  As a result of this adjustment, the  13    following recommendations were made to the Proposed Capital Budget in the Capital Improvement  Fund:     Eliminate the proposed addition of a Facilities Manager   Reduce Salaries and Benefits by $65,851   Increase the proposed allocation for contract services by $25,500    Related Memos Distributed At Places      May 13, 2014   Additional information pertaining to the May 13 department hearings  o Summary of Position Changes  o Revised Proposed Budget Pages   Changes to the Cubberley Covenant Not to Develop Reserve    May 15, 2014   Additional information pertaining to May 15 department hearings   Changes to the Utilities Department: Position Reclassification    May 20, 2014   Additional information pertaining to May 20 department hearings  o Special Revenue Funds Summary page   Changes to the General Fund:  o Golf Course Operations  o Position allocation between Planning and Community Environment Department and  Development Services Department  o Shuttle Service Funding   Follow‐up items from previous meetings    May 27, 2014   Additional information pertaining to the May 27 department hearings  o Planning and Transportation Commission Review  o Storm Drainage Fund Oversight Committee   Changes to the General Fund:  o Public Works Facilities Manager   Changes to the Capital Improvement Fund  o Baylands Levee Improvements Feasibility Study  o Public Works Facilities Manager   Follow‐up items from previous meetings  o Recycled Water   o Fiber Optics Program              City of Palo Alto ‐ 1 ‐ Fiscal Year 2015 Proposed Budget PE‐14018Baylands Interpretive Center Improvements and Boardwalk Feasibility Study BAYLANDS INTERPRETIVE CENTER AND  BOARDWALK FEASIBILITY STUDY (PE‐14018) CIP FACTS: •Project Type:  Nonrecurring •Project Stage:  Pre‐Design •Est. Timeline:  Fall 2013‐Winter 2016 •Managing Department:  Public Works •IBRC Reference:  Catch‐up •Potential Board/Commission Review:  ARB, PRC, HRB IMPACT ANALYSIS: •Environmental:  Permitting from various agencies (Fish and Game, Army Corp, BCDC) will require a year prior to construction for full approval. •Design Elements:  This project may require ARB, PRC, HRB •Operating:  none Relationship to Comprehensive Plan Primary Connection •Element:  Community Services & Facilities •Section:  Parks & Public Faciliites •Goal:  C‐4 •Policy:  C‐24 •Program:  C‐19 Description: This project provides funding for a feasibility study/ environmental review for the boardwalk and interpretive center. The  study will identify safety concerns and environmental issues associated  with repairing/replacing the boardwalk, and includes an evaluation of  the boardwalk and interpretive center structural systems.  Justification: The boardwalk was closed in early 2014 due to  deteriorated decking, railings and structural members that made the  pathway unsafe. Repairs will be needed if the boardwalk is to be reopened. The Baylands Interpretive Center is in need of structural improvements due to its age and exposure to the elements. Supplemental Information: The budget for this project previously included funding for the repair of the boardwalk which was eliminated  in the FY 2015‐2019 CIP because a structural assessment and  environmental review have not been prepared and the full scope of the  work is unknown at this time.  Once the structural assessment and  environmental review are complete, a funding strategy for the boardwalk will need to be developed, if construction is feasible. Funding for the improvements to the Baylands Interpretive Center, previously reflected in this project, have been moved to a separate project titled "Baylands Interpretive Center Improvements" (PE-15029). Attachment A BAYLANDS INTERPRETIVE CENTER AND  BOARDWALK FEASIBILITY STUDY (PE‐14018) CONTINUED ‐ 2 ‐City of Palo Alto Fiscal Year 2015 Proposed Budget Prior Years Expended and Encumbered $14,150 Continuing Appropriations $52,295 Expenditures FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total Funding Salaries and Benefits Design Costs Construction Costs Other Total Budget Request Revenues FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total Funding Infrastructure Reserve Total Sources of Funds Attachment A - 1 -City of Palo Alto Fiscal Year 2015 Proposed Budget PE-15029Baylands Interpretive Center Improvements BAYLANDS INTERPRETIVE CENTER IMPROVEMENTS (PE-15029) CIP FACTS: NEW • Project Type: Nonrecurring • Project Stage: Design • Est. Timeline: Spring 2015-Spring 2016 • Managing Department: Public Works • Potential Board/Commission Review: ARB, PRC, HRB IMPACT ANALYSIS: • Environmental: Permitting from various agencies (Fish and Game, Army Corp, BCDC) may require a year prior to construction for full approval • Design Elements: This project may require ARB, PRC, HRB • Operating: None Relationship to Comprehensive Plan Primary Connection •Element: Community Services & Facilities • Section: Parks & Public Faciliites • Goal: C-4 •Policy: C-24 • Program: C-19 Description: This project provides funding for design and construction of improvements to the Baylands Interpretive Center. Improvements may include replacement of the decking, railing, structure framing members, exterior wood siding, flooring, cabinetry, and doors. Justification: The Baylands Interpretive Center is in need of structural improvements due to its age and exposure to the elements. Supplemental Information: Funding for the improvements to the Baylands Interpretive Center was previously reflected in the "Baylands Interpretive Center Improvements and Boardwalk Feasibility Study" project (PE-14018). As part of the Fiscal Year 2015 budget process, funds were removed from that project and are now reflected in this separate proect to more clearly reflect the work required for the Interpretive Center project. Expenditures FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total Funding Salaries and Benefits $36,298 $36,298 Design Costs $100,000 $100,000 Construction Costs $405,000 $405,000 Other Total Budget Request $136,298 $405,000 $541,298 Revenues FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total Funding Infrastructure Reserve $136,298 $405,000 $541,298 Total Sources of Funds $136,298 $405,000 $541,298 Attachment A General Fund Citywide General Fund Citywide General Fund Citywide General Fund Citywide Salary 60,338,821 101,579,376 2,147,422 3,611,820 597,348 1,177,918 63,083,591 106,369,114 Overtime 3,380,626 5,226,745 0 0 0 0 3,380,626 5,226,745 Pension 18,608,810 24,446,352 2,343,093 3,643,351 149,892 296,526 21,101,794 28,386,229 Healthcare 6,599,416 17,912,952 382,772 (121,167) 205,096 363,452 7,187,284 18,155,237 Other Benefits*2,675,790 5,408,319 364,557 (94,716) 8,697 16,755 3,049,044 5,330,358 Retiree Medical 8,042,870 11,519,744 1,021,872 1,956,121 0 0 9,064,742 13,475,865 TOTAL**99,646,332 166,093,487 6,259,716 8,995,410 961,033 1,854,651 106,867,081 176,943,548 * Includes Professional Development, Long Term Disability, Medicare, Medical Stipend, and Contingent Account – Benefits, and assumed General Fund Vacancy Savings. ** The General Fund Salary and Benefits Reserve totaling $2,737,960 is included in this total.  Attachment B FY 2014 Adopted FY 2015 Base Changes FY 2015 Proposed Actions (Revised) FY 2015 Proposed (Revised) Fiscal Year 2015 Salary and Benefit Changes Attachment B_FY 2015 Salary and Benefit Changes.xlsx 5/29/2014 ATTACHMENT C Department Fund Job Title FTE Gross Salary and  Benefit Costs Justification Attorney's Office General  Fund Legal Fellowa 1.00 74,177  The addition of the Legal Fellow position, effective January 1, 2015, will  establish a two‐year Legal Fellowship Program in the City Attorney's Office.   The demand for legal services has increased during the last few years  resulting in an increased use of law firms to cover the workload.  The Office  has determined that it is far less expensive to add an entry‐level position  rather than continuing to contract with law firms.  The Office intends to  recruit third‐year law school graduates and court clerks in Fall 2014, and it is  expected that the position will be filled by January 2015, after the candidates  have graduated and passed the bar exam. CSD General  Fund Junior Museum and Zoo  Educatorb 0.50 54,189  Two Junior Museum and Zoo (JMZ) Educator positions will be increased from  0.75 part‐time positions to 1.00 full‐time positions due to an increase in  demand for science instructions at Palo Alto Unified School District (PAUSD)  schools.  The JMZ Outreach Program provides science instruction at seven  PAUSD elementary schools, and three schools in East Palo Alto, through  ongoing contracts.  The cost increase is mostly offset with revenues from  PAUSD estimated at $45,000. CSD General  Fund Management Analyst 1.00 153,694  The Management Analyst position will support the existing Senior  Management Analyst in managing the $23 million CSD budget through  program administration that includes over 14,000 enrollees; expenditure and  revenue monitoring; processing 34,000 cash handling transactions annually;  administration of over 200 contracts; and various other administrative duties  including management of over 400 full‐time, part‐time, and seasonal  employees.  This position will also help CSD to evaluate information from the  citywide cost of services study, done in 2012.  Due to significant ongoing  daily operational demands, existing staff has not been able to build on the  initial consultant study.  With the support of the additional position, CSD will  comprehensively review its fee structure for the various camps, classes,  theatre performances, and other activities in order to align the fees with  various factors such as demand, potential subsidies for youth or seniors, and  market elasticity as well as determine the cost recovery levels of its  programs.  a) The cost of this position is partially offset by revenue from Enterprise and Other funds through the Cost Allocation Plan $32,616 (43.97%) b) Direct cost is mostly offset by funding from the Palo Alto Unified School District ($45,000) Fiscal Year 2015 Proposed Operating Budget Net Position Additions ‐ Department 1 5/29/2014 ATTACHMENT C Department Fund Job Title FTE Gross Salary and  Benefit Costs Justification Fiscal Year 2015 Proposed Operating Budget Net Position Additions ‐ Department CSD Public Art Fund Manager Community  Services, Senior Programs 1.00 150,123  A transfer from the General Fund to the Public Art Fund will ensure sufficient  funding is available to support a Public Art Manager position.  A full‐time,  hands‐on manager is required, rather than an hourly employee, to provide  consistent project management of many complex and multi‐year projects,  support the Public Art Commission and its subcommittees, develop public‐ private partnerships, manage the portable collection, and oversee collection   management.  The cost of this position is partially offset with a reduction of  an hourly 0.48 Management Analyst position responsible for Public Art.  In  addition, $54,000 in estimated revenues from the 1% Public Art Program for  Private Development, as approved by the City Council on December 2, 2013,  will cover the cost for this position.   Total CSD 2.50 358,006  Development  Services General  Fund Senior Management Analyst 1.00 184,815  A Senior Management Analyst position is needed to support the operations  of the Development Services Department.  In FY 2014 analytical work has  been performed by the Senior Management Analyst in the Planning and  Community Environment Department and other Development Services  managers; however, the work required in the Planning and Community  Environment Department does not allow for sufficient time to support both  departments.  This new position will take a lead role in budget development  and monitoring; lead a fee analysis to determine the actual cost of providing  services to customers, ensuring compliance with the City's rules and  regulations; and perform other administrative functions as needed.  Libraryc General  Fund Librarian d 1.70 86,000  Libraryc General  Fund Library Assistant 1.00 45,000  Library General  Fund Senior Librariand 0.25 18,000  Total Library 2.95 149,000  c) These Library positions are effective January 1, 2015 d) Add 2.00 Librarian positions, partially offset by 0.30 Librarian position Reduction for 0.25 Senior Librarian Add The opening of the Mitchell Park and Rinconada Libraries, scheduled for Fall  2014, will lead to a four‐fold increase in square footage from approximately  9,500 sq.ft. to approximately 41,000 sq.ft. and an increase in available library  materials by approximately 62% from approximately 91,000 pieces of library  material such as books, CDs, and DVDs to approximately 147,500 pieces of  library materials.  With the anticipated higher demand of library materials  and to streamline the Department's collection acquisition process, 2.00  Librarian positions and 1.00 Library Assistant positions will be added.  In  addition, a part‐time 0.75 Senior Librarian position in the Technical Services  Division will be increased to a full‐time 1.00 position.  The cost for this  augmentation is offset with a reduction of 0.30 Librarian position.  2 5/29/2014 ATTACHMENT C Department Fund Job Title FTE Gross Salary and  Benefit Costs Justification Fiscal Year 2015 Proposed Operating Budget Net Position Additions ‐ Department PCE General  Fund Land Use Analyst 1.00 175,358  The Advance Planning Division of the Department is the City’s “go to” place  for data and analysis about population, housing, land use, and development  in the City and has responsibility for high‐profile, data‐intensive efforts such  as updating and maintaining the City’s Comprehensive Plan, tracking  residential and non‐residential development, and monitoring/informing  regional planning and data collection efforts by ABAG, MTC, Santa Clara  County, the state Department of Finance, and the U.S. Census.  With the  addition of a Land Use Analyst, the Division will be able to fulfil its data  collection/dissemination and analysis functions more effectively without  diverting resources from important long range planning projects.  This  position will also support the Current Planning division by providing data and  support for the objective analysis of development proposals; collaborating  with other departments on mapping and GIS efforts, such as Public Works  infrastructure mapping; and disseminating data to the public through the  Department’s website.  Without this position, the Department will likely not  be able to accomplish its objective (Fiscal Year 2015 Proposed Operating  Budget, p. 233) related to increasing “the amount of planning and  transportation data immediately available to the public on the department  website…” and it will not have capacity within the Advance Planning division  to support its work program. PCE General  Fund and Other Funds Coordinator Transportation  Systems Management 0.50 67,955  The part‐time 0.5 benefitted Coordinator of Transportation Systems  Manager position will help in expanding education efforts in the community;  serve as a liaison to the Palo Alto Bicycle Advisory Committee, the  City/School Traffic Safety Committee, and grassroot organizations within the  communit; take the lead in grant development for Safe Routes to Schools  and bicycle programs; and support the implementation of the Bicycle  Pedestrian Transportation Plan.  3 5/29/2014 ATTACHMENT C Department Fund Job Title FTE Gross Salary and  Benefit Costs Justification Fiscal Year 2015 Proposed Operating Budget Net Position Additions ‐ Department PCE General  Fund Senior Planner 1.00 156,209  The Department is working to address community concerns about the quality  and objectivity of transportation analyses of development proposals and the  addition of a senior level planning position to the Transportation Division will  support this effort.  The new position will not only oversee consultants who  work on transportation impact analyses, but also support completion of the  Division’s aggressive work program, including significant planning efforts  related to traffic, parking, bike routes, and transportation demand  management.  The Senior Transportation Planner will support the Chief  Transportation Official, and is expected to act as the Division’s main  spokesperson and point of contact for public complaints and inquiries about  traffic issues.  This will directly address goals and objectives in the  Department’s budget proposal (p. 232‐233) to increase the public’s trust in  the City’s planning functions; expand public engagement efforts; make  significant progress on critical planning and transportation projections,  including transit and transportation demand management programs and the  bike implementation plan. Total PCE 2.50 399,522  PW Wastewater Treatment Fund Laboratory Technician, Water  Quality Control 0.50 59,900  A 0.5 part‐time Laboratory Technician position will be converted to a 1.0  Laboratory Technician position to support increased testing requirements  from the California Regional Water Quality Control Board.  Currently, 0.5 FTE  is available for routine testing of samples to meet state and federal  regulations related to city's wastewater treatment plant and drinking water  distribution system. New regulations announced by the California Regional  Water Quality Control Board will increase monthly testing requirements,  effective July 1, 2014.  Additionally, process control sampling and testing  time has increased for this position in recent years due to changes in US  Environmenal Protection Agency requirements. PW Airport Fund Management Analyst 1.00 155,000  A Management Analyst position in the Airport Fund will ensure that the  Department has sufficient staffing and resources to operate and maintain the  Airport when operations are assumed from Santa Clara County in fall 2014.  The position will be responsible for budget development, analysis, and  monitoring; reviewing and tracking committee and City Council staff reports;  interacting with local state and federal agencies including the Federal  Aviation Administration (FAA), National Transportation Safety Board (NTSB),  and California Department of Transportation (CalTrans) Aeronautics Division;  and ensuring that Airport operations and personnel are in compliance with  federal, state, and local laws and regulations. Additionally, the position will  be responsible for grant writing, reporting and accounting processes. Total PW 1.50 214,900  4 5/29/2014 ATTACHMENT C Department Fund Job Title FTE Gross Salary and  Benefit Costs Justification Fiscal Year 2015 Proposed Operating Budget Net Position Additions ‐ Department Utilities Electric Fund Metering Technician 1.00 133,682  The Electric Meter Technician will be responsible for maintenance,  installation, and programming of advanced meters, and meeting customer  demands for advanced meters, which are designed to better monitor utility  usage. There are currently over 130 known commercial meters in need of  demand meter upgrades; and over 1,000 meters that require recalibration  and resealing to prevent meter tampering. Utilities Enterprise Funds Principal Management  Analyst 1.00 188,421  The Principal Management Analyst position, funded by the Electric (0.34 ),  Gas (0.33 ), and Water (0.33) funds, will serve as a supervisor to a team  consisting of a Senior Business Analyst and two Business Analysts. The team  maintains daily operation of, and develops and  implements improvements  to the Utilities customer service system including utilities billing, “My  Utilities Account” website and reporting.  This position will also be a key  contributor and project manager in some major projects including the ERP  assessment, “My Utilities Account” upgrade, mobile solutions, advanced‐ metering pilots, and information security.  Utilities is in the process of  completing an IT assessment which identifies 38 potential projects on the  Utilities roadmap to improve operational efficiencies, manage assets more  effectively, and enable customers. The Principal Management Analyst will be  responsible for overseeing the technical aspects of developing those projects  in conjunction with customer feedback for customer‐on‐line systems.   Finally, as IT shifts more applications and solutions to cloud‐based and  hosted services, Utilities will have to administer and support more of its own  business systems and applications. Utilities Enterprise Funds Safety Officer 1.00 152,128  The Utility Safety Officer position, funded by the Electric (0.55), Gas (0.20),  Water (0.15), and Wastewater (0.10) funds, will ensure compliance with  applicable workplace safety and environmental regulations, including timely  completion of mandatory training requirements by Utilities' over 250  employees.  In addition, this position will be responsible for planning,  organizing, coordinating, implementing, and evaluating the effectiveness of  the Departments' health and safety programs, both in the office and in the  field, including utility‐specific industrial safety‐ and job‐related training  programs within the Department. This position will also conduct trainings  with other City departments, and is a key position for providing emergency  preparedness.   Total Utilities 3.00 474,231  Total Positions 14.45 1,854,651 Note:  This table does not include position reclassifications or funding reallocations between Funds and Departments 5 5/29/2014 Vehicle Replacement VR-15000 Fiscal Year 2015 Category Type Quantity Fuel Type* Total Budgeted** Sedans 7 4 CNG, 3 Gas $234,000 Pick-up Trucks 12 1 Diesel, 11 Gas $722,000 Vans 17 9 CNG, 8 Gas $1,117,000 Fire Apparatus (2-Fire Engine, Blazer) 3 Gas $1,056,000 Police Vehicles (2 Patrol, 1 Tahoe, 1 Animal Control Truck, 1 Motorcycle) 5 Gas $260,000 Misc. Equipment (2 Tractors, 2 Brush Chippers, 2 Backhoes 5 Diesel $397,000 Vehicle Replacement VR-16000 Fiscal Year 2016 Category Type Quantity Fuel Type* Total Budgeted** Sedans 5 TBD $148,000 Pick-up Trucks 11 TBD $889,000 Vans 6 TBD $258,000 SUVs 2 TBD $79,000 Police Patrol Vehicles 3 Gas $150,000 Wildland Pumper 1 Diesel $343,000 Dump Truck 1 Diesel $166,000 Misc. Equipment (Tractor, Sprayer, Truck w/Rodder) 3 1 Diesel, 2 Gas $273,000 Attachment D Vehicle Replacement VR-17000 Fiscal Year 2017 Category Type Quantity Fuel Type* Total Budgeted** Sedans 2 TBD $58,000 Pick-up Trucks 16 TBD $840,000 Vans 15 TBD $693,000 SUVs 1 TBD $40,000 Dump Truck 2 1 Diesel, 1 Gas $263,000 Misc. Equipment ( Trailers, Fork Lifts, Brush Chippers, Generator, Mowers, Aerators) 16 2-Electric, 3 Diesel, 6-Gas Trailers-N/A $653,000 Vehicle Replacement VR-18000 Fiscal Year 2018 Category Type Quantity Fuel Type* Total Budgeted** Pick-up Trucks 6 TBD $326,000 Vans 6 TBD $252,000 SUVs 3 TBD $254,000 Police Patrol Vehicle 2 Gas $100,000 Aerial Truck 1 Diesel $216,000 Misc. Equipment (tractor, gen, backhoes) 6 Diesel $879,000 Vehicle Replacement VR-19000 Fiscal Year 2019 Category Type Quantity Fuel Type* Total Budgeted** Sedans 2 TBD $60,000 Pick-up Trucks 7 TBD $373,000 Ambulances 2 Diesel $566,000 Trailers 5 N/A $50,000 **Note – Proposed budgeted amount includes customizing, outfitting, branding and registration costs. **Note - Alternative fuel vehicles (CNG, Hybrid, Plug-in Hybrid & EVs) will be evaluated prior to replacement of all passenger vehicles. FLEET INVENTORY BY FUEL CATEGORY as of 5/27/14 Type/Gross Vehicle Weight (GVW)Unleaded Diesel CNG Hybrid Total Public Safety Police - Sedan 41 2 43 Police - SUV 5 5 Police - Van 3 3 Police - Truck 2 2 Police - Motorcycles 7 7 Police - Parking Enf. Vehicles 5 5 Police - Animal Control Trucks 2 2 Police - MEOC/SWAT/Support 4 4 Fire - Sedan 5 5 Fire - SUV 4 4 Fire - Van 3 3 Fire - Truck 2 1 3 Fire - Engines, Ladders, Ambulances, Rescue, Pumpers 18 18 Fire - Wildland Patrol 2 2 Total Public Safety 76 23 7 0 106 Non-Public Safety Sedan/SUV 20 21 1 42 Truck/Van <6K GVW 55 55 Truck/Van 6K-11K GVW 64 2 31 97 Trucks 11K-15K GVW 11 3 14 Trucks 15K-26K GVW 4 12 2 18 Dump truck <11K GVW 10 10 Dump truck 11K-15K GVW 9 0 9 Dump truck, boom truck, aerials, crane truck 3 34 37 Wildland patrol vehicles 3 3 Water truck 1 1 Sweepers 12 4 16 Backhoe, mowers, tractors, forklifts, rollers, air compressors, chippers, trailers 9 54 63 Asphalt rollers, water pumps, light towers, spray rigs 4 9 13 Generators, ditch witches, cable reelers 11 36 4 51 Total Non-Public Safety 203 163 62 1 429 Total- All Vehicles 355 209 76 1 641 *Will be exploring EVs for future replacement Attachment E APPENDIX #2 ATTACHMENT 1 1 6/3/2014 Fiscal Year 2015 Proposed Operating Budget Position Increases - Department Department Fund Job Title FTE Gross Salary and Benefit Costs Net Salary and Benefit Costs Attorney's Office General Fund Legal Fellow*1.00 74,177 41,561 CSD General Fund Junior Museum and Zoo Educatora 0.50 54,189 9,189 CSD General Fund Management Analyst 1.00 153,694 153,694 CSD Public Art Fund Manager Community Services, Senior Programs 1.00 150,123 150,123 Total CSD 2.50 358,006 313,006 Development Services General Fund Senior Management Analyst 1.00 184,815 184,815 IT Technology Fund Senior Technologist b 0.00 50,206 50,206 Library c General Fund Librarian d 1.70 86,000 86,000 Libraryc General Fund Library Assistant 1.00 45,000 45,000 Library General Fund Senior Librarianc 0.25 18,000 18,000 Total Library 2.95 149,000 149,000 Office of Sustainability General Fund and Enterprise Funds Management Analyst*1.00 153,696 116,329 PCE General Fund Business Analyst 1.00 175,358 175,358 PCE General Fund and Other Funds Coordinator Transportation Systems Management 0.50 67,955 67,955 PCE General Fund Senior Planner 1.00 156,209 156,209 Total PCE 2.50 399,522 399,522 PSO General Fund Senior Management Analyst*1.00 177,411 99,403 * The General Fund cost of these positions is offset by revenue from Enterprise and Other funds through the Cost Allocation Plan (43.97%) a) Cost is partially offset by funding from the Palo Alto Unified School District ($45,000) b) Add 2.00 Senior Technologist positions, offset by Elimination of 2.00 Technologist positions c) These Library positions are effective January 1, 2015 d) Add 2.00 Librarian positions, partially offset by 0.30 Librarian position Reduction for 0.25 Senior Librarian Add ATTACHMENT 1 2 6/3/2014 Fiscal Year 2015 Proposed Operating Budget Position Increases - Department Department Fund Job Title FTE Gross Salary and Benefit Costs Net Salary and Benefit Costs PW Wastewater Treatment Fund Laboratory Technician, Water Quality Control 0.50 59,900 59,900 PW Airport Fund Management Analyst 1.00 155,000 155,000 PW General Fund and Other Funds Manager Facilities Maintenance*1.00 194,073 137,753 Total PW 2.50 408,973 352,653 Utilities Electric Fund Metering Technician 1.00 133,682 133,682 Utilities Enterprise Funds Principal Management Analyst 1.00 188,421 188,421 Utilities Enterprise Funds Safety Officer 1.00 152,128 152,128 Total Utilities 3.00 474,231 474,231 Total Positions 17.45 2,430,037 2,180,727 * The General Fund cost of these positions is offset by revenue from Enterprise and Other funds through the Cost Allocation Plan (43.97%) Note: This table does not include position reclassifications or funding reallocations between Funds and Departments GF ENT Other**Total FY 2014 Adopted FTE 577.80 354.55 87.00 1,019.35 Net FTE Additions & Reductions 11.06 4.95 1.44 17.45 FTE Reallocations 1.93 (0.71) (1.22) - FY 2015 Proposed FTE Changes 12.99 4.24 0.22 17.45 FY 2015 Proposed FTE 590.79 358.79 87.22 1,036.80 **Other Funds are Internal Service Funds, Special Revenue Funds, and the Capital Fund CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET 1 CITY COUNCIL Mission Statement The City Council’s mission is to develop an overall vision for the community as a whole. Purpose The City Council is responsible for the scope, direction, and financing of City services; establishing policy based on information provided by staff, advisory boards and commissions, and the general public; and implementing policy through staff under the Council-Manager form of government. Description Under the Council-Manager form of government, the City Council is responsible for the legislative functions of the City, including establishing policies and priorities, developing an overall vision, and approving the annual spending plan for the City. The terms of the Mayor and the Vice- Mayor are for one year, expiring at the first meeting in January. The terms of the Council members are for four years, and the General Municipal City Council ATTACHMENT 2 2 CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET Budget Summary FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change $ FY 2015 Change % Dollars by Division City Council Operations 400,804 393,297 496,566 431,902 (64,663)(13.0)% Total Dollars by Division 400,804 393,297 496,566 431,902 (64,663)(13.0)% Dollars by Category Salary & Benefits Salary 64,477 64,286 64,771 64,800 29 0.0% Other Benefits 108,311 11,988 8,388 7,711 (677)(8.1)% Retiree Medical 134,296 133,000 125,549 77,652 (47,897)(38.2)% Pension 0 14,561 22,699 16,927 (5,772)(25.4)% Healthcare 0 111,321 120,280 99,289 (20,991)(17.5)% Total Salary & Benefits 307,084 335,156 341,687 266,379 (75,308)(22.0)% Contract Services 67,253 21,363 108,000 108,000 0 0.0% Supplies & Material 183 1,124 2,930 2,930 0 0.0% General Expense 26,003 33,146 42,455 52,455 10,000 23.6% Allocated Charges 281 2,507 1,494 2,139 645 43.2% Total Dollars by Expense Category 400,804 393,297 496,566 431,902 (64,663)(13.0)% Revenues Charges to Other Funds 56,408 288,083 107,300 93,814 (13,486)(12.6)% Total Revenues 56,408 288,083 107,300 93,814 (13,486)(12.6)% Positions by Division City Council Operations 9.00 9.00 9.00 9.00 0.00 0.0% Total Positions by Division 9.00 9.00 9.00 9.00 0.00 0.0% City Council ATTACHMENT 2 CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET 3 Staffing Job Classification FY 2012 Actuals FY 2013 Actuals FY 2014 Adopted Budget FY 2015 Proposed Budget FY 2015 Change FTE FY 2015 Salary City Council Member 9.00 9.00 9.00 9.00 0.00 64,962 Total FTE/Salaries 9.00 9.00 9.00 9.00 0.00 64,962 Budget Reconciliation Positions Expenditures Revenues Net General Fund Prior Year Budget 9.00 496,566 107,300 389,266 Citywide Adjustments to Costs of Ongoing Activities Charges for Services 0.00 0 (13,486) 13,486 Salaries and Benefits Adjustments 0.00 (75,309) 0 (75,309) Printing and Mailing Allocated Charges Adjustment 0.00 645 0 645 Citywide Adjustments to Costs of Ongoing Activities 0.00 (74,664)(13,486)(61,178) Total FY 2015 Base Budget 9.00 421,902 93,814 328,088 Budget Proposals 1 Conference Travel 0.00 8,000 0 8,000 2 Meal for Meetings 0.00 2,000 0 2,000 Total Budget Proposals 0.00 10,000 0 10,000 Total FY 2015 Proposed Budget 9.00 431,902 93,814 338,088 City Council ATTACHMENT 2 4 CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET Budget Proposals Budget Proposals Positions Expenditures Revenues Net General Fund 1 Conference Travel 0.00 8,000 0 8,000 This action increases travel for Council members to attend eight additional local, regional, and national events and new Council trainings for an average cost of $1,000 each. As part of the approval of the Fiscal Year 2014 Midyear Budget Review and Budget Amendment Ordinance, the City Council's budget was increased by $8,000 to cover additional travel expenses. This action increases the travel allocation from $10,000 to $18,000. The average per trip cost estimate is based on lodging, airfare, and taxis during out-of-state travel. Additionally, the City Council will have at least two new Council members who will attend new Council Member training and conferences. (Ongoing: $8,000) Performance Results Increased travel will improve Council members' knowledge and information regarding local government trends and best practices. 2 Meal for Meetings 0.00 2,000 0 2,000 This action increases food for meetings by $2,000, from $5,000 to $7,000. The $2,000 increase in meals provides funding for additional meetings anticipated to be scheduled by the Council following a recent increase in Special City Council meetings scheduled. This additional meals budget is based on five additional meetings, at $285 per meal, as well as CPI-related increases incurred during the last few years. (Ongoing: $2,000) Performance Results Not applicable. City Council ATTACHMENT 2 CITY OF PALO ALTO FISCAL YEAR 2015 PROPOSED BUDGET 129 Budget Proposals Budget Proposals Positions Expenditures Revenues Net General Fund 1Our Palo Alto 0.00 150,000 0 150,000 On February 3, 2014, the City Council approved the conceptual framework for Our Palo Alto. Our Palo Alto is a community conversation about the future of the City. This two-year, citywide engagement effort is intended to create opportunities for dialogue around important ideas and programs while tackling issues the community cares about. Fueled by input and participation from citizens, Our Palo Alto is organized into three parallel, yet interconnected tracks: Ideas, Action and Design. This action increases funding for Public Communications contractors and consultants, and for marketing and advertising on social media sites. More specifically, the increase includes support for Our Palo Alto communication, advertising, and messaging. Our Palo Alto additional support includes funding for videos about Palo Alto; and an increase to the City's photo database for social media and website communications. Our Palo Alto initiatives specifically linked to planning, traffic, and parking are budgeted in the Planning and Community Environment Department in the amount of $175,000. The total one-time funding for this effort is $325,000. (Ongoing: $0) Performance Results Our Palo Alto is expected to positively influence dialogue among citizens regarding issues facing the community and Palo Alto's future. 2 City Manager Staffing Reconfiguration 0.00 94,169 0 94,169 This action deletes 1.0 Assistant to the City Manager position and adds 1.0 Assistant City Manager position. This staffing reconfiguration will provide a higher level of operational oversight. (Ongoing: $94,169.) Performance Results This staffing reconfiguration is expected to provide additional capacity for operational oversight. 3 Sustainability Office Staffing 0.05 7,635 0 7,635 This action provides 1.0 Management Analyst position for the Sustainability Office, with 0.50 position funded in the Office of Sustainability, 0.25 position in Utilities Administration; 0.10 position in Utilities Fiber Optic; and 0.05 position funded in each of the following, Refuse Fund, Wastewater Treatment Fund, and the City Manager's Office. Funding for the 0.25 full-time equivalent (FTE) budgeted in Utilities Administration is allocated across Utilities' Electric, Gas, Wastewater Collection, Water, and Fiber Optics funds, in accordance with the Utilities Administration cost allocation methodology. This position will support the Chief Sustainability Officer with identifying and pursuing foundation, government and other funding for City sustainability initiatives; prioritizing and evaluating the progress and impacts of sustainability initiatives; and developing and executing the Climate Plan and other sustainability-related strategies. It is envisioned that, through receipt of grant funds, this position will be funded in subsequent fiscal years. (Ongoing: $0) Performance Results With the addition of this position, it is expected that the City will advance in its sustainability efforts throughout the organization and the community. City Manager's Office ATTACHMENT 3 Fiscal Year 2014 Fiscal Year 2014 Fiscal Year 2015 Fiscal Year 2015 Adopted Adjusted Proposed Revised Budget Budget Budget Change Budget Revenues Tournament fees 1,250                      5,000                      Green Fees 1,040,550              754,843                 Monthly play cards 99,700                   99,700                   Driving range 253,750                 321,000                99,044                  (16,644)                   82,400                   Cart/club rentals 169,400                 274,656                 Proshop lease 22,500                   27,248                  18,000                  ‐                           18,000                   Restaurant lease 58,800                   48,880                  33,600                  25,200                    58,800                   Restaurant Utilities 22,032                   15,336                  10,368                  9,632                       20,000                   Other Fee 2,800                      24,319                   Sale of Golf Course equipment* Total Revenue 1,670,782              1,570,982             161,012                18,188                    179,200                 Expenditures Operating Expenses Salaries 100,882                 100,882                97,676                   ‐                           97,676                   Benefits 68,570                   68,570                  47,497                   ‐                           47,497                   Miscellaneous       Supplies and Materials 29,447                   28,331                  8,000                     ‐                           8,000                      General Expense 1,438                      1,438                     1,438                     ‐                           1,438                      Rents and Leases 1,000                      1,000                     1,000                     ‐                           1,000                      Facilities and Equipment  Purchases ‐                          ‐                          Allocated Charges 412,337                 462,337                467,713                (110,000)                 357,713                 Subtotal 613,674                662,558               623,324               (110,000)                513,324                Contract Services Golf Maintenance 616,974                 691,283                663,955                (209,852)                 454,103                 Miscellaneous 22,003                   22,003                  24,030                  24,030                   Range fees 110,173                 129,200                84,188                  (14,148)                   70,040                   Cart rentals 64,785                   102,182                 ‐                          ‐                            ‐                            Club rentals 2,975                      4,999                     ‐                         ‐                           ‐                          Fixed management fees 256,965                 284,384                30,500                  ‐                           30,500                   Credit card fees 30,000                   30,000                  ‐                         ‐                           ‐                          Subtotal 1,103,875             1,264,051            802,673               (224,000)                578,673                Total Operating Expenses 1,717,549             1,926,609            1,425,997            (334,000)                1,091,997             Income From Operations (46,767)                 (355,627)              (1,264,985)           352,188                 (912,797)               Debt Expenses Debt Service (refunded)429,020                 429,020                428,194                ‐                           428,194                 Subtotal 429,020                 429,020                428,194                 ‐                           428,194                 Cost Plan Charges 26,224                   26,224                  30,485                   ‐                           30,485                   Net Income (Loss)(502,011)                (810,871)               (1,723,664)           352,188                  (1,371,476)            Attachment A Fiscal Year 2015 Proposed Budget Golf Course Financials 5/20/2014, 5:30 PM golf/Golf Financial Summary.xls,CheckIn ($000) Community Development Funds Street Improvement Funds Federal and State Revenue Funds Housing In-Lieu Funds Special Districts Funds Traffic Mitigation and Parking In-Lieu Funds Public Benefits Funds BID Fund SUMC Fund Public Art Fund Total Special Revenue Funds RevenuesGas Tax -$ 1,644$ -$ -$ -$ -$ -$ -$ -$ -$ 1,644$ Federal and State Grants - - 507 - - - - - - - 507Parking Permit/In-Lieu Fees - - - 2,500 1,993 45 - - - - 4,538Development Impact Fees 1,157 - - - - - - - - - 1,157Interest Income 221 8 5 127 20 101 3 2 646 - 1,133 Operating Transfers - - - - 170 - - - - 96 266 Other Revenue - - 277 149 - 280 30 - - 54 790Business Improvement District (BID) Special Assessment - - - - - - - 153 - - 153 Loan Repayment - - - 40 - - - - - - 40 Total Source of Funds 1,378$ 1,652$ 789$ 2,816$ 2,183$ 426$ 33$ 155$ 646$ 150$ 10,228$ ExpendituresCDBG Project Expenditures $ - $ - $ 581 $ - $ - $ - $ - $ - $ - $ - $ 581 CDBG Administration Cost Recovery - - 92 - - - - - - - 92 Transfer for Street Improvement Cost Recovery - 292 - - - - - - - - 292Street Improvement Fund CIP Transfer - 1,625 - - - - - - - 1,625Residential Parking Permit Fund - - - - 138 - - - - 138 University Avenue Parking Permit Fund Operating Expenses - - - - 1,527 - - - - - 1,527 California Avenue Parking Permit Fund Operating Expenses - - - - 197 - - - - - 197 Public Art Expenses - - - - - - - - - 150 150 Below Market Rate (BMR) Program Management Contract - - - 100 - - - - - - 100 BMR Loan Program - - - 1 - - - - 1 College Terrace Parking Program - - - - - - - - - - 0 Residential Housing In-Lieu - - - 475 - - - - - 475 Commercial Housing In-Lieu - - 50 - - - - - - 50 Transfer to General Fund - - - 133 - - - - - Transfer to Capital Improvement Fund 1,885 - - - 460 - - - 1,200 - 3,545 Senior Services Grant - - - - - - 28 - - - 28 BID Operating Expense - - - - 173 - - 173 SUMC projects - - - - - - - - 137 - 137 Total Use of Funds 1,885$ 1,917$ 673$ 626$ 2,455$ -$ 28$ 173$ 1,337$ 150$ 9,111$ Net To (From) Reserves (507)$ (265)$ 116$ 2,190$ (272)$ 426$ 5$ (18)$ (691)$ -$ 1,117$ Attachment BSpecial Revenue Summary By Fund Fiscal Year 2014 Fiscal Year 2014 Fiscal Year 2015 Fiscal Year 2015 Adopted Adjusted Proposed Revised Budget Budget Budget Change Budget Revenues Tournament fees 1,250                      5,000                      Green Fees 1,040,550              754,843                 Monthly play cards 99,700                   99,700                   Driving range 253,750                 321,000                99,044                  (16,644)                   82,400                   Cart/club rentals 169,400                 274,656                 Proshop lease 22,500                   27,248                  18,000                   ‐                           18,000                   Restaurant lease 58,800                   48,880                  33,600                  25,200                    58,800                   Restaurant Utilities 22,032                   15,336                  10,368                  9,632                       20,000                   Other Fee 2,800                      24,319                   Sale of Golf Course equipment* Total Revenue 1,670,782              1,570,982             161,012                18,188                    179,200                 Expenditures Operating Expenses Salaries 100,882                 100,882                97,676                   ‐                           97,676                   Benefits 68,570                   68,570                  47,497                   ‐                           47,497                   Miscellaneous       Supplies and Materials 29,447                   28,331                  8,000                      ‐                           8,000                      General Expense 1,438                      1,438                     1,438                      ‐                           1,438                      Rents and Leases 1,000                      1,000                     1,000                      ‐                           1,000                      Facilities and Equipment  Purchases ‐                           ‐                          Allocated Charges 412,337                 462,337                467,713                (110,000)                 357,713                 Subtotal 613,674                662,558               623,324               (110,000)                513,324                Contract Services Golf Maintenance 616,974                 691,283                663,955                (209,852)                 454,103                 Miscellaneous 22,003                   22,003                  24,030                  24,030                   Range fees 110,173                 129,200                84,188                  (14,148)                   70,040                   Cart rentals 64,785                   102,182                 ‐                          ‐                            ‐                            Club rentals 2,975                      4,999                      ‐                          ‐                            ‐                          Fixed management fees 256,965                 284,384                30,500                   ‐                           30,500                   Credit card fees 30,000                   30,000                   ‐                          ‐                            ‐                          Subtotal 1,103,875             1,264,051            802,673               (224,000)                578,673                Total Operating Expenses 1,717,549             1,926,609            1,425,997            (334,000)                1,091,997             Income From Operations (46,767)                 (355,627)              (1,264,985)           352,188                 (912,797)               Debt Expenses Debt Service (refunded) 429,020                 429,020                428,194                 ‐                           428,194                 Subtotal 429,020                 429,020                428,194                 ‐                           428,194                 Cost Plan Charges 26,224                   26,224                  30,485                   ‐                           30,485                   Net Income (Loss) (502,011)                (810,871)               (1,723,664)           352,188                  (1,371,476)            Attachment A Fiscal Year 2015 Proposed Budget Golf Course Financials 5/20/2014, 5:30 PM golf/Golf Financial Summary.xls,CheckIn ($000) Community Development Funds Street Improvement Funds Federal and State Revenue Funds Housing In-Lieu Funds Special Districts Funds Traffic Mitigation and Parking In-Lieu Funds Public Benefits Funds BID Fund SUMC Fund Public Art Fund Total Special Revenue Funds RevenuesGas Tax -$ 1,644$ -$ -$ -$ -$ -$ -$ -$ -$ 1,644$ Federal and State Grants - - 507 - - - - - - - 507Parking Permit/In-Lieu Fees - - - 2,500 1,993 45 - - - - 4,538Development Impact Fees 1,157 - - - - - - - - - 1,157Interest Income 221 8 5 127 20 101 3 2 646 - 1,133 Operating Transfers - - - - 170 - - - - 96 266 Other Revenue - - 277 149 - 280 30 - - 54 790Business Improvement District (BID) Special Assessment - - - - - - - 153 - - 153 Loan Repayment - - - 40 - - - - - - 40 Total Source of Funds 1,378$ 1,652$ 789$ 2,816$ 2,183$ 426$ 33$ 155$ 646$ 150$ 10,228$ ExpendituresCDBG Project Expenditures $ - $ - $ 581 $ - $ - $ - $ - $ - $ - $ - $ 581 CDBG Administration Cost Recovery - - 92 - - - - - - - 92 Transfer for Street Improvement Cost Recovery - 292 - - - - - - - - 292Street Improvement Fund CIP Transfer - 1,625 - - - - - - - 1,625Residential Parking Permit Fund - - - - 138 - - - - 138 University Avenue Parking Permit Fund Operating Expenses - - - - 1,527 - - - - - 1,527 California Avenue Parking Permit Fund Operating Expenses - - - - 197 - - - - - 197 Public Art Expenses - - - - - - - - - 150 150 Below Market Rate (BMR) Program Management Contract - - - 100 - - - - - - 100 BMR Loan Program - - - 1 - - - - 1 College Terrace Parking Program - - - - - - - - - - 0 Residential Housing In-Lieu - - - 475 - - - - - 475 Commercial Housing In-Lieu - - 50 - - - - - - 50 Transfer to General Fund - - - 133 - - - - - Transfer to Capital Improvement Fund 1,885 - - - 460 - - - 1,200 - 3,545 Senior Services Grant - - - - - - 28 - - - 28 BID Operating Expense - - - - 173 - - 173 SUMC projects - - - - - - - - 137 - 137 Total Use of Funds 1,885$ 1,917$ 673$ 626$ 2,455$ -$ 28$ 173$ 1,337$ 150$ 9,111$ Net To (From) Reserves (507)$ (265)$ 116$ 2,190$ (272)$ 426$ 5$ (18)$ (691)$ -$ 1,117$ Attachment BSpecial Revenue Summary By Fund May 21, 2014 Honorable City Council c/o City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 RE: Review of 2015-2019 Proposed Capital Improvement Program (CIP) The Planning and Transportation Commission (PTC) has completed its review of the 2015-2019 Capital Improvement Plan (CIP) and determined that the projects in the CIP are consistent with the Comprehensive Plan. The May 14, 2014 motion to determine that the 2015-2019 CIP is consistent with the Comprehensive Plan passed on a vote of 6-0 (Chair Mark Michael absent). The Commission was particularly pleased with the efforts of City staff to provide a comprehensive analysis of the relationship of CIP projects to Comprehensive Plan elements, the ranking of projects in terms of Council priorities, and staff’s responsiveness to PTC concerns from last year. As part of the motion determining that the 2015-2019 CIP is consistent with the Comprehensive Plan, the Commission also made two suggestions to be incorporated into the 2015-2019 CIP review process: •Include a CIP item for the 2015 budget to study sea level rise and potential options for addressing its impacts to Palo Alto; and •Include a change analysis in the Fiscal Year 2015-2019 Proposed CIP in comparison to the Fiscal Year 2014-2018 CIP, as feasible, given time constraints from approval of the CIP by the PTC to the final Finance Committee hearing on May 27 and City Council Budget hearing on June 9 In addition, the PTC suggested that the PTC CIP subcommittee be reconvened prior to the development of the 2016-2020 Proposed CIP. At the May 14, 2014 PTC meeting, the Office of Management and Budget indicated that next year’s CIP document would be prepared using a new budget and publishing software. The PTC subcommittee would meet with staff to review changes proposed by staff to the document and provide input as to how the document might further be improved. Respectfully submitted, Arthur Keller, Acting Chair Planning and Transportation Commission Attachment A City of Palo Alto (ID # 4673) Planning & Transportation Commission Staff Report Report Type: Meeting Date: 5/14/2014 City of Palo Alto Page 1 Summary Title: Review of 2015-2019 CIPs for Comp Plan Consistency Title: Review and Recommendation to City Council Regarding 2015-2019 Proposed CIP- Comprehensive Plan Compliance Report From: Chitra Moitra, Planner Lead Department: Planning & Community Environment RECOMMENDATION Staff recommends that the Planning and Transportation Commission (PTC) find the proposed 2015-2019 Capital Improvement Program (CIP) consistent with the Comprehensive Plan and forward the finding to the Finance Committee and City Council. BACKGROUND Each year the Planning and Transportation Commission is required to review the proposed CIP for consistency with the Comprehensive Plan and forward its recommendations to the Finance Committee and City Council. The Commission is charged with using the Comprehensive Plan as a guide for reviewing the CIPs and examining its effect on the physical development of the City. The Commission may also suggest modifications to the CIP preparation and review process. These suggested modifications are typically communicated through a letter to the City Council via the Finance Committee. The most recent letter to the City Council concerning the 2014- 2018 CIP, from May 2013, is included as Attachment A. The PTC’s recommendation for Fiscal Year 2014 will be presented to the Finance Committee at the CIP budget hearing on May 27, 2014. The City Council will hold public hearings on the Fiscal Year 2015 Proposed Operating and Capital budgets on June 9 and adoption of the entire budget is scheduled for June 16, 2014. DISCUSSION Overview of 2015-2019 CIP The 2015-2019 Proposed CIP was developed in coordination with all City departments responsible for capital projects. Between the General Fund, Enterprise Funds, and Internal Service Funds, the overall CIP is $330.8 million, which represents a decrease of $45 million, or 12% compared to the 2014-2018 CIP of $375.8 million primarily due to changes in infrastructure investments in the Wastewater Treatment Fund. Planned expenditures in Fiscal Attachment B City of Palo Alto Page 2 Year 2015 total $57.5 million across all funds (General Fund: $24.7 million; Internal Service Funds: $4.3 million; Enterprise Funds: $28.5 million). Consistent with recent years, the Infrastructure Blue Ribbon Commission’s (IBRC) Final Report, published on December 22, 2011 guided the development of the CIP. The IBRC analyzed the City’s infrastructure needs, and determined that “keep-up” needs had been significantly underfunded, which led to a backlog of “catch-up” needs, and the need for another $211 million for “new and replacement” projects, including a replacement of the public safety building, replacement of two fire stations, and various other transportation, parks, and facility needs, crossing all funds. In the years following the IBRC Final Report, The City Council has aggressively worked to improve the City’s infrastructure, by increasing the annual funding of keep-up needs by $2.2 million as well as transferring excess General Fund resources, as part of the closing of the fiscal year, from the General Fund to the Infrastructure Reserve (IR) starting with Fiscal Year 2012. Between Fiscal Years 2012 and 2013, $16.5 million was transferred, and it is expected that as part of closing Fiscal Year 2014 another $4.0 million will be transferred. Additionally, the City Council established the City Council Infrastructure Committee, tasked with addressing the “keep-up” and “catch-up” infrastructure needs. In March, the City Council considered a recommendation from the Infrastructure Committee that included a prioritized project list and a funding plan for addressing projects on the project list. The City Council approved the funding plan with a provisional 2% Transient Occupancy Tax (TOT) increase. For more information on the Infrastructure backlog and the Infrastructure Committee funding plan, please refer to the City Council Transmittal Letter of the FY 2015 Proposed Capital Budget (Attachment E). Project Prioritization A limited number of new General Fund projects and existing projects with increased allocations are included in the 2015-2019 CIP, including:  Civic Center Fire Life Safety and Electrical Upgrades (New)  Civic Center Waterproofing Study (New)  Boulware Park Improvements (New)  Palo Alto Community Gardens Irrigation System (New)  Embarcadero Road Corridor Improvements  Street Maintenance (additional $2.3 million over Fiscal Years 2015-2017)  Facility Interior Finishes Replacement (additional $75,000 in Fiscal Year 2015)  Transportation and Parking Improvements (additional $1.9 million in Fiscal Year 2015) An extensive review and prioritization process was completed in determining which projects would be recommended as part of the 2015-2019 CIP. The prioritization process included several key components and strategies, including:  City Council Top 3 priorities, as adopted on February 1, 2014; City of Palo Alto Page 3  Infrastructure Committee and March, 2014 Infrastructure Plan;  Projects with Health and Safety Implications;  Aligning annual allocations with historical spending levels;  Projects with pending studies and master plans, and  Cubberley Community Center. In prior years, the PTC has expressed an interest in seeing which projects were proposed for funding but ultimately not recommended for funding by the City Manager. As described in great detail in the Transmittal Letter of the Proposed Capital Budget, a concerted effort was made as part of the Fiscal Year 2015-2019 Proposed CIP to ensure that the Proposed General Fund Capital Improvement Plan aligned, as much as possible, with the Infrastructure Committee funding plan. The funding plan includes utilization of the IR (also known as the ending fund balance of the Capital Improvement Fund). As a result, certain projects were not recommended for funding which otherwise might have been recommended, and special consideration was given to the year projects were programmed, as well as any associated grant receipts. Additional detail on the strategies used to formulate the 2015-2019 CIP for the General Fund is included in Attachment F. A considerable investment is made each year from the Enterprise Funds (Electric, Gas, Water, Wastewater Collection, Fiber Optics, Airport, Wastewater Treatment, Storm Drainage, and Refuse) for infrastructure needs, reflective of the City’s commitment to provide safe, reliable, and cost effective services to the residents and businesses of Palo Alto. In Fiscal year 2015, a total of $28.4 million will be allocated towards the capital program from the Enterprise Funds, with $205.5 million over the five year period of the CIP. The prioritization of Enterprise Fund CIP projects are established by the department that manages the Enterprise Fund. Often the prioritization of CIP projects is dictated either by the department's operational needs, CIP strategic plan, oversight committee, and/or specific Council direction. Comprehensive Plan Alignment This year no PTC subcommittee was formed to work on the CIP review for Comprehensive Plan compliance. Planning Department staff followed the same procedure established for the in 2014-2018 CIP process for this year’s CIP review. Last year the PTC provided positive feedback on that process and hence the same format was followed for this year. The relationship of each project to the City’s Comprehensive Plan is clearly communicated in this year’s effort. The primary Comprehensive Plan element to which a given project is linked is readily apparent on each project page. Each CIP now has a primary element, section of Comprehensive Plan, goal and a policy assigned to it. Some projects also have a secondary element and goal. Planning Staff has provided an in-depth analysis of the 2015-2019 CIPs in Attachment B. The Analysis report consists of the following graphs, tables and charts that illustrate the Comprehensive Plan’s relationships to the CIPs.  Chart 1: Comprehensive Plan Elements by Number of Citations; City of Palo Alto Page 4  Table 1:, Number of Citations by Comprehensive Plan Goals, Policies and Programs;  Chart 2: Goals, Policies and Programs Citations, by Element;  Chart 3: Total CIP Budget by Comprehensive Plan Element;  Table 2: Most Cited Comprehensive Plan Goals, Policies and Programs, by Element;  Chart 4: Comprehensive Plan Elements by Source of Funds;  Chart 5: Capital Improvement Project Budget Summary by Comprehensive Plan Element and Policy Sections:  Chart 5.A Natural Environment Element  Chart 5.B Community Service and Facilities Element  Chart 5.C Land use Element  Chart 5.D Transportation Element and  Chart 5.E Business and Governance Elements  Chart 6: Capital Improvement Project Summary by City Council Priorities. The comprehensive spreadsheet database of all the CIP is contained in Attachment C. FY 2015 Proposed Capital Budget and 2015-2019 CIP Budget Document The Proposed 2015 Capital Budget and 2015-2019 budget document is largely unchanged from the prior year. As part of the FY 2014-2018 CIP, several changes to the budget document were made, which included a listing of projects funded in prior years with work expected to continue in future years, a more user friendly project index and table of contents, more meaningful use of bar graphs, charts, and pictures, and a better description of linkages to the Comprehensive Plan. These changes are again reflected in the FY 2015-2019 CIP. There were, however, some minor changes to the 2015-2019 capital budget document. In preparing the 2016-2020 Proposed CIP, the Office of Management and Budget plans to implement a new budget system as well as budget publication software. It is anticipated that with these new applications, further improvements to the capital budget process as well as document will be made. The changes that are included are outlined below:  Public art funding associated with the Art in City Capital Improvement Projects policy has been added to the Art in Public Places (AC-86017) project. The Art in City Capital Improvement Projects policy requires that the City allocate 1% of construction costs for qualifying projects to be used for public art. In previous years, public art funding was included with the budget for these projects. This change was made to provide more clarity to the public and City Council on the level of resources allocated for public art, centralizes funding and creates operating efficiencies, and avoids the possibility of inadvertently spending these dollars on non-public art items. City of Palo Alto Page 5  For recurring projects, the Project Stage, Estimated Timeline and Overall Project Completion Percentage have been removed to better reflect the ongoing need for these projects and signal to the public and the City Council that funding for these projects will extend beyond the five years included in the CIP.  As referenced previously within this report, as part of an effort to align the CIP with the Infrastructure Plan and ensure the cash flow in the Capital Improvement Fund aligns with potential usage of the Infrastructure Reserve, the timing of grant revenues has been reexamined. In previous budget documents, the grants associated with capital projects were generally programmed in the same year as the expense. Because many grants are reimbursable, meaning the grant funding comes to the City after expenditures are made, often times grant receipts are realized not in the year of construction but in a subsequent fiscal year. As part of the FY 2015-2019 CIP process, staff examined all grant reimbursements, and has tried to program the revenues in the year the actual receipts are anticipated. POLICY IMPLICATIONS All CIP projects are consistent with the Comprehensive Plan. Staff has reviewed the 2015-2019 CIP for consistency with the 1998-2010 Comprehensive Plan. A list of the Comprehensive Plan policies and programs cited in the CIP is provided in Attachment D. RESOURCE IMPACT The impact on City resources from individual projects, both fiscal and operational, is addressed in each project CIP description. ENVIRONMENTAL REVIEW The Capital Improvement Program is not a project under CEQA. Individual projects may or may not be subject to CEQA; an environmental determination will be made on each individual project at the time of project implementation. Attachments:  Attachment A: 2014 PTC CIP Letter (PDF)  Attachment B: Charts &Figures (PDF)  Attachment C: List of All CIPs (PDF)  Attachment D: Most Cited Comprehensive Plan Goals, Policies and Programs (PDF)  Attachment E: Proposed Capital Budget - P&TC, staff and libraries Only (PDF)  Attachment F: Summary of General Fund project prioritization (DOCX)  Attachment G: FY 2015-19 General Fund CIP Total by Category (DOCX) ATTACHMENT A ATTACHMENT B CAPITAL IMPROVEMENT PROGRAM PROJECTS AND COMPREHENSIVE PLAN CHART 1: NUMBER OF CITATIONS BY COMPREHENSIVE PLAN ELEMENT 2 35 2 16 67 14 1 Business & Economics Community Services & FacilitiesGovernance Land Use and Community DesignNatural Environment Transportation Salaries and Benefits •A total of 336 goals, policies, and programs of the 1998-2010 Comprehensive Plan were cited. •45% of the citations were from Natural Environment element and 30 % of the citations from Community Service & Facilities element. 1 | Page TABLE 1: NUMBER OF COMPREHENSIVE PLAN GOALS, POLICIES AND PROGRAMS CITED BY ELEMENT Elements Goals Policies Programs Business & Economics 2 2 2 Community Services & Facilities 35 35 30 Governance 2 2 1 Land Use and Community Design 13 11 6 Natural Environment 68 67 18 Transportation 14 14 14 CHART 2: GOALS, POLICIES, AND PROGRAM CITATIONS BY ELEMENT 0 10 20 30 40 50 60 70 Business & Economics Community Services & Facilities Governance Land Use and Community Design Natural Environment Transportation Goals Policies Programs 2 | Page CHART 3: PERCENTAGE OF TOTAL BUDGET INVESTED BY COMPREHENSIVE PLAN ELEMENT Business & Economics, 1% Community Services & Facilities, 18% Governance, 0% Land Use and Community Design, 4% Natural Environment, 59% Transportation, 12% Salaries & Benefits, 7% •$193 million (59%) of the total budget was invested for Natural Environment element and $60 million (18%) of the budget for Community Service element. •All the other elements accounted for 23% of the total budget. •Salaries and Benefits accounted for slightly more than 7% of the total budget. 3 | Page TABLE 2: MOST CITED COMPREHENSIVE PLAN GOALS, POLICIES AND PROGRAMS BY ELEMENT Natural Environment Number of Times Cited Community Services and Facilities Number of Times Cited Land Use and Community Design Number of Times Cited Transportation Number of Times Cited Goals Goals Goals Goals N-1 2 C-1 2 L-1 3 T-1 3 N-4 32 C-2 3 L-3 1 T-3 4 N-5 6 C-3 1 L-6 1 T-4 5 N-9 26 C-4 27 L-9 11 T-8 2 Policies C-5 1 Policies Policies N-1 2 Policies L-17 1 T-2 2 N-8 1 C-4 1 L-50 1 T-3 2 N-14 2 C-9 2 L-66 2 T-14 3 N-18 11 C-10 1 L-72 1 T-20 1 N-19 8 C-24 30 L-79 7 T-24 3 N-20 4 C-26 2 Programs T-25 2 N-24 3 C-32 2 L-80 4 T-47 2 N-25 6 Programs L-81 7 Programs N-26 7 C-12 1 T-7 1 N-44 25 C-18 1 T-10 2 Programs C-19 23 T-19 4 N-1 1 C-20 1 T-33 1 N-2 1 C-21 1 T-38 4 N-18 4 C-24 1 T-52 2 N-25 4 C-27 1 N-36 3 C-32 1 N-40 1 N-41 6 The following are the two most cited policies of the Comprehensive Plan: •Policy C-24 of the Community Service Element: “Reinvest in aging facilities to improve their usefulness and appearance. Avoid deferred maintenance of City infrastructure. •Policy N-44 of Natural Environment Element : “Maintain Palo Alto’s long-term supply of electricity and natural gas while addressing environmental and economic concerns”. 4 | Page CHART 4: FUND SOURCES AND EXPENDITURES BY COMPREHENSIVE PLAN ELEMENT $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 Natural Environment Community Services & Facilities Land Use and Community Design Transportation Business & Economics Governance Salaries Internal Service Fund General Fund Enterprise Fund •87% of the Enterprise Fund is allocated for CIPs supporting Natural Environment Element and 64% of the General Fund is allocated to CIPs supporting Community Services and Facilities Element. •Although not shown in the chart, University Avenue Parking Permit Fund and California Avenue Parking Permit Fund also contributed to CIPs related to Transportation Element. 5 | Page CHART 5A-5E: CAPITAL IMPROVEMENT PROJECT SUMMARY AND BUDGET BY COMPREHENSIVE PLAN ELEMENT 6 | Page $192.3 $179.6 $2.0 $11.8 0 50 100 150 200 250 Total CIP NEE Budget Enterprise Fund General Fund Internal Service Fund Millions Natural Environment Element CIP Budget in Millions Air Quality 6% Energy 32% Open Space 1% Water Resources 61% Total CIP Budget by Natural Environment Element Sections •Natural Environment Element accounts for 59% of total City’s budget and 87% of Enterprise Fund budget. •61% of total Natural Environment Element City budget (enterprise fund) is allocated for projects improving water quality and resources. •Remainder is allocated for improving our energy and air quality. 7 | Page $59.0 $56.3 $1.65 $0.9 0 20 40 60 80 Total CSE CIP Budget General Fund Internal Service Fund Enterprise Fund Millions Community Services and Facilities Element CIP Budget in Millions Access 1% Customer Service 5% Parks and Public Facilities 94% Total CIP Budget by Community Services and Facilities Element Sections •Community Service Element accounts for 18% of total City’s budget and 64% of General Fund budget. •94% of General Fund budget is allocated for projects improving parks and public facilities. 8 | Page $14.4 $2.7 $11.7 0 5 10 15 20 Total LUE CIP Budget General Fund Enterprise Fund Millions Land Use & Community Design Element CIP Budget in Millions Local Landuse and Growth Management 42% Public Ways 50% City Structure 6% Design of Buildings Public Places 2% Total CIP Budget by Land Use & Community Design Element Sections •Land use Element accounts for 4% of total City’s budget mostly using Enterprise Fund budget. •50% of the budget is allocated for projects improving public ways, and 42% for managing local land use growth. 9 | Page $39 $11.3 $27.1 $.2 $.4 0 20 40 60 Total TE CIP Budget General Fund Enterprise Fund California Avenue Parking Permit Fund University Avenue Parking Permit Fund Millions Total CIP Budget in Millions Bicycling and Walking 35% City Structure, Bicycling and Walking 22% Parking 1% Reducing Auto Use 29% Traffic Safety 13% Total CIP Budget by Transportation Element Sections •12% of the City’s CIP budget is used for Transportation related projects (70%) of this is funded by General Fund budget. •General Fund budget is allocated for projects improving bicycle pathways, reducing auto use and for traffic safety. 10 | Page $2.9 $2.8 $.01 0 1 2 3 4 Total BE & GE CIP Budget Enterprise Fund Internal Service Fund Millions Business &Economic Element and Governance Element CIP Budget in Millions Growth 68% Public Participation 32% Total CIP Budget by Business and Governance Element Sections •The Business Element and Governance Element accounts for less than 1% of the total City budget. •These projects are funded through the enterprise fund for Utility Department projects improving commercial telecommunication need, and hardware/software upgrades. 11 | Page CHART 6: CAPITAL IMPROVEMENT PROJECT SUMMARY BY CITY COUNCIL PRIORITY $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 Infrastructure Strategy and Funding Technology and the Connected City The Built Environment, Transportation, Mobility, Parking and Livability $292.3 $10.1 $5.3 Budget Invested in Million Dollars by City Council Priorities •Approximately 89% of the total budget is invested for infrastructure strategy funding. •3% of City’s budget is being invested for technology improvements and •Salaries and benefits are not included in the calculation but it accounts for 7% of the total budget. 12 | Page Page 1 Pr o j e c t I D . Na m e St a t u s Fu n d S o u r c e Fu n d i n g IB R C Ca t e g o r y De p t . Pr i m a r y C P Ele m e n t Pr i m a r y C P Se c t i o n Pr i m a r y C P G o a l Pr ima ry C P P o l i c y Pr i m a r y C P Pr o g r a m Se c o n d a r y C P Ele m e n t Se c o n d a r y C P Se c t i o n Se c o n d a r y C P G o a l Secon d a r y C P Po l i c y Se c o n d a r y C P Pr o g r a m Po t e n t i a l Co m m i t t e e Re v i e w Pr o j e c t L o c a t i o n Env iro n m e n t a l Im p a c t De s i g n R e v i e w Le g a l M a n d a t e ( 2 0 pt s ) He a l t h a n d S a f e t y (2 5 p t s ) Fa c i l i t i e s / I n f r a s t r (2 0 p t s ) Cit y O p s / S e r v i c e De l i v e r y ( 2 0 p t s ) Co u n c i l V i s i o n ( 1 5 pt s ) To t a l S c o r e Re c e i v e d To t a l 5 Y e a r Bu d g e t P r o p o s e d G r a n t s / Re i m b u r s e m e n t s /B o n d s Ci t y C o u n c i l Pr i o r i t i e s AP-15001 Temporary Airport Terminal Nonrecurring Enterprise Fund Airport Fund Buildings and Facilities Public Works Natural Environment Open Space N-1 N-8 Natural Environment Noise N-8 N-43 N-56 PTC,ARB, Site and Design 1925 Embarcadero Rd. Palo Alto, CA 94303 Possible Exemption This project may be subject to ARB review. This project may require Site and Design Review. 0 $180,000 The Built Environment, Transportation, Mobility, Parking and Livability PF-14004 California Avenue Parking District Parking Improvements Annual Recurring California Avenue Parking Permit Fund California Avenue Parking Permit Fund N/A Buildings and Facilities Public Works Transportation Parking T-8 T-47 T-52 N/A Various Possible Exemption This project may be subject to ARB review. This project may require Site and Design Review. 0 0 0 0 0 0 $222,800 The Built Environment, Transportation, Mobility, Parking and Livability PE-17005 Boulware Park Improvements Nonrecurring General Fund Infrastructure Reserve Catch-up Parks and Open Space Public Works Community Services & Facilities Parks and Public Facilities C-4 C-24,C- 26, C-32 C-32 N/A 410 Fernando Ave. Possible Exemption Review by PAC and ARB may be required. 0 15 20 20 15 70 $445,000 Infrastructure Strategy and Funding EL-02011 Electric Utility GIS Annual Recurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Governance Public Participation G-1 G-3 Transportation Reducing Auto Use T-1 T-3 T-10 UAC Possible Exemption Not Applicable 0 0 15 20 15 50 $825,000 Technology and the Connected City EL-09000 Middlefield Underground Rebuild Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 UAC, ARB Possible Exemption UAC 0 0 20 20 10 50 $250,000 Infrastructure Strategy and Funding EL-11006 Rebuild UG District 18 Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 Land Use and Community Design Public Ways L-9 L-79 L-81 UAC, ARB Possible Exemption UAC 0 10 20 20 10 60 $75,000 Infrastructure Strategy and Funding PF-93009 Americans with Disabilities Act Compliance Annual Recurring General Fund Infrastructure Reserve Keep-up Buildings and Facilities Public Works Community Services & Facilities Access C-5 C-32 C-27 ARB, HRB Various Possible Exemption This project may be subject to ARB and HRB review. 20 15 15 10 10 70 $505,830 Infrastructure Strategy and Funding EL-08001 UG District 42 - Embarcadero Road (Between Emerson & Middlefield) Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Land Use and Community Design Public Ways L-9 L-79 L-80, L- 81 UAC, ARB Possible Exemption UAC 0 5 15 20 15 55 $2,300,000 Infrastructure Strategy and Funding EL-13000 Edgewood/Wildwoo d 4 kV Tie Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 UAC Possible Exemption UAC 0 $450,000 Infrastructure Strategy and Funding EL-13003 Rebuild UG District 16 Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 UAR, ARB Possible Exemption UAC 0 10 20 20 10 60 $300,000 Infrastructure Strategy and Funding ATTACHMENT C Page 2 Pr o j e c t I D . Na m e St a t u s Fu n d S o u r c e Fu n d i n g IB R C Ca t e g o r y De p t . Pr i m a r y C P Ele m e n t Pr i m a r y C P Se c t i o n Pr i m a r y C P G o a l Pr im a r y C P P o l i c y Pr i m a r y C P Pr o g r a m Se c o n d a r y C P Ele m e n t Se c o n d a r y C P Se c t i o n Se c o n d a r y C P G o a l Sec o n d a r y C P Po l i c y Se c o n d a r y C P Pr o g r a m Po t e n t i a l Co m m i t t e e Re v i e w Pr o j e c t L o c a t i o n Env i r o n m e n t a l Im p a c t De s i g n R e v i e w Le g a l M a n d a t e ( 2 0 pt s ) He a l t h a n d S a f e t y (2 5 p t s ) Fa c i l i t i e s / I n f r a s t r (2 0 p t s ) Cit y O p s / S e r v i c e De l i v e r y ( 2 0 p t s ) Co u n c i l V i s i o n ( 1 5 pt s ) To t a l S c o r e Re c e i v e d To t a l 5 Y e a r Bu d g e t P r o p o s e d G r a n t s / Re i m b u r s e m e n t s /B o n d s Ci t y C o u n c i l Pr i o r i t i e s EL-13007 Underground Distribution System Security Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 Community Services and Facilities Parks and Public Facilities C-4 C-24 UAC, ARB Possible Exemption UAC 0 $600,000 Infrastructure Strategy and Funding EL-11009 UG District 43 - Alma/Embarcadero Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Land Use and Community Design Local Landuse and Growth Management L-9 L-79 L-80, L- 81 UAC, ARB Possible Exemption UAC 0 5 15 20 15 55 $2,650,000 Technology and the Connected City EL-14000 Coleridge/Cowper/T ennyson 4/12KV Conversion Nonrecurring Enterprise Fund Electric Fund Distribution System - System Improvements Utilities Natural Environment Energy N-9 N-44 UAC, ARB Possible Exemption UAC 0 $520,000 Infrastructure Strategy and Funding PF-14003 University Avenue Parking Improvements Annual Recurring University Avenue Parking Permit Fund University Avenue Parking Permit Fund N/A Buildings and Facilities Public Works Transportation Parking T-8 T-47 T-52 ARB Various Possible Exemption The project maybe subject to PTC and ARB review. 0 0 0 0 0 0 $394,200 The Built Environment, Transportation, Mobility, Parking and Livability EL-14002 Rebuild UG District 20 Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 Land Use and Community Design Public Ways L-9 L-79 L-81 UAC, ARB Possible Exemption UAC 0 10 20 20 10 60 $1,000,000 Infrastructure Strategy and Funding EL-14005 Reconfigure Quarry Feeders Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 UAC Possible Exemption UAC 0 $400,000 Infrastructure Strategy and Funding EL-13002 Relocate Quarry Road/Hopkins Substations 60 kV Line (Lane A & B) Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Land Use and Community Design Public Ways L-9 L-79 L-81 UAC, ARB Possible Exemption UAC 0 0 20 20 10 50 $850,000 Infrastructure Strategy and Funding EL-15000 Colorado/Hopkins System Improvement Nonrecurring Enterprise Fund Electric Fund Distribution System - System Improvements Utilities Natural Environment Energy N-9 N-44 UAC, ARB Hopkins and Colorodo Substations Possible Exemption UAC 0 10 20 15 10 55 $50,000 Infrastructure Strategy and Funding EL-15001 Electric Substation Battery Replacement Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 None Electric Substation Possible Exemption None Required 0 10 20 15 10 55 $400,000 Infrastructure Strategy and Funding EL-16000 Rebuild UG District 26 Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 None Possible Exemption UAC 0 5 20 15 10 50 $500,000 Infrastructure Strategy and Funding EL-89028 Electric Customer Connections Annual Recurring Enterprise Fund Electric Fund Distribution System- Customer Design and Connection Services Utilities Natural Environment Energy N-9 N-44 Land Use and Community Design Public Ways L-9 L-79 L-81 UAC, PTC Possible Exemption UAC 20 0 20 20 15 75 $17,500,000 Infrastructure Strategy and Funding EL-89044 Substation Facility Improvements Annual Recurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 UAC, ARB Possible Exemption UAC 0 5 20 20 10 55 $960,000 Infrastructure Strategy and Funding EL-98003 Electric System Improvements Annual Recurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 Land Use and Community Design Public Ways L-9 L-79 L-81 UAC, ARB Possible Exemption UAC 0 0 0 0 0 0 $12,750,000 Infrastructure Strategy and Funding GS-03009 System Extensions - Unreimbursed Annual Recurring Enterprise Fund Gas Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 AUC, PTC Possible Exemption UAC 0 0 20 20 20 60 $989,720 Infrastructure Strategy and Funding GS-11002 Gas System Improvements Annual Recurring Enterprise Fund Gas Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 UAC Possible Exemption UAC 0 0 20 10 0 30 $1,160,577 Infrastructure Strategy and Funding GS-12001 GMR - Project 22 Nonrecurring Enterprise Fund Gas Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 UAC Possible Exemption UAC 20 25 20 20 15 100 $4,142,575 Infrastructure Strategy and Funding Page 3 Pr o j e c t I D . Na m e St a t u s Fu n d S o u r c e Fu n d i n g IB R C Ca t e g o r y De p t . Pr i m a r y C P Ele m e n t Pr i m a r y C P Se c t i o n Pr i m a r y C P G o a l Pr im a r y C P P o l i c y Pr i m a r y C P Pr o g r a m Se c o n d a r y C P Ele m e n t Se c o n d a r y C P Se c t i o n Se c o n d a r y C P G o a l Sec o n d a r y C P Po l i c y Se c o n d a r y C P Pr o g r a m Po t e n t i a l Co m m i t t e e Re v i e w Pr o j e c t L o c a t i o n Env i r o n m e n t a l Im p a c t De s i g n R e v i e w Le g a l M a n d a t e ( 2 0 pt s ) He a l t h a n d S a f e t y (2 5 p t s ) Fa c i l i t i e s / I n f r a s t r (2 0 p t s ) Cit y O p s / S e r v i c e De l i v e r y ( 2 0 p t s ) Co u n c i l V i s i o n ( 1 5 pt s ) To t a l S c o r e Re c e i v e d To t a l 5 Y e a r Bu d g e t P r o p o s e d G r a n t s / Re i m b u r s e m e n t s /B o n d s Ci t y C o u n c i l Pr i o r i t i e s EL-89031 Communications System Improvements Annual Recurring Enterprise Fund Electric Fund General Services - Communications Utilities Land Use and Community Design Public Ways L-9 L-79 L-81 UAC, ARB Possible Exemption UAC 0 $500,000 Technology and the Connected City EL-89038 Substation Protection Improvements Annual Recurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Land Use and Community Design Public Ways L-9 L-79 L-81 UAC Possible Exemption UAC 0 15 20 20 10 65 $1,470,000 Infrastructure Strategy and Funding GS-13001 GMR - Project 23 Nonrecurring Enterprise Fund Gas Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 UAC Various Possible Exemption UAC 20 25 20 20 15 100 $3,630,650 Infrastructure Strategy and Funding GS-13002 Gas Equipment and Tools Annual Recurring Enterprise Fund Gas Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 UAC Possible Exemption UAC 0 10 150 10 0 170 $500,000 Infrastructure Strategy and Funding FO-10000 Fiber Optics Customer Connections Annual Recurring Enterprise Fund Fiber Optics Fund Commercial Telecommunicati ons Utilities Business & Economics Growth B-3 B-13 B-4 UAC, ARB Possible Exemption UAC 0 $1,000,000 Technology and the Connected City FO-10001 Fiber Optics Network System Improvements Annual Recurring Enterprise Fund Fiber Optics Fund Commercial Telecommunicati ons Utilities Business & Economics Growth B-3 B-13 B-4 UAC, PTC Possible Exemption UAC 0 $1,000,000 Technology and the Connected City GS-14003 GMR - Project 24 Nonrecurring Enterprise Fund Gas Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 UAC Various Possible Exemption UAC 20 25 20 20 15 100 $3,740,000 Infrastructure Strategy and Funding GS-15000 GMR - Project 25 Nonrecurring Enterprise Fund Gas Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 UAC Various Possible Exemption UAC 20 25 20 20 15 100 $3,885,000 Infrastructure Strategy and Funding GS-15001 Security at City Gas Receiving Stations Nonrecurring Enterprise Fund Gas Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 UAC Possible Exemption UAC 0 15 20 10 0 45 $150,000 Infrastructure Strategy and Funding GS-16000 GMR- Project 26 Nonrecurring Enterprise Fund Gas Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 UAC Various Possible Exemption UAC 20 25 20 20 15 100 $678,200 Infrastructure Strategy and Funding GS-80017 Gas System, Customer Connections Annual Recurring Enterprise Fund Gas Fund Distribution System- Customer Design and Connection Services Utilities Natural Environment Energy N-9 N-44 UAC Possible Exemption None Required 0 0 20 20 20 60 $4,051,410 Infrastructure Strategy and Funding GS-80019 Gas Meters and Regulators Annual Recurring Enterprise Fund Gas Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-44 UAC Possible Exemption None Required 20 15 10 15 0 60 $1,776,703 Infrastructure Strategy and Funding EL-04012 Utility Side Security Improvements Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Natural Environment Energy N-9 N-26 N-40 None Possible Exemption UAC 15 25 20 20 5 85 $500,000 Infrastructure Strategy and Funding VR-14001 Emergency Repair and Replacement Program Annual Recurring Internal Service Fund Vehicle Replacement Fund Miscellaneous Public Works Natural Environment Air Quality N-5 N-26 N-41 N/A 3201 East Bayshore Road, Palo Alto, CA Possible Exemption None Required 0 $100,000 Infrastructure Strategy and Funding VR-15000 Scheduled Vehicle and Equipment Replacements Nonrecurring Internal Service Fund Vehicle Replacement Fund Miscellaneous Public Works Natural Environment Air Quality N-5 N-26 N-41 Fleet Review Committee 3201 East Bayshore Road, Palo Alto, CA Possible Exemption None Required 10 15 15 20 10 70 $3,786,000 Infrastructure Strategy and Funding VR-16000 Scheduled Vehicle and Equipment Replacements Nonrecurring Internal Service Fund Vehicle Replacement Fund Miscellaneous Public Works Natural Environment Air Quality N-5 N-26 N-41 Fleet Review Committee 3201 East Bayshore Road, Palo Alto, CA Possible Exemption None Required 10 15 15 20 10 70 $2,306,000 Infrastructure Strategy and Funding VR-17000 Scheduled Vehicle and Equipment Replacements Nonrecurring Internal Service Fund Vehicle Replacement Fund Miscellaneous Public Works Natural Environment Air Quality N-5 N-26 N-41 Fleet Review Committee 3201 East Bayshore Road, Palo Alto, CA Possible Exemption None Required 10 15 15 20 10 70 $2,547,000 Infrastructure Strategy and Funding PE-18016 Civic Center Fire Life Safety and Electrical Upgrades Nonrecurring General Fund Infrastructure Reserve Keep-up Buildings and Facilities Public Works Community Services & Facilities Parks and Public Facilities C4 C-24 N/A Civic Center Building This project is categorically exempt from CEQA under Section 15302. Not Applicable 0 22 20 15 15 72 $925,000 Infrastructure Strategy and Funding Page 4 Pr o j e c t I D . Na m e St a t u s Fu n d S o u r c e Fu n d i n g IB R C Ca t e g o r y De p t . Pr i m a r y C P Ele m e n t Pr i m a r y C P Se c t i o n Pr i m a r y C P G o a l Pr im a r y C P P o l i c y Pr i m a r y C P Pr o g r a m Se c o n d a r y C P Ele m e n t Se c o n d a r y C P Se c t i o n Se c o n d a r y C P G o a l Sec o n d a r y C P Po l i c y Se c o n d a r y C P Pr o g r a m Po t e n t i a l Co m m i t t e e Re v i e w Pr o j e c t L o c a t i o n Env i r o n m e n t a l Im p a c t De s i g n R e v i e w Le g a l M a n d a t e ( 2 0 pt s ) He a l t h a n d S a f e t y (2 5 p t s ) Fa c i l i t i e s / I n f r a s t r (2 0 p t s ) Cit y O p s / S e r v i c e De l i v e r y ( 2 0 p t s ) Co u n c i l V i s i o n ( 1 5 pt s ) To t a l S c o r e Re c e i v e d To t a l 5 Y e a r Bu d g e t P r o p o s e d G r a n t s / Re i m b u r s e m e n t s /B o n d s Ci t y C o u n c i l Pr i o r i t i e s PE-18012 Hoover Park Improvements Nonrecurring General Fund Infrastructure Reserve Keep-up Parks and Open Space Public Works Community Services & Facilities Parks and Public Facilities C-1 C-4 C-24 ARB,PRC 2901 Cowper Street Possible Exemption This project may be subject to ARB, PRC review 0 10 20 5 5 40 $490,000 Infrastructure Strategy and Funding PO-89003 Sidewalk Repairs Annual Recurring General Fund Infrastructure Reserve Keep-up Streets and Sidewalks Public Works Community Services & Facilities Parks and Public Facilities C-4 C-24 C-21 N/A Ventura Avenue, southern City limits, Alma St, and El Camino Real Possible Exemption None Required 10 20 15 45 $9,278,776 Infrastructure Strategy and Funding AC-86017 Art in Public Spaces Annual Recurring General Fund Infrastructure Reserve Keep-up Parks and Open Space Community Services Land Use and Community Design Public Ways L-9 L-72 ARB, PAC N/A Possible Exemption Location and installation of Public Art may be subject to review by PAC. 0 $337,147 The Built Environment, Transportation, Mobility, Parking and Livability AS-10000 Salaries and Benefits - General Fund CIP Projects Annual Recurring Infrastructure Reserve N/A Salaries Administrative Services Possible Exemption Not Applicable 0 $21,704,812 VR-18000 Scheduled Vehicle and Equipment Replacements Nonrecurring Internal Service Fund Vehicle Replacement Fund Miscellaneous Public Works Natural Environment Air Quality N-5 N-26 N-41 Fleet Review Committee 3201 East Bayshore Road, Palo Alto, CA Possible Exemption None Required 10 15 15 20 10 70 $2,027,000 Infrastructure Strategy and Funding PE-08001 Rinconada Park Improvements Nonrecurring General Fund Infrastructure Reserve New Parks and Open Space Public Works Community Services & Facilities Parks and Public Facilities C-4 C-24 C-20 PRC, PAC, ARB 777 Embarcadero Road Possible Exemption Review by PAC and ARB may be required. 0 20 20 15 5 60 $3,952,080 Infrastructure Strategy and Funding PG-18000 Golf Course Driving Range Net and Artificial Turf Replacement Nonrecurring General Fund Infrastructure Reserve Keep-up Parks and Open Space Community Services Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 N/A Palo Alto Municipal Golf Course Possible Exemption This is a replacement project with like materials. 0 15 20 20 0 55 $770,000 Infrastructure Strategy and Funding PG-14003 Seale Park Improvements Nonrecurring General Fund Infrastructure Reserve Keep-up Parks and Open Space Community Services Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 PRC 3100 Stockton Pl Possible Exemption This project may be subject to ARB or PRC review 15 20 20 15 5 75 $121,000 Infrastructure Strategy and Funding PE-13011 Charleston/Arastrad ero Corridor Project Nonrecurring General Fund Infrastructure Reserve New Traffic and Transportation Public Works Transportation Bicycling and Walking T-4 T-25 T-33 ARB Charleston/Ara stradero Corridor Possible Exemption 0 25 20 0 0 45 $2,055,805 Infrastructure Strategy and Funding PL-05030 Traffic Signal and ITS Upgrades Annual Recurring General Fund Infrastructure Reserve Keep-up Traffic and Transportation Planning and Community Environment Transportation Traffic Safety T-4 T-24 T-38 Transportation Traffic Safety T-5 T-34 PTC Various Possible Exemption This project may be subject to PTC review. 5 25 20 20 0 70 $1,525,822 Infrastructure Strategy and Funding PL-12000 Transportation and Parking Improvements Annual Recurring General Fund Infrastructure Reserve Keep-up Traffic and Transportation Planning and Community Environment Transportation Traffic Safety T-4 T-2 T-38 Transportation Traffic Safety T-4 T-25 PTC Various Possible Exemption This project may be subject to PTC review. 20 20 20 20 5 85 $3,068,699 University Avenue Parking Permit Fund The Built Environment, Transportation, Mobility, Parking and Livability VR-19000 Scheduled Vehicle and Equipment Replacements Nonrecurring Internal Service Fund Vehicle Replacement Fund Miscellaneous Public Works Natural Environment Air Quality N-5 N-26 N-41 Fleet Review Committee 3201 East Bayshore Road, Palo Alto, CA Possible Exemption None Required 10 15 15 20 10 70 $1,049,000 Infrastructure Strategy and Funding PG-14002 Cameron Park Improvements Nonrecurring General Fund Infrastructure Reserve Catch-up Parks and Open Space Community Services Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 PRC Cameron Park Possible Exemption This project may be subject to ARB or PRC review 15 20 20 15 5 75 $124,000 Infrastructure Strategy and Funding PG-14001 Peers Park Improvements Nonrecurring General Fund Infrastructure Reserve Catch-up Parks and Open Space Community Services Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 PRC Peers Park Possible Exemption This project may be subject to ARB or PRC review 5 20 20 15 5 65 $205,000 Infrastructure Strategy and Funding Page 5 Pr o j e c t I D . Na m e St a t u s Fu n d S o u r c e Fu n d i n g IB R C Ca t e g o r y De p t . Pr i m a r y C P Ele m e n t Pr i m a r y C P Se c t i o n Pr i m a r y C P G o a l Pr im a r y C P P o l i c y Pr i m a r y C P Pr o g r a m Se c o n d a r y C P Ele m e n t Se c o n d a r y C P Se c t i o n Se c o n d a r y C P G o a l Sec o n d a r y C P Po l i c y Se c o n d a r y C P Pr o g r a m Po t e n t i a l Co m m i t t e e Re v i e w Pr o j e c t L o c a t i o n Env i r o n m e n t a l Im p a c t De s i g n R e v i e w Le g a l M a n d a t e ( 2 0 pt s ) He a l t h a n d S a f e t y (2 5 p t s ) Fa c i l i t i e s / I n f r a s t r (2 0 p t s ) Cit y O p s / S e r v i c e De l i v e r y ( 2 0 p t s ) Co u n c i l V i s i o n ( 1 5 pt s ) To t a l S c o r e Re c e i v e d To t a l 5 Y e a r Bu d g e t P r o p o s e d G r a n t s / Re i m b u r s e m e n t s /B o n d s Ci t y C o u n c i l Pr i o r i t i e s PG-14000 Ramos Park Improvements Nonrecurring General Fund Infrastructure Reserve Catch-up Parks and Open Space Community Services Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 PRC Ramos Park Possible Exemption This project may be subject to ARB or PRC review 15 20 20 15 5 75 $175,000 Infrastructure Strategy and Funding PO-05054 Street Lights Improvements Annual Recurring General Fund Infrastructure Reserve Keep-up Streets and Sidewalks Public Works Land Use and Community Design Public Ways L-9 L-66 ARB Various Possible Exemption This project may be subject to ARB review. 5 20 20 20 5 70 $740,000 Infrastructure Strategy and Funding PG-09003 Stanford/Palo Alto Soccer Turf Replacement Nonrecurring General Fund Infrastructure Reserve Keep-up Parks and Open Space Community Services Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 ARB Various Possible Exemption None Required 0 20 20 20 5 65 $770,000 Infrastructure Strategy and Funding PG-09002 Park and Open Space Emergency Repairs Annual Recurring General Fund Infrastructure Reserve Keep-up Parks and Open Space Community Services Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 PTC, ARB Various Possible Exemption This project may be subject to ARB review. This project may require Site and Design Review. 5 25 20 10 5 65 $375,000 Infrastructure Strategy and Funding PG-06001 Tennis and Basketball Court Resurfacing Annual Recurring General Fund Infrastructure Reserve Keep-up Parks and Open Space Community Services Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 PRC Various Possible Exemption None Required 0 15 20 5 5 45 $1,075,000 Infrastructure Strategy and Funding PF-17000 Municipal Services Center Building A, B, & C Roofing Replacement Nonrecurring General Fund Infrastructure Reserve Keep-up Buildings and Facilities Public Works Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 ARB, HRB Municipal Services Center Possible Exemption This project may be subject to ARB and HRB review. 0 20 20 5 5 50 $1,100,000 Infrastructure Strategy and Funding PF-15000 Rinconada Pool Locker Room Nonrecurring General Fund Infrastructure Reserve Catch-up Buildings and Facilities Public Works Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 Community Services and Facilities Access C-5 C-32 C-27 N/A 777 Embarcadero Road Possible Exemption None Required 15 15 20 20 5 75 $423,218 Infrastructure Strategy and Funding PF-02022 Facility Interior Finishes Replacement Annual Recurring General Fund Infrastructure Reserve Keep-up Buildings and Facilities Public Works Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 HRB, ARB Various Possible Exemption This project may require design review for historic structures. 0 15 20 10 5 50 $605,957 Infrastructure Strategy and Funding PF-01003 Building Systems Improvements Annual Recurring General Fund Infrastructure Reserve Keep-up Buildings and Facilities Public Works Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 HRB, ARB Various Possible Exemption This project may be subject to ARB and HRB review. 0 15 20 5 5 45 $512,295 Infrastructure Strategy and Funding PF-00006 Roofing Replacement Annual Recurring General Fund Infrastructure Reserve Keep-up Buildings and Facilities Public Works Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 HRB, ARB Various Possible Exemption This project may be subject to ARB and HRB review. 0 20 20 5 5 50 $825,808 Infrastructure Strategy and Funding PE-86070 Street Maintenance Annual Recurring General Fund Infrastructure Reserve Keep-up Streets and Sidewalks Public Works Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 PTC Various Possible Exemption This project will make reasonable efforts to match existing pavement. 5 20 20 20 10 75 $28,695,646 Infrastructure Strategy and Funding PE-18010 Mitchell Park Improvements Nonrecurring General Fund Infrastructure Reserve Keep-up Parks and Open Space Public Works Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 N/A 600 East Meadow Drive Possible Exemption None Required 0 15 20 5 5 45 $386,000 Infrastructure Strategy and Funding PE-15022 Palo Alto Community Gardens Irrigation System Nonrecurring General Fund Infrastructure Reserve New Buildings and Facilities Public Works Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 N/A 1313 Newell St Possible Exemption None Required 0 7 20 20 10 57 $256,504 Infrastructure Strategy and Funding PE-15011 Ventura Buildings Improvements Nonrecurring General Fund Infrastructure Reserve Catch-up Buildings and Facilities Public Works Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 ARB 3990 Ventura Court Possible Exemption This project may be subject to ARB review. 0 15 20 5 5 45 $690,000 Infrastructure Strategy and Funding PE-14018 Baylands Interpretive Center Improvements and Boardwalk Repair Nonrecurring General Fund Infrastructure Reserve Catch-up Buildings and Facilities Public Works Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 ARB, PRC, HRB Possible Exemption This project may required ARB, PRC, HRB 15 25 20 10 5 75 $541,298 Infrastructure Strategy and Funding Page 6 Pr o j e c t I D . Na m e St a t u s Fu n d S o u r c e Fu n d i n g IB R C Ca t e g o r y De p t . Pr i m a r y C P Ele m e n t Pr i m a r y C P Se c t i o n Pr i m a r y C P G o a l Pr im a r y C P P o l i c y Pr i m a r y C P Pr o g r a m Se c o n d a r y C P Ele m e n t Se c o n d a r y C P Se c t i o n Se c o n d a r y C P G o a l Sec o n d a r y C P Po l i c y Se c o n d a r y C P Pr o g r a m Po t e n t i a l Co m m i t t e e Re v i e w Pr o j e c t L o c a t i o n Env i r o n m e n t a l Im p a c t De s i g n R e v i e w Le g a l M a n d a t e ( 2 0 pt s ) He a l t h a n d S a f e t y (2 5 p t s ) Fa c i l i t i e s / I n f r a s t r (2 0 p t s ) Cit y O p s / S e r v i c e De l i v e r y ( 2 0 p t s ) Co u n c i l V i s i o n ( 1 5 pt s ) To t a l S c o r e Re c e i v e d To t a l 5 Y e a r Bu d g e t P r o p o s e d G r a n t s / Re i m b u r s e m e n t s /B o n d s Ci t y C o u n c i l Pr i o r i t i e s PE-09003 City Facility Parking Lot Maintenance Annual Recurring General Fund Infrastructure Reserve Keep-up Buildings and Facilities Public Works Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 PTC Various Possible Exemption This project may require Site and Design Review. 0 15 20 10 5 50 $1,063,484 The Built Environment, Transportation, Mobility, Parking and Livability OS-09001 Off-Road Pathway Resurfacing and Repair Annual Recurring General Fund Infrastructure Reserve Keep-up Parks and Open Space Community Services Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 PTC Possible Exemption This project may require Site and Design Review. 5 20 20 10 5 60 $500,000 Infrastructure Strategy and Funding AC-14001 Baylands Nature Interpretive Center Exhibit Improvements Nonrecurring General Fund Infrastructure Reserve New Buildings and Facilities Community Services Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 PTC, PRC, Site and Design Baylands Nature Interpretive Center Possible Exemption Review by PAC or Site and Design and or ARB may be required. 0 $56,000 Infrastructure Strategy and Funding AC-14000 Art Center Auditorium Audio, Visual, and Furnishings Nonrecurring General Fund Infrastructure Reserve New Buildings and Facilities Community Services Community Services & Facilities Parks and Public Facilities C-4 C-24 C-19 None Art Center Auditorium Possible Exemption None Required 0 $150,000 Infrastructure Strategy and Funding PE-18015 Robles Park Improvements Nonrecurring General Fund Infrastructure Reserve Keep-up Parks and Open Space Public Works Community Services & Facilities Parks and Public Facilities C-1 C-24 C-19 N/A 4116 Park Blvd Possible Exemption This project may be subject to ARB, PRC review 0 15 20 5 5 45 $325,000 Infrastructure Strategy and Funding PE-14012 Junior Museum and Zoo Improvements Nonrecurring General Fund Infrastructure Reserve Keep-up Buildings and Facilities Public Works Community Services & Facilities Customer Service C-2 C-9 C-18 Civil Uses L-8 PRC, PC 1451 Middlefield Road Possible Exemption None Required 15 15 20 5 5 60 $1,175,000 Infrastructure Strategy and Funding TE-10001 Utilities Customer Billing System Continuous Improvements Annual Recurring Internal Service Fund Technology Fund Technology Utilities Community Services & Facilities Customer Service C-2 C-10 C-12 PTC Possible Exemption None Required 0 $1,250,000 Technology and the Connected City EL-02010 SCADA System Upgrades Annual Recurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Community Services & Facilities Parks and Public Facilities C-4 C-24 Transportation Reducing Auto Use T-1 T-3 T-10 UAC Possible Exemption UAC 0 0 20 20 10 50 $520,000 Technology and the Connected City PL-14000 El Camino Real and Churchill Avenue Intersection Improvements - Design Nonrecurring General Fund Infrastructure Reserve New Traffic and Transportation Planning and Community Environment Transportation Traffic Safety T-4 T-24 T-38 Transportation Traffic Safety T-4 T-33 PTC, ARB El Camino Real & Churchill Avenue Possible Exemption The project maybe subject to PTC and ARB review. 0 25 20 0 15 60 $23,957 Infrastructure Strategy and Funding PL-15001 Embarcadero Road Corridor Improvements Nonrecurring General Fund Infrastructure Reserve New Streets and Sidewalks Planning and Community Environment Transportation Traffic Safety T-4 T-24 T-38 Transportation Traffic Safety T-4 T-33 PTC, ARB Embarcadero Road Possible Exemption The project maybe subject to PTC and ARB review. 0 $498,957 Infrastructure Strategy and Funding PE-11011 Highway 101 Pedestrian/Bicycle Overpass Project Nonrecurring General Fund Infrastructure Reserve New Traffic and Transportation Public Works Transportation City Structure, Bicycling and Walking T-3 T-14 T-19 ARB, PRC, PTC Possible Exemption This project may require ARB review 10 25 20 20 10 85 $8,440,000 Infrastructure Strategy and Funding PE-12011 Newell Road Bridge/San Francisquito Creek Bridge Replacement Nonrecurring General Fund Infrastructure Reserve New Streets and Sidewalks Public Works Transportation Bicycling and Walking T-3 T-14 T- 25 T-19 Land Use and Community Design Public Ways L-1 L72 ARB,PTC,SFCJ PA,CEPA, PAC Newell Rd at SF Creek Possible Exemption This project is coordinated with the street resurfacing program and the Palo Alto Bicycle Master Plan. 20 25 20 0 10 75 $2,536,037 Infrastructure Strategy and Funding PL-04010 Bicycle and Pedestrian Plan - Implementation Project Annual Recurring General Fund Infrastructure Reserve New Traffic and Transportation Planning and Community Environment Transportation Bicycling and Walking T-3 T-20 T-19 Local Land Use and Growth Management L-1 PTC & PARC Various Possible Exemption None Required 10 25 20 5 15 75 $6,023,957 Stanford University Medical Center Fund Infrastructure Strategy and Funding PL-14001 Matadero Creek Trail Nonrecurring General Fund Infrastructure Reserve New Traffic and Transportation Planning and Community Environment Transportation Bicycling and Walking T-3 T-14 T-19 Transportation Bicycling and Walking T-3 T-20 PTC, PRC, ARB Possible Exemption This project may be subject to PTC, PRC, and ARB review. 0 $2,192,163 Santa Clara County Grant Infrastructure Strategy and Funding EL-11014 Smart Grid Technology Installation Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Transportation Reducing Auto Use T-1 T-3 T-10 Natural Environment Energy N-9 N-44 N/A Possible Exemption UAC 0 $9,500,000 Infrastructure Strategy and Funding Page 7 Pr o j e c t I D . Na m e St a t u s Fu n d S o u r c e Fu n d i n g IB R C Ca t e g o r y De p t . Pr i m a r y C P Ele m e n t Pr i m a r y C P Se c t i o n Pr i m a r y C P G o a l Pr im a r y C P P o l i c y Pr i m a r y C P Pr o g r a m Se c o n d a r y C P Ele m e n t Se c o n d a r y C P Se c t i o n Se c o n d a r y C P G o a l Sec o n d a r y C P Po l i c y Se c o n d a r y C P Pr o g r a m Po t e n t i a l Co m m i t t e e Re v i e w Pr o j e c t L o c a t i o n Env i r o n m e n t a l Im p a c t De s i g n R e v i e w Le g a l M a n d a t e ( 2 0 pt s ) He a l t h a n d S a f e t y (2 5 p t s ) Fa c i l i t i e s / I n f r a s t r (2 0 p t s ) Cit y O p s / S e r v i c e De l i v e r y ( 2 0 p t s ) Co u n c i l V i s i o n ( 1 5 pt s ) To t a l S c o r e Re c e i v e d To t a l 5 Y e a r Bu d g e t P r o p o s e d G r a n t s / Re i m b u r s e m e n t s /B o n d s Ci t y C o u n c i l Pr i o r i t i e s PO-11001 Thermoplastic Lane Marking and Striping Annual Recurring General Fund Infrastructure Reserve Keep-up Streets and Sidewalks Public Works Land Use and Community Design Public Ways L-9 L-66 Various Possible Exemption None Required 12 20 15 15 5 67 $429,361 Infrastructure Strategy and Funding PE-15020 Civic Center Waterproofing Study and Repairs Nonrecurring General Fund Infrastructure Reserve New Buildings and Facilities Public Works Land Use and Community Design City Structure L9 L-79 C-19 N/A 250 Hamilton Avenue Possible Exemption None Required 0 20 20 5 0 45 $258,492 Infrastructure Strategy and Funding PO-11000 Sign Reflectivity Upgrade Annual Recurring General Fund Infrastructure Reserve Keep-up Streets and Sidewalks Public Works Land Use and Community Design Design of Buildings Public Places L-6 L-50 Land Use and Community Design Public Ways L-9 L-79 Various Possible Exemption None Required 12 15 15 15 5 62 $290,542 Infrastructure Strategy and Funding PO-12001 Curb and Gutter Repairs Annual Recurring General Fund Infrastructure Reserve Keep-up Streets and Sidewalks Public Works Land Use and Community Design City Structure L-3 L-17 N/A Various Possible Exemption City Arborist will be consulted for tree root protection. 5 20 15 20 10 70 $683,541 Infrastructure Strategy and Funding EL-06003 Utility Control Center Upgrades Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Community Services & Facilities Parks and Public Facilities C-3 C-24 UAC, ARB Possible Exemption UAC $475,000 Infrastructure Strategy and Funding SD-06101 Storm Drain System Replacement and Rehabilitation Annual Recurring Enterprise Fund Storm Drainage Fund Collection System- System Improvements Utilities Natural Environment Water Resources N-4 N-24 N-36 SDOC Various Possible Exemption This project is coordinated with street resurfacing program. 20 25 20 10 15 90 $1,727,944 Infrastructure Strategy and Funding SD-13002 Matadero Creek Storm Water Pump Station and Trunk Lines Improvements Nonrecurring Enterprise Fund Storm Drainage Fund Collection System- System Improvements Utilities Natural Environment Water Resources N-4 N-24 N-36 SDOC, ARB Various locations in Midtown neighborhood Possible Exemption This project is coordinated with street resurfacing program. 5 15 20 10 15 65 $5,816,946 Infrastructure Strategy and Funding SD-15008 Storm Drain Master Plan Update Nonrecurring Enterprise Fund Storm Drainage Fund Collection System- System Improvements Utilities Natural Environment Water Resources N-4 N-24 N-36 N/A Possible Exemption None Required 0 $319,320 Infrastructure Strategy and Funding PG-06003 Benches, signage, walkways, and perimeter landscaping Annual Recurring General Fund Infrastructure Reserve Keep-up Parks and Open Space Community Services Community Services & Facilities Parks and Public Facilities C-4 C-26 N/A Various Possible Exemption This project may require ARB or PRC review. 10 15 20 5 5 55 $700,000 Infrastructure Strategy and Funding TE-05000 Radio Infrastructure Replacement Nonrecurring Internal Service Fund Technology Fund Technology Police Community Services & Facilities Customer Service C-2 C-9 ARB Possible Exemption None Required 0 0 0 0 0 0 $400,000 Technology and the Connected City TE-14002 Virtual Library Branch Nonrecurring Internal Service Fund Technology Fund Technology Library Governance Public Participation G-1 G-3 G-6 Community Services & Facilities Efficient Service Delivery C-1 LAC Possible Exemption None Required 0 20 20 20 15 75 $95,000 Technology and the Connected City PL-00026 Safe Routes to School Annual Recurring General Fund Infrastructure Reserve Keep-up Traffic and Transportation Planning and Community Environment Transportation Bicycling and Walking T-1 T-3 T-7 Transportation Bicycling and Walking T-3 T-14 T-19 PTC Streets on Suggested Walk and Roll Routes for PAUSD schools Possible Exemption None Required 10 25 15 15 15 80 $744,536 Infrastructure Strategy and Funding WC-80020 Sewer System, Customer Connections Annual Recurring Enterprise Fund Wastewater Collection Fund Collection System- Customer Design and Connection Services Utilities Natural Environment Water Resources N-4 N-18 N-18, N- 25 Natural Environment Water Resources N-4 N-25 UAC Possible Exemption None Required 0 0 0 20 0 20 $1,970,000 Infrastructure Strategy and Funding WC-99013 Sewer Lateral/Manhole Rehab/Replacement Annual Recurring Enterprise Fund Wastewater Collection Fund Collection System- System Improvements Utilities Natural Environment Water Resources N-4 N-18 N-18, N- 25 Natural Environment Water Resources L-1 N-25 UAC Possible Exemption This project will be coordinated with Public Works Street Maintenance Program. 0 0 0 20 0 20 $500,000 Infrastructure Strategy and Funding WC-13002 Wastewater Fusion and General Equipment/Tools Annual Recurring Enterprise Fund Wastewater Collection Fund Collection System- System Improvements Utilities Natural Environment Water Resources N-4 N-14 N-18, N- 25 Natural Environment Water Resources N-4 N-20 N-25 UAC Possible Exemption None Required 0 0 0 20 0 20 $250,000 Infrastructure Strategy and Funding WC-15002 Wastewater System Improvements Annual Recurring Enterprise Fund Wastewater Collection Fund Collection System- System Improvements Utilities Natural Environment Water Resources N-4 N-14 N-18, N- 25 Natural Environment Water Resources N-4 N-20 N-25 UAC Possible Exemption None Required 0 0 0 20 0 20 $1,195,000 Infrastructure Strategy and Funding PE-13017 El Camino Median Landscape Improvements Nonrecurring General Fund Infrastructure Reserve Catch-up Streets and Sidewalks Public Works Natural Environment Open Space N-1 N-1 N-1, N-2 ARB Possible Exemption Caltrans review may be required 0 5 20 0 5 30 $1,076,284 Infrastructure Strategy and Funding Page 8 Pr o j e c t I D . Na m e St a t u s Fu n d S o u r c e Fu n d i n g IB R C Ca t e g o r y De p t . Pr i m a r y C P Ele m e n t Pr i m a r y C P Se c t i o n Pr i m a r y C P G o a l Pr im a r y C P P o l i c y Pr i m a r y C P Pr o g r a m Se c o n d a r y C P Ele m e n t Se c o n d a r y C P Se c t i o n Se c o n d a r y C P G o a l Sec o n d a r y C P Po l i c y Se c o n d a r y C P Pr o g r a m Po t e n t i a l Co m m i t t e e Re v i e w Pr o j e c t L o c a t i o n Env i r o n m e n t a l Im p a c t De s i g n R e v i e w Le g a l M a n d a t e ( 2 0 pt s ) He a l t h a n d S a f e t y (2 5 p t s ) Fa c i l i t i e s / I n f r a s t r (2 0 p t s ) Cit y O p s / S e r v i c e De l i v e r y ( 2 0 p t s ) Co u n c i l V i s i o n ( 1 5 pt s ) To t a l S c o r e Re c e i v e d To t a l 5 Y e a r Bu d g e t P r o p o s e d G r a n t s / Re i m b u r s e m e n t s /B o n d s Ci t y C o u n c i l Pr i o r i t i e s WQ-04011 Facility Condition Assessment and Retrofit Nonrecurring Enterprise Fund Wastewater Treatment Fund Wastewater Treatment- System Improvements Public Works Natural Environment Water Resources N-4 N-25 Community Services & Facilities Parks & Public Faciliites C-4 C-24 C-19 UAC 2501 Embarcadero Way, Palo Alto, CA 94303 Possible Exemption None Required 0 0 0 0 0 0 $4,431,579 Infrastructure Strategy and Funding WQ-14001 Biosolids Facility Nonrecurring Enterprise Fund Wastewater Treatment Fund Wastewater Treatment- System Improvements Public Works Natural Environment Water Resources N-4 N-25 UAC Possible Exemption The project maybe subject to PTC or Site and Design review. 0 $13,591,104 Infrastructure Strategy and Funding WQ-14002 Laboratory and Environmental Services Building Nonrecurring Enterprise Fund Wastewater Treatment Fund Wastewater Treatment- System Improvements Public Works Natural Environment Water Resources N-4 N-25 UAC 2501 Embarcadero Way, Palo Alto, CA 94303 Possible Exemption The project maybe subject to PTC or Site and Design review. 0 $2,049,000 Infrastructure Strategy and Funding WQ-14003 Primary Sedimentation Tank Rehabilitation Nonrecurring Enterprise Fund Wastewater Treatment Fund Wastewater Treatment- System Improvements Public Works Natural Environment Water Resources N-4 N-25 UAC 2501 Embarcadero Way, Palo Alto, CA 94303 Possible Exemption None Required 0 $7,321,532 Infrastructure Strategy and Funding WQ-14004 Fixed Film Reactor Rehabilitation Nonrecurring Enterprise Fund Wastewater Treatment Fund Wastewater Treatment- System Improvements Public Works Natural Environment Water Resources N-4 N-25 UAC 2501 Embarcadero Way, Palo Alto, CA 94303 Possible Exemption None Required 0 $19,433,398 Infrastructure Strategy and Funding WQ-80021 Plan Equipment Replacement Nonrecurring Enterprise Fund Wastewater Treatment Fund Wastewater Treatment- System Improvements Public Works Natural Environment Water Resources N-4 N-25 Community Services & Facilities Parks & Public Faciliites C-4 C-24 C-19 UAC 2501 Embarcadero Way, Palo Alto, CA 94303 Possible Exemption None Required 0 $10,006,302 Infrastructure Strategy and Funding WS-12001 WMR- Project 26 Nonrecurring Enterprise Fund Water Fund Distribution System- System Improvements Utilities Natural Environment Water Resources N-4 N-20 UAC This project is categorically exempt from CEQA under Section 15302. This project will be coordinated with Public Works Street Maintenance Program. 0 0 20 0 0 20 $4,396,800 Infrastructure Strategy and Funding WS-13001 WMR- Project 27 Nonrecurring Enterprise Fund Water Fund Distribution System- System Improvements Utilities Natural Environment Water Resources N-4 N-20 UAC This project is categorically exempt from CEQA under Section 15302. This project will be coordinated with Public Works Street Maintenance Program. 0 0 20 0 0 20 $4,551,420 Infrastructure Strategy and Funding WS-14001 WMR- Project 28 Nonrecurring Enterprise Fund Water Fund Distribution System- System Improvements Utilities Natural Environment Water Resources N-4 N-20 UAC This project is categorically exempt from CEQA under Section 15302. None Required 0 0 20 0 0 20 $6,091,744 Infrastructure Strategy and Funding WS-16001 WMR-16001 Nonrecurring Enterprise Fund Water Fund Distribution System- System Improvements Utilities Natural Environment Water Resources N-4 N-20 UAC This project is categorically exempt from CEQA under Section 15302. None Required 0 0 20 0 0 20 $549,816 Infrastructure Strategy and Funding WS-11003 Water Distribution System Improvements Annual Recurring Enterprise Fund Water Fund Distribution System- System Improvements Utilities Natural Environment Water Resources N-4 N-19 UAC This project is categorically exempt from CEQA under Section 15302. This project will be coordinated with Public Works Street Maintenance Program 0 0 20 0 0 20 $1,197,000 Infrastructure Strategy and Funding WS-11004 Water System Supply Improvements Annual Recurring Enterprise Fund Water Fund Distribution System- System Improvements Utilities Natural Environment Water Resources N-4 N-19 UAC This project is categorically exempt from CEQA under Section 15302. This project will be coordinated with Public Works Street Maintenance Program 0 0 20 0 0 20 $1,197,000 Infrastructure Strategy and Funding Page 9 Pr o j e c t I D . Na m e St a t u s Fu n d S o u r c e Fu n d i n g IB R C Ca t e g o r y De p t . Pr i m a r y C P Ele m e n t Pr i m a r y C P Se c t i o n Pr i m a r y C P G o a l Pr i m a r y C P P o l i c y Pr i m a r y C P Pr o g r a m Se c o n d a r y C P Ele m e n t Se c o n d a r y C P Se c t i o n Se c o n d a r y C P G o a l Se c o n d a r y C P Po l i c y Se c o n d a r y C P Pr o g r a m Po t e n t i a l Co m m i t t e e Re v i e w Pr o j e c t L o c a t i o n En v i r o n m e n t a l Im p a c t De s i g n R e v i e w Le g a l M a n d a t e ( 2 0 pt s ) He a l t h a n d S a f e t y (2 5 p t s ) Fa c i l i t i e s / I n f r a s t r (2 0 p t s ) Cit y O p s / S e r v i c e De l i v e r y ( 2 0 p t s ) Co u n c i l V i s i o n ( 1 5 pt s ) To t a l S c o r e Re c e i v e d To t a l 5 Y e a r Bu d g e t P r o p o s e d G r a n t s / Re i m b u r s e m e n t s /B o n d s Ci t y C o u n c i l Pr i o r i t i e s WS-15004 Water System Master Plan Nonrecurring Enterprise Fund Water Fund Distribution System- System Improvements Utilities Natural Environment Water Resources N-4 N-19 UAC This project is categorically exempt from CEQA under Section 15302. None Required 20 $500,000 Infrastructure Strategy and Funding WS-80013 Water System Customer Connections Annual Recurring Enterprise Fund Water Fund Distribution System- Customer Design and Connection Services Utilities Natural Environment Water Resources N-4 N-19 UAC This project is categorically exempt from CEQA under Section 15302. None Required 0 0 0 20 0 20 $2,369,000 Infrastructure Strategy and Funding WS-80014 Water Service Hydrant Replacement Annual Recurring Enterprise Fund Water Fund Distribution System- System Improvements Utilities Natural Environment Water Resources N-4 N-19 UAC This project is categorically exempt from CEQA under Section 15302. Screening may be required on above-grade equipment. This project may be subject to ARB review. 0 0 0 20 0 20 $1,262,480 Infrastructure Strategy and Funding WS-80015 Water Meters Annual Recurring Enterprise Fund Water Fund Distribution System- System Improvements Utilities Natural Environment Water Resources N-4 N-19 UAC This project is categorically exempt from CEQA under Section 15302. None 0 0 0 20 0 20 $2,001,452 Infrastructure Strategy and Funding WS-13002 Water Fusion and General Equipment/Tools Annual Recurring Enterprise Fund Water Fund Distribution System- System Improvements Utilities Natural Environment Water Resources N-4 N-18, N- 19 Natural Environment Water Resources N-4 N-25 UAC N/A None Required 0 0 0 20 0 20 $250,000 Infrastructure Strategy and Funding WS-02014 W-G-W Utility GIS Data Annual Recurring Enterprise Fund Water Fund Distribution System- System Improvements Utilities Transportation Reducing Auto Use T-1 T-2 T-10 UAC Possible Exemption None Required 0 0 0 20 0 20 $1,846,793 Technology and the Connected City WS-08001 Water Reservoir Coating Improvements Nonrecurring Enterprise Fund Water Fund Distribution System- System Improvements Utilities Land Use and Community Design Local Landuse and Growth Management L-1 UAC UAC This project is categorically exempt from CEQA under Section 15302. None Required 20 $750,000 Infrastructure Strategy and Funding WS-09000 Seismic Water System Upgrades Nonrecurring Enterprise Fund Water Fund Distribution System- System Improvements Utilities Land Use and Community Design Local Landuse and Growth Management L-1 UAC UAC, PTC This project is categorically exempt from CEQA under Section 15302. None Required 20 $2,230,000 Infrastructure Strategy and Funding WS-15002 WMR- Project 29 Nonrecurring Enterprise Fund Water Fund Distribution System- System Improvements Utilities Natural Environment Water Resources N-4 N-18, N- 19 Natural Environment Water Resources N-4 N-25 UAC This project is categorically exempt from CEQA under Section 15302. None Required 0 0 20 0 0 20 $6,055,034 Infrastructure Strategy and Funding WC-13001 WW Collection Sys. Rehab/Aug. Project 26 Nonrecurring Enterprise Fund Wastewater Collection Fund Collection System- System Improvements Utilities Natural Environment Water Resources N-4 N-18 UAC Possible Exemption None Required 0 0 20 0 0 20 $3,000,000 Infrastructure Strategy and Funding WC-14001 WW Collection Sys. Rehab/Aug. Project 27 Nonrecurring Enterprise Fund Wastewater Collection Fund Collection System- System Improvements Utilities Natural Environment Water Resources N-4 N-18 UAC Possible Exemption None Required 0 0 20 0 0 20 $3,410,000 Infrastructure Strategy and Funding WC-15001 WW Collection Sys. Rehab/Aug. Project 28 Nonrecurring Enterprise Fund Wastewater Collection Fund Collection System- System Improvements Utilities Natural Environment Water Resources N-4 N-18 UAC Possible Exemption None Required 0 0 20 0 0 20 $3,513,000 Infrastructure Strategy and Funding WC-16001 WW Collection Sys. Rehab/Aug. Project 29 Nonrecurring Enterprise Fund Wastewater Collection Fund Collection System- System Improvements Utilities Natural Environment Water Resources N-4 N-18 UAC Possible Exemption None Required 0 0 20 0 0 20 $3,610,000 Infrastructure Strategy and Funding WC-17001 WW Collection Sys. Rehab/Aug. Project 30 Nonrecurring Enterprise Fund Wastewater Collection Fund Collection System- System Improvements Utilities Natural Environment Water Resources N-4 N-18 Natural Environment Water Resources N-4 N-25 UAC Possible Exemption None Required 0 0 20 0 0 20 $3,711,500 Infrastructure Strategy and Funding WC-19001 WW Collection Sys. Rehab/Aug. Project 31 Nonrecurring Enterprise Fund Wastewater Collection Fund Collection System- System Improvements Utilities Natural Environment Water Resources N-4 N-18 Natural Environment Water Resources N-4 N-25 UAC Possible Exemption None Required 0 0 20 0 0 20 $360,000 Infrastructure Strategy and Funding OS-00001 Open Space Trails and Amenities Annual Recurring General Fund Infrastructure Reserve Keep-up Parks and Open Space Community Services Natural Environment Open Space N-1 N-1 PRC Possible Exemption Review by PAC or Site and Design and or ARB may be required. 0 $835,000 Infrastructure Strategy and Funding EL-12001 UG District 46 - Charleston/El Camino Real Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Land Use and Community Design Public Ways L-9 L-79 L-80, L- 81 UAC, ARB Possible Exemption UAC 0 $500,000 Infrastructure Strategy and Funding Page 10 Pr o j e c t I D . Na m e St a t u s Fu n d S o u r c e Fu n d i n g IB R C Ca t e g o r y De p t . Pr i m a r y C P Ele m e n t Pr i m a r y C P Se c t i o n Pr i m a r y C P G o a l Pr i m a r y C P P o l i c y Pr i m a r y C P Pr o g r a m Se c o n d a r y C P Ele m e n t Se c o n d a r y C P Se c t i o n Se c o n d a r y C P G o a l Se c o n d a r y C P Po l i c y Se c o n d a r y C P Pr o g r a m Po t e n t i a l Co m m i t t e e Re v i e w Pr o j e c t L o c a t i o n En v i r o n m e n t a l Im p a c t De s i g n R e v i e w Le g a l M a n d a t e ( 2 0 pt s ) He a l t h a n d S a f e t y (2 5 p t s ) Fa c i l i t i e s / I n f r a s t r (2 0 p t s ) Cit y O p s / S e r v i c e De l i v e r y ( 2 0 p t s ) Co u n c i l V i s i o n ( 1 5 pt s ) To t a l S c o r e Re c e i v e d To t a l 5 Y e a r Bu d g e t P r o p o s e d G r a n t s / Re i m b u r s e m e n t s /B o n d s Ci t y C o u n c i l Pr i o r i t i e s EL-11010 UG District 47 - Middlefield, Homer Avenue, Webster Street and Addison Avenue Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Land Use and Community Design Local Landuse and Growth Management L-1 Local Landuse and Grwoth Management L-1 UAC, ARB Possible Exemption UAC 0 $400,000 Infrastructure Strategy and Funding EL-06001 230 KV Electric Intertie Nonrecurring Enterprise Fund Electric Fund Distribution System - System Improvements Utilities Land Use and Community Design Public Ways L-9 L-79 L-80, L- 81 UAC, ARB,PTC Possible Exemption UAC 0 $50,000 Infrastructure Strategy and Funding EL-10006 Rebuild UG District 24 Nonrecurring Enterprise Fund Electric Fund Distribution System- System Improvements Utilities Natural Environment Water Resources N-4 N-18 UAC, ARB Possible Exemption UAC 0 $850,000 Infrastructure Strategy and Funding ATTACHMENT D List of most cited Comprehensive Plan Goals, Policies and Programs. COMMUNITY SERVICES AND FACILITIES ELEMENT EFFICIENT SERVICE DELIVERY GOAL C-4: Attractive, Well-maintained Community Facilities That Serve Palo Alto Residents. CUSTOMER SERVICE POLICY C-9: Deliver City services in a manner that creates and reinforces positive relationships among City employees, residents, businesses, and other stakeholders. PARKS AND PUBLIC FACILITIES POLICY C-24: Reinvest in aging facilities to improve their usefulness and appearance. Avoid deferred maintenance of City infrastructure. PROGRAM C-19: Develop improvement plans for the maintenance, restoration and enhancement of community facilities, and keep these facilities viable community assets by investing the necessary resources. NATURAL ENVIRONMENT ELEMENT OPEN SPACE POLICY N-1: Manage existing public open space areas and encourage the management of private open space areas in a manner that meets habitat protection goals, public safety concerns, and low impact recreation needs. PROGRAM N-2: Examine and improve management practices for natural habitat and open space areas, including the provision of access to open space for City vehicles and equipment, to ensure that natural resources are protected. GOAL N-4: Water Resources that are Prudently Managed to Sustain Plant and Animal Life, Support Urban Activities, and Protect Public Health and Safety. WATER RESOURCES POLICY N-18: Protect Palo Alto’s groundwater from the adverse impacts of urban uses. 1 POLICY N-19: Secure a reliable, long-term supply of water for Palo Alto. POLICY N-20: Maximize the conservation and efficient use of water in new and existing residences, businesses and industries. POLICY N-24: Improve storm drainage performance by constructing new system improvements where necessary and replacing undersized or otherwise inadequate lines with larger lines or parallel lines. PROGRAM N-36: Complete improvements to the storm drainage system consistent with the priorities outlined in the City's 1993 Storm Drainage Master Plan, provided that an appropriate funding mechanism is identified and approved by the City Council. POLICY N-25: Reduce pollutant levels in City wastewater discharges. AIR QUALITY GOAL N-9: A Clean, Efficient, Competitively-priced Energy Supply That Makes Use of Cost-effective Renewable Resources. POLICY N-26: Support regional, state, and federal programs that improve air quality in the Bay Area. ENERGY PROGRAM N-41: Reduce emission of particulates from wood burning stoves, construction activity, automobiles, and other sources. POLICY N-44 Maintain Palo Alto’s long-term supply of electricity and natural gas while addressing environmental and economic concerns. TRANSPORTATION ELEMENT GOAL-T-3 Facilities, Services, and Programs that Encourage and Promote Walking and Bicycling BICYCLING AND WALKING POLICY T-14: Improve pedestrian and bicycle access to and between local destinations, including public facilities, schools, parks, open space, employment districts, shopping centers, and multi-modal transit stations. 2 PROGRAM T-19 Develop, periodically update, and implement street, bicycle, and pedestrian facilities programs that identify and prioritize critical pedestrian and bicycle links to parks, schools, retail centers, and civic facilities. PROGRAM T-21 Study projects to depress bikeways and pedestrian walkways under Alma Street and the CalTrain tracks and implement if feasible. ROADWAYS GOAL-T-4 An Efficient Roadway Network for All Users POLICY T-24: Maintain a hierarchy of streets that includes freeways, expressways, arterials, residential arterials, collectors, and local streets. PROGRAM T-38 Implement computerized traffic management systems to improve traffic flow when feasible. LANDUSE AND COMMUNITY DESIGN ELEMENT GOAL-L-9 Attractive, Inviting Public Spaces and Streets that Enhance the Image and Character of the City. POLICY L-79: Design public infrastructure, including paving, signs, utility structures, parking garages and parking lots to meet high quality urban design standards. Look for opportunities to use art and artists in the design of public infrastructure. Remove or mitigate elements of existing infrastructure that are unsightly or visually disruptive. PROGRAM L-80: Continue the citywide undergrounding of utility wires. Minimize the impacts of undergrounding on street tree root systems and planting areas. PROGRAM L-81: Encourage the use of compact and well-designed utility elements, such as transformers, switching devices, and back flow preventers. Place these elements in locations that will minimize their visual intrusion. 3 ATTACHMENT E PROPOSED CAPITAL BUDGET http://www.cityofpaloalto.org/gov/depts/asd/budget.asp ATTACHMENT F Considerations included in development of 2015-2019 CIP (General Fund) Alignment with City Council Priorities The projects anticipated to be included in the 2015-2019 Proposed CIP align with the City Council priorities adopted on February 1, 2014: Comprehensive planning and action on land use and transportation: The built environment, transportation, mobility, parking, and livability- Projects supporting this goal include Street Maintenance, Highway 101 Pedestrian/Bicycle Overpass, Bicycle and Pedestrian Plan, Transportation and Parking Improvements, Matadero Creek Trail, and Boulware Park Improvements Infrastructure strategy and funding- A guiding strategy for prioritizing projects and determining funding levels was alignment with the Infrastructure Committee’s Infrastructure Plan and anticipated draw on the Infrastructure Reserve for projects not included in the CIP Technology and the connected City- A one-time investment in the Transportation and Parking Improvements Project will allow for parking guidance system, revenue collection, and access control technology in downtown City garages. New and Augmented Projects The 2015-2019 Proposed CIP includes a limited number of new projects and increased investments for existing projects. These projects were prioritized because of their health and safety impacts or because they reduce the “catch-up” needs identified in the final IBRC report: Civic Center Fire Life Safety and Electrical Upgrades: This project will assess and upgrade the fire life safety systems in City Hall and replace the electrical switch gear for the Civic Center Complex. The fire life safety system is approaching the end of its useful life. Civic Center Waterproofing Study: This funding will allow for the Civic Center plaza deck structural system to be evaluated, and will provide short, medium, and long term options to protect the structural system. Identifying necessary improvements allow for repairs to be completed sooner, potentially reducing the cost of remediation. Boulware Park Improvements: The project will focus improvements on the existing children’s playground, lighting, site amenities, and accessibility upgrades, and will reduce the parks “catch-up” backlog identified in the final IBRC report. Palo Alto Community Gardens Irrigation System: This project will provide funding for new irrigation systems at all three community gardens. The replacement of the existing irrigation systems will benefit the City and the users of these facilities, and will result in reduced downtown and service interruptions. Annual maintenance costs for the existing systems have increased due to repeated irrigation main line breaks. F Embarcadero Road Corridor Improvements: This project provides funding for the design of a traffic signal modification to combine the traffic signals at the Town & Country‐PALY Driveways with the PALY pedestrian crossing in response to community and City Council concerns. Street Maintenance: This additional funding will allow for the design and accelerated repaving of Middlefield Road and Alma Street, and will aid in achieving an average Pavement Condition Index (PCI) score of 85 before the 2021 goal. Facility Interior Finishes Replacement: The additional funding will allow for upgrades to the locker and restrooms in the Police Department. The restrooms are in need of repair as they have seen little to no change in approximately 40 years. Transportation and Parking Improvements: The additional funding will allow for the installation of parking guidance system technology, access control, and revenue collection equipment in the downtown garages. A summary of these adjustments is included below: Project FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Civic Center Fire Life Safety and Electrical Upgrades (NEW) $925,000 Civic Center Waterproofing Study (NEW) $258,492 Boulware Park Improvements (NEW) $45,000 $400,000 Palo Alto Community Gardens Irrigation System (NEW) $256,504 Embarcadero Road Corridor Improvements (NEW) $498,957 Street Maintenance $525,000 $950,000 $850,000 Facility Interior Finishes Replacement $75,000 Transportation and Parking Improvements $1,943,699 Total Increase $3,557,659 $950,000 $895,000 $400,000 $925,000 *Funding is provided for a study of the plaza deck. Funding for potential repairs is not included in the 2015-2019 CIP, hence the inclusion of this project in the subsequent table outlining the projects not recommended for funding. Recurring Projects There are several annually recurring projects in the Capital Improvement Fund. The level of funding proposed for these projects was reviewed to ensure that the annual funding level was set in alignment with historical expenditure levels as well as any funds anticipated to carry forward from FY 2014. As part of the FY 2015-2019 CIP, the following recurring projects were reduced: Project FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Open Space Trails and Amenities $40,000 Traffic Signal and ITS Upgrades $50,000 $50,000 $50,000 $50,000 Benches, Signage, Fencing, Walkways and Perimeter Landscaping $50,000 City Facility Parking Lot Maintenance* $275,000 Street Lights Improvements $150,000 $150,000 $150,000 $150,000 $150,000 Thermoplastic Lane Marking and Striping $10,000 $10,000 $10,000 $10,000 Total Reduction $240,000 $210,000 $210,000 $210,000 $485,000 Studies, Master Plans, and Anticipated Grants In reviewing the projects included in the FY 2014-2018 CIP and proposed by departments for 2015-2019, there were certain projects where the proposed budget amounts were based on very preliminary estimates, as the actual scope and feasibility of the project is not known at this time. The projects in this category are currently being evaluated, and upon completion of the applicable study, master plan, etc. recommendations to fund the project may be included in future capital budgets. It is therefore important that the IR maintain a balance, after accounting for the Infrastructure Funding Plan, to enable these projects to move forward once more details about cost, scope, etc. are available. Additionally, there are two projects that are anticipated to funded largely by grants (El Camino Real & Churchill Avenue Intersection Improvements, Embarcadero Road Corridor Improvments), that have not yet secured the anticipated grant funds. Rather than showing the funding as coming from the IR, or programming grant receipts that are not yet in place, funding has not been included for these projects. As part of the FY 2015-2019 CIP, the following adjustments were made: Project FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Civic Center Waterproofing Repairs* $200,000 Greer Dog Park (NEW) $81,504 $150,000 Baylands Interpretive Center Improvements and Boardwalk Repair $115,000 $1,695,000 PW Office in MSC, $584,205 Building C Renovation (NEW) El Camino Real & Churchill Avenue Intersection Improvements** $110,000 Embarcadero Corridor Improvements $1,200,000 Total Reduction $780,709 $3,355,000 $0 $0 $0 Cubberley Community Center Funding is not included in the 2015-2019 for infrastructure repairs at Cubberley Community Center. The City’s lease with the Palo Alto Unified School District for the Cubberley Community Center is set to expire at the end of 2014. On February 24, 2014, the City Council directed the City Manager to continue negotiating with the School District given certain parameters including a 20-year long-term lease and elimination of the Covenant Not to Develop, with conversion of that $1.5 million in funding to be used towards Cubberley maintenance and improvements. Since the lease with the School District is on a calendar year basis, the Fiscal Year 2015 budget assumes payment for the Covenant Not to Develop for the first six months of the fiscal year. The second six months of the Covenant Not to Develop payment ($958,679) for Fiscal Year 2015 is set aside in the Fiscal Year 2015 Operating Budget as a reserve, which can be used for Cubberley maintenance and capital needs. Project FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Cubberley Mechanical and Electrical Upgrades $206,529 $1,300,000 Cubberley Maintenance Planning $240,251 Cubberley Auditorium Remodel $1,250,424 Cubberley Roof Replacements $407,504 $465,000 $50,000 $150,000 $180,000 Total Reduction $2,104,708 $1,765,000 $50,000 $150,000 $180,000 IR Funding Constraints There were a number of new projects and funding increases to existing project proposed as part of the FY 2015-2019 CIP process that are not included in the proposed budget. The projects, while having merits and benefits to the community, are not included due to funding constraints and the potential usage of the IR for projects outside of the CIP that are included in the Infrastructure Plan. Absent the need to reserve a majority of the IR for projects outside the CIP, potential cost increases, and projects resulting from master plan/feasibility assessment efforts, these projects likely would have been recommended as part of the FY 2015-2019 Proposed CIP. These projects can be reviewed again as part of the 2016-2020 CIP process, and may be included in future CIPs. It should be noted that three of these projects (Sidewalk Program Assessment, Golf Course Parking Lot and Entrance, and Police Restroom Upgrades) are not recommended as the project, or a portion of the project, will be addressed through other existing capital projects. Project FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 University Circle Reconstruction (NEW) $467,558 Sustainability Improvements (NEW) $172,807 $150,000 Buckeye Creek Hydrology Study (NEW) $250,000 Baylands Comprehensive Conservation Plan (NEW) $250,000 West Bayshore Road Sidewalk Gap Closure (NEW) $65,000 $425,000 Sidewalk Program Assessment $219,475 Golf Course Parking Lot and Entrance $60,000 $600,000 Police Restroom Upgrades $75,000 $325,000 Total Reduction $1,174,840 $710,000 $1,175,000 $0 $0 Attachment G Buildings and Facilities $9,449,382 8% Parks and Open Space $11,841,731 11% Streets and Sidewalks $44,229,144 40% Traffic and Transportation $24,074,939 22% Salaries and Benefits- unallocated $21,704,812 19% Proposed FY 2015-19 General Fund CIP Total by Category Buildings and Facilities Parks and Open Space Streets and Sidewalks Traffic and Transportation Salaries and Benefits- unallocated Buildings and Facilities $1,861,182 8% Parks and Open Space $2,303,884 9% Streets and Sidewalks $12,810,600 52% Traffic and Transportation $5,249,939 21% Salaries and Benefits- unallocated $2,498,453 10% Buildings and Facilities Parks and Open Space Streets and Sidewalks Traffic and Transportation Salaries and Benefits- unallocated Proposed FY2015 General Fund CIP Total by Category Catch-up $3,679,800 3% Keep-up $55,957,825 50% New $29,957,571 27% Salaries and Benefits (unallocated) $21,704,812 20% Catch-up Keep-up New Salaries and Benefits (unallocated) Proposed FY 2015-19 by IBRC Category Proposed FY 2015-2019 CIP by Category $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 Parks and Open Space Nonrecurring Recurring $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 FY2015 FY2016FY2017 FY2018FY2019 Buildings and Facilities Nonrecurring Recurring $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 Traffic and Transportation Nonrecurring Recurring $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 FY2015FY2016FY2017FY2018FY2019 Streets and Sidewalks Nonrecurring Recurring Proposed FY 2015-2019 CIP by IBRC Recommendation $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 FY2015 FY2016 FY2017 FY2018 FY2019 Buildings and Facilities New- IR Funded Keep-up Catch-up $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 FY2015 FY2016 FY2017 FY2018 FY2019 Parks and Open Space New- Outside Funded New- IR Funded Keep-up Catch-up $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 FY2015 FY2016 FY2017 FY2018 FY2019 Streets and Sidewalks New- Outside Funded New- IR Funded Keep-up $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 FY2015 FY2016 FY2017 FY2018 FY2019 Traffic and Transportation New- Outside Funded New- IR Funded Keep-up $25,318,529 $23,370,648 $20,744,410 $25,059,673 $22,437,005 $24,724,058 $22,439,387 $26,655,107 $21,139,785 $16,341,671 $13,112,784 $14,044,044 $8,133,347 $12,053,235 $18,148,569 $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Sources Uses Projected Ending Balance Buildings & Facilities Parks & Open Space Streets & Sidewalks Traffic and Transportation Miscellaneous Totals By Year FY 2010 $9,386 $5,775 $5,478 $376 $261 $21,276 FY 2011 $20,255 $1,833 $6,907 $708 $898 $30,601 FY 2012 $23,868 $1,139 $6,370 $673 $184 $32,234 FY 2013 $14,136 $1,967 $11,589 $1,327 $1,049 $30,068 FY 2014 YTD $10,344 $1,412 $4,101 $614 $272 $16,743 $0 $5 $10 $15 $20 $25 $30 General Fund Capital Improvement Program Expenditures Summarized by Project Category for Five Years: Fiscal Years 2010-2014 ($ in thousands) City of Palo Alto Page 1 Planning and Transportation Commission 1 Verbatim Minutes 2 May 14, 2014 3 DRAFT 4 EXCERPT 5 6 Public Hearing7 CIP Review: Review of 2015-2019 Proposed Capital Improvement Programs for Comprehensive Plan8 Consistency (For more information, contact Chitra Moitra at Chitra.moitra@cityofpaloalto.org)9 10 Acting Chair Keller: So we’ll start with the Public Hearing which is the Capital Improvement Program (CIP)11 review, Item 1, which is a review of the 2015-2019 Proposed CIP for Comprehensive Plan consistency.12 By the way are there any members of the public who wish to speak to this item? If you do please give a13 card to the Secretary and we’ll start with the staff report.14 15 Steven Turner, Advance Planning Manager/Acting Director: Yes, thank you very much Commissioner16 Keller. I’m Steven Turner the Advance Planning Manager and on behalf of Hillary Gitelman our Director17 of Planning and Community Environment who is out of the office this week I do want to welcome our two18 new Commissioners and thank you for your service. And we hope to bring you lots of interesting projects19 this year for your review starting with the Capital Improvement Plan. Perhaps not the most interesting20 project we’ll bring to you this year, but certainly an important one in that every year as part of the21 budget process the City brings forth the proposed CIP to the Planning Commission to find consistency of22 the proposed CIP with the Comprehensive Plan.23 24 This is a yearly event and with us tonight to help present the information is our team of CIP professionals25 who have been working extremely hard over the past few months to prepare the materials in front of you26 this evening starting with Chitra Moitra a Planner with the Planning Division who have provided much of27 the information regarding the consistency of the CIP with the Comprehensive Plan. To her right is Brad28 Eggleston, Assistant Director of Public Works. Then we have Eric Bilimoria a Senior Management Analyst29 with the Administrative Services Department and then Walter Rossman our Budget Director also with30 Administrative Services. And they’ll be making the staff presentation tonight and are we starting with31 Eric or with you Eric? Very good. Take it away then.32 33 Eric Bilimoria, Senior Management Analyst, Administrative Services Department: Thank you Steven. Good34 evening Vice-Chair and members of the Commission, Eric Bilimoria with the Office of Management and35 Budget. I’d like to first spend a few moments providing a brief overview of the proposed 2015 Capital36 Budget and the 2015-2019 proposed CIP. The City’s overall investment towards capital projects in Fiscal37 Year 2015 is $57.5 million. The majority of this funding is allocated across the City’s nine Enterprise38 Funds, which include the various Utility Funds as well as the Wastewater Treatment, Refuse, Storm39 Drainage, and Airport Funds with the largest investments in the Utility funds and Wastewater Treatment40 Fund. Total Fiscal Year 2015 proposed expenditures in the Enterprise Funds are $28.5 million or 4941 percent of the overall 2015 Budget and are primarily supported by rate payers and new users connecting42 to the utility systems. Funding within the Enterprise Funds allows for a wide array of projects including43 upgrades and rehabilitation to the City’s utility systems, progress towards the completion of a seven44 storm drain capital projects outline in the 2005 voter approved ballot measure, and projects to improve45 the condition of the Regional Water Quality Control Plant.46 47 Approximately 43 percent or $24.7 million of the overall Fiscal Year 2015 Budget is allocated to the48 Capital Improvement Fund, which is supported primarily by an annual transfer from the General Fund.49 Projects budgeted within the Capital improvement Fund allow for improvements to streets and sidewalks,50 parks and open space, buildings and facilities, and traffic and transportation. The transfer for Fiscal Year51 2015 is $13.7 million.52 53 Finally, approximately eight percent or $4.3 million of the Fiscal Year 2015 Budget is in the Vehicle and54 Technology Internal Service Funds; the majority being in the Vehicle Fund. This funding allows for the55 Attachment C City of Palo Alto Page 2 timely replacement of vehicles and equipment, including public safety vehicles that are approaching age, 1 mileage, and utilization thresholds. 2 3 Planned expenditures over the 2015-2019 CIP of $330 million are approximately 12 percent or $53.4 4 million lower than the 2014-2018 CIP although still higher than the preceding three CIP’s. The decline in 5 planned expenditures from the prior CIP to the proposed CIP is a result of changes across all funds; 6 however, a reduction in planned expenses in the Enterprise Funds, specifically the Wastewater Treatment 7 Fund, is the largest driver of the decline. The prior CIP assumed full, assumed funding for the full build 8 out of the bio solids facility. While funding is included for the first phase of a bio solids handling solution 9 funding for the entire build out is not reflected in the proposed CIP. As more information becomes 10 available and decisions are made regarding the cost, size, and partner agency support for this project it 11 may be included in future CIP documents. Cumulative changes in the Wastewater Treatment Fund 12 resulted in a $58 million decline in planned capital expenditures. 13 14 Planned expenditures in the General Fund are $13.5 million lower than the 2014-2018 CIP. The decrease 15 is primarily due to the $8 million Golf Course Reconfiguration Project. Funding for this project will carry 16 over to Fiscal Year 2015; however, it is not reflected in the proposed CIP as no additional funding is 17 allocated for this project at this time. It is anticipated that work will begin on this project by summer of 18 2014. Planned expenditures in the Internal Service Funds are relatively unchanged from the levels 19 assumed in prior CIP’s. Information on the breakdown of capital projects by category including recurring 20 and nonrecurring status as well as Infrastructure Blue Ribbon Commission (IBRC) classification can be 21 found in Attachment G of this agenda item. 22 23 The General Fund projects included in the proposed CIP were recommended after a deliberate staff 24 driven vetting process. The recommendations included in the City Manager’s proposed Budget will also 25 be reviewed by the Finance Committee on May 27, 2014. As part of the prioritization process staff 26 considered several factors; first, staff ensured that proposed projects were aligned with City Council 27 priorities. Staff also prioritized health and safety projects over other projects. As an example, the Civic 28 Center Fire Life Safety and Electrical Upgrades Project was added to the proposed CIP. In March 2014 29 the City Council considered a recommendation from the Infrastructure Committee that included a 30 prioritized project list and associated funding plan, which included among others a new Public Safety 31 Building and the replacement of two outdated fire stations. While funding for these projects is not 32 included in the CIP the funding plan did assume utilization of the Infrastructure Reserve (IR), which is the 33 ending fund balance of the Capital Improvement Fund in the amount of $12.5 million over the next five 34 years. 35 36 The utilization of the IR was considered in developing the proposed Budget Spending Plan. As part of the 37 Fiscal Year 2015 budget process staff reviewed the amounts allocated to annually recurring projects. 38 Historical expenditure levels were reviewed and some adjustments were made to recurring projects as a 39 result. A number of proposed projects were identified that are dependent upon the completion of 40 studies and master plans or grant sources that have not yet been identified. The repair or replacement 41 of the Baylands Boardwalk is one such example. While funding is not included for these types of projects 42 the potential for funding, the potential for needing to allocate funds in the future once the feasibility, 43 scope, and costs are better defined is real however accentuating the importance of maintaining a healthy 44 IR balance. 45 46 Funding is not allocated for Cubberley Community Center in the 2015-2019 CIP pending negotiations with 47 the Palo Alto Unified School District (PAUSD). In February of 2014 the City Council directed staff to 48 eliminate the covenant not to develop as part of the negations with the School District and to use funds 49 towards Cubberley maintenance and infrastructure needs. If the City and the School District are able to 50 agree on a long term lease funds will be needed for capital improvements and maintenance of the site. 51 The proposed Operating Budget includes a recommendation to reduce the Cubberley lease payment 52 amount for Fiscal Year 2015 by approximately $1 million, which is the amount equal to the first six 53 months of the calendar year 2015 covenant not to develop payment and sets aside this amount in a 54 reserve for potential rehabilitation costs. 55 56 City of Palo Alto Page 3 As referenced within the staff report a number of new General Fund projects and increased General Fund 1 investments are proposed as part of the 2015-2019 CIP. A significant increase to the Annual Street 2 Maintenance Project spread over three years will allow for street resurfacing work on Alma as well as 3 Middlefield to be completed. This increase will bring the total allocation for street maintenance in Fiscal 4 Year 2015 to $6.4 million and approximately $6 million in Fiscal Years 16 and 17. Additionally, with the 5 level of funding programs in the 2015-2019 CIP the City is anticipated to reach its goal of an average 6 citywide Payment Condition Index Score of 85 by 2019, two years earlier than the Council established 7 goal. 8 9 An increase to the Transportation and Parking Improvements Project will allow for the installation of 10 parking guidance system technology in the downtown garages as well as access control and revenue 11 collection equipment. The Civic Center Fire Life Safety and Electrical Upgrades Project will upgrade aging 12 fire life safety systems in City Hall. The Embarcadero Road Corridor Improvements Project provides 13 funding for the design of traffic signal modifications to enhance safety and address resident concerns 14 regarding delays along Embarcadero Road. Grant funding will be pursued for the construction costs 15 associated with this project. Funding this program for improvements of Boulware Park including the 16 installation of a new play structure and rubberized surfacing to increase accessibility. This project will 17 contribute to a reduction in the park’s catch up infrastructure backlog. The Civic Center Waterproofing 18 Study Project provides funding for a condition assessment of a Civic Center Plaza Deck structural system. 19 Repairs are not programed in the CIP pending results of the study. The Palo Alto Community Gardens 20 Irrigation System Project allows for new irrigation systems to be installed at all three community gardens, 21 which is anticipated to reduce maintenance costs. Finally, additional funding is proposed for the Facility 22 Interior Finishes Replacement Project, which will allow for improvements to the Police Department 23 restrooms which are in need of upgrade. Staff did weigh the option of not funding these upgrades in 24 light of the proposed new Public Safety Building; however, it was determined that the need was too 25 severe to wait. 26 27 A number of projects, a number of new projects are proposed for the Enterprise Funds as well. 28 Improvements in the Electric Fund will enhance service reliability and replace aging equipment. The Gas 29 Main Replacement Project and the Wastewater Collection System Rehabilitation and Augmentation 30 Project will improve health and safety by replacing leaking inadequately sized gas mains and reducing the 31 likelihood of sanitary sewer overflows. The Storm Drain Master Plan Update Project will enable staff to 32 identify the drainage system infrastructure needs to be incorporated into a future ballot measure to fund 33 the City’s Storm Drain Program beyond 2017 when the 2005 property owner approved fee increase 34 sunsets. 35 36 Finally, the Temporary Airport Terminal Project will allow for a modular trailer to be installed at the 37 airport providing for a temporary airport terminal building to house airport staff and serve the flying 38 community until the completion of an Airport Master Plan. It is anticipated that the City will take over 39 operations of the Airport from the County of Santa Clara during Fiscal Year 2015. 40 41 The display of information contained in the proposed Capital Budget document is consistent with the 42 2014-2018 CIP. As part of the 2014-2018 CIP the Office of Management and Budget made some 43 changes to the Capital Budget document in response to feedback from this committee. These changes 44 included better descriptions of the operating budget impacts, listing of prior year budgets with remaining 45 funding that will carry forward to the next fiscal year, increased utilization of charts, graphs, and pictures, 46 and clearer linkages to the Comprehensive Plan for each project. The Office of Management and Budget 47 is in the process of transitioning to a new budget document publishing software and budget system 48 pending City Council approval. The 2015 Capital Budget was produced using the previous software. 49 Over the course of the next year staff will work to further enhance the clarity and information contained 50 in the budget document and the Fiscal Year 2016 Capital Budget will be prepared using the new 51 software. With that I’d like to turn the presentation over to Chitra from the Planning Department. 52 53 Chitra Moitra, Planner: Good afternoon Commissioners. I am Chitra Moitra, Advance Planning 54 Department. Today staff recommends that the Planning and Transportation Commission (PTC) find the 55 City of Palo Alto Page 4 proposed 2015-2019 CIP consistent with the Comprehensive Plan and forward its findings to the Finance 1 Committee and the City Council. 2 3 The CIP process this year started in last December of 2013 and the project managers from different 4 departments started working together on the CIP projects. Last year we had a process which was a little 5 bit different from planning side. Commissioner, then Commissioner Keller and Alex Panelli, ex-6 Commissioner had us two of them from the PTC subcommittee on CIP items. They worked with staff 7 very closely and suggested a lot of improvements on the document and on identifying the projects. In 8 September of previous year’s process the PTC subcommittee on CIP came and presented it to the whole, 9 full Commission and again the full Commission made a lot of improvements to the projects. 10 11 This year we have followed their recommendations and we have incorporated all the changes they 12 suggested last year and these changes include as Eric said establishing each of the CIPs, linking it with 13 the Comprehensive Plan element and section of the Comprehensive Plan with a goal and a policy and a 14 program. We also made improvements in designating the projects whether they are annual recurring or 15 nonrecurring projects or whether it’s a catch up or a keep up project. We have added a lot of visual aids 16 and maps and graphics to better illustrate. So these were all as a result of the last year’s process we 17 went through. 18 19 For this year let me start about the analysis work, which we did which is Attachment B of the staff report. 20 This year the CIP analysis can be grouped in three groups. First is CIP’s, individual CIP’s linkages with 21 the Comprehensive Plan goals, policies, and programs. This year again no surprise as your Chart 1, 2, 22 and Table 1 shows that overwhelmingly 45 percent of the goals, policies, and programs cited are from 23 the Natural Environment Element and about 30 percent of them are from the Community Service 24 Element. I have provided the list of the most cited goals, policies, and programs in Table 2 of the 25 attachment. And then as we can see, next slide, next one. So as we can see… the following one please. 26 The following one. So as we can see the goals, polices, and programs from the Community Service 27 Element the mostly referred ones are C4 Goal, Policy C25, and Program C19. These are all focused on 28 maintaining the City’s aging infrastructure facilities throughout the City. The Natural Environment 29 Element is the next most cited element and again the most of the Comprehensive Plan policies are 30 related to water resources and maintaining efficient energy system and supply. 31 32 The second set of analysis we did was CIP related to the budget side of the CIP. So each of the dollar 33 amounts requested for the CIP’s were now assigned to a Comprehensive Plan element and for that we 34 can see that about 59 percent of the budget has been devoted to Natural Environment Element. And the 35 types of funds which was used was Enterprise Fund basically funding most of all the projects in the 36 Natural Environment Element and about 64 percent of the General Fund went for the Community Service 37 Element. 38 39 The last section of analysis which we did was link the CIP’s with the City Council priorities. In 2014 the 40 City Council had three priorities and the Number 1 was infrastructure, Number 2 was technology, and 41 Number 3 was built environment and transportation and parking related. So again we find that about 42 $292 million were invested on the first category, which is the infrastructure strategy. Attachment C of 43 your staff report shows the additional information we provided in terms of the committee reviews 44 required for each project and if any environmental review is required for the projects or if there is any 45 design review required for the projects. Attachment D of your staff report also lists the most citied 46 Comprehensive Plan goals, policies, and programs. So with this, in conclusion I would like to say that 47 staff requests PTC to find the proposed CIP’s consistent with the Comprehensive Plan and forward it to 48 the Finance Committee and the City Council. Thank you. 49 50 Mr. Turner: And I might just add just to kind of wrap up the staff presentation the purpose of the PTC’s 51 role tonight is relatively straightforward. As Chitra mentioned it’s really to find consistency of the 52 proposed CIP with the Comprehensive Plan. Over the years staff has tried to add value to this process by 53 providing a lot of additional detail about the projects and their relationships to the Comprehensive Plan 54 thus a lot of the charts and information that Chitra just described have been provided to you over the 55 years. It’s really for your information. In addition the detailed project highlights that Eric provided in his 56 City of Palo Alto Page 5 presentation were for your information as well. The PTC is not required to go through each CIP and find 1 the individual CIP’s to be consistent with the Comprehensive Plan or for the PTC to add really substantial 2 comments on the CIP projects themselves. So it’s really the intention of the PTC to find that consistency 3 of the overall CIP with the Comprehensive Plan. We’ll be happy to answer any questions that you may 4 have. Thank you. 5 6 Acting Chair Keller: Thank you. So I appreciate the work of the staff in putting this together. It’s a lot of 7 work and having been involved in this for a number of years I can certainly see a lot of improvements in 8 the process so thank you very much. I see no inputs, cards from the public. So I’ll open this up to 9 comments from members of the Commission. Does any members of the Commission have any 10 comments or questions that you wish to make? Carl? Carl? Commissioner King. 11 12 Commissioner King: Let’s see… Thank you. This is my first time to go through one of these and so I’m 13 trying to understand the process and I’m not sure to whom to address this, maybe even one of the… 14 well, I’ll address it to staff and maybe the other Commissioners want to chime in. So the reason, so last 15 year obviously there was some subcommittee and the reason it was deemed not to have a subcommittee 16 was that it’s work was done or it wasn’t very productive or a subcommittee including Commissioners. 17 Does anybody want to address that one? 18 19 Mr. Turner: Sure. Well, early maybe gosh about four or five years ago staff would typically bring forward 20 the CIP to the PTC without a lot of background data except for maybe the big book itself. And the 21 Commission I believe as a whole felt there really wasn’t a lot of value that the Commission was adding to 22 the process of finding consistency of the CIP with the Comprehensive Plan. And so therefore kind of out 23 of the IBRC there was a subcommittee of the PTC that got together with staff who was putting together 24 the CIP book to try to find ways where we could more closely link the CIP with the Comprehensive Plan. 25 And through that process we were able to ask the project managers of each CIP project to provide 26 additional information and resources into their CIP information that would allow staff to more closely link 27 each CIP with the Comprehensive Plan. And so over the years we’ve been able to develop that 28 information and the project managers have gotten used to more closely liking their individual projects 29 with Comprehensive Plan goals, policies, and programs so that really over the last two years or so we’ve 30 gotten to develop a pretty good system of information that Planning staff is then able to analyze and 31 produce the information in terms of the graphs and charts that you received as part of your materials 32 today. 33 34 That got to a level of success last year that this year we felt that there weren’t any substantial requests 35 for alterations or additional information for the CIP of this year so we decided not to convene the 36 subcommittee of the PTC for this year and simply rely upon the information and the process that was 37 developed late last year for this particular process. So that, but over the past few years again that help 38 of the subcommittee has really helped inform the process that’s in front of you today. 39 40 Commissioner King: Ok, thank you. And then my second question you refer to an Infrastructure 41 Committee. Who is that and when do they do their work? 42 43 Mr. Turner: Well that was the IBRC. 44 45 Commissioner King: Oh, ok. 46 47 Mr. Turner: So that made… and Commissioner Tanaka was a member of that as well as Commissioner 48 Michael and so they had completed their work. 49 50 Commissioner King: Got it. 51 52 Mr. Turner: So but kind of evolving from that Commission is we have two members of the PTC who 53 typically kind of represent infrastructure type issues and relate directly to staff about questions that the 54 Commission may have about infrastructure. 55 56 City of Palo Alto Page 6 Commissioner King: Understood. So currently then the coordination with all City departments and the 1 project managers they are the ones who actually do the CIP planning at this point? 2 3 Mr. Turner: That’s correct. 4 5 Commissioner King: Ok. Is that my time? My time is up? 6 7 Acting Chair Keller: Yes unless you have a quick question or maybe we will do another round if you have 8 follow up. Give everybody a chance. Commissioner Alcheck who has just joined us a little while ago do 9 you wish to have any comments? 10 11 Commissioner Alcheck: Yeah the general, I feel like the general consensus is that we’ve maybe not, 12 we’ve maybe failed a little bit in keeping up and maintaining, but the I have sort of a different response 13 to this document, which was that it sort of made me proud to think this is how much we’re trying to 14 accomplish in a short time period. I like the fact that the essentially or the staff has sort of continued the 15 same Comp Plan based analysis that it did develop last year. I thought that was really helpful and I think 16 that this, I think the proposed Capital Budget I would support the finding that the proposed Capital 17 Budget was supported by the Comp Plan. And I mean to a certain extent I feel a little overwhelmed in 18 any effort to sort of determine any other conclusion because the, just the vast majority of projects that 19 are here and to what extent and to what degree should they be prioritized differently or such and to what 20 extent are certain Comp Plan policies and goals more important than others? But I think that you did a 21 superb job in putting this presentation together and the staff report and I look forward to sort of hearing 22 what the City Council… I look forward to hearing from them about just the general direction of the 23 budget. That’s all I have to say. 24 25 Acting Vice-Chair Keller: Thank you. Commissioner Gardias. Welcome. 26 27 Commissioner Gardias: Thank you very much. I have very simple questions so not very difficult in nature 28 and probably would be informational from your perspective only. So these questions are: is there some 29 single measure that was developed by staff to link a master plan with the proposed CIP Budget? Is there 30 something that we may look at and then say well this measure reflects master plan? That’s number one. 31 32 And then the second question is that you talked at the beginning of your presentation about the IR and 33 then certain items were excluded from the CIP. Is there some information that’s provided to the City 34 Council on those items if they come into fruition at once as a single item, expenditure item in the future if 35 they all materialize? Thank you. 36 37 Brad Eggleston, Assistant Director, Public Works - Engineering: Thank you Commissioner Gardias. I’m 38 Brad Eggleston, Assistant Director of Public Works. When you’re referencing master plan used to develop 39 the CIP’s did you perhaps mean the Comprehensive Plan? 40 41 Commissioner Gardias: That’s correct. 42 43 Mr. Eggleston: Ok. Yes, a lot of the development of the CIP’s has to do with the keep up and catch up 44 needs that were identified by the IBRC in its work. And so as Eric described we used that as a lot of the 45 basis for developing projects. And then as we do that and describe those projects the project managers 46 also look at the Comprehensive Plan elements and goals that are supported by them and provide that 47 information into the process. Does that answer your question? 48 49 Commissioner Gardias: Thank you. I think that for now it’s going to answer this. What about the second 50 question? 51 52 Mr. Eggleston: Would you mind repeating the question? 53 54 Commissioner Gardias: Yeah that was about not inclusion of certain items that were subject of the IR 55 expenditure, potential expenditures in the future years. 56 City of Palo Alto Page 7 1 Mr. Eggleston: Right. So in your packet Attachment F outlines the various projects which were not 2 included and it gives more detail on that prioritization side year by year, projects that may be subject to a 3 master plan or the projects that were recurring in nature and we’ve looked at the historical spending 4 amount. And then towards the very end of that attachment there’s a list of projects maybe on the fifth 5 or sixth page with a heading called IR Funding Constraints. And these are the projects which were 6 proposed as part of this process which were not ultimately recommended as part of the Budget. 7 8 Commissioner Gardias: Ok, thank you. 9 10 Acting Chair Keller: Thank you. Commissioner Rosenblum. Welcome. 11 12 Commissioner Rosenblum: Hi. I also want to echo everyone’s remarks about the comprehensiveness of 13 this plan. It is pretty amazing the detail and diligence that went into it. 14 15 I have a couple of questions and also an ask. I’ll do the ask first, which is I think for us to comprehend 16 this you put in some useful tables about the number of citations so we can easily find what priorities and 17 what programs, what goals each of these items referred to, but I think additional context would be 18 useful. So if there are sources for benchmarking other cities of our size, the percentage of capital that 19 goes into various types of projects on an annual basis, on a go forward basis, that would be useful. 20 21 The second, I don’t find the pie charts particularly revealing. It’s more useful to have a time series and 22 you provide them sometimes and not others. I’d like to know the growth of the individual items. I know 23 that some of these are nonrecurring so it may be difficult to do, but as a comment what I would find 24 more useful is to understand the relative change in various areas as a result in particular of Council 25 priorities changing. So what happened as a result of Council saying I’d like to do this? What changed? 26 So that’s the ask. And I know some of it may not be possible so I’d be happy to discuss that and hear 27 your reaction to it. 28 29 The question has to do with this, which is a huge part of this is infrastructure. So that’s where the 30 money is and so my question has to do with how did you benchmark the right amount for infrastructure? 31 I imagine that each department submitted the various improvements we need in water, sewage, 32 electricity, etcetera. And you’re particularly linking this to a Council priority that you don’t want to have 33 delayed, deferred maintenance. So this would imply that this is preemptive maintenance or the gold 34 plated maintenance. I don’t know what the word here would be, but are there different levels of 35 infrastructure investment that one considers for a mid-sized city and we picked the premium plan? 36 37 Walter Rossman, Director, Office of Management and Budget: Walter Rossman, Budget Director. It really 38 at the level of infrastructure investment depends on the funding source. So when you have a Utility 39 Fund, which is an Electric Fund or a Gas Fund what departments and the Utilities Department will do is 40 engineers that will look at what is the infrastructure investment needs given certain standards and bench 41 markings which best practice in the industry. So that they figure out how much money do we need to 42 set aside and then if it’s sufficient within the budget it may be with no rate increases to the rate payers if 43 it’s not then we may have a rate increase for the rate payers in certain years. So that’s one way how the 44 Capital Budget is set. 45 46 When it comes to the General Fund, which really is the Capital Budget for our libraries in general for 47 maintenance for our parks, for our roads, etcetera we now have a different picture. So what we have to 48 be out there with is what we give to Capital over here if it shifts more dollars from the General Fund over 49 there, but for less dollars in the Operating Fund. So it then becomes a balancing strategy based on 50 Council direction how we are going to invest those funds. So the Council in the past few years I think 51 about two years ago decided to increase the investment by $2.2 million annually in order to address the 52 catch up needs or the keep up needs, excuse me, in the General Fund Capital Fund and that really has 53 helped to alleviate those funding constraints. However, future investments increased investments we 54 have to balance out again the various needs within across the City and across for the residents. Lastly in 55 order to address the catch up need the Council is in discussion with staff and has looked at an 56 City of Palo Alto Page 8 Infrastructure Plan which propose money perhaps differently not necessarily from ongoing revenues, tax 1 revenues, but also potentially issuing debts in order to pay for this infrastructure investments, which are 2 quite large. 3 4 Mr. Turner: And Commissioner Rosenblum I’ll respond to your comments, which I thought were very 5 good. And if you would have asked me five years ago if we were able to get to this level of detail that 6 we’ve presented to you tonight I’d say it was a long shot. But it actually happened by the hard work of 7 our staff to really go out and seek additional information and then pull that all together and analyze it. 8 so I believe that once we move towards a CIP/Infrastructure Management system software that I think 9 we’ve been talking about internally to do that should give us additional capabilities for additional data 10 collection and then being able to track that change over time as you suggested. And then once we have 11 enough of that data over the years we’ll be able to provide you I think with that level of detail to respond 12 to your comments. 13 14 Commissioner Rosenblum: Thank you all very much. 15 16 Acting Chair Keller: Acting Vice-Chair Tanaka. 17 18 Acting Vice-Chair Tanaka: Yeah so also thank you for your work on this, I really appreciate it. It’s very 19 comprehensive. 20 21 So you talked about on Slide 3 the Budget Overview and you talked about how there’s been a decrease in 22 the different funds, but I guess because it’s been awhile since I looked at this can you talk a little bit 23 about why there was such a dramatic increase from the 2013-2017 Plan to the 2014-2018 Plan? So 24 basically the third and fourth set of bars on the chart. So it looks like the funding went down, but the 25 prior budget it was dramatically up and then it’s come back down due to some of the things that you 26 mentioned. I was just wondering can you refresh our memory why the budget went up again? 27 28 Mr. Bilimoria: I think the increase that you’re seeing in 2014-2018 is reflective of largely two large 29 projects. The first project being the bio solids facility, which you can see in the Wastewater Treatment 30 Fund. We included as mentioned in the presentation funding for the full build out of that facility as part 31 of the 2014-2018 Budget, which was about $89 million. So you see a big jump from 2013-2017 to 2014-32 2018. The second driver of that increase I believe being the Golf Course Project, which was budgeted as 33 part of the 2014-2018 CIP as well. That was an $8 million project. 34 35 Acting Vice-Chair Tanaka: I see. Ok. And so if we were to take those out and look at the 2013, basically 36 the third set of bars against the fifth set of bars, the last set of bars and so why is there an increase from 37 those two in those two budgets? So from the 2013-2017 Budget from then look at the 2015-2019 38 Budget. 39 40 Mr. Bilimoria: There’s numerous ups and downs within all of these funds. I think if you look at the total 41 bar line I think that’s reflective of going back to that bio solids facility. We can go back and look at that 42 again, but what we’re, while we removed the funding for the full build out of that project as part of the 43 2015-2019 a portion of the project is still included in the 2015-2019 Plan. So I think that might be one of 44 the big drivers of that growth. 45 46 Acting Vice-Chair Tanaka: Ok, and then I look at the staff report and so I guess I’m mostly out of time 47 here, but so I guess… can I finish? 48 49 Acting Chair Keller: Sure. 50 51 Acting Vice-Chair Tanaka: Ok, I guess so just talk a little bit about some of the differences in the budget, 52 like some of the projects that are added or some other budgets that are increased. Where these the only 53 projects that were increased or were there others that perhaps didn’t make… because I’m kind of 54 thinking of this as like the difference of between the previous budgets and this budget. Is that correct or 55 is there, have there been other things added? Because this is a very big book; I didn’t do a line by line 56 City of Palo Alto Page 9 comparison so has there been other projects added that aren’t on this staff report or is this pretty much 1 anything new that’s been added or increased? 2 3 Mr. Bilimoria: The projects called out within the staff report represent the new projects which have been 4 added. 5 6 Acting Vice-Chair Tanaka: The new projects but also the projects that have (interrupted) 7 8 Mr. Bilimoria: And the largest projects or the projects with the largest added investment. So there are 9 some ups and downs within projects not on this list, but we tried to call out the ones with the largest 10 investment within the General Fund. 11 12 Acting Vice-Chair Tanaka: Ok. 13 14 Mr. Bilimoria: Increased investment. 15 16 Acting Vice-Chair Tanaka: Ok. Ok, so just to make sure I’m clear so the projects called out in the staff 17 report are ones which are new project with large increases? 18 19 Mr. Bilimoria: The projects called out within the staff report represent the new projects and we also tried 20 to highlight some of the existing projects with increased investments. 21 22 Acting Vice-Chair Tanaka: Ok, and I assume there are also projects that like fell off the list, right? 23 24 Mr. Bilimoria: That would be correct, yes. 25 26 Acting Vice-Chair Tanaka: Ok, and where is that list? 27 28 Mr. Bilimoria: Actually there is not a list within the document that shows documents which were funded in 29 prior year and no longer being funded. 30 31 Acting Vice-Chair Tanaka: Ok. 32 33 Mr. Bilimoria: You can, there is a list within the report to show project that may have been funded in the 34 prior year and are not reflected in the CIP because the funding will carry over automatically per the 35 municipal code. But if there was a project programed in a prior CIP and is no longer being, is no longer 36 programed within the proposed CIP there’s not currently a listing of those projects. 37 38 Acting Vice-Chair Tanaka: Ok. You know because I think everyone’s talked about how comprehensive 39 this book is. It’s hundreds of pages. I think one thing that would really bring clarity to everyone is like a 40 difference list, right? Like what’s been dropped, what’s been increased, and having a summary of that 41 would be really helpful because otherwise you look at these bar graphs and go “Huh, why did it go up, 42 why did it go down?” It’s a little bit tough sometimes. 43 44 Mr. Rossman: Acting Vice-Chair Tanaka, that is with the new budget system that we hope to implement 45 in Fall that is indeed the intent of staff that we’d provide a much more comprehensive which means more 46 pages for you to review, but indeed to show those projects which are closed, those projects which are 47 intended in future year findings, etcetera. The challenge unfortunately with the current system we can’t 48 do this for you yet, but I do recognize your desire. This is ours as well to be more comprehensive with 49 all the projects we are currently funding and which we have in the pipeline of [unintelligible] streets. 50 51 Acting Vice-Chair Tanaka: Sure. Ok, I think my time’s up. Thank you. 52 53 Acting Chair Keller: Ok, a couple of issues; firstly, I don’t want an answer to this, but I’ll just point out 54 that the difference on Chart 3 between the 2014-2018 and 2015-2019 I’m assuming you’re deleting 55 things that were in 2010-2014 that dropped off, you’re adding new things from 2015-1019 that are new, 56 City of Palo Alto Page 10 and you’re subtracting those things that went decreased from 2015-2019. Because I’m assuming that at 1 the height of the depression in 2010-2014 there would be relatively few projects so the drop off is 2 explained by that deferral. Anyway. Of the bio solids facility and the Golf Course, which is what caused 3 the blip in the first place. 4 5 So people may have heard in the news the idea that Antarctica is been announced to be irrevocably 6 ungrounded. In other words, it’s going to completely the glaciers they’re going to melt causing sea level 7 rise that is more dramatic than many had previously expected. And I understand a lot of money is being 8 spent on the Regional Water Quality Control Plant to upgrade it and that may be impacted by sea level 9 rise and also the Municipal Services Center may be impacted by sea level rise as well as over 2,000 10 parcels in Palo Alto may be affected by sea level rise. Mountain View did a shoreline study that was 11 released in 2012 and I’m wondering whether it’s time for Palo Alto to do a shoreline study that will, can 12 lead to increased investments in improving the infrastructure for preventing tidal flooding for the Regional 13 Water Quality Control Plan that we’re spending money on as well as reduce the tidal flood risk for the 14 Municipal Services Center and the other parts of Palo Alto? Can you comment on that? Thank you. 15 16 Mr. Eggleston: Thank you Commissioner Keller. Yes, we have been in dialogue with Mountain View about 17 the study they’ve done. To date Palo Alto has been relying on the Santa Clara Valley Water District’s 18 program, the South San Francisco Bay Shoreline Study that they’re doing, which has mostly been 19 focusing on Alviso, but is shifting its focus northward to the rest of the County. That process however is 20 reliant on the Core of Engineers process, which is kind of a very long process. 21 22 So something else that’s been happening in our area recently is that the San Francisquito Creek Joint 23 Powers Authority (JPA) has grant funding to do both a feasibility study and design of levy improvements 24 from San Francisquito Creek to the Redwood City boundary. And we’ve been in discussions with them 25 about the potential of Palo Alto adding funding to their study which would address a feasibility study for 26 potential improvements in Palo Alto. So they have awarded a contract we’re still in discussions with them 27 about the possibility of adding Palo Alto to that work and that may be something that comes to fruition. 28 29 Acting Chair Keller: Thank you. Would that require a CIP for that contract? 30 31 Mr. Eggleston: Yes it would. 32 33 Acting Chair Keller: So I will suggest that we suggest to the Council that they add a CIP item for such a 34 study. And then I’ll add other comments in another go round. I believe Commissioner King you had 35 some more questions? 36 37 Commissioner King: Let’s see, first question is regarding the bio solids facility so that was because of the 38 recent changes in sort of the plan out there that was moved out past this horizon. Is that where that 39 funding how, why it was removed? 40 41 Mr. Eggleston: Essentially yes. I can’t speak to all the details of that, but in the prior year’s CIP 42 construction funding was shown for construction of anaerobic digesters, which was very expensive. And 43 now I believe just on Monday night the City Council approved a more phased process where they would 44 look at first constructing a bio solids transfer facility and there would be a separate Request For Proposal 45 (RFP) process looking forward to designing and constructing anaerobic digesters. 46 47 Commissioner King: Thanks. So that already has made it into this plan? The recent discussions 48 (interrupted) 49 50 Mr. Eggleston: Yes, the most recent plan that was approved by the Council. 51 52 Commissioner King: Ok, thank you. Let’s see and then just sort of it would be helpful I think the phrases 53 catch up, keep up, and new are used and I’m sure they’re referenced in the original final report, but it 54 would be helpful if for I think for residents if they were trying to clue in if those were defined somewhere 55 in the report and I assume that some of these new if I look at new there, in the new category there is 56 City of Palo Alto Page 11 some irrigation systems for the gardens, Civic Center water proofing that those actually would then really 1 fall into keep up or catch up. Is that accurate? 2 3 Mr. Eggleston: Yes and no. It becomes a little confusing because the context we’re using new here since 4 we’re trying to rely on the materials that IBRC developed for developing this plan largely. If there was 5 something that would be considered keep up but wasn’t factored into the materials and spreadsheets 6 that IBRC put together we’re calling it new here. In the future as we refine those materials, complete 7 our infrastructure management system, and do more planning for the future we would probably call that 8 keep up, but at this point we’re using those spreadsheets to guide us in our efforts and if there’s 9 something that comes up that’s really maintenance or keep up type work, but it wasn’t included in the 10 spreadsheets that we’re using we’re calling it new. 11 12 Commissioner King: I understand. So that would be helpful if the report referenced that so that a citizen 13 just picking this up new would understand. And then lastly sort of in the big picture and I echo 14 Commissioner Alcheck’s comments that it’s sort of hard to say either on a general level or a line item 15 level “Oh, this fits the Comp Plan,” because how do you determine what fit, how you define fit? And so 16 in general I think we’re just, to me it’s just agreeing that there’s no horrible lack of consistency with the 17 general plan or the Comp Plan. And so I guess my question would be from staff’s standpoint is this 18 exercise of tying the CIP to the Comp Plan a useful exercise? And is it what the Council intended? I 19 guess my in specifically I’m wondering ok, does this drive better decision making the fact that we’re tying 20 this in will then the next year we say, “Oh, well no, we need to be… we’re going to make different 21 decisions because of what of the findings were coming up with on this matrix of... Oh this met so many 22 Comp Plan bullet points.” So that’s my big question. 23 24 Mr. Turner: Yes, well the simple reason about why we’re here tonight is that we’re required to do so via 25 the municipal code. And so the municipal code outlines the Commission’s charge with finding consistency 26 with the Comprehensive Plan. It is not very helpful in telling us how to do that and so with the help of 27 the Commission over the years we’ve been trying to find ways to add value. And I think it’s going to be 28 an ongoing process to really make this process as useful and as helpful to City staff as possible. So I 29 think that we would certainly welcome your comments for improvements for the future and maybe it will 30 be a good opportunity next year to reconvene a subcommittee of the Infrastructure Committee to talk 31 about further improvements to the CIP and the PTC review process. So the simple answer is we have to 32 do it per the municipal code, but that doesn’t mean that we can’t find ways to improve it into the future. 33 34 Commissioner King: Thank you. I guess the crux of the question for me is does, should we change the 35 municipal code? I realize this is your opinion or is this a fruitful exercise as required by the municipal 36 code? 37 38 Cara Silver, Senior Assistant City Attorney: Yes, Cara Silver, Senior Assistant City Attorney. So this is a 39 very standard requirement in many local codes and under State law it’s standard for the Planning 40 Commission to review CIP’s to ensure consistency with the general plan or the Comprehensive Plan. The 41 particular amendment in the municipal code that requires Palo Alto to, Palo Alto’s Planning Commission to 42 do this consistency finding every year I believe was a voter enacted code so the Council can’t change it. 43 The voters have to vote to change it. And I think that especially through the recent work that the 44 Planning Commission has done it certainly at a staff level is a fruitful process. It requires that before 45 every CIP project gets placed onto the City’s priority list that we do due diligence to ensure that it is 46 consistent with the overall general goals of the City that have been articulated in the Comprehensive 47 Plan. And so it really is a critical I think role of this committee and it’s been helpful for the staff as well. 48 49 Acting Chair Keller: Commissioner King if I may for a moment? Since I’ve been here for a long time I can 50 give you some history. First of all we expect that the CIP will be consistent with the Comp Plan, but 51 there may be cases in which there may be specific projects that were non-consistent with the Comp Plan 52 or there may be projects such as the shoreline study that are sorely needed based on the facts on the 53 ground that would improve consistency with the Comp Plan. In particular this body has in the past 54 initiated the CIP for the study for the Pedestrian Bike Bridge over 101 in South Palo Alto and that was 55 one that was recognized because other cities were getting bridges and we weren’t and we initiated that 56 City of Palo Alto Page 12 process and as a result of the PTC’s pushing that along and the Council adopting it we’re now several 1 million dollars towards that project because when you do a study you can then raise money for it and 2 before you do a study you can’t. 3 4 The second thing is that at one point in time there was a CIP for putting composting in the Baylands 5 before Measure E and the PTC voted that that was not consistent with the Baylands Master Plan as it was 6 defined then and therefore more thoughtful study was done in terms of moving that forward. And we’re 7 seeing the results of that in terms of the bio solids and in terms of the potential for composting on the 8 part of the Measure E land. So I think that that process was where it was pointed out that there was a 9 problem there. And I think that that was important job of the PTC. And sort of think about having a cop 10 on the beat because the cop doesn’t find somebody doing something illegal doesn’t mean that that cop 11 isn’t useful. 12 13 Commissioner King: Thank you for the history and examples. And thank you Steven also and Cara, 14 thanks. 15 16 Acting Chair Keller: Commissioner Gardias did you have anything you wanted to add? Commissioner 17 Rosenblum? Thank you. So Commissioner Tanaka. 18 19 MOTION 20 21 Acting Vice-Chair Tanaka: So yeah, yeah so just to continue on where I was last which was we have a 22 very comprehensive piece of work here. I think the vast majority of it is compliant with the Comp Plan 23 and really I think every year when you look at it most of it’s good, right? I don’t think there’s a lot of it 24 that’s bad. We thought about it pretty hard, but I think to make this process more efficient one 25 recommendation would be to actually have those differences. So because really what we’re talking about 26 every year is what’s been added, what’s been removed, and did we get the priorities right and the issue I 27 think especially since we have two new Commissioners on board here is we get this mammoth book, 28 there is a ton of detail, and we see ok there’s been $2 million added to Transportation and Parking. 29 There’s probably a good, probably for good reasons, but it’s not because unless you literally look at last 30 year’s book and you look at this year’s book and you go page by page by page how the heck are you 31 supposed to know like what went up and what went down and did we get the priorities right? So I think 32 that would be a really nice cheat sheet for everyone because in order for us, because I think like I said I 33 think the vast majority of it is probably absolutely dead on, but it’s the differences every year that matter. 34 And the problem is is that it’s hard to find those differences. It’s really, really hard even for someone 35 that’s looked at it for a while it’s hard to know the differences. 36 37 And so but with that said I’ll also make a Motion that I think we should move forward on this thing. So 38 my recommendation, well my Motion is that we find the CIP consistent with the Comp Plan and we 39 should forward the finding to the Finance Committee and City Council, but with one amendment or one 40 recommendation here, which is we give City Council the benefit of a difference. Like what’s been 41 different so that they don’t have to kind of ponder this big book by themselves. 42 43 SECOND 44 45 Acting Chair Keller: Commissioner Tanaka do you wish to speak to your Motion? 46 47 Acting Vice-Chair Tanaka: No, thank you. 48 49 Acting Chair Keller: Ok. I have a few comments. I hadn’t had a chance to make a second round and 50 then I’ll offer an amendment. So firstly, with respect to the Golf Course I understand that that is in 51 litigation now. So I’m wondering is it realistic that we’ll expect the Golf Course to happen starting in the 52 summer? 53 54 Mr. Eggleston: Well we hope that it’s realistic. It’s not in litigation. What is going on is that we’ve taken 55 the project out to bid. We have bids, we’re actually ready to award a construction contract, but we 56 City of Palo Alto Page 13 haven’t received our regulatory permits and the primary thing holding us up has been the 401 water 1 quality certification that we need from the Regional Water Board. And the issue there has been a 2 concern about piecemealing between the JPA’s Flood Control Project and the Golf Course Project and 3 how the border between the two projects came to be. So we’ve been working very closely with the 4 Regional Water Board to try to resolve these issues. We think we’re quite close to being able to get the 5 regulatory permits to proceed with the Golf Course Project. 6 7 Acting Chair Keller: Thank you. I thought that there was potential maybe potential litigation with the 8 Regional Water Board so maybe I misspoke on that. Thank you. 9 10 With respect to the Newell Bridge I notice that that’s one of the projects on there. It indicates that 11 there’s PTC review of the Newell Bridge. I don’t recall that having gone before the Commission. Is there 12 a plan for when that would go before the Commission? Is that something that (interrupted) 13 14 Mr. Eggleston: I’m not certain when it’s planned to go before the Commission. Where we’re at right now 15 is just about to start the Environmental Impact Report (EIR) process for the project. 16 17 Acting Chair Keller: Ok, so (interrupted) 18 19 Mr. Eggleston: But at some point during that process over the course of the next year is when it would 20 come to the Commission. 21 22 Acting Chair Keller: Is there anything you want to add Chief Transportation Official Jaime Rodriguez? 23 He’s nodding no. Thank you. 24 25 The City Council has indicated its support for alternative fuel vehicles. To what extent are we considering 26 alternative fuel vehicles for the municipal fleet? In particular electric vehicles and I understand there’s a 27 natural gas fueling facility there? 28 29 Mr. Eggleston: There is a natural gas fueling station. I’m sorry Commissioner Keller I don’t have the 30 answer in front of me about what we’re doing currently for alternative fuel vehicles. 31 32 FRIENDLY AMENDMENT #1 33 34 Acting Chair Keller: Ok. That would be helpful on the next go round and you may be asked particularly 35 since an ordinance just went through Policy and Services last night regarding requiring electric vehicle 36 infrastructure. 37 38 And now I will make a, offer an amendment to the Motion on the floor and the amendment is to add to 39 the CIP a study of the tidal flood risk potentially in conjunction with the San Francisquito Creek JPA. 40 41 FRIENDLY AMENDMENT #1 ACCEPTED 42 43 Acting Vice-Chair Tanaka: I accept that. 44 45 Acting Chair Keller: Ok, thank you. Are there any other… oh, I’ll add one more comment and that is I 46 understand that you will by September have migrated to the new capital project system. Is that the 47 idea? 48 49 Mr. Rossman: Thank you for your comments Acting Chair Keller. Our goal is to implement the system by 50 October and then one actually has to figure out how does implementation work, how do you take the old 51 structure and new structures and make it functional? And once the system is functional the data is there 52 then the next step would be obviously how can we redesign the budget document with information and 53 what information can we extract from there which then makes it much more easier for the public as well 54 as for the Commission, the Council to review the CIP for the next fiscal year. 55 56 City of Palo Alto Page 14 Acting Chair Keller: Thank you. So as we go through the CIP process next year because of the 1 capabilities that the new system will afford us it may make sense to have a, the Planning Commission 2 subcommittee working with staff to try to figure out ways that we can improve the presentation taking 3 into account the suggestions that have been made by Commissioner Tanaka and Commissioner 4 Rosenblum. 5 6 Mr. Rossman: I think that’s a wonderful idea Acting Chair. I think what we would like to do is for staff 7 first to figure out what the capabilities are. Once we understand this better perhaps come with a plan to 8 you and then get feedback from a subcommittee regarding our next steps. 9 10 Acting Chair Keller: Great, well I guess that that will be up to the Chair of the Planning Commission at 11 that time. 12 13 Mr. Rossman: And if I may I do have to look at the quick alternative fuel vehicles. It’s in the Operating 14 Budget. So the goal at the current time of 25 percent of all light duty passenger vehicles, are alternative 15 fuel vehicles. It could be electric, natural gas, etcetera. And there’s an initiative which Public Works does 16 have is to continue replacing older less fuel efficient vehicles with newer more efficient equipment and to 17 continue to reduce fuel consumption and carbon footprint. So it’s definitely on staff’s radar to continue 18 this effort which we have done through the last fiscal years. 19 20 Acting Chair Keller: Great, and can you give me the CIP number? 21 22 Mr. Rossman: It’s actually in the Operating Budget and I would be happy to send you those sections and 23 point you to the website. 24 25 Acting Chair Keller: Thank you very much. 26 27 Mr. Rossman: Sure. 28 29 Acting Chair Keller: Are there any more comments from or questions from the Commission? 30 Commissioner King. 31 32 Commissioner King: Yes, I do have a question for staff. As the Motion reads now I believe it’s directing 33 you to present Council with the changes from last year to this year and so I guess my question is do you 34 have the capability with the existing system to do that? And if you do is that, please advise us to the 35 workload that would require. 36 37 Mr. Rossman: Sure. In order to make this happen Commissioner King we would have to do a lot of 38 manual work on spreadsheets and if the Commission would be kind enough to allow us to tack on this 39 work effort once we have a system in place I would really appreciate that. So therefore in other words it 40 will be very difficult to do this type of work at this time. 41 42 Commissioner King: Thank you. I’ll leave that to Commissioner Tanaka to discuss whether he wants to 43 leave that in the Motion. 44 45 Acting Chair Keller: Commissioner Tanaka? 46 47 Acting Vice-Chair Tanaka: So I understand it’s a lot of work, but we’re talking about a lot of money here. 48 And I think I don’t know how we as a body could say no problem, right? And not know what changed 49 and why it changed. I think it doesn’t have to be fancy. It could be a very quick summary, but I think 50 without that how do we expect the Council which is even busier than us to figure out how if this thing is 51 on target or not it they, if we have a hard time. We’re supposed to have more time to do this kind of 52 stuff. So I think it would not be right for us to ignore this and just to throw a big book at them and tell 53 them good luck. So I think we should do it. 54 55 FRIENDLY AMENDMENT #2 56 City of Palo Alto Page 15 1 Acting Chair Keller: Can I make a Friendly Amendment if I may? I’m going to suggest that at the end of 2 your request for changes to the previous CIP that we add the words “to the extent feasible within time 3 constraints.” Is that accepted? 4 5 FRIENDLY AMENDMENT #2 ACCEPTED 6 7 Acting Vice-Chair Tanaka: Yeah, I think so work could be unlimited so I think it does make sense to be 8 time bound where there’s X amount of time spent on it and so I’m fine with that. 9 10 Acting Chair Keller: Thank you and I accept that as well so hopefully that will allow staff to deal with it 11 based on the available time constraints. Does that satisfy your constraint? 12 13 Mr. Rossman: I appreciate for the friendly amendment and I just want to mention to that as we’re going 14 through the Finance Committee hearing at this time which happens this month we started yesterday we 15 are highlighting the major changes to the capital projects for the Finance Committee as part of the 16 review of the operating the Capital Budget. 17 18 Acting Chair Keller: Thank you. I believe that Commissioner Rosenblum has a comment. 19 20 Commissioner Rosenblum: Yeah, and given that this is my first meeting I apologize if this isn’t the right 21 procedure for this. I think it’s a, I think a delta analysis is a great idea, but with all due respect I 22 honestly was thinking about the source of costs here, which is overwhelmingly Utilities. And if you 23 showed me a delta that now we’re spending $5 million more on water but $2 million less on gas 24 improvements and $6 million I’d be equally hard pressed to say this is a wise increase in this versus that. 25 And so to go back to my first comment and again, procedurally I don’t know how this happens because I 26 think it’s asking for future iterations to put context on it around what does a city normally pay per 27 resident in infrastructure improvements of this sort, how has that grown over time, and what were the 28 choices? Meaning in the water system if we didn’t do this this year we’d have a bigger bill next year. 29 What were the choices that we were confronted with that would help us be able to say this is a wise 30 preemptive maintenance of this system for this amount? I do think it’s a really wise thing to do a delta 31 analysis. I think that’s always useful, but I am cognizant of the fact that I’m also not an expert in what a 32 water treatment facility should cost and deltas there may not be useful to all Commissioners. So my ask 33 again for the future is to put context around the numbers both in terms of other studies if possible and 34 second what is, what were the choices presented to the staff? 35 36 Acting Chair Keller: Thank you. Any other comments? So with that I’ll… yes, Commissioner King. 37 38 Commissioner King: I’d like to ask staff then again if so we’ve increased wiggle room on this. Are you 39 comfortable with the Motion as generally described now? 40 41 Mr. Eggleston: Yes we are. Thank you very much. 42 43 Commissioner King: Ok. Thank you. 44 45 Acting Chair Keller: Thank you. With that I’ll call for a vote. All in favor say aye (Aye). All opposed? 46 The Motion carries unanimously with Chair Michael absent. And so that closes the public hearing for the 47 Item 1 on the agenda. Are there people here for the Bike and Pedestrian Plan Update? No, not yet. 48 So… Jaime’s here. I’m not sure we’re all here for that. So why don’t we take a 15 minute break and 49 then we’ll reconvene at 6:30? 50 51 MOTION PASSED (6-0-1, Chair Michael absent) 52 53 Commission Action: The PTC finds the 2015-2019 CIP consistent with the Comp Plan and requests 54 forwarding this finding to the Finance Committee and City Council along with addition of a listing of the 55 changes between this CIP and the previous CIP to the extent feasible within the time constraints, and 56 City of Palo Alto Page 16 also requests adding a capital project to fund a study of sea level rise and removal of the 100-year risk of 1 tidal flooding to City facilities, such as the Regional Water Quality Control Plant and the Municipal 2 Services Center, as well as over 2000 homes and other parcels in Palo Alto, potentially in cooperation 3 with the San Francisquito Creek Joint Powers Authority. Motion by Acting Vice-chair Tanaka, second by 4 Keller as amended. Passes 6-0 with Chair Michael absent 5 - 1 -City of Palo Alto Fiscal Year 2015 Proposed Budget PE-15028Baylands Levee Improvements Feasibility Study BAYLANDS LEVEE IMPROVEMENTS FEASIBILITY STUDY (PE-15028) CIP FACTS: • Project Type: Nonrecurring •Project Stage: Pre-Design • Est. Timeline: Summer 2014-Spring 2015 • Managing Department: Public Works • Potential Board/Commission Review: ARB, PTC IMPACT ANALYSIS: • Environmental: This project is categorically exempt from CEQA under Section 15301. • Design Elements: None • Operating: None Relationship to Comprehensive Plan Primary Connection •Element: Natural Environment • Section: Natural Hazards • Goal: N-10 •Policy: N-52 Description: This project will study the existing network of flood protection levees in the Palo Alto Baylands between San Francisquito Creek and Mountain View and identify options for improving the levees to provide protection from a 1% (100-year) high tide event in San Francisco Bay and from future sea level rise scenarios. The feasibility study will identify potential alternative methods and alignments for levee improvements, estimated project costs, and environmental impacts and mitigation measures. Justification: The project will identify potential levee improvement alternatives that would provide flood protection to approximately 2,700 Palo Alto properties that are subject to tidal flooding, mandatory flood insurance purchase requirements, and restrictions on construction of new or remodeled buildings. The risk of tidal flooding will increase with expected sea level rise in future years. Supplemental Information: Funding will allow the City to participate in a levee improvement feasibility study being conducted by the San Francisquito Creek Joint Powers Authority (JPA) for the Bayfront levees between San Francisquito Creek and Redwood City. The City would enter into a cost-sharing agreement to pay the JPA to add the expanded geographic area in Palo Alto to the scope of work for their existing feasibility study contract. The project will also be coordinated with the Santa Clara Valley Water District and the City of Mountain View, who are pursuing independent studies of potential levee improvements. Attachment D BAYLANDS LEVEE IMPROVEMENTS FEASIBILITY STUDY (PE-15028) CONTINUED - 2 -City of Palo Alto Fiscal Year 2015 Proposed Budget Prior Years Expended and Encumbered $0 Continuing Appropriations $0 Expenditures FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total Funding Salaries and Benefits Design Costs Construction Costs Other $500,000 $500,000 Total Budget Request $500,000 $500,000 Revenues FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total Funding Infrastructure Reserve $500,000 $500,000 Total Sources of Funds $500,000 $500,000 Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP General Fund 2014-2018 Buildings and Facilities PE-14018 Baylands Interpretive Center Improvements and Boardwalk Repair 66 215 2,100 - - 2,381 General Fund 2015-2019 Buildings and Facilities PE-14018 Baylands Interpretive Center Improvements and Boardwalk Repair - 136 405 - - - 541 (1,840) General Fund 2014-2018 Buildings and Facilities PE-15020 Civic Center Waterproofing Study - - - - - - General Fund 2015-2019 Buildings and Facilities PE-15020 Civic Center Waterproofing Study 258 - - - - 258 258 General Fund 2014-2018 Buildings and Facilities PE-18016 Civic Center Fire Life Safety and Electrical Upgrades - - - - - - General Fund 2015-2019 Buildings and Facilities PE-18016 Civic Center Fire Life Safety and Electrical Upgrades - - - - 925 925 925 General Fund 2014-2018 Buildings and Facilities AC-14001 Baylands Nature Interpretive Center Exhibit Improvements - - - 56 - 56 General Fund 2015-2019 Buildings and Facilities AC-14001 Baylands Nature Interpretive Center Exhibit Improvements - - 56 - - 56 - General Fund 2014-2018 Buildings and Facilities PF-14004 California Avenue Parking District Parking Improvements 186 223 409 General Fund 2015-2019 Buildings and Facilities PF-14004 California Avenue Parking District Parking Improvements 223 223 (186) General Fund 2014-2018 Buildings and Facilities PF-14004 Cubberley Roof Replacements 454 385 465 50 150 1,504 General Fund 2015-2019 Buildings and Facilities PF-14000 Cubberley Roof Replacements - - - - - - (1,504) General Fund 2014-2018 Buildings and Facilities PF-14000 Fire Ringdown System Replacement 158 - - - - - 158 General Fund 2015-2019 Buildings and Facilities FD-14002 Fire Ringdown System Replacement - - - - - - (158) General Fund 2014-2018 Buildings and Facilities FD-14002 Internal Alarm System Replacement 78 - - - - - 78 General Fund 2015-2019 Buildings and Facilities PD-14000 Internal Alarm System Replacement - - - - - - (78) General Fund 2014-2018 Buildings and Facilities PD-14000 MSC Building A, B, & C Roofing Replacement - - - 1,100 - 1,100 General Fund 2015-2019 Buildings and Facilities PF-17000 MSC Building A, B, & C Roofing Replacement - - 1,100 - - 1,100 - General Fund 2014-2018 Buildings and Facilities PF-17000 University Avenue Parking District Parking Improvements 341 235 123 94 118 911 General Fund 2015-2019 Buildings and Facilities PF-14003 University Avenue Parking District Parking Improvements 60 223 44 68 - 395 (516) General Fund Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP General Fund 2014-2018 Buildings and Facilities PF-14003 Americans with Disabilities Act Compliance 138 100 100 100 100 538 General Fund 2015-2019 Buildings and Facilities PF-93009 Americans with Disabilities Act Compliance 106 100 100 100 100 506 (32) General Fund 2014-2018 Buildings and Facilities PF-93009 Art Center Auditorium Audio, Visual, and Furnishings - 150 - - - 150 General Fund 2015-2019 Buildings and Facilities AC-14000 Art Center Auditorium Audio, Visual, and Furnishings 150 - - - - 150 - General Fund 2014-2018 Buildings and Facilities AC-14000 Building Systems Improvements 112 100 100 100 100 512 General Fund 2015-2019 Buildings and Facilities PF-01003 Building Systems Improvements 112 100 100 100 100 512 - General Fund 2014-2018 Buildings and Facilities PF-01003 City Facility Parking Lot Maintenance 265 200 200 200 200 1,065 General Fund 2015-2019 Buildings and Facilities PF-01003 City Facility Parking Lot Maintenance 263 200 200 200 200 1,063 (2) General Fund 2014-2018 Buildings and Facilities PE-12017 City Hall First Floor Renovations 900 - - - - 900 General Fund 2015-2019 Buildings and Facilities PE-12017 City Hall First Floor Renovations - - - - - - (900) General Fund 2014-2018 Buildings and Facilities PE-15005 Cubberley Mechanical and Electrical Upgrades - 150 1,300 - - 1,450 General Fund 2015-2019 Buildings and Facilities PE-15005 Cubberley Mechanical and Electrical Upgrades - - - - - - (1,450) General Fund 2014-2018 Buildings and Facilities PF-02022 Facility Interior Finishes Replacement 407 105 105 105 105 827 General Fund 2015-2019 Buildings and Facilities PF-02022 Facility Interior Finishes Replacement 186 105 105 105 105 606 (221) General Fund 2014-2018 Buildings and Facilities PF-14002 Fire Station 1 Improvements 280 - - - - 280 General Fund 2015-2019 Buildings and Facilities PF-14002 Fire Station 1 Improvements - - - - - - (280) General Fund 2014-2018 Buildings and Facilities PE-14012 Junior Museum and Zoo Improvements - - 1,175 - - 1,175 General Fund 2015-2019 Buildings and Facilities PE-14012 Junior Museum and Zoo Improvements - 1,175 - - - 1,175 - General Fund 2014-2018 Buildings and Facilities PE-14015 Lucie Stern Buildings Mechanical/Electircal Upgrades 2,792 - - - - 2,792 General Fund 2015-2019 Buildings and Facilities PE-14015 Lucie Stern Buildings Mechanical/Electircal Upgrades - - - - - - (2,792) General Fund 2014-2018 Buildings and Facilities PF-05002 Municipal Service Center Improvements - 341 550 - - 891 General Fund 2015-2019 Buildings and Facilities PF-05002 Municipal Service Center Improvements - - - - - - (891) General Fund 2014-2018 Buildings and Facilities PF-15000 Rinconada Pool Locker Room - 400 - - - 400 General Fund 2015-2019 Buildings and Facilities PF-15000 Rinconada Pool Locker Room 423 - - - - 423 23 General Fund 2014-2018 Buildings and Facilities PF-00006 Roofing Replacements 38 45 40 100 - 223 General Fund 2015-2019 Buildings and Facilities PF-00006 Roofing Replacements 166 165 165 165 165 826 603 Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP General Fund 2014-2018 Buildings and Facilities PE-15011 Ventura Buildings Improvements - 90 600 - - 690 General Fund 2015-2019 Buildings and Facilities PE-15011 Ventura Buildings Improvements - 90 600 - - 690 - General Fund 2014-2018 Buildings and Facilities PE-17005 Boulware Park Improvements - - - - - - General Fund 2015-2019 Buildings and Facilities PE-17005 Boulware Park Improvements - - 45 400 - 445 445 General Fund 2014-2018 Buildings and Facilities PE-15022 Palo Alto Community Gardens Irrigation System - - - - - - General Fund 2015-2019 Buildings and Facilities PE-15022 Palo Alto Community Gardens Irrigation System 257 - - - - 257 257 General Fund 2014-2018 Parks and Open Space PG-14002 Cameron Park Improvements - - - - 124 124 General Fund 2015-2019 Parks and Open Space PG-14002 Cameron Park Improvements - - - 124 - 124 - General Fund 2014-2018 Parks and Open Space PG-18000 Golf Course Driving Range Net and Artificial Turf Replacement - - - - 770 770 General Fund 2015-2019 Parks and Open Space PG-18000 Golf Course Driving Range Net and Artificial Turf Replacement - - - 770 - 770 - General Fund 2014-2018 Parks and Open Space PE-18012 Hoover Park Improvements - - - - 490 490 General Fund 2015-2019 Parks and Open Space PE-18012 Hoover Park Improvements - - - 490 - 490 - General Fund 2014-2018 Parks and Open Space PE-18010 Mitchell Park Improvements - - - - 386 386 General Fund 2015-2019 Parks and Open Space PE-18010 Mitchell Park Improvements - - - 386 - 386 - General Fund 2014-2018 Parks and Open Space PG-14001 Peers Park Improvements - - - - 205 205 General Fund 2015-2019 Parks and Open Space PG-14001 Peers Park Improvements - - - 205 - 205 - General Fund 2014-2018 Parks and Open Space PG-14000 Ramos Park Improvements - 175 - - - 175 General Fund 2015-2019 Parks and Open Space PG-14000 Ramos Park Improvements 175 - - - - 175 - General Fund 2014-2018 Parks and Open Space PE-18015 Robles Park Improvements - - - - 325 325 General Fund 2015-2019 Parks and Open Space PE-18015 Robles Park Improvements - - - 325 - 325 - General Fund 2014-2018 Parks and Open Space PG-14003 Seale Park Improvements - - - - 121 121 General Fund 2015-2019 Parks and Open Space PG-14003 Seale Park Improvements - - - 121 - 121 - General Fund 2014-2018 Parks and Open Space AC-86017 Art in Public Places 50 50 50 50 50 250 General Fund 2015-2019 Parks and Open Space AC-86017 Art in Public Places 80 62 64 69 62 337 87 General Fund 2014-2018 Parks and Open Space PG-06003 Benches, Signage, Fencing, Walkways, and Perimeter Landscaping 150 150 150 150 150 750 General Fund 2015-2019 Parks and Open Space PG-06003 Benches, Signage, Fencing, Walkways, and Perimeter Landscaping 100 150 150 150 150 700 (50) General Fund 2014-2018 Parks and Open Space PE-13008 Bowden Park Improvements 199 - - - - 199 General Fund 2015-2019 Parks and Open Space PE-13008 Bowden Park Improvements - - - - - - (199) General Fund 2014-2018 Parks and Open Space PE-13020 Byxbee Park Trails 89 - - - - 89 General Fund 2015-2019 Parks and Open Space PE-13020 Byxbee Park Trails - - - - - - (89) General Fund 2014-2018 Parks and Open Space PE-13005 City Hall/King Plaza Landscape 124 - - - - 124 General Fund 2015-2019 Parks and Open Space PE-13005 City Hall/King Plaza Landscape - - - - - - (124) Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP General Fund 2014-2018 Parks and Open Space PG-13003 Golf Course Reconfiguration and Baylands Athletic Center Improvements 8,046 - - - - 8,046 General Fund 2015-2019 Parks and Open Space PG-13003 Golf Course Reconfiguration and Baylands Athletic Center Improvements - - - - - - (8,046) General Fund 2014-2018 Parks and Open Space PE-14010 LATP Site Development Preparation and Security Improvements 1,669 - - - - 1,669 General Fund 2015-2019 Parks and Open Space PE-14010 LATP Site Development Preparation and Security Improvements - - - - - - (1,669) General Fund 2014-2018 Parks and Open Space OS-09001 Off-Road Pathway Resurfacing Repair 100 100 100 100 100 500 General Fund 2015-2019 Parks and Open Space OS-09001 Off-Road Pathway Resurfacing Repair 100 100 100 100 100 500 - General Fund 2014-2018 Parks and Open Space OS-00001 Open Space Trails and Amenities 164 175 175 175 175 864 General Fund 2015-2019 Parks and Open Space OS-00001 Open Space Trails and Amenities 135 175 175 175 175 835 (29) General Fund 2014-2018 Parks and Open Space PG-09002 Park and Open Space Emergency Repairs 75 75 75 75 75 375 General Fund 2015-2019 Parks and Open Space PG-09002 Park and Open Space Emergency Repairs 75 75 75 75 75 375 - General Fund 2014-2018 Parks and Open Space PE-06007 Park Restroom Installation - - - - - - General Fund 2015-2019 Parks and Open Space PE-06007 Park Restroom Installation - - - - - - - General Fund 2014-2018 Parks and Open Space PE-13003 Parks, Trails, Open Space and Recreation Master Plan 156 - - - - 156 General Fund 2015-2019 Parks and Open Space PE-13003 Parks, Trails, Open Space and Recreation Master Plan - - - - - - (156) General Fund 2014-2018 Parks and Open Space PE-08001 Rinconada Park Improvements 189 1,150 - - 2,785 4,124 General Fund 2015-2019 Parks and Open Space PE-08001 Rinconada Park Improvements 1,167 - - 2,785 - 3,952 (172) General Fund 2014-2018 Parks and Open Space PG-13001 Stanford/Palo Alto Soccer Turf Replacement 625 - 770 - - 1,395 General Fund 2015-2019 Parks and Open Space PG-13001 Stanford/Palo Alto Soccer Turf Replacement - 770 - - - 770 (625) Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP General Fund 2014-2018 Parks and Open Space PG-06001 Tennis and Basketball Court Resurfacing 215 215 215 215 215 1,075 General Fund 2015-2019 Parks and Open Space PG-06001 Tennis and Basketball Court Resurfacing 215 215 215 215 215 1,075 - General Fund 2014-2018 Streets and Sidewalks PO-12001 Curb and Gutter Repair 362 250 100 100 100 912 General Fund 2015-2019 Streets and Sidewalks PO-12001 Curb and Gutter Repair 284 100 100 100 100 684 (228) General Fund 2014-2018 Streets and Sidewalks PE-13017 El Camino Median Landscape Improvements 46 230 50 776 - 1,102 General Fund 2015-2019 Streets and Sidewalks PE-13017 El Camino Median Landscape Improvements 250 50 776 - - 1,076 (26) General Fund 2014-2018 Streets and Sidewalks PE-12011 Newell Road/San Francisquito Creek Bridge Replacement - 2,500 - - - 2,500 General Fund 2015-2019 Streets and Sidewalks PE-12011 Newell Road/San Francisquito Creek Bridge Replacement 2,536 - - - - 2,536 36 General Fund 2014-2018 Streets and Sidewalks PO-89003 Sidewalk Repairs 2,430 1,716 1,710 2,065 2,065 9,986 General Fund 2015-2019 Streets and Sidewalks PO-89003 Sidewalk Repairs 2,439 1,710 1,710 1,710 1,710 9,279 (707) General Fund 2014-2018 Streets and Sidewalks PO-11000 Sign Reflectivity Upgrades 91 50 50 50 50 291 General Fund 2015-2019 Streets and Sidewalks PO-11000 Sign Reflectivity Upgrades 91 50 50 50 50 291 - General Fund 2014-2018 Streets and Sidewalks PO-05054 Street Lights Improvements 140 290 300 300 150 1,180 General Fund 2015-2019 Streets and Sidewalks PO-05054 Street Lights Improvements 140 150 150 150 150 740 (440) General Fund 2014-2018 Streets and Sidewalks PE-86070 Street Maintenance 5,724 5,438 5,438 5,119 4,754 26,473 General Fund 2015-2019 Streets and Sidewalks PE-86070 Street Maintenance 6,443 6,069 5,944 5,119 5,119 28,694 2,221 General Fund 2014-2018 Streets and Sidewalks PE-13014 Streetlight Condition Assessment 220 - - - - 220 General Fund 2015-2019 Streets and Sidewalks PE-13014 Streetlight Condition Assessment - - - - - - (220) General Fund 2014-2018 Streets and Sidewalks PE-13012 Structural Assessment of City Bridges 185 - - - - 185 General Fund 2015-2019 Streets and Sidewalks PE-13012 Structural Assessment of City Bridges - - - - - - (185) General Fund 2014-2018 Streets and Sidewalks PO-11001 Thermoplastic Marking and Striping 122 75 75 75 75 422 General Fund 2015-2019 Streets and Sidewalks PO-11001 Thermoplastic Marking and Striping 129 75 75 75 75 429 7 Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP General Fund 2014-2018 Streets and Sidewalks PL-15001 Embarcadero Road Corridor Improvements - - - - - - General Fund 2015-2019 Streets and Sidewalks PL-15001 Embarcadero Road Corridor Improvements 499 - - - - 499 499 General Fund 2014-2018 Traffic and Transportation PL-04010 Bicycle and Pedestrian Transportation Plan 1,318 1,200 1,200 1,200 1,200 6,118 General Fund 2015-2019 Traffic and Transportation PL-04010 Bicycle and Pedestrian Transportation Plan 1,224 1,200 1,200 1,200 1,200 6,024 (94) General Fund 2014-2018 Traffic and Transportation PE-13011 Charleston/Arastradero Corridor Project - General Fund 2015-2019 Traffic and Transportation PE-13011 Charleston/Arastradero Corridor Project 606 1,450 - - - 2,056 2,056 General Fund 2014-2018 Traffic and Transportation PL-14000 El Camino Real and Churchill Avenue Intersection Improvements 284 - - - - 284 General Fund 2015-2019 Traffic and Transportation PL-14000 El Camino Real and Churchill Avenue Intersection Improvements 24 - - - - 24 (260) General Fund 2014-2018 Traffic and Transportation PE-11011 Highway 101 Pedestrian/Bicycle Overpass Project 1,396 8,190 - - - 9,586 General Fund 2015-2019 Traffic and Transportation PE-11011 Highway 101 Pedestrian/Bicycle Overpass Project - 440 8,000 - - 8,440 (1,146) General Fund 2014-2018 Traffic and Transportation PL-14001 Matadero Creek Trail 384 2,000 150 - - 2,534 General Fund 2015-2019 Traffic and Transportation PL-14001 Matadero Creek Trail 42 2,000 150 - - 2,192 (342) General Fund 2014-2018 Traffic and Transportation PL-00026 Safe Routes to School 170 100 100 100 100 570 General Fund 2015-2019 Traffic and Transportation PL-00026 Safe Routes to School 345 100 100 100 100 745 175 General Fund 2014-2018 Traffic and Transportation PL-05030 Traffic Signal and ITS Upgrades 666 210 215 220 225 1,536 General Fund 2015-2019 Traffic and Transportation PL-05030 Traffic Signal and ITS Upgrades 841 165 170 175 175 1,526 (10) General Fund 2014-2018 Traffic and Transportation PL-12000 Transportation and Parking Improvements 373 225 225 225 225 1,273 General Fund 2015-2019 Traffic and Transportation PL-12000 Transportation and Parking Improvements 2,169 225 225 225 225 3,069 1,796 General Fund 2014-2018 Salaries and Benefits AS-10000 Salaries and Benefits 1,977 4,001 4,116 4,293 4,475 18,861 General Fund 2015-2019 Salaries and Benefits AS-10000 Salaries and Benefits 2,498 4,545 4,711 4,885 5,066 21,705 2,844 2014-2018 33,954 31,081 22,122 17,193 20,386 - 124,735 2015-2019 - 24,724 22,439 26,655 21,140 16,342 111,300 (13,435) General Fund Total Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP Vehicle Fund 2014-2018 Vehicle Fund VR-14001 Emergency Repair and Replacment Program 100 100 Vehicle Fund 2015-2019 Vehicle Fund VR-14001 Emergency Repair and Replacment Program 100 100 100 100 100 500 400 Vehicle Fund 2014-2018 Vehicle Fund VR-14002 MSC Fuel Station Demolition 240 240 Vehicle Fund 2015-2019 Vehicle Fund VR-14002 MSC Fuel Station Demolition - (240) Vehicle Fund 2014-2018 Vehicle Fund VR-14000 Scheduled Vehicle and Equipment Replacements 3,000 3,000 Vehicle Fund 2015-2019 Vehicle Fund VR-14000 Scheduled Vehicle and Equipment Replacements 3,786 2,306 2,547 2,027 1,049 11,715 8,715 2014-2018 3,340 - - - - - 3,340 2015-2019 - 3,886 2,406 2,647 2,127 1,149 12,215 8,875 Technology Fund 2014-2018 Technology Fund TE-14002 Library Virtual Branch 100 95 195 Technology Fund 2015-2019 Technology Fund TE-14002 Library Virtual Branch 95 - - - - 95 (100) Technology Fund 2014-2018 Technology Fund TE-99010 Acquistion of New Computers 75 75 75 75 75 375 Technology Fund 2015-2019 Technology Fund TE-99010 Acquistion of New Computers - - - - - - (375) Technology Fund 2014-2018 Technology Fund TE-05000 Radio Infrastructure Replacement 100 100 100 100 400 Technology Fund 2015-2019 Technology Fund TE-05000 Radio Infrastructure Replacement 100 100 100 100 - 400 - Technology Fund 2014-2018 Technology Fund TE-10001 Utilities Customer Billing System Continuous Improvements 250 250 250 250 250 1,250 Technology Fund 2015-2019 Technology Fund TE-10001 Utilities Customer Billing System Continuous Improvements 250 250 250 250 250 1,250 - 2014-2018 325 425 425 425 425 - 2,025 2015-2019 - 350 350 350 350 250 1,650 (375) Vehicle Fund Vehicle Fund Total Technology Fund Technology Fund Total Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP Electric Fund 2014-2018 Electric Fund EL-89028 Electric Customer Connections 2,200 2,300 2,400 2,500 2,600 12,000 Electric Fund 2015-2019 Electric Fund EL-89028 Electric Customer Connections 3,300 3,400 3,500 3,600 3,700 17,500 5,500 Electric Fund 2014-2018 Electric Fund EL-06003 Utility Control Center Upgrades - - - - - - Electric Fund 2015-2019 Electric Fund EL-06003 Utility Control Center Upgrades 75 - - 400 - 475 475 Electric Fund 2014-2018 Electric Fund EL-14004 Maybell 1&2 4/12kv Conversion 450 450 Electric Fund 2015-2019 Electric Fund EL-14004 Maybell 1&2 4/12kv Conversion - (450) Electric Fund 2014-2018 Electric Fund EL-14005 Reconfigure Quarry Feeders 50 400 450 Electric Fund 2015-2019 Electric Fund EL-14005 Reconfigure Quarry Feeders 400 - - - - 400 (50) Electric Fund 2014-2018 Electric Fund EL-14000 Coleridge/Cowper/Tennyson 4/12 KV Conversion - 120 400 - - 520 Electric Fund 2015-2019 Electric Fund EL-14000 Coleridge/Cowper/Tennyson 4/12 KV Conversion - 120 400 - - 520 - Electric Fund 2014-2018 Electric Fund El-15000 Colorado/Hopkins System Improvement - - - - - - Electric Fund 2015-2019 Electric Fund EL-15000 Colorado/Hopkins System Improvement 50 - - - - 50 50 Electric Fund 2014-2018 Electric Fund EL-13000 Edgewood/Wildwood 4KV Tie - - 50 400 - 450 Electric Fund 2015-2019 Electric Fund EL-13000 Edgewood/Wildwood 4KV Tie - 50 400 - - 450 - Electric Fund 2014-2018 Electric Fund EL-98003 Electric System Improvements 2,400 2,450 2,500 2,550 2,600 12,500 Electric Fund 2015-2019 Electric Fund EL-98003 Electric System Improvements 2,450 2,500 2,550 2,600 2,650 12,750 250 Electric Fund 2014-2018 Electric Fund EL-15001 Electric Substation Battery Replacement - - - - - - Electric Fund 2015-2019 Electric Fund EL-15001 Electric Substation Battery Replacement 400 - - - - 400 400 Electric Fund 2014-2018 Electric Fund EL-02011 Electric Utility GIS 225 165 165 165 165 885 Electric Fund 2015-2019 Electric Fund EL-02011 Electric Utility GIS 165 165 165 165 165 825 (60) Electric Fund 2014-2018 Electric Fund EL-04010 Foothills System Rebuild 75 75 Electric Fund 2015-2019 Electric Fund EL-04010 Foothills System Rebuild - (75) Electric Fund 2014-2018 Electric Fund EL-13004 Hansen Way/Hanover 12kv Ties 200 200 Electric Fund 2015-2019 Electric Fund EL-13004 Hansen Way/Hanover 12kv Ties - (200) Electric Fund Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP Electric Fund 2014-2018 Electric Fund EL-09000 Middlefield Underground Rebuild 200 200 Electric Fund 2015-2019 Electric Fund EL-09000 Middlefield Underground Rebuild 250 250 50 Electric Fund 2014-2018 Electric Fund EL-06003 Utility Control Center Upgrades - Electric Fund 2014-2018 Electric Fund EL-06003 Utility Control Center Upgrades 75 75 75 Electric Fund 2014-2018 Electric Fund EL-12000 Rebuild UG District 12 450 450 Electric Fund 2014-2018 Electric Fund EL-12000 Rebuild UG District 12 - (450) Electric Fund 2014-2018 Electric Fund EL-13003 Rebuild UG District 16 - - 300 - - 300 Electric Fund 2015-2019 Electric Fund EL-13003 Rebuild UG District 16 - 300 - - - 300 - Electric Fund 2014-2018 Electric Fund EL-11006 Rebuild UG District 18 200 200 Electric Fund 2015-2019 Electric Fund EL-11006 Rebuild UG District 18 - 75 - - - - 75 (125) Electric Fund 2014-2018 Electric Fund EL-14002 Rebuild UG District 20 - 500 500 - - 1,000 Electric Fund 2015-2019 Electric Fund EL-14002 Rebuild UG District 20 - 500 500 - - 1,000 - Electric Fund 2014-2018 Electric Fund EL-10006 Rebuild UG District 24 - - - - - - Electric Fund 2015-2019 Electric Fund EL-10006 Rebuild UG District 24 850 - - - - 850 850 Electric Fund 2014-2018 Electric Fund EL-16000 Rebuild UG District 26 - - - - - - Electric Fund 2015-2019 Electric Fund EL-16000 Rebuild UG District 26 - 500 - - - 500 500 Electric Fund 2014-2018 Electric Fund EL-13002 Relocate Quarry Road/Hopkins Substations 60 KV Line (Lane A&B)- - 100 750 - 850 Electric Fund 2015-2019 Electric Fund EL-13002 Relocate Quarry Road/Hopkins Substations 60 KV Line (Lane A&B)- - - 100 750 850 - Electric Fund 2014-2018 Electric Fund EL-13006 Sand Hill/Quarry 12KV Tie 200 - - - - 200 Electric Fund 2015-2019 Electric Fund EL-13006 Sand Hill/Quarry 12KV Tie - (200) Electric Fund 2014-2018 Electric Fund EL-02010 SCADA System Upgrades - 60 65 270 60 455 Electric Fund 2015-2019 Electric Fund EL-02010 SCADA System Upgrades 60 65 270 60 65 520 65 Electric Fund 2014-2018 Electric Fund EL-11014 Smart Grid Technology Installation 1,000 500 3,000 3,000 3,000 10,500 Electric Fund 2015-2019 Electric Fund EL-11014 Smart Grid Technology Installation - 500 3,000 3,000 3,000 9,500 (1,000) Electric Fund 2014-2018 Electric Fund EL-89044 Substation Facility Improvements 180 185 190 195 195 945 Electric Fund 2015-2019 Electric Fund EL-89044 Substation Facility Improvements 185 190 195 195 195 960 15 Electric Fund 2014-2018 Electric Fund EL-89038 Substation Protection Improvements 275 280 290 300 300 1,445 Electric Fund 2015-2019 Electric Fund EL-89038 Substation Protection Improvements 280 290 300 300 300 1,470 25 Electric Fund 2014-2018 Electric Fund EL-08001 UG District 42 - Embarcadero Road (Between Emerson and Middlefield)- - 150 150 2,000 2,300 Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP Electric Fund 2015-2019 Electric Fund EL-08001 UG District 42 - Embarcadero Road (Between Emerson and Middlefield)- - 150 150 2,000 2,300 - Electric Fund 2014-2018 Electric Fund EL-11009 UG District 43- Alma/Embarcadero - - 150 2,000 500 2,650 Electric Fund 2015-2019 Electric Fund EL-11009 UG District 43 - - 150 2,000 500 2,650 - Electric Fund 2014-2018 Electric Fund EL-12001 UG District 46- Charleston/El Camino Real - 800 150 - - 950 Electric Fund 2015-2019 Electric Fund EL-12001 UG District 46- Charleston/El Camino Real - 400 100 - - - 500 (450) Electric Fund 2014-2018 Electric Fund EL-11010 UG District 47- Middlefield, Home Avenue, Webster Street, and Addison Avenue - - - - - - Electric Fund 2015-2019 Electric Fund EL-11010 UG District 47- Middlefield, Home Avenue, Webster Street, and Addison Avenue - 400 - - - - 400 400 Electric Fund 2014-2018 Electric Fund EL-13007 Underground Distribution System Security - 300 300 - - 600 Electric Fund 2015-2019 Electric Fund EL-13007 Underground Distribution System Security 300 300 - - 600 - Electric Fund 2014-2018 Electric Fund EL-04012 Utility Site Security Improvements - 250 250 - - 500 Electric Fund 2015-2019 Electric Fund EL-04012 Utility Site Security Improvements 250 250 - - - 500 - Electric Fund 2014-2018 Electric Fund EL-10009 Street Light System Conversion Project 500 - - - - 500 Electric Fund 2015-2019 Electric Fund EL-10009 Street Light System Conversion Project - (500) Electric Fund 2014-2018 Electric Fund EL-89031 Communication System Improvements - 100 100 100 100 400 Electric Fund 2015-2019 Electric Fund EL-89031 Communication System Improvements 100 100 100 100 100 500 100 Electric Fund 2014-2018 Electric Fund EL-06001 230 KV Electric Intertie - - - - - - Electric Fund 2015-2019 Electric Fund EL-06001 230 KV Electric Intertie 50 - - - - 50 50 2014-2018 8,605 8,410 11,060 12,380 11,520 - 51,975 2015-2019 - 9,815 9,330 11,980 12,670 13,425 57,220 5,245 Electric Fund Total Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP Fiber Optics Fund 2014-2018 Fiber Optics Fund FO-10000 Fiber Optics Customer Connections 200 200 200 200 200 1,000 Fiber Optics Fund 2015-2019 Fiber Optics Fund FO-10000 Fiber Optics Customer Connections 200 200 200 200 200 1,000 - Fiber Optics Fund 2014-2018 Fiber Optics Fund FO-10001 Fiber Optics Network System Improvements 200 200 200 200 200 1,000 Fiber Optics Fund 2015-2019 Fiber Optics Fund FO-10001 Fiber Optics Network System Improvements 200 200 200 200 200 1,000 - 2014-2018 400 400 400 400 400 - 2,000 2015-2019 - 400 400 400 400 400 2,000 - Gas Fund 2014-2018 Gas Fund GS-80017 Gas System, Customer Connections 730 752 790 812 836 3,920 Gas Fund 2015-2019 Gas Fund GS-80017 Gas System, Customer Connections 752 790 812 836 861 4,051 131 Gas Fund 2014-2018 Gas Fund GS-03007 Directional Boring Equipment - 68 - 70 - 138 Gas Fund 2015-2019 Gas Fund GS-03007 Directional Boring Equipment - - - - - - (138) Gas Fund 2014-2018 Gas Fund GS-02013 Directional Boring Machine - - 46 - 258 304 Gas Fund 2015-2019 Gas Fund GS-02013 Directional Boring Machine - - - - - - (304) Gas Fund 2014-2018 Gas Fund GS-80019 Gas Meters and Regulators 325 335 352 362 373 1,747 Gas Fund 2015-2019 Gas Fund GS-80019 Gas Meters and Regulators 335 345 355 366 377 1,778 31 Gas Fund 2014-2018 Gas Fund GS-11002 Gas System Improvements 212 219 230 236 244 1,141 Gas Fund 2015-2019 Gas Fund GS-11002 Gas System Improvements 219 225 232 239 246 1,161 20 Gas Fund 2014-2018 Gas Fund GS-13002 General Shop Equipment/Tools - 52 - 54 - 106 Gas Fund 2015-2019 Gas Fund GS-13002 General Shop Equipment/Tools 100 100 100 100 100 500 394 Gas Fund 2014-2018 Gas Fund GS-12001 GMR- Project 22 - 468 3,200 - - 3,668 Gas Fund 2015-2019 Gas Fund GS-12001 GMR- Project 22 603 3,540 - - - 4,143 475 Gas Fund 2014-2018 Gas Fund GS-13001 GMR- Project 23 - - 482 3,300 - 3,782 Gas Fund 2015-2019 Gas Fund GS-13001 GMR- Project 23 - 621 3,010 - - 3,631 (151) Gas Fund 2014-2018 Gas Fund GS-14003 GMR- Project 24 - - - 492 3,465 3,957 Gas Fund 2015-2019 Gas Fund GS-14003 GMR- Project 24 - - 640 3,100 - 3,740 (217) Fiber Optics Fund Fiber Optics Fund Total Gas Fund Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP Gas Fund 2014-2018 Gas Fund GS-15000 GMR- Project 25 - - - - 542 542 Gas Fund 2015-2019 Gas Fund GS-15000 GMR- Project 25 - - - - 685 3,200 3,885 3,343 Gas Fund 2014-2018 Gas Fund GS-16000 GMR- Project 26 - - - - - - Gas Fund 2015-2019 Gas Fund GS-16000 GMR- Project 26 - - - - - 678 678 678 Gas Fund 2014-2018 Gas Fund GS-03008 Polythylene Fusion Equipment - 36 - 37 - 73 Gas Fund 2015-2019 Gas Fund GS-03008 Polythylene Fusion Equipment - - - - - - (73) Gas Fund 2014-2018 Gas Fund GS-15001 Security at City Gas Receiving Stations - 150 - - - 150 Gas Fund 2015-2019 Gas Fund GS-15001 Security at City Gas Receiving Stations 150 - - - - 150 - Gas Fund 2014-2018 Gas Fund GS-03009 System Extensions- Unreimbursed 178 184 193 199 204 958 Gas Fund 2015-2019 Gas Fund GS-03009 System Extensions- Unreimbursed 184 193 199 204 211 991 33 Gas Fund 2014-2018 Gas Fund GS-14004 Gas Distribution System Model 150 - - - - 150 Gas Fund 2015-2019 Gas Fund GS-14004 Gas Distribution System Model - - - - - - (150) 2014-2018 1,595 2,264 5,293 5,562 5,922 - 20,636 2015-2019 - 2,343 5,814 5,348 5,530 5,673 24,708 4,072 Gas Fund Total Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP Water Fund 2014-2018 Water Fund WS-80013 Water System, Customer Connections 440 450 460 473 486 2,309 Water Fund 2015-2019 Water Fund WS-80013 Water System, Customer Connections 450 460 473 486 500 2,369 60 Water Fund 2014-2018 Water Fund WS-13002 Water Fusion and General Equipment/Tools - 53 - 56 - 109 Water Fund 2015-2019 Water Fund WS-13002 Water Fusion and General Equipment/Tools 50 50 50 50 50 250 141 Water Fund 2014-2018 Water Fund WS-02015 WGW Utility GIS Data 275 275 275 275 275 1,375 Water Fund 2015-2019 Water Fund WS-02015 WGW Utility GIS Data 303 333 366 403 443 1,848 473 Water Fund 2014-2018 Water Fund WS-11003 Water Distribution System Improvements 218 225 232 239 247 1,161 Water Fund 2015-2019 Water Fund WS-11003 Water Distribution System Improvements 225 232 239 247 254 1,197 36 Water Fund 2014-2018 Water Fund WS-13006 Water Meter Shop Renovations 200 - - - - 200 Water Fund 2015-2019 Water Fund WS-13006 Water Meter Shop Renovations - (200) Water Fund 2014-2018 Water Fund WS-80015 Water Meters 379 386 393 400 407 1,965 Water Fund 2015-2019 Water Fund WS-80015 Water Meters 386 393 400 407 415 2,001 36 Water Fund 2014-2018 Water Fund WS-80014 Water Service Hydrant Replacements 229 236 243 250 263 1,221 Water Fund 2015-2019 Water Fund WS-80014 Water Service Hydrant Replacements 236 243 250 263 270 1,262 41 Water Fund 2014-2018 Water Fund WS-11004 Water System Supply Improvements 218 225 232 239 247 1,161 Water Fund 2015-2019 Water Fund WS-11004 Water System Supply Improvements 225 232 239 247 254 1,197 36 Water Fund 2014-2018 Water Fund WS-11000 WMR Project 25 2,737 - - - - 2,737 Water Fund 2015-2019 Water Fund WS-11000 WMR Project 25 - (2,737) Water Fund 2014-2018 Water Fund WS-12001 WMR Project 26 505 2,975 - - - 3,480 Water Fund 2015-2019 Water Fund WS-12001 WMR Project 26 - 4,397 - - - 4,397 917 Water Fund 2014-2018 Water Fund WS-13001 WMR Project 27 - 514 2,895 - - 3,409 Water Fund 2015-2019 Water Fund WS-13001 WMR Project 27 - 440 4,112 - - 4,552 1,143 Water Fund 2014-2018 Water Fund WS-14001 WMR Project 28 - - 324 3,445 - 3,769 Water Fund 2015-2019 Water Fund WS-14001 WMR Project 28 - - 523 5,569 - 6,092 2,323 Water Fund 2014-2018 Water Fund WS-15002 WMR Project 29 - - - 334 3,550 3,884 Water Fund 2015-2019 Water Fund WS-15002 WMR Project 29 - - - 557 5,498 6,055 2,171 Water Fund Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP Water Fund 2014-2018 Water Fund WS-16001 WMR Project 30 - - - - 344 344 Water Fund 2015-2019 Water Fund WS-16001 WMR Project 30 550 550 206 Water Fund 2014-2018 Water Fund WS-15004 Water System Master Plan - - - - - - Water Fund 2015-2019 Water Fund WS-15004 Water System Master Plan 500 - - - - 500 500 Water Fund 2014-2018 Water Fund WS-09000 Seismic Water System Upgrades - - - - - - Water Fund 2015-2019 Water Fund WS-09000 Seismic Water System Upgrades 2,230 2,230 2,230 Water Fund 2014-2018 Water Fund WS-08001 Water Reservoir Coating Improvements - - - - - - Water Fund 2015-2019 Water Fund WS-08001 Water Reservoir Coating Improvements 750 - - - - 750 750 2014-2018 5,201 5,339 5,054 5,711 5,819 - 27,124 2015-2019 - 5,355 6,780 6,652 8,229 8,234 35,250 7,376 Wastewater Collection 2014-2018 Wastewater Collection WC-80020 Sewer System, Customer Connections 361 372 383 394 405 1,915 Wastewater Collection 2015-2019 Wastewater Collection WC-80020 Sewer System, Customer Connections 372 383 394 405 416 1,970 55 Wastewater Collection 2014-2018 Wastewater Collection WC-19001 Wastewater Collection System Rehabilitation/Augmentation Project 31 - - - - - - Wastewater Collection 2015-2019 Wastewater Collection WC-19001 Wastewater Collection System Rehabilitation/Augmentation Project 31 - - - - 360 360 360 Wastewater Collection 2014-2018 Wastewater Collection WC-99013 Sewer Lateral/Manhole Rehab/Replacement 100 100 100 100 100 500 Wastewater Collection 2015-2019 Wastewater Collection WC-99013 Sewer Lateral/Manhole Rehab/Replacement 100 100 100 100 100 500 - Water Fund Total Wastewater Collection Fund Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP Wastewater Collection 2014-2018 Wastewater Collection WC-14001 Wastewater Collection System Rehabilitation/Augmentation Project 27 - 320 3,090 - - 3,410 Wastewater Collection 2015-2019 Wastewater Collection WC-14001 Wastewater Collection System Rehabilitation/Augmentation Project 27 320 3,090 - - - 3,410 - Wastewater Collection 2014-2018 Wastewater Collection WC-15001 Wastewater Collection System Rehabilitation/Augmentation Project 28 - - 330 3,183 - 3,513 Wastewater Collection 2015-2019 Wastewater Collection WC-15001 Wastewater Collection System Rehabilitation/Augmentation Project 28 - 330 3,183 - - 3,513 - Wastewater Collection 2014-2018 Wastewater Collection WC-16001 Wastewater Collection System Rehabilitation/Augmentation Project 29 - - - 340 3,270 3,610 Wastewater Collection 2015-2019 Wastewater Collection WC-16001 Wastewater Collection System Rehabilitation/Augmentation Project 29 - - 340 3,270 - 3,610 - Wastewater Collection 2014-2018 Wastewater Collection WC-17001 Wastewater Collection System Rehabilitation/Augmentation Project 30 - - - - 350 350 Wastewater Collection 2015-2019 Wastewater Collection WC-17001 Wastewater Collection System Rehabilitation/Augmentation Project 30 - - - 350 3,362 3,712 3,362 Wastewater Collection 2014-2018 Wastewater Collection WC-13001 Wastewater Collection System Rehabilitation/Augmentation Project 26 310 3,000 - - - 3,310 Wastewater Collection 2015-2019 Wastewater Collection WC-13001 Wastewater Collection System Rehabilitation/Augmentation Project 26 3,000 - - - - 3,000 (310) Wastewater Collection 2014-2018 Wastewater Collection WC-13002 Wastewater Fusion and General Equipment/Tools - 50 - 53 - 103 Wastewater Collection 2015-2019 Wastewater Collection WC-13002 Wastewater Fusion and General Equipment/Tools 50 50 50 50 50 250 147 Wastewater Collection 2014-2018 Wastewater Collection WC-15002 Wastewater System Improvements 219 225 230 241 247 1,162 Wastewater Collection 2015-2019 Wastewater Collection WC-15002 Wastewater System Improvements 225 232 239 246 253 1,195 34 2014-2018 990 4,067 4,133 4,311 4,372 - 17,873 - 2015-2019 - 4,067 4,185 4,306 4,421 4,541 21,520 3,648 Wastewater Collection Fund Total Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP Wastewater Treatment Fund 2014-2018 Wastewater Treatment Fund WQ-14001 Biosolids Facility - 1,603 2,671 4,274 80,491 89,039 Wastewater Treatment Fund 2015-2019 Wastewater Treatment Fund WQ-14001 Biosolids Facility 575 839 5,940 6,237 - 13,591 (75,448) Wastewater Treatment Fund 2014-2018 Wastewater Treatment Fund WQ-04011 Facility Condition Assessment & Retrofit 1,129 1,000 1,000 1,000 1,000 5,129 Wastewater Treatment Fund 2015-2019 Wastewater Treatment Fund WQ-04011 Facility Condition Assessment & Retrofit 432 1,000 1,000 1,000 1,000 4,432 (697) Wastewater Treatment Fund 2014-2018 Wastewater Treatment Fund WQ-14004 Fixed Film Reactor Rehabilitation - - - 1,031 1,260 2,291 Wastewater Treatment Fund 2015-2019 Wastewater Treatment Fund WQ-14004 Fixed Film Reactor Rehabilitation 127 458 9,710 9,138 - 19,433 17,142 Wastewater Treatment Fund 2014-2018 Wastewater Treatment Fund WQ-14002 Laboratory and Environmental Services Building - 410 614 717 307 2,048 Wastewater Treatment Fund 2015-2019 Wastewater Treatment Fund WQ-14002 Laboratory and Environmental Services Building - 410 615 716 307 2,048 - Wastewater Treatment Fund 2014-2018 Wastewater Treatment Fund WQ-80021 Plant Equipment Replacement 1,768 1,700 1,770 1,850 1,925 9,013 Wastewater Treatment Fund 2015-2019 Wastewater Treatment Fund WQ-80021 Plant Equipment Replacement 2,481 1,770 1,840 1,920 1,995 10,006 993 Wastewater Treatment Fund 2014-2018 Wastewater Treatment Fund WQ-14003 Primary Sedimentation Tank Rehabilitation - 731 2,140 2,248 2,194 7,312 Wastewater Treatment Fund 2015-2019 Wastewater Treatment Fund WQ-14003 Primary Sedimentation Tank Rehabilitation 81 823 2,249 2,194 1,974 7,321 9 Wastewater Treatment Fund 2014-2018 Wastewater Treatment Fund WQ-10001 Long Range Facilities Plan 40 - - - - 40 Wastewater Treatment Fund 2015-2019 Wastewater Treatment Fund WQ-10001 Long Range Facilities Plan - (40) 2014-2018 2,937 5,444 8,195 11,120 87,177 - 114,872 2015-2019 - 3,696 5,300 21,354 21,205 5,276 56,831 (58,041) Wastewater Treatment Fund Wastewater Treatment Fund Total Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP Storm Drainage Fund 2014-2018 Storm Drainage Fund SD-11101 Channing Avenue/Lincoln Avenue Storm Drain Improvements 1,531 - - - - 1,531 Storm Drainage Fund 2015-2019 Storm Drainage Fund SD-11101 Channing Avenue/Lincoln Avenue Storm Drain Improvements - - - - - - (1,531) Storm Drainage Fund 2014-2018 Storm Drainage Fund SD-06104 Connect Clara Drive Storm Drains to Matadero Pump Station 807 - - - - 807 Storm Drainage Fund 2015-2019 Storm Drainage Fund SD-06104 Connect Clara Drive Storm Drains to Matadero Pump Station - - - - - - (807) Storm Drainage Fund 2014-2018 Storm Drainage Fund SD-13002 Matadero Creek Storm Water Pump Station and Trunk Lines Improvements 340 1,840 1,915 1,990 6,085 Storm Drainage Fund 2015-2019 Storm Drainage Fund SD-13002 Matadero Creek Storm Water Pump Station and Trunk Lines Improvements 1,912 1,914 1,990 - - 5,816 (269) Storm Drainage Fund 2014-2018 Storm Drainage Fund SD-10101 Southgate Neighborhood Storm Drain Improvements 223 - - - - 223 Storm Drainage Fund 2015-2019 Storm Drainage Fund SD-10101 Southgate Neighborhood Storm Drain Improvements - - - - - - (223) Storm Drainage Fund 2014-2018 Storm Drainage Fund SD-06101 Storm Drain System Replacement and Rehabilitation 447 621 640 659 2,367 Storm Drainage Fund 2015-2019 Storm Drainage Fund SD-06101 Storm Drain System Rehabiliation and Replacement 429 640 659 - - 1,728 (639) Storm Drainage Fund 2014-2018 Storm Drainage Fund SD-15008 Storm Drain Master Plan Update - Storm Drainage Fund 2015-2019 Storm Drainage Fund SD-15008 Storm Drain Master Plan Update 317 - - - - 317 317 2014-2018 3,348 2,461 2,555 2,649 - - 11,013 - 2015-2019 - 2,658 2,554 2,649 - - 7,861 (3,152) Storm Drainage Fund Storm Drainage Fund Total Change Analysis: 2014-2018 Adopted CIP to 2015-2019 Proposed CIP- All Funds ($ Thousands)Attachment E Fund Year Category Project Number Project Title FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Total of 5- Year CIP Difference: 2014-2018 CIP to 2015- 2019 CIP Airport Fund 2014-2018 Airport Fund AP-15001 Temporary Airport Terminal - - - - - - Airport Fund 2015-2019 Airport Fund AP-15001 Temporary Airport Terminal 180 - - - - 180 180 2014-2018 - - - - - - - - 2015-2019 - 180 - - - - 180 180 60,795 59,986 59,237 59,750 136,020 - 375,788 - - 57,494 59,558 82,341 76,072 55,290 330,755 Airport Fund Airport Fund Total All Funds Total Storm Drain Oversight Committee MEMORANDUM Date: May 7, 2014 To: Honorable Finance Committee of the Palo Alto City Council From: Members of the Storm Drain Oversight Committee Subject: Review of the Proposed FY 2015 Storm Drainage Fund budget As directed by the City Council, we have reviewed the proposed Storm Drainage Fund budget for fiscal year 2015 and compared it with the provisions of the Storm Drainage Fee increase approved by Palo Alto property owners in 2005. Based on this review, we find that the proposed budget reflects the increased fees, CIP projects, and operating expenditures approved in the ballot measure. The Committee met to discuss the proposed budget on Wednesday, May 7, 2014. Prior to the meeting, Storm Drainage staff provided a packet of informational materials about the approved ballot measure and the proposed budget for the Committee’s review. During the meeting, staff presented information regarding the Storm Drainage Fund operating and capital budgets and answered questions from the Committee members. One noteworthy item in this year’s proposed Storm Drainage Fund budget is funding for an update to the City’s Storm Drain Master Plan. Preparation of an updated master plan will include the identification of future storm drain capital improvement needs, including consideration of climate change issues and innovative projects and techniques that achieve multiple benefits such as water conservation, groundwater recharge, and storm water runoff reduction. This information will be used to develop the scope of the ballot measure that will be required to sustain the storm drain program once the 2005 measure sunsets in 2017. Proposed FY 2015 funding for Storm Drain System Replacement and Rehabilitation is reduced by $250,000 from levels prescribed in the ballot measure and transferred to the proposed Storm Drain Master Plan Update CIP in order to provide adequate funding for development of the plan. Staff and the Committee agree that completion of the master plan update is a higher priority than system rehabilitation and recommend the reallocation of the $250,000 to the Master Plan Update CIP. Based upon our review of the materials provided to us by Storm Drainage staff, we find that the attached matrix describing the proposed use of the Storm Drainage Fee increase for FY 2015 and the table providing a side-by-side comparison of the ballot measure and the proposed budget accurately describe the relationship between the budget and the ballot measure. In addition, the attached spreadsheet summarizes the status of the Storm Drainage Fund capital improvement program implementation to-date. Staff and the Committee concur that there will be adequate funding generated by the Storm Drainage Fee increase authorized through the 2005 ballot measure to fully fund the seven capital improvement projects specified for implementation in the ballot measure. Attachments Attachment F Proposed Use of Storm Drainage Fee Increase for FY 2015 Line Item Revenue Expenditures Fee Increase Revenue SD Fee Increase $3,896,472 Capital Improvements and Program Enhancements A. One-time SD CIP Projects San Francisquito Creek Pump Station $0 Channing/Lincoln Storm Drain $0 Southgate Neighborhood Storm Drains $0 Gailen/Bibbits SD Improvements $0 Clara Drive SD Improvements $0 Matadero Creek Pump Station & Trunks $1,840,000 Alma Street SD Improvements $0 SD Master Plan Update $250,000 B. Enhanced Maintenance SD Replacement/Rehabilitation CIP $371,000 Augmented SD Maintenance $165,299 C. Innovative SD Projects $150,000 D. Augmented Storm Water Quality $150,482 E. Capital Improvement Program Staffing New CIP Engineer $155,751 CIP Support Staff $33,846 SUBTOTALS $3,896,472 $3,116,378 From Storm Drainage Fund Reserves $462,030 Other storm drain expenses previously covered by General Fund subsidy $1,242,124 TOTALS $4,358,502 $4,358,502 Prepared for the Storm Drai Oversight Committee by Joe Teresi and Tatiana Pham 05/07/2014 Approved Storm Drainage Fee Increase Ballot Measure vs. Preliminary FY 2015 Storm Drainage Fund Budget BALLOT MEASURE 1. Implementation of seven (7) high- priority storm drain capital improvement projects. 2. $ 500,000 annually (adjusted annually for inflation) for storm drain system repair and rehabilitation. 3. $ 90,000 annually for augmented storm drain system maintenance. 4. $ 125,000 annually (adjusted annually for inflation) for innovative projects to reduce storm water runoff and pollutant levels. 5. $ 100,000 annually (adjusted annually for salary increases) to fund storm water quality protection activities formerly funded by the Wastewater Treatment Fund. 6. $ 115,000 annually (adjusted annually for salary increases) for an engineer to assist with implementation of storm drain capital improvement projects. 7. Annual adjustment of fees by local CPI increase or 6%, whichever is lower. 8. Pre-payment of Storm Drainage Fees for City-owned properties to accelerate implementation of storm drain capital improvement projects. PROPOSED BUDGET 1. $1,840,000 for Matadero Pump Station and Trunk Lines Improvements (CIP SD-13002). 2. $ 371,000 for Storm Drain System Replacement and Rehabilitation (CIP SD-06101); $250,000 for Storm Drain Master Plan Update (CIP SD- 15008). 3. $165,299 in additional funding for Storm Drain In-House Maintenance: ($ 90,000 for supplies & materials + 0.45 additional FTE staffing). 4. $ 150,000 allocated to Storm Water Rebate Program for rain barrels, cisterns, permeable pavement, and green roofs. 5. $150,482 in additional funding for Storm Water Quality Protection (0.78 additional FTE staffing, $ 39,000 for non-salary expenses). 6. $189,597 in additional funding for Engineer position (1.0 FTE) and CIP support staff (0.3 FTE) funded in Storm Drain System Improvements. 7. Proposed 2.6% increase per the change in the CPI for San Francisco-Oakland- San Jose for calendar year 2013. 8. No pre-payment for FY 2015; all scheduled pre-payments by General Fund have been made. Proposed Storm Drain Capital Spending Plan SF Creek Pump Station Gailen / Bibbits Alma Street Channing Lincoln Trunk Matadero PS and Trunks Clara Drive Southgate Neighborhood YEARLY PROJECT Year FY $4,500,000 $650,000 $1,500,000 $4,600,000 $3,000,000 $900,000 $2,000,000 TOTAL 1 FY 2005-06 $900,000 $650,000 $180,000 $1,730,000 2 FY 2006-07 $735,000 $735,000 3 FY 2007-08 $7,535,000 ($915,000)$6,620,000 4 FY 2008-09 $700,000 $785,000 $1,485,000 5 FY 2009-10 $820,000 $820,000 6 FY 2010-11 $895,000 $895,000 7 FY 2011-12 $1,590,000 $140,000 $1,730,000 8 FY 2012-13 $1,680,000 $860,000 $2,540,000 9 FY 2013-14 $1,430,000 $315,000 $750,000 $146,000 $2,641,000 10 FY 2014-15 $1,840,000 $1,840,000 11 FY 2015-16 $1,915,000 $1,915,000 12 FY 2016-17 $1,990,000 $1,990,000 $9,135,000 $650,000 $785,000 $6,415,000 $6,060,000 $750,000 $1,146,000 $24,941,000 NOTES: 1. Cost figures immediately below project titles reflect Year 2005 cost estimates. Spreadsheet figures represent actual incurred costs & projected future costs. 2. Shaded projects have been completed to-date. 3. Phases 1 & 2 (of 3) of the Channing/Lincoln CIP have been completed. Design of Southgate Neighborhood CIP has been completed. 5/7/14 JT Page 1 of 3 What is the latest status of the level of total dissolved solids in the recycled water? The pre-2009 data set is not as robust as the 2009-2012 data. Therefore, the 2009-2012 is used as the “before” even though minor control projects were implemented during 2009-2012. The largest project to date, the Mountain View sewer relining, was completed in early January 2013. The first full year, 2013, of post-lining data was used. Total dissolved solids (aka, TDS) is a measure of all the organic and inorganic substances suspended in a liquid. The subset of parameters most impacted by the saline infiltration, chloride and sodium, show the greatest reduction following the sewer relining project. Further sewer repair projects are planned for the next few years and staff anticipate meeting the collective goal of a TDS of 600 mg/L in 2017, as shown in the graph below (page 3). The table below summarizes the salinity data for the treatment plant effluent. All data is in milligrams per liter (i.e., mg/L or ppm). Calcium Magnesium Chloride Sodium TDS 2009 49 36 328 211 924 2010 50 36 303 197 923 2011 53 37 295 196 923 2012 50 35 306 196 914 Average 50 36 308 200 921 2013 46 31 242 157 773 Percent Reduction 9 14 21 22 16 How do we monitor and test for total dissolved solids? Staff monitors each partner agency’s TDS level monthly. Salty infiltration is invariably found in high levels in areas near the Bay in East Palo Alto, Mountain View, and Palo Alto. For investigative work, plant staff cooperate with each agency’s sewer crews and engineers to evaluate proper monitoring points. Plant staff then measure electrical conductivity in various sewer manholes to locate sources of localized salt infiltration. Note that electrical conductivity is a fast, efficient testing method used as a surrogate for TDS. How do we get to the TDS goal of 600 mg/L? Projects have been completed and are scheduled that staff anticipate will get us to the goal of 600 mg/L TDS in 2017. Partners are committed to working towards the goal; a graph below shows progress and future plans on salinity control projects. Each partner works to eliminate infiltration, update their sewer master plans, and address problematic sections of pipeline. Projects completed include: Mountain View spent $2.9 million on 3,800-feet of pipe to reline an aging sewer and reduce salt infiltration [appx 170 mg/L TDS reduction]; EPASD spent $500,000 on Wisteria/Garden Drive sewer replacement and two years ago lined their trunkline from San Francisquito Creek through the Palo Alto Airport, a $1.3 million dollar project; and Palo Alto replaced a sewer in the Palo Alto Baylands Attachment G Page 2 of 3 In-progress and scheduled projects include:  At Mountain View’s landfill barrier extraction wells, Mountain View has submitted a report to state regulators with a plan to remove this highly saline discharge from the sanitary sewer. The state has the report; Mountain View will be meeting with state staff to keep the item moving.[appx. 105 mg/L TDS reduction anticipated];  Palo Alto and Mountain View staff recently identified the source of salty infiltration near Shoreline Amphitheater and are developing a plan of action [appx. 20 mg/L TDS reduction anticipated];  EPASD staff are working on a plan to complete repairs on a problematic and salty leak (about 13 gallons per minute) at one manhole near the Bay.;  The Palo Alto Utilities Department is completing a sanitary sewer replacement project this fall in an area identified to have salty infiltration.; and  Mountain View is tentatively planning approximately $17 mn of capital projects in the next 8 years to reline an additional 17,500’ of large diameter sewer main. Salt intrusion is a consideration in prioritizing the work.; Due to a potentially large future investment in recycled water, should we require partners to meet a negotiated water quality standard for salinity? Is getting to the TDS goal a mandatory or cooperative approach? Staff believes that continuing the cooperative approach will be the best way to meet our goal of recycled water with a 600 mg/L TDS level. As the graph of anticipated projects shows above, the 600 mg/L goal is expected to be achieved in 2017, with voluntary projects. This is several years ahead of the soonest the Palo Alto recycled water delivery project to the Stanford Research Park could be constructed. Each partner has adopted a resolution to reduce the salinity of recycled water. In 2013, recycled water use was 48% Mountain View and 52% Palo Alto; the other four partner agencies are not currently receiving recycled water because no pipelines have been built to their city. Whether a Page 3 of 3 partner agency receives recycled water or not, partners understand the importance of reducing infiltration and are working on it. Partners are not required to meet a TDS standard in their agreements (contracts) with Palo Alto. Any changes in the agreements must be mutually agreed upon, and it is very unlikely that the Partners would agree to the imposition of a salinity standard. However, all partners are voluntarily relining and funding their own sewer rehabilitation as part of an ongoing program. Staff will continue helping partners monitor and find the saltier infiltration as well as track progress towards our collective TDS goal. Recycled Water vs Potable Water Based on the grant feasibility study for the Bureau of Reclamation, the cost of SFPUC water is expected to rise significantly over the next 20 years such that recycled water will be almost the same cost as SFPUC water by 2033. The recycled water project has been pursuing several grant and low interest loan opportunities from state and federal agencies that will help project economics. The chart below compares the cost of SFPUC water with the recycled water base case (no grant) and with a $7.9 million federal grant. Both scenarios assume the City obtains a 2% State Revolving Fund loan from the State Water Resources Control Board, which are common funding sources for recycled water projects. With the federal grant, the cost of recycled water produced from the proposed project will be less than the projected price of SFPUC water by 2020. The initial high cost and subsequent drop is due to the gradual increase in recycled water deliveries that occurs following construction. Page 1 of 3 What is the market potential for additional dark fiber customers? CPAU commissioned a market study in 2011 by Tellus Venture Associates and CTC Technology & Energy. The focus of the study was an analysis of further market potential for commercial dark fiber, in addition to a very high level assessment of the feasibility of deploying citywide Fiber-to-the-Premise (FTTP). The first key finding of the study was that CPAU’s dark fiber services are effectively marketed to organizations that need correspondingly high levels of bandwidth. In addition, CPAU’s core competency is providing reliable and inexpensive dark fiber connectivity throughout the City. CPAU should continue to partner with resellers to make service available to a wider range of businesses, rather than competing against them. Telecommunication service resellers are CPAU’s best customers and are already positioned to provide higher-value added services. Dark fiber licensing is a unique service. It enables large commercial customers to customize their internal network configurations to meet bandwidth requirements for specific applications. Dark fiber is not cost-effective for small and mid-size businesses with limited bandwidth requirements because of the upfront construction and installation costs. The 2011 study recommended five specific locations for prospective extensions of the fiber system. CPAU has completed two of these extensions based on a demonstrated demand for dark fiber service connections: (1) 2012, East Meadow Circle, and (2) March 2014, completed a project which provided dark fiber service connections to the Business Office and seventeen schools of the Palo Alto Unified School District. Other targeted Capital Improvement Projects are being initiated to extend the system where there is actual demand for dark fiber services. CPAU staff continues to evaluate opportunities identified in the study, including: (3) El Camino Real, primarily for economic development purposes; (4) Sand Hill Road, west of El Camino Real, for medical facilities affiliated with the Stanford Medical Center; and (5) East Bayshore, north of Embarcadero, for office complexes. The second key finding of the study concluded that taking the next step by extending the fiber system citywide to provide telecom services in residential neighborhoods is a significant and risky investment for any community, particularly in urban metro areas where the telecom incumbents (Cable TV and Telcos) dominate the market and have the scale and market power to discourage new entrants from offering competing services. CPAU is currently working with the IT Department and the Citizen Advisory Committee to retain a consultant to develop a more in-depth FTTP Master Plan and Citywide Wireless Network Plan. Request for Proposals (RFPs) for each project are anticipated to be released by the end of June 2014. After contract award and initial engineering studies are complete, CPAU and IT will update the City Council in January 2015 to seek further direction on proceeding with the projects. Do people move to Palo Alto for dark fiber? Only a small handful of people are likely to be motivated to move to Palo Alto solely for our fiber optic services. The availability of dark fiber is attractive to established companies contemplating moving to Attachment H Page 2 of 3 Palo Alto that “have high-bandwidth requirements that would be facilitated by direct dark fiber service connections.” These companies must also have access to the technical resources and equipment required to “light” the licensed dark fiber strands and have the ability to maintain the equipment and connections to a collocation facility like the Palo Alto Internet Exchange for access to an Internet Service Provider (ISP). Otherwise, businesses that need access to broadband, voice and video services buy “managed services” from AT&T, Comcast, and a number of other telecom companies in the market (including the City’s reseller customers). 6/2/2014 1 FY 2015 Proposed Operating  Budget Document Overview City Council May 6, 2014 1 Overview Design and Format Performance Based Budgeting o Performance Measures o Workload Measures o Budget Proposals –Performance Results Accomplishments and Initiatives Base Budget and Budget Proposals Budget in Brief and Fiscal Year 2016 Budget Documents 2 Design and Format Implementation of new Publication Software Overarching Design Budget Summary Views 3 Performance Based Budgeting Performance Measures Workload Measures 4 Performance Based Budgeting Performance Results Quality          Cost Cycle Time      Customer Satisfaction 5 6 APPENDIX #3 6/2/2014 2 Budget Proposals Base Budget Adjustments o Deletion of prior year one‐time funded items o Salary and Benefits Adjustments o Allocated Charges Adjustments o Revenue Alignments with historical trends o Utility Charges Adjustments 7 Base Budget Reconciliation 8 Budget Proposals Detailed Description Performance Results  9 Next Steps Fiscal Year 2015 Adopted Budget – Budget  in Brief document Fiscal Year 2016  o Complete redesign of Operating Budget  Document o Redesign of Capital Budget Document 10 6/2/2014 1 Fiscal Year 2015 Proposed Budget Finance Committee May 13, 2014 FINANCE COMMITTEE MEETING__5/13/2014__[X] Placed Before Meeting[ ] Received at MeetingItem #1-11 Overview FY 2015 Proposed Citywide Funds  Position and Benefits Discussion FY 2015 Proposed General Fund Investment Prioritization Framework Finance Committee Review 2 Citywide Expenditures $470.1 Million Utility Purchase,  $127.2, 27% Salaries & Benefits ,  $150.3, 32% Contract Services ,  $32.1, 7% Supplies &  Materials , $7.7,  2% General Expense,  $20.4, 4% Rents & Leases,  $12.4, 3% Debt Service, $20.8, 4% Facilities & Equipment,  $0.7, 0% Allocated Charges,  $42.1, 9% Capital Improvement,  $53.2, 11% Net Transfers, $3.1, 1% 3 Capital Projects by Fund $57.5 Million 44 Capital Project Fund (General Fund), $24.7, 43% Airport Fund, $0.2, 0% Vehicle Replacement Fund, $3.9, 7% Technology Fund , $0.4, 1% Electric Fund , $9.7, 17% Fiber Optics Fund , $0.4, 1% Gas Fund , $2.3, 4% Water Fund, $5.4, 9% Wastewater Collection Fund, $4.1, 7%Wastewater Treatment Fund, $3.7, 6% Storm Drain Fund, $2.7, 5% 5 Citywide Positions 1,036.80 Positions 61,700  66,900   59,000  60,000  61,000  62,000  63,000  64,000  65,000  66,000  67,000  68,000 950 970 990 1010 1030 1050 1070 1090 1110 1130 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 10 Year Trend ‐Total Citywide Positions vs. Population Growth Total Citywide FTE Population Citywide Position Changes Proposed Operating Budget, pp. 411‐426 *Other Funds are Internal Service Funds, Special Revenue Funds, and the Capital Fund 6 GF ENT Other* TotalFY 2014 Adopted FTE 577.80 354.55 87.00 1,019.35 Additions & Reductions of FTE 11.06 4.95 1.44 17.45 Reallocations between Funds 1.93 (0.71) (1.22) - Net FY 2015 Proposed Changes 12.99 4.24 0.22 17.45 FY 2015 Proposed Budget 590.79 358.79 87.22 1,036.80 6/2/2014 2 7 Citywide Changes Salary and Personnel Benefits, $11.4M •Contractual salary adjustments •Healthcare rate adjustments and employee plan  election •Pension Retiree Actuarial Required Contribution (ARC),  net of employee contribution, $2.0M  Allocated Charges •Technology Fund, $0.6M  •General Fund cost allocation plan, $0.1M 8 Pension Expenses $12.85 $14.40 $16.10 $16.80 $16.46 $16.60  $19.90 $21.49  $24.31  $28.03  $5.35  $5.10  $4.70  $6.10  $3.54 $2.90  $3.18 $0.73  $0.13  $0.00  $0 $5 $10 $15 $20 $25 $30 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Employer Contribution Employee Portion Paid by City 10 Year Trend ‐Citywide Pension Expense * Paid by City ($Millions, FY 2014 Adopted, FY 2015 Proposed) 9 Healthcare Expenses $913 $945  $1,009 $1,047  $1,079  $1,170  $1,223  $1,306  $1,428 $1,398  $700 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 10 Year Trend ‐Citywide Average Monthly Healthcare  Cost Per Employee (2015 Proposed) Total Monthly Ave Per Employee*FY 2006‐2015 Overall Healthcare  Growth 53% 10 Rate Payer Cost Increase Proposed Operating Budget, pp. 51‐60 •Storm Drain & Fiber Optics rate increase 2.6% (CPI) Utility  Current  FY 2014 Bill   Proposed  FY 2015 Bill  $ Difference % Difference Electric $42.76 $42.76 ‐                        0.0% Water 67.35                   67.35                    ‐                        0.0% Gas 39.27                   39.27                    ‐                        0.0% Wastewater 29.31                   29.31                    ‐                        0.0% Refuse 41.54                   41.54                    ‐                        0.0% Storm Drain 11.99                   12.30                   0.31                      2.6% User Tax 7.47                      7.47                       ‐                        0.0% Total Monthly Bill $239.69 $240.00 $0.31 0.1% 11 General Fund Balancing Total Revenues $169.4 million Budget Stabilization Contribution $2.0 million Total Sources $171.4 million Total Expenditures $171.4 million Budget Stabilization Reserve (BSR)Proposed Funding Level:$29.5 M, 17.2% BSR Range: $25.7 million (15%) to $34.8 million (20.0%) General Fund Revenue by Type $169.4 Million 12 Sales Tax, $26.0, 15.3% Property Tax, $31.9,  18.9% Transient Occupancy  Tax, $14.2, 8.4% Document Transfer  Tax, $7.5, 4.4%Utility Users Tax, $11.3,  6.7% Other Taxes and Fines,  $2.2, 1.3% Charges for Services,  $23.0, 13.6% Permits & Licenses,  $7.8, 4.6% Return on Investment,  $0.7, 0.4% Rental Income, $14.2,  8.4% From other Agencies,  $0.5, 0.3% Charges to other Funds,  $10.7, 6.3% Other Revenue,  $1.1, 0.6% Operating  Transfers‐In, $18.4,  10.9% 6/2/2014 3 General Fund Expense by Category $171.4 Million 13 Salaries & Benefits ,  $107.3, 63% Contract Services ,  $15.1, 9% Supplies & Materials ,  $3.4, 2% General Expense, $12.4,  7% Debt Service, $0.4, 0% Rents and Leases, $1.4,  1% Facilities and  Equiptment, $0.6, 0% Allocated Charges,  $15.1, 9%Operating Trans‐Out ,  $2.1, 1%Transfer to  Infrastructure, $13.7,  8% General Fund Expenditures by Department $171.4 Million Administrative  Depts, $15.3, 9% CSD, $23.0, 14% Development Svcs,  $10.4, 6% Library,  $7.5, 4% Non‐Dept,  $13.3, 8% Office of  Sustainability, $0.3,  0% PSO, $3.3, 2% PCE, $7.1, 4% Public Safety, $62.1,  36% Public Works, $13.5,  8% Transfers Out,  $2.1, 1% Transfer to  Infrastructure,  $13.7, 8% 16 15 General Fund Salary & Benefits Reserve (includes pension costs) 1) Mgmt/Prof, Fire Chief Assoc., & Police Mgmt. Assoc. 550$                Pay‐for ‐Performance Increase Set‐Aside     Mgmt./Prof. Potential Market Adjustments in FY 2015 310                Total 860            2) SEIU Benchmark study 586              3) Salary budget for step increases (SEIU, Safety) 460              4) Potential salary & benefit increases 831              Total General Fund salary and benefit reserve 2,737$        Note: The contractual increases for SEIU employees are allocated to              departmental budgets General Fund FY 2014 Adopted Compared to FY 2015 Proposed Proposed Operating Budget, pp. 37‐38 16 FY 2014 Adopted Budget ‐ Surplus $854 Revenue Changes or Enhancements Tax revenues increase $9,123 Golf reconfiguration project revenue impact decrease (1,466)               Paramedic program fee increase 620                   Class fee increase 317                   Rental income increase from non‐General Fund Departments 1,254                Plan check, permitting & development fees revenue decrease (281)                  Animal Services revenue decrease (371)                  Equity transfer adjustment 128                   Library Foundation one‐time donation (500)                  Other revenue adjustments (31)                    Total Revenue Changes 8,793               Ongoing Expense Changes Salary & Benefits    Salary and benefits adjustments; position reallocations 5,051                   Proposed position additions; two unfrozen library positions 1,539                   Retiree ARC contribution (net employee contribution) 1,021                      Subtotal ‐ Salary & Benefits 7,611                Shuttle Service 1,000                Development Services funding 892                   Election expense 331                   Cubberley adjustment 218                   City Attorney contingency account 50                     Other non‐salary items 170                   Subtotal ‐ Ongoing Expense Changes 10,272              One‐time Expense Changes 1,415                Total Expense Changes 11,687             Net General Fund Change ($2,894) FY 2014 Proposed Budget ‐ BSR contribution ($2,040) 17 General Fund Investment Prioritization Framework City Council Priorities  City Council directed initiatives City operations effectiveness Training and succession planning Strengthening operational and  administrative oversight 18 City Council Priorities and Initiatives Transportation Funding Our Palo Alto Mitchell Park and Rinconada Library  Openings Palo Alto Airport Development Services Blue Print Public Art Manager Sustainability Office Staffing Elections Funding 6/2/2014 4 19 City Operations Effectiveness, Training, & Administrative Oversight Training and Succession Planning Cost of Services Study – Planning and  Community Environment Fire Department Integrated Community  Risk Assessment and Management Plan Administrative Staffing Support  Facility Manager 20 General Fund Balancing Total Revenues $169.4 million Budget Stabilization Contribution $2.0 million Total Sources $171.4 million Total Expenditures $171.4 million 21 General Fund Balancing (One-Time vs. Ongoing Expenditures) One-Time Ongoing Total Revenues $2.0 M $169.4 M $171.4 M Expenditures* $1.4 M $170.0 M $171.4 M Surplus/(Deficit) $0.6 M ($0.6 M) $0 M *One-time Expenditures:Election Costs ($331,000), Our Palo Alto ($325,000), Airport Loan – Additional Amount ($235,000), TMA Consultant ($150,000), Various Studies ($90,000), Fire Dept. Equipment ($70,000), City Attorney Contingency Increase ($50,000), Health and Outreach Coord. ($50,000) Sustainability Office Mgmt. Analyst ($84,000), Document Scanning ($15,000), Rideshare App Funding ($15,000) 22 FY 2015 Ongoing General Fund Balancing Strategy – Impact on FY 2016 Fiscal Year 2015 Fiscal Year 2016 Fiscal Year 2015-2024 LRFF Ongoing Surplus/(Deficit) $1.3 M $3.1 M Fiscal Year 2015 Proposed Budget Ongoing Surplus/(Deficit) ($0.6 M) ($0.6 M) Projected Ongoing Surplus/Deficit ($0.6 M) $2.5 M Budgeted or Projected Expenditure Level $171.4M $176.6 M 23 Date Meeting Time/Location Agenda Mon, 5/5 City Council 7PM, Chambers Transmittal of proposed capital and operating  budgets to Council and forward to Finance  Committee for discussion Tues, 5/13 Finance CommitteeSpecial Meeting 6PM, Chambers Budget Kickoff; Departments: ‐ Council Appointed Officials & Council‐ PSO, Employee Benefits Funds ‐ General Liability Fund  ‐ IT Department (capital & operating)                         ‐ ASD/Printing & Mailing Fund ‐ Non‐departmental Thurs, 5/15 Finance Committee Special Meeting 6PM, Chambers ‐ Utilities (capital & operating) ‐ Police, Fire & Office of Emergency Services Tues, 5/20 Finance CommitteeSpecial Meeting 7PM, Chambers ‐ CSD‐ Library‐ Planning ‐ Development Services ‐ Special Revenue Funds (including Parking  District & Stanford Development Agreement  Fund) Tues, 5/27 Finance CommitteeSpecial Meeting 6PM, Chambers ‐ Retiree Health Benefit Fund‐ General Fund Capital‐ Public Works: General Fund, Storm Drain,  Refuse, Wastewater Treatment, Airport, Vehicle  Replacement,  related capital  Thurs, 5/29 Finance Committee Special Meeting 6PM, Chambers ‐ Municipal Fee Schedule ‐ Wrap up with Finance Committee Mon, 6/9 City Council 7PM, Chambers Public Hearing ‐ Budget Adoption Mon, 6/16 City Council 7PM, Chambers Public Hearing ‐ Budget Adoption City of Palo AltoCouncil & Finance Committee Budget Hearings Fiscal Year 2015 Budget Process 24 Department Presentations (with Budget  Proposals only) o Department Overview o Accomplishments o Initiatives o Significant Budget Proposals o Major Capital Projects, if applicable Finance Committee Questions Fiscal Year 2015 Finance  Committee Review 6/2/2014 5 25 City Attorney’s Office Overview Mission Purpose Divisions •Administration •Consultation and Advisory •Litigation and Dispute Resolution •Official and Administrative Duties 26 Accomplishments Negotiated and drafted 3 renewable PPAs worth $350  million over 30 years. Drafted ordinance creating Public Art for Developers  program. Negotiated & secured certification of Palo Alto’s  Housing Element by the CA Dept. of Housing and  Community Development. Successfully renegotiated key Northern CA Power  Agency agreements and bylaws. Streamlined and updated contracting processes. 27 Fiscal Year 2015 Initiatives Complete 2015‐2023 Housing Element  update. Implement downtown residential permit  parking. Develop comprehensive plan update. Expand Polystyrene Ordinance. Complete transfer of Airport from Santa  Clara County to City of Palo Alto. 28 Significant Budget Proposals Legal Fellowship Program  (eff. Jan. 1, 2015; $74,177)  •Adds 1.0 Legal Fellow  •To meet higher demand  for legal services. •Ongoing Cost: $147,354 City Attorney Contingency one‐time  increase of $50,000 29 City Auditor’s Office pp. 99 ‐106 30 City Clerk’s Office pp. 107‐114 6/2/2014 6 31 City Council pp. 115‐118 32 City Manager’s Office  Overview Mission Principles Divisions •Administration and City Management •Place and Neighborhoods •Economic Vitality 33 Accomplishments Most Livable City in America by Livability.com and #1  Digital City by Digital Government Planned technology and Connected City initiatives Led infrastructure strategy planning and funding  strategy Increased economic vitality: welcomed new hotels  and businesses Neighborhood‐focused projects: Know Your Neighbor  Grant program, ban on public smoking, safe school  routes Launched Our Palo Alto 34 Fiscal Year 2015 Initiatives Partner with Planning Department on critical  land use and transportation initiatives Negotiations related to downtown Post Office  and Cubberley Lease Infrastructure strategy and funding Further San Francisquito Creek JPA flood control  project and Golf Course Project Launch Business Registry Enhance organizational strategic planning,  workplans, and performance management 35 Significant Budget Proposals Our Palo Alto ($150,000) •Create dialogue among citizens regarding  issues facing Palo Alto’s future (total funding:  $325,000). City Manager Staffing Reconfiguration  ($94,169) 36 Office of Sustainability  Significant Budget Proposals Sustainability Office Staffing •1.0 Management Analyst to support the Chief  Sustainability Officer, funded across various  departments, including CMO, Public Works, and  Utilities. (Current budget, $77,347; position  expected to be fully funded in future years with  grant funds.) Sustainability Office Travel •Funds travel to five to seven conferences annually.  (Ongoing: $7,000) 6/2/2014 7 37 People Strategy & Operations Department OverviewMission Purpose Divisions Total Compensation Employee and Labor Relations Organization and Employee Development Risk Management, Safety, and Workers’   Compensation 38 Accomplishments SpinifexIT personnel and payroll data reporting Total compensation study and labor negotiations  for Service Employees International Union (SEIU) Key recruitments of Chief Sustainability Officer,  City Auditor, and Planning and Community  Environment Director Guidespark Total Compensation Statement 39 Fiscal Year 2015 Initiatives Renew contracts for employee benefits Complete compensation studies prior to  negotiations with City’s bargaining groups Comprehensive employee training  program using Skillsoft and Guidespark Develop Succession and Retention Plans Increase worksite safety and job audits 40 Significant Budget Proposals People Strategy and Operations Analytical  Staffing (add 1.00 Sr. Management Analyst,  $177,000) o to assist with citywide salary and benefit data  analysis evaluation o to review and implement best practices regarding  policies and procedures General Benefits Fund –No budget proposals Workers’ Compensation Fund ‐No budget  proposals General Liability Fund –No budget proposals 41 Information Technology Department Overview Mission Purpose Divisions •Office of the CIO •IT Governance and Planning •IT Project Services •IT Operations  •Information Security Services 42 Accomplishments Awarded #1 Digital City for Cities under 75,000 in  population Implemented a real‐time, continuous threat  protection platform against cyber‐attacks Implemented Palo Alto 311 Mobile App WiFi in Cogswell Plaza WiFi in all City Buildings Implemented Tri‐City CAD 6/2/2014 8 43 Fiscal Year 2015 Initiatives Fiber to the Premise and Wireless  Network Plan Data Center and Computer Cloud Backup Cloud‐based Communication and  Productivity Suite Implementation Internet Redundancy Implementation Mobile Device Management (MDM)  Security Enhancement 44 Significant Budget Proposals Information Backup and Storage Solution  (funded by the IT Fund Reserve) $385,000 Communication and Productivity  Software Suite (funded by the Technology  Surcharge Fee) $368,500 Budget System (funded by the Technology  Surcharge Fee) $293,000 45 Administrative Services Department Overview Mission Purpose Divisions •Administration •Accounting •Purchasing and Contracts •Office of Management & Budget •Property Management and Acquisition •Treasury (incl. Print and Mail Fund) 46 Accomplishments New Department Strategic Plan Completed Review of Citywide Procurement  Process and Implemented Digital Signature for  Contracts Print and Mail Certified as  a California Green Business Streamlined the Comprehensive                                     Annual Financial Reporting                                      Process  Implemented Spinifex –HR/Payroll Enhanced  Reporting 47 Fiscal Year 2015 Initiatives Implement ASD Strategic Plan Upgrade City Hall Cashiering System Implement Procurement & Inventory  Process Improvement Implement Core Competency Training Implement Enhancement to the Budget  System 48 Significant Budget Proposals Temporary Staffing Adjustments in Revenue  Collections and Purchasing: $19,915 Electronic Document Storage (to reduce  paper copies and offsite storage needs;  generate efficiencies in records retention):  $15,000 Property Tax Consultant (to provide detailed  property tax data, analysis, and tax  projections): $10,000 6/2/2014 9 49 Non‐Departmental Significant Budget Adjustments & Proposals •Reserves •Salary & Benefits, $1.0M •Shuttle Service, $1.0M •Transportation Mgmt Authority, $0.2M •Cubberley Not to Develop $1.0 M •Cubberley  •Lease payment adjustment, $0.2M •Covenant Not to Develop, ($0.9M) •Elections cost (Nov. 2014), $0.3M •City Attorney Contingency Account, $50K •Public Art Fund transfer, $0.1M 6/2/2014 1 Fiscal Year 2015 Proposed Budget Finance Committee May 15, 2014 FINANCE COMMITTEE MEETING__5/15/2014__[X] Placed Before Meeting[ ] Received at MeetingItem #1-2 Utilities Department Overview Mission: earn high satisfaction of our customers with  cost‐competitive provision of safe, reliable, and  environmentally sustainable utility services. Divisions •Administration •Customer Support  •Engineering •Operations •Resource Management 2 Accomplishments Implemented Carbon Neutral Plan Expanded Youth Outreach Efforts Updated Comprehensive Financial Plans  including new Reserve Guidelines Received Reliable Public Power Provider  designation 3 Fiscal Year 2015 Initiatives Capital Improvement Program Emerging Technology Pilot Projects Communication Outreach Workforce Development Information Technology  Plan 4 Significant Budget Proposals Department‐wide No rate changes (Electric, Gas, Water, Sewer) Utility safety and project coordination: $152,129 o Add 1.0 Utility Safety Officer o Reclassify 1.0 Utility Safety Coordinator to                 1.0 Utility Projects Coordinator Utilities technology systems: $188,421 o Add 1.0 Principal Management Analyst 5 Electric Fund Fiscal Year 2015 Initiatives: o Develop new Local Solar programs o Expand Demand Response program  Significant Budget Proposals: o Increase funding for Solar Rebates:      $620,000 o Add 1.0 FTE Electric Meter Technician:  $134,000 6 6/2/2014 2 Electric Fund Fiscal Year 2015 Capital: $9.7 million Significant Project Costs: o Customer Connections: $3.3 million o System Improvements: $3.1 million o Undergrounding Projects: $2.0 million o Substation Improvements: $1.3 million 7 Fiber Optics Fund Fiscal Year 2015 Initiatives: o Citywide wireless network o Fiber‐to‐the‐Premise Master Plan  Contractual CPI Rate Increase of 2.6% Fiscal Year 2015 Capital:    $0.4 million o Customer Connections: $0.2 million o System Improvements: $0.2 million 8 Gas Fund Fiscal Year 2015 Initiatives: oImplement PaloAltoGreen  Gas Program oComplete Gas Main  Replacement projects  9 Gas Fund Fiscal Year 2015 Capital: $2.3 million Significant Project Costs: o Customer Connections: $0.8 million o Gas Main Replacement: $0.6 million o System Improvements: $0.4 million o Meter Replacements: $0.3 million o Receiving Stations Security: $0.2 million 10 Wastewater Collection Fund Fiscal Year 2015 Initiatives: oInvestigate and eliminate tree roots in over  30,000 feet of sewer lines oWastewater Collection System  Rehabilitation/Augmentation project 11 Wastewater Collection Fund Fiscal Year 2015 Capital: $4.1 million Significant Project Costs: o System Rehabilitation: $3.3 million o System Improvements: $0.4 million o Customer Connections: $0.4 million 12 6/2/2014 3 Water Fund Fiscal Year 2015 Initiatives: oReassess Water System   Master Plan oComplete Recycled Water Project environmental review  13 Water Fund Fiscal Year 2015 Capital: $5.4 million Significant Project Costs: o Seismic System Upgrades: $2.2 million o Reservoir Coating: $0.8 million o System Improvements:   $0.8 million o Meters and Hydrants: $0.6 million o Water System Master Plan: $0.5 million o Customer Connections: $0.5 million 14 Police Department Overview Mission Purpose Divisions 15 •Field Services •Investigations •Technical Services •Traffic Services •Parking Services •Police Personnel  Services •Animal Control  Services Accomplishments Received 147 citizen commendations in FY 2013 Overall reduction of Part One crimes Citywide Automated External Defibrillator (AED)  deployment, including 12 patrol cars 16 Urban Shield and other  regional emergency  preparedness initiatives  and exercises CAD Implementation Fiscal Year 2015 Initiatives Computer Aided Dispatch (CAD) and  Records Management System (RMS ) Cloud‐based Command Center Enhanced first aid training Citizen’s Academy Police Services Utilization Study Animal Control Services Evaluation 17 Significant Budget Proposals Field Patrol, Investigations, and  Leadership Training: $30,000 Police Cellular Phone Communication:  $30,000 Animal Control Services Staffing  Reconfiguration: $7,000 Animal Control Services Revenue  Alignment: $371,000 reduction 18 6/2/2014 4 Fire Department Overview Mission Purpose Service Programs •Fire Suppression •Emergency Medical Services •Fire Prevention Bureau •Employee Fire/EMS Certification Training 19 Accomplishments Responded to 150 fire incidents in FY 2013 with  82% of responses within 8 minutes Responded to 4,712 medical/rescue calls in FY  2013 with 91% of EMS calls within 8 minutes and  99% of paramedic calls within 12 minutes Assisted with citywide deployment of 52  Automated External Defibrillators (AEDs) Deployed third ambulance company Completed Strategic Planning Process 20 Fiscal Year 2015 Initiatives Improve performance  metrics system Conduct a diversity and  inclusiveness survey Department Engagement Process Deploy fourth ambulance company and  continue to reduce dependence upon  Santa Clara County’s ambulance provider 21 Significant Budget Proposals Emergency Fire and Medical Equipment:  $55,000 Fire Training Staffing Reclassification: 1.00  Captain to 1.00 Battalion Chief; $52,000 Public Fire Education Staffing: $49,000 Leadership/Succession Planning: $40,000 Paramedic Transport Services, savings:  $556,000 22 Office of Emergency Services pp. 263 ‐269 23 6/2/2014 1 Fiscal Year 2015 Proposed Budget Finance Committee May 20, 2014 FINANCE COMMITTEE MEETING__5/20/2014__[X] Placed Before Meeting[ ] Received at MeetingItem #1-6 FY 2015 Proposed Operating  Budget Office of Sustainability Operating, pp. 131‐136 2 Department Overview Mission Purpose 3 Accomplishments Hired Chief Sustainability Officer and  established internal Sustainability Board Launched audit of City’s Sustainability  activities, programs, and policies Conducted Study Session with City  Council 4 Fiscal Year 2015 Initiatives Develop Climate Action Plan Develop Sustainability Roadmap Develop and improve sustainability  performance tracking systems 5 Significant Budget Proposals Sustainability Office Staffing •1.0 Management Analyst to support the Chief  Sustainability Officer, funded across various  departments, including CMO, Public Works, and  Utilities. (Current budget, $77,347; position  expected to be fully funded in future years with  grant funds.) Sustainability Office Travel •Funds travel to five to seven conferences annually.  (Ongoing: $7,000) 6 6/2/2014 2 FY 2015 Proposed Operating  Budget Community Services Department Operating, pp. 153‐167 7 Department Overview Mission Purpose Divisions •Administration  and Human Services •Arts and Sciences •Open Space, Parks and Golf •Recreation and Cubberley 8 Accomplishments Launched ActiveNet, an enhanced class  registration software program Increased Arts & Sciences audiences, awards,  fundraising and revenue Increased Children’s Theatre revenue and  participation in all programming areas Public Art for Private Development Ordinance Implementation of the Foothills Wildland Fire  Management for safety and resource  management 9 Fiscal Year 2015 Initiatives Implement new customer service and  marketing initiatives Inaugurate the new Mitchell Community Center Renovate and reconfigure Palo Alto Municipal  Golf Course Continue Project Safety Net, HSRAP, & homeless  service initiatives Develop Parks Master Plan with public input Expand effective partnership program 10 Significant Budget Proposals Addition of a Management Analyst ($153,694) Increase FTE Public Arts Manager ($47,505) Class Registration System Transactions Cost ($115,000  offset with revenue) Additional Junior Museum and Zoo Educators for Palo  Alto schools ($54,189 offset with revenue) Additional Foothills Summer Camps ($40,000 offset  with revenue) Additional Arts & Science Summer Camps  ($35,000 offset with  revenue) 11 FY 2015 Proposed Operating  Budget Library Department Operating, pp. 199‐208 12 6/2/2014 3 Department Overview Mission Purpose Divisions •Public Services  Programs •Information Technology, and Collections •Buildings, Support, and Administration 13 Accomplishments Programs Offered o Attendance o Pop‐up story time o Silicon Valley Reads o IRS Volunteer Income Tax Assistance Library Branding makeX 14 Fiscal Year 2015 Initiatives Reopening of Mitchell Park and  Rinconada (formerly Main) libraries Strategic Plan Completion and  Implementation Integrated Library System  Implementation Cal Humanities Grant: War Comes Home 15 Significant Budget Proposals Mitchell Park and Rinconada Library  Staffing (unfreezes 2.0 effective July 1,  2014 and adds 3.0 positions effective Jan.  1, 2015; $298,000) Technical Services Staffing (higher  demand due to new libraries and  streamline collection acquisition) offset  with other staffing reduction –net zero  impact 16 FY 2015 Proposed Operating  Budget Development Services Department Operating, pp. 169‐182 17 Department Overview Mission Purpose Divisions •Administration •Planning •Building •Public Works •Green Building •Fire Prevention Bureau •Graphic Information Systems (GIS) 18 6/2/2014 4 PCE & DS Transition Planning & Community Environment Purview Long Range Planning Transportation Discretionary Planning Applications and related  plan reviews Development Services Purview Non‐Discretionary Applications Plan Check Review, Permit Issuance, and  Inspections (Building, Planning, Public Works, Utilities, & Fire) Development Center Customer Interface Overlapping Staffing and Coordination 19 Org Chart 20 Accomplishments Launched Accela Citizen Access Established  Citizen Advisory                                                    Groups Enhanced Online Customer                                                  Services Introduced Hybrid Staffing                                                         Model 2014 Best Solar Collaboration Award 2014 Most Electric Vehicle Ready Community Award 2013 Green Building Leader in the Public Sector Award 2013 Accela Trendsetter Award for Leveraging  Technologies 21 Staffing Changes On‐Call Contracts As a result of higher  valuations and more  complex projects, we have  experienced a spike in the  number of inspections  required. This has led to increased  spending on on‐call  contracts from $862k in  Fiscal Year 2011 to $1.6M in  Fiscal Year 2014 (to date) 22 Technology Initiatives that are In‐Flight $1 Million Spent* Accela:  V360, Mobile Office, Citizen Access, Management Reports, GIS Truepoint: Support for Accela Software Interwest: Support for GIS Implementation Building Eye: Mapping permit data Civic Insight: Email notifications of plan check status Green Halo: Automating the construction debris monitoring process Open Permit Data:Make permit data available in real time to  developers and residents in machine readable format Textizen:Text based public notification tool Hardware:monitors, printers, phones, tablets,  etc Maintenance & Support Service contracts for Data Plans for phones and tabletsLarge Format Plotter –For large format printing /scanning *Approximately $430k CIP & $530k Operating Budget (Previously Approved) 23 Technology ‐Future Initiatives  (to be completed by 12/31/2016) $1.4 Million Remaining in CIP GIS Related Innovations:Greater Mapping and layer based mapping Electronic Plan Check: Paper free plan checking Document Management System: Integrated and easy to use digital  document storage, tracking, and recalling  capability Business Registry Certificate Program: Track new and existing  businesses to improve business identification Open Counter:Electronic Form Banking System, permit estimating,  process roadmap tool Mobile App Technologies that Support Online Permitting:Custom  Mobile apps to interface with the Development Center Maintenance & Support of these technologies Hardware needs to support technology Training 24 6/2/2014 5 Current Metrics Reduced EV and PV permitting times 70 days in FY 2011 vs over‐the‐counter now Reduced the average wait time at the front counter Peak of 3 Hours in FY 2011 vs an average of 15 minutes now Improved plan check response times (within 5 days) 77% increase (132 plans in FY 2012 vs 233 now) Reduced wait times on the phone Customers now receive immediate assistance vs up to 40 minutes in  FY 2011 Increased the percent of on‐time (within 30 days) reviews  36% improvement (345 on‐time reviews in FY 2012 vs 470 now) Reduced the avg. number of days to issue building permits Average of 47 days in FY 2011 vs 17 days now 25 Prospective Metrics Double the number of available online permits from  four to eight, out of 20 total Improve our ISO Rating currently at Class Two to a  Class One Improve 30‐Day Plan Check response times to 21  days department wide Increase the total percent of over‐the‐counter  reviews over previous year by 10% Reduce the avg. number of days to issue a permit to  less then a 121 days(Projects < $500K) 26 Fiscal Year 2015 Initiatives Enhance Accela Citizen Access Reorganize Green Building Program Conduct Third Party Review of Building and  Inspection Guidelines Undertake a Cost of Services Study Reduce Response Times and Provide More  Transparency in the Review Process Launch Automated BRC Program 27 Significant Budget Proposals Building On‐Call Contract Services (provide on‐call, on‐site  contractual support during high workload periods to reduce  customer wait times; $238,943) Off‐Site Plan Check Services (provide off‐site contractual  support during high workload periods to reduce customer  wait times; $200,000) Analytical Support (adds 1.0 Sr. Management Analyst to  support Development Services operations;  $184,815) Permitting Support System (contractual services for  enhanced functionality of Accela; $120,000) Urban Forestry Contract (ensuring that the City’s urban tree  canopy requirements are addressed during the development  process; $85,000) 28 FY 2015 Proposed Operating  Budget Planning & Community  Environment Operating, pp. 229‐242 29 Department Overview Mission Purpose Divisions •Administration •Advance Planning •Current Planning •Transportation •Code Enforcement 30 6/2/2014 6 Accomplishments 2007‐2014 Housing Element Update Certification Completed first steps towards implementing a  Transportation Demand Management program as  directed by the City Council in Feb. 2014 Launched Downtown Cap Study Established Downtown Neighborhood Working  Group For Residential Parking Permit Program Completed 166 Planning Applications and  reviewed 1,293 Building Permit Applications (first  half of Fiscal Year 2014) 31 Fiscal Year 2015 Initiatives 2015‐2023 Housing Element Update Our Palo Alto and the Comprehensive Plan  Update Implement Residential Permit Parking Program  in downtown neighborhoods Complete California Avenue Streetscape Project Shuttle Service and Transportation  Management Authority RFPs and next steps Pursue Parking Enhancement Through  Public/Private Partnerships 32 Significant Budget Proposals Reallocation to Development Services  Land Use Analyst ($175,000) Sr. Transportation Planner ($175,000) Our Palo Alto ($175,000)* Planning Application and Processing Reports  ($45,000) Expanded Shuttle Service ($1,000,000) and  Establishment of Transportation Management  Authority ($150,000)*, non‐departmental  budget  33*one-time item FY 2015 Proposed Operating  Budget Special Revenue Funds Operating, pp. 71‐79 34 •Street Improvement Funds Gas Tax: Revenue is projected to decline by $0.3 million  Transfer to CIP:  $1.6 million (Gas Tax) for multiple street  and transportation improvements •Community Development Funds Transfer to CIP: $1.9 million (Citywide Transportation  Development Impact Fee) •Federal & State Revenue Funds Community Development Block Grant (CDBG): $673,000 35 Significant Activity By Fund •Housing In‐Lieu Funds Housing In‐Lieu Fees ‐Revenue is projected to decline  by $1.5 million •Special District Funds Parking Permit Fees ‐Revenue increased by $0.2  million Transfer to CIP ‐University Ave Parking Permit Fund:  $0.5 million  •Traffic Mitigation and Parking In‐Lieu Funds No change Significant Activity By Fund 36 6/2/2014 7 •Public Benefits Funds No change •Downtown Business Improvement District Fund No change •Stanford University Medical Center Fund Transfer to CIP:$1.2 million  •Public Art Fund Public Arts Manager: $150,000                                         Significant Activity By Fund 37 6/2/2014 1 FY 2015 Proposed General Fund  Capital Budget Finance Committee May 27, 2014 1 Overview Revenue and Expenditure Overview Infrastructure Reserve Prioritization of Projects New Projects/Increased Allocations IBRC Recommendations and Infrastructure Plan Planning and Transportation Commission  Review 2 3 General Fund $24,724,000 43% Enterprise Funds $28,439,000 49% Internal Service Funds $4,331,0008% FY 2015 Proposed Projects – By Fund Total FY 2015 Budget: $57.5 million Buildings and Facilities$1,861,1828% Parks and Open Space$2,303,8849% Streets and Sidewalks$12,810,60052% Traffic and Transportation$5,249,93921% Salaries and Benefits-unallocated$2,498,45310% Proposed FY 2015 General Fund CIP Total by Category Total Expenditure: $24,724,058 Transfer: Gas Tax Fund, $1.6 million, 6% Other Revenue, $1.2 million, 5% Other Agencies, $3.4 million, 13% VTA Vehicle License Fee, $0.4 million2% Transfer: Pkg Fees, $0.5 million2% Transfer:SUMC, $1.2 million5% Transfer: Transp. Dev. Impact Fee, $1.9 million7% Transfer: Enterprise Funds, $0.5 million , 2%Interest Earnings, $1.0 million, 4% Transfer:General Fund, $13.7 million, , 54% Proposed FY 2015 General Fund Revenue by Source Total Revenue: $25,318,529 Buildings and Facilities, $9,449,3828% Parks and Open Space, $11,841,731 11% Streets and Sidewalks, $44,229,14440% Traffic and Transportation, $24,074,93922% Salaries and Benefits-unallocated, $21,704,81219% Proposed FY 2015-19 General Fund CIP Total by Category Total Funding: $111,300,008 6/2/2014 2 $25,318,529 $23,370,648 $20,744,410 $25,059,673 $22,437,005$24,724,058 $22,439,387 $26,655,107 $21,139,785 $16,341,671 $13,112,784 $14,044,044 $8,133,347 $12,053,235 $18,148,569 $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Sources Uses ProjectedEndingBalance Budget Prioritization City Council Priorities Health and Safety Infrastructure Committee and March,  2014 Infrastructure Plan Alignment with Historical Spending Levels Studies and Master Plans/Grants Cubberley Community Center 8 2015‐2019 General Fund CIP  New and Increased Projects 9 Project $ Change Street Maintenance $2,300,000 Transportation and Parking Improvements $1,900,000 Civic Center Fire Life Safety (New) $925,000 Embarcadero Rd. Corridor Improvements- Traffic Signal Modifications Design (New)$500,000 Baylands Levee Improvements Feasibility Study (New) $500,000 Boulware Park Improvements (New) $445,000 Civic Center Plaza Waterproofing Study (New) $258,000 Palo Alto Community Gardens Irrigation System (New) $257,000 Total $7,085,000 Fiscal Year 2014  Accomplishments Continued the on‐time, on budget construction of  Rinconada Library Furthered construction of Mitchell Park Library and  Community Center, with completion anticipated in fall,  2014 Began the Parks, Trails, Open Space and Recreation  Master Plan study Completed Eleanor Pardee Park Improvements Began the California Avenue Streetscape Improvement  Project 10 Accomplishments Increased Funding for Street Maintenance FY 2010 Adopted Budget = $1.9 million FY 2011 Adopted Budget = $3.8 million FY 2015 Proposed Budget = $6.4 million Improved Pavement Condition Index score 2010 average PCI score = 74 2014 average PCI score = 78 2019 goal = 85 (originally projected for 2021) Modeling post‐2019 budgetary needs to maintain 85  PCI once goal has been attained Increase in outreach to the public Infrastructure Management  System (IMS) Status Key recommendation of the Infrastructure Blue  Ribbon Commission’s 12/2011 Final Report Contracted with Plante Moran in December  2013 Conducted interviews to assess current  practices and develop Needs Assessment  Report Evaluating current application capabilities Recommendation in July 12 6/2/2014 3 Catch-up, $3,679,800, 3% Keep-up, $55,957,825, 50% New, $3,990,946, 4% New- Non- General Fund, 25,966,625, 23% Salaries and Benefits (unallocated), $21,704,812, 20% Proposed FY 2015-19 CIP by IBRC Category Total CIP: $111,300,008 IBRC “Catch-up” Category IBRC Final Report “Catch- up” Backlog “Catch-up” amount funded to date, or included in Proposed CIP FY 2015-2019 Backlog Building $5.0 million $1.3 million $3.7 million Cubberley $6.9 million $0.7 million $6.2 million Parks $14.4 million $3.1 million $11.3 million Surface $14.9 million $5.6 million $9.3 million Total $41.2 million $10.7 million $30.5 million Progress of IBRC “Catch-up” Backlog Relationship of CIP to Infrastructure  Funding Plan Minimal overlap between CIP and  Infrastructure Funding Plan CIP was developed considering planned  draws from IR Projects included in CIP and Infrastructure  Funding Plan: o Highway 101 Bicycle/Pedestrian Overpass o Charleston/Arastradero Corridor Improvements o Bicycle/Pedestrian Transportation Plan 15 Planning and Transportation  Commission Review Capital Program reviewed on 5/14/14 PTC found CIP consistent with  Comprehensive Plan PTC Suggestions: o Study on the effects of sea level rise in Palo Alto o Change analysis from prior CIP o CIP subcommittee to reconvene next year to review  changes to budget document 16 $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 Buildings and Facilities Nonrecurring Recurring $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 Parks and Open Space Nonrecurring Recurring $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 Streets and Sidewalks Nonrecurring Recurring $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 Traffic and Transportation Nonrecurring Recurring Proposed FY 2015-2019 CIP by Category $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 FY2015 FY2016 FY2017 FY2018 FY2019 Buildings and Facilities New- IRFunded Keep-up Catch-up $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 Parks and Open Space New-OutsideFunded New- IRFunded Keep-up Catch-up $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 FY2015 FY2016 FY2017 FY2018 FY2019 Streets and Sidewalks New-OutsideFunded New- IRFunded Keep-up Catch-up $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 FY2015FY2016FY2017FY2018FY2019 Traffic and Transportation New-OutsideFunded New- IRFunded Keep-up Catch-up Proposed 2015-2019 CIP by IBRC Recommendation 6/2/2014 4 Budget Overview 19 5-Year General Fund CIP Planned Expenditures ($ millions) $- $20 $40 $60 $80 $100 $120 $140 FY 2011-2015CIP FY 2012-2016CIP FY 2013-2017CIP FY 2014-2018CIP FY 2015-2019CIP FY 2015 Proposed Operating  Budget Public Works Finance Committee May 27, 2014 20 Department Overview Mission Purpose Divisions •Administration •Public Services •Environmental Services •Engineering Services •Airport 21 Accomplishments Continued progress toward goal of citywide  excellent street conditions by 2019 Began capping the final section of the landfill  Coordinated the takeover of the Mitchell Park  Library and Community Center Project by a new  contractor Continued the on‐time, on budget construction of  Rinconada Library 22 Fiscal Year 2015 Initiatives Complete construction and opening to the public of  Mitchell Park Library and Community Center and  Rinconada Library Develop and implement an Infrastructure  Management System (IMS) American Public Works Association accreditation Obtain City Council approval of Organics Facilities  Plan to further zero waste goals Complete implementation of an enhanced flood  warning system for the San Francisquito Creek 23 General Fund Fiscal Year 2015 Initiatives: o Train staff on operation and maintenance of new  buildings at Mitchell Park Library and  Community Center and Rinconada Library o Begin implementation of adopted Urban Forest  Master Plan initiatives Significant Budget Proposals: o Facilities Operational Study: $75,000 o Shift cost of positions and associated revenues  to Development Services: $568,000 24 6/2/2014 5 Refuse Fund Fiscal Year 2015 Initiatives: o Make a determination on potentially   contracting residential street sweeping services o Complete capping of the landfill o Evaluate collection and disposal of residential  solid waste No Rate Increase Proposed for FY 2015   o A new rate structure will be developed for  potential implementation in July 2015 25 Storm Drainage Fund Fiscal Year 2015 Initiatives: o Continue working on  the 7 storm drain capital   projects outlined in the  2005 Storm Drainage Fee ballot measure o Complete an update to the Storm Drain  Master Plan to identify future capital  projects 26 Storm Drainage Fund Fiscal Year 2015 Capital: $2.7 million Significant Project Costs: o Master Plan Update: $0.3 million o Matadero Creek Pump  Station Improvements: $1.9 million  o Annual Storm Drain System Improvements: $0.4 million 27 Wastewater Treatment Fund Fiscal Year 2015 Initiatives: o Begin Implementation of Biosolids Facilities  Plan o Expand Polystyrene Ordinance to include food service ware,  coolers, and other items 28 Wastewater Treatment Fund Fiscal Year 2015 Capital: $3.7 million Significant Project Costs: o Plant Equipment Replacement: $2.5 million o Biosolids Facility Design: $0.6 million o Facility Condition Assessment  and Retrofit: $0.4 million 29 Airport Fund Fiscal Year 2015 Initiatives: o Complete transfer from Santa Clara County and  begin planning for needed capital improvement Significant Budget Proposals: o General Fund loan ($235,000; $560,000 in total) o Operating costs ($162,000 admin; $289,000  contracted maint; $109,000 start‐up costs and   allocated charges) Capital Improvement Program: o Temporary Airport Terminal 30 6/2/2014 6 Vehicle Fund Fiscal Year 2015 Initiatives: o Continue to implement recommendations in  Fleet Operational Study o Replace older vehicles with newer, more efficient  equipment to reduce fuel consumption and  carbon footprint 31 Vehicle Fund Significant Budget Proposals: o Vehicle Maintenance Service Delivery  Enhancement: $6,000 o Inventory Management and Regulatory  Compliance: $9,000 Significant Project Costs: o Scheduled Vehicle: Replacements: $3.8 million o Emergency Repairs and  Replacements: $0.1 million 32 CITY OF PALO ALTO RETIREE HEALTHCARE PLAN June 30, 2013 GASB 45 Actuarial Valuation Valuation Summary John E. Bartel, President Deanna Van Valer, Assistant Vice President & Actuary Mary Beth Redding, Assistant Vice President & Actuary Adam Zimmerer, Actuarial Analyst Bartel Associates, LLC May 27, 2014 Presented by Prepared by AGENDA Topic Page Benefit Summary 1 Implied Subsidy 3 Participant Statistics 4 Actuarial Methods 7 ActuarialAssumptions 8 Assets 10 Valuation Results 11 Projection 13 May 27, 2014 BENEFIT SUMMARY 1 May 27, 2014 BENEFITSUMMARY 2 Years of Service % <10 0% 10 50% ĻĻ •20 100% 2012 2013 2014 Single $ 566 $ 622 $ 642 2-Party 1,074 1,183 1,218 Family 1,382 1,515 1,559 1 Minimum 5 years City Service. May 27, 2014 BENEFIT SUMMARY 3 2014 2015 Single $ 688 $ 708 2-Party 1,375 1,415 Family 1,788 1,840 May 27, 2014 IMPLIED SUBSIDY ŶEmployer cost for allowing retirees to participate at active rates. ŶGASB 45 and Actuarial Standards of Practice allowed community rated plans to value their liability using premiums, resulting in no implied subsidy.ŶRevision to ASOP requires valuing implied subsidy in all cases. 4  25 30 35 40 45 50 55 60 65 Blended Premium $610 $610 $610 $610 $610 $610 $610 $610 $610 Cost by Age $343 $398 $442 $486 $586 $652 $752 $885 $1,041 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,100 May 27, 2014 PARTICIPANT STATISTICS 5 Participant Statistics May 27, 2014 PARTICIPANT STATISTICS 6 Participant Statistics – June 30, 2013 2 Group 3 PAPOA have Group 2 benefits May 27, 2014 ACTUARIALMETHODS 7 3 Using Market Value of Assets to determine the ARC will result in more volatile future ARCs than if a smoothed Market Value were used. May 27, 2014 ACTUARIALASSUMPTIONS 8 May 27, 2014 ACTUARIAL ASSUMPTIONS 9 Increase from Prior YearYearNon-Medicare Medicare 2013 9.0% 9.4% 2014 8.5% 8.9% 2015 8.0% 8.3% 2016 7.5% 7.8% 2017 7.0% 7.2% 2018 6.5% 6.7% 2019 6.0% 6.1% 2020 5.5% 5.6% 2021+ 5.0% 5.0% Increase from Prior YearYearNon-Medicare Medicare 2013 Premiums 2014 Premiums 2015 8.0% 8.3% 2016 7.5% 7.8% 2017 7.0% 7.2% 2018 6.5% 6.7% 2019 6.0% 6.1% 2020 5.5% 5.6% 2021+ 5.0% 5.0% May 27, 2014 ASSETS 10 Market Value of Plan Assets – CERBT (Amounts in 000’s) 4 Projected from actual 12/31/2013 balance using assumed rate of return for last half of fiscal year.5 Benefit Payments made outside of trust by City May 27, 2014 VALUATION RESULTS 11 Actuarial Obligations (Amounts in 000’s) May 27, 2014 VALUATION RESULTS 12 Annual Required Contribution (ARC) (Amounts in 000’s) May 27, 2014 PROJECTION 13 Estimated Full ARC Funding Projection (Amounts in 000’s) May 27, 2014 VALUATION RESULTS 14 Actuarial Gain/Loss (in millions) May 27, 2014 15 WHAT IS GASB 45? „OPEB - Other than pension Post Employment Benefits „Historically accounted for as Pay-As-You-Go z Generally ignored until employees retire z Pay $1 / account for $1 „GASB Statement No. 45 - Issued June 2004 z Requires agencies recognize OPEB cost over active service of employees rather than on a pay-as-you-go basis z “Annual Required Contribution” – how much should be set aside z Accrue difference between: ¾Annual Required Contribution ¾Actual payments z City implemented GASB 45 for 2007/08 fiscal year May 27, 2014 16 DEFINITION OF TERMS „Actuarial Accrued Liability (AAL) z Liability for benefits “earned” for past service using actuarial methods and assumptions „Normal Cost (NC) z Value of benefits “earned” during the current year „Annual Required Contribution (ARC) z Normal Cost, plus z Amortization of Unfunded AAL (UAAL) „Net OPEB Obligation (NOO) z Historical difference between ARC and actual contributions „PayGo z Cash payments for retiree benefits 6/2/2014 1 FY 2015 Proposed Municipal Fee  Schedule Finance Committee May 29, 2014 1 FINANCE COMMITTEE MEETING__5/29/2014__[X] Placed Before Meeting[ ] Received at MeetingItem #1 •Annual process •Cost of Services Study o Initial consultant study o Draft User Fee Cost Recovery Level Policy o Review of cost‐recovery levels for certain fees o Fiscal Year 2015 Budget proposals o City Council Study Session in fall •Development Services section 2 Background •Cost recovery level maintenance of 5.85%  except for  o Majority of development related fees (Planning and  Community Environment, Development Services – Building Division) o Community Services Fees (arts and sciences, golf  services, recreation activities) o Animal Services fees •New fees •Deletion of fees •Development Impact fee adjustments Fee Adjustment Recommendations 3 Initial Cost Recovery Ranges 4 Fee Grouping Lowest Highest ASD – Real Estate Division 100% 100% ASD – Documents 40% 100% Development Services – Fire Prevention 13% 100% Development Services – Public Works 23% 100% Police Department 18% 100% Public Works Department 11% 100% 6/2/2014 1 1 Fiscal Year 2015 Proposed Budget Finance Committee May 29, 2014 FINANCE COMMITTEE MEETING__5/29/2014__[X] Placed Before Meeting[ ] Received at MeetingItem #2 2 Budget Stabilization Reserve FY 2014 Projected Ending BSR (Feb. 2014) $31.5 Million FY 2015 Proposed Budget BSR (17.2%) (Feb. 2014) $29.5 Million FY 2014 Projected Ending BSR (+ $4.5 Million; Midyear Budget Review, March 2014) $36.0 Million  FY 2014 Infrastructure Reserve (IR) Contribution  (‐$4 Million; March 2014) $32.0 Million FY 2014 Projected Ending BSR (+$1.5 Million, May  2014) $33.5 Million FY 2015 Projected BSR (19.6%) $33.5 Million FY 2015 Revised Proposed Budget BSR (18.4%) $31.5 Million 3 Date Dept Description Amount Proposed Budget ‐ BSR Change ($41) 5/20 CSD Golf Course adjustments 352 5/29 PWD Remove Facilities Mgr; add contract dollars 49 Subtotal ‐ Tentatively Approved Changes to Proposed Budget $401 Tentatively Approved Budget ‐ BSR Change $360 Pending Actions as of May 29: 5/19 CSD Add'l HSRAP (5/19 Council action) ($31) PSO Remove Sr. Mgmt Analyst; add hourly & contract funding 8 SUS Remove Mgmt Analyst; add hourly funding 0 Subtotal ‐ Pending Actions ($23) Change to BSR Considering Pending Actions (BSR 18.6%) $337 General Fund Adjustments 4 Proposed Positions Additions Number of  Positions Fiscal Year 2015 Proposed Budget 17.45 Mostly General Fund Position Reductions (1.0 Sr. Management Analyst, 1.0 Mgmt. Analyst, 1.0 Facility Manager) ‐3.00 Fiscal Year 2015 Revised Proposed Budget 14.45 Enterprise and Other Funds Positions  (1.0 Metering Technician, 1.0 Principal Mgmt. Analyst, 1.0 Safety Officer, 1.0 Mgmt. Analyst, 1.0 Public Art Manager, 0.5 Laboratory Technician) 5.50 General Fund Positions (with a dedicated revenue source) (1.0 Sr. Mgmt. Analyst [Dev. Svcs.], 0.5 JMZ Educators) 1.50 General Fund Positions (with no dedicated revenue source) (2.95 Library Positions, 1.0 Legal Fellow, 1.0 Land Use Analyst, 1.0  Senior Planner, 0.5 Coordinator Transportation System Mgr.,  1.0 Mgmt. Analyst [CSD]) 7.45 5 General Fund Positions Title change Only: Purchasing Mgr to Chief Procurement Officer Withdraw proposed benefited position adds: Sr. Mgmt Analyst  (PSO), Mgmt Analyst (Office of Sustainability), ‐$0.3M Corresponding hourly and consultant funding to due  removal of benefited positions, $0.3M Additional HSRAP allocation, $31,260 Stanford University Medical Center Fund Project Safety Net Director, $105,000 Capital Fund Interpretive Center Improvements Project and Boardwalk  Feasibility Study Project Recommended Actions 6 Fiscal Year 2015 Proposed Budget Finance Committee May 29, 2014 6/2/2014 2 7 General Fund One-Time Expenditures One-Time Funding Requests Dollar Amount Election Costs $331,000 Our Palo Alto $325,000 Airport Loan Additional Amount $235,000 Various Studies $165,000 People Strategy and Operations Consultant Services $156,000 Transportation Mgmt. Authority Consultant Services $150,000 Sustainability Office Temporary Staffing $84,000 Fire Department Equipment $70,000 City Attorney Contingency Increase $50,000 Health and Outreach Coordinator $50,000 Document Scanning $15,000 Rideshare App $15,000 Total One-Time Funding Requests $1,646,000