HomeMy WebLinkAboutStaff Report 1338City of Palo Alto (ID # 1338)
Policy and Services Committee Staff Report
Report Type:Meeting Date: 4/20/2011
April 20, 2011 Page 1 of 12
(ID # 1338)
Summary Title: SUMC Development Agreement Review
Title: Review of the Stanford University Medical Center Facilities Renewal and
Replacement Project Draft Development Agreement
From:City Manager
Lead Department: Planning and Community Environment
RECOMMENDATION
Staff recommends that the Policy and Services Committee review and comment on the
Stanford University Medical Center (SUMC) Facilities Renewal and Replacement Project Draft
Development Agreement, and forward those comments to the City Council to be reviewed as
part of the overall entitlement package for the SUMC Project.
This is essentially the same report that was considered at the Finance Committee at its meeting
in March on this subject. Staff continues to meet with Stanford to resolve outstanding issues
and as such, may have an amended recommendation to share with the Policy and Services
Committee for the April 20, 2011 meeting, but after this staff report goes out in the packet.
BACKGROUND
Description of Project
The Stanford University Medical Center (SUMC) comprises the general area between Sand Hill
Road, Vineyard Lane, Quarry Road, Pasteur Drive, and including Welch Road and Blake Wilbur
Drive. The applicant is proposing the demolition of the existing Stanford Hospital and Clinics
(SHC), construction of new hospital buildings, renovation and expansion of the Lucile Packard
Children’s Hospital (LPCH), reconstruction of the School of Medicine (SoM) facilities, and
construction of new medical office buildings and parking structure as well as the renovation of
the Hoover Pavilion to meet State mandated seismic safety standards (SB 1953) and to address
capacity issues, changing patient needs and modernization requirements.
The SUMC Project, the largest development project in recent history, consists of 68 acres and
would add approximately 1.3 Million net square feet of new development over an approximate
20 year build out period. The Project is expected to generate a total of 2,417 new employees or
2,242 full-time equivalent employees. During the most intensive period of construction, the
average number of construction workers on site would range from 500-800 workers. By full
buildout the SUMC Project is projected to increase the daily average number of occupied beds
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by 210. The Emergency Department would be expanded from 11,700 square feet to 47,892
square feet and the number of treatment spaces would be increased from 38 to 51. As a result,
by full occupancy ED trips will be expanded from 116 per day to 199 per day. By full buildout
the SUMC Project is projected to increase annual outpatient visits by 215,050. As discussed in
more detail below, the fiscal impacts of the Project are largely driven by the projected
employee and patient increases.
Summary of Updated Fiscal Reports
On January 12, 2011, Stanford’s consultant CBRE informed the City that there had been a slight
shifting of the SUMC Project phasing that could impact the fiscal analysis. City staff requested
its fiscal consultant ADE to update its fiscal analysis to account for the updated project phasing
and also to run the fiscal analysis through the life of the project (51 years), rather than the
previous 31 years used by CBRE. The 51 year period better aligns with the project conditions
imposed through the Development Agreement. An updated version of ADE’s Fiscal Report is
included as Attachment C. Table 1 contains an annualized summary of ADE’s fiscal analysis in
current dollars for the time period of 2011 through 2062. For comparison purposes, Table 1
contains a staff extrapolation CBRE’s original 31 year analysis out to 51 years. ADE’s updated
analysis now projects a cumulative project related deficit for the City of $8.46 million in
constant dollars and CBRE’s extrapolated projection shows a surplus of approximately $6.5
million in constant dollars. Both projections assume that all projected revenues are realized.
Table 1
Comparative Fiscal Analysis of Stanford University Medical Center Project
Annualized Projection of Fiscal Impacts 2011-2062 (51 Years)
ADE Analysis CBRE Analysis
Mar 2011 Jan 2011 (1)ADE minus CBRE
Total Total
Item Projected Projected Difference
General Fund Revenue
Sales Tax
SUMC Direct Purchasing $
1,744,151 $
1,744,151 $ -
SUMC Facilities On-site sales
6,090,816
6,090,816 -
SUMC Employee Spending
2,606,890
2,608,110
(1,220)
SUMC Overnight Visitor Spending
13,229
17,620
(4,391)
Construction Related Purchasing
8,148,415
8,148,415 -
Construction Worker Spending
16,303
112,425
(96,122)
Property Tax
2,289,664
2,612,552
(322,888)
April 20, 2011 Page 3 of 12
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Transient Occupancy Tax
270,994
355,533
(84,539)
Utility Users Tax
13,166,846
13,856,432
(689,586)
Other
Motor Vehicle In-Lieu Fees
558,906
717,111
(158,205)
Fines and Penalties
1,430,999
1,430,985 14
Sub-Total $
36,337,213 $
37,694,150 $
(1,356,937)
General Fund Expense
City Attorney
1,175,710
136,431
1,039,279
City Auditor
326,580 -
326,580
City Clerk
457,205 -
457,205
City Council - - -
City Manager
718,476
109,530
608,946
Administrative Services
3,037,227
704,037
2,333,190
Human Resources
979,751
553,666
426,085
Community Services
2,727,556
4,248,112
(1,520,556)
Fire
8,270,588
7,400,866
869,722
Library
843,456
967,930
(124,474)
Planning and Community Env
2,573,192
1,526,574
1,046,618
Police
14,280,055
10,242,902
4,037,153
Public Works
6,522,643
3,394,725
3,127,918
Non-Departmental
2,883,887
1,915,928
967,959
Sub-Total $
44,796,326 $
31,200,701 $
13,595,625
Net Surplus/(Deficit)$
(8,459,113)$
6,493,449 $
(14,952,562)
(1)This is a staff generated estimate based on CBRE’s January 12, 2011 31-year analysis.
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Purpose of Development Agreements
The California Planning and Zoning Law authorizes cities to enter into “development
agreements” which grant certain rights to developers, typically in exchange for other benefits
which cities otherwise do not have the police power to require. The scope of a development
agreement is prescribed by State law. (Government Code section 65864-65869.5.) A
development agreement has the effect of immediately vesting a developer’s right to proceed
under existing zoning and other local laws, without having to worry about later changes in
those zoning requirements imposing expensive new requirements or preventing the project
from proceeding. Development agreements are also generally needed for bond financing. The
Government Code imposes various requirements on development agreements, including a
requirement that each development agreement specify its duration. Additional background
information on development agreements is contained in Attachment A.
Development Agreement Negotiations
Based on preliminary input from the Council and the public, Staff proposed four major guiding
principles governing negotiation of specific deal terms (CMR 197:10):
1. Minimize fiscal impacts to the City. Ensure that the project does not have a negative fiscal
impact on the City through focusing, among other things, on revenue guarantees and robust
analysis of long term project expenses.
2. Require project mitigation. Ensure that zoning ordinance and Conditions of Approval
adequately address all project mitigations. Ensure that the General Fund is not unfairly
burdened with long term impacts of project.
3. Preserve community health care. Ensure that local benefits of hospital and clinics will be
retained, while transitioning towards greater world class hospital status.
4. Enhance City infrastructure. Recognize mutual interest in preserving high standard of
economic and community vitality. Partner with Stanford to fund the long-term infrastructure
needs of the community (capital programs, housing, transportation, broadband).
On January 18, 2011, Stanford submitted an updated Development Agreement proposal to the
City (Attachment A). On January 31, 2011, the Council reviewed the revised proposal and
indicated general support for the direction the agreement was taking and preliminary review
schedule for the project. Council input and questions received have informed staff during
continuing negotiations with Stanford, focusing on the following areas:
1. Minimizing fiscal impacts to City by including a revenue guarantee or other assurance that
maintains service cost neutrality for the City of Palo Alto. This should include an inflationary
factor ensuring that the project does not deplete city services in the long term and is not
subsidized with existing city revenues.
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2. Maintaining maximum flexibility in terms of how the Health Care, Housing and Community
Improvement and Climate Change/Sustainable Communities funds are expended and defining a
clear and understandable funding schedule.
3. Ensuring that Transportation Demand Management (TDM) mitigations are feasible,
measureable and enforceable. Growing concerns over the long term future of Caltrain require
that the mitigation measure and TDM program have sufficient flexibility to adjust for any
program changes made to current Caltrain operations. (See Attachment D for a comprehensive
discussion of the proposed TDM program.)
DISCUSSION
Draft Development Agreement
Development agreements are mutually agreeable contracts and thus the parties have broad
latitude on negotiating terms. At a minimum, however, State law requires a Development
Agreement to specify the duration of the agreement, the permitted uses of the property, the
density or intensity of use, the maximum height and size of proposed buildings, and provisions
for reservation or dedication of land for public purposes. In addition, it is typical for a
development agreement to include a package of community benefits in exchange for the
vested rights conferred.
Summary of Terms of Agreement
A Draft Development Agreement is included as Attachment B and is annotated to show the
areas that still need to be resolved. Subject to final approval by the Council, the respective
negotiating teams have reached agreement on most of the principle terms of the agreement as
well as the major scope of the community benefit package. Unfortunately, there are
outstanding issues that, contrary to our expectations, staff has been unable to resolve. Below is
a discussion of the key terms of the agreement as well as the proposed community benefits:
1. Duration of Agreement (Section 18(a)): The basic term of the Agreement is 30 years;
however, there are certain obligations that are longer. These longer provisions include the
indemnity provision and maintenance of the TDM program. The term of the Development
Agreement establishes the length of time which the Council agrees to lock in the existing zoning
and development regulations, thereby relinquishing future Council’s land use authority over the
property. By providing this land use certainty, the applicant is able to secure more favorable
financing terms, significantly driving down the costs of the overall project. A thirty year term
exceeds the terms of other City Development Agreements, but given the scope and nature of
this project, staff believes the extended term is warranted.
2. Permitted and Conditionally Permitted Uses (Section 6(b)):The permitted uses of the
Property will be set forth in the Hospital District zoning ordinance, which is being drafted for
the project and would be reviewed by Council in mid May.In general, hospital, clinic and
school of medicine uses will be permitted subject to a conditional use permit.
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3. Maximum height and density (Section 6(c)): The height and density of the buildings will be
set forth in the Hospital District zoning ordinance. In general, the Hospital District will contain a
130 feet height limit, 40% site coverage and a maximum Floor Area Ratio of 1.5 to 1.
Reservation of Easements (Section 6(n)): With the exception of easements for City owned
public utilities, the City will not require any easements for park or open space or other public
facilities.
4. Payment of Fees (Section 8(b)):Applicants will pay all processing and permit fees in
accordance with the rates in effect at the time the fee is due. With respect to existing
Development Impact Fees (i.e. housing, transportation and community facilities), the proposed
agreement has an incentive for pre-payment by providing that all fees paid prior to December
31, 2011, would be subject to the rates in effect at the time the agreement is signed. All impact
fees paid between December 31, 2011 and December 31, 2019 would be subject to a CPI-U
adjustment for the San Francisco-Oakland-San Jose (CMSA). Finally all fees paid after December
31, 2019 would be at the rates in effect at the time of payment, thus providing a disincentive
for deferring payment of impact fees. The project would be exempt from new Development
Impact fees until 2019.
5. Indemnity (Section 9):The SUMC Parties will indemnify the City in the event that a legal
action is brought by a third party to set aside any of the project approval. In addition, the
SUMC will pay for the City’s reasonable costs of defending such an action.
6. Periodic Review (Section 12):The SUMC Parties will file an Annual Report describing their
progress on the Project and demonstrating compliance with the Development Agreement. In
addition, the City shall submit a supplement to the Annual Report containing an accounting of
all funds received under the Development Agreement.The Planning Department will be the
lead on this task with Administrative Services assisting in validating information.
Summary of Community Benefits and Project Mitigations
Health Care Benefit
1. In-patient and Out-patient benefits: Payment of $300,000 per year for a period of ten years
for health care services not currently provided for a total of $3.0 million. These payments are
to be specifically used for Palo Alto low income residents.
2. Community Health Programs: One-time payment of $4,000,000 to be used for community
based health and wellness programs. This will be paid 45 days after the effective date of the
Development Agreement.
Reduced Vehicle Trips
1. Stanford Hospitals will provide Go Passes to its hospital employees. Their estimated cost of
this mitigation is $90,907,500 over 51 years. The parties have mutually worked out a TDM
program that will provide for alternate TDM measures and/or penalties in the event an
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aggressive 35.1% alternative mode share is not achieved or Caltrain service is eliminated as a
result of ongoing financial difficulties.
2. To address the enhanced Go Pass program, SUMC will purchase and operate four new
Marguerite shuttles to support service to and from the train station. The capital and
operational cost over 51 years is $24,950,000.
3. Stanford will provide a permanent TDM Coordinator at the Hospitals in an amount of
$5,100,000 over 51 years.
4. The Hospitals will contribute to AC Transit to address potential capacity issues caused by the
project and will lease parking spaces at Ardenwood Park and Ride to encourage employees of
the hospital to use AC Transit and other transit options. The total cost of these additional
transit measures are $5,095,000.
Linkages
Stanford will fund various City improvements to enhance the pedestrian and bicycle
connections, including enhanced pedestrian and bicycle connection for the Intermodel Center
to El Camino Real and Quarry; improvements to the ROW to enhance pedestrian and bicycle
connection from west side of El Camino to Welch Road along Quarry Road, and improvements
to enhance the pedestrian connection between the Medical Center and the Stanford Shopping
Center in the area of the Barn. The total cost of these linkages is $3,350,000
Infrastructure/Housing
Stanford will provide $23,060,490, of which approximately $2,000,000 represents the housing
fee required for the clinics and the balance to be used by the City for other sustainable
neighborhood and community development and affordable housing programs. This fund could
be used for a wide variety of important infrastructure projects. This payment will be made in
three equal installments timed to the construction phases.
Climate Change/Sustainable Communities
Stanford will make a contribution of $12,000,000 paid in three equal installments for use in
projects and programs for a sustainable community also timed to the construction phases.
Fiscal
1. Stanford will provide a payment to address the projected deficit of the project as analyzed
by ADE. The deficit is a result of the gap between City revenues and expenditures generated by
the project over time. As discussed below, the amount of the payment has not yet been
established. Staff is meeting with Stanford and may have recommendations at the Committee
meeting in regard to resolution of the fiscal impact issues.
2. In addition Stanford will obtain a Use Tax Direct Payment Permit which will result in
$750,000 over the life of the project.
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Note that the City and Stanford differ in their valuation of the total benefit package in that
Stanford characterizes some of the required mitigations as community benefits. While they
are, in fact, mitigations, City staff recognizes that the bulk of the mitigations also have an
overall community benefit. Likewise many of the community benefits enhance the overall
project. In total, City staff has valued the total community benefit package to be approximately
$42,300,000 (without a revenue guarantee) and Stanford has valued it to be $173,452,500. (See
Exhibit E.)
Areas of Disagreement
Staff has continued meeting with SUMC representatives and has made progress on finalizing
the details of a Draft Development agreement. Unfortunately, there are still a few key
provisions that are unresolved. They are:
1. Agreement on a Cost Neutrality assurance that complies with Council direction.
2. Agreement on a tentative project phasing schedule to ensure that revenues cover expenses.
Cost Neutrality Agreement
One of City staff’s primary goals has been to assure that the Project is cost neutral to the City.
This goal is important for several reasons. First, one of Council’s major goals has been
economic sustainability. Going forward, Palo Alto must not only control costs, but with limited
revenue generating capacity, the City must ensure that private development is self-sustainable.
It is imperative that anticipated revenues generated from a large development project cover
the City expenses necessary to service the project.
Secondly, unlike most commercial development in the City, the majority of the SUMC
development will be exempt from property tax due to its non-profit status. Property taxes
represent an ongoing, relatively stable, and important revenue source to the City. Although
there is an ongoing, incremental annual sales tax stream from the project through direct and
indirect spending, it is somewhat nominal (one-time use taxes from construction are discussed
below) compared to ongoing costs. On the other hand, the Project is expected to add
approximately 2,417 full and part-time employees (not counting construction workers) and 210
average daily patients (not including visitors) which in turn will require additional community
resources. While cities at one time may have had revenue available to subsidize a portion of
these costs, that is no longer the case in this era of budget cuts and service reductions. This is
exacerbated by the fact that Palo Alto has approximately $500 Million in infrastructure needs.
Construction Use Tax
Stanford has offered to require its contractors to obtain the appropriate Use Tax permits to
maximize the allocation of Use Tax to the City, rather than to the County pool. Unfortunately,
this does not assure that the Contractors will in fact properly report and pay Use tax, nor that
the Use Tax will materialize at the levels predicted. Further, this does not provide any revenue
stream predictability and makes it very difficult for the City to budget. Again, because the
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project is exempt from Property Tax and is highly dependent on Use Taxes to cover expenses, a
guarantee of these revenues is essential to keeping the Project cost neutral. Without a revenue
guarantee, the projected deficit will increase by the revenues not realized.
City’s Approach: Partial Revenue Guarantee Based on Project Projections
In light of these factors, City staff recommends that the Development Agreement contain a Cost
Neutrality provision that has the following elements:
1. Guarantees the three primary sources of revenue that are most directly within Stanford’s
control –construction use tax, operating use tax and on-site sales tax. The projected total for
these three revenues sources is approximately $12.4 million.
2. Provides for an upfront payment to fund the operating deficit caused by projected revenues
falling short of projected expenditures.
3. Escalates the revenues by appropriate indices to account for inflation.
4. Each quarter the projected amounts would be compared to actual amounts; then annually if
the total amount does not meet the projected amount plus any annual CPI increases, SUMC
would be responsible for funding the deficit.
5. Periodic monitoring over the life of the Project to determine whether revenues are covering
expenses and if not an adjustment to the guarantee.
Staff’s approach is largely modeled after a similar project, the recently approved PAMF facility
in San Carlos. Staff acknowledges that this approach does not guarantee all of the revenue
projected by either fiscal consultant nor does it completely account for inflation. The largest
and most variable revenue source is construction use tax which is estimated by the fiscal
studies at approximately $8 million. Without this revenue source, projected revenues will fall
far short of covering projected costs. This source is largely within Stanford’s control as they are
uniquely positioned to require their contractor’s to obtain necessary permits to allocate the use
tax to the City. Also, the tax estimate was based on a construction budget provided by Stanford
and is completely outside the control of the City. Significant changes to the construction
budget could severely impact these revenues. Finally, because the City’s approach applies a
modest inflation factor which does not entirely align with the City’s projected labor costs, staff
is also recommending periodic monitoring of revenues and expenses to ensure cost neutrality
over the life of the project.
Stanford has objected to this approach for two major reasons. First, they are concerned that if
the construction phasing is pushed out or the construction budget shrinks, Stanford would end
up over paying. In response, staff believes that if construction were bumped out, the other
revenue sources dependent upon construction may not materialize either, so the guaranteed
revenue source becomes even more important to ensure stable budgeting for City resources
needed to service the Project. Second, Stanford has objected to this guarantee on the grounds
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that if the State were to re-allocate the Use Tax from local agencies to the State, Stanford
would be subject to “double taxation” with the guarantee.
Stanford’s Approach: Up Front Payment with No Revenue Guarantee
Stanford has proposed an alternative approach to the City’s Cost Neutrality proposal. Initially,
Stanford’s last offer made to the Finance Committee involves a lump sum up front payment of
$1.7 Million to offset the initial deficit predicted by the City’s fiscal consultant ADE.
(Attachment F.) As this proposal was made before Stanford adjusted the phasing schedule and
before ADE performed its extended analysis, it does not cover ADE’s current projected
operating deficit of $8.46 million. Further, while this proposal partially addresses the overall
operating deficit of the project it does not assure that all of the revenues predicted by the fiscal
consultants are achieved. Stanford’s offer partially accounts for inflation, but is still insufficient
to fully mitigate the 30 year inflated deficit projected by ADE.
Inflation Analysis
Because of the long term nature of the Project several council members have raised a concern
about inflation. To address this concern, ADE ran an inflation sensitivity analysis. ADE’s March
2011 inflation analysis is included as Attachment C. This analysis inflates revenues by various
indexes and inflates labor costs by 4.5%, the projection used in the City’s Long Range Financial
Forecast. As discussed in more detail in the City’s Long Range Financial Forecast, attempting to
forecast inflationary trends far out into the future is dependent upon a variety of factors.
Macro economic events such as recessions, federal deficit spending, and international supply
and demand for commodities such as oil can have immediate and dramatic effects on inflation.
In short, inflation trends cannot be predicted with certainty. However, the inflation sensitivity
analysis is instructive in showing that over time it is more likely that expenses will significantly
outpace revenues:
Table 2
SUMC Fiscal Analysis Summary with Inflation
March 7,2011
2011 2017 2029 2041
Revenues $
1,144,201 $
1,986,394 $
1,110,445 $
1,463,942
Expenditures -
1,147,107 2,217,563 3,539,721
Annual Net Revenues/(Costs)
1,144,201
839,286
(1,107,108)
(2,075,779)
Cumulative Net Revenue/(Costs)$
1,144,201 $
7,259,731 $
(210,485)$
(19,244,486)
April 20, 2011 Page 11 of 12
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Project Phasing and City Expenses
Other key issues are timing of the project and predictability of potential revenues, budgeting
for new expenses and timing of impact fees. Staff has proposed that a Project Phasing Schedule
be added to the Development Agreement that, with some limited predictability, allows the City
to determine when new revenues will begin and when to anticipate budgeting for new
expenses. Stanford has requested flexibility in project phasing. Resolution of this issue is largely
dependent upon the terms of a cost neutrality agreement. Staff recommends that a reliable
revenue stream be identified before employment is added and expenses incurred.
ENVIRONMENTAL REVIEW
Prior to acting on the entitlements for the Project, the Council must certify the Final
Environmental Impact Report (EIR). A hearing on certification of the Final EIR for this Project is
scheduled for mid-May.
NEXT STEPS
As the lead agency, the City of Palo Alto must certify the Final EIR before action can be taken on
the SUMC Project. Certification requires that the lead agency make findings that the Final EIR
complies with CEQA. The City Council will be considering the Final EIR at a public hearing in mid-
May 2011.
Additionally, the ARB is continuing their review of the architectural design of the SHC, LPCH,
SoM FIM 1, Hoover Pavilion renovation, Hoover Pavilion medical office building and parking
garage, Design Guidelines and Durand Way/Welch Road improvements. They will be making a
recommendation to the City Council on each of these components of the Project.
In early May 2011, the Commission will be reviewing the proposed Comprehensive Plan
amendments, the new Hospital Zone district, changes to the zoning ordinance, annexation,
conditional use permit and Development Agreement terms. The Commission will make a
recommendation to the City Council on each of these project components.
The City Council will be considering the recommendations from the ARB and the Commission at
a meeting now scheduled for June 6, 2011. At this meeting it is expected that the Council will
certify the Final EIR and act on the requested entitlements.
Attachments:
·Attachment A: CMR# 1283. January 31, 2011 (PDF)
·Attachment B: Draft Development Agreement, 3/9/11 (PDF)
·Attachment C: ADE Inflation Based Fiscal Analysis (PDF)
·Attachment D: TDM Program, March 2, 2010 (PDF)
·Attachment E: Analysis of Dev. Agreement Proposal (PDF)
·Attachment F: SUMC Palo Alto Cost Neutrality (PDF)
April 20, 2011 Page 12 of 12
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Prepared By:Steven Turner, Advance Planning Manager
Department Head:Curtis Williams, Director
City Manager Approval: James Keene, City Manager
A/73778958.2
DRAFT
3/9/11
This document is recorded
for the benefit of the City
of Palo Alto and is entitled
to be recorded free of charge
in accordance with Section 6103
of the Government Code.
After Recordation, mail to:
City Clerk
City of Palo Alto
250 Hamilton Avenue
P.O. Box 10250
Palo Alto, CA 94303
DEVELOPMENT AGREEMENT
Between
CITY OF PALO ALTO, a chartered city
and
STANFORD HOSPITAL AND CLINICS,
a California nonprofit public benefit corporation,
LUCILE SALTER PACKARD CHILDREN’S HOSPITAL AT STANFORD,
a California nonprofit public benefit corporation,
and
BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR
UNIVERSITY, a body having corporate powers under the laws of the State of
California
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A/73778958.2
[NOTE: ADD TABLE OF CONTENTS TO COMPLETED DOCUMENT]
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A/73778958.2
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (hereinafter “Agreement”) is
entered into as of this ___ day of _______, 2011, by and between the CITY OF
PALO ALTO, a chartered city of the State of California (“City”), STANFORD
HOSPITAL AND CLINICS, a California nonprofit public benefit corporation
(“SHC”), LUCILE SALTER PACKARD CHILDREN’S HOSPITAL AT
STANFORD, a California nonprofit public benefit corporation (“LPCH”), and
THE BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR
UNIVERSITY, a body having corporate powers under the laws of the State of
California (“University,” and together with SHC and LPCH, collectively, the
“SUMC Parties”).
R E C I T A L S
THIS AGREEMENT is entered into on the basis of the following facts,
understandings and intentions of the parties:
A. Definitions. These Recitals use certain terms with initial
capital letters that are defined in Section 1 of this Agreement. City and the
SUMC Parties intend to refer to those definitions when the capitalized terms are
used in these Recitals.
B. Outline of Terms. Stanford Hospital and Clinics and Lucile
Salter Packard Children’s Hospital provide substantial and important public
benefits through operation of world-class health care facilities and provision of a
Level 1 trauma center located in the City of Palo Alto. The Stanford School of
Medicine, which is part of Stanford University, provides substantial and important
public benefits through research that will be translated into life-saving and life-
enhancing medical treatments and procedures. To comply with the requirements
of state law and to provide state-of-the-art medical and research facilities, the
SUMC Parties intend to replace, retrofit and enhance their facilities in the City of
Palo Alto. In conjunction with certain state-mandated retrofit and replacement
work, the SUMC Parties also intend to expand their hospital, clinic and medical
office facilities to meet patient demand. To facilitate this, the SUMC Parties have
applied to the City for a development agreement pursuant to Sections 65864-
65869.5 of the California Government Code and the City’s Resolution No. 6597.
Pursuant to this development agreement, the SUMC Parties would provide certain
community benefits and voluntary mitigations measures. In exchange for these
community benefits and voluntary mitigation measures, and in recognition of the
substantial public benefits provided by the SUMC Parties’ facilities and
operations, the City would vest for a period of thirty (30) years the SUMC
Parties’ rights to develop and use their facilities in Palo Alto in accordance with
the Project Approvals, and would streamline the process for obtaining Subsequent
Approvals as described in this Agreement.
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A/73778958.2
C. Nature and Purpose of Development Agreements.
Development agreements were authorized by the State of California in 1979,
through the adoption of Government Code Sections 65864-65869.5. These
statutes authorize the parties to enter into binding agreements for the development
of real property within the City. Because California has a “late vesting” rule,
landowners usually cannot be certain that they can proceed with a development
project until they have actually obtained a building permit and started building.
This lack of certainty can discourage long range planning and investment and
make it more difficult for cities to provide needed public facilities. A
development agreement, in which a city agrees that, for a certain period of time, it
will not change the rules applicable to a project, and the property owner agrees to
assist with the provision of public facilities or to otherwise provide community
benefits, can benefit all parties.
D. Authority for City Development Agreements. Pursuant to
Government Code Section 65865, the City adopted Resolution No. 6597
establishing procedures and requirements for consideration of development
agreements in Palo Alto.
E. Comprehensive Plan. In July of 1998, the City of Palo Alto
adopted its current Comprehensive Plan, a document containing the City’s official
policies on land use and community design, transportation, housing, natural
environment, business and economics, and community services. Its policies apply
to both public and private properties. The Plan is used by the City Council and
Planning and Transportation Commission to evaluate proposed land use changes
in the City, including the adoption of this Agreement. It is intended to guide City
land use decisions.
F. Property Interests. The University is the fee owner of
certain Property. SHC leases from the University certain portions of the Property
and operates the Stanford Hospital and Clinics, as well as medical offices thereon.
LPCH leases from the University certain other portions of the Property, and
operates the Lucile Salter Packard Children’s Hospital thereon. A portion of the
Property is occupied by the University’s School of Medicine. A portion of the
Property consisting of approximately 0.75 acres is in the unincorporated area of
Santa Clara County. The balance of the Property is within the City of Palo Alto.
G. Seismic Safety Requirements. SB 1953 requires hospitals
to retrofit or replace facilities that do not meet State-designated safety criteria by
January 1, 2013. Further requirements must be met by 2030. If a hospital does
not comply with these mandates, the State may revoke the hospital’s operating
license. On September 30, 2010, Governor Schwarzenegger signed SB 608,
which will provide SHC with the ability to apply for up to five additional years
for extensions to meet seismic requirements. If the extensions are granted, the
legislation sets a new deadline of January 1, 2018. Effective January 1, 2011,
SHC may apply for a three-year extension of the structural compliance deadline;
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from January 1, 2013 to January 1, 2016. SHC may also be eligible for an
additional two-year extension of the 2016 deadline, subject to certain patient
safety criteria. The Office of Statewide Health Planning and Development is
responsible for approving plans for construction work required by SB 1953.
H. Seismic Safety Project Components. Several buildings on
the Property require structural retrofit or replacement to comply with SB 1953 and
other applicable laws. Also, many of the facilities within the Property require
nonstructural renovations or replacement to comply with SB 1953. Portions of
the School of Medicine that currently occupy space in structures used for hospital
purposes must be physically separated from those structures or replaced in order
to comply with SB 1953 requirements. In addition, new or replacement hospital
structures must meet current standards specified by the California building code
for hospitals; compliance with these standards necessitates increased square
footage and height to accommodate current seismic structural requirements,
patient safety requirements, air handling systems and mechanical duct work.
I. Project Purposes. The City and the SUMC Parties desire
that the Project is designed and constructed to achieve timely compliance with the
requirements of SB 1953 and other applicable laws, to meet existing and
projected future demand for patient care, to provide modern, state-of-the-art
facilities designed to deliver high quality healthcare services and related teaching
and research, and to meet regional needs for emergency and disaster
preparedness.
J. Project Approvals. The SUMC Parties have applied for,
and the City has certified or approved, as applicable, certain environmental
documents and land use approvals and entitlements relating to the development of
the Project. These actions are identified on Exhibit B.
K. Compliance with City Requirements. The City’s Planning
and Transportation Commission and City Council have given notice of intention
to consider this Agreement, have conducted public hearings thereon pursuant to
Government Code section 65867 and City’s Resolution No. 6597, and have found
that the provisions of this Agreement are consistent with City’s Comprehensive
Plan, as amended.
L. Binding Future Actions. This Agreement will bind future
City Councils to the terms and obligations specified in this Agreement and limit,
to the degree specified in this Agreement and as authorized under state law, the
future exercise of City’s ability to preclude development on the Property.
M. Elimination of Uncertainty. This Agreement will eliminate
uncertainty in planning and provide for the orderly development of the Property,
eliminate uncertainty about the validity of exactions imposed by City, allow
installation of necessary improvements, provide for public services appropriate to
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the development of the Project, and generally serve the public interest, both
within the City of Palo Alto and in the surrounding region.
N. Orderly Development. Development of the Project in
accordance with this Agreement and the Project Approvals will provide for
orderly development consistent with City’s Comprehensive Plan. The terms and
conditions of this Agreement have undergone extensive review by City staff, its
Planning and Transportation Commission and the City Council, and have been
found to be fair, just and reasonable. Specifically, the Planning and
Transportation Commission and the City Council have found that:
1. The provisions of this Agreement and its
purposes are consistent with the goals, policies, programs and standards specified
in City’s Comprehensive Plan;
2. This Agreement will help attain important
economic, social, environmental and planning goals of City and enhances and
protects the public health, safety and welfare of the residents of the City of Palo
Alto and the surrounding region.
3. The SUMC Parties will incur substantial costs
in providing community benefits, including voluntary mitigation, in excess of that
required to address the impacts of the Project;
4. This Agreement will mitigate significant
environmental impacts; and
5. This Agreement will otherwise achieve the
goals and purposes for which the Development Agreement Act (California
Government Code Sections 65864-65869.5) was enacted.
O. Nature of Recitals. These recitals are intended in part to
paraphrase and summarize this Agreement, however, the Agreement is expressed
below with particularity and the Parties intend that their rights and obligations be
determined by those provisions and not by the recitals.
NOW, THEREFORE, the parties do hereby agree as follows:
1. Definitions. In this Agreement, unless the
context otherwise requires:
(a) “Annual Payment” means each annual
payment subsequent to the first payment and shall be paid no later than August 31
of the year following the year in which the first payment is made. For example, if
the Initial Payment Date is June, 2011, the next Annual Payment would be due by
August 31, 2012.
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(b) “Applicable Rules” means the City
ordinances, resolutions, rules, regulations and official policies in effect on the
Effective Date, as amended by the Project Approvals.
(c) “Architectural Review Approval” means the
approval of an application for architectural review under the Applicable Rules,
including without limitation the Hospital Zoning Ordinance.
(d) “City” is the City of Palo Alto.
(e) “Comprehensive Plan” is the 1998-2010 Palo
Alto Comprehensive Plan, adopted in July 1998 and as amended through the
Effective Date.
(f) “Conditions of Approval” are the conditions
to the Project Approvals or Subsequent Approvals included in or incorporated by
reference in an ordinance, resolution or motion granting a Project or Subsequent
Approval, and including the environmental mitigations adopted by the City
Council.
(g) “Construction Period” is the time period
between (i) the issuance of the first permit or approval by an public agency with
jurisdiction over the Project, whether it be the City, OHSPD, or any other public
agency, which allows the SUMC Parties to undertake development and
construction activities contemplated by the Project, the issuance of which the
Parties currently estimate to occur in 2011, and (ii) the first anniversary of the
final certificate of occupancy for the Project, which anniversary the Parties
currently estimate to occur in 2027. [NOTE: If City Council modifies or elects
to forego Cost Neutrality requirements as proposed by City Staff, then this
provision may not be required.]
(h) “Construction Use Tax” is the actual amount
of use tax revenues derived from construction of the Project. [NOTE: If City
Council modifies or elects to forego Cost Neutrality requirements as
proposed by City Staff, then this provision may not be required.]
(i) “Construction Use Tax Estimates” are those
use taxes estimated to be derived from Construction Related Purchasing activities
undertaken as part of the Project each year between 2011 and 2041, as set forth in
Exhibit 3 to the January 14, 2011 memorandum from Amy L. Herman, Senior
Managing Director of CBRE Consulting, to Mr. William Phillips, Senior
Associate Vice President, Stanford University, Land, Buildings & Real Estate
(hereafter “CBRE Exhibit 3”, attached to this Agreement as Exhibit F), which
total $8,148,416 for the entire thirty (30) year period. [NOTE: If City Council
modifies or elects to forego Cost Neutrality requirements as proposed by City
Staff, then this provision may not be required.]
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(i) “County Property” means the portion of the
Property in the unincorporated area of Santa Clara County, consisting of
approximately 0.75 acres.
(j) “Days” shall mean calendar days.
(k) “Design Guidelines” means the Design
Guidelines approved as part of the Project Approvals, as listed on Exhibit B.
(l) “Development Agreement Act” means Article
2.5 of Chapter 4, of Division 1 of the California Government Code (Sections
65864 - 65869.5).
(m) “Development Impact Fees” means all fees
now or in the future collected by the City from applicants for new development
(including all forms of approvals and permits necessary for development) for the
funding of public services, infrastructure, improvements or facilities, but not
including taxes or assessments, or fees for processing applications or permits or
for design review. The fees included in this definition include, but are not limited
to those fees set forth in Chapters 16.45, 16.47 and 16.58 of the Municipal Code,
fees for traffic improvements and mitigation, and fees for other community
facilities or related purposes (but not including any school fees imposed by a
school district); provided nothing herein shall preclude City from collecting fees
lawfully imposed by another entity having jurisdiction which City is required or
authorized to collect pursuant to State law.
(n) “Discretionary Action” includes a
“Discretionary Approval” and is an action or decision which requires the exercise
of judgment, deliberation, and which contemplates the imposition of revisions or
conditions, by City, including any board, commission or department and any
officer or employee thereof, in the process of approving or disapproving a
particular activity, as distinguished from an activity which merely requires City,
including any board, commission or department and any officer or employee
thereof, to determine whether there has been compliance with applicable statutes,
ordinances, regulations, or Conditions of Approval.
(o) “Effective Date” means ____________, 2011.
(p) “Hospital Foundation Permit” means the
OSHPD Incremental Project Permit allowing either Hospital to construct the
primary load bearing foundation for a new or expanded hospital building. The
SUMC Parties’ best estimate of the anticipated date for issuance of the Hospital
Foundation Permit, based on current information, is by January 1, 2012
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(q) “Hospital Occupancy Permit” means issuance
of all permits necessary to allow the first Hospital building to be used by members
of the public for healthcare services. Issuance of a temporary occupancy permit
for purposes of building preparations in advance of opening shall not trigger
obligations based upon issuance of the Hospital Occupancy Permit. However, a
temporary occupancy permit that allows the Hospital building to be used by the
public for healthcare services shall trigger obligations based upon issuance of the
Hospital Occupancy Permit.
(r) “Hospitals” means SHC and LPCH.
(s) “Hospital Zoning Ordinance” is the ordinance
of City, adopted as part of the Project Approvals, amending the Zoning Ordinance
to revise and establish the permitted and conditionally permitted uses, intensity,
and other standards and specifications applicable to the Property.
(t) “HSSA” means the Alfred E. Alquist Hospital
Facilities Seismic Safety Act of 1973, as amended by the Alfred E. Alquist
Hospital Facilities Seismic Safety Act of 1983, and by SB 1953, as it may be
further amended from time to time.
(u) “Initial Payment Date” means the date that is
45 days from the filing and posting of the Notice of Determination filed by the
City after the second reading of the ordinance approving the Hospital District
zoning and the ordinance approving this Development Agreement.
(v) “Initial Project Approvals” means those
entitlements, permits and approvals listed on Table 1 of Exhibit B.
(w) “Life Of The Project” means fifty-one years
from the Effective Date.
(x) “LPCH” means Lucile Salter Packard
Children’s Hospital at Stanford, a California nonprofit public benefit corporation.
(y) “Mortgage” means and refers, singly and
collectively, to any mortgages, deeds of trust, security agreements, assignments
and other like security instruments encumbering all or any portion of the Property
or any of the SUMC Parties’ rights under this Agreement.
(z) “Mortgagee” means and refers to the holder of
any Mortgage encumbering all or any portion of the Property or any of the SUMC
Parties’ rights under this Agreement, and any successor, assignee or transferee of
any such Mortgage holder.
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(aa) “Net New Square Footage” means the amount
of new square footage constructed pursuant to the Project Approvals, less the total
amount of existing square footage demolished. For purposes of calculating
applicable fees, the demolition of square footage of the structure at 1101 Welch
Road, the 1973 Core Expansion building, and the 77 square foot hospital entry
shall be credited against the fees for the new SHC hospital structure; demolition
of the square footage of the structures at 701 and 703 Welch Road shall be
credited against the fees for expansion of LPCH; demolition of the square footage
of the Nurses’ cottage, shops and sheds at the Hoover Pavilion Site shall be
credited against the fees for the square footage of the new medical office building
at the Hoover Pavilion Site; demolition of the Stone Building complex (1959
Hospital Buildings, including East, West, Core, Boswell, Grant, Alway, Lane and
Edwards) shall be credited against the fees for new square footage for the
University and SHC in the amount corresponding to the new square footage
constructed by each entity. To the extent the SUMC Parties construct new
buildings to replace the Stone Building complex and/or 1973 Core Expansion
building prior to demolishing or vacating all or part of those structures, the SUMC
Parties may, in their discretion, elect to take credit for future demolition of the
Stone Building complex and/or 1973 Core Expansion building when calculating
payment of fees for the new square footage. Construction of School of Medicine
improvements for the University will result in no Net New Square Footage.
(bb) “Occupancy Permit” means a permit issued by
any agency that allows a new or expanded structure to be used by members of the
public for healthcare services. Issuance of a temporary occupancy permit for
purposes of building preparations in advance of opening shall not trigger
obligations based upon issuance of the Occupancy Permit. However, a temporary
occupancy permit that allows the building or structure to be used by the public for
healthcare services shall trigger obligations based upon issuance of the
Occupancy Permit.
(cc) “Operational On-Site Sales Tax” is the actual
amount of on-site sales tax revenues derived from SUMC Facilities On-Site Sales
activities undertaken as part of the Project and that are received by the City for
any particular Operational Use Tax Payment Year. [NOTE: If City Council
modifies or elects to forego Cost Neutrality requirements as proposed by City
Staff, then this provision may not be required.]
(dd) “Operational On-Site Sales Tax Estimates” are
those sales taxes estimated to be derived from SUMC Facilities On-Site Sales
activities undertaken as part of the Project for each year between 2011 and 2041,
as set forth in CBRE Exhibit 3 (Exhibit F hereto), which currently total
$3,270,033 for the entire thirty (30) year period. [NOTE: If City Council
modifies or elects to forego Cost Neutrality requirements as proposed by City
Staff, then this provision may not be required.]
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(ee) “Operational Use Tax” is the actual amount of
use tax revenues, as defined in Regulation 1806 of the California State Board of
Equalization, derived from SUMC Direct Purchasing activities undertaken as part
of the Project and that are received by the City for any particular Operational Use
Tax Payment Year. [NOTE: If City Council modifies or elects to forego Cost
Neutrality requirements as proposed by City Staff, then this provision may
not be required.]
(ff) “Operational Use Tax Estimates” are those
use taxes estimated to be derived from SUMC Direct Purchasing activities
undertaken as part of the Project for each year between 2011 and 2041, as set
forth in CBRE Exhibit 3 (Exhibit F hereto), which total $840,878 for the entire
thirty (30) year period. [NOTE: If City Council modifies or elects to forego
Cost Neutrality requirements as proposed by City Staff, then this provision
may not be required.]
(gg) “Operational Tax Payment Year” means each
year during the Term of the Agreement in which the Project generates On-Site
Sales Tax revenues or Operational Use Tax revenues to be allocated to the City
pursuant to this Agreement, which years are currently estimated by the Parties to
begin in 2017 and to end in 2041, inclusive. [NOTE: If City Council modifies
or elects to forego Cost Neutrality requirements as proposed by City Staff,
then this provision may not be required.]
(hh) “OSHPD” means the Office of Statewide
Health Planning and Development.
(ii) “Party” is a signatory to this Agreement, or a
successor or assign of a signatory to this Agreement.
(jj) “Project” means development of the Property
in accordance with the Applicable Rules, Project Approvals, and this Agreement,
which is generally described as follows: (1) construction of the new SHC
Hospital (in multiple phases), new SHC Clinic/Medical office buildings, new
medical office/clinic building at the Hoover Pavilion site, new LPCH Hospital,
new LPCH clinic/medical office space, new buildings for the School of Medicine,
new SHC parking structure, new LPCH parking structure, new clinics parking
structure at the Main SUMC Site, new parking structure at the Hoover Pavilion
Site, Welch Road widening, Durand Way connector road, new driveways and
drop-off areas, other roadway improvements, new heliport, and miscellaneous
accessory structures, surface parking, pavement and landscape improvements; (2)
renovation and remodeling of existing hospital, clinic and medical office facilities
including the Hoover Pavilion; and (3) demolition of the 1959 Stone Building
complex (hospital and School of Medicine buildings), 1973 Core Expansion
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building, 1101 Welch Road medical offices, hospital entry, nurses’ cottage,
miscellaneous shops and storage buildings at the Hoover Pavilion Site, 701 and
703 Welch Road medical offices, Parking Structure 3, Falk Lot 5, a portion of the
Hoover Pavilion surface parking lot, and other miscellaneous surface parking,
pavement and landscaped areas.
(kk) “Project Approvals” means the approvals,
certifications or actions listed on Exhibit B and any Subsequent Approvals,
including all Conditions of Approval.
(ll) The “Property” means the real property more
particularly described in Exhibit A.
(mm) “Right Sizing” means the increased Net New
Square Footage attributable to increased floor area per inpatient bed or service
without substantially increasing the number of patients or employees.
(nn) “SB 1953” means Senate Bill 1953 (Chapter
740, 1994), California Health and Safety Code Section 130000 – 130070
(amending the Alfred E. Alquist Hospital Seismic Safety Act of 1983).
(oo) “SHC” means Stanford Hospital and Clinics, a
California nonprofit public benefit corporation.
(pp) “School of Medicine” means the Stanford
University School of Medicine, which is part of the University.
(qq) “Subsequent Applicable Rules” means the
ordinances, resolutions, rules, regulations and official policies of City, as they
may be adopted and effective after the Effective Date that do not conflict with the
Applicable Rules, or that are expressly made applicable to the subject matter of
this Agreement by Section 8.
(rr) “Subsequent Approvals” means any approval
relating to the Project issued by the City upon request of any SUMC Party after
the Effective Date, including Discretionary Approvals and ministerial approvals.
(ss) “Subsequent Rules” means all City
ordinances, resolutions, rules, regulations and official policies in effect at the time
a City action is to be taken that would apply to the Project had this Agreement not
been adopted.
(tt) “SUMC” means the Stanford University
Medical Center.
(uu) “SUMC Parties” means SHC, LPCH, and the
University.
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(vv) “Tax Reports” means the quarterly detailed
sales and use tax revenue reports received by the City from the State of California
as they pertain to revenues generated by or in connection with the Project and the
Property. [NOTE: If City Council modifies or elects to forego Cost
Neutrality requirements as proposed by City Staff, then this provision may
not be required.]
(ww) “Term” shall mean the term of this Agreement
as set forth in Section 18.
(xx) “University” means the Board of Trustees of
the Leland Stanford Junior University, a body having corporate powers under the
laws of the State of California.
(yy) “Vested Right” means a property right
conferred by this Agreement that may not be rescinded, reduced, revoked or
abrogated by the City.
(zz) “Zoning Ordinance” is the zoning ordinance
for the City of Palo Alto (Title 18 of the Palo Alto Municipal Code).
2. Interest of the SUMC Parties. Each of the
SUMC Parties represent that, as of the Effective Date, it has a legal or equitable
interest in all or a portion of the Property as required by Section 65865 of the
California Government Code.
3. Binding Effect. Subject to the provisions of
Section 19 below, this Agreement, and all of the terms and conditions hereof,
shall run with the land and shall be binding upon and inure to the benefit of the
parties and their respective assigns, heirs or other successors in interest.
4. Negation of Agency. The parties acknowledge
that, in entering into and performing this Agreement, the City, on the one hand,
and the SUMC Parties, on the other hand, are each acting as an independent entity
and not as an agent of the other in any respect. Nothing contained herein or in
any document executed in connection herewith shall be construed as making City
the joint venturer or partner of any of the SUMC Parties, or any of the SUMC
Parties the joint venturer or partner of the City.
5. SUMC Parties’ Promises.
(a) Health Care Benefits.
(i) Summary of Intrinsic Benefits. Summary Stanford
University Medical Center is recognized as a global leader in medical care and
research, having pioneered advancements in transplantation medicine, cancer
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care, prenatal diagnosis and treatment, and diabetes and cholesterol treatments. In
2009, the SHC and the Lucile Salter Packard Children’s Hospital at Stanford
provided the following benefits and services:
• 36,559 inpatients admitted
• 48,744 emergency department visits
• 4,759 babies delivered
• $262.6 million in uncompensated medical services, charity
care, and community programs.
The SUMC Parties served 64 percent of Palo Alto residents who required
hospitalization in 2009. The Project will enable the SUMC Project sponsors to
continue this important work, and the addition of more beds for adults and
children will alleviate overcrowding and allow the hospitals to serve patients who
currently must be turned away. The hospitals also provide the only Level 1
Trauma Center between San Francisco and San Jose. The Trauma Center and the
Emergency Department ensure critical community emergency preparedness and
response resources for the community in the event of an earthquake, pandemic, or
other major disaster.
(ii) Fund for Healthcare Services. Not later than the Initial
Payment Date, and subject to the provisions in Section 21(p), the Hospitals shall
establish a program (the “Patient Services Program”) pursuant to which the
Hospitals will contribute up to Three Hundred Thousand Dollars ($300,000) in
Annual Payments, for a period of ten (10) years for a total of Three Million
Dollars ($3,000,000), to assist residents of Palo Alto who have self-payment
responsibilities beyond their financial means, to pay healthcare services. If in any
year less than Three Hundred Thousand Dollars ($300,000) is used by the Patient
Services Program, the excess shall be used in any one or all subsequent years or
added to the payment set forth in Section 5(a)(iii) below. The Patient Services
Program shall be in addition to the Hospitals’ Financial Assistance/Charity Care
Policy dated August 2010, as amended from time to time, and in addition to any
coverage afforded by the new federal Health Care and Education Reconciliation
Act and subsequent amendments. The Hospitals, in their reasonable discretion,
shall develop criteria for determining whether patients are qualified to receive
assistance from the Patient Services Program based on Palo Alto residency status
and financial need. The Hospitals shall report the criteria used to determine
eligibility for assistance from the Patient Services Program, comparative criteria
used to determine eligibility for assistance under the Hospitals’ charity policies
(in order to verify that the Patient Services Program is in addition to the
Hospitals’ charity policies and other federal requirements) and their
disbursements under the Patient Services Program annually, as part of the annual
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report described in Section 12(d). All reporting will comply with applicable
privacy laws and policies, as well as the privacy policies of the Hospitals.
If at any time the Hospitals and City mutually determine that the Patient
Services Program creates undue administrative burdens or is not needed by the
Palo Alto community in view of other available programs, the Hospitals shall
contribute, in annual installments, the remainder of the funds allocated to the
Patient Services Program to the Community Health Program Fund described in
Section 5(a)(iii) below.
(iii) Fund for Community Health Programs. Not later than the Initial
Payment Date, and subject to the provisions in Section 21(p), the SUMC Parties
shall contribute, in a single lump sum payment, Four Million Dollars ($4,000,000)
(the “Community Health Program Fund”) to the City, to be held in a separate
account and to be distributed to selected community health programs that benefit
residents of the City. The SUMC Parties and the City shall establish a joint
committee to evaluate proposals regarding the specific programs to receive the
funding, composed of two representatives selected by the SUMC Parties and two
representatives selected by the City. The committee may choose to coordinate its
efforts with the City’s Human Relations Commission, and the City’s
representatives on the committee may be members of the Human Relations
Commission. The joint committee shall make annual recommendations to the
City Council regarding proposed disbursements from the Community Health
Program Fund, and the City Council shall use its reasonable discretion to decide
whether to accept, reject or modify the committee recommendations. The City
shall keep the funds paid by the SUMC Parties to the Community Health Program
Fund in a separate account, to be used only for the purposes described in this
Section 5(a)(iii). The City shall deliver an annual report of disbursements from
the Community Health Program Fund in accordance with Section 12(d) below.
(b) Palo Alto Fiscal Benefits.
(i) Payment of Sales and Use Taxes Estimates.
[NOTE: If City Council modifies or elects to forego Cost Neutrality
requirements as proposed by City Staff, then this section may not be
required.]
(a) Designation of Project for Sales and
Use Tax Purposes. The SUMC Parties shall accrue or self report sales and use
taxes for the benefit of the City pursuant to the applicable regulations of the State
Board of Equalization (the “SBOE”) regulations, and any additional regulations
issued or amendments made thereto, for the purpose of ensuring that the City
receives the maximum allocation of sales and use taxes derived from the Project
available under the applicable laws and regulations. To this end, the SUMC
Parties shall: (i) obtain all permits and licenses necessary to maximize the City’s
allocation of sales and use taxes derived from the Project, including but not
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limited to California Seller’s Permits, Use Tax Direct Payment Permits, and any
other license or permit necessary or desirable to maximize the City’s allocation of
sales and use taxes derived from the Project; (ii) designate, and contractually
require its contractors and subcontractors to designate, the Property as the place of
sale of all “fixtures” furnished and/or installed as part of the Project; (iii)
designate, and contractually require all its contractors and subcontractors to
designate, the Property as the place of use of all “materials” used in the
construction of the Project; and (iv) contractually require all contractors and
subcontractors holding contracts to allocate the local sales and use taxes derived
from such contracts directly to the City, to the maximum extent permitted by law.
The SUMC Parties shall, and shall contractually require its contractors and
subcontractors to, complete and file any forms as the SBOE requires to effect the
designations required by this Section 5(b)(i), pursuant to the applicable
regulations of the SBOE. The SUMC Parties shall bear all costs associated with
its activities under this Section 5(b) (Palo Alto Fiscal Benefits).
(b) Construction Use Tax Estimates and
Payments. Within ninety (90) days from the end of each calendar quarter
throughout the Construction Period (and including any calendar quarter necessary
to capture the beginning or the end of the Construction Period), the SUMC Parties
shall submit to the City the written data needed for the City to ascertain (in
conjunction with the City's review of the Tax Reports) the amount of
Construction Use Tax derived from the Project during that calendar quarter. The
written data from SUMC Parties shall include, but is not limited to: (i) relevant
portions of the SUMC Parties' tax return for the quarter showing the break-down
of sales and use taxes; (ii) a self-accrual report for the quarter identifying
purchases made, purchase prices and taxes pertinent to such purchases for owner
supplied items; and (iii) a memorandum for the quarter identifying contractor,
sub-contractor, sub-contractor vendor, supplier and other similarly situated
persons from whom purchases were made, where such contractor, sub-contractor,
vendor, and/or other similarly situated party may allocate taxes directly to the
City rather than through SUMC Parties' self-accrual system.
On or before April 30 of each calendar year
throughout the Construction Period, the City Manager shall analyze the Tax
Reports for each calendar quarter during the preceding calendar year and,
applying the data supplied by SUMC Parties, shall provide SUMC Parties with a
written determination of the amount of Construction Use Tax allocated to and
received by the City for the preceding calendar year. The City Manager's written
determination shall further indicate the specific amount, if any, by which the total
Construction Use Tax received by the City during the preceding calendar year is
less than the Construction Use Tax Estimate for that calendar year. The SUMC
Parties shall, within forty-five (45) days after receipt of the City Manager's
written determination, pay to City such amount, if any, by which the Construction
Use Tax received by City for that calendar year is less than the Construction Use
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Tax Estimate (the “Construction Use Tax Difference Payment”), plus an amount
equal to the product of the Construction Use Tax Difference Payment times the
change in the Engineering News Record index for construction costs (the “ENR
Index”) for the period of time from the beginning of the preceding calendar year
to the end of the preceding calendar year as published by the Engineering News
Record expressed as a percentage.
(c) Operational Use Tax Estimates and
Payments. On or before March 15 of the year following any Operational Tax
Payment Year, the SUMC Parties shall submit to the City the written data needed
for the City to ascertain the amount of Operational Use Tax derived from the
Project for that Operational Tax Payment Year (in conjunction with the City's
review of the Tax Reports). The written data from the SUMC Parties shall
include, but is not limited to: (i) relevant portions of SUMC Parties' tax returns
covering the whole of the Operational Tax Payment Year showing the break-
down of sales and use taxes; (ii) a self-accrual report for the Operational Tax
Payment Year identifying purchases made, purchase prices and taxes pertinent to
such purchases for each contractor, sub-contractor, sub- subcontractor vendor,
supplier and other similarly situated persons from whom purchases were made
and self-accrued; and (iii) a memorandum for the Operational Tax Payment Year
identifying any purchases made, purchase prices and taxes pertinent to such
purchases for each contractor, sub-contractor, sub-subcontractor vendor, supplier
and other similarly situated persons from whom purchases were made where such
contractor, sub-contractor, vendor and/or other similarly situated party allocates
taxes directly to the City rather than through SUMC Parties' self-accrual system.
On or before April 30 of the year following any Operational Tax
Payment Year or as soon thereafter as practicable, the City Manager shall analyze
the Tax Reports for that Operational Tax Payment Year and, applying the data
supplied by SUMC Parties, shall provide SUMC Parties with a written
determination of the amount of Operational Use Tax received by the City for that
Operational Tax Payment Year. The City Manager's written determination shall
indicate: (A) the amount of Operational Use Tax the City received for that
particular Operational Tax Payment Year, and (B) the specific amount, if any, by
which the Operational Use Tax received by City is less than the Operational Use
Tax Estimate for that Operational Tax Payment Year. The SUMC Parties shall,
within forty-five (45) days after receipt of the City Manager’s written
determination, pay to City such amount, if any, by which the Operational Use Tax
received by the City for that Operational Tax Payment Year is less than the
Operational Use Tax Estimate for that particular Operational Tax Payment Year
(the “Operational Use Tax Difference Payment”), plus an amount equal to the
product of the Operational Use Tax Difference Payment times the change in the
Consumer Price Index for All Urban Consumers for the San Francisco Region
(“CPI-AUC”) for the period of time from the beginning of that particular
Operational Tax Payment Year to the end of that Operational Tax Payment Year
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as published by the United States Bureau of Labor Statistics (“USBLS”)
expressed as a percentage. [Note: This index will be changed to CPI-US.]
(d) Operational On-Site Sales Tax
Estimates and Payments. On or before March 15 of the year following any
Operational Tax Payment Year, the SUMC Parties shall submit to the City the
written data needed for the City to ascertain the amount of Operational On-Site
Sales Tax derived from the Project for that Operational Tax Payment Year (in
conjunction with the City's review of the Tax Reports). The written data from the
SUMC Parties shall include, but is not limited to: (i) relevant portions of SUMC
Parties' tax returns covering the whole of the Operational Tax Payment Year
showing the break-down of sales and use taxes; (ii) a self-accrual report for the
Operational Tax Payment Year identifying on-site sales made, sales prices and
taxes pertinent to such sales; and (iii) a memorandum for the Operational Tax
Payment Year identifying any sales made, sales prices and taxes pertinent to such
sales.
On or before April 30 of the year following any Operational Tax
Payment Year or as soon thereafter as practicable, the City Manager shall analyze
the Tax Reports for that Operational Tax Payment Year and, applying the data
supplied by SUMC Parties, shall provide SUMC Parties with a written
determination of the amount of Operational On-Site Sales Tax received by the
City for that Operational Tax Payment Year. The City Manager's written
determination shall indicate: (A) the amount of Operational On-Site Sales Tax
the City received for that particular Operational Tax Payment Year; and (B) the
specific amount, if any, by which the Operational On-Site Sales Tax received by
City is less than the Operational On-Site Sales Tax Estimate for that Operational
Tax Payment Year. The SUMC Parties shall, within forty-five (45) days after
receipt of the City Manager’s written determination, pay to City such amount, if
any, by which the Operational On-Site Sales Tax received by the City for that
Operational Tax Payment Year is less than the Operational On-Site Sales Tax
Estimate for that particular Operational Tax Payment Year (the “Operational On-
Site Sales Tax Difference Payment”), plus an amount equal to the product of the
Operational On-Site Sales Tax Difference Payment times the change in the CPI-
AUC for the period of time from the beginning of that particular Operational Tax
Payment Year to the end of that Operational Tax Payment Year as published by
the USBLS expressed as a percentage. [Note: This index will be changed to CPI-
US.]
(e) Establishment of Retail Sales and
Use Tax Reporting District. The SUMC Parties shall cooperate in good faith with
the City to assist the City in establishing and administering a Retail Sales and Use
Tax Reporting District that includes the Property and the Project, to enable the
City to track the generation, allocation, reporting and payment of sales and use
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taxes derived from the Project. Such cooperation shall include providing the City
with a list of all SBOE Permit Codes assigned to the SUMC Parties’ operations
and activities on the Property and associated with the Project, and the physical
locations (e.g., addresses) associated with such SBOE Permit Codes.
(f) Purpose of Tax Estimates and
Payment Provisions. The SUMC Parties hereby acknowledge and agree that the
purpose and intent of the tax payment provisions in this Section 5(b)(i) is to
ensure for the City that the sales and use taxes received by the City during the
Life Of The Project equal or exceed the sales and use tax estimates incorporated
into this Agreement, as adjusted for inflation. The SUMC Parties further
understand, acknowledge, and agree that the provisions in this Section 5(b)(i) to
ensure that the sales and use tax revenues received by the City equal or exceed the
sales and use tax estimates, as adjusted for inflation, are a material part of the
SUMC Parties consideration for the City’s entering into this Agreement, and the
City would not have entered into this Agreement if it was not guaranteed and
assured that the sales and use tax revenues it receives during the Life Of The
Project will equal or exceed the sales and use tax estimates incorporated into this
Agreement, as adjusted for inflation. Consequently, if the sales and use taxes
actually received by the City for any calendar year during the Construction Period
or for any Operational Tax Payment Year do not, for any reason, meet or exceed
the sales and use tax estimates set forth in this Agreement, as adjusted for
inflation, the SUMC Parties shall promptly pay to the City the shortfall as
provided for in this Section 5(b)(i). In addition, the SUMC Parties further agree
that they shall cooperate in good faith with the City to ensure that the City
receives the maximum allocation of sales and use taxes derived from the Project
available under the applicable laws and regulations, and such cooperation shall
include without limitation continuing, for the Term of this Agreement, to take all
reasonable and appropriate actions necessary to correct any misallocations or
reporting errors that may occur with respect to the generation, allocation,
reporting and payment of sales and use taxes derived from the Project.
(ii) School Fees. The SUMC Parties shall pay to the
City, who in turn shall forward the fees to the Palo Alto Unified School District,
school fees upon issuance of each building permit from the City or OSHPD, in the
amount that is generally applicable to non-residential development at the time of
payment based upon Net New Square Footage. For buildings subject to OSHPD
jurisdiction, the school fees will be paid within Thirty (30) days after issuance of
a building permit from OSHPD.
(iii) Payment to Fund Projected Operating Deficit. The
SUMC Parties shall make a one-time payment of one million one hundred
thousand dollars ($1,100,000) to the City, not later than thirty (30) days after the
Effective Date of this Agreement. [NOTE: If Cost Neutrality Agreement
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provisions rely on CBRE’s revenue projections and City Council elects to
forego inflation adjustment, then this provision would not be required.]
(iv) Payment of Utility User Tax. All requirements and
language in Section 2.35.100(a) of the City’s Municipal Code to the contrary
notwithstanding, the SUMC Parties shall pay to the City a utility user tax at a
minimum rate of five percent (5%) of all electricity, gas, and water charges
allocable to new construction completed as part of the Project for a period of fifty-
one (51) years following the Effective Date of this Agreement, which rate may be
increased by the City as provided by Section 2.35.100(b) of the City’s Municipal
Code.
(c) Traffic Mitigation and Reduced Vehicle Trips.
(i) Summary of existing programs. The
Hospitals provide a robust program to minimize commuting by
drive-alone vehicles, which currently includes the following
components:
• Incentives to forego driving or to carpool, including cash
payments or other credit for participating in a carpool
program, various parking incentives, online ride matching,
pretax payroll deduction for transit passes, emergency rides
home, free car rental vouchers, Zipcar car sharing credits,
and other gifts and rewards.
• The free Marguerite Shuttle system, supported in part by
payments from the Hospitals, connecting the Hospitals to
local transit, Caltrain, and local shopping and dining.
• The Eco Pass program for hospital employees, allowing
free use of VTA buses and light rail, the Dumbarton
Express, the Highway 17 Express, and the Monterey-San
Jose Express.
• Free use of the U-Line Stanford Express connecting BART,
the ACE train, and Ardenwood Park & Ride to Stanford.
• Alternative transportation support and information, such as
a bicycle commuter facilities (clothes lockers, showers,
bike lockers), transit pass sales, and various sources of
‘green’ and alternative transportation information including
an ‘alternative transportation website.
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(ii) Menlo Park Traffic Mitigation. The SUMC Parties shall
make the following contributions to mitigate traffic in the City of Menlo Park:
(A) Contribution to Menlo Park Traffic-Adaptive Signal
Technology. The SUMC Parties shall pay to the City of Menlo Park Seventy
Two Thousand Five Hundred Dollars ($72,500) to contribute toward the costs of
Traffic-Adaptive Signal Technology (collectively, “Intersection Improvements”),
at intersections in the City of Menlo Park, including the following: Middlefield
Road/Willow Road; Sand Hill Circle and San Hill/I-280; Sand Hill Road/Sharon
Park Drive, Middlefield Road/Ringwood Avenue, Middlefield Road/Ravenswood
Avenue, Marsh Road/Bay Road, Marsh Road/US 101 SB ramp, Marsh Road/US
101 NB ramp, Willow Road/Bay Road.
(B) Pedestrian/Bike Caltrain Undercrossing. The
SUMC Parties shall pay to the City of Menlo Park One Hundred Eighty-Three
Thousand Dollars ($183,000) to contribute to the construction of one
pedestrian/bike Caltrain undercrossing in Menlo Park.
(C) Menlo Park Shuttle Fee Program. The SUMC
Parties shall to the City of Menlo Park fees to Menlo Park’s shuttle fee program
or any successor program, based on Net New Square Footage in excess of Right-
Sizing Square Footage, in accordance with the formula set forth below. In no
event shall the SUMC Parties’ aggregate annual payment to Menlo Park for the
shuttle fee program exceed Forty Six Thousand Three Hundred Forty Dollars
($46,340) per annum.
(1) The shuttle fees shall be paid in Annual
Payments to the City of Menlo Park for each occupied Net New Square Footage
in excess of Right-Sizing Square Footage, beginning within Thirty (30) days from
of the date of issuance of an Occupancy Permit for the building, and continuing
for the Life Of The Project.
(2) The amounts payable pursuant to this Section
5(c)(ii)(C)(2) shall be calculated as follows: Total Net New Square Footage for
SHC facilities to be constructed is Eight Hundred Twenty Three Thousand Seven
Hundred Seventy Two (823,772) square feet, of which Three Hundred Twenty
Thousand (320,000) square feet is allocable to Right-Sizing. Therefore, SHC
shall pay Menlo Park shuttle fees in the amount of Five and Thirty Six
Hundredths Cents ($0.0536) per square foot for each Net New Square Footage of
SHC facilities in excess of Three Hundred Twenty Thousand (320,000) square
feet. Total Net New Square Footage for LPCH facilities to be constructed is Four
Hundred One Thousand Five Hundred (441,500) Net New Square Footage, of
which One Hundred Twenty Six Thousand (126,000) is for Right-Sizing.
Therefore, LPCH shall pay to Menlo Park shuttle fees in the amount of Five and
Thirty Six Hundredths Cents ($0.0536) per square foot for each Net New Square
Footage of LPCH facilities in excess of One Hundred Twenty Six Thousand
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(126,000) square feet. The SUMC Parties shall pay Menlo Park shuttle fees in the
amount of Five and Thirty Six Hundredths Cents ($0.0536) per square foot for
each Net New Square Footage of medical office space constructed at the Hoover
Pavilion site.
(D) Willow Rd/Bayfront Expressway Improvements.
The SUMC Parties shall contribute Fourteen Thousand One Hundred Dollars
($14,100) to the City of Menlo Park for construction of improvements at the
Willow Road/Bayfront Expressway intersection.
(E) Bayfront Expressway/University Avenue
Improvements. The SUMC Parties shall contribute Two Hundred Twenty Five
Thousand Dollars ($225,000) to the City of Menlo Park for construction of
improvements at the Bayfront Expressway/University Avenue intersection.
(F) Willow Road/Middlefield Road Improvements.
The SUMC Parties shall contribute Two Hundred Eight-Nine Thousand Dollars
($289,000) to the City of Menlo Park for construction of improvements at the
Willow Road/Middlefield Road intersection.
(G) Opticom Systems. The SUMC Parties shall
contribute Six Thousand Four Hundred Dollars ($6,400) to the City of Menlo
Park for installation of Opticom systems at the following four (4) intersections:
Middlefield Road/Willow Road, Middlefield Road/Ravenswood Avenue, Willow
Road/Bayfront Expressway, and Bayfront Expressway/University Avenue.
(H) Timing and Process for Payments. The SUMC
Parties shall make the payments to the City of Menlo Park as described above,
other than the shuttle fee payments described in Section 5(c), within Thirty (30)
days after issuance of the Hospital Occupancy Permit. The shuttle fees described
in Section 5(c)(ii)(C) shall be paid as Annual Payments, based on the calculations
set forth in Section 5(c)(ii)(C)(2).
(iii) Contributions to AC Transit. The Hospitals shall offer to
contribute the following to AC Transit:
(A) Within Thirty (30) days from issuance of the
Hospital Occupancy Permit, the Hospitals shall offer to make a one-time payment
to the Alameda-Contra Costa Transit District (“AC Transit”) of Two Hundred
Fifty Thousand Dollars ($250,000) to be used for capital improvements to the U-
Line to increase capacity.
(B) Commencing within Thirty (30) days from issuance
of the Hospital Occupancy Permit and continuing for the Life Of The Project, the
Hospitals shall offer to make Annual Payments to AC Transit in a reasonable
annual amount, not to exceed Fifty Thousand Dollars ($50,000), to be used for
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operating costs of the U-Line to maintain a load factor for bus service to the
SUMC of less than 1.0.
(C) In order to encourage Hospital employees who
commute from the East Bay to use public transit from the East Bay to the Project,
the Hospitals shall use best efforts to lease seventy five (75) parking spaces at the
Ardenwood Park and Ride lot, or an equivalent location, commencing within
Thirty (30) days from issuance of the Hospital Occupancy Permit and continuing
for the Life Of The Project, at a cost not to exceed Forty Five Thousand Dollars
($45,000) per year.
(iv) Opticom Payments. Within Thirty (30) days after issuance
of the Hospital Occupancy Permit, the SUMC Parties shall make the following
contributions to mitigate traffic in Palo Alto.
(A) Opticom Systems. The SUMC Parties shall pay
Eleven Thousand Two Hundred Dollars ($11,200) to the City for installation of
Opticom systems at the following seven (7) intersections: El Camino Real/Palm
Drive/University Avenue; El Camino Real/Page Mill Road; Middlefield
Road/Lytton Road; Junipero Serra/Page Mill Road; Junipero Serra/Campus Drive
West, Galvez/Arboretum, Alpine/280 Northbound ramp. The City shall use its
best efforts to cause the Opticom system to be installed at the intersections listed
in this Section 5(c)(ii)(A) that are not located within the City’s jurisdiction.
(v) Caltrain Go Passes.
Commencing on September 1, 2015, the Hospitals shall purchase annual
Caltrain GO Passes (free train passes) for all existing and new Hospital employees
who work more than 20 hours per week, at a cost of up to One Million Eight
Hundred Thousand Dollars ($1,800,000) per year, which amount shall be adjusted
annually to reflect any change in the San Francisco Bay Area Consumer Price
Index (the “GO Pass Amount”). The Hospitals’ obligation under this Section
5(c)(v) to provide GO Passes shall continue for the Life Of The Project, or until
such earlier date as: (a) Caltrain discontinues the GO Pass program, or a
substantially similar program; (b) Caltrain increases the cost of GO Passes, or a
substantially similar program, such that the Hospitals’ annual costs would exceed
the GO Pass Amount; or (c) Caltrain service is reduced by such an extent that the
Hospitals and the City mutually determine purchase of annual GO Passes, or a
substantially similar program, would no longer be effective in substantially
reducing Hospital employee peak period trips in order to achieve the Alternative
Mode targets specified in Section 5(c)(viii). If the cost of obtaining GO Passes
exceeds the GO Pass Amount, the Hospitals shall have the option to elect either to
purchase the GO Passes at the then applicable price, or to terminate the obligation
to provide GO Passes, or a substantially similar program. If the Hospitals’
obligation to provide GO Passes, or a substantially similar program, terminates
for any of the reasons specified in this Section 5(c)(v), the Hospitals shall
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contribute the GO Pass Amount to one or more substitute programs to encourage
use of transit by Hospital employees or otherwise reduce peak period traffic trips
in the intersections impacted by the Project as identified in the Project EIR. The
substitute program or programs shall be mutually agreed upon by the SUMC
Parties and the City’s Director of Planning and Community Environment.
(vi) Marguerite Shuttle Service.
The Hospitals shall fund the reasonable costs, in an approximate amount of Two
Million Dollars ($2,000,000), for the purchase of additional shuttle vehicles for
the Marguerite shuttle service, as and when required to meet increased demand
for shuttle service between the Project Sites and the Palo Alto Intermodal Transit
Station. In addition, for the Life Of The Project, the Hospitals shall fund as
Annual Payments the reasonable costs, in an approximate amount of Four
Hundred Fifty Thousand Dollars ($450,000) per year, to cover the net increase in
operating costs for the Marguerite Shuttle.
(vii) Transportation Demand Management Coordinator.
Commencing on September 1, 2015, and continuing through the Life Of The
Project, the Hospitals shall employ an onsite qualified Transportation Demand
Management (“TDM”) coordinator for the SUMC.
(viii) Monitoring of TDM programs.
The City and the SUMC Parties acknowledge that because use of transit by
employees of the Hospitals is voluntary, and may be influenced by a number of
factors outside of the reasonable control of the Hospitals, such as gasoline prices,
costs and availability of alternative transit, housing costs and availability, and
personal preferences of employees, the Hospitals cannot guaranty the results of
their TDM programs. However, the Hospitals shall monitor the success of their
TDM programs from the date of the Initial Project Approvals until 2025. The
following interim targets shall be used to measure the progress toward meeting
the desired mode split in 2025. These interim targets assume that in the early
phases of implementation, there may be larger shifts to alternative modes than the
shifts that may occur in later phases of the TDM program enhancement. For
purposes of calculating alternative mode share, any mode that does not constitute
driving in a single-occupant vehicle to and from the work site shall be considered
an “Alternative Mode,” including working remotely from home.
Target Year Alternative Mode Share Percent Change
EIR Baseline
(2006) 22.9 % NA
Project Approval TBD TBD
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Baseline (2011)
2018 30 % 7.1%
2021 33 % +3 %
2025 35.1 % +2.1 %
If the applicable interim target is not met for any two consecutive years
prior to 2025, the Hospitals shall provide alternative transportation funding to the
City in Annual Payments in the amount of One Hundred Seventy Five Thousand
Dollars ($175,000) per year until the earlier of the year 2025 or the year the
applicable interim mode split target is achieved, subject to a maximum of five
Annual Payments. The alternative transportation funding must be used by the
City for local projects and programs that encourage citywide use of alternative
transportation mode uses.
(A) Submission of Reports. The Hospitals shall submit annual reports
showing the current number of employees employed over 20 hours per week; the
number of employees using an alternative mode share as documented by a study
or survey to be completed by the Hospitals using a method mutually agreeable to
the City and Hospitals; and the efforts used by the Hospitals to attempt to achieve
the Alternative Mode targets.
(B) 2025 Mode Split Penalty. If by 2025, the Hospitals have not
demonstrated substantial achievement of the Thirty Five and One-Tenth Percent
(35.1%) target modal split for alternative transportation modes, the Hospitals shall
make a lump sum payment of Four Million Dollars ($4.0 million) to the City for
local projects and programs that encourage and improve citywide use of
alternative transportation mode uses. If required, said $4 million payment shall
constitute a penalty for the failure to achieve the target modal split of 35.1% by
2025, and shall not relieve the SUMC Parties of any of its other obligations under
this Agreement, which shall continue pursuant to the terms of this Agreement.
The City shall keep all payments received from the Hospitals pursuant to this
Section 5(c)(viii) in a separate account (the “TDM Fund”), to be used only for the
purposes described in this Section 5(c)(viii). The City shall deliver an annual
report of disbursements from the TDM Fund in accordance with Section 12
below.
(d) Linkages.
To further encourage use of Caltrain, bus and other transit services, and to
enhance and encourage use of pedestrian and bicycle connections between the
SUMC and downtown Palo Alto, the SUMC Parties shall fund the following
improvements:
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(i) Improvements to Enhance Pedestrian and Bicycle
Connection from Intermodal Transit Center to El Camino Real/Quarry Road
Intersection. Two Million Two Hundred Fifty Thousand Dollars ($2,250,000)
for improvements to enhance the pedestrian and bicycle connection from the Palo
Alto Intermodal Transit Center to the existing intersection at El Camino Real and
Quarry Road, with up to Two Million Dollars ($2,000,000) of that amount going
to the development of an attractive, landscaped passive park/green space with a
clearly marked and lighted pedestrian pathway, benches and flower borders. Not
later than the Initial Payment Date, and subject to the provisions in Section 21(p),
the SUMC Parties shall pay to the City Two Million Two Hundred Fifty
Thousand Dollars ($2,250,000) in one lump sum (the “Intermodal Transit Fund”),
and the City shall be responsible for constructing the improvements described in
this Section 5(d)(i). The City shall keep the Intermodal Transit Fund in a separate
account, to be used only for the purposes described in this Section 5(d)(i). The
City shall deliver an annual report of disbursements from the Intermodal Transit
Fund in accordance with Section 12(d) below. The City shall construct the
improvements described in this Section 5(d)(i) prior to issuance of the Hospital
Occupancy Permit.
(ii) Public Right-of-Way Improvements to Enhance Pedestrian
and Bicycle Connection on Quarry Road. Four Hundred Thousand Dollars
($400,000) for improvements to and within the public right-of-way to enhance the
pedestrian and bicycle connection from the west side of El Camino Real to Welch
Road along Quarry Road, including urban design elements and way finding,
wider bicycle lanes, as necessary, on Quarry Road, enhanced transit nodes for bus
and/or shuttle stops, and prominent bicycle facilities. Not later than the Initial
Payment Date, and subject to the provisions in Section 21(p), the SUMC Parties
shall pay to the City Four Hundred Thousand Dollars ($400,000) in one lump sum
(the “Quarry Road Fund”), and the City will be responsible for constructing the
improvements. The City shall keep the Quarry Road Fund in a separate account,
to be used only for the purposes described in this Section 5(d)(ii). The City shall
deliver an annual report of disbursements from the Quarry Road Fund in
accordance with Section 12(d) below. The City shall construct the improvements
described in this Section 5(d)(ii) prior to issuance of the Hospital Occupancy
Permit.
(iii) Stanford Barn Connection. Up to Seven Hundred
Thousand Dollars ($700,000) for improvements to enhance the pedestrian
connection between the SUMC and the Stanford Shopping Center going from
Welch Road to Vineyard Lane, in the area adjacent to the Stanford Barn. The
SUMC Parties shall be responsible for constructing these improvements prior to
issuance of the Hospital Occupancy Permit.
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(e) Affordable Housing/ Sustainable Neighborhoods and
Communities.
(i) Payment. The SUMC Parties shall pay to the City a total of
Twenty-Three Million Two Hundred Thousand Dollars ($23,200,000) for use in
connection with affordable housing and sustainable neighborhoods and
communities. The SUMC Parties shall make this contribution in three equal
payments as follows:
(A) the first payment shall be made not later than the
Initial Payment Date, subject to the provisions in Section 21(p);
(B) the second payment shall be made within Thirty
(30) days from issuance of the Hospital Foundation Permit; and
(C) the third payment shall be made within Thirty (30)
days from issuance of the Hospital Occupancy Permit.
(ii) The amount of One Million Seven Hundred Twenty
Thousand Four Hundred Eighty Eight Dollars ($1,720,488) shall be used in the
same manner as funds collected by the City pursuant to its housing fee ordinance.
The City shall keep the balance of the payments made pursuant to this Section
5(e) (the “Affordable Housing/ Sustainable Neighborhoods and Communities
Fund”) in a separate account, to be used only for the purposes described in this
Section 5(e). The City shall deliver an annual report of disbursements from the
Affordable Housing/ Sustainable Neighborhoods and Communities Fund in
accordance with Section 12(d) below.
(iii) The housing credit issued to the SUMC Parties in
connection with the Alma substation relocation may be used to offset the
obligations in this Agreement.
(f) Climate Change.
(i) Sustainability Programs Benefit. The SUMC Parties shall
contribute Twelve Million Dollars ($12 Million) to the City for use in projects
and programs (including carbon credits) for a sustainable community, including
programs identified in the City’s Climate Action Plan, as may be amended, and
investments in renewable energy and energy conservation. The SUMC Parties’
obligation to make this contribution is conditioned on there being no other non-
voluntary requirement applicable to the Project to participate in Palo Alto
Utilities’ Palo Alto Green Program. The SUMC Parties shall make this
contribution in three equal payments, as follows:
(A) the first payment shall be made not later than the
Initial Payment Date, subject to the provisions in Section 21(p);
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(B) the second payment shall be made within Thirty
(30) days from issuance of the Hospital Foundation Permit; and
(C) the third payment shall be made within Thirty (30)
days from issuance of the Hospital Occupancy Permit.
The City shall keep all payments made pursuant to this Section 5(f) (the “Climate
Change Fund”) in a separate account, to be used only for the purposes described
in this Section 5(f). The City shall deliver an annual report of disbursements from
the Climate Change Fund in accordance with Section 12(d) below.
(g) Administrative Costs. In implementing each of the funds
described in this Section 5, the funds may be used for the Party’s reasonable costs
of administering the funds, including establishing and maintaining the necessary
accounts, reporting upon the use and balance of funds, establishing and
implementing procedures to allocate funding, and other activities to implement
the funds’ purposes.
(h) Satisfaction of All Conditions of Approval. The SUMC Parties
shall satisfy all Conditions of Approval by the dates and within the time periods
required by the Project Approvals, subject to such modifications allowed by this
Agreement.
6. City’s Promises.
(a) Vested Rights to Develop and Use the
Property. City hereby grants to the SUMC Parties the vested right to develop,
construct and use the Project on the Property in accordance with the terms and
conditions of the Project Approvals and this Agreement, and City hereby finds the
Project consistent with the Comprehensive Plan and the Zoning Ordinance as
amended by the Project Approvals. City shall not apply to the Project any change
in the Applicable Rules adopted or effective after the Effective Date, except as
provided in Sections 7 and 8 below.
(b) Permitted and Conditionally Permitted Uses.
The permitted and conditionally permitted uses of the Property shall be those
described in the Hospital Zoning Ordinance. The rights of the SUMC Parties to
continue and maintain permitted and conditionally permitted uses on the Property
shall be subject to compliance with the terms and conditions of this Agreement,
the Applicable Rules, and the Project Approvals.
(c) Maximum Density and Intensity of Uses.
When developed, the density and intensity of use of the Property shall not exceed
those densities and intensities of use set forth in the Hospital Zoning Ordinance.
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(d) Other Development Standards. All design and
development standards not set forth in the Project Approvals or this Agreement
shall be in accordance with the Applicable Rules as applied to the Project;
provided such standards shall not conflict with the Project Approvals or this
Agreement.
(e) Subsequent Rules. Subsequent Rules that
conflict with the SUMC Parties’ rights to develop the Property as provided under
this Agreement are applicable to the Project only under the circumstances
described in Sections 7 and 8 below. This limitation applies to changes made by
ordinance, initiative, referendum, resolution, policy, order or moratorium,
initiated or instituted for any reason whatsoever and adopted by the Mayor, City
Council, Planning and Transportation Commission or any other board,
commission or department of City, or any officer or employee thereof, or by the
electorate.
(f) Subsequent Approvals. City shall not deny or
unreasonably delay any Subsequent Approval that is necessary to the exercise of
the rights vested in the SUMC Parties by this Agreement. Any conditions, terms,
restrictions, and requirements for subsequent Discretionary Actions imposed or
required by City, including those provided for herein, shall not prevent
development of the land for the uses and to the density or intensity of
development set forth in the Agreement. Except as provided in Sections 7 or 8
below. City shall not interpret any Subsequent Approval or apply any Subsequent
Rule in a manner that would conflict with the Applicable Rules or reduce the
development rights provided by this Agreement. Upon City approval, each
Subsequent Approval shall be vested for the Term of the Agreement and the
provisions of Section 6(a) shall apply to each Subsequent Approval.
(g) Limitation on Architectural Review
Approvals. To the extent that the Project Approvals or Applicable Rules require
further decisions, determinations or actions pertaining to architectural review
and/or site and design review (collectively “Architectural Review Approval”), the
decision in all cases shall be made by the Director of Planning and Community
Environment, after recommendation by the Architectural Review Board, subject
only to appeal to the City Council, pursuant to Section 18.77.070 of the Municipal
Code as set forth in the Applicable Rules, without review or recommendation by
the Planning and Transportation Commission. Further, in each case, Architectural
Approval shall be limited to determining consistency with the Design Guidelines
and Hospital Zoning Ordinance. City shall process any application for
Architectural Review Approval expeditiously and, to the extent feasible, in
accordance with the time schedule set forth on Exhibit D. The provisions of this
Section 6(g) shall apply to each architectural review or site and design review
process undertaken and Architectural Review Approval granted with regard to
any portion of the Project.
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(h) Phasing Schedule. [NOTE: Parties have not
agreed on Phasing Schedule provisions.]
(i) Annexation of County Property. City shall
petition the Local Agency Formation Commission (LAFCO) to annex to City the
County Property in accordance with the time schedule set forth on Exhibit D. The
SUMC Parties shall cooperate by executing all necessary documents, by
providing all information requested by City acting as the conducting authority for
purposes of the annexation proceedings, and by attending annexation hearings and
testifying in favor of the annexation. The SUMC Parties shall be responsible for
paying all reasonable costs of the annexation.
(j) Utility and Storm Drain Connections. Unless
prohibited by a moratorium lawfully adopted by another governmental agency, or
by action taken by City in accordance with Sections 7 or 8, or by state or federal
law, City shall allow the SUMC Parties to connect the Project to the City’s
sanitary sewers, storm drains, water system, gas system and electrical system in
accordance with its generally applicable rules in effect at the time of application
for service and shall issue all permits and authorizations necessary for such
connections and service in accordance with such generally applicable rules. A
moratorium shall not prevent the issuance of Discretionary Approvals or
ministerial approvals for the Project, provided that City shall not be required to
allow any connections or provide any services barred by the moratorium.
(k) Waste Treatment Capacity. Subject to any
limitation imposed by state or federal law, in the event of a moratorium
preventing or limiting sanitary sewer connections, the SUMC Parties shall have
priority for sanitary sewer treatment capacity for the Project over other unbuilt
residential, commercial or industrial development until December 31, 2025. In
addition, the SUMC Parties shall have priority over new commercial space built
or approved subsequent to the Effective Date, including but not limited to retail,
office and industrial space, until December 31, 2025. These priorities apply to
both “domestic waste” and “industrial waste.”
(l) Storm Drain Capacity. Subject to any
limitation imposed by state or federal law, in the event of a moratorium
preventing or limiting discharge or increased runoff to storm drains, the SUMC
Parties shall have priority for use of storm drains for the Project over other unbuilt
commercial development until December 31, 2025. The SUMC Parties also shall
have priority over new commercial space built or approved subsequent to the
Effective Date, including but not limited to retail, office, and industrial space,
until December 31, 2025.
(m) OSHPD. City recognizes that, pursuant to the
HSSA, (i) OSHPD has exclusive jurisdiction of certain aspects of design and
construction, including construction of associated infrastructure, of hospital
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buildings, including plan review, issuance of building permits, building
inspections, and issuance of certificates of occupancy, and, (ii) certain OSHPD
standards and rules apply to non-hospital buildings that provide outpatient clinical
services. In the event that any OSHPD requirement conflicts with the Project
Approvals, the City shall (a) approve revisions to Project Approvals or, as
necessary, grant Subsequent Approvals for modifications that are not inconsistent
with the Hospital Zoning Ordinance, or, (b) if necessary modifications would be
inconsistent with the Hospital Zoning Ordinance, promptly and in good faith enter
into negotiations with the appropriate SUMC Parties for such modifications to the
Project Approvals as are necessary to conform to the conflicting OSHPD
requirement so that the public benefits and objectives of this Agreement will be
achieved at the earliest feasible date. The approval of such revisions or
modifications shall be determined in the first instance by the Director of Planning
and Community Environment, subject to review only by expedited appeal to the
City Council.
(n) No Other Dedications. Except as may be
required to provide City-owned public utilities to the Project and emergency
vehicle access, and except as otherwise set forth in this Agreement or the Project
Approvals, or as may be agreeable to the SUMC Parties, the SUMC Parties shall
not be required to make any dedications or reservations of the Property, or any
portion thereof or interest therein, or of any other property in connection with the
development, construction, use, or operation of the Project, or any portion thereof.
(o) No Other Public Improvements or Financial
Contributions. Except as may be required under the Conditions of Approval, in
connection with the relocation of City-owned public utilities under Welch Road,
the gas line retrofitting on Welch Road, or restoration of any public improvements
impacted by the Project construction the SUMC Parties shall not be required to
construct public improvements or make financial contributions to City in lieu of
public improvements as part of the Project, except as expressly set forth in this
Agreement, or as may be agreeable to the SUMC Parties, or as provided in the
Project Approvals.
(p) No Obligation to Develop. The SUMC
Parties shall have no obligation to develop the Project, or any component of it.
The SUMC Parties may develop the Project in their sole discretion in accordance
with their own time schedule, subject to the terms and conditions of this
Agreement. The SUMC Parties may develop and construct the Project in any
sequence or phases, in their sole discretion.
(q) Timing for Performance of Conditions of
Approval. The SUMC Parties may request in writing a change in the time of
performance of any Condition of Approval. Within a reasonable time of
receiving the request, the City Manager or his or her designee (a) shall determine
whether additional environmental review is required because of the proposed
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change; (b) may condition approval of the proposed change upon changes in the
timing of related conditions or mitigation measures; and, finally, (c) shall
approve, conditionally approve or deny the requested change. Within a
reasonable time of receiving the City Manager’s decision on the request, the
SUMC Parties shall give written notice of its acceptance or of its withdrawal of
the request. The change shall be effective upon receipt by the City of the notice
of acceptance.
7. Exceptions. To the extent Subsequent Rules
(including a moratorium otherwise lawfully adopted by City) conflict with the
Applicable Rules, they may be applied to the Project without the consent of the
SUMC Parties only (i) if City determines that application of such Subsequent
Rules is necessary to protect against conditions that create a substantial and
demonstrable risk to the physical health or safety of residents or users of the site
to which the Subsequent Rules apply or the affected surrounding region; or (ii) if
such Subsequent Rules are mandated or required by supervening federal, state or
regional statute or regulation; or (iii) if otherwise provided by this Agreement.
8. Exclusions.
(a) Sewer Facilities, Storm Drains and Runoff.
This Agreement does not affect the SUMC Parties’ obligations, if any, to pay for
or construct improvements in the storm drain system required to implement the
Project, nor does it affect the SUMC Parties’ obligations to meet any applicable
federal, state and local discharge limits and requirements pertaining to sewer
facilities, storm drains or runoff.
(b) Limited Effect on Right to Tax, Assess, or
Levy Fees or Charges Except as expressly provided herein, this Agreement does
not limit the power and right of the City to impose the same taxes, levy the same
assessments, or require the payment of the same permit fees and charges by the
SUMC Parties as the City requires for all other nonresidential development or
property on a citywide basis. The SUMC Parties shall be required to pay all
Development Impact Fees in effect on the Effective Date, as provided in this
Section 8(b), subject to the SUMC Parties’ right to protest and/or pursue a
challenge in law or equity to the new or increased Development Impact Fee. The
SUMC Parties shall not be required to pay any new Development Impact Fees
adopted after the Effective Date through December 31, 2019, unless such
payment becomes due under the Applicable Rules or this Agreement on or after
January 1, 2020. Further, the City shall not require the SUMC Parties to pay any
increase in the amount of a Development Impact Fee, except as set forth in this
Section 8(b) and the amount of the Development Impact Fees shall be calculated
as set forth in this Section 8(b). All fees, charges, taxes and assessments
permitted by this Agreement, and as modified from time to time, are Subsequent
Applicable Rules. For buildings subject to OHSPD jurisdiction, City fees shall be
considered due not later than 30 days after issuance of the Hospital Foundation
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Permit from OSHPD. In no event may any fees be paid later than the date for
payment under the Applicable Rules.
(i) All provisions and requirements of the this
Agreement and the Applicable Rules to the contrary notwithstanding, the SUMC
Parties shall have the following options with respect to the timing of payment of
Development Impact Fees , and the rates of Development Impact Fees will be
calculated as follows:
(a) If the SUMC Parties elect to pay or
prepay all or any portion of the
Development Impact Fees between the
Effective Date and December 31, 2011, the
SUMC Parties shall pay such fees at the
rate in effect on the Effective Date;
(b) If the SUMC Parties elect to pay or
prepay all or any portion of the
Development Impact Fees on or after
January 1, 2012 through and including
December 31, 2019, the SUMC Parties shall
pay such fees at the rate applicable citywide
to nonresidential development at the time of
payment; except that the City shall not
require the SUMC Parties to pay any
increase in a Development Impact Fee that
exceeds an amount calculated according to
the rate in effect on the Effective Date and
adjusted to reflect the change in the San
Francisco Bay Area Consumer Price Index
from January 1, 2012 to the date of payment.
(c) If the SUMC Parties elect to pay all
or any portion of the Development Impact
Fees on or after January 1, 2020, the SUMC
Parties shall pay such fees at the rate
applicable citywide to nonresidential
development at the time of payment, subject
to the SUMC Parties’ right to protest and/or
pursue a challenge in law or equity to the
increased fee.
(ii) The SUMC Parties shall not receive any
credit against any City Development Impact Fees for any community benefits
provided pursuant to this Agreement.
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(iii) Payment of the city-wide Transportation
Impact Fees in accordance with this Agreement shall constitute the Project’s
entire fair share contribution to the following transportation mitigation measures:
TR 2.1 (contribution to traffic adaptive signal technology in Palo Alto); TR 2.2
(contribution to Everett undercrossing in Palo Alto); and TR 7.2 (contribution to
Palo Alto Crosstown Shuttle).
(iv) Except as provided in this Section 8(b), the
SUMC Parties shall pay Development Impact Fees in accordance with the
Applicable Rules, on the basis of Net New Square Footage.
(v) Nothing in this Agreement shall preclude the
City from collecting fees from the SUMC Parties that are lawfully imposed on the
Project by another entity having jurisdiction over the Project which the City is
required or authorized to collect pursuant to applicable laws.
(c) No Limit on Right of City to Adopt and
Modify Uniform Codes. This Agreement does not limit the right of the City, to
the extent permitted by state law, to adopt Building, Plumbing, Electrical, Fire
and similar uniform construction codes, and to adopt local modifications of those
codes, from time to time. Those codes, as modified from time to time, are
Subsequent Applicable Rules.
(d) No Limit on Power of City to Adopt and
Apply Rules Governing Provision and Use of Utility Services. Except as
expressly provided in Section 6, this Agreement does not limit the power and
right of the City to adopt and amend from time to time rules and procedures
governing the provision and use of utility services provided by the City. These
rules, as modified from time to time, are Subsequent Applicable Rules. If there is
any conflict between such Rules and Section 6, the latter shall control.
(e) California Environmental Quality Act
Compliance (CEQA). The City has prepared and certified an EIR and has
imposed mitigation measures as Conditions of Approval prior to the execution of
this Agreement. This Agreement does not limit the City’s duty to comply with the
provisions of CEQA and the associated Guidelines, and to comply with the
provisions of its own local CEQA procedures, as they may be amended from time
to time, that comply with the provisions of section 21082 of CEQA. However, the
City shall not undertake additional environmental review under CEQA unless
required to do so by CEQA. In the event that any such further environmental
review is required for a Subsequent Approval or other Discretionary Action, it
shall be in accordance with Sections 15162-15164 of the CEQA Guidelines, and
the scope of analysis and evaluation shall be as required by CEQA.
(f) No General Limitation on Future Exercise of
Police Power. The City retains its right to exercise its general police power
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except when such exercise would conflict with the vested rights granted under this
Agreement. The police powers so retained and enforceable under this Agreement
shall include, but are not limited to, the enactment of regulations concerning the
disposition of construction and demolition materials that apply generally to the
City.
9. Indemnity. To the maximum extent permitted
by law, the SUMC Parties shall defend, indemnify and hold harmless the City, its
City Council, its officers, employees and agents (each an “Indemnified Party” and
collectively the “Indemnified Parties”) from and against any claim, action, or
proceeding brought by any third party against the Indemnified Parties to attack,
set aside, or void any of the Project Approvals, or any Subsequent Approvals.
The SUMC Parties shall take the lead role in defending any such claim, action or
proceeding, and may, in their sole discretion, elect to be represented by the
attorneys of their choice. The City may, in its sole discretion, elect to be
represented by the attorneys of its choice in any such action or proceeding, with
the reasonable costs of such representation to be paid by the SUMC Parties. The
SUMC Parties and the City shall fully coordinate and cooperate in the defense of
any such action and shall keep each other fully informed of all developments
relevant to such defense, subject only to confidentiality requirements and any
privileges or legal doctrines that may prevent the communication of any such
information. The SUMC Parties’ obligations set forth in this Section 9 shall
survive any suspension or termination of this Agreement, regardless of cause.
10. Cooperation and Implementation. The Parties
shall cooperate to implement this Agreement in a manner that ensures that all
Parties realize the intended benefits of the Agreement. With respect to the City,
such cooperation shall include, but without limitation, diligent processing of
applications for approval of development of the Project that comply with the
Project Approvals, Applicable Rules and Subsequent Applicable Rules, and the
City shall not unreasonably deny or delay any Discretionary Action, Subsequent
Approval or OSHPD approval that is necessary to the exercise of the rights vested
in the SUMC Parties by this Agreement. Such cooperation shall include, but
without limitation, prompt compliance by each Party with all requests by another
Party for materials and information necessary to determine the responding Party’s
compliance with this Agreement, and the diligent provision and implementation
of all community benefits and voluntary mitigation measures to be provided by
the SUMC Parties under this Agreement and the City’s expenditures of funds for
the purposes described in this Agreement.
11. Identification of Applicable Rules. Prior to the
Effective Date, the Parties will use reasonable efforts to identify and assemble
four (4) sets of the Applicable Rules, one (1) set for the City and one (1) set for
each of the SUMC Parties, so that if it becomes necessary in the future to refer to
any of the Applicable Rules, there will be a common set of the Applicable Rules
available to each Party. Failure by City to identify or assemble written Applicable
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Rules shall in no manner limit City’s ability to later identify or use such
Applicable Rules.
12. Periodic Review of Compliance.
(a) Periodic Review. City shall review this
Agreement annually, in accordance with the procedures and standards set forth in
this Agreement and City of Palo Alto City Council Resolution No. 6597 in order
to ascertain the SUMC Parties’ compliance with the terms of the Agreement. The
SUMC Parties shall submit an annual report (the “Annual Report”) to the Director
of Planning and Community Environment (the “Planning Director”), in the form
and containing the content described in Section 12(c) below, each year within
thirty (30) days after the anniversary of the Effective Date. The Annual Report
shall be accompanied by an annual review fee sufficient to cover the estimated
costs of review of the Annual Report. The amount of the annual review fee shall
not exceed the City’s actual, reasonable costs for such review. Within forty-five
(45) days of receipt of the SUMC Parties’ Annual Report, the City shall prepare
and submit to the SUMC Parties a Supplement to the Annual Report, in the form
and containing the content described in Section 12(d) below, to demonstrate the
City’s good faith compliance with the terms of this Agreement.
(b) Special Review. The City Council may order
a special review of compliance with this Agreement any time the City Council
determines that the SUMC Parties may be in breach of the Agreement. The
Planning Director or City Council, as determined from time to time by the City
Council, shall conduct such special reviews, at the City’s expense.
(c) Annual Report. The Annual Report to be
submitted by the SUMC Parties pursuant to Section 12(a) above shall summarize
the SUMC Parties’ progress on the Project, including, at a minimum (i) a list of
the net new square footage for which a certificate of occupancy has been
received; and (ii) a description of the steps the SUMC Parties have taken to
comply with the obligations listed in Section 5 of this Agreement.
(d) Supplement to the Annual Report. The
Supplement to the Annual Report to be submitted by the City pursuant to Section
12(a) above shall include an accounting of the funds received by the City,
including a description of describe the account balances for each of the funds that
the City is required to maintain under Section 5 of this Agreement (“City Funds”),
the City’s expenditures from each of the City Funds, and the purposes for which
the expenditures were used. The City’s descriptions of the expenditures shall be
at the level of detail the SUMC Parties reasonably determine is necessary to
confirm that the City’s expenditures from the City Funds are consistent with the
terms of Section 5 of this Agreement. The City’s report shall be included in any
hearings held by the City pursuant to Section 12(e) of this Agreement. The City
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shall bear the burden of proof that the City has complied with the requirements of
Section 5 for use of funds paid by the SUMC parties.
(e) Procedure.
(1) During either a periodic review or a special
review, the SUMC Parties shall be required to demonstrate good faith compliance
with the terms of the Agreement. The burden of proof on this issue shall be on
the SUMC Parties. During the periodic or special review, the City may rely on
information in addition to that provided in the Annual Report prepared by the
SUMC Parties pursuant to Section 12(a) above. The Parties acknowledge that
failure by the SUMC Parties to demonstrate good faith compliance shall
constitute grounds for termination or modification of this Agreement in
accordance with the provisions of this Section 12.
(2) Upon the SUMC Parties’ submission of the
Annual Report to the Planning Director, the Planning Director shall review the
Annual Report and, based on the Annual Report and any other information
available to the Planning Director relating to the SUMC Parties’ compliance with
the Agreement, prepare and submit a report (the “Planning Director’s Report”) to
the City Council setting forth the evidence concerning good faith compliance by
the SUMC Parties with the terms of this Agreement and the recommended finding
on that issue.
(3) The City Council shall review the Planning
Director’s report, the Annual Report submitted by the SUMC Parties, and any
other information available to the City Council relating to the SUMC Parties’
compliance with the Agreement.
(4) If, upon completing its review, the City
Council finds that the SUMC Parties have complied in good faith with the terms
and conditions of this Agreement, the review shall be concluded.
(f) Default by SUMC Parties. If, upon
completing its review described in Section 12(e), the City Council makes a
finding, on the basis of substantial evidence, that the SUMC Parties have not
complied in good faith with the terms and conditions of this Agreement, the City
shall provide written notice to the SUMC Parties describing: (i) such failure to
comply with the terms and conditions of this Agreement (referred to herein as a
“Default”), (ii) whether the Default can be cured, (iii) the actions, if any, required
by the SUMC Parties to cure such Default, and (iv) the time period within which
such Default must be cured. If the Default can be cured, the SUMC Parties shall
have at a minimum 90 days after the date of such notice to cure such Default, or
in the event that such Default cannot be cured within such 90-day period but can
be cured within one (1) year, the SUMC Parties shall have commenced the actions
necessary to cure such Default and shall be diligently proceeding to complete
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such actions necessary to cure such Default within 90 days from the date of the
notice. If the Default cannot be cured or cannot be cured within one (1) year, as
determined by City during the periodic or special review, the City Council may
modify or terminate this Agreement as provided in Section 12(g) and Section
12(h).
(g) Proceedings Upon Modification or
Termination. If, upon a finding under Section 12(f) and the expiration of the cure
period specified in Section 12(f) above, City determines to proceed with
modification or termination of this Agreement, City shall give written notice to
the SUMC Parties of its intention so to do. The notice shall be given at least ten
calendar days before the scheduled hearing and shall contain:
(1) The time and place of the hearing;
(2) A statement as to whether or not the City
proposes to terminate or to modify the Agreement; and
(3) Such other information as is reasonably
necessary to inform the SUMC Parties of the nature of the proceeding.
(h) Hearings on Modification or Termination. At
the time and place set for the hearing on modification or termination, the SUMC
Parties shall be given an opportunity to be heard and shall be required to
demonstrate good faith compliance with the terms and conditions of this
Agreement. The burden of proof on the issue shall be on the SUMC Parties. If
the City Council finds, based upon substantial evidence, that the SUMC Parties
has not complied in good faith with the terms or conditions of the Agreement, the
City Council may terminate this Agreement or modify this Agreement in a
manner mutually acceptable to the Parties to address the Default. The decision of
the City Council shall be final and subject to judicial review as provided in
Section 14, below.
(i) Certificate of Compliance. If, at the
conclusion of a periodic or special review, the SUMC Parties are found or deemed
to be in compliance with this Agreement, City shall, upon request by the SUMC
Parties, issue a Certificate of Compliance (“Certificate”) to the SUMC Parties
stating that after the most recent periodic or special review and based upon the
information known or made known to the Planning Director and City Council
that: (1) this Agreement remains in effect, and (2) the SUMC Parties are not in
Default. The Certificate shall be in recordable form, shall contain information
necessary communicate constructive record notice of the finding of compliance,
shall state whether the Certificate is issued after a periodic or special review and
shall state the anticipated date of commencement of the next periodic review. The
SUMC Parties may record the Certificate without cost or expense to City.
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13. Default by City. If the SUMC Parties determine
that City has failed to comply with any of the City’s obligations under this
Agreement, the SUMC Parties may provide written notice to the City describing
its contentions regarding (i) such failure to comply with the terms and conditions
of this Agreement (referred to herein as a “City Default”), (ii) whether the City
Default can be cured, (iii) the actions, if any, required of City to cure such City
Default, and (iv) the time period within which such City Default must be cured. If
the City Default can be cured, City shall have at least 90 days after the date of
such notice to cure such Default, or in the event that such City Default cannot be
cured within such 90 days period but can be cured within one year, City shall
have commenced all actions necessary to cure such Default and shall be diligently
proceeding to complete all such actions necessary to cure such Default within 90
days from the date of notice. If the SUMC Parties contend that the City Default
cannot be cured or cannot be cured within one year, or if City fails to cure within
the applicable cure period as provided in this Section 13, the SUMC Parties shall
give notice to City of its contentions before pursuing the remedies described in
Section 14.
14. Remedies for Default. It is acknowledged by
the Parties that City would not have entered into this Agreement if doing so would
subject it to the risk of incurring liability in damages, either for breach of this
Agreement, anticipatory breach, repudiation of the Agreement, or for any actions
with respect to its implementation or application. The Parties intend by the
provisions of this Section 14 that none of the Parties shall have any liability for
money damages arising out of a breach of this Agreement, and no liability in
money damages for any claims arising out of the application process, negotiation,
execution and adoption, or the implementation or application of this Agreement.
Each of the Parties hereto may pursue any remedy at law or equity
available for the breach of any provision of this Agreement, including but not
limited to temporary or permanent injunctive relief or restraining orders, except
that the Parties shall have no liability in damages for any acts which are alleged to
have arisen out of or relate to this Agreement, under any circumstances.
The Parties further acknowledge that money damages and
remedies at law generally are inadequate, and specific performance is the most
appropriate remedy for the enforcement of this Agreement and should be
available to all Parties for the following reasons:
(a) Money damages are excluded as provided
above.
(b) Due to the size, nature, and scope of the
Project, it may not be practical or possible to restore the Property to its
original condition once implementation of this Agreement has begun. After
such implementation, the SUMC Parties may be foreclosed from other
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choices they may have had to utilize the Property or portions thereof. The
SUMC Parties have invested significant time and resources and performed
extensive planning and processing of the Project in agreeing to the terms of
this Agreement and will be investing even more significant time and
resources in implementing the Project in reliance upon the terms of this
Agreement, and it is not possible to determine the sum of money which
would adequately compensate the SUMC Parties for such efforts.
Except for non-damages remedies, including the remedy of
specific performance, the SUMC Parties, on the one hand, and the City, on the
other hand, for themselves, their successors and assignees, hereby release one
another’s officers, trustees, directors, agents and employees from any and all
claims, demands, actions, or suits of any kind or nature arising out of any
liability, known or unknown, present or future, including, but not limited to, any
claim or liability, based or asserted, pursuant to Article I, Section 19 of the
California Constitution, the Fifth and Fourteenth Amendments of the United
States Constitution, or any other law or ordinance which seeks to impose any
money damages, whatsoever, upon the Parties because the Parties entered into
this Agreement, because of the terms of this Agreement, or because of the
manner of implementation or performance of this Agreement.
All legal actions shall be heard by a reference from the Santa Clara
County Superior Court pursuant to Code of Civil Procedure Section 638, et seq.
The parties to the action shall agree upon a single referee who shall then try all
issues, whether of fact or law, and report a finding and judgment thereon and
issue all legal and equitable relief appropriate under the circumstances of the
controversy before the referee. If the parties to the action are unable to agree on
a referee within ten (10) days of a written request to do so by any Party , any
Party may seek to have one appointed pursuant to Code of Civil Procedure
section 640. The cost of such proceeding shall initially be borne equally by the
parties to the action. Any referee selected pursuant to this Section 13 shall be
considered a temporary judge appointed pursuant to Article 6, Section 21 of the
California Constitution.
15. Modification, Amendment or Cancellation by
Mutual Agreement. Subject to meeting the notice and hearing requirements of
Section 65867 of the Development Agreement Act, this Agreement may be
modified, amended, or cancelled at any time by mutual consent of the Parties in
accordance with the provisions of Section 65868 of the Development Agreement
Act and City’s Resolution No. 6597.
16. Superseding State or Federal Law. In the event
that any state or federal law or regulation enacted or adopted after the date of this
Agreement shall prevent or preclude compliance with any of the provisions
hereof, such provisions shall be modified or suspended only to the extent and for
the time necessary to achieve compliance with said law or regulation and the
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remaining provisions of this Agreement shall be in full force and effect. Upon
repeal of said law or regulation or occurrence of other circumstances removing
the effect thereof upon this Agreement, the provisions hereof shall be restored to
their full original effect.
17. Notices. All notices required or provided for
under this Agreement shall be in writing and shall be delivered personally or by
overnight courier service or sent by certified or registered mail, return receipt
requested. Any notice shall be deemed to have been duly given and received
upon receipt. Notices to the parties shall be addressed as follows:
City: City Manager
City of Palo Alto
250 Hamilton Avenue
Palo Alto, California 94301
with copies to:
City Attorney
City of Palo Alto, 8th Floor
250 Hamilton Avenue
Palo Alto, California 94301
Director of Planning and Community
Environment
City of Palo Alto, 5th Floor
250 Hamilton Avenue
Palo Alto, California 94301
SHC: _______________
_______________
_______________
with a copy to: ________________
________________
________________
LPCH: _______________
_______________
_______________
with a copy to: ________________
________________
________________
University: _______________
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_______________
_______________
with a copy to: ________________
________________
________________
Any Party may change its address for notice by giving ten (10) days’ notice of
such change in the manner provided for in this paragraph.
18. Term of Agreement; Force Majeure.
(a) Basic Term. Except as to those obligations that
expressly extend beyond the stated Term of the Agreement, the Term of this
Agreement shall commence as of the Effective Date, and shall continue for thirty
(30) years from the adoption of the Ordinance authorizing this Agreement or until
earlier terminated by mutual consent of the Parties or as otherwise provided by
this Agreement, Upon the termination of this Agreement, no Party shall have any
further right or obligation hereunder except with respect to any obligation to have
been performed prior to such termination or with respect to any default in the
performance of the provisions of this Agreement which has occurred prior to such
termination or with respect to any obligations which are specifically set forth as
surviving this Agreement.
(b) Extension for Default or Moratorium. If a Party is
deprived of a benefit under this Agreement as a result of referendum of one or
more of the Project Approvals; litigation challenging one or more of the Project
Approvals or one or more Subsequent Approvals, a moratorium or a default by
the other Party, then the Party so deprived may elect to extend the Term of this
Agreement with respect to that benefit for the duration of the moratorium or
default.
(c) Force Majeure. Performance by either the SUMC
Parties, on the one hand, or the City, on the other hand, of an obligation hereunder
shall be excused during any period of “Permitted Delay.” Permitted Delay shall
mean delay beyond the reasonable control of a Party including, without limitation,
an inability to perform caused by (a) acts of God, including without limitation
earthquakes, floods, fire, and other natural calamities, (b) civil commotion; (c)
riots or terrorist acts; (d) strikes or other forms of material labor disputes; (e)
shortages of materials or supplies; and (f) vandalism. A Party’s financial inability
to perform shall not be a ground for claiming a Permitted Delay. The Party
claiming the Permitted Delay shall notify the other Party of its intent to claim a
Permitted Delay, the specific grounds of the same and the anticipated period of
the Permitted Delay within 10 business days after the occurrence of the conditions
which establish the grounds for the claim. The period of Permitted Delay shall last
not longer than the conditions preventing performance.
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19. Assignment; Right to Assign.
(a) Assignment.
(1) Right to Assign. Each of the SUMC Parties
shall have the right to sell, transfer or assign its interest in the Property, in whole
or in part (provided that no such partial transfer shall be permitted to cause a
violation of the Subdivision Map Act, Government Code section 66410, et seq.),
to any person or entity at any time during the term of this Agreement; provided:
(i) Concurrently with any such sale,
transfer or assignment, or within ten (10) business days thereafter, the transferor
shall notify City, in writing, of such sale, transfer or assignment and shall provide
City with an executed agreement, in a form reasonably acceptable to the City, by
the purchaser, transferee or assignee and providing therein that the purchaser,
transferee or assignee expressly and unconditionally assumes all the duties and
obligations of the transferor under this Agreement.
(ii) No sale, transfer or assignment of
any right or interest under this Agreement shall be made without the prior written
consent of the City Council, which consent may not be unreasonably withheld.
Notwithstanding the failure of any purchaser,
transferee or assignee to execute the agreement required by subparagraph (i)
above, the burdens of this Agreement shall be binding upon such purchaser,
transferee or assignee, but the benefits of this Agreement shall not inure to such
purchaser, transferee or assignee until and unless such agreement is executed.
(2) Release of Transferor. Notwithstanding any
sale, transfer or assignment, the transferring Party shall continue to be obligated
under this Agreement unless such Party is given a release in writing by City,
which release will be provided by City upon the full satisfaction by the
transferring Party of all the following conditions:
(i) The transferring Party no longer has
a legal or equitable interest in the portion of the Property being transferred.
(ii) The transferring Party is not then in
default and default proceedings have not been commenced by City under this
Agreement.
(iii) The transferring Party has provided
City with the notice and executed agreement required under Section 19(a)(1)(i)
above.
44 of 51
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(iv) The purchaser, transferee or assignee
provides City with security reasonably satisfactory to City to secure performance
of its obligations under this Agreement.
Nothing contained in this Section 19 shall prevent a
transfer of the Property, or any portion thereof, to an institutional lender or
Mortgagee as a result of a foreclosure of a Mortgage or deed in lieu of
foreclosure, and any lender or Mortgagee acquiring the Property, or any portion
thereof, as a result of foreclosure of a Mortgage or a deed in lieu of foreclosure
shall take such Property subject to the terms of this Agreement; provided,
however, in no event shall such lender or Mortgagee be liable for any defaults or
monetary obligations of the SUMC Parties arising prior to acquisition of title to
the Property by such lender or Mortgagee; and provided further in no event shall
any such lender or Mortgagee or its successors or assigns be entitled to a building
permit or occupancy certificate for any portion of the Project until all fees due
under this Agreement have been paid to City, until all outstanding obligations of
the SUMC Parties have been performed, and until any and all outstanding
Defaults have been cured.
20. Mortgagee Protection. The Parties hereto agree
that this Agreement shall not prevent or limit any of the SUMC Parties in any
manner, at their sole discretion, from encumbering the Property or any portion
thereof or any improvement thereon by any Mortgage securing financing with
respect to the Property or development of the Property. City acknowledges that
the lenders providing such financing may require certain Agreement
interpretations and shall upon request, from time to time, meet with any of the
SUMC Parties and representatives of such lenders to consider any such request
for interpretation. City will not unreasonably withhold its consent to any such
requested interpretation provided such interpretation is consistent with the intent
and purposes of this Agreement. Any Mortgagee of the Property shall be entitled
to the following rights and privileges:
(a) No Impairment. Neither entering into this
Agreement nor a breach of this Agreement shall defeat, render invalid,
diminish or impair the lien of any mortgage or deed of trust on the Property
made in good faith and for value.
(b) Notice of Default by the SUMC Parties. The
Mortgagee of any mortgage or deed of trust encumbering the Property, or
any part thereof, which Mortgagee, has submitted a request in writing to the
City in the manner specified herein for giving notices, shall be entitled to
receive written notification from City of any Default by the SUMC Parties
in the performance of the SUMC Parties’ obligations under this Agreement.
(c) Notice. If City timely receives a request from
a Mortgagee requesting a copy of any notice of default given to any of the
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SUMC Parties under the terms of this Agreement, City shall provide a copy
of that notice to the Mortgagee within twenty (20) days of sending the notice
of default to the SUMC Parties. The Mortgagee shall have the right, but not
the obligation, to cure the default during the remaining cure period allowed
such Party under this Agreement.
(d) Transfer of Ownership. Mortgagee shall have
the rights set forth in the last paragraph of Section 18 above.
21. Miscellaneous.
(a) Effect of Recitals. The Recitals are intended
in part to paraphrase and summarize this Agreement, however, the terms,
covenants and conditions of this Agreement are expressed with particularity in
Section 1 et seq. and the rights and obligations of the Parties are to be determined
by the terms of the Agreement and not by the Recitals. To the extent the Recitals
provide factual context for the Agreement, they may be considered when
interpreting the terms and provisions of the Agreement.
(b) Construction. As used in this Agreement, and
as the context may require, the singular includes the plural and vice versa, and the
masculine gender includes the feminine and neuter and vice versa.
This Agreement shall be construed as a whole according to its fair
language and common meaning to achieve the objectives and purposes of the
Parties. This Agreement has been reviewed and revised by legal counsel for each
Signatory Party, and no presumption or rule that ambiguities shall be construed
against the drafting Party shall apply to the interpretation or enforcement of this
Agreement. Each Signatory Party has consulted with counsel and determined that
this Agreement accurately and completely reflects the agreement of the Parties.
The captions of the sections and subsections of this Agreement are
solely for the convenience of reference and shall be disregarded in the
construction and interpretation of this Agreement.
(c) Severability. If any terms of this Agreement
are determined to be invalid, void, or unenforceable, the remainder of this
Agreement shall not be affected to the extent the remaining terms are not rendered
impractical or impossible to perform taking into consideration the purposes of this
Agreement.
(d) Time. Time is of the essence of this
Agreement and of each and every term and condition hereof.
(e) Waiver. No waiver of any provision of this
Agreement shall be effective unless in writing and signed by a duly authorized
46 of 51
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representative of the Party against whom enforcement of a waiver is sought. No
waiver of any right or remedy in respect of any occurrence or event shall be
deemed a waiver of any right or remedy in respect of any occurrence or event.
(f) Governing State Law. This Agreement shall
be construed in accordance with the laws of the state of California.
(g) Determination of Compliance. At any time
during the Term of this Agreement, any Party or its lender, may request any Party
to this Agreement to confirm that to the best of such Party’s knowledge, no
defaults exist under this Agreement or if defaults do exist, to describe the nature
of such defaults. Each Party shall provide such a determination to such lender or
other Party within forty-five (45) days of the request therefor. The failure of any
Party to provide the requested determination within such forty-five (45) day
period shall constitute a confirmation that to the best of such Party’s knowledge,
no defaults exist under this Agreement. Request for such determinations shall be
made in writing and as required by Section 17 above.
(h) Entire Agreement. This Agreement contains
the entire understanding and agreement of the Parties. There are no oral or written
representations, understandings, undertakings, or agreements that are not
contained or expressly referred to herein, and any such representations,
understandings, or agreements are superseded by this Agreement. No evidence of
any such representations, understandings, or agreements shall be admissible in
any proceeding of any kind or nature relating to the terms or conditions of this
Agreement, its interpretation, or breach.
(i) No Third Party Beneficiaries. This
Agreement is made and entered into for the sole protection and benefit of the
signatory Parties and their successors and assigns, including Mortgagees. No
other person shall have any right of action based upon any provision of this
Agreement.
(j) Authority to Execute. Each person executing
this Agreement warrants and represents that he or she has the authority to bind the
signatory Party for which he or she is signing to the performance of its obligations
hereunder.
(k) Administrative Appeal. Whenever in the
Applicable Rules or Subsequent Applicable Rules any requirement or action by
the SUMC Parties is made subject to the approval or satisfaction, however
expressed, of any entity other than City, such condition shall not be interpreted as
providing the third party the right to make any final decision other than as may be
authorized by law other than the Applicable Rules or Subsequent Applicable
Rules. Where a third party has no right authorized by law other than the
Applicable Rules or Subsequent Applicable Rules to make a final decision, a
47 of 51
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condition requiring approval or satisfaction of such third party, however
expressed, shall mean that the third party shall provide, as appropriate, advice,
consultation, a recommendation and/or an initial decision regarding the condition.
The actual determination in such case will be made by the official or entity of
City required or authorized to make such determination in accordance with the
applicable provisions of the Palo Alto Municipal Code as set forth in the
Applicable Rules. Appeals from determinations made by City officials or entities
shall be made in accordance with applicable provisions of the Palo Alto
Municipal Code as set forth in the Applicable Rules.
(l) Exhibits.
The following exhibits to which reference is made in this
Agreement are deemed incorporated herein in their entirety:
Exhibit A – Property Description
Exhibit B – Project Approvals
Exhibit C – City Processing Schedule
Exhibit D – Anticipated Project Phasing Schedule [NOTE:
Parties have not agreed on Phasing Schedule provisions]
If the recorder refuses to record any exhibit, the City Clerk may
replace it with a single sheet bearing the exhibit identification letter, stating the
title of the exhibit, the reason it is not being recorded, and that the original,
certified by the City Clerk, is in the possession of the City Clerk and will be
reattached to the original when it is returned by the recorder to the City Clerk.
(m) Signature Pages. For convenience, the
signatory Parties may execute and acknowledge this Agreement on separate
signature pages, which, when attached hereto, shall constitute one complete
agreement.
(n) Precedence. If any conflict or inconsistency
arises between this Agreement and the Applicable Rules or the Subsequent Rules,
the provisions of this Agreement shall have precedence and shall control over the
conflicting or inconsistent provisions of the Applicable Rules or Subsequent
Rules.
(o) Recordation. Whenever recordation is
required or may be required by either Party, City shall be responsible for
recordation. If City fails to record a document when required, the SUMC Parties
may, but are not obligated to, record the document and by doing so the SUMC
Parties do not assume the duties or obligations of City established by this Section
48 of 51
A/73778958.2
or the Development Agreement Act nor does it waive any right it may have to
compel City to properly perform its duties and obligations. The failure of City to
record or to properly record this Agreement or any other document as provided
herein shall not affect or limit in any way the SUMC Parties’ rights to enforce this
Agreement and to rely upon it.
(p) Referendum or Challenge. In the absence of a
referendum petition, City shall not unilaterally submit the Project Approvals or
the Ordinance approving this Agreement to a referendum by action of the City
Council on its own motion without the SUMC Parties’ consent. In addition to the
remedies set forth in Section 18(b), if the Project Approvals or the Ordinance
approving this Agreement is the subject of a referendum, or if litigation is
commenced seeking to rescind the Project Approvals or the City’s decision to
enter into this Agreement or to declare this Agreement void, each Party shall have
the right to terminate this Agreement by written notice to the other Parties no later
than thirty (30) days after the event that gives a Party the right to terminate, or
such later time allowed in writing by the non-terminating Party or Parties. The
Parties may also by mutual agreement suspend performance of all or part of the
obligations in this Agreement pending the outcome of any such referendum or
litigation.
(1) City’s Reimbursement Obligation. If the Project
Approvals or the Ordinance approving this Agreement is challenged by a legal
action as described in this Section 21(p), the City shall return payments made by
the SUMC Parties to the City according to the following requirements:
a. If the legal action is filed with the court
before 90 days have elapsed from the filing
with the County Clerk by the City of the
Notice of Determination following the
second reading of the ordinance approving
the Hospital District zoning and the
ordinance approving this Agreement (the
“NOD”), then the City shall return all
payments made by the SUMC Parties
pursuant to Section 5 of this Agreement,
within 30 days of the City’s receipt of a
written request by the SUMC Parties.
b. If the legal action is filed with the court
more than 90 days but less than one year
after the filing with the County Clerk by the
City of the NOD, then the City shall return
payments made by the SUMC Parties
pursuant to Section 5 of this Agreement,
within 30 days of the City’s receipt of a
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written request by the SUMC Parties, as
follows:
(1) Section 5(a)(ii) (Fund for
Healthcare Services) Payments. The City
shall return to the SUMC Parties such
portions of payments made by the SUMC
Parties pursuant to Section 5(a)(ii) that have
not been disbursed through the City’s
Human Relations Committee or otherwise,
and contractually committed to a third party
community health care program by the City.
(2) Section 5(e)(i) (Affordable
Housing and Sustainable Neighborhoods
and Communities) Payments. The City
shall return to the SUMC Parties such
portions of payments made by the SUMC
Parties pursuant to Section 5(e)(i) that have
not been contractually committed by the
City to a third party.
(3) Section 5(f)(i) (Sustainability
Programs) Payments. The City shall return
to the SUMC Parties such portions of
payments made by the SUMC Parties
pursuant to Section 5(f)(i) that have not been
contractually committed by the City to a
third party.
c. If the legal action is filed with the court one
year or more after the filing with the County
Clerk by the City of the NOD, or if neither
Party elects to terminate the Agreement
pursuant to Section 21(p) above, then the
City shall have no obligation to return any
payments already made by the SUMC
Parties to the City pursuant to this
Agreement but the SUMC Parties shall have
no obligation to make further payments if
the Agreement is terminated or suspended.
(2) Effect of Suspension or Termination of Agreement.
If the Parties mutually agree to suspend performance of all or part of the
obligations in this Agreement pending the outcome of the legal action pursuant to
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Section 21(p) above, the agreement to suspend performance shall address the
terms under which the SUMC Parties’ payment obligations under Section 5 shall
be reinstated.
(3) Limit of City’s Reimbursement Obligations.
Except as specifically set forth in this Section 21(p), the City shall have no
obligation to return any payments made by the SUMC Parties pursuant to this
Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by
the parties as of the day and year first above written.
ATTEST: CITY OF PALO ALTO
______________________________ _____________________________
City Clerk Mayor
APPROVED AS TO FORM:
______________________________
City Attorney
APPROVED:
______________________________
City Manager
APPROVED AS TO CONTENT:
_____________________________
Director of Planning and
Community Environment
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STANFORD HOSPITAL AND
CLINICS
By: ______________________
Name: ____________________
Title: _____________________
LUCILE SALTER PACKARD
CHILDRENS HOSPITAL AT
STANFORD
By: _______________________
Name: _____________________
Title: ______________________
THE BOARD OF TRUSTEES OF
THE LELAND STANFORD
UNIVERSITY
By: ________________________
Name: ______________________
Title: _______________________
March 4, 2011
Page 2 of 12
As an institutional land use, it is not surprising that SUMC would generate a negative fiscal
impact on the City. Such land uses, which are typically exempt from most property taxes and
do not generate appreciable sales taxes, are usually not fiscal winners for local government.
The background fiscal analysis that was prepared for the Palo Alto Comprehensive Plan
Update estimated that institutional uses throughout the City, including schools and other
non-profit organizations, cost the City $1.575 million per year more in service costs than
they generate in revenue.1 Most cities see this kind of result from institutional uses. The fact
that CBRE's analysis shows a positive fiscal effect from the proposed project is contradictory
to the available evidence.
It is important to emphasize that the major difference between the ADE and CBRE studies
is the City services cost analysis. CBRE has maintained that there is little effect on City
administrative departments as the demand for direct services such as police and fire
protection increases. However, this is not borne out by historical budget data for Palo Alto.
City General Fund expenditures (excluding utilities and other enterprise funds) increased 39
percent between 1998-99 and 2008-09. However, management and support expenditures
increased by 50 percent during the same time period. While such experiditures were 14.4
percent of General Fund expenditures in 1998-99, they were 15.5 percent in 2008-09.2 We
are projecting a similar percentage of costs related to the SUMC project. Palo Alto is a full
service City and consequently is responsible for administrative and management functions
across a wide range of services. The Administrative Services Department, in particular,
centralizes many financial management and administrative functions that in other cities may
be located within the line departments. Thus it is critical that the ongoing escalation of
workload within this department, as well as other general government departments of the
City, be recognized in analyzing the fiscal impacts of major development projects.
Regarding the costs for line departments such as police and fire, these costs reflect per capita
service ratios for all similar projects in the City. The activities of project employees as well as
patients coming to and from the SUMC facilities will generate service demands for
emergency responses as well as use of City services such as libraries and cultural and
recreational programs. In this sense, the SUMC project is no different than other major
employers throughout the City.
1 Applied Development Economics, Pisca/Background Report, City oJPaloAlto,July 29, 2009.
2 California State Controller, Cities Annual Reports, for Fiscal Years 1998-99 and 2008-09, for the City of Palo
Alto.
March 9, 2011
Page 3 of 12
Moreover, the City cost estimates do not include any services that may be associated with the
substantial construction workforce that will be engaged at the project site for many years.
CBRE projects more than 800 Full Time Equivalent (PTE) construction workers in Phase 1
and more than 100 FTE in Phase 2. CBRE projects sales tax revenues from incidental
expenditures by this workforce, which ADE has disputed, but no effort has been made to
project City costs for emergency services, traffic enforcement or other City services during
the construction period.
Cost/Revenue Inflation
I have also incorporated the analysis of revenue and cost inflation over time in the
projections, per direction received from the City Council on January 31, 2011. There are
several components of the revenues and costs that may escalate at different rates, so I have
addressed each element separately. The various rates discussed below have all been updated
to the 2000 to 2010 period. The Use Tax calculations are based on construction costs for the
project and occur between 2011 and 2025 in the analysis. I have used the Engineering News
Record Building Cost Index to inflate these costs year over year during the construction
period. The index averaged 3.3 percent increase per year between 2000 and 2010. For Use
Tax on SUMC direct purchases, which essentially is for equipment purchased from out of
state, we have used the US CPI, at 2.4 percent.
The Property Tax is projected to escalate at the maximum rate of 2 percent per year
assuming no sales of property in the project during the analysis
TABLE 2
INFLATION FACTORS
ENR (Building) 3.3%
U.S. CPI 2.4%
Property Tax 2.0%
City Labor Costs (63% of Total) 4.5%
SF Region CPI 2.4%
In the current Long Range Financial Forecast, the City is projecting a 4.5 percent annual
inflation in salaries and benefits. Based on recent budget data, salaries and benefits constitute
about 63 percent of total City General Fund costs. Therefore, we have inflated this
proportion of City service costs by 4.5 percent per year and the remainder at the San
Francisco Consumer Price Index (CPl), which has been 2.4 percent between 2000 and 2010,
similar to the US rate. In addition, other revenues besides the Use Tax and the Property Tax
have been escalated at the CPI rate. The results of this analysis are summarized in Table 3
below.
The annual deficit, as shown for 2029, increases from $374,750 in the prior analysis to about
$1.1 million per year. This represents the stabilized build out of the project. In the year 2042,
March 9, 2011
Page 4 of 12
this deficit increases to $2.2 million per year and the accumulated deficit would be about
$21.4 million (compared to $964,000 without inflation). Given the uncertainties in the rate
of inflation, it is difficult to project inflationary effects over longer periods. For this reason,
the City limits its Long Range Financial Forecast to ten years.
TABLE 3
SUMC FISCAL ANALYSIS SUMMARY WITH INFLATION
2011 2017 2029 2042
Revenues $1,144,201 $1,986,394 $1,110,455 $1,498,058
Expenditures $0 $1,147,107 $2,217,563 $3,682,301
Annual Net Revenue!(Cost) $1,144,201 $839,286 ($1,107,108) ($2,184,243)
Cumulative Net RevenueL{Cost) ~O ~7£259£731 (PlO£485) (~21£428?29)
However, as a result of City revenues not keeping pace with ongoing operating costs, the
City has currently accumulated a backlog of unfunded infrastructure expenditures totaling
$500 million. The City has been forced to defer long term maintenance and capital
replacement costs that continue to accumulate. Given these circumstances, it is essential that
projects with known fiscal deficits, such as the SUMC expansion, mitigate those fiscal
impacts.
In its discussion with Stanford officials, the City has requested that the University guarantee
the major revenues projected to accrue from the SUMC project. These include the Use Tax
from construction of the project, Use Tax from ongoing equipment purchases and sales tax
from purchases of materials by SUMC and the other entities comprising the project. These
three revenues would total about $12.3 million over 30 years, which is about 53 percent of
the total revenues projected to be generated by the project in constant dollar terms. These
revenues are the subject of a proposed guarantee because they are most within Stanford's
control, resulting from direct expenditures by SUMC or by the University's construction
contractors. However, even with Stanford's guarantee of these revenues, if other revenues
fall short, the City is still at risk to experience fiscal deficits from the project. With the
significant potential of inflation to erode the value of these revenues in relation to City
costs, it is also essential that the guaranteed amounts in future years reflect appropriate
inflation rates. The Use Tax proceeds, for example, should be escalated to reflect increases in
construction costs as measured by the ENR index presented in Table 2 above. Similarly, sales
tax revenue guarantees should reflect CPI increases to be effective meeting City costs.
The City's main concern is to ensure that its costs for services related to the expanded
SUMC facilities are covered through revenues either guaranteed by Stanford or obtained
through normal taxing mechanisms. Given the current uncertainty about the ultimate project
size and phasing, as well as future needs for City services, the City and Stanford should
consider including a provision for periodic monitoring of City costs and revenues related to
the project, with the opportunity to adjust the fiscal mitigation amounts if needed to reflect
actual experience with revenues and costs in the future.
March 9, 2011
Page 5 of 12
APPENDIX A
ANNUAL COST lREVENUE ANALYSIS OF SUMC PROJECT
Revenue! Cost Categories Years
General Fund Revenues 2011 2012 2013 2014 2015
Sales Tax
SUMC Direct Purchasing $0 $0 $0 $0 $0
SUMC Facilities On-site Sales $0 $0 $0 $0 $0
SUMC Employee Spending $0 $0 $0 $0 $0
SUMC Overnight Visitor Spending $0 $0 $0 $0 $0
Construction Related Purchasing $1,036,857 $1,036,857 $1,036,857 $1,036,857 $1,036,857
Construction Worker Spending $2,065 $2,065 $2,065 $2,065 $2,065
Property Tax
Demolition Reduction $0 ($12,081) ($12,081) ($12,081) ($12,081)
211 Quarry Rd. $0 $20,949 $20,949 $20,949 $20,949
New Hoover Pavilion $0 $0 $0 $0 $0
Transient Occupancy tax $0 $0 $0 $0 $0
Utility Users Tax $0 $0 $0 $0 $0
Other Taxes and Fines
Motor Vehicle In-Lieu Fees $0 $2,165 $2,165 $2,165 $2,165
Fines and Penalties $0 $0 $0 $0 $0
Total General Fund Revenues ~1,038,922 ~1,049,955 ~1,049,955 ~1,049,955 ~1,049,955
General Fund EXQenditures
City Attorney $0 $0 $0 $0 $0
City Auditor $0 $0 $0 $0 $0
City Clerk $0 $0 $0 $0 $0
City Manager $0 $0 $0 $0 $0
Administrative Services $0 $0 $0 $0 $0
Human Resources $0 $0 $0 $0 $0
Community Services $0 $0 $0 $0 $0
Fire $0 $0 $0 $0 $0
Library $0 $0 $0 $0 $0
Planning and Community Environment $0 $0 $0 $0 $0
Police $0 $0 $0 $0 $0
Public Works $0 $0 $0 $0 $0
Non-Departmental $0 $0 $0 $0 $0
Total General Fund Expenditures $0 $0 $0 $0 $0
General Fund Net Fiscal Impact $1,038,922 $1,049,955 $1,049,955 $1,049,955 $1,049,955
Cumulative General Fund Im~act ~1,038,922 ~2,088,877 p,138,833 ~4,188?88 ~5,238,743
Inflation Analysis 2011 2012 2013 2014 2015
Construction revenues $1,141,986 $1,179,346 $1,217,929 $1,257,774 $1,298,922
Direct Purchase Use Tax $0 $0 $0 $0 $0
Property taX/Motor Veh. In-Lieu $0 $11,943 $12,181 $12,425 $12,674
Other revenues $2,215 $12,002 $12,285 $12,575 $12,871
Total revenues $1,144,201 $1,203,291 $1,242,395 $1,282,773 $1,324,467
Costs $0 $0 $0 $0 $0
Annual Net $1,144,201 $1,203,291 $1,242,395 $1,282,773 $1,324,467
Cumulative Net ~1,203,291 ~2,445,686 ~3,728,459 ~5,052,926
Source: ADE, Inc.
2016 2017
$0 $18,522
$0 $125,938
$0 $47,880
$0 $243
$1,036,857 $1,036,857
$2,065 $2,065
($12,081) ($12,081)
$20,949 $20,949
$0 $0
$0 $4,977
$0 $241,832
$2,165 $2,165
$0 $26,283
~1,049,955 ~1,515,631
$0 $21,594
$0 $5,998
$0 $8,398
$0 $13,196
$0 $55,784
$0 $17,995
$0 $50,096
$0 $151,904
$0 $15,492
$0 $47,261
$0 $262,279
$0 $119,800
$0 $52,968
$0 $822,764
$1,049,955 $692,867
~6,288,698 ~6,981,565
2016 2017
$1,341,417 $1,385,302
$0 $22,902
$12,927 $13,186
$13,175 $565,005
$1,367,519 $1,986,394
$0 $1,147,107
$1,367,519 $839,286
~6,420,445 F,259,731
March 9, 2011
Page 6 of 12
APPENDIX A
ANNUAL COSTlREVENUE ANALYSIS OF SUMC PROJECT
Revenue/Cost Categories Years
General Fund Revenues 2018 2019 2020 2021
Sales Tax
SUMC Direct Purchasing $18,522 $18,522 $18,522 $18,522
SlIMC Facilities On-site Sales $125,938 $125,938 $125,938 $125,938
SUMC Employee Spending $47,880 $47,880 $50,498 $50,498
SUMC Overnight Visitor Spending $243 $243 $256 $256
COnstruction Related Purchasing $111,302 $111,302 $111,302 $111,302
COnstruction Worker Spending $231 $231 $231 $231
Property Tax
Demolition Reduction ($12,081) ($12,081) ($12,081) ($12,081)
211 Quarry Rd. $20,949 $20,949 $20,949 $20,949
New Hoover Pavilion $13,919 $27,840 $41,759 $41,759
Transient Occupancy tax $4,977 $4,977 $5,249 $5,249
Utility Users Tax $241,832 $241,832 $255,055 $255,055
Other Taxes and Fines
Motor Vehicle In-Lieu Fees $5,562 $8,960 $12,358 $12,358
Fines and Penalties $26,283 $26,283 $27,720 $27,720
Total General Fund Revenues ~605!559 ~622!877 ~657!757 ~657!757
General Fund Exl:1enditures
City Attorney $21,594 $21,594 $22,774 $22,774
City Auditor $5,998 $5,998 $6,326 $6,326
City Clerk $8,398 $8,398 $8,857 $8,857
City Manager $13,196 $13,196 $13,918 $13,918
Administrative Services $55,784 $55,784 $58,834 $58,834
Human Resources $17,995 $17,995 $18,979. $18,979
Community Services $50,096 $50,096 $52,835 $52,835
Fire $151,904 $151,904 $160,209 $160,209
Library $15,492 $15,492 $16,339 $16,339
Planning and Community Environment $47,261 $47,261 $49,845 $49,845
Police $262,279 $262,279 $276,619 $276,619
Public Works $119,800 $119,800 $126,350 $126,350
Non-Departmental $52,968 $52,968 $55,864 $55,864
Total General Fund Expenditures $822,764 $822,764 $867,748 $867,748
General Fund Net Fiscal Impact ($217,205) ($199,887) ($209,992) ($209,992)
Cumulative General Fund Im~act ~6!764!360 ~6!564!473 ~6!354!481 ~6!144!490
Inflation Analy:sis 2018 2019 2020 2021
COnstruction revenues $153,571 $158,595 $163,784 $169,142
Direct Purchase Use Tax $23,448 $24,008 $24,581 $25,167
Property taX/Motor Veh. In-Lieu $34,559 $56,783 $79,881 $81,479
Other revenues $593,586 $625,573 $681,967 $698,049
Total revenues $805,164 $864,959 $950,212 $973,837
Costs $1,190,840 $1,236,357 $1,353,924 $1,405,941
Annual Net ($385,675) ($371,398) ($403,712) ($432,104)
Cumulative Net ~6!874!056 ~6!502!657 ~6!098!946 ~5!666!842
Source: ADE, Inc.
2022 2023
$18,522 $18,522
$125,938 $125,938
$50,498 $50,498
$256 $256
$111,302 $111,302
$231 $231
($12,081) ($12,081)
$20,949 $20,949
$41,759 $41,759
$5,249 $5,249
$255,055 $255,055
$12,358 $12,358
$27,720 $27,720
~657!757 ~657!757
$22,774 $22,774
$6,326 $6,326
$8,857 $8,857
$13,918 $13,918
$58,834 $58,834
$18,979 $18,979
$52,835 $52,835
$160,209 $160,209
$16,339 $16,339
$49,845 $49,845
$276,619 $276,619
$126,350 $126,350
$55,864 $55,864
$867,748 $867,748
($209,992) ($209,992)
~5!934!498 ~5!724!506
2022 2023
$174,676 $180,390
$25,768 $26,383
$83,108 $84,770
$714,510 $731,360
$998,062 $1,022,903
$1,460,092 $1,516,469
($462,030) ($493,566)
~5!204!812 ~4!711!247
March 9, 2011
Page 7 of 12
APPEN~IXA
ANNUAL COST lREVENUE ANALYSIS OF SUMC PROJECT
Revenuel Cost Cateaories Years
General Fund Revenues 2024 2025 2026 2027
Sales Tax
SUMC Direct Purchasing $18,522 $18,522 $35,999 $38,337
SUMC Facilities On-site Sales $125,938 $125,938 $128,034 $130,131
SUMC Employee Spending $50,498 $50,498 $52,566 $54,608
SUMC Overnight Visitor Spending $256 $256 $267 $277
Construction Related Purchasing $111,302 $111,302 $0 $0
Construction Worker Spending $231 $231 $0 $0
Property Tax
Demolition Reduction ($12,081) ($12,081) ($12,081) ($12,081)
211 Quarry Rd. $20,949 $20,949 $20,949 $20,949
New Hoover Pavilion $41,759 $41,759 $41,759 $41,759
Transient Occupancy tax $5,249 $5,249 $5,464 $5,677
Utility Users Tax $255,055 $255,055 $265,500 $275,813
Other Taxes and Fines
Motor Vehicle In-Lieu Fees $12,358 $12,358 $12,358 $12,358
Fines and Penalties $27,720 $27,720 $28,855 $29,976
Total General Fund Revenues ~657!757 ~657l57 ~579!671 ~597!805
General Fund Exl2enditures
City Attorney $22,774 $22,774 $23,707 $24,628
City Auditor $6,326 $6,326 $6,585 $6,841
City Clerk $8,857 $8,857 $9,219 $9,578
City Manager $13,918 $13,918 $14,488 $15,050
Administrative Services $58,834 $58,834 $61,243 $63,622
Human Resources $18,979 $18,979 $19,756 $20,523
Community Services $52,835 $52,835 $54,999 $57,136
Fire $160,209 $160,209 $166,771 $173,249
Library $16,339 $16,339 $17,008 $17,668
Planning and Community Environment $49,845 $49,845 $51,887 $53,902
Police $276,619 $276,619 $287,947 $299,132
Public Works $126,350 $126,350 $131,524 $136,633
Non-Departmental $55,864 $55,864 $58,152 $60,411
Total General Fund Expenditures $867,748 $867,748 $903,286 $938,374
General Fund Net Fiscal Impact ($209,992) ($209,992) ($323,615) ($340,569)
Cumulative General Fund Im~act ~5!514!514 ~5!304!523 ~4!980!907 ~4!640!338
Inflation Anal~sis 2024 2025 2026 2027
Construction revenues $186,292 $192,386 $0 $0
Direct Purchase Use Tax $186,292 $192,386 $0 $0
Property taX/Motor Veh. In-Lieu $27,013 $27,657 $55,037 $60,010
Other revenues $86,466 $88,195 $89,959 $91,758
Total revenues $748,607 $766,261 $808,275 $851,932
Costs $1,048,377 $1,074,499 $953,270 $1,003,700
Annual Net $1,575,168 $1,636,287 $1,769,550 $1,909,960
Cumulative Net (~526!791) (~56V88) (~816!280) (~906!261)
Source: ADE, Inc.
2028 2029
$40,675 $43,013
$132,227 $134,323
$56,676 $58,718
$288 $298
$0 $0
$0 $0
($12,081) ($12,081)
$20,949 $20,949
$41,759 $41,759
$5,892 $6,104
$286,259 $296,572
$12,358 $12,358
$31,111 $32,232
~616!113 ~634!245
$25,561 $26,482
$7,100 $7,356
$9,940 $10,298
$15,620 $16,183
$66,032 $68,411
$21,301 $22,068
$59,299 $61,436
$179,810 $186,288
$18,338 $18,998
$55,944 $57,959
$310,461 $321,646
$141,808 $146,917
$62,698 $64,957
$973,911 $1,008,999
($357,799) ($374,754)
~4!282!539 ~3!907!786
2028 2029
$0 $0
$0 $0
$65,189 $70,581
$93,593 $95,465
$897,476 $944,409
$1,056,259 $1,110,455
$2,059,763 $2,217,563
(~1!003!504) (~1!107!108)
March 9, 2011
Page 8 of 12
APPENDIX A
ANNUAL COSTlREVENUE ANALYSIS OF SUMC PROJECT
Revenue/Cost Categories Years
General Fund Revenues 2030 2031 2032 2033
Sales Tax
SUMC Direct Purchasing $43,013 $43,013 $43,013 $43,013
SUMC Facilities On-site Sales $134,323 $134,323 $134,323 $134,323
SUMC Employee Spending $58,718 $58,718 $58,718 $58,718
SUMC Overnight Visitor Spending $298 ' $298 $298 $298
Construction Related Purchasing $0 $0 $0 $0
Construction Worker Spending $0 $0 $0 $0
Property Tax
Demolition Reduction ($12,081) ($12,081) ($12,081) ($12,081)
211 Quarry Rd. $20,949 $20,949 $20,949 $20,949
New Hoover Pavilion $41,759 $41,759 $41,759 $41,759
Transient Occupancy tax $6,104 $6,104 $6,104 $6,104
Utility Users Tax $296,572 $296,572 $296,572 $296,572
Other Taxes and Fines
Motor Vehicle In-Lieu Fees $12,358 $12,358 $12,358 $12,358
Fines and Penalties $32,232 $32,232 $32,232 $32,232
Total General Fund Revenues ~634L245 ~634L245 ~634L245 ~634L245
General Fund Ex[!enditures
City Attorney $26,482 $26,482 $26,482 $26,482
City Auditor $7,356 $7,356 $7,356 $7,356
City Clerk $10,298 $10,298 $10,298 $10,298
City Manager $16,183 $16,183 $16,183 $16,183
Administrative Services $68,411 $68,411 $68,411 $68,411
Human Resources $22,068 $22,068 $22,068 $22,068
Community Services $61,436 $61,436 $61,436 $61,436
Fire $186,288 $186,288 $186,288 $186,288
Library $18,998 $18,998 $18,998 $18,998
Planning and Community Environment $57,959 $57,959 $57,959 $57,959
Police $321,646 $321,646 $321,646 $321,646
Public Works $146,917 $146,917 $146,917 $146,917
Non-Departmental $64,957 $64,957 $64,957 $64,957
Total General Fund Expenditures $1,008,999 $1,008,999 $1,008,999 $1,008,999
General Fund !'Jet Fiscal Impact ($374,754) ($374,754) ($374,754) ($374,754)
Cumulative General Fund Im~act ~3L533L032 ~3L158L278 ~2L783L524 ~2L408i770
Inflation Analysis ·2030 2031 2032 2033
Construction revenues $0 $0 $0 $0
Direct Purchase Use Tax $72,266 $73,990 $75,756 $77,564
Property taX/Motor Veh. In-Lieu $97,374 $99,322 $101,308 $103,334
Other revenues $966,680 $989,477 $1,012,810 $1,036,695
Total revenues $1,136,320 $1,162,788 $1,189,874 $1,217,593
Costs $2,304,630 $2,395,322 $2,489,796 $2,588,214
Annual N~t ($1,168,310) ($1,232,534) ($1,299,921) ($1,370,621)
Cumulative Net (~1L378L796) (~2L611L330) (~3L911L251) (~5L281L872)
Source: ADE, Inc.
2034 2035
$43,013 $43,013
$134,323 $134,323
$58,718 $58,718
$298 $298
$0 $0
$0 $0
($12,081) ($12,081)
$20,949 $20,949
$41,759 $41,759
$6,104 $6,104
$296,572 $296,572
$12,358 $12,358
$32,232 $32,232
~634L245 ~634L245
$26,482 $26,482
$7,356 $7,356
$10,298 $10,298
$16,183 $16,183
$68,411 $68,411
$22,068 $22,068
$61,436 $61,436
$186,288 $186,288
$18,998 $18,998
$57,959 $57,959
$321,646 $321,646
$146,917 $146,917
$64,957 $64,957
$1,008,999 $1,008,999
($374,754) ($374,754)
~2L034L017 ~1L659L263
2034 2035
$0 $0
$79,415 $81,310
$105,401 $107,509
$1,061,142 $1,086,166
$1,245,958 $1,274,985
$2,690,748 $2,797,575
($1,444,790) ($1,522,590)
(~6L726L662) (~8L249L253)
March 9, 2011
Page 9 of 12
Revenue/Cost Categories
General Fund Revenues
Sales Tax
SUMC Direct Purchasing
SUMC Facilities On-site Sales
SUMC Employee Spending
SUMC Overnight Visitor Spending
Construction Related Purchasing
Construction Worker Spending
Property Tax
Demolition Reduction
211 Quarry Rd.
New Hoover Pavilion
Transient Occupancy tax
Utility Users Tax
Other Taxes and Fines
Motor Vehicle In-Lieu Fees
Fines and Penalties
Total General Fund Revenues
General Fund EX(2enditures
City Attorney
City Auditor
City Clerk
City Manager
Administrative Services
Human Resources
Community Services
Fire
Library
Planning and Community Environment
Police
Public Works
Non-Departmental
Total General Fund Expenditures
General Fund Net Fiscal Impact
Cumulative General Fund Im~act
Inflation Analysis
Construction revenues
Direct Purchase Use Tax
Property tax/Motor Veh. In-Lieu
Other revenues
Total revenues
Costs
Annual Net
Cumulative Net
Source: ADE, Inc.
APPENDIX A
ANNUAL COSTlREVENUE ANALYSIS OF SUMC PROJECT
Years
2036 2037 2038 2039 2040
$43,013 $43,013 $43,013 $43,013 $43,013
$134,323 $134,323 $134,323 $134,323 $134,323
$58,718 $58,718 $58,718 $58,718 $58,718
$298 $298 $298 $298 $298
$0 $0 $0 $0 $0
$0 $0 $0 $0 $0
($12,081) ($12,081) ($12,081) ($12,081) ($12,081)
$20,949 $20,949 $20,949 $20,949 $20,949
$41,759 $41,759 $41,759 $41,759 $41,759
$6,104 $6,104 $6,104 $6,104 $6,104
$296,572 $296,572 $296,572 $296,572 $296,572
$12,358 $12,358 $12,358 $12,358 $12,358
$32,232 $32,232 $32,232 $32,232 $32,232
~634,245 ~634,245 ~634,245 ~634,245 ~634,245
$26,482 $26,482 $26,482 $26,482 $26,482
$7,356 $7,356 $7,356 $7,356 $7,356
$10,298 $10,298 $10,298 $10,298 $10,298
$16,183 $16,183 $16,183 $16,183 $16,183
$68,411 $68,411 $68;411 $68,411 $68,411
$22,068 $22,068 $22,068 $22,068 $22,068
$61,436 $61,436 $61,436 $61,436 $61,436
$186,288 $186,288 $186,288 $186,288 $186,288
$18,998 $18,998 $18,998 $18,998 $18,998
$57,959 $57,959 $57,959 $57,959 $57,959
$321,646 $321,646 $321,646 $321,646 $321,646
$146,917 $146,917 $146,917 $146,917 $146,917
$64,957 $64,957 $64,957 $64,957 $64,957
$1,008,999 $1,008,999 $1,008,999 $1,008,999 $1,008,999
($374,754) ($374,754) ($374,754) ($374,754) ($374,754)
~1,284,509 ~909,755 ~535,001 ~160,248 {~214,506}
2036 2037 2038 2039 2040
$0 $0 $0 $0 $0
$83,250 $85,237 $87,271 $89,354 $91,486
$109,659 $111,853 $114,090 $116,371 $118,699
$1,111,780 $1,137,998 $1,164,834 $1,192,303 $1,220,420
$1,304,689 $1,335,087 $1,366,195 $1,398,028 $1,430,605
$2,908,882 $3,024,863 $3,145,721 $3,271,668 $3,402,924
($1,604,193) ($1,689,776) ($1,779,527) ($1,873,640) ($1,972,319)
{~9,853,446} {~11,543,222} {~13,322,748} (~15,196,388) {~17,168,707}
2041 2042
$43,013 $43,013
$134,323 $134,323
$58,718 $58,718
$298 $298
$0 $0
$0 $0
($12,081) ($12,081)
$20,949 $20,949
$41,759 $41,759
$6,104 $6,104
$296,572 $296,572
$12,358 $12,358
$32,232 $32,232
~634,245 ~634,245
$26,482 $26,482
$7,356 $7,356
$10,298 $10,298
$16,183 $16,183
$68,411 $68,411
$22,068 $22,068
$61,436 $61,436
$186,288 $186,288
$18,998 $18,998
$57,959 $57,959
$321,646 $321,646
$146,917 $146,917
$64,957 $64,957
$1,008,999 $1,008,999
($374,754) ($374,754)
{~589,260} {~964,014}
2041 2042
$0 $0
$93,669 $95,905
$121,073 $123,494
$1,249,200 $1,278,659
$1,463,942 $1,498,058
$3,539,721 $3,682,301
($2,075,779) ($2,184,243)
(~19,244,486) {~21,428,729}
March 9, 2011
Page 10 of 12
Revenue/Cost Categories
General Fund Revenues
Sales Tax
SUMC Direct Purchasing
SUMC Facilities On-site Sales
SUMC Employee Spending
SUMC Overnight Visitor Spending
Construction Related Purchasing
Construction Worker Spending
Property Tax
Demolition Reduction
211 Quarry Rd.
New Hoover Pavilion
Transient Occupancy tax
Utility Users Tax
Other Taxes and Fines
Motor Vehicle In-Lieu Fees
Fines and Penalties
Total General Fund Revenues
General Fund EX[lenditures
City Attorney
City Auditor
City Clerk
City Manager
Administrative Services
Human Resources
Community Services
Fire
Library
Planning and Community Environment
Police
Public Works
Non-Departmental
Total General Fund Expenditures
General Fund Net Fiscal Impact
Cumulative General Fund Im~act
Source: ADE, Inc.
APPENDIX A
ANNUAL COSTlREVENUE ANALYSIS OF SUMC PROJECT
Years
2043 2044 2045 2046 2047 2048 2049
$43,013 $43,013 $43,013 $43,013 $43,013 $43,013 $43,013
$134,323 $134,323 $134,323 $134,323 $134,323 $134,323 $134,323
$58,718 $58,718 $58,718 $58,718 $58,718 $58,718 $58,718
$298 $298 $298 $298 $298 $298 $298
$0 $0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0 $0
($12,081) ($12,081) ($12,081) ($12,081) ($12,081) ($12,081) ($12,081)
$20,949 $20,949 $20,949 $20,949 $20,949 $20,949 $20,949
$41,759 $41,759 $41,759 $41,759 $41,759 $41,759 $41,759
$6,104 $6,104 $6,104 $6,104 $6,104 $6,104 $6,104
$296,572 $296,572 $296,572 $296,572 $296,572 $296,572 $296,572
$12,358 $12,358 $12,358 $12,358 $12,358 $12,358 $12,358
$32,232 $32,232 $32,232 $32,232 $32,232 $32,232 $32,232
i634,245 i634,245 i634,245 i634,245 i634,245 i634,245 i634,245
$26,482 $26,482 $26,482 $26,482 $26,482 $26,482 $26,482
$7,356 $7,356 $7,356 $7,356 $7,356 $7,356 $7,356
$10,298 $10,298 $10,298 $10,298 $10,298 $10,298 $10,298
$16,183 $16,183 $16,183 $16,183 $16,183 $16,183 $16,183
$68,411 $68,411 $68,411 $68,411 $68,411 $68,411 $68,411
$22,068 $22,068 $22,068 $22,068 $22,068 $22,068 $22,068
$61,436 $61,436 $61,436 $61,436 $61,436 $61,436 $61,436
$186,288 $186,288 $186,288 $186,288 $186,288 $186,288 $186,288
$18,998 $18,998 $18,998 $18,998 $18,998 $18,998 $18,998
$57,959 $57,959 $57,959 $57,959 $57,959 $57,959 $57,959
$321,646 $321,646 $321,646 $321,646 $321,646 $321,646 $321,646
$146,917 $146,917 $146,917 $146,917 $146,917 $146,917 $146,917
$64,957 $64,957 $64,957 $64,957 $64,957 $64,957 $64,957
$1,008,999 $1,008,999 $1,008,999 $1,008,999 $1,008,999 $1,008,999 $1,008,999
($374,754) ($374,754) ($374,754) ($374,754) ($374,754) ($374,754) ($374,754)
Ci1,338,768} Ci1,713,521} Ci2,088,275} Ci2,463,029} Ci2,837,783} Ci3,212,537} C~3,587,291 }
March 9, 2011
Page 11 of 12
Revenue/Cost Categories
General Fund Revenues
Sales Tax
SUMC Direct Purchasing
SUMC Facilities On-site Sales
SUMC Employee Spending
SUMC Overnight Visitor Spending
Construction Related Purchasing
Construction Worker Spending
Property Tax
Demolition Reduction
211 Quarry Rd.
New Hoover Pavilion
Transient Occupancy tax
Utility Users Tax
Other Taxes and Fines
Motor Vehicle In-Lieu Fees
Fines and Penalties
Total General Fund Revenues
General Fund EX(2enditures
City Attorney
City Auditor
City Clerk
City Manager
Administrative Services
Human Resources
Community Services
Fire
Library
Planning and Community Environment
Police
Public Works
Non-Departmental
Total General Fund Expenditures
General Fund Net Fiscal Impact
Cumulative General Fund Im[1act
Source: ADE, Inc.
APPENDIX A
ANNUAL COSTlREVENUE ANALYSIS OF SUMC PROJECT
Years
2050 2051 2052 2053 2054
$43,013 $43,013 $43,013 $43,013 $43,013
$134,323 $134,323 $134,323 $134,323 $134,323
$58,718 $58,718 $58,718 $58,718 $58,718
$298 $298 $298 $298 $298
$0 $0 $0 $0 $0
$0 $0 $0 $0 $0
($12,081) ($12,081) ($12,081) ($12,081) ($12,081)
$20,949 $20,949 $20,949 $20,949 $20,949
$41,759 $41,759 $41,759 $41,759 $41,759
$6,104 $6,104 $6,104 $6,104 $6,104
$296,572 $296,572 $296,572 $296,572 $296,572
$12,358 $12,358 $12,358 $12,358 $12,358
$32,232 $32,232 $32,232 $32,232 $32,232
~6341245 ~6341245 ~6341245 ~6341245 ~6341245
$26,482 $26,482 $26,482 $26,482 $26,482
$7,356 $7,356 $7,356 $7,356 $7,356
$10,298 $10,298 $10,298 $10,298 $10,298
$16,183 $16,183 $16,183 $16,183 $16,183
$68,411 $68,411 $68,411 $68,411 $68,411
$22,068 $22,068 $22,068 $22,068 $22,068
$61,436 $61,436 $61,436 $61,436 $61,436
$186,288 $186,288 $186,288 $186,288 $186,288
$18,998 $18,998 $18,998 $18,998 $18,998
$57,959 $57,959 $57,959 $57,959 $57,959
$321,646 $321,646 $321,646 $321,646 $321,646
$146,917 $146,917 $146,917 $146,917 $146,917
$64,957 $64,957 $64,957 $64,957 $64,957
$1,008,999 $1,008,999 $1,008,999 $1,008,999 $1,008,999
($374,754) ($374,754) ($374,754) ($374,754) ($374,754)
{~3196210442 {~4133617982 {~4171115522 {~5,086,3062 {~5146110602
2055 2056
$43,013 $43,013
$134,323 $134,323
$58,718 $58,718
$298 $298
$0 $0
$0 $0
($12,081) ($12,081)
$20,949 $20,949
$41,759 $41,759
$6,104 $6,104
$296,572 $296,572
$12,358 $12,358
$32,232 $32,232
~6341245 ~6341245
$26,482 $26,482
$7,356 $7,356
$10,298 $10,298
$16,183 $16,183
$68,411 $68,411
$22,068 $22,068
$61,436 $61,436
$186,288 $186,288
$18,998 $18,998
$57,959 $57,959
$321,646 $321,646
$146,917 $146,917
$64,957 $64,957
$1,008,999 $1,008,999
($374,754) ($374,754)
{~5183518132 {~612101567}
March 9, 2011
Page 12 of 12
APPENDIX A
ANNUAL COST/REVENUE ANALYSIS OF SUMC PROJECT
Revenuel Cost Categories Years
General Fund Revenues 2057 2058 2059 2060
Sales Tax
SUMC Direct Purchasing $43,013 $43,013 $43,013 $43,013
SUMC Facilities On-site Sales $134,323 $134,323 $134,323 $134,323
SUMC Employee Spending $58,718 $58,718 $58,718 $58,718
SUMC Overnight Visitor Spending $298 $298 $298 $298
Construction Related Purchasing $0 $0 $0 $0
Construction Worker Spending $0 $0 $0 $0
Property Tax
Demolition Reduction ($12,081) ($12,081) ($12,081) ($12,081)
211 Quarry Rd. $20,949 $20,949 $20,949 $20,949
New Hoover Pavilion $41,759 $41,759 $41,759 $41,759
Transient Occupancy tax $6,104 $6,104 $6,104 $6,104
Utility Users Tax $296,572 $296,572 $296,572 $296,572
Other Taxes and Fines
Motor Vehicle In-Lieu Fees $12,358 $12,358 $12,358 $12,358
Fines and Penalties $32,232 $32,232 $32,232 $32,232
Total General Fund Revenues $634,245 $634,245 $634,245 $634,245
General Fund Expenditures
City Attorney $26,482 $26,482 $26,482 $26,482
City Auditor $7,356 $7,356 $7,356 $7,356
City Clerk $10,298 $10,298 $10,298 $10,298
City Manager $16,183 $16,183 $16,183 $16,183
Administrative Services $68,411 $68,411 $68,411 $68,411
Human Resources $22,068 $22,068 $22,068 $22,068
Community Services $61,436 $61,436 $61,436 $61,436
Fire $186,288 $186,288 $186,288 $186,288
Library $18,998 $18,998 $18,998 $18,998
Planning and Community Environment $57,959 $57,959 $57,959 $57,959
Police $321,646 $321,646 $321,646 $321,646
Public Works $146,917 $146,917 $146,917 $146,917
Non-Departmental $64,957 $64,957 $64,957 $64,957
Total General Fund Expenditures $1,008,999 $1,008,999 $1,008,999 $1,008,999
General Fund Net Fiscal Impact ($374,754) ($374,754) ($374,754) ($374,754)
Cumulative General Fund Impact ($6,585,321) ($6,960,075) ($7,334,829) ($7,709,582)
Source: ADE, Inc.
2061 2062
$43;013 $43,013
$134,323 $134,323
$58,718 $58,718
$298 $298
$0 $0
$0 $0
($12,081) ($12,081)
$20,949 $20,949
$41,759 $41,759
$6,104 $6,104
$296,572 $296,572
$12,358 $12,358
$32,232 $32,232
$634,245 $634,245
$26,482 $26,482
$7,356 $7,356
$10,298 $10,298
$16,183 $16,183
$68,411 $68,411
$22,068 $22,068
$61,436 $61,436
$186,288 $186,288
$18,998 $18,998
$57,959 $57,959
$321,646 $321,646
$146,917 $146,917
$64,957 $64,957
$1,008,999 $1,008,999
($374,754) ($374,754)
($8,084,336) ($8,459,090)
1
TDM White Paper March 2 2011 for Stanford
Attachment D
City of Palo Alto White Paper on Stanford University Medical Center Expansion
Project Transportation Demand Management (TDM) Mitigation Program
(Based on Master Response 1 in FEIR)
Updated March 2, 2011
GO Pass Program
The Caltrain GO Pass is an employer-sponsored annual pass that offers unlimited rides
on Caltrain through all zones, seven days per week for one annual payment per employee.
The GO Pass – a small sticker affixed to an employee I.D. badge – can be used at any
time of the day that Caltrain is operating. Employees traveling on Caltrain simply
present the badge and the GO Pass sticker. The GO Pass is not available for purchase by
individuals and does not cover parking at Caltrain stations or travel on other transit
systems. It is valid for a calendar year and expires on December 31 each year.
Participating employers pay an annual fee to provide the GO Pass to each and every
regular, full-time employee (working more than 20 hours per week) regardless of how
many will use the transit pass.
The GO Pass program is a contractual program open to companies of any size.
Companies currently pay $155 annually (2011) for every regular employee working more
than 20 hours per week at the company or a flat fee of $10,850, whichever is higher.
The GO Pass is valid for unlimited rides, including personal trips, on Caltrain during the
period for which it is purchased, in any zone, seven days a week. It should be noted that
the employee’s ability to utilize the GO Pass for personal, non-business related use not
only provides an incentive to take cars off the road during non-commute times, but also
offers the opportunity for a current non-user to experience the advantages of Caltrain in
other situations and become “sold” on its convenience and comfort for regular or
commute use. Although anecdotal, Stanford University’s experience is that this aspect
helps influence changing commute choice to Caltrain.
Caltrain allows colleges and universities to participate in the same way as companies.
Schools can purchase the GO Pass for staff or faculty or both and for students, but the
benefit must be for everyone in the category for which the school decides to provide it –
all eligible faculty or staff, for example, or all undergraduate or graduate students.
Stanford does not provide GO Passes for students as most students are housed on
campus. Parking & Transportation Services is the organization that manages the GO
2
TDM White Paper March 2 2011 for Stanford
Pass for Stanford University employees. Stanford University currently purchases GO
Passes for a large portion of its employees. The subgroup of GO Pass eligible employees
is defined as those who work more than 20 hours a week, and those who do not live on
campus, but excludes students, SLAC employees and Hospital employees.
The SUMC Project Draft EIR evaluates project-related traffic effects based upon current
trip generation data at the SUMC, without assuming any changes to the Hospitals’
transportation demand management (TDM) programs. This produces an analysis of
SUMC Project impacts before mitigation. The Draft EIR then evaluates the reduction in
traffic effects that would be achieved by the implementation of a Mitigation Measure to
enhance the Hospitals’ existing TDM program by providing a Caltrain GO Pass to all
eligible SUMC employees.
In addition, as part of the enhanced TDM mitigation, the Hospitals would be required to
use all reasonable efforts to lease parking spaces in the Ardenwood park-and-ride lot (or
at an equivalent lot) at the east end of the Dumbarton Bridge to allow East Bay
employees to park at the park-and-ride lot and board the U-Line to reach the Hospitals.
The SUMC Project sponsors would also use all reasonable efforts to assure that the
controlling agency provides sufficient bus service on the U-Line (i.e., no standees).
Therefore, while the GO Pass would not be of use to residents not served by Caltrain,
alternate modes of transportation would be available to some of those employees.
As described below, the trip reduction anticipated to be achieved by offering Caltrain GO
Passes to all eligible Hospital employees is based on the Caltrain usage rates that
Stanford University achieved in 2006 by offering Caltrain GO Passes to University
employees.
Stanford University currently has a total employment of approximately 15,300 and
purchases about 10,100 GO Passes annually. In a five-year period, the University
achieved a substantial decrease in the number of drive-alone commuters from 64 percent
in 2004 to 50.3 percent in 2008. Much of this decrease is attributable to the Caltrain GO
Pass program. The Caltrain GO Pass was initially offered in the fall of 2002 to Stanford
employees. Between 2002 and 2004, Stanford University Caltrain ridership tripled from 4
percent to 12 percent of total commuters. In 2005, Caltrain opened its “Baby Bullet”
service and expanded its express train service. By 2006, Stanford University commuters’
use of Caltrain to campus had quadrupled to about 16 percent. In 2007, 18 percent of
Stanford University employees used Caltrain, and in 2008, the ridership increased to 20
percent.
3
TDM White Paper March 2 2011 for Stanford
By contrast, the Hospitals do not offer GO Passes to their employees. While the level of
drive-alone commuters that are Hospital employees dropped recently by approximately
4.6 percent (from 78.2 percent in 2007 to 73.6 percent in 2008), the shift from a drive-
alone commute mode by Hospital employees has come due to increases in carpooling and
express bus use. There has been little change in Caltrain use by Hospital employees.
Accordingly, it is reasonable to expect that offering Caltrain GO Passes to Hospital
employees would substantially increase transit use and reduce drive-alone rates. In 2006,
the annual employee transportation survey for the Hospitals determined that the existing
TDM program resulted in the following employee mode splits:
Single Occupant Modes
Drive Alone 77.1%
Alternative Transportation Modes
Carpool 9.8%
Caltrain 3.6%
Bus 4.7%
Bicycle 2.5%
Marguerite 0.6%
Walk 0.6%
Vanpool 0.1%
Other 1.0%
Total: 22.9%
In addition to reviewing the timing of Hospital shifts, the City’s traffic consultants also
reviewed data regarding the location where Hospital employees reside in comparison to
the location where Stanford University employees reside. A higher percentage (65
percent) of Hospital employees than of Stanford University employees (52 percent) live
in cities that are located near the Caltrain tracks (excluding Palo Alto and Menlo Park
which are considered too proximate).
Commentors have asked whether it is reasonable to assume that a similar percentage of
future SUMC employees would live proximate to Caltrain as occurs under existing
conditions. Trying to determine the future location of Hospital employees is difficult.
Residence and work choices consider commute conditions. Unless there are drastic
changes in the commute conditions, future choices are likely to be similar to current
4
TDM White Paper March 2 2011 for Stanford
choices. The best source of future employee location of residence is the place of
residence of existing employees. Therefore, the Transportation Impact Analysis relied on
the existing Hospital employee place of residence to determine future travel patterns.
Based on Stanford University’s experience with the GO Pass, it can be conservatively
assumed that Hospital employee transit use would at least double from about 3.5 percent
to 7 percent with the introduction of GO Passes and could achieve substantially higher
levels of use over time. The steady rise in Caltrain use by Stanford University employees
since 2002 is a good indicator of the effectiveness of the GO Pass program, and there are
likely to be additional changes in travel behavior due to increasing congestion on area
freeways and rising fuel costs. It is very likely that Caltrain use by Hospital employees
could be at the 15.8 percent level with the GO Pass and supporting shuttle service, which
is the level Stanford University achieved in 2006.
Future Viability of Caltrain
Some commentors have noted that Caltrain is experiencing financial difficulty and have
asked whether it is reasonable to rely upon provision of the GO Pass as mitigation in light
of those concerns. All local and regional transit agencies are currently experiencing
financial difficulties. There would be considerable changes to commuting behavior if all
transit agencies were to discontinue operations. Given the high volume of ridership, it is
not likely that the transit services would cease to exist. More likely, cutbacks would
occur outside of the Peak Hours minimizing the effect on employee commute trips.
Caltrain, along with Metrolink in Los Angeles, are the most successful commuter rail
systems on the West Coast, each carrying approximately 40,000 passengers per day. The
complete loss of Caltrain service would add about 37,000 daily vehicle trips to Peninsula
roadways if each current rider shifts to driving (assuming an occupancy rate of 1.1 person
per car). This increase in traffic would have considerable effects on roadways in Palo
Alto and up and down the Peninsula, independent from the SUMC Project. Such effects
could not be addressed through mitigation measures imposed on a single project. Rather,
a regional solution would need to be developed.
Caltrain’s biggest challenge is its funding mechanism, which comes from three agencies:
San Francisco Transportation Authority, San Mateo County Transportation Authority,
and Santa Clara Valley Transportation Authority. Each of these agencies is experiencing
financial constraints, which affect their allocation of funding to Caltrain. However,
continued funding of Caltrain by these agencies or alternatively the creation of an
independent funding source for Caltrain are the most likely solutions to be pursued.
5
TDM White Paper March 2 2011 for Stanford
Having employers such as the SUMC Project sponsors participate in the GO Pass
program provides benefits to Caltrain. Issuing GO Passes to existing and future Hospital
employees represents an annual cost for the SUMC Project sponsors. As explained
above, this cost is estimated to be $1.8 million per year. This expenditure would
contribute to support Caltrain’s financial stability.
In sum, it is not likely that transit service on the Peninsula would cease to exist.
Participation in programs such as the Caltrain GO Pass benefits transit operators. To the
extent cutbacks occur, they likely would be outside of peak commute periods. In the
unlikely event that Caltrain were to shut down operations, regional solutions would be
needed to address the needs of the high volume of Caltrain ridership. Such regional
solutions are outside of the control of individual project sponsors.
Revised FEIR Mitigation Measure
Mitigation Measure TR-2.3 requires that the SUMC Project sponsors enhance the
currently-implemented TDM Program to achieve a 35.1 percent usage of alternative
transportation modes (i.e., carpool, vanpool, bus, Caltrain, bicycle, and walk) by Hospital
employees by build-out and full occupancy of the SUMC Project in 2025. Mitigation
Measure TR-2.3 also requires that annual TDM monitoring be performed and a report
submitted to the City documenting that the desired modal split to alternative forms of
travel and away from a drive-alone commute is actually achieved. Mitigation Measure
TR-2.3 has been refined based upon further discussions between City staff and the
SUMC Project sponsors, and the key components now are as follows:
1. GO Pass or Equivalent Program
Commencing on September 1, 2015, the Hospitals shall purchase annual Caltrain
GO Passes (free train passes) for all existing and new Hospital employees who
work more than 20 hours per week, at a cost of up to One Million Eight Hundred
Thousand Dollars ($1,800,000) per year, which amount shall be adjusted annually
to reflect any change in the San Francisco Bay Area Consumer Price Index (the
“GO Pass Amount”). The Hospitals’ obligation under this mitigation measure to
provide GO Passes shall continue for the life of the Project (51 years), or until
such earlier date as: (a) Caltrain discontinues the GO Pass program, or a
substantially similar program; (b) Caltrain increases the cost of GO Passes, or a
substantially similar program, such that the Hospitals’ annual costs would exceed
the GO Pass Amount; or (c) Caltrain service is reduced by such an extent that the
Hospitals and the City mutually determine purchase of annual GO Passes, or a
substantially similar program, would no longer be effective in substantially
reducing Hospital employee peak period trips in order to achieve the Alternative
Mode targets specified in the DEIR. If the cost of obtaining GO Passes exceeds
the GO Pass Amount, the Hospitals shall have the option to elect either to
6
TDM White Paper March 2 2011 for Stanford
purchase the GO Passes at the then applicable price, or to terminate the obligation
to provide GO Passes, or a substantially similar program. If the Hospitals’
obligation to provide GO Passes, or a substantially similar program, terminates
for any of the reasons specified in this mitigation measure, the Hospitals shall
contribute the GO Pass Amount to one or more substitute programs to encourage
use of transit by Hospital employees or otherwise reduce peak period traffic trips
in the intersections impacted by the Project as identified in the Project EIR. The
substitute program or programs shall be mutually agreed upon by the SUMC
Project sponsors and the City’s Director of Planning and Community
Environment.
2. AC Transit Measures
Use all reasonable efforts to arrange with AC Transit to lease 75 spaces at the
Ardenwood Park & Ride Lot, or an equivalent facility, to serve SUMC
employees who commute from the East Bay.
3. Expanded Marguerite Shuttle
The Hospitals shall fund the reasonable costs, in an approximate amount of
Two Million Dollars ($2,000,000), for the purchase of additional shuttle
vehicles for the Marguerite shuttle service, as and when required to meet
increased demand for shuttle service between the Project Sites and the Palo
Alto Intermodal Transit Station. In addition, for the life of the Project, the
Hospitals shall fund as Annual Payments the reasonable costs, in an
approximate amount of Four Hundred Fifty Thousand Dollars ($450,000) per
year, to cover the net increase in operating costs for the Marguerite Shuttle.
4. U Line
Use all reasonable efforts to assure that the controlling transit agency
maintains load factors less than 1.00 on the U Line.
5. Bicycle and Pedestrian Connections
Expand and improve the bicycle and pedestrian networks as specified by
Project site plans and Mitigation Measure TR-6.1.
6. Other TDM Measures
Commencing on September 1, 2015, and continuing through the life of the
Project, the Hospitals shall employ an onsite qualified Transportation Demand
Management (“TDM”) coordinator for the SUMC. The coordinator would be
responsible for organizing and disseminating TDM information primarily to
Hospital employees and also to Hospital patients. A central location would be
made available to provide information on alternative travel modes. Also, the
SUMC or Hospitals’ website would contain information on TDM programs.
7
TDM White Paper March 2 2011 for Stanford
Provide a guaranteed ride home program for all employees who use transit
and other transport alternatives like carpool and vanpool. The guaranteed ride
home shall allow employees with dependent children the ability to use
alternative modes to travel to and from work but still be able to travel home
mid-day in case of an emergency.
Provide employees with shower facilities within the SUMC Sites to encourage
bicycling to work. The SUMC Project sponsors shall also provide bicycle
storage facilities on the SUMC Sites that would be conveniently located near
the employee showers.
Establish, in conjunction with the GO Pass implementation, a “Zip Car” (or
other similar car-sharing program) with Zip Cars available at the medical
complex.
7. TDM Monitoring and Phase In
The Hospitals shall submit annual reports showing the current number of
employees employed over 20 hours per week; the number of employees using
an alternative mode share as documented by a study or survey to be completed
by the Hospitals using a method mutually agreeable to the City and Hospitals;
and the efforts used by the Hospitals to attempt to achieve the Alternative
Mode targets.
The City and the SUMC Parties acknowledge that because use of transit by
employees of the Hospitals is voluntary, and may be influenced by a number
of factors outside of the reasonable control of the Hospitals, such as gasoline
prices, costs and availability of alternative transit, housing costs and
availability, and personal preferences of employees, the Hospitals cannot
guaranty the results of their TDM programs. However, the Hospitals shall
monitor the success of their TDM programs from the date of the Initial Project
Approvals until 2025. The following interim targets shall be used to measure
the progress toward meeting the desired mode split in 2025. These interim
targets assume that in the early phases of implementation, there may be larger
shifts to alternative modes than the shifts that may occur in later phases of the
TDM program enhancement. For purposes of calculating alternative mode
share, any mode that does not constitute driving in a single-occupant vehicle
to and from the work site shall be considered an “Alternative Mode,”
including working remotely from home.
Target Year Alternative Mode Share Percent Change
EIR Baseline
(2006) 22.9 % NA
8
TDM White Paper March 2 2011 for Stanford
Project Approval
Baseline (2011) TBD TBD
2018 30 % 7.1%
2021 33 % +3 %
2025 35.1 % +2.1 %
8. Mode Split Penalties
If the applicable interim target is not met for any two consecutive years prior
to 2025, the Hospitals shall provide alternative transportation funding to the
City in Annual Payments in the amount of One Hundred Seventy Five
Thousand Dollars ($175,000) per year until the earlier of the year 2025 or the
year the applicable interim mode split target is achieved, subject to a
maximum of five Annual Payments. The alternative transportation funding
must be used by the City for local projects and programs that encourage
citywide use of alternative transportation mode uses.
If by 2025, the Hospitals have not demonstrated substantial achievement of
the Thirty Five and One-Tenth Percent (35.1%) target modal split for
alternative transportation modes, the Hospitals shall make a lump sum
payment of Four Million Dollars ($4.0 million) to the City for local projects
and programs that encourage and improve citywide use of alternative
transportation mode uses. If required, said $4 million payment shall constitute
a penalty for the failure to achieve the target modal split of 35.1% by 2025,
and shall not relieve the SUMC Parties of any of its other obligations under
this mitigation measure, which shall continue pursuant to the terms of this
Agreement. The City shall keep all payments received from the Hospitals
pursuant to this mitigation measure in a separate account (the “TDM Fund”),
to be used only for the purposes described in this mitigation measure. The
City shall deliver to the SUMC Project sponsors an annual report of
disbursements from the TDM Fund.
Comparison of Cost Effectiveness of Private Bus Service to the Go Pass
As explained above, the provision of the Caltrain GO Pass to Hospital employees is
expected to be an effective measure to reduce vehicle trips and associated air pollutant
emissions, including greenhouse gases. Further, it is unlikely that commuter train service
would cease to exist on the Peninsula. Nevertheless, if such an event were to occur, or if
the GO Pass program were to cease to exist in its present form, the SUMC Project
sponsors have offered as part of the Development Agreement to re-allocate the GO Pass
money to other trip reduction programs. Accordingly, money from the SUMC Project
9
TDM White Paper March 2 2011 for Stanford
sponsors could be used to subsidize a future regional solution developed in response to
changes to the Caltrain service or GO Pass Program.
This portion of Master Response 1 explores an alternative approach under which the City
would require the SUMC Project sponsors to provide a private bus service for their
employees, rather than funding the GO Pass Program or other regional transportation
solutions. Information has been collected regarding shuttle bus operations from private
companies. This information is presented below, including an estimate of the cost.
Provision of private bus service sufficient to yield the same Peak Hour trip reduction as
would result from provision of the GO Pass is estimated to cost approximately $10.7
million per year.
For purposes of comparison, provision of GO Passes for all Hospital employees would
cost approximately $2.25 million annually. This amount is based on Caltrain GO Pass
rates for 2011. Caltrain has increased the GO Pass cost in January 2011 from $140 per
pass per year to $155 per pass per year, a nearly 11 percent increase. The per pass cost
multiplied by 11,500 Hospital employees totals approximately $1.8 million per year.
Provision of expanded Marguerite shuttle service to accommodate increased ridership
between the SUMC and Caltrain is estimated to cost approximately $450,000 per year in
operating costs (including capital depreciation). In addition, capital costs of new shuttles
for the expanded Marguerite service are expected to add $2 million.
Employer-Provided Shuttles
The following analysis presents an example of a successful employer-provided shuttle
program currently being implemented in the Bay Area and compares it with the SUMC
conditions to determine if it is viable for the SUMC Project sponsors to implement a
similar scheme.
Existing Example. Several large employers in the Bay Area provide dedicated shuttle
services to carry Bay Area employees to their campuses. These include Google, Apple,
Genentech, Facebook and Yahoo. As privately-operated systems, operating data is
difficult to obtain. The most information was available about Google, and it is the
subject of this example.
Google Inc, located in Mountain View, started its shuttle service in 2004. Today, 50
buses provide about 170 shuttle service runs from different parts of the Bay Area to its
Mountain View headquarters and two other Bay Area campuses (San Francisco and San
Bruno). There are 45 pick-up locations in the Bay Area with services starting as early as
5:00 am. The last pick-up for the AM peak service is at 10:40 a.m. The evening service
runs from 3:40 p.m. to 10:00 p.m. The highest pickup frequency during the peak period
10
TDM White Paper March 2 2011 for Stanford
is every five minutes. There are about 10,000 employees at the Mountain View campus,
500 employees at the San Francisco campus and 300 at the San Bruno campus.
Currently, approximately 20 percent of Google employees make use of the shuttle
service. In order to meet the constant change and increase in demand, Google has
transportation coordinators who monitor the employees’ residence location and regional
traffic pattern to plot new routes.
Operating Cost.
Using the data collected regarding the Google system, the bus system for 10,000
employees at a 20 percent usage rate requires approximately 50 buses operating
approximately an average of 8 hours per day. This assumes that half of the buses operate
12 hours per day and half operate six hours per day. Not all of the buses would be
needed during the “shoulders” of the Peak Period (i.e., 5:00 a.m. to 6:00 a.m., 9:00 a.m.
to 11:00 a.m., and 7:00 p.m. to 10:00 p.m.). Based on Stanford’s experience in operating
the Marguerite system, the operating cost per bus hour is $80. Annual operating costs
therefore would equal $80 per bus per hour multiplied by 8 hours per day multiplied by
254 days per year multiplied by 50 buses, for a total of $8.1 million per year. In addition,
the Hospitals would have to incur capital costs associated with the purchase of 50
highway buses, which are estimated to cost approximately $500,000 per bus (for a non-
hybrid model), resulting in a cost of $25 million for the bus fleet. Assuming that each
bus would last approximately 10 years, the amortized annual capital cost is estimated as
$2.6 million per year. Thus, the total annual cost (operating plus capital costs) would be
$10.7 million per year.
Conclusion. This represents the upward range of an alternative shuttle program that
would be as effective as the GO Pass program. A more economical program could also
be implemented through the contracting with another transit agency such as SamTrans.
In the event CalTrain were to go away or the level of service significantly reduced, it is
likely that a strong market demand would develop and additional lower cost transit
options would emerge.
Analysis of SUMC Development Agreement Proposal
Updated March 9, 2011
SUMC Proposal City Staff Response
Health Care
In‐patient and out‐patient services $ 3,000,000 3,000,000
Community health programs 4,000,000 4,000,000
Total Health Care $ 7,000,000 $ 7,000,000
Reduced Vehicle Trips
Four new shuttles $ 2,000,000 Mitigation
Shuttle operations over 51 years 22,950,000 Mitigation
GO PASS over 51 years 90,907,500 Mitigation
Sub Total $ 115,857,500
TDM Coordinator $ 5,100,000 Mitigation
AC Transit and U‐Line‐Capital 250,000 Mitigation
AC Transit and U‐Line ‐Operating 2,550,000 Mitigation
East Bay Transit options ‐ Ardenwood Lease 2,295,000 Mitigation
Sub Total $ 10,195,000 $‐
Total Reduced Vehicle Trips $ 126,052,500 $‐
Linkages
Improvements to enhance the pedestrian and
bicycle connection $ 2,250,000 Mitigation
Improvements to the public ROW to enhance the
ped/bike connection $ 400,000 Mitigation
Improvements t enhance ped connection between
SUMC/SSC/Welch Rd $ 700,000 Mitigation
Total Linkages $ 3,350,000 $‐
Housing
Housing Impact Fee $ 1,720,488 Required Impact Fee
Housing/Sustainable Neighborhoods and
Communities $ 21,479,512 $ 21,479,512
Total Housing $ 23,200,000 $ 21,479,512
Climate Change/Sustainable Communities
Defined contribution $ 12,000,000 $ 12,000,000
Total Climate Change/Sustainable Communities $ 12,000,000 $ 12,000,000
Fiscal
Upfront Contribution/Cost Neutrality Assurance $ 1,100,000 $1,100,000 (1)
Use Tax Direct Payment Permit 750,000 $ 750,000
Total Fiscal $ 1,850,000 $ 1,850,000
TOTAL $ 173,452,500 $ 42,329,512
Notes:
(1) City proposes cost neutrality agreement to ensure projected revenues exceed City expenses
Item Description
Defined as a mitigation in DEIR/Requiired Impact Fee
110308 jb 0130685
-(
SUMC Parties' Proposal for
City of Palo Alto Fiscal Cost Neutrality
The SUMC parties have considered carefully the core issues that surround the
divergent views over how to assure the City a reasonable degree of fiscal cost
neutrality for the SUMC Project as proposed. Those core issues are, first, how to
calculate City costs attributable to the Project and, second, what impact, if any,
future inflation will have on both Project revenues and cost. '
Cost-Assignment. The City's (ADE) approach and the SUMC parties' (CBRE)
approach to assigning future City operating expenses as a result of the SUMC
Project are significantly different, resulting in a non-infl~ted cost differential of
$9.5M over the 3D-year Development Agreement period. ADE calculates a net
deficit or -$1.1 M; CBRE calculates a net positive of $8.4M. From time-to-time,
the City has noted that neither approach is irrefutable and that the answer
probably lies somewhere in the middle. We firmly believe that the CBRE fixed
cost-plus-incremental approach is, for an infill project which only increases City
employment by about 2%, far more logical and realistic. This is because costs of
certain city-provided services in a built-out environment do not increase
proportionate to increased employment in the community, even though costs of
other city services may experience such a proportionate increase. Wf3 also note
that both consultants have been extremely conservative in calculating city costs
in that they assume very high increases in police and fire costs, even though
replacement of older buildings ,and expansion of existing hospitals and medical
school buildings is not likely to result in such numbers, especially given the state-
of-the-art fire protection mechanisms in the new buildings and the robust private
security system in the hospitals, Nevertheless, we present both the AbE and
CBRE cost e~timates below.
Cost Inflation. Regarding inflation, the City ADE approach diverges significantly
from CBRE's in that ADE assumes that the City's labor cost component would be
significantly higher than the inflation factors for CPI and for construction'indices.
The annual factors used by ADE are as follows: construction --related revenues
3.27%, CPI (U.S.) 2.39%, property tax revenues 2%, CPI (S.F.) 2.36% and City
labor costs 4.52%. We feel that the ADE is predicting a wholly unsustainable
labor cost increase which dramatically outpaces overall City revenues and
continues for at least 30 years and up to 52 years. While the City may currently
be experiencing escalating labor costs, we would expect that, going forward over
a 3D-year or longer period, the City would take steps to rectify the situation-and
new hires resulting from SUMC Project-related needs would not be given
contracts that allow such an untenable Situation to continue. The SUMC parties'
consultant, CBRE, on the other hand, estimates an inflation component for City
labor costs closer to general revenue growth or the CPI (S.F.)
Present Value. Since both consultants are making predictions about revenues
and costs that occur well into the future, it's necessary to convert those forecasts
into present value calculations in order to understand what the numbers mean .in
terms of today's dollars. The net cumulative results can be compared as follows:·
Revised ADE and CBRE Dynamic Fiscal Impact Analysis
SUMC Projecl
Present Value and Inflation-Adjusted Analyals (1)
30 Years and Project Llle (2)
March 11, 2011
Discount
Rate
4.52% Labor Eacalation Rate (3)
30 years Project Life (2)
Applied Development Economics Analysis
5%
6%
($1,656,520)
($395.488)
CBRE Consulting Analysis
5%
6%
Source: CBRE Consulting
Notes:
$4,334,370
$4,678,799
($11.833,466)
($7.273,569)
($1,413,390)
$803,324
CPI (SF) Labor Escalation Rate (4)
30 years Project Life (2)
$3,274,149
$3.666,534
$7,765,995
$7,505,889
$578,761
$1,827,173
$7,225,394
$7,131,350
(1) Variable escalation rates used, pursuant to ADE's Revised March 7,2011 Dynamic Analysis, as follows:
ENR (Building) . 3.27%
CPI (US) 200p·2010 2.39%
Property Tax 2.00%
CPI (SF) 2000·2010 2.36%
City Labor Costs (63% of Total) 4.52%
ADE's analysis assumes 3 years of inflation are in place by 2011,the first analytical year in the fiscal analysis.
(2) Project life defin ed as 52 years by ADE.
(3) ResuHs using all escalation rates estimated by ADE, including 4.52% forthe labor share of City
costs (labor share estimated by ADE at 63%). The balance of City costs are escalated at the CPI (SF).
(4) Resuns using the CPI (SF) for the labor share of CHy costs:
For a 30-year period, this comparison suggests a risk of being less than cost
neutral only when the ADE approach to both cost assignment and unsustainable
City labor cost inflation are assumed, If ADE's cost assignment approach were
used, but instead of using ADE's unsustainable labor cost inflation, CPI inflation
for City labor costs are assumed, the Project achieves amounts that are revenue
positive on a present-value basis for a 30-year period, Alternatively, if the SUMC
parties' consultant's (CBRE) approach to cost assignment is used (under which
only certain city costs grow along with SUMC project square footage and
employment), and ADE's unsustainable labor cost inflation of 4.52% is used, the
present value net revenue is still positive over a 30-year period.
We feel that assuming an unsustainable level of 4.5% per year for City labor cost
inflation in a 2.4% CPI inflation environment for more than 30 years reflects not
only budget unsustainability but also a sheer lack of budget administration and
control. And none of the parties should accept such an assumption or condition.
SUMC Parties' Proposed Cost Neutrality Assurance
Development Agreement Terms
March 11, 2011
5. SUMC Parties' Promises
(b) Palo Alto Fiscal Benefits.
(i) Payment of Sales and Use Taxes
(a) Designation of Project for Sales and Use Tax Purposes. The
SUMC Parties shall accrue or self report sales and use taxes for the benefit of. the City
pursuant to the applicable regulations of the State Board of Equalization (the "SBOE"),
and any additional regulations issued or amendments made thereto, for the purpose of
maximizing the City's allocation of sales and use taxes derived from the Project available
under the applicable'laws and reguHltions. To this end, the SUMC Parties shall: (i)
obtain all permits and licenses necessary to maximize the City's allocation of sales and
use taxes derived from the Project, including but not limited to California Seller's
Permits, Use Tax Direct Payment Permits, and any other license or permit necessary or
desirable to maximize the City's allocation of sales and use taxes derived from the
Project; (ii) designate, and require, to the extent feasible, its contractors and
subcontractors to designate, the Property as the place of sale of all "fixtures" furnished
, and/or installed as part of the Project; (iii) designate, and require, to the extent feasible,
all its contractors and subcontractors to designate, the Property as the place of use of all
" "materials" used in the construction of the Project; (iv) require, to the extent feasible, all
contractors and subcontractors holding contracts to allocate the local sales and use taxes
derived from such contracts directly to the City, to the maximum extent permitted by
law. The SUMC Parties shall require its contractors and subcontractors to complete and
file any forms as the SBOE requires to effect the designations required by this Section
pursuant to the applicable regulations of the SBOE. The SUMC Parties shall bear all
costs associated with its activities under this Section 5(b)(i).
(b) Direct Pay Permit for Sales and Use Taxes from Existing
Facilities. Within thirty (30) days of the Effective Date, the Hospitals shall obtain a use
tax direct payment permit from the State of California in order to increase, on an ongoing
basis, the City tax allocation for the Hospitals' purchases. The Hospitals shall maintain
the use tax direct payment permit for the Life Of The Project, unless the State of
California ceases to continue to administer the use tax direct pay permit program or a
substantially equivalent program.
(c) Establishment of Retail Sales and Use Tax Reporting District. The
SUMC Parties shall cooperate in good faith with the City to assist the City in establishing
and administering a Retail Sales and Use Tax Reporting District that includes the
Property and the Project, to enable the City to track the generation, allocation, reporting
and payment of sales and use taxes derived from the Project. Such cooperation shall .
However, in order to provide the City with an ample and conservative risk hedge
for th~ ADE-projected n~t present value revenue deficit of $1.7M (-$1.7M) over
30 years (Le. assuming both ADE's cost assignment methodology AND
continued unsustainable annual City labor cost inflation of 4.52%), the SUMC
parties will agree to increase their offer of an upfront fiscal contribution to the City
from $1.1 M to $1.7M. This will ensure that the project is cost-neutral even under
ADE's worst-case assumptions.
In addition, the SUMC parties are aware that both consultants (ADE and CBRE)
based their revenue project.ions on assumptions that certain revenues will flow to
Palo Alto due to allocation of sales and use taxes during both the construction
. period and post-construction facility operations. First, the SUMC parties will
agree to institute immediately the Direct Pay Use Tax permits necessary to
capture existing purchases at the SUMC and thereby provide at least an
additional estimated $750,000 (non-inflated) over 30 years. This money will flow
to the City for existing SUMC hospital facilities and operations, so is simply
revenue added without any associated City costs.
Second, the SUMC parties will agree to take the steps needed to obtain
necessary permits, work with SUMC Project construction contractors, and work
with City staff to provide for the maximum, feasible on-site sales and use tax
allocation to the City applicable to construction and facility operations. We attach
Development Agreement terms that would implement each of these components
of our revised offer.