Loading...
HomeMy WebLinkAboutStaff Report 230-10TO: HONORABLE CITY COUNCIL ATTENTION: POLICY & SERVICES COMMITTEE FROM: CITY MANAGER DATE: APRIL 22, 2010 DEPARTMENT: CITY MANAGER'S OFJ;'ICE PUBLIC WORKS CMR: 230:10 SUBJECT: Discussion and Recommendations Regarding Colleagues' Memorandum on Infrastructure Blue Ribbon Commission RECOMMENDATION Staff recommends that the Policy & Services Committee review the Colleagues' Memorandum on an Infrastructure Blue Ribbon Commission and make recommendations to Council on this memo. BACKGROUND On March 8, 2010, the City Council considered a Colleagues' Memorandum from Vice Mayor Espinosa and Councilmembers Klein, Scharff and Schmid that referred the issue of formation of an Infrastructure Blue Ribbon Commission (IBRC) to the Poliey & Services Committee for further discussion and recommendation. The original Colleagues' Memorandum is included with this report as Attachment A. Due to the timing suggested in the original memo, the Policy & Services Committee had a preliminary discussion about the matter at the March 9, 2010 meeting. The draft minutes from that mceting are included as Attachment B. The Committee raised several concerns about the proposal set forth in the Colleagues' Memorandum, including: issues of scope of the IBRC; timing and magnitude of a proposed finaneing measure; and inlplications of the proposal on existing workloads. The Committee did not believe they had sufficient time and information to thoroughly vet the issues given the timeline requested in the memo. As a result, the Committee asked staff to bring the item back to the Committee for further discussion at the April 13, 2010 meeting. Due to the scheduling of other items on the agenda of April 13 th (e.g., Stanford Medical Center projects) the Committee agreed to schedule a special meeting at the end of April to finalizc recommendations to the full Council on the proposal set forth in the Colleagues' Memo. The 2010 and 2011 Adopted Capital Budget (Link on City's website: http://www.cityofpaIoaIto.org/civica/filebank/blobdload.asp?BlobID=15637) contains a General Fund Infrastmcture Backlog Summary (pg. 299) and a listing ofInfrastructure Future Needs (pg. 300). The back log summary is broken down by category such as streets, sidewalks, buildings, parks, etc. and shows a five year backlog of approximately $153 million. It also shows a twenty CMR: 230:10 Page I of5 year backlog total of approximately $302 million. This backlog includes all existing infrastructure malntained using General Fund resources. The future needs are major infrastructure projects that are cUl'rently unfunded and include: replacement of fire stations 3 and . 4; replacement of the municipal services center (MSC) and animal shelter; completion of the Charleston and Arastradero Road corridor; and other major projects for an additional backlog totaling approximately $148 million. The public safety building was not included in this back log total and, if it were, the backlog would increase by another $60 million. The resulting combined total backlog of all the above items is approximately $510 million. DISCUSSION This report lays out some key questions to assist the Policy & Services Committee structure their discussion and recommendations regarding any proposed Infrastructure Conunission. The Colleagues' Memorandum puts forth recommendations regarding the structure of the lBRC, scope of the question/problem statement, possible scale of a financing measure and schedule. The memo doesn't necessarily address the staff and/or other resources necessary to support the Commission. The Policy & Services Committee should consider each of these areas in making recommendations back to the Council. Scope: As was discussed at the previous meeting, the problem definition and scope of the question posed to the lBRC is likely the most important element in ensuring the success of the Commission's work. Here are some discussion questions to assist in defining the scope of the question posed: 1) Should the lBRC look at closing the current five year CIP infrastructure gap or should they be analyzing a longer term or ongoing solution (e.g. a 10 year horizon or the Palo Alto 21 ,[ Century Reinvestment Program)? 2) Should the lBRC review and make reeommendations about both General Fund and Enterprise Fund projects? 3) How should "infrastrueture" be defined for the lBRC? 4) Should any financing mechanism close the funding gap on the eurrent backlog or should it address ongoing infrastructure repair and maintenance needs in some way? Additionally, there have been two other recent outside reports completed that havc discussed the City's infrastructure needs. Staff reconunends that the IBRC analyze the recommendations put forth in each of these reports as part of the Commission's work. The first report was the Infrastructure Report Card audit completed by the City Auditor in March 2008 (Attachment C). The second report (Attachment D) was a report prepared last year by a Leadership ICMA team hired by the City to analyze and recommend community engagement strategies around the City's infrastructure challenge. The Interuational City/County Management Association (ICMA) developed Leadership ICMA as a competitive, intensive two-year program designed to cultivate key compctencies needed tor successful leadership at all levels of local govcrrunent management. The team came from across the country and brought a diverse knowledge base and skill set to their analysis and report. The reconunendations in this report may be helpful to the Commission in designing an outreach process around the City's infrastructure needs. Scale of a Financing Mechanism: Staff reconunends that the Commission be tasked with researching different financing mechanisms to address the City'S infrastructure needs and then CMR: 230:10 Page 2 of5 making recommendations regarding the type and scale of financing mechanism to be utilized. These recommendations will likely stem from the outcomes of the Commission's discussion on the questions posed as part of the problem statement. Structure of/BRe: The Colleagues' Memorandum recommends that the IBRC consist of 18 members with each Council Member appoint 2 members. One of the Mayor's appointees would serve as the convener of the JBRC and the Commission would elect a Chair and Viee Chair within its first 30 days. The Memorandum also recommends that the IBRC also be subject to financial disclosure rules and the Brown Act. At the March 9 Policy & Services meeting, the Committee members had a lengthy discussion about the pros and cons of these recommendations. There are a couple key questions to help foeus the discussion around the structure of the IBRC: 1) What is the appropriate size of the IBRC membership? Is 18 the right number? A larger Commission membership number may be tenable if the group forms smaller working sub-committees. These sub-committees would not be subject to Brown Act guidelines. 2) Should the Commission be subject to Brown Act and financial disclosure requirements? Because the Council is forming the eommission and establishing the scope of its responsibilities, the Commission would be subject to the Brown Act and financial disclosure requirements. While this may enhance perceived transparency of the Commission's work, it will add to the staff resources necessary to support the Commission due to the more stringent noticing, agenda preparation, and minute taking required. However, the Commission could form smaller working sub­ committees that would not be subject to Brown Act guidelines. Schedule and Staff Resources: The schedule and staff resources necessary to support the IBRC are critical questions to the success of the Commission's work and need to be discusscd together. The Colleagues' Memorandum discusses having the IBRC seated and beginning work by May 1, 2010 and that the IBRC would provide its report to Council no later than February 28, 2011 in preparation for the November 2011 ballot. There are two key challenges with this timeline. The first is the experienee of other similar task forces. The Blue Ribbon Task Force on the Pub lie Safety Building was able to develop their recommendations to Council in a 6 month time period. However, the seope of that task force was very well defined. The Composting Task Force took approximately 9 months to develop a final report to Council. The Storm Drain Committee initially took 8 months to develop a report to CounciL Council was looking for different recommendations and decided to pause for approximately two years before the Committee reconvened in 2004 for 3 months and developed final recommendations. These experiences suggest that the IBRC will take, at best, a minimum of 6 months to complete its work and will likely take e10ser to 9-10 months. To meet the target February date, the IBRC would need to begin work in May and complete the work within 10 months. The second challenge to the time line is the staff resources necessary to support this effort. The City Manager identified this challenge at the March 9 Policy & Services Committee meeting. Some of the staff who will be key to supporting this effort are the same staff who arc currently prcparing the operating budget, working on the Library Bond Program, and other current CMR: 230:10 Page 3 of5 priorities. Realistically, they will not be available in any significant way until at least after the budget is adopted in June and probably beyond. Despite these challenges, staff recommends that the Council proceed and target the November 2011 election date. Additionally, staff recommends that the Committee be seated, at the earliest, in the begiuning of June to do their formation work with the substantive work begiuning after July 1. To meet the timeframe set forth by the Council, staff will need to reprioritize some existing workload. To be successful, this effort will require a cross-departmental team with staff from the City Manager's Office, Public Works and Administrative Services leading the effort. This effort will tap at least six staff who are part of the group identified by the City Manager as part of his "Route 66" key staffing model, with at least two or three needing to devote a significant amount of their time to this effort (estimated at between 25-40% depending on the schedule and work of the IBRC). This will require some reprioritization of existing workload. The Committee made a point of emphasizing the importance of this issue and the need to spend the time to design a structure that will be effective and maximize the resources necessary to accomplish the Council's goal. The City Manager wholeheartedly endorses this sentiment and will ensure that staff resources be appropriately reallocated towards this critical issue. The discussion above is an attempt to identify for the Committee the difficult prioritization exercise that staff undertakes each time a new high priority project comes forward. RESOURCE IMPACT As mentioned above, the formation of an Infrastructure Blue Ribbon Commission (IBRC) will require a significant allocation of staff resources and support. In addition, there may be other resources necessary to support the work of the Commission, such as engineering consultants, cost estimators, and outreach/polling. consultants among others. Staff would identify these resource needs and work to address them either through existing staff chaunels or by returning to Council. If the IBRC recommends that the Council proceed with a bond election, there are numerous direct and indirect costs associated with preparing for an election. Staff would recommend that the IBRC have, as part of its direction from Council, the task of identifying and quantifying these resource needs in partnership with staff. POLICY IMPLICATIONS This report is consistent with Council direction for the Policy & Services Committee to further consider the matter. ENVIRONMENTAL REVIEW The report does not qualify as a project under the California Environmental Quality Act. Any future infrastructure projects would undergo the required environmental review based on the project submitted at that time. CMR: 230:10 Page 4 of5 ATTACHMENTS Attachment A: Attachment B: Attachment C: Attachment D: PREPARED BY: March 8, 2010 Colleagues' Memorandum Excerpt from March 9, 2010 PoLicy & Services Committee Minutes Infrastructure RepOlt Card Audit Leadership ICMA Report on Infrastructure l~----Kelly Morariu Assistant to the City Manager C~ _ Glenn Roberts Public Works Director CITY MANAGER APPROVAL: ~ CO ~W ~ r:~ les Keene . -\ ~lty Manager CMR:230:10 Page 5 of 5 DATE: TO: FROM: · Attachment A CITY OF PALO ALTO ~ MEMORANDUM March 8, 2010 City Council Colleagues 17 Vice Mayor Espinosa and Council Members Klein, Scharff, and Schmid SUBJECT: Request for the City Council to appoint an Infrastructure Blue Ribbon Commission (lBRC) PROBLEM Staff has advised us, based on prior studies, that we have a backlog of approximately $500 million of infrastructure projects. We presently allocate about $10 million per year of the General Fund budget to infrastructure. At that rate, we will never reduce that backlog and in all likelihood will fall further behind. However, the Council has not explored in depth the need for particular projects in the $500 milJion list, whether additional projects should be added to the list and whether a bond measure or other financing measure should be attempted to reduce or eliminate this backlog. RECOMMENDATION The Council appoint, as soon as feasible, an Infrastructure Blue Ribbon Commission (IBRC) to advise us on the questions set forth in the Problem statement. The IBRC would be charged with providing its report to Council no later than February 28, 2011, so that there would be sufficient time for the Council to review the report and put an item on the November 2011 ballot if that was deemed desirable (final Council action would have to take place by late July 2011 for an item to be on the November ballot). The IBRC would be advised that it could assume that the Council would continue to fund infrastructure at not less than 5% of General Fund revenues per year. We suggest that the IBRC consist of 18 members, each Council Member to appoint two following such procedures as he or she deems appropriate. One of the Mayor's appointees would serve as the Convener and the IBRC would elect a Chair and Vice Chair within its first 30 days. The IRBC would be subject to the financial disclosure rules and the Brown Act. We hope that the IBRC would .be seated and get to work no later than May 1,2010. A copy of this Memorandum has been sent to the City Manager who has expressed general agreement with its contents but has not as yet provided any specific comments. He supports sending it to Policy and Services Committee at this time for further discussion. CONCLUSION We hope that you will join us in voting to send this proposal to the Policy and Services Committee for further consideration with direction that the matter be returned to the full Council in time for action at the Council's meeting of April 5, 2010. Attachment B POLICY AND SERVICES COMMITTEE Regular Meeting March 9, 2010 Chairperson Yeh called the meeting to order at 7:05 p.m. in the Council Conference Room, 250 Hamilton Avenue, Palo Alto, California. Present: Yeh (Chair), Holman, Price, Shepherd Absent: none 1. Oral Communications 2. Discussion and Potential Recommendations on Colleagues' Memorandum Related to Infrastructure Blue Ribbon Commission. Herb Borock, PO-BOx 632spoke regarding the task force being formed subject to the Brown Act. He said that the Blue Ribbon Commission, as well as any sub-committees formed should be subject to the Brown Act. City Manager James Keene summarized the Colleagues Memo from the previous night's City Council Meeting. He reminded the Committee that under Council procedures, the colleague's memo should be provided to the City Manager while in draft form. Typically, If an item goes to Council with a service impact, the Council could not approve the memo until a subsequent meeting to allow Staff to comment. The previous night was atypical. The impetus for the memo was a significant Infrastructure backlog of about $500 million. A citizen's task force would be formed to determine if that was correct, and what the City should do about it. If there were to be a bond measure the memo assumes that the earliest It could be up for public vote would be the November 2011 election. The memo built three target dates into the schedule. One was the POlicy and Services Committee to return to the CounCil by April 5, 2010 with their recommendations. Secondly, the task force could be convened and appointed no later than May 1,2010, completing its work by February 28, 20ll. It would be difficult to do the task force work starting May 1, 2010 because the Staff that would have to support the process and the meetings, would be the same Page 1 of 13 Staff that were engaged with Finance and Council on the 2011 budget preparations. Council Member Price said that given the entire workload with budget, labor negotiations, High Speed Rail, and everything else, true implementation of the task force should be considered after the adoption of the budget. With a November 2011 target date, it would take a tremendous amount of work to get it done. She said that the infrastructure issue must be addressed and if it continued to be deferred, it would only get worse. Council Member Shepherd said this needed to be done sooner rather than later. She was concerned about an 18 member task force. It would be a challenge given the Brown Act restrictions. She suggested looking at a nine member task force, and she asked for a better understanding of Infrastructure problem. Council Member Holman said that her concerns were similar to those of Council Member Price. She said that given the current Staff workload, this was a fast tlmeline. She said It would be difficult to properly vet the issue. She said If the analysis was not done correctly it would not succeed. Chair Yeh said, regarding the process of the memo, the equivalent of the memo would be all the colleagues on Policy and Services directing the Finance Committee to hold a series of budget-focused community meetings within the month of April, prior to holding the budget hearings in May. He said that it was not appropriate for one standing committee to direct another standing committee to do something. He said, regarding timing, this Issue could not be divorced from some of Council's other priorities such as Economic Development and Revenue Generation. He said the bond issuance relates to how much revenue would be antiCipated in the upcoming years. He said he wanted to better understand the parameters of the task force. He wanted to know what the prioritized projects were within the $500 million. He spoke regarding setting parameters to protect Staff time in relation to this task force. He said that putting this project first, before the other already determined Council priorities, would circumvent the entire process. Council Member Shepherd asked how much of this could get done now while preparing for the budget presentation in May. Mr. Keene said that the focus over the next few months would be on the Operating Budget. The Capital Improvement Program was a five year plan for infrastructure which the Council would adopt. The first year of that plan would be the Capital Budget, which was the only truly funded part of that five year plan. He said that the conversations regarding the infrastructure deficit had Page 2 of 13 been focused on the General Fund portion, not the Utilities portion. He said the General Fund contribution to the crp was around $19 million for 2011. He said the support on the back log for the Infrastructure process should be looked at separately. He said that Policy and Services was dealing with the workload issues and it would be appropriate for the task force issue to go to Pollcy and Services. Council Member Holman asked the City Manager when he first saw the Colleagues Memo. Jim said he saw it about one week prior to the meeting. Council Member Holman said that she wanted this done right and rushing through things would lead to failure. She said that if this went to Council on AprilS, 2010 and the task force was implemented the following month, there would be little opportunity to define role of the task force. She asked what the criteria for additional projects would be. There was no direction and no time to create It. Council Member Price asked how this fit in relation to all the other things on the list. She said questions about the viability of this project must be asked and that timing and scheduling were critical. She asked what projects would not progress due to impact on Staff time if this were to move ahead. She said a statement of mission requires much work on the part of Staff prior to launching any type of blue ribbon group. She said that if this were to be explored it should have proper preparation before the launch. The dilemma was how to respond quickly, but there still would need to be discussion on how it fits given everything else. She said that to be so schedule driven that content was not reviewed properly would cause a lost element of strategy. Council Member Holman said there had been discussion in the community regarding a PubliC Works Commission. She suggested that other communities may have tackled the same issues and that Palo Alto could perhaps learn from them. She asked what percentage of projects were General Fund versus Utilities. Mr. Keene said the capital value was bigger on the Utilfties side. Almost all of the General Fund projects were Public Works. Council Member Holman asked if there was a simple and direct way to find out up-front if the public would even support a bond measure. Page 3 of 13 Assistant to the City Manager Kelly Morariu referred to the Library Bond and that preliminary polling was used to gage public opinion. Mr. Keene said that the library needs were developed over time. He said the residents had strong opinions on infrastructure. The last National Citizen survey had two key drivers: the city street conditions and land use issues. He said that Council Member Shepherd's question about infrastructure was a good question. The community needed to understand what it meant. He added that the Policy .and Services Committee could discuss this as they deemed appropriate. The obligation would be to return to the Council with a recommendation. He said it was clear that the City had an infrastructure problem that would get worse if something was not done. There were currently inadequate funding sources. He said that if a bond measure was the answer, November 2011 was the earliest possible target date. He suggested a task force could be seated in June and then they would not begin work until much later. The design for this task force could not begin until July 1, after budget adoption. Council Member Shepherd said that, in her experience, bond measures could go quicker than it seemed they could. She suggested vetting and choosing battles properly. This process could serve to bring the community together. In a financial crisis, everyone works double time. Everything needs to go on the tableT regardless of workload. She said they need to start seating people on the task force to show the publiC that this was being worked on. Council Member Price asked Staff if this could be managed correctly in the next three to four months given all the other priorities. Mr. Keene said that the infrastructure problem was critically important and they should aim for the possibility of going to the voters in the fall of 2011. That being said Staff would not be able to do any meaningful work prior to July 1. He suggested that they start, even if they do not ultimately meet the November 2011 deadline. Ms. Morariu said that it was not just about the Public Works or Finance Staff. The whOle concept was outreach. The amount of Staff time that goes into that needed to be considered and it needed to start from day one. Accomplishing that properly could be half to three quarters of the time of one Staff member. ~ Mr. Keene said this was more complex than the library bond issue. Council Member Holman said the goal was an optimistic one. She asked if there was a way to get to an achievable end result without gOing down a long Page 4 of13 unpredictable road. The polling that was done for the public safety building was not supported. Polling was done to determine if the public would support the Art Center as part of the library bond measure and that was not supported. She asked for ideas about what areas of infrastructure the community would support. She wanted to know if the bond measure could be targeted to an area the public would support so as not to spend too much time only to get to a no answer. Chair Yeh said Boards and Commissions that already exist should be considered as part of this process. A Blue Ribbon Task Force would circumvent the Boards and Commissions that were already in place. The City already had a group of people in place that were subject to the Brown Act and already submit Form 700s. They have already offered their time and demonstrated their desire to help. He suggested a cross Board & Commission group, consisting of one or two Commissioners from each Board, rather than creating a new task force. He cited the example of the Utilities Advisory Commission which had adopted a review of all Utilities CIPs using a subcommittee in an effort to prioritize the CIPs. He said the Commissioners were already familiar with the Issues, they were close to the departments they advised, and they understood the services. The Parks and Recreation Commission, for example, was familiar with many of the CIPs going on in parks. They were qualified to discuss which should be prioritized. He said the qualifications of the members should be considered. The City could probably issue revenue bonds without going to the voters for the Enterprise CIP. The scale would then be reduced. Council Member Price said another option would be, to use the model chair Yeh suggested as a core, and then add a few people with other required expertise. The time to do the problem definition and vehicles was still out there and how it fit within all the existing priorities. She said it was an intriguing idea to use resources that were already in place. Mr. Keene said there were three needs that were identified from the memo: 1) a definition of an ability to communicate the infrastructure needs, 2) what needs to be done to fix it, which could have a whole range of recommendations, and 3) who was going to promote it -effective advocates would be needed. \ Council Member Shepherd said that the memo specifically referred to vetting a bond measure which might require a different group of people than those seated on the Boards and Commissions. There were tasks that could be shaped by Board and Commission members prior to even seating a task force. Page 5 of 13 Mr. Keene said that infrastructure had a key place on the workplan matrix. It was clear that this was going to be one of the biggest initiatives in the coming year. City Auditor Lynda Brouchoud said that an internal process would need to take place to address the prioritization of the infrastructure. Council Member Price said that, as a follow up, they need to frame the structure of the project. Perhaps the infrastructure definition could be one of the organizing principles for 30% of the list. She asked If it could be used as an organizing principle. Chair Yeh said an article in a recent edition of the San Francisco Chronicle was co-authored by the City of Oakland's City Auditor, Courtney Ruby, and Berkeley's City Auditor, Ann Marie Hogan. It had a basic focus on the need for elected policy makers to define core services and for them to have the political will to lead discussions that result in the service priorities being identified, even when that discussion might lead to painful cuts. Council Member Shepherd said that identifying what could be done given the restraints they have was critical. Council Member Holman said there were many areas where the City could run more efficiently. There was no timeline with work projects. She asked how Staff could reasonably be able to work towards having a more efficient workload. Mr. Keene said infrastructure was easier to define than services. He said the ability to structure something with infrastructure was easier than trying to structure a whole array of services. Everything the City did had a constituency attached to it, which could create challenges when making decisions. A system would be needed to make this happen. The elected policy makers were going to have to make some difficult deCisions with incomplete information. Council Member Holman said the publiC would ask what was being done to make sure the same problems would not happen again. Mr. Keene argued that it was an easier answer on capital issues than on operating issues. Chair Yeh suggested the Committee not take a vote immediately to go back to Council. He said it would be good to see it congealed into a clearer picture to be fine-tuned by the Committee at the next meeting. Page 6 of 13 Ms. Morariu summarized by saying Council set a deadline of April 5, 2010 to get back to them. She clarified that the Committee was asking Staff for a recommendation in terms of structure and time line. Mr. Keene suggested the Committee either schedule an additional meeting or extend the April 5 deadline. Council Member Holman asked if Staff could come back at the next meeting with a schedule of how to frame the infrastructure cataloging before the task force starts. Mr. Keene suggested they tell the Council that the Committee shared the belief that dealing with the infrastructure was important, and in an effort to be effective had asked the Staff to bring more information to the Committee on April 13, 2010. Council Member Price said that it was reasonable to list the items that need to be addressed. Ms. Morariu said there was a conflict on April 13, 2010. Council Member Price asked if the rest of the Committee felt a need for an additional meeting. She asked if there were other deadlines that would need to be pushed out If they continued this discussion on April 13, 2010. Chair Yeh said if it meant having more meetings he was open to It as they discussed expanding the role of the Committee. Council Member Shepherd said it should be reviSited after the next goal setting meeting. Chair Yeh said that they need to consider the structure, scope of the task force questions, schedule, staff resources required for the task force, and how much it would cost. 3. Policy and Services Discussion and Recommendations on Committee and Council Priorities Workplans. Assistant to the City Manager I<elly Morariu said it would be helpful to discuss the goals and the Intent of the matrix with Staff. Page 7 of 13 City of Palo Alto Office of the City Auditor Honorable City Council Attn: Finance Committee Palo Alto, California Attachment C March 4, 2008 INFRASTRUCTURE REPORT CARD FOR PALO ALTO Maintaining aging infrastructure is a major concern in Palo Alto. The City has increased capital spending in recent years, but it is a challenge to ensure that existing infrastructure is maintained at an acceptable level. The purpose of our review was to assess the results of the increased capital spending, and to assess the impact of increased capital spending on the City's infrastructure including utilities -is the City making progress, losing ground, or just holding Its own? . Where do we stand? Palo Alto maintains a large number of infrastructure assets for a city of its size. Utility infrastructure, including electric, gas, wastewater collection, wastewater treatment, water, refuse, and storm drains, represents a significant portion of the City's infrastructure. The City also has substantial investments in parks, open space, community centers, city hall, fire stations, roadways, and trees. The 1997 Adamson report identified the need for increased infrastructure maintenance, and the City increased capital spending as a result. Our Infrastructure report card (on pages 12-13) is a qualitative assessment to assess the Impact of that spending, It Is a monitoring tool to help ensure that all aspects of the City's infrastructure program stay on course. The report card shows that net asset values overall have increased, but General Fund progress Is mixed. Moving toward a sustainable capital budget. Based on the Adamson report, the City launched the Infrastructure Management Plan (IMP) to address the Identified backlog. However, many of the facility/infrastructure needs identified for years 1-10 have not yet been completed. It is now year 11, and the work identified by Adamson for years 11-15 should, ideally, be in the current 5-year capital improvement program. In addition, costs have escalated, and it has proven difficult to keep the focus on existing infrastructure. Furthermore, since Adamson, additional facilities have been determined to be physically and programmatically obsolete -in particular, the Police Wing of the Civic Center (proposed to be vacated in favor of a new facility to be built on Park Boulevard) and the Mitchell Park Library and Community Center (proposed to be rebuilt on site). We recommend adopting Government Finance Officers Association's (GFOA) best practices for capital maintenance and Improvement. These include: maintaining a complete capital asset inventory; periodically measuring the condition of capital assets; establishing maintenance standards for capital assets; adopting Jinanclng policies for capital assets with a high priority on maintaining the quality of existing assets; allocating sufficient funds for routine maintenance and repair; annually reporting on the condition of and spending on capital assets; and reporting on overall trends in spending and replacement cycles. - 1 - We further recommend that the .City use the Geographic Interface System (GIS) as a coordinating tool and, to the extent feasible, a repository of infrastructure inventory and condition. We also recommend the City adopt a sustainable capital budget that (1) provides additional funding for critical needs, and (2) lists unfunded needs in the annual capital budget document. Our report includes a total of 10 recommendations to improve the City's infrastructure program. Management has reviewed the information in this report and the City Manager's response is attached. We will be presenting this report to the Finance Committee on March 4, 2008. Public Works expects to present additional information about the condition of the City's infrastructure to the Finance Committee in late March. Respectfully submitted, S~,,-VJ.~ Sharon W. Erickson City Auditor -2- TABLE OF CONTENTS Cover letter INTRODUCTION • Background • Scope and methodology • 1 4 4 5 Where do we stand? 7 • Palo Alto reports its investment in infrastructure in its financial statements 7 • The, 1997 Adamson report and development ofthe Infrastructure 10 Management Plan (IMP) • An infrastructure report card for Palo Alto 12 Moving toward a sustainable capital budget 15 • Setting priorities for capital spending 15 • Adopt best practices for capital maintenance and replacement 16 • The need for systematiC tracking of infrastructure condition and 16 maintenance needs • Providing for ongoing system maintenance, replacement and routine 17 upgrades • A sustainable capital budget 18 CONCLUSION 23 • Recommendations 23 CITY MANAGER'S RESPONSE 25 Appendix 1: GFOA Recommended Practice -Capital Maintenance and 27 Replacement (2007) Appendix 2: Questions to ask about infrastructure condition 29 Appendix 3: Cross-city Comparison of Capital Assets 30 Appendix 4: Summary of Adamson Report 31 Appendix 5: Capital Spending and Depreciation 32 Appendix 6: Description of IFlfrastructure Assets 33 INTRODUCTION. Background The City Auditor's Office conducted this review In accordance with the FY 2007- 08 Annual Audit Plan. The objective of this project was to assess the impact of increased capital spending on the City's infrastructure including utilities. For purposes of this report, "infrastructure" includes only publicly-held permanent physical assets. It does not inclUde furniture, equipment, computers, or fleet. Palo Alto owns and maintains a large collection of infrastructure assets for a city of Its size. Palo Alto's infrastructure assets include more than 30 city parks, nearly 4,000 acres of open space, and a 176-acre golf course. Palo Alto has 4 community centers --LUCie Stern, Mitchell, Cubberley, and Ventura. The City has 5 library facilities, a junior museum and zoo, and an art center. The 90,000 square foot civic center with 260,000 square feet of underground parking is located downtown on Hamilton Ave, and the HI-acre MuniCipal Services Center is located on East Bayshore. The City owns other properties that are operated by others including Gamble Garden (a community horticultural foundation), the senior center (operated by Avenidas), Williams House (a history museum operated by the Museum of American Heritage), and Winter Lodge (an outdoor ice skating rink). The City operates 8 fire stations and maintains 2,700 fire hydrants. Roadway infrastructure includes 40 million square feet of pavement, 10 million square feet of sidewalks, 89 traffic signals, 6,200 street lights, and 425,000 square feet of striping and legends, bridges, thousands of street trees, and medians. The City owns and operates 20 parking lots and structures. In addition, the City owns, and Santa Clara County operates, a municipal airport. The City's utility infrastructure includes electric, gas, wastewater collection, wastewater treatment, water, refuse, and storm drains. Aging infrastructure Is a major concern Aging infrastructure is a major concern throughout California, and has been a City of Palo Alto priority for a number of years. According to the City's 1998- 2010 Comprehensive Plan: "Palo Alto's parks, community centers, libraries, and other civic buildings are an important part of what makes the City a desireble place to live. The City is committed to continued investment in its infrastructure and public facilities, as resources are availab/e. This commitment requires a strong emphasis on maintenance, rehabilitalion, and mOdernization. Retrofitting existing facilities to incorporate new technology is important /0 ensure that Ihese facilities remain useful. The Cily is also committed to providing new facilities in areas that are under-served, and in areas where change is expected in the future. New parks, plazas, and communily facilities will help the City suslain its position as a model for public service delivery. ,,' 1 1998-2010 Comprehensive Plan, Parks and Public Facilities Goal C-4 -4- The Bay Area and California Infrastructure deficits The American Society of Civil Engineers (ASCE) has prepared a series of Infrastructure report cards for the nation. In 2005, the San Francisco Section of ASCE prepared a Report Card for Bay Area Infrastructure that rated overall San Francisco Bay Area Infrastructure C·. The Bay Area report card was intended "to selVe as a vehicle to engage our community and civic leaders in a calf to action for stronger investment in our region's vilal infrastructure." The report card was based on ratings by public works officials in all nine county governments In the Bay Area and a representative number of cities in each county. Survey responses were weighted according to population served and letter grades were assigned. Exhibit 1 shows the Bay Area and California report cards. Exhibit. 1 : ASCE Infrastructure Report Cards -Bay Area 2005 and California 2006 ..... .asce-sf.org ~ Audit Scope and Methodology ASCE CAI.IFORNIA mNFRMTRUClURE RE'ORT CARD ~~o, www.ascecareportcard.org levees I Flood Control ... ,'_',,;_'/'" F;-I,') ... ,, ,.c,. , PariisilQ(iJ1i)5$P5c6 " . " ",',,\,,'-,';'-":. : .. '- Ports Sohd)Was\e;;," .' -.. "\;~'\{'-I,,--g.,: ,-:4 "",- Transportation : --~{>;;;:-;~;-;;:-::,.,-" ",,' -,' ',"', ",~baQi!\qU~P!j';;i.:' . Wastawatar . WAief;'i;.·~·';t,.' :':,-,'l,.,;·,:,,·,7 "<_' ..• California's Infrastructure GPA Annuallnvestmanl Needs · ·C· F D+ c+ ;:~ D+ P+ c+ ;c~, '''; ;'''~,;.'' ,', c· $37 Billion We conducted this review in accordance with generally accepted government auditing standards. To meet our audit objective, we researched the asset management and Infrastructure report card strategies recommended by ·5· professional organizations and used by other jurisdictions; we used available documents to prepare a description of the City's assets by type; and we used the City's Comprehensive Annual Financial Reports, adopted Capital Budgets, and financial system to summarize Palo Alto's net investment in infrastructure. -6- Where do we stand? Palo Alto owns and is responsible for maintaining substantial capital assets. The City reports its investment in its financial statements, budgets for infrastructure improvements in its 5-year capital improvement plan (CIP), and has developed a program to address its infrastructure backlog. That information is incorporated into an infrastructure report card for Palo Alto. Palo Alto reports Its investment in infrastructure in Its financial statements More than half of Palo Alto's capital assets are in the Utility/enterprise funds. Exhibit 2: Book value of total capital assets by fund (historic cost net of depreciation) as of June 30, 2007 ~--~~~~~~~~~~~~~ Wastewater Treatment 4% Waslewa(ar Collection 6% ~~ __ _ Gas 9% Refuse 1% Siorm Dralnage .. 2% water 6% Source: 2006-07 Comprehensive Annual Financial Report Governmental funds 47% In total, Utility/enterprise fund assets (net of depreciation) have shown growth over the last 30 years. -7 - Exhibit 3: Utility/enterprise Fund capital assets (1977-2007) 400,000 f.---- , " 350,000 ilWiilL I 300,000 250,000 I 450,000 200,000 150,000 -, , 100,000 50,000 ,-"" I!::II!! f!j Ii!! ~ ~ ~ ~ r:I LI "" , ~'" ~<1J to" to'" 9>"" ;(} ~4i' ,," ,,':> ,,"" ~ " " [; do !OJ'" o,Oj !OJ'" ",'" r:> ,,0, ,,0, ,,0, ,,0, ~ ,,0, " "q; ,,OJ ,,OJ "q; " 'l) '1) 'l) <e> i II Water CI Electric [J Gas • Wastewater Collection I III Wastewater Treatment. Refuse [J Stenn Drainage • External SeNee Source: Comprehensive Annual Financial Reports Investment in General Fund Infrastructure The City's General Fund owns and maintains various types of infrastructure assets, Exhibit 4: Book value of general governmental capital assets by type (historic cost net of depreciation) as of June 30, 2007 Roadway netW<lli< 47% Recreation 8. open space network 3% Equipment 4% Source: Comprehensive Annual Financial Report 2006-07 Land and 21% Buildings and I 11% 4% Construction in progress 10% With the adoption of GASB 34 2 in FY 2001-02, the City began recording and depreciating its General Fund capital assets in the Citywide financial statements,' Capital assets are valued at historical cost, net of accumulated depreciation. 2 Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements for State and Local Governments 3 The City's financial statements are on-line at www.cityofpaloalto.org/!inance/cafr.html. -8- This includes buildings and structures, vehicles and equipment, and roadways,4 Prior to FY 2001-02, the financial statements excluded most General Fund assets and their depreciation, It is useful to record depreciation because it can be used to estimate the rate of deterioration of capital assets, Exhibit 5 shows the increased valuation of the City's assets after implementation of GASB 34, Exhibit 5: General Fund capital assets 1997-20075 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 R.Land and Improvements o Street trees • Buildings and improvements m Equipment [] Recreation & open space network Source: Comprehensive Annual Financial Reports Capital spending o Construction in progress • Roadway network Capital spending can fluctuate Significantly from year to year. As shown in Exhibit 6, capital spending by Palo Alto's governmental funds increased from an estimated $79 per capita in 1977-78 to $302 per capita in 2006-07; but to only $80 per capita when adjusted for population growth and inflation (i.e, in 1977-78 dollars), 4 In January 2002, Harris & Associates prepared a GASB 34 compliant infrastructure valuation for the City, It included historic values, annual depreciation, accumulated depreciation, and net book value for City infrastructure assets, 5 In 2002, the City changed its method of accounting for General Fund assets, and began accounting for all its assets including depreciation on its financial statements; figures prior to 2002 did not include roads, various other infrastructure assets, or depreciation, -9- Exhibit 6: General Fund capital spending per capita (in millions)" Capital spending percaplta (Qowmmenlal funds) $450 A $400 $350 7 " $300 .. _""""------ , , I $250 -~--$200 r---------... . $150 f-.-.. /" ~-"-. .. $10Q .-..... :!!: ... ~ "'-.... ,/ $50 $0 , , , , , , , , , , , , , , , , , , , , , , -. ., "-.. .. 0 ~ N ., ~ '" ~ ~ " m 0 ~ N <'> .. '" '" "-'" ., '" ~ ~ <'> .. '" :;; i ... :I; :l: ~ ~ ~ ;! J: J: :'l ~ :J; m m m ;! ~ ~ ~ ::\ 0 t; ~ ,}, J, ,f \;; ~ \;; '" '" '" ~ '" '" ~ '" ~ m m m m m ill 0 0 0 0 0 ;:! ;:! m ~ ;:! ;:! 1! m ;:! ;:! ~ ;:! ;:! ;:! m l'i l'i 0 l'i '" ~ ~ ~ ~ ~ N N i i -+-:"'~¥",J:l1 f!1U""'1::l average: adjusted for inflation ___ 3·year moving average I Source: Comprehensive Annual Financial Reports The 1997 Adamson report and development of the Infrastructure Management Plan Over the years, Palo Alto has conducted various assessments of its infrastructure. In 1990, the City authorized a long tenn utilities infrastructure replacement program for its Utilities. And in FY 1996-97, the City contracted with Adamson Associates for an infrastructure management study of the City's buildings, streets and roadways, and parks. The goals of the study were to identify major site components and associated replacement costs anticipated in the next 25 years, identify annual funding requirements including backlog, organize logical flow of work to be done, and create ongoing infrastructure management systems and a method for periodic updates of the system. In response to the 1997 Adamson report, the City stepped up capital spending and also established an Infrastructure Reserve (IR). The IR was created to maintain and restore the City's infrastructure by ensuring that funding was available for infrastructure repair and replacement. In FY 2004-05, at the recommendation of the City Auditor, the IR was moved from the General Fund to the Capitel Projects Fund -where it would accrue interest that would benefit the infrastructure CIP. The IR continues to be funded by transfers from the General Fund. The 1997 Adamson report provided a plan for General Fund infrastructure maintenance for the next 25 years. As shown in the sample at Exhibit 7, the report summarized the status of each infrastructure asset, and provided estimated cost data (unescalated; I.e. in 1996-97 dollars) organized by life cycle with adjustments 10 provide a smoother program-wide annual cost. 6 Population figures from California Department of Finance, and inflation from Bureau of Labor Statistics (Consumer Price Index -An Urban Consumers San Francisco, hUp:/twww.bJs.gov/cpifhome.htm). -10 - \.J i -- ---. ., "-Q :i: ,}, 0 " '" l1i N Exhibit 7: Sample asset data sheet from Adamson report I ~--·-__ ac_,-a-•• _,.~.-,._ •••• -••• ' Falo AllG PjM MllIIIfUI1MlStdy -AA 91fl~8 l'!I!etAlI .. Callfuml. UIIi«ptll1' rOOIhllIt'hrl< Pvklnt. . ,--F<>mt!llltJ'Dtufltl;\Mj)loIlel!lMl,~~ l$mil~'<lfhIkIIIl\tnni,.'M'{>nrc wm. tlVfmlWtI t~llA, it,,' lute b1<1I_ i Ae!lNlt{~!!lUitt) : "fHlJf rn.1mM~ln:pml:IJmJ{~fI1IiII\\lW(MMt.,liIldwWlmu~ofu..: Mfllm.}, tulM!(1!>I~ttplaeemtlllof I~~ <l1AMprwl"'(fMIM"-t4bt","~1!dy1Mlr'"l"'tuI~_'15jMglmtJfMrltns ---«<pat!ljlff"u. , , , , , • , • , li)1I·)St6·M;;1·2~ Fffittllll hrll Cytk PreY, Hilt • !YMlS lUll 111J1l, Ou.nt "''' ~tJI hlOnO !N~-r\ MII_t. M;tllt. gil'" "/00 OIWI Ol,n OJ/03: ~ Q4J05 OS1D6 06ifi1 (I1IU IlfIJ 17118 lUl': Pavl1l8 h!lo:tna)";'1 (JnICl'pI'4L1vc "I'M) :W,OOD S) ',00 '00 '" "" '00 0 Vitl~HIl1 8,000 gy 11l.O0 " " ,,,. " 0 ~ve_ WIlltwl,)'Q 3.000 51 .. ., " " "" 30 , ~I maltllwtJlC»olll'!l!rntI!y S" Ml ,-" , '''' " " " " " " " " " " 'SO '" '" ~y«rt~!c TI4r1"lgIi\Ioow1'llp&lr.PhiM a u: '" " '''' '" Ww4tt1l1l)'{lj,_nllln lUi AC 1,"'" '" , '''' '" '" ". " " ,>I " '" @!mllilllal : M~ clw,. oflu» , '" ,,"" 10. , '''' 10 10 10 " " to " 10 " to .. lO 50 I ~ L4ktandDun~ , '" """ " to "" " " " !~~«mIma l'wt~<ll)' , "'" """ JOO " 19&8 : 300 ---, SA JG.ooo '" " '''' Wl'1; " l'ernl",·..,.nW 1,00£1 til ,.,11 10 10 'II 'II 'II to 'II ,II " to " ,. " 1Il """',,-'EA ',00II " " '''' " " PleniebbJe. N3Q. b<rM:lwt, ew. "" M '.'" "" , " " " " " ~!t~.[RII1 voott (un~.~atod) 44~ 11) 'jOOO ,ao '" .)20 '" 7. '" 'l\l '" '" ~I: The report summarized that data in a format that anticipated system-wide costs over the next 25 years. In 1998, staff proposed a $95 million, 10-year General Fund Infrastructure Management Plan (IMP) for the maintenance and improvement of the City's existing infrastructure based on the assessment that Adamson had completed. The first three modules were buildings, traffic and transportation, and parks. A fourth module on bridges and parking lots was expected in 1998, but was never produced. Appendix 4 provides more detail on the estimated cost of the IMP. The first 10- year plan was more than $95 million (in 1996-97 dollars). The life cycle cost analysis showed an additional $25 million would be due in years 11-15 (also in 1996-97 dollars), $9 million in years 16-20, and $9 million in years 21-25 for a total estimated cost of $138.6 million over 25 years (in 1996-97 dollars), In 2006, the City Council directed staff to review options to increase General Fund infrastructure spending by $3 million per year. The City's 2008-2018 Long Range Financial Forecast included a $7.6,million transfer from the General Fund for Infrastructure projects in FY 2007-08, and assumed the annual transfer would increase by an inflation factor of 7% per year. -11 - Other sources of funding for infrastructure projects include gas tax7 , development impacts fees, and federal/state grants. For example, the FY 2007-12 Capital Improvement Plan (CIP) Included $5.8 million In gas tax, $2.4 million in development impact fees, and $0.9 million in federal/state grants. An infrastructure report card for Palo Alto Given that the Adamson study was 12 years ago, and given recent increases in capital spending, the purpose of this project was to assess the results of this increased capital spending on the City's infrastructure, including utilities. Are we making progress, losing ground, or Just holding our own? The following report card is one way to look at the question. ASSignment of green (making progress), yellow (holding our own), or red (losing ground)8 Is based largely on the following four factors: • Net book value -historic cost of assets net of depreciation (per GASB 34) •. Change in net value over the last 3 years -to monitor whether assets are being improved or are being used up (Includes construction in progress) • Approved-In-concept five year capital Improvement program (2007-2012) • Unfunded backlog -estimated investment needed to prevent further deterioration of the asset and to ensure heath and safety" Additional Information about the assets that are included In each category can be found In Appendix 6. The report card shows mixed results The report caro shows the change in net value for assets in both the general and enterprise funds. An increase in net value over the last three years indicates that the City has invested more than has been expensed for depreCiation '0. Overall, the City is progressing, but results, especially for General Fund assets, are mixed. 7 Use of gas tax is restricted for maintenance of the road network system of the city. a Rating system concept based on the GreenBiz Index (wwW.greenbiz.com) • Current estimates of the General Fund infrastructure backlog were not available at the time of this report. 10 While depreciation depends upon the original purchase price of the asset as well as the depreciation method used, it is a useful gauge for estimating whether the City's capital spending is keeping pace with the deterioration of the assets. For additional information see Appendix 5. -12 - Infrastructure Report Card for Palo Alto Net book 5 year capital improvement Unfunded I 11 Current estimates of the General Fund infrastructure backlog were not available at the time of this report. -13 - -14- Moving toward a sustainable capital budget The City has struggled to fund backlogs of infrastructure repair for a number of years. Based on the age and estimated useful life of infrastructure assets and their component parts, the Adamson Infrastructure Management Study proposed a schedule for maintenance and replacement of various components with estimated costs (in 1996-97 dollars). The study identified $95 million of work required in years 1-10, and $25 million in work required in years 11-15. Many of the facilitylinfrastructure needs identified for years 1-10 have not been completed. It is now year 11, and the work identified by Adamson for years 11- 15 should, ideally, be in the current 5-year CIP. Setting priorities for capital spending The City's current process for decision-making is based on departmental assessments of infrastructure needs. The City Manager's IMP committee reviews General Fund capital budget proposals to determine which projects shOUld be recommended for funding In the 5-year CIP. Project submissions are selected based on any of the following five criteria: • Project involves a mission-critical need that, if not addressed, would impede operational effectiveness. • Project is the result of specific Council direction. • Project is legally required for compliance with codes or laws. • Project mitigates exisling health and safety risks as Identified by the Public Works, Fire or Building Division Inspectors, or prevents potential future health and safety risks. • Project is fully reimbursed through an external funding source.'2 The IMP committee has tried to prioritize items that were originally identified in the Adamson report. However, it has proven difficult to keep the focus on existing infrastructure. In the 10 years since the plan was adopted, the City built 2 new parking garages downtown (funded by the parking assessment district bonds), the Homer Avenue tunnel (largely funded by grants), acquired additional open space and built a new interpretive center at the Arastradero Preserve (largely funded by grants), and acquired the Roth building as part of the Summerhill development. In addition, costs of projects increased and scopes expanded. Furthermore, since Adamson, additional facilities have been determined to be physically and programmatically obsolete." 12 2007-09 Adopted Capital Budget, page 3 13 The 1997 Adamson report observed that at that time 6 facilities were close to both physical and programmatic obsolescence, and recommended that planning for the replacement of these structures within the next 10 years should be considered. Those buildings were: Fire Station 3 (790 Embarcadero), Fire Station 4 (3600 Middlefield Road), the Animal Services Center, the Baylands Interpretive Center, the Lawn Bowling Facility, and the rest rooms at Peers, EI Camino, Mitchell, and Rinconada Parks. -15 - Adopt best practices for capital maintenance and replacement The International City Management Association (ICMA) encourages local jurisdictions to develop policy statements that suggest appropriate levels of spending, as well as budgeting procedures, for maintaining fixed assets, Suggested policy statements include: • The budget will provide sufficient funding for adequate maintenance and orderly replacement of capital plant and equipment • All assets will be maintained at a level that protects capital Investment and minimizes future maintenance and replacement costs" The ~overnment Finance Officers Association (GFOA) has issued a recommended practice for capital maintenance and replacement. It addresses key capital spending issues facing Palo Alto, We recommend adopting the practice as City policy. We have based additional recommendations in this report on the principles outlined in GFOA's recommended practice, The full text is included in Appendix 1 , RECOMMENDATION #1: The City should adopt the Government Finance Officers Association Recommended Practice "Capital Maintenance and Replacement" as City policy. The need for systematic tracking of infrastructure condition and maintenance needs Estimates and inventory are outdated It is now year 11 of the Adamson study period. The work outlined in the first 10- year plan is not yet complete and, according to the 1997 Adamson work schedule, more repair and replacement is now due, Furthermore, cost estimates are out of date. The Adamson report recommended a consultant be retained to periodically update the conditions ofthe sites included in that study. According to the report, periodic "updates are required for this report to remain a meaningful and useful financial planning tool," Staff has completed various condition assessments, and in July 2007, the City Council approved a contract in the amount of $147,684 with Kitchell CEM to update condition assessments of 86 City buildings (CMR:303:07). Public Works is preparing an assessment of the total General Fund infrastructure backlog. That data was not available at the time of this report. The need to coordinate multiple asset management systems Asset management systems are used to systematically track maintenance, upgrades, and operating characteristics of physical assets. Systems include an 14 Evaluating Financial Condition: A Handbook for Local Government by Sanford M, Groves and Maureen Godsey Valente (leMA). page 105 -16 - up-to-date inventory of assets, periodic condition assessment of infrastructure assets,and estimated annual amount required to maintain and preserve assets at a desired condition level. In addition to various consultant reports and studies of infrastructure condition, several asset management systems are maintained by staff in various City departments. For example, Public Works Facilities tracks building maintenance in a stand-alone database. Pavement maintenance and storm drain maintenance is stored in the City's geographic interface system (GIS). Parks information is stored in a stand-alone parks database (PlaySafe). Utilities information is stored in industry-specific databases. Additional sources of information about infrastructure assets include the City's financial system (that contains information about asset values), and appraisal reports that show asset values for insurance purposes. Thus, the City has eonsiderable data, but does not have a comprehensive list of its infrastructure. The City's Geographic Interface System (GIS} contains some location-specific information about City assets, and is available to employees in all departments. GIS systems are designed to hold location-specific infrastructure information. RECOMMENDATION #2 (GFOA recommended practice): Develop and maintain a complete inventory of all capital assets. This inventory should contain essential information including engineering description, location, physical dimensions and condition, "as-buitt" documents, warranties, maintenance history, book value and replacement cost. Operating cost information could also be included. Database and geographic information technologies should be employed to assist in this task. RECOMMENDATION #3 (GFOA recommended practice): Develop a policy to require periodic measurement of the physical condition of all existing capital assets. Document the established methods of condition assessment. Periodically evaluate the capital program using data driven analysis of asset condition as well as past expenditure levels. RECOMMENDATION #4: The City should utilize the GIS system as a central coordinating tool and, to the extent feasible, an ongoing repository of infrastructure inventory and condition. Providing for ongoing system maintenance, replacements and routine upgrades Asset management is "a methodology to efficiently allocate resources amongst valid and competing goals and objectives. ,,15 It "is a business process and a decision-making framework that covers an extended time horizon, draws from economics as well as engineering, and considers a broad range of assets. The asset management approach incorporates the economic assessment of trade­ offs between altemative investment options, both at the project level and at the network or system level, and uses this infotmation to help make cost-effective 15 American Public Works Association Task Force on Asset Management -17 - investment decisions.... [It] is a systematic process of maintaining, upgrading, and operating physical assets cost-effective/y.,,'6 The Adamson report documented the need for a planned approach to infrastructure maintenance. In April 1998 (CMR:191:98), staff recommended Council adopt the priorities presented within each module of the Adamson report with some modifications that had been proposed by departments, and with backlogged work receiving the highest priority. 17 Staff further recommended prioritizing existing facilities over new facilities for purposes of infrastructure funding, and that new or enhanced infrastructure should be funded from specifiC new revenue sources such as general obligation bonds, grants, new or increased taxes, assessments, or special tax districts. RECOMMENDATION #5 (GFOA recommended practice): Establish condition/functional performance standards to be maintained for each component of capital assets. Such standards may be dictated by mandated safety requirements, federal or state funding requirements or applicable profeSSional standards. Use these standards and a current condition assessment as a basis for multi-year capital planning and annual budget funding allocations for capital asset maintenance and replacement. RECOMMENDATION #6 (GFOA recommended practice): Develop financing policies for capital maintenance/replacement which encourage a high priority for those capital programs whose goal is maintaining the quality of existing assets. Consider earmarking fees or other revenue sources to help achieve this goal. A sustainable capital budget There is no one right level of capital spending Comparisons of capital spending between jurisdictions are difficult for a variety of reasons: capital spending varies from year to year; the book value of assets depends on when they were purchased; and each city classifies its infrastructure in different ways. For example, as shown in Appendix 3, Palo Alto, Mountain View, and Redwood City each use different asset classifications that make comparisons difficult.' Among other things, the "right level" of infrastructure spending depends on the physical condition, average age/expected service life, capacity/utilization, safety/seismic concems, functionality, sustain ability issues, and even potential impacts of climate change'· on the City's infrastructure assets.'s ,. U.S. Department of Transportation's Asset Management Primer. available on the web at www.fhwa.dot.gov/infrastructureiasslmgmtlamprimer.pdf 11 CMR:191 :98 further explained that two areas in the original Adamson reports were not included in the proposed infrastructure program. These were CUy medians (originally identified as a $3.2 million backlog; later revised to $2.1 million in upgrades) and weeding in the City's open space areas (original estimate reduced by $1.13 million and recommended for funding within the operating budget). ,. According to a recent staff report. a projected 1 metar rise in sea level and increased storm surge would likely impact the Municipal Airport. Water Quality Control Plant, Municipal Services Center and -18 - The 2007 City Council "sustainable budget" priority In October 2007, the Administrative Services Department prepared a discussion paper on the Council's Top 4 priority "sustainable budget" (CMR:387:07). It provided the following definition: "A sustainable budget can be considered a spending plan that meets the needs of the present without compromising the ability to provide services to future generations. Such a budget would meet the challenge of funding current operational costs while at the same time funding incurred long-term liabilities." As aptly stated by the GFOA, "budgetary pressures may impede capital program investments for maintenance and replacement purposes, making it increasingly difficult to sustain existing capital asset condition and avoid functional obsolescence. Yet deferring such essential reinvestments reduces vital public services and may even endanger public safety.,,20 Simply put, a sustainable capital budget is one that keeps existing infrastructure operable and decent -not "using down" the infrastructure that previous generations of taxpayers "built up". Provision for construction cost inflation The Adamson report estimated the cost of work to be performed during the 25- year period from 1998-99 to 2022-23. The study was intended to establish "order of magnitude" estimates for financial planning of long term work items. It did not make any allowance for inflation or discounting of future expenses. Exhibit 8 compares .the consumer price index to producer prices indices for various construction segments. Including building inflation estimates helps ensure accurate and sufficient capital budgets.21 Utility Control Center, Utility substations and transmission routes, recycling center, recreation facilities, storm drains, residential neighbomoods.and portions of business districts. " See Appendix 2 for a list of questions to ask about infrastructure condition 20 GFOA Recommended Practice, Capital Maintenance and Rep/acement (2007) 21 The State of Mi.nnesota Department of Finance provides specific direction to its agencies to first determine estimated building costs in "today's dollars", and then inflate that value (using a provided construction cost inflation schedule) to the midpoint of construction (based on the proposed project schedule). -19 - Exhibit 8: Changes in consumer and producer price indices 1997-2007 180,----················· •• ········------------------- c----=----, :-+-COnsumer Plice Index: All Urban 170 i-----------------------------:;?-=-Customers, San Franclsco. §" Oakland-San Jose ~ 160 .....-Producer Plice Index: Highway ~ and street construction ~ 100~------------------------~~~=- ~ 140 1130 il +------ -PrOOucer Price Index: Other heavy constructIOn ~ Producer Price Index: N0n­ residential buildings ~ 120 +---------~.~, ------""~---------8 -*-Prociucer Price Index: ;t 110 t:.:~~~~:§~~~~===:=: Maintenance and repair construction • -5% per year rule of thumb 100 , . 1007 1998 1009 2000 2001 2002 2003 2004 2005 2000 2007 Index as at June 30th Source: Bureau of Labor Statistics (www.bls.gov) The Importance of preventive maintenance Experts agree that preventive maintenance of eXisting assets is key to holding down future costs, Whether caulking windows, painting building exteriors, or slurry sealing roadways, the purpose of preventive maintenance is to prevent further deterioration which could lead to the need to rebuild facilities, For example, according to the U,S, Department of Transportation's Asset Management Primer, "The preventive approach is generally less costly and time­ consuming than the traditional, more reactive approach, However, a strategy of prevention may be more difficult to justify because the public's expectation is that the worst roads demand immediate attention. Furlhennore, the public often interprets activities related to pavement preservation as 'fixing something that isn't broken," Additional funding for refurbishment According to staff, the annual budget for refurbishment has been $50,000 per year since the 1980's, The "Facility Interior Finishes Replacement" project (PF- 02022) is meant to replace worn interior finishes at various city facilities including ceilings, paint, carpet and flooring, and window coverings that are not part of a major renovation project. The need is great. For example, in 2005, the Auditor's Office recomrnended funding of $25,000 to $50,000 per year for unantiCipated park repairs and minor improvements." Similarly, in 2007, the Auditor's Office recommended funding of routine maintenance and replacernent of furniture, shelving and minor repairs in Library facilities stating that even minor upgrades would help, 23 "Audit of Parks Maintenance (December 2005), page 14 2. Audit of Library Operations (jUly 2007), page 15 • 20- The value of an infrastructure reserve to smooth funding As previously discussed, the infrastructure reserve was created to maintain and restore the City's infrastructure by ensuring that funding was available for infrastructure repair and replacement. As shown in Exhibit 9, the balance in the reserve has been declining. Exhibit 9: Balance in the infrastructure reserve at year end (in millions) Balance In the Infrastructure reaorvo at year end (In millions) $40.000 $35.000 $30.000 $25.000 $20.000 $15.000 $10.000 55.000 50.000 ~ '" !ll '" ~ ~ ~ "-::i ~ '" '" '" '" ~ ;'2 ~ ~ '" l'l ~ Source: Comprehensive Annual Financial Reports In our opinion, even if the current infrastructure reserve is completely spent down in the near term, it will be essential to retain the infrastructure reserve as a place to accumulate one-time monies and/or to save for antiCipated future projects. RECOMMENDATION #7 (GFOA recommended practice): Allocate sufficient funds in the multi-year capital plan and annual operations budget for routine maintenance, repair and replacement of capital assets in order to extend the useful life of these assets and promote a high level of performance throughout the target period. RECOMMENDATION #8 (GFOA recommended practice): At least annually, report on capital infrastructure, including: • Condition ratings jurisdiction-wide • Condition ratings by geographical area, asset class, and other relevant factors • Indirect condition data (e.g. water main breaks, sewer back-up complaints) • Replacement life cycle(s) by infrastructure type • Year-to-year changes in net infrastructure asset value • Actual expenditures and performance data on capital maintenance compared to budgeted expenditures performance data (e.g. budgeted street miles reconstructed compared to actual). RECOMMENDATION #9 (GFOA recommended practice): Report trends in infrastructure spending and accomplishments in the jurisdiction's Capital Improvements Program including trends in spending, replacement cycle, and other important factors for each major infrastructure category. -21 - RECOMMENDATION #10: Staff should propose and the City Council should consider a sustainable capital budget that: • Provides additional funding for critical needs that have been identified in the infrastructure condition assessments, including construction cost inflation. • Lists all other unfunded needs that were identified in those assessments in the annual~!lpital budget document. -22- CONCLUSION In recent years, Palo Alto has increased its infrastructure spending, and the net book value of Palo Alto's assets is increasing overall. Nevertheless, Palo Alto is losing ground in many categories. There is no one right level of maintenance or level of investment, however the City should maintain assets purchased by previous generations in a condition that is useful to future generations. Recommendations RECOMMENDATION #1: The City should adopt the Govemment Finance Officers Association Recommended Practice "Capital Maintenance and Replacemenf' as City policy. RECOMMENDATION #2 (GFOA recommended praotioe): Develop and maintain a complete inventory of all capital assets. This inventory should contain essential information including engineering description, location, physical dimensions and condition, "as-built" documents, warranties, maintenance history, book value and replacement cost. Operating cost information could also be included. Database and geographic information technologies should be employed to assist in this task. RECOMMENDATION #3 (GFOA recommended praotioe): Develop a policy to require periodic measurement of the physical condition of all existing capital assets. Document the established methods of condition assessment. Periodically evaluate the capital program using data driven analysis of asset condition as well as past expenditure levels. RECOMMENDATION #4: The City should utilize the GIS system as a central coordinating tool and, to the extent feasible, an ongoing repository of infrastructure inventory and condition. RECOMMENDATION #5 (GFOA recommended practice): Establish conditionlfunctional performance standards to be maintained for each component of capital assets. Such standards may be dictated by mandated safety requirements, federal or state funding requirements or applicable professional standards. Use these standards and a current condition assessment as a basis for multi-year capital planning and annual budget funding allocations for capital asset maintenance and replacement. RECOMMENDATION #6 (GFOA recommended practice): Develop financing policies for capital maintenance/replacement which encourage a high priority for those capital programs whose goal is maintaining the quality of existing assets. Consider earmarking fees or other revenue sources to help achieve this goal. RECOMMENDATION #7 (GFOA recommended practice): Allocate sufficient funds in the multi-year capital plan and annual operations budget for routine maintenance, repair and replacement of capital assets in order to extend the -23 - useful life of these assets and promote a high level of performance throughout the target period. RECOMMENDATION #8 (GFOA recommended practice): At least annually, report on capital infrastructure, including: • Condition ratings jurisdiction-wide • Condition ratings by geographical area, asset class, and other relevant factors • Indirect condition data (e.g. water main breaks, sewer back-up complaints) • Replacement life cycle(s) by infrastructure type • Year-to-year changes in net infrastructure asset value • Actual expenditures and performance data on capital maintenance compared to budgeted expenditures performance data (e.g. budgeted street miles reconstructed compared to actual). RECOMMENDATION #9 (GFOA recommended practice): Report trends in infrastructure spending and accomplishments in the jurisdiction's Capital Improvements Program including trends in spending, replacement cycle, and other important factors for each major infrastructure category. RECOMMENDATION #10: Staff should propose and the City Council should consider a sustainable capital budget that: • Provides additional funding for critical needs that have been identified in the infrastructure condition assessments, including construction cost inflation. • Lists all other unfunded needs that were identified in those assessments in the annual capital budget document. -24- From: Emily HamsOII, Assistant City Manager Date: February 27, 2008 OHlce of the City Manager MEMORANDUM Subject: Response to 2Q08 Infrastructure Report Card Audit Report . Staff Is In general agreement with the recommend.llons contained In the Infrastructure Report Card audit reporl. and will be prOVIding a more detailed response at the March 16 Finance Committee meeting. At that same March 16 meeting, slattwlll be presenting the updated Inventory end costing of the General Fund Infrestruclure program, That report recommends additional staff resour<l8s for Infrastructure, whl<;h would aleo bs required to Implement the recommendations In the Audllor'. Report, Any eddltlonal staffing. however, would Med to bs oonsldered within the overall context of the assignment to statt to lOOk at Identifying new reVenues and expenditure reductions to accommodate debt sarvl<;e for the public safety building COPs and for addltlonallnfrestructure funding. -25- -26- APPENDIX 1 GFOA RECOMMENDED PRACTICE Capital Maintenance and Replacement (2007) Background. Capitai assets comprise major government facilities, infrastructure, equipment and networks enabling the delivery of public sector services. The quality and continued utilization of these capital assets are essential to the health, safety, economic development and quality of life of those utilizing such assets. Budgetary pressures may impede capital program investments for maintenance and replacement purposes, making it increasingly difficult to sustain existing capital asset condition and avoid functional obsolescence. Yet deferring such essential reinvestulents reduces vital public services and may even endanger public safety. The financial result is increased cost as the physical condition of these assets declines. Government entities should therefore establish capital planning, budgeting and reporting practices to encourage adequate capital spending levels. A government's financial and capital improvement plans should address the continuing investment necessary to properly maintain its capital assets. Such practices should include proactive steps to promote adequate capital maintenance and reinvestment in existing public capilal assets. Recommendation. The Government Finance Officers Association (GFOA) recommends that local and state governments establish a system for planning, budgeting and periodic assessment of their capilal maintenance/replacement needs. The following actions should be considered: I. Develop and maintain a complete inventory of all capital assets. This inventory should contain essential information including engineering description, location, physical dimensions and condition, "as-built" documents, warranties, maintenance history, book value and replacement cost. Operating cost information could also be included. Database and geographic information technologies should be employed to assist in this task. 2. Develop a policy to require periodic measurement of the physical condition of all existing capital assets. Document the established methods of condition assessment. Periodically evaluate the capital program using data driven analysis of asset condition as well as past expenditure levels. 3. Establish condition/functional performance standards to be maintained for each component of capital assets. Such standards may be dictated by mandated safety requirements, federal or state funding requirements or applicable professional standards. Use these standards and a current condition assessment as a basis for mUlti-year capital planning and annual budget funding allocations for capital asset maintenance and replacement. 4. Develop financing policies for capital maintenance/replacement which encourage a high priority for those capital programs whose goal is maintaining the quality of existing assets. Consider earmarking fees or other revenue sources to help achieve this goal. 5. Allocate sufficient funds in the multl-year capital plan and almual operations budget for routine maintenance, repair and replacement of capital assets in order to extend the useful life of these assets and promote a high level of performance throughout the target period. 6. At least annually, report on capital infrastructure, including: -27· a. Condition ratings jurisdiction-wide b. Condition ratings by geographical area, asset class, and other relevant factors c. Indirect condition data (e.g., water main breaks, sewer back-up complaints) d. Replacement life cycJe(s) by infrastructure type e. Year-to-Year changes in net infrastructure asset value f. Actual expenditures and performance data on capital maintenance compared to budgeted expenditures performance data (e.g., budgeted street miles reconstructed compared to actual) 7. Report trends in infrastructure spending and accomplishments in the jurisdiction's Capital Improvements Program including trends in spending, replacement cycle, and other important factors for each major infrastructure category. , References • John Vogt, Capital Budgeting and Finance: A Guide for Local Governments, leMA, 2004. • Nicole Westerman, Managing the Capital Planning Cycle: Best Practice Examples of Capital Program Management, Government Finance Review, 2004. • GFGA & National Advisory Council on State and Local Budgeting Best Practices in Public Budgeting (practice #s 2.2, 5.2, 6.2, 11.5). www.GFGA.orgiservices/nacslb. • GFGA Recommended Practice, Capital Project Budget (2006); www.GFOA.org. • GFOA Recommended Practice, Establishing the Estimated Useful Lives of Capital Assets (2002, 2007); www.GFOA.org. • GFOA Recommended Practice, Considerations on the Use of the (GASB 34 Reporting Model) Modified Approach to Accountfor Infrastructure Assets (2002); www.GFOA.arg. Approved by the GFOA's Executive Board, October 19,2007. -28- APPENDIX 2 QUESTIONS TO ASK ABOUT INFRASTRUCTURE CONDITION DESCRIPTION AND CONDITION ASSESSMENT: General description of current assets and their condition. • PHYSICAL CONDITION: Description of overall condition and average age. Are assets wearing out. or wearing well? • AVERAGE AGE/EXPECTED SERVICE LIFE: What's the average age (e.g. when were parks established. when last renovated) and estimated service life (e.g. what's expected interval between major renovations)? • HISTORIC COST AND ESTIMATED REPLACEMENT COST: In accordance with GASS Statement 34. the City records its infrastructure assets in its financial statements. What is the historic cost of these assets net of depreciation? What is the estimated replacement cost. if available? • CAPACITY/UTILIZATION: Description of current capacity/utilization. Is there sufficient capacity to serve current/future demand? How intensively is the asset used? • SAFETY: Description of any near-term or long-term safety issues (e.g. seismic). • FUNCTIONALITY: Description of how well assets are suited to the functions they serve. Is the physical infrastructure meeting program delivery needs? • SUSTAINABILlTY: Description of energy efficiency. water conservation. storm water or other environmental impacts of the facility/assets. • CLIMATE CHANGE: Will this facility/asset be impacted by climate change (e.g. storm impacts or sea level rise). DESCRIPTION OF MAINTENANCE AND IMPROVEMENT PLAN: Description of current renovation and maintenance programs. • ANNUAL MAINTENANCE: Description of annual maintenance efforts and costs (i.e. what is estimated maintenance cost per year? Projected future maintenance needs?) • DEFERRED MAINTENANCE/BACKLOG: Description from 1997 Adamson report or other studies. What is nature of maintenance need -minor maintenance. major rehabilitation. replacement? What would it take to restore it to nearly new conditions? • PLANNED IMPROVEMENTS: General description of proposed 5-year capital improvement program (CIP). • NOT SCHEDULED FOR FUNDING: General description of improvements identified but not yet funded or scheduled. -29 - APPENDIX 3 CROSS-CITY COMPARISON OF CAPITAL ASSETS No other nearby city owns and maintains a full range of utility infrastructure like Palo Alto, and each city classifies its infrastructure in different ways. For example, as shown below, even under GASB 34, Palo Alto, Mountain View, and Redwood City each chose different classifications for their assets that make comparisons difficult. Cross-city comparison of capital assets as of June 30, 2007 (in millions) Palo Alto Mt. View Redwood City POPULATION 62,615 73,262 77,025 GOVERNMENTAL ACTIVITIES Land and improvements $ 71,407 $ 71,708 $ 29,303 Street trees $ 15,Q42 $ - Construction in progress $ 34,309 $ 69,834 $ 70,533 Buildings and improvements $ 93,542 $109,455 $ 57,445 Improvements other than buildings $ -$105,546 $ 7,731 Equipment $ 40,155 $ 20,994 $ 16,693 Roadwav network $239,179 $ 41,440 $ 75,745 Sidewalks, curbs and gutters $ -$103,769 $ - Traffic signals $ -$ 6,956 $ 2,452 Streetlights $ -$ 7,476 $ - Storm drains $ -$ -$ 8,131 Bridoes and culverts $ -$ 8,055 $ - Recreation & open space network $ 13,532 $ -$ - Parks, bridges, etc. $ -$ -$ 21,609 Less accumulated depreciation $(171,465) $(240,680) $ (69,761) SUBTOTAL $ 335,701 $ 504,553 $ 219,881 Percaoita $5.36 $6.89 $2.85 BUSINESS-TYPE ACTIVITIES Land and improvements $ 1,953 $ 220 $ 3,448 Construction in preg ress $ 88,969 $ 27,834 $ 47,690 Buildings and improvements $ 18,915 $ 8,927 $ 10,915 Improvements other than buildinos $ -$ 62,987 $ 81,750 Equipment $ -$ 2,755 $ 1,366 l'ransmission, distribution, and treatment systems $ 480,143 $ -$ - Harbor improvements $ -$ -$ 3,305 Less accumulated depreciation $(206,171) $ (35,403) $ (39,736) SUBTOTAL $ 383,809 $ 67,320 $ 108,738 Percaoita $6.13 $0.92 $1.41 TOTAL $ 719,510 $ 571,873 $ 328,619 Per capita $11.49 $7.81 $4.27 Source: Comprehensive Annual Financial Reports -30- APPENDIX 4 1997 ADAMSON REPORT Summary of repair and replacement needs over the next 26 years (1996·97 dollars, In millions) Years Years Years Years 1·10 11·15 16·20 21·25 TOTAL, MODULE 1: BUILDINGS Civic center 4,224 575 1,008 1,685 7,492 Fire stations 2,342 390 243 309 3,284 Municipal services center 3,607 368 840 496 5,311 Community centers . 3,755 1,079 930 908 6,672 Libraries 2,886 446 492 228 4,052 Park and golf facilities 4,322 170 347 147 4,986 ------ Parking lots 407 667 185 1,127 2,386 Cubberley 6,984 971 2,213 401 10,569 Other' 190 60 60 30 340 Subtotal 28,717 4,726 6,318 5,331 45,092 MODULE 2: TRAFFIC AND TRANSPORTATION Streets 24,679 9,000 --33,679 Sidewalks 14,790 2,790 ---17,580 Bikes and pedestrian facilities 1,261 186 --1,447 · Medians, islands, plants 6,377 5,329 --11,706 • Subtotal 47,107 17,305 . -64,412 i MODULE 3: PARKS Parks 9,373 1,753 1,512 1,108 13,746 · Open space 5,408 1,489 1,307 1,841 10,045 • School sites 385 125 -125 635 : Other 4,256 60 210 170 4,696 Subtotal 19,422 3,427 3,029 3,244 29,122 TOTAL $95,246 $25,458 $9,347 $8,575 $138,526 -31 - APPENDIX 5 CAPITAL SPENDING AND DEPRECIATION The City values capital assets at historical cost or estimated historical cost if actual historical cost is not available. Depreciation is provided on capital assets. The City has assigned useful lives to capital assets as follows: Governmental activities Buildings and stnuctures 10-30 years Eauipment 4-10 years Roadway network including pavement, striping and legends, curbs, • 5-40 years gutters and sidewalks parking lots traffic signage and bridges , Recreation and open space network including major park facilities, 25-40 years i i park tr13j1s, bike paths and medians , • Business·tvpe activities • Buildings and structures 25-60 years ~IEls and heavy equipment 3-10 years JVlachlnery13~dequipment 10-50 years Transmission and distribution systems 10-1 00 years In a positive trend, the City's financial statements show that net capital assets in both the general governmental funds and the enterpri.se funds are growing. Since FY 2001-02, annual capital outlay/expense (i.e. what we are investing in capital assets) has exceeded depreciation expense (i.e. what we are using up). i General governmental funds (in milli()~s) Enterprise funds (in millions) Net general Capital Net enterprise Capital capital assets outlav" Depreciation capital assets eXPElnse Depreciation FY 2001-02 $266.9 $16.9 $6.7 $301.2 $25.0 $10,4 • FY 2002-03 $293.1 $32.4 $9.4 $315.2 $ $11.0 : FY 2003-04 $310.0 $22.3 $8.8 $329.1 $22.8 $11.4 . ........ c:'-- FY 2004-05 $318.5 $21.3 $9.5 $346.9 $22.8 $11.7 FY 2005-06 $324.8 $13.2 $12.3 $360.9 $20.3 $11.8 FY 2006-07 $335.7 $17.5 $11.0 $383.8 $28.9 $12.7 Source: ComprehenSive Annual Fmanclal Reports as shown In the Annual Service Efforts and Accomplishments Report 24 Includes capital expenditures in the General Fund, Capital Projects and Special Revenue funds. Does not include capital expense associated with Utility or other enterprise funds. FY 2002-03 and FY 2003-04 outlay included $32.3 million for two new downtown parking structures funded by an assessment district. -32- APPENDIX 6 DESCRIPTION OF INFRASTRUCTURE ASSETS The following list, compiled from various City documents, shows more detail about the assets included in the infrastructure assessment, and the broad scope and nature of City-owned infrastructure assets?5 Parks: The City owns and maintains about 158 acres of urban parkland in more than 30 parks. Facilities at the parks include lawns and pathways, playgrounds, picnic areas and benches, tennis and basketball courts, signage and fencing, and some restrooms and parking lots. In addition, there is a stadium baseball complex and softball field at Baylands Athletic Center, a lawn bowling green and clubhouse, swimming pool facilities at Rinconada, skateboarding facilities at Greer, and field houses at Peers Park, Rlnconada Park, and Mitchell Park. . 1098 AmarillO Ave Amenities area, jogging and bicycle i areas area area, soccer iii I diamond, 2 basketball courts, picnic area with barbeques, par course, small dog run, skateboard bowl, playgrounds, 3.7 1967 0.6 1924 1990 " Sources include the City's financial system, Infrastructure Management Study City of Palo Alto by Adamson (1997), Departmental Infrastructure Assessment by the Community Services Department (1997), GASB 34 Compliance Package by Harris & Associates (2002), Appraisal Report by Maximus (2002), Local Agency Formation Commission of Santa Clara County Service Reviews -City of Palo Alto by LSA Associates Inc. (2007), City of Palo Alto website (www.cityofpaloalto.org), Palo Alto Online (www.paloaltoonline.com), and All About Your Utilities by City of Palo Alto (2007). -33- Heritage Park Lawn area 2.0 2003 Homer Ave Hoover Park 2 tennis courts, 2 handball courts, tennis backboard, softball 4.2 1954 2901 Cowper St fjeld, playgrounds, picnic areas with barbeques, restrooms, multipurpose concrete bowl with basketball hoop, dog run, lawn area • Hopkins Creekside Park Mile·long strip of land along the creek, 3 open grassy areas 12.4 1907 Pal,o Alto Ave with benches and tables i Johnson Park Lawn area with shade trees, playground, wide concrete slide, 2.5 1980's 200 Waverly St basketball hoops, picnic area, sand volleyball pit, community carden plots i Lawn Bowling Green Lawn area, bowling green, clubhouse 1.9 1933 i 474 Embarcadero Rd I Lytlon Plaza Paved area with benches and public art 0.2 1960's I University Ave Main Garden 60,000 sq ft organic community garden located behind the 1.4 1970 i 1313 Newell St main library, bordered by fruit trees and flower beds Mayfield Park Small lawn area with benches; site of College Terrace 1.7 1898 2300 Wellesley St q~f1lrv and child care center Mitchell Park 7 tennis courts, 2 paddle tennis courts, 4 handball courts, 21.4 1955 600 East Meadow Ave shuffleboard courts, checkerboard/chess tables, jogging trails, picnic areas with barbeques, multiuse concrete bowl, playgrounds, children's water park, large dog run, restrooms, field house large lawn areas Monroe Park Mounded grassy area, playground, benChes (thiS park is split 0.6 1975 4305 Miller Ave between the cities of Mountain View and Palo Alto) Peers Park 2 tennis courts, picnic tables, restrooms, field house, 4.7 1922 1899 Park Blvd playground, basketball court larQe lawn area I Ramos Park Playground, picnic areas with barbeques, multipurpose 4.4 1950's , 800 East Meadow Ave square cement slab with basketball hoop, lawn area, paths I with benches Rinconada Park Swimming pool (built in 1940), picnic areas with barbeques, 19.0 1924 777 Embarcadero Rd 9 tennis courts (6 with lights), 2 shuffleboard courts, 1 tennis backboard, multipurpose cement bowl, 2 playgrounds, ioallina paths Mallie Forest large lawn areas Robles Park Picnic areas with barbeques, playground, lawn area 4.7 1956 4116 Park Blvd Sarah Wallis Park Lawn area with benches, short path 0.3 1980 202 Ash St Scott Park Circular basketball court, playground, picnic benches, small 0.3 1970's 911 Scott St lawn area Seale Park Lawns, playground, picnic area, barbeque area, large open 3.6 1950's 3100 Stockton PI areas for volleyball and soccer Stanford Palo Alto 2 artificial turf soccer fields, warm·up area, night lights, 6.0 2005 Community Playing restrooms, parking Fields EI Camino Real Terman Park 4 tennis courts, 1 basketball court, 2 soccer fields, 1 softball 7.7 .1983 655 Arastradero Rd field, large lawn area,P13thway Weisshar Park 2 tennis courts, small lawn area with benches 1.1 1965 2298 Dartmouth St Weary Park Large open lawn area, playground 1.1 1965 21 00 Dartmouth St ·34· Open Space: The City owns and maintains nearly 4,000 acres of open space in the baylands and foothills. In addition, the Midpeninsula Regional Open Space District owns and maintains 2,400 acres of open space in Palo Alto (2,200 acres of Montebello Open Space Preserve and 200 acres of Los Trancos Open Space Preserve). In total, over 1/3 of Palo Alto's land area consists of open space preserves. The City employs 5 park rangers and operates 3 interpretive centers in these areas. Date Open Space Areas Amenities Acres acquired Baylands Nature Open space with trails, duck pond, ranger station 1,940 1946 Preserve (Harbormaster House built 1930), sailing station, parking, 3,600 (Byxbee Park) sq It Lucy Evans Baylands Nature Interpretive Center, Byxbee Embarcadero Rd Hills Park (public art), wildlife observation platforms, boardwalks, benches, picnic areas, restrooms, culverts and flood control tide gate, Emily Renzel Wetlands, Harriet Mundy Marsh, and Sea Scout building (listed under other community facilities). Faber Laumeister Tract (totaling 452 acres) was purchased 1926 and 1944. Foothills Park Open space with 15 miles of trails, 7 picnic areas (tables, 1,400 1965 3300 Page Mill Rd barbeques, and water), dam and lake with boat dock, 5,000 sq It interpretive center, restrooms, maintenance facility, seasonal campground, fire trails, roadways and parking lots, large lawn area, fire trails Pearson Arastradero Open space with 10.25 miles of trails, bridges, interpretive 609 19861 PreserVe center with rest rooms, fencing, parking 2006 1530 Arastradero Rd Esther Clark Park Undeveloped nature reserve of grassland and oaks with no 22 1965 Old Trace Rd public access or services Golf Course: The City owns and maintains a 176-acre municipal golf course at 1875 Embarcadero Road which opened in 1956. The golf facility includes an 18-hole championship length course, lighted driving range, practice putting green area, 8,600 square foot Golf Pro Shop and restaurant constructed in 1979 (the interiors are the responsibility of the tl'lnants), and maintenance facilities (3,600 square feet). The City subcontracts operations of the golf course, golf shop, driving range, and restaurant. Golf course revenues are currently sufficient to cover golf course operations, maintenance, debt service, and overhead. Community centers: The city owns and operates nearly 300,000 square feet of community center space. Date Community Centers Amenities Size built Lucie Stern Community Community center complex which includes Children's 10,350 1934 Center Theatre, Children's Library, Community Theater, large SF 1305 Middlefield Rd ballroom, community room, fireside room, kitchen, outdoor patio, offices, restrooms, Boy Scout offices and fire circle, parking. The buildings are traditional Spanish style with wood framed structures, stucco exterior and clay tile roof. Lucie Stern was seismically upgraded in 1991. Lucie Stern Children's Fully equipped 200-seat theatre consisting of an auditorium, 15,700 1937 -35- : Theatre stage, fly, lighting and sound systems, shop, costume room, SF I 1305 Middlefield Rd dressing rooms, offices Lucie Stern Community Fully equipped SOO-seat theatre 14,000 1933 I Theater SF 1305 Middlefield Rd , r Mitchell Park Community Main hall, kitchen, patio, meeting room, offices, parking 10,400 1967 Center SF 3800 Middlefield Rd , Palo Alto Junior Museum Wood frame stucco structure, mostly single story with 9,100 1941 : and Zoo offices over the main entry. SF , 1451 Middlefield Rd Palo Alto Art Center Former City Hall (1956-1971), now Includes art studios, 30,000 1956 1313 Newell Rd gallery, offices and meeting rooms. It was remodelled after SF city offices moved to 250 Hamilton in 1971, and seismically retrofitted in the mid-1980's. The Palo Alto Art Center Foundation provides financial support and volunteers to : help operate the Art Center. -Cubberley Community The City leased 35 acres of the site from the Palo Alto 1955 Center Unified School District in 1990. In 2002, the City 4000 Middlefield Rd transferred ownership of 8 acres at the Terman school site to the Cubberley school site. As a result, the City now owns 8 acres at Cubberley (Including 76,138 square feet of buildings) and continues to lease 27 acres at Cubberley from the school district. Facilities total approximately 180,000 square feet including auditorium, theater, 2 gyms, amphitheater, dance studio, kitchen, offices, meeting rooms, and restrooms. The facility also Includes tennis courts, soccer fields, softball field, football field with bleachers, and parking. The City is solely responsible for maintenance of the facilities. Library facilities: The City owns and operates 5 library facilities -Main, Mitchell, Children's, College Terrace, and Downtown -totaling 51,000 square feet. In comparison to other nearby libraries, Palo Alto's libraries are cramped and dilapidated. Only Children's Library has been completely renovated; it reopened in September 2007. I Square Date Library Facilities Description feet built Main Library Single story wood frame structure with concrete columns and 26.313 ! 1958 1213 Newell Rd partial basement; heated by hot water using boiler in the Cultural SF Center; small remodels over the years include additional staff work areas, seismic bracing to the stacks, computer room addition, restroom remodels, asbestos abatement, carpet replacement , Mitchell Park Library Single story wood framed structure with 2 small additions; 9,478 SF 1958 3700 Middlefield Rd renovations in the late 1980's included new carpet, stack lighting and bracing, and ADA~.~arades • College Terrace Wood frame/stucco exterior and clay tile roof (half the building is 2,392 1935 Library leased to a child care facility) SF" • 2300 Wellesley St Children's Library Wood frame/stucco exterior with clay tile roof (part of the Lucie 6,043 1940/ 1275 Harriet St Stern Community Center complex) ... SF27 2007 26 The College Terrace facility includes 2,392 SF of library space and 2,650 SF of child care space, for a total of 5,050 SF. -36 - Downtown Library 270 Forest Ave Single stOIy wood framed structure with concrete columns Other community facilities: In addition to maintaining athletic fields and facilities at 15 Palo Alto Unified School District Sites2S , the City owns several other community facilities that are operated by community groups:29 Other Community Amenities Size Date Facilities built Gamble Garden Formal and demonstration gardens, historic home, carriage house, 2,5 acres 1900 1431 Waverley St tea house; property is owned by the City and leased to Elizabeth F, with 8,800 Gamble Garden (a local non-profit community horticultural SF foundation), The Foundation is responsible for all maintenance and facilities improvements. Roth Building Historic 2 story office building with basement and added "spine" 17,000 SF 193C 300 Homer Ave with elevator; property is owned by the City and leased to the Palo Alto History Museum (a local non-profit), It is expected that the , Museum will be responsible for all maintenance and improvements, Sea Scout Building Historic wood frame structure; option to lease awarded to 2,209 SF 1941 Environmental Volunteers in 2007 with potential cost sharing for a public restroom that the City would maintain; otherwise proposed improvements, maintenance and operation of the property at no cost to the city Senior Center 2 story wood framed stucco with tile roof; property is owned by the 17,800 SF 1930's 450 Bryant St City and leased to Avenidas (a local non-profit providing services to mid-peninsula seniors), The City is responsible for the exterior shell of the building; Avenidas is responsible for interior maintenance and improvements, Ventura Community Former elementary school purchased from the school district in the 23,000 SF 1958 Center early 1980's, Includes 4 wood frame buildings leased to various 3990 Ventura Ct tenants inclugi l19F'alo Alto Community Child Care. Williams House 2 story historic Craftsman-style residence with historic gardens; 8,000 SF 19071 351 Homer Ave property is owned by the City and leased to the Museum of 2000 American Heritage in 199B; the museum constructed the Frank Livermore Leaming Center in the rear of the property in 2000, The City has limited responsibility for the driveway; otherwise the Museum is responsible for all maintenance and improvements, : Winter Lodge Outdoor skating rink (only permanent outdoor ice rink west of the 3,6 acres 1958 13009 Middlefield Rd Sierras), tennis courts, parking. Property is owned by the City and leased to Community Skating Inc. which is responsible for maintenance and improvements, i 27 The original Children's Library was 3,442 SF. 2S The City and School District jointly share maintenance and capital costs of athletic fields at specific sites and tennis courts located on school grounds, 2. Does !!2l include: • Lou Henry Hoover Girl Scout House (1120 Hopkins Ave), which is located on City land, but owned by the Girl Scouts of America, Built in 1926, it is the oldest Girl Scout meeting house remaining in continuous use in the United States, • University Avenue Depot leased from Stanford University and subleased to others, -37- Civic Hall: Built In 1970, the civic center at 250 Hamilton Ave is a 10-story office tower housing city offices, city council chambers, police station, and 3 levels (260,000 SF) of underground parking, The 90,000 SF building was seismically retrofitted in the mid-1980's .. The city is currently considering vacating the Police Wing of City Hall, and building a new public safety building on Park Boulevard.30 Municipal Services Center (MSC): The 16-acre Municipal Services Center on E. Bayshore Blvd houses Public Works and Utilities operations, the warehouse, and animal services center. Municipal Services Date Center Description Size built Building A Concrete tilt-up structure with tar and gravel roof; warehouse 15,300 SF 1966 3201 E. Bavshore Blvd and offices Building B Concrete tilt-up structure with tar and gravel roof; offices, 22,200 SF 1966 3201 E. Bayshore Blvd maintenance shops vehicle maintenance shop Building C Concrete tilt-up structure with tar and gravel roof; offices and 30,300 SF 1966 3201 E. Bayshore Blvd shops for Public Works and Utilities operations divisions MSCSCADA Concrete block structure with plaster exterior and metal 5,500 SF 1987 3241 E. Bayshore Blvd framed roof; utility control center. The 1996 Adamson report found this relatively new building was In relatively good condition. An Imal Services Center Several single story wood-framed structures with some 6,300 SF 19721 3281 E. Bayshore Blvd concrete block walls; connected by an exterior walkway; 1986 small office ad.ditlon in the early 1990's; and parking lot. Fire Stations: The City operates 8 fire stations (2 of the buildings are owned by others) Fire Stations Description Size Built I Station '1 Largest of the fire stations with a partial second floor. Concrete 9,100 SF 1965 301 Alma St block steel framed structure with tar and araval roof. Station 2 Second largest fire station. Single story, block wall construction 6,800 SF 1965 2675 Hanover St with wood framed roof. Station 3 Smallest and oldest station, Wood framed structure with cold 3.000 SF 1942 790 Embarcadero Rd applied roof, Station 4 Wood framed construction with wood shake roof. 3,000 SF 1954 3600 Middlefield Rd Station 5 Single story structure with concrete block and wood frame 3,600 SF 1962 600 Arastradero Rd construction and tar and gravel roof. Station 6 Located on the Stanford Campus. Owned by Stanford, the 18,308 1969 711 Serra St shell is the responsibility of the University; the interiors are Stanford responsibilitv of Palo Alto, Station 7 Located at the Stanford Linear Accelerator (SLAC). Owned by 2,615 1966 2575 Sand Hill Rd Stanford; buin wnh funding from the Department of Energy. Menlo Park Station 8 Wood frame and siding with composition shingle roof, located In 1,500 SF 1986 3300 PaQe Mill Rd Foothills Park, 30 In 2007, the City entered into an option to purchase the 1,27 acre Essex Park Blvd site for the proposed public safety building. -38- Streets: The City owns and maintains 197 linear miles (or 463 lane miles) of City streets. The approximately 40 million square feet of pavement has an estimated useful life of 40 years. Sidewalks, curbs and gutters: The City owns and maintains approximately 10 million square feet of sidewalks and2 million linear feet of curbs and gutters with an estimated useful life of 40 years. Parking facilities: In addition to parking facilities managed by Parks and Open Space, and at City Hall, the City owns and operates at least 20 parking lots and parking structures. I 19 Date : Parkin Facilities Description Size built : California Avenue surface Lots on Sherman Ave and Cambridge Ave : : parkinQ lots i Cambridge Parking Garage Single deck over on grade parking 58,000 SF 1968 i Mimosa and Cambridge I : Parking Garage Lot B 2 floors below grade. The city has 20,000 SF 1988 I Ramona and University. responsibility for the first level below grade only. The city is 100% responsible for all cost associated with Ihe public parking areas, 47% of lower level capital items, and 17% of : 1-..0; replacement cost for elevators. Downtown surface parking Lot A (400 block Emerson SI), Lot C (400 block lots Ramona St), parking lot D (300 block Hamilton Ave), Lot E (600 block Gilman St), Lot F (400 block Florence Sll, Lot G (600 block Gilman St), Lot H (400 block Hamilton Ave), Lot K (300 ! block Waverley Sll. Lot N (500 block Emerson St). Lot 0 (400 block Emerson St). Lot P (500 block High St), Lot T (Kipling) Parking Garage Lot Q 3 floors below a retail/housing development. 48,000 SF 1984 430 High St The city has joint responsibilities with the homeowner's association for 85% of elevator. mechanical and electrical costs. and 50% of seismic linorovements : Lot R garage . 2003 Entrances on Alma and High Lot Land S garage 2003 Between Brvant and Florence Ted Thompson Garage 2 floors 55,000 SF 1994 275 Cambridge -Webster Cowper Garage 5 floors above grade plus basement; 180.000 SF 1988 concrete/steel/wood structure with 2 elevators Street lights and traffic signals: The Utilities department maintains 89 traffic signals and 6.240 street lights as part of the Electric Enterprise Fund. Trees: The City owns and maintains nearly 35,000 trees, Including street trees, trees In parks, and trees at City facilities. Public Works Is responsible for planting new trees, trimming/pruning existing trees. removing dead/diseased trees, fertilizing and pest control. line clearing around electrical wires, 2417 emergency response, and providing Certified Arborist advise to residents reganding care of street trees. Canopy, a local non-profit organization, also plants City trees. Managers in the tree -39- group also oversee several tree-related contracts including stump removal, electrical line clearing, and annual tree maintenance contracts. Other roadway improvements: The City is also responsible for bike paths, bridges, medians, traffic signage, striping and legends. Estimated Other roadway improvements Quantity useful life Bike path's 35,300 feet 40 years Bridges, underpasses and crossings 22 bridges (including roadway, pedestrian. and bike brldQes)' 40 years Traffic siQnaQe 10,000 signs 5 years StripinQ and legends 425 000 sQuare feet 5 years Medians, islands and planters Including at least 150 landscaped and non-25 years landscaped median strips, 15 concrete median strips, 50 traffic islands, 70 planters, 7 gateway areas, 4 traffiC circles, 30 traffiC diverters, 70 side strir:>.s.. and right-of-way areas The City of Palo Alto operates several utility systems. Each of the utilities is responsible for its own infrastructure. Electric Utility: Founded in 1900, the electric utility purchases and delivers over 975,000 megawatt hours per year to its customens. Electric utility infrastructure includes the following (traffic signals and street lights are shown above as part of the roadway network): Estimated Description Quantity useful life Distribution system 413 miles of overhead and 186 miles of underground" 1 0-1 00 years distribution system Services and meters 28,700 service connections 10-50 vears Miscellaneous 11 substations 10-100 years Fiber OptiC Utility: Founded in 1996, the Fiber Utility is a sub-fund within the Electric Fund that owns and operates a fiber optic network with the following Infrastructure: Estimated Description Quantity useful life Fiber backbone 40.6 miles 10-100 years Services to customers 161 service connections; 39.5 10-100 years I miles of fiber 31 Since 1965, approximately 45% of the City's electric system has been undergrounded -including the majority in commercial areas, and about 14% of residences. Undergrounding recuires the cooperation of telephone and cable companies, but California Public Utilities Commission rules limit their recoverable costs, At the current rate of 150-200.homes per year (with funding set at 2% of annual electric revenues per year), staff estimates it would take 70-100 years to complete the undergrounding of the entire city, -40 - The City has considered expanding the network to serve Palo Alto residences. A fiber to the home (FTTH) trial, approved in Nov-2000, was terminated in Deo-2005. The City is considering a proposal to deploy FTTH citywide. The estimated cost of that deployment is approximately $40 million. Gas Utility: Founded in 1917, the gas utility purchases and delivers over 31 million thenns to over 23,000 customers. Gas utility infrastructure Includes the following: Estimated Description Quantity usefullife~ Distribution pipelines 207 miles of gas mains 10-100 years Sel'1i'ices and meters 23.400 gas meters 10-100 years Mlsceilaneous 4 gas receiving stations, 1 boosler stalion 10-100 years Refuse and landfill: The City owns and operates a 137-aore landfill, Inoludln~ a 2.5-acre recycling drop-off center and 9,300 sq feet of buildings, at 2380 Embarcadero Road. 2 In FY 1991-92, a section of the refuse area was capped with final cover and Byxbee Park was constructed on top of that section. A second section was capped with final cover during FY 1992-93, but has not been opened to the public. The City expects that the landfill will soon reach maximum capacity and that the remaining areas of the landfill will be closed in 2011. The City is required by State and federal laws and regulations to make annual funding contributions to finance closure and post-closure care. As of June 30, 2007, the city was in compliance with those requirements with the establishment of a fully-funded liability of $7.1 million for that purpose. The site is owned by the General Fund and is dedicated parkland (the Refuse fund pays rent to the General Fund for use of the property). The City has a masterplan for final development of Byxbee Park, but has not budgeted for park development on the site. The Refuse Fund also owns a portion of the former Los Altos Treatment Plant (LATP) site. In 1985, Palo Alto entered into a lease purchase agreement with the city of Los Altos for an undivided half interest in the 13.26-acre fonner LATP site with the intent of building a solid waste faCility. The General Fund purchased the remaining half interest in 2007. Storm drainage: The City owns and operates a storm drainage system that collects storm water runoff from streets and developed properties, and conveys the water to one of four local creeks (San Francisquito, Matadero, Barron and Adobe) that flow directly into San Francisco Bay without receiving any treatment. Most of the storm drain system was built by private developers over the past 100 years as a component of individual residential subdivisions and commercial developments. Upon completion of construction, the City accepted the storm drain infrastructure from the developers and is now responsible for the maintenance and operation of the system."" In April 2005, Palo AHo property owners approved a storm drain fee increase to provide resources for the storm drain improvements project. Due to rapidly increasing construction costs, projects were reprioritized and available resources were reallocated among projects. Supplemental funding may be required. 32 In addition, the Palo Alto Sanitation Company (PASCO) currently leases 1.9 acres of cily-owned land on Geng Road adjacent to the 8aylands Athletic Center. That use may end in 2009 when the PASCO refuse hauling agreement expires. The existing Comprehens.ive Plan land use designation for the Geng Road site is Public Park; the zoning is Public Facilities with Site and Design overlay. 33 All About Your Utilities (2007) page 26 -41 - I Estimated useful Asset description Quantity life !Coilection system 107 miles of underground pipeline; 2,750 storm 10-100 years i drain inlets; 800 manholes; 7 pump stations . Sewers: Founded in 1989, the wastewater collection utility maintains more than 200 miles of sanitary sewer lines, annually transporting over 3 billion gallons of sewage and wastewater to the Regional Water Quality Control Plant. The FY 2007-2012 CIP includes $26 million for an ultraviolet disinfection system to replace the current use of chlorine for disinfection. Estimated useful Asset description Quantitv life Collection system 202 miles of sewer mains 10-100 years Service to customers 21,800 service connections 10-100 years Wastewater Treatment: The City owns and operates a regional wastewater treatment plant that treats about 26 million gallons of wastewater each day from Palo Alto, Mountain View, Los Altos, Los Altos Hills, Stanford, and East Palo Alto. Water that goes down a sink or toilet is treated and released to the Bay about 12 hours later. The cities of Palo Alto, Mountain View and Los Altos shared the original costs of acquisition and construction of the plant, and participate jOintly in the cost of maintaining the plant. Water utility: Founded in 1896, the water system purchases and distributes more than 580 million cubic feet per year to its customers. The FY 2007-2012 CIP includes a $40.2 million emergency water supply project (WS-Oa002).34 Estimated useful Asset description Quantity life Distribution and treatment 219 miles of water mains· 10-100 years Services and meters 19,700 customer water meters 10-100 years Reservoirs and wells 5 emergency standby wells; 4 steel and 2 reinforced 30-100 years concrete reservoirs with a total capacity of 10.5 million "allons of stoned water Hydrants 2,699 hydrants 50 years Other infrastructure, not specifically attributable to specific categories above includes other land owned by the General Fund and leased to Utilities, the Palo Alto Airport (leased to Santa Clara County), and levees. Palo Alto Airport: The City owns the 100-acre Palo Alto Airport at the end of Embarcadero Road, adjacent to the Palo Alto Baylands and the Golf Course. The County of Santa Clara operates the airport under a 50 year lease with the City ($25 for the entire term 1967-2017). Under the terms of the lease, all revenue from the Airport is to be used to reimburse the County for continuing " Note that proposed costs to retrofit and improve the Halch Hetchy water system will be passed along 10 Palo Alto customers through increased water rates. -42 - operations and/or for maintenance and capital improvements at the Airport Airport facilities include a lighted, paved, 2,443 foot long runway, a small temporary terminal building, 357 tie-down spaces, a heliport, taxiways, and parking.· The airport control tower is entirely funded and operated by the FAA. Two fixed based operators (FBOs) provide hangar space for about 95 aircraft, 3 large maintenance hangars, and airport-related office and commercial space. All facilities are the property ofthe City upon termination of the lease (2017 or sooner). Levees and sea level rise: The Santa Clara Valley Water District (SCVWD) and San Mateo County control easements and levees along San Francisquito Creek. Palo Alto is a participant in the San Francisqulto Creek Joint Powers Authority, working with the Army Corps of Engineers to address flooding from the creek. The SCVWD is also responsible for the flood control basin in the baylands. , According to a recent staff report, a projected 1 meter rise in sea level and increased storm surge would likely impact not only the baylands, but the Municipal Airport, Water Quality Control Plant, Municipal Services Center and Utility Control Center, Utility substations and transmission routes, recycling center, recreation facilities, storm drains, residential neighborhoods and portions of business districts. To date, projected costs to increase flood protection for these facilities has not been included in infrastructure projections. -43 - Attachment D Palo Alto, California: General Fund Infrastructure Opportunity Report Prepared for Mr. Jim Keene, City Manager, City of Palo Alto, California Submitted: September 3, 2009 Completed by 2009 Leadership ICMA Team Members: Mike Goodrich. Arlington County. VA Eric DeMoura, Town of Mount Pleasant. SC Sara Ott, City of Dublin. OH Pamela Rambo-Estill, City of Arlington, TX Sabra Smith-Newby, Clark County, NV Page 1 of33 Table of Contents Introduction ............................................................................... """ """ " ................ "." 3 Summary of Recommendations .. " " ... " ..... ,,"" " ... "" .. " ........ " " ......... " .. " ... " " ......... " ... 4 Capital Infrastructure Accuracy and Inventory Recommendations .............................. 5 Infrastructure Categorization and Prioritization Criteria ............................................... 8 Civic Engagement. ..................................................................................................... 11 Multimedia Budget Storytelling Presentation ............................................................. 14 Conclusion ................................................................................................................. 15 Exhibit A: List of Document Analyzed ........................................................................ 16 Exhibit B: List of Individuals Interviewed .................................................................... 18 Exhibit C: Examples of Weighted Prioritization Criteria ............... " ............................ 19 Exhibit D: City of Palo Alto Infrastructure Storytelling Outline .................................... 32 Page 2 of33 Introduction Incorporated in 1894, the City of Palo Alto has an estimated population of 61 ,200 (2007) and is approximately 25,6 square miles in size, The city includes portions of Stanford University and is headquarters to a number of Silicon Valley high technology companies, including Hewlett-Packard and Facebook, Palo Alto has a council-manager form of government consisting of a manager and a nine member City Council. In February 2009, Mr, Jim Keene, City Manager of Palo Alto, California, retained a team of Leadership ICMA (LiCMA) Class of 2009 members to perform a comprehensive study of the City's general fund infrastructure, methods for project selection, and community engagement. These members of LlCMA undergo a competitive, intensive two-year ICMA University program designed to cultivate key competencies needed for successful leadership at all levels of local government management. The Leadership ICMA process culminates with a final capstone project, which requires partiCipants to work in a team to complete a local government consulting project solicited through a formal RFP process with a local government client. Through the RFP process, a request for assistance submitted on behalf of the City of Palo Alto was selected and an agreement for consulting services was achieved, As a result of the request for proposal and the resulting agreement, the following tasks were completed on behalf of the City of Palo Alto: 1, Reviewed all pertinent documents and conduct interviews in order to properly describe the infrastructure funding issue in Palo Alto, 2, Collected and analyzed data in order to assess the comprehensiveness and accuracy of Palo Alto's general fund capital inventory, 3. Analyzed existing criteria used to prioritize and categorize projects, and provided recommendations as necessary, 4, Conducted stakeholder interviews in order to identify elements to be used in the development of a story narrative and multimedia presentation featuring the status of Palo Alto infrastructure, 5. Researched and recommended community engagement strategies in an effort to build public support to address the infrastructure issues in Palo Alto. The following report describes briefly the data collected, analysis performed, and recommendations suggested as a result of the completed tasks described above, Page 3 of33 Summary of Recommendations Capital Infrastructure Accuracy and Inventory Recommendations • That the City of Palo Alto update its capital asset information annually and invest in GIS compatible software specifically designed to keep and manage all vital infrastructure information, which will also help "!lith asset analysis and with the development of the City's Capital Improvement Program. • That the City should pass by ordinance a minimum annual contribution requirement from the General Fund to the Infrastructure Reserve. • That the City should establish an annual matching contribution cap for funds allocated towards challenge projects with "Friends Groups." • That the City of Palo Alto should use debt financing supported by a tax increase as the primary method to finance infrastructure repair. • That the City of Palo Alto should use the civic engagement strategies contained herein to tell the story of general fund infrastructure needs in order to receive the required two thirds voter approved debt financing. Project Prioritization and Criteria Recommendations • That the City of Palo Alto develop and implement a weighted criteria decision tool to more fully evaluate the relative value of competing Infrastructure projects when prioritizing. • That the City of Palo Alto should communicate potential capital projects through a categorization structure that emphasizes urgency and need rather than physical description. Community Engagement Recommendations • That the City of Palo Alto integrate its current Civic Engagement strategies with a mix of the fifteen (15) strategies contained herein in order to further the dialogues regarding resource allocations, and in particular, the general fund Infrastructure Reserve. Page 4 of33 Capital Infrastructure Accuracy and Inventory Recommendations The City has a vast general fund infrastructure profile that features, most notably, 8 fire stations, 5 libraries, 4 community centers, 30 city parks, 20 parking lots and parking structures, a civic center (which includes the Police Department), a municipal services center, a golf course, a zoo and junior museum and an art center. The average age of the City's buildings is 50 years old. The City also is responsible for the maintenance of 40 million square feel of pavement and 10 million square feet of sidewalks. Funding Infrastructure profiles of this size require SUbstantial capital funding to adequately maintain, preserve and replace facilities. Adequate capital funding in support of these facilities did not occur in recent decades resulting in many parks, roads, sidewalks and buildings reaching their useful lives at the same time. The community's concern over the deterioration of their facilities reached its high point in the mid-1990's resulting in the city contracting with Adamson Associates for an infrastructure management study. The study identified all major facilities and their associated replacement costs anticipated in the next twenty-five years. The study also identified annual funding requirements, including backlog, and recommended an ongoing infrastructure management system. In response to the report, the City increased capital spending through direct General Fund contributions to what is known as the Infrastructure Reserve. The purpose of the Infrastructure Reserve is to ensure funding is available for infrastructure repair and replacement. However, despite the presence of the Infrastructure Reserve, funding has not been adequate to address capital deficiencies and, with the exception of libraries, additional public support for capital improvements is low in the community. The Adamson Report was an important document for the City as it successfully provided a foundation of information on which to plan for and fund improvements and, as a result, the City Council authorized annual contributions to the Infrastructure Reserve. Combined with grants, gasoline taxes and impact fees, the annual contribution to the Infrastructure Reserve successfully reversed the downward trend of general fund capital spending per capita as shown in Exhibit 6 of the March 4, 2008 Infrastructure Report Card for Palo Alto. Since the Adamson Report and later the Kitchell Report, the City has maintained at varying levels its financial commitment to the Infrastructure Reserve, and many facility improvements have been made. But despite successes of the capital program, funding is not adequate to properly address the infrastructure backlog estimated by the City on May 13, 2009 to be $386M. General fund contributions, grants, special use taxes and fees, leases and Certificates of ~articipation are helpful to addressing this problem. But, in the opinion of the LlCMA Page 5 of33 team, the only effective means to remedy the large amount of deteriorating assets is through debt financing supported by a tax increase. Since many of the major community facilities have reached their useful lives, issuing debt is the only means that will allow for needed, large scale capital asset repair to be accomplished quickly. While debt financing has obvious drawbacks, one benefit is that the repairs will be completed in today's dollars, saving taxpayers the future cost of materials and labor. And by issuing debt the cost of these repairs will be bome by multiple generations who stand to benefit from these new long-lived assets. Recommending indebtedness is not taken lightly by this LlCMA team and it is fully recognized that municipal general fund debt financing in California requires both available debt capacity and two-thirds support from the voters. Even with the recent passage of general obligation bonds to support libraries, Palo Alto still maintains considerable debt capacity which is capped by the State of California at fifteen percent of assessed value. The biggest obstacle is voter support. Understanding that receiving two-thirds support for municipal capital projects is difficult to achieve and, with the exception of libraries and moderate momentum for a police station, there currently is little public support. This will be addressed later in the report in the section of civic engagement. Debt financing supported by a tax increase is required to resolve a problem of this magnitude. The City should employ two methods to limit the amount of borrowing and the corresponding tax burden. First, the City should pass by ordinance a minimum annual contribution from the General Fund to the Infrastructure Reserve. This would demonstrate further commitment by the governing board by making infrastructure repair an organiZational priority. It would also provide funding stability and reduce the level of debt issuance. Second, the City should establish an annual matching contribution cap for funds requested by "Friends Groups." While these groups are well intentioned, their requests (and decisions by the City to accommodate these requests) have disrupted the capital program by shifting resources from more critical projects. Accuracy of General Fund Inventory One major focus of this project is to assess the comprehensiveness and accuracy of Palo Alto's general fund capital inventory. Only through this effort could the LlCMA team see the full scope of the problem and determine whether the assets used to generate the infrastructure repair figures were reasonably accounted for. After conducting stakeholder interviews and reviewing City documents (shown in Exhibit A) the initial conclusion was that not one location existed that inventoried the vast number of facilities in Palo Alto. Rather, it appeared that different facilities were listed in different documents found in different departments. Hpwever, as the research of the project team progressed, the LlCMA team has concluded that the Department of Public Works (DPW), through its GIS and compilation of nearly two dozen infrastructure lists, does indeed possess a comprehensive inventory of Palo Alto's streets, sidewalks, public buildings, parks and other facilities. However, with the exception of streets and sidewalks, vital statistical information (year built, square footage, etc.) and information Page 60f33 on asset condition and life cycle is not easily accessible. But this information does exist in other City documents. Although asset information could be comp'iled better, the LlCMA team can conclude that city management can be confident that the DPW has a comprehensive inventory of the City's capital assets. While most of the documents reviewed provided some level of value, it is through the review of four major documents as well as the GIS that has led the LlCMA team to this conclusion. These documents are the 2007-08 Comprehensive Annual Financial Report, the City of Palo Alto Service Efforts and Accomplishments Report 2007-08, the March 4, 2008 Infrastructure Report Card and the CPEPP Property Schedule for the City of Palo Alto. The first three documents were reviewed at the onset of the project. Each captured general fund facilities to some level, but neither was complete. This left the team with the belief, initially, that a comprehensive listing did not exist and left the team skeptical of the accuracy of the infrastructure backlog figures. But after receiving the DPW's infrastructure listings and reviewing the City's GIS information, it became clear that a comprehensive inventory of general fund facilities did exist and in sufficient detail. For example, while many City documents mentioned the golf course, the DPW's listings also included the office, the pro shop, and the maintenance shop. And the three documents were cross checked again to ensure the facilities mentioned were found in the DPW's listings and they were. But despite gaining confidence in the DPW's information, there was not a method of determining just how fully comprehensive the information was. The site visit was very important and very helpful, but not enough to gain high confidence in the listings of general fund infrastructure. This is where the fourth document, the Property Schedule, became very helpful. The Human Resources Department with the help of a private consulting firm maintains a complete listing of non transportation capital assets. This document allowed another means to successfully cross-check the information kept by the DPW. Although vital statistics (year built, square footage, etc.) found in the Property Schedule and other documents like the Adamson Report were either lacking or difficult to locate in the GIS, the LlCMA team can conclude that the City's DPW has a comprehensive inventory of general fund assets and that the maintenance, repair and backlog figures are reasonable. While the DPW possesses a comprehensive inventory, pieces of information regarding the inventory are located in different documents. Not one document or database exists that contains all relevant information about Palo Alto's general fund capital assets. An investment in GIS compatible software specifically designed to keep and manage vital infrastructure information is recommended. Newer software will also help with asset analysis and with the development of the City's Capital Improvement Program. Furthermore, if this report is successful in some way in helping the community to focus its attention on the need for infrastructure repair, the DPW's data will surely be scrutinized by the City Council and the community. As the consequences of long term financial commitments are weighed, they will expect the information to be presented to them in a more digestible format. More relevant and comprehensive software will assist in assuring the interested parties that the current information is correct. Page 7 of33 Infrastructure Categorization and Prioritization Criteria The prioritization criteria being used by the City of Palo Alto is logical, easy to understand and defensible on the whole. The Adamson report (1998) is the basis of the prioritization criteria and appears generally accepted by both the City staff and the City Council. Palo Alto's current capital improvement program is referred to as CityWorks. CityWorks is based on a 2008 update of the General Fund infrastructure backlog through 2028 and was created to document the backlog. Projects are now classified as: • Land, Buildings and Facilities • Streets and Sidewalks (including Traffic and Transportation) • Parks and open Space • Miscellaneous Equipment To be a capital project a project must have a minimum cost of $50,000 for each stand· alone unit or combined project, have a useful life of at least 5·7 years and must extend the life of an existing asset or provide a new fu nctional use for an existing asset for at least five years. Using physical descriptors to communicate the infrastructure investment needs is not making a connection with the community. Categories of need rather than physical descriptions might bridge this gap and create more of a story than an inventory when it comes to classification. Prioritization In the background section of CMR 406:99 reports a prioritization of the General Fund IMP for Buildings and Facilities (CMR:466:96), Traffic and Transportation (CMR:297:97) and Parks and Open Space (CMR:409:97) was approved in 1998. These are the prioritization criteria found in the Adamson Report. Currently, Palo Alto reports that the overall criteria used to prioritize CI P projects is: 1. Council Direction Project is a result of a specific Council directive. 2. Leveraged Funding (Public/Private Partnerships/ Grants/Impact Fees) Project has leveraged funding through private/public partnership, government grants, development impact fees, special revenues or enterprise funds. 3. Health and safety requirements Project mitigates existing health and safety risks as identified by Public Works, Fire or Building Division inspectors, or prevents potential future health and safety risks. 4. Code/legal requirements Page 8 of33 Project is legally required for compliance with codes or laws. 5. Operations needs and efficiency Project involves a mission critical need that, if not addressed, would impede operational effectiveness 6. SustainabiJity Project impacts the sustainability of the community-the ability of the community to meet its current needs without compromising the ability of future generations to meet their own needs. 7. Community P~iorities Project meets community priorities or serves a Council-identified need of a segment of the community such as youth or seniors. Process The capital budget notes "Projects listed in [Adamson] are weighed in with other non­ IMP projects as prioritized based on the seven criteria. The process for ranking then consists of a recommendation from the IMP Committee to the City Manager as to what should be included in the five-year plan. Recommendations The seven criteria currently utilized to evaluate capital projects using the IMP committee, while good from a conceptual standpoint, lacks rigor and is perceived as subjective. While adopted decision making criteria will never fully be objective, more rigorous evaluation criteria will allow the City of Palo Alto to improve its decision making process. The City of Palo Alto should develop and implement a weighted criteria decision tool to more fully evaluate the relative value of competing Infrastructure projects, such as the example of Louisville, KY in Exhibit C. The LlCMA team also recommends that the City of Palo Alto communicate the vast array of capital deficiencies using categories that emphasize urgency and need to provide the public with a compelling reason to undertake funding solutions for capital projects. Consequently, categories with emotive connections rather than physical descriptions might better convey the importance of public infrastructure investment while telling a cogent story about the current infrastructure deficiency issue. The following is only one possible categorization schematic, based on levels of need and disrepair, that would help describe why there is a need for completion as well as communicate a sense of urgency associated with the various projects. The categorization system provided below is designed to incorporate aspects of the Adamson Report and CityWorks, while mimicking the urgency and hierarchy of the Department of Homeland Security color scheme. The proposed categories in descending order of critical importance are: Level Red: Imminent Risk. Immediate health/public safety risk or high possibility that structural failure is a posing threat or other significant risk to health and Page 90f33 safety will occur in the near future, or that critical services and/or supply lines would be unavailable during an emergency. Level Orange: Significant liability exists for not meeting codes and/or other legal standards, public accessibility and/or quality service delivery is or will be disrupted in the near future if not addressed, and/or significantly escalated cost will make the project even more difficult to fund. The possibility exists that if ignored, conditions of the asset will deteriorate and the project will be escalated to Level Red. Level Y(~lIow: Provides survivability and/or adds useful life and/or enhancements to existing assets, allows tho community access to a new or improved service delivery. Level Green: Provides opportunities for investments in the community, which include identified and currently or potentially available funding in from sources other than the City's general fund (I.e. grants, "Friends" groups), but physical condition does not qualify it for Yellow, Orange or Red status. Level Blue: Is recognized as an existing asset that will need to be addressed at some point in the future due 10 physical aging and/or technological innovations, or a new asset that will be needed based on community values, growth, and/or other emerging issues, but is currently. not of a critical nature, or creating an existing service void. In categorizing capital needs using non-physical descriptors, care should be given to avoid the assumption that classification based on project attributes does not also carry with it an absolute as far as prioritization in the annual capital budget and the order in which projects will be completed. When taking into consideration a holistic picture, including weighted criteria as recommended in the beginning of this section, a Level Blue project that is low in cost and has 95% leveraged funding already in possession of the City, might in fact be funded in any given year's capital budget before a Level Red project with significant barriers that must be addressed before work on the project can begin. Again, the color schematic becomes a communication tool for the public to better understand urgency and need, not an absolute on the order that capital projects will be addressed. While the LlCMA team believes that some categorization scheme based not on physical descriptors will assist the City of Palo Alto to more effectively communicate the level of need and urgency for funding capital improvements, we also recognize that the most difficult task of implementing this process involves correctly placing the projects into the categories. In the next section, the LlCMA team provides some recommendations regarding accessing citizen input to assist in the categorization of projects. Page 10 of33 Civic Engagement In order to determine the current level of civic engagement in Palo Alto, the LlCMA team interviewed a number of city staff who interact with the citizenry as well as citizens who had served on various boards or in local organizations. In addition, the LlCMA team also developed a short survey for several citizens selected by city management that are involved in Palo Alto neighborhood groups. The focus of these interviews and surveys was to determine several factors surrounding civic engagement, including the types of civic engagement tools employed by the city, the openness of city staff to working with the citizenry, and the resulting opinions of citizens about the city's efforts to engage them. From this assessment, it appeared that the new city management was committed to more actively engaging citizens in the issues facing the city, but that staff still had reservations about encouraging citizen participation. These reservations seem to stem from the considerable expertise held by some of the more outspoken citizens and the fear of having well-laid plans critiqued by citizens. Staff who have often spent their careers in a certain area, particularly specialized technical areas relating to infrastructure, often believe that their years of experience qualifies them as experts in the field. At the same time, Palo Alto citizens may have also spent their careers in similar technical expertise areas-albeit outside of city government-and provide their expert opinions regarding the plans developed by staff. As a result, the LlCMA team believes that one impediment to true citizen engagement in Palo Alto will be overcoming the barrier of fear that impedes dialogue between staff and citizens. Recommendations The LlCMA team interviewed a number of citizens. In a review of academic literature regarding civic engagement, specifically examining how public resource discussions are held in the public domain, several themes emerged. • Public participation is most beneficial early in any resource allocation process. Citizens reject attempts to collect input into a resource allocation process that is already underway, where the outcome is perceived to already be determined. • Traditional methods of gaining citizen engagement, such as public hearings or public comment periods are limited in terms of their efficacy. Public participation is often low, and those citizens that do participate often represent narrow concerns. • Citizen engagement processes are best when they involve two-way information sharing and deliberation. • Because any individual means for collecting public input will invariably have strengths and weaknesses, a comprehensive citizen engagement strategy Page 11 of33 should include several types and opportunities for public input. These means for collecting public input should complement each other, compensating for weaknesses and capitalizing on strengths in any given citizen engagement, strategy. Using these principles as guiding tools, the LlCMA team has prepared a list of recommendations for citizen engagement tools. The City of Palo Alto may elect to use some or all of the set of suggested tools that will allow for maximum public participation and information sharing. While these tools were developed with the capital improvement process in mind, the optimal utilization ofthese recommendations would be integrated with the city's overall approach to civic engagement. The following are the suggested approaches and strategies to enhance the involvement of the citizens of Palo Alto. • Media tours of current infrastructure deficiencies designed to encourage coverage of the problems and consequences of delaying investment, thereby increasing public perception of need and urgency. Example: Colorado Springs, Colorado Transportation Education Initiative. • Neighborhood walking tours to identify the features that make neighborhoods desirable and the relationship between the infrastructure and the identified features. These are a good way to engage City Council members to help them hear what the neighborhood views as important. • Improve relationships with neighborhood groups such as Palo Alto Neighborhoods by designating staff liaisons for each group. Neighborhood groups and citizens would be encouraged to contact their liaison with concerns or questions, and the liaisons would be trained to access information and resources in various departments in order to provide the neighborhood groups with seamless customer service. • Create a Neighborhood College program that would seek to build capacity among citizen groups and with neighborhood organizations. The Neighborhood College would offer training opportunities on issues that matter to the neighborhoods, such as leadership capacity building, neighborhood organizing skills, and Homeowners Association (HOA) maintenance areas & financial management. Example: Charlotte, North Carolina • Create a Capital Improvement AdviSOry Commission comprised of citizen representatives that would work with residents, businesses and staff to develop the recommended CIP. Representatives would be geographically diverse in order to provide representation from the many neighborhoods within Palo Alto, and individuals on the Commission would be able to provide their neighbors with perspective on the challenges of developing aCIP. Examples: Arlington, Texas, Denton, Texas, and Chicago, Illiniois. Page 12 of33 • Engage current Boards and Commissions to determine funding recommendations to City Council. Current Boards and Commissions already possess a great deal of intellectual capital regarding their subject-matter concentrations. This task may be accomplished by allowing the appropriate Board/Commission to allot limited 'points' in the weighted prioritization system. • Clearly link citizen input to budget decisions when presenting justification for recommendations before the City Council or other public groups. Input can come in many forms -budget meetings, citizen surveys, focus groups, suggestions received throughout the year. • Clearly communicate budget priorities by identifying fundamental infrastructure categories that must be the priority for funding. Identifying those categories that must be the priority for funding could be accomplished by conducting a public prioritization exercise with the City Council and community. Example: Longmont, CO and Shoreline, WA • Communicate infrastructure improvements clearly and often to keep the community aware of the work that is being accomplished. Focus on the intended outcomes of the improvements. Include the story about why the project is valuable and important, and what value it has added to the community. Provide cost information for typical improvements. Example: Chicago, IL and Greenville, SC. • Implement a NeighborCircles program, which involves resident-facilitated conversations about issues facing the neighborhood and City. Use tools such as paired comparison survey technique to create dialogue about priorities. • Create a city budget guide that explains what the city budget is, why it's important and how the community can make it better. The goal in creating this document is to analyze the budget, put the budget categories and expenditures in terms most people can understand, and compare resident and official budget priorities. One example is Lawrence, MA, which created a 72-page bilingual publication called Money, Our Future, Our Right to Know; The People's Guide to the Lawrence City Budget, which sheds light on the city's three major budgets - operating, capital improvement, and CDBG and HOME funds. • Create a document to explain taxes and revenues upon which the city depends. This document should be. developed from a resident's perspective in terms that residents can understand. Make these documents available at all community centers and at community events. Example: Dublin, Ohio tax brochure. • Host a Community Lecture/Speaker's Series that would provide focused discussions on various aspects of city management and community issues. These speaker series could be hosted in conjunction with neighborhood Page 13 of33 organizations that could leverage group membership and be tailored to the interests of the neighborhood group. • Provide Internal Facilitator Training to build staff's skills in using facilitation techniques for meaningful dialogue. These in-house facilitators would be available for topic specific staff to utilize when public meetings are being held. The advantage of this is that staff experts would then be able to focus on the substance of the meeting, and not get caught up in managing the process as well. These training sessions would also help overcome barriers that staff may have in interacting with citizens that may be critical of staff plans. • Host a series of World Cafes, which is a conversational process based on a set of integrated design principles that reveal a deeper living network pattern through which the collective future is co-evolved, These principles ensure that each participant's voice is heard and communicated and integrated with the larger group of interested parties, ' Multimedia Budget Storytelling Presentation As part of the final report to the City of Palo Alto, the LlCMA team has prepared a short multimedia presentation that models the application of the principals of storytelling to the infrastructure funding needs of Dublin, OH. The hope of the LlCMA team is that this presentation may serve as a blueprint for a similar production for the City of Palo Alto that could be provided on disk, web, or at public meetings to effectively communicate the urgency for investment into public infrastructure, The multimedia presentation is included with this report. In addition, the LlCMA team has provided the City of Palo Alto with an outline of an infrastructure storytelling production, found in Exhibit D, Page 14 of33 Conclusion The LlCMA Team sincerely appreciates the opportunity to work with the City of Palo Alto, California. The team would like to specifically thank City Manager Jim Keene, Assistant to the City Manager Kelly McAdoo·Morariu, and all of the talented staff that devote their talents, skills and abilities to the citizens of Palo Alto. With their continued leadership, the LlCMA team is convinced of the future success of the City of Palo Alto. The City of Palo Alto has considerable work ahead in their general fund capital improvement program. The team debated over many weeks about the recommendations contained in this report, especially around increasing debt service for the City in this difficult economic climate. However, the team is convinced that the combination of the civic engagement strategies with the communication of the infrastructure needs will ultimately result in a successful and predictable revenue stream for capital projects. Page 15 of33 Exhibit A: List of Document Analyzed • The National Citizens Survey 2008 • 2008-09 Adopted Capital Budget • Infrastructure Report Card -March 4, 2008 • Approval of Criteria that would identify Capital Improvement Projects -March 15, 2005 • Infrastructure Reserve Staff Report -February 23, 2005 • Planning & Transportation Staff Report -March 30, 2005 • Status of the Infrastructure Management Plan -September 16, 2003 • Manager Report on Infrastructure -March 5, 2008 • Capital Improvement Project Funded Programs • Capital Improvement Project Adopted 2008-09 • Candidates Emphasize Planning: Opinions differ on management, Stanford expansion -October 3, 2007 • Milestones Estimated Completion Date • Library Service Model Analysis and Recommendations -December 4,2006 • 2008-09 Annual Street Maintenance Program -June 5, 2008 • Transportation Strategic Plan -April 2004 • Strategic Infrastructure Reinvestment Policy -May 26, 2000 • 2007-08 Comprehensive Annual Financial Report • City of Palo Alto Service Efforts and Accomplishments Report 2007-08 • CPEPP Property Schedule for the City of Palo Alto • Adamson Report • Kitchell Report • Department of Public Works Infrastructure Lists ). 20-Year Projections for Transportation ). 2008 Infrastructure Backlog -Byxbee Park Development ). 2008 Infrastructure Study -Sidewalk ). Building Module Campsite Capital Costs ). Bridge Costs with Backlog ). Building Seismic Estimates ). Copy of Infrastructure Future Needs ). EI Camino Park Restoration 032707 ). Fire Station Civic Center and Animal Shelter Replacement ). Infrastructure Future Needs ). Infrastructure Report Final ). Karen Bengards Building Replacement Module ). MSL Construction Cost Estimate -Option 3 ). OS Management Study Page 16 of33 » PA Parks Management Study » Parking Lot Costs with Backlog » Pathway Costs » Police Wing Tenant Improvements » Shortcut to Infrastructure Report Final » Streets » Template 2008 Infrastructure Study • Budget Presentation -May 13, 2009 • 2010-11 Proposed Operating Budget • 2010-11 Proposed Capital Budget • GIS Database Page 17 of33 Exhibit B: List of Individuals Interviewed • Jim Keene, City Manager, City of Palo Alto • Steve Emslie, Deputy City Manager, City of Palo Alto • Kelly McAdoo-Morariu, Assistant to the City Manager, City of Palo Alto • Glenn S. Roberts, Public Works Director, City of Palo Alto • Lalo Perez, Administrative Services Director, City of Palo Alto • Mike Sartor, Assistant Public Works Director, City of Palo Alto • Joe Saccio, Assistant Administrative Services Director, City of Palo Alto • Sharon Bozman, Budget Manager, City of Palo Alto • David Ramberg, Assistant Administrative Services Director, City of Palo Alto • Lynda Brouchoud, City Auditor, City of Palo Alto • Bern Beecham, Former Mayor/City Councilman, City of Palo Alto • Cash Alaee, Recreation Services Supervisor, City of Palo Alto • Stephen Levy, Director, Center for Continuing Study of the California Economy • Lanie Wheeler, Former Mayor/City Councilman, City of Palo Alto (Member of Blue Ribbon Task Force on Public Safety Building) • Pete Hazarian. Senior Administrator, Police Department, CHy of Palo Alto • Deputy Chief Roger Bloom, Fire Department, City of Palo Alto • John Melton, Storm Drain Oversight Committee/Library Bond Campaign Treasurer) • John Tarlton, Tarlton Properties (Local developer/Storm Drain Oversight Committee) • L.C. Tig Tarlton, Tarlton Properties Page 18 of33 Exhibit C: Example of Weighted Prioritization Criteria LOUISVILLE CAPITAL BUDGET SCORING CRITERIA EXPLANATION Threshold Criteria The first filler to be used to integrate project requests into a capital plan is composed of threshold criteria. These criteria are used to discern the mandate level of the project, if any mandate exists. Mandate, as the term is used here, means that a project must proceed due to a specific commitment or requirement. The reasons for a mandate are described as separate criteria so that projects can be differentiated and ranked by mandate type. Every project fitting a mandate type will be automatically ranked higher than every project that does not have a mandate. This means, that in the integrated capital plan there will be a separate category of projects named "Mandated Projects". All mandated projects will also be ranked within the category according to the scores assigned for the mandate level as well as the scoring criteria that describe the substance of the project. The outcome would be a ranking of 1 through N of the projects that have a mandate level. 1. State or Federal Mandate As implied by the titie, a State or Federal mandated project is one that must be funded in order to comply with a legal requirement enacted by the State or Federal Government. A good example of such a project would be to construct infrastructure, such as handicap ramps on sidewalks, in order to comply with the federal disabilities act requirements. In order to receive the points assigned to this criterion, the project description should identify the legal requirement that pertains to the project. 2. Local Law or Adopted Codes This criterion applies to projects that are proposed pursuant to a local law or adopted code, as opposed to a state or federal requirement. An example of this type of project might be to update fire suppression and warning systems in certain City/County owned facilities to comply with the locally adopted fire code. The project description should identify the local law or code requirement apropos to the project. 3. Local Policy/Service Equalization This criterion pertains to projects that are proposed in order to comply with local policy that does not have the force of law. For example, local policy may be that police patrol Page 19 of33 vehicles will be replaced when they reach 65,000 miles. This is not a legal requirement. This criterion is applicable only if there is an official adopted policy or administrative regulation that is being followed. The policy or administrative regulation must be cited and how the proposed project meets the requirement must be explained. " Sometimes new commercial or residential development requires construction of new capital facilities to provide service to the new development. An example of this might be construction of a new fire station to serve a newly developed residential area. The project description should explain the rationale for service equalization. 4. Contractual Agreements This criterion addresses projects that must be funded due to an executed agreement between Louisville and another governmental jurisdiction or private agency/business. An example of this type of project might be an agreement to extend a road to a site in exchange for a business building on the site. Another example might be agreement to match federal and state funding for construction of a segment of interstate highway. The project description should identify the specific agreement basis and explain what Louisville has agreed to fund and when it has agreed to provide funding. 5. Subsequent Project Phase Some capital project requests are for funding subsequent phases of a project already under construction. The key to whether the project will be scored under this criterion is if the prior phases are rendered useless if the subsequent phase is not funded. An example of this type of project could be funding for construction of tenant improvements and equipment for a newly acquired or constructed office building. Without the tenant improvements and equipment, the intended use of the space could not be fulfilled and the purchase or construction of the building will be rendered useless. Projects where previously completed phases would still lead to useful application of the project intent will not be scored under this criterion. For example, a new phase of land acquisition for a park expansion would not be scored if the previous park improvements would still provide useful service to residents. Ranking Mandated Projects Mandated projects will first be grouped by the mandate that applies. For example, all state or federal law requirement projects will be grouped together and all Local Policy/Service Equalization projects will be grouped together and so forth for each of the mandate levels. The advisory group will have previously assigned scores to each of the mandate levels. All of the projects in the mandate level with the highest assigned weight will then be filtered through the scoring criteria and ranked according to the score achieved in the appropriate year of the capital plan. This process will be repeated for the projects in the mandate level with the second highest assigned score. The process Page 20 of33 will repeat successively for each of the mandate levels according to the assigned score. The result will be that all projects that are in the mandate level with the highest assigned score will all rank higher than every project in the mandate level with the second highest assigned,score -and so forth. The final product will be ranking of all mandated projects for each year of the capital plan. Scoring Criteria Every project that does not have a mandate level will be ranked according to the score it achieves in the scoring criteria filter. Grow Better Jobs 6. Increase in number of jobs eligible for state/local tax incentives This criterion will apply only to projects that directly lead to an increase in the number of jobs eligible for state/local tax incentives (not including jobs related to construction of the project itself). By "directly lead" it is meant that the project must in and of itself create the potential for new jobs to be created. An example of this might be a project to rehabilitate a federal facility, such as an old arsenal, into a distribution center. Projects that have an element of speculation may receive points under this criterion. Extending the example used for this criterion, it would not be necessary to have a signed agreement with a developer for the distribution center to receive points. It should be noted that some projects that are designed to retain current employment, another criterion, may also increase employment. If such is the case, that project will be scored in both criteria as appropriate. Projects scoring in this criterion must calculate the cost per job created. The advisory committee may decide to establish a ceiling on cost per job created to win points under this criterion. 7. Retain Current Employment This criterion will apply only to projects that are directly designed to retain a current employment base. An example might be purchase of land and provision of infrastructure to allow an existing business to relocate from an undesirable site to a more desirable site. Projects scoring in this criterion must calculate the cost per job retained. The advisory committee may decide to establish a ceiling on cost per job retained to win points under this criterion. Page 21 of33 Improve Quality of Life 8. Unacceptable Environmental Condition/Protect/Improve Quality of Environment Projects that are designed to prevent or correct an unacceptable environmental condition will be scored in this criterion. To be considered, the project description must specify the hazardous condition and name the agency that has judged the condition to be hazardous or specify the code that the condition violates. An example of this type of project is removal of asbestos from a public building. 9. Substandard condition that would close infrastructure element or facility Projects that are designed to correct a substandard condition that would cause an infrastructure element or facility to be closed within a year will be scored in this criterion. The cause of the closure could be for any reason: hazard to occupants, safety of residents, functional obsolescence etc. 10. Historic Structure/Artifact If the project is designed to preserve an historic structure or artifact that will be damaged if work is not begun in the first fiscal year of the capital plan it will be scored using this criterion. The.-submission should describe the nature and extent of the damage that would occur without immediate action. 11. Leisure Time Activities Projects that will improve the quality of leisure time activities for residents will be scored in this criterion. This is self-explanatory. 12. Improve Quality of Transportation Projects that are meant to improve an element of the area's transportation system will be scored using this criterion. Projects fitting this description include investment in system maintenance, repair and replacement as well as system upgrades. 13. Public Health Projects whose purpose is to improve or protect public health will be scored using this criterion. In this case, the term public health is meant to apply to personal health as opposed to general environmental health. An example of such a project could be the construction of a new health clinic. Keep Us Safe Page 22 of33 • 14. Emergency Services If a project is designed to provide emergency services to the citizenry it will be scored under this criterion. Emergency is defined as a situation or occurrence of a serious nature, developing suddenly and unexpectedly, and demanding immediate action. 15. Homeland Security , If a project is an element of a prescribed homeland security program or effort, it will receive points for this category. It is not sufficient to cite improved security as an outcome of the project. The project description must cite the overall homeland security plan of which it is an element Create Strong Neighborhoods 16. Housing A project that is meant to support the provision of decent, safe, sanitary and affordable housing will be scored using this criterion. This is self-explanatory. 17. Neighborhood Level Community Building A project with the primary purpose of building community at tlie neighborhood level will be scored under this criterion. An example of this type of project might be construction of a multi-purpose community center. Bring Us Together 18. Government Accessibility This criterion applies to project meant to make it easier for residents to access government operations and information through use of the inter-net and/or other non­ technology based enhancements. An example of technology type of project might be an application allowing businesses to renew their business license on-line. A non­ technology project might be opening a branch office for issuing business permits. 19. Co-location of related operations/Elimination of Service Duplication Projects that provide co-location of related operations or eliminate service duplication will be scored using this criterion. An example of this type of project might be construction of a senior services facility that houses geriatric health services and senior citizen social services programs. 20. Promote Diversity Page 23 of33 Projects with a purpose of promoting or leading to greater diversity will be scored under this criterion. A description of how the project will result in greater diversity is required to be scored under this criterion. Improve Financial Condition 21. Net Present Value Some projects will generate additional revenue or reduce operating cost, many will not. This is known as a return on investment (ROI). Projects with an ROI will be subject to an additional analysis by the Budget Office to determine the net present value (NPV)of the ROI. Net Present Value applies a time value to the ROI stream to determine the economic value of the investment in current dollars. The Budget Office will determine the NPV of each project and rank them from most value to least value. The ranking will be divided into thirds and scored accordingly. New or Increased revenue :estimates must be fully explained and justified. Annual cost reductions must also be fully explained and justified with the understanding that the Budget Office will be fully justified in reducing the agency's operating budget in the future when an approved project is completed. 22. Project Deferral Cost Increases All projects, if deferred, will experience cost increases greater, equal to or less than the rate of inflation. All projects will be scored on this criterion. An example of a project that might experience cost increases greater than the inflation rate might be deferred roadway paving. The American Public Works Association has developed a cost curve that shows that accelerating deterioration dtle to deferred maintenance increases the cost of future maintenanCe. That cost curve should be compared to historical inflation experience to determine how the project should be scored. Project cost will be assumed to increase at the historic inflation rate unless documented otherwise. Each project description should state cost increase expectations with appropriate documentation. 23. Project Cost Sharing This criterion will apply only to projects where a portion of the cost is to be paid by another party, either a government jurisdiction or a private party. This criterion is self­ explanatory. 24. Annual Operating Cost Increase This criterion will apply only to projects that will require additional annual operating costs to be appropriated to operate the improvement upon completion. Factors in this criterion will be assigned a negative weight on the premise that it is undesirable to add costs to the annual operating budget if no new/expanded service results. Page 24 of33 25. Increase in Property Tax Base Projects that will directly lead to an increase in property tax base will be scored in this criterion. Examples of this type of project might be creation of an office park or extension of a roadway to serve a parcel of land for which development has been approved. To receive points under this criterion, the nexus for increasing the property tax base must be clearly articulated and documented. Information Technology 26. Information Technology Project Infoomation Technology projects are to be scored according to the scoring criteria applied to all requests for information technology. The ranking of IT project requests will be divided into thirds and points will be awarded according to the project's ranking within the IT scoring criteria. 27. Records Security This criterion is self"explanatory. Department Importance 28. Department Priority The three criteria applicable to department priority are meant to incorporate a department's opinion of project importance into the ranking scheme. Project Beneficiary 29. Resident Benefit The three criteria applicable to this factor are designed to distinguish among the relative benefit levels of the projects in terms of the number of residents benefiting. This criterion will have to rely on judgment and estimates. For example, an improvement to a heavily traveled arterial roadway could be judged to benefit more than 50% of the citizenry based on traffic count. Conversely, an improvement to a local street with a much lower traffic count may benefit fewer than 10% of the residents. Project descriptions should take these criteria into account and provide a statement of the benefit estimate applicable to the project with a short explanation as to the basis for the statement. Louisville, Kentucky Criteria Scoring Matrix PageZ50f33 Scorer Name: THRESHOLD # CRITERIA Mandate Level Is project required to meet a state or 1 federal mandate? Is project required to comply with a local law or adopted 2 codes? Is project required to comply with local policy or to equalize service for new 3 residential or commercial development? Is project required to comply with a contractual 4 agreement with another governmental entity? Is the project a subsequent project phase necessary to keep a project 5 already begun from becoming useless? SCORING CRITERIA Grow Better Jobs Will the project directly lead to an increase in jobs that are eligible for state/local tax 6 incentives? 25 or fewer new jobs created 25 to 50 new jobs created 51 to 75 new jobs created 76 to 100 new jobs created Page 26 of33 101 or more new jobs created Is the project required to retain current employment with the following 7 impact: 25 or fewer jobs retained 25 to 50 new jobs retained 51 to 75 jobs retained 76 to 100 jobs retained 101 or more jobs retained Improve Quality of Life Does the project prevent or correct an unacceptable environemental condition or improve 8 or protect the quality of . the environment? Does the project correct a sub- standard condition that would cause an infrastructure 9 element or facility to be closed in the next year'? Does the project preserve a historic 10 structure of artifact? Does the project improve the quality of residents' leisure 11 time activities? Does the project improve the quality 12 of transportation? Will the project 13 improve or protect Page 27 of33 public health? SCORING CRITERIA Keep Us Safe Does the project Improve the government's ability to provide emergency services 14 to residents? Is the project related to homeland 15 security efforts? Create StrMg Neighborhoods Does the proja;;! provide deceh!, safa, sanitarY and affordable howsins 16 to residents? Does the project enhance community building at the 17 neighborhood level? Bring Us Together Will the project improve residents accessibility to government 18 operations By the applicatiO'n of technology By means other than technology Will the project provide better customer service by eliminating duplication or 19 bringing similar functions into closer proximity to one another? Will the project promote or lead to 20 greater diversity? Page 28 of33 Improve Financial Condition Does the Budget Office rank the project in terms of Net Present Value of Return on 21 Investment: In the top 1/3 of ROI projects In the middle 1/3 of ROI projects In the lower 1/3 of ROI projects If deferred, will the project cost 22 increase: Faster than the rate of inflation Same as the rate of inflation Lower than the rate of inflation Will total project cost be shared with another jurisdiction/entity in 23 the following ratio: Other jurisdiciton. share 10% or less Other jurisdiction share10%to 33% Other jurisOiction share 34% to 50% Other jurisdiction share 51 % to 75% Other jurisdiction share more than 75% Will project add cost to the annual operating budget in the followirig 24 amount? $25,000 or less $25,001 to $50,000 $50,001 to $100,000 $100,001 to $500,000 Page 29 of33 $500,001 or more Will project directly increase property tax base value by 25 the following: $1,000,000 to $5,000,000 $5,000,000 to $10,000,000 $10,000,000 or more SCORING CRITERIA Information Technol0gy Will the project implement an information technology improvement that the IT ranking 26 system scores: In the top 1/3 of project requests In the middel1/3 of project requests In the lower 1/3 of project requests Will project provide for improved security of government 27 recordslinformation7 Department Importance Factors What importance does the department assign to the project 28 request? Top 1/30f department priorities Middle 1/3 of department priorities Lower 1/36f department p(iorities Project Beneficiary Page 30 of33 Factors What percent (estimated) of the residents will benefit 29 from the project? 10% or less 11% to 50% 51% or more Page 31 of33 Exhibit D: City of Palo Alto Infrastructure Storytelling Outline I. Palo Alto is a wonderful place a. Diverse population b. Valued amenities c, Rich history of community, technology and pursuit of learning II. What is Infrastructure and why is it important for Palo Alto? a, Definition -facilities necessary for the community to operate b, Examples of City infrastructure i. Visible -roads, parks, libraries, city hall, rec center, fire trucks and stations ii. Invisible -broadband network, wi-fi network, storm sewer system, sanitary sewer system, water treatment and distribution, seismic retrofitting c, Importance i. Supports quality of life 1, children's theater, libraries, access to the Bay, access to transportation ii. Supports the local, national, and international e'conomy 1, City selected as an employment center 2. transport of goods, services and information globally III. Getting infrastructure built through the Capital Improvement Program (CIP) a. Requires planning years in advance by City leadership b. Planning occurs through the Capital Improvement Program (CIP) c. CIP Definition: long term financial policy that provides blueprint for investment in the City d. CIP Timeline e. City staff responsible for engaging with community (residents, businesses, university, schools, etc) in the planning stages IV. Project Selection a. Revenue Projections and Debt Issuance b. Selection Criteria c. Administration recommends and City Council approves CIP V. Citizen Involve~ent in CIP a. Citizen involvement is critical for i. directing how dollars are spent ii. creating the best public policy b. How to get involved i. Citizen surveys ii. Public meetings Page 32 of33 m. One-on-one meetings iv. Boards and Commissions v. Emails vi. Telephone calls vii. Neighborhood meetings c. Sharing information early and often i. Creating dialogue and understanding on project priorities ii. Developing citizen ambassadors for before and after funding projects Page 33 of33