HomeMy WebLinkAboutStaff Report 335-10TO: .
FROM:
DATE:
HONORABLE CITY COUNCIL
ASSISTANT CITY MANAGER AND ADMINISTRATIVE SERVICES
DEPARTMENT
AUGUST 2, 2010 CMR: 335:10
REPORT TYPE: CONSENT
SUBJECT: Approval of Amendment to City Manager's Employment Agreement
Relating to Housing Capital Improvements and City Loan and Capital
Improvements Plan Up to $250,000 and Adoption of Ordinance Amending
the Fiscal Year 2011 Budget in the Amount of $125,000 from the General
Fund Budget Stabilization Reserves for Capital Improvements to City
Manager's Home
Recommendation
l. In accordance with the City Manager's Employment Agreement, City Council approval is
requested for $250,000 of potential capital improvements to City Manager's house (as identified)
to allow a reallocation of the equity ownership share.
2. Amendment of the City Manager's Employment Agreement to allow the City to loan the City
Manager up to $125,000 for Capital Improvements to the home at 335 Webster. Loans will be
made on a dollar for dollar matehing basis, with an equal equity eontribution made by the City
Manager.
3. Amendment to the City Manager's Employment Agreement,that e1arifies that the Mayor may
approve City Manager funded capital improvements less than $50,000 in the future to allow for a
reallocation of equity interests. (Since this CMR approves $250,000 in improvements for
reallocation purposes, this change will only affect future improvements beyond $250,000. All
such improvements would be funded by the City Manager.)
4. Approve a Budget Amendment Ordinance (BAO) in the Amount of $125,000 funded from the
General Fund Budget Stabilization Reserve.
CMR:335:10 Pagelof4
Background
The City Manager purchased a home at 335 Webster Street in March 2010 for $1,875,000.
Under the terms of his employment agreement with the City, the City contributed 75% of the
purchase price through an equity investment and loaned the Manager the remaining 25%. The
City equity contribution was $1,406,250 and the Manager's Loan is $468,750. The City'S equity
share in the house is 75% and the Manager's equity share is 25%.
The Manager's Employment Agreement allows a City equity contribution bf$I,500,000 and a
Manager's Loan of$500,000 for a total of $2,000,000.
The City Manager's Employment Agreement also allows for capital improvements (Section 6.7)
that result in a reallocation of equity ownership interests only with the written approval of the
City in advance of the initiation of capital improvements.
The City Manager's Employment Agreement also requires City Council approval of any
additional mortgages recorded against the property.
Discussion
The City Manager wants to make capital improvements to his house and seeks City approval.
The Manager plans a series of house improvements that could total up to $250,000 and seeks
Council approval in advance for such improvements. These primarily include but are not limited
to kitchen renovation and improvements, bathroom improvements including new tile and
flooring, new flooring in the house with stair repair, painting, plumbing and electrical work and
some landscaping. If the full $250,000 in capital improvements were made, the City'S equity
share in the house would be 66.2% and the Manager's share would be 33.8%.
City Equity Keene's Equity
Transactions Share % Share %
Purchase Price 1,875,000 1,406,250 75.0% 468,750 25.0%
Potential Capital
Improvements 250,000 0 250,000
2,125,000 1,406,250 66.2% 718,750 33.8%
In addition, the City Manager seeks to make full use of the $2,000,000 in equity and loans in the
City Manager Employment agreement by amending the agreement to allow up to $}25,000 in
city loans towards capital improvements. Such loans would only be given on a matching basis
through equal direet equity contributions by the City Manager, with the loans to be repaid under
the interest rates and term of the loan language in the current City Manager Employment
Agreement.
For example, if the City Manager made capital improvements totaling $100,000, the Manager
would directly provide $50,000 and the City would loan the Manager $50,000. The City
Manager is seeking approval for $250,000 in capital improvements through this CMR but City
CMR:335:10 Page 2 of4
loans will be made only on a matching basis to any Manager's Contribution and the total in
Capital Improvement Loans will not exceed $125,000.
While unlikely that the City Manager will make more capital improvements than the $250,000
authorization requested in this item, it is requested that any further future capital improvements
less than $50,000 (that reallocate equity share) be authorized by the Mayor's review and
approval on behalf of the City. Any such improvements would be funded by the City Manager
and his equity share would increase by such amount.
Resource Impact
Recommended action could result in City Loan for Capital Improvements to the City Manager
totaling $125,000. Consistent with his house loan, funding would come from the General Fund'
Budget Stabilization Reserve (BSR). As a result of this transaction the BSR will be reduced from
$23,885,611 to $23,760,611. In FY 2010 a BAO for $2,000,000 was approved by Council, but
only $1,875,000 was used to purchase the property. The remaining funds were returned to the
BSR.'Ifiis action item would re-instate those funds. The loan would be repaid with bi-weekly
payments by the Manager with interest as stated in the City Manager's Employment Agreement
section 6.3.3 (the rate will be equal to the lower 5.5% or the sum of the City's portfolio rate,
which is defined as the anuual rate of return on investment funds of the City of Palo Alto during
the most recent fiscal year, plus one quarter percent (114%) as calculated annually by the City's
Director of Administrative Services.
Policy Impact
The Capital Improvements Loan request is within the existing $2 million equity and loan
commitment cap from the City in the City Manager's Employment Agreement. Nevertheless,
staff appropriately analyzed the request as any loan can run a risk given changes in real estate
market conditions and the potential defanIt as in any loan. Depending on the actual amount
invested in the home capital improvements, if sold in the short-term the house would need to sell
for $2.0-$2.26 million for the City to recuperate its investment. Given that the transaetion stays
within the $2 million cap originally approved by Council, staff feels comfortable in
recommending the transactions. TIle capital improvements will add to the value of the property.
In addition, the expected tenure of the City Manager provides time for the property to appreciate.
City Manager Loan
(Original)
Potential Capital Loan
(Maximum)
Total Loans
City's Equity Share
Total City Transllction
CMR:335:10
468,750
125,000 (requires watching by City Manager)
593,750
1,406,250
2,000,000
Page 3 of 4
Attachment A: Amendment No. One to Employment Agreement Between the City Of Palo Alto
and James R. Keene, Jr.
Exhibit A: Employment Agreement Between the City of Palo Alto and James R.
Keene, Jr.
Attachment B: Ordinance of the Council of the City of Palo Alto Amending the Budget for
Fiscal Year 2011 to Provide Appropriations of$125,000 from the General Fund
Budget Stabilization Reserve for Capital Imp vements to the City Manager's
Home
PREPARED BY:
CITY MANAGER APPROVAL:
CMR:335:1O
L OPEREZ
Director, Administrative Services
PAMELA W. ANTIL
Assistant City Manager
Page4of4
ATTACHMENT A
AMENDMENT NO. ONE TO EMPLOYMENT AGREEMENT
BETWEEN THE CITY OF PALO ALTO AND
JAMES R. KEENE, JR.
Ibis Amendment No. One to EMPLOYMENT AGREEMENT BETWEEN THE
CITY OF PALO ALTO AND JAMES R. KEENE, JF.. ("Agreement") is entered into on August
-' 2010 by and between the CITY OF PALO ALTO, a California chartered municipal
corporation ("City"), and JAMES R. KEENE, JR. ("Manager"), an individual, located at 250
Hamilton Avenue 7u, Floor, Palo Alto, CA.
RECIT ALS:
WHEREAS, the original EMPLOYMENT AGREEMENT BETWEEN THE Crry
OF PALO ALTO AND JAMESR KEENE, JR., attached hereto and incorporated herein as Exhibit
"A" was entered into between the parties for the serviees as City Manager on or about August 8,
2008; and
WHEREAS, the parties wish to amend the Contract;
NOW, THEREFORE, in consideration of the covenants, terms, conditions, and
provisions of this Amendment, the parties agree:
SECTION 1: Section 6.7.1. Approval of Capital ImprOVements of$50,000 or Less
is hereby added to read as follows:
"6.7.1. Approval of Capital Improvements of $50,000 or Less. For capital
improvements of less than $50,000 resulting in a change in equity share, "City Approval" may be
granted in writing by the Mayor."
SECTION 2: Section 6.7.2. Capital Improvements Loan is hereby added to read as
follows:
"6.7.2. Capital Improvements Loan. City shall loan the Manager a sum not to exceed
$125,000 at the loan interest rates and term in Section 6.3.3, to be used for capital improvements to
the home on a matehing contribution basis ("Capital Improvements Loan"). For every dollar the City
Manager contributes through a Manager's Contribution to capital improveroents, the City will loan
the Manager an equivalcnt amount in matching funds, capped at a total Capital Improvements Loan
of $125,000. For example, if the City Manager makes a contribution of $50,000 (Manager's
Contribution), the City will loan the Manager $50,000 for a total of $100,000 in eapital
improvements. If the Manager makes a contribution of $150,000 (Manager's Contribution), the
City'S loan match will be capped at $125,000. Such capital improvements and a City Capital
Improvements Loan can be made in increments but in no ease will the City loan the Manager a total
of more than $125,000 for capital improvements. The loan amount will result in a reallocation of
ownership interest where the City's interest will decrease and City Manager's interest will increase
as described in paragraph 6.7.
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100727 ,il 0111497
SECTION 3. Except as herein modified, all other provisions of the Contract,
including any exhibits and subsequent amendments thereto, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have by their duly authon7.ed representatives
executed this Amendment on the date first above written.
APPROVED AS TO FORM: CITY OF PALO ALTO
City Attorney City Manager
APPROVED:
Mayor
Director of Administrative Services
Title: _________ _
Attachments:
EXHIBIT "A": EMPLOYMENT AGREEMENT BETWEEN THE CITY OF PALO ALTO
AND JAMES R. KEENE, JR.
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100727 'h 0111497
Exhibit A
EMPLOYMENT AGREEMENT BETWEEN
THE CITY OF PALO ALTO AND JAMES R. KEENE, JR.
TIllS AGREEMENT is between the City of Palo Alto, a California
municipal corporation and chartered city ("City") and James R. Keene, Jr., an individual
("Manager"). It is effective on the latest date next to the signatures on the last page.
This Agreement is entered into on the basis of the following facts, among
others
A. City, acting by and through its duly elected Ciry Council, desires to
employ Manager as its City Manager subject to the terms and conditions set forth in this
Agreement and in the provisions of the Charter of the City of Palo Alto (the "Charter");
B. The Charter provides, among other things, that the City Manager shall
be appointed for an indefinite term by a majority vote offue City Council and that he
may be removed at the pleasure of the City Council by a two-thirds vote on a reso lution
passed for that pUrpose;
C. Manager desires to be employed by the City of Palo Alto as its City
Manager, subject to the terms and conditions set forth in this Agreement and in the
Charter;
D. Manager desires a predictable amount of severance notice and
severance pay;
E. City, mindful of the frequency, administrative disruption, and expense
of employment-related litigation, desires to prevent litigation arising from any
termination of the employment relationship with Manager;
F. City and Manager desire to establish specific terms and conditions
relating to compensation and benefits, housing assistance, performance evaluations, and
related matters;
BASED UPON THE FOREGOING, CITY AND MANAGER AGREE AS
FOLLOWS:
1. Employment Start Date. City hereby appoints and employs Manager
as City Manager, and Manager hereby accepts the appointment and employment, for an
indefmite term that begins on September 2, 2008, provided Manager actually reports for
and commences work on that date (the "Employment Start Date"). In the event Manager
..
does not actually report for and commence work on September 2, 2008, the Employment
Start Date will be the date, if any, as otherwise mutually agreed by the parties.
2. Duties of Manager. Manager shall perform the duties established for
the City Manager by 1he Charter, Palo Alto Murlicipal Code, direction of the City
Council, or as otherwise provided by law, ordinance, or regulation.
2.1 Full Energy and Skill. Manager shall devote his full energy,
skill, ability, and productive time to the performance of Manager's duties. Manager
understands that the Charter requires that the City Manager devote his entire work time to
the discharge of the duties ofthe office.
2.2 No Conflict. Manager shall not engage in any activity which is
actually or potentially in conflict with, inimical to, or which interferes with the
performance of Manager's duties.
2.3 Uncompensated Professional Activities. Manager may attend
and/or participate in uncompensated professional activities, including but not limited to
the activities described in subsections 8.3 and 8.4, provided that Manager's ability to
perform the duties described in this Section 2 is not unreasonably compromised or
impaired. Manager shall inform the City Council in writing in advance of absences of
more than one day related to such activities.
3. Compensation. Manager shall be compensated as provided in this
Section 3.
3.1 Initial Compensation. Commencing on and continuing from the
Employment Start Date, Manager will receive an initial base annual salary of Two
Hundred Forty Thousand and No/lOO Dollars ($240,000.00), prorated and paid on City'S
normal paydays.
3.2 Salary Adjustments. Manager shall be entitled to the same
percentage increase in his pay as any inflation or similar adjustment that the City
Council approves which applies to all Management and Professional Personnel and
Council Appointees. Not less than once each year, the City Council shall meet for the
express pUlpOse of evaluating the performance of Manager and determining whether to
grant him an individual incentive award based on performance. The City Council will act
in good faith in determining whether to provide the incentive award, but the ultimate
decision in this regard is within the sole discretion of the City Council. The Council may
also grant special labor market and/or internal equity adjustments to the Manager.
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4. Regular Benefits and Allowances. Manager will be eligible for, and
shall receive, all regular benefits (e.g., health insurance, PERScontribution paid by City7)
and vacation, sick leave, and management leave as are generally provided to
Management and Professional Personnel and Council Appointees from time to time by
the City Council.
5. Additional Benefits and Allowances. In addition to the benefits
specified in section 4, Manager will receive the following additional benefits and
allowances to the extent they are not already included in the regular benefits generally
provided to Management and Professional Personnel and Council Appointees.
5.1 Transportation Allowance. Manager's duties require that he
have available exclusive and unrestricted use of an automobile for business purposes and
Manager agrees to have a personal vehicle available for such use. In consideration of this,
City agrees to pay to Manager, during the term of this Agreement and in addition to other
salary and benefits, a transportation allowance of Six Hundred and NollOO Dollars
($600.00) per month. This transportation allowance will increase by the percentage
amount of any increases provided for transportation allowances received by Management
and Professional Personnel and Council appointees, rounded to the nearest five dollars ($
5.00) .. The transportation allowance includes reimbursement for an appropriate allocation
of vehicle insurance and all other expenses of vehicle ownership, maintenance and
operation. The Manager may also use the Transportation Allowance for alternative means
of transportation necessary and useful for the exercise of his duties. The time and manner
of payment will be in accord with City's normal procedures. Manager shall be solely
responsible for any personal federal or state tax liability arising from this transportation
allowance.
5.2 Retirement Contributions. City maintains an Intemal Revenue
Code § 401 (a) governmental money purchase retirement plan in which Manager will be
an eligible participant. City will make employer monthly contributions as a percent of the
prorated maximum contribution permitted by law. Starting in the month Manager
becomes eligible to participate in the 40 1 (a) plan, City will make an employer
contribution of 50% of the maximum contribution, prorated and paid monthly,
Commenci,ng in the month in which Manager completes three (3) years of service with
the City, City will make employer contributions of75% of the maximum contribution,
prorated and paid monthly. Commencing in the month in which Manager completes five
(5) years of service with the City, City will make employer contributions of 100010 of the
maximum contribution, prorated and paid monthly. An employer contribution will be
paid in the fmal month of employment if Manager' s last day of employment is the last
workday of the month. Otherwise, no contribution will be made in the last month of
employment.
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5.2.1 The maximum contribution for purposes of this
paragraph includes the legal maximum with cost of living adjustments provided under the
Intemal Revenue Code. It is not intended to and does not incorporate increases resulting
from future federal legislative or regulatory action.
5.2.2 By way of example, the contribution limit for 2008 is
$46,000.00. City will contribute $1,916.67 per month ($46,000.00112 == $3,833.33 * 50%
= $1,916.67) for those months Manager remains employed. If the Intemal Revenue
Service increases the contribution limit for years after 2008 based on a cost of living
adjustment, the new contribution limit will be used as the basis for calculating
contributions. After three (3) years of service the City contribution will be $2,875.00 per
month plus 75% of cost of living adjustments ($46,000.00 plus COLAI12 = $3,833.33 ...
75% = $2,875.00 plus 75% of COLA). After five (5) years of service, City will pay the
entire monthly amountof$3,833.33 plus COLA.
5.2.3 Manager will make any additional contributions required
under the plan, if any, and may make additional voluntary contributions, if permitted.
5.2.4 Manager is also eligible to make contributions to the City
Intemal Revenue Service Code 457 plan at his discretion, to the maximum extent allowed
under the plan document or by law, whichever is less.
5.3 Parking. City shall provide parking at the Civic Center at no
cost to Manager.
5.4 Leave Accrual Rate. Manager's tenure and long career in
public service has been considered to determine the accrual rate for annual leave,
including but not limited to vacation. As a result, Manager's initial vacation accrual rate
will be based on an annual accrual of two hundred (200) hqurs. Any other accrual rates
that are based on years of service will be applied at the maximum rate. Accruals will
begin upon assumption of employment.
5.5 Leave Balance upon Start of Employment. Manager will be
credited with one hundred twenty (120) hours of vacation leave and two hundred forty
(240) hours of sick leave upon reporting for work and actually starting employment.
6. Relocation and Housing Assistance. City will assist Manager with
relocation and the purchase of housing in Palo Alto as provided in this section 6.
6.1 Relocation Expenses. In accordance with City's compensation
plan for Management and Professional Personnel and Council Appointees and any related
policy, City shall bear the actual and reasonable expenses, not exceed Twenty Five
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Thousand and Noll 00 DolJars ($25,000), incurred within twelve (12) months of
beginning employment to move Manager and his family from his fonner home to Palo
Alto. Manager will keep an accurate record of all such expenses and present such record
with his request(s) for payment or reimbursement.
6.2 Temporary Housing. City will bear the actual and reasonable
monthly rental or lease cost, not to exceed Five Thousand and Noll 00 Dollars
($5,000.00) per month, for temporary housing located within the corporate limits of the
City, for a period not to exceed twelve (12) months, while Manager is seeking suitable
housing that qualifies for housing assistance provided in this section 6. Manager will
keep an accurate record of all such expenses and present such record(s) with his request
for payment or reimbursement. City will advance any refundable deposits and will be
reimbursed for such deposits by Manager (including interest, if any, paid by the deposit
holder) at the time the refund is paid or if the refund is refused by holder, at the time it
would otherwise be due.
6.3 Home Purchase and Method of Financing Purchase of Rome.
City will assist in purchasing a home for Manager and his family as provided in this
.subsection 6.3.
6.3.1 Time of Purchase. To be eligible for assistance under
this subsection 6.3, Manager will purchase a home within the corporate limits of the City
within a reasonable time after the Employment Start Date (the "Property"). The parties
anticipate this will occur within one year but acknowledge that market conditions may
make a longer period reasonable.
6.3.2 Manager's Contribution. Manager may contribute his
personal funds toward the purchase price of the Property (the "Manager's Contribution").
6.3.3 City Loan. Should the price of the home exceed
Manager's Contribution, if such contribution is made, City will provided to Manager a
loan (the "City Loan"), secured by a note and first deed of trust on Manager's tenancy in
common interest, for the home purchased by Manager, in an amount as determined by
Manager not to exceed FiVe Hundred Thousand and No/IOO Dollars ($500,000.00). The
City Loan will be fully amortized over a maximum term of30.years, but the term may be
shorter at Manager's request. The loan will be immediately due on sale. The interest on
the City Loan will be adjusted annually on July 1 as follows:
From the date of execution of the note, the rate will be
equal to the lower of 5.5% or the sum of the City's portfolio rate, which is defmed as the
armual rate ofretum on investment funds of the City of Palo Alto during the most recent
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fiscal year, plus one quarter percent (1/4%) as calculated annually by the City's DireCtor
of Administrative Services.
6.3.4 City Contribution Toward Purchase Price. In addition to
any Manager's Contribution and the City Loan provided to Manager, City will
contributed an additional amount, not to exceed One Million Five Hundred Thousand and
No/I 00 Dollars ($1,500,000.00) toward the purchase price ofthe Property. The purchase
price will include any real estate broker's fee payable by buyer, but does not include
closing costs, title insurance and related fees normally attributable to a buyer in Santa
Clara County, the reasonable and actual cost of which will be paid by the City. The City
contribution provided in this subsection will be made in a ratio of three (3) to one (I), as
compared to the total of the Manager's Contribution and the City Loan. Stated
differently, the City contribution will be 75% and the combination of Manager's
Contribution and the City Loan will be 25% of the purchase price, The City's
combination of equity contribution and City loan will notte exceed Two Million and
Noll 00 Dollars ($2,000,000).
Once the City contribution limit of One Million Five
Hundred Thousand and Noll 00 Dollars ($1,500,000.00) is reached, the City contribution
share of75% will cease. Any further contributions will be made as Manager's
Contribution or, if the City Loan limit has not been exhausted, by City Loan.
6.3.5 Equity Ownership Interests. If City participates in the
purchase of the home, the proportional ownership ofthe home will be shown on the deed
as the ratio of funds provided by Manager and City toward the purchase. By way of
example:
a. If the purchase price is Two Million and No/IOO Dollars
($2,000,000.00), Manager may utilize the full City Loan as his 25% contribution, with
the City making its 75% contribution, equal to the maximum contribution. Under this
scenario, the equity ownership of Manager will be will be 25% ($500,000/$2,000,000 =
25%) and the equity ownership of City in the Property will be 75%
($1,500,000/$2,000,000= 75%).
b. Similar to the prior scenario, but with a purchase price of
Two Million Five Hundred Thousand and Noll 00 Dollars ($2,500,000.00), Manager's
Contribution will be $500,000, in addition to the City Loan and City contribution. Under
this revised scenario, the equity ownership of Manager will be 40%
([$500,000+$500,000]/$2,500,000 = 40%) and the equity ownership of City in the
Property will be 60% ($1,500,000/$2,500,000 = 60%).
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· 6.3.6 Eguity Ownership Interests Not A Partnership. City and
Manager agreed to share the equity interest in the Property in order to consummate
transactions contemplated in this Agreement related to assisting Manager with purchasing
a home within Palo Alto city limits. Nothing herein shall be construed as creating a
partnership or other joint venture between Manager and the City, it being agreed that they
are not partners and did not intend by entering into this Agreement to form a partnership,
or otherwise to have the relationship of partners to one another.
6.3.7 Title Held As Tenants~In~Common. The Property will be
held by Manager and City as tenants~in-common, with Manager and City owning
proportional undivided interests, as determined under subsection 6.3.5, above. Manager
will have the exclusive right to 'occupy the Property and will not rent, lease or transfer
any interest to a third party without the written consent of City, which may be withheld in
City's sole discretion. Neither party may sell its interest in the Property separate from the
other and agrees to cooperate in the sale of its interest in the Property, as provided in
section 6.8, below. .
6.3.8 Execution of Documents. City and Manager will ,
cooperate in the preparation and execution of all title documents, notes, deeds of trust,
escrow instructions, agreements and other documents reasonably necessary to conform
the purchase of the home to the provisions or'this subsection, in a form mutually.
determined by Manager and the City Attorney. The deed will reflect the terms and
conditions ofthis Agreement. At the option of City, the documents may also include a
tenancy in common agreement supplementing the terms of this Agreement and a recorded
power of attorney in favor of City to facilitate the sale of Manager's interest under the
circumstances provided in section 6.8 in the event Manager is unable or unwilling to
cooperate in the sale.
6.4 No additional mortgages or liens. Except liens for taxes, .
special assessments, and the fIrst deed of trust referred to above, Manager shall not cause
any lien or mortgage to be recorded against the home except as expressly authorized in
writing by the City Council. The City Council shall not unreasonably withhold
permission for refInancing or equity loans that do not impair City's interest in the home.
6.5 Property Taxes and Insurance. Manager will pay property taxes
proportionate to Manager's equity ownership interest in the Property, as determined by
subsection 6.3.5 above and City will be responsible for its proportionate share. The equity
share of Manager may be provided through the City Loan or Manager's Contribution or
both. Manager will pay for all insurance on the home without reimbursement from City,
except as provided below. If City contributes to the purchase price of the Property,
Manager will obtain, and agrees to continue to maintain in force, comprehensive
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homeowner's insurance (HO· 3), including earthquake and, if applicable due to location,
flood coverage, for as long as City has a security interest or equity share in the home. All
such insurance will state the respective interests of the parties and provide that the
proceeds of any such insurance shall be paid to the parties as their respective interests
appear. City shall provide and/or pay the cost of earthquake and flood insurance.
6.6 Occupancy and Maintenance. Manager will reside at the
Property from the time of purchase and initial occupancy and will continue to occupy the
Property at all times as his principal residence during the term ofthis Agreement.
Manager will maintain the home in good condition and in compliance with all applicable
codes. Manager shall be solely responsible for all maintenance and repair costs, including
deductibles and repair and restoration of uninsured losses.
6.7 Capital Improvements. Manager may, at his sole expense,
make such improvements to the home as he deems beneficial, provided such
improvements do not cause the value of the Property to decline. For purposes of this
agreement, a capital improvement is the addition of a pennanent structural improvement
or restoration of some aspect of the Property that either increases the Property's resale
value or increases its useful life. With the approval of City, the actual costof each capital
improvement with a cost in excess ofTen Thousand and Noll 00 Dollars ($10,000.00)
will be treated as an addition to Manager's Contribution and used to reallocate equity
ownership interests at the time of sale, as provided in subsections 6.8 and 6.9, below, in
such amount(s) as the parties may mutually agree. City's approval, when sought for a
capital improvement that will result in the reallocation of equity ownership interests,
must be obtained in writing prior to the initiation of the capital improvement and may be
withheld in City's sole and absolute discretion.
6.8 Sale. The sale ofthe home will occur on the happening of one
of the following:
a.
subsections 6.9 and 6.10;
At the option of Manager, subject to the provisions of
b. The passing of 18 months following the termination of
the employment of Manager for any reason, whether voluntary or involuntary;
c. At the option of City, upon the occurrence of any default,
as defined in any agreement or document related to purchase or holding of the Property,
including the purchase and fmancing tenns of this Agreement;
d.. Should the Manager pennanently move out of the
Property or cease to use the Property as his primary residence; and
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e. Upon mutual agreement of the parties.
Notwithstanding the above, one party may purchase the home
by buying the interest of the other as provided in subsection 6.10.
6.9 Proceeds On Sale. Upon sale of the home, the proceeds of sale
shall be divided between the parties as follows:
a. The costs of sale, including, but not limited to escrow
fees, real estate broker's fees, and related expenses shall first be deducted from the gross
sales price to reach a net sales price ("Net Sales Price");
b. "Manager's Equity Share" will be equal to his equity
ownership percentage, determined by subsection 6.3.5 and, if applicable, subsection 6.7,
above, multiplied by the Net Sales Price and "City's Equity Share" will be equal to its
equity ownership percentage, determined by subsection 6.3.5 and, if applicable, .
subsection 6.7, above, multiplied by the Net Sales Price;
c. The outstanding balance of the City Loan, together with
any accrued, but unpaid, interest and all other amounts shall be deducted from Manager's
Equity Share and paid to City pursuant to the terms of the City Loan, and Manager shall
receive the remainder; and
d. City shall be paid the City's Equity Share, calculated as
set forth in clause (b) above; amounts paid in connection with the City Loan are
independent of City's Equity Share and shall not be credited toward City's Equity Share
and vice versa.
6.10 One Party's Right to Purchase the Interest of the Other Party.
6.10.1 City Right. If Manager determines to put the home up
for sale, either while he is still employed or after his employment is terminated, City shall
have the right to purchase Manager's interest rather than have the home sold and the
proceeds divided as provided above. In order to value the interests of the parties in the
home at that time, the home will be appraised, at City's expense, by a qualified real estate
appraiser acceptable to both parties. If the parties are unable to agree on an appraiser,
each party may hire and pay for its own appraiser. The value of the home will be the
average of the two appraisals. After the value of the home is determined, City may
purchase Manager's interest-in the home, the value of which shall be calculated using the
formula set forth in subsection 6.9; and
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6.10.2 Manager's Right. At any time while still employed by
the City in good standing, Manager may purchase the home by paying to City its Final
Equity Share as calculated under subsection 6.9 and paying any other amounts
outstanding, as provided in subsection 6.9 (c) (including the outstanding balance on the
loan, interest and other amounts). In order to determine the interests of the parties in the
home at the time, the home will be appraised, at City's expense, by a qualified real estate
appraiser acceptable to both parties. If the parties are unable to agree on an appraiser,
each party may hire and pay fodts own appraiser. The value of the home will bethe .
average of the two appraisals.
7. Duration of Eml?loyment. Manager understands and agrees that he
has no constitutionally protected property or other interest in his employment as City
Manager. He understands and agrees that he works at the will and pleasure of the City
Council and that he maybe terminated, or asked to resign at any time, with or without
cause, subject only to the requirements of Section 3 of Article IV of the Charter, a copy
of which has been provided .to Manager. It is understood that the public hearing accorded
Manager upon termination as provided in the referenced section of the Charter is not a
hearing in which wi~nesses will be called and examined nor in which Manager may
formally contest the reasons for termination. The hearing is solely for the purpose of
Manager being able to publicly respond to any reasons given for his termination by the
City Council.
7.1 Severance Pay. If Manager is terminated or asked to resign in
lieu of termination, he shall receive a cash payment, or payments (without interest) at
intervals specified by Manager, equivalent to the sum of his then-current monthly salary
multiplied by twelve (12) and the cash value, as reasonably determined by City, of his
monthly non-salary benefits multiplied by twelve (12). The monthly non-salary benefits
shall be those specified in sections 4 and 5.2. All normal withholdings as required by law
shall be made with respect to any amounts paid under this section.
7.2 Non-Payment of Severance Under Certain Conditions. If the
termination of Manager is the result of con,viction of a felony, he shall not be paid any
severance pay.
8. Payment of Expenses of Employment. City shall pay the following
usual and customary employment expenses:
8.1 The cost of any fidelity or other bonds required by law for the
City Manager.
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8.2 The cost to defend and indemnify Manager to the full extent of
the law as provided by the California Tort Claims Act (Govennnent Code § 810 et seq.),
or otherwise.
8.3 Reasonable dues for Manager's membership in professional
organizations associated with the office of City Manager. City will allow Manager
reasonable time away from the City to attend the meetings and annual conferences of
such organizations and will pay the cost of such attendance in accord with applicable City
policies and procedures. The organizations and activities include but are not limited to
the International City/County Management Association, League of California Cities,
Alliance for Innovation and the Transforming Local Govennnent Conference.
8.4 The cost of attending other conferences or events (i.e.
retirement dinners, out of town meetings, etc.) necessary to the proper discharge of his
duties.
9. Miscellaneous.
9.1 Notices. Notices given under this Agreement shall be in
writing and shall be either:
a. Served personally; or
b. Delivered by frrst-class United States mail, certified, with
postage prepaid and a return receipt requested; or
c. Sent by Federal Express, or some equivalent private mail
delivery service.
Notices shall be deemed received at the earlier of actual receipt or three (3)
days following deposit in the United States mail, postage prepaid. Notices shall be
directed to the addresses shown below, provided that a party may change such party's
address for notice by giving written notice to the other party in accordance with this
subsection.
. CITY: Attn: Mayor
City of Palo Alto
250 Hamilton Avenue
Palo Alto, CA 94301
Phone: (650) 329-2226
FAX: (650) 328-3631
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MANAGER: James R. Keene, Jr.
c/o 250 Hamilton A venue
Palo Alto, CA 94301
Phone: (650) 329·2563
FAX: (650) 325"5025
9.2 Entire AgreementJAmendrnent. This Agreement constitutes the
entire understanding and agreement between the parties as to those matters contained in
it, and supersedes any and all prior or contemporaneous agreements, representations and
understandings ofthe parties. This Agreement may be amended at any time by mutual
agreement of the parties, but any such amendment must be in writing, dated, and signed
by the parties and attached hereto.
9.3 Attorney's Fees. If any legal action or proceeding is brought to
enforce or interpret this Agreement, the prevailing party as determined by the court shall
be entitled to recover from the other party all reasonable costs and attorney's fees,
including such fees and costs as may be incurred in enforcing any judgment or order
entered in any such action.
9.3.1 Alternate Dispute Resolution. Nothing in this subsection
shall be read to prevent the parties from agreeing to some alternative method of dispute
resolution. If such a method is agreed to, any final detennination shall include an award
of attorney's fees and costs by the presiding officer.
9.4 Severability. In the event any portion of this Agreement is
declared void or unenforceable, such portion shall be severed from this Agreement and
the remaining provisions shall remain in effect, unless the result of such severance would
be to substantially alter this Agreement or the obligations ofthe parties, in which case
this Agreement shall be immediately tenninated.
9.5 Waiver. Any :fuilure of a party to insist upon strict compliance
with any tenn, undertaking, or condition of this Agreement shall not be deemed to be a
waiver of such tenn, undertaking, or condition. To be effective, a waiver must be in
writing, signed and dated by the parties.
9.6 Employee's Independent Review. Employee acknowledges
that he has had the opportunity and has conducted an independent review of the fmancial,
tax and legal effect of this Agreement. Employee acknowledges that he has made an
independent judgment upon the financial, tax and legal effects of this Agreement and has
<not relied upon any representation of City, its officers, agents or employees other than
those expressly set forth in this Agreement.
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,
•
9.7 Governing Law and Venue. This Agreement shall be governed
by and construed in accordance with the laws of the State of California. Manager and
City agree that venue for any dispute shall be in Santa Clara County, California.
9.8 Section Headings. The headings on each of the sections and
subsections of this Agreement are for the convenience of the parties only and do not limit
or expand the contents of any such section or subsection.
Dated: rqJu,;z-y CITY OF PALO ALTO
~ d:r/)e
Larry Klein
By
Mayor
Attest
Dated: ~-«' .... ~ MANAGER
Approved as to Form:
1~ (ff City Attorney
/I
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ATTACHMENT B
ORDINANCE NO.xxxx
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING THE BUDGET FOR FISCAL YEAR 2011 TO PROVIDE
APPROPRIATIONS OF $125,000 FROM THE GENERAL FUND BUDGET
STABILIZATION RESERVE FOR CAPITAL IMPROVEMENTS TO THE
CITY MANAGER'S HOME
The Council of the City of Palo Alto does ORDAIN as follows:
SECTION 1. The Council of the City of Palo Alto finds and
determines as follows:
A. Pursuant to the provisions of Section 12 of Article III
of the Charter of the City of Palo Alto, the Council on June 28,
2010 did adopt a budget for Fiscal Year 2011; and
B. In accordance with the City Manager's employment
agreement, the City is to provide up to $1,500,000 towards the
purchase of a home within the City of Palo Alto. The City will
also provide a $500,000 loan to the City Manager with a 30 year
term, with an interest rate of 5.5% or the sum of the City's
portfolio rate plus one-quarter percent, whichever is lower. The
City will share in the home's equity in proportion to the cost of
the home and the City's contribution; and
C. In March 2010, the City Manager purchased a home at 355
Webster Street, Palo Alto, CA, 94301. The purchase price totaled
$1,875,000. The City's equity share is $1,406,250 and City
Manager equity share is $468,750. The City Manager's loan
totaled $468,750, a 30 year term at the City's portfolio rate
plus one-quarter percent. The balance remaining of $125,000 was
returned to the Budget Stabilization Reserve; and
D. The City Manager's employment agreement also allows for
capital improvement to the home, per Section 6.7 of the
employment agreement; and
E. The City Manager plans a series of house improvements
at a total estimated cost of $250,000, and
F. Per approval of the City Manager's amended employment
agreement on August 2, 2010, the cost sharing for the planned
improvements will be made on a dollar for dollar matching basis,
with an equal equity contribution made by the City Manager; and
G. City Council authorization is needed to amend the
Fiscal Year 2011 budget to make an additional appropriation of
$125,000 (One Hundred Twenty Five Thousand Dollars) for the
City's contribution to costs associated with capital improvements
to the City Manager's home located at 355 Webster Street, Palo
Alto, CA, 94301.
SECTION 2. The sum of $125,000 (One Hundred Twenty Five
Thousand Dollars) is hereby appropriated to Building and Building
Improvement expenses in the Administrative Services Real Estate
department, and the Budget Stabilization Reserve is
correspondingly reduced.
SECTION 3. The Budget Stabilization Reserve is hereby decreased
by the sum of $125,000 (One Hundred Twenty Five Thousand Dollars).
As a result of this change the Budget Stabilization Reserve will be
reduced from $23,885,611 to $23,760,611.
SECTION 4. As specified in Section 2.28.080(a) of the Palo Alto
Municipal Code, a two-thirds vote of the City Council is required to
adopt this ordinance
SECTION 5. The Council of the City of Palo Alto hereby finds
that this is not a project under the California Environmental
Quality Act and, therefore, no environmental impact assessment is
necessary.
SECTION 6. As provided in Section 2.04.350 of the Palo Alto
Municipal Code, this Ordinance shall become effective upon adoption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:
City Clerk
APPROVED AS TO FORM:
City Attorney
APPROVED:
Mayor
City Manager
Director
Services
of Administrative