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HomeMy WebLinkAboutStaff Report 268-06City of Palo Alto City Manager’s Report TO: FROM: DATE: SUBJECT: POLICY AND SERVICES COMMITTEE CITY MANAGER JUNE 13, 2006 TRANSMITTAL POLICY UPDATE OF DEPARTMENT: COMMUNITY SERVICES CMR: 268:06 DRAFT PUBLIC/PRIVATE PARTNERSHIP RECOMMENDATION Staff requests that the Policy and Services Committee review- and approve the attached update to the City’s Public/Private Partnership policy. (Attachment A) Upon approval the policy will be transmitted to the City Council for adoption. BACKGROUND At its April 26 meeting, the Policy and Services Committee provided staff with comments and direction to update the existing Public/Private Partnership policy (CMR 198:06, Attachment B). This report transmits staff’s work on the policy update and requests input and approval from the Committee. The new policy defines the types of public/private parmerships, available to the public into three separate categories called Joint Ventures, Alliances and Co-sponsorships, and creates a process for each type of parmership, clarifying the relationship between the public sector entity and the City. RESOURCE IMPACT Public/private parmerships can be beneficial by providing a way to leverage City funds and meet the community’s needs, however careful consideration must be made as to the use of all finite City funding sources. POLICY IMPLICATIONS This report does request a change in City policy as described above. ENWIRONMENTAL REVIEW This recommendation is not a project under the California Environmental Quality Act. ATTACHMENTS Attachment A:6/5/2006 Draft Public Private Partnership Policy Attachment B:Policy and Procedure 1-25, PUBLIC!PRIVATE PARTNERSHIPS Attachment C:CMR 198:06, Direction to Update Public!Private Partnership Policy CMR: 268:06 Page 1 of 2 DEPARTMENT HEAD: RICHARD Director, Co Services Department CITY MANAGER APPROVAL: ’~EIgIILY HARRISON Assistant City Manager CMR: 268:06 Page 2 of 2 Attachment A DR_AFT 6/5/2006 PUBLIC PRIVATE PARTNERSHIPS POLICY STATEMENT It is the policy of the City of Palo Alto to encourage the development of public/private partnerships for the benefit of the public. A public/private partnership is defined as a formal cooperation between the City and the private sector, including but not limited to nonprofit organizations, in providing services and/or capital facilities and projects to the community. It is the intent of this policy to encourage and promote the City’s active participation in the formation of such parmerships. Under this policy the three types of public/private partnerships are Joint Ventures, Alliances and Co-sponsorships. These are defined, as follows: Joint Venture: Where an individua!, business, or agency enters into a contractual relationship with the City and the parties agee to collaborate on a project or activity. Both entities contribute to the partnership to their mutual benefit. Examples here would include the Historic Museum’s lease of the Roth building, the Environmental Volunteers improvements to the Sea Scout building, the Avenidas senior progam, and Palo Alto Community Child Care. Alliances: Where an organization invests in one or more City activities, pro~ams and facilities, either through contribution of funds or rendering of in-kind services, and does not expect any direct benefit in return. The organization’s mission is to support the activities, programs and facilities of the City and work directly with staff to determine how best to help meet the City’s goals. Examples of Alliances include Friends of the Children’s Theater funding and building the Magic Castle theatre, Friends of the Parks funding for Heritage Park amenities, Friends of the Library support of library collections, and the Art Center Foundation’s ongoing funding for Project Look. Co-sponsorships: Where an organization supports the City’s activities and programs by providing services that further the mission of the City in consideration of the provision of in-kind or other promotional benefits. Examples of these include the Palo Alto Tennis Club, Neighbor’s Abroad, AYS0, and the Palo Alto Run Club. City Role in Partnership Formation Historically, the City has been primarily a passive recipient of proposals for public/private parmerships. It is the intent of this policy to now promote the City’s proactive participation in the formation of such partnerships. "Proactive participation" could include: ¯Facilitation of proposals through the City’s regulatoryoprocess. ¯Solicitation of proposals for joint ventures. ¯Waiver of fees (See section entitled ~Fee Waiver") ¯Contributions of City funds for construction of facilities to be owned and controlled or operated by the City. ¯Use of facilities without charge or permitted use under a subsidized rent arrangement. Guidelines Proposals for a public/private partnership opportunity are normally received by City staff from the private sector, including nonprofit organizations. They may also be received by Council referral to staff for its review and recommendation. An important aspect of all public/private partnerships is the ability of the City to respond promptly and comprehensively to a proposal. Also of importance is the potential impact of the City’s fees for any activity, program or facility. The following guidelines establish the mechanism by which the prompt and comprehensive City review of proposals are obtained, the consideration of requests for waiver of the City’s fees is given, and the streamlined process for Alliances that directly support City goals is conducted. Joint Ventures: A Joint Venture can be initiated in one of two ways. One is when a private sector entity approaches the City with a proposal for a project or program that it would like to initiate. The other is when the City actively initiates a search for a Joint Venture partner to consider a project or program. Joint Venture proposal will be reviewed using the following guidelines: All Joint Venture proposals will be reviewed by a staff committee convened by the City Manager or his desig-nee. (See section on "Staff Review) City staff will request approval of Council only after staff first determines that the project has merit and sufficient benefit redounds to the City to warrant further review by the Council. Should staff deny the Joint Venture request, the requesting party may appeal the decision to the Counci!’s Finance Committee. Organizations should possess and demonstrate sound organizational, administrative and fiscal management. The requestor should also have the experience to achieve and sustain project tasks, such as fund raising and building community support. For facility improvement or expansion initiatives, the organization should be prepared to commit 50% to 100% of the necessary funding for the proposed project. Projects with a higher level of outside funding wil! be met more favorably. Should the project incur cost overruns, the City and private industa3, entity shall share costs at the ratio of funding commitment. ¯ For facility improvement projects, long-term staffing, operations and maintenance costs must be addressed in the proposal. If appropriate to the project, costs and funding sources for furniture, fixtures and equipment must be identified. ¯ Should the Joint Venture be approved, scheduling of the project wilt be determined by the Council with staff input and be made contingent on existing project schedules and staffing capacity. A City-initiated Joint Venture may include incentives offered to the other entity, including, for example, naming rights, waiver of building and planning fees, reduced lease rates, subsidies, and staff resources. All incentives may be negotiated on a case-by- case basis. Alliances. An Alliance takes place when an individual or organization provides financial or in-kind assistance to the City to achieve a stated City goal without any expectation of direct benefit. Consequently, it is appropriate for City staff and the Alliance organization to jointly determine the specific terms of a project or activity, and carry out those projects and activities, except when unbudgeted City funds or resources are required. In the event City funds and/or resources are needed, the Council’s prior approval will be necessary and may be contingent upon the use of specific funding sources (e.g.: development impact fees, Infrasmacture Reserve, General Fund), the negotiation of an option to lease or license facilities for the facilitation ofpro-bono or other cost-cutting opportunities, and the negotiation of memorandums of agreements that set guidelines for projects that are complex in nature or that may take place over an extended time period. Co-sponsorships: Co-sponsorships can take the form of one-time events or annual agreements with organizations whose activities are deemed to further the mission of the City. Each department incorporating co-sponsorships in its program will develop administrative regulations that specify the guidelines for the initiation and maintenance of co-sponsorships. These regulations will be approved by the City Manager before they are reviewed by the Council. Staff Review On an ad-hoc basis, the City Manager or his designee will assemble a staff committee to review all Joint Venture and Alliance proposals that impact City resources. Pros and cons of a proposal will be identified and discussed. If staff determines the proposal has merit, the proposal will be forwarded to the City Council with a recommendation by the City Manager concerning participation. All co-sponsorship requests will be reviewed and approved by the appropriate department head. Fee Waiver Staff may recommend, as part of its review of a proposal, that any normal City processing or use fee authorized under the Municipal Fee Schedule, excluding fees and charges levied by City of Palo Alto Utilities or other City enterprise fund progan~s, should be waived as a condition of the City’s participation. Waiver of fees shall be ~anted by the Council and limited to those fees associated with a construction or capital improvement project which, upon its completion, results in a new or improved public facility, building or park, or some portion thereof, that will be solely owned or controlled by the City. In the event that only a portion of a construction or capital improvement project will result in a new or improved City facility, building or park, or portion thereof, then the Council may waive only that portion of any associated fee directly relating to the construction, improvement or enhancement of the City facility, building or park. As appropriate, the summary and recommendation in the report to the Council will include a recommendation on waiving fees, excepting Utilities and other enterprise-related fees, which the Council can approve or reject. A[[achmen[ B POLICY AND PROCEDURES 1-25~GR Revised: March 2003 PUBLIC/PRIVATE PARTNERSHIPS POLICY STATEMENT It is the policy of the City of Palo Alto to encourage the development of public/private partnerships for public benefit. A public/private partnership is defined as cooperation between the City and private sector or nonprofit organizations in providing services, facilities or other capital projects to the community. This policy and its implementing procedures were approved by the City Council on February 28, 1994. Public/private partnerships may take different forms. Two of the most common include: Cooperative partnerships: This approach assumes cooperation between the public and private or nonprofit sectors in order to achieve mutually shared objectives. Examples include construction of the expansion to the Children’s Theatre and the City’s relationships with the Senior Center and the Palo Alto Housing Corporation. ¯Inducements: In this approach, the City structures incentives that change the market environment in which the private sector operates in order to achieve social goals. An example would be the PARTNERS program in the Utilities Department. City Role in Partnership Formation The City has historically acted primarily as a passive recipient of proposals for public/private partnerships. It is the intent of-this policy, however, to promote the active participation of the City in the formation of such parmerships. "Active participation" could include: ¯Facilitation of proposals through the City’s regulatory process (e.g. Downtown Childcare Center); ¯Solicitation of proposals for public/private ventures (e.g., Tower Well site, Chuck Thompson site); ¯Waiver of fees by the City Council for construction of facilities to be owned, or controlled, and operated by the City (e.g. Hoover Park Restroom, Rebuilding Together); ¯Use of facilities/subsidized rent (e.g., Cubberley). PROCEDURE Proposals for a public/private partnership opportunity are normally received by City staff from private sector or nonprofit organizations. They may also be referred by the City Council to staff for review and recommendation. Page 1 of 2 - POLICY AND PROCEDURES 1-25/MGR Revised: March 2003 An important component for facilitating public/private partnerships is the ability of the City to react quickly and comprehensively to a proposal. Also of importance for some proposals is the impact of City processing fees. The following procedures establish a mechanism to obtain prompt and comprehensive initial City review of a proposal and consideration of requests for waiving City fees. Public/Private Committee A Public!private Review Committee shall be appointed by the City Manager, with representation from all major City departments, as well as the City Attorney’s Office. As appropriate, staff from other departments who are involved in a public/private proposal may also participate on the Committee. The Committee shall be chaired by the Assistant City Manager. The Committee shall meet as required to review public/private proposals. Pros and cons of a proposal will be identified and discussed. A summary of each private or non-profit sector proposal will be forwarded to the City Council, accompanied by a recommendation from the City Manager to the City Council on whether the City should participate. The summary and recommendation to the City Council will be prepared whether or not the City staff support the proposal as a public/private partnership. Fee Waiver The Public/Private Committee may recommend, as part of its review of a proposal, that any normal City processing or use fees under the Municipal Fee Schedule, not including fees and charges levied by City of Palo Alto Utilities, be waived as a part of the City’s participation in appropriate public/private partnerships. Waiver of fees shall be by the City Council and limited to those fees associated with a construction or capital project which, upon its completion, results in a new or improved public facility, building or park, or some portion thereof, that will be solely owned or controlled by the City. In the event that only some portion of a construction or capital project will result in a new or improved City facility, building or park, or some portion thereof, then the City Council may only waive that portion of any associated fees directly relating to the construction, improvement or enhancement of the City facility, building or park. If appropriate, the summary and recommendation report to the City Council will include a recommendation on waiving fees, and the Council can approve or deny the waiver recommended by staff. NOTE..Questions and/or clar~cation of this policy should be directed to the Assistant City Manager. Page 2 of 2 Attachment C TO: ATTN: FROM: DATE: SUBJECT: CITY MANAGER APRIL 26, 2006 HONORABLE CITY COUNCIL POLICY AND SERVICES COMMITTEE DEPARTMENT: COMMUNITY SERVICES CMR: 198:06 DIRECTION TO UPDATE PUBLIC/PRIVATE PARTNERSHIP POLICY RECOMMENDATION Staff requests that the Policy and Services Committee provide direction to staff to update the existing Public Private Partnership Policy (Attachment A) and return to Council for approval. BACKGROUND In 1994, Council approved a PuNic!Private Partnership policy that was intended to encourage the development of public/private parmerships be~Teen the public and local gove~ent. A public/private partnership is defined as cooperation between the City and private sector or nonprofit organizations in providing services, facilities, or capital projects for community benefit. There have been a number of recent public/private partnerships that have highly successful. ¯ The Friends of the Children’s Theatre conducted a fundraising campaign that culminated in the construction of the Magic Castle stage located at the Children’s Theatre. Not only did the Friends raise most of the required capital, they also managed the construction project by leasing the land from the City and returning it to the City when the project was complete. ¯Through a partnership with TheatreWorks, the Community Theater was improved with new stage curtains, newly upholstered seating and the installation of an air conditioning system. TheatreWorks found the grant funding to make this project a reality. ¯Through an ageement with the Friends of the Junior Museum and Zoo, improvements were made to the interior of a Junior Museum classroom facility without the use of City funds and City staff resources. Additionally, there are two recent major public/private partnership initiatives in process. One partnership is with the Art Center Foundation which is raising funds to replace antiquated electrical and HVAC systems and build a Children’s education wing at the Art Center. The other is with the Friends of the Junior Museum and Zoo, which have requested the formation of a parmership to rebuild the aging Junior Museum. DISCUSSION Staff is bringing this request to the Policy and Servic~ Committee because the economic environment has greatly changed since the policy’s inception and staff now has a working CMR 198:06 Page 1 of 3 familiarity with the existing policy. A number of questions and concerns have been raised that staff believes merit discussion and incorporation in some form into the policy. Given the economic outlook, public-private partnerships may hold an even greater benefit to leverage increasingly scarce City resources. Having a clearly defined policy would enhance future opportunities and at the same time make the most efficient use of staff and community resources by filtering proposals and setting guidelines before extensive Counci! and staff time are utilized. Staff has identified questions and concerns and requests that the Policy and Services Committee provide comments and prior to preparing a policy amendment. 1.There are at least two ways in which public/private partnerships are initiated; the first, and the most prevalent, can arise when an organization is prepared to make a commitment of funds or provides in-kind services to improve an existing, or construct a new City.- facili~. Some issues that may require policy clarification are: o At what funding percentage of the proposed project should the organization be prepared to commit before the proposal would be given consideration? o What measurement standards apply to an organization to assure success of the project? Areas of concern would be stability of the board of directors, experience in fundraising, sound management and fiscal history, etc? o Whether any portion of the private funding should be committed before the partnership can be formalized? o Should the organization submit a business plan detailing project justification, funding sources, proposed timelines, future maintenance costs, etc.? o How will project cost overruns be dealt with? Are costs shared equally or is it the responsibility of the requesting part. ner or the City? The second type of partnership can arise when the City actively seeks partnerships with the private sector to accomplish projects or programs. An example of this might be a project where the City has 80 percent of the required funding and seeks a partner who could provide pro bono services or funding to accomplish the project. One consideration is whether the City can offer benefits to the potential partner, for example, naming rights, exclusive use agreements, etc. 2. Many of these types of partnerships may have a direct impact to the Infrastructure Reserve. Groups perceive the Infrastructure fund as a viable way to "seed" a fundraising campaign. For instance, if an improvement project is presently funded in the Infrastructure Management Program for $800,000 to replace aging electrical systems, a group may suggest that those funds be allocated to a larger project that will not only accomplish the upgrade, but also make improvements requested by the user group. The questions are: o Is this an appropriate use of Infrastructure Management Program funds? o Does the City wish to limit the amount of Infrastructure Management Program funds available to a project, so the fund is not substantially drawn down, impacting future planned projects? 3.Should there be a process developed that will streamline public-private partnerships so that there are pre-determined methods to use pro-bono services or, if necessary, lease City facilities to the partner during construction periods. With the Policy and Services Committee’s direction and comments, staff will draft an updated policy and return to the Policy and Services Committee for further discussion and approval. CMR 198:06 Page 2 of 3 RESOURCE IMPACT Public!private partnerships can be beneficial by providing a way to leverage City funds, however careful consideration must be made to the use of the Infrastructure Management Fund, and future impacts on staff and maintenance resources. POLICY IMPLICATIONS This report envisions a change in City policy as described above. ENVIRONMENTAL REVIEW This recommendation is not a project under the California Environmental Quality Act. ATTACHMENTS Attachment A: Policy and Procedure 1-25, PUBLIC/PRIVATE PARTNERSHIP PREPARED BY:~ _. ]~I CI-~I~’JA~ME S Di~or~ Co~ity Se~dces c xv APPROVAL:(/ LV’nA SO Assist~t City CMR 198:06 Page 3 of 3