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Home My WebLink About2004-06-01 City Council (2)City of Palo Alto City Manager’s Report TO:FINANCE COMMITTEE 2 FROM: DATE: SUBJECT: CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT JUNE 1, 2004 CMR: 298:04 APPROVAL OF AN AMENDMENT TO THE 2004/2005 BUDGET TO ALLOCATE $500,000 FOR INITIAL WORK PROVIDE FOR RELOCATION OF THE ALMA SUBSTATION. CIP TO RECOMMENDATION Staff recommends that the Finance Committee add to the 2004-05 Proposed Budget an appropriation of $500,000 in the 2004-2005 Electric Fund CIP for engineering design for relocation of the Alma Substation to the Quarry Substation site. BACKGROUND Eden Housing was selected by the City Council in 2003 to identify a site and develop a proposal for a future affordable housing project. After a fairly exhaustive effort to find a site, Eden focused on the Alma Substation site after the Utilities Department indicated that relocation of the substation was under consideration. For the past six months, Eden has been working closely with staff to prepare a feasibility study for development of the Alma property. DISCUSSION The existing Alma Substation is located downtown on Alma Street, between Homer and Channing Avenues, directly behind the 800 High Street housing project currently under construction. The site is included in the SOFA 2 Coordinated Area Plan (CAP) and zoned for high-density housing. Recent redevelopment has been occurring in the area surrounding the substation. Further redevelopment of the area is constrained by the substation’s location and its adjoining overhead power lines. CMR:298:04 Page 1 of 4 The proposed relocation of the Alma Substation to the Quarry site would serve two purposes: it would enable development of the Alma site consistent with the SOFA CAP and it would provide more efficient use of electric fund enterprise resources by reducing substation operating expenses. A preliminary analysis of the projected future cost of rent, maintenance and required capital improvements for the Alma Substation has indicated a net benefit to the Utilities Department if the facilities were consolidated at the Quarry Substation. Inclusion of this project in the 2004-2005 CIP provides a budget for the first phase of the relocation of the electric substation distribution and transmission facilities to the existing Quarry Substation. During the first phase of the project, the design contract would be established. This would include the preparation of design specifications and the selection of a design consultant. To accommodate the relocation of the substation, the transmission and distribution facilities will be reconfigured over a three-year period requiring budget allocations for the next three fiscal years. The overall project would include: relocating the substation transformer and switchgear to the Quarry Substation, relocating the transmission line from the alley behind the Alma Substation, relocating the fiber telecommunications cabinets, and building new electric distribution feeders to reconnect the downtown area to the Quarry Substation. FISCAL YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 AMOUNT $500,000 $1,800,000 $135,000 COMPONENTS Engineering Design and Start of Feeder Construction Relocate Substation Equipment and Feeder Const. Complete Construction and Vacate Site. Sources of Funding: Electric Fund (Reimbursed through the elimination of the rent payments for Alma Substation). City staff has been involved in ongoing negotiations with Stanford regarding the relocation of the Alma Substation facilities to the Quarry Substation site. In initial discussions, Stanford has been supportive of the co-location of the facilities. Since it has been determined that there is sufficient space available on the Quarry site to fit the additional electrical facilities, the City would not have to modify its lease for the additional facility. CMR:298:04 Page 2 of 4 However, the current land lease with Stanford for the property expires 2006; therefore, the lease must be renegotiated and extended.- Additional easements and rights-of way may be required for the new electric distribution facilities. Eden Housing is currently studying three development scenarios for the 0.36-acre site including senior, single room occupancy (SRO) and workforce housing types. Eden Housing is preparing initial pro forma analysis for financing options for these three product types. Staff will be returning to Council next quarter with a complete feasibility analysis of the different development and funding options. During the interim, Phase 1 and 2 hazardous materials analysis of the Alma site will be prepared to determine the level and extent of any contamination from past use of the site using CDBG funding allocated for 2004/2005. RESOURCE IMPACT Staff has completed an analysis of the future utility cost for rent, reconditioning and maintenance, and construction of a new retaining wall at the Alma Substation site: Long Term Electric Utility Cost of the Alma Sub Station (30 year useful life) Option 1: Stay at Alma Site Recondition Sub Station Wall construction Rent (30 years) 1,000,000 150,000 9,850,527 Sub Total 11,000,527 Option 2: Relocate to Quarry Road Relocation Cost (2,435,000) Thirty year savings 8,565,527 Net present value 23,100 This analysis demonstrates that relocation to the Quarry Road site yields a positive net present value return on the proposed cost. In addition to the long-term savings for the Electric fund, the General Fund would incur a revenue loss due to reduction in rent effective 2005-06. A portion of this loss would be offset by the proposed payment of $1,077,276 from the developer. This payment would cover the cost of lost rent for the next five years. In addition, the General Fund would be contributing the cost of the real estate, which is approximately $1,496,025, based upon a $95.00 per square foot cost. CMR:298:04 Page 3 of 4 POLICY IMPLICATION Future development of the Alma Substation site with an affordable housing project would support one of the City Council’s Top 5 priorities. Development of a housing project on the site would be consistent the SOFA 2 CAP and with housing policies in the Comprehensive Plan including H-2, which emphasizes and encourages the development of affordable housing and H-12 which encourages diverse housing opportunities for affordable households. The Alma Substation property is also listed on the City’s Housing Sites Inventory as a site most suitable and available for housing development within the timeframe of the City’s Housing Element. Relocation of the substation would also further Comprehensive Plan policy L-79 that calls for minimizing the visual intrusion of utility infrastructure. ENVIRONMENTAL REVIEW Allocation of funding in the CIP for the initial design studies is not subject to CEQA. Both the relocation project and any future development of the vacated Alma site would be subject to environmental review. ATTACHMENTS Attachment A: Relocation-Alma Substation (EL-05003) CIP Page Description PREPARED BY: ~ r/ JULIt~ d~PORGNO, Advar~e Planning Manager APPROVED BY: LIE, Director of Planning & Community Environment APPROVED BY: JOHN :H, Direcfor of Utilities CITY MANAGER APPROVAL: EMI~’-HAR~SON, Assistant City Manager CMR:298:04 Page 4 of 4 NEW Relocation - Alma Substation (EL-05003) New -- Distribution System - System Improvements Attachment A PROJECT DESCRIPTION This project relocates the electric distribution facilities and transmission facilities at Alma Substation to accommodate the development of this site. The substation facilities will be relocated to Quarry Substation. To accommodate the relo- cation of the substation facilities, the transmission and distribution facilities will be rearranged to accommodate the changes in the electrical system. Specific items to be accomplished are: relocating the substation transformer and switchgear to Quarry Substation, relocating the transmission line out of the alley behind Alma Substation, relocating the fiber telecommunications cabinets, and building new electric distribution feeders to reconnect the downtown area to Quarry Substation. PROJECT JUSTIFICATION Alma Substation is located in a central downtown location on Alma Street. Redevelopment has been occurring in recent years in the areas surrounding the substation. Further redevelopment of the area is being impacted by the substa- tions location. The Council has set as one of it’s top 5 priorities providing low income housing within the city. This project will vacate Alma Substation to allow for the redevelopment of the site as low-income housing. The project cost will be offset by the elimination of the rent the Utility Department pays on the Alma Substation Property. PROJECT STATUS This is a new project in FY 2004-05. FUTURE FINANCIAL REQUIREMENTS FISCAL YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 COMPONENTS Engineering design and start of feeder construction Relocate substation equipment and feeder construction Complete construction and vacate site Sources of Funding: Electric Fund Cit3’ of PaIo Alto 2004-05 Budget Relocation - Alma Substation (EL-05003) continued CIP IMPACT AND SUPPORT ANALYSIS ¯Environmental: ¯Design Elements: ¯Operating: Categorically exempt under Section 15302 of CEQA, replacement of existing utility facilities. Screening of padmounted equipment in the public right-of-way will be included in the design. Planning Department will be consulted when new padmounted equipment is located. Reduced operating expenses due to reduction of the number of substation sites maintained. ¯Telecommunications: Facilities on the Alma Substation site will have to be relocated. COMPREHENSIVE PLAN This project furthers Policy L-79 of the Comprehensive Plan. Managing Department: Utilities 2004-05 Bttdget City of Palo Alto